Oasis Conference Call -- 2Q12

Updates

August 15, 2012: the company's August presentation (a PDF file):

• pad drilling; 35% of 2012 wells scheduled for pad drilling; moving to 100% in 2013
• days to frack wells: down 50% to ~ 5 days
• upgrading rig fleet; running 9 - 10 operated rigs
• pressure pumping: 2 - 3 dedicated external frack crews; own in-house fracking 24-hr ops
• cost to complete wells: moving from $10.5 to $8.8/well (remember, these are long laterals)
• well design: significant lower well costs in Hebron (eastern Montana) and Red Bank (north of Williston)
• north Cottonwood: all-sand fracs; saves money
• TFS; Spratley produced over 1,300 boed in first 60 days; TFS wells look similar (if not better) than nearby Bakken wells
• interference tests suggest Bakken and TFS produce independently of each other; confirms CLR's findings
• in-fill test program: 4 Bakken well test; 3 Bakken, 3 TFS test in Indian Hills
• slide 26: average EUR for middle Bakken now at 600K; was 350 - 450 when company went public 

Original Post

Data points from the Oasis 2Q12 conference call below. I didn't see a whole lot new. Like others, Oasis will focus on cutting costs (pad drilling, better use of ceramics; optimize fracking; in-house frack team). Bringing in more work-over rigs, something Whiting also said. 

2011: a transition year; consolidated acreage position; coring up large blocks

2012: focused in four areas - a) holding of all our drill blocks by production (successful); b) continue extensional testing in both the middle Bakken and the Three Forks; c) optimizing services, including start-up of Oasis well services (in-house fracking); and, d) infrastructure development.

Looking to knock off ~ 10% of drilling costs by end of year (every operator is saying this)

Moving to pad drilling -- again, the trend

Added leases around the company's core areas; now 320,000 net acres

Has brought in additional work-over rigs (also mentioned by Whiting; Whiting's ratio is 1.5 work-over rigs for every drilling rig)

Like CLR, Oasis increased full-year guidance to 22,500 to 22,50 boepd; 3Q12 will range between 22,000 and 24,000 boepd

Like CLR, Oasis increased its 2012 CAPEX as of July from $900 million to $1.1 billion; partly due to increased pace of drilling -- when the going gets tough, the tough get going

Current well cost: $9.8 million; hoping to reduce that to $8.8 million by end of year

Oasis Well Services: commenced 24-hour ops, two-week-on/one-week off rotation in June; 30% of Oasis frack work on a 10-rig schedule; will increase about 50% when OWS goes to full 24-hour operations

Guar not an issue;  nor is sand

In the north Cottonwood, where the Bakken is thick, but higher water concentrations, 36-stage completions, but reduced size of individual stages

EURs have increased significantly; now up to about 500,000 bbls on these (Cottonwood?) wells

Hebron prospect in Montana: similar approach; less proppant per stage; the Bakken is thinner; EURs there also about 500,000, but at lower cost in stimulations previously used in that area

In the Indian Hills (sic) and south Cottonwood, Three Forks are as good or better than the middle Bakken

Optimize proppant mix: Indian Hills (sic) and South Cottonwood, 60 to 65 percent ceramic; north Cottonwood is all sand to this point; Red Bank, beginning to use less ceramic;

Takeaway: 50/50 rail/pipeline

Looking at going from six wells to eight wells per 1280-acre spacing unit

OASIS: stimulation is "our biggest ticket item with respect to our total well cost" 

Important data points:

In a recent interference test, the JO Anderson Three Forks well was drilled about 800 feet from a Bakken well, which had already produced about 140,000 barrels. So far, the JO Anderson well has produced at a higher rate and other nearby Three Forks wells. We think that this is indicative of unique Three Forks reserves, even at close-Bakken/Three Forks well spacing.

Farm Subsidies and Welfare -- Red Herrings in the Budget Debate

Farm subsidies and welfare are red herrings in the budget/debt/deficit debate. There are only two areas that cuts will make a difference: military and health care. Period. Dot. Eliminate farm subsidies and welfare and one might feel "good," but the budget/debt/deficit will remain relatively unaffected.

Farm subsidies.

