Monday, October 10, 2011

Last Post for The Evening -- Early Morning Reading For Some -- Bakken, North Dakota, USA

The following was a comment sent in by "anon 1" who never fails to surprise with great links:

"Samson Investment Co., one of the country's largest privately held oil and gas explorers, is considering strategic options including whether to sell itself in a deal that could fetch as much as $10 billion ...
The first link takes you to a very impressive web page to include:
Samson’s oil and natural gas activities originate from our headquarters in Tulsa, Oklahoma and include most major oil and gas regions in North America. Some key producing regions and basins for Samson are East Texas, Texas Gulf Coast, Anadarko, Permian, San Juan, Green River, and the Williston Basin.

Samson operates more than 4,000 wells and has interests in more than 11,000 wells. Production operations are a core strength at Samson and the company operates more than 80% of its total production. Our experienced and resourceful field ....

Samson is an active driller in the United States and annually spends well over a billion dollars a year in drilling new wells. It will operate the drilling of close to 500 wells and will drill more than 1 million feet of new hole in a single year.
The second link takes you to a Wall Street Journal in which Samson is looking at several options:
Samson Investment Co., one of the country's largest privately held oil and gas explorers, is considering strategic options including whether to sell itself in a deal that could fetch as much as $10 billion, according to people familiar with the matter.

The Tulsa, Okla.-based company, little known outside the oil patch, has been seeking a financial adviser to assess a range of options from setting up a joint venture to a full sale, the people said.
Very, very interesting. WLL? BEXP? CLR? or will it be one of the majors? Or an oil service company, SLB, HAL? WMB, which I always thought of as a pipeline company is actively drilling in the Bakken when it bought mineral acreage in the reservation and is now drilling through Dakota-3 LLC. So, anything is possible, I suppose. CLR's market cap is about $10 billion.

Williams County Sets Fee For Man-Camps -- Bakken, North Dakota, USA

Link here.
All man camps in Williams County will now be required to pay a permit fee, a move that is expected to bring in hundreds of thousands of dollars to the county every year. However, exactly how many people are living in the temporary housing structures is still unknown.

The Williams County Commission approved a measure to charge $1.50 per square foot on man camps.

"The Crew Housing Permit Fee must be paid in full for all approved years prior to the building permit being issued and any improvements made to the site," according to the new guidelines.

Existing man camp owners will be pro rated for the fees dating back to May 1, Williams County Director of Tax Equalization Shawna Gooch-Egge said.
The question is not whether this is appropriate; the question is why was this not done sooner?

My understanding is that permanent hotels/motels pay an occupancy tax (see below), and almost everything that requires a permit, comes with a fee attached. The $1.50/square foot was based on hotel/motel occupancy tax rates to the best of my understanding and is a one time fee per the duration of the permit, which is generally two years for "temporary" man-camps.

Based on the size of the man-camp units, I assume the permit fee will be between $500 and $750, which on a 730-day basis works out to less than a dollar/day. The fee will help cover costs incurred by the county in services provided to the man-camps, including but not limited to: emergency response (fire and rescue; currently much of this is volunteer fire department); law enforcement; wear and tear on roads (should be covered by temporary license fees, but something tells me that isn't happening across the board); processing the permits; following up concerns voiced by residents; and so on.

For all intents and purposes the professional man-camps are run like hotels/motels and are in competition with the established hotels/motels. It appears that the fee helps level the playing field among the various lodging options.

I am a strong proponent of man-camps, and have no problem with a permit fee.


Regarding lodging taxes in the state of North Dakota:
The governing body of any city may, by ordinance, impose a city tax, not to exceed 2%, upon the receipts from leasing or renting hotel and motel accommodations. A city may impose an additional 1% tax on lodging accommodations and on receipts from restaurant sales of prepared food or beverages.
Three percent of a $75 lodging bill works out to $2.25/night.

Random Photos of Activity in the Bakken -- New Technology Business Going Up?

Just an empty lot right now; it will be interesting to see what, if anything, is here six months from now. The other reasons for the photograph is to point out how trucks are seen parking anywhere they can find a spot in Williston.

