The Million Dollar Way (The Bakken Oil Blog): 05/25/12

Friday, May 25, 2012

Week 21: May 20 -- May 26, 2012

How important was the Bakken? --> energy independence for the US

API: North Dakota is an energy juggernaut; federal leases down

EURs in the Bakken -- Filloon

Filloon Updates BEXP wells in 1Q12 and talks about IPs

Key Energy Services to build $5 million complex in Williston

Mainstream media: yes, it could be 900 billion bbls OOIP

Whiting's Pronghorn Sand could be best payzone in the Williston Basin

Chesapeake to see southern DJ assets

Housing growth in Williston, Minot, photos, great article

Target Logistics to add more units in the Bakken; mostly in Williams County

Billings County (southwest North Dakota) to get is first crew camp

Growth in Divide County -- northwestern North Dakota -- explosive

Permitorium in North Dakota -- just a matter of time

New record: 215 active rigs in North Dakota

Update, case 16110: ten wells in one spacing unit

Commentary: why each additional rig speaks volumes for oil activity in the Bakken

Commentary: Yes! Let's duplicate fracking regulations now

Commentary: coal is the new "alternative" energy

Commentary: the price of oil, Canada, and another perfect storm

Photos of TransCanada XL Pipeline Stacked at Gascoyne, ND; hints of another crude-by-rail terminal

North Dakota oil production could match that of Texas -- in the short term; unlikely, but possible

Staggering statistics from the Bismarck Bakken Conference

Magnum Hunter to buy Baytex' Nonoperated assets in North Dakota

Billions of dollars in shovel-ready jobs -- if only.....

It's Kinder Morgan's Trans Mountain Pipeline -- not the TransCanada Keystone XL -- the markets aren't waiting for the US to act

MDU subsidiary buys half of Whitings gathering system in southwest North Dakota

Takeaway capacity in the Bakken: breakdown by rail, pipeline, truck

Crude-by-rail: Crescent Point Energy

Oil flowing from Cushing to the gulf via the Seaway

Full-cost accounting vs successful-efforts accounting in the oil industry

Data points from Bismarck oil conference

Link to site for those seeking jobs in the Bakken

Permitorium in the Bakken: if the EPA gets its way

Japanese line up for American shale gas

OPEC 1Q12 spare capacity lowest since 2008

Some Data Points From CLR, WLL, MRO -- Last Day of Bismarck Conference -- The Bakken, North Dakota, USA

Some random data points from three Bakken oil execs on the last day of the May 22 - 24, 2012, Bismarck Bakken Conference. Link to Bismarck Tribune. Some numbers rounded.

conference broke its own record the last day of the conference: 4,300
population of North Dakota: 1 million by 2020 - 2030 (date found at different story); current population: 684,000
oil production: 1 million bopd by 2015; currently 575,000 bopd
CLR estimates: 27 to 45 billion bbls of recoverable oil from the Bakken; (back of envelope: 5% recovery of 500 billion bbls OOIP --> 25 billion bbls of recovered oil; so either higher rates of recovery or greater OOIP -- assuming I did the math right; perhaps both: higher rates of recovery and greater OOIP)
new estimates based on production from two previously untapped "bench zones" in the Bakken
WLL: expects 500 wells in its Pronghorn Prospect between Dickinson and Belfield; 30 wells now
WLL: 7 - 10 rigs in the Pronghorn Prospect for the next couple of years
(back of envelope: 500/3 --> 165 wells/year/10 rigs --> each rig about 16 wells/year; 365/16 --> 22 days to move in, reach total depth, and move out)
(or, again, back of envelope: 500/4 --> 125 wells/year/10 rigs --> 12 wells/years; one well/month/rig)
WLL: best financial returns in its history
WLL: Sanish $7 million wells reach payout in less than a year
WLL: wells elsewhere are taking a bit longer to reach payout
WLL: Pronghorn Prospect is expected to be every bit as good as the Sanish
CLR: expects to see 250 active rigs in ND; currently 200 - 210 (record: 215)

Some interesting quotes:

To find what he calls “Bakken sweet spots,” [WLL/CEO] Volker said, his company relies increasingly on microscopic analysis of core samples to evaluate how porous, saturated and permeable formations are.

