Halcon Buying Resolute's Williams County Bakken Acreage For $75 Million

Resolute Energy Bakken Acreage Map

Resolute Energy has agreed to sell approximately 19,600 net acres in the Bakken to Halcon Resources for $75 million.

The deal includes 19,600 net acres in Williams County in what the company calls the New Home area. Production is estimated at a little less than 1,000 boe/d and Halcon already owns an interest in the acreage.

Halcon is gaining back an interest in acreage that was sold to Resolute from GeoResources in 2010. Halcon bought GeoResources in August of 2012. Resolute purchased a 47.5% interest in 42,000 gross acres for $20 million from GeoResources almost three years ago. Now, Resolute is the selling the acreage to Halcon for $75 million.

Resolute will retain approximately 9,400 net acres prospective for the Bakken in McKenzie County.

At the time of writing, neither company had issued a press release in regard to the deal. Only an 8-K detailing the PSA was recorded with the SEC.

Bakken Oil Continues Moving To The Pacific Northwest

Bakken Crude Rail Costs

We've noted Bakken Oil can get premium prices on the West Coast before and more crude is making its way that direction. Most of the oil is moving by rail, but it is not being railed all the way to California.

Most of the oil is unloaded at ports in the Pacific Northwest, put on barges, and sent south to refineries. Some is consumed locally.

• Tesoro ships oil from the Bakken to its refinery in Anacortes, Washington.
• Tesoro & Savage are building a 120,000 b/d rail to marine facility in Vancouver, Washington.
• A mothballed ethanol plant that is being used as a Bakken oil terminal in Oregon.

There are other projects that might come to fruition as well. Oil moving west is likely going to be a mainstay in North Dakota and Montana.

In total, there are 10 rail terminals planned or under construction in Washington and Oregon. One Tesoro facility has been completed in Anacortes, WA. Others include:

• 2 in Anacortes, WA
• 2 in Ferndale, WA
• 1 in Tacoma, WA
• 3 in Hoquiam, WA
• 1 in Vancouver
• 1 in Clatskanie, OR

It's an interesting development to watch.

While pipelines are the cheapest, safest, and most efficient way to move crude, rail has become competitive due to price differences around the country and barriers to building pipelines. Pipelines face significant regulatory scrutiny and high initial capital costs.

Wet Weather Forcing Delays In North Dakota's Bakken Oilfield

North Dakota Bakken Region Precipitation Map May 2013

It has been a tough couple of months for operators in the Bakken.

McKenzie County was forced to initiate a semi-truck ban on gravel roads this past weekend. The ban lasted from noon on Sunday through 6 am on Monday.

The past two months have been rough in North Dakota. Lynn Helms noted in his directors cut that April was the coldest month on record and May was the wettest. It hasn't let up much in June and McKenzie County estimates road damage from the past several weeks will cost the county as much as $50 million.

“Operators have not been able to catch a break.”

— Lynn Helms

Nine inches of rain fell over the past two weeks in McKenzie County alone. More than one-third, or 67 of the 188 rigs targeting the Bakken are active in McKenzie County.

Expect mention of delays to creep into earnings calls and operational updates over the coming weeks. A truck ban on a Sunday won't slow down the industry too much, but damaged roads and continued rain might.

Bakken Natural Gas Production Could Fuel New Fertilizer Plant

Northern Plains Nitrogen Facility - Grand Forks ND

North Dakota could be home to a new $1-1.5 billion fertilizer plant. Norther Plains Nitrogen has proposed building the plant near Grand Forks, ND.

The project could use Bakken natural gas to produce 2,200 tons of ammonia per day.

Corn production in the region has grown significantly over the past decade and most nitrogen fertilizer used in the area is imported. Capital costs, electricity, water supply, and natural gas prices are a few important metrics in making the facility competitive.

NPN CEO Don Pottinger notes, "this green-field world-scale production facility will be among the safest, most efficient and environmentally compliant ever constructed. By using modern technology which, among other benefits, reduces our carbon footprint, the NPN facility is taking shape to be a very exciting and worthwhile undertaking."

Natural gas from the Bakken might provide a cheap way to supply hydrogen for use in the plant. Natural gas accounts for approximately 80% of the cash costs of producing ammonia. The plant is designed to consume ~80 mmcfd.

Bakken production is on pace to eclipse 1 million barrels per day of oil and 1 bcf per day of natural gas in the next 18 months. Approximately 30% of gas production in the Bakken region is flared, so a new source of demand will be welcomed by operators.

While the gas is expected to be produced, getting it to eastern North Dakota is not quite as easy. A pipeline will be needed to move any significant volume of natural gas across the state or the plant will only be indirectly supplied by the Bakken. The facility is connected to the Viking Gas Transmission System. The Viking system just happens to be the destination for a Bakken natural gas pipeline proposed by WBI Energy. If the pipeline goes forward, it is expected to be in service in 2016.

The developers hope to have the fertilizer plant online in time for the 2017 growing season.

You can read more about the project at norternplainsnitrogen.com

Abraxas - Natural Resource Partners Bakken Deal Announced

Abraxas Petroleum Bakken Acreage Map

Abraxas Petroleum has signed an agreement to sell the majority of the company's non-operated Bakken acreage to Natural Resource Partners.

Natural Resource Partners is paying $35.3 million plus the assumption of well commitments that total $8.1 million related to 22 wells in which Abraxas has elected to participate.

The deal includes production of 502 boe/d. Abraxas will retain operated acreage in the Bakken.

Bob Watson, President and CEO of Abraxas commented, "This is obviously a transformational day for Abraxas as we significantly reduce our leverage while simultaneously shifting our focus to a core operated portfolio. Heading forward we will continue to rationalize our asset base to focus on our core operated properties primarily in the Bakken and Eagle Ford. Moreover, the removal of the non-operated Bakken assets from our portfolio will provide the company with a much more predictable production growth profile and CAPEX schedule.

Read the full press release at abraxaspetroleum.com