Oil and gas in the Powder River Basin are inching ever closer to a significant milestone that could help unlock this underperforming play.
That metric is a barrel of oil that consistently costs less than $50 to produce, which is the point where this play becomes competitive with other shale plays in America.
That’s vital to attracting development capital and infrastructure, creating further efficiencies to unlock the play.
The Powder River’s average break-evens have been around $60 to $65 for the Mowry and the Niobrara formations. Three-mile laterals, however, are changing that, bringing the average down to more like $55, according to an analysis by Enverus, which tracks the oil and gas industry in all of America’s major plays.
Getting to $55 is significant movement in the right direction for the Powder River Basin to finally start taking off, Enverus analyst Ryan Hill told Cowboy State Daily.
“What is still most relevant to the market is sub $50,” Hill said. “But we do think there are ways to get there, and there are certain operators who are already achieving sub $50 per barrel break even.”
Devon led the way with 3-mile laterals in the Powder, Hill added, drilling the play’s very first one. So far, Devon has drilled 38 of the 3-mile laterals, while powerhouse Continental comes in second with 33. The play’s largest private operator, Anschutz, drilled its first 3-mile laterals this summer and has completed three to date.
Becoming The Next Bakken
Both Devon and Continental are multi-play operators, and they are applying knowledge gained in places like the Bakken in North Dakota and Montana and the Permian in Texas and New Mexico, where 3-mile laterals are already becoming the norm, Hill said.
While the Powder remains a tiny, largely undeveloped part compared to both companies' overall portfolios, Continental has said it plans to turn the Powder into its next Williston Basin.
The Williston Basin’s biggest formations are the Bakken and Three Forks, which, for a long time, made that play the nation’s No. 2 oil and gas producer. The Williston Basin has since been eclipsed by the Permian, but it is still the nation’s No. 3 producer.
In 2023, Continental’s Harold Hamm told Hart Energy in 2023 that the Powder River Basin just needs “somebody that had enough size and scale to consolidate the basin.”
“We’ve done a pretty good job of that, putting a huge leasehold together — and big enough that we could add scale to it,” Hamm said.
In that same timeframe, Continental Vice President in the Powder River, Ryan Baker talked about how three-mile corridors were going to “turn the Powder River Basin into the next Williston Basin.”
Trend Is Toward Fewer But Better Wells
Two-mile laterals had been the norm in the Powder River Basin for some time, giving plenty of baseline data for comparisons. So far, Enverus data shows that production from the third mile on horizontally drilled wells is comparable to the first two miles, Hill said.
“They’re not leaving oil in the ground,” he said. “When we’re looking at our early life production and we forecast all these wells out, we adjust each one based on how long those wells are. And to be blunt, we’re not seeing any degradation in the Powder River Niobrara wells, the three-milers.”
The other trend Hill is seeing in the PRB is that operators are going for wider spacing.
“By going wider, like having more space between each one of these wells, you’re just allowing for more recovery per well,” Hill said. “So just getting into that headspace of somebody like a multi-basin operator saying, ‘You know, quite frankly the market doesn’t care a lot if (those) million locations (shift) down to 100.”
That, in turn, is driving ever lower rig counts, Hill said. It’s just better efficiencies that are helping to shave costs from a barrel of American oil.
“This isn’t just happening in the Powder,” he added. “We’re seeing it in the Bakken, too.”
Getting Three For The Price Of Two
Market prices are down right now, and that’s driving everything, Steve Degenfelder, a landman with Kirkwood Oil and Gas in Casper, told Cowboy State Daily.
“They’re drilling into a market where they’re getting $53 a barrel, $54 a barrel,” he said. “So, it’s imperative with the oil prices that you have to improve your operations for the project to make sense to do.”
Longer laterals are not just about improved performance for one well, though.
“If you drill all these wells with 20-mile laterals, 10,000-foot laterals, and you extend that by 5,000 feet, now you can drill two wells that have the same pay zone that three wells used to have, right?” he said. “So, you can save the whole third well. That makes it a lot more economic, as long as productivity and the drilling time and all of that is not negatively impacted.”
Wells in Wyoming cost millions to drill, Degenfelder added.
“Even the ones that we’re projecting we’re going to hopefully drill out in Sublette County, which will be two-mile laterals, will be $12, $13 million.”
The Robots Are Coming
Three-mile laterals with wider spacing aren’t the only tricks that can help make the PRB competitive, both Hill and Degenfelder said.
Producers are already test driving even longer, 4-mile laterals in the Eagle Ford, Bakken, and Permian, Hill said. Some are also experimenting with a curved, horse-shoe shaped lateral that fits in tighter spacing.
“Part of the benefit of being in multiple basins is that they should be able to be fast followers,” Hill said.
So, anything learned in th1e Eagle Ford or the Permian is fair game for the Powder, too.
Degenfelder expects the next wave of improvements will come from technology and artificial intelliegence.
“There’s been lots of articles on robotics on the drilling rigs,” he said. “You can have them run with less human labor, or operate them with the same labor, but that labor is in an office and not out there on the rig.”
Artificial Intelligence, which can parse all kinds of metrics, like drill bit penetration rates, could help lower completion times for wells. That’s another factor that could help drive break-evens for the Powder River even lower.
“If you lessen the drilling time by five days, that might be, your rentals and everything, might be $50,000 a day,” Degenfelder said. “So, there’s $250,000 you saved by just being able to penetrate the formation five days quicker.”
Renée Jean can be reached at renee@cowboystatedaily.com.
