Massive Power Outage in San Diego

Of course we don't yet know what tripped the 500-kilovolt (kV) high-voltage line from Arizona to California to start the cascade of lost power to the entire San Diego metropolitan area, but it was certainly a wake-up call for what we would have expected if President Obama had not reined in the EPA.

His advisers suggested that allowing the EPA regulation to go through could result in blackouts.

Again, we don't know what tripped the high-voltage line (they say it wasn't terrorism) but it reminds us (at least it reminds me) how perilously close we are to meeting (or not meeting) peak energy demands. [Update: on the evening of September 8, 2011, it was being reported that it was human error; one man repairing a piece of equipment.]

Letting the EPA tail wag the dog is a recipe for disaster. (Is that mixing metaphors?)

Oilfield Services to Increase Spending -- Schlumberger

Link here.

I debated whether to link this article; the fact that oilfield services will increase CAPEX doesn't surprise me, it's not news.

This is why I linked the article:

Schlumberger's CEO said that the current industry approach to shale development in North America is sub-optimal, as it involves significant cost and resource waste. Thought the energy industry drills horizontal wells spread evenly over acreage, with the entire horizontal section completed and fractured with massive amounts of water proppant and hydraulic horsepower, shale reservoir quality varies both vertically and laterally. "And the standard logging measurements interpretation techniques and modeling workflows used in sandstones and carbonates cannot be directly applied."

Gould noted that the company is seeing signs that the scientific approach to shale developments is gaining momentum and as the international oil companies continues to build their positions in the shale basins both in the U.S., and overseas this trend will only strengthen. "The scientific approach will also be critical overseas as the industry faces more public pressure to minimize the operational footprint and adapt to less available infrastructure compared to North America," said Gould.

Harold Hamm, CLR/CEO, has said the same thing about the need for more science, less art in drilling for oil. I can't remember if I linked those stories. Trust me. 

Proppants -- Bakken, North Dakota, USA

Fores Ceramics transloading facility, ad, posted August 28, 2012 
Another source for fracking sand: posted February 2, 2012
Proppants for Sale: posted January 31, 2012
Fracking chemicals, March 12, 2013

Updates

December 13, 2011: Reuter's update on Chinese proppants; names, alternatives; costs

October 22, 2011: Perhaps the definitive post on proppants and field reports.

Original Post

Just after talking with someone about proppants for fracking, and specifically about grey ash" or "grey sand from China, two 18-wheeler flatbeds passed me with 14 bags each of "Black Cat" proppant, obviously on their way for a fracking job.

I had mentioned, off-handedly, in that conversation, that based on another short conversation in the Bakken, it sounded like "grey sand/grey ash" from China was "big man on campus" here in the Bakken. And then, just to prove me wrong, these two flatbeds passed me, as noted above, with 28 bags of "Black Cat" proppant.

Incidentally, companies are sending local North Dakota folks to China to be trained in sales of proppant in the Bakken. 

So, now I am aware of these  proppants in the Bakken:

• Econoprop, two sizes: 20/40 and 30/50; a product of Carbo Ceramics, six manufacturing plants in the U.S., China and Russia; Houston, TX; for investors: CRR, SeekingAlpha.com
• Black cat ceramic proppant; three standard sizes: 20/40, 30/50 and 40/70; Ft Worth, Texas
• China Ceramic Proppant: also, three sizes; 1500 kg tote bags (3,300 pounds)
• Thor's Ceramic Proppant: manufactured in northwest China; bauxite mines
• Hexion: informative website
• Pioneer Oil LLC: has its own supply source from Asia (note: warehouse at Dore, North Dakota)

See photos of Chinese proppant here.

By the way, I first blogged about CRR a year or so ago. See the tag / label "proppants" at the bottom of the blog to see the earlier posts.

Casual observations inside Williston city limits (most of the proppant trucks inside Williston load at the depot, and then take 2nd Street West out of town:

• September 16, 2011: one flatbed of proppant, possibly Chinese (not close enough to see)
• September 13, 2011: one flatbed of fly ash; one flatbed of proppant, possibly Chinese (not close enough to see)
• September 11, 2011: one flatbed, ~ 24 sacks, fly ash
• September 9, 2011: loading dock at depot with ~50 sacks of Chinese Mid Pacific proppant
• September 9, 2011: one flatbed, 14 sacks, Black Cat proppant; second flatbed, amount, type unknown
• September 8, 2011: two flatbeds; 14 sacks each; Black Cat proppant

Williston Train Depot, September 17, 2011

Google: Electric Use = 1/4 Output of a Nuclear Plant -- Not a Bakken Story

Link here.

