Sunday, July 7, 2013

Random Look At 100 Wells Drilled In 2007

The current Bakken boom in North Dakota began in 2007.

Looking at the first 100 wells starting with permit #16400, tested June, 2007.

Of the 100 wells
  • Birdbear: 3
  • Greenhorn: 4 (all dry)
  • Madison: 28
  • Red River: 13
  • Spearfish: 1
  • Bakken: 51
One Bakken well was inactive; all the rest were active.

The table below:
  • The fourth column: bbls of oil in thousands, cumulative (updated 10/14)
  • The fifth column: month/year drilled (tested)

16400 127 6/7
16401 197 4/7
16402 madison dry 10/6
16403 birdbear 14 11/8
47 5/7
20 5/7
64 2/7
48 7/8
16408 madison 14 3/7
16409 madison 0 11/6
16410 spearfish 0.6 3/7
TA 3/7  -- CLR
174 2/7
127 3/7
16414 madison 160 2/7
150 2/7
16416 madison dry 9/9
16417 madison 192 1/7
16418 madison 36 11/6
16419 madison 10 6/7
16420 red river 69 10/7
16421 red river 33 9/8
114 12/7
16423 red river 624 3/7 IA
510 7/7
92 5/7
16426 red river 28 8/7
16427 madison 137 3/8
16428 madison 6 12/7
16429 red river 181 3/7
16430 red river 6 4/7
16431 madison 60 6/10
227 5/7
168 6/7
273 7/7
16435 madison 38 4/12
16436 madison dry 1/8
16437 madison 53 5/7
16438 28 9/7  -- CLR
113 9/7
208 5/7
203 5/7

25 4/7  -- CLR
16444 madison SI

16445 madison PNC

16446 madison 80 3/7
26 4/7
104 12/8
16449 birdbear 31 9/8
16450 madison 76 4/7
62 11/7
167 10/7
16453 red river 390 4/7
16454 birdbear pnc

16455 madison 86 3/7
16456 madison pnc

431 5/7
26 6/7
201 10/8  -- MRO
200 3/7
460 3/7
16462 madison 0.1 8/7
385 5/7
16464 madison 1 3/7
16465 madison 30 4/7
16466 madison 196 2/7
322 8/7
16468 madison dry

520 12/7
71 4/7
16471 red river 307 3/7
45 3/7
134 4/7 IA
16474 greenhorn 0 9/7
16475 greenhorn 0 10/7
16476 greenhorn 0 3/7
16477 greenhorn dry 1/7
73 4/7
64 7/7
244 6/7
16481 madison 108 3/7
16482 red river 269 3/7 IA
523 6/7
445 9/7
377 9/7
367 4/8
16487 red river 120 5/7
135 8/7
16489 red river 190 6/7
156 6/7
16491 red river 266 3/7
16492 157 9/7
16494 madison 263 8/7
193 9/8

425 6/7
220 6/7
16499 red river  PNC

16500 madison 5 6/7 IA

I did this little exercise because some folks have said the Bakken wells have such a bad decline rate, they will start shutting some of them down after five years. Many of the 51 Bakken wells above appear not to be economic, but as long as they are producing, they hold the lease by production.

In the game of basketball, there are players whose stats (points, rebounds, etc) are very, very poor, but they play an important role on the team for other reasons.

The most interesting thing in this little exercise: how great some of the Red River wells were.

Disclaimer: I went through the data base fairly quickly, and it is very likely there are errors. But the errors are unlikely to change the general results.

Varying Completion Techniques, Varying Results In The Bakken -- Mike Filloon

Mike has another exceptional article at SeekingAlpha: very long, detailed, with a nice summary.

