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Amazing energy fact of the day: Recoverable oil in the Bakken Formation is more than double the previous estimates

Bakken-MapA new government study released today estimates that the amount of recoverable oil in the Bakken Formation in North Dakota, South Dakota and Montana (see map above) – at 7.4 billion barrels – is more than twice the previous estimate of 3.65 billion barrels from a 2008 study.

The United States Geological Survey (USGS) today released an updated oil and gas resource assessment for the Bakken Formation and a new assessment for the Three Forks Formation in North Dakota, South Dakota and Montana. The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks represents a twofold increase over what has previously been thought.

The USGS assessment found that the Bakken Formation has an estimated mean oil resource of 3.65 BBO and the Three Forks Formation has an estimated mean resource of 3.73 BBO, for a total of 7.38 BBO, with a range of 4.42 (95 percent chance) to 11.43 BBO (5 percent chance). This assessment of both formations represents a significant increase over the estimated mean resource of 3.65 billion barrels of undiscovered oil in the Bakken Formation that was estimated in the 2008 assessment.

“These world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation’s dependence on foreign sources of oil,” said Secretary of the Interior Sally Jewell. “We must develop our domestic energy resources armed with the best available science, and this unbiased, objective information will help private, nonprofit and government decision makers at all levels make informed decisions about the responsible development of these resources.”

Since the 2008 USGS assessment, more than 4,000 wells have been drilled in the Williston Basin, providing updated subsurface geologic data. Previously, very little data existed on the Three Forks Formation and it was generally thought to be unproductive. However, new drilling resulted in a new understanding of the reservoir and its resource potential.

Note: Harold Hamm, CEO of Continental Resources and a pioneer in horizontal drilling and hydraulic fracturing, estimates that there are actually 24 billion barrels of recoverable oil in the Bakken Formation, an estimate partly based on the assumption that drilling technologies will continue to improve.

16 thoughts on “Amazing energy fact of the day: Recoverable oil in the Bakken Formation is more than double the previous estimates

  1. The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil.

    It means little when you can’t make money because the cost of production is higher than the revenue you get from that production.

    • But with prospects of BOOMING demand and the bets on the shale oil patch now being made by thousands of broadly-based industrial American companies with more knowledge and resources, your undocumented and uninformed observations–once again–have been reduced to pure ludicrous, preposterous and kaka status.

      You are an outsider sitting on the bench as an uninformed observer; don’t pretend that you know more than the decision making insiders whose jobs are at risk and at stake. You answer to no shareholder owners, your status is vacant and hogwash.

      You have no status or position in this revolution, your opinions are, therefore, irrelevant and worthless.

      • But with prospects of BOOMING demand and the bets on the shale oil patch now being made by thousands of broadly-based industrial American companies with more knowledge and resources, your undocumented and uninformed observations–once again–have been reduced to pure ludicrous, preposterous and kaka status.

        I have documented my claims. Look at the super great KOG that is supposedly better than Apple. See any positive cash flow? Notice what is happening to the debt? Those can’t be faked. But note that the depreciation costs can be assumed to be what the accountants want them to be.

        You are an outsider sitting on the bench as an uninformed observer; don’t pretend that you know more than the decision making insiders whose jobs are at risk and at stake. You answer to no shareholder owners, your status is vacant and hogwash.

        Correct. I am an outsider. I only make money if I am right in my analysis. An insider can make money by selling more product to a greater fool. That is why I trust little of what is said and like to check the data for myself. And right now the data says that the depreciation costs are underestimated and underreported because the EURs are twice what the production profiles suggest that they should be. While there are some great wells in the core areas the average will is a loser.

        You have no status or position in this revolution, your opinions are, therefore, irrelevant and worthless.

        I require no appeals to authority because the data tells us what is going on.

  2. A few things:

    1. This is essentially “another new Bakken.”

    2. Recent SeekingAlpha article featured four Bakken operators growing an “enormous” amount of operating cash flow. KOG has a profit margin of 32% and an operating margin of 43%, compared to AAPL with 23% and 31% respectively according to Yahoo!Financial.

    3. The USGS figure of 7.4 billions is the mean. Even the USGS “top line” figure of 11.4 billion bbls is considered conservative.

    4. Even if the operators can’t make any money (LOL) a lot of North Dakotans are certainly getting rich, including the state, which by March, 2013, has more than $1 billion in its Legacy fund (it has been projected to have $650 million by the end of June).

    • KOG has a profit margin of 32% and an operating margin of 43%, compared to AAPL with 23% and 31% respectively according to Yahoo!Financial.

      KOG has been adding debt to finance its activities. It had $273 million in cash flow from operations but wound up spending more than $1 billion for capital investment. It keeps having to issue bonds and rely on short term financing. The last time I looked Apple was swimming in cash. KOG isn’t.

    • 3. The USGS figure of 7.4 billions is the mean. Even the USGS “top line” figure of 11.4 billion bbls is considered conservative.

