WSJ outlining the Bakken Boom

There is a good article and video in the Wall Street Journal Online about the Bakken oil boom.    There are some telling statistics about how the bakken region has brought economic prosperity to North Dakota and the companies operating in the region.

  • The Bakken Shale had helped North Dakota oil production double in the past three years, surging to 80 million barrels in 2009
  • Booming Bakken oil production has helped North Dakota escape the worst of the economic downturn. The state’s unemployment rate was 4.3% in December—more than five percentage points below the national level—and the state government projects a surplus for the current budget cycle.
  • There are many operators who can acheived profitability with $50 a barrel oil,  down from $80 three years ago.    The improved drilling economics means that companies can expand their footprint with faster ROI in the region.

Below is the video:

Active Drilling Rigs – Feb 28th 2010

Drilling rig activity is heating up in the Bakken Region.    The latest count is up 8 from about 3 weeks ago to 96.   EOG (EOG: 89.02 +1.16%) leads the pack with 13 rigs and CLR  (CLR: 30.55 -0.78%) is a close second with 11 rigs.     The private players are also adding rigs with Zenergy, Tracker Resources and Slawson all increasing their count since the last tally.    Looking at the rig providers,  Nabors is far an away still the predominant provider with an almost 30% share of the entire bakken drilling market.    H&P, Precision Drilling and Cyclone drilling find themselves with all having approximately 10% of the overall share.    

A recent article in the WSJ online had the following interesting note related to drilling costs in the Bakken Region :

The real shift has come in the past two years as companies honed drilling techniques, leading to bigger wells, faster drilling and lower costs. Marathon, for example, last year took an average of 24 days to drill a well, down from 56 days in 2006.    That has opened up new areas that weren’t previously worth drilling in and made wells profitable at prices as low as $50 a barrel, down from $80 three years ago

