11
Jun

KOG Notes

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West 6/1

KOG, updated their presentation slide show for conf. One of my previous questions got answered, as previous slide show didn’t show that they had leased all the land for the Charging Eagle #7( prev slide show this was #8). Their new presentation shows approx an add’l 880 ac on the north end of the tract.It still shows 100% wi on this well. It shows apprx. spud date late July.

I finally got KOG’s site to pull up and it shows 56k ac gross/ 37k net as of 1-1-2009. One thing that I have always wondered about is that this amount has remained constant even after they did the 60/40 deal on the Mocassin Creek acreage with the private company. I continue to believe that that private company may have been Zenergy. This occurred at about the same time as Zenergy did a deal with Peak North Dakota on acreage in this area. KOG has filed for five 1280 units between Mocassin Creek and Two shields Butte 5&6 in area shown on map as Skunk Creek, 50% ami with Peak ND

BOP 6/1

west — KOG — who was the private company who sold their bakken acreage to XTO? I believe it was Hunt. That was who i was told formed the 6 well JV. But, you’re right… the fact that the 37,000 acres has stayed a static figure is a bit of a head-scratcher for me too.

thanks for all your help here. i’ll take a look at their acreage map and see if anything has changed. (i printed out that page and have it close, in order to keep the locations, wells, and names straight)

 

Tater 6/2

KOG added
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2933882

BOP 6/4

From the horse’s mouth… “end of June,” KOG will report results from wells 3 and 4. 4 is being completed first. It’s the 10k lateral with Peak. 3 completed next. The 4,500 lateral with XTO. HAL doing the completions. HAL had better not screw it up this time (like they did on well #1).

West 6/6

Bakken Weekend Update: (1) WLL closes deal with private oil co. for interest in Sanish field. Private co. will pay 65% of WLL completed well cost for 50% interest. Link to news releasehttp://phx.corporate-ir.net/phoenix.zhtml?c=147759&p=irol-newsArticle_Print&ID=1296494&highlight=. This will be great help to develop this field as WLL has to much debt to be an effective developer of the field in a stand alone capacity. I have personally being avoiding the stock long term because of the debt and how they did a stock offering in February and then showed in their non official reports and presentation what their yearend 2008 would have been including this cash from 2/2009. This was a red flag to me. Probably time to look again, this is a really hard stock to trade options on because of the spread and lack of volume……..(2)South of the Sanish MRO continues to add 1280s in the Reunion Bay Field area and west of the Missouri River in McKenzie Co,ND. According to the Rocky Mountain Oil Journal (RMOJ): MRO continues develop 100,000 ac tract purchased from variuos interest for 42 million mostly on the western side of the Lake Sakakawea, the third largest manmade lake in the United States, after Lake Mead and Lake Powell. MRO also completed a Lodgepole well in the Baily Field which is above the Bakken formation. This would seem t be a localized situation due to fault running thru area. Link to Bakken Discussion group site with this article and other information that may be of interest,http://bakkenshale.blogspot.com/2009/06/marathon-opens-lower-lodgepole-third.html…………(3)Questar, STR, Has staked its fourth well on it’s 78,000 acre prospect which is mainly under Lake Sakakawea. These prospects are all on the east side of the Lake in an area that EOG is also drlg some wildcats.STR interest surrounds KOG’s acresge like a horeshoe. If you put all this together on a map and look in the center of all the activity you will find KOG. As a discloser I own KOG so I may report this with some leanings in that direction. Core positon established and not having much pull back to add to positions. At $1.15 its like buying an option that doesn’t expire. I don’t know how close to the end of June well announcements you can wait to get in the stock, but if the mkt corrects there will probably be an lower entry point. thx

 

West 6/9

KOG, Just wanted to see if any opinion as to value of bakken wells that make 100bopd. A lot of the offset wells to KOG’s area are coming off the confidential list and after 5 months of production they are averaging about 100bopd. MRO’s are avg more as they have been able to tie into nat gas lines. MRO standard well is about 9,000′ lateral with single stage frac. Peak ND has a couple of wells that just came off confidential list that offset KOG’s well that is drlg. This well is now avg 100bopd and flaring all gas, this is about a 4500′ lateral but I don’t any information about completion or # of or type of frac. Anyone with behind the envelope # ? STR is drlg an offset to their discovery east of the lake that is now avg 100bopd, so the economics must work. KOG est 300k to 400k eur on 4500′ lateral and 500k to 600k eur on 9000′ lateral. Any insight would be appreciated. thx

