Wednesday, October 17, 2012

Two Confidential Wells Reported

Active rigs: 186 (steady)

Only two wells coming off the confidential list today:
  • 17308, drl, BR, CCU Meriwether 44-19TFH, Corral Creek,
  • 22572, 147, Samson Resources, Saratoga 12-1-161-92H, Black Slough, t9/12; cum --
Corral Creek is a unique field in the Bakken; newbies may want to click on the link.

How Big Is Crude-By-Rail Coming Out of the Bakken? Pretty Big

Link to Billings Gazette (huge "thank you" to Don for the link).
BNSF’s oil shipments out of the Bakken have grown exponentially, from 1.3 million barrels in 2008 to 90 million barrels in 2012.
Thirty-five facilities for unloading crude oil from trains are under development in several states, and that will lead to even more shipments, Rose said.
Likewise, the railroad is shipping more freight into the Bakken area. Sand used in hydraulic fracturing is in big demand, as well as other products such as lumber used to build new houses, Rose said.
BNSF’s big investment in oil hauling resulted from a shortage of pipeline capacity that has constrained oil shipments out of the Bakken.
90 million / 365 --> 250,000 bopd.

The Bakken is producing about 700,000 bopd.

Rail. Flexible. Scalable. Incredible.

Wall Street Money Discovers the Bakken

Earlier today, I linked an article in a fairly well-known newspaper, but did not post this from the article:
Mr. Perkin said he was putting together a group to invest in a unique way in the oil boom in North Dakota: lodging.
“Every oil company in the world is going gaga over the Bakken oil fields,” he said. “The problem is there is zero infrastructure: terrible roads, no restaurants, nowhere to stay, the airport is awful, no hospitals or schools, nothing.”
Despite all that, he said, he has a group of clients investing $60 million into a hotel project with another $40 million of investments planned.
“It’s the kind of thing people are looking for — infrastructure and a hard asset,” he said. “It’s like the California gold rush. Who made the most money on the gold rush? Levi Strauss. We’re looking at the ancillary businesses that come out of the demand for oil.”
This is not without risks beyond the lack of liquidity in the deal. If the price of oil drops below $60 a barrel, the demand for Bakken crude could slow, he said. But now, he said, clients like investments that appear uncorrelated with the market volatility the fiscal cliff could cause. 
So, what newspaper? The New York Times.

MDW has noted that Wall Street money has not found its way to the Bakken yet. Occasionally I get notes from readers suggesting that once Wall Street "discovers" the Bakken, the bar will be raised; it will be a whole new ball game.

I believe this is the second post -- only the second post -- that links a story about Wall Street money discovering the Bakken. Here was the first

HUGE ARTICLE: The Bakken: A New Exploration Frontier -- SeekingAlpha

Note: this is a story I have been anticipating for some time. I am guilty of not having done some of the primary research on my own, but Richard Zeits,, has provided that for us, in a format much better than I could have done. For additional background, you may want to read a couple of other posts with the same tag.

I don't know if it's hyperbole to say this is one of the most exciting developments to come out of the Bakken in the past few months.

There are so many story lines in this Richard Zeits story, but maybe for another time. 


Some months ago I think I jumped the gun, jumping on the same bandwagon as many others, suggesting and agreeing that "we" were entering the manufacturing stage in the Bakken. Then the blockbuster briefing by Continental Resources following through with aggressive plans to test two, three, or four "benches" below the upper Three Forks.

Earlier this month, I started changing my comments to reflect that perhaps some operators were moving into the manufacturing stage, some, particularly Continental Resources, were still very much in the exploration phase. Other operators, due to the high cost of completing a well, were delaying plans to enter the manufacturing phase.

Now, we have another nice article suggesting that exploration is still the name of the game for some in the Bakken.

This could be huge, and was foreshadowed by with regard to Slawson (see other posts with the same tag).

Back on June 16, 2012, I posted a note about Slawson testing the Upper Bakken shale (for newbies, 99% of the "Bakken formation" wells are middle Bakken wells (dolomite sand); "no one" is drilling the Upper Bakken "tight" shale -- "no one," that is, except Slawson.

According to the linked story, CLR recently made reference to the drilling results by Slawson in the Mondak, recently made public, that tested the upper Bakken shale.
On September 27, Slawson Exploration (the operator) and its 10% working interest partner PetroShale announced the initial results from their first four test wells in the Mondak field. These four horizontal test wells are noteworthy for having been drilled and completed in the Upper Bakken Shale itself (as opposed to the vast majority of the industry's development activity which has targeted the Middle Bakken dolomite, a reservoir rock sandwiched between the low permeability source rocks, the Upper Bakken Shale and Lower Bakken Shale).
Go to the link for the rest of the story. I may post some data points later, but the story is too incredible to wait for me to post data points.

