Thursday, February 23, 2012

Oasis 4Q11 Earnings and Crude-By-Rail

Comment from Oasis earnings press release:
In February 2012, the quoted prices for oil coming out of the Williston Basin on pipeline (typically quoted at Clearbrook, Minnesota and Guernsey, Wyoming) ("Bakken Crude Oil") was substantially less than prices quoted for WTI due to refinery and transportation constraints. 

Transportation constraints were largely due to increased volumes produced in North Dakota in the second half of 2011.  In December 2011, oil production in North Dakota was approximately 535,000 barrels per day compared to approximately 386,000 barrels per day in June 2011. 

Oil from Canada also put pressure on the existing pipeline infrastructure that terminates in Mid-West refineries.

Although there was 300,000 barrels per day of railcar transportation capacity in place as of December 31, 2011, these railcar facilities are not running at nameplate capacity due to limited availability of railcars.  We believe the operators of these railcar facilities have railcars on order and expect utilization on these facilities to increase substantially during the first half of 2012. 

Additionally, during 2012 we expect to begin transporting a portion of our crude oil on gathering systems, originating at the wellhead, in the West Williston, which will eliminate the need to transport barrels by truck from the wellhead.  The gathering system is expected to provide us access to multiple pipelines and rail outlets where we can sell our crude oil.

NOG's CEO On Forbes List

Link here.
Michael Reger, the 35-year-old CEO of Northern Oil & Gas , was named by Forbes magazine as one of "America's Most Powerful CEOs 40 and Under."

Forbes ranked Reger as No. 13 on the list, which was led by Larry Page of Google and Andrew Mason of Groupon.

New Bypass West of Williston To Be Paved By July, 2012 -- The Williston Basin, North Dakota, USA

Very, very impressive. Link to the Williston Herald.
The first phase of a proposed bypass around the west side of Williston will be completely paved by July and the state will do what it can to ease the burden on area schools and other public agencies severely impacted by the North Dakota oil boom.

Submarine to Be Commissioned: USS North Dakota

Commissioning in 2014.

Link here to the Williston Herald.

Unfortunately there is only an artist's rendition of the submarine; date of newspaper: February 23, 2012. 

Near the Heart of the Bakken, US Postal Service to Close Mail Center at Minot, North Dakota

Bureaucracies good at looking at old data; not so good at looking forward

Link here to newspaper of good news.
The U.S. Postal Service says it will eliminate mail processing centers in the South Dakota city of Huron and the North Dakota cities of Devils Lake and Minot in North Dakota.
I assume the mail center serving western North Dakota will be in Bismarck, ND.

National story link here

Algae? $110 Oil; $5 Gasoline; And Obama Offers Us Algae


July 7, 2013: The president of the United States may still be sold on "algae as an alternative fuel" but the industry clearly isn't. Having once invested as much as $7.6 billion in one quarter in 2007, the industry will invest a paltry $57 million in 1Q13. That amount of money will mostly cover the glossy advertising by oil companies saying how far they've come and how much they love "algae" as an alternative fuel. Bloomberg is reporting:
Europe’s biggest oil companies are scaling back work on the next generation of biofuels, a setback for the effort to create a gasoline substitute that doesn’t drain the food supply.
BP and Royal Dutch Shell have halted funds for four separate ventures because the technology to produce fuel from woody plants and waste won’t be economical until 2020 or beyond, executives at both companies said in interviews. 
 “This is very capital intensive,” Phil New, head of BP’s biofuels program, said in an interview. “There’s lots of difficult engineering. It will take time for scale-up.” 
The decisions helped cut global investment in biofuel production to $57 million in the first quarter, the lowest since 2006, from its peak of $7.6 billion in the last quarter of 2007. 
That makes it less likely the industry will meet the ambitions of U.S. and European leaders to help reduce fossil fuel pollution and wean motorists off crude oil-based fuel.
“Progress in deploying these technologies has been slower than many had anticipated and what’s needed to keep on track with our aspirations,” Maria van der Hoeven, executive director of the International Energy Agency, said in an e-mailed response to questions. 
“Many potential producers have found it difficult to secure the capital they need.”
Original Post 

Link to The Examiner.
President Obama admitted today that he does not have a "silver bullet" solution for skyrocketing gas prices, but he proposed alternative energy sources such as "a plant-like substance, algae" as a way of cutting dependence on oil by 17 percent.

