Saturday, August 4, 2012

The "Miracle State"

North Dakota's leading index for June predicts a 3.8% growth rate for the state's economy over the next six months, by far the highest expected growth rate among the 50 states (only No. 2 Ohio comes even close at 2.6%), and a rate of growth almost four times higher than the expected 1% at the national level.  
By the way, being an inveterate optimist, the chart at the link (for the US), is very, very encouraging, for the long-term investor.  (Disclaimer: this is not an investment site; that's just my 3-cents worth).

Like Father, Like Son

This story is fairly complicated but if read closely, most folks will understand. Data points (not all data points may be accurate):
  • Nevada-state power exceeds mandated green energy requirements
  • politician wants state power utility to buy more green energy
  • green energy will cost up to 5x more; costs will be passed directly to consumer
  • green energy is via solar panels from China
  • son of politician in second data point is a lawyer representing the green energy company
  • politician is a greedy old Republican
  • lawyer son is a greedy young Republican
Same ol', same ol'.

Eagle Ford

Texas Railroad Commission: The Eagle Ford

PowerPoint Presentation, October, 2014:
A stacked play, Richard Zeits, November 13, 2013.

SeekingAlpha on Eagle Ford, June 12, 2012: great summary of the Eagle Ford to date.
Note: the article says US government estimates 3 billion bbls of recoverable oil. The Bakken is officially estimated to have similar amount of recoverable oil, but Harold Hamm estimates closed to 24 billion bbls recoverable oil. When I do the math, I get a similar number. We must use the same envelopes to do our calculations. 

June 22, 2018: USGS 2018 Survey of the Eagle Ford.

October 2, 2017: Eagle Ford struggling.

December 14, 2016: minor comments from a contributor over at SeekingAlpha on Austin Chalk and COP. Downspacing in the Eagle Ford has appeared to reach its limit, and is significantly lower than that in the Bakken.

Has the Eagle Ford fallen out of favor? SeekingAlpha, August 16, 2016.

The Eagle Ford play expands to include Lee County; some players -- SeekingAlpha, June 11, 2014.

Who's got the best wells in the Eagle Ford? -- SeekingAlpha, October 6, 2013. the Eagle Ford is the most profitable oil field in the world, December 3, 2012.

Eagle Ford links from Independent Stock Analysis.

Proved Reserves of US Oil in 2010 Rose By Highest Amounts Since Recording Began in 1977

Before The Permian Re-Surgence


August 5, 2012: a couple days after writing the note below, it was interesting to read EOG's comments about the Bakken (supporting what I wrote below): other than the Bakken and the Eagle Ford, all other North American "plays" are either inconsequential or NGL plays.

Original Post

While going through the top stories for the past week, I had to chuckle (again) recalling all those stories back in 2007, 2008, 2009, etc., by almost everyone, including, suggesting that stories coming out of the Bakken were just a bit of hype.

As a reminder, from an earlier post this week:
Earlier this week, August 1, 2012, the EIA published its annual summary of proved crude oil and natural gas reserves in the United States as of December 31, 2010.
Proved reserves of U.S. oil and natural gas in 2010 rose by the highest amounts ever recorded since the U.S. Energy Information Administration (EIA) began publishing proved reserves estimates in 1977.

Net additions to proved reserves of crude oil plus lease condensate in 2010 totaled 2.9 billion barrels, surpassing the previous high of 1.8 billion barrels added in 2009 by 63 percent.
Again, to repeat in case anyone missed it: Proved reserves of U.S. oil and natural gas in 2010 rose by the highest amounts ever recorded since the U.S. Energy Information Administration (EIA) began publishing proved reserves estimates in 1977.
North Dakota reported the second largest increase, 829 million barrels (78 percent), driven by development activity in the Williston Basin [the Bakken]. Collectively, North Dakota and Texas accounted for nearly 60 percent of the net increase in total U.S. proved reserves in 2010.
An honest reading of the EIA report will confirm that the Bakken was not hyped. To its credit, was a bit more circumspect in its analyis of the "Bakken story" -- suggesting, perhaps, that the "jury was still out."

Anyway, for what it's worth, that was the EIA report, for those who might have missed it the first time.

Week 31: July 29, 2012 -- August 4, 2012

Second Williston bypass by end of year

Other formations
Monterey Shale, California

Another crude-by-rail oil loading facility
Oasis reports a 3,000+ IP
With less than six months to go, Hess announces increased CAPEX in the Bakken for rest of 2012
Samson Resources' Thomte well with 102,000 bbls in first six months, Divide County
Marathon to reduce rigs in North Dakota; pace of drilling won't slow

Trial balloon -- is TransCanada looking for a way to exit the Keystone XL?

