I would never pay attention to some of these stories if I wasn't blogging.
People talk about the value of a brand name: what Coca-Cola is worth? What is Apple worth? Just the brand name?
What is the value to an oil exploration and production company to say they are in the Bakken? I have no idea, but a headline story in Rigzone.com today: Magnolia Petroleum Plc announced an update on the two Eckelberg wells in the Bakken today, suggests that it means something.
Magnolia is participating with Marathon who is the operator of these two wells.
How much participation does Magnolia have in these two wells? Drum roll....
- Eckelberg 14-23H infill well in Dunn County, North Dakota (0.53367 percent working interest) in partnership with Marathon Oil Company, located in Sections 14 & 23-146N-93W.
- Eckelberg 14-23TFH infill well in Dunn County, North Dakota (0.53367 percent working interest) in partnership with Marathon Oil Company drilling to the Three Forks Sanish Formation using the same pad as the above well.
Ok, so that's the value of the "Bakken" name.
But we get a bit more from that article. We learn what a Bakken well costs these days.
- The first well is drilling to the Middle Bakken Sandstone interval and is expected to be completed with a 30 stage frac at a cost to Magnolia of approximately US $43,232.
- The second well is expected to be completed with a 30 stage frac at a cost to Magnolia of approximately US $44,933.
My third grade granddaughter is learning how to use "estimation" in math; the Bakken is providing a great opportunity to show how rounding makes things easier to follow.
Samson, from Australia, has done well lately, but I have followed them for humor. They send out press releases for no good reason, such as, well xyz is preparing to run casing, we have a 3% interest.
ReplyDeleteBeware of investments in companies that announce nothing as if it is something. Especially if they think it is something.
The PR newswire, for a price, will send out stuff. It will fill holes in blogs and papers. But, it is not news. It is puffery.
anon 1
You are 1000% correct. I would have fallen over laughing when I read the Magnolia story above, but I was too exhausted from all the other news today.
ReplyDeleteA possible exception to the rule: a year or so ago I got a phone call -- yes, a phone call from some investment firm on the East Coast, asking about GMXR which had a press release saying they were going to enter the Bakken.
At the time I had never heard of GMXR. After a little research I learned two things: a) GMXR was primarily a natural gas company (at the time); and, b) its entry into the Bakken was very, very small. That's what I told the individual who called me.
Well, it turns out that GMXR has become quite active in the Bakken based on permits issued as reported in daily activity reports. I haven't followed their outcomes yet. That's on my list of things to do.
Your math is a little off. If they own .5% of each well, they own .5% of the total. At $90,000 total and .5% ownership, the total cost of EACH well is $9,000,000 - $18,000,000 total.
ReplyDeleteHere's what I wrote:
DeleteRounding, that totals $90,000. Rounding, Magnolia has 1 percent interest in these two wells. A 30-stage Bakken well these days is budgeted for $9,000,000.
Thats not accurate. There are overhead charges that are billed to partners that are not part of the capital budget. The average 1280ac Bakken well costs between $6.5M - $7.5M.
ReplyDeleteThe operative word is "average."
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