Market Pullback Creates Value In Bakken Oil Companies, Part III

by: Michael Filloon

<< Return to Part II

In the third installment of Market Pullback Creates Value in Bakken Oil Companies I will try to list as many of the small oil companies I am aware of operating in the Williston Basin. The first two parts are here and here. A reoccurring theme is the focus of smaller companies in Roosevelt and Richland Counties of Montana. Those companies that locked into acreage early, were able to obtain large net acres. Samson (NYSEMKT:SSN) has done this with its recently announced deal in Montana's Williston Basin. It has seen a significant drop in market cap, as other oil companies have. It currently trades for $2.22/share, down from a 52 week high of $4.75. Samson's current projects are:

  • Niobrara (16391 net acres)
  • North Dakota Bakken (1200 net acres)
  • Montana Bakken (20000 net acres with a 20000 acre option)
  • Conventional DJ Basin in Wyoming (30 possible targets)

It has $55 million in cash and no debt. Samson's North Dakota Bakken acreage recently had two wells fracced. One 5,000 foot well is ready to be fracced on 640 acre spacing. There are three additional 10,000 foot wells to complete on 320 acre spacing. Samson has had some success in the North Dakota Bakken. Its acreage is in McKenzie County west of the Nesson Anticline. IP rates in the North Stockyard are:

  • Gary 1-20H had an IP rate of 2780 Boe/d
  • Leonard 1-23H had an IP rate of 900 Boe/d
  • Gene 1-22H had an IP rate of 2936 Boe/d
  • Earl was recently fracced and had an IP rate of 1300 Bo/d
  • Rodney was recently fracced and had an IP rate of 1100 Bo/d
  • Everett will be fracced in September

Samson's Montana Williston Basin (Roosevelt Project) has 2 wells planned in the third quarter. These wells are used to prove productivity of the play. Of this 20,000 net acres, Fort Peck Energy has the option to buy back 33.334%. Fort Peck can reimburse Samson's cost on the two initial wells and receive 33.334% working interest. Samson can purchase another 20,000 net acres if the first phase goes well. The last phase of this deal has Fort Peck and Samson creating an AMI to jointly acquire 50000 additional acres.

Samson's Roosevelt Project is in an area of interest for some of the best Williston Basin players. Companies next to Samson's acreage are:

  • Brigham (BEXP)
  • Continental (NYSE:CLR)
  • EOG Resources (NYSE:EOG)
  • Whiting (NYSE:WLL)

There are also very good companies in the general area of the Roosevelt Project:

  • Enerplus (NYSE:ERF)
  • SM Energy (NYSE:SM)
  • Marathon (NYSE:MPC)

The general area around Samson's Roosevelt Project has several wells in production:

  • Brigham's Rogney 17-8 (IP rate of 909 Boe/d)
  • Brigham's Swindle 16-9 (IP rate of 1065 Boe/d)
  • Brigham's Johnson 30-29 (IP rate of 2962 Boe/d)
  • Continental Baxter 1-5H (IP rate of 412 Boe/d)
  • Continental Rognas 2-22H (IP rate of 1013 Boe/d)
  • Continental Tolksdorf 1-1H (IP rate of 642 Boe/d)

When Samson first announced its Roosevelt Project, I was pessimistic. My first instinct seems to have been wrong. There are several good producing wells nearby, which are further reinforced by some very good oil companies in the general vicinity. Samson has had better luck in its North Dakota wells. Samson still has another three wells to drill in this area. All of this coupled with its Niobrara acres should produce significant cash flow to fund cap ex.

GeoResources (NASDAQ:GEOI) has 46,000 net acres in the Williston Basin. 33,200 net acres are operated. It has two operated rigs in the play with an additional rig in 2012. GeoResources has an additional 24,000 net acres in the Eagle Ford. Its proved reserves are 60% oil. 32% of proved reserves are in the Williston Basin. Average daily production has consistently increased since 2000:

  • In 2000, it produced 768 Boe/d
  • In 2007, it produced 1826 Boe/d
  • In 2008, it produced 3388 Boe/d
  • In 2009, it produced 4589 Boe/d
  • In 2010, it produced 5090 Boe/d

GeoResources Bakken play is divided into three parts:

  1. Williams County Project (25,000 net acres)
  2. Mountrail County Project (11,000 net acres)
  3. Eastern Montana Project (10,000 net acres)

