Tioga: Waste Oil Processing Plant and Expanded Natural Gas Plan -- North Dakota, USA

Link here. Archived articles at the "Oil Patch Hotline" are not available except by subscription.

First project: $2.3 million crude oil waste processing plant to be built near Tioga

In same issue, Hess outlines CAPEX for the Bakken for 2011. Most significant: increase rig count from ten to fifteen. Hess will also allocate $325 million to expand its gas processing plant, to double current capacity from 110 million cubic feet to 225 million cubic feet daily. The project was originally estimated to cost $500 million. The construction project will employ 300 to 600 personnel; Hess will provide temporary housing.

I don't know how the size of this natural gas processing plant compares with others, but in 2009, a 30 million cubic feet/day processing plant was built in Pennsylvania to support the Marcellus shale natural gas production. A plant in West Virginia has just been approved this year which will process 300 million cubic feet/day. However, that plant will be built in phases and maximum capacity will be reached only if production mandates it.

A natural gas processing plant in Texas expansion project completed in 2010 increased capacity from 9 million cubic fee/day to 100 million cubic feet/day.

Based on this limited information, it sounds like the natural gas processing plant at Tioga will be one of the bigger ones in the country.

Okay, one more. A 200 million cubic feet/day natural gas processing plant was approved in 2010 in British Columbia (Canada) but it, too, would be built in two phases, the first phase for 100 million cubic feet/day.

668 Housing Units Built in Williston in 2010 -- North Dakota, USA

Link here.

From the Williston Herald:

If hotel units, temporary housing and units still under construction were included, the total would be nearly 1,200. Year-end numbers put the total value of building permits issued at approximately $106.2 million.

By the numbers:

• 668 housing units completed in 2010, a record
• 303 mobile home units
• 246 apartment units
• 147 single-family homes

61-Mile Transmission LIne Williston to Tioga Now Operational -- North Dakota, USA

Link here.

From the Williston Herald:

A 61-mile transmission line between Williston and Tioga has been completed and gone operational this week.

Work on the 230-kilovolt line began on May 10. The line runs from a substation owned by the Western Area Power Administration to another substation owned by Mon-Dak Utilities near Tioga.

By the numbers:

• Total cost: $26.5 million
• $15 million financed by North Dakota Transmission Authority
• 406 single-pole towers, no guy wires (important issue in snow mobile country)
• Seven towers per mile, on average

Investors Only: SSN Up 17 Percent Today (January13, 2011) -- Bakken, North Dakota, USA

Updates 

January 17, 2011: SeekingAlpha: perhaps a bit of explanation for the run-up

November, 2010: Corporate Presentation

• Interesting tidbit: in the August, 2010, corporate presentation SSN had 3,600 acres in the Bakken; in the November, 2010, SSN had 1,200 net acres in the Bakken
• Acreage in the Niobrara stayed stable at 16,000 acres
• Their presentation says they are "looking to accrete acreage in the play" -- but yet, they report a decrease in acreage. In the August presentation, they say 3,600 acres, but in November, it's 1,200 NET acres. 
• Sold some Niobrara acreage to raise cash ($74 million)
• By the way, that's exactly what AEZ did -- it sold all its Niobrara acreage to become a pure-play Bakken company, and was then bought out by Hess

August, 2010:  Corporate Presentation

• August corporate presentation
• An Australian Company, but all acreage in the US
• Bakken: 3,600 acres -- 2 producers, 2 to frac, 2 to drill
• Niobrara: 16,000 acres

Original Posting

From "In Play":

4:23 p.m., January 13, 2011:  Samson Oil & Gas (SSN) advises that its policy is not to comment on unusual market activity or rumors: Samson further advises that it continues to adhere to its longstanding policy to make prompt public announcements of material information concerning its business, operations or prospects.

Good News: Price of Oil Will Hold Relatively Steady Through 2035. It May Even Fall in Price

That's what the US government says (Energy Information Administration).

