The Million Dollar Way (The Bakken Oil Blog): 03/22/11

Tuesday, March 22, 2011

Well, The Libyan Thing Is Working Out Just Swell ....

The price of oil hit $105 / barrel today, and now I see that it is up again in overnight futures.

The president can't get home fast enough from his Latin American trip to get this turned around.

I'm glad to see that Hillary Clinton, at least, is relaxed. She should be. As I noted earlier, she is in a win-win situation. If the war goes well, she will get the credit; if it goes badly, her boss will be blamed.

Say Anything Blog

No, I'm not changing my policy of "saying anything." I will stick to the Bakken 90 percent of the time. I have hired an accountant to ensure that my non-Bakken comments do not exceed 10 percent of the content on this site.

But I digress. I have just "discovered" the "Say Anything Blog." If you like my occasional political comments, you will enjoy "Say Anything Blog."

And the reverse is true. If you don't care for my occasional political comments, you will probably not care for "Say Anything Blog" either.

Epping-Ray Corridor: American Oil and Gas / Hess Wells West of Ray, North Dakota -- Parallelling US Highway 2 -- Bakken, North Dakota, USA

There is a string of wells west of Ray, and extending west to north of Epping. So that I can find my posts on these wells more quickly I have given them a label: the Epping-Ray Corridor.

The original post will be updated periodically.

I did mention these wells in passing here back in January, 2011, and also here, also in January, 2011.

The original eleven wells were all wildcats; they were all in an area that was not yet designated by name when I originally posted on these wells. They are in a line, two miles south of, and paralleling US Highway 2. The first one is "by itself" but all the rest are in pairs, right next to each other or across section lines from each other, with one horizontal going north, and one horizontal going south.

At the time of the original post, only one well (18887, Bergstrom 15-23H) had any data; but I will update data as it starts to come in.

21497, 736, Hess, GO-Hauge-156-97-2116H-1, Dollar Joe, t3/12; cum 31K 7/12;

19500, 1,006, Hess/American Oil and Gas, Knudsen 15-20H, Dollar Joe, t7/11; cum 77K 7/12;

21060, PNC, Hess, GO-Abbott-156-97-1918H-1, Dollar Joe,

18887, 2,444, Hess/American Oil and Gas, Bergstrom 15-23H, t8/10; cum 121K 6/12;
18931, 1,860, Hess/American Oil and Gas, Johnson 15-35H, Wheelock, t8/10; cum 109K 7/12;

19739, 321, Hess/American Oil and Gas, Strahan 15-22H, t10/11; cum 66K 6/12;
19316, 335, Hess/American Oil and Gas, Bergstrom 2-27H; t9/11; cum 66K 6/12;

20351, 1.093, Hess, GO-Vinger-156-98-2116H-1, t8/11; cum 102K 6/12;
19398, 1,945, American Oil and Gas, Bergstrom 2-28H,

20168, 740, Hess, Beck Living Trust 15-20H, t12/11; cum 64K 6/12;
19459, 611, Hess/American Oil and Gas, Dustin Brose 2-29H, t7/11; cum 80K 6/12;

19395, 778, Hess/American Oil and Gas, Haug 14-19H; t4/11; cum 84K 6/12;
20391, 824, Hess, GO-Haug-15098-3031H-1, t9/11; cum 101K 6/12;

18826, 516, Hess/Newfield, Twilight 1-24H; t3/11; cum 73K 6/12;
19087, 1,395, CLR/Newfield, 1-H Sandhill 25-36; t1/11; cum 80K 6/12;

19033, Conf, CLR/Newfield, 1-H Chloe 20-17, Wildcat/East Fork;

19202, 1,010, CLR/Newfield, 1-H Manolo 21-16, t3/11; cum 63K 6/12;

19931, 1,257, CLR/Newfield, 1-H Breitling 23-14; t9/11; cum 71K 6/12;
20944, PNC, CLR, Vandeberg 156-99-26-35-3H, East Fork,
20946, drl, CLR, Vandeberg 1-26H, East Fork, cum 18K 7/12; no IP yet

23180, conf, CLR, Buddy 1-27H, East Fork, 19
23181, conf, CLR, Domindgo 1-22H, East Fork,

Just south of these wells and paralleling them is another string of wells; they are in Dollar Joe oil field, and if I follow them, that's where they will be followed.

