I won't print names here (for various reasons) but I want to publicly thank the individual who suggested I link folks who routinely post good comments on other message boards.
I started posting those links on my "Western Union" page and it is amazing how useful this page is.
Two clicks and I can see at a glance what some knowledgeable people are posting across the net.
If there is anyone you would like to see on "Western Union," please let me know.
On a completely unrelated note, the new Apple iPad is incredible. I own no stock in APPL but I travel a lot and want to stay connected to the net. The iPhone is not adequate. The iPad is absolutely incredible. If you do any traveling at all, the iPad is a must. Be sure to get the "wi-fi PLUS 3g" version -- more expensive but a must. The 3g version connects wirelessly (just like your cell phone) and there is no contract: simply $15/month and a specified amount of data; or $30/month and UNLIMITED download.
Friday, April 30, 2010
Only 45 Wells Reported in April, 2010
Again, I may be missing something, and I may be missing some reports, but generally on "New Wells Reporting," I report any well that is reported by North Dakota Industrial Commission (NDIC) and any well that I find through a press release. I don't go out of my way looking for press releases, but I bet I don't miss any. If anything, I am more liberal with reporting wells.
Regardless, my methods have not changed, but I only have 49 wells that were reported in the month of April, and unlike previous months, I've included wells that have come off the confidential list even if they have not yet reported initial production numbers. Only 49 new wells. And some had been reported previously through a press release, so I bet truly new wells with initial production data numbered less than 45 for the month of April. None -- repeat, none -- were reported today by the NDIC. It sure seems like there should be more wells being reported with 111 rigs in the basin. [Update: 112 today; a new record.]
Halliburton recently announced that their fracking crews will now be working 24/7 in North Dakota. It is obvious fracking is the chokepoint in completing these wells in North Dakota. But if the price of oil continues to trend up, this may not be all bad news for the drillers.
Regardless, my methods have not changed, but I only have 49 wells that were reported in the month of April, and unlike previous months, I've included wells that have come off the confidential list even if they have not yet reported initial production numbers. Only 49 new wells. And some had been reported previously through a press release, so I bet truly new wells with initial production data numbered less than 45 for the month of April. None -- repeat, none -- were reported today by the NDIC. It sure seems like there should be more wells being reported with 111 rigs in the basin. [Update: 112 today; a new record.]
Halliburton recently announced that their fracking crews will now be working 24/7 in North Dakota. It is obvious fracking is the chokepoint in completing these wells in North Dakota. But if the price of oil continues to trend up, this may not be all bad news for the drillers.
2010: Record-Setting Year for ND Energy
From the McKenzie Farmer: 2010 to be a record-setting year for North Dakota energy.
Samson Oil and Gas Halts Trading Before Announcing Efforts to Raise Capital
May 2, 2010: Samson to offer shares at 3.4 cents (Australian)/share to raise $4 million (Australian). Go to link to sort it out; US dollars and Australian dollars are near par. Samson's immediate Bakken drilling program will include three wells: Gary 1-20H (31% WI, to spud May 25); Rodney 1-14H (26% WI, to spud in August); and, the Earl 1-13H (31% WI, to spud in September).
Samson Oil and Gas halts trading in anticipation of announcing efforts to raise capital. The halt in trading is expected to last through May 3, 2010.
Samson Oil and Gas halts trading in anticipation of announcing efforts to raise capital. The halt in trading is expected to last through May 3, 2010.
That News That There is a New Oil Formation in North Dakota -- NOT!
The Associated Press published a story yesterday that is now making the rounds on the net and the blogosphere (including mine). The headline: ND Study: New Oil Formation Rivals Bakken.
I am one of the most inappropriately exuberant observers and commentators on the North Dakota oil industry, and on first glance, "appreciated" this headline.
But I think this is a misleading headline and will be used by investment newsletters to lure the uninformed into making possibly wrong decisions on investing in the oil business in North Dakota.
The AP story refers to the Three Forks Sanish formation. This is not a new formation. I don't know when oilmen first determined that the TFS was an oil-producing formation but I do know that the US Geologic Survey (USGS) accomplished in 2008 was a survey of the Bakken pool which included the Bakken formations (yes, plural) and the Three Forks Sanish.
After that study, there were some oilmen that opined that the Bakken and the TFS were separate formations. Well, geologically, they were always separate formations. What the oilmen meant was this: that the Bakken formations did not communicate with the TFS formations. The first derivative of this theory, was that oilmen could drill into either the Bakken formations or the TFS formations and not disturb the other, or "drain" oil from the other.
[Before going further, this is why I refer to these formations in the "plural": the Bakken has an upper, middle, and lower formation. Early in this boom the wells were reporting production from the upper Bakken, but now the majority -- probably 99% -- of "Bakken wells" are targeting the middle Bakken. Likewise, the Three Forks or the Three Forks Sanish, used interchangeably, has an upper and a lower formation. These five formations are part of the NDIC administrative designation called the "Bakken pool." But even with that it is confusing: on the NDIC website they separate cumulative oil totals from the Bakken and the Bakken/TFS. I assume the latter is the TFS formation, part of the Bakken pool. For complete discussion and additional links to interesting discussion threads, click here.]