Human interest stories
SkyNews (British) discovers the Bakken (great aerial video)
The Bakken, a game changer; Williston -- the nation's fastest growing small city
Infrastructure problems in South Texas (Eagle Ford) maybe worse than those in the Bakken
Chicago Tribune News, energy revolution in the US
Williston K-12 student enrollment to double

EIA: US proved reserves, 2010 -- 25 billion barrels

Bakken, OXY, Monterey Shale: The Dots Are Starting To Connect


February 20, 2017: Monterey County voters overwhelmingly voted to ban fracking in their county. If I recall correctly, there's very little drillingin Monterey County to begin with; this is not a big story. And the fact that USGS has knocked off 96% of reserves. See April 30, 2015, RBN Energy link below.  

September 20, 2015: Business Insider calls it a scam

June 17, 2015: hope springs eternal

April 30, 2015: incredibly good update, RBN Energy. 

January 25, 2015: hope springs eternal. The San Jose Mercury News is reporting:
The oil and gas potential of the vast Monterey shale formation will be the focus of an upcoming study by an independent panel of scientists operating under direction of the state Legislature.
The study will be part of a highly anticipated report on the controversial practice of hydraulic fracturing, with the first volume released last week. That report, covering existing well-stimulation practices, underscored the profound uncertainties about the amount of developable oil beneath Monterey County and parts south.
"We're going to look at what it would really take to get a good estimate," said Jane Long, who is spearheading the study for the California Council on Science and Technology.
The effort is one result of SB 4, a 2013 state bill that was the Legislature's answer to a raging debate about the impacts of hydraulic fracking in California. Santa Cruz County banned fracking, and in November, San Benito County voters did the same.
The Monterey shale underlies the San Joaquin Valley and parts of Monterey County. In 2011, the U.S. Energy Information Administration estimated it held 15.4 billion barrels of untapped oil -- more than any place in the U.S.
But in 2014, the agency dramatically lowered its estimate to 600,000 million barrels. The study found both estimates to be unreliable.
Say what? They found "both estimates to be unreliable."

Jerry Brown needs the money for his bullet train. 


January 14, 2015: the slump in the price of oil spells the end for the Monterey Shale ... like forever?

October 2, 2014: OXY USA to spin off California Resources (aka Monterey Shale). 

May 23, 2014: the potential of the Monterey Shale is "taken off the table" by the Feds.

May 21, 2014: from NaturalGasIntel --
The Energy Information Administration (EIA) has cut its estimate of recoverable oil in California's Monterey Shale to 600 million bbl, a 96% decrease from previous estimates, an agency spokesman told NGI's Shale Daily Wednesday.
The revised number comes nearly three years after EIA had estimated Lower 48 technically recoverable shale oil resources at 23.9 billion bbl, including 15.4 billion bbl in the Monterey/Santos play, then believed to be the nation's largest shale oil formation (see Shale DailyJuly 11, 2011). A year later, in its Annual Energy Outlook 2013 (AEO2013), the agency estimated technically recoverable oil in the Monterey at 13.7 billion bbl (see Shale DailyJuly 24, 2012).
But changes to technically recoverable resources (TRR) estimates "do not necessarily have significant implications for projected oil and natural gas production, which are heavily influenced by economic considerations that do not enter into the estimation of TRR," an EIA spokesman told NGI.
"Importantly, projected oil production from the Monterey play is not a material part of the U.S. oil production outlook in either AEO2013 or AEO2014, and was largely unaffected by the change in TRR estimates between the 2013 and 2014 editions of the AEO," Jonathan Cogan said. "EIA estimates U.S. total crude oil production averaged 8.3 million b/d in April 2014.
“In the Annual Energy Outlook 2014 (AEO2014) Reference case, production of economically recoverable oil from the Monterey averaged 57,000 b/d between 2010 and 2040, and in the AEO2013 the same production averaged 14,000 b/d. Clearly, there is not a proportional relationship between TRR and production estimates -- economics matters, and the Monterey play faced significant economic challenges regardless of the TRR estimate."
Estimates of TRR "are highly uncertain," Cogan said.
Key factors driving the lower estimate included new geology information from a U.S. Geological Survey review of the Monterey "and a lack of production growth relative to other shale plays like the Bakken and Eagle Ford."
The TRR estimates and other assumptions in AEO2014 are due to be released by EIA in June.
Except for a footnote, the EIA never mentions the Monterey Shale in the AEO2014. Very, very strange.

May 20, 2014: The Los Angeles Times carries the story that the Monterey Shale is a "bust"-- EIA.

