Tuesday, November 6, 2012

On Tap For Wednesday; Whiting Has a Nice Red River Well; Oil and Gas Activity in Montana; Economic Development in Great Falls

From Rigzone today: musings on fracking.  Timing is interesting. Everyone knows. And a second article on same issue. Everyone knows.

RBN Energy: part IV in the series on natural gas pipelines; the Marcellus effect;

Active rigs: 185 (steady, down slightly)

Wells coming off confidential list:
  • 20691, 928, EOG, Fertile 49-3024H, Parshall, t5/12; cum 55K 9/12; 
  • 21222, 519, EOG, James Kill 10-0112H, Kittleson Slough, t6/12; cum 27K 9/12; 
  • 21223, 572, EOG, James Hill 100-0112H, Kittleson Slough, t6/12; cum 19K 9/12; 
  • 21443, drl, KOG, Smokey 14-21-33-14H, Pembroke,
  • 22260, 930, MRO, Landblom 24-26H, Murphy Creek, t7/12; cum 21K 9/12;
  • 22277, 118, MRO, Elizabeth Ann 1-32H, St Demetrius, t7/12; cum 11K 9/12; 
  • 22731, 496, Slawson, Magnum 3-36-36H, Baker, t7/12; cum 13K 9/12; 
  • 22750, 455, Whiting, Rieckhoff 44-22, Camel Hump, a Red River well; t8/12; cum 25K 9/12;
Montana news:

Eight new wells permitted for the Bakken in Richland County, Montanta! Cool. Five are CLR; two are Slawson; and one is Kraken Operating.

Also, out of Montana, a huge fabrication complex in Great Falls:
ADF GROUP INC. announced on Monday that the Corporation’s Board of Directors approved an estimated US$24 million plan to build a new 100,000-square-foot structural steel fabrication complex on a 100-acres industrial site located in Great Falls, Montana.

Under its U.S. subsidiary banner, ADF International Inc., the Corporation will be operating by the second half of 2013 its new fabrication plant which will be equipped with state-of-the-art equipment, similar to those at its Terrebonne fabrication plant. The annual fabrication capacity of this new plant is estimated at more than 25,000 tons.

According to a story published Monday in the Great Falls Tribune, the plant will initially produce modules for the Alberta oil sands.
This begs the question: why is a Canadian company building a huge steel fabrication complex to support Canadian oil in the United States? That's a rhetorical question.

Twelve (12) New Permits; Whiting With a Huge Well; BEXP With a Nice Well (Again); SM Energy With a Very Nice Well (All Based On IPs)

Bakken Operations

Active rigs: 186 (steady)

Twelve (12) new permits (on track for 2,600 permits*):
  • Operators: Hess (4), KOG (3), CLR (2), BEXP (2), MRO
  • Fields: Robinson Lake (Mountrail), Banks (McKenzie), Truax (Williams), Brooklyn (Williams), Wolf Bay (Dunn)
  • Comments: Nary a Newfield nor an OXY USA permit; but another two CLR Brooklyn field wells (wow); the Robinson Lake wells will be running north to south; two others in this area are running south to north; elsewhere I've talked about heel-to-toe/toe-to-heel for fracking purposes; by the way the wells in this immediate area in Robinson Lake have or will blow through 100,000 bbls by the end of first full year of production;
Encore is still operating in North Dakota; a very old producing well (#06992) was operator-transferred from Denbury Onshore to Encore Energy

Wells coming off the confidential list were reported earlier; see sidebar at the right.

Producing wells completed:
  • 19707, 288, Slawson, Ambush 1-31-30H, wildcat, t10/12; cum 1K 912;
  • 21953, 2,790, BEXP, Cvancara 20-17 2TFH, Alger, t9/12; cum 14K 9/12;
  • 22180, 545, True Oil, Slash Federal  44-33-4-9H, Bowline, t10/12; cum 3K 9/12;
  • 22700, 1,171, SM Energy, Norby 9X-20HA, Charlson, t8/12; cum 39K 9/12;
  • 23251, 2,370, Whiting, Rohde 41-1H, Sanish, t9/12; cum 6K 9/12;
Also, sixteen (16) wells were reported to be "plugged or producing."

