Brigham Exploration Company Q2 2010 Earnings Call Transcript

Brigham Exploration Company Q2 2010 Earnings Call Transcript
Author:
Publish date:

Brigham Exploration Company (BEXP)

Q2 2010 Earnings Call Transcript

August 4, 2010 11:00 am ET

Executives

Bud Brigham – Chairman, President and CEO

Gene Shepherd – EVP and CFO

Lance Langford

– EVP, Operations

Jeff Larson

– EVP, Exploration

David Brigham – EVP, Land and Administration

Analysts

John Freeman – Raymond James

Brian Lively – Tudor, Pickering, Holt

Joe Allman – J.P. Morgan

Ron Mills – Johnson Rice

Scott Hanold – RBC

Steve Berman – Pritchard Capital Partners

Michael Bodino – Global Hunters

David Snow – Energy Equity, Inc.

Richard Bresler – Gulfsands Petrol

Subash Chandra – Jefferies

Eugene Lipovetsky [ph]

Ed Campbell [ph]

Presentation

Operator

Compare to:
Previous Statements by BEXP
» Brigham Exploration Co. Q1 2010 Earnings Call Transcript
» Brigham Exploration Co. Q4 2009 Earnings Call Transcript
» Brigham Exploration Co Q3 2008 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the second quarter 2010 Brigham Exploration Company earnings conference call. My name is Erica, 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 this conference. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call Mr. Bud Brigham, Chairman, President and CEO. Please proceed, sir.

Bud Brigham

Thank you, Erica. Thanks to each of you for participating in Brigham Exploration Company’s second 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 Land, Legal and Administration; and, Rob Roosa, our Finance Manager.

Importantly, before we get started, I'd 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 web site at www.bexp3d.com. It includes very helpful information regarding our second quarter results, as well as our plans for the remainder of the year. We'll be referring to the slides in the presentation during our discussion. It will help you to be prepared with this as we’ll flip through some of the slides pretty quickly.

During the call, we're going to make some forward-looking statement 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 what we talk about today or from our projections. 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 Web site 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 during the call today. I am going to start by covering the headline items. I’ll then briefly discuss our near-term catalysts. Following that, Gene Shepherd will provide you with the financial update, and Lance Langford will finish with an update on our operational activity on the field. After that, we’ll be happy to answer any questions.

Regarding the headline items, we’re very excited about the 52,800 net acres we've acquired both organically by leasing and in four recent transactions. These are quality acquisitions at a very attractive cost, particularly relative to recent M&A transactions and, of course, the state lease sales. These transactions illustrate that our track record in the area makes us the purchaser of our choice for consolidating acreage, particularly in the Rough Rider area.

Our core acreage has grown by roughly 34,000 net acres or 21% to approximately 198,000 net acres. This core acreage is generally proximal to the 21 consecutive high rate wells we've drilled in the Rough Rider area today, as well as that of key wells drilled by other operators.

I will first show you these acquisitions in map view. Following that, I’ll discuss our first Montana discovery, the Rogney; then discuss other catalysts including our currently drilling Rough Rider Three Forks well and our Increased Density well, and briefly discuss our production, which continues to ramp up and is currently at record levels.

If you’ll to go slide six, you can see our acreage position in the basin prior to our 2010 acreage acquisition transactions. If you then flip forward to slide seven, you can see the acreage we’ve added during 2010 in orange.

Now, let’s zoom in and look in more detail at Rough Rider on slide eight. Well, you can see our position prior to the 2010 edition. Flipping to slide nine, illustrates our 2010 editions again in orange. This includes the acreage additions we previously announced in April. Moving forward one more time to slide 10 and you’ll see the 52,800 net acres we've just added. Some of this acreage is in sections in which we already had acreage, and in most cases, we color those sections orange. Importantly, these acreage additions were driven by the same geologic attributes that had been validated by our drilling of the 21 consecutive successful high rate Bakken wells that we've drilled in this area.

In addition to the geologic attributes and the wells we’ve drilled, there are also some key third party operated wells that help us delineate these opportunities. The combination of that production and geologic data makes the approximate 34,000 net acres in and proximal to our Rough Rider drilling core in our view, and therefore, more developmental in nature. For example, our recent Sedlacek well is located in the southwest portion of the Rough Rider area, just east of the state line separating Montana and North Dakota.

The well recently commenced production at initial rate of approximately 2,695 barrels of oil equivalent per day. Roughly 12 miles to the northwest of the Sedlacek is the Zenergy Luke Sweetman, they commenced production at roughly 12,000 barrels of oil equivalent per day, which I will discuss further in a minute.

Between the Sweetman and the Sedlacek wells, we've acquired a nice acreage block, including roughly 9,900 net acres right across the line from the Sedlacek in Richmond County, Montana. Based on those wells, which confirms our geologic attributes in the area, we believe that this acreage is significantly de-risked and is now core for us. We plan to spud a well in this area, almost half way between the Sweetman and our Sedlacek in October.

There’s an additional 17,300 net acres that we acquired that lies a bit farther due west in Montana, northwest of the Elm Coulee Bakken field. It's shown in the lower left portion of the map roughly five miles or more from our Sedlacek well and southwest of the Sweetman. We think this area has very good potential, but the geology is a bit different and is not as proximal to these wells, so we don’t yet consider it to be core acreage. We currently plan to drill our first well in this area, which could potentially begin to move it into the core category during the first quarter of 2011.

Now, before we leave this map of the Rough Rider area on slide 10, you can spot our currently drilling initial Three Forks test in the area. It’s at the upper right with the purple label. This is a significant potential near term catalyst for us and success here could begin to move up to 344 net Three Forks locations into the core category.

We’re very positive about the Three Forks in the area given the geology and also given that other operators – excuse me, other operators had made encouraging Three Forks discoveries proximal to our acreage. Those Three Forks producers are shown with the purple stars. The state #2H Three Forks well is drilling in the curve and we currently expect to frac it in late October or early November.

Moving to slide 11, to Roosevelt County in Eastern Montana, inclusive of our Rogney well, we now have three apparent Bakken discoveries proximal to our approximately 75,000 net acres in this area. In drilling and completing the Rogney well, our primary goal was to learn as much as possible on this first test to accelerate our learning curve which could – would benefit us on our all subsequent wells. We were particularly cautious that given that a third party well drilled about eight miles to the northwest, the FH muddy apparently produced with large water tests, and likely associated with that, lower oil rates.

Read the rest of this transcript for free on seekingalpha.com