Bakken player focuses on cutting costs

With rig activity down more than 40% from the peak in late 2008, Encore Acquisition is focused on reducing costs, high-grading acreage, and continuing a highly successful refrac program.

By OGJ editors
HOUSTON, Mar. 3 -- With rig activity down more than 40% from the peak in late 2008, Encore Acquisition Co., Fort Worth, is focused on reducing costs, high-grading acreage, and continuing a highly successful refrac program.

The company, which has drilled 24 wells in several areas of its 307,900 acres in the Bakken play, estimates 3.75 billion bbl of oil in place on its holdings. Initial potential rates averaged 411 b/d.

Low recovery of 1.9% of the oil in place per well based on 300,000 bbl/well presents opportunities for downspacing, improved drilling and completion techniques, and possibly even enhanced recovery once oil prices recovery, the company said Mar. 3.

Encore saw its costs per 640-acre Bakken single-lateral well climb to $5.2 million in 2008 from $4.5 million in 2007. It has a goal of reducing the average to $4 million this year. It is already seeing 8-10% cost savings compared with 2008 wells and needs another 14% reduction to reach the $4 million goal.

Casing costs, which doubled in 2008, are starting to decline. Stimulation costs have dropped 40% since mid-2008, and other costs are 15% lower.

Encore wants to cut $1 million from the cost of 1,280-acre Bakken wells that averaged $6.5 million last year.

The company has drilled 12 operated Middle Bakken wells that averaged 380 boe/d in the first 7 days on production and 7 Sanish wells that averaged 487 boe/d. Gas-oil ratio is assumed to be 1,000 scf/st-tk bbl.

Refracs, initiated 9-18 months after the initial completion, are returning 80,000 bbl of incremental reserves at a cost of $500,000. Multiple refracs may be possible at many wells.

Encore, producing 3,000 boe/d from the play, has a $73 million budget for 2009 that includes $12 million for land acquisition. It has an interest in 530 identified locations in five areas. Economics are marginal at $50/bbl and $5/Mcf at $5 million/well and 250,000-300,000 bbl recovery.

Bakken and Sanish appear to be in communication in some areas where they are separated by less than 20 ft but may be separate along the Nesson anticline where they are 50-75 ft apart, Encore said.

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