Not part of the string of wells above, but in the corridor:

17843, 1,981, Hess/American Oil and Gas, Ron Viall 1-25H; t5/10; cum 107K 6/12;
19209, 539, Crescent Point/Anschutz, State 1-36H-156-98, t11/10; cum 33K 6/12; (the only short lateral in this corridor)
18931, 1,860, Hess/American Oil and Gas, Johnson 15-35H; t8/10; cum 106K 6/12;

19752, 716, Hess/American Oil and Gas, Seaton 15-7H; t6/11; cum 109K 5/12;

Mountainview Adds Acreage in the Bakken, North Dakota, USA

Link here.

Mountainview has acquired a 12.5% working interest in certain lands in the Williston Basin in Montana, comprised of 160 acres (net) of a 1,280 acre spacing unit (the "Lands"). The Lands were purchased from a private company owned by a related party of the Company (the "Vendor"). Pursuant to the Acquisition, Mountainview acquired the Lands for aggregate consideration of $160,000, being the same price on a per acre basis that the operator of the Lands recently acquired its interest in the Lands in an arm's length transaction.

$160,000 / 160 net acres = $1,000 / acre of Montana Bakken acreage. (Williston Basin, not Alberta Bakken)

Obama's Energy Initiative With Brazil: US Will Supply Brazil With Batteries; Brazil Will Supply US With Oil

Link here.

No further comment needed. Oh, I can't resist. I wonder what US company is making the batteries. Three guesses and the first two don't count.

Nine (9) New Permits -- Bakken, North Dakota, USA

Producers: BR (3), BEXP (2), CLR, XTO, EOG, and Hunt

Fields: Heart Butte, Parshall, Ross, Charlson, Camp, and East Fork.

The three BR permits will be on the same pad in Charlson. Charlson is a very good field.

The two BEXP permits will be on the same pad in East Fork, Williams County. I have no experience with the East Fork.

The daily activity report was otherwise unremarkable; no new IPs were reported. Ten wells on the confidential list were reported as "plugged or producing," which usually means they were producing. We'll have to wait and see what their IPs are.

East Fork oil field is northeast of Williston, east of Epping, on the way to Ray. It is just west of a string of wells that, I believe, are in acreage once owned by American Oil and Gas (AEZ) before being bought out by Hess. However, many of these wells are Newfield, so I may be mistaken. More later, perhaps.

Status of Enbridge's Proposal for Bakken Pipeline Canada Project -- Bakken, North Dakota, USA

Link here.

Data points, if approved:

Pipeline to transport oil from North Dakota Bakken to refineries in North America via a connection with the existing Enbridge mainline near Cromer, Manitoba
A 16-inch outer diameter pipeline
123.4 km (74 miles) from a pump station near Steelman, Saskatchewan, to the Cromer terminal
Service date: early 2013
Cost: $180 million

Other data points:

In February, ENB booked 100,000 b/d of oil on its 145,000 Bakken Expansion Program, comprised of elements of its North Dakota system and its Saskatchewan system.
The added capacity between Beaver Lodge, ND, and Cromer is to enter service late 2012

Is This Getting a Bit Bizarre? The War on Libya Will Be Managed by a Political-Steering Committee

The US wants out (of the leadership position).

NATO wants out (of the leadership position).

Britain's Prime Minister wants out (of the leadership position).

France has proposed that a new political steering committee outside NATO be responsible for overseeing military operations over Libya.

I get a lot of "hate mail" for my non-Bakken posts, but I generally re-report it as I see it. Again, in this case, I can't make it up: this is exactly what is being proposed by the man/country who got us into this mess in the first place (Sarkozy/France) and to some extent, Cameron/Great Britain.

And whether you support, don't support, or have no opinion on what's going in and over Libya, a) setting up a new "entity" to manage a coalition in the middle of the war; and, b) labeling it a "political steering committee" seems entirely nuts.