North Dakota is a learning laboratory for oil development here and in other states. “North Dakota is helping lead the way,” [MRO executive] Roberts said.

Six (6) New Permits -- Another Nice BEXP Well -- Some Nice EOG Wells -- The Williston Basin, North Dakota, USA

Daily activity report, May 25, 2012 --

Operators: Abraxas (4), Zenergy (2)
Fields: North Fork (McKenzie), Nohly Lake (McKenzie)

Ten (10) wells released from confidential status:

18569, 90, EOG, Sidonia 9-35H, Clear Water; t12/11; cum 15K 3/12;
18648, 197, EOG, Clearwater 4-11H, Clear Water; t12/11; cum 12K 3/12;
19231, 398, EOG, Liberty LR 13-14H, Van Hook, t12/11; cum 68K 3/12;
19700, 228, EOG, Kandiyohi 21-3427H, Clear Water, t1/12; cum 10K 3/12;
20254, 980, EOG, Liberty LR 2--26H, Van Hook, t12/11; cum 69K 3/12;
21107, 231, Samson Resources, Dorado 14-23-162-98H, Blooming Prairie, t4/12; cum 6K 3/12;
21116, 952, QEP, MHA 2-05-06H-149-90, Deep Water Creek Bay, t 4/12; cum ND;
21668, DRL, BR, Uberwachen 22-34, a Birdbear well, primarily a "research well," good gas show in the middle Bakken; some gas show in the Birdbear but not as much; casing problems; workover rig on site; a vertical well;
21804, 2,699, BEXP, Clifford Bakke 26-35 4H, Alger, t2/12; cum 49K 3/12; in less than 2 months --> almost 50K bbls;
21848, 567, CLR, Cincinnati 1-30H, Indian Hill, t2/12; cum 21K 3/12;

Sixteen (16) wells approved for confidential status (EOG, OXY, Whiting, Triangle, Fidelity).

Note: BEXP reported another great IP; see Filloon's comments regarding BEXP's IPs -- I am in complete agreement; I think I have posted my thoughts regarding IP but can't remember for sure.

It looks like it is time to update EOG's Liberty wells.

Out and About Until Later This Evening

Good luck to all.

Filloon Updates BEXP's Bakken Results -- 1Q12

Link here to SeekingAlpha.com.

These results are significant. Brigham has some of the best IP rates in the Williston Basin. These high 24-hour IP rates, are created by Brigham's decreased choking back of production. The choke it is currently using will tend to lose pressure in a shorter period of time. Brigham opens up these wells and obtains more resource in a shorter period of time. Companies that choke back production more, allow the well to produce for a longer period of time before being placed on artificial lift. I am unsure which way is more productive. Some think releasing well pressure too fast will decrease recovery over the life of the well. But when compared to other producers to date, this has not been the case as Brigham still outperforms much of its competition, although an argument can be made for Kodiak in the Koala and Polar prospects.

Fracking and Truck Safety

Link here to a fascinating Rigzone article.

Idle Chatter -- Price of Oil and Canada -- The Perfect Storm

It looks like the oil industry has avoided another bullet...for the time being. Oil is holding at $90, but just barely.

Folks can search the blog for oil and pricing to better understand where I am coming from in this bit of idle chattering; I won't go through all of it again.

But if one wants to connect the dots for a perfect storm, it's not difficult

the Canadian economy and the strength of the loonie is directly related to the Canadian oil industry
Canada's oil industry, for all practical purposes: heavy oil from the oil sands
there is a glut of oil on the market
Keystone XL 1.0 was killed
Canadian pipelines to the west coast are inadequate to make up the slack caused by demise of KXL1
US east coast terminals prefer Bakken oil, light and sweet
more and more talk of global recession (half of EU already in recession); China slowing down
Canadian oil sands oil is most expensive of all oil sources to produce -- by a significant margin

If oil does not hold above $90, the Canadian oil industry is in deep trouble.

If the Canadian oil industry flounders/founders, folks will look at the three points in bold above. Had the global economy been growing and had there been a better demand-supply imbalance in favor of the oil industry, killing of the KXL1 would not have mattered. It would have been a speed bump. But with the other two (a global recession and a glut of oil), killing the KXL1 resulted in the perfect storm for the Canadian oil industry.

