Sunday, August 12, 2012

Animated Map of the Bakken Shale Production

You may need to click on the graphic to start the interactive map.
The animated map above is from the EIA and shows the growth in Bakken shale production of oil and gas from 1985-2010.  It's interesting that most of the early increases in Bakken production (1998-2006) were in Montana (Elm Coulee Oil Field), and not the North Dakota Bakken.  It wasn't until about 2008 that production exploded in the North Dakota Bakken following the discovery of the Parshall Oil Field.  From the EIA:

"The animation highlights that drilling activity in the Bakken has been focused mainly on crude oil and natural gas liquids (generally the green and yellow dots). The larger circles indicate higher productivity wells; these are mostly horizontal wells. Bakken production, which averaged just over 2 thousand bbl/d in 2000, averaged more than 260 thousand bbl/d in 2010; horizontal wells accounted for nearly 90% of total 2010 volumes."

MP: Note that since 2010, the number of producing oil wells in the Bakken has more than doubled from 1,593 in May 2010 to 3,983 in May 2012, so there would be a lot more green and yellow dots on the map if it was updated through 2012.  

12 Comments:

At 8/12/2012 10:16 AM, Blogger Storm'n Norm'n said...

"...so there would be a lot more green and yellow dots on the map if it was updated through 2012."

And there will be a lot more green and yellow dots on the map when Obama is ousted from the White House in 2012.

 
At 8/12/2012 10:16 AM, Blogger VangelV said...

MP: Note that since 2010, the number of producing oil wells in the Bakken has more than doubled from 1,593 in May 2010 to 3,983 in May 2012, so there would be a lot more green and yellow dots on the map if it was updated through 2012.

What would be even more helpful is a map showing cash flows.

 
At 8/12/2012 12:49 PM, Blogger rjs said...

and yield per well over time...

 
At 8/12/2012 8:09 PM, Blogger Hydra said...

One of these days, the map will ge going the other direction. Will it get equal play?

 
At 8/13/2012 5:19 AM, OpenID moneyjihad said...

I like the map.

 
At 8/13/2012 6:55 AM, Blogger VangelV said...


One of these days, the map will ge going the other direction. Will it get equal play?


Of course not. When I first showed scepticism about shale oil I was being pounded with graphs showing the increase in Montana production. As soon as Elm Coulee peaked the graphs were much harder to find.

 
At 8/13/2012 10:58 AM, Blogger SteveH said...

Vange, Do you know the first thing about oil production? What a stratigraphic trap is? My family has been in the oil business for 4 generations and real income from existing production declines very slowly. My point is that elm coulee has produced about 120 million barrels on a resource base of over 400 million barrels. Just a decade ago it was considered marginal. The decline rate might be faster than conventional fields but the resource base is still large.

 
At 8/13/2012 11:54 AM, Blogger Che is dead said...

"What would be even more helpful is a map showing cash flows ... When I first showed scepticism about shale oil I was being pounded with graphs ..." -- "Vag"

What "Vag" never says is that the reason that cash flows at some of these companies have not been growing, relative to production, is that production has been off the charts temporarily driving down the price of natural gas. I say temporarily because there has been, at the same time, hundreds of billions of dollars in supporting investment in new chemical plants, power plants, and the like taking place which should support natural gas prices in the future.

According to "Vag", and his guru Arthur Berman, that was not supposed to happen. By now, high depletion rates were supposed to have caused production rates to fall precipitously revealing shale gas as a scam. According to "Vag" and Berman, this dramatic decline in production was to somehow be accompanied by continued record low prices for natural gas. Instead, production has been growing by double digits even as the number of rigs has been declining as producers re-task those rigs to exploit tight oil and other liquids. This consistent increase in gas production calls into question another claim of "Vag's", that companies have been deliberately exaggerating EURs.

Even in this environment, producers who have found themselves under pressure have been able to sell their undeveloped leaseholds for enormous profits to extremely sophisticated, private multi-national firms with decades of profitable industry experience. (Chessy realized nearly a billion dollars through the sale of unproved leasedholds, ex-drilling carries, in 2011)

"Vag" looks at one snapshot in time and extrapolates the entire future of an industry from it. (And I thought that "Carnac" was magnificent)

 
At 8/13/2012 4:24 PM, Blogger VangelV said...