The EIA, according to wikipedia, is the statistical and analytical agency within the U.S. Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.

The link is here. The source document is here -- this is the government's 12-page PDF document.

The graph has an upper estimate, a lower estimate, and an "average" estimate.

The "average" estimate, or the consensus estimate, shows that "we" don't hit $100 oil until 2015, with a steady rise from $60 to $100 between 2009 and 2015. And from there, a nice smooth increase to $125 in 2035. So, it looks like it's safe to keep buying those SUVs, and Ford F-450's.

In fact, it might even be better than that. The agency's "lower" estimate suggests that there could be a nice smooth drop in the price of oil from $60 in 2009 to $50 in 2015 and then remain stable (at $50) through 2035. Forget the SUVs and Ford F-450's, buy the Winnebago of your dreams.

But, there must be some real pessimists in the agency. The pessimists (or realists?) suggest a fairly steep rise from $60 in 2009 to $150 in 2015, and then slightly slower, but steady, increase to $200 in 2035. If that's as bad as it gets, I guess we can live with that.

The optimistic assumptions are based on a significant increase in oil production between now and then.

They cite long term potential supply increases in resource rich non-OPEC areas. Brazil, Russia, Kazakhstan, and also an increase in American production by 2035.

This would suggest that "Peak Oil Theory" is not an issue at least through 2035. 

Maybe the EIA feels the Bakken has more recoverable oil than even the most optimistic.

Meanwhile, Reuters has an article today about oil nearing $100/bbl. OPEC says it won't hold any meeting to  discuss production unless oil goes over $100/bbl, but will let members pump what they want. You really think at $90/bbl, OPEC members aren't pumping as fast as they can? Maybe not; maybe they are sticking to their quotas and maybe they are waiting for $100 oil.

***********

FLASHBACK: IEA's projections for 2010 and 2011, November 13, 2010.

Five (5) New Permits -- North Dakota, USA

Producers: Anschutz, Murex, Sinclair, and MRO (2).

Fields: Manning, Glass Bluff, Cherry Creek, Murphy Creek.

In today's daily activity report, January 13, 2011, BEXP's Brad Olson well was reported. This, I think, is a huge story. See the comments at the link.

By the way, there was another huge well reported in today's daily activity report (I almost missed it). This was Whiting's BSMU 3604, Big Stick oil field, Billings County, #18625: it had an IP of 368. 368 -- that doesn't seem all that great. True. If it was a Bakken well. But BSMU targeted the Madison formation, and most of the Madison wells have IPs in the double digit range or very low triple digit range, so an IP of 368 for a Madison well is pretty interesting. Whiting. Again. [BSMU: Big Stick Madison Unit]

For more on Whiting's wells in Stark County and Big Stick oil field in Billings County, click here.

For all intents and purposes, the Cherry Creek permit could almost be considered a wildcat; it's out in the middle of nowhere -- south of the river and west of the reservation, in an area where there isn't much activity right now.

But just a bit north of this new Cherry Creek permit are a string of wells:

• 19795, rig on site, Newfield
• 19995, confidential, Encore, Lee 34-31NWH
• 18690, producing, long lateral, KOG (taken over from Peak), Schile 8-24H, 1,060
• 20012, confidential, Encore, Sorenson 34-32NWH
• 18805, producing, long lateral, SM, Johnson 16-34H
• 19390, confidential, SM, Broderson 13-35H
• 19305, rig on site, Encore, Hoffmann 149-98-1-12-1H
• 17456, producing, long lateral, Encore, 114 (an early well in the area; probably single-digit frac), Cherry Creek State 44-36H
  
• 19890, confidential, Encore, Johnson 31-6SWH
• 20096, confidential, Encore, Johnson 11-5SEH
• 18998, almost complete; has probably reached TD, Encore, Lundin 14-33NEH

Remember, Encore was bought by Denbury. All of the Encore wells are on a line, running west to east; the other non-Encore wells are in the immediate area.

