Director's Cut for December, 2010, Released

NDIC/Director's Cut, December 15, 2010

Sept oil: 10,262,814 bbls --> 342,094 bbls/day

Oct oil: 10, 609,662 bbls --> 342,247 bbls/day (all-time high) (see director's notes)

Sept producing wells: 5,197
Oct producing wells: 5,300 (all-time high)

Sept permitting: 167
Oct permitting: 232

Sept sweet crude price: $67.95
Oct sweet crude price: 74.41

Rig count: 166 --> high during this reporting period -- an all-time high

Comments:

• Weather significantly impacted oil production; 75% of oil is trucked from sites; snowstorms stop the trucks; there was a major wind and snowstorm the week of October 25th
• Takeaway capacity remains above production 
• Takeaway by rail is growing; crude trucked to Canada is decreasing
• New pipelines and rail projects: three in the review or engineering stage; two under construction; one just concluded an open season
• The spread between ND sweet crude and NYMEX-WTI remains about 10 percent
• Threat for federal regulation of hydraulic fracturing remains high -- investors need to note
• Natural gas producing is rising and flaring is still well above normal

ERF Guidance for 2011 and 2012

Link here.

On the road, so minimal comments now. Maybe more later.

I used to accumulate ERF, then sold when Canada changed their tax laws. Will consider ERF after the first of the year (2011).  ERF continues to excite me.

I Will Be on the Road for Awhile: Blog Will Be Relatively Quiet

I will be on the road for awhile; the blog will be relatively quiet. I hope to post a bit by Sunday, and then a bit each day next week, but it won't be nearly as much as when I am "home" wherever "home" might be for several weeks or months.

However, there is a ton of stuff that has been updated in the sidebar at the right. And there's always my other personal blogs to visit if you are really, really bored.

Eight (8) New Permits in North Dakota, USA

Producers: Oasis (2), Murex (2), Slawson (2), CLR, and Petro-Hunt.

Fields: McGregor, Sandrocks, Glass Bluff, Alger, Big Bend, Brooklyn and one wildcat.

The two Slawson permits are on the same pad (this is generally how Slawson is doing things now, two wells on one pad, where indicated).

166: Not A Record, but "We're" Back Up to 166 Active Rigs in North Dakota

166 is the current record; we dropped back for a few days. I expected to see a drop back to just below 160, so I am surprised that we are back up to the record.

Coldest December Ever in Britain -- Not a Bakken Story

I was going to link this story at an earlier post -- piggy back it in, as it were, but this is too good a story to hide.

Swathes of Britain skidded to a halt today as the big freeze returned -- grounding flights, closing rail links and leaving traffic at a standstill.

And tonight the nation was braced for another ten (10) inches of snow and yet more sub-zero temperatures -- with no let-up in the bitterly cold weather for at least a month, forecasters have warned.

The Arctic conditions are set to last through the Christmas and New Year bank holidays and beyond (at least until January 14, 2011) and as temperatures plummeted to 14 degrees F the Met Office said this December was 'almost certain' to become the coldest since records began in 1910.

No comment. Except: time for Brits to vacation in Cancun, Mexico. Oh, I forgot: unexpectedly cold weather there also closed beaches earlier this "winter." 

Instant Cattle Ranch -- Not a Bakken Story

Link here.

Four words: In.Cred.I.Ble

Maybe more words later.

More Global Warming Hits Europe -- 800 Flights Canceled Due to Snow -- Not a Bakken Story

Link here.

In addition to massive airline chaos due to this latest round of global warming:

The Italian island of Capri, meanwhile, woke up to its first snowfall in 25 years, said Luciano Garofano, an official in the mayor's office. Street cleaners in the chic tourist destination in the Gulf of Naples doused the town's streets the with boiling water to melt the ice. Snow also coated beaches on the neighboring island of Ischia, whose thermal waters attract visitors all year round. 

And,

In Denmark, the state postal service reported snow in the past weeks has caused a high number of injuries to the country's 12,000 letter carriers — including broken limbs.

 PostDanmark reported 355 carriers have so far been injured since November — compared with a total of 450 during last year's entire winter, a newspaper reported. 

It's not winter yet. 

There was no comment about rising water along the beaches due to melting Arctic ice.