"We’re making new investments in the development of gasoline, diesel, and jet fuel that’s actually made from a plant-like substance, algae -- you've got a bunch of algae out here," Obama said.

"If we can figure out how to make energy out of that, we'll be doing alright. Believe it or not, we could replace up to 17 percent of the oil we import for transportation with this fuel that we can grow right here in America."
If a) the administration quit slow rolling the industry; b) the administration approved the Keystone XL; c) the administration pursued off-shore production, "we" could replace a lot more than 17 percent of the oil "we" import.

[I've been told that algae-fuel costs the equivalent of $33/gallon gasoline at the algae service station pump.]

Oasis Trading At Unadjusted Basis of $11,000/Straight Acre OR $6,000 Per Production Adjusted Net Acre

Highly discounted compared to KOG's trading basis per acre

KOG trading at unadjusted basis of $20,000/straight acre OR $8,000 per production adjusted net acre. Numbers rounded.

Also, Z Man says "should OAS achieve their guidance the $ per acre falls into the negative."

Wow -- carrying acreage at negative value.

Link here to

Wow, Wow, Wow -- UK Imports Exceed Production -- First Time Since 1978

Link here to
Energy statistics released by a UK government department Thursday showed that the country's imports of crude oil exceeded UK production for the first time since 1978.

The Department of Energy and Climate Change said that provisional data for 2011 showed that primary energy production fell by a record 14 percent, compared to 2010, to 136.3 million tons of oil equivalent, following sharp falls in output from the UK Continental Shelf as a result of maintenance activity and slowdowns.
There was no mention of the increased taxes on North Sea production.
Meanwhile, 2011 saw large increases in imports of liquefied natural gas (LNG), with imports from Qatar at similar levels to those for pipeline gas from Norway.
DECC added that UK gas demand was at its lowest level since 1995 due to a combination of milder weather and reduced use by generators.
Much could be said of this, but I'll wait. I'm behind on blogging and reading e-mail.

Four (4) New Permits -- The Williston Basin, North Dakota, USA

Daily activity report, February 23, 2012:

Operators: ERF, American Eagle Energy, SM Energy

Fields: South Fork, Colgan, and Ft Buford

No wells reported IPs today.

Why Gasoline Demand Is Decreasing in the US (But Will Be Increasing in China)

Link here to
The U.S. Census Bureau confirms that in 2009 there were 75 million or 35 percent of U.S. drivers between the ages of 45 and 65 years. Cutting off the group at age 55, we see that 33 million are in the home stretch towards retirement. Since miles driven decrease dramatically post retirement, our aging population (that as a group will create the most retirees we will see in our lifetime) is having an impact on gasoline demand.

We will illustrate the basic change underway using "crude" math to summarize our findings. A total of 33 million (drivers between ages 55 and 64 years) implies 3.3 million drivers will hit retirement age in the next 12 months. Conversely, over the past 15 years the U.S. driving rolls have averaged a gain of 2.3 million drivers per year. So, a net 1 million drivers, who on average travel 6,000 miles fewer during a year, points to an average trend of 6 billion fewer miles driven than the preceding year. We expect this amount of loss per year to continue through 2021.
And China's population averages much less in age than the US. 

Two New Presentations: OAS and DNR

Oasis: presentation. -- a dynamic link.

Denbury: presentation. -- a dynamic link.

Another Nail in the Kyoto Protocol Coffin --

Link to the Oil and Gas Journal.
A European Union technical committee handed Alberta producers a “small victory” by declining to declare fuels made from bitumen to be greater emitters of greenhouse gases than those from other types of crude oil.

The committee didn’t muster a majority in support of changes to the EU’s fuel quality directive that would raise costs of fuels originating in Alberta’s oil sands. But there was no majority in favor of killing the proposal, either.
Something tells me the Europeans are getting tired of Brent at $127/bbl. Gasoline in Norway costs $12/gallon, and Norway has an oil exploration and production industry which cannot be said for most other EU countries.

T-Mobile Losing Customers to iPhone -- To ATT, To Verizon, To Sprint

For newbies: in addition to the Bakken, I enjoy following the information industry and Apple, Inc., in addition to the Bakken, and will blog about them occasionally.

