Source: ENB
Bakken consolidation is here! Pumped to be back for this latest Deal Spotlight covering Chord + Enerplus. This deal makes sense in lots of ways: acreage, development timelines etc… One of the things quoted many times by Chord management is the under-development on the Enerplus acreage of 3-mile laterals. If true, this deal has a lot of legs give the acreage position of Enerplus and its place in the development window. At $3.8B – and PDP worth around $1.5B – meaning PUDs are around 50% of the value in this deal. Hopefully, Chord is right with their development expectations!
John Ferrell is my guest again, and he has some interesting views as to the performance of Chord’s 3-mile wells and offers some interesting data points as to why Chord has been successful with their current 3-mile development.
Until the next deal, thanks for tuning in.
Helpful Links:
We use WellDatabase on the Sandstone Group’s deal evaluations, saving us time and money. Check out WellDatabase HERE: https://welldatabase.com/
Follow John on his LinkedIn Here: https://www.linkedin.com/in/johnferrellsr/
Follow Michael on his LinkedIn Here: https://www.linkedin.com/in/michaeltannersandstone/
Repo: https://github.com/Sandstone-Group/dealspotlight
Check out https://survey.energynewsbeat.com/ and see what is coming around the corner as we expand services and products.
Highlights of the Podcast
00:10 – Introduction
02:40 – Deal’s Overview
07:12 – Financial and Regulatory Discussion
11:13 – Analyzing Acreage Consolidation
13:53 – Inventory and Productivity Insights
19:07 – Inventory and Productivity Insights
22:11 – Acquisition Potential and Product Mix
23:35 – Drilling Strategies and Operational Insights
29:49 – Market Speculations and M&A Enhancements
33:18 – Conclusion
35:41 – End
Michael Tanner: [00:00:10] What’s going on, everybody? Welcome into episode five of the Deal Spotlight, where we cover all things M&A in the oil and gas space. Today we are covering the balking roll up cord buying energy. Plus it’s an it’s a pretty great deal. And I am excited to again be joined by John Ferrell. He’s the CEO and co-founder over at well database. Guys if you have it checked out well database just go to the description below. Highly recommend checking out. In my opinion they’re the best energy data platform you anything you need from a data standpoint. Well database has you covered. And I love bringing John onto the show because we’re able to really dive in using his data to a lot of the really nitty gritty stuff that we care about. And specifically when we’re looking at this deal, you know, the biggest thing you’re going to hear in this podcast is our discussion of the three mile lateral and the potential that enter, plus his acreage may or may not have. And I think there’s some really interesting insights that can and will be shown. You know, we also cover a little bit about maybe what the next deal might be out there when you kind of look at some of the other big players. So this is a great breakdown all in our quad core plus enter plus, consolidation is happening even in the end. And there’s not many two players left. This is a, a really interesting deal. Hope you guys check it out again. This is always sponsored by Energy News and World Database. Check out everything in the link below. But I’m going to go ahead and turn it over and let you guys have it. All right. There’s a lot to get to in this in this project and in this deal. So, John, thanks again for joining us. This is this is going to be fun. But there’s Holy smokes. We’ve been going back and forth on this for for a few weeks now trying to get everything lined up. [00:01:50][99.7]
John Ferrell: [00:01:50] Absolutely. No. It’s been an interesting one. And honestly, I guess it’s a nice perspective now to get a month out and especially watching the markets and how they react to things, went back and did some back looks on the, on the ExxonMobil pioneer, on the Diamondback, deal that these the market didn’t react favorably to a lot of these things. And so I was a little bit of surprised. But being a we we had a good month for energy last month. And so, everybody’s ticking upward. So yeah, at the end of the day, it’s, it’s been a really interesting thing to kind of take a look back and a month later and see, see what the net result looks like. So far. [00:02:25][34.4]
Michael Tanner: [00:02:26] The oil is 85 bucks. You can’t beat it. We were also talking about how, you know, we’re going to be diving into this, this cord and or plus deal. I mean, it was only a $3 billion deal, $3.5 billion deal. That’s now a small deal. I mean, it’s kind of crazy. [00:02:41][15.2]
John Ferrell: [00:02:42] Only 3 billion, I don’t know, I’d take 3 billion. We’re okay. [00:02:45][2.7]
