How the Keystone XL Pipeline Would Impact the Bakken

Senate Votes Today On Bill to Approve Controversial Pipeline
Pipeline Photo

Pipeline Construction | Click to Enlarge

The Senate will vote today on a bill to approve the Keystone XL Pipeline, after the House voted to approve it last Friday. The controversial pipeline would carry heavy oil sands crude from Canada and lighter Bakken crude to the Gulf Coast refining market.

In 2013, the Congressional Research Service released a report that stated 12% of the Keystone XL Pipeline’s 830,000 b/d ultimate capacity has been set aside for the transport of Bakken Crude. The report further said the Keystone XL pipeline project would include a lateral pipeline, called the Bakken Marketlink, to carry oil from Baker, MT, to the hub in Cushing, OK.

Although the Keystone XL Pipeline would play a role in the Bakken, its significance in the region has diminished slightly over time. Despite a still lacking midstream infrastructure in the Bakken, several pipeline projects have advanced as the political thunderstorm has ensued surrounding the Keystone XL Pipeline.

In September of 2013, Harold Hamm, CEO of Continental Resources, the Bakken’s second largest producer, said the Keystone XL pipeline was no longer critical in an interview with Amy Harder from the National Journal. For full disclosure, at the time of the interview, Hamm’s Hiland Partners was pushing its Double H Pipeline, a 460-mile pipeline project from Dore, ND, to Guernsey, WY., which is slated to be online by January of 2015.

Read more: No Need for Keystone XL – Continental’s CEO Harold Hamm

Political Sway for the Keystone XL Pipeline

Senator John Hoeven (R-ND) is the Senate bill’s chief sponsor. Hoeven has pushed for the pipeline for several years, and touts its benefits (i.e. an increase in jobs, energy security and a decrease in crude by rail transport).

“The Keystone XL pipeline is about energy, jobs, helping to grow our economy and increasing national security by increasing energy security,” Hoeven said in a prepared statement.

Keystone Pipeline Could Alleviate Rail Congestion from Bakken Crude

Currently, just under 70% of all the oil produced in North Dakota, where much of the Bakken’s development is concentrated, is transported out of the state by rail, ultimately making its way for now to refining markets, primarily on the East and West Coasts. The Keystone XL Pipeline could alleviate some of the rail congestion being caused by the transport of oil, which would free up the rail service in North Dakota and across the midwest for the transport of other goods, primarily agricultural.

Continental Resource’s Harold Hamm on Falling Oil Prices – Videos

Hamm: OPEC Causing Price Drop with Rhetoric

Continental Resources, the Bakken’s second largest producer, will not change its course on new drilling immediately due to falling oil prices, according to its CEO Harold Hamm. In a Platt’s Energy Week interview on Sunday, Hamm said prices would have to fall another 20% before Continental would significantly cut back its operations.

Hamm has been making the rounds on TV, also appearing on CNBC, talking about what he believes are some of the reasons behind the drop in oil prices. Hamm points the finger sharply at OPEC, accusing the Saudi’s of using rhetoric to dictate price.

Since June of this year, oil prices have been falling, and the reasons why have to do with supply v. demand. The shale oil boom, for instance, has increased the supply of oil worldwide, and demand has gone down in China, the world’s second largest oil consumer. But the main reason oil prices have dropped can be traced back to OPEC, which has for all intents and purposes allowed the price of oil to drop, by actively engaging in talks of opposing cuts to production to curb supply.

Hamm doesn’t believe the Saudi’s have the power to set oil prices, but the fact remains OPEC controls 81% of the world’s crude oil reserves. According to the Wall Street Journal (WSJ), which cited sources familiar with the matter, OPEC will oppose any cuts to it’s oil production ceiling., in its late November meeting in Vienna.

See  Harold Hamm interview:

Platt’s Energy Week Interview – 10/26/14

Continental Resources Appoints New President

Stock Drops Slightly Following Announcement of High Bakken Well Costs
Continental President & COO Jack Stark

Continental President & COO Jack Stark

Continental Resources appointed a new president and COO this week, following the reportedly unexpected resignation of Rick Bott last week.

Read more: Major Bakken Producer’s President Quits – Continental Resources 

The company provided few details when Bott left his position, other than he was leaving “to pursue other opportunities.” Bott’s replacement is Jack Stark, 59. Stark has been with Continental since 1992, and was formerly the company’s Senior VP of Exploration.