Rig Operator Well Name and Number Current Location County
NABORS 486 AMERICAN OIL & GAS INC RON VIALL 1-25H SWSE 25-156N-98W WIL
BRONCO 16 ANSCHUTZ EXPL CORP KUBIK TRUST 1-19-18H-143-95 SWSE 19-143N-95W DUN
H & P 255 ANSCHUTZ EXPL CORP STATE 1-25-36H-144-97X SWSE 24-144N-97W DUN
ENSIGN 67 BAYTEX ENERGY USA LTD MYERS 2-162-99H SESE 2-162N-99W DIV
NABORS 266 BRIGHAM OIL & GAS LP ARNSON 13-24 1-H NWNE 13-155N-103W WIL
NABORS 350 BRIGHAM OIL & GAS LP ABELMANN-STATE 21-16 1-H SESW 21-152N-101W MCK
NABORS 49 BRIGHAM OIL & GAS LP MORTENSON 5-32 1-H SESW 5-154N-102W WIL
NABORS 52 BRIGHAM OIL & GAS LP SORENSON 29-32 1-H NWNE 29-155N-92W MTL
NABORS 59 BURLINGTON RES O&G CO OLD HICKORY 43-34H NWSE 34-153N-96W MCK
PRECISION 825 BURLINGTON RES O&G CO CLEO 2-1H LOT4 1-149N-96W MCK
NABORS 165 CIRQUE RESOURCES LC GUNNISON STATE 44-36H SESE 36-161N-91W BRK
CYCLONE 14 CONTINENTAL RESOURCES KENNEDY 2-31T SWSE 31-151N-96W MCK
CYCLONE 19 CONTINENTAL RESOURCES ROGER 1-18H SWSE 18-147N-96W DUN
CYCLONE 20 CONTINENTAL RESOURCES FRANKLIN 1-20H NENW 20-160N-95W DIV
CYCLONE 21 CONTINENTAL RESOURCES BROCKMEIER 1-1H NWNW 1-146N-98W MCK
CYCLONE 22 CONTINENTAL RESOURCES LUNDBERG 1-8H NWNE 8-146N-96W DUN
CYCLONE 23 CONTINENTAL RESOURCES GENEVIEVE 1-27H NENE 27-160N-96W DIV
CYCLONE 25 CONTINENTAL RESOURCES STEDMAN 1-24H NWNW 24-155N-104W WIL
CYCLONE 28 CONTINENTAL RESOURCES HEGLER 1-13H SESE 12-146N-97W DUN
CYCLONE 9 CONTINENTAL RESOURCES DUAINE 42-4NH SENE 4-130N-106W BOW
PATTERSON 180 CONTINENTAL RESOURCES BAILEY 1-24H SESW 24-150N-97W MCK
TRINIDAD 36 CONTINENTAL RESOURCES MYRTLE 2-7H SESE 7-159N-95W WIL
RED HAWK 357 EAGLE OPERATING INC EAST FLAXTON MADISON UNIT 27H NENE 29-163N-90W BRK
PATTERSON 305 ENCORE OPERATING LP HANSON 11-12H NWNW 12-144N-96W DUN
PRECISION 289 ENCORE OPERATING LP SWENSON 31-33SWH NWNE 33-153N-95W MCK
BRONCO 23 EOG RESOURCES INC BURKE 29-33H SESE 33-155N-90W MTL
BRONCO 28 EOG RESOURCES INC BURKE 4-06H LOT4 6-155N-90W MTL
DHS 10 EOG RESOURCES INC SIDONIA 34-31H LOT1 31-158N-90W MTL
DHS 12 EOG RESOURCES INC SIDONIA 29-34H NENW 34-158N-90W MTL
MAJOR 42 EOG RESOURCES INC VAN HOOK 7-23H NWNW 23-152N-91W MTL
0.09375 EOG RESOURCES INC PALERMO 2-18H LOT1 18-156N-90W MTL
NABORS 148 EOG RESOURCES INC FERTILE 101-04H SESW 4-151N-90W MTL
NABORS 161 EOG RESOURCES INC FERTILE 18-30H SESE 30-151N-90W MTL
NABORS 527 EOG RESOURCES INC LIBERTY 6-25H NWNW 25-151N-91W MTL
RED HAWK 354 EOG RESOURCES INC SCANDIA 1-34H NENE 34-164N-78W BOT
TRUE 28 EOG RESOURCES INC JAMES HILL 4-10H NWNW 10-157N-91W MTL
TRUE 32 EOG RESOURCES INC SIDONIA 33-33H SESE 33-158N-90W MTL
TRUE 33 EOG RESOURCES INC FERTILE 37-07H SESE 7-151N-90W MTL
NABORS 108 FIDELITY EXPL & PROD CO DEADWOOD CANYON RANCH 44-32H SESE 32-154N-92W MTL
PRECISION 604 HELIS OIL & GAS CO. LLC DODGE 4-6/7 HR LOT 4 6-149N-95W MCK
H & P 179 HESS CORPORATION RS-JOHNSON A-157-90- 2128H-1 NWNE 21-157N-90W MTL
H & P 241 HESS CORPORATION EN-L CVANCARA-155-93- 2726H-1 SWNW 27-155N-93W MTL
NABORS 1 HESS CORPORATION RS-RUDOLPH-157-90- 1708H-1 SESW 17-157N-90W MTL
NABORS 2 HESS CORPORATION BLOU 12 NWNE 15-155N-96W WIL
NABORS 460 HESS CORPORATION BB-FEDERAL B-151-95- 2122H-1 SWNW 21-151N-95W MCK
BRONCO 20 HUNT OIL COMPANY SEVERANCE 1-9-4H SESW 9-153N-89W MTL
H & P 317 HUNT OIL COMPANY KING 35-4H NENW 35-157N-90W MTL
UNIT 117 KODIAK OIL & GAS (USA) INC MOCCASIN CREEK 13-34-28H SWSW 34-148N-93W DUN
H & P 256 MARATHON OIL CO MYLO WOLDING 14-11 SWSW 11-151N-93W MTL
H & P 257 MARATHON OIL CO LAZY DE 34-7H SWSE 7-146N-93W DUN
H & P 258 MARATHON OIL CO MYRMIDON 1-2H LOT 1 2-151N-94W MCK
H & P 259 MARATHON OIL CO FETTIG 11-27H NWNW 27-146N-95W DUN
PRECISION 602 MUREX PETROLEUM CORP KRISTI LEIGH 11-2H SESE 11-156N-96W WIL
PRECISION 645 MUREX PETROLEUM CORP JOYCE 3-10H LOT 4 3-154N-91W MTL
NABORS 272 NEWFIELD PROD CO PITTSBURGH 1-3H NWNW 10-153N-96W MCK
NABORS 419 NEWFIELD PROD CO HEIDI 1-4H SESE 4-156N-99W WIL
WHITE MT. 750 NEWFIELD PROD CO BLUEFIN 1-13H SESE 13-149N-98W MCK
NABORS 149 OASIS PETRO NO AMER HYNEK 5693 42-35H SESW 35-156N-93W MTL
NABORS 177 OASIS PETRO NO AMER NJOS FEDERAL 5602 11-13H NWNW 13-156N-102W WIL
BRONCO 22 PETRO HUNT LLC FORT BERTHOLD 148-94-22A-27-1H NWNE 22-148N-94W DUN
BRONCO 8 PETRO HUNT LLC BRENNA 152-96-23C-14-2H SESW 23-152N-96W MCK
ENSIGN 46 PETRO HUNT LLC JONSRUD 151-96-3B-10-2H NENW 3-151N-96W MCK
ENSIGN 93 PETRO HUNT LLC FORT BERTHOLD 148-94-25A-36-1H NWNE 25-148N-94W DUN
MAJOR 27 QUESTAR E & P CO MHA 2-06-01H-149-92 SESE 6-149N-91W DUN
UNIT 329 QUESTAR E & P CO MHA 1-06-31H-150-92 SESW 6-149N-92W DUN
RED HAWK 351 RITCHIE EXPLORATION INC SYLVIA 1-27 LOT 2 27-164N-77W BOT
KEY NRG 370 SAGEBRUSH RESOURCES LLC DEIBLER 25-16 SESE 25-162N-83W BOT
NABORS 152 SAMSON RESOURCES CO NESS 29-32-163-98H N2NW 29-163N-98W DIV
PRECISION 512 SIMRAY GP LLC LEVINGS ESTATE 1-08H SESE 8-149N-93W DUN
NABORS 687 SLAWSON EXPLORATION CANNONBALL FEDERAL 1-27-34H NENW 27-152N-91W MTL
PATTERSON 167 SLAWSON EXPLORATION WHIRLWIND 1-31H NWNE 6-151N-92W MTL
RED HAWK 558 SLAWSON EXPLORATION TARANTULA 1-16H SESE 16-152N-92W MTL
UNIT 106 SLAWSON EXPLORATION LUNKER FEDERAL 1-33-4H NENE 33-152N-91W MTL
NABORS 476 ST MARY LAND & EXPLORATION CO NELSON 4-29H NWNW 29-151N-96W MCK
NABORS 182 TRACKER RES DEVMNT MURPHY 11-1H SESW 11-144N-95W DUN
NABORS 44 TRACKER RES DEVMNT LIND 2-1H NWNE 2-145N-97W DUN
PRECISION 618 TRACKER RES DEVMNT BICE 12-1H SESW 12-147N-97W DUN
BRONCO 59 WHITING OIL AND GAS CORP OLSON FEDERAL 42-8H SENE 8-153N-91W MTL
NABORS 686 WHITING OIL AND GAS CORP RON OLSON 31-1HCE NWNE 1-155N-97W WIL
NABORS 99 WHITING OIL AND GAS CORP ROHDE 43-1H NESE 1-153N-92W MTL
PIONEER 56 WHITING OIL AND GAS CORP ANNALA 12-33H SWNW 33-153N-91W MTL
PIONEER 57 WHITING OIL AND GAS CORP HOLMBERG 44-24H SESE 24-153N-93W MTL
PIONEER 66 WHITING OIL AND GAS CORP MEIERS 11-17H NWNW 17-154N-92W MTL
PIONEER 67 WHITING OIL AND GAS CORP LITTLEFIELD 12-34H SWNW 34-154N-91W MTL
PRECISION 106 WHITING OIL AND GAS CORP PLATT 43-28H NESE 28-154N-91W MTL
PRECISION 51 WHITING OIL AND GAS CORP CURREN 11-14H NWNW 14-153N-93W MTL
PRECISION 520 WHITING OIL AND GAS CORP TTT RANCH 12-25H SWNW 25-154N-92W MTL
H & P 180 XTO ENERGY INC H M HOVE 34X-33 SWSE 33-155N-96W WIL
NABORS 265 XTO ENERGY INC BOOMER 34X-35 LOT 3 35-148N-97W DUN
NABORS 681 XTO ENERGY INC THOMAS 44X-18 SESE 18-154N-95W WIL
NABORS 742 XTO ENERGY INC WARD 11X-23 NWNW 23-154N-95W WIL
NABORS 688 ZAVANNA LLC GRASSER 1-26H SESE 22-154N-99W WIL
CYCLONE 31 ZENERGY INC ROLFSRUD 7-6H SESW 7-152N-97W MCK
ENSIGN 76 ZENERGY INC BERQUIST 34-27H SESW 34-152N-98W MCK
PRECISION 517 ZENERGY OPERATING CO LLC DAKOTA-3 CLARA 14-17H SESW 17-149N-93W DUN
PRECISION 96 ZENERGY OPERATING CO LLC DAKOTA-3 BIRDSBILL 14-16H SESW 16-149N-93W DUN

