Investors Only: COP to Sell $5 - $10 Billion in Non-Core Assets. Proceeds For Stock Buyback and CAPEX.

Link here.

ConocoPhillips unveiled plans to sell an additional $5 billion to $10 billion in non-core assets over the next two years and said it will use the proceeds to fund its share buyback and capital expenditure programs.

The move, announced at the company's analyst meeting in New York, had been expected by some analysts. Chief Executive Jim Mulva told analysts the company plans to sell a total of $12 billion to $17 billion in assets in a three-year period.

Incredibly Bullish Story on Oil: China's Oil Demand 2nd Highest on Record

Recent demand -- 2nd highest in China's history -- comes two months after China set record for greatest demand for oil.

China's apparent oil demand in February rose 10.1% year over year to 36.65 million metric tons (mt), or an average 9.58 million b/d, according to Platts' analysis of Chinese government data. This is the second strongest demand level on record, occurring two months after hitting an all-time high.

Oil demand in February was 4.2% higher than January's 9.19 million b/d, and just a tad lower than the all-time high reached in December of 9.62 million b/d. The rebound in oil demand, after a dip in January, was attributed to increased crude throughput by several refineries ahead of scheduled turnarounds and higher production by other plants coming back from planned maintenance.

This comes before the Japanese nuclear disaster. 

For comparison, according to Wikipedia:

• US oil consumption is approximately 21 million bbls per day. Domestic production is only 6 million bbls per day. 

If North Dakota gets to 1 million bbls/day, North Dakota will be producing 1/6 of America's domestic oil, assuming current trends in the US continue.

Higher Gas Prices Haven't Decreased Demand

I don't know if posting these stories has any useful value; the information is otherwise widely disseminated. Be that as it may, I found it interesting: gasoline consumption continues to increase in the United States despite increased cost.

I don't know if I've ever seen any statistics on "necessary" driving vs "discretionary" driving vs "purely recreational" use of gasoline and/or diesel.

Something tells me that once we got above $3.00, "purely recreational" and "discretionary" driving started dropping. Common sense tells me that increased gasoline demand is due to increased economic activity.

This has to be a bullish indicator.

Interestingly, this comes when newer cars and trucks have better fuel mileage. All things being equal, if automobiles are getting better fuel mileage, gasoline demand should be going down. For gasoline demand to be going up despite better fuel mileage AND higher prices speaks volumes about economic activity in the country.

Remember, also: the number one selling vehicle in the US in January (or was it February?) was the F-150 Ford pick-up. Pundits remind us that US economic activity can be indirectly measured by sales of pick-up trucks.

It's hard not to be bullish.

Updating the Sanish / Whiting -- Bakken, North Dakota, USA

I am in the process of just looking at the total production of 30 - 50 wells chosen completely by random in the Sanish oil field. I am about half way through, but you can see some incredible numbers if you click here.

All of these wells are very, very good. Some of these wells are great. And a few are downright staggering.

No New Permits -- But Many Wells Reporting -- Bakken, North Dakota, USA

No new permits today, but many, many wells reporting IPs, etc., some of which have been reported earlier. Reported elsewhere.

One More Example of Gradual Shift From Nuclear to Fossil Fuels

The Saudis will partner with their counterparts to build a 200,000 barrel-per-day refinery in Yunnan Province, China.

The proposed refinery will be designed to process 200,000 bpd of Arabian crude oil and will produce high-quality refined products, such as ultra low-sulfur gasoline and diesel that meet current and future China products specifications.

Yunnan province is China's most southwestern province. It is one of its poorest provinces with much poverty. It is also one of the most beautiful parts of China. I suppose one could imagine the Everglades with poverty.

President Obama Encourages More Off-Shore Drilling ...

.... off Brazil.

I reported this first yesterday, but new source.

I can't make this stuff up.

These are not my comments:

Congressional Documents and Publications
March 21, 2011 

WASHINGTON, D.C., March 21, 2011 - While gasoline prices in the U.S. continue to near the $4 mark, President Obama has finally embraced increased offshore oil production. Too bad it's in Brazil and not in the United States.

During remarks at the CEO Business Summit in Brazil this weekend, President Obama stated:

"We want to help with technology and support to develop these oil reserves safely, and when you're ready to start selling, we want to be one of your best customers. At a time when we've been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy."

Since taking office, President Obama has repeatedly blocked access to U.S. oil and natural gas production - including withdrawing onshore leases, imposing a de facto moratorium in the Gulf of Mexico and placing huge portions of the United States' offshore areas off-limits to new drilling. It's troubling that the President would promote oil production abroad while blocking it here at home.

