Guide To Oil And Gas Plays In North America: Williston, Bakken And Three Forks
The Williston Basin is one of the most prolific leaseholds in the U.S. It extends 475 miles north to south and 300 miles east to west. Although the Bakken Formation is the best known of the Williston Basin pay zones, several others have been targeted. The Madison Group, Red River and Three Forks are all commercial. Vertical targets along the anticlines were the first to be drilled before horizontal technologies allowed for the Bakken/Three Forks recoveries. The Bakken is only 90 feet at its thickest, but the Three Forks reaches 270 feet. Harold Hamm CEO of Continental Resources has announced this play has 24 billion recoverable barrels of oil equivalent.
The best way to look at the Bakken/Three Forks is by breaking it up into pieces. There are very different economics from one county to the next, and some of these economics have to do with how good the pay zone is, or even the operator. Western Mountrail County is thought of as having some of the best acreage in the Williston Basin. Alger, Ross, Sanish and Parshall fields are all in this county and have had excellent production. North to northeast McKenzie County has recently produced great results for several different oil producers. Recent results seem to point to the possibility of consistent, commercial production from the second bench of the Three Forks. It is possible the third and fourth benches could be productive in spots. South to southeast Williams County has also been prolific, and it should be remembered that the Williston Basin got its name from Williston, North Dakota as it is the center of this basin.
There are a significant number of players in the Bakken. Exxon is in the play through its purchase of Xtreme Oil & Gas (OTC:XTOG) for $41 billion in December 2009. It has 395,000 net acres in the Bakken, which is by no means a top play for the company but it has had some very good success as of late. It has acreage in the counties of Billings, Dunn, McKenzie and Williams in North Dakota. Billings is more of a play on the Three Forks, as the Bakken thins significantly. Exxon has very good acreage in northeast McKenzie, southeast Williams and northeast Dunn counties. These areas have been known to produce EURs of 900 MBOE in the middle Bakken and 700 MBOE in the upper Three Forks. It has seven operated rigs that drilled 51 wells in 2011, and 18 of these wells were completed in the fourth quarter. Its Bakken production was up 41% year over year for the fourth quarter. Xtreme completed FBIR Darcie 34X-14 in December 2011, with an IP rate of 1,338 barrels per day (B/D) and 1,338 thousand cubic feet (MCF). It used a 24/64 choke, a lateral of 9,650 feet and 24 stages.
ConocoPhillips is working the Bakken as Burlington Resources. In December of 2005, ConocoPhillips paid $35.6 billion to purchase Burlington. It has 460,000 net acres in the Williston Basin and Burlington is active in the Cedar Hills Field. This field is located in the southwestern corner of North Dakota and is prospective for the conventional Red River. Burlington is working in the south and northeast of McKenzie, and in the west and northeast of Dunn counties. In Bailey Field on Jul. 30, 2011, Burlington completed its Patton 31-1H and produced an IP rate of 2,645 barrels of oil and 1,738 MCF in the first 24 hours. It had a 28/64 choke, was completed with 21 stages and a lateral of 10,760 feet. These types of results are becoming more common place in better areas of this play. Burlington's results have improved significantly in a very short period of time. The company has long-term leases in the Bakken and has decided to slowly develop this play and not get ahead of the infrastructure. It is increasing its rig count from 10 to 15 in the Williston Basin. In the fourth quarter of 2011 it averaged Bakken production of 18,000 BOE/D.
Occidental has been increasing its Bakken leasehold since its first purchase in 2009. In 2011 it had 204,000 net acres in the Williston Basin, and estimates it will produce 30,000 BOE/D by 2017. It increased its acreage to 277,000 net acres in the fourth quarter of 2011. The core of Occidental's Bakken acreage is in northeast Dunn County, but also has a significant amount of acreage in the southwest area of the county. This is some of the best acreage in the Basin. It is also currently working in the counties of Burke and Billings. Occidental will run six rigs in the Bakken, but stated better economics in the Permian and California as why additional capital will be deployed there. The company is currently experiencing well costs of $8 million to $8.5 million in the Bakken, $6 million to $7 million in Bone Springs and $2 million to $2.5 million in the Wolfberry.
