As it shifts its portfolio toward more oily prospects, natural gas producer Williams Cos. said Monday it will pay $925 million to acquire 85,800 net acres in the Bakken Shale.
The acreage, which is being acquired from private, unnamed sellers, is on the Fort Berthold Indian Reservation in the Williston Basin of North Dakota. According to Williams, the leasehold contains an estimated 185 million boe in total net reserves potential in the Middle Bakken and the Upper Three Forks formations. Twenty-four wells now are producing 3,300 b/d net.
Williams' entry into the Bakken play follows its entry into Pennsylvania's Marcellus Shale, where the company has accumulated almost 100,000 net acres in the past year and a half. By 2013 about one-quarter of Williams' exploration and production (E&P) revenue streams are expected to be generated by oil production, up from 7% this year.
In September both Williams and its partnership reduced earnings forecasts and planned capital spending through 2012 to reflect lower expected gas prices and natural gas liquids margins (see Daily GPI, Sept. 17). Williams posted a $1.26 billion loss in the third quarter, which it blamed partly on significant impairment charges related to its Barnett Shale leasehold (see Daily GPI, Oct. 29).
"This acquisition establishes a significant acreage position in an area which further diversifies, and when combined with our recently acquired Marcellus position, basically transforms our business -- both geographically and in terms of our product mix," said Williams E&P President Ralph Hill. "It enables us to deploy available capital and existing technical expertise to a very attractive new opportunity."
Williams is "now positioned in three of the country's most attractive growth areas: the Piceance [basin], the Marcellus and now the Bakken," said Hill.
In addition to the purchase price, Williams plans to spend $60 million this year and $200-300 million in 2011 for drilling and development costs. Currently three rigs are operating on the Bakken leasehold, and the rig count should double by 2012, said the company. By the end of 2012 Williams is forecasting that it will be producing more than 20,000 b/d from the Bakken Shale.
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