IPs for Recent Whiting Wells Reported In May, 2011, Corporation Presentation -- Bakken, North Dakota, USA

This is the Whiting's corporate presentation (CP), May, 2011:

• CP, 1,182, WLL, Barlow 14-6H
• CP, 920, WLL, Deal 43-28TFH
• CP, 1,416, WLL, Arndt 14-5XH
• CP, 1,087, WLL, Scott Meiers 12-17TFH
• CP, 1,529, WLL, Ness 42-31WH
• CP, 715, WLL, Warden 43-9TFH
• CP, 2,212, WLL, Hoover 14-1X
• CP, 1,254, WLL, Guinn Trust 1-13TFH
• CP, 2,028, WLL, Smith 14-29XH
• CP, 1,232, WLL, Hollinger 21-14TFH
• CP, 596, WLL, Hollinger 11-14TFH
• CP, 440, WLL, Robert Patten 44-3TFH
• CP, 2,247, WLL, State 12-32H

If I remember, I will replace the "CP" with the file number, and add the field where the wells are located.

The graph in that presentation doesn't explicitly state it, but it appears that Whiting's short laterals average EUR is 450,000 bbls of oil equivalent; long laterals average EUR is 950,000 bbls of oil equivalent.

Whitings budgets a CAPEX of $6.5 million for a long lateral; $5.5 million for a short lateral.

Slide 31/32 is very, very interesting: WLL's graph says this is their "typical" Sanish well profile. At the end of the first year, the long lateral Sanish well is producing 250 bbls/day x 365 days x $75 --> $6.8 million (remember, CAPEX is $6.5 million). But the average production during that first year appears closer to 450 bbls/day x 365 days x $75 --> $12 million. And these wells will produce 25 - 30 years; BEXP says as long as 39 years. 

At $75/bbl, an EUR of 950,000 bbls --> a whopping $70 million.

$70 million / 1280 acres --> $55,000/acre.

Back-of-the-envelope calculations: at one time one could buy a Sanish township net mineral acre for $3,000. One hundred acres --> $300,000, about the price of a very nice home in Bismarck. With a EUR of 950,000 for a long lateral, one hundred net acres in a 1280-acre spacing unit would gross more $5.5 million (at $75/bbl) over the lifetime of the well.

I believe the state gets about 12 percent in extraction/production taxes.

At ten years, long lateral Bakken wells are predicted to still be producing 80 boepd on average; short laterals, about 25 boepd. When looking at these figures, one may want to review the definition and benefits of a stripper well.

I'm sure folks will correct me if my math is wrong.

Observations on Building in The Bakken -- North Dakota, USA

I thought I had written this post last night but I can't find it, so if I am repeating myself, I apologize.

Driving around Williston something interesting stands out:

• the local field offices for the various E&P companies are rather ho-hum or even unsightly
• on the other hand, the offices for the oil service companies are generally very, very nice
• and the new homes in Williston keep getting nicer, bigger, and more expensive

With regard to the second point, Schlumberger is putting in a huge new complex just west of Williston. I don't know what will be there, but my hunch is it's going to be the finest building in Williston when it's complete, based on its exposure to the passing public. 

Now, about that first point. It's my contention that the E&P companies will eventually put in some very nice regional headquarters or field offices in the Bakken.

But it appears the E&P companies are starting to do exactly that. Going through the May, 2011, corporate presentation by Whiting Petroleum Corporation tonight provides evidence that this new building is starting.

Slide 24/25 is a photo of Whiting's new Robinson Lake Field office. It seems I've seen this picture before so it may not be all that new, but it still brings out the point. It's a gorgeous building and I think we will see more of this in the future. Both Oasis and SM Energy in Williston have very small office footprints, and I think it's just a matter of time before they upgrade.

Whiting's corporate presentations can be found at its website.

Global Oil Demand To Hit Record This Year (Poll) -- 89 Million Bbls/Day

Link here.

Global oil demand is growing faster than analysts expected just six months ago, according to a new Reuters poll...

The poll of 10 top oil analysts showed oil demand will grow by 1.5 million barrels per day (bpd) this year to hit a record 89 million bpd. At that level, global use will have risen by 5 percent since the depths of the recession in 2009.

The forecast for demand this year is 300,000 bpd higher than it was in the last Reuters poll in December, based on strong emerging market growth. And early indications for 2012 suggest growth will quicken further.

So, we'll see.

The last barrel is most expensive. And sets the price for the first 88,999,999 bbls. 

Update on Investment Opportunity -- Investors Only

I don't know if folks recall and I don't know if I can easily find the original link, but some time ago, I received a note from a developer looking for investors interested in a motel/hotel project in "the Bakken."