COP: Re-Allocating Gulf of Mexico CAPEX to Best Shale Plays

This is from COP's current corporate presentation. Because Burlington Resources is "buried" in COP, it is difficult to find the net acreage that BR/COP has in the Bakken. It is extensive; BR has been there "forever" and it must have significant legacy holdings.

If you go to slide 16 of COP's Credit Suisse Vertical Tour 2010, you will see that COP is re-allocating its Gulf of Mexico exploration capital to the "best shale plays": Eagle Ford (Texas), North Barnett (Texas), and Bakken (ND).

2010 exploration capital was $1.3 billion.

Sometime ago I opined that companies operating in the gulf would move their attention to the Bakken. 

One other thought: in light of MRO's splitting off refinery operations from E&P, I wonder if COP, XOM, CVX could do the same?

• COP: huge refiner.
• XOM: huge in chemicals from oil.
• CVX: large NG exposure (I don't understand why it bought into the Marcellus last year)

Just saying.

Motley Fools: What a Difference One Well Can Make -- Bakken, North Dakota, USA

I have posted many times on my blog two things about the oil industry in North Dakota:

• Because many of the pure-Bakken-play companies are so small, one well can make a huge difference; and,
• I don't think oilmen really worry about past wells or IPs of previous well; all they want is the cash flow to keep drilling, hoping for that one big well (and when they hit it, they will move on again)

Well, today, I see that the Motley Fools have an article echoing that first point. Interestingly enough, they cite Credo Petroleum in that article, and just yesterday I added CRED to my Bakken market basket. (I added it to the sidebar at the right; it does not mean I purchased shares in CRED.)

Motley talks about the wells that Credo has now reported.

Their final paragraph is interesting:

In short, you can take a lot of the risk out of even the most speculative realms of investing. The less you pay up for potential upside, and the more downside protection you have in the form of cash or other tangible assets that are unlikely to be frittered away, the less speculative the activity becomes.

By the way, just after posting the above, I ran across an interesting slide in a recent Abraxas presentation.

Abraxas has a bar graph comparing the number of net Bakken acres oil companies have vs their enterprise value. I can't reproduce the graph here but here are the numbers (the graph provides much more impact and if any interest at all in investing in the Bakken, you should take a look):

Net Acres in the Bakken/Enterprise Value (EV)

• AEZ: 275 net Bakken acres/$1 million EV
• GEOI: 175 net
• BEXP: 170 net
• KOG: 160 net
• NOG: 150
• CLR: 100
• WLL: 60
• AXAS: 55
• NFX: 48
• SM: 47
• DNR: 46
• EOG: 40
• HES: 39
• MRO: 25
• XTO: 25
• MDU: 23
• STR: 10
• COP: 2

If one is interested in investing in the Bakken, this slide speaks volumes. 

Bottom line: one or two great wells will move the needle on GEOI, BEXP, KOG, NOG, and CLR.  That's probably true for TPLM and CRED, also. With 22 rigs drilling, CLR has the best chance of hitting some great wells. BEXP has a history of breaking IP records. AEZ was bought by Hess, recently, and GEOI moves to the top of this list.

Net North Dakota Bakken Acreage by Producer

Just a reminder.

This link provides a fairly quick look at net mineral acreage various producers have in the North Dakota Bakken.

Minot's Taxable Sales Surge -- Not a New Story -- North Dakota, USA

Link here. These links are generally lost fairly soon in local, regional newspapers.

The city of Minot saw taxable sales grow more than 16 percent in the third quarter of 2010 over that same period the previous year, totaling nearly $270 million.

Williston, as noted earlier, far surpassed these numbers: grew 150 percent; $380 million; dollar figure second only to Fargo statewide.

But how about Tioga, population 1,200?

Tioga: 186 percent increase, to almost $80 million. Tioga's percentage increase was seventh in the state. That's almost $70,000 in taxable sales/Tioga resident.

Ranking of cities in the state for taxable sales, in dollars: Fargo, Williston, Bismarck, Minot,  Gand Forks, Dickinson, and then ... drum roll .. Tioga.

