Flashback: Hess -- 4Q2009 -- "the Bakken is robust at $40..."

With the price of oil now solidly back above $80/barrel, this is as good a time as ever to remind what Greg Hill of Hess said about the price of oil and the economics of the Bakken a few months ago.

Go back to the 4Q2009 conference call for this quote:

"So nothing has really changed in our thinking about the Bakken. It was just a timing thing related to the oil price shock in early 2009. Again, I’d like to remind everyone the Bakken is robust at $40. It returns the cost of capital at $40. So that’s why we feel very confident kind of pulling the trigger on the Bakken now and aggressively going after a five year program."

"Robust" at $40. I wonder what adjective he uses to describe the Bakken at $80 oil?

*****

Update, October 7, 2010: You know, I just read that paragraph again, for the umpteenth time (today is October 7, 2010). This conference call was back in 2009, almost a year ago. The Bakken seemed to be exploding with activity. Re-read what I just put in bold in that statement above: "...we feel very confident kind of pulling the trigger on the Bakken..."

"... kind of pulling..."  "...kind of pulling..." --- finally in 2009, Hess is thinking it might be ready to "pull the trigger."  Might be ready to "pull the trigger."

 Ah, yes, the nuances of these conference calls. It was my impression that at the same time BEXP, WLL, and CLR were practically betting the farm on the Bakken.

This is just idle coffee table talk. I would not put any stock into my idle rambling.

EOG: Current Presentation

Current presentation: like all previous EOG presentations, very low-key

North Dakota Bakken / Three Forks Sanish

• 850,000 total net acres

ObamaCare: Great News (Not a Bakken Story) (Not Even an Oil Story)

Finally some good news with regard to ObamaCare, the new federal health care program.

3M, the large industrial company in Minnesota, has announced it will shift all current and new retirees off the company's medical program and unto the federal Medicare program.

This guarantees retired 3M folks will access the world's best federal healthcare program and take some of the pressure off the 3M healthcare insurance program.

My hunch is this is a win-win for everyone.

3M's stock went up $1.03/share (1.16% today) after the announcement.

UPDATES

Update, October 18, 2010: add Boeing to the list of companies whose employees will be affected adversely by ObamaCare. 

"We're up to 151 rigs at 3:10 pm pacific time."

The quote from a reader -- and I just checked and that's absolutely accurate: a new record -- 151 active rigs in North Dakota.

A big thank you to the reader in California!

Whiting's October, 2010 Presentation

Whiting's October presentation, going through the slides for the first time:

Adjusted earnings, three months ending June 30, 2010: $1.31
Adjusted earning, three months ending June 30, 2009: (0.01)

Whiting produced 1.3 million bbls of oil from North Dakota in one month, August, 2010
Whiting produced 1.5 million bbls of oil from Oklahoma for the entire year, 2008
Whiting produced 3.5 million bbls of oil from Texas for the entire year, 2009

2010 CAPEX:

• $273 million in Sanish field
• $11 million in Parshall field
• $77 million in Lewis and Clark area

Williston Basin

• 86,000 net acres in Sanish and Parshall fields
• Average EUR of 850,000 bo/well -- and remember, multiple wells going into each section

Role of Rail in Shipping Oil Out of the Bakken

This is a nice overview / human interest story regarding the role rail plays in shipping oil out of the Bakken.
Bakken crude on its way to Cushing

Statistics:

• Rail facilities shipping 30,000 bbls/day (June, 2010)
• Capability: 125,000 bbls/day

In early 2010, analysts felt ND could produce over 350,000 bbls/day by 2015 -- that's five years from now! In fact, we are almost there now (310,000 bbls in July) -- three to four years earlier than expected.

There are oil loading facilities for rail at Stanley (EOG, 65,000 bbls/day); Stampede, ND (4,000 bbls/day); Minot, Tioga, New Town, Dore, Donnybrook and Ross. Another site is being proposed for Williston.

Incredible story.

Cost of shipping oil:

• Cost to ship by pipeline: $5 - $7/bbl
• Cost to ship by rail: $6 - $10/bbl

Updates:

February 4, 2011: new terminal to be built at Tioga, North Dakota

Another 13 Permits in the Bakken, ND, USA

Another thirteen (13) permits in the Bakken announced today. At this pace, "we" are on track for 1,470 new permits this calendar.

Ten different companies, and every permit in a different field and/or a wildcat.

Fidelity has two more wells in Stark County, including another Kostelecky well.

We've now had  a week of double-digit new permits per day. That's about double what the usual number has been.

Three Big Whiting Wells in the Sanish

Whiting is reporting three great wells in the Sanish. See link to Bakken Shale Discussion Group on the right sidebar.

Here are the wells:

• 18530, 2,686, WLL, Jorgenson 12-27H, Sanish, Bakken; no decline over 90 days
• 18481, 2,672, WLL, Niemitalo 12-35H, Sanish, Bakken; no decline over 90 days
• 18475, 2,405, WLL, Fladeland 21-12H, Sanish, Bakken; moderate decline over 90 days

But this is the rest of the story:
18530, the Jorgenson well

• 21 days in May: 27k bbls
• 30 days in June: 32k bbls
• 31 days in July: 33k bbls
• Doesn't look like much of a decline the first 90 days

18481, the Niemitalo well

• 25 days in May: 27k bbls
• 30 days in June: 27k bbls
• 31 days in July: 25k bbls
• Doesn't look like much of a decline the first 90 days

18475, the Fladeland well

• 11 days in May: 12k bbls
• 30 days in June: 31k bbls
• 31 days in July: 25k bbls
• Doesn't look like much of a decline the first 90 days

I'm still looking for evidence the drillers are finding ways to minimize the horrendous decline rate in the Bakken. I think they will eventually do it.

