Monday, August 13, 2012

Wells Coming Off Confidential List ; Slawson, BEXP, and XTO Report Nice Wells; Twelve (12) New Permits; Tuesday Links (Starting Monday Night)


Independent Stock Analysis: if you have time to read just one article today, read this one


RBN Energy: Eagle Ford, Part IV, Transportation Costs
Eagle Ford crude production is increasing rapidly and the rush to deliver it to market has created an infrastructure boom. US Gulf imports are already declining as Eagle Ford and Bakken crude start to reach the Gulf Coast in significant quantities. Today we survey the transport costs that Eagle Ford producers pay to get their crude to market.

Twelve (12) new permits, Monday, August 13, 2012 --
  • Operators: Petro-Hunt (3), Hess (3), Samson Resources (2), Whiting (2), American Eagle, North Plains Energy 
  • Fields: New Hradec (Stark), Colgan (Divide), Four Bears (McKenzie), West Ambrose (Divide), Green River (Stark), Saxon (Dunn), Robinson Lake (Mountrail)
Coming off the confidential list, Tuesday:
  • 20906, 1,965, XTO, Arley 21X-18B, Grinnell oil field, t4/12; cum 29K 6/12;
  • 21870, 420, Petro-Hunt, Agribank 157-101-34C-27-1H, Otter, t4/12; cum 11K 6/12;
  • 22134, 627, CLR, Feller 1-22H, Lone Tree Lake, t6/12; cum 14K/ 6/12;
  • 22188, 470, CLR, Points 1-6H, Stoneview, t5/12; cum 3K 6/12; 
Producing wells that were completed:
  • 21397, 1,004, Slawson, Wolverine Federal 1-31-30H, Elm Tree; middle Bakken; no frack data posted as of August 14, 2012
  • 19538, 1,152, Hess, AN-Gudbrandson-153-94-2215H-1, Elm Tree; gas throughout the lateral averaged 2,767 units while drilling and spike to as much as 9,995units at connections; a Three Forks well;
  • 20166, 377, Hess, EN-Johnson-155-94-2017H-3, Mountrail,
  • 21819, 725, Hess, BL-A Iverson-155-96-1213H-3, Williams
  • 19304, 174, Sinclair, Crosby Creek 1-5H, Dunn
  • 22061, 1,837, BEXP, Anderson 28-33 2TFH, Mountrail
  • 22032, 80, Hess, AV-Flugge-162-94-1918H-1, Burke,
  • 22055, 697, Hess, GO-Tong Trust A-157-96-2932H-1, Williams, 
Opened? We'll see. 
Secretary of the Interior Ken Salazar on Monday outlined a proposed plan to open additional acreage in the National Petroleum Reserve in Alaska (NPR-A) for oil and gas development.

The proposed plan would make approximately 11.8 million acres available for leasing. Salazar said the move would make the vast majority of projected oil resources in the NPR-A available for leasing.

In March, Interior released the draft Integrated Activity Plan and Environmental Impact Statement (IAP/EIS), which included four future management alternatives for the NPR-A.
If the link doesn't break, you will love the photo with Ken in a 10-gallon hat; great photo op as we go into the election cycle. I assume we will see him in Carhartt work clothes on a work-over rig in the Bakken.

By the way, for the women working in the Bakken, visit Sorel boots; also at Home of Economy, Williston, ND. And while I'm at it, Home of Economy has Carhartt.


I was taken to task earlier this year when I posted a link to a story in which one analyst suggested we will see $5 gasoline this year. Well, we have $5 gasoline in Los Angeles, and it has yet to rise much following the refinery fire --> 19 cents according to Bloomberg.

Then this: it looks like oil may trend higher -- Bloomberg. 
Oil snapped two days of losses in New York on speculation that inventories declined for a third week in the U.S., the world’s biggest crude consumer. 
And, just in time for the election, gasoline prices surge above year-earlier levels -- Bloomberg. 

Energy Revolution -- "Is This The Tip of the Iceberg?"


August 14, 2012: in the very last paragraph of the original post, I wrote:
Ask the Japanese about how advantageous nuclear power is when it comes to producing less carbon dioxide.
Today it is being reported:
Prairie Island nuclear plant shut down Unit 1 after operators declared its two backup diesel generators inoperable Tuesday.

