Wednesday, September 14, 2011

Top Story of the Week? Bakken, North Dakota, USA

 A huge thank you to Gary for bringing this to my attention.

Go to the GIS map server and check out Tyrone field, or search for the "Clark" well in Tyrone field.

Oasis Petroleum has three wells in section 13-156-102.

18418, 1,228, Oasis, Sandaker 5602 11-13H, Wildcat, Bakken; s3/23/10; t6/2/10; 7/11 75K bbls
18567, 1,835, Oasis, Njos Federal 5602 11-13H, Tyrone Field, Bakken; s1/19/10; t6/18/10; 7/11 79K bbls
21261, 94, Oasis, Clark 5602 12-13H, came off confidential May 1, 2012; said to be economical by Oasis (personal correspondence); closed hole frack; 4 million lbs sand/ceramics; Lodgepole (not a Bakken)


Oasis was issued permits for the Njos and Sandaker back in late 2009/early 2010. Note the wildcat status for the Sandaker well.

There was no third well planned at that time. Oasis simply planned to do something standard: put two wells near each other, and drill a long horizontal north, and a long horizontal south.

As per standard procedure, the vertical portion of the well would be drilled into the Lodgepole, where the kickoff point to start angling the horizontal portion of the well would begin, with the middle Bakken as the target.

A surprising thing on the way to middle Bakken happened: promising oil show in the Lodgepole.

And so, shortly after drilling these two Bakken wells, Oasis applied for, and received another permit in the same area for a short lateral targeting Lodgepole. The two Bakken wells: 1280-acre spacing; the Lodgepole well: 640-acre spacing.

For more on the Lodgepole formation, click here.

This could end up being very, very interesting.

Seven New Permits -- And Another Great BEXP Well -- Bakken, North Dakota, USA

Daily activity report, September 14 2011 --

Operators: BEXP (3), OXY USA, Denbury Onshore, Whiting, and CLR

Fields: Murphy Creek, Elk, Bull Butte, Banks, Camp, and Whiskey Joe. No multi-well pads.

BEXP had a great well:
  • 20345, 2,746, BEXP, Gunderson 15-22 1H, McKenzie County, Bakken

For Investors: Top 10 Potential Highest Return Oil E & P Companies -- Motely Fool

Link here.

Gulfport Energy
Ultra Petroleum
Concho Resources
Marathon Oil
Denbury Resources


I'm still flummoxed by pundits who are confused with the definition of "to speculate" after seeing the list of companies bidding for oil from the US Strategic Petroleum Reserve and how much they are willing to pay for it.

After the announcement that oil would be released from strategic petroleum reserves around the world, there were pundits who expected the price of oil to fall (and it did for the next 24 hours or so). When the price of oil stabilized and then rose again, going above the price before the announcement, there were pundits who said that it was speculators driving the price back up.

But looking at the list, these were all refiners (or oil companies with refineries) looking for SPR oil.

With three exceptions: Barclays, JPMorgan, and Trafigura.

With those exceptions, I just don't include refiners buying oil from the SPR as speculators. If one does, then one must agree that anyone trading in oil are "speculators."

As for me, I don't use the word "speculator" to describe folks buying and selling commodities. In fact, I'm not even sure when I would use the word "speculator" -- it's all in the eye of the beholder.

Here are the generally accepted definitions of "to speculate":
  • to engage in thought or reflection; meditate (often followed by on, upon,  or a clause);  
  • to indulge in conjectural thought; and,
  • to engage in any business transaction involving considerable risk or the chance of large gains, especially to buy and sell commodities, stocks, etc., in the expectation of a quick or very large profit.
I just don't see bidding for oil at $107 when it was trading on the open market for $97 as "considerable risk" or even the chance of large gains. I just don't see oil spiking to $107 before these refiners take delivery of the oil they are bidding on. In fact, one could argue, based on the pundits who say there is no shortfall, that they are taking a huge risk on the downside.

