Investors Only: Fourth Opportunity to Invest in the Bakken?

Some time ago I talked about three specific times in the past that offered opportunities to invest in the Bakken. I can't find that post right now and I can't remember the exact three opportunities, but I believe they were these:

• 2007: when Parshall oil field "discovered"; following the Elm Coulee field in Montana some years earlier
• 2008: one year of experience in the Bakken; and a huge drop in the market at the end of the year
• 2009: when the market dropped again in early 2009

I honestly can't remember the specifics. If I find the original post, I will link it. Here is it. I finally found it.

Regardless, I think we are being offered a fourth opportunity.

• It looks like oil is going to trend higher, and when it pulls back, it will stay appreciably higher than in the past
• Outside analysts are finally recognizing the Bakken

As I have said numerous times, I am inappropriately exuberant about the Bakken; I tend to look at the Bakken through oily-covered glasses.

But this $100 oil not a minor issue. EOG said a couple years ago that "we" are "robust" in the Bakken when oil hits $60. I can only imagine the words the EOG executives use to describe the Bakken when the price of oil hits $100. We've been at $100 oil for quite some time now, and we haven't gotten to summer driving season yet.

But what really has excited me is the outside interest in the Bakken "all of a sudden." It's been my impression that the "believers" in the Bakken tend to be those closely associated with the Bakken. Either they work there, live there, or grew up there, ("there" being the Williston Oil Basin) and have been following the story closely. But there have been relatively few -- in the big scheme of things -- investment stories in the mainstream media featuring the Bakken.

Now all of a sudden Jim Cramer (CNBC's "Mad Money") has had not less than three segments on the Bakken including interviews with the governor of the state and the CEO of Whiting. [Has Harold Hamm been on Cramer's show? If not, that's about the only place I have not see Mr Hamm recently.]

Now the highly respective oil consultant Ryder Scott has a huge story / analysis of the Bakken. To go direct to the PDF, click here. The opening paragraphs:

The world is watching the Bakken oil shale play. Net importers of oil—including China, France and Poland—are studying the Bakken as a model for their own countries, which contain geologically similar deposits, they say.

Companies from countries as far away as Australia have Bakken interests.

The unconventional play has become a proving ground for advanced drilling-and-completions (D&C) technology, including multistage hydraulic fracturing. The Bakken is to the future of UC oil production as the 20-year-old Barnett shale play has proved to be for UC gas, industry observers say.

Eight pages of information. And this note:

Bakken operators are downspacing to 320 acres by drilling four wells on 1,280 acres. Increased well densities are boosting PUD locations while dragging down EURs per well.

The degree to which EURs are being "dragged down" is still being discussed.

But I digress. Articles like these and television segments like Jim Cramer can only have a beneficial effect for Bakken investors.

US Declares War On Libya: Oil Futures Up $2.10 -- Back to Near Recent All-Time High

Okay, okay, okay, before I get any "hate mail," I know the US did not declare war on Libya.

I do know that the US has fired more than 100 Tomahawk missiles into Libya.

I do know that futures for WTI oil are up $2.10 tonight.

Futures seldom reflect true trading the next day.

But something tells me, the floor for WTI oil will be a bit more than $60 when the market opens tomorrow. From everything I have read the past two years suggests that analysts have valued Bakken companies based on oil trading between $50 and $60 per barrel.

This is an opinion post, and no one should take any investing action on these type of posts.

[To be honest with you (and I always am), regardless of what your feelings about Kadafi are, this military action almost seems like a) target practice the US Navy wants since it has limited play in Afghanistan and Iraq; and, b) going after a fly with a sawed-off shotgun. Two shotguns. No wonder the President left town when the shooting began. One hundred ten Tomahawk missiles in the first night. And we're just getting started. Wow. Nobel peace prize for someone for making this UN decision, no doubt. Something tells me I'm not alone in my thinking.]

[A random thought. North Dakotans will know what I'm talking about. There is a great debate -- currently at the legislative level -- regarding the University of North Dakota mascot, the "Fighting Sioux."  The NCAA has demanded that UND change the mascot since it is not politically correct. I wonder if naming a weapon of major destruction a "Tomahawk" missile is any more politically correct.]

*******

March 21, 2011: Lots of talk today about the "end game" in Libya. Let's assume we take the western coalition at its word, that this will be limited in scope, that it will be primarily a "no-fly zone" mission, and no US "boots on the ground." If so, it looks pretty much like all the western coalition has done is "level the playing field," literally and figuratively. If so, now the rebels and Khadafis' forces can fight it out with handguns and knives, which would become quite protracted, and in the end, if Khadafi is not removed, would result in the Khadafi family ultimately winning out.  If they get the oil fields back up and running, and if oil revenue flows back ot Khadafi, does one assume the money will be used to help the Libyans or be used to re-establish his military. Three guesses and the first two don't count. Is the French Foreign Legion going in?

Investors Only. Nothing To Do With The Bakken: ATT To Buy T-Mobile

This is incredible, and, of course, subject to regulators. But no matter how big a company gets, apparently it can get bigger. Although this has nothing to do with the Bakken, it's a huge story, and may have implications for the Bakken down the road.

*******

March 21, 2011, 0830: With the announcement, I would have thought share price of ATT would have dropped, which usually happens when companies take on a huge acquisition.

So I am surprised that ATT is up significantly in pre-market open.

CNBC "Squawk Box" discussion brought up something I had not thought about: this puts Sprint in a box. Sprint is losing market share and had hoped to do its own deal with T-Mobile. Now, with ATT going after T-Mobile, whether it happens or not, it prevents Sprint from buying T-Mobile for at least a year. In fact, while ATT share price is rising (surprising), Sprint share price is dropping.

