Bakken A&D Remains Steady Despite Overall Slowdown

[Editor's note: The chart in this story was updated at 4:15 p.m. CST July 17.]

A&D activity in the Bakken is chugging along despite an overall slump in upstream deals for the first half of the year.

Recent announcements from PetroShale Inc. and Energy Resources 12 LP show the oil-rich Bakken has not been forgotten as E&Ps comb the Williston Basin for deals while others prune their portfolios or exit for more profitable areas.

Overall, the U.S. upstream market in the second quarter was significantly down with $8.7 billion worth of deals compared to the quarterly average since 2014 of $17.1 billion, according to a recent report by Drillinginfo.

Activity was also down from the $22 billion worth of first-quarter deals, Drillinginfo said. However, nearly half of the first quarter’s deal value was due to the $9.5 billion merger of Concho Resources Inc. (NYSE: CXO) and RSP Permian Inc. (NYSE: RSPP) announced in February.

Bill Marko, managing director at Jefferies, attributed the dwindling pace of deal flow to E&P investors insisting on a reset of cash flows.

Deals are no longer valued by dollars per acre or development plans, Marko said at Hart Energy’s DUG Permian conference in May. Instead, he said, “it’s really about cash flow. Tell me what the EBITDA is this year, next year.”

Still, the Bakken, in particular, has seen a growing number of transactions after a relatively quiet period following the oil market crash in late 2014. For example, deals in the Bakken totaled about $5.3 billion in 2017—up from $2.9 billion a year before, according to a report from PwC.

Bakken A&D continued into 2018 with about $1.4 billion worth of deals announced in the first half of the year.

Deals continued to trickle in early July beginning with the acquisition by Energy Resources 12 LP of certain nonop interests in the Bakken from Bruin E&P Partners LP for $82.5 million, according to a filing with the U.S. Securities and Exchange Commission on July 6.

The transaction, which includes assets predominately in McKenzie, Dunn, McLean and Mountrail counties, N.D., follows Bruin’s $1.4 billion acquisition of Williston Basin assets from Halcón Resources Corp. (NYSE: HK) last year.

Also, PetroShale said July 12 it agreed to acquire assets in the core North Dakota Bakken play from an undisclosed independent oil and gas company for $55 million. The deal is expected to close in August and will be funded by proceeds of up to $56 million from recent financings. Haywood Securities Inc. is PetroShale’s financial adviser for the acquisition.

The divestiture of QEP Resources Inc.’s (NYSE: QEP) Williston Basin position is also expected to be announced this month with proceeds of more than $2 billion, according to analysts with Tudor, Pickering, Holt & Co.

PetroShale’s purchase includes 100% operatorship in 1,931 net HBP acres with about 550 boe/d of production and total proved reserves of 9.1 MMboe. The acquisition is expected to boost the pure-play Bakken producer’s existing acreage position by 34%.

Based in Calgary, Alberta, with an office in Denver, PetroShale’s acreage position is located in the heart of the Bakken play in Dunn, McKenzie, McLean, Mountrail and Williams counties, N.D., according to the company’s website.

In June, PetroShale produced about 6,100 boe/d following the completion of 3.5 net wells during the first quarter. The company is currently participating in four (1.6 net) wells that it expects to place on production in late July or early August.

Additionally, PetroShale initiated a multiwell drilling program in its core area in early July with the spudding of the first well on the Horse Camp West pad.

Emily Patsy can be reached at epatsy@hartenergy.com.