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Featured Articles
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Jul 2008
| Source: Oilweek Magazine
| | | The long road to the Bakken
| | | For the geologists who built their careers in Saskatchewan, the so-called Bakken discovery is no surprise. What everyone was waiting for was technology.
| | | by Paul Stastny
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| Dean Potter, president of Medora Resources Inc., a small private company making it big in the red-hot Bakken oil play, has been working in southern Saskatchewan his entire career. And he is not an anomaly. He is among a number of oilmen whose lives are tied to this region and give the play its unique, clubby flavour.
"Unlike an Alberta play, where you´ve got different players moving in and out, there´s an indigenous group of players down there-geologists and engineers. We all know each other and it´s a fairly gregarious group."
Southeast Saskatchewan´s Bakken is in the Williston Basin, which extends south into Montana and North Dakota where there is just as much excitement over Bakken exploitation. Production from the Elm Coulee Bakken in Montana began in 2000 and average 53,000 barrels per day in 2003.
Bakken attention south of the border shifted last year to North Dakota from Montana when EOG Resources (which is front and centre in the emerging Horn River shale gas play in northern British Columbia) reported that a single well it drilled into an oil-rich layer of shale near Parshall, ND, is expected to produce 700,000 barrels of oil.
"We can never look back and say, ‘Why didn´t we see those Bakken fields 30 years ago?´ as we drilled through those formations thousands of times," Potter says. "The reason is simply that the technology wasn´t there."
The Bakken play arrived with the advent of horizontal drilling and modern frac stimulation technology in combination with robust oil prices. It couldn´t have come any earlier, despite decades-old estimates suggesting there are two, three, or four billion barrels of recoverable oil in the Bakken.
"We now know where at least some of the oil sourced in the Bakken is pooled, but there most likely will be further discoveries in Saskatchewan, North Dakota, and Montana," Potter notes.
Medora is one of a handful of smaller players in an increasingly crowded play, dominated by three large players-Crescent Point Energy Trust, Petrobank Energy & Resources Ltd., and TriStar Oil & Gas Ltd. Medora got into the Bakken when it was in its early stages. If it hadn´t, Potter says, it would be too late now because of the high price of land.
For Medora, "it´s a great place to do business," Potter says. "The government is industry friendly, the surface is year-round access except for break up and, for the most part, surface owners are very comfortable with the oil industry. Many surface owners are mineral owners, battery operators, or [they] work in the oil industry."
Packers Plus
Arguably, the play-opener in the Bakken was a frac stimulation technology developed by Packers Plus Energy Services-the StackFrac system. Initially, the industry doubted horizontal wells could be fracturerd using conventional open-hole packers. Less than three years ago, Packers Plus begged and pleaded with a company active in the Bakken to try the StackFrac system, but "they felt they had it figured out," recalls Packers Plus president, Dan Themig.
Then Petrobank stepped forward and gave Packers Plus a chance. For the next six months, while Petrobank used the system but wasn´t required to publish its production information under Saskatchewan rules, Packers Plus still faced an uphill battle selling its idea. Six months and two weeks later, the phone started ringing.
"Today, all the frac companies-Schlumberger, BJ [Services], Calfrac and Trican-pumped through our systems in the Bakken," Themig says. "They do the fluids, the proppant, and the gel, and we make sure it goes to the right places in the wells."
The Packers Plus multi-stage frac liner systems improved pre-StackFrac oil cuts to 70 per cent from 15 per cent. Before StackFrac became the system of choice, horizontal wells were drilled and left open. Coil tubing and jetting nozzles tried to force a frac into specific well locations, but when fracing a 1,000-metre horizontal well in the Bakken, the frac typically ended up in only one or two places-the places of least resistance.
"You might as well have drilled a vertical well," Themig says.
StackFrac ensures fracs go to a number of locations along the horizontal well by installing a well liner with open-hole packers. The horizontal well is segmented into eight or ten segments by setting up mechanical diversions using open-hole packers. The packers isolate each section from the rest. Each segment has its own a frac port and each segment is fraced separately, starting from the bottom.
"The frac still can go anywhere it wants in each segment, but since it´s done eight to ten times, you get great coverage," Themig says. "You used to spend anywhere from four days to four weeks doing ten fracs on a horizontal well, but now typically, in the Bakken, we do all eight or ten fracs in a single day."
Painted Pony Petroleum Ltd.
Small is beautiful in the Bakken. It seems to attract entrepreneurs. A case in point is Painted Pony Petroleum Ltd., a junior that went public in May 2007. The company started drilling a month later and as of May 2008, had 16 horizontals (5.65 net), producing a total of 325 barrels per day from four net producers. It plans to drill another 40 Bakken horizontals by year-end.
