Bakken Update: Q3 Results

Includes: EOG, KOG, NFX, STO, WLL, XOM
by: Michael Filloon

We have had some very interesting results over the past couple of weeks. The company of focus, at least for me, was Kodiak (NYSE:KOG). Much of Kodiak's news had already been released so there wasn't much new to report. When looking over these results, my focus was on 60-day average production for four of Kodiak's most recent Koala wells and 90 day initial production for two of those wells. For those unfamiliar with initial production rates, the further out in days, the more accurate an estimated ultimate recovery. EURs basically are an estimated amount of resource believed to be pulled from the well over its lifetime. This is the 24 hour IP rate (in parentheses) and the 60 day IP rate for those McKenzie County wells:

  1. Koala 9-5-6-5H (3042 Boe/d): 1165 Boe/d
  2. Koala 9-5-6-12H3 (2327 Boe/d): 1063 Boe/d
  3. Koala 3-2-11-14H (3412 Boe/d): 1230 Boe/d
  4. Koala 3-2-11-13H (3021 Boe/d): 1004 Boe/d
  5. Average IP rate=2950.5 Boe/d
  6. Average 60 day IP rate=1115.5 Boe/d

These four wells had 24 hour IP rates between 2327 and 3412 Boe/d. Comparing these Koala wells to some of Brigham's (BEXP) best in the Roughrider we (pdf) see how 24 hour IP rates (in parenthases) correlates with 60 day IP rates:

  1. Lucy Hanson 15-22#1H (4358 Boe/d): 934 Boe/d
  2. Gunderson 15-22#1H (3905 Boe/d): 1220 Boe/d
  3. O'Neill 17-20#1H (3349 Boe/d): 789 Boe/d
  4. Knoshaug 14-11#1H (4443 Boe/d): 1051 Boe/d
  5. Lloyd 34-3#1H (4030 Boe/d): 1094 Boe/d
  6. Average IP rate=4017 Boe/d
  7. Average 60 day IP rate=1017.6 Boe/d

In The 3 Best Oil Fields InThe Bakken And The Stocks That Are Capitalizing Parts One, Two and Three, I was able to show Brigham not only had better IP rates than Whiting (NYSE:WLL) and EOG Resources (NYSE:EOG), but had better long-term rates as well. Because of Brigham's results, its wells are the best suited for comparison to Kodiak's Koala wells. I chose wells that had very high IP rates in Brigham's Roughrider, because of this it had a higher average than Kodiak by more than a thousand Boe/d. When the 60-day IP rate is used for those same wells, Kodiak produces more than a hundred Boe/d, than Brigham's. Those hundred barrels of oil equivalent per day over sixty days produce over six thousand barrels more than some of the best Brigham Roughrider wells. Comparing these Koala wells to Brigham's best Ross wells we (pdf) see:

  1. Sorenson 29-32#1H (5133 Boe/d): 1425 Boe/d
  2. Jack Cvancara 19-18#1H (5035 Boe/d): 1368 Boe/d
  3. Clifford Bakke 26-35#1H (5061 Boe/d): 1796 Boe/d
  4. Sorenson 29-32#2H (5330 Boe/d): 1371 Boe/d
  5. Average IP rate=5139.75 Boe/d
  6. Average 60 day IP rate=1490 Boe/d

This is significant as Ross wells with initial production of 5000+ Boe/d have a very large increase in 60 day IP rates, which is probably indicative of Ross Field and not any change in Brigham's drilling or completion activities.

Kodiak's Koala wells have (pdf) been a great deal better than was previously expected. These wells are still not as good as those in Dunn County, but this operated area has performed closer to expectations, which were quite high in comparison. Kodiak operates wells in Dunn County but also has non-operated acres with XTO (NYSE:XOM). Recent 30-day IP rate results show Dunn County wells producing 1398 to 1449 Boe/d. The latest Koala well 30-day IP rates were 1144 and 1337 Boe/d.

In summary, Kodiak's well results are very good. When these wells are compared with Brigham wells with 4000+ Boe/d IP rates in the Roughrider the Koala wells perform better. When these results were reported, the significance seemed to go unnoticed. Much can be said for the area as Whiting just reported the best IP rate in the Bakken in Twin Valley Field. This is just to the northeast of Poe (Koala) Field, only separated by Camp and Banks fields. Newfield (NYSE:NFX) is another name to watch in Westberg Field. Newfield recently announced a discontinuing of Bakken operations due to an average well cost of $11 million. I believe Newfield will slow down its drilling program until it signs a completion deal, but this is temporary. This field is just to the southeast of Whiting's well and has had several good completions to date.

Disclosure: I am long KOG.

Disclaimer: This is an update to Bakken/Three Forks operations in northeast McKenzie County. It is not a buy recommendation.