Tuesday, February 21, 2012

CLR, WLL, OAS, NFX Report Later Today? CLR's Most Recent Corporate Presentation

I don't know for sure, but that's what my calendar shows.

CLR's February, 2012, corporate presentation, data points (some numbers rounded):
  • 901,098 net acres; down slightly from 2Q11 data -- 901,370 net acres
  • 22 rigs in North Dakota; down 1 from previously announced 23
  • EUR: 603K boe per well
  • 4Q11: 75,219 boepd production
  • early January: 80,000+ boepd
  • proved reserves: 40% growth yoy; 500 million boe proved reserves
  • three Bakken formations: payzone -- generally the middle Bakken
  • four Nisku (Three Forks) formations; Charlotte 2-22H; 1st successful test of a deeper TF bench; 1,496 boepd in 1-day test
  • 2nd test of this deeper TF bench: Sunline 11-1TF-2SH; 1,023 boepd
  • Huge footnote on slide 9: "CLR estimate of recoverable oil and gas (24 billion boe) includes only Middle Bakken and upper Three Forks. Lower TF benches should be additive."
  • Montana Bakken: 2-rig program
Well cost:
  • Single well: $8 million, 603K EUR
  • ECO-Pad well: $7.2 million, 603K EUR
Rate of return:
  • $50 oil: 15 - 20 percent
  • $70 oil: 25 - 30 percent
  • $90 oil: 40 - 45 percent
ECO-Pad: examples (IP per well average for 4 wells)
  • Dvirnak-Pletan: 1,838 boepd 
  • Bailey-Wiley: 1,105 boepd
  • Hamlet-Salo: 811 boepd
Bakken Development Plan
  • Original dual-zone plan: 8 wells per 1,280-acre unit; 4 middle Bakken; 4 TF; 603K boe EUR per well
  • Additional Three Forks potential: total TF 180 to 270 feet thick
  • Words don't do the graphic justice; if serious about the Bakken or CLR, you need to look at this slide yourself
For newbies, a thickness of 250 feet is huge in the "Bakken"

Total cash cost/boe (slide 18)
  • 2008: $17.20
  • 2009: $15.01
  • 2010: $17.12
  • 2011 (first 9 months): $19.73 (Newfield is right: it's gotten a lot more expensive to drill in the Bakken)
Remember EOG saying $40 oil is robust in the Bakken some years ago?

Swaps and Collars (oil)
  • 4Q11: $80 - $97
  • 2012: $80 - $97
  • 2013: $80/$95 - $92/$110
Swaps (natural gas)
  • 4Q11: $5.40
  • 2012: $5.07

Jim Cramer and EOG/CEO

I missed it but I guess Jim Cramer interviewed the CEO of EOG.

I have not viewed the video. I assume it was a pretty laid-back, quiet, calm, soporific Jim doing the interview.

Note the disclaimer on the sidebar at the right. This is not an investment site. I do accumulate shares in EOG, but will not be accumulating any more shares in the next several months, not until at least after April 15.

Fracking Backlog Improving? -- The Bakken, North Dakota, USA

Of the 13 most recent reporting wells, all reported IPs, except for three.

Futures Don't Mean Squat ...

... but oil futures are down, and the spot price of oil is still above $106.

This is making the rounds as a political cartoon but you will have to locate the cartoon on your own. The good news is that the words are enough:

What to do about the high cost of gas?
a. Open up public land for drilling
b. Approve the Keystone pipeline
c. Speed up the refinery approval process
d. Stop the government delays
e. Blame George Bush

US, Bangladesh, and Ghana in Coalition to Fight "Climate Change"

I can't make this stuff up.
US Secretary of State Hillary Clinton said the coalition of the United States, Bangladesh, Canada, Mexico, Sweden and Ghana will launch a global drive to curb black carbon (soot), methane and hydrofluorocarbons (HFCs).
Canadian bureaucrats have more time on their hands now to attend climate change conferences (CCC) in Ghana and Bangladesh now that Canada has withdrawn from the Kyoto Protocol.