In Williams County, GeoResources four wells are drilled and completed. Two rigs are running. It plans 11 to 13 wells to spud in 2011. It partnered with Resolute (NYSE:REN) in March of 2010. GeoResources has a 47.5% working interest. Three wells have been completed with Resolute as the non-operator:

  1. Carlson 1-11H (640 acre) 236 Bo/d 30 day IP rate
  2. Siirtola 1-28-33H (1280 acre) 246 Bo/d 30 day IP rate
  3. Muller 1-21-16H (1280 acres) 275 Boe/d 12 day IP rate

Two of the wells were good, but the Siirtola and Muller results lagged. There are 4 to 5 competitor rigs drilling in or around its Williams County Project. These competitors have had better results than GEOI, which can only help expectations. Oasis (NYSE:OAS) results are close to GEOI completions:

  • Horne 5603 44-9H had a 30 day IP rate of 550 Bo/d
  • Bean 5703 42-34H had a 30 day IP rate of 298 Bo/d
  • Ellis 5602 12-17H had a 30 day IP rate of 421 Bo/d

Brigham completed a well close to GeoResources and Oasis wells which was quite good:

  • BCD Farms 16-21 had a 30 day IP rate of 485 Bo/d

GeoResources completed a well to the eastern portion of its AMI with Resolute:

  • Anderson 1-24-13H (1280 acre) 372 Bo/d 30 day IP rate

Oasis (OAS) has three wells near the Anderson well:

  1. NJOS Federal 5602 11-13H had a 30 day IP rate of 375 Bo/d
  2. Sandaker 5602 11-13H had a 30 day IP rate of 440 Bo/d
  3. Somerset 5602 12-17H had a 30 day IP rate of 352 Bo/d

There is no doubt that Williams County is important to GeoResources. I am interested to see future results as it gets more comfortable in the play.

GeoResources' Mountrail County Project is operated by Slawson. Slawson is running 4 to 5 rigs. GeoResources has stated it believes Mountrail wells will have EURs between 400 MBoe and 600 MBoe. Williams County and Eastern Montana will be between 350 MBoe and 500 MBoe. In summary, I think GeoResources has turned the corner and could begin to produce good well results.

Sundance Energy (OTCPK:SDCJF) has 8,667 net acres in the Williston Basin. Its average cost/acre is $279. Its Pheonix Prospect is in McKenzie County. There is one well on the Pheonix Project producing 20-30 barrels/day. Along with McKenzie County, Sundance has acreage in Williams and Mountrail. As of the end of last year, Sundance had total proved reserves of 6709.6 MBoe. Of this total, the Williston Basin accounts for 6281 MBoe. Of the six plays Sundance is in, it has 117,446 net acres. The majority of Sundance's growth is coming from the Williston Basin and Niobrara. Due to the very slow fourth quarter of last year (poor weather) Sundance saw its first decline in production in well over a year. Before that Sundance had an 80% annual growth rate. It has seen an 84% increase in cash margin/Boe to $50.29/Boe. Sundance is a pure spec play, and it will be interesting as to how quickly it can increase production.

Mountainview Energy (OTCPK:MNVWF) is a play on the Williston Basin Bakken and the Alberta Bakken. Its Lake Frances Alberta Bakken Project has 60,000 net acres. Mountainview will spend $400,000 on two vertical wells. It has 2,500 net acres in its Red Creek Field, and plans to spend $700,000 on two vertical wells. These two projects are plays on the Alberta Bakken. Its Stateline Project has 11,000 net acres. Mountainview will spend $22 million in capital this year on one vertical and four horizontal wells. There are several good companies with acreage near Mountainview's Stateline Project:

  • Brigham

  • Kodiak (NYSE:KOG)
  • EOG Resources

  • GeoResources

GeoResources' Carlson 1-11H well had an IP rate of 685 Bo/d using a short lateral. Mountainview states it will continue to pursue acreage acquisitions and plans on permitting its first four wells in the Williston Basin.

There are several high growth oil companies in the Williston Basin that have value after the recent market sell off. Some investors look at market pull backs as a decrease in invested dollars. In the short term this is true, but more importantly it is an opportunity to start or add to positions. Some of the fastest growing companies have pulled back to valuations not seen in quite some time. Because of this it may be a good time to get into names with very good long term outlooks.

Disclosure: I am long BEXP, KOG. This is the continuation of a list of small oil companies operating in the Willston Basin. It is only a list and not a buy recommendation. Be careful with any investment as it can result in losses to original investment.