Monday, April 9, 2012

Human Interest Story -- Life in the Oil Patch (Texas); Texas Oil & Gas Jobs the Highest This Century

Link here to Rigzone: life in the oil patch.

Link here to Rigzone: oil and gas jobs highest in this century.

Rigzone: Crude Prices and Employment

Link here.

Current unemployment/employment bands vs crude oil prices within the "norm" compared to 50-year data.

Three Forks -- Again

Mike Filloon's article on the Three Forks is outstanding.

I blogged about it earlier, but re-reading it makes it difficult not to highlight it again.

This is particularly noteworthy:
It is very possible (and likely) that areas like Alger Field, where Hess has planned its first twelve well pad, that an additional six locations could be possible in the best areas. This would equal 36 acre spacing without any wells in the third or fourth bench.
And, Mike reminds us of several additional payzones including the Red River, Heath/Tyler, Mission Canyon (Madison), Lodgepole (formation and reefs), and so on.

Yes, this continues to be eye-popping (many months ago, a reader felt that the Bakken was no longer exciting, it was no longer "eye-popping, that it had become predictable).

For me: analyses like this by Mike Filloon and then reading press releases from ONEOK about $2 billion pipelines taking 200,000+ barrels from the Bakken to Cushing --> eye-popping.

I guess the Bakken is predictable: it keeps getting bigger.

Five (5) New Permits -- The Williston Basin, North Dakota, USA

Daily activity report, April 9, 2012 --

Operators: Oasis (2), ERF (2), Whiting

Fields: Pleasant Hill (McKenzie), Bull Butte (Williams), Mandaree (Dunn)

21 wells released from "tight hole" status, and another four producing wells were completed; another ten wells were reported to be plugged or producing. 

Of the 21 wells released from "tight hole" status, 12 were completed/fracked, including:
  • 20088, 1,390, Petro-Hunt, Fort Berthold 151-94-34C-27-1H, McKenzie
  • 20626, 1,125, Zenergy, Kelter 7-6H, McKenzie
  • 21066, 1,347, Petro-Hunt, Fort Berthold 148-94-17D-08-2H, Dunn
  • 21201, 1,145, Denbury, Erickson 41-25NWH, McKenzie
  • 21381, 1,150, Fidelity, Dinwoodie 11-14H, Mountrail
Of the four producing wells completed:
  • 19706, 1,358, Oasis, Brier 5200 42-22H, McKenzie,
  • 20619, 1,568, Oasis, Flinders Federal 5602 13-18H, Williams,
  • 20651, 934, Hess, EN-Weyrauch C-154-93-2932H-2, Mountrail,
Some KOG name changes were interesting; the following "from" and then "to":
  • 19962, KOG, Komodo State 154-... to P State 154-97-3-16-21-13H, Truax
  • 20515, KOG, Polar 154-... to P Alice 154-99-4-3-27-4H, Stockyard Creek (possibly Epping)
  • 21078, KOG, Polar 155-... to P Alexander 155-99-16-11-2-1H, Epping (possibly East Fork)
  • 21817, KOG, Jorgenson 5-14H to P Jorgenson 154-98-5-14-23-16H, Truax oil field,
The name changes have not been updated on the GIS map server at the date of this posting. Could KOG be designating wells by the prospect? "P" for Polar Prospect? No. The Truax/Epping certainly are not in their Polar Prospect. Formation? Not aware of any. "Pilot"?

Filloon: Three Forks -- Great Potential -- The Bakken, North Dakota, USA -- SeekingAlpha.com

Note: the "Three Forks" is a formation just below the Bakken formation. The Bakken formation is further divided into the upper, middle, and lower Bakken.  In 2011, operators started talking about four benches "below" the Three Forks.  The Bakken formations and the Three Forks formations are part of the Bakken Pool. The "Sanish" or the "Three Forks Sanish" is a specific part of the Three Forks found in western Mountrail county, where the Sanish oil field is located. 

Over time operators are becoming more consistent when referring to the various Three Forks formations. The "legacy" upper Three Forks formation is TF1; the second bench is TF2; the third bench is TF3; and, the lowest bench is TF4. As of 2014, TF4 has not been tested widely. 

