Later, 12:49 pm: I finally got a chance to see the linked article in the original post. This is a really nice article, putting everything together in one spot. It is of interest that all of this has been posted in bits and pieces earlier on the Million Dollar Way, some of it quite awhile ago, some of it very recently: a) the CLR graphic on 14 wells on one 1280-acre spacing unit; b) a trillion-bbl Bakken reservoir (903 billion bbls OOIP); c) the lower benches of the Three Forks; d) closer spacing of horizontal laterals; e) KOG's Smokey and Polar pilot projects; and, f) Whiting's six or seven downspacing pilot projects.
Whiting, by the way, provided an interesting data point in their most recent earnings conference call, regarding spacing of horizontals in various locations around the Bakken.
The comments, as usual, are very interesting. XOM has said that their production will actually decrease this year and then increase 2 to 3 percent in the out years; compare that with the production increases expected for the Bakken-centric operators. Today, at Yahoo, the forward P/E for XOM: 11; OAS, 11; KOG, 10; CLR, 13; WLL, 11; CVX, 10, COP, 10.
Disclaimer: this is not an investment. Do not make any investment decisions based on what you read at this site.
In addition, the article did not address cost savings Bakken operators will start seeing this year due to myriad of factors. Having said all that, the linked article in the original post will bring folks up to speed. The author, Richard Zeits, says an article on KOG is forthcoming.
A reader sent this in as a comment. It's important enough to re-post as a stand-alone post. Lots of detail, explanations. So many story lines. A huge "thank you" to the reader for alerting me to the article:
The March 5, 2013 Seeking Alpha article by contributor R Zeits entitled, “The Birth Of 'Array Fracking' in the Bakken” Below are a couple of short excerpts from this very long and informative post that indicate why IMHO this is a must read for any Bakken investor.There are many, many story lines here. I can't even begin to think of all the posts that could come from this article. It looks like I will have a long, long weekend.
Bakken: The Downspacing Bounty And Birth Of 'ARRAY Fracking' - Mar 5 2013, 14:41, includes: CLR, COP, EOG, ERF, HES, KOG, MRO, NFX, NOG, OAS, QEP, STO, TPLM, WLL, WPX, XOM
What is the motivation behind the effort to downspace? According to Whiting Petroleum's CEO Jim Volker:
And so the idea here is to drill a series of pilots - and we're going to be doing that in both Hidden Bench, Pronghorn, Sanish, possibly Missouri Breaks as well - to go in and drill on higher densities, essentially doubling the density in the better reservoirs in there, TO DEMONSTRATE OUR ABILITY TO INCREASE THAT RECOVERY EFFICIENCY, get it up from 10% or 11% UP TO SOMEWHERE AROUND 20%.
And what that means is breaking up more rock. And we don't believe that with the current spacing that we are on, that we are getting all of the oil that's out there. So that's really what this is all about
The majors, Exxon Mobil (XOM) and Statoil (STO), and super-independents, ConocoPhillips (COP), Marathon Oil (MRO) and Hess Corporation (HES), as well as privately held operators - the companies that account for a large portion of drilling activity in the Bakken - rarely share sufficient details of their operation in the play. However there are multiple indications that the downspacing evaluation and deeper Three Forks testing by this group of companies is also ongoing.
See http://seekingalpha.com/article/1248431-bakken-the-downspacing-bounty-and-birth-of-array-fracking for the full article.
But to just get started: remember in the early days of the Bakken boom, folks were talking about 1 - 3% recovery? Among the amateur sites, MDW was one of the first to note that recovery looked a lot closer to 8% based on corporate presentations. Whiting confirms that in this conversation, suggesting they are already at 10%, and looking to 20%.
That would be doubling their recoverable reserves.