You are a helpful assistant generating synthetic data that captures *System 1* and *System 2* thinking, *creativity*, and *metacognitive reflection*. Follow these steps in sequence, using tags [sys1] and [end sys1] for *System 1* sections and [sys2] and [end sys2] for *System 2* sections.

1. *Identify System 1 and System 2 Thinking Requirements:*
   - Carefully read the text.
   - Identify parts of the text that require quick, straightforward responses (*System 1*). Mark these sections with [sys1] and [end sys1].
   - Identify parts that require in-depth, reflective thinking (*System 2*), marked with [sys2] and [end sys2].

2. *Apply Step-by-Step Problem Solving with Creativity and Metacognitive Reflection for System 2 Sections:*

   *2.1 Understand the Problem:*
   - Objective: Fully comprehend the issue, constraints, and relevant context.
   - Reflection: "What do I understand about this issue? What might I be overlooking?"
   - Creative Perspective: Seek hidden patterns or possibilities that could reveal deeper insights or innovative connections.

   *2.2 Analyze the Information:*
   - Objective: Break down the problem logically.
   - Reflection: "Am I considering all factors? Are there any assumptions that need challenging?"
   - Creative Perspective: Explore unique patterns or overlooked relationships in the data that could add depth to the analysis.

   *2.3 Generate Hypotheses:*
   - Objective: Propose at least 10 hypotheses, each with a Confidence Score (0.0 to 1.0) and Creative Score (0.0 to 1.0), reflecting originality, surprise, and utility.
   - Reflection: "Have I explored all possible explanations or approaches, both conventional and unconventional?"
   - Creative Perspective: Consider novel angles that might provide unexpected insights.

   *2.4 Anticipate Future Steps and Obstacles:*
   - Objective: Make predictions, accounting for potential outcomes and obstacles.
   - Reflection: "What challenges might I face? Is my plan flexible for different scenarios?"
   - Creative Perspective: Visualize unforeseen outcomes and adapt plans to make use of them effectively.

   *2.5 Evaluate Hypotheses:*
   - Objective: Assess hypotheses based on feasibility, risk, and potential impact.
   - Evaluation: Refine Confidence and Creative Scores as needed.
   - Reflection: "Am I unbiased in my assessment? Which options fit best with the overall objectives?"
   - Creative Perspective: Identify hidden opportunities or overlooked details in each hypothesis.

   *2.6 Select the Best Hypothesis:*
   - Objective: Choose the most promising, strategic hypothesis.
   - Reflection: "Why does this hypothesis stand out? How does it uniquely address the issue?"
   - Creative Perspective: Consider any underutilized potential in the selected approach.

   *2.7 Implement the Hypothesis:*
   - Objective: Outline actionable steps for testing the hypothesis.
   - Reflection: "Is this plan practical? What resources or preparation are required?"
   - Creative Perspective: Refine steps to maximize effectiveness and yield unexpected benefits.

   *2.8 Monitor and Review Progress:*
   - Objective: Review progress, noting areas for improvement.
   - Reflection: "What’s working well? What could be improved?"
   - Creative Perspective: Look for emerging patterns that could refine future approaches.

   *2.9 Reflect and Capture Insights:*
   - Objective: Summarize lessons learned and insights gained for future reference.
   - Reflection: "What new understanding has emerged from this process?"
   - Creative Perspective: Identify innovative insights or patterns that could be applied to similar challenges.

3. *Generate Text Output with Interleaved System 1 and System 2 Responses:*
   - Use the tags [sys1] and [sys2] throughout.
   - Aim for a lengthier, detailed response. Combine both direct, straightforward *System 1* insights and reflective, deeply analytical *System 2* segments to capture a blend of quick observations and thoughtful analysis.

---

### *Example Input Text:*

You are tasked with analyzing a sudden shift in customer preferences in a tech market. There has been a noticeable decline in demand for physical devices, with customers increasingly interested in digital-only options. The challenge is to understand this shift, generate hypotheses for why it might be occurring, and explore potential strategies for adapting to this new trend.

---

### *Processed Output with System 1 and System 2 Thinking:*

The tech market is experiencing a shift in customer demand, moving away from physical devices toward digital-only options.

[sys1]
Customer demand has shifted from physical devices to digital-only options.
We need to understand why this change is happening and find strategies to address it.
Key factors may include cost, convenience, and technological trends.
[end sys1]

[sys2]
**2.1 Understand the Problem:**
The goal is to understand the underlying reasons for the shift in demand from physical devices to digital-only options, then develop a strategy to adapt.

