Friday, September 28, 2012

Northward Ho! -- Great Video of "Ideal" Bakken Rig -- Huge Overview of the Bakken, September, 2012

This story sent to me by a reader. It's an incredible story. It will be linked at the sidebar at the right.
Link here to a article.

There is an incredible video at the very beginning -- the AC Ideal Rig -- a National Oilwell Varco (NOV) rig.  Coming into Williston from the west is the huge NOV complex. I always wondered what they did; now I know.

The video also explains why there are so many cranes in the Bakken and why Borsheim Crane Service has gotten so big in Williston.

BE SURE TO WATCH THE ANIMATION AT THE END of this video. Sons and daughters will want to grow up to be geologists, roughnecks, truck drivers, and LEGO modelers instead of policemen and firemen!

Some data points from the article:
  • In 2011, 2,017 new wells were brought online in the Bakken, a number that will be eclipsed this year with the addition of 2,800 wells. “Brand-new wells are seeing initial production rates of 900 bbls/day,” ... 
  • Often characterized as a “layer cake” with sometimes complicated geology and long, extended-reach laterals with measured well depths as long as 22,000 ft, the Bakken has served as a proving ground of sorts for rig designs and technology that take into account everything from the geology and well profiles to weather, manpower challenges and lack of infrastructure
  • The company also has adopted a drilling wells on paper (DWOP) practice that breaks down the drilling operation into a series of processes, with rig crews focused on achieving the maximum technical limit for each stage. The program has resulted in a reduction of up to seven days in drilling time, ...
  • But the play is just one of seven petroleum systems, or “pools,” that have been identified in the Williston Basin, suggesting “huge potential in upcoming years, much more than just the Bakken,” said Dr Steve Sonnenberg, professor of petroleum geology at the Colorado School of Mines and chair of the Bakken Research Consortium, a group of 35 companies researching the various aspects of the play. 
  • Encompassing much of North Dakota, parts of South Dakota and Montana and extending into Saskatchewan and Manitoba, Canada, the Williston Basin was deposited in the late Devonian and early Mississippian periods. The basin also includes the shallower Tyler play, where the first horizontal test using Bakken drilling technology is planned for Q4 this year; the deeper Mission Canyon and Red River plays; Duperow; Winnipegosis and Winnipeg Group. 
  • Operators also have conducted exploratory drilling in the Exshaw formation in northwestern Montana and Alberta, a region formed at the same time as the Williston Basin with very Bakken-like organic shale.
I will leave it at that, but the article is full of information about the Bakken boom. I'll find a place to link it on the sidebar at the right. It's that good.

When I read an article like this, it reminds me that the Bakken boom is not like any previous boom. The companies may be very, very competitive, and very, very secretive, but they are sharing "something" -- the Bakken Research Consortium and well as the UND geology folks (the geology school will soon have a new name, I think) are working behind the scenes to solve common problems. It really is very, very exciting. 

Google It And Follow The Money Trail


September 30, 2012: It may be more than just the UAE funding environmental groups in the US trying to stop tracking. Now there is a report that Russia might be proving funding for anti-fracking environmental groups in Europe The dots are starting to connect. This is very, very interesting. Link at CNBC. Same story at Yahoo/AP.

Pace's work for Gazprom has raised some eyebrows in Washington, and Hill noted that industry watchers in Europe already believe Russia is bankrolling environmental groups that are loudly opposing plans for fracking in Europe, which could cut down on Russia's natural gas market.
Original Post

This the advice I have given my daughters over the years:
  • If you don't know the answer to something, google it.
  • If something doesn't make sense to you, follow the money trail.
Those two pearls of advice came back to me today when I posted the following today (literally just a "cut and paste" of something I posted earlier). If it doesn't make sense as posted, go to the links:

From an earlier post, earlier today, September 28, 2011: 

Later, 7:07 pm: this is getting weirder by the moment. Now this story (sent to me by a reader, thank you), regarding the movie about fracking, Dimock, EPA, and starring Matt Damon.
While left-leaning Hollywood often targets supposed environmental evildoers, Promised Landwas also produced “in association with” Image Media Abu Dhabi, a subsidiary of Abu Dhabi Media, according to the preview’s list of credits. A studio spokesperson confirmed that AD Media is financing the film. The company is wholly owned by the government of the UAE. 
Original Post

Fracking, Dimock (Pennsylvania), EPA, Matt Damon, and all that jazz: perhaps the best link of the day, from a reader's comment. Thank you. See update above, dated "later, 7:07 pm." This is getting really, really weird. But at least we're starting to find out who is backing anti-fracking in this country. 
Bigger story: I wish I could post some other dots that connect, based on the above, but better part of valor tells me to leave that alone.

