Jan
02
Posted by bakken
It has been a banner year for companies operating in the Bakken region. Brigham Exploration (BEXP: 0.00 N/A) , Northern Gas & Oil (NOG: 17.18 -0.58%) saw gains over 100% and American Oil & Gas was acquired by Hess corporation (HES: 44.60 -1.22%). Bigger players such as Continental Resources (CLR: 71.31 +0.62%) and Whiting Oil (WLL: 44.20 -0.20%)] also rebounded in a big way and are within striking distance of all time highs in 2011.
| Symbol |
Trade |
Market Cap |
P/E |
PEG Ratio |
Pct from Yr Low |
| NOG |
27.21 |
1.37B |
132.09 |
3.16 |
 159.89% |
| HES |
76.54 |
25.14B |
10.33 |
0.71 |
57.17% |
| CLR |
58.85 |
10.01B |
37.99 |
1.38 |
62.26% |
| WLL |
117.19 |
6.86B |
30.64 |
1.68 |
87.03% |
| BEXP |
27.24 |
3.18B |
92.34 |
1.29 |
116.53% |
| EOG |
91.41 |
23.22B |
45.80 |
5.93 |
7.01% |
| SM |
58.93 |
3.72B |
23.51 |
-28.62 |
91.95% |
| GEOI |
22.21 |
438.05M |
21.19 |
N/A |
96.72%
|
So what will 2011 bring for the Bakken region? Of course, specific predictions are rarely accurate but in the spirit of the new year we will give it our best shot. Underlying assumptions in our predictions are that oil prices will sustain over $90 per barrel over the majority of 2011 and that the overall domestic and global economies will continue a recovery albeit slow and sometimes painful.
PREDICTION #1 - Brigham Exploration (BEXP: 0.00 N/A) gets acquired by a large O&G in the region such as EOG.
It is no secret that Brigham Exploration is one of the best executing pure plays in the Bakken Region. Their expertise in multi-stage fracking is a boon for a larger player with untapped acreage. They may look expensive on paper to some with a forward PE around 30, but an acquisition would be focused around operational synergy with Brigham’s drilling prowess, not necessarily looking at their current revenue numbers.
PREDICTION #2 - PetroBakken goes up 50% in 2011 .
Although, most US based Bakken players did well in 2010, PetroBakken (PBN on TSX), just across the border did not fare as well. Declining production and sub-par execution related to a number of factors such as bad weather caused many big investors to shun this stock for most of 2010. PetroBakken has no shortage of opportunity with 210,000 net undeveloped acres with 1,000+ locations in the Bakken region “North of the Border”. The company will put upwards of 20 rigs into action in 2011 and has a focus on Bilateral well drilling under their “Bakken 3.0″ strategy which should increase Bakken boepd significantly over the next 12 months. More about their strategy can be found on their latest presentation posted in Dec 2010
PREDICTION #3 - Continental Resources (CLR: 71.31 +0.62%) tops $75 per share in 2011 .
Continental has banked a lot on their ECO-pad strategy in the latter half of 2010 and that strategy is already paying dividends. Continental Resources has nearly doubled its production from the North Dakota Bakken during 2010, growing from an average of 8,384 (BOE) per day during the 4th quarter of 2009 to 15,000+ BOE per day in Q3 2010. We expect production to top 21,000 BOE per day by the end of 2011. With seemingly few factors that can stop a 30% sustained growth rate for CLR, a move above $75 seems quite probable in 2011.
