Short Vs Long Lateral Fracks in Canadian Bakken Just North of North Dakota Bakken -- Implication for Spearfish Wells in Bottineau County, North Dakota -- Surge/Corinthian Acquires Ritchie's Bottineau Spearfish Wells

Updates

July 29, 2012: from a reader:

It does appear that Surge believes Madison/Mission Canyon may be a second target from the Spearfish. Even though NDIC names the Spearfish to be Spearfish Madison, the drilling lands in the Spearfish on the 15 or so wells that EOG, Corinthian and Legacy have drilled since horiz drilling started in 2009 in Bottineau County. Most of the older wells in this area of ND targeted the Madison using vert drilling. These are now stripper or abandoned. It will be interesting to find out more about the Mission Canyon hearings as these are right in the middle of what has been for the last 3 years an attempt to establish a Spearfish play. If the objective is Mission Canyon, then these two wells will be slightly deeper as the Spearfish overlays the Madison in this area. It will also will be interesting to find out if horiz Madison is the objective. Sure seems as tho Surge saw something on the seismic in mc and want a closer look.

Original Post

I'm not sure how important this is, and I'm not quite sure if it has any relevance in the Bottineau Spearfish wells, but until it is sorted out, I don't want to lose the link.

This is a PDF of a study comparing fracking long and short laterals in the Canadian Bakken just north of North Dakota.

I'm attaching a Spearfish label even though this has to do with the Bakken.

My interest in this is piqued by the recent acquisition of the Ritchie Bottineau Spearfish wells by Surge Energy/Corinthian Energy. According to Surge Energy's March 8, 2011, corporate presentation, slide 7, Surge Energy has drilled approximately 100 horizontal wells in the Canadian Spearfish between January, 2008, and April, 2010.

On slide 15 of that presentation, it is noted that Surge has drilled five (5) horizontal Spearfish wells just on the other side of the North Dakota border. It is costing them $1.2 million to drill a well, compared to $6 - 8 million for a typical North Dakota Bakken well.

Based on the well file reports and the GIS map server it appears the two Bernstein Spearfish wells were simply fracked vertical wells. Surge's core competency is horizontal fracturing of the Spearfish and it's very likely that Surge will go back into the Bottineau Spearfish wells and put in horizontal laterals.

Oil Hits Highest Price Since Recession; Oil Consumption Will Continue to Rise

Link here.

We went into the weekend with oil solidly above $105 and this price appears sustainable. In fact, there are few indications that the price won't continue to rise over the next few weeks:

• Mideast heating up; Bahrain/Saudi story may be more troublesome than some think
• Libya's oil industry is off-line for the foreseeable future
• US driving season just about to begin
• Japan switching to fossil fuels
• Japan's rebuilding yet to start
• US domestic drilling program in decline; glimmers of hope in the Gulf but deep water drilling rigs have moved to off-shore Africa
• China will re-assess role of fossil fuels vis a vis nuclear energy
• Canadian pipeline to US stalled for another year

Comments from the linked article:

Oil prices hit another post-recession high this week as economists said the world will keep consuming more petroleum even with this month's destruction in Japan and the wave of uprisings in North Africa and the Middle East.

China's oil demand has jumped 15 percent this year. Analyst Sudakshina Unnikrishnan has raised her forecast for the average price of benchmark oil to $106 per barrel this year from $91.

Meanwhile, major oil producers like Saudi Arabia already have cranked up production to make up for lost Libyan oil. While this increases the flow of oil right now, it also cuts off spare production that could have been tapped later this year to meet increasing world demand. Spare production capacity, which was thought to be around 5 million barrels per day earlier this year, has since dropped to about 3 million barrels, Unnikrishnan said.

Another Company Fed Up With High Income Taxes -- CAT -- Nothing To Do With The Bakken

Updates

March 30, 2011: Fascinating discussion on CNBC this a.m. The discussion featured a "60 Minutes" piece on Transocean (RIG) moving headquarters to Switzerland some years ago for tax reasons. It turns out that RIG is not the only company doing that. Without getting into specifics, CNBC "Morning Joe" noted that CNBC's parent company GE was also moving subsidiaries overseas for tax reasons. A graphic behind the panel showed the corporate tax rate for the US at 35%; Ireland at 12- 13%; and, Switzerland at 15% (or thereabouts). I knew there was a discrepancy in corporate rates, but I did not know it was so great. One can see the list here.

