Motley Fool Lists Four Key Areas To Watch When Following KOG

Updates

Later, 12:47: the more I look at this, the more I have to agree with the individual who provided the first comment questioning "cemented liners." It sounds like KOG's cemented liners for completion is simply the "old" plug-and-perf method of fracking. And the little I know about it suggests that the swell packers technique is more effective in the Bakken. But that's just my two cents worth, coming from a non-specialist with no formal (or informal) training in the oil and gas industry. 

Later, 12:08 pm: see first comment below. The questions: is anyone other than KOG using cemented liners in the Bakken? Has KOG switched to cemented liners as a matter of course, or are they testing various completion methods? Is cemented liners "old" technology, common technology when fracking Bakken wells? This UND-EERC source would suggest that cemented liners are neither innovative nor preferable to other methods. This is the conclusion of the UND-EERC source:

Since horizontal drilling became standard practice over the past two decades, all of these completion methods have been utilized in the Bakken. However, the uncemented, preperforated liner isolated with swell packers has become the most commonly employed method of completion in most Bakken wells because of its high degree of fracture control and long-term success rate.

Original Post

This is an older article that I did not see while I was traveling, but it's a must read. This Motley Fool article actually has some substance, not always seen at the free-site Fool.

This linked article breaks out four key areas it says must be watched:

• production
• cash balance and credit facility 
• hedge situation
• cost-cutting measures

First, production: The Motley Fool is correct. KOG has some of the best acreage in the Bakken, and based on recent IPs, some of the best wells.

Second, hedge situation: currently, KOG is using swaps and "no premium" collars; in hedging transactions, KOG will either receive cash from, or will have to pay cash to, its counterparties in the transaction.

Third, cash balance and its credit facility situation: good, bad, or indifferent regarding its financial situation, KOG provides a glimpse of the potential and the risk of drilling in the Bakken. In 2009, KOG's CAPEX was $27 million. Two years later, in 2011, its CAPEX was $260 million, and for 2012, the company estimates it will spend $650 million to meet production goals. Wow. KOG now has a $750 million revolving line of credit.

Finally, cost-cutting measures. Drilling times, completion techniques, reduction in time to complete wells, lease operating expense. Several data points:

• according to the article, KOG has cut drilling time to five days, representing a 3-day reduction
• using cemented liners for completing a well (more on that later)
• using "zipper fracs" to decrease time to complete a well; completed two well pads in 8 to 10 days by using "zipper fracs," which are made possible by microseismic fracture mapping
• bringing lease operating expenses down to $5 range per barrel
• cost-cutting measures most helpful in areas (of Williams County) where wells are not as good; KOG expects an internal rate of return fo 20%, assuming well costs of $7 million to $7.5 million EURs of 300,000 bbls

KOG's completed wells cost between $10 million and $10.5 million but hopes to reduce costs by another 5- to 10% in 2013.

Now, about those cemented liners:

In terms of completion, the company is making solid progress by using innovative techniques, such as cemented liners. This is a completion technique that involves cementing the liner throughout the horizontal wellbore, which has the benefits of greater wellbore stability, greater control of fracture initiation, as well as improved well serviceability. [See first comment and update.]