Michael Tanner: [00:02:46] Yeah, yeah, we’ll split the difference and we’ll we’ll go find some. But no. Really excited to dive in and talk about this deal because I think there’s there’s a few interesting nuggets. So I obviously want to start this with some of the transaction, overview here. So if you’re following along at home, this is slide five, on the slides. But we’ll go ahead and pull it up here. So quick overview here we’ve got, you know a combined enterprise value of about $11 billion. And that’s inclusive of enterprises net debt. You’ll see on another slide that that works out to about a $3.4 billion market cap or total price of 3.8 billion when you include debt, four and or plus and add about 7.1 to 7.4 billion of enterprise value with quartz. So that’s how they get that $11 billion. You know, basically be about a 90% stock, 10% cash consideration. You know, speaking of oil being an $85, it’s a lot easier to get deals done when you can pay in all stock versus all cash. And people actually want to do that. So I think that’s a key point. To look at here. Pro forma ownership is going to be about 67% cord, 33% enter. Plus, you know, it looks like there’s some, you know, dividend in there. Obviously they’re going to tout synergies. Why wouldn’t they? You know, it’s going to be about seven Cord representatives on the board and four plus representatives. You know, hopefully it’ll close at the end, mid-year 2024. But I think in the light of what we’ve seen on all these other, you know, deals that we really haven’t heard much about, you know, haven’t heard about the pioneer deal going through. I mean, I have a hard time thinking this is going to close mid-year. I would think this could be end of year 24. I found that interesting as well. [00:04:25][99.7]
John Ferrell: [00:04:27] It really is. And that was when I was going back and looking back. And none of these things have closed yet. And we’re I mean, we are nearly six months out from the the pioneer deal. And so it’s it’s really amazing how long they’re taking, but we’re not really hearing a lot. At least I haven’t heard a lot on the regulatory side about anything that’s needing to be spun off. I think a lot of these considerations are being done ahead of time, which is beneficial. This deal in particular, being relatively small, should ideally roll through a little faster. But, yeah, you’re exactly right. Things are taking their sweet time. [00:04:56][29.5]
Michael Tanner: [00:04:57] Yeah. So you know that that distribution, that one time distribution and plus shareholders going get pushed out a little bit. You know, we ran something on Newsbeat, a few weeks ago where it’s. Send it. I think it’s Joe Kennedy. The Louisiana senator came out and was like, you’re basically blackballing these oil and gas companies and the FTC. It trade. So it’s kind of crazy. But, we’ll make sure to put the link to that article in the description. I want to quickly pop over and do slide six. This is again a breakdown of the, the financials here. Total market cap of 10.4 billion on a pro forma basis. And R plus the value was 3.4. But you include net debt. You get you up to 3.9 billion. You’re talking about Williston Basin production of about 75,000 B boe per day. The nice little BOE equivalent there. I’m sure that’s on a 6 to 1 basis. They also do I think it’s it’s helpful to point out there is a little bit of a marcellus angle to enter plus. But part of this transaction was they’re going to shed that. So there’s a piece of this is going to get returned in in the form of a divestiture. But we’ll kind of leave that off to the side for now, because I think there’s some really interesting things to to point out here. And so I think, you know, one of the big things and, and I encourage everybody to do this is go find the transcript, which all we’ll put in the show notes of the, the, the, the earnings release, not the earnings release, but the, the M&A presentation or at least that, that every management team does when some big public deal happens, they put together a slide deck like you see in the slide, here. And then they go on and they chat about, hey, here’s exactly what, you know, they basically give the corporate PR version of why this is the sweetest deal of all time. I mean, you’ll never not listen to one of these things and come away with, oh, wow, maybe it is a great deal. I mean, you got to look at it with a little bit of like, okay, they’re trying to sell me that. This is a good deal. But I think in this case, what we find is a lot of what management’s telling us is somewhat backing up here. And, and I think there’s some really interesting nuggets that we found. So you know, I think there was you know, before we dive into some of the specific points that management, on the court side is highlighting for why they feel really good about this transaction. Just cover John real quickly what you got up here and kind of a quick overview of, of, of just so people can get their bearings straight on what they’re looking at. [00:07:13][135.8]
