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Monday, August 8, 2011

Talk About Bullish! Listen to EOG CEO Mark Papa With Jim Cramer -- Bakken, North Dakota, USA

Link here.

Data points:
  • No dry wells in the Bakken! Huge. Only other place in the world with no dry holes: Saudi Arabia
  • IPs range from 700 - 1,500; even the lowest IPs would be considered "monster" wells
  • EOG values their Bakken acreage at $35,000/acre
  • Average price EOG paid for Bakken acreage: $453
  • MRO recently paid $21,000/acre (I may have that wrong; I missed it on the broadcast and didn't listen to it again; if I'm wrong, send me a comment, and I will correct it.
But the thing that impressed CEO Mark Papa is that there are NO dry holes in the Bakken. I used to talk about that two years go when I first started this blog. No dry holes.
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6 comments:

  1. AnonymousAugust 8, 2011 at 11:37 PM

    Great comments from Papa on a lousy day to own oil stocks.

    ReplyDelete
  2. Bruce OksolAugust 8, 2011 at 11:45 PM

    I used to say there were two things common to all oil men:
    1) They keep drilling, hoping to find the next "big one."
    2) They love to deal.

    But I need to add a couple more:

    3) They are, by nature, optimistic, although that's very much like #1 above.

    4) The oil industry is boom and bust; the successful oil men have seen it all.

    Thank you for taking time to comment. We'll get through this, too.

    ReplyDelete
  3. AnonymousAugust 8, 2011 at 11:59 PM

    Yes, we will and maybe crude will hit 150$ as the goldman sachs analysts analyzed (I use the term loosly) assured us. Crude is on the way to 60$ or less for a long time. Bakken companies are in for some rough sledding in the near to intermediate term. Not a pretty picture even with no dry holds.

    ReplyDelete
  4. AnonymousAugust 9, 2011 at 12:01 AM

    $35,000 an acre? What does that price BEXP or OAS with even better acreage? $10 Billion + market cap?

    ReplyDelete
  5. Bruce OksolAugust 9, 2011 at 12:02 AM

    We'll see. China would love to soak up all that oil for $60/bbl.

    ReplyDelete
  6. Bruce OksolAugust 9, 2011 at 12:18 AM

    6 wells on 640 acres
    Each well with a EUR of 300,000
    1,800,000 bbls @ $75 --> $135,000,000
    $135,000,000 / 640 acres --> $210,000/acre
    That is gross; out of that comes expenses, royalties, taxes, etc.

    Background to those numbers:

    1. If you have seen the August dockets, you will see that operators are now requesting permits for up to six wells on 640-acre spacing units. In some places more (14 wells on 1280-acre units, for example, in some locations).

    2. CLR's Harold Hamm opines that the Bakken wells will average 603,000 bbls (EUR). I used 300,000 in my example above.

    3. The price of $75 will change over time; the wells are expected to produce for 30 years. I assume the price of oil will generally trend up over the years.

    4. I continue to maintain the operators are grossly underestimating the value of their acreage. The Bakken is but one pool (there is the Tyler, Lodgepole, Madison, Red River, Silurian throughout the basin.

    ReplyDelete

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