Another Huge Development Project in the Heart of the Bakken -- Stanley, North Dakota, USA

Updates
May 22, 2011: Minot Daily News with nice update. Annabelle Homes will pay for all infrastructure; will pay police and fire departments $500/month for their costs.


Original Post
Link here. Regional links break early and break often.

The city of Stanley is moving forward with a sizable development that will address housing concerns as well as revitalize the city's appearance.

Minneapolis development firm Annabelle Homes has received approval for a project consisting of more than 50 homes, office and commercial business space as well as two parks.

Some data points:

• 20-acre tract
• 28 energy efficient single-family homes
• 25 townhouses
• A 16,000-square-foot office complex: a two-story building to house a visitor center, Mountrail County Historical Society and entrance to Flickertail Village Museum
• A 12,000 square foot retail building next to the office complex
• Developer: Annabelle Homes out of Minneapolis, Minnesota; the firm approached Stanley; told them it was a "50-year decision"

The population of Stanley, North Dakota, was 1,458, in the 2010 census. Stanley is north/northwest of the two best fields (right now) in North Dakota: the Sanish and the Parshall. The town sits in Ross oil field, near Alger and Stanley oil fields. All of them are very good fields.

"Demand Destruction"

I assume we will be hearing the phrase "demand destruction" on CNBC more and more going into the summer driving season. CNBC reporters like to bandy that phrase around but they don't expound on the phenomenon. 

From wikipedia:

Demand destruction is an economic term used to describe a permanent downward shift in the demand curve in the direction of lower demand of a commodity such as energy products, induced by a prolonged period of high prices or constrained supply.

Note the words "permanent" and "prolonged." I don't know if one could call the current period of "high prices" for oil and gasoline "prolonged." However, Saudi Arabia does not see a "permanent downward shift in the demand curve" for oil."

It would be interesting to see some studies regarding "demand destruction" in the mainstream media or on the business pages. I have not seen any objective, quantitative studies.

Taking the summer vacations out of the equation, and limiting the discussion to the 44 to 48 weeks of using a car for work, errands, and pleasure, I would assume that below $2.00/gallon, folks don't worry a whole lot about their driving habits.

I would also assume the "demand destruction" curve is a typical college biology 101 "S" curve. As the price of gasoline increases, folks cut back on their driving, but at some point, they feel they can cut back no more. They need their car for work and/or school and essential errands.

Let's say folks can cut their driving to 70 percent of "normal" or baseline consumption. Pick your number. It may not be 70 percent, but at some point folks feel that is all they can cut. Let's say, then for argument, the "demand destruction" for a typical, individual driver is about 30 percent.

At $2.00/gallon and a baseline of 100 gallons, that is $200. Let's say the oil industry cost is $150/100 gallons, and thus the oil industry makes $50/100 gallons.

At $3.00/gallon, one might think about cutting back on gasoline, but my hunch is that any cutback is minimal. The big reason: most folks either pay with a credit card and those paying with cash have already cut back some. So, 90 gallons at $3.00/gallon --> $270.The cost of producing the gasoline has not gone up enough to make a difference in back-of-the-envelope calculations. $270 - $150 --> $120 to the oil industry.

At $5.00/gallon, "demand destruction" is serious, and now folks have cut back to 70 gallons (70% of baseline). 70 x $5 --> $350. The cost to the operator is the same. $350 - $150 --> $200 to the oil industry. The increase to the consumer at the pump is 2.5 times (from $2/gallon to $5/gallon) but the oil industry sees in increase in margins from $50 to $200, or 4 times as much.

Again, I am well outside my comfort zone trying to understand the consequences of "demand destruction" and would prefer to link to an expert analysis. But I have to start somewhere.

Most concerning to state and federal governments will be significant loss of taxes at the gasoline pump, as folks cut back to 70 percent of baseline with "demand destruction."(It should go without saying that coal-powered cars have been contributing to this loss of revenue for several years now.)

If the cost to the operator was driving the cost of oil/gasoline up, the consequences would be different. But the price of oil is up because of the weakness of the dollar. And the weakness of the dollar is due to ......

***************

On a different note, I think supply and demand, global economy, and Mideast concerns affect the price of oil between $60 and $90; but the weakness / strength of the dollar affects the price of oil above $100.

***************

Monday morning, April 25, 2011, CNBC: first pundit to mention "demand destruction" and related it to a downward pressure on GDP.

Confidential List by Operator -- Bakken, North Dakota, USA

A big thank you to "Rory" for providing this list of wells on the confidential list in North Dakota.

Each horizontal well represents about $7 million. This is a huge cash flow issue for these companies.

