Wednesday, December 4, 2013

QEP With Twelve (12) New Permits; In All, NDIC Reports Twenty-Five (25) New Permits Today -- The Williston Basin, North Dakota, USA; Petro-Hunt Reports Three (3) Nice Wells; KOG Reports Another Nice Smokey Well

Active rigs:


12/4/201312/04/201212/04/201112/04/201012/04/2009
Active Rigs19318119916466

Twenty-five (25) new permits --
  • Operators: QEP (12), EOG (5), Hess (4), XTO (3), Oasis (1)
  • Fields: Gros Ventre (Burke), Parshall (Mountrail), Ray (Williams), New Home (Williams), Heart Butte (Dunn), Siverston (McKenzie), Midway (Williams)
  • Comments: QEP's twelve (12) new permits are all in SWSW 12-149-91, Heart Butte, Dunn County
Wells coming off the confidential list were posted earlier; see sidebar at the right.

I opined early on that anyone who "had" one (1) in the better Bakken would eventually have 8, 12, 16, or more wells.

Here's a screen shot of the Heart Butte area. The QEP permits for twelve (12) new wells are in the lower right hand corner; they will fan out as indicated by the three red arrows. Note similar arrangement of wells inside the ovals, most of which are also QEP wells.


Wells coming off confidential list Thursday:
  • 22491, 1,687, Petro-Hunt, Jonsrud 151-96-3A-10-6H, Clear Creek, t10/13; cum 25K 10/13;
  • 24313, 1,895, Petro-Hunt, Brenna 152-96-14A-23-6H, Clear Creek, t10/13; cum 11K 10/13;
  • 24531, 1,859, Petro-Hunt, Wolan 152-96-34A-3H, Clear Creek, t9/13; cum 33K 10/13;
  • 24899, 2,067, KOG, Smokey 2-17-5-2H3,  Pembroke, t10/13; cum 24K 10/13;
  • 24944, drl, XTO, Sorkness State 24X-36B,  Sorkness, no production data,
  • 25091, conf, Statoil, Bill 14-23H,  Alexander, no production data,
  • 25609, drl, Abraxas, Lillibridge 20-17-8H,  Alexander, no production data,

The "Next North Dakota": Five States About To Go (Oil) Boom

The Fiscal Times is reporting:
The black-gold rush in North Dakota—a technological revolution in oil production—is creating a new class of rugged millionaires. North Dakota might be grabbing headlines, but horizontal drilling and “fracking” to tap into newly accessible oil reserves is by no means limited to that state. 
The shale revolution is still in its “early innings,” as a recent report by Credit Suisse put it. OPEC’s 2013 World Oil Outlook, published last month, said that new oil supply from the U.S. and Canada would hit nearly 5 million barrels a day within five years, up from last year’s forecast of 1.7 million barrels a day by 2018. As that boom plays out, tens of billions of dollars in new infrastructure and development will likely be invested in the coming years.
Where will the new investment be concentrated? Though oil and gas companies across the U.S. are busy buying up acres of mineral rights in oil shale hot spots in an effort to be early players in the next booms, most are staying quiet about early production numbers.  
If they let on that they’ve uncovered another Bakken or Eagle Ford Shale, land and production costs could skyrocket. In Texas’s Eagle Ford, for example, companies were paying $250 to $450 an acre in 2009 when the area’s potential was unknown, but by 2011, an acre was going for $21,000 to $22,000.
I doubt there is much in the article that regular readers don't already know. My 30-second sound bite on the five states:

Texas: the numbers are going to be huge, but will not have the impact on Texas that the Bakken had on North Dakota -- for many reasons. Investing? One word: EOG.

Oklahoma: Investing? One word: CLR.

Louisiana: Don't know much about shale story in Louisiana but Tuscaloosa Marine Shale is the "new kid" on the block. It's linked at the sidebar at the right. Another new shale play in Louisiana: Smackover Brown Dense Shale.

