Oasis With New Presentation -- Drilling Has Just Begun -- Pure Bakken Play, North Dakota, USA

Link here.

The drilling has just begun.

Oasis reports drilling 5.5 net wells in 1Q11. Oasis has identified 1,303 drilling locations (772 operated locations). They've identified 1,100 additional gross drilling locations from the TFS formation. Getting from 6 wells/quarter to 3,000 wells will take awhile, to say the least. And this is just one Bakken company.

Seven operated rigs. Working on 8th and 9th rig for 2H11.

West Williston area: three wells per formation (Middle Bakken and Three Forks) in each spacing unit yields 10 to 15 percent of the (original) oil in place (OOIP)

Three dedicated frac crews (ratio rigs to fracking crews: 7:3; with 9 rigs, 3:1). How bad is the fracking backlog? In West Williston, Oasis has 35 producing wells; Oasis has another 20 wells waiting to be completed (fracked)

Wells: $9 million for 36-stage completion.

North Dakota is aiming for 1.5 million bopd starting in 2H14, plateauing out through 2H16; currently about 350,000 bopd (1.5 million: 0.350 million --> 4.3 times greater)

For investors, Oasis has hedged their oil sales with 2-way collar contracts: floors $60 - $80; ceilings $80 - $123. Hard to sort out "true" cost of production/bbl, but appears to be about $25.

 

Spring Edition of the North Dakota Energy Bulletin

PDF file linked here.

There are some disturbing trends in the articles published this time, but I will let folks read it first before I comment, if I remember, or if I have time.

North Carolina Eager to Get Started Fracking

Another state joins the fray: North Carolina House voting to encourage drilling and fracking offshore and onshore.

Pennsylvania: Drill, Baby, Drill

By a margin of 2-1, Pennsylvanians want drilling to continue. Woe to politicians who try to shut it down.

Pennsylvania voters, by a more than 2-1 margin, say the economic benefits of gas drilling in the Marcellus shale outweigh the environmental impacts, a statewide poll shows.

They also believe by a 69-24 percent margin that companies doing the drilling should be taxed, according to the poll of 1,277 registered voters by Quinnipiac University. 

Actually 69-24 sounds even more lopsided than 2-1. Of the 24 who said "no," ten or more must have misunderstood the question. 

What Are Your First Thoughts When You Read This Story?

Updates

June 21, 2011: I posted the original note below on June 15, 2011. It's now been about a week and time to post the first thoughts I had when I read the linked story. 

First: my world view is that there is a small, but very vocal and very influential group of folks that will do anything to destroy "Big Oil," the domestic oil industry, or whatever you want to call it. They use whatever means they can, including scams like "global warming." They use existing bureaucratic agencies and regulations to stop "Big Oil" wherever they can. They co-opt legitimate entities to assist in their efforts. Examples abound.

Now, my first thoughts when I read the story below. I think the small but very vocal and very influential group of folks intent on destroying "Big Oil" were caught flat-footed when it came to horizontal drilling and fracking oil- and gas-containing shale. Even "Big Oil" was surprised how fast this process took off and how successful it has become. Right now, the success has resulted in huge supplies of natural gas and it's very possible we may see something like that in oil.

Those who hate "Big Oil" have been very successful in stopping/delaying off-shore exploration. They are now playing "catch-up" with hydraulic fracking and will do what they can to stop that process. It's very possible they will be successful.

But, states across the nation, including financially-strapped states are starting to appreciate the oil and gas royalties coming in from oil and gas produced through hydraulic fracture stimulation.

So, that was my first thought: everyone was caught off-guard with regard to hydraulic fracking. Now everyone is playing catch-up. Including those who want to stop "Big Oil."

June 22, 2011: And yet another story that suggests everyone was surprised how fast this puzzle was solved: hydraulic fracking, natural gas, and unconventional oil. 

Natural-gas producers are pumping fuel at a record pace as advances in drilling techniques help offset a decline in rigs, signaling no respite for the world's worst-performing commodity in the past year.

Gas has tumbled 39 percent since the end of 2007 as companies increased output by about 11 percent to a monthly record in March. Improvements in drilling amid rising demand for the cleaner-burning fuel have outweighed a 45 percent drop in the number of rigs since reaching an all-time high in 2008.

Companies from Range Resources Corp. to Chesapeake Energy Corp. are using capital from joint-venture partners to simplify the process of extracting gas contained in shale. Natural gas is the only raw material that hasn't gained in the past 12 months, losing 12 percent, according to the Standard & Poor's GSCI Index. Oil has jumped 24 percent in the same period.

