Wednesday, February 6, 2013

Mergers -- Nothing About the Bakken

I don't know if folks recall this story from the New York Times back in 2005:
Blockbuster Inc., the video rental giant, dropped its bid yesterday to acquire the Hollywood Entertainment Corporation, the second-largest video rental chain, citing the likelihood that the Federal Trade Commission would reject the deal on antitrust grounds. 
I remember the story very, very well. Endless opportunities and vendors for television shows and big-screen movies, and yet the FTC was worried about anti-trust issues with regard to two video rental companies. (Are either of them even around any more?)

I am reminded of the story because the American Airlines - US Airways merger is expected next week according to a news station in Dallas-Ft Worth.

99-cent video rentals and the FTC is worried about antitrust, but no such worry for $800-seats on airlines. Extra for bags.

Marathon Reports Earnings

Rigzone is reporting:
Marathon Oil Corp.'s fourth-quarter earnings fell 41%, partly due to write-downs and other charges, and the company fell short of analysts' expectations as high taxes and exploration costs offset increased oil and gas sales.
Marathon Oil spun off its downstream and petroleum assets in 2011, creating Marathon Petroleum Corp., in order to focus its drilling efforts on oil-rich unconventional fields in the U.S. The company's profits from oil and gas operations have risen in recent quarters as its production has exceeded expectations.
In the fourth quarter, the company reported a profit of $322 million, or 45 cents a share, down from $549 million, or 78 cents, a year earlier. Taking out items such as impairment, pension settlement and unrealized gains on crude-oil derivative instruments, earnings from continuing operations fell to 55 cents from 78 cents. Revenue jumped 11% to $4.24 billion. Marathon's fourth-quarter results came in 12 cents under the 67 cents per-share forecast of analysts polled by Thomson Reuters, who had anticipated revenue of $3.93 billion.
MRO continues to trade near it's 52-week high, dropping a bit today. Unremarkable.

Louisiana LNG to Japan -- Another Incredible Story

"Anon 1" sent this very incredible story.

JapanToday is reporting:
The operator of Japan’s crippled Fukushima nuclear power plant said Wednesday it plans to buy 800,000 tons of light liquefied natural gas (LNG) annually from the United States as it looks to cut its fuel bills.
Tokyo Electric Power (TEPCO) said it had agreed to buy 400,000 tons a year from Mitsui & Co trading house, and was in final talks with Mitsubishi Corp trading firm for the same amount. Both will come from the U.S. Cameron liquefaction project to be operated in Louisiana.
The power company says it wants the LNG every year for two decades, starting 2017, and has already secured a further 1.2 million tons of light LNG, mainly from North America.
Just the beginning. 

Decline Rates and EURs; Bakken-Type Curves; Economics


 April 11, 2013:
From the Oasis corporate presentation, September, 2012, a PDF, slide 26, middle Bakken type curve and economics.
  • Average EUR type curve: 600K bbls (range 450K to 750K)
  • Average cost of well: $8.8 million
  • Average cumulative Mboe, at 365 days: 111K
  • Price of oil: $90 --> $10 million at the wellhead
  • 111/600 = 18.5%
Original Post

Another article on the dreaded decline rate of the Bakken. I debated whether linking it or not.

Let's say for point of argument that the average Bakken well has an estimated ultimate recovery of 400,000 bbls of crude oil.

The Bakken produces the majority of that oil in the first few years, and then tapers off. But the EUR, for the sake of this argument, will be 400,000 bbls of crude oil.

Now, for sake of argument, let's say there was no decline rate but the EUR remained the same. The initial production would be lower but production would not vary, and the wells would produce 400,000 bbls of crude oil.

So, I don't get it. With regard to EURs, who cares what the decline rate is?

Actually, I can't think of a better scenario. Operators and their investors get their money back in two or three years; they don't have to wait twenty years for payback.

