BEXP: Ten (10) Wells Per Spacing Unit Coming -- Bakken, North Dakota, USA

Theme for this conference call:

• BEXP was an early mover and has some of the best Bakken and Three Forks acreage
• BEXP's growth is occurring through acreage acquisitions
• Focused on Three Forks in Rough Rider prospect
• Savings and efficiencies from Smart Pads, zipper fracks, and infrastructure buildout
• Moving to 5.5 wells/formation/spacing unit; as many as 10 wells in one spacing unit
• 11 to 18 years of drilling inventory (2011 + 11 --> 2022; 2011+ 18 --> 2029; agrees with academics who suggests drilling to continue through 2030 in the Bakken

Perhaps the most interesting quote: ""... so we try not to focus too much on the IPs. I know we've been trying to get everybody to focus away from it and look at more the longer term production." -- coming from the company that was probably most responsible for driving higher IPs.

Highlights of the BEXP 2Q11 earnings conference call (some numbers rounded)

General:

• Bakken and Three Forks is the top resource play in North America
• BEXP: is an early mover; right in the middle of the best areas of the play
• BEXP "setting up for a remarkable second half of 2011"
• Headed for another very big year for reserve additions
• BEXP has grown their inventory faster than they've drilled it
• Growth is occurring through acreage acquisitions and step-out drilling successes in Montana
• A lot of effort focused on their Rough Rider prospect; 44 non-BEXP rigs drilling around the edges of BEXP's Rough Rider prospect; BEXP thinks they got some of the best acreage in this area due to early mover status
• It was a little hard to make out this part of the conference call, but in the  Q&A portion, it sounded like BEXP is "way ahead" of any concern about losing leases because they can't get to all their leases. This has been a concern from the peanut gallery on other discussion boards.

Preparing for next winter and next spring

• SmartPad, zipper fracs and infrastructure build-out made huge difference past winter/spring
• Two fully dedicated frac crews

Success

• 79 consecutive Bakken wells with an average IP of 2,800 boe
• Tip of the ice berg
• 1,400 to 2,200 gross wells yet to be drilled

Cost savings

• Smart Pads: 10% to 20% cost savings per well
• A well with a 600,00 EUR: $9 million net present value; 50% rate of return; payout < 2 years; wells will produce over 25 years
• Some of these cost savings will offset recent decrease in price of oil

Three Forks/Rough Rider

• Looks like it will be de-risked; if so, an additional 500 incremental net drilling locations

Well Density

• Will compare pilot program of 5.5 Bakken wells with current 4.5 Bakken wells/unit 
• Brad Olson wells continue to support "theory" that 4-well spacing does not materially affect wells in the Bakken
• Slide 31 suggests 10 wells on each 1280-acre unit: 5 Bakken wells, and 5 TF wells; because of overlap at the edges, it averages out to 5.5 wells per spacing unit

Technological Innovations

• Smart Pads: 112 spacing units, representing more than 896 gross wells
• Swell packers
• Still some sorting out to do with regard to frac technology; Baker and Halliburton cannot do 30 stages with the new technology

By the way, for those folks who think BEXP might be getting ahead of itself with ten wells on a spacing unit, these are cases before the NDIC for the August, 2011, docket:

15603, Dakota-3: Eagle Nest-Bakken, 8 wells on a 1280-acre spacing unit, Dunn County
15604, Dakota-3: Reunion Bay-Bakken, 7 wells each on 2 1280-acre units, Mountrail County
15605, Dakota-3: Van Hook-Bakken, 7 wells each on 2 1280-acre units, Mountrail County
15606, Slawson: Saxon-Bakken, 2 wells on a 1280-acre unit, Dunn County
15607, Slawson: Cabernet-Bakken, 6 wells on a 640-acre unit, Dunn County
15608, Slawson: Four Bears-Bakken, 7 wells on a 1280-acre unit, McKenzie, Mountrail Counties
15609, Slawson: Ross-Bakken, 3 wells on a 1280-acre unit, Mountrail County
15610, Slawson: Alger-Bakken, 6 wells on a 640-acre unit; Mountrail County

Times are a'changin'.