The Million Dollar Way (The Bakken Oil Blog): 10/17/11

Monday, October 17, 2011

Statoil's Presentation With Regard to BEXP

Link here.

Statoil provides a nice presentation at the link above.

This from Rigzone.com:

"A bigger enterprise with a larger balance sheet will be better positioned to take advantage of our large and growing inventory of Williston Basin drilling locations and the associated assets. We are excited to see this transaction completed and look forward to having our assets and employees integrate with the Statoil organization and the substantial asset position that they are growing in their U. S. onshore business," said Bud Brigham, Brigham Exploration's Chairman, President and CEO.

That speaks volumes.

BEXP fracked the Lucy Hanson with 36 stages using 2.7 million pounds of ceramic proppants. That speaks volumes.

Steve Zachritz on the sale, click here, SeekingAlpha.com.

Ten (10) New Permits -- 6/12 of New Wells Completed -- The Bakken, North Dakota, USA

Link here.

It was a little strange today with regard to the daily activity report; none of the reporting wells were listed as coming off the "confidential list," but twelve were listed as being released from "tight hole status."

Be that as it may, six of these 12 wells did not have an IP. In addition to these 12 wells, there were an additional three wells reported as previously producing and now completed.

Some notable wells:

18517, 1,595, KOG, Two Shields Butte 2-24-12-2H, Dunn
18981, 2,952, BEXP, Holm 9-4 1H, Mountrail
20465, 1,305, Zenergy, Rolfson 20-17H, Bakken, McKenzie
20236, 824, Dakota-3, Dakota-3 Packineau 15-32H, Dunn
19427, 767, Oasis, Montague 5501 13-3H, Williams

Of the ten new permits:

Operators: Hess (5), Petro-Hunt (2) , G3 Operating, True Oil, Ward-Williston

Fields: Ellsworth, Foreman Butte, Clear Creek, Little Deep Creek, and Capa.

Hess has permits for two 2-well pads.

Hess has a wildcat in Williams County; G3 has a wildcat in McKenzie; True Oil has a wildcat in McKenzie.

I see a couple of wells had their names changed: The Leiseth 31-19SEH was changed to the more generic Tobacco Garden 31-19SEH as was the sister well "NEH." I have an idea why the name was changed.

Crude Oil Prices

Elsewhere folks are asking about crude oil prices.

I have links to this data at my "Data Links" page above.

It should be noted that SemCrude prices and Murphy prices can be significantly different.

For newbies: "Light, sweet oil is the preferred oil."

The lighter the oil, the better. Bakken is very light oil.

Sweet oil is preferred over sour oil. Sour oil has higher sulfur content which no one wants for various reasons. Spearfish formation oil, I believe, is sour (I could be wrong, and if I am, I will be corrected). Bakken oil is sweet.

For newbies: Bakken oil is both sweet and light. It would command a higher price but there is glut of oil at the North American storage facilities, particularly at Cushing, Oklahoma. The storage glut (and lack of pipeline capacity) has been worse.

According to Murphy's prices, Bakken is selling between $75 and $80. ND sour is selling between $65 and $70/bbl.

Some time ago, Enbridge in North Dakota said it would carry only Bakken (sweet) oil in its pipes; it would not longer mix sour with sweet. Much of the sour oil, I believe, is being trucked into Canada.

Update Hess Prospects in the Bakken -- The Bakken, North Dakota, USA

Bottom Line

With this update (see below), it looks like Hess is moving into McKenzie County next summer. Hess has some incredibly nice prospects in the south Bakken/TF area. Activity in Little Knife, Murphy Creek, and Russian Creek prospects helps explain the new CBR oil-loading facilites at Zap, Dickinson, and Fryburg.

Original Post
At FAQs, one can link to prospects, net acreage, drilling program for the players in the Bakken. Periodically I update them. Today I updated BEXP following the Statoil announcement.

In the process it looked like a good time up update Hess.

I don't date the updates, but since the last update, it appears that Hess has added some net acreage,or at least it's been clarified. Earlier this year, Hess net acreage was recorded at 750,000 acres, although in a BEXP presentation, Hess was said to have 900,000 net acres. In the most recent corporate presentation, Hess says it has 900,000 net acres in the North Dakota Bakken.

