Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
BT Lee,
The depth and cost are essentially the same - vertical thickness of the entire "sandwich" is 300 feet or less. So it is really a matter of what are the best intervals to target. If the productivity of deeper benches turns out low relative to the Middle Bakken and TF1, than the answer is trivial - deeper benches will be put on the back burner. If, on the other hand, we seem more results like EOG's, the play may see major shifts in development plans, at least in those areas where lower benches show strong results.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
Generally speaking, less communication would mean more reserves per section.
There are several separate issues here though. One is vertical communication. Are TF1 and TF2 parts of the same reservoir or are they separate reservoirs? In other words, if a lateral is landed in TF1 and fracs are "local," does it still drain, at least to some extent, the TF2? CLR's null hypothesis seems to be that the TF1 and TF2 are separate reservoirs.
Second issue is how to produce most efficiently and what wellbore pattern would yield the highest return on capital. I would think this is as much a petrophysical question as it is a technological question. Frac designs and process will probably evolve to accommodate the new requirements.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
g8trgr8t,
I think both KOG and CLR are trying to figure out the degree of communication and the optimal development pattern. CLR just seems to be doing it most comprehensively (and is spending serious exploration capital doing such science).
Vertical distance between lateral positions in TF1 and in TF2 is less than 50 feet - clearly, there can be a lot of communication if two powerful frac jobs are positioned exactly on top of each other. In reality, completions will be staggered and likely "simul-fracked" to avoid pressure sinks and minimize the overlap of fracture networks.
It seems it would take some serious testing and "array" optimization before one can conclude at what spacing the loss of production to communication becomes uneconomic. It is also a 3D problem that the industry has not faced before.
From CLR's commentary it does indeed sound that they are optimistic about the outlook. Their 160-acre pattern looks very aggressive.
With regard to COP's sale, they still have a formidable position in the central part of the basin.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
kt5744,
Sorry, it is just a formatting glitch. Those companies on the list at the end of the article that do not have tickers next to them have been mentioned in the article, with tickers serving as "links" to the company-related materials. I guess the electronic editing software simply eliminated duplicative links and the tickers got lost.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
change is the only constant,
I think this discussion is very specific to the Bakken. But you are absolutely right - the development of oil resource plays in North America is its very first inning. As I wrote in several of my erlier notes here on SA, the opportunity set is tremendous, there is no shortage of land available for explorationm, and many plays are multi-stack. We are just getting started.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
Tarponman61,
I think it's a bit premature to think of an estimate, with just a dozen wells down. It will probably strongly depend on location. However, in certain areas - as EOG's comment indicates - TF2 may add another "leg" to the reserves and be as big as TF1 or even bigger.
The important question remains, can one extract oil without cannibalizing production from the near-by horizon. Continental is running exceptionally aggressive high-density tests. The tenor of their commentary has been very optimistic. We should know some preliminary results by the end of this year and will have some confidence by the end of 2014.
Most optimistically, TF2 may have the same impact on the play that TF1 had five yeas ago.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
Jbind,
I have no knowledge if Statoil or Hess have the tested lower benches. Clearly, a lot of wells would not be released from confidential status for quite some time.
The spacing does not matter too much at this point, IMO - productivity needs to be proven first. Once there is confidence that TF2 works just as well as TF1, at least in certain areas, the entire productive "sandwich" would need to be optimized for density, the way CLR, KOG, WLL and other are doing in their pilots.
If TF2 productivity is not competitive, it may not even be drilled at this time.
I am perhaps more optimistic. A garage sale is a healthy process, in most cases. It cleans the house and helps focus attention on the core operation.
There is one important aspect to CHK: its market cap is not that large (in fact, smaller than COG's or RRC's). At the same time, the producing asset base is very significant.
CHK is certainly not a simple asset portfolio to get one's hands around (and a partial short sale may in fact be not unexpected to simplify the story). But I am not prepared to think of it as an implosion of some sort.
Just one question on earnings numbers. Your article states:
"Net income amounted to $15 million or 30 cents per share which were above investors' expectations."
Newsline I googled said the per share number is 2 cents. How many shares are there?
You also state:
"Production expenses for the current quarter declined by 18% and is to follow a similar trend in the near future."
This sounds really terrific, particularly the trend. How do you calculate the cost? Could you please provide some back up data/references/links to the source?
You further stated:
"Capital expenditure is expected to be in line with the budget."
Did you mean to compare capital expenditure to discretionary cash flow?
I was particularly intrigued by the Ohio Shale Project:
"Chesapeake announced 9% increase in production mainly attributed to the Ohio Shale Project and its strategic investment decisions."
Could you please provide some detail on the Ohio Shale Project and on the "strategic investment decisions." I really would like to understand the 9% number you are quoting. A link to the source would be very helpful too.
Many thanks indeed in advance for clarifications and thank you for an interesting read.
Marcellus, Mississippian, Permian: What Is The Acreage Worth? - Economic Analysis [View article]
TimeOnTarget,
Thank you for taking the time to read, delighted you found this note useful. CHK is clearly still "a company in transition," with a lot of challenges, but I think it has a lot of valuable assets. Existing production is obviously the most significant one. Drilling inventory that is already HBP (or will be soon) is also vast. I don't want to opine on their stock valuation in a comment (would take a detailed article to substantiate arguments), but I sense they may be worth evaluating even at these price levels (I guess, one would need to take a view on the gas price, among other things...)