Colorado: two words -- environmentalists and disappointing. In my mind the Niobrara has yet to "prove" itself.

California: not even on my radar scope. If Ogalalla was the rallying cry in Nebraska for activist environmentalist that stopped the Keystone, fracking will be the rallying cry in California for activist environmentalists to stop the practice. The crazy geology in California will make two-mile horizontals in North Dakota look like child's play.

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

Wednesday's News

The Wall Street Journal

DC votes to raise minimum wage to $11.50 by 2016, and index it to inflation thereafter Great news; we will finally see McDonald's move to some better technology. It should be fun.

Talk about tilting at windmills. By the time this is resolved, new policies will be in force. If folks really, really, really want their old policies back, wait until the see the "new, revised, improved premiums." The Journal reports that states are divided on letting insurers extend old health policies. But it's a non-story. The insurers won't do it. Example: the map shows that the North Dakota commissioner will allow it, but BC/BS says that's BS. [WallStreet Cheat Sheet has a similar story; perhaps longer; perhaps more partisan if that's possible.]

the other day, I can't remember if I posted it, it was reported that the Bakken will greatly affect Russia's oil and gas industry (as well as OPEC's). Today we see some evidence of that. The Journal is reporting Russia is cutting its growth forecast for the next two years. Substantially. The Russian economy is expected to grow at its slowest pace in 2013 since Vladimir Putin came to power. The economy ministry also cut its forecasts for 2014 and 2015.

Brazil, too, is falling.  Off-shore oil not panning out so well? Brazil's third-quarter GDP contracted 0.5% on quarterly basis, more than expected, on falling investments and stagnating manufacturing. Just in time for the summer Olympics.

 Taper? Don't hold your bated breath. OECD global inflation rate falls further. The annual rate of inflation across the world's largest economies fell for a third straight month in October, suggesting central banks may have to continue or further stimulus efforts to avert the threat of deflation.

This story has been reported many times on the blog. This particular story was posted/linked earlier, after being sent to me by a reader. This is the first time I noted it in the paper itself. Whatever. Today's WSJ update: oil climbs in price as opening of Keystone XL pipeline draws near. I guess TransCanada is going to call the Keystone XL 2.0 South pipeline its Keystone Gulf Coast Pipeline. I think RBN Energy had a slightly different name, CMP?
One of the more confusing features of the Keystone Gulf Coast Pipeline is what to call it – the name seems to change in real time. That is probably due to a desire to disassociate the southern Gulf Coast section of the pipeline from delays in permitting the Canada to US Keystone XL pipeline. Owner and operator TransCanada most recently set up a subsidiary to operate the pipeline called Marketlink LLC and it should now apparently more properly be called the Cushing Marketlink Pipeline so we will go with CMP as an abbreviation.

Waiting With Bated Breath: What's The Number Gonna Be?

From the press release (unlinked):
Oasis Petroleum Inc. announced today that it has priced an underwritten public offering of 7,000,000 shares of common stock for total gross proceeds (before the underwriter's discounts and commissions and estimated offering expenses) of approximately $314.6 million. Oasis intends to use the net proceeds of this offering to repay outstanding borrowings under its credit facility and for general corporate purposes.  The offering is expected to close on December 9, 2013.
So, what's the number? $311,500,000 / 7,000,000 = $44.50. 

Oasis is trading at $45.79 today.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. 

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 A Note To The Granddaughters

Speaking of bated breath:
Bated and baited sound the same and we no longer use bated (let alone the verb to bate), outside this one set phrase, which has become an idiom. Confusion is almost inevitable. Bated here is a contraction of abated through loss of the unstressed first vowel (a process called aphesis); it means “reduced, lessened, lowered in force”. So bated breath refers to a state in which you almost stop breathing as a result of some strong emotion, such as terror or awe.
Shakespeare is the first writer known to use it, in The Merchant of Venice, in which Shylock says to Antonio: “Shall I bend low and, in a bondman’s key, / With bated breath and whisp’ring humbleness, / Say this ...”. Nearly three centuries later, Mark Twain employed it in Tom Sawyer: “Every eye fixed itself upon him; with parted lips and bated breath the audience hung upon his words, taking no note of time, rapt in the ghastly fascinations of the tale."
Sir Henry Neville, aka William Shakespeare, was incredible. He also coined the term "into thin air."