The prospects previously reported:

East Nesson (EN) -- great area; Stanley area
Impact -- northeast of Stanley
Red Sky (RS) -- east of Stanley
Passport -- farther east of Stanley
Stampede -- south of Passport
Avalanche (AV) -- north near Canadian border; north of East Nesson
American Oil and Gas -- Goliath Prospect (GO) -- Ray area; great area
Nesson Anticline (Tioga, Beaver Lodge, Capa, Hawkeye, Antelope, Blue Buttes)

Since the last presentation, the following prospects have been added:

Stony Creek: east of Williston; SSN's area
West Nessen: northeast corner of McKenzie County, just south of the river
Buffalo Wallow: east, central McKenzie County
Little Knife: west, central Dunn County (if I remember correctly, huge CHK presence)
Murphy Creek: south, central Dunn County
Russian Creek: west Stark County, small prospect

Comments:

Stony Creek seems to be a very good play; SSN had a lot of success in this area. Most exciting are the two prospects in McKenzie County. It is clear that the Bakken oil activity is moving to McKenzie County this next year (2012): West Nessen and Buffalo Wallow have had some very, very good wells.

Murphy Creek and Little Knife in Dunn County are also very exciting. I do believe this is where CHK is focused, and, of course, Whiting's "southern ops" are in these areas, along with Stark County. I forget, but either WLL or CHK is also interested in Russian Creek.

In the last presentation, Hess also had these two prospects listed: Newburg in Bottineau (far north; probably Spearfish formation; I don't see that prospect this time). Likewise, I don't see "Fryburg" prospect in the Hess presentation this time, although it could have been replaced by Russian Creek.

Fryburg is in south Billings County, west of Russian Creek in Stark County.

Fryburg was recently in the news; it's outside the national part; it's east of Medora; it is where one of three new CBR oil-loading facilities will be built in this area (Zap, Dickinson, Fryburg).

Job Watch: Lowe's Closes 20 Stores; Lays Off 2,000 Workers

Link here.

Possibly one reason why Menard's is going slow with regard to expansion into Williston Basin. Two things: a) there is no hurry; Lowe's is no longer a threat; and, b) risk of piling on more debt when the next two years for the economy is still in doubt.

Lowe's closing at this late stage in the recession is depressing. Scary.They hung on during the worse housing crisis in US history (well, at least in my short memory) but unable to outlast the Lost Decade (2000 - 2010) and may now face even another Lost Decade. Washington just does not get it. A policy of bashing the oil, natural gas, and coal industries is nothing more than tilting at windmills. Oh, did I say windmills?

The BEXP Deal on a Dollar/Acre Evaluation -- The Bakken, North Dakota, USA

Update

Oil and Gas Journal article on the BEXP / Statoil deal.

Norway’s Statoil ASA reported it will acquire Austin-based independent Brigham Exploration Co. for $4.4 billion in a merger agreement. The deal marks Statoil’s entry into the Bakken and Three Forks unconventional oil plays in the Williston basin in North Dakota and Montana.

Plans call for Statoil to retain Brigham’s headquarters and retention plans for employees are in place.

The Brigham transaction will provide Statoil with more than 375,000 net acres in the Williston basin. Brigham also holds interests in 40,000 net acres in other areas. Brigham’s current equity production is 21,000 boe/d, and the acreage has potential to ramp up to 60,000-100,000 boe/d equity production in 5 years.

Using horizontal drilling and hydraulic fracture stimulations, Brigham has drilled 88 consecutive producing wells in North Dakota having an average early 24 hr peak production rate of 2,800 boe/d. The company currently operates 12 rigs in the Bakken-Three Forks and aims to drill 140 wells/year.

Original Post

Two folks have already beat me to the punch on this, so a quick post for time/date stamp bragging rights, and then more information if anyone requests it.

First person said BEXP deal: $11,733/acre.
Second person said BEXP deal: $12,500/acre.

My calculations show that the better Bakken is conservatively valued at $156,250/acre over the lifetime of the well, and probably much more.

Minneapolis StarTribune: 2nd in A Series of Articles on the Bakken -- The Bakken, North Dakota, USA

Link here.

There's no keeping up with North Dakota's surging economy, but at least they're hiring some of us to do chores.

So much prosperity is flowing from oil wells there that it's spilling into neighboring states, with a growing number of Minnesota companies and workers sharing the lucrative oil field contracts and wages.

Of Minnesota's largest metro areas, Moorhead, sister city to Fargo, had the biggest population gain over the past decade -- 15.2 percent. Wayzata-based Northern Oil and Gas, which was built on North Dakota crude, saw oil revenue jump from $3.5 million two years ago to nearly $60 million in 2010. And there's no shortage of tales of Minnesotans getting steady work and big salaries by heading west.

"You guys are far and away our most common source of workers from out of state," said Michael Ziesch, manager of North Dakota's Labor Market Information Center. However, Ziesch added that many of those workers are daily commuters to the North Dakota border cities of Fargo and Grand Forks.

Just 17 counties in western North Dakota produce oil, but the impact is being felt statewide.

Seventeen counties may produce oil in western North Dakota, but "all" the activity right now is centered in just a few: Dunn, Mountrail, Williams, McKenzie, Stark, Bottineau, Divide, Burke. And, of those, it is the first four that account for the most activity.

