Saturday, February 2, 2013

Oakdale Field Has Been Updated

Oakdale field has been updated; CLR testing the lower benches of the Three Forks in this oil field. At the link, spend some time looking at the cumulative totals of some of the wells, particularly the Whitman.

The Whitman, a most incredible well.

20210, 803, CLR, Whitman 2-34H, 4-section spacing; Oakdale, F; t9/11; cum 602K 11/12:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Poe Field Has Been Updated

Poe field has been updated.

If you want to see some nice wells, check out the wells in this field. Be sure to look at the cumulative production and months since the wells have been fracked.

This field is right in the heart of one of the best sweet spots in the Bakken, or perhaps just slightly west of the sweet spot.

This is KOG's Koala field.

It's a nice field to compare KOG head-to-head with BEXP, CLR, Zavanna, and SM Energy who also have a well or two in this field. I remember folks "complaining" about BEXP "hyping" their IPs. KOG is matching BEXP's IPs in this field, and I haven't heard a word about KOG hyping their IPs. Just saying. Whatever. The proof will be in the one-year, three-year, and five-year production totals. And we're not there yet.

A Note to the Granddaughters

Our country's GDP contracted this most recent quarter, with a GDP of -0.1%. Someday that might make sense to you.

I continue to read David Graeber's Debt: The First 5,000 Years, c. 2011. Of course no one knows how long the book had been in draft or a sparkle in the author's eyes before it was available to the general reading public.

Out of context, from the last chapter, nearing the end of the book, in which Mr Graeber asks, "So, what is capitalism, anyway?"
All this raises the question of what 'capitalism" is to begin with, a question on which there is no consensus at all. The word was originally invented by socialists, who saw capitalism as that system whereby those who own capital command the labor of those who do not. Proponents, in contrast, tend to see capitalism as the freedom of the marketplace, which allows those with potentially marketable visions to pull resources together to bring those visions into being.

Just about everyone agrees, however, that capitalism is a system that demands constant, endless growth. Enterprises have to grow in order to remain viable.

The same is true of nations. Just as five percent per annum was widely accepted, at the dawn of capitalism, as the legitimate commercial rate of interest -- that is, the amount that any investor could normally expect her money to be growing by the principle of interesse -- so is five percent now the annual rate at which any nation's GDP really ought to grow.

What was once an impersonal mechanism that compelled people to look at everything around them as a potential source of profit has come to be considered the only objective measure of the health of the human community itself.
Again, note: our economy contracted this last quarter, very soon after the worse (?) recession in modern US history.  And pundits would be happy with a GDP of 3%.


I won't back down:

I won't back down, Tom Petty
The member you may not recognize is Mike Campbell, not Brian May.

What a great song! What a great country!

And then this:

Rhiannon, Stevie Nicks


Rhiannon, Stevie Nicks, Fleetwood Mac

This Is An Amazing Story: Right Place, Right Time, Right Industry

A reader alerted me to the amazing Grand Forks Herald story:
About six years ago, R&R Contracting, a Grand Forks builder of railroad infrastructure, was looking for its next opportunity after the recent ethanol boom.
“When that thing started dying out, we said, ‘What’s next?’” said Mark Reimer with R&R.
The next big thing turned out to be pretty big. And it was two things.
As North Dakota’s two primary economic engines of energy and agriculture picked up steam, R&R found itself in the middle of a rail shipping boom for oil and agricultural products.
And as the twin booms have lifted North Dakota’s economy, they have helped make R&R the seventh-biggest railroad construction and design company in the country, a status they just learned about last year, to their pleasure.
Agriculture, crude oil, rail. Warren Buffett is smiling today.

Idle Rambling On The Dreaded Bakken Decline Rate


February 3, 2012: Extremely important update. See comments below. It was pointed out that the BR Kummer well below is "takeaway constrained" and that's why the monthly production has not decreased over time.

That pretty much takes most of the wind out of my sail regarding thoughts on the Bakken decline rate but there may be some validity in some of what I wrote. Certainly the linked Oil & Gas Journal article is still relevant.

If the BR Kummer well is takeaway constrained, and that certainly appears accurate, a whole new story line opens up. Maybe more on that later. But if this well is producing 20,000 bbls/month and is takeaway constrained, it speaks volumes about some of the better sweet spots in the Bakken.

Original Post

A few weeks ago I mentioned in passing that operators might be getting a handle on the "dreaded Bakken decline rate."

