Wednesday, April 1, 2015

No Update On Trucking Fracking Sand From Wisconsin, Minnesota -- April 1, 2015

A reader asked if I knew of any updates regarding trucking (not rail, but trucking) fracking sand from Minnesota and Wisconsin to the Bakken.

I did not have any updates, but did reply:
I do not have any updates but can only assume that rates have dropped. I did hear from another read that a trucker in Minnesota had this to say about two months ago: "no fracking sand was being shipped by truck."

I would assume it's less expensive and more efficient to ship by rail. I assume trucking sand in was due to lack of adequate rail, but that's just my opinion.
I am most curious to see what this summer brings, with upwards of 850 wells waiting to be fracked. 

Wednesday -- April 1, 2015

Active rigs:


4/1/201504/01/201404/01/201304/01/201204/01/2011
Active Rigs99191186207170

RBN Energy: how the dollar affects the price of oil.
RBN has documented many fundamental influences on crude oil prices including supply, demand and inventory levels as well as infrastructure constraints. One that we don’t often mention is the strength or weakness of the U.S. dollar. As with most international commodities - oil is bought and sold priced in U.S. dollars. As a result, a change in the value of the dollar relative to other currencies has an impact on oil prices. Likewise the dramatic fall in oil prices since June of 2014 has been mirrored by the dollar rising to levels not seen since 2003. Today we look at how oil prices are impacted by the value of the dollar.
Since the 1980’s crude prices have generally been determined through bilateral negotiation between counterparties based on differences in quality and location as well as other market fundamentals. Counterparties in these transactions typically make reference to widely traded benchmark crudes to link their deals to spot market prices and. We recently described the formula pricing system used by Saudi national oil company Aramco to determine the price buyers pay for their crude – based on a benchmark linked to destination and a monthly adjustment factor. All of these transactions are carried out using a single currency – the U.S. dollar. The reason why oil transactions take place in dollars dates back to the early dominance of the U.S. oil industry – that was originally the center of world production and the largest exporter in the 1930’s. Since World War II the dollar has been the dominant reserve currency and most international commodity transactions are carried out in dollars for the convenience and security of both parties.
Of course, the fact that oil is priced in dollars provides U.S. companies an inherent advantage over their competitors in other countries. For one thing, buyers and sellers here do not have to pay currency exchange fees to buy or sell the dollars they use in crude trades. In addition to those fees they also avoid any currency risk associated with refining outside the U.S. For example, overseas refiners have to buy their crude using dollars and sell their refined products to consumers in the local currency – so that exchange rate fluctuations can end up costing them money if they do not hedge that risk.
One side effect of oil being priced in dollars is that large investors often take financial positions in oil (usually in paper form e.g. in the futures market) as a hedge against a decline in the value of the dollar. The theory behind these hedges is that if the dollar loses value against other currencies then the price of oil will increase to compensate for that weakness – protecting the investor from dollar deflation. Obviously that works the other way around as well – with a stronger dollar tending to push prices down. With oil being such a huge commodity these financial players have an influence on the physical crude market because of the strong links between oil futures markets and physical prices.
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Annus Horribilis

Queen Elizabeth II referred to 1992 at England's annus horribilis.

It is very likely that Saudi Arabia will see 2015 as their own annus horribilis.

This was the year that the US made it very clear that Saudi Arabia and the US had parted ways. Saudi was no longer guaranteed US protection, something guaranteed since 1933 by FDR.

It was the year that it also became clear that the dominant resident power in the Middle East would be Iran.

It was the year that, through gross miscalculation on their part, oil prices crashed.

And it was the year that Saudi Arabia was pretty much surrounded by the Shi-ites -- Iraq to the north; Iran to the East; Yemen to the south. Saudi Arabia had to resort to going to war on its own -- attacking Yemen -- and losing at least one fighter aircraft in the conflict -- which seems pretty hard to do going against Yemen.

There is some irony: I believe Iran is the only country in the Mideast to have global sanctions placed on exports, and yet, the country has a positive balance of trade in each of 70 sectors. I'm not sure the US can even claim that. I doubt Saudi Arabia even has 70 sectors in which it has a trading relationship. They have oil, that I know. 

Disclaimer: I often make factual errors in my opinion and comments. There may be factual errors above. If this information is important to you, go to the source.

