Thursday, October 27, 2011

For Investors Only: CVX Bests XOM, COP --

Link here.
Over the years these three bounce back and forth among themselves; perhaps at this point in time CVX beats COP and XOM, but others can argue that COP is undervalued and when natural gas "comes back" COP will be well positioned. 
I post this mostly for interest and because CVX will reports earnings tomorrow, Friday, before the opening.

OXY Posts 48% Increase in Earnings -- The Bakken, North Dakota, USA

Link here.
Occidental Petroleum Corporation (OXY) announced earnings from continuing operations of $1.8 billion ($2.18 per diluted share) for the third quarter of 2011, compared with $1.2 billion ($1.48 per diluted share) for the third quarter of 2010. Net income was $1.8 billion ($2.17 per diluted share) for the third quarter of 2011, compared with the $1.2 billion ($1.46 per diluted share) for the third quarter of 2010.
And again, the Bakken plays a role:
The third quarter 2011 production volume increase was a result of 56,000 BOE per day higher domestic volumes, partially offset by lower volumes in the Middle East/North Africa and Colombia. The domestic increase was from Midcontinent and Other, including the new acquisitions in South Texas and the North Dakota Williston Basin, and California.

Top Leasing Will Be Anecdotal But Won't Have Any Material Effect On Any Particular Operator

Link here from the Watford newspaper -- this link will break soon.
According to Allison Ritter, Public Information specialist for the N.D. Department of Mineral Resources, Oil and Gas Division, for the next few years there will be an estimated 225 rigs in western North Dakota, and they’re not going anywhere.

Ritter states that 225 rigs can drill 1,100 to 2,700 wells per year. There are 5,000 wells needed to secure leases in western North Dakota, and 225 wells can drill enough wells to secure those leases in 2.5 years.
Even more staggering is the estimation that if those 225 rigs accomplish what the Oil and Gas Division is projecting, then there could be 33,000 wells drilled over the next 14  years.

“There are already 5,951 active wells in western North Dakota,” Ritter states. “If 2,700 wells are drilled per year, then approximately 28,000 additional wells will be drilled in the next 14 years.”
This is an incredibly interesting article. I was wondering how to get this information -- if all the leases could be secured.

It's been my contention that the leases can be secured, but message boards have suggested I am in the minority on this issue.

A big thank you to Kent for sending me this link. I would have missed it. Finally some numbers to work with regarding leases. My own database suggested that it would not be difficult for leases to be secured for the most part. There will be some anecdotal stories about top leasing, but I doubt they will have a material effect on any specific company.
In addition, 33,000 active wells could create 30,000 to 35,000 long-term jobs in western North Dakota over the next 14 years.

Presently, according to Ritter, the total rig count is 197, so that is still a ways off from the estimated 225 total rigs in western North Dakota.

The main reason being that, “A lot of rigs actually need to be built,” Ritter states. “The oil industry is moving faster than rigs can be made, so operators are building them and bringing them in as soon as they can.”
So, another data point explaining why we may not seeing the number of rigs increasing in the Bakken as fast as some said they would. 

Hess To Triple Bakken Production by 2015 -- The Bakken, North Dakota, USA

Link here. -- The link is finicky -- it's a Wall Street Journal article.
Hess Corp.'s oil production in North Dakota's prolific Bakken Shale will triple by 2015 as the oil company increases drilling activity in the area, Chief Executive John Hess said Wednesday.

Hess's net output, currently at 39,000 barrels of oil equivalent per day, will reach 60,000 barrels of oil equivalent in 2012 and 120,000 barrels of oil equivalent in 2015, the executive said in an earnings call.
Hess, a large U.S. oil company with large offshore and international operations, has been aggressively expanding its presence in North American oil shale fields. In addition to the Bakken, the company has spent nearly $1 billion acquiring acreage in Ohio's Utica Shale, an emerging play; appraisal activity there will commence in the fourth quarter, Hess said.

