Tuesday, May 29, 2012

A Fracking Revolution

Back in 2008 some web sites were saying the Bakken was over-hyped. They said that daily production from the Bakken would never amount to much, on  a percent basis of total daily global consumption. They were missing the bigger story: the Bakken as a laboratory.

Proving the point:
Conservative estimates are that oil and natural gas produced through “fracking,” as the process is better known, could amount to 3 million barrels a day by 2020. “We have a revolution here,” said Larry Goldstein, director of the Energy Policy Research Foundation in New York. 'In 47 years in this business, I’ve never seen anything like this. This is the equivalent of a Category 5 hurricane.'
From the Washington Times via Carpe Diem.com

Incidentally, doesn't that 3 million bbls/day sound a bit low? Some predict the Bakken will be producing 1 million bbls/day by then, and the Eagle Ford slightly more. That's more than 2 million bbls/day -- just those two basins.

Hey, on another note, something you can use as cocktail chatter at your next social event. Remember the "Dead Cow" formation? See this post, November, 2011. It turns out that the "Dead Cow" formation in Argentina is mentioned in the Washington Times article.
But the prize for energy companies is potentially huge. Repsol estimated this year that a cross section of the vast Dead Cow formation here in Neuquen province could hold nearly 23 billion barrels of gas and oil. That followed a U.S. Energy Information Administration report that said Argentina possibly has the third-largest shale gas resources after China and the United States.

“All the top-of-the-line companies are here,” said Guillermo Coco, energy minister of Neuquen province, including ExxonMobil, Chevron and Royal Dutch Shell. Although only about 200 wells have been drilled, Coco said companies here talk of drilling 10,000 or more in the next 15 years.
To put this in perspective, some are predicting for the Bakken, 50,000 wells over 20 years

Housekeeping: Another Brooklyn Field Well Reported An IP

21053, 764, CLR, Richmond 1-26H, cum 26K 3/12;

For the entire Brooklyn field list, click here

Heel-To-Toe Siting of Wells -- Whiting in the Sanish

A long time ago I blogged about the radial effectiveness of horizontal drilling -- about a 500-foot radius and blogged about the fact that there was room for 4 to 5 wells across one mile (across one section). That was when "they" were only drilling one well per section. It was the BEXP Olson wells that first got me to blogging about that. To the best of my knowledge, I was the only one publicly blogging about that -- the radial effectiveness -- at that time. Since then, corporate presentations have verified that.

Along that same line, some time ago, I suggested that we would start seeing well siting heel-to-toe and toe-to-heel. I based this on an observation that the frack stages two miles away from the vertical pipe must be quite a challenge, suggesting that production from the distal end of the horizontal was not as good as that more proximal.  Even if fracking is as effective distally as proximally, it just seems the farther one gets away from the vertical, the less effective the "drainage." Tonight I see an example of this heel-to-toe, toe-to-heel siting. There are probably other examples, but this is the first example I've run across.

Go to the Sanish field on the NDIC GIS map server. Then to sections 25-154-92  and 30-154-91. In the former section, there are three wells sited on the far west, and running in a southeasterly direction. Then, something I had not seen before but something I suggested we would see at some point. In the latter section, at the far east are three wells running in a northwesterly direction.

With the scores of Whiting wells in the Sanish I am sure one can find other such examples, but for the most part this is a new phenomenon.

Assuming it is more cost effective to put all wells together on one pad, there must be some reason that Whiting is trying the heel-to-toe, toe-to-heel siting. 

If you search by well name on the NDIC GIS map server:
  • 22156, 1,766, Whiting, Joy TTT 42-30XH, Sanish, t8/12; cum 321K 12/16;
  • 22157, 1,110, Whiting, Theresa TTT 41-30TFX, Sanish, t8/12; cum 126K 12/16;
  • 22500, 483, Whiting, Ben TTT 42-30TFX, Sanish, t6/12; cum 168K 12/16;

Bison Could Be Named National Mammal

Link here to LA Times.
The designation would be strictly symbolic, adding the buffalo to the bald eagle, the rose and the oak tree as official national symbols.

