Monday, November 7, 2011

Busy, Busy, Busy in Williston, North Dakota -- The Bakken, North Dakota, USA

It is impossible for me to find the words to describe how much traffic there is in Willison. It is truly incredible.

All I can say is "thank goodness" for the vision some city leaders had years ago with roads, intersections, etc.  The signal lights also seem to be set about right to keep the traffic moving. I'm sure I'm in the minority on my enthusiasm for how good things are going, but as Norwegians always say, "it could be worse."

And folks keep arriving daily.

About two weeks ago, I was looking for a specific location out in the Bakken where there was new construction. I talked with a surveyor who happened to be there. He was unable to help. It turned out he had arrived in Williston only hours earlier that morning.

Today, I ran into a young man and woman, general contractors. It turns out they had arrived from Alaska yesterday; he from Fairbanks; she from Anchorage.

Two Rigs On Site On The Far East Edge of The ND Bakken -- The Bakken, North Dakota, USA

Don alerted me to these two wells.

Look at the "state" view on the NDIC GIS map server -- there are two rigs so far east, they stand out
  • 17623, dry, BEXP, 25-143-90 (updated 6/12)
  • 21284, drl, Cirque, 16-142-90 (updated 6/12)
We probably won't know until next year but if these are good wells, BEXP and Cirque have really extended the play.

And, of course, we're waiting for the results of some Chesapeake wells in southwestern North Dakota. [August 17, 2012: and we know how that all turned out. Dismal.]

Three Notable Wells Reported These Past Ten Days -- The Bakken, North Dakota, USA

A "chore" I never look forward to every week or so is going back and posting the links to the top stories for the week.

But I sure am glad I do it. So much happens in a week I can forget some of the great stories. This was one of those weeks. Among everything else, this was a week for three great wells, and all great for a different reason:
  • Tarpon Federal: record IP in the Bakken; northeast of Watford City; a Whiting well
  • Multiple payzones likely in the Three Forks formation, a Continental Resources well, Charlotte 2-22H
  • The Hagen well in Red Wing Creek -- a Madison well with an IP like those of good Bakken wells
So, we have the Tarpon Federal, the Charlotte, and the Hagen wells -- three different companies, three different formations; all notable records for different reasons

Week 44: October 29 -- November 4, 2011

Mining and longer laterals in the Bakken

New Oasis complex west of Williston

Slawson's Armada well -- 120,000 bbls in one year

Statoil coming to North Dakota

Oil boom spurring Bismarck building boom

Update on ONEOK's Garden Creek, Stateline I and II; more on ONEOK in North Dakota; expansion of the Hess natural gas plant in Tioga; update on LNG industry in western North Dakota;

Frack and trade

Bakken boom fuels rail boom

As many as four payzones in the Three Forks formation

Activity moving to McKenzie County; record Bakken well; deeper Three Forks payzone

Tarpon Federal -- record IP -- Whiting, NOG

Formations in the Williston Basin, porosity and permeability

Whiting: growth, value, and speculation -- all in one

Multiple reasons for fracking backlog

Whiting: high IPs, low cost

Mexico scraps plans for ten nuclear power plants; will switch to natural gas

Newfield's hand wringing over the cost of fracking

Enbridge to increase pipeline capacity

$14,000/acre in southwestern North Dakota -- a new record; full auction results here

North Dakota may have new refinery

The new Hagen/Madison well in Red Wing Creek; near Watford City

North Dakota: #1 in the Nation for Hotel Occupany Rate --

From Carpe Diem:
Thanks to the oil boom, finding a hotel room anywhere near Minot, Williston or Dickinson is becoming nearly impossible if you don't have a reservation. Coleman says North Dakota is leading the country in hotel occupancies, increasing by 9 percent from this time last year."
Again, a reminder to folks coming to western North Dakota: don't come without knowing what your plans are for staying somewhere.

Eight (8) New Permits -- The Bakken, North Dakota, USA

Daily activity report, November 7, 2011 --

Operators: Ward -Williston, MRO (2), CLR (2), Hess (3)

Fields: Little Deep Creek, Deep Water Creek Bay, North Tioga, Beaver Lodge, LIttle Knife.

CLR has a wildcat in Burke County.

MRO  has permits for a 2-well pad, as does Hess.

