Wednesday, August 15, 2012

I Missed This, Sorry ---- Steep Drop in US Oil Stockpiles

From Rigzone:
Oil futures prices rose to their highest level in three months Wednesday following a report of a steep drop in U.S. oil stockpiles and fresh tensions in the Middle East.

Light, sweet crude for September delivery settled 90 cents, or 1%, higher at $94.33 a barrel on the New York Mercantile Exchange, the highest finish since May 14. Brent crude on the ICE futures exchange recently rose $2.20, or 1.9%, to $116.23 a barrel.

Crude futures jumped from earlier losses after the Energy Information Administration said U.S. oil stockpiles fell 3.7 million barrels last week. The drop was well above the 1.9 million-barrel-draw forecast by analysts surveyed by Dow Jones Newswires, and came as U.S. demand for gasoline rose to a 13-month high.
And then this:
The demand jump comes as a surprise...

Zero to Sixy in Two Seconds

A picture (in this case, a graph) is worth a thousand words.

Every roughneck should have a copy of this graph pasted to the ceiling over their bed, and thinking, "I'm part of all this."

I have simply run out of superlatives to describe the Bakken.

What folks seem to keep forgetting is that the most spectacular thing about this boom is the sheer speed. That's all CarpeDiem, I think, was trying to say. Zero to sixty in two seconds is about all I can say.

Just think of the number of trucks needed to haul all this oil; the number of unit trains rolling with oil; the miles of pipeline pumping oil. And now barges with Bakken oil down the Mississippi.

And each individual working in the Bakken was a part of this history.

I've told this story before (and I will tell it again, I'm sure). I remember last autumn looking for a new address in a new subdivision. I was unable to find the location, but I spotted a young man surveying the area. I walked over to him, knowing for sure he would know where the location was. But he didn't. He pulled out a "mimeographed" black/white/smudged map with some lines and unreadable street names on it. His boss had give it to him earlier that day. I asked him how long he had been working in Williston. He said that he arrived in Williston earlier that same morning after driving all night; he had started out from Wisconsin. As soon as he arrived in Williston his boss gave him the map, and sent him out on his first job. I asked him where he was staying; he said he did not have a place yet. But there he was, already working.

Random Note on Hotel/Motel Construction in the Oil Patch

From KXNews:
Statewide since 2010--North Dakota has seen a large increase in the number of Hotels being built.
  • In 2010: eight (8) new hotels/motels
  • in 2011: twelve (12) new hotels/motels; nine (9) in western North Dakota
  • 2012, through first half of the year: twenty (20) new hotels/motels
  • coming: thirty-four (34) new hotels/motels publicly announced or under construction in western North Dakota
Total: 74 and counting.

I don't know about you, but after awhile I start to become "numb" to these numbers. But, if you step back, catch a breath, and really look at these numbers, it's incredible. I thought we had seen the boom in hotels/motels, and it would end this year, but halfway through the year, almost double last year's (20 vs 12), and then we see the next number: 34.

I still find it quite incredible. A big thank you to KXNews for tracking this.

Skoal! -- Some Huge Wells; BR Reports Six Nice Wells; Thirteen (13) New Permits Issued; 203 Active Rigs Drilling in North Dakota

For all the talk of the decline in active rigs, and all the talk of the boom leveling off, I see we still have 203 active rigs in North Dakota. Assuming a handful of the "record" number of rigs are just across the line in Montana, this is not yet a dramatic decline.


Earlier today, I posted the wells that came of the confidential list.

