Monday, March 23, 2015

It Is Spring, Isn't It? -- March 23, 2015

Maybe spring comes later in Canada. Or maybe Algore has an explanation. I certainly don't.

The New York Times -- who is the first to tell us that the global warming discussion is closed -- is reporting that ... well, maybe the global warming discussion is not closed. The New York Times is reporting:
The trip to pick up a load of iron ore powder in Conneaut, Ohio, was supposed to take four days by way of the Great Lakes.
But within sight of its destination, the cargo ship, the Arthur M. Anderson, got trapped in ice. Two heavy icebreakers from the Canadian Coast Guard eventually broke the vessel free.
It was a 24-day ordeal, and the ship returned to its home port in Wisconsin without picking up the cargo.
A deep freeze this winter left much of the Great Lakes blanketed in thick ice, sidelining the ship lines and companies that move vast amounts of grain, cement and other commodities through this system of waterways. And now the spring thaw, which creates piles of impassable ice, will most likely create more delays. 
I hope this clears up by July 1, 2015, because that's when the new tag comes out: "GlobalWarming_2015_2016." The current "2014 - 2015" tag runs through June 30, 2015, and if this "ice story" is not resolved by then, I won't know whether to continue it in "last year's" updates or move it to the next year.

Whiting To Issue 35 Million Shares As Well As Issue $1.75 Billion In New Debt -- March 23, 2015

Reuters is reporting:
Whiting Petroleum Corp , the largest North Dakota oil producer, said on Monday it would sell 35 million shares of common stock to help pare debt from its December buyout of rival Kodiak Oil & Gas.
The offering, as well as a $1.75 billion debt issuance, may signal the company is not seeking to sell itself outright, as the cost of an acquisition would rise exorbitantly.
The stock and debt raisings also give Whiting breathing room to clean up its balance sheet and weather the low oil-price environment.
Talk had swirled in recent weeks that the company was considering a full sale, a strategy that many investors had decried, though sources said it was not in the cards.
The Kodiak deal swelled the company's debt load to $5.63 billion, a level that was increasingly uncomfortable as Whiting's shares fell more than 60 percent in tandem with oil prices.
More on this later, maybe.  I believe Whiting has about 167 million shares outstanding; this would take it to about 200 million shares outstanding.
 
Disclaimer: this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. I did this quickly while watching our older granddaughter play water polo and there may be typographical and factual errors. If this is important to you, go to the source.

I can't remember if I confirmed it through a credible source, but through the "grapevine," it is my understanding that Whiting is selling off non-core acreage in North Dakota.

Four (4) Away From The Century Mark -- March 23, 2015; Only Four (4) New Permits

We're nearing the century mark on active rigs in North Dakota and yet there are 850 wells waiting to be fracked. It looks like the new metric won't be number of active rigs. A reader sent this link to an excellent story on how US oil industry is responding to low crude oil prices. is reporting: the AP / Yahoo!Finance is reporting. The Bakken is a great laboratory. Many of the data points presented in this article were being worked on well before the price slump; now, the slump in oil prices will simply move things along a bit more quickly.

By the way, note the effective range of fracking -- about 500 feet. Long-time readers know why I highlight that.  Also note, the number of rigs Exxon (XTO) says it plans to keep in the Bakken. On a per acreage basis, I believe almost every operator has cut the number of rigs working in North Dakota, at least by half. If Exxon maintains the same number of rigs, but remains in line with the other operators to reduce the number of rigs / acre, then there's only one option. Think about it.