Every time a person runs a Google search, watches a YouTube video or sends a message through Gmail, the company’s data centers full of computers use electricity. Those data centers around the world continuously draw almost 260 million watts — about a quarter of the output of a nuclear power plant.

Up to now, the company has kept statistics about its energy use secret. Industry analysts speculate it was because the information was embarrassing and would also give competitors a clue to how Google runs its operations.

I find it interesting, that's all.

Only Two (2) New Permits Today -- Bakken, North Dakota, USA

Daily activity report, September 8, 2011 --

Operator: MRO (2)

Field: Reunion Bay

MRO with permits for a 2-well pad in Mountrail County (Reunion Bay).

Only one well reported an IP today:

• 19289, 386, Dakota-3, Dakota-3 Beaks 36-25H, Dunn County

Otherwise, nothing of note.

Memorial Videos

The Arizona:

Time For Golf -- FBI Raids Solar Company -- Solyndra -- Obama's Pet Project -- Not a Bakken Story -- Money Laundering

Updates

November 10, 2018: I don't know the date of this cartoon. A reader sent it to me:

April 30, 2013: another company that received DOE-stimulus money goes bankrupt; under investigation; Feds hold records; fraud:

The U.S. Department of Energy is withholding records involving a Wyoming carbon-capture project on the grounds that a legal investigation is under way and that releasing documents could compromise the probe.

The carbon-capture study at the site of the Two Elk Energy Park site about 15 miles east of Wright in the Powder River Basin got almost $10 million in economic stimulus grants from the Energy Department.

Two Elk developer North American Power Group, based in Greenwood Village, Colo., halted the carbon-capture study over a year ago. Scientists involved in the research say they expected a well to be drilled so they could field-test data they'd gathered. The study never progressed to that phase.

The Associated Press filed a Freedom of Information Act request seeking documents that might show what happened with the carbon-capture project. The Energy Department has denied the request in its entirety, citing a FOIA exemption for records involving matters under investigation, according to a letter to AP from the chief counsel for the department's National Energy Technology Laboratory in Pittsburgh, Pa.

October 11, 2012: billboards don't lie.  (At the link, click on the photo to enlarge it.)


March 21, 2012: the buck does not stop in the Oval Office. It stops in China, in Congress, everywhere buy in the Oval Office. The president says Solyndra's failure was bipartian, not his fault alone. Likewise, he didn't kill the Keystone; that was the fault of Congress. End game. Check. And checkmate.

November 22, 2011: 4Q11 shipments of solar from China to decline;companies are writing off inventory; "liquidation is leading to suicidal pricing."

November 17, 2011:  It was my fault, but I had the taxpayers' best interests at heart. -- Chu

Congressman: how much will the taxpayer recoup?
Steven Chu: “I’m anticipating not very much.”

NY Times: solar subsidies --  $554,217/job --

Halfway between Los Angeles and San Francisco, on a former cattle ranch and gypsum mine, NRG Energy is building an engineering marvel: a compound of nearly a million solar panels that will produce enough electricity to power about 100,000 homes.

The project is also a marvel in another, less obvious way: Taxpayers and ratepayers are providing subsidies worth almost as much as the entire $1.6 billion cost of the project. Similar subsidy packages have been given to 15 other solar- and wind-power electric plants since 2009.

These projects are a way of moving money from the taxpayer to the project to the politician. There is a fancy name for doing that and it has to do with washing clothes. -- November 12, 2011.

Isn't this ironic? The fallout from the Solyndra case will be more expensive solar energy. November 10, 2011. It the argument of the administration that their pet project -- all $500 billion worth -- went bankrupt because the Chinese undercut the price of solar panels made in the US. The administration's answer: slap tariffs on Chinese solar panels. The result: the price of solar energy gets more expensive. I can't make this stuff up. One of the president's legacies: driving up the cost of solar energy; killing the industry in the US. Even so, it looks like a shake-out in the US solar industry with prices plummeting for panels.