Here are additional wells, the producing wells that were completed:
  • 21782, 383, ERF, Hippo 148-94-03A-10-4H TF, McGregory Buttes; t7/12; cum 408 bbls 6/12; Dunn
  • 21784, 5,599 (no typo), ERF, Lion 149-93-31A-30-2H TF, Mandaree; Dunn; cannot confirm IP at well file; not scanned in yet;
  • 21783, 831, ERF, Rhino 148-94-03A-10-3H, McGregory Buttes, Dunn
  • 20082, 1,683, BR, Intervale 31-35H, Murphy Creek, Dunn
  • 20323, 3,325, BR, Midnight Run 11-1MBH, Union Center, McKenzie,
  • 20435, 1,545, BR, 1,545, Scott 21-36MBH, Murphy Creek, Dunn,
  • 20812, 1,884, BR, Hammerhead 31-26MBH, Sand Creek, McKenzie
  • 20817, 1,603, BR, Conner 34-9H, Haystack Butte, McKenzie,
  • 21058, 1,128, BR, Logan 24-8H, Haystack Butte, McKenzie
The following wells will come the confidential list tomorrow, Thursday:
  • 20466, 1,944, Whiting, Sprague 41-12TFH, Sanish, t2/12; cum 67K 6/12;
  • 21091, 499, QEP, MHA-1-05-06H-149-90, Deep Water Creek Bay, t7/12; cum ---
  • 21465, 1,907, Helis, TAT 15-33/28H, Grail, t5/12; cum 56K 6/12;
  • 22145, 844, Hess, LK-Bice-147-96-0621H-3, Big Gulch, t6/12; cum 29K 6/12; 
  • 22255, drl, Samson Resources, Longhorn 9-4-158-99H, Ellisville, s2/12;
Whiting recently discussed how good the TFS was compared to the Bakken and used one of the Sprague wells as an example. The Sprague well above, runs: February - 13K; March - 21K; April - 11K; May 13K; June 9K. All along there has been chatter that the TFS could produce better wells than the middle Bakken, albeit perhaps not as many due to "size" of the formation.

Helis reports another great Grail oil field well.

Maybe I'm just a bit inappropriately exuberant, but even if ERF's Lion is a mistake, there are a lot of nice wells being reported. (See comments: "they" say this IP is accurate.)


Thirteen (13) new permits issued today:
  • Operators: Oasis (4), SM Energy (3), Whiting (2), Liberty Resources (2), CLR, Liberty Resources (2), Slawson
  • Fields: Poe (McKenzie), Alger (Mountrail), Sanish (Mountrail), Willow Creek (Williams), Last Chance (Williams), Camel Hump (Golden Valley), North Tobacco Garden (McKenzie)
Liberty Resources has permits for two wildcats, both in McKenzie County. It's hard to call them "true" wildcats. They are in the heart of the Bakken, just south of Alexander.

For newbies, I generally expect to see five to eight new permits issued each day; when it gets into double digits, it's quite extraordinary. Thirteen (13) is a fairly remarkable number of new permits.


All in all, I would say this is a pretty good day for the Bakken. And, the price of oil edged up another dollar, or thereabouts.

Southwestern North Dakota OIil Patch Development -- New Airport for Bowman


August 17, 2012: they got the money, and earth is starting to be moved. Soon federal money will be flowing -- whoopee and Bowman will have a new airport. And, get this:
Bowman airport manager Brent Kline says the new facility will have a longer runway to handle private jet traffic from oil companies.
For the CEOs of Whiting, CLR, and CHK, I suppose, to use.  The runway is probably not big enough for Air Force One, precluding a visit by the president pointing out that "North Dakotans did not build that airport."

Original Post

Link here (regional links break early and break often).
At a Tuesday morning meeting at the Bowman County Courthouse, the Bowman County Airport Authority accepted a bid of just short of $3 million to start the dirt work to replace Bowman Municipal Airport.

Once the dirt work is completed, more bids will go out for the rest of the project, which is estimated to cost $10 million to $12 million, paid for mostly by the Federal Aviation Administration.
I get a few notes from Chester periodically complaining about all the federal money that goes to North Dakotas -- whoopee -- and this, too, should generate some mail.

To make it easier for Chester: population of Bowman, North Dakota, was about 1,650 in the 2010 census. 

Boy Scout Motto: Be Prepared

Something is going down folks. Or not.

Social Security Administration stocking up on ammo. Data points:
First it was the Department of Homeland Security, then it was the National Oceanic and Atmospheric Administration, and now the Social Security Administration is set to purchase 174,000 rounds of hollow point bullets that will be delivered to 41 locations across the country.

The synopsis to the solicitation adds that the ammunition is to be shipped to 41 locations within 60 days of purchase. A separate spreadsheet lists those locations, which include the Social Security headquarters in Baltimore, Maryland as well as major cities across the country including Los Angeles, Detroit, Oklahoma City, Dallas, Houston, Atlanta, Denver, Philadelphia, Pittsburgh and Seattle.

Hollow point bullets are designed to expand as they enter the body, causing maximum damage by tearing apart internal organs.
National Weather Service stocking up on ammo.  Data points:
  • 16,000 rounds of hollow-point bullets --> Ellsworth, ME; and, New Bedord, MA
  • 6,000 rounds of same --> Wall, NJ; St Petersubrg, FL (wow, if only Hunter S Thompson were alive)
  • 750 million rounds of various ammo; 
  • US Army also busy buying similar equipment
  • all in preparation for possible civil unrest in and around DNC, RNC conventions
The above was updated and taken from an earlier post which has a video. If you go to the link, scroll down for the video. 

