Marathon Petroleum Corp (MPC) the unit that was spun off from Marathon Oil Corp (MRO), announced that it may itself spin off its pipeline and logistical assets sometime in the second half of 2012.
The company, which consists of the downstream operations of Marathon Oil Corp., is under increasing pressure to increase shareholder value, namely by New York-based hedge fund Jana Partners LLC, who currently hold a 5.5% stake in MPC.
Marathon Petroleum Corp. was spun off from the Marathon Oil Corp. last July, taking with it downstream operations. Marathon Oil Corp. maintained all upstream operations in the separation of the two entities. MPC currently operates six refineries in the United States along with roughly 9,600 miles of pipelines and logistical equipment. The company currently has the capacity to refine approximately 1.2 million barrels of crude oil per day. Additionally, it also has a distribution network of a little more than 5,000 outlets (independently owned) in 18 states. Obviously all of this requires an extensive logistical network. It is the 9,600 miles of pipeline and the logistical assets which are under consideration for a separate spin-off into a Master Limited Partnership.
I don't follow MRO or MPC but surfing through the headlines regarding this most recent headline suggests that both MRO and MPC have appreciated nicely since the split (but don't take my word for it; I really don't pay attention to it). MPC has also announced plans to buy back $850 million in shares.
See disclaimer at the sidebar at the right; this is not an investment site. I don't accumulate shares in Marathon and do not even follow it on a regular basis, except for its activity in the Bakken.
Some of the MTM spin-offs worked; some didn't. It will probably be the same for the MRO spin-offs.
The Green River Formation, the world's largest oil shale
deposit, is located in a largely vacant region of mostly federal land
on the western edge of the Rocky Mountains that includes portions of
Wyoming, Utah, and Colorado. The Green River Formation contains about 3 trillion barrels of oil, and
about half of this may be recoverable, depending on available
technology and economic conditions. The Rand Corporation, a nonprofit
research organization, estimates that 30 to 60 percent of the oil shale
in the Green River Formation can be recovered. At the midpoint of this
estimate, almost half of the 3 trillion barrels of oil would be
recoverable. This is an amount about equal to the entire world’s proven oil reserves." -- and not reported in mainstream media. Why?
After 20 years of steady decline, light and medium oil production is now conclusively trending upward in Alberta. Take a look at the chart above [at the linked site], which could heighten the blood pressure of a few peak oil theorists.
... Alberta’s light and medium oil production was declining by an almost perfectly linear rate of 16,000 B/d every year up until late 2009. This predictable line extends back to the early-1990s, and more generally as far back as the peak of production in the 1970s. Extending the trend line past the recent turning point, I infer that production should have been 284,000 B/d in October 2011, the time of the most recent data point available. However, rather than declining, actual production has jumped up to 375,000 B/d, an increase of 91,000 B/d off the 20-year status quo.
In early 2011, common wisdom among industry veterans was that light and medium quality oil production would rise gently, reaching 375,000 B/d by 2017. The latest data shows the target was achieved six years early.
Based on the e-mail notes and comments sent, it sounds like most saw this story on CNBC or read it on the internet: Prince says Saudi will not let oil rise above $100/bbl, when the discussion regarding the Iranians closing the strait came up.
Two points: first, in the very recent past, WTI spot price was above $100/bbl (on January 4, 2012, the high for WTI was $103.90) -- just barely, but technically ...
So, Saudi oil, Brent or WTI? Who's on first, what's on second? The prince also said the entire Middle East needs to be nuclear free, stating that Israel needs to give up its nuclear weapons also (Israel, by the way, has never said it has a nuclear program). Like that's going to happen.
Beyond quibbling over who's on first, what's on second, the whole interview lacked credibility. In January, 2012, Saudi Arabia set the price target for oil at $100 (again, WTI, Brent?), implying that was the floor. So, if that's the floor, and today's prince says the ceiling is $100, that's not much of a spread. Zero, in fact.
Further, we've been through this exercise before. During the recent Libyan conflict when somewhere between one-half million bbls of Libyan oil and 2 million bbls were taken off the market, Saudi said it would make up the difference. Many of us opined that Saudi can't easily make up the difference, and, in fact, there is little evidence that Saudi increased production significantly during the Libyan conflict.