Western Canadian Oil A Shaky Investment -- BloombergBusinesweek

For the archives.

It's an old story.

BloombergBusinessweek is reporting:
The real value of the Keystone XL is that it would deliver oil-sands crude down to the Gulf Coast, where it could compete with Mexican crude priced against the Maya benchmark. Heavy Mexican oil enjoys a $20 premium over its Canadian rival and is trading at about $87 a barrel. Even if the Keystone XL gets approved, just getting Canada’s crude down to the Gulf is barely enough to make it worthwhile. Mark Lewis, one of the new Keystone report’s co-authors, estimates that between the transport costs and the extra lubricants needed to coax the oil through thousands of miles of pipeline, it would cost about $18 a barrel to get that tar-sand crude from Western Canada down to the Gulf Coast on the Keystone XL.
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here.

Remember two facts:
  • the earth is not making any new oil (for all practical purposes, in human-time-span)
  • presidents come and go
Smart investors will remember those two facts.  

Lead Story Over At Yahoo!Finance Right Now: Why Cheap Oil Could Disappear Soon; Oil Trading Up Another 1%; Trading Solidly Above $97

The report was a bit misleading; the story was a bust, but here it is for what it is worth (and why I don't watch CNBC any more).

Finance!Yahoo Breakout is reporting:
And finally, Baruch says, most investors are celebrating a party that doesn’t even really exist by looking at the 13% slide in WTI or NYMEX crude, instead of the 5% dip in the price of the more globally watched Brent crude, which is still above $110.

“The reality is, everybody is focused on WTI (West Texas Intermediate).  You have to focus on Brent. Our government even uses Brent as a benchmark. What’s really moving (things) is the Brent.”

As he sees it, even if OPEC holds off on trimming its output quotas tomorrow, high domestic production, and backlogged refineries will serve as a floor in the price of petroleum prices. (sic)
I don't understand how "backlogged refineries" will serve as a floor in the price of petroleum prices. Backlogged refineries will serve as a floor in the price of refined products, but ....

This is very circuitous reasoning but perhaps this is why "backlogged refineries" could serve as a floor "in the price of petroleum prices." (sic)

Because of the Bakken, the Permian, and the Eagle Ford, the US refineries are backlogged. However, the European refineries are not facing a huge increase in oil. The US does not allow oil to be exported, and most of Canada's oil is landlocked. Therefore, Brent oil will take its own path: higher.

The folks above suggest the price of NYMEX/WTI will tend to follow the price of Brent oil.

In addition, the US refineries need heavy oil from the Mideast to "make" the light oil "work" in US refineries which are optimized for heavy oil. If there is a glut of oil in the US, but refiners need heavy oil from overseas (including Venezuela), they might pay a premium for Brent/overseas oil.

I don't know. Like I said, it's circuitous reasoning.

On a day-to-day basis, all things being equal, it is the strength of the dollar that affects the price of oil the most.

Right now, the "thing" most oil traders are focused on is the global economy, trying to figure out if more or less oil is likely to be used. And smart traders are watching one country.  Okay, maybe two. Countries.

The Devil Makes Me Do This

It is incredible how the mainstream media can slant the news -- almost as bad as my blog. LOL.

From the Los Angeles Times.

First, the headline: Studies warn of abrupt environmental effects of warming.

