Scotia Capital on Alberta Bakken and BWD - A few dBOWOOD ENERGY INC.
Listed: TSXV-BWD
Bowood is notable within the Canadian side of the play in that it was early to the concept and has
announced a major farm-in agreement with the Blood Tribe. The gross land position is 118,000 acres, or 100,000 acres on a net basis. The company acquired 22,000 acres of freehold land in 2007, along with
additional Crown land, and 60,640 acres through an agreement with the Blood Tribe. As noted, the Blood lands are very significant in size, are sparsely drilled, and the Bowood Blood lands represent
approximately 17% of the reservation. The company paid approximately $230/acre to attain its Blood
acreage position, with one drill required in years one and two, followed by two wells per year in years three through five, all to the first of 1,000 metres depth or 5 metres into the Devonian as minimum drilling depths. Royalties are structured similarly to Alberta royalties; with a 10% minimum, the tribe can elect to participate straight up for 20% or is entitled to a 20% working interest upon Bowood’s recovery of 200% of total capital costs.
Bowood has in turn formed a joint venture and strategic farm-out arrangement with Legacy Oil + Gas Inc. on its Blood and non-Blood acreage, whereby Legacy can earn 50% of all Bowood lands, part of which has already occurred through an equalization for $8 million net to Bowood on 33,280 acres, and the balance of which is through farm-in on 83,840 acres. Legacy is initially committed to drill two horizontals, with one well expected to spud by the end of March and the second by the end of August. Legacy pays 80% of each well to earn 50% in eight sections of farm-out lands and has a rolling option to continue drilling past the second well.
“Baby, I’ll be there
to share the land.”
– The Guess Who
Oil & Gas – Play Spotlight March 2011
We view Bowood’s relationship with the Blood as an intangible but also very valuable feature of the
business. There is no doubt in our minds the Blood lands were hotly pursued by industry; that a company the size of Bowood was chosen is therefore a noteworthy achievement and endorsement, in our view. We also view the decision to invite Legacy into its opportunity set as a positive development in that Legacy is an experienced and well regarded team, with significant Bakken experience in the Williston Basin. Legacy is also of a size where the potential exposure to the play versus its company size is appropriately geared to offer good appreciation potential upon success, and should therefore help ensure it is motivated and focused to achieve proof of concept. In our view, Bowood has one of the most advanced interpretations of the factors that could make the play work.
• Wells licensed: surface and licensing underway for two wells with Legacy