Williams has signed an agreement to acquire a major acreage position in North Dakota's Bakken oil play that will, upon completion, diversify the company's exploration and production interests into light, sweet crude oil production.
By 2013, approximately 25% of the company's E&P revenue streams are expected to be generated by oil production, up from 7% in 2010.
In the sale, Williams has agreed to purchase approximately 85,800 net acres from private owners for US$ 925 million. The acreage is located entirely on the Fort Berthold Indian Reservation, located in the Williston Basin of North Dakota.
The company estimates that these properties represent approximately 185 million barrels of oil equivalent in total net reserves potential in the Middle Bakken and the Upper Three Forks formations. The assets in the proposed transaction also include 3300 bpd of net oil production from 24 existing wells.
“This acquisition establishes a significant acreage position in an area which further diversifies, and when combined with our recently acquired Marcellus position, basically transforms our business – both geographically and in terms of our product mix,” said Ralph Hill, president of Williams' exploration and production business.
Williams' entry into the Bakken Shale play follows its entry into Pennsylvania's Marcellus Shale, where the company has accumulated approximately 100,000 net acres over the past year and a half.
“This latest acquisition gives us a significant position in the best geologic portion of the strongest onshore oil play in the United States, based on our geologic and engineering analysis,” Hill said. “The pay thickness, high porosity and amount of hydrocarbon saturation are highly attractive. We are now positioned in three of the country's most attractive growth areas – the Piceance, the Marcellus, and now the Bakken.”
In addition to the purchase price, Williams expects to invest additional funds for drilling and development costs totalling approximately US$ 60 million in 2010 and US$ 200 million to US$ 300 million in 2011.
Williams expects to double the current level of drilling activity to six rigs by 2012 and expects the new leases to be producing more than 20,000 bpd by the end of 2012.
Steve Malcolm, Williams' chairman, president and chief executive officer, said, “Development of the Bakken will be very similar to the low-risk, repeatable nature of the Barnett and Marcellus shales, as well as the tight sands in the Piceance Basin,” Malcolm said. “Technological advancements in just the past few years have allowed the play to shift from exploration to resource development.”