Markets rebounded decisively on positive European bailout news on Friday with the Dow and Nasdaq with gains of 2.2% and 3% respectively. Many Bakken stocks got a much needed boost with gains of 3-9% across most Bakken O&G companies. For many of the stocks, the move represents a push above the 15 day MA of the stocks and hopefully will provide a support base for future gains.
The region was busy with a lot of key developments as listed below:
Pershing Square Capital Management LP, the largest investor in Canadian Pacific Railway continues to expand rail operations in the Bakken. The railway is one of only two with access to the bakken region in North Dakota. Canadian Pacific Railway Ltd. announced an agreement June 22 with U.S. Silica (SLCA: 34.94 +1.87%) , the second largest U.S. producer of sand for hydraulic fracturing – known as fracking – to bring sand from a facility in Sparta, Wisconsin to the North Dakota.
Statoil (STO: 16.69 +0.72%) announced aggressive plans to triple output in the next 8 years. A key growth area for Statoil is the Bakken region where it acquired Brigham Exploration in 2011 and is actively leveraging Brigham’s drilling expertise.
Credo Petroleum (CRED: 111.97 +0.02%) provided an update on operations. Credo has participated in 30 Bakken and Three Forks wells to date. 21 of the wells have been completed and all are high rate producers. Eleven new producing wells have been placed on production this fiscal year, and five producers have been added since the Company’s last update. Based on recent progress, the Company expects additional wells to be added to this year’s drilling schedule.
The Occupational Safety and Health Administration issued an alert on Friday to protecting workers at drilling sites with hydraulic fracturing operations. Hydraulic fracturing involves blasting rock with water, sand and chemicals to extract the valuable oil and natural gas. Part of the sand is a silica component that OSHA says poses a risk of silicosis, a “lung disease where lung tissue around trapped silica particles reacts, causing inflammation and scarring and reducing the lungs’ ability to take in oxygen.” They also indicate silica is linked to lung cancer and tuberculosis.
A hazard alert they issued Thursday describes how engineering controls, work practices, protective equipment, worker training and product substitution can protect employees. In cooperation with oil and gas industry partners, NIOSH collected 116 full shift air samples at 11 hydraulic fracturing sites in five states (Arkansas, Colorado, North Dakota, Pennsylvania, and Texas) to determine the levels of worker exposure to silica at various jobs at the worksites. Many air samples showed silica levels for workers in and around the dust generation points above defined occupational exposure limits.
Given the Bakken region uses predominantly hydrauling fracking as part of the extraction process, this could have an effect on drillers in the region if the media takes hold of this report. Thus far, Fracking concerns have not slowed North Dakota oil production at risk as it is the current (and possibly only) lifeblood of the state economy. We don’t see a short term impact for O&G companies in the region, but there is a possibility that sand/silica producers like US Silica (USCA: N/A N/A) could get hit as the negative sentiment swirls. We will be tracking this story closely in the coming weeks to determine the impact on Bakken drillers.
It has been half a year since we profiled Active Drilling Rigs in the Bakken region and surprisingly not much has changed in that time. The number of rigs has grown steadily by 7% in that time from 200 back in December of 2011 to 214 in June. If we take a look at the major players below, the numbers have stayed fairly static either adding or reducing a rig or two. Brigham Exploration, now Statoil (STO: 16.69 +0.72%) saw the largest increase adding 3 rigs in the last 6 months. We have also seen movement from WPX Energy (WPX: 9.52 +3.03%) which has 6 rigs in the region.
It has been a while since our last post so I do apologize, but we should be bringing you more Bakken news in the coming weeks! The last 2 months have been hard on many Bakken players due to the downward pressure on oil due to European pressures as well as domestic unease about the economy. This week, there was some firming on oil prices as some fears subsized over Spain’s debt, and most Bakken stocks including Northern Oil & Gas (NOG: 1.45 +3.57%) , Continental Resources (CLR: 30.55 -0.78%) & Oasis Petroleum (OAS: 7.87 -0.76%) bounced back with 3-4% weekly gains. They are still all approximately down 15-30% from 52 week highs and we will have to see where oil prices converge towards before having more confidence in a meaningful recovery. Some of the smaller players like Northern Oil & Gas, Oasis Petroleum and Kodiak Oil & Gas do look cheap with forward PE’s below 10.
In terms of Bakken news, it has been a busy month and we touch on the major happenings below:
GMX RESOURCES INC. (GMXR: N/A N/A) , a 60 Million dollar micro-cap O&G company, announced that the Company has successfully drilled and completed its sixth operated horizontal Bakken well, the Johnston 31-4-1H, 55% working interest, located in Sections 4&9 Township 146N Range 99W in McKenzie County, North Dakota. The Johnston 31-4-1H was drilled to a measured depth of 20,979′ with a lateral length of 8,869′. It was completed as a 34-stage frac Middle Bakken producer achieving a peak rate of 1,479 boepd. The Johnston 31-4-1H had a spud to total depth of 29 days, a spud to rig release of 31 days and a spud to sales of 58 days.
Triangle Petroleum (TPLM: 0.0274 -9.8684%) got a reiteration of a buy rating from Cannacord Genuity last week. Analyst, Marcus Talbert, said, “We are reiterating our rating and revising our price target following Triangle’s Q1/13 financial and operations update. In our view the recent share underperformance is not warranted given the strong project updates and relative growth outlook. TPLM remains one of our favorite ideas based on its meaningful leverage to the Bakken play and impactful near-term catalysts. We believe the current valuation represents a compelling buying opportunity given the accelerated development potential and operated catalysts in H2/12.”
Harold Hamm, CEO of Continental Resources (CLR: 30.55 -0.78%) showed optimism in his company by making over 7 million dollars in insider buys of CLR over the last 6 months. Hamm’s average cost works out to $71.68/share. Shares of Continental Resources Inc. closed Friday’s session at $70.74.
North Dakota still continues its economic growth in the Bakken region. North Dakota produces a record amount of oil during the month of April at a clip of over 600,000 barrels per day besting Alaska to continue in the No. 2 spot in terms of oil production. North Dakota continues to lead the nation with the lowest state unemployment rate at four-year low of 3.0% in April.
We will take a look at drilling reports and trends in the coming days on BakkenStocks. Have a great Father’s Day!