Photo credit: Enerplus.
Enerplus (ERF 0.24%) recently held an investor presentation that took a deeper look into its assets in the Williston Basin. What the company shared was its discoveries from its own deeper look into its Bakken assets. The biggest discovery was that the company now estimates that there's 50% more original oil in place than it previously thought. In doing so, it's joining peers like Kodiak Oil & Gas (NYSE: KOG) and Oasis Petroleum (OAS) in realizing that the Bakken is a lot bigger than previously thought.
Drilling down into the data
What Enerplus found was that as it evaluated well data and core data across its average, there was more oil saturating the rocks beneath its acreage. Not only was there more oil in the Bakken Shale and the first bench of the Three Forks formation than estimated, but Enerplus is finding that there's also oil in the second bench of the Three Forks formation. As the following slide notes, by adding up this data, the company came to the conclusion that its position in the Williston Basin is 50% more saturated with oil than previously thought.
Source: Enerplus Investor Presentation.
What's worth noting on that slide is that the company still might have some upside, as it's only counting on some contributions from the second bench of the Three Forks, while completely excluding any oil from the third and fourth benches of the Three Forks as well as both the Upper and Lower Bakken Shale. However, both Kodiak Oil & Gas and Oasis Petroleum are testing wells in the second and third benches of the Three Forks formation. In fact, Oasis Petroleum plans to complete 30 wells into those formations this year alone. So, while it's still early in its development, there remains the potential for these two formations to be productive and provide more upside to Enerplus.
What this means to investors
In discovering that there is more oil saturating the rocks underneath its acreage, while at the same time discovering how to access this oil, Enerplus is now seeing a significant increase in its resource potential. As the following slide notes, the company now estimates it should be able to extract another 97 million barrels of oil equivalent, or BOE, from its land position in the Williston Basin.
Source: Enerplus Investor Presentation.
As that slide points out, the company is boosting its contingent resource potential from 39 million BOE to 136 million BOE. That's a 250% surge in contingent resources and a big potential value boost to the company in the future. Over time, some or all of these contingent resources will become proved reserves, and when that happens, it will provide a big boost to the company's value.
We've seen this at both Kodiak Oil & Gas and Oasis Petroleum. Since 2009, Kodiak Oil & Gas' proved reserves have grown by a 147% compound annual growth rate as the company has converted its resources into reserves. Meanwhile, Oasis Petroleum's proved reserves surged 53% last year alone as the company's drilling program continues to prove up its acreage. As a result, both stocks have surged more than 200% over the past five years. Because of this, we should expect to see continued reserve growth at Enerplus, too, as the company turns resources into reserves.
Investor takeaway
The rocks underneath Enerplus' acreage in the Williston Basin are more saturated with oil than the company thought. That's really great news for investors, as it makes the company's land position all that more valuable. Further, there's still plenty of upside left as Enerplus isn't even expecting to see any oil from some of the lower benches of the Three Forks formation, which are places that peers like Kodiak Oil & Gas and Oasis Petroleum are seeing some solid results. Bottom line here, Enerplus' position in the Williston Basin is better than it thought, and it might still have upside.
