It’s been months since a drop of oil has leaked into the Gulf but the remnants still reside from this PR disaster. BP is still running radio and TV ads in all major markets to slowly reclaim it’s brand equity and based on the Exxon Valdez disaster it will take upwards of 15-20 years for the subject to fade into wikipedia.
In the last few weeks in a number of papers a similar theme is circulating that should catch the attention of all the Bakken O&G companies that exist. Elements of the media have started reported that “Fracking” is a dirty word. On Yahoo today the term hit #1 in the “Trending Now” section. In the Christian Science Monitor, a prominent article ran with the subject
If the title didn’t get your attention then surely the tagline would – “Fracking opponents carried signs saying “Kids can’t drink gas” and “Protect our water. “. In the Bakken region hydraulic fracking is a core component, perhaps the core component in drilling and recovering oil from the layers of rock within the Williston Basin. The long term effects of hydraulic fracturing are not entirely clear as the data around this technique is limited.
Opponents make claims that fracking destroys the environment, sickens children and sets water ablaze. There are a couple of congressional inquiries on the matter related to the practice in Pennsylvania and New York within the lucrative Marcellus Shale beds. For Bakken related companies, the inquisition has not started, but these protests against fracking may be the beginning. Any North Dakota state commission or board has not raised a vocal ruckus over this issue as yet, after all, this is the very practice that catapulted ND into the national spotlight as one of the only bright economic growth stories in recent years. The state took in more than $400 million in oil revenue last year and handcuffing drillers would hamper growth.
If Bakken O&G companies are smart, they will get out in front of this issue, form an independent commission, and do some real unbiased research on the potential impact of this type of drilling and develop a detailed industry standard incident response plan as well as disaster prevention strategies in case this issue surfaces on any real scale in North Dakota. Sure there has been a few small incidents including a recent spill near Killdeer, but these were passing glances in terms of media coverage. One of the only things that can derail the growth in the Bakken is some sort of human casualty (or near casualty) as a direct (or even indirect result) of the environmental impact of fracking.
Just as O&G companies de-risk their acreage, bigger players such and Continental Resources (CLR: 30.55 -0.78%), Brigham Exploration (BEXP: N/A N/A) and Whiting Petroleum (WLL: 5.48 +0.00%) need to step up and de-risk the environmental impact of drilling before lawmakers step in and try to do it for them. Even a temporary moratorium on hydraulic drilling could lead to a 30-40% haircut across all Bakken related stocks and that is the last thing a loyal Bakken investor needs.
Our last report 3 months ago yielded 121 active drilling rigs. The capex constrains seem to be lifting across the sector as the number of rigs is up a whopping 18% to 143 total rigs. We have seen steady increases across the board of all the major Bakken players such as Continental Resources (CLR: 30.55 -0.78%) and Whiting Petroleum (WLL: 5.48 +0.00%) which both increased their presence by 2 rigs. American Oil & Gas (AEZ: N/A N/A) a small cap player increased from 2 to 4 rigs. AEZ in the process of being acquired by Hess (HES: 42.09 +1.74%) which already has a formidable 9 rigs in the region. With the acquisition, Hess will be thrown in with the top players in the region. Brigham Exploration has had a stable 4-6 rigs in the region throughout 2010. Brigham’s followers however know that its not the number of rigs that matter, but the quality of the well. Brigham has made a name for itself squeezing every ounce of production from its wells. After hours today, they released some more promising news on some recent exploits:
Brigham Exploration Company announced the completion of four Bakken wells in its Ross and Rough Rider project areas. To date, Brigham has completed 32 long lateral high frac stage wells in North Dakota with an average early 24-hour peak flow back rate of 2,643 barrels of oil equivalent. In the Ross project area in Mountrail County, North Dakota, Brigham announced the completion of the Wright 4-33 #1H, which was completed with 38 fracture stimulation stages, at an early 24-hour peak flow back rate of 3,660 barrels of oil equivalent (3,097 barrels of oil and 3.38 MMcf).
We’ll have more about Brigham in an upcoming article. Until next time, we’ll keep drillin’ for more bakken news.
It seems like a few days have gone by but its been almost 2 3 months since my last post…. I have some interesting articles on the way and a little about an interesting project I’m working on, stay tuned!