This is the paragraph on COP's completion technique:
COP has been very active in Haystack Butte. This field is to the southwest of Grail. Conoco's production here is a good example of how IP rates can be altered due to operator completion changes. Conoco would frac part of the horizontal and bring to production. It does this three to four times, bringing parts of the lateral to production over time.
The above results are all over the board and first indications are this completion method is not successful. Conoco had the worst production average of all operators in this article. Also, there is no consistency to design. Some of these long laterals used very low amounts of proppant, while others used very large volumes of water. Conoco's well results may have been skewed due to how it reports its IP rates. 
In some of the above wells, it would report production over a larger number of days in the first month than were actually producing. It also shut down production in some of these wells over the winter months. I would guess there isn't pipe in the ground to transport crude, so instead of trying to truck it out, Conoco shuts the well for a few months. Either way, many of these wells did have production problems.
His summary:
We continue to see a large number of economic wells in northeast McKenzie County.
Not only are these wells economic, but we are seeing a larger number with one year pay outs.
Although production per foot is much better with short laterals, tight stages and more water and proppant, we continue to see more operators using long laterals. This has been very good for operators like Kodiak, which has proven its laterals are sound at a two mile length.
We are starting to see a decrease in production to the south of Grail Field in northeast McKenzie County.
The sweet spot is 30 miles north to south from Charlson to Grail Field. From east to west, it covers 20 miles from Twin Valley to Sanish Field.
I excluded Sanish, Parshall and Alger fields, as it is a different type of production. The northeast McKenzie sweet spot has increased natural fracturing and natural gas production. Parshall Field and the surrounding areas have a much larger percentage of crude.
Northeast McKenzie County will not only produce higher EURs, but it will do this in both the middle Bakken and upper Three Forks. This does not necessarily mean these wells will produce larger revenues, as southwest Mountrail County will produce a much larger percentage of crude.
The long article at the link has much, much more information. 

WTI-Bakken Spread Remains Tight Signaling Adequate Takeaway Capacity

To say the least, it's been frustrating that Bloomberg and Platts removed "free" access to daily Bakken spot prices. But it is what it is.

Occasionally we find a site that provides an update (and even analysis, sometimes) regarding the Bakken-WTI spread.

MarketRealist is reporting:
From a short-term perspective, the spread changed by $2.00/barrel over the week (with Bakken moving lower relative to WTI Cushing) which was a negative catalyst for producers in the region.
However, over the medium to long term, increased infrastructure has allowed for differentials to close and stabilize and has even spurred major Bakken operators such as Continental Resources (CLR) to change guidance on its realized differentials to be closer to WTI.
These developments are medium-term positive catalysts for other operators in the region, such as Whiting Petroleum (WLL), Kodiak Oil & Gas (KOG), and XTO Energy (part of Exxon Mobil, XOM) and indeed over the medium-term the spread had closed in to trade around par where it was trading as wide as $10/barrel in October 2012, and as wide as $27/barrel in February 2012.
Much more at the linked article, including a very nice graph. 

Off The Net For Awhile: My Biggest Surprise Today -- So Few Stories On $104 Oil ...

... and unless I missed it, a story about the Bakken crude oil train that exploded in the center of a small Canadian town was not on the front page of the NY Times on-line Sunday edition, but a story on funding for the Texas highway department was.

As we all know, "futures" mean squat, but right now, 1800 EDT, Sunday evening, the price of oil (futures) is up 50 cents, hanging on to gains from last week.

A Note To The Granddaughters

You know you've found the best hobby store in the world when your granddaughters love it, and your wife is disappointed that it was a "model" store, not a hobby store. 

JD Hobbies, on 6th Street, just off Pacific Avenue, in San Pedro, CA, is one of the best hobby stores I've visited in a very, very long time. This is an "old school" hobby store. Mr Louis Lee is the proprieter; he has had his store for about eleven years, first on Western Avenue, which he outgrew, and then on 6th Street, which he outgrew, and then moved next door to his present location. 

For the most part, yes, it is a model kit hobby store. But one can spend hours looking around, finding hidden treasures. Much of his inventory is purchased from private collectors who have grown old(er) and realize that they will never put together that model they bought 50 years ago. Mr Lee has a huge fan base from all over southern California, and probably farther away than that. He looks for models that customers ask about, and when he finds them, he puts them in the back for three days after notifying the customer who was interested. If the customer does not come in within three days, the item is put on the floor, and it becomes an "Easter egg hunt" to find it. There is some organization to the store, but only in a general sort of way. That is what makes it so inviting to look around. 

I'm used to looking straight ahead, and perhaps down, when looking at "things" inside a store, but at JD Hobbies, it is just as important to look up: maybe a 100 model aircraft are hanging from the ceiling.

Upstairs, he has a library of history books and books on models. It is there that one realizes this is truly his passion; it's the store I always wanted.  He has two brand new sofas upstairs (about the only things not on sale in the store) designed for folks to sit down, read a bit, and rest. It really is quite inviting, and quite incredible. 

