Sunday, December 12, 2010

Details of the OXY Acquisition in North Dakota -- Private Seller: Anschutz

More on the OXY acquisition in North Dakota.

A big "thank you" to Suzanne for alerting me to the OXY presentation referenced below.

This is an OXY presentation; when you get there, go to slide 12 first to see the acreage they acquired in North Dakota. On slide 12 of that presentation, OXY has two prospects: the South Coteau prospect and the Russian Creek prospect. If I understand the previous slides (slide 10 and 11) correctly, OXY already controlled the South Coteau prospect and was not part of the most recent acquisition.

For the moment, the South Coteau prospect in southeastern Burke county is not particularly noteworthy or active in the current boom, though that could change.

Again, if I understand the presentation correctly, the OXY acquisition is the Russian Creek prospect in the southwest quarter of Dunn County. (OXY's presentation says the newly acquired acreage is in Stark, Billings, and Dunn counties. That's technically correct, but the acreage in Stark County (according to the slide) is so tiny as to be not worth mentioning; and there is only slightly more acreage in Billings County. For all intents and purposes, the Russian Creek prospect is entirely within Dunn Country.)

By the way, if anyone wants to "play around" with a map of North Dakota's counties, click here, and then compare that map with the map at the OXY presentation. 

This was the subject of a very interesting blog some months ago; I highly recommend you take the time to go back and read it if you are interested in the OXY acquisition.

The net acreage in the Russian Creek is about 180,000 net acres; the net acreage in the South Coteau is about 20,000 acres.  According to MarketWatch, OXY acquired 180,000 acres for $1.4 billion ($7,800/acre, but of course, there was already producing assets there). 

Since then there has been more clarity regarding the potential in the Russian Creek prospect area. This area is at the southern edge of the Bakken, where it starts to thin out, but the Three Forks formation pinches out in this area. More interestingly, this is near the area where Oil for America is using new technology to target Lodgepole reefs. In the most recent federal lease auction, Lodgepole Land Services paid $11,600/acre for a 720-acre tract.

Right now, the Russian Creek Prospect is very active. In one area there are six rigs on site, and several of the sites are multi-well pads (two wells/pad):
  • 19430 / 19431: one rig on site, a multi-will pad; 33-144-97, Little Knife oil field; Anschutz permit
  • 19396: rig on site, 33-144-96, Murphy Creek oil field, but right on the edge of Fayette oil field; will probably drill into the Fayette oil field; Marathon permit; 82
  • 18823 / 18822: one rig on site, a multi-well pad; 9-143-96; already drilled going south, Fayette oil field; Anschutz permit, 906 / 1,304
  • 19438: rig on site, 21-142-97; Willmen oil field; southwest of Fayette; Anschutz permit, 756
  • 19710 / 19711: one rig on site, a multi-well pad; Fayette oil field, southern end of the field; Anschutz permit (19710 is in Fayette; 19711 is in Manning oil field; 22,072 first month / DRY
  • 19113 / 19114: no rig on site; a multi-well pad; right next to 19710 / 19711 (32-143-96); Anschutz permit; like 19710 and 19711, 19113 is in Fayette and 19114 is in Manning oil field.
Again, that is just one local area within the Russian Creek prospect. There is a Russian Creek oil field in the area, by the way.

According to the OXY presentation:
  • The acquisition includes 44 operated and 17 non-operated wells producing approximately 5,500 boe/d from the Bakken and the Madison formations
  • Currently there are five active drilling rigs operating on acreage with plans to increase the rig count to eight during 2011
  • Five wells are awaiting completion
  • OXY controls 200 operated spacing units and interest in an additional 110 non-operated spacing units
  • 98% of the spacing units are 1280-acre units
  • The Russian Creek prospect encompasses Three Forks formation and deeper objectives across the entire prospect
  • Net risked reserve potential: 250 million boe
  • This acquisition plus existing OXY assets in the Williston Basin: over 200,000 net acres; 50 operated wells producing over 6,000 boed
  • OXY's goal is to grow production in the Williston Basin to at least 30,000 boepd over the next five years
250 million bbls net risked reserve at $50/bbl = $12.5 billion. OXY paid $1.4 billion

Note in bold above: deeper objectives across the entire prospect -- the only two formations deeper than Three Forks that I can see are the Birdbear and the Red River.  Both the Tyler and the Lodgepole lie "above" the Three Forks formation

In addition, in this transaction, OXY also increased its interest in its ownership in Plains All-American (PAA) by 13% to approximately 35%; this is a major pipeline serving the Williston Basin

10 comments:

  1. just a couple bits to add to the discussion:

    -- you're right about the Burke Cty acreage not being part of this latest deal. the company picked up ~20,000 acres prior to this deal via the latest lease sale (80 acres) and I believe the rest from privately held Cirque Resources. in any case, I know for sure that that acreage was scooped up ahead of time.
    -- word is that this latest 180,000-acre holding came from Anschutz.

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  2. I have to say this site is in my top 5 list. Right up there with the Drudge report. Being an out of state mineral owner (south Coteua area) I really appreciate the job you do of keeping us informed and providing us with links for the latest info on the Bakken.
    Thanks,
    Anonymous in Portland Oregon

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  3. Thank you for that confirmation. It all makes sense, matching the words in the presentation with the map.

    Price of oil is up today, I see. Every day oil is up, makes the deal that much better for the buyer.

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  4. I really appreciate the kind words. I do my best to stay away from too much politics, but once in awhile I do step across the line. If I go too far, the good news: you can ignore me -- I always eventually get back to the Bakken.

    I try very hard to link all my comments with the source so folks can see if I reported correctly.

    Again, thank you for your kind comments; when on the road it's more difficult to stay current, add all the posts that need posting, but I try.

    And for newbies, I pack a lot of stuff into old posts that one finds on the sidebar on the right. The sidebar on the right is dynamic: this is not a Popeil board where you "set it and forget it." Smile.

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  5. Is the best way to search for the private seller on the NDIC webside?

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  6. This is not a great deal for Oxy. They are looking at a drilling investment of $5-6 Billion to get those reserves out of the ground and it will take many years. Add the $1.4B they paid upfront and the return is not great.

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  7. I hold three different areas of minerals in the yellow map area. Currently controlled by Anschutz, They are the private sellers. Not sure how good a deal this is, 160 acres under production, but about 860 acres are up for lease in next couple of years. They need to drill really fast to hold by production. Have a lot of relatives in this area, in the same situation, OXY will need to spend some money to re-up leases.

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  8. It's funny you mention that. I have been transcribing permits since 2006. At the end of 2010, a fair number of those permits had still shown no activity. I assume a lot of those permits were leased and yes, time, is running out.

    I have opined on several occasions that 2010 would be a watershed year for the Bakken.

    I think I could argue I wasn't wrong: XOM buys XTO; OXY buys Anschutz; OAS grows significantly; WMB enters the Bakken; any number of new pipelines; etc.

    I think we will see an explosion of drilling next spring, summer; and we will see whether fracking teams can keep up. Look at all the man-camps being built; many of them for dedicated frack crews, no doubt.

    Thank you for stopping by; sorry for my rambling. Yes, you are correct: OXY, like several others are going to be spending a lot of money in the Bakken next year.

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