Texas:

• $25.9 billion in subsidies 1995-2011. ($1.5 billion/year)
• Texas ranking: 1 of 50 States
• 81 percent of farms in Texas did not collect subsidy payments - according to USDA.
• Ten percent collected 78 percent of all subsidies.
• Amounting to $16.7 billion over 17 years.
• Top 10%: $41,496 average per year between 1995 and 2011.
• Bottom 80%: $657 average per year between 1995 and 2011.

Iowa:

• $23.6 billion in subsidies 1995-2011. ($1.4 billion/year)
• Iowa ranking: 2 of 50 States
• 19 percent of farms in Iowa did not collect subsidy payments - according to USDA.
• Ten percent collected 58 percent of all subsidies.
• Amounting to $11.8 billion over 17 years.
• Top 10%: $33,626 average per year between 1995 and 2011.
• Bottom 80%: $1,553 average per year between 1995 and 2011.

Illinois:

• $19.7 billion in subsidies 1995-2011. ($1.15 billion/year)
• Illinois ranking: 3 of 50 States
• 26 percent of farms in Illinois did not collect subsidy payments - according to USDA.
• Ten percent collected 68 percent of all subsidies.
• Amounting to $11.2 billion over 17 years.
• Top 10%: $28,747 average per year between 1995 and 2011.
• Bottom 80%: $831 average per year between 1995 and 2011. 

Minnesota:

• $16.2 billion in subsidies 1995-2011. ($0.95 billion/year)
• Minnesota ranking: 4 of 50 States
• 30 percent of farms in Minnesota did not collect subsidy payments - according to USDA.
• Ten percent collected 62 percent of all subsidies.
• Amounting to $7.95 billion over 17 years.
• Top 10%: $35,237 average per year between 1995 and 2011.
• Bottom 80%: $1,319 average per year between 1995 and 2011.

Nebraska:

• $15.6 billion in subsidies 1995-2011. ($0.92 billion/year)
• Nebraska ranking: 5 of 50 States
• 27 percent of farms in Nebraska did not collect subsidy payments - according to USDA.
• Ten percent collected 62 percent of all subsidies.
• Amounting to $7.97 billion over 17 years.
• Top 10%: $36,494 average per year between 1995 and 2011.
• Bottom 80%: $1,340 average per year between 1995 and 2011.

Kansas:

• $15.4 billion in subsidies 1995-2011. ($0.91 billion/year)
• Kansas ranking: 6 of 50 States
• 32 percent of farms in Kansas did not collect subsidy payments - according to USDA.
• Ten percent collected 70 percent of all subsidies.
• Amounting to $8.67 billion over 17 years.
• Top 10%: $27,615 average per year between 1995 and 2011.
• Bottom 80%: $721 average per year between 1995 and 2011.

 North Dakota:

• $14.0 billion in subsidies 1995-2011. ($0.82 billion/year)
• North Dakota ranking: 7 of 50 States
• 16 percent of farms in North Dakota did not collect subsidy payments - according to USDA.
• Ten percent collected 61 percent of all subsidies.
• Amounting to $6.17 billion over 17 years.
• Top 10%: $45,980 average per year between 1995 and 2011.
• Bottom 80%: $1,712 average per year between 1995 and 2011.

California:

• $9.99 billion in subsidies 1995-2011. ($0.58 billion/year)
• California ranking: 10 of 50 States
• 91 percent of farms in California did not collect subsidy payments - according to USDA.
• Ten percent collected 73 percent of all subsidies.
• Amounting to $5.93 billion over 17 years.
• Top 10%: $66,781 average per year between 1995 and 2011.
• Bottom 80%: $1,436 average per year between 1995 and 2011.

Indiana:

• $9.78 billion in subsidies 1995-2011. ($0.57 billion/year)
• Indiana ranking: 11 of 50 States
• 41 percent of farms in Indiana did not collect subsidy payments - according to USDA.
• Ten percent collected 74 percent of all subsidies.
• Amounting to $6.01 billion over 17 years.
• Top 10%: $27,525 average per year between 1995 and 2011.
• Bottom 80%: $556 average per year between 1995 and 2011.

