Legend Completes Acquisision -- Bakken, North Dakota, USA

Legend has completed the acquisition of un-developed mineral leases in Divide County, North Dakota, in close proximity to the Ambrose Field.
Data points:

• Un-developed leases in Divide County
• Six sections totaling 3,840 gross acress, Bakken and Three Forks develpment
• 387 net acres
• Leases are contiguous in nature
• Close proximity to Three Forks play where SM Energy and Baytex drilling in the Ambrose field to the east

This should give folks some idea how "big" the Bakken name is to oilmen.  A story of a company acquiring 387 net acres was big enough to get Rigzone's attention.

Actually, I have trouble believing it made the news.

Saudis Might Like What They're Seeing

Kudlow on CNBC's "Kudlow Report" tonight said the Saudi stock market "rocketed up" today. I don't follow the Saudi stock market so I don't know if the Saudi market simply recovered from falling so far after the Libyan thing, or if the Saudi market really has hit new highs.

Let's assume for argument's sake, that Kudlow was accurate when he said the Saudi stock market "rocketed up."

If the Saudis were comfortable about "controlling the day of rage," and comfortable about the Libyan thing, the Saudi market might have recovered, but I doubt those facts alone would have caused the Saudi market to rocket up.

A stock market rockets up on perceived earnings. If Kudlow was speaking accurately that the Saudi market rocketed up, it suggests to me Saudis see huge earnings. And the only earnings the Saudis have (for all intents and purposes) is oil or related to oil.

If the Saudis thought $104 oil was temporary, earnings might not be enough to move the needle on the Saudi stock market.

Hold that thought.

******

All I've been hearing for the past few days with regard to oil is a) $100 oil won't affect overall economy by more than 0.2 to 0.5 percent GDP; and, b) the tipping point for Americans is $4.00 oil.  You don't have to agree with that; I don't know if I agree with that, but that's all I'm hearing from the pundits. If I'm hearing that from the pundits, I assume Saudi is hearing the same thing.

Saudi is hearing what I'm hearing: a) the American economy can handle $100 oil (in fact, the US administration doesn't seem a bit upset about it: permitorium remains in effect, and no "drill, drill, drill" speech by the president); and, b) Americans can handle gasoline up to $3.99/gallon.

*******

Now back to the thought you were holding. If Saudis thought $104 oil was temporary, it wouldn't affect earnings. And the market wouldn't have rocketed. Nope, if Kudlow was right, and the Saudi market rocketed, someone thinks Saudis earnings are going to be very, very good. For that to happen, someone thinks that Saudi is going to be selling oil for $100 for a long time, and, oh by the way, Saudi is being given a pass by the rest of OPEC to increase production.

Every time price of oil has gone up over the past fifty years, Saudi has been able to watch the effect on the American consumer, and learn what the American consumer can tolerate. I think Saudi is hearing from pundits that Americans can tolerate $100 oil and $3.50 gasoline. "We" may not agree with the pundits, but that's what the Saudis are hearing. Now they get to see if the pundits are right.

********

Idle rambling. For all I now, the price of oil will plummet after Friday when the "day of rage" is a bust. For all I know oil will be back to $60 next week.

And it will be 95 degrees in North Dakota this weekend.

Actually, the Saudi market didn't rocket up all that much. It hasn't even recovered from its recent plunge. But I still think the Saudis like what they see.

*********

By the way, these are the February OPEC figures that show Saudi increased production to offset Libyan loss. Saudi increased production by 200,000 bopd = $15 million/day (at $75 oil) or an additional $450 million/month (on top of what they were already bringing in). Yeah, I think the Saudis like what they see.

And they like what they hear: the American economy can handle $100 oil.

Libya: 600,000 BOPD Lost? Iraq: 400,000 BOPD Lost.

The amount of Libyan oil that is not being exported due to the conflict has been all over the place. It started out at "onepointfivemillion" barrels of oil per day, but I have seen figures as low as 600,000 barrels oil lost per day. I assume some of the difference has to do with the source of the report, and any "hidden agenda" of the media source.  Be that as it may, the Libyan loss could have been as little as 600,000 bopd when the conflict started. Since then, of course, it has increased (one would assume).