Vange, Do you know the first thing about oil production? What a stratigraphic trap is? My family has been in the oil business for 4 generations and real income from existing production declines very slowly. My point is that elm coulee has produced about 120 million barrels on a resource base of over 400 million barrels. Just a decade ago it was considered marginal. The decline rate might be faster than conventional fields but the resource base is still large.

But the math does not work. You can keep throwing money into the field but its production peak will not be surpassed unless you are willing to take massive losses and pull what is available out much faster than economic sense dictates.

Mark's argument is about growing production but that can't take place without huge losses. We have already seen his shale gas predictions fail when the increased production destroyed capital as producers had to sell their product at a price that was below the cost of production. If you look at the 10-Ks filed by the producers and listen to the conference calls you see a lot of negative cash flow and hear a lot of talk about funding gaps that have to be made up by asset sales and more debt. I would have little trouble with this if the companies were all new and if the production data supported the EURs but it does not seem to.

One way or another we should know in about a year and a half. By that time we will have a great deal of data to look at and we will have to see a resolution of the funding gap issue. If companies keep writing off shale assets the actions will support my side of the argument. If they increase dividends, lower debt, and start reporting positive cash flows Mark's argument would gain the upper hand.

 
At 8/13/2012 4:40 PM, Blogger VangelV said...

What "Vag" never says is that the reason that cash flows at some of these companies have not been growing, relative to production, is that production has been off the charts temporarily driving down the price of natural gas. I say temporarily because there has been, at the same time, hundreds of billions of dollars in supporting investment in new chemical plants, power plants, and the like taking place which should support natural gas prices in the future.

So what you are saying is that Mark's claim of cheap and plentiful gas is wrong? Increased demand will drive up prices to above the break even point, which was around $7.50 according to Aubrey when he was honest about the prospects and had cover from high gas prices.

The problem is that the very expensive gas wells that were drilled and lost money are now depleted and can't generate the cash flow required to pay back the loans that paid for the drilling. If that debt is to be paid off the producers will need even higher prices but I doubt that they can say ahead of the depletion long enough to avoid writing off their assets or going bankrupt.

According to "Vag", and his guru Arthur Berman, that was not supposed to happen. By now, high depletion rates were supposed to have caused production rates to fall precipitously revealing shale gas as a scam. According to "Vag" and Berman, this dramatic decline in production was to somehow be accompanied by continued record low prices for natural gas. Instead, production has been growing by double digits even as the number of rigs has been declining as producers re-task those rigs to exploit tight oil and other liquids. This consistent increase in gas production calls into question another claim of "Vag's", that companies have been deliberately exaggerating EURs.

Berman was right about the economics of shale production while everyone else whiffed. We have already seen companies begin to write down the value of some of their shale properties and have seen a collapse of rigs drilling for shale gas. While there are plenty of wells drilled but not producing because of the shortage of pipeline capacity the reduced drilling levels will show up once that backlog is worked off.

 
At 8/13/2012 4:51 PM, Blogger Hydra said...

One way or another we should know in about a year and a half.

===========================

Yep. there is an objective truth, which we willeventually learn.

All the dogma in the world cannot change it.

 
At 8/13/2012 4:55 PM, Blogger VangelV said...

Even in this environment, producers who have found themselves under pressure have been able to sell their undeveloped leaseholds for enormous profits to extremely sophisticated, private multi-national firms with decades of profitable industry experience. (Chessy realized nearly a billion dollars through the sale of unproved leasedholds, ex-drilling carries, in 2011)

Of that doesn't that sound like a housing bubble argument nothing does. First of all, the sales have not been at huge profits. When a company like Chesapeake sells off assets it doesn't just dump its shale leases. It also was forced to sell good assets and infrastructure that can generate cash flow because other producers need the capacity. Equity holders of Chesapeake would be lucky to be able to extract any value because the company could easily go to zero if it remained a stand-alone operation. Fortunately, there is a lot of value in hiding reserve declines by using the 6:1 energy ratio and economically worthless producing assets have enough balance sheet value to allow Chesapeake to find a buyer if the economy manages to stay afloat for a while.

 

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