The overall market has been on an upswing over the last few trading sessions with oil up almost 12% in the last 3 weeks. Bakken stocks benefited from the recent move and may have gotten a little extra buying with Brigham being acquired by Statoil ASA. The move may trigger some consolidation in the region with a number of other companies such as Continental Resources and Oasis Petroleum looking attractive. We’ll be issuing our top 3 bakken acquisition targets at the end of the week but in the meantime, noodle on the latest happenings in the region:
There as been a lot of recent leasing activity in South Dakota and the potential for the Tyler Formation. State geologist Ed Murphy in North Dakota said the formation extends from the western part of that state into northwest South Dakota and may hold up to one-third the volume of oil estimated in the prolific Bakken.
As expected, many investors are looking at the largest owners of acreage in the region with the Brigham acquisition. Among the biggest U.S. explorers in the formation are Oasis and Whiting who own the most Bakken shale acreage versus their takeover value, according to data compiled by Bloomberg. On that basis, both control more land than Brigham Exploration.
Sunoco (SUN: 31.18 -1.33%) has been receiving quantities of Bakken crude oil from the Mid-Continent to run at its Philadelphia-area refineries, trade sources said on Friday. Traders said the crude was railed to Albany, New York and then barged down to Philadelphia. One trade source said volumes were between 10,000 and 20,000 barrels per day.
The 2nd annual Bakken Infrastructure Summit kicks off this week in Denver. The summit’s focus will be on the full range of initiatives to develop expanded infrastructure capacity for the Bakken region, including briefings on every major pipeline project currently under development.
After yesterday’s news that Statoil ASA was going to acquire Brigham, the long road for Brigham investors appears to be nearing an end. Brigham has 370,000 plus acres in the Williston basin that holds a resource base of 300 million to 500 million barrels of oil. At the acquisition price of $36.50, the 2012 PE multiple looks to be around 16. This seems expensive for a traditional and mature O&G producer, but for a company like Brigham can be viewed as fair value or perhaps even “cheap”. In terms of a “Bakken Pure Play”, Brigham is the only game in town that has significant acreage, a clear competitive advantage and a market cap under 5 billion dollars. Brigham has completed 88 consecutive, successful Bakken and Three Forks long lateral, high frac stage completions in North Dakota averaging 2,797 barrels of oil equivalent during the early 24 hours peak flow period. Brigham often is able to squeeze 20-40% more oil out of every well than their competition… In fact they have copyrighted the slogan “No Oil Left Behind” to stress their ability and acumen to maximize drilling efficiency. In my opinion, the perfect suitor would be a be O&G conglomerate that ALREADY has Bakken acreage, not a overseas O&G firm that is desperately looking for a growth engine. A company with significant Bakken acreage would be able to apply Brigham’s patented processed and techniques on their own properties and derive more overall value from their own portfolio. Something that StatOil will not be able to do with the Brigham Exploration. I wouldn’t be surprised to see a bid in the $39-42 range for Brigham in the next 2 weeks. That would still put the forward PE at a respectable 18 and be less than a $5 billion acquisition which is effectively in the noise for a larger player. It seems that Statoil ASA needs Brigham more than Brigham needs Statoil ASA, we’ll see if I’m right in the coming weeks.
Note: Please note this is just an opinion and does not constitute investment advice
As you have probably seen in the news today, Brigham Exploration (BEXP: N/A N/A) was acquired today. Statoil ASA announced the acquisition of Brigham Exploration Co. in a deal that will strengthen the Norwegian O&G’s foothold in the Bakken. The Norwegian company will buy Brigham for $36.50 a share in an all-cash tender offer, a 36% premium over the average trading price for the last 30 days. The total equity value of the deal is approximately $4.4 billion, with an enterprise value of about $4.7 billion. It will be interesting to see if Bud Brigham, CEO of Brigham Exploration stays on in the new venture long term. For long time Bakken investors, this acquisition is bittersweet. Many investors knew BEXP was a solid pure-play and could have seen greater levels in the next few years as it continued to execute on its growth strategies.
We have been bullish on BEXP for a while now, and have mentioned it as a candidate for acquisition a few times. In our interviews with Bud Brigham in the past, he always left the door open for an acquisition if it was the right time and in the best interest of the shareholders and it looks like that time has come.
We’ll start digging for the next acquisition target now but this one will be tough to beat.
Below is the latest Active Drilling Rig report from the ND Bakken Region. We see that the number of Rigs is up 10% and approaching 200 since our last report 4 months ago. In comparing the count for the major players below, we see that with the exception of Brigham Exploration (BEXP: N/A N/A), the remaining operators have stayed at the same count or increased slightly. Brigham, on the other hand has really been aggressive in the region growing to 12 rigs and doubling their presence since March of this year. Happy drilling!
Oil bounced off its short term low last week and is currently a bit below $83. European debt issues are still in the forefront, but the most investors backed off the panic selling we saw a week ago. Similarly, Bakken plays also bounced off their 52 week lows, but most are still down over 40% in 2011. Despite the poor stock performance, there continues to be a number of promising developments for oil & gas companies in the region. The latest are listed below.
Oil company Continental Resources (CLR: 36.91 -1.36%) expects full-year production to be at the high end of its outlook for a 39 percent increase thanks to a strong third-quarter performance. Continental Resources completed 45 gross operated wells in the Bakken oil field of North Dakota & Montana in the quarter. This was a 30% increase over the prior quarter.
Department of Mineral Resources Director Lynn Helms said Thursday at the North Dakota Association of Oil and Gas Producing Counties annual meeting in Medora. “We think it is going to go up for the next four years,” Helms said. “There is no real evidence of a slow down in this thing.” North Dakota was producing 440,000 barrels a day in August, according to Helms. While some counties may not produce as much as others, Helms predicted that North Dakota could produce up to 800,000 barrels a day by the end of 2011.
About $3 billion worth of infrastructure projects are on the drawing boards in North Dakota’s Bakken Shale play to monetize the natural gas produced in association with oil, which otherwise would be lost to flaring, operators and state officials said in interviews. About 134,000 Mcf/d, or almost one third of the gas produced in North Dakota, is flared because of the lack of infrastructure to take the gas away or otherwise monetize it, Bruce Hicks, assistant director of the Oil and Gas Division of the North Dakota Industrial Commission said in an interview Monday.