Week 28: July 9 -- July 15, 2011

Reasons Why BHP Bought PetroHawk

What BHP's Purchase of PetroHawk Means for Bakken Investors

Michael Filloon's Overview of Smaller Bakken Producers

Tesore Replacing Declining Alaskan Crude With Bakken Crude

New 720-Acre Industrial Park, Major Truck Stop North of Williston

EPA: Fracking Safe

Select Energy Enters the Bakken

ND Bakken Acreage: $8,800/Acre

Most Ridiculous Story of the Year -- So Far

Texas: Fracking Fluids To Be Made Public -- 2012

Williston Nets $720,000 in Impact Grants

Williams County Approves 900-Man Camp North of Williston

BR Has An Application In to Unitize Lost Bridge Field

US Announces Winners of Recent SPR Giveaway

Top ND Oil Producers in 2010

WAWS: Huge Deal for Williston -- $150 Million Project

Hampton Inn, La Quinta Inn, Among 70 Permits for Dickinson, ND  

MDU to Build 88-Megawatt Natural Gas Facility at Mandan, ND

For Investors Only: Burning Through Cash While Waiting To Frac -- Bakken, North Dakota, USA

Just a random thought.

On any given day, about four wells come off the confidential list. Of the four, about three are reported to be in DRL status (no IP provided).

DRL status means that the well has been on the confidential list for six months, and must now come off the confidential list. If the well has not been completed (fracked, in the majority of the cases), the operator is allowed to put the well on DRL status and keep it there until 30 days after the well is completed and tested.

Think about that.

The "confidential clock" starts ticking when the well is spud. Operators can now drill to total depth in less than a month. That means, at a minimum, when a well comes off the confidential list and is reported to be on DRL status, it has sat there for five months (and a few days in some cases) waiting to be fracked.

And then, for every 30 days that one does not see an IP reported, that is another month that the well has been sitting there waiting to be fracked.

Five months and another 30 days is six months -- two financial quarters. Half a year. That's a long time for investors (in some cases) to wait. 

Natural Gas Quietly Moving Up -- $4.50 Today

My "tipping point" for natural gas is $5.00.

"Tipping point" in this case means a huge scream to buy natural gas producers when natural gas hits $5.00.  I said that two or three years ago when I first started this blog; I was particularly focused on EOG at the time.

T. Boone Pickens Top 5 Energy Picks -- EOG Listed First -- Bakken, North Dakota, USA

Link here from SeekingAlpha.com.

With Saudi Arabia increasing production and the International Energy Agency having already put out some strategic reserves, it seems unlikely that supply can go up further. Keep in mind that EOG’s focus on oil over natural gas has been increasing recently, and this change looks like it will be beneficial.

And much more at the link.

Prices Soar; Crude Oil Draw Higher Than Expected -- A Draw Of 4 Million Bbls Even Though 30 Million Bbls Released From SPR

This is old news -- it was reported earlier today -- but I was gone all day and am now getting caught up.

Link here.

Crude oil futures spiked to a one-week high on a big draw in crude oil inventories and a slumping U.S. dollar.

Crude oil back to near $100.

The Department of Energy on Wednesday reported a much larger-than-expected draw in crude oil inventories for the week ended Jul. 15, saying that U.S. commercial crude oil inventories decreased by 3.7 million barrels from the previous week compared with the pull of 1.3 million barrels expected by analysts polled by Platts.

Am I missing something? Didn't President Obama just release 30 million barrels of crude oil from US inventories. Oh, I see now. The higher-than-expected draw was from "commercial crude oil inventories."

So, the commercial crude inventories drew down larger than expected even with 30 million barrels of crude oil being released from US strategic petroleum reserve. "30 million" is  a number that I don't comprehend but in context with "U.S. commercial crude oil inventories decreased by 3.7 million barrels from the previous week compared with the pull of 1.3 million barrels expected" puts it into perspective.

Perspective: wow!

US Records Record Exports of Natural Gas to Mexico; Can't Keep Up With Demand

Link here; original story from Houston Chronicle.

U.S. natural gas is flowing to Mexico at a record pace as demand for the fuel south of the border provides an outlet for surging supplies that have battered prices. Exports by pipeline to Mexico, which can't pump enough gas to meet local needs, reached 42.9 billion cubic feet in April as yields from shale formations drove U.S. output to an all-time high. Producers are shipping the fuel as prices at the Waha hub in west Texas, about 100 miles from Mexico, have dropped 65 percent from pre-recession levels in 2008. 