I can't remember if I blogged this, but at the time of the proposed ATT-T-Mobile merger I said that it was a win-win for ATT. Even if the Justice Department killed the merger (just as the administration killed the Keystone XL), the protracted "dance" would result in customers leaving T-Mobile. Those customers really had only two choices in the states: ATT and Verizon. Sprint is an option, but it's a niche player in the big scheme of things. And sure enough, ATT and Verizon (and Sprint) are taking customers from T-Mobile.
Customers have been leaving T-Mobile USA, the country's No. 4 cellphone company, for the last two years. Now that all three of the bigger carriers have the iPhone, that stream has turned into a flood.

The company on Thursday said it lost a net 526,000 subscribers in the fourth quarter. Worse, it lost a net 802,000 subscribers on contract-based plans, which are the most lucrative. That's an unheard-of figure for an industry that was characterized by rapid growth for more than a decade.

T-Mobile, a Bellevue, Wash.-based subsidiary of Germany's Deutsche Telekom AG, is now losing subscribers from contract-based plans faster than regular phone companies are losing landline customers.
My hunch: T-Mobile is essentially "gone" as a "national carrier" by this time next year.  ATT carried the water for ATT/Verizon but ATT will benefit nicely. This movie has played several times before, but with different players in different sectors, the most notable being the movie rental industry some years ago.

More Saudi Oil Diverted From Europe to India -- Nothing To Do With The Bakken

Link here to Oil and Gas Journal.
The Indian Ministry of Petroleum and Natural Gas said a Saudi delegation “assured affirmative consideration” of a request made during meetings in New Delhi for increased oil supplies to compensate for reduced purchases from Iran.

In 2010, according to the US Energy Information Administration, India received about 18% of its 2.2 million b/d of oil imports from Saudi Arabia and 11% from Iran.

According to press reports, India sought an additional 100,000 b/d from Saudi Arabia.

.... Man Speaks With Forked Tongue

Link here to Oil and Gas Journal.
More than $85 billion in new oil and gas taxes in US President Barack Obama’s proposal to reform federal corporate tax rates reflect his administration’s inconsistent attitude toward the industry, American Petroleum Institute Pres. Jack N. Gerard said. He strongly objected to characterizing recovery of normal business expenses as tax preferences and loopholes.
Administration officials have said that eliminating what it considers special tax breaks is essential before the US corporate tax rate can be reduced from 35% to a more globally competitive 28%. Industry leaders expect the proposal to include the same new oil and gas taxes that are in the White House’s fiscal 2013 federal budget request.
Meanwhile, elsewhere, it is said that these same "tax preferences and loopholes" will be extended to green energy companies, several of which went bankrupt this past year.

Original Oil in Place -- The Bakken, North Dakota, USA

From wiki:
A research paper by USGS geochemist Leigh Price in 1999 estimated the total amount of oil contained in the Bakken shale ranged from 271 billion to 503 billion barrels, with a mean of 413 billion barrels  -- original oil in place (OOIP).  (200,000 square miles) 
With the deeper benches in the Three Forks formation, CLR says there could be 900 billion barrels of OOIP in the Bakken Pool.

Simply incredible.

Also from wiki:
Ghawar is an oil field located in Al-Ahsa Governorate, Saudi Arabia. Measuring 280 by 30 km (170 by 19 mi), it is by far the largest conventional oil field in the world. When appraised in the 1970s, the field was assessed to have 170 billion barrels of original oil in place (OOIP). (3,230 square miles)
"Drill, drill, drill is not an energy plan." -- President Barack Obama, February 22, 2012

Random Comment on IPs -- From DNR -- The Williston Basin, North Dakota, USA

From the DNR transcript:
I think one important point to note in this detail is that many of our wells completed during the fourth quarter had 60- and 90-day production averages that were greater or better than the initial 30-day averages. Now this indicates that our wells have good sustaining production rates and also illustrates that sometimes we are not able to produce a well with the maximum initial flow rates often due to stock tank shortage or transportation capacity constraints. This also demonstrates the drawback of putting undue emphasis on the initial published short-term production rates.
The Bakken companies are starting to crack the code on the hyperbolic decline rate. 