Incredible: Eight Golden Eagle Deaths -- Wind Farm Implicated -- Sad, Sad, Sad

Solar companies going broke; whooping cranes killing golden eagles in record numbers.

Link here to LA Times.
Two more golden eagles have been found dead at the Los Angeles Department of Water and Power wind farm in the Tehachapi Mountains, for a total of eight carcasses of the federally protected raptors found at the site.

The U.S. Fish and Wildlife Service is trying to determine the cause of death of the two golden eagles found Sunday at the Pine Tree wind farm, about 100 miles north of Los Angeles and 15 miles northeast of Mojave, said Lois Grunwald, a spokeswoman for the agency.
Oh, the lede?
The toll makes the Pine Tree site in the Tehachapi Mountains among the deadliest in California's wind farm industy. Activists say birds' behavior should be studied before erecting more sites.
I don't know about you, but as much as I like the sage grouse, I adore the golden eagle.

I am not aware of one redeeming feature of wind farms.

For Investors Only: Interesting Group of Five Companies "To Own" Before Oil Price Shock

Link to SeekingAlpha.com here.

The list includes Weatherford which just reported its best quarter ever.

The list: Weatherford, Halliburton, Hess, Abraxas, and Magnum Hunter Resources.

This is not an investment site; note disclaimer at sidebar at the right. I do not own any shares in the companies mentioned and have no plans to buy any in the near future.

Great Human Interest Story on Geologist Kathleen Neset -- The Williston Basin, North Dakota, USA

A big "thank you" to Gary for sending me the link.

Link here to KX News (unfortunately this link won't be here long).
Kathleen Neset is the president of Neset Consulting Service, based in the heart of oil country: Tioga. She is the keynote speaker at the Bismarck/Mandan Development Association's annual meeting.

"We provide crews to the geo-steering operation while the wells are drilling, we help the oil companies target and stay in the Bakken." says Neset.

A formation that she considers one of the best situations in the nation.
"I think it's important we North Dakotans understand just how special the Bakken is, our surface aquifers are in the top 2000 feet of the drilling process and they're drilled with fresh water, then we seal them off with casing and cement, totally seal that off from fracking that will happen down in the Bakken formation at 10,000 feet of true vertical depth, that puts about 8000 feet of overburdened rock between fracking and aquifers." says Neset.

She cares as a geologist, and a farmer.

 "I'm a farmer, I farm northeast of Tioga, I rely on rural water on a well, so I have to take care of our surface aquifers just as much as the next North Dakotan does." says Neset.
That's a lot of cement.

Weatherford's Earnings in 4Q11 Highest In Company's History

Link here to Rigzone.
Weatherford International Ltd. reported preliminary fourth quarter 2011 pre-tax income of $254 million, or $352 million after excluding pre-tax losses of $98 million. The excluded items were composed of a $67 million charge for assets principally in Libya, as well as $31 million for exit, restructuring, investigation and other costs.

Fourth quarter revenues of $3.71 billion were the highest in the company's history. Revenues were 10 percent higher sequentially and 27 percent higher than the same period last year. North America revenue was up five percent sequentially and up 34 percent versus the fourth quarter of 2010. International revenues were up 15 percent sequentially and up 21 percent versus the same quarter of 2010. Artificial Lift, Drilling Services, Integrated Drilling and Stimulation and Chemicals posted strong sequential growth.
Earnings Central link here

India To Surpass China as Largest Coal Importer; China "Blowing Past" US in Coal Production

Don sent me this Bloomberg link:
India is poised to surpass China as the world’s biggest thermal coal importer as Prime Minister Manhoman Singh seeks supplies for power makers that have halted plans for $36 billion of new plants because of a fuel shortage. Purchases from abroad may exceed 118 million metric tons this year in India, compared with China’s 102 million tons.
The article is one of the longer articles I've read on this subject, and is one of the more in-depth articles on the subject that I've read, and these two words were not mentioned anywhere in the article: global warming.

