Wednesday, October 27, 2010

Week 42: October 19 - October 25, 2010

Update on the Keystone XL Project

Scenario for Spike in Price of Oil

Update on TransCanada's MarketLink Pipeline: Bakken to the Gulf Coast, a First

Update on Potash Story in North Dakota

Enbridge to Increase Takeaway Capacity

A Niobrara Update/Primer

Anschutz Finds Buyer for Bakken Assets. But Who Is It?

A Dry Eco-Pad Well?

KOG Acquires Significant Amount of New Acreage; Huge Story

Enerplus Completes Acquisition in the Bakken

Q & A For A Glass Bluff / Zavanna Well

The following permit was issued today:

#19849 - ZAVANNA, LLC, KEPNER 9-4 1H, SWSE 9-151N-103W, MCKENZIE CO., 220' FSL and 2600' FEL, DEVELOPMENT, GLASS BLUFF, 'Tight Hole', 2121' Ground, API #33-053-03336.

Someone wrote in with several questions about this permit, but the questions are general enough that I will post my reply here which might be of help to others.

Here are the questions:

1. There are several numbers at the end of the official listing of the permit which appear to refer to feet. What do these represent?

2. Is the next step for there to be something filed regarding a spacing unit? Or does that not happen until a well is drilled? Where can I track the spacing unit issue?

3. Any comment on the normal turn-around time in today's climate between issuing a permit and drilling? I think Zavanna has two active rigs at present. Is there any way I can determine how many open permits they currently have?

4. Finally, is there somewhere to track when a well initially started? I know that wells get placed on the confidential list. Is that at the beginning of the drilling process? Is that information also contained on the daily activity reports.

Answers:

1. Starting with the last number. I believe the API stands for "American Petroleum Institute." I'm sure that number is for administrative purposes only.  The "2,121'" number is probably the elevation of the surface of the earth on which the well will sit. The three-digit and the four-digit numbers are feet from the south and east, respectively, of the section line.

2. It is my understanding that once the permit is issued, the company can drill at its convenience. The permit is for an established field, the Glass Bluff field, so spacing has been determined. It is 1,280-acre spacing. You can find spacing by going to the NDIC GIS map server. If you need help using that app, let me know. By the way, this is considered a "Development" well since it is being drilled in an established field.

3. There is no easy way to track the movement of the rig that is likely to drill this well. You say that you think Zavanna has two rigs. Tonight, the NDIC website shows Zavanna with only one active rig. If they have another one, it is moving and not active. However, when I've looked before Zavanna has only had one rig.  Zavanna's rig is Nabors 688 and it is currently in Stockyard Creek, east of Williston, #19328, Earl 1-13H; the permit for that well was issued July 28, 2010, which means they got on that well within 2-3 months after getting the permit.

4. The good news is that Zavanna knows what it has in Stockyard Creek and may be eager to move to Glass Bluff to see what they have there. On the other hand, to save money and time, Zavanna may continue drilling out their permits in Stockyard Creek before moving to Glass Bluss.

5. Zavanna has 18 wells on the confidential list. Zavanna has ten permits from 2009 that have not yet been reported on and seven permits from 2010 that have not been reported on. That doesn't mean they still have 17 wells to drill; some of them have already been drilled and are confidential status. I don't know the specifics.

6. The "confidential" clock is tricky. When this permit was issued, it was granted "tight hole" status which is the same as "confidential" for all practical purposes and will stay in that status until the well is completed. The "confidential" clock doesn't start ticking until the well is complete, and that can vary from operator to operator. Some do not consider a well completed until it has been fracked. Some companies do not frack during the winter. You can see how long a well could remain "tight" or "confidential." Once the well is completed, the "confidential" clock starts ticking which is six months in North Dakota. If it's a really good well, the company or one of its partners on the well could issue a press release early, but it still keeps its original confidential date, because there is additional confidential information that might not be released in the press release. For more information, go to my FAQ tab at the top of the website and search for "confidential."

