Mire & Associates, Inc. www.mireandassociates.com 2014 Bakken Shale Activity & Performance Review 8/15/2015 2014 Bakken Shale Activity & Performance Review 1
2014 Drilling Locator Map Divide Burke Williams Mountrail Richland McKenzie Dunn Billings 2014 Wells 8/15/2015 2014 Bakken Shale Activity & Performance Review 2
Activity continues to increase through 2014 Mire & Associates has analyzed the available data for the Bakken/Three Forks oil shale play for 2014. Our goal has been to answer the questions, what is the current well performance & how is it changing each year?, who is drilling the best wells? Drilling activity has continued to be strong despite lower prices toward the end of 2014. There were 3,085 wells spudded to target the Bakken & Three Forks in 2014. See the activity trend. Activity Trend Three Forks Completions Spuds Bakken Completions 566 810 865 300 103 385 178 656 1,022 1,396 1,254 1,372 2009 2010 2011 2012 2013 2014 8/15/2015 2014 Bakken Shale Activity & Performance Review 3
Thousands 500 450 Bakken Play Production Trend 10,000 9,000 400 Oil MBO 8,000 350 300 250 200 150 Gas MMCF Water MBW Average Well Count Oil up 26%, gas up 35% over 2013. Well count up 29% 7,000 6,000 5,000 4,000 3,000 Average Well Count 100 2,000 50 1,000 0 2008 2009 2010 2011 2012 2013 2014 Oil MBO 42,827 63,127 97,283 140,440 233,403 307,532 388,981 Gas MMCF 32,621 49,492 78,124 129,655 238,671 331,784 447,365 Water MBW 8,910 14,174 34,911 68,250 144,893 207,192 295,667 Average Well Count 1,239 1,751 2,386 3,414 5,158 7,182 9,284 Dec 2014 Active wells 10,184, average well rates 116 BOPD, 141 MCFD, 91 BWPD 0 8/15/2015 2014 Bakken Shale Activity & Performance Review 4
Initial Production & Reserves per Well 600 Total Play Performance vs Time Oil IP30 (BOPD) OiI EUR (MBO) EUR - MBOE(6) 500 400 300 200 100 0 2009 2010 2011 2012 2013 2014 8/15/2015 2014 Bakken Shale Activity & Performance Review 5
Bakken Shale Play 6 year performance data* * Based on production type curves 8/15/2015 2014 Bakken Shale Activity & Performance Review 6
Oil IP30 (BOPD) Initial Production Rates over Time 600 Total Play Bakken Three Forks Rates continue to slowly improve 500 400 300 200 100 0 2009 2010 2011 2012 2013 2014 8/15/2015 2014 Bakken Shale Activity & Performance Review 7
Where are the best wells? We also looked at where the best rates and reserves were being achieved and found that based on 2014 average oil IP 30, EUR, and total 2014 oil production, the best counties were McKenzie, Mountrail & Dunn. Mountrail County had the highest reserves per well. 2014 Total Oil (MMBO) from wells coming online in 2014 Dunn, 18,726 Divide, 4,012 Williams, 16,780 McKenzie, 51,730 McKenzie County had the best initial oil rates and most production in 2014 2014 IP30 (BOPD) Mountrail, 23,844 2014 Oil EUR (MBO)/well Williams 480 McKenzie 640 Williams 379 McKenzie 411 Stark 541 Dunn 602 Stark 390 Dunn 466 Mountrail 550 Mountrail 470 8/15/2015 2014 Bakken Shale Activity & Performance Review 8
2014 Activity & Well Performance by County* Completion Reservoir Average Well Performance County Bakken Sanish Three Forks TF/Bk Total Oil BOPD MCFD EUR Oil EUR Gas MBOE(6) McKenzie 502 14 277 10 803 640 672 411 669 523 Mountrail 267 2 164 433 550 413 470 756 596 Williams 239 158 397 480 550 379 534 468 Dunn 168 113 2 283 602 512 466 358 526 Divide 54 77 131 295 205 176 181 206 Richland 85 85 315 200 385 279 432 Burke 28 20 48 320 300 261 270 306 Stark 2 35 37 541 430 390 317 443 Billings 3 26 29 475 500 191 204 225 Roosevelt 22 3 25 297 167 292 310 344 * Mclean county excluded due to low well counts As in 2013, Mckenzie county had the most wells completed in 2014 8/15/2015 2014 Bakken Shale Activity & Performance Review 9
Best Operators 1,200 1,000 800 600 400 We have analyzed production data for over two thousand (2,200) wells which came on line in 2014 and find that the best operators are drilling wells with IP 30 rates* of 520-1300 BOPD and with EURs of 285-871 MBO. The overall average well in the play had an IP 30 of 567 BOPD and an EUR of 405 MBO in 2014. Well results for the most active operators are shown below. Continental was the most active driller but WPX had the highest reserves per well. *IP 30 rates were estimated from reported days produced & monthly production Oil IP30 Gas IP30 EUR Oil Well Count 300 250 200 Well Count 150 100 200 50 0 0 8/15/2015 2014 Bakken Shale Activity & Performance Review 10
2014 Activity & Well Performance by Operator* * Top 25 operators based on wells drilled in 2014, (41 operators were active in the play during 2014) 8/15/2015 2014 Bakken Shale Activity & Performance Review 11
2014 Top 10 Operators by Initial Oil Rate 8/15/2015 2014 Bakken Shale Activity & Performance Review 12
