NOW READ OUR ARTICLES IN 40 DIFFERENT LANGUAGES.

SEARCH our ARCHIVE of over 14,000 articles
Vol. 17, No. 39 Week of September 23, 2012
Providing coverage of Bakken oil and gas

Legacy Reserves enters Bakken with Summit, Panther lease, well transfers

In mid-July Summit Resources and Panther Creek Resources transferred operatorship of 61 North Dakota wells, and the leases held by them, to Legacy Reserves LP, a Midland, Texas based company that signed the $70.8 million cash deal in April; a deal that included another 60 wells and adjacent acreage in Montana. (See chart of N.D. wells on page 15.)

Total net production from the wells was 776 barrels of oil equivalent a day at that time.

The transaction, which closed May 23, represented Legacy’s entry into the Williston Basin in North Dakota.

The new assets will be managed by the company’s wholly owned subsidiary, Cody, Wyo.-based Legacy Reserves Operating LP, which absorbed Iron Creek Energy and its team in 2010 and oversees its parent’s properties in the Rocky Mountain region.

Legacy’s company-wide strategy is to acquire long-lived oil properties in basins with multiple producing horizons, aligning it with carefully selected, “efficient” and “reputable” nearby leasehold operators that then operate the combined acreage, Tom Fitzsimmons, Cody business unit leader, told Petroleum News Bakken in mid-September.

“We’ll participate with partners,” he said of the wells.

In the next few years Fitzsimmons can envision Legacy picking up a rig in the Williston Basin, but before the company drills its own wells it will “look for a little more risk to be taken off the table.”

Competitive bidder in basin

Currently, Legacy is an “aggressive purchaser of production.”

“We are going to be a completive big bidder on packages … sold that are highly developed,” Fitzsimmons said.

Several thousand acres came with the Summit and Panther wells, he said, of which only eight were from Panther.’

Summit had three packages for sale — exploration, joint venture and PDP, or a “proved developed producing” package, the last of which Legacy purchased.

Legacy estimated that the acreage contained 3.2 million boe of proved reserves, of which 95 percent were oil, 2 percent natural gas liquids and 3 percent natural gas.

One hundred percent of the reserves were considered PDP, and 95 percent were operated, and 75 percent were in North Dakota, in Billings, Golden Valley and McKenzie counties.

The North Dakota wells “produce mainly from the Madison, Bakken and Birdbear formations,” Legacy said.

The Montana properties were primarily in Blaine County “and produce mainly from the Sawtooth and Bowes formations,” Legacy said.

In second quarter, Legacy’s company-wide production averaged 14,297 boe per day, generating a net income of $82.9 million. Its 2012 capital budget is $62 million, and it operates primarily in the Mid-Continent and Rocky Mountain regions of the U.S.

Old producers hold leases

Most of the well operatorships transferred in North Dakota in recent weeks are older vertical penetrations, such as the wells now in Legacy’s name and those transferred Aug. 17 (see chart) to Williston Hunter ND, a subsidiary of Houston-based Magnum Hunter, as part of its April 2 acquisition of the working interest in 191 wells from Eagle Operating Inc., bringing the total transferred as of Sept. 17 to 189.

In April, Magnum Hunter said the wells were producing around 350 boe per day and the leases surrounding them included some 15,500 gross acres in four counties in North Dakota. Those leases, the company said, have total proved reserves of 2.1 million boe.

Magnum Hunter, which said in April that it wanted to become an efficient “drilling factory,” previously owned a 47 percent working interest in the properties and now owns a 95 percent working interest.

When asked whether wells are generally transferred with leases, Lynn Helms, director of North Dakota’s Department of Minerals, said yes, “to all depths.”

In most cases, he said, operators will add existing wells to new pads to access the Bakken and Three Forks formations, using modern technology.

They are acquiring the wells and their leases because they are both held by production, Helms said. It would be in an operator’s second phase of drilling that they would go back to the existing sites to add more wells.

Continental to Burlington

One other recent well operatorship transfer of note was recorded on Aug. 24, three horizontal wells in McKenzie County, from Continental Resources to Burlington Resources, which is now part of ConocoPhillips.

In addition to the details proved on the adjacent chart, the following information was available in State of North Dakota’s public records:

• Barkley 1-5H: API No. 33-053-03564-00-00; total depth 21,718 feet; field Twin Valley; spud 7/28/2011; completed 10/25/2011; IP test date 10/31/2011; pool Bakken; IP oil 606; IP mcf gas 1,869; IP water 822; cumulative oil 87,009; cumulative mcf gas 184,288; cumulative water 36,671.

• IVAN 1-29H: API No. 33-053-03271-00-00; total depth 21,026 feet; field Elidah; spud 12/6/2010; completed 3/4/2011; IP test date 3/30/2011; pool Bakken; IP oil 372; IP mcf gas 617; IP water 105; cumulative oil 102,965; cumulative mcf gas 218,656; cumulative water 25,018.

• HE 1-20H: API No. 33-053-03271-00-00; total depth 21,718 feet; field Elidah; spud 10/15/2010; completed 2/1/2011; IP test date 2/22/2011; pool Bakken; IP oil 539; IP mcf gas 991; IP water 139; cumulative oil 160,412; cumulative mcf gas 328,858; cumulative water 32,901.

—Kay Cashman



|
Click here to subscribe to Petroleum News for as low as $89 per year.
Petroleum News Bakken - Phone: 1-907 522-9469
[email protected] --- https://www.petroleumnewsbakken.com

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News Bakken)Š2013 All rights reserved. The content of this article and website may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.