QEP Resources South Antelope Bakken Properties Valued at $2.8 Billion at Year-end 2013

February 11, 2014 Kirk Eggleston

QEP Resources Bakken Three Forks Acreage Map

QEP Resources acquired its South Antelope Properties in the fall of 2012 for ~$1.4 billion.

Since the acquisition, QEP's value estimate for those properties has increased to $2.8 billion based on probable reserve estimates.

QEP Bakken South Antelope Properties

Since the acquisition of its South Antelope properties, QEP has lowered its development costs and increased production.

Current gross completed well costs have decreased by more than $1 million from estimated costs at the time of acquisition.

In spite of delays due to downstream and weather-related issues, current South Antelope oil production grew in 2013.

“Our South Antelope acquisition is a great example of our sound and stringent capital allocation process,” commented Stanley. “We are pleased to see that the assumptions made in our South Antelope acquisition have proven to be accurate and conservative.”

QEP Production and Proved Reserves for 2013

QEP total equivalent production in 2013 was 309 bcfe and oil production was 10.2 million bbl. Natural gas and NGL production was 218.9 bcf and 4.8 million bbl respectively.

2013 year end total proved reserves were 2.55 tcf of natural gas, 148.6 million bbl of crude oil and 102.6 million bbl of NGL. That's a 37% increase of total proved reserves at year end 2013 compared to 2012.

At the end of 2013, QEP's Williston Basin proved reserves were estimated at 797.5 bcfe or ~140 million boe.

Highlights

QEP Resources South Antelope property valued at $2.8 billion
QEP total equivalent production in 2013 was 309 bcfe and oil production was 10.2 million bbl
Proved crude oil reserves at 149 million barrels. Up 25% from prior year
37% increase in total proved reserves
Williston Basin contributed more than 140 million boe in reserves

* Extensions and Discoveries: As to any period, the increases to proved reserves from all sources other than the acquisition of proved properties or revisions of previous estimates.

Hess, Marathon, and Whiting Face Fines for Bakken Oil Classifications

February 10, 2014 R.T. Dukes

Hess, Marthon Oil, and Whiting Petroleum all face potential fines from the Pipeline and Hazardous Materials Safety Administration (PHMSA). The fines are being pursued as a result of PHMSA's investigation into the transportation of Bakken oil.

Oil taken from cargo tanks en route to rail facilities in the region was not properly classified. PHMSA took 18 samples from cargo tanks, storage tanks, and pipelines. In all, 11 of the 18 samples were not classified properly.

Hess faces fines of more than $50,000, Marathon Oil faces ~$30,000 in fines, and Whiting faces $12,000 in fines.

Also read:DOT's Arm Issues Bakken Sahle Oil Shipping Safety Alert

“Transportation has an important role to play in helping meet our country’s energy needs, thanks to the increased production of crude oil, but our top priority is ensuring that it is transported safely,” said Transportation Secretary Anthony Foxx. “The fines we are proposing today should send a message to everyone involved in the shipment of crude oil: You must test and classify this material properly if you want to use our transportation system to ship it.”

PHMSA requires the use of nine hazardous materials classifications. Proper classification ensures the material is handled properly and that emergency responders can accurately assess accidents.

As a result of the findings, PHMSA has expanded the scope of the testing to include testing for proper vapor pressure characterizations, corrosivity, hydrogen sulfide, and concentration of dissolved gases.

http://phmsa.dot.gov/

Marathon Oil's Bakken Production Drives North American E&P Income Up 38%

February 7, 2014 Kirk Eggleston

Marathon Oil's Bakken production helped drive the company's North American E&P segment income to $529 million in 2013, compared to $382 million in 2012.

The approximately ~38% increase was primarily due to higher liquids volumes from the Eagle Ford, Bakken and Oklahoma resource basins.

Marathon Q4 2013 Production and 2014 Bakken Budget

[ic-l]Marathon Oil averaged approximately 40,000 net boe/d of production in the Bakken during the fourth quarter. That's approximately a ~5% increase from 38,000 net boe/d in the third quarter of 2013.

In 2014, Marathon will spend $1 billion of its $3.6 billion budget in North America in the Bakken. As a result, Bakken production is expected to grow to a little less than 50,000 boe/d.

Marathon Oil's average Bakken production by commodity is as follows:

90% crude oil
4% NGLs
6% Natural Gas

Marathon Hits Q4 2013 Production Target

In the fourth quarter, the company reached total depth on 15 gross wells and brought 22 gross wells to sales, hitting its year-end exit rate estimate of 40,000 boe/d.

“During 2013... our strong year-over-year net production growth in the top U.S. liquids resource plays — 136 percent in the Eagle Ford, 34 percent in the Bakken and 68 percent in the Oklahoma resource basins — demonstrated our ability to drive superior operating results,” said Lee M. Tillman, Marathon Oil’s president and CEO.”

