Brigham Exploration (BEXP)

Q4 2010 Earnings Call

February 25, 2011 11:00 am ET

Executives

A. Langford - Executive Vice President of Operations

Rob Roosa - Finance Manager

Ben Brigham - Chairman, Chief Executive Officer and President

Eugene Shepherd - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Jeffery Larson - Executive Vice President of Exploration

Analysts

Scott Hanold - RBC Capital Markets, LLC

Brian Lively - Tudor Pickering Holt

Derrick Whitfield - Canaccord Genuity

Martin Beskow - Northland Securities Inc.

Ronald Mills - Johnson Rice & Company, L.L.C.

Subash Chandra - Jefferies & Company, Inc.

Peter Mahon - Dougherty & Company LLC

Michael Scialla - Stifel, Nicolaus & Co., Inc.

Presentation

Operator

Compare to:
Previous Statements by BEXP
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Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Brigham Exploration Company Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host today, Bud Brigham, Chairman, President and CEO. Please begin.

Ben Brigham

Thank you, Sean. Thanks to each of you for participating in Brigham Exploration Company's Year-End 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; and Rob Roosa, our Director of Finance.

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 website at www.bexp3d.com. Rob?

Rob Roosa

So one quick point. If you're having any trouble downloading the new version of the presentation and the older one shows up, the older files might be still cache on your computer. So if you're at the Home page and you hit Control F5, you should then be able to download the newer presentation.

Ben Brigham

So Control F5. The presentation includes some really helpful information regarding our 2010 results as well as our plans for 2011. We'll be referring to the slides in the presentation during our discussion, and it will help you to be prepared with this as we'll flip through some of the slides pretty quickly.

One other note regarding the website. In conjunction with the redesign, we've added some animations, and we'll continue to add animations, which should help you to better understand our business. These can be found by clicking Operations and then clicking Technologies & Animation, and finally, clicking Animations, which is located in the central part of the web page.

Also, regarding the website, with the popularity of iPhones and iPads, we've upgraded the website with a mobile version. This mobile site link is located at the top central portion of our Home page.

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'll 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 2 of our corporate presentation for our cautionary note to U.S. investors regarding the use of 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 4, you can see our outline for the call. As we discussed on our last call, our theme these days could be described as No Oil Left Behind. Given that we've completed our prior initiative in the Williston Basin to drill geographically dispersed wells around our acreage position in order to initially delineate the attractive economics, we've 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 several years.

The newsworthy events we'll be discussing on the call include the following. One, our planned acceleration to 12 rigs relative to our previously planned eight; two, our belief that we have the opportunity and are therefore spacing our units to drill at least four wells per horizon per spacing unit, which provides roughly 33% growth in our inventory to develop; three, the visibility we have for driving down costs given our concentrated acreage position and our utilization of smart pads; four, our continuing improvement in well performance; and five, our second Bakken discovery in Montana with the Swindle. We had hoped to be announcing our currently completing Johnson as our third Montana discovery as well as two additional significant Ross Area wells, but we didn't quite get the flow back on these wells in time.

So I'm going to start by briefly discussing the macro environment we're operating in, followed by a brief summary of our results. Following that, Lance will discuss our reserves further to provide you an operational update and discuss opportunities we have to drive down costs and update you on our facilities build-out in the field. Jeff will then provide you an overview of our current and planned activity by project area in the Williston, following which Gene will discuss our 2010 financial results and our 2011 budget.

So let's get started by first taking a quick look at the macro environment on Slide 6. As shown, oil has traded at a premium to natural gas for several years now. I think most of you agree with me that given this abundant supply of natural gas, that this relationship is likely to persist for some time now, at least the next three to four years, though I think probably much longer.

As shown on Slide 7, partly as a result, it's a great time to be compounding value for our shareholders by accelerating our activity in the Bakken and Three Forks plays. 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 oil play. Our view is that the Williston Basin, Bakken and Three Forks plays are the number one margin and return plays in North America. It's easily the best play we've been involved in.

Now for the sake of time, I won't discuss Slides 8 and 9, but they further illustrate the commodity advantage we're benefiting from in the Bakken and Three Forks plays.

Moving forward, Slide 10 summarizes the history of the Bakken and Three Forks plays and the fact that we benefit from our first-mover position in the play dating back to 2005. As a result of our aggressive early entry into the play, our acreage has concentrated in the center of the best areas of the play. Those, we believe, with the thickest Bakken and highest Middle Bakken porosities. That, combined with the outstanding efforts of our technical staff, has enabled us to lead the way in the play by completing 51 consecutive high frac stage long lateral wells in North Dakota with an average initial peak rate of roughly 2,858 barrels of oil equivalent per day. So when you look at the list of leading companies active in the play on the left, I'd point out that it's not just the quantity, but the quality of our acreage that puts us in such an enviable position. And, of course, it's our people who are successfully executing our plan.

Moving to Slide 11. You can see the updated list of our 51 consecutive high-rate Bakken and Three Forks completions in North Dakota. This list includes the three highest IP wells in the basin and the eight highest IPs west of the Nesson Anticline. Our record wells were among our recent wells. We're continuing to optimize operationally, and our results continue to improve, as we'll show you in a minute on the subsequent slide.

Now let's move forward to Slide 12. Let's look at a table illustrating our inventory. Please note that based on the information disclosed in our press release regarding the microseismic results, which were recorded during the completion of the Brad Olson #2, it looks as though we will have opportunity to drill four Bakken and four Three Forks wells per spacing unit or eight total wells per spacing unit. This update has been incorporated in this slide and, therefore, our inventory has grown from 590 net locations in our core acreage to 782 net locations. This slide clearly shows the depth of our inventory even if you assume our 484 additional potential Three Forks locations in Rough Rider are not yet de-risked.

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