Thursday, November 28, 2013

Just A Random Note: Some Interesting WellsTo Follow

24666, conf, EOG, Van Hook 126-2523H, Parshall:

DateOil RunsMCF Sold
10-20135786326949
9-20134899325624
8-20134055522580
7-20133048612144


Based on the "126" I assume this is a Three Forks well.

For newbies: generally the first month is not a full month (though it could be). This well has already produced about 180,000 bbls of oil in the first four months.

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 24667, conf, EOG, Van Hook 19-2523H, Parshall:

DateOil RunsMCF Sold
10-20135336030936
9-20135689129328
8-20135281527066
7-20132332211007


This well has produced more than 186,000 bbls of oil in the first three months.

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24960, conf, EOG, Wayzetta 155-2536H, Parshall:

DateOil RunsMCF Sold
10-20134838314822
9-2013457698265
8-2013420624916
7-201389490



This well has produced more than 145,000 bbls of oil in the first four months.

Wells Coming Off Confidential List Thursday, Friday: HRC, Hess, MRO All Reporting Great Wells And All Hooked Up To Natural Gas System

Friday, November 29, 2013
  • 25298, 1,012, Hess, EN-Weyrauch 154-93-1918H-4, Robinson Lake, t9/13; cum 33K 10/13;
  • 25570, 997, HRC, Johnson 7-25-36H, Strandahl, t8/13; cum 17K 9/13;
Thursday, November 28, 2013
  • 25484, 2,071, MRO, Bluegrass 21-25TFH, Bailey, t10/13; cum 15K 10/13;
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25298, see above, Hess, EN-Weyrauch 154-93-1918H-4, Robinson Lake:

DateOil RunsMCF Sold
10-20131261614470
9-20132062820986

 25570, see above, HRC, Johnson 7-25-36H, Strandahl:

DateOil RunsMCF Sold
9-201355494219
8-2013118527749

25484, see below, MRO, Bluegrass 21-25TFH, Bailey:

DateOil RunsMCF Sold
10-2013148656273

Exxon Sells Iraq Stake To PetroChina

Updates

November 30, 2013: Michael Fitzsimmons, over at SeekingAlpha, has a nice commentary on this deal.
4-traders.com reports a landmark multi-billion dollar energy deal has been struck between Turkey and Iraqi Kurdistan. The state-backed Turkish Energy Company has signed a contract to operate 13 exploration blocks in northern Iraq and is teaming up with Exxon Mobil in about half of them. After years of being bogged down in low margin Iraqi projects, this is a coup for Exxon and a positive catalyst going forward. The deal will likely benefit Chevron as well.
Back in January, I wrote Exxon And The KRG Need A Pipeline and explained why the only thing keeping the oil riches of Kurdistan from being exploited was a secure pipeline to world markets independent of the Baghdad government to the south. The existing pipeline (see map) used to carry 1.6 million bpd of Iraqi oil to the global market, earning nice transit fees for Turkey. At the time of the article, wars and saboteurs had left the Iraqi section of the pipeline in shambles. One of the two parallel pipelines was totally empty and the other was running at a small fraction of capacity.
Original Post
Yahoo!News/AFP is reporting:
American energy giant Exxon Mobil on Thursday sold part of its controversial stake in a massive Iraqi oilfield to PetroChina and Indonesia's Pertamina amid a long-running row with Baghdad.
The sale of the stake in the West Qurna-1 field in south Iraq, one of the country's largest, marks a key step towards resolving the dispute with the central government over Exxon's contracts with the autonomous Kurdish region.
"The agreement was signed for Exxon Mobil to sell part of its 60 percent stake," oil ministry spokesman Assem Jihad told AFP.
"Representatives of all the companies signed the deal today with the Iraqi government in the ministry."
PetroChina takes a 25 percent stake in the oilfield, while Pertamina will hold 10 percent, thereby reducing Exxon's share to 25 percent.
An earlier post, January 23, 2013, has a bit more, leading up to this.

Several Articles On The Shale Oil Boom -- For The Archives: How The Bakken Has Affected Global Oil Industry; The State Of Texas; And An Indian Reservation In North Dakota

A reader sent me two interesting articles on the "tight oil" revolution we're experiencing in the US. Both articles are quite long, particularly one of them, and there are so many more stories within the articles that it is hard to figure out how to capture all the issues, and all the data points.

