Wednesday, April 11, 2012

Polar Bears -- Absolutely Nothing To Do With The Bakken

Data points from The Globe and Mail via Carpe Diem.
  • polar bear counts 66 percent higher than expected, maybe more
  • population: 1,013
  • global warming researches predicted numbers as low as 610 due to melting ice, yada, yada, yada
  • the government did a count because hunters kept reporting more bears than expected
  • reminder: Canada jettisoned the Kyoto Protocol earlier this year
'Nuf said.

Another Scam In The Oil Patch?


April 12, 2012: I cannot post some comments regarding possible scams in the Bakken.

Original Post
Verbatim, as sent to me:
Just to inform you of a new scam that you could pass on.

We have been contacted by two different land people this week. The offer they have is to buy your royalty on your acres for 30 years. They claim no taxes (capital gains) which is not true. They just want acreage with one (1) well after decline. They request to see your royalty payment to make their bid. I hope they are not successful at this because as you know there will be many more. I also fear that the wording will take unsuspecting people's minerals forever.
I did not get any additional information.

North Dakota Oil Production Hits a New All-Time High (Again)

Link here.
  • Feb, 2012, oil: 558,254 bopd  (NEW all-time high)
  • Jan, 2012, oil: 546,453
  • Feb, 2012, producing wells: 6,726 (NEW all-time high)
  • Jan, 2012, producing wells: 6,624

Back-of-the-envelope nonsense:
  • 558,254 bbls per day x $83/bbl --> $50 million/day (rounded) into the economy.
  • An additional 12,000 bbls x $83 -->  $1 million at 12% --> an additional $120,000/day for the state? (rounded)

    Director's Cut: April 11, 2012

    Link here.

    Production hits all-time high in North Dakota (again):

    • Feb, 2012, oil: 558,254 bopd  (NEW all-time high)
    • Jan, 2012, oil: 546,453
    • Feb, 2012, producing wells: 6,726 (NEW all-time high)
    • Jan, 2012, producing wells: 6,624
    • Feb, 2012: 181 (all time high: 245, 2 Nov 10)
    • Jan, 2012: 170
    • Feb, 2012: sweet crude, $83.26
    • Jan, 2012: sweet crude, $88.09
    • Dec, 2011: sweet crude, $88.75
    • Nov, 2011: sweet crude, $88.54
    Director's comments:
    The warm dry weather continues to result in increased hydraulic fracturing activity and increased production.....the idle well count is falling with just under 240 wells now waiting for fracturing services. [Last month it was 250 wells; not falling very fast.]

    Crude oil take away capacity via pipeline is well below production, but rail and truck transportation combined are keeping up with near term production projections.
    "EPA regulation of hydraulic fracturing under the safe drinking water act through the diesel fuel provision in the 2005 energy policy act remains on hold with the proposed guidance document(s) still under review at OMB. Following that review a 60-day public comment period is planned.

    US Budget Deficit Widened To Almost $200 Billion In March -- Bakken-Related?

    Link here to Bloomberg.

    The larger deficit is pretty much in line with analysts' expectations:
    The U.S. government’s budget deficit widened 5.3 percent in March, as outlays increased on recurring benefit payments and a subsidy re-estimate for the Troubled Asset Relief Program (TARP).

    The shortfall expanded to $198.2 billion from $188.2 billion a year earlier, the Treasury Department said today. Economists projected a $196 billion gap, according to the median estimate in a Bloomberg News survey. 
    Bakken-related? There are many who feel that the deficit --> debt will eventually lead to commodity inflation, thus increasing the royalty checks for Bakken mineral owners.

    Roster of Presenters at Next Week's IPAA Oil and Gas Investment Symposia Now Available -- More Than Just The Bakken

    IPAA's Oil and Gas Investment Symposia, April 16 - 18, 2012, will have several Bakken presentors, including but not limited to:
    • Abraxas
    • Baytex
    • Chesapeake
    • Denbury
    • GADECO
    • GeoResources
    • GMX Resources
    • KOG
    • Marathon
    • MDU
    • NOG
    • Oasis
    • QEP Resources
    • Samson Oil and Gas
    • SM Energy
    • Triangle Petroleum
    • US Energy
    • VOG
    • Whiting
    If Continental Resources was on the list, I missed them.

