Monday, November 26, 2012

Zenergy Has a Nice Well in Marmon; BR With a A Great Well in Haystack Butte;

Heckman? SpongeBob SmartPants? SmartSponge (Robert Kennedy, Jr, sits on the board)? at
Companies such as Heckmann Corporation, who derive the majority of their business from hauling produced water off-site, look to be the most likely to lose business as the natural progression from off-site disposal to on-site reuse takes hold. Larger companies, perhaps sensing the shifting landscape, have begun to move to recycling their produced water. In fact, Chesapeake Energy, a leading natural gas producer, now recycles all of the water it recovers from its wells according to this recent article from the WSJ titled "Drillers Begin Reusing 'Frack Water."
RBN Energy: new crude oil pricing? See the update on Enterprise Crude Houston (ECHO) Brent, WTI, ECHO?

Active rigs: 185 (steady, upward trend)

The wells coming off the confidential list Tuesday:
  • 20708, 1,352, Zenergy, Nelson 24-13H, Marmon, t8/12; cum 20K 9/12;
  • 21923, 2,968, BR, Dayton 14-22MBH, Haystack Butte, t10/12; cum --
  • 21979, drl, CLR, Alpha 3-14H, Camp,
  • 22067, 758, Liberty Resources, Sylte 156-101-10-3-1H, Tyrone, t6/12; cum 49K 9/12;
  • 22369, 304, OXY USA, State Jablonsky B 1-36-25H-142-95, Murphy Creek, t5/12; cum 16K 9/12;
  • 22649, drl, WPX, Charles Blackhawk 31-30HA, Heart Butte,
  • 22813, 646, Zavanna, Sylvester 1-32H, Springbrook, t9/12; cum 15K 9/12; 
For newbies, a reminder: wells with high initial production numbers are posted here.

Foreshadowing The Great Recession of 2013: Longshoremen Don't Want To Strike ...

... either that or they saw what happened to the Hostess/Twinkie union employees when they went on strike ... which lasted about a week ...

Link here to KX News.
Longshore workers say they don't want to strike grain terminals in the Northwest, and want to continue contract talks with terminal owners beyond a Wednesday deadline.
International Longshore and Warehouse Union spokeswoman Jennifer Sargent said Monday that they have proposed additional dates for talks to the Pacific Northwest Grain Handlers Association, which represents the owners of 6 grain terminals along the Columbia River and in Puget Sound in contract talks.
This would be up in Portland, Oregon, I suppose. 

About As Clear As One Can Be: Coal Is Dead; Natural Gas Turbines To Benefit

Link here to Wall Street Transcript/Yahoo.
Assuming our six- to 18-month time horizon, the nonregulated energy businesses remain challenged by low gas prices and oversupply of natural gas. Regulated utilities are less sensitive to low gas prices, and actually are positively exposed to low gas prices. The United States energy industry is rapidly evolving or undergoing a significant revision to its landscape driven by a sudden abundance of natural gas. As a result, natural gas prices have fallen from over $10 per MMMBtu to as low as $2. So it's become cheap at the same time that EPA regulations are making many older coal plants uneconomical. The biggest beneficiaries are regulated utilities and U.S. consumer.
Disclaimer: this is not an investment site; do not make any investment decisions based on what you read at this site. But that doesn't mean you can't use some common sense when reading the tea leaves. 

Ten (10) New Reports; Some Huge BEXP Wells In the Alger and Todd; BR Reports a Corral Creek Well, and A Midnight Run Well

Bakken Operations

Active rigs: 185 (steady, up 1 from this morning)

Ten (10) new permits --
  • Operators: Petro-Hunt (4), BEXP (2), CLR 92), Whiting, Sinclair
  • Fields: Hebron (Williams), Robinson Lake (Mountrail), Green River (Stark), Camp (McKenzie), Antelope (McKenzie), Nelson Bridge (McKenzie)
  • Comments: Petro-Hunt remains very busy
The IPs for wells released the past five days were reported earlier; see sidebar.

