Monday, April 15, 2013

Wells Coming Off The Confidential List Tuesday; Some Very Nice Wells; Pay Particular Attention To Another EOG Round Prairie Well

When looking at #19927, EOG's Short Prairie well, be sure to look back at this January 20, 2013, post about another EOG Round Prairie well

Tuesday, April 16, 2013
19927, 725, EOG, Short Prairie 8-1224H, Round Prairie, t11/12; cum 52K 2/13;
23145, 714, Fidelity, Luke 19-20-29H, Sanish, t10/12; cum 35K 2/13; 4-sec spacing;
23398, 673, Liberty Resources, Lassey 152-103-22-15-1H, Glass Bluff, t10/12; cum 62K 2/13;
23544, drl, BEXP, Albert B. 27-34 4TFH, no data;
23590, drl, Samson Resources, Thomte 0508-3H, Ambrose, no data;
23677, 482, Hess, SC-Tami 157-99-0805H-1, Lone Tree Lake; t1/13; cum 28K 2/13; 
23714, 892, CLR, Memphis 2-4H, Last Chance, t2/13; cum 8K 2/13;


19927, see above, EOG, Short Prairie 8-1224H, Round Prairie,

DateOil RunsMCF Sold
2-201393984634
1-201390855620
12-2012192071862
11-2012141110

23145, see below, Fidelity, Luke 19-20-29H, Sanish, a nice well;

DateOil RunsMCF Sold
2-201333860
1-201355910
12-201286200
11-201250310
10-2012116910


23398, see below, Liberty Resources, Lassey 152-103-22-15-1H, Glass Bluff, a very nice well;


DateOil RunsMCF Sold
2-201397130
1-2013125140
12-2012139510
11-201285100
10-2012162790


23677, see below, Hess, SC-Tami 157-99-0805H-1, Lone Tree Lake:

DateOil RunsMCF Sold
2-2013122500
1-201391910
12-201258660

The Market, The Price of Oil, And Saudi Arabia, Canada, and Bakken Investors

With regard to the price of oil, one of three things will happen:
  • the market recovers, continues an upward trend
  • finds a new trading range, near where it is now
  • continues to trade down
With regard to investors in the Bakken, this is the hierarchy: Saudi, Brent, WTI, Bakken, Canadian Sands oil. I might have the first three for four in the wrong order, but the point is this -- even before the fall in the price of oil today, producers in Alberta were anxious. Today's fall makes them that much more nervous.

Canada, the country, has to be very, very nervous. Just yesterday, the article asking whether the Canadian economic miracle was over. If Canada had problems yesterday, it has bigger problems today.

Earlier this month, April 3, 2013, I posed the question: even if the Keystone XL is approved this month (which, of course, it won't be), will it be too little, too late? If on April 3, 2013, that question had validity, it has even more validity as the price of oil plummets.  At the April 3, 2013, linked post, there is a link to a great RBN Energy article regarding Canada's situation.

So, from two different sources, about two weeks apart we have these two dots: a) the article yesterday asking whether the Canadian economic miracle was over; and, b) two weeks ago, RBN Energy pointing how out dire the Canadian energy situation is. A one-two punch, perhaps?

For the US, the oil industry is a big component of the economy, but, still, it is just one part of a pretty well-diversified economy. For Canada, not quite the same can be said. For Canada, the energy industry is a huge component of the Canadian economy, especially the export market. From wiki:
Canada is one of the few developed nations that is a net exporter of energy - in 2009 net exports of energy products amounted to 2.9% of GDP. Most important are the large oil and gas resources centred in Alberta and the Northern Territories, but also present in neighbouring British Columbia and Saskatchewan. The vast Athabasca Oil Sands give Canada the world's third largest reserves of oil after Saudi Arabia and Venezuela according to USGS.
[Interestingly, if the drop in price is for a short period of time, US oil companies may actually do better due to contracts, hedges, floors, ceilings, etc., of which I have a sense of how they work but not the resources to analyze or forecast what price changes on a short term basis mean for the oil industry.]