EOG Resources has a very good core leasehold in Mountrail County, including Parshall Field. It is the top Bakken/Three Forks oil producer in North Dakota, and at the end of 2011 it had gross production of 56.4 thousand barrels of oil equivalent per day (MBOE/D) gross production. The Bakken is one of EOG's top plays behind the Eagle Ford, Barnett Combo and Wolfcamp with respect to liquids production. Cost pressures have forced it to pull a rig from the Bakken, but the company could still increase the number of wells drilled and completed as it will be focusing mostly on pad drilling. It has kept costs in check much better than its competitors with an average well cost of $5.5 million. Keep in mind that this is for short (5,000 feet) laterals. The company continues to down space in the Bakken, and is currently testing a spacing of 160 acres in its core acreage and a spacing of 320 acres elsewhere. It has four rigs in its core acreage (Mountrail County) and three in other areas of the Basin. It has over 600,000 net acres in the Bakken/Three Forks, and has the capacity to ship 100,000 barrels of oil per day (BO/D) to its St. James crude unloading facility. By doing so, it is able to garner LLS pricing which is priced close to Brent. EOG has had good results in the Bakken, as its Fertile 48-0905H recorded an IP rate of 1,324 BO/D. Its results are often overlooked as it uses short laterals in the Bakken while most other operators have moved to long laterals (10,000 feet). If EOG's results are broken down, independent of lateral length, it has the best EURs in the basin. What may be the most important variable in upcoming quarters is its secondary recovery pilot. There have been questions as to the ability to do a secondary recovery in this shale, and if accomplished we could see a big jump in company oil reserves. EOG states its middle Bakken wells have had 86% oil production, and upper Three Forks 81%.
Marathon has 402,000 net acres in the Williston Basin. In 2010, it produced 17% of its total U.S. liquid hydrocarbon sales. It has seven rigs running in the Bakken. It has begun to use 30 stage fracs, which should significantly increase EURs. The company has a current spacing of 420 to 640 acres per location. I am guessing this will tighten significantly as Marathon de-risks its acreage. The 2011 exit rate was 24,000 net BOE/D, and estimates the 2016 exit rate will increase to 33,000 net BOE/D. Its core acreage is excellent and its prospects are broken down into these areas:
- Myrmidon: Southwest Mountrail and northeast McKenzie counties
- Helen: Northeast Dunn County
- Cazador: Western Mountrail County
- Aeneas: Northwest McLean County
- Hector: North central Dunn County
- Ajax: Central Dunn County
- Elk Creek: Northwest Dunn County
- Diomedes: Northwest Williams, southeast Sheridan and northeast Roosevelt counties
- Paris: Southeast McKenzie County
- Menelaus: Southwest McKenzie County
Hess has been producing in the Williston Basin since 1957 but it first discovered oil in 1951. It is currently the top natural gas producer and third largest oil producer in North Dakota at 50,000 BOE/D at its 2011 exit rate. It has an estimated 2012 average production rate of 60,000 BOE/D. By 2015 this number will climb to 120,000 BOE/D. Its 2011 capital expenditure (capex) on the Bakken was $2.1 billion compared to $.8 billion on the Utica and $.4 billion on the Eagle Ford. It has over 900,000 net acres and is running a 16 rig program, with 600,000 in its core. Hess has acreage all through the Bakken, including favorable areas of western Mountrail, northeast McKenzie and a large presence in the Nesson Anticline. Its Bakken rail transloading system became operational in February and will be very important to the price of Bakken crude. Its initial capacity was 54,000 BO/D. The company has over 100 wells with 34 plus stages, and these wells are seeing 30-day IP rates of over 1,000 BOE/D. Its average EURs throughout the Bakken are currently 550 MBOE. Well costs are around $10 million, but this number should decrease closer to $9 million as pad drilling is utilized.
