Although some Williston basin players have recently marketed their non-operated acreage in the play, the trend appears to be a case-by-case scenario and not systemic.
“I don’t think it’s going to be an extensive trend. … I don’t think every operator’s looking to do this at this point,” said Scott Hanold, an analyst with RBC Capital Markets.
The Calgary-based Baytex Energy Corp. recently closed on a deal to sell its non-operated interests in North Dakota to a subsidiary of Magnum Hunter Resources Corp. for $312 million. The Denver-based SM Energy Co. recently began marketing some 8,600 net-acres in North Dakota that include 81 non-operated wells in the Bakken/Three Forks and 28 operated and non-operated vertical wells producing from conventional reservoirs.
These deals give companies more control over their capital budgets in the short term, Hanold said. “In general, companies like to control their capital expenditures and obviously what happens from a non-operated perspective is out of their control,” he said.
Although initially a heavy oil producer, Baytex has spent more than $100 million over the past four years targeting light oil plays in Alberta, Saskatchewan and North Dakota.
Through the sale, Baytex divested about 45 percent of its net acreage in North Dakota and 40 percent of its United States production, but increased its average working interest in the play to 45 percent from 39 percent. Baytex reduced its production guidance for the year by 500 barrels of oil equivalent, but maintained its capital budget at $400 million.
When companies purchase blocks of acreage, they usually end up with non-operated chunks in addition to their operated portions and often look to swap, sell or trade, Hanold said. “There’s really no consistency in terms of who’s buying this,” he added.
—Eric Lidji
