Kodiak Oil & Gas reported that the co assumed its sixth operated rig; All of KOG's operated drilling rigs are presently drilling ahead on wells in North Dakota: All of co's operated drilling rigs are presently drilling ahead on wells in North Dakota, with one rig in Dunn County, two rigs in southern Williams County and three rigs in McKenzie County.
Furthermore, the co has an approximate 50% working interest in lands being drilled by two non-operated drilling rigs as part of its Dunn County Area of Mutual Interest.
Co has entered into a contract for a seventh operated rig, a new build rig, which is scheduled for second quarter 2012 delivery. As the year progresses, Kodiak plans to operate one to three rigs in Dunn County, two to three rigs in McKenzie County and three to four rigs in Williams County.
The 2012 to 2013 drilling program is designed so that Kodiak is positioned to have nearly all of its acreage held by production by mid-2013, eliminating leasehold expiry across much of its 155,000 net acre position in the Williston Basin.
Tuesday, February 7, 2012
KOG Reports Sixth Rig in North Dakota -- To Eliminate Lease Expiring Issues
No link; this is from Yahoo!InPlay which is dynamic and will be gone by tomorrow. This is the totality of the announcement, a press release from the company:
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I believe these operators will be following the actions of KOG as the clock continues to run on these leases. For example, Marathon has several permits around the border area in Williams County and numerous acres in MT which are all nearing expiration dates. We will probably see some trading among operators occur before this year is over.
ReplyDeleteI think you're right. There's gonna be a lot of acreage changing hands.
DeleteI concur
ReplyDeleteKog's stated plans and intentions avoid the need to top lease make perfect sense. However, execution will be anything but easy. In reviewing kog's investor presentations, kog will need to complete over 200 wells in 18 months. Cog doubled it's 2012 capex o er 2011 thereby significantly increasing the pace of it's effort. Time will tell but drilling their leases before exp will not be easy and not clear to me who operators are that have capacity/desire to take over leases that are about to expire.
ReplyDeleteThat's why I am so glad I started this blog, to keep track of what is going on. I agree. It will be interesting to see if these folks can do it. Again, my hunch is they will come close. I believe the law says leases held by production, but something tells me putting in a pad will be enough to hold the lease. We may see some discussion threads on this topic later.
DeletePS
ReplyDeleteWith rig utilization at 95%, not entirely clear to me what happens when operators increase their capex budgets as kog did to the tune of 100%. In particular if the increases are in the same time frame 2012-2013.
Drilling is getting more expensive, so even if no more wells were drilled, CAPEX would have have increase just to keep the same pace of drilling.
DeleteIn KOG's case, they will have two additional rigs, requiring additional capital just for those two rigs.
In addition, as WLL mentioned in their February presentation, they have set aside $136 million for purchasing more acreage; acreage has gotten more expensive, and thus CAPEX increases there, also.
Bottom line: even with no increase in drilling CAPEX will go up in the Bakken just to maintain the pace. But, in fact, many will increase their drilling by bringing in additional rigs (begs the question regarding manpower) although WLL addressed that issue also with regard to how fast they are drilling their wells (17 days in the Sanish; 23 days in the southwest part of the state).
It is the lease agreement (a contract between mineral owner and oil co) that describes the conditions under which the secondary term (production) starts and ends. During the secondary term, thea land is described informally (not legally) as "held by production". In other words, what will e at issue is the lease wording more than any law specific to mineral leasing.
ReplyDeleteMost leases allow oil co to extend the primary term if operations are "continuing". You are correct, some oil cos will test the limits of the lease language and not top lease when leases start expiring to avoid releasing or top leasing. Expect some interesting court action as more (money) is on the line on this issue than ever before although many cases have come up over the years.
Very, very helpful. Thank you. I get it now, or at least I feel I have a better understanding. I had not seen the terms "primary term" and "secondary term" and that makes sense. Thank you; helps a lot.
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