*A few permits have been canceled this year, but won't have significant effect on final number of permits issued.

Keep An Eye on MRO's Eagle Ford Burrow -- A "Monster" Well? -- Or Just More Chatter?

Updates

November 6, 2012: a reader found the transcript:
 "Our investment in the Eagle Ford shale a little more than a year ago, and our bolt-on acquisitions since then, continue to deliver value beyond original expectations. Not only have we improved the speed and efficiency of our drilling and completions there, we also continue to optimize well spacing which could significantly increase drillable locations and recoverable reserves. One recent Gonzales County well, the Burrow 2-H in which we hold a 100 percent working interest, achieved a 24-hour rate of 6,275 barrels of oil equivalent per day (boed), of which 4,646 barrels were oil and condensate.
Original Post

From MRO transcript, apparently. I haven't found the original source/transcript yet; this note from SeekingAlpha:
Tuesday, November 6, 3:15 PM Marathon Oil adds to earlier gains from its Q3 results as CEO Clarence Cazalot tells a conference call the company "is positioned to meet or exceed our full-year production targets." MRO raises in FY13 target for Eagle Ford production to ~85K net boe/day from 70K prior, and Bakken production to ~33K net boe/day from 30K; its Eagle Ford Burrow well could be a "monster."

The Clouded Leopard -- For Apple Fans; For the Bakken, Scroll Up, Down, or Sideways

Updates

June 22, 2013: some weeks ago at the WWDC, Apple announced the new name for Apple OS. They briefly considered "Sea Lion." Apple has decided to switch direction. New operating systems will be named after landmarks in California. The first one is Mavericks, a surfing locale off San Francisco.

Original Post

Early signs of OS 10.9 appearing --
  • Apple OS 10.9 -- your guess here --
  • Apple OS 10.8 -- Mountain Lion -- July 25, 2012 -- 9th major release of OS X
  • Apple OS 10.7 -- Lion -- July 20, 2011 -- 8th major release of OS X
  • Apple OS 10.6 -- Snow Leopard -- June 8, 2009, 7th major release of OS X
  • Apple OS 10.5 -- Leopard -- October 26, 2007, 6th major release of OS X
  • Apple OS 10.4 -- Tiger -- April 29, 2005, 5th major release of OS X
  • Apple OS 10.3 -- Panther -- October 24, 2003, 4th major release of OS X
  • Apple OS 10.2 -- Jaguar -- August 23, 2002, 3rd major release of OS X
  • Apple OS 10.1 -- Puma -- September 25, 2001, 2nd major release of OS X
  • Apple OS 10.0 -- Cheetah -- March 24, 2001, 1st release of OS X 
Other than the "Clouded Leopard" found in southeast Asia, there are few other distinctive big cat names available.

How appropriate. But is it a "leopard too far"?

By the way, my nine-year-old granddaughter knew of the clouded leopard; she said it was in the National Geographic Almanac.  That I did not know.

Lease Results -- North Dakota State -- November, 2012

Results of the oil and gas lease sales auction, November, 2012, Department of North Dakota Trust Lands:
  • Highest bonus paid/acre: $15,300/acre, 5-153-101, Diamond Resources, McKenzie county, 5 acres;
  • Highest bonus paid/tract: $8,400/acre x 160.03 acres --> $1.3 million, 12-94-153, Diamond Resources
  • Most active township: 153-94, McKenzie County, Diamond Resources
  • Most active townships: 152-93, 153-93, 153-94, McKenzie County, Diamond Resources 
  • Most active bidder: Diamond Resources
So, where is this area of interest in McKenzie County?
  • The five acres that sold for $15,300/acre appears to be in an undesignated area, just south of Todd oil field, south of Williston, under the river on the McKenzie side of the county line;  it will most likely become part of the Indian Hill oil field.
  • It appears the 160.03 acres @ $8,400/acre is under the water in an undesignated area between the Sanish oil field and Elm Tree.
  • Another 160 acre tract @ $8,400/acre is also under water just north of the reservation, west of the Sanish, southeast of Elm Tree.
There are sources that suggest Diamond Resources is working for Continental Resources.