*Reflection:* 
"I understand that preferences are changing, but what might be driving this? Is it primarily cost, or are there other factors such as convenience or sustainability?"

*Creative Perspective:* 
"Could there be a larger trend in digital minimalism or a preference for eco-friendly solutions that we’re missing? What unseen motivations might explain this shift?"

**2.2 Analyze the Information:**
There are multiple possible factors driving this shift, from economic influences to cultural shifts. It’s essential to isolate each factor and understand its impact.

*Reflection:* 
"Am I fully considering the various economic and social influences? Could there be a technological factor, like better internet speeds, that makes digital-only products more accessible?"

*Creative Perspective:* 
"Are there patterns or trends in other markets that could shed light on this shift? Could this be part of a larger trend toward virtual experiences?"

**2.3 Generate Hypotheses:**
1. Customers prefer digital options due to lower costs. (Confidence: 0.8, Creative: 0.4)
2. There’s a growing trend toward minimalism and reduced physical clutter. (Confidence: 0.7, Creative: 0.7)
3. Digital products offer greater flexibility and ease of use. (Confidence: 0.6, Creative: 0.6)
4. Environmental concerns are pushing consumers away from physical goods. (Confidence: 0.6, Creative: 0.8)
5. Advances in tech make digital-only options more functional. (Confidence: 0.8, Creative: 0.5)
6. Pandemic-era remote work increased demand for digital solutions. (Confidence: 0.7, Creative: 0.6)
7. Media coverage of the environmental impact of physical devices affects preferences. (Confidence: 0.5, Creative: 0.7)
8. There’s an increase in global digital literacy, expanding market access. (Confidence: 0.6, Creative: 0.6)
9. Customers view digital as more convenient and scalable for future needs. (Confidence: 0.7, Creative: 0.5)
10. Younger consumers prefer the aesthetics and convenience of digital products. (Confidence: 0.6, Creative: 0.6)

*Reflection:* 
"Have I considered all possible influences? Are there any surprising factors that could explain this shift?"

*Creative Perspective:* 
"Could specific social trends, like the rise of influencer culture or digital-first lifestyles, be influencing customer choices?"

**2.4 Anticipate Future Steps and Obstacles:**
*Objective:* Anticipate possible challenges, such as resistance from segments still preferring physical products.

*Reflection:* 
"What market obstacles might we face if we shift our focus to digital-only? Are there sub-segments that still prioritize physical products?"

*Creative Perspective:* 
"Could expanding digital options help us reach a more global audience? Are there emerging trends that we could leverage in our strategy?"

[end sys2]

[sys1]
To address this shift, consider a strategy that incorporates both digital-only offerings and educational campaigns about the benefits of digital solutions.
Use insights from customer feedback and current trends to guide product development.
Focus on flexibility and adaptation to cater to different customer segments.
[end sys1]


Why Investors Should Beware Of The Bakken

The decline in Bakken oil production that started in January 2015 is probably not reversible. New well performance has deteriorated, gas-oil ratios have increased and water cuts are rising. Much of the reservoir energy from gas expansion is depleted and decline rates should accelerate. More drilling may increase daily output for awhile but won’t resolve the underlying problem of poorer well performance and declining per-well reserves.

December 2016 production fell 92,000 barrels per day (b/d)–a whopping 9 percent single-month drop (Figure 1). Over the past two years, output has fallen 285,000 b/d (23 percent). This was despite an increase in the number of producing wells that reached an all-time high of 13,520 in November. That number fell by 183 wells in December.

Well performance was evaluated for eight operators using standard rate vs. time decline-curve analysis methods. These operators account for 65 percent of the production and also 65 percent of producing wells in the Bakken play (Table 1).

Estimated ultimate recovery (EUR) decreased over time for most operators and 2015 EUR was lower for all operators than in any previous year (Figure 2). This suggests that well performance has deteriorated despite improvements in technology and efficiency.

Figure 3 shows Bakken EUR and the commercial core area in green. The map on the left shows all wells with 12-months of production history and the map on the right, all wells with first production in 2015 and 2016.

Most 2015-2016 drilling was focused around the commercial core area. The fact that EURs from these core-centered locations were lower than earlier, less favorably located wells indicates that the commercial core is showing signs of depletion and well interference.

(Click to enlarge)

Figure 3. Bakken EUR map showing all wells with 12-months of production and all wells with first production in 2015 and 2016. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Changing GOR is important because it suggests decreasing reservoir energy. The Bakken has a solution gas drive mechanism. Initially, oil is produced by liquid expansion across the pressure drop from the reservoir to the well bore. Later, gas dissolved in the oil expands and this is the mechanism that lifts oil to the surface.

