Is it boom time again? Bakken Conference speakers offer insight

By Patrick C. Miller | July 17, 2018

Three analysts providing varying perspectives gained from studying different data on where the Bakken shale play has been and where it’s going helped launch the fourth annual Bakken Conference & Expo on Monday.

This year’s event is taking place in the heart of North Dakota oil country in Watford City at the Rough Rider Center. A full day of speakers and panelists is scheduled for Tuesday, along with activities in the expo hall with oil and gas industry vendors. The conference and expo ends at 3 p.m. Wednesday.

Joel Brown, reservoir engineer and partner with McKenzie Minerals Management, discussed how his initial experience of working with Bakken non-ops taught him key lessons about the industry and its operations. He addressed the question of whether the current $70 a barrel oil price is the new $100 a barrel price of 2014.

“Regardless of what sector you work in, 70 as the new 100 is important,” Brown said. “We have a much leaner industry; costs have gone down and well performance has gone up, and economic returns have gone up with it. The Bakken’s best days are still in the future.”

Brown began by noting that drilling in the state has always been cyclical and affected by events around the globe. He traced oil development in North Dakota leading up to the drilling in Nesson anticline in the Bakken and Three Forks formations, showing how drilling trends changed and gravitated toward and moved away from different formations.

“Bakken/Three Forks exploded,” he said. “Never before has western North Dakota experienced anything like the Bakken. In May, a new production record was set for North Dakota with 62 percent coming from the Bakken, 36 percent from the Three Forks and 2 percent from conventional legacy wells.”

The advent of oil from tight shale fundamentally changed the oil business, Brown noted, which went from just one well in five being successful to nearly every well being a producer. “We could treat the Bakken more like a bank account than we ever could with a conventional play,” he said.

Brown said that in 2018 with wells producing an average of 660,000 barrels at $70 per barrel, the payoff is significantly better in one year, after which the investment is quadrupled. “The Bakken is back and better than ever,” Brown said. “It will compare favorably to the Permian, which is facing challenges from the way it’s ramped up production. Company budgets will shift back toward the Bakken.”

Andy Ptacek, director of research for Denver-based East Daley Capital, said the company specializes in dissecting the assets of oil and gas businesses to better understand where they’re generating cash flow. He noted that it was just over a year ago when oil prices were at $45 a barrel that East Daley projected significant production increases from the Bakken.

“We got a lot of blowback from our clients, saying there’s no way the Bakken can grow like this at $45,” he recalled. “But we were seeing IP rates come up. We saw the EURs increase and service costs come down. We were like, ‘Yeah. This is our stance. We’re going with this.’ We came out with this crude forecast for the Bakken that was quite contrary to other commodity shops out there.”

East Daley’s forecast proved accurate, and the company remains bullish on the Bakken. It expects production from the play to reach 1.8 million barrels per day by 2020.

“It’s Boomtown 2.0 for sure, baby,” Ptacek crowed. “The Bakken’s not rebuilding; it’s more just reloading. We think the record-breaking trends we’re seeing from the North Dakota Petroleum Council are something we’re going see through summer and into next year as well. We were bullish on the Bakken from the very beginning. We’re seeing the market adjust up to where we were at before.”

Thomas Jacob, senior analyst of shale research with Rystad Energy’s Houston office, said that after 2021, their analysis is more bearish for the Bakken’s long-term outlook. “From our analysis, one concern we that have is tier-one acreage or people running out of good acreage,” he explained. “That’s the reason that in 2021, we are a little more bearish than some of the other folks out there. With that being said, we have not put in any technological advancement in these few years. So if anything new comes up, a tier two and a tier three acreage could become a tier two and a tier one. That’s something to keep in mind.”

Conference attendees also heard a panel discussion on the various uses of unmanned aircraft systems (UAS) for the oil and gas industry in the Bakken with insights provided by Matt Dunlevy, president of SkySkopes; Kathy Neset, president of Neset Consulting; and Kevin McGlaughlin, environment, health and safety supervisor with Hess Corp. Andrew Bargelski, project coordinator with Delta Constructors, described how a construction company from Alaska transformed into a major Bakken player and employer.