The bipartisan legislation was introduced at the request of the Wildlife Conservation Society,  the National Bison Assn., made up of meat producers, and the Intertribal Buffalo Council as a way to raise public awareness of  the "important cultural, economical and ecological role of the bison,’’ said John Calvelli, executive vice president of public affairs of the Wildlife Conservation Society.
The only "big name" not on the list was Ted Turner, who has probably done more than anyone to popularize bison-burgers. 

Ten (10) New Permits -- The Williston Basin, North Dakota, USA

An unusual daily activity report, today, May 29, 2012 --

Major typographical on the daily activity report. Incorrectly stated that 16 wells sought/approved confidential status, when in fact the 16 wells reported, had just come off the confidential list. It is also interesting to note that just after the most recent Director's Cut suggested "they" were catching up with fracking/completing wells, 8 of the 16 wells (50 percent), were not completed:
  • 19509, 625, KOG, East Grizzly Federal 3-25-36-15H,
  • 20363, 668, CLR, Edward 1-23H
  • 20714, DRL, BEXP, Johnston 7-6 1H,
  • 20180, DRL, Petro-Hunt, Fort Berthold 148-04-30A-31-2H,
  • 21304, DRL, Samson Resources, Stanley 28-21-156-91H,
  • 21397, DRL, Slawson, Wolverine Federal 1-31-30H,
  • 21438, 370, Whiting, Lahti 14-22TFH,
  • 21546, 537, Whiting, Lahti 12-22TFH,
  • 21598, 1,570, Denbury, Johnson 24-31NEH,
  • 21634, 108, Crescent Point, CPEUSC Austin 17-20-158N-99W,
  • 21641, 682, CLR, Rixey 1-28H,
  • 21681, DRL, Chesapeake, Kostenko 30-138-97 A 1H,
  • 21783, DRL, ERF, Rhino 148-04-03A-10-3H,
  • 21824, 814, QEP, MHA 5-05-06H-149-90,
  • 21845, DRL, CLR/Newfield, Bratlien 154-100-33-28-1H: Newfield was the original operator; CLR is now the operator. File report: gas measured up to 4,000 units; no frac data yet;
  • 21932, DRL, Hess, GO-Biwer-157-98-2635H-1,
Ten (10) new permits:
  • Operators: CLR (5), BEXP (3), OXY USA, MRO
  • Fields: Ranch Creek (McKenzie), Alger (Mountrail), Werner (Dunn), Cedar Coulee (Dunn), Banks (McKenzie)
OXY USA has a permit for a wildcat in Dunn County.

Continental Resources has a permits in Ranch Creek, a field of which I am not familiar.
BEXP has permits for a two-well pad in Banks oil field, the heart of the Bakken.
CLR has permits for an Eco-Pad in Cedar Coulee in southwest McKenzie County, a small field with a small amount of activity. There is currently a 2-horizontal lateral-well in this section:
  • 16605, 418, CRL/BR, Dennis 44-8H, Cedar Coulee, t7/07; cum 58K 3/12;

Some Folks Think Bakken Wells Are Expensive ...

First, there are "no" dry holes in the Bakken.

Second, on average, a Bakken well runs about $8 million.

Cuba off-shore?

$100 million.



COP In North Dakota: 626,000 Acres; 9 - 10 Rigs

I believe this article was published in a regional newspaper recently (Bismack Tribune?). I don't know if I linked it at the time. I missed some subtleties in the article and need to post it.
ConocoPhillips has 626,000 net acres in the Williston basin with Bakken potential. Plans for 2012 include having 9-10 rigs under contract in the Bakken/Three Forks by yearend, Carroll said. The company has reduced horizontal drilling time by developing new methods and best practices.
First, my data base shows only 460,000 net acres for COP in North Dakota. I update this data base whenever I see acquisitions or divestitures. It's hard to believe I missed COP's growth from 460,000 net acres to over 600,000 net acres.

