Earlier this year, Oasis sold some of its Williston acreage and bought a $946 million position in the Permian’s Delaware Basin.
That works out to a pricey $46,600 per acre, and, at the time, was the most expensive entry yet to the Permian on a per-acre basis, according to analysts. One question that company’s officials heard a lot since acquiring that costly acreage is: What does it mean for the Bakken?
Vice President of Operations for Oasis Petroleum, Jason Swaren, had an answer for that question during the Bakken Conference and Oil Expo.
“Ninety-five percent of our total hydrocarbon production comes from Bakken assets, and only 5 percent comes from the Permian,” he said. “From our company perspective, I cannot stress enough how important the Bakken is to our company.”
Oasis was founded in 2007 and, until the beginning of this year, had been a purely Bakken player. Through a series of successful measures and initiatives, they rose to become North Dakota’s fourth largest oil producer. They now have about 1,000 operating wells in the Bakken and employ 365 in the region.
The company has a vertically integrated structure, and so they are actually three companies. One is focused on production, the second on midstream gathering of produced liquids and the third completes their wells.
Oasis Petroleum has put more than $10 billion into capital projects to develop its Bakken assets, Swaren said.
“To put that into perspective, the budget for the state of North Dakota was just over $8 billion,” he added.
That capital budget includes a gas processing plant in Watford City that will process 200 million cubic feet per day of gas when it comes online later this year. The Wild Basin plant will increase Oasis’ total gas processing capabilities to 345 million cubic feet per day from the previous 80.
Oasis still has Bakken inventory to drill through 2032, despite the recent sale of some assets, Swaren said. The sales were just a way to “cash forward” certain assets that they wouldn’t have gotten around to developing until 2025 anyway.
Company officials described their new Permian acreage as “core of the core” in earnings presentations earlier this year, and said the transaction would not only extend the life of their core inventory, but presents many other opportunities with so much of the acreage remaining undedicated as far as oil and gas gathering.
Oasis’ new position in the Permian had led some analysts to speculate that the Bakken had fallen from favor with producers. Swaren said that’s simply not the way Oasis sees it.
“We have a world-class premier asset (in the Bakken), and we plan to develop it in a cash discipline management style,” he said.
From an activity standpoint, Oasis is operating five drilling rigs in the Bakken, and has three hydraulic fracturing crews going. It plans to maintain that going forward, which should realize about 100 well completions for the year. That is what the company had said it would do prior to entering the Permian.
To realize all its objectives, including expanded gas processing capacity in North Dakota, they will hire a number of new employees. Right now, 32 positions are advertised for the Williston Basin. Swaren, during the conference, said they plan to hire at least 50 new employees in all.
As far as future acquisitions, Swaren said the company will focus on property that makes a nice “bolt-on” to existing assets. That way the company can take advantage of the existing infrastructure that the company’s midstream business has already built.
“From a corporate perspective, we are looking to spend 85 percent of our capital budget in the Bakken, and only 15 percent in the Permian,” he added. “The majority of our capital concentration is right here.”
During the downturn, Oasis did not drop its production in the Bakken.
“We did that within cash flow,” Swaren said. “We will maintain that capital discipline, but grow by 20 percent per year.”
A key factor that has helped Bakken production retain its value despite the rise of the Permian Basin has been the construction of the Dakota Access pipeline. The substantial addition of takeaway capacity has dropped differentials — the cost of taking a barrel of oil to a refinery — tremendously.
“It’s made oil produced here very competitive on the global landscape,” Swaren said.
Another factor that has been improving Bakken competitiveness is technology.
At one time, Oasis had around 100 lease operators physically visiting all the company’s well locations. That data is being collected remotely instead, and is able to highlight immediately and in real-time the 10 percent of wells that need immediate attention.
“The techs can make adjustments remotely,” he said. “they don’t have to go to the well site, or, if necessary, they can dispatch a lease operator to the well site. If a well is down, we can see it immediately, and we can prioritize those first.”
It’s meant a 25 percent reduction in artificial lift failures, and a lot less downtime as well, Swaren said.
Drone technology is another area where advances are being made. Oasis has been using them primarily for surveying by construction crews.
“What would take a survey team weeks to do in the past is now taking hours with a drone,” he said.
Not only do they take less time, but the data is better. Survey crews took a photo every 50 feet, Swaren said. Drones can take one every inch.
“Looking forward to the future, with beyond visual line of sight, we see further applications for leak and emission detection in the future,” he said.