Bbl/Mcf Millions 25 20 Top 20 Operators - 2014 Total Production Bakken & Three Forks Zones (from wells coming online in 2014) Oil Gas Water 15 Whiting had the most production in 2014 10 5 0 8/15/2015 2014 Bakken Shale Activity & Performance Review 13
What are the best wells for 2014 according to IP 30? Note that most of these wells were in McKenzie county. 8/15/2015 2014 Bakken Shale Activity & Performance Review 14
What are the best wells for 2014 according to oil EUR? Note that Enerplus had 3 of the highest well reserves. 8/15/2015 2014 Bakken Shale Activity & Performance Review 15
Initial Oil Rate (IP30) BOPD 2014 Bakken Shale Initial Oil Rate vs EUR 1,100 1,000 900 Operator Data County Data HRC Operating EOG Resources WPX Energy 800 McKenzie County 700 Zavanna, Abraxas 600 500 Whiting Dunn County 400 300 Oasis, Continental 200 100 Divide County 0 100 200 300 400 500 600 700 800 900 1,000 EUR (MBO) 8/15/2015 2014 Bakken Shale Activity & Performance Review 16
Frac Stages Lateral Length and Proppant Thousands 2014 Average Completion Data The average completion used 32 frac stages and 4.1 million pounds of proppant, with a lateral length of over 9,740 feet (1.8 miles). EOG and Enerplus use the most proppant, while Fidelity has more frac stages Frac Stages Lateral Length (ft) Proppant M Lbs 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 11 10 9 8 7 6 5 4 3 2 1 0 * For operators with 10 or more completions in 2014 8/15/2015 2014 Bakken Shale Activity & Performance Review 17
Millions of gallons 2014 Fracturing Fluids 45 40 35 EOG used the most fracturing fluids per well Unspecified Fluids GEL SlickWater X-LINKGEL Total 30 25 20 15 10 5 0 8/15/2015 2014 Bakken Shale Activity & Performance Review 18
Multi-Lateral Completion Trend Several of the operators identified as having the best results sometimes fracture two or more laterals simultaneously. Using completion information for over 16,000 Bakken Shale Play wells, we have data for nearly 1,260 completions since 2005 which had multiple laterals fractured at the same time. 8/15/2015 2014 Bakken Shale Activity & Performance Review 19
Average Well Economics 2014 Type Curve with 2015 product prices & 2015 well costs Economic Assumptions Leasehold: $320,000 Drill & Complete: $7,700,000 Facilities: $50,000 NRI: 80% Operating Expense: $15,000 / month 1st 3 months $7,500 / month until ECL Prices: August 2015 NYMEX strip Oil Differential: -$6.00 Gas Differential: -$0.40 Gas Shrinkage: 25% NGL Differential: -25% NGL Yield: 50 BBL/MMCF IRR: 26.7%, Payout: 2.7 years, NPV(10): 4,159 $M Oil EUR: 405 MBO GAS EUR: 505 MMCF EUR Oil: 447MBO EUR Gas: 489MMCF Type Curve Parameters Oil% 87.9 Initial Decline Gas% 87.8 Oil 1.15 Hyperbolic Factor Gas 1.0 Oil 5 Minimum Decline Gas 6 8/15/2015 2014 Bakken Shale Activity & Performance Review 20
2014 Conclusions Continental Resources was the most active operator (300 production starts) Whiting added the most production in 2014 (16 Million barrels from new wells) Of the more active operators WPX had the highest production rates. Enerplus with only 12 new wells had outstanding results (1,333 BOPD IP 30 ) The best well results were from McKenzie County (IP 30-640 BOPD) The average well IP 30 was 567 BOPD and average EUR was 405 MBO. Well costs for 2015 are about $8.1 million versus $8.8 in 2013. The Bakken play is still economic at current product prices and well costs. 8/15/2015 2014 Bakken Shale Activity & Performance Review 21
Engineering terms BOPD is barrels of oil per day MBO is thousands of barrels of oil MMCF is millions of cubic feet of natural gas MBW is thousands of barrels of water MBOE(6) is thousands of barrels of oil equivalent, where 6 MCF of natural gas adds 1 barrel of oil equivalent to the reserves. Proppant is sand or other material pumped into a well to fracture the rock and stimulate production. Lateral refers to the horizontal portion of the wellbore. IP 30 is the average oil rate over the first 30 days of production. EUR is the estimated ultimate recovery (per well), based on decline analysis. 8/15/2015 2014 Bakken Shale Activity & Performance Review 22
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Engineering Consultant Peter Morgan Petroleum Engineer Summary Mr. Morgan is a junior petroleum engineer with two (2) years of experience in E&P. He has worked borehole seismic projects in Egypt, shale fracturing jobs in Pennsylvania and drilling operations in west Texas. He is skilled in data analysis, royalty database creation and cash-flow projections. Peter is fluent in Arabic and English. Experience 2 years Mire & Associates, Inc., Houston 2015 present Halliburton, Midland 2014-2015 Halliburton, Pittsburg 2014 Schlumberger, Cairo Egypt 2013 Education B.S., Petroleum Engineering The American University in Cairo, 2012