Reminder: Acronyms and Glossary Page. Two More Definitions Added

Reminder: at my "acronyms and glossary page" I explain some commonly used terms in the oil patch, in corporate presentations, and in financial statements.


Michael Filloon provides nice definitions for internal rate of return (IRR) and net present value (NPV).

NPV is the difference between cash inflows and cash outflows. It shows the overall profitability of each well. This NPV is figured using these values:

• $8.9 Million in Well Costs
• EUR (Estimated Ultimate Recovery) of 600 Mboe
• 5-31-11 NYMEX Strip

This produces a 75% IRR (Internal Rate of Return). The IRR is best described as the rate of growth a project is estimated to generate.

Operator Effectiveness in the Bakken -- North Dakota, USA

I'm sure this metric has been discussed by someone elsewhere before but until today I had not seen it discussed, except for my stand-alone post on the subject on June 21, 2011.

Perhaps he discussed it in Parts I and/or II and I simply missed it, but here is what Michael Filloon had to say in today's Part III regarding the Bakken:

Continental (CLR) had 868,900 net acres as of March 2011. 68% of this acreage is de-risked and in development mode. Of its 365 million boe 2010 proved reserves, 42% were in the North Dakota Bakken. Continental has had very good results. The six month total production of wells drilled since 2009 by Continental is 4.145 million boe. Over this time it has drilled 69 wells. Its six month average production as of January, 2011, is 60 Mboe. This trails Whiting's (WLL) 100 Mboe and Brigham's (BEXP) 81 Mboe over the same time frame, while being equal to EOG Resources' (EOG) 60 Mboe. 

(100-60)/60 = 67%. Whiting's production is about 67 percent better than CLR and 23 percent better than its nearest "competitor." A very interesting metric. 

Of, 4 million / 365 million = about one percent. Yup, there's a lot of drilling yet to be done.

If America Doesn't Want Canadian Oil, The Asians Will Step In

I posted something similar not too long ago, but the heading was a bit more limited: "If America doesn't want Canadian oil, China will be more than happy to buy it."

Or something to that effect.

I was too limited. "China" should be replaced with "Asia."

It turns out South Korea (and other Asian countries will follow) has bought into Canadian energy reserves.

The world's largest liquefied natural gas purchaser is buying into a northeastern B.C. shale gas play in a move proponents and observers say promises to accelerate LNG exports to Asia.

Korea Gas Corp. is acquiring a five per cent stake of the Cordova Embayment project from Mitsubishi Corp., the equal joint venture partner of Calgary's Penn West Exploration, in the play.

Mitsubishi said it will transfer one-tenth of its share of the project, through the Japanese firm's Calgary-based subsidiary Cordova Gas Resources Ltd., to Korea Gas (KOGAS), to leverage the Korean firm's weight as the largest global LNG importer in discussions with potential future Japanese buyers of the western Canadian gas.

Note: this is a natural gas play, the exact "stuff" the New York Times says is a scam. 

Minnesota Shuts Down -- All The Unintended Consequences -- Truly Incredible -- How Can Such Smart People Do Such Dumb Things?

I've replaced the "Minot Flooding -- Live Streaming" link on the right with a link to the Minnesota state government shutdown.

One tragedy was somewhat out of the state's control; the other tragedy was completely in the state's control.

Another Story on Economy in the Dakotas

Link here. (PowerLine site which is also linked at the sidebar at the right. A very nice site.)

Go West, that is, if you live East of the Dakotas. Quite a few years ago, I read that North Dakota had more millionaires per capita than any other state, the consequence of agriculture and oil. And that was before the Bakken Shale development, currently the largest construction project in the United States.

Daniel Gross (via InstaPundit) cites chapter and verse on North Dakota’s boom: the unemployment rate is 3.2%; one quarter of all the oil drilling rigs in the United States are operating in North Dakota; in Williston, McDonald’s restaurants pay entry level workers $12.50 to $15 per hour; North Dakota’s economy has grown 7.1% in the past year; and the state can’t find enough workers to man the jobs it is creating.

It isn’t just oil, either. Agriculture is booming in North Dakota as it is throughout the Midwest. This is partly due to our government’s decision that it would be a good idea to burn our biggest cash crop, as a result of which Iowa is now a net importer of corn. But even without boneheaded federal intervention, agriculture would be doing very well.

I am always impressed how well South Dakota is also doing, and the state has "no" oil -- that may change, but South Dakota's economy weathered the recession much better than most for the reasons that are cited in the linked story. 

North Dakota has gotten most of the publicity, but South Dakota also enjoys enviable prosperity. Its unemployment rate was 4.8% in May, not as low as North Dakota’s but a heck of a lot better than the national rate of 9.1%. South Dakota doesn’t have any oil, but its business-friendly environment and superior work force attract jobs of all kinds. I spent last weekend in Sioux Falls, a booming city of over 150,000.

Go to the link for a great photo and a great story.