Sunday, June 6, 2010
What Whiting Can Tell Us About the Bakken
Anyone with a serious interest in "the Bakken" should spend some time looking at Whiting's June, 2010, corporate presentation. This presentation is not just about Whiting, but about the Bakken in general. Many, many pearls can be found in this presentation.
Focus on Whiting (WLL)
It's been a long time since I've looked closely at Whiting Petroleum Corporation. For investors interested in "the Bakken" play, it's hard not to recommend WLL.
Whiting's June 2010 corporate presentation is 58 slides long, and most of them deal with the Bakken. It is chock full of interesting information. It may be the most informative presentations that I have seen in a very long time.
Some high points:
1. The USGS survey, 2008, estimated that oil companies could extract 2 - 3 percent of the oil in place in the Bakken; I have opined that oil companies will be able to double that (based on comments by CLR/CEO). WLL states that they estimate they are extracting 8 percent of the oil in place. If accurate, that changes the entire outlook for the Bakken. Depending on how one rounds the numbers, that is anywhere from 2 times to 4 times the amount that the USGS estimated that could be extracted.
2. Although the USGS survey of the Bakken Pool included the three Bakken formations and the two Three Forks Sanish formations, the fact is that information about the TFS was essentially non-existent. All projections coming from the USGS survey, for all practical purposes, was coming from the Bakken formations. We are now getting a bit more clarity on the TFS. Whiting estimates ultimate recovery (EUR) of 850,000 barrels of oil in each section from the Bakken formations and 300 - 500 bbls from the TFS formations. This is very much in line with what others have said.
3. For investors, I have opined that most companies in the Bakken are being valued on their Bakken formation production. The "frosting on the cake" is the Three Forks Sanish. The Whiting presentation supports that hunch.
4. Whiting "owns" the very prolific Sanish oil field in North Dakota. WLL is currently planning to drill three wells in each section in the Sanish.
5. In the June, 2010, presentation, WLL announces they are aggressively exploring a new area in North Dakota, which they refer to as the "Lewis and Clark exploration area." This is in southwestern North Dakota; one of the prominent oil fields in this area is the Bicentennial field.
6. For investors, WLL estimates it costs them $10 to extract a barrel of oil from the Sanish and the Parshall fields in North Dakota. This compares with $14 to $20 quoted by other producers for their wells. See paragraph 12 below for possible explanation.
7. I don't know if I'm reading this next slide wrong (slide 13) but if I understand it correctly, it blows me away. At the end of 2009, WLL estimated 14 million barrels of oil (resource potential) in the area it controls in the Sanish field, BUT Whiting estimates 58 million barrels of oil (resource potential) in its newly announced Lewis and Clark exploration field. I don't know about you, but I thought the Sanish was prolific; it pales in comparison to what WLL thinks about the Lewis and Clark area. Again, I could be reading the slide incorrectly.
8. For calendar year 2010, WLL plans to drill 48 net wells ($275 million) in the Sanish field and 9 net wells ($60 million) in the Lewis and Clark exploratory area.
9. Although the decline rate is horrific in the Bakken, WLL is still averaging 700 bopd at 90 days out (slide 26).
10. Additional information on the Lewis and Clark exploratory field
12. Comment: EOG, CLR, and WLL all agree that EUR for each section is about 700 - 900 thousand barrels. It is interesting to note that this is PER SECTION. EOG and CLR historically have been drilling short laterals (one section) whereas WLL has historically been drilling long laterals (two sections). It is also interesting to note that WLL says their wells cost about $5.5 to $6 million to drill; the very same range as the short lateral wells that EOG and CLR drills. So, for about the same amount of money, WLL is drilling one well but tapping into two sections, and the EUR for each section is in the same range as those of EOG and CLR. This is very, very interesting. Now, WLL will be putting in wells between their existing/producing wells. Going forward, this will all change, since NDIC has moved toward 1280-acre spacing (or greater) for all units.
The presentation is very, very good. I have not discussed the financial aspects which would interest investors.
I own no shares in WLL. However, with ...
These are my favorites in the Bakken: CLR, WLL, ENB, KOG, and NOG.
Slawson is privately held. AEZ is interesting. EOG may be the most impressive; I always come back to EOG; it is perhaps the most consistently productive and seems to be everywhere in North Dakota.
The "March, 2010, runs" (oil and natural gas sold) in March from the Sanish field can be found here. Whiting sold approximately 305,000 barrels of oil in March (18 wells) from the Sanish field. At $50/bbl that is about $15 million at the well head.
The total amount of oil sold from the Sanish in March, 2010, was 385,000 barrels, from 23 wells.
I don't quite understand this because there are close to 100 producing wells in the Sanish, most of them Whiting's, and clearly many, many more than the 23 reported here. I think these are the wells still on the confidential list: we don't have IPs, specific information about the wells like total depth, water, etc., but the state does publish the amount of oil sold from wells while on the confidential list once they are producing.
Whiting's June 2010 corporate presentation is 58 slides long, and most of them deal with the Bakken. It is chock full of interesting information. It may be the most informative presentations that I have seen in a very long time.