I wonder if everyone on the East Coast would be happy if Bakken-centric oil companies would simply store oil on site, and put the identical amount of Bakken oil into the pipelines each year for forty years with EURs of 400,000 bbls of crude oil. Thus, no decline rate coming out of the Bakken.


The Bakken-centric operators certainly don't seem too worried about the dreaded decline rate. In the North Dakota state lease yesterday, companies were still willing to pay $13,000/acre for good Bakken acreage.  Without the Bakken, these acres would be going for $25/acre. Last month, one operator paid a record $19,500/acre in the better Bakken at the Federal lease sale.

Again, I don't know why non-operators are so worried about the decline rates. One would think if anyone should worry, it would be the folks paying the bonuses for these leases.


Here's a well with a typical Bakken decline rate:
  • 17152, 937, EOG, Wayzetta 15-05H, Parshall, short lateral, t7/09; cum 573K 12/12;
The first six months of production:


The last (most recent) twelve months of production:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Again, it's the EUR that's important; not the decline rate. This well is a SHORT LATERAL. It was completed in July, 2009 -- it has produced about 3.5 years. Bakken wells are expected to produce 39 years. But again, regardless how long they produce, it's the ultimate recovery. And this is PRIMARY RECOVERY.

Global Warming to Hit Boston, New England This Weekend -- Finding Nemo

Boston's Winter Storm of the Century: Nemo


February 9, 2013: Boston nearly sets all-time record; currently Nemo ranks #5. And I think the traffic ban was the single most important factor that prevented more problems; along with shutting down the bus and subway system at the same time. People hunkered down and most did fine. The coastal areas were hit hardest with storm surge.

February 9, 2013: 40 inches of snow in Connecticut; at least five deaths;

February 9, 2013: Nemo sets a new, all-time snow record for Portland, Maine. The previous record was set in 1979. The "global warming" house of cards continues to topple. It is generally agreed that the warming stopped sixteen years ago.

February 9, 2013: It is being reported that total snowfall for this winter in Boston is now slightly above average for this time of the year, and there's at least six more weeks of winter.  Mother Nature having the last laugh.

February 8, 12:37 am: Christian Science Monitor, up to 36 inches; winds of 65 mph; coastal floods;

February 7, 11:48 pm: CBS New York, blizzard warning. 

February 7, 11:47 pm: weather channel update; historic storm?

February 7, 2:15 pm, CNBC weather: the talking head question -- "why is it so difficult getting a handle on this storm -- lots of snow, or no snow?" Okay, so the storm is less than 48 hours away and "they're" finding it difficult to even determine if there will be snow in NYC from this storm. On the other hand, with absolute surety they tell us the global temperature will be 3.5 degrees warmer in 2035.

February 7, 3:49 am statement:
Locations... much of New Hampshire eastward to central and
southern Maine excluding the immediate coast.

* Hazard types... heavy snow possible... with blowing a drifting.

* Accumulations... snow accumulation of 14 to 24 inches.

* Timing... snow will begin falling late tonight and continue
through at least Saturday morning. Snow will be heavy at times
Friday night into Saturday morning. The snow should taper off
and end Saturday afternoon.
Original Post

Headlines for Nemo:
So, a year ago, to the best of my knowledge, no one predicted that the storm of the century would hit Boston in February, 2013, but yet, we know with certainty that the earth's temperature will increase 3.5 degrees by 2035 (the new slogan: "3.5 in '35"). Back in November, 2010, the Christian Science Monitor reported:
Global temperatures are projected rise 3.5 degrees C. over the next 25 years, the International Energy Agency said Tuesday, meaning that governments worldwide will have failed in their pledge to hold global temperature at a 2-degree increase.
So, a year ago not only did the East Coast state governments not prepare for Hurricane Sandy, but to the best of my knowledge there has been no planning this entire past year for this weekend's storm which we now learn at the last minute could be the winter storm of the century. Talk about a snow job. But yet we know that because we failed to pledge to hold the earth's temperature to only a 2.0-degree increase through 2035, we are now doomed to a 3.5-degree increase. ("We" failed to pledge when Canada withdrew from the Kyoto Protocol.)