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Welfare payments, 2007

As the recession grinds on and people run out of unemployment benefits, the last safety net is the government's Temporary Assistance for Needy Families (TANF) program. Though benefits vary by state, TANF provides a maximum of 60 months of coverage throughout a recipient's lifetime.

The list appears to be ranked on basis of percent of population on assistance, not total dollar amount.

1. California, $3.3 billion
2. Maine, $62 million
3. Tennessee, $91 million
4. Massachusetts, $295 million
5. Vermont, $31 million
6. DC, $19 million
7. New York, $1.5 billion
8. Minnesota, $106 million
9. Washington state: $266 million
10. New Mexico: $59 million
11. Indiana: $102 million

The Great Plains, Joe Kotkin, The Wall Street Journal, 2006

A huge "thank you" to a reader who stumbled across this 2006 WSJ article and sent me the link. 

Look at how incredibly prescient Joel Kotkin was. This was at least a year before things really got going in North Dakota.

It begins:

At a time when the much-celebrated coasts creak from rising interest rates, faltering income levels and soaring energy prices, this windswept, energy-rich city of 57,000 on the western edge of the Dakota plains is experiencing the best of times. Cities like this one out in the far-off hinterland -- Iowa City, Sioux Falls, Fargo, Grand Forks, Rapid City -- now are enjoying job growth rates that, if they don’t rival Las Vegas, certainly put to shame those of most major metropolitan areas.

Unemployment is negligible and wages are rising across virtually all job categories.

Over the past five years, the fastest growth in per capita income has taken place in energy-rich Wyoming, Montana, North Dakota, New Mexico and West Virginia, while highly urbanized places like California, New York, Michigan and Illinois gather dust at the bottom of the pack. Tax revenues in these once hard-pressed states are also soaring; North Dakota’s surplus is now estimated at $527 million, representing more than a quarter of the state’s $2 billion annual budget.

Behind the good times are numerous factors, such as an Internet-enabled shift of technology and business service firms into the region, and a growing migration of downshifting boomers and young families. But perhaps the most dramatic change has come from an upsurge of energy prices that is turning places like North Dakota into a Nordic Abu Dhabi.

"We’re on the verge of a gold rush driven by energy," crows Bob Valeu, state coordinator for North Dakota Sen. Byron Dorgan. Mr. Valeu and other leaders here in both political parties see their state as a growing bastion of energy production for the U.S. Already North Dakota is among the major exporters of energy to the rest of the country, exporting roughly three-fourths of its 4,000 megawatts of electricity.

The article is a must for those interested in history of the boom as it was taking off. 

Remember the Poppers? The name pops up again:

Two decades ago the academics Frank and Deborah Popper described the development of the Great Plains as a mistake -- an expansion of too many people and farms into an environment unable to support them. They pointed, with some justification, to the depopulation of much of the area and suggested that it be "de-privatized," brought back to its "original pre-white state" and turned into "the ultimate national park." This notion was widely described as the "buffalo commons," and it gained some traction among environmentalists -- many of whom seem to regard people as a kind of blot on the landscape. Indeed the Plains -- parts of which are now suffering from a severe drought -- as a kind of human disaster area remains a popular theme among Eastern journalists: irresistible decline, dying towns, aging populations, a place to visit now before it all blows away.

Incredible stuff.

And, if you enjoyed this, you will really enjoy his article in the WSJ earlier this spring, "The Great California Exodus":

"California is God's best moment," says Joel Kotkin. "It's the best place in the world to live." Or at least it used to be.

Mr. Kotkin, one of the nation's premier demographers, left his native New York City in 1971 to enroll at the University of California, Berkeley. The state was a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas' iconic "California Dreamin'" and the Beach Boys' "California Girls." But it also attracted young, ambitious people "who had a lot of dreams, wanted to build big companies." Think Intel, Apple and Hewlett-Packard.

Now, however, the Golden State's fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn't Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

So many story lines. CBS News reports the same.

Random Update of A Midnight Run Well; Random Updates of Some Other Monster Wells

This well is still on "DRL" status. It was spud 3/10/11. It has produced almost 100,000 bbls of light, sweet crude to date (97,830 as of 6/12).

