Official: TFS May Have as Much as the Bakken

It's official: the Three Forks Sanish formation "holds nearly as much recoverable crude oil as the rich Bakken shale formation above it."  That's the word from Bismarck, ND.

The article states that most folks agree that the Bakken formation has about 2.6 billion barrels of recoverable oil in North Dakota. The North Dakota Industrial Commission (NDIC) estimates that the TFS has about 1.9 billion barrels of recoverable oil in North Dakota.

Others think there is even more recoverable oil: Harold Hamm, CLR/CEO, said two years ago or so that he felt there was as much as 8 billion barrels recoverable oil in the Bakken and the TFS in North Dakota.

My inappropriate exuberance is not misplaced.

[By the way, the Madison Group has produced almost 1 billion barrels of oil since oil was discovered in North Dakota. It's hard to believe that if the Bakken is as big as they say it is, it will only produce 2 1/2 times what the Madison Group produced. I won't live long enough to see, but it is an interesting conundrum.]

BEXP First Quarter 2010

Financials

• Net income: gain of 11 cents/share vs loss of $2.60/share same qtr 2009

Operations

• Avg daily production: 5,420 boe, up 1% from first quarter 2009
• Avg daily crude oil production: up 84% from first quarter 2009
• Average price for crude oil first quarter: $72.39/bbl
• 305,400 net acres in North Dakota and Montana
• Rough Rider: 123,000  acres
• Ross Area: 98,800 acres
• Eastern Montana: 83,600 acres

Drilling operations

• Capital to ramp up to 8 operated rigs by May 2011
• Enough liquidity to ramp up beyond 8 operated rigs
• Conference call to follow

Comments:

• Wow: at first glance that measly increase in daily production volumes from one year ago has to be concerning: up only 1% from a year ago. But there's a very good reason for it: it was all due to less natural gas being produced. Crude oil production jumped 84%; natural gas production dropped by almost half. 
• Crude oil production increased  by 84% from first quarter 2009. 
• There were 46 million shares outstanding a year ago; this year, 101 million 
• Overall, this has to be a very good report by any measure; curious what others have to say
• BEXP has five (5) active rigs according to NDIC today (April 29, 2010). Next month, there could be three more BEXP rigs in North Dakota/Montana
• Compare BEXP's 221,800 net acres in North Dakota compared to Newfield's 400,000 net acres

Hess Conference Call, First Quarter, 2010

Hess Conference Call, First Quarter, 2010

Financials
Net income: $538 million gain vs $59 million one year ago
Higher commodity prices offset weaker refining results

Operations
Bakken: 13,000 boepd
Currently: 5 rigs in the Bakken
Exit 2010: 10 rigs in the Bakken
Completed four dual laterals: cost -- $10 - $11 million apiece
Five dual laterals in stage of being completed
EUR of dual laterals: one million barrels per well
30-day average for dual laterals: 1,000 boepd (500 per lateral)

Greg Hill (Hess) on dual laterals:

So, where are we on the drilling? Our current base plan is to utilize the dual laterals across most of our phase one acreage, and that's because the Middle Bakken and Three Forks are largely present across that phase one acreage. Now, the cost advantage of this approach is clear.

You get one less vertical wellbore, you have fewer downhole equipment, you have fewer surface facilities. So, we really believe that there is dual lateral approach combined with the application of lean manufacturing techniques and pad drilling is going to result in superior returns for us on the Bakken, which is why we're going with that approach. Now, we'll say it's in its early days. As we learn, as we need to, we'll change and modify as appropriate. But right now, we're happy with dual lateral performance.

Source: Seeking Alpha

These are the five wells currently being drilled by Hess and the counties they are located in (based on conference call, all except one should be dual laterals):

• 18201, HA-State-152-95-1621H-1, McKenzie, 16-152-95
• 18602, RS-Nelson Farms A-156-90-2829H-1, Mountrail, 27-156-90
• 18838, EN-Abrahamson-155-93-3019H-1, Mountrail, 30-155-93
• 17196, BL-Dilland-156-96-2536H-1, Williams, 25-156-96
• 18680, Blou 13, Williams, 12-155-96W, a vertical well? Surrounded by vertical wells

Comment: reviewing the IPs for Hess wells for the past year, they have all been below 500 bopd (with maybe one or two exceptions, and yet in the conference call, Hess said their dual laterals were all averaging 500/1000 bopd on a daily basis with their on-going production from dual laterals. If we are all on the same page of music, it would suggest that the production from Hess wells improved after the initial production. 

COP Profits Double; Production Fell 5%

Burlington  Resources is a subsidiary of ConocoPhillips (COP). Burlington, of course, saw its fortunes rise when oil was discovered on its property in North Dakota in 1981. I assume many folks who invested in the Bakken, invested in Burlington Resources (BR at the time) and now hold COP.

Today, COP announced that first quarter (2010) profits doubled, even though its production fell 5%.

You may remember that COP was faulted by many for overpaying for natural gas reserves in the Far East. Warren Buffett had a huge COP holding about this time (I don't remember the specifics, but probably bought before, during, and after the natural gas reserves purchase). Pundits said that Buffett probably lost money on the deal; regardless, he subsequently sold some/all of his COP holdings. (I forget the specifics.)

As JRR Tolkien says: we all have our myths. That's my myth regarding COP, BRK, and BR.