In the Bakken Update: McKenzie and Williams Counties Are The Next Emerging Plays Part One, well metrics were discussed comparing these two counties and how they measure up to Mountrail County from an initial production standpoint. By County in North Dakota, oil production for July of 2011 was:
- Mountrail: 3962989 barrels of oil
- McKenzie: 2343335 barrels of oil
- Dunn: 1778820 barrels of oil
- Williams: 1632474 barrels of oil
- Bowman: 805548 barrels of oil
- Divide: 350131 barrels of oil
- Billings: 294557 barrels of oil
- Burke: 179999 barrels of oil
- Bottineau: 153177 barrels of oil
- Stark: 135932 barrels of oil
Mountrail County has a significant lead with production coming from Brigham's (BEXP) Ross, Whiting's (WLL) Sanish, and EOG Resources (EOG) Parshall fields. These three areas have seen aggressive development. Mountrail's development remains strong, but now that some of these companies are beginning to build cash flow, other counties are increasing production.
Brigham's Roughrider acreage is in the northern most border of Whiting's Hidden Beach. This Roughrider acreage continues until its northern border is into central Williams County. Brigham's Montana acreage is northeast of Continental's (CLR) in Richland County. Continental has acreage in and to the south of Brigham's Roughrider. The Roughrider has produced excellent initial production numbers, although not as good as Ross. These numbers get better the further south and east we go in the Roughrider. In west central Williams County, Brigham has IP rates of:
- Kalil Farms 14-23: 1603 Boe/d
- MacMaster 11-2: 1129 Boe/d
- Stanley Larsen 8-5: 1020 Boe/d
- Continental's Obert 1-13H (Three Forks): 896 Boe/d
The last well was included to give an idea of how the upper Three Forks produced and could perform in the future on the North Dakota side of the border in Williams County.
On the eastern border of the Roughrider from north to south, IP rates are:
- L Tufto 7-6: 3215 Boe/d
- A Tufto 18-19: 2871 Boe/d
- Heen 26-35: 3791 Boe/d
- Larsen 3-10 #2H: 3212 Boe/d
- Larsen 3-10: 3090 Boe/d
- Knoshaug 14-11: 4443 Boe/d
- Lucy Hanson 15-22: 4358 Boe/d
- Abelmann 23-14: 4169 Boe/d
- Lloyd 34-3: 4030 Boe/d
There has also been very good upper Three Forks results in the eastern Roughrider. Remember, this area was originally only worked for middle Bakken production. Now that the Three Forks is being de-risked, it is making these areas more appealing. Recent Three Forks wells in this area had IP rates of:
- State 36-1 #2H: 2356 Boe/d
- Tracker Scanlan 17-1TH: 1781 Boe/d
- Kodiak (KOG) Koala 9-5-6-12H3: 2327 Boe/d
Kodiak'sThree Forks well was much better than expected. From the same pad, Kodiak's Koala 9-5-6-5H which is a middle Bakken well, had an IP rate of 3042 Boe/d. It has two additional Koala wells:
- Koala 3-2-11-14H: IP rate of 3412 Boe/d
- Koala 3-2-11-13H: IP rate of 3021 Boe/d
At an IP rate of 3000+, it is conceivable these wells could have EURs at 700000+ Boe. Drilled from a pad with four Bakken and four Three Forks wells, could produce 5.6 million barrels of oil equivilent per pad. These are my estimates, and to the high side of Kodiak's estimates of 550000 to 700000/well.
Directly north of the Koala prospect in McKenzie County, Kodiak has a pending purchase of acreage in Williams County. This acreage is on the east side of some of Brigham's best Roughrider wells. Kodiak will acquire 13500 net acres in exchange for $235 million. At closing, this purchase will add 3000 Boe/d in production. A drilling rig, natural gas pipelines, and a full time frac crew make this deal more interesting.
Kodiak will have a total of 110000 net acres in the Bakken/Three Forks. EUR for the middle Bakken wells in this purchase are estimated to be 650000 Boe. Rumors Kodiak will have cash issues because of this purchase are floating around. This created a very good buying opportunity, as the stock pulled back below $4/share. I do not believe Kodiak has any liquidity issues, as it just cleaned up its balance sheet. Kodiak plans to pay for this acquisition with cash on hand and increased borrowings from its credit facility.
To the east of Kodiak's Koala acreage is Newfield's (NFX) Westberg prospect. Newfield has had good initial production numbers between 2029 to 2789 Bo/d. Newfield has acreage in other good Bakken/Three Forks areas:
- Catwalk: Located in Williams County. Its acreage shares some of Brigham's Roughrider, although Catwalk stops at the river to the south and is not as far west.
- Aquarium/Watford: Located in the same area as Whiting's Hidden Beach.
- Lost Bear: Located in northwest Dunn County.
- Big Valley: Located in northwest Williams and southwest Divide counties in North Dakota. A smaller portion of this acreage is in Sheridan County, Montana.
Oasis (OAS) has 191716 of its 303321 net acres in west Williston . On the North Dakota side, this acreage is in southwest Williams and northwest McKenzie counties. It also extends into eastern Roosevelt and Richland counties in Montana. In the past I have been negative with respect to Oasis. In my opinion, this company was a slow mover with respect to increasing stages and amounts of proppant, and was making a habit of missing earnings estimates. It seems Oasis is making a concerted effort to rectify this situation, as IP rates have been improving.
Oasis has some very good acres in Mountrail County. It has 8729 net non-operated acres in the Sanish. Oasis has another 102786 net acres East of Nesson, including Mountrail and Burke counties. West Williston is much more interesting. Red Bank (63000 net acres) is in west central Williams County.
Brigham has had some good wells in its Roughrider play in the same general vicinity as Red Bank. More interesting is Oasis' Indian Hills (23000 net acres). Some of Brigham's best Roughrider wells are in this area. To the southeast is Kodiak's Koala Bakken and Three Forks wells. In 2011, Oasis has seen a jump in initial production of oil:
- Ruud 5493 42-23H: 1592 Bo/d
- Cowden 5404 13-35H: 1752 Bo/d
- Devon 5601 12-17H: 1033 Bo/d
- Glover 5601 12-17H: 1235 Bo/d
- Logan 5601 42-35H: 1746 Bo/d
- Dixon 5602 44-34H: 1023 Bo/d
- Hagen 5792 44-31H: 1685 Bo/d
I think Oasis is starting to turn its business around. It has started its own oil services company to decrease pressure pumping costs. It is increasing the number of stages and will have full pad development by the second half of 2012.
In summary, Williams and McKenzie counties are beginning to see a large increase in production. Whether these counties will start catching up to Mountrail is anyone's guess. But two things are for sure. The first is a dramatic increase in IP rates in Williams and McKenzie by several different producers. The second is a rapid increase in locations per 1280 acre spacing. This is due to a de-risking of the Three Forks and in some areas the possibility of density drilling and its 5.5 Bakken wells/1280 acre unit. When this is coupled with Williston Basin players being incredibly cheap, it could be a very good time to buy some of these names.