One well that I did not mention was particularly interesting:
  • 11747, 28, Boh Inc, Nelson 17-1 SWD, McKenzie; now a salt water disposal well; this well was first spud back in 1985, and produced from several formations: Stonewall (68K), Red River (21K), Birdbear (237 bbls); and Duperow (79K)
Some great producing wells were completed:
  • 21769, 3,603, BEXP, Domaskin 30-31 3H, Alger, t101/2; cum --
  • 21772, 2,994, BEXP, Jack Cvancara 19-18 3TFH, Alger, t10/12; cum --
  • 21711, 2,272, BEXP, Rich 30-31 2H, Todd, t10/12; cum --
  • 23529, 1,095, Whiting, Monson 11-35H, Sanish, t10/12; cum --
  • 22815, 1,643, BR, CCU Powell 21-29MBH, Corral Creek, t10/12; cum --; spacing unitized;
  • 22675, 2,640, BR, Midnight Run 11-1TFH, Union Center, t10/12; ; cum --; 
For those who do not know the peculiarities of Corral Creek, highly recommend you click on the link above.

Todd field: western side of the city of Williston is inside Todd field. 

For newbies: note the nice IPs of the Three Forks wells, also.

In addition, newbies may also want to read about the Midnight Run wells

A Disaster Waiting To Happen -- Public Borrowing Without Limits; Menard's Wisconsin Workers Fly to Minot


December 9, 2012: School District Owes $1 Billion On $100 Million Loan
More than 200 school districts across California are taking a second look at the high price of the debt they've taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.
In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school.
Those bonds, known as CABs, are unlike typical bonds, where a school district is required to make immediate and regular payments. Instead, CABs allow districts to defer payments well into the future — by which time lots of interest has accrued.
In the West Contra Costa Schools' case, that $2.5 million bond will cost the district a whopping $34 million to repay.
November 29, 2012: it turns out that Wisconsin schools don't have the only recipe for disasters when it comes to borrowing. From today's LA Times:
Two hundred school districts across California have borrowed billions of dollars using a costly and risky form of financing that has saddled them with staggering debt, according to a Times analysis.
Schools and community colleges have turned increasingly to so-called capital appreciation bonds in the economic downturn, which depressed property values and made it harder for districts to raise money for new classrooms, auditoriums and sports facilities.
Unlike conventional shorter-term bonds that require payments to begin immediately, this type of borrowing lets districts postpone the start of payments for decades. Some districts are gambling the economic picture will improve in the decades ahead, with local tax collections increasingly enough to repay the notes.
CABs, as the bonds are known, allow schools to borrow large sums without violating state or locally imposed caps on property taxes, at least in the short term. But the lengthy delays in repayment increase interest expenses, in some cases to as much as 10 or 20 times the amount borrowed.
Put another log on the fire.
Original Post

Oh, I'm sure there are limits, but they can be raised. When it is other people's money, there really doesn't need to be a limit, does there?

A reader was nice enough to send me this little gem, link to
Wisconsin schools are taking advantage of a three-year-old state law to catch up on maintenance and become more energy-efficient. According to Gannett newspapers, school districts throughout the state have borrowed $134-and-a-half million on energy projects since 2009, without having to get voters’ approval. The law lets school districts exceed their state revenue limits without referendums, in order to borrow for energy projects.
Last year the law was expanded to let schools spread their payments over a number of years instead of just one. And that spurred a big increase in borrowing – from about $9-million in fiscal 2011 to $93-million this year, with around 30 projects throughout the state each year.
The Racine School District has borrowed the most since the revenue cap exemption was adopted – around $42-million, covering almost half its deferred maintenance. Oshkosh officials said they handled about one-fifth of their maintenance needs with a $21-million project.
RSD may have borrowed the most, so far, but the others will catch up now that they see how easy it is.

Memo to self: file under "Recipes."

"For Disaster."