Another Solar Farm Scrapped; The Price of Oil Just Went Up Another Buck -- Quietly, Steadily; Best Dividend Payers on August 14, 2012

I don't watch television any more so I don't know what CNBC talking heads are saying about oil today, but regardless, oil has gone up almost one dollar -- at least where I follow it at Yahoo!Finance.  (That's a dynamic link and this pertains to the page shot at 10:51 a.m. Pacific Time. Your results will vary.)
Meanwhile, SRE -- wow, that company has been on a tear this year -- has scrapped plans to build a 300 MW solar farm near Hawaii's Pearl Harbor.
Sempra U.S. Gas & Power has taken off the table its plan to build a $1 billion, 300-megawatt solar farm on Navy land near Hawaii’s Pearl Harbor.

Sempra’s photovoltaic project, which would’ve been one of the biggest solar farms in the country, was announced at last year’s conference.

Crider had said last year that the solar farm could provide the Navy with electricity at no cost and that Sempra would sell power to Hawaiian Electric Co. to make up its costs. 
If solar energy is not economically viable in Hawaii....

Or maybe the same admiral who likes $26/gallon diesel, couldn't see the cost savings in "free" electricity.

I cannot make this stuff up.

My hunch is some "movers and shakers" moved in on Sempra and said "no way, Jose, will you give away your electricity to the Navy." Wow, can you believe the outrage in the civilian community if they knew they were subsidizing the US Navy's electricity bill. Wow. I cannot make this stuff up.

A lot of story lines here, too, I bet.

Again, this is just opinion. I have no inside information. Some posts are simply for entertainment.

For those folks concerned about another solar farm scrapped, and global warming temperatures this summer:
Remember, folks choose to live in Hawaii and not North Dakota for a reason. 

As most of you know, we've been boogie boarding off Huntington Beach the past few days. Actually, we've been eating dinner at Ruby's at the end of the Huntington Beach pier during the past week, and boogie boarding up the coast, at Bolsa Chica. We have this "magic card" that gets us into the beach for free: we just show this card, and "voila," as my 6-year-old granddaughter says, and they wave us in.

But I digress. I see that AES is looking at updating the power plants at Huntington Beach.
California energy regulators started reviewing U.S. power company AES Corp's proposed 939-megawatt (MW) addition to the Huntington Beach power plant in Orange County.

AES wants to build two natural gas-fired, combined-cycle plants on a 28.6-acre site located within the existing footprint of the existing Huntington Beach facility about 30 miles (48 km) south of Los Angeles.

The California Energy Commission said in a release late Thursday the estimated capital cost of the project would be from $500 to $550 million. Power traders noted that cost was low and may only pay for one of the two combined cycle facilities AES is looking to build.
Why not solar? Why not wind? Why not algae? Because the math simply does not work.

Deep in the story:
After both reactors at the 2,150-MW San Onofre nuclear power plant in Southern California shut in January due to problems with its steam generators, the California ISO, which operates the power grid for much of the state, called on AES to take Huntington Beach Units 3 and 4 out of retirement for at least for the peak summer demand months.
Go to the link; it's a great story, with some great background to the energy situation and the heat wave in California. 
Normally I would not link/post this story, but I've been a very long-term accumulator of shares in one of the companies listed. I use the blog as a reminder for myself for stories I might otherwise miss. This is for my archives only and not a recommendation to invest. Best dividend payers on August 14, 2012 --

China Is Doing It Again -- Ready to Buy More US Energy Reserves?


Later, 2: 10 p.m.: Forbes weighs in on the proposed deal.
According to the Wall Street Journal, Sinopec aims to invest as much as $1 billion in a west Texas clean coal project. The idea is to capture the carbon dioxide emissions from burning the coal for power, then piping the CO2 around to be injected into old oil fields to coax out more stubborn crude.

In fact, it’s in the Permian Basin fields where more carbon dioxide is used for enhanced oil recovery than anywhere else in the world. A thought: wouldn’t it make just too much sense for Sinopec to be looking for ways to secure a long-term carbon dioxide supply before it announced a deal for Chesapeake’s Permian assets? Just speculation, but it fits.
The Permian Basin: "more CO2 is used for EOR than anywhere else in the world." All this cocktail chatter and no cocktail parties to go to.

Original Post
From the Wall Street Journal:
A Chinese group that includes major oil company Sinopec is in advanced talks to put up to $1 billion in a Texas clean-energy project, in what would mark one of the biggest investments by Chinese companies in the U.S. power sector.

