Monday, February 28, 2011

LINN Energy Enters The Bakken

Link here.

More to follow.
The Company signed a definitive purchase agreement to acquire certain oil properties in the Bakken play from Concho Resources for a contract price of $196 million, subject to closing conditions.
I was unable to find a recent summary of Concho Resources (CXO) holdings in the Bakken, but based on CXO's 2009 annual report, CXO had 11,193 net acres with 146 gross drilling locations. Cost / acre works out to: $196 million / 11,193 acres = $17,510. I am told by others that the price paid worked out to $16,500/acre. So, let's call it $17,000/acre. That would be the highest amount paid/acre in the Bakken that I am aware of; the previous record was $12,000/acre. Does it make sense? I'll post on that later. But, yes, it makes sense.


Recently I noted that with the huge backlog in fracking, undercapitalized E&P companies, or individuals / companies owning relatively small acreage, will probably realize that they will face a long delay in seeing their assets developed. Many will decide the wait is not worth it, and look to sell.

The backlog in fracking is very likely going to lead to accelerated consolidation in the Bakken, as well as larger, better capitalized companies buying in for the first time.

The backlog can result in a delay as long as six months for an otherwise completed well to be fracked. That's a lot of time to have one's money tied up in a $7 million Bakken well that is not producing at maximum rates.

No comments:

Post a Comment