Back downstairs, about a third of the front of store is "covered" with a huge US HO railroad layout. Really, really nice reminder of what so many of us did or wanted to do when we were younger. Resting against one of display cases was a vintage slot car racing set; I was tempted to purchase it just to show the grandchildren what I enjoyed so much growing up. In the process I learned a bit about building (or at least maintaining) electric motors.

Back to the HO train set: I have a huge collection of Märklin trains and I've always wanted to set up my own HO railroad layout but it looks more and more like I will never get around to it.

The younger granddaughter couldn't wait to buy a Snap-Tite model. She was introduced to them yesterday and when we went back to the store today, she picked out a 1977 Monte Carlo. She couldn't wait to start putting it together as soon as got back home.

By the way, Mr Lee, about 50 years old, son of Korean immigrants, will soon have his own reality show, either on the History channel or National Geograpic. Watch for "History in a Box." In addition, he did the "lake model" for the Hollywood movie "Evermore" coming out later this year (2013).

JD Hobbies

Incredibly he has Pocher models available. The Rolls Royce will take you more than two years to build, working full time, he says. Looking at the parts, I believe him. It will cost you $1,000.99 for the kit.

An example of a Pocher Model Rolls (Mr Lee had a different version):

Pocher Rolls

Wells Coming Off The Confidential List Over The Weekend, Monday; Murex With a Gusher; OXY Reports A Nice Well; QEP With Two Big Wells

Monday, July 8, 2013
  • 24009, drl, Statoil, Paulson 36-1 1H, Briar Creek, no data,
  • 24174, drl, Statoil, Panzer 22-23 3TFH, Alger, no data,
  • 24343, 2,880, BR, Waterton 34-32TFH, Keene, t5/13; cum 4K 5/13;
  • 24616, 2,389, QEP, Hemi 2-34-27TH, Grail, t5/13; cum 9K 5/13;
Sunday, July 7, 2013
  • 24109, 623, Murex, Maxwell James 17-20H, Stanley, t3/13; cum 24K 5/13;
  • 24257, 4,125, Murex, Albert Skari 35-26H, Sandrocks, t2/13; cum 75K 5/13;
  • 24525, drl, True Oil, Hagen Federal 23-25 30-29H, Red Wing Creek, no data
Saturday, July 6, 2013
  • 20395, 159, OXY USA, Henry Kovash 1-6-7H-142-95, Manning; t1/13;  cum 29K 5/13;
  • 22336, drl, CLR, Columba 2-5H, Dollar Joe, no data,
  • 24357, drl, Hess, EN-Hermanson 154-93-0235H-3, Robinson Lake, no data,
  • 24431, drl, CLR, Coleter 5-14H3, Bear Creek, no data,
  • 24562, drl, Hess, EN-Hermanson-154-93-0235H-5, Robinson Lake, no data,
  • 24615, 3,167, QEP, Hemi 3-34-27BH, Grail,t5/13; cum 5K 5/13;

24257, see above, Murex, Albert Skari 35-26H,  Sandrocks:

DateOil RunsMCF Sold

20395, see below, OXY USA, Henry Kovash 1-6-7H-142-95, Manning:

DateOil RunsMCF Sold

It Appears Libya Wants To Get Out Of The Oil Business ...

... another oil exporting port is closed....

Reuters is reporting:
An armed group has shut down export operations at Libya's crude oil port of Ras Lanuf in a move believed to be linked to a similar closure of the country's main export terminal last week, industry sources said on Sunday.
It was not immediately clear what the group wanted, but three Libyan industry sources drew comparisons with the shutdown of OPEC member Libya's Es Sider crude oil export terminal overnight on Thursday.
"Arab Spring":  President O'Bama's greatest gift to the US oil and gas industry. 


President O'Bama's Cairo speech, "A New Beginning," June 4, 2009.

The Arab Spring began on 18 December 2010.

I've never understood the "why" of WWI. But the 30-second sound bite is this: in 1914, Europe was a powder keg; all it needed was a spark.

When one reads the "Arab Spring" article linked above, one gets the feeling history books will write this about the Mideast implosion: in 2009, the Mideast was a powder keg; all it needed was a spark.

If You Want It, You Can Have It -- But You Better Hurry, 'Cause It May Not Last

Here are two great Bloomberg stories on renewable energy in Europe and Great Britain (which likes to think it is not part of Europe).