I can think of only one thing that could make things worse for the Canadian oil industry: a meteor hitting Alberta. (Actually I can think of one thing worse, but as it is, I already get enough "hate mail.")

I'm not a currency trader, but if...

Disclaimer: this is not an investment site. This is not a recommendation to buy, sell, or hold loonies.

By the way, I wonder if as regards the Bakken, the Canadian oil sands is not the canary in the coal mine?

Crude-By-Rail Story -- Globe and Mail

Updates

Later, 12:00 noon: what did I say about need for more maintenance? A reader just sent in this link. BSNF to hire more maintenance workers; more CAPEX for maintenance. "Rail-ready jobs," Mr President.

Original Post

This is a great story from the Globe and Mail, a story sent in by a reader. Thank you. A great story.

Go to the link for the whole story, but this paragraph caught my eye:

Take Crescent Point. It has built its own facility to load rail cars and, in spring, was shipping 8,000 barrels a day by train. By summer, “we should be up to 15,000 to 16,000 barrels per day,” or a fifth of its oil, said Trent Stangl, Crescent Point’s vice-president of marketing and investor relations. The markets the company is accessing by rail are paying so much more for the oil that Crescent Point expects to pay off the loading facility in under a year.

They will pay for the loading facility in under a year. Repeat: in under a year. Without tax incentives.

Remember:

a) the industry can't build tank cars fast enough
b) the rails were not meant to handle this much traffic; there will be need for more tracks and lot more maintenance

Investors might want to re-read the last two bullets.

Disclaimer: this is not an investment site.

Japanese Buyers Line Up for US Shale Gas -- WSJ

Link here to WSJ article. I've yet to read the entire article, but the headline says everything.

I'll be surprised if the article doesn't mention the fact that Japan has shuttered 54 of its .... 54 nuclear plants (does one shutter a nuclear plant?). Not a lot of options. Algae comes to mind. But I digress.

When a small island nation -- oh, oh, small, island, nation...global warming....could disappear ... rising sea level ... but again I digress....

When a small island nation shuts off 54 of 54 nuclear reactors, there's not a lot of short term solutions: coal, natural gas, and...yeah, that's about it.

The WSJ article takes up the entire back page (except for the ad which is even bigger) in the print edition. It's a very big story. A huge thank you to Google and WSJ for letting readers access it. I do my little part by subscribing to the print edition, but have not yet signed up for the free internet access that comes with the paid subscription. My Lutheran background does not let me have everything that's offered. I wonder if that's why smorgasbords are so big (no pun intended) in Norway? The one time Lutherans can have everything they want. The first time I ever tasted shrimp was on a ferry from Norway to Denmark when I was in 8th grade. Another story for another time.

Is kelp related to algae? Kelp is algae.

Friday Morning Ramblings -- Absolutely Nothing To Do With The Bakken -- Much Political -- Read At Own Risk

I've already posted a couple of energy-related stories earlier this Friday morning, including a great one from RBN Energy. If you don't want to read "political stuff" and came here looking for energy-related stories and the Bakken in particular, skip this post and continue to scroll down.

1. A few days ago I posted a note about two different ways of accounting in the oil patch: full-cost accounting and successful-efforts accounting. It turns out that federal government agencies can also choose from a menu of accounting choices: generally accepted accounting rules (GAAR); Congressional Budget Office (CBO) estimates; White House (WH) estimates; best efforts guess (BEG) accounting; Dr Seuss Cat-and-Mouse (SCAM) accounting; and, PITS (Pie-In-The-Sky) accounting.

2. The beginning of the end? The president is not talking much about climate change, global warming, or whatever faux environmentalists are calling it now. Incidentally, having just read Richard Fortey's Horseshoe Crabs and Velvet Worms, it appears the earth's greatest extinctions came during the beginning of and during the Ice Ages. "Snowball Earth" in the Proterozoic comes to mind. That's just my interpretation of his Table of Geologic Periods on page xv in the book. Richard Fortey is a "warmer."

3. Say it isn't so: Dem Senators pay female staffers less than male staffers. Another inconvenient truth. (Did Al copyright that phrase? I know he invented the internet.)