These Utica acquisitions, as well as other purchases in the North Sea, account for a $1 billion increase in the company's forecast capital spending for 2011 to $7.2 billion, Hess said. 
It is interesting that Hess says it's Bakken shale production will triple by 2015: that's exactly what Lynn Helms is suggesting for the Bakken in general -- that North Dakota could triple its daily production by 2015. 

In early 2011 or late 2010, Harold Hamm, CLR/CEO, said he would triple the size of his company, Continental Resources, in five years.

The Energy Revolution That Keeps Carbon On Top -- Implications for the Bakken, North Dakota, USA

Link here. -- Bloomberg

This is an incredible analysis of the energy revolution: horizontal drilling and fracking.
In the meantime, however, a real revolution has happened in traditional energy -- one that poses a serious challenge to companies and investors betting on alternative energy. This breakthrough is arguably one of the greatest advances in energy production since the 1960s. And it came not from a Silicon Valley company, or from MIT or Stanford, but from the son of a Greek goatherd who immigrated to the U.S.

George Mitchell was born in Galveston, Texas, went to Texas A&M University and, in 1946, founded an oil-drilling and real- estate business. The company did well, and in the 1980s, Mitchell decided to take on a major technical challenge: He would try to coax gas out of a portion of the Barnett shale, which lies deep under Fort Worth and 15 counties in north- central Texas. 
And, of course the rest is history: horizontal drilling and fracking.

The author, unfortunately spends too much time on anthropogenic global warming, but at least points out the following:
A more serious problem is that both collecting and burning natural gas produce carbon dioxide, the main culprit in global warming. Gas producers never miss a chance to point out that burning gas emits less CO2 than burning coal does. But detailed research (including some of my own) shows that, in practice, switching from coal-fired electricity plants to gas-fired ones would have almost no effect on global warming. In fact, some scientists who have tried to do a full accounting of the emissions due to gas produced by fracking have concluded that it actually ends up putting more CO2 into the atmosphere than coal does. 
As I noted just a few days ago, global warming caused significant environmental changes in 8,000 B.C, a millenium not exactly known for us its of oil. But global warming is no longer debated in the science arena, it's debated (usually one-sided) in the op-ed pages of mostly irrelevant print media.
Not so long ago, many people believed that the cost of oil and gas would rise indefinitely, thus supporting the market for alternatives. Mitchell’s miracle [horizontal fracking] has changed that calculus, much to the chagrin of the Silicon Valley venture capitalists who caught the green-energy bug.

Germany's Energy Sources Becoming More Limited -- Bakken Implications

Nuclear power, solar power, natural gas, coal, wood ---

Link here.
Germany, the world’s biggest solar- panel market, will cut subsidies for photovoltaic power by a record amount next year as the government tries to control the pace of installations and wean the industry off support. 

North Dakota Hunters Don't Recall Four Harsh Winters In a Row --

I don't have the link; it's in the print edition, and probably won't be on-line for a day or two from the Minot Daily News. From the hunting section, much hand wringing over the poor deer hunting season. The harsh winters have taken their toll.

The writer says hunters do not remember a time when four winters in succession have been so harsh.

I doubt you could find a hunter in North Dakota who "believed" in global warming. Actually, it might be difficult to find any that even pay attention to the scam.

It turns out the hunters were correct:
The coldest winter in 30 years was recorded across many parts of the US during the 2010-2011 winter. Eastern parts of the US plunged to a record -50F with the Northeast of the US also seeing records broken. Temperatures was also largely below normal averages for New York, Chicago, New Orleans, and Minneapolis. Snowstorms shattered New York City in December 2010 and January 2011 to become the snowiest January ever recorded.

So let’s turn to the US winter of 2011/2012.

