I have been doing some research in regards to the proppants used in the fracturing procedures on Bakken wells. It appears that “quality” proppants are in short supply thus a lesser quality is being utilized in the majority of wells. Also, it appears that there is a shortage of all proppants due to the increased demand for the product. Has anyone else gathered similiar information and does all operators in the Bakken play use the same type of proppants.
The AFE for well participation I am currently looking at from Kodiak for a 9.4 million dollar well includes 4 million dollars plus for well stimulation. Seems a little bit high unless they are using the imported top of the line hardened ceramic bead sand. I see three possibilities, in no particular order are 1. They are sparing no cost to make it a very good well. 2. They are trying to scare off participants by jacking the price up. Or 3. Demand has become so great that they must pay whatever price the supplier of proppants cares to demand. It will be interesting to see how the actual cost breaks down.
Of your three possibilities, I would say the third is probably right on the money. My thinking it is the old “supply/demand” theory in the industry and these suppliers are going to cash in while the boom is active. It worries me that some drilling companies may try to cut corners in the area of well stimulation due to the cost factor and thus not get the greatest production potential from a well. My main interest is on this stimulation procedure as it is the heart of the completion process.
The truth isn’t always as cut and dried as I’d like. I Think it’s likely a bit of all 3 are correct. Wouldn’t using low quality proppants be bad for production, long term?
charles s mallory said:
Of your three possibilities, I would say the third is probably right on the money. My thinking it is the old "supply/demand" theory in the industry and these suppliers are going to cash in while the boom is active. It worries me that some drilling companies may try to cut corners in the area of well stimulation due to the cost factor and thus not get the greatest production potential from a well. My main interest is on this stimulation procedure as it is the heart of the completion process.
r w kennedy:
Yes, the use of low quality proppants will result in production which is probably sub-par for what the well is capable of producing. My worry is the fact that if top grade proppants are in short supply or if the operator uses this area to cut cost, guess who all gets less production and less $. I'm hoping this is not the case but looking over production figures on completed wells in the same Township, I sometimes see a huge difference in the # of barrels produced. I know that this will occur due to the locations but it sure makes you wonder if the quality of proppants has a factor in this. I retired from the oil and gas industry in Texas and through the years been actively involved in drilling many gas wells. I have witnessed first hand what a poor frac job will do.
That 9.4 million dollars seems ridiculously high unless they are planning on doing multiple horizontal legs because I recently saw a marathon AFE with a 2 section spacing for 6.5 million. Granted Kodiak is a smaller company and because of that they often have to pay a lot for fracking (I do not know if Kodiak has their own fracking crew which would could be the reason behind the huge completion costs)…which well is that AFE for?
The well in question is skunk creek2-24-25-15H, the location of which is T149N R93W sec24 NE 1/4. This is the second well to be drilled in the North half of sec 24 although the first well I’m told was offset drilled and actually legs into a different well spacing than mine. Kodiak also tells me that a third well, which will leg into my section/ spacing will be drilled in 60 days. It would seem to me that it would be crowded with multiple legs from 2 or more wells. I signed a lease regarding my interest twice for Kodiak and they recorded both and honored the draft on neither. Since I have brought this to their attention they have shown me a remarkably small [carrot] to ratify the lease and accept payment. They also have shown me some [stick] saying they intend to go before the N.D. Oil and Gas Commission and petetion for an increase of the risk penalty to 200% or 300% since their lease ratification offers weren’t well recieved.
Philip Mollner said:
That 9.4 million dollars seems ridiculously high unless they are planning on doing multiple horizontal legs because I recently saw a marathon AFE with a 2 section spacing for 6.5 million. Granted Kodiak is a smaller company and because of that they often have to pay a lot for fracking (I do not know if Kodiak has their own fracking crew which would could be the reason behind the huge completion costs)...which well is that AFE for?
Have you looked at the ND GIS? It looks like Kodiak plans to drill 4 wells all from the same well pad. The four wells are shown below. It is quite possible that the AFE that you received are for both Skunk Creek wells. One reason why they drill so many from the same pad is so they don't have to take down the rig and instead they can just roll it the couple of feet to the new wellbore location. As for the other part, correct me if I am wrong...Kodiak leased the mineral rights and recorded the leases but won't give you the check for the bonus. What was the reason they gave for not paying you? As for the risk penalty, I believe they can only impose a 50% penalty for mineral owners (for a mineral leasee, it is 200%, but it sounds like they are petitioning it to get it raised to 200% for you, the mineral owner). Did I get that right? Why did they ratify the lease though? When did you receive the AFE?
| 1 | 19825 | 33-025-01202-00-00 | KODIAK OIL & GAS (USA) INC. | SKUNK CREEK 2-24-25-15H |
| 2 | 19826 | 33-025-01203-00-00 | KODIAK OIL & GAS (USA) INC. | TWO SHIELDS BUTTE 2-24-12-1H |
| 3 | 19827 | 33-025-01204-00-00 | KODIAK OIL & GAS (USA) INC. | SKUNK CREEK 2-24-25-16H |
| 4 | 18517 | 33-025-01011-00-00 | KODIAK OIL & GAS (USA) INC. | TWO SHIELDS BUTTE 2-24-12-2H |
Yes I have seen the ND GIS. I have a subscription. Doing a well search for that section 8 wells come up not including my great grandfathers. Kodiak claims it was all a big mixup involving another mineral owner with a similar name getting paid, and my payment being denied because they thought they had paid me even though they sent me a second lease which I executed and they recorded. I have viewed both on the NDRIN website as I have a subcscription to that now also. Yes they told me they intend to go before the ND Oil and Gas Comission to ask that the risk penalty be raised to 200% or 300%, which pretty much dooms their chance of leasing my brother who has equal interests in the pool.
