Samson Oil & Gas Announces Hedging and Operations Program for its Foreman Butte Acquisition in the Williston Basin

Samson Aims to Return 29 Inactive Wells to Producing Status

On April 3, Samson Oil & Gas Limited (ticker: SSN; SamsonOilandGas.com) announced it had closed its planned acquisition of oil and gas assets in Montana and North Dakota—the Foreman Butte acquisition.

Acquired Asset Highlights

• 721 bopd net production (11/01)
• 100 Operated wells
• 50 Non-Operated wells
• 7MMBO in net proved reserves
• 51,305 net acres, 98% HBP

Samson Oil & Gas Limited – Foreman Butte acquisition in the Williston basin.

New Hedges 

In conjunction with the extension of Samson’s current credit facility to fund the Foreman Butte acquisition, Samson has entered into new hedging arrangements. Approximately 75% of total current production including the acquisition has been hedged from May 2016 to April 2018. Additional hedges will be put in place as production increases. The counter party to the hedges is BP, Samson’s previous hedge counter party.

The hedges, detailed below, were put in place on March 30, 2016. Samson has deferred premiums of $0.5 million with respect to this hedge program. The net value, after deferred premiums of the hedge portfolio at April 4, 2016, was approximately $0.8 million.

The company said its hedge program was designed to protect the acquisition price of the Foreman Butte project and has a floor of around $41 per barrel. Samson said it will continue to monitor the oil markets with a view to trading out of the hedge positions or reducing the deferred premiums as the market dictates.

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Samson Oil & Gas Limited Foreman Butte Field

Foreman Butte: Upside Opportunity from Conventional Traps Above the Bakken

Oil & Gas 360® asked Samson Oil & Gas CEO Terry Barr today why Samson was drawn to acquire these particular assets in the Williston.

“There is considerable upside in this asset in the current price environment,” Barr told Oil & Gas 360®. “These wells produce from conventional traps above the Bakken, and therefore they were not a funding priority for the previous owner who was a Bakken-centric company.

“Accordingly, the shut-in wells can be re-started for minimal cost, and the existing wells can be stimulated with state of the art acid treatments which have been proven to be very effective.

“These factors along with the infill development drilling opportunities were all reasons to do the deal,” Barr said.

Foreman Butte Project – Operations 

Samson has submitted the transfer of operator forms to the regulatory agencies in Montana (MBOGC) and North Dakota (NDIC) for approval of the newly acquired assets. Following receipt of these approvals, Samson said it will embark on a development program that will bring 29 inactive wells that are expected to be economic even at current prices back to producing status.

Samson said the program can be put into three different categories:

Round 1: Workover shut-in wells with mechanical problems

Of the 29 inactive and currently economic wells acquired, 11 wells have been selected for the initial round of mechanical workovers. These are wells that have been shut-in for various mechanical reasons, including parted rod strings, a stuck pump, or a tubing leak. The investment necessary to bring these wells back online is expected to be modest, estimated at between $15,000 and $25,000 per well. The expected first month’s production from these wells is estimated to be around 200 BOPD from these 11 wells without any stimulation beyond that encompassed in the mechanical workovers, namely a regular acid stimulation.

The acid stimulation is aimed at cleaning the perforation tunnels and near well bore restrictions to maximize oil flow. An increase in production would be expected from this type of operation; however, no additional uplift has been factored into the 200 BOPD production expected from the mechanical workovers.

Round 2: Workover shut-in horizontal wells with advanced stimulation potential

There are 18 wells in this category, which have been identified based on their individual production history, the structural position of the well in the field, and the porosity trends across the field. These wells have been examined by Samson’s reserve auditor and have been assigned a 4 times uplift in production from the previous shut-in rate shown in Samson’s current reserve report. This uplift was developed using data from immediately adjacent (but outside Samson’s project area) well bore treatments. The 18 wells could collectively add an additional 1,400 BOPD to the project in the first month following the treatment. The treatment for these wells is being designed by a leading oil service provider using state-of-the-art reactive fluids and diversion material. Total expenditure associated with this operation is expected to be around $100,000-$150,000 per well.

These first two initial workover programs are expected to substantially increase the acquisition assets’ production rate.

Round 3: Proved undeveloped drilling

Samson has identified a total of 37 infill well locations that could be drilled. The majority of these 37 infill well locations are extended laterals. Only 13 of these are included in Samson’s current reserve report due to capital constraints imposed on that estimate. These wells are expected to cost $2.8 million and are economic in the current pricing environment. The company press release stated that “they are, however, a third ranked investment priority as the capital efficiency associated with the initial and second round workover programs is superior to drilling wells in the current price environment.”

All drilling locations are within the boundaries of the various fields acquired and are immediately adjacent to existing production.

Samson Oil & Gas has additional assets in the Williston, D-J, Greater Green River and Western Permian basins.