KOG Acquires Significantly More Acreage: EUR at $50/boe = $1.7 billion?

Here's the link.  On first glance, this looks huge for KOG.
See also: SeekingAlpha (author misspells McKenzie County).

Some data points:

• Seller: unnamed private oil and gas company (any idea? here's a list of possible candidates)
• Cost: $99 million in cash and 2.75 million shares to the seller for $4.00/share
• There is no mention of issuance of new shares to help pay for this

• KOG will acquire 19,016 gross (11,742 net) acres in McKenzie County, midway between KOG's core Dunn County operating area and KOG's Koala Project area
• KOG will also acquire 4,117 gross (2,752 net) acres in northern Williams County and southern Divide County, located just north of BEXP's Rough Rider area
• Bottom line: the deal will expand KOG's acreage position in the Williston Basin to over 72,000 net acres
• Before this acquisition, 57,506 net acres. 14,494 net acres in this deal, represents 25% of KOG's pre-acquisition acreage.  25%. It's easier for a small company to double in size than a big company.

• The deal adds four wells currently producing 500 net boe per day
• The deal includes a pipeline that feeds into a regional natural gas pipeline

KOG's current spacing model for this area:

• 1,280-acre unit spacing
• Three (3) Bakken wells per unit; and,
• Three (3) Three Forks wells per unit.
• Total: six wells in each 1,280-acre spacing unit.

The new acreage adds nearly 60 net unrisked drilling locations
Including the acquisition, KOG will have over 200 net undrilled locations in the MB and TFS formations.


Rawhide, The Blues Brothers


EUR for each of these wells? a conservative 500,000 boe

• 500,000 x 6 = 3 million barrels per 1,280 acre spacing unit

Back-of-the-envelope calculations:
(please let me know if my math is wrong):

• $99 million + (2.75 million shares x $4.00) = $99 + $11 = $110 million
• Net acreage: 11,742 + 2,752 net = 14,494 net acres
• Price per net acre: $7,589/net acre

NOTE: this price per acre does not factor in the four producing wells, the pipeiline infrastructure and other associated assets.

EUR calculations:

• Each 1,280-acre spacing unit with six wells
• 500,000 x 6 = 3 million boe per 1,280-acre spacing unit
• 14,494 net acres/1,280-acre spacing units = 11.3 spacing units
• 11.3 spacing units x 3 million boe = 33.9 million boe over the lifetime of this new acquisition
• At $50/boe x 33.9 million boe = $1.695 billion. 

I hope somebody will check my math and show me where my assumptions are incorrect.

Or you can do the math a different way. KOG says this acquisition results in 60 unrisked drilling locations:

• 60 x 500,000 = 30,000,000 boe over the lifetime of the 60 wells
• $50/bbl x 30 million boe = $1.5 billion 
• $1.5 billion almost identical to $1.7 billion
• And that's assuming the price of oil doesn't appreciate over the next 20 years.

Amazing.