Staff determined during routine testing that both generators had exhaust leaks, Xcel Energy media relations spokeswoman Mary Sandok confirmed. That deemed them inoperable, and the plant filed an incident report of the safe shutdown with the Nuclear Regulatory Plant.
... the unusual white steam clouds released throughout the day during the reactor shutdown – are ominous reminders of the fact that the 40-year-old Prairie Island Nuclear Generating Plant operating a half-mile from our homes relies on aging technology.
This sort of puts oil spills in the correct perspective.

Original Post

I linked this article elsewhere, but it's such a great article I thought I would post it again, make some notes. Don sent it to me early this morning: America's energy revolution could add 3.6 million jobs and "add 3% to the GDP."

For investors, I think this article has a lot to offer. 

The article noted:
So far, the economic benefits have been confined to states such as Louisiana, Texas and North Dakota, while the national jobless rate has stayed above 8 percent for 42 straight months in the wake of the worst recession in seven decades.
I find that observation interesting because there are huge oil, natural gas, and coal reserves across the US.  All things being equal, if states other than Texas, Louisiana, and North Dakota, are not participating in the energy revolution, it's related to federal and state government policies, and not to lack of potential. For starters, the following states should all be participating in the energy revolution: Alaska, California, Colorado, Wyoming, Montana, New York, Pennsylvania, Ohio, Nebraska. I probably missed a few.

The article noted:
The report from Citigroup -- "North America, the New Middle East?" -- estimated that the U.S. could become the world's largest producer of crude and natural gas liquids such as propane by 2020, overtaking Russia and Saudi Arabia. 
Companies mentioned in the article, near New Orleans:
  • Nucor: new iron-processing plant an hour upstream from New Orleans
  • Westlake Chemical Corp
  • Potash Corp of Saskatchewan
  • Methanex Corp
  • Ormet Corp: re-opened an alumina refinery last year, 250 jobs brought back
Data points from the energy revolution:
  • US natural gas production will expand to a record this year
  • Oil production in the US at highest level since 1999
Michael Feroli, chief US economist for JPMorgan needs to get out and about a bit more:
Oil and gas production account for about 1 percent of gross domestic product, and will have a limited impact on the country's unemployment, he said. 
Energy is dirt-cheap in the US compared to the rest of the world:
This is one of those rare opportunities that every country looks for and few ever get. This abundance of energy gives us an opportunity to rebuild our economy.
An opportunity...if the government gets out of the way.

Other data points
  • $138 billion to be invested in natural gas gathering and processing plants
  • $88 billion to be invested in > 500 gas-fired utility plants
  • new petrochemical and fertilizer projects; benefitting from glut of wet natural gas
  • increased rail links from East Coast to gulf and midwest
Other companies mentioned
  • Orascom Construction, Cairo-based: $250 million to re-start an ammonia and methanol plant in Beaumont, TX
  • Orascom Construction, subsidiary: might build a $1.3 billion fertilizer plant in Iowa; 2,000 construction jobs; 165 permanent positions
  • Cheniere Energy's $10 billion gas-export plant at Sabine Pass, Louisiana
  • EPD and Enbridge: Seaway reversal project
  • MMR, Louisiana-based contractor: will double its workforce of 2,800 in next two years; can't keep up with electricians, pipefitters, and welders (thank goodness we're in a recession)
China consumption: will drive natural gas consumption almost 3% per year through 2017 (I have no idea how they can forecast with such specificity when analysts miss on monthly unemployment numbers).

It could be the tip of the iceberg, the article concludes. Or "morning in America" with the right leadership, and the right attitude.

It's a great article. Go to the link. Spend some time thinking about all that was not said, and all that was said. It's quite remarkable. But only three states (Lousiana, Texas, and one other one whose name escapes me at the moment) are participating in this energy revolution.

By the way, I had to chuckle at this politically-correct statement that was probably added by the editorial staff, and not the journalist:
Lower gas and oil costs have also undermined investment in power sources that produce less carbon dioxide, including wind, solar and nuclear, raising concern that climate change will accelerate. 
I guess they would be referring to the billions spent on Solyndra et al by the federal government before they pretty much filed for bankruptcy en masse.  Ask the Japanese about how advantageous nuclear power is when it comes to producing less carbon dioxide.

