Tuesday, August 21, 2012

What You Will Be Talking About Wednesday Morning; Fifteen (15) New Permits; Four Nice Wells Reported;

Fourth year in a row: another $1 trillion deficit for the US
ObamaCare has not even kicked in yet
link here
almost every union and almost every state (except North Dakota) got waivers to opt out of ObamaCare for now


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The Bakken: Daily Operations Report

Another big construction project in Williston to start next week: re-surfacing 2nd Street West from west side of town to Main Street; this is main thoroughfare for this side of town; will require flaggers and pilot cars; goes past the busy CENEX station; goes past the very, very busy Williston water depot;

Active rigs dropped another four, down to 193 this Wednesday morning, a new recent low. 

Wells released from confidential list today:
  • 20621, 3,591, BR, Blue Ridge 14-21TFH, Keene, Three Forks, t5//12 cum 3K 6/12;
  • 20624, 2,087, Oasis, Wrangell Federal 5602 43-11H, Bonetrail, t3/12; cum 26K 6/12;
  • 21093, 436, QEP, MHA 6-05-06H-149-90, Deep Water Bay, t7/12; cum --
Fifteen (15) new permits, the Williston Basin, North Dakota:
  • Operators: Whiting (8), Hess (3),  Continental (2), Newfield, Corinthian
  • Fields: Sanish (Moutntrail), Keene (McKenzie), Antelope (McKenzie), Cedar Hills (Bowman), Norwegian Creek (Billings), Dickinson (Stark), Ranch Coulee (McKenzie), Dutch Henry Butte (Stark), North Souris (Bottineau)
Whiting is permitting a lot of "Pronghorn Sand" wells in Stark County.

For newbies, 15 new permits is very impressive.

Wells released from the confidential list yesterday were reported earlier.

197 active rigs in North Dakota Tuesday. This is a new "short-term" low.

Producing wells completed:
  • 19597, 1,052, Newfield, Obenour 150-99-28-33-1H, South Tobacco Road, t3/12; cum 36K 6/12;
  • 21959, 1,200, MRO, Elizabeth Strommen 24-12H, Killdeer, t7/12; cum --
  • 20671, 1,279, Sinclair, Martens 2-6H, Sanish, t12/11; cum 45K 6/12;
  • 21985, 1,422, SM Energy, Kirkland 4-18H, Croff, t6/12; cum 16K 6/12; 
Maybe it's just me, but the IPs seem to be getting better over time. There are a lot of wells waiting to be completed/fracked, but they seem to be fracked pretty soon after they come of the confidential list if they haven't been completed. So, although there may be a backlog of fracked wells, the wait is not as long as it was a year ago. At least that's my perception.

North Dakota: the "miracle" continues

North Dakota and Ohio Lead the Nation in "Coincident Indexes"
Coincident indexes are composite index measures based on four individual variables that summarize the current economic conditions in each state in a single statistic. The four state-level variables in each coincident index are: a) nonfarm payroll employment, b) average hours worked in manufacturing, c) the unemployment rate, and d) inflation-adjusted wage and salary disbursements. 
From CarpeDiem, several data points, including this one:
Over the last six months, North Dakota's increase of 4.29% in its state coincident index was the highest in the country, followed again by Ohio at 2.92% and then by Massachusetts at 2.61%.  The increase in the national index from February to July was 1.28%.
Highest in the country. I wonder if the president of the Federal Reserve Bank in Minneapolis caught that?

Headline: more US jobs lost if Japan Joins President Obama's Trade Pact 
A study released on Tuesday warned the United States could lose 2,600 auto industry jobs and thousands more in the broader economy if Japan is allowed to join a proposed free trade pact at the center of President Barack Obama's trade agenda.
Par for the course.

Energy Links

RBN Energy: explaining the art of distribution of natural gas liquids
Independent stock analysis: various links for oil and gas
The US economy cannot handle $4 gasoline -- talking head; sees release of SPR oil; sees correction in oil price, regardless, based on how I interpret his commets

For investors only (see disclaimer)

OAS: one of three mid-growth stocks mentioned in this SeekingAlpha article
Déjà vu all over again: CLR remains the perfect stock -- Motley Fool
Enbridge's economic moat widens: Morningstar at SeekingAlpha (a twofer)
Greece asks for more time (says "more time" does not mean "more money") --
 Of course they will be given as much time as they want, as long as they don't get more money; Germany is tired of hearing about Greece (and so am I)

Finally, Some Common Sense -- States Rights, Air Quality, Coal

US court rejects EPA's curbs on coal pollution standards.
A federal court threw out a U.S. Environmental Protection Agency rule aimed at cutting pollution from coal-fired power plants, dealing a blow to the Obama administration’s efforts to curb harmful emissions.