So, 3.5 degrees. Not 3.3 degrees or 3.7 degrees, but 3.5 degrees. Over 27 years or more -- depending how long ago this dire prediction was first forecast.

And I'm not exactly sure how much the difference between 3.5 degrees and 2.0 degrees really means -- for the arithmetically challenged, that's a 1.5 degree change. Over the next 25 years.

And still, no one has said what the "correct" temperature is for the earth is; and, who sets the thermostat. But whoever sets the thermostat, it appears there is good news for the faux environmentalists -- records indicate the earth quit warming 16 years ago. Now, we just have to worry about the earth cooling. Whatever.

Floridians Moving To the Bakken --

A reader sent these two links -- I think there may be audio; turn your speakers down/off.

From Jacksonville, FL, ABC news station, two stories:

Wells Coming Off The Confidential List Thursday

17822, 1,061, Oasis, Colbenson 5792 11-6H, Cottonwood, t10/12; cum 23K 12/12;
22009, 208, Petro-Hunt, Wold 160-94-32A-5-5H, North Tioga, t11/12; cum 16K 12/12;
22836, 539, Petro-Hunt, Gunder T. 151-101-30A-31-1H, Lonesome, t10/12; cum 16K 12/12;
23181, drl, CLR, Domindgo 1-22H, East Fork; no production data

17822, conf, Oasis, Colbenson 5792 11-6H, Cottonwood:

DateOil RunsMCF Sold

22009, conf, Petro-Hunt, Wold 160-94-32A-5-5H, North Tioga:

DateOil RunsMCF Sold

22836, conf, Petro-Hunt, Gunder T. 151-101-30A-31-1H, Lonesome:

DateOil RunsMCF Sold

Recommendations for New York's Commission to Study Fracking

New York to continue studying fracking according to Bloomberg.
New York’s study of potential links between hydraulic fracturing and earthquakes may be tainted by the selection of a university geologist and gas-industry consultant to lead the review, drilling critics said.
Robert Jacobi was picked by the Department of Environmental Conservation for a seismology study as part of its environmental review of the drilling process known as fracking, Lisa King, an agency spokeswoman, said in an e-mail. Jacobi is a University at Buffalo professor and has advised drillers for two decades.

Jacobi, who has taught at the state university for more than 30 years, has advised various gas drillers since 1994, according to a resume released by the university. He has been a senior geology adviser for Pittsburgh-based EQT Corp., a natural gas drilling company, since last year.
Yes, the governor should have selected a banker to lead the study, and put ten lawyers on the 13-member commission. The other two slots could have gone to community organizers for Occupy Wall Street.

Eight (8) New Permits -- The Williston Basin, North Dakota, USA

Something tells me this is going to be a busy night of blogging.

But first, the daily activity report.

Active rigs: 182 (no change)

Eight (8) new permits --
  • Operators: SM Energy (3), WPX (2), Oasis (2), Surge Energy
  • Fields: Alger (Mountrail), Van Hook (Mountrail), Poe (McKenzie)
  • Comments: Surge has a permit for a wildcat well in Bottineau County;
Wells that came off the confidential list today were posted earlier; see sidebar at the right.

North Dakota State Lease Results -- February, 2013

Transcribed quickly. There may be errors. It is for my personal use only in understanding the Bakken and keeping track of what is going on in the Bakken. If you are interested in this information, you should go to the original source.