John Ferrell: [00:07:14] Absolutely. Yeah. So we got, just pulled up, the Whiting Oasis and, you know, Whiting Oasis later core. And we got a couple of years ago now, they continue to operate under their respective names and, you know, it all rolls up as a parent company, but in doing this, it allows us to at least break down the acreage and a little bit of a different position. So first things, location wise, it’s really remarkable. Blocking is not the biggest of all plays. And so it’s not surprising that these are well offset to each other. But they are the enormous acreage on the reservation especially. It is basically sandwiched between, what Oasis and Whiting had there. And then the stuff up in the northwestern side does offset some pretty productive oasis, acreage that they had. So of course, now all being caught, location wise, it’s a really solid, you know, the amount of, efficiency that can be gained by offsetting acreage that’s always kind of up in the air, especially when it’s in. And it’s not that spread out to start with. But you do have other things going on there with the gas, disposition and what you need to do, what’s planning, what’s your pipeline availability, all those things. And so having, you know, directly adjacent, acreage is a very big positive for us. And so we’re. [00:08:30][76.1]
Michael Tanner: [00:08:30] Going to stick along that point. I think, you know, one of the, one of the cool things, again, one of the things I love about database is it takes you about a quarter of a second to get the reservation shapefile loaded up in there, because we just pulled that off the the North Dakota website. So that’s the easy thing, because I think it’s key to go back to what you just said about it’s the regulatory requirements in North Dakota are already very high in terms of what you need to do with flaring it on on the reservation. It’s even more and I think that’s part of the delineation is and plus as you see, has the has a big acreage block and have developed a large section of that southwestern reservation. And a lot of their other acreage happens to also land in that northeastern part, which when we get into one of the things that management is pushing could be something to watch in terms of productivity, if you’re having to, again, take all those steps that you just mentioned to the nth degree. [00:09:18][47.7]
John Ferrell: [00:09:19] Absolutely. Yeah. And that is definitely something to dive into that the acreage on the reservation, it’s highly productive acreage. And it’s really good. But you’re exactly right. It’s going to be a little bit more regulated. And in not ways that have really prevented anything, but it’s something an additional cost that everyone’s gonna have to take into account. When we kind of scroll down, obviously our plus is, you know, significantly smaller. We already got kind of that idea of there, you know, less than half the size of what the current court energy looks like. But when we go in and we dive into their type curves, we can see some pretty again, tight, tight curves as far as who’s, going with what with that inner plus actually spiking quite a bit higher than the rest. So we flip this over to a chart. We’ll be able to run a comparison here. But I think this will come to a common theme that the acreage that they got from Inter plus, by and large, is just better acreage from a chart place we’re looking at, you know, over the course of 180 months where, it’s, you know, for 20, 30% more productive, than the type curve. Of course, now lands is normalized for lateral feet and all those things which we’ll dive into. But I think the, the baseline here is that while a it’s relatively small in the grand scheme of acreage that they pulled, it’s still very productive, very quality acreage, in the block in which, I mean, at the end of the day, block and acreage is good or better in so many cases, but this is on the better side. So all in all, a very good, kind of bolt on to what they have here. There’s some space for them to add some more, which I think we touched on would be really ideal for a good, block in consolidation to find themselves upwards. You know, we’re at 11 billion here. Getting a little bit bigger might be nice, but. But, yeah, all in all, it pretty straightforward. Nothing. Nothing to, fancy to show from this kind of consolidation standpoint. Until we start diving into the laterals. [00:11:12][113.1]
Michael Tanner: [00:11:13] Yes. Which will get to, you know, our, our M&A merger area, private equity firm Cambridge is behind this one. So you know, they’re going to be gobbling up anybody else. The real question is who’s cord going to go get next. Now especially they were able to pay 90% stock. When you can make an acquisition like this get some highly productive acreage and pay mostly stock especially as prices go up. And let’s be fair, that’s how these stocks trade public. And PS just pretty much are proxy for oil price. Some relative to others are going to be different. But you know, unless you’re buying Exxon and Chevron which are a little bit detached maybe from that if you’re buying cord, all you’re buying is a proxy for oil price. And hopefully it goes well for you. But so I think that’s, that’s you know, it’s definitely it’s interesting there. So, you know, when we look at, you know, I want to pull up real quickly, I think