The U.S. Court of Appeals in Washington in a 2-1 ruling today struck down the EPA’s cross-state air pollution rule, saying the agency illegally imposed federal authority over state air pollution programs. The court sided with more than three dozen challengers to the measure, which caps emissions in more than two dozen states. The rule had been put on hold by the court in December while it considered the regulation’s legality. 
States rights issue.

Fracking: states rights issue.

Also, in the story:
The court’s decision, which sparked a rally in coal stocks, could leave the EPA with years of work to replace a regulation the agency said would have “dramatic” health benefits for 240 million people, Whitney Stanco, senior energy policy analyst at Guggenheim Securities LLC, said.
And,
The rule would put the owner of a coal-fired power plant in the position either of having to close the facility or bring it into compliance by installing pollution control equipment, which can be very expensive,” said Sam Brothwell, senior analyst covering utilities for Bloomberg Industries in New York.
Well, yes.

 

One of My Hot Buttons: Cold Weather Complaints

Updates

November 29, 2012: The Bismarck Tribune reports that N-Flex has gotten the $1 million grant
A $1 million state grant has been pledged to a New York company seeking to convert wasted natural gas into much-needed farm fertilizer by using portable plants that can be moved from well to well throughout North Dakota’s oil patch.
The state Industrial Commission approved the grant to N-Flex LLC last week, under conditions that include financing commitments from investors.
Company founder Neil Cohn said Wednesday that Easton, Md.-based Beowulf Energy LLC acquired rights to N-Flex and will provide capital and engineering for the project.
Original Post

A New York company wants to field test portable natural gas unit to make fertilizer:
Neil Cohn, founder of the project’s developer, N-Flex LLC, said it would test the use of a portable unit to take unprocessed natural gas and use it to make anhydrous ammonia. The unit would be located at the well site.

The technology has been in use for years, Cohn said. However, it needs field testing in North Dakota’s harsh climate, and it is unusual to use unprocessed natural gas to make fertilizer, he said.
If I recall correctly, the entire field test would cost about $4 million. The company has venture capitalists backing it. The company is seeking a $1 million grant from the state. NDIC will made the recommendation/decision.

Right now, NDIC has delayed making a decision ("$1 million is real cash," said one member) while looking for more information from N-Flex, LLC.

Prudent. 

However, a couple of things:

It will take strong leadership and vision to move the state forward in developing in-state opportunities rather than simply shipping all the oil and natural gas out of state for others to process. (Think United Pulse.)

I'm getting a bit tired of the cliche, "North Dakota's harsh climate." Give me a break. If you want to talk about harsh climate, talk about Alaska, Canada, the Falklands, the Arctic. The climate in North Dakota is only harsh if one considers the temperature during two months of January. Unless N-Flex is talking about mosquitoes. If one is talking about terrorists, roadside bombs, permitoriums, etc. North Dakota's climate is not a bit harsh compared to Iraq, Afghanistan, Iran, Florida, New York State, or California.

In private e-mails, I have flip-flopped on this issue, and will probably flip-flop again, but right now, I would tell N-Flex that if they want to test their product which has been in use for years, but not in harsh climates, they need to do their study in New York State, Iraq, or the Arctic, where things are really harsh.

$4 million? This is pocket change to CLR, ONEOK, WLL, EOG, if they all thought this was a good investment and wanted to participate.

Harsh climate! Two stories and I bet every NODAK has a similar story in his or her background.

