Black Bear Resources believes the following factors make oil and gas activities in the Bakken and Three Forks formations in the Williston Basin appealing:
· The majority of mineral rights are owned privately, rather than by state or federal government entities, facilitating easier oil and gas exploration in the Bakken.
· Multiple geological formations in the Williston Basin create breadth and depth of opportunities. The Three Forks formation often has multiple strata of petroleum deposits; up to three separate benches are currently being tested by Continental Resources, which would provide multiple production zones within the same spacing unit. Multi-well spacing units consequently are viable. Most operating oil companies are estimating it will take 4-8 Bakken wells per spacing unit for full development, with some analysts anticipating a total of 12-16 wells per spacing unit, including four Bakken and wells in multiple Three Fork layers.
· Advancements in oil well completion techniques such as increasing the number of hydraulic fracturing stages per well have significantly impacted production. Whiting Petroleum Corporation illustrated this in its November, 2013 investor presentation, which notes initial production rates of older well completion designs at 587 BOE/day, and describes its belief that newly implemented completion techniques are significantly raising the productivity of wells to 1,290 BOE/day of initial production.
· We expect continued advancements in recovery factors. Information provided by the NDIC states that the current recovery factor for the Bakken is between 3-4% of the original oil in place (OOIP). The NDIC believes that with continued improvements to technology and secondary recovery techniques, this figure could go as high as 5-20%.
· Average production volumes from producing wells support relatively short breakeven estimates of 1-4 years for investment in wells.
· The ratio of oil to gas and the quality of crude in the Bakken and Three Forks formations is high. The ratio of oil to gas in current production reports is around 85-90%. Bakken crude oil gravity ranges from 36-44 degrees API, which oil quality is excellent, almost identical to the 40 degrees API for West Texas Intermediate (WTI) sweet crude, the benchmark for crude oil. WTI is the benchmark because it requires the least amount of processing in a modern facility to produce the most valuable products, gasoline and diesel.
· High drilling and acquisition activity creates an opportunistic environment.
· Since spring of 2012, management has experienced the stabilization, and even decline in average drilling costs, making economic wells even more obtainable.
We appreciate your interest in Black Bear Resources and thank you for checking out our website. Additional general information can be found here including oil and gas terminology and common documents encountered in the mineral leasing environment. Again, should you have any questions, we would love to hear from you!