Bakken Update: Occidental Is Searching For The Right Completion Design In Southwest Dunn County

Jul.17.12 | About: Occidental Petroleum (OXY)

Occidental Petroleum Corporation (NYSE:OXY) has a significant leasehold in the Williston Basin. This acreage is overshadowed by other plays like California or the Permian Basin. Occidental has accumulated a concentrated acreage, most of which is in southwestern Dunn County. This area is not one of the best Bakken acreages, but is still economic.

I have covered several companies in recent articles, and how their well design equates to IP rates. Of these companies, Brigham (NYSE:STO), Kodiak Oil & Gas Corp (NYSE:KOG) and Newfield Exploration Co. (NYSE:NFX) have done better than the others. The majority of these well results use a 24-hour IP rate when reported to investors. Although this number does give an idea of well success, it is difficult to gauge how this will translate to EURs. Because of this, I have covered IP rates that are spaced out over 60 and 120 day periods. These are much better indicators of well economics.

This article has a somewhat different approach than the previous one. In December 2010, Occidental purchased Anschutz's 180,000 acres for $1.4 billion. This valued the transaction at $7,800/acre. The majority of wells purchased in this transaction started producing in 2011. So a comparison between Anschutz-operated wells of 2011 will be drawn to Occidental's in 2012. Anschutz's 2011 results and corresponding well design are given in the table below .

2011 Anschutz Southwest Dunn Results
Name Date Choke Stages Water Proppant 60Day IP 120Day IP
Nelson 1-12-1H-143-95 3/11 22/64 22 73689 1335578 305 274
Novasio State 1-16-21H-142-95 6/11 16/64 21 63852 1310220 179 134
Harlan Rebsom 1-2-11H-143-95X 7/11 12/64 21 57169 1221567 184 94
Wannemacher 1-4-9H-142-95 9/11 24/64 18 39304 474900 238 146
Eleanor Twist 1-3-10H-143-95 9/11 22/64 13 56370 1313210 178 122
Richard Dvorak 1-33-28H-143-95 9/11 14/64 20 53946 1148216 301 194
State Jaeger 1-21-16H-142-94 11/11 18/64 35 60664 1262300 67 50
David Kovash 1-12-13H-142-96 11/11 26/64 21 47343 1276420 372 282
Laura Sadowsky 1-1-36H-142-96 11/11 20/64 30 69347 1498594 167 211
Click to enlarge

These results show why Anschutz needed to get rid of its acreage. The results were poor, even at the end of 2011 with higher stages. It used an average amount of water, with very low amounts of proppant. These variables would lead one to believe there was more wrong with the well than just its components. The State Jaeger well is probably the most disappointing well, given the low IP rates and high number of stages. The table to the bottom shows Occidental's well design in the same area of Dunn County.

2012 Occidental Results In Southwest Dunn County
Name Date Choke Stages Water Proppant IP Rate
Maurice Hecker 1-19-18H-142-97 1/12 N/A 21 57847 1172868 60Day=98
Wittinger 2-8-5H-143-95 1/12 22/64 21 54407 1302792 60Day=402
Coyote Creek 1-20-17H-142-97 4/12 24/64 21 69508 2014040 60Day=91
Elroy Kadrmas 2-10-3H-143-96 6/12 24/64 21 58636 2159770 24Hour=840
Click to enlarge

Occidental's results have been less than stellar in southwest Dunn County. I am uncertain if this is due to geology or poor completion design. In analyzing the area, southwest Dunn may be in a difficult spot. To the south and southwest of Occidental's acreage is prospective of the Pronghorn Sands. Whiting Petroleum Corporation (NYSE:WLL) and Fidelity have enjoyed success in this area. To the north and northwest is a much thicker middle Bakken and upper Three Forks. This area also tends to produce more water and natural gas than other areas of the Williston Basin.

In summary, the results to date have not been impressive. Occidental's operated results have not been any better than Anschutz, so we will have to watch how its well program progresses. If Occidental can get more well results like the Wittinger well, this play is economic. Given the low number of stages and proppant coupled with a tight choke, there could be significant upside.

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 measured in barrels of oil per day. Water volume is measured in barrels. Proppant is measured in pounds. This is not a buy recommendation.