Inside Brigham’s reported earnings loss

 The following article was contributed by one of our readers, M. Klotz.  

Be careful with what you hear as the press notes Brigham’s 2009 annual report on 2/25/2010. Net income before income tax for 2009 is being reported as a loss of $123.2 million. However if you dial back to Q1 ‘09, you will remember that accounting rules required a write down of $114.8 million because the discounted present value of “Proved Reserves” was less than the capitalized cost of oil and gas properties at that time. This calculation is required to be based on the realizable price of Oil/Gas at the end of Q1 ‘09. The realizable price at that date was substantially less than today. Additionally, since Q1 ‘09, Brigham’s proved reserves have increased substantially as Bakken has de-risked substantial acreage. Unfortunately, rules do not permit reinstatement of an impairment such as this once made. While this accounting rule substantially reduces 2009 net income, there is a positive carry forward impact of this write-down. The foot-notes report that this write down reduced the rate of depletion by $18.2 million ($.18 per share) for 2009. In future years this would imply similar gifts to reported net income because the expense has already been absorbed. Other oil and gas players likely have similar stories, although they may not be as extreme as Brigham. As Washington focuses on places to create new revenue sources, they are bound to look soon to oil and gas net income and return to some form of Jimmy Carter’s Windfall Profits taxes. This $.18 per share is not in fact income but recovery of premature losses caused by write-down of assets due in large part to a temporary low commodity price.

A sixth month chart of BEXP is below,  the stock has support at its 50 day MA of 14.28.  In pre market, BEXP was up over 3% but is down in early market trading with the rest of market due to poor uemployment data that came out before the trading session.

Feb 22nd – Bakken Fund Update

The Bakken Fund continues to outperform the general market and all major indices as shown in the figure below.   Since its inception earlier this month,  the Bakken Fund is now up 10.5% with Brigham Exploration (BEXP: N/A N/A) leading the way with a 20% gain.     Oil stocks have had a decent run in the last 2 weeks and we may consider booking some gains and looking for a better re-entry point with some of our gainers in the coming days.     

Bakken Fund NAV: $11.05 YTD Return: 10.5%

 

Symbol  Price  Shares  Value  %of Fund Gains  Today  Return
BEXP $16.67 6,710 $111,855.70 10.13% $20,502.29 -0.06% 20.48%
AEZ $4.86 23,765 $115,497.90 10.46% $18,118.36 2.21% 17.82%
GEOI $13.60 8,698 $118,292.80 10.71% $17,102.26 0.44% 16.90%
WLL $74.12 1,390 $103,026.80 9.33% $15,750.21 1.10% 15.67%
CLR $40.96 2,540 $104,038.40 9.42% $11,212.40 0.32% 11.16%
SM $34.20 3,020 $103,284.00 9.35% $9,998.31 0.23% 10.03%
KOG $2.47 15,985 $39,484.55 3.57% $2,729.87 -3.89% 7.43%
MRO $29.97 3,395 $101,748.15 9.21% $6,859.51 0.07% 6.82%
EOG $94.64 1,000 $94,640.00 8.57% $4,291.50 0.32% 4.31%
NOG $12.23 8,090 $98,940.70 8.96% ($1,182.43) -2.16% -1.18%
               

 

