It's been a long wait, with a lack of news I have written down a few thoughts as to where I think they are buying or leasing, so if you don't like speculation read no further.
Hopefully the bar chart of the economics of the various basins has posted ok. It is the most recent I can find. Obviously the economics depends on the royalty rate paid along with interest cost & a number of other factors. Also the basins themselves have sweet & not so sweet spots, however it does give you an idea.
MAD said they came across the current properties they're leasing whilst looking at acquisitions, so I'd say there is a good chance the leased property is in the same area as they are looking to make acquisitions. The Quarterly is due out end of this month. It will take a cash hit with the extra acreage they've leased. I'm guessing they'll advise details of a finance package for these leases in the quarterly to lessen the blow. Back in Jan they said they'd be able to advise the location of the leases in "several months". So who knows, they may be able to release that information too. (ending my speculation)
Looking at the bar chart, the 3 most economic basins are in the Permian's Midland & Delaware basins, followed by SCOOP, STACK, Permian - Bone Spring, then Eagle Ford oil.
MAD changed its wording in it's asx reports from "economic at todays prices" to "economic at forward prices" as WTI dropped from $35 to $31 so the acreage needs to be in one of the first 6 or so shown on the chart.
For my money, I'd guess they are looking at the Permian basin for the following reasons:
It will be a predominately oil area, gas is uneconomic today
Yeager bought acreage for BHP in the Eagle Ford & Permian so is familiar with these areas, and no doubt has the inside knowledge as to BHP's economics in these basins.
MAD is based in Texas, Eagle Ford & Permian are both in Texas, the Bakken a long way away (N Dakota, Montanna) as is the Niobrara, SCOOP, STACK fairly close in Oklahoma.
The Eagle Ford acreage is a newer area held by big companies, all horizontally drilled, with few buying opportunities, whereas the Permian is a much older developed field made up of many smaller acreages leased/bought years ago, but has a large overall area. Much of this acreage only has vertical wells but is being developed by the bigger companies with horizontal drilling.
Permian gives many different pay zones (layers) such as the various Wolfcamps, Spraberry, Bone Spring + others. The various zones come into play at different economic prices and vastly extend the acreage life. Also the one Pad & associated infrastructure can be used for the various zones when one becomes depleted.
Permian being older, is well set up with infrastructure such as pipelines etc
SCOOP, STACK although showing good economics are new areas with little development drilling. MAD advised us the new leased areas had "numerous wells drilled adjacent to the lease boundaries" enabling the 1P reserves, so the leased acreage is unlikely to be in these areas.
The Permian is one of the oldest areas in the US, many of the pay zones are not shale, but are still tight oil. Although it's been drilled for many years, horizontal drilling/fraccing has given it a second life. I'd be surprised if much of MAD's efforts aren't in this area, having said that, if a good property became available in the Eagle Ford or other area, I'm sure they'd give that careful consideration. Although the Permian's Midland basin Wolfcamp zone looks best, a sweet spot in the Delaware basin would probably trump "average" Midland acreage. The same can be said for other basins too.
FDM Price at posting:
6.7¢ Sentiment: Buy Disclosure: Held
