Tuesday, April 9, 2013

The Disappearing Bakken Story Explained

Updates

April 12, 2013: Alan Von Altendorf also posted an article at SeekingAlpha, The Myth of US Energy Independence, April 2, 2013. I did not post it at the time.

April 10, 2013: Yes, SeekingAlpha pulled the article by Alan von Altendorf.  The writer provides an explanation:
I have retired as an analyst, and thank SA for prompt action in removing an article that contained a material error. I sent SA the following in response to a note they received from Continental Resources:
I unreservedly and profoundly apologize for having misunderstood the notation pertaining to CLR's audited 1P oil reserves. It was a terrible mistake on my part. I accept sole responsibility for publishing an article about CLR that Seeking Alpha's alert readers rightly condemned as rubbish. -- Alan von Altendorf
Mr Von Altendorf needs to un-retire. It is incredibly important for analysts like him to observe and comment on the Bakken. As I noted below, for all we know, he may be correct. A lot of what we see in the Bakken appears not to make sense. Maybe more later: for now, I hope Mr Von Altendorf unretires.

Oh, by the way, the article was still on my iPad when I woke up this a.m. I was using my laptop last night when I mentioned I couldn't find the article. I had forgotten I had downloaded the article on the iPad on the bus when I left Logan Airport. So, I got to see the article again this a.m. but the iPad was too quick for me. Before I could go back and figure out how to "save" it, the iPad refreshed the screen. Zap. Gone.

A reader sent me this short note:
Seem to recall he had CLR's Bakken proven oil reserves in only double digit millions, like maybe $13 or $18. Kept saying how small they are. I am not close to this, but there is the smell test.
Original Post

I assume I just can't find it but I've gone to two URL's sent to my be trusted readers, and did a search with the key words at SeekingAlpha and I get a dialogue box that the story has been removed. I'm sure I'm just missing it, but if it is removed, that in itself will be quite a story.

Again, I assume I am just not seeing it. My problem.

Having said that, if it is gone, that's too bad. I was going to have so much fun with that story. For folks who missed it, some character wrote a short novel, I guess one would call it a novella, about the Bakken, saying that the Bakken is destined to fizzle. In the manner in which he wrote the article I don't think it was libelous but it may have come close.

Interestingly, the URL is still there (one cannot get rid of URLs on the internet): http://seekingalpha.com/article/1330811-bakken-boom-destined-to-fizzle?source=yahoo. But it's really something. It's completely disappeared.

I hope the article gets re-posted. I will be upset if SeekingAlpha does not provide an explanation. This is too sweet.

I was going to have such fun with it. The author's premise was that the Bakken was all hype, that it was just a matter of time before this house of cards would fall and that everyone "believing in the Bakken" were all dupes. That may be, but what an interesting group of dupes. Starting with Statoil for buying BEXP not too long ago.

And now this Rigzone today: foreign companies boost investment in US shale plays.
Investment by foreign oil and gas companies played a significant role in the development of U.S. shale plays, according to a recent report by the U.S. Energy Information Administration (EIA).
Foreign oil and gas companies invested 20 percent, or nearly $27 billion, of the $133.7 billion total investment from 2008 to 2012 as part of 73 deals, EIA reported Monday. The rest of the investments were part of outright acquisitions – including BHP Billiton Petroleum's acquisition of Petrohawk Energy Corp., or joint ventures among U.S. companies and financial institutions.
Since 2008, foreign companies have entered into 21 joint ventures with U.S. acreage holders and operators, investing more than $26 billion in tight oil and shale gas plays. These investments include Sinochem Group's $1.7 billion joint venture with Pioneer Natural Resources to buy a stake in West Texas' Wolfcamp shale play.
We may all be dupes, but we've got very good company. 

Huge Story: ONEOK Announces Completion of Bakken Projects ... And Continued Expansion

Updates

May 23, 2013: ONEOK announces permit to build Garden Creek III

Original Post

This is the biggest story of the day, and there have been a number of big stories today. I've been following this story closely since I first spotted the Stateline I facility under construction in 2011.