WPX Energy (NYSE:WPX) has 89,420 net acres in the Bakken. It has 23 million barrels of oil equivalent (MMBOE) of proved resource and has a current production of 6.8 MBOE/D. In November 2010, Williams paid $925 million for 85,800 net acres. This acreage included 24 wells producing 3,300 BOE/D. Some thought the company paid too much, but when looking at the assets it obtained, this seems to have been a very good deal. This acreage was located in western part of Fort Berthold Indian Reservation.
Figure 6: The Ford Berthold region of the Williston Basin.
Fort Berthold has some of the best acreage in the Williston Basin, which includes southwestern Mountrail, northeastern McKenzie and northeastern Dunn counties. At the end of 2010, production was 1,700 BOE/D, and this increased to 6,400 BOE/D in the third quarter of 2011. It currently has six rigs running and expects to have seven in 2013. WPX Energy expects three to four wells per 1,280 acre spacing. This includes the middle Bakken and upper Three Forks, so the total could mean six to eight wells. It has well costs of $9.5 million and EURs of 710 MBOE.
Continental's Harold Hamm made big news when he stated there are 24 billion technically recoverable BOE in the middle Bakken/upper Three Forks. This could be why the company has accumulated almost 1 million acres with an average EUR of 603 MBOE. It has 22 operated rigs and estimates four middle Bakken and four upper Three Forks wells per 1,280 acres. The company has been involved in two recent wells testing the second bench of the Three Forks. These two wells had IP rates of 1,396 BOE/D and 1,023 BOE/D, which is in line with the upper Three Forks producers. This second bench will be tested two to three times this year along with a test of the third and fourth bench. It will be interesting to see production numbers 90 days out. Its Eco-pad projects decreased costs by 10% from an average of $8.2 million. The most expensive wells in the Bakken have costs of $9.8 million to the low end of $6.9 million. In 2012, Continental plans to have 12 to 14 Eco-pad rigs and 20 by the year end of 2013.
Chesapeake had recently made an acquisition of acreage in and around Stark and Hettinger counties. This area has an interesting geology and is not a play on the middle Bakken. This far south we begin to see the Bakken pay zone thin (Bakken Pinch Out), but the upper Three Forks starts to thicken. It is very possible that there are further opportunities in the second, third and fourth benches as well. Although some of Stark County has been de-risked by Whiting, Chesapeake's acreage is outside of this area. Chesapeake has approximately 300,000 acres and has one rig running. It has pulled at least one rig from the area, and is refusing to honor leases it had agreed to pay between $450 and $700 per acre. Currently, the company has a rig drilling Hutzenbiler 9-137-99A 1H and is analyzing the results of other wells to deem the commercial value of its leasehold.
Linn Energy has 17,000 net acres in southwest Mountrail and northeast McKenzie counties, with a smaller position in northeastern Dunn and southeastern Williams counties. The company purchased its non-operated core position for $196 million from Concho Resources in March 2011. It has a working interest of 7% and 3,500 BOE/D of production. IP rates have averaged approximately 1,000 BOE/D with EURs of 500 MBOE.
Denbury's initial transition into the Bakken was a surprise as it has been the leading enhanced oil recovery (EOR) company in the U.S. It spent approximately $4 billion to purchase Encore's Rocky Mountain acreage which became the second Denbury core EOR leasehold. This purchase also included 275,000 net acres in the Bakken/Three Forks. It controls 200,000 net acres, with a net production of 11,743 BOE/D in the fourth quarter of 2011. The company estimates net Bakken production for 2012 to be between 12,750 BOE/D and 14,750 BOE/D. Its core acreage is concentrated in different prospects in northeast McKenzie County. Denbury also has its NE Foothills Prospect in Burke County. It is consistently seeing IP rates around 2,000 BOE with mile long laterals and 26 stages. It expects all of its acreage will provide six wells at a spacing of 1,280 acres except Burke County and Montana which should produce three middle Bakken wells.
Whiting has 681,504 net acres in the Williston Basin. Its Sanish field development has yielded EURs of 450 to 950 MBOE from the middle Bakken and 400 MBOE from the upper Three Forks. Sanish well costs have averaged $6 million, but outside the Sanish field well costs increase to $7 million and EURs drop to a range from 350 to 600 MBOE. The company has completed 16 Sanish Bakken wells with 90-day IP results, which averages to 528 BOE/D. Hidden Bench/Tarpon 90-day IP rates have averaged 930 BOE/D, which by my estimates translates to an EUR of 1,000 MBOE.
