Schlumberger Says It's Too Early To Predict The Bakken Boom

Bakken Oil Production Forecast - NDPA

Schlumberger released quarterly results and provided a little commentary on the oil boom in North Dakota and the rest of the U.S.

Paal Kibsgaard, CEO, was asked his view in regard to U.S. production growth. He responded with several comments. Many of which point to it being too early to determine the volume that will come from many shale plays.

• Overall production increases have been very impressive
• It's too early to extrapolate production trends
• It's too early even in the Bakken
• Production data over a longer period of time is needed
• Initial rates outside of the core or fairways of plays need to be studied in more detail

His response can be summed up with "it's too early to know". Activity levels are high and that is really what matters to Schlumberger. The provide oilfield services and volumes of production only have an indirect impact on their business.

Bakken Flaring In The News - Report Cites Billions In Lost Revenue

Bakken Natural Gas Flaring

Bakken flaring is in the news again. A sustainability group published a report touting the billions in lost revenue from natural gas flaring. It's a contentious topic that isn't going to disappear until flaring is reduced.

The study estimated that as much as $1 billion in revenue was lost in 2012. The report assumed a natural gas value of $13.50/mcf (this includes the value of NGLs). While the natural gas produced from the Bakken has a high btu content, it does not have a local market like other areas of the U.S. We'd put $13.50 on the very generous side.

If one billion or more in revenue had been lost in a single year, operators and midstream companies would be closer to making the financial commitments necessary to eliminate flaring.

Instead, midstream companies are waiting for commitments from operators and more assurance that production will be here for the long haul. Money isn't made building pipelines for peak production.

WBI Energy, a subsidiary of MDU Resources, is preparing for a open season for commitments on a pipeline that will move natural gas to Minnesota. If the pipeline goes forward, it will be in service some time in 2016 and will have capacity to move more natural gas than what is currently flared.

Revenue Lost Was Likely Much Lower

In actuality, I believe the amount of revenue lost was closer to 25-50% of the estimates provided in the report. When you only get a fraction of the $250-500 million in revenue lost, it makes building multi-billion dollar infrastructure a much more difficult decision.

Boone Pickens On The Shale Boom - Video

Boone Pickens shares his views as part of a Fox Business special on the American Shale Boom. Highlights include:

• ND led GDP growth in the U.S. for the second year in a row
• Houston has become the largest exporting region in the U.S. surpassing New York
• OPEC controls 30% of worldwide oil production and can control the price

Kodiak Increasing Bakken Spending & Production Guidance

Kodiak Bakken Acreage Map

Kodiak provided a second quarter operations update, along with plans to spend more and produce more from the Bakken in the second half of the year. The increase comes as no surprise. Kodiak acquired Liberty Resources' Bakken acreage earlier in July 2013 for $660 million.

Kodiak's production at the time of the announcement was 34,000 boe/d. 28,500 boe/d from legacy assets and 5,500 boe/d from the recently acquired Liberty assets.

The update included the following 2013 guidance changes:

• Production guidance increases from 29,000-31,000 boe/d to 30,000-34,000 boe/d
• Capital spending will increase from a planned $775 million to $950 million to $1 billion
• The budget includes the completion of ~100 net wells

Kodiak's Second Quarter Bakken Activity

[ic-l]Kodiak participated in the completion of 48 gross (24 net) wells in the second quarter. Kodiak brought on a second full-time completion crew in May and plans to use a third crew temporary on its newly acquired lands. Third quarter activity is expected to include completing 30 gross (25 net) operated wells plus additional non-operated wells.

Kodiak was operating seven rigs in the area, dropped one in June, and then added a rig back through the recent acquisition. The company is running three rigs in the Polar area, two in the Smokey project, one at the Koala project, and one in Dunn County.

Wells on two 12-well units are nearing completion and one pad has eight wells already producing. Kodiak is testing 12 wells within a single 1,280 acre unit in both the Polar (Williams County) and Smokey (McKenzie County) areas. We should hear more in the third quarter.

Railroads Are Moving 70% Of Bakken Oil Production

Bakken Rail Export Volumes

Railroads are moving almost 70% of the oil produced in North Dakota. That represents volumes of more than 600,000 b/d, which is up from less than 100,000 b/d in 2011.

The importance of rail has increased as Bakken production surged over the past few years. The North Dakota Pipeline Authority estimates pipeline capacity out of the region will total 565,000 b/d and rail capacity will total 865,000 b/d at year-end 2013.

If the Bakken is going to truly surpass production of 1,000,000 b/d, additional pipelines will be needed. Even if the pipelines don't come quickly, operators benefit from ample rail capacity.