Then, the lede:
Scientists sounded alarms Tuesday with a pair of studies challenging the idea that climate change is occurring gradually over the century and that its worst effects can be avoided by keeping emissions below a critical threshold.
A National Research Council report says the planet is warming so quickly that the world should expect abrupt and unpredictable consequences in a matter of years or a few decades. Among the changes already underway are the sudden decline in Arctic sea ice and climbing extinction rates, the report found.
Now the details, buried in the story:
  • James Hansen, the climate scientist who led the study, has his own agenda (reputation and money, but mostly reputation; he is probably off the A-list for cocktail parties)
  • not all scientists are in full agreement with the report's findings: Martin Hoerling, a meteorologist at the National Oceanic and Atmospheric Administration's Earth System Research Laboratory, said he does not agree with some of the conclusions of Hansen's group, including predictions that the 3.6-degree warming target would eventually raise sea level about 20 feet. [Everyone, except Hanson, pretty much agrees 20 feet is hyperbole)
  • others finally understand the economics of all this -- other experts said a cap on carbon is pointless unless technological advances make renewable energy an affordable alternative
And then way at the bottom (this, in fact, could have been the headline and the story; it was the second-to-last paragraph and could have easily been cut):
The National Research Council report was not entirely grim.
Scientists now believe several threats once of imminent concern, including the potential shutdown of an important circulation pattern in the Atlantic Ocean and a massive release of methane from Arctic permafrost, are no longer likely to happen this century.
I am well past the feelings that the individual who posted the third comment. I agree with him, but I am way beyond that.

I'm not sure why Algore and Barry are so uptight over global warming: these "bad things" are no longer likely to happen this century. By then Algore and Barry will be long gone. Except as footnotes in high school textbooks.

Global Warming To Put Nation In Deep Freeze This Week; An Extended Period Of Cold Weather That Hasn't Been Seen Since The 1990s (Reminder: Global Warming Stopped 18 Years Ago -- 1995); California's Great White Sharks Lovin' The Warmer Water

It's being reported everywhere (except in The New York Times). From AccuWeather. From Helena, Montana, the byline: this will definitely impact the Bakken. If nothing else, roughnecks will be at Home of Economy picking up Carthartt parks/overalls.
Areas of Montana and the Dakotas were forecast to reach lows in the minus-20s, while parts of California could see the thermometer drop to the 20s. The icy arctic blast was expected to be followed by another one later in the week, creating an extended period of cold weather that hasn't been seen since the late 1990s, meteorologists said.
Oh, about that headline ... "global warming stopped 18 years ago ..." That is pulled directly from the most recent UN report. From FoxNews, posted September 30, 2013:
Since 1998, there has been no significant increase in global average surface temperature, and some areas -- notably the Northern Hemisphere -- have actually cooled. The 2,200-page new Technical Report attributes that to a combination of several factors, including natural variability, reduced heating from the sun and the ocean acting like a “heat sink” to suck up extra warmth in the atmosphere.
Oh, really?

I believe there is one island in the entire world with any significant number of people that might actually note the ocean rising. 18 millimeters.

On the other hand, it appears the real winners of this warmer water (as suggested by the UN report) are the great white whales. Again, I cannot make this stuff up. The Los Angeles Times is reporting:
Researchers are still trying to determine why the young sharks have been drawn to the El Porto area — perhaps warmer temperatures or a larger feeding pool. Through tagging and other monitoring methods, researchers hope to have more of an answer by next year.
But one thing is clear: Experts have noticed an increase in shark sightings off beaches in Manhattan, Redondo and Ventura over the last few years. That may be alarming for some, but it's a welcome development for wildlife researchers who say it's a sign of a healthy rebound for marine life after California legislators prohibited the use of gill nets for fishing in 1990.

