The Million Dollar Way (The Bakken Oil Blog): 01/01/12

Sunday, January 1, 2012

Animated Graphic of Bakken Activity -- Carpe Diem -- The Bakken, North Dakota, USA

Link here.

I've seen this animated graphic before, and I think I may have even linked it at one time, but it would have been quite some time ago.

But it's a lot of fun.

If you pause as you watch, you can see when Elm Coulee in Montana took off and when activity took off in the Parshall oil field, North Dakota.

The Bakken -- Another Year for The Record Books -- The Bismarck Tribune

From the Bismarck Tribune:

By every measure, the oil boom dominated North Dakota's economic activity in 2011, making it yet another year for the books.

As of the end of October, the last reporting quarter, old records fell and new oil production records continued to be set, just as they have every reporting quarter for the past three years.

13.9 million - The number of barrels of oil being produced each month in North Dakota as of October. That's nearly 500,000 barrels a day.

4 - The state is the fourth highest oil producing state in the country.

196 - The drilling rig count at the end of December.

201 - The all-time high number of rigs ever operating in the state, set in August.

The link takes you to more data points.

One comment: I'm not sure where the "201" -- all-time high number of rigs came from. The record was clearly 204, albeit not very long, a day or so. But clearly 204.

For Investors Only -- Filloon -- What to Buy in 2012 -- A Series of Articles -- The Bakken, North Dakota, USA

Part One.

This is Mike's thesis:

The year 2012 could be a big one in the Bakken. Many of these names are cheap based on $100 oil, and if there is some certainty gained from Europe, these names will carry a higher valuation. The price garnered from Bakken oil will trade higher as demand in the United States rebounds. More importantly is the pipeline from Cushing to the coast. If and/or when this is completed, WTI will trade closer to Brent, and Bakken oil will trade with WTI.

I agree.

Companies he highlights, and some data points:

Triangle Petroleum

the majority of TPLM's wells are in or near Whiting's Hidden Bench prospect
the average IP for Whiting's HB prospect: 2,669 boepd

Oasis

some very good acreage in Indian Hill
I have emphasized Indian Hill over the past few weeks

Part Two

Bakken names are also insulated from water shortages that have made things difficult for oil producers in the Eagle Ford or Permian Basin. A mild winter in North Dakota and Montana has helped to get these names off to a good start. Look for the Bakken names to come in at the top end of expectations in the fourth quarter.

The company highlighted in Part 2: Geo Resources.

Part Three

The next two have little to do with production, but receive a portion of revenues from the Williston Basin. Flotek has started out the new year well. In my opinion, this is the best name in the fraccing fluids space. Frac fluids have been developed over the years by oil service companies that have performed and improved fracing.

Mike says:

Market share of the frac fluid space is dominated by these big oil service companies (numbers rounded):

Schumberger: 36%
Halliburton: 24%
Baker Hughes:11%
Newpark: 8%

Folks may want to comment on my top ten list of fracking companies in the Bakken. This list is linked in the sidebar at the right.

Part IV

Bakken oil producers ended the year on a high note as the weather remained mild. In fact, North Dakota is having one of its warmest winters in four decades. With no snow on the ground in the Williston Basin, drilling and completing are ahead of schedule, and it would be fair to say most will come in toward the top end of earnings estimates. This was the opposite of what was seen last winter.

That's right; this has been an incredible winter. But the big story is not that a mild winter has made it better for the oil patch, but that on top of this, the oil patch is much better prepared -- lots of infrastructure went in over the summer "just in case" and now this will pay off even more if the mild winter holds.

Mike says:

For those unfamiliar, southwest Mountrail, northeast McKenzie, and northeast Dunn counties all border what I think is the Bakken/Three Forks sweet spot.

I assume Mike has pointed that out before, but it really jumped out at me: I have been blogging for the past few months that the Bakken bull's eye is northeastern McKenzie County, northeast of Watford City, and this is where the activity will be headed this year (2012). My gut impression is that it will be even bigger than Whiting's Sanish, partly because drillers have gotten a lot better since the boom began four or five years ago.

Companies highlighted by Mike in part IV:

NOG

A Whiting well in its Tarpon prospect was the best news Northern got in 2011. Whiting recorded the highest IP (initial production) rate of any well in the Williston Basin at 7009 Boe/d and Northern has non-operated working interest.

KOG: Mike has important things to say to investors about KOG in this article. He took his profits earlier (he doesn't say at what price he sold, but probably in the $9.50 range) but says he will get back in if KOG pulls back to $8.00 or so. I used to use $6.00 as my data point for accumulating more shares.

