In Part 4 of this series, I broke down Kodiak's (KOG) acreage into individual prospects. Of its current 155000 net acres, approximately 90000 is in the Polar and Koala leaseholds. To assess the value of this acreage, a comparison could be made to another recently acquired company. I have received a significant number of emails from investors wondering how Kodiak stacks up against Brigham (BEXP). No matter what the comparison is, it is always difficult to judge whether one leasehold is better than another this early in the development stage. It helps that Brigham has provided a significant amount of information, which will aid in developing a value.
Brigham's acreage breaks down like this:
- Parshall/Sanish: 4900 net acres
- Ross: 35200 net acres
- Roughrider: 161600 net acres
- Eastern Montana: 119100 net acres
- Mercer: 30100 net acres
- Other: 24900 net acres
Brigham has a total of 375800 net acres. Much of this is not in the best areas of the Williston Basin. Its Parshall/Sanish and Ross acreage is top notch. I think this acreage is slightly better than Kodiak's Koala. I went through this in Bakken Update: Q3 Results.
In analyzing Kodiak's Koala acreage, I compared it to Brigham's Ross and Roughrider acreage. In doing so, I found that the Koala is better than Brigham's best Roughrider wells and gets much better as we head west. Brigham's best Ross wells were better than the Koala, but not as much as one would expect. To put this into perspective, Brigham has done a better job than anyone else in the Williston Basin with respect to its Ross (Alger Field) development.
I compared Brigham to EOG Resources (EOG), Hess (HES), Oasis (OAS), and Fidelity Exploration (MDU) in The Three Best Oil Fields In The Bakken And The Stocks That Are Capitalizing Part 1. All of these companies have locations in Alger Field, but Brigham has seen much better production from its wells. Production was better both from a 24 hour and 60 day IP rates.
In The Three Best Oil Fields In The Bakken And The Stocks That Are Capitalizing Part 2, I compared Whiting's (WLL) Sanish Field to Brigham's Alger Field wells. This article proved Brigham's numbers were much better in the short and long term.
Lastly, The Three Best Oil Fields In The Bakken And The Stocks That Are Capitalizing Part 3 was an overview of EOG Resources' Parshall Field. This article proved Brigham's Alger Field numbers and Whiting's Sanish Field numbers were both better than EOG's Parshall Field (640 acre spacing) results. The information from all of these companies will help in grading this acreage with respect to EURs:
- Kodiak Dunn County, Polar, and Koala: 800M to 900+MBoe
- Kodiak Smokey: 750M to 850+MBoe
- Kodiak Grizzly: 350M to 450+MBoe
- Whiting Sanish Bakken: 450M to 950 MBoe
- Whiting Sanish Three Forks: 400MBoe
- Whiting Lewis and Clark: 400MBoe
- Parshall Bakken: 816MBoe
- Oasis West Williston: 450M to 787MBoe
- Oasis East Nesson: 393M to 675MBoe
- Continental (CLR) Dual Zone: 603MBoe
- GMX Resources (GMXR) Model: 500M to 600MBoe
- LINN Energy (LINE) Sanish Bay/Westberg: 500MBoe
- Denbury (DNR) Bakken: 575MBoe
- Enerplus (ERF) Fort Berthold: 600M to 800MBoe
- Abraxas (AXAS) North Fork: 500MBoe
- Brigham: 500M to 700MBoe
- QEP Resources (QEP) Ft. Berthold Bakken: 400M to 1000MBoe
- QEP Resources Ft. Berthold Three Forks: 350M to 600MBoe
As you can see, these companies vary significantly in EURs. For some, this list is a bit mind numbing, but these estimates start to make sense when you compare one area to the other. Some of these companies have developed specific EURs for each area it is operating in. Others have given estimates, which should pertain to an average throughout its prospects in the Williston Basin. Also, most of these estimates are related to the middle Bakken only, which is understandable given it has seen more development than the upper Three Forks.
Whiting's Sanish EURs vary from 450M to 950MBoe. I believe the lower end of this number is an estimate of some of Whiting's initial wells in this field, with the high end of estimates being more recent long laterals. Given the proximity of the Ross, Alger, and Parshall fields, they could all fall under this estimate. QEP's estimate is the first to my knowledge of 1000MBoe. Its acreage is south of Sanish Field, and if this is correct we could see wells as good as the Sanish straight south to the southern border of Fort Berthold. Keep this in mind as Kodiak's Dunn County acreage is in close proximity to the southwest of QEP's leasehold. In effect, this shores up the high end of expectations to the east of the Nesson Anticline. Whether these EURs are correct, IP rates have delineated this the best area in the Williston Basin.
To the west of the Nesson Anticline is not as consistent. If there is a rule of thumb, the closer to the Nesson Anticline the well is, the better the results. Oasis has had the best results in West Williston in its Indian Hills Prospect. Newfield has had very good results in its Westberg Prospect. This is the closest to the Nesson Anticline. Brigham's Roughrider IP rates have been the greatest the further east the acreage is.
In summary, east of Nesson continues to have the highest expectations in the Basin. The question remains as to how good the acreage west of Nesson is. The closer the well is to the Nesson Anticline has a direct correlation to higher IP rates and EURs. Given this finding, it is possible Kodiak has a higher number of very good acres compared to Brigham. Don't take this wrong, as Brigham has more than double Kodiak's acreage, but most of its leasehold is farther west.
The 40100 net acres in Brigham's Ross/Sanish/Parshall acreage is some of the best in the Bakken, but may only be slightly better than Kodiak's Polar and Koala plays which total approximately 90000 net acres. If the Smokey play is added, its 116000 net acres. It is my conclusion that Kodiak has a much better good acre concentration than Brigham. This does not mean Kodiak's acreage is worth more than Brigham, it just means there is a very good possibility it will produce more oil per acre. Remember EURs are estimates, and IP rates can vary significantly in the first week or two of production. The numbers from Koala have been nothing short of great. Koala 9-5-6-5H had a 90-day IP rate of 1103 Boe/d. This was done with a lateral shorter than 9000 feet long and only 24 stages. Watch these numbers closely as this is the most important variable with respect to Kodiak's future.
Disclosure: I am long KOG.
Additional disclosure: This is the sixth part of a series which tries to prove how good Kodiak's acreage is. This is not a buy recommendation.