Another government-backed energy company files for bankruptcy: Beacon Power in Massachusetts; got about the same amount of money as Solyndra. Filed for bankruptcy two days after government decided to review all energy department loans. The energy department is the same department that .... oh, I'm just preaching to the choir.

Truly incredible: it turns out Obama administration was considering a second half billion-dollar loan for Solyndra when it was obvious it was already failing. One wonders exactly for whom the president was working. Or who at Solyndra was working for the president?

Those 1,100 folks holding fake jobs at Solyndra now eligible for government aid for retraining. I cannot make this stuff up. And then folks wonder why the US economy is in debt.

Chicago Tribune: Reeks of the "Chicago Way"

Incredible: White House re-writes contract to favor Solyndra donor. 

It looks like the mainstream media has found its cause celebre. The following were all linked September 16, 2011:

• Solyndra was not alone to hit rock bottom despite stimulus
• White House e-mail: giving more money to Solyndra risky
• White House e-mail: risky; will hit news during peak campaign cycle (same link as one previous)
• Goldman Sachs was the sole financial advisor (is it my imagination, or is it always Goldman Sachs?)
• Solyndra lobbyist paid $187,000 -- taxpayer stimulus money
• White House races to close billions of dollars in Solyndra-like guarantees
• "Consumer hope" skids to lowest level since 1980 -- in over his head -- AWOL on mortgage mess, slammed by his own DEMS -- "jobs bill won't work" -- his own DEMS

Obama administration ignored signs at Solyndra -- that's exactly what gets ideologues in trouble.

Bush administration voted against the loan: of course -- the numbers don't work out. This is not rocket science. It's solar snake oil.

Bloomberg: Solyndra debacle may blunt Obama's drive for clean energy. Well, duh.
ABC News: White House monitored loan to Solyndra. Great example of choosing winners and losers. But even with this huge gimme, the solar folks couldn't survive.

Solyndra story could bring White House down.  If only.

Drudge Report, via ABC: Obama sat in on Solyndra meetings

In 2009, the Energy Department put Solyndra's application on a fast-track for approval, and announced the award with great fanfare. The generous terms of the government loan included the lowest interest of all the green projects benefitting from Energy Department help, iWatch News and ABC News found.

And as part of the deal, the Energy Department agreed that if the company went bust, private investors could recoup their losses before the government. Republicans in Congress called the investment "a bad bet" and said it "put taxpayers at unnecessary risk."

iWatch News: FBI expands search
Cramer: Obama Silent on Solyndra
Bloomberg BusinessWeek: Update of Bankruptcies
Wall Street Journal: The Story

This all happened yesterday, the story broke yesterday. The big story of the day: the mainstream media avoided this story and focused on a) the president's speech of the century; and, b) the opening NFL football game between two recent national champs.

Original Post   Link here (linked again, below). This is why I love to blog.

A month ago I had not heard of Solyndra but when it declared bankruptcy, taking one-half billion of tax payer dollars with it, it was a huge story on my blog.

I guess the FBI thought it a big story, too. It's being reported that the FBI has raided Solyndra's headquarters. I guess to some folks a half-billion dollars is still a lot of money, even if not a lot of money in Washington, DC.

FBI agents served search warrants this morning at Solyndra, the Fremont solar company that abruptly closed last week, two years after receiving more than $500 million in federal stimulus money, an agency official said.

Solyndra was the first company to receive a multi-million-dollar loan guarantee from the federal government as part of the Obama administration's effort to create green jobs. The company, founded in 2005, received $528 million in federal loans to help build a factory in Fremont for making tube-shaped solar modules. The company also raised more than $1 billion in private investments. [Can you spell Madoff?]

But Solyndra closed its doors on Aug. 31, saying it couldn't compete against cheap solar cells flooding into the market from new, heavily subsidized factories in China. The company filed bankruptcy papers earlier this week, listing $784 million in secured loans, including the government's money. [At least it's not a $billion: even the New York Times would be unable to avoid that story!]

Solyndra's abrupt collapse has turned into a political embarrassment for the Obama administration. Last year, Obama toured the company's new plant and said that "The true engine of economic growth will always be companies like Solyndra."

Actually, President Obama was not far off in his hyperbole. He could have said: "The true economic growth of the US will be a lot like Solyndra going forward."

