Schlumberger Profits Up 40 Percent; Revenues up 55 Percent; On Strength of US Drilling Boom

Link here.

Weather and Libyan unrest/civil war hurt SLB's earnings, but still very robust, and underlying strength in oil patch remains robust.

Rigs By Operators: 176 Active Rigs -- New Record

[A big "thank you" to Rory for providing the data below.]

Notice:

• CLR has 23 (one more than their recent corporate presentations)
• KOG has added a third rig
• Fidelity (MDU) has added a second rig
• Hess with 20 due to last year's acquisitions (TRZ and AEZ)

Breakdown

CONTINENTAL RESOURCES    23
HESS CORPORATION    20
WHITING OIL AND GAS CORP    15
EOG RESOURCES INC    11
ANSCHUTZ EXPL CORP    8
BRIGHAM OIL & GAS LP    7
PETRO HUNT LLC    7
SLAWSON EXPLORATION    7
MARATHON OIL CO    6
NEWFIELD PROD CO    6
XTO ENERGY INC    6
BURLINGTON RES O&G CO    5
DENBURY ONSHORE    5
OASIS PETRO NO AMER    5
HUNT OIL COMPANY    3
KODIAK OIL & GAS (USA) INC    3
MUREX PETROLEUM CORP    3
SAMSON RESOURCES CO    3
ZAVANNA LLC    3
ZENERGY INC    3
ZENERGY OPERATING CO LLC    3
BAYTEX ENERGY USA LTD    2
FIDELITY EXPL & PROD CO    2
HELIS OIL & GAS CO. LLC    2
NORTH PLAINS ENERGY LLC    2
OXY USA INC    2
PEAK NO DAK LLC    2
QEP ENERGY CO    2
SM ENERGY CO    2
ARSENAL ENERGY USA INC.    1
CORNERSTONE NAT RES LLC    1
G3 OPERATING LLC    1
GADECO, LLC    1
SEQUEL ENERGY LLC    1
SINCLAIR OIL & GAS CO    1
TRUE OIL LLC    1
WARD-WILLISTON CO    1

Grand Total    176

The Case For Liquified Natural Gas; and, Oil Won't Go Below $100 Again -- SeekingAlpha

Link here.

If you think oil prices are too high now, at $100 a barrel, it's time to adjust your thinking. Truth be told, I don't think we'll see sub-$100-a-barrel oil ever again.

That's not great news for U.S. consumers ... but it could be great news for U.S. investors, because this new era of always-high oil prices is going to open the door for liquefied natural gas (LNG). Investors who accept this new oil-price reality, and position themselves accordingly, can settle back and enjoy the ride: As oil prices soar, expect LNG prices to zoom in tandem.

Administration Notes There Are Regional Differences in the Price of Gasoline

I was out and about with my granddaughters today. When I heard this on a 30-second soundbite on the five-minute, top-of-the-hour news, I thought it must be a joke: the administration is going to look into the high price of gasoline.

Let's see, let's start with Brent oil at $122 and WTI at $112.

I cannot make this stuff up. The administration is actually going to form a task group to see why gasoline costs so much.

The task force will focus some of its investigation on "the role of traders and speculators" in the oil-price surge, Obama said, and will include several Cabinet department officials, federal regulators and the National Association of Attorneys General.

In Washington, Holder said he would press ahead with the investigation, even though he did not cite any current evidence of intentional manipulation of oil and gas prices or fraud.

"Based upon our work and research to date, it is evident that there are regional differences in gasoline prices."

Regional differences in gasoline prices? Well, duh. There are regional differences in prices in just about everything.

Fidelity (MDU) Adds a Second Rig -- Bakken, North Dakota, USA

Link here.

MDU Resources Group, Inc., announced that its natural gas and oil production subsidiary has moved a second drilling rig into the Bakken oil play and is preparing to kick off a growing multi-year development program. Fidelity plans to invest about $2.1 billion over the next five years, including $306 million in 2011, to develop existing reserves and fund additional leaseholds.

Fidelity Exploration & Production Company expects the second rig to spud the TTT Ranch 33-28 well, located in Mountrail County, North Dakota next week. The well will target the middle Bakken formation.

Why Apple Moved From California to North Carolina

Folks have been wondering why Apple, headquartered in Cupertino, California, would locate its huge, new, cloud-computing data center in North Carolina.

Here's the reason: it's all about the cost of electricity. It has been...

... reveal[ed] that the company's investment in a new North Carolina facility will triple its electricity consumption, equivalent to the electricity demand of 80,000 average US homes. The facility's power will be supplied by Duke Energy, with a mix of 62% coal and 32% nuclear. 

California has just voted to increase the cost of its electricity dramatically between now and 2020.