Twenty-Two (22) New Permits; Permitting Hits A New Record -- The Williston Basin, North Dakota, USA

Wells coming off the confidential list today were posted earlier; see at the top of the sidebar at the right.

One producing well was reported as completed:
  • 19655, 283, Baytex, Jorgenson Federal 2-15H, West Ambrose, t8/12; cum 6K 7/12
And twenty-two (22) new permits were issued:
  • Operators: KOG (6), XTO (6), BEXP (4), Hess (4), Zenergy, Whiting, 
  • Fields: Hoot Owl (Golden Valley), Heart Butte (Dunn), Ragged Butte (McKenzie), Rosebud (Williams), Twin Buttes (McKenzie), Robinson Lake (Mountrail)
These are the two wells in the same section where XTO has six new permits:
  • 19940, 1,196, XTO,  FBIR Yellowwolf 21X-10, Heart Butte, t1/12; cum 73K 7/12;
  • 19948, 2,106, XTO, RBIR Ironwoman 21X-10, Heart Butte, t12/11; cum 65K 7/12;  
These are the two wells one mile east of the section where KOG has six new permits:
  • 19925, 609, KOG, Charging Eagle 15-22-15-4H, Twin Buttes, t11/11; cum 94K 712; 
  • 21069, 553, KOG, Charging Eagle 15-22-15-3H3, Twin Buttes, t11/11; cum 81K 7/12; 
MDW posted this September 25, 2012: 
Right now, the most interesting metric is the number of new permits each month. A record was set this most recent month (July, 2012) and I suspect we are going to see some more records. According to the Director's Cut, there were 266 new permits in July, 2012 (surpassing the old record of 245 set in 2010). My records show 261 new permits in August but I don't count SWD wells, so maybe a new record in August. For September (only 30 days) we are on track for 253 new permits; it won't be a record but it will beat the 2010 record. 
Update: The state issued 272 permits for oil wells in September, 2012. September was a short month (30 days); the last two days were weekend days, and there were no permits issued on the first three days. So, 272 permits, a record in itself, and in a very short month.

President Orders Chinese Firm To Divest Itself Of Wind Farms in Oregon

First time in 22 years that the president has blocked a legitimate business deal, "they" say. Basis for rejection of the business deal: national security. (It should be noted that Michelle is also on record that obesity is a national security issue which is unrelated but, for some, adds another dimension to the story.)
Citing national security risks, President Barack Obama on Friday blocked a Chinese company from owning four wind farm projects in northern Oregon near a Navy base where the U.S. military flies unmanned drones and electronic-warfare planes on training missions. 
This story has so many story lines, one does not know where to begin.

But this is one of the story lines:
In his decision, Obama ordered Ralls Corp., a company owned by Chinese nationals, to divest its interest in the wind farms it purchased earlier this year near the Naval Weapons Systems Training Facility in Boardman, OR.  Ralls asked for a restraining order and a preliminary injunction to allow construction at the wind farms to continue. 
The firm said it would lose the chance for a $25 million investment tax if the farms were not operable by Dec. 31.
Additional background here.

What little I know about these wind farms is that they are built for tax advantages for larger corporations, and when the tax advantage has run its course, the wind farm is re-sold. Whether or not they eventually turn a profit or not without tax breaks, I do not know.

It will be interesting if anyone steps into buy the Chinese position, especially in light of fact that the tax incentives are not likely to be renewed by the end of the year.

Good, bad, indifferent. It is what it is.