    Also, I did not see a Statoil/BEXP representative or someone from EOG, Newfield, XOM/XTO, or COP/Burlington Resources.

    North Dakota Coal Story: Nothing To Do With the Bakken

    UND's Energy and Environmental Research Center and Pratt & Whitney Rocketdyne have partnered to study ways to make "coal cleaner."

    Data points:
    • the joint venture has introduced a prototype gasification system that uses dry coal
    • current process requires large quantities of water
    • new system burns coal more efficiently, more cleanly according to spokesman
    • coal is pulverized and kept under pressure to behave like a fluid
    • no additional water is used
    • 2015: will start looking for commercial plants worldwide
    Back on July 20, 2010, I blogged about New Zealand shipping lignite to North Dakota to test a coal-drying process.

    Again, For The Nth Time: Have Housing Lined Up Before You Arrive In Williston

    Williston will likely ban living in recreational vehicles inside city limits.

    Absolutely nothing to do with the subject but this posting looked a bit drab. In lieu of some footage from the Bakken:

    California Dreamin', The Seekers

    Thirteen (13) New Permits -- Many, Many Great Wells Being Reported -- The Williston Basin, North Dakota, USA

    Daily activity report, April 11, 2012 --

    Operators: CLR (4), Murex (2), Oasis (2), True Oil (2), Crescent Point Energy, Baytex, Petro-Hunt

    Fields: West Ambrose (Divide), Dolphin (Divide), Stanley (Mountrail), East Tioga (Mountrail), Baker (McKenzie), Brooklyn (Williams), Bowline (McKenzie), Whiteaker (Divide)

    Five (5) wells were released from "tight hole" status; three were fracked/completed, including:
    • 20131, 1,343, Whiting, Pronghorn Federal 34-11TFH, Billings,
    • 20758, 49 (no typo), Baytex, Moe 19-18-162-100H, Divide, 
    Nine producing wells were completed, including:
    • 19605, 1,595, KOG, Charging Eagle 15-14-24-16H, Middle Bakken, Dunn County
    • 20399, 2,081, Oasis, Stewart 5200 12-29H, Bakken, McKenzie
    • 20980, 2,708, BEXP, Hawkeye 16-21 1H, Bakken, Williams
    • 21125, 1,543, BEXP, Kalil 25-36 2H, Bakken, Williams
    • 21188, 2,033, Whiting, Jones 34-4H, Bakken, Mountrail
    • 21193, 125, KOG, Ames 15-321H, Middle Bakken, Divide
    And, perhaps, some kind of record, 27 wells were reported to be plugged or producing.

    Bakken Tight Oil Conference -- Early Booking Offer To Save 15% Percent Ends This Friday

    Link to Bakken Tight Oil Conference.

    I received the following, as a reminder:

    Early Booking Offer ends this Friday.  To save 15% off the $200 rate, e-mail with the code MDW 15 to claim the discount by close of business on Friday.

    Graphic of the Evolving Bakken -- EIA -- The Bakken, North Dakota, USA

    Link here.

    I didn't click on it at the Bakken Shale Discussion Group, but I assume it linked to this same site. It's quite amazing to see that the EIA actually posted this. I linked it to the blog some time ago, but don't know where it is. So, great opportunity to see it again, especially for newbies.

    Prototype Lithium Battery Blows Up at GM Research Lab


    April 12, 2012: according to the WSJ (print edition, not linked), the battery in question was being developed by A123 (Watertown, Massachusetts) for the aptly named Spark.

    Back in November, 2011,  I wrote this:
    The Chevy Spark is due to be released in the summer of 2012. Yes, the Spark. Something tells me GM has formed a focus group to determine whether a different name might be warranted.
    Now, more than ever. 

    Original Post 
    Edited post (I got several notes that relating this story to the Volt was inappropriate).

    Prototype lithium battery blows up at GM research lab; one seriously injured.

    Blowing up before being put into the Volt vehicle saves a lot of unnecessary work.

    On another note, unrelated to the battery: I believe the Volt assembly line remains shut down, waiting for the surge in demand to balance out with supply.