North Dakota's New CBR Rules Take Effect Today -- April 1, 2015

This is why the flurry of stories on CBR safety / risks the last few days. North Dakota's new CBR rules kick in today. The Dickinson Press is reporting:
Starting today, oil companies in North Dakota will be required to remove more volatile gases from Bakken crude oil so it has a vapor pressure of no greater than 13.7 pounds per square inch. Oil conditioning occurs at the well through equipment that separates the oil, gas and water. Companies can meet the new standard by operating their equipment at specific pressures and temperatures. If they choose an alternative method, companies will need to submit documentation that shows they are meeting the standard.
How was 13.7 chosen? The independent standards organization ASTM, formerly American Society for Testing and Materials, defines stable crude oil as having a vapor pressure of 14.7 psi. Equipment that tests for vapor pressure has a margin of error of 1, so state regulators chose 13.7 to ensure that it meets the definition, said Alison Ritter, spokeswoman for the Department of Mineral Resources.
The article conveniently forgot to mention that the North Dakota standard is a full pound below the federal requirement. The article alludes to this fact by stating that the federal government considers crude oil to be stable if the vapor pressure is 14.7 psi or less. However, from an earlier post:
The order, to go into effect April 1, will limit Bakken to a vapor pressure of no more than 13.7 per square inch, 1 psi below the national standard of 14.7. It also requires that operators separate light hydrocarbons from the crude and prohibits blending light hydrocarbons back into the oil.
A full pound -- almost 7% -- below the federal requirement. The state could have mandated 14.7 psi for Bakken crude oil, but chose to go significantly lower. 

No April Fool's Joke -- But Sales Tax In San Francisco Bay Area Now In Double Digit -- March 1, 2015

CBS San Franciso is reporting:
Buy something in Hayward and you’re going to get whacked with a 10% sales tax. Take a few steps outside the city limits and the tax is a half cent cheaper.
Last summer, Hayward voters taxed themselves. Measure C passed with an overwhelming 68% approval.
City spokesperson Frank Holland says it could mean $10 million more for the city to hire more police and build better roads. 
It's not often you can find something that 68% of the folks agree on -- and raising taxes seems to be about the last thing.

There are several story lines here: just because sales tax rise, does not necessarily mean the overall prices will increase; competition is such, businesses will find other ways to cut costs to try to minimize what consumers pay overall.

Unfortunately, the Bay area is also ground zero for raising the minimum wage. 

Fortunately Hayward is not in my travel plans.

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Apple: A Semiconductor Powerhouse

... being reported at Seeking Alpha

Samson Resources May Request Bankruptcy -- April 1, 2015

I saw this story last night but ran out of time to get it posted. I'm getting a fair number of e-mails on the story, so I better get it posted before I get any more e-mail.

FuelFix is reporting:
Oklahoma oil producer Samson Resources says it doesn’t expect to be able to repay its debt with income from battered oil fields and it may have to file for Chapter 11 bankruptcy protection or face liquidation.
Samson, which had nearly 1,000 employees at the end of last year, also said in its annual report Tuesday it began laying off 30 percent of its workforce this month.
Though it will weigh asset sales, securing more debt and other measures to avoid liquidation, Samson said filing for bankruptcy protection “may provide the most expeditious manner in which to effect a capital structure solution.”
The cash streaming in from oil fields run by Samson and other companies across the U.S. has slowed dramatically as crude prices have plummeted from above $100 a barrel last summer to less than $50 a barrel now. Samson, which operates oil and gas fields in the Rocky Mountains region and in East Texas, said it had $4.2 billion in debt and $220.7 million in cash on hand at the end of February, and is considering whether  to pay upcoming interest payments on its debt.
It cut its annual budget by $156.5 million and said it is selling non-core assets. It collected $48 million selling its properties in Oklahoma and Arkansas’ Arkoma basin.
“We expect ultimately to seek a restructuring, amendment or refinancing of our debt,” Samson said.
In response to a note I received from a reader on this story last night, I responded:
I used to get Samson Resources and Samson Oil and Gas (SSN) mixed up.
The former is a US company (Oklahoma); the latter is Australian.
The former has really mediocre to poor property -- up north in Divide County; at $100 oil it's wonderful; at $50 oil, horrendous.
The latter (SSN) has really good property southeast and east of Williston -- Stockyard Creek.
This bankruptcy is probably just one of the first; and many other companies will sell out before declaring bankruptcy. It's all about liquidity. If CLR and Whiting and EOG can survive, they could pick up a lot of cheap mineral acres. Samson Resources had a respectable 19 permits in 2015; and even as many 5 permits this year. In the big scheme of things, it's really sad; lots of good people will be out of work.
Diclaimer: the response above was opinion only. I often make factual errors in my comments and opinions. If this information is important to you, go to the source. Do not make any investment, financial, travel, or relationship decisions based on what you read here or what you think you may have read here.

