NOG Presentation

I listened to the 2010 Enercom NOG presentation because someone asked about some of the acronyms. After listening to the presentation, I was only able to hear one acronym that some folks my not have heard of before: AFE.

From the Schlumberger glossary:

Authorization for expenditure (AFE): A budgetary document, usually prepared by the operator, to list estimated expenses of drilling a well to a specified depth, casing point or geological objective, and then either completing or abandoning the well. Such expenses may include excavation and surface site preparation, the daily rental rate of a drilling rig, costs of fuel, drillpipe, bits, casing, cement and logging, and coring and testing of the well, among others. This estimate of expenses is provided to partners for approval prior to commencement of drilling or subsequent operations. Failure to approve an authority for expenditure (AFE) may result in delay or cancellation of the proposed drilling project or subsequent operation.

However, after listening to that presentation, it's hard not to invest in this company (my two core holdings in the Bakken are CLR and NOG).

My notes from the NOG presentation (may have errors; listen to presentation to clarify in your own mind)

• Non-operating company partners with best in the world: EOG, Slawson, CLR, COP, etc
• Currently participating in 70 of the 140 wells being drilled in the Bakken
• Recently involved in six wells in the Red River in Montana, but now 100% Bakken
• Most of NOGs acreage in the best area of the Bakken, along the Nesson anticline in Mountrail County
• They buy about 200 acres of mineral rights every day, including weekends and holidays
• They elect to participate in about 10 AFEs every day
• Mentioned two 42-stage fracks, recent highly successful wells; future of the Bakken will be superfracks
• Third generation of fracturing techniques; now up to 42 stages; results are spectacular; superfracks
• Payback begins within 3 - 6 months from EOG and Slawson; often within 60 days; NOG generally have their money back on any particular well in 180 days
• NOG will be maximizing opportunities with Slawson/EOG; about 50 percent of all drilling will be with Slawon/EOG; the split will be 60/40 (Slawson/EOG)
• Downspacing is NOG's future; behind every well drilled, there will be five to follow (one well per unit; five wells "behind it")
• They expect to exceed their guidance of 18 net wells this year
• With 20 spudded wells this year, they will hold another future 100 wells by production (leases will never expire) 
• NOG paid $986/acre average in 2010 (operated interests pay $5,000 to $7,000/acre) 
• Hedges important
• 30,000 acres held by production; aiming for 100,000 acres by 2012; on track to meet that

Lots of information. What I like best:

• Buying 200 acres every day (weekdays, weekends, holidays)
• Core acreage along the Nesson anticline; best area in the Bakken
• Participates with my favorite non-public company, Slawson
• Participates with one of most successful companies in the Bakken, EOG
• Hints that participation with CLR may be increasing
• Downspacing holds leases forever
• Three Forks doubles, quadruples 2006/2007 estimates
• They participate where they want; currently participating in 70 of the 140 wells being drilled

I"m a sucker for presentations, but I enjoyed listening to this one more than most.

Nibbling At the Margins (Not the Bakken)

With unemployment at 9.6% and at least eight (8) million people out of work, and literally "everyone" calling for extension of tax breaks to keep the economy going, the President just can't do it (cut taxes). It goes against every grain in his body.

So, today, finally, a headline story: he will make permanent tax breaks for research and development (R&D). I can't imagine this will amount to a hill of beans. How many of those eight million unemployed folks are involved in research and development?

Don't get me wrong? I'm not sure across-the-board extension of tax cuts to the very wealthy makes sense, but this nibbling at the margins seems to be putting the first band-aid on a thousand paper cuts. This is an idea a junior US House representative would come up with, not the president. We need to see a broad-based plan to get the unemployed back to work.

To see how severe the unemployment picture has been, click here. Remember: President Obama assumed office January 20, 2009. 

That's my rant for the day.

Updates:

September 6, 2010: Now the administration wants $50 billion for infrastructure support; too bad this wasn't the emphasis in the original stimulus plan (the emphasis was on supporting state government expenditures and pet projects that had languished for decades). Nibbling on the margins. (Note: the recession must not be that bad: the vast majority of Americans, according to polling, are against new stimulus spending.)

Another #1 For North Dakota: Highways!

With all the reports coming out of the oil  patch in North Dakota regarding the truck traffic and the road situation, I would have thought North Dakota would have been dead last with regard to highway transportation.