For now, I will simply post the links with only a few comments.

First the links:

The impact of the US oil boom; global re-ordering.  

Texas oil boom: another oil boom that is changing everything.

The StarTribune has a story on the reservation

With regard to the actual boom, in Texas and in North Dakota, I don't think there's anything new for regular readers of the blog, in the big scheme of things.

From the second article:
Drilling and fracking are expensive, and shale wells tend to decline quickly, so new drilling is constant, according to a Harvard University study. Only the United States, with 60 percent of the world's supply of drilling rigs, most of which can do the horizontal drilling fracking requires, has the wherewithal to maintain the pace. For comparison, the Harvard study noted, the U.S. completed 45,468 oil and gas wells last year; the rest of the world outside of Canada completed just 3,921.
Also:
Wilson said he's noticed many of his fellow operators drilling wells closer and closer together at the major fields in Texas and North Dakota. That makes money quickly and satisfies shareholders. But then the wells start competing with one another for the same oil and decline quickly, he said.
I think the jury is still out but whenever I see comments about decline rates and well spacing it makes me think that some folks still have not adjusted to a new way of thinking: conventional vs unconventional oil. I don't think we've seen evidence in North Dakota that putting wells more closely together is hastening the decline rate.

However, remaining focused on the decline rate seems to be missing the bigger picture. Unless I'm missing something, EURs seem to be the more important metric. If the EURs of Bakken wells exceed the EURs of Madison wells, and Bakken wells pay for themselves in one to three years, who cares what the decline rate is. That's always been the problem in the oil and gas industry. Wells deplete.

Hitting a Bakken well or a great Madison well is sort of like hitting the lottery. With the Bakken, you take the winnings upfront; with the Madison, you have an annuity over a lifetime. [I used to say that with more conviction; now that we have moved into the manufacturing phase of the Bakken, anyone who has a well on his/her section, will have Bakken annuities (plural) that will easily last a lifetime.]

When I first started blogging, they were talking about recovering 1 - 3% of original oil in place; then it went to 3 - 8%. I believe I have seen numbers that are higher. The operators continue to explore new methods and new technologies. Completion methods being introduced by EOG and Whiting in North Dakota are resulting in significantly better wells.

The third article is on the challenge the Native Americans have "managing" their spiritual land:
Theodora Bird Bear and Corey Sanders are the unlikeliest of protesters.
She’s 62 and works as a bookkeeper at a Catholic church just up Bureau of Indian Affairs Road 12 from the simple brown house she shares with her sister.
He’s 44, similarly soft-spoken and ranches down BIA Road 14 with his brother, running cattle on dozens of hilly acres climbing from a creek-lined ravine.
“When you have roots buried deep here, there’s something intangible that really connects you to the earth,” said Bird Bear, who has spent her entire life on this arid terrain that’s now in a bull’s-eye for the next burst of oil extraction in North Dakota’s frenzied Bakken boom. “Yes, it’s rough and hard out here. But this is our land, darn it, this is what we’ve got left and we’ve got to fight for it.”
Some other comments:
Hudson, like many tribal members, inherited mineral rights. She and her siblings share a $10,000 check each month, royalties she calls “a real blessing” in tough economic times. But she’s been through earlier oil booms here and knows it might not last. “Oil is a fickle business; if they can find a cheaper way to produce it, they’ll pull out of here in a New York minute.”
Neighbor Lisa Deville, 39, a mother of five from Mandaree, is less torn, despite her husband’s royalty checks that helped them pay off $70,000 of their home mortgage.
“We’re supposed to be keepers of the earth,” she said. “We’re supposed to be the water that makes things grow. We’re losing that connection.”
For newbies, it is important to remember that the folks living on the reservation are divided on the issue, some even insisting that their tribal leaders were "cheated" in their leases -- referring to the WPX deal a couple years ago.

I doubt the folks on the reservation have problems all that different from other folks in the oil patch who do not live on the reservation.

By the way, anyone who is getting $10,000/month in royalties will eventually get ten times that amount, or $100,000/month in royalties, from the Bakken. The reservation appears to average one or two wells/section. Before the drilling is over, is very likely that the better Bakken (and much of the reservation is in the better Bakken) will support eight to sixteen wells/section.