7. Even after the well is completed and producing, it can be several months before you get the first royalty check. Search "royalty" or "checks" at the Bakken Shale Discussion Group to see much chatter about that issue.

8. The Glass Bluff field is fairly "new" for this boom. Zenergy has several relatively "new" and "older" permits. BEXP has one permit: #18653, Tjelde 29-32 1-H, in section 29-151-102. It had a nice IP, as many BEXP wells do: 2,802 barrels of oil. The Zavanna permit issued today is in section 9-151-103 about 6 miles northwest of the BEXP well.  Go to the NDIC home page, and click on "Well Search" on the sidebar on the left. Use the drop down menu to type in Glass Bluff for field and then "submit." That's all you have to put in to find out what's been going on in the Glass Bluff field. Likewise, clear everything, and place "Zavanna" in the "Operator" field to see what Zavanna is doing overall. Or you can place "Zavanna" and "Glass Bluff" in the same submission and find out only what Zavanna is doing in the Glass Bluff.

9. My hunch is that Zavanna won't get to the Glass Bluff until next spring. If I'm wrong, and it's sooner, great! If I'm wrong, and it's longer, the wait will be excruciating. But Zavanna will eventually get there.

10. Disclaimer: all the above is based on my status as an amateur, only what I've gleaned from public sites elsewhere. I could be wrong in any number of places, and any number of people will comment to point out where I'm wrong. Smile.

11. The folks over at the Bakken Shale Discussion Group would know this much better than I. Many members of that group own mineral rights and many have wells. I do not have any mineral rights. That group is very, very helpful. Check in with them periodically and use the search engine at their site to look for Glass Bluff activity.

Highlights of Whiting's 3Q10 Earnings Report

There is simply too much to report; I recommend you go to the report itself, but here are a few things that have me excited about Whiting (and the Bakken in general). 
Based on results of the Company’s microseismic studies and reservoir pressure monitoring in both the Bakken and Three Forks formations, not only do reserves continue to pleasantly surprise us, it also appears that additional infill drilling is warranted in the Sanish field. As a result, Whiting has increased by 152 the total number of gross operated wells that it expects to drill in the Sanish field to 534 gross wells from 382 gross wells. 
Remember: the Sanish field has about 194 sections; this means almost one more well in each section than originally planned. Also 534/194 = 2.75 gross wells/section

Data points
  • 83 of the 152 additional wells: "wing wells" which are 7,500-foot laterals drilled primarily in the northeast and southwest portions of the field's 1,280-acre spacing units
  • Whiting has asked to drill three (3) TFS wells per 1,280-acre unit as compared to its previous plan of two (2) TFS wells per unit
  • Additional TFS well in each unit will add 80 potential gross well locations in the Sanish field
  • Whiting estimates 323 gross wells remain to be drilled in the Sanish field as of October 15, 2010
  • In calendar year 2010 to date, Whiting as completed 57 wells in the Sanish
  • The average IP for Whiting Bakken wells increased 21 percent since the beginning of the year, from 2,102 boe to 1,433 boe
  • The average IP for Whiting TFS wells increased 42 percent since the beginning of the year, from 1,012 boe to 2,541 boe
Fracking:

Whiting believes that additional frac stages have contributed to the higher initial production rates for wells completed in 2010. In 2010, the Company has fracture stimulated its wells with between 15 and 30 separate fracs, averaging 20 frac stages per well. Prior to 2010, most of Whiting’s wells in the Sanish field were fraced in 10 stages. The Company is also using more proppant and frac fluid in its fracing operations. For a 30-stage frac, Whiting is currently using 46,000 to 50,000 barrels of frac fluid and 3.6 to 4.0 million pounds of sand. 
Whiting has contracted a full-time dedicated frac crew at Sanish that the Company estimates is capable of fracture stimulating 100 wells per year.

Twelve (12) More Permits Today (Bakken, ND, USA)

Operators: Oasis (3), MRO (2) , Hunt, AEZ, Newfield, Petro-Hunt, Whiting, Cornerstone, and Zavanna.