    Another "Largest" For North Dakota -- Largest Fiber-Optic Network in the Country -- 10,000 Square Miles

    Link here to the Bismarck Tribune.
    ... the largest fiber-optic Internet connection in North America.
    Officials say a new broadband network in south central North Dakota covers a 10,000-square mile region, or equal to the size of the state of New Jersey. It will bring high-speed Internet service to homes and businesses., I can't wait for the state to be the first to have wireless throughout....

    A World Of Our Own, The Seekers

    Williston Oil Field -- The Bakken, North Dakota, USA


    November 23, 2013: random update of flaring in the Williston oil field.


    2013 (the list is complete)
    • 27303, conf, Zavanna, Husky 33-28 2H, Williston, 
    • 27302, conf, Zavanna, Husky 33-28 4TFH, Williston,
    • 27301, conf, Zavanna, Husky 33-28 6H, Williston,
    • 27300, conf, Zavanna 33-28 8TFH, Williston, 
    • 25958, conf, Statoil, Mark 4-9, 3H, Williston, 
    • 25957, conf, Statoil, Mark 4-9 4TFH, Williston,
    • 25956, conf, Statoil, Mark 4-9 5H, Williston, 
    • 25955, conf, Statoil, Mark 4-9-6TFH, Williston, 
    • 25672, conf, Statoil, Larsen 3-10 5TFH, Williston,
    • 25671, conf, Statoil, Larsen 3-10 4H, Williston, 
    • 25670, conf, Statoil, Larsen 3-10 3TFH, Williston,
    • 25553, conf, Zavanna, Bear Cat 33-28 2H, Williston, 
    • 25552, conf, Zavanna, Bear Cat 33-28 3TFH, Williston,
    • 25459, 784, Triangle, Little Muddy 13H, Williston, t10/13; cum 9K 9/13;
    • 25458, 631, Triangle, Little Muddy 11H, Williston, t10/13; cum 9K 9/13;
    • 24543, 1,086, Zavanna, Bear Cat 33-28 1H, Williston, t4/13; cum 148K 12/13;
    • 23746, 2,145Statoil, Mark 4-9 2TFH, Williston, t1/14; cum --
    • 22384, 2,910, Statoil/BEXP, Mark 4-9 1H, t5/12; cum 167K 12/13; 
    Original Post
    The operators in the Bakken are obviously saving "the best for last."

    The Williston oil field is a small field, encompassing one section inside Williston city limits, and having only ten sections in all. I can walk to it from my dad's house when I am visiting Williston. I have a lot of stories about this area of Williston and Williams County in the immediate area. I have heard most of the stories more than once from my dad. He was county commissioner some years back and had a great deal of involvement in this area.

    There's a creek that runs through this little field, the Little Muddy. Maybe it's called a river. Probably depends on how high the water is. At times it can be quite high, and allows for a nice recreational boating area, north of where it runs into the Missouri, near the US Army Corps of Engineers regional headquarters. East of the creek, the terrain rises to fairly high rolling hills, on top of which one has a beautiful view of Williston. (I suppose some Dickinson folks will come up here during the summer to look at the ball of dust that is said to overhang the city, and like the seven wonders of the world, seldom seen, though often talked about.) As with other wells in the Williston area, it is rewarding to see family names of which I am familiar (none of my own family name, it should be noted; I own no mineral rights).

    Ironically/interestingly, though though this field shares its name with the basin, it has not yet seen much activity, but the wells in the neighboring fields are very, very good, and I can only assume the operators are saving the "best little field for last."

    Here the current well files/permits (PA --> permanently abandoned; PNC --> permit canceled):
    • 7079, PA, Citation
    • 7386, PA, Harper,
    • 7578, 509/20, Burnett Energy, Hefflefinger 34-1, s2/08; t8/80; Red River/Madison; cum 100K 2/12;
    • 8793, Dry, Texas Gas,
    • 8862, Dry, Texas Gas,
    • 9914, Dry, Harper Oil
    • 11141, Dry, Harper Oil
    • 11959, PNC
    • 14637, 210, Liberty Resources, Jeffrey 33-33, s5/97; t7/97; cum 55K 2/12;
    • 14771, 219, Liberty Resources, Shae 21-33, s10/97; t12/97; cum 69K 2/12;
    • 18891, 2,631, BEXP, Larsen 3-10 1H, s5/10; t9/10; cum 138K 2/12;
    • 20842, 2,743, BEXP, Larsen 3-10 2H, s5/11; t7/11; cum 78K 2/12;
    • 21146, DRL, BEXP, Sjol 5-8 1H, s8/11; 4,500 bbls in first 25 days before fracking;
    • 22132, DRY, BEXP, M. Ellis 4-9 1H, nothing in well file; didn't get very far before it was abandoned, plugged
    • 22384, 2,910, BEXP, Mark 4-9 1H, Williston, t5/12; cum 139K 6/13;