Continental Stock Dips Slightly

In the midst of its leadership change, Continental also announced that it plans to increase its’ portfolio-wide capital expenditures budget for 2014 to $4.55-billion ($2.85-billion in the Bakken). The reason for the increase has to do with Bakken well costs, which the company revealed this week are $10-million per well. That’s more than $2-million per well, compared to the same time last year. This comes at at time when most operators in the area are reducing the well costs. According to Forbes, as a result of the higher than expected well costs, the company’s stock dropped ~8% (about $5 per share) on Sept. 18th.

Continental is the largest oil producer in the Rockies,  Bakken Shale play and the SCOOP play combined. It is the second largest producer in the Bakken, behind Whiting Petroleum, which just recently acquired Kodiak Oil & Gas.

Read more at contres.com

Major Bakken Producer’s President Quits – Continental Resources

Botts Departure Leaves Leadership Gap

The Bakken’s second largest producer, Continental Resources, Inc., announced this week that President and COO W.F. “Rick” Bott, 54, has resigned to “pursue other opportunities.”

According to company officials, his duties will be absorbed by senior management. Bott joined Continental in 2012, and worked previously at Cairn India Ltd and in Devon Energy Corp’s international division.

Continental CEO Harold G. Hamm said, “we are grateful for his professional contributions and wish Rick the very best.”

During the second quarter of 2014, Continental Resources completed 224 gross (93 net) wells in the Bakken, and finished the reporting period with an inventory of approximately 84 gross operated (66 net) Bakken wells drilled, but not completed. Continental’s Bakken production totaled 108,573 boe/d (North Dakota: 94,702 boe/d, Montana: 13,871 boe/d) for the second quarter, which was an increase of 11% quarter-on-quarter and 23% year-over-year.

Read more: Continental Resources Bakken Production Up 

Continental says it is ahead of its five year plan to triple production and proved reserves from 2012 to 2017 and maintains its leadership position as the largest oil producer in the Rockies,  Bakken Shale play and the SCOOP play combined.

Continental currently holds ~1.14-million net acres in the Bakken.

Read more at contres.com

Continental Resources Bakken Production Up 11% in Q2 2014

Company Uses Modified Completion Techniques in Q2 2014 and Reports Positive Inter-Well Spacing Tests
Continental 2014 Production

Continental Production | Click to Enlarge

Continental’s Bakken production totaled 108,573 boe/d (North Dakota: 94,702 boe/d, Montana: 13,871 boe/d) in the second quarter of 2014. That’s an increase of 11% quarter-on-quarter and 23% year-over-year.

During the quarter, the company completed 224 gross (93 net) wells in the Bakken, and finished the reporting period with an inventory of approximately 84 gross operated (66 net) Bakken wells drilled, but not completed. The second quarter drilling inventory numbers are down from 100 gross operated wells drilled, but not completed at the end of the first quarter of 2014.  Continental expects to complete approximately 870 gross (287 net) wells in the Bakken in full-year 2014, including both operated and non-operated wells.

Read moreContinental’s Proved Reserves in Bakken Valued at $14.5 Billion – 2013

Continental Bakken New Completion Techniques Employed

The company continues to modify completion techniques. During the quarter, Continental conducted three slick water completions in an unspecified geological area of the play, which company officials say resulted in an average early cumulative production increase of 35% higher than the production trend for the company’s 603,000 BOE estimated ultimate recovery (EUR) model for North Dakota. Additionally, in the same geological area, early production was also stronger for three wells completed with increased proppant volumes, which averaged between 200,000 to 300,000 pounds of proppant per stage.

COO Rick Bott, said, “we’re pleased with several of the new completion methods we are testing and early results show significant improvements in well performance. We are studying the broader implications of applying enhanced completions across the play.”

Continental Bakken Well Tests Update

In 2013, Continental began testing different areas across the Bakken field to determine the optimum well density and pattern for maximizing recovery and returns.  So far, the company has initiated seven density pilot projects, all designed to include the Middle Bakken (“MB”) and Three Forks One, Two and Three across the company’s approximately 1.2 million net acres of leasehold.

Three of these projects are testing 1,320-foot inter-well spacing and four are testing 660-foot inter-well spacing. Four of the projects have already been completed. Company officials indicate positive results from the first completed 660-foot inter-well spacing test:

  • Wahpeton (660 ft test); Initial Production (IP) rate for 12 wells in unit – 1,015 boe/d; IP rate for three MB wells in unit only – 1,730 boe/d

Three more projects testing the 660-foot inter-well spacing are in various stages of drilling or completion. The new wells are expected to be completed in the second half of 2014.

