Tuesday, November 15, 2011

Eleven (11) New Permits -- The Bakken, North Dakota, USA

Daily activity report, November 15, 2011 --

Operators: GMX Resources (2), OXY USA (2), XTO (2), Petro-Hunt (2), Dakota-3 (WMB), CLR, Whiting

Fields: antelope, New Hradec, West Capa, Bell, Hungry Man Butte, Willmen, Dollar Joe, and McGregory Buttes

No IPs reported today: no new wells, no producing wells that were completed. Hmmm. 

USEG Press Release -- Koufax 3-10 1H; 1,660 boepd -- The Bakken, North Dakota, USA

U.S. Energy Corp. today announced the successful completion of the Koufax 3-10 #1H well with Zavanna, LLC.  The Koufax 3-10 #1H well (file # 20478) was completed with 35 fracture stimulation stages and had an early 24-hour flow back rate of 1,660 boepd on a restricted choke during drillout of the plugs, which consisted of approximately 1,436 barrels of oil and 1,346 MCF of natural gas  (for newbies, it appears the oil/natural gas ratio that they are using is 6,009). The Koufax is located about six (6) miles southwest of Alexander.

Christmas Gift Suggestion -- The Bakken, North Dakota, USA

This was posted a few days ago without a website. A Minnesota reader found a website -- thank you Charley.

These were sold at the Hoestfest this year. Photo courtesy of DH. I was particularly pleased to see that in Latin "frackum" is spelled correctly.

For those who would like to order these for Christmas gifts for mineral owners living out-of-state, here's the website: http://www.bakkenduds.com/.

Wrap-Up: The Newest KOG Acquisition -- The Bakken, North Dakota, USA

With KOG increasing its acreage by 70% in the last couple of months, there will be a fair amount written about KOG over the next few days.

Here are the links, pretty much all in one place.

Of course, the first three postings I did on KOG after the announcement are also linked down below.

This acquisition is a game-changer for KOG. -- Atticvs Research, SeekingAlpha

Steven "Z-Man" Zachritz: bought it cheap, SeekingAlpha. With six rigs as of January, 2012, they need two dedicated frack crews just to keep up; they have one dedicated HAL frack team; they need one more. With acquisition, KOG estimates 24,000 boepd for 2012 with 30,000 boepd ext target for 2012. BEXP hit a record of 10,401 boepd in 2Q11; and estimated around 15,000 boepd at end of 2011. BEXP is a $4.3 billion market cap; KOG is currently a $1.52 billion market cap. BEXP corporate presentation, October, 2011, here.

New acquisition is eight miles from the Bakken well with the record IP: the Tarpon Federal

Data points regarding the acquisition

Initial announcement

Alma Mater Enrolls Most International Students In The Nation -- Absolutely Nothing To Do With The Bakken -- Full Page Story in LA Times

Link here.

I was first aware of this last year or maybe the year before that.

It's a great success story.
For the 10th year in a row, USC held on to a championship that has nothing to do with sports: The Los Angeles campus once again enrolled the most foreign students of any college or university in the United States, according to a new study. UCLA had the sixth-highest international enrollment, up from seventh place the year before.

Across the country, the ranks of international students enrolled in American higher education last year increased 5%, to 723,277, according to the annual report by the Institute of International Education, a New York nonprofit, in partnership with the U.S. State Department.

China, for the second consecutive year, sent the largest group, which was up 22% to about 158,000. Indian students were the next-biggest contingent, followed by those from South Korea, Canada, Taiwan, Saudi Arabia, Japan, Vietnam, Mexico and Turkey, the report found.
USC is a private university; UCLA is a public university. 

Production Costs for BEXP -- The Bakken, North Dakota, USA

BEXP, 3Q11, SEC filing:

Production costs:
Operating and maintenance: $6.89
Expensed workovers: $2.03
Ad valorem taxes: $0.39

Lease operating expenses: $9.31
Production taxes: $7.87
Production costs: $17.18

That's about in line with what I have seen at other corporate presentations for the Bakken.

Video of Harvest Hills Subdivision, Williston, North Dakota -- The Bakken, North Dakota, USA

About 2,200 family units planned for this subdivision if I remember correctly. Largest new subdivision in the Williston area.

You get a bit of perspective how big this subdivision is: I was driving fairly fast and did not back track except for one short half-block section.

The video ends at the coolest circle in the great plains.

Turn off the sound unless you like to hear the North Dakota wind.

Renewables Caught In Perfect Storm -- Europe's Experience -- Absolutely Nothing To Do With The Bakken

Link here.