Also, when North Dakota hit a new record of 217 active drilling rigs, Burlington Resources (the wholly owned subsidiary of COP) showed 8 rigs. The link above says COP intends to move toward 9 - 10 rigs.

Finally, the other subtlety: the spokesman and the article only referenced "COP," and did not mention "Burlington Resources." It is subtle and may mean nothing, or it may mean something significant that will become apparent sometime down the road. But that jump from 460,000 to 626,000 net acres is very, very interesting.


P.S. It is very possible there has been no change in COP's acreage in the Williston Basin. Note this at the COP website today:

Williston Basin
The company’s position in the Williston Basin is comprised of 460,000 net acres in Bakken, 183,000 net acres in Cedar Creek Anticline and 4 million net acres in other mineral positions, for a total of 4.6 million net acres in western North Dakota and eastern Montana. The company’s 2010 net production from the basin averaged 31 MBD of liquids and 15 MMCFD of natural gas. Plans for 2011 include an increase in total wells by utilizing five drilling rigs for the full year. The company has successfully reduced drilling time by developing and implementing innovative new methods and best practices.
It is possible that COP now considers the Cedar Creek Anticline as a Bakken play (which I thought it was), which has historically been seen as a Red River play.

A most interesting note regarding the Cedar Creek Anticline is found at this link regarding Encore.

This has also led me to an interesting note here, at the website for Family Tree Corporation:
Oil was first found in the Williston Basin along the Cedar Creek Anticline in southeastern Montana, in the 1920s and 1930s. The basin did not become a major oil province until the 1950s when large fields were discovered in North Dakota. Production peaked in 1986, but in the early 2000s significant increases in production began because of application of horizontal drilling techniques.
A more recent story, April 18, 2012:
In addition to Belle Creek, further north is the Cedar Creek Anticline, which Dover called a "monster field." [Denbury] plans to invest $2.5 billion to recover some 200 million barrels of oil. Cedar Creek Anticline is four miles wide and 100 miles long, "and saturated with oil," said Dover. At its peak, the field will produce 40,000 barrels of oil a day.
Finally, one last link. Note this article was originally published in 2010, but an interesting clarification at the very beginning of the story.  This was back in 2010:
Even though it hovers at the western edge of the Bakken, Baker, Montana is being focused upon as “the hub of the Williston Basin.” Baker is where oil companies are headquartering and where pipelines are intersecting.

Inmates Running the Asylum?

If ever there was a better story ... link here:
Greco said the Clean Air Act requires EPA to determine the mandated volume of cellulosic biofuels each year at “the projected volume available.” However, in 2011 EPA required refineries to use 6.6 million gal of cellulosic biofuels even though, according to EPA’s own records, none were commercially available, Greco said.

US Highway 85 Traffic Increased 124% Year-Over-Year

Link to Dickinson Press.

For newbies, US Highway 85 is the main north-south artery through the Bakken. As active as the traffic is west of Dickinson, it must be even more active in the heart of the Bakken, between Williston and Watford City, farther north.

Random Data Points on The Bakken From the State Via The Dickinson Press


Later, 2:25 p.m.:  This is now a front-page headline, along with Facebook implosion, at Yahoo!Finance front page. The link is dynamic.  Here's the AP story.

Original Post

Link here.

The average Bakken/Three Forks well in North Dakota (some numbers rounded; see link for their data):
  • costs $8 million
  • will produce 540,000 bbls of oil 
  • will produce for 30 years 
  • net profit: $20 million 
  • in taxes: $4.5 million 
  • royalties: $7.5 million 
I remember when I started this blog: many folks said the Bakken was "hyped."

I assume these numbers, if coming from the state, are conservative and based on USGS estimates of 4 billion bbls of recoverable oil. Some oil companies now estimate more than 24 billion bbls of recoverable oil from the Bakken Pool.

