In a state known for its Badlands—the “land God forgot”—the oil finds in North Dakota’s Bakken and Three Forks formations have been heavenly.

In 2012 the state saw record production of 770,000 barrels per day, rocketing North Dakota past Alaska by 32 million barrels of oil. While state output has spiked 155% to 219.3 million barrels from 2010 to 2012, some operators are forecasting an even better 2013. Production growth estimates range as high as 30% to 40%, and state officials say operators will be producing 830,000 barrels a day by July.

Yet even more potential appears to be waiting for operators. Successful wells drilled in the third bench of the Three Forks formation have turned heads throughout the play. By summer, further exploration could yield good news, when a well is expected to be drilled in the fourth bench of Three Forks.

Lynn Helms, director of the Department of Mineral Resources for the North Dakota Industrial Commission, says the possibilities of the Three Forks benches have companies eager to appraise their potential. “In the center of the basin, companies are working really hard right now to quantify how many layers of Three Forks they have,” he says. “This particular area is the deepest part of the basin…and so it has the deepest rocks in every layer.

“We’re pretty confident that there will be at least some areas that have five potential layers of production,” he says. Producers are also busily working to maximize the amount of oil they draw up, by squeezing more wells into each 1,280-acre unit. Applications to downspace drilling units have inundated the North Dakota commission.

After years of drilling one or two wells on spacing units, companies want to place wells closer together, perhaps within a quarter of a mile apart or nearer. Higher-density drilling is seen as a way to improve oil recovery from the low-permeability Bakken shale.

“We’re seeing now pages and pages of applications go from one or two wells per 1,280 (acres) to seven, 10, 18 wells,” Helms says. “We’re seeing it really begin to pick up speed.” Oasis Petroleum Inc. chief operating officer Taylor Reid says the Houston-based company and others are shifting from exploration and delineation of the Bakken to development. That will include higher-density drilling on leaseholds.

“We’re in transition from holding all our leases, which generally requires one well per 1,280-acre spacing unit,” Reid says. The range of wells needed to “effectively drain the resource is probably anywhere from, at the low end, three wells, to at the high end, as many as 12 wells per spacing unit both in the Bakken and Three Forks.”

Bench marks

A dozen years ago, North Dakota was living off its legacy production despite knowledge of the huge reservoir of oil and gas trapped within the shales and silty dolomites of the Bakken formation.

While horizontal drilling was feasible, it wasn’t then economical. The technologies to stimulate the laterals in the tight rocks had not yet been invented. The way forward would require a breakthrough, a North Dakota state geologist wrote in 2001. Years later, technology caught up and went beyond what the Bakken required.

Today, the Three Forks benches hold similar promise for more crude. Continental Resources Inc., Oasis, Whiting Petroleum Corp. and others are scrutinizing the Three Forks benches. So far, the results are good, analysts say.

For Continental, the process started about 18 months ago, when its coring program was under way throughout the state. The company reckoned the total petroleum system held recoverable oil in the neighborhood of 24 billion barrels of oil equivalent.

“Our theory back in 2008 when we started drilling the Three Forks was that the oil had been pushed down into the Three Forks as it was being generated and was probably only in the upper part of it, because the rock is so dense,” says Warren Henry, vice president of investor relations. Instead, the company was surprised to see core samples consistently saturated with oil to the bottom of the formation.

In December 2012, Continental tried its hand at a third bench well. The Charlotte 3-22H flowed 953 barrels of oil equivalent per day in its initial one-day test period. Located in McKenzie County, North Dakota, it was drilled to a total depth of 21,324 feet, including a 9,701-foot lateral section, and completed with a 30-stage fracture-stimulation design.

“The well … performance compares favorably with other first bench and second bench producing Three Forks wells,” Harold Hamm, Continental chairman and chief executive officer, said at the time.

Continental has shown “impressive early productivity in the deeper second, third, and fourth benches of the Three Forks,” said Nicholas P. Pope, a Cowen Securities managing director and senior research analyst for oil and natural gas exploration and production, in a recent report.

“A successful 2012 program, which included three lower-Three Forks…has pushed the 2013 program to 20 wells (from 14),” he said. “Should lower Three Forks and downspacing pilots prove successful, CLR has the potential to double its well locations in the basin and should provide positive catalysts for shares.”

Initial lower Three Forks wells appear to be as much as 15% below the company’s Willis-ton Basin-wide well results, Pope said. “But we don’t view this as a big concern considering the breadth of the opportunity, the early stage of the work, and the robustness of the economics at current…prices.”

Continental said additional oil found in the second, third and fourth Three Forks benches could raise the volume of original oil in place in the petroleum system to 903 billion barrels, a 57% increase over its earlier estimates. That means its estimates of recoverable oil will likewise rise.

Each of the benches ranges from 50 to 75 feet thick. Continental wants to determine whether green inorganic shale between the benches could act as a barrier, preventing stimulations from communicating between benches, Henry says. In that case, additional drilling would be required.

For 2013, Continental has initiated a well productivity testing program in the Three Forks. Overall, the company is spending $267 million on exploration in the Bakken this year.