Some time ago, GMXR, a relative latecomer to the Bakken, also restructured through bankruptcy and is still operating in North Dakota as Thunderbird Resources. This company, and most others operating in the Bakken, are linked at the sidebar at the right.

Tuesday, March 31, 2015

The Bakken Still Has Legs -- March 31, 2015

Updates

April 1, 2015: the more I thought about, the more I thought this might be the most important / most interesting story of the week, the story below about "the Dickinson refinery is not expected to stabilize diesel prices."

So many story lines. First, the "refinery" (more about that later) was completed at all -- the first new refinery in the US in decades. Second, the amount of diesel if produces is a "drop in the bucket" with regard to how much diesel North Dakota farmers use, especially at harvest. Third, it reminds us how vibrant / huge the North Dakota agricultural industry is. Fourth, the MDU-Calumet partnership and how that plays into the national refinery "grid" and CBR.

After the original post below, I received a nice note from Don. The note, heavily edited to fit the story lines follows:
The "Dickinson refinery" is technically a distillery and NOT a refinery. North Dakota state usage of diesel is 53,000 bpd and is expected to grow to 75,000 BPD in 2025. The plant will be referred to as a "topping” plant because it is an early stage refinery that refines only certain petroleum components found in the crude oil. As such, it does not meet the full definition of a refinery that processes all petroleum components found in the crude oil feedstock that comes into the plant.
"It’s called a ‘topping plant’ because, in essence, it strips out the easily refined components, processes them and ships the remaining components off to other refineries for complete processing,” he said. "Topping plant facilities are typically smaller than full-scale refineries and are usually located near the primary market for their key product.” 
What is not refined is put in tank cars and shipped to Superior Wisconsin, where Calumet has a refinery..   remember there is a CBR  unit right next to the MDU plant. 
Original Post
 
This is almost bizarre.

This AP story was picked up by the Washington Times: Dickinson refinery not expected to stabilize diesel prices.

Give me a break. This is a 20,000 bopd diesel refinery -- hardly a rounding error among US refineries. This was simply a local entrepreneurial story; someone saw a local need and took advantage of it. It took years to get it up and running -- although the fact that it was completed at all is probably the real story.

And this story gets picked up by The Washington Times -- must have been a slow day in DC on the day this was published.

The Washington Times/AP is reporting:
A new oil refinery near Dickinson is expected to begin operations within three months, but officials don’t expect it to stabilize the price of diesel fuel during harvest.
The Dakota Prairie Refinery is expected to produce nearly 300,000 gallons of diesel fuel each day. It will be sold locally, but MDU Resources Group spokesman Rick Matteson [says] that the amount is “a drop in the bucket” compared to the demand.
North Dakota State University Assistant Professor David Ripplinger also says the refinery will have little to no impact on what farmers pay for diesel, though he says it might help ease supply disruptions. 
Wow, even regionally it's a drop in the bucket. So, why didn't they build it 10x bigger? Let's hope this was a trial run -- time to think much bigger.

Again, I'm getting a feeling for just how big the energy picture is in North Dakota, not just the "Bakken," but the energy picture driven by agriculture. 

Isn't This Interesting -- Active Rigs Increase Over 3% -- March 31, 2015; Twelve (12) New Permits; Eighteen (18) Producing Wells Completed; OXY USA With Six (6) OXY USA Wells; BR With Two Big Wells

Active rigs:


3/31/201503/31/201403/31/201303/31/201203/31/2011
Active Rigs99194188206168

Wells coming off the confidential list on April Fool's Day:
21386, conf, White Butte Oil Operations, Panzer 2-20MLH, Antelope, no production data,
26769, see below, EOG, Mandaree 134-05H, Squaw Creek, producing,
26779, see below, EOG, Mandaree 17-05H, Squaw Creek, a big well,
28666, see below, QEP, Johnson 4-9-4BH, Grail, a huge well,
29231, conf, Statoil, Heen 26-35-4TFH, Todd, no production data,
Two (2) Hess Stanley permits canceled.