So, I am flummoxed, again, by the pundits who are confused with the definition of "to speculate" when it comes to oil.

New Bypass For Williston -- Truck Reliever Route -- $85 Million Project -- Heart of the Bakken -- North Dakota, USA

Link here (regional links break early and break often).
The proposed, four-lane Truck Reliever Route would begin north of Williston along U.S. Highway 2 at the Springbrook turnoff. It would end west of Williston near what is called the Four Mile Corner.
Rolfstad said SRF Consulting Group out of Fargo, which produced the city's comprehensive land use and transportation plan as well as a recent annexation study, will be working on the planning of the route.
  • Fast-track
  • Cost estimate: $85 million
  • Construction could begin as early as spring, 2013
Route:The proposed, four-lane Truck Reliever Route would begin north of Williston along U.S. Highway 2 at the Springbrook turnoff. It would end west of Williston near what is called the Four Mile Corner.


I was probably about 10 years old, maybe a bit older, when they put in the current bypass around Williston. Even at that age (so, maybe I was 14), I was aware of a significant number of Willistonites who were opposed to the bypass, saying that tourists bypassing Williston would kill the town.

If the current bypass did not now exist, the truck traffic would have destroyed the town.

It often takes vision to do the right thing, and then tenacity to see it get done.

I hazard to think how Williston would be doing without the current bypass. I understand Ray had the opportunity to run US-2 around the city but made a conscious decision to not do so.

New Extended Stay Value Place Hotel To Be Ready For Occupany Next Spring -- Bakken, North Dakota, USA

"Anonymous" alerted me to this story earlier in September, see my quick update, September 9, 2011.

Developers "broke ground" for an extended-stay hotel, Value Place Hotel, for the new Granite Peak development north of Williston.

This is about four miles north of Williston, on US Highway, north on "milliondollarway," I might add. It's on the northeast corner of the Epping turning.

It will sit on the 720-acre industrial park-hotel-truck-stop complex, perhaps the largest complex in the area. The entire site is referred to as the Bakken Industrial Park.
"We have found that Williston is an exceptional place to do business. The 'can do, let's get it done' attitude and the cooperation we have experienced from the city and county has truly been refreshing," Chairman and CEO of Nakota Development of Jacksonville, Fla. Arthur Cahoon said.

The Value Place hotel is slated to open in the late spring of 2012. The hotel will feature 124 all-suite efficiency units each containing its own kitchenette. Pre-opening lease commitments are currently being accepted. Suites will be available for a minimum of one week at a time.

Monster Well Update -- Bakken, North Dakota, USA

Folks elsewhere follow the Chandler James and a couple of sister Austin wells. The Chandler James hit the 750,000 bbl mark in July, 2011. The Austin 21-28 ended July (2011) with 740,471 bbls after starting in 8/18/2008. both wells are now in the 300+ bbl/month (qualifying for strip well status). See first comment below. These well are still high producers. The Austin well is producing 7,000 bbls / month and the Chandler James is producing 11,000 to 12,000 bbls/month.  There is a 640/1280 difference between these two wells. Adding the 695,009 bbl from the adjacent Austin 18-21, the two sections in the Parshall oil field have produced 1,435480 bbl in 3 years.

See "monster wells" for more.

Dimond Field

"Spooner" elsewhere asks whether this docket will affect any wells already in these sections?

Thre are NO wells in these sections. There was a dry well drilled some time ago (many, many years ago) in section 24 but that is irrelevant.

