Monday, October 26, 2009

Active Rigs

Locator: 10001RIGS.


Active rigs in North Dakota (by producer)
Official Activity

Page 1 (last entry, September 8, 2016)
New entries will begin on Page 2.

Updates/Commentary: 
Milestones:
  • 29 rigs -- April 23, 2020
  • 66 rigs -- May 12, 2019
  • 25 rigs -- May 20, 2016
  • 218 rigs -- May 29, 2012, 2:00 p.m.
  • 215 rigs -- May 24, 2012
  • 210 rigs -- April 3, 2012
  • 205 rigs -- February 1, 2012
  • 200 rigs -- August 26, 2011
  • 195 rigs -- August 22, 2011
  • 190 rigs -- August 9, 2011
  • 185 rigs -- August 8, 2011
  • 180 rigs -- July 18, 2011
  • 175 rigs -- April 16, 2011
  • 170 rigs -- February 17, 2011
  • 165 rigs -- November 29, 2010
  • 160 rigs -- November 18, 2010
  • 150 rigs -- October 6, 2010
  • 145 rigs -- September 3, 2010
  • 140 rigs -- July 29, 2010
  • 135 rigs -- July 21, 2010
  • 130 rigs -- June 15, 2010
  • 125 rigs -- June 11, 2010
  • 120 rigs -- May 28, 2010
  • 115 rigs -- May 20, 2010
  • 110 rigs -- April 24, 2010
  • 105 rigs -- March 25, 2010
  • 100 rigs -- March 8, 2010 
  •   95 rigs -- February 22, 2010: ties record
95: Bloomberg: highest rig count in US since 1993

UPDATES

April 28, 2013 (big UP movers: BR, CRL, G3 Operating, QEP, Triangle) (big DOWN movers: Petro-Hunt; Statoil [BEXP])
  • Abraxas:1
  • American Eagle: 1
  • Armstrong: 1
  • Arsental Energy: 1
  • Baytex: 2
  • BEXP:  0 (transitioned from STO to BEXP)
  • BR:  12
  • CLR:  19
  • Cornerstone: 0
  • Crescent Point Energy: 0
  • Denbury Onshore: 0
  • Emerald (was VOG): 1
  • Enerplus (ERF): 3
  • Environmentally Clean: 0
  • EOG: 5
  • Fidelity:  3
  • G3 Operating (Halcon):  8
  • GMX Resources: 0
  • Helis (now QEP)
  • Hess:  14
  • Hunt: 2
  • KOG: 8
  • Legacy: 1
  • Liberty Resources: 1
  • Marathon (MRO):  5
  • Murex: 0
  • Newfield: 3
  • North Plains: 0
  • Oasis:  8
  • OXY USA:  7
  • Petro-Hunt: 6 (I believe Petro-Hunt sold a significant amount of acreage since last rig update)
  • QEP: 8 (bought Helis since last rig update)
  • Samson Oil and Gas: 1 (new to the list?)
  • Samson Resources: 3
  • Sequel: 1
  • Sinclair: 1
  • Slawson: 4
  • SM Energy:  4
  • Statoil: 12 (transitioned from BEXP to STO)
  • Triangle: 4
  • True: 1
  • Welter Consulting: 1
  • Whiting:  19
  • WPX: 4
  • XTO:  9
  • Zavanna: 1
  • Zenergy: 2
August 22, 2011
  • Abraxas: 1
  • Baytex: 2
  • BEXP:  16
  • BR:  9
  • CLR:  14
  • Cornerstone: 1
  • Crescent Point Energy: 2
  • Denbury Onshore: 4
  • Enerplus (ERF): 2
  • Environmentally Clean: 1
  • EOG: 7
  • Fidelity:  4
  • G3 Operating (Halcon): 2
  • GMX Resources: 1
  • Helis: 3
  • Hess:  17 
  • Hunt: 2
  • KOG: 8
  • Legacy: 1
  • Liberty Resources: 1
  • Marathon (MRO):  6
  • Murex: 2
  • Newfield: 2
  • North Plains: 2
  • Oasis:  8
  • OXY USA:  6
  • Petro-Hunt: 12
  • QEP: 4
  • Samson Resources: 4
  • Sequel: 1
  • Sinclair: 1
  • Slawson: 4
  • SM Energy:  4
  • Triangle: 2
  • True: 1
  • Whiting:  17
  • WPX: 6
  • XTO:  7
  • Zavanna: 1
  • Zenergy:  4
February 3, 2011
  • CLR: 23
  • WLL: 15
  • Hess: 15 (includes 7 AEZ rigs)
  • EOG: 9 -- has been as high as 13
  • BEXP, Newfield, Oasis, Petro-Hunt, XTO: each with 7
  • Encore, MRO, Slawson: each with 6
  • Anschutz (now OXY), BR: each with 5
  • Samson Resources: 4
  • Hunt, Murex, Tracker, Zenergy: each with 3
  • Baytex, KOG, North Plains, OXY, QEP, Zavanna: each with 2 (KOG says it is adding a 3rd)
  • The following each had one (1) active rig in North Dakota today: Arsenal, Core 54, Cornerstone, Enerplus, Fidelity, G3, Helis, Legacy, Oil for America, Peak, Prima, Sinclair, and SM. (SM has been as high as 2; Fidelity says it is adding a second)
October 11, 2010 (compare to Jul 13, 2010): 135 (compare to October, 2009: 56):  
WLL: 14 (up 2)   
EOG: 13 (same)
CLR: 20 (up 1)   
BEXP: 7 (up 2)   
Slawson: 5 (down 1)
BR: 5 (up 2)
Marathon: 6 (down 1)
Hess: 10 (up 1)
Newfield: 5 (up 1)
St Mary Land: 2 (same)     
Petro-Hunt: 5 (same)   
Encore: 3 (same)  
XTO: 5 (same)  

