Need to understand what this announcement means folks , before flying off the handle with all the negativity.
This is not an acreage acquisition at the high point in the oil price cycle, but the final step in court proceedings which facilitates court orders for project advancement . This is the culmination of the court approvals for Bruins DSU and the Sycamore formation of the Flames DSU ( Maroons as is a seperate DSU overlaying the Woodford Flames DSU).
The original Flames DSU was a Woodford only DSU… BRK originally didn’t lease the Sycamore at Flames because of the historic high number vertical well penetrations and production of that formation. This meant a lot of the Sycamore was held in vertical well DSU’s. BRK originally tried to purchase the vertical wells DSU’, was successful with a few, the Lee well for example, but wasn’t successful as most owners wanted to keep their wells….. to progress BRK had to apply for an exemption which allowed them to apply for a 640 acre horizontal DSU if over 50 % of the vertical DSU holders agree to allow their vertical well DSU’s to be included in the BRK DSU whilst keeping their interests in the vertical wells. This application was originally put up in mid 2022, was protested and was finally won recently. This is significant for the Flames/ Maroons development because CLR have shown ideally, the Sycamore and Woodford can be developed simultaneously, effectively as 1 zone for maximum efficiency. BRK can now drain the reserves in the Sycamore with the Woodford which is a HUGE value add.
For the Bruins DSU, this is a Woodford only DSU, again for the same reasons as the Flames was. To my understanding, it will only be a Woodford because there are many more historic vertical well Sycamore producers than present at Flames, and currently there is no benefit to drill the Sycamore,with a horizontal well….. but, the original DSU was for 960 acres, being 320 acres in the southern half of section 2, and 640 acres in section 11 which was applied for in mid 2022. As BRK managed to lease increase their leasing to a majority position in that 960 acre DSU , with the 320 acres in the northern half of section 2 not currently held within a horizontal well DSU, or under any application, BRK decided to “ grab” that acreage as well . So they changed their multi unit DSU application from 960 to 1280 acres in Jan 2023, which was finally approved recently.
Despite not involving the Sycamore formation , the fact the Bruins can be developed with 2 mile laterals, instead of the original 1.5 mile laterals, is where the huge value add has occurred from this process.
Now that the court has approved these applications, orders will be issued soon. This means BRK can now start the process of getting these DSU’s drill ready in DSU’s where the valuation have been enhanced…. Flames/ Maroons through dual zones and Bruins through acreage addition allowing for longer laterals.
This does not mean BRK are going to develop these reserves by them selves now, it just means any JV partners have more certainty/ clarity over the DSU’s they will be “ investing” in. Pooling still has to occur for Bruins/ Maroons, but as with the previous wells, that doesn’t need to be completed before any wells are drilled.
BRK increasing it’s position in the Jewel DSU is also a positive as it will have more equity to “play” with in any JV .
So instead of crying out in derision, you guys should be jumping with joy as BRK / BM have just increased the reserve position by over 12%( over and above the reserve report) as well as making those reserves more efficient / cheaper to drain. Pooling costs should be less than US $ 1 million as cash bonuses set by the court will be based on earlier leasing.
BRK now have locked in and expanded, a 3 multi unit DSU contiguous acreage position ( much more valuable than 3 seperate DSU’s) in the heart of the core of the hot spot. Has anyone bothered to look at the individual flow rates of the Woodford wells CLR have drilled in the Corbett?….. these are some of the best wells in the Woodford which traditionally are seen as inferior to the Sycamore.
The share price action may seem to indicate otherwise, but today BRK basically announced the reserves , therefore the NPV and therefore the value of the company increased by over 12%.
There is what happens and the interpretation of what happens.
Ciao
Dan
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