it’s interesting. Let’s look at slide eight here. You know, on on our slide deck. This is really just kind of an idea of talking about the inventory that’s available. You know. Right now Inter plus their booking about 552. net new locations. cord as it stands right now, pre-merger was about 1200 locations. So that combined proforma entity somewhere around 1800 new locations, you can kind of see that would make them the third largest, operator and the biggest where the and this is where they would say biggest pure play lock in player. I think it’s interesting. This is the first thing you know. And one of the things that management’s really proud of, if we look at that first bullet point towards conservative spacing and transition to three mile laterals drive significant value. And this is exactly where the first big point that management brought up in in this overall in the call was, you know, CEO Danny Brown hounded on the fact that, you know and or plus had the lowest number of had the lowest number of three mile laterals drilled. Yet their acreage was designed for three mile laterals. And one of the and I don’t know if you call it secret sauce, but one of they felt like their unique strategy differences from what Enter Plus was doing now to what going forward is increasing the amount of three mile laterals that were drilled in their inventory. They were only planning. And this is you go back and look at the transcript. They were planning about a 10% inventory number at enter plus for three mile laterals. Or it’s bringing that up to about 40%. And I think it’s interesting to dive into the two the numbers here quickly on just the overall three mile laterals. But that’s the first big point. And you see that it jumps out on slide eight. It’s the first one. And you know again. And their second bullet point enter plus is strong core inventory drives outperformance versus peers. Well we’ll see the same. You’re about to see the same thing. [00:13:54][160.5]
John Ferrell: [00:13:55] Absolutely. Yeah. And so to kind of step back on that to look at it at a high level in the block. And the three mile lateral is not a new phenomenon over there. We obviously due to a lot of, restraints typically like your land and your lease acreage position, the 10,000 lateral was kind of the standard. However, over the past few years, a couple hundred three mile laterals have been drilled. So it’s not a, it’s not a big question as to what’s happening here. So, what we have up right now, we’ve got a few layers of the one, two and three mile laterals and then go ahead and just make the simplify our plot just to look at the, type curves, of each of these three, this is now across the entire board. And so it’s not exactly, related just to this transaction. But yeah. So pull this up. We can see that on the three mile lateral side, we have 222 to look at. You’ve got about 3602 to 3 mile laterals. And that 1 to 2 of my line was is 14,000 wells. On the three mile lateral, though we can see here this is a tight curve based off positioning production. So there’s no forecasting involved. Nothing like that. This is real data just hard line data. And we’ve got data that goes, you know, a couple hundred months. We probably that’s the newer ones probably need to, you know, as far as getting cohesive, results, we can see that about 120 months here. We’ve got, what, four, 547,000 barrels. So this is just pure oil, obviously. And that same thing on the three mile laterals is 360,000. So, we’re seeing an uptick of nearly 200,000 barrels, and that’s, that’s way more than your 50% that they we’re talking about. Now, what you’re also noticing. And again, you’ve got time to factor in here. These are flattening out. So the decline on these are a little bit rougher than what you’re seeing on the, 2 to 3 mile laterals. We can visualize this a little bit better by footing it over to the right and turning off the logs. Get turn on the log scale again to get our standard kind of type curve look. But the takeaway from this is that three mile laterals in the back end are giving you more on a per foot basis than even the 2 to 3 mile. So which is actually not what I personally would expect to see. I suspect to see some level of a degradation on a per foot basis. Just because of the fact that, you know, all the other constraints. I think we. [00:16:18][142.9]
Michael Tanner: [00:16:19] Have to look at the vintage, you know, maybe the, you know, because these are modern wells, modern frack supply, using bigger sand volume. There’s probably a lot of other factors to normalize where you’re probably right. Because one thing to point out is that, you know, and this is we were debating this right before we got on here. There’s this quote in here along this three mile along along your point, the CEO, Danny Brown, he points up he goes. However, it’ll take a little more time, likely until the end of the year, to get sufficient production history to effectively analyze the three mile declines and determine whether we can increase our uplift assumptions from 140 cent to 150%. So to me, that sounds like there’s a little bit of a degradation, because if you went and we were talking, you’re the math guy. So I want I want to, you know, step on your toes. But that seems to me that’s a 40% increase. I’m an engineer. So I was never I never good at that. [00:17:10][50.9]
