Monday, August 13, 2012

Bernstein on Bakken Decline Rates and Estimated Ultimate Recovery (CLR; EOG; KOG; NFX)

From FT Alphaville:
Shale oil everywhere… for a while
The US is going to be free from the tyranny of imported crude oil soon, according to just about everyone. This is thanks to the wonders of shale gas extraction technologies being applied to sizeable and mostly untapped shale oil reserves. Previously marginal resources can now be economically extracted. Even the Europeans are getting excited about it. It’s a game changer.
You can probably guess what’s coming next…

Bernstein Research’s Bob Brackett (H/T Steve Levine) has an interesting note which examines the performance of shale oil wells in the Bakken formation. While the formation is in both Montana and North Dakota, Brackett narrowed his analysis to those in the former state.

There are high hopes for future output of the Bakken shale, which is why a graph like the below is disconcerting:
Montana Bakken shale output - Bernstein Research
The decline cannot be explained simply by the number of wells being operated — because those have increased. A per-well average looks like this:
Montana Bakken shale wells - average peak flows - Bernstein Research
Writes Brackett:...MUCH MORE
The EUR's I've seen range from 300,000 to an EOG estimate of 750,000 bbls.
Harold Hamm of Continental has a 603,000 bbl/well estimate. 
Because the North Dakota boom only really got going in 2006 nobody know for certain.