Saturday, June 8, 2013

Human Interest: Texan Descendent Of Epping, North Dakota, Homesteader Visits The Bakken

Dallas Morning News is reporting.

[When I went to the link, I was blocked out, requiring a subscription. I placed the "headline" in google search and got the article. The headline: Homesteader’s grandson offers personal view of North Dakota’s great oil rush.]

The article begins:
EPPING, N.D. — In the early 1900s, as American homesteaders made their last big push for free federal land, more Western soil was claimed than during the previous 40 years of the Homestead Act.
By chance, some of that dirt happened to cover what has become one of the richest oil formations in the world, the Bakken Shale in North Dakota, which pumps more crude than any state but Texas.
Thousands of descendants of those original North Dakota homesteaders now benefit from the hard toil of their ancestors.
I am one of them.
When I received the first modest royalty check a year ago, I set out to learn more about my homesteader ancestors and the new North Dakota oil boom, which is helping to reshape the balance of power in world energy markets.
It’s a small, personal connection to one of the biggest ongoing business news stories. Because of shale plays in North Dakota and elsewhere, like Texas, some experts forecast eventual North American self-sufficiency in fossil fuels, meaning no dependence on oil from the Middle East.
And then a very, very long article follows.

Epping, by the way, is the home of a huge CBR terminal. (see photo #7 at this site)

I am convinced this story is not out-of-the-ordinary based on the e-mail I receive from folks with a similar background.

Excellent, excellent article; a must for everyone, but especially "newbies."

A Little Humor? At Least In The Eyes Of Someone, I'm Somebody

Maybe I'm just exhausted and anything will strike me funny. If so, this e-mail from an airline I recently flew on arrived at a "bad" time.

My Name (as the airline has it on file)
Member  #:
Membership Tier:
Miles posted this month:
781 miles
No miles are due to expire.
Miles expired:
0 miles have expired from your account.
Account Balance:
1615 miles

I don't have very many miles. I didn't apply for a credit card from the airlines that would have given me a gazillion free miles and two free trips (assuming I qualified for the credit card).

I can't imagine there are many "membership tiers" below "Somebody."

  • Dumb a$$
  • Nobody
  • Terrorist
  • Religious fanatic
  • The unknown comic
A Note To The Granddaughters

I debated whether to include that first category above -- the one with the dollar signs. But I ultimately went with it.

Our six-year-old granddaughter has a great "dumb a$$" story involving her grandmother so I think I'm on safe ground.

As long as I don't repeat the story here.


Your Nobody Called Today, Sylvia

The other day I mentioned to someone in Starbucks that country/western songs have (had?) the best "hooks." "I won't stand in line behind nobody" is a great line. Same with "don't it make my brown eyes blue" and "quarter moon in a ten-cent town." The list is endless.

The KOG-Liberty Resources Deal -- Mike Filloon At Seeking Alpha

I don't remember posting this one from a few days ago. At SeekingAlpha, Mike Filloon on the KOG-Liberty Resources deal:
Kodiak announced on June 3rd it was acquiring 42,000 net acres in Williams and McKenzie counties. This added production of 5700 boepd. The acquisitions ups Kodiak's Bakken acreage to 196,000 net acres. It will pay $660 million in cash. Kodiak continues to add acreage, and seems willing to pay market value (or a little more). Liberty Resources is a privately held company, and many believed it would be an IPO sometime in the near future. There are no indications Liberty was hurting financially, or was motivated to sell. I would guess Liberty got the deal it wanted, and Kodiak thought there was added value to the purchase.
Given the infrastructure and daily production, Kodiak received a reasonable deal. I also like the transaction, as Liberty is a very good operator and is on acreage I believe to be outside the top tier, but still very good. I do have some issues with respect to timing and leverage as Kodiak continues to add debt and difficulties for management to execute through 2013. Without the deal, Kodiak was well positioned to grow without worries of raising equity. My biggest worry is how it plans to pay for this deal. Kodiak will probably have to go back to its shareholders in the second half of the year. It probably won't be working with in cash flow for another year or two. Managing the new acreage could also be difficult as there have been difficulties with other bolt on acquisitions.
At the sidebar at the right, I have a section where I link to "deals" in the Bakken.

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

Update On The Niobrara For Investors -- Mike Filloon

From SeekingAlpha:
The Niobrara of the DJ Basin gets little press when compared to the Bakken and Eagle Ford. This play extends from Platte and Goshen counties in Wyoming to Elbert County in Colorado. I first covered this play in January of 2011, as Samson Oil and Gas made a huge discovery in Goshen County. This turned out to be an excellent trade as it sold this acreage to Chesapeake. It did not turn out well for Chesapeake, as it has struggled to develop this acreage. Goshen County is not the top prospect, as Wattenberg Field in Weld County, Colorado has been the outperformer. This stacked play is prospective the Niobrara A, Niobrara B, Niobrara C, Codell, and Greenhorn. The Niobrara B is in full development mode, while the other source rocks are currently being tested. I will cover this specific area, and provide reasons to invest in the top small cap operators in Wattenberg Field.
Bonanza Creek may be the best way to play this area. This was an IPO flop, but made some investors look like geniuses. Bill Costello, Portfolio Manager/Research Analyst at Westwood Holdings Group has been on this name, which is up over 100% over the past 12 months. It currently trades around $37/share, and looks to be headed to $45/share over the next 12 months. A recent EPS miss provided a buying opportunity, but the sell-off wasn't warranted as it reaffirmed annual production guidance. I recommended and bought the stock on April 16th at $34/share. I sold the position at just below $40/share. The stock is beginning to look attractive again.
Disclaimer: this is not an investment site. Do not make investment decisions based on anything you read here or anything you thought you read here. I do not follow the Niobrara. I post this information to help me understand the Bakken. 

