This is an "ad lib" note that I sent a friend, that could have been overheard at the Econo-Mart in Williston. I haven't put a lot of thought into this (as you can all tell), but it might be an interesting conversation starter.
But this is the conversation starter:
Since I don't follow the Eagle Ford, I had not paid attention to this transaction.
I went back and read the five part series. Very interesting.
In Part 2 of Michael Filloon's very nice five-part series:
Look at the difference in the number of acres / well. Since the Eagle Ford can drill approximately 160 acres in one well, it significantly increases the net resource potential of the field. Don't take this as gospel, its estimates have a well every 833 acres in the Bakken and companies like Brigham (BEXP) are drilling 4 wells per 1280 acres and are talking about increasing to five or six wells. The most important variable with respect to unconventional plays is reliable and repeatable data. We also do not know for sure what wells will be producing in 15 years. These numbers are just an educated guess. As technologies increase, along with proficiency in completion and production, this could increase IP rates and EURs significantly in a matter of years.
Part of the reason Filloon says Eagle Ford is worth $20,000 - $25,000/acre in this area of the Eagle Ford is multiple pay zones, if I understand him correctly.
Multiple pay zones are also true in the Williston Basin (Bakken, TF, Tyler, Spearfish, Madison, Red River, etc.).
"Producing in 15 years." Most analysts in the Bakken think these wells will produce upwards of 30 years. [I won't be around to find out.]
One has to wonder if $500 to $10,000 / acre in the Bakken turns out to be a very, very good investment when some are willing to pay $20,000 to $25,000 / acre in the Eagle Ford. When you look at the EURs Filloon quotes in the Eagle Ford they aren't a whole lot different than what we are seeing in the Bakken.
For my thoughts on price differential between Texas, ND start with the cost of doing business, much higher in ND
ReplyDeleteThen look at competition, much more in Texas.
Under costs look at severance/extraction taxes. Not sure what they are now but Texas used to have a much friendlier rate. Texas has a huge support industry along with a much higher population base to support their growth with skilled workers. Cost of drilling and completing wells would have to be more competitive/lower priced I would think.
Also on the competition side how many independent oil companies do you think there are in Texas? With more companies trying to secure a limited amount of mineral acres it drives the value of those acres up.
Also in Texas you do not have to deal with 50 below wind chills, 15' snow drifts and 4' of frost in the ground during the winter.