Tuesday, July 29, 2014

I'm Wrong Again! SM Energy Acquires 61,000 Net Acres In The Bakken -- July 29, 2014; SM Energy And Newfield Release 2Q14 Earnings; Shoot! I'm Wrong Again!!!

Updates

November 21, 2014: list of wells transferred from Baytex to SM Energy in this deal was posted in the Daily Activity Report, November 21, 2014.

Later, 3:17 p.m. PDT: a reader answered the question and provided the source -- Baytex was the seller of 61,000 acres to SM Energy. From Yahoo!InPlay:
Baytex Energy announces that it has entered into an agreement to sell its North Dakota assets to SM Energy, effective July 1, 2014, for gross proceeds of ~$357 mln (US$330.5 mln) :
  • Co announces that it has entered into an agreement to sell its North Dakota assets to SM Energy Co, effective July 1, 2014, for gross proceeds of ~ $357 mln (US$330.5 mln).
I really blew that one (see "original post) below. Baytex wasn't even on my short list. I'm glad I didn't have much "riding" on that. Smile.

A huge "thank you" to the reader for sending me the note. 
Original Post
 
SM Energy acquires 61,000 net acres in the Bakken for $330 million.

Link here to SM Energy press release.

Works out to about $5,400/acre.

The press release references SM Energy's Gooseneck prospect; see this post.

Unless, SM Energy pieced the 61,000 acres together from multiple smaller entities, the other other large operators in that area include North Plains, Newfield, Hunt, and Murex.

North Plains doesn't have enough acreage and I think its acreage was bought by KOG some time ago (2012). And, of course, KOG isn't selling acreage at this point, unless ... Whiting/KOG/SM Energy....

Recently, I posted, regarding Newfield:
  • 4Q12/2012: 10,500 boepd;
  • July presentation: yes, NFX is down to 100K net acres in the Bakken; 2 - 4 rig program; 
  • 4Q11: CEO mentions only 60,000 net acres in core Bakken (Nesson anticline) and 40,000 acres in Elm Coulee -- so is NFX down to about 100,000 acres in the Bakken? 
Murex is privately held, and wouldn't have to publicly disclose.

I have not been able to sort out Hunt Oil or Petro-Hunt oil. Others can start here. And, then, of course, everyone remembers this story, barely a year old, in which William Herbert Hunt became a billionaire again selling some Bakken acreage. Petro-Hunt sold 81,000 acres to Halcon in 2012.

For now, I'm betting a cup of coffee on Hunt Oil being the seller.

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Newfield

Newfield was also on the short list, but reading its 2Q14 earnings release -- also, just released -- there is nothing to suggest Newfield would have sold. In fact, the report is somewhat/quite bullish on the Bakken. A couple of years ago I thought Newfield was less than happy about the Bakken but the company seems to be "working" the Bakken now.

4 comments:

  1. Bruce - take a quick peek at this afternoon's press release at baytexenergy.com. It helps sort this one out.

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    1. Drat! I'm wrong again! I think I'm batting about 0 for 6 on guessing who sells what when someone announces an acquisition. But I learn stuff along the way (mostly not to make any big bets). Smile. Thank you for that note. Much appreciated.

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  2. As a resident of western Divide county, I have been observing how busy Murex and Hunt were continuing to drill a bunch of mediocre wells - - (generally middle Bakken wells with typically IP's of 150 bpd or less, with an occasional well here and there that might have an IP of 200 to 500. But no matter what the IP of crude was, almost always a major negative factor has been the ratio of salt water to oil - I have seen some reported at a salt water to oil ratio of 10 to 1 or more!

    So I asked an oil field professional, as to why they kept on drilling these "low end" IP wells (also with saltwater problems, and with the need to also rather quickly install the natural gas gathering system). His response was that such oil companies were likely attempting to "lock up' all their acres by drilling at least one well - no matter what the production was, just so that they would have the option of assembling a "package" (mineral acres and/or pipelines for SWD & NG) that they could put up for eventual sale.

    The other option was that by locking up their acreage, they MIGHT eventually be able to later take advantage of the developing improved technology and/or drilling expertise, on how to better mine this part of the Bakken. And the same "package" would help them sell outside passive investors on helping fund their eventual additional drilling.

    So I agree that we are likely to see even more sales in the years to come in this part of the Bakken.

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    1. Excellent post; yes, I think a lot of the early wells were done quickly for the reasons you suggest. Over time, better planning, better technology, better completion techniques should all improve EURs and decline rates.

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