This is the docket to which "Spooner" was referring:
Case No. 15649: Application of OXY USA Inc. for an order extending the  outline of theDimond Field to include Sections 1, 12, 13, 24, 25, 26, 35 and 36, T.160N.,R.90W., and Sections 6, 7, 18 and 24, T.160N., R. 91W., Burke County,ND; amending the applicable field orders for the Dimond-Bakken Pool to establish sixteen 1280-acre spacing units described as Sections 1 and 12;Sections 2 and 11; Sections 3 and 4; Sections 5 and 8; Sections 10 and 15; sections 13 and 24; Sections 14 and 23; Sections 20 and 29; Sections 21and 28; Sections 22 and 27; Sections 25 and 36; Sections 26 and 35,T.160N., R.90W.; and Sections 1 and 2; Sections 5 and 6; Sections 7 and 18; and Sections 24 and 25, T.160N., R.91W., and allow a horizontal well to be drilled on each such spacing unit; and such other relief as is appropriate.
It's possible #20743, still on the confidential list could be affected, in section 8-160-91, depending which way it is going, but my hunch it is headed southeast based on the pattern of the other wells; it's an unsual spot to place a horizontal.
  • 20743, CONF, OXY USA, Erickson 160-91-8-D-1H, Dimond, Bakken
I guess this would be a "dimond in the Bakken." Smile.








Four Wells Drilling -- 2560-Acre Spacing -- Pershing Oil Field -- Bakken, North Dakota, USA

In light of my last post and "dilemma," here are four more wells to watch:
  • 19933, 495, CLR, Bailey 2-24H, Pershing oil field, goes north, t1/12; cum 75K 3/14;
  • 19934, 877, CLR, Bailey 3-24H, Pershing oil field, goes north; t7/11; cum 112K 3/14;
  • 19935, 309, CLR, Wiley 2-25H, Pershing oil field, goes south; t12/11; cum 120K 3/14;
  • 19936, 724, CLR, Wiley 3-25H, Pershing oil field, goes south; t12/11; cum 125K 3/14;
These four wells, all long horizontals, are on the same pad, each 50 feet from its neighbor.  Two go north, and two go south. Spacing is 2560-acre/four sections.

First Well With 2560-Acre Spacing -- Bakken, North Dakota, USA

Well, this is very, very interesting.

Folks have been opining, wondering, speculating, arguing, elsewhere, how anyone is going to be able to drill a well on 2560-acre spacing.

Well (no pun intended), I think we got ourselves our first example. (Note: I'm sure someone will tell me it's been done a hundred times before and that this is no big deal. But it's the first time I've seen it, and the first time I've blogged about it, so for me -- and, perhaps, me alone -- it's a big, big deal.) But I don't quite understand what I'm seeing. First, here's the well:
  • 19666, 1,028, MRO, Elk Creek USA 33-12H, Lost Bridge, Bakken (note spacing: 4 sections). The well is located in Lost Bridge oil field, west of the reservations, about 20 miles NNW of Killdeer, as the crow flies.
But this is what still needs to follow. There are two wells on this pad (the other is 19667, and that long horizontal goes south. The 19666 long horizontal goes north).

Each horizontal, as noted, is a long horizontal: 19666 goes north into sections 12/1 - 148-96, while 19667 goes south into sections 13/24 - 148-96.

The GIS map server confirms that this is 2560-acre spacing. This suggests to me that whoever owns any mineral rights in any of these four sections will collect royalties from both horizontals.

But I think this answers the question: just because it's "2560-acre spacing," doesn't mean the operator has to push the horizontal four miles or more.

See third comment below for explanation why "2560-acre spacing" is chosen: it has to do with the "500-foot setback rule."

One can go to the GIS map server and locate other 2560-acre spacing units. I checked out #19712, CLR, Ivan 1-29H: it's a long horizontal, but the scout ticket says it's only 2-section spacing. This is the same for its sister well, #19586, He 1-20H (one 2560-acre spacing, but yet being reported as "2-section spacing."  I wonder if there is an error, an inconsistency, a change in spacing rules, or most likely, I'm misreading/misunderstanding something. It wouldn't be the first time.

(Same with #17770/#17742: two long horizontals drilling on 2560-acre spacing, and the scout ticket for both shows 2-section spacing.)

Other wells coming off confidential list today: 
  • 19471, 1,412, Fidelity, Behr 16-21H, Stanley, Bakken,
  • 20323, DRL, BR, Midnight Run 11-1MBH, Union Center, Bakken,
Note: one of three wells reporting today was not fracked/completed.

