Keith Schaeffer - Mar 29 "DEETHREE (DTX-TSX; DTHRF-PINK)
Deethree has hit on their next Alberta Bakken well. They have a 3 day IP rate of 800 bopd oil with 3% water cut. The update on their first successful well of 2012 in the Alberta Bakken is an IP30 of 415 bopd – IP30 means their 30 day Initial Production rate, and is considered the more prudent standard of reporting well results.
Management clearly believes they have this play figured out, as they upped their capex (capital expenditures; drilling money) on the AB Bakken from 2 – 11 wells, and overall capex increased from $57 million to $82 million. Year end production guidance was also increased from 4300 – 5000 boe/d, with a 70% weighting to oil and NGLs—Natural Gas Liquids.
Just FYI, this is NOT a true resource/shale play like the original Bakken, and perhaps that has been the Learning Curve the industry is going through in developing this play. The productive formation here is the siltstone portion of the Exshaw/Bakken, and it is a channel sand, which meanders like a river bottom. A true resource play has what is called a sheet sand, which spreads out more…more like a sheet.
What does this mean? Well, in terms of production and reserve volume--because of the size of this channel sand—these first two successful wells are 30 km apart—probably not much. It APPEARS to be a very large productive structure, and it won’t be as reliable as a sheet sand—so drilling risk will be slightly higher. The channel sands will have discreet productive pods in them. But it does mean the market value the production slightly lower than a normal true sheet sand resource play. Management does believe they can see the edges of these pods on seismic.
In the Belly River play at Brazeau, about 70 miles north of Rocky Mountain House (I love the names of these small prairie towns) the next few wells have been successful, though not as successful as the first one. The IP30 on their breakthrough well—reported on a short term test of 600 boe/d earlier this year—is 480 boe/d (83% oil and NGLs), which is about double the previous operator’s type curve.
The official rates on these subsequent wells were not all released, though management did say they were all well above their internal type curve expectations—which based on the previous operator was roughly 225 boe/d IP rate. A type curve plots production over time of a well. On these tight oil plays they fall sharply from a high IP rate for several months and then decline much more slowly from there.
One was reported at a stabilized rate of 450 boe/d, with 75% oil and NGLs. A stabilized rate means the high and fast drop off in production has stopped—this usually takes a couple weeks—and the well is declining its production daily at a rate that management believes is realistic and can be forecast.
Interestingly, management thinks there may be productive potential in one of the sand intervals at Belly River they haven’t produced from before—and 3 of the next 8 wells will be tested for this.
So all in all, it means the organic growth here in 2012 should be as good as I expected back in January. I still think their current year end guidance is low. Most analysts kept their targets in the $5.75-$7 range, though one did up theirs to $9.
I look for 50% on each and every trade in one year. At $4.20, DeeThree still meets my criteria for new subscribers."
Aplogies if the is a duplicate post, but wanted to make sure we can see there is oil in the Alberta Bakken!!