Bakken: Persistence Pays Off
I drilled my first Bakken horizontal well back in 1990. We had so many problems with well bore integrity we gave up after drilling only a handful of wells. In fact, we were getting cuttings the size of hockey pucks at the shale shaker. Fast forward twenty years and the Bakken is the most successful horizontal oil play in the world. We knew there was oil and gas in that shale we just didn't have the technology to get it out.
Bakken economics compare favorably to other horizontal plays. The table below compiled by Stephen Berrman from Pritchard Capital Partners, LLC illustrates this fact. Notice the Haynesville play has a higher Gross EUR (Estimated Ultimate Reserves) but the F&D (Finding and Development) cost is higher. At a 10:1 (gas to oil) conversion the advantage of an oil shale play is seen in F&D costs that are almost half of the Barnett and Haynesville.
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Mr. Berman also reveals in the next table that lower F&D costs are a result of operational advancements. Well costs have nearly doubled since 2006 yet EUR has increased 5.5 times. This is typical of a shale play as the operators start to figure out the play. In this instance, it's both hydraulic fracture technology and using super extended laterals that account for increase in EURs.
Rising acreages costs are a direct result of the lowering of F&D costs. Below you can see that from January 2008 costs were below $1000 per acre. Late 2009 saw over a 6-fold increase of acreage costs exceeding $6.000 per acre. As the economics of the play improve, the operators can afford to pay more for acreage.
The above tables and graphs provide an excellent example of how the economics change as operators climb the learning curve of a shale play. Not all plays are as dramatic as the Bakken, but with perseverance and a smart technical team these types of results can be expected. It took close to 15 years to figure out the Bakken using horizontal technology. I wish I knew then what I know now.