"A political steering committee to be responsible for overseeing military operations over Libya." I guess Clausewitz was correct: war is a mere continuation of politics by other means. In this case, FranceBritainUS won't even disguise it: it will a political exercise. With Tomahawks. And two Qatar vintage fighter jets.

Wow.

It just dawned on me: the country closest to Libya with most interesting political history -- Italy.

There's an old saying that victory has 100 fathers and defeat is an orphan. JFK News Conference, April 12, 1961.

******

April 4, 2011: US pulls back its fighter-bombers; then extends for two days; pulls them back again. Now Kadafi says he's staying for now but Libyans in "free" election will determine if he stays longer.

March 23, 2011: US Marines are being sent to Libya. Amphibious vessels are already there. I assume the US Marines will follow orders from a foreign "political steering committee."

March 23, 2011: British Navy -- after only five days of war -- and attacking a small country -- is running out of Tomahawk missiles. I cannot make this stuff up.

Flashback, March 23, 2011: from the Drudge Report -- apparently it isn't only Democratic senators that want to impeach the president. Even his vice president is on record voicing his responsibility to see that the president is impeached if he goes to war without Congressional approval. I can't make this stuff up. It is interesting to watch Howard Dean support the war effort. Hell must be freezing over.

Update, March 22, 2011, 9:30 p.m. EST: this is nuts. Germany has pulled its forces out of NATO over the Libyan crisis. The coalition is in disarray. Obama will cut short his Latin American trip to head home to sort things out -- I guess report to the "political steering committee." So, now, on top of everything else our current administration has done, now it looks like they've fractured NATO. This is incredible. Amateur hour. With consequences. I can only imagine the talk shows tomorrow morning. I can hardly wait to hear the spin we get on this. France: "We are not at war." How did the US step into this? Hillary Clinton: win-win. If the war went well, it was her war. If the war went badly, it was Obama's war. Something tells me Hillary Clinton is going to avoid a face-to-face meeting with her boss as long as she can. Democratic lawmaker says Obama's actions are impeachable offense; hell must be freezing over -- I'm starting to like Dennis Kucinich.

There Are "No" Dry Holes in the Bakken -- CLR Was Able To Find One -- North Dakota, USA

One of the big surprises today was a dry hole reported by Continental Resources. A dry hole in the Bakken is a headline story. In this case it was:

19003, DRY, CLR, Haag 1-21H, Wildcat, Bakken

This well was drilled in the middle of a 9-section oil field, called the Blacktail oil field. Even though the well was drilled in a designated field, it was considered a "wildcat" because there were no producing wells in the immediate area. Interestingly enough, there are six other dry holes in this tiny field, but all of them were drilled years ago, and have nothing to do with "modern" history regarding the North Dakota oil industry, based on the file numbers listed on the GIS map server.

The location of the Blacktail oil field is interesting and may be the reason CLR was curious to see if it would be productive. The field sits fairly far south in the Bakken, near where the Bakken thins out and the Three Forks "pinches out." It is located pretty much midway between two very historically active areas. To the west there is the Bicentennial oil field where Whiting is establishing a Three Forks presence. To the immediate east are a number of very good Bakken fields: Little Knife, Murphy Creek, Cabernet, and Fayette, just to name a few. These fields appear to have a good mixture of Bakken formation and Three Forks formation wells.

If I understand the survey data as provided at the NDIC site, the Haag 1-21H was drilled to a vertical depth of 10,658 feet, then brought back up a bit, and the lateral went horizontal at 10,626 feet. The last reading was 11,139.63 feet. A short lateral normally extends 4,000 feet or so, and a long lateral twice that distance. If I am reading the data correctly, the horizontal only went 513 feet; the drilling was stopped well before a normal completion, and certainly not fracked.

It's possible someone will provide further details, but right now that's all I've been able to gather. And as a layperson, I could be well off the mark. [Update: The link above has the definitive answer.]

Heavy Storm Hitting North Dakota -- Bakken Shutting Down

Link here. Regional links break early and break often.

This is the North Dakota story. The storm is currently hammering North Dakota. I was notified that at least one oil company in North Dakota has shut down its operations until the storm passes. I assume producing wells will continue to pump if there is room in the storage tanks or if they are directly linked to a pipeline. But drilling, trucking, and fracking will all stop, at least for one company. All will probably follow suit.

