Monday, April 2, 2012

Random Video of Electric Needs in the Oil Basin

Basin Electric Power Cooperative CEO visits the Bakken oil patch; uploaded February 15, 2012:

EPA Postpones New Air Standards for Fracking Natural Gas wells

Link to Rigzone here.

The delay is for two weeks.
The Environmental Protection Agency postponed its first rules aimed at reducing air pollution from oil and natural-gas wells drilled by hydraulic fracturing, following a last-minute push by energy companies to weigh in on the new standards.

The EPA said in a statement Monday it is postponing the rules by two weeks to April 17. The EPA said it needs more time to digest more than 150,000 comments submitted on the rule.

Earthjustice attorney Robin Cooley told reporters Monday that environmental groups are "disappointed that EPA hasn't gotten its act together," but said it is important for the agency to develop tighter standards.

Earthjustice sued the EPA to compel the agency to develop the rules, resulting in court-ordered deadlines for the EPA to do so.
As someone noted: this isn't even about Clean Water Act -- this is clean air. Will the madness ever stop?

Incredible "Talking Paper" on North American Energy -- Citi Sponsored -- Energy 2020


April 3, 2012: a rebuttal to the CITI paper.
Gasoline prices remain high, and Reuters recently noted that there are enough countries with civil unrest, technical problems and bad weather that there are around a million barrels a day of possible supply that are not getting to the market. Yet with Saudi Arabia continuing to reassure that it is willing to pump more oil, if needed, there appears to be, superficially, little cause for supply concerns this year. By the same token, in the longer term, concerns over supply also seem to be increasingly discounted. For example Citigroup has just released a new report on Energy 2020:North America as the new Middle East (same link as in the original post). The report suggests that there is really no concern with future supplies of oil and gas.

I would argue that the numbers for Saudi Arabia and Russia are difficult to realistically justify. For the Kingdom, which is reported to be producing 9.9 mbd, to increase production by another 2 mbd is optimistic, given the ageing of their primary fields and the decline in remaining volumes that I will discuss in future posts in the current series on that country. The projection of an increase in Russian production is a similar concern. With the decline in production from Western Siberia there is not enough new production coming from Timan-Pechora and Eastern Siberia to sustain existing levels let alone see an increase in production – a point that has been made by Russian officials in the past. However the real concern lies with the relatively unrealistic image that is being projected for US production over the next eight years.
The article continues; go to the link.
Original Post

This is, without question, the best overview of the status of the energy picture in North America. A huge thank you to "anon 1" for sending this link. I would have missed it.

It's a long, long PDF. I haven't read it all yet but I've scrolled through it and it will be great weekend reading.

Titled "Energy 2020," it's sponsored by CITI.

Abraxas Update

Link here to Abraxas update.

In the Bakken:
The refurbishment of the Company owned drilling rig has been completed and is currently rigging up in McKenzie County, North Dakota where it is scheduled to spud its first well, the Ravin 26-35 3H, a middle Bakken horizontal well, later this week. Abraxas owns an approximate 59 percent working interest in this well, as well as in the Ravin 26-35 2H, which will be drilled concurrently from the same multi-well pad site.
But this is the best line of the day:
"After many unforeseen delays, many of which were beyond our control, the drilling rig is in North Dakota and will be turning to the right very soon. ..... The Hedgehog well is probably one of the best in the Crossbow area, and the Cobra well is quite impressive, ....We look forward to getting all of the Pekisko wells on-line and stimulated .... With these new wells now or soon to be on-line, our 2011 exit rate production guidance will be exceeded – just a little late," commented Bob Watson, Abraxas' President and CEO.
His candor is refreshing.

Rigzone: Saudi Hypocrisy, Our Gullibility

It looks like I'm not alone with regard to my thoughts regarding Saudi Arabia. Link here to Rigzone.
One is compelled to pull out that old chestnut, "There he goes again." The face of Saudi oil, and de facto senior voice of the OPEC cartel, Saudi Oil Minister Ali Naimi entertained us to one of his seminal dissertations, expounding on Saudi Arabia's concerns for the well being of all mankind.

Stating the case clearly, that Saudi Arabia "... remains the world's largest producer and the country with the largest proven reserves, so it has a responsibility to do what it can to mitigate prices." No argument here.

Yet that bit of wisdom is prefaced by the oldest of canards, "Needless to say Saudi Arabia does not control the price: it sells its crude according to international prices." A truly bizarre declaration coming from the leading protagonist of the cartel, OPEC, whose primary function is to limit the supply of oil to world markets to control, and within the limits of the world's tolerance, to maximize the price of crude oil in the market place. Clearly their efforts have been so successful that the limits of tolerance have now been reached and letting off a little steam has become part of the ritual.
And that's just the beginning. Go to the link. Great op-ed piece. 

