Kodiak Oil & Gas Grows Bakken Production More Than 50% in Q3

October 29, 2013 R.T. Dukes

Kodiak Oil & Gas grew production more than 50% to 35,400 boe/d in the third quarter. That compares to a little more than 23,000 boe/d in the second quarter and almost 16,000 boe/d in the third quarter of 2012.

Kodiak completed 29 gross (24.5 net) operated wells and participated in 37 gross (6.6 net) non-operated completions during the quarter.

The company plans to continue utilizing seven rigs and has two dedicated completion crews running through the end of the year. Production at the end of the year is expected to grow to ~42,000 boe/d.

“We believe the third quarter of 2013 was a transformational quarter for Kodiak. In addition to accelerated growth in production and reserves, we successfully brought our two down-spacing pilot programs onto full production.”

— Kodiak's CEO, Lynn A. Peterson

Downspacing Test In McKenzie County Proves Successful

Kodiak also released results from the company's first high density downspacing test in McKenzie County. The company drilled six wells targeting the Bakken, three wells targeting the Middle Three Forks, and three wells targeting the Upper Three Forks. The wells are approximately 800 ftt apart and target an approximate 210 acre drainage area.

The wells came online at almost 2,000 boe/d in the first 24 hours and averaged just under 800 boe/d over the first 30 days. The best well produced almost 1,100 boe/d from the Bakken and the worst well produced a little less than 400 boe/d from the Middle Three Forks in the first 30 days.

Tesoro Website Launched In Response to Oil Spill

October 24, 2013 R.T. Dukes

Tesoro has launched tesoroalert.com to keep everyone up to date on the North Dakota oil spill response efforts. The spill was discovered at the on September 29th and became national news a couple of weeks later. Tesoro estimates 20,000 barrels of oil were spilled. The company has recovered approximately 4,000 barrels to date. The spill affected 7-8 acres and remediation efforts are expected to be completed by the end of 2014.

“We deeply regret our recent crude oil spill north of Tioga, North Dakota. This type of event is unacceptable. We take full responsibility and will make the situation right.......We`re committed to leaving the land in the same or better condition it was in before our event, and we are taking steps to prevent incidents of this kind from occurring again.”

— Dan Romasko, COO

A page of FAQs and the October 10th press release are also included on the site.

Mineral Owners Sue Over Bakken Flaring

October 23, 2013 R.T. Dukes

North Dakota mineral owners have started filing class action lawsuits (10 to date) against oil and gas companies that are flaring gas produced from their property.

Roughly 30% or 300 mmcfd of the natural gas produced in North Dakota is flared.

Mineral owners, and the lawyers working for them, hope to force operators to pay them based on the market value of the flared gas. Even though I consider many estimates for losses high because they assume Henry Hub or a similar benchmark natural gas price, there are millions in lost royalties each month.

No matter how you look at it, operators will be more highly scrutinized and might have a bigger financial incentive to decrease flaring. This could be the straw that forces operators to build necessary infrastructure that will minimize flaring. Now that most acreage is held by production in the region, operators can be more deliberate in their development drilling.

One result might be that operators allocate resources in central locations that have access to necessary infrastructure.

The companies named in the suits include:

Continental Resources
ConocoPhillips
Crescent Point Energy
ExxonMobil (XTO Energy)
HRC Operating
Marathon Oil
Samson Resources
SM Energy
Statoil
WPX Energy

The industry will be forced to address this issue in the courts, but watch for operators to accelerate plans to reduce flaring on all fronts. Coincidentally, the ND Petroleum Council announced a new task force dedicated to flaring the day before the law suits became public.

Rigs in the Bakken Add Almost 500 Barrels of Oil Production Per Month

October 22, 2013 R.T. Dukes

The EIA published it's first "Drilling Productivity Report" for six major producing regions in the U.S. and the Bakken didn't disappoint.

The Bakken, along with the Eagle Ford, accounts for approximately 75% of monthly oil production growth in the U.S.

There are several highlights from the report. The average rig drilling in the area adds 450-500 b/d of oil production each month and the play is approaching 1 million b/d.

The EIA also predicts Bakken oil production will grow by 26,000 b/d in November 2013.

The report will be published monthly, so we'll have updates in the coming months. View the report at eia.gov

North Dakota Oil Spill Recovery Efforts Underway - Tesoro

October 18, 2013 R.T. Dukes

North Dakota oil spill recovery efforts are underway near Tioga in Williams County and it will likely be weeks before we know the full story.

The spill affected a little more than 7 acres and did not penetrate groundwater sources or impact wildlife.

Many have criticized the state for taking 11 days to notify the public. One reason for the delay was officials thought the spill was less than 1,000 bbls.

Tesoro now estimates more than 20,000 bbls of oil were spilled from the pipeline. Some are questioning those estimates, but again it's early and very difficult to estimate the true impact.

"As unfortunate as it is, it is actually very beneficial with a clay layer and not hitting water," one Tesoro official stated.

Tesoro and locals are actually lucky as there is thick clay layer approximately 10-12 feet deep that helped contain the oil. The seal has allowed Tesoro to recover more than 3,000 bbls already. Trenches have been dug to allow the oil to flow out of the soil. Those trenches will likely be used like french drains throughout the winter, while remediation efforts continue.

The section of pipe that was leaking has been sent to an independent lab to be studied and a replacement pipe circumventing the spill site is already being installed.

Watch for an official announcement from Tesoro as the cause and impact of the spill can be more confidently determined.