BOP 6/9

west — KOG = good, solid info. Thanks. With an 80% decline curve in the first year, doesn’t take long to get to 100bopd if IP’s low, I would think. Ignoring KOG’s 1st well (only 4 of 8 frac stages completed), the 2nd well (4,169 ft lateral, 5 stage frac) IP’d at 1,274 bod/d + 717 mcf/d. I’ve been adding the gas into the IP number, but if they had to flair, doesn’t make sense to do that.

In their last PR, they were estimating 350-500mboe/4,500 ft lateral + “seeing well costs come down significantly.”

I only have Back-of-Envelope estimates for the value of KOG (based on assumptions about acreage, well spacing, NRI, and EURs). I haven’t seen anyone else come up with anything more exacting.

Until we get a cost/IP/decline/EUR profile using 4,500 ft laterals and 5-8 stage fracs, it’s just cocktail napkin calculations. Also, we are ignoring any upside from the TFS. It sounds like that formation underlies the entire Bakken play as a 2nd resource objective.

But, all the data points you cite are helpful. What do you think?

West 6/9

I think that they will have 8 wells producing by the end of 12-2009. I think the four short laterals will avg 100bopd after initial flush production and the four 9000′ laterals will avg 250 bopd this is probably the low end but realistic. In the 1st qtr conf call Lynn said that he thought they would be more like WLL’s Sanish field. If this was the case, then with a reference to WLL site infor avg prod data, we would be looking at something more like 400 to 500 bopd on the long laterals after 60 days. I would caution that we would need to see something in the range of 2500 plus ip, to match avg Sanish well, in the Two Shields Butte # 4 for this to apply. Please don’t use this information for investment, but I expect the # 4 to ip for 2000+ bopd and in excess of 2 mmcfgpd based on drlg speeds in lateral and associated fracturing in the area if orientation is correct. Time will tell the story but they did frac the # 4 first and did change their drlg sequence for upcoming wells to more directly be drlg in the area of #3 & 4. The decline curve on the bakken is ski slope material so investor beware. So bottom line what value do we assume for the co with this information? I would like to think that we are in the neighborhood of at least $ 2.00 by the end of the year, but honestly I wouldn’t have so many shares if I didn’t the long term price wasn’t considerably higher. I have to complement the KOG crew for not pumping the stock and taking their time to do it right. As I have said before I am probably not objective as I have a bullish lean towards the stock. thx, any thoughts from anybody are always appreciated. Maybe Tater can post his link to his excellent chart work on KOG on the stockcharts.com site

BOP 6/10

going to start fracing well #3 around June 20th. Will report results from #3 and 4 together. “End of June.” Whatever that means…. but, if fracing on 20-22nd (or so), how long from there to get a 24 hr IP? So, June 26th, maybe?

 

BOP 6/12

west — on that KOG drilling schedule… wells 5 and 6 were scheduled to be located just south of 3 and 4. Wells 7 and 8 were supposed to be much further south, in the Charging Eagle area. Are you hearing that 7/8 locations have changed?

West 6/12

BOP, I should apologize because that dates back from them changing 3&4 to their new location in the 2 Shields Butte and making the old 3&4 the new 5&6. Then south of the river do drill 7&8. Their most recent updated maps r the ones that show add’l acreage on the north end of #7 horizontal leg that has not been there on previous presentations. Is that confusing enough. I keep expecting them to announce some type of joint venture deal for the Charging Eagle wells # 7&8. The NDIC still shows rig on # 5 and we r about 30 days so we should be about through with this 4500′ lateral. They will then skid and start long lateral # 6. I’m sure locations may be determined by many factors , but their newest presentations has changed orientation for a couple of the wells south of the river. The Charging Eagle still shows 100% wi but I don’t see them keeping all of that in their present financial condition. I would expect them to anounce a deal for this prospect before the completion of well # 6. I continue to believe that that partner will be Zenergy, although there is ample room to think that they may form some type of jv with STR as most of their 78,000 acres underlies the Lake with very rough terrain on what sites they do have on swamp lands. Of course what everybody really wants to know is if a white knight will appear with his checkbook. MRO has checkbook but turtle speed execution. My past experience has been that it always takes longer than normal for the offer to show up and then everybody has an interest. Only thing of note in RMOJ today is that MRO adds rig to Reunion Bay area north of KOG. Zenergy has most of the land acreage between MRO’s Reunion area and KOG’s 2 Shields.

