Kodiak Oil & Gas CEO At Barclays 2012 CEO Energy-Power Conference (Transcript)

One of the things we've worked really hard on is trying to bring our lease operating cost down. I think it's very important. If you can see the change we made between Q1 and Q2, and probably more importantly even going back to Q3 and 4, 2011. We've driven these costs down in the $5, $6 per barrel range, largely through our work we've done on our water, both secure in water and then obviously the disposal of the water. This is our number one portion of the LOE. We hired some guy late last year. We've not got three guys involved in this part of it. We've seen a dramatic improvement. Are we going to continue to see a downward trend? We hope so, as probably it's not going to be as dramatic as you saw between the two quarters, but we think in this $5 to $6 range, it's certainly solid number to work forward on.

Our capital expenditures, we went out to $585 million budget. We tried to lay out that we do have some additional cost going into mostly non-operating properties. We put 650 on this; I think it’s a fair number probably at this point. We did say on the Q2 that we were running seven rigs. Couple of weeks later we moved to an eight rig and we did this because as the rig became available on the area we wanted to drill a few wells in, we think the economics of display are very solid right now. We brought our well cost down.

To give you an example, I think when we look back first half of the year, our well cost were probably run in the $11.5 million range. Again, I would focus on location of our acreage; we're in the deeper part of the basin. Typically our wells are going to run between 10,000 and 11,000 of vertical feet, may be 10.5 and 11.5 (ph). We've seen those well cost come down nearly 10 from that number already. We think today we are in that $10.5 million range. And a lot of that's been driven by the efficiency of our drilling team that has done a great job of bringing our drilling base down from kind of a mid-30s number to a low 20s number today.

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