4. And you thought crime was bad in Detroit with the lights on! Wait until they turn off the lights.

5. On Kudlow last night, a clip of the president was shown advocating for tax breaks for wind and solar energy. The president said the tax breaks were needed to save these companies to save jobs. Sort of like killing the Keystone XL to kill jobs, I guess. Picking winners and losers from the Oval Office.

6. Now that Arizona has accepted Hawaii's proof that the president was born there, let me be the first to suggest this be the president's re-election campaign anthem (lyrics would have to be tweaked, but that would not be difficult):

Born in the USA, Bruce Springsteen
7. I don't know how many folks have been following this story but if enacted by the Obama administration would shut down every swimming pool in every motel/hotel across the country -- and that would just be the start. Don't even get me started.

8. For those who have been following the Elizabeth Warren story in Massachusetts, the Boston Globe has connected the dots.

9. From Drudge: surfers who land on the Drudge Report page were most likely to have a bachelor's degree; more than double the percentage of all active college grad Internet users (36 percent vs 17 percent).

10. This issue should resonate with North Dakotans following the UND "Fighting Sioux" tussle with the NCAA. Oregon recently banned public schools from using Native American imagery in team names and mascots. Tribes on two Oregon "Indian" reservations have protested. I don't blame them. Minnesotans take pride in their Vikings. I guess Oregonians can't take pride in their Native Americans in the same fashion. If I were a school administrator in Oregon I would have Starbucks license their name (for a nice fee) to the school athletic team, or come up with some LGBT logo. And that's why I'm not a school administrator.

11. This is a most interesting article for me personally. It brings back a lot of memories. Perhaps this should be a stand-alone post, but I would get a lot of complaints, so I will just add the link to this ever-lengthening list. From the WSJ (again), there is a half-page story on Afghan's Air Force grounded due to maintenance problems.

When I was assigned to an F-15 squadron stationed in Bitburg, Germany, many years ago, the squadron would fly to Morocco every two years to participate in an exercise called "African Eagle," in which US F-15 pilots trained Moroccan pilots in the use of their US-built fighters (F-5's if I remember correctly). Generally speaking, maintenance was the number one problem, and often training was postponed because one or more (usually more) of the Moroccan fighters were grounded due to maintenance.

The United States Air Force is anal about maintenance. Every morning, wing commanders are briefed on the status of every plane (by exception, of course). If a plane is grounded because of a missing part en route and it has not yet arrived (anywhere in the world overnight) the wing commander, a colonel or a general officer, is on the horn with his supply officer asking why FedEx has not yet arrived in "onlygodknowswhere." Some of these sites are bare base operations and not yet loaded into any known atlas of the world's airstrips. And, by golly, FedEx shows up. If not FedEx, DHL.

(Maintenance is so good, the USAF can locate the status of a missing screw anywhere in the world. On the other hand, air evacuation of seriously ill/injured military personnel was not nearly as good. We could literally "lose" a patient in the air evac system for days. One of my favorite medical general officers suggested a bar code wrist band on each patient. His idea was eventually adopted, but that's another story.)

The Moroccans -- and I say this with no judgement of their religion, it is simply fact -- the Moroccans did not rely on FedEx or DHL. They relied on Allah. Seriously. They called it "inshallah." If God was willing, the part would show up. One does not insult Allah by calling up "Radar"in logistics and asking where the part is or was. If God was willing, the part would show up. Often Allah was apparently unwilling for weeks on end to get the part to Sidi Slimane Air Base. The first day I arrived in support of "African Eagle 1984 (?)" I learned my first word in Arabic, inshallah. It took me by surprise (tactfully said) but by the end of the week I was used to the whims of Allah. And, surprisingly, in the big scheme of life, things worked out very well.

Why Refineries Are Shutting Down -- Fascinating Article -- RBN Energy

Maybe the most interesting article of the week: link to RBN Energy.

I would love to put a summary paragraph here but I don't want to post the "spoiler." This is a very, very good article from RBN Energy today.

What Happened to $200 Oil -- Globe and Mail -- Via ISA

Updates

Later, 6:05 p.m.: based on unpublished comments regarding $5 gasoline, folks may want to check out all the earlier posts tagged with "$5Gasoline" at the bottom of the blog, or one can cut and paste this URL: http://milliondollarway.blogspot.com/search/label/%245Gasoline.

Very interesting to say the least, particularly the post of February 15, 2012. The dots all connect.