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Michael Filloon  

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  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    David and Alexander,

    Interesting stuff! I am currently working on some data by EOG in the Antelope Field on some 13000 to 15000 foot laterals done a couple years ago. Should be coming out soon.
    Jul 22, 2015. 10:48 AM | 2 Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    David,

    Very good points. Its impossible to predict M&A, and many operators that want to sell get very little interest anyways. We tend to like names that are smaller but have mostly core play acreage. But before we would buy them, we would need to know they can "stand on their own". Maybe a company with high debt but good assets is attractive, but a conservative approach may be the best one right now. We want to stay away from names that will have big upcoming write downs, as this will be the next big issue for names. The problem is we wont know what this is until oil prices stabilize. We think it stabilizes (at some point) with WTI around $65 and Brent in the $71 or $72 average. But we could be wrong.........
    Jul 18, 2015. 06:13 PM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Thanks David,

    We are pretty conservative with our investments when we have this type of down turn. But we do get very aggressive when things are good. I know you know this, but the time will come again where these small higher growth companies will emerge. They will emerge in plays like the Tuscaloosa and Powder River, or even one of the prospective shale plays in Mexico that could become good targets. We would sooner short a high debt name right now than buy it. Once we reach capitulation we still wouldn't buy it unless they had something special we knew someone else would want. Looking at HK (the name you brought up), they seem to be a decent operator (you would know this better than I) and I really like some of the changes they have made to well design in a short period of time, but only a small portion of acreage is what I would consider core. Although McGregory Buttes is probably core leasehold it isn't a sweet spot. But much of the acreage it bought from GeoResources and Petro-Hunt looks close to worthless. I am also not sold on El Halcon (Eaglebine), and definitely not the Tuscaloosa. Its possible a larger name would buy HK, but there is too much baggage there given the very average leasehold. I would be interested in your thoughts, David.
    Jul 18, 2015. 01:21 AM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    g8tr,

    Sorry, I don't have that one. maybe someone else has an estimate?
    Jul 18, 2015. 01:07 AM | Likes Like |Link to Comment
  • Economics Of A Shale Well - Diamondback Energy [View article]
    Zoltan,

    Everyone will have a differing estimate. But I would keep in mind that FANG, PXD, RSPP, etc. are all using production numbers based off of its specific geology and wells. If one uses an estimate for a decline curve it needs to be up to date because this changes from year to year depending on design. Averages will also change depending on where wells are being drilled. Historically, the Permian's decline curve has been much less than that of the best areas of the Bakken and Eagle Ford. So if we were to use Antelope Field in McKenzie County of ND or Gonzales County of the Eagle Ford we would get a much different curve than Midland County of the Permian. Geology affects the curve a lot. Depth, type of rock, natural gas content are just a few variables that affect this from the standpoint of geology. Well design also changes things significantly. Just a few years ago, our model for the Bakken Core had a fairly sharp decline and now we have found high intensity fracs have reduced depletion to next to nothing over the 12 months.

    Operators in Midland County like FANG, RSPP and PXD all use specific well results from the area with specific well design to model EURs. Keep in mind we think EURs are almost worthless in figuring out the economics of a well since they produce for 40 years, when payback times are more important.

    David Hughes developed his decline curve and presented it in 2012 which is out of date. Also he used an average over all wells, back when we saw 3000 foot laterals with just 6 stages all the way to the average back then of 10000 foot laterals using 30 stages. His decline curve was correct if we are using an average over time and not wells with a current design.

    Your results wouldn't be an issue if they were even close to the current models produced by current operators for the area. I would agree that FANG may be a little optimistic on EURs, but that matters little. What matters is current decline curves for current well designs in specific areas.
    Jul 18, 2015. 01:03 AM | 2 Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    David and Herb,

    I would rather take the money to the roulette table and put it on Red. A little less than 50% odds. Right now I would say that any operator with a high debt load is not one to own. Maybe after we see capitulation in oil prices (and the Euro) we will have a better idea of who the survivors will be.