Whiting Bills Itself As The Low-Cost Driller -- Now, a Report From Reuters


Later, 8:34 pm: a reader noted this -- my bad; I missed it. The linked story is over a year old, published by Reuters back in early 2011. I missed that. I apologize to readers. Interestingly, it seems "we" are talking about the same problems, and the costs of drilling seem to be in the same ball park.

Original Post
Link here to Reuters.

For several months now, at their corporate presentations (and perhaps in the earnings conference calls; I don't recall) Whiting advertises itself as the low-cost driller in the Bakken. And now there's a Reuters story that seems to confirm that.

This a great article, sent to me by a reader (thank you).

Just the other day I posted prices of sand, resin-coated sand, and ceramics (from another source which I cited).

When you read the article, focus on two things: cost of prop pants, and cost of trucking. MDW has blogged that EOG has its own sand mines out-of-state.

MDW also posted a link to a story regarding the continuing shortage of truck drivers.

Some data points from the article:
  • costs of wells in the Bakken: due to sand -- KOG
  • KOG: $9.5 million/well
  • WLL: $6 million/well
  • WLL: greater use of sand
In some cases, sand has been so difficult to "get," companies have been forced to switch to larger amounts of ceramics (just out of necessity):
As for the ceramics mix, Abraxas Petroleum Corp  CEO Robert Watson said he aimed to use an average of 40 percent ceramics on Bakken wells. But on a recent well, Abraxas was forced to inject 60 percent ceramics because flooding had prevented a shipment of sand from arriving in the region.
And for investors:
Whiting believes it is the largest customer for Halliburton's white sand in the region, since it has their crews committed to its wells, Whiting CEO James Volker told Reuters on the sidelines of the IPAA conference in San Francisco. At $6 million per well, and $80-per-barrel oil, he told investors that Whiting could expect at least a 3-to-1 return.
The Oil Drum folks might want to read this article.

No More Blogging Until Later This Evening

Brazil: One Might As Well Write It Off -- Another Lost Decade


January 10, 2014: note the remarks below -- in which I allude to the fact that I avoided investing in shares in Petrobras as soon as it occurred to me that the country wouldn't risk its sandy beaches. Now an update: Brazil's oil euphoria hit reality hard. The Washington Post is reporting 
When fields said to hold billions of barrels of oil were discovered off the coast here, exuberant government officials said the deep-sea prize would turn Brazil into a major energy player.

More than six years later, the outlook for Brazil’s oil industry, much like the Brazilian economy itself, is more sobering. Oil production is stagnant, the state-controlled oil company, Petrobras, is hobbled by debt, and foreign oil companies are wary of investing here.
Original Post
On September 19, 2012, MDW linked a Forbes story and posted the following: Unless the federal government regulates fracking across the board, the Bakken continues to look very, very good. How good?

Read the article Don sent from Forbes magazine.

The Bakken is not mentioned but these plays are:

  • the Arctic: the Dutch can't help but notice that Shell has given up drilling this year; the company has spent $5 billion (with a "b") so far "scratching the surface of the Burger A well; permits not in place to develop Beaufort wells (the "permitorium" problem); paid $2 billion (with a "b") back in 2008 for the rights to this debacle; 
  • the Gulf of Mexico: "BP's terminal experience" -- 'nuf said 
  • Canadian oil sands: "very tetchy local legislators" 
  • off-shore Brazil: MDW wrote this play off long ago; country won't risk white sandy beaches
  • Russia: "where the biggest unconventional challenge rests"; operators simply don't trust Russia -- Forbes 
  • China: the state oil companies will resist foreign intrusion (except for the technology)
And now today this story: Brazil gives Chevron and Transocean 30 days to halt all drilling off-shore.

This  to a Motley Fool story and anyone who hasn't written off Brazil as a dependable country for developing its oil and gas resources is also a fool.


The End of Love, Anna Abreu

North Dakota Rigs: Who Is Drilling And Where Are They Drilling

  • Billings, 2
  • Bottineau: 1
  • Burke: 6
  • Divide: 11
  • Dunn: 30
  • Golden Valley: 2
  • McKenzie: 70
  • Mountrail: 29
  • Stark: 7
  • Williams: 32
I knew McKenzie was busy, but did not know it was this busy compared to Mountrail and Williams. As one can see, if the Canadians really get serious about drilling the Spearfish in Bottineau County, the daily active rig count could change dramatically.