The bottom line is this: the AP story headline is incorrect -- this is not a new formation. It has always been there. And the USGS survey in 2008, by its very nature, included both the Bakken formations and the TFS formations.
But and this is a huge "but": the USGS survey is based on production from existing wells, informed scientific input from geologists, likely available technology, etc., in completing their survey. At the time of the survey, almost all of the the Bakken pool wells were in the upper and middle Bakken formations.
Had there been an equal number of wells in the upper and lower TFS formations at the time of the USGS survey, it is likely that their estimates of total and recoverable reserves would have been greater.
One might look at it this way:
2008: based on USGS survey, conservative estimate that 3.0 billion barrels are recoverable from the Bakken pool.
2010: based on above information, conservative estimate that 5.0 billion barrels are recoverable from the Bakken pool.
By the way, one way I look at the "value" of E&P companies working in the Bakken or "value" of their shares: if the value is based only on Bakken formation production, the shares are undervalued; if the value includes conservative -- repeat, conservative -- estimates of TFS formation production, the shares are more likely fairly valued, all else being equal.
Grand Forks Herald story, same subject.
Bismarck Tribune story, same subject.
Minot Daily News story, same subject.
Williston Herald story, same subject.
Discussion thread on Bakken and TFS, read through the entire discussion but be sure to read Teegue's comments on February 25.
Some companies estimate that the total estimated ultimate recovery (EUR) from a good "Bakken" well in the better oil fields in North Dakota could be in the range of 700,000 barrels. Adding a "TFS" well at the same location could add about 400,000 barrels. This is based on published reports late last year (2008) but obviously there are many, many variables. Based on this information, some companies are now placing stacked dual laterals at a single wellsite / single pad, drilling one lateral into the Bakken formation and one lateral into the TFS formation. In the 1Q 2010 conference call, Hess stated that their dual laterals cost them $10 - $11 million and produce, on average, 500 bbls of oil/per lateral, or 1,000 bbls per site. At $10 - $11 million I am not seeing the cost savings I had hoped would be there. A single horizontal well in North Dakota costs anywhere from $4.5 - $6.5 million based on published comments by oil companies working in North Dakota. Efficiencies are pushing the price down, but as the price of oil increases, oil service companies can charge more, pushing prices back up.
Elsewhere I questioned the rates of production that Hess said in their conference call based on the IPs that Hess has reported on their wells, but that's another story.
I am one of the most inappropriately exuberant observers and commentators on the North Dakota oil industry, and on first glance, "appreciated" this headline.
But I think this is a misleading headline and will be used by investment newsletters to lure the uninformed into making possibly wrong decisions on investing in the oil business in North Dakota.
The AP story refers to the Three Forks Sanish formation. This is not a new formation. I don't know when oilmen first determined that the TFS was an oil-producing formation but I do know that the US Geologic Survey (USGS) accomplished in 2008 was a survey of the Bakken pool which included the Bakken formations (yes, plural) and the Three Forks Sanish.
After that study, there were some oilmen that opined that the Bakken and the TFS were separate formations. Well, geologically, they were always separate formations. What the oilmen meant was this: that the Bakken formations did not communicate with the TFS formations. The first derivative of this theory, was that oilmen could drill into either the Bakken formations or the TFS formations and not disturb the other, or "drain" oil from the other.
[Before going further, this is why I refer to these formations in the "plural": the Bakken has an upper, middle, and lower formation. Early in this boom the wells were reporting production from the upper Bakken, but now the majority -- probably 99% -- of "Bakken wells" are targeting the middle Bakken. Likewise, the Three Forks or the Three Forks Sanish, used interchangeably, has an upper and a lower formation. These five formations are part of the NDIC administrative designation called the "Bakken pool." But even with that it is confusing: on the NDIC website they separate cumulative oil totals from the Bakken and the Bakken/TFS. I assume the latter is the TFS formation, part of the Bakken pool. For complete discussion and additional links to interesting discussion threads, click here.]
The bottom line is this: the AP story headline is incorrect -- this is not a new formation. It has always been there. And the USGS survey in 2008, by its very nature, included both the Bakken formations and the TFS formations.
But and this is a huge "but": the USGS survey is based on production from existing wells, informed scientific input from geologists, likely available technology, etc., in completing their survey. At the time of the survey, almost all of the the Bakken pool wells were in the upper and middle Bakken formations.
Had there been an equal number of wells in the upper and lower TFS formations at the time of the USGS survey, it is likely that their estimates of total and recoverable reserves would have been greater.
One might look at it this way:
2008: based on USGS survey, conservative estimate that 3.0 billion barrels are recoverable from the Bakken pool.
2010: based on above information, conservative estimate that 5.0 billion barrels are recoverable from the Bakken pool.
By the way, one way I look at the "value" of E&P companies working in the Bakken or "value" of their shares: if the value is based only on Bakken formation production, the shares are undervalued; if the value includes conservative -- repeat, conservative -- estimates of TFS formation production, the shares are more likely fairly valued, all else being equal.