Legacy Oil & Gas Update Press Release: Spearfish Outperforming

Link here.

Data points (some numbers rounded):
  • 1Q12: drilled 35 net wells, all targeting light oil; 100% success rate; included 10 net horizontal wells ain its Spearfish play at Pierson, Manitoba,  and Bottineau County, North Dakota
  • In Bottineau: 5 wells producing; 90-day average -- 100 bbls/day (3,000 bopm)
  • "The Company estimates that IP capability of these Bottineau County wells would be in excess of the constrained rates reported"
  • Stratigraphic wells: confirming net pay of 9 meters, OOIP of > 10 million bbls/section
  • 230 net locations on the north portion only of its lands in Bottineau County; approximately 97% unbooked
  • The total Spearfish play: inventory of 440 net locations; 8 wells / section; but location could could increase by 50 percent through downspacing
  • evaluating the waterflood potential; anticipates recovery factors of up to 14 percent

Nine (9) New Permits -- 13 of 17 Wells Not Completed -- The Bakken, North Dakota, USA

Daily activity report, April 2, 2012 --

Operators: BEXP (3), Hess (2), XTO, Eagle Operating, SM Energy, Whiting

Fields: Greenbush (Renville), Sixmile (Williams), Robinson Lake (Mountrail), Big Stick (Billings), Alger (Mountrail), Grinnell (Williams)

Seventeen (17) wells released from "tight hole" status; four (4) wells were completed/fracked, including:
  • SM Energy, 1,164, SM Energy, Leiseth 1-24H, McKenzie

German Solar Panel Company Files for Bankruptcy -- Once The Largest Solar Panel Maker In The World

As regular readers know, I track the number of active drilling rigs in North Dakota; we're currently up to 208, a new record.

It looks like we need to start tracking something else: the solar companies that are going bankrupt.

Earlier today I posted a story about an American solar company filing for bankruptcy, another one given financial backing by the US government. It appears the contagion is spreading: now Germany.
German solar panel maker Q-Cells SE, once the largest solar panel maker in the world, has said it will file for insolvency tomorrow following a failed attempt to restructure its debt. A court ruling last week prevented the company from completing a debt for equity swap.
I count about four US solar companies have have declared bankruptcy in the last year, and now a German company. We're up to five (5).

Bloomberg reports on Q-Cells here

208: New Record

Dynamic link.

Earlier today, a contributor "concerned" about the Bakken slowing down. Just saying.

Selected operators:
  • BEXP: 20
  • CHK: 1
  • CLR: 19 (has 22 in North Dakota)
  • DNR: 5
  • ERF: 4
  • EOG: 6
  • Fidelity: 4 (finally)
  • Hess: 15
  • Hunt: 3
  • KOG: 6
  • Liberty Resources: 2
  • MRO: 8
  • Oasis: 9
  • OXY USA: 14
  • Petro-Hunt: 12
  • Slawson: 5
  • SM Energy: 4
  • Whiting: 14 
  • WPX: 5
  • XTO: 6
  • Zenergy: 4

The Entire Story Not Told -- Whooping Cranes and Windmills

Link to Dickinson Press here.
Endangered whooping cranes will be passing through North Dakota during their spring migration over the next few weeks.

Whooping cranes are federally protected, and Game and Fish says people who spot them should not disturb them.  
Not quite the whole story: wind turbines have a license to kill whooping cranes. Sad.

For Investors Only: Investopedia Has a Nice Article on Oasis

Link here to Investopedia.

I don't care for this site: way too much space devoted to advertising with the "news" stories and op-ed pieces in small font (which, of course, with Apple, one can zoom in with a simple key stroke).

However, having said that, the site provides a lot more depth than Motley Fool, and some great educational links.

With regard to Oasis:
There's a lot to like about Bakken. Drilling results have been good, the asset base is excellent, and the company is led by experienced management. As time goes on, I see no particular reason that investors should not expect significant production increases and ongoing reserve growth.

When it comes to valuation, things get hazy. While EV/EBITDA analysis works pretty well for established producers, it tends to undervalue growth plays. Likewise, while NAV-based analysis looks more rigorous, there is a tremendous amount of guesswork in the numbers for a company like Oasis with so much undeveloped acreage.

Another Incredible Graph Over At Carpe Diem: 2011 -- Most Energy Efficient Economy In History

Link here to CarpeDiem. com.
Energy consumption per dollar of output in 2011 was 2% less than 2010 (7.47 thousands BTUs), and half of the energy required in 1979 (14.79 thousand BTUs)
The graph is BTUs per real dollar of GDP.