CLR and WLL Transcripts Released -- 4Q11

I have not read them yet; will look at them later, but wanted folks to see them:

How "Big" Is The Bakken? -- The Williston Basin, North Dakota, USA

Crude oil supply growth will double from 2011-16, including production increases of 547,000 b/d in the Williston Basin and 131,000 in the Utica Shale. Anticipation of U.S. and Canadian crude oil supply growth is leading to significant U.S. infrastructure projects in all sectors of the industry, including more than 75 crude oil pipeline projects, 25 crude oil rail projects and seven crude oil refinery expansions.
If I read that correctly, "increases of" when added to current 500,000 b/d, puts the Williston Basin easily over one million bopd.

Now if only the administration would get on board. 

Link here.

"Drilling Is a Bumper Sticker"

Michelle: "Let them eat white bread."

"Drilling" is a bumper sticker? Tell that to the blue collar worker in November.

I see oil is now over $108/bbl. My hunch is that if oil goes over $115 in September/October of this year, we will get a formal announcement from the president on the Keystone XL.

$6 Gasoline Will Hurt Florida Tourism More Than Off-Shore Drilling

Link here for article on $6 gasoline in Florida.
Talk about pain at the pump! Some Florida drivers are spending nearly $6 a gallon to fill up their gas tanks.

According to, motorists are shelling out $5.89 for a gallon of regular gas at a Shell station in Lake Buena Vista, topping out at $5.99 a gallon for premium. It doesn’t get better at a Suncoast Energy station in Orlando, where drivers are paying $5.79 for a gallon of regular.

“Prices over in the Disney World area are much higher than any other place in Florida,” Jessica Brady, AAA spokeswoman, told CBS Tampa, adding that people regularly complain about gas prices in that area.
I guess the writer is trying to say that the price of gasoline is no big deal, people complain about it all the time.

Active Drilling Rigs Back up to 204

Ultra-Expensive Brick -- Tesla Acknowledges the Potential of Their EV

Link here.
Tesla Motors' lineup of all-electric vehicles — its existing Roadster, almost certainly its impending Model S, and possibly its future Model X — apparently suffer from a severe limitation that can largely destroy the value of the vehicle. If the battery is ever totally discharged, the owner is left with what Tesla describes as a "brick": a completely immobile vehicle that cannot be started or even pushed down the street. The only known remedy is for the owner to pay Tesla approximately $40,000 to replace the entire battery. Unlike practically every other modern car problem, neither Tesla's warranty nor typical car insurance policies provide any protection from this major financial loss.

An unrelated story.  To the best of my knowledge, all batteries lose their ability to re-charge over time. I can't imagine buying a 3-year-used Prius, knowing that I may have to replace a battery. And a 5-year-old Prius with original battery must have absolutely no re-sale value. I must be missing something on this, and I'm sure readers will tell me, but to the best of my knowledge, the batteries will have to be replaced at some point. And even before replacement, the re-charging interval lessens.

OPEC Not Keeping Up With World Demand -- Goldman Sachs

Someone just sent in a comment that "we" mis-heard Papa's comments on CNBC. As noted, I have not listened to the video yet; not enough time to catch up on everything.

I still stand by my "myth" that Saudi Arabia cannot keep up with demand. Here is a cut and paste from Reuters:
Goldman Sachs said it expects Brent crude prices to rise to $127.50 a barrel over the next 12 months in order to restrain demand growth and keep it in line with available supplies.

"We see the risks to our forecasts as skewed to the upside as world oil inventories have not been building despite Saudi Arabia pumping at its highest levels in 30 years and Libyan supplies returning to the market," analysts at the bank said in a February 22 note.

"This suggests that the increased supplies have been absorbed by the market and leaves the world in the unprecedented situation in which OPEC spare capacity is at a trough rather than at a peak just as the world economic recovery is getting on a more solid footing."
... despite Saudi Arabia pumping at its highest levels in 30 years and Libyan supplies returning to the market. Wow.

By the way, it was recently reported that Saudi's production dropped back a bit in January; it was based on estimates provided by independent sources. I have a hunch what was going on, but will leave that to later.

Will Be Awhile Before I Catch Up With All The Earnings Reports, Comments -- Traveling

I will post as fast as I can but I am traveling so it won't be as fast or as well organized as usual.

