Saturday, August 25, 2012

Point, Counter-Point; Glut or No Glut

I doubt many folks remember "Leonardo Maugeri" ("Maugeri," not "Dicaprio") and his contention that there will be a glut of oil by 2020.

A former vice president for Saudi Aramco weighs in. If you have the time, you might find it interesting.  This takes you to the original post.

Except that it provides a counter-point to Maugeri's paper, I doubt it's all that exciting to read.

For Those Who Think NOG is Over-Priced, and Other Myths


August 31, 2012: is NOG undervalued? -- Motley Fool

August 26, 2012: non-operators are undervalued in the Bakken -- SeekingAlpha. Non-operators who participated with Helis:
Black Hills Corp was able to sell 4,800 net acres and average first half 2012 production of 990 Boepd for $243 million. Sundance Energy was able to sell 3,900 net acres and 500 Boepd average production for FY2012 for $172.4 million. Finally, Unit Corp. announced it will receive $268 million for two separate transactions, including the QEP transaction and another in Texas, for an undisclosed acreage position and 1,200 Boepd in total production. The ability to combine with the operator did not impact the price they received for the producing oil and gas, but it did bring a premium for the future drilling locations since QEP will be able to control the pace of the development of the project.
Other companies mentioned in the article, but not part of the QEP acquisition: NOG, VOG, TPLM, and USEG.

Original Post

Z-Man's analysis of the QEP-Helis/Black Hills/Unit Corp $1.38 billion Bakken deal.

Note my usual disclaimer for this blog: it is not an investment site. I post articles of interest for education, information, and entertainment.

Z-Man points out that QEP acquired about 27,000 net acres in a very sweet spot in the Bakken, at a cost of somewhere between $10,000 and $50,000/acre. Most would agree that the price QEP paid was about $20,000/acre but could have been as high as $33,000/acre (other sources).

NOG has about 180,000 net acres. NOG's market cap is about $1 billion.

From my snapshot of NOG:
  • 2Q12: 180,000 net acres; average cost: $2,184/acre for most recent 7,060 net acres in key prospect area; 16 net wells in 2Q12;
  • June corporate presentation: 177K acres; average cost: $1,832; $15 - $20 million/quarter in 2012 for acreage acquisition
  • 1Q12 results: 173,000 net acres; average cost: $1,672/acre; acquired 10,278 net acres in 1Q12;
  • Dec 15, 2011, corp update -- 4Q11: acquired 7,600 acres; $19 million ($2,500/acre); exit 2011 w/ 160,000 net WB acres

Update on the Keystone XL -- From Washington's Point of View

The original source seems to have disappeared from the internet, unless one is willing to pay for "archives."

Linda sent me a PDF of a screen shot from the front page of the August 18, 2012, edition of the Washington Post.  The first picture is of the paper "in general" to capture the date and the name of the publication. If there's any doubt that it is the Washington Post, a quick google will confirm that it is.

The second photo is zoomed in on the map seen in the photo above. It might be a bit difficult, but one can see the abbreviations of the states.

Check the source for the map: the pipeline route was provided by TransCanada. The underlying map was provided by the US State Department.

It seems I have seen this map before, and may have even posted it. If so, it is doubly scary. This is from August 18, 2012, which means the US State Department has not caught the error and provided a correct map. And, TransCanada is also in the dark with regard to "which" Dakota borders Canada.

Little wonder the decisions that come out of Washington.

[If you have trouble seeing the state abbreviations on the second map, your browser may allow you to click on the photo, opening a new page, where you can zoom in further.]


Along this same line, I posted the following note on December 16, 2011: Easterners think the Keystone XL's proposed route is through the Keystone State, Pennsylvania.

Stuff I can't make up. 

Business Climate: Minnesota vs North Dakota -- Again

Don sent me a great link, one I would have missed. Nothing to do with oil. It has to do with expansion of the manufacturing base in North Dakota.

One might want to see my original post regarding reasons why companies are expanding in North Dakota vs Minnesota. The original post was written a long time ago, but there have been many updates. If you go to that link first, skip all the updates, and scroll down to the original post. This was the nut of that post:
President Obama might want to talk to Senator Al Franken (D) from Minnesota to find out what's happening out in the trenches.

