Thursday, December 18, 2014

Future Of Shale -- December 17, 2014

In a long note like this there will be factual and typographical errors. There will be opinions mixed in with facts. Consider this entire "essay" nothing more than opinion within the guidelines expressed in the "welcome/disclaimer." This has absolutely nothing to do with investing in the Bakken. The main purpose of the blog is to help me better understand the Bakken. The Bakken is what it is. I'm not doing this for any reason other than the enjoyment I get out of following it. There is no hidden agenda. The essay is not complete. I will add to it when the spirit moves me. When it is complete, I will note that. 

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Preamble, Disclaimer, And All That Stuff

Rigzone's look at the future of shale in light of the oil glut and depressed oil prices.

I don't think I will post any excerpts of the linked article above. I have it saved elsewhere; most of these articles eventually "disappear," requiring a subscription later on to access them (a word to the wise).

I scanned the article linked above but I didn't read every word. I think there is a huge story line that was mentioned in another Rigzone article but not in this most recent one.

Looking at that previous Rigzone article and then at this most recent one (linked above), I think we will see an essay soon at Rigzone or elsewhere about another lesson learned with regard to US shale which I am trying to express in the rambling notes below. Developing an unconventional oil play is entirely different than what has gone on before.

What follows is personal opinion; what looks like facts may in fact be wrong; I'm not looking up staff to confirm (I discuss this in my "welcome/disclaimer" pages).

If any of this information is important to you, go to linked sources throughout the blog; don't take my word for it; I make a lot of factual and typographical errors.

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Initial Thoughts

There are three unconventional plays that account for about half of all unconventional oil right now: the Permian, the Eagle Ford, and the Bakken.

Of the three unconventional plays (remember, the Permian has both conventional and unconventional aspects) the Bakken is the most mature in terms of development and understanding of the geology.

Within the Bakken, the middle Bakken is well delineated. This is not true for the other payzones within the Bakken pool. A lot of work has been done on the upper bench of the Three Forks, the Sanish, and the Pronghorn Sand(s), but even those formations are not delineated as well as the middle Bakken.

The lower benches of the Three Forks are hardly delineated at all; that delineation was just beginning when the slump in oil prices began. And, of course, we know almost nothing about the Tyler or the Lodgepole (not the reefs) formations.

The Bakken is 90 - 96% oil across the Basin.

The Eagle Ford is still in the early stages of being delineated; I have no idea how many pay zones there might be in the Eagle Ford, just as we did not know how many pay zones there would be in the Bakken until several years into the boom. The Eagle Ford has areas that are predominantly oily and other areas that are heavier in condensate. The general areas are known but the Eagle Ford came in later than the Bakken and delineation is probably less clear than the middle Bakken.

The Permian is even less delineated with regard to its unconventional plays.

Then across the US there are several other unconventional plays; perhaps the Niobrara is #4. Then a half dozen others.

All figures below are 2014 US dollars. 

At $150 oil, operators will explore every shale play and every area within every shale play.

At $100 oil, operators will still explore the better shale plays but start to concentrate on development of delineated fields.

At $75 oil, operators will pretty much discontinue exploration in even the best plays and emphasize development and infill wells.

Somewhere between $80 and $65 oil operators will start to circle the wagons, not only discontinuing exploration in the newer shale plays but will discontinue exploratory drilling in the three big US shale plays.

At $50, the circling of the wagons will become obvious to even the most casual observer. It's possible oil could get so low that all drilling in all US shale might stop but that seems incredibly unlikely.

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$80 Oil 

Below $80, shale operators will start to demonstrate just how flexible they can become.

I don't now enough about the Permian or the Eagle Ford to comment, but I bet they are similar to the Bakken.

First, behind the scenes, the Bakken operators are going to extract savings from the oil service operators. Earlier I posted an example of where Sanjel was providing almost a 50% discount for some services. Sand and ceramic will come down in price (more on that later).

In the Bakken, almost everything of interest or of value is now held by production. If one wants to look how an oil company can leverage that, look at at the Grail oil field on the GIS map server. Operators can move their rigs to the best areas in the Bakken.

In the Bakken, it's all about location, location, location.

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$50 Oil  

This is where it gets very, very interesting. When I first started blogging, long-time readers might remember that I always used $50-oil in looking at the economics of any well.

Everyone says that Bakken wells have gotten more expensive over the years, but it seems they forget the other side of the coin: the wells are also much more productive. And the exorbitant lease bonuses have been paid. And more infrastructure is in place. I remember all the challenges with just getting water to the wells for fracking; that's not even talked about any more.