If there is a challenge in the Bakken, most all producers agree it is competition. Land prices are high now. But for those that got in early and secured a large land base, as Painted Pony did, this isn´t really a concern.
"Our philosophy is to stay six months ahead of our competition," says Pat Ward, president, chief executive officer, and director of Painted Pony. "We try to get into areas before the herds come in."
This is easier said than done, but, as exploration vice-president at Innova Exploration-one of the original participants in the Bakken discovery wells drilled by StarPoint Energy-Ward had a leg up on latecomers to the Bakken. He also managed to bring the geologists that worked for him at Innova to Painted Pony, so the company´s expertise is pointed and has a historical context.
"The Packers Plus system is really the fourth generation of fracs in the Bakken," Ward explains. "Most people don´t realize that. The first fracs that we were doing there were called ‘zipper fracs,´ then came the ‘pulsed zipper frac,´ followed by a thing called the ‘surgey frac,´ and now the Packers Plus system."
Petrobank Energy & Resources Ltd.
In an industry that has always depended on technology, it is difficult to imagine a company that believes it has any play totally figured out. The most successful companies always tend to be on the lookout for technologies to improve efficiencies.
Petrobank has always been such a company. In fact, it seems to make a point of embracing innovation, whether that it is its toe-to-heel air injection and CAPRI bitumen and heavy oil recovery processes or its early adoption of StackFrac.
In a televised interview with CBC´s The National in April, Petrobank´s president and chief operating officer, John Wright, discussed its Bakken play:
"We´ve amassed a land position there that has provided us with the opportunity to drill somewhere in the neighbourhood of 600 and 650 wells in our existing land base," he said. "It´s a huge play for us."
With seven rigs running full-time in the Bakken, Petrobank expects to have about 150 new wells (gross) on stream by the end of the year. Eighty per cent of its 2008 total Canadian capital budget (or $300 million to $400 million) is devoted to drilling, building facilities, and acquiring new opportunities in the Bakken. First-quarter production from the Bakken was 12,400 barrels of oil equivalent per day.
Asked whether Petrobank has plans to increase its land holdings, Wright said, "Well yes we do. Obviously most of the land has been snapped up and it´s been a very competitive process. The bid levels have gone through the roof. But there are always little bits and pieces. There´s always little corporate acquisitions. There are always new opportunities."
One of these opportunities was Petrobank´s acquisition of Peerless Energy Inc., completed earlier this year. The $339-million purchase added approximately 5,600 barrels per day of oil equivalent production (73 per cent light oil and 27 per cet natural gas) at a cost of approximately $60,000 per flowing barrel. Approximately 3,400 barrels per day of the acquired production is Bakken light oil, located within Petrobank´s core properties in southeast Saskatchewan.
Crescent Point Energy Trust
During last year´s royalty discussions in Alberta, Crescent Point was one of the first companies to voice its dismay with the Alberta government and said it would focus its efforts Saskatchewan. And it followed through.
"We´ve grown our production in Saskatchewan from about 20,000 barrels per day last year to about 28,000 barrels a day," says Scott Saxberg, Crescent Point´s president and chief executive officer. "A good chunk of that growth is through our Bakken development."
Crescent Point production in the Bakken went from 8,000 to 13,000 barrels per day, making it the largest oil producer in southeast Saskatchewan and the dominant player in the Bakken.
It has more than 360 net sections of undeveloped land and 1,050 net development drilling locations. Only 358 of these locations so far have been booked to reserves, while recovery to date at the Viewfield Bakken resource play is scant 0.3 per cent. As of year-end 2007, independent engineers booked a recovery factor of 3.9 per cent and Crescent Point´s Bakken technical team conservatively estimates that a recovery factor of 15 per cent is achievable on primary recovery.
"In 2008, we´re going to drill about 106 wells under Crescent Point and about 75 wells under Shelter Bay-a private company we formed to focus on Saskatchewan," Saxberg says. Crescent Point made a $60-million investment in Shelter Bay Energy in exchange for a 20 per cent stake.
"The rationale is that Crescent Point can´t raise the equity because of the safe harbour rules," Saxton explains. "So the concept was to have the same business plan as Crescent Point. In March, we raised $600 million [in Shelter Bay] to focus on acquisition, development, and exploration in southeast and southwest Saskatchewan."
Over the last five months, Shelter Bay has grown from zero to close to 4,000 barrels per day of production. With a 2008 capital budget of $240 million, Shelter Bay is expected to exit the year with over 5,500 barrels per day of production. It will spend another $175 million in the Bakken under Crescent Point.
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