Kodiak Oil & Gas Grows Bakken Reserves 138%

Kodiak Bakken Acreage Map

Kodiak Oil & Gas ended 2012 with 94.8 mmboe of proved reserves (85% oil) in the Williston Basin. That's up 138% from 39.8 mmboe at year-end 2011. Just under half of the company's reserves (46%) are proved, developed, and producing (PDP). Production is expected to grow to 29,000-31,000 boe/d in 2013. That's almost double the ~15,000 boe/d the company produced in 2012 (18,200 boe/d in Q4).

Kodiak spent $810 million developing the Bakken in 2012. Guidance for the year was $738 million, but the company spent more as drilling efficiencies allowed more wells to be drilled and good weather allowed for more activity in the fourth quarter. Kodiak has planned to spend $775 million in 2013 - $740 million for drilling and completing wells, along with $35 million for waste water disposal, well connections, and acreage acquisitions.

The company plans to continue operating seven rigs going forward. Four rigs are operating in Williams County, two in McKenzie County, and one in Dunn County. The company also employs two dedicated frack crews.

Two tests are also underway where the company will drill 12 wells in one 1,280-acre spacing unit. One unit is located in the Polar area and one in the Smokey area (see map above).

The company will also expand drilling in the Three Forks:

Kodiak's Chairman and CEO Lynn Peterson said: "Regarding the TFS, we believe the multiple intervals of TFS appear to exist only through the deeper part of the Williston Basin where the TFS is thicker and more thermally mature. We continue to view the TFS as a single hydrocarbon system. Based upon our fracture stimulation analysis, we believe that the production does communicate between the TFS intervals; however, due to the expanding thickness of the oil saturated reservoir, additional well bores are required to optimize reservoir drainage. We do not believe the lower TFS interval exists throughout our entire acreage block, but that the interval is most likely present in the southern portion of our Polar acreage block and in our Koala and Smokey blocks. The tighter density of well bores in the Middle Bakken will likely be effective only through these same geographic areas as well as in our Dunn County acreage where we continue to achieve strong well results."

Bakken Production Sets Record - Surpasses 700,000 b/d

Bakken Production and Oil Price

Bakken oil production hit a new record in December of 2012, after declining in November for the first time in almost two years. Weather related delays kept operators from pushing through old records in November, but production surged to more than 700,000 b/d in December.

The state reported Bakken production of 21,835,148 barrels or 704,360 barrels per day in December. The region also eclipsed the 5,000 producing well mark during the month. 5,044 wells produced an average of almost 140 b/d.

Opportunities in the Bakken - Houston Event

Houston Skyline

If you're located in Texas, there's a Bakken Event on February 21st at the Sheraton. Speakers will address the why, how, and the future of North Dakota. You'll learn why the state has the lowest unemployment rate in the US and hear more about business opportunities in the region.

The lineup of speakers includes reps from the several companies active in the Bakken.

EOG Resources' Bakken Core Acreage Could See 160-Acre Development

EOG Resources Bakken Shale Map

EOG Resources reported improvement in wells after implementing new completion techniques in 2012. In the company's core acreage centered around the Parshall Field, 320-acre spacing success has been confirmed and the company is encouraged by early results at 160-acre spacing. Recent wells are indicating cumulative production over previously drilled wells has improved by a range of 30-70%.

In the North Dakota Bakken/Three Forks, positive results from downspaced drilling tests, together with significant modifications in drilling and completion techniques, further boosted EOG's crude oil production growth.

The first wells tested at 160-acre spacing in Parshall, the Wayzetta 022-1509H and Wayzetta 149-1509H, came online at max rates of 1,185 and 1,265 b/d, respectively.

Notable wells outside of Parshall include:

• The Hawkeye 01-2501H and 102-2501H, Three Forks wells in McKenzie County, were turned to sales at 2,445 and 2,945 b/d, respectively.
• The Garden Coulee 001-1410H, in Williams County, had an IP rate of 1,415 b/d with 1,260 mcfd of rich natural gas

In 2013, EOG expects to complete 46 net wells in the Parshall and Antelope areas. That's up from 28 net in 2012. If the company proves the potential of 160-acre spacing, an accelerated development program will ensue in 2014. Oil price realizations are also improving:

During the fourth quarter and currently our Eagle Ford crude is priced off an LLS index and essentially all of our Bakken and part of our Wolfcamp crude is being railed to our St. James terminal.

Notes From Winter NAPE 2013

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We spent Winter NAPE (February 6-8 in Houston) listening to the pros discussing their views on energy policy, fundamentals, and investments. The event is centered on North American, but international influence seems to grow each year. A few photos are included below the post. Highlights from the business conference include:

• At one point in 2012, there were 12-13 federal agencies overseeing some point of the E&P business
• Alaska is working to create incentives to fuel future exploration. (Only 500 exploration wells have ever been drilled in Alaska. More than 250,000 have been drilled in Texas)
• Alaska is working to ensure the federal government can't block development the state is in favor of
• Most of those that oppose "Fracking" oppose oil & gas development in general
• The industry moving to address all stakeholders. (Not just mineral owners and shareholders)
• Asia and the US are set to lead global growth in 2013
• Payroll tax hike will reduce growth, but we should still grow
• Chemical facilities are expanding for the first time in 50 years ($95 billion in investment planned)
• Problems in the US are artificial (man made)
• Brent is expected to trend into the low $80s, with WTI differentials shrinking
• A Whiting executive believes the Bakken-Three Forks could hold 25-50 billion barrels of recoverable oil
• Anadarko is 500 wells into the Eagle Ford and still sees upside (targeting a 4.2 day drilling time)
• Schlumberger shared a study showing 30% of perf clusters don't contribute to production

In previous years, the floor of NAPE has had a general theme. One year it would be the Barnett, the next the Haynesville, then the Bakken. This year there wasn't a single area that seemed to dominate the booths. There were small deals across almost all of the shale plays. I saw several Bakken and Eagle Ford deals, as well as conventional projects around the country. From speaking with the attendees, it sounds like conventional drilling has become unconventional in today's market. The largest operators are investing in big, repeatable shale plays.

The North American Prospects Expo (NAPE) is one of the largest oil and gas gatherings in the wold. E&P companies from across the world come to Houston to showcase the next big oil deal.