When I first started blogging, it was taking 40 - 60 days to drill to total depth. At $50-oil, operators are going to have access to the best rigs, the best geologists, the best locations (where they know the geology) and they are going to routinely drill to TD in less than 14 days. They will maximize the efficiency of their rigs -- look at what we learned about Whiting just a few days ago -- moving back and forth between wells on the same pad, letting the cement casing cure/set in one well while drilling the neighboring well and then moving back to the first well.

When I first started blogging, it was my hunch that the total cost of the well was pretty much 50 - 50: 50% for drilling and 50% for fracking. I've looked at the costs of some of the wells one year ago compared to the wells this year and it seems the cost to complete a well is about the same today as it was a year ago (in some cases, the cost has come down). Drilling times to total depth have decreased significantly; if the cost to complete a well has remained the same and the drilling time has decreased significantly, one has to assume that fracking costs have increased significantly. That makes sense.

Before the slump in oil prices Filloon predicted that frack sand prices would go "parabolic" and there were stories this past year that fracking sand was getting very, very expensive (and hard to find). When I first started blogging, a million lbs of sand was quite remarkable (look at the previous post: the two MRO wells used about 250,000 lbs of sand for stimulation). Then BEXP did the unthinkable: routinely using 4 million lbs of proppant. There are still a lot of wells being stimulated with less than 3 million lbs of sand. But for quite some time now, EOG has been using massive amounts of sand, upwards of 14 million lbs. In a recent presentation, CLR said that massive amounts of proppant is the key, and recently CLR completed a well with 19 million lbs of sand.

At $50 oil, operators are going to show just how flexible they can be. They are going to stop fracking, but they are going to keep drilling.

Remember the CLR Atlantic pad in the Baker oil field? At a time when oil was selling for $100+, CLR was willing to hold off on all production on that 14-well pad for 18 months until all wells were fracked. If CLR was willing to hold off production for 18 months when oil was selling for $100+, one can only assume they are more willing to hold off completing a well when oil is selling for $50.

Operators hedge their oil (CLR recently made news in this area), and have contracts to provide a certain amount of oil for a certain price. My hunch is when times get tough, they will make their contracts, but not deliver non-contracted oil at spot prices. Hedging will get many operators in the Bakken through the first half of 2015 if not all of 2015.

Now back to fracking. At one time, early in the boom, it was said that EOG did not frack in the North Dakota winter; I posted that, got some pushback so don't know how accurate that is. I noted that the definition of a North Dakota winter for a planner in Houston is different than the definition of winter for a roughneck working in freezing rain (or a late spring snow) in April in North Dakota.

The point is that fracking is going to start slowing down, though drilling might not slow down quite as much. We've already seen hints of that based on the past three "cuts" from the Director. The amount of drilling is more than just a function of the number of active rigs.

As noted earlier, when I first started blogging, the cost to complete a well was probably 10-40-50 (pre-drilling/drilling/fracking). The middle Bakken is quite mature now; I would bet that the cost breakdown is closer to 2-28-70. If that's too extreme, then 2-38-60. Again, the point is that the real cost of these middle Bakken wells is now shifting to completion/fracking.

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The Decline Rate

The bad news about a middle Bakken well is its decline rate. The good news about a middle Bakken well is its decline rate. Off-shore, deep-sea drilling requires years of planning. Didn't Shell or BP take two or three summers just to get one drilling ship into the Arctic, and they still haven't started. How many years has the Kashagan been tied up? A decade?

But in a nicely delineated middle Bakken, the operators simply minimize their fracking, waiting for prices to move back up (which will eventually happen, at least according to Peak Oil theorists), and then start fracking at their convenience and time of choosing. Again, using the CLR Atlantic pad as an example, 18 months from pad building to production (the exact duration may be somewhat inaccurate, but you get the point).

CLR "sold back" all its hedges resulting in $440 million; prior to that, I seem to recall that CLR had an unused $2 billion credit facility (again, from memory and I could be way wrong). The point is that for $500 million, CLR can drill a lot of wells and frack them later. I'm going way out on a limb here but who's to say that 500,000 lbs of sand in an open hole frack to tide one over during a period of depressed oil prices and then come back in and do a bang-up frack when oil is back up. Again, that's the beauty of the dreaded Bakken decline rate. The production, the big money, is up front. The first year or two.

