Hess Eager to Develop Newly Acquired Property -- Bakken, North Dakota, USA

Link here.

Hess Corp. says it will devote $5.6 billion to capital spending this year, including exploration off the coast of Africa and continuing heavy investment in North Dakota oil fields that it bought last year (last year was only seven days ago). Hess bought TRZ LLC.

Note: Hess' purchase of TRZ LLC followed closely on the heels of another Hess purchase in the same area. 

One of my favorite posts last year (2010) was a commentary on how the Bakken has given investors three opportunities to invest in North Dakota oil industry.  Is this confirmation?

• Goldman Sachs analyst Daniel Boyd said oil drilling in the U.S. will increase more than 40 percent this year over 2010 while gas activity will decline 12 percent.
• Much of Hess' production spending will be in the U.S., especially oil fields in North Dakota that the company acquired last year. The company plans to expand production facilities and use 15 rigs to drill in the Bakken oil shale fields in North Dakota.

Hess has twelve (12) active rigs today in North Dakota.

Chesapeake to Cut Back -- Not a Bakken Story

Well, well, well -- this is interesting. This is like a bolt out of the blue.

Chesapeake is going to cut back.

Chesapeake Energy Corp. announced plans to reduce its long-term debt by 25% by substantially reducing leasehold spending and by reducing its 2-year production growth rate to 25% from its previously planned growth rate of 30-40% for 2011-12. 

 Chesapeake will sell some assets, but will not issue any new shares to cut debt.


As far as I know, Chesapeake is almost solely a natural gas company. According to its current presentation (180 slides, so it takes a moment to download), 90% of its production is natural gas; six percent oil; and four percent natural gas liquids. 


But, and it's a "big but," slide 24 of that presentation says that CHK is transitioning to unconventional oil and has been quietly buying up unconventional oil acreage since 2007. 

The rest of that slide:

• Quietly built leasehold positions in unconventional plays
  that would benefit from advancements in drilling and
  completion technologies
• 2008-2010: confirmed play concepts work
• Now have ~2.9 mm net acres in unconventional liquids-rich
  plays with ~3.7 Bboe of risked unproved resources and
  ~11 Bboe unrisked unproved resources
• Expect to increase liquids production to ~200,000 bbls/d,
  or ~25% of total production and ~35-40% of production
  revenue by YE 2015 through organic growth

On slide 24, there is a big hint that there could be another unconventional play for CHK; they are already in the Rockies (Niobrara and Frontier) and Eagle Ford Shale in Texas. But nothing in the Bakken.

And with that, I will let folks start thinking "what if?"

Just a reminder: ERF, WMB, OXY, XOM all recently bought into the Bakken paying $6,000 to $12,000/mineral acre (round figures; I could be off by a $1000 or so).

This suggests to me that CHK does not see any turnaround in price of natural gas in the near future.

I am truly perplexed. I'm not the only one.

1,176 Wells On the Confidential List -- North Dakota, USA

Actually, 1,176 permits are on confidential field. Not all of these permits have been drilled and/or completed.

Eighty (80) wells will come off confidential list this month (January, 2010); 90 will come off the confidential list in February; and, 122 wells will come off the list in March.

And, "we" are back up to 163 active rigs.

All 22 of Continental Resources' rigs are active. BEXP is down one rig at the moment; BEXP with six active rigs. Both of KOG's rigs are active. But it's a snapshot in time, and tomorrow the  numbers could change.

Seven (7) New Permits -- North Dakota, USA

Producers: Petro-Hunt (2), Prima, QEP, Tracker, XTO, and MRO.

Fields: Four Bears, Deep Water Creek Bay, Truax, Heart Butte, and two wildcats.

The Truax field is a bit interesting -- several different smaller companies there, including Tracker (TRZ assets recently acquired by Hess).  Truax is north of the river about twelve miles east of Williston, and east of Stockyard Creek. State highway 1804 runs through the northern third of the field. Very pretty country; rolling hills with great view of the river.

The wildcats: one is in the northern part of the North Dakota Bakken near Lignite. The other wildcat is one mile east of Alexander; when/if the well is drilled, you should be able to see it from US Highway 85 off to the east.  In fact, it could be the talk of the town at next summer's Old Settlers' Day weekend in the park.

The Four Bears permit is a Petro-Hunt permit in section 17-152-93; Petro-Hunt already has a producing well (IP not yet reported) in that section (long lateral, running north): 18126, Fort Berthold 152-93-17C-08-1H. In fact, it will be in the same section quarter, SWSW. The name for the new well: Fort Berthold 152-93-17C-08-2H.

Investopedia: Yet Another Story on the Booming Bakken

Link here.

The article mentions that the "majors" (XOM, COP) are not interested in the Williston Basin because it's just too small to affect their bottom line.

That may be true, but the other side of the coin is more interesting.

KOG now calls "XOM" their partner in the Bakken, and XOM provides the deep pockets a company like KOG needs to execute their drilling program. They probably prefer raising cash with / through partners, than offering yet more shares, and diluting shareholder value.

XOM bought XTO and XTO had acreage alongside KOG in the reservation. For me, that spoke volumes about the long-term viability of KOG.

COP may not be in North Dakota per se, but BR is a wholly-owned subsidiary of COP. BR hasn't been particularly active in this boom compared to others, but it is there, and I expect we will see more of BR going forward.

Williams is almost a "major" in my mind; I've always considered them a pipeline company and something tells me they know something about the pipeline infrastructure necessary for the acreage they just acquired. Also, seeing how much WMB and others were willing to pay for acreage in the Bakken gave me an idea what other, smaller companies might be worth.

And Occidental Petroleum wasn't mentioned in the article, and they just bought Anschutz's assets in the Bakken.

One interesting fact: one or two great wells in the Bakken would not affect XOM's bottom line, but one or two great wells for KOG or Oasis, or even CLR, would be "dynamite." A few great wells will affect KOG's and OAS's bottom lines, but more importantly, it will have a significant psychological effect on those trying to calculate the value of these companies. It's not so much that one well affects their bottom line, this is what it really means: a) that company may have broken the code on how to effectively reach the oil in the Bakken; and, b) that the company has some very, very valuable acreage.

That's why BEXP always seems to be in the news: they keep reporting exciting IPs. Those who follow the Bakken closely aren't impressed (due to the horrendous decline rates) but not everyone is aware of that. More importantly, the jury is still out regarding the significance of IPs.  But all things being equal, I would prefer my well have an IP of 3,000 boe vs 30 barrels.

Just saying.

Wow, talk about rambling.

The point of the article was to link the most recent Investopedia story. Sorry.