The sequence of events summarized in Figure 6 is demonstrated in Bakken field production shown below in Figure 7. Gas increased before oil production peaked in December 2014 and continued increasing through March 2016, and then declined.

(Click to enlarge)

Figure 7. Bakken gas production increased as oil production peaked and then it declined. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Water cut—water as a percent of total liquid produced—has increased for most operators over time (Figure 8) and this provides additional support for progressive Bakken depletion.

Well performance for the 8 key operators shown above in Table 1 above provides a framework for company performance and break-even prices for the Bakken play.

Reserves were estimated for more than 4,400 wells with first production in 2012 through 2015 using standard rate vs. time methods. Decline-curve analysis (DCA) was used to evaluate wells with at least 12 months of production history for key operators. Production group DCA was done separately by operator and year of first production for oil, gas and water.

None of the key operators’ average well breaks even at current Bakken wellhead prices of $42.50 per barrel although ConocoPhillips ($43.08 break-even price) is very close. EOG, XTO and Marathon all break even at prices less than $50 per barrel but other operators need higher oil prices to break even. It is worth noting that Bakken wellhead prices are about $10 per barrel less than WTI benchmark prices.

Current well density was calculated by measuring the area of the $50 commercial area (406,000 BOE cutoff) and dividing by the number of horizontal wells within that area. There are 5,500 producing wells within the 1.2 million acre commercial area shown in Figure 9. That equates to a current well density of 215 acres per well.

Tight oil operators describe infill spacing of 40 to 120 acres per well favoring the lower end of that range. Current well density in the Bakken core of 215 acres per well suggests substantial infill locations remain yet declining EURs, increasing water cut and falling GOR do not support further infill drilling.

The Bakken is unique because of the extraordinary lengths of lateral wellbores compared with other tight oil plays. Laterals are commonly more than 10,000 feet in length and often approach 12,000 feet. Related: OPEC Lost $2 Trillion In Oil Price Slump

Figure 10 shows lateral lengths in the Bakken. It is clear that within the commercial core area, most laterals exceed 8,000 feet. Available evidence suggests that current well density is sufficient to fully drain reservoir volumes. That implies that further drilling will not result in producing new oil volumes but will interfere with and cannibalize production from existing wells.

The Bakken play represents the fullest application of modern horizontal drilling and hydraulic fracturing technologies. The Middle Bakken and Three Forks reservoirs are tight, naturally fractured sandstones that respond exceptionally well to long laterals and multi-stage fracture stimulation. Field rules allowed long laterals well before these were feasible in other plays.

The downside of efficiency and technology is that depletion has accelerated. Resulting higher initial rates masked underlying field decline that is becoming apparent only in wells with first production in 2015. The evidence for depletion is compelling but pressure data is not publicly available and is needed to complete the case.

The most appealing aspect of resource plays is their apparent lack of risk. Source rocks are the drilling target so finding oil and gas is given. Because the plays are continuous accumulations, there is no need to map and define a trap. Since the reservoirs are tight, seals are not an issue either. But commercial risk should be more of a concern for investors than it seems to be so far.

The downside is that there is no way to stay away from water and it is produced from day one in large volumes. The Bakken has produced 1.5 billion barrels of water along with its 2.2 billion barrels of oil over the decades. Where are they putting it and what does that cost?

Investors should be worried. As analysts cheered the resilience of shale plays after the 2014 price collapse, nearly a billion barrels of Bakken oil were produced at a loss--about 40 percent of total production since the 1960s. Vast volumes of oil were squandered at low prices for the sake of cash flow to support unmanageable debt loads and to satisfy investors about production growth. The clear message is that investors do not understand the uncertainties of tight oil and shale gas plays.

And all major Bakken producers continue to lose money at current wellhead prices. If observations presented here hold up, there may be nowhere for the Bakken to go but down. Higher oil prices may not help much because the best days for the play are behind us. Future profits were sacrificed for short-term objectives that lost the companies and their shareholders money.

The early demise of the Bakken should serve as a warning about the future of other tight oil plays.

Related posts

An exceptionally well written article by a very knowledgeable industry insider. This is a big contrast with some other writers on this website, who only seem to write articles to serve the interests of oil shorts.

In my opinion, the fast reserve depletion of the Bakken is a precursor to the demise of the whole US shale industry, including the Permian. People are taught by Wall Street oil shorts that US shale has infinite reserve to increase production indefinitely. The simple physical truth is that the faster you produce, the faster you deplete your finite reserve.

With this knowledge and with luck in timing, you can make a ton of money in the next few years.

