Tuesday, November 16, 2010

Williams Cos. Buys 7 Percent of the Fort Berthold Indian Reservation Mineral Rights -- Bakken, North Dakota, USA

Update

NOTE: In the Bakken, Dakota-3 "was" Williams. 
Although there may be references to "Dakota-3" after January, 2011, in the hearing dockets, the "Williams Companies" operator in the Bakken is WPX Williston Energy.



January 6, 2017: Crown jewel of US shale: the Transco pipeline from the Gulf Coast of Texas to New York City. Williams knows it has a "gold mine" with that pipeline. Transco has now been re-engineered to flow south as well as north. Opposition to other energy projects makes the Transco pipeline that much more valuable. Transco route: Corpus Christi, TX, Atlanta, GA; Charlotte, NC; and then NYC. Other WMB news:
  • if it sells Transco, won't buy other assets
  • already has plenty of other irons  in the fire
  • Atlantic Sunrise: a $3 billion and 185-mile expansion of Transco in eastern Pennsylvania that Williams expects to place in service this year
  • will concentrate on capitalizing on gas export terminals along the Gulf Coast and gas-fired power plants in the east
  • much more at the link
September 4, 2015: update on WMB being pursued by ETP and Spectra.

June 25, 2015: have we weathered the worst?

June 21, 2015: unsolicited bid to buy Williams (WMB) for $64/share = almost $50 billion.

June 15, 2014: will buy Access Midstream Partners LP, and increase dividend by 32%

February 14, 2014: activists get involved.
The two activist hedge funds looking to spur change at the Williams Companies disclosed on Friday that they have raised their collective stake in the gas pipeline company and have hired an investment banker to aid them in their campaign.
The firms, Corvex Management and Soroban Capital Partners, said in a regulatory filing that they have increased their economic interest in Williams to just under 10 percent of the company’s value, up from an initial 5.3 percent.

November 21, 2013: WPX will form an MLP in 1H14 to expedite development of the Piceance Basin in Colorado.

October 2, 2013: more Marcellus natural gas pipeline capacity; plans to build an LPG export facility in Louisiana;

August 24, 2013: from a message board --
A piece from Barrons, the co has been communicating the growth for a while, specific targets for the dividend, just now the market seems to believe the plan. Still think we as investors focus too much on stock price movements and not enough on fundamental value, but most don't have a longer term horizon.

The big energy transporter Williams is keeping the pipeline full of payouts for investors. The Tulsa, Okla., company, which last week advanced plans for a new "Bluegrass" pipeline connecting the Marcellus and Utica shale fields to Gulf Coast exporters, also boosted its quarterly common dividend to 36.625 cents a share, up 3.9% from the previous quarter and 17.2% above the year-ago amount. The fatter dividend is payable Sept. 30 to shareholders of record Sept. 13. Williams (ticker: WMB), which has paid a common stock dividend every quarter since 1974, reaffirmed its commitment to raise its full-year payout to shareholders by 20% in each of the next three years. The projected distributions would rise to $1.44 for 2013, $1.75 for 2014 and $2.11 for 2015. Based on a recent share price of $36.21, the dividend yield is 4.05%.

The natural-gas company is coming off a solid second quarter, in which earnings rose a better-than-expected 7.6% to $142 million. Williams both gathers and transports gas and owns most of its namesake master limited partnership, Williams Partners (WPZ). It has been investing heavily to try to take advantage of the energy production opportunities provided by shale. The new pipeline, due to launch in 2015, should be able to carry 200,000 barrels per day of natural-gas liquids, and twice that amount in subsequent years.
June 5, 2013: I've "lost the bubble" on Dakota-3. Under NDIC "well-search," Dakota-3, LLC, and Dakota-3 E&P, LLC, each have only one well/permit. [The Dakota-3 well was drilled back in 1966; the one Dakota-3 E&P permit was canceled in November, 2011.] WPX Williston Energy acquired Dakota-3 E&P in December, 2010; it acquired 89,420 acres, and had three rigs drilling the next year. The interesting thing is that I still saw Dakota-3 in the hearing dockets in early 2012. It appears "WPX" in the Williston Basin is now "WPX Williston Energy." Be that as it may, the "Williams Companies" operator in the Bakken is WPX Williston Energy.