 
Type Close Date Symbol Name Quantity Price Net Commission SEC Fee
Buy Feb 11, 2010 NOG Northern Oil & Gas, Incorporated 8,090 $12.38 $100,123.13 $404.50 $0.00
Sell Feb 8, 2010 CLR Continental Resources, Incorporated 200 $38.16 $7,631.20 $10.00 $0.10
Sell Feb 8, 2010 WLL Whiting Petroleum Corporation 200 $66.11 $13,222.63 $10.00 $0.17
Sell Feb 8, 2010 AEZ American Oil & Gas, Incorporated 1,000 $4.28 $4,283.94 $50.00 $0.06
Sell Feb 8, 2010 SM ST. MARY LAND EXPLORATION 200 $31.98 $6,396.61 $10.00 $0.09
Sell Feb 8, 2010 BEXP BRIGHAM EXPLORATION 600 $14.58 $8,750.84 $30.00 $0.12
Sell Feb 8, 2010 EOG EOG RESOURCES INC 100 $92.87 $9,287.28 $5.00 $0.12
Sell Feb 8, 2010 MRO Marathon Oil Corp 200 $28.13 $5,625.72 $10.00 $0.08
Buy Feb 5, 2010 GEOI GEORESOURCES INC 3,144 $11.77 $37,012.66 $157.20 $0.00
Buy Feb 5, 2010 AEZ American Oil & Gas, Incorporated 10,470 $4.13 $43,210.89 $523.50 $0.00
Buy Feb 5, 2010 KOG Kodiak Oil & Gas Corporation 15,985 $2.30 $36,754.68 $799.25 $0.00
Buy Feb 5, 2010 AEZ American Oil & Gas, Incorporated 14,295 $4.09 $58,452.58 $714.75 $0.00
Buy Feb 5, 2010 GEOI GEORESOURCES INC 5,554 $11.56 $64,177.88 $277.70 $0.00
Buy Feb 5, 2010 MRO Marathon Oil Corp 3,595 $27.96 $100,514.36 $179.75 $0.00
Buy Feb 5, 2010 CLR Continental Resources, Incorporated 2,740 $36.66 $100,457.20 $137.00 $0.00
Buy Feb 5, 2010 BEXP BRIGHAM EXPLORATION 7,310 $13.69 $100,104.25 $365.50 $0.00
Buy Feb 5, 2010 SM ST. MARY LAND EXPLORATION 3,220 $30.96 $99,682.30 $161.00 $0.00
Buy Feb 5, 2010 WLL Whiting Petroleum Corporation 1,590 $63.21 $100,499.22 $79.50 $0.00
Buy Feb 5, 2010 EOG EOG RESOURCES INC 1,100 $90.58 $99,635.78 $55.00 $0.00

EOG Earnings fueled by Bakken production

EOG Resources Inc.  (EOG: 89.02 +1.16%)  posted fourth quarter 2009 earnings of $234.3 million, or 92 cents per share, which were 26% higher than the same quarter in 2008. The Houston-based oil and gas exploration company, also reported full-year 2009 results of $754.5 million, compared with $1.9 billion the previous year. Bakken Shale development helped increase total liquids production 30 percent, a clear indication that the contribution from the Bakken region is increasing and becoming a larger segment of EOG’s overall revenue.   The company currently has more than 500,000 net acres of leasehold in the Bakken Shale play, in North Dakota. In 2010, EOG Resources is targeting a 13 percent production growth and a 47 percent increase in total liquids production due to development in the Bakken and Barnett plays and another field in Canada, near their Bakken plays.  Since a 2008 all-time-high of more than $140 per share, the company hit a low of about $45, but rebounded to its current levels in the low 90’s in the past 2 months as indicated in the chart below. The stock currently is below it’s 50 day MA and at the mid point of its Bollinger Band.    The stock should have support at the $88-89 level and may see resistance around $99.  EOG is up almost $2 in early morning trading.

EOG Resources 6 month chart

Feb 14th – Bakken Fund Update

The Bakken Fund continues its upward ascent finishing last week on an upswing while the overall market was under pressure.  American Oil & Gas (AEZ: N/A N/A) lead the pack with a 15% return in little more than a week.  BEXP, KOG and GEOI all came in with greater than 10% returns.   We picked up a position in Northern Oil & Gas (NOG: 1.45 +3.57%) this week as well and are evaluating Hess (Hes: 42.09 +1.74%) and PetroBakken for inclusion.    Overall the fund is now up 6.6% since inception and has outperformed all major indexes (as shown below) thus far in its short life.    One of the main questions I’m getting about the fund is what the ticker symbol is and how to invest.    Unfortunately,  there is no direct way to invest in this fund although you could track my trades (which I’ll post at the bottom of each update)  and replicate the trades yourselves to some extent (You can see some real time stats on the fund at Marketocracy on this page).   Hopefully this fund will raise the awareness with the fund managers in this sector and show them the investment potential of the Bakken region.    In terms of managing the virtual fund my style is not necessarily to buy and hold but to trade in and out when I see technical tops or bottoms in the stocks.   Oil has been fairly cyclical and predictable over the last year and we’ll try to use that to our advantage with this fund.   I’ve been flooded with a number of other questions about the fund and will set up a separate FAQ and prospectus to help address them.

Bakken Fund     NAV: $10.66     YTD Return: 6.6%

The Bakken Fund is up 6.6% in little more than a week
Symbol Price Shares Value %
of Fund
Gains Today Return
AEZ $4.74 23,765 $112,646.10 10.57% $15,266.56 1.07% 15.02%
BEXP $15.42 6,710 $103,468.20 9.71% $12,114.79 1.65% 12.10%
KOG $2.55 15,985 $40,761.75 3.82% $4,007.07 1.59% 10.90%
GEOI $12.82 8,698 $111,508.36 10.46% $10,317.82 3.05% 10.20%
WLL $69.27 1,390 $96,285.30 9.03% $9,008.71 0.03% 8.96%
SM $33.31 3,020 $100,596.20 9.44% $7,310.51 0.39% 7.33%
CLR $38.76 2,540 $98,450.40 9.24% $5,624.40 -0.62% 5.60%
MRO $28.61 3,395 $97,130.95 9.11% $2,242.31 0.07% 2.23%
EOG $90.98 1,000 $90,980.00 8.53% $631.50 -0.09% 0.63%
NOG $12.37 8,090 $100,073.30 9.39% ($49.83) 0.49% -0.05%

