The Million Dollar Way (The Bakken Oil Blog): 06/28/11

Tuesday, June 28, 2011

Samson O&G's Rodney 1-14H Producing: 1,439 BOPD

Samson O&G advised that the Rodney #1-14H has been turned to production following the successful fracture stimulation and completion. The work over rig was released on June 25th after all of the fracture isolation plugs were drilled out without incident. The maximum 24 hour measured oil rate during the drill-out operation was 1,439 bopd.

Rigzone: North Dakota Floods Idle Five Rigs, Shut Down 45 Wells

Link here.

Bad weather, flooding and road restrictions are disrupting oil production in North Dakota, shutting down the transportation by rail of 50,000 barrels a day of crude, a state official said.

"No one was prepared to deal with floods that are breaking records set 130 years ago," said Lynn D. Helms, director of the North Dakota Industrial Commission's Department of Mineral Resources said in an e-mail sent late Monday. Helms said the temporary shutdown of the rail transportation will last until it can be re-routed west, but didn't give an estimate as to when that might occur.

The weather has forced the shut in of 45 wells and idled five drilling rigs and is delaying the arrival of service crews to 500 wells waiting to be fractured, Helms said.

Significant, but not overwhelming.

Who Will Buy Boeing's Brand New (Never-Been-Used) Aircraft Factory in South Carolina When The NLRB Rules Boeing Can't Move To South Carolina?

Update

June 30, 2011: Another possibility. Who's to say American Airlines might not just buy the brand new factory for a song, and then lease it out to Airbus and/or Boeing to build American Airlines' new fleet of 250 airplanes in a deal worth $15 billion? AMR would have some leverage: if Airbus wants to be part of the deal, they would have to accept the terms and the new factory.

Original Post

Yes, I know: this has nothing to do with the Bakken, but sometimes I can't resist. I apologize. For those folks who want to read only about the Bakken, please ignore this post.

Now, back to the question: Who Will Buy Boeing's Brand New (Never-Been-Used) Aircraft Factory in South Carolina When The NLRB Rules Boeing Can't Move To South Carolina? Story here.

Answer: Airbus.

And Airbus will buy it for a song.

Airbus and Boeing signed over $25 billion in orders to kick off the Paris Air Show, June, 2011.

Airbus topped the totals, signing orders and commitments for 142 aircraft worth $15 billion.

Rival Boeing countered with more than $11 billion worth of orders and commitments for 56 of its jets, including an order by Qatar Airways for six of its 777 jets in a $1.7 billion deal.

And again, Airbus set a record at the June, 2011, Paris air show, for the most airplanes ever sold at an airshow by any manufacturer, with 730 orders worth over $70 million.

They gotta build those jet planes somewhere, and it's probably cheaper in South Carolina than Germany and France.

A precedent has already been set: BMW has a nice factory in Spartanburg, South Carolina.

Headline Writers At It Again

Here's the headline: "Oil Could Drop to $87 In the Near-Term"

Read the article at the link and decide for yourself if that's the take-home message.

This was the concluding paragraph in the article:

The current retreat [in the price of oil] is an aberration in the fundamentals of demand and supply. The price chart shows the constraints of this policy. A return to the usual demand and supply relationships restores the price activity to its previous behavior and this points the way to a resumption of the uptrend. [Note: on the day this article appeared, WTI oil was up $2.00 from $91 to $93, or thereabouts.]

Elsewhere in the article, the writer says:

The downside target is the long-term support level near $87/barrel. If this fall was triggered by changes in the fundamentals of demand and supply then the chart would also suggest a further downside target near $77/barrel. This is a low probability target simply because the new supply of oil is limited by the size of the stockpiles and the political will power of the IEA member nations.

This is very different from OPEC intervention in the market where their virtually ‘unlimited’ supply allows for the almost infinite increase in production to meet the demand and supply balance. IEA increases in supply are limited by the very nature of the stockpile. This suggests string support around $87/barrel with the development of a consolidation pattern.

I agree with everything in the article (in a general way) except the statement (written as fact) that OPEC has an "unlimited supply [that allows] for the almost infinite increase in production to meet the demand and supply balance." But in the aggregate, a nice analysis.

But even so, the writer of the linked article and I probably agree on OPEC supply as generally defined and understood, but my definition is a practical one; the writer's definition is no doubt a "theoretical" one.