June 10, 2013: Williams announces major expansion of its natural gas pipeline in southeast United States

June 5, 2013: Oil & Gas Journal is reporting:
WPX Energy Inc. plans to add two drilling rigs in western Colorado’s Piceance basin for the rest of 2013, making a total of seven compared with earlier plans for a five-rig drilling plan.
The additional drilling this year will target the Williams Fork formation where WPX has developed more than 4,100 tight sands wells. The company has drilled a Williams Fork well in 3.7 days.
“Natural gas prices are stronger, and this helps lay the groundwork for our 2014 development,”...
January 21, 2013:  Williams raises dividend to 33.88c per share from 32.5c per share, payable March 25, to holders of record at the close of business on March 8.
The Q1 dividend is an increase of 1.38c, or 4.2%, over the previous quarterly dividend of 32.5c per share. The new amount is an increase of 8c, or 30.9%, over 1Q12. The increased dividend is consistent with the company’s previously announced plan to increase its dividend more frequently, with increases every quarter. The company continues to expect the full-year dividend it pays shareholders in each 2013 and 2014 to increase by 20%, to $1.44 and $1.75 per share, respectively. Williams’ full-year dividend for 2012 was $1.20 per share.  
December 11, 2012: WMB, partnering with ACMP, to acquire the remaining Chesapeake midstream assets for $2 billion.

November 1, 2012: RBN Energy story on Williams pipeline projects, the Marcellus effect. 

October 16, 2012: from a comment at SeekingAlpha.com, this date:
WMB $35.14 spun off WPX $17.86 in a tax free deal where if you participated your total today would be $41.09. You received one WPX for every three WMB you owned. The WMB share price has recovered to the pre-spin-off price plus $2 and you now have WPX. And WMB pays nearly 4% div.  
October 8, 2012: Three Affiliated Tribes want more money; they signed 50-50 agreement with the state four years ago; now they want more money; 

September 26, 2012: Canadian story, not the Bakken -- Williams Cos signs new agreement to provide gas processing in Canada's oil sands: Co announced that it has signed a new long-term gas processing agreement with a producer in the Canadian oil sands. Under the new long-term agreement, Williams will extract, transport, fractionate, own and market the natural gas liquids (NGLs) and olefins recovered from the offgas at the oil sands producer's upgrader near Fort McMurray, Alberta. Under the agreement, the NGL/olefins recovered are expected to be ~12,000 barrels per day (bpd) by mid-2015 and growing to approximately 15,000 bpd by 2018.

July 4, 2012: the obstacles to developing the FBIR.

January 3, 2012: Williams completes its split: WMB -- pipelines; WPX -- exploration and production. 

December 30, 2011: Williams buying a gathering unit in the Marcellus.

September 7. 2011: WMB increases dividend by 25%.

April 9, 2011: Reservation leadership under fire for failures and poor management of assets in the reservation.
In the report dealing with oil and gas, the transition team said a sale of 85,000 tribal mineral acres to the Williams Co. Inc., of Oklahoma, for $925 million represented “the largest exploitation of tribal minerals in the history of this country and the sad part of this whole deal is that we did it to ourselves."
Sour Grapes
Original Post

I am re-posting this. I posted this story as one of two stories on one post yesterday.  I think it's a bigger story than when I first read it. It needs to stand alone with its own post.

For the past several weeks, I have been posting that I expect to see increased consolidation or acreage exchanges in 2011 - 2012.

I have to re-calculate the percent of acreage in the reservation that was bought, but rough calculations suggest that it was about 10 percent, probably a bit less.  My rough calculations were not too far off. According to wikipedia.com, FBIR is composed of 12 million acres. 85,000 acres/12 million acres = 7 percent.

In this case, Williams Cos. has purchased 85,000 net acres in the Fort Berthold Indian Reservation for just less than $1 billion. Analysts estimate the property has potential reserves of 185 million barrels.

Back-of-envelope calculations:
  • 185 million barrels * $50/bbl = $9.25 billion (remember, WMB paid about $1 billion in cash)
  • 185 million barrels/85,000 net acres = 2200 bbls/acre.
  • 2200/acre x 640 acres = 1.4 million barrels/section
  • Two wells/section = 700,000/well EUR
  • In fact, WLL is getting up to three wells, maybe four wells / section in the core Bakken (Sanish)
  • 85,000 net acres/640 acres = 133 sections; 133 sections/36 sections/township = just less than 4 townships. FBIR is about 7 townships x 6 townships = 42 townships (that's where the original rough calculation of 10 percent came from)
From Bloomberg, November 15, 2010:
Williams Cos, the fourth-largest U.S. pipeline operator by market value, agreed to purchase 85,800 net acres in North Dakota’s Bakken oil play for $925 million in cash as it seeks to expand its exploration and production business. The acreage is in the Fort Berthold Indian Reservation.

The property has potential reserves equivalent to 185 million barrels of oil in the Middle Bakken and the Upper Three Forks formations, Williams said in a statement today. The property has 24 existing wells producing 3,300 barrels of oil a day, the company said.
An analyst calculates that Williams is paying about $8,000 a net acre when production is included, less than Enerplus Resources Fund agreed to pay in September for leases in the same area. See my posting regarding the Enerplus purchase.

