Thursday, May 10, 2012

Random Profile of Dore, North Dakota -- CBS News

Link here.  A "thank you" to a reader for sending me the story.
Dore's economic and population turnaround began in 2008, when Houston-based Musket Corp. purchased land at the old town site for its oil loading facility, which uses railroad tracks that once moved grain and sugar beets to market.

"Logistically, that's where the rail configuration was that we needed," Musket spokeswoman Kyla Turner said.

Crude from North Dakota's rich oil patch comes to the facility by truck and pipeline before leaving by rail. The company has been sending small shipments over the past two years but intends to raise production to 70,000 barrels a day this spring, Turner said.

The operation will employ about 45 workers, nearly equal to Dore's population in its heyday.
I cannot count the number of times I drove "through" (actually, "by") Dore, never even realizing there was a town (or a "ghost town") there. As Tina Fey says, "there was no there there." Not even a sign.

But it truly is amazing now. On the east side of the highway, nothing has changed: broad, flat fields of sugar beets. On the west side: everything has changed. Countless number of brand new black oil tank cars.

The video is not of Dore, North Dakota, but is said to have been taken in North Dakota:

A unit train

Investing In This Environment: Absolutely Nothing To Do With The Bakken


May 14, 2012: JP Morgan is "one of the best-managed banks." -- President Obama. 

May 14, 2012: It appears that before this is all over, Jamie Dimon may be in more trouble than it appears at the moment

May 11, 2012: As the dust starts to settle, or the clouds start to clear, pick your metaphor, the JP Morgan story becomes clearer. This from the WSJ today, print edition, front page:
The bank, betting on a continued economic recovery with a complex web of trades tied to the values of corporate bonds, was hit hard when prices moved against it starting last month, causing losses in many of its derivatives positions. The losses occurred whle JP Morgan tried to scale back that trade. 
The big story, for most of us, is not that JP Morgan bet wrong and lost $2 billion, and more to come. (In fact, as the dust settles, the $2 billion seems more than manageable: "... we still earned approximately $4 billion after-tax this quarter give or take," according to Mr Dimon. The bank earned $5.38 billion in the first quarter. -- WSJ.

The big story for most of us is how JP Morgan bet wrong. The company bet "on a continued economic recovery." Earlier this week the word "recession" started appearing more often in business circles.  

Original Post

All day today on CBNC, one theme that was being repeated: individual investors should not do their own investing. The professionals feel the individual, retail investor is not smart enough to do his / her own investing. One talking head said retail investors investing on their own is like removing one's own appendix. One wouldn't do that; likewise, one should not do one's own investing. By 4:30 p.m. it was pretty much a dead story. Or so I thought.

At 4:30, Jamie Dimon says there would be a conference call at 5:00 p.m. regarding JPM quarterly earnings.

It turns out JPM took a "whale" of a loss on derivatives trading. We are given the numerator ($2 billion, and possibly an additional $1 billion later) but no denominator. But apparently it's a huge, huge, huge hit.

See Wall Street Journal. In that short article a trader's name is mentioned: Bruno Michel Iksil. Now, google that name.

A blog.

Who knows where this will lead? But I keep thinking of the CNBC theme all day today: that the individual, retail investor is not smart enough to do his/her own investing, and that "we" need to trust our money with the professionals.

Just saying.


From another source:
There had been media reports that a single JPMorgan trader in Europe, known in the bond market as "the London whale," was making massive bets that were influencing prices in the $10-trillion market.
And some folks in Congress are concerned about speculators influencing the price of oil.

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

Daily activity report, May 10, 2012 --

Operators: BEXP (2), Hess (2), OXY (2), EOG, CLR, Petro-Hunt
Fields: Parshall (Mountrail), Stony Creek (Williams), Little Knife (Dunn), Fayette (Dunn), Murphy Creek (Dunn), Stoneview (Burke), McGregory Buttes (Dunn), and Alger (Mountrail)

