COP: Re-Allocating Gulf of Mexico CAPEX to Best Shale Plays

This is from COP's current corporate presentation. Because Burlington Resources is "buried" in COP, it is difficult to find the net acreage that BR/COP has in the Bakken. It is extensive; BR has been there "forever" and it must have significant legacy holdings.

If you go to slide 16 of COP's Credit Suisse Vertical Tour 2010, you will see that COP is re-allocating its Gulf of Mexico exploration capital to the "best shale plays": Eagle Ford (Texas), North Barnett (Texas), and Bakken (ND).

2010 exploration capital was $1.3 billion.

Sometime ago I opined that companies operating in the gulf would move their attention to the Bakken. 

One other thought: in light of MRO's splitting off refinery operations from E&P, I wonder if COP, XOM, CVX could do the same?

• COP: huge refiner.
• XOM: huge in chemicals from oil.
• CVX: large NG exposure (I don't understand why it bought into the Marcellus last year)

Just saying.

Motley Fools: What a Difference One Well Can Make -- Bakken, North Dakota, USA

I have posted many times on my blog two things about the oil industry in North Dakota:

• Because many of the pure-Bakken-play companies are so small, one well can make a huge difference; and,
• I don't think oilmen really worry about past wells or IPs of previous well; all they want is the cash flow to keep drilling, hoping for that one big well (and when they hit it, they will move on again)

Well, today, I see that the Motley Fools have an article echoing that first point. Interestingly enough, they cite Credo Petroleum in that article, and just yesterday I added CRED to my Bakken market basket. (I added it to the sidebar at the right; it does not mean I purchased shares in CRED.)

Motley talks about the wells that Credo has now reported.

Their final paragraph is interesting:

In short, you can take a lot of the risk out of even the most speculative realms of investing. The less you pay up for potential upside, and the more downside protection you have in the form of cash or other tangible assets that are unlikely to be frittered away, the less speculative the activity becomes.

By the way, just after posting the above, I ran across an interesting slide in a recent Abraxas presentation.

Abraxas has a bar graph comparing the number of net Bakken acres oil companies have vs their enterprise value. I can't reproduce the graph here but here are the numbers (the graph provides much more impact and if any interest at all in investing in the Bakken, you should take a look):

Net Acres in the Bakken/Enterprise Value (EV)

• AEZ: 275 net Bakken acres/$1 million EV
• GEOI: 175 net
• BEXP: 170 net
• KOG: 160 net
• NOG: 150
• CLR: 100
• WLL: 60
• AXAS: 55
• NFX: 48
• SM: 47
• DNR: 46
• EOG: 40
• HES: 39
• MRO: 25
• XTO: 25
• MDU: 23
• STR: 10
• COP: 2

If one is interested in investing in the Bakken, this slide speaks volumes. 

Bottom line: one or two great wells will move the needle on GEOI, BEXP, KOG, NOG, and CLR.  That's probably true for TPLM and CRED, also. With 22 rigs drilling, CLR has the best chance of hitting some great wells. BEXP has a history of breaking IP records. AEZ was bought by Hess, recently, and GEOI moves to the top of this list.

Net North Dakota Bakken Acreage by Producer

Just a reminder.

This link provides a fairly quick look at net mineral acreage various producers have in the North Dakota Bakken.

Minot's Taxable Sales Surge -- Not a New Story -- North Dakota, USA

Link here. These links are generally lost fairly soon in local, regional newspapers.

The city of Minot saw taxable sales grow more than 16 percent in the third quarter of 2010 over that same period the previous year, totaling nearly $270 million.

Williston, as noted earlier, far surpassed these numbers: grew 150 percent; $380 million; dollar figure second only to Fargo statewide.

But how about Tioga, population 1,200?

Tioga: 186 percent increase, to almost $80 million. Tioga's percentage increase was seventh in the state. That's almost $70,000 in taxable sales/Tioga resident.

Ranking of cities in the state for taxable sales, in dollars: Fargo, Williston, Bismarck, Minot,  Gand Forks, Dickinson, and then ... drum roll .. Tioga.

Williams County, home of both Williston and Tioga: $91 million more than Burleigh County, home of the twin cities, Bismarck / Mandan.

California University System Crying Foul on Cutbacks -- Nothing to Do With the Bakken

Full story here.

The headline says that Governor Brown's proposed cuts to the University of California would imperil California's dream that resulted in Hollywood and Silicon Valley. 

You have to read to the end of the article to find out the cuts are minimal:

The $500 million reduction is relatively small compared with the University of California’s overall budget, a spokesman said.

The system’s spending plan for the 2010-2011 academic year is $21.8 billion, including revenue from hospitals and federal contracts, which are restricted and can’t be shifted to make up for state cutbacks, according to budget documents. The core educational budget is $6.28 billion. 

I can't fathom such large numbers, so as I usually do, I change the billion to simply numbers I can adjust to. Let's say as a teenager, my parents gave me $6.28 in allowance every week. Due to loss of income, they tell me my allowance will be cut by 50 cents. Something tells me I could continue, especially if I managed my money differently.  For the entire budget, that includes federal money, my allowance would be almost $22 a week, and I would be asking to give up 50 cents to help the family.

But this is the emotional hyperbole we hear:

"It’s ass-backwards, it’s upside-down, it’s stupid,” said Robert Ackerman, whose firm has investments in computer networking and software companies including Allegiance, Inc., and Solera Networks, Inc.,  both in South Jordan, Utah. “We’re reducing the ability to create the next generation that is going to create the jobs that’s going to pay the pension obligations that this state has, let alone create the jobs we need.”

Oh, by the way, William Gates, who is probably the biggest benefactor of Silicon Valley, with net worth of $54 billion could close the University of California's $500 million gap for 108 years, assuming no inherent growth in his current portfolio.

The biggest concern, according to Ackerman (above) is tuition costs. Obviously the $500 million is not entirely related to tuition and fees, so Bill Gates could probably make up the difference for 120 years. And Ackerman is only worried about engineers. The UC system is a liberal arts community; engineers make up a very small percentage. The amount of cuts coming to engineering departments is so small (as a percentage) it's not worth worrying about.

My hunch is that Robert Ackerman's companies could also help out. Just saying.