Bakken Research

INVESTMENT RESEARCH
A Border Comparison of the Bakken
Differences Apparent, but Attractive Nonetheless

Across the Williston Basin that spans the Canadian/US border, the geology of the
Bakken varies, resulting in regional differences in economic metrics. While we find the
economics attractive in most areas today, there are both sweet spots in the play along
with new emerging areas that look prospective for the formation. We also find the
formation directly below the Bakken, the Three Forks or Sanish, to be attracting
increased industry attention in tandem with the Bakken.
The Bakken formation is deeper in North Dakota relative to Saskatchewan,

resulting in higher pressures and flow rates, but is somewhat offset by higher
drilling costs;
Well economics in Saskatchewan generate lower individual well NPV values
but have higher IRR and efficiency metrics, relative to North Dakota;
Development for the Bakken and Three Forks formation, also known as the
Sanish, has pushed into the emerging areas of Tableland Saskatchewan, as
well as the counties of Divide and Burke in North Dakota;
The Sanish sand layer lies directly below the Bakken and may contain Bakken
oil, depending on the amount of communication between the two formations;
In any case, the quality of Sanish oil is similar to the Bakken and looks to have
similar type curves for both IP and EUR;
Sanish plays may complement or substitute for the Bakken in certain
development areas, but the productive sand layer may not be present
everywhere;
In ideal cases, the Bakken and Sanish are complementary, potentially
doubling the drilling locations per section along with expected recoverable oil;
Land sale prices have escalated both north and south of the border;
Midstream pipeline expansion plans provide an indication of increased
drilling activity in the near future;
All sub-areas within the Williston Basin in Saskatchewan and North Dakota
appear to be economic.
Please refer to the final page(s) of this report for required disclosures.
September 10, 2010 Victor Rodberg, CFA (403) 767-0821

David Phung, P.Eng., Associate (403) 767-0824
John O’Keane, Associate (403) 767-0825
Table of Contents
WILLISTON BASIN .................................................................................................................... 3

SUB-AREAS................................................................................................................................... 3
GEOLOGY ..................................................................................................................................... 7
SASKATCHEWAN VERSUS NORTH DAKOTA ................................................................................... 7
FLOW RATES AND RESERVES ....................................................................................................... 8
ECONOMICS ................................................................................................................................ 10
Saskatchewan Type Curves ..................................................................................................... 9
North Dakota Type Curves ...................................................................................................... 9
Bakken Economics - Saskatchewan vs. North Dakota .......................................................... 10
LAND SALES ACTIVITY .............................................................................................................. 10
Saskatchewan and North Dakota Recent Land Sales............................................................ 11
SUMMARY ................................................................................................................................. 13
APPENDIX A: TYPE CURVE EXHIBITS ............................................................................. 14

TYPE CURVE ASSUMPTIONS ...................................................................................................... 16
September 10, 2010 / p.2 Victor Rodberg, CFA (403) 767-0821

David Phung, P. Eng., Associate (403) 767-0824
WILLISTON BASIN
The Williston Basin covers an extensive area that includes parts of North Dakota, South Dakota
and Montana in the United States, as well as southern Saskatchewan and southwest Manitoba in
Canada, as shown in Exhibit 1.
Exhibit 1. Williston Basin
Source: Canadian Plains Research Center
In the past decade, the basin has experienced increased industry interest with the exploitation of
the Bakken formation for light oil. Although originally discovered in 1951, the Bakken
formation did not achieve prominence until horizontal drilling and completions technology was
developed to economically unlock the oil resource. The strength in oil prices during this past
decade has also helped to accelerate development of this resource.
SUB-AREAS OF THE WILLISTON BASIN

North of the border in Canada, the primary area of industry activity has been in the Viewfield
area of southeast Saskatchewan where Crescent Point Energy (CPG, NR) and Petrobakken
(PBN, NR) are the largest companies currently exploiting the Bakken. Activity for the Bakken in
the United States has been centered on areas such as Billings Nose, Sanish Parshall, Bailey and
the Nesson Anticline regions, amongst others. Outside of these established production fields,
development has pushed into such emerging areas as Tableland and Taylorton in Saskatchewan
Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.3
and into the North Dakota counties of Divide and Burke. Exhibit 2 shows both the developed and
emerging Williston Basin sub-areas in North Dakota while Exhibit 3 shows the sub-areas in
Saskatchewan.
While our discussion on sub-areas focuses on North Dakota, another prominent oil field within
the Williston Basin is the Elm Coulee field in Montana, which is northwest of the Billings Nose
sub-area. Development began at Elm Coulee in 2000 and is one of the largest oil field in the
United States. Oil recovery estimates ranges from 270 million barrels to 500 million barrels at
Elm Coulee.

