Targa Resources - Saddle Butte Pipeline Agree to $950 Million Deal

Saddle Butte Pipeline System Map - Bakken Shale

Targa Resources and Saddle Butte Pipeline have agreed to a $950 million deal that includes the Williston Basin crude oil pipeline & terminal, as well as its natural gas gathering and processing operations.

The deal centers around 155 miles of crude oil pipelines in Dunn, McKenzie, and Mountrail counties in North Dakota. The related terminals have a planned 70,000 barrels of storage capacity. The Johnsons Corner Terminal is being expanded from 20,000 to 40,000 barrels and the Alexander Terminal has capacity of 30,000 barrels. In terms of gas assets, the deal includes 95-miles of gathering lines and a 20 mmcfd processing plant that is being expanded to 40 mmcfd.

"This acquisition of a major, strategic midstream business complements our extensive portfolio of midstream assets, extends our footprint to the very attractive Bakken Shale play, further diversifies our business with the addition of crude oil gathering, and adds significant long-term growth in fee-based revenues," said Joe Bob Perkins, CEO. "We are very excited to expand our geographic footprint into one of the most important oil producing basins in the country. The visible, long-term growth potential of this business complements our attractive portfolio of ongoing and future organic growth projects and enhances the Partnership's longer term distribution growth."

Targa Resources also expects to spend $250 million to complete current expansions and to grow to meet industry needs in 2013. The company plans to fund the deal with 50% equity and 50% debt.

Oasis Petroleum's Bakken Production Set to Grow 100%+ in 2012

Oasis Petroleum West Williston Basin Map

Oasis Petroleum announce results from the third quarter of 2012 along with production guidance that is tracking even higher than planned. The company grew production 19% during the quarter. That's almost 20% growth over a 90 day period. Oasis is on track to reach growth of 115% to 120% by year-end 2012. That's a pretty amazing growth trajectory.

The company has also been able to drive operated well costs down from $10.5 million in the first half of the year to $9 million in the quarter. Significant savings was realized from utilizing company owned services - Oasis Well Services. The company is targeting well costs of $8.8 million by year-end 2012.

"The momentum of our operational success continued into the third quarter, as we again exceeded our production guidance and drove down our capital cost per well," said Thomas B. Nusz, CEO.

Price realizations improved during the quarter. The company realized a discount of 9% to WTI prices in Q3. The discount was 12% in Q2. Prices across the basin have been improving in recent months as rail facilities are providing necessary outlets in areas of higher demand (e.g. East Coast).

Oasis Well Services is Exceeding Expectations

Oasis Well Services completed its first well in March 2012 and has completed 100 well stages per month since. The company has saved $13 million in capital expenses to date and expects to save $500,000 per well in locations OWS can be utilized (40-50% of operated wells). Oasis invested $24 million in Oasis Well Services and expects a full payout in year one of operations.

Continental Acquiring Bakken Acreage for $650 million - Sets Production Record

Continental Resources Bakken Shale Map

Continental Resources is acquiring 120,000 acres for $650 million primarily located in Divide and Williams counties. The deal will add 6,500 boe/d of production and is expected to close by year-end. If the deal closes as expected, Continental's Bakken acreage position will swell to 1.1 million acres.

Harold Hamm commented: "Continental operates a large portion of the acreage that we are acquiring, and more than half of it is held by production."

The deal was announced in conjunction with the company's third quarter earnings release. Continental Resources reported record production of almost 103,00 boe/d, with 70% attributable to oil. The Bakken accounted for over 60% of the the total, 62,000 boe/d. Continental participated in 137 gross (46 net) wells during the quarter. The company completed 46 (34 net) operated wells during the quarter, with 24 of those producing more than 1,000 boe/d at a peak 24- hour period. Operated wells had average IPs of 1,076 boe/d in ND and 886 boe/d in MT.