When the going gets tough, the tough get going:

  • Abraxas: 1
  • American Eagle: 2
  • Baytex: 2
  • BEXP: 15
  • BR: 8
  • CLR: 15
  • Cornerstone: 1
  • Crescent Point Energy: 2
  • Denbury Onshore: 4
  • Enerplus: 3
  • EOG: 5
  • Fidelity: 5
  • G3 Operating: 3
  • GMXR: 1
  • Helis: 2
  • Hess: 17
  • Hunt: 3
  • KOG: 8
  • Liberty Resources: 2
  • MRO: 7
  • Murex: 2
  • Newfield: 3
  • Oasis: 8
  • OXY USA: 6
  • Petro-Hunt: 10
  • QEP: 3
  • Samson Resources: 3
  • Sequel: 1
  • Sinclair: 1
  • Slawson: 3
  • SM Energy: 4
  • Surge: 1
  • Triangle: 3
  • True Oil: 1
  • Whiting: 18
  • WPX: 6
  • XTO: 5
  • Zavanna: 1
  • Zenergy: 4
  • May not add up to 190 because I did not include salt water drillers.
  • This is a snapshot in time; it could change by this afternoon.
  • At least one rig will be moving to Montana after it drills the current well: Oasis Nabors 177. 
  • WPX's Nabors 486 will be stacked after the current well is drilled.
  • BEXP's Nabors 254 will be stacked after the current well is drilled. 
  • Destinations for most wells are listed as "undetermined." It is a very rare well that has its destination posted. 
  • Data from NDIC website, September 28, 2012, 1:52 p.m.

Homeland Security: The New Conduit for Federal Funding for States

Chester gives the MDW a lot of grief for all the federal funding North Dakota receives. It turns out CNBC provided a list today of the states that receive the most federal funding, ranked per capita. North Dakota does NOT even make the top five! I was sure, based on all the comments sent to me by Chester, North Dakota would be number one. It's not. Doesn't even make the top 5. Smile.

Turns out North Dakota is #7.

Number 4 is the president's home state: Hawaii.

Number 5 is the home of major Pentagon contractors: Virginia.

Number 1 is home of a lot of northeast US snowbirds: Florida. It’s similar to second-place Louisiana in that one of the 10 prime awards it received went to the Health and Human Services, and the rest to Homeland Security. In case you missed that, nine of the ten prime awards went to Homeland Security.

Number 2 is Louisiana but Louisiana seems to be an out-lier. Remove Louisiana from the list and North Dakota will rise a notch. Louisiana is number 2 because ... Of the top 10 prime awards that it received, one went to the Health and Human Services and the rest to Homeland Security. But of note: not only was it number 2 based on per capita federal spending but it was number five in overall spending.

And number 3 is South Carolina. That's surprising. Why would that be? Let's look: As with Delaware and Hawaii, all of the top 10 prime awards went to Homeland Security. Back to Hawaii: In fiscal year 2011 all of the top 10 prime awards allocated to Hawaii went to Homeland Security. This federal agency received a total of $12.4 billion, more than half of the entire amount of federal dollars given to the state. Of the major agencies receiving prime awards, the Social Security Administration came in a very distant second place to DHS. Its award of $3.2 billion was just over a quarter of what DHS received.

Maybe I'm misreading this, but I was quite surprised that Homeland Security is the new conduit for federal monies. Amazing. At $8 billion or so from the Federal government, North Dakota's share is paltry compared to the rest.

Another inconvenient truth. North Dakota residents can feel a bit less guilty about all the federal monies they receive.


By the way, this is not idle chatter. Cottage industries have grown up around the country helping state governments tap into federal funding. At universities, an important skill set is knowing how to procure federal funding.

Did The Japanese Beat the Chinese to the Bakken?