Week 25: June 18 -- June 24, 2011

Several Stories on the Release of Oil From the Strategic Petroleum Reserve (most recent at the top)

Administration Admits to Slow-Rolling the Petroleum Industry: The Permitorium Continues

Rigzone Discussion on Fracking Backlog

Fracking Backlog, Road Restrictions, Flooding Conditions: Taking Toll on North Dakota Oil Industry

Rigzone: North Dakota Booms Into Energy Era
Impact of Oil Industry on Northwest North Dakota

Takeaway Capacity, Oil, Bakken
Enbridge To Build Railroad Oil Loading Facilities: Gains Flexibility
Bakken, Niobrara, Eagle Ford: One Million BOPD Within Five Years

EPA Selects Killdeer, Dunn County, North Dakota, To Test Fracking

Merger, Buyout Action in the Oil Patch: WMB Makes Unsolicited Bid for SUG
Merger, Buyout Action in the Oil Patch: Williston-Based Grizzly Wire Bought by Texas-Based Co.

National Energy Center for Excellence: Bismarck, North Dakota
$4 Million For Oil Field Training -- Williston, North Dakota

Forbes: The Bakken, Natural Gas, CLR, and Oil

The Oil Fields of the Nesson Anticline

Rig Utilization in the Bakken

Hot Spot in the Bakken: McGregory Buttes/South Fork Inside the Reservation

Update on Number of Wells on the Confidential List

Nine (9) New Permits -- Bakken, North Dakota, USA

Daily activity report, June 28, 2011 ---

Operators: Denbury Onshore (2), Hunt (2), CLR, Sinclair, OXY USA, G3 Operating, Whiting

Fields: Siverston, Brooklyn, Sanish, Dimond, Park, and two wildcats.

Hunt and G3 have the two wildcats; one in McKenzie and one in Williams.

Whiting's permit is in Billings County; Sinclair has the permit in the Sanish field.

Some nice wells reported today:

18581, 755, Newfield, Williams
19185, 1,377, XTO, Dunn
19187, 510, XTO, Dunn
19473, 1,060, Marathon, McKenzie (Sanish)
19626, 1,060, Marathon, Dunn

2Q11 Earnings Central

All 2Q11 earnings will be reported at this page; link will be on sidebar at the right, under "Earnings Central."

NOG, VOG, USEG, others, all on one page.

Michael Filloon, recap, August 9, 2011.

Earnings Calendar.

June 28, 2011: In general, Bakken companies are starting to announce lower production than previously predicted for 2Q11 due to weather, roads, and flooding. Earnings estimates probably at lower end of forecasts, but as of June 27, 2011, not many "earnings warnings" from Bakken companies.

2Q11 -- EARNINGS -- CONFERENCE CALLS

HAL: 80 cents vs 74 cents forecast; Revenues hit new record; transcript; share price target increased; oil market heats up on news; fracking industry can't keep up with demand

NFX: $1.02 vs $1.05; may have hit record IP in the Bakken; share price up 1.5%; misses expectations in two of last five quarters (are expectations too high?)

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 32.2%, with the biggest boost coming in the second quarter of the last fiscal year when revenue rose 56.1% from the year earlier quarter.

The company has now fallen short of estimates in the last two quarters. In the first quarter, it missed expectations by 5 cents with net income of $1.02 versus a mean estimate of net income of $1.07 per share.

SLB: 98 cents vs 85 cents forecast; profit jumps 64 percent; share price jumps.

BHI: earnings triple! Transcript here. Look at the two-year share performance.

The company’s earnings of 93 cents a share inched passed the Zacks Consensus Estimates by 2 cents, but showed a dramatic improvement from 23 cents earning a year ago.

Revenue shot up 40% to $4.7 billion in the quarter from the year-earlier level of $3.4 billion. The top line also exceeded the Zacks Consensus Estimate of $4.6 billion (numbers rounded).

OXY: profit up 71%; $2.23 vs $2.15; transcript;

WFT: record revenues;

Second quarter revenues of $3.052 billion were the highest in the company's history, despite the severe negative impact of Canada's spring break-up. Revenues were 25 percent higher than the same period last year and seven percent higher than the prior quarter.

NBR: revenue jumps 40%; 65 cent vs 25 cents;

QEP: earnings jump 22%;

NOV: earnings up 18%;

COP: $2.41 vs $2.19; despite lower quarterly profit;

HES: $1.78 vs $1.94; shares drop; refinery and Libya drag down earnings;

NBL: beats on revenue; $1.44 vs $1.07 comparable quarter last year;

XOM: surges; net income up 41%; misses forecast; $2.18 vs $2.33

WLL: income up 17%; production records set; replay of conference call; transcript here;

LINE: misses forecast; 47 vs 61 cents; still, earnings increase; raises dividend 5 percent;

CHK: net income nearly doubled; transcript;

HP: beats estimates; revenue up 33 percent; announced contracts for 12 new rigs earlier this month; with earnings announcement, announced contracts for 20 more new rigs; transcript;

EEP: lags estimates; raises distribution by 3.6 percent; share prices appreciate;

CVX: profit jumps 43%; a second-quarter record; $3.85/share beat estimates by 23 cents;

SM: blow-out quarter; 28 cents/share last year; $1.86 this year -- incredible

MDU: revenues in-line; reaffirms guidance; transcript;

CLR: $1.33 vs $0.61; transcript;

WMB: 23% higher profit; 39 cents vs 28 cents a year earlier; earnings call Tuesday, August 9, 2011; WMB paying 3% now.