Shale is incredibly more flexible than deep-sea drilling. Rigzone (I believe it was) suggested that when push comes to shove, CAPEX will go to deep-sea drilling and not to shale. But that was the first six months through the first year. After that, the CAPEX goes back to shale. That makes sense; you don't stop a deep-sea drilling in the middle of things; it takes six months to a year to complete a project, but if during that time, the slump in oil prices appears to be long-term, or there is likely to be huge volatility in the price of oil, folks will pull back on deep-sea drilling and concentrate where they have more flexibility -- e.g., on-shore conventional and off-shore conventional.

We don't hear much about on-shore conventional, but prior to the slump in oil prices, every so often there was an article on transferring unconventional technology to on-shore conventional plays.

The sustainability of the Bakken and the survival of operators is an issue of liquidity, no profitability, and the cooperation of credit facilities.

Just some idle thoughts. No conclusions or predictions. Just some things that run through my mind. For every point made much more could be written. It will be interesting to watch this play out.

The metrics I'm following:
  • IPs (24-hour production -- company specific)
  • IPs (90-day production, Bakken-wide)
  • number of active wells (daily)
  • number of wells waiting to be fracked (monthly report) 
  • circling of wagons (concentration of activity in the sweet spots of the Bakken)
  • infill density (family names)
  • permitting projections
  • operators who remain most active
As noted above, this essay is not complete. I will add to it when the spirit moves me. When it is complete, I will note that.

Wednesday, December 17, 2014

MRO Re-Fracking Wells -- An Update On Two Wells That Were-Re-Fracked -- December 17, 2014

A long time ago, back in the summer of 2011, I went through the MRO wells that looked like they might be candidates for MRO's re-fracking program. Periodically, I go back through that list to see if there is any evidence of any re-working or re-fracking.

Tonight, an update on two wells of interest. First:
  • 17753, 553, MRO, Strommen 34-8H, Killdeer, t6/09; cum 193K 10/14; looks like it was re-fracked/re-worked July 11; re-fracked this past summer, 2014
According to the sundry forms, this well was initially stimulated 6/12/2009, 0 stages (open-hole), 208,360 pounds of sand.

Then, most recently, it was stimulated again, on 8/9/2014 (a couple of months ago), 30 stages, 2.1 million lbs of sand.

Note the production profile for the past year:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN10-20144804591126231214
BAKKEN9-20143010396103077154695634272240
BAKKEN8-2014735123364524511556859
BAKKEN7-20141970044044
BAKKEN6-201417787931103641378167
BAKKEN5-201431151316132131166665321
BAKKEN4-20143015321380223999352467
BAKKEN3-201431165116162261005328491
BAKKEN2-20142813221415253871391322
BAKKEN1-201431176316402491295697412
BAKKEN12-20133017751880273867327368
BAKKEN11-20133021362090327922314428
BAKKEN10-2013319001331320120

*******************************************

The second well of interest:
  • 17966, 358, MRO, Jerry Pennington USA 34-21H, Reunion Bay, t6/09; cum 177K 10/14; it looks like it was re-fracked this past summer (2014)
It appears this well was originally an open-hole stimulation with 207,500 lbs of sand in early June, 2009.

The first few months of production:
BAKKEN1-20102937693744423344003267
BAKKEN12-20093134613200803281702817
BAKKEN11-20092020142410415163801638
BAKKEN10-20093137073899423301403014
BAKKEN9-20093038003559517308903089
BAKKEN8-20093146164449788375503755
BAKKEN7-200927522551251365425104251
BAKKEN6-200919516748422600420004200

A sundry form received on May 20, 2014, states that MRO plans to re-frack this well; the frack must have been completed, but the data is not yet on file. The production profile for the past few months, note the huge jump from 1400 bbls in April, 2014, to over 16,000 bbls in just 22 days of September:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN10-201422127911279446231164856624491
BAKKEN9-201422163131626763971383845377429
BAKKEN8-201431147541470061651292958426902
BAKKEN7-20141511958119901257101651419935
BAKKEN6-20140000000
BAKKEN5-20141985687584809486211
BAKKEN4-201430138813571361471993298

Cool, huh?

First of all, back in 2011, with minimal data, and painstakingly going through the scout tickets I came up with a list of MRO wells that might be suitable for MRO's re-fracking program (see link above).  It turns out a few of those wells have been re-fracked; others have had some re-work done based on the production profile, but whether they were re-fracked is hard to say. 

