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.

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Goodrich Petroleum Corporation shifting towards Oil and Liquids development from Natural Gas; Allocated 70% of its 2011 Capital Program to Oil Exposure (62% Eagle Ford Shale Trend)!!

Goodrich Petroleum increased 2011 capital program to develop the company's new acreage in the Eagle Ford Shale, as the company joins the shift towards oil and liquids development. Goodrich Petroleum increased its total 2011 capital budget by $10 million, from $225 million to $235 million.  The company increased the allocation to the Eagle Ford Shale formation by $45 million, from $100 million to $145 million.

Eagle Ford Shale

Goodrich Petroleum has been focusing its attention and capital over the last few years for developing the company's natural gas assets, including the Haynesville Shale and Cotton Valley formations in East Texas and North Louisiana.

In April 2010, faced with low prices and weak fundamentals for natural gas, the company decided to diversify away from this commodity, and purchased 35,000 net acres in the Eagle Ford Shale in Texas. The acreage is located in La Salle and Frio County, which is considered the oil window of the play. During the fourth quarter of 2010, the company drilled 4 gross or 3 net wells into the Eagle Ford Shale. Goodrich Petroleum is operating two rigs on its Eagle Ford Shale acreage and expects to drill from 22 to 26 wells on its 40,000 net acres.

Recent M&A Deals in Eagle Ford Shale:

Source: Derrick Petroleum E&P Transactions Database

Haynesville Shale

Although Goodrich has been focusing in the Haynesville Shale, the company is deemphasizing development here in 2011 in favor of more oil focused properties in its portfolio. In 2010, the company spent approximately 56% of its total drilling budget, or $156 million, to drill 18 net wells into the Haynesville Shale. In 2011, the company plans to spend only $90 million to drill nine net wells on its Haynesville Shale properties. One area of focus for Goodrich Petroleum in 2011 will be in the Shelby Trough area of East Texas, where the company has 28,000 net acres under lease. The company drilled its first Haynesville Shale well here, and also plans development of the Bossier Shale in 2011. This formation lies just above the Haynesville Shale and produces natural gas.

Recent M&A Deals in Haynesville Shale:

Source: Derrick Petroleum E&P Transactions Database

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Eagle Ford oil production to ramp up in 2011. Eagle Ford opportunities worth $3 billion are up for grab

Significant increase in deal activity

Activity in Eagle Ford has stepped up with more than $4 billion worth of assets on the market. Operators are looking to tie up with partners to develop the oil window, as the returns on investment expected from oil window is higher compared to gas window.  

Heading	Type	Value Range ($m)
SM Energy considers options for Eagle Ford acreage	Property	$500 - $1,000
El Paso seeks JV partner for Eagle Ford acreage	JV	$100 - $500
ConocoPhillips offers Eagle Ford/Austin Chalk acreage	Acreage	$100 - $500
Forest Oil seeks JV partner for  Eagle Ford acreage	JV	$100 - $500
Stonegate and TriTech offer Eagle Ford acreage	Acreage	$100 - $500
EOG Resources to sell certain Eagle Ford Shale acreage	Acreage	$100 - $500
Buffco Production seeks partner for Eagle Ford acreage	Acreage	$100 - $500
U.S. Enercorp and partners offer Eagle Ford acreage	Acreage	$25 - $100
Sanchez Oil & Gas offers Eagle Ford acreage	Acreage	$25 - $100
Petro-Hunt to divest Eagle Ford acreage	Acreage	$25 - $100
BlueStone Natural Resources offers Eagle Ford acreage	Acreage	$25 - $100
BTE Energy offers Eagle Ford acreage	Acreage	$25 - $100
Caiman Ranch offers Eagle Ford acreage	Acreage	$25 - $100
Denali Oil & Gas considers sale of certain Eagle Ford assets	Acreage	$25 - $100
Newfield Exploration to sell certain Eagle Ford assets	Property	$25 - $100
Texas HBP to sell certain Eagle Ford acreage	Acreage	$25 - $100
Touchwood Resources to divest 12.5% ORRI in Eagle Ford	Royalty	$10 - $25
Westover Energy offers Eagle Ford oil window acreage	Acreage	$10 - $25
SMSE offers Eagle Ford oil window acreage	Acreage	$10 - $25
Don Poe & Associates offers Eagle Ford acreage	Acreage	$10 - $25
Vander Ploeg offers Eagle Ford and Pearsall acreage	Acreage	$10 - $25
Bald Eagle Land offers Eagle Ford oil window acreage	Acreage	$1 - $5

