Sunday, March 4, 2012

Poll Results: Will Iran/Mideast Push Price of Oil To New Highs -- New Poll: Housing in Williams County


March 16, 2012:  Talking head on CNBC says if diplomatic deal with Iran reached, oil will fall $15. I assume he is talking about WTI which would take oil at its present $105 to $90. The sanctions are due to go into effect July 1, 2012, near the height of US driving season. I don't see the $15 premium for the Iran risk. I think the "Iran risk" has been baked in, and we are seeing other reasons for $105 oil and trending up. At the moment, 12:45 p.m. March 16, 2012, oil is up $1.25 when it appears this has caught folks by surprise.

Original Post 

This poll has been out there for quite some time now; thank you to all who participated:
Do you think events in the Mideast will push price of oil to new highs within the next six months?
My understanding is that the Iranian sanctions/embargo become effective July 1, 2012, at which time we may see how the poll results anticipated actual events. Until then, here are the results (numbers rounded):
45% -- Yes, Iran is foolish enough to close the strait
35% -- No, Iran will try something but won't amount to much
20% -- No, Iran won't dare tangle with the US, EU, and/or NATO
New poll:
Recently the Williams County commission banned all new man-camps indefinitely. Since the boom began, the county has approved around 10,000 man-camp beds; somewhere between 8 and 12 new motels/hotels have gone up in Williams County (most in Williston); and countless housing developments have been started/completed. 
Has housing in Williams County finally caught up with the needs of the oil patch?
  • Yes, we are close to overbuilding
  • Yes, but just barely
  • No, but we are getting close
  • No, we still need much more

Goodnight Moon, Shivaree, From Kill Bill 2

    Saudi Arabia: A Tough Week For Denying Rumors

    First, it was the pipeline explosion that never happened.
    Saudi Arabia denies the report [that there was a pipeline explosion], and less than 24 hours later, the world's journalists accept the Saudi statement as gospel truth, despite the fact that no could confirm it one way or the other. Everyone agrees that the pipeline in question is in Saudi's eastern province, a hop, skip, and a jump away from Iran which is now Saudi's #1 (and maybe only) enemy. 
    Now, we have the sandstorm stopping oil-loading operations that never happened.
    Operations at King Abdul Aziz Port in Dammam were suspended yesterday [due to a sandstorm], the commercial port’s General Director Naim al-Naim said, according to the newspaper al-Eqtisadiah.
    Despite shutting down all operations, oil loading went on as usual, according to the Saudis.
    Saudi Arabian Oil Co. is shipping crude normally today from terminals in the Persian Gulf, the world’s largest oil exporter said, even as sandstorms stop other kinds of cargo from leaving the nation’s main eastern port. 
    So, the pipeline explosion that never happened, and the sandstorm that stopped all harbor operations except normal oil loading.

    Build Your Own Bakken ETF -- Motley Fool

    I really don't care for Motley Fool. I lost my "love" for Motley Fool some time ago; I forget the specific tipping point but it had to do with all the focus on getting folks to pay for their newsletters. They write superficial, short stories and then entice you to link elsewhere to pay for a newsletter subscription.

    I will still post Motley Fool articles, but I am much more circumspect.

    Motley Fool has another such story: superficial, minimal analysis, and a blurb on what Bakken companies would make up his ETF. This writer says there is no easy way to invest in a Bakken ETF; this is not entirely correct. There is a mutual fund that focuses on the Bakken. I forget the name of the fund; I don't follow it and I don't invest in it. This is not an investment site; see disclaimer at the sidebar at the right. [Update: a reader sent me the name of the referenced fund: it is the Williston Basin Stock Fund, managed by a group in Minot, ND, Integrity Viking Funds.] 

    Be that as it may, the writer of the linked article says his Bakken ETF would be composed of these five as starters: KOG, Triangle, NOG, Oasis, and Magnum Hunter Resources. I can't argue. But I'm not sure why he wouldn't throw in WLL and CLR.

    Of the five companies the Motley Fool writer mentions, Oasis seems to be the one hitting on all cylinders. I don't own Oasis but Oasis is my favorite of the KOG-OAS-NOG triumvirate. KOG has its work cut out for itself to convince analysts it can make a profit next time around, or at least not surprise them. NOG has become packed with too much emotion for many; it has a unique business model, one that I particularly like but I don't own. I hold some shares in Triangle, bought a long time, but no longer follow. (Yes, no typo. Unless I check now, I don't know what Triangle is selling for and I don't know what Mike Filloon says it's worth. It's simply one of my long-term holdings. I follow the news closely but I don't follow day-to-day fluctuations.)  I don't follow Magnum Hunter but it is getting a lot of press.