"The Eastern Edge Is Far From Dead" -- Minot -- Lynn Helms -- NDIC -- Bakken, North Dakota, USA -- September 8, 2011

Update

Look how inexpensive some of these leases were -- see comments below -- $25/acre.

Original Post

This in an incredibly interesting story. We're starting to get a bit more insight into the northern and eastern margins of the Bakken.

In the past few weeks I have been in conversation with others regarding the margins and I have hinted at the kernel of those discussions in an earlier posting regarding the Baker Hughes "SuperSite" in Williston.

I can't go into it now, but I post this again, for the time-date stamp.

See today's story in the Minot News for comments about the Bakken pool extending farther east and farther north than accepted by general consensus. The article is in a small regional newspaper and will be seen by very, very few folks (except in hindsight). Local folks are being given a big gift with this local reporting. This may be the biggest story this month. Very, very interesting, and explains a few things.

New players are starting to drill in the margins of the Bakken-Three Forks area, said the states' top oil and gas regulator.

"There are a lot of new players coming in the Renegades, the Chesapeakes, the Devons...

"It's actually happening a little bit sooner than I thought it would be," said Helms.

"I thought we've got to get through that five years securing a leasehold time," Helms said. After that, he said he thought some of the big oil companies, naming Hess, Continental Resources and others, in the state then would move into those areas "

"Renegade Resources is really excited about this area," Helms said.

"So there are localized or maybe larger regional areas of mature source rock much lot closer to Minot straight north than [western North Dakota] ...

"The eastern edge is far from dead," Helms said.

"The Renegade well really demonstrates eastward expansion of this play into northern Ward County. It's really good news for northern Ward County and for Renville and western Bottineau (counties)," he said.

As noted above: this may be my biggest story this month.

The Bakken, North Dakota, USA -- Autumn Review -- September 8, 2011

With regard to the "manufacturing phase" that we have entered in the Bakken, my thoughts and observations:

Drilling rigs

• We are probably near our top in active drilling rigs. It stands at about 200; most agree that the number will top out at about 225 - 250.
• Older rigs will probably be replaced with newer, more powerful rigs; think H&P
• Roughnecks are gaining experience every day
• More stable employee base is starting to materialize

Fracking crews

• Major players suggest that they have adequate fracking crews, many are dedicated crews
• The smaller players do not have dedicated crews and wait in queue for available crews
• Conference calls: major players say they will catch up on fracking; my numbers suggest they won't catch up in the near term; more than 50 percent of wells coming off confidential list are still being placed on DRL status
• Halliburton recently announced they will hire 11,000 more workers; most to the Bakken
• Schlumberger is building huge new complex west of Williston, ND -- heart of the Bakken
• My hunch is that we are yet to see huge surge in frack teams
• Frack teams still gaining experience

Fracking

• Major players still looking for optimum number of stages (of course, this varies even among wells)
• Major players still testing optimum technology (sliding sleeve; plug and per; zipper)
• Jury still out on sand vs proppants (expense/benefit ratio)
• Water is NOT a problem in the Bakken
• The state cobbled together a $150 million water plan for fracking and drinking water for cities in oil patch

Aging permits

• Lots of chatter on the boards about Bakken players losing their permits leases (see first comment below)
• My hunch: these guys are smart enough to handle this; they won't lose their good permits leases
• Lots of horse-trading could result

Financing

• Wells are expensive to drill, but they now drill two-section horizontals vs one-section horizontals
• Canary-in-the-coal-mine: companies issuing more stock to raise cash
• Canary-in-the-coal-mine: mergers, buyouts
• Carnary-in-the-coal-mine: poorer wells, dry wells

Manufacturing

• Wells require maintenance
• Winters possibly harder on rigs and maintenance crews, increasing need for maintenance folks during winter
• Few number of Bakken wells to date, few mainentence crews
• As Bakken wells increase (166 new wells/month), expect to see surge in maintenance folks

Infrastructure

• Construction: gathering facilities (natural gas and oil)
• Pipeline infrastructure
• Eectrical substations
• CRYO plants for natural gas (see earlier note on subject); crude-by-rail terminals

Housing

• Despite all the talk about housing issues in the Bakken, projects are moving ahead
• It appears that big operators have "taken by the bull by the horns" in Williston and adding significant housing
• See Kiewit subdivision
• Additional housing now expanding to outlying towns (Killdeer, New Town)
• My hunch: a lot of the roughnecks (single and young) won't move into single-unit homes; will stay in man-camps (for amenities) or move to apartments (with less restrictions)
• Any slack in single-unit housing by roughnecks will be replaced by surge in workers here long-term to maintain the wells

Takeaway Capacity

• With crude-by-rail ramping up, takeaway capacity no longer an issue

For Investors: Energy Sector -- Low Valuations; Future Growth; Low Risk -- Wall Street Journal

Link here.