John Ferrell: [00:17:11] So no, I mean I would again. And we’ve seen this in some of the other, lengthening, and even we went from 1 to 2, for so 1 to 2 mile laterals. We saw you don’t get a direct 1 to 1 up two. It gets more like you get, you know, just some level of degraded. So if you double the size you get, you know, maybe a hundred and, you know, 50%, not a 200% return on it, but your cost savings can range from 20 to 30% of the total cost and sometimes even larger than that. So, you know, if you’re seeing an uptake over 20%, you generally see, favorable condition to continue drilling what you’re seeing there, which we’re seeing way more than that here. And I think that’s part of the enthusiasm, in this deal for the cord people, is that, you know, if this all holds true, then you’re going and you’ve got the acreage position, which is key, to get a three mile lateral in the park. And, you very well might see a 10 to 20% increase in the DAC cost, but then you also will see potentially 40, 50% uptick on the, on the return. So, at the end of the day, you, at a high, high level, you can’t lose. If you’ve got the acreage to do it, you should do it. And, you know, for miles, that’s another whole story. I guess we can explore, into the future. But there have not been a formal there has not been a formal lateral drill, that we can evaluate to date. [00:18:31][79.5]
Michael Tanner: [00:18:32] Whenever oxy decides to sell their. They’re doing some crazy stuff in Colorado. I know because of the, the land and restriction requirements, they’re doing all these u shape. So whenever oxy decides to sell their Colorado position it’ll be interesting. But let’s let’s take a look at these. The three mile laterals, if you don’t mind. Broken down by I think you’ve got it pulled up here. This is by, you know, and or plus and cord. But what we’ve split, we’ve also split it out to Oasis and Whiting, because it’s a really interesting little nugget that we discovered here first off. Right. You know, let me guess. That big line, the top line on the rate curve. That’s inter plus right. [00:19:07][35.6]
John Ferrell: [00:19:09] All right, we got it. Actually, they’re step down. From what? The oasis, acreage was. Which, as it highlights on the map, you can see the three mile, the three mile, laterals they did on Oasis are on that far west side, these, wells right here, a couple in the central, and then a couple right off on the reservation side as well, which we could drop that back on. Which is good to note. Inter plus has very few. They’ve got, three, to work with. However, those three line up much closer to what Oasis had, which was all of which completely blew away what Whiting had Whiting’s at the dead last of those three. Mind you, the numbers aren’t terrible for Whiting, but still they dragged down what are really remarkable wells from the oasis and even the inner plus side. So at the end of the day, it’s very clear I. And I believe that most of these are going to be tying into that, that northwestern side acreage that they have, which I think is where they have got the space to to do the three mile laterals. I think on the reservation, their acreage might be a tad bit tighter, but that’s I haven’t verified that point. But again, the inter plus average right there with the Oasis stuff in the western side is what is really pulling up. So the, the at the average recent three month, both the Oasis and Inner plus stuff outperforms those, whereas the Whiting underperformed that leaving us somewhere in the middle, which puts us pretty dang close to average, which is nice, because when we looked at the average earlier, we were seeing that uplift of the, anywhere from. 30 to 60% on what we were saying. Again, you’re doing this by vintage will kind of change a bunch of things. But obviously, the acreage and what they can do on the inner plus acreage is going to outperform the average of what court has been doing today. So it’s all a net positive. [00:21:06][117.2]
Michael Tanner: [00:21:07] This is coming from me and in corporate finance. And I’ve I’ve had to read some of these. Yeah I’ve written some of these sell side presentations about I don’t know how the game works. The third bullet point came Master Class in how to. We’ve now looked at the data. So the truth is enter plus is acreage is really good. The chord stuff’s marginal because you’ve got the Whiting stuff. That sucks. The Oasis is really good. So it’s a mixed bag with where courts at this third bullet point. Let’s go back to slide eight. Master class here, folks. Since 2022 or plus Enter Plus has TLY turned in line 30% of the top 100 wells based on less than six or based on six months oil production, while having only TLD or turned in line 15% of all the wells in that time up to six months. So they’re the sleight of hand there. They combined Court plus Enter Plus on a pro-forma basis to say, oh, look how good we have been since 2022 when you didn’t own enter plus back in 2022. So master class in sleight of hand I love it. That stuff gets me fired up. [00:22:10][63.2]