BOP 6/12

west — total gold mine of info on KOG. You have a great grasp of the lay of the land there. Thank you for sharing.

Partnering on wells 7 and 8… maybe. Maybe not. Depends on whether they can get some liquidity on their bank revolver, perhaps. But, would hate to see them pull down much debt until they have some real (profitable) production and hedges to cover the interest expense there. I do think that KOG is bought out/merges at some point. But I also know that the bids haven’t been in the same universe as what the company thinks they are worth. So, might have to wait until the next oil spike to accomplish that. Meanwhile, I have been impressed with Lynn’s ability to manage across the Abyss. I think he did the right things to keep the call option (called KOG stock) alive.

Here’s something to think about… one of the reasons KOG sold down to that 16¢ after 4Q conf call, was the $5mm (or so) take-or-pay contract on that 2nd Unit rig. Hear that rig rates in the Bakken are one of the few areas that are higher lately. Given that, KOG might be able to get out or subcontract that 2nd rig. I think the stock would do a Happy Dance, if that was the case.

Pure speculation, on my part. But, wonder if Lynn has resolved that 2nd rig…

RMD 6/12

KOG comment from Bakken investor:
1. there’s a reason there are few wells on the Rez: there’s no due process and they can even abrogate the deal if they want (and have in the past). The local co.s know there is oil there, but it is just not worth it.
2. rig penalty exceeded capital raise; can’t see a way out of the hole given rig committments.
3. working on 3 different ways to drill/complete wells = don’t know what they are doing yet.
Just passing comments along.

ZTRADE: $10KP 6/17

KOG - 1,000 shares at $0.9298. Stock is off about 12% as crude retreats with the broad market. This is a starter position and I may add more when we get further Bakken results later this month or early next.

West 6/17

KOG, I would say that price action is more market related than company specific. Icontinue to like the stock and would view this as a buying opportunity. I did send Lynn an email asking about the 2nd rig but I have not heard back from him.It should be noted that there are those that have a lot to gain by people that panic trade.Once again I would look at the long term view here for KOG. There may still be some moves up and down with the general market. Our thesis is strong there are 2 producing wells on production now and 1 long lateral well that has been fraced and is flaring gas and producing oil now . The off set well to this is the #3 which should be fraced next week and ip rates will be announced for both at the same time, probably at the end of the month. KOG averaged 100 bopd for North Dakota last year, with these new wells their production should move up to 500 to 1000 bopd in North Dakota. This company is doing it right they are not hyping their wells but putting their plan into action. … Sometimes I think that with all the instantaneous information we start to micromanage and loose sight of the bigger picture. Is there a possibility that the stock could go down more , of course. If you can’t sleep at night worrying about your position then you need to sell down to the level that lets you sleep at night…. I’m a fearless trader so I can take a little more pain as far consolidation periods for stocks. The chart says the longer we have this sideways consolidation the stronger the next move will be. Thesis: (1) Right Company, This is a veteran crew with years of experience partnered with XTO one of the most successful independents in the US. (2) Right Area, KOG has 37,000 net acres on trend between two large oilfields,to the north the Parshall/Sanish Field is one of the largest onshore oilfield discoveries in the contential US in the last 50 years. They have now drilled 5 wells all with oil and gas shows while drilling. In the last 3 months they have put 3 wells on production. The most recent was the long lateral #4 which is a tight hole but a visitor confirmed production and gas flare. So this is confirmation that we have the a productive formation under the leased acreage. There is also the deeper Three Forks Sanish Formation which is producing at an offset to the # 5, this is a tight hole so we don’t have any information on this well. This is additional potential in the future for the company. This would say that they are in the right area and have confirmation that it is productive. This is not confirmed but they have filed to sale 10,000 barrels of oil from the first 2 wells. (3) Better Information, we don’t know everything but I guarantee you that we have better information than the vast majority of people trading this stock. Go do a search on Google and see how much information you can find about the company. So the bottom line is that I think that we have the right co., in the right area and that we are ahead of the herd with our information. Have a plan, execute the plan and stick with the plan

Z 6/17

(Price less differential) X Volumes = revenues.