Canada has pulled out of the Kyoto Protocol, Germany has pulled the plug on solar energy and the Netherlands has pulled the plug on off-shore wind energy, and Spain has suspended all renewable energy projects. It almost appears that the US alone is carrying the weight of anthropogenic global warming prevention.

Meanwhile, another link which is also very, very good (and very long) on the state of coal industry in China and the US (and, again, minimal mention of global warming): 
Among the forces at play are federal power plant regulations that are more costly for coal than for other fuels, a barrage of environmentalist litigation hitting individual coal plants, and stiff competition from a glut of inexpensive domestic natural gas that is facing less aggressive attention from the EPA.

Other factors include rising coal prices for power plants amid increasing transportation costs and industry pressures from countries like China.

Coal is still the top dog in the U.S. power supply, serving as the fuel for about 45 percent of U.S. electricity. But the Energy Information Administration has predicted that coal’s share of the U.S. market will drop to 39 percent by 2035, assuming no changes in legislation or regulations.

Some members of Congress worry that coal could have no real future at the hands of the EPA.

U.S. exports have risen only slightly while China is blowing past the United States in production and consumption of coal. In 2010 China produced around triple the amount of coal that the U.S. did, though in recent years the Chinese have also dramatically increased coal imports.

In many ways, this outlook is a relief for the U.S. coal industry, providing an opportunity for export as China can hardly keep up with its own energy demand. But it has also led China to barrel forward on renewable technologies, “clean” coal science and a variety of other efficiency measures that the country hopes will eventually catch up with its now-insatiable appetite for power. In the meantime, most of China’s coal imports come from Australia and Indonesia.
My hunch: when it comes to fracking rules, the states with much to lose with regard to fracking will get help from states which much to lose from coal regulations, and that, without question, is more than enough to hold back the EPA. Unfortunately, faux-environmental lawyers and judges can hold things up for years even without new rules and regulations. 

Keystone XL Killed But New Pipelines Keep Going In

Link here to Yahoo News
SemGroup® Corporation, Gavilon Midstream Energy, LLC, a subsidiary of The Gavilon Group, LLC; and an affiliate of Chesapeake Energy Corporation today announced plans to form a joint venture that will construct a 210-mile pipeline in western and north central Oklahoma which will deliver crude oil to a 1-million-barrel storage facility in Cushing, Oklahoma. The pipeline and storage facility will meet growing midstream requirements resulting from the burgeoning drilling activity in western Oklahoma and the Mississippi Lime play. 
Hopefully they build the storage facility first. 

San Francisco OIl Conference Going On Now

Link here.

Detour Around Williston Seems to Be Getting Expedited Support -- The Bakken, North Dakota, USA

Link here to The Dickinson Press.
Plans are under way to detour heavy truck traffic around several cities in western North Dakota's oil patch.

Gov. Jack Dalrymple announced this morning that a $10 million temporary highway bypass is slated to be completed this summer in Williston. A similar $6 million project also is scheduled to be completed this summer in New Town.

Obama Wants to Raise Price of Oil

Link here to Oil and Gas Journal.

The story is about the Obama administration wanting to raise royalty rates.

Common sense tells me these increased costs will be passed on to the consumer.

I only read the headline; not worth the time to read the entire story. With oil at $106 and trending higher, a increase in the royalty rates won't affect the oil and gas industry much in the short term, and will only exacerbate the price of oil. The UK tried this and things aren't working out so well.

Random Note on Proppants

This is a note sent to me by a reader regarding proppants:
Sand is considered a proppant and actually was the first generation of proppants. The second was ceramic and resin-coated sand. [In your blogging post on proppants] it depends on what you mean by "better."

For instance the conductivity and permeability of ceramic proppants is almost always better than regular sand. Although, there are some sands that perform better that lightweight ceramics.