GeoResources Provides An Operating Update

GeoResources provided an operations update yesterday.

The reason for this update: GEOI initiated drilling in September, 2010, of their recently acquired Williams County acreage.

These are the wells for which GeoResources had results (all 24-hour flowbacks):

• 18170, 1,517, Slawson, Cannonball Federal 1-27-34H,  Parshall
  
• 18416, 904, Slawson, Wizard 1-35H, Big Bend
  
• 18495, 1,045, Slawson, Voyager 2-28H, Van Hook
  
• 18590, 553, Slawson, Alamo 1-19-18H, Big Bend
  
• 18621, 753, Slawson, Diamondback 1-21H, Van Hook
  
• 18870, 1,371, Slawson, Moray Federal 1-10H, Van Hook
  
• 18871, 1,394, Slawson, Neptune 1-15H, Van Hook
  
• 18749, 921, Slawson, Osprey Federal 1-26-25-30H, Van Hook

From that presser:

GEOI's Operated Bakken Shale

On September 25, 2010, we initiated drilling on our Williams County acreage with the Carlson 1-11H well, a Middle Bakken test in Section 11, T157N-R103W. The initial location is a 640 acre drilling unit and we have a 47.5% working interest.  We also plan to drill two 1,280 acre spacing units immediately following the Carlson well. Our working interests in these locations are 34% and 35%, respectively. 
We have acquired approximately 50,000 net leasehold acres in an AMI covering about 115,000 acres and as mentioned in prior releases, brought in industry partners to participate in development. As operator, we retained a 47.5% working interest, representing approximately 24,000 net acres. Assuming full development on a 1,280 acre spacing unit basis, we have a majority interest and control about forty (40) units and have working interests in another forty-two (42) units. Where we have a minority interest in a spacing unit, we will continue to focus on increasing our interests; thereby increasing the likelihood that we will be the designated unit operator.  

GEOI's Non-Operated Bakken Shale

To date, in our non-operated program located in Mountrail and adjacent counties, we have participated in 72 wells drilled by our primary operator, Slawson Exploration, with a 100% success rate.  In addition, we own minor working interests in numerous wells within the Bakken/Three Forks play.   Slawson is currently running three drilling rigs and we continue to acquire additional acreage and well interests, when reasonably available.

The following table updates our prior operations releases regarding this project (those results are up above). Generally, we report only the wells operated by Slawson, but may include others where the wells or our interests are meaningful. We do not report our numerous minor interest wells. The table below lists all such 2010 wells as we have included 30 and 60 average production rates, where data is available. We are reporting oil production only, therefore excluding natural gas and equivalents.  We expect to participate in approximately 100 wells over the next two years.

For Investors: Enbridge Considering New Pipeline (Not a Bakken Story)

Enbridge has announced it is considering a major pipeline from Cushing, Oklahoma, to the gulf region. Periodic gluts of oil being stored at the huge Cushing complex artificially affects the price of West Texas crude and additional takeaway capacity would help remedy that. Enbridge is considering a 24-inch pipeline, called the Monarch Pipeline, which could initially move as much as 150,000 barrels per day of oil to Houston. The pipeline could eventually move as much as 350,000 barrels per day. The pipeline appears to be contingent on whether the TransCanada Keystone XL from Canadian oil sands to Texas is allowed to proceed; the US government continues to look at environmental concerns.

In another story regarding Enbridge and its partners, it was interesting to note that the company said it expected no impact to earnings or payouts due to recent oil spills. I remember right after the spills, there was a huge pullback in share price, providing a great buying opportunity. The photographs of four men involved in the clean-up of the first spill suggested the size of this spill which garnered a lot of space in the press.

Yes: It Is Official -- New ND Active Rig Record -- 149

The Williston Herald's headline story today: new active drilling rig record for North Dakota -- 149.

Previously, the record for active drilling rigs in North Dakota was 148 in October 1981. State oil activity has spiked dramatically in the last year, with an increase of approximately 100 drilling rigs.

I posted 148 yesterday and a viewer pointed out he/she had seen 149 for  a short period before it dropped back to 149.

Because rigs come on and go off the list on a regular basis as they move from job to job, it is obvious that the active drilling rigs could increase. The "149" number is the low number of active drilling rigs at this moment. Most likely there is at least one other drilling rig that is being moved and ready to start drilling.

In addition, many rigs recently brought to North Dakota are being moved into Montana and so one can expect flux regarding this active drilling rig number. But this is clearly a most remarkable milestone.

According to the Herald, the number of active wells also hit a record: 5,005 (in July, 2010).

The Bismarck Tribune also reports on the story with additional statistics.

• North Dakota produced 9.9 million bbls of oil in July (a new record)
• Estimates are North Dakota will produce 10.5 million bbls in August with 5,200 active rigs
• Two years ago USGS estimated up to 4.3 billion barrels of oil could be recovered from the Bakken
• Since then, NDIC estimated another 1.9 billion barrels of could be recovered from the TFS
• Time to drill a well has decreased from about 45 days in the past couple of years to about 20 days
• Original estimates were that only 1 - 3 percent of oil in place could be recovered; in most recent presentations, some companies estimate they are already taking 8 percent from some of the core area wells

For the story in the Billings Gazette, click here.