Williams County, home of both Williston and Tioga: $91 million more than Burleigh County, home of the twin cities, Bismarck / Mandan.

California University System Crying Foul on Cutbacks -- Nothing to Do With the Bakken

Full story here.

The headline says that Governor Brown's proposed cuts to the University of California would imperil California's dream that resulted in Hollywood and Silicon Valley. 

You have to read to the end of the article to find out the cuts are minimal:

The $500 million reduction is relatively small compared with the University of California’s overall budget, a spokesman said.

The system’s spending plan for the 2010-2011 academic year is $21.8 billion, including revenue from hospitals and federal contracts, which are restricted and can’t be shifted to make up for state cutbacks, according to budget documents. The core educational budget is $6.28 billion. 

I can't fathom such large numbers, so as I usually do, I change the billion to simply numbers I can adjust to. Let's say as a teenager, my parents gave me $6.28 in allowance every week. Due to loss of income, they tell me my allowance will be cut by 50 cents. Something tells me I could continue, especially if I managed my money differently.  For the entire budget, that includes federal money, my allowance would be almost $22 a week, and I would be asking to give up 50 cents to help the family.

But this is the emotional hyperbole we hear:

"It’s ass-backwards, it’s upside-down, it’s stupid,” said Robert Ackerman, whose firm has investments in computer networking and software companies including Allegiance, Inc., and Solera Networks, Inc.,  both in South Jordan, Utah. “We’re reducing the ability to create the next generation that is going to create the jobs that’s going to pay the pension obligations that this state has, let alone create the jobs we need.”

Oh, by the way, William Gates, who is probably the biggest benefactor of Silicon Valley, with net worth of $54 billion could close the University of California's $500 million gap for 108 years, assuming no inherent growth in his current portfolio.

The biggest concern, according to Ackerman (above) is tuition costs. Obviously the $500 million is not entirely related to tuition and fees, so Bill Gates could probably make up the difference for 120 years. And Ackerman is only worried about engineers. The UC system is a liberal arts community; engineers make up a very small percentage. The amount of cuts coming to engineering departments is so small (as a percentage) it's not worth worrying about.

My hunch is that Robert Ackerman's companies could also help out. Just saying.

BEXP Well "Passes The Test" For Increased Drilling -- Bakken, North Dakota, USA

Two nice BEXP wells being reported, both in the Williston area, the "heart of the Bakken."

• 18891, 2,631, BEXP, Larsen 3-10 1-H, Williston, Bakken (previously reported)
• 19086, 2,472, BEXP, Brad Olson 9-16 2H, Painted Woods, Bakken, 22K first month

A lot of folks have been waiting to see how yet another "Brad Olson / Olson" well would do.

From an earlier post, posted November 1, 2010:

19086, Brad Olson 9-16 2-H, 32-stage fracture; an Increased Density Pilot Project well; IP might be announced within 24 hours; Painted Woods, west of Williston; this is BEXP's first infill test west of the Nesson Anticline; by monitoring the well with a deployed microseismic array and monitoring continued well performance, BEXP hopes to delineate the potential to drill incremental infill wells beyond the currently envisioned three wells per spacing unit. If results indicate that four to six wells may be required to effectively drain spacing units, Brigham's de-risked Rough Rider drilling inventory could increase by approximately 120 to 360 net locations, which would represent a significant net asset value enhancement event. Subject to results, Brigham plans to commence additional increased density pilots in Rough Rider and Ross in the first half 2011, including four well density units.

I don't know about others, but somehow this well seems to have "passed the test."

By the way, #19085, BEXP, Brad Olson 9-16 3H, sits right next to the "9-16 2H," just 158 feet to the west.

As long as I'm starting to ramble:

Although BEXP is increasing their acreage in the area, much of the prime locations have been purchased. This has increased the value of these properties which also increases BEXP's value. It has been rumored that conglomerates such as COP and XOM are looking around to purchase some of the smaller companies before lease values increase. -- previously linked.