We'll tag this to follow up in 2030 to see how this worked out.


This story was carried alongside another Wisconsin story which was a bit more upbeat, link to
In Eau Claire, Menards’ is looking for 50 good employees to help cover a severe shortage of workers at its store in Minot North Dakota. And those people are needed so badly, the Eau Claire Leader-Telegram says Menards plans to fly them to Minot on a private jet to and from their jobs on a weekly basis – and give them lodging and food while they’re there. 
Data points
  • booming oil patch --> thousands of retail jobs
  • retail workers --> to the oil patch; stores "scrambling" to find workers
  • offer: private jet from Eau Claire to Minot; 4 - 5 days/week in Minot; room and board paid; $13/hour pay + overtime, weekend pay.
I particularly like the "private jet" part.

Speaking of which: any update on the Menard's in Williston?

Am I Mis-Reading This?

Cut-and-paste from the LA Times:
The administration warns that automatic tax hikes set for next year could cripple the holiday shopping season and slash consumer spending by $200 billion in 2013.
What? Holiday shopping season will be over by the time the new taxes take effect. Foreshadowing the Great Recession of 2013.  But I digress.

The above link is the front page story in the LA Times today.
But the White House report warned that "the hard-earned rise in consumer confidence will be at risk if the middle-class tax cuts are not soon extended with a minimum of political drama."

So, Now, Enbridge Rail --- Specifically For The Bakken

From Yahoo In-Play:
Co announced its U.S. subsidiary, Enbridge Rail (Philadelphia) L.L.C., has entered into an agreement with Canopy Prospecting to create the Eddystone Rail Company to jointly develop a unit-train facility and related local pipeline infrastructure near Philadelphia, Pennsylvania, to deliver Bakken and other light sweet crude oil to Philadelphia area refineries. The project is expected to handle 80,000 barrels per day (bpd) in the third quarter 2013 and can ultimately be expanded to receive up to 160,000 bpd for subsequent transport by barge or pipeline to nearby refineries as early as mid-2014. Enbridge will own 75% of the joint venture and serve as operator during construction and operation of the facility.

Saudi's Export Profile During Recent Doubling in Brent Prices

The Oil Drum has another article on peak oil; lots of graphs.

The final paragraph:
The above Saudi estimate, based [on] the six year decline in their ECI ratio, seems to be impossibly pessimistic, but then one has to ask the following question: Why would the Saudi net export profile be materially different from what other prior case histories, with similar ECI declines, have shown? (Note that there are certainly case histories of temporary ECI declines, e.g., the Saudis themselves in the early Eighties, in response to falling oil prices, but the 2005 to 2011 decline in their ECI ratio corresponded to a doubling in annual Brent prices.)
The ECI ratio as defined by BP: ratio of domestic total petroleum liquids production to liquids consumption.

So, if I understand this correctly, the ECI takes into account recessions, decreased demand, conservation, etc., etc. So, perhaps Saudi was just playing nice with its OPEC neighbors and letting them take up the slack.  Saudi says they have more than enough oil to meet any shortfall.

Economic Development: Valley City and John Deere

Link to KX News.
The John Deere factory in Valley City is holding a groundbreaking Tuesday for its $20 million plant expansion, a 100,000 square-foot addition.

The factory makes air seeders and tillage equipment and has about 325 workers. The company says that up to 100 new jobs are expected with the expansion.
I don't know about you, but for North Dakota, a $20 million plant expansion is not trivial. For newbies, Valley City is in eastern North Dakota, nowhere near the oil patch. 

Considering the large number of available workers in other states and other metropolitan areas, I find it very, very interesting that John Deere is expanding in North Dakota. Speaks volumes.

If interested, one might want to superimpose the three maps: a) where the jobs will be the next few years; b) the right-to-work map; and, c) the electoral map.

By the way, this article might shed some light on why John Deere is expanding in North Dakota: air seeders -- how big will they get?

