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Bakken Breakeven Economics – A Closer Look at Recent M&A

The wave of mergers and acquisitions (M&A) activity that started in 2020 has continued into 2021, with one of the most recent announcements coming from Enerplus. The transaction to acquire a Bakken pure play private operator, Bruin E&P, for a total cash consideration of $465 million is expected to close in early March 2021. Given the tenuous crude pricing environment and lack of transparency into private operators, BTU Analytics will take a closer look at the Enerplus/Bruin transaction using the BTU Oil & Gas View to examine how Bruin’s acreage could be positioned by Enerplus. 

Less than a decade ago, a trip to Williston, North Dakota might remind you of stepping back in time to visit the Wild West with E&P companies scrambling to bring new wells online as quickly as possible. Today, the Bakken sees a much slower pace of drilling and completion activity given basin economics and current commodity prices. Historically, the $50 benchmark has been a threshold for upticks in Bakken drilling activity given breakeven estimates from basin leaders. Demand destruction attributable to the global pandemic suppressed crude prices in 2020, but the Bakken’s pace of drilling recovery remains cautious even as WTI crested $55/bbl recently.

Enerplus estimated in the transaction press release that the acquisition of Bruin would add “inventory of 149 (111 net) drilling locations (including drilled uncompleted wells)” to its portfolio and cited “enhanced operating scale and asset synergies resulting from the acquisition are expected to drive continued efficiency gains and cost reductions supporting further cash flow improvements beyond Enerplus’ current forecast.” The map provided in the press release shows the acreage of both parties, highlighting the contiguous acreage addition in the Fort Berthold area. It begs the question of how the acreage outside of the Fort Berthold area stacks up against their common footprint? A printed map like this is a static graphic, so there are limitations to how much information can be displayed. That is where the BTU Analytics Oil & Gas View steps in to highlight the comparative economic estimates of Bruin and Enerplus assets.

The screenshot from the BTU Analytics Oil & Gas View above highlights our Operator Comparison functionality. By paring down results to 2018-Present well economics, BTU Analytics estimates there are 138 remaining Bruin locations with sub-$60 breakeven estimates at the 12/31/20 Henry Hub strip, with 89 of these locations estimated to breakeven between $50 and $60. Comparatively, Enerplus already has an estimated 217 locations with a sub-$60 breakeven, so this acquisition nearly doubles this position. Furthermore, Enerplus is implying that there is opportunity to drive costs lower through additional synergies, which could improve breakeven economics of remaining inventory.

Bruin has not been turning many wells to sale outside of the Fort Berthold area in the last three years. Increasing the range of well years within the BTU Analytics Oil & Gas View shows the Williams and Dunn County acreage was primarily developed from 2013-2014, which corresponds to a period of significantly higher oil prices. New technologies and fresh approaches could change the economics of the non-core Bruin acreage to be acquired, but recent breakeven estimates suggest the likelihood of Enerplus focusing on the development of the contiguous acreage.

This analysis of well economics and remaining inventory by operator barely scrapes the surface of the data available within the BTU Analytics Oil & Gas View and allows insight into not only public, but private operators as well. In just a few clicks, significant detail above and beyond the preliminary press release for the Enerplus/Bruin transaction was made available. How do other recently announced M&A transactions stack up? Are there other E&P companies ripe for acquisition as the M&A wave continues onward in 2021? Request a trial by setting up an informational interview with BTU Analytics today.

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Hamilton (Hamp) Smith is an Energy Analyst at BTU Analytics, focusing on the publication of BTU’s E&P Positioning Report and Economics View. He also oversees oil and gas production forecasting for the Rockies. Prior to joining BTU Analytics, he was a hydraulic fracturing field engineer at BJ Services. Hamp holds a B.S. in Petroleum Engineering and M.B.A. in Energy Management, both from the University of Wyoming.

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