KOG: Highlights Re-Posted

With all the information that comes out of the Bakken on a given day, it is easy to lose sight of some of the more interesting announcements/information. In today's KOG press release, it was too easy to focus on the nice IPs and miss the other announcements. So, re-posting six items here:

• First: KOG will double the number of rigs it has; from two to four
• Second: KOG will have a dedicated frac team for 14 days/month
• Third: KOG is putting four horizontals in one section (two TF and two MB)
• Fourth: upped its cash to $75 million from its revolving credit facility
• Fifth: results of two recent wells support theory that MB and TF do not communicate
• Sixth: 4-well pads

Comparison of OAS and KOG

Net acreage in the North Dakota Bakken

• OAS: 303,000 net acres
• KOG: 70,000 net acres

Market cap

• OAS: $2.75 billion
• KOG: $1.24 billion

Number of rigs

• OAS: five
• KOG: four by the end of the year; currently 2; a third next month (May, 2011)

Comments:
It is obvious that KOG is increasing the pace of its drilling (increasing its cash and increasing the number of rigs significantly). OAS has 300,000 acres and 5 active rigs; KOG will have 4 active rigs for one-fourth the acres (70,000). KOG might have "better" acreage, but with a market cap of $2.75 billion for 300,000 acres (OAS) and a market cap of $1.24 billion for 70,000 acres (KOG), OAS is either under-valued or KOG is over-valued, based on net acreage only, comparatively speaking. They could both be over-valued or both under-valued, also.  [On acreage alone, investors are valuing KOG at $18,000/acre; and, OAS at $9,000/acre.]

Fracking remains the bottleneck in the Bakken, but it appears that KOG is addressing this by negotiating for a dedicated frack team for 14 days/month.

By putting four wells on one pad and simul-fracking, a dedicated frack crew for half a month may be adequate. The delay is no longer due to fracking, but due to waiting for the fourth well to reach total depth before fracking all four wells. 

For investors, this is either concerning or exciting: valuation of the companies based on net acreage alone (OAS, $9,000/acre; and, KOG, $18,000/acre). KOG's acreage is more contiguous; KOG's acreage is closer to the core Bakken; KOG's infrastructure may be more robust (a pipeline in place); KOG has an interesting "partner," in XOM. In addition, KOG, with its 4-well pads, is now putting in four horizontals in some sections.

Wow! Good Economic News!

IBM earnings up ten percent.

Intel's earning leap on business demands for computers.

Apple's Net Income Up 95% Year-Over-Year!

Yahoo's 1Q11 earnings beat forecasts.

CSX earnings jump 30 percent.

American Express Profits Surge 33 Percent in First Quarter

Johnson and Johnson reports strong earnings.

Qualcomm Profits Up 29% -- Chips in SmartPhones (including iPhones)

Yum Brands Profits up 10 Percent; China's Segment Soars

New home construction up 7 percent in March.

Unemployment falls in two-thirds of states.

And the best news of all?

Except for HAL, I have yet to see earnings reports of the oil and oil service companies. And HAL had blowout/record earnings. Not just "record" earnings, but soaring earnings.

SeekingAlpha: Seven More Oil Company Shares That Are Undervalued

Link here. The list includes several companies in the Bakken, including OAS, NOG, and ENP.

Global Warming Resulting In Record Snowpacks -- More Than Enough Water Is Going To Flow Into Missouri River for Fracking

Link here (regional links break often and break early).

Snowpack in Wyoming’s mountains stood at 129 percent of the historical average for this point in the year. All basins were sitting above average, ranging from a high of 159 percent in the Upper Bear River Basin of southwest Wyoming to 103 in the Belle Fourche Basin of northeast Wyoming.

In the Upper North Platte Basin, the snowpack was 150 percent of average. The NWS projects a high potential for headwater spring snowmelt flooding there, with the snowpack trends at or surpassing the record years of 1982, 1986 and 1997.

In the western Big Horn Mountains, the snow-water equivalent sits at 120 to 140 percent of average.

That is at or beyond the record water years of 1986, 1997 and 1999.

More than enough water is going to flow into the Missouri River for fracking.  US Army Corps of Engineers now charges a "storage fee" for storing water behind the dam -- don't even get me started. 

Getting Closer: South Heart Coal Beneficiation REVISED Application Has Less Than 400 Deficiencies

Link here. Regional links break often and break early.

Fortunately these are just minor deficiencies, like failure to cite uranium levels in the ore.

