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Back from the dead: TPLM

February 3rd, 2011 · No Comments

Finding an audience..
We’ve written about this company years ago, but the low US natural gas prices of the last couple of years haven’t inspired us to follow this up. Good job somebody has, in the form of SA opinion leader Michael Filloon:

Triangle Petroleum: Speculating in the Bakken
Michael Filloon

Triangle Petroleum Corporation (TPLM) is an oil and gas exploration and production company that operates in the United States and Canada. It has a market capitalization of 182 million. Triangle has a sizeable acreage in the province of Nova Scotia, but is mainly interested in adding additional acres in the Bakken Shale of North Dakota.

Its Williston Basin position is currently 15000 acres. These acres are in Williams and McKenzie counties. The company also has a current position of 412924 acres in Nova Scotia’s Windsor Block. The Bakken position was attained after Triangle realized it could use shale technologies to get access to oil. It plans on further acquisitions to increase its oil exposure.

Areas currently acquired have a history of success. Plans are to increase the company’s position to 30000 acres by the end of this year. It estimates it will participate in 30 gross wells (Bakken) or 6 net in 2011. 9 wells are currently being drilled. Due to size the company is currently seeking partners to develop acreage to continue its non-operator model. In 2011 it has $58 million in cash for development.

Triangle’s move to the Bakken was done for several reasons. This is supported by the size and scope of the oil deposit within the Williston Basin. It has an eight million acre continuous oil accumulation. The USGS survey has come into question and its assessment of 4.9 to 6.2 billion barrels estimated recoverable oil , may be conservative. Density and offset drilling made it possible to recover more oil. Now the industry is doing eight wells per 1280 acre spacing unit. Drilling this way, Triangle believes, will increase recoverable oil to 12-24 billion barrels from the Bakken/Three Forks area. Whether this amount is true, is speculation.

By taking results of neighboring companies, we can better estimate what Triangle may recover from its acreage. Using the averages of seven oil drillers in the area, I have come up with some estimates for the value of 1280 acres for Triangle. These companies are: Brigham Exploration Co. (BEXP), Continental Resources Inc. (CLR), Kodiak Oil & Gas Corp. (KOG), Oasis Petroleum (OAS), Newfield Exploration Co. (NFX) and Whiting Petroleum Corp. (WLL):

Average Wells Per Section Bakken: 3.67

Average Wells Per Section Three Forks: 3

Average Gross EUR (MBOE): 663.29

Average Well Cost : $7153570

Average F&D Cost (BOE): $11.10

Average IP Results (One Month) BOE/D: 1024.86

Average IP Results (24 Hour): 2107.20

Average Lateral Lengths (ft.): 9357

Average Frac Stages: 28.57

These numbers confirm that the economics of Bakken/Three Forks wells are becoming a better value. The Eco-Pad and Super Pad are helping to increase margins by unlocking value. The offset operator activity continues to reflect improving well results. Although many of the companies drilling in the Bakken/Three Forks are seeing these improvements, it is safe to say we will see even better results as drillers become acclimated to the area. The amount of oil reserve Triangle’s wells hold will give a better idea of well dynamics. Based on numbers developed by Brigham, a Bakken/Three Forks well with 500 MBOE will have a life of 35.3 years and an undisc. payout of 2.2 years. If the well holds 700 MBOE, Triangle will see an economic life of 39.1 years and undisc. payout of 1.3 years.

2011 capital expenditures will be $72 million. There is $42 million to fund drilling projects. Triangle expects to commence its first operated well here at the end of this year. $30 million will be appropriated to leasehold acquisitions. Triangle will try to purchase 10000 to 15000 acres in the Bakken/Three Forks in 2011. Partnerships and cash flow will subsidize these transactions.

Triangle also has an acreage in Nova Scotia. This play has two different sections. First is an unconventional gas play and the other is conventional. The large gas area of net 412924 acres is currently being marketed to other oil and gas companies. Apache (APA) and Southwestern Energy (SWN) are also in the unconventional play. Triangle will be a non-operator here.

Although I like the way this company looks based on its Bakken/Three Forks acres, Triangle is very speculative. It currently has some cash and no debt (Yahoo Finance). Analysts do not expect a profit from this company in 2011 or 2012. All said Triangle has some upside given the price of oil and its first operated well going sometime this year. Being more like a Northern Oil and Gas (NOG) as a non-operator, it could see better growth and also lower expenses. There is a lot of pressure with respect to the operated well. If it does not produce the market will punish the company. I would recommend this stock like I would any speculative play. There could be a lot of upside or downside.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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