Monday, February 18, 2008

Some Players in the Mountrail Parshall/Sanish/Austin Bakken and Adjacent Areas

David has forwarded this info he put together about some of the players:

It is interesting to look at some of the players in the development of the field from the perspective of their size, history and financials. I have chosen four of them. In looking at the company size in terms of market capitulation, keep in mind that Exxon-Mobil (XOM) a Dow Jones Industrial Average component and largest integrated oil company, has a market capitalization of $289 billion. Market capitalization is the product of the shares outstanding times the current stock price. I will discuss each of the publicly traded players in descending market capitalization

EOG resources (stock symbol EOG)

Market cap about 21 billion or about 14% the size of XOM

EOG resources was once known as Enron Oil and gas, but was spun off by Enron in 1999 to senior executives in the group as a separately traded company. This was a couple years prior to when Enron collapsed. Jeff Skilling and Ken Lay, running Enron at the time, and both later convicted in trials, were interested in dumping what they saw as old economy parts of the company to finance their “new economy” ventures, and to them, the oil and gas drilling unit was as old economy as it gets. When Enron collapsed, the completely separated drilling unit was a valuable company, but no longer any part of Enron. As a company EOG seems to be run very conservatively, with executives going overboard to make sure the company is not seen as being anything like the old Enron. More details of company history can be found at: http://www.eogresources.com/about/company_history.html

Currently running 7 rigs in the area—supposed to have 8 shortly. EOG’s most important financial contributor to company profit by far is their very successful Barnett gas field in Texas, but the relative importance of the Bakken to the company bottom line is moving up. Its stock currently trades at 80-$95 a share. The stock was trading in the low-mid $60 range as late as last summer, but the trading range popped about $10 after the third quarter earnings report last October, TIP: The stock price tends to move on a daily basis with the crude oil price, which moves around a lot day to day. Watch the price of crude oil and try to make purchases of EOG on days when the crude price is off.

Whiting Oil and Gas (stock symbol WLL)

Market cap 2.1 Billion or about 10 % the size of EOG. Company Web Site http://www.whiting.com/

If you study the company Web site, you will see that they do much the same thing EOG does, except that they are a much smaller company. For now, the Sanish field in not as significant a contributor to the Whiting bottom line as the Parshall field is for EOG. They have 3 rigs in the Sanish field.

New Whiting wells in the Sanish are done with what I call “birdsfoot” laterals. 1280 acre spacing with laterals going out three ways. This is technologically more complex than the 640 acre spacing and single diagonal EOG has had success with. Whiting swears that given where they are their approach is better than if they were to simply apply EOG’s approach of a single SE-NW lateral on 640 acres. The most recent birdsfoot lateral completion came in at over 2200 initial bopd, so they may have a case. With the bigger spacing and smaller number of rigs, Whiting will be drilling far fewer wells than EOG, and as a consequence the Sanish field will appear to be developing less rapidly than the Parshall field has developed.

Stock price moved up from $35 about the same time the EOG share price moved and as I write this it is at $51. It came close to breaking $60 a few weeks ago. Again, if you are interested in this stock, look for buying opportunities on days when the crude price is off.

Brigham Exploration (
Stock symbol BEXP)

Market capitalization 289 million, about 1/8th of the size of Whiting.
Company Web site: http://www.bexp3d.com/

Brigham has recent news releases claiming success in the Bakken which you will find highlighted on their company Web site. For the most part, the wells they have significant interest do not appear to be doing quite as well as the EOG wells near them. They have had small working interest in some EOG wells, for example 1.3% in Risan #1. The wells Brigham has primary interest in are producers, but initial production appears to be in the 300-550 bopd range not 750-2000 bopd.

The stock has been trading in the $6 to $7.50 range, on much smaller volumes. Because of its small size, this company will have the major working interest in a very small number of wells relative to Whiting or EOG. Stock price trades in a range between $6 and $7.50 or so, obviously more speculative than EOG Or Whiting. Current share price is $6.32

Northern Oil and Gas (
Stock symbol NOGS or perhaps NOGS.OB)

Market Cap ??? but small relative even to BEXP. Company Web site http://www.northernoil.com

Northern Oil and gas has a minority working interest in one of the Brigham wells recently completed. Their major asset is that they acquired a large number of yet undrilled leases in areas adjacent to but south of the Parshall and Sanish fields and to the NE of the main Parshall field. There have been very few wells drilled on these leases. As I read NOGS financials, they seem pretty shaky. It appears to me that the only way they can sink holes is to partner with someone that has more capital and wants leases. And how productive the leases are that they hold is highly speculative. The stock has been trading at around $6, expensive for a company with such shaky financials, but investors are speculating that all the leases they hold could prove to be very valuable.