This permit caught my eye:
  • 22922, loc, BEXP, Syverson 1-12 2TFH -- Mr Syverson was the high school band director for many, many years, and a Williston icon
Three producing wells were reported as completed, including:
  • 21237, 62 (no typo), Hunt, Palermo 2-6-34H, Mountrail
Six wells were released from "tight hole" status:
  • 18071, DRL, Zavanna, Cheetah 1-10H,
  • 20882, 506, Whiting, Arndt 12-24TFH,
  • 21241, 1,624, BEXP, Kari 10-3 1H,
  • 21495, 577, XTO, Clyde Hauge 11X-13,
  • 21588, DRL, Hess, EN-Stenbak 157-94-1324H-1,
  • 21614, DRL, BTA, 9215 JV-P Snow-B-1R, a Madison well

North Dakota Farmers: Record Winter Wheat Harvest

Link here. (some numbers rounded)

Two data points:
  • total number of acres to be harvested
  • bushels of wheat per acre
First: acreage
  • previous record: 550,000 acres harvested in 1984, 2008
  • this year: 720,000 acres predicted
  • that's a whopping 30 percent increase
  • that really is huge 
  • last September, ND farmers planted 750,000 acres, tied record set in 1985
Second: bushels per acre
  • last year's (2010) winter wheat was a record at: 55 bushels/acre
  • this year's expectation: 48 bushels/acre
  • previous record, 2009: 26 million bushels
  • this year's estimate: 2012: 35 million bushels
  • wow, that is huge; we're not talking a tad more -- (35-26)/26 --> 35% increase
  • wow

I remember folks talking about "oil millionaire" farmers quitting farming to enjoy the good life.

Others were concerned that all the oil activity, all the oil pads, the bad roads, the grocery shortage would all adversely affect North Dakota farming. I could be wrong but the bulk of winter wheat farming is done in oil country, the western side of the state.

The real story is this: with oil money, ND farmers can now afford to farm. Good for them!

The wheat story, April, 2011

Thoughts From Readers on Water Waste Management In The Oil Patch

Some time ago I mentioned to a friend that we should start seeing more waste management activity in the oil patch as the EPA and state agencies get more active, and the oil patch matures.

Coincidentally, the following comment was sent in earlier today:
Currently, I am wondering if anyone has any idea about what the EPA is going to require in terms of water cleanup in field operations, whether the well is fracked or not.

My associates and I are working a new oil/water separation technology that would speed up well flows, and separate out the oil, water, gas, minerals.

It's a new in-line, electronic process. Early tests show the water as potable, good for irrigation. We will add membranes if needed to get it even cleaner. But the concern here is are we all trying to hit a moving target? I would appreciate any feedback.


Steve Joslyn
Joslyn Consulting 
You can send information, thoughts, etc., directly to Steve if you don't want to share them publicly.

Modular Housing From South Dakota Coming To Dickinson Area

Link here.
Housing and workers are in high demand in oil country. Developer Butch Kern tells KELO-TV that his family's company is ordering homes from South Dakota instead of building them on-site. He says his company has sold more than a dozen homes in South Heart and Dickinson since last June and is waiting on at least a dozen more.

It's not just houses that Madison, S.D.-based Custom Touch Homes is sending north. Dickinson State University has ordered a four-story student housing complex because the school can't find off-campus housing for students. The building is being trucked up from Madison in sections.

GMXR Update -- SeekingAlpha

GMXR on link here.
On May 7, 2012, GMXR reported results from its fifth operated well in McKenzie County. The Akovenko 24-34-1H (66% WI), achieved a peak rate of 1,483 boepd. GMXR is still awaiting the completion of the fracture stimulation job on its sixth operated well in McKenzie County, North Dakota. As we mentioned in our previous write-up, "GMX Resources "Walking-the-Walk" - Company Delivers Positive Oil Well Results out of the Bakken/Three Forks Formations," GMXR's fourth operated well, the Lange 11-30-1H (89% WI), achieved a company record peak production rate of 2,549 boepd.

