Bakken Update: Continental Resources' Well Results Are Getting Better

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Includes: KOG, OAS, STO, WLL
by: Michael Filloon

I have done a series of articles covering recent well results by Bakken operators. Information garnered from this shows improvements in 90-day IP rates. The main reasons are stimulation improvements from increase stages and proppant, but these companies are doing a better job in all phases of production. It wasn't long ago we were seeing 10 stage short laterals, and now long laterals with 30+ stages are common place. In my opinion, the two best operators are Kodiak (NYSE:KOG) and Brigham (NYSE:STO). It should be noted both have very good acreage positions as well. Kodiak's Polar and Koala prospects are its best, while Brigham's Alger Field acreage is thought by some to be the best in the Bakken. Whiting (NYSE:WLL) has had some very good completions in Sanish Field, and has been the first to work the Pronghorn. Oasis (NYSE:OAS) is getting much better, with significant upside in the Camp Field area.

Continental (NYSE:CLR) may be the best way to follow the Bakken. It has a large acreage that covers a significant area in North Dakota and Montana. Because of this, it has well results in virtually every area of the Williston Basin. Here are its 4Q 2011 and 1Q 2012 well results.

 

 

Continental's RecentBakken/Three Forks Well Results
Well Name IP Rate (BO/d) 90-day IP Rate Stages Volume Proppant Choke Field
BURIAN 1-27H 854   30 59471 2918184 18/64 ST. DEMETRIUS
CHRETIEN 1-31H 43   15 26289 1339970   DEMORES
BEAVER CREEK STATE 1-36H 829 413 22 39318 2192730 16/64 BEAVER CREEK
ENTZEL 1-26H 1208 537 30 52809 2825927 20/64 CABERNET
HAAG 1X-21H 230 128 27 50487 2237626 22/64  
JACK 2-9H 678   30 61626 2963127 22/64 MURPHY CREEK
BENNER 1-6H 905   30 52751 2790829 14/64 JIM CREEK
GRANDE 1-18H 814 319 30 60174 2884106 22/64 JIM CREEK
CATRON 1-26H 753 263 30 59253 2924500 18/64 LITTLE KNIFE
LAZORENKO 1-2H 288           LITTLE KNIFE
KUKLA 3-16H 1301   30 59945 2938591 29/64 CHIMNEY BUTTE
CANDEE 3-9H 813   27 53562 2687948   CHIMNEY BUTTE
BENNER 1-6H 905   30 52751 2790829 14/64 JIM CREEK
GRANDE 1-18H 814 319 30 60174 2884106 22/64 JIM CREEK
DVIRNAK 2-7H 744 496 30 59132 2132669 24/64 JIM CREEK
DVIRNAK 3-7H 831 604 30 59132 2959045 16/64 JIM CREEK
PLETAN 3-18H 1106 544         JIM CREEK
PLETAN 4-18H 1294 387 30 59465 3015281 24/64 JIM CREEK
THORVALD 2-6H 659 411 30 1237 2985661 14/64 RATTLESNAKE POINT
KATE 2-19H 1071 435 30 51698 1633905 16/64 BIG GULCH
MCKENZIE 1-34H 223 145 38 78412 4396529 18/64 MONDAK
NILS 1-25H 717 297 30 60541 3082535 20/64 HAYSTACK BUTTE
PALMER 1-25H 533 313 30 46856 2855979 12/64 HAYSTACK BUTTE
BAILEY 3-24H 877 316 24 37568 2281679 20/64 PERSHING
BAILEY 2-24H 495 244 24 4330 2046060 16/64