The first article is a "feel-good" article that elitist environmentalists will enjoy. One really needs to read the entire article and think of the unintended consequences, perhaps ask some questions not asked (or answered by Bloomberg.
Germany’s $710 billion green-energy drive is cutting production at nuclear reactors, the nation’s most profitable large-scale plants, as power prices slump to a six-year low. 

The reductions, which typically last for hours at a time, underscore how Chancellor Angela Merkel’s plan to replace atomic power with renewable energy within a decade is gaining ground at the expense of profit at utilities from RWE to EON SE. The boom in green power, coupled with the lowest demand in 10 years, sent the average operating margin at 15 European utilities to the lowest since 2002, company data compiled by Bloomberg show.
Renewable power is so prominent in Germany’s grid that natural gas-fired plants haven’t been profitable for 17 months, according to a Bloomberg calculator that takes power prices, fuel and emissions costs into account. Reactors are cheaper to operate than lignite-, coal- and gas-fired stations on a marginal cost basis.
Sounds great, doesn't it?

Nowhere are the implications or the unintended consequences mentioned in this very, very long article, filled with figures and obfuscation that few folks will read to the end.

Nowhere is the cost factor discussed.

For that we need to go to a second article, also from Bloomberg, and also just published, June 14, 2013. In this article we are told very clearly what this "feel-good" story is costing the Germans, and how much more it will cost the Brits.

The lede:
Electricity in the U.K. is poised to cost almost twice as much as in Germany within two years as Britain lags behind in building solar and wind plants. U.K. power will be 85 percent more expensive than in Europe’s biggest energy market in May 2015, according to data compiled by Bloomberg. That compares with an average premium of 17 percent over the past five years and 80 percent today.
So, big deal. British electricity will be more expensive than German electricity. If the price the Germans are paying for electricity is inconsequential, then no big deal.

Unfortunately that's not the case.
The lower German prices are no comfort for the 40 million households in Europe’s biggest economy.
Retail [electricity] prices have risen 17 percent since the end of 2009, according to Eurostat data compiled by Bloomberg Industries.
[Germany] has the highest residential costs in Europe after Denmark as utilities pass on the costs of solar and wind generation
German Chancellor Angela Merkel’s government should take steps to contain the cost of the switch to renewables as households have so far borne the brunt through power bills inflated by renewable-power subsidies while industrial users have been shielded from the increased costs, the International Energy Agency said last month.
“The fact that German electricity prices are among the highest in Europe, despite relatively low wholesale prices, must serve as a warning signal,” Maria van der Hoeven, the Paris-based adviser’s executive director, said May 24.
More, after the video.

Come and Get It, Badfinger

So,  how bad is the price of electricity in Germany? Again, from Bloomberg, January 28, 2013 (yup, this year):
Worlee-Chemie GmbH, a family-owned company that has produced resins in the city of Hamburg for almost a century, is trying to escape the spiraling cost of Germany’s shift to renewable energy.
A 47 percent increase on Jan. 1 in the fees grid operators set to fund wind and solar investments is driving the maker of paint ingredients to Turkey, where next month it will start making a new type of hardening agent at a factory near Istanbul.
The levy will cost Worlee 465,000 euros ($620,000) this year, the equivalent of 10 full-time salaries, or one-third of the company’s tax bill. As German labor costs rise at the fastest pace in a decade, the price of weaning the country off nuclear energy by 2022 is crushing the so-called Mittelstand, the three million small and medium-sized businesses like Worlee that account for about half of gross domestic product.
“It could be the proverbial straw that breaks the camel’s back,” Chief Executive Officer Reinhold von Eben-Worlee said in an interview. “It comes on top of tax, general production costs, raw-material availability and bureaucracy, which have led to a deterioration of the investment climate in Germany.” 
From CanadaFreePress:
Germany’s switch to renewable energy is bound to fail with consumer prices at a 15-year high while wholesale prices are languishing, the chief executive of Austrian energy group Verbund said. Germany’s market, due to its retreat from nuclear power after Japan’s 2011 Fukushima disaster, was ‘about to collapse’, Wolfgang Anzengruber said, citing a lack of necessary investment that is compounding a broken pricing model.
The CEOs of manufacturing industries are warning that production in Germany is at risk because of low energy prices in the United States. The energy prices there are now only a third of those in Germany. “Many industrial companies are planning to build new factories in the U.S. and not in Europe because of low energy prices there,” said Gisbert Rühl, chief of steel trader Kloeckner. “We are now reacting to this development and plan new business units in the United States.” To move production to the U.S. is especially attractive for companies in energy-intensive industries such as steel and aluminium or chemistry.
Even the NY Times reported on this debacle, December, 2012:
On Dec. 19, Voestalpine, an Austrian maker of high-quality steel for the auto industry, announced that it would build a plant in North America that would employ natural gas to reduce iron ore to a kind of raw iron that would then be used in the company's European blast furnaces. 
Asked whether he had considered building the plant in Europe, Voestalpine’s chief executive, Wolfgang Eder, said that that “calculation does not make sense from the very beginning.” Gas in Europe is much more expensive, he said.
High energy costs are emerging as an issue in Europe that is prompting debate, including questioning of the Continent’s clean energy initiatives. Over the past few years, Europe has spent tens of billions of euros in an effort to reduce carbon dioxide emissions. The bulk of the spending has gone into low-carbon energy sources like wind and solar power that have needed special tariffs or other subsidies to be commercially viable. 
Both consumers and the industry are upset about high energy costs. Energy-intensive industries like chemicals and steel are, if not closing European plants outright, looking toward places like the United States that have lower energy costs as they pursue new investments.
BASF, the German chemical giant, has been outspoken about the consequences of energy costs for competitiveness and is building a new plant in Louisiana.
“We Europeans are currently paying up to four or five times more for natural gas than the Americans,” Harald Schwager, a member of the executive board at BASF, said last month. “Energy efficiency alone will not allow us to compensate for this. Of course, that means increased competition for all the European manufacturing sites.”