Wow! Job Openings Drop to a Five-Month Low in September

Link here to Bloomberg.
Job openings in the U.S. dropped to a five-month low in September, signaling uneven progress in the labor market may extend through year-end.

The number of positions waiting to be filled declined by 100,000 to 3.56 million from the prior month, the Labor Department said today in a statement. Openings have cooled since reaching a peak this year of 3.74 million in March. 
But Americans are content/satisfied. Polls continue to show Obama has better chance than opponent.

PetroBank, PetroBakken

For archival purposes: these two companies operate in Canada but occasionally pop up in links.

After distributing Petrobank's heavy oil business to New Petrobank (a new company), PetroBank and PetroBakken will combine and operate under the name PetroBakken Energy. PetroBakken operations include light-oil Bakken (Saskatchewan) and Cardium (Alberta) plays and conventional light oils in Saskatchewan.

New Petrobank will focus on heavy oil and heavy-oil-related techology.

Bottom line:
  • PetroBakken Energy: Canadian Bakken light oil.
  • New Petrobank: Canadian heavy oil.

No Comment

Suzuki won't be selling any more automobiles in the US; in bankruptcy
It said it was exiting the car business in the United States because of slow sales, unfavorable foreign exchange rates and the high costs of complying with state and federal regulatory requirements. American Suzuki sold just 2,023 cars in the United States last month. [Chevy Volt sold about 2,900 vehicles last month.]
That's one way to drive out competitors.

For Investors Only: AAPL, MSFT, and ARMH

Yesterday I posted a story about Apple pushing the envelope. Today, we see another example: Microsoft may follow Apple's lead in dumping Intel processors for ARM processors.

For Investors Only -- Investment Opportunities in the Bakken

I don't remember if I posted  Part I of this 2-part series. I know I have not yet posted Part 2. Enjoy.

Two themes:
  • Bakken companies will do well if WTI-Bakken differential narrows, as expected
  • increasing debt for some companies as they continue to increase CAPEX
Folks talk about the high cost of completing a well in the Bakken, but I don't think it's a lot less expensive to complete a well in the Eagle Ford.

From the link, NOG:
During the current year Northern is boosting its drilling program by upping capital expenditures to over $400 million. A substantial part of the benefits of this will flow through to earnings in 2013. By edging capex higher again in both 2013 and 2014 the company should be able to generate healthy earnings growth for both years. 
The projections for 2014 in the above table assume that oil prices will remain unchanged from 2013. However, as with Kodiak, Northern will benefit further in 2014 if Bakken differentials versus WTI come down. Additionally, the 2014 data assumes that total cost of production (LOE, taxes, depletion) will only improve from 2013 levels by 1%, not a big ask. Suffice to say that Northern's 2014 EPS of $2.20 should be attainable without too much of a stretch.
Oasis:
Oasis is predominantly a Bakken driller and, like Kodiak and Northern above, its 2014 estimates do not incorporate any assumed improvement in differentials versus WTI. In either case - better differentials or not - OAS should have 2014 EPS above $3.00 per share, possibly a fair amount higher with better differentials. An ongoing theme to watch with Oasis is the level of its borrowings. Even a small increase in capex from 2012 to 2014 would leave the company with a high debt/equity ratio during the next two years
The shares, now $30.40, would be on a next year p/e of 9.6 in early 2013 using 2014 EPS of $3.15. That leaves upside potential but, considering the projected high level of debt, that upside may be capped unless it can be demonstrated that earnings should be even stronger in 2014 and/or that better inroads will be made into reducing the debt.

Earnings Season Almost Over -- Thank Goodness!

I don't know who suggested it, possibly Don, but I really have to thank the individual who gave me the idea of "Earnings Central" at the sidebar at the right. During earnings season, I move this to the top of the sidebar.

For newbies, "Earnings Central" is not particularly robust, but it puts all the energy companies that are talked about at this blog in one central location, which makes it easy to skim through. I use it all the time to quickly scroll down the list to get a feeling for how a particular earnings season has been. I'm glad this earnings season is over. Smile.

For regular readers, if there are short data points that would summarize a company's earnings, please feel free to let me know and I can post them at "Earnings Central."

