Whiting's Second Quarter 2011 Financial and Operating Results -- Bakken, North Dakota, USA

As you go through all the data below, pay particular attention to the results of two wildcats in McKenzie County (Arnegard 21-26H and Rovelstad 21-13H).

Also, when you look at the new production records and the increased cash flow and income/share, remember, this was one of the toughest quarters experienced in the Bakken to date with floods, shut in wells due to muddy roads, truck traffic shut down in Williams County due to road conditions. With that in mind, this report practically shouts: HUGE QUARTER.

Zachritz at Seeking Alpha weighs in on report.

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Data points and comments from the WLL second quarter 2011 financial and operating results. 

Interesting tidbits at end of this post, as well as here. 

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For investors: remember, WLL split their shares 2-1 back in late February, 2011

Production records in 2Q11

• WLL's Bakken production: new production record -- 58,105 boepd gross (31,161 boepd net) on July 19, 2011
• WLL in the Sanish field: reached 44,102 boepd (22,817 boepd net) on July 19, 2011

Rigs in the Williston Basin

• 17 rigs
• Typical inventory of 20 - 25 wells waiting to be completed (fracked)
  

Fracking

• 2.5 dedicated frack crews
• 18 - 20 wells / month through the rest of the year (2011)
• Expect to reduce current 44-well inventory of operated wells waiting for completion to below 25 by November 30, 2011
• Commentary on fracking backlog here

Shut-In Wells

In several recent daily activity reports, I have noted some wells were shut in (not only WLL but also other producers). This quote explains what is going on in many cases:

We have 11 service units running in the Sanish field and are making good progress in placing back into production wells that were shut-in during the inclement weather due to muddy roads. As of July 15, 2011, we had 27 wells waiting for a service unit. We expect this inventory to be eliminated by September 30, 2011.

Financial Results (some numbers rounded)

• Discretionary cash flow in 2Q11 increased 37% to $313 million (mostly due to higher price of oil)
• Net income increased 17%, to $1.73/share vs $1.18/share comparable quarters

Net Acreage in the Bakken

• CEO: >680,000 net acres in the Bakken/Three Forks system
• Prior: 678,000

CAPEX Increased To $1.6 billion from $1.35 billion

• 18 additional wells in Hidden Bench (Watford City area)
• 6 additional wells in Cassandra
• 5 additional wells in Starbuck

Recent Notable Wells

The CEO presented several recent notable well results. All of these are 2010 permits except the Nesheim well (2011 permit). The two Hidden Bench wells are wildcats. The Hidden Bench prospect is in the Watford City, North Dakota, area. The Sanish prospect is WLL's cash cow.

• 19684, 3,092,WLL, Arnegard 21-26H, Hidden Bench, Bakken, wildcat
• 20014, 2,450, WLL, Rovelstad 21-13H, Hidden Bench, Bakken, wildcat
• 20451, 3,752, WLL, Nesheim 11-24XH, Sanish, Bakken
• 19475, 2,835, WLL, Brookbank State 41-16XH, Sanish, Bakken
• 19972, 2,294, WLL, Oppeboen 14-5WH, Sanish, Bakken
• 19860, 1,338, WLL, Vangen 11-3TFH, Sanish, Bakken
• 19687, 2,108, WLL, Clemens 34-9TFH, Lewis and Clark, Bakken
• 19923, 1,028, WLL, Richard 21-15TFH, Lewis and Clark, Bakken,
• 19917, 282, WLL, Maus 23-22, Big Island, Red River,

Regarding those wildcat wells, here's more from the report:

Hidden Bench Prospect. Whiting completed the Arnegard 21-26H discovery well at its Hidden Bench prospect flowing 2,423 barrels of oil and 4,012 thousand cubic feet (Mcf) of gas or 3,092 BOE per day from an 8,913-foot lateral in the Bakken formation on June 23, 2011. The flow rate was gauged on a 48/64-inch choke with a flowing casing pressure of 900 psi. The well, which was drilled to a vertical depth of approximately 11,490 feet, was fracture stimulated in a total of 30 stages, all using sliding sleeves. Whiting owns 59,170 gross (30,905 net) acres in the Hidden Bench prospect, located in McKenzie County, North Dakota. The Company plans to drill a total of 11 operated wells in the prospect in 2011.

Also at Hidden Bench, Whiting completed the Rovelstad 21-13H flowing 1,880 barrels of oil and 3,419 Mcf of gas (2,450 BOE) per day on June 15, 2011. The well was tested on a 48/64-inch choke with a flowing casing pressure of 700 psi and was fracture stimulated in a total of 30 stages, all using sliding sleeves. The Rovelstad well is located approximately two miles northeast of the Arnegard well.

Look at the Red River well:

Big Island Prospect. At our Big Island prospect in Golden Valley County, North Dakota, we completed the Maus 23-22 pumping 282 barrels of oil per day from the Red River formation at a depth of approximately 12,450 feet. This is a conventional vertical well that we believe sets up four more tests of adjacent Red River prospects. We estimate EURs in this area at 400,000 BOE for a completed well cost of only approximately $3.8 million. 

Comment: conventional vertical well vs horizontal, fracked well

• A EUR of 400,000 BOE is at the lower end of the lower-production Bakken wells. Bakken wells cost upwards of $8 million to complete. 

CONFERENCE CALL

Listening to the conference call, these are soundbites that caught my attention:

• Whiting wells generally pay out in one year or less (remember these wells are expected to produce for 30 -- 35 years)
• Hidden Bench and Cassandra Prospects in North Dakota gaining more attention
• Increased acreage in the Bakken by over 76,000 net acres; >680,000 net acres
• Across the Bakken, WLL paid an average $419 per net acre -- core Bakken acreage is now going for $8,000/acre
• Lewis & Clark prospect at 254,000 net acres is 3.5 times larger than WLL's phenomenally prolific Sanish prospect
• In the Lewis & Clark, WLL controls 164 1280-acre units with an average 64% working interest
• Lewis & Clark: decline rates more shallow than in the Sanish
• Lewis & Clark: EURs will average 300 to 500,000 boe
• In the Sanish, 261 sites left to drill; represents 2.5 years of drilling activity
• Pipeline from Sanish field to the Enbridge field at Stanley has been completed, saving $2/bbl in transportation costs

Over and over, WLL mentioned the phrase "sliding sleeves"

• 30-stage, all using sliding sleeves, frac for the very productive Arnegard well
• 30-stage, all using sliding sleeves, frac for the very productive Rolvestad well
• They compared SS with PP in harder rock area and found no difference in production results between the two methods; SS is much faster (days instead of weeks); and much less expensive
• Can do SS in one day, rather than 7-9 days for PP; and at much less cost; and production is not different; "it's all about the rock"
• Combining PP/SS -- Sanish -- microseismic to see what they are doing -- 60-stage completion being tested -- BHI and HAL equipment both being used

Lewis and Clark: "one of the best" plays in the United States today

• 300 - 500 boe/well
• Cost: $6 million/well; production: $18 - $24 million of future net over the life of the well 
• "There may be two or three Sanishes in the Lewis and Clark

Wow, wow, wow! Cost of wells will be coming under $5 million; being drilled in 14 days.