• 20323, drl, BR, Midnight run 11-1MBH, Union Center, s3/11; cum 97,830 bbls 6/12; (at 98K bbls produced, no IP had been reported)

Other random updates:

• 19690, 2,884, BR, Mazama 44-21H, Westberg, Bakken, t7/12; cum 125K 6/12; not even a full year of production, and > 125,00 bbls
• 19764, 3,249, BEXP, Vachal 3-34 1H, Alger, Bakken, t5/11; cum 142K 6/12; just over a year old;
• 20079, 2,760, Whiting, Obrigewitch 21-16TFH, Bell, t2/12; cum 117K 6/12; 

PBS Discovers the Bakken -- Human Interest Story

Link here to PBS. A reader sent me the link; thank you.

In case the link breaks, the first few paragraphs:

In western North Dakota, near the Montana border, there's so much oil around, it almost feels risky to say it: boom -- a 1 percent unemployment rate, heavy traffic in what was once a sleepy town of 12,000 [Williston, North Dakota], nowhere to live, restaurants that close early because they can't find enough people to work at $15 an hour and others offering signing bonuses to dishwashers and fast food workers.

Geologists say there is a small ocean of oil, hundreds of billions of barrels trapped underground here in North Dakota. So, thousands of workers flocked to Williston to pull it out. Instant towns rose, instead of corn and wheat, as Williston joined a new American energy boom driving growth in parts of the West.

Just two years ago, the United States was importing two-thirds of its oil. Today, imports are down to less than half U.S. oil needs. Oil companies have known about these supplies for decades, but new technology makes the deposit, known as the Bakken, profitable to drill.

Nowhere to live? Also, no groceries.

The entire transcript looks promising.

Random Thought on Decreasing Rig Counts

Updates

August 28, 2012: discussion in local media about decreasing rig count

Data points:

• At 191, the number of rigs drilling for oil is at the lowest level in a year
• the decrease in rigs is due to oil companies becoming more efficient
• new rigs are being built specifically for drilling in the Bakken
• there are now more Bakken wells than traditional wells in the state
• over 4,000 Bakken wells have been drilled in the last 6 years
• North Dakota produces more oil with 7,300 wells than California does with 60,000 wells

Original Post

Some rigs are moving to Montana. I track only the active rigs in North Dakota. But assuming the decreasing rig count in North Dakota reflects a decreasing rig count across the Williston Basin Bakken, my hunch is that it has little to do with the current price of oil.

Every time I talk about current price of oil affecting the oil companies, I am reminded by folks who have followed the industry for years, the daily price has little effect on daily rig counts.

All things being equal, the well-established Bakken companies are noting:

• even with decreased number of rigs, they can increase their monthly/annual production
• they are putting an ever-increasing amount of oil into a saturated pipeline and storage system
• stacking a rig results in immediate savings
• and, oh, by the way, in the Bakken, most of their leases are now held by production

Just a random thought for newbies out there.

A very long time ago I mentioned that an oil company would do almost anything it had to to save a lease if it was a good lease, even if they had to partner with another operator to drill the well. With stacking of rigs, it tells me that companies are not worried about losing leases. Sure, they will lose some leases, but the ones they lose, they won't miss. [See NOG at this link.] And if a company finds itself in a bind, needs to drill a well, there are now more rigs available.

Williston Development Activity -- From the Williston Wire

One can subscribe to the Williston Wire for free.  No links, just quick notes:

Huge: Vern Haugen returns to home state; to build area's largest RV park and an apartment complex in Harvest Hills subdivision. Previously his group build Crosby Meadows Mobile Home and RV Park in Crosby; 75 mobile home lots; 140 RV pads. They hope to open the Williston RV Resort by September, 2012.  It will have 180 parking spaces with full services.

New hotel opens in Williston: Hampton Inn and Suites; rooms for leisure travelers; half of the 98 rooms are reserved for tourists. See earlier post today: has the housing situation turned the corner in Williston?

Target Logistics opens Stanley Hotel; $175/night for anyone, not just contract oil workers. See previous link. This hotel targets walk-ins. It is located near a new Microtel Inn; see next story. Target Logistics is the largest man-camp provider in the Bakken. [By the way, weren't we all going to use the term "crew-camp"?]

