Wednesday, July 6, 2011

Nearly $1 Billion Worth of Bakken Shale Acreage For Sale in 2011

The Bakken shale is an oil rich shale, present mostly in the Williston Basin, and covers parts of North Dakota, South Dakota, Montana, Saskatchewan and Alberta. Production at the end of 2010 was estimated by Bentek Energy to be 458,000 BOE/d. Some operators (Eg., Continental Resources) estimate that output potential could be a huge 1.2 MMBOE/d by the end of 2016. Continental Resources also estimates that there is ~ 24 billion barrels of recoverable oil, which is a huge jump from USGS estimates of up to 4.38 billion barrels a couple of years ago, and a meagre 151 million barrels in 1995. Therefore, this shale is likely to be a major contributor to US oil production in the near future. The following table gives a list of the top 10 Bakken Shale acreage holders.

Opportunities in the Bakken Shale are presented in the following chart using data captured in the Derrick 'Deals in Play' Database.


Table 1: Bakken Play opportunites sorted by net undeveloped acres. Also shown is the deal value range as estimated by Derrick analysts. Hover over bars for additional information. Click on the bars to get details on individual deals. Source: Derrick ‘Deals in Play’ database.






The following table shows recent transactions involving the Bakken Shale for insight into its recent $/Acre.


Table 2: X axis shows Buyer-Seller. Y axis is deal value. $/acre is given above the bar's in the chart. Data is sorted by quarter. Only recent deals involving primarily acreage transactions are shown. Hover over bars for additional information. Click on the bars to get details on individual deals. *Multiple Sellers = Arkoma Bakken LLC; Long Properties Trust; Reynolds Drilling Co Inc. Source: Derrick Deals Database.  












   Analyst Comments
      a. Most of the opportunities involving the Bakken shale are in the US, with just 2 in Canada.
b. Mid and small cap, and private companies are looking to sell, possibly due to the higher prevailing oil prices at the moment.
c. The majors are holding on to their assets, possibly signaling that they believe they are high value and are worth keeping.
d.The oil rich Bakken Shale could present a low risk - high reward opportunity as oil prices are high.
e. With increasing technology, the potential to recover far more oil than was previously possible makes this acreage a potential gold mine; to acquire or hold onto.

For more presentations on "Bakken", use our oil and gas document library:
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Shell divests 20% stake in BM-S-8 for $350 million. Looks to farm out or divest additional blocks in Brazil

Barra Energia agreed to acquire 10% stake in the largest block in pre-salt area, Block BMS-8, from Shell, which currently owns a 20% participation in the area. The chief executive of Barr Energia, Joao Carlos de Luca, said that the company acquired the stake for $175 million. The other 10% was acquired by Queiroz Galvao Exploration and Production, which paid the same amount for joining the consortium that operates the block.
The block is located offshore in the Santos Basin in water depth of approximately 2,100 m. Petrobras is the operator of the block with a 66% working interest while Galp holds a 14% working interest. BM-S-8 includes two discoveries Bem-te-vi and Abare W and four prospects. The expected gross capital expenditure in 2011 is US$250 million and in 2012 is US$200 million.

Trend of M&A activity in Brazil
South America is emerging as a growing player in the oil and gas industry. With discoveries of new reserves across the continent, Brazil, Venezuela, Colombia, Chile, Peru and Argentina all look set to prosper. South America accounted for 17% of the total deal value in 2010, whereas it was not exceeding 5% in the last four years. In terms of major discoveries, Brazil has become a leading country in world rankings with oil reserves estimated to be around 26.9 billion barrels. This figure includes the Brazilian pre-salt discoveries that are revolutionising the oil & gas market in South America currently, with a number of major offshore investments taking place.

The following graph shows the trend of M&A activity in Brazil since 2007.


Shell- Looks to restructure non-core Brazilian assets
Shell in the past one year was acquiring new assets across United States, Australia, China, Africa and none in Brazil or South America. Also, according to Shell's June 2011 presentation, the company’s investment plan in Brazil is only towards BC-10 which includes five fields Ostra, Abalone, Argonauta B-West, Argonauta O-North and Nautilus. It is observed that Shell is looking to restructure the other Brazilian assets.

Earlier in August 2010, Shell initiated a process to sell its stake in four offshore oil blocks in Brazil as part of their portfolio review. The blocks put up for sale included: BS-4, BM-S-8, BM-S-45 and BM-ES-28. In addition to Shell, Chevron, Petrobras, Petrogal and Vale also own stakes in these blocks. The sale remains pending with the remaining three blocks.

This sale represents an exciting opportunity to the interested companies to enter Brazil’s offshore oil frontier, where no new exploration and production concessions have been put up for bid by the government since the presalt oil discoveries were made in 2007.


The following map shows the acquisitions made by Shell in the past one year


Note: The data used for obtaining the above graph and the map is sourced from Derrick Petroleum Database.

Source Documents:
Bm s-8 overview
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