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    ND Bakken reaches 1MMboe milestone

    Straddling the border between the US and Canada, the oily Bakken shale currently sits atop the list of most revered unconventional resource plays. Recent reserves estimates and production milestones highlight the play's attraction.

    Recently, after a 2.5% oil production increase in April, preliminary figures released by North Dakota put state oil production past the one million barrels of oil per day milestone. The milestone boosts North Dakota to an enviable position in the eyes of the industry. According to North Dakota's Director of Mineral Resources, the state is now in the top 17% of crude oil producers around the world.

    As technology continues to improve, statistics in the play are expected to trend higher. Harold Hamm, CEO of Oklahoma City-based Continental Resources, the largest leaseholder and producer in the Bakken, recently told conference-goers that he expects production to eventually reach two million barrels per day.

    Elevated production numbers from Bakken are attributed to innovation and drilling advancements. While rig count in the state has remained relatively stable at approximately 190 rigs, operators have increased efficiency, enabling more production.

    Advancements also increase estimates on what may be recoverable. In a recent update, energy consultancy Wood Mackenzie put recoverable crude in the Bakken field in North Dakota around 21 billion barrels, higher than government estimates.

    Not in question is the need for movement. The EIA, citing the North Dakota Pipeline Authority, recently noted Bakken rail outflow capacity totaled 965,000 barrels per day at the end of 2013, compared to 515,000 bbl/d of pipeline capacity. While Wood Mackenzie analysts estimate roughly 70% of crude leaves the Bakken by rail, the firm expects new pipelines to divide that number by nearly half as we reach 2016.

    Regardless of the mode of transportation, production will likely continue to move out of the region. While refineries are being built or planned, the EIA recently noted, "most Bakken crude oil will continue to be moved out of the region to be processed at refineries in other parts of the country."

    Summit Midstream Partners is one company investing in infrastructure. The partnership recently announced a plan to invest an additional $300 million in the region as part of a planned expansion that includes additional interconnects and the provision of crude gathering, associated gas gathering, and water services to an unnamed producer.

    M&A activity continues in the region, as well. According to PwC US, the Bakken was the second most active shale play (following Texas) for M&A transactions with values greater than $50 million during 1Q14 with three deals totaling $863 million.

    One recent deal in the play involves Vitesse Oil LLC and Vitesse Energy LLC. Vitesse acquired non-operated oil and gas assets in the Williston Basin from a private seller consisting of a working interest in over 250 wells and approximately 3,625 net acres primarily in Williams, McKenzie, and Mountrail counties. The acquisition closed on May 9. PLS Inc. analysts put a value of $64 million on the deal.

    Continental Resources remains the largest leaseholder and producer in the Bakken.
    Continental Resources remains the largest leaseholder and producer in the Bakken.

    In May, Triangle Petroleum Corp. announced two separate agreements for a total consideration of $120 million for acreage in Williams and Sheridan counties in the Williston. Current production on the properties sits at 1,175 boepd, with 4.45 MMboe of 1P reserves and $110 million of PV-10, as of April 30,

    "We think this adds solid optionality value, as activity in the Williston continues to trend westward, which is being driven in large part by improvements in completion technologies that have improved economics on this acreage," noted analysts at Global Hunter Securities following the announcement. "If we value the current production of this transaction at $70.5MM ($60K/flowing boe), we estimate that TPLM paid $1,074/acre, which we believe is an appropriate price for a majority non-operated stake in this area of the Bakken."

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