Link here. Regional links break early and break often.

This story concerns the storm when it hits Minnesota.

Wind Turbine Rotor and Blades Fall -- Rugby, North Dakota

Update

March 24, 2011: The cause -- the bolts failed. Six other turbines in this particular wind farm have been shut down so bolts on the other turbines can be replaced. The wind farm has a total of 71 wind farms. It has been in operation less than a year (it was dedicated last October).

Original Post

Just when I thought I had heard everything, here's a new wrinkle in wind energy: the rotor and three blades recently fell from a wind turbine near Rugby, North Dakota.

A wind energy project in north-central North Dakota has resumed generating power, a spokeswoman said Monday, a week after the rotor and three giant blades on one of its towers plummeted to the ground.

The wind farm has 71 turbines perched atop steel towers just north of Rugby, about 150 miles northeast of Bismarck, and is capable of generating up to 149 megawatts of electricity. It was inspected after the March 14 accident and judged to be safe to resume operation, said Jan Johnson, a spokeswoman for Iberdrola Renewables Inc. in Portland, Oregon.

One can only wonder.

TransCanada Keystone XL: If Approved By End of Year, No Increased Cost For Project

Link here. Regional links break early and break often.

Data points:

Approval of Canadian-US pipeline delayed for further review.
Company still thinks it will be approved by end of year.
$7 billion project: Shovel-ready.

"Our impression is that we'll have a decision by the end of the year," a company spokesman said. "If we get a decision later, we would have to do a recalculation."

If approval delayed, the company would have to recalculate the cost.

This delay for approval is part of the administration's national energy program.

Here's where I follow Keystone XL.

North Dakota Refiner To Expand -- Bakken, North Dakota, USA

Link here. Regional links break early and often.

Tesoro Corp. announced Monday that it plans to increase capacity at its North Dakota refinery by 10,000 barrels a day, partly because of record production in the rich Bakken shale and Three Forks formations in the western part of the state.

This probably won't help overall takeaway capacity because the refinery is "outside" the Bakken area. Bakken oil will still have to go into the pipeline to get to the refinery.

It is interesting to read that the refinery is operating at full capacity.

Oil Slips As US Says Airstrikes Slow Gadhafi -- CNN.Money Headline

Yes, that was the headline I woke up to and a headline that is still on the front page, Yahoo!Financial: Oil Slips As US Says Airstrikes Slow Gadhafi.

With a fair amount of my discretionary portfolio tied up in oil and oil services, I was naturally curious to see how much the price of oil had slipped. When I checked: 15 cents. Yup. 15 cents. Trading in a narrow range around $102. And the headline is "Price of oil slips." Give me a break.

A more appropriate headline: "Oil Trading in Narrow Range Despite Libyan War, Japan Disaster, China Growth, Lack of US Energy Policy."

So, now, three hours later, what is oil doing? By CNN.Money reckoning the headline should be "Oil Price Skyrocketing After USAF F-15 Crashes Over Libya."

Yup. Oil was up another $1.00 after that news came out. Pundits say that increasing tension in Syria is driving up the price of oil (I was unaware that Syria had any oil.)

I can't make this stuff up. "Oil Slips As US Says Airstrikes Slow Gadhafi." Fifteen cents on $102/bbl.

[Update, Tuesday, end of day: oil closed up $1.67, to $104.00. Apparently it topped $105, but if it did, I missed it. Iraq's new oil minister said Tuesday that he expects oil to reach $120 a barrel.]

Murex Has Another Great Well -- Interesting Production History

Rewritten Post

I really blew it on this one. See "original post" below. Then read the comments at the bottom of the post. I have updated the post as it should have been written:

NDIC report here.

19196, 2,395, Murex, Ventura 11-2H, West Bank, Bakken; spudded 8/10; tested 11/10; 45K in first four months.