Bowman County:
  • highest bonus paid: $280/acre, Gary Warnke
Burke County:
  • highest bonus paid: $300/acre, Dave Weiler
  • others: $280/acre, Fossl Oil & Gas
  • several tracts for Herco
Dunn County:
  • highest bonus paid:$13,000, QEP, Missouri River
  • others: $12,500, QEP, Missouri River
  • others: $11,500/acre, QEP, Missouri River
  • others:$11,000, QEP, Missouri River
  • others: $10,500/acre, QEP, Missouri River
  • others: $10,400/acre, QEP, Missouri River
  • others: $10,300/acre, QEP, Missouri River
  • others: $5,700/acre, TDB Resources, Missouri River
  • others: $4,600/acre, Herco, Missouri River
  • others: $3,400/acre, QEP, Missouri River,
  • others: $3,400/acre, Bakken Assumptions, Missouri river
  • others: $1,250/acre, QEP, Missouri River,
  • others: $2,200/acre, Herco, Missouri River,
  • others: $260/acre, 556 Skyline Investements, 80 acres
McKenzie County:
  • highest bonus: $4,500/acre, Gerrity Bakken, Yellowstone River
  • others: $4,200/acre, Davis Exploration
  • others: $1,600, Petrogulf Corporation
  • highest bonus: $3,500/acre, Herco
  • others: $2,900/acre, Herco
  • highest bonus: $140/acre, Holly Suko
  • highest bonus: $1,100/acre, Bakken Oil
Holly Suko
8030 Brnt Creek Island Road
Bismarck, ND 58503-9278

2812 1st Avenue N # 311
Billings, MT 59101-2312

556 Skyline Investments
1122 E Jefferson Street
Phoenix, AZ 85034

Summary (all numbers rounded): County; # of total acres; total bonus; average/acre
  • Bowman: 1,250 acres; $182K; $145/acre
  • Burke: 1,460 acres; $302K; $210/acre
  • Dunn:  9,900 acres; $21,227K; $2,150/acre
  • McKenzie: 1,500 acres; $750K; $500/acre
  • Mountrail: 734 acres; $138K; $188/acre
  • Slope: 4,850 acres; $303K; $60/acre
  • Stark: 800 acres; $1,099K; $1,380/acre
  • Ward: 6,900 acres; $565K; $80/acre
  • Williams: 38 acres; $42K; $1,100/acre

Random Data Points From The Whiting Corporate Presentation, February, 2013

Some random notes from Whiting's February 5, 2013, corporation presentation. Many of these random comments are simply from the slides and taken out of context. Some numbers rounded.

Again, this presentation is for my benefit to help me understand the Bakken and to keep track of it. I may have misunderstood some slides and there may be typographical errors.

If interested in this data, one should access the original source.

A photograph of rig at Kannianen 22-32XH, 3Q12, flowing 3,462 boepd on September 6, 2012, Sanish field, Mountrail, North Dakota.

Q312: production: 80 mboepd; almost 90% oil

Rocky Mountains, 60 mboepd; Permian, 10 mboepd; mid-continent, 8 mboepd

345 million boe proved reserves (12/31/11)
  • almost 50% in Rocky Mountains prospect
  • just less than 40% in the Permian
Drilling locations, future:
  • 640 net, northern Rockies
  • 889 net, central Rockies
  • 307 net, Permian
  • $850 million -- northern Rockies
  • $225 million -- EOR
  • $100 million -- Permian
Lease areas in the Williston Basin
  • Sanish: 83K (MB, TF) -- Sanish and Parshall; sweet spot, northern ops
  • Pronghorn: 130K (Pronghorn Sand) -- southern ops; mostly southerly Whiting area in ND
  • Lewis & Clark: 138K (TF) -- northwest of Pronghorn; very interesting
  • Hidden Bench: 29K (MB/TF) -- north of Lewis & Clark
  • Tarpon: 6K (MB/TF) -- very small area; a sweet spot
  • Starbuck: 92K (MB/TF) -- Montana, west of Williston;
  • Missouri Breaks: 66K (MB/TF) Montana, Richland county; west of Hidden Bench
  • Cassandra: 14K (MB/TF) -- Williams County, Ray corridor, I believe
  • Big Island: 122K (multiple objectives)
  • Other: 34K  
BigIsland: perhaps the most interesting play for me to watch -- vertical Red River wells; currently seven (7)discovery wells;
  • Ross 13-2, 306 boepd
  • Stecker 23-3, 283 boepd
  • Rieckhoff 44-22, 480 boepd
Production profiles provided:
MB: EUR, 950K boe;
MB: EUR, 450K boe
TF: EUR, 400 mboe

