600 East Boulevard Ave. - Dept 405 Bismarck, ND 58505-0840

(701) 328-8020 (701) 328-8000

North Dakota Department of Mineral Resources

http://www.state.nd.us/ndgs http://www.oilgas.nd.gov

Western North Dakota

• 1,100 to 2,700 wells/year = 2,000 expected

– 100-225 rigs = 12,000 – 27,000 jobs

– Another 10,000-15,000 jobs building infrastructure

– 200 rigs can drill the wells needed to secure leases in 1 year

– 225 rigs can drill the wells needed to develop spacing units in 16 years

– 35,000-40,000 new wells = 45,000-50,000 long term jobs

Typical Bakken Well Production

904

427

149

10582 66 56 50 45 43 41 39 37 35 33 31 30 28 27 26 24 23 22 21 20 19 18 17 16 15 15 14 13 12 12 11 11 10 10 9 9 8 8 7 7 7

0

100

200

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400

500

600

700

800

900

1000

0 5 10 15 20 25 30 35 40 45 50

Year

Bar

rels

of O

il pe

r Day

A typical 2012 North Dakota Bakken well will produce for 45 years

If economic, enhanced oil recovery efforts canextend the life of the well

In those 45 years the average Bakken well:

Produces approximately 615,000 barrels of oil

Generates about $20 million net profit

Pays approximately $4,325,000 in taxes$2,100,000 gross production taxes$1,800,000 extraction tax$425,000 sales tax

Pays royalties of $7,300,000 to mineral owners

Pays salaries and wages of $2,125,000

Pays operating expenses of $2,300,000

Cost $9,000,000 to drill and complete

North Dakota Oil Production

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,0001,100,0001,200,0001,300,0001,400,0001,500,000

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

Bar

rels

per

Day

History Bakken - Three Forks P10 Bakken - Three Forks P50 Bakken - Three Forks P90

4,040 Bakken and Three Forks wells drilled and completed 36,000 more new wells possible in thermal mature area Proven=7 BBO Probable=10 BBO Possible=15 BBO (billion barrels of oil)

Proven

Possible

Probable

Expected Case North Dakota Oil Industry Jobs

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

Jobs

Prod jobs Gathering jobs Fracing jobs Drilling jobs

Expected Case

North Dakota Rigs and Wells

0

50

100

150

200

250

300

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Year

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Rigs Wells

The North Dakota Way

Vern Whitten Photography

Vern Whitten Photography

Six Wells on a Single Pad

Oil and gas well locations are built (stockpiling top soil and lining reserve pits) to make reclamation easier.

DRILL TO BASE OF POTABLEWATER SOURCES WITH FRESHWATER

4 ½” Frac String

Upper Bakken Shale

Lower Bakken Shale

Middle Bakken

Potable Waters

• Drill with fresh water • Total depth below lowest potable water • Run in hole with surface casing • 1st layer of surface water protection • Cement casing back to surface of ground • 2nd layer of surface water protection

TYPICAL HORIZONTAL OIL WELL

9-5/8” in 13.5” Hole

DRILL TO TOP OF HYDROCARBON ZONE WITH FRESH WATER, SALT WATER OR OIL BASE MUD

4.5” Frac String

Upper Bakken Shale

Lower Bakken Shale

Middle Bakken 10,000’

Potable Waters

TYPICAL HORIZONTAL OIL WELL

Cement

Packer

Run in hole with: • 4.5” liner • 30-40 swell packers

• sliding sleeves

4.5” liner

• 9 5/8” surface casing • 7” production casing • 4.5” liner • 30-40 swell packers • sliding sleeves • 4.5” frac string • 5 layers of protection

Precambrian Basement

Red River Formation

Madison Group Tyler Formation Spearfish Formation

Dakota Group

Fresh Water Zone

Prairie Formation Bakken-Three Forks

Shallow Gas Zone

A Salt

Spearfish Formation:

Prairie Salt

D Salt F Salt

Charles Formation:

Prairie Formation:

Opeche Formation:

Dunham Salt Pine Salt

Salt A

Piper Formation:

Significant Salt Intervals of Northwestern North Dakota

PLUG AND ABANDON

Cmt. Plug

Cmt. Plug

Cmt. Plug

Cmt Plug

Well was plugged in 07/1998

Reclamation work in 09/1998

Seeded in Spring of 1999

The North Dakota Challenges

North Dakota Monthly Gas Flared

0%

5%

10%

15%

20%

25%

30%

35%

40%

1985 1990 1995 2000 2005 2010 2015

$4b

The future looks promising for sustained Bakken/Three Forks

development

Draft BLM Hydraulic Fracturing rule could double federal drilling

permit approval time or worse. Comments due

7/10/12

Draft EPA guidance on diesel fuel in hydraulic fracturing could triple

drilling permit approval time or worse.

Comments due 7/9/12

Current administration budget contains tax changes that could

reduce drilling capital 35-50%

World and U.S. economies continue to struggle. If

China joins the downward spiral oil price could fall enough to make some

areas uneconomic

Slide Number 1Slide Number 2Slide Number 3Western North DakotaSlide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10The North Dakota WaySlide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31The North Dakota ChallengesSlide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37Slide Number 38Slide Number 39