Bakken Update: Comparing Kodiak's Acreage To Newfield's

 |  Includes: CLR, COP, EOG, HES, KOG, MDU, NFX, STO, WLL, XOM
by: Michael Filloon

In my last article, I compared Kodiak (NYSE:KOG) to Brigham (BEXP) in an attempt to show how good Kodiak's Koala wells are. When looking at Kodiak's recent results and comparing all of the variables, these wells could be as good as some of the best locations in Ross.

This involves some speculation, as it is difficult to know what will happen in a play this new. It is important to realize that the Koala results are much newer and benefit from technologies and experience that was not being used just a year or two ago. When I say the Koala could have better ultimate recoveries than some Ross or Sanish wells, it does not necessarily mean the geology is better, but drilling and completion methods have improved enough to compensate.

Before Brigham was purchased by Statoil (NYSE:STO), it had seven of the top ten IP rates in the Bakken, and For a short time Brigham had all ten. Initial production rates are the main piece of information used to develop estimated ultimate recovery. The only problem is this number can be manipulated. The 24 hour IP rate is generally figured by taking a full 24 hours of production for calcuation. It is rumored some companies take the best hour of production and multiply that number by 24. This can produce an inflated IP rate. I am unsure who is doing this, but it could be why wells near Kodiak's Koala and Polar projects can be drilled and completed with the same lateral length, number of completions, and choke, but have great differences in initial production. As I have reported, Continental (NYSE:CLR), Hess (NYSE:HES), Burlington (NYSE:COP), Fidelity (NYSE:MDU) and XTO (NYSE:XOM) just to name a few, have had lower results than Kodiak, Brigham, Newfield (NYSE:NFX) and Whiting (NYSE:WLL). In my opinion, all of these operators are good, but some may be using different math.

Much of the best results to date had been east of Nesson, until Brigham and then Newfield reported very good results west. Brigham's big results were in its Roughrider prospect, but were still much lower than its Ross wells. Newfield's Westberg wells are further east than the Roughrider and had 24 hour IP rates that did compete with Ross. Keep in mind, this area is in northeast McKenzie and southeast Williams counties is close to the river. Brigham's Roughrider seems to get better moving to the southeast, which backs this assumption.

Kodiak's Koala 24-hour, 60- and 90-day IP rate results are:

  1. Koala 9-5-6-12H3: 1990 Bo/d, 680 Bo/d and 645 Bo/d
  2. Koala 9-5-6-5H: 2526 Bo/d, 875 Bo/d and 790 Bo/d
  3. Koala 3-2-11-14H: 2816 Bo/d, 890 Bo/d and 860 Bo/d (83-day IP rate)
  4. Koala 3-2-11-13H: 2514 Bo/d, 775 Bo/d and 705 Bo/d

In Bakken Update: Is Kodiak's Acreage Better Than Brigham's, we found that Kodiak's 60 and 90 day numbers declined much less from its 24 hour IP rate, than Brigham's. Much of the hype surrounding Brigham's results was based on its first full day production, as longer term rates settled back to more realistic numbers. I am not badmouthing Brigham, as my research has found its Ross acreage to have the best long term production rates in the Williston Basin. I am just acknowledging I may have been too optimistic on EURs. In Bakken Update: How Good Is Kodiak's New Acreage? Part VI, Bill Costello commented on his model of Koala 9-5-6-5H (this model is in Boe/d). His numbers (which are conservative), have this well at an EUR of just over one million barrels of oil equivalent. Points to take away from this are:

  1. 1000MBoe is an EUR that is exceptional. There are only a few other wells in the Williston Basin that have produced this type of estimate. This was the first to my knowledge west of Nesson.
  2. This well was completed with 24 stages. It is generally excepted wells produce much better with 30+ stages. Brigham has consistently been completing its wells with 36 to 38 stages. Oasis surveyed five wells and found increasing its stages from 28 to 36 created a 20% to 30% increase in the 90 day IP rate. Keep in mind the number of stages is only a part of the completion process to improve production.
  3. Koala 9-5-6-12H3 is a Three Forks well. This, in my opinion is as exciting as the Koala 9-5-6-5H having an EUR of a little over 1000MBoe. Having very good results from both the upper Three Forks and middle Bakken creates a dual zone EUR of what I would estimate at 1700MBoe.

Newfield is a more interesting comparison to Kodiak. The reason is the close proximity of its acreage. When the comparison is made of Kodiak to Brigham, its acreage is not close enough to evaluate the Polar and Koala leaseholds. In effect, the comparison was more about Ross, the Roughrider and the Polar/Koala, which are no where near one another except the most eastern point of the Roughrider. Using Newfield's numbers we get a more complete result of northeast McKenzie County. Newfield's Westberg field, in my opinion, is its best acreage. These are three of its newest completed wells, and its 24-hour, 60-day, and 90-day IP rates:

  1. Clear Creek Federal 1-26H: 2166 Bo/d, 417 Bo/d, and 347 Bo/d
  2. Gladys 2-9H: 2955 Bo/d, 791 Bo/d, and 630 Bo/d
  3. Wisness Federal 152-96-4-2H: 3731 Bo/d, 1117 Bo/d and 1032 Bo/d (83-day IP rate)

It is interesting these three wells were all short laterals, which is half the length Kodiak's Koala wells. Wisness Federal had 26 stages which is two more than in the Koala wells. It seems Newfield believes it can use short laterals and still have very good production numbers as long as it uses a large number of stages. Clear Creek Federal 1-26H, has seventeen stages. This seems to be the best reason for this well having lower production Westberg looks to be an excellent field. These numbers are very good, and its short laterals have better production than a lot companies using long laterals.

In summary, Westberg is a very interesting play. Newfield's use of short laterals with a high number of stages have been very productive in this field. These are some of the best short laterals in the Williston Basin. When Newfield's wells are compared to the short laterals completed by EOG Resources (NYSE:EOG) in Parshall Field, we see Newfield coming in with much better production with its most recent wells. It is difficult to know if the drilling and completion work, or the geology are the reason for this production, but I would guess its a little of both.

This is the first part of what is intended top be a series of articles comparing Kodiak's Koala prospect to Newfield's Westberg field.

Disclosure: I am long KOG.

Disclaimer: This is not a buy recommendation.