As usual I digress. Where was I? Oh, yes. If the drop in the price of oil has a Bakken-centric investor worried, think what the drop in the price of oil means to Canada -- and not just Canadian investors investing in Canadian oil, but the entire economy.

One could stop there, but if the oil industry is a significant part of the American economy, a bigger piece of the Canadian economy, is the oil industry even a bigger component of any other country? Yes, several: I can think of three countries immediately that are of interest to many readers: Venezuela, Iraq, and Saudi Arabia, and possibly a fourth, Mexico.

Venezuela is in deep trouble; it's not going to weather a prolonged drop in the price of oil very well. Iraq, Mexico, meh.

Saudi Arabia? Ah, there's the rub. Their production is down, and if the price of oil stays down for a protracted period of time? The one-two punch, again (see Canada, above). Volume x price = revenue.

Bottom line:
  • Saudi Arabia: hustling, worried
  • Canada: in very deep trouble, and when it comes time to blame someone, it may be the US (right or wrong); and the approval of the Keystone, if it comes at all, will be too little too late.
  • Bakken investors: worried; but opportunities abound
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you read here. 

The Futility -- The Futilty -- Again; Domestic Crude Oil Production to Exceed Gross Imports By Year-End -- Oil & Gas Journal

Remember the first post with that subject, the futility, the futility -- the futility of paying attention to forecasts by EIA, IEA, OPEC, and others? One day "they" forecast oil demand will go up, the next day, they forecast it will go down.  Unless it's a fairly remarkable forecast, I'm starting to ignore them. But it's difficult.

Here's another one, from today. The headline says consumption will increase, but the lede says the consumption increase will be less than predicted just one month ago. Give me a break. The validity of the forecasts are suspect and even if they turn out to be true, the numbers hardly seem remarkable. Oil & Gas Journal is reporting:
In the most recent Short-Term Energy Outlook (STEO), released Apr. 9, the US Energy Information Administration projected that world oil consumption will reach 90 million b/d in 2013 and 91.3 million b/d in 2014, lower by 100,000 b/d and 200,000 b/d, respectively, compared with last month’s STEO. World liquid fuels consumption in 2012 was 89 million b/d.
With new refining capacity coming online and investment expansion in the property market and infrastructure sector, refinery crude oil inputs in China are expected to increase in 2013. Due to weaker industrial indicators at the beginning of 2013, liquid fuels consumption in China is forecast to increase by 450,000 b/d in 2013 and by 510,000 b/d in 2014, compared with average annual growth of 540,000 b/d from 2004 through 2010. In 2012, liquid fuels consumption in China increased by 380,000 b/d in 2012, according to EIA’s estimate.
Liquid fuels consumption by members of the Organization for Economic Cooperation and Development fell by 600,000 b/d in 2012. Projected OECD consumption will decline by an additional 400,000 b/d in 2013 and 200,000 b/d in 2014, EIA said.
On the supply side, EIA estimates that liquids production from countries outside the Organization of Petroleum Exporting Countries will increase by 1.1 million b/d in 2013 and by 1.6 million b/d in 2014. With continued production growth from US tight-oil formations and Canadian oil sands, North America drives almost all the projected growth in non-OPEC supply over the next 2 years.
There's way too much data to sort through at the moment, but if you are so inclined the linked article will keep you busy for the rest of the week.

As mentioned a gazillion times, one of the reasons I blog is to help me keep track of what's going. I finally figured out the big three on-shore oil plays in the US and mentioned them as my lead story at this past week's "Top Stories."