For once, it looks like Fidelity has a good well. Which reminds me: the MRO well above is another in a string of good wells being reported by MRO. I remember about a year ago, an "expert"told me that MRO doesn't report wells with IPs greater than 500 bbls, and seldom about 300 bbls. MRO must have gotten the memo.

Busy, Busy, Busy in the Oil Patch -- Williston -- Bakken, North Dakota, USA

This morning on my way into work -- work: exploring the Bakken -- I stopped at Tim Herman's out on the bypass for gas (as in gasoline, not natural gas). I left early to beat the morning rush. After 7:00 a.m. one cannot make a left turn at any intersection that does not have signal/traffic lights.

For folks unfamiliar with Williston: in the "old days" -- four years ago, before the current boom, I would have been the only one in the store at that moment, or maybe one of two, possibly three.

This morning, all pumps were occupied. When I was ready to fill up and pay, there were two lines of folks in the store, each line about six people long. I was the only one not in coveralls or similar oilfield garb.

It appeared the chaos was self-organizing. One line was mostly folks who were passengers with others and stocking up on snacks and drinks for the day. The othe line was for those folks who were paying for gasoline or diesel. By their speech, or by their comments, I could tell that most were from outside North Dakota. Many had accounts at Herman Oil; kept the line moving quickly and efficiently.

It is a beautiful day in Williston. We are under a freeze warning until 9:00 a.m. (now passed) and it was a very, very pleasant 30 degrees; at least that's what I heard the temperature was, according to news radio. Not exactly short-sleeve weather, but certainly no sweater or windbreaker is/was needed. I good long-sleeve heavy western shirt is more than enough, and probably too much once one begins manual labor. I expect it will be quite warm this afternoon under these absolutely clear blue skies.

Leaving Herman Oil, one can cross four lanes of divided highway (no traffic signals yet) or turn right and go about a mile down the road to make a less busy left turn, which I did. The city contracted to have traffic lights up at the Herman Oil intersection by September 2, 2011. Deadline passed; contractor couldn't get supplies, which appeared to be the metal poles because on Setember 2 (or thereabouts) the contractor was putting up temporary wooden utility poles (probably on loan from MDU) with traffic lights. Let's see, it's now September 14, and the lights have been up for about two weeks, and not yet working. I'll keep you posted.

Oh, by the way. How long did I have to stand in line? By North Dakota standards it was "an eternity." Probably three minutes. How long did it take to get to my destination? Five minutes. Had we not had the oil boom, probably four minutes. Me? I love the traffic. Those folks are happy to have work. It sure beats 12.1 percent unemmployment enjoyed by California and Nevada.

By the way, for folks new to Williston or Herman Oil: Herman Oil provides coffee free of charge for anyone who purchases gasoline. At least I was told that one day. I didn't see any sign advertising as such. I think coffee at McDonald's is higher than what I paid in California McDonald's: about 85 cents in Williston. A tall draft beer -- wow, I am really starting to digress -- is $1.00 between 4:00 p.m. and 6:00 p.m. every day at one of the busier sports bars in town. Then, up to $2.50 or so after that. Maybe more. I don't remember. And a full meal for $3.50 between 4:00 and 6:00 p.m.

North Dakota Has Little Faith in United States Economy In the Long Run

Link here (regional links break early and break often).

The state will invest its "oil money" in "money market instruments" in the Bank of North Dakota currently earning about 1 percent.

This speaks volumes about how much the state of North Dakota trusts the US economy going forward.

The lede:
The board's chairman, state Sen. Randy Christmann, R-Hazen, said he's reluctant to put much of the revenue into the stock market, even though similar funds in other energy-producing states have significant investments in stocks.

"I think stocks would be pretty limited," Christmann said. "Preserving that principal is the priority."