Hurricane Sandy and the Failures of Blue-Statism

Link to the failures here at WSJ.
Mr. Mead was writing in reference to the hell that our inner cities have become for many African-Americans. But the failure is larger than that, because so many of the government agencies that citizens depend on have morphed into jobs programs, where pensions take priority over performance. Compare, for example, the response of Verizon—which within 24 hours of Sandy's landfall had 95% of its cell service up and running in affected areas—with the glaring lack of hard information from the government for people shivering in cold homes without power.
In their own ways, Mayor Bloomberg and President Obama embody the obsessions of modern liberalism. Each holds an advanced Ivy League degree. Each believes he would make better choices for others than they could make for themselves. Each has consequently eschewed the gradual and the modest—the unglamorous improvements that might have better prepared, say, Staten Island, for a dangerous storm. These leaders prefer instead the shiny and large, whether it is Mr. Bloomberg's huge and costly 2nd Avenue subway project or Mr. Obama's $860 billion federal stimulus.
Meanwhile, what do we get from blue-state liberalism? In New York we get a mayor who makes war on Big Gulp sodas while proving himself inept at basic government functions such as clearing snow. At the national level, we get a president who vows to help the victims of Hurricane Sandy even though some might not be without power if regulators in Washington and New York hadn't been making the environment so hostile to new investment.
And then a bit of regional color:
Chapman University fellow in urban futures Joel Kotkin spends a great deal of time looking at which communities deliver and which do not, and he says it need not be a partisan issue. He cites Sioux Falls, S.D., which has a Democratic mayor in a sea of Republicans—and a fine new water-development system. Or Galveston, Texas, which maintains a huge seawall to avoid the kind of hurricane damage that killed 6,000 people back in 1900. Much of the nation's best new infrastructure, he says—roads, bridges, airports, ports—has been built in "red" cities on the Gulf Coast and Great Plains with bipartisan support. [Fly-over country.]

By contrast, he is astounded by the kind of liberalism he sees in his adopted state of California and his native New York, where a mayor who jets down to his mansion in the Bahamas on weekends tells working- and middle-class New Yorkers that they really shouldn't be driving to work or living in single-family homes. "In many ways," Mr. Kotkin says, "liberalism is increasingly big brother meets blue nose."
Please go to the link for the full op-ed piece. Really good writing regardless of one's worldview.  

WOW! Wall Street Likes What It Sees in EOG

Updates

Later, 10:44 pm: for newbies, these are the five "big" story lines regarding EOG
  • first operator in the Bakken to build a crude-by-rail terminal (if not the first, one of the early ones)
  • first operator in the Bakken to own its own sand mines in Minnesota/Wisconsin (if not the first, the most visible)
  • one of the first natural gas companies to make early shift from natural gas to oil
  • one of the few major Bakken-centric companies that "diversified" into the Eagle Ford
  • lucky or smart (it doesn't matter which) with their Parshall oil field
My hunch regarding EOG and the Bakken: they will manage their Bakken assets very, very well in the Bakken, even if that means fewer rigs while waiting for better opportunities.

Later, 10:20 pm: this is the kind of earnings report that might get the attention of Wall Street, and again, remind them of tectonic changes in the oil and gas industry due to lessons learned in the Bakken:
EOG Resources Inc reported a better-than-expected quarterly profit on Monday as the U.S. exploration company sold more crude oil at higher prices.
Shares of EOG rose 1.3 percent to $118.40 in post-market trading. (That was yesterday; today EOG was up another $6.00 to $123.)
EOG also raised its 2012 total production growth target to 10.6 percent from 9 percent, citing gains in crude oil and liquids output.
EOG has targeted oil reserves trapped in rock like shale in basins including the Eagle Ford and the Bakken in North Dakota. Oil production grew 45 percent in the quarter, the company said.
"With especially strong, consistent individual well results, EOG's best plays have become even better," said Mark Papa, EOG's chairman and chief executive.

Original Post
I generally don't do this, write about share prices -- this is not an investment site. In between blogging, I occasionally check what the market is doing. I don't look at the market when the market is down or flat (I don't even look at the green/red arrows on the sidebar at the right), but I get a kick out of it when the market is doing well. But having not looked at individual companies in several days I was curious. Checking them out  in this order....WMB, T, CVX, then .... EOG. Wow!