Wednesday: Harry Reid Exempts His Staff From ObamaCare; Pipeline Patterns In The US Are Changing Dramatically; Poor Nations Need Fossil Fuel -- NY Times

ObamaCare milestones:
employer-mandate delayed one full year
small-business on-line enrollment delayed one year
Harry Reid exempts his staff from ObamaCare
    individual mandate delayed one year (currently delayed a few weeks) 
    webpage fixed 
Active rigs: 192

RBN Energy: this is just incredible, how pipeline patterns in North America are changing. Again, I highly recommend folks read the RBN Energy posts daily; if you have limited time, I would recommend their posts over my blog. It's my experience that RBN Energy is posting actionable investing information six months to a year before Motley Fool picks up on the same ideas. But remember, this is not an investment site. But wow, you can pick up some great ideas reading RBN Energy.
Output of naphtha range material such as plant condensates and natural gasoline in the Ohio section of the Utica shale is increasing rapidly as new processing and fractionation capacity in the region comes online. Output of field condensate from the wellhead is also expected to take off in 2014. These light hydrocarbons will be delivered to market by a combination of pipeline, rail and barge infrastructure. Today we look at pipeline infrastructure plans to deliver condensates and natural gasoline to Canada as diluent.
The headline is interesting, the story much less so. Reuters is reporting:
Iran and Iraq on Tuesday put OPEC on notice of substantial oil output increases to come, saying others in the producer cartel will need to give way to make room for them. Speaking ahead of an OPEC meeting, oil ministers for the two countries -- rivals as the group's second and third biggest producers after Saudi Arabia -- said they were targeting 4 million barrels a day, growth of about one million bpd apiece.
Neither country can expect to reach those goals any time soon, but both are keen to prepare the ground for special treatment should the Organization of the Petroleum Exporting Countries need next year to negotiate a deal to curb supplies to keep oil prices above its favoured $100 a barrel. Neither can raise output quickly enough to make waves at Wednesday's OPEC meeting - ministers confidently predict no change in the group's production cap of 30 million bpd.
There are two interesting stories that deserve stand-alone posts, but maybe later. Maybe it's just me, but it appears there is more balanced reporting / more rational reporting / deeper analysis when it comes to renewable energy. Take this op-ed from The New York Times sent to me by a reader:
For many parts of the world, fossil fuels are still vital and will be for the next few decades, because they are the only means to lift people out of the smoke and darkness of energy poverty.
More than 1.2 billion people around the world have no access to electricity, according to the International Energy Agency’s World Energy Outlook for 2012. Most of them live in sub-Saharan Africa and in Asia. That is nearly four times the number of people who live in the United States. In sub-Saharan Africa, for instance, excluding South Africa, the entire electricity-generating capacity available is only 28 gigawatts — equivalent to Arizona’s — for 860 million people. About 6.5 million people live in Arizona.
Even more people — an estimated three billion — still cook and heat their homes using open fires and leaky stoves, according to the energy agency. More efficient stoves could help. And solar panels could provide LED lights and power to charge cellphones.
But let’s face it. What those living in energy poverty need are reliable, low-cost fossil fuels, at least until we can make a global transition to a greener energy future. This is not just about powering stoves and refrigerators to improve billions of lives but about powering agriculture and industry that will improve lives. 
Amen. A liberal sees the light.  Perhaps he's a closet conservative.

The writer is wrong one thing but I won't bother to re-print it. It's obvious the error he made but I firmly believe he had to put it in the story to maintain his credibility among the activist environmentalists.

The second story. That will have to wait. I have to take the granddaughters to school.

A Bakken Case Study

Updates

July 16, 2018: this well had yet another bump in production after new, neighboring wells were fracked, although not as remarkable as before:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-20183114091247726797776980
BAKKEN4-20183016811865812798677160
BAKKEN3-201831240925191098724769680
BAKKEN2-201828296629001099668264300
BAKKEN1-201831573654771607816578860
BAKKEN12-201731743780262163873884630
BAKKEN11-2017123293256415154396427816
BAKKEN10-20170000000
BAKKEN9-201721582859622475222691
BAKKEN8-201731108690193459943200
BAKKEN7-201731964109080456042810
BAKKEN6-2017309591037824157386628
BAKKEN5-201731104910561523178288417

 Original Post

After reading an article from an oil analyst, I posted the following on November 28, 2013:
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.
Hold that thought.