John Ferrell: [00:22:11] Yeah. No, absolutely it is. It’s great. But now it is clear that, again, only three wells or drill that that distance on the inner plus side, but, you know, knowing that they have the acreage position to do it, there is a lot of upside here. And honestly, you know, they alluded to it in that call that they think there could be even more upside than what is shown to date. And that’s, that’s really, encouraging. [00:22:32][20.6]
Michael Tanner: [00:22:33] Oh, I think the story in, in from from my, from my vantage point, the story is looking very favorably upon this acquisition in terms of they got a great deal for this kind of the rest of the stuff they talk about is, is is fairly financial. But I mean, it’s a super interesting deal. I want to go back for a second and, and talk. I want to look up, you know, they mentioned that, the product mix is 56% oil. And that’s really interesting to also talk about. That up in the box, you’re only really talking about the reason why bio is a big number up there is because it’s like a 50% oil gas mix. So I think it also you gotta, you know, to your point of pipelines, to your point of take away capacity. You know, one of the synergistic things about this deal, which they highlight is the fact that they’ve got a bunch of infrastructure already there that they can leverage, and that’s probably left over Oasis stuff relative to what? Whiting. I mean, I mean, I think another thing we’ve discovered, we know why Whiting went bankrupt. [00:23:32][59.3]
John Ferrell: [00:23:35] No. That is very true. So if we pop over to the inter-club side, I throw on a separate layer here to kind of look at. I think to evaluate these, it is best to break down, almost in three sections and step directly on the reservation to step adjacent and step to the northwest. All of which, you know, I have a grid map behind me with the 30 year year. And it looks, you know, you’ve got hot spots and all of that. So there’s no, like, one to, like, far and away better position. You can see the stuff on the fringes on the far west are going to be a little bit lighter. But to your point, though, on the production side, let’s just zoom into the most recent couple of years. You know, production here from the Whiting Wells alone. It’s, you know, what are we we max out. Let’s see. In September of last year, we’re doing, 2 million barrels of oil and 4 million of gas. So 2 to 1 on the gas oil ratio there. And so it’s, it is an issue, you know, what we can actually do over here is come into the, disposition dashboards, and we can actually see what all Whiting is up against on the flaring side, to see what their current. So they. Yeah, they’ve they’ve been up there as recently as 2019. Now the new flaring regulations I think came through in 21 or 2021 or the other. And so that’s where we see this big dip off. But even over the course of 23 they’re trailing down. However they’re still flaring 150,000 MCF, on a any given month. And so flaring is still something that, I guarantee you, has been, you know, luckily, the regulations have been in place for some time, so that percentage of production that can be flared, I think it’s something or 6%, 8%, some lowish number. I think it’s already been taken into account with this. But there are a lot of numbers. You know, this flaring data is kind of interesting, especially in, in the back end. And then, from a type curve perspective, one thing to note is that as a well, life goes on in the back end, the gas ratio starts to increase. We see heavier gas. And, so anyway, those issues will continue to rise. And honestly, this seems pretty uniform across the entire board. And so luckily that means if you are an operator, this is a world you live in already. [00:25:54][138.6]
Michael Tanner: [00:25:55] Yeah. They you you knew this. You knew this coming into it. And I think, again, I think what’s emerging right now specifically is the fact that there’s upside on this, on this adder plus acreage. I mean, I’m just looking through kind of the, the, the next. The transcript. Hear nothing in the three mile laterals was something that they, you know. You know, they they mean they they basically said 50% of the new locations are going to be drilled it through my laterals. It’s basically their entire pitch on, on what’s going to happen here. Obviously they’re they’re looking at some of the same data we’re looking at. I think the only other thing that that jumped out to me is, okay, who’s next? Now if this is what the cost of, of, of, you know, this is what it’s going to cost to buy up, you know, 1200, you know, eight, you know, five, 600 locations. I think that’s what they were pitching. I mean, that’s I mean, there there could be some value around there. I again, it’s going to be very interesting. The market is obviously enjoyed this deal. Prices have gone up a little bit relative. But that’s also because we’re sitting at $85 oil. This deal happened a month ago. So you’re going to get a little bit there. What’s I know you’re pulling up formations. You’re going to ask me. Exactly. You’re going to answer my questions. What’s the main formation that they’re drilling out here? [00:27:11][76.0]
