Link here.
The article mentions that the "majors" (XOM, COP) are not interested in the Williston Basin because it's just too small to affect their bottom line.
That may be true, but the other side of the coin is more interesting.
KOG now calls "XOM" their partner in the Bakken, and XOM provides the deep pockets a company like KOG needs to execute their drilling program. They probably prefer raising cash with / through partners, than offering yet more shares, and diluting shareholder value.
XOM bought XTO and XTO had acreage alongside KOG in the reservation. For me, that spoke volumes about the long-term viability of KOG.
COP may not be in North Dakota per se, but BR is a wholly-owned subsidiary of COP. BR hasn't been particularly active in this boom compared to others, but it is there, and I expect we will see more of BR going forward.
Williams is almost a "major" in my mind; I've always considered them a pipeline company and something tells me they know something about the pipeline infrastructure necessary for the acreage they just acquired. Also, seeing how much WMB and others were willing to pay for acreage in the Bakken gave me an idea what other, smaller companies might be worth.
And Occidental Petroleum wasn't mentioned in the article, and they just bought Anschutz's assets in the Bakken.
One interesting fact: one or two great wells in the Bakken would not affect XOM's bottom line, but one or two great wells for KOG or Oasis, or even CLR, would be "dynamite." A few great wells will affect KOG's and OAS's bottom lines, but more importantly, it will have a significant psychological effect on those trying to calculate the value of these companies. It's not so much that one well affects their bottom line, this is what it really means: a) that company may have broken the code on how to effectively reach the oil in the Bakken; and, b) that the company has some very, very valuable acreage.
That's why BEXP always seems to be in the news: they keep reporting exciting IPs. Those who follow the Bakken closely aren't impressed (due to the horrendous decline rates) but not everyone is aware of that. More importantly, the jury is still out regarding the significance of IPs. But all things being equal, I would prefer my well have an IP of 3,000 boe vs 30 barrels.
Just saying.
Wow, talk about rambling.
The point of the article was to link the most recent Investopedia story. Sorry.
Bruce have you heard anything about Chesapeake moving in up here? I have heard they are leasing in Billings and Stark.
ReplyDeleteI keep watching, but I haven't seen (or heard) anything. No one else has sent me any "rumors." I will ask around. But, you know, it wouldn't surprise me with Occidental buying Anschutz; XOM buying XTO (natural gas company, like CHK); WMB coming in, etc. Those are all pretty big players and I'm sure the directors all travel in the same circles.
ReplyDeleteI posted the above comments late afternoon on January 7, 2011.
ReplyDeleteNot more than three hours later, I read a news story that CHK is cutting back on natural gas production this year (2011) and will be increasing its oil exploration and production. According to its corporate presentation, CHK has been quietly buying up unconventional oil acreage since 2007. Just saying. Tom may be on to something.