One example I cited:
  • 22050, 2,806, BR, Kummer 41-30MBH, Blue Buttes, t5/12; cum 165K 12/12; 2-section spacing; completion report not seen (1/27/13); this particular well lies less than a thousand feet from the "Helis Grail." At the time of the original post, the data only through November; this time another month has been added, December, and still no decline. 

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

In the process of looking for something else along the lines of decline rates, I happened to come across an old posting. I had forgotten I posted it, suggesting I was posting quickly that day and didn't have a chance to reflect on it.

I am surprised that I have not seen more in the chat rooms about this.

I have had no formal training in the oil and gas industry. I am a novice, and know relatively little, and what I "think" I know might be "way wrong." Readers remind me of my mistakes, misunderstandings, misreadings, and typos on a daily basis.

Be that as it may, I feel I have a very, very good understanding of the relationship of IPs and overpressurization, with or without natural gas.

I also have a "picture" of what a conventional pool of oil looks like and an unconventional reservoir, or tight oil, looks like. I have seen photographs of the shale from which "tight oil" is extracted, which helps. I have never seen a live video or a photograph of a conventional pool of oil; something tells me my "picture" of a conventional pool is not quite accurate, but probably not too far off the mark.

A thought experiment.
First: A one-liter bottle of Coca-Cola, unopened. Shake vigorously. Open. Let settle. Put in a very small-diameter straw (say, the size of a ball-point pen refill). Suck out the remaining cola. Conventional pool of oil.

Then: A two-liter bottle of Coca-Cola, previously opened and one liter of the liquid cola removed and replaced with flour. Let settle. Shake vigorously. Open. Settle. Put in a very small-diameter straw (say, the size of a ball-point pen refill). Suck out the liquid but leave the flour behind. Tight oil.
End of thought experiment.

Now, this "cut and paste" from an article in a trade journal written by folks who are trained, educated, and experienced in the oil and gas industry:
For continuous shale oil fields such as the North Dakota Bakken, the decline rate may not be as steep as those experienced in conventional reservoir oil fields. Upon well saturation of the development area with four wells/sq mile, E&P companies will continue to perform well refracs and drill infill wells as long as well economics are positive.
Read that again: "...the decline rate [in the Bakken] may not be as steep as those experienced in conventional reservoir oil fields."

Two thoughts come immediately to mind:
a) averaging
b) the long game
Taking them in order:

First, averaging. Go to the NDIC Basic Services module and go sequentially through the well files, starting with #1 through #22000.  I'll do the first 20 for you:
  • 1: DRY; 2: DRY; 3: DRY; 4: DRY; 5: DRY: 6: DRY; 7: DRY....okay, enough of that
Let's move ahead to the 10,000 series:
  • 10001: DRY, 10002: 0; 10003: 0; 10004: 0; 10005: 0; 10006: 0 ... well, not much better
Let's move ahead to the 14000 series:
  • 14001: 217K; 14002: 514K; 14003: DRY; 14004: 165K; 14005: 396K, 14006: PNC; 14007: PNC; 14008: PNC; 14009:  337K; 14010: 573K (mostly Red River wells from 1997 time frame)
Now the 16000 series:
  • 16000: 312K; 16001: 68K; 16002: 32K; 16003: PNC; 16004: DRY; 16005: PNC; 16006: PNC; 16007: 61K; 16008: 829K (Red River); 16009: PNC; 16010: 81K (mostly Madison wells from 2006)
So, early on: mostly dry holes; then in the early 80s, the 10000 series -- look at all the dry holes. Then the Red River wells from the 1997 time frame but after 15 years, very erratic -- some are still great wells; but many were PNCd.

The 16000 series, Madison wells were really erratic; some good ones, lots of poor one, and many dry or PNCd.

The Bakken wells are too new to get much meaningful data for total production to date, but a) there are "no" dry Bakken wells and a fair number (the majority?) of Bakken wells producing for four years have produced more than the majority of legacy wells producing more than 15 years.

It doesn't take many dry wells to ruin one's "average" production of wells from a given formation. The decline rate for a DRY well is meaningless, but one can do a thought experiment with decline rates for a group of wells if seen as one well.

So, that takes care of "averages" for the moment.

Now, the second point, the long game. Maybe it is more important to look at the decline rate over the entire life of a well rather than just the first few years.

Again, the cut and paste from the trade journal:
For continuous shale oil fields such as the North Dakota Bakken, the decline rate may not be as steep as those experienced in conventional reservoir oil fields. Upon well saturation of the development area with four wells/sq mile, E&P companies will continue to perform well refracs and drill infill wells as long as well economics are positive.
Averaging, and the long game. 