Local groups are concerned about a coal company’s 376 deficiencies, while the company and North Dakota Public Service Commission representatives attribute minor technical errors to the shortcomings.

Deficiencies range from typos and incorrect web links to questions about groundwater and the presence of uranium.

All updates to the South Heart project are posted here.

Blowin' In the Wind -- Promises To Streamline the Permitting Process

CapeWind updates are at this post.

Cape Wind finally gets Federal permit -- it took ten (10) years. And there are still obstacles, least of which is financing.

President Obama says he will look into streamlining the permitting process.

Five (5) New Permits -- Bakken, North Dakota, USA

Operators: Zenergy (2), Behm, Pride, and XTO.

Fields: Elidah, Painted Woods, Mondak, and a wildcat.

The Behm wildcat will be in Ward County -- that is home of Minot, and quite a ways east. Perhaps more to follow. The wildcat is seven (7) miles northwest of the small town of Berthold, just west of Minot, North Dakota. It may be the farthest east permit in the current boom; having said that, it is only ten (10) miles from the prolific Parshall field and ten miles from the Ross oil field. But in general, wells on the eastern side of the Parshall oil field have not been all that great.

Several wells were completed and reported, including:

• 19426, 1,207, EOG, Mandaree 9-0H, McKenzie County
• 19491, 1,327, Whiting, Ness 42-31H, Mountrail
• 19543, 983, Whiting, Scott Meiers 12-17TFH, Mountrail
• 19599, 1,308, Whiting, Arndt 14-5XH, Mountrail
• 19760, 853, Whiting, Deal 43-28TFH, Mountrail
• 19820, 843, Whiting, Dietz 21-17TFH, Stark County

I have said a number of times over the past three to six months that Whiting is really beginning to impress me. It may have the best business model of any of the operators working in the Bakken right now.

In addition, coming off the confidential list:

• 19437, 2,804, Burlington  Resources, Inga 24-12A, McKenzie

I have to look this up, but I think this is the second great well Burlington Resources has reported in the last couple of weeks. I could be wrong.

Yup, I just checked. BR reported out another good well April 4, 2011:

• 18675, 1,806, BR, Franklin 24-36H, Little Knife, Bakken, spudded 10/10; tested 1/11

Unemployment Falls in Two-Thirds of All States: Exception -- California

Link here.

The unemployment rate fell in two-thirds of the nation's states last month, the latest evidence that the strengthening economy is encouraging many employers to boost hiring.

The Labor Department said Tuesday that the unemployment rate dropped in 34 states in March. That's the largest number of states to record a decline since June. The rate rose in seven states.

Texas added 37,200 net jobs in March, the most of any state. It was followed by Missouri and Florida, both of which reported strong gains. California lost 11,600 net jobs -- the most of any state. Connecticut, Louisiana, Maryland and Maine all had large job losses, too.

California lost 11,600 net jobs -- the most of any state. And that was before the state decided to dramatically increase utility rates between now and 2020. Companies who use lots of electricity -- like technology firms, server farms, etc., -- will have to make a decision to pay higher rates to stay in California or move elsewhere. This is not rocket science.

HAL: Surprisingly Good -- and Driven by the Bakken

I particularly like the HAL posting of a day or so ago.

Now with this Investopedia article, I really enjoy that posting.

HAL earnings conference call transcript linked here. 

Remember, all conference calls for 1Q11 are linked here, as well as the 2010 annual reports.

Ireland: Offshore Oil Rush?

Ireland is one of the PIIGS.

Maybe oil will help Ireland get out of their financial mess. If so, maybe some lessons in there for the US.

KOG Links and News -- Negotiating for Fourth Rig -- Dedicated Fracking Crew -- Bakken, North Dakota, USA

Updates

May 27, 2021: KOG is long gone.

August 13, 2011: I updated the status of some wells below.

Original Post

InPlay: I think this link will break over time. Here are the high points:

• KOG negotiating to contract a fourth rig for delivery in 4Q11 (KOG has 2 rigs, currently)
• KOG executed a two-year agreement for dedicated frack crew 14 days/month
• KOG's area of mutual interest with XOM reiterated
• KOG records IP rate of 3,042: #19651, Koala 9-5-6-12H3, 22 stages, first well on the pad
• t4/11; cum 395K 3/21; needs to be re-fracked;
  
• KOG increased its borrowing from borrowing base from $50 million to $75 million; KOG has $200 million under this revolving line of credit facility

KOG's press release: interim operational update (if the link is broken, I am sure you can find it at KOG's website)

KOG's earnings results are scheduled for May 5, 2011.