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

Active rigs:


3/23/201503/23/201403/23/201303/23/201203/23/2011
Active Rigs104198187206171

Four (4) new permits --
  • Operator: Statoil (3), Whiting
  • Field: Banks (McKenzie), Sanish (Mountrail)
  • Comments:
Twelve (12) producing wells completed:
  • 26088, 461, SM Energy, Nelson 7-6-161-98H 1XB, Plumer, t12/14; cum 16K 1/15;
  • 27162, 618, Hess, GN-Justin-158-97-3328H-1, New Home, t3/15; cum --
  • 27787, 1,712, XTO, Johnson 43X-27B, Murphy Creek, t3/15; cum --
  • 27788, 1,602, XTO, Johnson 43X-27G, Murphy Creek, t3/15; cum --
  • 27789, 1,825, XTO, Johnson 43X-27C, Murphy Creek, t2/15; cum --
  • 27790, 1,815, XTO, Johnson 43X-27H, Murphy Creek, t2/15; cum --
  • 27868, 476, CLR, Skar 2-28H1, 4 sections, Stoneview, t2/15; cum -- 
  • 28355, 2,244, BR, CCU Pullman 3-8-7MBH, Corral Creek, unitized, t2/15; cum --
  • 28372, 1,254, Hess, AN-Brenna-153-94-3130H-7, Sanish, t3/15; cum --
  • 28834, 252, SM Energy, Waters 3B-28HN, Ambrose, t3/15; cum --
  • 28835, 372, SM Energy, Waters 3-28HN, Ambrose, t2/15; cum --
  • 28836, 448, SM Energy, Waters 3-28HS,Ambrose, t2/15; cum --
Wells coming off confidential list Tuesday:
  • 22106, drl, Hess, GO-State A-158-97-3625H-1, New Home, no production data,
  • 24567, SI/IA, Sinclair, Horovitz 10-09-1H, Lone Butte, no production data,
  • 27477, 1,328, WPX, Kale Bad Brave 19-18HB, Squaw Creek, t1/15; cum 8K 1/15;
  • 28751, 337, CLR, Miramar 3-32H-1, Elk, t3/15; cum --
  • 29177, drl, XTO, Moses 21X-9B, Garden, no production data,
  • 29397, 12, Enduro, NGMU 11-H1, North Grano, producing, albeit not much, a Madison well, t12/14; cum 400 bbl;
From Friday's daily activity report that was not posted until today: nothing new that wasn't already posted except two permits were canceled, one by Oasis (the Addy permit in Burke County) and one by Hess (LK-Trotter in Dunn County).

North Dakota Leads The Pack -- Strongest Gains In Restaurant Sales; National Restaurant Association's Chief Economist A Native Of Minot, ND -- March 23, 2015

Updates

March 24, 2015: after posting the note below I got an e-mail note from the National Restaurant Association's Chief Economist Bruce Grindy — a native of Minot, North Dakota, with family roots in Lignite, a small town in Bakken oil patch -- in which he said I could add a (c) bullet at the very end of this post (scroll down to end of post to see the original data points);
  • and c) has been an occasional reader of The Million Dollar Way over the years.  
I'm glad I didn't put anything "snarky" into the post below. What a nice note to have received from Mr Grindy.

Original Note
 
The Bakken never quits. The link to this article was sent by a reader. The article is awesome but what really caught my attention: the source of the article. Who would have ever thought and "energy story" would end up in a "fast casual" publication. Fast Casual is reporting:
The National Restaurant Associations recent forecast for the states expecting the strongest gains in restaurant sales in 2015, one state stood out from the pack: North Dakota.
The other states listed — Arizona, Florida, Texas, Colorado — are fairly well populated and have strong tourist trade, but as the 48th state in the union in terms of population, North Dakota seems to be an outlier.
But thanks at least in part to its energy sector, it makes sense for North Dakota to be on the radar for restaurant developers.
Over the past decade, North Dakota has experienced an oil boom in the Bakken oil fields in the western part of the state.
According to the National Restaurant Association's Chief Economist Bruce Grindy — a native of Minot, North Dakota, with family roots in Lignite, a small town in Bakken oil patch — North Dakota is poised for restaurant sales growth.
"With so many people moving into the state for the new jobs in the oil industry, North Dakota led the nation in population growth in each of the last three years," Grindy said. "During the last five years, North Dakota’s population jumped 11 percent, or nearly three times the 4-percent population gain registered on the national level."
"It also helps that pretty much anyone in North Dakota who wants a job has one," added Grindy, pointing out North Dakota's low 2.8-percent unemployment rate, "and a lot of the new oil industry jobs are high-paying jobs."
What perfect timing -- the national restaurant association's chief economist a) shares my first name with me and Mr Springsteen; and, b) is a native of Minot.