First story:
My parents shared carpooling responsibilities with three other families when I was in kindergarten. We lived about two miles, maybe three, from the church. One day, on a very, very cold, and a very, very snowy day in January, my dad was late picking us up. I started out on my own, five years old, walking back home. I almost made it. But my dad found me someone along the trail. So, in snow higher than my knees, and temperatures forty to fifty degrees below freezing, this five-year-old almost made it home before getting picked up. I personally don't remember the story; my dad tells it. But if it was all that terrible, I would have remembered the story.
Second story:
First grade. We lived about a mile, maybe 3/4 mile from the elementary school (part of Williston High School at the time). Again, a miserably cold January or February. We always walked to school then. Yes, six years old and I walked the 3/4 mile to school no matter how cold the weather was. I do not recall "snow days" or "cold days." About twenty students were standing outside waiting for the school doors to open. We were freezing. One of us started chanting, "let us in, let us in." Eventually all of us were chanting, "let us in, let us in.

The vice principal or principal or superintendent or someone in charge came out and in a booming voice told us to all go back home; we had arrived too early and he didn't want us outside chanting "let us in, let us in." So, in temperatures probably approaching 30 degrees below zero (that would be about 60 degrees below freezing) we all turned around and started walking home. About halfway home, we heard the school bell and we quickly ran back. 
Yeah, maybe North Dakota weather seems harsh to New Yorkers, but five- and six-year-old NODAKS would never know.

This Won't happen, But It Will Be Interesting To Watch

Updates

January 14, 2015: update on the BakkenLink under the river/lake.

Original Post

Enbridge would like to set a world record by drilling horizontally 13,000 feet for an oil pipeline under Lake Sakakawea.

I'm not sure if this is part of the BakkenLink pipeline from the Beaver Lodge oil field north of the river to Fryburg in southwestern North Dakota.  The feds have already turned down an idea to place a pipeline on the bottom of the river for the BakkenLink.

Something tells me the whole BakkenLink is something of a pipe dream. Looks like we may have barges criss-crossing the lake.

Tracking Jobs in Various Industries -- Bloomberg

Don can find more trivia in an hour than I can find in a week.

Bloomberg tracks jobs available by salary in various industries at this site.

For oil and gas:
  • $20,000+ (22,351)
  • $40,000+ (15,663)
  • $60,000+ (8,934)
  • $80,000+ (4,460)
  • $100,000+ (2,407) 
For wind energy:
  • $30,000+ (2,138)
  • $50,000+ (1,543)
  • $70,000+ (785)
  • $90,000+ (367)
  • $110,000+ (214) 
For solar energy:
  • $20,000+ (2,600)
  • $40,000+ (1,843)
  • $60,000+ (1,150)
  • $80,000+ (526)
  • $100,000+ (240) 
But it looks like the real opportunities are in health care, for nurse, physician assistants, physicians. Salaries above $90,000, this has to be physicians. Look at the number of physician openings compared to almost everything else.
  • $30,000+ (220,743)
  • $50,000+ (175,740)
  • $70,000+ (124,356)
  • $90,000+ (85,769)
  • $170,000+ (42,961)
Links to data bases can be found here.

EOG Has Another Huge Well in the Parshall; An Earlier Well In This Section >316,000 Bbls to Date; Blowing The Shale with 9 Million Pounds of Sand; Gasoline at Record Seasonal Highs

Cumulatives of EOG's Liberty Wells in Van Hook field have been updated

Speaking of sand

Richardton, North Dakota: City commissioners unanimously agreed to allow annexation of nearly 80 acres of land south of the railroad for a fracking sand railroad depot during a meeting Monday at City Hall

Now we know why EOG has its own sand mines in Wisconsin (or wherever they are)
For newbies: BEXP impressed us with 4 million pounds of proppant (sand/ceramic)
EOG: 9 million pounds of sand on a short lateral