Fields: Antelope (2), Camp (2), Parshall, Ray, Charlson, Alkali Creek, Pleasant Hill,  Glass Bluff, and two wildcats.

American Oil is in the same area it has other nice wells.

Two of the Oasis wells (in Camp oil field) are on the same pad. Is this Oasis' first multi-well pad?

Petro-Hunt is in Charlson, one of my "favorite" fields.

Ten more wells listed as "plugged or producing."

On track for 1,560 new permits this calendar year.

US Highway 1 in North Dakota? Video That Has Absolutely Nothing To Do With The Bakken

This will only make sense to those of you who have driven one of the most beautiful highways in the country: US Highway 1 up the California Coast, along the Pacific Ocean, and appropriately known as the Pacific Coast Highway.

Apparently we missed the news earlier today that the big one (as in: earthquake) finally hit the west coast overnight and the entire western US fell into the ocean.

US Highway 1 now runs smack dab through the middle of North Dakota, previously known as ND State Highway 57 (through Devils Lake):




And another video:

Nice Well For ERF: Henry Bad Gun 8D-5-1H

A nice well for ERF?

The IP has not yet been reported but this looks like a great well based on production (Update: IP is now reported, Oct 28, 2010: 1,594.
18753, ERF, Henry Bad Gun 8D-5-1H:
First nine days: 12,880 barrels
Next 31 days: 34,542 barrels
Cumulative for first 40 days: 47,422
Daily average, first nine days:1,431 bopd
Daily average, next 31 days: 1,114 bopd
Cumulative average: 1,185 bopd
Note the field: Moccasin Creek.
Remember: ERF converting to corporate structure by end af calendar year, I believe.

In addition to this well, ERF has three more Henry Bad Gun (HBG) wells in the immediate area. Here are the four:
  • 18753, 1,594, HBG 8D-5-1H, 47,422 barrels of oil, cumulative in 40 days
  • 18752, 2,194, HBG 17A-20-1H, being drilled now (October 27, 2010)
  • 18627, HBG 9C-4-1H
  • 18790, HBG 16B-21-1H
Each of the pairs (18753 and 18752) and (18627 and 18790) are about 100 feet from each other, suggesting they are on the same pad.

What other company has huge presence in Moccasin Creek and is now starting to put in multi-well pads? KOG.

Alaska's Oil Reserves Cut By 90% (Non-Bakken Story)

This is a most interesting story: Alaska's oil reserves cut by 90 percent.
The U.S. Geological Survey says a revised estimate for the amount of conventional, undiscovered oil in the National Petroleum Reserve in Alaska is a fraction of a previous estimate.
The group estimates about 896 million barrels of such oil are in the reserve, about 90 percent less than a 2002 estimate of 10.6 billion barrels.
It will be interesting to see the stories that follow. This story has to have huge geopolitical implications. You think?

CNN reports this story today. It makes me wonder: when did the oil companies know this? It explains a lot.
For example, back in August, 2010, the federal lease sale was "disappointing" for the reserve. Only five bids were submitted, all from ConocoPhilips (COP) and totaled less than $800,000. It costs that much just to frack one well in the Bakken. That's incredible. But now we know why: lousy EUR projections and onerous federal regulations.
Can you imagine the talk around the coffee tables today up in Anchorage?  Is this the beginning of the end for Alaskan oil? All of a sudden, in my simple mind, the Canadian oil sands become a bit more important.

More to follow.

Absolutely Nothing To Do With The Bakken

This has absolutely nothing to do with the Bakken but for reasons that will be obvious to those who follow this blog and my other blogs, this is a most exciting story for me.

Arrowhead Elementary School in Billings, Montana (I believe) is getting a technology grant from Qwest, and it will be used to buy iPads for the classroom.

I do not invest in Apple Corporation.

Oh, I don't invest in Qwest, either.

This is purely about the iPad as a great investment for students.