Magnum Hunter Resources Provides Second Quarter Bakken Update

Magnum Hunter Bakken Shale Map

Mangnum Hunter Resources participated in bringing on 19 gross (5.5 net) Bakken wells in the second quarter of 2013. At the end of the quarter 20.4 gross (11.4 net) wells were in some stage of drilling or being completed.

Magnum Hunter also noted midstream delays brought on by wet weather. A Oneok gathering system expected to be online in April did not accept gas until the last week of June. The gas gathering system is being built in an effort to conserve natural gas production in the area. In total, the project will connect ~300 wells in the area over the next year.

Bakken & Three Forks Well Highlights

• Border Farms 3130-5TFH - (28.3% interest) Drilled to a measured depth of 14,300 ft (lateral length of 6,075 ft), fraced with 26 stages. The 24-hour flowing initial production (IP) rate was 626 boe/d
• Montclair 0112-2TFH - (16.7% interest) Drilled to a measured depth of 17,710 ft (lateral length of 9,572 ft), fraced with 40 stages and placed. The 24-hour flowing IP rate was 683 boe/d
• J. Olson 22-15-162-98H 2DM - (36.25% interest) Drilled to a measured depth of 18,215 ft (lateral length of 9,455 ft), fraced with 36 stages. The 24-hour flowing IP rate was 872 boe/d
• J. Olson 27-34-162-98H 2XM - (35.7% interest) Drilled to a measured depth of 18,842 ft (length of 10,096 ft), fraced with 36 stages. The 24-hour flowing IP rate was 820 boe/d
• Baja 2215-2H - (30.4% interest) Drilled to a measured depth of 18,155 ft (lateral length of 9,568 ft), fraced with 25 stages. The 24-hour flowing IP rate was 813 boe/d
• Baja 2215-3H - (30.4% interest) Drilled to a measured depth of 18,280 ft (lateral length of 9,820 ft), fraced with 25 stages. The 24-hour flowing IP rate was 1,076 boe/d
• Baja 2215-1H - (30.4% interest) Drilled to a measured depth of 17,977 ft (lateral length of 9,545 ft), fraced with 25 stages. The 24-hour flowing IP rate was 913 boe/d

Magnum Hunter controls 190,000 net acres in the Williston Basin. 140,000 acres are located in North Dakota and ~50,000 acres are located in Canada.

Bakken Natural Gas Production Could Fuel New Fertilizer Plant

Northern Plains Nitrogen Facility - Grand Forks ND

North Dakota could be home to a new $1-1.5 billion fertilizer plant. Norther Plains Nitrogen has proposed building the plant near Grand Forks, ND.

The project could use Bakken natural gas to produce 2,200 tons of ammonia per day.

Corn production in the region has grown significantly over the past decade and most nitrogen fertilizer used in the area is imported. Capital costs, electricity, water supply, and natural gas prices are a few important metrics in making the facility competitive.

NPN CEO Don Pottinger notes, "this green-field world-scale production facility will be among the safest, most efficient and environmentally compliant ever constructed. By using modern technology which, among other benefits, reduces our carbon footprint, the NPN facility is taking shape to be a very exciting and worthwhile undertaking."

Natural gas from the Bakken might provide a cheap way to supply hydrogen for use in the plant. Natural gas accounts for approximately 80% of the cash costs of producing ammonia. The plant is designed to consume ~80 mmcfd.

Bakken production is on pace to eclipse 1 million barrels per day of oil and 1 bcf per day of natural gas in the next 18 months. Approximately 30% of gas production in the Bakken region is flared, so a new source of demand will be welcomed by operators.

While the gas is expected to be produced, getting it to eastern North Dakota is not quite as easy. A pipeline will be needed to move any significant volume of natural gas across the state or the plant will only be indirectly supplied by the Bakken. The facility is connected to the Viking Gas Transmission System. The Viking system just happens to be the destination for a Bakken natural gas pipeline proposed by WBI Energy. If the pipeline goes forward, it is expected to be in service in 2016.

The developers hope to have the fertilizer plant online in time for the 2017 growing season.

You can read more about the project at norternplainsnitrogen.com

Bakken Natural Gas Flaring Should Continue to Fall

Bakken Natural Gas Flaring

Bakken natural gas flaring has risen over the past few years as drilling expanded across North Dakota and Eastern Montana. Flaring hit a peak at the end of 2008, declined through 2009, and has been increasing since that point. Currently, 30-35% of natural gas produced in North Dakota is flared.

Operators are focused on producing oil and have largely defaulted to waiting for infrastructure when it comes to natural gas. Oil accounts for approximately 90% of the production stream in a Bakken well and can be transported by truck or rail, in addition to pipelines. Natural gas, on the other hand, needs a pipe and in North Dakota it needs processing plants. Natural gas produced from the Bakken yields 8-13 gallons of NGLs per mcf (gpm).

Rich gas and a positive production outlook are why Oneok plans to add the Garden Creek III processing plant. When the plant is completed in 2015, the company will have almost 600 mmcfd of processing in the basin.