Bakken Production Points To Future World Growth - BP's Dudley

Bob Dudley BP

BP's Bob Dudley addressed the crowd at IHS CERAWeek to share expectations of what he deemed "challenging opportunities" in the oil and gas industry. His points of emphasis were growth in both North America and Russia. He highlighted "spectacular" growth here in the US.

BP's CEO Bob Dudley stated "Gas production will be the fastest growing fossil fuel at 2% annually. Oil will grow more slowly......But that still means the world will need around 16 million barrels per day more in 2030 than today....that increase alone is nearly the combined daily 2011 production of Russia, Canada, and the UAE"

Non-fossil energy will grow faster as a group, but will still only account for 1/5th of all energy in 2030. To no surprise, BP has a view that oil and gas are here to stay. Oil production needs to grow substantially through the next two decades and shale plays like the Bakken will fill the void.

Notes from Dudley's speech include:

• US oil production is above 7 mmbbls/d, from 5 mmbbls/d in 2008
• Both the Gulf of Mexico and Alaska are producing longer and more than thought
• ND has grown from 100,000 b/d of oil in 2006 to over 750,00 b/d at year-end 2012
• ND production surpassed Alaska for #2 in the US and now produces more than OPEC member Ecuador
• US has been successful due to privatized mineral rights and incentives for entrepreneurs
• Oil & gas employment has risen 27% in the US since 2008 "It is a great renaissance"
• Import dependence is falling
• BP spent 35 years attempting to make solar work and was never able to turn a profit

Follow us on twitter @BakkenShaleNews for live updates from the conference.

Top 10 Bakken Operators - December 2012

Bakken Shale Operated Production Dec 2012

The top ten Bakken operators ranked by gross operated production include the normal list of companies. Whiting Petroleum edged out Continental Resources by a mere 15 b/d to claim top operated in December of 2012:

1. Whiting Petroleum
2. Continental Resources
3. Hess
4. Statoil
5. EOG Resources
6. ExxonMobil (XTO)
7. Marathon Oil
8. Petro-Hunt
9. Slawson Exploration
10. Kodiak Oil & Gas

Whiting Petroleum #1 Operated Bakken Producer in December

Whiting Bakken Map

Whiting Petroleum's operated Bakken production of ~66,156 b/d was higher than any other North Dakota company in December of 2012. Whiting edged out Continental Resources by less than 15 b/d. For operated and non-operated production during the quarter, Continental averaged 67,522 boe/d net in the Bakken to Whiting's ~63,000 boe/d across all of the Rockies (primarily Bakken).

Proved reserves grew in step with production. Whiting had over 378 million boe of proved reserves at the end of 2012, with 165.1 mmboe attributable to the Northern Rockies. Production and reserves growth was the direct result of the company's aggressive spending. The company completed 192.9 net wells in 2012 after only planning for 160 net wells. The company spent a total of $2.1 billion in 2012 and plans to spend $2.2 billion in 2013. Approximately 52% or $1.1 billion will be spent in the Northern Rockies (Bakken) region.

Whiting's Bakken Well Production Improves in 2012

The average Bakken well in the region averaged 572 b/d, 470 b/d and 403 b/d over 30, 60, and 90 day initial production periods in 2012. That's an increase from 432 b/d, 373 b/d, and 338 b/d over 30, 60, and 90 day periods in 2011. That's an improvement over almost 100 b/d over all three periods.

2013 will be spent further proving prospects and downspacing across the basin. Whiting has significant exploratory and development plans across all of its prospects:

• Pronghorn Prospect - Planning six wells per 1,280-acre spacing unit, up from three
• Tarpon Prospect - Drilling three well pads
• Hidden Bench Prospect - Testing the "Middle Bakken Silt" this year and hopes to establish a third productive zone
• Missouri Breaks Prospect - Continue to de-risk acreage in 2013
• Sanish Field - 32,590 boe/d net in Q4 2012. Planning a tighter spacing test in early 2013 and refracking wells
• Rid River - Completing seismic study at the Starbuck prospect and expect $3-3.5 million vertical wells to have EURs of 200,000-300,000 boe at Big Island

The Robinson Lake Plant was processing 67 mmcfd and the Belfield Gas Plant was processing18 mmcfd at year-end.