Exhibit 2. Williston Basin Sub-Areas of Development in North Dakota
Divide
(emerging)
Burke
(emerging)
Stanley
Mkt. Cap
Sanish US Operators Ticker ($mm)
Parshall Exxon Mobil XOM-N 309,600
ConocoPhillips COP-N 83,300
EOG EOG-N 22,900
Marathon MRO-N 22,600
Hess HES-N 17,800
Continental CLR-N 7,500
Nesson Whiting WLL-N 4,700
Enerplus ERF.UN-T 4,300
Anticline Baytex BTE.UN-T 3,700
Brigham BEXP-Q 1,900
Oasis OAS-N 1,600
Northern NOG-N 780
Kodiak KOG-N 390
Arsenal Energy AEI-T 110
Samson Resources Private N/A
Bailey
Billings
Nose
Source: GeoScout, Bloomberg

Exhibit 3. Williston Basin Sub-Areas of Development in Saskatchewan
Viewfield
Tableland Taylorton Mkt. Cap

(emerging) (emerging) CDN Operators Ticker ($mm)
Crescent Point CPG-T 8,400
Enerplus ERF.UN-T 4,300
PetroBakken PBN-T 3,800
NAL NAE.UN-T 1,600
Legacy LEG-T 1,400
Painted Pony PPY.A-V 340
Renegade RPL-V 130
NuLoch Resources NLR-V 120
Tundra Private N/A
Source: GeoScout, Bloomberg

GEOLOGY- BAKKEN AND THREE FORKS

While the Bakken play has received much of the attention recently, the Williston Basin has also
had operators drilling for oil in the Sanish, also more commonly called the Three Forks
formation in the United States. The Three Forks or Sanish lies directly below the Bakken
formation, as displayed in Exhibit 4.
Exhibit 4. Stratigraphic Chart of Bakken and Three Forks (Sanish)
Bakken
Sanish
Source: Saskatchewan Government
The Bakken is classified into Upper, Middle and Lower Members where the Middle Member is
typically the most prospective layer due to its higher mobility of oil relative to the upper and
lower layers. This relative mobility is a result of a difference in reservoir properties as the
Middle Bakken is closer to a silt (higher permeability/oil mobility) while the upper and lower
layers are closer to a shale (lower permeability/oil mobility).
The Three Forks (Sanish) consists of dolomite and shale with an upper layer of sand. This sand
layer may not be present everywhere but where it is present, it may contain economical amounts
of Bakken oil that has migrated there over time. In these cases, the Sanish may be a substitute or
a complement to the Bakken in an exploitation area, depending on the degree of communication
with the Middle Bakken. The degree of communication is a function of the thickness of the
Lower Bakken and the amount of fractures connecting the Middle Bakken with the Three Forks
(Sanish). Areas where the Lower Bakken is greater than 25 feet thick with little vertical fracture
communication, the probability of two separate reservoirs may be higher. An area having two
separate independent reservoirs should reduce the exploration risk and enhance the magnitude of
economic returns by potentially doubling the oil that is originally in place. Over time, operators
can confirm or refute the presence of separate reservoirs by observing pressure differentials and
correlations between wells drilled into each reservoir.
SASKATCHEWAN VERSUS NORTH DAKOTA

A cross sectional view of the geology from Viewfield in the north to Billings Nose in the south
shows a down-dip trend where the Bakken and Sanish are deeper in the United States, as shown
in Exhibit 5. The approximate depths of the Bakken in southeast Saskatchewan and North
Dakota are 1,600 meters and 3,000 meters, respectively. As a result of greater depth, wells
drilled further south will typically exhibit greater pressures and contribute to higher flow rates.
However, this advantage is somewhat offset by higher drilling and completion costs.