Updates

January 25, 2018: a geologic update of the middle- to lower-Three Forks, ND geologic survey. A must-read.


September 26, 2013: Three Forks wells in northeastern McKenzie County five times better than middle Bakken wells -- Lynn Helms

June 23, 2013: the 2013 USGS Survey -- The Three Forks

May 24, 2010: Source Rock for the TFS

January 6, 2010: Continental Resources (CLR) reports six wells that targeted the TFS; excellent results.

Original Post

Link at SeekingAlpha.com here.

The article is very detailed and I won't go through it now. Maybe later for future reference.

Suffice to say:
Filloon: The Three Forks could be a bigger story than the middle Bakken. At its thickest point it is 270 feet thick, compared to the middle Bakken at 90 feet.
Yup. See an earlier (November, 2011) post here

Something tells me ONEOK did the math.

*******************

This is from Mike's article linked above. I am providing bare details. Go to the link for the full story.

Data points:

Upper Bench
  • the Three Forks is commercial throughout a good portion of the Williston Basin
  • the thinnest portion of the upper Three Forks is in the northwest portion of the Williston Basin in Montana; it thickens significantly to the east and south
  • the further north in Williams County, the thinner the upper Three forks
  • a notable well: Magnum Hunter's Thomte, just a few miles from the Canadian border
  • in McKenzie County, Three Forks seems thicker in the south and east
  • gets thicker into northern Billings and western Stark counties
  • extends into South Dakota
Second Bench
  • Continental Resources testing the second bench
  • of the few wells drilled so far into the second bench, it appears that bench is consistent throughout the Basin
  • if the second bench is like the first, an additional four wells/pad possible
  • Hess has planned its first 12-well pad, and an additional 6 locations could be possible with the second bench --> 36-acre spacing without wells in the third or fourth bench

ONEOK: Billion Dollar Pipeline from Bakken to Cushing -- Bakken Crude Express Pipeline

Updates

April 15, 2015: link to short note on this at PennEnergy.  PennEnergy links break early, requiring a subscription for archives. The important point in this short note:
The Bakken Crude Express Pipeline, Oneok's first foray into oil, would be able to handle as much as 200,000 barrels per day and would combine with five other proposals to offer the region the ability to ship 900,000 barrels per day.
Original Post

Huge. (It was posted at Yahoo!In-Play at 9:02.)

"Tygar45" provided the map: note how much of the proposed pipeline follows existing pipeline corridor.  The pipeline appears to originate near Stanley area, goes west, then southwest into Montana; the pipeline follows the Montana state line south, the Wyoming state line south (staying outside of Nebraska), through northeast Colorado (D-J Basin), and then southeast through Kansas into Oklahoma, over to Cushing.

This is a huge story. And a huge "thank you" to a reader for sending me the link. I would have probably seen it evenutally, but I had not seen it until now.

The press release was released 3 hours ago.
ONEOK today announced plans to invest $1.5 billion to $1.8 billion between now and 2015 to build a 1,300-mile crude-oil pipeline with the capacity to transport 200,000 barrels per day (bpd).  The Bakken Crude Express Pipeline will transport light-sweet crude oil from the Bakken Shale in the Williston Basin in North Dakota to the Cushing, Okla., crude-oil market hub.
For those keeping track, ONEOK:
  • $1.8 billion for natural gas gathering and facilities in McKenzie and Williams County (for future reference, I will probably round this to $2 billion)
  • another $150 million for more gathering pipeline in Divide County (announced this month)
  • now, $1.75 billion for a new crude-oil pipeline (for future reference I will probably round this to $2 billion)
Meanwhile, the Obama-killed Keystone XL 1.0 morphs into 2.0N and 2.0S and no end in sight.

More from the press release (and, again, repeating, a press release):
"As producers continue to aggressively develop crude oil from wells in the Bakken Shale, more crude-oil pipeline takeaway capacity will be required," said Terry K. Spencer, ONEOK Partners president. "This proposed pipeline will provide producers with efficient and reliable transportation of their product directly to one of the largest crude-oil market hubs in the U.S."

