Natural Gas
Weekly Update

Apr 11, 2024

Bakken: Dead Man Walking??

Perhaps not yet, but the Barnett Dilemma is knocking at the Bakken door.

The hallmarks of the Barnett Dilemma are clearly visible.

The first is remaining sweet spot well location conservation (chart BakDrillWTI). Despite oil prices (and hence well profitability) that in this cycle were much higher, drilling this cycle declined substantially. The main reason this happens is as the Barnett Dilemma becomes mature, operators in the basin begin to see the event horizon of no more remaining sweet spot well locations approaching. They slow down their pace of drilling-out their well inventory in order to delay that day of reckoning. Bakken operators have moved from a feeling of infinite well locations to a mentality of very finite well locations.

A scarcity/hoarding mentality has taken over.

The second sign of the Barnett Dilemma dynamics is the net adds per well for the Bakken, declines (chart BakNetAdds). The falling production per new well is indicative of a decline in the quality of the geology being drilled. Operators tend to drill their best quality wells first; so, any sustained drop in performance is a sign that the operator has run out of their best opportunities and is now working their way down the quality ladder until they hit unprofitability.

There is a third sign of the Barnett Dilemma for oil plays. It is the....