Anschutz: 5 (same)
Cirque: 2 (up 2)
Zenergy: 1(down)
Tracker: 3 (same)
Zavanna: 1 (same)
Kodiak: 2 (same -- both in ND now)
Oasis: 6 (up 2) 
Murex: 2 (down 1)
Others: QEP (2 -- up 1);  Sagebrush (1 -- down 2), Hunt (2), Ritchie (1), American (4 -- up 1), Eagle (0), Baytex (2 -- down 1);  Samson (3), Simray (0 - down 1), Jayhawk (0), PDC (0), Cornerstone (2 -- same); Peak (1), Fidelity  (1), North Plains (2), BTA (1).
If a number goes down, my hunch is the rig is moving to a new site, going over to Montana, or is being refurbished. I doubt rigs are being moth-balled or sent to states outside the Bakken.

It's really quite amazing how much activity/production these companies can get out of one or two rigs. During the recent boom, the number of rigs rose to a high of 99 (summer of 2008) and dropped to a low of 33 (summer, 2009). The number of rigs is gradually increasing and it appears we will be near 90 wells by summer of 2010.

In the past, the norm was to complete a well in 45 days. Now drillers are routinely reaching "total depth" in less than 30 days (for a horizontal well; a vertical well can be drilled in about a week).

Producers used to "frac" a well immediately after the well reached total depth. They now may wait a week, a month, or even longer.

Total depth (TD): that is the total length of pipe put into the well, not the depth straight down from the surface of the ground to the targeted formation (such as the Bakken). Drillers are generally reaching the Bakken at about 9,000 feet, and then drill laterally for another mile (an additional 5,000; for one-section spacing) or two miles (an addition 10,000 after going vertical; for two-section spacing).  Therefore, a TD of 14, 000 to 15,000 suggests a "short lateral" and a TD of 18,000 or more suggests a "long lateral."

*****

Following the number of active rigs by producer will give you the best idea of what the next year will be like. This list is from November 12, 2009. Compare it with the list at the top of the page.

WLL: 7
EOG: 6
CLR: 5
BEXP: 3
Slawson: 3
BR: 3
Marathon: 3
Hess:3
Petro-Hunt: 3
St Mary Land: 3
XTO: 2
Anschutz: 3
Cirque: 2
Zenergy: 2
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Labels:

Investing: Energy Musings




COMMENTARY: April 24, 2010

I am not going to update previous commentaries because it would be too much work and it might be nice archive material.

I remain enthusiastic about the Bakken. These are my observations at this point:

1. For investors, I think share prices are fair: neither over-valued nor under-valued. Folks have priced in recent events. All things being equal, share prices will follow price of oil. 