Rising shipments to Mexico signal that U.S. gas exports may keep expanding as onshore production climbs, said Biliana Pehlivanova, an analyst at Barclays Capital. "We certainly have the production capabilities to export," Pehlivanova said. 

U.S. gas production rose 0.5 percent to a record 78.58 billion cubic feet a day in April from 78.16 billion a month earlier, the Energy Department said last month. Net U.S. exports to Mexico rose 53 percent from April 2008 to a record this past April.

Hardball: Keystone XL At Risk of Being Lost; If Lost, TransCanada to Shut Down Cushing MarketLink Which Carries 150,000 Bbls From Cushing to Gulf Coast Refineries

Link here.

Continued regulatory delays could place the proposed 700,000-b/d Keystone XL pipeline in jeopardy, according to Robert Jones, TransCanada vice-president and manager of the Keystone Pipeline project, while speaking to reporters July 20 on the sidelines of the Oil Sands & Heavy Oil Technologies conference in Calgary. “US refiners will have to replace the oil they’re losing from Mexico and Venezuela and they will do that by whatever means they can,” he said. [Whatever that means.]

Jones also noted that TransCanada’s Keystone Cushing MarketLink project, delivering 150,000 b/d of crude from Cushing to the US Gulf Coast by 2013, would not proceed without approval of Keystone XL, explaining that the economics do not work for the line as a stand-alone facility.

During his keynote presentation on Keystone XL, Jones described the pipeline as a target for environmental groups who simply oppose oil, noting that building the facilities to export the crude overseas instead, conducting those export activities, and then importing crude by truck, rail, or tanker onto the Gulf Coast would have environmental impacts, including greenhouse gas emissions, exceeding those of building and operating Keystone XL.

After reading about the properties of Canadian oil to be shipped through Keystone XL and the new, increased reserve numbers from Venezuela, the loss of Keystone XL may not be all that important to the US.

Canada will probably ship Canadian sands oil to west coast to China.

Remember That Highway 22 Re-Opening Story? Never Mind -- Bakken, North Dakota, USA

Link here.

Another landslide this week means Highway 22 near Killdeer, North Dakota, won't open this week as planned.

Original story here (both links contain regional links which break early).

Minnesota Governor Signs Budget Bill -- Ends State Shutdown

Tipping point? Beer.

Big thank you to Greg from FourFiftyGas.com for article on the "real" story.

Link for Yahoo story on governor ending shut down.

The state lost millions of dollars in the shutdown, including lost revenue from lottery sales, tax audits and state park fees, money spent preparing to shut down and the cost of unemployment and health benefits for laid-off workers. The full cost wasn't expected to be known for some time because the workers who could calculate it weren't on the job.

The budget was widely panned for setting up a new problem down the road. It borrows money from schools and from future payments on a legal settlement with tobacco companies to erase a $5 billion deficit through mid-2013. Republicans and Democrats have been at odds for years over how to address persistent deficits, with GOP leaders pushing for deeper spending cuts and Democrats arguing for new taxes.

But again, if you want more background to this incredibly stupid story, go to the first link. Just part of an excellent summary from True North.com:

Then came the decision to take Miller off the shelves.  The reaction was both enormous and obviously unexpected to the Dems.  Rachel Stassen-Berger whined in a tweet on July 13, 2011, “”What do MNs care about? Beer. @ stribroper’s post about a Miller-free MN has 300 comments, 300 RTs and 4k#fb shares.”  You could practically hear the professional jealousy Stassen-Berger was feeling in her comment about her fellow Party-run pamphleteer at the Star Tribune.  That night the local television coverage about Miller products getting pulled from the stores was huge.  Once the whole story was told, people were livid.

Eric Roper’s story, “MillerCoors kicked off state shelves,” Star Tribune, July 13, 2011 reports the story.

“The problem stems from brand label registrations that brewers must renew with the state every three years, showing the label on each brand of beer. MillerCoors attempted to renew in mid-June, but, according to company officials, sent the state a check for more than the required amount. Green said the company followed up with a new check, which the state received June 27.

But on June 30, one day before the government shutdown, the company received a letter from the state that its brand licenses had expired. State employees who would typically renew those licenses have been deemed noncritical during the shutdown and laid off.”