John Ferrell: [00:27:12] Oh, it is definitely in the back. [00:27:14][1.3]
Michael Tanner: [00:27:14] In the back and straight up. What is it? The three forks. I’ve never worked North Dakota specifically. You got the bucket share with the three forks. [00:27:20][6.5]
John Ferrell: [00:27:22] Yeah. The bucket. And then a lot of people will split it up in the lower, upper and middle block. And and then the upper and lower three forks. I this is a funny story. I had a friend that that was, managing drilling out there for, one of the operators told me that, the fact of the matter on the drill floor, they just couldn’t care less. They, they come down, and I know there’s a plan, and I know that they are trying to, you know, hit the middle block and or upper block and in some areas. But, they can get pretty loose, loosey goosey on, hitting the three forks and kind of rolling their way up into the block. And because at the end of the day, these wells, I mean, yes, some are better than others and to date, a little more precise, but back then they just couldn’t lose. And so that was one of the things that I found interesting, how, how little effort they put into precision on some of this in the back. And that’s not to say it’s what they do today, but, but yeah, they’re going to be living in the block. And, primarily the three forks will be kind of auxiliary stuff for the most of it. When I was bringing up here, actually, it was I want to show everything just in the back and specifically, but to our point earlier, let’s look and see, of these current operators, you know, when we talked about interplay, I said 824 positions in the block and alone. And so we’re only looking in the block, and but when you look at that level of acquisition, what other consolidations might be available there? Pretty rough there. I mean, what jumps out at one, I was going to say. [00:28:48][86.0]
Michael Tanner: [00:28:48] One jumps out. We were talking about this at Nape. [00:28:50][1.7]
John Ferrell: [00:28:51] Absolutely. Yeah. And it’s definitely rumored that there are out there, kind of seeing what they can get the Incat backed, group. And so, they should build their operations. I do know, you know, a couple people over there, they’re fantastic on the data side. They’re fantastic on the operation side, they, they’ve got their stuff in order. So that’ll be my number one to see. Fault. Where you go past that, you’re going to have to dive. I mean, you’re going to be talking about larger companies divesting out of the block and is what you’re going to be aiming for. And then also, you know, this is why the back end is less sexy because it’s mostly spoken for. And so, anyway, it’s Grayson Mill will definitely be the one to keep our eyes on moving forward outside of anything else to get divested. But that’s it. Everything else is pretty much spoken for, in my opinion. And some are big, a continental that’s big. But who knows? The stranger things have happened. [00:29:48][57.3]
Michael Tanner: [00:29:49] So know I don’t know. I don’t know if is. We’ll see what Harold Hamm decides to pull off. I feel like they’re staying. They. They’ll probably end up staying put. No, I think you’re absolutely right. I think Grayson Mills, the target out there. I think the issue of there is you’ve got two you’ve got two private equity firms going against each other. It’s hard to make a deal when both people feel like they got absolutely destroy the other person. So it’d be interesting to see if they can come to, come to a meeting of the minds in an agreement. On a on a value that feels like is good to both sides because, you know, unfortunately, sometimes there’s some egos there. So very, very interesting. To watch. And see how this all this all plays out, but. Yeah. No, it go ahead. [00:30:32][42.4]
John Ferrell: [00:30:33] No looking ahead. This is kind of just a quick look at Grace and nails PDP overview here. They’ve got a great position. They’ve got, you know, 343 and Kim on the oil side, but then 460 on the 30 year you are. So they’re sitting at 120 million barrels in production out there, 1200 spots. It actually puts them right in line with the Inter plus deal. Honestly, it’ll be in that ballpark depending on how many locations they have. But yeah, they’re asking price is definitely going to be tainted by what happened here. But then or plus in my opinion they should expect something in that ballpark as well. But we’ll see. Yes. [00:31:09][36.7]
