I plan on posting this twice.
I will post it now; it won't be quite ready for prime time, but I want to get it out there for a number of reasons.
The question is this: what did XOM pay for a DNR Bakken acre?
A reader who follows the North Dakota oil industry very, very closely comes up with these figures regarding the XOM-DNR deal.
1. He estimates that DNR should be able to clear $15/bbl from oil recovered in the Texas and Wyoming fields (Webster field and Hertzog field). This takes into account the cost of drilling, completing, EOR, pipelines, transportation, etc.
2. Webster field has 60 - 75 million bbls of recoverable oil.
3. Hertzog field has 20 - 30 million bbls of recoverable oil.
4. For argument's sake, let's say a nice round 100 million bbls of recoverable oil.
5. At $15/bbl, $1.5 billion.
6. $1.5 billion in oil from the EOR fields and $1.6 billion in cash --> $3.1 billion
7. $3 billion / 196,000 acres --> $15,000/acre.
Bottom line: using assumptions in lines 1 - 3, one can come up with a figure of about $15,000/Bakken acre that XOM paid for DNR Bakken acreage.
So, we will see what the analysts come up with. In addition, it will be interesting to see what readers come up with.
The $15,000/Bakken acre seems about right.
Before the QEP-Helis deal, the record amount paid for a Bakken acre was $12,000 in a state lease auction (by my reckoning, it was a record in the public domain; there may have been other deals that I missed that were more, and I don't know about private deals).
DNR has some great acreage in the Williston Basin, including much in the heart of the Bakken, but also some acreage that probably will not amount to much.
Anyway, I'm curious if readers have an estimate on what XOM might have paid for these DNR Bakken acres.
If we take the good,bad,and ugly acreage the $ mark on the good acreage is closer to $25,000 acre. I think that is the new number for good acreage.
ReplyDeleteThat's why I think the $15,000/acre is a good number for the entire deal as an average. DNR has a lot of acreage outside the better Bakken.
DeleteI agree with you. The QEP-Helis deal showed us that the best Bakken can command a $25,000/acre price (or better).
But there's still a lot of Williston Basin acreage that is not in a sweet spot.
The question of price was an obvious and important question in which I am equally intrigued by.
ReplyDeleteHaving an iron in this fire, Denbury acreage in Murphy creek, I am also interested if any one will have some comments on Exxon's performance, well finishing techniques, and royalty relations service.
Will they drill under their name or use XTO as there drilling partner?
1. I am curious, too, if they use XOM or XTO.
Delete2. I would be very, very disappointed if XOM has any problem completing (fracking) unconventional shale. They have deep enough pockets to pay for the very best.
3. Having said that, OXY USA has been a disappointment; in addition to their track record of low IPs, someone noted that a OXY USA well has been temporarily abandoned (not yet posted by NDIC) because they failed a second time to complete the well. So, I guess we will see.
4. XTO has had average to good success compared to the other Bakken operators, based on anecdotal evidence (I don't have statistical data to back that up).
5. It will probably be a year before we know.
I am drilling on a rig working for dnr in nd and found this info out while reading a post by you while in the doghouse at the rig. The company hand on the rig did not even know yet at that point. We had been hearing rumors for awhile now but did not think anything would happen so soon. Just wanted to say thanks for all you do on the blog and I think it's great that I could find this out from you first even when I was sitting on a dnr location. Now we are all just wondering what they will be doing with the rigs drilling for dnr in nd now. XTO or XOM? Or will we just get dropped? Only time will tell.
ReplyDeleteI appreciate the kind words.
DeleteI would seriously doubt that XOM would not want to jump in quickly to see what they've got. They certainly don't want to spend upwards of $15,000/acre in the Bakken and then just let it sit. I assume there might be a transition period but my hunch is you will be as busy as ever. They also have to meet shareholders' expectations on a quarterly basis, and although it can't be measured, I would think XOM would want to maintain their reputation -- and they can do that by completing some good wells.
XOM will certainly have deeper pockets than some to keep drilling.
Again, I really appreciate you taking the time to write. Thank you and good luck.
One piece I read today stated this will be an XTO operation. Don't know if that's true, but that was printed. Also the driller shouldn't feel too bad about not knowing in advance of the sale.
ReplyDeleteI'm a mineral owner in a few Denbury fields (ND & MT) so I called today to ask if those properties were included in the sale. Reportedly I was connected to the proper person. Though all I was told is "Sorry, we don't have that information yet. You'll need to call back in 3 or 4 weeks." When asked to speculate, she said presumably if it was in North Dakota it was sold (Bakken & otherwise), and in Montana some acreage, but their MT fields were "probably not" included.
As you can see even some folks down at headquarters in Plano, TX were caught off guard with today's statement. Time will tell what this deal contains. My guess is Exxon/XTO will keep every rig DNR had. Exxon won't have the same budget constraints which Denbury had (trying to balance new pipelines vs drilling costs). As a result the pace of Bakken drilling should quicken.
Thank you. Exactly my thoughts: that XOM has deep pockets and will want to see what they've got, how well they can do, and maximize their investment.
DeleteThank you for that tidbit about XTO being the operator. That only makes sense.
Just as MDU used Fidelity for oil and gas E&P, so it appears XOM will use XTO in the Bakken.
Wow, great note. Thank you.
I hope a year from now the roughneck who wrote in earlier, will write back and say he's busier (and wealthier) than ever.
Enjoyed the late night banter, I should be sleeping. Did a quick read on a well file (XTO) 148 96 township. I know this is just one data point. Twenty four stages, about 50,000 barrels of water, three million units of sand, is that pounds or tons I forget.
ReplyDeleteStrong opening settled into high 4000 barrels with most months on full production. The only tid bit that caught my eye is they are using schedule 120 pipe. They are almost reaching 10,000 psi on their frack at least a thousand to a thousand five hundred psi higher. Overall I think they will be equal to or better thanDNR.
Good news to hear (XOM/XTO to be equal/better than DNR).
DeleteI can't keep track of units either, but in case of proppants, that's pounds: three million to four million POUNDS of sand is about average these days. Twenty-four stages is on the low side but not unusual.
I think we both need to get a life. Smile.