One week ago, this lot just north of Applebee's was the site for several 18-wheelers. It is now posted, something I am seeing more of every day.

The following are random photos of trucks parked wherever they can find a spot:

These are not very dramatic photos but it is an attempt to show how trucks are literally parked everywhere. These are back in the industrial area and not on the main thoroughfares. I am impressed with the "give and take" of all folks involved.

TCOP May Not Be All That Relevant -- CLR -- Bakken, North Dakota, USA

I've blogged about this before, that the television crawler oil price (TCOP) may not be all that relevant -- oil exploration and production companies use various instruments to protect themselves from severe price swings. In addition, the contracts are written well in advance of the spot price we see on the crawler.

It's great to see this in print.
CLR is delivering its oil to "premium markets." "More than 90 percent of our operated production is priced, apart from transportation costs, at a premium to West Texas Intermediate. WTI is an increasingly unrealiable reflection of the realized value of Bakken oil due to the chronic oversupply at Cushing," Mr. Hamm said. The majority of Continental's oil is sold for delivery by pipeline to Clearbrook, MN or Guernsey, WY, or delivered by railroad to various points including St. James, LA.

During the third quarter of 2011, Continental had 3.1 million barrels of oil production covered by derivative instruments, with fixed price swaps averaging $85.64 per barrel and collars in a weighted average range of $79.39 to $91.27. The Company expects to recognize a pre-tax unrealized gain on mark-to-market derivative instruments of more than $500 million for the quarter.
There's something to be said for flexibility in ways and places to ship oil.

I've always said the key to success is effectively and efficiently managing the "business of the business."

Random Photos of Activity in the Bakken -- New Development -- Border States?

Continuing my walk from the bypass on the east side of the city out to the airport, something new going up here. This is located between Triangle Electric and Border States on the north side of town; I don't know what is going up here. Next month it should be up.

Again, this is on a Sunday and workers are on site -- as they were at most places that were under construction.

Random Photos of Activity in the Bakken -- New Laundromat -- Williston, North Dakota

This laundromat seems to have gone up overnight. I have driven by this site numerous times; several months ago it was just a vacant lot, now it's almost closed in for completion before winter weather sets in. The folks putting it up appear to be staying on-site. If true, most likely due to lack of affordable housing while building the laundromat. This is on the north side of Williston, down the road from the site of the first Wal-Mart.

Random Photos of Activity in the Bakken -- Apartment Complex -- Northwest Watford City, North Dakota

I did not see this a few months ago when passing through Watford City. I don't know the developer or the name of the apartment complex. See first comment: apartment complex being built by Power Fuels for their employees. A big "thank you" for the note.

A Little Bit For Everyone: Investors and Non-Investors (Those Just Interested in the Bakken) -- CLR -- Oklahoma Says OK to Long Laterals -- Bakken, North Dakota, USA

Link here.

Even if you are not an investor but are still interested in the Bakken, the CLR press release has to get you excited.

The press release came out last week, but I didn't really get a chance to look at it until now. Here are some data points (some numbers rounded):
  • The production this company reported in the 3Q11 will very likely mean CLR will be at the top end of its forecast for the entire year: 40% increase in production year-over-year (2010 vs 2011)
  • September exit rate: 70,000 boepd; 30% higher than exit rate of 55,110 boepd for June, 2011
  • CLR completed 45 gross wells in 3Q vs 34 gross wells in 2Q
  • And CLR has another 49 gross wells in completion (fracture-stimulation) phase; folks, think about, CLR completed 45 gross wells in 3Q (three months) and at press time had more than that ready/almost ready to produce -- that's incredible, no matter how you look at it -- 25 of those had been fractured and are probably producing now as we write/read
  • CLR's focus: infrastructure; gathering oil and gas; less truck traffic; exploring use of portable gas turbine generators that would consume excess gas and produce electricity -- wouldn't it be a hoot if Harold Hamm put electricity back into the grid at the pad!
  • 24 rigs; 5 dedicated frack teams; the most in the Bakken
  • CLR's Hawkinson-Whitman Eco-Pad tested 7,214 boepd IP (1,804 average per four wells)
  • One of the four, the Whitman 3-34 has not yet been fracture-stimulated due to its high natural production rate: remember, fracturing can double the cost of the well; to boot, this was a short lateral -- WOW!
And finally I get to the reason I went back and read the press release. Oklahoma just passed a new statute allowing long laterals (two or more 640-acre pooled units to be developed with one well bore). We've been doing that in North Dakota during the entire boom. This is huge for players like CLR who have tweaked the long lateral technology in the North Dakota Bakken.

