WHITING PETROLEUM CORPORATION WLL

Bakken Shale

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Bakken Shale - The Highs And Lows Of 2009

Posted:Dec 24, 2009 09:11 AM by Eric Fox

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Filed Under:Commodities,Economics,Futures,StockAnalysis,Stocks

Tickers in thisArticle:NOG, BEXP, ENB, CLR, WLL

Exploration and production companies continued developmentactivity in the Bakken Shale, as operators crowded into this domestic shale oilplay. The companies were attracted by the economics of the play as well as theattractiveness of oil relative to natural.

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SolidPotential
Continental Resources (NYSE:CLR) was one of thebiggest players in the Bakken Shale in 2009. The company has 650,000 net acresunder lease on both the Montana and North Dakota sides of the play. Productionfrom here equals 34% of the company's. And thatpercentage is sure to grow as the company develops more of itsacreage.

Continental Resources also provided preliminary evidence in 2009that the area may hold more potential than previously thought. In August 2009,it reported the completion of the Mathistad 2-35H well, which was drilled byContinental Resources to test whether the Middle Bakken and the ThreeForks/Sanish formations were separate producing reservoirs. The results indicatethat the formations are separate in some areas, although further tests areneeded to confirm. (For more on this sector, read TheIndustry Handbook: The Oil Services Industry.)

During 2009,Whiting Petroleum (NYSE:WLL) reported thehighest initial production rate of any Bakken Shale well. The Maki 11-27H camein at 4,761 barrels ofoil equivalent (BOE) per day during an initial 24-hour period in lateOctober 2009.

Increased Production
Infrastructure isalways an issue in high growth basins, and the industry attempted to keep upwith the growing production in the Bakken Shale in2009. Enbridge (NYSE:ENB) spent the yearconstructing its North Dakota System Expansion Phase 6, which will add 51,600barrels per day of capacity when it is complete next year.

All thisactivity has helped push oil higher inNorth Dakota, from 188,000 barrels per day at the beginning of 2009 to 239,000barrels per day through September 2009, according to the North Dakota Departmentof Mineral Resources.

Among the smaller independent companies,Brigham Exploration (Nasdaq:BEXP) stands out forits development program in the Bakken Shale. The company has 288,000 net acresexposed to the play. (For more on evaluating these types of companies, check outBecomeAn Oil And Gas Futures Detective.)

Brigham Exploration's latestcompletion announced in the Bakken Shale was the Strand 16-9 #1H in the RoughRider Project area, which produced approximately 2,264 BOE during an early24-hour period. Brigham Exploration also has pushed the limits on technology and drilled this well using a 26 stagehydraulic fracturing operation. The company is planning wells with even morefracturing stages in the future.

A Sign of theTimes
Like other shale plays, the cost to drill dropped during 2009due to efficiency and service cost declines. Northern Oil &Gas (NYSE:NOG) is a small capexploration and production company with 85,000 net acres in the Bakken Shale.Chief Executive Officer Michael Reger said during the company's Q3 2009 earningsresults that costs were "dramatically lower" to drill and complete wells,leading to "substantially increased well economics."

BottomLine
The Bakken Shale enjoys an advantage over other shale plays inNorth America because it produces oil rather than natural gas. This fact, andthe high rate of return, has kept operators interested in this play during2009.

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By Eric Fox