Eighteen (18) producing wells completed:
  • 28264, 5, Denbury, CHSU 24-23NH 15, Cedar Hills, a South Red River B well, t8/14; cum 6K 1/15;
  • 28905, 1,441, Oasis, Harbour 5601 42-33 2B, Tyrone, t2/15; cum --
  • 28352, 2,445, BR, CCU Pullman 1-8-7TFH, Corral Creek, t2/15; cum --
  • 29218, 1,643, BR, CCU North Coast 4-8-23TFH, Corral Creek, t3/15; cum --
  • 28551, 1,057, XTO, HM Hove 34X-33C, West Capa, t3/15; cum --
  • 28650, 1,701, XTO, HM HOve 34X-33H, West Capa, 4 sections, t2/15; cum --
  • 29061, 964, Whiting, Barb W. 11-6TFH, Sanish, 1 section, t2/15; cum --
  • 25849, 1,223, Whiting, Elsie Bartleson Federal 14-29TFX, Sanish, ICO, t2/15; cum --
  • 28581, 226, OXY USA, State 4-21-16H-143-96, Fayette, t3/15 cum --
  • 28759, 854, OXY USA, Raphael Stroh 3-13-24H-143-97, Fayette, t2/15; cum 14K 1/15;
  • 28758, 963, OXY USA, Raphael Stroh 4-13-24H-143-97, Fayette, t2/15; cum 15K 1/15;
  • 28757, 633, OXY USA, Kenneth Stroh 4-12-1H-143-97, Cabernet, t2/15; cum 13K 1/15;
  • 28582, 438, OXY USA, Schneider 2-28-33H-143-96, Fayette, t2/15; cum 3K 1/15;
  • 28583, 661, OXY USA, Schneider 3-28-33H-143-96, Fayette, t2/15; cum 4K 1/15;
  • 29124, 633, CLR, Kennedy 3-31H, Dimmick Lake, 4 sections, t3/15; cum --
  • 29123, 605, CLR, Kennedy 4-31H1, Dimmick Lake, 4 sections, t3/15; cum --
  • 29122, 639, CLR, Miles 3-6H, Dimmick Lake, 4 sections, t3/15; cum --
  • 29121, 567, CLR, MIles 4-6H1, Dimmick Lake, 4 sections, t3/15; cum --
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Twelve (12) new permits --
Operators: XTO (6), BR (3), Hess (3)
Fields: McGregor, Elidah, Dimmick Lake, Robinson Lake
Comments:


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26769, see above, EOG, Mandaree 134-05H, Squaw Creek:

DateOil RunsMCF Sold
1-2015870414133
12-2014864212568
11-2014965911782
10-20142190012168

26779, see above, EOG, Mandaree 17-05H, Squaw Creek:

DateOil RunsMCF Sold
1-20151251419586
12-20141400419479
11-20141508515483
10-20142703023885

28666, see above, QEP, Johnson 4-9-4BH, Grail:


DateOil RunsMCF Sold
2-20154138341164

News From All Over -- March 31, 2015

Well, that was it. It's a wrap. The US-Iran-French-Chinese-et-al talks have come to an end. A "general statement" will be released later and the group will re-assemble in June, 2015.

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Today's EIA Blurb

And here it is:
For the first time, EIA is providing monthly data on rail movements of crude oil, which have significantly increased over the past five years. The new data on crude-by-rail (CBR) movements are integrated with EIA's existing monthly petroleum supply statistics, which already include movements by pipeline, tanker, and barge. The new monthly time series of crude oil rail movements includes shipments to and from Canada and dramatically reduces the absolute level of unaccounted for volumes in EIA's monthly balances for each region…

Total CBR movements in the United States and between the United States and Canada were more than 1 million barrels per day (bbl/d) in 2014, up from 55,000 bbl/d in 2010. The regional distribution of these movements has also changed over this period. --- EIA 
Well, that was helpful. 

In other news, the sun came up in the east today.