Exhibit 5. Bakken and Sanish Depth Trend
Viewfield, Saskatchewan North Dakota
Upper Bakken
Middle Bakken
Lower Bakken
Sanish
CAN
US
Source: Clarus Securities, NuLoch Resources Inc. corporate presentation (June 29, 2010)
FLOW RATES AND RESERVES

Exhibits 6 and 7 display the rate versus cumulative production graphs for the different areas,
based on an average type curve. It should be noted that we have only taken the oil production for
comparison purposes. Natural gas and natural gas liquids production would provide additional
upside if gas conservation is available. To reflect the most recent technological developments
and well results, each type curve was generated based on a sample of wells from the beginning of
2009 onward. Some areas had a larger sample, such Viewfield with 474 wells, while other areas,
such as Tableland, had limited information and we have had to make educated assumptions.
Comparing Exhibits 6 and 7, we see higher IP rates and higher EUR values in North Dakota, as
expected, because of greater depth and pressures. To note, because of a lack of sufficient data
points, the Tableland, Burke and Divide type curves were generated using assumptions and
recent industry announcements on well results. For Tableland, one industry player has recently
achieved a 30-day IP rate of 142 bbl/d across five Sanish wells and it was assumed that a similar
rate of 140 bbl/d may be reasonable moving forward. The decline profile was assumed to be
similar to wells in Viewfield with an initial hyperbolic decline in the first year followed by a
low-decline harmonic profile thereafter. For Burke, because the Bakken begins to pinch out
when approaching this region, we have assumed a lower IP rate when compared to both the
neighboring Nesson Anticline and Stanley. For the Divide type curve, the IP rate was assumed to
be slightly lower than Burke since it is further north and may have shallower depths with lower
reservoir pressure. However, without a large number of data points, the decline rates assumed
may be aggressive, leading to a lower and more conservative EUR value. Appendix A
summarizes type curve assumptions and also compares the type curves to the available data for
sub-areas where it was available.

Exhibit 6. Saskatchewan Sub-Area Type Curves

200
180
160
Production (bbls/d)
140 Viewfield - 474 Wells
120 Tableland - Limited Data
100 Taylorton - 17 Wells
80 (organized by IP rate)
60
40
20
0
0 20 40 60 80 100 120
EUR (mbbls)
Source: Company reports, GeoScout, Clarus Securities
Exhibit 7. North Dakota Sub-Area Type Curves

800
700
600 Sanish Parshall - 126 Wells

Production (bbls/d)
Nesson Anticline - 112 Wells

500 Stanley - 70 Wells
Burke - Limited Data
400 Divide - Limited Data
Bailey - 62 Wells
300 (organized by IP rate)
200
100
0
0 100 200 300 400 500 600 700
EUR (mbbls)

A LOOK AT ECONOMICS
Using the area type curves generated in Exhibits 6 and 7, economics were estimated using a 30-
year productive life and a flat $75/bbl oil price. The economics have been summarized in Exhibit
8 for comparison. Different sub-areas within Saskatchewan and North Dakota generate a range
of different economics, primarily dependent upon geology and drilling and completions
techniques. For example, when comparing Viewfield to Taylorton and Tableland, Viewfield
economics have benefited from cost efficiencies with higher drilling density and intensity of
development, as well as refined drilling and completions techniques developed in the past few
years, which all culminates in a lower capital cost per well and more attractive economics. For
emerging areas such as Tableland, Divide and Burke, if history repeats itself with companies
moving up the learning curve, we may see the economics improving in the future.
In general, Saskatchewan wells may generate lower NPV values but higher IRR and capital
efficiency metrics, relative to North Dakota. Royalties in Saskatchewan are generally lower on
crown lands, as operators benefit from a royalty holiday of 2.5% up to the first 100,640 mbbl,
depending on well depth (in North Dakota the average freehold royalty rate is 18.5% with an
additional state severance tax of 11.5%). Despite differences, the economics remain attractive
across the basin, both north and south of the border.
Exhibit 8. Comparison of Bakken Economics in Saskatchewan and North Dakota
30-Day IP EUR Capex NPV10 BT IRR
Area (bbls/d) (mbbls) ($mm) ($mm) (%)
Saskatchewan
Tableland 140 110 3.2 1.3 29%
Taylorton 150 110 2.2 2.3 77%
Viewfield 170 120 1.6 3.3 180%
North Dakota
Divide 240 190 4.5 2.6 36%
Burke 300 240 4.5 4.4 59%
Nesson Anticline 360 330 4.5 4.8 54%
Stanley 350 290 4.5 6.1 87%
Sanish Parshall 630 580 5.5 15.2 156%
Bailey 220 230 4.0 3.8 47%
LAND SALES ACTIVITY

