KOG's 3Q12 Operations Update -- Company Guides Lower End of Production for 2012 (Daily Basis)

Link to press release here.

For the third quarter 2012, Kodiak reported average sales volumes of 15,855 barrels of oil equivalent per day (BOE/d).  This represents a 301% increase over sales volumes of 3,953 BOE/d for the third quarter 2011 and a 25% increase over second quarter 2012 sales volumes of 12,696 BOE/d.  Crude oil accounted for 88% of third quarter 2012 sales volumes.

Data points:

• eight drilling-rig program now; but seven rigs during the winter
• two non-operated rigs
• operated rigs will be moved to multi-well pads located primarily in Polar and Smokey project areas by the end of 2012
• drilling efficiencies: 11 wells per year vs 10 wells per year, per rig; more wells with fewer rigs
• two full-time (24/7) frack teams; to remain active through end of 2012
• each frack crew completes two wells every 8 - 10 days
• pipelines are being installed ahead of completion efforts
• projected exit rate for 2012: 27,000 boepd

And then this direct quote from the press release, KOG appears to be guiding lower end of production for this calendar year (2012):

Kodiak now believes its average daily production will be in the range of 15,500 boe/d to 17,500 boe/d for the full-year 2012.  The new range compares to previous disclosure of 17,000 boe/d to 21,000 boe/d average production for 2012.

If I'm reading that correctly, that's a significant change -- the low end vs the high end (15,500 vs 21,000; the delta is about 25 decrease) -- again, if I'm reading that correctly.

Two other data points from the press release:

"Our team is diligently working on well bore down-spacing potential, as well as testing additional Three Forks Formation intervals.  Work has begun to obtain the necessary approvals to commence drilling a multi-well pilot program within a 1,280 acre spacing unit in each of the Polar and Smokey project areas.  The pad design contemplates additional down-spacing of wells drilled in the Middle Bakken Formation and testing of multiple zones in the Three Forks Formation.

"We are particularly pleased about the recently completed third well in our Wildrose block in Northern Williams County. The initial 24-hour average production rate of 1,007 BOE/d represents a significant improvement from the earlier two wells.  The improved performance is attributed to ongoing advancements in our completion techniques.    Since the wells are much shallower than wells drilled in the core of our acreage, and are not in the same pressure regime, we believe we can lower our completed wells costs in this area to $7.5 million per well.