Officials with Whiting Petroleum Corp. said the company is poised to meet its production guidance for the year, with increased drilling in emerging shale plays and a slight increase in capital expenditures (capex).
In a 2Q2012 earnings call on Thursday, James Volker, CEO of Whiting Oil & Gas Corp., said production increased 26% from the same quarter one year prior, and replaced 4,500 boe/d spun off by the formation of Whiting USA Trust II, an initial public offering (IPO) that went public in March.
“Including those volumes in our second quarter production would have equated to a 33% production increase year-over-year,” Volker said, adding that the company planned to drill 257 gross (160 net) wells in 2012 in its core areas. “We continue to execute on our drilling program and have increased our guidance for the third time this year to a range of 20% to 23% production growth year-over-year.”
Volker said the company was “modestly” increasing its capex for 2012 — from $1.8 to $1.9 billion — with $50 million devoted to recompletions and capitalized workovers, $46 million to two enhanced oil recovery (EOR) projects in Oklahoma and Texas, and $27 million for nonoperated drilling.
As of June 30, Volker said Whiting has acquired an additional 4,000 net acres for its Missouri Breaks prospect — which spans Montana and North Dakota in the Williston Basin — and now holds approximately 90,000 gross (62,000 net) acres there. He said the company has drilled and completed three wells in the western part of the prospect, with estimate ultimate recoveries (EUR) of between 300,000 and 400,000 boe per well.
Whiting controls more than 112,000 net acres in the Williston Basin, up more than 10,500 net acres from 1Q2012.
Just south of Missouri Breaks, Volker said Whiting has identified more than 50 vertical potential drilling sites at its Big Island prospect, which also straddles Montana and North Dakota, in the Red River play. The CEO said EUR from the Big Island wells would be between 200,000 and 300,000 boe per well.
“Before the Bakken play, the Red River was one of the two most prolific plays in the basin, the other one being the Mission Canyon,” said Mark Williams, senior vice president for exploration and development. “There’s a fairway of production that runs through the Montana side primarily — in Roosevelt and Richland County — and if you look at all the drilling that’s happened out there over the years, it’s about 130 million barrels of oil have been produced from that fairway. Both our Starbuck prospect and our Missouri Breaks prospect are right in the middle of that.
“We’re essentially applying [3-D seismic] technology to all of our areas that we think are perspective in the Red River. But both Starbuck and Missouri Break are both right in the middle of that, as is Big Island. So we feel particularly good about those three areas.”
Williams later added that wells drilled in the Red River play would be vertical and would not require hydraulic fracturing, dubbing them “plain Jane” wells that would cost between $3 million and $3.5 million to drill and complete.
“It really has a profound effect on the economics out there, especially if you think you can do between 200 and between 300 Mboe per well,” Williams said. “Those numbers are very attractive to us. But the other side of that is they’re not hyperbolic. In other words, they don’t decline very, very rapidly over the course of the first year. They tend to stabilize early on, and so you don’t get quite as much flush production.”
Volker said a third prospect in North Dakota, Sanish/Parshall, is home to the company’s new Drill Wells on Paper (DWOP) program, which the CEO said has saved and estimated $2 million per well.
“Sanish Field is the gift that keeps on giving,” Volker said, adding that DWOP combined with white sand and sliding sleeve completions, and improvements in pad drilling and fracture stimulation “enable us to drill and complete our Williston Basin wells for approximately $7 million [per well].” During the question-and-answer session, Volker said a standalone well would cost $500,000.
“These wells have excellent economics at an $80 [per barrel] oil price,” Volker said. “Whiting continues to lead the pack in terms of cumulative production during the first 12 months from all Bakken and Three Forks wells drilled in North Dakota. Our 12-month average is more than 49,000 boe higher than the average of the next 25 operators.”
Whiting has also acquired 117,521 gross (87,017 net) acres for its Big Tex prospect, located in Pecos, Reeves and Ward counties, TX. COO James Brown said Whiting has recently completed the May #2501 well, which is producing 323 boe/d from a vertical wellbore in the Wolfcamp formation.
“Currently we are drilling a horizontal offset to the May well, which should help us determine whether to go horizontal or vertical in that area,” Brown said, later adding that another well in the Wolfcamp — Legear #1102H, a horizontal test well — was “currently flowing back oil and load water, up casing as it cleans up.”
Brown said Whiting’s two EOR projects — the Postle Field in Texas County, OK, and the North Ward Estes in Ward and Winkler counties, TX — represent about 39% of the company’s total proved reserves and 21% of current production.
“Second quarter production from the Postle and North Ward Estes totaled 16,780 boe/d,” Brown said. “During the second quarter, the field averaged 8,630 boe/d. This average rate was up 6% from the 8,125 boe average daily rate in the second quarter of 2011. One of the largest phases at North Ward Estes, Phase 3B, is pressuring up with CO2 [carbon dioxide], and we anticipate a production response by the first quarter of 2013.”
Whiting reported 2Q2012 adjusted net income available to common shareholders of $86.8 million (73 cents/diluted share), down from $120.3 million ($1.02/diluted share) in 2Q2011. “Compared to the second quarter of 2011, our discretionary cash flow was essentially flat as the increase in production offset the decrease in oil prices,” said CFO Michael Stevens.
The company reported net production of 80.7 Mboe/d, of which 56.9 Mboe/d (71%) came from its core Rocky Mountain Region, Montana, Wyoming, Utah, Colorado and the Dakotas. Another 11.6 Mboe/d (15%) was produced in the Permian Basin (New Mexico and portions of Texas), followed by 8.4 Mboe/d (10%) from Midcontinent states (Arkansas, Kansas and Oklahoma), 2.8 Mboe/d (3%) from Michigan and 1.0 Mboe/d (1%) from the Gulf Coast (Alabama, Mississippi, Louisiana and portions of Texas).
In May, Bitter Creek Pipelines LLC, a subsidiary of MDU Resources Group. Inc., paid $66 million for a 50% stake in Whiting Oil & Gas’ natural gas and midstream assets in the Bakken Shale (see Shale Daily, May 23).
“Fidelity Exploration & Production Company, also a subsidiary of MDU, has dedicated gas production from its development activity in the area for the gas plant,” Volker said. “We are pleased to have MDU as a partner. Whiting will continue to operate the facilities.”
According to company reports analyzed by NGI’s Shale Daily, Whiting Petroleum has the third-highest net acreage position in the Bakken at 701,751 acres (see Shale Daily, June 15), trailing only Continental Resources Inc. (938,940) and Hess Corp. (900,000).
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