Recent land sales pricing information for southern Saskatchewan and North Dakota within the
Williston Basin is presented in Exhibit 9. Prices have been escalating both north and south of the
border as exploration and development has pushed into the emerging areas of Tableland,
Taylorton, Divide and Burke. As additional wells are drilled and adjacent lands are de-risked,
prices will likely escalate even further in these emerging areas. However, the top tier land prices

Exhibit 9. Southern Saskatchewan and North Dakota 2010 Land Sales
Southern Saskatchewan
Source:
Source:Geoscout
GeoScout
North Dakota
Divide Burke Renville
$1,300 /acre $670/acre $170/acre
Mountrail
Williams $5,300/acre
$3,400/acre Ward
$200/acre
McKenzie
$3,100/acre
McLean
$100/acre
Dunn
$5,500/acre Re gional
Permeability Barrier
Billings
$850/acre
Stark
$1,289/acre
Slope Hettinger
$100/acre $70/acre
Source: North Dakota Department of Mineral Resources, August 30, 2010, US$
Source: North Dakota Department of Mineral Resources,
August 30, 2010, US$

are found currently in the more established areas of Viewfield, Sanish Parshall (Mountrail
County) and the Nesson Anticline (Mountrail, Williams, McKenzie and Dunn Counties). Price
inflation reflects the economic attractiveness of the areas as well as the relative scarcity of
remaining land. Some of the lower land prices paid have been to the east of the regional
permeability barrier where the prospectively for oil is lower, as the Bakken formation thins and
pinches out at this line.
ENBRIDGE BAKKEN EGRESS EXPANSION

Having sufficient egress capacity is essential to getting production to market and ensuring cash
flow. In the past, especially during the last run-up in oil prices this past decade, operators in the
Bakken plays were faced with limited oil egress options as pipelines were running at or near full
capacity.
After a pipeline expansion of 51,000 bbls/d in January, 2010, Enbridge’s current pipeline
capacity in Southern Saskatchewan and North Dakota is 161,500 bbls/d. This previous capacity
expansion was immediately utilized and a further expansion was recently announced. This new
expansion is depicted in Exhibit 10 and is planned for a commissioning timeframe of Q1/13. The
egress expansion is a result of an expected increase in Bakken and Sanish oil production in
southern Saskatchewan and North Dakota. Take away capacity in the region will increase by
145,000 bbls/d and can be further expanded by 325,000 bbls/d with relatively low incremental
cost. Enbridge has also incorporated further increases in area production into their construction
plans. The plans call for an expansion originating at Beaver Lodge Station at Tioga, North
Dakota and will terminate at Cromer, Manitoba. In addition, a separate pipeline connection will
be made to the Beaver Lodge Station that will connect the Bakken pipeline system to pipelines
south of the Missouri River. This would effectively open additional markets for the area.
Typically, midstream companies work closely with E&P operators to produce realistic
production forecasts and egress capacity needs. In fact, Enbridge announced that there was
sufficient long term shipping commitments from a number of large operators to enable this
expansion to proceed. The expectation of an acceleration of drilling activity is clear.
Exhibit 10. Enbridge Bakken Pipeline Expansion
Source: Enbridge Inc.