Then LOE comes out (including transportation)
then production taxes,
then G&A,
that gets you to their field level margins.
Subtract interest from that and you have cash margins which compare pretty well to their peers.

6/18/09 Z

KOG Operations Update:

  • Wells 3 and 4 see 24 hour production tests at 1,856 and 811 BOEpd.

    • TSB #16-8-7H - (29.5% NRI) - 9,000 foot, 15 stage frac is the bigger IP mentioned above and produced 1,236 bopd over a 7 day period.
    • TSB #16-8-16H (41% NRI) - 4,465 foot lateral with a 5 stage frac drilled from the same pad as the long lateral well.
    • While there was talk of higher rates from these wells floating about, these are very respectable wells for the Bakken and should be easily economic at current oil prices. Over time, most of the Bakken players have seen their well results improve as they gain experience in the play, which is typical for a resource play. Had I not heard whispers of higher numbers here I have been more than a little impressed as I would be from most non-Parshall area wells of this size.
  • Well #5 (TSB #14-33-6H; 41% NRI ) at TD and #6 (#14-33-28H; 41% NRI ) is drilling ahead in the horizontal portion of the well. Both wells are expected to be completed mid 3Q.
  • Wells #1 and #2 which IP’d at 711 and 1,394 respectively were disclosed to have average production of 280 and 447 Bopd for their first 30 days on line.
  • A lot of the numbers above are just for my notes; they also played about with their acreage, selling down a piece of two prospects to net a little cash. I’ll sort out a model here soon.

 West 7/14

KOG, This is some recent offset well information from NDIC, RMOJ, Bakken Shale discussion group and KOG website presentation. Peak ND recently requested temporary spacing for nwnw4-148n-93w and provided the following information in that request: 40′thick, 320ac(4500′ lateral), 6%porosity, 25%H2O saturation, 988scf/bbl, (now it gets interesting) PRIMARY RECOVERY 13.8%, EUR 342,520BO, 330,190MCF GAS, OPERATING COST 5k/month plus $ 6/BBL H2O SWD, investment cost 6 mill.The Co. requested to be allowed to vent gas for 12 months as the closest gathering system is 16 miles away & would cost apprx. 2.5 mil to connect well. The Co. did not anticipate any pipeline solution until there was enough production in this area to justify cost, earliest anticipated completion date is Jan 2011. It should be noted that some wells to the southwest will be having their annual review in the next couple of months for venting approval and at present there is no indication that they will not be renewed. It is a possibility that at some point the state may not allow the venting to continue as they are losing tax revenue and this would shut in oil production.The well has cum 42,692 bo, 2,783mcf(vented) and 14,550 bow from 9-08 thru 5-09. The well is currently averaging 107 bopd, 77 mcfpd, and 30 bowpd. Original ip for well 829 bopd, 647 mcfpd and (from NDIC) 1160 bowpd…………………………….. Fredericks 6-31H, which is suppose to be a Three Forks Sanish well but is listed as bakken by infor on NDIC has the following information available: IP test dated 3/8/09, 465 bopd, 272mcfpd and 1202 bowpd. For the 3 months ending 5/09 the well has cum 16,783 bo, 9611 mcf gas, and 7968 bow. This decline curve will probably tell the story for pace of development for TFS in this area. There were no estimated eur for this well available and no other public information is available on this well that I can locate at this time…………….The reported production for most Bakken wells in this immediate area is about 100 bopd after about 5 months of production on a 4500′ lateral. Of course there are a dozen other variables that need to be applied, i.e. # of frac stages, length, etc. Most of the MRO wells in Baily Field are 10,000′ laterals with a single stage frac and average about 100 bopd and 44 mcfpd and 30 bowpd. The numbers game works here as there are 63 wells making 156,000 bop month, 84 mmcfg bpm and 41,000 bowp month. Most of WLL’s Sanish Field wells avg about 200 bopd with some now hooked up to their Robinison Lake Gas Processing Plant. These would be 10,000′ avg lateral length with mutli-stage fracs…………………………….Probably one of the most important events forth coming for KOG will be their tests Charging Eagle and Tall Bear wells south of the Little Missouri River. Aproximately 1/3rd of KOG’s ac gross lies in this area and bumps up against pinch out area that defines eastern edge of EOG’s production in the Parshall Field. The more experienced people on this site can review logs on KOG website presentation page 7 http://www.kodiakog.com/pdf/KOG-June2009-v2.pdf,but there would appear to be a large section in the middle part of the Bakken section, in the Charging Eagle log that is very tight.This could be good or bad, but it could be argued that it will be harder to have frac stimulate entire area or restrict penetration area. As stated this would be better addressed by someone with greater knowledge and experience……………Hopefully this information may be helpful for back of the envelope considerations. Best regards

