Nothing New: Oil Demand Grows; Policies Stymie Production -- US

Link here.

Stronger US petroleum deliveries for all of 2010 as of December reflected a growing US economic recovery, the American Petroleum Institute said. But its chief economist warned that the Obama administration policies could restrict growth of US crude oil production to help meet higher US demand in the future. 

Well, yeah, duh.

The API refers to the policies in the Gulf of Mexico as the "permitorium." The economist says this is also true in the Bakken; that I am not sure what he is referring to. There were some delays a year or so ago in the Fort Berthold Indian Reservation, but I am not aware of problems now unless there are delays in the national parks or national forest areas in North Dakota, and that's very possible.

US oil production rose by 1.3% in December to an average 5.52 million bopd from 5.45 a year earlier (to me that's inconsequential: that represents 70,000 bopd, or as noted, a 1.3% increase -- inconsequential.

Full-year production averaged 5.49 million bopd in 2010 compared with 5.36 million bopd in 2009.  That's an increase of 2.4% over the course of one year, again fairly inconsequential.

What is concerning, didn't the US once produce almost 10 million bopd? They say every million barrels of oil produced in the US translated into one million jobs. Have we lost 4 million jobs due to decimated domestic drilling program?

Fourteen (14) New Permits Today -- North Dakota, USA

So much for being worried about low number of new permits so far this year.

Today, January 21, 2011, there are fourteen (14) new permits.

Producers: EOG (6), BR (5), Petro-Hunt, MRO, and Crescent Point

Fields: Bailey, Union Center, Antelope, Clarks Creek

The six EOG wells will be on one pad, or at least all in one section; section 24-151N-95W, Clarks Creek, McKenzie County.
These will be the "West Clark" series of wells

• West Clark 4-2425H
• West Clark 3-2413H
• West Clark 101-2425H
• West Clark 100-2413H
• West Clark 2-2425H
• West Clark 1-2413H

I forget the discussion regarding 100- and 101- series; perhaps TFS laterals.

BR's three wells will be the Midnight Run series, two targeting the Three Forks and one targeting the Middle Bakken. This is a bit different that what I've seen before when it has been two targeting the Bakken and one targeting the TF.

The three BR wells will be one pad or at least in one section:  Lots 1, 2, and 3, section 1-T152N-R96W, Union Center, McKenze County.

In addition, thirteen Hess well files were granted confidential status (earlier permits issued); two WLL well files were also granted confidential status (earlier permits issued).

GMXR -- Another Company Entering the Bakken -- North Dakota, USA

Link here. MMX Resources will purchase a small Bakken holding from an undisclosed party. Based on amount they plan to spend for this acquisition, "we" are talking anywhere from 4,000 to 8,000 net acres. The company did not say where those acres were located. It's hard to believe, I know, but there are some "less than good" areas in the Bakken.

Along with JayHawk this is getting a little interesting. It seems to me these companies want to put into their presentations their presence in the Bakken simply to attract capital.

There cannot be any other reason. As Zman says, GMXR buying into the Bakken "seems a little late and 'me tooish.'"

24 Billion Barrels -- Collaborating Support? -- Bakken, North Dakota, USA

Updates

February 21, 2011: Drilling up to seven (7) wells in one section, one 640-acre unit spacing.

Original Post

It's a slow day for me; I did not get called in to teach today.  When I have time on my hands, I tend to ramble. Rational individuals may do well to skip this post.

This goes back to Harold Hamm's position that there is/are 24 billion barrels of recoverable oil in the Bakken and Three Forks formation.

A comment just sent to me from a reader spurred this post. In addition, here's another comment from another who has first-hand experience with CLR's performance (when you get to that link, scroll down to "57seeker," posting January 28, 2011, 2:00 a.m.)

For those interested, this is the link to Dr Leigh Price's original paper that "predicted" the Bakken:
http://www.undeerc.org/price/TextVersion.pdf  or click here. (Same links.)

Go to page 238 of that text: it is there that you will find that Dr Price stated that he estimated 413 billion barrels of original oil in place in the Bakken. (Dr Price provides an excellent argument for this number earlier in the text. In fact, for investors, on a "down day" in the market, I recommend you re-read the Price article; it will cheer you up.)