GMXR: earnings report;

DNR: results; transcript;

DBLE: results; transcript;

EOG: better than expected; shares up 6%; transcript; $1.10 vs $0.24 (huge);

KOG: results; transcript;

ENB: beats estimates; transcript;

OAS: 36 cents vs a loss; conference call; transcript;

BEXP: beats expectations; operations update; transcript;

RIG: misses;

EPD: profit rises 27%;

NOG: records set; production up 200% year-over-year ; Michael Filloon -- response to NOG's 2Q11 was "good"

VOG: record results; doubles production year-over-year

GEOI: press release;

USEG: press release;

SSN: filed at its website (PDF file); production increased by 63% and earnings increased by 57%, compared to year earlier.

AXAS: after market closes on August 9; conference call on August 10

ERF:

WHX: Aug 16 - Aug 21

Hess Donating $1 Million to North Dakota Flood Relief Efforts

Link here.

“We are deeply concerned about the people who are suffering from the devastation caused by the floods that have occurred in North Dakota,” said John Hess, Chairman of the Board and CEO of Hess Corporation. “To support relief efforts, we are donating $1 million to the following organizations: $750,000 to the Minot Area Community Foundation and $250,000 to the North Dakota Community Foundation. These groups will coordinate their activities to provide services to flood victims and assist in long term recovery and rebuilding efforts in the Minot area and across the state.”

In addition, Hess has offered a matching gift program for employees who wish to make a personal contribution to these relief organizations as well as the American Red Cross North Dakota Flood Relief.

I assume others will step up to the plate also.

In Case You're Not Watching It -- Oil Is Up Over $2.00/Bbl

This might just be an anomaly today, the direction of oil, and tomorrow it might be all taken away, but does anyone else think it strange that oil is up over $2.00/bbl right now (11:45 Pacific Daylight Time)?

This is just days after it was announced that governments around the world were going to release 17 hours-worth of global consumption from their strategic petroleum reserves? From Business Insider, not me:

That 60 million barrel oil release? It amounts to about 17 hours of global oil consumption, according to the IEA, which says the world consumes 84.2 million/day.

Sure, into a weak, jittery market that was already selling oil this morning, today's (June 23, 2011) news caused a bit of a jolt, but this really is a big, inconsequential waste.

Two comments: a) Saudi must be happy; they didn't even have to scare the world by suggesting they would cut production if reserves were going to be released; and, b) supply and demand is more than just about "oil" but also "type of oil."

And like the "right whale" in the 1800s, Bakken oil is the "right oil."

Solar Plants Living On The Edge

Quick! What's the extraction and production tax in North Dakota levied on oil industry?

I think it's 6 to 6.5% for each, totaling 12.5 to 13% tax on oil industry for each bbl of oil taken out of the ground in North Dakota. There are other taxes associated with the production of oil. Extraction and production is just the start. There are property taxes, road taxes on the trucks that haul away the oil, income taxes on profits, etc.

Now, headline story in Los Angeles Times business section today: "Fee Is Considered For Solar Plants."

Quick! How much does the home to some of the largest solar energy plants in the state want to "tax" the solar industry?

Two (2) percent of annual revenue.

Response from the solar energy companies: it will break us. We can't afford to be taxed at 2%.

Here's the crux of the story:

Riverside County, home to some of the largest solar energy plants in the state, is considering imposing a development fee on such installations, a move that critics say could chill prospects for the renewable energy business in the region.

The new levy, which would require solar developers to pay 2% of their annual revenue, is needed to help offset the potential toll that the massive plants could take on surrounding communities, county officials said.

More large-scale solar plants are being installed in Riverside County than anywhere else in California, according to the county. More than 185 square miles in the county is set to be blanketed in mirrors.

Those projects could strain local roads, bridges, law enforcement and medical services, the county said.

Here's the response from the solar energy:

But solar developers said the fee, which they said came out of the blue, could make their installations unaffordable and less attractive to investors. Some are threatening to relocate their projects if the proposal, which they have dubbed the "sun tax," is approved.

If these companies are living that close to the edge with regard to economics/finances, heaven help them.

By the way, look at the footprint these projects take up:

"It's a game of gotcha," said Jim Woodruff, vice president for government affairs for First Solar, which is in the process of obtaining permits for Desert Sunlight, a 4,000-acre project that would provide enough electricity for 160,000 homes. "For the county to come in at the eleventh hour, when we're so close to the finish line, is a troubling way to do business."

