Test well results and micro-seismic analysis have identified more than 200 drilling locations in the Mondak in the Upper Bakken Shale, according to initial drilling results released Thursday by Calgary, Alberta-based PetroShale.

Formed in March by a combination of Mondak Petroleum Inc. and Algonquin Oil and Gas Ltd., PetroShale is partnering with Slawson Exploration Co. Inc. to complete an initial appraisal of the 40,000 acres making up the Mondak shale play, using four horizontal test wells in what is designated as the Upper Bakken.

Based on the results, PetroShale and Slawson plan to start a two-rig, two-well/month program immediately and increase to a three-rig, three well/month program in the fourth quarter. In addition, the pair indicated that they intend to test the Red River, Mission Canyon and Tyler formations next year. They said the Mission Canyon is analogous to the Oklahoma Mississippian play.

“Each [test] well has been completed with different techniques,” a spokesperson for PetroShale said. “The preferred completion formula to date…showed a 24-hour initial production rate [IP] of 476 b/d flowing, and after 90 days it is producing 200 b/d on pump.” PetroShale said its 2013 capital expenditure budget for the Mondak is $25 million.

The spokesperson added that well costs have dropped from $6 million to below $5 million for stimulated, one-mile laterals. “Production is 98% oil with netbacks in the high $50/bbl [range] at $90/bbl WTI. Netbacks will increase when additional infrastructure is completed, the spokesperson said.

With the testing done, the area of interest defined as the Mondak has grown for PetroShale and Slawson to encompass 40,000 acres from its initial 35,000 acres.

PetroShale CEO John Fair called Slawson “the only Bakken operator with experience drilling the Upper Bakken Shale…They drilled five unstimulated wells adjacent to Mondak from 1994 to 2007, which had modest IPs but averaged 730,000 for their estimated ultimate recoveries [EUR].”

At least two of the earlier wells are now expected to exceed one million bbl, Fair said. “These new test wells in Mondak prove that the play is continuous; now we are experimenting with completion techniques to increase the early stage deliverability.”

Slawson is working on further reducing its costs, said its President, Todd Slawson. “The shale wells in the Mondak area will never have flashy IPs, but they exhibit very shallow decline curves, hence the high expected EURs and projected recycle ratios of 4.5 to 1 or greater.”