Monday, February 13, 2012

Denbury Presentation -- February, 2012

Link here.

"Highest crude oil exposure in peer group"
Projecting $1.2 to $1.4 billion cash flow in 2012

Oil in place (numbers rounded)
  • Primary rcovery: 20%
  • Secondary recovery (waterflooding): 20%
  • Tertiary recovery (CO2 EOR): 20%
  • Oil left in place: 40%
Percent crude oil revenue among peers:
  • DNR: 97%
  • WLL: 93%
  • CLR: 88%
  • SD: 79%
  • CXO: 76%
  • NFX: 69%
  • NBL: 66%
Capital per BOE
  • Gulf Coast: $13.50
  • Bakken: $21
  • 200,000 net acres
  • 2Q11: 8,826 boepd
  • 4Q11: 11,892 boepd
  • 2Q12: 12,750 - 14,750 boepd

Oil Refinery Regulatory Tsunami -- API

Link here.
Proposed US Environmental Protection Agency regulations directed at refiners could put several US refiners out of business and place others at a significant disadvantage to overseas petroleum product manufacturers, American Petroleum Institute officials warned.

“At the same time, data suggest that the environmental benefits would be modest,” API Regulatory and Scientific Affairs Director Howard Feldman told reporters during a Feb. 10 teleconference.

API spent much of 2011 opposing an out-of-cycle proposal that would have imposed more stringent ozone standards, and EPA subsequently withdrew, he said.

Currently, API is concerned with proposed Tier 3 gasoline rules, greenhouse gas emission rules, and new sources performance standards for refiners, the third phase of EPA’s tailoring rule, and the boiler maximum achievable controllable technology rule, Feldman said.
Bottom iine: increased costs; "modest" returns on investment; costs passed on to consumer. 

Daily Activity Report

It looks like there will be about sixteen (16) wells that come off the "tight hole" list today, including:
OXY's Dimond field well is still another example of the IPs for this field for OXY.

Note the Hess well in Manitou field. Hess just got permits for six more wells in this field.

BEXP, of course, has another great well. So, what else is new?

And yet another CLR well in Brooklyn oil field north of Williston. 

But, perhaps most impressive, is a Whiting IP of 200 for a Red River well as good as OXY's Bakken wells in the Dimond field. And the Red River wells are vertical, inexpensive, and a sure thing. In addition, Red River wells do not have the hyperbolic decline curves of the Bakken.

"Held By Production" and Other Basic Information for Mineral Rights Owners

Elsewhere they are talking about mineral rights -- fairly basic but folks continue to ask these questions.

This is probably most important:
If your mineral acres are included in a  spacing unit and a producing well is drilled anywhere in that spacing unit, your acres are now "held by production" if that well produces oil.
I'm not sure if that has been made clear in early posts. 

Talking Paper on Fracking -- Colorado

Total Amount of Water Used in Fracking (as a percentage) Represents a "Rounding Error"

Don sent me the link to this talking paper on water and fracking.

Lots of great data points.

Perhaps the data point I like best is found on page 4 of the 9-page paper:

Water Demands in Colorada
Total: 17.4 million acre-feet/year
Agricultural: 13.9 million acre-feet/year (85.5%)
Municipal and industrial: 1.2 million acre-feet/year (7.4%)
Total All Others: 1.2 million acre-feet/year (7.1%)

Breakdown of "All Others" (selected):
Recreation: 923K (5.6%)
Hydraulic fracturing: 14K (0.08%)
Snowmaking: 5K (0.03%)
One of the things that I find frustrating in mainstream media is that they deal in numerators and not denominators. We always hear how much water is necessary for fracking, but mainstream media never provides the percent that water represents compared to other industries and other needs.

I assume these percents are about the same in North Dakota. If so, the amount of water used in fracking represents a "rounding error."

For those folks who want to play around with the calculator app on their iPad: one acre-foot is approximately equal to 326,000 gallons.

For Investors Only -- Top Ten Large Cap Oil and Gas E&P in Mega Funds - Seeking Alpha

Link here to

Mentioned as most desirable among mega fund managers: Noble, Whiting, Cobalt, EOG, Encana, Southwestern Energy, Cabot.

Mentioned as most bearish among mega fund managers: Talisman, Canadian Natural Resources Ltd, Devon, Denbury Resources, Andarko, and Pen West Petroleum.

Pulled Back; Higher Earlier -- Oil Above $100 -- Saudis Must Be Getting Ready to "Dial It In"

This refers to statement last week that Saudi would not let oil go above $100.  Brent is well above $100; and I have no idea why Saudi talks about WTI when it it tied to Brent.

February 13, 2012, 10:02 a.m. EST: NYMEX spot, $100.02

New Oasis Presentation -- The Bakken, North Dakota, USA

Link here.