Microtel Inn and Suites celebrated its grand opening in Stanley: 77 rooms. Mostly long-term contracts but some daily availability. But call well in advance.

Minnesotans form B&H construction; are constructing 10 buildings --> indoor RV park.

Many, many other stories at the Williston Wire. Subscribe. Or click here.

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This video was posted on YouTube in the summer of 2011, about one year ago.

Building Permits in Williston Rise in 2012 -- This is Huge On So Many Levels -- Halliburton In The Housing/Real Estate Business -- Love's Trucking, Ditto

From the Williston Herald: building permits on the rise in 2012.

Data points:

July building permits: $50 million (rounded)
To date, through July 31, 2012: $190 million (for all of 2011: $355 million)
In July: housing - $15 million; commercial - $30 million

Weatherford International: tops in July with three permits at one location -- $12 million, $3 million, and $1.3 million
Schlumberger: two permits, $5 million; The Herald says the location is 13959 Highway 2; Google maps show this near the Montana state line; if so, this is well west of their huge new location nearer Williston

Mercy Medical Center: $2.7 million
Wyoming Casing Services: location yet to be determined
R&T Properties: two permits, $500,000 (separate/total?)

And this is why I noted that this is a huge story on so many levels:

• Halliburton received the most residential permits for their new permanent housing project on Sleepy Ridge Ave: two permits on new apartments valued at $3,793,758 and 10 permits on new Duplexes, all valued at $332,425.


• Love’s Travel Stops had a permit approved for a $900,000 apartment complex.   

I may be off-the-mark here, but $300,000 for a duplex doesn't seem too out of line; is that $150,000 for a housing unit? If so, are housing prices starting to moderate in Williston? Likewise, $900,000 for an apartment complex is not out-of-line at all. 

As noted a long, long time ago, BEXP also built houses for its employees, buying a whole development and putting in its own sewer and utilities because the city would not be able to get to it right away -- I don't know how accurate that is; not confirmed; from reliable source.

The Weatherford expansion was a huge story in mid-2011; it is amazing how fast/slow everything is moving in Williston. Whether it is fast/slow; accelerating/decelerating seems to depend on the observer.

For reference, the Herald reported back in early 2012:

The hub of North Dakota's oil boom issued a record number of building permits in 2011. The city issued more than $355 million worth of permits. That is more than three times what Williston issued in 2009.

At $190 million through July, 2012, the city is on pace to exceed the $355 million in permits last year.

Someone wrote to tell me yesterday the boom won't last forever. And that the oil will eventually run out. I think this boom is affecting the third generation of North Dakotans, and is the biggest boom to date. But yes, the boom won't last forever, and the oil will eventually run out.

As a reminder: CLR is stacking rigs; increasing CAPEX significantly; will increase wells drilled to 330 in 2012 (from 249 originally planned for 2012); and, had raised guidance on how much oil it expects to produce in the Bakken this year. One rig expense: $10 million/well/month. Stacking one rig: $120 million/year. Stacking five rigs: $600 million/year. Companies are stacking rigs and Schlumberger, Halliburton, and Weatherford increasing their footprint, and some are increasing their housing units for their employees. Investors take note.

Disclaimer: this is not an investment site. Don't make any investment decisions based on anything you read at this blog. It is for information and educational purposes only; see welcome and other disclaimers.

Four Years Running: North Dakota's Employment Picture Top in Nation -- Gallup

Link here.

Workers in North Dakota reported the best hiring situation at their places of employment, with 42% saying their companies are hiring and expanding the size of their workforces versus 8% letting workers go and reducing the size of the workforce. The resulting Job Creation Index score of 34 is seven points better than that of any other state.

North Dakota's position atop the list is not unexpected, given that it ranked first in 2009, 2010, and 2011, and among the best states on the Job Creation Index in 2008. North Dakota's economy is benefiting from increased oil production, as well as strong technology and agriculture sectors. The positive jobs situation there is also creating a demand for construction work to build new homes, roads, and schools.