Our weather models consider all of these factors and are currently showing a particularly harsh winter for many parts of the US during 2011-2012. Large parts of Central and North America will face below average temperatures with above average snowfall throughout this winter, with temperatures in many Eastern and Western parts also showing as below average with above

NOG: "Best in Show" -- Cash Margins -- The Bakken, North Dakota, USA

Link here.
This growth has also yielded "best in show" cash margins. NOG isn't posting growth for the sake of growth either as they have managed to eke out the best cash field margins (Revenue per BOE less LOE, G&A, and Production Taxes) among their Bakken Player peers. Or thought about another way, they're the low cost player of the pack, far lower than a Kodiak or an Oasis, both operators in the play.
As I've said many times, NOG has a very interesting and a very unique business model. Following the debacle that was Newfield, this is very reassuring.

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

Daily activity report, October 27, 2011 --

Operators: CLR (3), BEXP (2), Enerplus (2), SM, Hunt

Fields: Banks, Parshall, McGregory Buttes, Baker, Oliver, Corinth, Wildrose

Not one well released from "tight hole" status had been completed, and only one producing well reported an IP:
  • 19983, Hess, EN-Ruland A-155-94-1201H-1, Manitou oil field, Mountrail; this is on a 6-well pad;
But something I don't see often, or haven't paid attention to them, nine (9) permits renewed --  Petro-Hunt and Hess. This may be a data point that needs to be followed.

Running Out of Oil That We Can Afford

Link here.
DOE’s optimistic future supply forecasts are dangerously unrealistic, James S. Baldauf, president and cofounder of ASPO-USA, told reporters during an Oct. 26 press conference in front of DOE’s headquarters. “If these exuberant predictions are wrong, the consequences could be catastrophic. We need to be conservative in planning for the future,” he said. “We are not running out of oil. But we appear to be running out of oil that we can afford.”
The US Department of Defense’s Joint Operating Command said in its biennial report that a world oil supply shortfall would pose a serious challenge to military preparedness, he said in an e-mail to OGJ. “They have said that as soon as 2012, total world oil production will begin to decline, and that there could be a 10 million bbl/day shortage by 2015,” he indicated.
Memo to self: remind me to look at this report in December, 2015

Oklahoma Osages Sue To Stop Wind Farm -- Interesting Twist -- Bakken Implications

Link here.
The Osage Nation has sued in federal court in Tulsa, Okla., asking a permanent injunction against construction of a 150-Mw wind farm in Osage County, Okla.

The lawsuit states that building and operating the turbines, their foundations, and electric lines will interfere with the construction of flow lines for natural gas. It says federal law guarantees oil and gas lessees access to the surface above the mineral estate.

The Bureau of Indian Affairs has opposed the wind project, saying it would interfere with current and future oil and gas development in violation of federal and state law.
Very, very interesting. 

Fracking Backlog -- Oasis -- Preliminary 3Q11 Guidance

Link here.

Data points regarding drilling/fracking/rigs. The first data point (several sub-points):
  • At end of the 3rd quarter (September 30), Oasis had 21 gross (15.6 net) operated wells waiting on completion
  • At end of the 3rd quarter (same date), Oasis was drilling 7 gross (5.4 net) operated wells
  • Thus, on September 30, Oasis had 15.6 net wells waiting to be completed and 5.4 net wells being drilled --> 21 net wells
  • For the entire third quarter (three months, July - Aug - Sept), Oasis completed 17.4 net wells
  • Repeating for my benefit: if I'm reading this correctly, Oasis completed 17.4 wells in three months (3Q11) but yet on the last day of that quarter, they had 21 new wells waiting for completion or being drilled, and the fourth quarter was yet to begin. 
I find that first data point incredible.

Second data point, rigs:
  • Oasis now running nine operated rigs, an increase of two rigs above the seven they were running on Sept 30
  • Again, for my benefit: less than a month ago, Oasis had seven rigs; now they have nine
Third data point, production:
  • Year-over-year: production increased by 110%
  • Sequentially, quarter-over-quarter, production increased 47%
  • Total production: 14,300 boepd, including about 700 boe of natural gas
  • Natural gas production increased 80 percent due to ongoing installation of natural gas gathering projects on Oasis projects
  • When you read the report, one gets the feeling that Oasis will miss their financial targets or be at the low end, due to expenses associated with atrocious spring flooding earlier this year, salt water disposal expenses, building natural gas gathering infrastructure

Brian Williams -- Rock Central -- The Bakken, North Dakota, USA

Dynamic link.