4,000 acres is 6.25 sections (a section is 640 acres). Absolutely nothing else can be done in a solar panel project -- the panels take up every square foot of the 4,000 acres, unlike wind turbines, oil wells, or natural gas wells, where farming can still go on around the towers or the pumpers. Here in Los Angeles, we have pumpers in residential neighborhoods.

I wonder how many desert tortoises are affected?

Deepest Well Drilled in North Dakota

Updates

February 1, 2016: see comment from reader about another deep well, perhaps the deepest reported:

In 1991 I was a well logger and we went 16,300ft. The bit broke off and we fished for nearly a week, recovered ~2 cones before tripping back in and setting on the third cone going nowhere fast. That's the bottom of the Bakken. Red sandstone if I remember correctly.

May 11, 2013: There are two depths of interest in drilling a Bakken horizontal well: a) the true vertical depth; and, b) the total depth which includes the vertical depth + the length of the horizontal. It gets a little confusing, therefore, when talking about the "deepest" wells in North Dakota. From the roughneck's perspective, it doesn't matter if it's vertical or horizontal, it's a lot of pipe.

That being said, here are some deep wells in the Bakken:

23532, 527, CLR, Louisville 2-9H, Last Chance, t2/13; cum 256K 9/19; total depth: 26,555 feet; NWSW 10-153-100, runs east-to-west, sections 9/8/7-153-100 (it is sited just inside section 10); it runs under the river. Section 8 is entirely under the river. 44 stages; 3.65 million lbs, sand and ceramic.

EOG also has some super long laterals.

22484, 2,946, EOG, Hawkeye 102-2501H, Clarks Creek, t1/13; cum 600K 9/19;

22485, 1,926, EOG, Hawkeye 102-2501H, Clarks Creek, t1/13; cum 695K 9/19;

22486, 2,421, EOG, Hawkeye 102-2501H, Clarks Creek, total depth 25,101 feet; t9/12; cum 781K 4/19; off line 4/19; remains off line 9/19;

22487, 67 (no typo), EOG, Hawkeye 102-2501H, Clarks Creek total depth, 24, 740 feet, t12/13; cum 850K 9/19;

Updates

The Redwing well noted below:

20753, 231, Iron Oil Operating, LLC/Hunt, Redwing 1-3-10H 1, Bear Butte t11/11; cum 89K 9/19; the Middle Bakken was encountered at 11,215 MD, or 11,017 TVD.

Original Post

Greg alerted me to this story (link is broken); it is quite fascinating.

There is quite a bit of trivia in that one story. I think folks might get a kick out of reading it.

The story references the Red Wing Creek field which I have talked about before, and in itself, is a very interesting story.

Dallas-based Hunt Oil (Hunt) is planning to drill a horizontal Bakken test some 10 miles southeast of Alexander and 13 miles southwest of Watford City in McKenzie County, North Dakota.

The company has staked a location for the Redwing #1-3-10H 1 (#20753), ne-nw 3-148n-101w. This wildcat will be drilled on a 1,280-acre standup spacing unit and will bottom somewhere in the southern portion of section 10-148n-101w. Permit/file number 20753.

This new location by Hunt is located roughly 4 miles southwest of a horizontal Bakken discovery drilled earlier this year by Tracker Resources (Tracker) at the Gudmunsen #27-1H, ne-ne 27-149n-100w. This oil strike was given an IPF of 1,006 bopd, 1.6 mmcfgpd and 1,106 bwpd from the Bakken interval at 11,428’–20,370’. The discovery well is operated by Hess Corp. (Hess) following its purchase of Tracker for $1.05 billion. Hess also plans to drill three more Bakken ventures near this strike: the Helga Stenseth #29-1H, ne-ne 29-149n-100w; the Edwin Stenseth #28-1H, se-sw 21-149n-100w; and the McGregor #26-1H, se-sw 23-149n-100w. No activity has been reported at any of these Hess locations.

The article goes on to talk about the deepest wells drilled in North Dakota, which was the original reason Greg sent me the link.

No real reason for posting this except for some light reading on a Tuesday morning, when the price of oil is up about a dollar despite recent announcement that countries around the world will be releasing oil from their strategic petroleum reserves.

More on these deep wells and other deep wells:

W.H Hunt Estate, Larson 1, 10-148N-101W, now operated by WISCO (warms the cockles of my heart, but that's another story); this was a wildcat, discovery well for Bear Butte Field, a now-abandoned Birdbear and Duperow oil pool. Of interest, this well is the 14th deepest ever drilled in the state of North Dakota, the deepest being 15,380'.

The Million Dollar Way (The Bakken Oil Blog)

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