Flashback: The Day XTO Bought Into the Bakken

Link here.  (Note: this is from 2008.)

Flashback: this is a re-look at the announcement in which XTO bought Headington Oil back in 2008. I was interested in some Nesson Anticline information, and ran across this gem. I thought others might enjoy reading about it again.

XTO bought Headington Oil in 2008, and XOM bought XTO in 2010.

Data points:

• Conference call date announcing the deal, publication date: May 28, 2008
• Acquisition: XTO buys privately held Headington Oil for $1.85 billion in cash in XTO common share
• Proved reserves + production + 215,000 net undeveloped unacreage = value of acquisition
• Deal effective: May 1, 2008
• Proved reserves (est): 68 million boe
• Production costs: $3/boe (not a typo --> $3/boe)
• Production growth (est): 12 - 15% per year going forward
• 352,000 net acres; 215,000 undeveloped
• [Note: XOM acquired XTO; XOM has 410,000 net acres in the Bakken]
• XTO first bought in the Bakken back in 1987; a horizontal well --> a "500,000 boe type well"
• Acquisition should put XTO into top three producers in the basin
• Plans to add to this position

Comments:

• XTO had been looking at the Bakken for past couple of years; Headington put together a ice position
• Most of acreage in Nesson Anticline
• Believed there was about 3 billion bbls of oil in place
• If only 10% recoverable, and get only half, looking at 150 million bbls in this acquisition; believes currently it is about 68 million bbls; thus, XTO sees a "double"
• Wells are "getting much better"
• There is a trend of drilling wells into the Sanish in Three Forks (the zone below the Bakken)
• This is one of the few acquisitions that XTO will get 12 - 15% annual growth with the third of the cash flow (based on current oil prices)

Trends:

• Back to single laterals (problems with dual and multiple laterals)
• Single stage fracks (that has changed)
• Oil is light (43 gravity)
• Natural gas is rich (1,500 BTUs)
• EOG has been successful east of the Nesson Anticline
• XTO may be drilling 320-acre infills in Elm Coulee; belies down spacing will occur over time
• Expects technology to improve recoveries
• CLR was looking at CO2, small pilot, CO2 project in Elm Coulee
• Believes there may be some potential for some additional secondary, tertiary recovery

Question and Answer:

• We expect a lot of refracking (yes, that's how the publication spelled it)
• Will drill tighter spacing --> resulting in increased recovery (seen in other shales)
• CAPEX: $130 - $140 million/year (represents about one-third of the cash flow "on the strip"
• Hess has been active on the northern part of the anticline
• CLR: active on the northern and southern end of the anticline
• BR, MRO: active on the southern end
• Murex: "another little independent that's been very successful drilling wells on the top of the anticline"