Continental Resources (NYSE:CLR) is evaluating a number of oil saturated zones at the bottom of the Three Forks formation present on its acreage in the Williston Basin. If these new zones prove to be commercial, the industry will see an increase in recoverable reserves in this formation.

Investopedia Markets: Your one-stop source for financial news, quotes and insights.

Three Forks
The Three Forks formation lies just under the better known and more developed Bakken formation in the Williston Basin. Although the Three Forks formation can be up to several hundred feet thick, Continental Resources has done most of its Three Forks development in the upper twenty to thirty feet of this play.

Continental Resources decided to investigate the hydrocarbon potential of the bottom layers of the Three Forks and obtained core samples from five wells that penetrated the entire Three Forks formation. These core samples were spread out across a hundred mile wide portion of Continental Resources leasehold. (Find out how to invest and protect your investments on this slippery slope. For more, see Peak Oil: What To Do When The Wells Run Dry.)

An analysis of the core samples by the company found that the Three Forks has four oil saturated layers of dolomite below the bottom of the Lower Bakken. These layers or benches are separate and run between 20 and 30 feet thick in the area that Continental Resources is testing.

Continental Resources is currently drilling the Charlotte 2-22H well in McKenzie County, North Dakota, to test out the commercial potential of the second bench of the Three Forks formation. Northern Oil and Gas (NYSE:NOG) is participating in this test well on a non operating basis and has a 1.68% working interest.

Continental Resources plans future tests of the third and fourth benches of the Three Forks, although the management noted during a recent conference call that these layers are not as "uniformly developed" as the upper two.

Other Exploration in the Area
Continental Resources and other operators have drilled a number of horizontals wells into the top or first bench of the Three Forks with mostly good results.

Brigham Exploration and Production (NYSE:BEXP) has drilled 79 wells in the Williston Basin in North Dakota since entering the play, with four of these wells targeting the Three Forks. The company reported initial production rates on these wells ranging from 1,100 to 2,400 barrels of oil equivalent per day.

Whiting Petroleum (NYSE:WLL) reported several Three Forks well results in August 2011, with one of the wells producing above 2,300 BOE per day, and the other producing only 193 BOE per day. The company blamed a weather related shut in during the initial flow back period for the poor results of the second well.

Although Three Forks development has been encouraging to date, this play is still more complex to develop than the Bakken. Oasis Petroleum (NYSE:OAS) plans to drill as many as six Three Forks wells in 2011 and said that the formation has more "variability in reservoir quality" than the Middle Bakken.

The Bottom Line
While Continental Resources is positive about the potential of deeper parts of the Three Forks play, this is still a very prospective area. Investors should be cautious about assigning too much value to future reserves here until the play can be proved up. (Drill into financial statements to tap into the right companies and let returns flow. For more, see Unearth Profits In Oil Exploration And Production.)

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

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Regional Banks

    Obtain information and analysis of the iShares US Regional Banks ETF for investors seeking particular exposure to regional bank stocks.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!