Samson Oil and Gas To Acquire A Net 1,225 Acres In Two 1280-Acre Spacing Units;

From Yahoo!In-Play:

12:53AM Samson Oil & Gas extends Central Bakken acreage : Co advises that it has agreed to acquire, in two tranches, a net 1,225 acres in two 1,280 acre drilling units located in the Rainbow Project, Williams County, North Dakota.

The transaction involves an acreage trade by the parties and a future carry of the vendor by Samson in the initial drilling program on the Rainbow Project. Samson will transfer 160 net acres from its 1,200 acre undeveloped acreage holding in North Stockyard and the vendor will fund its share (between 7.5% and 8.5%) of the North Stockyard initial infill program. Samson will acquire 950 net acres in the Rainbow Project from the vendor for this acreage trade and will provide a $1.2 mln carry to the vendor. For the first (10% carry) and second (2% carry) development wells to be drilled in the Rainbow Project Samson will have the ability, subject to the vendor acquiring additional acres, to acquire a further 274 acres by carrying the vendor for $0.7 mln in the second well in the project.

From Investor's Business Daily:

The Rainbow Project is located in Sections 17, 18, 19 and 20 in T158N R98W. The details of the transaction will be documented in a sale and purchase agreement to be entered into at or before closing.

Samson has assessed the project based on offset well data and believes that the project will support 16 wells, 8 in the middle Bakken and 8 in the first bench of the Three Forks. These wells would be expected to be configured as north-south orientated 10,000 foot horizontals.

Sixteen wells/4 sections = 4 wells/section. About right for this area.

The Rainbow Prospect is in the Rainbow oil field which is just a few sections short of a full 36-section township. The field is located pretty much straight north of Williston, at the far north of Williams County, almost at the Divide County line.  The northern area of this field is pretty much undeveloped, but the field has four producing wells, mostly in the south:

• 22595, 580, Hess, GO-Darryl-158-98-0904H-1, Rainbow, t8/12; cum 54K 2/13;
• 22161, 508, Hess, GO-Hill 158-908-3427H-1, Rainbow, t8/12; cum 54K 2/13;
• 19835, 711, Hess, Skjei Midwest Trust 15-35H, Rainbow, t5/12; cum 73K 2/13;
• 22241, 553, Hess, GO-Grimson 158-98-3625H-1, t7/12; cum 51K 2/13;

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The Rainbow Project

Link over at oilandgas360, August 19, 2013:

Samson Oil & Gas Limited is an exploration and production company domiciled in Australia, but has all of its oil and gas assets in the United States. The Company’s executive management and technical staff are based in Denver, Colorado. Samson announced a new joint venture (JV) with privately-owned Slawson Exploration Company, Inc. an established Bakken operator, to advance its plan for full-field development.

Prior to the JV, Samson owned a 60% working interest in three sections along with a 30% working interest in seven producing wells (average 23% net revenue interest). Continental Resources owns the other 40% working interest.

As part of the JV, Samson sold half of its interest in the three northern sections of the field, or 345.6 net acres, to Slawson for $5.562 million in cash and other consideration, which values the acreage at $9,656 per acre.

Along with the cash, Slawson will assume operatorship of North Stockyard and take assignment of the drilling contract for the rig that is currently working in the field. The infill drilling program calls for six new horizontal Bakken wells and seven wells in the first bench of the Three Forks formation. 

Samson forecasts gross drilling and completion costs at $8.1 million per well ($2.0 million net to Samson). That cost is consistent with data reported by public companies, like Oasis Petroleum who guided to well costs of $8.0 million towards the back half of this year. The Company estimates a gross End Ultimate Recovery (EUR) per well of 440 MBOE, which is also consistent with that reported by other operators in the play. Samson projects the per-well PV10 for both Bakken and Three Forks infill wells to be $810 thousand, using oil and natural gas prices of $82.00 per barrel and $6.48 per Mcf, respectively.  

In early January 2013, the North Dakota Industrial Commission approved 160-acre spacing in the Bakken play, effectively quadrupling the number of potential well locations on existing acreage. Since then, Samson has been focused on increasing oil production from North Stockyard through expanded infill drilling. The JV with Slawson advances Samson’s objective by partnering with an established operator in the Bakken play who has the resources, expertise and relationships to drill and operate the infill wells.

The North Stockyard project is located in Williams County, North Dakota, in the heart of the Bakken play. In either close proximity and/or contiguous to North Stockyard are producing wells and acreage operated by other operators, including EOG, Kodiak Oil & Gas, Continental Resources, Hess and Statoil.

Samson appears to have an interest in what most would consider the “sweet spot” of the Bakken play. Management has been diligent in securing control of the North Stockyard acreage from the previous operator and persistent in moving its infill drilling program forward. Partnering with a known Bakken operator like Slawson is a wise move and we are optimistic that the infill drilling program will commence soon, as Samson has forecast oil production from the field to increase in the late third quarter into the fourth quarter of this year. 

Additional upside exists from an additional 24 gross infill wells in lower three benches of the Three Forks. This potential provides Samson with some near-term visibility beyond the initial infill drilling program.

To improve future visible growth potential, Samson has increased its leasehold in Williams County via the Rainbow Project, which includes an initial 52% working interest in 950 net acres with an option on another 1,250 net acres (44% working interest). The Company estimates the Rainbow Project holds potential for 16 infill wells, including eight in the middle Bakken and eight in the first bench of the Three Forks.