Wednesday, February 27, 2008

Canadian oil and gas trust paid $120,000 per flowing barrell for Bakken lands

Canadian insurer Manufacturer’s Life, in a 50 percent interest in a partnership with NAL Oil and Gas Trust (NOIGF.PK) on February 11, 2008, set a record in purchasing Bakken Lands in Southeast Saskatchewan.

The MLI/NAL partnership acquired two private companies, Tiberius Exploration and Spear Exploration, for a total of $115 million. The new partnership receives 3,336 acres of land, 2.1 million barrels of P+P reserves and a current 925 barrels of daily production.

The key metric in this purchase for investors to be aware of is the 120,000 dollar per flowing barrel cost the partnership paid in this transaction.

If the investor looks at Crescent Point Energy Trust’s (CPGCF.PK) January 16, 2008 purchase of Pilot Energy, you see that CPT in a very comparable deal paid 73,000 dollars per flowing barrel or 66 percent of what NAL/MLI did for their Bakken purchases several weeks later.

CPT received 24 percent more acreage with 22 identified low risk drill locations in addition to a full 1,000 BOE a day of production for 76 million dollars as compared to NAL and MLI’s $115 million purchase.

The American side has yet to see the consolidation like the Canadian side due to a much larger land area that offers plenty of “running room” for explorcos. Inevitably, it is a matter of time before drilling success is achieved in the Dakotas and Montana with increasing 3-D seismic delineation and improved technology to extract the oil source. With that will come consolidation, but not for awhile.

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