2. Everything suggests that the price of oil now has a trading floor of $80 and will gradually trend up. I find it interesting that when oil spiked to $150 a year or so ago, gasoline prices at the pump were not a whole lot different then they are now -- maybe a buck/gallon more in some areas of the country, but folks seemed to manage it. That suggests to me that the price of oil could easily go to $100 by the end of the summer, 2010, without much effect on the economy.

3. If oil hits $100/bbl, a windfall profits tax (disguised as "cap and trade") is all but guaranteed. And, an additional windfall profits tax might be added. 

4. Energy companies in the Bakken are focused on oil and all oil companies have changed their focus from oil & natural gas to predominantly oil.  If the price of natural gas increases significantly, the share prices of all these companies will appreciate significantly.

5. I find it interesting that there has been a paucity of new wells being reported despite number of active rigs jumping to 109. I first noted this in April (this month). Yes, wells can remain on the confidential list for six months and six months ago we had significantly less than 109 rigs. However, companies are quick to announce the results if it's a good well. Some folks in the oil patch are opining that drillers are stalling completion of their wells. The Bakken wells are front-loaded (decline rates are horrendous) and the price of oil appears headed higher. If so, it only makes sense to hold off for the time-being in completing these wells. 

6. Capacity to ship oil out of the Bakken has caught up with production. North Dakota oil is on par with best ("sweet") oil and sells close to the price one sees on the business network crawlers. There should be little-to-no discount paid for Bakken oil due to transportation costs. 

7. Activity in the reservation was delayed two years compared to activity in the Sanish and Parshall (outside the reservation) due to bureaucratic delays in Washington, DC. Those obstacles have been removed and this year (2010) should be the year in which the reservation (think KOG) catches up. 

COMMENTARY: November/December, 2009

This is why I am very, very bullish on energy: a) North Dakota has been in the news the past two years due to activity in the Bakken. North Dakota set a record in 2009 by producing 80 million barrels of oil. The US uses 80 million barrels/oil/day and North Dakota produced enough oil in one year to provide enough oil for the US for one whole day. And yet the Bakken is in the news. If that little amount of oil is in the news, it tells me there isn't a lot of oil around -- and it's only going to get more expensive; b) wind energy accounts for about 1% of all energy used in the US; it will take huge investments in wind, just to maintain that 1%, due to growth in energy demand over the next several decades; c) despite attempts to kill fossil fuel, coal seems to be holding its own, and if it doesn't, natural gas is ready to step in (Exxon knows that; XOM bought XTO for its natural gas); and, d) solar energy is still too expensive for serious consideration on a macro-scale. Solar energy will play a lesser role than even wind.  Yeah, I'm inappropriately exuberantly bullish on energy. Call me crazy, Ishmael.  December 26, 2009.

Two things have me excited today (November 29, 2009): a) the results of the record-setting North Dakota state land lease auction earlier in November; and b) the docket before the North Dakota Industrial Commission on December 17, 2009.  If I count correctly, producers will be asking the state of North Dakota for permission to drill more than 851 wells, and that's in just one hearing. The state holds an average of two to three hearings each month. For comparison's sake, there were about 400 - 600 wells drilled in North Dakota in each year, 2006 - 2009.  It doesn't take a rocket scientist to think that (a) and (b) are related -- the record land lease in November and the record-setting (?) docket in December, one month later.

By the way, I just counted up the number of wells requested in the July 21/29, 2009, docket: 541. So, two dockets alone and over 1400 new wells. (November 29, 2009).

There are multiple ways to play the energy industry in North Dakota:
Oil, big (EOG, MDU, COP, HES)
Oil, medium (WLL, BEXP, CLR)
Oil, small (KOG, NOG, USEG**)
Oil services (SLB, HAL, BHI)
Refineries (I don't follow; not optimistic on future)
Utilities (MDU, OTTR)
Natural gas (MDU, XTO)
Coal (MDU)
Materials (cement, gravel, sand) (MDU)
Transportation (BNI)
Pipelines (ENB)
Wind (MDU, FPL, ITC)
High dividends (HTE***, ERF, EEP, EPD*, ENP)
*EPD: not in North Dakota.
** I added USEG after it partnered with BEXP  on some interesting acreage/wells.
***HTE no longer exists; bought by a Korean company, posted July 20, 2010.

