Tuesday, May 20, 2014

EURs. Again. There's An Important Question That Needs To Be Asked -- See If You Can Guess The Question


Later, 6:00 p.m. central time: a reader over at the Discussion Group provided the following (I'm just getting ready to take older granddaughter to swimming, so I will look at the links later). Having said that, these links are to Petroleum News which always has great information:
EOG - Downspacing expands return:


Continental - Bakken-bullish:

Despite exploration results to the upside, since 2010 Continental has not revised its recoverable oil estimates for the Bakken - currently 24 billion boe.

“We’re confident that the total now is larger,” Henry told Petroleum News Bakken in a Feb. 21 e-mail. “But we don’t have a formal estimate of it yet.”

Original Post

Motley Fool is asking whether the Bakken is still being undervalued:
Back in 2011, Continental Resources founder and CEO Harold Hamm made waves when he said the Bakken shale formation in North Dakota and Montana held up to 24 billion barrels of recoverable oil. This seemed completely outlandish considering that the U.S. Geological Survey had estimated total recoverable oil in the region to be about 4.3 billion barrels. Since that time, though, the results from this region have just been better and better, and it makes the investment thesis for Bakken players such as Continental, Kodiak Oil & Gas, and Enerplus all the stronger. Let's look at some astounding numbers coming out of this oil patch that are making Hamm's claims less outrageous by the day.

In the Bakken, the average well is expected to generate an EUR in the range of 400,000 to 900,000 barrels depending on where in the formation drilling occurs. Through optimization programs and testing, the EUR for wells has been improving dramatically recently. At some of Continental's recent test wells, EUR has exceeded its typical 600,000 EUR projection by as much as 50% through tighter spacing between wells and increased use of sand in the hydraulic fracturing fluid.

Such results aren't unique to Continental. Kodiak has noted that several of its most recent wells have outperformed its 900,000 EUR projection curves at its wells in Dunn County, N.D., and Enerplus' most recent wells in the Fort Berthold region have seen early production nearly double its own 800,000 projection curves
Hmmmm....I just "showcased" an Enerplus well earlier today -- well before I saw this article. How coincidental.

I have a poor wi-fi connection now, so I can't write as much as I would like. If I remember, I will come back to this post, but I wanted to get the article posted.

For newbies: there is data that suggests the Bakken is a trillion-barrel reservoir (previously posted) and at a measly 3% recovery rate, that yields 300 billion barrels.

But getting back to the subject line, there was a line in the Motley Fool article that should raise eyebrows. I'll come back to it later. Hint: I thought it was also mentioned in the EOG conference call in which EOG seemed to come to the opposite conclusion than Motley Fool did.

The conclusion to this little exercise will be found at this post

Meanwhile, for investors ...

  • Anadarko Petroleum is looking too pricey after a 25% YTD gain for Barclays analyst Thomas Driscoll, who downgrades shares to Equal Weight from Overweight.
  • It is easy to understand the enthusiasm for APC considering the strong record of deepwater exploration success, the willingness to monetize assets and the large discovery in Mozambique, Driscoll says; yet Continental Resources, EOG Resources and Noble Energy all are likely to grow twice as fast as APC while lacking any appreciable premium in their shares.
  • The analyst prefers Devon Energy, which he says has made decisive steps to upgrade its portfolio in recent months, significantly improving its near-term investment opportunity set.
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