bear creek

Growing gas to oil ratios in the Bakken represent a challenge for the state’s continued oil production, but it’s a challenge that the state’s largest gatherer sees as a potential double opportunity in 2022.

ONEOK in its third quarter earnings call outlined a battle plan for 2022 that includes the resumption of mothballed project Demick’s Lake 3.

“Our outlook for growth in 2022 continues to strengthen, driven by increasing producer activity and rising gas oil ratio in the Williston Basin, along with the recent completion of our Bear Creek plant expansion” Chief financial Officer and Executive Vice President of Strategy and Corporate Affairs Walt Hulse said. “Additionally, new ethane demand from new and expanding petrochemical facilities is expected to come online before the end of the year.”

The strength of Rocky Mountain region volumes, which includes the Bakken, is driving expectations for net income 26 percent higher for the third quarter and 10 percent higher for the year. The company now expects to net $1.43 to $1.55 billion, as compared with the previous estimate of $1.2 to $1.5 billion.

The company also pushed up its capital expenditure expectations to the higher end of its guidance range of $525 million to $675 million as a result of increased producer activity it is seeing and project timing. However, the bulk of extra proceeds will be used for debt reduction, company officials said, as well as unique opportunities to drive value forward, even into a low-carbon world.

The double opportunity the company sees is the strong prices and strong production of both more natural gas and ethane volumes primarily coming from the Bakken, but also, potentially, the mid-continent.

New petrochemical plants are coming online before the year end will provide 160,000 barrels per day of additional ethane demand once fully operational. The increased demand and additional capacity should lead to a better differential for ethane to natural gas next year.

“Ethane volumes on our system in the Rocky Mojtnain region increased compared with the second quarter of 2021 as we incited additional ethane recovery during the third quarter,” Executive Vice President and Chief Operating Officer Kevin Burdick said. “Recovery continued in October and is also expected throughout November, given current regional natural gas and ethane prices.”

Discretionary ethane on ONEOk’s systems now exceed 225,000 barrels per day. A little more than half of that at 125,000 barrels per day are from the Rocky Mountain region, and there west is from the mid-continent.

Burdick said ONEOK can maintain 1.4 billion cubic feet per day in production in the Rocky Mountain region on about 14 to 15 rigs, which can drill about 300 wells per year. Any additional rigs, combined with the rising gas oil ration for wells already connected to the system will just provide additional volume growth.

“Conversations with our producers in the region continue to point to higher activity levels through the end of the year and into 2022,” Burdick said. “There are currently 32 rigs and 10 completion crews operating in the basin with 17 rigs and five completion crews on our dedicated acreage. This is more than enough activity to grow gas production on our acreage.”

There’s also aa large inventory of drilled but uncompleted wells. ONEOK connected 72 wells in the third quarter in the Rocky Mountain Region and expects to have connected more than 300 wells by year’s end.

“With our Bear Creek plant expansion and related compressor stations now compete and in service, we should see a significant number of well completions int eh fourth quarter in Dunn County,” Burdick said. “Producer had timed their completions with the startup of our expansion to avoid flaring.”

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