Philip Mollner said:
Have you looked at the ND GIS? It looks like Kodiak plans to drill 4 wells all from the same well pad. The four wells are shown below. It is quite possible that the AFE that you received are for both Skunk Creek wells. One reason why they drill so many from the same pad is so they don't have to take down the rig and instead they can just roll it the couple of feet to the new wellbore location. As for the other part, correct me if I am wrong...Kodiak leased the mineral rights and recorded the leases but won't give you the check for the bonus. What was the reason they gave for not paying you? As for the risk penalty, I believe they can only impose a 50% penalty for mineral owners (for a mineral leasee, it is 200%, but it sounds like they are petitioning it to get it raised to 200% for you, the mineral owner). Did I get that right? Why did they ratify the lease though? When did you receive the AFE?
1 19825 33-025-01202-00-00 KODIAK OIL & GAS (USA) INC. SKUNK CREEK 2-24-25-15H
2 19826 33-025-01203-00-00 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 2-24-12-1H
3 19827 33-025-01204-00-00 KODIAK OIL & GAS (USA) INC. SKUNK CREEK 2-24-25-16H
4 18517 33-025-01011-00-00 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 2-24-12-2H
Kodiak never offered a check. I have a couple weeks left to elect to participate.
Philip Mollner said:
Have you looked at the ND GIS? It looks like Kodiak plans to drill 4 wells all from the same well pad. The four wells are shown below. It is quite possible that the AFE that you received are for both Skunk Creek wells. One reason why they drill so many from the same pad is so they don't have to take down the rig and instead they can just roll it the couple of feet to the new wellbore location. As for the other part, correct me if I am wrong...Kodiak leased the mineral rights and recorded the leases but won't give you the check for the bonus. What was the reason they gave for not paying you? As for the risk penalty, I believe they can only impose a 50% penalty for mineral owners (for a mineral leasee, it is 200%, but it sounds like they are petitioning it to get it raised to 200% for you, the mineral owner). Did I get that right? Why did they ratify the lease though? When did you receive the AFE?
1 19825 33-025-01202-00-00 KODIAK OIL & GAS (USA) INC. SKUNK CREEK 2-24-25-15H
2 19826 33-025-01203-00-00 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 2-24-12-1H
3 19827 33-025-01204-00-00 KODIAK OIL & GAS (USA) INC. SKUNK CREEK 2-24-25-16H
4 18517 33-025-01011-00-00 KODIAK OIL & GAS (USA) INC. TWO SHIELDS BUTTE 2-24-12-2H
So even though they said it was a mix-up, they still aren’t going to pay you? I have never dealt with Kodiak but after talking to you, it seems like they are definitely not a good company (i would use another description but I feel that it may be inappropriate for this forum). You may need to get those leases terminated if they don’t pay you your bonus. As for the AFE, I have a feeling that when they hold the hearing with the ND oil and gas commission, if you can show they never paid you your bonus, they will probably not accept their petitions.
The AFE's are reasonable. Frac expenses have gone from $1.5MM to over $5MM (& are still increasing) in the last year for multiple stage horizontal completions. All the increases are due to a shortage of equipment, manpower AND materials (including but, certainly not limited to frac proppant). MOST operators realize they need to put the best completion on a formation to get the best results. While they could skimp on the uphole work some (light pipe, not enough cement etc.) they really can't scrimp on the frac to get the production they need to make the expenditure an economic venture. If they skimp on the uphole work, it will come around to bite them in the future & truly doesn't make economic sense. All state regulatory agencies that we have dealt with have the expertise to identify well completion problems & have done a good job in most cases..As has been mentioned, mistakes & unforeseen failures have to be expected (it is just another human endeavor, you understand) & if they are dealt with in a timely manner, long-term problems are prevented.
That's a long way around to say that frac proppants do affect the completion results & are a major concern of operators in ALL areas of the country dealing with the oil & gas horizontal boom.
The funny thing is I received another afe where the well stimulation, completed 6 months ago, was $400,000 and not over $4 million. Both are 2 section long lateral wells. If the cost went up 10X in 6 months then at that rate they won’t be able to drill an economic well in another 6 months.
Nick Privett said:
The AFE's are reasonable. Frac expenses have gone from $1.5MM to over $5MM (& are still increasing) in the last year for multiple stage horizontal completions. All the increases are due to a shortage of equipment, manpower AND materials (including but, certainly not limited to frac proppant). MOST operators realize they need to put the best completion on a formation to get the best results. While they could skimp on the uphole work some (light pipe, not enough cement etc.) they really can't scrimp on the frac to get the production they need to make the expenditure an economic venture. If they skimp on the uphole work, it will come around to bite them in the future & truly doesn't make economic sense. All state regulatory agencies that we have dealt with have the expertise to identify well completion problems & have done a good job in most cases..As has been mentioned, mistakes & unforeseen failures have to be expected (it is just another human endeavor, you understand) & if they are dealt with in a timely manner, long-term problems are prevented.
That's a long way around to say that frac proppants do affect the completion results & are a major concern of operators in ALL areas of the country dealing with the oil & gas horizontal boom.
WOW, I wonder what kind of a producer that 2 mile lateral is with a $400k frac?
The economics you are pondering are real-life problems these days.
With only 6 months production to look at it seems to be on track to be one of the better of my 8 wells.
Nick Privett said:
WOW, I wonder what kind of a producer that 2 mile lateral is with a $400k frac?
The economics you are pondering are real-life problems these days.
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