Friday, February 22, 2013

Rigzone: Musings on Shale Oil Energy Revolution

Begins with the Bakken.
PwC begins its report with a brief review of the history to date of shale oil and shale gas in the United States. The economists point out that shale oil production has grown from 111,000 barrels per day (b/d) in 2004 to 553,000 b/d in 2011, or an annual growth rate of 26%, albeit starting from a very small base. We know shale oil production increased further in 2012.
The oil production increase in North Dakota alone, where the Bakken tight oil formation dominates the output, rose by 233,805 b/d last year. Furthermore, the Energy Information Administration, in its supplemental information supporting its latest Short Term Energy Outlook, is calling for an increase in tight oil output between November 2012 and December 2014 of 1.13 million b/d, or nearly all of the projected total U.S. crude oil production increase during this period of 1.26 million b/d.

For Investors Only: Look For Increased Dividends In The Oil Patch

MarketPlace is reporting:
Halliburton Co. late Wednesday increased its quarterly dividend 39% to 12.5 cents a share, adding it wants future yearly cash dividends to represent at least 15% to 20% of net income.
The last time Halliburton had raised dividends was May 2007. The company’s goal implies a potential dividend increase of 30% to 35% next year, analysts at Simmons & Co said.
UBS analysts, for their part, said the Halliburton move could lead others to follow suit later this year, particularly U.K.-based offshore driller Ensco PLC. Ensco’s dividend increase could be announced in the first quarter.
Ensco currently pays $1.50 a share, but could raise it to $2 or $2.50 a share, they added.
Schlumberger Ltd.  increased dividends in January by 14%.
“Schlumberger will also seek to regularly raise their dividends in coming years as free cash flows grows substantially,” UBS said.
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read at this site.

Random Update: The Red River Formation

The Dickinson Press is reporting:
Emails between Lynn Helms, Department of Mineral Resources, Oil and Gas Division director, and Debra Walworth, executive director of Prairie West Development and point person for Golden Valley County for the Vision West steering committee, show that Colorado-based Whiting Oil and Gas are drilling with one rig in the Red River formation.
“Their best estimate for now is somewhere between 50 and 150 wells,” Helms wrote in the email. “One rig is enough to drill out the 50 wells, if some of the concepts they are testing result in the well count going to 100 they will add a second rig and if it goes to 150 possible a 3rd.”
Information Helms had previously shared with the Golden Valley County Vision West steering committee had only shown development in the Bakken and Three Forks formations in the county, Walworth said.
Adding Red River formation projections changes the growth outlook for Beach and Golden Valley County, she said.
“It made a big difference in the oil field jobs that would be out here,” Walworth said. “I think 2013 to 2015 will be interesting.”
Beach, like many western North Dakota cities, is already struggling with housing, Walworth said. But its need is not as great as cities like Dickinson or Watford City.
It just never quits, does it?

In the "Top Stories of 2012" I mentioned that the Red River is the "other" formation in the Williston Basin, right now.

Wow! And Washington State Is Worried About Coal Shipments! Nuclear Waste Storage Tanks Leaking; No Worry -- Governor -- It Will Take A Few Years For Radioactive Waste To Reach Groundwater -- But Heaven Forbid -- No Coal Shipments

CBS News is reporting:
Six underground tanks that hold a brew of radioactive and toxic waste at the nation's most contaminated nuclear site are leaking, federal and state officials said Friday.
Washington Gov. Jay Inslee said the leaking material poses no immediate risk to public safety or the environment because it would take a while — perhaps years — to reach groundwater.
But the leaking tanks raise new concerns about delays for emptying them and strike another blow to federal efforts to clean up south-central Washington's Hanford nuclear reservation, where successes often are overshadowed by delays, budget overruns and technological challenges.
Department of Energy spokeswoman Lindsey Geisler said there was no immediate health risk and said federal officials would work with Washington state to address the matter.
State officials just last week announced that one of Hanford's 177 underground tanks was leaking 150 to 300 gallons a year, posing a risk to groundwater and rivers. So far, nearby monitoring wells haven't detected higher radioactivity levels.
This is really quite incredible: " immediate risk to public safety or the environment because it would take a while — perhaps years — to reach groundwater."

The radioactive waste has already leaked; one can't put it back into the tanks. Something tells me bottled water has a huge future in Washington State.

Unless I missed it, the EPA was not mentioned in the article. Too busy measuring methane in that one well in Wyoming, I guess.