Up $6 at the open. Huge. I do not recall any oil/gas company moving this much in one day under circumstances like we have right now (falling commodity prices with perhaps a bottoming).

But Wall Street must have liked what they saw in EOG. It's one of my favorites. Yes, I do hold shares in EOG. I resisted for quite some time, but a year or so ago, I forget when, I bought EOG when it expanded in the Eagle Ford. I was leery of investing in any more Bakken-only companies and EOG seemed to have it right: a) switching from predominantly natural gas to oil starting a year or so ago; and, then, b) involvement in the Eagle Ford. [Again, I could be wrong on all this; it's just my idle chatter, and world view, which is often wrong. But it seems that it what I recall about EOG.]

Regardless EOG with a recent high of $119 is now up to $123 today. Up $6. Pretty incredible. It was selling for $83 this past July. Let's see some of the links:
Anyway, enough of this.  I can only handle so much excitement in one day.

They Could Start By Allowing Fracking

But I digress.

This is the story at the WSJ: France looks to halt industrial decline. And with a Socialist in charge, France should do just hunky-dory.
France needs to slash payroll taxes and take other measures to reverse the country's declining industrial might, says a much-awaited report commissioned by the Socialist government to help it overhaul economic policy.
"I'm proposing 22 main measures to stop the slide and support the economy," Mr. Gallois said after submitting the report to French Prime Minister Jean-Marc Ayrault. "This is what I call a competitiveness shock."
Mr. Ayrault is set to announce the first raft of economic overhaul measures during a government meeting Tuesday, and is expected to employ some of Mr. Gallois's recommendations, but reject others. It wasn't immediately clear whether the payroll tax idea would be acted on.
The proposals come as the International Monetary Fund is singling out the lack of competitiveness as the major challenge facing France. "The loss in competitiveness predates the crisis, but risks becoming even more severe if the French economy does not adapt along with its major trading partners in Europe," the IMF said in a review of France's economy on Monday.
Unlike other euro-zone countries caught in deeper financial turmoil, such as Spain and Italy, France has yet to detail ways to make national production more competitive.
President Fran├žois Hollande barely mentioned such a path prior to his election in May. But the outlook for the French economy has darkened considerably since then, with growth at a standstill and unemployment above 10% and rising. 
But with unemployment above 10% France is about on par with the US, somewhere between 7.9% and 14.5% depending on what numbers you trust.

And, yes, the Paris Basin in France looks a lot like the Bakken, but the French ban fracking, preferring their reliable source of oil from Libya instead.

More Global Warming, Another Perfect Storm? -- Page A3, WSJ: A New Storm Threatens -- A Nor-Easter to Follow Sandy

Updates

November 6, 2012: Weather Channel predicting quite a cold winter storm for tomorrow. I did not know this until now: Newark, New Jersey, recorded a record low temperature last night -- November 5, 2012. 
Original Post

Link here to a new storm threatens, WSJ.
A coastal storm that could bring flooding and wind gusts as high as 65 miles per hour was expected to strike the storm-battered New York-New Jersey region Wednesday, threatening recovery efforts as authorities raced to find shelter for thousands and considered the possibility of bringing in trailers.
Officials warned the new storm could slow utility companies' efforts to restore power to hundreds of thousands of people in the area who still don't have power one week after superstorm Sandy devastated the region. The new storm could also cause additional power losses, authorities said.
More global warming:
With frigid temperatures afflicting the region, officials said restoring power and finding shelter for those displaced by the storm remained top priorities. The supply of gasoline entering the region from interstate pipelines increased, but long lines at the pumps continued to frustrate motorists. And the region's mass-transit system struggled with the resurgent demand of the new workweek.
Secretary of Homeland Security Janet Napolitano said authorities were examining all options on housing, including available apartments, hotel and motel rooms.
"And, yes, we will look at trailers and prefab housing that were used in other areas of the country," Ms. Napolitano said.
Cape Code and possibly the Boston area will also be hit hard by this storm. Gloucester will also feel this storm. Gloucester is on the "other cape" in Massachusetts: Cape Ann. From wiki:
The F/V Andrea Gail was a commercial fishing vessel that was lost at sea with all hands during the "Perfect Storm" of 1991. The vessel and her six-man crew had been fishing the North Atlantic Ocean out of Gloucester, Massachusetts. Her last reported position was 180 mi (290 km) northeast of Sable Island on October 28, 1991. The story of the Andrea Gail and her crew was the basis of the 1997 book The Perfect Storm by Sebastian Junger, and a 2000 film.
I drive Miss Daisy to Gloucester almost every weekend. We start our Saturday or Sunday with breakfast at the Morning Glory cafe overlooking the Gloucester Bay.