February 14, 2014: OXY to move headquarters from Los Angeles to Houston, spin off California assets.

September 23, 2013: update on the Monterey Shale in The Wall Street Journal.

September 20, 2013: Governor Jerry Brown signs fracking regulations for the first time ever in the state of California.

June 29, 2013: The Dickinson Press has a nice little story on the Monterey

June 3, 2013: water issues / fracking issues in the Monterey

April 1, 2013: Taft, California, hopes to cash in on Monterey. Update at LA Times. Doesn't sound promising. I don't think oil companies have cracked the code on fracking in the Monterey, and the environmentalists are circling. The Monterey is California's Keystone XL.

February 21, 2013:  short video on Monterey Shale; sounds like it will be more difficult to figure out geologically (think tectonic plates, fault lines, mountains, earthquakes); CVX is on record as saying they are not impressed. Remember earlier post of CVX moving some 800 of their California employees to Houston. The transcript of the video is here.

February 3, 2013
: New York Times article on the Monterey Shale in California.

December 24, 2012
: recent BLM auction in Monterey County turns out to be a dud: $10/acre.

December 23, 2012
: BLM approves leasing for the Monterey shale; says fracking is safe; 

August 29, 2012
: with Californians so anti-oil, not much chance that the Monterey Shale will be huge competitor to the Bakken with regard to bragging rights. It's not as easy as it sounds to drill the Monterey Shale.

August 5, 2012
: after posting the story below, and after posting the first couple of comments, I read the transcript of EOG's 2Q12 earnings conference call. What EOG had to say about Eagle Ford, the Bakken, and the Monterey, confirms what I wrote below. Very, very interesting.

California Dreamin', The Mamas and The Papas

Original Post

Huge "tip of the hat" to for this story: Monterey Shale may not match the Bakken.

Regular readers should find this very, very interesting.

First, some data points from the blog over the past few weeks.

Occidental, in my mind, is as California-centric, as Whiting is Bakken-centric. (I could be wrong, but in general, that's my world view.)

Occidental entered the Bakken; initials wells were not particularly noteworthy, and OXY mentioned (in an earnings conference call) they would be reducing their effort in North Dakota and moving to California where they perceived better opportunities.

About this time, there was a flurry of articles about the Monterey Shale in California, and the dots started to connect.

But, then two interesting observations. First, after that initial flurry of stories, I didn't read much more about OXY and Monterey Shale. Perhaps I wasn't looking hard enough (true), but I scan the headlines of four or five oil and gas trade journals five days a week, and I don't recall much being written about Monterey Shale.

The second observation; in the 2Q12 earnings conference call, OXY mentioned that its worldwide production had increased, but that increase was mostly attributable to the Bakken. And unlike earlier conference calls when the Bakken was hardly mentioned, it seems the Bakken was mentioned fairly often this time around. Those two observations suggested to me that maybe, just maybe, perhaps the Bakken was looking at least a little bit better to OXY.

So, that's where matters stood in the left side of my brain until a few minutes ago. I was checking up on as a Bakken news site, and came across the linked story (above). From that site:
The field, a formation of rock known as the Monterey Shale, was thought to have 15 billion barrels of “technically recoverable” reserves, according to government estimates. That’s triple the amount of oil found in huge and newly prolific fields in North Dakota and Texas. The formation lies under the San Joaquin Valley in central California. Most of the locations probed so far have been northwest of Bakersfield.

But drillers haven’t been able to get the Monterey Shale to produce oil at high rates. Brackett suggests that there are a few characteristics of the geology that could make the field more difficult to develop. There are lots of natural faults in the rock, which means drillers can’t easily control the flow of oil through faults they create. Also, the rock is not under enormous pressure, so there is less force pushing the oil to the surface. And the oil may be relatively thick and sticky, which slows its flow.
Interesting, huh?

Now, add a few more data points.

"Everyone" agrees that the Bakken should have 3 to 4 billion barrels of recoverable oil. This is a most conservative estimate and was "developed" back in 2008 (?). Certainly technology and geopolitical events have changed since 2008. Recent estimates, by some credible folks, suggest there may be as much as 24 billion barrels of recoverable oil in the Bakken/Three Forks. Note how those numbers (4 billion and 24 billion) compare to the estimate for Monterey Shale.

Also, note at the linked story, the drillers interested in the Monterey Shale: Occidental Petroleum Corp.(mkt cap: $75B), Plains Exploration & Production Co. ($5B), Venoco Inc. ($0.5B) and Berry Petroleum Co ($2B). That list speaks volumes, especially when compared to the list of drillers interested in the Bakken: Statoil (Norway State Oil), XOM, COP, Marathon, Whiting, Continental Resources, Burlington Resources.