The energy sector in particular stands out in this regard. A current holding that reflects our value bias is Chevron (CVX). Chevron trades with a forward 12-month p/e of 6.9 and even the trailing p/e is less than 10. Those valuations are quite attractive.


The valuations we are seeing in the financial sector are also incredibly low. The risks in financial stocks right now bother me more than the risks associated with the energy companies. But a company like Discover Financial Services (DFS) - with modest valuations and a strong, steady upward trend in earnings estimates - is attractive to us. You can almost go to any of the economic sectors and identify securities that are being priced at single-digit p/e. While we don't think that low p/e alone is reason enough to buy a stock, below-market valuation tends to be a characteristic that is common in our portfolios.

By the way, the first company mentioned in this extensive interview was ... drum roll ... AAPL, my favorite company. I do not hold any shares in Apple, Inc., however.

Crude-By-Rail -- Bakken, North Dakota, USA

Knowing that a lot of folks may not be aware that I put up many posts in one day, and that I update earlier posts on a regular basis, folks who are interested in crude-by-rail, might want to go back to this site and see updated information, including PDF files with photograph of a typical facility.

A big "thank you" to Don for providing me some of these links.

New Jobless Claims Rise Unexpectedly -- Not in the Bakken, North Dakota, USA

Link here.

The number of Americans filing new claims for jobless benefits rose unexpectedly last week, further evidence of a weak labor market just hours before President Barack Obama unveils a plan on job creation in a major address to Congress.

What makes this particularly noteworthy is the news comes during the peak construction season: all those shovel-ready jobs promised by the admininstration should have kicked in by now.


My understanding is that the new jobs bill will be to a) renovate public schools (of course school has already started this year, and those projects won't get off the ground until next summer, at the height of the campaign); and, b) to provide more money for public school teachers to save those jobs (of course school has already started this year, contracts have been signed, and those not teaching have moved on).

The speech is tonight.

Update: originally around $300 billion; overnight up to $400 billion; perhaps by tonight's speech, we can get it up to $1 trillion.

Bakken Metrics -- Bakken, North Dakota, USA

Some time ago I asked readers to help me sort out best metrics for tracking the Bakken companies operating in the Bakken (for investment purposes).

The best metrics to date, by company:

• Total acreage held in the Bakken
• Year-over-year increase in acreage held in the Bakken
• Year-over-year increase in Bakken production
• Oil production vs share price over time

Other metrics of some use:

• Percentage of wells completed within six-month confidential period (BEXP seems to lead in this category)

With regard to oil production vs share price over time, a Seeking Alpha contributor provides a very interesting and compelling update.

Today let's shorten that and just look at one metric: Production growth per share. Most of the names in the Bakken players list have grown absolute production volumes from the Williston in line with a rising rig count in North Dakota and now in Montana. But share offerings along the way have in some cases muted this growth at the per share level which is key for investors as they hold the names for long term growth, not long term dilution. 

It should be noted that all analysts agree:

• The development of the Bakken is in its early stages
• The legacy formations have yet to be fully exploited
• Technology will improve

Some analysts opine:

• The Bakken is bigger than currently imagined (the average is less than one well per Bakken section now; the average will grow to at least two wells per Bakken sections; the better Bakken will grow to four wells/section)
• Secondary and tertiary production, each, will equal primary production over time
• Price of oil will trend higher over time
• Cost of drilling Bakken wells will decrease over time
• Bakken efficiency will improve over time (less flaring; less trucking)

Reuters Factbox on Crude-By-Rail Terminals Serving the Bakken -- Bakken, North Dakota, USA

It should be noted that "crude-by-rail" is on my top ten list of trends (see sidebar at the right).