    I  have no plans to buy or sell shares in any Bakken-play company in the near term.

    Discussion Developing for Best Lateral Spacing


    March 8, 2012: the discussion continues. An individual from Hawaii has summarized my thoughts quite well. Check out "kuaudave" and his/her comments at this link, March 8, 12:03 a.m.

    March 6, 2012: Teegue's board is nothing if it's not predictable -- today Teegue suggested the topic be taken over to the water cooler if "they" introduce politics into the discussion. I did not see any indication of politics in the discussion, but I did see a lot of apologies to Teegue. "They" desperately don't want to be kicked off the discussion board. I see that the most recent post (by BRI-VA) references my blog which is blogga-non-grata. It will be interesting to see what the response is. Generally, Teegue will respond that this blog is a joke and he won't "recognize" it. In this case, BRI-VA is only referencing a very important link for surface owners which I can guarantee practically no one on the Bakken Shale Discussion Group has seen. BRI-VA takes great risk in referencing this blog. If one references my blog at that site more than once, they are generally threatened with being "kicked off the island." A third time, and it's all over.

    March 6, 2012: Wow, I think it's time for Dufus to take the conversation over to the water cooler, over at Teegue's Bakken Shale Discussion Group. (See link below.) Teegue is starting to get a bit hot under the collar (see Teegue's long entry at the link this date). In my eyes, Teegue has always been correct with regard to the Bakken, but I think he is wrong in this case. Read the entire thread at the link below.  Then come back here and read the following. Tight oil/unconventional oil/shale oil is something new for everyone involved. One can argue, under oath, that a single horizontal well can drain a 1,280-acre spacing unit, but it will take 30 years or longer, and a lot of oil will be left behind because of the ineffectiveness of the frack more than 500 feet away. One can argue that by putting in additional wells/infill wells/density wells one can drain the spacing unit in a shorter period of time, and, oh by the way, recover more oil than a single horizontal. Teegue is thinking like a non-participating mineral rights own who inherited a few acres from his grandfather; others are thinking like oilmen. Much more could be written, but it starts to open more Pandora boxes.

    March 5, 2012:  I hope the folks who argue against Teegue know they could be excluded from the discussion group.

    Original Post

    Elsewhere there is a nice discussion regarding the optimum lateral spacing for horizontal wells in the Bakken.

    There are several issues brought up: how far from the lateral is oil recovered; is technology changing things; do models have to be updated; are EURs increasing due to improving technology and experience? It's a messy discussion (skipping from topic to topic) but the data points are interesting and helpful in understanding the Bakken. 

    This was the question, and rhetorical answer:
    The original question asked here was how far oil is recovered from the lateral.  Marathon's evidence shows it is recovered from at least 3/4 mile over 25 years, upon which legal determinations have been made regarding that only one well is necessary in a unit. 
    I guess there are at least two questions: a) how far is oil recovered from a lateral; and, b) how far out is fracking effective, which I started discussing a long, long time ago, and a question that operators are discussing in their corporate presenations.

    I do agree that EURs are increasing due to improving technology and experience.

    I understand "pressure" arguments for liquid pools; I don't understand "pressure" arguments as well when discussing "tight" or shale oil.

    Decade For Energy? Kinder Morgan Announces Huge New CBR Terminal In Pecos, TX

    I remain concerned that this will be another lost decade. With gasoline at $5.00/gallon in some places, and flirting with $4.00 everywhere, the president praises the Volt (whose production is temporarily suspended due to underwhelming demand) and promotes algae-oil (I feel the term "pond scum" too inflammatory to use). I feel I have reasons to worry. Especially when he promotes algae-oil at the same time he kills the Keystone XL 1.0 and 2.0.

    But market forces and technology are such that there may be hope. "Anon 1" just sent me a great story: Kinder Morgan announces plans to build a mega-railroad-crude-oil-terminal in Pecos, Texas, to gather, process, and transport the liquids coming out of the Permian Basin.
    The first stage of the terminal is expected to be completed and operational by May 2012. Crude oil, natural gas liquids, frac sand, pipe, tube, structural steel, rig mats and other commodities can be railed in and out, and transloaded to truck for delivery to the surrounding area. Once the terminal has been fully developed, it will encompass approximately 85 acres and will be able to support unit trains. Total railcar capacity is anticipated to be 300 to 600 per day based on demand. The terminal is strategically located along the Pecos Valley Southern Railway (PVS) and directly adjacent to the Union Pacific mainline in the city of Pecos, and will offer scalability and convenience for local area producers.

    “KMP is excited for the opportunity to join with Martin Midstream and Watco to develop this opportunity in the Permian Basin.  
    This is Watco's eighth crude-by-rail terminal.