At the time of the 2008 USGS assessment of the Bakken, it was generally agreed that technology (then) could result in recovering two to three percent of the original oil in place (OOIP). I noted early on that it appeared, using different figures, but publicly accepted figures, that companies like CLR might already be recovering six to eight percent of OOIP.

The anonymous reader suggested taking the 24 billion barrels of recoverable oil that Harold Hamm opines and dividing that by Dr Price's estimate of OOIP, 413 billion barrels. Result: 6 percent.

How interesting. Six percent. Exactly what some companies argue they are currently recovering from the Bakken, and not out of line. At the time of the 2008 survey, the two to three percent was estimated well before current technology. Correct me if I'm wrong, but back in 2008, the norm was short laterals with single-stage fracture stimulation. The norm is now long laterals with multiple-stage fracture stimulation, and probably with better mix of proppants.

Just for the fun of it (again this is a slow day for me which gives me a lot of time to play around with the figures), what does 24 billion barrels of oil mean?

Let's say North Dakota maxes out with a production rate of 750,000 bopd. How long would it take to exhaust 24 billion barrels, producing at 750,000 bopd? 32,000 days, or 88 years. That would guarantee life time employment for Harold Hamm's grandchildren.

How many years do the analysts now say that it will take to fully exhaust the Bakken? It is now generally accepted by academic analysts that active drilling will continue until about 2030 and production will peak sometime after than and then decline until about 2100. How many years is it until 2100? 90 years.

Hmmm. Harold Hamm's 24 billion barrels at 750,000 bopd and 88 years is almost identical to the academic analysts' 90 year estimate.

I started this commentary, as I do with most commentaries, not knowing where I will end up. If the commentary ends up being too insane, I delete it, no matter how much time I spent on it. For the life of me I did not expect to see two estimates (88 years vs 90 years) come out so close together.

Check my math. It's too coincidental.

Idle rambling.

Investors: Another Opportunity -- GasFrac Energy Services, Incorporated

Speaking of fracking, here's an oil and gas fracking company that was brought to my attention from one of my readers: GasFrac Energy Services.

This is not a recommendation. This is the first time I have heard of it. A long time ago someone wrote in asking for names of companies fracking in the Bakken. I don't recall if I included this one. [No, GasFrac was not included in that posting.]

Regardless, apparently GFS.V went public last year.

Their corporate presentation is located here.

According to the corporate presentation, this company has fracked in both the Bakken and the Niobrara formations. In fact, they mention 48 different formations they have experience in; I recognize only the Bakken as a North Dakota formation, and it's possible, it's the Alberta Bakken, which is completely different than the ND Bakken. Whether they are in North Dakota or not, I do not know.

Bakken: Fully Developed, 4 Wells/1280-Acre Unit --> 24 Billion Barrels

Video link with Harold Hamm, CEO and founder, Continental Resources. Video posted in November, 2010.

All due to technology, and most of that technology has been developed in past two to three years.

See commentary.

Photos of the Bakken -- North Dakota, USA

For those interested in seeing photos of the Bakken, click here. Easy to scroll through, no downloading. Photos taken by David Debertin and posted at the "BakkenBlog." At that site, click on photographs for more incredible photos.

The Lost Decade

Update

August 6 , 2011:  Although I did not vote in the last election (my vote in Texas would not make a difference), I was happy that America would choose "a Barack Obama" for president. Maybe folks would finally accept that as a nation, we are not a racist people. Individually, there are racists, but corporate America, political America, social America is not racist. So I was happy to see Barack Obama, the man, elected president. I wished him well; and if America did well, I would do well.

But with the market in free fall and the nation's credit rating downgraded for the first time in history, and he still doesn't get it, I may become more political on this blog. I try to hold back, but his policies have become a disaster. The nation is not headed in the wrong direction by accident. It took specific actions to move us to where we are headed.

The president simply does not get it. New link here.

Original Post

Some months ago -- has it been a year? -- I started referring to the folly of government betting on the "global warming" scam and all that followed from it as the "Lost Decade." Of course, others will argue there was much more to it, and that's fine. I won't argue.

But with regard to energy policy in this country, all I can say is that the past ten years represents a "Lost Decade."

The National Journal reports a story today with a "mystery":

Taming unemployment starts with solving the mystery of the jobs that were supposed to have been created in the past ten (10) years but weren't.

