Wednesday, September 15, 2010

New KOG Presentation

I had not looked at a KOG presentation in a long time, so I enjoyed a quick look at their presentation at the Rodman and Renshaw Annual Global Investment Council. I have not had a chance to take an-depth look at the presentation but three slides jumped out at me:
  • Slide 6: significant increase in daily production coming out of the Bakken; of course, this has to be looked at in light of increased number of shares outstanding when anticipating earnings/share
  • Slide 10: XOM jumps out at you as a major oil company in the Bakken; this has to impress Wall Street investors who may not understand the significance of the Bakken; of course, that is due to XOM buying XTO
  • Slide 15: the difference between short laterals and long laterals
I still don't think folks understand why there is such a huge decline following the initial production number. Porosity, natural fractures, stimulated fractures, and thickness of the formation appear to be the four most important factors. I get that, but I don't understand the steep decline immediately following most of these wells. And based on an accumulation of data, it certainly appears to me that fracturing doesn't "reach out" more than 400 feet laterally, and maybe even less. That thinking may be very naive but it certainly seems that is true.
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4 comments:

  1. embraceyourinnerhillbillySeptember 15, 2010 at 8:28 PM

    on page 7, they say acreage has been de-risked both East & West of the Nesson Anticline.
    ¿What does 'acreage de-risked' mean?

    ReplyDelete
  2. Bruce OksolSeptember 15, 2010 at 8:43 PM

    Someone else may be able to provide a specific definition, but to me, it means one of two things.

    In both cases, it means they have a producing well.

    Either, 1) it means the "new" producing well is in an area where they had acreage, but because the acreage was in a designated field, it was not a wildcat by definition, but the "new" producing well means that area has economic potential "proved" by the well. That acreage is no longer an unknown, no longer a risk -- it has been "derisked."

    Or, 2) less likely, it means that because the "new" well is producing, the lease in that area is now HBP (held by production) and they no longer have to worry about losing the lease. Ever. (Unless they abandon the well.)

    Regardless of its specific definition, to me it means the acreage where the "new" producing well is, has gone from unproven reserves to proved reserves (and I think on their financial statements they can now carry that acreage at some of level of potential financial return.

    Something tells me, if I'm wrong on this, someone will let me know. Smile.

    ReplyDelete
  3. Bruce OksolSeptember 15, 2010 at 8:53 PM

    I just did a Google search of "derisked," and I get the feeling that there is no formal definition. It almost appears that analysts and company spokesmen use "derisk" in any situation when the likelihood of economic production of oil is now pretty much a sure bet, at least to some extent.

    You will notice that there is never a follow-on question: "To what extent has the well "de-risked" your investment?"

    I think it is similar to "you betcha" among the Norwegians when asked if there was a chance that the crops would be good the following year, as in, "Are the crops gonna be any good next year?" "Yup, you betcha."

    ReplyDelete
  4. embraceyourinnerhillbillySeptember 16, 2010 at 12:16 AM

    Okay. Thank you for the explanations.
    Seems reasonable, ya ubetcha.

    ReplyDelete

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