You may want to catch a screen shot of the link.
Those hurt hard by the ailing economy are flocking to Williston, N.D., where an oil boom has turned a sleepy prairie town into a place producing thousands of jobs.

"There's opportunity here and that's what we all need is opportunity," said Williston Mayor Ward Koeser. "It's kind of been an oasis for the country.  You know, there's a lot of jobs here, good paying jobs in the oil industry."

Williston is situated on the Bakken formation, an oil field that some say will produce the biggest boom in North America since the 1960s. Koeser said that his town currently has 2,000 to 3000 jobs and they haven't been able to fill the openings fast enough.
Nothing that we haven't heard before but on October 31, 2011, Willistonites can see themselves on national television.

Trending in the Bakken -- Drilling Deeper in the Three Forks Formation -- The Bakken, North Dakota, USA

This was touched on briefly but needs to be re-emphasized as more and more folks are asking how many wells can be drilled on a spacing unit.

Whiting and Continental Resources provide nice graphics in their presentations. This information comes from the August, 2011, CLR presentation.

This is where CLR is with regard to this issue, slide 9:
  • their first ECO-Pad well pair: a Middle Bakken horizontal and an Upper Three Forks 1st Bench horizontal
  • the slide, interestingly enough, shows a dialogue box with "multiple fracture stages with a 500' stimulation radius"
  • CLR is currently drilling horizontals into the Three Forks 2nd Bench -- 1st test drilling
  • in the future, CLR plans to test the Three Forks 3rd Bench and the Three Forks 4th Bench.
CLR has interests throughout the Bakken.

Some of their ECO-Pad results, average IP for four (4) wells):
  • Glasoe/Raymo, 940: east Divide county, near Burke; north of Williston
  • Kennedy/Miles, 1,377: northeast McKenzie county; ground zero for 2012 activity; the bull's eye
  • Arthur/Hegler 1, 1,088: northwestern Dunn county
  • Bridger/Bonneville, 745: northwestern Dunn county
  • Carson Peak/Morris, 1,948, northwestern Dunn county
Northeastern McKenzie County and east-central McKenzie County will be where the action is in 2012;
Northwestern Dunn County is just south and east of that area

In Montana, it appears CLR is emphasizing northeastern Richland, directly west of Alexander, Watford City area:
  • Rognas 2-22H, 1,013
  • Tolksdorf 1-1H, 642
  • Big Sky 3-35H, 1,163
  • Clayton 3-20H, 1,118
  • Amestoy 1-6H, 836
  • Earl 2-25H, 1,024
  • David 2-20H, 831
In this area, CLR has twelve (12) wells planned -- I guess CLR's Montana motto will be " 12 in '12"

Active Drilling Rigs Creeping Up -- Back to 200 -- One Short of the Record -- The Bakken, North Dakota, USA

Contrary to what folks might think, I have no dog in this fight: I have no opinion regarding the number of rigs in the state.

I follow it simply as a metric which has some relationship to the degree of activity in the Bakken.

A couple of things to keep in mind:
  • as rigs get more powerful and crews become more efficient, less rigs are needed to do the same amount of work
  • the infrastructure needs to catch up before significantly more wells can be drilled
  • the fracking backlog continues to be a problem; and if they don't frack in January/February, the backlog will worsen
So, rigs are probably a better metric to use for tracking how many workers there are in the state. The number of permits granted on a daily basis may be a better metric for tracking future activity.