Besides, the whole discussion was idle rambling: the Iranians are not going to shut the strait. I was going to update the poll with a new question, but it appears it may be relevant for a few more weeks.
I take the prince's comments with a grain of salt. Or perhaps with a drop of oil.
Legacy and Chimney Sweep each have a permit for a wildcat, on in Bottineau County and one in Stark County.
The Chimney Sweep well, Hondl 21-1, a wildcat in Stark County is listed as confidential, and is Chimney Sweep's only active permit/well. Chimney Sweep had one other permit, 16945, Ridl 16-1, that was placed on the temporarily abandoned (TA) list last month. These two wells, Hondl and Ridl were in adjoining townships. The Ridl well targeted the Lodgepole. These wells are southwest and south of Dickinson, in the general area where other Lodgepole mounds have been targeted, some successful.
Sixteen (16) wells released from "tight hole" status. Eleven were completed; one was a salt water disposal well. Some of the better wells:
20408, 1,824, Whiting, Kummer 34-21H, McKenzie
20985, 1,049, ERF, Hawaii 148-94-23A-1H, Dunn
21152, 901, CLR, Mack 4-2H, McKenzie
Eight (8) wells on DRL status reported IPs, including:
The pipeline shut down in 1996 as Alaskan crude shipments declined and reopened in 2003 to transport Ecuadorian crude to the Gulf Coast (still west-to-east).
Except for that part about carrying Bakken oil, all the rest is from the linked article; I just thought I would throw that Bakken part in to capture current events.
In a national disaster such as Hurricane Katrina, the state's national guard is called up to help out. It is my understanding that "New Orleans" has requested that the national guard be brought back in due to the heavy crime and homicide rate. How many years has it been since Katrina?
If things are as bad in the Bakken, specifically Williston, as some claim, and if state leaders are as serious as they say they are in helping the oil patch, why has there been no talk of deploying national guard to Williston? Yes, I am aware of military-civilian issues, but calling out the national guard for local disasters is commonplace, and some reports would suggest there is a disaster in Williston related to the boom in the oil patch. Maybe we will see some of that disaster-in-the-making on tonight's heavily advertised CNBC program on the Bakken.
Approximately 2,000 members of the North Dakota national guard have been deployed to Iraq over the past few years; the last member returned in December, 2011, and with the US drawdown there, they are not likely to be redeployed.
The Williston police department is looking to hire less than a handful of new recruits, somewhere between one and five new recruits if I remember correctly. Certainly, this would be a great assignment for some of our young national guard security forces to get training and fill a temporary need in Williston.
I don't know if the North Dakota guard has a medical unit, but it doesn't take a whole of training to get a handful of soldiers to run shotgun with the volunteer force for all those emergency calls. My understanding is that many of these calls are for domestic disputes, and certainly the guard member could provide initial response.
I am not aware of major fire issues in the oil patch. So that leaves security (law enforcement) and medical first responders.
And if fights are breaking out downtown, a few soldiers carrying automatic weapons patrolling the streets would put an end to that. The man-camps have responsibility for managing their own "hotels." Likewise, hotels/motels in Williston could be tasked with providing their own private security (not national guard). Is Wal-Mart providing professional security?
Food shortage? Have the military escort and/or provide convoy training for Albertson's, Economart, and Wal-Mart.
Sewage, water, utilities? Outsource it to Halliburton. They did it in Iraq under much worse conditions.
Truck reliever route? Bypass? Why isn't that completed yet? At least a temporary fix. Again, outsource it and get it done. I drove the proposed route for the temporary bypass and much of it is already in place. How many years are we into this boom? Five? How long have folks been predicting these problems? Five?
But when I don't see these suggestions making the editorials or in "letters to the editor," it suggests to me things are not as bad as some say.
Based on all I'm reading, it sounds like Williston is looking for a handful of more law enforcement personnel and a handful of medical responders (most non-violent). And if the jail is overcrowded, the military has a core competency in temporary facilities called tents, again manned by the guard.
Certainly if the North Dakota national guard could help Iraq, it could help Williston, and something tells me that assignment would be very comfortable compared to what they saw in the Middle East.
