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In part one of this series, I covered Triangle Petroleum (NYSEMKT:TPLM) and Oasis (NYSE:OAS). Triangle has a significant Bakken/Three Forks acreage for a company of its size. Oasis had been in Brigham's shadow, until its recent purchase by Statoil (NYSE:STO). Look for both to outperform in 2012. There are several Bakken players I am bullish on, but I believe we will see strong oil prices throughout next year. Bakken names are also insulated from water shortages that have made things difficult for oil producers in the Eagle Ford or Permian Basin. A mild winter in North Dakota and Montana has helped to get these names off to a good start. Look for the Bakken names to come in at the top end of expectations in the fourth quarter.

GeoResources (NASDAQ:GEOI) is a small cap with acreage in the Williston Basin, Eagle Ford, Permian, Austin Chalk and southern Louisiana. GeoResources has 46000 net acres in the Bakken with 33200 net acres operated. The other focus area is the Eagle Ford, with 25000 net acres. Only 60% of reserves and 65% of production are from oil. Keep in mind that its Eagle Ford locations have a high percentage of liquids from oil and natural gas liquids.

GeoResources currently has 11000 non-operated Bakken acres in Mountrail County, with Slawson as the operator. It has an average working interest per well of 8%. Big Bend and Van Hook fields are in the southwest corner of Mountrail, near Statoil's (STO) Ross, and Whiting's (NYSE:WLL) Sanish fields.

GeoResources also has 25000 net acres in Williams County. Initial production from its completed Bakken wells has ranged between 500 Bo/d and 900 Bo/d. Just to the south of GeoResources acreage in Williams County is a well by Oasis, Bean 5703 42-34H. This well had an IP rate of 1346 Bo/d. Although production tapers off significantly the closer the location is to Divide County, GeoResources has what looks to be a profitable leasehold. Two rigs are running here and it has signed a deal with Resolute (NYSE:REN). GeoResources retains 47.5% working interest.

GeoResources' Williams County leasehold has drawn little attention. It has not produced the IP rates of Alger or Poe fields, and because of this it has been ignored. There is justification for improved IP rates and EURs by way of other oil producers near by. Just south of GeoResources' Williams County leasehold, Brigham had several successful wells:

  1. Kalil Farms 14-23 1-H: IP rate of 1603 Boe/d, 60-day IP rate of 501Boe/d
  2. Macmaster 11-2 1-H: IP rate of 1129 Boe/d, 60-day IP rate of 380Boe/d
  3. BCD Farms 16-21 1-H: IP rate of 1776 Boe/d, 60-day IP rate of 530Boe/d
  4. Kalil 25-36#1H: IP rate of 1586 Boe/d, 60-day IP rate of 475 Boe/d

Oasis has also been active in Bull Butte Field. Recent well completions have produced more than 1000 barrels of oil in the first 24 hours. Newfield (NYSE:NFX) has producing wells to the north of GeoResources. These wells have not produced as well as hoped, with production about half that of the Oasis wells to the south.

GeoResources has 10000 net acres in eastern Montana. 8200 of these acres are operated with the other 1800 net acres being non-operated. Average working interest in this project is 50%. GeoResources recently completed its first operated Bakken well in Montana.

This article has a Bakken focus, but GeoResources has very good acreage in the Eagle Ford. It has 25000 net acres, of which 20300 are in Fayette County and 23000 in the oil window. This acreage may very well be better than GeoResources' Bakken leasehold. Its acreage in Gonzales County is the most important with respect to production rates. The reason is Fayette County is directly to the northeast of Gonzales County, which has had a moderate rate of drilling activity providing estimates that help to show the upside to Fayette.

GeoResources' Fayette County well results in the Eagle Ford have been good:

  1. Black Jack Springs#1H: 30-day IP rate of 369 Boe/d
  2. Flatonia East #1H: 30-day IP rate of 391 Boe/d
  3. Flatonia East#2H: 30-day IP rate of 465 Boe/d

These well results improved to the south and west. This would stand to reason as EOG Resources' (NYSE:EOG) well results have been much better than GeoResources in Gonzales County:

  1. Hill Unit #1: IP rate 1461 Bo/d+1.0 MMcfd (30-day IP 829 Bo/d)
  2. HIll Unit #3: IP rate of 1734 Bo/d+1.3 MMcfd (30-day IP 959 Bo/d)
  3. Meyer Unit's best well: IP rate of 2918 Bo/d+2.7 MMcfd (30-day IP rate 1555 Bo/d)
  4. King Fehner Unit's best well: IP rate of 1487 Bo/d+1.6 MMcfd (30-day IP rate 997 Bo/d)

These EOG Resources' wells are in northeast Gonzales, which is in the same general area as GeoResources, and not far from its Fayette leasehold. EOG Resources has 535000 net acres in the Eagle Ford, and results have been consistent throughout. This is different than the Bakken, as results in northeast McKenzie County are much better than northwest McKenzie. Magnum Hunter Resources (NYSE:MHR) also has done well in this area:

  1. Oryx Hunter #1H: IP rate of 2044 Boe/d
  2. Kudu Hunter #1H: IP rate of 1590 Boe/d
  3. Southern Hunter #1H: IP rate of 1321 Boe/d

Penn Virginia Corp (NYSE:PVA) is also in this area:

  1. Gardner #1H: IP rate of 1247 Boe/d
  2. Hawn Holt #9H: IP rate of 1877 Boe/d

Eagle Ford wells have shown marked increases in production with an increase of stages, which have been around 20 on a half mile lateral. EOG Resources has been ahead of the curve, as they continue to outperform. It is my guess given EOG's statement the oil window is consistent, that GeoResources will have numbers this good, once they get comfortable in the play. Further proof of this is seen in neighboring competitors in Gonzales and Fayette counties. I believe its Bakken acreage is better than average, and should see EURs in the 500 MBoe range. Its Eagle Ford acreage will produce around the same if not better, but will do this with half mile laterals versus the Bakken mile long laterals. Watch its results closely, as we are seeing improvement that gives a better idea how good its acreage is. GeoResources has value here, but with execution it will be a play on growth.

Source: Bakken Update: What To Buy In 2012 Part II

Additional disclosure: This is the second part of a series on my best ways to play small cap oil and gas in the Bakken for 2012. It is not a buy recommendation.