********

March 21, 2011, 0920: Sprint is down 13 percent in pre-market open trading; quite remarkable. This just shows the importance of being diversified. I think it was less than a month ago that pundits were "talking up" Sprint. I can only imagine the "hate mail" that some investors are sending their financial advisers who encouraged them to buy Sprint. I never would have expected this (that ATT would buy T-Mobile). This is quite remarkable.

March 21, 2011, 1330: Meanwhile, the FCC has approved the CenturyLink-Qwest merger, due to close April 1, 2011. CenturyLink shares are down 1.4 percent on a huge "up" day for the market. Paying more than 7 percent dividend, this might be a company to watch by investors interested in dividends.

Stockyard Creek Updated

I just did an extensive update of Stockyard Creek.

Again, this is the reason I originally became interested in the Stockyard Creek field:

But this is what got me excited about the Stockyard Creek, and again, I have to thank a reader for sending me this information: at the link noted above, the writer noted that Gene 1-22H, #18009,  a Zavanna well in this field, section 22, has been completed  and is flowing at 2,936 boepd. A second well on the confidential list, #18015, is also a Zavanna well, Grasser 1-26H, sited on the same pad as the Gene well but will be drilling NW to SE.  These two wells are on a pad exactly one mile south of the highway about midway through the field.

That was posted almost exactly one year ago.

This is a small field, only 33 sections, located east of Williston, North Dakota. For being so small, it certainly has a lot of activity and a lot of interest.

I have updated the field for a couple of reasons.

• Now that we have three years of production in the North Dakota Bakken in this boom, we can start comparing IPs and long-term production among companies and fields
• We can look at a reason why the folks are willing to pay so much for "Bakken" acreage

When you go to the link (Stockyard Creek), compare the IPs of the various wells and then compare those IPs with this well:

• 19406, 3,761, BEXP, Knoshaug 14-11 1H, Wildcat, Bakken, produced 12K in first five days of production

This BEXP well appears to be another monster well for BEXP based on IP. It is located less than two miles directly west of Stockyard Creek. BEXP has asked the NDIC for temporary spacing for this well in the March 24, 2011, hearing dockets, case 14259. Compare the BEXP Knoshaug with any of the great wells in the Stockyard and they still don't compare (based on IPs) and yet the BEXP well is less than two miles directly west of the Stockyard Creek.

The second reason this update was interesting is this. Take a look at another well in the Stockyard Creek:

• 17446, 49, short lateral, Zavanna, Leonard 1-23H; spudded 9/08; tested Bakken, 12/08; 76K as of 11; this originally was a Madison well (now EXP)

The Leonard 1-23H tested both the Madison and the Bakken, if I understand the NDIC report correctly.  Its IP was only 49 and yet, it looks like this well will eventually pay for itself. There was no production from the Madison. All the production has come from the Bakken. I can't tell from the report but it appears to be a single stage frac. The frac took less than 3 hours to complete. Perhaps more on this later.

Although there was no production from the Madison (this time), I believe this is another reason folks are willing to pay so much for "Bakken" acreage. There are "no" dry Bakken wells, and once they have production from the Bakken, they hold the acreage as long as there is production 25 - 30 years, and can go back to other formations at any time. The Madison is generally a pretty reliable formation. I'm not sure if there might be more to the story.

BEXP Has Another Gusher; A Wildcat East of Williston; Near Stockyard Creek -- Bakken, North Dakota, USA

The Bakken never fails to surprise me and I think that's why I like blogging about it. I liked looking for Easter eggs growing up; and, I like doing Sudoku puzzles, so maybe it all connects. Tracking the Bakken is a lot like both (looking for Easter eggs and filling in Sudoku puzzles).

Now that the Bakken inside the state of North Dakota has a three-year history, it is easier to compare wells among the various fields and among the various producers. Early on there in the North Dakota Bakken there was a discussion on the relevancy of IPs, but it seems that, although the jury is still out on the verdict, the evidence is pointing to an answer.

There is an interesting story being told just east of Williston in the Stockyard field. This is an extremely small field (only one township) but it is an extremely active area. I first wrote about it almost one year ago:

But this is what got me excited about the Stockyard Creek, and again, I have to thank a reader for sending me this information: at the link noted above, the writer noted that Gene 1-22H, #18009,  a Zavanna well in this field, section 22, has been completed and is flowing at 2,936 boepd. A second well on the confidential list, #18015, is also a Zavanna well, Grasser 1-26H, sited on the same pad as the Gene well but will be drilling NW to SE.  These two wells are on a pad exactly one mile south of the highway about midway through the field.

At the time, I noted that the field was 41 sections, all of one township except for section 36 and an additional 6 sections in an adjoining township on the northwest. Either I was mistaken at that time, or the field has been changed: according to the GIS map server, Stockyard Creek has now "lost" those "additional 6 sections" -- now part of the Epping field -- and has all of the township except sections 25, 31, and 36, for a total of 33 sections.

Just two miles to the west of this field, BEXP has a new well, and in hearing dockets for March 24, 2011, BEXP is requesting temporary spacing for that well (case 14359):

• 19406, 3,761, BEXP, Knoshaug 14-11 1H, wildcat, spudded 9/10; tested 1/11 (four months between spudding and testing; again, weather and a fracking backlog; no work was being done in January)

This looks like another huge well for BEXP.  Apparently it produced more than 12,000 barrels in five days in January. At $75/barrel, that's almost $1 million in those five days.

As noted above, Zavanna has a nice well in the Grasser 1-26H, and, in general, it appears Stockyard Creek is going to have some nice wells, but again, BEXP comes through with a monster well (or at least it seems right now).


The Stockyard Creek needs to be updated which I will do later.