From The Million Dollar Way:
In a long note like this there will be factual and typographical errors. There will be opinions mixed in with facts. Consider this entire "essay" nothing more than opinion within the guidelines expressed in the "welcome/disclaimer." This has absolutely nothing to do with investing in the Bakken. The main purpose of the blog is to help me better understand the Bakken. The Bakken is what it is. I'm not doing this for any reason other than the enjoyment I get out of following it. There is no hidden agenda. The essay is not complete. I will add to it when the spirit moves me. When it is complete, I will note that....MUCH MORE
*****************************Preamble, Disclaimer, And All That Stuff
Rigzone's look at the future of shale in light of the oil glut and depressed oil prices.
I don't think I will post any excerpts of the linked article above. I have it saved elsewhere; most of these articles eventually "disappear," requiring a subscription later on to access them (a word to the wise).
I scanned the article linked above but I didn't read every word. I think there is a huge story line that was mentioned in another Rigzone article but not in this most recent one.
Looking at that previous Rigzone article and then at this most recent one (linked above), I think we will see an essay soon at Rigzone or elsewhere about another lesson learned with regard to US shale which I am trying to express in the rambling notes below. Developing an unconventional oil play is entirely different than what has gone on before.
What follows is personal opinion; what looks like facts may in fact be wrong; I'm not looking up staff to confirm (I discuss this in my "welcome/disclaimer" pages).
If any of this information is important to you, go to linked sources throughout the blog; don't take my word for it; I make a lot of factual and typographical errors.
*********************************Initial Thoughts
There are three unconventional plays that account for about half of all unconventional oil right now: the Permian, the Eagle Ford, and the Bakken.
Of the three unconventional plays (remember, the Permian has both conventional and unconventional aspects) the Bakken is the most mature in terms of development and understanding of the geology.
Within the Bakken, the middle Bakken is well delineated. This is not true for the other payzones within the Bakken pool. A lot of work has been done on the upper bench of the Three Forks, the Sanish, and the Pronghorn Sand(s), but even those formations are not delineated as well as the middle Bakken.
The lower benches of the Three Forks are hardly delineated at all; that delineation was just beginning when the slump in oil prices began. And, of course, we know almost nothing about the Tyler or the Lodgepole (not the reefs) formations.
The Bakken is 90 - 96% oil across the Basin.
The Eagle Ford is still in the early stages of being delineated; I have no idea how many pay zones there might be in the Eagle Ford, just as we did not know how many pay zones there would be in the Bakken until several years into the boom. The Eagle Ford has areas that are predominantly oily and other areas that are heavier in condensate. The general areas are known but the Eagle Ford came in later than the Bakken and delineation is probably less clear than the middle Bakken.
The Permian is even less delineated with regard to its unconventional plays.
Then across the US there are several other unconventional plays; perhaps the Niobrara is #4. Then a half dozen others.
All figures below are 2014 US dollars.
At $150 oil, operators will explore every shale play and every area within every shale play.
At $100 oil, operators will still explore the better shale plays but start to concentrate on development of delineated fields.
At $75 oil, operators will pretty much discontinue exploration in even the best plays and emphasize development and infill wells.
Somewhere between $80 and $65 oil operators will start to circle the wagons, not only discontinuing exploration in the newer shale plays but will discontinue exploratory drilling in the three big US shale plays.
At $50, the circling of the wagons will become obvious to even the most casual observer. It's possible oil could get so low that all drilling in all US shale might stop but that seems incredibly unlikely.
************************$80 Oil
Below $80, shale operators will start to demonstrate just how flexible they can become.
I don't now enough about the Permian or the Eagle Ford to comment, but I bet they are similar to the Bakken.
First, behind the scenes, the Bakken operators are going to extract savings from the oil service operators. Earlier I posted an example of where Sanjel was providing almost a 50% discount for some services. Sand and ceramic will come down in price (more on that later)....