South Heart Eyes 200-Unit Crew Camp -- Near The Heart of Whiting's Pronghorn Prospect

Link here to Dickinson Press.
The city has given the go-ahead for construction of a 200-unit crew camp, but the company interested in the project has yet to find a place to build it.

South Heart City Council members unanimously decided May 9 that Texas-based Ameri-Tech Industries, LLC may build the facility.
On the south side of the interstate, South Heart is inside the Zenith oil field

KOG Wells Better Than BEXP -- Filloon -- SeekingAlpha

Link here to SeekingAlpha.

I've never seen a significant error in a Filloon posting, but the subject line doesn't seem to fit the story at the link above. Maybe I'm missing something. The headline suggests a comparison with KOG and BEXP but only BEXP wells are shown. Perhaps one needs to go back to an article on KOG. But the linked article in this story goes back to a BEXP story.

I must be mis-reading the story.

Monterey Shale Near Santa Barbara, California

Link here to Oil & Gas Journal

Several things attracted me to this story, not least of which I enjoyed many wonderful weekend outings with some nice southern California women -- ah, but that was a long time ago, in another galaxy, far, far away.
Underground Energy Corp., Santa Barbara, Calif., will attempt to complete the Monterey shale at the Chamberlin 3-2 well on the 7,750-acre Chamberlin lease in its Zaca field extension project in Santa Barbara County, Calif.
Some data points:
  • Depth: 7,685 feet (somewhat shallower than the Bakken, in general)
  • Cost: budgeted for $2.4 million (well below the $7 million to $10 million for Bakken wells)
  • Payzone in offset well: 1,700 feet (huge); more than 1,200 feet of continuous Monterey oil
  • Typical payzone in this area: 1,100 feet (huge -- the middle Bakken, I believe, is 50 - 100 feet)
  • Original Zaca field: 10-acre spacing; 61 wells
  • Original Zaca field: average IP -- 200 bopd; EURs > 540,000
Another rig in the area will drill to 4,350 feet (much shallower than the Bakken; and will offset two other wells have produced more than 500,000 bbls of oil.

A bit of competition for the Bakken, it appears, and suggests why some operators, like OXY say they have better prospects in California than North Dakota.

Note: I have no formal training in the oil and gas industry; no formal training in geology; I don't follow California oil industry; and I may have misread the story. Check out the link if you plan to make any investment decisions after reading this post.  I am well-known to make errors. This is presented, again, for my benefit and benefit of readers to try to sort out the Bakken.

A Note for the Granddaughters

And speaking of long ago, far away:

Buffy, piaknowguy

A Long Time Ago, Waylon Jennings
And then he met Jessi:

Storms Never Last, Jessi and Waylon
I'm Looking for Blue Eyes, Jessi Colter

Bullish Article on CLR -- SeekingAlpha

Link here to SeekingAlpha.
In other words US expectations this week are set up to be met or beaten. Such an occurrence could allow oil to rally. On top of the above the overall market in general and oil specifically are near over sold levels. They are set up to rally if given half a chance.Big Bakken producer Continental Resources stands to be one of the biggest beneficiaries if such a rally does occur. 
Disclaimer: this is not an investment site. This is not a recommendation to buy, sell, or hold CLR.

Back-of-envelope calculations (numbers rounded); personal use only; absolutely not recommended to be used by anyone else, but as noted in my "Welcome" and "Disclaimer": I use this site for personal notes to try to keep track of things; again this is not to be used by others in making investment decisions; there are way too many fallacies in the numbers. See first comment below to see the first major mistake I made when doing this (even more reason not to pay attention to these numbers (smile):
CLR's market cap: $14 billion
CLR's Bakken acreage: slightly < 1,000,000 acres
Per Acreage/evaluation: $15,000/acre (CLR has significant interests outside the Bakken)