Cushing: Supply And Demand -- March 23, 2015

Today's EIA blurb:
“Although inventory levels at Cushing are at their record high, storage utilization (inventories as a percent of working storage capacity) are not at record levels. Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014. However, utilization reached 91% in March 2011, soon after EIA began surveying storage capacity twice a year, starting in September 2010.”---EIA
At least it looks like the Bakken gave the EIA folks something to do -- start surveying storage capacity twice a year -- I assume Mr EIA sends an e-mail to Mr Cushing on a Monday requesting the data; Mr Cushing sends the data to the Mr EIA by that Friday; and, then Mr EIA spends the next week to ten days "massaging the data" before posting the data on the EIA website. 

Wells Coming Off Confidential List Over The Weekend -- See Link -- March 23, 2015

Data for wells coming off the confidential list over the weekend is posted at this link.

Some great wells were reported.

Take a look at the Whiting Sovig wells -- some great IPs, fracking with about 3.5 million lbs in 30 stages.

EOG has a big well in the Parshall oil field, fracking with 12.55 million lbs of sand in 48 stages.

Hess and WPX also had nice wells.

Unfortunately the MBI Wolberg well in Rocky Ridge targeting the Heath (Tyler) was dry.

**************************
Whiting Sovig Wells
  • 20011, 949, Whiting, Sovig 150-100-22C-15-1H, Arnegard, t6/11; cum 266K 12/18;
  • 27473, 2,732, Whiting, Sovig 24-22-3H, Arnegard, t9/14; cum 172K 12/18;
  • 27474, 2,321, Whiting, Sovig 24-22-4H, Arnegard, t9/14; cum 179K 12/18;
  • 27475, 2,548, Whiting, Sovig 24-22-5H, Arnegard, t9/14; cum 201K 12/18;
  • 27476, 2,858, Whiting, Sovig 24-22H, Arnegard, 30 stages; 3.5 million lbs, t9/14; cum 190K 12/18;
#20011, selected production profile:
BAKKEN6-2015302512247336254145403353
BAKKEN5-2015201953202816202747268325
BAKKEN4-201530332533072154210710461002
BAKKEN3-201531410241172315431921592099
BAKKEN2-201528397941541707378316382089
BAKKEN1-20153147214499371949764636278
BAKKEN12-201428345732987678421014392716
BAKKEN11-20140000000
BAKKEN10-20140000000
BAKKEN9-201411850000
BAKKEN8-20140000000
BAKKEN7-20140000000
BAKKEN6-20140000000
BAKKEN5-20140000000
BAKKEN4-20141310271564103218301556250
BAKKEN3-20143126852658206045823958563
BAKKEN2-2014282591246021614276417050
BAKKEN1-201431289829562456468546230
BAKKEN12-2013313023298425545522537190
BAKKEN11-20133033673639355362626052150
BAKKEN10-20132627862756314940713923100

Dumbbell Crude -- March 23, 2015

This is an interesting article; I don't quite understand everything in the article yet, and the article does not address the modifications that refineries along the Gulf Coast have made in the past 20 years in anticipation of the Keystone XL pipeline getting passed.