PREDICTION #4 - Bakken drilling continues to surpass estimates and will yield record production in 2011
The growth train that is the Bakken was derailed slightly in 2008 amidst the economic crisis but came back with bang in 2010. North Dakota is currently is pumping about 350,000 barrels of crude per day and was on pace to produce about 110 million barrels in 2010, up from about 80 million in 2009. In 2011, we expect the following
- Record production in excess of 140 million BOE in 2011
- Well completion time averaging 23 days in 2011 (was over 60 days 2 years ago)
- USGS revision that outlines more than 11 billion barrels of recoverable oil in the Bakken region
- 1900 new wells in North Dakota (200% growth from 2010)
We’ll check back in a few months to see how our predictions have fared, but based on the solid growth in 2010, we are not worried about what we’ll find. Have a great start to 2011! Look for more insight in the coming days on new plays in the region
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Mar
03
Posted by bakkenexpert
There has been considerable amount of press in the US about the exploits in Montana and North Dakota, but the Canadian Bakken shale has seen substantially less coverage by the US press. Most US investors are aware that the Bakken formation, covers parts of the states of Montana and North Dakota in the USA but over 25% over the entire Bakken formation resides in Saskatchewan province over the border in Canada. Two of the main Canadian players at the moment are Crescent Point Energy Corp (TSX:CPG) and PetroBakken (TSX:PBN) which was formed by an alliance of TriStar Oil and Gas and Petrobank Oil and Resources Ltd. Smaller players include Cenovus, Painted Pony Petroleum & PetroStar. An overview of some of these players are below
Crescent Point Energy (TSX:CPG) Market Cap: 7.5 Billion (CAD)
The expected production figures for Crescent Point Energy is currently in the region of 27,000 BPD oil equivalent comparing to the 24,500 BPD oil equivalent that was reported as being extracted by Crescent towards the end of last year. Crescent Point Energy Corp is one of the larger Bakken plays in Canada with a market capitalization of 7.95 billion dollars (CAD) and an average production in Q3 last year of just over 46,000 BPD oil equivalent for all operations, comprising roughly 88% oil with the remainder being natural gas and natural gas liquids. Crescent Point Energy Corp currently is $39.40 (CAD) at the final bell yesterday. They have a drilling inventory rumoured to comprise of almost 3,000 locations in the Bakken area. In looking at a 6 month chart, the stock should have support around $39 and has been in a narrow $4 trading range over the period.
PetroBakken (TSX: PBN) Market Cap: 4.83 Billion (CAD)
PetroBakken wasn’t far behind in the same period, producing an average of approximately 41,500 BRP oil equivalent from their operations. 94% of this comprised light oil, excluding Alberta production figures where they are planning to sell a majority of their assets. They have also been active on the acquisitions front recently, acquiring Berens Energy Ltd and Result Energy Inc. early this year. Since having a share price of over $35 CAD in October 2009, a couple of months after the formation of the alliance, PetroBakken shares have languished relative to other Bakken plays and currently sit just above $28 CAD per share. PetroBakken have approximately 1,300 wells in the Bakken region and look to have an aggressive acquisition strategy. PetroBakken added a 3rd acquisition this year by acquiring a private west Pembina Cardium play a few days ago. Recent highlights include the following:
- Fourth quarter 2009 average production increased by 105% to 45,621 barrels of oil equivalent per day (“boepd“) from 22,274 boepd.
- Proved plus probable (“2P“) reserves increased by 146% to 143.6 million barrels of oil equivalent (“boe“) at December 31, 2009.
- 2009 working interest production was replaced more than ten times as a result of increases in reserves from operations and acquisitions.
- Net present value (“NPV“) (before tax, discounted at 10%) of 2P reserves increased by 145% to $3.7 billion.
- 2P finding, development and acquisition (“FD&A“) costs, including revisions and future development costs of $32.11 per boe. Excluding net acquisitions, including the TriStar Oil & Gas Ltd. (“TriStar“) acquisition, our 2P finding and development (“F&D“) costs were $30.82 per boe.
- January 2010 production averaged 43,600 boepd, after the disposition in December 2009 of approximately 2,000 boepd.
- We anticipate further dispositions of non-core producing assets in the first quarter of 2010 totalling 3,800 boepd.
- To-date in 2010, we have announced three corporate acquisitions focusing on the Cardium light oil resource play in Alberta. In addition to more than 500 development drilling locations for Cardium, these assets are expected to initially add, in aggregate, approximately 5,800 boepd of production.
- Since July, 2009, PetroBakken has been implementing the use of long bilateral horizontal wells with 51 bilateral horizontal wells now on production. Bilateral horizontal wells have generated on average greater than a 50% increase in productivity compared to offset single leg Bakken horizontal wells.
If we look at a 6 month chart, we see good support at the 200 day MA which the stock has bounced off of twice in the last 3 weeks. The stock has been hit by some selling pressure due to a number of acquisition related expenditures, but this may present a good long term buying opportunity as PetroBakken has poised itself for production growth in the next 3 years.