Hunt Oil

Hunt Oil is privately held, not publicly traded, with some of the offspring of H. L. Hunt still being very actively involved. Hunt has been drilling and has had good success on a section just east of the EOG Parshall field—the so-called “Bowman” well in Shell Twp was drilled by Hunt not EOG. The oil industry has always attracted more than a fair share of colorful characters, and senior H.L. Hunt (who died in 1974) perhaps would be voted as the most colorful character in the industry ever.

Many of his traits had to have served as inspiration for the J.R. Ewing character on “Dallas.” The company Web site: http://www.huntoil.com/ There is a company history page http://www.huntoil.com/history.asp that hits some of the high points, and includes some fascinating photos, but carefully circles around some of the more “colorful” details about HL’s personal life and public persona. A quick H.L. Hunt biography is at http://en.wikipedia.org/wiki/H.L._Hunt

13 comments:

Larry said...

David. Good report.

Yahoo Finance recently began reporting NOGS Market Capitalization as $170 million.

P said...

According to WLL latest press release the latest wells were drilled on 1280's but with a single lateral well and not a "birdsfoot".
I heard they were having difficulty fracing the multilateral "birdfoot" and have gone to a single lateral approch with multistage fracs.
Does anyone have any confirmation of this information?

Anonymous said...

My family has interest in some new wells that are being drilled near the Parshall field. The permits were issued to Fidelity Exploration. Do you have any information on this company? I never see them discussed, so should I assume they do not much experience drilling in this area? Thank you for this great blog, I have learned so much from it!

Larry said...

Fidelity is the oil drilling arm of MDU Resources Group, Inc., (NYSE:MDU).

You can read about them at:

http://www.mdu.com/business_profile/mdur13.htm

Steve said...

Another interesting stock is Hess (HES). They're also a big company, but have a huge amount of ND acreage held by non-Bakken production. They now have the potential to develop the Bakken formation in these areas in a major way, without the leasing costs other companies are bearing.

Teegue said...

I give Hess credit just for staying in the state for almost 60 years when all the other majors came and left.

Larry said...

Hess has a market capitalization of $30 billion, about 20% larger than EOG.

Hess through its currently producing wells and its leasing program is likely the largest leaseholder in Mountrail County.

There are about 1.2 million acres of land in Mountrail County. Hess likely controls 400,000 of those acres principally in the the Northwest Quadrant of Mountrail.

The next largest leaseholder in Mountrail County is probably EOG with holdings in the range of 250,000 acres.

Anonymous said...

Speaking of Hess, any new details on the new Hess well RS-STATE-156-90-1609H-1? This is the furthest east Hess well and initial pre-frac reports sounded promising. I see there are 2 new permits offsetting it.

david said...

I have what I think is a simple tax question from a first time mineral interest owner on calculating oil depletion for my 2007 income taxes.
I read that I can deduct 15 % from the gross value of the well production that I received as income as my depletion allowance not subject to tax. But is the gross value the amount before the 11.5 % severance tax is subtracted, or is the gross value the net after the severance tax is paid? Any help here would be appreciated. The driller reports both amounts on the 1099 form I received.
Thanks

Steve said...

David...the 15% depletion tax deduction is based upon gross royalty before severence/prodution tax.

David said...

Thanks Steve..
I appreciate the info confirming what I was hoping.

The chartists might want to contemplate this chart. My reading is that Hess has shown steadier gains but EOG has had a stronger recent uptick.
I THINK EOG is more heavily tied to the price of natural gas than Hess is, and this price didnt fall apart as EOG was worrying about in their third quarter conference call. In fact, natural gas prices seem solid.
http://finance.yahoo.com/q/bc?s=HES&t=1y&l=on&z=m&q=l&c=eog

Has anyone seen any recent data from Hess signally that they have had a few recent ND Bakken wells that blew everone away in terms of initial output? I haven't seen any data but I haven't kept that close track on Hess either, as they are drilling outside the small area I am most interested in.

Larry said...

Hess's stock price took off in December because of their interests in a long range offshore Brazilian oil prospect. It could be 10 years before that oil is produced.

"Petroleo Brasileiro SA, Brazil's state-controlled oil company also known as Petrobras, Exxon Mobil Corp., Royal Dutch Shell Plc, Repsol YPF SA, BG Group, HESS CORP. and Galp all have concessions in the area neighboring Tupi, Gattass of UBS said, referring to the formation as ``SUGAR LOAF.''"

Unlike many of the drillers in Mountrail County, Hess seems to have little interest in issuing press releases every time they lease an acre of land or rent a rig.

It seems we will have to wait the requisite 6 months until the Hess wells are taken off confidential status.

dan said...

you have a greatplace that you share info on well thoght out and easy to understand responses. my first time here just looking for jr explorers and hit this site with google. saw your listing of eog wll etc. do you have any with some major upside potential 1 or 2 years down the road

thanks dan