I don't think the state of California will stand in the way of developing the Monterey Shale due to the state's budget crisis, but a) faux environmentalists will always be a challenge; b) I've never thought of California as pro-business as North Dakota; c) even under best of circumstances, lawyers per capita in California vs North Dakota is a concern; and, d) if anything goes wrong, environmentally while drilling the Monterey, the press will be ready to pounce.

The tone of OXY's 2Q12 conference call seems to reflect those data points, especially in light of the article linked above, Bloomberg, July 31, 2012.

Another Crude-By-Rail Loading Facility

Another crude-by-rail loading facility: this time in Berthold, west of Minot, from the Oil Patch Dispatch.
Fourteen months ago, the general manager of the Berthold Farmers Elevator worried how he would keep everyone on the payroll during such a wet season.

Today, as a result of two partnerships with the oil industry, the elevator is poised to nearly double its revenue and add up to 40 new workers. [More new jobs than the entire US netted in the most recent reporting period?]

The most significant collaboration is an Enbridge Pipelines expansion that includes a railcar loading facility that will be operated by elevator employees.

“It’s going to be a big deal for us,” said Dan DeRouchey, who manages elevators in the towns of Berthold and Carpio, which are about 25 miles northwest of Minot.
Much more at the link, including earlier success with using facility to unload fracking sand.

The Bismarck Tribune also reported this story

Human Interest Story: SkyNews (British) Discovers the Bakken

Link here.
The United States Geological Survey has estimated there are at least four billion barrels of recoverable oil in the Bakken reserve. It stretches for 15,000 square miles all the way in to Canada and Montana, and is attracting thousands of temporary workers from across the US.

At last count, 24,000 of them, mainly men, were living in what have become known as "man camps", lured by the prospect of earning up to $100,000 (£65,000) a year working in the oilfields.
Great aerial views of Williams County.  Reporter mentions two downsides: a) truck traffic; and, b) housing.  No roadside bombs.

Truck Driving Licenses

North Dakota has a similar problem as that of Arizona:
He said if nonresident drivers are pulled over, many times troopers have to take their word for things when asking about their status as a resident.

SandRidge Transcript

A very, very interesting transcript:
The Mississippian continues to be our growth engine. Last quarter, we drilled 91 horizontal wells and our production continues to meet or beat our expectations. This play also is a shallow, low-risk carbonate reservoir, where our production per well on a 30-day rate has continued to improve over time. The value driver of the horizontal Mississippian play is the ability to consistently drill thousands of high rate of return oil wells over hundreds of miles. It's a story of scale. Our team has assembled 1.7 million net acres with room to drill more than 8,000 horizontal wells. And now nearly 50% of that acreage has been proven by the 872 horizontal wells that have been drilled. Each quarter, we become more convinced in the size and scope of the play. SandRidge has now drilled 382 producing wells across the original acreage we put together from 2007 to 2011. And we are seeing consistent results from Comanche County, Kansas through Grant County, Oklahoma. This covers an area of more than 150 miles and an area where we have nearly 850,000 net acres or a 10-year inventory at today's rig count at only 3 wells per section.

We also have optimism about our extension acreage in Western Kansas, where we control nearly 900,000 net acres and where there have been more than 7,000 vertical Mississippian producers drilled. We are now drilling oil wells in the extension portion of the play with 3 rigs. And we'll know more about the results by the end of this year.
For some perspective, CLR is #1 or #2 in acreage in North Dakota Bakken with about 915,000 net acres.

Wow, Wow, Wow -- The Origins of "You Didn't Build It"

Link here to Legal Insurrection.

For archival purposes only. Someday we will want to know how this discussion began.

A huge "thank you" to a reader for sending me this story.


Note to the granddaughters

Every summer you spend a few weeks with us in San Pedro, California, where your great-grandfather and great-grandmother lived, worked, and retired after "their" 30+ year career in the US Army, which included one tour in Korea, and two tours in Vietnam. They had a "tough" life as "they" say, but they did well, leaving a small home for you to visit when you come out to southern California.

Tonight while relaxing I was reading the story of the "Pirozzi" family here in San Pedro re-opening their deli after it had been closed for many, many years. The patriarch of the family built a thriving deli but stepped down and sold the deli when his children were approaching their late teens so they wouldn't feel compelled to follow his steps into the deli business. He wanted them to go to college, and be free to make their own choices for their livelihoods.

After several unsuccessful ventures in that building in the interim after the Pirozzis left, the children have "come back" and voiced a desire to re-open the deli, partly because of so many good memories of the deli when they were growing up. It was their home. I think of John-John in the Oval Office. 

