The Bakken shale play has been the subject of much hype for the better part of 2011. Touted as the single largest oil find in U.S. history, this region witnessed several companies lining up to exploit its reserves. Companies that couldn't invest in acreage simply bought into companies with established bases there -- the most prominent being Statoil
The question that needs to be answered
Several companies are currently developing their properties, with some even commencing production. The question that really needs to be answered is this: Are the wells in Bakken living up to the hype in terms of output and touted reserves? The turn of the year is the best time to answer this question. What really matters to the investor is whether these wells are capable of giving returns that are worth the investment.
There are several wells whose initial production, or IP, rates are fantastic, i.e. flow rates in the first 24 hours once the well becomes operational. However, it'd be wise not to get carried away by those figures. While IP rates are high, so are the initial rates of decline. This is especially true for shale formations where the virgin reservoir may exhibit high well pressures initially, only to decline and level off output at a much lower rate.
To calculate daily production, the wisest approach is to wait for three to six months before estimating an average value. If the data aren't available for such a period, then the next lowest period available should be considered. In any case, average daily flow rates shouldn't be calculated using a period that is less than 30 days. Today we'll check out three companies operating in the Bakken.
Kodiak Oil & Gas
A couple of new wells, which were completed last September, have shown promise. Their 30-day average daily output stood at 1,449 BOE and 1,398, respectively. Bakken's Dunn County has been playing true to potential for Kodiak.
McKenzie County also ensured some fantastic production for Kodiak. The four Koala wells that were completed this year have a 60-day average daily output of 1,116 BOE -- again phenomenal. Three more Koala wells are due for completion in the fourth quarter this year. Eighteen additional wells are due for completion in 2012.
- Add Kodiak Oil & Gas to My Watchlist.
For EOG Resources
The company's Hardscrabble 13-3526H in Williams County had an IP rate of 1,474 BOE/d, while the Clarks Creek 3-0805H in McKenzie County had an IP rate of 1,384 BOE/d. Investors need to realize that actual average daily production will be much less than these values.
- Add EOG Resources to My Watchlist.
- Add Triangle Petroleum to My Watchlist.
Foolish bottom line
All in all, the Bakken has been looking impressive in 2011. In the next article, we shall check out some more companies operating in this shale play. If you're looking for more ideas, The Motley Fool has created a new special oil report titled "3 Stocks for $100 Oil," which you can download today, absolutely free. In this report, Fool analysts cover three outstanding oil companies. To get instant access to the names of the three oil stocks, click here -- it's free.
Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Statoil A. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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