Trade Ledger:

Type Close Date Symbol Name Quantity Price Net Commission SEC Fee
Buy Feb 11, 2010 NOG Northern Oil & Gas, Incorporated 8,090 $12.38 $100,123.13 $404.50 $0.00
Sell Feb 8, 2010 CLR Continental Resources, Incorporated 200 $38.16 $7,631.20 $10.00 $0.10
Sell Feb 8, 2010 WLL Whiting Petroleum Corporation 200 $66.11 $13,222.63 $10.00 $0.17
Sell Feb 8, 2010 AEZ American Oil & Gas, Incorporated 1,000 $4.28 $4,283.94 $50.00 $0.06
Sell Feb 8, 2010 SM ST. MARY LAND EXPLORATION 200 $31.98 $6,396.61 $10.00 $0.09
Sell Feb 8, 2010 BEXP BRIGHAM EXPLORATION 600 $14.58 $8,750.84 $30.00 $0.12
Sell Feb 8, 2010 EOG EOG RESOURCES INC 100 $92.87 $9,287.28 $5.00 $0.12
Sell Feb 8, 2010 MRO Marathon Oil Corp 200 $28.13 $5,625.72 $10.00 $0.08
Buy Feb 5, 2010 GEOI GEORESOURCES INC 3,144 $11.77 $37,012.66 $157.20 $0.00
Buy Feb 5, 2010 AEZ American Oil & Gas, Incorporated 10,470 $4.13 $43,210.89 $523.50 $0.00
Buy Feb 5, 2010 KOG Kodiak Oil & Gas Corporation 15,985 $2.30 $36,754.68 $799.25 $0.00
Buy Feb 5, 2010 AEZ American Oil & Gas, Incorporated 14,295 $4.09 $58,452.58 $714.75 $0.00
Buy Feb 5, 2010 GEOI GEORESOURCES INC 5,554 $11.56 $64,177.88 $277.70 $0.00
Buy Feb 5, 2010 MRO Marathon Oil Corp 3,595 $27.96 $100,514.36 $179.75 $0.00
Buy Feb 5, 2010 CLR Continental Resources, Incorporated 2,740 $36.66 $100,457.20 $137.00 $0.00
Buy Feb 5, 2010 BEXP BRIGHAM EXPLORATION 7,310 $13.69 $100,104.25 $365.50 $0.00
Buy Feb 5, 2010 SM ST. MARY LAND EXPLORATION 3,220 $30.96 $99,682.30 $161.00 $0.00
Buy Feb 5, 2010 WLL Whiting Petroleum Corporation 1,590 $63.21 $100,499.22 $79.50 $0.00
Buy Feb 5, 2010 EOG EOG RESOURCES INC 1,100 $90.58 $99,635.78 $55.00 $0.00

Why BEXP could be a takeover target

The following edited post was primarily contributed by one of our readers, J. Franke.  It contains some great information on BEXP and drilling in the region:

BEXP presented at Credit Suisse’s 2010 Energy Summit on Feb 5. Credit Suisse has an interesting method of arriving at a valuation of the company. They initiated coverage with an “Outperform” and a price target of $17.  Some key figures:

  • 287,000 acres in the basin
  • 1200 net locations (Brigham has postulated three Bakken and three TFS wells per 1280 acre spacing unit)
  • 500,000 BO over the life of a well (600 MMBoe total over 1200 wells – 50 years of drilling!)
  • Well pay-out in 13 months

Credit Suisse suggests that Brigham is a takeover candidate by a large cash-rich oil company that is not a current  player in the Bakken/TFS (Three Forks/Sanish formations).   As another reader pointed out, the average current value of a mineral acre is of some value in comparing companies but not all acreage is created equal.   The most important aspect of Brigham’s potential is the fact that their successes to date have “de-risked” about a 100,000 acres of their position in the WillyBee.  Their completion processes are the best yet and they also must have an extremely talented Petroleum Engineer at the drill rig providing superb guidance for the lateral. They obviously have some very tight management of the drill rig because they have achieved 19,000 TD in just 18 days on a recent well. At a $15,000/day rate for the rig, that’s a huge savings. Many other operators have the rig on site for over 30 days.

The best investments will be with companies that have already de-risked their acreage. Companies that are already there are companies like Continental, EOG, & Whiting.  These companies have a lot of infill drilling yet to come. That infill drilling will be using far more advanced completion processes than they used in the earlier field development.    There is the potential for many 3000+ BOPD infill wells in the future.

A small E&P company that holds acreage in an area that has been “de-risked” by other operators could also be candidates for investment.  If you want to assess the potential of acreage that has not been de-risked by drilling, you will have to review the [tippy title=”isopaches”  header=”off”]An isopach map is a contour map showing the thickness of a given “stratigraphic unit.” A stratigraphic unit is a rock layer, or series of rock layers, that geologists have recognized as extending across a given area. Isopach maps provide insight on how a rock layer formed, what its structure is like, and other features such as the size and extent of ore deposits, oil fields, and similar formations.[/tippy] of the Bakken (see figure below)  that have been prepared by the ND Geological Survey and ND DMR (More info on isopaches  in the Bakken in this presentation by the ND DMR).   The Bakken-TFS is fairly uniform over vast areas of the WB but there are “hot spots”.   Winners in the Bakken will be the ones who understand the geology and the genesis of the formation and the oil within it.

Lower/Middle Bakken Isopach (source:searchanddiscovery.com)

Most investors keen on the Bakken-TFS are not aware that the technology that made the Bakken a viable prospect is also available to explore other formations.  There were hundreds of vertical wildcats that were drilled in the past 50 years that found “traces” or “uneconomical”  oil in the Madison, Birdbear, Stonewall, Red River, Duperow, Ratcliff  just as they found similar “traces” in the Bakken-TFS.  There are huge areas where these formations were “uneconomical” but with horizontal drilling could provide very nice payouts if drilled in the future.    The current Bakken-TFS drilling is focused on securing existing leases from expiration but these other areas could be a boon to O&G companies willing to take a chance.