The IPs for Tuesday, August 22, 2012, have been posted.
  • 21239, 1,315, EOG, Wayzetta 156-3329H, Parshall, t3/12; cum 116K 6/12; some can check the well file and tell me if I'm wrong, but it appears they used over 9 million pounds to frack in 42 stages; wow; and "holy mackeral," the gas units averaged 1,931 units and almost hit 9,000 units at the max; the original paperwork suggested this was to be a Three Forks well, but the report says it ended up targeting the middle Bakken; crossing from spud site in section 33, through northeast corner of section 32, and ending in section 29, this is slightly longer than a typical short lateral, at least from what I can tell (for newbies: I am an amateur at all this, and could be quite wrong). This well, already at 116,000 bbls cumulative, is on its way to being paid for; and, in less than three months.
That was the third EOG well in this section in the Parshall. Generally, EOG drills only short laterals on 640-acre spacing in the Parshall. An earlier well in this section, 21378, was a bit longer:
  • 21378, 663, EOG, Wayzetta 124-3334H, middle Bakken, t3/12; cum 74K 6/12; someone can check the well file and tell me if I'm wrong but in 32 stages they used almost 7 million pounds of proppant, no ceramics; although geologic markers took it into the Three Forks, the narrative says the Middle Bakken was the target; gas units averaged 402 units with a max of just over 3,000 units. the horizontal crossed the section line and appears to be a bit longer than a standard short lateral
The first well in this section:
  • 16746, 695, EOG, Pederson 1-33H, t6/09; cum 316K 6/12; the well file is not particularly helpful; it was a short lateral; geologic marker was upper Bakken shale, but I assume this was a middle Bakken well; most notable: like all wells at this time, 500-foot setback required. Think about that, and then think about 2560-acre spacing. 500-foot setback at both heel and toe leaves a bit of ground untouched. For one well, maybe not a big deal, but in the aggregate ...
 More to follow, but I want to get this posted for those who have already been up three hours.

Note for Newbies

For newbies, note: I often go back through the blog, updating older posts. With your first to the blog on any given day, you may want to scroll down to check the last several posts.

Gasoline Prices at Record Seasonal Highs

Some of the increase is due to lack of refinery capacity -- didn't we just have excess capacity earlier this year? Anyway, I digress. The Richmond, California, refinery fire is blamed for part of the increase in the price of oil. One refinery fire -- and a small fire at that (less than a few minutes to put out?) -- and we have record seasonal gasoline prices.
Retail gasoline in the U.S. rose to a seasonal high after refinery upsets cut fuel supplies and crude traded near a three-month high. 

The national average price for regular gasoline gained 2.3 cents to $3.744 a gallon this week, and was up from $3.581 a year ago, the Energy Information Administration said in report yesterday. That's the highest level for this season since at least 1990, when the agency began collecting prices. 
As I said yesterday: I wish we were paying $3.75 for gasoline here in southern California. The price of gasoline in downtown Los Angeles is over $5.00 (I assume the same for Chicago, New York City, and Washington, DC). For most of the LA metropolitan area it looks like gasoline is about $4.19.

So, how does the president think that releasing SPR oil after Labor Day is going to lower the price of gasoline at the pump? I honestly don't get it. Independent Stock Analysis says the same thing.  Flooding the market with oil will just fill up the pipes, the storage tanks, but the refineries won't be there to take it. On top of that, the driving season slows significantly after Labor Day. If one wanted to lower the price of gasoline for summer driving, one wonders why he didn't release the SPR oil in April, May, or June of this year.  

Eagle Ford Oil Creates Challenges/Opportunities for Refiners, Bloggers

Another great piece from RBN Energy: pricing Eagle Ford crude arriving at Gulf Coast refineries 

Aesop's Fable: Sour Grapes

Apple's run / market value is not all that amazing. Four words: give me a break.  
Six words: "who is he trying to kid." One more reason I'm glad I no longer watch television. I can view all that craziness on the internet and not be bothered by commercials.


What You Will Be Talking About Tuesday Morning; New York State Getting Ready to Frack; Record Gasoline Prices; Wells Coming Off Confidentail List; Filloon on NOG;

Daily Bakken Operations Report

Wells coming off the confidential list, August 21, 2012
  • 20076, 273, EOG, Vanville 15-1102H, Thompson Lake, t3/12; cum 23K 6/12;
  • 20417, drl, XTO, FBIR Goeseverywhere 31X-11, Heart Butte, s2/12;
  • 21239, 1,315, EOG, Wayzetta 156-3329H, Parshall, t3/12; cum 116K 6/12;
  • 21770, drl, BEXP, Domaskin 30-31 2H, Alger, s2/12;
  • 21852, 1,526, MRO, One Feather USA 31-17H, Deep Water Creek Bay, t5/12; cum 17K 6/12;
  • 21931, 427, Hess, GO-Elvin Garfield-156-97-1918H-1, Dollar Joe, t6/12; cum 10K 6/12;
  • 22038, 1,025, Oasis, Willie 5992 12-8H, Cottonwood, t3/12; cum 23K 6/12;
  • 22045, drl, Oasis, Acklins 6092 12-18H, Cottonwood, s1/12; cum 19K 6/12;
  • 22217, 356, CLR, Barmoen 1-18H, Stoneview, t5/12; cum 10K 6/12;
  • 22220, 1,962, Oasis, Jefferies 5301 43-12B, Baker, t4/12; cum 47K 6/12
Record August gasoline prices 
Gasoline in the US is now at the highest price ever paid on this date