ONEOK is reporting:
ONEOK Partners today announced the completion of three projects that are part of its previously announced $4.7 billion to $5.3 billion growth program through 2015, including:
  • the Bakken NGL pipeline that transports unfractionated natural gas liquids (NGLs) from the Bakken Shale and Three Forks formations in the Williston Basin to the partnership's 50 percent-owned Overland Pass Pipeline, a 760-mile NGL pipeline extending from southern Wyoming to Conway, KS
  • the Stateline II natural gas processing facility in western Williams County, N.D.; and,
  • an ethane header pipeline that creates a new point of interconnection between the partnership's Mont Belvieu, TX, NGL fractionation assets and several petrochemical customers.
Data points for the Bakken NGL pipeline:
  • $500 million
  • 600-mile pipeline
  • capacity to transport 60,000 bpd of unfractionated NGls from the Williston Basin to the Overland Pass Pipeline in northern Colorado
  • first NGL pipeline to transport natural gas from the Williston Basin to facilities in the Mid-Continent and the Texas Gulf Coast
  • further plans: another $100 million to install additional pump stations to increase capacity to 135,000 bpd from 60,000 bpd as noted in today's press release; this expansion will be completed i 3Q14
Data points for the Stateline II natural gas processing facility
  • completed
  • $150 million 
  • 100-million cubic feet per day (MMcf/d) natural gas processing facility
  • northwest of Williston, Williams County
  • this is the third new natural gas processing facility in the Williston Basin constructed by ONEOK Partners since late 2011; joins Garden Creek and Stateline I plants
  • this increases processing capacity to 390 from 90 MMcf/d in 2011
  • another $2 billion planned through 2015 for Garden Creek II and III plants in eastern McKenzie County, northeast of Watford City (I believe)
  • these new plants should be in service by 3Q14 and 1Q15 respectively
  • this will increase capacity from 390 now to 590 MM cf/d
From the linked press release:
ONEOK Partners is the largest independent operator of natural gas gathering and processing facilities in the Williston Basin, with a natural gas gathering system of more than 5,000 miles and acreage dedications of approximately 3.1 million acres.
To the best of my knowledge, no federal government stimulus money was used in these projects. Nor were any animals harmed. These guys did it on their own. And they did it in an "oily" field where folks said natural gas was uneconomical. And now with all the public pressure to minimize flaring, the timing could not be better. 

A lot of story lines here.

No matter how you slice and dice this one, this is a huge story. I'm glad to see this story come out the same day Debbie Downer posted a Bakken note over at SeekingAlpha suggesting "the Bakken will eventually fizzle." What the Debbie Downers talk about regarding the Bakken, I'm not seeing on the ground. Quite the opposite.

Good for ONEOK. I wish them the best. They've provided a lot of jobs for a lot of North Dakotans, and every activist environmentalist who has complained about flaring should send ONEOK a Christmas care. Like that will  happen.

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Don notes that at 590 MMcf/d (as noted above), ONEOK will produce enough NGL BTUs in one day -- repeat, ONE DAY -- for all the energy needs of ONE typical house in North Dakota for 7,284 years. I did not check the math.

North Dakota is going to be quite a wet natural gas power house before this is all over. These five processing plants are located in one small geographic area. I can only assume there will be more, and I can only assume ONEOK is going to provide North Dakota jobs for quite some time. These are high-paying jobs.

Wow! Talk About a Global Warming Winter Storm -- Closed the Entire West-East Interstate Highway In South Dakota

I'm sure it's happened before -- I just don't recall, and I certainly don't recall it happening in the spring -- that the South Dakota Department of Transportation closed almost the entire west-east South Dakota Interstate, I-90, from Rapid City to Sioux Falls -- almost 400 miles of highway closed. Incredible.

SkyView is reporting (note the time: earlier this afternoon, and conditions deteriorating):
South Dakota officials are closing Interstate 90 between Rapid City and Sioux Falls. That announcement came at about 5:45pm Tuesday. The Department of Transportation says that segment of the interstate will remain closed until conditions improve and crews are able to clear the roadway. DOT officials say road conditions are deteriorating as the storm intensifies.
In addition, going east from South Dakota into Minnesota, Austin, MN, to Rochester, MN, could get a foot of snow.

I remember these springtime winter storms growing up in Williston, decades before we heard about global warming. All this precipitation in the midwest should relieve some of the ocean-rising pressure on the Maldives (the islands that are at risk of being lost due to global warming). Maybe there's hope for the Maldives yet.

Eight (8) New Permits -- The Williston Basin, North Dakota, USA; Seven Wells Coming Off Confidential List Wednesday; KOG With A Gusher; 4 of 7 Wells To DRL Status

Eight (8) new permtis:
  • Operators: OXY USA (4), KOG (3), Hess
    Fields: Cabernet (Dunn), Pembroke (McKenzie), Hofflund (Williams)
  • Comments:
Wells coming off the confidential list were reported earlier; see sidebar at the right.