It is very, very exciting.

Play this loud (real loud) while reading the article:

What is Love? A Night at the Roxbury, Haddaway

75th best-selling single of all time in Germany.

Fourteen (14) New Permits

Bakken Operations

Active Rigs: 186 (steady, but down)

New wells reporting were posted earlier; see sidebar at the right.

Fourteen (14) new permits:

  • Operators: BEXP (4), Zenergy (2), SM Energy (2), American Eagle, Whiting, Mountain View, Murex, Cornerstone, Baytex
  • Fields: Colgan (Divide), East Fork (Williams), Stony Creek (Williams), Bully (McKenzie), Stanley (Mountrail), Foreman Butte (McKenzie), Bear Den (McKenzie), Garnet (Baytex)
Comments: Mountain View has a wildcat in Divide County; Cornerstone has a wildcat in Burke County; no OXY USA or Newfield permits;

A temporarily abandoned well:
  • 21279, TA, Petro Harvester, Wright 12-10NESE 12-163N-81W, Bottineau,

Pipelines Update -- Natural Gas -- The "Marcellus" Effect

Earlier today, RBN Energy: natural gas pipeline operators rethinking entire national system; the Marcellus effect

Now this afternoon, a similar story at Reuters: a surge in pipelines in the northeast.

This is the Reuters list of pipeline projects expected to be online at the end of 2012 and in 2013:
Pipeline Project OPERATOR CAPACITY (million cubic feet per day) STATE Startup Date

Inergy Marc 1 Hub Line Inergy Midstream 555 PA Nov 2012
Ellisburg to Craigs Dominion Transmission 150 PA Nov 2012
TETCO Team 2012 Texas Eastern 200 PA Late 2012
Northeast Supply Diversification Project Tennessee Gas Pipeline 250 PA/NY Nov 2012
Station 230C Project Tennessee Gas Pipeline 320 PA/NY Nov 2012
Line N Expansion National Fuel Gas Supply Corp 150 PA Nov 2012
Northeast Expansion Project Dominion Transmission 200 PA Nov 2012
Northern Access Expansion Project National Fuel Gas Supply Corp 320 PA/NY Late autumn 2012 Marcellus Expansion Phase Equitrans 800 WV/PA Late 2012
Northeast Williams 100 PA/NJ Late 2012
MPP Pipeline Tennessee Gas Pipeline 100 PA 2013
Northeast Supply Transcontinental Gas 250 PA 2013
NJ-NY Project Spectra Energy 800 NJ/NY 2013
Sabinsville to Morrisville Dominion Transmission 92 PA 2013
TETCO Team 2013 Expansion Texas Eastern 500 PA 2013
Tioga Area Expansion Dominion Transmission 270 PA 2013
New Jersey to New York Expansion Texas Eastern 800 NJ/NY 2013
Dominion Keystone Pipeline Dominion Transmission 500 PA 2013
Northeast Supply Link Transcontinental Gas 250 PA/NJ/NY 2013
Northeast Passage Kinder Morgan/Equitable 1,100 OH/NY 2013
Northeast Upgrade Tennessee Gas Pipeline 636 PA/NJ 2013

I know that President Romney will not shut down these pipeline projects and will not put a moratorium on fracking. I can't say the same for President Obama. [Hint: Keystone XL. Killed.]

I wonder how many jobs are at stake here?

Obama's Bakken Bust?

Link here to CNBC.
And although this presidential election is not a referendum on energy policy per se, there is an undercurrent of concern.
"I think people in this part of the state are very nervous," Williston Mayor Ward Koeser told CNBC. "There isn't a lot of confidence in President Obama when it comes to understanding the oil industry.
If fracking were to be more tightly regulated, that's one thing. But a moratorium or ban is another story.
"Things would stop here as quick as a thief in the night," said Tom Rolfstad, Williston's head of economic development. "It would just halt it."
Rolfstad is adamant about positive efforts to limit any environmental damage from fracking. 
"I think we’ve made dramatic changes with a great deal of caution and care," he said. "Our cleanup in accordance to laws in the last year or two — that required every well has everything cleaned up after the well has been drilled. It's said to cost $400,000 per well to do that cleanup.
One comment: "If fracking were to be more tightly regulated, that's one thing." -- a slippery slope. 