The problem I have with the StarTribune story: a) we've heard this before and before and before; b) it's more of an op-ed than a news story; c) the journalist had an agenda -- the story was written to fit the thesis, and thus not objective, though it looks like an objective news story; and, d) there seems to be more than a bit of hypocrisy in the article. I think this quote will be the takeaway for me: "...a $10,000 check each month, royalties she calls “a real blessing” in tough economic times." The writer should have asked what their income was prior to the royalties and how the royalties have changed their life. Most importantly, is most or all (or even, any?) of the royalty being used to fuel the campaign stop the oil industry from drilling on the reservation?

Newbies may want to take a look at this post to see what the Native Americans are complaining about.

Alaska Oil Future


January 4, 2019: ENI to operate Alaska oil field.

March 15, 2017: Smith Bay, North Slope

March 10, 2017: Nanushuk Play; Pikka Area; North Slope; Repsol, Armstrong Energy, big discovery announced; 1.2 billion bbls of recoverable light oil; said to largest conventional onshore discovery in US in 30 years.

October 27, 2015: 88 Energy Limited has begun drilling horizontal shale on the North Slope This is just one of many links.

October 13, 2015: update on Kuparuk oil field, north slope, Alaska.

July 17, 2015: Alaska's North Shore production areas, EIA.  

Original Post
 
The Alaska oil story has always been difficult for me to understand. This article -- sent to me by a reader -- in The New Times brings us up to speed.

The NYT is reporting:
Ms. Palin was elected governor in 2006 on a pledge to clean house after revelations of oil-industry corruption in the State Legislature, and in 2007 oversaw a sweeping overhaul of policy that included big new taxes on oil profits.
But this year Gov. Sean Parnell — Ms. Palin’s lieutenant governor, and successor after her resignation in 2009 — led a drive in the Republican-controlled Legislature to repeal the Palin tax package, arguing that it discouraged new exploration. That is a big issue in Alaska, where oil taxes pay for 90 percent of the state’s general fund budget. 
And now the confusion due to strange bedfellows:
Supporters of the Parnell plan scoff that nostalgia for the Palin years is misguided hindsight. The old law, they said, created big disincentives for oil companies to explore and drill.
“People were angry at the oil industry, angry at the Republican Party, angry at the lawmakers who got caught in the scandal, and she channeled that,” said Andrew Halcro, the president of the Anchorage Chamber of Commerce, referring to Ms. Palin. “And so when she raised taxes, people were like, ‘All right, you go get ’em.’ But then the reality sunk in.” 
And that's why I was always so confused when I heard Alaska, oil, Palin, Tea Party, taxes, all in the same paragraph. 
She did the right thing. She put in a tax that was tough on the big guys,” said Jack Roderick, 87, a major public figure since Alaska’s early statehood as a lawyer, author, former Democratic mayor of Anchorage Borough — and now leader of the repeal drive
The Alaskans did not see the Bakken coming, nor did anyone else for that matter:
“In just the last five or six months, Alaskans are starting to see the benefit of a competitive tax regime,” he said in a telephone interview, pointing to new investment in oil drilling areas. He said that he gradually saw harmful effects in the ACES law he helped Ms. Palin pass and that Democrats, in “all of a sudden now raising her legacy,” were overlooking or ignoring the explosive rise of challengers in energy production since Ms. Palin’s time, notably North Dakota.
When will this be decided? 
The referendum on oil taxes will be in August. Mr. Parnell is aiming to seek a second full term in the general election two months later. The two races are now intertwined, Democrats said. 
This will be interesting to watch.

By the way, this helps me put into perspective North Dakota's approach to the oil patch.