Drilling Down in the Sanish -- No, Drilling Is Not Down -- "Drilling Down" into the Data -- Bakken, North Dakota, USA

For newbies, who want to get a quick visual example of how two different companies are approaching the Bakken, it is very, very easy. Go to the NDIC web site, download the GIS map server, and zoom in on the Sanish oil field and the Parshall oil field.

Compare the two fields side-by-side. The Sanish oil field is "owned" by Whiting. The Parshall oil field is owned by EOG.

EOG got a head start on WLL in these respective fields, at least from my perspective. EOG had some great wells early on in the Parshall but recently their wells seem not so spectacular. Today, there is one rig operating in the Parshall. Meanwhile, there are eight rigs operating in the Sanish.

EOG has barely begun putting in development or infill wells. Whiting appears to be moving as quickly as possible to develop their Sanish field. The strategy of Whiting appears to use the Sanish as their cash cow to develop fields elsewhere.

EOG has mostly short laterals in the Parshall (I assume that will change) and placing one well in each section. Whiting is all about long laterals, and is putting up to seven wells in a 1280-acre spacing unit.

Just to see what Whiting's experience has been in the Sanish, I simply went to the GIS map server, and went across the map, typing in file numbers, and then looking up production data. There was no rhyme or reason to how I picked the file numbers, and a few non-Whiting wells showed up. But look at that: compare head-to-head the Whiting wells (IPs about 2,000 to 4,000) with the IPs of Fidelity (300 - 600). But enven with low IPs, Fidelity's total production slowly gets to 100K, the generally accepted number at which the wells are close to being paid for (at the wellhead).

Here are updates of 30 to 50 wells in the Sanish that are off the confidential list (Whiting wells unless otherwise stated) (IPs in red; the last "figure" is total production as of 1/11):

T154N-R92W

• 18268, 997, t1/10; cum 156K 9/14;
• 19044, 1,866, t10/10; cum 226K 9/14;
• 19025, 1,361, t11/10; cum 186K 9/14;
• 17091, FIDELITY, 575, t7/08; cum 158K 9/14;
• 19081, FIDELITY, 788, t2/11; cum 157KK 9/14;
• 19080, FIDELITY, 877, t10/10; cum 188K 9/14;
• 17642, FIDELITY, 810, t4/09; cum 122K 9/14;
• 17641, FIDELITY, 448; t7/09; cum 111K 9/14;
• 18350, FIDELITY, 904, t6/10; cum 170K 9/14;
• 17879, FIDELITY, 145, t2/11; cum 67K 9/14;
• 17056, FIDELTIY, 419, t8/08; cum 149K 9/14;
• 17098, FIDELITY, 516, t9/08; cum 178K 9/14;
• 19291, 1,851, t11/10; cum 221K 9/14;
• 18342, 1,274, 4/10; cum 278K 9/14;
• 19029, 2,411, t10/10; cum 297K 9/14;
• 18928, 1,890, t8/10; cum 330K 9/14;
• 19517, 1,870, t2/11; cum 293K 9/14;
• 18318, 1,759, t2/10; cum 320K 9/14;
• 18711, 4,126, t7/10; cum 387K 9/14;
• 18347, 2,074, t5/10; cum 242K 9/14;
• 16953, FIDELITY, 440, 4/09; cum 212K 9/14;
• 18302, FIDELITY, 555, t3/10; cum 149K 9/14;
• 17102, FIDELITY, 337, t9/08; cum 147K 9/14;
• 17652, FIDELITY, 403, t2/09; cum 182K 9/14;
• 18345, FIDELITY, 997, t5/10; cum 181K 9/14;
• 19195, 2,654, t12/10; cum 316K 9/14;
• 18167, 1,337, t9/09; cum 234K 9/14;
• 18055, 1,316, t9/09; cum 269K 9/14;
• 18570, 3,475, t8/10; cum 394K 9/14;
• 18462, 2,249, t4/10; cum 426K 9/14;

T154N-R91W

• 18085, 1,370, test date 10/09, 132K
• 18176, 1,731, test date 2/10, 124K
• 19355, 3,159, test date 1/11, 17K
• 18247, 2,080, test date 11/09, 178K
• 18244, 3,014, test date 1/10, 186K
• 18530, 2,686, test date 5/10, 226K
• 17092, 3,027, t6/08; cum 1,001,579 9/14;  (at $50/bbl = $50 million)
• 17872, 1,814, test date 5/10, 185K
• 18298, 3,422, test date 1/10, 251K
• 19502, 2,720, test date 2/11, no data
• 17154, MUREX, 221, test date 7/08, 245K
• 18409, 2,404, test date 3/10, 244K (at $75/bbl = $18 million in less than one year)
• 17338, FIDELITY, 352, test date 1/09, 194K
• 18408, MUREX, 1,945, test date 2/10, 330K