I had no previous connection with the developer and have never met him. We have corresponded only a couple times since then, only in regards to the development project.

The whole thing had sort of slipped my mind until someone wrote me today asking me to forward his name/e-mail address to the developer, which I did.

The developer wrote back and said that his group had actually broken ground on the new project -- I believe they actually broke ground today. They hope to have it completed by "late winter."

On his way through Williston, the developer heard that twenty (20) people are moving into Williston daily, and that there is only one house on the market for sale in Williston which he agreed might be hyperbole. (I replied that I am aware of two houses, both on the same street, but it's possible that one  sale is in escrow. Smile. )

He said that their investment group still has "room for about $500,000" for their project(s). I can't remember but I believe the group prefers a minimum of about $100,000 per investor. (I'm wrong: looking at the fact sheet, they require $250,000/investor.) The total project is budgeted at $13.4 million and the group is looking for $4 million equity.

If anyone remains interested, let me know, and I will send you a copy of the fact sheet that was sent to me.

I Don't Think Most People Would Get This Answer Correct: Globally, Which "Company" is the Largest Oil and Gas Company?

The answer is buried near the end of this long article on the game-changing transformation Saudi Aramco plans to undertake.

In a speech in Washington, D.C. in mid May, Saudi Aramco's President and Chief Executive Officer, Khalid A. Al-Falih, outlined for the first time in public, the company's new Accelerated Transformation Program (ATP) that will transition Aramco from "an oil and gas company to a fully integrated global energy enterprise."

... Aramco is pressing ahead with the massive expansion of its global refining capacity and continuing with refining and chemicals integration and expansion in the U.S., Korea and China.

The statement buried in the Q-and-A that we found most interesting was that "the foundations of Saudi Aramco's future will remain in those reservoirs [the current prolific producing fields of Saudi Arabia], but the Kingdom and the company will have a future that is larger and more diverse." The timing of the disclosure of the ATP initiative is curious. It comes at the same time the media discovered that the Kingdom has begun a foreign relations effort aimed at creating an alliance of Muslim countries to provide a counter-balance to a militant Islamist Iran.

The answer to the question is in the article. I did not want to take it out of context and place it here. 

Six (6) New Permits -- Bakken, North Dakota, USA

A very uneventful daily activity report.

Drillers: Enerplus (5), Hess.

Fields: Spotted Horn, Ray, McGregory Buttes.

Four of the five ERF wells will be on a single pad, McGregory Buttes, 23-148-94, Dunn County.
The Hess permit is in Ray field.

Two wells came of the confidential list:

• Oasis' Ruud 5493 42-23H with no data, and
• XTO's Michael State 31X-16, in Williams County, with an IP of 1,027 bbls.

A Little Unexpected Sanity -- Keystone Pipeline Allowed to Re-Open -- I Guess $5.00 Gasoline Isn't a Pretty Sight

Link here.

Just a day after ordering a TransCanada Corp. subsidiary to make necessary repairs and address safety issues arising from leaks last month along the Keystone oil pipeline, the US Pipeline and Hazardous Materials Safety Administration gave TransCanada Oil Pipeline Operations Inc. permission on June 4 to restart the system.

Approval to restart the pipeline came after TCOPO submitted metallurgical testing results of the failed pipe components and satisfied the US Department of Transportation agency that necessary repairs were made and all immediate safety issues were addressed, PHMSA Central Region Director David Barrett said in a letter to Vern Meier, vice-president of TransCanada’s US pipeline operations. He authorized a daylight restart no sooner than June 5 under restricted conditions and close monitoring by PHMSA.

TransCanada employees worked around the clock to take all necessary actions to allow the pipeline to resume safe operations, TransCanada Chief Executive Russ Girling said on June 5. He confirmed that PHMSA would closely monitor the line’s operation.

You can be sure the agency will closely monitor the line's operation: "Hell hath no fury like a federal bureaucrat scorned."

I thought I had posted the original story. I guess I didn't. For those who forgot, the Keystone recently reported two spills: a 400-bbl spill and a 10-bbl spill.

I can't comment much on a 400-bbl spill, not knowing all the facts, but a 10-bbl spill ... when the administration referenced the 10-bbl spill as one of the reasons for shutting down the Keystone, it spoke volumes about this administration's pro-growth policy.

A 10-bbl spill.

In the airline industry this would be the same as shutting down United Airlines so that all walkways could be inspected for safety issues following a report of a passenger spraining his ankle upon boarding. And not letting United fly the friendly skies until all walkways were certified safe by the US Walkway and Moving Sidewalk Safety Administration (WMSSA).

