Bakken Shale - The Highs And Lows Of 2009

By Eric Fox | December 24, 2009 AAA

Exploration and production companies continued development activity in the Bakken Shale, as operators crowded into this domestic shale oil play. The companies were attracted by the economics of the play as well as the attractiveness of oil relative to natural gas.

Solid Potential
Continental Resources (NYSE:CLR) was one of the biggest players in the Bakken Shale in 2009. The company has 650,000 net acres under lease on both the Montana and North Dakota sides of the play. Production from here equals 34% of the company's total. And that percentage is sure to grow as the company develops more of its acreage.

Continental Resources also provided preliminary evidence in 2009 that the area may hold more potential than previously thought. In August 2009, it reported the completion of the Mathistad 2-35H well, which was drilled by Continental Resources to test whether the Middle Bakken and the Three Forks/Sanish formations were separate producing reservoirs. The results indicate that the formations are separate in some areas, although further tests are needed to confirm. (For more on this sector, read The Industry Handbook: The Oil Services Industry.)

During 2009, Whiting Petroleum (NYSE:WLL) reported the highest initial production rate of any Bakken Shale well. The Maki 11-27H came in at 4,761 barrels of oil equivalent (BOE) per day during an initial 24-hour period in late October 2009.

Increased Production
Infrastructure is always an issue in high growth basins, and the industry attempted to keep up with the growing production in the Bakken Shale in 2009. Enbridge (NYSE:ENB) spent the year constructing its North Dakota System Expansion Phase 6, which will add 51,600 barrels per day of capacity when it is complete next year.

All this activity has helped push oil production higher in North Dakota, from 188,000 barrels per day at the beginning of 2009 to 239,000 barrels per day through September 2009, according to the North Dakota Department of Mineral Resources.

Among the smaller independent companies, Brigham Exploration (Nasdaq:BEXP) stands out for its development program in the Bakken Shale. The company has 288,000 net acres exposed to the play. (For more on evaluating these types of companies, check out Become An Oil And Gas Futures Detective.)

Brigham Exploration's latest completion announced in the Bakken Shale was the Strand 16-9 #1H in the Rough Rider Project area, which produced approximately 2,264 BOE during an early 24-hour period. Brigham Exploration also has pushed the limits on technology and drilled this well using a 26 stage hydraulic fracturing operation. The company is planning wells with even more fracturing stages in the future.

A Sign of the Times
Like other shale plays, the cost to drill dropped during 2009 due to efficiency and service cost declines. Northern Oil & Gas (NYSE:NOG) is a small cap exploration and production company with 85,000 net acres in the Bakken Shale. Chief Executive Officer Michael Reger said during the company's Q3 2009 earnings results that costs were "dramatically lower" to drill and complete wells, leading to "substantially increased well economics."

Bottom Line
The Bakken Shale enjoys an advantage over other shale plays in North America because it produces oil rather than natural gas. This fact, and the high rate of return, has kept operators interested in this play during 2009.

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