McKenzie County: The Number 2 Bakken/3 Forks Oil Producer

by: Michael Filloon

In my most recent article on Mountrail County, I highlighted what may be the best oil producing county in the country. Anyone that follows the Parshall, Sanish and Ross areas knows that initial production numbers are very high. Current density drilling methods could be a game changer as it could produce 11 wells per 1280 acre unit. Company estimates have Mountrail County 1280 acre units producing six to seven wells, providing a four to five well increase over current methods. If this is the case, and the average EUR per well is 800 MBoe (I believe this number is conservative), estimated total recovery would increase by 3.2 to 4 million barrels of oil equivalent. This number does not include possible re-fracs, or secondary recovery methods. It is very possible these technologies will also work in other areas decreasing costs and increasing the number of wells/1280 acre unit.

Brigham's (BEXP) Rough Rider prospect is located in southern Williams and northern McKenzie counties. The majority of its work has been in Williams, but it has several McKenzie middle Bakken wells worth looking at:

  1. Greenstein 30-31: IP rate of 3232 Boe/d
  2. Raymond 20-17: IP rate of 2602 Boe/d
  3. Bratcher 10-3: IP rate of 3667 Boe/d
  4. Abelmann 23-14: IP rate of 4169 Boe/d
  5. Lloyd 34-3: IP rate of 4030 Boe/d
  6. Hovde 33-4: IP rate of 2349 Boe/d
  7. Gunderson 15-22: IP rate of 3905 Boe/d

Brigham has done a great job of de-risking northern McKenzie County as it has interests in these fields:

  • POE
  • Ragged Butte
  • Sandrocks
  • Wildcat

These are just a few fields Brigham is active in and it does not include wells still in confidential status (26 wells of its wells are still confidential). We have a fairly good idea of how the middle Bakken will produce here, but the real question mark is the Three Forks. Located between Brigham's Lloyd 34-3 and Gunderson 15-22 is Kodiak's (NYSE:KOG) Koala 9-5-6-12H3. This is a Three Forks well and it had an IP rate of 2327 Boe/d. The Three Forks has the possibility of production equal to that of the middle Bakken pay zone. By this I mean the middle Bakken and Three Forks pay zones are much thicker than in southern McKenzie County. The geology backs these results. Kodiak has a lot riding on its interest in northern McKenzie County. It currently has 10000 net acres and these are its Koala wells:

  1. Koala 2-25-36-15H (Squaw Creek) Confidential
  2. Koala 13-36-25-3H (Squaw Creek) Confidential
  3. Koala 14-32-29-2H3 (Banks) Confidential
  4. Koala 14-32-29-3H (Banks) Confidential
  5. Koala 14-32-29-4H3 (Banks) Confidential
  6. Koala 15-31-30-2H (Poe) Confidential
  7. Koala 15-31-30-3H3 (Poe) Confidential
  8. Koala 2-25-36-14H3 (Wildcat) Confidential
  9. Koala 2-25-36-16H3 (Poe) Confidential
  10. Koala 3-2-11-13H (Poe) IP rate of 3021 Boe/d
  11. Koala 3-2-11-14H (Poe) IP rate of 3412 Boe/d
  12. Koala 9-5-6-12H3 (Wildcat) IP rate of 2327 Boe/d Three Forks
  13. Koala 9-5-6-5H (Poe) IP rate of 3042 Boe/d

SM Energy (NYSE:SM) also has interests in Poe Field, near Kodiak's recent wells. Its IP tests of Jayness 16-12H at the end of June produced 1067 Bo/d. Continental's (NYSE:CLR) Jerry 1-8H well is in Poe Field but is on confidential status. Brigham's Bugs 27-22 1H is also confidential.