Original Post

This is an interesting story -- read it.

Then, take a moment to reflect on the first thing that comes to your mind.

I will tell you the first thought I had while reading the article -- tomorrow, unless I forget.

First two paragraphs of the story:

The U.S. shale oil and gas drilling boom boosted U.S. oil and gas reserve growth to a five-year high in 2010, while upstream spending more than doubled from 2009 to 2010 largely due to producers' acquisitions of shale properties, according to Ernst & Young's fourth annual U.S. E&P Benchmark Study.

The survey of the 50 largest oil and gas companies by end-of-year reserves found that end-of-year oil reserves grew 11 percent from 16.1 billion barrels in 2009 to 17.8 billion barrels in 2010, and natural gas reserve grew 12 percent from 156.2 Tcf in 2009 to 174.3 Tcf in 2010, the strongest combined annual growth posted from 2006 to 2010.

Coal Not Wanted By Minnesota, California, Others, Will Be Shipped To Asia

Updates

June 17, 2011: Cloud Peak Energy successfully acquired nearly 60 million tons of coal which will help the company meet its growing exports to Asian markets.

The "key" words are "help meet." incredible.

Original Post

I don't know how many times I have posted similar stories, or sent e-mails regarding the same to others regarding this issue, but every time someone sends me a story that some state won't allow coal-produced electricity, or will minimize the use of coal, I simply reply that Asia will take all we can produce.

Here's an article to support my thesis.

While the US administration does what it can to destroy the domestic energy industry, and superficially raise energy prices through "cap and trade" talk, EPA regulations, etc., China and India are going to take advantage of the situation.

This is not rocket science.

I have to commend (again) Warren Buffett for having the foresight to buy Burlington Northern to ship coal to Asia. Note something else in this story: after all the hassle of trying to ship more coal out of a Washington State port, this new initiative will ship coal out of a Canadian port. A Washington State port refused to increase port facilities because it did not want to contribute to global warming.  Even Canada is looking better and better vis a vis the United States and energy.

I talk about the lost decade (2000 - 2010, see tag) but I fear we are headed for another lost decade.

2,500 Man-Camp Approved -- Near Tioga, Along Highway 2 -- Bakken, North Dakota, USA

This proposal was reported earlier; now it has been approved. This is simply huge: 2,500 man-camp.

Think about that for a moment: two thousand five hundred new men (mostly men, I assume) descending on a small village.

To put this in perspective, Minot Air Force Base has 4,536 active duty personnel with full support services to include commissary (grocery store), base exchange (department store), hospital, recreation centers (including an indoor swimming pool), etc.

Something tells me roads are going to be the least of the county's problems going forward. Hospitals, restaurants, night clubs, etc. will be severely impacted.

2,500 man camp on US Highway 2 between Tioga and Ray. This is in addition to all that is already there. Incredible. Maybe I'm being a bit overly concerned, but I truly can't get my mind around that many men moving into a man-camp. Just think of the traffic -- actually they will be moved from man-camp to work areas by bus, as much as possible.

Is Annabelle Homes of Minneapolis "Betting the Farm" on the Bakken?

With the housing market essentially moribund nationwide, it almost appears Annabelle Homes of Minneapolis is "betting the farm" on the Bakken.

The Minot Daily News reported that Minneapolis-based Annabelle Homes could have projects under way this summer in Columbus, Plaza and Kenmare, and is visiting with officials in Tioga, Crosby, Watford City, Velva and Berthold about potential projects in those communities.

If Annabelle is making decisions based on solid consulting analysis, this speaks volumes.

Search this blog for other Annabelle stories and you will see where I am coming from.

Three (3) New Permits -- Bakken, North Dakota, USA

Daily activity report, June 15, 2011 ---

Drillers: Slawson, CLR, and MRO

Fields: North Tioga, Bailey, and a wildcat.

Slawson's wildcat will be in McKenzie County.

Several permit renewals (Hess, OXY USA, Newfield) but otherwise an unexciting report.

Another Road Closure in the Bakken -- Bakken, North Dakota, USA

Alert in full:


1806 Road Alert
Jun 13, 2011

ND 1806 CLOSURE

ND 1806 has become inundated with breakups and pavement deterioration beyond

repair. The Department is working on a contract to grind up the existing pavement

and base, add some gravel, and maintain the gravel surface until we can find the

resources to widen the roadway, place new base gravel, and asphalt paving

sufficient enough to support the heavier loads generated by the industry.

