Enerplus (NYSE:ERF) has a large acreage leasehold in the Williston Basin and plans to exploit this position to generate oil and liquids production and reserves growth for the company over the next few years.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
Oil and Liquids Development
The company estimates that oil and liquids production will grow to 50% of the total company production in 2012. This goal will be accomplished through oil production growth of 22% as it exploits tight oil plays across its portfolio in the United States and Canada. Natural gas production growth is expected to be flat during the year.
One area the company is focused on is the Williston Basin, where it has 74,000 net acres under lease. It has approximately 78 drilling locations into the Bakken and Three Forks plays in the Fort Berthold area in North Dakota.
The development program will lead to rapid production growth for Enerplus from the basin. It expects to exit 2012 with a production of 15,600 barrels of oil equivalent (BOE) per day, up from 9,000 BOE per day at the end of 2011.
In 2012, the company is planning to drill 30 wells in the Williston Basin and allocate $300 million in capital here, or 50% of its total drilling and completion budget.
SEE: A Guide To Investing In Oil Markets
The company estimates that its Bakken wells will cost approximately $11 million to drill and complete. The average well will have an estimated ultimate recovery (EUR) of 940,000 BOE, with 95% composed of oil and natural gas liquids. The wells will generate an internal rate of return (IRR) of 90%.
The Three Forks wells will have the same cost and liquids content as the Bakken wells, but will yield an EUR of 650,000 BOE. The company expects to earn an IRR of 40% on these wells.
These returns are comparable to other operators that are active in the Williston Basin. Linn Energy (Nasdaq:LINE) has 17,000 net acres under lease and estimates that it will generate returns of approximately 50% on wells drilled and completed here. Marathon Oil (NYSE:MRO) has a large position here and estimates that IRR's on Bakken wells will range from 22 to 27%.
SEE: Oil And Gas Industry Primer
Enerplus estimates that production in the Bakken and Three Forks has the potential to reach 25,000 BOE per day by 2015. This estimate is dependent on the future price of oil and adequate access to capital.
One company that is planning for future production growth from the Williston Basin is MDU Resources Group (NYSE:MDU), which recently purchased a 50% interest in midstream infrastructure from Whiting Petroleum (NYSE:WLL). The company paid $66 million for the assets, which include a natural gas processing plant and an oil storage terminal.
SEE: What Determines Oil Prices?
The Bottom Line
Enerplus is trying to grow its oil and liquids production and has chosen the Williston Basin as one of its core areas to help achieve this goal. Many other operators have chosen this basin as a means to accomplish similar goals and have attained success.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
EconomicsExplore the historical relationship between interest rate increases and the price of gold, and consider what effect a fed funds rate hike might have on gold.
InvestingHow do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
SavingsSocial entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
InvestingMany global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
Stock AnalysisThese three stocks are resilient, fundamentally sound and also pay generous dividends.
Investing NewsAre stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
Investing NewsHere are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
Investing NewsHere are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
Stock AnalysisIf you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
Stock AnalysisLearn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
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 >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>