Kodiak O&G provided an interim corporate update on recent drilling and completion activities and announced third quarter 2011 oil and gas sales volumes.
Interim Drilling and Completion Operations Update
The Company took delivery of its fifth operated rig in early October. Kodiak's five operated drilling rigs are presently drilling ahead on multi-well drilling pads, with three rigs in McKenzie County, N.D. and two in Dunn County, N.D.
During September and continuing into early October, Kodiak completed five gross (four net) operated wells, bringing total third quarter completions on operated wells to seven gross (five net) wells. Initial production results from the wells completed in September and October are included in the table below. The results from wells completed earlier in the third quarter have previously been released.
For the remainder of the fourth quarter 2011, Kodiak expects to complete or commence completion operations on an additional seven gross (six net) operated wells in the Williston Basin. These operated wells are located on three drilling pads consisting of two, two-well pads and one, three-well pad. Drilling has been completed and operations are underway to construct surface equipment, with completion operations scheduled within the next thirty days.
In addition to its operated wells, the Company has participated in completion of five gross (2.5 net) non-operated wells under its area of mutual interest (AMI) with its partner in Dunn County, N.D. Initial production results from the completed wells are included below. Drilling activity continues with three gross (1.5 net) wells drilled and waiting on completion and two gross (1.0 net) wells drilling. Non-operated drilling and completion activities within the AMI are expected to continue throughout the fourth quarter and into 2012.
As a result of minor leasehold interests that are operated by other industry partners, the Company also participated in 13 gross (1.3 net) wells during the third quarter.
Commenting on ongoing operations, Kodiak's Chairman and CEO Lynn A. Peterson said, "Kodiak made significant operational strides during the third quarter, which we expect to contribute to production growth during the fourth quarter and beyond. The well performance from our new producers is in-line or exceeds comparable early results from some of our better wells completed to date.
"With the addition of these new wells, our current production is approximately 7,500 to 8,000 BOE/d. With the six net operated wells scheduled for completion during the fourth quarter, as well as the ongoing non-operated completion work within the Dunn County AMI area, we feel confident in our earlier 2011 exit rate guidance of 9,000 BOE/d. These volumes do not include volumes associated with our pending acquisition, which is on track to close in late October.
"We are delighted with the early performance of our two new Three Forks successes, the SC 12-10-11-9H3 and the TSB 2-24-12-1H3 wells. We will closely monitor our Three Forks wells' performance to gain additional information as we continue our assessment of the formation's ultimate potential.
"While we continue to closely monitor our drilling and completion techniques and associated costs, we are pleased with the well results that continue to achieve strong rates of returns. As we move to more development drilling activity we would anticipate cost reductions in our drilling and completion along with improved lease operating expense. Basin-wide infrastructure build-out continues at a heightened pace, providing us additional outlets for our oil and gas production. We should continue to see improvement in our gas sales as additional wells are connected to pipeline and, more importantly, as gas plant expansion nears completion."
Completion Agreement Expanded
Kodiak has reached agreement to expand the number of days for completion work with Halliburton Energy Services. Initially, the agreement will provide for 21 days of availability each month, reconciled on a quarterly basis, with the intent to expand to a full-time dedicated crew after year-end. As the agreement includes 24-hour crews, Kodiak believes that the 21-day allotment is adequate to complete its fourth quarter completion schedule.
Third Quarter 2011 Results
In conjunction with its third quarter 2011 operational and financial results news release, expected to be issued after the close of trading on Thursday November 3, 2011, the Company intends to furnish a comprehensive operations update, including its per-well tabular data that includes working interest, net revenue interest, lateral length and 30/60/90/180 and 360-day production rates. Also included will be initial results from additional completed wells yet to be announced.
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