Bakken Update: IP Rates Confirm Kodiak May Be In The Best Part Of The Williston Basin

Jul.14.12 | About: Kodiak Oil (KOG)

In previous articles, I have covered several oil and gas names operating in the Williston Basin. Exxon (XOM) operating as XTO Energy has completions similar to that of Kodiak, although end numbers have not been quite as good. Marathon (MRO) and Continental (CLR) EUR numbers will increase significantly going forward as both move to 30 stage fracs.

Since the sale of Brigham (STO), Kodiak (KOG) has been one of the best ways to invest in the Bakken. It operates differently than Brigham with respect to choke size, but has initial production numbers as good as any company in North Dakota. Depending who you talk to, it could be its best oil producer. Recently, Kodiak had several poor completions due to problems with new sliding sleeves. These problems seem to be rectified, as its newest completions in southern Williams County were quite good. Kodiak is starting to move to a higher number of stages, which should continue to push IP rates and EURs.

It is difficult to work out a generalized table with respect to Kodiak's recent well completions, as it has made significant acreage purchases, with the majority of those wells being drilled and completed by the previous operators. Right now, Kodiak's best prospect is the Koala. This prospect has completions in three different fields, but I would guess the geology is somewhat similar given the results. That said, I will cover Kodiak by prospect as opposed to field as I have done in my most recent articles.

2011 Kodiak Koala Prospect Results
Name Date Choke Stages Water Proppant 60Day IP 120Day IP
Koala 9-5-6-5H 4/11 36/64 24 72600 3658042 878 739
Koala 9-5-6-12H3 4/11 36/64 22 66305 2799300 678 665
Koala 3-2-11-14H 7/11


24 76510 3504900 894 790
Koala 3-2-11-13H 7/11 36/64 21 64815 3193560 777 651
Koala 2-25-36-15H 12/11 96/64 4 12248 456859 * *
Koala 2-25-36-16H3 12/11 33/64 25 79818 3323925 650 501
Click to enlarge

The table above shows a very consistent well design, with very predictable outcomes. Kodiak does a fantastic job of well drilling and completions, and much of this can be attributed to its insistence of doing things right. The Koala 2-25-36-15H is one of the wells to have trouble with sliding sleeves. This is why we see a larger choke than in the other wells. I think Kodiak knew there was trouble and tried to save the IP rate by opening up the well. This didn't work, but the well is doing a little better as production improved in the last month documented. In 24 days of production in May it produced 8613 barrels of oil. This is by no means as good as we would like to see, but at least some value was salvaged from the well. Kodiak uses a middle of the line choke (which I do like) and large amounts of water and proppant (even better). Kodiak has not strayed from its design much, but it continues to improve its process as a very good operator. In the table below I have listed Koala wells in 2012.

2012 Kodiak Koala Wells
Name Date Choke Stages Water Proppant IP Rate
Koala 2-25-36-14H3 1/12 12/64 18 53752 2290368 *
Koala 15-31-30-3H 5/12 42/64 28 90842 4192937 15Day=1235
Click to enlarge

The first well listed above had sliding sleeve issues and this is why I didn't include the IP rate. I know they have done some rework on this well so we will have to wait a while to find out how it will end up. The second well is a different story as we see a consistent increase of stages, water and proppant. Also, Kodiak used a slightly larger choke which could be a sign of things to come. I will continue to watch this well as it could show the upside to wells on confidential status.

One last bit of information concerning KOG going forward, it has some very important well results coming up in the Smokey and Skunk Creek areas. I believe these wells will come in ahead of estimates. Also, its most recent southern Williams County well Thomas 154-98-15-33-28-2H, used a 42/64 choke, 34 stages, 91455 barrels of water and 4.7 million pounds of proppant. This well had a very good result, but may come in lower than the Koala wells. I do expect the Polar Prospect to be very good, and Kodiak may have got a good deal with two operators ready to sell. I look forward to upcoming results, Kodiak is a great investment long term. It would be one of my top names to be acquired this or next year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: IP rates are in barrels of oil per dayWater volumes are in barrelsProppant is measured in pounds