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
The depth and cost are essentially the same - vertical thickness of the entire "sandwich" is 300 feet or less. So it is really a matter of what are the best intervals to target. If the productivity of deeper benches turns out low relative to the Middle Bakken and TF1, than the answer is trivial - deeper benches will be put on the back burner. If, on the other hand, we seem more results like EOG's, the play may see major shifts in development plans, at least in those areas where lower benches show strong results.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
There are several separate issues here though. One is vertical communication. Are TF1 and TF2 parts of the same reservoir or are they separate reservoirs? In other words, if a lateral is landed in TF1 and fracs are "local," does it still drain, at least to some extent, the TF2? CLR's null hypothesis seems to be that the TF1 and TF2 are separate reservoirs.
Second issue is how to produce most efficiently and what wellbore pattern would yield the highest return on capital. I would think this is as much a petrophysical question as it is a technological question. Frac designs and process will probably evolve to accommodate the new requirements.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
I think both KOG and CLR are trying to figure out the degree of communication and the optimal development pattern. CLR just seems to be doing it most comprehensively (and is spending serious exploration capital doing such science).
Vertical distance between lateral positions in TF1 and in TF2 is less than 50 feet - clearly, there can be a lot of communication if two powerful frac jobs are positioned exactly on top of each other. In reality, completions will be staggered and likely "simul-fracked" to avoid pressure sinks and minimize the overlap of fracture networks.
It seems it would take some serious testing and "array" optimization before one can conclude at what spacing the loss of production to communication becomes uneconomic. It is also a 3D problem that the industry has not faced before.
From CLR's commentary it does indeed sound that they are optimistic about the outlook. Their 160-acre pattern looks very aggressive.
With regard to COP's sale, they still have a formidable position in the central part of the basin.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
Thank you for your expert insight, much appreciated.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
Sorry, it is just a formatting glitch. Those companies on the list at the end of the article that do not have tickers next to them have been mentioned in the article, with tickers serving as "links" to the company-related materials. I guess the electronic editing software simply eliminated duplicative links and the tickers got lost.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
I think this discussion is very specific to the Bakken. But you are absolutely right - the development of oil resource plays in North America is its very first inning. As I wrote in several of my erlier notes here on SA, the opportunity set is tremendous, there is no shortage of land available for explorationm, and many plays are multi-stack. We are just getting started.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
I think it's a bit premature to think of an estimate, with just a dozen wells down. It will probably strongly depend on location. However, in certain areas - as EOG's comment indicates - TF2 may add another "leg" to the reserves and be as big as TF1 or even bigger.
The important question remains, can one extract oil without cannibalizing production from the near-by horizon. Continental is running exceptionally aggressive high-density tests. The tenor of their commentary has been very optimistic. We should know some preliminary results by the end of this year and will have some confidence by the end of 2014.
Most optimistically, TF2 may have the same impact on the play that TF1 had five yeas ago.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
I have no knowledge if Statoil or Hess have the tested lower benches. Clearly, a lot of wells would not be released from confidential status for quite some time.
The spacing does not matter too much at this point, IMO - productivity needs to be proven first. Once there is confidence that TF2 works just as well as TF1, at least in certain areas, the entire productive "sandwich" would need to be optimized for density, the way CLR, KOG, WLL and other are doing in their pilots.
If TF2 productivity is not competitive, it may not even be drilled at this time.
Bakken: 'Deep' Revolution Underway - Everything Investors Need To Know [View article]
Chesapeake Sells Granite Wash Midstream Assets To MarkWest: Quick Read [View article]
That is great color. I have not thought about RTC value, this is really interesting.
Chesapeake Sells Granite Wash Midstream Assets To MarkWest: Quick Read [View article]
I am perhaps more optimistic. A garage sale is a healthy process, in most cases. It cleans the house and helps focus attention on the core operation.
There is one important aspect to CHK: its market cap is not that large (in fact, smaller than COG's or RRC's). At the same time, the producing asset base is very significant.
CHK is certainly not a simple asset portfolio to get one's hands around (and a partial short sale may in fact be not unexpected to simplify the story). But I am not prepared to think of it as an implosion of some sort.
Chesapeake Will Continue Its Rise [View article]
Very interesting, insightful research report.
Just one question on earnings numbers. Your article states:
"Net income amounted to $15 million or 30 cents per share which were above investors' expectations."
Newsline I googled said the per share number is 2 cents. How many shares are there?
You also state:
"Production expenses for the current quarter declined by 18% and is to follow a similar trend in the near future."
This sounds really terrific, particularly the trend. How do you calculate the cost? Could you please provide some back up data/references/links to the source?
You further stated:
"Capital expenditure is expected to be in line with the budget."
Did you mean to compare capital expenditure to discretionary cash flow?
I was particularly intrigued by the Ohio Shale Project:
"Chesapeake announced 9% increase in production mainly attributed to the Ohio Shale Project and its strategic investment decisions."
Could you please provide some detail on the Ohio Shale Project and on the "strategic investment decisions." I really would like to understand the 9% number you are quoting. A link to the source would be very helpful too.
Many thanks indeed in advance for clarifications and thank you for an interesting read.
Marcellus, Mississippian, Permian: What Is The Acreage Worth? - Economic Analysis [View article]
Thank you for taking the time to read, delighted you found the notes helpful.
Marcellus, Mississippian, Permian: What Is The Acreage Worth? - Economic Analysis [View article]
EURs are clearly very relevant. However, it is often difficult to conclude if acreage is "core" before drilling wells.
Marcellus, Mississippian, Permian: What Is The Acreage Worth? - Economic Analysis [View article]
Thank you for taking the time to read, delighted you found this note useful. CHK is clearly still "a company in transition," with a lot of challenges, but I think it has a lot of valuable assets. Existing production is obviously the most significant one. Drilling inventory that is already HBP (or will be soon) is also vast. I don't want to opine on their stock valuation in a comment (would take a detailed article to substantiate arguments), but I sense they may be worth evaluating even at these price levels (I guess, one would need to take a view on the gas price, among other things...)