Theme for this conference call:
- BEXP was an early mover and has some of the best Bakken and Three Forks acreage
- BEXP's growth is occurring through acreage acquisitions
- Focused on Three Forks in Rough Rider prospect
- Savings and efficiencies from Smart Pads, zipper fracks, and infrastructure buildout
- Moving to 5.5 wells/formation/spacing unit; as many as 10 wells in one spacing unit
- 11 to 18 years of drilling inventory (2011 + 11 --> 2022; 2011+ 18 --> 2029; agrees with academics who suggests drilling to continue through 2030 in the Bakken
Perhaps the most interesting quote: ""... so we try not to focus too much on the IPs. I know we've been trying to get everybody to focus away from it and look at more the longer term production." -- coming from the company that was probably most responsible for driving higher IPs.
Highlights of the BEXP 2Q11 earnings conference call (some numbers rounded)
General:
- Bakken and Three Forks is the top resource play in North America
- BEXP: is an early mover; right in the middle of the best areas of the play
- BEXP "setting up for a remarkable second half of 2011"
- Headed for another very big year for reserve additions
- BEXP has grown their inventory faster than they've drilled it
- Growth is occurring through acreage acquisitions and step-out drilling successes in Montana
- A lot of effort focused on their Rough Rider prospect; 44 non-BEXP rigs drilling around the edges of BEXP's Rough Rider prospect; BEXP thinks they got some of the best acreage in this area due to early mover status
- It was a little hard to make out this part of the conference call, but in the Q&A portion, it sounded like BEXP is "way ahead" of any concern about losing leases because they can't get to all their leases. This has been a concern from the peanut gallery on other discussion boards.
Preparing for next winter and next spring
- SmartPad, zipper fracs and infrastructure build-out made huge difference past winter/spring
- Two fully dedicated frac crews
Success
- 79 consecutive Bakken wells with an average IP of 2,800 boe
- Tip of the ice berg
- 1,400 to 2,200 gross wells yet to be drilled
Cost savings
- Smart Pads: 10% to 20% cost savings per well
- A well with a 600,00 EUR: $9 million net present value; 50% rate of return; payout < 2 years; wells will produce over 25 years
- Some of these cost savings will offset recent decrease in price of oil
Three Forks/Rough Rider
- Looks like it will be de-risked; if so, an additional 500 incremental net drilling locations
Well Density
- Will compare pilot program of 5.5 Bakken wells with current 4.5 Bakken wells/unit
- Brad Olson wells continue to support "theory" that 4-well spacing does not materially affect wells in the Bakken
- Slide 31 suggests 10 wells on each 1280-acre unit: 5 Bakken wells, and 5 TF wells; because of overlap at the edges, it averages out to 5.5 wells per spacing unit
Technological Innovations
- Smart Pads: 112 spacing units, representing more than 896 gross wells
- Swell packers
- Still some sorting out to do with regard to frac technology; Baker and Halliburton cannot do 30 stages with the new technology
By the way, for those folks who think BEXP might be getting ahead of itself with ten wells on a spacing unit, these are cases before the NDIC for the August, 2011, docket:
15603, Dakota-3: Eagle Nest-Bakken, 8 wells on a 1280-acre spacing unit, Dunn County
15604, Dakota-3: Reunion Bay-Bakken, 7 wells each on 2 1280-acre units, Mountrail County
15605, Dakota-3: Van Hook-Bakken, 7 wells each on 2 1280-acre units, Mountrail County
15606, Slawson: Saxon-Bakken, 2 wells on a 1280-acre unit, Dunn County
15607, Slawson: Cabernet-Bakken, 6 wells on a 640-acre unit, Dunn County
15608, Slawson: Four Bears-Bakken, 7 wells on a 1280-acre unit, McKenzie, Mountrail Counties
15609, Slawson: Ross-Bakken, 3 wells on a 1280-acre unit, Mountrail County
15610, Slawson: Alger-Bakken, 6 wells on a 640-acre unit; Mountrail County
Times are a'changin'.