There could be a few other reasons:

• unions (North Carolina is a Right to Work state; California is not;
• state corporate and state individual income tax rates; and, 
• minimum wages (California at $8.00 is higher than Federal at $7.25; North Carolina's minimum wage matches Federal, at $7.25)

Odds are it was significantly cheaper to build the facility in North Carolina than California and will be cheaper to operate.

In addition, there is less chance of North Carolina falling into the ocean than California due to earthquakes.  

176!

New record: 176.

That's the number of active rigs drilling in North Dakota. (This is a dynamic link, and obviously the data will change, but on this date, the number was 176.)

GE Profits up 77 Percent; Pays No Federal Income Tax; CEO is Administration's Economic Czar

Update

Link here.

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn't pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.


The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. "GE was able to utilize all of these various loopholes, all of these various deductions--it's legal," Ryan said. Nine billion dollars of GE's profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn't taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property.

I don't have a lot of problem with depreciation of property -- that's pretty standard, but the oil companies, and GE, have really made an art of investing in money-losing green energy projects: not only do they lose money providing for one way to offset income elsewhere, they get grants, subsidies, etc. in the process, and it's great advertising/marketing PR.GE's CEO is the administration's economic czar; the president's learning curve is probably straight up. Even community organizers don't do this well.

Original Post

Except for the earnings numbers, which just came out this morning, the rest of this has been reported earlier. I was just surprised by the earnings report for GE. Very, very impressive. And even more impressive knowing GE didn't pay any federal income tax for 2010, if I remember correctly.

Profits top expectations.

I can see why the GE/CEO is the administration's economic czar. Anybody who can make that kind of money and not pay federal income taxes gets your attention.

Link here.

Jobless Claims -- Another Disappointing Report

The big story on CNBC is how disappointing the jobs numbers are after this morning's report.

For weeks, CNBC and mainstream media have been looking for any silver lining in jobless reports. Reporters kept putting positive spin on the numbers, and indeed, a couple of times, it looked like there might be a ray of sunshine with regard to jobless numbers.

But today's numbers suggests we are back to square one, and surprisingly, the CNBC pundits are actually talking as if this is the "new" reality.

The reason I harp on this has to do with the frustration I have with lack of vision. I can only imagine a "Ronald Reagan" talking about putting people back to work and meaning it.

I am reading Ayn Rand's Atlas Shrugged for the first time. It is very, very painful to read. It was first published in 1957, and unlike Animal Farm which prequeled/foretold/foreshadowed the Soviet Union, Atlas Shrugged prequeled/foretold/foreshadowed the current situation in America. From Wikipedia:

The [female] protagonist sees society collapse around her as the government increasingly asserts control over all industry. 

Wow, if that doesn't describe America today. It is hard to believe that in the booming post-war years, Ayn Rand could see this coming.

Belfield -- Bakken South -- Looking To Build Apartment Complex -- North Dakota, USA

The Lutheran Social Services Housing, Inc., of Belfield is looking to build an apartment complex with 12 units, to be moderately priced for "average" families in the city.

Belfield has been in the news recently due to increased Whiting activity in the area.

Partnership Opportunity to Invest in the Bakken -- A Re-Look -- North Dakota, USA

I just had the opportunity to review the "prospectus" of the partnership opportunity to invest in an extended stay apartment-like complex in the heart of the Bakken where housing is critical.

It is very, very enticing.

If I was a mineral rights "millionaire" familiar with the Bakken, I would seriously consider this opportunity.

I would do two things:

• Find out as much as I could about the history and composition of the investment group
• Drive to the area where the complex will be built and research the area

I would want to meet with the investment group in person. 

Again, I have no association with the investment group. I have not done any background research, and I am not investing. I have no hidden agenda, but I have to admit, it is an enticing and interesting opportunity.

The Oldest Field in the Williston Basin -- Beaver Lodge Oil Field -- North Dakota

Updates

July 21, 2012: my hunch is that before this Bakken boom is all over, we will see a lot more activity in the oldest oil field in North Dakota, the Beaver Lodge oil field. This was an extremely productive oil field in the early years but relatively quiet in this boom.

2020 permits
37494,
37493,
37492,
37491,
37490,
37489,
37488,
37487,
37486,
37485,


2019 permits (the list is complete)
37146,
37145,
37144,
37143,
37142,
37132,
37131,
37130,
37129,
37128,
37017,
36797,
36773,
36772,
36771,
36770,
36709,
36708,
36707,
36706,
36705,
36685,
36684,
36683,
36682,
36681,
36643,
36642,
36641,
36640,
36639,
36638,
36626,

2018 (list is complete)
35461,
35306,
35305,
35304,
35303,
35302

2017 (still to complete)
33867,
33866,
33865,
33864,
33831,
33830,
33829,
33828,
33827,