Ceramics tend to weigh more than sands so it takes a more viscous fluid to transport the ceramic further into the fracture and the fluid can cause more damage to the proppant pack than if a lighter fluid was used on sand. There is much to consider when evaluating a proppant.
I posted that as a comment, but knowing that not everyone reads the comments, I re-posted the comment here. I am still learning about proppants and appreciate any insight.

The most interesting thing about the note above: the note about the damage fluid can do to the frack, in general. I had heard that before, but did not know the difference between "heavy" fluid, and a lighter, less viscous fluid, but it all makes sense.

Obama's Blueprint(s) For Regulating Fracking

Link here to Oil and Gas Journal.

It's an old story but was re-published in the journal today.
US Sec. of the Interior Ken Salazar told the US House Natural Resources Committee that regulations covering hydraulic fracturing on federal lands are necessary, and will be developed after full consultations with state and Indian tribal governments. Proposals will go through a full federal rule-making process and possibly could provide a template for national standards, he suggested.
Re-election of the Obama administration and fracking regulations are a given.

Random Update on the Bakken on the Montana Side of the Border -- The Williston Basin, North Dakota, USA

Link here to Big Sky Business Journal.
The development of the North Dakota Bakken has been dependent on technology changes that improved efficiencies, over how it was used when first applied in the Elm Coulee field in Montana.

The technological advances have almost completely eliminated the risk of dry holes. Montana’s Elm Coulee Field currently has about 750 producing Bakken oil wells; during the process of development, only two dry holes were drilled.

While it is commonly lamented that it is Montana’s tax system that has curtailed development in the state, while it booms in North Dakota, Richmond pointed out that in terms of the direct tax on oil extraction, Montana’s tax rate is actually 20 percent lower than North Dakota. Montana’s rate is 9.25 percent compared to North Dakota’s 11.5 percent.

Drilling rig count in Montana increased from nine last year to 13 in January 2012.

2nd Diesel Refinery in the Works for North Dakota -- The Bakken, North Dakota, USA


May 28, 2012: MDU to hold informational update meetings on their proposed refinery. Some in the Dickinson area voiced concerns about CO2. It appears that some folks in the Dickinson area think that if you export the crude, refine it elsewhere, no CO2 is produced.  And then those same faux environmentalists somehow overlook the fact that the refined crude -- in the form of diesel -- is shipped back to North Dakota. A tip of the hat to Don who pointed this out.  We're also talking about a 20,000 bopd refinery; can someone quantify the CO2 production with this proposed refinery and with huge refineries in Texas. Just saying.

Original Post

A big "thank you" to Mike for sending me the story.

Reuters link here.

Data points:
  • 20,000 bpd refinery; Bakken crude to diesel; hopefully by 2014
  • 5 miles southwest of Dickinson, between Dickinson and South Heart; estimate now $325 million
  • joint venture between MDU and Calumet Specialty Products
  • cost estimate: <$500 million
  • this is the second such recently-announced diesel refinery; first one is a $200 million, 20,000 bpd plant; the first US "greenfield" refinery in 35 years
  • Calumet bought Murphy Oil's 34,300 bpd refinery in Superior, WI, last summer
A refinery proposal near Dickinson? Good luck. I can already "see" the op-ed and letters to the editor in The Dickinson Press.

For newbies, the trucking industry is in desperate need for more diesel in the Bakken.

And the need for trucks and rail will only increase as long as the Keystone XL is not built. You almost wonder if faux-environmentalists have invested in the railroad industry, the trucking industry, and companies building diesel refineries.

Tax Breaks For Oil Companies Operating in the Marcellus -- Nothing To Do With The Bakken

Link to a huge story at SeekingAlpha.com.
As millions of Americans brace for a slew of new potential taxes next year, Shell – the U.S. subsidiary of Royal Dutch Shell – is contemplating which state it wants its next big tax break from.
West Virginia passed legislation in January that would give Shell a 25-year property tax break if it sets up a new $2-billion operation there. And according to the Associated Press, “Pennsylvania offered 15 years, and Ohio has reportedly offered major incentives.”