Monday morning (6/13/2011), the Williston Sign crew will begin signing for the

closure of ND 1806, north of Watford City to Tobacco Garden. The entire highway

will be closed to thru traffic. Those living along ND 1806 will be allowed to

travel to the nearest detour location for access. Also, oil operators needing to

get to oil locations isolated from other roadways, can use minimum mileage for

that purpose. There are a couple pieces of ND 1806 that are necessary to tie

McKenzie County routes together: Cty 12 to 36 & Cty 10 to 35, these segments will

not be barricaded off.


ND 1806 will revert to an 80,000# roadway effective Monday morning. (the 5 ton

will not be removed until the closure is complete). Any permitting will be based

on the 80,000#.


A detour route has been established and will be signed. Eastbound: take ND 23

east and north to McKenzie County 10 (north of Keene), then west on McKenzie

County 10 (39th str.) to McKenzie County 43, then northbound on MC 43 to meet

with ND 1806 near Tobacco Garden Recreation Area. The return from Tobacco Garden

will the reverse of the eastbound route. Watch for signing.



Walter Peterson P.E.

Williston District Engineer

701-774-2710

A Little Sign That Things MIght Be Getting Back to "Normal" in the Bakken

I could be wrong, but I believe the number of active rigs in North Dakota was 169 yesterday, significantly below the all-time high of 179. This morning the count is up to 174 which is much more respectable.

On Friday night (June 10, 2011), the "only" highway through the North Unit of the Badlands (just south of Watford City) was abruptly closed due to "slides," ground shifting and tons of earth cascading over the highway. It probably closed about 4:00 p.m. -- I was driving through at 6:45, and was held up in a line of oil truck traffic for about 15 minutes. Highway patrolmen were helping truckers find alternate routes to their destinations. State highway 22 (Killdeer area) has been closed for quite some time due to slides and detours around this area were already constrained. Closing US Highway 85 south of Watford City obviously made things much worse.

I have no idea if US Highway 85 is open yet. There are ways around but I assume there are some wells that will not be reached if this portion of the highway is closed.

Slides in North Dakota are not uncommon (as noted in the link above). One can download maps showing where the slides have occurred at this site. When there, the best map to start with is the Watford City area, and then zoom in on the area in the Badlands, along the Little Missouri River.

PennEnergy Story on the Bakken

Link here.

Russ Atkins, an area supervisor for Continental Resources, said the emergency shutdown cost his company 8,000 barrels of daily production, though he said there was no blame for what nature caused.

Atkins said the Bakken is unique and he suspects even North Dakotans don't realize how to grasp its stature.

"This is world-class, bigger than Prudhoe Bay. We have to start thinking differently," he said.

Bigger than Prudhoe Bay (Alaska). That's huge. And we've barely started.

Railroads Ramp Up To Support The Bakken -- North Dakota and Montana

Oil Unit Training Pulling Out of Williston, Heading East Toward Minot

Link here.

Both BNSF Railway and Yellowstone Valley Railroad (YSVR) are increasing railroad services in Montana to support growing oil production from the Williston Basin and the Bakken Shale.

BNSF and YSVR have amended their lease agreements on the railway route between Snowden and Glendive, Montana, to support increased oil transport traffic.

“The tremendous growth of oil production in the Williston Basin and the Bakken Shale formation over the last several years has resulted in significant increases in traffic volumes in and out of this area,” said Dean Wise, BNSF vice president, network strategy. “This amended agreement will allow BNSF and YSVR to respond to the changing demands of our customers, improve direct service and unit train handling efficiencies, and continue to invest to serve this rapidly growing part of the Montana and North Dakota economies.”

By the fall of 2011, BNSF will offer service for unit trains, and YSVR will offer service for any other traffic along the rail line between Snowden and Crane.

This is just a snapshot of a much bigger story. Throughout the Bakken, I saw more oil loading facilities being built along railroad tracks, sidetracks filled with brand new oil tank cars, etc.

Saudi Unable to Make Up The Libyan Loss of Oil

Updates

July 5, 2011: Another one agrees -- Saudi may not be able to make up shortfall.

Some major investment banks are still betting that oil prices will grow next year despite an emergency injection of crude on world markets from the U.S. and other countries.

Independent oil analysts say prices still could head lower this year. But some think IEA's announcement speaks volumes about its expectations for world oil supplies.

"I think it's an admission from them that Saudi Arabia might not be able to produce enough oil on its own" to meet increased world demand, analyst Stephen Schork said.

July 3, 2011: Filloon -- Saudi can't make up the Libyan shortfall with either the right kind of oil or in a timely manner.

