Tuesday, June 19, 2012

EOR in the Bakken

PetroBakken considers three EOR methods for the Bakken north of the border:
  • water flooding
  • natural gas flooding
  • CO2
Water is the worst choice. It comes down to natural gas vs CO2.

CO2 is best in getting oil out of the ground, but it is most corrosive.

By default: natural gas may be the method of choice for EOR.

PetroBakken has budgeted for six natural gas flooding pilot projects by end of 2012. These will be in Canada.

Harold Hamm To Operators in the Bakken: Change Tactics

Link to Petroleum News-Bakken.

Harold Hamm's pet peeve? It might be the WTI-Brent spread, and Bakken is at the "bottom of the barrel." Solution: more pipelines, and fast.

Cites statistics that show average return from three fields:
  • the Bakken: 25 percent
  • the Permian Basin: 40 percent
  • the Eagle Ford: 50 percent
Activity will go where the returns are better.

Maybe a good way to close the subject ... 

I Tried to Leave You, Leonard Cohen

Update on the Keystone XL -- Press Release But No News

Looks like we are into summer reruns

It dawned on me, while waiting for tonight's NBA game, that I haven't seen a Keystone XL update in quite some time. In fact, I considered a poll asking how many could remember seeing a story on the pipeline in the past month.

But, the better part of valor was to see if google could provide an answer. An lo and behold, there was an article posted seven hours ago at the Daily Republic, byline Bismarck. A reminder: earlier this year the administration killed Keystone XL 1.0. Pending are two, maybe three projects:
  • Keystone XL 2.0N (northern leg, Canada to Nebraska, 1,000 miles)
  • Keystone XL 2.0G (the Nebraska gap, 88 miles)
  • Keystone XL 2.0S (southern leg, Nebraska to the Gulf coast, the rest of the miles)
Data points:
  • US State Department reaffirmed Friday (last week) that it would make a decision on the permit next year
  • the State Department would open up review of the entire northern route, from Canada through Nebraska
  • Sen John Hoeven expressed dismay that the entire 1,000 miles needed review
  • Sen Hoeven suggested only the 88 miles through Nebraska needs to be reviewed 
  • the original review took four years
So, the takeaways:
  • no decision until well after the election
  • the entire northern route will be reviewed, not just the Nebraska portion that was the original issue
Meanwhile, this past month the takeaway capacity for Bakken oil by rail jumped 55 percent.

Simple Primer on Wet Gas and How It Relates To the Bakken

From the beginning, I have tried to avoid blogging about natural gas. I had enough trouble understanding the oil business and the Bakken, and it goes without saying that I had no clue about natural gas. But, every so often I would post something about natural gas. The subject came up again in this month's Director's Cut.

"Anon 1" provided a nice comment to that posting which sheds more light on the subject at that post. At risk of misstating / miswriting the comment here goes:


Liquids are NGLs - propane, for example,  in the gas.

"Liquid rich" is the new buzz word.

When "dry" natural gas is priced at $2 (the number we see on the crawler all day long at CNBC), it is the accompanying liquids that make the money for the operator, not the dry natural gas.

Gas is measured in BTU. 1200 BTU/MCF is rich. The Bakken is 1500 BTU (+/-). [Note: sometimes liquids are stated in barrels per MMCF; MM = thousand thousand --> million. 25 bbls/mmcf is "good."]

[This explains how Chesapeake and others can make money in natural gas fields like the Utica or Marcellus when natural gas is selling for $2 and all the talking heads say $2 natural gas is not economical. This also explains what ONEOK saw when it decided to build those three or four natural gas gathering and processing plants in the Bakken.]

The Utica ...

On page 14 of that linked PDF, it is stated that the Utica has condensate averaging 25 to 175 bbls/mmcf; and, the natural gas liquids average 120 to 160 bbls/mmcf (note again: 25 bbls/mmcf is good).

"Anon 1" says: see page 16 for Utica processing plants. There is much more just east of there for the Marcellus.

Prepare for the liquid flood.

CHK: "CHK’s best Utica well, the Buell 8H in Harrison County, OH, had an IP rate of 3,000 boe/d in September, 2011, with roughly half the production from liquids. The Buell well is currently producing 1,040 boe/d, and CHK believes the well will have an EUR of at least 575,000 bbls of liquids and 13 bcf of natural gas."

CHK: "On a post-processing basis, peak rates from wet gas window have averaged ~415 bbls/d of oil, 260 bbls/d of NGLs and 3.9 mmcf/d of natural gas, or ~1,325 boe/d."