By the way, at $75/bbl at the wellhead, what does 70,000 boepd calculate to? $5.25 million/day, or $157 million/month.

Photos of the New Holiday Express Inn -- Williston -- Bakken, North Dakota, USA

Over the weekend, I promised some photos of the new Holiday Inn Express. Here they are:

There are three hotels in this group, all managed by Brutger Equities: HomStay to the left (south); Candlewood straight ahead (to the west); and, the Holiday Inn Express to the right (under construction, north).

It is my understanding that both the Candlewood and the HomStay are contracted out  and not taking reservations. That was true of the Candlewood some time ago; I could be wrong, and things could have changed. Both the Candlewood and the HomStay have been occupied for some time; the Holiday Inn Express is under construction and should be ready for occupants by the end of 1Q12.

From this location, I took one photograph that included these three hotels. Immediately to the left (the south) and just outside the photo is the Williston airport. 

To the east, closer to Million Dollar Way are three more motels: International Inn, Travel Lodge, and Missouri Flats Inns.

In addition, to the north in the same area is the Microtel. 

Farther south, near the hospital are three hotels, some complete, some under construction, including the Hampton Inn and Suites next to the hospital. 

Most of these are new to Williston. 

By the way, these are photos of two other motels mentioned above (in the distance is the Microtel).

Eleven (11) New Permits -- Some Nice Wells -- Bakken, North Dakota, USA

First comment: I don't often notice typographical errors in NDIC's daily activity report, but today there were at least two: QUP for QEP; and Burlinton for Burlington.

Daily activity report, October 10, 2011 --

196 active drilling rigs, two more this afternoon than there were this morning; all-time record, 201.

New permits --
Operators: EOG (2), Chesapeake (2), Denbury Onshore (2), OXY USA (2), CLR, Liberty, Oasis

Fields: Pronghorn, Siverston, Bull Butte, Murphy Creek, and Spotted Horn.

CLR has a wildcat in Burke; CHK has two wildcats in Stark.

Denbury Onshore has permits for a 2-well pad; it appears OXY has permits for a 2-well pad; and, EOG has permits for a 2-well pad.

Three of four wells coming off confidential list were not completed; the one that was:
  • 19449, 1,993, Whiting, State 12-32H, Mountrail, Bakken, Sanish (not unexpected -- nice well)
It's my impression (which I've been saying for some time), BEXP and Whiting seem to have their wells fracked by the end of the six-month confidential period.

Whiting, by the way, had two more wells that were said to be producing or plugged today (of course, you know they are producing); that represented half of all such wells; the other two -- one was MRO and one was EOG.

Other wells reporting included this one:
  • 19997, 1,016, SM Energy, Johnsrud 1-1H, McKenzie, Siverston (turning out to be a great field)

Should Be Easy To Double, Triple, Quadruple Your Money in the Oil Patch -- in South Dakota -- See Disclaimer

Disclaimer at the bottom.

The Rapid City Journal reports that a Boerne (pronounced "Bernie), Texas, company has purchased oil and gas leases in northwestern South Dakota: $520,994 for 66,938 acres. If I did my math correctly, that's $7.80/acre.

The location of these acres were not shown, but they were stated, as noted, to be in "northwestern South Dakota." Maps of the Williston Basin show the basin extending into northwestern South Dakota.

My hunch is that an operator could repackage these 500,000 acres into smaller parcels and market them for $15/acre. Folks looking at prices paid for acreage in North Dakota, upwards of one thousand dollars and more, could be enticed into getting a small stake for only $15 to $30/acre.

The writer noted that the Boerne company is not listed as an active driller in South Dakota.