Earlier this week (week of April 20):


CONTINENTAL RESOURCES, INC.    132
XTO ENERGY INC.    87
HESS CORPORATION    71
PETRO-HUNT, L.L.C.    62
BURLINGTON RESOURCES OIL & GAS COMPANY LP    58
BRIGHAM OIL & GAS, L.P.    54
MARATHON OIL COMPANY    53
SLAWSON EXPLORATION COMPANY, INC.    45
NEWFIELD PRODUCTION COMPANY    43
EOG RESOURCES, INC.    39
DENBURY ONSHORE, LLC    35
ZENERGY, INC    34
ZAVANNA, LLC    29
ZENERGY OPERATING COMPANY, LLC    28
KODIAK OIL & GAS (USA) INC.    27
SM ENERGY COMPANY    27
WHITING OIL AND GAS CORPORATION    26
AMERICAN OIL & GAS, INC.    23
HUNT OIL COMPANY    22
NORTH PLAINS ENERGY, LLC    20
SAMSON RESOURCES COMPANY    19
FIDELITY EXPLORATION & PRODUCTION COMPANY    17
PEAK NORTH DAKOTA, LLC    17
QEP ENERGY COMPANY    17
ANSCHUTZ EXPLORATION CORPORATION    14
OXY USA INC.    14
CORNERSTONE NATURAL RESOURCES LLC    11
OASIS PETROLEUM NORTH AMERICA LLC    11
BAYTEX ENERGY USA LTD    9
ENERPLUS RESOURCES USA CORPORATION    9
HELIS OIL & GAS COMPANY, L.L.C.    9
TEXAKOTA, INC.    9
G3 OPERATING, LLC    8
LEGACY OIL & GAS ND, INC.    7
BTA OIL PRODUCERS, LLC    6
PRIMA EXPLORATION, INC.    6
SINCLAIR OIL AND GAS COMPANY    6
WARD-WILLISTON COMPANY    6
FRAM OPERATING LLC    5
MUREX PETROLEUM CORPORATION    5
SUMMIT RESOURCES, INC.    4
BALLANTYNE OIL, LLC    3
CRESCENT POINT ENERGY U.S. CORP.    3
OIL FOR AMERICA EXPLORATION, LLC    3
URSA RESOURCES GROUP LLC    3
ABRAXAS PETROLEUM CORP.    2
ARSENAL ENERGY USA INC.    2
SHD OIL & GAS, LLC    2
TRUE OIL LLC    2
WESCO OPERATING, INC.    2
AMERADA HESS CORPORATION    1
ARMSTRONG OPERATING, INC.    1
BEHM ENERGY, INC.    1
BERENERGY CORPORATION    1
CORE 54 OIL AND GAS, LLC    1
DAKOTA MINERALS, LLC    1
DAKOTA SALTS, LLC    1
FLATIRONS RESOURCES LLC    1
GADECO, LLC    1
HALEK OPERATING ND LLC    1
PETRO HARVESTER OPERATING COMPANY, LLC    1
PRIDE ENERGY, AN OKLAHOMA GENERAL PARTNERSHIP    1
REEDER OPERATING, LLC    1
RENEGADE PETROLEUM (NORTH DAKOTA) LTD.    1
RYAN EXPLORATION, INC.    1
SAGEBRUSH RESOURCES, LLC    1
SBG TIOGA FACILITY LLC    1
ZARGON OIL (ND) INC.    1

  
Grand Total    1164

For Investors Only: Six Oil and Gas Equities Paying More Than 7 Percent

Link here, SeekingAlpha.

One of the six, Encore Energy Partners, LP (ENP), is working in the Bakken.

Energy Energy Partners, LP (EEP), did not make the list because it paying only 6% or so. EEP operates  pipelines in the Bakken.

Minnesota May Have The Frac Sand Needed for The Bakken -- North Dakota, USA

Link here.

RED WING, Minn. - Near the muddy banks of Hay Creek, a popular trout stream, are significant bluffs covered with a hardwood forest of oak, bass wood and black cherry trees.

Underneath the forested land is an increasingly valuable resource called "frac sand," highly sought after for its size and strength. With perfectly round grains that look like brown sugar crystals, the sand is ideal for the oil and natural gas exploration industry, which uses it to extract fuel from underground rock in a process called hydraulic fracturing, or fracking.

An increasing number of companies are eying Minnesota for the valuable sand, which geologists say is buried in virtually unlimited amounts deep beneath the bluffs that straddle the Mississippi River in southeastern Minnesota.

WWindsor Permian, a division of Oklahoma-based Windsor Energy, bought 155 acres near Red Wing for $2.6 million earlier this year.

Administration's Answer to $5.00 Gasoline: More Wind Turbines

Link here.

President Barack Obama says one answer to high gasoline prices is to spend money developing renewable energy sources.

Another answer, of course, would be to work seriously with ... I'll let you fill in the blank. There's more than one correct answer.

I can't make this stuff up. Those who seriously think wind turbines are the answer live in a different world than I do.

The interesting thing is that $5.00 gasoline disproportionately hurts the administration's base and its supporters: college students (those lucky enough to own cars, as the President said the other day), the poor, the unemployed, the lower middle class.

By the way, regarding the "need to spend more money," whose money is he talking about? The country is broke. Hello.