Feb 10 – Bakken Fund Update

Our Bakken Fund has held up well since inception, All of our holdings are up 2% or more with BEXP the leader with 8% gain in just a few days as oil has rebounded in the last week. The response and feedback has been great for the concept with a number of suggestions on other companies we should be considering. Over the next few days we’ll look at Northern Oil & Gas as well as Hess for inclusion to the fund. Our Net Asset Value (NAV) current stands at $10.42 which represents a 4.2% return since inception.

Bakken Fund     NAV: $10.42        YTD Return: 4.2%

 

 

Symbol Price Shares Value % of Fund Gains Today Return
BEXP $14.82 6,710 $99,442.20 9.54% $8,088.79 0.00% 8.08%
AEZ $4.37 23,765 $103,853.05 9.96% $6,473.51 1.83% 6.37%
SM $32.72 3,020 $98,814.40 9.48% $5,528.71 2.66% 5.55%
GEOI $12.24 8,698 $106,463.52 10.21% $5,272.98 0.00% 5.21%
WLL $66.33 1,390 $92,198.70 8.84% $4,922.11 0.68% 4.90%
CLR $38.31 2,540 $97,307.40 9.33% $4,481.40 1.31% 4.46%
EOG $94.54 1,000 $94,540.00 9.07% $4,191.50 3.13% 4.21%
KOG $2.39 15,985 $38,204.15 3.66% $1,449.47 -0.42% 3.94%
MRO $28.62 3,395 $97,164.90 9.32% $2,276.26 2.03% 2.26%
               

Active Drilling Rig List – Feb 9th 2010

Only 1 driling rig has been added since the last time we looked at Active Drilling Rig Operators about 2 weeks ago.   EOG is still in the lead with 11 and Whiting Oil & Gas (WLL)  has taken second place with 10.     Continental Resources (CLR) is third with 9 rigs in place.    We really expected Saint Mary’s Land & Exploration to be in the Top 10 in terms of drilling activity in the region but currently they have only 1 rig in operation.  If we look at the rigs themselves,  Nabors has had a stranglehold on the majority of the rigs with a 30% share of all rigs in the region.    Precision Drilling is a distant second with 10% share of all rigs in the region.