Finally, eleven wells released from "tight hole" status and six of them reported IPs, including:
  • 19499, 1,264, Fidelity, TTT Ranch 33-28H, Mountrail, Bakken
  • 20373, 2,812, BEXP, Alger State 16-21 1H, Mountrail, Bakken
And a well that was producing is now completed:
  • 20068, 929, North Plains, Flatland 9-9H, McKenzie, Bakken
But, still, of the eleven wells coming off "tight hole" status, almost half were still waiting to be fracked/completed.

Drillers in the Gulf of Mexico -- Petrobras Finds Oil -- Absolutely Nothing To Do With The Bakken

This is how a crazy mind sees the world. It's a bit of a stretch and I won't blame folks if they can't connect the dots, but this is how my mind works:

News report early this morning: Petrobras discovers oil in America's Gulf of Mexico. And, everyone remembers Cuba's plans to drill in the Gulf. Even the Chinese oil company, CNOOC, plans to venture into the gulf. It seems everyone is headed there but the US. Supposedly the permitorium has been lifted, but I'm not hearing much.

So, all I'm thinking is that Brazil, the Chinese, and Cuba are going to be drilling in the gulf, everyone but the US.

Then later today, this story:
The US is working with adjacent countries to develop effective responses to offshore crude oil spills that could threaten US coasts, a US Department of the Interior official told a US House subcommittee.

Other witnesses suggested that more needs to be done, particularly in regard to Cuba.

Michael R. Bromwich, interim director of the US Bureau of Safety and Environmental Enforcement, told the House Natural Resources Committee’s Energy and Minerals Subcommittee that the US government is in close contact with Repsol-YPF SA as it prepares to drill offshore Cuba.

The US government will use all appropriate resources and authority to respond to any spill in Cuban or other waters.
So, one of the most technologically-advanced countries in the world, with some of the most stringent environmental protection laws is clamping down on our own companies drilling in the Gulf, while foreign countries like Cuba are pressing forward.

And the first thing I thought of was Jerry Reed's "She Got the Goldmine, I Got the Shaft."

She Got the Goldmine, Jerry Reed

The foreign drillers will get the gold mine, the US the shaft.

Yes, I know it's a stretch.

Oasis Reports 3Q11 Results -- The Bakken, North Dakota, USA

Link here.
  • Grew average daily production to 11,583 barrels of oil equivalent per day ("Boepd"), a 110% increase over the third quarter of 2010.  Daily production increased by 47% compared to the second quarter of 2011.
  • Increased Adjusted EBITDA to $62.9 million, an increase of $40.9 million over the third quarter of 2010 and a sequential increase of $18.4 million over the second quarter of 2011.
This is particularly interesting for folks who have been commenting on the WTI - Brent spread:
Average price per barrel of oil, without realized derivatives, was $83.52 in the third quarter of 2011, compared to $66.42 in the third quarter of 2010 and $95.48 in the second quarter of 2011.  The average price differential compared to West Texas Intermediate ("WTI") crude oil index prices was 6% in the third quarter of 2011, compared to 13% in the third quarter of 2010 and 7% in the second quarter of 2011.  The Company's differentials have improved due to higher quoted prices for Bakken crude in markets such as Clearbrook, Minnesota, and Guernsey, Wyoming.
And the "business of the business" is making a huge difference:
The Company reported net income of $66.3 million, or $0.72 per weighted average diluted share, for the third quarter of 2011 as compared to a net loss of $1.7 million, or $0.02 per weighted average diluted share, for the third quarter of 2010.  The third quarter of 2011 included an unrealized gain on derivative instruments of $71.4 million, an increase of $39.7 million, or 125%, over the second quarter of 2011 of $31.7 million.
And, of course, all this is linked at "Earnings Central."

Nothing To Do With The Bakken -- But Implications Just the Same -- China's Demand for Corn

Link here.

I normally wouldn't post a story about corn, but this caught my attention; see if you see what I see. It's obvious.
Grains traded higher  [last week] after a survey of Chinese corn growers shows a need for more imports. Even with record production, growers in that country say it’s not enough to keep up with demand. A survey says corn imports to that country are expected to hit a record high, 5 million tons in the 2011, 2012 marketing season. Last season imports were just one million tons. According to the USDA, China bought 900,000 tons of U.S. corn back in October--the second largest single-day sale in U.S. history. So far this year, corn purchases are up 50%. The National Corn Growers Association says China will continue to be a major market for U.S. grains.
I don't know about you, but when a country needs to increase its imports of a staple by five-fold -- from one million tons in 2010 - 2011  marketing season to five million tons this season -- that catches my eye.

