(SMI-V) The oil and gas industry in North America is soaring, with areas that were as quiet as a church mouse only a few years ago now thriving with property values and employment surging, thanks largely to the boom in shale plays. The Williston Basin, which canvases about 25,000 square miles across North Dakota, South Dakota and Montana in the U.S. and Saskatchewan and Manitoba in Canada, is known as one of the most prolific oil and gas regions in North America, with oil production dating back to 1951. Exactly how much oil and gas (as well as coal) are in the Williston Basin is a moving dynamic as discoveries across several layers of rock are uncovered, but experts generally agree that about 24 billion barrels of oil reserves are recoverable and 20 billion tonnes of coal are mineable. Continental Resources (CLT-NY) the largest producer in the play, thinks the oil figure should be much higher, estimating that the Bakken formation alone in the Williston Basin holds 24 billion barrels of oil reserves. The estimates could continue to grow as things unfold in coming years, such as the Three Forks formation that was previously thought out of reach with current drilling technologies now known to be accessible and more porous than the Bakken, meaning it could contain even more oil and gas than the Bakken.
Since 2006, more than 72 million barrels of oil have been produced from the Williston Basin. The growth potential in the Williston is staggering, considering that in 2012 there were only about 8,000 active wells in the basin, compared to more than 82,000 active wells in the also prolific Permian Basin in Texas.
With these facts, acreage commands a premium in the Williston and will likely continue to rise going forward, lending increasing valuations to junior explorers, such as Saturn Minerals (SMI-V). Saturn is one of the largest landholders in the northern Williston Basin with more than 376,000 acres of land under title spanning 16 townships. The company’s two largest blocks for oil and gas exploration, Bannock Creek (120,000 acres) and Little Swan (250,000 acres), are in southeastern Saskatchewan, where weather allows for year-round exploration, which is being conducted under a “Special Exploration Permit” from the Saskatchewan government. Saturn has complete oil rights in every zone, from surface to basement, for its expansive portfolio of property with a permit life of eight years.
The oil and gas discoveries in the regions by Saturn on its properties were essentially a byproduct of drilling for coal, which yielded three large discoveries itself, while frequently showing oil and gas, including surface and sub-surface oil seeps. Turning its focus mostly to oil and gas and scouring through historic drill data from the region – albeit for minerals, water or something else – the company discovered that nearly every hole drilled on the property showed evidence of oil to some degree.
In May, Saturn forged a 50/50 partnership with Lateral Capital Corp. for the working interest in the two flagship properties, a move that could prove invaluable to the future of the company. Lateral Capital was recently formed by senior oil and gas executives and petroleum geoscientists with extensive experience and success in the Williston Basin. Lateral Capital’s management team is comprised of former members of Reliable Energy’s executive team that grew production in the region from nil to more than 1,100 barrels of oil per day before selling the company to Crescent Point Energy (CPG-T) in 2012 for $97 million.
Saturn has also partnered with Vector Exploration Corp on two oil and gas permits on the Bannock Creek and Little Swan properties, with both companies taking a 50% working interest in the projects.
Oil and gas production in the Williston Basin essentially started in the middle and has been working its way outward. Discoveries have been made north of the epicenter of the basin and just south of Saturn lands that have proven to have low decline rates and rapid, high return on investment. Only a few months ago, Crescent Point announced a discovery in the Torquay formation in southeast Saskatchewan that it grew production from nil to more than 5,000 barrels of oil per day in less than one year. Additionally, light oil production from the Red River "Tyvan" oil pool, also on property south of Saturn lands, has produced 15 Million barrels (31 API).
Saturn’s properties are particularly compelling because the land is relatively unexplored with majors producing all around to the south and west. Those in the region include Crescent Point, Husky Energy (HSE-T) and Tourmaline Oil (TOU-T), to name a few.
Saturn has identified prolific reservoirs with up to seven stacked targets for drilling. An airborne survey has identified structural (graben-horst)/stratigraphic features to set up trapping of oil and 2D data acquired in 2013 which confirmed the presence of several basement structures on both Bannock Creek and Little Swan. Data from a fourth seismic survey is currently being evaluated as the company prepares for drilling vertical wells. A key to profitability for Saturn is that shallow, conventional drilling will bring the oil and gas to surface, which will yield a quick return, similar to that of the aforementioned recent production of Crescent Point. No horizontal drilling or expensive and time-consuming multi-stage fracking is required.
Permits are in process for the drilling of up to three exploration wells by the end of the year, which could further catalyze the valuation of Saturn that more than doubled in the first half, although it still stands at a paltry $22 million. Two new partnerships and a recent private placement raising a gross amount of approximately $667,000 have the company aligned for significant growth as a leader in what looks like could be the next major oil play in western Canada. Proper due diligence is, as always, encouraged. |
