The past couple of years have been pretty rough for Williston Basin deals, and the blowout of A&D seen elsewhere in the first quarter of 2017 was lost on North Dakota and Montana.

But, as Stephen Crane wrote in “The Red Badge of Courage,” could the cold finally be passing “reluctantly from the earth” to reveal an opportunity stretched out on the hills, resting?

Put us down for a maybe. Perhaps the Bakken has merely been snoozing during the downturn.

Raymond James reports that drilling in the Rockies quietly continues to recover as rigs return. But the A&D terrain in the Williston is tricky, and timing and prices continue to play havoc with deal flow.

Art Krasny, managing director at Wells Fargo Securities, told Oil and Gas Investor that the Williston Basin deal inventory is more than 500,000 net acres—a number he believes is understated.

But some E&Ps will be recalibrating their portfolios to see if the Williston is strategic. Krasny’s take: expect some companies to leave the basin or consolidate.

“I think you’re going to see a movement of private companies that are in the play,” he said. Deals should pick up by the second half of 2017 with the “momentum of the play hopefully continuing in 2018.”

The Bakken’s A&D steam has yet to build to tea kettle strength. But the play still has one crucial ingredient on its side: a shale full of oil. Overall, Bakken deal activity has been sparse and land cheap in 2017. In 2016, four shale deals were announced at a total value of $2.9 billion.

The Bakken’s deal haul for the first quarter stands at about $185 million in value—grouping it with the also-rans (think Utica) that are collectively about $20 billion behind the Permian Basin.

The oil-rich Bakken has not been forgotten, and E&Ps likely will comb the Williston Basin for deals that will boost their economics. Other E&Ps may decide to prune their portfolios or exit for more profitable areas, opening up acreage for other companies.

In April, an 8,500 net-acre purchase in the Bakken in Williams County, N.D., for $100 million was announced. The asset is primarily undeveloped land with about 50 net drilling locations and about $250 million of future development opportunities.

Production is about 375 barrels of oil equivalent per day. Canadian E&P Crescent Point made just the third publicly disclosed transaction in the Williston this year, and the first to hit the $100 million mark.

What’s different is not who is in the Williston, but who isn’t.

Krasny said a swarm of private equity companies is absent from the Williston, though they still have a presence.

“The place is not completely abandoned,” Krasny said. He said new capital is taking interest in the area and a few private
equity companies may be looking to step up their presence.

However, unlike the smoking hot Permian, the Bakken doesn’t feature stockpiled equity-backed operators looking to exit
after years of acreage development, said Jonathan Garrett, research director for Wood Mackenzie.

“I’d expect more bolt-ons and noncore acreage sales from operators looking to use that cash to bring value forward in more economic parts of their portfolio.”

Garrett said company acquisitions will have to justify purchases that either have economics that are more compelling than their current acreage “and/or there must be some synergistic upside.”

Most Bakken operators already have large positions within the basin. And rig counts are proportionately up at the same rate as the Permian and Scoop/Stack/Merge plays. However, the Permian Basin has 350 rigs to the Williston’s 47.

The play has a lineup of strategic companies “to whom the Bakken is of varying degrees of relevant importance.”

As with other basins getting a taste of technological innovations, sweet spots are working and Krasny said operators indicated that “even on the fringes,” Gen 3 completion techniques may yield solid results.

“The proof is in the pudding,” he said.

Garrett said that, for now, operators financially capable of making deals are likely already well-positioned within a core part of a play or focused on aggressively developing acreage in the Permian.

“That said, the Bakken could attract attention from buyers outside of the U.S.,” he said.

However, companies with heavy Bakken exposure trade at discounts to their Permian-focused peers.

“A view that oil prices will rise significantly in the near term would provide an M&A spark, as a Bakken acquisition would look like a value play as it is very geologically consistent and its production is about 85% oil on average,” Garrett said.

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