Here is an interesting piece from Tristar on their Bakken drilling for 2009. The whole piece is interesting but you can skip to the last paragraph where they show drilling costs in the Bakken of less than $2 million per horizontal well. The Bakken is a bit deeper than the two oil shales in the Beetaloo, so unless the geology is much tougher the costs should be comparable after the first couple of wells have been drilled.

I have attached another piece on the Bakken below the Tristar article that shows a much higher return for the Bakken for each horizontal well. The economics for horizontal wells in the Bakken appear to very good and so am not sure why the analysis on the Beetaloo would be so poor in comparison.

Regards Paul

For the first quarter of 2009, TriStar Oil and Gas Ltd., achieved a 100 per cent success rate in the number of wells it drilled in the Bakken play.

Of the 31 total wells drilled during the first three months of the year for a 94 per cent completion rate, 24 horizontal wells were drilled in the Bakken, each successfully completed. Nineteen were short length horizontals, while five were longer length horizontal wells.

Overall, 20,883 barrels of oil equivalent per day (boe/d) were produced in the first three months, an increase of seven per cent from last year during the same time. Crude oil and natural gas liquids were up 23 per cent to 16,784 barrels per day, while natural gas was down 30 per cent to 24,598 cubic feet per day during the same time period.

TriStar's production revenue during the first quarter of 2009 was $81.918 million, down 39 per cent from a year ago when first quarter production revenues totalled more than $135 million. The company experienced a net loss of more than $13.8 million during the first three months of this year, compared to roughly $6 million a year ago.

Operating expenses were $21.4 million in the first quarter of 2009, compared to $18.6 million during the first three months of 2008. Growing production volumes in southeast Saskatchewan during 2008 and into 2009 have resulted in above-average oil emulsion and other trucking costs.

Last year, TriStar completed the construction of several oil processing facilities in the Bakken play, which helped reduce costs of trucking emulsion from single well batteries, as wells are tied directly to the facilities. TriStar says they plan to further implement infrastructure changes in the area in the remainder of 2009, to further reduce operating expenses related to oil emulsion trucking.

The company's transportation expenses were $1.9 million for the first three months of 2009, compared to the $2 million at the same time last year. The initial expansion of the major oil gathering system, Enbridge Pipelines (Saskatchewan), was completed in June 2008 and was expected to alleviate clean oil trucking costs in the near term.

However, the continued expansion of the Bakken plant led to this additional pipeline capacity being entirely utilized faster than expected. More recently, this situation has been somewhat alleviated due to diminishing new production coming on-line, due to reduced drilling activity in the area because of lower realized oil prices.

"The first quarter of 2009 saw the continued collapse of commodity prices, which accelerated as a result of the global financial crisis in the second half of 2008," said TriStar president Brett Herman, in a company news release from May 11.

"In the current market environment, TriStar management has been diligent in aggressively managing the company's financial position by cutting planned capital expenditures in both the fourth quarter of 2008 and the first quarter of 2009. Together with management's disciplined hedging strategy and TriStar's high quality asset base, the company has maintained strong financial flexibility during these uncertain times - thereby protecting the upside inherent in the company's significant resource base."

On Mar. 4, TriStar, together with Crescent Point Resources Limited Partnership, entered into an agreement to acquire properties in the southeast from Talisman Energy Inc., for $720 million. Certain properties bought by both companies were then sold to Shelter Bay Energy Inc., for $71 million. The remaining properties will now be divided between TriStar and Crescent Point in a 50 per cent split, with a net cost to TriStar of $324.5 million. The acquisition is expected to close on about Monday, June 1.

One of TriStar's key foci in the Bakken is improving the potential primary recovery factors through the optimization of fracture stimulation efficiency. The company has now drilled 52 shorter horizontal wells (roughly 600 metres in length relative to 1,400-metre full length horizontals) while continuing to fracture stimulate the wells using as many as nine fractures and similar tonnage per fracture as used in full-length wells.

This technique reduces the inter-fracture distance and increases effective reservoir contact per metre of a horizontal well bore. Production results from these shorter length horizontals are encouraging, the company said in its news release, with initial production profiles similar to off-setting longer horizontal length wells. While ultimate recoverable reserves may be less per well over the longer term, recovery factors per section appear to be greater.

Based on the initial production profiles of these shorter length horizontals, TriStar says it believes this development plan will result in an increased primary recovery factor in the Bakken than what is currently being projected by third-party engineers. For the rest of 2009, the company plans to drill an additional 43 Bakken wells, for total risked capital expenditures of roughly $90 million, including facilities and land acquisitions, now representing almost 45 per cent of the company's $200 million capital budget.

Next article:

While Bakken development in the Williston Basin got its start in Montana, more recent developments indicate the middle Bakken and the Three Forks/Sanish formation in North Dakota will be the focus of future development. The Nesson Anticline in western North Dakota, which had a long history of oil production from vertical wells, was the initial testing ground for the horizontal technology that worked so well in the Elm Coulee. However, early efforts at dual-leg lateral wells that worked brilliantly in the Elm Coulee field did not achieve nearly the same level of success in North Dakota. This was due to the fracture stimulations that were traveling into the Lodgepole formation, which sits directly above the Bakken. It was not long before operators in North Dakota discovered that long length horizontal wells, which in some cases are 1,280 acres long, combined with multi-stage fracture stimulations were the key to success in North Dakota. As operators climbed the learning curve, the results have been spectacular. With the ability to fracture a horizontal well nearly 20 times, initial production rates have been up to 3,600 barrels of oil per day (bopd) in the Parshall Field in North Dakota. According to one of the largest operators in the Bakken, a 15,000 ft. horizontal well in the Parshall Field which can be drilled and completed for approximately $6 million can be expected to recover 900,000 barrels of the over 9 million barrels of oil in place per 640 acre section.

Technology similar to that which made the North Dakota Bakken successful has been employed north of the border. The Bakken formation in southeastern Saskatchewan has emerged over the last several years as Canada’s hottest and most economically robust oil play. While there are many similarities to the successful Middle Bakken play on the US side of the border, there are also many differences. For example, the Bakken is not a resource play in Canada like it is in the US. In other words, geological studies have shown that the oil trapped in the Bakken migrated south from Canada and has left oil trapped in large reservoirs in Canada rather than in blanket-like deposits similar to those found in the US. In Canada, the Bakken occurs at a much shallower depth -- 2,200 to 7,000 feet deep compared to 7,500 to 10,000 feet in the US. Also, the cost of the wells, the initial production rates and the expected ultimate recovery per well is lower in Canada. The typical Bakken well in Canada will cost approximately $1.7C million to drill and complete, is expected to have an initial production rate of as high as 300 bopd and recover 150,000 barrels of oil over its lifetime using a recovery factor of 15%. While only one-third of the Bakken formation lies on the Canadian side of the border, David Hume of Canadian Discovery Ltd. estimates that by using primary and secondary recovery techniques, 1.1 billion barrels of oil will be harvested from the Canadian Bakken.