7/15 Comment on BEXP TFS Well ~ Z

Brigham (BEXP) Announces Sizable Three Forks Sanish Test + Ops Update

Williston Basin, Ross Area, Montrail County, North Dakota

  • Strobeck 27-34 #1H
    • Three Forks Sanish well
    • 24 hour production test of 2,021 BOEpd (88% oil)
      • 20 frac stages, 18 successfully completed
    • Believed to be 2nd largest IP out of the TFS (just underlies the middle Bakken)
    • 63% NRI

      • On a net to the company basis, the IP rate would represent  7,639 Mcfepd to BEXP, or 26% of 2Q09 total company production guidance.
      • This will decline rapidly but it is still significant to the company
    • $6.1 mm to drill and complete, a third below what it would have cost at year end 2008 (note press release says $3.6 mm but presentation goes with the higher, more plausible number).

Before the Strobeck well:

BEXP’s first TFS wells was completed in October as the Adix 25-1H well, with an IP of 892 BOEpd, has since been appraised by a 3rd party reservoir engineer at 374,000 BOE.  Thinking here is double the IP and you roughly double the recoverable reserves.

7/15 & 7/16 Comments from WEST and BOP

BEXP, A review of their wells that r off confidential list shows that most avg 30 to 40 bopd, most gas is vented, and avg about 30 bowpd. Their best well makes about 160 bopd, Addix 25 1-H and has cum 58312 bo, 48029 mcf and 30528 bw. At the present time it looks like the TFS best wells are along the Nesson anticline. XTO’s Boucher 41X-21, has made 42650 bo, 48679 mcf ( this is connected to sales line) and 4520 bw in 2 months. This is one of the wells drilled from the super pad on the north side of the Lake Sakakawea. Also from this pad NE directional CROWDER 41X-21 well has made 46017 bo in 5 months,SW DEANGELIS 41X-21
has made 62093 bo in 7 months. Most of this area was purchased from Headington and Hunt last year. Hopefully KOG will get XTO frac crews for their next 2 completions. It is my understanding that XTO brought the completion from the Barnett to the Williston Basin for their expertise.

BOP, you r funny. BEXP is definitely king of the hype. In researching their production ND state wide it does show some promising areas for other cos that r followed on this site. WLL’s Lewis & Clark play in sw ND is a TFS play from existing wellbores, which should bring down cost. WLL looks like it has one of the best acreage positions beside EOG.Wll’s financial position has improved with the recent partnership deal with Kaiser-Francis and their drilling activity should pickup from here. Hopefully WLL’s drlg cost have come down, because they were one of the highest in the Bakken play. EOG has recently purchased 8622 net acres for $2.75 million just west of the Missouri River from Sundance Energy.EOG has also applied to pool 83 adjacent sections as follows: 12 eastern sections of T158 R91 all of T158 R90 Western 12 sections
of T158 R89 and southern 18 sections of T159 R90. Also sections
4,5,6,7,18 of T157 R 90. Most of the Bakken and TFS will work but require the higher prices to be profitable. As always the best operators will be the most successful in good and bad times.

KOG — West, to answer your question first, KOG does NOT include NatGas and NGLs in their EUR estimates. Although the production of nat gas (and NGLs) is significant (NGL capture will add about 50-70k BOE to the EUR), until KOG gets their gas into a pipeline and can separate out the liquids, they do not include them in reserve estimates. Seems about right to me. Non-squirrely reporting. Like to see that.