EOG To Report One Nice Well, Whiting Two Nice Wells Friday -- December 17, 2014

Nine (9) permits canceled, some older ones, as well as some newer ones:
  • Oasis (5), Hess (2), EOG (2)
  • One of the EOG cancellations is in Burke County
  • Oasis cancels 3 permits in Mountrail County; 2 in McKenzie County
Twenty-three (23) confidential wells plugged or producing.
Active rigs:



12/17/201412/17/201312/17/201212/17/201112/17/2010
Active Rigs180186183200166


Wells coming off the confidential list Thursday:
25080, conf, Statoil, Field Trust 7-6 4H, Todd, no production data,
25749, see below, EOG, Wayzetta 28-1424H, Parshall, a big well,
27050, see below, Whiting, Mork Trust 21-17-6H, Pleasant Hill, a nice well, 
28089, see below, Whiting, Mork Trust 21-17-7H, Pleasant Hill, a nice well, 
28251, conf, Hess, EN-Johnson A-155-94-2932H-5, no production data,

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25749, see above, EOG, Wayzetta 28-1424H, Parshall:

DateOil RunsMCF Sold
10-201475213223
9-2014133333299
8-2014201633553
7-201424646741
6-2014251313734

27050, see above, Whiting, Mork Trust 21-17-6H, Pleasant Hill:

DateOil RunsMCF Sold
10-201457837258
9-2014755711718
8-20141234814021
7-20141289911869
6-2014169006827

28089, see above, Whiting, Mork Trust 21-17-6H, Pleasant Hill:
 
DateOil RunsMCF Sold
10-2014664010020
9-2014747210506
8-2014879512421
7-201486409386
6-2014110998347

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Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Eleven (11) new permits --
  • Operators: Hess (4), XTO (3), MRO (2), Slawson, Sinclair
  • Fields: Tobacco Garden, Alkali Creek, Wolf Bay, Big Bend, Sanish
  • Comments:
Ten (10) producing wells completed:
  • 25528, 683, Zavanna, Sylvester 32-39 1H, Springbrook, t12/14; cum --
  • 26436, 1,944, BR, CCU Powell 41-29MBH, Corral Creek, t11/14; cum --
  • 26843, 1,986, XTO, Roxy 21X-6E, West Capa, t11/14; cum --
  • 26844, 1,999, XTO, Roxy 21X-6A, West Capa, t11/14; cum --
  • 27005, see below/2,126, Statoil, Brown 30-19 5TFH, Alger, t11/14; cum --
  • 27339, A, CLR, Vachal 7-27H, Alkali Creek, no test data, s2/14; cum --
  • 27700, 1,200, BR,  Haymaker 31-15TFH-A, Elidah, t11/14; cum --
  • 27723, 290, SM Energy, Almos Farm 1-26HS, West Ambrose, t101/4; cum 4K 10/14;
  • 27724, 713, SM Energy, Almos Farms 1B-26HS, West Ambrose, t10/14; cum 13K 10/14;
  • 28232, 778, Statoil, Myron 9-3H, Squires, t11/14; cum --
NOTE: from "Things To Follow Up On" --
November 17, 2014
Statoil's Brown wells will be their first crack at cemented liners and increased frac stages. Will be interesting to see the difference. [27003, 27704, 27005, 27006, 28733, older wells: 20790, 18760]

Wednesday -- December 17, 2014; Utility Bills Soar In New England -- Forbes; Housing Starts Decline, First Drop Since August -- Global Cooling To Blame -- Bloomberg

Before we get started. Rex Reed's top 10 movies for 2014 includes The Grand Budapest Hotel, at number 6. I watch it regularly, watching it again last night. And before that, I watched The Great Gatsby for the third time in two days. I never fail to see something new. I remember Roger Ebert saying he once went through Casablanca frame-by-frame; at the time I had trouble seeing why someone would do that. Now I understand. By the way, Rex Reed's comments on Scarlett Johansson (Under The Skin, #3 among the ten worst) are right on (with one exception, Lost In Translation).

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Remember: This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Make no travel plans based on what you read here. I post quickly and frequently; typographical and factual errors are likely. If this information is important to you, go to the source.

Linn Energy (soars 28%).

New England's utility bills soaring -- Forbes. Memo to self. See if Pocahontas is quoted. [No, she isn't. Apparently she is not interested in this issue, just banking.]

Why oil will go up in price in 2015 -- 24/7 Wall Street.