Again, to repeat:  The energy used in 2011 was half of the energy required in 1979 (14.79 thousand BTUs) per dollar GDP.

On top of this natural gas has never been cheaper (at least in my investing lifetime).

Most interesting aspect of the graph? Energy use vs productivity not even noticeable during the remarkable recessions. The graphic pretty much leveled off between 1985 and 1995, experiencing significantly declines prior to 1985 and after 1995. The largest drop was from 1975 to 1985.

Bakken Milestone: Fidelity With Four (4) Rigs In North Dakota

Two in Mountrail County; two in Stark County.

SWSW 13-155N-92W MTL permit #22122 3/26/2012

SWSW 14-153N-92W MTL permit #22429 3/29/2012

SWSW 22-140N-98W STK permit #21984 3/28/2012

NWNW 25-140N-98W STK permit #22224 3/28/2012

GM Extends Volt's Assembly Line Closure; Sales Surge


July 18, 2012: I could have put the link on any number of Volt posts, but chose this one just as a reminder of Volt shutting down its assembly line to allow supply to catch up with demand.

Original Post
April Fool's Day extended also?

The lede:
General Motors Co. will suspend production of the Chevrolet Volt for an extra week this summer as it tries to control the electric car's inventory.

But the company says sales picked up in March to a record of more than 2,000, and it may cancel the extra week if sales stay strong.
I can't make this stuff up. 

Oil Up $2.10/Bbl --


And Brent up 2%.

I believe on Friday a chart reader/technician noted that the price of oil, breaking through 102.99 had broken a "floor" and predicted further slide today. So, I suppose this is a "dead cat bounce." 

Remember, if they can reverse the Seaway as scheduled, we should see some positive news for Bakken prices. In fact, now that I ramble, one wonders if this provides an opportunity for investors.

Another Solar Energy Company Seeks Bankruptcy Protection

Link here to the Associated Press.

Another California solar energy company is seeking bankruptcy protection.
Solar Trust of America’s Chapter 11 filing on Monday listed assets between $1 million and $10 million, and liabilities between $10 million and $50 million.
The filing comes amid the ongoing controversy surrounding Solyndra, a solar firm that received a half-billion dollar federal loan and was touted by the Obama administration before declaring bankruptcy last year.
President Obama: "Solyndra is the wave of the future."

Back to 207 -- Ties Record for Active Rigs in North Dakota

Dynamic link here.

WMB In Play -- WPX Energy In Play

Williams Cos prices public offering of 26 mln shares of its common stock at $30.59/share.  Businessweek link here.

WPX Energy signs agreement to sell Texas, Oklahoma properties for $306 mln to KKR Natural Resources : Co announced that it has signed an agreement to divest its holdings in Texas' Barnett Shale and the Arkoma Basin in Oklahoma for $306 million, subject to closing adjustments. The properties represent less than 5 percent of the company's year-end 2011 proved domestic reserves. The Barnett shale properties include current net production of approximately 67 million cubic feet per day. The parties expect to close the transaction during the second quarter, subject to standard closing conditions. New York Times link here

As The World Turns

Tonight's episode of the new cable television adult soap, Keystone XL: "We've Got a Secret."
The developer of the Keystone XL pipeline has identified a new corridor through Nebraska that avoids the environmentally sensitive Sandhills, but a spokesman says the company won't yet release its proposal.
In tonight's episode Jack Nicholson reprises his role as president of the United States (see Mars Attack).

Spoiler alert!
TransCanada spokesman Shawn Howard told The Associated Press the Canadian pipeline company has identified a rough corridor, but not a specific route, through which the pipeline could run.

Howard said the proposal will be revealed during public hearings set by the Nebraska Department of Environmental Quality, if a state review is allowed to proceed.
Stay tuned.  The critically-acclaimed soap is being shown on an ad hoc basis (schedule subject to change) on Al Gore's Current TV cable network. Keith Olberman Eliot Spitzer is this evening's guest host introducing the episode.

The Pause That Refreshes? -- Seeking Alpha -- The Bakken, North Dakota, USA

This writer says that once the Bakken sees increased takeaway and once fracking costs come down, the Bakken is headed for another spurt in visible activity.
Once the infrastructure problem is reined in and crude and service prices stabilize, get ready for full scale Bakken development: rig counts north of 250, and more major oil companies moving into the State.
"250" has been bandied about for some time. The number of rigs is not a particularly useful metric to judge productivity. Bigger rigs and the increasing number of mega-multi-wells pads are changing the landscape. The best metric: month-over-month and year-over-year oil production. 

The writer's use of "capitalization" in interesting.

Oh, by the way, speaking of rigs: 206 active drilling rigs today -- one short of the all-time high of 207.