Kodiak Oil & Gas Corp. (NYSE: KOG) reported preliminary unaudited operational and financial results for the third quarter ended Sept. 30 and provided a Williston Basin operations update.
Kodiak has prepared the preliminary operational and financial information included in this news release based on the most current information available to management. Its normal closing and financial reporting processes with respect to the preliminary operational and financial information have not been fully completed. As a result, its actual operational and financial results could be different from this summary preliminary data, and any differences could be material. Kodiak expects to report its 3Q 2013 operational and financial results after the close of trading on Oct. 31.
Third Quarter and Nine-Month Period 2013 Sales Volumes
Kodiak reported average daily sales volumes of 35,400 barrels of oil equivalent per day (BOE/d) for 3Q 2013. This represents a 54% increase over 2Q 2013 sales volumes of 23,200 BOE/d, and a 123% increase over sales volumes of 15,900 BOE/d for 3Q 2012. Crude oil accounted for 90% of 3Q 2013 sales volumes.
Drilling and Completion Operations
During 3Q 2013, Kodiak completed 29 gross (24.5 net) operated wells and participated in the completion of 37 gross (6.6 net) non-operated wells. Through the first nine months of 2013, Kodiak has completed 74 gross (60.5 net) operated and 80 gross (13.2 net) non-operated wells. Kodiak currently operates seven drilling rigs and participates for an approximate 50% working interest in the drilling activity of one non-operated rig in its Dunn County area of mutual interest. In addition, Kodiak participate for a minority working interest in numerous non-operated properties with other operators. At this time, its operated rigs are drilling in the following prospect areas: one rig operating in Dunn County, three rigs in the Polar project area in southern Williams County, one rig in each of the Smokey and Koala project areas in McKenzie County, and one rig in the Wildrose project area in northern Williams County.
Drilling operations continue to benefit from improved efficiencies resulting in decreased spud-to-rig-release drilling times. Drilling costs continue to decline as a result of these efficiencies, as well as from cost reductions across the full drilling spectrum.
From late May to late August, Kodiak operated with two full-time, 24-hour-per-day completion crews. The second completion crew was released for the month of September and was brought back in early October. The company plans to utilize two crews through the remainder of the year. The company expects to complete 29 gross (21.5 net) operated wells during the fourth quarter.
Kodiak's testing of 12 wells within a 1,280-acre drilling spacing unit continues in the Polar and Smokey operating areas. All wells in both project areas have been completed and are on production. The wells in the Polar area were drilled and completed simultaneously, while the wells in Smokey were drilled and completed in various quarters, in an attempt to evaluate the proper development of future drilling spacing units. The two pilot programs have tested well bore spacing of approximately 800 feet between wells or roughly 210 acre drainage in each of the two formations.
2013 Production and Capital Expenditure Guidance
After assessing production volumes for the first nine months of 2013, taking into account the July acquisition along with closed trades, divestitures of properties, and acquisition of additional interests in operated drilling units, combined with the completion activity planned for the fourth quarter, the company estimates its average daily production for the full-year 2013 will be 30,000 BOE/d. This compares to 2012 full year production of 14,400 BOE/d. The company projects an exit rate for 2013 sales volumes of 42,000 BOE/d.
The company estimates its full year capital budget to be roughly $1 billion which contemplates 100 net wells in 2013.
"We believe the third quarter of 2013 was a transformational quarter for Kodiak. In addition to accelerated growth in production and reserves, we successfully brought our two down-spacing pilot programs onto full production. We continue to be pleased with the initial well performance in each of these pilot programs. Based upon early information gathered, we have not experienced circumstances that would indicate that the tighter well density (approximately 800 feet apart) has adversely impacted production. We are currently drilling just to the east of our Polar project using a tighter 600 foot spacing which could potentially allow up to eight wells in the Middle Bakken Formation and eight wells in the Three Forks. This type of spacing would equate to approximately 160-acre drainage for wells drilled in each of the formations. Assuming continued success in our down-spacing programs, we believe the results will help determine the optimal development program for the remainder of our drilling inventory," Lynn A. Peterson, Kodiak chairman and CEO, said in the release.
"We also successfully closed and financed the purchase of additional Williston Basin assets that we are very excited to bring into the portfolio. The team has made tremendous progress in a short time in integrating these assets. We are working diligently to high-grade the acquired assets by divesting or trading out of non-operated units and increasing our working interest in operated units. We continue to have success on this front and will look to a have a full summary of our transactions out to the market later this year."
"Our drilling program continues to see efficiency gains with fewer drilling days which, when combined with lower third-party service costs and efficiency gains in our completion work, is helping to drive down our well costs. Our current completed and equipped well costs, using 100% ceramic proppants, are approximately $9.2 million to $9.5 million, which is down nearly 10% from well costs earlier this year. With further movement to full-scale development drilling we anticipate that these well costs can be further reduced in the next 12 months," Peterson said.
Kodiak Oil & Gas Corp. an independent energy company engaged in the acquisition, exploration, exploitation, development, and production of crude oil and natural gas primarily in the Williston Basin and Rocky mountains. The company is headquartered in Denver.