All together, these four operated wells place GMXR's average peak flow rate for its McKenzie County wells at 1,855 boepd. On the non-operated side, the company achieved strong completions on its first two non-operated Bakken wells as well with the Marsh 21-16TFH (Whiting-operated; 2% WI) and Taboo 1-25-36H (Slawson-operated; 25% WI), which flowed back at average IP rates of 2,694 boepd gross and 1,436 boepd gross, respectively.
GMXR-operated wells:
  • 21002, GMXR, Wock 21-2-1H, New Hradec,
  • 21213, GMXR, Frank 31-4-1H , New Hradec,
  • 21214, GMXR, Frank 31-4-2H,  New Hradec,
  • 21540, GMXR, Evoniuk 21-2-1H,  Tree Top,
  • 21545, GMXR, Akovenko F24-34-2H,  Ranch Creek,
  • 21545, GMXR, Akovenko 24-34-1H; Beicegel Creek; in the southeast corner of McKenzie County, not in the bull's eye of the Bakken; in a fairly quiet area of the Bakken
  • 21582, GMXR, Lange 11-30-1H; Bennett Creek; also in the southeast corner of McKenzie
  • 21589, DRL, GMXR, Johnston 31-4-1H, wildcat
  • 21892, loc, GMXR, Frank 31-3-2H, New Hradec,
  • 21893, loc, GMXR, Frank 31-3-1H, New Hradec,
  • 21947, conf, GMXR, Fairfield State 21-16-1H,  St Demetrius,
  • 22048, conf, Franks Creek Federal 24-8-1H, wildcat
    22065, confLower Thirty Federal 21-4-1H, wildcat
  • 22207, conf, GMXR, Basaraba 34-35-1H, wildcat,

Additional information per request (see comment):
  • 21540, 521, GMXR, Evoniuk 21-2-1H, Tree Top field, Three Forks, s10/11; t1/12; cum 6,185 bbls as of 3/12; 30-stage frack; 2.8 million lbs proppant; sand; the Tree Top field is located in northern Billings County, just south of McKenzie County; there doesn't appear to be much Bakken activity there, but there are a slew of active and abandoned Madison vertical wells in this area. A number of the Madison wells were very, very good wells.
From the geologist's drilling report:
Gas recorded at the upper Three Forks was 1,337 units (high/good). While drilling it was decided to change from a Three Forks target to a middle Bakken target; gas in the middle Bakken averaged 1400 - 1700 units with shows over 2,500 units (very good). But the middle Bakken was very, very thin in this area, about 10 feet thick. It was difficult to stay in the middle Bakken; it had thinned to 3 feet. They went back into and stayed in the Three Forks with gases ranging from 1100 - 1500 with shows over 2,600 units. Difficult to stay in the seam. Near the end of drilling, gases ranged from 1700 - 1900 units with shows well over 3,000 units.
The well was successfully drilled to a depth of 20,600 feet ....

Future wells in this area should target the middle portion of the Middle Bakken or the top of the Three Forks six (6) feet below the Lower Bakken Shale, as the amount of gas and oil seem to increase in these two intervals. Care should also be taken as to adjust for rapid changes in dips of the formation and to possible regional thinning of different zone within the Middle Bakken and Three Forks. s/wellsite geologist

Production data:
Monthly Production Data

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

WLL Snapshot Updated; Comment on EOG Update -- The Bakken, North Dakota, USA

The amount of material coming out of the Bakken, especially during earnings season, is simply overwhelming.

Having said that, there are three things newbies may want to focus on, or become familiar with:
a) Whiting's strategic focus in the Williston Basin
b) EOG's initiatives in the Williston Basin
c) the midstream infrastructure boom-within-a-boom
Starting with the last one first: the midstream infrastructure boom refers to the pipeline infrastructure, particularly for natural gas liquids, that has become a mini-boom in the nation's current energy boom. I won't go over it again but there have been several articles posted in the past week about this mini-boom, most coming from RBN Energy but others have also contributed. The search browser within this application will find those articles.

The EOG conference call transcript was absolutely remarkable. Three things that stick with me after reading the transcript: a) downspacing; infill wells; increasing the density of wells per spacing unit; downspacing to 160 acres in the Bakken; maybe 40 acres in the Eagle Ford; b) why the rush to drill in the Bakken once leases are held by production -- a very interesting question that was almost a throwaway; a comment easily missed when reading the transcript; and, c) waterflooding; EOG has two pilot waterflooding projects; there is evidence that infill/offset wells communicate. The editorial comments by EOG regarding the Bakken were simply wonderful to read. These EOG takeaways have relevance for all operators in the Bakken. Investors may be concerned about two comments from EOG: a) why the rush to drill in the Bakken?; and, b) EOG production in the Bakken may be flat in 2012. But the things EOG is doing in the Bakken are absolutely breathtaking in terms of what it may mean for the Bakken if their initiatives are successful.