West — KOG EUR reminder: they are thinking they get 350k and 600+k for short and long laterals. That is oil only. Also, they estimate that their cash commitment per well runs about $3mm and should have 10-11 wells down by EOY.

KOG — other comments. 99% of the water they “produce” from their wells comes from fraccing fluid. Water is not a big problem or cost. A pipeline (the Arrow Pipeline) will be completed in their area by the EOY 2009. KOG thinks they will be able to hook into this pipeline by mid-2010 and have planned their 2010 drilling schedule around this (to capture their nat gas and NGL production).

BOP information on KOG is really a big WOW as far as I am Concerned. Thx for all the information and taking the time to get the answers. The lite trading volume makes it difficult to trade many shares at a time without moving the stock but here goes nothing. THX again

One more comment, floating around out there re: KOG. Think the source is TommyWeisel… they think KOG will be sold by the end of this year. TW has a $3 NAV on the stock, but think KOG would hit a bid at $2.00. I beleive, at the right price, KOG will be sold. They didn’t like the bids they got last winter, so raised equity to prove up their acreage. I give KOG mngmt huge kudos, for managing through the definitive “tough period.” However, Lynn knows KOG is too small to be a stand-alone… just think he want’s to prove up Charging Eagle and Tall Bear (which will be a VERY interesting well to watch… as it is near the Bakken pinchout and on trend with Parshall Field). Both areas should have well results around the 1st of December. Something else to watch for… hearing that EOG is in the process of buying the acreage of a small, private player on the Rez. Will be very curious to know what $/acre will be paid… if it gets reported.

NDIC site is showing KOG started drlg Charging Eagle 1-22-23H on 7-12-09.Thanks to BOP for updating all of us on KOG activity and getting the facts about what is going on with their operations……….EOG is setting up to another of their technology leading test in the Middle of their new 83 section (53,120 acres) area that they are trying to unitize on the Burke and Mountrail Co lines…EOG has also applied to pool 83 adjacent sections as follows: 12 eastern sections of T158 R91 all of T158 R90 Western 12 sections of T158 R89 and southern 18 sections of T159 R90. Also sections
4,5,6,7,18 of T157 R 90…. They are drlg monitor well to 9,048′ to the bottom of the 3forks between two Bakken 5,000′ laterals. EOG has not released any infor on these wells but thought is they will do simo fracs with microseisms monitors in monitor well. Unconfirmed field reports say that Sidona#2-05H, nwnw 5-158n-90w, is flowing 250 bopd unfraced. The well monitoring would be similiar to recent stacked horizontal fracs with monitor well in Wyoming Powder River Basin. In addition EOG has been busy fracing many of the Parshall wells that they drilled this winter. I don’t know what it takes to move the needle on EOG’s stock but this all argues for a strong CC in August, especially if they give any information on their Eagle Ford Shale wells.

KOG wells off confidential status have following production reports. The MOCCASIN CREEK 16-34H
5-2009,prod 12604 bo, sold 11845 bo, 5673 bow, 5962 mcf vented, 24 days of production…….MOCCASIN CREEK 16-34-2H
prod for 36 days as follows: 8883 bo, Cum Oil: 9812 Cum MCF Gas: 5540 Cum Water: 2688 they sold 9420 bo from this well. All figures from NDIC site and are thru the end of May, 2009.

 8/19/09 ~ Z

KOG valuation thoughts. Most of the data points in the tables below are self explanatory. I presented my back of the envelope NAV, which is my answer for what KOG would be worth in a takeout given what they have accomplished to date and my sense of oil prices for the near term (next 3 to 6 months). I do not see them getting acquired in the near term as I think the M&A window is still pretty tightly shut for most of their potential suitors. Some other thoughts:

