Other major notable Bakken oil producers include QEP and STO

Ingrid Pan, CFA

A must-know overview of the Bakken Shale oil play (Part 11 of 12)

(Continued from Part 10)

Other major notable Bakken producers

The following companies also have significant operations in the Bakken Shale/Williston Basin, but they may be less exposed to the area in relation to the overall size of the company. For example, ExxonMobil (XOM) produces 65,000 barrels of oil equivalent per day in the region, but the company overall produces 4,018,000 barrels of oil equivalent per day. So, although Exxon has sizable Bakken operations, production from the region makes up less than 2% of the company’s overall production.

QEP Resources (QEP)

QEP Resources (QEP) is in the midst of shifting from a predominately natural gas–weighted company to becoming “oilier.” One major step in doing so has been a focus on the oily Bakken/Williston region. In 2012, QEP significantly increased its position in the Bakken through a $1.38 billion acquisition that came with 10.5 thousand barrels of oil equivalent per day of production and ~27,600 net acres. Currently, the company has 116,000 net acres in the area and eight rigs drilling, with 3Q13 average production of 21.3 thousand barrels of oil equivalent per day (~15% of total company production). Plus, for 2013, QEP is investing over half of its 2013 capex budget in the Bakken/Williston. This year, the company plans to spend ~$815 million in the area, out of a total ~$1,580 million budgeted for companywide capex.

Statoil (STO)

Statoil has 355,000 net acres in the Bakken and is currently running five rigs in the area. Interestingly, Statoil noted on its last quarter earnings call that at one point, it had been running 16 rigs in the area. Management commented on the decline in activity in the Bakken area:

  • “It’s very important to take a long-term perspective on that asset. So what we do see is that when we run with such a number of rigs we’re able to take learnings across the rig portfolio and apply it… It would be the easiest thing to boost short-term production in Bakken. It is just to frac very hard and then you’ll see the initial production go very, very high and then decline very rapidly. The key here is to frack as subtle as you can, reduce the distances between the fracks and get the maximum out of your reservoir, then you get higher recovery rates, but a much flatter production profile and much less initial production. Without naming anyone, companies that want to dress up for being acquired really have the incentives to boost initial productions, we have not that driver. So, I think that is a short and brutal comment.”

Note that Statoil entered the Bakken play through its acquisition of Brigham Exploration, which was a pure-play Bakken energy company. The acquisition was announced in October 2011 for a value of $4.4 billion, or $36.50 per share, resulting in a 36% premium over average of the past 30 days. At the time, Brigham’s production was 21,000 barrels of oil equivalent per day. Note that Statoil’s 3Q13 production totaled 1,687,000 barrels of oil equivalent per day.

Continue to Part 12

Browse this series on Market Realist: