Brigham Exploration 25 Feb 2010 Earnings Conference Call, Bakken, Three Forks, Rogney

My Notes:

BEXP is currently running four drilling rigs, which will yield them 25.7 net wells for the full year 2010. In Rough Rider and Ross areas combined, they have 422 derisked locations yet to drill. Therefore, at the current rate of 25.7 wells/year, it would take BEXP 17 years to drill the 422 locations. Obviously, they plan to do it much faster; this just illustrates how much proven potential Brigham has.

Updated acreages by area:
Rough Rider 105,000 acres
Ross/Parshall 99,000 acres
Ghost Rider (Eastern Montana) 84,000 acres

Brigham Exploration has started to lease again, and have put $15.6 million in their 2010 capital expenditure (CapEx) budget for leasing.

Brigham management is optimistic about both the Three Forks Formation wildcat in the Rough-Rider area and the Bakken Formation wildcat in the Ghost Rider area. BEXP believes both targets have good porosity (8%-10%).

Rogney Wildcat: BEXP’s Eastern Montana wildcat will be the Rogney well, which is in the middle of their 84,000-acre Ghost Rider prospect. A couple of wells to southeast were economic completions, even though they used archaic single-stage frac jobs. One had an Initial production (IP) of 500 barrels of oil per day (BOPD). In my opinion, unless that operator got real lucky on his single stage frac, that well could have easily IP’ed at 3,000-4,000 BOPD using a multi-stage frac stimulation. Ghost Rider is a red hot prospect!

BEXP will be able to glean some information from two wells currently being drilled to the east and south east, because Brigham owns a small percentage of both wells. BEXP will spud the Rogney well in mid-March, but BEXP is unlikely to give us any information on initial production until mid to late June. Much of the delay will be due to coring the Bakken and Three Forks and the 30-day delay in getting those cores examined.

Lance Langford commented on Geosteering, which he said gives them the ability to keep the drill bit within ten feet of where they want it. This keeps them drilling in the highest quality rock. [That is truly amazing].

Each time that Brigham Exploration completes one net well, the value of BEXP goes up $9.5 million, assuming a present-value discount rate of 10% (PV10) on future oil. In other words, if you take the PV10 value of the complete well and if you subtract all the drilling and completion costs, you net out $9.5 million. ‘‘Net well” is a term needed because, if BEXP drills a well in which they own only 60%, they have only drilled 60% of a net well because their partners own the other 40%.

Non-Williston Basin Properties Updates: Brigham Exploration is currently drilling a Vicksburg gas well. This is down on the Gulf Coast where BEXP has some good leases that they would like to sell. In response to a question, Ben Brigham said they have no plans to drill a Mowry shale well (Wyoming, Powder River Basin), and, instead, are watching nearby drilling. They have been looking at some other oil plays in the Rockies, but haven’t budgeted any money to acquire leases there.

No Lease Expiration Proplems: One man asked BEXP what percentage of BEXP’s North Dakota leases are “held by production.” Oil leases have an expiration date. If BEXP hasn’t drilled and found production by a certain date, the leases expire, or sometimes BEXP must pay a large renewal fee. “Held by production” means that BEXP already has a producing well on the lease, and so the lease cannot expire.

The value of Brigham is not their existing oil wells but their leases on which they can drill more oil wells. Obviously, expiring leases and renewal fees are to be avoided. So BEXP drills first on the leases that will expire first. Bud Brigham’s answer was all important leases that would have expired in 2010 are either help by production or being drilled now. Currently, Brigham is drilling mostly 2011 leases.

The AFE cost to drill and complete a Williston Basin well is $6.825 million.

BEXP defines Initial Production (IP) as the peak oil 24-hour early flow rate. [This is a liberal definition, and BEXP is sometimes accused of overstating their IPs.]
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