EPA Says "NO" to Keystone XL -- Bakken, North Dakota, USA

Link here.

The Environmental Protection Agency has raised new concerns about a proposed pipeline that would carry oil from western Canada to the Texas Gulf Coast.

The EPA said that despite two lengthy reports, the State Department still has not done sufficient analysis of the project's impact on the environment. The letter urged State to conduct a more thorough analysis of oil spill risks and alternative pipeline routes.

Three Five observations:

• What "new concerns" could there possibly be? I especially like the "alternative pipeline routes." I suggest: straight west to Canadian Pacific ports.
• I don't thnk the EPA actually said, "No." I think the exact words were, "H***, no. A pipeline ships oil, doesn't it. We can't let that happen. Better study it some more."
• This is good news for US oil industry, at least from my perspective.
• TransCanada needs to move this oil to China.
• Can you spell ENB?

Eleven Oil Companies That Hedge Funds "Are Buying Like Crazy" -- For Investors Only

PennEnergy has a nice story on eleven oil companies that "hedge funds are buying like crazy."

The companies (and my personal history):

• Williams Co (WMB) -- one of my favorites
• BP Plc (BP) -- never bought
• Marathon Oil (MRO) -- bought a long time ago; sold
• ExxonMobil (XOM) -- core holding; have accumulated shares for 30 years
• Anadarko Petroleum (APC) -- never bought
• ConocoPhillips (COP) -- core holding; one of my best investments; accumulated shares over 30 years
• Chevron Texaco (CVX) -- ditto, see COP
• Halliburton (HAL) -- never bought
• Schlumberger (SLB) -- see COP
• Chesapeake (CHK) -- never bought
• Ensco Plc (ESV) -- never bought

Parking Restrictions Hitting Truckers in Dickinson -- Bakken, North Dakota, USA

There's a long discussion elsewhere on parking tickets given to truckers waiting to dispose of salt water. I have to agree with the individual who said it that giving out tickets is not exactly helpful.

I side with the truckers on this issue. They need to be helped, not made to feel like second-class citizens. 

With regard to "safety," the oil companies could hire someone to wear a reflective vest, and hold a sign with "slow" on one side and "stop" on the other side. In Boston, they use off-duty policemen for these pop-up problems until the situation is resolved. These policemen make a lot of money and generally retire at 45 years of age, and spend their retirement years reading nasty letters to the editor about how big their pensions are.

Every truck driver has a cell phone. This is not rocket science. Airports in San Antonio, Boston, and I assume elsewhere, have solved the "waiting problem."

Sounds like a 16-year-old looking for a summer job could work out a business plan in 10 minutes, propose it to the city and/or county, manage the waiting problem, and make enough money to hire a 14-year-old to manage it. He/she could contract out a lemonade stand to his/her 8-year-old sibling at the same site.

Having said all this, I see all of this as growing pains and these things will be worked out over time. But it will certainly help if folks work together on this rather than fighting it out with $20 traffic tickets.

NOG Operational Update -- Bakken, North Dakota, USA

For now, just the link, and an abbreviated summary of operational highlights. More to follow, when I catch up.

Some quick observations: a) these are not inconsequential wells; these are the real deal; b) note the working interest NOG has in these wells; NOG has the advantage of selecting what and where they want to go; over time their cash flow increases, allowing for greater working interest; and, c) check out the full press release and note how much some of these wells were choked down for the IP.

Mustang 1-22H, 1,829 bbls IP

Northern Oil participated in the Mustang #1-22H, a successful Bakken test well operated by Slawson Exploration in Mountrail County, North Dakota.  Northern Oil controls a 39.56% working interest in the well.

Alamo 2-19-18H, 1,286 bbls IP 

Northern Oil recently participated in the Alamo #2-19-18H, a successful Bakken test well operated by Slawson Exploration in Mountrail County, North Dakota.  Northern Oil controls a 29.98% working interest in the well, which had an initial production rate of 1,286 BOPD. 

Porcupine 1-19H, 1,566 bbls IP

To the south, Northern Oil participated in the Porcupine #1-19H, a successful Bakken test well operated by Sinclair Oil and Gas in Dunn County, North Dakota.  Northern Oil controls a 29.02% working interest in the well, which had an initial production rate of 1,566 BOPD.

Bighorn 1-6H, DRL 

Directly offsetting the Porcupine well, Northern Oil is currently awaiting completion on the Sinclair operated Bighorn #1-6H (48.79% working interest (WI)) and the Sinclair operated Crosby Creek #1-5H (29.63% WI) wells.  These wells are expected to be fracture stimulated in early June.