An additional tax that was not raised in this discussion was the payroll tax that is "matched" by the corporation and thus a cost to the employer. The payroll tax is as high as 15 percent in the United States. There is no payroll tax in Switzerland, and it is 10 percent in Ireland. 

Original Post

A few weeks ago I posted a couple of articles about Fidelity Investments moving some of their operations out of Massachusetts to New Hampshire and/or Rhode Island due to high income tax rate in Massachusetts.

For the same reason Minnesota icon Marvin Windows is moving its manufacturing plants out of Minnesota to neighboring North Dakota.

Now, another similar story, but one that is even bigger. Caterpillar is considering moving its headquarters out of Illinois.

In a letter sent March 21 to Gov. Pat Quinn, Caterpillar chief executive officer Doug Oberhelman said officials in at least four other states have approached the company about relocating since Illinois raised its income tax in January.

"I have been called, 'cornered' in meetings and 'wined and dined' -- the heat is on," Oberhelman wrote. "Before, I never really considered living anywhere else and certainly never considered the possibility of Caterpillar relocating. But I have to admit, the policymakers in Springfield seem to make it harder by the day."

Minnesota, Illinois, and Massachusetts. Hmmm.

A reader reminded me that Boeing moved from Washington state to Chicago for tax reasons. (I mistakenly thought it was to be closer to United in Chicago but that apparently had nothing to do with decision to move. It was all about taxes.)

Illinois agreed to provide Boeing with up to $41 million in tax breaks and various state grants over 20 years, while the city of Chicago offered an additional $19 million in property tax relief over a similar period and a $2 million grant. 

ATT moved its headquarters out of Texas several years ago (but not for tax reasons, as far as I know). The point is this: corporations can and do relocate. 

CAT is a global company. There is no reason it has to remain in the United States. Transocean (RIG) moved to Switzerland a couple of years ago due to US federal income tax and regulatory climate.

Producing Diesel Fuel and Jet Fuel From Natural Gas

A company called Syntroleum does that: it makes diesel fuel and jet fuel from natural gas.

Motley Fuel has an article titled "Four Companies With Tomorrow's Fuel," and then they showcase five companies. Whatever.

They are all interesting but Syntroleum making diesel fuel and jet fuel (for the USAF) from natural gas is most intriguing.

Apparently Sasol (SSL) and Shell are the leaders in this technology (making liquid fuel such as diesel from natural gas).

RINs: Terminology Explained

In the process of looking something else up I ran across RINs: RINs are "renewable identification numbers.

The EPA requires that each gallon of renewable fuel produced have a unique serial number attached to it.

Is that not incredible? Each gallon of renewable fuel produced must have a unique serial number attached to it.

So, those folks producing ethanol must have a unique serial number attached to every gallon -- every gallon -- of ethanol produced. I find that amazing.

And then producers can trade RINs. If a producer produces more renewable energy than needed, they can trade them to another producer who needs them to make their quotas. RINs have become a currency in the fuels industry. Sort of like "cap and trade." ENRON would have made a killing trading RINs. 

For more about RINs, this is a great site: Got RINS? At renewableenergyworld.com.

One more reason I love maintaining a blog: the things one runs across.

CLR Completes Public Offering of 10 Million Shares -- $600 Million

Link here.

Public offering complete; raised $600 million; sold about 10 million shares. Not all of the over-allotment was sold. I don't know much about "over-allotments" but it is interesting that not all shares offered were sold.

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

Producers: BEXP (2), EOG, Whiting, XTO, OXY, SHD, Anschutz, and Hess

Fields: Parshall, Ellsworth, Dimond, Deep Water Creek Bay, St Anthony, Ray, and two wildcats.

The two BEXP wildcats will be on the same pad in McKenzie County.

The Whiting well will be in Ellsworth oil field; it's a small field south of Arnegard in a fairly quiet area.