T153N-R92W

• 16092, 92, test date 6/06, 24K
• 17964, 571, test date 6/09, 61K
• 17827, 865, test date 6/09, 94K
• 19242, 1,667, test date 10/10, 41K
• 17284, 1,152, test date 11/08, 86K
• 18947, 2,595, test date 10/10, 54K
• 17285, 1,207, test date 3/09, 89K
• 18762, 1,146, test date 6/10, 49K
• 18990, 1,054, test date 9/10, 38K
• 17717, FIDELITY, 292, test date 2/08, 107K
• 17898, SINCLAIR, 912, test date 3/09, 107K
• 16750, SINCLAIR, No IP, test date 12/07, 103K
• 17157, 1,176, test date 5/09, 97K
• 19082, 697, test date 1/11, 12K
• 16734, 945, test date 3/08, 133K
• 16879, FIDELITY, 83, test date, 77K
• 17812, FIDELTIY, 660, test date 6/09, 155K
• 18743, 1,468, test date 8/10, 54K
• 17643, 1,038, test date 4/09, 109K
• 18475, 2,405, test date 5/10, 142K
• 16781, 1,923, test date 4/08, 315K
• 16463, 1,081, test date 5/07, 293K
• 18869, 947, test date 10/10, 27K
• 16833, 1,009, test date 4/08, 112K

T153N-R91W

• 18804, 1,561, test date 8/10, 46K
• 18297, 2,762, test date 3/10, 172K
• 18876, 3,023, test date 8/10, 91K
• 17133, 2,195, test date 8/08, 313K
• 18392, 2,530, test date 3/10, 141K
• 18853, 1,485, test date 7/10, 89K (# of days production way down March - May, 2011)
• 16852, 1,765, test date 6/08, 280K
• 18500, 1,073, test date 8/10, 8K (no production since October, 2010; only one month of production) (still no production after that initial month, as of May, 2011)
• 17443, 1,663, test date 2/09, 231K
• 18077, 1,773, test date 9/09, 204K
• 17158, 4,184, test date 10/08, 549K, Richardson Federal 11-9H
• 17917, 1,782, test date 5/10, 162K
• 17700, 3,405, test date 4/09, 317K, Rigel State 11-16H
• 18278, 2,894, test date 1/10, 199K, Rigel State 12-16H; one year of production!
• 17134, 3,115, test date 11/08, 279K, Smith 11-20H
• 16731, 1,323, test date 12/07, 338K, Locken 11-22H
• 18531, 3,863, test date 6/10, 146K, Hansen 12-20H, one-half year of production!
• 17032, 1,934, test date 7/08, 230K
• 17908, 3,226, test date 3/10, 151K
• 16731, 1,323, test date 12/07, 339K
• 16780, 2,247, test date 1/08, 331K
  

T152N-R92W

• 16068, 104, test date 5/05, 126K; Bartleson 44-1H; it took awhile but this well has paid for itself; now producing at 1,500 bbls/month; seems to have leveled out
• 19364, 874, test date 1/11, 8K
• 17337, 1,020, test date 5/09, 102K
• 16905, 1,135, test date 9/08, 143K, Brehm 44-5H
• 18882, 1,527, test date 7/10, 84K
• 18724, 1,251, test date 6/10, 59K
• 17552, 843, test date 2/09, 105K
• 16902, 791, test date 7/08, 249K, Lacey 11-1H, production declining slightly at 4,000 bopm
• 17326, 3,199, test date 5/10, 134K
• 17544, 2,164, test date 5/09, 194K
  

T152N-R91W

• 17072, 
• 18477,
• 17579,
• 16845
• 17912,
• 18109,

More to follow

Note: this is not an investment site. I am inappropriately exuberant about the Bakken and the oil and gas industry. The "easy money" has been made in the Bakken. It may still be in the growth stage, but it is clearly transitioning to a value (development) stage. I am impressed with the strategy that Whiting has chosen.

George Bush Had His Osama Bin Laden ...

Hussein Obama had his Colonel Khadafi ...

And Ahab had his Moby Dick ...

From Wikipedia:

Ahab ignores this voice of reason and continues with his ill-fated chase. As the three boats sail out to hunt him, Moby Dick damages two of them, forcing them to go back to the ship and leaving only Ahab's vessel intact. Ahab harpoons the whale, but the harpoon-line breaks. Moby Dick then rams the Pequod itself, which begins to sink. As Ahab harpoons the whale again, the unfolding harpoon-line catches him around his neck and he is dragged into the depths of the sea by the diving Moby Dick. The boat is caught up in the whirlpool of the sinking ship, which takes almost all the crew to their deaths.

Wow, that couldn't be more perfect. And I can't make this stuff up.