Nevada Unemployment Rate Rises -- Not a Bakken Story

I find this story incredible on so many levels.  (To keep my rambling points straight I will number them one, two, three, and four in parentheses.)

The headline: Nevada Jobless Rate Rises to 14.3 Percent

What was the rate before it rose to 14.3 percent? .... drum roll ... drum roll.. 14.2 percent.

(First) 0.1 percent can't possibly be reproducible and it certainly isn't statistically significant. But the headline certainly suggests this is news.

(Second) But as usual, the mainstream media can find a silver lining in any unemployment report:

In addition to staying below their highs, the newest figures reveal other hints that Nevada's labor market has stopped its free fall.

Wow, that's a leap of faith. It's probably true, but not much of a silver lining when a state's unemployment rate is highest in the nation and fifty percent higher than the national average.

"The stabilizing unemployment rate indicates that the worst of the recession is over," a state spokesman said. "However, the unemployment rate will likely remain elevated well into 2011 before declining slowly over a number of years." 

Declining slowly over a number of years. Wow. 

(Three) For some sectors, however, the free fall has not leveled off:

The leisure and hospitality industry cut 2,900 positions, while the construction industry lost 1,500 positions. Construction employment fell below 60,000 jobs in Nevada for the first time since February 1995. Employment in the manufacturing industry continues to contract, falling by 400 to 37,800. Since peaking in September 2006, manufacturing employment has fallen by 13,500, or 26.3 percent.

It didn't help when corporations were chastised by the President of the United States for holding conferences in Las Vegas. 

When I read the contraction numbers above, I have to ask: is the free fall in unemployment over? A job lost has a multiplier effect. So we will see next month. 

(Four) What is newsworthy is that Nevada re-elected their senior senator one month ago. Now that's incredible.  Even North Dakotans with their strong state economy did not send back their senior senator nor their lone representative.

With regard to full report on joblessness: payrolls drop in 28 states (a majority) and joblessness up in 21 states. We're not out of this yet, not even close.

• North Carolina led the nation with 12,500 job cuts: then Massachusetts (8,600); Ohio (7,800)
• Joblessness increased most in Georgia and Idaho
• Nevada faced highest rate (14.3 percent, see above); California (12.4); Michigan (12.4)
• Michigan's unemployment dropped by 0.4 percent, pushing it to lowest lowest level since Feb 2009
• Consistent with report that unemployment increased first time since August
• Unemployment was lowest in North Dakota, unchanged at 3.8 percent

Nope, we're not out of this yet, not by a long shot.

President Obama met with 24 CEOs this past week to discuss joblessness; not one CEO from a major oil company.

For Investors Only -- Request for NOG Information

I know a lot of folks are not likely to read comments sent to my site.

I, of course, see all the comments but the way the blogging template is set up, it's hard to access / search comments.

If I get a comment that might be of interest to readers, I will post it (or paraphrase it) as a stand-alone posting calling attention to it.

In this particular case, folks interested in NOG may be interested in looking at the third comment at this posting.

The individual who sent in that comment is interested in more information on NOG, and has named a couple of sources that might provide some additional information.

I accumulate shares in NOG, so I post almost anything I find regarding NOG. (Although, I actually post almost anything of interest coming out of the Bakken regardless of whether I have a financial interest in it.)

For newbies, NOG has a unique business model in the Bakken. There are others that do what NOG does, but I think NOG is the largest of those companies and maybe the only one of those companies publicly traded. Now that I have said that, I'm sure any number of folks will write me to correct me. Smile.

Now, on a personal note. The person who sent in that comment was from Walnut Creek. A widget at my site allows me to see where visitors are located, and I have always been "interested" in the visitor(s) from Walnut Creek. Thirty some years ago, I was a classmate of a woman from Walnut Creek, California, who attended Augustana College, Sioux Falls, SD, my alma mater, for one or two years.

In addition, one day back in 1984 (or thereabouts), a brokerage investor out of Walnut Creek, California, made a "cold sales" call to my home phone number. I have no idea how he reached me. At the end of that relatively short phone call I had opened my first brokerage account and had started down my investment path.

Rigzone Article on EOG

Rigzone article on EOG. I have not had time to read it, but wanted to link it as soon as possible.