Also, in today's daily activity report, it was noted that seventeen wells in Bottineau County changed operator. Corinthian Exploration (USA) Corporation has now acquired these seventeen wells, including the recent Bernstein wells. They used to be operated by Ritchie Exploration. I assume Corinthian Exploration is related to Corinthian Energy headquartered in Calgary, Alberta, but do not know for sure.   When you go to www.corinthianenergy.ca you end up at a website for Surge Energy.

For Investors Only: Reminder -- How To Invest in Slawson -- Bakken, North Dakota, USA

I've opined many times before how good the Slawson wells are, and I know there are folks standing in line to buy shares in Slawson if it were to ever go public.

The good news is that there are other companies that partner with Slawson. Two that I know of are NOG and GEOI.

GEOI's most recent press release (March 24, 2011) has a number of great wells. It turns out that most of them are Slawson-operated.

In addition, GEOI mentions Resolute Energy:

To date, we have acquired approximately 25,000 net acres in our Williams County project, generally representing a 47.5% working interest, within an area of mutual interest (“AMI”) being developed with a subsidiary of Resolute Energy Corporation and another industry participant. We are the operator for our group. Assuming full development on 1,280 acre spacing units, our group has varying interests in 100 units. Our intent is to accelerate drilling and we plan to add a second drilling rig during the summer. 

The other industry participant is unnamed but might be Slawson. 

NOG: Up 3.5% Today -- Bakken, North Dakota, USA

It's amazing how things work out. About a week ago I posted something to the effect that we might be seeing a fourth opportunity to invest in the Bakken. That was on Sunday, March 20, 2011.

A day later, March 21, 2011, a Street Sweeper.com article came out questioning the valuation of NOG. Most retail investors did not see that article until a couple days later. I would have completely missed it had someone not sent me a link which I immediately shared on the blog. I posted it as soon as I got it.

Talk about a gut check for long term holders of NOG.

If I thought we were seeing a fourth opportunity to invest in the Bakken last weekend, this pullback in NOG was an outstanding opportunity for folks to get in who might have missed it earlier.

But for those holding NOG, and or those who had recently bought NOG at $30 or higher, it was a gut check.

It appears that NOG has leveled off, was perhaps oversold, and is now going back up. Up 3.5 percent today. In addition, I have been seeing more reports that NOG is doing just fine. (I don't follow VOG very closely, but my gut feeling is that VOG is a johnny-come-lately, and if given the choice, I would take NOG before VOG. But I have missed some great opportunities in the Bakken, and VOG might be a better choice for some folks, especially for traders.)

On top of that, the price of oil will end the week above $105. The leaders in the market today have been energy, and if you go to the sidebar at the right, you will see that everything (with one or two exceptions) is "green."

As noted, on Sunday a week ago, I posted that this looked like a fourth opportunity to get into the Bakken.

It's been an interesting week.

Note: this is not an investment site. These are my observations only.  I found that I cannot tell the Bakken story without observing investment angles. I'm making no recommendations. Simply conversational observations.

Again, for those who need reminders, three things.

• First, Hess said that the Bakken was robust at $40 oil (folks, we're at $105, which appears sustainable).  
• Second, look at the Whiting wells in the Sanish, just to get an idea of what the Bakken can produce. Folks, these are incredible wells, and there are no "dry" wells in the Bakken.
• Third, leases are held by production for "eternity" (my definition of "eternity" elsewhere).

QEP Hitting 52-Week Highs -- CNBC, 1:30 p.m. -- March 25, 2011

QEP hitting 52-week highs.

QEP was a "spin-off" of sorts from Questar in last year or so.

QEP has 89,000 net acres in the Bakken, mostly inside the reservation, a very good area. 

This site has several postings on QEP from the very beginning. This supports something I've said before: one could almost acquire shares in any Bakken company starting two years ago and do well. Going forward it's a bitter tougher, but recent pullback on Bakken-related shares due to NOG issue provided another opportunity.

Note: this is not an investment site. I am inappropriately exuberant with regard to the Bakken and my postings. I am much more exuberant in my posting than I am with regard to investing; I remain very conservative in my holdings. This is an educational site; I tried the site without referencing investment sites  but it is impossible to tell the Bakken story without citing investment angles. To some extent, and maybe a major extent, share prices of Bakken companies reflect enthusiasm in the Bakken for continued growth rather than current earnings.