I missed on EAC and EOG.

But there are a dozen ways to be involved in the Bakken, even for those who do not own mineral rights. I am convinced that Williston could be another "Tulsa." It won't be another "Tulsa" in terms of people -- the weather is too harsh and the region too remote, but in terms of storage, infrastructure, and production, I don't think I'm too far off. Some of the wells are generating $15 million in cash flow each year.

By the way, looking at the results of the November 3, 2009, North Dakota state land lease auction, something tells me that a) it's going to be a very active 2010; and, b) Slawson may be a
"sleeper."  Slawson: not publicly traded; however, Slawson is partnered with NOG in a number of palces.

**********

Earnings calls:
ENB, November 4: great results; raising guidance
CVX, October 30: results delay talk of windfalls profit tax
XOM, October 29: results delay talk of windfalls profit tax
WLL, October 29: great results; raised guidance
CLR, November 5 : great results; will double # of rigs
EOG, November 6: so-so results; exciting 2010
BEXP, November 6: poor results; anticipating better times

Other investing news in general:
The following new share offerings occurred just before the largest North Dakota state land lease auction ever, November 3, 2009. Coincidence? I think not.

NOG: new share offering, October, 2009

BEXP: new share offering, October, 2009

KOG: public offering of new shares closed October 30; sold 13,800,000 including 1,800,000 over-allotment; all sold at $2.20. Net proceeds, after expenses, $28.6 million. Posted October 30, 2009.
**********

December 7, 2009: Oil and Gas MLP likely to increase distributions 6% in 2010.

December 5, 2009: Motley Fool's recommendations.

November 25, 2009: Natural gas up over 8%. Now over $5.00.

November 25, 2009: Is EOG looking at another 570 wells in the Parshall oil field?

November 3, 2009: Largest ever North Dakota land lease auction ($71 million)

November 3, 2009: Warren Buffeet announces he will buy BNI for $100/share (BRK).


November 1, 2009: DNR will buy EAC. Denbury, a powerhouse of a company.


October 27, 2009: Korean company will buy Canadian oil trust.
Wow! Harvest Energy Trust is being bought by Korean company (KNOC): “KNOC has ambitious plans for future growth and is committed to a long-term investment strategy in Canada."
October 26, 2009: Today, CNBC contributor predicts gasoline shortage next spring.
Daniel Dicker, an oil and gas analyst/contributor for CNBC since 2002, predicts a shortage of gasoline at the pump in the spring of 2010 and the price of oil at $110. This is interesting in light of the October 25, 2009 post, regarding the EPA ruling on the BP refinery expansion in Whiting, Indiana.


Updated December 26, 2009.
Posted by at

Investing: NOG


Yahoo!Financial: NOG.



4Q10 Earnings
3Q10 Earnings

2010 Enercom NOG Presentation
2Q10 10Q 
2Q10, Earnings Release
1Q10, Earnings Release
Conference Presentation, Mar 2010
2009 Annual Statement (Report)
Conference Presentation, Dec 2009
No Holds Barred, February, 2010 -- for seasoned investors only -- will require you to sign in at Google Groups to access -- great discussion on relevancy of IPs

NEWS
July 21, 2011: NOG looks like a winner -- Motley Fool. 

June 8, 2011: NOG to investors -- "Stick with us."
The CEO of Northern Oil and Gas Inc. tried to assure shareholders at the company's annual meeting on Wednesday that management has an aggressive business plan that will prove doubters wrong.

The stock price of the four-year-old company has been cut in half since March amid accusations of sloppy accounting and insider conflicts. Michael Reger, Northern's CEO, acknowledged that the Wayzata-based management of the North Dakota oil field-leasing company has a credibility problem.

Northern's stock has fallen from a $33.98 per share peak in March, amid heavy insider selling, to a Wednesday close of $17.84 per share. The stock has risen about 5 percent in the past two days on higher oil prices and a supportive analyst report.

The company's detractors, including CNBC's Herb Greenberg, have been saying that Northern can no longer buy land cheaply and that it's vulnerable to more experienced competitors flooding the Williston Basin of North Dakota.
May 13, 2011: In response to recent "bear raid": on wives, friends and beauticians. All the "stuff" needed for a sitcom. 