Kodiak also has prospects in two other McKenzie areas. It has 16000 net acres in its Smokey project. Kodiak has plans for six wells here:

  1. Smokey 15-22-15-2H
  2. Smokey 15-22-34-15H3
  3. Smokey 16-20-17-2H
  4. Smokey 16-20-17-1H3
  5. Smokey 16-20-32-15H
  6. Smokey 16-20-32-16H3

Kodiak also has 22000 net acres in East Grizzly and 3000 net acres in Grizzly projects. Mondak Field is the area of interest. Kodiak has been working this field for sometime as it completed Kodiak Grizzly 13-6H in July of 2006 which produced an IP rate of just 82 Bo/d. Kodiak Federal 4-11H was completed in October of the same year. It had an IP rate of 393 Bo/d. Kodiak also completed Grizzly Federal 1-27H in December of 2006 in Mondak Field.

A significant improvement was seen in October of 2010, when Kodiak completed Grizzly Federal 1-27H-R. It had an IP rate of 447 Bo/d. There are three Kodiak East Grizzly wells on the confidential list:

  1. East Grizzly State 4-16-15-8H
  2. East Grizzly Federal 3-25-13-3H
  3. East Grizzly Federal 3-25-36-15H

XTO (NYSE:XOM) is the only currently active participant in the Mondak Field. In February, XTO completed Dwyer Federal 44X-1 which had an IP of 1647 Boe/d.

Wildcat Field has had a much larger impact on North Dakota oil. In 1952, Hess (NYSE:HES) drilled its North Dakota "B" Tract-1 1. Burlington Resources' (NYSE:COP) Ole 1-29H had an IP rate of 658 Bo/d in May of last year. In July of last year, Continental recorded an IP rate of 380 Bo/d with its Ravin 1-1H. Marathon's (NYSE:MRO) Watson USA 14-32H recorded an IP rate of 225 Bo/d. Hess had a very good well in December of last year with an IP rate of 1006 Bo/d with its Gudmunsen 27-1H. There are several companies drilling or awaiting completion in the Wildcat Field:

  • Whiting (NYSE:WLL)
  • Marathon
  • Newfield (NYSE:NFX)
  • XTO (XOM)
  • Oasis (NYSE:OAS)
  • SM Energy
  • Denbury (NYSE:DNR)
  • Hunt Oil
  • Slawson

This is just some of the companies with interests in the Wildcat Field.

Whiting is very bullish its McKenzie acres. It has 37170 net acres in its Hidden Bench/Tarpon and will spend $52 million in cap ex here this year. 26 wells will be completed in its Hidden Bench/Tarpon acreage in 2011.

The wild card in McKenzie seems to be Newfield. In its Staal 150-99-26-35-1H well in South Tobacco Garden Field, there was an IP rate of 2606 Bo/d. In the first 26 days, this well produced over 30 thousand barrels of oil. Other Newfield wells of note are:

  • Sawfish 1-1H in Sandrocks Field had an IP rate of 1507 Bo/d
  • Johnsrud 150-98-6-7-1H in Siverston Field had an IP rate of 2674 Bo/d
  • Lawlar 151-98-31-30-1H in Siverston Field had an IP rate of 2789 Bo/d

McKenzie County is the number two oil producer in the North Dakota Bakken/Three Forks. This county is important for two reasons. The first reason is 2343335 barrels of oil it produced in July of this year. The second has to do with potential. Northern McKenzie County has had some very good wells from Brigham, Kodiak and Newfield. These results would indicate that northern McKenzie and southern Williams counties may have results comparable to that of Mountrail. Because the middle Bakken and the first bench of the Three Forks thickens in areas of McKenzie, this would substantiate the better results. Kodiak seems the most levered to McKenzie County, while Brigham seems to be the most innovative. I would watch these companies. There has been a substantial improvement in wells over the past 12 months. There is a very good chance that these companies have found the ways to make the most out of each well.

Disclosure: I am long KOG, BEXP. This article is an overview of what oil and gas companies are doing in McKenzie County with respect to the Bakken and Three Forks formations. It is just an overview and is not a buy recommendation. Of the stocks mentioned I own KOG and BEXP stock. If there are any questions, concerns or if there is just a question feel free to email me through SeekingAlpha.