Brent-WTI Spread Explained -- Again

Deutsche Bank explains the spread.

Just for the record, the folks following the Bakken shale story had already figured it out, and solutions were provided.

Increased pipeline capacity to bring crude oil to Cushing, Okla., has resulted in more oil flowing into PADD 2 than the refinery system there can handle, and therefore the landlocked crude is trading at a persistently wide discount to comparable global crudes.

The current Brent-West Texas Intermediate spread is about $15/bbl. And although the spread corrects over the life of the futures curve, the price of WTI crude has moved structurally to a discount to Brent crude in a reversal of the historic premium that WTI has enjoyed.

It's also been reported at this website that the Keystone XL will alleviate the excess oil building up at Cushing.

CNBC's explanation.

Watford City in the Heart of the Bakken To Double in Size With Annexation

Link here. Regional link will be broken soon.

The city council will hold a hearing today to decide whether to annex 700 acres into the town's city limits, nearly doubling its current size.

All the annexations are by request, not force, so it's expected to be a procedural slam dunk. Most is for airport and golf course land, but about 140 acres are privately owned and prime for development as the busy town tries to find room to grow.

Since the announcement of the event, three more requests have come in for annexation, adding another 110 acres to the initial request. 

Taking the paved highway all the way, Watford City is 46 miles from Williston.

EPD: Record Revenue; Record Distributable Cash Flow -- Not a Bakken Story

Enterprise Products Partners L.P. announced its financial results for the three months and year ended December 31, 2010. Enterprise reported record aggregate natural gas liquid (NGL), crude oil, refined products and petrochemical pipeline volumes as well as record natural gas pipeline volumes for 2010. The partnership also reported record NGL fractionation, propylene fractionation, equity NGL production and fee-based natural gas processing volumes for 2010. This volume growth contributed to record net income of $1.4 billion, record gross operating margin of $3.3 billion and record distributable cash flow of $2.3 billion for 2010.

Another indication of a new energy decade.

For other earnings results, see the "4Q10" earnings tab.

EOG 4Q10 and Full Year Earnings

Link here.

Excluding some items (numbers rounded):

• EOG earned $750 million or $3.00/share in 2010 vs $550 million or $2.00 share in 2009

Other data points:

• EOG will sell $1 billion worth of assets in 2011
• Bakken still plays a major role in EOG's earnings
• EOG making progress in the Niobrara
• EOG will increase dividend again; this time in April

Again, another indication of the beginning of an energy decade, after a lost decade

Eight (8) New Permits -- QEP With an "Eco-Pad-Like" Endeavor -- North Dakota, USA

On a day that we hit a new record for rigs actively drilling in North Dakota, we see eight (8) more permits.

Producers: QEP (4), SM (2 ), XTO, Zavanna.

Fields: Heart Butte, Long Creek, Elk, and West Ambrose.

XTO had one of the permits in Heart Butte, but QEP had four permits in Heart Butte. All four (4) are on the same pad. Is this an Eco-Pad-like endeavor? The four wells will be in section 32-150N-91W.

The rest of the daily activity report was pretty unremarkable, although Wesco got a nice well targeting the Red River in Golden Valley with an IP of 211. 

Government Estimates: The Government Sees Employment Improvement in 2012

The US government sees improved employment numbers in the 4Q12 -- that's October, November, December about fifteen months from now. The numbers are impressive.

For the fourth quarter of 2012, the jobless rate will average 7.6 percent to 8.1 percent, versus the 7.7 percent to 8.2 percent in the previous estimates by policy makers. 

The link is here. Just think: US policy makers predict a drop, at best, from 7.7 percent to 7.6 percent in unemployment fifteen months from now. Meanwhile, in the here and now, Gallup has the unemployment rate at 10 percent.  Worse, the trend is up. Let's see: how much stimulus money has the government pumped into the economy? $30,000 per America. $120,000 per the "average" 4-person family.

(The Gallup link may break; it is probably a dynamic link.)

I cannot make this stuff up.

HUGE STORY IN RIGZONE ON THE BAKKEN

Link here.

The Bakken play in the Williston basin could become the world's largest discovery in the last 30 - 40 years.

This was the lead story in Rigzone today, February 17, 2011, on a day when the number of rigs actively drilling in North Dakota blew through two records in quick succession.

The data points were those of a Continental Resources senior manager:

• CLR's estimates: 24 billion recoverable bbls in the Bakken; represents five times the US Geological Survey's 2008 estimate
• The new estimate compares with the 151 million bbls the survey put forth as recently as the mid-90's
• Close to 2 billion bbls of the 24 billion will come from the underlying Three Forks
• CLR helped proved that the Three Forks was a separate reservoir from the Bakken
• The middle Bakken is more porous and permeable than both the upper and lower Bakken
• Production exceeds 400,00 bopd including Montana and North Dakota
• Recovery of the oil will take years
• The industry has completed 2,750 horizontal wells since 2000
• Currently: 165 rigs that will drill 1,800 more wells in 2011
• Production could reach 1 million bopd in a few years
• The Bakken is continuous under nearly 15,000 square miles
• Most operators are now drilling 9,500 foot laterals with 18 - 30 frac stages/well
• Optimum number of frac stages is not known, but fracking appears to reach a point of diminishing returns between 18 and 24 frac stages

There is nothing in the report that readers of this blog haven't read before.

172

New record: 172 rigs actively drilling in North Dakota.

171.

Well, that didn't take long.

New record: 171 rigs actively drilling in North Dakota.

Shell Oil: Step Change in Energy Use

Shell releases its energy outlook.

We are seeing a step change in energy use. Developing nations, including population giants China and India, are entering their most energy-intensive phase of economic growth as they industrialise, urbanize, build infrastructure, and increase their use of transportation.

"Step change." This is a reference to line graphs in which there is a discontinuous "jump" on the vertical, or "y" axis, rather than a continuous movement up or down. The suggestion is that regardless of whatever rate energy use had been growing, Shell is now seeing a jump to a new base level.

I think that's what folks often forget: the developing nations are entering their most energy-intensive phase of economic growth. And in China's case, they have the money to pay for this growth. As just one minor example, last year, for the first time in its history, GM sold more cars in China than it sold in the United States.

******

Some of my recent posts took me back to thoughts of the 1973 OPEC oil embargo. Thirty-seven years later who would have guessed that Alaska production would be slowing, if not outright declining, due to environmental concerns; the promising Gulf of Mexico might suffer the same fate due to environmental concerns; and that a formation in North Dakota would set off a drilling revolution around the world (horizontal drilling and fracking in the Colorado-Wyoming Niobrara; in the Texas Eagle Ford; and, in the French Parisian Basin).