3 Major Bakken Plays

By Eric Fox | November 25, 2010 AAA

Recent acquisitions of acreage by some large oil and gas companies in the Williston Basin indicate that the Bakken formation is clearly one of the hottest oil plays in North America. These acquisitions should continue as exploration and production companies stampede into this area and lock up acreage for development. Here are of the more recent and notable companies to buy into the Bakken formation.

IN PICTURES: World's Greatest Investors

1. Hess Corporation (NYSE:HES) is the latest company to make an acquisition of acreage prospective for the Bakken. The company announced the purchase of 167,000 net acres in North Dakota for $1.05 billion, or $6,287 per acre. The acreage comes with existing production of 4,400 barrels of oil equivalent (BOE) per day.

Hess Corporation is rapidly moving up the ranks of Bakken players in the exploration and production industry. The company already had 500,000 net acres under lease prior to the latest acquisition.

Hess Corporation reported average production of 16,000 BOE per day during the third quarter of 2010 and planned to grow that production by a 35% compound annual growth rate, reaching 80,000 BOE per day by 2015. This production goal will probably move higher when the 167,000 net acres is added in.

2. Williams (NYSE:WMB) also made a recent acquisition of acreage prospective for the Bakken, picking up 85,800 net acres for $925 million. The company estimates its net reserve potential at 185 million BOE in the Bakken and the Three Forks, another oil-bearing formation on the acquired acreage.

Williams also picked up 3,330 BOE per day of production with the acquisition, and the company will spend between $200 million and $300 million in 2011 to increase this production. The company's goal is to get production up to 20,000 BOE per day by the end of 2012.

Exploration and production companies like the Bakken play because wells here produce primarily oil, and the high returns achieved on the wells is enticing.

3. Continental Resources (NYSE:CLR) has approximately 864,000 net acres across North Dakota and Montana that is prospective for the Bakken and Three Forks formations. The company expects wells here to have an internal rate of return of approximately 44% using a NYMEX oil price of $80 per barrel. This return assumes a completed well cost of $6.5 million and an estimated ultimate recovery (EUR) of 518,000 BOE.

The Bottom Line
Other exploration and production companies expect to achieve similar returns in the Williston Basin by developing the Bakken. Kodiak Oil and Gas (NYSE:KOG) estimates an internal return of 49% on long lateral wells in the Bakken at $75 per barrel. This return assumes a completed well cost of $8 million and an estimated ultimate recovery of 750,000 BOE per well. The Bakken play in the Williston Basin is the hottest play on the continent as exploration and production companies stampede into this area in North Dakota and Montana. (To learn more, see our Oil And Gas Industry Primer.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus
Related Analysis
  1. India Remains An Emerging Market Bright Spot
    Stock Analysis

    India Remains An Emerging Market Bright Spot

  2. Still More Gains Ahead For Semiconductor Makers
    Stock Analysis

    Still More Gains Ahead For Semiconductor Makers

  3. Unconventional Drilling Still Has Room To Boom
    Stock Analysis

    Unconventional Drilling Still Has Room To Boom

  4. Finding An Alternative With Currency ETFs
    Stock Analysis

    Finding An Alternative With Currency ETFs

  5. Commodities: Has Their Time Come Again?
    Stock Analysis

    Commodities: Has Their Time Come Again?

Trading Center