Brigham Exploration CEO Discusses Q3 2010 Results – Earnings Call Transcript
Brigham Exploration Co. (
)
Q3 2010 Earnings Call Transcript
November 2, 2010 10:00 am ET
Executives
Bud Brigham – Chairman, President and CEO
Gene Shepherd – CFO and EVP
Lance Langford – EVP of Operations
Jeff Larson – EVP of Exploration
Analysts
Brian Lively – Tudor, Pickering, Holt
John Freeman – Raymond James & Associates
Subash Chandra – Jefferies
Derrick Whitfield – Canaccord
Ron Mills – Johnson Rice
Scott Hanold – RBC
Eugene Lipovetsky – Zimmer Lucas Partners
Presentation
Operator
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Good day, ladies and gentlemen, and welcome to the Brigham Exploration Company third quarter 2010 earnings conference call. My name is Gen and I will be your coordinator for today.
At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today's conference, Mr. Bud Brigham, Chairman, President and CEO. Please proceed, sir.
Bud Brigham
Thank you, Jen. Thanks to each of you for participating in Brigham Exploration Company's third-quarter 2010 conference call. With me today, we have Gene Shepherd, our Chief Financial Officer and Executive Vice President, Lance Langford, Executive Vice President of Operations, Jeff Larson, our Executive Vice President of Exploration, David Brigham, Executive Vice President of Land, Legal and Administration and Rob Roosa, our Finance Manager.
Importantly, before we get started, I would like to encourage you to be prepared such that during the course of this call, you can view our conference call presentation, which can be accessed via our website at www.bexp3d.com. It includes very helpful information regarding our third-quarter results as well as our plans for the remainder of the year. We will be referring to the slides in the presentation during our discussion. It will help you to be prepared with this, as we will put through some of the slides pretty quickly.
During the call, we're going to make some forward-looking statements to help you understand our company's results. In our company's SEC filings and the press releases that were issued yesterday, there are some risk factors that should be noted that might cause our actual results to differ from the plans and projections we talk about today. I encourage you to review our filings with the SEC.
In addition, in this call, we may use the terms probable and possible reserves that we do not include in our SEC filings. We may also discuss locations, which include proved reserves, as disclosed in our SEC filings.
Please refer to page two of our corporate presentation for a cautionary note to U.S. investors regarding the use of the terms probable and possible reserves and locations.
Finally, a copy of our company's press releases as well as other financial and statistical information about the periods to be presented in the conference call, will be available on the company's website under the section entitled Investor Relations at www.bexp3d.com.
So let's get started. First, if you'll go to slide four, you can see our items for discussion which are also the key takeaways for our call. I'm going to start by briefly discussing the major transformations of our company that's occurring this year, including our dramatic production growth, which is a good proxy for our very substantial 2010 proved reserve additions.
I will also discuss our continued strong drilling results and our near-term catalysts. Following that, Gene will discuss our record financial performance and Lance will discuss our well out-performance and the fact that generally speaking, our wells continue to outperform that of our peers in the same areas.
Lance will also update our operational progress and update you on our infrastructure project and our current initiatives to secure additional services to be prepared for potential further acceleration in 2011.
In summary, our theme for today's call could be described as no oil left behind, given that we completed our prior initiative in the Williston Basin to drill geographically dispersed wells around our acreage in order to initially delineate the attractive economics. We have subsequently turned our focus towards evaluating operational enhancements in an effort to further enhance our recoveries and improve our efficiencies at extracting oil from this huge resource.
So our theme of “No Oil Left Behind” summarizes our effort to optimally extract as much oil in place on our acreage as possible. We expect to be discussing that quite a bit over the next year or so.
So let's jump right in by first taking a quick look at the macro environment on slide six. As shown, oil is traded at a premium to natural gas for several years now. I think most of you agree with me that given the abundant supplies of natural gas that this relationship is likely to persist for some time now, at least for next three or four years.
As shown on slide seven, partly as a result, it's a great time to be compounding value for our shareholders in the Bakken and Three Forks play. Given that, we were pleased to pull forward our seventh rig and further accelerate our drilling in 2010. Also, the fact that the rig count in the gas play should come down over time should help to further mitigate potential cost increases in our play.
Moving ahead to slide nine, you will see the list of our 40 consecutive high-rate Bakken and Three Forks completions in North Dakota. We are continuing to optimize operationally and that is showing up in our recent well results. We just announced a record well west of Nesson with our Abelmann, which came on at a peak rate of 4,169 barrels of oil equivalent per day.
We also just brought online another monster well in the Ross area with the Clifford Bakke, which was fraced with 38 stages and came on for a peak rate of 5,061 barrels of oil equivalent per day.
This is one of four monster wells that we brought online in the Ross area. It's pretty remarkable when you consider that we drilled eight long lateral Bakken wells in Ross that have an average early peak rate of 3,988 barrels of oil equivalent per day and they provided us with the three highest initial rate wells in the basin and four of the top five.
Lance will review the production curves for these wells. And you will see that based on its early performance, the Clifford Bakke may be the best of the monster wells. It will also demonstrate that these wells are continuing to outperform our competitors' wells in the same area.
Slide 10 illustrates our early well performance relative to our peers. Again, we will have more specific examples of this later in Lance's section. Our outperformance is a function of two things.
First, we were a first mover in the play, focused on the right geologic attributes, so we're blessed with acreage in some of the very best areas.
Second, our technical team has been a leader for the industry in innovating and optimizing operational technologies in order to deliver the best possible returns on invested capital. They've enabled us to transform areas initially thought to be uneconomic to marginally economic early on and now to highly economic.
Moving to slide 11, you can see the general improvement we've seen over time, partly relating to our increasing the number of frac stages, which we believe leads to a more effective stimulation along the length of the lateral.
You can see that our recent Clifford Bakke Monster well with 38 stages, but at this point, the most elevated curve, even above our prior Monster wells. The Clifford Bakke averaged 3,657 barrels of oil equivalent per day during its first week of production.
Moving forward to slide 12, this slide shows our Williston Basin production growth through 2009.
And slide 13 illustrates the growth, we have achieved thus far in 2010.
Since the end of the third quarter, we have had partial access to a second frac crew, thus, the rate of completions has accelerated. Further, since September 30, we have announced eight new wells impacting our fourth quarter.
In 2011, we will continue to ramp up to at least eight rigs and we expect to have two dedicated frac crews working for us, providing us with further acceleration of our completions and production additions.
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