Connecting the Dots in Southwest North Dakota -- Bakken, North Dakota, USA

The dots: 

• The Chesapeake 2Q11 earnings conference call suggests something interesting in southwest North Dakota.
• Whiting (WLL) has two major operations in North Dakota: a) North Bakken Ops (centered around the Sanish); and, b) South Bakken Ops (centered around Bell). Reminder: Whiting is also testing the Red River formation, click on Maus.Whiting had the highest producing TFS well in the Williston Basin in this area.
• CLR has suggested something very, very interesting about the Three Forks in southwestern North Dakota

To those three, which is "old" news (within past six months or so), add this, from the July 31, 2011, KOG presentation:

• KOG has 22,000 net acres in its SW BKN-TF Trend as noted on slides 9 and 10 of that presentation

There is a press release dated June 30, 2011, which seems to fit this acquisition:

Included in the transaction are approximately 25,000 net mineral acres and production of approximately 200 net barrels of oil equivalent per day (BOE/d).  The total purchase price for the leasehold interests and associated assets is $85.5 million and is comprised of $71.5 million in cash and the issuance to the Seller of 2.5 million shares of Kodiak common stock.  Kodiak funded the transaction through cash balances and borrowings under credit facilities including its reserve-based revolving line of credit.   As part of the transaction, Kodiak entered into a contract for a new build drilling rig that was previously contracted to the Seller.  The new build drilling rig is scheduled for completion in September 2011.

It looks like they valued the 2.5 million shares at $5.60/share.

[I calculate 89,500 net acres, as does their July 31, 2011, presentation. From a "PR" point of view, this acquisition, according to KOG, was important:

Including today's acquisition, Kodiak's acreage position in the Williston Basin now approximates 100,000 net acres.]

But I digress.

CHK's cryptic remarks about their prospect in southwestern North Dakota and CLR's very clear comments about the Three Forks formation in southwestern North Dakota are interesting to say the least. The amount of activity that WLL has laid down in the Bell field is very interesting. And now we have KOG entering the same area

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Everything below this is for my use only. 

Back of the envelope calculations:

For the $85 million: the 22,000 net acres, current production (200 boepd), and a new rig.

Somewhere I read that the production was from two wells, but I could be wrong on that. But let's say it was two wells (cost to drill: $14 million); a new rig ($12 million on eBay); leaves $60 million/22,000 net acres --> $2,700/acre. If the wells are worth more, the rig more, the $$ per acre goes down. If the rig is less, the wells less, the $$ per acre goes down, of course, but at least the $$/acre seems to be in the ballpark.

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It's hard to tell, but it looks like the newly acquired KOG acreage in the "SW BKN - TF Trend" is in the area of the Bicentennial, Squaw Gap, Mondak, and Poker Jim oil fields.