Trucks, Trains, Pipelines, and Barges


November 27, 2012: in a comment, someone asked about the relative contribution of rail, truck, barge, and pipeline for shipping Bakken oil. A reader  provided me this PDF, from Alter Logistics Company.

Original Post

This is really something: a Bakken shale logistics conference in Houston -- the second one.
This conference is response to the sudden challenge being faced by U.S. petroleum companies who are pumping crude out of the Bakken shale in North Dakota and Montana. The sudden increase in volume has resulted in the problem that the companies are having problems shipping the crude to the refineries.
Truck and rail are being used and the volume has put an enormous strain on the supply of tank cars and available tank trucks.
This conference is a follow up to our highly successful 2012 Bakken Crude Oil Logistics Conference, where we had over 135 attendees, numerous sponsors, and a great lineup of speakers. This event is organized to help bring together the crude producers, the rail companies, truckers, barges, and those who provide technology solutions to help develop a more efficient supply chain.
It looks like the only major mode of transportation not moving oil out of the Bakken: airlines.

Announcement here: Bakken Crude Oil Logistics Conference, March 7 - 8, 2013. 

Another Bakken Deal: Magnum Hunter and Samson Resources


November 27, 2012: $1,500/acre bonus seemed a bit low compared to some of the numbers we've seen in the Bakken, so let's look at what state auctions have brought in Divide County:
  • November, 2012: no Divide County acreage.
  • August, 2012: $1,371.41/acre bonus in Divide.
  • May, 2012: $1,534.06/acre bonus in Divide.
  • February, 2012: $1,760.67/acre bonus in Divide.
  • November, 2011: $150.48/acre bonus in Divide (no typo).
  • August, 2011: $1,439.73/acre bonus in Divide.
  • May, 2011: $1,050.02/acre bonus in Divide.
  • February, 2011: $755.15/acre bonus in Divide.
  • November, 2010: $948.12/acre bonus in Divide.
  • November, 2009: $440.87/acre bonus in Divide.
  • November, 2008: $582.63/acre bonus in Divide.
  • November, 2007: no acreage auctioned.
  • November, 2006: $82.10/acre bonus in Divide.
It looks like, based on those numbers, $1,500 was a fair price. In a large tract of land, some of the acres will be better than others. The $1,500/acre was at the upper end even in 2012. Compared to what they may have originally paid for the acreage ($90 back in 2006?), $1,500/acre is a pretty good return.

Original Post

This link will take you to a PDF.

A huge "thank you" to "anon 1" for sending me this link.
Magnum Hunter Resources, through its subsidiary, Bakken Hunter, LLC, will purchase 20,000 net Williston Basin acres in Divide County, North Dakota, from Samson Resources, for $30 million in cash.

In addition to the acreage, Magnum Hunter will also acquire approximately 310,000 boe of proved developed producing reserves and approximately 192 net boepd.  
This represents the second Samson Resources sale in the last couple of weeks. The other one involved CLR.

Back-of-the-envelope: $30 million/20,000 --> $1,500/acre. Is the math correct? There is already production in some of those areas, as noted.

This has been typed quickly, uploaded quickly; there may be errors. I will go back and edit, as necessary.

Defining Terms: Wildcat, Development, Extension

A reader is wondering about the difference among: wildcat, development, and extension wells.

This was my unedited, quick answer:
That's a very, very good question.

Wildcat is probably the easiest to explain: there's much more to it, but two factors -- drilling in an area that has not yet been designated a field, and a "six-mile" rule. I could be way wrong on this, but it appears that even if a company drills inside a designated field, if there is no other activity within six miles, it is deemed a wildcat. I have seen some wells that are designated "wildcats" in the Bakken and they are literally sitting in a sweet spot, but because there is no other local activity, they are considered wildcats. For me, the designation of "wildcat" in the Bakken has lost a lot of its historical meaning.

"Development" and "extension" are a bit more difficult for me to understand. Perhaps just a continuum. Regardless, "development" wells are additional wells in the same section or, I suppose, adjacent sections, where there are already producing wells.

