06
Aug

CLR Beats; Data Supports M. Bakken and Three Forks Sanish As Distinct

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CLR Reported Big Beat On The Numbers; Confirms Bakken and T.F.S. Separate .... And The Crowd Goes Wild

 The 2Q Numbers:

  • Production of 37,347 BOEpd (74% oil)
    • Oil production was up 1.4% vs 1Q09
    • Oil production was 18% from 2Q08
  • Revenue of $151.7 mm vs $131 mm expected
    • Pricing: oil realized at $53.44; $6.02 below NYMEX vs a $8.32 differential in 1Q09
    • Production exceeded sales, company put 384 bopd into storage during the quarter which it will sell in the future.
  • Operating Costs - saw improvements in both LOE and G&A per BOE
  • EPS of $0.16 (ex items) vs $0.10 expected
  • CFPS of $0.59 vs $0.49 expected

Highlights:

  • Mathistad 2-35H well completed - this was there long awaited test to determine if the middle Bakken and the Three Forks Sanish reservoirs were indeed separate. 
    • this well was drilled parallel to, and 50 feet above (in the lateral) the Mathistad 1-35H, a previously completed Three Forks Sanish well in McKensie County, North Dakota.
    • Data from the new well supports their belief that the two reservoirs are separate/not in communication
      • pressure gauges on the lower well showed a pressure spike during fracing but insignificant communication afterwards
      • the #2 well produced at 4x what the lower well had been producing
      • CLR says its clear they tapped new reservoir rock with the second well.
    • 7 day production test average of 995 BOEpd - highest test they have had from a m. Bakken well
    • CLR thinks half of its 439,000 acres in North Dakota have potential to produce independently. On the conference call, analysts should try to ferret out just where these acres are, at least where they are in the ballpark.   
    • See press release here.

Positive Implications For: NFX, WLL, EOG, XTO, HES, MRO, COP (listed by my thinking on potential impact). KOG and BEXP probably should top the list but I wnet with largely, more established players the Street will be able to put liquidity into.

  • CLR now has 605,000 net acres in the Bakken between North Dakota and Montana
  • Eco-Pad drilling approved by North Dakota
    • plans to drill 2 Bakken and 2 TFS wells from the same pad
    • 70% smaller footprint than 4 seperate drill sites
    • only 1 access road needed,
    • quicker move times between spuds
    • 0' setback instead of normal 500' setback (from the edge of the two section unit (1,280 acres)) means they can drill longer horizontals (can add 1,000 feet this way)
    • sees 10% drill and complete cost reduction
  • Spud to rig release time in the first half of 2009 was 28 days, down from 40 days in first half 2008.
  • Latest well was drilled to a total measure depth of 20,904 feet in 16 days. That is fast.
  • 4 rigs running now (3 in N.D. and 1 in Oklahoma - Woodford Shale)
  • Average IP of Bakken wells in the quarter increased to new high for them of 737 BOEpd. Of this 9 company operated TFS wells saw an IP average of 876 BOEpd

 

Guidance:

  • Budget increased to $390 mm, up 42% due to higher oil prices which are generating stronger cash flows.
  • As usual, no direct volume growth guidance was given but given the outperformance in the quarter and the increased spending, the numbers will be drifting higher.

What Else Should Go Over Well With The Crowd Watch: "the company plans to to continue redcing the level of borrwoings under its credit facility in the second half of the year."

Nutshell: Very strong results, better still data on the distinctness of the middle Bakken from the Three Forks Sanish. I own a little stock here but no options at present. I will be taking a look at getting long some calls at least for a trade after and depending on the open.

Conference Call: Today, 10 am EST

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