Recession Vs Widening Gap Between Investors and Non-Investors

Update

Saturday, June 4, 2011: This past week's stock market drop and the horrendous job report on Friday, June 3, 2011, for the month of May, has others thinking of a "double dip recession. Again. I came across this headline after my original post yesterday: Jobs Report Stokes Fear of Double Dip Recession.

With government cutting back on employment and private sector job growth slowing, many economists now fear the economic recovery has stalled and could be heading for a double-dip recession. Government fiscal and monetary programs are set to expire between now and the end of the year, and traditional engines of economic growth like construction and housing are still in free fall.

Original Posting

Friday, June 3, 2011: Today's market action and commodity plunge has all the feel of a tipping point: either back into a recession or another widening of the gap between investors and non-investors. I am conflicted which way it will fall.

Data points that suggest slipping back into recession:

• Pundits noting that $115-equivalent oil in the past has resulted in recessions (oil almost hit $115 a couple weeks ago) [I can't remember the exact number, or the link, but it's out there.]
• Housing prices have officially hit a double dip [that link is easy to find if anyone is interested]
• Prices on high-end bicycles down the street are being slashed [no link; personal observation]

On the other hand:

• Productivity/worker hits new record
• Earnings reported 1Q11 higher than ever; more companies than ever participating
• High-end bicycle prices down the street are still over $5,000/bike

On second thought, I don't think the two events (slipping back into a recession and a widening in the gap between investors and non-investors) are mutually exclusive, especially for investors with nice-dividend-paying stocks. Many companies increased their dividends this past quarter.

Bakken Potential? -- North Dakota, USA -- Williston Oil Basin

From SeekingAlpha.com:

A forty-year independent oil entrepreneur with a conservative financial streak, [Whiting Petroleum] Chairman James Volker's data points:

• 8.4 million acres as providing for 39,000 wells on a spacing of six for each 1280 acre unit
• A mid-range 300,000 barrel reserve for each well, almost 12 billion barrels recoverable
• Comparable in size to the Prudhoe Bay discovery that made Alaskan oil famous

Other views of the North Dakota Bakken:

• USGS survey, 2008: 4 billion barrels recoverable
• Harold Hamm, CEO, CLR: 20 - 24 billion barrels recoverable (Three Forks + Bakken)

The 300,000 barrel reserve is very conservative (of course that's an average). Some use 500,000 barrel reserve for Bakken/Three Forks wells. Estimates for wells in the best Bakken run as high as 900,000 barrels over 30 years.

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

The rest of this posting is just back-of-the-envelope doodling. Just playing around with the figures. I don't recommend anyone reading past this section; it's just for my benefit, sort of like imagining that I'm playing the lottery. Smile.

Another way of looking at Mr Volker's data:

3 wells/section (640 acres) * 300,000 bbls/well * $100/bbl -->  $90 million/section or $140,000 acre.

20 acres at $10,000/mineral acre would cost $200,000.  Those 20 acres will generate $2.8 million over the course of 30 years (at the wellhead, with lots of tax angles) at $100/bbl using 300,000 as the EUR.

Will a $200,000 house investment pay you $2.8 million over the course of a lifetime? And this assumes oil stays at the $100/bbl range.

I don't see much mineral acreage going for as much as $10,000. And a lot of the core Bakken wells will get double to triple 300,000 bbls over 30 years.

$200,000 x 0.06 = $1,000/month interest. 20/640 = 3%. Three wells leveling off at 1,200 bbls/month --> 1,200 bbls/month * 3% * $100/month --> $3,600/month.

New York City Awards City Cabs Conventional Combusion Engine Contract -- No Hybrids or EVs

Link here.

I honestly do not understand the thinking. NYC should be on the forefront of "green energy." As should Washington, DC, and Boston, MA. The entire I-95 corridor should be "green."

Dickinson Airport Update -- Bakken, North Dakota, USA

Link here (regional links break often and break early). Some data points:

• $1.3 million terminal expansion project on schedule; should be completed by end of May, 2011
• A new flight schedule to be released this month (May, 2011)
• New flight schedule will no longer be connected with Williston for afternoon flights (not sure what this means; no connecting flights to Williston, or schedules will be independent of each other)
• Developers would like "high-end" airport hotel; only early discussion has begun

Halek's West Dickinson 1 Lodegpole Well Comes Off Confidential List But No Production Data -- North Dakota, USA

19886, GL, Halek, West Dickinson 1, Dickinson oil field, Lodgepole; I do not understand the "GL" status; NDIC has "GI" --> gas injected, but no explanation for "GL" GL is usually associate with ground elevation for the well, e.g., for this well:

• Elevation(s): 2517 KB   2503 GR   2503 GL 

The "KB" line is usually one foot higher than the derrick floor

Some Typical Bakken Wells As Reported By NOG -- North Dakota, USA

In its 1Q11 earnings reports, NOG released the following data. These are wells that NOG participates in to some degree:

• xxxx, 917, XTO, Helen 11X-05
• xxxx, 2,218, Slawon, Vixen Federal 1-19-30H
• xxxx, 1,594, Oasis, Cowden 5404 13-35H
• xxxx, 1,479, Hess, Tattu 19-1H
• xxxx, 330, EOG, Crowfoot 35-3031H
• xxxx, 2,240, BEXP, Brown 30-19 1H
• xxxx, 388, XTO, Almer 31X-6
• xxxx, 933, CLR, Holte 1-32H
• xxxx, 1,323, Zenergy, Zi Payette 10-15H,
• xxxx, 1,453, Slawson, Muskrat Federal 1-28-33H
• xxxx, 400, MRO, Ernest Scharchenko 34-33H
• xxxx, 921, CLR, Vona 1-13H
• xxxx, 511, Hunt, Shell 1-3-34H
• xxxx, 857, CLR, Nielsen 1-12H
• xxxx, 2,015, Ursa, Borseth15-22 1H
• xxxx, 1,490, Slawson, Water Moccasin 1-34H
• xxxx, 1,325, Sinclair, Hovden Federal 1-20H
• xxxx, 1,229, Slawson, Vagabond 1-27H

Slawson, as usual, had some great wells.

Helis' Henderson Well in the Grail Oil Field -- Off the Confidential List Today -- 16,000 Bbbls in 21 Days -- Three Forks Well -- Bakken, North Dakota, USA

I posted the results of the Henderson well about three weeks ago. At that time I noted that one of the wells in the Grail oil field had produced more than 129,000 bbls in less than six months. Here's part of that post (comes from the link above):

Grail oil field is a 30-section oil field just west of the reservation.

Back on March 3, 2011, this was reported:

• 17722, 2,068, Helis Oil and Gas, LLC, Henderson Federal 4-26/35H, Grail, Bakken; TFS, 35K in 41 days; ~ 24-stage frac

But this is the "biggie" in Grail, section 17-149-95:

• 18448, 2,429, Helis Oil and Gas, LLC, Andrecovich 5-17/16H, 24-stage frac; TFS, tested, 9/10; 129K in 4.5 months; 20K/month

No comments yet at the discussion board regarding this well, but perhaps we will see some later on.

Dakota-3 Acquires 50+ Zenergy Wells -- TAT Linked -- Williams (WMB) and Dakota-3

I've always wondered how Dakota-3 E&P Company, LLC, fit in.

Yesterday's NDIC daily activity report shed a bit of light yesterday, at least for me.

But first, remember that Williams (WMB) acquired the mineral rights in about 7 percent of the reservation last year.

In yesterday's daily activity report, about 55 wells changed hands: "change of operator from Zenergy Operating Company, LLC, to Dakota-3 E&P Company, LLC, a subsidiary of Williams." The wells are in the core of the Bakken: Dunn, Mountrail, and McKenzie counties and based on their names are all in the reservation. I do not know if this change in operator was all part of the Williams deal, but most likely it was. It's been my experience that whenever I get really excited about something in the Bakken someone writes to tell me it's no big deal.

By the way, when you see "TAT" as part of an oil well name in North Dakota, it stands for Three Affiliated Tribes, the Mandan, the Hidatsa, and the Arikara.

Only Two (2) New Permits Yesterday in the Bakken, North Dakota, USA -- Lots of Other Action However

Drillers: Hunt, Densbury Onshore.

Fields: Werner and Siverston.

Four wells released from confidential status, but unremarkable, e.g.:

• 19396, 82, MRO, Ernest Charchenko 34-33H, Murphy Creek/Fayette

Hard to believe, only 82 bbls IP; the well sits in Murphy Creek right in the middle of several good fields, including Fayette and Cabernet; perhaps more to follow. Others much smarter than I have noted in the past that MRO has not had outstanding wells in the Bakken.

Meanwhile, five WLL wells approved for confidential status, all in Mountrail County. Three of them are designated TFH wells and one is an "X" well.

In addition, about 55 wells changed hands: from Zenergy to Dakota-3 E&P Company, LLC (a subsidiary of Williams, according to the NDIC report).

More on this in a stand-alone post. 

Seeking Alpha: Still On Track for $200 Oil a Year From Now

Link here.

179

I was told we hit 179 active drilling rigs yesterday.

I missed it because I'm away from the computer much more these days due to traveling.