I keep waiting for news that the Chinese state oil company, CNOOC, has come to the Bakken. But it looks like another Asian company may have gotten here first (yes, I know Chinese ceramics are all over the Bakken, but I am not aware of a Chinese company actually operating in the Bakken, but I could be wrong). But I digress.

Matheson Tri-Gas is in the process of establishing a facility just outside Dickinson's city limits to provide pure nitrogen for use during the casing aspect of the hydraulic fracturing process.

MTG is headquartered in New Jersey. It is a subsidiary of Taiyo Nippon Sanso, a large Japanese corporation.

See link at the Dickinson Press/InsideClimate News.

Matheson Tri-Gas has quite a history; very interesting; as is its parent company.

PBS Series on "Boomtown" Williston

In case some readers don't read the comments, this is a comment that was sent in earlier today:
For a great “up close and personal” look at day to day living in “Boomtown” Williston, N.D., your readers should check out PBS News Hour’s American Graduate’s series video on September 27, 2012. 
JUDY WOODRUFF: Now to our American Graduate series on the high school dropout problem.Tonight, we explore the pressures on a public school system in a city that's unexpectedly benefiting from economic good times. Ray Suarez has our story from North Dakota. 
RAY SUAREZ: There is no better economic view in the U.S. than the one seen from above Williston, North Dakota. A rapidly expanding oil boom has taken root below, bringing with it widespread prosperity and an unemployment rate that sits at just 1 percent. This city's fortunes are in stark contrast to most of the nation. Real estate is profitable. Blue-collar jobs are abundant. And much of the globe, including Asia, the Middle East and Europe, is investing in the local economy. But as opportunities and new residents pour in, it is clear that Williston, home to 12,000 people just a few years ago, is dramatically changing. 
Also See PBS REPORT - AIR DATE: Aug. 7, 2012 North Dakota Boomtown Suffers Growing Pains Trying to Keep Up with Demand 
SUMMARY - As domestic oil production increases, towns like Williston, ND, struggle to meet demand for workers, housing and improved infrastructure. For some communities experiencing the benefits of an energy boom, rapid expansion comes with serious trade-offs. 
Ray Suarez reports See 
And – 
September 27, 2012 at 11:09 AM EDT - In Rural Williston, ND, Bus Drivers Act as School's Eyes and Ears. By April Brown.
I always enjoyed Ray Saurez. I knew I would be viewing a good segment when he came on.

Friday Morning Links -- Most Of It: Nothing To Do With The Bakken; If You Came Here For The Bakken, Scroll Up or Down But Avoid This Post


Later, 7:07 pm: this is getting weirder by the moment. Now this story (sent to me by a reader, thank you), regarding the movie about fracking, Dimock, EPA, and starring Matt Damon.
While left-leaning Hollywood often targets supposed environmental evildoers, Promised Landwas also produced “in association with” Image Media Abu Dhabi, a subsidiary of Abu Dhabi Media, according to the preview’s list of credits. A studio spokesperson confirmed that AD Media is financing the film. The company is wholly owned by the government of the UAE. 
Original Post

Fracking, Dimock (Pennsylvania), EPA, Matt Damon, and all that jazz: perhaps the best link of the day, from a reader's comment. Thank you. See update above, dated "later, 7:07 pm." This is getting really, really weird. But at least we're starting to find out who is backing anti-fracking in this country.

IPs for wells coming off the confidential list today have been posted; see sidebar at the top.

Google Chinese slowdown idles US coal mines. This article is about metallurgical coal. It is a very, very sobering story. Front page story in the WSJ.
While many have blamed the downturn in the US coal industry on cheap natural gas supplanting coal and tougher environmental regulations, the slide in metallurgical coal demand has been equally devastating.
But voters seem to be content/satisfied. Polling continues to show four more years.
What are the odds? The other night I met a nice young couple from Sri Lanka here in Boston area; he was working in the local area; she was his sister visiting the US for the first time. I knew a little, but not much, about Sri Lanka. So, today, p. D6 of the WSJ, a full page story on "tropical modernism in Sri Lanka." Almost as good as opening to a full page on the Bakken. Sri Lanka is a tropical paradise, and for Bakken oil millionaires, one can get a brand-new, 8,000 square-foot architectural masterpiece for 40 million rupees ($300,000).