The EOG initiatives have relevance for all operators in the Bakken. On the other hand, the takeaways from the Whiting conference call seem a bit more specific for WLL. I have updated my snapshot of Whiting. I won't re-write it here, but Whiting certainly has to be exciting for investors.

Although I didn't mention it in the three bullets at the beginning, I would feel a bit remiss if I didn't mention Continental Resources (I would also mention BEXP if they were still independent). Like Whiting's conference call, CLR's conference call is more specific to CLR than to the Bakken in general.

Maybe another way to say this:
  • Whiting is all about execution; little mid-course correction; simply drilling their leases at full speed
  • CLR is drilling their leases but tweaking their strategy a bit
  • EOG is testing hypotheses that could significantly affect all operators in the Bakken
Note disclaimer: this is not an investment site. This is not a buy, hold, sell recommendation for any company mentioned. I have no plans to trade buy or sell shares in any company mentioned in the near future.

Link to Modular / Manufactured Housing Site

Over at this post, a reader provided a comment regarding manufactured and modular homes, hotels, and other buildings.

The reader wrote:
Our Company Jag Construction and Development sell multi-family, hotel and motel and single-family manufactured and modular buildings.

We are very competitive in our pricing! Please visit our web site at and you can pass along my email address at
The webstie is very interesting.

When you go to the site, check out the drawings of the modular homes. This is exactly what "they" (not this company; other companies) are doing in Williston. Modular homes are being built off-site -- in another state (Colorado? Nebraska?) and then being trucked into Williston and set on a prepared site. The garages are built on site, attached to the modular homes. I don't think it's easy for the average person to tell the difference between a modular home or a "conventional" home once the landscaping is in and the house is a few months old.

Shale-Related Midstream Infrastructure -- Pipeline & Gas Journal, May, 2012

Link here to original article.

Link to earlier post this week.

Data points
  • midstream infrastructure lagging
  • unprecedented midstream infrastructure building boom
  • $511 billion cumulative boost to US economy over next two decades (2010 - 2030)
  • advantageous for some operators to own infrastructure through master limited partnerships
  • Chesapeake and Anadarko own MLP midstream infrastructure
  • High Prairie Pipeline, new major pipeline project, Saddle Butte (named for the original company operating in the state); southeasterly from the Bakken to Clearbrook, MN; owned by NYC-based private equity and venture capital firm, Yorktown Energy Partners
  • sense of urgency in ND for NGL pipelines; four new plants under development
  • DCP Midstream Partners LP: one of the nation's largest gas processor throughout all of the major basins, north-to-south, in the middle of the lower 48; the only two in which it does not have a presence now are the Bakken and the Marcellus; company intends to develop a presence in those two as well
  • DCP CAPEX now $4 billion; planning an additional $2 billion
  • some estimates, industry-wide: $7 1- billion/year for the next several years
  • Crestwood Midstream Partners LP: founded in 2010 when they purchased three existing gathering systems in the Barnett Shale from Quicksilver Resources; in February, entered the Marcellus by buying Antero Resources; 
  • major obstacle to growth: US Army Corps of Engineers

Filloon: Update on Flotek -- A Bakken Play

Link here.

Another Pipeline in the Bakken -- NGL

Earlier this week I posted a link to a nice piece on the need for more midstream pipelines in the oil patch. In addition, RBN has had numerous stories on natural gas liquids, including this 3-part series on the need for more NGL pipelines.

And today, coincidentally, there's a story on a new natural as pipeline.

Hess' proposed Tioga Natural Gas Liquids Pipeline:
  • $4 million
  • 3.6 miles
  • originate at Hess' Tioga Gas Plant, a mile east of Tioga
  • terminate about a mile west of Tioga; from there by rail
  • will replace the need for BNSF rail line for this segment; eliminate BNSF storage track in Tioga
  • initially 31,500 bbls/day; capacity 63,000 bbls/day

Reminder to Read the SeekingAlpha Transcript for EOG

For folks who haven't read it yet, a reminder -- don't forget to read the conference call transcript, EOG's 1Q12 earnings.

This rather lengthy transcript may be the article that brings folks quickly up to date on what is happening in the Bakken, where it is headed.  The best takeaway from the transcript: EOG is much more excited about the Bakken than they were a year ago. It should be noted that EOG says its Bakken production could be flat for 2012 before rising in 2013. That's a huge data point: EOG is the number one producer in the Bakken.

