Kodiak Concludes 50,000-Acre North Dakota Bakken Deal
Acquired 2 blocks of contiguous acreage totaling 50,000 net leasehold acres in Williams & McKenzie cos., ND, with 30,000 net acres adjacent to company's core Koala project area, gaining 3,500 BOE/d, 19.7 MMBOE proved.
Kodiak Oil & Gas Corp., Denver, (NYSE: KOG) has closed its purchase of additional producing properties and undeveloped leaseholds in the North Dakota Williston Basin from a private oil and gas company and its financial partners for $588.4 million in cash and stock.
The purchase price includes $540 million in cash and $48.4 million in common shares.
The deal includes two blocks of contiguous acreage totaling approximately 50,000 net leasehold acres in Williams and McKenzie counties. The southernmost lands, approximately 30,000 net acres, are adjacent to the company's core Koala project area and are contiguous to the lands acquired as part of the acquisition that recently closed in October.
The remaining leasehold is in northern Williams County near the Nesson Anticline in an area actively being developed. The transaction includes a working interest in 17 gross (13.5 net) operated producing wells and 10 gross (1.3 net) nonoperated wells. As indicated above, the acquisition also includes four gross (3.1 net) wells that have been drilled and are waiting on completion and one gross (0.6 net) well that is currently drilling ahead.
Net oil and gas production is approximately 3,500 barrels of oil equivalent per day. Production is expected to increase before closing as there are four gross (3.1 net) wells waiting on completion. Proved reserves are 19.7 million barrels equivalent (81% oil).
Kodiak's total acreage position in the Williston Basin is now approximately 155,000 net acres.
Based upon Kodiak's internal evaluation of the production profile and history from the wells drilled within the southern acreage block in Williams and McKenzie counties, Kodiak projects an average per-well estimated ultimate recovery of 750,000 to 900,000 barrels equivalent from the Bakken formation. Internal evaluation of the northern acreage block yields per-well estimated ultimate recoveries of 350,000 to 450,000 barrels equivalent.
If both formations are productive, the company believes that the acquired lands could allow for nearly 300 additional operated locations, providing Kodiak with 800 net (1,100 gross) estimated Williston Basin locations.
Kodiak chairman and chief executive Lynn Peterson says, “Upon closing, we will have amassed a significant position in a part of the play with which we are intimately familiar due to our ongoing operations that are yielding excellent well performance. We expect improved field-level efficiencies in trucking, rig moves, personnel management, access to oilfield services and proximity to midstream infrastructure due to the highly concentrated nature of our McKenzie and Williams County assets.”
Included in the acquisition are certain surface equipment and gas pipeline connection facilities that tie into a regional third-party natural gas gathering system. Three water disposal wells have been drilled on the acquired lands. The southernmost operated lands are proximate to a crude oil railway terminal and interstate pipeline interconnect that is expected to be fully in-service during 2012.