Chilean Mine Rescue (Not a Bakken Story)

This is absolutely incredible to be watching this live on the Internet.

The first trapped miner came up out of the "shaft" -- actually a 24-inch diameter pipe --  at about 10:12 p.m. central standard time -- I forgot to check the time, I was so mesmerized by the live video.  The link will probably be there as long as the rescue goes on, which could take as long as 36 hours, well into Wednesday morning. There were 33 miners trapped; now there are 32.

Press reports say that the rescuers expect to bring up one miner every hour. It takes the capsule about twenty minutes to bring a man up from the bottom of the mine where the miners are trapped to the surface.


Big John, Jimmy Dean

Investor Day: CLR Presentation -- This Is Worth Studying

I post 3 to 5 stand-alone postings per day as well as sometimes a dozen updates of previous postings every day, as well as posting comments. 

Occasionally there are some very, very interesting postings, but this posting may be one of the most incredible I have ever posted. CLR is suggesting it may be sitting on as much as 3.0 billion recoverable barrels of oil equivalent in the North Dakota and Montana Bakken.


In addition, CLR is suggesting that there may be as much as 24 billion boe recoverable in the Bakken. It is hard to tell from the slides alone (without the audio or Q&A) but the slides as shown suggest CLR is separating the Bakken formation from the Three Forks formation. If so, this presentation is even more incredible.

Investor Day: CLR Presentation (slide presentation)

Continental Resources Investors Day 2010: "Drilling Down in the Anadarko Woodford"
October 12, 2010
Skirvin Hilton, Oklahoma City, OK

Slide 12:  (slide 12 of overview)
In addition to 130 million barrels of oil (boe) equivalent proved reserves at mid-2010:

• 2.3 billion boe in unbooked, unrisked reserve potential (= 7.5 x mid-2010 proved reserves)
• With 320-acre spacing in the Bakken, unbooked, unrisked reserve potential would total 3 billion boe

(Yesterday, before seeing this presentation, someone estimated CLR might be sitting on 3.6 billion recoverable boe, which I posted as "back-of-the-envelope" calculations; uncanny)




Wurlitzer Prize, Norah Jones, piano; Willie Nelson, strumming.


Slide 32 (slide one of the Bakken presentation)
CLR suggests there may be as much as 24 billion barrels of oil recoverable (=5 times 2008 USGS estimate) in the Bakken
More than 2,750 horizontal wells completed since January, 2000
Industry adding 1,800 wells/year

NOG Increases 2010 Drilling Guidance and Provides Operational Update

Press release: October 12, 2010.
October Presentation.

NOG expects to spud approximately 24 net wells by the end of 2010, increased from previous guidance of 18 net wells.

The increase in number of net wells is probably due to increased number of drilling rigs.

NOG has acquired a total of 38,864 net acres year-to-date in the core of the Williston Basin Bakken and Three Forks play at a total cost of approximately $42.2 million. This represents an average cost of $1,086/acre.

The press release then lists 60 completed wells that NOG has participated in.
By operator (approx):

• EOG: 19
• Slawson: 11
• CLR: 6
• XTO: 4
• Others: the rest

NOG had a high of 49.5% working interest in a Hess well, and a low of 1.8% in an EOG well and almost every amount of working interest in between.

The press release then lists 90 wells that NOG is currently participating in.
By operator (by approx):

• Slawson: 17
• EOG: 12
• CLR: 7

NOG has a high of 60.9% working interest in a Slawson well (Vagabond 1-27H), and a low of 0.52% in a Petro-Hunt well (Fort Berthold 152-94-13B-24-1H) l and almost every amount of working interest in between.

NOG's open commodity derivative contracts as of September 30, 2010:

• 2010: 288,000 barrels at $80.41 (weighted average price)
• 2011: 720,000 barrels at $80.89 (weighted average price)
• 2012: 339,000 barrels at $80.62 (weighted average price)

MDU Subsidiary, Knife River, Knifes $34 Million in New Work

Find story at Knife River website.

Midwest (Sioux City) and Central Texas (Bryan, TX) were successful bidders on six new projects totaling more than $34 million.

South Dakota Department of Transportation

• Concrete paving, I-29, Roberts County, $12.9 million
• Concrete paving, I-29, Union County, $11.4 million
• Nebraska Department of Roads
• Asphalt overlay, Stanton County, $1.825 million

Waco, Texas

• Highway 6, $4 million
• Highway 6, $0.9 million
• I-35, $3.5 million

Earnings Season Has Begun

This is a reminder that during earnings week I will be updating my earnings post.

CSX, the railroad: earnings jumped 43% year-over-year.