PERSHING

WILEY 2-25H 309 361 30 53887 2832894 16/64 PERSHING
WILEY 3-25H 724 391 30 53150 2744862 20/64 PERSHING
DURHAM 1-2H 1138 637 30 54433 2876090 18/64 NORTH TOBACCO GARDEN
ROCHESTER 1-24H 838 422 29 52385 2773204 14/64 NORTH TOBACCO GARDEN
JERRY 1-8H 472 378 30 53605 2884685 12/64 POE
BERLAIN 1-30H 1094 418 30 55120 2856031 20/64 PATENT GATE
QUALE 1-1H 1423 765 30 53959 2890910 24/64 ANTELOPE
MACK 3-2H 571 306 15 25820 1422043 18/64 ANTELOPE
MACK 4-2H 901 335 15 26545 1258927 22/64 ANTELOPE
BARKLEY 1-5H 606 416 30 54211 2856278 18/64 TWIN VALLEY
BOULDER 1-4H 906   30 60847 2879656 20/64 BANKS
CHARLOTTE 2-22H 692 356 30 51639 2279778 18/64 BANKS
PATTERSON 1-13H 929 572 30 54408 2559960 18/64 CAMP
MIRAMAR 1-32AH 783 330 30 54832 2409639 18/64 ELK
STANGELAND 1-18H 519 273 17 34265 1345612 22/64 CRAZY MAN CREEK
TRUMAN 1-23H 954 581 30 55984 2590035 18/64 LONG CREEK
TODD 1-6H 691   30 53821 2878837 16/64 BAKER
TALLAHASSEE 1-21H 602 341 30 53802 2905530 16/64 INDIAN HILL
CINCINNATI 1-30H 567   30 46503 2838149 16/64 INDIAN HILL
REHAK 2-25H 765 450 30 52949 2773163 18/64 ALKALI CREEK
SALEM 1-6H 671 388 30 60927 2569111 22/64 DOLLAR JOE
RALEIGH 1-20H 558 438 30 58617 2538284 20/64 DOLLAR JOE
PIERRE 1-21H 480 320 30 59868 2530067 24/64 DOLLAR JOE
MADISON 1-28H 182 383 30 55755 2514240 18/64 DOLLAR JOE
ANNAPOLIS 1-29H 634 387 30 57906 2542450   DOLLAR JOE
DOVER 1-30AH 801 460 30 60354 2585008 24/64 DOLLAR JOE
TOPEKA 1-1H 645 407 30 61017 2588704 24/64 BROOKLYN
JUNEAU 1-2H 740 348 30 53108 2542440 24/64 BROOKLYN
HELENA 1-7H 993 504 30 60099 2560300 20/64 BROOKLYN
SPRINGFIELD 1-8H 667 511 30 58190 2536946 22/64 BROOKLYN
BISMARCK 1-9H 816 499 30 51219 2557885 18/64 BROOKLYN
SACRAMENTO 1-10H 542 466 30 57605 2540610 22/64 BROOKLYN
ADDYSON 1-23H 871 482 30 54619 2553226 24/64 BROOKLYN
BOISE 1-24H 388 381 27 48966 2542515   BROOKLYN
RICHMOND 1-26H 764   30 57517 2546260   BROOKLYN
MILLOY 1-15H 148 183 24 39817 2212526 18/64 HEBRON
STOCKTON 1-28H 937 460         EAST FORK
KING 1-5H 699   30 51674 3283208 32/64 OLIVER
MARCY 1-24H 472 417 30 60354 2575985 24/64 OLIVER
WILHELM 1-21H 519   30 59946 2561870 20/64 LONE TREE LAKE
RIXEY 1-28H 682   30 59740 2598954 22/64 LONE TREE LAKE
RUFFING 1-34H 554 334 30 53634 2562703 20/64 LONE TREE LAKE
COVELESKI 1-35H 298 353 30 57401 2506870 20/64 LONE TREE LAKE
GARNER 1-32H 564   30 63864 3387215 26/64 RAINBOW
MCCOY 4-18H 541   30 54732 2591592   NORTHWEST MCGREGOR
SEVRE 1-22H 279   30 62196 3450100 26/64 CORINTH
GROTE 1-21H 237 243 30 59774 3526935 32/64 NORTH TIOGA
MCGINNITY 3-15H 770   30 58549 2997059 44/64 STONEVIEW
LINDELL 3-10H 325   30 58272 2985890 64/64 STONEVIEW
MCGINNITY 4-15H 487   30 53970 3302630 32/64 STONEVIEW
ROSENVOLD 1-30H 492 282 24 48849 2810300 34/64 HAMLET
HAMLET 4-2H 609 448 24 48240 2794887 30/64 HAMLET
SALO 2-35H 429 321 24 45091 2481543 32/64 HAMLET
SALO 3-35H 756 327 23 41423 2609983 28/64 HAMLET
HAMLET 3-2H 240 441 24 51058 2587836   HAMLET
INGEBRET 1-8H 314   30 62319 3496680 48/64 WILDROSE
BRUNDTLAND 1-15H 249   30 62303 3480410 32/64 WILDROSE
TYLER 1-19H 566 360 30 59848 3566610 32/64 UPLAND
LAKEWOOD 1-20H 122 177 21 43278 2449285 36/64 UPLAND
HAGERUP 1-28H 292   30 63176 3480027 32/64 UPLAND
SCHILKE 1-30H 421   11 17643 1421093 36/64 UPLAND
Click to enlarge

There are several factors of focus with respect to Continental's recent results. The first is the fast expansion of stages to 30. Last year at this time, it was consistently doing 20 stage completions on its long laterals. It continues to choke back production, for the purpose of keeping pressure high with in the well for a longer period of time. I have received questions about this specific variable on several of my articles. Theories on well pressure are complex, so I will try to explain in the most simplistic way I can. It is believed by some oil producers that keeping well pressures high will lower initial production, but provide better production over the long haul. Also, longer time frames are seen until the well will be placed on artificial lift. Some fear not choking back production could possibly damage the well. Brigham (Statoil) uses a choke that allows crude to leave the well at a much quicker rate, and is the reason for its higher IP rates. What has been interesting, is longer term production has been better for Brigham than Continental, but Brigham's completion methods have been done with more proppant, higher water volumes, and larger number of stages. Because of this we are not necessarily comparing apples to apples. Further research is needed to determine the effects of well pressure, and this will take time.

In summary, Continental has had some very good results. These results are a huge step up from just a year ago based on 90-day IP rates. 90-day IP rates are used as what I believe to be the absolute minimum of time to properly model well results. This number can be used to determine depletion rates, which gives an estimated ultimate recovery or EUR. Its completions average 90-day IP rates of 400 to 500 BO/d, but several of its wells are 600 or better. Its QUALE 1-1H had a 90-day IP of 765 BO/d, which is competitive with many of the best wells in the Williston Basin. Not only are results getting better, but Continental is also beginning its ramp up of pad drilling. Continental will not only beat expectations in the amount of crude produced per well, but will also be ahead of schedule on the number of wells it completes. One thing to watch in the second quarter is the quick pullback in the price of crude. Many of these companies (Continental included) had large mark to market derivatives losses in the first quarter. Much of these losses will find their way back on balance sheets in the second quarter if oil prices remain below $90/Bbl. Right now Continental is trading at a large discount, and has value here. Given the upside to its production numbers, and large hedged position it could have a very good second quarter.

Disclosure: I am long KOG.

Additional disclosure: This is not a buy recommendation, but I do own Kodiak and have been adding below $8.