Google Obama trumpets revised job data.
For the first time since President Barack Obama's inauguration, the number of jobs in the US economy is higher than it was when he took office.
And voters seem to be content/satisfied. Polling continues to show four more years.


Google ObamaCare's tax raid on medical devices. --> RECESSION

Data point: the new health care bill places a 2.3 percent tax on medical devices -- call it  the US medical devices VAT. The tax...
threatens thousands of American jobs and our global competitiveness. It will also stifle critical medical innovation in the industry that gave us defibrillators, pacemakers, artificial joints, stents, chemotherapy delivery systems and almost every device we depend on to save lives. 
The 2.3% tax well be charge to manufacturers on each sale and takes effect in January. 
Many US device companies, in response, have already announced layoffs, canceled plans for domestic expansion and slashed research-and-development budgets. This month, Welch Allyn --- a make of stethoscopes and blood-pressure cuffs -- announced that it will lay off 10% of its global workforce over the next three years, but all of the jobs being cut are in the US. [Welch Allyn produces 90% of the medical diagnostic equipment sold in the United States. -- wiki]
And that's the point. Remember all the hand-wringing over NAFTA which essentially sent US textile jobs overseas, and killed that domestic industry -- at least that's what I've heard. I don't know. I don't follow the industry.

But Evan Bayh, a US senator from Indiana, a member of the president's party, says that the medical device VAT will force another US industry overseas.

I'm pretty sure this industry was headed overseas before the VAT. A 2.3% VAT on medical devices seems pretty inconsequential. If a medical device company cuts margins that close ...

What's the production tax and extraction tax on Bakken oil? I believe its 6 to 7% on each -- 12% total. Again, I could be wrong (see "welcome" and "disclaimer" posts regarding this blog). Maybe a grand compromise: the senators from "oil states" will vote for repeal of the medical device VAT if senators from "high tech" states vote for keeping the EPA out of fracking on state land.

I wonder what high-tech medical device company is located in Indiana that got Mr Bayh's attention?

Regardless of how this turns out, it appears not to be a big issue for voters. Americans seem pretty content/satisfied; polling shows we are headed for four more years.

Remember: An ISM reading above 50 -- expanding; an ISM reading below 50 -- contracting
See also: Business investment falls off a cliff -- November 19, 2012

The linked article has a lot of words and phrases we've come to expect from the mainstream media when reporting on current state of the economy; words like: "unexpectedly," unexpectedly contracted," "uncertainties surrounding domestic fiscal policy," "unemployment exceeding 8 percent for 43 consecutive months -- the longest stretch in the post-World War II era," etc. But here's the data points from the linked article:
  • business activity in the US unexpectedly contracted in September for the first time in three years -- foreshadowing the Great Recession of 2013
  • the ISM fell to 49.7; it was a whopping 53 in August -- just one month earlier
  • expectations: median -- 52.8; range -- 50 to 54.54. No one predicted a contraction.
  • this explains why the Fed acted -- QE3
  • household purchases rose by 0.5 percent (GOOD); because prices increased 0.4 percent (BAD)
  • the jump in prices was the biggest since March, 2011, (not March, 2012, but March, 2011) (BAD)
  • unemployment exceeding 8 percent for 43 consecutive months; the longest stretch in the post-WWII era (REALLY BAD)
  • household spending increased at a 1.5 percent annual rate in the second quarter, the lowest in a year (BAD)
  • lingering concerns (Congressional dithering) about the January "fiscal cliff" are restricting business such as ATT and their long-term planning (BAD)
  • taxes are going to go up and companies are looking at ways to cut costs
Bakken readers know that when oil companies look to cut costs, they lay down rigs (or at least that's the mantra).

But Americans are content/satisfied. Polling suggest we are headed for four more years.

The really good news: once these artificial chokeholds on American business are released, the pent-up demand for goods and services will be staggering. If the eight percent unemployed can just hang on for another four years.

Speaking of VAT. There's been a lot of talk in Washington about a VAT. Won't happen. So, one way to get around a VAT: do it by industry. The medical device VAT is as good an industry as any to start.