Continental's ECO-Pad Results in Mckenzie County

The company also completed a ECO-Pad in McKenzie County during the quarter:

"Consisting of the Antelope 3-23H and 4-23H and the Bohmbach 3-35H and 4-35H wells. The four wells tested at an aggregate initial rate of 6,240 Boepd in total, for an average of 1,560 Boepd per well, with average flowing tubing pressure of 3,800 psi."

Continental is the largest leaseholder in the Bakken Shale and has 19 operated drilling rigs (15 in ND, 5 in MT) running in the play.

Rangeland Energy - Inergy Midstream Deal Announced for $425 Million

Inergy Midstream COLT Terminal Map

Rangeland Energy is being acquired by Inergy Midstream for $425 million. Rangeland owns and operates the largest crude oil hub in North Dakota - the COLT Rail Facility & Hub. The COLT facility is located in Williams County, ND, and includes a rail loading termina, as well as related pipeline and storage assets. All employees in the state will be offered jobs with Inergy.

"This is an exciting day for both companies. It`s also a great day for the crude oil industry in the Bakken, which will be well served by Inergy`s dynamic new presence in the play," said Rangeland CEO Chris Keene. "Inergy`s CEO, John Sherman, and the rest of his very seasoned leadership team have the experience and desire to serve our current customers with distinction and aggressively grow the business we`ve developed at COLT. We started with a piece of paper and a vision and now, just three years later, COLT is well positioned to be the premier crude oil terminal in the Bakken. I`m very proud of what the Rangeland team has accomplished in North Dakota in a very short period of time. The scope, quality and efficiency of the storage, rail and pipeline facilities we`ve put in place are unparalleled in the market."

COLT`s rail car loading facility is serviced by BNSF Railway. Storage and working capacity include:

• 720,000 barrels of working storage
• 120,000 barrels of tank storage
• Access to 120,000 barrels of tank storage at the Dry Fork Terminal
• Rail export capacity of 120,000 b/d
• Pipeline capacity to move 75,000 b/d

Rangeland is based in Sugarland, TX, and its management will retain the company name to pursue other midstream developments. Rangeland is back by EnCap Flatrock Midstream - a private equity fund focused on midstream developments.

Kodiak Oil & Gas is Spending More & Lowering Guidance

Kodiak Oil and Gas Bakken Shale Map

Kodiak Oil & Gas lowered its production guidance for 2012 last week, but beat earning expectations today. The company expected to average 17,000-21,000 boe/d in 2012, but has lowered its production expectation to 15,500-17,500 boe/d. The company still reported a 300% increase in sales volumes year over year for Q3 and expects to hit its 2012 exit rate of more than 27,000 boe/d. My understanding is the company got a little ahead of itself with early projections and is being saved now by better realized prices. Better oil prices led the company to an earnings beat even though production volumes were lower than expected.

The company is also spending $165 million more than initially planned, while completing 66 net wells compared to 51 planned. The total capital budget was planned with $585 million in expenses, but 2012 spending is going to fall closer to $750 million. Almost $80 million of the outspend is due to non-operated areas being developed more quickly than expected. The other $85 million is due to higher costs than expected across the board. The company has spent about 20% more than expected on drilling and completing wells, salt water disposal facilities, and leasehold acquisitions.

The outspend isn't troubling considering the company is completing almost 30% more wells, but lower production guidance suggest wells aren't performing quite as strong nor are they coming online as quickly as the company expected. Kodiak expects to complete 26 net wells in the fourth quarter. That represents almost 40% of total activity for the year.

KOG's CEO commented:

"Kodiak continues to make progress in growing its production, as demonstrated by the 50% increase in average quarterly sales volumes for the third quarter of 2012 compared to the first quarter of 2012. With a large number of wells scheduled to be completed in the fourth quarter, we should see that same upward trajectory continue over the coming quarters. We completed 10 gross (9.3 net) wells during the month of October, and with two completion crews working steadily through year end, we expect to meet or exceed our stated 2012 exit rate guidance of 27,000 BOE/d."

Kodiak also expects well costs to fall below $10 million in the coming year. Current wells are running approximately $10.5 million to drill and complete, but pad drilling should allow the company to drill more wells with fewer rigs.