Pages A3 and B3 of the WSJ have the most important/relevant/interesting stories in the paper. "Page 3" is also a well-known feature in the UK.

China Moves Into Medicine Bow, Wyoming; Coal --> Gasoline

Link here to the WSJ: Sinopec moves into small US town.
An arm of state-controlled Sinopec Group, also known as China Petrochemical Corp., is planning to build an advanced facility there that will convert coal into gasoline, which will capture and reuse carbon dioxide otherwise emitted into the atmosphere. 
Sinopec brings to the potentially expensive and complicated project less pricey Chinese components and materials. It may also open up the doors to attractive Chinese capital.
"What's important obviously is their ability to source internationally components here," said Bob Kelly, executive chairman of Houston-based DKRW Advanced Fuels, which contracted Sinopec and will own and operate the plant through a unit. "They have one of the most competitive procurement arms I think world-wide."
**************************

DKRW? I first blogged about DKRW more than a year ago. I was struck by their comments at their website back in June, 2011:
This is what DKRW was saying on their website just one year ago:

The most conservative estimates of North American natural gas supply demonstrate a serious shortfall in production for the foreseeable future. With short supply driving prices higher, we are now seeing some of the highest natural gas prices in the world here in the Southwestern United States and Mexico. With so much of our energy infrastructure and industry tied directly to natural gas, it is necessary to identify and deliver more competitive supply options in order for the US and Mexican economies to grow.
 Wow, how times have changed. I wrote DKRW when I first saw this at their website, but did not receive a response. Subsequently they changed their views to reflect reality.

Connecting Dots: WB, BRK, BNI, NGL, AZ, CA

I'm getting closer and closer to wrapping up the Bakken blog and moving to a new subject: Berkshire Hathaway portfolio. Truthfully, I doubt I could ever give up the Bakken blog but the trivia one could find about Warren Buffett's mutual fund appears to be unlimited.

Today, of all places, there are dots to connect between the RBN Energy link and Warren Buffett. But perhaps when you own a railroad the size of BNSF (Burlington Northern Santa Fe) it's easy to find Warren touches almost everything west of the Mississippi.

From RBN Energy today:  the huge NGL underground storage facilities serving California.
Because out in the Arizona desert there are these two old and fairly unknown underground salt facilities for storing NGLs - Bumstead Storage near Phoenix, AZ, and Adamana Storage in Holbrook, AZ. They have been around for a long time. 
Interestingly they now find themselves located right between the West Coast NGL market and a lot of the new shale plays in Permian and the Rockies. 
Think about that for a minute. 
Together these two facilities provide about 6 million barrels of NGL (LPG) storage capacity.  That may not sound like much in the context of Mont Belvieu, but it is huge in the West Coast market.  Could it be that they are in a really good spot with what is going on in the new world of shale gas derived NGLs?
Check out the map [at the linked site].  Holbrook is on BNSF, only about 500 short railroad miles away from the Permian Basin.  Bumstead fortunately has connections with both BNSF and Union Pacific (UP), making it an ideal way station between the two rail systems.
It would be a stretch to think that Warren and his team were even aware of these two remote, "old, and fairly unknown" (and relatively small) NGL storage facilities when they bought BNI, and if they did, the information did not factor into the decision to buy or not buy.

Coincidentally, and only slightly related, Independent Stock Analysis, had an interesting piece on natural gas as an investment today. The ISA thesis, if I understand it correctly, there has always been a time lag between natural gas prices and shifts in oil and gas production. The bottoming out of natural gas prices will eventually turn to the upside (and when it does, it will be quite dramatic, I suppose).