Excess of 2 million bopd -- LA Times. Regular readers have read several times that pundits said one million bopd need to be taken off the market; I have said from the start, 2 million, and have always said that would be easy to do.

CLR's earnings match estimates -- Market Realist.

COP surging today -- The Street

Dow surges 220 points -- ExxonMobil, Chevron surge -- Barron's.

I had lost track of this one; watch for an increase in head of cattle in North and South Dakota, and Montana next summer. Beef is hitting all-time highs and unlikely to plateau any time soon. Blame it on the drought in the southwest.  -- Wall St Cheat Sheet.

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Active rigs in North Dakota:


12/17/201412/17/201312/17/201212/17/201112/17/2010
Active Rigs180186183200166

RBN Energy: crude and natural gas after the crash -- the ratio
West Texas Intermediate crude futures settled yesterday at $55.93/Bbl, down 52% since June 2014 and NYMEX Henry Hub natural gas futures settled at $3.619/MMBtu. The crude-to-gas ratio of these two energy commodities - meaning the crude price in $/Bbl divided by the gas price in $/MMBtu - was just over 15X.
We have not seen a crude-to-gas ratio at this level since June 2010. Over the past 4 years the ratio has been far higher - averaging 27X and reaching a high of 54X In April 2012.
That lofty four year run for the crude-to-gas ratio has arguably been responsible for much of the crude and natural gas liquids production boom since 2011 and a “Golden Age” of natural gas processing. Today we begin a two part series on the implications of a lower crude-to-gas ratio.
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Global Warming
Climate Change
Extreme Weather
Whatever
Ice Age Now

Putting things into perspective: we all agree -- warmists, deniers, and Algore --  we all agree that the warmists predict that the global temperature will rise about 1.5 degrees over the next 100 years.

Don noted that Minot's average temperatures deviated from the mean by almost that exact amount this past year, 1.27 degrees. Link here

But for the warmists: note that the 1.27-degree deviation was a DECREASE in temperature in Minot by that amount.

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New Englanders and Pocahontas Are Betting On Global Warming

Remember the shock last year when New Englanders paid 20 cents/kWh during the "Polar Vortex"?

No "Polar Vortex" yet this year, but, if I'm reading the story correctly, the New England utilities have already set this winter's fare rate at 24 cents/kWh. Maybe I'm misreading the story. Forbes is reporting:
Consumers in New England got a shock in their utility bills this month. A 40% increase over the previous month. National Grid , the largest utility in Massachusetts, decided that electricity prices for this winter would rise to 24¢/kWh, a record high.
But peak electricity prices could exceed 100¢/kWh like they did last year during the polar vortex.
Not sure why New Englanders are so surprised. It was their choice to throw all-in for natural gas and renewables in a land of harsh winters. But they’ve refused to build new gas pipelines. And they’re shutting a nuclear plant that has 20 years of cheap reliable cold-resistant energy left on it.
New England already has the highest electricity prices in North America – about 18¢/kWh averaged over the whole year. The national average is 12¢/kWh. In my own state of Washington, it’s only 8¢/kWh thanks to hydro and nuclear, and a reasonable market structure.
But last year during the polar vortex, New Englanders paid over 20¢/kWh.
Prices will go up, of course, if Cape Wind ever gets built. That was the agreement the state made with Cape Wind promoters -- a guaranteed 3.5% increase / year.

As usual, the Forbes article is excellent, providing a lot of background.

It continues:
ISO New England, which manages the region’s transmission grid and wholesale electricity market, had to bring up dirtier coal and oil plants to try to make up the difference.
Nuclear energy, unaffected by cold, became the primary provider of electricity in New England, edging out gas 29% to 27%. Oil generation made up 15% while coal accounted for 14%. Hydro, with a little renewable, provided the rest.
The utilities know they are in for another bad winter and have adjusted prices up knowing they’ll have to pay for these dirtier and more expensive stop-gaps when the same thing happens this winter.
But nuclear won’t be able to help as much this year. The political and warped market pressures have forced Vermont Yankee Nuclear Power Plant to close at the end of this month.
Ironically, low gas prices were cited as a reason for this closure 20 years ahead of schedule. And some coal plants are closing as well, making sufficient capacity and reliability for the region dicey.
So, not only are the Boston folks going to pay more for their electricity this year, they are going to push more coal-derived CO2 into the atmosphere.

But that could be good, if it hastens global warming, at about 1.5 degrees over the next 100 years.