"It also represents our entry into the crude-oil transportation business and utilizes our existing core capabilities of transporting and storing natural gas, natural gas liquids and refined petroleum products," he said. "Many of the supply commitments under negotiation are with the same producers in the Williston Basin that we currently serve."

Supply commitments for the proposed pipeline are in various stages of negotiation. Following receipt of all necessary permits and compliance with customary regulatory requirements, construction is expected to begin in late 2013 or early 2014 and be completed by early 2015.  Based on supply commitments prior to construction, the capacity can be increased.

Additionally, the proposed pipeline route will be well-positioned to transport crude-oil production from the Niobrara Shale.

The proposed pipeline route is expected to parallel more than 80 percent of the partnership's existing and planned natural gas liquids pipelines.  It will be designed, constructed and operated using proven technology, pipeline control systems and continuous safety monitoring.
ONEOK has a special place in the cockles of my heart. I knew nothing about ONEOK before I started blogging. I discovered ONEOK accidentally when I drove by Stateline I and saw something huge going up. I posted photos at the time. It was a bit of a learning curve for me as I posted live what I thought was going one. Some folks (a minority) wrote to tell me I was an idiot (they didn't read my disclaimer, I guess) but others provided me outstanding support and additional information. I don't recall if "anon 1" was one of those, but most likely.

ONEOK also holds a special place in my heart because it tackled a problem that others folks saw but didn't pursue: flaring. It still amazes me ONEOK jumped on this before MDU which is headquartered in North Dakota.

I'm impressed because it appears ONEOK did its homework well. The talking head analysts' view of the natural gas economic potential of natural gas in the Bakken oil field was 3 percent. Be that as it may, three percent of $4 billion/month going into the Bakken represents a bit of change (as in silver, gold, and sandwich coins).

Finally, ONEOK has a unique business model in an oil field -- not really unique, I suppose, but again, seeing an opportunity others passed up. It might be a stretch, but it sort of reminds me of NOG, another company (albeit much smaller, and comparing apples to oranges) that saw an opportunity others did not, and has a unique business plan.

But the biggest story that comes out of this press release: North Dakota currently produces 500,000 bbls/oil per day. An earlier post today, from Bakersfield.com, reiterated what others are talking about: 1,000,000 bbls/day in the out years from the Bakken. This one pipeline ONEOK is proposing will carry 200,000 bbls/day and will be built with potential to expand. This suggests to me that others agree, that the Bakken will eventually surpass one million barrels of crude oil/day.

Huge.

Disclaimer: this is not an investment site. I do this for my own education and enjoyment and elect to share it with others. I do not hold shares in ONEOK and probably never will.

But if you want to know where I might be headed (with regard to investing), re-read the Bakersfield article.

Oh, as long as I'm rambling. Everyone knows that Cushing is glutted with oil, and yet ONEOK is going to push another 200,000+ bbls of Bakken to Cushing. This suggests at least two things to me, but I've already rambled too long.

Flaring

Over at the Bakken Shale Discussion Group, they are discussing the issue of flaring.

Some data points and new links.

From the Bakken Formation Discussion Forum:
North Dakota Century Code states that gas can only be flared for 60 days after a well is completed without financial sanctions or production being limited to less than 200 bbls of oil per day. An absolute maximum of one year is available under special exemptions without paying taxes, royalties, or sanctions.
By the way, that entire "comment" is an excellent overview of the issue of flaring in North Dakota. I highly recommend folks going to the link who are interested in this issue.

There are at least two PDFs that provide additional information:
According to one of the sources (PDF), "Typically wells are allowed to produce at a maximum efficient rate or MER for a period of time (generally 30 - 60 days) in order to evaluate the potential of the well and stabilize the production. After such time, the well production is then restricted to 200 bopd for another 30-60 days, then 150 bopd for an additional 30-60 days, and finally 100 bopd until the well is connected to a gas-gathering system. Further extensions may be granted provided certain conditions are met." -- Section 38-08-04 of the North Dakota Century Code.

Having said that, there may be more to the answer. Another source (PDF) states that "Currently, state law, under section 38-08-06.4 of the North Dakota Century Code, grants an exemption from payment of taxes and royalties to all new wells for one year from date of completion.