Cenovus Energy (TSX: CVE.TO) Market Cap: 19 billion CAD
Cenovus Energy Inc (CVE.TO), a traditional oil sands-focused company which spun off from EnCana Corp (ECA.TO), is expanding its business prospected by investing in light oil prospects in Saskatchewan. Cenovus Vice-President Don Swystun said the company is investing in its own lands and acquiring new acreage in the Bakken and Lower Shaunavon unconventional light oil plays in the southern part of the province, something it was unable to do under the EnCana umbrella. Similar to shale natural gas operations, companies drill numerous horizontal wells and fracture rock deep underground to maximize oil output. Cenovus is currently producing about 1,000 barrels a day from eight wells in Lower Shaunavon, Swystun said. It can likely boost that to 3,000-5,000 bpd, depending on how aggressively it decides to drill, he said. In reviewing the 6 month chart for Cenovus, the stock is in a downtrend since the spin-off and is currently testing the 50 day MA. We would stay on the sideline until more definitive plans are released on their Bakken strategy and investment.
Painted Pony Petroleum (TSX:PPY.A) Market Cap: 325 million (CAD)
Painted Pony Petroleum Ltd. (TSX:PPY.A) and (TSX:PPY.B), has a market cap of slightly over 340 million dollars (CAD). In Q4 of last year their average production was just shy of 2000 BPD oil equivalent which was up 70% on the same period in 2008. In 2009, Painted Pony carried out an active horizontal Bakken development drilling program with the drilling of 19 (16.5 net) wells at 98% success. Painted Pony has budgeted to increase its Bakken drilling in 2010, with approximately 30 net wells forecast. In the first quarter of this year, the Company expects to drill 10 (8.8 net) horizontal oil wells in Saskatchewan. The Company has drilled 3 (2.3 net) wells to date, and 2 (2.0 net) wells are currently drilling. Painted Pony expects to have two operated rigs drilling primarily in the Midale and Huntoon development areas for the balance of 2010. A one year chart shows that Painted Pony has had a steady climb over the last 12 months that is commensurate with their increased bopd production. Some back of the napkin math indicates that if they can acheive the same bopd rates on the 30 wells they plan to drill, they should be able to top 5000 bopd by the end of the year and average 3500 bopd throughout 2010. At current rates that equates to about $100 million CAD in 2010 revenue which fairly values the company at its current pps. But similar to a Brigham Exploration, the investment community is expecting growth to continue 30% yoy for the forseeable future. The 6 month chart shows the stock has been in a steady uptrend with consistent support at the 50 day MA.
PetroStar Petroleum (TSX: PEP.V) Market Cap: < 10 Million CAD
Its hard to call PetroStar Petroleum a key player as it is a tiny micro-cap, but we figured we would include as a minuscule bakken play. Petrostar Petroleum Corporation (TSX-Venture: PEP) is a small Canadian-based oil and gas producer focused on production of heavy and medium oil properties and development, implementation and commercialization of enhanced oil recovery systems and processes. Petrostar Petroleum announced recently that work is scheduled to commence on one of the company’s 100% owned P&NG leases that are located in the SE. Saskatchewan extension of the prolific Bakken oil formation. . The extent of this initial work program will be to re-enter and re-complete the A1-26-14-31W located near Moosomin, SK l in order to place the well into production. If Petrostar management can execute on this plan and get the aforementioned well into production, they will most likely be able to raise financing to fund further Bakken ventures. To date the Company has acquired P&NG leases covering some 30 locations, both in the SE Saskatchewan area and in SW Manitoba. The stock is thinly traded on the TSX and is below .10 cents CAD. This is a pure speculation play with no fundamentals to back up any legitimate investment thesis. However, if the company does execute, it could easily be a 5 or 10 bagger. A 6 month chart of PetroStar Petroleum is below but any technical analysis of trends is not relevant with such a thinly traded equity
Summary
The closest thing to a pure-play in the Saskatchewan Bakken Region is currently PetroBakken with a growth strategy focused on both aggressive organic growth as well as growth through acquisition. Their horizontal drilling technology and deployment process appears to be slightly behind American counterparts such as Brigham, but this gap will inevitably close in the next 12-24 months. Expect to see the average bopd increase and a proportional increase in production. I wouldn’t be surprised to see 65,000-70,000 boepd by mid 2011 as they develop their 210,000 acres in the Bakken region.
Drop us a line if there are other Canadian players we should consider profiling
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