    A couple of immediate observations, useful for newbies:
    • first, this is why the Bakken is so unique; the Bakken has "no" dry wells; look at all the DRY wells in this one small field in the early years, before the Bakken
    • Bakken wells are very expensive, but the payoff is still in two to three years
    • look at the IPs of Bakken wells vs "legacy" wells; not trivial

    Random Soundbites From Ten Companies Operating in Oklahoma; Some Interest to Those In the Bakken provides short sound bites from ten companies attending recent luncheon talking about regional plans (in Oklahoma City. They spoke to a packed house at Quail Creek Country Club):
    • Chesapeake: most active driller in the US; 161 active rigs last year; ramp up to 165 this year; going through "massive reallocation effort" to shift its focus to oil and liquids rich resource plays; "soon" CHK will have just 23 rigs drilling for gas
    • SandRidge Energy: has completed its switch to oil and liquids; 23 rigs and ramping up to 33 rigs; southern Kansas is in play; will drill 384 horizontal wells in the Mississippian oil play (northern Oklahoma and southern Kansas)
    • Devon Energy: almost all wells being drilled are horizontal; "oil is king"
    • Apache Corp: will also ramp up operations in Oklahoma and Texas Panhandle; doubled its acreage with acquisition of Cordillera Energy Partners; will also keep promoting natural gas
    • Linn Energy, Unit Corp, SM Energy, and QEP Resources complete the ten that attended the luncheon, updating their activity in Oklahoma
    Without question, CHK is the one to watch.  I believe CHK has one rig in North Dakota (it owns a subsidiary with additional rigs in North Dakota, so I have to be careful how I write that); it plans to ramp up to 165 rigs (almost all will be drilling for oil); CHK has 100's of thousands of acreage in North Dakota; there are not a whole lot of oily plays in the US right now: Bakken, Utica, Eagle Ford, Niobrara?

    World's Fourth Largest Crane in the Rocky Mountain Oil Region


    Later: I cannot take credit for this one. More than one person has suggested that the old tanks be used for growing algae. Memo to self: note to Interior Secretary to talk to the president about this one. The only downside: mosquitoes would love the breeding opportunity, but lots of DDT could take care of that.  Apologies to Rachel.

    Original Post

    If I had the time it would be interesting to post a commentary on the oil and gas industry in the Williston Basin, reflecting on the "relative" obscurity of the biggest energy play going on in the world right now. I really don't know if the Williston Basin is the biggest energy play, but it certainly must be in the top five. The Eagle Ford will eventually get there, but it will be obscured somewhat by the fact that everyone knows "Texas" as a center.

    But I really don't think most Americans think of North Dakota when asked about oil in the US. I thought about that again, when I saw the photograph of Conoco's Billings (Montana) story (sent to me by Don).

    I assume most folks think of North Dakota as depicted in the photograph that is posted at the bottom of this note. 

    Very, very few folks will see this story, and even those who do, will likely skip over what I think is the biggest part of the story:
    As dawn broke Tuesday, the world's fourth-biggest crane began the delicate task of replacing coke drums at the Billings ConocoPhillips refinery.
    Data points:
    • that was the first lift; five more lifts to complete the project
    • the crane is owned and operated by Mammoet; the crane weighs 1,760 tons
    • each new drum weighs 350 tons
    But the data point that caught my attention: this is the fourth-largest crane in the world (not in the region, not in the US, not in North America, but in the entire world). That, metaphorically, speaks volumes about the oil and gas industry in the US.

    I do believe this process was held up by faux environmentalists blocking megaloads on Idaho and Montana highways, but don't know for sure. I do know that megaloads going to Canada have been held up by faux environmentalists.