So, it appears that if the law hasn't changed, the "one-year rule" applies.

We will probably get a more definitive answer from the discussion group since I always defer to them if there are different opinions.

Interestingly enough, I do not recall having seen the Bakken Formation Discussion Forum before; if so, I have forgotten. It is now linked at the sidebar at the right. 

New Poll: Are You Interested in the Eagle Ford?

It's time for a new poll.

Results of the current poll regarding likelihood of US releasing oil from the Strategic Petroleum Reserve:
  • Yes, no question: 30%
  • Yes, only if gasoline > $5/gallon: 28%
  • No, unless gasoline > $6/gallon: 12%
  • No, unless shooting war in Mideast halts "all" exports: 18%
  • No, not under any circumstances: 11%
I will go out on a limb and suggest that 70% of those responding feel the US will not be releasing oil from the Strategic Petroleum Reserve in the near term (this summer): I doubt gasoline will > $5 gallon, and I doubt a shooting war will halt "all" Saudi oil.

Now, for the new poll: what percent of readers are interested in the Eagle Ford?

I ask this question because I think the Eagle Ford will become a bigger play in terms of production than the Bakken over time. I believe the Eagle Ford covers a larger area, and is thicker. The Eagle Ford will become the biggest competitor for Bakken resources (fracking sand, rigs, personnel).

Regardless of the outcome of the poll, I won't be following the Eagle Ford any more closely than I do now. I don't have the time or resources, and I am emotionally attached to the Bakken, where I grew up. Interestingly, I now call San Antonio home.

I know many (majority?) of my readers are also interested in the activity in Montana but I don't have the time or resources to follow it more closely than I already to. Sorry.

Technology and Unconventional Shale

A short op-ed in PennEnergy for newbies. For regular readers, nothing new.

Two data-points:
  • The large quantities of water injected and produced pose a problem primarily in non-water rich states. The northeast, where the Marcellus Shale is located, is water rich. Supply is not as much of a concern as safe disposal.
  • The API reports that in 2004, the United States EPA stated, “the injection of hydraulic fracturing fluids into coal-bed methane wells pose little or no threat to underground drinking water.”

For Investors Only: COP Provides an Interim 1Q12 Update

Link to PennEnergy here.

For investors, this is an important update.

Just one data point:
  • Prior guidance: 1.55 - 1.60 million boepd for the full year; 1Q12 guidance of 1.62 million boepd is consistent with earlier guidance according to COP.
Analysts will no doubt say that the estimate is at the "high end" of previously announced guidance.

Mega-Pads in the Bakken: QEP and WPX in Heart Butte and Deep Water Creek Bay

Mike Filloon mentioned that QEP has finished drilling all the wells on its 10-well pad. There are two fields in which QEP has a number of multi-well pads: Heart Butte and Deep Water Creek Bay.

Heart Butte is an interesting field, a very active field, and one with much history -- for a boom that's in its early stages. The oil field first caught my eye back in March, 2010, when I was transcribing the NDIC hearing dockets for that month:
  • 12284: Questar, extending the Heart Butte Field and creating 24 640-acre spacing units in Dunn, McLean and Mountrail Counties, with two horizontal wells in each (48 wells)
This was before Questar split of QEP.

The Heart Butte oil field was also the focus for the Arrow Pipeline, a huge deal at the time for many reasons.

So, now we wait for the IPs for the ten wells that QEP has just completed.

Here are some multi-well QEP pads and WPX pads in Heart Butte and Deep Water Creek Bay:
Two 5-well pads, section 3-149-92:

23331, 2,282, QEP, MHA 1-03-34H-150-92, Heart Butte, 4 sec, t3/13; cum 42K 5/13;
23332, 2,348, QEP, MHA 3-03-34H-150-92, Heart Butte, 2 sec, t3/13; cum 48K 5/13;
23333, 2,310, QEP, MHA 1-03-35H-150-92, Heart Butte, 4 sec, t3/13; cum 40K 5/13;
23334, 1,949, QEP, MHA 3-03-35H-150-92, Heart Butte, 4 sec, t3/13; cum 35K 5/13;
23335, 1,791, QEP, MHA 2-03-35H-150-92, Heart Butte, 4 sec, t3/13; cum 27K 5/13;
23336, conf, QEP, Heart Butte,
23337, conf, QEP, Heart Butte,
23338, conf, QEP, Heart Butte,
23339, conf, QEP, Heart Butte,
23340, conf, QEP, Heart Butte,