Lots of earning reports coming out: CLR, WLL, OAS, CHK, NFX, DNR, others. Be sure to check ou "Earnings Central" where I post the links.

DNR just reported record quarterly earnings

Also, Mike Filloon is also starting to go through these reports: derivative losses hurt the Bakken companies.
  • After Newfield's poor third quarter, many investors saw value. This was a mistake as Newfield continues to have trouble controlling costs. More worrisome is Newfield's natural gas exposure. It has done a fantastic job of increasing liquids production from 30% of total production in 2010, to approximately 40% last year. Even if Newfield hits its liquids goal of 48% in 2012, it will still have significant issues with natural gas at $2.60. Earnings estimates averaged $1.01/share, but Newfield missed by six cents. After derivatives losses, Newfield's EPS shrank to 51 cents/share.
  • Oasis also noted Bakken oil pricing has been difficult. Increased oil production in the Williston Basin and Canada has strained pipeline capacity. There was supposed to be large increase in railroad transports, but rail cars are in short supply so it is not running at full capacity. Oasis' average sales price per barrel of oil was $86.20, for the quarter. All said, the biggest problem was a derivatives loss of $65.5 million that pushed EPS down significantly.
  • More of the same derivative issues dogged Continental in the fourth quarter.
  • In the Bakken, Continental purchased 23,161 net acres from Newfield. Continental will operate 89% of this play and most of this is held by production.
  • Whiting had a very good quarter.  [compare well costs of WLL and EOG to others.]
CHK, transcript here.
  • On slide 10, mentions its gas and oil plays; does not mention North Dakota.
  • Notably, our reserve additions in just that 1 year of 2011 exceeded the total proved reserves of all but just a handful of our competitors, many of which have been in operation for more than 20 years. As an operator, we drove a total of 1,680 gross wells and connected more than 1,400 wells, or about 1 every 6 hours, and substantially all of these were horizontal wells. This is an unprecedented level of activity, a performance the industry has never seen before. We also participated in another 1,250 wells drilled by others, and those operators turned 1,050 wells online during the year.
  • Well, it's enough to handle a full divestiture of the Permian, if that's your question. It's about 5% of our current production,
  • on the DJ Basin, like with other companies, our results have been spotty. And today, I don't think we're drilling anything in the DJ Basin in the Niobrara. On the other hand, our Powder River Basin play is working quite well.
  • I might also mention that it's in both of those areas, it's not just the Niobrara. We're investigating lots of different other formations as other operators are as well. So I think for the DJ, I wouldn't say all is lost as you're outside of Greater Wattenberg, but there's going to be some other ideas. But we have certainly shifted our focus on the Niobrara play to the Powder River Basin.
  • Great note on cost of wells in the Utica; depth; time to TD, etc
  • The Bakken: yes, we drilled a couple of wells up there and not crazy about what we found to date, so kind of recalibrating there. We have just under 0.5 million acres kind of south of Dickinson and really to the Three Forks idea for us. And I suspect the western part of our acreage, which is kind of abuts where Whiting is operating, will probably work out fine. We drilled our initial wells more towards the south than the east. So disappointed to date in what we've seen in the Bakken, but have a huge acreage position there. We didn't spend a whole lot of money on it, so not too worried about that. And really, just moving our rigs over to the western side of the play and kind of cozy up a little bit more to what Whiting is doing there. 
From WLL press release:
  • 2011 was a year of discoveries for Whiting Petroleum. We de-risked a substantial portion of our acreage at Lewis & Clark/Pronghorn and generated excellent initial drilling results at Hidden Bench/Tarpon. Our 2011 drilling program sets the table for what we believe will be a strong year for production and reserves growth in 2012. Based on independent engineering at December 31, 2011, we had 2,264 gross locations from our 3P reserves. Based on internal estimates at year-end 2011, we had an additional 3,741 gross locations estimated from our resource potential.
  • In 2012, we will focus on bringing a number of our prospects into development mode. These prospects include Hidden Bench/Tarpon and Missouri Breaks. We also plan further development of our resource play at Lewis & Clark/Pronghorn. With these key projects, we are optimistic about Whiting’s operational results in 2012. 
  • Our average lease cost in the Williston Basin, where we hold 681,504 net acres in the Bakken/Three Forks Hydrocarbon System, is $432 per net acre.
