The Bakken Formation is a large unconventional resource found throughout central Williston Basin (Saskatchewan, Manitoba, Montana and North Dakota). The shales that comprise the upper and lower members of the Bakken are world class source rocks with a total thickness generally between 30-40m. The USGS (U.S. Geological Survey) 2008 estimate for technically recoverable reserves in the Bakken stands at 4.3 billion barrels, a figure expected to be reviewed higher. Some companies are estimating about 10 billion barrels in recoverable reserves!
Bakken oil companies are targeting light-sweet crude oil trapped within shale rock 10,000 feet below the surface. Bakken wells generally IP at 400-800 boepd (as high a 2,000 boepd) in the first 30 days followed by production declines of 50-80% in the first year. The estimate ultimate recovery rate is between 350-700 thousand boe. Bakken oil production currently exceeds 350,000 bopd and is continually growing. Land prices exceeded $8,000 per acres in some instances as the momentum keeps growing on the back of strong oil prices.
We are looking for uniquely positioned, light oil focused, junior exploration and development companies maintaining high working interest and operatorship in a large contiguous land base prospective for Bakken light oil. While there aren’t many of them in North Dakota with a meaningful land position because land is pretty much tied up, we chose to focus on 3 junior companies offering a lot of exposure to the Bakken outside of ND.
Reliable Energy (REL.V $0.12 [-0.01]) (acquired by Crescent Point Energy)
Bakken Land: 144 net sections
Reliable Energy is a pure Bakken player with an enviable position in the Kirkella area of South-East Saskatchewan and South-West Manitoba where it is pursuing high netback light sweet Bakken oil on the Canadian side of the play. Reliable has access to 194 gross sections of land with a 75% WI (working interest). Its joint venture partner for the remaining 25% WI is no other than Crescent Point Energy which also owns about 14% of Reliable. Reliable Energy is the operator.
REL’s core area enjoys multi-formation potential and posses high operating margins ($57 profit on $84 CAD oil). As a bonus, the company also holds 100,000 net acres in Blaine Country, Montana currently under exploration for Bakken oil potential. This tract of land is considered a wild card that provides a huge upside if the Bakken oil play is proven. Reliable is on track to exit 2011 producing more than 900 bopd with a 100% light oil weighting. The company built an inventory of more than 450 net locations in its primary area which translates into a multi-year development program.
Torquay Oil (TOC-A.V $N/A [N/A]) (acquired by Private Company)
Bakken Land: 86 net sections
Torquay Oil holds 55,000 net acres of land in SE Saskatchewan’s Lake Alma area that is prospective for the Bakken formation. TOC assembled a drilling inventory of more than 200 net locations on this land alone close to the Montana/North Dakota US border. Torquay holds various small parcels of land prospective for other formations in SE Saskatchewan but its flagship property at Lake Alma provides a lot of exposure to the Bakken play. TOC is currently producing 600 bopd (97% light oil). TOC is still considered an exploration play so watch for a huge revaluation by Mr. Market when the company releases results from its Lake Alma area.
Enterprise Energy Resources (EER.V $N/A [N/A])
Bakken Land: 49 net sections
Enterprise Energy Resources is another pure Bakken player with 100% of its land on the US side of the play. The company is mainly focused on North East Montana where it holds 31,000 net acres prospective for Bakken oil. In North Eastern Montana the key geological elements for the Bakken are all present with comparable thickness but at shallower depth compared to North Dakota which translates into lower drilling costs. EERL has no production as of yet and should be considered a play on land as it has secured its land base at a low cost of $420/acre. The company expects to close on another 30,000 net acres in NE Montana at a similar cost bringing its total land base up to 60,000 net acres. This early entry has strategic benefits as the Bakken oil play is expanding from North Dakota into Montana where it is becoming increasingly competitive. Please remember that this is another exploratory play as the land has not been proven to produce economically from the Bakken yet.
Since wide scale development began, the Bakken’s black gold returned small fortunes to investors and propelled North Dakota into the 4th largest oil producing state with one of the lowest unemployment rates. Keep in mind that Reliable Energy is both an exploration and a development play while Torquay Oil and Enterprise Energy are still viewed as exploration plays as the Bakken delineation expands west into North East Montana, South East Saskatchewan and South West Manitoba. There are notable Canadian producers like Arsenal Energy and Renegade Petroleum with Bakken holdings in North Dakota except that their land is not a major core area compared to their peers which translates into a small potential drilling inventory. Take the time to choose which stock provides you with the most upside potential before making an investment decision.
Disclaimer: the information presented above is only for informative purposes; it’s meant to serve as a starting point to carry your own due diligence. It is in no way an encouragement to buy or sell the aforementioned securities. If you find any errors in the data please do not hesitate to contact us.