Williston Basin operator Kodiak Oil & Gas Corp. has pulled out the stops, more than doubling sales volumes in a year’s time.
Daily sales volumes rocketed to an average 21,700 barrels of oil equivalent in the first quarter of 2013, compared to 10,578 boe during the first quarter of 2012, a whopping 105 percent increase, the Denver-based company reported April 15.
Compared to the fourth quarter of 2012, Kodiak added, 2013 first quarter sales volumes jumped 19 percent from previous quarter volumes of 18,228 boe per day.
Crude oil accounted for 88 percent of its first quarter 2013 sales volumes.
“We … believe that we are on course to deliver sustained production growth during the remaining quarters,” said Lynn Peterson, Kodiak’s chairman and chief executive officer. “We kind of see that same growth as we go through the second quarter here. And that point we start to ratchet this thing up.”
Kodiak has said that for full-year 2013, it expects production to average between 29,000 to 31,000 boe per day.
“We believe we’re on target to hit our guidance that we put out earlier,” Peterson said.
Capex $775 million for year
Capital expenditures for the year are anticipated to total about $775 million, or 75 net wells at roughly $10 million per well. To protect its capex program, Kodiak said it hedged about 18,000 barrels per day for 2013 at a little over $95 per barrel. Currently, the company also has hedged about 8,000 barrels per day for 2014 at about $92.50 per barrel.
Kodiak said it expects to report its first quarter 2013 operational and financial results after the close of trading on May 2.
During the first quarter, Kodiak completed 20 gross (14.6 net) operated wells and participated in the completion of 13 gross (3.4 net) non-operated wells, the company said, noting that beginning in March, it was operating with just one full-time, 24-hour completion crew. However, as drilling operations on several multi-well pads have recently concluded, Kodiak now plans to add a second full-time, 24-hour crew in May. With the additional help, Kodiak now expects to complete 27 gross (23 net) operated wells during the second quarter.
Kodiak is currently operating seven drilling rigs in the Williston Basin. Four rigs are operating in the Polar project area in southern Williams County, two rigs in the Smokey project area in McKenzie County and one rig operating in Dunn County.
The company’s program to test 12 wells within a 1,280-acre drilling spacing unit continues on schedule in the Polar and Smokey operating areas, with two drilling rigs operating in each area.
Core data from one of the wells in the Polar project has been obtained and is undergoing evaluation, Kodiak said, adding that completion work on both projects, including a micro seismic program in the Polar area, is scheduled to commence in May.
Facilities added
In an ongoing effort to reduce operating costs, the company said it finished the drilling and equipping of three additional water disposal wells during the first quarter. And Kodiak anticipates that oil, gas and water lines in the Polar area should be substantially completed during the second quarter, which would then complete the significant portion of the pipeline work throughout Kodiak’s acreage blocks.
“We look forward to being able to move to the completion procedures on our pilot projects in the coming weeks which should result in continued growth in production, cash flow and reserves for our shareholders,” Kodiak’s Peterson said.
In spite of bad weather that plagued the North Dakota oil patch this winter, Kodiak’s field operations were able to move ahead without significant delays, Peterson said.
“With the onset of the warmer months, we anticipate that our well completions will increase and expect that our efficiencies should improve,” he added. “Our drilling program continues to see efficiency gains with fewer drilling days which, when combined with better third-party service costs, is helping to drive down our well costs.”
Borrowing base increased
Meanwhile, Kodiak and its lenders have entered into an amendment which increases the company’s borrowing base to $650 million from the previous $450 million. For the present, Kodiak decided to limit its aggregate commitment on the revolver to $550 million. Concurrently, the overall facility was increased from $750 million to $1.5 billion with the maturities extended to April 2018. Kodiak’s long-term debt at March 31 was $1.25 billion consisting of $1.15 billion in senior notes and $100 million in borrowings under its credit facility.
Kodiak said management believes that the credit facility’s undrawn portion, when combined with cash flow from operations, is adequate to finance its anticipated 2013 capital expenditures.
—Ray Tyson
