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MDU Pays $66M for Stake in Whiting's Bakken Midstream Assets

MDU Resources Group Inc., which has five rigs in operation in the Bakken Shale and holds 124,000 net leasehold acres in the play, said subsidiary Bitter Creek Pipelines LLC has paid $66 million for a 50% interest in Whiting Oil and Gas Corp.'s natural gas and oil midstream assets near Belfield, ND.

Bitter Creek will be responsible for 60% of certain future capital expenditures, according to MDU. Whiting will continue to operate the facilities. The facilities include a newly constructed natural gas processing plant with an inlet processing capacity of 35 MMcf/d and a natural gas gathering pipeline system connected to the plant.

A natural gas residue line that ties into MDU subsidiary Williston Basin Interstate Pipeline Co.'s system is also included, along with a crude oil gathering system, storage terminal and pipeline that connects the terminal to the Bridger Pipeline. The 20,000 bbl oil terminal is currently under construction, with completion expected in the third quarter of this year.

"This transaction is an important step forward in executing our strategy to become more liquids-based in the midstream space," said MDU CEO Terry Hildestad. "As production continues to ramp up and the storage terminal is completed later this year, we will be positioned nicely for the investment to produce accretive earnings and cash flow."

Oil and natural gas production from Whiting's Pronghorn acreage in Stark and Billings counties, combined with adjacent Stark County acreage owned by MDU subsidiary Fidelity Exploration & Production Co., will supply the facilities, MDU said. Fidelity and Whiting have a combined seven rigs operating in the acreage feeding the facilities.

Bismarck, ND-based MDU plans to invest at least $160 million -- about 40% of its exploration and production (E&P) budget -- on its Bakken acreage this year (see Shale Daily, May 2).

The Bakken/Sanish/Three Forks play has seen the third largest increase in activity over the last year of all unconventional plays. According to NGI's Shale Daily Unconventional Rig Count, 218 oil and gas rigs were actively drilling in the play for the week ending May 18. That marks a 25% increase over 174 rigs one year ago.

MDU also has active E&P operations in the Niobrara in Wyoming, Paradox Basin in Utah, and in Texas (both disclosed and undisclosed locations) and Heath Shale in Montana.

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