Natural Gas: It's Just a Matter of Time

October 13, 2010: Opportunity of the decade. Also, natural gas knocking the wind out of renewable energy.

August 6, 2010: Maybe Argentine is the bird in the coal mine.   Importing natural gas; demand outstrips supply.

July 19, 2010: Burned by Apache!  APA down 10% since June, 2010.

Natural gas: it's just a matter of time.

August 5, 2010: Smart Money Moving to Natural Gas!


It's Just A Matter of Time, Brook Benton

Someday,
Some way,
You will realize that you've been blind.
Yes, darling,
You're going to need me again.

It's just a matter of time.

Go on, go on
'Til you reach the end of the line,
'Cause I know
You'll pass my way again.

It's just a matter of time.

After I gave you
Everything I had
You laughed and called me a clown.
Remember in your search for fortune and fame,
What goes up must come down.

I know, I know
That one day you'll wake up and find
That my love was a true love.

It's just a matter of time.

Someday and some way
Girl, you'll realize that you've been blind.
Yes, darling, I know you're gonna need me again.

It's just a matter of time.

(Unable to embed the Randy Travis version which may be the best arrangement ever.)

Still No Answer From DKRW

The most conservative estimates of North American natural gas supply demonstrate a serious shortfall in production for the foreseeable future. With short supply driving prices higher, we are now seeing some of the highest natural gas prices in the world here in the Southwestern United States and Mexico. With so much of our energy infrastructure and industry tied directly to natural gas, it is necessary to identify and deliver more competitive supply options in order for the US and Mexican economies to grow. 

That's the first paragraph on the homepage of DKRW Energy. They must be seeing something different than what I'm seeing. I've e-mailed DKRW twice and have never gotten a response.  As much as I think natural gas is the bridge to America's energy future, DKRW's statement seems to be a bold-face ..... unique opinion.

From my perspective, America is swimming in natural gas, and we are seeing some of the lowest prices ever. Investors would love to see natural gas stay above $5.00; it seems to be in a trading range of $4.00 to $4.50. The break-even point for natural gas in the Marcellus for ERF is about $3.85. Compare that to oil. Even in the Bakken where oil is relatively expensive to find/produce has a break-even price of about $14 to $20, and is in a trading range of $60 to $80.

Whatever.

SE Buys a Gas Storage Facility: MDU vs SE

Making Hay While the Sun Shines 

On May 25, 2010, I first posted that something is going on in the natural gas industry. I think the "big boys" are acting on the obvious: natural gas will be the bridge to American energy independence (whatever that means).

Here are some of the stories I have posted since May 25, 2010, supporting my argument:

• Another natural gas play: Shell
• CenterPoint expanding pipeline
• MIT: natural gas to become more important
• Moving from coal to put a strain on natural gas
• Montana's largest utility: need to diversify into natural gas
• Coal to gas: South Heart
• ERF moves into the Marcellus

Spectra Buys More Storage 

Now, today same song, different verse: Spectra Energy will buy Bobcat Gas Storage from two partners, including GE Energy Financial Services, for $540 million. In addition to the purchase price, Spectra will invest another $400 - $450 million to fully develop the facility by the end of 2015. The facility with 46 bcf of gas storage capacity is located in southeastern Louisiana.

This will bring Spectra's total storage capacity to about 340 bcf. 

Spectra vs MDU

MDU's total storage capacity is about 353 bcf. (I do not know if this includes the expansion of the Baker storage facility. I assume it does.)

My understanding is that Spectra is a pure-play natural gas production and distribution company, compared to MDU in which natural gas production and distribution is but one division.

The market cap for Spectra is: $14 billion
The market cap for MDU is: $3.6 billion

MDU's Baker Expansion

As long as I'm rambling, here's the link to the expansion of the Baker storage facility (same link as above) and some data points:

• Williston Basin Interstate Pipeline Company is the wholly owned natural gas transmission pipeline subsidiary of MDU Resources
• The Baker storage facility is in southeastern Montana, part of the Bakken play currently in boom
• The Baker storage facility is the largest natural gas storage field in North America and is one of three storage fields owned and operated by Williston Basin
• The total working capacity of those three fields is 193 bcf
• The Baker storage field (before expansion) is about 115 mcf/day
• The expansion will add about 125 mcf/day
• The expansion will include additional compression and gathering pipelines
• When completed, the total storage capacity at Baker will be about 240 mcf/day
• Bids for the expansion project were taken between February and March, 2010
• The project is expected to be completed by early 2012
• The expansion of the Baker storage facility is estimated to be between $100 and $130 million