Until more drilling is done, the company won’t have an estimate of how much oil is technically recoverable. “It’s bigger than the 24 billion barrels of oil equivalent, but we don’t know if it’s 20% bigger or double,” Henry says.

Meanwhile, Whiting’s core analysis has identified an additional reservoir between the Middle Bakken and Three Forks with significant oil in place, potentially increasing its reserves. “We plan to test this zone, which we refer to as the ‘Middle Bakken Silt,’ by drilling 160-acre-spaced wells above and below this target zone and stimulating these wells with large frac volumes,” the company said recently. “We believe that this higher-density drilling could also improve our recovery efficiency in the Middle Bakken reservoir.”

Oasis is drilling deeper, too, to test multiple benches of the Three Forks, notes Curtis Trimble, managing director, senior E&P analyst for Global Hunter Securities. “Continued positive results from these tests could lead to significantly more drilling locations,” Trimble says in a recent report, adding that “valuation estimates for Oasis and its Bakken brethren likely will continue to scale up, all other things being equal.”

Oasis is intrigued by the Three Forks. “We’re very interested,” Reid says, noting that some of Continental’s lower bench wells are close to Oasis’ position. “We’ve got a program going this year where we are coring and doing high-resolution logs on six wells.”

The company has finished the work of drilling vertically through the section and the lower benches. Cores and logs have been taken for evaluation, Reid says. Most of the data will be analyzed by the end of the second quarter, and based on the results, “we’ll then set up some tests in the lower benches,” most likely in late 2013 or early 2014. “We think it holds a lot of promise. We just have to do the work,” he says.

Helms says Continental’s third bench discoveries have captured attention, but there’s still more to do. “Nobody has tested the fourth bench yet. But that’s coming yet this summer,” he says.

Spaced out

Companies such as Whiting and Oasis are now working on a drilling squeeze play that positions them for oil recovery without jeopardizing other wells’ performance.

The goal is to raise recovery efficiency, said Mark Williams, Whiting’s senior vice president for exploration and development, at Winter NAPE in Houston.

“The next step is to try to optimize the number of wells in each zone to figure out what we can do in balancing increased recovery efficiency against the effect of potential depletion in other wells,”

Williams said. The fundamental question, he said, is whether such optimization is possible and whether efficiencies can be even higher.

Many Bakken producers appear set on the idea. Helms said a summer 2013 test will pack in 24 wells per 1,280 acres. Kodiak Oil & Gas, for instance, plans to test 12 wells in the Polar and Smokey areas, taking six wells to the Middle Bakken and six wells to the Three Forks. “Much effort in 2013 should focus on downspacing Middle Bakken wells,” Trimble says. “Management plans three four-well pads; drilling on the first pad has already commenced. “In the Smokey area, KOG already established production from adjacent Middle Bakken and Three Forks wells, with a rig drilling a third well in the same drill space unit.”

Estimates for in-place resource potential in the Bakken vary, as do technically recoverable resources that are dependent on the development of technology, Williams said. At four wells per unit, for instance, statistical evidence might confirm that Whiting’s recovery efficiency is 10% or as much as 11% when fracture stimulated.

But Williams said that as Whiting and a number of other companies downspace, he really doesn’t know what will happen and what, if any, opportunities are possible.

Likewise, Continental is testing downspacing to increase ultimate recovery. Its exploration and appraisal initiative involves four pilot density projects to test 320-acre and 160-acre spacing in the Middle Bakken and first three benches of the Three Forks. It plans to complete 47 gross wells in the program over 18 months, with production starting in late 2013 through first-quarter 2014.

In March 2013, the company also ramped up the number of wells it is drilling with its Eco-Pads, which involve multiple wells per pad and walking the rig from well to well. The Eco-Pad process has advanced from drilling four wells per pad to as many as 14, Henry says. “It’s getting more and more efficient.”

In 2013, Oasis Petroleum will test increased well density across its acreage position. In some cases, it will test well spacing down to about 400 feet between laterals, which equates to six wells per formation or 12 Bakken/Three Forks wells per 1,280-acre spacing unit.

Trimble notes Oasis has ongoing efforts to expand Three Forks prospectivity and to downspace the Middle Bakken. He said the company plans to drill 22 pilot wells in 2013 with six to 12 wells per drilling spacing unit to test well patterns. “Continued positive results from these tests could lead to significantly more drilling locations,” he says.

Reid says Oasis wants to strike a balance between the optimum number of wells and higher costs that would make the wells uneconomic. One complication is that the thickness of reservoir rock varies widely across the Bakken and Three Forks. “One size doesn’t fit all across the basin,” he says.

Recovery of 10% to 15% will require up to four Bakken wells per unit in some areas and in others, as many as five or six wells. “I give you those ranges because that’s actually what we’re testing this year,” he says.

Helms, however, believes vertically stacked horizontal wells may hold the key to enhanced oil recovery. “The tests that we have seen so far that have tried to enhance the recovery within the horizontal plane between these closely spaced wells haven’t worked very well,” he says. With the Three Forks, the hope is “it can be determined that these things stack up vertically and have some restrictions in between them (so) that it might be possible to do some type of vertical enhanced oil recovery.”