    Along with crude oil, natural gas liquids, frac sand, pipe, tube, structural steel, rig mats and other commodities, KMI will probably ship kitchen sinks for Sears.

    So, there is hope.

    Pecos, Texas, is about 100 miles southwest of Midland, Texas.

    Two Huge (?) Pipeline Stories That Might Make News Monday

    Enbridge shuts down a major pipeline due to spill
    BP increasing flow of midwest oil just before the spill
    Expect some volatility in WTI/Canadian oil market Monday
    Economic spillover (pun intended) for the Bakken? -- no, there is no Bakken oil spil
    Keystone XL decision looms in background


    Later: "opening" futures Sunday evening suggest this is not having a major impact on market in general; stock mkt futures up a bit; WTI up a bit; mostly flat

    Original Post

    First link: Enbridge oil spill due to vehicular accident; does not know when they will re-open the major pipeline.
    The pipeline, called Line 14/64, normally carries up to 318,000 barrels of oil a day to Griffith, Indiana, from Superior, Wisconsin.
    They say this will further depress the price paid for Canadian oil, but I can't imagine that Bakken oil won't be affected also, if Canadian oil is affected.

    Second link: a bit more confusing for me because the writer combines two stories -- the planned ramping up of oil before the spill AND then the spill that resulted in Enbridge closing the pipeline.
    The line usually carries 175,000 barrels per day of West Texas Intermediate and West Texas Sour from the storage tanks in Cushing, northeast to BP's massive 431,500 bpd Whiting, Indiana, refinery, a major supplier of gasoline and diesel to the Chicago market.

    A spokesman for Genscape said the refinery was running normally but the decision to cut back on the flow out of Cushing could be economic.

    "BP could be maximizing the CDU that runs Canadian heavy crude while cutting back on the one that runs WTI and WTS," said Abudi Zein, a spokesman for Genscape.

    "The other lines that we monitor and that could compensate are already running full," Zein said, adding that the outage will "blow out" the Canadian crude spreads.

    Canadian crude is already heavily discounted to the United States WTI benchmark. On Wednesday, Canadian Heavy crude was bid at $35 under WTI while sellers were looking for $30 under. WTS is trading at about a $25 premium to Canadian crude, according to Reuters data.
    From wiki:
    Whiting is a city located in the Chicago Metropolitan Area in Lake County, Indiana, which was founded in 1889. The city is located on the southern shore of Lake Michigan. It is roughly 16 miles from the Chicago Loop and just short of two miles from Chicago's South Side. Whiting is home to Whiting Refinery, the largest oil refinery in the Midwest. 
    It is not clear how this will play out, but my hunch is we will see volatility in the oil markets, and it's possible the price of gasoline will edge up in the Chicago area. 

    This might be a stretch, but that decision to kill the Keystone XL looks more and more irresponsible/ill-advised all the time. Yes, spills happen, but they're cleaned up and life goes on. But in the meantime, the lack of adequate pipeline capacity threatens operations at any given refinery. The country runs on gasoline/diesel.

    Williston Makes Top-Ten List of Ranked North American Oil Capitals

    Williston voted #9 among North American oil capitals

    In North America --- Canada, USA, and Mexico -- oil executives vote Willison #9 of 10 oil capitals, ahead of Edmonton, in 10th position.
    The Tulsa World conducted an informal and mostly anonymous poll asking oil and gas insiders to rank the so-called Oil Capitals of North America. The group included executives and analysts in Tulsa, Dallas, Oklahoma City, Houston and on the East Coast. 
    When you see the list, it is amazing Williston is even on the list (considering the food shortage, lack of water, sewer, electricity, and no more room on the highways). Ten years ago, nay, five years ago, who would have guessed.

    But it explains why Williston is getting two daily flights to Minneapolis: more and more corporate (and not just oil industry) execs are flying into Williston. Sure, some of the CEOs have their own corporate jets, but not all, and certainly not the mid-level managers.

    Here's the list (be sure to look at the honorable mention list; those cities that did not make the list):
    1. Houston: HQ for almost every major company

    2. Calgary: Center of Canadian oil and coal industries

    3. Oklahoma City: Devon, Chesapeake, SandRidge, Continental Resources

    4. Tulsa: Energy diversity, Williams, ONEOK, manufacturing

    5. Dallas-Fort Worth: Barnett Shale, Exxon Mobil offices

    6. Denver: Cimarex, gateway to Piceance, Niobrara Shale

    7. Midland, Texas: Permian Basin hub

    8. New Orleans: Hub of Gulf Coast operations and shipping

    9. Williston, N.D.: Bakken Shale. Can you say "Boomtown!"

    10. Edmonton: Hub for Alberta oil and gas activity

    Honorable mentions: New York, Cushing, Los Angeles, Casper, Wyo. 
    Population of each city:
    Houston: 2.1 million
    Calgary: 1.1 million
    Oklahoma City: 600,000
    Tulsa: 400,000
    Dallas-Ft Worth: 6.4 million
    Denver: 600,000
    Midland, TX: 140,000
    New Orleans: 1.2 million --> 350,000
    Williston: 13,000 --> 20,000 (best estimate)
    Edmonton, Alberta: 1 million
    No city in Mexico or Wyoming made the top-ten list; Salt Lake City didn't even make honorable mention, nor did Billings, Montana. 

