Sunday, August 5, 2012

Fire In/Near the Oil Patch -- Montana/North Dakota Border

Plevna, Montana, train fire

Same link:

Billlings Gazette story.
Burlington Northern Santa Fe reports that 15 rail cars went off track around 2:45 p.m. Sunday. Fourteen of the cars were carrying denatured alcohol, which is used as a fuel additive. The fifteenth car was carrying cardboard.

No injuries have been reported. Highway 12, which is near the derailment, has been blocked off at both ends to secure the accident scene.

"Eight cars are on fire. It was chain reaction of one car catching fire and another car catching fire as well," said Gus Melonas, BNSF spokesman. "It's a fuel additive. There are no air quality issues. They are letting the product burn."
I have not heard whether Warren will be flying out to see his railroad. Images of s'mores just flashed in front of me.

EOG Earnings Conference Call -- 2Q12

2Q12 Earnings, EOG, conference call, random data points:
  • total crude and condensate production approached or exceeded high end of company's guidance
  • total crude and condensate production up >50% yoy
  • among large-cap independents, EOG had highest absolute organic crude oil growth rate DESPITE selling $3.2 billion in assets (during the last 3-year period)
  • Eagle Ford: EOG's "800-pound gorilla"; with monster wells (see link)
  • EOG feels their Eagle Ford acreage is the largest domestic net oil discovery in the past 40 years
  • severe discount at Clear Brook, MN; almost all of EOG Bakken oil to St James, Louisiana, and Eagle Ford oil to Houston ("St James price")
Five points about the Eagle Ford: overall -- better than expected
  • monster wells
  • learning curve is dramatic
  • drilling time down to 14 days (from 21 days in 2009)
  • EOG is now connected to the Enterprise pipeline system
  • self-sourced Wisconsin frac sand: saves $0.5 million/well
The Bakken:
  • last year, advised that EOG more excited about the Bakken than previously, for 3 reasons
  • 320-acre infill continues to be productive; the down-spacing suggests that EOG's 90,000 net acre core if the sweetest spot in the entire Bakken; 22 of the 30 best Bakken wells in the entire Bakken
  • great results in EOG's Antelope Extension area, 25 miles southwest of their core area
  • the third growth area is EOG's Stateline area (eastern Montana) -- additional 200 potential locations
  • continuing waterflood pilot project (will be reviewed at August NDIC hearings)
Two EOG differentiators
  • crude-by-rail: operational since mid-April, 2012; terminal construction cost already paid out; now that the Eagle Ford pipeline is operational, moved more rail cars to the Bakken; rail captures the $20 delta between Clear Brook, MN, and St James, Louisiana; 50,000 bopd gross at St James (now); will increase to 80,000 bopd gross by end of year as more tank cars become available
  • Wisconsin sand frac project working as planned; saving $0.5 million/Eagle Ford well; will serve 700 wells this year ($350 million savings)

These are the "big 4" plays for EOG: Eagle Ford, Bakken, Permian Basin, Barnett combo
  • EOG: near term, horizontal oil production in US (2 million bopd by 2015) will NOT affect 90 million bopd global production; only three consequential horizontal plays in North America: Eagle Ford, Bakken, and Permian (all others are either inconsequential or really NGL plays); -- see a stand-alone post on OXY and the Monterey Shale that was posted very recently -- it supports what EOG is saying about other plays;
  • near term: oil supply-demand ratio remains tight
  • long term: at least 10 years before North America horizontal supply affects that supply-demand ratio
Mark Papa will retire in mid-late 2013.

For Investors Only: Doodling on the Back of an Envelope

STO: $80 billion market cap; operating cash flow: $20 billion

KOG, NOG, and OAS: combined, mkt cap about $7 billion; premium --> $10 billion

Numbers rounded, as if "spoken" at the Economart in Williston; just some doodling. 

Disclaimer: this is not an investment site. Make no investment decisions based on anything you read at this site. 

STO Bakken: 375,000 net acres
KOG Bakken: 155,000 net acres
NOG Bakken: 175,000 net acres
OAS Bakken: 300,000 net acres

For newbies: I keep snapshots of companies operating in the Bakken here; numbers were accurate when posted; they are updated when I receive new information; current numbers cannot be guaranteed to be accurate. Actually nothing at this blog can be guaranteed to be accurate. 

Global Warming: Not Much New Under The Sun

Long before Al Gore first talked about global warming and long before he invented the internet, it appears the Antarctic (the South Pole) was a tropical rain forest.

This brings up the most basic point in this whole discussion: who decides at what temperature the global thermostat should be set?

The last time the South Pole was a tropical rain forest was about 50 million years ago. "They" say the Antarctic could again be ice-free within decades. Wow, within decades. If "within decades, means two decades, twenty years, I could be around long enough to visit. Three decades starts to get out of my longevity reach. Four decades?

Nah, "within decades" means by the end of the century. But to put that into perspective, the Bakken is expected to continue be producing oil through 2100.

By the way, if interested in global warming, you may want to read "Notes to the Granddaughters," at this link

State Budget; Oil Tax Money; Other Taxes -- 2011 - 2013 Biennium

From The Dickinson Press.

I often misread these stories, but I think I have it right.  Numbers are rounded, as if "spoken" over coffee at the Economart in Williston

Data points:
  • oil tax revenue continues to surprise, surpass expectations -- and the numbers are not trivial
  • ND has a biennial budget (a two-year budget)
  • recent oil tax paid to state: $2 billion (fiscal year 2011)
  • forecasts: $4 billion/biennium (2011 - 2013)
  • the money has all been allocated
  • most of the money will be spent on the bullet train from Williston to Watford City; chunnel under the Missouri River
Put this in stone:
“The price (of oil) hasn’t changed much from what we anticipated,” said Senate Appropriations Chairman Ray Holmberg, R-Grand Forks. “It is the production that is going through the roof … clearly the Bakken has taken off.”
Clearly. But at least it sounds better than "you didn't build that."

The last data point up above is not true; I just placed it there to see if anyone is paying attention -- also to direct traffic to the linked source.

That $2 billion / $4 billion is direct from oil extraction/production taxes. It does not include:
  • vehicle licenses: $125 million ($30 million more than expected)
  • sales taxes: $1 billion ($365 million more than expected)
  • state income tax (individual and corporate): $630 million (more than double what was expected -- $300 million)
In fiscal year 2010: oil tax money -- $600 million

So, from fiscal year 2010 to fiscal year 2011: < $600 million to > $1.7 billion

Sunday Links

General 2Q12 review of companies operating in the Bakken; hurt by widening deltas -- Mike Filloon

SandRidge "slammed" by increasing spending -- Buying opportunity? It takes money to make money.

Saudi Aramco raising prices on light oil being sent to Europe/US; lowering prices on light oil being sent to Asia. 

A year after massive Minnesota fire, federal officials abandon "let it burn" forest fire policy.

For a city and a county that is short on infrastructure (water, sewer, groceries), they have time, money, and manpower to put in an indoor surfing water park

Halcon CEO to sell company in three yearsHalcon at Yahoo!Finance.

Disclaimer: this is not an investment site; don't make any investment decisions based on anything you read at this blog.