Continental Resources, the Williston Basin’s largest producer and one of the region’s most active and experienced explorers, has all but officially declared a significant increase in the amount of oil it believes can be recovered from the massive Bakken petroleum system.
Its estimate today stands at 24 billion barrels of oil equivalent, already far exceeding the federal government’s official estimate, which it recently doubled.
Continental’s recoverable calculation for the U.S. portion of the Bakken is based on a dated oil in-place estimate of 577 billion boe. Last year the company raised that in-place estimate to 903 billion boe without increasing the recovery estimate, leaving others to speculate based on whatever recovery rate they chose to apply.
Continental has indicated that any change it makes to the current 24-billion boe recovery estimate likely would not come until at least the end of 2013, after it completes extensive productivity testing of the lower benches of the Three Forks formation. But the more successful these test results become, the bolder the company seems to get with its observations.
“As much as you’ve been hearing, and as large as this play is with 24 billion boe recoverable, we believe at this time that’s a somewhat faded estimate,” Warren Henry, Continental’s vice president of investor relations, conceded during his presentation to the Global Hunter Securities GHS 100 Energy Conference June 25 in Chicago, Ill.
Some areas 32-40 wells a unitIn spite of all the drilling Continental and others have conducted in the Bakken over the past several years, “this play is still very, very young in its development,” he said, noting that on average there is still less than one well per 1,280-acre spacing unit across the 15,000- square-mile play.
“So, depending on how you look at the spacing and how you look at the different benches, we believe there is going to be anywhere from 16 to 20 wells at minimum per spacing unit and, in some areas, we think this is going to be 32 to 40 wells per unit.”
Given the fact that Continental already has boosted its in-place estimate a whopping 57 percent to the 903 billion-boe mark, increasing the amount of resource that can be recovered from this base seems inevitable. The bigger the pie, the more there should be to eat.
Continental published its original 24 billion boe recoverable estimate on 577 billion boe of in-place oil in October 2010, based on work it did in the Middle Bakken and in the upper part of the Three Forks. All this was based on 320-acre well spacing.
In 2011 and 2012, the company further conducted a well-coring program and was in the process of developing “a whole earth model” with some of its vendors, “thinking that we would core through the oil saturation and find where it ended,” Henry recalled.
“What we found was it didn’t end,” he added. “It went all the way down to the Nisku (bottom cap). So based on the coring and the work we’ve done since then, we now believe there’s 903 billion boe.”
Possible to double recoverable oilThe Oklahoma-based company’s reluctance to establish an updated oil recovery estimate on the 903 billion boe of in-place resource has not kept it from publicly talking about possibilities, even working out numbers in advance for the curious, as it did at last week’s Global Hunter Securities energy conference.
Henry noted that a 3.5 percent recovery rate on 903 billion barrels of in-place oil would “pump” the 24 billion barrels up to 32 billion barrels.
“If we were able to increase the recoveries with technology, it could be four or five percent (and) could double the recoverable oil,” he said.
He said “the key catalyst” for Continental right now is the on-going well productivity and density tests, which will carry into next year and help establish just how much resource can be recovered from the Bakken petroleum system.
However, Henry said “probably the most important catalyst” for the company during the past several months in the Bakken has been the company’s continuing move to pad drilling.
“And to the extent that we were originally four wells per pad and now we’re doing up to 12, this has really taken off,” he said. “And you can see here in terms of the times that we have eliminated between single wells and pad wells. We eliminated $7.5 million in costs for six wells in 73 days, with this pad drilling on the project.”
Meanwhile, Continental has spent a lot of time “educating refineries” on the East Coast, West Coast and Gulf Coast about the high quality of Bakken oil, Henry said, pointing out the low sulfur content of the oil and the fact its quality is consistent across the Williston Basin.
“So what you have now are these markets that have been created … for oil which is reaching primarily by rail,” Henry said. “This is very important because the rate of growth of production in the Bakken is growing. They are continuing to build offloading facilities on all three coasts for Bakken oil.”