We haven’t looked at the Rig Owners in a while, so lets take a fresh look there

Rig Operator Well Name and Number Current Location
NABORS 486 AMERICAN OIL & GAS INC RON VIALL 1-25H SWSE 25-156N-98W
BRONCO 16 ANSCHUTZ EXPL CORP KUBIK TRUST 1-19-18H-143-95 SWSE 19-143N-95W
H & P 255 ANSCHUTZ EXPL CORP STATE 1-25-36H-144-97X SWSE 24-144N-97W
PATTERSON 490 ARMSTRONG OP INC GRUMAN 18-3 NENE 18-139N-96W
RED HAWK 351 BALLANTYNE OIL AUS 4-22 NWNW 22-159N-83W
ENSIGN 67 BAYTEX ENERGY USA LTD JACOBSON 15-161-98H SESE 15-161N-98W
NABORS 266 BRIGHAM OIL & GAS LP ARNSON 13-24 1-H NWNE 13-155N-103W
NABORS 350 BRIGHAM OIL & GAS LP ABELMANN-STATE 21-16 1-H SESW 21-152N-101W
NABORS 49 BRIGHAM OIL & GAS LP PAPINEAU TRUST 17-20 1-H NENW 17-151N-102W
NABORS 52 BRIGHAM OIL & GAS LP SORENSON 29-32 1-H NWNE 29-155N-92W
NABORS 59 BURLINGTON RES O&G CO BOXER 21-6H LOT 3 6-149N-96W
PRECISION 825 BURLINGTON RES O&G CO CLEO 2-1H LOT4 1-149N-96W
NABORS 165 CIRQUE RESOURCES LC GUNNISON STATE 44-36H SESE 36-161N-91W
CYCLONE 14 CONTINENTAL RESOURCES MILES 1-6M SWSE 31-151N-96W
CYCLONE 20 CONTINENTAL RESOURCES OTIS 1-13H NWNE 13-161N-96W
CYCLONE 21 CONTINENTAL RESOURCES BROCKMEIER 1-1H NWNW 1-146N-98W
CYCLONE 22 CONTINENTAL RESOURCES LUNDBERG 1-8H NWNE 8-146N-96W
CYCLONE 23 CONTINENTAL RESOURCES GENEVIEVE 1-27H NENE 27-160N-96W
CYCLONE 25 CONTINENTAL RESOURCES STEDMAN 1-24H NWNW 24-155N-104W
CYCLONE 28 CONTINENTAL RESOURCES KATE 1-19H NENE 19-147N-96W
PATTERSON 180 CONTINENTAL RESOURCES MURI 1-27H NENW 27-151N-97W
TRINIDAD 36 CONTINENTAL RESOURCES IMSLAND 2-31H SESW 31-160N-95W
RED HAWK 357 EAGLE OPERATING INC EM OAS 35-1 NENE 35-162N-93W
PATTERSON 305 ENCORE OPERATING LP BECKERT 24-7H SESW 7-145N-94W
PRECISION 289 ENCORE OPERATING LP PORCUPINE RIDGE 11X-2H LOT4 2-147N-96W
BRONCO 23 EOG RESOURCES INC BURKE 29-33H SESE 33-155N-90W
BRONCO 28 EOG RESOURCES INC AUSTIN 30-13H SESE 13-154N-90W
DHS 10 EOG RESOURCES INC SIDONIA 34-31H LOT1 31-158N-90W
DHS 12 EOG RESOURCES INC SIDONIA 29-34H NENW 34-158N-90W
MAJOR 43 EOG RESOURCES INC FERTILE 11-10H NWNW 10-151N-90W
NABORS 148 EOG RESOURCES INC VAN HOOK 13-35H SESE 35-152N-91W
NABORS 161 EOG RESOURCES INC FERTILE 34-31H NENW 31-151N-90W
NABORS 527 EOG RESOURCES INC FERTILE 14-17H SWSE 17-151N-90W
TRUE 28 EOG RESOURCES INC SIDONIA 8-26H SESE 26-158N-90W
TRUE 32 EOG RESOURCES INC SIDONIA 7-25H NWNW 25-158N-90W
TRUE 33 EOG RESOURCES INC FERTILE 37-07H SESE 7-151N-90W
NABORS 108 FIDELITY EXPL & PROD CO DEADWOOD CANYON RANCH 44-34H SESE 34-154N-92W
H & P 179 HESS CORPORATION EN-TROUT-157-93- 3130H-1 SWSE 31-157N-93W
H & P 241 HESS CORPORATION EN-L CVANCARA-155-93- 2726H-1 SWNW 27-155N-93W
NABORS 1 HESS CORPORATION RS-RUDOLPH-157-90- 1708H-1 SESW 17-157N-90W
NABORS 460 HESS CORPORATION BB-FEDERAL-151-95- 0817H-1 NENW 8-151N-95W
BRONCO 20 HUNT OIL COMPANY SEVERANCE 1-9-4H SESW 9-153N-89W
H & P 317 HUNT OIL COMPANY KING 35-4H NENW 35-157N-90W
UNIT 117 KODIAK OIL & GAS (USA) INC MOCCASIN CREEK 13-34-28H SWSW 34-148N-93W
H & P 256 MARATHON OIL CO MYLO WOLDING 14-11 SWSW 11-151N-93W
H & P 257 MARATHON OIL CO GLENN ECKELBERG 24-8H SESW 8-146N-93W
H & P 258 MARATHON OIL CO MYRMIDON 1-2H LOT 1 2-151N-94W
H & P 259 MARATHON OIL CO FETTIG 11-27H NWNW 27-146N-95W
PIONEER 44 MUREX PETROLEUM CORP ALFRED BROWN 2 NENE 34-151N-96W
PRECISION 602 MUREX PETROLEUM CORP TERESA NELL 20-17H SESE 20-157N-95W
PRECISION 645 MUREX PETROLEUM CORP JOYCE 3-10H LOT 4 3-154N-91W
NABORS 272 NEWFIELD PROD CO PITTSBURGH 1-3H NWNW 10-153N-96W
NABORS 419 NEWFIELD PROD CO HEIDI 1-4H SESE 4-156N-99W
NABORS 476 NEWFIELD PROD CO SAND CREEK FEDERAL 1-21H NENW 28-153N-96W
NABORS 149 OASIS PETRO NO AMER HYNEK 5693 42-35H SESW 35-156N-93W
NABORS 177 OASIS PETRO NO AMER ANGELL 5200 31-28H NWSW 28-152N-100W
BRONCO 22 PETRO HUNT LLC FORT BERTHOLD 148-94-22A-27-1H NWNE 22-148N-94W
BRONCO 8 PETRO HUNT LLC ANDERSON 152-96-35C-26-1H SESW 35-152N-96W
ENSIGN 46 PETRO HUNT LLC JONSRUD 151-96-3B-10-2H NENW 3-151N-96W
ENSIGN 93 PETRO HUNT LLC FORT BERTHOLD 152-93-17C-08-1H SESW 17-152N-93W
UNIT 329 QUESTAR E & P CO MHA 1-06-31H-150-92 SESW 6-149N-92W
KEY NRG 439 SAGEBRUSH RESOURCES LLC DEIBLER 25-16 SESE 25-162N-83W
PRECISION 512 SIMRAY GP LLC LEVINGS ESTATE 1-08H SESE 8-149N-93W
MAJOR 27 SLAWSON EXPLORATION ATLANTIS FEDERAL 1-34-35H NWSW 34-152N-92W
NABORS 687 SLAWSON EXPLORATION CANNONBALL FEDERAL 1-27-34H NENW 27-152N-91W
RED HAWK 558 SLAWSON EXPLORATION WIZARD 1-35H NENW 35-152N-93W
NABORS 152 ST MARY LAND & EXPLORATION CO ANDERSON 12-14H NWSW 14-149N-96W
NABORS 182 TRACKER RES DEVMNT WERRE TRUST 29-1H SW SW 20-144N-94W
NABORS 44 TRACKER RES DEVMNT LIND 2-1H NWNE 2-145N-97W
BRONCO 59 WHITING OIL AND GAS CORP OLSON FEDERAL 42-8H SENE 8-153N-91W
NABORS 686 WHITING OIL AND GAS CORP RON OLSON 31-1HCE NWNE 1-155N-97W
NABORS 99 WHITING OIL AND GAS CORP ROHDE 43-1H NESE 1-153N-92W
PIONEER 56 WHITING OIL AND GAS CORP ANNALA 12-33H SWNW 33-153N-91W
PIONEER 57 WHITING OIL AND GAS CORP HOLMBERG 44-24H SESE 24-153N-93W
PIONEER 66 WHITING OIL AND GAS CORP MEIERS 11-17H NWNW 17-154N-92W
PIONEER 67 WHITING OIL AND GAS CORP SMITH 12-7H LOT 2 7-153N-91W
PRECISION 106 WHITING OIL AND GAS CORP PLATT 43-28H NESE 28-154N-91W
PRECISION 51 WHITING OIL AND GAS CORP CURREN 11-14H NWNW 14-153N-93W
PRECISION 520 WHITING OIL AND GAS CORP TTT RANCH 12-25H SWNW 25-154N-92W
H & P 180 XTO ENERGY INC H M HOVE 34X-33 SWSE 33-155N-96W
NABORS 265 XTO ENERGY INC BOOMER 34X-35 LOT 3 35-148N-97W
NABORS 681 XTO ENERGY INC THOMAS 44X-18 SESE 18-154N-95W
NABORS 742 XTO ENERGY INC MONDAK FEDERAL 14X-11 SWSW 11-148N-105W
NABORS 742 XTO ENERGY INC WARD 11X-23 NWNW 23-154N-95W
NABORS 688 ZAVANNA LLC GENE 1-22H SESE 22-154N-99W
CYCLONE 31 ZENERGY INC ROLFSRUD 7-6H SESW 7-152N-97W
ENSIGN 76 ZENERGY INC LUNDEEN 4-26H NWNW 26-152N-98W
PARAMOUNT 517 ZENERGY OPERATING CO LLC DAKOTA-3 CLARA 14-17H SESW 17-149N-93W
PRECISION 517 ZENERGY OPERATING CO LLC DAKOTA-3 VAN HOOK – R/S 16-4H SESE 4-150N-92W
PRECISION 96 ZENERGY OPERATING CO LLC DAKOTA-3 BIRDSBILL 14-16H SESW 16-149N-93W