2016 (still to complete)
33214,
33213,
33181,
33180,
33179,
33178,
33177,
33134,

2015 permits (still to complete)
32342,
31477,
31903,
31902,
31901,
31900,
31888,
31887,
31886,
31885,
31884,
31848,
31843,
31842,
31841,
31840,
31839,
31356,
31355,
31354,
31353,
31316,
31100, 740, Hess, BL-Iverson C-LE-155-96-1423H-1, t11/15; cum 19K 11/15;
31099, 886, Hess, BL-Iverson C-155-96-1423H-4, t11/5; cum 27K 11/15;
31098, SI/NC, Hess, BL-Iverson C-155-96-1423H-2
30794,
30793,30792,
30691, SI/NC, Hess, BL-Odegaard-156-95-2116H-2
30690, PNC, Hess, BL-Odegaard-156-95-2116H-3, 12/15;
30689, PNC, Hess, BL-Odegard-156-95-2116H-4, 12/15;
30675, dry, Hess, BL-Odegaard-LW-156-95-2116H-1, 9/15;
30674, SI/NC, Hess, BL-Odegaard-156-95-2116H-8, no production data,
30673, SI/NC, Hess, BL-Odegaard-156-95-2116H-7, no production data,
30672, SI/NC, Hess, BL-Odegaard-156-95-2116H-6, no production data,
30671, SI/NC, Hess, BL-Odegaard-156-95-2116H-5, no production data,
30663,
30662,
30661,
 
2014 permits (list complete)
30356, 819, Hess, BL-Kerbaugh-156-96-3427H-5, t9/15; cum 44K 11/15;
30355, 536, Hess, BL-Kerbaugh-156-96-3427H-4, t8/15; cum 20K 11/15;
30354, 836, Hess, BL-Kerbaugh-156-96-3427H-3, t8/15; cum 45K 11/15;
30353, 820, Hess, BL-Kerbaugh-156-96-3427H-2, t8/15; cum 45K 11/15;
29278, 945, Hess, BL-Iverson C-155-96-1423H-5, t11/15; cum 24K 11/15;
29277, 1,078, Hess, BL-Iverson C-155-96-1423H-3, t11/15; cum 47K 11/15;
28958, 976, Hess, BL-Iverson 155-95-1819H-8, t41/5; cum 76K 11/15;
28050, 1,214, Hess, BL-Iverson 155-95-1819H-7, t41/5; cum 76K 11/15;
28049, 1,069, Hess, BL-Iverson 155-95-1819H-6, t4/15; cum 82K 11/15;
27980, SI/NC, Hess, BLSU E-406, no production data,
27773, 550, Hess, BL-Iverson B-155-95-0708H-5, t2/15; cum 55K 11/15;
27772, 830, Hess, BL-Iverson B-155-95-0708H-4, t2/15; cum 61K 11/15;
27771, 586, Hess, BL-Iverson B-155-95-0708H-3, t1/15; cum 54K 11/15;
27770, 772, Hess, BL-Iverson B-155-95-0708H-2, t1/15; cum 68K 11/15;

2013 permits (list is complete)
26823, 753, XTO, Boe State 31X-16C, t7/14; cum 47K 11/15;
26822, 607, XTO, Boe State 31X-16H, t7/14; cum 48K 11/15;
26821, 1,298, XTO, Boe State 31X-16D, t7/14; cum 70K 11/15;
26074, 879, Hess, BL-Iverson 155-95-1819H-2, t5/14; cum 120K 11/15;
26073, 948, Hess, BL-Iverson 155-95-1819H-3, t4/14; cum 123K 11/15;
26072, 928, Hess, BL-Iverson 155-95-1819H-4, t4/14; cum 106K 11/15;
26071, 860, Hess, BL-Iverson 155-95-1819H-5, t4/14; cum 113K 11/15;
25474, 1,658, XTO, Kerbaugh 31X-4C, t12/13; cum 93K 11/15;
25473, 931, XTO, Kerbaugh 31X-4D, t12/13; cum 107K 11/15;
24889, loc, Murex, Michael Douglas 8-5H,

2012 permits (list is complete)

• 24352, 287, CLR, Gibb 1-24H t3/13; cum 87K 11/15;
• 24327, 626, CLR, Vera 1-1H, t7/13; cum 97K 11/15;
• 24294, 324, CLR, Langved 1-35H, t7/13; cum 113K 11/15;
• 22513, 699, Hess, BL-Amelia 156-95-1415H-1, t12/12; cum 122K 11/15;
• 23191, 682, Hess, BL-Myrtrice 156-96-2536H-2, t12/12; cum 159K 11/15;
• 23192, 1,085, Hess, BL-Myrtrice 156-96-2536H-1, t12/12; cum 196K 11/15;

2011 permits:

• 20820, 569, Murex, Jack David 8-5H, t11/11; cum 133K 11/15;
• 21140, 862, Hess, BL-Iverson B-155-95-0708H-1, t2/12; cum 143K 11/15;
• 21399, 55 (no typo), Hess, BL-Davidson 156-96-3526H-2, t1/12; cum 243K 11/15;
• 21400, 823, Hess, BL-Davidson 156-96-3526H-3, t6/12; cum 218K 11/15;
• 21411, 598, Hess, BL-Herfindahl 156-95-3031H-1; t5/12;  cum 133K 11/15;
• 21412, 885, Hess, BL-Herfindahl 156-96-3031H-2, t5/12; cum 219K 11/15;
• 21818, DRY, Hess, BL-Iverson 155-96-1213H-2, s12/11; this was designed to test Bakken potential; problems with drilling at the kick-off point; abandoned;
• 21855, 1,279, Hess, BL-S Ramberg 155-95-0601H-2, t7/12; cum 282K 11/15;
• 21856, dry, Hess, BL-S Ramberg 155-95-0601H-3,
• 21944, 343, Hess, BL-Frisinger 156-95-2833H-1, t11/12; cum 69K 11/15;

Original Post

It appears to me that when looking at the financial parameters/productivity/success of an oil well or an oil field, there are three important data points:

• How fast the well will pay for itself (to some extent, a function of the IP)
• The estimated ultimate recover rate (EUR)
• The likelihood that a given well will be dry

Offsets

• If the well pays for itself quickly, it can offset a lower EUR.
• If the well produces more slowly, a higher EUR may make the well worthwhile
• And if there are "no" dry wells, that offsets either of the first two

I always get a kick out of seeing nice wells (based on IPs) being reported in old fields, and then going back to take a look at those fields.

I don't have the resources to sort out the math regarding how fast the early wells paid for themselves, or what the overall rate of return was, but given the current trend in the price of oil, one can look back at these "old" wells and compare them to what is going on in the Bakken.

Recently Murex reported three nice wells in the Beaver Lodge oil field in the Williston Basin. This is the oldest field in the Williston Basin.

Going to the GIS map server, one is struck by the number of wells drilled in that field and how very few dry wells there were.

Just out of curiosity, I took one of the sections in the Beaver Lodge oil field, and looked at total recovery to date.

I went to section 17 of T156N-R95W and looked at all the wells (I may have missed one or two).

Most of the wells are now permanently abandoned, although a few are still active. What was most interesting was that many wells were abandoned even though they were still producing at levels they had sustained for several years, suggesting the price of oil had bottomed out and the wells were no longer economic. I believe a lot of this occurred when really "cheap" oil was first being produced in Saudi Arabia, but I could be wrong.

Be that as it may, here are the file numbers, the formation, total oil produced, year spudded, and current status (PNA: permanently abandoned; or still on active and on pump):

• 88, Madison, 208,654, spudded 1952, PNA
• 122, Madison, 128,559, spudded 1952, PNA
• 152, Madison, 291,133, spudded 1952, PNA
• 182, Madison, 268,577, spudded 1953, PNA
• 204, Madison, 282,654, spudded 1952, PNA
• 296, Madison, 733,580, spudded 1953, PNA
• 325, Madison, 97,653, spudded 1953, PNA
• 388, Madison, 189,207, spudded 1953, PNA
• 1636, Devonian, 700,520, spudded 1957, pump
• 2092, Devonian/Silurian, DRY, spudded 1958
• 3901, Madison, 555,303, spudded 1965, PNA
• 4382, Madison, 121,055, spudded 1968, PNA
• 14915, Madison, 317,348, spudded 1999, pump
• 16786, Madison, 45,100 spudded 2007, pump

And this is why oilmen keep drilling, looking for the "big one." This one was a mile away from the above wells (same Beaver Lodge oil field):

• 2462, 340/564, Hess, Beaver Lodge-Devonian Unit C-3051, Silurian/Devonian, t11/59; cum 706K/2.74 million bbls --> total, over 3.4 million bbls; was producing 4,000 bbls/month in 1997 when it was taken off-line; produced for almost 40 years;

For newbies, many (most?) Bakken wells decline to 3,000 bbls/month in less than five years, or sooner.

These were, for the most part, all vertical wells, and relatively (compared to current Bakken wells) inexpensive to drill.

If the price of oil remains at the current level, I can only assume companies will go back into some of these legacy formations in the older fields. But they can't do it yet. They have too many Bakken wells to drill before losing leases.

Unless something incredible occurs/changes, it is very clear that the drilling in North Dakota will go on for some time, and will be very, very profitable.

Number of Idle North Dakota Wells At Highest Level Since 2001 -- Bakken, North Dakota, USA

This was reported earlier, but it's a headline story over at PennEnergy, so thought it re-posting.

Number of wells idle due to harsh weather in North Dakota is at highest level since 2001. This will be the second quarter in a row in which production for oil companies will be constrained to about two months out of three.