North Dakota voters last year approved a state constitutional amendment to create the new "Legacy Fund," which will get regular deposits equaling 30 percent of North Dakota's oil tax collections.

The first $34.3 million infusion was deposited in the state-owned Bank of North Dakota last week. It will earn less than 1 percent interest there.
The amendment bars the Legislature from spending any of the fund's principal or earnings until July 1, 2017.

Afterward, lawmakers may spend money from the fund only with two-thirds approval of the North Dakota House and Senate, and they are barred from spending more than 15 percent of its principal during any two-year period.
Very, very sad commentary. [2012 was an incredible year for investors.]

For another view, click here: this story has been picked up and reprinted numerous places.

Case Study -- In Real Time -- BEXP -- West Of Williston -- Bakken, North Dakota, USA

Start with the discussion here.

Two BEXP three-well pads, with a rig-on-site in the middle well for both of the following configurations. In Todd oil field (Williston).

Here's the first:
  • 21005, 2,436, Statoil/BEXP, Borsheim Trust 33-28 1H, section 33-155-101, t3/12; cum 239K 5/17;
  • 21006, 3,001, Statoil/BEXP, Orville 4-9 2H, section 33-155-101, t3/12; cum 274K 5/17;
  • 21007, 2,788, Statoil/BEXP, Orville 4-9 1H, section 33-155-101, t3/12; cum 232K 5/17;
These three wells sit on one pad, or are very, very close to each other. I will have to take a drive out there sometime this month.

Of the three wells, two will go south (ala the Olson wells -- 19085 and 19086) and one will run north. Both will be long laterals.

And what makes this really cool, BEXP will do the same thing again, 0.36 miles to the southeast in section 3-154-101:
  • 20997, 2,823, Charles 3-10 1H, section 33-155-101; t5/12; cum 238K 5/17;
  • 20098, 2,315, Charles 3-10 2H, section 33-155-101, t3/12; cum 252K 5/17;
  • 20099, 1,080, Cherrey 34-27 1H, section 33-155-101, t11/11; cum 340K 5/17;
Again, these three wells sit on one pad, or are very, very close to each other. I will have to take a drive out there sometime this month.

Of the three wells, two will go south (ala the Olson wells) and one will run north. Both will be long laterals.

Since I mentioned the Olson twins, here's an update:

NDIC File No: 19085 API No: 33-105-01857-00-00 County: WILLIAMS CTB No: 119085
Well Type: OG Well Status: A Status Date: 4/21/2011 Wellbore type: HORIZONTAL
Location: NENW 9-154-102
Lateral 1 Start Coordinates 102 S 131 W From Wellhead, End Coordinates 10105 S 573 W From Wellhead
Current Operator: BRIGHAM OIL & GAS, L.P.
Current Well Name: BRAD OLSON 9-16 3H
Spud Date(s): 8/16/2010
Completion Data
Pool: BAKKEN Perfs: 10993-20440 Comp: 4/21/2011 Status: F Date: 4/24/2011 Spacing: 2SEC
Cumulative Production Data
Pool: BAKKEN Cum Oil: 39154 Cum MCF Gas: 22707 Cum Water: 39709
Production Test Data
IP Test Date: 4/24/2011 Pool: BAKKEN IP Oil: 2172 IP MCF: 1218 IP Water: 5733
Cum 163K 8/14;

NDIC File No: 19086 API No: 33-105-01858-00-00 County: WILLIAMS CTB No: 119086
Well Type: OG Well Status: A Status Date: 11/1/2010 Wellbore type: HORIZONTAL
Location: NENW 9-154-102
Current Operator: BRIGHAM OIL & GAS, L.P.
Current Well Name: BRAD OLSON 9-16 2H
Spud Date(s): 7/13/2010
Completion Data
Pool: BAKKEN Perfs: 10830-20580 Comp: 11/1/2010 Status: F Date: 11/2/2010 Spacing: 2SEC
Cumulative Production Data
Pool: BAKKEN Cum Oil: 64723 Cum MCF Gas: 42895 Cum Water: 64793
Production Test Data
IP Test Date: 11/2/2010 Pool: BAKKEN IP Oil: 2472 IP MCF: 1470 IP Water: 3107
Cum 171K 8/14;