North Korean Food Supplies Running Out -- Not a Bakken Story

Link here.

North Korea's government food distribution programme will run dry in May, 2011. 

This is what caught my eye:

The UN World Food Programme, which resumed sending food aid to North Korea in 2006, blamed flooding, foot-and-mouth disease, and an unusually cold winter for devastating food supplies to the country.

I have long used this blog to voice my skepticism regarding global warming caused by man (but I keep my non-Bakken posts to less than 90 percent of overall content).

Based on photos and history of the Korean War, my concept of North Korea is a country with very cold winters. To read that the country had yet another "unusually cold winter" is interesting considering all the years we've supposedly had global warming. By now, I would have thought it would have gotten warmer in North Korea. It's been 60 years of increased industrialism since the Korean war, and yet, the winters remain unusually cold.

As JRR Tolkien said, we all have our myths.

On another note, go back and read the reasons why the UN says North Korea's food distribution programme will run dry. It is interesting that "inept government" and/or "corrupt government" did not make the list of reasons why North Korea is running out of food.

CNBC Opening Bell and Opening Comments -- Nothing About the Bakken

Updates

April 28, 2011: GE sees best profit outlook in a decade. Skip the article. Read the comments.


April 21, 2011: GE's profit jumps 77 percent and pays no income taxes; increases dividend for third time in one year. For those who might have forgotten, the GE/CEO is the administration's economic czar. I can see why -- making that much money and not paying federal income taxes.

March 31, 2011: When I first posted the GE story, it was mostly a throw-away post. I thought it interesting but not much more than that. Little did I think it was going to become a big, big story. Today it's the front page story on CNN.com. 

March 31, 2011: The story about GE not paying US federal income tax keeps getting more embarrassing for the administration and GE. GE says they did not pay any US federal income tax in 2010 because the company last $32 billion in the financial banking meltdown. He said today on CNBC that when things get back to normal, GE's effective tax rate would be back to its more normal "teens to 20's." In fact, the last year that GE paid federal income tax, their rate was 9 percent. The corporate statutory rate is 35%. GE owns 49% of CNBC. Comcast owns 51% of CNBC. Comcast's tax rate this year was 41%.  GE's CEO is the president's economic adviser. (Note: This was CNBC as I heard it at 2:20 p.m., March 31, 2011. I believe what I typed was accurate.)

March 28, 2011: After posting the comment about GE not paying taxes this year (as reported by CNBC), someone wrote me saying that XOM had not paid US federal taxes in years. Of course, that was incorrect, and was discussed in the comment section below.  Interestingly enough, CNBC touched on this subject again today, and put up two slides. The first slide listed four Forturne 500 companies that paid less than the statutory corporate tax rate (35%). That slide did not include any oil companies. The second slide had three companies, and the top two were XOM and COP. XOM had an effective 42% US federal tax rate for 2010, and COP had an effective 41% US federal tax rate for 2010, double the average tax rate paid by Fortune 500 companies. The average effective tax rate paid by Fortune 500 companies is 20%. The good news: if XOM and COP have effective tax rates above 40%, they both had very good years. ATT had a negative tax rate for 2010 according to CNBC, which I assume means they carried losses forward (with or without a gain this year) to result in no taxes being paid, and carrying tax losses forward.

Later, same day as original post: I've raised the issue some time ago about President Obama appointing GE/CEO as the nation's economic czar. Others are joining the fray now that "we" learn that GE paid no federal income taxes last year. 

Original Post

CNBC opening bell:

GE paid no taxes last year; took bailout money; CEO is economic czar.

Can't make this stuff up. GE paid no taxes last year -- if true, I paid more taxes than GE last year. CNBC pundits want corporate tax rate cut. What am I missing?

GE is diversifying rapidly into oil. I guess GE wants to to get into an industry where they can pay some taxes.

Here's the printed media link. 

By the way, send me the links of US oil companies not paying any federal income tax and I will link them, also.

$200 Oil -- This Author Says "No Way" -- Seeking Alpha ... but read the fine print...

Link here.