***************************
The Spin Is 24/7

Despite a dismal housing report yesterday, this is what the spin was:
“All the conditions for stronger residential investment are in place for 2015,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc., who forecast starts would slow to a 1.03 million pace. “An improving job market is going to do wonders for the housing market.”  
Say what? "An improving job market"? If, and it's a big if, the job market is improving, it's because fast food restaurants (McDonald's) and hospitality services (motel/hotel cleaning staff) have increased hiring, along with seasonal retail hiring (at $8.25/hour here in the DFW area) -- these aren't the kind of jobs that will drive the housing market.

So how bad was the report yesterday?  Bloomberg is reporting:
Housing starts declined 1.6 percent, the first drop since August, to a 1.03 million annualized rate from a revised 1.05 million pace in October that was stronger than previously estimated, figures from the Commerce Department showed today in Washington.
The decrease was led by a plunge in the South as other areas registered gains.
Building permits also fell last month, indicating a surge in construction is probably not in the cards for the immediate future. 
The word "plodding" was used to describe the housing market. 

And what are the attributing the plunge in housing starts in the South? Sit down; you won't believe this. The plunge in housing starts was blamed on global cooling. Say what, global cooling?  From the linked article:
Only the South showed a decrease in starts, plunging 19.5 percent in November from the prior month, the biggest drop for the region since June.
Some economists attributed the drop in starts to colder-than-normal temperatures. Last month was the coldest November since 2000, according to the National Climatic Data Center.
I can't make this stuff up. The CNBC headline for a Reuters story was even sillier: "US housing starts, permits fall; trend points to recovery."

No, I can't make this stuff up.

****************************
Islamic Spin Puts US Spin Into Perspective

The Islamic Taliban justifies killing / executing / massacring / butchering / slaughtering 132 children, some as young as two years of age.

But we all know that the Taliban is not an Islamic organization. No religion would ever do this. President Obama has told us this. It is interesting which religions he defends.

****************************
For The Archives
Governor Cuomo Bans Fracking In New York State


This was their "smoking gun":
The health department spent more than 4,500 hours on its analysis, reviewing academic studies, consulting experts and meeting with health officials in other states, Zucker said. The studies and data showed many potential health risks, including groundwater contamination in Wyoming and increased traffic deaths in areas of Pennsylvania.
I am unaware of any documented groundwater contamination due to fracking, and "increased traffic deaths in areas of Pennsylvania" is simply laughable.

Based on the health department's findings, I'm surprised they haven't banned tobacco cigarette smoking altogether. 

Tuesday, December 16, 2014

It's Always Something -- December 16, 2014

Rigzone is reporting:
Environmental permit delays are likely to set back the Brazilian offshore drilling activities of French oil company Total SA by about a year.
Total, which has stakes in 13 Brazilian offshore blocks and runs drilling activities in seven of them, is grappling with the a slow environmental approval process that has become a recurring complaint for many in the industry.
"Environmental licensing takes a long time. Drilling will only take place in 2016 or 2017. Licensing makes things a little harder ... exploration and production is a long-term job, that takes a long time in general."
Oil prices have fallen to their lowest levels in six years, prompting oil firms to seek cut costs and improved efficiency. Lower prices could force oil companies to reconsider some investments. Even so, Brazil continues to be a "priority" for Total. 
And so it goes. It's always something.

3/4 Wells Go To DRL Status; Fourteen (14) Wells Approved For "Tight Hole" Status; Eighteen (18) New Permits -- Wednesday -- December 16, 2014

Wells coming off the confidential list Wednesday:
  • 28220, drl, Slawson, Stallion 6-1-12TFH, Big Bend, no production data,
  • 28283, 786, Hess, BW-Hedstrom-149-100-1201H-3, Ellsworth, t11/14; cum 2K 10/14;
  • 28311, drl, XTO, Hoffmann 14X-12B, Siverston, no production data,
  • 28369, drl, BR, CCU Pullman 6-8-7MBH, Corral Creek, no production data,
  • 28439, conf, Liberty Resources, Gohrick 158-95-17-8-4MBH, McGregor, producing,
*********************************
 28283, see above, Hess, BW-Hedstrom-149-100-1201H-3, Ellsworth:

DateOil RunsMCF Sold
10-201417120

*********************************

Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Eighteen (18) new permits --
  • Operators: HRC (8), CRL (8), Whiting (2)
  • Fields: Four Bears (McKenzie), Crazy Man Creek (Williams), Antelope (McKenzie), Sanish (Mountrail), Banks (McKenzie)
  • Comments: Two more Antelope oil field wells
Active rigs:


12/16/201412/16/201312/16/201212/16/201112/16/2010
Active Rigs183191181199165


************************
For Investors

EOG declares its quarterly dividend; it appears to be unchanged from the previous quarter.

