The Rise of the Three Forks
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The Three Forks formation lies below the Bakken in many of the same areas in North Dakota and Montana and saw additional testing and development by oil and gas operators active in the area during the second quarter of 2012.
Leader
Continental Resources (NYSE: CLR) has done more development in the Three Forks formation than any other operator active in the area. The company has delineated the play into four separate benches, or zones, and has drilled two successful wells into the second bench of the Three Forks in different areas on its acreage.
Continental Resources plans to drill wells into the first and third benches to test the productivity of these zones. The company’s long term plan is to drill eight wells per 1280 acre section, with four into the Bakken and four into the Three Forks.
Continental Resources has grown rapidly on the strength of its Bakken program and will also benefit from the development of the Three Forks. In June 2012, the company increased its oil and gas production to over 100,000 barrels of oil equivalent (BOE) per day.
New Players
Murphy Oil (NYSE: MUR) is just starting the company’s Three Forks development program and reported during the recent quarter that its first well in the Alberta Basin was producing 280 barrels of oil per day after being on production for almost seven months. The company’s second completed well into the Three Forks was producing 100 barrels of oil per day after 70 days.
While these production rates might seem low to some investors, it is common for to see low rates at the start of development while operators refine their well design and completion techniques. Murphy Oil plans to drill a third well into the Three Forks in the fourth quarter of 2012.
Southwestern Energy (NYSE: SWN) is one of the newest oil and gas operators to get involved with the Bakken and Three Forks and reported the drilling of a horizontal well during the second quarter of 2012. The well was spud in Sheridan County, Montana, and will have a 3,200 foot lateral. Southwestern Energy includes this play in its New Ventures portfolio and has not disclosed any additional information on these properties.
Issues
One issue for operators developing the Bakken and Three Forks is whether there will be communication between the two formations since they are typically close together. Oasis Petroleum (NYSE: OAS) has properties in North Dakota and Montana and recently reported a successful Three Forks well drilled less than a 1000 feet from a producing Bakken well. The company has four other Three Forks test wells in various stages of drilling or completion and plans to disclose the results of these wells at the end of the third quarter of 2012.
Oasis Petroleum expects that these test wells will prove that the Three Forks can produce independently of the Bakken even at close spacing. The company has 320,000 net acres and estimates it has more than 1,300 gross locations into the Bakken and Three Forks.
Other Operators
EOG Resources is active in the Three Forks and reported two highly productive wells during the second quarter of 2012. The initial production rates on the two wells were 1,437 and 1,834 barrels of oil per day and both wells produced significant amounts of natural gas as well.
Newfield Exploration (NYSE: NFX) is testing the potential of the Three Forks on its acreage in the Williston Basin and believes that these tests will be successful and eventually lead to tighter spacing and more development locations for the company. Newfield Exploration has drilled eight wells into the Three Forks to date and plans a total of four wells in 2012. The company reported a recent Three Forks well with an initial production rate of approximately 1,400 barrels of oil per day.
The development of the Bakken has led to an energy boom and soaring production in North Dakota and even raised the prospect of energy independence for the United States. The additional oil and gas resources present in the Three Forks would make this scenario a little more realistic.
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