Reuters provides a very nice update on status of crude-by-rail facilities serving the Bakken:

Company: US Development Group
Location: St James, Lousiana, delivery hub
Project: expansion to 130,000 bopd
Current ops: 65,000 bopd in unit trains mostly from the Bakken, North Dakota
Comment: partners with Plains All American


Company:  US Development Group
Location: South Texas, East Coast, West Coast, Others
Projects: new crude-by-raid terminals
Project: to build up to five new terminals around the US by 2013; to serve unit trains; each terminal to hand 65,000 bopd; to receive oil from the Bakken, Eagle Ford, and Niobrara


Company: EOG Resources and NuStar
Location: St James, Louisiana
Project: expand existing terminal to receive unit trains by end of 2012
Capacity: 70,000 bopd
Current: 20,000 bopd
Comment:  completion date 1Q12


Company: Savage Cos
Location: Port Arthur, Texas
Project: to receive unit train terminal
Completion date: 2H12
Capacity: 60,000 bopd; oil from the Bakken
Comment: Savage is also building a terminal in North Dakota


Company: Various
Proejects: assorted rail projects to boost Bakken Shale crude loading
Location: North Dakota, Wyoming, Bakken Shale/Williston Basin
Completion: 2012
Capacity: add up to 370,000 bopd loading capacity
Completion date: 2012
Current: Expansion of Bakken crude-by-rail terminals to bring loading capacity from the current 130,000 bpd to 500,000 bpd. New York-based Hess (adding 130,000 bpd terminal), Oklahoma-based Musket Corp (adding 70,000 bpd terminal), Utah-based Savage (adding 90,000 bpd terminal) and Texas-based Rangeland Energy (adding 80,000 bpd terminal). Rangeland has signed a deal with refiner Tesoro Corp to supply Bakken crude by rail to its Washington State refinery beginning in 2012. Savage says it is in talks with various refiners on the East and West coasts for Bakken crude supply deals by railroad.


Bottom line: rail has capacity to handle entire Bakken production; at some point, Bakken oil might be exported overseas (I think some Bakken oil was shipped to Europe during the Libyan conflict; I have blogged about that, I believe; a company took advantage of the WTI-Brent delta and sold Bakken oil to Europe; transportation costs less than the delta).  [I do not know the current laws regarding exporting US oil; according to CIA World Factbook, the US exports about 2 million bbls/day (2009, est) but I may be misreading the source. I have had one person comment that the US has banned exporting US oil.]

Back on February 4, 2011, Reuters had a similar update:

Up to a dozen railroad terminals to load, unload and store oil are sprouting up around the United States as oil shippers turn to railroads to deliver barrels into markets where crude is priced higher.
Growing Canadian and North Dakota oil supplies are heading to Cushing, Oklahoma, in pipelines that can't deliver them further south. Flexible rail routes could allow oil cargoes to move to destinations where oil fetches a premium, and avoid a 38 million barrel glut of oil sitting at Cushing.

More data from North Dakota, located here (a PDF file):
https://www.dmr.nd.gov/pipeline/assets/Video/03022011/NDPA%20Rail%20Webinar%20Slides%202-28-2011.pdf

For those who want to see graphic of a CBR facility, here is a PDF file:
http://www.rgldenergy.com/sites/default/files/resources_bakkeninvestorsconference.pdf

Crude-by-Rail: Another Rail Hub for Oil -- Zap, North Dakota -- Bakken, North Dakota, USA

Link here.

Unit trains taking Bakken oil to Louisiana refineries and elsewhere will be filled at an oil tanker truck load out east of Zap, part of a growing trend to move oil by train to get to the best-paying market.

The deal was sealed Wednesday at a Mercer County Commission meeting in Stanton, where three commissioners split 2-1 to approve a reconfigured county road alignment that will allow 110-car trains to pull in without splitting for a road crossing.

It takes 300 tanker trucks -- the semis you see on the road pulling tanks carrying oil -- to fill one 110-tank unit train.

For more on crude-by-rail and unit trains, click on the "Rail" tag at the bottom of the blog.

It's been an observation of mine over the years that the grain farmers have historically been upset with Burlington Northern Santa Fe (and its predecessors) because it was the farmers' feeling that BNI was not adding enough rail or cars to transport grain out of North Dakota. Just noting the 2-1 split vote.