More Housing -- The Bakken, North Dakota, USA

I've been getting e-mails from readers about all the oil-related activity in the Minot area. It's an interesting phenomenon to watch. Minot is just under the radar in terms of the Bakken. I think there's a lot more going on there than folks are aware; certainly more than I am aware.

Folks have been writing me with anecdotal examples of Minot's growth over the past couple of years; some requested the information not be posted and in other cases, I couldn't post more than what might be a rumor.

The first story of the Baker Hughes complex in Minto; then the recent story of the Berthold grain elevator; then a note about activity between Lansford and Maxbass; then the Port of North Dakota story; and now this story: a flurry of activity in Burlington could see 1,500 housing units in this small town west of Minot, link to The Bismarck Tribune.

I know Burlington very, very well -- at least to the extent that one knows a town by driving through it a thousand times in one's life. When we got to Berthold, coming from Williston, we knew we were just minutes away from McDonald's in Minot. I think there must have been 33 houses in Burlington when I drove through it during my college years. I remember having a crush on a senior who hailed from Burlington attending Augustana College when I was a freshman. It was but a 20-hour crush -- the car ride one Thanksgiving from Augustana to Williston. And maybe the return trip. Or something like that; I've forgotten the drive; I've not forgotten the beautiful woman. She had a distinctive nickname; I'm sure folks would recognize it and she may not appreciate it. Smile.

But I digress. Here's the lede from The Bismarck Tribune story (sent to me by Don):
Hundreds of additional houses could be dotting the landscape of an expanded Burlington city limits in a few years.

The sight of heavy equipment forging a road up the terrain behind what is known as Speedway corner, west of Minot, is just the beginning of construction yet to occur this year and next.

Developers of Highlands Ranch Subdivision are preparing infrastructure to accommodate around 1,500 housing units, which could be built over the next five to seven years.

The master-planned community will include single-family and multi-family homes. Property closest to U.S. Highway 2 & 52 is set aside for commercial uses such as retail and professional offices.
The population of Burlington in the 2010 census was 1,060.

MondayLinks; SSN News; BEXP and KOG With Nice Wells; OXY Fail; Google's Motorola Division To Close One-Third of US Offices; Harold Hamm; CLR To Issue $2 Billion in Senior Notes

Samson Oil & Gas acquires 25% stake within Williston Basin: Co announces it has executed a definitive agreement to participate in the exploration of an area within the Williston Basin. Pursuant to this agreement, co will acquire a 25% interest in 23,700 acres at a price of $266 per acre, with the payment of $1.58 mln due at closing following normal due diligence on land title. The exploration opportunity is a conventional oil project that is adjacent to existing production from Mississippian aged reservoirs. The specific location of the project will remain undisclosed.


Coming off confidential list, Monday:
  • 21218, 463, WPX/Dakota-3, Good Bird 36-25H, Moccasin Creek, t7/12; cum --
  • 21492, 460, Hess, GO-Walt Lewis 157-97-2017H-1, Ray, t7/12; cum 8K 6/12;
  • 22017, 341, Oasis, Cathy Edwards Federal 5992 31-2H, Cottonwood, t5/12; cum 10K 6/12;
  • 22384, 2,910, BEXP, Mark 4-9 1H, Williston, t5/12; cum 48K 6/12;
  • 20899, drl, BEXP, Eldridge 29-20 1H, Briar Creek, s2/12;
  • 21462, 866, Whiting, Klefstad 24-25H, Robinson Lake, t3/12 cum 26K 6/12;
  • 21606, 19, OXY USA, Privratsky 1-28-33H-141-95, Simon Butte, t2/12; cum 12K;
  • 21670, 923, CLR, Anderson 1-4H, Willow Creek, t6/12; cum 23K 6/12;
  • 21701, 2,057, KOG, Skunk Creek 13-18-17-9H, Heart Butte, t6/12; cum 19K 6/12;
  • 21855, 1,279, Hess, BL-S Ramberg-155-95-0601H-2, Beaver Lodge, t7/12; cum 16K 6/12;
  • 22182, drl, CLR, Opee 1-23H, North Tioga, s2/12;
  • 21122, 428, Hess, HA-Chapin-152-95-3229H-2, Hawkeye, t5/12; cum 17K 6/12;
  • 21494, drl, Hess, GO-Durning 157-97-2932H-1, Ray, s2/12;
  • 21775, 561, CLR, Syverson 1-1H, East Fork, t5/12; cum 20K 6/12;
  • 99190, drl, Dakota Salts, Sorenson Eby Etal 1, Lignite, SWD

The operators in this list (who is here; who is not here) speaks volumes.