Today, we learn that a terrorist (?) blew up a major Iraqi pipeline which has resulted in the loss of 400,000 bopd being exported by Iraq. There's not a whole lot of difference between 600,000 bopd and 400,000 bopd.

It took a major national upheaval in Libya to result in a loss of a relative small amount of oil, and some terrorist was able to cause almost a much disruption with one event, and it got minimal press.

KMOT: Lady Bug Becomes Official North Dakota Insect But No Update on the Jaynes Well Fire Near Arnegard/Watford City -- North Dakota

I am unable to find an update on the Jaynes well fire northeast of Arnegard/northwest of Watford City. I assume it is still burning. A spokesman said it would likely continue to burn until specialty oil well firefighters arrived on scene to put the fire out.

The last update on KMOT.com was last night and nothing since then (at least that I could find) and nothing on other regional media sources. But KMOT did have the lady bug story.

No update speaks volumes.

Update: fire-fighting equipment reaches site, March 9, 2011. The story was posted yesterday, March 9, 2011, but I did not see it until this a.m.

Only Three (3) New Permits Today -- North Dakota, USA

Producers: Anschutz, XTO, and EOG.

Fields: Murphy Creek, Grinnell, and Ross.

Except for one well released from confidential status, no other information:

• 19394, 525, Robert Heuer 2-20H, Dolphin field, Bakken; 11K in 1.5 months.

Great link on the Bakken

Link here.

In the grasslands of western North Dakota, one of the country's richest oil men is using a controversial gas drilling technology to develop what could be the biggest domestic oil discovery in the last 40 years.

The oil lies underground in a shale rock formation stretching across western North Dakota, northeast Montana, and into Canada's Saskatchewan Province known as the Bakken.

From CNN/Money, March 9, 2011.

The quarter-million barrels a day currently being produced from the Bakken is already partly responsible for the glut of oil seen in Cushing, Okla., one of the United States' main oil storage and distribution hubs. The glut has helped distort U.S. oil prices in relation to the worldwide market.

What do "they" mean, quarter-million barrels? North Dakota is well above 330,000 bbls opd and without weather constraints should easily hit 400,000 bbls opd this summer. 

More later.

Posting Will Be Minimal During The Day -- March 9, 2011

I will be teaching today, so there may be minimal posting throughout the day.

I have just posted seven (7) stand-alone postings this morning (all new since 5:30 a.m.) so that should fill in the gap a bit. Scroll down to see them.

The postings include an update of the Cabernet field.

By the way, there are 171 active drilling rigs in North Dakota this a.m. Will we see it go to 104 today, which would be a new record?

Seeking Alpha: CPA Comes Up With Staggering Numbers -- Bakken, North Dakota, USA

Link here.

The author has "discovered" the same data that I have posted, namely the number of wells per section that may be possible vs the number of wells per section that is being reported in annual reports. The delta is very wide.

However, being a retired CPA, I naturally started trying to figure things out. The first thing I noticed when I did this was that the USGS figures seemed very low. I did some calculations on the amount of potential oil that Brigham Exploration Company (BEXP), in which I own some shares, has in the ground.

[In the company's latest presentation], they state the estimated equivalent barrels of oil reserves is 600 thousand barrels of oil per well. They also stated that they will get 4 wells per unit - 1,280 acres or two sections (square miles) per unit.

Their work indicates that they will probably get 5 wells per unit, but they are only claiming 4 wells per unit at the present time for the Bakken and slightly less for the Three Forks formation.

And from there, the numbers become staggering.

Market Watch: Downside Surprise Possible; Holding CLR as Insurance

Link here.

The author presents one more opinion on current state affairs of oil and price of oil.

Again, this fact is presented: there is no more storage available at Cushing. If one "buys" oil, one must take delivery, or sell it before the delivery date. The author argues that some folks may be scrambling to unload their oil "at any price."

