February 7th, 2011 
Category: 
The Bakken formation is a 350 million-year-old layer of rock occupying 520,000 km2 of the subsurface of the Williston Basin covering parts of Saskatchewan, Manitoba, North Dakota and Western Montana. The formation was discovered in 1953 and as early as 1974, it was postulated that vast amounts of petroleum (up to 500 billion barrels) were contained in the formation itself but it was not economically viable as the oil was trapped in shale (fine sedimentary rocks).
With the development of new drilling techniques, it became possible to horizontally drill right into the flat shaped deposits and collapse the oil rich rocks by fracking (pumping sand and liquids at high pressure into the well bore) in order to allow the oil to flow back up.
Applying new drilling techniques alongside higher oil prices made it economically viable to exploit the oil trapped in the Bakken shale as well as other formations such as the Cardium in Alberta and the Viking in Saskatchewan. Armed with the same proven technology, the industry has now set its eyes on the Southern Alberta Basin. With its similarities to the Williston Basin, the companies are excited about the potential of this new emerging light oil play dubbed: The Alberta Bakken.
The Alberta Basin Bakken is a Devonian Shale light oil play stretching from Southern Alberta into Montana covering a large land area (>100 miles). Although the Bakken is the targeted zone, there is multi-zone oil potential (deepest to shallowest):
• Nisku/Arcs
• Bakken group (BigValley, Exshaw(lower Bakken)/Bakken and Banff (upper Bakken))
• Swift/Reirdon
• Mannville
• Barons
• Second White Specks
The Bakken group constitutes the heart of the play as the reservoirs are deep, over-pressured and highly saturated with oil. The Alberta Bakken play shares a lot of geological characteristic with the original Bakken. Horizontal multi-fracced wells will be targeting light 35-42 degree API oil at a depth ranging from 4500 feet deep up to 7000 feet. Those deep wells are going to be expensive starting at $4 million each. High initial production rates are expected to be followed by high decline rates after the first year. Estimated ultimate recovery (total amount of oil to be recovered) is potentially about 185,000 barrels per well. In terms of economics, it will come close to North Dakota Bakken wells i.e. it will be very profitable especially with current oil prices.
In the Alberta Basin Bakken, the companies are scrambling to secure as much land as possible. Millions of dollars are being spent on land sales and leases. Joint Venture agreements are being announced and the major players are following it closely. Even though several exploratory wells have been drilled on both sides of the border, data is being held tight until everybody has finished positioning himself. Rosetta Resources (NYSE:ROSE) was one of the few to report significant oil hydrocarbons in place and over‐pressured reservoirs. The company estimates that there are 13–15 million barrels of oil in place per section. What that means is that a junior company holding 100 net sections with a theoretical 10 mmbls per section and a 15% recovery factor is sitting on 150 million barrels of light oil.
I am sure many amongst us missed the opportunity a few years ago to invest in the emerging Bakken oil play which turned out to be extremely lucrative for oil investors. This is potentially a repeat of the Bakken play and the good news is it’s still in its early stages.
Obviously, don’t expect every company to hit it big. Sweet spots will emerge in the Alberta Bakken based on varying production rates and recovery factors which will prove the play profitable for some companies but not for others.
See the following articles for further details on a number of companies that have the potential to be richly rewarded for their positions in the Alberta Bakken: the Southern Alberta players and the Montana players.
Nice writeup Mich! ROSE has returned more than 38% in the last 3 months alone! The PE is a little too high for my taste.. but I put this on my watch list.
Always a good read and I learn about oil production and drilling too
Good work, BTI. I quite like your write ups on oil play.
[...] The Alberta Bakken Oil Play [...]
@MC, ROSE is poised to shoot higher if the play is confirmed.
@PIe and 101, I write this stuff with the non-technical audience in mind. Glad you’re enjoying it.
[...] that you’re familiar with the Alberta Bakken oil play and the players in Southern Alberta, let’s cover the players on the US side of the border in [...]
[...] The Alberta Bakken Oil Play (Beating The Index) [...]
[...] The Alberta Bakken Oil Play [...]
[...] of the emerging oil plays being chased covers both Canada and the US; it is dubbed the Alberta Bakken oil play. It covers a huge area across Southern Alberta and Northern Montana. The potential is huge as it [...]
[...] Beating The Index discusses the Alberta Bakken, an emerging oil play in North America along with potential star companies that stand to be richly [...]
Great article, I’m definitely going to check this out!!!
I’ve never heard of ROSE before, but with oil continually rising, it makes sense…
Great writeup. Don’t know much about oil plays, but you sure know your stuff. Do you work in the oil industry? Will add to my watch list, too. Thanks!
@Money Reasons, Check out the other majors as well (NFX, KWK)
@Buck, am not part of the oil industry, this is just my passion.
[...] 45. Tell a story in a multi-part series. Example – Beat the Index: The Alberta Bakkan Oil Play [...]
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This is very interesting, as I am an Environmental Investigator and currently heading up an oil and gas well site special project. Turns out these new drilling techniques involve a lot of pollution (particularly volatile organic compounds).
Anyway, just had to put my investigator hat on for the moment:).
@Amanda, Thank you very much for providing your insight. I hope you share more with us as your investigation proceeds as I would be very interested in the final outcome on fraccing.
[...] The Index presents The Alberta Bakken Oil Play, saying, “The Bakken formation is a 350 million-year-old layer of rock occupying 520,000 km2 [...]
[...] The Alberta Bakken Oil Play (Beating The Index) [...]
BTI,
I have ROSE on my watchlist. Just curious, what exit strategies do you use on your positions?
@Buck, How long do you want to hold it for? Why do you want to hold it? How will the company unlock value for you? What is your risk tolerance? Is ROSE undervalued compared to peers?
Answering those questions will help you draw your exit strategy.
Great questions I need to answer. Thanks!
[...] The Alberta Bakken Oil Play (Beating The Index) [...]
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[...] Alberta Bakken @ Beating The [...]
[...] Alberta Bakken @ Beating The [...]
[...] many sites do I own? I don’t even know @ TheFinancialBlogger -Why I love Yahoo @ TheStreet -Alberta Bakken, the next hot emerging oil play in North America along with potential star companies that stand to [...]
[...] Alberta Bakken @ Beating The [...]
[...] many sites do I own? I don’t even know @ TheFinancialBlogger -Why I love Yahoo @ TheStreet -Alberta Bakken, the next hot emerging oil play in North America along with potential star companies that stand to [...]
[...] the Index discusses the Alberta Bakken, an emerging oil [...]
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[...] you wish to capture the full upside of the Alberta Bakken, Bowood Energy Error opening: http://finance.yahoo.com/d/quotes.csv?s= bwd.v as well as Primary [...]
[...] even Murphy. How much would a suitor pay for its 110,000 net acres of contiguous land base in the Alberta Bakken? This is a pure play on land [...]