Friday, February 24, 2012

Random Comment on CLR Bakken Acreage -- Nearing the 1 Million Mark Milestone

4Q11: per Harold Hamm -- 915,863 net acres; does not include the 35,178 net acres acquired in February, 2012.

The Films of Joel and Ethan Coen, Various Artists

Gasoline Prices

Reminder: these links are at my "Data Links" page.
Speaking of runaway gasoline prices --

Runaway, Del Shannon

    Random Comment On Cost of Fracking -- The Bakken, North Dakota, USA

    According to Oasis' most recent presentation, the cost of a 36-stage fracked well:
    • Ceramic/sand mix: $10 million
    • Sand only frack: $9.2 million
    Oasis Well Services - in-house pressure pumping
    • operations to begin 1Q12
    • will result in savings of $0.8 to $1.0 million/well on 20 net wells/year  

    Mother Was a Roughneck, Jalan Crossland

        Coal-Powered Cars

        Link to

        Seven (7) New Permits -- The Williston Basin, North Dakota, USA

        Daily activity report, February 24, 2012 --

        Operators: Hess (3), Denbury (2), BEXP (2)
        Fields: Charlson, Murphy Creek, Little Knife, Alger

        Four wells on DRL status report an IP, including:
        • 20336, 1,162, BR, Sun Notch 43-32H, McKenzie
        • 21192, 2,148, Newfield, Bernice 150-99-20-17-1H, McKenzie
        For newbies, remember, I post new wells reporting here.  I updated the 4Q11 new wells earlier today. There were some impressive wells.

          For Investors Only: Hess A Better Buy Than XOM -- SeekingAlpha

          Link to here.

          Actually, there are probably many investing opportunities better than XOM.

          Potash Update -- I'm Not Too Disappointed

          Knowing the environmental effects of potash mining, this might not be all bad news for North Dakota.

          Potash potential in North Dakota not all that promising. Link here to Debbie Downer.

          Company turning their sights on northern England.

          Nations Scrambling to Find Immediately Available Oil; Algae-Oil Will Have To Wait

          Just yesterday I posted a story about India asking for Saudi help to make up Iranian shortfall. Saudi said they would "see what they could do."

          Now today, Don sends another story with the same players: Saudi, India, and now the US.
          The U.S. government has offered to help India get alternative supplies for Iranian crude as it looks to squeeze the Persian Gulf producer’s oil revenue, according to three people with knowledge of the matter.

          The U.S. may help broker deals with suppliers such as Iraq and Saudi Arabia, the people said, declining to be identified because the information is confidential. Saudi Arabia has already offered to replace Iranian oil supplies if needed, two of the people said.

          The U.S. is in talks with countries around the world on reducing their dependence on Iranian oil, Victoria Nuland, a spokeswoman at the State Department in Washington, said in an e-mail yesterday.

          The assurance follows Iran’s offer to sell extra crude to India as the Persian Gulf nation, OPEC’s second-biggest producer, cuts supplies to some European nations in response to sanctions imposed over its nuclear program. The U.S. and European Union tightened sanctions on Iran last month, restricting trade and financial transactions. They say the program is a cover for developing atomic weapons. Iran denies the accusation. 
          It certainly looks like phones are ringing off the wall/e-mails are flying trying to find "excess" oil for Iranian embargo.

          Obama may not be so upset about $110 oil: the US becomes a central player to broker deals and it justifies wind and solar subsidies.

          I stand by my story: I think Saudi is going to be hard-pressed to ramp up production/exports/deliveries.  What's Brent doing today? $126, up slightly, 40 cents. So, scrambling but things seem to be working.

          Week 8: February 19, 2012 -- February 25, 2012

          New estimate of original oil in place (OOIP) revised by CLR up to 900 billion bbls; well above 500 billion bbls; dwarfs Saudi's largest oil field with 170 billion bbls; could be top Bakken story of the year

          Bakken production could increase by another 547,000 bbls between 2011 and 2016

          CHK to stay in the Bakken; move closer to Dickinson; cozy up to WLL

          Cracking the code on hyperbolic Bakken decline: DNR reports 60- and 90-day production better than 30-day production numbers

          Potential proppant production in the Bakken

          TransCanada said to be stockpiling pipe in North Dakota

          UK oil imports exceed production -- first time since 1978

          More Saudi oil could be diverted from Europe to India

          Saudi not keeping up with demand despite pumping at highest level in 30 years -- Goldman Sachs

          Saudi cuts production; doesn't tell anyone; estimates from an independent source

          Oasis: crude-by-rail nameplate not being reached

          India to surpass China as largest coal importer; China "blowing past" US in production

          New bypass west of Williston will be paved by July, 2012 -- governor

          Filloon's Bakken 4Q11 Update

          Oasis trading at unadjusted basis of $11,000/acre; KOG at $20,000/acre

          Corvettes being sold in Williston

          Eight golden eagle deaths due to one windmill farm in California -- tipping point?

