Saturday, December 6, 2014

Slump In Oil Price, October 1, 2014 -- December 31, 2014: Permitting

Disclaimer: all data is unofficial; all data is subject to error. Assume there are typographical and/or factual errors. If this information is important to you, go to the source. Everything about the Bakken is posted in good faith. This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here.
Slump In Oil Price, October 1, 2014 - December 31, 2015
Permitting, October 1, 2014 - December 31, 2014
Permitting, January 1, 2015 - December 31, 2015
Pricing, Part I
Pricing, Part II
Saudi Arabia Market Share
Mid-East Geo-Politics
OPEC Realities

For permitting in 2014, note the surge in permitting after the Saudis said they were going to maintain production and oil prices plummeted (after November, 2014). 

Total permits. This is from my database. See disclaimer above. I assume my numbers are different from those of the NDIC, but I also assume they are very close. These are only oil and gas permits, not salt water disposal permits. If this information is important to you, go to the source:
  • 2014: 3,012
  • 2013: 2,247
  • 2012: 2,187
  • 2011: 1,916
Real time (date, # of permits; projection to end of year)
  • December 31, 2014: 3,012, 3012
  • December 30, 2014: 3,003, 3,011
  • December 29, 2014: 2991, 3007
  • December 26, 2014: 2977, 3018
  • December 24, 2014: 2969, 3027
  • December 23, 2014: 2967, 3033
  • December 22, 2014: 2948, 3023
  • December 19, 2014: 2928, 3028
  • December 18, 2014: 2919, 3,027
  • December 17, 2014: 2908, 3,024
  • December 16, 2014:  2897, 3,021
  • December 15, 2014: 2879; 3,011
  • December 12, 2014: 2860; 3,017
  • December 11, 2014: 2839; 3,004
  • December 10, 2014: 2825;  2997
  • December 9, 2014: 2811; 2991
  • data is from my data base
  • only oil and gas permits; no salt water disposal well permits
  • may not agree with NDIC data
  • errors are likely; I will correct them when found
Projected Permits For Calendar Year 2014 At Various Points in 2014

Date; number of permits on that day; number of days so far in the calendar year as of that date; projected number of permits for the entire calendar year (2014) based on that data:
  • January 31, 2014: 253 permits; 31 days; projected permits by end of 2014: 2,979
  • June 30, 2014:  1398; 181 days; 2,819
  • September 30, 2014: 2154; 273 days; 2,880
  • October 31, 2014: 2241; 304 days; 2,691
  • November 30, 2014: 2761; 334 days; 3,017
The "October number" of 2,691 is so far from the others, I suspect an error, but haven't found it yet. I will keep looking. If there are not errors, one has to chuckle. The number of permits projected was actually decreasing (of the dates provided above, until November, (the month of the OPEC meeting) when permit projections jumped. Again, subject to error. And it doesn't take much difference in the number of permits in one month to make a big difference in projected permits.

Change in Number of Permits October / November 2014

Fitzsimmons said the number of permits declined by 29% Oct/Nov. My data suggested 28% which is pretty good, if you ask me, with regard to data accuracy, and basic arithmetic (month, ending permit number - starting permit number; number of permits for that month:
  • July: 1665 - 1397: 268 permits
  • August: 1938 - 1665: 273 permits
  • Sept: 2200 - 1938: 262 permits
  • Oct: 2526 - 2200: 326 permits
  • Nov: 2761 - 2526: 235 permits (calculations: 91 fewer than October; 28% fewer; Thanksgiving week; last permit on November 28; there were no permits issued on the holiday, November 27, and only four permits issued the next day, Friday, last business day of the month)
I think it was too early to suggest the decrease in permits month-over-month, October to November, to draw any conclusions, but it's a nice baseline going forward. Remember, the OPEC meeting that started all of this was on Thanksgiving, last week in November, 2014.

Regardless of where we end in calendar year 2014 with regard to permits, I think 2014 permitting data is irrelevant with regard to the slump in the price of oil. The year was pretty much decided by the end of October with regard to permits, and by the end of November, the number of projected permits for the entire year had jumped significantly, to over 3,000.

There is one month left, and a huge holiday month could impact the final number.

If folks are looking at the number of permits to judge activity in the Bakken, I would say that this year (2014) is pretty much over. The year to follow will be calendar year 2015 and compare that year with previous years.

  • during the boom, permits came fast and furious to get wells spud to "hold by production"
  • during the initial manufacturing phase, more permits had been issued than could be drilled by the end of any given year; there has always been a backlog of permitted locations at the end of every year
  • as the middle Bakken matured, no one could say what the pace of future permitting would be (with or without a slump in oil prices)
  • there was (and, is) no need to be fast and furious in exploring and delineating the Three Forks; to the best of my knowledge, in all areas of North Dakota (for that matter), the NDIC has determined that the Three Forks is "part of the Bakken" 
  • unlike the middle Bakken boom, there was no need for "fast and furious" permitting to "hold by production" in the Three Forks (repeats previous bullet)
  • operators moved to other shale plays in the US once the Williston Basin boom declared itself; no one could say what the pace of future permitting would be in the Three Forks (with or without a slump in oil prices) if the price of oil remained high -- because of competing plays (operators used high prices to pay for exploration; lower prices will change the "E&P" equation
  • even with the "fast and furious" permitting during the "boomiest" years, records were still being set each year with regard to number of permits; at some point one would expect permits to decrease, all things being equal
Conclusion: the jury is out with regard to the relevancy of permitting in North Dakota. It is counter-intuitive, but I can argue both sides of the same coin (and in fact I have posted my thoughts on this elsewhere for the date/time stamp but will not share it now)


December 26, 2014: terrifying headline -- number of Texas oil & gas permits halved in November following OctoberReally terrifying.

No comments:

Post a Comment