Bakken Update (Part III): McKenzie And Williams Counties Are The Next Emerging Plays

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Includes: APA, CHK, CLR, COP, DNR, EOG, EQNR, ERF, HES, KOG, OAS, SM, XOM
by: Michael Filloon

<<Click here for part 1

In the third part of this series, I will continue to address very good initial production numbers in Williams and McKenzie counties. This article will focus on well results around Kodiak's Koala wells. SM Energy (NYSE:SM) is a company with excellent acreage in several U.S. land plays. It has a conservative balance sheet, which will come in handy if problems persist in Europe. SM will continue to work its Eagle Ford acreage as its primary, but its Bakken acreage still receives a significant portion of capital at $190 million. 84,000 of its 204,000 net acres are in Divide, Williams and McKenzie counties. SM is currently working these fields:

  1. Poe
  2. Camp
  3. Wildcat
  4. Colgan
  5. Ambrose
  6. West Ambrose
  7. Baker
  8. Elk
  9. Bear Den
  10. Indian Hill

Most of these fields are in north McKenzie County next to the river. Indian Hill, Baker and Elk are fields near Hardscrabble. Hardscrabble is significant due to EOG Resources' (NYSE:EOG) Hardscrabble 13-3526H which had an IP rate of 1474 Bo/d. This well was better than some of its recent wells in Mountrail County.

Indian Hill has had some very good producers. Oasis (NYSE:OAS) has acreage in this field and its well Missouri 5302 44-35H had an IP rate of 1999 Bo/d (101053 barrels of oil produced since August of 2010). Denbury's (NYSE:DNR) Joseph 11-1H produced an IP rate of 1524 Bo/d. XTO's (NYSE:XOM) Dedrick 24X-32 had an IP rate of 934 Bo/d. This well produced over 14000 barrels of oil in its first two months. SM Energy had initially worked this field for the Red River pay zone. In November of last year it completed Fossum 15-35H. It had an IP rate of 674 Bo/d. Continental (NYSE:CLR) has a well in confidential status in Indian Hill, which was spud in April. We should get the results on this well soon.

SM Energy may find even better results in its locations in Poe Field and the surrounding areas. SM has interests in these fields:

  1. Stenberg 16-8H of Wildcat Field
  2. Wold 15-33H of Wildcat Field
  3. Nora 13-9H of Poe Field
  4. Jaynes 16-12H of Poe Field: IP rate of 1067 Bo/d (produced 30516 barrels of oil in the first 69 days)
  5. Leiseth 16-13H of Poe Field
  6. Stenehjem 15-9H of Poe Field
  7. Leiseth 1-24H of Poe Field
  8. Syverson 16-34H of Camp Field

Continental Resources (CLR) is also active in this area:

  1. Wahpeton 1-16H of Banks Field
  2. Chicago 1-26H of Banks Field: IP rate of 540 Bo/d
  3. Steele 1-24H of Banks Field
  4. Seattle 1-35H of Camp Field: IP rate of 683 Bo/d
  5. Missoula 1-21H of Camp Field: IP rate of 749 Bo/d
  6. Akron 1-27H of Banks Field: IP rate of 443 Bo/d
  7. Norfolk 1-1H of North Tobacco Garden
  8. Jerry 1-8H of Poe Field
  9. Charlotte 1-22H of Banks Field: IP rate of 496 Bo/d

Oasis is active in this area:

  1. Hysted 5200 44-19H of Camp Field
  2. Ogle 5200 44-19H of Camp Field
  3. Brier 5200 42-22H of Camp Field
  4. Angell 5200 31-28H of Camp Field: IP rate of 2887 Bo/d
  5. Bering 5200 12-29H of Camp Field
  6. Sparrow Federal 5201 42-11H of Camp Field: This well was spud in January of this year and is confidential, but rumor is it is a very good producing well.

Brigham (BEXP) is a top player in these fields:

  1. Lloyd 34-3 1-H of Sandrocks Field: IP rate of 3240 Bo/d
  2. Banks State 16-21 1-H of Banks Field
  3. Enderrud 9-4 1-H of Banks Field
  4. Bratcher 10-3 1-H of Ragged Butte Field: IP rate of 3206 Bo/d
  5. Patent Gate 7-6 #1H of Sakakawea Field
  6. Forest 26-35 #1H of Camp Field
  7. Hovde 33-4 1-H of Sandrocks Field: IP rate of 1933 Bo/d
  8. Bugs 27-22 1H of Poe Field
  9. Abelmann 23-14 1-H of Camp Field: IP rate of 3745 Bo/d
  10. Gunderson 15-22 1-H of Banks Field: IP rate of 2746 Bo/d
  11. Heinz 18-19 1-H of Wildcat Field

Burlington Resources (NYSE:COP) is beginning to test this acreage:

  1. Abercrombie 44-12H of Elidah Field: IP rate of 1603 Bo/d
  2. West Kellogg 24-31H of Elidah Field: IP rate of 321 Bo/d

Kodiak (NYSE:KOG) has had very good success in this area:

  1. Koala 9-5-6-12H3 of Wildcat Field:IP rate of 1919 Bo/d
  2. Koala 9-5-6-5H of Poe Field:IP rate of 2526 Bo/d
  3. Koala 13-36-25-3H of Poe Field
  4. Koala 14-32-29-4H3 of Banks Field
  5. Koala 2-25-36-16H3 of Poe Field
  6. Koala 2-25-36-15H of Wildcat Field
  7. Koala 14-32-29-2H3 of Banks Field
  8. Koala 3-2-11-13H of Poe Field: IP rate of 2514 Bo/d
  9. Koala 15-31-30-3H3 of Poe Field
  10. Koala 2-25-36-14H3 of Wildcat Field
  11. Koala 3-2-11-14H of Poe Field: IP rate of 2816 Bo/d
  12. Koala 14-32-29-3H of Banks Field
  13. Koala 15-31-30-2H of Poe Field

Hess (NYSE:HES) is also present in these fields:

  1. 2WX7-1H of Banks Field
  2. Rolfson 21-1H of Siverston Field

Denbury (DNR) has a significant acreage in this portion of McKenzie County:

  1. Bergem 44-28NWH of Tobacco Garden Field
  2. Lawlar 34-10NWH of North Tobacco Garden Field:IP rate of 922 Bo/d
  3. Amundson 44-22NWH of Siverston Field
  4. McCoy 44-23NWH of Siverston Field
  5. Jore 34-22NWH of North Tobacco Garden Field
  6. Loomer 34-4NWH of North Tobacco Garden Field
  7. Nelson 24-11NEH of Garden Field

Enerplus (NYSE:ERF) was in the Wildcat Field, but its one well had its permit cancelled. Chesapeake (NYSE:CHK) and Apache (NYSE:APA) both use to have acreage in these fields and had worked the Madison pay zone, but left the play after much of these wells were not commercial. Private companies like Slawson, Zenergy and Zavanna are all in this area. The number of big oil companies in these fields helps to legitimize its value. Up until a few months ago, only the middle Bakken was being worked, but Kodiak's Three Forks focused Koala well seems to have changed this. Over the past two years, there has been a significant increase in IP rates. Average results for middle Bakken wells in 2009 were 200 to 300 barrels of oil for the first 24 hours. Now that results are as high as 2000 barrels of oil, it makes one wonder where results will be in another two years.

Disclosure: I am long KOG, BEXP.

Additional disclosure: This is an overview of pending, confidential and reported well results around Kodiak's recent Koala results. It is just an overview and is not a buy recommendation.