First it was Hess
On Monday, the integrated natural gas company announced that it's picking up more than 85,000 acres of core Bakken acreage for $925 million. The purchase is twice as large as the one Enerplus closed last month, and is located in the same Fort Berthold area in North Dakota. This lies to the south and west of the EOG Resources
At more than $10,000 per acre, this acquisition provides another clear data point for valuing North Dakota Bakken operators. Williams picked up its acreage from private sellers, but there are plenty of publicly traded E&Ps with leasehold in the million-acre Fort Berthold Indian Reservation, which spans counties including Dunn, McKenzie, and Mountrail. Let's have a quick look at one of these operators.
Kodiak Oil & Gas
I think it's just as important to point out the Bakken players for which this $10,000 per acre figure is not at all an appropriate shorthand metric. That would be the operators to the north, in southeast Saskatchewan. Up there, the Bakken is shallower and pressures are lower. A good Bakken well there initially produces 200 barrels per day and has an ultimate recovery of 125,000 to 150,000 barrels. In Kodiak's focus area, IP rates exceed 1,500 barrels per day, and ultimate recoveries are projected to be at least 750,000 barrels. We're talking apples and oranges, and it shows in the transaction values. Enerplus paid less than $1,200 per acre at a Crown land sale in Saskatchewan earlier this year.
North Dakota and Saskatchewan Bakken plays are both highly economic today, but they are very different animals. Don't make the mistake of treating them interchangeably in your valuations.