Read more at contres.com

Whiting Petroleum Acquires Kodiak Oil & Gas – $3.8 Billion

Transaction Creates Largest Bakken Producer
Whiting Bakken Acreage Map

Whiting Bakken Acreage Map | Click to Enlarge

Whiting Petroleum announced on July 13, 2014, that it would acquire Kodiak Oil & Gas, in an all stock transaction, for $3.8 billion. The deal makes the combined company the largest Bakken/Three Forks producer, unseating Harold Hamm’s Continental Resources from the top spot.

Next to the Eagle Ford Shale in South Texas, the Bakken Shale is the most prolific shale play in the world, with daily oil production exceeding 1-million b/d. With Whiting’s acquisition of Kodiak, the company is positioning itself to be an even more formidable force in the Bakken.

In the first-quarter of 2014, Whiting and Kodiak had combined production of 107,000 boe/d, and officials indicate total 2014 production will be 152,000 boe/d. The combined company has 855,000 net acres and an inventory of 3,460 net drilling locations.

“The addition of Kodiak’s complementary acreage position (approx. 173,000 net acres) and substantial inventory of high return drilling locations will provide the opportunity to drive significant value growth for both Whiting and Kodiak shareholders through an acceleration in drilling and increase in operational efficiencies,” said Whiting CEO James Voulkner.
Kodiak Bakken Acreage Map

Kodiak Bakken Acreage Map | Click to Enlarge

Whiting officials said the deal is valued at $6 billion when Kodiak’s net debt of $2.2 billion is absorbed.

Kodiak shareholders will receive 0.177 share of Whiting stock in exchange for each of Kodiak common stock they hold, representing a value of $13.90 per share based on the closing price of Whiting shares on July 11, 2014.

The transaction is expected to close in the fourth quarter of 2014.

 

Read more at whiting.com

Continental Resources: Bakken Hits 1-Billion Barrel Mark

Two-thirds of Total Oil Produced in the Last Three Years
Continental 2013 Production

Continental Production | Click to Enlarge

Citing IHS data, Continental Resources revealed the Bakken field of North Dakota and Montana reached the milestone of 1 billion bbls of cumulative light, sweet crude oil produced during first quarter of 2014.

Two-thirds of the total was produced in the last three years according to Continental.

 

 

[Read more...]

Continental’s Proved Reserves in Bakken Valued at $14.5 Billion – 2013

The Bakken Makes Up 72% of Continental's Net Proved Reserves
Continental 2013 Production

Continental Production | Click to Enlarge

Continental’s proved reserves stretched to more than 1 Billion boe in 2013, with an estimated value of more than $20 billion. The Bakken accounted for 72% of the volume and it’s estimated value.

Continental’s Bakken and Three Forks position contributed 741 million boe to the company’s proved reserves at an estimated value of $14.5 billion.

Within the proved reserve estimates, Continental had 2,330 gross  (1,302 net) PUD (proved undeveloped) drilling locations at the end of 2013. According to the company, the Bakken accounted for about 84% or almost 1,100 PUD locations.

Read moreContinental’s Bakken & Three Forks Density Test Yields Almost 15,000 boe/d

[Read more...]

Continental’s CEO Harold Hamm Wants No Part of Harms’ “Moderated Approach”

Moderating Development After a Slow Down Could Cause Additional Issues
Harold Hamm Continental Resources

Harold Hamm of Continental Resources | Click to Enlarge

Harold Hamm spoke out against Robert Harms’ recent comments regarding a “moderated approach” to oil and gas development in North Dakota in an interview with Forum News Service.

Hamm makes the case that the industry has already slowed down quite a bit from the frantic pace of exploration and is now developing leases in a more orderly fashion.

One example is the Bakken rig count. It’s down almost 20% from the peak. [Read more...]

Continental’s Bakken & Three Forks Density Test Yields Almost 15,000 boe/d

Planning Full Field Development With 20-30 Well Pads in the Antelope Area
Continental Resources Hawkinson Bakken Three Forks Density Test

Continental Resources Hawkinson Bakken & Three Forks Density Test | Click to Enlarge

Continental set a record with third quarter production of 141,900 boe/d. Bakken production grew 7% and accounted for 94,500 boe/d of the total.

Continental operated 20 rigs in the Bakken region during the quarter and grew gross production to almost 120,000 boe/d (94,500 boe/d net). That’s 51% higher than the third quarter of 2012 and even more impressively, Montana production grew 17% over the second quarter. [Read more...]

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