No Keystone? No Worry? Rail Making Up The Difference

Slate is reporting:
The Keystone XL is designed to transport 830,000 barrels per day. Over the past two years or so, domestic railroads have increased their transport capacity by an amount equal to about 55 percent of what Keystone is supposed to provide.
There’s nothing new in moving oil by rail. In the late 1860s, John D. Rockefeller began investing in railroad tanker cars, a move that saved him the cost of building barrels to hold his product. The oil baron’s control over the Cleveland-area refining market allowed him to negotiate favorable shipping rates with the railroads.
U.S. and Canadian oil producers aren’t waiting for the Keystone XL or other pipelines; they are building rail-car terminals so they can ship their product to market. In North Dakota alone, oil producers have built rail terminals capable of handling nearly 1 million barrels of oil per day. Refineries are also building rail terminals.
Last month, Delek U.S. Holdings, a subsidiary of the Israeli energy company Delek Group, announced that it will begin refining 15,000 barrels of Canadian crude at its El Dorado, Ark., refinery. All of that oil is being shipped in by rail. A refinery in Delaware, owned by PBF Energy, recently completed a rail terminal that will allow it to take up to 110,000 barrels of crude oil per day. The Sunoco refinery in South Philadelphia as well as a Phillips 66 refinery in Bayway, N.J., are also ramping up their ability to accept more crude by rail.
Earlier this month, Sandy Fielden, an analyst for energy consulting firm RBN Energy LLC, reported that about 1 million barrels per day of new rail-unloading capacity is being built or planned in the United States. Fielden says that “the crude-by-rail express came from nowhere on the radar screen” to become one of the biggest energy stories of 2012. And Fielden says that railroads have shown themselves to be “faster and more flexible than traditional pipeline development.”
Long article. Great article.

Fracking the Bakken also "came from nowhere on the radar screen."

But back to crude-by-rail: one could argue that crude-by-rail began with EOG's terminal in Stanley back in 2009. From RBN Energy, earlier today:
EOG was the pioneer of the crude-by-rail resurgence in North America, building the first unit train facility in the Bakken – in service during December 2009. While much of the industry thought EOG was grasping at an antiquated technology, EOG ignored the disparagement and succeeded in redefining the economics of crude oil transportation. EOG’s terminal in Stanley, ND (Montrail County) is dedicated to the company’s proprietary production and additional crude that the company purchases.

Global Warming Clobbers Wichita; Only Winter Storm Worse Was in 1962

The Wichita Eagle is reporting:
A snowstorm elbowed its way into the record books as it laid siege to Wichita and much of the rest of Kansas on Thursday, bringing traffic to a virtual standstill.
Overnight snowfall was so heavy that whiteout conditions were being reported Thursday in and near Wichita as the morning commute began – and again later in the day in south-central, western and northern Kansas.
More than 100 traffic accidents had been reported countywide by mid-evening. Even a plane got stuck in the snow at Wichita Mid-Continent Airport.
“The majority of activity across the state of Kansas has come to a stop,” the Kansas Adjutant General’s Office reported in a statement Thursday.
A rare thundersnow storm dumped several inches of snow on Wichita just before dawn Thursday; as the storm pulled out of the area by evening, the total was 14.2 inches. Only the storm of Jan. 17-18, 1962, delivered more snow: 15 inches.
And so it goes.

Read more here:

Random Note on Hess Wells in Antelope Field

There must be a lot of great stories from the Williston Basin over the years.

Today, in the daily activity report, Hess was issued four permits for section 2-152-95 in Antelope oil field.

There were already six wells in that section, most older Madison wells, most now plugged and abandoned.

Two notable Madison wells in that section:
  • 1571, 27/A, Hess, Antelope-Madison Unit D-519HR, Antelope, t12/57; cum 680K 12/12; still producing after 55 years;
  • 2035, 181/PA, Hess, Antelope-Madison Unit C-520, Antelope, t2/59; cum 731K 9/90;
Neither of these wells are even on the "Monster Wells" page simply because of so many incredible Madison wells.

On Track For 2,555 Permits for Calendar Year 2013

As of today, 371 new oil and gas permits have been issue by the NDIC. That projects out to 2,555 permits for calendar year 2013.

At this time last year (2013), 276 permits had been issued with projected out to 1,901 permits for the year.

In 2012, 2,521 permits were issues with 30 or so ultimately canceled.