In T154-R102W, there is currently (January 13, 2010) a string of interesting wells, running west to east. Distance from westernmost well to easternmost is 3.75 miles. The area involved is the equivalent of five 1280-acre units. If BEXP were to put six wells in each 1280-acre unit, that would be 30 wells (6 x 5), compared to the ten they have now. Here are the wells (they are all long laterals):

• 18955, 2,278,  BEXP, Weisz 11-14 1-H
• 17513, 1,160, BEXP, Olson 10-15H 1-H
• 18175, 1,810, BEXP, Brad Olson 9-16 1-H
• 19086, 2,472, BEXP, Brad Olson 9-16 2H, Painted Woods, Bakken, 22K first month
• 19085, confidential, BEXP, Brad Olson 9-16 3H
• 20178, confidential, BEXP, Erickson 8-17 3H
• 18534, 2,314, BEXP, Mortenson 5-32 1-H
• 16276, 156, BEXP, Erickson 8-17 1 H, status date: August, 17, 2006, first of the ten in this string
• 20171, confidential, BEXP, Erickson 8-17 2H
• 18439, 2,654,  BEXP, Jack Erickson 6-31 1-H

CNBC Reporting That Value of Dollar and Price of Oil Diverging

CNBC reporting that price of oil related to recent shutdown of Alaskan pipeline. Oil is starting to move again through that pipeline, but it is being reported that the pipeline will likely shut down over the weekend to complete bypass work.

Total Unemployed Passes New Milestone -- 9 Million Unemployed -- Absolutely Nothing About the Bakken

If interested in commentary having nothing to do with the Bakken, press on. Otherwise, ignore this posting.

The headline: "Jobless Claims Post Biggest Jump in Six Months."

The number of Americans filing for first-time unemployment benefits rose unexpectedly to 445,000 from 410,000 in the prior week, the Labor Department said on Thursday. It was the biggest one-week jump in about six months, confounding analyst forecasts for a small drop to 405,000.

The number of first-time jobless claims has been bouncing around in this range for quite some time, so the casual observer -- like me -- sees this as simply "background noise." I read the headline, saw the crawler on television and then decided to move on.

Something tipped me off that there was a bigger number to look at, not the first-time claims number. I forget where I got that tip. So I decided to check out the story, but with no plans for posting. A link took me to the Reuters "version," the link above.

The number had to do with the total number of unemployed. It had crossed a new milestone. I wanted to see if that was accurate: had "we" crossed a new milestone?

Wow, was that hard to find. I started reading the Reuters story, and read, and read, almost giving up, thinking I had misheard / misread something. But there it was, buried in the story: at the bottom of the story, the 18th paragraph in a 20-paragraph story.

This should have been the headline: Total US Jobless Hits New Milestone: 9 Million Unemployed.

A huge amount of information was packed in that paragraph buried at the end. Here's the entire paragraph:

Continuing claims did retreat sharply to 3.88 million from 4.13 million, offering some reason for hope. Still, the total number of Americans on benefit rolls, including extended benefits under emergency government programs, jumped to 9.19 million from 8.77 million.

But even there, to temper the shock that we have passed the 9 million unemployed milestone, the paragraph began with a "reason for hope."

I can only imagine how the headline and how this story would have been written if a different party occupied the White House.

Recent monthly reports show that new jobs are averaging about 100,000/month -- if my memory serves me correctly -- the number has bounced all over. At 100,000 new jobs/month, it will only take 7.5 years to get these 9 million employed.

Investors Only: GeoResources Increases Size of Public Offering

GeoResources upsizes public offering of common stock to 5.36 million from 4.7 million; prices offering at $25.00 per share.

Link here.

Investors Only: MRO Surges, Up Ten Percent Pre-Market -- Spins Off Refinery Division

Link here.

It will be interesting to see if this changes anything for MRO Petroleum in the Bakken.