My hunch is that RBN Energy has provided the same information in the past in as easily understandable words, but, if so, I missed it. The above may be the best explanation I have seen. I know I have posted similar information before, but maybe this time I will remember/understand it.

From an earlier comment from Don, it is my understanding that natural gas liquids are returning about $8 for wet gas vs the $2 we see for dry natural gas.

So these are the takeaways:
  • the talking heads on CNBC have not yet talked about how natural gas companies can still make money in natural gas fields (they can if the if the fields are rich in wet gas)
  • there may not be a lot of natural gas in the Bakken compared to oil, but what natural gas there is, it is rich, around 25 bbls/mmcf
  • fields like the Utica and Marcellus are extremely rich in wet gas
  • we should start seeing more stories on wet gas in the near future

The above information should help those who receive royalty payments to better understand their statements. Question 38 from FAQs.
"O" for oil. "G" for natural gas. "P" for plant products.  As the gas is processed and purified for transportation, by products like natural gas condensate, sulfur, ethane, and natural gas liquids like butane, propane, isobutane, and pentanes are produced and sold. Source. On some royalty checks "P" will be abbreviated at "PPROD." The Bakken Shale Discussion Group has a nice discussion on "plant products."

A Summer Job For An Aspiring Rural Community Organizer

I can't remember exactly what summer, but one of my high school summers I got a job with the Williston Health Department or the Williston office of the state health department; I don't remember the particulars.

My job was to collect mosquitoes without "damaging" them, bring them to the office downtown, and they would send them off to the Bismarck lab for identification, looking for the mosquitoes that carried various viruses.

Once the mosquito landed on my arm and had settled in, I would tip a test tube with anesthetic (ether or chloroform, I forget which) over the mosquito.

I was reminded of that story after Don sent me an article offering an opportunity for another summer job.

The opportunity is in this article: BLM hopes to keep cows out of emissions plan.

Apparently the EPA has identified an area in Wyoming in need of study before new air quality regulations go into effect; "all" emissions must be identified and quantified before implementing the new regulations. It has not yet been determined whether methane emissions from cattle will need to be quantified. But if it is, state officials will have to hire someone to determine the number of cattle that graze on federal land, and the time they spend there.

Apparently in earlier studies, the average amount of methane produced by cattle has been determined (80 to 110 kg per cow per year).

The concern for the new hire, and the first question I would ask if interviewing for the job, was whether I would have to confirm that 100 kg methane/cow/year will be acceptable to the BLM/EPA or whether it will have to be re-studied. And if so, will it be part of the job description for the summer job.

Random Update on North Dakota Finances

Link to Bismarck Tribune.

Data points (some numbers rounded):
  • North Dakota budget projection: $850 million surplus a year from now (June, 2013)
  • Three months ago (March, 2012) the surplus projection was: $600 million
  • Reserve funds: $1.2 billion -- 
The reserve fund (currently $1.2 billion):
  • oil tax trust fund
  • public school fund
  • property tax relief fund
 And the best line in the story:
Sharp says state income, sales and oil tax collections are running well ahead of projections.

Nine (9) New Permits -- The Williston Basin, North Dakota, USA

Daily activity report, June 19, 2012--
  • Operators: Hess (3), Fidelity (2), Enerplus (2), CLR (2)
  • Fields: Antelope (McKenzie), Spotted Horn (McKenzie), Dutch Henry Butte (Stark), East Fork (Williams), Truax (Williams), Dickinson (Stark)
Fidelity has two permits in the Whiting Pronghorn Prospect area (Dutch Henry Butte) and the very interesting Dickinson field, southwest North Dakota.

Wells released from "tight hole" status:
  • 21317, 880, Fidelity, Laci 21-28-27H, Sanish, t3/12; cum 51K 4/12;4-section (2560-acre) spacing
  • 21324, 720, Denbury Onshore, Olson 34-19SWH Arnegard field, t3/12; cum 7K 4/12;
  • 21710, drl, BEXP, Rich 30-31 1H, Todd, s12/11;
  • 21872, 526, CLR, Bondevik 1-14H, Wildrose, t4/12; cum 12K 4/12;
  • 21939, 370, G3 Operating, Pasternak 1-32-29H, Climax, t3/12; cum 5K 4/12;
We'll see later how accurate this is.