The other interesting data point is this, something I've thought about for quite some time: what's the rush to drill (once leases are held by production)? Unless one has been under the Geico rock since 2007, it's been obvious that wells in the Bakken have gotten better -- and significantly better -- over time. Technology keeps improving, so what's the rush to drill? Of course, some companies need to drill at max rates to keep cash flow coming to execute their CAPEX programs; bigger companies may have some latitude. Besides improving technology, costs for oil services support should come down, and infrastructure should improve. Did we just read the other day (RBN Energy) that 70% of all North Dakota oil is still trucked at some point before getting to a pipeline or a rail terminal?

The company spokesmen said several times that fracking an infill well improves the production from an older offset well, and that EOG will be downspacing to 160 acres in the better Bakken.

Ethane Surplus Thru 2018, Part I; Frac Lengths and Number of Stages -- RBN Energy

Link her for the ethane surplus story, Part II.

Link here for the ethane surplus story, Part I

Link here for the frack story.

Highlights of the EOG 1Q11 Conference Call Transcript -- SeekingAlpha

Before reading the rest of this post highlighting EOG's 1Q12 earnings conference call, you might want to re-read the earnings report itself. It was a very good report from what I could tell.

Now the conference call --

EOG's strong liquids revenue and volume growth comes from four large horizontal domestic plays: Eagle Ford, Bakken, Permian, Barnett Combo

Some interesting quotes:
  • "As you know by now, we believe that total company production per debt adjusted share is a useless metric, given the current 42:1 oil to gas price ratio."
  • "The Eagle Ford continues to be our 800-pound gorilla in terms of crude oil growth, and we still believe our position is the largest domestic net oil discovery in 40 years ..."
  • "So why rush to drill wells that may not be technically optimum?"
  • "In summary, we're much more excited than we were a year ago about our remaining Bakken and Three Forks potential."
  • "The Bakken/Three Forks is our upside surprise to the quarter, and we're considerably more optimistic about the next 10 years of this play than we were a year ago." -- fifth of six summary comments
  • "Some of our technical people that are optimistic about the waterflood have a theory that the reason we've doubled the production in the older wells is that we've in fact done a mini waterflood with the frac. So that's one theory anyway." -- this is one of the most interesting things to come out of this conference call
Some highlights:
  • total crude and condensate production up almost 50% yoy
  • North American natural gas volumes declined almost 10% (good)
  • unlike some other Bakken companies, EOG is not changing its full year CAPEX 
  • IPs are not based on "wide open chokes"; IPs based on normal production equipment with a normal choke
Eagle Ford
  • EOG increased Eagle Ford's net recoverable reserve estimate from 900 million to 1.6 billion boes
  • higher estimates --> testing tighter spacing, down to 40 acres (rather than current 65 to 90 acres)
  • wells are better: better fracking and better placement of laterals
  • will reduce number of rigs from 26 to 23 (Eagle Ford)
  • identified at least 3,200 additional locations to drill; 11-year inventory 
  • business-as-usual tone in conference calls belies how big the Bakken is for EOG
  • EOG: #1 Bakken producer 
  • core Bakken: downspacing to 320-acre; 640-acre spacing suggests 320 will work
  • Bakken lite: downspacing from 320-acre to 160-acre
  • both the middle Bakken and the Three Forks productive in the Antelope Extension
  • high quality wells in far eastern Montana and western North Dakota; identified over 200 drilling locations
  • waterflooding trial; two wells
Discussion regarding crude-by-rail posted elsewhere

Quarries own fracking sand (Wisconsin); saves $500K/well x 600 wells --> $300 million/year

Supply and demand; pricing
  • global demand is tight
  • fundamentals dictate an average $105 WTI price in 2012
  • the downside risk is a second global recession
Go to the link for EOG's six summary points

From Q&A:
  • recovery from the Bakken is about 8%; goal -- 12%
  • if I recall correctly, when the boom began, folks talked about a 2 - 4% recovery rate in the Bakken
  • long discussion on 640-acre vs 320-acre spacing in the Bakken -- go to the link
  • Bakken production in 2012 may be flat but in 2013 may be on an incline
  • a most interesting point: new fracs affecting (positively) geographically close off-set wells