Operations, Wildcats -- 2-well pad

• 19301, 2,526, Whiting/Koala 9-5-6-5H (KOG-operated, 95% working interest), middle Bakken, short lateral, 24 stages,  t4/11; cum 282K 5/17; cum 335K 3/21;
  
• 19651, 1,919, Whiting/Koala 9-5-6-12H3 (KOG-operated, 95% working interest), Three Forks, short lateral, 22 stages, t4/11; cum 317K 5/17; cum 395K 3/21;
• These two wells were "part of an on-going effort to evaluate communication between MB and TF formations"

Operations, Established Field, Mandaree oil field -- two 4-well pads

• 18517, 1,595, Whiting/KOG, Two Shields Butte 2-24-12-2H, t9/11; cum 468K 5/17; cum 593K 3/21;
  
• 19825, 2,698, Whiting/KOG, Skunk Creek 2-24-25-15H, t9/11; cum 475K 5/17; cum 564K 3/21;
• 19826, 2,845L, Whiting/KOG, Two Shields Butte 2-24-12-1H3, t9/11; cum 431K 5/17; cum 528K 3/21;
  
• 19827, 515, Whiting/KOG, Skunk Creek 2-24-25-16H, t10/11; cum 273K 5/17; cum 349K 3/21;
  

In same section, farther west, an Orion belt:

• 18518, 2,736, Whiting/KOG, Two Shields Butte 3-24-12-4H, t4/14; cum 322K 5/17; cum 484 K 3/21;
  
• 20257, 2,475, Whiting/KOG, Two Shields Butte 3-24-12-3H, t4/14; cum 272K 5/17; cum 403K 3/21;
  
• 20258, 2,399, Whiting/KOG, Skunk Creek 3-24-25-13H, t4/14; cum 262K 5/17; cum 367K 3/21;
  
• 20259, 1,579, Whiting/KOG, Skunk Creek 3-24-25-14H, t4/14; cum 139K 5/17; cum 233K 3/21;
  

New Yorker Article on the Bakken

"Anonymous" send me a link to an article in The New Yorker Magazine, "Kuwait on the Prairie."

I have not yet seen the article, but will access it later.

Again, a big "thank you" to "anonymous" for sending me the link.

This is the abstract of the article, from a press release:

In the April 25, 2011, issue of The New Yorker, in “Kuwait on the Prairie” (p. 42), Eric Konigsberg examines the Williston Basin, which holds the largest accumulation of oil identified in North America since 1968. North Dakota’s head of mineral resources, Lynn Helms, recently estimated that the region could contain some eleven billion barrels of oil that could be obtained using current technology, nearly enough to supply the United States for two years.

Pete Stark, a geologist at the energy-consulting firm IHS, recently forecast that the output of the basin would double in the next five years. A hundred and fifty companies are now competing to extract oil from the area, which has a history of defeating oil prospectors. Konigsberg writes that “the amount that will eventually be recoverable is the subject of intense speculation.” Helms tells him that the Williston Basin “is still relatively underexplored and poorly understood in terms of its geology. It’s a subterranean detective story.”

A hundred and thirteen million barrels of crude oil were produced in North Dakota last year—a well-timed increase, as President Obama just announced the goal of reducing by one-third America’s reliance on foreign oil by 2025.

The oil in the Williston Basin has been unlocked with new technologies, including the controversial technique of hydraulic fracturing, or fracking. Bud Brigham, the founder of Brigham Exploration, one of the most successful oil companies in North Dakota, tells Konigsberg that plays for oil throughout the rest of the country are being slowed down by concerns that fracking accidents have contaminated drinking water. “There are some legitimate risks to simply getting frack chemicals to the well,” Helms tells Konigsberg. But, he says, because the fracturing takes place one and three-quarters of a mile below the aquifers, the risk of underground contamination is “as close to scientifically impossible as anything can be said to be.”

The oil boom has revitalized North Dakota’s economy; the state has the lowest unemployment rate in the country, 3.7 per cent, and many residents of struggling agricultural communities have made a fortune selling mineral rights. One local man describes the influx of cash as a “changing of the weather.” Before the boom, he says, “the two families that had all the money were always the banker and the telephone-company operator.”