For an individual investor, or for the Boerne company for that matter, $15 to $30 doesn't sound like much, but when one pays $8.00/acre, and can then turn around and sell it for $15 an acre or more, that's a pretty good return.

On the other hand the company may be getting ready to drill. If so, they got in at a great price compared to prices being paid in North Dakota.

I don't know if the story would have caught my eye for posting (it was sent to me), but I know the city of Boerne quite well. It is just on the outskirts of San Antonio, where I call home. It has a great history and a favorite of tourists.

DISCLAIMER: With regard to the oil and gas leases, I am making no recommendation one way or the other, simply linking the story for those who might be interested in the story as a "human interest story," not an investment story.

Another Superb Look At Three Outstanding Oil Fields in the Bakken -- A Mike Filloon Perspective -- -- Bakken, North Dakota, USA

Link here.

The three fields: Alger, Sanish and Parshall.

The three fields are pretty much "owned" by BEXP, Whiting, and EOG, respectively.

Without going to the GIS map server, one can sort of envision the three fields as forming a "good luck" horseshoe with Stanley at the opening of the horseshoe. Not quite perfect, but close. (A "good luck" horseshoe looks like a "u"; hanging upside down, the "good luck" will run out of a horseshoe.) The Stanley oil field is south of Stanley and in the "cup" of the horseshoe; Stanley, the town, sits in Ross oil field.

At the link Mike Filloon has a nice discussion of the three fields noted above.


Remember my post last Friday linking a story in which Lynn Helms said North Dakota could be producing 800,000 bopd by the end of the year (2011)?

I am being told (see first comment at that link) that Mr Helms was misquoted, and that he said, "800,000 bopd by the end of 2015."  That makes a lot more sense and has been the story line for the past year.

I kept running the numbers to get from 400,000 to 800,000 and thought maybe, but I should have been more suspicious ...

I apologize if I startled anyone (and I assume I did).

That's why I try to link all my stories.

However, one thing that was also in the comment from Mike (see link/comment above) was the suggestion that there will be 225 - 250 rigs by the end of the (year). I had heard the same suggestion last week but did not post it because a) the trend has been going the other way; b) the counties are stressed; and, c) I only heard it from one other source. But now that two folks have heard it (and not from each other), I will post it.

But again, sorry about the 800,000 bopd by the end of the year. That story was in the Dickinson Press and the on-line story has not been corrected.

Oil for America? Remember That One? -- Bakken, North Dakota, USA

I remember how excited I was when I first started reading the press releases from Oil for America. And then for the longest time, we heard little from the company, and then when we did hear something, it was not encouraging.

Oil for America's second well released from confidential status is now listed as "shut in" by NDIC:
  • 19272, SI, Oil for America, Wolf 29-1, Wildcat, Lodgepole (not a Bakken)
This was one of those wells looking for a Lodgepole reef.

I don't recall any press release from the company.

The production numbers for Oil for America's first well have not changed:
  • 19258, F, Oil for America, Zastoupil 22-1, Wildcat, Lodgepole (not a Bakken) -- one day of production back in March, 2011, and cumulative -- 75 barrels.
It's listed as "flowing" but, if so, it certainly isn't flowing much.

I went back to these because a Fidelity rig is on site, near the Wolf well -- about 3 miles distant to the east (Fidelity is east of the Wolf well): Fidelity's Wanner 44-23H, a wildcat, and most likely targeting the Three Forks.

Nearby are two Chesapeake rigs:
  • 21143, DRL, Schoch 21-137-97 A 1H
  • 21139, DRL, Zent 30-138-95 A 1H
These are south of Dickinson, in Stark County, but near Slope and Hettinger counties.

Keystone XL Will Be Built -- CNNMoney

I think the headline writer is ahead of the story.

Link here.
"We still anticipate State will approve the project by year end," Christine Tezak, an energy and environmental policy analyst at asset management firm Robert W. Baird & Co., wrote in a research note earlier this week. "The White House will cite national energy security, trade with a close neighbor, new jobs, and historically strict permitting requirements as justification for approval."
Oh, I think SecState Hillary Clinton will okay the deal, or at worse, forward it to the president without a recommendation. Then, in my mind, it's still a 50-50 proposition whether the president signs off on it before the end of the year.

