Ramblings

I'm gonna be gone all day tomorrow, Friday, August 6, 2010, so I won't be able to post as much as I would like. As it is, I cannot keep up with everything coming out of the Bakken during earnings season.

There are huge stories out there that are not getting the headlines they deserve; fortunately the Drudge Report provides many of them.

1. Putin will ban all Russian wheat exports this year due to drought. Russia is the #3 wheat exporter in the world. This is huge for North Dakota.

2. Obama's economic advisor resigns: I think the Obama team saw tomorrow's unemployment numbers and the meeting went downhill from there. If you recall, earlier this week, Mr Geithner said unemployment numbers likely to get worse before they get better. That spoke volumes.

3. Back to the Bakken: DNR upped their recoverable reserves in the Bakken by 3.5 times. That is huge. My hunch: the management team was blown away by what the geologists were telling them. If this is true for Encore (DNR), I don't know why it's not true for the other Bakken companies. Three and a half times. And that's only three years into the boom in North Dakota.

4. Marathon, in its conference call, says it is taking lessons learned in the Bakken worldwide.

5. Almost all Bakken companies are blowing away the consensus. CLR earns 60 cents; consensus 40 cents.

6. The Montana play is back in play. I would assume all those wells completed between 2000 and 2005 were fracked with a single stage; now they will go back in and re-frac with 14 - 30 stages.

7. My investment commentary has been posted.

8. The Anschutz gusher in the Cabernet is incredible: 40,000 bbls in 40 days, with an IP of 3,294. And no one gets excited about the IP; we've become numb to these numbers (of course, we no longer know what an IP means, do we?). Whiting's 100,000 bbl well in less than 90 days. As I've said before it only takes one monster well to move the needle for these relatively small Bakken companies. And nary a dry hole. Some may not be all that economic in the long run, but 98% hit oil. Even the ones that are dry, seem to be an anomaly: another operator comes in and hits oil.

9. The natural gas story is the sleeper. When natural gas goes above $5, the valuation of these oil and gas exploration and production companies will move meteorically. Is that a word?

10. "They" are starting to put in the equivalent of four and five wells in some sections in the Sanish. 

11. The Niobrara is not a North Dakota play, but a lot of the Bakken companies are going to see the same success in the Wyoming Niobrara.

12. EOG opens a regional office in Stanley, and reports that the first time ever in the history of EOG, more revenue came from oil than natural gas, and most of that came from the Bakken.

For all the Louisiana roughnecks being flown into North Dakota: a big thank you ---


Picture This, Blondie

Did Encore Just 'UP' Their Estimates of Potential Recoverable Oil by 3.5 Times?

I don't have time to post all the links right now, but this is very, very interesting.

Working backwards from NDGS numbers, I calculate that the  NDGS estimates about 200 - 350,000 barrels of oil as their estimate of ultimate recovery (EUR) / section in the top five (5) North Dakota Bakken counties.

And yet, the operators are estimating 400,000 to 750,000 bbls EUR for each of their wells, and now they are putting in more than one well per section.

Do you see the disconnect?

Here's the interesting paragraph from the earnings report posted by Denbury (Encore):

Based upon recent drilling results and technical data in the Bakken area, the Company has re-evaluated the potential barrels of oil equivalent recoverable from its approximately 300,000 net acres in the Bakken.

Based on these updated internal engineering estimates, the Company projects its total potential recoverable BOEs in the Bakken could be approximately 350 MMBOE, of which approximately 29 MMBOE is considered proved at mid-year 2010, up from approximately 100 MMBOE as previously estimated by Encore, of which approximately 84 MMBOE was considered unproven upside potential.

This analysis is based on an increase to three wells per section per reservoir with varying estimated recoveries ranging from approximately 200,000 BOE to 675,000 BOE per well (on a gross basis), depending on location and expected horizontal length (5,000 feet or 10,000 feet).

The estimate excludes a portion of the Company’s acreage in the Almond and Northeast Foothills area (approximately 34,000 net acres) that is North or East of prior unsuccessful wells in those areas.

So, Encore suggests as much as 675,000 bbls per well with three wells in each section. That's a heck of a lot more than 200,000 to 400,000 bbls per section. If I'm confused, I'm sure someone will write to tell me.

Gun Fight at the OK Corral: High Noon in the Cabernet Oil Field

On the dockets for the August 25, 2010 hearing, there are four cases in which BR wants the Anschutz permits for four wells revoked:

• 13036: BR, request to revoke Anschutz Evelyn Stroh 1-17-20H-143-96, Dunn
  
• 13037: BR, request to revoke Anschutz Harry Stroh 1-8-5H-143-96, Dunn
  
• 13038: BR, request to revoke Anschutz Cecilia Stroh 1-18-19H-143-96, Dunn
  
• 13039: BR, request to revoke Anschutz Elizabeth Stroh 1-7-6H-143-96, Dunn

Requests to revoke occur periodically. But in the big scheme of things, it is very, very rare. It catches my eye when it happens. Well, I think there might be an explanation.

Anschutz just reported a phenomenal well in this area, a well that had an IP of 3,294 and produced a cumulative of 40,000 bbls of oil in less than 40 days, and is unfracked as of that date:

• 18644, State 1-25-36H-144-97X, Cabernet, 24-144-97, 3,294, 40k in 40 days, un-fracked 

One of the best blogs ever posted regarding the Bakken referenced the Anschutz in the Cabernet field and was posted by "Teegue." I linked that posting from the very beginning. That posting was the impetus for me to periodically focus on various oil fields (see sidebar at the right).

For me, this suggests another game changer in the Bakken. Regardless, it explains to me why BR wants those Anschutz permits revoked. BR has been in the Bakken a lot longer than Anschutz. It will be interesting to see how this turns out.

Yeah, a good ol' fashioned gunfight on the high plains.

 
Il Mercenario, Ennio Morricone