The good oil on Bakken barrels

It'S 60 years today since oil was discovered south of Tioga (present population: 1127) in North Dakota.

So what, we hear you cry.

Well, that hole drilled by Amerada Petroleum of Tulsa, Oklahoma, led to the discovery of the Williston Basin and the much bigger hydrocarbon province now known as the Bakken formation lying under North Dakota and Montana, which was estimated by the US Geological Survey in 2008 to contain 4.3 billion barrels of what it called "technically recoverable oil".

Despite the discovery on April 4, 1951, the Bakken was not a big drawcard. There was seen to be plenty of oil elsewhere and more easily recovered than crude trapped in shale, and the big falls in oil prices made the technology cost too great.

But now it is changing. Oil production in the Bakken went from 3000 barrels a day in 2005 to 225,000 last year and some say it will be yielding 1 million barrels a day by 2020.

And we are never going to see oil at $US10 a barrel as we did in the 1990s. Light crude closed in New York on Friday at $US108.31.

Hartley oil analyst Dave Wall has a "buy" on Samson Oil & Gas (SSN), which has a play in the Bakken and in the Williston Basin in particular. It's not a big call, with a three-month price target of 21c, against Friday's close at 18c.

Samson has a maximum flow rate of 1320 barrels a day from the Bakken with its Rodney 1-14 well in North Dakota.

Work has not finished, though, and 15 plugs in the well, which effectively choke back the potential flow of the well, are expected to be drilled out this week. We should get a more reliable oil flow figure after that.

Today the company will start fracture stimulation (which involves injecting water, sand and chemicals to release trapped oil and gas) at its nearby Earl 1-13H well.

Wall says 30 recent wells by various companies into the shale have achieved average daily production of 678 barrels each and that, if Samson could emulate those results, he calculates an upside potential of 36c for the share price.

Overall, though, the record of Australian juniors looking for oil and gas in the US has, with some exceptions, been fairly dismal to judge by present share prices.

Among the latest news, Entek Energy (ETE) - Friday close at 13c - had added to its Gulf of Mexico acreage. The junior has also teamed up with Emerald Oil & Gas (EMR) - Friday close at 4.5c - to explore ground in the Green River Basin, a huge shale formation that extends through Wyoming, Utah and Colorado.

Grand Gulf Energy (GGE) - Friday close at 0.6c and a day-traders' delight - has papered the walls with another 364 million shares issued at 0.5c to raise about $1.8 million.

This junior owns a stake in Louisiana's Napoleonville salt dome project which, the company says, has the potential to contain 520 billion cubic feet of gas and 4.5 million barrels of oil.

Pure Speculation reported on the acquisition in mid-2007. As the story still seems to be all about potential rather than reserves, we'll check back in 2015.

A little more advanced is Sundance Energy (SEA) - Friday close at 94c - which has interests in five US states, including four Bakken plays in the Williston Basin. The company has just announced a 202 per cent increase in its 2P (proved plus probable) reserves and will have a 3P (proved, probable and possible) reserve estimate in September.

Kyrgyzstan or bust

NOTHING quite like laying off a bit of your political risk weighting.

Kentor Gold (KGL) has had its ups and downs depending on the situation in Kyrgyzstan but seems on track there for its Andash project to produce 70,000 ounces of gold and 7400 tonnes of copper a year.

Obviously, Macquarie Bank thinks so, having last month lent Kentor $US50m. And the new government in Bishkek seems to be holding together, although cosying up to Moscow for support.

But the company, with access to $71m in the bank, has the ability to shell out $12.8m in cash to take over an unlisted public company and pay off its debt.

Jinka Minerals has the appealing factor of owning three projects, all of them reassuringly in Australia - the Burnakura gold project 50km south of Meekatharra, the nearby Gabanintha copper-gold deposit and the Jervois base metals project near Alice Springs.

Jinka has 1400 shareholders. You would have thought that such a company would have floated, but the main barrier to that has been the $4.9m Jinka owes MD Michael Ruane, who parted with the readies needed to buy Burnakura.

The debt is perfectly justifiable - directors from time to time lend their companies money - but it is hard to sell an IPO when a chunk of the proceeds will be used to pay debt, no matter that it may have been money well spent.

Meanwhile, Kentor has begun talking to the locals in Kyrgyzstan. Most of the people are on board, the main opposition coming from the wealthiest families in the area.

They are opposed to the mine because they fear it will deprive them of cheap farm labour.

The workers tending crops and herds get paid between $60 and $80 a month, while Kentor is planning to offer about $450 a month.

Kentor is trying to get the top landowners onside by offering contracts for them to supply the mining village with meat and build fences and pipelines.

Milestone at Dragon

SO many ASX announcements get scant attention except from the more enthusiastic shareholders, but we like to notice milestones when possible.

We didn't have space for the news several weeks ago from Dragon Mining (DRA) reaching a gold inventory of 1 million ounces, but the latest drilling result allows us to make amends.

The 1.12 million ounce resource was due mainly to the upgrade of resource at the Kuusamo project in Finland, where there is 383,500oz at an average 5.4 grams/tonne.

During the week, the company announced a very good result there, with the top half of a hole returning 34.9m at 9.3 grams/tonne.

There's 583,200oz at 5.7g/t at Vammala, also in Finland, and 158,200oz at the Svartliden gold mine in Sweden.

These figures are after depletion has been subtracted, these two operations producing 14,940oz between them in the December quarter.

Speewah ambitions

ONE to keep an eye on is Speewah Metals (SPM), which has an ambitious exploration program for this year.

That program, unveiled on Friday, is to target another two to five billion tonnes of ore at its vanadium-titanium project in the East Kimberley region.

The company says it has Australia's largest vanadium in magnetite deposit, with a resource of 3.16 billion tonnes at 0.3 per cent.

Speewah is doing metallurgical tests and other groundwork before either raising money for a bankable feasibility study and development or sale of the project.

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