Am I missing something here, do I have my numbers wrong, or do I not understand something (am I comparing apples to oranges):

According to their corporate presentation, the Baker expansion equates to about 30% increase in storage deliverability. 30% of 193 bcf is 58 bcf. MDU estimates a $100 - $130 million price tag for this expansion whereas Spectra paid $450 million to purchase and will spend another $400 - $450 million to finish the project for 46 bcf. Obviously I either don't understand something or have miscalculated. Maybe someone can sort this out for me.

With regard to the Baker facility:

"Usage of our storage facilities reached record levels in 2009 and we are currently sold out of firm storage capacity so this is an excellent time to move forward with an enhancement of our Baker storage field," said Steven L. Bietz, president and chief executive officer of Williston Basin Interstate Pipeline Company.

In its most recent presentation, Williston Basin says the Baker expansion should be complete by November, 2011, versus the original April, 2012, target date. That speaks volumes about the workers not wanting to go through another North Dakota/Montana winter! And they will have plenty of work elsewhere in the Basin.

Ten More Permits: On Track for 1,315 New Permits This Year. BR Notable New Permits

Activity in the Bakken has not slowed down: ten (10) new permits today, all except three in McKenzie County. This keeps "us" on track for 1315 new permits in North Dakota for 2010, well above the 945 or so last year, the previous record in the current boom.

Of most interest: BR is putting four wells on one pad on Lot 4 Section 1 of T151N-9W in the Clear Creek field. I love the naming system: one can quickly tell which two of the wells will target the Three Forks Sanish and which two will target the Middle Bakken. In addition, one can easily tell which horizontals run north and which run south.

For newbies, CLR pioneered this scheme, calling it an Eco-Pad.

Here are the new BR permits on one pad:

• 19283, Sunline 11-1MB-3SH
• 19286, Sunline 11-1TF-2SH
• 19285, Rising Sun 11-1MB-3NH
• 19287, Rising Sun 11-1TF-2NH

These are the first permits granted in the Clear Creek field, so far, in 2010.

In 2009, there were four permits granted in the Clear Creek field. #18442, BR, Mesa Verde 24-22H, had an IP of 2,348. The other three Clear Creek permits are Petro-Hunt wells; two are plugged/producing, and one has not yet reported (18388, 18404, and 18379).

By the way, if I remember correctly, NDIC no longer requires permission to go to 1280-acre spacing; until recently, 640-acre spacing was standard. Now the NDIC requires permission fro 2560-acre spacing, but it's pretty much "rubber-stamped" with two conditions: a) not less than 6 wells on each 2560-acre unit; and, b) all wells completed in "a reasonable period of time" once the first one has spudded. In other words, NDIC does not want an operator to hold control of 2560 acres with one well.

As long as I'm rambling, this is for newbies. People often ask why oil companies keep their wells "confidential." I think this is a good example. We have no idea how good the Petro-Hunt wells are. If BR had access to this information, it would help make the decision whether to drill/not drill in the area. Yes, BR had one great well, but how will the Petro-Hunt wells come in? My hunch is: the Petro-Hunt roughnecks drink beer (or colas) in the same taverns as the BR roughnecks.

Wow, I miss North Dakota.

Home Prices Increasing in 20 Countries: Eye-Opener

Wow, this is an eye-opener.

Listening to the news every day, I truly thought "we" were in a global recession. But the recession is very spotty. When I saw this headline, "20 Countries Where Housing Prices Are Increasing", I assumed it was in places like the Congo where things could not get much worse. (Warning: the link takes forever to load; I have fast connection and it still moved slowly. Lots of ads, I suspect.)

I was quite surprised to see that home prices are rising in much of the western world and in the developed world in the east. Not a single country in Africa, eastern Europe, the former Soviet bloc, or the Mideast was on the list. Nor was Japan, Vietnam, or South Korea.