Conclusion:

This was a contrived farce from the get-go.  They would continue to subsidize food stamps for unwed mothers but refused to cash a simple check and return the overages to Miller.  This kind of madness typified exactly what is going wrong with this country. 

I knew the shutdown was a farce when the very first story about the state shutdown had to to with the state's two horse racing tracks that would be shut down.

Bakken Operators Worried About Losing Their Leases? Sixteen (16) New Permits Today -- Sweet Sixteen -- Bakken, North Dakota, USA

Daily activity report, July 20, 2011 --

Operators: KOG (4), Hess (3), Whiting (2), BEXP (2), EOG, Newfield, EOG, North Plains Production, GE (GeoResource)

Fields: Pembroke, Climax, Pleasant Hill Ray, Sanish, Elk, Patent Gate, South Tobacco Garden, Wildrose, Parshall, and a wildcat.

KOG's four permits are on same section in Pembroke oil field (McKenzie), an Eco-Pad-like setup?

BEXP has the wildcat, in McKenzie County.

Two of the Hess wells will be on same permit in Ray field, Williams County.

Whiting has one permit in Pleasant Hill and one in their cash cow, Sanish oil field.

Two of three wells coming off confidential list had not data (DRL status, most likely); the third was Hess' EN-Lalim A-156-94-27H-1, in Mountrail County, with an IP of 250.

Crescent Point Energy canceled permit #10827, CPEC Ridgeway 25-36-163N-101W, Divide County.  (That NDIC entry, by the way, was filled with typographical errors.)

Another Reocrd: 184 Active Drilling Rigs -- No More Posts Until Later Today

I will be out and about all day.  I will post late this evening.

Lots of information along the sidebar, especially for new folks who are interested in the Bakken.

In the last couple of days, "we" have hit new records in number of active drilling rigs -- from 179, to 180, then 182, and then 183.

I just checked. A new record! 184 active drilling rigs in North Dakota. Just two weeks ago or so, we had hit a recent low (166), so this move is quite spectacular.

I see the price of WTI oil is up about $1.00 today, amid reports (that were blogged yesterday) that US crude oil supplies fell for the 7th week in a row.

KOG continues to rise despite announcement to issue 24 million more shares, adding to its current 180 million outstanding shares. 

Brooklyn oil field is getting exciting, as someone has noticed -- two rigs on site on this small field.

And construction is starting on another crude oil rail loading terminal; this one near Trenton, ND. If I remember, this will get a stand-alone post later.

US Crude Supplies Continue To Fall -- Average Price of WTI This Year --> $100 -- Analyst

Link here. 

An Energy Department report may show U.S. crude supplies fell 1.5 million barrels for a seventh week in the seven days ended July 15, according to the median of 10 analyst estimates in a Bloomberg News survey. Gasoline inventories probably slid 100,000 barrels from 211.7 million, the survey shows. 

Same report: analyst predicts average price of WTI oil this year -- $100/bbl. 

Interesting Look at Price of Oil Since the Civil War

Another graph that tells a very interesting story. It certainly puts things into perspective.

But oil prices are what draw the primary predictions nowadays, even though $100 per barrel oil is really nothing new. During the Civil War, for instance, the price of oil soared to about $115 per barrel when adjusted for inflation in 2010 dollars. In fact, until an extended period after World War II through about 1970, oil prices were anything but stable and were often above levels seen in the 1980s and 1990's even without inflation taken into account.

Link here.

Venezuela's Reserves Top Saudi Reserves -- Nothing To Do With The Bakken

Link here.

OPEC's growth in oil reserves was mainly due to Venezuela, whose holdings climbed to 296.5 billion barrels from 211.2 billion in 2009, the report said. Top OPEC exporter Saudi Arabia's reserves were steady at 264.5 billion barrels.

Very interesting data point in view of recent world events. 

Seven (7) New Permits -- One New Eco-Pad -- Bakken, North Dakota, USA

Daily activity report, July 19, 2011 --

Operators: CLR (4), Arsenal, Whiting, and Oasis

Fields: Stoneview, Stanley, Sanish, and a wildcat in McKenzie.

Oasis has the new wildcat; Whiting has another permit in its cash cow, the Sanish.

And CLR has an Eco-Pad in Stoneview, Williams County (Lokken/Landblom wells).

The rest of the daily activity report uninspiring except for one well (and one observation): four wells came off the confidential list but only BEXP had an IP to report.