Active Rigs: 185 -- Approaching The Low; XOM Hits a New 52-Week High

184 is the previous "low" as we slide back down from the Bakken boom high of 218.
  • OXY USA remains at 4.
  • Newfield remains at 3.
  • CLR at 14.
  • KOG at 8.
  • Oasis at 7.
  • Hess at 17.
  • EOG at 6.  
Random notes:

XOM hits a new 52-week high.

For investors only: MLP at the New York Times. [Disclaimer: this is not an investment site.]

The Dakota Decade

Don suggested a theme: Dakota Decade.

Interesting. That works out just about right.

I consider the Bakken began in Montana in 2000, and in North Dakota in 2007 (although I might have the years wrong; I tend to forget these things). But if that's about right, then ...

Continental Resources five-year plan to triple their production, triple their proved reserves takes them out to 2017. A nice decade: 2007 - 2017. Funny how things work out.

The "lost decade" for the rest of the country. Maybe two lost decades, 2000 - 2020. See "lost decade" tag at bottom of the blog.
The "lost decade" I was referring to was 2000 - 2010. I had periods of optimism in 2011 that "we" would be moving out of that "lost decade" into a decade of opportunity, but that, too, appears to be a mirage.

There will be a generation of Americans who will never work, at least not work in the area for which they had hoped. Another group of Americans, those aged 45+ and having been laid off from their life-long career, will also never work again.

For me, in the field that most interests me (energy), killing the Keystone XL may be the defining moment of 2012. I hope it does not define the entire decade, but one wonders.
If killing the Keystone was America's defining moment in 2012, California's defining moment was the decision to throw billions toward the bullet train from LA to San Francisco. Like that will ever happen. The high-speed part.

But I am an eternal optimist, and today, with news coming out of the oil patch, I am even more optimistic. The two stories that put me in a great mood: XOM/Celtic and CVX share price move today.

Even the comment that a reader sent in overnight, that OXY USA was moving to a 7-rig program in 2013, adds to my momentary euphoria. I had all but given up on OXY USA, but if that turns out to be accurate, that's a huge.

Idle rambling. That happens when I forget to take my medication.

Oh, speaking of the Dakota Decade, I see federal money is at work in southwestern North Dakota: dirt is moving, as they say, at the new Bowman airport.
After years of planning, the first ground was broken during a ceremony that included civic, county and state aviation leaders. Expected to cost in the neighborhood of $12 million by its completion, the airport will replace the aging Bowman Municipal Airport.
Paid for mostly by the Federal Aviation Administration, the complex is expected to be finished sometime in 2015.

For Investors Only: Watch NAT -- Absolutely Nothing To Do With The Bakken

Disclaimer: this is not an investment site. I have followed NAT for years, and it's a favorite of Cramer's, though I don't know where Cramer stands on NAT right now. I haven't watched Cramer since July, 2012. [My "live" television viewing is limited to NASCAR, if I can find a "free" (as in "available") television; and "Perry Mason" on]

But NAT is enticingly interesting: first and foremost, it serves as a bellwether of sorts for the global economy; as such it is interesting to watch its share price plummet (hoping that is not too strong a word). It is now almost fifty percent below its 52-week high (and even worse over 2- and 5-year history).

Second, it will be interesting to see its next dividend announcement.
Nordic American Tankers Limited today [October 9, 2012] announced that it expects to release its 3rd quarter 2012 report November 15, 2012, before the opening of trading at the New York Stock Exchange.

At that date the quarterly amount of dividend is expected to be announced. The record date is expected to be November 29, 2012, and the payment of dividend is expected to take place on or about December 12, 2012.
As previously communicated, the 3rd quarter 2012 is expected to be weaker than the 2nd quarter 2012. However, the 3rd quarter 2012 is expected to be well above the same period last year.
"Well above the same period last year." Hmmm. That only tells us how bad last year was.

It's hard for me to believe NAT won't continue a healthy dividend payout, but ...

Idle chatter.

I have no shares in NAT, and no plans to invest in NAT before the announcement, but I am eagerly awaiting the November 15th announcement, almost as much as the October 23 Apple announcement(s).

Wednesday Links and The Post Leads With A Video Even I Couldn't Make Up

Huge thanks to Don for this one:

Government Causing Deer Crossing Problems; DOT Needs To Move Signs to Low-Traffic Areas

After "Accidentally" Hitting a Deer, Insurance

Map: states with highest risk of hitting a deer.

