– Analysts may eat crow on pessimistic Bakken Outlook

DALLAS — Like crows moving on to the next shiny new thing, the incredible new estimate of 30 billion barrels of oil has drawn attention away from the mighty Bakken Formation lately.

 Falling rig counts and faulty assumptions had some analysts sounding the death knell for the Bakken at the end of 2012. The thing is, rig counts aren’t an accurate gauge. Yes, rig counts fell by about 10 percent in North Dakota and, yes, that’s a scary statistic when you consider the fact that Bakken wells are most productive at the start. But while rig counts may have fallen, well counts were on the rise.

As is often the case, operators have been improving efficiencies by drilling multiple wells through single rig sites. Bakken pioneer Continental Resources, for example, drilled an average of seven wells per rig in 2011, compared to an average of 11 wells per rig in 2012.

Continental has said that it expects to drill 262 wells in 2013. The company drilled 175 in 2011 and 235 wells in 2012.

Now comes the latest assessment of the Bakken by the United States Geological Survey (USGS) and things are looking better for the Bakken. According to the USGS April news release, the Bakken and Three Forks Formations contain twice the recoverable oil as the last USGS estimate in 2008 (a total of 7.38 BBO), and three times more natural gas and natural gas liquids than the previous estimate (6.7 trillion cubic feet of natural gas and 0.53 billion barrels of natural gas liquids).

This is sort of par for the course with the Bakken. In 1995, the USGS estimated 151 mil Investment and technology key to unlocking lion barrels of recoverable oil but adjusted its Bakken’s full potential estimate in 2008, putting the figure at 3.65 bil- Accessing all of the Bakken’s resources will lion barrels of oil. require continued advancements in drilling

The USGS estimates are typically on the technologies and extraction techniques. It was conservative side; Continental has put the increased drilling in the Williston Basin, number as high as 30 to 35 billion barrels of oil after all, that enabled the April USGS assess for the Bakken and Three Forks combined. ment with a lot more data than was previously

 With each new assessment, the news just available to the USGS. gets better and better. Fortunately, the industry is well positioned to

Now, analysts expect to see 5,000 new wells make the necessary investments in exploration in the Bakken by 2015 and another 28,000 by in drilling to develop promising Bakken forma-2035. tions. Both WTI and Brent prices are on the rise, and America’s refining and transportation infrastructure is starting to come up to capacity to handle the oil and gas boom. Though it won’t be popular among consumers, the industry will need to maintain higher oil and gas prices to help fuel investment. High oil and gas prices can be at least partially credited for the shale oil and gas boom that began in 2008. The western edge of the Bakken in Montana is a good example. A

few thousand feet shallower and interrupted by the Brockton-Froid Fault, its existing wells have brought up more

briny water than oil, making its prospects for serious investment seem dim. But the Bakken continues to surprise.

Keep in mind the fact that the Three Forks Formation was once thought to be unproductive, but increased

commercial development made possible by advances in fracking, horizontal drilling and microseismic imaging

gave operators a more accurate and optimistic picture of the Three Forks’ potential. The recent USGS estimates

for the Bakken should be making it shiny enough for the crows to come home to roost, bringing the capital

necessary to continue unlocking all the treasures hidden beneath.

Faulkner is the Founder and CEO of Dallas-based Breitling Energy Companies, the holding company of Breitling

Oil and Gas and Breitling Royalties, which he also founded and serves as CEO. The companies are in the oil and

natural gas exploration, production and investment business. Faulkner’s diverse and extensive background in the

oil and gas industry in North America, Europe and the Middle East covers all aspects of oil and gas operations,

including project management, production, facilities, drilling and business development. Faulkner serves as an

advisor to the ECF Asia Shale Committee and sits on the Board of Directors for the North Texas Commission.