The article is titled: "The Phantom 15 Million."

It's a four-page article in the National Journal so it would be a great article for high school social studies and college economic students to read.

This is the soundbite the author of this article uses for this story: "The Lost Decade." (Most likely this is a thesis for an upcoming book.) As noted, I've been calling this the Lost Decade for quite some time now.

I scanned the article pretty quickly, but did not see the oil industry mentioned. I'm not even sure if the energy industry was mentioned.

For every one million barrels of oil produced in United States, one can expect about one million jobs. I do not know if that figure is "direct" jobs or all jobs related to the oil industry. I will be conservative and assume it is all jobs related to the oil industry. So, without even much research, I can account for about two million jobs lost due to decrease of oil production in the US.

As you approach the end of the article, looking for conclusions, explanations, and/or thoughts where "we" go from here, we read this:

A recent paper by researchers at the Asian Development Bank Institute concluded that the iPhone, one of the United States’ top innovations of the past decade, actually contributes nearly $2 billion to our trade deficit because it is almost entirely produced and assembled in Asia. The paper also raises a conundrum for lawmakers and business leaders alike: If Apple moved its assembly line to the United States and created domestic jobs but didn’t raise the cost of the iPhone, the company would still turn a 50 percent profit on every one it sold.

Maybe Apple’s greed is at fault.

"Apple's greed"? Apple, Incorporated, is a publicly traded company owned by its shareholders. It has a fiduciary responsibility (and legal duty) to maximize shareholder return.  Apple was supposed to sell their iPhones for a loss?

It never ceases to amaze me how mainstream media is so anti-fossil fuel, they cannot even address it. If this -- that "maybe Apple's greed is at fault" for the 15 million unemployed/underemployed -- is the takeaway message for those setting policy in Washington, there is little hope that the unemployment problem will be resolved in my investing lifetime.

The word "unions" was not mentioned in the article. But plenty of folks submitting comments did not miss that oversight.

The legal system was not mentioned.

But I digress. As far as I am concerned, one can argue that the folly of chasing the "global warming" scam set the tone for the "Lost Decade."

For more posts on the "Lost Decade" go to the "Labels" at the bottom of this blog and click on "LostDecade."

SM and XTO Report Two Nice Wells -- Bakken, North Dakota, USA

Two nice wells being reported on NDIC file reports today:

• 19134, 1,171, XTO, Kelvie 11X-15, Grinnell, Bakken, cum 26K in 80 days
• 18814, 1,754, SM, Wilson 8-20H, Charlson, Bakken, cum 36K in 50 days

The Charlson has always been a good field. I don't know much about the Grinnell field. 

With regard to the Charlson:

The most successful well to date in North Dakota sits in the Charlson: file #16059, the USA 2D-3-1H, a Petro-Hunt, LLC, well that was spudded in October, 2006.  That well targeted the Three Forks Sanish. [At $60/barrel = almost $55 million in about 3 years]. UPDATE: USA 2D-3-1H hit a new record this past June, 2010: one million bbls of oil cumulative. See comment at this post.

The Wilson 8-20H is 3.7 miles southwest of the USA 2D-3-1H, just a couple of sections away from each other.

The Grinnell oil field is due east of Williston, and east of the fairly well-known Stockyard Creek. The field is about 41 sections in size, but almost all of it is under water. Approximately 10 sections are dry land and that's where the wells will be place.

XTO is now owned by XOM.

JayHawk Enters the Bakken -- North Dakota, USA

I consider the Rigzone a pretty good source of news.

Today it reported additional background to the recent BP - Russia deal.

And then just below that is this headline: "JayHawk Enters Bakken/Three  Forks Play."

So, I'm expecting a pretty substantial story. This is it:

In order to proceed with the Company's recent drilling at Crosby, a quarter section of land was acquired with Bakken rights, which allowed JayHawk a small entry into the play. With this acquisition, the Company decided to begin the search for additional Bakken rights. This recent acquisition is the first of what the Company hopes to be multiple additions to its holdings in the Crosby-Bakken lands."

The Bakken and Three Forks rights acquired include 1,066.5 gross acres and 135.056 net acres in Divide County approximately 20 miles from the Crosby pool.

A quarter section was acquired. Okay.