          Wind farms in Wyoming on hold; "abandoned" projects not yet, but being talked about

          Fillooon's Bakken Update -- 4Q11

          First iteration, EOG, CLR, NFX, OAS, WLL,
          Second iteration: DNR, SM, QEP, WPX, KOG, LINE

          NFX sold its Catwalk Prospect, Williams County, 23,000 net acres; slight production; 8 drilled/uncompleted wells for $275 million (numbers rounded). NFX says its focus is on the Uinta Basin in Utah, and the Bakken, in the Williston Basin. That's a strange comment when not too long ago, NFX had 270,000 net acres in the Bakken, and now has 100,000 net acres (60,000 in North Dakota and 40,000 in Elm Coulee, Montana). All of their leased acreage in Montana (Elm Coulee) is held by production so there is no urgency in drilling there. (It's a bit unclear how much acreage NFX still has in the Bakken, but the 60-40 split is how the CEO described it in the 4Q11 transcript. I don't know enough about the Uinta Basin to comment but three things strike me about NFX: a) it's a natural gas company trying to switch to oil; b) it got into a cash flow problem and had to sell some very, very good Bakken property; and, c) its share price is about half its 52-week high.

          EOG has done a great job switching from natural gas to oil in the past year. For the year (2011), EOG's liquids production increased 52% while its gas production decreased 7%. Earnings estimates continue to be raised by analysts. With much of its acreage now held by production, Filloon feels that the Bakken will take the "back seat" to the Eagle Ford for EOG. Most exciting: EOG is downspacing to 320 acres. I remember someone writing me telling me that producers wanted the largest spacing units possible. Hmmmm.

          OAS, according to Filloon, had a number of infrastructure-related problems, but derivative losses drove earnings per share down significantly. Analysts expected EPS of 30 cents; actual was a loss of 15 cents due to increased expenses across the board and the aforementioned derivative losses. Investors seemed not concerned; shares rose significantly after the announcement.

          WLL had a very good quarter according to Filloon. Whiting says its well costs are down $6 million/well in the Sanish field; if accurate, that's incredible. Remember, these are long horizontals. This is less than or certainly comparable with cost of wells when the boom was just starting. Filloon says EOG wells are costing them even less, $5.5 million (compare to NFX's hand-wringing about wells costing them >$10 million). Outside the Sanish, Whiting wells cost upwards of $8 million.

          DNR had a good report according to Filloon if I read him correctly. But this nugget is huge. Back in 1H11, DNR said they had 5 rigs in the Bakken and would increase to 7 rigs by January, 2012. Filloon says, now, DNR will let contract expire on one of those 5 wells and go to 4 wells in the Bakken. DNR took their Almond prospect in Ward County off the books, and thus one less rig is needed. At one time, DNR had nearly 300,000 acres in the Bakken; now down to their best 200,000 acres.

          WPX has 5 rigs and will add a 6th this year. It is still gas heavy, but it will devote more of its CAPEX to the Bakken than to any other play. For investors, Filloon says to be wary since this company is still too gas heavy; I tend to disagree. WPX has great acreage in the reservation; it is focused on oil; a recent spin-off, eager to prove itself.

          LINE pays 7.5% and continues to grow.

          Random Comment on Rigs/Frack Crew Ratios -- The Bakken, North Dakota, USA

          Random data points:
          • I can't remember where I blogged it and I can't remember what I said was optimal number of rigs/frack team ratio, but I believe I said it was in the 4/1 neighborhood -- every four active rigs require one dedicated frack team
          • KOG: 6 rigs now; ramping to 7 rigs; one dedicated HAL frack team as of 1Q12
          • OAS: 9 rigs now; ramping to 12 rigs; three dedicated frack teams and Oasis Well Services should begin operations this quarter (1Q12)
          I believe my data is accurate, taken from corporate presentations and corporate press releases. If the above is accurate, and I believe it is, KOG has not had a dedicated frack team since the boom began, and is finally getting its first team this quarter. On the other hand, Oasis has been ahead of the curve on fracking teams.

          All things being equal, getting your well fracked/completed as soon after the well reaches total depth may be one of the most important things a company can do. (Lousy grammar, I know, but you get the point.)

          See also this link re: Oasis Well Services.