Bullish Story on Possible Further Merger and Acquisition in the Bakken

This is a very, very interesting story. Superficially it looks like just one more "human interest" story about the Bakken. Most of us would read the headline and move on.

The story was published yesterday.

This is what I find interesting about it: it's as if some people are just hearing about the Bakken for the first time, and this includes established, well-capitalized energy companies.

I don't think these well-capitalized energy companies have only recently heard about the Bakken. I think they were a) focused on natural gas (as the article suggests); and, b) were not convinced the Bakken was as good as the hype back in 2006 through 2008. Harold Hamm was one of the first to really believe in the Bakken and he quietly bought up leases. Other individuals, families, and small investment companies who had been in the Williston Basin for decades accumulated acreage as best they could.

But now, the Bakken is as good as the hype, maybe better, and the price of natural gas has fallen to lows that are not expected to reverse for years.

Here are some takeaways from the article:

"The large U.S. independents like Devon Energy and Anadarko are increasingly coming to the view that some exposure to oil is good," Frank Murphy, an investment banker with Robert W Baird, told Reuters.

Murphy said these companies were underexposed in the oil shales, so there was potential for them to move in either through joint ventures or buying companies active in the Bakken....[but the prices were too high; the companies were overvalued; as an example, BEXP is 74 times earnings].

But

Looking ahead, however, smaller operators may need to seek external funding as service costs go up and maintaining multiple acreage becomes increasingly capital intensive.

"The higher costs will squeeze some of the smaller, less well capitalized players ... they may find that teaming up with larger players or selling out is a more viable option," said Robert W Baird's Murphy.

Private players such as Tracker Resource Development Inc, or small-cap listed operators Kodiak Oil & Gas Corp -- which had end-2009 proved reserves of 4.46 million barrels of oil equivalent -- and Oasis Petroleum would be the sort of firms that could be in this position, analysts said.

"Before the year-end, we'll see one or two deals in the Bakken, maybe in the $400-$500 million range. I think we'll see large independents as the primary acquirers," said Murphy.

So, we'll see. Normally I would not expect to see this merger and acquisition activity before the end of the year (there are less than three months less) but with the uncertainty of tax-break extensions being passed, it just may happen. Especially with the low price of natural gas hurting the bottom line of some of these companies.

Nuclear Reactor Nixed: Peak Oil Theory Revisited

Nuclear reactor nixed: the government is not in favor of more nuclear reactors at this time. Does anyone really believe this administration is worried about jobs? This project would have been paid for by the private sector and would have employed untold number of union workers. The government was apparently worried about whether the project would pay for itself over the its lifetime, something that was apparently not a concern when the stimulus money was distributed.

On another note: does this mean the current administration thinks price of natural gas will stay low for decades due to better technology (horizontal drilling and fracturing)? It would take a decade to bring this new reactor on-line.

So much for peak oil theory. But good news for those bullish on the Bakken.

On another unrelated note, but as long as we're talking about jobs: General Electric received $25 million in stimulus money and cut 18,000 jobs during calendar year 2009. Top line benefitted from decreased cost of salaries and health care costs; stimulus money dropped right to bottom line. Of many associated ironies, one of the contracts GE got with the stimulus money was a program to monitor jobs saved/jobs created by the stimulus money.

Gary (Samson Oil and Gas) Flowing Without Pump at 995 BOPD

I will write more about this later, if necessary, but for now, here's the link.

Here's the original posting on Gary 1-24H. The well is located along the highway east of Williston in Stockyard Creek.

Hoping To See Lower IPs, Lower 24-Hour Flowback Results

There is some suggestion that maximizing the 24-hour flowbacks may be hurting the results of the fracking process and, ultimately the estimated ultimate recovery (EUR) of the well.

Think about it: one forces under high pressure a huge amount of fluid, pushing proppants into manmade fractures. The purpose of the proppants: to remain in place to hold the fractures open. A high backflow literally flushes these very proppants back out of the fractures. The proppants were placed there to help hold the fractures open. I would assume the drillers are analyzing the content of the initial flowback to see how much proppant is being returned to the surface.

Perhaps limiting the flowbacks might begin to decrease the horrendous decline rates.

With that in mind, I'm hoping to see lower IPs and/or lower 24-hour flowback results reported by the drillers. I think "we" are past the point where "we" need to impress investors with ever-increasing 24-hour flowbacks.

My hunch is that the EURs of wells in a specific area are the same, all things being equal. What is not equal is the driller's expertise and the processes used to recover the oil.

Right now, some of the companies provide data on 24-hour flowbacks, IPs, 30-day average, 60-day average, and 90-day average production. Once we start seeing 270- and 360-day average production on PowerPoint presentations, we will know that companies are solving the horrendous decline rate.