Counter-point to the above points, sent to me by Don:
  • Maybe less rigs needed for current work (as they get more powerful and more efficient) but new prospects in the Spearfish (Bottineau) and more drilling in Montana will push rig count up (remember, some industry observers suggest 250 rigs in the Bakken by next summer)
And speaking of the Spearfish/Bottineau, I'm actually getting more excited with the Madison formation; particularly what Whiting is doing in the Big Stick oil field in Billings County, southwestern North Dakota

Week 43: October 22 -- October 28, 2011

Could ceramics be manufactured in North Dakota?

Big Stick oil field; part of Whiting's southern ops strategy.

Brian Williams, NBC anchor, will debut with feature on the Bakken, October 31, 2011

Whiting's net acreage updated

Heel-to-toe/toe-to-heel parallel horizontals

Unitizing Little Missouri State Park

Wind turbines: license to kill

Idle rambling on takeaway capacity in the Bakken

Another energy buyout: Plains All American in hostile bid to acquire SemGroup Corporation

Industrial park update, Williston, North Dakota ; and here.

Highlights of the November NDIC hearing dockets

Another game changer in the Williston Basin?

CRYO plants west of Williston, an update; and here.

Proppants: sand or ceramics?

Williston growth: sometimes, in the eye of the hurricane

Schlumberger's HiWAY technology update 

Commentary on all that hand-wringing following the Newfield earnings 3Q11

CNN finds North Dakota on the map

2,000 Job Openings Every Day

Stuck in Neutral -- First Time Unemployment Benefits Claims -- Four-Week Average Rises

Link here.
The number of people seeking unemployment benefits dipped slightly last week, though not by enough to suggest that hiring is picking up.

Weekly applications for unemployment benefits declined 2,000 to a seasonally adjusted 402,000, the Labor Department said Thursday. That's the fourth drop in six weeks.

Still, the four-week average, a less volatile measure, rose to 405,500. The average had fallen to a six-month low two weeks ago.

Despite the recent declines, applications are stuck above 400,000, where they have been for all but two weeks since March. Applications need to fall consistently below 375,000 to signal sustainable job growth. They haven't been below that level since February.
The weekly jobless reports and the almost weekly updates in non-movement on the Keystone XL pipeline haven't changed in months. There's probably some connection but probably a bridge too far for most. Ayn Rand could write a great book about those seemingly unrelated factoids.

GDP Grew At Fastest Pace In a Year -- 2.5 Percent for the Third Quarter

Link here.
The economy grew at its fastest pace in a year in the third quarter as consumers and businesses stepped up spending, creating momentum that could carry into the final three months of the year.

Though part of the increase in output came from the reversal of temporary factors that had restrained growth, the expansion was a welcome relief for an economy that looked on the brink of recession just weeks ago.
Wow, one snapshot in time, one data point, and all that about a double dip recession is over.Who wudda thought?

XOM Earnings Soar -- Here We Go

Link here.

Expectations: 40 percent jump in earnings.

Report: 41 percent jump in earnings. Sets $5 billion stock buyback.
Exxon Mobil's quarterly profit rose 41 percent as higher prices for oil and natural gas made up for lower production.

Despite outspending other oil giants for the past few years, production dropped for the largest publicly traded oil company. Some of the declines resulted from international deals that limit the amount of oil that Exxon can sell as prices rise, the company said. But excluding those limits, production was still flat.
Great news for peak oil theorists: production was flat, although that's the classic "chicken and egg" story.

Happy Birthday ----

For one of my most faithful contributors, Happy Birthday.

Birthday Song, Paul McCartney

Could Ceramics Be Manufactured From North Dakota Clay? Why Not -- The Bakken, North Dakota, USA

Link here.
The manufacture of tiny ceramic beads as small as a grain of sand could become the next opportunity for western North Dakota.

Millions of pounds of the beads, worth billions of dollars, are being imported into the oil zone, where they're injected along with water and chemicals to prop open the minuscule fissures made by fracture-treating deep Bakken wells to make the oil flow.