It will be interesting to see where the horizontal for the Laci well runs; the spacing unit is 2560-acres, sections 27, 28, 21, and 22, where there are already 7 other wells, all 640-acre spacing, I believe.

Production for Laci, 21317:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

It was always my impression that BEXP got their wells completed by the date the wells came off the confidential list, but it seems the new normal is for BEPX wells to go to DRL status, although they are not there very long.

Director's Cut: June 19, 2012

Link here.

First time I've seen this comment in the Director's Cut: "The high liquids content makes gathering and processing of Bakken gas economic."

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

  • Apr, 2012, oil: 609,371 bopd  (NEW all-time high)
  • Mar, 2012, oil: 577,478 (revised upward)
  • Apr, 2012, producing wells: 7,025 (NEW all-time high)
  • Mar, 2012, producing wells: 6,932 (revised upward)
Permitting (all time high: 245, 2 Nov 10)
  • Apr, 2012: 167 drilling
  • Mar, 2012: 181
  • Apr, 2012: sweet crude,  $78.17
  • Mar, 2012: sweet crude,  $76.29
  • 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:
Crude oil take away via pipeline is almost 30% below production, but rail and truck transportation are adequate to keep up with near term production projections. Drilling permit activity is high, but well below record levels. The number of wells drilling on the reservation rose to 32. North Dakota leasing activity is mostly renewals and top leases in the Bakken. This statement noted for the first time last month, was repeated: the high liquids content makes gathering and processing of Bakken gas economic ($2.03/MCF).
Comments on BLM regulation of fracking. See linked document. 
Comments on fracking using diesel fuel. See linked document.

Investor's View of EOG


October 1, 2012: in the "note for the granddaughters I talk about our whale watch. What we experienced was incredible, but I had no idea how incredible the "watch" really was, and how fortunate we were to see what we did. Dick Russell describes much of this "new" whale behavior in his Eye of the Whale and emphases the rarity of some of the behavior we saw (breaching) and describes exactly the behavior we were fortunate enough to observe that rough day on the seas.

Original Post

Disclaimer: this is not an investment site. This is not a recommendation to buy or sell shares in EOG. This is simply a link to a story about EOG over at SeekingAlpha that might be of interest to those who follow the Bakken.

A Note for the Granddaughters

Yesterday the three of us participated in a New England Aquarium Whale Watch. This was our second time to do this.

We were told, at the time, we were buying our tickets, that we might want to come back on a different day; the waves were high and the seas would be rough. Anyone with tendency to motion sickness would get sick on this trip. If we went, we were advised to take medication to counter motion sickness, which we did.

It was a spectacular trip. At the time I did not know how spectacular it really was. The naturalist on board said that it was very rare to see breaching; we were treated to multiple episodes of breaching. I had read some time ago that it is very rare for humans to see whales breaching -- breaking the surface, leaving the ocean entirely. As soon as I got home, I searched to learn more about breaching:
  • rarely do humans see breaching
  • humpbacks are most acrobatic
  • more likely to see breaching in rough seas 
Mother and calf, humpback whales:

Breaching humpback calf:

Shot with a Canon PowerShot A3100 IS:

Mother in background, black; calf in foreground, white flipper

Oasis Upgraded By UBS

For investors only: Oasis upgraded by UBS.

Disclaimer: this is not an investment site. This is not a recommendation to buy or sell shares in Oasis. It is simply a link to a story about a company that is Bakken-centric.

CNBC With Most Interesting Interview With Founder of GreenPeace

The video is here.

In a 30-second sound bite, the co-founder of Greenpeace noted that Germany has spent $130 billion on solar energy which now accounts for one-third of one percent of its energy production. Germany's electricity prices are three times what we pay in the US. 

This is a common theme of mine on this site, but it is not an original thought (so don't blame me): the data is provided by folks much, much smarter than I.

Earlier link on same: European suicide. The co-founder of Greenpeace agrees: wind and solar won't solve the energy problem. The co-founder called "wind and solar" a bubble. Wind and solar is economically unsustainable. Solar and wind is raising the prices of everything else. I am not saying that; the co-founder of Greenpeace is saying that.

Great Graph at Seeking Alpha on Tight Shale Production

Link here to SeekingAlpha.com.

I did not read the article (yet). In fact, this provides an opportunity to warn folks that I don't have time to read everything I post, and I certainly don't have time to read closely everything I post. My goal is to post information as soon as possible.

This graph at this link is very, very interesting. It certainly puts things into perspective. The colors may be a bit hard to read, but the names on the key at the right are in order with the graph (if that makes sense: e.g., Eagle Ford is the top increment on the graph; then the Bakken; and then so on).