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Figure 7: Showing the thickness of the Bakken.
In the figure above, we see why the Hidden Bench/Tarpon areas could be the best in the Williston Basin. In Tarpon, the middle Bakken is the thickest in the play while Hidden Bench has the thickest with respect to the upper Three Forks. Whiting finished drilling its first well of the second bench of the Three Forks. This well is in the Hidden Bench area, but there are two other areas it believes the second bench will be commercial.
Baytex (NYSE:BTE) has 130,000 net acres prospective in the middle Bakken, which 95% of this acreage is in North Dakota. Baytex's acreage is in Divide County. This part of the Bakken is shallower and less expensive to drill than areas to the south, but it is also not as productive. It has 10 net wells planned for 2012. The average Baytex well in Divide County has an IP rate of 435 BO/D and EURs of 440 MBOE. This company is more of a play on heavy Canadian oil, but does have a substantial acreage in northwest North Dakota.
QEP Resources (NYSE:QEP) has 90,000 net acres in the Bakken/Three Forks. Its core acreage is located in the Fort Berthold Indian Reservation and may be some of the best acreage in the play. Its 10 well pads in Heart Butte field (SESE 31-150-91) are still confidential, but will help to show what spacing may be like in this area. QEP is seeing well costs ranging from $9.4 million to $9.7 million. It has completed longer laterals reaching up to 12,500 feet. This company has EURs ranging from 300 MBOE to 900 MBOE with 50% of resource produced in the first five-and-a-half years. The low end includes thinner areas of the upper Three Forks and the high end includes its acreage in Fort Berthold.
SM Energy has 202,000 net acres in the Bakken/Three Forks. Of this it has three core prospects. The top prospect is Bear Den, which has 15,281 net acres in northeastern McKenzie County. Bear Den EURs are 554 MBOE for the middle Bakken and 447 MBOE for the upper Three Forks. The Raven Prospect consists of 36,534 net acres and is in north McKenzie County. The Raven has EURs of 498 MBOE in the middle Bakken and 409 MBOE in the upper Three Forks. The Gooseneck Prospect is 35,143 net acres and is a play only on the Three Forks. The company expects well spacing of 320 acres per well. EURs are 365 MBOE and is 100% oil. Well costs in the Gooseneck are $6.9 million while the other two prospects are $9.1 million. SM Energy's estimated savings with pad drilling is $1 million for three wells, or $333,333 per well. These three prospects are roughly 87,000 net acres. Three rigs are running with a fourth to be added in the second quarter of 2012.
Newfield is known for two things in the Bakken: it may have drilled and completed the best wells of the Williston Basin and its poor cost management, which caused it to pull three rigs from the Bakken in favor of its Uinta Play. The company deferred completions until 2012 to maintain its 2011 budget, and sold 23,000 net acres in its Catwalk Prospect for $276 million. This transaction also included 300 BOE/D of production and eight drilled and uncompleted wells. This capital will be used to work other more productive parts of the play. Newfield will spend $200 million in the Williston Basin for the 2012 calendar year. After the sale of the acreage in the Williston Basin, it had nine remaining uncompleted Bakken wells. In 2012, three of these wells were completed which had an average IP rate of 2,900 BOE/D. It will drill a total of 25 wells this year, and has a production of 7,500 BOE/D. The company has lowered its well cost from over $11 million per well to the low $10 million range. Non-operated well costs are $7 million.
Enerplus (NYSE:ERF) has 74,000 net acres in the Williston Basin, more specifically, in the Fort Berthold Reservation. The majority of this acreage is in northeastern Dunn and McKenzie counties. The company's well costs are currently $12 million. Although costs are high, it has had some very good results. It has EURs of 800 MBOE and 30-day IP rates of 1,160 BOE/D. On average, laterals are 9,500 feet and it is using between 20 and 24 stages. It will spend $300 million in the Bakken and run three to four rigs. It expects a payback of 1.6 years.