Here they are, #20 to #1:

• Malaysia
• Portugal
• Luxembourgh (if I could live anywhere, this is where I would live)
• The Netherlands
• Switzerland (Roman really likes this country now)
• New Zealand (beautiful)
• Colombia (right next to Venezuela)
• India (surprise)
• Austria
• UK (yes, this "socialist" country)
• Sweden
• Norway  (my ancestral home)
• Finland (remember radiated reindeer)
• Canada (our neighbor to the north)
• South Africa
• Israel (how much money does US loan them?)
• Australia
• Singapore (not unexpected)
• Hong Kong (not unexpected)
• China (a complete surprise; #1 on the list; prices up 68% on average)

This list truly surprises me. Check out the link/slideshow; the average increase is interesting, but the average prices are really startling.

And as long as I'm rambling, check out the new luxury mall in the Gaza strip.

Minneapolis Federal Gazette: North Dakota -- the Little Engine That Could

When I get around to it, this will be an interesting article to read. There is also a companion article.  For those with a bit of time, enjoy now. I have to get back to posting today's daily activity events in the Bakken.

First article
Author: Ronald A. Wirtz, editor, fedgazette, The Federal Reserve Bank of Minneapolis.

From the article:

The state’s repositioning on the economic totem pole is dramatic. A decade ago, the state’s per capita personal income ranked 39th in the country; at $23,500, it was about 83 percent of the national average, according to the federal Bureau of Economic Analysis.

Over the next 10 years, annual personal income grew by 5.3 percent—two full percentage points better than the national average. By 2009, personal income in the Peace Garden state had leapt to $39,500—slightly above the national average and good for 19th highest.

For much of the decade, that growth went overlooked—indeed, dismissed—as the rest of the country strolled along with the housing boom. But when the country fell into recession, North Dakota gained more attention for its ability to continue swimming against an outgoing economic tide. While job loss has been rampant across the United States and the Ninth District, North Dakota actually added jobs from 2007 through the end of 2009. With 4.9 percent unemployment in March (seasonally unadjusted), North Dakota had easily the lowest unemployment rate in the country—a fraction of the nation’s rate of 9.7 percent and well ahead of second-place South Dakota (5.3 percent).

Second article:
Authors: Terry J. Fitzgerald, Senior Economist and Assistant Vice President; Woncho Chung, Research Assistant; and Ronald Wirtz, Editor, fedgazette

From the article:

As it turns out, that “could’ve been worse” theme runs through most of the Ninth District—not only from sources, but from reams of data. To get a better idea of comparable performance from 2007 through 2009, the fedgazette analyzed employment patterns across various geographic jurisdictions (states, counties, metro versus rural) as well as other categorical frameworks, such as industry sectors and against past recessions.

In general, Ninth District states fared relatively well against states nationwide in terms of total job losses and unemployment rates. Though unemployment rates have grown considerably in the past two years, they grew less than the national average in district states over the past two years. Just as important, unemployment rates in the district were lower to begin with. In December 2009, North Dakota and South Dakota had the two lowest unemployment rates in the nation, with both still under 5 percent. Larger district states—Minnesota and Wisconsin—didn’t perform as well, yet they did outperform the nation. 

The articles are chock-full of economic information regarding the Ninth District of the Federal Reserve. Not much of it is "news" to those living in the Ninth District, but it might be of interest to those on the coasts or overseas.

Simray GP, LLC, Reports a Nice Well, Mandaree Oil Field, ND, USA

File # 18560 in the Mandaree Oil Field, Williston Basin, North Dakota (USA) with an IP of 1,330 barrels of oil per day, operator: Simray Ray Group, LLC.

This is in "the Bakken." The Bakken has a horrific decline rate so the initial production is expected to fall dramatically over the next 90 days. But it is still a good well. The Mandaree oil field is a fairly good field, located inside the Fort Berthold Indian Reservation. The most prominent operator in FBIR is Kodiak Oil and Gas, I believe. 

China World's Biggest Energy Consumer

China is now the world's biggest energy consumer, surpassing the US.

I forget but I thought this milestone was not predicted to occur until several years from now. If my memory is correct, it suggests that the recession in the US contributed to this happening sooner than later, as noted in the linked article.

Regardless, this is a huge story.

I've posted several times about the aggressiveness of China to snap up oil assets around the world, no doubt playing by different rules than the US.

Halliburton: Profits Soar 83 Percent, Beat Expectations

Halliburton's profits for the second quarter soared 83 percent and beat expectations.

I guess the analysts overlooked the news that, in the North Dakota Bakken, Halliburton went to 24/7 fracking earlier this year to keep up with demand. Still, there is a backlog in fracking .

(For investors: analysts and Halliburton warn that the moratorium in the gulf will hurt earnings for 2010.)