Deep Carbon Observatory

We may live on a natural gas machine: -- Matt Ridley; new research suggests the world's hydrocarbon resources are far greater than previously thought.

From the linked article at the WSJ:
Coal, oil and gas are "fossil" fuels, right? They are derived from ancient life-forms and are nonrenewable, stored energy, extracted from prehistoric sunlight. In the case of coal and most oil, this is obviously true: You can find fossil tree trunks and leaves in coal seams and chemicals in oil that come from plankton.
But there's increasing doubt about whether all natural gas (which is 90% methane) comes from fermented fossil microbes. Some of it may be made by chemical processes deep within the earth. If so, the implications could be profound for the climate and energy debates.
Dr. Kutcherov thinks the evidence "confirms the presence of enormous, inexhaustible resources of hydrocarbons in our planet." If he is right—and America's new Deep Carbon Observatory aims to resolve the question in the next few years—natural gas may effectively never run out.
I had not heard of the Deep Carbon Observatory before.

Nancy Pelosi may have been right: natural gas might not be a fossil fuel (at least most of it).

Week 23: June 2, 2013 -- June 8, 2013

Bakken Operations
Some spectacular IPs could be seen in the Three Forks -- Rigzone
Better wells even as costs go down
It's all about sand: EOG bringing Eagle Ford completion techniques to the Bakken
Shipping sour crude: Enbridge "wins"
CLR's well-spacing pilot projects -- update
KOG adds more Bakken acreage -- at $10,000/acre; KOG buys Liberty Resources;
From the June dockets: CLR looking to place 17 wells on one 640-acre spacing unit

Other formations
Tyler locations in Slope County

Just how much oil is leaving the state by rail? You might be surprised

Just how effective is fracking (radially)?
BLM extends comment period on new fracking regulations for another 60 days
Winona County, MN, approves a new sand mine; first approval after moratorium

The central corridor
The central corridor -- the smart money moves in first
32 billion bbls in recoverable reserves -- CLR's estimate of the Bakken/Three Forks
The Bakken will be very, very difficult to replicate
The party's over: fracking is the death knell of OPEC
US shale oil boom scrambles Mideast calculus
North Dakota's GDP growth exceeds that of China
North Dakota economy #1 among states, third year in a row -- CNN

ND road construction program for 2013 will be largest in history; almost $1 billion
Williston's Buffalo Wild Wings outsells all other BWW restaurants in the universe, first week opening
Dickinson: $1.3 million for 34 acres off I-94, exit 59

Vern Whitten: the Pyramid oil wells
Robb Siverson photography
Vern Whitten photography

Increasing use of LNG in E&P operations in Canada, displacing diesel

For investors only
After the KOG-Liberty Resources deal: tracking valuations of KOG, TPLM, OAS
Flashback: QEP paying $40,000/acre may have been a bargain
Price of oil rises; holding above $90; surprising

It Must Be A Slow News Day For The Energy Reporter

Pipeline called key to Canada oil sands: extracting may not be economically viable without the pipeline.

There was one story this past week suggesting the Keystone XL was not all that important; Alberta was still getting the bulk of oil to market without the new pipeline. I accepted the premise. But I did note that the issue was getting "curiouser and curiouser."

Now, this from the WSJ today. 
In a report this past week, the Canadian Association of Petroleum Producers projected oil-sands production capacity will more than double by 2030 to more than five million barrels a day. If the Keystone expansion is blocked, production could exceed shipping capacity by as early as 2016—unless rail delivery takes up the slack.
"We're very confident the market will respond," said Greg Stringham, CAPP vice president.
Keystone is just the highest profile among a spate of pipeline projects that would be needed to carry all of the growing Canadian oil production to distant markets. The CAPP report says that even if all proposed pipelines for Canadian crude are built on schedule, oil-sands production will still fall short of the 2030 forecast by one million barrels a day.
Unfortunately, the article doesn't seem to excite me, and if it doesn't excite me, I doubt it will "move" Obama on the issue. But the tea leaves suggest he is will still approve it. At least when I last read the tea leaves about two months ago.

By the way, whenever I see a story on the Keystone XL now, my first thought: it must be a slow news day. This is a non-story until the announcement is made, one way or the other.

Saturday Morning Links

WSJ Links

Section D (Off Duty): Later

Section C (Review):
Section B (Business & Finance):
  • ATT digs in against wireless competition: the company is set to add an unusually high number of wireless customers for the second quarter, reflecting efforts to ward off increasingly aggressive competitors in an already tight market.
  • Spain said to be poised to cut renewable subsidies: Spain is set to cut subsidies for renewable-energy production, a move that could drive struggling solar firms into default and boost loan losses for banks that financed their projects, according to people familiar with the plan.
  • Wedding bell blues: marriage tax penalty worsens this year. Cue up Connie Francis.
Section A: