Folks new to the Bakken may be interested in looking at the Sanish oil field. The original post was written back in February, 2010, but I have updated much of it. I believe the IPs are all updated; I may have missed a few.
Before the current boom, folks got excited about an IP of 300 barrels/day in the Williston Basin. But soon after drillers cracked the code on horizontal drilling and increased fracture stages, they started hitting some big wells in the Bakken, going from IPs of 500 to 1,000.
There has been much discussion about "inflated IPs" and how much they mean, but it's hard to argue with IPs of 2,000 or greater.
Newbies might want to look at the IPs in the Sanish, an oil field pretty much owned by Whiting.
Folks familiar with the Bakken have pretty much become numb to these 4-figure IPs. It should be noted that Whiting is targeting two formations in the Sanish: the Bakken and the Three Forks Sanish. A single "H" in the name suggests a Bakken formation well; a "TFH" in the name means the Three Forks formation.
Monday, August 30, 2010
Is the Bakken Over-Hyped? Are Leases for $5,000/Acre Reasonable?
Earlier, Whiting reported the IP for the TTT Ranch 4-6TFH, file number 18804: 1,561. It also set a record for a TFS well in the Sanish.
The TTT Ranch 4-6TFH is the fourth well in section 6-153-91. In fact, two of the wells are on the same lot, lot 4 in that section.
Earlier I posted the file numbers of the other three wells in that section but did not provide other information, due to fact I was traveling and hard to post all of that here. Here are the other three file numbers/wells in that section and their names:
The other three are:
18804, 1,561, WLL, TTT Ranch 4-6TFH, Lot 4, Sanish (record IP for a TFS well in the Sanish); this is the fourth well in this section.
Back-of-the-envelope calculations (I recommend that you disregard the following; it's my personal thinking-out-loud):
Some operators in their corporate presentations suggest that the EUR of wells in the better Bakken sections will in the 700,000 barrel range. If these four wells live up to that "hype," this section could produce upwards of 2,800,000 barrels. At $50/bbl, this represents $140 million at the wellhead. North Dakota sells at a discount to Texas crude because of shipment costs. Once pipeline takeaway matches production, that delta should decrease. In addition, going forward, the price of oil will probably increase, not decrease, as a general trend.
640 acres * $5,000 = $3.2 million. (Remember, a section is 640 acres.)
The cost to drill a well at $7 million * 4 = $28 million.
$5,000/acre represents a very small price when compared to the cost of drilling.
The TTT Ranch 4-6TFH is the fourth well in section 6-153-91. In fact, two of the wells are on the same lot, lot 4 in that section.
Earlier I posted the file numbers of the other three wells in that section but did not provide other information, due to fact I was traveling and hard to post all of that here. Here are the other three file numbers/wells in that section and their names:
The other three are:
- 17603, producing, WLL, TTT Ranch 11-6H, Lot 4, northwest to southeast
- 18297, 2,762, WLL, TTT Ranch 12-6H, Lot 5, northwest to southeast, 70k bbls < 90 days
- 18876, confidential, Rohde 14-6XH, Lot 7. For a discussion on Whiting's "X" designated wells in the Sanish, click here.
18804, 1,561, WLL, TTT Ranch 4-6TFH, Lot 4, Sanish (record IP for a TFS well in the Sanish); this is the fourth well in this section.
Back-of-the-envelope calculations (I recommend that you disregard the following; it's my personal thinking-out-loud):
Some operators in their corporate presentations suggest that the EUR of wells in the better Bakken sections will in the 700,000 barrel range. If these four wells live up to that "hype," this section could produce upwards of 2,800,000 barrels. At $50/bbl, this represents $140 million at the wellhead. North Dakota sells at a discount to Texas crude because of shipment costs. Once pipeline takeaway matches production, that delta should decrease. In addition, going forward, the price of oil will probably increase, not decrease, as a general trend.
640 acres * $5,000 = $3.2 million. (Remember, a section is 640 acres.)
The cost to drill a well at $7 million * 4 = $28 million.
$5,000/acre represents a very small price when compared to the cost of drilling.
BP Spill Investigation: So Far -- Incredible (Not Directly Related to the Bakken and Somewhat Political in Nature)
I doubt most people will take the time to listen to this video, but it's worth your time. Early investigation suggests a) one or two BP employees the direct cause (BP's own investigation); b) the effects of the deep water drilling moratorium getting worse daily; and, c) this could destroy the deep water drilling program in the gulf for up to two years.
I generally file these links under "anything to destroy the oil industry."
On the other hand, if the drilling program in the gulf is delayed for two years, it bodes well for the Bakken.
I still maintain this is the time to be accumulating shares in oil and oil service companies operating in the Bakken.
By the way, this link has nothing to do with the Bakken, but you might enjoy it, especially those who play cards in Vegas during the winter.
I generally file these links under "anything to destroy the oil industry."
On the other hand, if the drilling program in the gulf is delayed for two years, it bodes well for the Bakken.
I still maintain this is the time to be accumulating shares in oil and oil service companies operating in the Bakken.
By the way, this link has nothing to do with the Bakken, but you might enjoy it, especially those who play cards in Vegas during the winter.
How Times Have Changed: Definition of "Ridiculously Low Unemployment"
The mainstream media has a story with the headline about the ten (10) states with ridiculously low unemployment rates. Only three states are below five percent. The rest are above six percent, except for New Hampshire which comes in at 5.8 percent, for all intents and purposes, also six percent. The three states with unemployment less than five percent: North Dakota, South Dakota, and Nebraska.
North Dakota is the only state below four percent, and has been there for quite some time. I would assume the rate will drop a bit come winter when some of the underemployed, newcomers return to their home states.