But it's a fine line. I will post this as a stand-alone and see if a roughneck has time to set me straight.
A much better answer:
This is probably the best source: at this google book link.
Wildcats: as noted above
Development: as noted above
Extension: wells that will be drilled at the perimeter of where known reservoirs are.

I've learned something. I never paid attention to the "extension" designation before.

Deadline for the Long-Term Unemployed -- WSJ

Link here to deadline looms for long-term unemployed, WSJ.
More than 40% of the nearly five million Americans who receive unemployment insurance are set to lose those benefits if federal programs expire as scheduled at year-end.
Some economists worry that cutting off those benefits could harm the economy by leaving millions of Americans with less money to spend on everything from food to fuel. Others argue that overly generous benefits are helping to prolong joblessness.

Congress has repeatedly extended unemployment benefits amid high joblessness, and it could do so again. But the programs have gotten caught up in the fight over the "fiscal cliff," a package of tax increases and spending cuts due to take effect early next year.
Some Democrats are pushing to extend benefits again, but the programs must contend not only with Republican opposition but also competing priorities such as business and individual tax breaks.
  • at least one Hostess/Twinkie employee said unemployment benefits better than the $35,000 job
  • American Crystal union members have voted down, three times, and counting, a contract offering a wage increase
  • so much noise about the fiscal cliff, the long-term-unemployed story is having trouble being heard
  • the number on extended unemployment benefits continues to drop; smaller constituentcy
  • no election for two years

The Flip Side of the Natural-Gas Boom, WSJ

We've talked about the "importance" of page three in newspapers. This story occupies the entire page today, except of course for the ads, including Warren's ad for NetJets, the Signature Series. No, the NetJets are not a basketball team. But I digress.

Link to natural-gas boom's flip side, WSJ: A long article on the demise of King Coal and the rough spot West Virginia is in. It's pretty much all about the low cost of natural gas, but there is no mention of the administration's role in killing coal, unless I missed it. My hunch is that coal and natural gas would be competitive if left to market rules, but the administration's goal to kill coal certainly must have played a role.

Haven't Heard About "Push-To-Talk" in A Long, Long Time

Link here to wireless firms chase push to talk, in the WSJ.

Wow, it's taken a long, long time. Since 2005. I remember following this story with interest back in 2005 when it was first announced. In fact, I think I owned shares in Sprint at that time, long since sold.

From the link:
Competition is heating up among wireless carriers seeking to grab push-to-talk customers as Sprint Nextel Corp. enters the final stages of closing the legacy Nextel network purchased for $35 billion in 2005.
Push-to-talk service lets users communicate instantly as they would with a walkie-talkie. The niche service, using so-called iDEN technology, is popular in industries such as manufacturing and construction, and Sprint is battling against Verizon Wireless and AT&T Inc. to hold on to such customers. Aside from boosting subscriber rolls in a tight market, adding former Nextel customers gives carriers a foothold to sell more services to business customers.
I'm surprised it's taken this long. I assume folks can program smart-phones to emulate "push-to-talk" already, but maybe not.

COP: To Sell Its Minority Interest in the Caspian


November 27, 2012: India will buy COP's assets in the Caspian.
Oil & Natural Gas Corp.'s plan to pay as much as $5 billion to ConocoPhillips for a stake in a Kazakhstan oil project could herald more such deals by Indian energy companies seeking to offset declining domestic production in the face of rising energy demand.
The purchase by ONGC Videsh Ltd., the state-owned company's overseas investment arm, will likely help India's largest explorer to arrest a steady decline of oil and gas production in recent years.
Original Post

I wasn't going to post this as a stand-alone post; rather just post a link at the COP page.