Hayes on March 01 2017 said:

I have no idea how this man has any clout in this industry. All people have to do is a Google search on Art Berman and look at all of his nonsense over the years. His schtick grew old about a decade ago.

CrazyUncle on March 01 2017 said:

The Bakken is so 2015. It's all about the Permian. Can't get land in the Permian try the SCOOP or the STACK. The end result will be the same, but you can keep raising money on the same old business plan, just a different play. You see it's not the plan that is faulty, it's the rock. Executives get big salaries and shareholders get the promise that "next year" the company will be cash flow positive. It's only been a decade...

Lee James on March 02 2017 said:

There's something seductive about fracing machinery, and that it goes so far underground, that we forget that the resource objective is, after-all, finite.

pat paterson on March 02 2017 said:

thank you for the well written article...

agree with your comment tesla...

Josh Jones on March 02 2017 said:

I wonder if anyone chokes back their wells when crude sells for less than what it costs to produce. And why would anyone drill a well and not frac it... it's gotta be reservoir depletion, right? And what gives with production declines in months when travel is difficult to impossible and temperatures are fifty degrees below the freezing point of water. That's frackin' weather in Texas, y'all! Any correlation between lateral length and production declines is purely coincidental, and I'm being polite. Let me guess - the author is a highly educated engineer with advanced degrees in petroleum geology.

Joe on March 02 2017 said:

So Tesla, you think oil prices are heading up?

Bud on March 02 2017 said:

The shorts have made good money, but that was based on geopolitics and listening to what the Saudis were saying.

Regarding the bakken, you are analyzing wells that, other than 15, were based on much higher oil prices. Hess and Marathon did very little drilling up there in the past year plus, so the numbers look better given your methodologies.

It would be helpful to analyse the newest wells built with 50 dollar oil in mind. Your map shows sweet spots in Dunn and a concentration around Spanish and New Town. Marathon has shown some monster 30 day ip in this area that they claim will produce upwards of 90 percent IRR given the current flat futures curve.

These firms need to produce oil, so it would be informative to know who has drilled up most of their best acreage and who does not. Given the commodity has an annualized long term avg Vol of near 45 percent, it is hard to discount oil back in the 70-80 dollar range given depletion and geopolitical uncertainty. So, if oil is back in that range in two years, who is in the best shape in the bakken regardless of whether the production drops at field level? Curious that you don't talk about the margins impact from the new delayed pipeline and the exports into Canada. Marathons margins in the bakken look as good as those in Texas when you factor in NGLs.

Steve on March 02 2017 said:

So many comments so many different views. Most every operator choke their wells back, as well as shut them in. All costs have come down from drilling to fracing. You drill on a lease and not complete it as after permitted lease you have 1 year to drill then another year to complete, when oil was high you stood in line to get anything done in the bakken. Times have changed in the bakken, life is better for operators. As far as bakken shale depleting at a rate it can't come back is a careless statement and time will show, bakken is bidding it's time waiting on mid $60 bbl pricing. With DAPL now completed, (it is finished with oil flowing only days away) and Keystone being re-submitted cost will come down for 3-forks, bakken benches, sanish, and tyler oil plays all producing LSC. Now what no one really talks about is our neighbor to the north (Canada) who are completing LSC wells at very low cost. Less than $4.4 million from permit to production. Oil Sands will be increasing production and dumping quickly onto the market this needs to be addressed with more concern than America's shale plays being depleted. JUST SAYING !

Thank You,

Steve

Werner J. Casotti on March 03 2017 said:

In my sincere opinion, Art Berman’s article on the Bakken shale is of an excellent technical and economic level.

Oil geologists are the professionals better qualified to give opinions on these subjects, even better than oil engineers, which is my case, I obtained my title in 1969 in Mendoza, Argentina.

It would be interesting to know Berman’s opinion on our “Vaca Muerta” (Dead Cow) shale play, which should be called “Very Rich Cow”, because the Argentinian State, in fact the pockets of taxes-paying citizens, offers 7,5 US$/MMBtu to foreign and national enterprises, to provide natural gas, relatively a lot more expensive than the price of the commodity in the US and the rest of the world.

Best regards,

<PRESIDIO_ANONYMIZED_PERSON>

Anonymous234 on March 03 2017 said:

Art has removed several viewing of the comments on his post on his home blog. Several good numeric criticisms were included.

I also recommend to look at the (measured) criticisms by Enno Peters on Shale Profile, with lots of data. (He is actually more towards a shale critic, although sort of middle of the road, so it is not bias.)

Bottom line is if you look at the cum curves, there is NO clear proof of the wells getting worse. The opposite, actually.