COP and Bakken; 3Q10 Conference Call; Message Thread

From the Yahoo!Finance message board for Northern Oil and Gas (NOG), Oct 27, 2010:

HOUSTON (Dow Jones)--ConocoPhillips (COP) is looking for acquisition opportunities in the deepwater U.S. Gulf of Mexico and in the oil-rich shales in Texas and North Dakota, Chief Executive Jim Mulva said Wednesday. Nevertheless, ConocoPhillips is actively looking for acquisition opportunities in the area, where the company believes is its under-represented......is also shopping for acreage in the Eagle Forld and Barnett shales in Texas and in the Bakken shale in North Dakota, Mulva said. Those are the areas where the company is currently ramping up oil production and is eager to increase its position. Mulva said the $2 billion to $3 billion the company is expecting to spend in these acquisitions will be on top of the $10 billion it has budgeted for capital spending in 2011.

I think it's pretty exciting to hear the CEO of COP talking about the Bakken in this manner.

I opined some months ago that 2010 would be a watershed year for KOG.

I think 2011 will be the year of mergers, acquisitions, major acreage deals, etc., in the Bakken.

Updates

Update, November 1, 2010: I posted the above on October 29, 2010. Three days later my comment that the year 2011 will the year of mergers, acquisitions, major acreage deals, etc., in the Bakken seems to be validated by a well-researched analysis posted on the Bakken Shale Discussion Group board.

For Investor's Only: Seeking Alpha 10 Bakken Shale Stocks, 2010 Guide

I missed this article which was posted at Seeking Alpha back in August, 2010.  Better late, than never.

This is a nice list of ten Bakken shale stocks. I can't disagree with any of Hunter Austin's recommendations. He goes from big cap to speculative.

I don't know if his list is ordered in any way, but he lists Oasis as number one, then QEP, KOG, VYOG, WLL, EOG, XOM, CLR, MRO, COP, and AXAS.

I find it interesting that he includes XOM. XOM's position in Bakken is due to its purchase of XTO. It's hard to believe that the Bakken is even more than a single pixel on XOM's radar scope. It will be interesting to watch.

I don't have time to show all the calculations, but it might be fun to see where you would be if you had put together a market basket of Bakken stocks based on this list.

The story was published on August 6, 2010. Suppose you decided to study the list, make the decision to invest in those stocks, and raise the money. So, maybe about August 16th you would have gotten around to "pulling the trigger."  Had you placed $1,000 in each of those ten stocks on August 16, 2010,  for a total investment of $10,000, your portfolio would be worth $11,182 at the close of the market, Friday, October 29, 2010.  (These calculations were based on Yahoo!Financial interactive tables based on the closing price on those two dates.)

Almost all of the companies went up 10% in that period (about $100). KOG was an outlier, having gone up exactly $400 (on that initial $1,000 investment). OAS was second best with a $224 gain. VYOG was the only company to have gone down in share price, valued at $860 at the end of the period. EOG was up only $17.  Everyone else, about a $100 gain.

ERF: Recovering As Much As 20 Percent of The Oil in The Bakken?

Take a look at the current ERF presentation, specifically slide 19 (ERF's slide numbered "19").

Now, see if you can find some original estimates of recoverable oil from the Bakken (in percent). If my memory serves me well, USGS back in 2008 estimated that about two (2) percent of original oil in place (OOIP) would be recoverable, based on results to date and technology at that time. If I'm wrong on that, please let know (with links).

Then, Harold Hamm, CLR/CEO, said that he thinks some folks are already recovering at a rate of eight percent of OOIP. Two percent to eight percent may not sound like all that much, but it quadruples the original estimate in volume measured in barrels.

Now we have ERF estimating as much as:

• 12 - 16% in the Fort Berthold area, ND, Bakken
• 10 -14% in the Fort Berthold area, ND, Three Forks
• 15 - 20% in the Sleeping Giant, MT, Bakken
• 10 -15% in the several fields in Saskatchewan, Canada

In the Sleeping Giant, 20 percent. Twenty percent is ten times two percent. Just saying.

You all can do the math on EUR per section based on EUR per well and estimated number of wells per section as noted on slide 19 in ERF's presentation.

ERF estimates two (2) short lateral wells per 640-acre spacing and two long laterals per 1,280-acre spacing. Look at a Whiting presentation: they are putting in significantly more wells than this in their 1,280-acre spacing units in their best Bakken (the Sanish).

Ten (10) New Permits (Bakken, ND, USA)

Operators: Slawson (2), Whiting (2), Petro-Hunt, BR, Hunt, BEXP, Prima, and CLR.

Fields: Charlson, Haystack Butte, Sanish, Parshall, Cow Creek, Northeast Foothills, Medicine Pole Hills, and three wildcats.

Six permits expired: 17708, Penn Virginia; 17749, Penn Virginia; 17768, XTO; 17806, CLR; 18348, BTA; and 18397, Red Willow Great Plains.

On track for 1,567 new permits in calendar year 2010.