China Petrochemical Corp., known as Sinopec, together with Chinese banks are in talks to acquire an equity stake in and provide financing to the roughly $2.5 billion Texas Clean Energy Project, said people familiar with negotiations.

Such a move would be significant for Sinopec, which is looking to build favor in the U.S. as it aggressively acquires energy reserves and seeks U.S. production expertise, currently through minority stakes and partnerships with Western companies

The project has already secured $450 million in grants from the U.S. Department of Energy, in addition to tax benefits. It also has the necessary permits and contracts, including a contract with San Antonio to buy its electricity for 25 years.
Wow, there are a lot of story lines here:
1. China knows that time is on its side.
2. China continues to buy US energy reserves, but more importantly -- the technology that comes with these partnerships.
3. The world will need coal for a long, long time. We read every day about "peak oil"; we never read about "peak coal."
4. China needs a lot of energy resources. And China likes coal. A lot. [So does India; so does Japan.]
5. China has a lot of cash. A log. 
6. Ideology: Massachusetts vs Texas. Texas using cheap clean coal; captures 90% of CO2 production; Massachusetts is forcing consumers to buy very, very expensive wind energy (Cape Wind).
7. Economics: the Texas clean-energy project has already secured $450 million in grants from US DOE
8. Economics: the Texas clean-energy project has one of the fastest-growing cities in the nation as a customer; global warming will result in ever-hotter south Texas; more air conditioning; more electricity; more coal
Don, thank you for the link. 

Wells Coming Off Confidential List; Nine (9) New Permits -- The Bakken, Williston Basin, North Dakota, USA; Buffett Reallocates; Update On Iranian Embargo: Petrobras Worst Performing Oil Company This Past Year

These wells come off confidential list on Wednesday:
  • 21449, 612, CLR, Borten 1-9H, Wildrose oil field; t5/12; cum 25K 6/12;
  • 21724, 800, Hess, SC-Nelson 157-99-3031H-1, Lone Tree Lake; t6/12; cum 24K 6/12;
  • 22273, 609, CLR, Steele 2-24H, Banks, t5/12; cum 22K 6/12;
Nine (9) new permits issued August 14, 2012:
  • Operators: Petro-Hunt (2), Newfield (2), CLR (2), SM Energy, OXY USA, Murex
  • Fields:  North Tioga (Burke), South Tobacco Garden (McKenzie), Murphy Creek (Dunn), West Ambrose (Divide), Rawson (McKenzie)
OXY USA has a wildcat in Dunn County.  This is a "real" wildcat for the Bakken; it is very far east; in the southeast corner of Dunn County; about a mile southeast of Murphy Creek; there is nothing currently active in this immediate area. The name of the proposed OXY wildcat well does not have the typical "H" designation for a middle Bakken/TFS well. [Update: the folks over at the Bakken Shale Discussion Group noted this OXY wildcat. Teegue provides "explanation." Most like it's a vertical well targeting the Duperow with no implications for the Bakken. Rufus noted the wildcat on the permit list; probably read it here first. Smile.]


Independent Stock Analysis: a particularly nice article at Bloomberg on Petrobras -- this has been blogged about before.  Also, at BloombergBusinessWeek: apparently the world does not need Iranian oil. We saw this movie during the Libyan revolution. 

RBN Energy: natural gas "close-shave"; the link provides a nice quick look at coal/natural gas pricing for power plants:
That window was open all summer until a “close shave” occurred in July.  On July 23, natural gas fuel costs rose above coal when natural gas NYMEX prices hit $3.12/MMbtu and NYMEX Appalachian coal was $55.75/short ton ($/ST). That event technically put an end to the coal-switching window based on our simple model (other locations and price indicators produce different heat rates – for example powder river basin coal is far less expensive for Midwest generators).
From the link above: 
Iran’s oil exports have fallen by about 1.4 million barrels per day, which “substantially exceeds” an earlier estimate of 900,000 barrels ...

That’s a 50 percent cut in Iran’s crude exports in the past year, quite a bit steeper than the gradual “20 to 30 percent” decline predicted in June by Iran’s government, which gets about 80 percent of its revenue from oil. At $100 a barrel, that’s roughly $100 million a day in revenue that is no longer flowing into Iran’s coffers. And inflation is starting to take hold—the price of chicken has tripled since last year. [Remember: the government of Iran subsidizes gasoline for its citizens -- or at least did.]