An interesting graphic of 12-month average production by operator for Bakken and TF wells drilled since January 2009, for operators with 10 wells or greater:

Interesting graphic of MB/TF vs Pronghorn in L&C, Hidden Bench: the average 30-, 60-, and 90-day rates for the Pronghorn exceed the Sanish -- Bakken & Three Forks

Natural gas processing plant -- Robinson Lake
  • current wells connected: 635
  • estimated ultimate wells connected: 1,538
  • current volume: 64 mmcfd
  • planned capacity: 90 mmcfd processing, 72 mmcfd compression, 310 mgpd fractionator
  • estimated cash flow per year, 2013: $40 million
Natural gas processing plant -- Belfield
  • wells connected: 61
  • ultimate wells connected: 310
  • current colume: 13 mmcfd
  • planned capacity: 35 mmcfd processing, 27 mmcfd compression 
  • estimated cash flow per year, 2013: $20 million

Oil, Gasoline Supplies; Gasoline Demand -- Certainly Doesn't Point To A Worsening Economy

Link here to Yahoo!Finance.

Forecast: oil to increase by 3 million bbls; actual: 2.6 million bbls.

Forecast: gasoline to increase by 1.75 million bbls; actual: 1.7 million bbls, just one percent more than this time last year.

But this is the good part. Gasoline demand rose -- and distillate supplies dropped --
Demand for gasoline over the four weeks ended February 1 was 4.7 percent higher than a year earlier, averaging 8.4 million barrels a day.

Supplies of distillate fuel, which include diesel and heating oil, decreased by 1 million barrels to 129.6 million barrels. Analysts expected distillate stocks to decline by 750,000 barrels. 
This is all background noise, but certainly doesn't point to a worsening economy.

Wednesday Links -- WSJ Links, USPS To Stop Saturday Letter Delivery; ObamaScare

Wow, this is quite a post from the RBN Energy folks today: an update of crude-by-rail. A must read; must-bookmark.

One note: the RBN folks say BNSF is #1 in crude-by-rail, but I believe Union Pacific Railroad is #1 in moving fracking sand. I could be wrong on that, but that was noted in a recent presentation.

Finally: USPS to stop Saturday letter delivery; packages will still be delivered on Saturday. The end of Saturday service is scheduled to "begin" in August. This will Congress and postal employees plenty of time to muster their forces and prevent this from happening. If we see the end of Saturday letter mail delivery by August, 2013, I will shut down the blog.

An ObamaScare note: this is a very interesting headline -- 7 million folks will lose their job-related health benefits under ObamaCare. This is a big deal. An argument in support of ObamaCare was the oft-cited figure that 34 million Americans did not have health insurance. The number may or may not have been accurate but everyone agrees it included many young adults between the ages of 18 and 26 who do not need health care insurance for the most part in the first place; it included a lot of folks "in-between" jobs; it included a lot of folks who did not want health insurance; it may have included illegal aliens, depending on who was doing the counting. But this new wrinkle will be devastating to many who are employed: some employers have done the number crunching and it will be cheaper to pay the fine for not providing health care insurance than it would be for covering it. And so, these employers will dispense with their health care insurance programs. The government had predicted that some employers would do this, but 7 million is more than double the original estimates according to the linked story. So, before ObamaCare 34 million people did not have health care insurance, but the "actual" people changed from month to month, depending on their status. But, starting some time this year, employees who were happy with their job-related health insurance programs will find they no longer have that insurance. Very, very interesting.