In that "cut and paste" there are two interesting points. The first one: re-fracs. Self-explanatory. The second one, sort of hidden, but this is it: "... upon well saturation of the development area with four wells/section, companies will ... drill infill wells as long as well economics are positive.

With conventional reservoirs, once that first well has been drilled and the development area saturated with wells, that's pretty much the end. However, in an unconventional reservoir, the writer of the linked article suggests that even when a development area is saturated with wells (four wells/section), operators will drill more infill wells as long as the economics are positive.  (By the way, "we" are now up to 14 wells in a spacing unit, and infill drilling really has not begun. Re-fracking on a routine basis certainly has not begun.)

Go back to the thought experiments involving the Coca-Cola bottles. Expand the thought experiment. After the first liter bottle is pretty much empty, lay it on its side and insert ten more straws.

Now, do the same with the second bottle. At any point, turn it on its side and insert ten more straws.

I apologize for mixing apples and oranges in this discussion regarding Bakken decline rates. My hunch is that most folks were not even aware of that. I started out talking about operators getting a handle on the Bakken decline rate and providing an example of a well with just eight months of production (the short game), and ended with talking about the decline rate as discussed in the linked article (the long game).

Even if I am way wrong on my narrative, and/or if I don't make sense, and/or if the thought experiments have flaws, ignore what I've written and do the following (go to the source).
  • read the linked article from the trade journal;
  • follow the monthly production of BR's Kummer well and the newer BR and EOG wells coming on-line

One Step Closer In Wyoming -- State vs Feds in Regulating Greenhouse Gases

From Wyoming, comes this story:
Companies that release carbon dioxide, methane, nitrous oxide and other greenhouse gases are one step closer to being regulated by the state.
On Friday the Senate Minerals Committee approved House Bill 63, which would transfer the regulation from the U.S. Environmental Protection Agency to the Wyoming Department of Environmental Quality.
So, the process is moving along. Time will tell how it works out.
The EPA decided in 2011 to oversee permitting of large sources of greenhouse gasses in states that had shown themselves unwilling or unable to do so. Wyoming sued, protesting that the EPA hadn’t given the state enough time to submit its plan to regulate such facilities. The lawsuit is ongoing.
In the meantime, legislators on the Joint Minerals Interim Committee and industry proceeded to design a process by which the state — and not the federal government — would regulate the emissions.
DEQ regulates other emissions from such facilities. With the federal greenhouse standards, companies must deal with both EPA regulators in Denver and state regulators.
“What you have is dual permitting,” said Todd Parfitt, director of DEQ.
DEQ tried to work with EPA to deliver permits at the same time, but there is no guarantee they can always work together, he said.
Again, the major component of greenhouses gases, water vapor, which composes 95 to 97 percent of greenhouse gases, is not regulated. 

A Note To The Granddaughters on Corporations, Debt, Monks, and Anthropology -- Nothing About The Bakken

A Note To The Granddaughters

I normally don't do this, quote from a book that I am reading and enjoying, but the spirit moved me, and so here it is.

I continue to read David Graeber's Debt: The First 5,000 Years. This is a well-researched book of debt from an anthropologist's point of view.

So, from his chapter on the Middle Ages:
That was the entire point. By doing so, Buddhism, unlike Islam, produced something very much like what we now call "corporations" -- entities that, through a charming legal fiction, we imagine to be persons, just like human beings, but immortal, never having to go through all the human untidiness of marriage, reproduction, infirmity, and death. To put it in properly Medieval terms, corporations are very much like angels.

Legally, our notion of the corporation is very much a product of the European High Middle Ages. The legal idea of a corporation as a "fictive person" (persona ficta) -- a person who, as Maitland, the great British legal historian, put it, "is immortal, who sues and is sued, who holds lands, has a seal of his own, who makes regulations for those natural person of whom he is composed" -- was first established in canon law by Pope Innocent IV in 1250 AD, and one of the first kinds of entities it applied to were monasteries -- as also to universities, churches, municipalities, and guilds.

The idea of the corporation as an angelic being is not mine ....

All this is worth emphasizing because while we are used to assuming that there's something natural or inevitable about the existence of corporations, in historical terms, they are actually strange, exotic creatures. No other great tradition came up with anything like it. They are the most peculiarly European addition to that endless proliferation of metaphysical entities so characteristic of the Middle Ages --as well as the most enduring.