U.S. drivers paid an average of $3.72 per gallon on Monday. That's the highest price ever on this date, according to auto club AAA, a shade above the $3.717 average on Aug. 20, 2008. A year ago, the average was $3.578.
I wish we were paying $3.72 in Los Angeles. In downtown LA, the price is over $5.00/gallon. In the metropolitan area, mostly $4.19/gallon.  This is truly crazy. I believe in January, 2008, the price was about $2.20/gallon. So "we've" doubled the price of gasoline despite an economy that appears to be headed nowhere.

President Obama earlier this summer: the private sector is doing fine. If you are not talking about the price of gasoline on Tuesday morning, I will be surprised. Fortunately the private sector is doing fine and can handle the doubling of price of gasoline.

Related: High price of oil


Devils Lake project fast-tracked

The federal government will fast-track environmental reviews this winter so that construction can begin on raising the rails of BNSF tracks (owned by Warren Buffett) in flood-prone Devils Lake, North Dakota.

The federal government awarded $10 million for the project. The entire project will cost $100 million. BNSF is owned by Warren Buffett who has said he feels he should pay more taxes than his secretary. I have no idea why the federal government is sending more cash to North Dakota but ... it is what it is. I don't think North Dakota is a swing state in this fall's election. Again, something you will be discussing Tuesday morning.

Germany burning more coal

Germany burning more coal. Kyoto Protocol? What protocol?
Chancellor Angela Merkel’s government says RWE AG’s new power plant that can supply 3.4 million homes aids her plan to exit nuclear energy and switch to cleaner forms of generation. It’s fired with coal.

The startup of the 2,200-megawatt station near Cologne last week shows how Europe’s largest economy is relying more on the most-polluting fuel. Coal consumption has risen 4.9 percent since Merkel announced a plan to start shutting the country’s atomic reactors after last year’s Fukushima disaster in Japan. 
Now that US CO2 emissions are the lowest in 20 years, "we" have a bit of breathing room for Germany to start adding more CO2 to the mix.

New York State to allow fracking: their Pennsylvania neighbors are driving new tractors

New York to allow fracking: huge, huge story
I heard this story on the news today. Faux environmentalists say fluids used in fracking cause cancer. New York farmers said they have not seen any increase in cancer, but they have seen the farmers in Pennsylvania (where fracking is allowed) driving new tractors. It should be noted that the same fluids used in fracking are commonly found / used in car dealerships and high school chemistry laboratories,
For investors only

Other opportunities in the miracle state, SeekingAlpha
KOG: a strong buy at current prices, SeekingAlpha
KOG: a takeover candidate, Wall Street Cheat Sheet
NOG: bullish reasons to invest in the Bakken, Mike Filloon, SeekingAlpha
KOG: poised to pop, Motley Fool
Gee, is KOG the darling of Wall Street, or what?

The Permian Basin

NEWS

August 20, 2012: The resurrection of the Permian Basin, Motley Fool.
The Permian Basin recently achieved a milestone that went almost unnoticed by many investors active in the energy sector.  The rig count in this basin moved above 500 rigs during the second quarter of 2012, passing levels reached during the energy boom of the early 1980s.  This is an extraordinary event for the Permian Basin, which was once disdained by many as a mature oil and gas producing area that had little value.
So, this is an old, old field, and now has more rigs than during the energy boom of the early 1980's.

And folks think the 5-year-old Bakken boom in North Dakota is a flash in the pan.

My favorite (as a company to watch, not necessarily as an investment) in the Permian:
Whiting Petroleum  has a smaller development program in the Permian Basin and plans to spend $97 million, or 5% of its capital budget here in 2012.  These funds will cover the drilling of 19 wells during the year.  Most of the company’s acreage in the Permian Basin is located at the Big Tex prospect in Texas where Whiting Petroleum has almost 88,000 net acres under lease. The company is targeting the Upper Wolfcamp formation on this acreage.

The Permian Basin

All you need to know about it: Texas panhandle, old, vertical wells, resurgence, Whiting's Wolfcamp formation