I will post comments that provide additional positive suggestions but I won't post any comments that are negative in nature. This is brain-storming and negativity is not allowed. We're looking for solutions at this point, not looking for "why this won't work." That comes in Part II.
This post contains a lot of information received from a GMXR spokesperson -- very informative. Highly recommended for update regarding GMXR but also the Bakken in general.
I can't find it: either I blogged it or it was in the comment section, but I can't find a comment regarding GMXR and my reply.
It had to do with the company's press release updating operations and the need to rework several of their wells.
I don't always understand the jargon or the technology, but a spokesman for GMXR was nice enough to expand on what I had written (either expand or correct my mistakes -- it's in the eye of the beholder, smile):
Here is that additional information:
Our first three wells were successfully drilled, successfully fracture stimulated.
The first two are very long laterals (some of the longest in the basin).
All three wells are flowing but have restricted flows due to frac balls (all 30 balls are still in the well bore on all three wells) and proppant.
We have secured our own new fit-for-purpose work over rig. It is expected to arrive between February 15 and March 1st. At that time we plan to send the work over rig to the Frank well first as it has the most restriction. Second would be the Evoniuk and finally back to the Wock.
Once the work is completed and we can assess flow and production we plan to update the public on these wells.
While the “IP” rates reported are accurate they are not in our view true IP rates based on the restricted flow rates. We do plan to flowback our 4th well (Lange) in different manner than our first three.
I truly appreciate this information.
Some data points and additional comments:
1. Quite some time ago I got a call from a East Coast investor or journalist (I now forget which), and he wanted to know more about GMXR and the Bakken. At that time I had never heard of GMXR, but my research at that time suggested GMXR, a natural gas company, was using the "Bakken" as an investor-marketing gimmick. It seemed very late in the game for a company like GMXR to enter the Bakken. I was very wrong. GMXR appears to be a real player in the Bakken. I am impressed.
2. To expand on one of the points made above by the GMXR spokesperson: it is true. They do have one of the longest, if not the longest, lateral in the Bakken. I've blogged on it before.
3. The information above really helps fill in knowledge gaps. I guess it doesn't take much to get me excited.
As I told the GMXR spokesperson: the most important thing folks can do to help me out, is correct any errors I make. I don't intentionally mean to report inaccurate information.
Second, I generally don't write to investor relations to get questions answered; I just don't have time, but maybe I should when there are obvious disconnects.
Finally, I give the oil companies the benefit of the doubt on most issues, holding off on negative comments. But after awhile, I will call it like I see it (such as the disappointment in OXY's Dimond field wells and Fidelity for minimal activity in its own backyard -- MDU is headquartered in Bismarck, ND).
Anyway, again a big thank you to GMXR for expanding on their operations.
I've asked about the Marsh well -- NDIC shows "DRY" whereas GMXR reports a very, very nice IP. This is the information from GMXR regarding the Marsh well:
The Marsh 21-16TFH is listed twice. One has a –R after it. It’s a re-drill. Whiting apparently had some issues in the original vertical and moved the wellbore over 10 or 15 feet and re-drilled the vertical. That is why it showed the original as a DRY.
The one with a -R after it is currently on confidential status and did IP at 2,694.
One can find more on GMXR and the "Marsh" well by searching at this blog site.
With regard to work-over rigs, he had this to say:
Work over rigs have been in very short supply as noted by press releases from Kodiak and Whiting. Every well drilled in the Basin will periodically be in need of a work over rig. It’s not uncommon for a newly drilled well to have a work over rig drill out frac balls or plugs and/or proppant post-fracture stimulation.
With more rigs drilling and more wells producing than ever in the Bakken it’s not surprising that “ one more thing” is in short supply in the Bakken.
Julie LeFever (NDGS), Stephanie Gaswirth (USGS), and John Robinson (North Ranch Resources, LLC) are editors of a new book on the Bakken and the Three Forks, published by the Rocky Mountain Association of Geologists:
This book has the latest info from authors who work for EOG, Whiting, Samson, Colorado School of Mines, North Dakota Geological Survey, Colorado State University, and Cirque Resources, among others. It includes two of the classic publications by Leigh Price and a paper by Mike Johnson on the discovery of Parshall Field (he's the geologist who sold the original deal to EOG).