SUMMARY
Differences across the border include a deeper formation in North Dakota relative to
Saskatchewan, resulting in higher pressures and flow rates. These geological and reservoir
differences drive the play economics. Although North Dakota Bakken and Three Forks (Sanish)
wells have higher pressures and production rates, the economics are somewhat offset by higher
capital costs. In general, wells in Saskatchewan generate lower NPV values but higher IRR and
efficiency metrics. Larger operators, with more cash flow and access to capital, that desire
greater magnitudes of growth may prefer development in North Dakota while smaller operators
might view higher efficiency metrics in Saskatchewan to be more attractive. Recently, both small
and large operators have pushed development of the Bakken and Sanish into the emerging areas
of Tableland, Divide County and Burke County. Development of these areas has pushed land
sale prices upwards accordingly.
The Sanish lies immediately beneath the Bakken, but not all areas have the productive Sanish
sand layer. Where the productive Sanish sand layer exists, it may contain Bakken oil that has
migrated there over time. The quality of Bakken and Sanish oil are effectively identical, with
Bakken and Sanish wells also appearing to have similar IP rates and EUR values. As such, the
Sanish can be a substitute or a complement to the Bakken in certain areas. However, should there
be a significant degree of communication between the Bakken and Sanish via vertical fractures,
the complement scenario may not be proven to be true over time and can be observed or inferred
from reservoir pressure measurements. With similarly attractive economics, there has been an
increase in industry focus on exploiting the Sanish in addition to the Bakken.
As a clear signal that industry expects an increased level of drilling activity in the southern
Saskatchewan and North Dakota area targeting the Bakken and Sanish, midstream egress
pipelines look to be expanded in the near future to accommodate additional volumes. The
capacity associated with the last pipeline expansion in January, 2010, was utilized immediately.
The large oil resource in place in the Williston Basin has effectively been unlocked by the
development of horizontal drilling and completions technology. The ascension of higher oil
prices this past decade helped to further increase the Bakken’s spotlight. After a period of
uncertainty associated with the recent recession, commodity prices appears to have stabilized,
lending confidence to operators to once again push forward their development plans for the
Bakken and Sanish. Today’s commodity price environment results in attractive economic returns
from all of these plays.

APPENDIX A: TYPE CURVE EXHIBITS
Taylorton, 2009/10 - 17 wells

180
160
140
Production (bbl/d)
GeoScout
120
Clarus Curve
100
80
60
40
20
0
0 5 10 15 20 25 30 35 40 45 50
Month
Viewfield, Yr. 2009/10 - 145 wells

200
180
160
Production (bbl/d)
140
GeoScout
Clarus Curve
120
100
80
60
40
20
0
0 5 10 15 20 25 30 35 40 45 50
Month
Nesson Anticline, 2009/10 - 112 wells

450
400
350
Production (bbl/d)
GeoScout
300
Clarus Curve
250
200
150
100
50
0
0 5 10 15 20 25 30 35 40 45 50
Month
Source: GeoScout, Clarus Securities

Stanley, 2009/10 - 70 wells

400
350
Production (bbl/d)
300 GeoScout
250 Clarus Curve
200
150
100
50
0
0 5 10 15 20 25 30 35 40 45 50
Month
Sanish Parshall , 2009/10 - 126 wells

800
700
Production (bbl/d)
600
Clarus Curve
500 GeoScout
400
300
200
100
0
0 5 10 15 20 25 30 35 40 45 50
Month
Bailey, 2009/10 - 62 wells

250
200
Production (bbl/d)
GeoScout
Clarus Curve
150
100
50
0
0 5 10 15 20 25 30 35 40 45 50
Month
Source: GeoScout, Clarus Securities

TABLELAND, BURKE AND DIVIDE TYPE CURVE ASSUMPTIONS

First Year Decline Parameters After Year 1
IP Life
Area (bbls/d) Exponent Di Exponent Di (Yrs)
Tableland 150 0.75 18% 1.0 5% 30
Burke 320 0.75 17% 1.0 5% 30
Divide 260 0.75 17% 1.0 5% 30
Source: Clarus Securities