Two 5-well pads:
  • 23093, conf, QEP, Heart Butte, 
  • 23094, conf, QEP, Heart Butte, 
  • 23095, conf, QEP, Heart Butte, 
  • 23096, conf, QEP, Heart Butte, 
  • 23097, conf, QEP, Heart Butte, 
  • 23098, 1,632, QEP, MHA 4-06-32H-150-92, Heart Butte, t2/13; cum 24K 5/13;
  • 23099, 1,994, QEP, MHA 2-06-32H-150-92, Heart Butte, t2/13; cum 33K 5/13;
  • 23100, 1,922, QEP, MHA 3-06-32H-150-92, Heart Butte, t2/13; cum 52K 5/13;
  • 23101, 1,777, QEP, MHA 1-06-32H-150-92, Heart Butte, t2/13; cum 107K 5/13;
  • 23102, 1,966, QEP, MHA 4-06-31H-150-92, Heart Butte, t2/13; cum 51K 5/13;
Two 5-well pads, 31-150-91
(I don't know if this is the 10-well pad Filloon is referring to), Heart Butte:
  • 21551, 2,757, QEP, MHA 3-31-25H-150-92, 4 sec, t10/12; cum 89K 5/13;
  • 21552, 2,351, QEP, MHA 2-31-25H-150-92, 4 sec, t10/12; cum 74K 5/13;
  • 21553, 2,202, QEP, MHA 4-31-25H-150-92, 4 sec, t10/12; cum 85K 5/13;
  • 21554, 2,430, QEP, MHA 1-31-30H-150-91, 4 sec, t10/12; cum 78K 5/13;
  • 21556, 2,376, QEP, MHA 3-31-30H-150-91, 4 sec, t10/12; cum 70K 5/13;
  • 21557, 2,140, QEP, MHA 1-31-36H-15-92, 4 sec, t5/13; cum 14K 5/13;
  • 21558, 2,359, QEP, MHA 3-31-36H-150-92, 4 sec, t5/13; cum 18K 5/13;
  • 21559, 2,032, QEP, MHA 5-31-25H-150-92, 4 sec, t5/13; cum 12K 5/13;
  • 21560, 673 QEP, MHA 7-31-25H-150-92, 4 sec, t5/13; cum 19K 5/13;
  • 21561, 1,731, QEP, MHA 1-31-25H-150-92, 4 sec, t5/13; cum 9K 5/13;
32-150-91, Heart Butte; one 4-well pad and one 2-well pad
  • 20487, 606, QEP, t11/11; cum 160K 5/13;
  • 20488, 1,571, QEP, t11/11; cum 182K 5/13;
  • 20489, 933, QEP, t11/11; cum 141K 5/13;
  • 20490, 2,609, QEP, t11/11; cum 243K 5/13;

