Weekly Roundup: Kodiak makes a big move

The theme from previous weeks still prevailed last week with EU debt issues causing some schizophrenia in the market. The Dow lost 300 points over the course of the week and oil lost some ground to about $97 but is still up significantly in the last month. Investors are still in the process of looking for a new favorite (now that Brigham has been acquired) in the Bakken region, there are a number of front runners, and Kodiak (KOG: N/A +0%) made a move this past week to try to rise to the top. More details listed below:

 

  • On Monday, Kodiak Oil & Gas Corp. (KOG: N/A +0%)  said it has agreed to acquire North Dakota assets for $590 million in cash and stock to expand the energy exploration and development company’s presence in the Williston Basin.  Kodiak also said it will offer 37.5 million common shares to fund the transaction and significantly increase its capital expenditures next year.  The company also said its board has approved a $585 million capital expenditure budget for 2012, more than double the $230 million for the prior year, allocated to oil and gas activities in the Bakken and Three Forks oil play in the Williston Basin.
  • Bloomberg reported that rising crude output in the Bakken shale formation is set to make North Dakota a bigger oil producer than OPEC member Ecuador.   “There’s been an amazing jump in North Dakota output,” said Rick Mueller, a principal with ESAI Energy LLC in Wakefield, Massachusetts. “We are looking for output to be anywhere from 700,000 barrels to 1 million barrels a day within five years.”
  • Anadarko Petroleum released news on a huge new shale find in Colorado.  Approximately 1.5 billion barrels of oil were discovered  by Anadarko Petroleum (APC: 42.53 -1.64%) at Colorado’s Niobrara Shale.     J Christionsen , an APC spokesman said “Everything you could possibly want in a play — this has it. It’s great news for us and for Colorado because it’s going to generate a lot of activity and investment for a number of years,”  The find could inject close to $4 billion in annual revenue for the area, it could sharply reduce U.S. dependence on foreign oil even more.

 

Until next time,  Keep drillin’ in the Bakken!

2011 Predictions Review

In the January of 2011 we put out a number of predictions related to the Bakken region,  let’s see how we are tracking thus far.

PREDICTION #1 – Brigham Exploration (BEXP: N/A N/A) gets acquired by a large O&G in the region such as EOG.

>> RIGHT – As most everyone who follows the region knows, Statoil ASA acquired Brigham last month for $36.50 per share. We weren’t at all surprised that BEXP got acquired, but were expecting more of a bidding war for this jewel in the Bakken region.

PREDICTION #2 – PetroBakken goes up 50% in 2011 .

>> WRONG – This prediction has been a huge disappointment for PetroBakken shareholders. Instead of being up 50% the stock is down about 50% since the beginning of the year. They have failed to execute on their growth plan and missed a few earnings estimates and Wall Street has responded negatively. On paper many investors (such as this one) believe it still has some potential.

PREDICTION #3 – Continental Resources (CLR: 32.68 -1.39%) tops $75 per share in 2011 .
>> TBD Continental Resources (CLR: 32.68 -1.39%) came within striking distance of $75 in July hitting $73.48. The market experienced a pullback shortly thereafter and CLR followed suit. It has bounced back in recent days to $67 and there is an outside chance it will hit $75 in the next 2 months… but don’t hold your breath.

PREDICTION #4 – Bakken drilling continues to surpass estimates and will yield record production in 2011

>> RIGHT – By the end of 2010 oil production rates had reached 458,000 barrels per day in the Bakken region. The numbers are obviously not yet complete for 2011, but right now the numbers are tracking to easily beat 2010 numbers. From the North Dakota Industrial Commission (NDIC) Oil & Gas some positive numbers on 2011 development are below:

Aug Oil 13,829,114 barrels = 446,122 barrels/day
Sep Oil 13,923,650 barrels = 464,122 barrels/day (preliminary) (all time high)
Aug Gas 14,349,802 MCF = 462,897 MCF/day
Sep Gas 14,552,239 MCF = 485,075 MCF/day (preliminary) (all time high)
Aug Producing Wells = 5,951
Sep Producing Wells = 6,071 (all time high)

Look for our 2012 Predictions next month!

Crisis averted..for now

The market looked to be in very precarious territory earlier this week with a worry that Italy debt situation would quickly deteriorate into a full blown crisis.    The Dow was down almost 400 points and a major think tank predicted that a banking crisis was a 65% possibility in November.    Italy,  for the short term however was able to quell fears by quickly passing austerity measures and Greece put a new PM in power.   The market responded by going up about 1% yesterday and futures indicate another positive movement today.   In the Bakken region a number of developments hit the news and are listed below

  • The first train with Bakken crude oil shipments embarked on Monday from the newly completed Bakken Oil Express terminal near Dickinson, North Dakota, Lario Logistics said on Wednesday.   The BNSF railway train, owned by Berkshire Hathaway, left for St. James, Louisiana, with 70,000 barrels of crude aboard, said the company, which owns the terminal.
  • Bakken oil from North Dakota weakened to a discount to West Texas Intermediate for the first time in more than eight months as output rose to a record and inventories in the U.S. Midwest increased.   North Dakota production reached a record 444,142 barrels a day of oil in August, up 4.5 percent from the previous month, according to the state’s Industrial Commission.
  • Denbury Resources Inc. (DNR: 1.28 -5.88%),  has reported that net income attributable to company stockholders for the third quarter ended September 30, 2011 was $275.67 million, or $0.68 per diluted share, compared to $29.1 million, or $0.07 per diluted share, for the third quarter ended September 30, 2010.  Total revenues for the third quarter of 2011 were $576.5 million, compared to $466.7 million for the corresponding period of 2010.  The Company’s prior 2011 annual production guidance remains unchanged at 31,000 Bbls/d for tertiary production, 8,400 BOE/d for Bakken production and 65,600 BOE/d for total Company production. Also, the Company’s 2011 capital expenditure budget remains unchanged at $1.35 billion, excluding acquisitions, capitalized interest and tertiary start-up costs and net of an estimated $60 million in equipment leases.
  • Crescent Point Energy Corp , a  producer of oil in Canada’s Bakken region, said  it climbed back to profit in the third quarter on increased production and prices as well as a  hedging gain.  Crescent Point earned C$205 million ($204 million), or 74 Canadian cents a share, up from a year-earlier loss of C$8 million, or 3 Canadian cents a share.The result included an unrealized gain of C$303 million in the recent quarter and a hedging loss of C$81 million in the third quarter of 2010.  Crescent Point said it remains on track to meet its production target for the year of 72,500 bpd.