It would be nice to see this graph updated in 1, 5 and 10 years.


At the story at the link:
Yes, the United States had the largest increase in production year on year again. Five years ago with American oil production in a thirty year decline trend, very few people could have imagined that we would now be on the upswing or the third consecutive year.

And this upswing is no short term blip. It is the beginning of a long term trend that is made possible by technological advances that now allow oil trapped in tight rocks to be produced economically.
It will be interesting to see how fast Mississippi Lime can ramp up.  As you reflect on that, think of the miles of pipeline that has been added in the Williston Basin and the number of rail/oil terminals that have been built since 2008.

It's also interesting to see the players in the Mississippi Lime: Apache, SandRidge, and Chesapeake.

Great Video Sent in by Reader: the North Dakota Oil Patch


Later, 5:45 p.m.: "anon 1" sent me the origin of this video

Later, 1:10 p.m.: I see now that Carpe Diem also has this video linked/embedded.

Original Post

Link here. A big "thank you" to "reader" for sending it in.


The two links are the same (for some reason, the link wasn't "linking" through the shortcut for some reason at first; it is now).

If anyone sends me anything to post, let me know if you want credit. I default to not naming names, but want to give credit where credit is due.

Railroad Takeaway Capacity in the Bakken -- One Word: Amazing

Link to InsideClimate News/Dickinson Press.

  • rail capacity in the Bakken: up 55 percent in June with addition of two new loading facilities
  • Dore: jump from 10,000 to 60,000 bopd (Musket Corp)
  • Rangeland/Epping: 120,000 bopd
  • 17 rail/oil terminals built since 2008
  • current rail/oil capacity: 470,000 bopd
  • possibly could reach 710,000 bopd by end of the year
Folks may want to reflect on this. I suggested that producers may be choking back on their productivity if there is a lack of takeaway capacity. As takeaway capacity is increased, production should increase. I mentioned that to someone, and his immediate response was that production will increase when the price of oil gets back to $100.

I think we will be quite surprised a year from now with production numbers coming out of the Bakken.

RBN Posts Part III (3) Re: Bakken Pricing

The link is here: it will take you to the links.

I have not read the RBN post today, but their articles regarding the Bakken are among the best on the net. But, I have a small number of blogs I read on a regular basis, so I may be missing some other great sites.

[Update: since the original post, Part IV has been added.]

Nice Energy Links at Independent Stock Analysis

Link here to ISA.

WSJ Wrap-Up - Tuesday Morning

I'm done for now on this wrap-up, but could provide more notes later.

Fourth section: "Music lessons may benefit the diaper set." --- for new parents, grandparents, something to consider.  We placed a CD player under the cribs of our daughters when they were infants. I truly think it made a difference, but we will never know.

Third section: "FedEx signals freightload of economic woe." Just as I was typing that headline, CNBC mentioned that FedEx was "warning. But now, FedEx exceeds expectations and spikes. Wow, how things change in moments. So, in less then 60 seconds: a) bad news in WSJ; b) bad news on CNBC in a teaser; c) share price pops. This tells me: do your own due diligence (wow, I that cliche), but follow companies you are interested in for awhile, read as much as you can, and invest cautiously. One can seldom predict how the market will react. Disclaimer: this is not an investment site -- simply idle chatter among friends.

"French vote bids austerity adieu," p. C10.  Americans should be happy to see France doing this. We will get to see how this works out. Is the Krugman model the correct model: tax and spend our way out of the recession? I don't know, but I have my hunch.

Biggest story of the day, as far as I'm concerned, and I'm not through half of the paper yet: "Microsoft unveils its surface tablet." More on this later. This will be very, very interesting to follow.

"Icahn agent is joining board of Chesapeake," p. B2.

"Exxon ends drilling for Poland shale gas," p. B2. I blogged about this yesterday.

"Google, Apple tighten grip on phones," p. B4.

"Coke ready to share cash, not blame," p. B8. Years ago I owned shares in Coca-Cola but sold a long time ago. I still think it's a nice holding for young investors, getting used to the market.

The first section, not so interesting today.

Seven Very Nice BEXP Wells - Based on IPs -- Announced Today -- And A Nice Whiting Pronghorn Prospect Well

This doesn't add anything to the blog in the big scheme of things.  This was posted earlier, but I find it amazing, this list of wells with IPs >2,000 bbls. Quite amazing. Yes, they were all BEXP wells, with one exception, but yet, it looks pretty impressive.