The paper has a fair amount of information regarding the Lodgepole. Here is a sampler (page 21 of the paper):
Core analyses demonstrate that the characteristics of the lower Lodgepole reservoir rock for thees Waulsortian mound oils are typical of that for all lower Lodgepole rocks throughout the Bakken HC kitchen, with low matrix porosity and very low matrix permeability.
However, in spite of these poor reservoir characteristics, the better wells of this play have very high initial potentials and also high cumulative productions. For example, the discovery well of the play, the Conoco Dickinson State #74 was completed in February 1993 at an initial open-hole potential of over 8,000 bbls per day. From February, 1993, to July, 1996, this well produced over one million bbls of oil and was producing 3 percent of Conoco's entire onshore US oil production.
These high productivities are entirely due to extensive tectonic fracturing overprinted in the rocks of the better lower Lodgepole wells, tectonic fracturing which has been caused by salt dissolution and collapse ... In fact, salt collapse is most likely responsible for the entire play.
Back in the early 90s, one well accounted for 3 percent of Conoco's entire onshore US oil production. A nice bit of trivia for a cocktail party.
The reference to "Conoco Dickinson State 74" is file:
13447, 419, Conoco, Dickinson-Lodgepole Unit 74, s11/92; t2.93; F, cum 2.93 million bbls; currently flowing at 4,000 bbls/month.
Note: this vertical well is still flowing without a pump and is still active approaching the 20-year mark. This well was recently featured as a monster well at this link.
I don't often do this but this is a pretty nice explanation of liquid natural gas vs compressed natural gas, etc., things I don't really understand. So, I have simply "cut and paste" a comment sent to me by Greg from FourFiftyGas.com:
I have been googling the small scale liquid natural gas (LNG). The components are skid size (think inter-modal container size). They can process "stranded gas" by removing carbon dioxide (CO2 and sulfur dioxide) from gas at flare sites before cooling to a liquid. In the short term the LNG should not be much different than propane but propane is passive so you can let it sit or lay there in the event of a vehicular crash.
By contrast, LNG is active, meaning that if it is not kept cool it will boil (unlike propane). This difference comes into play with the population density of areas. Out in the boondocks this is low so a big flare or an "air bomb" poses less of a threat.
On a BTU basis: benchmark natural gas can cost one quarter or less the cost of propane or heating oil. The system is expensive but the flare gas is almost free so it could be made to work in rural areas. Keeping a propane backup is easy. A LNG truck can carry a lot of fuel.
Hedge funds have invested a record $6.5 billion in U.S. petroleum refiners, expecting profit to jump as companies shut aging plants and acquire cheaper supplies of North American crude from burgeoning shale-oil wells.
Barry Rosenstein’s Jana Partners LLC and David Tepper’s Appaloosa Management LP alone have amassed $1.3 billion of stock, joining funds that together more than quintupled their money in the industry since the S&P 500 Oil & Gas Refining & Marketing Index’s eight-year low in the fourth quarter of 2008. The index soared 18 percent this year, beating the 5 percent gain in the Standard & Poor’s 500 Index.
This was reported in a Bloomberg article. See the last paragraph:
North Dakota’s Bakken is the center of that boom. Production has more than tripled since 2008, according to data compiled by Bloomberg, because of drilling techniques including hydraulic fracturing.
I remember all the stories back in 2008 about how the Bakken was over-hyped.
Again, see disclaimer at the sidebar at the right. This is not an investment site. I accumulate shares in none of the companies mentioned on this page, and have no intention of doing so in the near term (> 1 year).
I invest, although not so much anymore. I give most of any free cash I have to a) Starbucks; b) my granddaughters; c) my younger daughter (the older daughter has the granddaughters); and, d) the Harvard Book Store. I do not trade.
What impressed me most is how often the Bakken is referenced.
Maybe more on this later. Lots of data in the article but probably of interest only to those who follow DNR. DNR is a leader in tertiary production (CO2 injection); in fact, when I see DNR, I see "tertiary production."
Okay, as long as I'm rambling, this is one of those companies an investor might do well in the long run with dollar-cost averaging accumulation.
I don't accumulate DNR, just pointing out something. It's possible I could start accumulating DNR sometime in the distant future (>1 year from now).
Note the disclaimer at the sidebar: this is not an investment site.