They have, of course, changed a great deal over time.....The ones that came closest were, perhaps unsurprising, monastic orders -- above all, the Cistercians -- whose monasteries became something like the Chinese Buddhist ones, surrounded by mills and smithies, practicing rationalized commercial agriculture with a workforce of "lay brothers" who were effectively wage laborers, spinning and exporting wool....
There are a number of reasons I am enjoying the book, and a specific reason why I chose this passage to quote, I suppose.

First, when I was in eighth grade, or thereabouts, age 14 or so, I suppose, I wanted to be an anthropologist, though I did not know specifically that "word." I just knew the subject area I wanted to study. A friend of my father heard that and gave me my first real adult book to read: The Territorial Imperative by Robert Ardrey.  (The first real adult book that I recall reading at about the same time was a hardback copy of a very different kind of book: it was called something like INA, with the "INA" embedded in "ImagINAtion." It may have been about the Insurance Company of North America. I forget. Be that as it may, I digress.

I first wanted to be an anthropologist, but did not know the correct word, so I said I wanted to be an archaeologist. (Until my dad asked me how much money archaeologists make.)

Fast forward thirty or forty or fifty years, and I find myself traipsing over the English, and more specifically, the Yorkshire countryside. I was enamored with everything English, or more specifically, everything Yorkish, then. Even the ubiquitous Land Rover. Serenity and beauty could be found on the grounds of the old abbeys and monasteries. With a friend, I visited many, and re-visited many more. For some odd reason, the Cistercian monasteries stood out; I remember them best. Perhaps it was because I had recently read The Seven Storey Mountain by a Cistercian monk,  Thomas Merton, whose prayer I had memorized. I learned later he had some skeletons in his closet, or at least one skeleton, but that did not diminish my enthusiasm for the Cistercian story.

It was a joy to find an "anecdote" taking me back to those halcyon days in David Graeber's book on debt. Who would have thought.

Maybe more, later.

25% of 1.1 Degree Over The Past 100 Years -- Solar Flares

Link here to Fox News.
An estimate from NASA said that solar variations caused 25 percent of the 1.1 degree Fahrenheit warming that has been observed over the past century.
So, now we can add 75 percent to the equation:
75% of 5% of 3% of 3% of 1.1 degree F -->  whatever.
Two story lines here:
  • a reminder that we are talking about 1.1 degree F over ONE HUNDRED YEARS; and, 
  • Fox News is slipping. The global temperature is always reported in Celsius. A Celsius degree is 1.8 Fahrenheit degrees (in other words, the degree markings are farther apart on a Celsius thermometer. So a 1.1 degree F = a 0.6 Celsius degree. So, assuming I did the math correctly, we are talking about a 0.6 Celsius degree change over ONE HUNDRED YEARS
But again, the two big questions are never answered:
  • what is the "correct" temperature for the earth? and,
  • who sets the thermostat?
Many have said they want to re-set the thermostat, but no one has said what they want to set the thermostat to.

WPX and The Niobrara

I can't recall if I posted this earlier (I don't think I did) but recent news articles suggest this story might have some legs.  
WPX Energy’s successful Niobrara shale discovery in western Colorado has the potential to significantly increase the company’s natural gas reserves and daily production in ensuing years.
The discovery well produced an initial high of 16 million cubic feet per day at a flowing pressure of 7,300 pounds per square inch.
The well has since been choked back substantially to optimize reservoir performance and ensure maximum resource recovery. Over the past 30 days, it produced at an average rate of 12 million cubic feet per day.
WPX has the lease rights to approximately 180,000 net acres of the Niobrara/Mancos shale play that underlies the company’s expansive leasehold position in the Piceance Basin.

Saturday Morning -- Feds To Allow Slicers and Dicers To Kill Bald Eagles For 30 Years -- Cue Up Connie Francie; Feds Accept 15 Eagle Deaths/Year By Wind Turbines Okay


Later, 11:12 am: Minneapolis Star-Tribune -- Feds okay wind turbines killing 15 eagles/year, more if necessary. There is no limit, but the estimate is "at most," 15 eagles would be killed every year for the next 30 years. Gee, that's ony 450 eagles. Someone told me there are about 400 eagles in the area under consideration. One migratory duck drowns in a waste pond and it's a felony for the oil company. Cue up Connie Francis. No wonder Steven Chu resigned; even he saw the craziness. 
A bitterly contested wind farm proposed for Goodhue County got the go-ahead Wednesday to pursue a permit that would allow it to legally kill or injure eagles, in what could be the first case of federal authorities issuing a license to kill the protected national symbol.
The 48-turbine project would kill at most eight to 15 eagles a year, a number that would not harm the local population, federal officials said in a letter to state regulators. The U.S. Fish and Wildlife Service said its estimate does not include possible strategies to reduce the number of eagles killed and, that if a permit is eventually granted, the goal would be a much lower figure.
So, while the faux environmentalists are upset about sand/gravel pits, they applaud killing unlimited numbers of eagles (and hawks and whooping cranes and ducks), although "at most," 15 eagles/year is the likely worse case scenario.
Original Post

WSJ Links

Section D (Off Duty): not much.

