In regards to todays announcement, yes this is an increase in BRK acreage in the SWISH area but it is not quite as simple as that .
On the map those individual green and grey squares represent what is known as a section, and they are exactly 640 acres in area.
Your basic premise is correct, the green bordered squares are our operated DSU's, the grey un-bordered squares are sections where we own acreage in a non operated capacity.
The Jewell DSU that BRK applied for and won is 880 acres in area, the Rangers DSU is 640 acres and the Flames is 960 acres. Now , when BRK applied for the Jewell DSU, from memory they had purchased ~400 net acres in the area that was to be the Jewell DSU. That gave them a controlling interest which gave them the confidence to apply for the DSU. Their application was successful which meant they were designated operators which gave them the right to "force pool" the remaining ~480 acres they hadn't yet leased. The operator is the only party that has the right to apply to force pool . When BRK recently announced that XTO and Citation decided to participate in the Jewell well and the DSU at a combined 6.8 % level, that means they already held 6.8% of the 880 acres or ~60 acres. The other 5.7 % or ~50 acres was held by individuals and small private oil and gas firms . That means that BRK will hold ~87% of the acres in the DSU or ~766 net acres as all other parties who owned the other 480 net acres excluding XTO, Citation etc agreed to be force pooled and leased out their acreage for one of the 4 options they were given, either cash up front and a standard royalty, or less cash and greater royalty, to no cash up front and the maximum royalty.
The same above pooling process is will be repeated for each of the Rangers and Flames DSU's.
So you have a DSU size, and then you have a % of the DSU that you own... BRK are aiming to pick up at least 80-90% of each of the 3 DSU's. The majority of the BRK SWISH acreage if held within the operated DSU's. The rest of the acreage in the un-bordered grey squares ranges from 0.03% ( 0.2 net acres) to 5% (30 net acres) in non operated positions and not really material. These small positions are important as data points for wells drilled by other operators, small production revenue when wells are placed on production, or trading acreage for future transactions.
Back to the picture/map... it is only a graphical representation of where BRK ( which sections) it owns acreage in . Th Rangers DSU being a 640 one takes up an entire square, The Flames being a 960 acre DSU would take up 1.5 squares and the Jewell takes up less than 1.5 squares ( even though they are filled in as 2 squares.)
The announcement says the the new lease is adjacent to the rangers DSU, so if they depict it like they have previously it probably be another green bordered square adjoining north, south, east or west of the Rangers square, but would only be half a square if they represented the 320 acres in the DSU
Now, when you read todays announcement is says " Set to increase our SWISH AOI acreage by 13%" because of the 320 acre DSU, that doesn't mean BRK have right now picked up 320 acres. What it means is they have picked up enough acres (60-80) or 18%-25% of their intended 320 acre DSU, and when they win the application for a DSU, they will be in a position to repeat the pooling process to force pool the rest and possibly get the rest. Without me knowing who, what and how many acres other parties have, especially major players like Exxon, Continental, Citation etc it is hard to say how many or what % of the 320 acre DSU they will end up with.. but as mentioned before, they aim for 80-90%.
What is significant about todays announcement is by the rule of thumb discussed yesterday, where BRK target 10MMBOE reserves per a 2 section or 1280 acre " multiunit" DSU, it would be reasonable to assume that the 320 section will hold up to 320/1280 x 10MMBOE or 2.5 million BOE. If we use the metrics for the 3 SWISH DSU's , where by they hold ~11.6 MMBOE net the the BRK interest of ~90% or 13.2 MMBOE for the 880 + 960 + 640 = 2480 combined DSU acres, then the 320 acres could hold 320/2480 x 13.2 MMBOE = 1.7 MMBOE.
If BRK can win 90% of the DSU then todays announcement should mean BRK has added between 0.9 x 1.7mmboe = 1.5 MMBOE and up to 0.9 x 2.5 mmboe= 2.25 MMBOE to it's SWISH resource which will become a reserve when the 3 wells are drilled.
Hope that makes some sense... if not, at US$ 20 a barrel NPV10 per BOE , todays announcement basically added between US$30 million to US$ 45 million to BRK's asset base when the " paper work" application process is completed.
This is another example of the knowledge, technical expertise and star quality management BRK have working for us in Australia and Oklahoma and another great day in the evolution of this company
Cheers
Dan
BRK Price at posting:
2.7¢ Sentiment: Buy Disclosure: Held
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