So, it was very rewarding to see the linked Oil & Gas Journal say the same thing today:
Over the next 2 years, drilling in tight oil plays in the onshore Williston, Western Gulf, and Permian basins will contribute to the rapid growth of US crude oil production. Projected production is expected to climb to 7.3 million b/d in 2013 and to 7.9 million b/d in 2014 from an average 6.5 million b/d in 2012. Growing domestic crude oil production has helped to lower crude oil imports. US crude oil gross imports are expected to be exceeded by domestic production as early as yearend.
Yes, those are the the big three -- the Williston Basin, the Western Gulf Basin, and the Permian Basin -- and I finally get it.

But did you notice what was slipped into the middle of that very long linked article? US crude oil gross imports are expected to be exceeded by domestic production as early as year-end. This year, folks, by the end of this year, domestic production could exceed gross imports and that would include Canadian imports, I suppose. I don't know if the EIA forecast is based on an approved Keystone XL or not.

Today's events in Boston should remind us this is a very dangerous world, folks are out to destroy the American way of life, and politicians need to get over their petty politics, and ensure the security of the US and its allies. And part of that includes a safe and secure oil and gas industry, and that includes big pipelines, like the Sandpiper and the Keystone XL.

We're Safe

A Note To The Granddaughters

I apologize.

I did not blog as much today as usual.

It did not have anything to do with the bombings in downtown Boston or the JFK Library bombing/fire.

Several things:

1. I got to Starbucks first thing this a.m., a little after 6:00 a.m. -- the earliest I think I've been to this Starbucks. They changed their log-in procedure and despite everything I tried, I couldn't get on Starbucks wi-fi. Like most men, I won't ask for help. So I took my coffee, and doughnut, and went back home. I was in a bad mood which didn't help with blogging.

2. I knew the market was going to be bad today: I mentioned that yesterday in the WSJ links when I saw "China....growth...slows" all in one sentence. When the market is bad it takes a bit of enthusiasm out of my desire to blog.

3. But the big reason for minimal blogging was out-of-town guests.

4. I had planned to bicycle down to the 20-mile marker of the Boston Marathon route this morning, but after the Starbucks fiasco, I forgot about the Marathon.....yes, I need to get a life.

5. When I am in Boston with my granddaughters I have access to television; I turned on the set about 3:30 or 4:30 -- I forget when, and saw the news. I was stunned. But I was a long way from the events and everyone here is safe. Even our out-of-town guests had planned to be downtown today for the event, but decided not to get into the big crowd.

6. A lot of folks have asked if we are safe; we are, thank you.

7. I expected that we would not see much from the NDIC today with Bismarck shut down due to the storm; and indeed, there was no daily activity report (at least when I last checked).

8. So, it was a bad day all around. Now I see Pilot Flying J has FBI/IRS issues, which just puts the frosting on the cake, as they say. Wow, this has been a bad day.

9. Of course, I suppose to top it off, I dropped my income tax paperwork off at the post office. Wow, the postal clerk was nice. She is usually pretty deadpan, but we had a nice discussion, joked about sending it certified or not. I figured if anyone could use the $3.61 the US Postal Service could use it, so I sent it certified. She told me the IRS would reimburse me the $3.61 if I put a claim in for it. Just joking.

10. So, sorry for the rambling. But I'm safe. I'm not really eager to look at all the damage in the market today, but, of course, it pales alongside the insanity downtown.

11. Oh, two things: a) I am absolutely amazed how fast "they" can isolate a suspect [apparently wrong in this case], and how fast the media gets it in print (and so often correct from the "get-go"; and, b) the DrudgeReport gets a lot of grief from a lot of folks, but if you want to find out immediately about a really big breaking story, one goes to the DrudgeReport. It was the fastest way to get links to multiple sources regarding the story.