Grand Forks Herald story, same subject.
Bismarck Tribune story, same subject.
Minot Daily News story, same subject.
Williston Herald story, same subject.
Discussion thread on Bakken and TFS, read through the entire discussion but be sure to read Teegue's comments on February 25.
ADDED
Some companies estimate that the total estimated ultimate recovery (EUR) from a good "Bakken" well in the better oil fields in North Dakota could be in the range of 700,000 barrels. Adding a "TFS" well at the same location could add about 400,000 barrels. This is based on published reports late last year (2008) but obviously there are many, many variables. Based on this information, some companies are now placing stacked dual laterals at a single wellsite / single pad, drilling one lateral into the Bakken formation and one lateral into the TFS formation. In the 1Q 2010 conference call, Hess stated that their dual laterals cost them $10 - $11 million and produce, on average, 500 bbls of oil/per lateral, or 1,000 bbls per site. At $10 - $11 million I am not seeing the cost savings I had hoped would be there. A single horizontal well in North Dakota costs anywhere from $4.5 - $6.5 million based on published comments by oil companies working in North Dakota. Efficiencies are pushing the price down, but as the price of oil increases, oil service companies can charge more, pushing prices back up.
Elsewhere I questioned the rates of production that Hess said in their conference call based on the IPs that Hess has reported on their wells, but that's another story.
MDU First Quarter, 2010, Earnings Release
MDU's First Quarter Earnings Report (2010) will be available later today; some have received a summary from the company already.
Financials:
1Q, 2010: 22/share cents gain vs a lost of $1.87/share 1Q, 2009
According to some analysts, this missed estimate by 6 cents
Operations:
MDU has increased acreage in two areas for oil and gas exploration and production
Bakken (North Dakota): total -- 56,000 acres
Niobrara (SE Wyoming and north-central Colorado) -- 80,000
Comment: and this is just my personal thoughts, take it for what it's worth -- as a long term investor in MDU early in my investing career, I always thought MDU was appropriately conservative but also very forward-looking. Having said that, I started becoming disillusioned with MDU about two years ago with regard to their activity in western North Dakota (the Bakken). Despite being headquartered in Bismarck, ND, the company seemed to completely miss what was going on under their feet, and let other companies including EOG, COP (BR), WLL, CLR, BEXP, Slawson, Oasis, and even smaller companies like KOG, NOG, and AEZ take the lead in grabbing acreage. As a utility, they were focused on coal and natural gas, of course, but they did have a division, Fidelity, which calls itself an OIL and gas exploration and production company. It appears they did well with natural gas production but not oil. No one could have predicted the fall in natural gas prices and the growing disparity between prices of oil and natural gas, but other OIL and gas companies seemed to react more quickly. The majors were a bit slow in seeing this shift, and some majors made significant blunders (COP's purchase of natural gas reserves in the Far East a couple of years ago) according to some analysts. But I can't get it out of my mind that MDU was too close to the forest to see the trees. Or is it too close to the trees, to see that there is a forest there?
JRR Tolkien says we all have our myths, and that's my myth regarding MDU.
It appears MDU is trying to get back into the game by increasing its acreage in the Niobrara.
Its other unregulated divisions are dependent on the economic recovery.
MDU's regulated divisions should perform better than peers simply because of the amount of economic activity in western North Dakota.
Financials:
1Q, 2010: 22/share cents gain vs a lost of $1.87/share 1Q, 2009
According to some analysts, this missed estimate by 6 cents
Operations:
MDU has increased acreage in two areas for oil and gas exploration and production
Bakken (North Dakota): total -- 56,000 acres
Niobrara (SE Wyoming and north-central Colorado) -- 80,000
Comment: and this is just my personal thoughts, take it for what it's worth -- as a long term investor in MDU early in my investing career, I always thought MDU was appropriately conservative but also very forward-looking. Having said that, I started becoming disillusioned with MDU about two years ago with regard to their activity in western North Dakota (the Bakken). Despite being headquartered in Bismarck, ND, the company seemed to completely miss what was going on under their feet, and let other companies including EOG, COP (BR), WLL, CLR, BEXP, Slawson, Oasis, and even smaller companies like KOG, NOG, and AEZ take the lead in grabbing acreage. As a utility, they were focused on coal and natural gas, of course, but they did have a division, Fidelity, which calls itself an OIL and gas exploration and production company. It appears they did well with natural gas production but not oil. No one could have predicted the fall in natural gas prices and the growing disparity between prices of oil and natural gas, but other OIL and gas companies seemed to react more quickly. The majors were a bit slow in seeing this shift, and some majors made significant blunders (COP's purchase of natural gas reserves in the Far East a couple of years ago) according to some analysts. But I can't get it out of my mind that MDU was too close to the forest to see the trees. Or is it too close to the trees, to see that there is a forest there?
JRR Tolkien says we all have our myths, and that's my myth regarding MDU.
It appears MDU is trying to get back into the game by increasing its acreage in the Niobrara.
Its other unregulated divisions are dependent on the economic recovery.
MDU's regulated divisions should perform better than peers simply because of the amount of economic activity in western North Dakota.
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