All Those Stories About The Challenges Of Moving To Williston ...

... 70 y/o Californian finds a new home, and loves it....

The Dickinson Press is reporting:
Californian Marvin Smith got a second wind at 70 and decided to move to North Dakota to chase one more oil boom.
Smith knew his days as a derrickhand were long behind him, but he thought he was still healthy enough to work in the oilfield.
Smith, of Woodbridge, Calif., has a pension but would like to supplement that income, as well as enter the workforce again. That led him to Williston.
“I’m really tired of fishing and I want to go back to work,” Smith said.
The job search has taken longer than Smith expected. He’s lived in Williston about seven weeks and continues to sleep in his pickup. He found temporary work as a carpenter and recently lined up a maintenance job.

Smith plans to work toward renewing his commercial driver’s license while he does maintenance work.
During his downtime in Williston, Smith gets out his guitar and plays gospel music around town. He plays for dinners that Life Church Assembly of God hosts weekly for newcomers to Williston and plans to play for workers at a crew camp.

Time For A New Poll: North Dakota Daily Production In May, 2013

Time for a new poll.

First, the results of the current poll in which we asked the reason for the recent surge in the price of oil:
  • weakening dollar: 16%
  • tighter supplies: 15%
  • Mideast strife: 68%
Now, for the new poll.

Pretty simple. Will North Dakota oil production in May, 2013, set a new all-time record? The month of May was a particularly difficult month this year, mostly due to spring flooding and impassable roads (due to mud). It will be interesting to see if severe weather in May affected overall production to a noticeable extent. To make it interesting, the threshold will be a 1% increase.

Will North Dakota oil production in May, 2013, exceed production in April, 2013, by more than 1%. The next Director's Cut will provide production data from May, 2013, and should be posted late next week at the earliest.

For the archives: is reporting that Bakken production will eventually plateau. Well, duh. I'm not sure what the point of the article was. Having said that, the graph was most interesting. North Dakota is currently producing about 800,000 bopd. In 2055, these are the production estimates:
  • proven: 500,000 bopd
  • probable: 600,000 bopd
  • possible: 900,000 bopd
The graph does not indicate which metric for technically-recoverable oil they are using:
  • USGS: 7 billion bbls (which the USGS admits, is conservative)
  • CLR, pre-2013 USGS assessment: 24 billion bbls (middle Bakken, upper Three Forks)
  • CLR, post-2013 USGS assessment: 54 billion bbls (middle Bakken, four benches of the Three Forks) 
"They" should be using the USGS estimate; if so, the graph referenced above could look a lot different in 2055. By then I will have celebrated by 100th birthday.

But again, worse case scenario: North Dakota oil production will be "about the same" in 2055 as it was in 2011. Pretty spectacular, I would say. 2011 was a pretty good year by all accounts.