For one thing, a very well-respected company and, should we say, an icon of Minnesota has recently expanded, building three new plants on the North Dakota side of the border.
Warroad-based Marvin Windows and Doors has opened North Dakota plants in Fargo, West Fargo and Grafton.
Marvin’s John Kirchner explained why the firm expanded to North Dakota in the last several years: “The regulatory and tax climate in North Dakota ... tend to be more friendly toward the business."
Also, Kirchner said, it takes too long to get state permits, delaying expansion plans.
While pledging that “we are not going to walk away from Minnesota” and saying Warroad will remain Marvin’s home and biggest factory, North Dakota is a good location for company manufacturing plants, he said.
Now, back to today's story.

The above digression will help put this new story into perspective.
Officials in Mapleton, a few miles west of Fargo on Interstate 84, say a pair of building projects involving a new manufacturing plant and an expanding business should attract new residents.

Groundbreaking was held Saturday for the 10,000-square-foot Horsch Anderson LLC manufacturing plant. The plant, which will make agricultural equipment, is the collaboration of Aberdeen, S.D.-based Anderson Industries and two other companies.

Mapleton Mayor Eric Hillman told the Forum newspaper  the city is spending about $3.2 million for a new industrial plant to accommodate the $6.5 million plant. It will be covered by special assessments.
The Horsch Anderson plant, which is scheduled to be completed early next year, will serve as the North American headquarters for the triumvirate of Anderson Industries; Horsch Maschinen, of Schwandorf, Germany; and Harper Industries, of Harper, Kan.

The other project involves Great Plains Transport, which has been leasing space in Mapleton and plans a new 25,000-square-foot headquarters to open in 2013. The company, which employs about 80 people, plans to add about 50 new jobs, said Bob Holland, Great Plains Transport president.
From a geographical perspective, it probably would have been just as easy to open on the east side of Fargo, in Minnesota. 

Water, Fracking, and Myths


August 28, 2012: this is the second part of that 2-part series by the Dickinson Press. This is one of the reasons why I support WAWS and have concerns with independents. 

August 26, 2012: The article is all over the place but if you take the time, you might be able to put together the water story posted by The Dickinson Press/InsideCimate News.  For newbies, water per se is not an issue in the Bakken: hauling water, cost of water, and greed, are the problems, but there is more water than necessary to frack wells in the Bakken. It appears that something less than 3,000 wells will be fracked yearly; the US Army Corps of Engineers promised enough water from the Missouri River for 10,000 wells/year (whether they keep that promise or not is another issue).
One inch of water drawn from Lake Sakakawea contains 10 billion gallons of water — enough to drill 5,000 wells using an average of 2 million gallons of water, according to state calculations.
One inch of water from Lake Sakakawea would more than meet the needs of twice the number of wells projected to be fracked in any given year.

One other data point:
"... a thriving market for water that has become an industry with yearly sales estimated at between $45 million to $120 million."
One well costs $10 million to complete; about 200 wells/month are being drilled in the Bakken. The cost of only 12 of those wells in one month alone works out to $120 million; or another way, the dollars it costs to complete one well per month (out of 200 wells) is all that water is costing. The volume of water is even less when put into perspective (see original post and go to link).

It must have been a slow news day. It's hard for me to believe WAWS is still an issue. One word: greed.

Original Post

If you don't do anything else this weekend while surfing the net, visit this site to see a great graphic on how much water is used to frack a typical Marcellus shale gas well. It's absolutely horrendous. When you get to the link, scroll down until you see the graphic on "How Much Water Does a Shale Gas Well Use."

It's shocking. Shocking, I say.

By they way, if you google the question, "how much water does a shale gas well use," the hits all use the same analogy but only tell the first half of the story. Thank goodness for the internet.

The link was provided by Independent Stock Analysis.

What! Me Worry? The Fire at the World's Second Largest Refinery Won't Have Much Effect on Prices -- Analyst

Refinery fire in Venezuela.
Amuay, with the capacity to process 645,000 barrels of oil a day, was halted as a result of the explosion, Lugo told Union Radio. The Amuay, Cardon and Bajo Grande refineries form the Paraguana complex, with capacity of about 950,000 barrels a day. It is second in size to Reliance Industries Ltd. (RIL)’s Jamnagar refinery in India, according to data compiled by Bloomberg. 
I did not know this; this suggests the Venezuela refiner complex is the second largest refinery (in terms of capacity) in the world. I would have expected this in Europe, possibly even Saudi Arabia.