    A big "thank you" to a reader for alerting me to the story.

    Human Interest Story: Laid-Back Lifestyle in Williston

    Here's a great feel-good story from Detroit to Williston, link to the Dickinson Press.
    The family went through home foreclosure and was behind on rent and other bills. “We were in some dire straits there,” Rhonda said.

    Then they saw an ad for truck drivers in Williston. At first, they thought the job was only for the summer, but it turned out to be a permanent position.

    With their two daughters and one son grown and on their own, Rhonda, 46, and Charles, 49, decided the timing was right to relocate to North Dakota.

    Charles works 7 p.m. to 7 a.m. hauling water to oil sites for Key Energy.

    Rhonda joined him in Williston a little more than a year ago and liked the small-town feel and the laid-back atmosphere.

    “To come from the hustle and bustle of Detroit where you always had to be suit and tie, skirts and stockings to just jeans and slacks … this is wonderful, this is marvelous,” Rhonda said.
    Read the entire story at the link. 

    Rhonda didn't mention anything about the food shortage in Williston, or lack of water, sewer, or electricity as noted by the Williams County commission. And somehow, despite no room on the highway for anyone else, both Rhonda and her husband were able to find room.

    “We’re still out of water, we’re still out of sewage capacity, we’re short of electricity and there’s no room on the highways for anyone else,” Kalil said.
    A big "thank you" to a reader who alerted me to the story. I apologize for adding my editorial two-cents worth, but it points out the difference between those who "have" and see the cup half empty; and those who "don't have" and see the cup half full.

    South Dakota Wind Farm Developer Not Happy With Handout

    Link here to Rapid City Journal.
    The developer for a Belle Fourche-area wind farm said South Dakota’s pro-wind farm bill now on the governor’s desk should have a lower threshold for refunds from state tax on construction costs.

    Mark Eilers said that as it stands now, House Bill 1228 will hurt smaller projects such as the one northwest of Belle Fourche.

    The Rapid City native said his concern is for the $50 million capital costs threshold before the refunds would kick in.

    “Our Belle Fourche project is targeted at 20 megawatts and will fall under the $50 million threshold,” Eilers said.
    Advice: build a bigger wind farm.

    Better advice: from South "Daschle" Dakota? Invest in ethanol. 

    What a racket. I don't know of one redeeming aspect of whooping bird and golden eagle killing wind turbines. They are an eyesore; they are a nuisance for utilities; and, they increase the cost of one's utility bills. The Netherlands, Spain, and Germany have pulled the plug on wind and/or solar renewable projects. They too have seen the light. Canada has withdrawn from the Kyoto Protocol.

    Angerer Back in the News -- Oil For America --

    This time natural gas processing plants

    Link here to the Dickinson Press.
    A major oil player needs to “get his act together” before he can build a natural gas processing facility near Patterson Lake, said Jay Elkin, Stark County Zoning Board commissioner.

    It has been more than a year since Bob Angerer dug up six oil sites near Taylor, Elkin said Saturday, and the developer has yet to close reserve pits that threaten surrounding farmland, livestock and heavily-used water sources.
    "A major oil player"?  I don't think Mr Angerer / Oil for America has any successful Lodgepole reef wells in North Dakota, but I could be wrong. I've long lost interest in Oil for America. I was surprised to see that he is still making the rounds. Quite a promoter it seems.

    Not to be confused with Ken Anger. Although both may have used the same formula: "dream logic."

    Kenneth Anger Interview and Clips

    24-Hour Wendy's and Chester's Chicken Coming to Williston -- Love's Truck Stop North Of Williston

    Williston Herald on-line edition.

    Where, oh where, do they find all these workers to staff these new restaurants?

    Originally, Love's planned to have a Subway restaurant, but there are already two Subway restaurants in Williston. This will be the first Wendy's restaurant in Williston.

    Chester's Chicken is headquartered in Birmingham, AL. According to MapMuse there are 65 Chester's Chicken locations around the continental United States. I do not see one in North Dakota. The nearest one appears to be in/near Minneapolis, MN.