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Triangle Amped Over Williston JV

December 17, 2012
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Triangle Petroleum Corp. recorded the first profitable quarter in its history, is on track to meet its production goals and is excited about the possibilities from a joint venture (JV) in the Bakken Shale, officials said last week.

"The turnaround of Triangle is complete and the startup nature of our operations is a thing largely of the past," CEO Jonathan Samuels said during the company's 3Q2012 earnings call last week. "We can focus on margins [and] making this as profitable a business as possible, which just wasn't something we were able to focus on this year when you're trying to drill and complete your first well, get your integrated service business up and running and get your midstream entity fully funded."

Denver-based Triangle generated net income of $1.2 million, with gross earnings of $6.8 million, in the third quarter, which ended Oct. 31. Total revenues were $23.1 million and operating expenses were $21.9 million. This fall Triangle formed Caliber Midstream Partners LP, a JV with First Reserve Corp.'s Energy Infrastructure Fund, which plans to invest $180 million on midstream and infrastructure in the Williston Basin areas of North Dakota and Montana (see NGI, Oct. 8).

According to Samuels, Triangle is excited about the geology and reservoir quality of its holdings in the Williston Basin. "We think we're ultimately going to get a lot more wells per 1,280 [acres] than other folks are going to get in other parts of the basin," he said. "We continue to study our down spacing and what the appropriate well spacing is, but as of today with wells spaced just as little as 600 feet apart, we see no communication between these well bores."

Samuels said production during 3Q2012 averaged about 1,400 boe/d. While that was a 20% increase over 2Q2012, well downtime hampered production. He added that drilling costs in McKenzie County, while declining, were still high because wells drilled there were targeting the deepest and hardest part of the Williston Basin. Other downsides for the quarter, according to Samuels, included high general and administrative costs and lease operating expenses as a percentage of revenue, and the company's experience with natural gas lift. Production is forecast to exit January between 2,600 and 3,200 boe/d. "We are on track to meet or exceed that target," said the CEO.

In an earnings disclosure, Triangle said its capital expenditure (capex) for fiscal 2014 would total $190 million, most of which ($128 million) would be devoted to a two-rig drilling program. However, Samuels said the board also had approved a revised capex budget of $130 million and would drop one rig in the spring "if macro or fiscal cliff issues warrant it." Conversely, he also said he didn't think the company would add a third drilling rig.

Next year Triangle also plans to "keep an eye" on its Station Prospect, about 42,000 net acres in Montana prospective for both the Middle Bakken and Three Forks formations that it acquired in 2011 (see NGI, May 30, 2011).

"This is part of our portfolio that gets very little attention, very little value accredited to it," Samuels said. "But we're monitoring activity in the area. There are some big boys out there sniffing around -- Apache, Southwestern, Whiting, Samson Resources -- all drilling wells, leasing acres. Definitely we want to continue to de-risk Three Forks in our area, and in the same vein flesh out exactly what wall spacing should look like in our current area of operations. We continue to believe there's a lot more recoverable oil out of this play than people give it credit for."

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