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Vol. 18, No. 36 Week of September 08, 2013
Providing coverage of Bakken oil and gas

Samson costs dropping

KKR firmís well completion costs in Ambrose focus area continue to decline

Mike Ellerd

For Petroleum News Bakken

As Samson Resources continues to develop its core North Dakota acreage in the Ambrose focus area in north-central Divide County along the Canadian border, the Tulsa-based independent is also seeing progressive declines in its completed well costs resulting from operational improvements and efficiencies.

The company released information in August indicating that its average completed well cost for its Williston Basin wells declined from approximately $9 million per well in the fourth quarter of 2010 to approximately $7 million by the fourth quarter of 2012, a reduction of approximately 22 percent over two years.

However, that $7 million completed well cost at the end of 2012 does not account for the lower cost of several wells drilled in the third and fourth quarters that had shorter laterals, i.e., shorter than Samsonís typical 9,500 to 10,000 foot lateral. When those wells are considered, the average well cost at the end of 2012 was slightly over $6 million, representing a 36 percent reduction in completed well cost over the two year period.

One of the operational areas where Samson has made improvements in well costs is in its drilling rates. The company reports it ranks in the top quartile among 22 of its peers in the Williston Basin based on data sourced by Smith Bits for Bakken horizontal wells with total depths greater than 17,000 feet that were spud between Jan. 1, 2012, and March 14, 2013. Within that data set, Samson was drilling an average of nearly 900 feet per day.

Bakken operations

Samson plans to drill 33 gross operated wells throughout 2013 and approximately 25 more wells in 2014. The wells are targeting both middle Bakken and Three Forks formations. Samson operated two drill rigs in the Ambrose focus area until August and now is operating only one. It plans to keep one rig operating through 2014.

The companyís total vertical well depths in the Ambrose area average approximately 8,000 feet with laterals averaging 10,000 feet. Ultimate recoveries are estimated at 394,000 barrels of oil equivalent with an initial rate of return estimated at between 15 and 20 percent based on $85 per barrel oil. Samson has an average 43 percent working interest in its wells.

Samson reports having approximately 69,000 net acres in its Ambrose focus area in Divide County, approximately 29,000 of which are company operated. For the second quarter, Samson reported total Bakken production at approximately 4,500 barrels of oil equivalent per day.

According to Department of Mineral Resources Oil and Gas Division records, Samson has 86 wells on active status and another 49 on confidential status in North Dakota, most of which are in the Ambrose and West Ambrose fields.

Other plays

Samson has several other key plays in the U.S. and divides its operations into three divisions: Rockies, Mid-Continent and East Texas. The Rockies division consists of the companyís operations in North Dakota, Wyoming, Colorado and northern New Mexico where it has a combined net acreage of approximately 1 million acres. Samson is running two drill rigs in the Powder River basin and two in the Green River basin, all in Wyoming. Second quarter production in the companyís Rocky Mountain division averaged 233 million cubic feet, mmcf, of natural gas equivalent per day.

In its Mid-Continental division Samson has approximately 574,000 net acres in the upper Granite Wash, Marmaton and Mississippi Lime plays in Texas and Oklahoma where it is operating four drill rigs. Second quarter Mid-Continent production averaged 185 mmcfe per day.

The company has approximately 380,000 net acres in its liquids-rich and dry gas Cotton Valley and Haynesville/Bossier plays in its East Texas focus area, and operates two rigs in the Cotton Valley play. Production in the East Texas focus area averaged 177 mmcfe per day in the second quarter.

Overall, Samsonís second quarter production was 71 percent gas, 16 percent oil and 13 percent natural gas liquids. However, Samson is shifting more to liquids and from the first to the second quarters of 2013, the companyís natural gas production declined by 3 percent while its oil production increased by approximately 8 percent and NGL production increased by approximately 11 percent. Overall production increased 1 percent between the first and second quarters from 591 mmcfe to 595 mmcfe per day.

About Samson Resources

Samson Resources is a subsidiary of Samson Investment Company. In 2011, most of Samson Investmentís holdings, including its Williston Basin assets, were acquired by the private equity firm KKR and Co.

In December 2012, Samson sold approximately 116,000 net acres, primarily in Divide and Williams counties, to Continental Resources, but it kept its acreage in its Antelope focus area. Samson Resources has been active in the Williston Basin since the late 1970s.

Samson Resources should not be confused with Samson Oil and Gas, an Australian company that also operates in the Williston Basin. In August, Samson Oil and Gas submitted applications with the North Dakota Industrial Commission seeking authorization to drill 14 wells in northeast Williams County.

Samson Oil and Gas also has assets in the North Stockyard project in south-central Williams County, although in mid-August, it announced the sale of half of its equity position in undeveloped acreage in its North Stockyard project in south-central Williams County to Slawson Exploration and PetroShale Inc.

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