Operator transfer:
About 124 wells from Petro-Hunt LLC to G3 Operating; and a couple of salt water disposal wells. These 124 wells all have recent permit / file numbers and all appear to be Bakken wells. The lowest permit number is #18094; the highest number is #24588. The bulk of them appear to be in the sweet spot of the Bakken; the majority are Fort Berthold wells in Dunn and McKenzie Counties. This earlier post on William Herbert Hunt may or may not be related.
Wells coming off the confidential list on Wednesday:
  • 22475, drl, SM Energy, Dishon 1-30H, Ft Buford,
  • 22848, 2.257, KOG, Koala 15-33-28-3H, Poe, t11/12; cum 80K 2/13;
  • 23395, 1,158, XTO, FBIR Baker 34X-25E, Heart Butte, t1/13; cum 1K 2/13;
  • 23553, 500, Hess, EN-Hanson S-156-94-3130H-6, Manitou, t3/13; cum 4K 2/13;
  • 23558, drl, BEXP, Jake 2-11 2TFH, Last Chance,
  • 23625, drl, Abraxas, Lillibridge 20-17-4H, Pershing,
  • 23720, drl, Samson Resources, Montclarir 0112-2TFH, Ambrose
Abraxas has provided recent operational update regarding the Lillibridge East PAD.

Real Estate Opportunity ... And We Don't Know What We Don't Know

I received the following today as a comment. I know nothing about it other than this.

I am re-posting it here because some folks may not read the comments that come in:

I have a 140 SF development in Carpio in search of an equity investment.

clingrealestate@wi.rr.com

It was a comment to this post: http://www.milliondollarwayblog.com/2011/04/for-investors-only-partners-interested.html

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A Note To The Granddaughters  

I mentioned earlier that I am re-reading David Bodanis' biography of E=MC2. I had read it some time ago, but now, re-reading it, I do not recall any of it. Of if I do, only a small amount. I've said it before, but to get the most out of a book (or perhaps any experience) one must be prepared, and one more be ready to read it or experience it. 

There are so many lessons to be learned in the history of E=MC2 and many of them relate to the Bakken. 

During the late 1800s and the early 20th century when physicists and chemists were beginning to work out the equation, before Albert Einstein grasped it, the feeling I get is that these physicists and chemists did not know what that they did not know what they did not know. Mr Rumsfeld says it better than I:
There are known knowns; there are things we know that we know.
There are known unknowns; that is to say, there are things that we now know we don't know.
But there are also unknown unknowns – there are things we do not know we don’t know.
Regardless of your personal thoughts of Mr Rumsfeld, this is a most important observation, from wiki.

That insight has application to the Bakken.

I see that when I read the comments over at the Bakken Shale Discussion Group. It applies to me, also. There are simply things we do not know we don't know about unconventional shale, or tight oil.

Folks have suggested that the NDIC needs to put a textbook of "Oil Reservoir 101" or something to that effect on their bookshelf (and hopefully read it). The problem: the book on unconventional shale has not been written. It is being written, and one can read hundreds of drafts of chapters that will eventually make up the book, but the book itself has not been completed. There is no "Bakken 101" book or "Bakken For Dummies" for the NDIC to read.

I don't think folks get it. It seems to me the vast majority of folks give lip service to the fact that the Bakken is unconventional or tight, but then they want it developed or managed like classical oil pools. Based on the evolution of what has occurred in the Bakken, I am absolutely convinced the operators are learning as they go along. The regulators are being pulled along. Considering what they know and what they don't know, I am quite impressed how well they seem to be doing. [What bugs me the most: it appears that some operators are doing much better than others, and the operators doing poorly are not being held accountable.]

I have to chuckle: in the early days of the Bakken, there were any number of comments made by county commissioners that "we" need to slow down. I commented that it almost seemed that there attitude was: "Now  that I have my well, we can slow down development."

In the early days, the word on the street was that there would one well on each section before the Bakken was drilled out. Now, the better Bakken will have upwards of four wells on each section, maybe more, and the best Bakken could have twelve wells on a section. Now folks talk about unitizing the Bakken (which they will, because that's what you do with an oil field) but that's language from "classical" / standard oil pools, not from unconventional shale/tight oil, or whatever the correct terminology is (middle Bakken shale oil is different than upper Bakken tight oil, just for the record).

Anyway, for you, my granddaughters, the purpose of this note is to remind you: never quit reading. It amazes me that a book on the biography of Einstein's most famous equation has relevancy in the Bakken. In his time, physicists did not know what they did not know, and they completely missed what Einstein didn't. One almost gets the feeling that people following the Bakken, including me, do not know what we do not know.

Yes, I Saw The "Debbie Downer" Article At Seeking Alpha ...

... I was traveling all day. No chance to blog.

I'll be with the granddaughters for the rest of the evening won't get caught up with the Bakken until late tonight.

The 30-second soundbite in response to Debbie Downer: "He may be right, but I'm not seeing on the ground what he's writing in his article."