The Bakken continues to be my favorite shale play in the United States. Its oil dominated resource is well placed in an environment of world demand slowly outstripping supply. The 60 million barrels of oil released to cover lost Libyan supply shows how close these two variables are. Saudi Arabia has the ability to meet this demand, but could take months to come on line. This increased Saudi supply is mostly sour crude, which also creates worry as to refining capacity. Now that OPEC is siding with Iran, the price of oil is headed upward. My estimates have it at $100/barrel, but $110 by year end may be closer to correct.

June 24, 2011: Well so much for that opinion by "anonymous" that Saudi was telling us the truth when "they" said "they" could make up the shortfall in loss of Libyan oil. This story pretty much puts the end to that argument. 

The loss of Libyan oil output since February represented a greater disruption to global oil supply than the aftermath of Hurricane Katrina in 2005, said Richard Jones, the deputy head of the International Energy Agency.

Jones, speaking in Reuters' Paris bureau, said that the initial disruption to oil output in Libya happened at a "fortuitous" time for European oil refiners as many were closed for maintenance.

"Now we're going into the summer driving season, those refineries which have returned to operation are about to ramp up their production."

Jones said the market was facing a possible shortfall of 1.8 million barrels per day for the remainder of June and 1.7 million for the next quarter.

It appears if any oil is released from the US strategic petroleum reserve it will be sent to Europe. America's storage tanks are more than full.
 
June 21, 2011: Deep in this story a reference to the fact that Saudi has not been able to replace the loss of Libyan oil. I remember back in March folks saying Saudi could make up the difference. It's almost July and it's being reported the Libyan loss is still palpable.

June 17, 2011: John Hofmeister is concerned about three regions in the western hemisphere: Venezuela, Mexico, and the Gulf of Mexico. He did not mention Alaska.

He says China's consumption will go from 9 million to 15 million barrels in four to five years. He said India's consumption will go from 4 million to 7 million barrels.

Interestingly, he seemed to confirm what I already thought: the Saudis have not yet made up the Libyan shortfall promised back in March, 2011, but I could have been mistaken. My impression is that the Libyan shortfall has not been replaced with light, sweet oil.

On CNBC, Friday, June 17, 2011.

June 16, 2011: IEA raises forecast on five-year global demand by 700,000 bbls of oil per day.

The IEA, during its medium-term report, urged OPEC to raise output levels. The IEA claimed global demand remains strong and increased its five-year global forecast by approximately 700,000 bpd.

Let's do the math. Scroll down to the original post below where it says:

Saudi Arabia would boost output to 10 million barrels per day (bpd) in July, which Goldman Sachs' global head of commodities research Jeff Currie said would leave only 500,000 bpd spare.

Re-stating the obvious: if Saudi raises production to 10 million bbls of oil per day, GS calculates that Saudi has only another 500,000 bpd to spare. Now the IEA raises its forecast for global demand by another 700,000 bpd.

I can't make this stuff up.

By the way, I thought Saudi had already raised its output to meet the deficit caused by the Libyan "thing" which the administration says is not covered by the US War Powers Act.
 
June 15, 2011: Saudi oil terminal vulnerable to terrorism.

When al-Qaida suicide bombers tried on Feb. 24, 2006, to blow up Saudi Arabia's Abqaiq oil processing facility, arguably the world's most important petroleum hub, it was taken as a sign of strength that internal security had foiled the attack. Secret U.S. State Department cables obtained by WikiLeaks and shared with news organizations show otherwise. Even though 70 percent of Saudi Arabia's oil exports flow through the Abqaiq facility, Saudi security forces were woefully ill-prepared to defend it, investigations into the attack found, according to the cables.

"Anonymous" has trouble envisioning Saudi execs sitting around a table making decisions to bluff investors. 

Original Post

Link here.

Saudi newspaper al-Hayat reported Saudi Arabia would boost output to 10 million barrels per day (bpd) in July, which Goldman Sachs' global head of commodities research Jeff Currie said would leave only 500,000 bpd spare. Currie and his team have warned for months about overstated Saudi output capacity.

"If you get up to (10 mln bpd), you start to really create a very tight market relative to spare capacity," he told the Reuters Global Energy and Climate Summit in London.

"But the question that's more appropriate is when do you get to 9.5, when do you get to 10? Because when you start to look out over the horizon, their ability to create more flexibility in spare capacity increases tremendously."

Peter Oosterveer, group president for energy and chemicals with global engineering giant Fluor Corp (FLR.N), recently met with executives in the Middle East, and returned with a feeling that Saudi Arabia's capacity was not as large as some estimates.