In the "old days," Bakken oil was at a disadvantage due to lack of pipeline capacity to get the oil to Cushing. Now with Enbridge shipping only sweet crude (i.e, only Bakken crude) from the Williston Basin, and with increasing rail shipments, Bakken oil companies should be sitting pretty.

Out of nowhere, the author ends his article with a shout-out to CLR.

Investors: "KOG Poised for Phenomenal Growth" -- Motley Fools

Link here.

I could be wrong, but it's my impression that in 2008, there was local enthusiasm about the Bakken but at the national level there were arguments about how big the Bakken really was.

In 2009, local folks realized that the Bakken looked to be "real," and investors following the Bakken started investing.  I opined in January, 2010, that 2010 would be a watershed year for the Bakken.

In 2010, we started to see investors who had gotten into the Bakken "early" were doing very well. But still there was little investing news in the mainstream media outside the region.

Then, and I don't remember exactly when, in late 2010, we started to see more investing stories on the Bakken in the national / mainstream press. In the first quarter of 2011, the Bakken is now reaching the mainstream. Jim Cramer on "Mad Money" is probably most visible. There are an increasing number of articles about the Bakken on Investopedia.com and SeekingAlpha.com.

I ramble about this because yesterday there was an interesting article on KOG over on Motley Fool. Actually, I should say there was an interesting "headline" on KOG over on Motley Fool. There was almost nothing of substance in the story.

Megaloads in Montana Keep Moving; One Over the Pass; One At the Top

For those following the COP megaloads that are moving across the Rocky Mountains to Billings, Mountain, click here for an update.

Update on Some Whiting Data Points Regarding Drilling in the Bakken -- Drawing Wells on Paper (DWOP) -- North Dakota, USA

According to Oil Patch Hotline, here are some Whiting fracking data points (numbers rounded) (links to Oil Patch Hotline are dynamic and will change over time):

• A 30-stage fracture stimulation in the Bakken costs $750,000
• Whiting is looking at technology that can do 60 frack stages
• Typical fracking for long lateral: 40K bbls frack fluid and 3 million pounds of sand
• Horizontal wells are now being drilled in an average of 18 days (38 days in 2009; cost savings: $1 million)
• Bringing all players together for an all-day meeting prior to spudding (Drilling Wells on Paper [DWOP] program) allows WLL to drill four wells in less than 14 days
• Efficiencies have brought Sanish field wells down to a cost of $5.5 million

Why so many frack stages? CLR has data that suggests more frack stages a) result in well being paid off more quickly; and, b) correlate with higher EURs.

It's my impression that BEXP has found the sweet spot with 32 - 38 frack stages, but it will be interesting to see what 60 frack stages bring.

Note:

• Actual frack fluid ranges from 30 - 45K
• Actual sand ranges from 2.4 - 3.3 million pounds

Oil Falls To "Near" $104

That's the morning headline. Price is said to have fallen "amid a mixed US oil supply report."

Futures show oil is down 25 cents to $104.77.

Call me crazy, but am I the only one that can't get too excited about "oil is down 25 cents" when it's trading above $100?

If by chance, oil hits $104.78 will we see a headline that says "Oil Spikes, Closing in On $105"?

Meanwhile folks continue to talk about "no-fly zone" on Libya which would require strikes on air defense systems, and some folks "think" that would be a declaration of war. Well, duh.

[Update: at 6:00 a.m., as CNBC's morning show came on, the price of WTI had spiked 13 cents and was above $105. It has dropped back, now down 2 cents at an even $105. 6:53 a.m. For those interested.]

I  have always doubted Saudi had much spare capacity, and that was well before recent events. I was definitely in the minority. Well, today we are starting to see that others agree. Prior to "the Libya thing," Saudi had already quietly increased production by 700,000 bopd, and any more increase is unlikely. Production from new fields is probably going to about match production from declining fields.

The price of oil continues to go up not because "we're" worried about "a day of rage" in Saudi Arabia but because a) there is increasing doubt that Saudi can increase productivity; and, b) there is no Plan B.

Cabernet Field Updated -- Bakken, North Dakota, USA

Link here.