The story:
ConocoPhillips is selling a minority interest in drilling sites off the coast of Kazakhstan for about $5 billion as it continues to downsize.
The Houston company has aggressively sold refineries, pipelines and other assets over the past few years to remake itself as an independent oil and gas producer. It has sold more than $20 billion in assets and investments since 2010. 
I could be wrong, but this seems to be shouting: we are going to focus on the continental US and Canada.  COP operates in the Bakken through Burlington Resources.

By the way, whether the area under discussion is the very same area or not, it's probably close enough to remind readers that the MillionDollarWay posted a story about this area almost exactly one year ago: the Caspian Sea is turning out to be a bust. The link to the original story is still there, surprisingly.

Trican, Well Services Company, In Minot Since Earlier This Year; Fracking List Updated

One of the most visited pages on this site is the "Top Ten Fracking Companies" in Williston, that was first posted back in 2011. Of course, over time, things have changed, but because I am not in the Williston area right now, it's impossible to really keep track of what's going on.

So, the list is subject to errors.

I received an e-mail this morning suggesting that two of the companies (GasFrac and Key Energy) are no longer in the Bakken, and that I have missed at least one company, Trican.

From its website:
Trican is an international pressure pumping company with operations on four continents and corporate headquarters in Calgary, Alberta, Canada. Trican Well Service provides pressure pumping services to the United States through its US operations. With US regional headquarters in Houston, Texas, and operational facilities in Texas, Oklahoma, Arkansas, Pennsylvania, and North Dakota, Trican provides pressure pumping services to the Barnett Shale, Fayetteville Shale, Haynesville Shale, Woodford Shale, East Texas, the Eagle Ford Shale, the Permian Region, Northwest Oklahoma, the Bakken Shale and the Marcellus region.
In 2007, Trican Well Service Ltd. acquired Liberty Pressure Pumping L.P., a provider of pressure pumping services in Texas. With a solid base of employees, equipment and service excellence, Liberty was a strategic addition to Trican’s growing international operations, and was re-branded to Trican in 2009. In early 2010, Trican acquired a private stimulation services company based in Shawnee, Oklahoma, increasing the Company’s fracturing horsepower capacity and bringing on additional acidizing assets. 
Wow, that sounds familiar, but a quick googling of the MillionDollarWay did not yield any other Trican hits. So, this may be the first Trican posting on the site.

Let's see: if they got to Minot last May (2012), this will be their first North Dakota winter. There's a lot of misinformation out there about winters in North Dakota. They really aren't that bad. Just joking. Smile. Good luck. Wishing Trican all the best.

And please correct me if the information is wrong about the other two companies mentioned near the top of the post. Thank you. Key Energy website says they are still located in Williston.

Oh, one last thing: located in Minot. Very, very interesting.

The Bakken Resonates In Washington State

This link was posted among other links earlier, but it's such a great story, I don't want it to get lost. A reader sent it to me: thank you.

The headline: oil boom in center of country resonates on Washington shores.
The arrival in Tacoma last week of a 103-car train from North Dakota was a sign of just how swiftly the sudden abundance of oil in this country is shifting business even in an area 1,200 miles distant from the booming oil fields.
The first few paragraphs:
When recent headlines proclaimed that the United States was poised to become the world's largest oil producer by 2017, the import of that news may have seemed distant and abstract. Yes, the oil fields of North Dakota, Montana and Texas are alive with new activity, but for Northwest residents, the effects are not something they see every day.
That fact is quickly changing in businesses from Olympia to the Canadian border. The arrival in Tacoma last week of a 103-car train from North Dakota was a sign of just how swiftly the sudden abundance of oil in this country is shifting business even 1,200 miles away from the booming oil fields.
That BNSF Railway train was the first of what will ultimately become weekly trains bringing oil to Tacoma from the new oil fields opened up by hydraulic-fracturing technology in the country's northern Great Plains.
The train's arrival and the construction of a new $8 million rail yard at the Tacoma Tideflats refinery of U.S. Oil and Refining is indicative of a shift in the source of crude shipments to Puget Sound refineries.
So many story lines.  One could start with the naysayers back in 2007 but will let that go.