March 28, 2011: SeekingAlpha.com responds to recent "bear raid." NOG responds to recent "bear raid" and provides operational update.

March 21, 2011: Questions about NOG's valuation and concerns about NOG's failure to account for steep production declines in Bakken wells.

March 1, 2011: NOG a buy, Seeking Alpha.

February 25, 2011: NOG added to S&P MidCap 400. Huge development.

February 18, 2011: Investor's Business Daily with a nice little article on NOG.

January 20, 2011: SeekingAlpha -- positive article on NOG.

November 24, 2010: NOG raises $200 million; 10 million new shares; oversubscribed; share price up.

November 16, 2010: Will issue 9.2 million new shares (18% of current outstanding) and will double its CAPEX program for 2011.

September 5, 2010: Highlights of the 2010 Enercom NOG presentation.

August 10, 2010: NOG breaks out --up 7 percent on 4 times usual volume.

May 11, 2010: NOG earns 4 cents/share (revised from previously announced 3 cents/share).

April 28, 2010: Recent stock offering -- 5.7 million new shares; raised $82.8 million. Over-allotment.

2009 Earnings Report -- see press release

NOG Press Release, March 8, 2010: Fiscal Year 2009 Earnings
2009 Earnings, 2009 vs 2008
2009: net earnings of $2.8 million on oil and natural gas sales of $15  million
2008: net earnings of $2.4 million on oil and natural gas sales of $3.5 million
Wasn't price of oil higher in 2008? If so, the 2009 numbers are even more impressive
Reserves
2009: 6 million barrels boe proved reserves
2009: 700% increase over 2008 proved reserves
2009: 2,065% replacement of 2009 production
Those numbers were based on SEC pricing parameters of $53/bbl
Using constant realized net prices of $72/bbl, proved reserves jump to 10 million boe 
Production
2009: 282K boe
2008: 51K boe
Results represent a 448% increase in production
Net wells
2009: 9 wells; producing approximatley 1,508 boepd
As of March 1, 2010, NOG has completed or is completing an addition 3.45 net wells with approximately 1,986 boepd
Slawson wells that NOG participated in, names and 20-day production rates:
Stallion 1-1-12H: 1,525
Zephyr 1-36H: 1,245
Ripper 1-22H: 975
Minx 1-28H: 923
Fox 1-28H: 1,139
Bazooka 1-20H: 1,042
Other wells NOG participated in:
Highland 1-9H (Sinclair Oil): 564
Edwards 5992 44-10 (Oasis Petroleium): 478
Van Hook 100-15H TFS (EOG): 1,585
Liffrig 29-20 1-H TFS (BEXP): 2,477
Norman 1-9H (CLR): 1,366
Arvid 2-34H (CLR): 407
For more, go to NOG's press release, March 8, 2010
Note: IPs will vary depending on who is reporting



COMMENTARY
(Written following 3Q09 Earnings Report)

Although NOG missed the analysts' earning estimates by 20%, four cents vs five cents, it still had a very interesting press release for third quarter earnings. [Actually, I have to chuckle at that. With MSFT or AAPL there are probably a 100 analysts; for NOG, I would be surprised if more than two analysts follow the company as closely and as well as analysts follow a Fortune 500 company.]
1. Production cost: $2.50/bbl. Sell price: $58/bbl (with hedges taken into account)
2. First development well: 16 days; $2.9 million; 18-stage fracture
3. Partnered with Slawson.
4. Discussion thread on this press release
NOG has partnered with Slawson. Slawson is a well-known oil exploration and production company in North Dakota but, to the best of my knowledge, is not publicly traded. Slawson ,by the way, was a huge participant in the November 3, 2009, North Dakota state land lease auction that set a record ($71 million vs $30 million in 1980).

If one wants to "invest" in Slawson, perhaps one way is to invest in NOG.

Slawson has has 37 wells on the confidential list. In addition, many of the Slawson wells are in the Van Hook field on the Fort Berthold Indian Reservation and on the watch list. A more comprehensive posting on the Slawson wells in Big Bend/Van Hook (FBIR) can be found here. 