Apple Not Guilty In Huge Case -- December 16, 2014

Tweeting now: Jury finds Apple not guilty of harming consumers in iTunes DRM case; says iTunes 7.0 was a 'genuine product improvement' - @verge

Over at MacRumors:
Jury deliberations for the iPod antitrust lawsuit Apple faced in court last week began on Monday, and it appears the jury has already reached a verdict just a day later. As reported by The Verge, the jury has sided with Apple, finding the company not guilty of harming consumers with anticompetitive practices.

In the class action lawsuit, the plaintiffs argued that Apple had deliberately crippled third-party music services by locking iPods and iTunes to its own ecosystem, which in turn artificially raised the price of Apple's products. At issue was a specific iTunes 7.0 update that disabled the DRM workarounds put in place by RealNetworks, a competing music service, allowing its music to be played on the iPod. 
Yes, Virginia, this is huge.

I don't know if you've ever served on a jury on a big case, but after weeks of hearing testimony, the jury begins to deliberate. The first thing the jury needs to do is get organized, select a foreman, go over the rules of a jury, determine seating arrangements, and order lunch. To come to a verdict in one day suggests they must have done all that and then took a preliminary vote -- when it was unanimous, the foreman must have said, "that's a wrap."

Abraxas, December, 2014, Corporate Update; Silver Linings Among The Clouds, December 16, 2014

Link here.

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Silver Linings Among the Clouds

The headline is scary but close reading of the story makes the story less scary than it sounds:
The Energy Information Administration (EIA) foresees a pull back in onshore drilling activity because of less-attractive economic returns in both emerging and mature oil production regions.
As of Friday, however, projected oil prices "remain high enough to support development drilling activity in the Bakken, Eagle Ford, Niobrara and Permian Basin, which contribute the majority of U.S. oil production growth."   
EIA now expects U.S. crude oil output to average 9.3 million b/d in 2015, an increase of 0.7 million b/d from 2014, but down from the projected growth of .09 million b/d that EIA had forecast in November.

Random Look At How Incredible The Antelope Oil Wells Are In The Reservation; CLR's Changing Completion Strategies -- December 16, 2014

There is so much in the Bakken I simply cannot keep up. Hopefully, the slump in oil prices will slow things down.

Just how good are the wells and just how fast are completion strategies changing? Over at the sidebar at the right, I have a link to oil fields in the North Dakota Bakken.

A couple days I started updating the Antelope oil field in the reservation (NOT the Antelope Creek oil field west of Watford City). I updated a lot of the field, but there is much more left to do. In the process I came across a Continental Resources well with an example of their new completion strategy:
  • 28330, 1,716, CLR, Salers Federal 3-27H, six days to vertical depth; six days to drill the lateral, target zone 11 feet to 23 feet below the top of the middle Bakken (so I assume the middle Bakken thickness in this area ranges from 20 to 40 feet), background gas was averaged about 650, though there were spikes to 2750; 50 stages; 19 million lbs; 14 days spud to TD, t10/14; cum 41K 10/14;
I don't recall the largest amount of sand EOG has used on a well, but 19 million lbs of sand/ceramic has to be a record for sand/ceramic mix. EOG uses only sand as far as I know. Almost all off the proppant used by CLR in #28330 was sand, however, I believe less than 2 million lbs ceramic;

NDIC File No: 28330     API No: 33-053-05917-00-00     CTB No: 128330
Well Type: OG     Well Status: A     Status Date: 9/18/2014     Wellbore type: Horizontal
Location: NENE 27-152-94    Latitude: 47.962331     Longitude: -102.688017
Current Operator: CONTINENTAL RESOURCES, INC.
Current Well Name: SALERS FEDERAL 3-27H
Total Depth: 20534     Field: ANTELOPE
Spud Date(s):  6/8/2014
Completion Data
   Pool: SANISH    Comp: 9/18/2014     Status: F     Date: 10/2/2014     Spacing: 2SEC
Cumulative Production Data
   Pool: SANISH     Cum Oil: 40983     Cum MCF Gas: 47241     Cum Water: 17612
Production Test Data
   IP Test Date: 10/2/2014     Pool: SANISH     IP Oil: 1716     IP MCF: 1193     IP Water: 670
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
SANISH10-201431323883275915252431892492218267
SANISH9-20148859577482360405204052

Regular readers might be surprised at what CLR is doing.