12. Someone's knocking at the door; gotta go. Hope it's not the FBI/IRS.

Somebody's Knocking', Terri Gibbs

NOG: 1Q13 Operations Update

Press release:
Northern's first quarter 2013 production is expected to average approximately 11,100 barrels of oil equivalent per day, a 30% increase over the first quarter of 2012 and a 2% sequential quarter-over-quarter increase. 
During the first quarter of 2013, Northern added 128 gross (9.6 net) wells to production
As of March 31, 2013, Northern was participating in 1,355 gross (115.8 net) producing wells and an additional 152 gross (12.2 net) wells that were drilling or waiting on completion.
Northern expects its first quarter 2013 realized price per barrel of oil equivalent, including the effect of settled derivatives, to be between $82.00 - $83.00.
Northern expects lease operating expense (LOE) per barrel of oil equivalent to be $8.50 - $9.00 for the first quarter of 2013.

Happy Birthday, Amber Renee --

The Amber Renee well was completed/tested almost exactly three years ago. It has produced about 750,000 bbls in those three years. It is still producing about 10,000 bbls/month, and is not on a pump (based on the scout ticket)
  • 18408, 1,945,  Murex, Amber Renee 25-36H, Sanish, one mile to the west of the Chandler James; s12/09; t2/10; F ; "long" lateral; cum 750K 2/13; 
This well is considered a "long lateral" but, in fact, is quite short, barely extending in to the second section;  the Chandler James is in the same section, running parallel to Amber Renee, but is a "full" long lateral;

The Chandler James:
  • 17263,  3,124, Chandler James 25-36H, s7/08, produced 500,234 bbls in 484 days; as of 8/12 -- 899K; no pump; still producing 8,000 to 9,000 bbls/month; t10/08; cum 921K 2/13;
Interestingly enough, another well is in the south half of the Amber Renee spacing unit, and although it is "two-acre spacing," in fact, it is not even as long as a typical short lateral:
  • 16839, 864, Murex, Jacob Daniel 25-36H-RE, Sanish, t1/08; cum 417K 2/13;
For newbies: Bakken wells are expected to produce for 39 years. Average EURs for long laterals seem to range somewhere between 600,000 and one million bbl.

By the way, a bit of trivia: the best wells seem to be long laterals in sections 25-36, suggesting that the oil in the Bakken tends to run downhill towards the southeast corners in their respective townships. Just something to note.

The Production Numbers For The Austin Wells In Parshall Field Have Been Updated

Link here.

Note: these are, for the most part, all short laterals. In addition, most are still producing between 3,000 and 5,000 bbls/month.

The only question is when will these wells start hitting the million-bbl mark.

Many of these were drilled early in the Bakken boom, as long as five years ago. I assume the wells were paid for at the wellhead when they hit 100,000 bbls. It is anticipated that the Bakken wells will produce for 39 years. 

Monday Morning Links

RBN Energy: the Niobrara.
Far from a recent discovery – Niobrara has been producing oil for nearly a century from vertical wells. The Niobrara is organic rich shale with the potential to generate 10-20 MMBbl of oil per square mile. As a result this 200 to 400 feet thick layer of sedimentary rock has long attracted the attention of producers.
However Niobrara is not easy to work with – frustrating even. The shale has many different layers and rock types that make horizontal drilling and hydraulic fracturing particularly difficult. Incidentally the oil rich part of the formation running north to south from Wyoming to Colorado is shaped like a banana. For the operators at least it turns out that the Niobrara can be one tricky banana to peel.
WSJ Links

Section C (Money & Investing):