      It is a guess that depends on many assumptions. One of them is positive economics of the production process but that guess has been proven wrong already for operations outside of the small core areas.

      4. Even if the operators can’t make any money (LOL) a lot of North Dakotans are certainly getting rich, including the state, which by March, 2013, has more than $1 billion in its Legacy fund (it has been projected to have $650 million by the end of June).

      That is true. But if the economics don’t change it will not be sustainable and many of the investments will have to be written down.

  3. At $80 a barrel, how much oil is out there—and in the globe, not just the USA?

    And will consumption rise much for crude, at $80 a barrel?

    My guess is that there is doom in the oil world—prices will stagnate, and maybe go down in coming years. Could be tough for those with high costs. Might be glutty for a a long time.

    • That is the way it has always happened. Recall that after the East Texas Field was found, the governor had to call in the National Guard to shut wells down. The Texas Railroad commission acted as the OPEC from the 1930s to the 1960s.
      It seems in oil you swing from shortage to glut and back again.
      Actually the last glut lasted from the mid 1980s until about early 2000s. ( I recall a few times in that time frame where gasoline in Houston got to under a dollar a gallon)

      • It seems in oil you swing from shortage to glut and back again.
        Actually the last glut lasted from the mid 1980s until about early 2000s. ( I recall a few times in that time frame where gasoline in Houston got to under a dollar a gallon)

        Notice that there is no need to ration production today as we had to in the 1960s? The US has no spare capacity and there is no need to restrict production anywhere.

        • However the role of the railroad commission got taken over by OPEC after 1980. Production rationing by OPEC (who would do it) would only happen after the price falls to below $50 a barrel and the producing countries starting having extreme financial problems.

          • However the role of the railroad commission got taken over by OPEC after 1980. Production rationing by OPEC (who would do it) would only happen after the price falls to below $50 a barrel and the producing countries starting having extreme financial problems.

            I agree that OPEC was modelled after the Texas Railroad Commission and that it was using quotas to ration production of members. But that is no longer happening as the spare capacity is down to a historical low. Hubbert said that we would know when Peak Oil came for the United States by looking at the papers and noticing that the Texas Railroad Commission was no longer restricting output. That took place in 1970.

    • My guess is that there is doom in the oil world—prices will stagnate, and maybe go down in coming years. Could be tough for those with high costs. Might be glutty for a a long time.

      If economic activity continues to stagnate there is no reason why the price of oil should not go down. But that is different than saying that the amount of oil produced will go up. It is now apparent that the production of light sweet peaked during the 2005 to 2007 period and that we are not going back to those levels. After the next contraction we may find that the production of heavy sour and unconventional oil has also fallen and will not get to the previous levels. Shale is not a solution; it is an expensive source that is not economically viable in most locations. It is the destroyer of capital, not the net creator of wealth. While it will make the Wall Street promoters rich it is doubtful that the retail investor is gong to see any positive return over the long term.

  4. I hate the way the USGS does these studies. Most people want to know the *total* amount of recoverable oil (or gas) in a petroleum system (perhaps minus what’s already been produced). These USGS studies calculate “undiscovered” recoverable oil or gas. Well, how much has “already been discovered?” With all the drilling that’s gone on in the Bakken, there’s probably a huge amount of oil that’s “already been discovered” but the USGS doesn’t even mention that. If oil companies have “already discovered,” say, 10 billion barrels, plus the USGS’s 7+ billion barrels, then the total amount of recoverable oil would be 17 billion barrels, which is the more interesting number to know. But most people who look at these studies think that the number the USGS turns out is the whole kitten kaboodle, when it isn’t.

    Same issue happened recently with the Marcellus shale.

  5. Harold Hamm (born December 11, 1945) is an American oilman who was ranked in the March 2012 issue of Forbes as the 30th richest person in America and 76th richest person in the world, with a net worth of $11 billion.[1]

    Hamm was born in Lexington, Oklahoma, the 13th and youngest child of Oklahoma cotton sharecroppers.[2]

    Hamm and Continental Resources have been instrumental in developing the Bakken Oil Field in Montana and North Dakota.[13]

    Hamm was credited in a report with being among oil and energy executives consulted in a plan to devolve permitting on Federal lands to the state where the land is located.

    http://en.wikipedia.org/wiki/Harold_Hamm

    • Hamm and Continental Resources have been instrumental in developing the Bakken Oil Field in Montana and North Dakota.

      You ever bother looking at Continental’s balance sheet? See the exploding debt that is three times higher than it was last year? Note the $1.6 billion in cash from operations? And the $4.1 billion in capital expenditures? This company has been around for a long time and is a pioneer in the shale space. If shale were viable why can’t it self finance after all these years? (Note that you get most of the cash flow from shale wells in the first two years.)

      It looks to me that you can’t make an argument for economic profit in the shale space no matter how hard you try.

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