Read the company's full release at whiting.com

Continental's Bakken Production Soars - Oil Prices Improved

Continental Resources Bakken Production Chart

Continental Resource's Bakken story keeps getting better and better.

The company reported fourth quarter and full-year 2012 earnings with news of soaring production, falling well costs, and better oil price expectations.

Continental's Bakken Production Continues to Outperform

Continental Resources' Bakken production grew 64% from the fourth quarter of 2011 to the fourth quarter 2012 average of 67,522 boe/d. The Bakken and Three Forks now account for over 63% of company-wide production. Continental drilled a total of 259 gross wells with 21 rigs running in 2012. Operations drove proved reserve estimates to 564 million boe at the end of 2012. That's almost double what was booked at year-end 2011 and is what drove us to ask Will Continental's Reserves Cross 1 Billion boe in 2013?

Company operated wells averaged initial production rates of 1,187 boe/d in in North Dakota and 655 boe/d in Montana in the fourth quarter of 2012. Those results fall in line with the company's EUR estimates of 603,000 boe in ND and 430,000 boe in MT.

The second bench of the Three Forks yielded yet another impressive well. The Angus 1-9H flowed at 1,556 boe/d at 3,200 psi in a one day test period.

Bakken Well Costs Are Falling

Continental is entering full development mode on much of its acreage and is pushing operational efficiencies. The most recent improvements in cost are the result of faster cycle times, lower completion costs per stage, and pad drilling. Continental improved its per rig performance to 12 wells per rig in 2012. That's up from just seven wells per rig in 2011.

The most recent six well pad, named the Florida-Alpha project, was completed for $46.8 million or $7.8 million per well. That's well below the company's year-end 2013 target well costs.

Mr. Bott said. "Pad drilling is the future for full-field development, and, given our transition to more pads, we are on track to meet our goal of reducing average operated well costs in the Bakken to $8.2 million per well by year-end 2013, a reduction of $1 million per well in early 2012."

Bakken Oil Prices Are Improving

Continental's oil price differential to NYMEX prices decreased to $3.24/bbl in the fourth quarter of 2012.

Rick Bott, COO, stated, "We now expect average oil differentials in 2013 will be $5 to $7 per barrel....2012 saw fundamental changes in U.S. oil markets, with Bakken crude shipped directly to all major U.S. refining centers and making progress, we believe, toward becoming a national benchmark crude," he said. "Refiners on the East, Gulf and West coasts value the consistently high quality of sweet Bakken crude and the fact that supply from the basin continues to grow.

The expectation for differentials that average just $5-7/bbl is a sharp improvement from prior guidance of $8-11/bbl.

Read the full press release at contres.com

SM Energy Begins Bakken Infill Drilling - Moving to Walking Rigs

SM Energy Bakken Map

SM Energy grew company wide production by 18% from the fourth quarter of 2011 to 2012. Strong growth was the direct result of successful development in both the Bakken (40% growth) and Eagle Ford (50% growth).

During 2012, SM completed 30 operated wells, with focus in the Bear Den, Raven, and Gooseneck prospects noted in the map. In 2013, drilling will shift almost completely to infill drilling in those areas. Exploration is complete and the company can begin pushing to improve operational efficiencies by employing walking rigs on multi-well pads. Two traditional rigs will be exchanged for walking rigs in early 2013.

Tony Best, CEO, remarked, "SM Energy had a record-breaking year in 2012 with new highs for proved reserves and annual production, completing the year with record quarterly production. These results were driven by our high rate of return oil and liquid-rich programs in the Eagle Ford shale and Bakken/Three Forks, which are expected to continue to drive our growth in 2013."

SM Energy produced 11,900 boe/d from the Bakken in the fourth quarter of 2012 and increased proved reserves in the Rockies from 48.4 to 54.8 mmboe during the year.

The company also sold non-operated Bakken acreage as the year ended. In total, SM divested 27,000 net acres, with 6,000 net acres located in the company's focus area.

SM now has:

• 162,000 net acres prospective for the Bakken and Three Forks Formations
• 81,000 net acres located in the company's focus area

Read the company's full press release at sm-energy.com