The story is told in the San Pedro Today, a local glossy, the August, 2012, issue.

The Pirozzi diner reminds me of the diner we enjoyed so much when you first moved to Belmont, Massachusetts: the Andros Diner on Trapelo Road. That diner has now changed hands and has recently re-opened as The Sweet Peach.

I probably would have skipped through the article on the "new" Pirozzi Deli except that the following jumped out at me:
... Vince Pirozzi, became very emotional when speaking of what it means to reopen in San Pedro, where he arrived from Italy in 1958 and never left. Tearing up, Pirozzi struggled to find the words to articulate how grateful he is to the community for its outpouring of support.

"For me it is a legacy, this is what my father did, he made this," Enza Pirozzi said. "He came here from Italy with nothing, and he made a legacy in San Pedro. It took a lot of risk to do what he did, to open a business. He went from having nothing to being able to support and provide for us."
This is what his father did; he made it. Something Mr Obama doesn't get.

Human Interest on Bakken, the Game Changer; Williston: America's Fastest-Growing Small City

From Chicago Tribune News:
Domestically, the energy bonanza changes the American outlook far more dramatically than most people yet realize. This is a Big One, a game changer, and it will likely be a major factor in propelling the U.S. to the next (and still unknown) stage of development — toward the next incarnation of the American Dream.
Fuel-stingy engines and development of renewable energy sources deserve ample credit. What's really driving the positive trend, though, is a controversial near-quadrupling of oil and gas harvesting investment in the Western Hemisphere over the last decade. Nowhere is the resulting energy boom more stark than in high-plains reaches of the Williston Basin. Named for the North Dakota community that now is America's fastest-growing small city, the underground rock formations shelter rich pockets of oil and natural gas beneath 140,000 square miles of grassy remoteness in the two Dakotas, Montana and southern Saskatchewan and Manitoba.

Random Update on Crude-By-Rail Increase

"Anon 1" sent me this little gem:
"Eight of the 20 commodity categories tracked by the AAR saw carload gains in July 2012 compared with July 2011, including: petroleum and petroleum products, up 13,368 carloads, or 47.2 percent..."
Link at AAR.

Crude-by-rail. Up almost 50% year-over-year. Incredible.

24 Billion Bbls of Recoverable Oil; EIA Estimate of US Crude Oil Proved Reserves: 25 Billion Bbls

I have a new tag / label at the bottom of the blog, "24billion" to find those posts in which "24 billion bbls of recoverable oil in the Bakken/Three Forks" has been mentioned or referenced.

For newbies, you may want to read some of those posts before reading further. Bottom line: "official" estimates for likely recoverable oil in the Bakken/Three Forks is about 3 - 4 billion bbls. Some folks now suggest 24 billion bbls of oil is recoverable from the Bakken. (That number can be arrived at with very little math using the original Leigh Price paper. You can do that at home with paper and pencil.)

That "24 billion bbls" is a very interesting number.

Earlier this week, August 1, 2012, the EIA published its annual summary of proved crude oil and natural gas reserves in the United States as of December 31, 2010.
Proved reserves of U.S. oil and natural gas in 2010 rose by the highest amounts ever recorded since the U.S. Energy Information Administration (EIA) began publishing proved reserves estimates in 1977.

Net additions to proved reserves of crude oil plus lease condensate in 2010 totaled 2.9 billion barrels, surpassing the previous high of 1.8 billion barrels added in 2009 by 63 percent.
Crude oil plus lease condensate reserves at end of December, 2010: 25.2 billion bbls. 
Proved reserves of crude oil and lease condensate rose 13 percent to 25.2 billion barrels in 2010, marking the largest annual increase since 1977 and the highest total level since 1991. Proved reserves increased in each of the five largest crude oil and lease condensate areas (Texas, the Gulf of Mexico Federal Offshore, Alaska, California, and North Dakota) between 2009 and 2010. Of these, Texas had the largest increase, 860 million barrels (16 percent), resulting mostly from ongoing development in the Permian and Western Gulf Basins in the western and south-central portions of the state. North Dakota reported the second largest increase, 829 million barrels (78 percent), driven by development activity in the Williston Basin. Collectively, North Dakota and Texas accounted for nearly 60 percent of the net increase in total U.S. proved reserves in 2010.
We are comparing apples to oranges at this point, but very interesting data points: the EIA says the entire US has 25.2 billion bbls proved reserves of crude oil plus lease condensate. Some say the Bakken/Three Forks holds 24 billion bbls of recoverable oil.

Regardless of the numbers, the narrative is very, very interesting. Remember, that was 2010: the Bakken was going strong, but 2011 was an even bigger year.