Natural Gas Is Not Economical In North Dakota -- Bakken, North Dakota, USA

Update

Yup. Less than an hour later after posting the original note below, CNBC's Erin Burnett had a segment on natural gas. It was noted that XOM is now the biggest American natural gas E&P company and shifting its focus toward a 50/50 mix of oil/natural gas.

Then, just a few minutes ago (March 23, 2011, 11:00 a.m. EST, I come across this article: XOM Touts Importance of Natural Gas for Future Energy Needs. Incredible timing. 

Original Post

The director of the NDIC has said many times that natural gas is not economical to gather and produce in North Dakota ... yet.

When I was growing up in North Dakota, it was often said that that part of the world was God's country.

Maybe.

Today, a Bloomberg headline: US Natural Gas Output May Get Boost From Japan Nuclear Crisis

The $99 trillion U.S. natural-gas industry, led by Exxon Mobil and Chesapeake Energy, is prepared for a surge in demand as Japan's nuclear crisis shakes confidence in atomic energy ...

Natural gas futures have risen 11 percent since the March 11 record earthquake and tsunami in Japan spurred a round-the- clock battle against a meltdown of nuclear reactors there. Futures gained as much as 0.5 percent to $4.275 per million British thermal units on the New York Mercantile Exchange and were at $4.264 at 11:11 a.m. in Singapore. Nymex gas contracts for delivery in March 2015 touched $6.083 on March 16. The contract has since fallen 1.5 percent to $5.99.

Production of the heating and power-plant fuel can be ramped up within months, thanks to the industry’s ability to extract gas cheaply from vast shale deposits in North America ...

By the way, XOM recently announced it was going to move back toward natural gas, something that caught many of us by surprise, and was quite contrary to what the rest of the industry was doing.

I doubt the crisis in Japan will change the natural gas situation in North Dakota overnight, but the nuclear disaster is just one more undeniable sign that Boone Pickens is right: natural gas is the bridge to our energy future.

I couldn't be happier. I've been accumulating shares in companies engaged in natural gas for years. I think there is more upside potential for natural gas than for oil. If oil goes up another dollar, that's less than one percent. If natural gas goes up one dollar, that's 25 percent.

Note: this is not an investment site. I am inappropriately exuberant about the Bakken and the oil and gas industry. No one should construe anything I write as being investment advice.

Whiting's Incredible Wells -- Bakken, North Dakota, USA

Later today, if I have have time I'm going to review thirty to fifty Whiting wells that have been on-line for at least one year, just to remind folks how incredible the Bakken is.

But for now, I highly recommend folks go back and look at some of the monster wells in the Bakken and wells with high initial production numbers. There have been so many incredible Bakken wells, I no longer post wells with IPs less than 2,000 on that page (with some exceptions); there would be just too many to post. It's funny. The typical non-Bakken well ten years ago: we were happy to get a well with an IP of 300. Then when it went to 600 in the early boom, folks got very excited. I remember folks being upset when "their" well came in with an IP less than 1,000. And they debated the merits of the relevancy and accuracy of these IPs. It appears that BEXP was right. CLR says high IPs mean a) that the wells will be paid off more quickly; and, b) that EURs will be higher. Whiting, Newfield, and Oasis are others that have been most consistent with 1,000-bbl IPs.  Hess and EOG continue to disappoint, but they may have other strategies. Now that we have three years of production, it will be interesting to compare the WLL wells in the Sanish with the EOG wells in the Parshall.

I had forgotten how incredible the Bakken has been and continues to be. I forgot who said it, but I will find it: an experienced oilman, with more than 30 years of experience in the oil patch, says that with regard to the Bakken, he has never seen anything like it.

Now that we've got two to three years of production history in the North Dakota Bakken, it will be "fun" to look at how some of these wells have done.

As a rule of thumb, a Bakken well needs to produce 100,000 bbls of oil to "show" that it will pay for itself. It appears that "every" Bakken well will hit 100,000 bbls by five years, most by three years, may by two years, and some in 18 months or less. Is five years a long time? Most analysts expect Bakken wells to go on producing for 25 - 30 years.

Bakken wells "hold their leases by production."  The lease remains in effect for an "eternity." While producing, that well holds that spacing unit, and 30 years for me, is an "eternity."

We have barely seen any "development" or "infill" wells except in some areas. Most of the wells completed before 2010 were completed with an inadequate number of frack stimulation stages and those wells will be re-worked and re-fracked.

So, enjoy the links above, and hopefully I have time to update 30 - 50 Whiting wells that have been producing for at least one full year.

Remember: this is not an investment site. From my perspective, the "easy" money has been made in the Bakken. The Bakken has finally been "discovered" on Wall Street where analysts understand spreadsheets but do not understand the oil patch. I am inappropriately exuberant about the Bakken but that doesn't mean I'm inappropriately exuberant about investing in the Bakken.