NOG Presentation

I listened to the 2010 Enercom NOG presentation because someone asked about some of the acronyms. After listening to the presentation, I was only able to hear one acronym that some folks my not have heard of before: AFE.

From the Schlumberger glossary:

Authorization for expenditure (AFE): A budgetary document, usually prepared by the operator, to list estimated expenses of drilling a well to a specified depth, casing point or geological objective, and then either completing or abandoning the well. Such expenses may include excavation and surface site preparation, the daily rental rate of a drilling rig, costs of fuel, drillpipe, bits, casing, cement and logging, and coring and testing of the well, among others. This estimate of expenses is provided to partners for approval prior to commencement of drilling or subsequent operations. Failure to approve an authority for expenditure (AFE) may result in delay or cancellation of the proposed drilling project or subsequent operation.

However, after listening to that presentation, it's hard not to invest in this company (my two core holdings in the Bakken are CLR and NOG).

My notes from the NOG presentation (may have errors; listen to presentation to clarify in your own mind)

• Non-operating company partners with best in the world: EOG, Slawson, CLR, COP, etc
• Currently participating in 70 of the 140 wells being drilled in the Bakken
• Recently involved in six wells in the Red River in Montana, but now 100% Bakken
• Most of NOGs acreage in the best area of the Bakken, along the Nesson anticline in Mountrail County
• They buy about 200 acres of mineral rights every day, including weekends and holidays
• They elect to participate in about 10 AFEs every day
• Mentioned two 42-stage fracks, recent highly successful wells; future of the Bakken will be superfracks
• Third generation of fracturing techniques; now up to 42 stages; results are spectacular; superfracks
• Payback begins within 3 - 6 months from EOG and Slawson; often within 60 days; NOG generally have their money back on any particular well in 180 days
• NOG will be maximizing opportunities with Slawson/EOG; about 50 percent of all drilling will be with Slawon/EOG; the split will be 60/40 (Slawson/EOG)
• Downspacing is NOG's future; behind every well drilled, there will be five to follow (one well per unit; five wells "behind it")
• They expect to exceed their guidance of 18 net wells this year
• With 20 spudded wells this year, they will hold another future 100 wells by production (leases will never expire) 
• NOG paid $986/acre average in 2010 (operated interests pay $5,000 to $7,000/acre) 
• Hedges important
• 30,000 acres held by production; aiming for 100,000 acres by 2012; on track to meet that

Lots of information. What I like best:

• Buying 200 acres every day (weekdays, weekends, holidays)
• Core acreage along the Nesson anticline; best area in the Bakken
• Participates with my favorite non-public company, Slawson
• Participates with one of most successful companies in the Bakken, EOG
• Hints that participation with CLR may be increasing
• Downspacing holds leases forever
• Three Forks doubles, quadruples 2006/2007 estimates
• They participate where they want; currently participating in 70 of the 140 wells being drilled

I"m a sucker for presentations, but I enjoyed listening to this one more than most.