Fidelity has three rigs running and 124,000 net acres in the Bakken. Of its $400 million 2012 capex, $160 million will be spent on the Bakken. It has three core areas with the first being 16,000 net acres in Mountrail County. Fidelity's well results have improved dramatically with IP rates just shy of 2,000 BOE/D in Alger and Stanley Fields, and it has 51,000 net acres in Stark County. There have been several very good Three Forks wells west of Dickinson. Its third core area is in Richland County, Montana. The company has acquired 57,000 net acres and 27,000 of those acres were purchased in the first quarter of this year.
Oasis (NYSE:OAS) is one of the few Bakken pure plays that are left. It has 307,000 net acres in the Bakken/Three Forks, and its prospects are broken into three parts. The first is its Sanish position. This is non-operated and includes 8,409 net acres. Its East Nesson prospect is located from west Mountrail to west Burke counties and runs the length of the eastern Nesson Anticline. This prospect is 97,756 net acres. Its largest holding is in West Williston. This runs west of the city of Williston (center of the Williston Basin) and is in southwest Williams, northwest McKenzie, eastern Roosevelt and eastern Richland counties. This prospect is 201,265 net acres. There were 49.1 net wells brought to production in 2011 and 19.6 are waiting completion. It has nine rigs running in the Williston Basin, with seven in West Williston and two in East Sanish. Three additional rigs are under contract and will be delivered this year. Its East Nesson prospect has some very good acreage towards the south. In West Williston, Indian Hills is near the deepest part of the Basin. Oasis' acreage in Alger Field and Indian Hills are both some of the best acreage in this play, and its increase in stages has significantly increased production. It estimates the average daily production will increase from 15.2 MBOE/D in the fourth quarter of 2011 to 22 MBOE/D for the full year of 2012.
Kodiak (NYSE:KOG) has 157,000 net acres in the Bakken/Three Forks, and its combination of great acreage and performance has made it one of the better plays in the Bakken. In 2011, before acquisitions, Kodiak had a 2011 average production rate of 3,922 BOE/D. It estimates the 2012 exit rate will be at 27,000 BOE/D. In 2012, it plans to drill 51 net new wells. It may have the best acreage of the group as its 34,000 net acres in Dunn County, 10,000 net acres in its Koala prospect and 42,000 net acres in its Polar prospect are all what could be considered to be the best in the Bakken with EURs of 900 MBOE. Its Smokey Prospect is further to the south in McKenzie County and has EURs in the 750 MBOE range. Its recent acquisition of the Wildrose prospect of 24,000 net acres in Divide County is a good but not a great acreage. Recent difficulties in drilling seem to be linked more to its takeover of wells done by the previous producers and difficulties using sliding sleeves.
Northern Oil and Gas (AMEX:NOG) is another Bakken pure play, but it uses a non-operated model. I have had difficulties buying into this, but costs are lower and the company seems to be on the comeback from a series of stories attacking the stock. It has 160,000 net acres in the Williston Basin, and the acreage is spread throughout the play, spreading out risk.
Figure 8: Holdings for Northern Oil & Gas in the Bakken.
|Image Source: Northern Oil & Gas Inc.|
It has extensive acreage in Mountrail, eastern Williams and northern McKenzie counties. All of this acreage is very good and should have good production. In the third quarter of 2011, Northern averaged production of 5,700 BOE/D. Guidance for 2012 is for 44 net wells spud, with an average cost of $7.4 million. Keep in mind that the average operator has costs of $10 million. In 2011, it added 38,000 net acres for $2,000 per acre and plans to spend $20 million per quarter on additional acreage.
Magnum Hunter has 69,299 net acres in the Williston Basin. There are 36,355 net acres located in North Dakota. Much of this acreage is in Divide and western Burke counties. Although, a small portion of the acreage is in Renville and Bottineau counties, which I am unsure is commercial. Divide County has proved to be a decent producer considering well costs have been about 30% less than in other productive North Dakota counties. Although prospective for both the middle Bakken and Three Forks/Sanish, the latter has performed better. Thomte 8-5-163-99 had an IP rate of 1,309 BOE/D using a 30-stage frac. Its wells in Saskatchewan have had lower IP rates, but these are one-mile laterals as opposed to the two-mile laterals used in Divide County.