Single Largest Consumer of Bakken Crude -- New East Coast "Sunoco" Owners; All Made Possible By Rail

Reuters is reporting:
Refiner Philadelphia Energy Solutions (PES) expects to be bringing in by rail 140,000 barrels of Bakken crude per day by the third quarter of this year, Chief Executive Officer Philip Rinaldi told an energy forum late on Thursday.
PES, a joint venture of Carlyle Group and Energy Transfer Partners, which bought former owner Sunoco last year, decided to take advantage of swelling supplies of crude from the huge shale oil play in the northwest.
"By the end of the year, we will be the single largest consumer of Bakken oil," Rinaldi told the New York Energy Forum, outlining a three-phased project to expand the ability of the two-refinery complex to take in the crude.
Tapping into rail as a means of getting cheap domestic crude, rather than importing from abroad, had turned around the plant, which had been losing a million dollars a day for three years running, he said, citing Sunoco's assessment of losses.
By April 1, PES will be able to accept two or three unit trains filled with crude per week. By July and perhaps as early as the end of May, it will take five unit trains, and in the third quarter of this year, 14 in total, Rinaldi said.
The linked article has several other interesting data points.

A big "thank you" to a reader.

For Investors Only: SRE Raises Dividend Five Percent (5%)

Press release here. SRE closed near another 52-week high.

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

Meanwhile, from Forbes, an earnings preview:
In spite of an expected dip in profit, most analysts are positive about Sempra Energy before it reports its fourth quarter earnings on Tuesday, February 26, 2013. 
Analysts are expecting Sempra Energy to come in with earnings of 97 cents per share, down 19.8% from a year ago when it reported earnings of $1.21 per share. 
The consensus estimate has fallen over the past three months, from $1.09. For the fiscal year, analysts are expecting earnings of $4.11 per share. Revenue is projected to eclipse the year-earlier total of $2.6 billion by 1%, finishing at $2.63 billion for the quarter. For the year, revenue is projected to come in at $9.82 billion.

Not Quite Done

US News is reporting that the president is ready to finish what he started years ago: kill the domestic coal industry.
President Barack Obama is tired of waiting for Congress to move on legislation to reduce carbon emissions, and his administration is poised to move forward on actions to do just that—including a move that will effectively eliminate the possibility of any new coal plant opening in the United States, experts say.
Lots of union jobs. Railroads. Whatever. Cue up Connie Francis.

Southern California Rise in Gasoline Prices Set One-Month Record

Link to LA Times.
“Prices have now gone up even more than they did during the spike in October and the one last February, and more quickly than they did during any one-month stretch in 2008, when we had another big spike,” said Auto Club spokesman Jeffrey Spring.
One of the reasons cited by analysts is Southern California's early switch to more expensive summer-blend gasoline. Northern California is about to make the same switch from cheaper winter blend gasoline.
Unusually high levels of refinery maintenance in California is cited as another reason.
But big-money investment speculation, from hedge fund and commodity pools, has also soared in recent months, based on bets that the price of oil and gasoline would rise.
No mention of the policy decision in Washington to a) kill the Keystone XL 1.0; and, b) delay decision on Keystone XL 2.0 until at least July, 2013.

Williston Wire Headlines

Williston Wire headlines only; no links; it is easy to subscribe to the Williston Wire.

New Williston airport could be ready by late 2016

Williston's service population could reach 54,000 by 2017. PDF download here.

Williston looking to eliminate "crew-camps" in downtown Williston

Helms singles out a McKenzie well as "remarkable": a well northwest of Watford City could likely be the #2-producing well ever drilled in North Dakota. An IP of almost 5,000 bbls of crude and 12 million cubic feet of natural gas in one day, flowing at over 2,000 pounds tubing pressure.  [12 million / 6,000 = adds another 2,000 boe.] The well is still on confidential so Helms would not provide more information, not the name of the well. He did say we should start seeing production runs soon.

Rail crude shipments triple in 2012

BNSF explores using liquid natural gas for locomotive fuel (previously posted)

Eleven (11) New Permits -- The Williston Basin, North Dakota, USA

Active rigs: 181 (uh-oh, heading down)

Eleven (11) new permits -- 
  • Operators: Hess (7), Zargon, Legacy, Crescent Point, EOG
  • Fields: North Souris (Bottineau), Dublin (Williams), Parshall (Mountrail), Blue Buttes (McKenzie), Antelope (McKenzie), Mackobee Coulee (Renville)
  • Comments: Hess with permits for three wells in Blue Buttes; and, four wells in Antelope oil field
Wells coming off the confidential list were reported earlier; see sidebar at the right.

One producing well completed:
  • 21979, 338, CLR, Alpha 3-14H, 4-section spacing, Camp, t1/13; cum --

Off The Net For Most Of The Day, I Assume -- Traveling

Spot On

Yesterday, I said that the market's reaction to the "divided Fed" on when qualitative easing would end was a classic head fake.

Spot on.