I'm going to walk you through something very, very interesting, a case study that a reader alerted me to. This is worth your time.

First, look at the screen shot of this portion of northeast McKenzie County, sections 4/9-152-96:



The Wisness 1-4H well is file #17345. It is a 640-acre spaced well, fracked/completed/tested in March, 2009, about 4 1/2 years ago. I will show the production numbers later. But the Wisness well is the one you want to keep your eye on -- that's why it's in "green."

Now, look at the three-well pad at the end of the arrow:
  • 24747, 1,511, Newfield, Anderson Federal 152-96-9-4-10H, t8/13; cum 25K 10/13;
  • 24748, 2,095, Newfield, Anderson Federal 152-96-9-4-3H, t8/13; cum 47K 10/13;
  • 24749, 1,915, Newfield, Anderson Federal 152-96-9-4-11H, t8/13; cum 30K 10/13;
Note when they were completed/fracked/tested: August 13, 2013, or in my shorthand: 8/13.

Okay, that's the data you want to keep in mind.

First, the Wisness well, in green, that was drilled back in 2009.

Second, the Anderson Federal 3-well pad that was fracked just a few months ago (8/13).

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

Did you "hold that thought," the thought I told you to hold at the beginning of this post? The expert suggesting that as more wells go into the Bakken, they start competing with old wells and the decline rate hastens.

I opined long ago that new fracking near old wells will actually improve production in the old wells. Does this case study support that view? Let's see.

Here is the screenshot of produciton for the Wisness well:


The Wisness well, #17345 was drilled in 2009. It had a typical Bakken decline rate. But then note what happened in August, 2013. The well was off-line for about half the month (regular readers can probably guess why). Then note the increase in productivity in September and October. This well as producing around 3,000 bbls/month prior to August, 2013. Two months later, production jumped to an astounding 15,000 bbls (or thereabouts). It will be interesting to see the "new" decline rate.

That's good enough for me. But the skeptics in the audience should ask: "Okay, if that's correct, what about another old neighboring well?"

Aren't we lucky? There just happens to be an old well in the immediate area, #17687:
  • 17687, 1,077, Newfield, Gladys 1-9H, t3/09; cum 232 10/13;
Like the Wisness well, the Gladys well was also drilled in 2009.

What did its production look like in the August, 2013, time frame? Here's a screen shot:


Prior to August, 2013, production from this 640-acre spaced well had dropped to less than 2,000 bbls/month. Again, this well was taken off-line for most of August (regular readers can probably guess why). When it came back on line production had come back to nearly 5,000 bbls/month, more than doubling its production prior to the 3-well pad being fracked just to the west.

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

Kinda fun for a Wednesday morning, huh? Who knows if there is any cause and effect? Maybe this is all just coincidence. Maybe Newfield is simply changing the choke on the older wells. Maybe a workover rig for the older wells was in play. There are a lot of unknowns. [See first comment and other comments that might follow; readers will provide additional insight and information regarding these wells.]

But the reader who sent this to me suggested that nothing changed with regard to the Wisness well except that a 3-well pad nearby was fracked in August, 2013. What a great way to start a new day in the Bakken.

A huge "thank you" to the reader for alerting me to this. Good luck to all. Something tells me there are more surprises yet to come out of the Bakken.

By the way, did you all notice the cumulative production of that old #17687?  Almost 235,000 bbls and still going strong. This well paid for itself long ago. The bad news: up to 2/3rds of the natural gas that is being produced by this well is being flared. But not all. That means it has a natural gas pipeline hooked up to the well. Look at the screenshot of the NDIC GIS map server again. In the little overview map of North Dakota, you will note a small red speck: that's the location of the area that is zoomed in on. Note where these wells are: northeast McKenzie County where ONEOK has three brand new natural gas processing plants. And even with the three new natural gas processing plants, there is not enough capacity to handle all the natural gas.

Folks who think that operators are simply dragging their feet putting in natural gas pipelines and thus contributing to the problem of flaring might want to take note.