Unit Corp has 13,400 net acres in the Bakken. Its acreage is in south central Williams, northeast McKenzie and Sheridan counties. The 30-day IP rates have averaged 1,098 BOE/D. It is experiencing average well costs of $11 million with a lateral of 9,000 feet and with 28 stages.
GeoResources, which was purchased by Halcon, has 55,000 net acres in the Bakken. It increased to three rigs and has combined with Halcon to have 33 operating wells with respect to its net operated Bakken acreage. The Bakken production as of the fourth quarter of 2011 was 1,998 BOE/D, with 93% being oil. This was a growth of 26% quarter over quarter. The company operates in the Bakken as G3 Operating LLC, in a partnership with Resolute (NYSE:REN). G3 Operating is currently working in west Williams County, east Roosevelt and Richland counties. This acreage has EURs of 350 to 500 MBOE, and well costs of between $7.5 million and $8.5 million.
Resolute has 33,000 net acres in the Bakken. Its Paris prospect is located in southeast McKenzie County. It is 8,400 net acres and is operated by Resolute. Its Shep prospect is non-operated in western McKenzie County. Five wells will be completed this year in New Hope using drill pads, decreasing well times by a week.
Triangle Petroleum (AMEX:TPLM) has 83,500 net Bakken acres. Of this, it has 29,000 net acres in North Dakota and 54,500 net acres in Montana, and 52% of its acreage is operated. The majority of its non-operated acreage is in the counties of McKenzie and Williams. Triangle is the operator for its Station prospect in Montana, but has been looking for an industry partner for this acreage. It currently has 17 wells permitted in North Dakota, along with two offline wells today and five that were fracked in October. Three of its sites are permitted to be drilled on four well pads. The company also created its own pressure pumping business that commenced operations in July 2012.
Abraxas (Nasdaq:AXAS) has 20,835 net acres in the Bakken. Its acreage is spread out over seven prospects, and its Harding/Rough Rider prospect is the largest at 7,010 net acres. It is a non-operated area though. Its North Fork/Nesson prospect is 3,540 net acres, and this is operated and has well results. This part of the play has the most upside. The Carter prospect is composed of 3,200 net acres, its Sheridan prospect is 2,340 net acres and its Elkhorn Ranch/Lewis & Clark is 2,035 net acres. Its smallest acreage is in the Elm Coulee with 440 net acres. On average, Abraxas estimates its acreage will be four middle Bakken and four upper Three Forks wells. In 2012, it plans to drill five net operated wells and one net non-operated well. It estimates average well costs will be $9 million, or $7.5 million per pad drilling. EURs for its acreage average to 500 MBOE.
Renegade Petroleum (OTC:RPTTF) has 23,673 net acres in the North Dakota Bakken. This company has assets in the U.S. and Canada with the majority a play on light sweet crude. Its Canadian acreage is quite good, but we are unsure if its American acreage in Renville County, North Dakota is commercial.
Sundance Energy (OTC:SDCJF) has 8,667 net acres in the Bakken/Three Forks. It is currently participating in three North Dakota prospects. Helis operates Sundance's S. Antelope prospect with two rigs, and expects to drill 18 gross wells this year. Hess is the operator in the Goliath prospect. It has three rigs running and expects to drill 30 gross wells this year. EOG Resources operates its Phoenix prospect. By August 2012, 13 gross wells were completed and two Sundance owned Chase wells in the second half of the year. Sundance has some good acreage and should have good non-operated results going forward.
Samson Oil & Gas (AMEX:SSN) has acreage in the Bakken in Montana and North Dakota. Its North Dakota acreage in North Stockyard Field is a very small position (1,200 net acres) and was used as a starting point to get into the Williston Basin. It has 35,000 net acres in its Roosevelt project. In North Stockyard, it plans to have four infill wells in 2012 and two infill wells in 2013. It has had very good success here as it has had IP rates in excess of 2,000 BOE/D. Samson's Roosevelt project is on the edge of the Weldon-Brockton Fault Zone. It is too early to tell on how successful this area will be, but other good producers are working the area and are getting good results.