Michael Tanner: [00:31:10] More I bet. Yeah, it could be interesting. I could see Harold here. I could see continental coming in again. This, this, this that I’m for. He hasn’t done anything in a hot minute. He’s he’s here. And everybody else doing all these deals. He’s got to figure something out. What would that acreage look like? [00:31:23][13.4]
John Ferrell: [00:31:24] Let’s see. We’ll go ahead and dial up this analysis, grace and think we’ll come in and we will just drop in continental on top of it here. And so coming together. Yeah a big. It a. They’re good offsets from each other. They’re basically all all intertwined on this Western side, all off the reservation, obviously. Here. The continental anchored acreage in the heart of the block and is really solid and up in this, this eastern part. I would venture to say this, brand stuff is probably not quite as, as, productive, but it’s a good fit. It’s a good acreage fit. It would take there, the PDP on, if we had about 100 million from Grayson Mill. So that adds a tax on that to, what would be a high 1.2 billion. So it wouldn’t be transformative. And the companies, but they’d probably be the one that would need to buy them. So I don’t know who else is, going to be the player that’s going to shell out 3 or 4 billion on this? I will say, though, if that happens, that that probably, again, will have a similar reaction to what they had with this court deal. And blocking consolidation isn’t isn’t anyone’s favorite. But, but man, the wells are good up here. [00:32:53][88.3]
Michael Tanner: [00:32:54] They are no love. Love us some North Dakota. And maybe we just did a little bit of a preview of what’s to come, but but we’ll see. We’ll see it. I think that’s everything I’ve got. Again, appreciate you hopping on. What are you guys working on? You know, last time we spoke, you guys were rolling out a, you know, really refining and doing a bunch of M&A stuff. What’s what’s coming new on, well, database that we should be looking for. [00:33:17][22.8]
John Ferrell: [00:33:18] Yeah. No thanks for asking. The M&A deal is really, you know, naif really kind of kicked off a lot of those things we were talking about because so many people, are diving in on the same kind of valuation. And I watch these people step through the same exact steps over and over and over. And so we’ve had people using World Database for M&A work for a while, doing kind of some of the stuff we did, but we’ve got some brand new M&A projects rolling that are going, that’s specifically called an M&A project, that’s going to basically shortcut a lot of these processes take you from 0 to 60 in no time flat. And then, you know, always understanding that when you’re going to dive in and do the full blown economic analysis, you’re going to take it out to another software. More than likely where this because it’s areas and the banks need it or combo curve or FD when you know, we’re not trying to replace that ness that need but the order in order to get a very quick and easy answer on a potential deal. That’s where our goal is. And so this is, something that’s rolling right now. We’re about to do a big webinar on it. And so hopefully the next time we evaluate a deal will roll in some of these, some of these, insights. And it’ll be, make this for a very quick video. [00:34:21][62.8]
Michael Tanner: [00:34:22] Yeah. No, that’ll that’ll be awesome. It’s it is good because I mean, a lot of the time the goal in, in a, in deep process is how quickly can I kill the deal. And the quicker you kill a deal, the more deals you can look at and you can actually get deeper into, you know? And again, if you’re buying a $200 million deal, you better be deep in geology. I mean, that’s where I mean, we could we could have a whole webinar on how, like a lot of the Fugazi stuff we do with the economic software is just it all comes down to, like you said, it’s the rock there. Who cares of its middle upper lowers. You said, we’re just there’s oil there. We’re going to go find it. [00:34:51][29.4]
John Ferrell: [00:34:52] Yeah. No, you’re exactly right. And so getting to that go No-Go decision is, is key in order to do it. And that’s what you’re seeing, coming down the pipeline from us is the way we can kind of make that easier on everybody. So you can focus on the stuff that’s really hard, you know, like the geology and, you know, the actual operations, not wrangling data to find a PDP value in a tight curve. So now, yeah, we’ll get that, that bottom layer for you and make it fast. And then you can jump in and dive into the details. [00:35:18][25.3]
Michael Tanner: [00:35:19] Love it. No love well database. Appreciate your time. This is fun. Always love checking out these deals. Luckily we haven’t had any yet. There’s probably, you know, maybe there’s a couple floating out there, but, we’ll, we’ll, we’ll, we’ll let you get out of here. Appreciate it again. And, guys, you can check out more about interviews and, well, database comments. Till next time. We’ll see you then. [00:35:39][19.9]
John Ferrell: [00:35:40] Thanks, Michael. Talks in. [00:35:40][0.0][2092.0]
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