Significant increase in the rig count in the region

Last year, U.S. operators expressed their intentions to step up drilling programs in the Eagle Ford Shale formation. Strong oil prices and favorable well economics, due to greater concentrations of natural gas liquids, made drilling in this part of Texas appealing. True to their word, the rig count in the Eagle Ford has nearly doubled to 154 rigs, versus 82 reported in March 2010.

EOG is the largest oil producer in the Eagle Ford at 23MM bopd and currently controls 595,000 net acres across the region. After drilling 96 net wells in 2010, EOG has plans for 250 net wells in 2011. Chesapeake Energy currently has the most active rigs in the region at 17 rigs where it holds 445,000 net acres through a partnership with CNOOC. In terms of concentration of resources, ConocoPhillips, with 14 rigs drilling across 254,000 acres held, has approximately half of its currently active U.S. rig fleet operating in the region.

The five largest drilling fleets in the Eagle Ford control 68% of the market.

Shift from gas to oil window

The shift occurring between drilling for natural gas or oil continues to move away from the natural gas. A year ago, the split was 91% gas and 9% oil rigs in the Eagle Ford. Today, the mix is 60% gas and 40% oil.

Operators in the region are responding to the huge return on investment gap that exists between drilling oil wells today versus drilling natural gas wells .On drilling a natural gas well operator gets around $4 per unit of production vis vi drill an oil well and receive around $15 per unit of production.

Drilling plans for the Eagle Ford operators

EOG Resources commented that the Eagle Ford would be the firm's largest component of year over year oil growth during 2011. EOG also expects that its well costs in the region were anticipated to fall from current levels of $6 million per well to approximately $5 million in 2012 due to frac optimization techniques.

ConocoPhillips has very aggressive development programs going on in the Eagle Ford where they plan to drill probably 140 to 150 wells this year.

Reliance may buy more US Shale assets, after BP Deal Doubles Cash

Reliance Industries, which has struck three shale gas joint ventures with U.S. firms this year, may make a full buyout next as the cash-rich firm builds the knowledge it needs to run such operations.

Reliance has received about 20 to 25 pitches from investment bankers for shale assets with potential targets include Fort Worth, Texas-headquartered Quicksilver Resources Inc, Denver, Colorado-based Enduring Resources and companies with assets in the Horn River shale formation in Canada.

Major US Shale Assets on the market

Heading	SubRegion	Value Range ($m)
Chesapeake to sell 20% interest in Marcellus Shale	Marcellus	>$1,000
Chief Oil & Gas put up for sale	Marcellus	>$1,000
Seneca seeks JV partner for Marcellus assets	Marcellus	>$1,000
Anadarko seeks JV partner for Eagle Ford assets	Eagle Ford	>$1,000
EOG offers Marcellus acreage	Marcellus	$500 - $1,000
SM Energy considers options for Eagle Ford acreage	Eagle Ford	$500 - $1,000

Why US Shale?

Shale gas accounts for between 15 percent and 20 percent of U.S. gas production, but is expected to quadruple in coming years, touching off a scramble among producers large and small for access to resources. Reliance's overseas ambitions, and is looking to invest in new areas such as shale gas to expand the firm's businesses beyond petrochemicals, refining, oil and natural gas exploration, and retail.

Reliance to generate free cash flow of $18 billion by 2014, giving it plenty of firepower for investment.  Reliance’s India asset sale of $7.2 billion to BP is seen as part the cash generation.

Done Deals

Heading	Deal Value ($MM)	$/Acre
Reliance and Carrizo form Marcellus JV	392	6,258
Reliance and Pioneer form Eagle Ford JV	1,315	11,111
Atlas and Reliance jointly acquire Marcellus acreage	191.9	4,532
Atlas and Reliance form Marcellus JV	1,699	14,158

Probable target

A firm on Reliance's radar may be Houston, Texas-based EOG Resources, which said in early August it plans to sell about 180,000 acres in U.S. shale plays -- underground rock formations that hold reserves of oil and natural gas.