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Why BEXP could be a takeover target
Posted by bakkenexpertThe 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 isopaches 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.
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Tags: basin BEXP Brigham Credit Suisse isopach TFS Willybee
AEZ — Announced this AM :
American Enters Into Letter Of Intent To Receive Approximately $44 Million From Sale Of Powder River Basin, WY Assets
This is significant in that AEZ has no debt, only 48 million shares and 62,000 net acres in their Goliath field just east of BEXP’s Rough Rider. At the ND November lease sale price of $1,154, cash plus lease value is about $2.50/share…. Current trade around $5!
In reality these leases while technically are 2P/3P are not in a totally wildcat area and likely worth several times the ND lease sale price.
This quickly becomes a player either by development or take-over.
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