It should be no surprise these states are competing to win Shell over. After all, they’re located in the heart of the Marcellus Shale region, the largest shale gas deposit in the world. And as CBS News reports, Shell “would create 12,000 jobs, both direct and indirect” and “provide $600 million in wages annually.”
The story is about "cracking" but that's not the reason the story is so big.

You think these states are going to let the EPA shut down fracking? That's the BIG story. 

For those interesting in the cracking story:
... cheap natural gas is creating a number of opportunities to profit in the plastics industry. As I explained, ethane is a natural component of natural gas. And through various cooling and heating procedures, can be turned into ethylene, one of the primary building blocks for producing plastics.

Facilities that specialize in turning ethane into ethylene are called cracking plants. For Shell, its newest cracking facility will be the fifth plant it will have set up in the United States. And the best part…. it’s just one of many plants about to be built.
The ONEOK cryo plants in the Bakken are doing the same thing: adding value to natural gas. Over at the Bakken shale discussion board, a royalty owner mentioned that he/she was getting $8 for natural gas by-products compared to $2.00 for natural gas.

Ten (10) New Permits -- The Williston Basin, North Dakota, USA

Daily activity report, February 21, 2012 --

Daily rig count back up to 201.

New permits by operator and field:

Operators: KOG (5),  BEXP (3), Whiting (2)

Fields: Alger, Moccasin Creek, Sanish, Heart Butte

A Bakken well permitted for injection (the 2nd such well?):
  • 17170, injection permit/667, EOG, Wayzeta 4-16H, Parshall, Bakken, s4/08; t7/08; F; cum 317K, 12/11 -- pretty impressive -- no pump; >300K after 3 years; a short lateral; 6 frack stages (?);
Two wells reported an IP today, including this one:
  • 19089, 2,500, Newfield, Sand Creek State 1-16H, Sand Creek; short lateral, I did not see frack report yet

Behind in My Blogging -- Will Catch Up Late(r) Tonight

But Newfield reported huge well today. 2,500 IP, I believe. More later.

Ten new permits. KOG has five of those permits; BEXP has three.

I saw the headline that Obama says he didn't kill the Keystone XL. It was just a matter of time for this denial. I wonder how high gasoline gets / oil gets before we see a formal statement from the president on the Keystone XL. My hunch is we hear something if WTI-NYMEX gets to $115.

A reader pointed out that the US entered and won WWII in less time than it's taken to study the pros and cons of this single pipeline. Americans won't buy it that it was the Republicans who forced the president's hand on this. 

Can't wait to get caught up.

I see NOG dropped back today; didn't see how others did yet.

Germany throws in the towel on solar subsidies. Let's see now: that's Japan, Canada, Spain, Netherlands, and Germany.

Keystone XL: 75 Percent of Material To Be US-Made

Again, it is unbelievable that the US killed this project.  Link to PennEnergy article here.
TransCanada confirmed the vast majority of the pipe for Keystone XL would be manufactured in North America. In addition, the company intends to purchase approximately 90 per cent of all other goods for the $7.6 billion project from companies on the continent.

"Seventy-five per cent of the pipe used to build Keystone XL in the U.S. would come from North American mills, including half made by U.S. workers in Arkansas," said Alex Pourbaix, TransCanada's president, Energy and Oil Pipelines. "In addition, we have already sourced goods for the pipeline valued at approximately $800 million from U.S. manufacturers."

Pourbaix points out that the American Iron and Steel Institute recently sent a letter to the U.S House of Representatives and Senate stating its support of Keystone XL, describing it as vital to the national economic recovery. The Institute's member companies represent 80 per cent of both U.S. and North American steel capacity.

We estimate 821,000 tons of high strength line pipe will be used on the project in Canada and the U.S. TransCanada has estimated it will use 660,000 tons of steel for the U.S. portion of the Keystone XL pipeline. 
No comment.