Voyager Oil and Gas, which acquired Emerald Oil and Gas in July 2012, and operates under the Emerald Oil, Inc. (AMEX:EOX) has a non-operator model. It has 32,000 net acres in the Bakken/Three Forks. It has partnered with several of the bigger Bakken players like Oasis, EOG Resources and Brigham. Emerald's average EUR for the Bakken/Three Forks is 450 MBOE, with well costs around $9 million. It purchased 1,400 net acres in the fourth quarter of 2011 at an average cost of $2,100 per acre. Emerald's acreage is spread out through the play with significant holdings in the counties of Williams, McKenzie and Richland. It uses the same non-operator model as Northern Oil and Gas.
American Standard Energy Corp. (OTC:ASEN) has 32,300 net acres in the Bakken. It is a non-operator and has small interests in a large number of wells, drilled by some of the bigger operators in this basin. Working interests range from 6.25% to minuscule.
Credo Petroleum has 6,000 net acres in the Fort Berthold Reservation of North Dakota. It is to the south and west of Parshall Field. Its Bakken acreage is quite small, but it's important to a company that has a market cap of $107 million. This company garners most of its production from the Central Kansas Uplift.
Arsenal Energy (OTC:AEYIF) has production of 1,200 BOE/D in North Dakota. The company has 4,123 net acres in the Stanley area, which is very good acreage, and has 676 net acres in the Lindahl area of northeast Williams County. It has 2,411 net acres in Rennie Lake/Black Slough in Burke County. Arsenal is an operator and has had some very good completions in North Dakota with IP rates at 1,850 BO/D in its Stanley prospect.
GMX Resources has 35,375 net acres in the Williston Basin. Of that 7,117 net acres are located in McKenzie County, and 9,441 net acres are in Stark County. It has EURs of 500 MBOE, and believes well costs will be from $9 million to $10 million using laterals of 9,500 feet. The company's acreage is located in southeast McKenzie, north Billings and Stark counties. Some of this acreage has been de-risked by Continental and Whiting, but a portion is still outside of what I would say is commercial. Its McKenzie acreage is average at best, but should be prospective for both the middle Bakken and upper Three Forks. Its Billings County acreage has had some very nice upper Three Forks wells in spots, but has not been as consistent as I would like to see. The upside for GMX rests on the possible upside to additional lower Three Forks benches. Another worry is the acreage in central to eastern Stark County. This acreage was poor enough to cause Chesapeake to pull rigs and not honor leases. GMX has benefited from very good non-operated well results by Whiting and Slawson but has had difficulties to date as an operator.
US Energy Corp. (Nasdaq:USEG) is currently working with Brigham (STO) and Zavanna in North Dakota. It has 2,825 net acres with these two operators. It recently (December 2011) sold 75% of its undeveloped working interest to Brigham for $13.7 million. USEG insists it maintained its best and highest interest wells. It also sold interests in its Zavanna program to Halcon and Yuma. In January 2012, it sold 75% of its interests for $16.7 million. It retained 35% of Zavanna's working interest in 1,650 net acres. These sales were made to raise cash while maintaining a steady flow of income from its best wells. USEG also has 19,000 net undeveloped acres in Montana.
Earthstone (AMEX:ESTE) is an oil company that used to purchase underperforming wells and refurbish them for the purpose of increasing oil and gas production. This has changed as it has become a Bakken non-operator participating in wells with Marathon, Brigham and Continental. It recently sold some non-core assets for the purpose of expanding its non-operated program and funding its operated program in Montana.
Emerald Oil, which was acquired in July 2012 by Voyager and operates under the Emerald Oil, Inc.,is a newcomer to the Williston Basin. It purchased over 9,000 net acres for $143.1 million in Dunn County. It estimates well costs will be $8 million and it will drill four middle Bakken and three upper Three Forks wells per pad.