The Pronghorn well is particularly interesting. If this becomes the norm, it certainly raises the bar for those in the Bakken. I haven't had time to look at the well file/geologist's report, but maybe later.

From today's/yesterday's daily activity report:
  • 21740, 2,389, BEXP, Blanche 27-22 1H, Williams,
  • 21006, 3,001, BEXP, Orville 4-9 2H, Williams,
  • 21007, 2,788, BEXP, Orville 4-9 1H, Williams
  • 21005, 2,436, BEXP, Borsheim Trsut 33-28 1H, Williams,
  • 21562, 2,037, BEXP, Borsheim Trust 33-28 2H, Williams
  • 21154, 2,460, BEXP, Ron 28-33 1H, McKenzie
  • 21740, 2,389, BEXP, Blanche 27-22 1H, Williams
And then this from Whiting's Pronghorn Prospect:
  • 20504, 2,696, Whiting, Pronghorn Federal 21-13TFH, Billings,
Pretty interesting.

Update on the WTI-Brent Spread Now That The Seaway Has Been Reversed

The first crude following the Seaway reversal reached the gulf on June 7th. The spread at the time was about $16 according to Bloomberg; it is now down to $12, using the same source.

Unfortunately, because of all the events occurring in Europe in the past week, since the reversal, the price of Brent has continued to slide, thus making it difficult to sort out whether the narrowing delta is due to the Seaway reversal or the events in Europe.

I would not even want to hazard a guess, but it will be interesting to follow over the next few months.

Random Look at OXY USA -- Break-Even Point in the Bakken is Brent Oil Price of $55

First, some data points:
Regular readers should remember my blogs comparing Anschutz wells with OXY USA wells (for newbies, OXY USA bought Anschutz assets in the Williston Basin about two years ago).

It's been my impression that OXY is not all that enamored with the Bakken and will be shifting from of its assets from North Dakota to elsewhere, probably California.

In its 1q12 earnings conference call, OXY USA did not even mention the Bakken in its prepared comments. In the Q&A someone asked about Bakken, the horizontal play, and the costs. Here's the exchange:
Jessica Chipman - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division
Okay. that's helpful. And then I've asked this before and I'll ask this again, could you give us an update just on well cost within the Bakken, the Permian, particularly on the horizontal side and then California?
Stephen I. Chazen
Horizontal side? The Bakken stuff is still not come down to the level that's appropriate, so we continue to reduce our current -- we have a lot more better places to put money right now than the Bakken, so we're reducing that count. The rest of the stuff doesn't seem to change very much. The rest of the horizontal -- I think our service costs are essentially flat.
I didn't listen to the audio, so I don't know the inflection/intonation of the "Horizontal side?" but isn't that just classic: "Horizontal side?" As in, "Oh, yeah, I completely forgot about our horizontal play in the Bakken (actually I didn't forget; I was trying to avoid the issue; and who invited that analyst to the party?)."

So, along with Newfield, we have another company complaining about the costs of the Bakken, while BEXP, WLL, CLR, others suggest they are paying for their wells in under three years.

And then this, in Monday's (today's/yesterday's) daily activity report OXY USA has a permit for a wildcat in a most "oil-desolate" area in the Williston Basin, in northeastern Stark County. Yes, it's near Dunn County, just across the county line and it's in Stark County (one of the better oil-producing counties in North Dakota, but this one is pretty distant from producing fields.
  • 23171, loc, OXY USA, Tomahawk 1-28-33H-141-93
And, then coincidentally this article in the WSJ today: OXY offers moxie when nerves fail.
  • ... Occidental counts the Bone Spring, Wolfcamp and Wolfberry prospects among its largest land holdings. All three areas make a 15% posttax return at a Nymex oil price of $75 a barrel or less, ...
  • California's Monterey shale, meanwhile, is estimated to hold more oil than the storied Bakken and Eagle Ford shales put together. Consultancy Wood Mackenzie estimates a cash break-even Brent oil price of $55. Monterey prospects make more use of vertical wells than of the horizontal, hydraulically fractured wells typical of other shale basins,...
So, we got a company that says it is cutting back on the Bakken, producing less than stellar wells (based on IPs) at high cost, and is now drilling in a unproven area of the Williston Basin.

That's what I love about oil men/women -- always looking for the next best big thing. This will be huge if OXY gets a nice well in northeast Stark County.