The Alberta Bakken light oil resource play was on fire in the first half of 2011 where investors bid stocks to new heights. But the market did not have realistic expectations as the play was exploratory in nature and could not be expected to yield initial production rates comparable to North Dakota’s Bakken play. As the first set of results appeared, demoralized investors exited these stocks in droves which fell from a premium valuation to fire sale lows.
The Alberta Bakken is far from dead as it is still in its early days. Land sales in Southern Alberta attracted over $270MM since April 2010. The average price paid was $812/acre hitting a maximum of $3,300/acre in some places. There are currently about 34 Canadian companies and 11 US companies operating in the Bakken fairway which is estimated at 110 mi long by 25 mi wide running roughly north-south from Southern Alberta into Northern Montana. We believe this resource play is still in its infancy and the size of the prize is still estimated in the billions of barrels in original oil in place.
We are looking for companies that offer a significant exposure to the Alberta Basin Bakken providing all the upside potential but with limited downside risks. These companies should have a light oil focused production with a diversified asset base in the form of proven low risk development oil plays for driving production and growth. We seek to avoid companies that would take a major hit if exploratory well results come in below expectations.
DeeThree Exploration [Stock DTX.to]
Alberta Bakken land: 280 sections in Southern Alberta
DeeThree Exploration enjoys an expansive land base in the Alberta Bakken light oil resource play. The company took a prudent approach by striking 2 joint venture agreements which only represent 30% of its acreage keeping to itself most of the upside potential. On the other hand, DTX has a large inventory of repeatable light oil drilling locations in the Brazeau Belly River formation where the company recently hit a 600 bopd oil well (44 API degrees). DTX has access to over 42 net sections of contiguous land base with an inventory of 100-150 horizontal drilling locations which will be the focus of the company to fuel high production growth. DTX is looking to exit 2012 with more than 5,000 boed (70% liquids). It is one of a few companies that successfully cracked the Alberta Bakken play with 2 wells drilled in 2012 in the Lethbridge area reporting an IP30 (initial 30 day production) rate of 415 bod for the first well and an IP3 rate of 800 bod for the second well.
LEG & DTX provide a diversified land exposure to the Alberta Bakken
Legacy Oil & Gas Error opening: http://finance.yahoo.com/d/quotes.csv?s=LEG.TO&f=sl1c1j1yn
Alberta Bakken land: 115 net sections in Southern Alberta
Legacy is an intermediate light oil producer that exited 2011 with more than 16,250 boed. The company has an extensive drilling inventory of more than 1200 net hz locations excluding the Alberta Bakken! LEG provides material exposure to development + emerging light oil resource plays through 500,000 net acres in undeveloped land in Southern Alberta and the Williston Basin. Legacy has access to a large chunk of its Alberta Bakken acreage through a Joint Venture with Bowood Energy Error opening: http://finance.yahoo.com/d/quotes.csv?s=bwd.v&f=sl1c1j1yn where additional wells are to be drilled in order to for Legacy to earn the net total interest in Bowood’s land. Each horizontal well earns Legacy up to a 50% W.I. in eight sections as part of a rolling option to earn all lands.
In terms of results Newfield reported 225 bopd from a 30% stimulated portion of 1 HZ well, Rosetta Resources reported that 8 producing vertical wells with up to 30 bopd per well. At the end of the 15 day clean up Legacy-Bwd’s first well (Spring Coulee 2‐36) was swab tested at a rate of approximately 220 bbls/day of oil at a 65% oil cut. DeeThree reported the best results so far for its first 100% working interest Bakken well at approximately 250 bbls/d of oil and 250 mcf/d of natural gas after a 7 day clean-up. DeeThree’s 30 day average initial production rate on that well is 175 boe/d (80% oil & NGLs with no associated water).
Based on the initial production results that have been reported, the Alberta Basin Bakken should not be considered a total write off as the players believe they can improve results. Furthermore, the emerging play potentially has multizone resource play potential in addition to the Bakken petroleum system with the Middle and Upper Banff + Second White Specks formations.
If you wish to capture the full upside of the Alberta Bakken, Bowood Energy (tsxv:bwd.v) as well as Primary Petroleum (tsxv:pie) would be your best bet. Just remember that you will also be capturing the full downside as you will assume all the risk in a capital intensive exploratory play.
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.