JayHawk says that drilling costs in Divide County are "somewhat reduced" from the average of $5 - $7 million as reported by EOG, BEXP, and Whiting, because drilling depths are about 3,000 feet less. 

The article does include a nice graphic of Marathon's prospects in the Bakken but why it was placed with JayHawk story is beyond me. Unless I missed it, Marathon is not mentioned in the article. MRO does have a small advertisement on that page.

Investors Only -- Schlumberger Revenues Up a Whopping 58% -- Earnings "Beat" by Seven (7) Cents

Some datapoints:

• Earnings: $0.85/share
• Revenues rose 58% (to $9.07 billion from $8.7 billion)
• During the past quarter, SLB repurchased 6.1 million shares of its common stock
• Impact of deep water drilling moratorium in US Gulf of Mexico: about 5 cents/share
• Expectations: a "stronger" year coming up in 2011 for Schlumberger
• Current price of SLB: $85; SLB bought back 27 million shares for average price of $64
• Increases dividend 19% to 25 cents

I think estimates can be a source of manipulation (if that's the right word) among many players, but revenues are revenues.

Mexico just announces policy that will allow increased opportunities for Schlumberger in the Gulf of Mexico; on CNBC, no link yet.

Idle rambling (I probably shouldn't post this and will probably delete it later, if I remember):

CNBC says "Mexico needs to get its act together" and that "Mexico oil industry is being run by politicians." (January 21, 2011, 6:35 a.m.)

Okay, the US has a de facto moratorium on drilling in the Gulf put in by the administration. And CNBC says Mexico's oil industry is run by politicians and "needs to get its act together."

Am I missing something here? Yes, I know it's a stretch, but...

Oil Futures -- Oil Still at $90

Because I was at school this week, I didn't follow the news as closely and certainly didn't follow the stock market at all, except to hear that the oil companies, based on share price, had a bad week. And then on the crawler yesterday I saw that oil was down $2.00 or something like that. I forget the specifics.

And then this morning, I see with all the "bad news" "we're" still above $90. I remember when folks were excited with $60 oil.

I could make a similar comment regarding initial production (IP) numbers for Bakken wells, but will let it pass.

TransCanada To Ship Bakken Oil to Gulf of Mexico -- $140 Million Project -- North Dakota

Link  here. Link will be broken shortly; regional newspaper.

• Contracts for 65,000 bopd.
• Through proposed Keystone XL pipeline.
• Bakken sweet oil to be segregated from heavy sands oil.

TransCanada has been under intense pressure to put in a pipeline link between the Bakken pipeline system and TransCanada. After a bit of public wrangling, TransCanada agreed to put in the link ... drum roll ... yes, a five-mile, repeat, five-mile link with Bakken Marketline which will meet up with the Keystone XL pipeline near Baker, Montana.

The five-mile long Bakken Marketlink pipeline would meet with the Keystone XL pipeline in Baker, Montana, said Paul Miller, TransCanada's senior vice president of oil pipelines. The $140 million project would rely on so-called feeder pipelines proposed by other companies to move North Dakota and Montana crude to the facility in Baker, Miller said.

$140 million for five miles?

The Keystone XL project has not yet received approval from the US; that approval is expected by mid-year (2011) according to TransCanada.

65,000 bopd is a significant amount of capacity; current capacity is around 400,000 bopd depending how and what is measured. Railroad shipments are scalable.

The segregation of sweet oil from heavy sands oil is very significant.

By the way, I was wrong on this issue.  I was irritated that Governor Schweitzer threatened to hold up this project over this issue. I won't go through that discussion again; I am thrilled it has worked out the way it has. 

Williston Airport Boardings Up 40% -- North Dakota, USA

Link here. The link will be broken shortly; regional newspaper.

Year-end airport boarding numbers in Williston show a more than 40 percent increase in traffic in 2010 over the previous year.

Numbers from the North Dakota Aeronautics Commission show that Sloulin Field International Airport recorded 15,897 boardings in 2010.

Meanwhile, boardings at the Billings, Montana, airport dropped below 400,000 for the first time since 2003. I assume the Billings airport is affected a bit more by leisure travel -- subject to recession. But I believe there are more direct routes from Denver to Williston (with stops along the way). I could be wrong on that; it's been awhile since I've flown in that area, and I don't follow the airlines.