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The fourth section of The Wall Street Journal today is "Business & Environment." Lots of EPA stuff, green energy stuff, lots of short interviews with movers and shakers. After going through the four or five pages of interviews very, very quickly, I was left with these notes:
  • green energy folks talk a lot in generalities; not a lot of facts or figures
  • everyone in the know agrees that renewable energy accounts for 1% of all US energy
  • think tank representative on renewable energy: "[for solar] there are a range of subsidies, and they are very, very substantial. My back-of-the-envelope calculations of my own system is about two-thirds of the cost is subsidized."
  • as in oil, there are sweet spots when it comes to solar -- the US is not in the sweet spot; Chile is
  • the elite, the rich can personally afford solar panels on their roofs, mostly as tax credits
  • Lisa Jackson over at Apple is still unintelligible
  • when Apple talks about their green energy successes, they are talking apples and oranges (US and overseas) -- their US carbon footprint represents 2% -- two percent -- of their total global carbon footprint (they manufacture almost everything overseas; they have non-carbon-producing retail stores in the US)
I did not read the "Utilities Adapt to a New Era," but I did note the graph that depicts global energy growth over the next 25 years:



Take-aways:
  • nuclear power will grow the most: 90% -- probably in China
  • natural gas will grow almost as much: 88% -- advantage -- the US
  • not only is coal still the most important, but coal energy will grow a whopping 51%
  • solar and wind will more than double -- and will approach a third of natural gas energy
  • the amount of energy that will be needed in 2015 is astounding
In another interview (which I can't find on-line but is in the print edition), Robert Murray discusses coal. He notes that "China burned four billion tons last year, a new 500-megawatt power plant, every year. Australia killed their carbon tax. They're going back in coal world-wide."

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For The Archives

New York Times -- as US and Iran make deals, Saudi makes its own moves.
As America talks to Iran, Saudi Arabia is lashing out against it.
The kingdom, Iran’s chief regional rival, is leading airstrikes against an Iranian-backed faction in Yemen; backing a blitz in Idlib, Syria, by jihadists fighting the Iranian-backed Assad regime; and warning Washington not to allow the Iranian-backed militia to capture too much of Iraq during the fight to roll back the Islamic State, according to Arab diplomats familiar with the talks.
Through Egypt, a major beneficiary of Saudi aid, the kingdom is backing plans for a combined Arab military force to combat Iranian influence around the region. With another major aid recipient, Pakistan, Saudi Arabia is also expected to step up its efforts to develop a nuclear bomb, potentially setting off an arms race in the region.
Foreign Policy -- How France became an Iran hawk.
France’s policy is dictated by a set of principles with regard to nonproliferation that have guided administrations on both sides of the political spectrum in the talks with Tehran since 2002. And the tension with Washington is just one expression of a larger disagreement between the two countries over U.S. strategy in the Middle East.
Differences between Washington and Paris have been quietly brewing for months. The French feel that they are being kept out of the loop in critical discussions. The multilateral framework of Iran and the P5+1 (the five permanent U.N. Security Council members plus Germany) has turned into a bilateral discussion between Iran and the United States.
At the end of his administration, the president will have thrown everyone under the bus except, a) Valeri Jarrett; b) Iran; and, c) environmental fanatics.

Port Of North Dakota Announces Expansion -- March 31, 2015

KXNET is reporting:
Drilling rig numbers and oil prices are slowing down, but the industrial park in Minot is picking up speed.
Promoters are looking to a 3,000-acre expansion with developing the first 120 acres this year with eight miles of railroad track for easy exportation from the business to the Port of North Dakota on the main track less than a mile away.

Tuesday -- March 31, 2015

Active rigs:


3/31/201503/31/201403/31/201303/31/201203/31/2011
Active Rigs96194188206168

RBN Energy: Infrastructure development in the Marcellus / Utica.
Natural gas liquids production in the Utica and “wet” Marcellus has taken off like a rocket, and all that ethane, propane, butane and natural gasoline needs to be either moved out of the region or consumed there. That presents a real operational challenge to midstream companies, mostly because the Upper Ohio River Valley offers very little of the NGL storage capacity that Mont Belvieu—the center of the NGL universe—has in spades. Storage is the mechanism that helps balance out supply and demand on any given day.  How can the nation’s fastest-growing NGL production play function without the luxury of significant NGL storage? Today, we continue our look at infrastructure development in the region.
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It's All About American Drivers

Update on crude oil storage "crisis": Reuters is reporting -- 
A month ago, it seemed inevitable: a massive global oversupply of crude oil production would overwhelm storage tanks in Oklahoma and fill supertankers off Singapore.
Now, there are growing signs that the U.S. oil market can avoid the doomsday scenario in which it runs out of room to stockpile surplus crude, a development that oil traders worried would send crude prices into another tailspin.
I'm still looking for an all-time gasoline consumption record over the 3-day Memorial Day weekend here in the US.

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