Except, maybe for North Dakota, and that's a stretch, I wouldn't call these unemployment rates ridiculously low. During my entire working life, "full employment" was defined as an unemployment rate of four percent.
North Dakota is the only state below four percent, and has been there for quite some time. I would assume the rate will drop a bit come winter when some of the underemployed, newcomers return to their home states.
Except, maybe for North Dakota, and that's a stretch, I wouldn't call these unemployment rates ridiculously low. During my entire working life, "full employment" was defined as an unemployment rate of four percent.
For Investors: Lots of Data This Week
Every business page headline today says investors are holding back today waiting for slew of economic data to be released this week.
Just for the fun of it, let's follow the headlines as that data is released.
I'm particularly interested because I am as fully invested as I can be, having accumulated a few more shares of CLR and NOG earlier last week.
1. Consumers spend at fastest pace in four months. Reading closely between the lines, the numbers suggest folks may be tapping into savings and/or retirement accounts. The article does state economists are worried that consumers are holding back on purchases due to economic uncertainty. Dow is down 75 points.
2. Japan's factory output unexpectedly rose 0.3 percent in the month of Japan.
3. August automobile sales in August slowest for that month in 28 years? We will know tomorrow when sales figures released.
4. Unexpected jump in consumer confidence -- August 31, 2010: A report showed confidence climbed more than expected in August, giving traders some hope that the slowdown in the economy might be finding a bottom. Manufacturing activity in the Midwest slowed in August, slightly worse than expected.
5. Home prices rose more than expected in the month of June.
6. Banks made money. Banks overall made $21.6 billion in net income in the April-to-June quarter, the Federal Deposit Insurance Corp. said. It was the highest quarterly level since 2007 and was led by the largest institutions. The industry lost $4.4 billion in the second quarter of 2009.
7. Stock futures surge on signs of overseas growth -- Wednesday, Sept 1, 2010 -- third day of this five day series. Australia's economy grew by the fastest pace since 2007. China auto sales rebound; grow by 56% in August (recession? what recession?).
8. Joy Global (coal) raises 3Q forecasts. Heinz boosts 1Q earnings due to Asia growth.
9. Ford Canada has best August in 20 years. Enuf said.
10. US manufacturing sector grew in August.
11. The number of planned layoffs at U.S. firms fell 17 percent in August from the prior month and hit the lowest level in 10 years, a report on Wednesday showed. Employers announced 34,768 planned job cuts last month, down from 41,676 in July, outplacement consultancy Challenger, Gray & Christmas, Inc. said. It was the first month-on-month decline since April, when planned job losses had hit a seven-year low, and the lowest level since June 2000.
12. Pending home sales rose 5.2 percent in July. Even so, home sales remain at the lowest level in a decade.
13. August retail sales slightly better than forecast. This year, the index up 3.2% (forecast: 3%) but it's better than the 2% downturn experienced last August.
14. In general, economic data quieting talk about a double-dip recession.
15. Fewer jobs lost than expected (who are we trying to kid?) -- but it's considered a good report. Unemployment inches up to 9.6%. It appears 10% is the "new normal." Market "happy" if unemployment is less than 10%. Jobs gained this past reporting period not even enough to absorb new entrants into workforce, much less make any dent in the jobs lost in this recession.
Just for the fun of it, let's follow the headlines as that data is released.
I'm particularly interested because I am as fully invested as I can be, having accumulated a few more shares of CLR and NOG earlier last week.
1. Consumers spend at fastest pace in four months. Reading closely between the lines, the numbers suggest folks may be tapping into savings and/or retirement accounts. The article does state economists are worried that consumers are holding back on purchases due to economic uncertainty. Dow is down 75 points.
2. Japan's factory output unexpectedly rose 0.3 percent in the month of Japan.
3. August automobile sales in August slowest for that month in 28 years? We will know tomorrow when sales figures released.
4. Unexpected jump in consumer confidence -- August 31, 2010: A report showed confidence climbed more than expected in August, giving traders some hope that the slowdown in the economy might be finding a bottom. Manufacturing activity in the Midwest slowed in August, slightly worse than expected.
5. Home prices rose more than expected in the month of June.
6. Banks made money. Banks overall made $21.6 billion in net income in the April-to-June quarter, the Federal Deposit Insurance Corp. said. It was the highest quarterly level since 2007 and was led by the largest institutions. The industry lost $4.4 billion in the second quarter of 2009.
7. Stock futures surge on signs of overseas growth -- Wednesday, Sept 1, 2010 -- third day of this five day series. Australia's economy grew by the fastest pace since 2007. China auto sales rebound; grow by 56% in August (recession? what recession?).
8. Joy Global (coal) raises 3Q forecasts. Heinz boosts 1Q earnings due to Asia growth.
9. Ford Canada has best August in 20 years. Enuf said.
10. US manufacturing sector grew in August.
11. The number of planned layoffs at U.S. firms fell 17 percent in August from the prior month and hit the lowest level in 10 years, a report on Wednesday showed. Employers announced 34,768 planned job cuts last month, down from 41,676 in July, outplacement consultancy Challenger, Gray & Christmas, Inc. said. It was the first month-on-month decline since April, when planned job losses had hit a seven-year low, and the lowest level since June 2000.
12. Pending home sales rose 5.2 percent in July. Even so, home sales remain at the lowest level in a decade.
13. August retail sales slightly better than forecast. This year, the index up 3.2% (forecast: 3%) but it's better than the 2% downturn experienced last August.
14. In general, economic data quieting talk about a double-dip recession.
15. Fewer jobs lost than expected (who are we trying to kid?) -- but it's considered a good report. Unemployment inches up to 9.6%. It appears 10% is the "new normal." Market "happy" if unemployment is less than 10%. Jobs gained this past reporting period not even enough to absorb new entrants into workforce, much less make any dent in the jobs lost in this recession.
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