Rascal 1-18H, Elm Coulee, Montana, 707 bbls IP

In an important discovery drilled in the upper Bakken shale on the edge of the Elm Coulee field in Richland County, Montana, Northern Oil participated in the Rascal #1-18H, a successful upper Bakken shale test well operated by Slawson Exploration.  Northern Oil controls a 20.00% working interest in the well, which had an initial production rate of 707 BOPD.  Slawson and Northern refer to this exploration program as the Big Sky/Lambert prospect.

Goodson 1-28H, 690 bbls IP

In an additional Three Forks delineating well, Northern Oil recently participated in the Goodson #1-28H, a successful Three Forks test well operated by Continental Resources in Divide County, North Dakota.  Northern Oil controls an 18.75% working interest in the well, which had an initial production rate of 690 BOPD.  

Hunter 1-8-17H, 1,668 bbls IP

Northern Oil also participated in the Hunter #1-8-17H, a successful Bakken test well operated by Slawson Exploration in Mountrail County, North Dakota.  Northern Oil controls an 11.74% working interest in the well, which had an initial production rate of 1,668 BOPD. 

North Dakota Sand for Fracking -- Bakken, North Dakota, USA

Elsewhere someone raised the question: where are they getting the sand for all the fracking in the Bakken.

Here's a nice start: https://www.dmr.nd.gov/ndgs/newsletter/NLjan2011/Proppants.pdf.

Again, a big thank you to Don for sending me the link to this article. As with other articles, it will be linked at my data page for future reference.

One (1) New Permit -- Bakken, North Dakota, USA

The daily activity report for Monday, June 6, 2011, was practically blank; one new permit:

• A Murex well, file #2936, T.P. Clifford 1, Renville County, was permitted for injection.

One well was released from confidential status:

• 18103, TD=14,900, Enerplus, Look Out Ridge 4-31H, Dunn County

And that was about it.

Innovation In The Oil Patch -- Bakken, North Dakota, USA

Two stories in this link: one with regard to an industrial park north of Dickinson, Stark County, North Dakota; and the second story about a small overflow housing facility.

With regard to the second story:

Baranko Brothers Inc. found favor in its request for a conditional use permit to build a facility for temporary housing of employees, office spaces and meeting rooms.

The building would be a five-bedroom, 16-by-76 foot manufactured home. It would be located a half-mile east of Steffes.

Baranko Brothers representative Glenn Baranko said the building was needed in response to recent housing shortages in the area.

“It is basically overflow if somebody needs to spend the night,” Baranko said, adding that employees would not permanently stay there and the facility would be an alternative to commuting long distances after a long day of work or being forced to find a hotel room for the night. 

"Overflow housing" is perhaps the most critical issue in the area. Talking to a motel manager in the Williston area, it is obvious that a major risk is putting someone back on the road when they are exhausted, sending them down to the next town looking for lodging. "Urban areas" in North Dakota are measured in hours apart.

The first story had to do with an industrial park:

The board accepted the final plat map for Suzanne Medley’s company Northpark Industrial LLC that would allow industrial building in a 150-acre tract north of Dickinson and west of Steffes ETS.

Both projects (the industrial park and the "overflow housing" facility") were approved.

Williams County Roads Open Again to Oil Traffic -- Bakken, North Dakota, USA

Link here.

Williams County shut down the oil patch last week and reopened it Monday, partly because crude oil supplies were becoming strained at the Tesoro Refinery at Mandan.

Divide County and Williams County, home of Williston, both severely restricted gross weight of vehicles to prevent gravel roads from being completely destroyed by semi truck traffic. In both northwestern counties, the heavily-freighted oil industry came to a dead stop.

Williams County planned to reassess the roads' condition Tuesday after county crews, helped by the oil industry, worked all weekend to make repairs.

It stepped up that assessment after getting a call Monday morning from North Dakota Petroleum Council President Ron Ness, who said Tesoro, which depends on a pipeline station in Williams County, was beginning to get tight on supply.

"We knew late last week that they had a supply for five or six days, but another week (of the shutdown) would have a significant impact on their product," Ness said. "Not only that, but an entire industry was sitting on its heels."

Williams County Commissioner Dan Kalil said the oil industry brought blades and other equipment to the county crew's road battle and significant headway was made over the weekend.

I said in my last post (written yesterday) that I would comment on the Williams County Commission decision to shut down the oil industry locally, but my two cents worth is no longer needed. Interesting turn of events, though.

I've been driving the county roads the last couple of days and they are truly horrendous. Horrendous but not impassable. And no IEDs.