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Here's an EOG well in the same field:
  • 24337, 2,519, EOG, Hawkeye 3-2413H, 28 stages; 10 million lbs sand, t5/13; cum 452K 10/14;
  • EOG says it will be utilizing "up to 4 NGL stripping skids on this pad in an effort to reduce VOC volumes. Spud date, December 16, 2012; TD, January 11, 2013. Thickness of middle Bakken appears to be about 50 feet at this location.  
Yes, that's almost a half-million bbls in less than 18 months (including one month with NO production; and with three months on-line for only about 50% of the time). And, yes, it's tracked on the "Monster Well" page.

NDIC File No: 24337    
Well Type: OG     Well Status: A     Status Date: 5/15/2013     Wellbore type: Horizontal
Location: SESE 24-152-95    Latitude: 47.964492     Longitude: -102.771760
Current Operator: EOG RESOURCES, INC.
Current Well Name: HAWKEYE 3-2413H
Total Depth: 20626     Field: ANTELOPE
Spud Date(s):  12/8/2012
Completion Data
   Pool: SANISH     Perfs: 10816-20572     Comp: 5/15/2013     Status: F     Date: 5/17/2013     Spacing: 2SEC
Cumulative Production Data
   Pool: SANISH     Cum Oil: 451928     Cum MCF Gas: 894900     Cum Water: 59607
Production Test Data
   IP Test Date: 5/17/2013     Pool: SANISH     IP Oil: 2519     IP MCF: 4060     IP Water: 669
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
SANISH10-2014311303412257326955690431619010
SANISH9-20143014109144063349503553380213126
SANISH8-20143116476165084166607602740632735
SANISH7-20142616956168353479602522485834905
SANISH6-20143018214182412846500861734332150
SANISH5-20143124017239573524651692611638433
SANISH4-20142731057309273828489011096537403
SANISH3-20140000000
SANISH2-201421161651632919763792020237623
SANISH1-201431244362481529535177941551217
SANISH12-201331273002730129405136259050772
SANISH11-2013303187732028321459465059316
SANISH10-2013314048340529381571259071106
SANISH9-2013304391743941390776231076087
SANISH8-2013314584946421471278445078292
SANISH7-2013314939549130614469907069753
SANISH6-20131224333237091802389803842
SANISH5-20131714310133793683342103342

Tuesday -- December 16, 2014; Active Rigs Up To 184; Russia Might Default

Active rigs:


12/16/201412/16/201312/16/201212/16/201112/16/2010
Active Rigs184191181199165

RNB Energy: natural gas pipeline projects in the Northeast -- an update on the Constitution Pipeline, the Northeast Energy Direct project, and Access Northeast, all of which are planned to help move Marcellus gas into the heart of New England.

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Clarity

The fog is starting to clear. This is getting pretty cool. Looking back ten years from now, the current slump in oil prices will be something historians will still be writing about.

Saudi Arabia has talked about "protecting their market share."

There have been a lot of stories about Russia growing closer to China with all those energy deals over the past year. That's like raising a red flag in front of a bull for Saudi Arabia when it comes to protecting their market share.

Prices began to collapse immediately after Saudi made the announcement over Thanksgiving, 2014. Less than three weeks later, there is serious talk about Russia defaulting.

If Russia defaults, oil companies (mostly US) are going to extract huge concessions from Russia if the oil companies even agree to stay. In the meantime, I don't suppose a lot of westerners drilling in Russia are really going to work for free. All that talk about Russia maintaining 2014 production going into 2015 seems a bit questionable, doesn't it.

[As a side note, back on November 23, 2014, I talked about the amount of oil the US imports from Russia despite sanctions. Sounds like Saudi actions cause more pain than US sanctions.]

With regard to Saudi's action, there are six dots to connect. Things are becoming much clearer.

On a side note, I don't watch television any more (except for occasional NASCAR, NFL, and college football), so let me know if CNBC is more worried about a) Greece defaulting; b) Russia defaulting; or, c) what Herb Greenberg is saying about Starbucks.

I Can See Clearly Now, Johnny Nash

Of course, some folks can't see clearly at all. Despite "Islamic" being in their name, ISIS is not Islamic. LOL. When you listen to the speech, see if he could be describing the Palestinians under Arafat when that "state" was just getting started? It's interesting which religions the president goes out of his way to defend.