North Dakota has generous clay deposits, and State Geologist Ed Murphy said his office is analyzing samples from two separate formations to determine if the clay-based ceramic proppant could be made here. Right now, it's imported from other states and countries, including Brazil and China.
This reminds me of a story.

Two men meet a cheetah in the jungle (bear in woods). One gets out his running shoes and starts putting them on. The other says, you can't outrun the cheetah (bear). The runner replies: I don't have. I just need to outrun you.

Likewise, Hebron ceramics don't have to be better than Chinese/Russian ceramics (although they probably will be, knowing the folks who will manufacture them). Hebron ceramics just have to be better than sand. Apparently silica crushes at those great depths, and gums up the works. Ceramics can withstand the pressure and last longer. Hebron ceramics just have to be better than sand, and they will beat foreign ceramics on price (transportation advantage).

Active Drilling Rigs Creeping Up -- Back to 199 -- Two Short of The Record -- The Bakken, North Dakota, USA

Link here.

This is a dynamic link and will obviously change.

Oil up $2 and change on the television crawler this a.m.

For investors only: XOM reports today (this is not an investment site; see disclaimer; this site is for eduction and entertainment). However, Shell and Statoil report soaring profits, 42 percent, and 50 percent, respectively. I get a kick out of these 30-second sound bites: profits at Shell and Statoil were said to be due to higher oil and gas prices; for those energy companies who missed estimates, it was said to be due to lower oil and gas prices.
Later today, Exxon Mobil, the world's largest publicly-traded oil company, is expected to report a 40 percent jump in third-quarter net income to $10.26 billion, according to I/B/E/S estimates.
Saudi likely to cut production: cites increased production from Libya, Canadian oil shale, and the Bakken, Not in so many words. 

Crime Wave

Link here.
Fargo police are investigating another armed robbery, and whether a bomb threat might be connected.

Authorities on Wednesday were looking for three males who walked into a Stop-N-Go convenience store about 6:15 a.m. with either a shotgun or a rifle and demanded money.

The robbery was the latest in a string of hold-ups in the Fargo area.
The bomb threat telephoned in about the time of the most recent hold-up may have been a diversion.

Also, there appears to be a string of burglaries in Bismarck.
Bismarck Police Sgt. Mark Buschena said an employee at Fairview Cemetery, 2929 E. Century Ave., reported that someone had forced open a door on a shop ... and ... Bismarck police also took a report of a house burglary during the same time frame. Between 10:30 p.m. Monday and 2 p.m. Tuesday, someone broke into a home on the 400 block of North 15th Street ...
And from Dickinson,
A Dickinson man who admitted trying to kill hiswife by running her down with his truck has been sentenced to serve 12 years in prison.

Mama Loved Papa, Garth Brooks
I cannot make this stuff up.

Can anything be better in the Bakken? Garth Brooks, a truck song, and slide show of 18-wheelers. Wow. 

Global Warming in Bismarck --- Snow Overnight --

Link here.
While the snow didn't stick and was considered only a "trace" amount, it was Bismarck's first snowfall of the season.

Keystone XL Decision Delayed Until After Election -- The Bakken, North Dakota, USA

Crude-by-rail facilities oil loading facilities continue to get good news. The administration will delay the Keystone XL decision until after the election.

Link here.
Obama said his administration was looking into the issue but had made no decision. He told the protester: ``I know your deep concern about it. We will address it.''

Obama's comments came as a State Department official hinted that a decision on the pipeline may be delayed until next year. Officials have pledged to decide by the end of the year. The State Department has jurisdiction over the pipeline because it crosses an international border.

A senior State Department official, who asked not to be identified because the department was still reviewing the project, said, ``While we are working towards a timely decision by the end of the year, our foremost commitment is to a thorough review and assessment of information and to make a decision based on the best available data and analysis.''
Translation: "It ain't gonna happen."
Although not said outright, it is obvious the administration is slow-rolling TransCanada. As I have said for the past several months, TransCanada needs to shift the Keystone XL 90 degrees west.