  • This is very back of the envelope
  • This is not a present value analysis
  • This is a "what they might fetch" given a look at potential reserves and an "in the ground" (undeveloped) $ price for oil
  • With more drilling they will derisk more of their acreage … or not.
  • My assumptions are deliberately more conservative than management’s but also what I feel to be fair given where we are at now:
    • 4 wells with data, all in the Bakken, none in the Three Forks
    • IPs have been decent but not what I’d call gangbuster: average of 4 wells: 1,193 BOEpd.
    • KOG is calling EURs of 600,000 barrels in the Bakken and 400,000 barrels of oil in the Three Forks.
    • Production history has been short. We don’t yet have 30 and 60 day rates on these wells. Again, feel that its a bit early to start tossing high EURs around.
    • The wells are grouped in 2 locations so much of the acreage is untested
    • The acreage is in a relatively untested part of the Bakken play
    • I find management’s 90% of acreage prospective comment from their presentation to be over zealous
    • I find management’s EURs to be unwarranted as averages go given the data we have seen to date.
    • They obviously have more data than I do.
    • They will have to do a deal to fill the gap between their nascent cash flows and their proposed drilling program. I am working on a model to try and pinpoint but this but if you look at the recent rally in the shares you have to think they will be tempted in the $1.25 to $1.50 range. Recent insider sales may mean such a deal is not imminent but the a deal will have to happen at some juncture as their cash position is limited and they are not entirely carried on their upcoming wells. But again, I still have to pin this down.
  • EUR comments from other Bakken players:
    • WLL is estimating EURs of 850,000 BOE. Their wells are some of the biggest seen in the plays in terms of IPs with an average IP north of 2,000 BOEpd from over 40 wells. 
    • EOG - in their core area (Parshall) they see EURs of 850,000 BOE as well. Out side the core they see less oil in place and EURs around 300,000 BOE.
    • CLR - puts reserves at 325,000 BOE for both its Bakken and its TFS tests (2 to date).
    • NFX - has 500,000 acres in the play and calls 200,000 prospective for development of the Bakken and / or the Three Forks. They have drilled 11 wells to date in the play, ranging from 300 to 1,300 BOEpd and at last check, were still declining to estimate EURs saying that it was still too early to comment.

My table and then what it would look like using their assumptions. Compelling in either case but I think they need to be conservative until they get more results under their belt from a wider swath of their acreage. Repeat after me: "Under promise. Over deliver."

West ~ 8/30/09

KOG: Here is a good link for those with an interest in the Rez lands and KOG’ play. http://www1.eere.energy.gov/tribalenergy/guide/pdfs/fort_berthold.pdf….and http://www.adv-res.com/pdf/Identifying%20Oil%20Exploration%20Leads%20-%20Fort%20Berthold%20Final%20Report,%20July%202004.pdf..KOG should report their wells either Monday or Tuesday and I wouldn’t expect anything more than a press release from the Co. The Co probably continues their recent history of not hyping well completion data. Of course there may be many who would wish for a bit more rah rah from the Co with these announcements. Studying BEXP recent presentation and reviewing production history for wells from NDIC, the large mutli-stage fracs of the long laterals is increasing production and EURs in the Bkn/3Fks. So KOG’s wells will and have been dependent on the success of the mutli-stage completions. A brief review of KOG’s production shows that their Mocassin Creek wells that have had less than successful completion of all stages of the frac have had less initial production and total production during the same time period. Of course we have very limited data for KOG but BEXP has about 8 months production to compare and the difference is significant. In the case of KOG’s MC 16-34-2H that had a frac problem and not all stages were put away, total production reported 14,266 bo and 8597 mcf for 64 days. The offset well MC 16-34H has produced 20,375 bo and 11,377 mcf for 51 days. Both of the MC wells were around 4150′. Also remember that KOG’s long lateral ( 8,995′) to the North, TSB 116-8-16H, did not successfully get all the stages off during the completion process. The hope here is that KOG is successful in completing all stages of their multi-stage fracs on TSB 14-33-28H and 14-33-6H. Of course I would be remise if I did not say that not everyone holds the same view as me concerning the mutli-stage fracs so here is a link to bakken shale group discussion site for review and other opinions. http://groups.google.com/group/bakken-shale-discussion/browse_thread/thread/bdeb2aa9cae1925f#…... On KOG’s well CE 1-22-10H south of the River good gas flares and oil shows were reported during drlg. Of course this doesn’t say what the ultimate well may produce but these shows are good shows which means that we are not right on the edge of the oil /water contact zone or magic line. I view this as a very positive development but I would not expect much from KOG mgmt until the well is completed which is the correct action to pursue. Also all wells on this side of the River are closer to the gas line that is hooked up in the MRO section of the Bailey Field. As soon as they are able to start hooking up wells to gaslines instead of flaring this is going to give them additional proved reserves immediately….Discloser: I own a position in KOG.

 

 

 

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