PetroShale’s growth strategy paying offBakken non-op’s first quarter 2014 acquisitions push production up 34 percent with second quarter growth already reaching $5.6M Mike Ellerd Petroleum News Bakken
Following a series of acquisitions in the first quarter, PetroShale Inc. saw a production increase of 34 percent in the first quarter compared to the first quarter of 2013 as it “continued to successfully execute on its aggressive acquisition strategy in North Dakota,” the company said in a May 29 announcement.
As Petroleum News Bakken previously reported, the Calgary-based non-operator more than doubled its proved plus probable, 2P, pro forma reserves in the first quarter to 2.19 million barrels of oil equivalent with two first quarter acquisitions. One of the acquisitions is an 18.75 percent working interest in a proposed EOG Resources-operated drill block in McKenzie County. The other is a 19.14 percent working interest in a 1,280-acre spacing unit in Williams County.
In addition to those two first quarter acquisitions, PetroShale partnered with Slawson Exploration in picking up eight tracts in the Van Hook Peninsula in southwest Mountrail County in a January Bureau of Land Management lease auction. Those three acquisitions had a total consideration of US$6.5 million.
Thus far in the second quarter, PetroShale has picked up interest in two acreage blocks in McKenzie County as well as in two existing wells in its Slawson-operated Stockyard Creek project in Williams County. Consideration for those two acquisitions totaled US$5.6 million. The PetroShale/Slawson Stockyard Creek joint venture involves other non-operators including Black Ridge Oil and Gas and Australian-based Samson Oil and Gas (see related story on page 1).
The company also announced a private placement of up to 5 million common voting shares at $1.30 per share, generating gross proceeds of up to $6.5 million, which the company will initially use to repay outstanding debt. That, along with an extension of its subordinated loan facility, gives PetroShale the flexibility to continue pursuing acquisitions in the Williston Basin. “With our financial strength coupled with our business alliance with premier operator, Slawson Exploration Company Inc., we are well positioned to continue seeking strategic asset acquisitions in the Williston Basin that offer us the ability to grow organically through a high quality asset base,” Executive Chairman and Chief Executive Officer Bruce Chernoff said in a May 29 press release.
First quarter operations PetroShale, which has headquarters in both Calgary and Denver, brought four gross (0.2 net) wells on production in the quarter and drilling was in various stages on four more gross (0.4 net) wells “subsequent to the end of the quarter.” For the quarter, the company reported gross daily oil and natural gas production of 166 barrels of oil equivalent per day which was 96 percent liquids. As of early May, PetroShale’s average daily production increased to approximately 300 boepd (gross of royalty). The company reports first quarter 2013 output was 124 boepd and was 94 percent liquids. In a May 29 press release, PetroShale put its current production at 300 boepd.
Eighty nine percent of PetroShale’s first quarter production came from its core Williston Basin assets with the remaining 11 percent from its non-core Canadian assets in Ontario. The company says its Canadian production has decreased as a result of natural gas declines, and that the 34 percent increase in first quarter production was due primarily to output from its Slawson-operated Stockyard Creek project along with working interest in 11 Continental Resources-operated wells in the Elm Tree and Alkali Creek fields in McKenzie and Mountrail counties, which PetroShale calls its MJ Angus assets.
First quarter financials Growth in the company’s assets is reflected in its $1.1 million revenue net of royalties in the first quarter, which was a 47 percent increase over the first quarter of 2013. That revenue comes from a net royalty operating netback prior to hedging of $71.14 per boe for the quarter. The company’s operating costs were $10.84 per boe in the quarter, down from $18.50 in the first quarter of 2013.
PetroShale’s realized combined oil and natural gas price for the quarter averaged $93.92 per barrel. Adding in a realized natural gas price of $10.24 per thousand cubic feet, gave the company a per boe realized price of $92.57. In comparison, the company’s realized price per boe was $82.38 in the first quarter of 2013.
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