Biggest Danger To Wildlife: President's Ethanol Program

This AP story is being reported "everywhere." I found the story in the Dallas Morning News hard copy (my wife sent me on an early morning errand to buy a 5-pound Thanksgiving issue: four pounds of ads, one pound of non-ad news, comics, editorials, etc. Online, one source is The Charlotte Observer (weightless):
SIOUX FALLS, S.D. Pheasants once drew hundreds of weekend hunters to Fairbury, Neb., each fall, filling the 45 rooms at Randy Brown's Capri Motel with sportsmen eager to bag their limits. But times have changed. The native grasslands and milo crops that used to dot surrounding Jefferson County have been overtaken by corn and soy crops.
Neither provides the shelter that wildlife once enjoyed. This year's opener drew just two rooms of out-of-state hunters to the Capri, one of many businesses indirectly affected as farmers move to meet the nation's demand for biofuel.
"We don't have the habitat we had 20 years ago," said Brown, owner of the motel near the Nebraska-Kansas border.
The U.S. Conservation Reserve Program, which pays landowners not to farm their property, has been a boon to wildlife. Since its creation in 1985, it has boosted populations of ducks, ring-necked pheasants, prairie chickens, Columbian sharp-tailed grouse and other wildlife by providing areas where they can feed and reproduce.
"Everything's against the pheasants right now." Since the government began requiring oil companies to add billions of gallons of ethanol to their gasoline each year, the states of Iowa, Kansas, Minnesota, North Dakota, South Dakota and Nebraska have lost 2.8 million acres from the conservation reserve program, as farmers planted nearly 10 million more acres of corn, the main feedstock used to produce ethanol.
About 5 million other acres are now included in other conservation programs, but nearly all that land is being actively farmed.
So, we have slicers and dicers killing golden eagles, red-tailed hawks, migratory ducks, and whooping cranes, and the ethanol program decimating pheasants, prairie chickens, and grouse. Where are the Poppers? Where is Jane Nielson? Where is the Sierra Club?

Stark County - Dickinson - Approves New Rail Transloading Facility

Updates

January 17, 2014: post with link to press release (PDF) providing more details

December 4, 2013: The Dickinson Press is reporting:
Stark County commissioners on Tuesday gave final approval to rezone a 686-acre plot for a rail terminal 5 miles west of South Heart, but not without a lengthy list of stipulations.
There was no reason to post this; the story / original post remains unchanged. However, the explanations why the county commissioners flip-flopped add a bit of hilarity to today's news.  One commissioner suggested that he knew how to run the railroad better than BSNF and that's why he originally denied the request. But, now, after two or three weeks of "RAILROAD 101" he understands how the railroad works. It turns out that the train occasionally has to stop to load and unload materiel. I cannot make this stuff up.
 
Original Post
The Dickinson Press is reporting:
On the second go around, Stark County Planning and Zoning Board members approved a 686-acre agricultural-to-industrial rezoning request on Wednesday from developers seeking to build a rail terminal 5 miles west of South Heart.
Developers want to create a transloading facility to receive loads of fracking proppants, aggregate, oilfield equipment, agricultural products and building products.
It doesn't really matter, and it doesn't add anything to the story, but I always enjoy trying to figure out where these proposed sites will be. 

It appears that based on the description in the article, the proposed site will be near the "A" in the graphics below:




Good Morning! Happy Thanksgiving!

I almost hate to be so mundane on such a wonderful day, but I'm off my meds, and OCD has kicked in, so I will sit here, listen to some classical music (per my wife's "suggestion" if I want coffee and fresh muffins), and check the e-mail. There are at least two stories that came to me via e-mail, both related to the Bakken so that should be nice.

The first story comes from SeekingAlpha. This one caught me completely by surprise. I had not looked at the market over the past two days, except for the Dow. I had no indication that PSX (Phillips 66) hit a new high. On November 20, 2013, PSX was said to be overvalued with respect to its peers, by at least one analyst.

Now, just a few days later, PSX hits a new high and Michael Fitzsimmons takes a look at it. Mr Fitzsimmons asks whether PSX might just be the "best play on domestic shale."

It looks like its previous high was $69.67, and is now comfortably at $71 and paying over 25. The two things that excite me about PSX: a) their $2 billion LPG export facility in Texas; and, b) their "investor-friendly" management.

Again the disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

Now, to get some coffee and some fresh muffins.

(The second story alluded to above regards the proposed rail transloading terminal near Dickinson.)


***************************

We really do have something to be thankful for in this arena. Can you imagine the state of the US economy if five years ago, the US had banned all fracking, and Great Britain (Scotland and northern England); France; and Poland had pressed "full steam ahead" with their own shale programs, instead of doing quite the opposite and putting most of their eggs into wind (Germany) and solar (Spain)? We would be sitting over here, wondering, "what just happened?" But the US is as close to energy independence as it has ever been since the President Carter days, and the refined products export market is about to take off.