Apache Enters Bakken With Big Acquisition Across Daniels County, MT

By Kay Cashman
Petroleum News Bakken

Apache Corp., which has a reputation for entering new oil provinces in a big way, has recently acquired a 300,000 net acre position in Montana’s Daniels County, which has a total of 912,700 acres and is on the fringe of the Williston basin’s known Bakken petroleum system.

The big independent, which made the announcement at an investor’s conference in mid-June, acquired the leasehold in a deal with Shale Exploration LLC, a PR savvy firm based in Fort Worth, Texas, with three other U.S. offices, including Scobey, Mont., the county seat of Daniels.

Houston-based Apache says the acreage, dubbed the Jayhawk prospect by Shale, has “more than 1,900 potential” drilling locations with a “potential resource of 1 billion barrels of oil.”

Apache, never a company to dally when there’s drilling to be done and money to be made, plans to drill “up to five wells” this year, beginning in July.

“That program will run through the end of the year, and assuming success, we’ll continue on into 2013,” company vice president for exploration and new ventures, John Bedingfield, said June 15 at Apache’s 2012 Investor Day.

Daniels County is known for producing conventional oil from the Ratcliff, Madison, Mission Canyon and McGowan formations, and is considered to have potential for producing from the unconventional oil-prone Bakken formation, and the underlying Three Forks and Nisku members.

The mid-June announcement of its entry into the Williston basin is the first time Apache officials talked about it publicly, giving the company what Bedingfield refers to as a “first-mover” advantage.

“What can I say? It’s good to be there first. We got low entry costs.”

And the leasing is done, he said.

“Some will trickle in, but the big leasing is done and we’re surrounded by some of the traditional Bakken players you should recognize,” he said, likely referring to well-known Bakken and Three Forks players such as Continental Resources, XTO Energy (part of Exxon), Whiting Petroleum and others drilling in nearby counties such as Sheridan and Roosevelt, with the direction of drilling moving west and north from the heart of the Bakken system’s development.

“Interestingly, our biggest competitor up there on the west side … is Exxon,” Steve Farris, Apache’s well-known chairman and CEO, told the audience.

Shale Exploration’s story

According to its website (http://shaleexp.com), an interesting story in itself, Shale Exploration and its joint venture partners, such as such as Greehey Co., “began a quest to assemble a strategic position” in Montana’s Williston basin in 2011.

After more than 12 months of “leasing and multiple large acquisitions, from numerous companies, Shale is strategically positioned to begin development of our Bakken-Three Forks Jayhawk prospect,” the company says on its website, noting it and its partners “hold more fee leaseholds and state of Montana leaseholds in Daniels County than any other company.”

Shale’s “leasehold position in Daniels County is substantially superior to all other companies in the area, as evidenced by four drilling permits filed with the state of Montana,” the company says.

Shale has “obtained over 400,000 acres within Daniels, Sheridan and Roosevelt counties for the purposes of drilling for oil and gas and has secured an operator, Apache Corp. If you would like to include your minerals in the impending development, please lease to Shale Exploration,” its website says.

“We are good neighbors, partners, and friends as proven through our actions, which are not just empty promises,” Shale says.

A March news article and advertisement on Shale’s website says the company recently paid more than $30 million to Daniels County mineral rights owners, undoubtedly making for some happy citizens.

Community publication and press release headlines also testify to the company’s community spirit: “Shale doing its part in community safety” (a $45,000 check to the Daniels County Rural Fire Department); “Community champion presented by Shale Exploration,” “Sam Tallis makes donation to Montana Rescue Mission Women’s and Family Shelter on Sunday,” and the list goes on.

The company’s two top executives, both principals in the limited liability corporation, are Sid J. Greehey, CEO, and F. Sam Tallis, president.

Tallis’ favorite quote: “Always do right. It will gratify some and astonish the rest.”

Apache has area ‘locked up’

PNB sources say Apache and Shale first started talking in February.

And while the larger company, now operator of Jayhawk, might not have been astonished by Shale’s prospect, there are things it very much likes, including the geology and lower well costs.

Pointing to the Elm Coulee field on the Williston basin oil map, Bedingfield told investors, Elm Coulee’s “got a billion barrels of oil from the Bakken. … There’s no Three Forks at that location. The red dots … represent where industry is currently drilling, and what you can see is that industry is moving in this direction and certainly … has been quite active in Canada, as well.”

But “what really brought us to this point was … we recognized an area that had not been viewed as attractive by industry. It’s thermally mature. We’ve got great reservoir and we’ve got about 35 wells on or near our acreage, all of which are oil saturated. So this is an area where moving quickly can make a real difference.”

Per Bedingfield, Apache has the area, which he previously identified as Daniels County, “pretty well locked up.”

Cheaper wells, stacked plays

And, he says, the wells will be less expensive — $7.5 million versus about $10 million — because the Bakken formation is at a shallower depth in Daniels County than farther east.

Although Apache is initially focusing on the middle Bakken and the upper Three Forks zones, Bedingfield said “there are a number of other plays throughout. … The Madison section above us, Lodge Pole and others. … And below in the Devonian, there’s other Devonian plays, the Birdbear, for example, which also has oil pay.”

One drilling pad, he says, should be able to access four square miles with 16 wells — “eight Bakken and eight Three Forks wells, at basically 10,000 foot laterals.”

In a third slide that looks at a cross section of Apache acreage, the reservoirs are “fully matured and definitely in the oil window,” with the lighter colors representing higher oil saturation. The two grey bands or the grey band at the top and the one sort of in the upper middle represents the two Bakken shales. They are mature in this area. We put a lot of time and effort into (determining) that. … We have great saturations in our reservoirs. And the reservoirs here, they’re a little bit siltier. It actually has slightly better porosities than we’ve seen elsewhere and the facies are, I think quite amenable to very good production rates,” Bedingfield said.

“So we do think this is a great location. It’s very similar to the Rough Rider field, I believe, on the eastern side, and also a little bit to Elm Coulee to the south, although our pay … in this part of play is significantly larger than an Elm Coulee.”

And what does Farris have to say about Jayhawk?

“We’re really very confident about what we’re doing in the Bakken,” he told investors.

It’s “a good time to be back in the United States.”

© Petroleum News. Reprinted with permission. www.petroleumnews.com

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About montanaoilreport

After my first job at a newspaper -- delivering papers for the Jackson (TN) Sun, ink was in my veins. Since the 1970's I've worked in every area of the Printing and Publishing industry, with most of that time spent in the pressroom. In 2008 I moved to Montana and purchased the Sun Times of Fairfield (fairfieldsuntimes.com). In 2011 I realized that most media outlets were either ignoring, or attacking, the growing oil and gas industry in Montana, so I started the Montana Oil Report as the source of information on this important industry.
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