But that was not the most important note. This was the most important takeaway: the Chinese will increase imports five-fold, not because they had a lousy growing season (which always seemed to be the story with the Russians). The Chinese are increasing their imports of corn even as they themselves are producing record amounts. A lot of those American dollars that the Chinese hold will be coming back to American farmers. 

I would assume corn imports correlate with population, and I would assume there is a correlation between corn imports and energy needs: no cause and effect, just a correlation. The same folks in China who enjoy and can afford corn-fed beef, most likely enjoy and can afford automobiles.

China's growing demand for corn leads one naturally to thinking about China's growing need for oil. CNOOC's anticipated purchase of BP's $7.1 billion state in Argentine crude producer Pan American Energy LLC did not materialize. My hunch is that this will have repercussions for the entire oil industry going forward.

Coincidentally, Carpe Diem reports that corn yields have increased six times since the 1930s and are estimated to double by 2030. Other data points:
  • Farmers today grow five times as much corn as they did in the 1930s – on 20 percent less land. That is 13 million acres or 20,000 square miles, twice the size of Massachusetts. The yield per acre has skyrocketed from 24 bushels in 1931 to 154 now, or a six-fold gain.

  • The national average of 153 bushels produced on each acre in 2010 was nearly 20 percent larger than the average yield in 2002 – and plant breeding experts estimate yields may jump 40 percent before 2020 and, perhaps, hit a national average of 300 bushels per acre by 2030.
  • America’s corn farmers are by far the most productive in the world, growing 20% more corn per acre than any other nation.

Mike Filloon Has Nice Update Re: KOG 3Q11 -- For Investors -- The Bakken, North Dakota, USA

Link here.

Some months ago, maybe two years ago, there was a lot of discussion about the "inflation" of IPs. Over time, it appears that most operators in the Bakken have come to terms with reporting IPs and it appears that most use similar methods. My hunch is that we are closer to being able to compare IPs among different operators.

Also, some time ago, some folks were starting to opine that IPs correlated with EURs: that is, the better the initial production (IP) number, the higher the estimated ultimate recovery (EUR). Of course, the jury is still out on that, and we won't know for many years.

However, Mike Filloon in the link above does write:
For those unfamiliar with initial production rates, the further out in days, the more accurate an estimated ultimate recovery. EURs basically are an estimated amount of resource believed to be pulled from the well over its lifetime.
Mike goes on to write:
Brigham not only had better IP rates than Whiting  and EOG Resources , but had better long-term rates as well. Because of Brigham's results, its wells are the best suited for comparison to Kodiak's Koala wells. I chose wells that had very high IP rates in Brigham's Roughrider, because of this it had a higher average than Kodiak by more than a thousand Boe/d. When the 60-day IP rate is used for those same wells, Kodiak produces more than a hundred Boe/d, than Brigham's. Those hundred barrels of oil equivalent per day over sixty days produce over six thousand barrels more than some of the best Brigham Roughrider wells. 
This is not an investment site. See disclaimer on the sidebar on the right. I accumulate shares in companies operating in the Bakken to include but not limited to KOG, WLL, and EOG, but am not planning on buying any more shares for the next several months. All my discretionary income is going to my granddaughters, daughters, and wife; not necessarily in that order.

I have not kept up as closely with the numbers as Mike has, but it's been my impression that Newfield, Oasis, and KOG consistently have some great wells. MRO has made a huge improvement in IPs over the past year. Slawson (privately held) has always had great wells. NOG partners with some of the best operators in the Bakken.

By the way, Mike references the best IP rate reported in the Bakken: the Tarpon Federal 21-4H, a Whiting Petroleum operated well that had a 24-hour initial production (IP) rate of 7,009 barrels of oil equivalent (BOE), setting a new Williston Basin record for a Bakken well. This is just to the northeast of Poe (KOG's Koala prospect) Field, only separated by Camp and Banks fields.