Snapshot of most Bakken companies here.


  • 307,430 (4Q11 earnings call)
  • 303,231 (3Q11) (ND and Montana Bakken acreage)
  • (10,000 acres acquired in late 2010, Elm Coulee, Richland County, Montana)
  • Analyst's figure: 292,000 net acres (December 31, 2010)
  • 9 rigs; 12 in 2012; 
  • West Williston: 191,716 net acres (up slightly from 191,552, last report)
  • East Nesson: 102,786 net acres
  • Sanish: 8,729 net acres
  • Prospects: Red Bank (north of Williston), Indian Hills (south of Williston, other side of river, deepest of the formation), Mondak (southwest of Williston, straddles Williams County and McKenzie County; Hebron (Montana, directly west of Williston, Richland County, Montana); Target (Montana, northwest of Williston, west of the Red Bank prospect)
  • Nine rigs as of October, 2011 (seven in September, 2011)
  • 4Q12 (est): 22,000 boepd (Feb 3, 2012 presentation)
  • 4Q11: 10,724 boepd
  • 3Q11: 14,300 boepd (was that a typo?)
  • 4Q10: 5,206 boepd
  • Proved reserves increase 98%, 4Q11 vs 4Q10 
Note: production will have quadrupled in two years if Oasis meets 2012 estimates.

Poland Shale Gase Could Upset Russia's Monopoly --- Using American Technology


February 14, 2012: multi-zone discovery well announced in Poland's east Baltic basin.  See comment.

Original Post
Link here to Reuter's:
But the shale gas push [in Poland] is about more than energy. Poland wants to break its reliance on Russian energy and reduce Moscow's power over Europe. That is one reason why Warsaw has welcomed U.S. oil majors such as Chevron, Exxon Mobil, Conoco and Marathon, even though it risks igniting tensions with Russia.

"If this thing comes true, if the American technologies deployed here at some point are really able to produce this gas, then this means a winning situation for the whole of Europe really," Radzieciak said in an interview in his small office filled with sports trophies, banners from local teams and a large map of Poland on the wall. "It would create more competitiveness on the gas market, which is now dominated by Russia, and one side would not be able to force anything unilaterally anymore."
I really don't care about the geo-political issues here. What is most interesting to me is that it is American technology being bought and it is CVX, XOM, COP, and MRO that are being emphasized. 

In the big scheme of things, I am glad that the president does not emphasize US leadership in oil and gas technology; it would only invite the anarchists to target our overseas operations.

Right or wrong, my "myth" is that a lot of this technology was developed and is being developed in the Bakken.

Great Monday Morning Summary by Bloomberg

Link to Bloomberg sent to me by Chris. Thank you.
The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.

Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Methanex Corp. (MX), the world’s biggest methanol maker, said it will dismantle a factory in Chile and reassemble it in Louisiana to take advantage of low natural gas prices.

And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.

The result: The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the U.S. Department of Energy. That would be the highest level since 1992. 
The article is much longer and goes on with several "pearls."

A must read.

That note in bold above is not trivial.

Chris provided his own comments:
One last thought on the Bloomberg article linked above.  First there was the Internet boom..then we had the huge housing boom and now it's going to be the energy boom. We are going to look back at this time the same way we did for those booms.

It's where all the jobs and innovation will happen for the next decade. The energy boom is spread across the whole country...everyone can get in on this boom no matter where you live, California to NY. 
I wonder if Obama will take credit like AL gore did with the internet? [Comment: he alreadyhas -- The 2012 State of the Union address.]

Maybe this was obvious but now it's all very clear...this is the countries next major boom...the golden years of energy for our country.
I agree. 

In Play!Yahoo -- Monday, February 13, 2012

Chesapeake Energy targets $10-12 billion in asset monetizations during the year and announces $1.0 billion offering of senior notes due 2019 Co provided details on its financial plan to fully fund the company's anticipated capital expenditures during 2012 and provide additional liquidity for 2013. Co has also recently received industry inquiries about a complete exit from the Permian Basin and today is announcing that it may consider a 100% sale of its Permian Basin assets if it receives a compelling offer. Co believes the Mississippi Lime joint venture, a Permian Basin transaction and various other minor asset sales could result in cash proceeds to Chesapeake of ~ $6-8 billion in 2012. The co is targeting completion of these transactions by the end of the 2012 third quarter. Furthermore, Chesapeake anticipates monetization proceeds of ~ $2 billion during 2012 involving a portion of its midstream assets, service company assets and miscellaneous investments, bringing estimated total monetization cash proceeds in 2012 to $10-12 bln. [Comment: $14 billion cap; $12 billion debt; to the best of my knowledge, the Permian does not include the Rocky Mountain (Bakken).]