Today, CNBC is reporting:
The Federal Reserve's "very aggressive" easy money policy is going to stay that way for a "long time," St. Louis Fed President James Bullard told CNBC on Friday.
"This is a monetary policy that packs a punch," said Bullard, who's a voting member on the Federal Open Market Committee (FOMC).

Uncertainty about the future of the central bank's bond buying program has weighed on the stock market in recent days.

Another Ball of Dust in Western North Dakota?

The Dickinson Press is reporting (the link is broken).
Dickinson zoning board gives OK to city for 221-lot subdivision preliminary plat.
Resident concerns and park board conflicts didn’t keep the Dickinson Planning and Zoning Board on Wednesday from recommending to the City Commission, by a vote of 6-2, a preliminary plan for a 221-lot subdivision in east Dickinson.
Sort of reminds me of the old "ball of dust" story some time ago. And so it goes. 

ObamaCare: Fewer Americans Getting Health Care From Employer

Predictable under ObamaCare.

A subject that has been mentioned numerous times on the site. Archived under ObamaCare.

Gallup is reporting:
Fewer Americans reported having employer-based health insurance in 2012 than did in 2008, 2009, and 2010, but at 44.5% it is unchanged from 2011. At the same time, more Americans continue to report having a government-based health plan -- Medicare, Medicaid, or military or veterans' benefits -- with the 25.6% who did so in 2012 up from 23.4% in 2008.
The majority of workers who do not have a government job continue to get their health insurance from their employer. But the 56.8% who did so in 2012 is down from a high of 64.2% in 2008. More non-government workers now get their insurance from a government plan or are uninsured than were in 2008.
Meanwhile, yesterday's WSJ had an opinion on the subject: ObamaCare's "Baby Elephant"

Low Natural Gas Prices Hurting Electricity Wholesalers

When you read the linked article, think about the cost of wind and solar, each up to six times more expensive for the consumer than electricity produced from conventional sources (natural gas and coal).
Fitch believes that the ongoing low natural gas prices in the U.S. continue to have a positive effect on many issuers, particularly in energy-intensive manufacturing sectors like refining, chemicals, and fertilizers.
However, low natural gas prices have pressured electrical utilities and others that depend on the sale of excess power and continue to put pressure on exploration and production companies with significant spot exposure to North American natural gas.
Surging domestic oil and gas output has been beneficial from a macroeconomic perspective. The December U.S. trade deficit narrowed by 20.7% ($38.5 billion) largely based on an all-time record export of petroleum products and the smallest amount of oil imported in 16 years. Over the near term, we believe this export activity will continue.

Clean Coal: Burning Coal Without Releasing CO2

"Wattsupwiththat" is reporting:
For 203 continuous hours, they operated a scaled-down version of a power plant combustion system with a unique experimental design–one that chemically converts coal to heat while capturing 99 percent of the carbon dioxide produced in the reaction. 
This new technology, called coal-direct chemical looping, was pioneered by Liang-Shih Fan, professor of chemical and biomolecular engineering and director of Ohio State’s Clean Coal Research Laboratory. (Fan is a Distinguished University Professor and a 2012 Innovator of the Year.)
My understanding is that the world has an almost "endless" supply of coal based on current consumption. "Endless" defined as about 100 years, I suppose.  With some countries moving away from coal, "endless" might be even longer.

RBN Energy: Overview of Crude-By-Rail In The Bakken

Note: wells coming off confidential list have been posted. Several very, very good wells, including a very nice GMXR well.


Wow, this RBN link below is awesome. Maybe the best link of the day, so far.

RBN Energy:
The first episode in this series provided an introduction and overview of the “Year of the Tank Car." 
We described the rapid growth in US crude oil production that pressured pipeline logistics and made rail a viable alternative for taking crude to market. The second installment (see Crude Loves Rocking Rail – The Bakken Terminals) began a detailed survey of rail loading terminals with a map and a complete list of facilities in North Dakota. In this episode we begin a more detailed review of the Bakken terminals.
Readers will find it useful to refer back to the map in the previous blog to see where these terminals are located as well as a terminal listing by name and location. We start our survey with two of the largest Bakken oil producers that have built their own crude loading facilities and the COLT merchant terminal facility recently purchased by Inergy from Rangeland Energy.
The linked article has maps and graphics; another great RBN post.

This first-in-the-series detailing the various CBR terminals in North Dakota:
The first three terminals detailed in this blog are among the largest and between them can load 250 Mb/d of crude onto rail cars - about 32 percent of the latest December 2012 total crude production estimate for North Dakota of 770 Mb/d. The three terminals are all located on the BNSF rail system, giving them access to East, West and Gulf Coast destination terminals. The current favored destination for EOG and Hess is St. James, LA. 
RBN Energy will continue the series.