WPX Energy (NYSE:WPX) plans to focus on the development of the Bakken formation in 2012 and will use this play as one of its core areas to help grow the company. (To know more about oil and gas, read Oil And Gas Industry Primer.)

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

WPX Energy is the former exploration and production segment of Williams (NYSE:WMB), which announced a restructuring in 2010 that involved splitting up into separate upstream and downstream public companies. The separation was completed at the end of 2011, with shareholders of Williams receiving one share of WPX Energy for every share owned.

Bakken Shale
WPX Energy established a position in the Bakken through an acquisition in November 2010, purchasing approximately 86,000 net acres for $925 million. The acreage is located on the Fort Berthold Indian Reservation in the Williston Basin. The company picked up existing oil production of 3,300 barrels per day from 24 existing wells, as well as extensive undeveloped acreage.

WPX Energy has been aggressive since the acquisition closed and completed 22 wells over the last year, increasing production to 6,400 barrels of oil equivalent (BOE) per day by October 2011.

After WPX Energy announced the Bakken purchase in late 2010, the company established a production target of 20,000 BOE per day from this play by the end of 2012. WPX Energy is currently operating five rigs in the Bakken and plans to add an additional rig in mid-2012.

WPX Energy estimates that Bakken wells will generate an after-tax return of 57%. This return incorporates a cost of $9.5 million to drill and complete a well, an estimated ultimate recovery of 700,000 BOE per well and an assumed oil price of $95 per barrel.

Other operators active in the Bakken with acreage on the Fort Berthold Indian Reservation include Enerplus (NYSE:ERF), which has 74,000 net acres here. The company estimates that it can increase production from here to a range between 20,000 and 25,000 BOE per day by 2014.

Credo Petroleum (Nasdaq:CRED) also has acreage exposed to the Bakken and plans an aggressive ramp up in development here in fiscal 2012. The company has budgeted to participate in 20 operated wells and will spend most of its drilling budget in this area.

One issue that investors should monitor is the difficult environment present in the Williston Basin during certain months of the year. In the second quarter of 2011, many operators active in the Bakken reported delays in development due to a severe winter and flooding.

SM Energy (NYSE:SM) had to shut in wells during the quarter and reported shut-in production of 1,500 BOE per day at the peak. Hess (NYSE:HES) was also impacted by this issue and reported completion delays during the quarter.

The Bottom Line
WPX Energy made a large acquisition of undeveloped acreage with Bakken exposure and aggressively worked these properties in 2011. The company plans to increase activity here in 2012 and will make the oil play in the Williston Basin one of its core areas going forward. (For additional reading, check out A Guide To Investing In Oil Markets.)

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.

Related Articles
  1. Economics

    The Biggest Oil Producers in Latin America

    Find out which countries produce the most oil in Latin America, and learn about some of the biggest oil companies operating in each country.
  2. Economics

    The 9 Industries Driving Texas' Economy

    Find out which industries are driving the Texas economy. Learn about the largest and fastest growing employers and producers in Texas.
  3. Stock Analysis

    Is Now the Right Time to Buy Brazilian Stocks?

    Examine the current state of the economy of Brazil, and learn why there may be some reasons for investors to look for a rally in Brazilian stocks.
  4. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  5. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  6. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  7. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  8. Stock Analysis

    The 4 Best Buy-and-Hold Dividend Stocks

    Discover four of the best dividend stocks for investors to buy and hold, along with the reasons for each stocks' suitability for long-term success.
  9. Investing Basics

    How to Think About Seasonality Trends

    Investors benefit when company research incorporates seasonality trends that predict relative strength and weakness throughout the calendar year.
  10. Investing

    Why Coal Won't Go Away Anytime Soon

    Despite government regulation, more competition and higher production costs, coal remains a relatively cheap source of fuel for electricity.
  1. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  2. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  3. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  4. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  5. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  6. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>

You May Also Like

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!