The Goldman report estimates that U.S. sanctions have cut demand for Iranian crude by about 350,000 barrels per day, and that the European Union embargo have reduced it by another 600,000 barrels per day. The extra 500,000 barrel loss comes from the fact that Iran can no longer get ships from other countries to carry its oil. The EU sanctions ban European insurance companies from covering ships carrying Iranian oil—a big problem for Iran considering EU companies control at least 90 percent of the oil tanker insurance market, according to the Goldman report. If you were feeling dodgy about carrying Iranian oil before, you’re certainly not going to do so without insurance.
From the Petrobras link:
Petroleo Brasileiro SA, the world’s worst-performing major oil company this year, is heading for its first annual output drop since 2004 as offshore discoveries fail to counter declines at aging fields. [Some of the same issues with which Mexico is dealing.]

Petrobras, as the Rio de Janeiro-based company is known, had its first loss in more than a decade in the second quarter after output fell 1.1 percent amid declines at the offshore Campos Basin, maintenance-related shutdowns at platforms and the closing of Chevron Corp.’s Frade field, where Brazil’s state- controlled oil producer has a minority stake. 

“We’re not bullish on Brazilian production -- they’ve got massive declines,” Jamie Webster, the head of market intelligence at PFC Energy Inc. in Washington, which covers the global energy industry, said in a telephone interview. “It wouldn’t take much for them to have reduced production.” 
It looks like Brazilian government regulations are a major reason for the declining output, but two other reasons were not discussed (unless I missed them). 

For investors only: OAS is starting to move again. Disclaimer: this is not an investment site.

I just posted highlights of OAS' corporate presentation for August at this site.

I am sharing information. Make no investment decision based on anything you read at this blog. At Motley Fool today: an Oasis in the oil patch. I have made the following point often on this blog:
Among the smaller companies with wide open growth potential that is rarely mentioned in the press is Oasis Petroleum.

Oasis, like Kodiak Oil and Gas, which gets more media love, is a Williston Basin pure play.  The company has about 320,000 net acres in the Williston Basin making it a top ten lease right holder, though not of the scale of top dog Continental Resources, which holds almost 900,000 acres. 
I think CLR holds close to 954,000 net acres unless there is news that I missed, which is possible.


For investors only, a note about the "scary" headline yesterday that Warren Buffett slashed his stock market holdings: Buffett's Berkshire Slashes Stock Holdings.  Wow, talk about a misleading headline -- almost as bad as some of my headlines at this blog. Berkshire did not slash its holdings; it reallocated its holdings, a huge difference. For some of us it was great news, for two possible reasons. 

First, for those who hold Berkshire shares, Buffett got rid of several dogs and replaced them with some great value/growth stocks. And for some of those who do not hold Berkshire shares there was also good news. For example: 
Berkshire added a stake now worth about $1 billion in Phillips 66.

National Oil Well Varco is another addition. That holding is worth almost $216 million.

Berkshire also more than quadrupled its stake in Viacom to 6.8 million shares from 1.6 million. Those holdings are now worth about $335 million.

It also more than tripled its holdings of Bank of New York Mellon to 18.7 million shares from 5.6 million. It's now worth almost $290 million.
I don't own shares in National Oil Well Varco but I think it's a great move on Buffett's part. The company has been in the news lately and has a huge complex west of Williston in the Bakken.  I was quite thrilled to see his position in Phillips 66, though I thought he already had a significant position through COP, but I don't know.

His reallocation looks like he is betting on continued consumer recession, and further energy resurgence.

Later: now the headline story -- Obama's chances of re-election are higher than "you" think; presidents get re-elected when the market is up and the market looks to be heading up.

Earlier: Associated Press is pro-Obama. Lead story at Yahoo!News/AP is a breath-taking story that after voting against the trillion-dollar Obama stimulus program, Paul Ryan worked to steer that stimulus money to his home state. Hey, maybe I'm wrong. Maybe AP is pro-Ryan: I would hope he would do exactly that. Duh. No link necessary. Trust me.

North Dakota: 2 Million BOPD in 2025; Quintuple Natural Gas Production

This is KXNews reporting on the Bentek study which was posted earlier. So, to remind folks, this is one consultant's forecast:
Bentek Energy presents it's estimates of the potential of natural gas in the Williston Basin to those active in the oil and gas industry. 

Bentek's Justin Carlson says North Dakota can expect to produce 2.2 million barrels of oil a day in the next ten years -- along with 3 billion cubic feet of natural gas per day...
These regional news links tend to break early and often. If the link is broken, try this link