Disclaimer: this is not an investment site. See disclaimer at top of sidebar at the right. Make no investment decisions based on this blog.

Idle Rambling -- Play-by-Play NFL Coverage and Politics

I always get a kick out of listening to sports announcers doing all they can to keep the audience from switching stations when the score is 42 - 3 and there's less than 6 minutes to play. They keep coming up with scenarios in which the losing team could stage a comeback: a kick-off return, followed by a recovered on-side kick, followed by a punt return touchdown, and so on.

That random thought crossed my mind while reading the CNNMoney story on the Keystone XL. Part of the tax extension deal was to require the president make a decision on the Keystone XL within 60 days. Political and business talk radio and talk television will milk this political theater for all its worth.

CNNMoney has it exactly right. Obama has three choices: a) approve it; b) deny it; c) kick the can down the road until after the 2012 election. Wow, I wonder what the president will do?

Both sides and all the talk shows will milk this story for all they can. It will result in political contributions and ad dollars. As with the payroll extension which amounted to 2% for 2 months (a pizza night out), analysts were able to keep folks on edge waiting to see how this would play out. Anyone who thought that the year would end with taxes going up .... well ...

So, just as we know the outcome of an NFL game at 42 - 3 with less than 6 minutes to play, and chuckle listening to the play-by-play announcers trying to make the game seem exciting, we will see the political equivalent in February, 2012.

The president's speech is easy: "60 days is not enough time to evaluate such an important decision ... we love Canada, our closest ally ... and we need/want their oil .... but 60 days not enough time ... so, I will direct the State Department to let Canada know we need/want their oil ... but we need to have TransCanada resubmit their bid so we evaluate a route that doesn't affect ~~the MacGuffin~~ the aquifer."

Oh, and by the way, square the $40 tax deduction, the 99-week unemployment benefits, and the $180 Nike Air Jordan Retro XI sneakers craze.

I can but I won't.

Follow-Up On That Incredible South Fork Dakota-3 Well: 130,000 Bbls in < 6 Months -- No Pump -- 17 Stages -- KOG Nearby -- The Bakken, North Dakota, USA

While updating the top stories of 2011, I was reminded of this story:

18922, 472, Dakota-3 (WMB), Dakota-3 Skunk Creek 1-12H, (South Fork field), 19,354 bbls in first 14 days; s9/10; t6/11; cum 416K 9/14;

So, how is it doing now?

The company did not summarize the completion report but attached the entire "well completion summary."

As a rule I do not read these summaries, so I may have some of the details incorrect, but this is what I see:

Spud: 9/25/10
Date TD reached: 11/2/11
17-stage frack
Date of 1st stage: 5/13/11
Date of 2nd stage: 6/9/11
Date of 17th (last) stage: 6/12/11
Looks like about 130,000 lbs sand (including ceramics)/stage: 2.2 million lbs (very rough est)

This is part of the geologic summary: "The Zenergy Operating Company's Precision 517 Dakota-3 Skunk Creek 1-12 is a wildcat well located ... The initial phase of the Skunk Creek 1-12H is a vertical section, and curve landing in the upper part of the Middle Bakken formation. It will be re-entered at a later date as a single lateral coplanar well targeting the Middle Bakken Silty Dolomitic Limestone / Sandstone formation. The Skunk Creek 1-12H spudded September 22nd, 2010, and reached a Total Depth of 19,228 feet Measured Depth, and 10,490 feet Total Vertical Depth on November 1st, 2010..."

Production data:
Test date: 6/15/11
IP: 472
Still flowing (no pump)
Date/Days/Runs:

11/11; 30 days; 18,154 bbls
10/11; 31 days; 16,741 bbls
9/11; 28 days; 17,587 bbls
8/11; 31 days; 29,410 bbls
7/11; 29 days; 31,310 bbls
6/11; 14 days; 19,354 bbls

Of interest, KOG has a rig on site just to the west of this well, less than a mile away:

21065, 539, KOG, Skunk Creek 9-2-3-12HS/Skunk Creek 9-2-3-12H3, t3/12; cum 144K 8/14;

At the time of the original post, I noted:

In South Fork oil field (where the Dakota-3 well is), there are 12 permits; three are active and producing; all the rest are confidential. But note this: 8 of the 12 permits belong to KOG.

Cost of well, according to the "well completion summary":

AFE budgeted: $6,487,650.00
Actual: drilling, $3,610,264.00; completion (fracking), $3,685,033.65. Total: $7,295,297,65.

For more discussion on the costs associated with drilling Bakken wells, click here.

The Million Dollar Way (The Bakken Oil Blog)

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