Surprise, surprise, surprise: North Dakota's highway system was rated #1 in the most recent survey by the only folks I suppose who do such surveys! Smile.

I was just back in the Bakken and I was surprised how good the roads were. The Boston and Boston suburb roads were horrendous, with all the potholes. San Antonio's roads are hardly better. And Portland? Let's just say in certain neighborhoods the Portland roads are even worse than Boston's.

But here's the report, the 19th Annual Highway Report. North Dakota, first; Montana, second; and, Kansas, third.

New York: 46th.

California: 48th.

Paradise (Hawaii, with one of the worse economic recessions in the nation): 47th due to all the congestion. Recession? What recession?

But here's a kicker: the largest state, Alaska, at 49th, is understandable; but, Rhode Island, the nation's smallest state, probably smaller in land area than some of the counties in North Dakota is dead last.

Bridges play a big factor in the rating systems, and there aren't a whole lot of bridges when you come right down to it in North Dakota, but the taxpayer/highway mile is also a lot less, making per capita spending on highways a bigger deal for North Dakotans, so maybe it's a wash.

Speaking of road traffic in the oil patch, for my Samson readers (there's something about the Samson readers I really appreciate; perhaps it's their passion for the outback):

Link here: https://www.youtube.com/watch?v=Cg-eBs5enD4.


Lights on the Hill, Slim Dusty

Link here: https://www.youtube.com/watch?v=FqtttbbYfSM.

Waltzing Matilda, Slim Dusty

In 1983 a rendition of "Waltzing Matilda" by country-and-western singer Slim Dusty was the first song broadcast by astronauts to Earth

Duke Energy Sues (Not a Bakken Story)

Updates

September 19, 2012: update here.

“If they [Duke Energy] win this appeal, they will have paid an average of $1.4 million per year and will be on a pace to pay $7 million over five years,” Schell wrote to Mead. “Duke has effectively cut their Wyoming tax burden in half. Keep in mind that they have also paid no production tax and that the project was exempt from Wyoming sales tax.” 

For construction of the wind farm, Duke Energy was eligible for a state renewable resource tax credit, said Ed Schmidt, director of Wyoming Department of Revenue. The cost of the wind farm was $173.2 million. But Duke Energy did not pay full price for the wind farm’s equipment. “A significant portion of that would have been exempt” from state tax because of the renewable resource credit, said Schmidt.

While updating this article, I noted this from an earlier post:

February 20, 2012: wind projects in Wyoming slowing down, on hold; starting to use the word "abandoned." Hmmm.

Original Post

From the BillingsGazette.com:

Duke Energy was able to get permits, at least in part, by testifying that the state would benefit from the property tax revenue generated by the wind farms.

The county of Converse, for example, was led to believe on the basis of Duke Energy statements, that they coulda, woulda, shoulda received approximately $2.8 million in property taxes per year and about $13 million over the next five years. But when Duke Energy got the bill for about the amount they said they expected to pay, .... drum roll ... they sued.

The company says it now believes it owes about half as much as it previously estimated.

Regardless of the legal issues, two derivatives follow:

• Just a reminder that wind energy can't compete without subsidies; 
• Increasing costs for wind energy (in this case, increased property taxes), will increase subsidies

It doesn't take a whole lot of thinking to determine who is going to pay for those subsidies.

Meanwhile, the country is swimming in natural gas, which is phenomenally cheap, and pretty close to "going green."

Duke Energy has four wind farms in Wyoming (property tax assessments):

• Campbell Hill wind farm, Converse County ($23 million)
• Silver Sage wind farm, Laramie County ($9 million)
• Happy Jack wind farm, Laramie County ($6 million)
• Top of the World wind farm, Converse County ($3.4 million)

Why does this story not surprise me?

Because .... it's only make believe....

It's Only Make Believe, Glen Campbell, cover (Conway Twitty)

Center of the Williston Basin Sets New Record for Building Permits

From the Williston Herald.com:

With four months to go, the Williston Building Department has set a new record for the dollar value of building permits issued in a year.

Some data points:

• In August: 70 permits issued, $24 million total value
• So far this year, 2010, through end of August: 436 permits, $66 million
• Previous record: last year (2009), 257 permits, $44 million

The dollar amount of permits issued this past month was in same ballpark as all of last year, and last year was a record.

The two big projects receiving permits in August: a new dormitory at the Williston State College ($9.3 million) and the Halliburton man camp.