    Oh, yes, here's the photograph I mentioned above:

    North Dakota blizzard, winter, 1936

    A Red River Well Added To The "Monster Well" List

    The first Red River well was added to the "Monster Well" list:
    • 5259, 380, Abraxas, Miller 7X-27, s5/73; t7/73; cum 928K 2/12
    A huge "thank you" to JDR for alerting this well to me.

    Note: almost 1 million bbls. It takes awhile for a Red River well to get a million bbls but they can do it. This well is still active (almost 40 years old) and still producing about 500 bbls/month. Pennies to operate, I assume, this well could be generating >$25,000/month free cash flow.

    Ethane -- Another Great Update -- RBN Energy

    Link here; registration may be required; well worth it.

    In addition to financial/economic side of ethane, some great education regarding the gas. Had ONEOK not invested in the Bakken in a big way, I might not have been interested, but with the interest ONEOK has, this is now an important chapter in the Bakken.

    Perhaps more on it later.

    Footnote To Be Added To State Land Leases -- The Williston Basin, North Dakota, USA

    Link here to Bismarck Tribune.

    I've read this story several times, but I must be missing something.

    The lede:
    For the first time in North Dakota history, tracts of state-owned mineral acres will be leased with a special footnote that says an oil well may not be allowed there.

    That footnote intended to protect essential wildlife habitat will appear on about 1,800 acres that will go on the auction block May 1. That’s when the Department of Trust Lands will hold a quarterly sale of mineral acres nominated by companies interested in leasing them.
    So, if I understand this correctly, you should feel free to bid to lease state land for the purpose of drilling for oil, but understand that the state probably won't issue you a permit for a well (even with a state lease) without a long, drawn-out, involved process with no guarantee that a permit will ever be issued.

    Why not just take the affected land off the table?

    This seems a bit like a lottery with regard to obtaining a permit: you pay your money for a winning lease bid, and then learn later whether it's any good.

    Like I said, I must be missing something.

    But, it is fair warning, and it helps folks understand the process.

    Even if one has a lease, it doesn't mean the state will issue a permit. (This reminds me of the Seinfeld episode in which Jerry had a rental car reservation but when he showed up at the rental desk, no car was available.)

    The Reservation, Jerry Seinfeld

    I am not sure how this is any different than what the federal government has done with offshore drilling.

    If the state later on denies a permit to drill, does the leaseholder get the bid money back (with interest + loss opportunity costs)?

    KOG -- March Presentation -- The Williston Basin, North Dakota, USA

    The presentation has been available for quite some time, and I may have posted some notes on it earlier, but here is a bit more.

    KOG's March 21, 2012, presentation, data points (numbers rounded):

    Production, boe/d
    • 2011: 10,00
    • 2012, exit, estimated: 27,000
    • 4Q11: $55
    Drilling plans
    • CAPEX: one-half billion dollars
    • Wells (2012): 73 gross (51 net)
    • Rigs: 7th rig contracted for 2Q12 + 2 non-operated rigs
    Well economics
    • $10.5 million/well
    • Payout: varies, but about two years
    Prospects: 157,000 net acres
    • Wildrose: Williams County along Divide County line
    • Polar: east of Williston, north of river
    • Koala: east of Williston, south of river; Bakken bull's eye
    • Smokey: eastern McKenzie, north of Little Missouri
    • Dunn County: west of Lake Sakakawea, north of Little Missouri
    • Grizzly: southwest McKenzie; extends from Elm Coulee, Montana
    • Dunn County: 800 - 900+
    Slide 20: great US crude oil pipeline system

    2012 completions to date:
    • xxxxx, 2,174, KOG, SC 9-2-3-5H
    • xxxxx, 2,429, KOG, CE 15-14-11-4H
    • xxxxx, 1,716, KOG, CE 15-14-24-16H
    • xxxxx, 2,680, KOG, SC 2-8-17-14H3
    • xxxxx, 508, KOG, Grizzly 3-25-13-3H
    • xxxxx, 689, KOG, Grizzly 3-25-36-15H
    • xxxxx, 1,419, KOG, Lind 211 1H
    • xxxxx, 1,673, KOG, King 3 8H