WLL's market cap: $5 billion
WLL's Bakken acreage: 700,000 acres
Per acreage/evaluation: $7000/acre (Whiting has significant interests outside the Bakken)

OAS' market cap: $2.6 billion
OAS' Bakken acreage: 300,000 acres
Per acreage/evaluation: $8,700/acre

KOG's market cap: $2.3 billion
KOG's Bakken acreage: 155,000 acres
Per acreage/evaluation: $15,000/acre

BEXP at time of sale
110 million shares @$36.50/share (?) --> $4 billion (?) -- I don't remember specifics
375,000 Bakken acres
Per acreage/evaluation: $11,000/acre

Twinkies and Fracking

Another great article from PennEnergy.
That wasn’t always the case. Nitrilotriethanol, for instance, is not a compound most people are familiar with. Without a specific reason to be concerned about it, the chemical can be written off in the public consciousness as easily as thiamine mononitrate. It’s just another big word that’s probably not worth worrying about. Of course, one of those big words is used in fracking fluids. The other is an ingredient in Twinkies. But on paper, they’re both big, complex words seemingly uninteresting to the average person. That unfamiliarity and un-interestingness could have kept people from concerning themselves with fracking. Then somebody’s tap water caught fire, and everything changed. 
It's a great article but unfortunately one needs an eighth-grade education to be able to read it to the finish and understand it. 

Tuesday Morning Ramblings -- Absolutely Nothing To Do With The Bakken -- Political Comment

1. Yahoo!Autos had a piece over the weekend about thirteen models that won't be coming back in 2013. For Saab, it will be more than just one model that is not coming back. GM is retiring the entire company. It's not mentioned in the article, but I would not be surprised that the drawdown of US military in Germany and England played at least a small role in the demise of Saab. Both Saab and Volvo had a marketing program targeting active duty personnel stationed in Europe. In addition to bargain prices, buyers of Saab and Volvo could take delivery in Sweden at the expense of the manufacturer. But with the huge drawdown in US military in Germany and England, I imagine Saab lost a lot of dedicated Saab owners.

I bought two Saabs while stationed in England, and ended up driving them both to our next assignment in Germany.

Wow, I loved those cars. We sold one in Germany before we were transferred to Turkey, but brought one Saab with us to Turkey.  The US military would ship American-made cars back to the US, but not foreign-made cars. Saab and Volvo had a similar incentive, if I remember correctly, but there was something in the small print that precluded sending our second and last Saab back to the states.

By the time I got back to the states, the "basic" Saab model had changed so much it hardly reminded me of the Saab I knew, and I no longer had any interest in another Saab. In addition, way too expensive in the states.

2. You know things can't be all that bad in the world when an on-line "front page" article in the Bismarck Tribune notes that the price of party balloons and graduation balloons has almost doubled due to high price of helium.

3. One word: sad. This tells me this guy has no idea what camaraderie is; no idea what "semper fidelis" means; no idea what "hero" means. Men and women who earned these medals for heroism did not think of themselves as heroes, and I doubt any of them were thinking of getting themselves killed, maimed, or injured to insure our freedom. All of them were thinking about one thing: saving the lives of their fellow soldiers, airmen, marines, and sailors. And in most cases, it was probably done instinctively and altruistically.  Anyone who has trouble calling someone a hero who falls on a grenade to save his buddies is incredible naive. Sad.

By the way, Darwinism and the "selfish gene" has great difficulty explaining altruism. 

4. Four words: this doesn't surprise me. Thank goodness for the Drudge Report.

5. It seems so long ago. When the iPad first came out I blogged about all the uses one could find for an iPad. Here's a great story connecting two of my favorite things: Apple and NASCAR.  A lot of great apps are mentioned. Enjoy.

6. Twenty-five (25) people killed overnight in Chicago and it is not widely reported. Am I missing something or do people simply not care about this many people being shot or knifed in one night?