Clarus Securities Equity Research Disclosures
General Disclosure
The information and opinions in this report were prepared by Clarus Securities Inc. (“Clarus Securities”). Clarus Securities is a wholly-
owned subsidiary of Clarus Securities Holdings Ltd. and is an affiliate of such. The reader should assume that Clarus Securities or its
affiliate may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of
issuers discussed herein.
The opinions, estimates and projections contained in this report are those of Clarus Securities as of the date of this report and are subject
to change without notice. Clarus Securities endeavours to ensure that the contents have been compiled or derived from sources that we
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Equity Research Ratings
Buy: Attractively valued and expected to appreciate significantly from the current price over the next 12-18 months.
Speculative Buy: Expected to appreciate significantly from the current price over the next 12-18 months. Financial and/or operational
risk is high in the analyst’s view.
Accumulate: Attractively valued, but given the current market price, is expected to appreciate moderately over the next 12 -18 months.
Hold: Fairly valued and expected to trade in line with the current price over the next 12-18 months.
Sell: Overvalued and expected to decline from the current price over the next 12-18 months.
Under review: Pending additional review and/or information. No rating presently assigned.
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INVESTMENT RESEARCH

A Border Comparison of the Bakken

Differences Apparent, but Attractive Nonetheless

 The Bakken formation is deeper in North Dakota relative to Saskatchewan,

September 10, 2010 Victor Rodberg, CFA (403) 767-0821

WILLISTON BASIN .................................................................................................................... 3

APPENDIX A: TYPE CURVE EXHIBITS ............................................................................. 14

September 10, 2010 / p.2 Victor Rodberg, CFA (403) 767-0821

Source: Canadian Plains Research Center

SUB-AREAS OF THE WILLISTON BASIN

September 10, 2010 / p.4 Victor Rodberg, CFA (403) 767-0821

Exhibit 2. Williston Basin Sub-Areas of Development in North Dakota

Source: GeoScout, Bloomberg

Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.5

Exhibit 3. Williston Basin Sub-Areas of Development in Saskatchewan

Tableland Taylorton Mkt. Cap

Source: GeoScout, Bloomberg

September 10, 2010 / p.6 Victor Rodberg, CFA (403) 767-0821

GEOLOGY- BAKKEN AND THREE FORKS

SASKATCHEWAN VERSUS NORTH DAKOTA

Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.7

Exhibit 5. Bakken and Sanish Depth Trend

Viewfield, Saskatchewan North Dakota

FLOW RATES AND RESERVES

September 10, 2010 / p.8 Victor Rodberg, CFA (403) 767-0821

Exhibit 6. Saskatchewan Sub-Area Type Curves

140 Viewfield - 474 Wells

120 Tableland - Limited Data

100 Taylorton - 17 Wells

Exhibit 7. North Dakota Sub-Area Type Curves

600 Sanish Parshall - 126 Wells

Nesson Anticline - 112 Wells

Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.9

LAND SALES ACTIVITY

September 10, 2010 / p.10 Victor Rodberg, CFA (403) 767-0821

Exhibit 9. Southern Saskatchewan and North Dakota 2010 Land Sales

Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.11

ENBRIDGE BAKKEN EGRESS EXPANSION

Source: Enbridge Inc.

September 10, 2010 / p.12 Victor Rodberg, CFA (403) 767-0821

Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.13

APPENDIX A: TYPE CURVE EXHIBITS

Taylorton, 2009/10 - 17 wells

Viewfield, Yr. 2009/10 - 145 wells

Nesson Anticline, 2009/10 - 112 wells

Source: GeoScout, Clarus Securities

September 10, 2010 / p.14 Victor Rodberg, CFA (403) 767-0821

Stanley, 2009/10 - 70 wells

Sanish Parshall , 2009/10 - 126 wells

Bailey, 2009/10 - 62 wells

Source: GeoScout, Clarus Securities

Victor Rodberg, CFA (403) 767-0821 September 10, 2010/ p.15

TABLELAND, BURKE AND DIVIDE TYPE CURVE ASSUMPTIONS

September 10, 2010 / p.16 Victor Rodberg, CFA (403) 767-0821

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September 10, 2010 / p.20 Victor Rodberg, CFA (403) 767-0821

TEL: 416-343-2777 FAX: 416-343-2799

The Bakken formation is deeper in North Dakota relative to Saskatchewan,