I've always thought of WMB as a pipeline company; somewhere along the way, they got involved with oil exploration and production, something I must have missed. Williams will have to update its webpage; the current map of operations includes nothing in the North Dakota Bakken. (Of course, some weeks from now, that will change.)

The seller is private and undisclosed.

**********************************

In case the link is broken, here is a bit of the story from the link. 
The Fort Berthold Indian Reservation is located in the center of North Dakota’s oil rich Bakken – Three Forks play. Prior to the horizontal drilling boom in these formations, there was very little development of oil and gas on the Reservation. Interestingly, past production maps of North Dakota once contained an ominous black hole in the state’s oil and gas development, which is now undergoing dramatic development due both to changes in technology and the legal framework for leasing on the Fort Berthold Reservation.
The 1851 Treaty of Fort Laramie reserved lands for the Mandan, Hidatsa and Arikara Tribes, which were later diminished by Executive Order in 1880 creating the present day boundaries of the Fort Berthold Reservation. The reservation encompasses approximately 945,000 acres, of which the current subsurface mineral lease ownership is roughly comprised of 211,186 acres being owned by the Tribe, 321,779 acres owned by individual Indians in trust and 409,657 owned in fee simple. Reflecting Congress’s mood in 1887, the Dawes Act marked the beginning of the allotment and assimilation period, which transferred ownership in severalty to individual tribal members.
Allotment was part of an official policy aimed at destroying tribalism through a reduction in the treaty-guaranteed tribal land base. It is estimated that nearly two-thirds of all Indian lands were lost during the Allotment period. Allotment on the Fort Berthold Reservation would not begin in earnest until 1894; but would result in the familiar checkerboard type ownership of tribal and non-Indian lands located within the exterior boundaries of Indian reservations throughout the American west.
Due to the policy of allotment and attendant restraints on alienation, the mineral ownership on the Fort Berthold Reservation is often highly fractured. The problem is further compounded by the relative inaccessibility of the Bureau of Indian Affairs land records necessary for verification of mineral ownership. These complexities greatly limited the development of the allotted lands on the Fort Berthold Reservation during the last oil boom of the early 1980’s. In 1998, in an effort to increase development on the reservation, North Dakota’s long-serving United States Senator, Brian (sic) Dorgan, introduced and passed an amendment to the Mineral Leasing Act of 1909 specific to the Fort Berthold Reservation. Currently, under Public Law 105-188, it only requires the consent of a majority of the undivided interest in the Indian land that is the subject of a mineral lease or agreement, along with Secretarial approval for proper lease approval. Along with provisions for approving interests of unlocatable and deceased Indian mineral owners, this statutory revision provided an avenue for development that resulted in a flood of new allottee leases in 2007 from interested oil and gas operators.
From the prospective of the oil and gas operator, in order to determine the oil and gas leasehold status of a tract of allotted Indian land within the Fort Berthold Reservation, it is necessary to determine individual ownership of the allotted tract only insofar as is necessary to establish that a lease has been accepted by the owners of the requisite majority interest in the tract and that the lease has been approved by the Secretary of Interior, whose authority has been delegated to the Bureau of Indian Affairs Area Director. Though this statutory framework is a marked improvement over the original provisions of the Mineral Leasing Act of 1909, serious problems resulting in complete lease failure can still arise. The current practice in leasing Indian lands involves acquiring a title status report prepared by the Bureau of Indian Affairs for a particular allotment or tract of land and then obtaining the necessary acceptances from a majority of the Indian owners as referenced in the report.
As a practical matter, oil and gas operators and leasing agents are forced to rely upon these title status reports to obtain leases. Many operators used to operating on Federal lands often act under the assumption that the title status reports are either 100% reliable or under the mistaken belief that once approved by the Area Director, an oil and gas lease is unassailable even if it is later discovered that the title status report was in error and an incorrect Indian owner executed the lease. However, as a general rule, leases which are not executed or approved in accordance with Federal Regulations are deemed void. In United States v. Labbitt, 334 F. Supp 665 (D.C. Mont., 1971) the court essentially took the position that even though oil and gas operators have acted in good-faith in obtaining these leases, the Secretary of the Interior does not have the authority to act beyond Congressionally enacted regulations, due in part to the Federal governments role as trustee and guardian of Indian owned property. In the instances of lease failure, the Bureau of Indian Affairs has designed a process to recoup the lost funds paid as a bonus in consideration of the oil and gas lease, but often the erroneously paid Indian owner has already spent these funds and has no other significant ownership interest from which to collect from.

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