Speaking of being shot and knifed: some stories. In another life I rode with the Los Angeles County (city?) ambulances for a period of time. I remember that we launched as fast as we could when we got the call, but enroute, if learning it was a gunshot injury, the driver immediately slowed down. He wanted the police to arrive first. Smile. Once in the emergency room, the first question the attending/treating emergency room physician asked the gunshot/knifing victim was not a medical question but "how many more casualties were coming in?" The physician was getting ready to triage victims. Relatively less threatening conditions such as appendicitis were given lower priority than gunshot victims. At that time, most gunshot/knifing cases were part of gang-related activity. I remember gang members providing protection to their buddies when the latter were convalescing on the units. I wonder if any of this has changed.

7. I think the refs in the NBA playoffs are getting tired. The technical fouls called in last evening's NBA game between Miami and the Boston Celtics were ridiculous.

8. I've talked about this numerous times: the after-spill actions taken by the government caused much more economic damage than the spill itself. The story will also be linked here

9. Midwest manufacturing booming! From CarpeDiem.

10. Finally, in print, what we've all been thinking: Greece is the laziest, most incompetent nation in the Eurozone

218 -- A New Record -- Active Drilling Rigs in North Dakota


Later, 2:10 p.m.: 218

Original Post: 217

This is really quite incredible. I would not have expected it. I know "experts" in the field are talking about 225, maybe more, but the "tea leaves" suggested we would be leveling off at 210.

I wonder if the activity in southwestern North Dakota is having an effect?

The link is dynamic.

Selected operators (when the # was 217):
  • Continental Resources: 24
  • Hess: 19
  • BEXP: 18
  • Whiting: 15
  • OXY: 13
  • Petro-Hunt LLC: 13
  • Burlington Resources: 8 
  • KOG: 8
  • Oasis: 7
  • EOG: 7
  • XTO: 7
  • WPX: 6
  • Slawson: 5
  • Fidelity: 4
  • Zenergy: 4
added when "we" went to 218

Note: this is what I wrote about the number of active wells in North Dakota a few days ago:

For newbies: the number of active rigs is only one data point reflecting activity in the Bakken.

If the number of active rigs increases, it speaks volumes about activity in the Bakken. All things being equal, we should start seeing a decrease in the number of rigs in the Williston Basin:

  • more operators are going to multiple well pads, decreasing the need for rigs
  • when this all started, it was not unusual for an operator to take 45 days to reach total depth; now, if it takes longer than 25 days, there's a problem (this is for a Bakken horizontal well; non-Bakken vertical wells will reach total depth in a matter of a few days)
  • when this all started, operators were predominantly drilling short laterals, thus two wells for every two sections; now routinely, they are drilling long laterals (one well for every two sections)
  • several major operators have announced they will reduce the number of rigs in the Bakken
  • some operators are moving their rigs across the state line to Montana (not counted in my total)
  • some operators have to get their rigs to other plays, such as the Eagle Ford in Texas, to save their leases; most (?) of the leases in North Dakota are now held by production and drilling in some areas would not be needed to hold leases
At the end of the day, it's not the number of rigs that is important, it is the number of bbls produced.

However, each rig is said to represent about $10 million in drilling and completing, much of which goes toward personnel costs, and much of which stays within the state.

China Buying Up Oil Assets In the Americas -- CNN

Link here to CNNMoney.

Regular readers are well aware of this activity. But this is a nice article providing an update.
Much of China's energy and natural resource buys have been in unstable places -- Southeast Asia, the Middle East, Africa.

The Americas region is arguably much more stable than any of those regions. That's an attractive prospect for a country that relies on a steady flow of resources.

The Americas are also in the midst of an energy boom. From oil sands production in Canada to shale gas in the United States to promising deepwater finds off Brazil, the Americas are quickly becoming an energy powerhouse.

NGLs, Petrochemicals and Cracking -- RBN Energy

Link here to RBN Energy, Part I.

Part II.  

Link here to RBN Energy, Part III.  

Part IV

Part V.