KOG Releases Operations Update

Talk about an exciting report.

More to follow but here are three bullets that caught my attention:

• KOG will add a third rig this quarter
• IPs are very impressive
• KOG says they've partnered with XOM

Just yesterday I posted dots connecting Arrow Pipeline, KOG, XOM (buying XTO), and Mandaree oil field. This link will provide additional background.

As noted earlier, cash flow and/or access to credit facilities are key in the Bakken for wells costing $5-8 million. Having XOM as a partner allows a company to expedite their drilling program.

For newbies, note: Bakken companies will miss their production targets in December due to weather. KOG mentions their wells were shut in part of December due to snow and blizzard conditions. For those who understand this, it could result in a buying opportunity for those who invest in the Bakken.

Other details from the report:

• FBIR 34X-25 spudded; XOM is the joint venture partner; KOG holds 50% working interest
• Producing 2,700 boe/d (in line with previous announcements)
• Expect to end December with 2,100 boe/d (decrease due to winter conditions)

Dunn County: 35,000 net acres

• Completed two of four wells on its initial four-wells pad
• Partially completed a third well on same pad that targeted the Three Forks formation
• Due to weather, completion work on remaining wells delayed until 1Q11
• All wells on this four-well pad will be connected to recently completed third-party operated pipeline 

Longer-lateral Bakken producer records IP of 2,030

• Two Shields Butte 14-21-33-15H, long lateral, 23 stages, completed in December, 2010; IP based on 32/64" choke (my understanding is that 64/64" is wide open; 32/64" is half-open -- I do not know if this is accurate -- saw that on a message board)
• This well was drilled 1,350 feet from existing producing Bakken well completed in 2009
• During drilling, some pressure communication was observed, but both wells now appear to be producing independently
• History is limited, but KOG believes results lend support to drilling at least four Bakken wells within a drilling unit -- note this was a long lateral, thus a drilling unit of 1280 acres

Longer-lateral Bakken producer records IP of 1,042

• TSB 14-21-33-16H3, long lateral, Three Forks formation, completed only 6 of 22 planned stages
• The remaining 16 stages will be completed in 1Q11, along with a fourth well from the pad
• Drilled 700 feet from TSB 14-21-33-15H
• Completion history of these two wells (one Bakken, one TFS) demonstrates production potential of TF formation in KOG's core operating area

Shorter-lateral Bakken producer records IP of 1,196 

• TSB 14-21-4H, short lateral, 11 stages (completed)

Drilling Activity: another 4-well pad

• Reached TD on first well, TSB 2-24-12-2H, a long lateral
• Now drilling second well on same pad, the Skunk Creek 2-24-25-15H, a long lateral
• The final two wells (TSB 2-24-12-1H3 and SC 2-24-25-16H3), both long laterals, should be completed 2Q11

McKenzie County: 26, 000 net acres

• Drilling operations completed on two-well pad
• Koala 9-5-6-5H, Bakken
• Koala 9-5-6-12H3, Three Forks
• Completion work yet to be completed, 1Q11

Drilling activity commenced on second two-well pad in same area

• Koala 3-2-11-14H is currently drilling ahead and will be followed by 
• Koala 3-2-11-13H
• Grizzly 13-6H, a short lateral is scheduled for completion in 1Q11