WSJ Links

Section D (Personal Journal):
The headline says it all: Surface Pro -- Hefty tablet is a laptop lightweight -- Walt Mossberg. KOD. Zune. I will come back to this. "Microsoft's latest device is something of a tweener -- a compromised tablet and a compromised laptop."

Section C (Money & Investing): nothing. The Microsoft-Dell story was there, but it's also linked at the Yahoo!Finance page, I see, earlier this morning.

Section B (Marketplace):
Duke to close troubled nuclear plant in Florida

Microsoft takes a side in PC war -- Dell holders wanted more

Section A:
Rising murder rate in Chicago is quite ... well, getting out of control ... when it's worse than Afghanistan... photograph on front page; story on page A4;

Page 3, and we've talked about page 3 before: city gun laws hit roadblock; Arizona tightens law; Tucson says "no way, Jose"; wow, can you imagine the bad guys coming up from Mexico knowing that no one in Tucson is allowed to have guns... of course, that would not be true, but that would be the "lost in translation" bit...perception is huge... the president knows that very well... perception more important than facts...

Finally, same-sex military spouses to get some benefits ...

I guess the administration hasn't completely killed the coal industry --- White House weighs emission rules; state of the union could signal effort to curb greenhouse gases from existing coal-powered facilities;

Op-ed: Apple's new normal; the smartphone has become too interesting a product for one company to dominate; compares Apple to Ford; "Apple's accomplishments during its heyday boiled down to a single accomplishment. Its design and engineering teams were leaps ahead of all others in incorporating the latest technological possibilities into a package could fit in your hand." Of course, regular readers will know I disagree completely with this observation. One could argue Steve's big insight was the "i." He couldn't get rid of the floppy discs soon enough. Number one problem for system operators back in the 80s and 90s" viruses. And the viruses proliferated with high school and college kids sharing infected disks.

Op-ed: Shakespeare has a (parking) lot to answer for; Richard III may be fairer treatment than the spin-doctoring playwright offered 420 years ago. It is much easier to understand Richard III and all the Shakespearian plays when one knows the "real" Shakespeare. Thank you, Brenda James.

Op-ed: The stock rally that isn't. The publisher of Forbes posits two observations -- a) the "rally" in the stock market is fake; it is simply money rushing from commodities and money market funds; and, b) the stock market could be doing a lot better if America's tax, regulatory, and monetary policies were shaped to provide a 1982- 2000 tailwind. I see the editorial as only good news. The rally can really only go "up" from here based on Karlgaard's analysis.

Wells Coming Off the Confidential List: KOG Has A Great Well -- Look At The Name Of That Koala Well

  • 19598, 537, Petro-Hunt, Opsal 158-99-26A-35-1H, wildcat, t10/12; cum 17K 12/12;
  • 20455, 1,309, Zenergy, Stepan 16-9H, Dore, t11/12; cum 25K 12/12;
  • 22352, 628, OXY USA, State Fisher 2-21-16H-142-97, Willmen, t7/12; cum 29K 12/12;
  • 22457, 1,930, Whiting, Moen 41-26H, Timber Creek, t8/12; cum 3K 12/12; very few days producing;
  • 22849, 2,120, KOG, Koala 15-33-28-2H3, Poe, t11/12; cum 32K 12/12; a Three Forks well; look at the well name; 28 stages; 4.4 million lbs; all ceramic;
  • 22900, drl, BEXP, Topaz 20-17 3H, Banks,
  • 22923, 826, Hess, LK-Alwain 147-97-1324H-3, t12/12; cum 27K 12/12;
  • 23075, 80, Corinthian, Corinthian McCullough 13-36 1H, North Souris, a Spearfish well; t10/12; 8K 12/12;
  • 23411, 833, Samson Resources, Border Famrs 3130-1H, West Ambrose, t12/12; cum 12K 12/12;
In addition, some of the OXY USA wells have been updated at the OXY USA page.  OXY appears to be doing an outstanding job managing its assets (its oil in the ground).

Again, note the name of KOG's Koala well above.

Active rigs: 182 (steady)