 

Stay tuned for more Bakken news next week!

Oasis Petroleum beats on earnings, could be an acquisition target

OAS Bakken Operations Overview

Oasis Petroleum Inc. (NYSE: OAS) announced financial and operational results for the quarter ended September 30, 2011 yesterday after the market closed.  In the quarter ending on September 30, 2011,  OAS grew average daily production to 11,583 barrels of oil equivalent per day (“Boepd”), a 110% increase over the third quarter of 2010. Daily production increased by 47% compared to the second quarter of 2011.  Increased Adjusted EBITDA to $62.9 million, an increase of $40.9 million over the third quarter of 2010 and a sequential increase of $18.4 million over the second quarter of 2011.    Thomas B. Nusz, Oasis’ Chairman and Chief Executive Officer stated

“Our multi-year inventory of oil drilling locations in the Williston Basin provides us with strong visible growth potential. Consistent with our plan, we just added our eighth and ninth operated rigs.”

Total revenue for the third quarter of 2011 was $87.6 million compared to $33.0 million for the third quarter of 2010, an increase of 166%. Sequential quarter-over-quarter revenue growth was $20.4 million, or 30%.   Lease operating expenses (“LOE”) increased $6.6 million to $9.8 million for the third quarter 2011 compared to the third quarter 2010 and increased by $3.6 million in the third quarter 2011 compared to the second quarter 2011.     With the latest earning report,  the forward 2012 PE for OASIS (OAS: 7.34 -2.26%) looks to be under 15.   This could be an attractive aquisition target with 300,000 plus acres in the Bakken region.   In an earlier Bloomberg report, Among companies drilling for Bakken shale oil, Oasis and Whiting now offer the greatest value per acre, according to data compiled by Bloomberg. Houston-based Oasis controls 303,000 net acres in the Bakken and has an enterprise value, or the sum of its equity and net debt, of about $2.87 billion.   Using Statoil’s deal offer of $12,082 per acre for Brigham, shares of Oasis and Whiting could now be worth at least 20 percent more in an acquisition, the data show.      Oasis is a likely takeover candidate because it has properties close to Brigham’s fields and is probably open to selling itself, Pritchard Capital’s Berman said.

Weekly Roundup

For the moment, the Greek crisis is somewhat contained with the likelihood that the public referendum will not move forward and Greek will secure the 130 billion euro bailout from eurozone partners and the International Monetary Fund (IMF). Unfortunately, the Greek PM George Papandreou said a new coalition government would need four months to secure the new euro130 billion ($179 billion) rescue agreement and demonstrate the country’s commitment to remaining in the eurozone. If it indeed takes 4 months to stabilize the government, that will continue to cause volatility in the markets with a high probability that the large swings will continue. The dust has settled in the Bakken region with the Brigham acquisition closing soon and focus turning to some other players. Get your daily dose below:

  • Saxon Oil Company Ltd.announced that the Bakken 30-31 #1H well, in Williams County, North Dakota, has produced approximately 85,629 bbls (281 bopd) of oil since the first date of production on December 1, 2010. The well recently produced approximately 6,522 bbls (217 bopd) of oil in the month of September 2011. Saxon owns a 4.2% working interest in the well.
  • Enbridge Energy announced it was planning a $90 million expansion to oil projects in North Dakota that would add 100,000 barrels of oil to the market.  M. Maki, president of Enbridge Energy Partners, announced his company was working on expanding the gathering capacity of its Bakken program in North Dakota by 100,000 barrels per day.
  • Tesoro Corp Chief Executive Greg Goff said on Thursday the company’s 120,000 barrel per day (bpd) Anacortes, Washington, refinery would cut the use of Alaska North Slope crude oil as it boosts shipments of Bakken crude by rail.  Tesoro has a railroad loading system under construction that will boost its shipments of Bakken crude from North Dakota to the Anacortes refinery by the end of 2012.  The $50 million Bakken rail shipment project, announced in July, will eventually bring 30,000 bpd in the cheaper crude oil to the Anacortes, up from the current 1,000 to 2,000 bpd.
  • There was a rare negative article on Whiting Petroleum (WLL: 4.40 -5.58%) earlier this week in Barron’s.   Global Hunter Research stated that  Whiting Petroleum posted solid third-quarter results. However, it they indicated that it  seemed that the company’s production growth is on a treadmill that constantly requires more capital to maintain growth levels.   They wrote:  “As a result, we are lowering our rating on Whiting (ticker: WLL) from Buy to Neutral and our price target from $70.00 to $60.00 reflecting seven times our updated 2012 earnings  (Ebitda) estimate of $1.18 billion down from $1.2 billion.

Keep checking back for more Bakken news in the next few days!