The company improved it's average time to drill a well in the Bakken by 16% compared to a year prior, averaging 15 days spud to total depth. Drilling and completion costs have decreased approximately 10% compared to the fourth quarter 2012.

Marathon Highlights for 2013

~5% increase in production from Q3 (38,000 boe/d) - Q4 (40,000 boe/d)
North American E&P income Up ~38% from 2012 to $529 million thanks to unconventional drilling
16% faster rate to drill a well than Q4 2012 (approx. 15 days)
Drilling and completion costs decreased 10%
Marathon sets capital budget in Bakken at $1 billion in 2014

Winter NAPE Expo Business Conference Highlights - 2014

February 6, 2014 Kirk Eggleston

The NAPE Expo is a North American event with some international influence, which features key players in the oil and gas industry. The business conference theme for 2014 was sustainability in the U.S. oil and gas industry.

The conference touched on key issues such as hydraulic fracking, sustainable business strategies and technological innovations.

Multiple speakers put a spotlight on the practice of hydraulic fracturing. Here are some of their comments:

Former Secretary of the Interior, Ken Salazar, said, "I believe hydraulic fracking is safe... there is not a single case where fracking has caused an environmental problem for anyone."
David Blackmon, Dir. FTI Consulting, said, "the biggest issue by far facing the industry today is water."
"Treatment and recycling will be one of the main drivers moving the industry forward over the next 10 years," said Andrew Slaughter, VP, Upstream Research, IHS

The Business of Unconventional Drilling and Technology

Robert Turnham, CEO, Goodrich Petroleum on business strategy: "we move early, identify opportunities and take the risk up-front. If you move early, then you enjoy lower royalty burdens straight off the top."
Industry targeting the "sweet spots" in the shale plays. Floyd Wilson, CEO, Halcon Resources, on the Bakken: "[the company's] most recent wells in the Bakken are the best ever."
Apache converting waste gas to electricity for field grid usage
General industry focus on artificial lift technology in shale drilling to quickly drain reservoirs
New diverter technology being utilized to make marginally economic wells profitable

Other Highlights from the Conference

Luke Keller, VP, BP America, said, "[the] U.S. could achieve energy independence by 2035."
"$2000 financial benefit to every American household by 2015 due to unconventional drilling of natural gas," according to Don McClure, VP, Government Stakeholder Relations and Legal, EnCana Oil and Gas USA
"Tremendous amount of light sweet crude is about to be discovered and put into the marketplace [in the U.S.]" according to Charles McConnell, Rice University
Industry encouraged to support better outreach and education initiatives via social media outlets

Learn more about NAPE by visiting napeexpo.com

Oasis Sells Bakken Acreage - Strong Production Growth in 2014

February 4, 2014 Kirk Eggleston

Oasis Petroleum Bakken Acreage Map - Acquisition Included

Oasis Petroleum set its 2014 capital budget at $1,425 million, with 96% of expenditures ($1,367 million) earmarked for drilling and completion of its operated and non-operated wells.

The company saw production growth jump ~50% in 2013 from its' 2012 figures, and expects continued growth in 2014.

Oasis Anticipates Growing Production in 2014

Oasis plans on increasing production to 46,000 boed/d - 50,000 boe/d by the end of the year.

If the company reaches it's midpoint estimate of 48,000 boe/d, then that will be ~42% higher than total production of 33,904 boe/d in 2013.

Oasis Petroleum Divestiture of Bakken Acreage

A portion of Oasis's capital budget for 2014 will come from a $333 million sale in January of its' non-operated Sanish properties and a few non-operated leases adjacent to the Sanish.

Whiting Petroleum is believed to be the operator of the Sanish properties, and would be a logical buyer, although, Oasis has not disclosed any information about the purchaser.

“Mr. Nusz said, “The funds from the Sanish divestiture strengthen our liquidity position to execute on our accelerated drilling program in 2014. The transaction is consistent with our growth strategy as we de-lever the balance sheet and put the capital into our high return operated projects.”

Properties ear-marked in the sale are 8,354 net acres and 28.2 net producing Bakken and Three Forks wells. Production from the properties was 2,691 boe/d during Q4 2013.

In 2013, Oasis grew its Bakken acreage to 515,314 total net acres from 335,383 net acres in 2012. With ample running room, non-operated and non-core properties become a fit for divesting. The company generated cash that can be used immediately and saved future development expenses that it can directed toward operated wells and acreage.

Oasis at a Glance in 2014

$1,425 million capital budget ($1,367 million for drilling and completing wells)
42% production increase to 46,000 boed/d - 50,000 boe/d expected by the end of 2014
$333 million sale of 8,354 net acres in January 2014
Increase total operated rigs from 14 - 16 by second half of 2014
Complete approximately 205 gross (147.8 net) operated and 7.7 net non-operated wells