I do own a very small amount of NOG and added to my position this week (it's a trivial amount in my overall portfolio). I raised cash by selling a small amount of SLB and some WMB which I
have had for some time. SLB and WMB have been two of my core holdings over the years.

NEWS

November 9, 2009: NOG has closed $59.3 million registered direct common stock offering.
Comment: NOG, BEXP, and probably others have recently raised more money through common stock offering. It should be noted that these stock offerings occurred at exactly the same period when North Dakota announced a record land lease auction ($70 million vs $30 million previous record in 1980, adjusted for inflation, worth $80 million).
July 20, 2009: Press release.
Posted by at

Welcome to the "New" Million Dollar Way.

The news coming out of North Dakota oil patch is almost coming too fast to keep up.

If you think "the Bakken" is over-hyped, check out "monster wells." Remember, the list of monster wells is only the tip of the iceberg, as they say.
What's not to love: a) oil back to a new, higher trading range; b) the major oil companies losing money or reporting lower earnings (forestalls talk of windfall profits tax, driving Congress nuts); and, c) a well in the Bakken at almost 5,000 boepd on initial production -- a new record (reported this week). At $50/barrel, that is $250,000 a day. That's more than a million dollars a week. If I'm wrong on my math, someone will correct me. Yes, the Bakken has severe production declines but let's see what this well is doing a year from now. And, I'm still waiting to hear how the "barnburner" up by Grenora is doing.
And now, another monster well, the Chandler James, in production for one full year, producing at a rate of 35,000 barrels/month, which at $50/barrel, is $19 million/year. Yeah, I'm excited.

Now, about the blog.

The "old" Million Dollar Way was very eclectic: literature, music, "the Bakken," energy in general, and personal musings. Ninety-nine percent of visitors to the site visited only Bakken-related sites, and even then, only one or two specific pages.

So, this site will, at least for the time being, concentrate on "the Bakken," more correctly the North Dakota oil industry.

I have an emotional interest in "the Bakken." I wear my heart on my sleeve when it comes to "the Bakken."

This is where I grew up. I have no background or connection with the oil industry. I own no mineral rights. I am an investor, but my investments in "the Bakken" are trivial compared to my overall investments. I am more emotionally attached to "the Bakken" than interested in investments. I have no inside information. I do not subscribe to any premium services regarding "the Bakken."

I no longer live in North Dakota, but I visit at least once a year and see first-hand what is going on. My information comes primarily from the NDIC website and the internet in general. Occasionally I will get input third-hand or fourth-hand from someone I know still living in the Williston area. (Williston, North Dakota, USA, is at the center of the Williston Oil Basin, home of "the Bakken.")

Bottom line: I'm pretty much a novice at all this. I know I will make many mistakes on this website but will correct them when brought to my attention. I would not use my site to make investment decisions, although it may be one of several data points to lead you in certain directions. Much of what I write can look factual, when in fact it is opinion or my general understanding of the issue.

Over time, I assume this site will evolve, based on reader feedback. As expected, it was hard not to have op-ed pieces, and some have already been added.

The site's name.

The friends of the "old" Million Dollar Way know that the name of the site has nothing to do with money -- at least not directly in terms of me or investing. When I was growing up, the road leading out of Williston was known as the "Million Dollar Way" because of the automobile dealerships and businesses related to the oil industry. The "Million Dollar Way" was my road out of town to an exciting life. This "Million Dollar Way" site is a new road leading me to new destinations.

Profile of Williston, North Dakota, USA.

Last updated: November 1, 2009.
Posted by at

Sunday, October 25, 2009

Investing: KOG

Yahoo!Finance: KOG
3Q10 Earnings Report
1Q10 Earnings Report

NEWS

July 10, 2011: KOG -- one of six oil and gas companies with best price appreciation (publicly traded shares). 


April 25, 2011: Motley Fool on KOG.

February 12, 2011:  Michael Filloon/SeekingAlpha on KOG (February 11, 2011).

January 5, 2011: KOG bows says it partners with XOM. I was originally concerned with KOG due to need for capital to finance it's drilling program. With XOM as a partner, and KOG located in some of the best Bakken/Three Forks, there is no question any more that KOG is a great holding in the Williston Basin. One could put this among the top five drillers in North Dakota and a great stock to accumulate.