REUTERS: Three of Europe's top renewable energy companies became the latest victims of a global collapse in prices, massive oversupply and governments slashing subsidies in light of growing debt piles, echoing recent comments from overseas peers. 

SolarWorld, Q-Cells and Nordex are among the latest renewable energy companies to be hit by a mix of high inventories, slower demand and banks tightening their purses regarding wind parks.

Solar companies in particular suffered as they ramped up production last year to meet a surge in demand from Germany and Italy where customers rushed to buy solar panels before governments cut vital subsidies.

Both economies are reducing so-called feed-in tariffs to make the solar sector more productive, and subsidies and prices have been falling at a faster rate than manufacturing costs, leading Germany's renewable elite to slash their 2011 outlooks.

"Elite" is exactly right.

KOG's New Acquisition Is In the Bull's Eye of the Bakken -- The Bakken, North Dakota, USA

The record IP: Tarpon Federal was in Twin Valley oil field.

The center of the southern portion of KOG's January, 2012, acquisition is located about 8 miles to the northwest. Eight miles.

Part II: KOG's January, 2012, Acquisition in the Bakken, North Dakota, USA

Part I here, along with location of acquisition; thoughts on seller

  • The record IP in the Williston Basin: Tarpon Federal is in Twin Valley oil field
  • The center of the southern portion of KOG's January, 2012, acquisition is located about 8 miles to the northwest. Eight miles.
Data points from KOG's press releases and summary at this link.

Southern acreage block, 30,000 net acres:
  • Average per well EUR: 750,000 to 900,000 boe. My hunch: 1 million boe, easy
  • Bakken wells only drilled so far in this area; no Three Forks wells yet
  • KOG feels Three Forks will be in play based on KOG's Koala Project nearby to the southwest
Northern acreage block, 20,000 net acres:
  • Average per well EUR: 350,000 to 450,000 boe
Also included in the sale:
Surface equipment and gas pipeline connection facilities that tie into a regional third-party natural gas gathering system
Three salt water disposal wells
Southern operated lands are near to a crude-by-rail terminal and interstate pipeline interconnect that is expected to be fully operational in 2012

  • 300 additional operated locations prospective; total for KOG in Williston Basin: 800 net
  • 50,000 new acres brings KOG's net acreage to approximately 155,000 acres (compare with others at this link)
  • BEXP: 375,800
  • Oasis: 303,000
  • OXY USA: 200,000
  • Baytex: 126,000
  • Chesapeake: 190,000
  • Denbury: 266,000
Of course, these pale in comparison to WLL and CLR net acreage

Most recent date suggested North Plains Energy, LLC, had about 40,000 net acres in the Bakken; the KOG acquisition: 50,000 net acres.

"Concurrent with this announcement, we furnished our 2012 preliminary Capex budget of $585 million , which includes accelerated plans for development drilling in each of our core Williston Basin operating areas throughout 2012."

Random Video of Home Construction -- Williston -- Heart of the Bakken, North Dakota, USA

Video taken northwest side of Williston, November 13, 2011.

Turn the volume down, unless you like the sound of the North Dakota wind.

Part I: KOG To Acquire 50,000 Net Acres in Heart of The Bakken; Issue $550 Million in Senior Notes; Will Issue 40 Million More Shares -- Moves To New Level In The Bakken -- The Bakken, North Dakota, USA

Some numbers in this post are rounded. Scroll to bottom to see results of some wells in the area in discussion; in the south unit, there are some huge wells.

If you have opportunity for two screens, you may want to pull up KOG's most recent corporate presentation, go to slides 18 and 19, and review those slides while reading the rest of the post.

KOG made three major announcements, Monday, November 14, 2011 (I often get the details wrong when I report financial notes, so you may want to go to the original press releases for what I am about to summarize):
  • KOG will acquire approximately 50,000 net acres in the Bakken to include some producing properties as well as undeveloped leaseholds; the purchase price is $540 million in cash and $50 million in KOG common shares
  • KOG announced it will offer $500 million in senior notes due 2019
  • KOG announced it will issue approximately 43 million more shares of its common stock
Back of envelope calculations:
  • 45 million shares @ $7 --> $315 million
  • Senior notes --> $550 million
  • Total cash raised: $865 million
  • KOG's market cap: $1.6 billion
  • Shares outstanding: 210 million
  • Percent new shares represent: 43 million / 210 million --> 20 percent
This was done quickly and very roughly. Mike Filloon will give us his thoughtful, insightful reaction later this week, I would assume.