Reuters is reporting that refiners are turning to trucks to avoid "dumbbell" crudes.
In a pressing quest to secure the best possible crude, U.S. refiners are increasingly going straight to the source.   
Firms such as Marathon Petroleum Corp and Delek U.S. Holdings are buying up tanker trucks and extending local pipeline networks in order to get more oil directly from the wellhead, seeking to cut back on blended crude cocktails they say can leave a foul aftertaste.
While the business of hauling crude from individual oil wells to bulk storage depots or pipeline hubs has become a lucrative niche in recent years thanks to the shale oil revolution, refiners are getting into the "first mile" game for a different reason: taking control of their supply chains to secure a more predictable, consistent stream of crude.
Phillips 66, the nation's fourth-largest refiner, has added trucks and offloading equipment at several of its refineries to help reduce its reliance on oil coming from Cushing, Oklahoma, the nation's biggest crude oil crossroads and storage hub. Here, a growing volume of Canadian oil sands is often mixed with lighter domestic shale crude, resulting in blends that can be less profitable than similar oil fresh from the field.
Phillips 66 executives say operations at its 200,000-barrel-per-day refinery in Ponca City, Oklahoma, only 62 miles (100 km) from Cushing, have improved since it began getting more of its crude directly from wells in the Mississippian Lime shale patch nearby.
"That's really the key," Phillips 66 President Tim Taylor told Reuters. "With Cushing, you can get a blended barrel that hits the spec, but it's not as consistent as you'd like."
Shipping crude by truck, though costly, has become a fast-growing necessity in places like the Eagle Ford in Texas and Permian Basin, newly productive shale oil patches ill-served by small local pipeline networks known as gathering systems.
As a result, truck deliveries direct to U.S refiners have surged to nearly 400,000 bpd nationwide in 2013, doubling since 2010, government data show. Midstream companies including Blueknight Energy Partners and some private equity firms, including Riverstone Holdings, have also invested.
For refiners, the investment is less about profitable logistics than quality control.
This could help explain why even as the price of oil is going down, the price of gasoline is going up. 

The issue of "dumbbell" crudes was an issue a long, long time ago. I won't be able to quickly find posts on the Million Dollar Way -- it was probably back in 2012 or 2013. RBN Energy talked about one aspect of this issue back in March, 2013.

**************************
Kennedy Cold Front With Snow Hitting Chicago, Minneapolis

Five inches of the white stuff at rush hour in Chicago

Ten inches in Minnesota.

*****************************
That Didn't Take Long 

Starbucks declares victory; ends "Race Together" campaign after less than a week.

Monday -- March 23, 2015

Active rigs:


3/23/201503/23/201403/23/201303/23/201203/23/2011
Active Rigs107198187206171

RBN Energy: update on the fracking sand industry.
Last year was a banner year for the sand mining companies that cater to the U.S. shale drilling services industry. That’s because in 2014 well operators significantly increased the amount of sand used to complete fracturing operations in shale plays – from an average of about 5 MMlb for a single well to 15 MMlb (7,500 tons) or more. In 2015 however, the stock prices of frac sand producers has plunged in response to lower oil prices, producer drilling budget cutbacks and falling rig counts – signaling the industry is on the ropes. Today we describe how sand producers may be in better shape than expected.
Hydraulic fracturing (fracking) and horizontal drilling are the two technologies most responsible for the boom in extracting oil, natural gas and natural gas liquids from hydrocarbon bearing shale deposits over the past 8 years.
These techniques involve high pressure stimulation using water and proppant (usually sand) to create small cracks in tight shale rock that allow oil and gas trapped in the formation to flow more easily into the well and up to the surface. When the water pressure is released, the fractures attempt to close but the proppant contained in the fluid keeps them open, making a ready path for oil and gas to flow into the well. Once a well is drilled vertically into the shale, horizontal laterals are drilled out in different directions and fracking is carried out in multiple stages along the laterals. We have previously discussed the scale of activity surrounding getting supplies and equipment  (water, sand, pumps, machinery etc.) to well sites that are often remote – a process that has become a complex transport and logistics challenge.
We also described the sources and use of different frac sand proppants back in August 2013. In short, three primary types of proppant are used in fracking; raw frac sand – generally mined at the surface, resin coated sand that has been treated to increase it’s strength and ceramic beads that are manufactured (usually from clay) to withstand greater pressure. The most popular proppant (85% of the market) is raw sand and the best grade of sand preferred by well operators is Northern White - found predominantly in Wisconsin. Sand quality for fracking is very important and is measured by particle size, shape (roundness) and crush resistance using standards set by the American Petroleum Industry (API).
Much more at the link. There are some important data points in that article.