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I Remember You, Slim Whitman

Solar Power -- The Math Doesn't Work

This is in response to comments I have received regarding my earlier posts about solar energy. In those comments, no one provided any numbers, which meant the comments did not add anything to the discussion and weren't worth posting.

The numbers are at this link.

Solar energy contributes the least of the various forms of renewable energy. Of the three (wind, solar, and geothermal), geothermal contributes the most.

In 2011, renewable forms (all types) of energy accounted for 2.1% of global energy consumption, up from 0.7% in 2001.

As recently as 2007, from CNN:

But if you equate the level of seriousness with which world governments treat solar power with the actual amount of solar energy generated globally, the figures aren't that reassuring. According to the BP Statistical Review of World Energy 2007, solar, wind and geothermal combined only account for around 1 percent of the world's electricity generation, with the International Energy Agency (IEA) putting solar power's contribution to the global energy supply at just 0.039 percent. In the United States, solar power meets less than 0.01 percent of electricity needs, according to the Los Angeles Times.

To repeat: globally, solar power's contribution to the global energy supply was less than 0.04 percent in 2007. Zero point zero four per cent.

In the US: 0.01 percent. Solar power's contribution to the US energy supply was about 0.01 percent. If we double that: 0.02 percent. Double that again, and we are up to a whopping 0.04 percent. If we double that again, we are up to an even more whopping 0.08 percent, not even 0.1 percent.

I am unable to think of one of anything in which 0.1 percent even means anything. That's a rounding error in almost any endeavor.

Worse: Solar panels/solar energy as presently used in most situations does not allow dual use of the surface area. See Apple's new complex in North Carolina.

Germany, Spain, and the Netherlands have suspended all renewable energy initiatives, based on what I've read and posted in the past. I'm sure folks can find links that suggest otherwise.

I probably won't post any comments so don't write any long notes in reply.

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Two things tire me out: my granddaughters and comments suggesting that solar energy will make a difference in global energy in the next century.

Results of August, 2012, State Lease Sales; Warning

Warning: I am absolutely worn out with all my activities with the grandchildren over the past few days. We have been all over Los Angeles County and Orange County in southern California.  I am a bit burned out with all the 2Q12 earnings data. Therefore, I assume I will be making more typographical errors than usual. Proceed with caution. If something doesn't make sense, I probably made a mistake. Let me know.

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I had forgotten all about this. A reader reminded me; thank you.

The lease results:

• For all leases
• For August, 2012

This quarterly sale did not amount to much.

Some numbers rounded below:

The highest bonuses paid were in McKenzie County:

$10,500/acre for 22 acres
$8,250/acre for 62 acres
$8,100/acre for 165 acres
$8,000/acre of 230 acres

The best Divide County got was about $2,000/acre

No lease acres sold in Mountrail or Williams County; only 140 acres in Dunn County

Dollar totals:

Billings: $6,760 for 320 acres
Bottineau: $7,643 for 1,677 acres
Bowman: $170,483 for 1,907 acres
Divide: $7 million for 5,000 acres (numbers rounded)
Dunn: $24K for 140 acres
McKenzie: $4 million for 643 acres
Renville: $4,490 for 80 acres
Slope: $266,000 for 6,656 acres
Ward: $1,850 for 80 acres

Week 32: August 5, 2012 -- August 11, 2012

No links but several stories on decreasing rig counts this past week

No links but several stories regarding 2Q12 earnings

The Bakken, general
It is still the gold standard 
Mississippi Lime vs the Bakken; the Bakken is still the gold standard
Twenty-three new permits in one day
Proved US reserves in 2010 grew the most since records began in 1977
August state lease sales

For investors only
Something going on with OAS?
KOG vs OAS 

Operators
CLR to raise 2012 CAPEX significantly
Random note on Whiting's Starbuck prospect in eastern Montana
Update of ONEOK's activities in the Bakken
Whiting's Pronghorn Prospect: the Obrigewitch wells
OXY getting its groove back? New fracking teams?
Random update of a BR Midnight Run well; almost 100,000 bbls in little over a year

Pipelines
Seaway reversal, WTI-Brent spread

State budget
Anticipate doubling of oil tax revenue

Human interest stories
Moving to Williston, best thing I ever did