Mountainview Energy has 22,000 net acres in the Williston Basin. Its Stateline and Medicine Lake prospects cover the counties of Divide, Sheridan and Roosevelt. Although this is not the best area, it is has several bigger names in the area with producing wells. It also has non-operated acreage in the Williston Basin that ranges from 12.5% in the Olson well to 1% in the Miller and Strahan wells. Mountainview estimates its wells will have an IP rate of 600 BO/D, based on a 30-stage frac and well costs of $6.624 million.
American Eagle has 10,000 net acres in the North Dakota Bakken. Its Spyglass prospect is in Divide County, and it is currently drilling three wells in Colgan Field which are expected to be completed by the end of 2012. Its West Spyglass prospect is also in Divide County and is 4,000 net acres. American Eagle's Benrude prospect is located in Roosevelt County. It recently merged with Eternal Energy which added to American Eagle's core acreage.
Figure 9: The blue and purple lines show the Bakken thermal maturity boundary. This is the furthest extent to which it is believed the middle Bakken will provide commercial production. The black dots show all wells drilled in the Basin.
In the illustration above (from GMXR's fourth quarter of 2011 conference call), is also useful in showing the depth of the Basin. The light blue and white areas show the deepest and most productive plays. As a general rule, the deeper the Basin the thicker the shale, and this backs the assertion that in the counties of western Mountrail, southeast Williams, northeast McKenzie and northeast Dunn are the best from a geological standpoint. This sweet spot borders a shallow area which is the Nesson Anticline, which was a vertical target in the past. Shale thickness is also important.
Figure 10: Map showing the thickness of middle Bakken.
These maps give an idea as to how good each county is with respect to possible oil recovery. It also helps to substantiate EURs by county. Because oil producers vary in completion methods and ability these estimates are difficult to generate, but for the purpose of this we will use a level playing field or one producer to drill in each area. Kodiak has provided estimates throughout its acreage and because of this I will use this company as a baseline.
Figure 11: Map showing the counties of Polar, Koala and Dunn.
In defining what the best acreage is, one must look closely at the play and see what defined borders can be used to properly group acreage. Acreage in the counties of Polar, Koala and Dunn County are all considered to be the best in the play. Also, west and southwest Mountrail County can be included in this area. My EURs in this area are 800 to 900 MBOE including acreage in northeast McKenzie from Koala to the Dunn County prospect. This is backed by very good results by Newfield in its Westberg prospect.
Figure 12: Map showing Newfield\'s Westberg prospect.
The most northern aspect of this sweet spot is from Polar and east into Mountrail County terminating at the most northern portion of Alger and around Sanish fields. Kodiak's Smokey prospect has EURs in the 750 to 850 MBOE. This area seems to cover a very good portion of central McKenzie County such as Newfield's Aquarium/Watford, and Whiting's Hidden Bench. Brigham's Roughrider, EOG's Stateline and Oasis' Red Bank prospects also fall in this grouping located in western and southwestern Williams County.
North Williams and Divide counties are not as good as the areas previously listed. Well costs are lower here as the middle Bakken is not as deep, but the shale itself is very thick. I would expect EURs of 500 MBOE, which are substantiated by Continental's results. Southwest Dunn County should produce roughly the same type of numbers. Kodiak's Grizzly prospect will be in the 300 to 400 MBOE range and roughly the same EUR as its Sheridan County acreage. These estimates are just the middle Bakken and do not reflect numbers associated with the upper Three Forks. Very good results have come from Kodiak's Koala prospect, with EURs in the 700 to 800 MBOE range. Whiting's Lewis & Clark prospect, in northern Billings and western Stark counties, is only productive from the Three Forks. Given that the Three Forks reaches a thickness of 270 feet in some spots, it could provide additional resource and locations. Below the upper Three Forks are three additional benches, which will add locations and decrease well spacing. This has not been properly tested, but initial results have been good. EOG will be conducting secondary recovery in its Parshall Field, which could help to provide an idea of whether the middle Bakken can be produced by this method. Guide To Oil And Gas Plays In North America: Eagle Ford
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