Mike Filloon has and continues to be one of the leading writers...

Mike Filloon has and continues to be one of the leading writers on the Bakken.

Whereas at one time most authors were focused on capturing acreage, EUR, well design & optimization and production growth, the last year has seen the focus concentrate on capital efficiency.  One measure of that is payback time. That of course can also be interpreted in many ways and a very simple one is how long to payback the capital cost. The numerator is easy (the AFE of the well's D&C cost). The denominator varies. Some simply use an index price, others the lifting cost, some the operating netback and some the cash margin.

Mike's article is here
Michael-Filloon-Bakken-Update


Relevance to SSN?

(A). Article closes with (bolding is me)
"It is also possible we see banks tighten credit on operators with large non-core leaseholds. There are a number of operators to watch with this issue including Triangle, Emerald (NYSEMKT:EOX), Approach (NASDAQ:AREX), Halcon (NYSE:HK), Samson (NYSEMKT:SSN), PetroQuest (NYSE:PQ), Comstock (NYSE:CRK), and Bonanza Creek (NYSE:BCEI). Since oil prices may remain around $30/bbl in the first half of the year, considerable downward pressure could remain."

(B). Article is fundamentally a short call on OAS. This is put in context of the acreage it has through the Bakken (bolding is me)
"Much like North Cottonwood, Red Bank and Foreman Butte are some of the worst Bakken areas and need oil around $100/bbl to see decent returns. This is a total of 236K acres and is 47% of its entire holdings. It is possible that its northern acreage in both Red Bank and North Cottonwood would need much higher prices than $100/bbl."

For SSN shareholders, don't lose sight of the fact that SSN is NOT ACQUIRING the rights to Bakken/TFS. The acquisition is (mostly) above that formation. Also most importantly (IMO), is that this is not a D&C to develop PUD in the short term. It is a RECOMPLETE and put on production the 17 (?) PDNP wells strategy of (opportunistically?) using someone else's (OAS) sunk capital.

(C). Take a look at the maps. Where would you position the SSN existing acreage?

Operators in these areas are the best positioned in the Bakken:

1. Northeast McKenzie County
2. Sanish and Parshall Fields
3. Southwest Mountrail County
4. Southeast Williams County
5. Northwest Dunn County
6. North McKenzie County
7. South Williams County

(D). Take the time to understand the hedging aspect - its why I have a b/hedging row in the SSN transformed spreadsheet as I do for all.  Major damage coming for many operators (and another I hold that was well hedged in 2015 and is near naked with hedging in 2016 will see cash flow from operations slashed to 1/4 to 1/3 of 2015). This of course is very dependent on oil price, but for the past 18 months all those bottom calls have been wrong (to put it politely).

(E). Also has a good review of the logistics of the Bakken and the pricing differential


I think that TB is possibly setting SSN up for a Bakken exit once there is a recovery in oil price (and assuming MOB funds the acquisition and SSN executes on the recompletion strategy). The (conventional) Foreman Butte project will be their focus and if he can proportionally retire the debt supported by NS PDP Reserves I think he may do it.

As usual GFTA