DUCs and Drilling in the Bakken: Oasis Petroleum Case Study

Our guest author, Tanya Andrien, is the Market Director for Finance and Oilfield Services, and Product Manager for Analytics at Drillinginfo. We were interested in her observations because many of our clients use our marketplace to secure pricing for work on DUC wells.

Oasis Petroleum: Drilling and DUCs in the Bakken

Nowadays, everyone seems to be tracking the Drilled but Uncompleted well inventory (DUCs) to forecast supply and evaluate how operators will strategically utilize DUCs to lower capital requirements in 2016. I am curious whether operators will complete their DUC wells faster than they add new wells, allowing them to maintain production levels now but potentially jeopardizing 2017 results. As an example, I analyzed Oasis’ operations in the Bakken. While Oasis doesn’t appear to be completing its DUCs in lieu of drilling new wells, their activity demonstrates a change in strategy during 2015 and into 2016. Here are some observations:

Oasis has almost 90 DUC wells in the Bakken Grouping the DUC wells by drilling vintage, and color-coding by county, shows a definite shift in activity.

Drilling Info Graphic
FIGURE 1: Oasis DUC Wells in the Bakken by Vintage, Colored by County. Data as of May 15, 2015

As shown in Figure 1, DUC wells drilled prior to June 2015 vary across four counties, and appear to be “deferred completions”, or wells that probably require an oil price recovery to be completed. By contrast, DUC wells drilled after June 2015 suggest Oasis high-graded activity to only McKenzie County, which is consistent with their rig movements, as illustrated in Figures 2 and 3 below.

Drilling Info GraphicFrom March 2014 through June 2015, Oasis was drilling in six different counties (Figure 2). As of July 2015 to present, Oasis has focused solely on McKenzie County (Figure 3).

But did they complete some of their early vintage DUC wells in 2016? I compared Oasis’ May 15 DUC well count to its count in early February, and Oasis had only reduced the DUC count by a few wells during that time in Mountrail, Roosevelt and Williams counties. Oasis does not appear to be completing many of its early vintage DUC wells.

Drilling Info Graphic
FIGURE 4: Oasis New Wells by Month of First Production, Colored by County. Data as of May 1, 2015.

What about McKenzie County? The DUC count in McKenzie County decreased by 5 wells from early February to mid-May, however, we haven’t seen the production results yet as no new McKenzie County wells were brought online since Q3 2015.

Based on Figure 4 above, Oasis has only reported new production in Q4 2015 from Williams and Mountrail counties, and there are no new wells in 2016. Since Figure 1 indicates that Oasis has continued to drill new wells in McKenzie County, the lack of new wells coming online is probably explained by the Confidential Well exception in North Dakota; Oasis reported 26 wells in McKenzie County under Confidential status as of May 15, 2015.

Despite drilling activity being focused on McKenzie County, Oasis’ permit activity since January 2015 demonstrates that, while they filed the greatest number of permits in McKenzie County (130 permits), Williams, Mountrail, and Roosevelt counties were also important, with 51, 41, and 36 permits filed, respectively.

Drilling Info Graphic
FIGURE 5: Oasis Permit Filings, 1/2015 – 3/2016. Data as of 5/16/16.

The recent permit activity in Roosevelt County suggests Oasis may begin drilling here soon, at which time Oasis might also complete its DUC wells in Roosevelt. Monitoring rig activity will be the next indicator of a change in focus.

¹ This count reflects a literal definition of a DUC well, meaning drilling is finished but there is no evidence of production or completion. Because we track rig activity on a daily basis, some of the DUC wells may have been drilled as recently as two days ago and are part of normal work-in-process inventory which Oasis may plan to complete immediately.

Tanya Andrien

Author: Tanya Andrien

Tanya is the Market Director for Finance and Oilfield Services, and Product Manager for Analytics, at Drillinginfo. Prior to Drillinginfo, Tanya was a Lecturer at the McCombs School of Business at the University of Texas at Austin, and the Associate Director of the McCombs Energy Center, where she was responsible for alumni relations, student programming, and business operations. Prior to working for McCombs, Tanya was a Director with Duff and Phelps, a financial advisory firm.