Section C (Review):
Book review: The Theoretical Minimum, by Leonard Susskind and George Hrabovsky -- Physics made (almost) easy;

Book review: P. G. Wodehouse: A Life in Letters, edited by Sophie Ratcliffe, missives from the master.

Section B (Business & Finance):
Coping with the pain of souring Apple shares.

Exxon, Chevron receive big boost from refining.

Is taxing health plans next?

Section A:
Op-ed: The Fish and Wildlife Service is not for the birds -- the federal government plans to allow wind turbines to kill bald eagles for 30 years. Slicers and dicers have no redeeming features. Nada. Except as a tax break for the rich.

From XOM Earnings Call, Killing The Keystone, Rail, Plan B

"Anon 1" alerted me to this Q&A in the XOM earnings call: second question, it really relates to the use of rail for oil movement in North America. And I know that Exxon has a large existing railcar fleet, a diversified and growing liquid footprint. I also read a report recently that Exxon's placed a significant railcar order recently. And so I just wondering do you see rail as a potential solution for taking [ph] barrel production in the event maybe the Keystone is delayed or denied, or if you have other kind of specified or a contemplated use for rail as a bit more permanent solution for oil movement in North America. 

David S. Rosenthal - Vice President of Investor Relations and Secretary: That's an all-encompassing question, so I'll probably step back here for just a second and put it in perspective. First of all, with relation -- or with regard to the Kearl project, we have worked all of the logistics out and we can place all of our barrels and we have the capability to run all those barrels in our own refineries for that first 110,000 barrels a day.
We may elect to put some into third-party refineries, but we do not have an issue in terms of logistics, moving those barrels out of the Kearl project and into the market. As you look a little more broadly, both at the Canadian heavy crude as well as a lot of the crudes such as Bakken, until pipelines are built and some of the things that you mentioned actually come to fruition, there are, today, some bottlenecks across the industry and there's a lot of different modes of transportation being used to move that product to market, of which railcar is certainly one of them, waiting for some of these pipelines to come in.
As you mentioned, we have -- or as you would expect with the size of our business, we have a very large fleet of rail cars, both across all of our businesses, and so that is already a primary mode of transportation for us. We're always looking at that. We're always looking at the logistics and how we can optimize both the placement of our production into the market as well as obtaining advantaged feedstocks for our refining circuit. And so that is an ongoing effort, and there's nothing unusual in that.
In regards to the rumor that you heard, I would just say that's a rumor. I wouldn't have a comment on it specifically, but I can say there's nothing out of the ordinary in terms of what our organization, our supply organization is working on, again, getting our crudes to market for the best value and getting the lowest cost advantaged feedstocks into our refineries and chemical plants.

Week 5: January 27, 2013 -- February 2, 2013

Gasoline at highest price EVER for this time of year.
Gasoline prices headed up; will hit $4/gallon by spring.
2012: best year EVER for average price of oil; will it continue?
WTI-Brent spread widening: Seaway expansion delayed until 4Q13.

Decision on Keystone XL delayed indefinitely.
SecEnergy Steven Chu announces resignation

Economic development
BHI has invested $120 million in Bakken facilities in past 20 months
Random video of new BHI complex west of Williston
$12 million not enough for Dickinson's needed infrastructure 

Bakken operations
Magnum Hunter's Bakken Hunter seeks 264 wells in single case, February dockets.
Is OXY ready to get out of the Bakken?
2,051 wells on the confidential list.
Another look at CLR's plan to target the lower benches of the Three Forks

Whiting has another record-setting well in Twin Valley; another Tarpon Federal well.
Slawson pays $19,500/Bakken acre in recent BLM auction.

Barges to carry Bakken oil to California, Washington State
Barge, rail moving oil to Washington; Washington State having difficulty coping with activity.
Rail will be primary Bakken mover for several years
A first: a multi-grade crude oil loading terminal to be built near Guernsey, Wyoming; will handle Bakken crude; first multi-grade crude oil rail terminal
Calumet considering a new crude oil loading dock on Lake Superior for Bakken oil

Oasis surges 5% in one day.

Disclaimer: this is not an investment site; do not make any investment decisions based on what you read here.