Mr Privratsky was my middle school physical education instructor.

Just when I thought OXY was getting its groove back: an IP of 19 for a Bakken well.

For newbies: the IPs above are almost predictable. Over the years, there has been a lot of chatter about BEXP "inflating" IPs (whatever that means) but look at the BEXP production for the Mark 4-9 well: 48K, far exceeding any other report above. I doubt those participating in this well are complaining. KOG has a very nice well -- another Skunk Creek well in Heart Butte


RBN Energy: Halloween, 2012 -- year-over-year natural gas production will start to show a decline. Finally.
It just so happens that if you extend the 2012 average on out for the next few weeks, it intersects the 2011 trend line on October 31, 2012 – Halloween.  After that point, if there is no change in the 2012 gas production growth trajectory, the year-on-year difference between 2012 and 2011 will no longer be positive.   Due to the slight drop in late 2011 and early 2012, even flat production will show a year-on-year decline.  I’m guessing that that will be big news when the media gets ahold of the statistics.


So, natural gas is at an all-time low; there's a glut of a natural gas. The drought is destroying the US corn crop. Corn prices may reach record highs. In another universe, the EPA mandates additional corn be turned into biofuel. The G20 plans an emergency behind-the-doors meeting on escalating price of food worldwide. Meanwhile the president who killed Keystone XL ...
...arrives in corn-growing Iowa for a three-day tour on Monday. He will be entering a fierce debate in the run-up to the presidential election on whether the grain is worth more as food or biofuel.
The conversations behind closed doors among senior G20 and UN agriculture officials come after the cost of corn, or maize, surged to an all-time high, surpassing the level seen during the 2007-08 food crisis.
The president has three options. It will be interesting to see which option he chooses when he visits Iowa where they love ethanol only slightly more than they love wind energy.

 Wow, wow, wow. This article doesn't mention Apple, but Apple's dominance is all over this article. Google recently bought Motorola Mobile. Google has announced it will lay off 20% of its workforce worldwide and close one-third of its offices in the US, to streamline its mobile phone operations.
Motorola Mobility has told employees it plans to slash 20 percent of its workforce and shut down nearly a third of its offices worldwide, the New York Times reported. 

 One-third of the 4,000 jobs lost will be in the United States as the company plans to exit unprofitable markets, stop making low-end devices and focus on a few cellphones instead of dozens.
In California, the iPhone is everywhere; everyone has an iPhone.


Human interest story on Harold Hamm (again); this time in the Washington Post. Thank you to a reader for sending me the link. 
One has to chuckle. The writer noted that Harold Hamm's casual conversation now comes under greater scrutiny, like the time he said Dickinson's McDonald's is the second busiest in the world. The Post pointed out that was incorrect. It would be Williston's McDonald's. It's easy to confuse Williston with Dickinson when one is from out-of-state. 

It was nice to see the Washington Post pointed out that Harold Hamm did win his case in court when his company was charged with the death of one -- repeat, one -- migratory duck during perhaps the worst spring flooding in North Dakota history. [Slicers and dicers kill hundreds of thousands of migratory birds, eagles, and bats annually, to help put things into perspective, something the Post did not point out.]

Speaking of Continental Resources:
Continental Resources, Inc., announced today that, subject to market conditions, it intends to offer $700 million in aggregate principal amount of new senior notes in a private placement to eligible purchasers. The new notes will be part of the series of 5% Senior Notes due 2022 issued by the Company on March 8 , 2012.
Continental Resources, Inc. (" Continental " or the "Company") (NYSE: CLR) announced today the pricing of its private placement of $1.2 billion of new 5% senior unsecured notes due 2022.  The new notes will be issued pursuant to the March 8, 2012 indenture applicable to its previously issued $800 million aggregate principal amount of 5% senior unsecured notes, resulting in a total of $2.0 billion aggregate principal amount of 5% senior unsecured notes being issued pursuant to the March 8, 2012 indenture.  The new notes were sold at 102.375% of par, resulting in a yield to worst of 4.624% with respect to the new notes.  The offering is expected to close on August 16, 2012 , subject to customary closing conditions.