Here's the production history:

10/10, 31 days of production: 472 bbls produced; 0 "runs"
Fracked 10/29/10
11/10, 30 days of production: 27,215 bbls produced; 26899 bbls run
12/10, 31 days of production: 10,427 bbls produced; 10,479 bbls run
1/11, 31 days of production: 7,331 bbls produced; 7,169 bbls run
2/11, 28 days of production: 10, 915 bbls produced; 10,763 bbls run

What does one notice?

First the decline rate is typical of a Bakken well, but one always wonders if to some degree it is intentional.
Second: the well was fracked on October 29, 2010 -- look at that huge bump. It is truly incredible. At one time there was thinking that horizontal wells would eliminate the need for fracking which was used in vertical wells.
It's possible that the production was slightly affected by weather in January.

Miscellaneous comments regarding fracking this well:

Based on number of ports, this looks like a 19- or 20-stage frack stimulation
This was a sand frack; no mention of Slick Water or gel, although I don't know if they necessarily post that
No acid was used; some folks feel strongly that acid improves a frack

*******

Original Post (for archival purposes only; please disregard)

NDIC report here.

19196, 2,395, Murex, Ventura 11-2H, West Bank, Bakken; spudded 8/10; tested 11/10; 45K in first four months. This well has an interesting production history.

Here's the production history:

10/10, 31 days of production: 472 bbls produced; 0 "runs"
11/10, 30 days of production: 27,215 bbls produced; 26899 bbls run
12/10, 31 days of production: 10,427 bbls produced; 10,479 bbls run
1/11, 31 days of production: 7,331 bbls produced; 7,169 bbls run

What does one notice?

First the decline rate is typical of a Bakken well, but one always wonders if to some degree it is intentional.
Second thing I noticed: either it's a typographical error, or something very, very strange. The report says that October, 2010, was a full month (31 days) of production and yet the total produced was less than 500 bbls. If accurate, this tells me that initial reports of how a well is doing have to be taken with caution especially if the number is low. If there was a not a typographical error, this well was having difficulty in October, but the driller sorted it out, and by the end of the second month had a great well. The well is still listed as "flowing." No pump has been put on the well.

$20,000/Acre in the Eagle Ford, South Texas -- Implications for the Bakken, North Dakota, USA

This story has been all over the print and cable media today: South Korea takes huge position in Eagle Ford oil shale, South Texas, as a partner with Anadarko.

Others can sort out the details, but those details will start out with these three facts:

$1.55 billion
80,000 net acres in the liquids-rich Eagle Ford Shale play
16,000 additional prospective net acres for the deeper dry-gas Pearsall Shale, as well as Pearsall opportunities underlying the aforementioned Eagle Ford acreage

Back-of-the-envelope calculations

Dividing $1.55 billion by 80,000 net acres = $19,375/acre
Dividing $1.55 billion by 96,000 net acres = $16,145/acre

The trick now is to find out what else South Korea got that would bring down the price / acre. Certainly, South Korea didn't pay $20,000/acre. Or did they?

Based on what I've read so far, the Eagle Ford has no greater potential than the Bakken (similar at best, but not greater; of course, this has yet to play out; we are very early in the Eagle Ford play).

Based on what I've read so far, the Bakken was much more prepared for development at the start of the boom in 2007. There is much preparatory work yet to be done to fully bring the Eagle Ford to where the Bakken is today. (The Williston Oil Basin has been continuously worked since 1951; core samples of every well drilled in the basin have been sent to the UND geological library; the world's largest microseismic array).

So, for folks trying to put a value on the Bakken acreage, the Anadarko-South Korea deal is one more data point.

Japan Nuclear Disaster --> Reinvigorate, Reenergize, Reexcite Non-Nuclear Fuels

Yesterday, I had a long post on reason for increased oil prices, suggesting that it was less Libya, and more Japan that was driving near-term increase in oil prices.

Well, today, that's the lead story over on Yahoo!Finance: Japan Fuel Demand To Surge

In my posting, I mentioned oil, natural gas, and coal, and was not sure whether to add coal, and definitely not sure about adding oil. But here it is, from the AP story:

Japan's nuclear crisis could reverberate through global energy markets for years to come, pushing up prices as suppliers look to take advantage of a surge in demand for non-nuclear fuels from the world's third-largest economy.