January 4, 2011: Investopedia on KOG.

November 5, 2010: Comments on KOG's 3Q10 earnings.

October 19, 2010: KOG increases acreage base by 25%! Huge deal. Worth $1.6 billion? Paid $88 million in cash.

May 4, 2010: Three wells on one pad!
  • 18987, KOG, Two Shields Butte 14-21-16-2H, SESW 21-149N-92W
  • 18988, KOG, Two Shields Butte 14-21-33-15H, SESW 21-149N-92W
  • 18989, KOG, Two Shields Butte 14-21-33-16H3, SESW 21-149N-92W
April 24, 2010: When I first posted my commentary regarding KOG, I asked the question: where does KOG get the cash it needs to pursue its very aggressive CAPEX program. Recent events may have shed some light on the situation. It started with this bit of sleuthing. First Arrow Midstream announces a joint venture with XTO and the Three Affiliated Tribes for a new pipeline in the Mandaree area, where there are no XTO wells. Review of KOG's most recent corporate presentation reveals that KOG has partnered with XTO (50/50) in KOG's Two Shields Butte and Saddle Butte prospects. Ka-boom.

February 21, 2010: Hypothetical investment results with dollar-cost averaging since KOG announced the results of its first wells back in 2007.

February 16, 2010: KOG provides interim update on operations, including announcement that recent short lateral had an IP of 1,419. The report also notes that a) KOG has some 3-well pads; and, b) they are moving to long laterals (like everyone else, it seems).
From the report: "Kodiak focuses its well-performance analysis on longer-term production rates and also looks to ensure that it invests its capital for the most efficient development of our reserves.  Based upon our production data, the recovery rates per-foot of horizontal lateral appear to be greater in the shorter laterals; however our analysis indicates that we achieve a stronger rate of return with the longer laterals as additional reserves are obtained with marginal incremental investment.  Therefore our 2010 development program will be geared to longer laterals as opposed to the shorter laterals."
December 18, 2009:  KOG announces $60 million 2010 CAPEX program ($21 million CAPEX in 2009). KOG will take delivery of a second rig in February 2010 for the Bakken. KOG commits to 12 gross (9.5 net) wells in 2010; this compares to 9 wells in 2009.

COMMENTARY

This is a most interesting play. It's one of the smaller companies in the Bakken by market capitalization.

KOG was one of the first to be active in the Fort Berthold Indian Reservation. The reservation has part of the prolific Parshall oil field as well as the developing Van Hook and Big Bend fields.

It appears one can divide the FBIR in quarters. I don't know much about the SW or the SE quarter yet. The NE quarter is "owned" by EOG. The rest of the productive FBIR is split among several companies notably Slawson and KOG. (I am not aware that Slawson is publicly traded; I could be wrong. Slawson partners with several other producers, most notably NOG.)

KOG has a number of wells on the FBIR, and there's a lot of discussion on the message boards about how well KOG might do. I can't argue. KOG might do quite well.

In the summer of 2009, I was negative to neutral on KOG; with KOG adding a second rig in the Bakken, one can argue KOG is stepping into the "big leagues" in the Bakken -- maybe not quite there but heading in that direction.

KOG share price has lagged NOG significantly (January, 2010). Earnings soon to be reported. Although KOG states it has $50 million in assets, most of that is in property plant and equipment ($35 million); it has only $1.75 million cash on hand (according to Yahoo!Financial and KOG's current presentation, based on 3rd quarter data). And yet KOG says it has committed to a $60 million 2010 CAPEX program: where do they get that cash, $60 million? They state, in their current presentation, that in early 2010 they will have established necessary credit lines. "Kodiak expects to substantially fund the budget primarily from cash on hand ($1.75 million vs $60 million CAPEX), cash flow from operations (negative cash flow?), and potential borrowings under a new reserve-based revolving line of credit that it expects to put into place in early 2010." To me, it looks like they will need to a) borrow significantly, b) issue more stock, or c) hit some huge wells. Dunn County, where most of their activity is, is a good location, but it's not the Parshall oil field. KOG has been as high as $6/share; around $1 last March, 2009, and now back up to $2.50 (January, 2010). Speculative to say the least.

Updated: April 25, 2011.
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