Seeking Alpha
Oil & gas, small-cap, growth at reasonable price, hedge fund analyst
Profile| Send Message|
( followers)  

In the first two parts of this series (Part I, Part II) I have analyzed the production of companies, like Brigham (BEXP), close to the acreage recently acquired or to be acquired by Kodiak (NYSE:KOG). There are significant difficulties in this type of analysis as there are several variables that can effect well production, and this was further skewed by the bad winter and flooding in the beginning of this year.

As I stated in Part II, its purchase of 13400 net acres in Williams County from BTA Oil was a good one. It is risky, as Kodiak spent a considerable amount of capital for acreage not currently producing as well as its Koala. Given Brigham's results around Epping Field, I believe Kodiak is right in its assessment of EURs comparable to the Koala if the same completion techniques are used.

It is no coincidence Kodiak's Koala wells have been good as several players have had very good results nearby. Some of these companies have done quite well, and much better than other areas they have drilled. Oasis (NYSE:OAS) has acreage to the north and west of Koala. In the north, its Kjorstad 5300 24-22H had an IP rate of 2707 Bo/d, and almost 100000 total barrels of oil since October of last year. A couple of miles to the northwest of Koala, Oasis' Angell 5200 31-28H had an IP rate of 2887 Bo/d. This well has produced 122000 barrels of oil since April of 2010. Oasis is bullish its Indian Hills as it believes it is the deepest portion of the Basin. This area is to the north and northeast of Kodiak's Koala wells. Oasis has not only emphasized the middle Bakken, but more so the upper Three Forks.

Continental (NYSE:CLR) is also active to the north of Koala. Continental's IP rates are lower in this area, but have been throughout the Williston Basin. This may make little difference in much longer term rates, as all of these wells may see production even out a few years down the road. Continental's completions have been around 30 or more stages in the area, and I think it figures more oil may come from a well with production choked back more initially.

Brigham has done things differently as it has had very high IP rates. These high rates have helped to show this area is something special. Brigham has had some very good wells to the southwest of the Koala. Its Lloyd 34-3 1-H well had an IP rate of 3240 Bo/d, just a little over 5 miles from Kodiak's Koala project.

As we move to the southeast of Koala there are some very good producing Newfield (NYSE:NFX) wells:

  1. Barracuda 150-100-2-11-1H: IP rate of 2185 Bo/d (Sandrocks Field)
  2. Staal 150-99-26-35-1H: IP rate of 2606 Bo/d (South Tobacco Garden)
  3. Wilson 150-99-29-32-1H: IP rate of 1046 Bo/d (South Tobacco Garden)
  4. Johnson 150-99-34-27-1H: IP rate of 2029 Bo/d (South Tobacco Garden)
  5. Staal 150-99-23-14-1H: IP rate of 3034 Bo/d (South Tobacco Garden)
  6. Charlotte 150-98-17-20-1H: IP rate of 2526 Bo/d (Siverston)
  7. Johnsrud 150-98-6-7-1H: IP rate of 2674 Bo/d (Siverston)
  8. Lawlar 151-98-31-30-1H: IP rate of 2789 Bo/d (Siverston)
  9. Holm 150-99-13-24-1H: IP rate of 2370 Bo/d (Siverston)
  10. Hoffman 150-98-18-19-1H: IP rate of 2502 Bo/d (Siverston)

In summary Newfield, Brigham, and Kodiak have had very good results in the Williston Basin. Some think these three companies do a better job drilling and completing wells. Others think its the acreage producing better results. Brigham de-risked a good portion of its leasehold and consistently outperformed its competition. Its increased stages, zipper fracs, pad drilling and mobile rigs are just some of the ways Brigham increased production and cut costs. I would guess the same goes for Kodiak and Newfield, but Oasis has not had the recent success, but still managed some very good wells. Newfield seems to be well placed in this acreage, and are only guilty of poor cost containment. I would look for its return and escalation of production in this play next year depending on completion costs and how well Newfield has been developed.

Because the majority of its acreage is in this area, Kodiak has the most to gain from its success. Although I am only approximately half done with this series of articles, it is apparent that Kodiak has done its due diligence. The fact that this acreage is in the deepest portion of the Williston Basin opens up the possibility of more than 4 middle Bakken wells as was planned by Brigham in its Ross prospect. The additional three Three Forks benches could also provide three times the locations. I am unsure as to how correct it is, but page 7 of Whiting's (NYSE:WLL) corporate presentation shows the difference in the thickness of the middle Bakken and Three Forks pay zones. I would expect these results will continue to improve, with additional estimates of increased locations.

Source: Bakken Update: How Good Is Kodiak's New Acreage? Part III

Additional disclosure: This is the third part in a series of articles on Kodiak's new southern Williams County acreage and its core northern McKenzie County acreage. This is not a buy recommendation.

Continue to Part IV >>