Section B (Marketplace):
  • Oil-tanker operations struggle to stay afloat: For the largest ships—so called Very Large Crude Carriers, which can carry up to two million barrels of oil—the average charter rate on the Mideast-to-Japan route is around $7,085 a day, far below the operation cost of $10,000 to $12,000 a day. The rate peaked at $309,601 a day in 2007.
  • 'Kon-Tiki,' a biopic made in two languages lands in US: The result is two versions of the same film, one in English due in theaters on April 26 and another in Norwegian. The Norwegian-language version, released in 2012, was nominated for this year's Academy Award for best-foreign language film (the Oscar went to Michael Haneke's "Amour"), and is the second-highest grossing film in Norway at about $14 million behind Messrs. Rønning and Sandberg's 2008 movie "Max Manus: Man of War." Weinstein Co., which acquired the rights to both films in November, plans to distribute only the English-language version in the U.S.
Section A:
  • SecState Lurch blinks; offers direct talks to North Korea; taking the high moral ground; "giving peace a chance";
  • Race for support before key gun vote: looks like this, too, will pass; will be the most significant gun-control legislation in years; if passed, it will never be repealed;
  • Looks like a good week for the criminal mind: first, law-abiding citizens will have gun ownership abridged making them targets for the criminal mind; second, Supreme Court could stop routine DNA sampling; and, of course, due to overcrowding in California, criminals are being released even earlier than parole guidelines; yup, a good week for the criminal mind. I'm not saying I agree or disagree with any of these three "events." Just noting the obvious. It is notable that the most heinous gun crimes occur in gun-free zones.
  • The Sierra Club is never satisfied: El Paso says goodbye to landmark. Asarco smokestacks are demolished as part of effort to clean up and redevelop industrial site.
  • Republicans are never happy; now they are upset that the President's labor-secretary nominee may have lied.
  • Any surprise? Venezuela says Chavez successor wins vote. One more reason it would have been nice for the Keystone XL to be on-line by now.  Canadian heavy oil = Venezuelan heavy oil. One arrives by pipeline; one by ocean-going vessel. One comes from America's closest ally; one comes from .... well, from Venezuela.
  • China GDP growth slows to 7.7%. Gonna be an ugly day on the market.
  • Palestinian Prime Minister resigns just days after visiting with Sec State Lurch. The meeting must not have gone so well.
  • Cash-strapped Egypt will spend $18 billion until 2017 to build new refineries and modify existing plants in a move to increase its annual fuel output -- now why else would a country build new refineries and modify existing plants if not to increase production?

Canada's Economic "Miracle" In Trouble?

CNBC is reporting a story regarding Canada's economic "miracle."
But recent growth has consistently fallen short of expectations and a very rough patch late last year turned disappointment into dread. Economists had been betting on a quicker U.S. recovery to boost Canadian exports, as well as a pickup in business spending.
There was no mention of the challenges the Canadian energy sector is having. I would assume that with a deteriorating energy sector, it would limit the government's options.

Student Loan Repayment

Updates

April 16, 2013: See below. Right now, the "forgiven" student loan is treated as income. President Obama will change that: "forgiven" student load will not be treated as income. This is huge. Students should borrow as much as they can possibly afford; they know that the max they will have to pay is 10% of their discretionary pay for 20 years. Meanwhile, colleges and universities can now charge literally as much as they want. Price of a college education will no longer be an issue.
 
Original Post

CNBC is reporting an interesting story for those with student loans. Most folks assume that student loans require a monthly payment determined by the lender based on loan amount, interest rate, and repayment period.

However, everyone with a student loan should apply for income-based repayment (IBR) schedule. The worse that will happen is that you won't qualify, but that is very, very unlikely. I would imagine the vast majority with a student loan would qualify.

The loan repayment is maxed out based on discretionary income, and the remainder of any loan outstanding after the repayment period is forgiven.

The OLD IBR:
  • monthly payments capped at 15% of discretionary income
  • 25-year repayment period
  • any loan remaining not paid off at the end of 25 years is forgiven
The NEW IBR (part of the ObamaCare bill):
  • monthly payments capped at 10% of discretionary income
  • 20-year repayment period
  • any loan remaining not paid off at the end of 20 years is forgiven
Using this calculator, a $70,000 loan at 6.8% over 20 years: $534.34/month.

If one qualifies for an IBR loan over 20 years with an income of $40,000/year: $291/month.

One needs to re-apply annually, so it's impossible to determine how much of the loan would be written off at the end of the 20-year period, but it could be substantial. Loan forgiveness would probably be a taxable event.