Legacy, Surge, and an Update on the Bottineau Spearfish Wells -- North Dakota, USA

I still don't have the complete story, but here a few more dots to connect.

First, a story from the Calgary Herald just a couple of days ago, May 30, 2011:

Formation watchers have drawn a bead on the Manitoba Spearfish light oil formation, with a report from FirstEnergy Capital suggesting it may have twice the amount of original oil in place per acre as the storied Saskatchewan Bakken.

"Drilling activity levels and play-wide production volumes have grown exponentially since the winter of 2008-09, with latest public data (current to January 2011) showing Spearfish production approaching the 15,000 barrel of oil equivalent per day range, and likely capable of much more today if it were not for an anomalously wet spring break-up this year," says the report.

"In terms of resource potential, the regional extent of the Spearfish is still being delineated, however, in areas already shown to be prospective, reservoir parameters can suggest potential OOIP to be in the realm of 9.0 to 15.0 million barrels per section, which could represent 2-3 times what the southeastern Saskatchewan Bakken offers on average."

The Spearfish attracted super-looking oilpatch newcomer Legacy Oil + Gas to invest $185 million to buy assets from Molopo Energy Canada Ltd. in February, paying $93 million in cash and issuing 6.18 million Legacy common shares.

EOG Resources and Penn West Exploration are considered the leaders in the play but for maximum exposure, FirstEnergy likes Legacy or Surge Energy, who both have concentrated, low risk, development inventories.

Then this comment sent in to me, and posted at this site:

Looks like Surge energy may have purchased EOG's leases in Bottineau County Spearfish. Appears that Surge now claims a 329 low risk drilling inventory.
http://surgeenergy.mediaroom.com/index.php?s=10448&item=39018
Also check out their May 20 investor presentation and look at the spearfish land map page 14. The land position looks very similar to what EOG had shown in some of its reports. However I haven't seen any public record of sale by EOG? 

The press release at that link says Surge's deal to acquire Spearfish assets in North Dakota has closed:

CALGARY, May 16 /CNW/ - Surge Energy Inc. (SGY) is pleased to provide the results of its third horizontal multi-frac well at Valhalla South and to announce the closing of its previously announced light oil asset acquisition in North Dakota. Surge is also pleased to announce that it has syndicated its bank facility and increased its bank line from $90 million to $120 million.

The press release goes on: 

Surge is pleased to announce that it has closed its second light oil asset acquisition in North Dakota.  As previously disclosed, the first light oil asset acquisition in North Dakota closed on March 31, 2011. The assets from both acquisitions were acquired by Surge Energy USA Inc., a wholly owned subsidiary of Surge Energy Inc. 

Through the two acquisitions, Surge acquired 100 bbl/d (2010 exit rate) of high quality, high netback, light oil production, 6,000 net acres of highly prospective land in the Spearfish light oil resource play and greater than 100,000 acres of high working interest, undeveloped land for total consideration of $21.5 million in cash. The acquisitions added an internally estimated 205 gross (120 net) horizontal Spearfish drilling locations and approximately 126 mmbbls gross DPIIP (discovered petroleum initially in place; similar to US companies "OOIP" -- original oil in place). 

Surge now has approximately 329 gross (231 net) horizontal Spearfish drilling locations in southwest Manitoba and North Dakota and greater than 460 gross (350 net) oil drilling locations in the Company.

For those who have forgotten what/who Legacy is:

Legacy Oil + Gas Inc., an oil and natural gas company (from the BusinessWeek.com site) engages in the acquisition, development, exploration, and exploitation of oil and natural gas properties in Canada. It principally holds interests in various properties located in an area ranging from approximately 130 to 290 kilometers southeast of the city of Regina, Saskatchewan; the Turner Valley property situated in southern Alberta; and the Maxhamish property located in northern British Columbia. The company also owns interests in approximately 44,684 net acres of undeveloped land in Bottineau County, North Dakota; and a 50% working interest in 16,640 net acres of undeveloped land in southern Alberta. In addition, it invests in petroleum and natural gas gathering, processing, and transportation assets. The company was formerly known as Glamis Resources Ltd. and changed its name to Legacy Oil + Gas Inc. in November 2009. Legacy Oil + Gas Inc. was incorporated in 2005 and is headquartered in Calgary, Canada.

So, bottom line: it looks like Surge, Legacy, and EOG have assets in Bottineau's Spearfish formation, but whether EOG sold most/all of its assets to Legacy and/or Surge is still an issue.