People who write about oil going over $200 are full of nonsense. It's extremely unlikely that oil will be trading for over $200 on any kind of sustained basis in the near future.

I agree. But it is interesting the qualifying statement the author makes: "... on any kind of sustained basis in the near future."

So even author admits that we could see a spike to $200 oil.

As I've been posting for the past few days, folks are talking us into, or saying it another way, folks are preparing us for $120 oil on a sustained basis.

Having said that, some folks will say we will see $60 oil, or $80 oil, pick your number, before we see $120 oil. I certainly have no idea. But it certainly makes for a more interesting Bakken if it wasn't already exciting enough for you.

50,000 bbls at $120 = $6 million. About the cost of a Bakken well. And "every" Bakken well reaches 50,000 bbls by the end of the first year. Many reach that milestone in six months. Some in three months.

Why Federal Government Has Us With $14 Trillion in Debt ...

... they can't do simple math.

I make math errors on this blog, and when I do, someone usually corrects me pretty correctly.

Whenever a Federal director makes a major speech, you can bet it was written by others, vetted, researched, and edited before it is finally given.

That's why it is so surprising that the Federal government overestimated the value of the recent Wyoming coal deal by a factor of 10.

Instead of $20 billion going to government coffers, the "huge" deal announced by Secretary of Interior will add about $2 billion to state coffers, and that's over several years. That's a huge error. Had the state government worked their budget on a $20 billion windfall, it would have been devastating to learn that "hey, it's only $2 billion."

To put that in comparison, the Bakken is adding about half a billion to one billion dollars to the North Dakota state coffers annually. I could be way wrong on that; I haven't looked at the numbers lately. Someone can check my numbers.

Anything To Kill the Domestic Drilling Industry -- San Angelo Standard-Times

If you think the price of oil is high now and going in the wrong direction, just wait a few years.

One of the themes I stress on this site is the administration's goal to destroy the domestic oil industry. In fact, I have a full section devoted to that. See the sidebar at the right; you will need to scroll down a bit.

I am not alone. Today I wake up to a great op-ed in the San Angelo Standard-Times (Texas).

Consumers beware! If you think that the recent rise in energy costs hurts your pocketbook, just wait a few years after the Obama administration and some members of Congress get through putting the domestic oil and gas industry out of business.

Consumers will be more susceptible to shortages of energy and price volatility. The reality is if Washington makes it more costly and difficult to extract hydrocarbons from beneath U.S. soil, the more vulnerable Americans become to imported oil.

Washington's assault includes proposed changes to the tax law and more restrictions on oil and gas.

The president has proposed in his 2012 budget repeal of tax provisions to apply primarily to independent oil and gas producers, who drilled 96 percent of the wells in Texas in 2009 and produced 88 percent of the oil and natural gas. Some members of Congress have demagogued the issues by claiming Obama's proposal would end subsidies for Big Oil, but actually the tax provisions apply to small, independent producers that drill and produce in the U.S.

On the regulatory front, the Environmental Protection Agency in the last year issued new regulations of carbon dioxide emissions, taken over the air permitting procedure from the state of Texas, and falsely accused a natural gas company of water well pollution.

I think the breaking point was the EPA falsely accusing Range Resources, something I picked up on in my post title "Avoiding an Erin Brockovich Moment."

Oil to $140 by June -- Bank of America Merrill Lynch

Last night before going to bed I added this statement to this posting:

One almost gets the feeling there is a self-fulfilling prophecy to get oil to $120. 

It is interesting that this morning I wake up to this story:

• Oil prices could temporarily break through $140 a barrel in the next three months due to the political situation in the Middle East, the Bank of America (BofA) says in its latest weekly Merrill Lynch global report on energy. 

I think "we" are talking ourselves into $120 oil or higher. The guys that write these articles have years of experience. It's hard to argue against them.

And whether one agrees or not, the fact is that a major bank / investment house is making decisions and recommendations based on oil going to $140. 

I see oil is up slightly today (futures).

SeekingAlpha: Oil Stocks With Low PEG Ratios

Link here.

More later.

This is not an investment site. It should not be construed that such links are recommendations. But I have found it difficult to cover the Bakken story without including links to investment sites.