From Yahoo!In-Play:
And, yes, Kaiser-Francis has been "featured" on the blog before.Natural Resource announces acquisition of additional Williston Basin oil and gas interests for $340 mln; raises rev guidance as result : Co reported that it has signed a definitive agreement to acquire non-operated working interests in oil and gas properties located in the Bakken/Three Forks play of the Williston Basin from an affiliate of Kaiser-Francis Oil Company for $340 million, subject to customary purchase price adjustments.
The Houston Business Journal is reporting:
The properties are in the Sanish Field in Mountrail County, North Dakota, in the Bakken/Three Forks play of the Williston Basin. They are all held by production and operated by Whiting Petroleum Corp. of Denver.
The approximately 5,700 net acres include 186 producing wells and 10 wells in various stages of development and estimated average current production of approximately 3,100 barrels of oil equivalent per day.For $340 million, the assets to be acquired:
- Estimated average current production of approximately 3,100 Boe/d
- Includes 186 producing wells and 10 wells in various stages of development
- Approximately 5,700 net acres, all held by production
- Average working interest of approximately 15%
- 100% operated by Whiting Petroleum
Other back-of-the-envelope ciphering:
There are 640 acres in one section.
640 x $60,000 = almost $40 million / section.
There are 36 sections in a township. [$1,440 million = almost $1.5 billion]
The Sanish has about 5 townships. [about $8 billion]
5,700 net acres / 1280 acres = 4.5 drilling units; at a minimum there will be 12 wells/drilling unit = 54 wells; apparently there are currently 186 producing wells in the deal and another 10 wells in various stages of development.
Note: I often make simple arithmetic errors.
From your calcs, this seems to be mostly developed acreage. I wonder what the normal delta is of developed and undeveloped acreage?
ReplyDelete186 +5 (half of 10)= 191 wells. Estimate 10 million/well (little high, but there will be gathering systems and the like also). 1.9 billion!
Seems like number of wells is really high, either on a capital or spacing basis.
Good observation. I missed that. If I remember I might come back to this. An important observation on your part. Thank you.
DeleteThere are several issues here which I am unable to sort out at the moment. The most basic: the mineral acres were provided as "net acres," not "gross acres." On the other hand, the number of wells were obviously "gross wells," not "net wells."
DeleteSo, we have "net acres" and "gross wells."
Yes, they did report gross wells and net acres. Gross acres would be 5700/.15 = 38,000. Net wells = 186 x .15 = 27.9. Since one can net about 35% more by participating with an interest instead of leasing, it would imply a leased interest in Tier 1 Bakken is worth ($60,000 X .65) = $39,400/ac.
ReplyDeleteI'm leased so I was curious how this deal would imply value for my acres.
Very, very interesting; nearly $40,000 / acre in the better Bakken. Thank you for taking time to write; a lot of readers will be very appreciative.
DeleteSo the $40k , is it for taken over as the mineral operator Or did they buy the mineral?
ReplyDeleteFor very small companies with mostly acreage as their assets (not owning much else), the valuation is generally what the buyer paid for the minerals.
DeleteFor larger companies with rigs, pipeline, proprietary processes, sand, trucks, etc., the valuation based simply on acreage wouldn't work.
This site (the milliondollarway) is not an investment site. It is not very sophisticated when it comes to dollars and cents; in fact, it is not sophisticated at all. I have no background in finance or economics, and none in the oil and gas industry. When I post numbers on the site, like everything else, it is for my use to help me understand and track the Bakken. If others want to read my site that 's fine, but, again, a warning: I wouldn't make any financial or investment decisions based on what is posted here.
Also, folks have questioned why, as a mineral owner they might get offered $500/acre when these corporate deals are showing upwards of $20,000/acre -- I've discussed that before on the blog. Apples and oranges.
Whether the $40,000/acre is based on valuation of the acreage or valuation of the company, one should consider the method on how the figure was arrived.