The 9.0-magnitude earthquake and tsunami that likely killed more than 18,000 people earlier this month shut down 11 of Japan's 54 nuclear power plants -- a source that provided 30 percent of the country's power. That means producers of natural gas, coal and oil -- particularly in Asia -- will be called on to help fuel conventional sources of power generation in Japan.

The irony: the Kyoto Protocol now seems to be an inconvenient fact of life.

Analysts expect the power plants affected by the earthquake/tsunami will be out of commission for three years, if not permanently. Does one really think the Japanese government will be able to convince their citizenry that nuclear plants are safe?

A Hess "Orion Belt": Six-Well-Complex -- And So Much More -- Bakken, North Dakota, USA

If one wants to see the potential of horizontal drilling and the Bakken, one may be interested in following the discussion of Hess' Dolan/Fisher complex in Pleasant Valley oil field.

Over a year ago, I first talked about the "Orion Belts" of Hess.

Not only does Hess have six wells running west-to-east much like a CLR Eco-Pad, it appears that Hess is putting down parallel horizontals (dual stacked) from the same well. Six permits/six wells but perhaps more than six horizontals?

The even-numbered file permits are "Dolan" wells; the odd-numbered file permits are "Fisher" wells.

I do not yet know if there is any specific reason for identifying some as Dolan or some as Fisher. It certainly is not based on direction; not all Dolan wells are running in the same direction.

More to follow.

Just as interesting is the Hess EN-Will Trust complex in the Big Butte oil field just east of the Dolan/Fisher complex. Here there are three wells, either on the same pad, or close enough to be on the same pad.

19006, 412, EN-Will Trust B-157-94-2635H-2, Big Butte, t2/11; cum 133K 6/18;
19007, 372, EN-Will Trust B-157-94-2635H-3, Big Butte, t2/10; cum 112K 6/18;
17842, 402, Hess, EN-Will Trust C-157-94-2215H-1, Big Butte, t4/11; cum 147K 6/18;

If that isn't enough to pique your interest in Hess, take a look at the six wells that Hess is drilling along a long lateral to monitor the the fracking

Move a couple miles southeast of the Dolan/Fisher and the EN-Will Trust complexes, still in Big Butte oil field, and you will note that Hess now has two rigs on site drilling two monitoring wells along #17117. (eventually seven wells around this one lateral; see "NineWells" tag at bottom of blog

And then just a bit south, still in Big Butte, Hess another 3-well complex, the EN-Wefald complex (19225, 19226, and 19227): one well is listed as confidential; one well is almost complete; and, the third well has a rig on site.

19225, 667, Hess, EN-Wefald-156-94-1324H-1, Big Butte, t3/11; cum 217K 6/18;
19226, 275, Hess, EN-Wefald-156-94-1324H-2, long lateral running south; t9/11; cum 152K 6/18;
19227, 723, Hess, En-Wefald-156-94-1324H-3; t6/11; cum 315K 6/18;

Incredible amount of activity in a very small area, and much yet to be learned.

********

More information on background of the Dolan/Fisher wells which provides insight into how Hess will be developing these wells

Six wells on a single pad; well heads will be spaced fifty feet apart. Each well will be a dual-stacked lateral.
Hess will use a small surface casing rig to drill each hole in succession, temporarily plugging each hold before drilling the next to prevent foreign matter from entering the wellbore. Once the six wells are drilled to casing level, a larger drilling rig will be moved in to complete the wells to total depth.
With dual stacked laterals, I assume one is going into the middle Bakken and one lateral is going into the Three Forks formation. Someone has stated that Hess is only reporting the production from the middle Bakken. I do not know if that is accurate, and, if it is, how one can measure just one of the laterals that both enter the same vertical.

SSN Update on Fracking in Stockyard Creek -- Bakken, North Dakota, USA

Update:

March 31, 2011:

Since last report, the 16th and final stage of the stimulation was pumped.
The restricted flow back revealed a maximum oil rate of 1,320 bopd.
Gas rates are about 1 million cubic feet per day; the gas sales line was connected after four (4) days of flaring, so both products are already being marketed and generating cash flow.