Location of the newly acquired acreage, two areas:
  • East of Williston, on the Williams/McKenzie county line; some under water; much in T154N-R97/98W
  • Second area directly north of of the first area, but about 30 miles north; on the Williams County / Divide County line, mostly in Williams County; it's hard to tell from the map, but I think it's mostly T159N-R98/97W, including part of Corinth oil field on the east side of the acquisition
Data points of the assets
  • 50,000 net acres
  • 21 operated wells drilled: 17 are producing; 4 are waiting completion
Back of envelope calculations, cont'd:
  • 21 x $7 million --> $150 million.  $600 million - $150 million = $450 million/50,000 acres --> <$9,000/acre
Based on everything I see, it looks like the seller was North Plains Energy, LLC. The data fits almost perfectly. The most recent data suggested North Plains Energy, LLC, had approximately 40,000 net acres in the Williston Basin.

Newly acquired north unit, along Divide County line, some Corinth field wells:
  • 20056, DRL, North Plains Energy, A. Cvancara 9-7H, Wildcat, producing, waiting to be fracked
  • 19878, DRL, North Plains Energy, Holland 9-19H, waiting to be fracked
  • 19546, 197, North Plains Energy, Collyer 9-8H, s11/10; t3/11; cumulative 15K
  • 21798, 197, North Plains Energy, Collyer 9-8H, s11/10; t3/11; cumulative 15K
  • 8039, PNA, Hunt Energy, Olaf Sevre 1, s9/80; t4/81; cumulative 273; Madison (essentially dry)
  • 6745, PNA, Hunt Energy, Halverson-FLB 1, s10/78; t3/79; Madison/Red River (essentially dry)
  • 21615, Rig on site, Continental Resources, Sevre 1-22H
  • 9323, SWD, North Plains Energy (was a Texaco well back in 1982); Dahlke 11-25SWD
  • 20684, DRL, Baytex Energy, Bragg 32-29-160-98H 1NC, wildcat
Newly acquired south unit, straddling Williams/McKenzie County line, east of Williston, much in T154N-R97/98W; Truax and Banks oil fields; Truax is north of the river; Banks is south of the river; some wells
  • 18644, 1,148, OXY USA/Anschutz, State 1-25-36H-144-97X, s1/10; t4/10; cum  229,444 bbls
  • 19970, 502, North Plains Energy, Nelson 5-18H, s4/11; t8/11; cum 15K
  • 19468, 866, North Plains Energy, Wold 16-7H, s11/10; t3/11; cum 95K
  • 19533, 1,342, North Plains Energy, Hellandsaas 16-8H, s1/11; t7/11; cum 46K
  • 20068, 929, North Plains Energy, Flatland 9-9H, s2/11; t9/11; cum 3K

Global Oil Outlook -- OPEC, Libya -- Implications for the Bakken

Link here.
Based on its latest monthly report, OPEC's production in October was about 750,000 barrels a day short of the average demand it sees for its crude in the fourth quarter.

Meanwhile, U.S. commercial oil inventories have been wearing thinner --down by 9.8 million barrels in October, suggesting the market is still slightly tightening despite Libya's return. But at the same time, continuous concerns in the euro zone show OPEC will still face a balancing act in the coming months. The group has downgraded its global oil demand growth forecasts four times in recent months and, although it didn't cut its prospects this month, has warned it could slash them again.

Furthermore, in the first half of 2012, amid lower seasonal consumption, demand for OPEC crude is expected to fall by over 1.3 million barrels a day compared to the fourth-quarter to an average of 29.29 million barrels a day. That's higher than OPEC's current production and will likely come amid higher Libyan production. So the numbers will likely give ammunition to those in the group calling for a reduction of Gulf production.

"The Saudis will cut whether they like it or not," said an OPEC delegate with a country that opposed an increase in June. "The conditions in the market dictate that."

Global Warming Hits Williston -- The Bakken, North Dakota, USA

Wow -- a beautiful, beautiful night.

I woke up about midnight, eager to see what was happening in the Bakken. The most gorgeous snowfall. No traffic, of course, except for the occasional oil truck. It looks like something out of a storybook with the snow gently falling, and really quite warm. My thermometer shows 29 degrees; the downtown bank thermometer shows 33 degrees.

When I was growing up in Williston we had snow all the time from early November to sometime in the spring. But as the years went by, there was less and less snow. I don't recall getting much snow in November during the late 60's and, of course, after that I left Williston for 30-some years and seldom visited. The shop owners in downtown Williston told me it would be a severe winter this year; it's not harsh yet, but it's early or on time, depending on your perspective.

Tonight, it reminds me of the snow we had in the 50's and early 60's.