If the federal government okays it, Nebraska could still balk.

For TransCanada to go around Nebraska (through Colorado) it would require another environmental impact statement, which I believe has been said would take five years. If it takes five years for a new environmental impact statement, the project is dead.

As noted, I think the headline writer is ahead of the story.

For Bakken Investors: Interesting News -- Major Supplier to US Won't Meet Forecasts

Link here.

Nigeria -- unrest -- "force majeure" -- Shell oil -- pipeline leak -- explosives -- intentional

You can probably fill in the rest of the story. If not, check out the link.

Renewables -- Green Energy -- National Scandal -- Others Using That Phrase

A constant theme of this blog has been the need for a level playing field when discussing energy alternatives, and science-based decisions. Policy decisions at the federal level are fine if folks agree to level playing fields and science-based decisions.

Less than that, I consider alternative energy proposals bad business. In some cases a harsher word might be used. I don't know if I have used those harsher words, although I have often implied them.

But here is someone who has strong words for alternative energy policies based on uneven playing fields and myth-based decisions.
This cliché within a mixed metaphor reflects the madness of President Obama’s obsession with “green jobs.” It would be bad enough if this disaster were limited to possible criminality at Solyndra — the solar-panel maker that Obama stimulated with loan guarantees, despite repeated warnings about its rickety finances.

“The true engine of economic growth will always be companies like Solyndra,” Obama proclaimed at its Fremont, Calif., headquarters on May 26, 2010. Not quite. Solyndra’s August 31 bankruptcy transformed 1,100 green jobs into pink slips and marinated taxpayers in $527 million of red ink.

But many green-jobs programs that have not been raided by the FBI — as Solyndra was last September 8 — nonetheless are fiscally reckless enough to merit a five-alarm national scandal.

Consider these other green bankruptcies: Spectra-Watt (website today says it is in Chapter 11);  Evergreen Solar (wiki says it is in Chapter 11; Evergreen Solar's website fails to mention that on the first page, at least as far as I could tell), and Mountain Plaza (filed for Chapter 11 in 2010 and I can't find their website).  [While we are at it, we can add one closer to home: Genesis Poly, Mankato, MN, recycling silage bags and hay wraps; bankrupt within two months, $850,000 lot paid for by federal govt; $500,000 from city of Mankato.]
A very, very good editorial. It's nice to have company.
Every dollar that chases a money-losing windmill is a dollar that cannot fund Head Start.
And don't even get me started on the whooping crane killing is okay if its done by a windmill.

Parts I, II, and III: Filloon's Series -- Bakken Activity Moving to McKenzie and Williams Counties

Part III of Filloon's series on "Bakken activity moving to McKenzie and Williams counties."

Part II of Filloon's series on "Bakken activity moving to McKenzie and Williams counties."

The first part is here.

Of the many nuggets in these two articles, this was particularly interesting:
Kodiak will have a total of 110000 net acres in the Bakken/Three Forks. EUR for the middle Bakken wells in this purchase are estimated to be 650000 Boe. Rumors Kodiak will have cash issues because of this purchase are floating around. This created a very good buying opportunity, as the stock pulled back below $4/share. I do not believe Kodiak has any liquidity issues, as it just cleaned up its balance sheet. Kodiak plans to pay for this acquisition with cash on hand and increased borrowings from its credit facility.
I remember the missed opportunity of buying BEXP a couple years ago for similar reasons.

Superior Energy Services Acquires Complete Production Services

Link here.
The deal will create a new formidable competitor to the Big Four oil service providers : Schlumberger , Halliburton , Baker Hughes and Weatherford.

Superior Energy Services Inc has agreed to buy Complete Production Services Inc in a cash-and-stock deal valued at $2.7 billion, creating an entity that could expand its footprint in the oil-field services sector.
And to think I just posted this note last Friday, about mergers and acquisitions. Smile. Whether it can be considered a big deal or not is in the eye of the beholder. Complete Production Services has operations in North Dakota.

My Favorite Company -- Sells Out Their Cell Phones -- Opening Day

Link here.