http://seekingalpha.com/article/270...struggle-to-find-economic-wells-in-2015?ifp=0
Mike is a long time author (I've read him for over 4 yrs) and well respected, especially on the Bakken.
Article opens with. Bolding is my emphasis. Italics are my observations
"
El Halcon and its western ND acreage
well economics are in question at today's realized oil prices."
"Operators will have to
decide on how long it will wait to get paid back on projects, and more importantly, if the acreage is still worth keeping. Some rigs will work to get acreage held by production, but big pad projects will be moved to core areas. This may deliver short-term pain in many names, and further opportunities on the downside. When those rigs move, cap ex may also decrease. This creates an issue as rigs are moved to better areas producing more resource per well. These areas provide better margins."
This I think will truly show whether or not Birch is in the sweet spot of HK El-Halcon acreage. They can't do development pad drilling on all 105K acres and not all 105K acres are HBP. Going to have to choose.
Also then for AKK, they really do need to now layout what plan they have for Pathfinder. If I understand earlier communications by the company - they have not yet satisfied primary lease drilling requirements - so they have a minimum spend necessary to retain the acreage (how much $$$ would be nice to know). Surely further appraisal beyond that spend would be considered unnecessary (and foolish) at this time.
"After year-end, there
may be asset write-downs due to low crude prices. For some operators it could trigger a review
and a possible reduction of borrowing base. It will take a while for all of this to play out and will continue downward pressure on many names with large leaseholds of lower tier acreage. That is unless pricing improves."
This is in reference to SEC NPV10 value of 1P reserves based on NYMEX strip (which will be lower) and also may cause questioning of "economic development in 5 years".
Look closely at what AKK use in their calculation and risk accordingly.
HK already has announced a reduction on Capex and approx halving of the number of drilling rigs. You'd have to think the JV with Apollo on the TMS will be put on hold (at best). Mike forecasts that Bakken differentials to WTI will expand so that just exaggerates the pricing problem. Floyd is hanging on to his hedges whereas Harold Hamm monetized calling the bottom (or near to it).
This is when having great acreage that is HBP really carries the company through (e.g. EOG).
