June's flood in and around the Bakken Shale play in North Dakota has been a setback for all the producers in the area, but it may not be as devastating as earlier reports indicated, MDU Resources Group Inc. senior executives said Tuesday during a second quarter earnings conference call.
Just a month ago the Bismarck, ND-based company forecast a reduced 1-5% increase in oil production, down from the previously released guidance of a 5-10% increase compared with 2010, and financial analysts on Tuesday's call asked about this (see Shale Daily, Aug. 3). MDU officials acknowledged that the weather has clearly had a impact, but they said they need to step up activity to rise above the setbacks.
"Clearly, the weather had an impact [on our operations] and it affected the whole industry," said Kent Wells, CEO of MDU's exploration and production (E&P) business, Fidelity E&P. "Everyone was slowed down, so we all have a little bit of a backlog to take care of as we go forward, but at Fidelity we're in pretty good shape on that."
The solution, Wells said, was for MDU to ramp up its activity to get to "the higher levels of growth we are looking to down the road."
An analyst questioned the company's proposed drilling plans for Stark and Mountrail counties in the Bakken, but Wells downplayed any pullback in the changing numbers. Wells said Fidelity is running two rigs in the Bakken with three areas of interest: Stark, Mountrail and new properties in Montana (Richland County).
"We'll be juggling those two rigs and running them continuously among the three areas," he said. "The wells being drilled in each county will vary from time to time, but I wouldn't read much into that. It is just a matter of how we are managing our logistics."
When asked about drilling costs in the different parts of the Bakken, Wells did not want to get pinned down, but he acknowledged that Mountrail was the "better part of the basin, but as we are finding in all of the shale plays across the country, as we work in them longer, we are able to improve them. That is seen in the wells we are offsetting today that were drilled a year and a half ago. They are doing significantly better."
In the second quarter earnings report, MDU CEO Terry Hildestad cited "favorable results" on recently completed wells in Mountrail County, such as the Hill 31-30H having a five-day initial production rate of 1,633 gross boe/d, and a 30-day rate for the Behr 16-21H of 1,216 boe/d. Overall in the second quarter, MDU's total oil production in the Bakken was running about 3,700-3,800 b/d, the company said.
"We are focused on moving more toward a balanced portfolio of gas and liquids," said Hildestad, noting that MDU will add rigs as it pursues further expansion plans.
"Those were 12-80 acre spacing wells two miles wide with 30 stages in each, which we are starting to see looks like a good quantity to go with for that length of lateral," Well said. "I think we were very encouraged by the rates we got from those wells. We will continue with that mindset as we go forward with the rest of our development there."
In response to a question, Wells would not give any production estimates from the three wells in neighboring Stark County. Getting these wells cleaned up has been delayed by the recent bad weather, he said, but he would not commit to having results from the wells by the next quarterly call.
For the most part E&P questions centered on the Bakken, although MDU has developing interests in the Niobrara, Heath Shale and Paradox Basin. There was one question on Niobrara, and there, Wells said the company plans to move a rig there in the fourth quarter this year to drill four "appraisal" wells among the three blocs that Fidelity is eyeing. "We'll drill two wells each on the two southern blocks, and based on how those do, will dictate what the development will be like there and what additional appraisal work we do on the northern block," he said.