Some high points:
1. The USGS survey, 2008, estimated that oil companies could extract 2 - 3 percent of the oil in place in the Bakken; I have opined that oil companies will be able to double that (based on comments by CLR/CEO). WLL states that they estimate they are extracting 8 percent of the oil in place. If accurate, that changes the entire outlook for the Bakken. Depending on how one rounds the numbers, that is anywhere from 2 times to 4 times the amount that the USGS estimated that could be extracted.
2. Although the USGS survey of the Bakken Pool included the three Bakken formations and the two Three Forks Sanish formations, the fact is that information about the TFS was essentially non-existent. All projections coming from the USGS survey, for all practical purposes, was coming from the Bakken formations. We are now getting a bit more clarity on the TFS. Whiting estimates ultimate recovery (EUR) of 850,000 barrels of oil in each section from the Bakken formations and 300 - 500 bbls from the TFS formations. This is very much in line with what others have said.
3. For investors, I have opined that most companies in the Bakken are being valued on their Bakken formation production. The "frosting on the cake" is the Three Forks Sanish. The Whiting presentation supports that hunch.
4. Whiting "owns" the very prolific Sanish oil field in North Dakota. WLL is currently planning to drill three wells in each section in the Sanish.
5. In the June, 2010, presentation, WLL announces they are aggressively exploring a new area in North Dakota, which they refer to as the "Lewis and Clark exploration area." This is in southwestern North Dakota; one of the prominent oil fields in this area is the Bicentennial field.
6. For investors, WLL estimates it costs them $10 to extract a barrel of oil from the Sanish and the Parshall fields in North Dakota. This compares with $14 to $20 quoted by other producers for their wells. See paragraph 12 below for possible explanation.
7. I don't know if I'm reading this next slide wrong (slide 13) but if I understand it correctly, it blows me away. At the end of 2009, WLL estimated 14 million barrels of oil (resource potential) in the area it controls in the Sanish field, BUT Whiting estimates 58 million barrels of oil (resource potential) in its newly announced Lewis and Clark exploration field. I don't know about you, but I thought the Sanish was prolific; it pales in comparison to what WLL thinks about the Lewis and Clark area. Again, I could be reading the slide incorrectly.
8. For calendar year 2010, WLL plans to drill 48 net wells ($275 million) in the Sanish field and 9 net wells ($60 million) in the Lewis and Clark exploratory area.
9. Although the decline rate is horrific in the Bakken, WLL is still averaging 700 bopd at 90 days out (slide 26).
10. Additional information on the Lewis and Clark exploratory field
- Potential: 250 1280-acre units; 500 possible wells
- EUR: 350,000 - 500,000 boe
- 3-rig program; a fourth rig will be added at end of 2010
- Discovery well: Federal 32-4H. 700, 530, and 450 at 30, 60, 90 days respectively
- Federal 32-4H: long lateral, 15 frac stages, 1,970 boed
- MOI 22-15H: long lateral, 5 frac stages, 339 boed
- Buckhorn Ranch 31-16H: short lateral, 8 frac stages, 1,000 boed
12. Comment: EOG, CLR, and WLL all agree that EUR for each section is about 700 - 900 thousand barrels. It is interesting to note that this is PER SECTION. EOG and CLR historically have been drilling short laterals (one section) whereas WLL has historically been drilling long laterals (two sections). It is also interesting to note that WLL says their wells cost about $5.5 to $6 million to drill; the very same range as the short lateral wells that EOG and CLR drills. So, for about the same amount of money, WLL is drilling one well but tapping into two sections, and the EUR for each section is in the same range as those of EOG and CLR. This is very, very interesting. Now, WLL will be putting in wells between their existing/producing wells. Going forward, this will all change, since NDIC has moved toward 1280-acre spacing (or greater) for all units.
The presentation is very, very good. I have not discussed the financial aspects which would interest investors.
I own no shares in WLL. However, with ...
- the significant pullback in the price of oil;
- the concerns about the pace of economic recovery in the US;
- the moratorium on new deep water drilling off the US shore; and,
- the fact that even at best of times, most companies are being valued solely for Bakken formation production; thus,
These are my favorites in the Bakken: CLR, WLL, ENB, KOG, and NOG.
Slawson is privately held. AEZ is interesting. EOG may be the most impressive; I always come back to EOG; it is perhaps the most consistently productive and seems to be everywhere in North Dakota.
Other information: March, 2010, sales from Sanish wells still on confidential status
The "March, 2010, runs" (oil and natural gas sold) in March from the Sanish field can be found here. Whiting sold approximately 305,000 barrels of oil in March (18 wells) from the Sanish field. At $50/bbl that is about $15 million at the well head.
The total amount of oil sold from the Sanish in March, 2010, was 385,000 barrels, from 23 wells.
I don't quite understand this because there are close to 100 producing wells in the Sanish, most of them Whiting's, and clearly many, many more than the 23 reported here. I think these are the wells still on the confidential list: we don't have IPs, specific information about the wells like total depth, water, etc., but the state does publish the amount of oil sold from wells while on the confidential list once they are producing.
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