    One thing I would also like to make clear with respect to "taking a chance" on riskier E&P names, is that the current situation the world is in is much different than it was when we had the credit crisis. Although demand is a component of the issues facing operators, the main issue is supply. When oil prices have been driven down by an overabundance of supply in crude, it can take longer for oil prices to recover. This means a possible, long drawn out pricing problem. I am not saying they will all fail, but this is how the market will rebalance. Names like EOG that have a great balance sheet and have proven to be a fantastic operator, are probably fine (although all names will have short term affects on share prices), but they will survive and mop up some of the leasehold that is still good when names go under. EOG probably wont decrease production much (although they will focus on producing in quarters with better prices) as operators never like to decrease production targets, because stock prices can get crushed on that type of news, but when operators default we see that production fall off relatively quickly. We are in the camp that high-grading is working and although many operators will not see payback in 18 months (they will on some, but not others) they will accept this as the new norm until World demand catches up to supply.

    In short, some operators will go out of business, which we discuss on our site, while others will not. But that is a very risky bet. Now operators with no core acreage have a much higher percentage chance of default and that is why we are seeing it pricing itself into shares. Hope this helps!
    Jul 17, 2015. 02:33 PM | 1 Like Like |Link to Comment
  • Economics Of A Shale Well - Diamondback Energy [View article]
    Zoltan,

    Thanks for that. Why did you use the Eagle Ford? Forgive me, just trying to figure out your decline curve, and why it doesn't line up with mine. Thanks!
    Jul 17, 2015. 02:20 PM | Likes Like |Link to Comment
  • Economics Of A Shale Well - Diamondback Energy [View article]
    Zoltan,

    Could you elaborate more on how you put together your decline curve?
    Jul 17, 2015. 12:55 AM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Herb,

    God Bless you as well! Have a great night!
    Jul 16, 2015. 11:10 PM | 1 Like Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Thanks lol wut.
    Jul 16, 2015. 07:41 PM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Herb,

    We don't currently own EOX. Looking at current well results and revenues generated, it will have major issues making debt payments. If you would like more info on the name we provide that at http://bit.ly/1si3hbl.
    Jul 16, 2015. 07:40 PM | 1 Like Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    lol wut,

    I thought the MB and TF1 wells were just fine in Rollefstad considering the well design. 30 stage fracs don't generally "knock the wellhead off", so those wells seemed fine considering. The only reason the pad overall didn't look that great from a production standpoint was the lower bench wells. I don't disagree with you that they should stop lower bench development. As for adding wells to sections with 1 to 3 wells already producing, I wouldn't get too worried about it. It will depend on geology, well design and spacing. The MB can carry 4 wells for sure in most areas, and the upper Three Forks in and around NE McKenzie County can do roughly the same without to many worries. Wells drilled next to another well may not produce as well, but locations with a well on each side have underproduced in our opinion depending on area and spacing. I don't think depletion necessarily will mute efforts in higher pressure areas, and this depletion can generally be made up for easily depending on well design.
    Jul 16, 2015. 07:37 PM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Hi Jonathan,

    I agree. There are couple of points I might add though. I think they are doing a better job of pushing out added production from deep sea exploration and some of the heavy crude jobs. From what I understand, the Saudis are adding production in heavier grades of crudes and maybe looking to push out some Canadian production. This isn't an absolute estimate, and I think it is taking longer than they had anticipated, but may work in the long term. Projects with very high upfront costs are going to be put on the back burner for a while, at least until the world economy improves significantly. Thanks for sharing your insights.
    Jul 16, 2015. 01:09 PM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Thanks A Farmer, I appreciate it.
    Jul 16, 2015. 01:04 PM | Likes Like |Link to Comment
  • Bakken Update: Continental Resources Completes Mega-Frac [View article]
    Thanks Ron,
    Everything is great, and thanks for asking. Definitely keeping busy.
    Jul 16, 2015. 01:03 PM | Likes Like |Link to Comment
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