  • 22028, 2,737, QEP,  MHA 2-32-29H-150-91, t11/12; cum 91K 5/13;
  • 22029, 1,961, QEP, MHA 4-32-29H-150-91, t11/12; cum 84K 5/13;
A 3-well pad, and two 4-well pads in 31-148-92, Heart Butte:
  • 22649, 709, WPX, Charles Blackhawk 31-30HA, t11/12; cum 63K 5/13;
  • 22650, 247, WPX, Charles Blackhawk 31-30HX, t11/12; cum 50K 5/13;
  • 22651, 219, WPX, Charles Blackhawk 31-30HB, t11/12; cum 62K 5/13;
  • 22652, conf, WPX, Charles Balckhawk 31-30HY, 
  • 22653, conf, WPX, Charles Blackhawk 31-30HC, 
  • 22654, conf, WPX, Charles Blackhawk 31-30HZ,
  • 22655, conf, WPX, Charles Blackhawk 31-30HD,
  • 21904, 1,542, QEP, MHA 4-06-07H-147-92, Heart Butte, t8/20/12; cum 101K 5/13;
  • 21905, 2,223, QEP, MHA 2-06-07H-147-92, Heart Butte, t8/17/12; cum 81K 5/13;
  • 21906, 2,142, QEP, MHA 4-32-33H-148-92, Heart Butte, t8/15/12; cum 75K 5/13;
  • 21908, 2,180, QEP, MHA 2-32-33H-148-92, Heart Butte, t8/22/12; cum 83K 5/13;
5-149-90, Deep Water Creek Bay
  • 21091, 499, QEP, t7/12; cum 54K 5/13
  • 21092, 436, QEP, t7/12; cum 51K 5/13
  • 21093, 878, QEP, t7/12; cum 72K 5/13
  • 21116, 952, QEP, t4/12; ccum 70K 5/13
  • 21824, 814, QEP, t4/12; cum 53K 5/13
18-150-90, Deep Water Creek Bay
  • 17434, 880, QEP, t1/09; cum 145K 5/13;
  • 17940, 1,217, QEP, t1/10; cum 211K 5/13;
  • 18930, PNC, QEP
  • 18991, 1,053, QEP, t9/10; cum 148K 5/13;
  • 19683, 766, QEP,  t12/11; cum 115K 5/13;
  • 20271, 592, QEP, t12/11; cum 102K 5/13; 
Some time ago I mentioned that I was no longer tagging/labeling "multi-well pads" because this was becoming too commonplace. I am now tagging/labeling "mega-pads"which have more than 5 wells on the pad. This is different than the tag "mega-units" which generally refers to 2560-acre spacing units, but at least 1,920 acres.

Note: there may be some errors on the data above; it was done quickly and not double-checked.

Mike Filloon on Marathon -- SeekingAlpha -- The Bakken, North Dakota, USA

Mike Filloon had another excellent article in SeekingAlpha.com last week looking at Marathon Oil.

Marathon's activity in both the Eagle Ford (south of San Antonio, Texas) and the Bakken provide an opportunity to compare the two fields.

For newbies, it also provided a look at where the Bakken was headed in terms of spacing: four wells per spacing unit in general, and six wells in some areas of the Bakken. Filloon talks of Marathon's 420-acre spacing in the Bakken.

Filloon noted that Marathon feels that takeaway capacity will be less of an issue by late 2013 or early 2014, "even if by that time the Williston Basin production grown to over a million barrels of oil per day."

According to the article, Marathon's oil:
  • 55% to Tesoro refinery in Mandan
  • 28% pipeline
  • 14% rail
In passing, Filloon reminds us of the potential of downspacing in the Three Forks, and that EOG is testing secondary recovery (water flooding).

Bakken Oil Being Shipped To California -- A Great Story To Start Off The Week

Link here to Bakersfield.com.This story is huge, and immensely enjoyable to read. The data points do not do the story justice.

Data points:
  • Kern County (Bakersfield, heart of California oil country) refinery buying "large amounts" of Bakken oil
  • 26,000 bbl/day refinery
  • Kern Oil & Refining Co
  • turns a bigger profit refining Bakken oil than using same grade of oil produced in Kern County
  • the site says the shift appears to have begun in 2010
  • California's 2-million bbl/day refining industry needs more oil than California able to produce
  • due to pipeline issues, there is a relative "glut" of Bakken oil
  • $20 differential between Bakken and Kern oil
  • experts estimate rail costs no more than $18; maybe less than $15/bbl

The article has much more information and some nice links embedded.

What a great way to start the week.

A huge thank you to a reader for alerting me to the story. 

Other refiners across the country are considering the same thing. The "genius" of all that unit trains and crude-by-rail terminals in North Dakota -- as someone else said, "necessity if the mother of innovation."

One small point might need clarification for the experts: early in the article the writer suggests that Bakken oil and Kern County oil are similar grades, but later in the story the writer refers to Kern County oil as "heavy" oil. If accurate, it is less expensive to refine Bakken oil than heavy oil, all things being equal.