An Oklahoma exploration and production company, pushing the technology envelope for years, discovering new fields and finding ways to produce from those fields, understands the potential in the Bakken crude oil shale play because it has operated in Williston Basin since the 1980s.
The report from the U.S. Geological Survey earlier this month about the huge simply confirms what Enid-based Continental Resources Inc. has been doing 20 years.
“The report confirmed what we have been doing for a long time,” said Harold Hamm, Continental’s chairman and CEO. “It validates our activity and what we’ve accomplished.”
Continental uses horizontal drilling to take advantage of the behemoth Bakken, an oil reserve stretching across North Dakota, Montana into southeastern Saskatchewan. It is so massive that it contains 10 times more barrels of oil than Alaska’s North Slope.
All oil and natural gas wells are drilled vertically. But with a horizontal well, the hole is drilled down to a point, and then the pipe is angled out and made to run horizontally, called a “leg” or a “lateral,” for several thousand feet.
The typical Continental North Dakota Bakken well is drilled to a vertical depth of 10,000 feet then a horizontal leg is extended another 9,000 feet for a completed cost of about $5 million, said Mark Monroe, CRI president.
“The Bakken in North Dakota consists of three zones – Upper Bakken Shale, Middle Bakken and Lower Bakken Shale. The horizontal lateral is typically laid in the Middle Bakken, which can be a dolomite, limestone or sandy member. The entire package of the three formations range up to 120 feet in thickness,” Monroe said.
CRI recently drilled a well with the horizontal lateral in the Three Forks/Sanish zone which lies just below the Lower Shale, Monroe said.
“Horizontal drilling is very accurate,” he said. “We are drilling wells in areas where we have fairly good control to know at what depth we expect to encounter the zones. Also, technology has improved the tools available to help us stay within zone.”
The company shifted its focus away from Oklahoma in search of larger prospects years ago, Hamm said. That search led Continental to Montana and the Dakotas.
Today fields in the Williston Basin make up the largest part of the company’s business, said Warren Henry, of Continental Resoures’ investor relations. CRI’s properties in the Rocky Mountain region represented 84 percent of its holding.
“The Bakken formation is widespread and relatively uniform in development throughout the Montana and North Dakota portions of the Williston Basin.”
Other Tulsa-based Players
Continental is not the only Oklahoma E&P involved in the Bakken. Tulsa-based Unit Corp. and Helmerich & Payne Inc. either have their own rigs operating there or clients operate their equipment.
Unit has a 20 percent interest in the Bakken and plans to add another 10 to 20 wells this year, said Larry Pinkston, Unit president and COO.
“The industry is ready to make ? huge forecast but the only way to confirm it is to drill more wells,” he said.
Helmerich & Payne has seven of its FlexRigs operating in the region, said Juan Pablo Tardio, manager of investor relations.
“This is a relatively new project for us,” he said. “We have been there since 2005 and we are looking to expand our operations.”
Horizontal drilling and advanced fracture stimulation technologies have enabled commercial recovery from this historically non-commercial reservoir.
CRI has been using the breakthrough techniques for years because CRI is a science-driven E&P company, said Subash Chandra, managing director of Energy Analysts at Jefferies. “For the last 40 years the company has taken the science by the horns. They have a vision and an ability to look at areas that makes sense to them.”
CRI expects to drill about 55 gross, or 33 net, Bakken wells this year, Monroe said.
CRI mapped the Middle Bakken reservoir in Richmond County, Mont. in 1995. While the majority of companies were using vertical drilling, CRI approached the same area with what was then a radical idea — horizontal drilling.
Over the past decade CRI wells doubled Montana’s production — raising the daily 50,000-barrel output to 100,000 barrels.
CRI has been buying up acreage for years and today controls 460,000 acres, easily the largest position in the region.
“They have demonstrated an historic willingness to take risks,” John Freeman, senior vice president of Raymond James & Associates. The company co-managed an initial public offering of 29.5 million CRI shares at $15 last May, when the company went public.
The Bakken covers more than 220,000 square miles, and CRI is targeting that portion in western North Dakota. One well, drilling into another promising formation, called the Three Forks Sanish, has become the biggest producer in the entire play, producing 350,000 barrels in 18 months, Freeman said.
The need for horizontal drilling technology is growing, Hamm said.
“When I first started drilling, it was a novelty,” Hamm said. “Then, few operators used the technique. Now, 90 percent of our wells are horizontal.”
Over time there has been a greater demand for precision drilling. Horizontal drilling has become so accurate, the saying goes, that engineers could “hit a can a mile away” with the drill bit.
With the release of the USGS report, it could get crowded in the North Dakota field Hamm admits.
“We think the party is just beginning,” he said. “There is more opportunity today than ever before. ?