The two laterals start out within feet of each other, diverge, and end up less than 1,500 feet apart as long horizontals. Fracking effectiveness goes out 500 feet from a horizontal, so there is still 500 lateral distance between these two horizontals that is being missed. If these end up being great Bakken wells, BEXP will put a third Olson horizontal in the same formation between these two legs. There are  three horizontals in this spacing unit and the general consensus is that there will eventually be at least 7 horizontals in each "good" Bakken spacing unit. We're not even halfway there in an area with intense activity already.

For Investors Only: Sell BHI -- Seeking Contributor

The contributor to may be correct.
It is only a mat­ter of time before oil and gas stocks stop mov­ing with the price of oil and start reflect­ing their under­ly­ing economics.
When this hap­pens, Baker Hughes (BHI – “very dan­ger­ous” rat­ing) will be among the stocks that fall the hardest.
But I would have more "faith" in his analysis if he actually came out to North Dakota to see the new industrial sites BHI is building in Dickinson, Minot, and Williston.

As for me, I hope the oil and gas stocks stop moving with price of oil, and start moving based on "growth" parameters and not "value" parameters. But then, that's just me with a very, very long horizon.

Florida Has No State Income Tax, Will End Its Business Tax, and Has No Oil Industry

Rick Scott, governor of Florida, said they had a record summer, one year after the oil spill in the Gulf -- oh, by the way, no oil on Florida beaches.  He reminded folks that Florida created more jobs in the US than any other state, except for Texas. He reminded folks that Florida has no state income tax. And he will eliminate state business taxes in Florida.

Without doing the research, my hunch is that the North Dakota budget is in better shape than Florida's by a long shot and that the oil money is going to "overwhelm" even the politicians in Bismarck.

And yet, I don't see any broad-reaching tax-less initiatives in North Dakota. And yes, I know there has been some nibbling on the margins, but even in Williston, they will vote (again) to raise a sales tax / bond issue for city park improvement. Some developers are putting in their own water and sewer, relieving Williston of that cost in some areas. House appraisals in Williston are probably doubling over what they were four years ago, and I have not heard of any property tax relief like Proposition 13 in California, but again I could be wrong -- I have not followed tax policy in North Dakota, so a very superficial understanding. But I certainly haven't seen any headlines on tax reduction that would get one excited.

Don't Hold Your Breath

Link here
The Center for Liquefied Natural Gas (CLNG) has sent a letter to congressional energy leaders urging them to support the congressionally-established regulatory process for considering LNG export applications.

"DOE has the tools in place to manage the flow of natural gas supplies in and out of the U.S. and has made it clear that they will address concerns regarding domestic needs without harming the economy," said Bill Cooper, president of the Center for Liquefied Natural Gas.

"Unless DOE finds that an export application is not consistent with the public interest, then the burden is on those opposed to LNG exports to provide evidence beyond mere conjecture and innuendo."

In the letter, Cooper urges Congress not to allow opponents of LNG export applications to seek redress in order to prematurely circumvent the administrative permitting process. This process was established by Congress whereby the federal agency can gather evidence, hear public comments, hold hearings, and make a determination based upon the guidance provided to it by the statute.
Don't get your hopes up. The US won't be exporting LNG under this administration.

First Gas-To-Liquids Plant to Be Built in Louisiana -- Eventually A Bakken Story

Link here.
South African oil and gas company Sasol  has chosen southwest Louisiana as the location of its planned gas-to-liquids (GTL) facility. The first GTL plant in the United States, the Sasol facility would produce GTL transportation fuels and other products.

Unlike other clean fuel alternatives, GTL fuel can be used in existing vehicles and fuel delivery infrastructure without any modifications. 
I am reminded of the CRYO plants west of Williston.