Interview with Slawson Exploration Company, Inc.

Craig Slawson of  Slawson Exploration Company Inc. was gracious enough to grant an interview that provides great insight on the Bakken region.  Craig and Todd Slawson, along with other  family run the exploration arm of the Slawson companies.   It underscores some of the challenges for O&G companies operating in the region.  Enjoy and look for more interviews to come:


Question: How did your family get started in oil & gas and ultimately see the potential in the Bakken region?

Answer: Our father started the business in 1957 as a young geologist out of KU hunting for Mississippian age pools in central, then western Kansas.  Initial successes led to expansion and ongoing integration within the industry to a culmination of 800 employees, 9 rigs (KS and deep Anadarko), largest crude purchasing/transport in KS, extensive radio towers, and essentially became the most dominate wildcatter in most of the basins we played (Powder, Williston, KS, Anadarko, Sacramento and some Gulf Coast).

Our secret sauce was tenacity, patience and applied “proven” technology as a “fast follower”.  We stayed in core basins through thick and thin, applying cutting edge technologies as risk reduction tools to convert exploration plays to exploitation provinces.  Thus was the case with 3D AVO in the Sac basin turbidites, the Bakken Shale in the late 80’s (3rd Rockies operator to drill a H test) and now in associated reservoirs within the Bakken sequence as well as other regions.  As is often the case we “found” the Bakken when looking for other formations but in the right area for a Bakken “bailout” at a time when others just started to deploy horizontal technologies from Texas.  Thus Slawson jumped in very early, learned by drilling and tweaking ourselves versus using conventional wisdom.  We understood what made this work and from there focused on exploration of other adjacent provinces, specifically the Richland County area – which also had “accidental” vertical production.  In 1991 we amassed some 40,000 acres in options to attempt this region but with crude selling in the teens we gave up after 50 showings.  Finally in 2003 one of the other operators hit near this area and were able to quickly capitalize once again on our previous work.

As one of the smaller players in the Bakken province(s) we still see places we can employ our unique traits.  The Bakken is more complicated than most realize.  And the ever-evolving drilling and completion technologies will continue to lesson some of the complications but one must know where to drill and why – which subset strata and why – direction and the optimal length laterally and which completion technique will optimize the exploitation.  By my count thus far there are 8 different provinces.  The industry has mastered maybe 4.  Potential remains in the remaining areas/formations and in refining what we have already mastered with latest techniques.


Question: Being “on the ground” in the Bakken region, do you see any trends occurring in terms of uptick in drilling,  heightened interest etc?

Answer: We do see many trends evolving in both testing other geologic concepts and in the ever-evolving drilling/completion techniques that will help us both better develop and better exploit some of the lesser productive yields.  BEXP’s expansion and deployment of closer stage frac spacing from early attempts in Mountrail is one trend.  We just successfully deployed a record 36 stage frac on a 8000’ lateral thus now yielding a ~200’ frac spacing.  I believe some of Canada’s work is now ~150’ spacing.  And as the gas-prone Gulf Coast companies attempt to morph to oil given the ongoing gas supply pressure they are starting to enter the province – we have seen this trend all too many times.


Question: Are you seeing improved deployment times (time to get drill online and producing) in the region and if so, is the improved technology around horizontal drilling making the difference?

Answer: In general the infrastructure is improving such that there is currently a good balance of completion vendors, drilling rigs and oil/gas egress from the state (some tightness of course in all areas if things heat up further).  The past two winters have not been kind to operations but this goes with the territory and gives others pause.


Question: What are some on the technical and personnel challenges you’ve faced in growing the business in the Bakken region?

Answer: Challenges have been many and varied.  First in acquiring leases at fair prices commensurate with the risk/reward.  Drilling rig shortages, crew shortages, tubular shortages, pipeline egress capacity issues, then wildly fluctuating product prices which put EVERYTHING into a tailspin immediately after a boom cycle.  Companies had just signed longer term commitments for rigs, pipe, egress infrastructure, etc and given the longer lead times in this industry, most cannot back peddle fast enough to accommodate swings like this and thus suffered.  Slawson’s perseverance in this time prevailed and was able to take advantage of the early 09 recession to re-amass more acreage.  We “doubled-down” because the market presented a buying opportunity in a relatively short term pricing issue that was artificially too high anyway.


Question:  Is Slawson going to stay a private entity or do you potentially see a public offering in the future?

Answer:  Slawson (SECI) is manically private and enjoys answering only to ourselves, right or wrong.


Thanks again to Craig for the great information