The boom started in Montana in 2000 (13 years), and in North Dakota in 2007 (6 years), and appears to be going strong. The Bakken has changed oil worldwide. How long it continues, and how it ends, who knows. Even Debbie Downer says he wasn't recommending folks sell their shares this quarter, or even this year.

But anyway, more on the Bakken later tonight.

Tuesday Morning Links

Wells coming off the confidential list have been posted

Active rigs: 185 (steady)

RBN Energy: natural gas storage. Physicians will enjoy Figure 1 at today's RBN link. The line graph for crude oil storage looks like "V fib." The line graph for natural gas storage looks like "V tach." Both conditions are life-threatening, though if God gives you a choice, select "V tach."

For Apple fans, you may enjoy a special post today: Apple Genius Musings (sent in by a reader)

Wi-fi connectivity. Note: San Antonio, at one time, was headquarters for ATT. As a gift to the city, they provided free wi-fi at the San Antonio International Airport. Even though ATT has moved to NYC, it still has a huge presence here in San Antonio (Southwest Bell used to be located here; one can still find all kinds of archaeological evidence of that company throughout the city). And it still provides free wi-fe at the airport with no funny gimmicks. Slightly easier than Starbucks to connect. And, the speed is incredible. I am absolutely amazed. On top of that, all seats in waiting areas, at least in the new terminal B (terminal A will be renovated by 2014) have electric outlets (no doubt sourced by wind) and) ethernet connections for those who do not have wi-fi.

WSJ Links

Section D (Personal Journal):
  • Cooling infants to battle brain damage; hypothermia treatment for newborns suspected of having a brain injury. No link. Saving my few links for the articles with broader appeal, but googling key words will get you to the article.
  • Crackdown on elective baby deliveries; strict rules are having a dramatic effect. No link. See note preceding.
  • Does reading in dim light hurt your eyes? No. Plus, why pirates wear eye patches (telescopes, perhaps?).
  • Louisville NCAA men's basketball champion.
  • For Tiger Woods, putting matters. 
Section C (Money & Investing):
  • Google is about to roll out high-speed broadband in Kansas City, Kansas, and there are rumors it will do the same in Austin, TX. This is a huge story. 
Section B (Marketplace):
  • Introducing the 97-month car loan; rising new-car prices and competition to keep monthly payments under $500 a month are stretching out loan durations; spurring car sales, but buyers pay for six to eight years. Six years, not uncommon. Eight years. Wow.
  • Alcoa's net rises almost 60%.
  • Fisker edges closer to Chapter 11. 
Section A:
  • Margaret Thatcher dies; story everywhere.
  • Newfangled, ornery breeds of bull are bucking pro riders at a bodacious rate. That was my impression also after watching recent rodeo on television.
  • Hunter S Thompson didn't live long enough to see it: Colorado lawmakers decide that purveyors of recreational marijuana will not have to grow most of what they sell. Considered controversial.
  • An update on the Korean Missile Crisis. By the way, the FT noted the same thing I posted a few days ago. April 15 marks the birthday of the founder of "modern" North Korea, and the grandfather of the current ruler. There are rumors that the fireworks could go off on April 15.
  • Long time coming: the Defense Department will recommend an overhaul of the military justice code that restricts the rights of commanders to overturn military court verdicts. 
  • The first Mouseketeer to strike it big, Annette Funicello, died Monday; overshadowed, of course, by Margaret Thatcher's death. 
  • With the report that a 7th Chinese victim has died of avian flu, the population of China, according to one source, is now below 1,344,130,000.
  • This movie has almost as many sequels as the Keystone XL epic: John Kerry is at the center of efforts to restart the Arab-Israeli peace process. One begins to think that if a president doesn't like to be overshadowed by a political opponent, put him/her in charge of the Arab-Israeli peace process, on-site.
  • Inflation in China? Consumer inflation fell to 2.1% this past month. I am impressed. Very impressed.
  • Not surprising in this politically correct, nonsensical world: measles outbreak hits the British Isles. The UK is experiencing an outbreak of measles among unvaccinated children, prompting warnings from health officials and long lines at emergency vaccination clinics. The original vaccine was introduced in 1963; the current MMR, one of the best vaccines ever, was introduced in 2005. Vaccination programs should be about the easiest thing a modern country could do. Children should not be admitted to school without vaccinations and welfare entitlements should be held back if families do not have evidence that infants and toddlers are vaccinated. This is not rocket science. And it's not a religious issue, either. It's a public health issue. Parents whose unvaccinated children come down with measles should be interviewed by child protective services. My heart goes out to those children who willl suffer short-term and long-term from measles because they were not vaccinated. People like Orrin Hatch should be ashamed of themselves.