I'm posting this story only to see how forecasts work out. This was the forecast posted in the story at the link:
The incident will probably have little effect on crude prices, while possibly putting “upward pressure” on gasoline and distillate prices, Lipow said. The refinery supplies a “significant portion” of its products to the domestic market, he said.

The accident is one of the worst at a refinery in recent memory, Lipow said. “This is one of the extremes. It’s quite extensive.”
The blast affected nine storage tanks for crude and products. And pipelines. And morale.

Week 34: August 19, 2012 -- August 25, 2012

Note: I occasionally mess up on the links; if I mess up, let me know.

The QEP - Helis, Black Hils Power, Unit Corp $1.3 Billion Deal
A look back at the incredibly good Helis wells
When the news broke; many links regarding the deal
The initial post

Bakken Area Development
Grassy Butte, ND: new truck stop going in
Minot: 8 new motels/hotels opened; 8 motels/hotels under construction
Killdeer airport to re-open after years of being closed -- hey, maybe more taxpayer FAA support
New motel in Belfield, southwest North Dakota
New sand/rail depot proposed for Richardton -- maybe I should do a piece on why this out-of-the-place little town is looking at a sand/rail depot
More grocery stores in the oil patch
Growth plans for Watford City, McKenzie County, North Dakota

Bakken Oil Operations
EOG uses 9 million pounds to frack
The case for short laterals: first post
The case for short laterals continue: BR has a gusher in a well that took 8 days to drill
Down to 188 active rigs in North Dakota (Bakken boom record: 218)
Schlumberger moving Colorado frack crews to the Bakken
Whiting with another great well: drilled long lateral well in 13 days
For newbies: a look at pad drilling in Heart Butte (XTO, QEP)
For newbies: anticipation -- up to 16 additional wells/spacing unit expected
Update of active rigs (by producer) in the Bakken
For the Bakken: 175 rigs adequate
For newbies: a quiz -- answer tomorrow, Sunday, if I don't forget

Energy News Outside the Bakken
Resurrection of the Permian Basin
The permitorium continues; frankly it gets a bit frustrating
Keep your eye on Saudi Arabia
Gasoline prices at record highs  -- hope and change (well, we will hope that changes)
Germany burning more coal. Kyoto Protocol? What protocol?
New York State to allow fracking: envious of Pennsylvania farmers' new wealth
Saudi Arabia producing at levels not seen in 30 years

For investors (the usual disclaimer)
Enbridge: the economic moat has widened

Human interest
The Calgary Herald looks at the Bakken
United Pulse in Williston, Minot

Stuff I Can't Make Up
"Unconventional shale favors private land" -- federal spokesperson -- God must have been an oilman
"$1 million is real cash" -- North Dakota state official
"The private sector is doing fine" -- President Obama
CO2 emissions lowest in 20 years -- official; so let's start talking about methane (again)

Williston Wire Headlines: Daycare Shortages and Solutions; Mercy Medical Center Cancer Treatment Center; New Apartment Complex in Sidney

North Dakota and Texas play significant role in cutting US crude oil imports to 42% this year, lowest level in two years. For years, the 30-second soundbite has been the US imported more than 60% of its crude oil.

It's not just the Bakken any more. Bakken-centric Whiting is pursuing the Red River Williston Basin play, also.

There are 500 wells producing oil on Fort Berthold Indian Reservation.

Williston's temporary truck reliever route west of Williston has officially opened.

Mercy Medical Center has broken ground on a new cancer treatment center.

TJ Corcoran, founder of two award-winning childcare centers in Ohio, will open the Corcoran School in Williston on September 4. Corcoran had read about the issues in Williston and was determined to help find a solution.

Good Shepherd Lutheran Church is also opening a child care center.

[Personal note: while living in the Charleston, South Carolina, area, my son-in-law found an outstanding day care/school to send the granddaughters to: Ridge Christian Academy. The staff was incredible. There's something to be said for Christian options for many families.]

Construction has begun on a 58-unit apartment complex, Pheasant Run Apartments, in Sidney.

And perhaps most important, Golf Digest, has named three North Dakota courses "as most fun to play." One of the courses is The Links of North Dakota, Ray,  about 30 miles east of Williston. I can't recall if I've posted the photos of my dad and I visiting the links last autumn.

Anyway, please visit the Williston Wire for more stories, the complete stories, and additional links.