Magnum Hunter Resources Provides Second Quarter Bakken Update

July 18, 2013 R.T. Dukes

Mangnum Hunter Resources participated in bringing on 19 gross (5.5 net) Bakken wells in the second quarter of 2013. At the end of the quarter 20.4 gross (11.4 net) wells were in some stage of drilling or being completed.

Magnum Hunter also noted midstream delays brought on by wet weather. A Oneok gathering system expected to be online in April did not accept gas until the last week of June. The gas gathering system is being built in an effort to conserve natural gas production in the area. In total, the project will connect ~300 wells in the area over the next year.

Bakken & Three Forks Well Highlights

Border Farms 3130-5TFH - (28.3% interest) Drilled to a measured depth of 14,300 ft (lateral length of 6,075 ft), fraced with 26 stages. The 24-hour flowing initial production (IP) rate was 626 boe/d
Montclair 0112-2TFH - (16.7% interest) Drilled to a measured depth of 17,710 ft (lateral length of 9,572 ft), fraced with 40 stages and placed. The 24-hour flowing IP rate was 683 boe/d
J. Olson 22-15-162-98H 2DM - (36.25% interest) Drilled to a measured depth of 18,215 ft (lateral length of 9,455 ft), fraced with 36 stages. The 24-hour flowing IP rate was 872 boe/d
J. Olson 27-34-162-98H 2XM - (35.7% interest) Drilled to a measured depth of 18,842 ft (length of 10,096 ft), fraced with 36 stages. The 24-hour flowing IP rate was 820 boe/d
Baja 2215-2H - (30.4% interest) Drilled to a measured depth of 18,155 ft (lateral length of 9,568 ft), fraced with 25 stages. The 24-hour flowing IP rate was 813 boe/d
Baja 2215-3H - (30.4% interest) Drilled to a measured depth of 18,280 ft (lateral length of 9,820 ft), fraced with 25 stages. The 24-hour flowing IP rate was 1,076 boe/d
Baja 2215-1H - (30.4% interest) Drilled to a measured depth of 17,977 ft (lateral length of 9,545 ft), fraced with 25 stages. The 24-hour flowing IP rate was 913 boe/d

Magnum Hunter controls 190,000 net acres in the Williston Basin. 140,000 acres are located in North Dakota and ~50,000 acres are located in Canada.

Bakken Ethane Pipeline Gets State Department Approval

July 17, 2013 R.T. Dukes

A pipeline that will move ethane from a Hess processing plant in Tioga, North Dakota, to Canada has been approved by the U.S. State Department.

The Vantage Pipeline will stretch 430 miles from Tioga, North Dakota, to Alberta, Canada, where it will deliver ethane to petrochemical plants. Approximately 80 miles of the pipeline will be located in North Dakota.

The pipeline will take several hundred thousand man hours and more than $300 million to build. Capacity is expected to be 40,000-60,000 b/d.

“The Vantage Pipeline is another major piece of infrastructure that will help us build our North American energy security partnership with our closest friend and ally Canada. The project illustrates clearly how modern pipelines can create jobs, make us more energy secure, and do so with good environmental stewardship. It will enable us to reduce flaring in North Dakota and also reduce emissions where the natural gas is used by industry.”

— Senator John Hoeven

Oasis Petroleum Forms Bakken Midstream Subsidiary - Production Above 30,000 boe/d

May 9, 2013 R.T. Dukes

Oasis Petroleum has realized significant cost savings through its Oasis Well Services (OWS) subsidiary and will be targeting savings on the midstream side through Oasis Midstream Services (OMS). Oasis formed the midstream venture when it transferred salt water disposal and other midstream assets to the subsidiary.

Creating subsidiaries for oilfield and midstream services allows the company to realize costs savings through vertical integration. Being split out as subsidiaries also makes them much easier to divest if the company chooses to do so in the future.

"The momentum of our operational success continued into the first quarter, as we again exceeded our production guidance and drove down our average capital cost per well by 5% to $8.4 million, excluding the impact of Oasis Well Services," said Thomas B. Nusz, CEO.

The company saved an additional $0.3 million per well through OWS to lower total capital expenditures to $8.1 million per well.

Bakken production surpassed 30,000 boe/d in the quarter, but is expected to hold relatively flat in the second quarter as the company transitions to pad drilling. Full year production guidance has been increased to 31,000-34,000 boe/d.

Indigo Resources Building Bakken Rail To Barge Facility in Osceola, AR

April 3, 2013 R.T. Dukes

Indigo Resources Ltd plans to build a rail to barge facility in Osceola, Arkansas, to improve movement of Bakken and Canadian crude to Gulf Coast markets.

A 610-acre site at mile marker 784.5 on the Mississippi River will have 3,000 ft of river frontage, three sets of manifolds, five rail loops, and 16 miles of track with room for 100+ car unit trains. The site has direct rail access to Minot and Tioga, with shipments moving as much as three times faster than long rail hauls to the Gulf Coast. Increased speeds lead to higher tank car utilization or to put it another way - cost savings. Deliveries are expected to take less than 10 days and savings is estimated at $1-2 per barrel compared to rail alone.

Tomas Fuentes, project manager, stated "Unit trains will be able to come directly from Minot or Tioga without hitting any rail yards or switching stations."

A total of 15 refineries with 3.4 million barrels per day of demand is downstream of the site on the Mississippi River.

The terminal will have the capacity to unload two unit trains of light crude per day and three to four manifest trains of bitumen per week.

"Combining rail and barge will lower the overall cost to the market" explains John Park, Director of Indigo Resources Ltd. "Plus due to our location, Indigo will be able to turn around the unit trains faster and in today`s high cost of rolling stock, this is an added bonus."

The terminal will allow for crude movement to the lower Mississippi at cheaper rates than rail. The terminal will have a total of two million barrels of storage capacity:

4 x 250,000 bbl tanks
10 x 100,000 bbl tanks

The facility will be flexible enough to handle multiple crude types and Indigo Resources expects deliveries from Canada, Colorado, Montana, North Dakota, and Wyoming.

Construction is expected to begin in the fourth quarter of 2013 and the facility should be in service in late 2014.

Enbridge's Sandpiper Project Will Expand its North Dakota System

December 7, 2012 R.T. Dukes

Enbridge is planning a new 600-mile, 24-inch pipeline, the Sandpiper Project, from Beaver Lodge, ND, to Superior, WI. The Sandpiper Project has a planned cost of $2.5 billion and will move 225,000 b/d of Bakken crude The pipeline is part of a larger program in which Enbridge will invest $6.2 billion to increase accessibility to North Dakota and Western Canada's light crude. In total, the system expansions will move 400,000 b/d of light oil. The pipeline has shipper support and is expected to be completed in early 2016. FERC approval is required before construction begins.

The Sandpiper Project is likely a determining factor in Oneok Canceling the Bakken Crude Express. If Enbridge's estimates prove true, you could see the Bakken Crude Express or a similar project come back to life. Current production is near 700,000 b/d and Enbridge expects it could grow to 1,200,000 b/d in the next five years.

"This $6.2 billion investment rounds out our suite of major crude oil new market access initiatives for North American markets," said Al Monaco, President and Chief Executive Officer, Enbridge Inc. "..... These market access initiatives reflect changing North American supply and demand fundamentals and will create significant value for our customers....."

It must be a promising investment. Enbridge has a total of $26 billion in projects planned between 2012 and 2016. That's impressive considering the company (ENB) has a market cap of ~$35 billion. Add Enbridge Energy Partner's market cap and it's closer to $43 billion - still no small feat. The $2.5 billion Sandpiper Project will be funded by EEP.