This company recently announced plans to pull in additional revenue by tweaking its current drilling process. Here’s how they’re doing it…
The Bakken formation has already proven its worth as America’s shale champ… but it’s far from hanging up its gloves.
Hardly a blip on the energy radar just a decade ago, it’s now a bona fide oil-producing machine that, by next month, will pump out an average of 1 million barrels per day.
Yet despite all the prosperity in the region, there remains an incredibly lucrative opportunity that has alluded even the most seasoned of energy producers.
But Continental Resources, Inc. (NYSE:CLR) recently decided it would be the first company to change all of that.
CLR, the largest acreage holder in the Bakken, is looking to capitalize on what could be the easiest cash grab in all the years the company has been operating there.
You see, during the fracking process in shale oil formations, it’s long been known that crude oil isn’t the only fuel that gets pulled from the ground. One significant byproduct that often gets overlooked is natural gas.
It’s estimated that the average yield of shale fuel constitutes roughly 85% of oil, with the remaining 15% being mostly gas.
Now traditionally, in order to collect and transport natural gas from wells, pipelines would need to be built.
But because the amount of natural gas escaping from a single well isn’t economical enough to retain, producers have simply been flaring the gas off into thin air instead.
From the beginning of the Bakken shale boom, flaring was common practice in the oil patch.
But now that there’s so much drilling activity in the region, the sheer number of wells has added up to a lot of precious gas going up in smoke — literally.
In May 2011, the North Dakota Industrial Commission estimated that roughly 106 million cubic feet of natural gas was being flared each day. Today, that amount has more than doubled to 266 million cubic feet per day.
That’s more gas than what the entire country of Denmark produces in a single year.
And according to estimates by the non-profit environmental group Ceres, the amount of gas that gets burned off in North Dakota would have a price tag of $1 billion per year.
That’s a lot of potential revenue lost. Not only is there environmental value, there’s economic value as well.
Furthermore, for every 1,000 cf of Bakken gas produced, there actually contains 8-12 gallons of premium natural gas liquids – including propane and butane.
“The flaring of natural gas is a tremendous economic waste, and it threatens the oil and gas industry’s license to operate, as well as the environment.” says Pat Zerega, senior director at Mercy Investment Services.
Fortunately, with the advancements in fracking technology, companies like Continental are now on the verge of reversing this disturbing trend.
Multiple Plays = Zero Flaring
What’s unique about Bakken’s geology is that it has multiple shale formations overlapping one another.
A stacked play like this thus allows Continental and other Bakken producers to reach the layers concurrently from a single well pad, thanks to modern drilling techniques.
By their ability to reach more resources within a smaller footprint, installing a pipeline to collect the expended gas from multiple wells becomes that much more practical.
Now imagine a drill site with 30 well pads all in close proximity to one another.
These potential “megapads” are precisely what Continental intends to do with some of its older leases, which could finally make flaring a thing of the past.
It’s not often that environmental concerns and economics converge to come up with a mutually beneficial solution.
But in the case of putting an end to gas flaring, everybody wins.