Mike Filloon's Continuing Saga on the Spectacular Fields in the Bakken -- The Bakken, North Dakota, USA

Link here.

Another nice summary of recent events in the Bakken, coming just before we start getting earnings reports.

Intriguing Story Coming Out of South Dakota

An intriguing oil story coming out of South Dakota. I know I won't see it in my investing lifetime, possibly my daughters'.

It should be noted that the inland sea extended from the Spearfish in Estavan, Saskatchewan, Canada, all the way down to the Permian in Texas and New Mexico. There is oil in Oklahoma. My hunch is it's just a matter of time before we get that "exciting discovery" in South Dakota.

Having said that, I think the next big story is the Monterey Shale in California. Everyone knows it is there; the infrastructure is there; it is only politics holding it back, but things are a'changin'.

EnCana Expands Compressed Natural Gas Corridor -- New Public Fueling Station in Southwestern Wyoming

Two links: first the original story and then where I follow these stories in general.

Does anyone else find it interesting where a Canadian company is building-out its compressed natural gas corridor? I find it very intriguing. But maybe that's just me.

My hunch is that EnCana knows that the truckers are getting tired of paying top dollar ($4.50/gallon) for diesel and will be among the first to switch to compressed natural gas. Truck drivers are used to being around fuel and are not antsy about fueling with CNG. Just a thought.

Statoil to Buy BEXP -- The Norwegians! -- The Bakken, North Dakota, USA

Update

Mike Filloon on the BEXP-Statoil deal, October 20, 2011 (part II).

Although I [MF] did not mention ExxonMobil's (XOM) possible motivation to add to its Bakken acreage in part 1 of this series, it is very possible that Exxon may want to purchase this acreage. Exxon currently has 450000 net acres in the Williston Basin. This acreage was acquired last year with its XTO Energy merger. Kodiak's acreage may not be a large enough purchase for Exxon to consider purchase, but it has acreage close to Kodiak in multiple prospects.

More on the BEXP deal, October 20, 2011 -- SeekingAlpha.com. Looks like Statoil was interested in the Bakken for the production, as well as the education of working unconventional fields:

Statoil shareholders, on the other hand, have very little to dislike about this deal. Statoil has been working very aggressively in recent years to expand their production base outside of Norway. The acquisition of Brigham Exploration serves to further this goal. Brigham is based in Austin, Texas but has strong positions in the Bakken and Three Forks unconventional oil plays in the Williston Basin in North Dakota and Montana. While Brigham does have other assets, Statoil CEO Helge Lund made it quite clear that the biggest reason for acquiring Brigham is to acquire the Bakken and Three Forks assets, stating,

“The U.S. unconventional plays hold a substantial resource base and represent an increasingly important part of future energy supplies. Statoil has step by step developed industrial capabilities through early entrance into Marcellus and Eagle Ford. Entering the Bakken and Three Forks tight oil plays and taking on operatorship represents a new significant step for Statoil. We are positioning ourselves as a leading player in the fast growing U.S. onshore oil and gas industry, in line with the strategic direction we have set out.”

Original Post
So much for Kinder Morgan buying El Paso Corp as the big story of the morning. Another story that falls in same category: billionaire with $12.6 billion for energy purchase. Link here.

HAL: profits up 27 percent. 94 cents vs 91 cents forecast.

With regard to Statoil and BEXP: link here.

Norwegian energy company, Statoil ASA, on Monday said it has agreed to buy Brigham Exploration Co., a U.S.-based oil producer focused in the Bakken and Three Forks oil plays, for $36.5 per share in cash. The total equity value of the deal is about $4.4 billion, reflecting an enterprise value of approximately $4.7 billion. The deal is expected to close by the end of first quarter of 2012, subject to terms and conditions.

Here's Statoil's presentation.

BEXP: 20,000 bopd; could ramp up to 100,000 bopd in five years.

Quick comments:

1. BEXP was not who I thought would "go" first.

2. I think this tells us the Bakken has got international attention. If anyone still doubted the Bakken, this might change their thinking, although I doubt it.

3. What's the biggest story line? The Bakken companies need deep pockets to keep funding these wells. The BEXP Lucy Hanson well must have broke the bank -- 2.7 million pounds of ceramic to frack. BEXP/CEO said as much:

"A bigger enterprise with a larger balance sheet will be better positioned to take advantage of our large and growing inventory of Williston Basin drilling locations and the associated assets. We are excited to see this transaction completed and look forward to having our assets and employees integrate with the Statoil organization and the substantial asset position that they are growing in their U. S. onshore business," said Bud Brigham, Brigham Exploration's Chairman, President and CEO.

4. The next biggest story line? How important the Bakken is.

5. Next story line? Who's next and for how much? I have my thoughts, but I never guessed BEXP, so I won't opine now. There will be plenty of talking heads talking about this.

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