  • In 2012, we plan to invest $851 million for the drilling and completion of 218 gross (124 net) wells in the Williston Basin. This represents 69% of our total planned exploration and development expenditures of $1,236 million. We have initiated pad drilling at our Sanish field and our Lewis & Clark/Pronghorn prospects. We expect to drill two or three wells off of each pad at Sanish and, for the most part, two wells off of each pad at Lewis & Clark/Pronghorn. We currently estimate that we can save approximately $500,000 per well in mobilization costs and efficiencies utilizing pad drilling.
  • We currently have 21 drilling rigs operating in the Williston Basin. We have 33 service rigs running in the Basin, which is up from 20 at September 22, 2011, and three full-time dedicated frac crews. As of February 1, 2012, there were 292 Whiting-operated wells producing, 46 operated wells being completed or awaiting completion, 16 wells were being drilled and 31 wells were shut-in awaiting workover operations.
NFX transcript:
  • At year end 2011, our proved and probable reserves totaled 6.5 trillion cubic feet equivalent, a 5% increase over 2010. [This alone, caught my eye and helped explain share price action yesterday.]
  • The largest transaction was the $276 million sale of about 23,000 net acres in the Williston Basin, located West of the Nesson Anticline and our Catwalk area. We sold current net production of about 300 barrels of oil equivalent per day and 8 drilled and uncompleted wells. This sale allows us to focus our development drilling efforts on high-graded areas in the basin. I'll talk more about our increased Williston Basin activity levels in just a moment. [Comment: CLR bought about 22,000 net acres about this same time; the numbers are very coincidental/similar.]
  • We will invest about $200 million in the Williston Basin in 2012. You'll recall that our activities in the basin slowed in late 2011 to ensure that we limited our budget overexpenditures. We deferred the completion of about 17 wells and dropped 3 rigs. Since then, we sold a package of the assets, which included 8 of the uncompleted wells. Our crews have completed 3 wells since January 1 with an average 24 hour IP of 2,900 barrels of oil equivalent per day. Plans are to have the remaining 6 wells completed before mid-year, and we expect to run 2 to 4 rigs in the Williston Basin during the course of the year. Our current production is about 7,500 barrels of oil equivalent per day, and expected to grow about 35% in 2012 compared to 2011 levels.
  • In 2012, we expect to drill about 25 new wells in the Williston Basin. Our drilling is focused on identified locations in the Middle Bakken and Sanish/Three Forks across our acreage. We have about 60,000 net acres in core development regions along and southwest of the Nesson Anticline and an additional 40,000-acre position, all held by production in the Elm Coulee. We have more than 250 identified development drilling locations today and plan to increase our activity levels in the Williston Basin going into 2013.
  • I would say we have no additional plans to divest Williston Basin assets. We've described those as bridge assets. We've got a strong development inventory and we're looking to ramp up activity there. So I'd say that's not on the short-term target list.
  • [Cost of Bakken drilling:] I can tell you that our view of it is, right now, we're looking at somewhere in a kind of a low $10 million well cost for a 1,280-acre well. That's maybe upwards of about $1 million lower than what we previously had talked about. There's are a couple of things. I think just improved execution is going to drive a most of that versus service cost changes and in 640-acre wells, looking at somewhere around $7 million well or so, in that vicinity.

CHK to Stay In North Dakota -- The Bakken, North Dakota, USA

From the transcript:
Yes, we drilled a couple of wells up there and not crazy about what we found to date, so kind of recalibrating there. We have just under 0.5 million acres kind of south of Dickinson and really to the Three Forks idea for us. And I suspect the western part of our acreage, which is kind of abuts where Whiting is operating, will probably work out fine. We drilled our initial wells more towards the south than the east. So disappointed to date in what we've seen in the Bakken, but have a huge acreage position there. We didn't spend a whole lot of money on it, so not too worried about that. And really, just moving our rigs over to the western side of the play and kind of cozy up a little bit more to what Whiting is doing there.

Proppant For Sale

A reader sent me this as a comment:
I have ceramic proppant from China for sale, good cost and quality. If interested, contact Aveeta International Trade @ Thank you.
I do not have any other information; I have no association with Aveeta. This is not an endorsement or a recommendation. It is simply posting a note I received.