Bakken Companies Generating An Enormous Amount Of Cash Flow

Ya gotta love this. "V" as a frequent nay-sayer contributor over at Carpe Diem and Rune Likvern over at The Oil Drum might want to read this article over at Motley Fool. Bakken doubters consistently tell us Bakken wells are too expensive for drilling to continue.

Motley Fool lists five energy companies that are "generating enormous operating cash growth." Four of those five companies were Bakken companies: Magnum Hunter Resources, Oasis, Kodiak, and Heckmann.

A few weeks ago, I opined that it is my expectation that Bakken-centric companies are going to concentrate on their financial statements this year, preparing for a huge M&A year in 2014. Generating "an enormous operating cash stream" certainly fits.

KOG's CAPEX is $775 million, enough for 75 net wells. With the cost of wells coming down, KOG might be able to sneak in a few more wells. But think of this: with ten-well pads, KOG has a CAPEX that could support seven pads. I don't know about you, but seven 10-well pads is a lot of drilling. The Bakken oil patch, geographically, is simply not that big. I think it would be quite impressive to drive by seven 10-well pads in one day.

As long as I'm rambling, another thought.

KOG has about 8 rigs.

Eight rigs, eight 10-well pads: 80 wells. One rig/pad. And then you start looking at the cost savings operating eight pads vs 80 separate well pads.

Having most of their acreage held by production allows Bakken-centric companies to drill where it makes most sense without drilling simply to save a lease. And not having to negotiate new leases does two things: a) saves money; and, b) makes it easier to budget.