RBN Energy: natural gas pipeline operators rethinking entire national system; the Marcellus effect

Wall Street money starting to discover the Bakken: NY Times article, but you have to read to the very end;  I'll post more of the story later, but want folks to read it on their own; it's really quite an eye-opener; an early-morning reader sent the link to me -- huge "thank you" -- amazed one would read through all the other stuff to get to the part on the Bakken;

Wells coming off confidential list today have been posted; scroll down.

Oil companies did very, very well yesterday; obviously some were oversold last week. [Disclaimer: this is not an investment site.]

HAL: earnings out; bad; expensive guar

Anyone following CVX is surely following the shenanigans in Ecuador, so I was happy to see that CVX futures are up today.

Another daily newspaper may end is print edition. This actually saddens me: One of my greatest pleasures in Yorkshire (another life) was to grab the two London Sunday papers, while picking up bacon, fresh bread, etc., for breakfast and enjoying a long leisurely morning reading and enjoying the incredible Nidd Valley view. The biggest casualty of the print media, however, will be the politicians. Note the very first post at the above link:
February 8, 2010Magazines' Newstands Sales Fall 9.1%: Newsweek down 41.3% (wow!). Time down 34.9% (wow!). TV Guide -- the whole company -- sold for a dollar in 2008. Reader's Digest is in bankruptcy.
Time featured Obama on its cover 14 times in 2008. Newsweek was close behind, featuring the president-to-be on 12 of its issues in 2008. Time had 52 issues in 2008, so Obama has been featured on more than one-in-four of its covers, or about 27% of the time.
Obama's face or name somehow made it onto the cover of Time just about half of the time in 2008 (25 out of 52 issues -- 48%).
And so it goes. Sad. But there was a story somewhere yesterday that regional papers in the United States were actually doing quite well. Warren Buffett is a big investor in regional US newspapers. I still prefer the print edition to the on-line edition.

On another note, back to the Keystone XL 2.0. I have not dog in this fight, and no longer care what happens to the Keystone (actually I never have). But when President Obama killed Keystone XL 1.0 he gave the opposition all along the way (Montana to Nebraska to Texas) time to regroup. What Nebraska does now may be moot; Texas landowners are going to do all they can to kill Keystone XL 2.0. Rail looks better and better all the time.

Housing construction is up 15% in September; strongest number in years.

WSJ, page A15, book review, Camille Paglia's Glittering Images. A very nice review. I will be buying the book; perhaps an early birthday present. Very early.

WSJ, page A16, Electric Car Crash. Obituary: President Obama's green energy industrial policy.

That's all.

XOM To Buy Celtic Exploration, Canadian Exploration Company


Later, 1:04 pm: a reader alerts me to another new fracking technology: NEXT Frac
NEXT Frac outperforms traditional hydraulic fracturing techniques as it can easily reach wellbore radial fracture propagation of 180m - 365m, as compared to typical hydraulic fracture propagation of 30m.
I may do a stand-alone post on this later. I have mentioned several times on the blog that is appears to me that the radial effectiveness of conventional fracturing is about 500 feet. I may have been way too generous. CLR suggests as much with its study on the Three Forks, and then this link to NEXT Frac in which they suggest that the "typical hydraulic fracture propagation of less than 100 feet."

Later, 9:53 am: Celtic is up over $8, almost 50% higher in opening. I think XOM bought the company for the fracking technology; great news for the Bakken.

Original Post
For around $3 billion.

Market cap yesterday for Celtic, about $2 billion.

Bought for Celtic's technology/experience in nitrogen fracking?

September 10, 2012, operations update:
At Jayar, Alberta, in the northern portion of Celtic's Resthaven land block, the Company has completed a horizontal well located at 4-22-61-3W6 (100% WI). The well was drilled with a horizontal lateral of 1,545 meters in the Montney formation and was completed with a 900 tonne, 18-stage nitrogen foam fracture. The well was flowed on clean-up for 194 hours and during the last 24 hours of the test the well was flowing at 11.7 MMCF per day of raw gas and 362 barrels per day of condensate with a flowing tubing pressure of 8,748 kPa (1,268 psi).
2012 guidance:
Celtic re-confirms its exit 2012 production guidance of 29,900 boe per day. In addition, the Company's 2012 net capital expenditure program remains at $322.0 million. Celtic expects production in 2012 to average between 22,000 and 23,000 boe per day. 
Average production in 2012 is expected to be weighted 24% oil and 76% gas; however, operating income in 2012 is expected to be weighted 78% oil and 22% gas. At the low end of the range of 2012's average production forecast, this represents a 36% increase from average production of 16,212 boe per day in 2011. On a production per common share basis, the increase would be 26%.
XOM  with $18 billion in cash.