Enhanced Oil Recovery (EOR)

This post will disappear soon and then will be linked at the sidebar on the right.

There is not much activity in North Dakota yet on enhanced oil recovery, but more and more stories are starting to appear, so I might as well get ready for them.

NEWS

November 23, 2011: Investopedia highlights Denbury Onshore and EOR. OXY and Denbury appear to be the largest EOR players in the US.

August 11, 2011: PDF presentation -- Elk Oil and Denbury partnership in the Niobrara; first CO2 joint venture for Elk Oil.

July 25, 2011: Whiting to buy CO2 from a planned Permian basin coal-fueled power plant at Penwell, Tex., near Odessa.

July 23, 2011: EOR update in Wyoming.

July 23, 2011: Government fact sheet. 

December 17, 2010: Company wants to store CO2 in underground dome in North Dakota. Link here. The company's plans are being met with skepticism.

For Investors Only -- Share Price Comparison of Selected Bakken Companies

For those interested, here is a link comparing share price action of six companies of interest to those investing in the Bakken.

A "thank you" to the individual who sent me this link.

And, of course, once you get there, you can change the parameters very easily. For longer term perspective, it is interesting to look at the same comparison at one year out.

Several Articles on Bullish Case for Oil

Three overviews of status of oil -- and price of oil -- going forward.

The first linked article is from the Wall Street Journal is very bullish on price of oil and is much more succinct than the second and third articles from Seeking Alpha.

The WSJ thesis: a small growing demand in many countries amounts to a significant growing demand overall. Unlike the 2008 spike to $150 which may have resulted in demand destruction / recession, the current oil price increase has been slower and more sustained. The argument is that as long as the price of oil increases at a slower rate, the global economy can absorb the cost.

The Seeking Alpha articles are much more involved and will take a bit of time to review and digest.

And, of course, this is what I wrote back in October, 2010: the scenario for a price spike in oil in the not-too-distant future.

Natural Gas Going Forward

There's a nice story in the Wall Street Journal about natural gas today.

Natural gas is the second worse performing commodity this past year, mostly due to producers showing no restraint. But they have little choice. It is estimated that about two-thirds of leases have "produce or lose clauses" and those leases expire if wells not drilled.

Producers are starting to show restraint, according to the story, but if there is to be a turnaround in the price of natural gas it will be due to electric utilities using more natural gas. That has already begun as federal regulations make it more costly to use coal.

In 2000, coal accounted for 52 percent of fuel for electric utilities, and natural gas accounted for 16 percent.

Currently, the numbers are about 45 percent for coal and 24 percent for natural gas.

Earthstone in the Bakken -- North Dakota, USA

During the early days of this current boom, I actually invested in a small company called Basic Earth Science System (BSIC), but sold at a loss after holding it for a very short period of time. Every now and then I checked in on Basic Earth but then lost interest and then completely lost the bubble. I always wondered what happened to it.

It turns out that it was renamed Earthstone Energy, Inc. Rigzone provides an operational update of the company.

Three wells are mentioned. IPs have not been announce for any but preliminary data has been provided:

• Fossum 15-35H, SM Energy, Indian Hill field, McKenzie County, $6.4 million cost, expected initial production rate of over 1,000 barrels/day.
• Ceynar 29-32H, Zenergy, Inc., Banks field, also in McKenzie County, $7.0 million cost, no estimates of IP data.
• Mondak Federal 24X-12, XTO Energy, Inc., Mondak field, another McKenzie County well, estimated to cost $6.6 million. Again no preliminary estimate of the IP.

For individuals with mineral rights who have been concerned about paperwork details, this may or may not be comforting. Earthstone noted that XTO notified Earthstone with some great news. It turns out Earthstone has an interest in an XTO well, the Mondak Federal 14X-11 which was completed in February, 2010, and had an IP of 1,175 barrels of oil. To date, the well has produced over 45,000 barrels of oil (at $50/bbl = $2.25 million at the wellhead). Earthstone estimates its share of the cost of the well was $150,000, and that in the last eight months it has received $50,000 for this well, with about a 2.2 percent working interest.

Working backwards, if $50,000 represents 2.2% of the well's production, then the total return to date (eight months of production) must have been about $2.27 million.