Williams Cos. Buys 7 Percent of the Fort Berthold Indian Reservation Mineral Rights -- Bakken, North Dakota, USA

Update

NOTE: In the Bakken, Dakota-3 "is" Williams.

January 21, 2013:  Williams raises dividend to 33.88c per share from 32.5c per share, payable March 25, to holders of record at the close of business on March 8.

The Q1 dividend is an increase of 1.38c, or 4.2%, over the previous quarterly dividend of 32.5c per share. The new amount is an increase of 8c, or 30.9%, over 1Q12. The increased dividend is consistent with the company’s previously announced plan to increase its dividend more frequently, with increases every quarter. The company continues to expect the full-year dividend it pays shareholders in each 2013 and 2014 to increase by 20%, to $1.44 and $1.75 per share, respectively. Williams’ full-year dividend for 2012 was $1.20 per share.  

December 11, 2012: WMB, partnering with ACMP, to acquire the remaining Chesapeake midstream assets for $2 billion.

November 1, 2012: RBN Energy story on Williams pipeline projects, the Marcellus effect. 

October 16, 2012: from a comment at SeekingAlpha.com, this date:

WMB $35.14 spun off WPX $17.86 in a tax free deal where if you participated your total today would be $41.09. You received one WPX for every three WMB you owned. The WMB share price has recovered to the pre-spin-off price plus $2 and you now have WPX. And WMB pays nearly 4% div.  

October 8, 2012: Three Affiliated Tribes want more money; they signed 50-50 agreement with the state four years ago; now they want more money; 

September 26, 2012: Canadian story, not the Bakken -- Williams Cos signs new agreement to provide gas processing in Canada's oil sands: Co announced that it has signed a new long-term gas processing agreement with a producer in the Canadian oil sands. Under the new long-term agreement, Williams will extract, transport, fractionate, own and market the natural gas liquids (NGLs) and olefins recovered from the offgas at the oil sands producer's upgrader near Fort McMurray, Alberta. Under the agreement, the NGL/olefins recovered are expected to be ~12,000 barrels per day (bpd) by mid-2015 and growing to approximately 15,000 bpd by 2018.

January 3, 2012: Williams completes its split: WMB -- pipelines; WPX -- exploration and production. 

December 30, 2011: Williams buying a gathering unit in the Marcellus.

September 7. 2011: WMB increases dividend by 25%.

April 9, 2011: Reservation leadership under fire for failures and poor management of assets in the reservation.

In the report dealing with oil and gas, the transition team said a sale of 85,000 tribal mineral acres to the Williams Co. Inc., of Oklahoma, for $925 million represented “the largest exploitation of tribal minerals in the history of this country and the sad part of this whole deal is that we did it to ourselves."

Sour Grapes

Original Post

I am re-posting this. I posted this story as one of two stories on one post yesterday.  I think it's a bigger story than when I first read it. It needs to stand alone with its own post.

For the past several weeks, I have been posting that I expect to see increased consolidation or acreage exchanges in 2011 - 2012.

I have to re-calculate the percent of acreage in the reservation that was bought, but rough calculations suggest that it was about 10 percent, probably a bit less.  My rough calculations were not too far off. According to wikipedia.com, FBIR is composed of 12 million acres. 85,000 acres/12 million acres = 7 percent.

In this case, Williams Cos. has purchased 85,000 net acres in the Fort Berthold Indian Reservation for just less than $1 billion. Analysts estimate the property has potential reserves of 185 million barrels.

Back-of-envelope calculations:

• 185 million barrels * $50/bbl = $9.25 billion (remember, WMB paid about $1 billion in cash)
• 185 million barrels/85,000 net acres = 2200 bbls/acre.
• 2200/acre x 640 acres = 1.4 million barrels/section
• Two wells/section = 700,000/well EUR
• In fact, WLL is getting up to three wells, maybe four wells / section in the core Bakken (Sanish)
• 85,000 net acres/640 acres = 133 sections; 133 sections/36 sections/township = just less than 4 townships. FBIR is about 7 townships x 6 townships = 42 townships (that's where the original rough calculation of 10 percent came from)

From Bloomberg, November 15, 2010:

Williams Cos, the fourth-largest U.S. pipeline operator by market value, agreed to purchase 85,800 net acres in North Dakota’s Bakken oil play for $925 million in cash as it seeks to expand its exploration and production business. The acreage is in the Fort Berthold Indian Reservation.

The property has potential reserves equivalent to 185 million barrels of oil in the Middle Bakken and the Upper Three Forks formations, Williams said in a statement today. The property has 24 existing wells producing 3,300 barrels of oil a day, the company said.

An analyst calculates that Williams is paying about $8,000 a net acre when production is included, less than Enerplus Resources Fund agreed to pay in September for leases in the same area. See my posting regarding the Enerplus purchase.

I've always thought of WMB as a pipeline company; somewhere along the way, they got involved with oil exploration and production, something I must have missed. Williams will have to update its webpage; the current map of operations includes nothing in the North Dakota Bakken. (Of course, some weeks from now, that will change.)

The seller is private and undisclosed.