Thursday, August 16, 2012

A Glut Of Oil At Cushing, the Coast -- Plan "B" -- Release Oil From Strategic Petroleum Reserve Before the Election


August 17, 2012: from Oil and Gas Journal -- oil prices rise despite talk of SPR release. See note below

August 17, 2012: The IEA "bases our actions on data and reality. The market is sufficiently supplied," reporters were told in Houston -- in response to the president's suggestion to dust off "Plan B" -- tap the SPR.

Analysts suggest tapping the SPR will raise prices; we've been through this analysis before. Apparently the White House bases their actions on political data, fantasy, and ideology.

Original Post
Link here.
The White House is "dusting off old plans" for a potential release of oil reserves to dampen rising gasoline prices and prevent high energy costs from undermining the success of Iran sanctions, a source with knowledge of the situation said on Thursday.

U.S. officials will monitor market conditions over the coming weeks, watching whether gasoline prices fall after the September 3 Labor Day holiday, as they historically do, the source said.

It was too early to say how big a drawdown would be from the U.S. Strategic Petroleum Reserve and, potentially, other international reserves if a decision to proceed was taken, the source said.

Oil prices have surged in recent weeks, with Brent crude prices closing in on $120 a barrel, up sharply from around $90 a barrel in July. The United States and other Group of Eight countries studied a potential oil release in the spring but shelved the plans when prices dropped.
Yeah, like that will help. The incumbent. 

By the way, whatever happened to Keystone XL 2.0?

Twelve (12) New Permits -- The Williston Basin, North Dakota, USA; Nameless Oil Field

Coming off confidential list, Friday, August 17, 2012
  • 19963, 496, Whiting, Littlefield 12-29TFH, Sanish, t2/12; cum 33K 6/12;
  • 20554, 1,802, Zenergy, Nelson 11-2H, Banks, t4/12; cum 36K 6/12;
  • 21732, 1,373, XTO, Stromme Federal 14X-10A, Haystack Butte, t5/12; cum 41K 6/12;
  • 21780, 705, Hess, SC-David 157-99-2932H-1, Lone Tree Lake, t7/12 cum 11k 6/12;
  • 22035, drl, BEXP, Strobeck 27-34 3TFH, Alger, s2/12
  • 22063, 1,842, BEXP, Anderson 28-33 4TFH, Alger, t6/12; cum 10K 6/12;
  • 22309, 563, G3 Operating (Halcon), Thome 1-6-7H, Strandahl, t5/12; cum 10K 6/12;
Twelve new permits, August 16, 2012
  • Operators: BEXP (8), Enerplus (2),Whiting, XTO
  • Fields: Hay Creek (McKenzie), Nameless (McKenzie), Spotted Horn (McKenzie), Last Chance (Williams), Capa, Williams
Nameless Oil Field

Nameless oil field: a six-section field two miles west of Alexander.

In section 3-150-102 in Nameless oil field, these four wells:
  • 8530, 8, Petro-Hunt, Alexander 3-7, t11/81; cum 508K 6/12; a vertical welll; still producing about 300 bbls/month; spud in 1981, this well has produced for 30 years; a Madison well;
  • 14432, 57, Petro-Hunt, Link 3-1, t1/97; cum 162K 6/12; a short directional well targeting the Madison formation; still producing about 250 bbls/month;
  • 15759, 115, Petro-Hunt, Romo 3C-2-1H, t11/05; cum 70K 6/12; producing about 450 bbls/month; a short horizontal targeting the Madison formation, also;
  • 17743, 533, Petro-Hunt, Focht 3D-4-1H, t8/10; cum 48K 6/12; producing about 1,500 bbls/month; targeted the Bakken; 14 stages; 1 million pounds of proppant; spud June 11 and reached total depth July 7, 2010 -- less than a month; a trip gas of 3,936 units and a 3-foot flare;
In section 34-151-102 in Nameless oil field, this one (1) SM Energy well:
8322, multiple payzones, SM Energy, Link 34-1,
  • Duperow, 486, completed, 1986; PNA, 1997: cum 214K bbls
  • Madison, 91; completed 1997; cum 160K bbls, produced 566 bbls 6/12;
  • Red River, 142, completed, 1981; PNA, 1982; cum 20K bbls
  • Silurian, 340, completed 1982; PNA, 1986; cum 207K bbls
Total to date:  > 600K bbls 6/12;

In section 34-151-102 in Nameless oil field, this one (1) SM Energy well:
13556, two payzones, SM Energy, Church 1-2X, a plain vanilla vertical well
  • Red River, 186, completed, 1993; cum 124 K 6/12; has not produced since 2006
  • Stonewall, 140; completed 1994; cum 268K bbls 6/12; producing about 1,300 bbls 6/12; 
Total to date: > 392K bbls 6/12;


This is worth watching, but only if you watch it to the end:

Wow, Wow, Wow --- CO2, Market Forces, and All That Jazz

Lowest CO2 emissions from the United States in 20 years.
In a surprising turnaround, the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years, and government officials say the biggest reason is that cheap and plentiful natural gas has led many power plant operators to switch from dirtier-burning coal.

Many of the world’s leading climate scientists didn’t see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide, a greenhouse gas that traps heat in the atmosphere.
The drop occurred despite all the flaring in the Bakken. 

This is not entirely true....that part about "market forces only." The government has put in strict environmental controls. In fact, I assume the president should take credit for this turnaround when he defends his well-known position to kill the US coal industry. 

One of the hottest US summers on record; record drought; and CO2 emissions at a 20-year low.

Just saying.

The story continues:
In a little-noticed technical report, the U.S. Energy Information Agency, a part of the Energy Department, said this month that total U.S. CO2 emissions for the first four months of this year fell to about 1992 levels. The Associated Press contacted environmental experts, scientists and utility companies and learned that virtually everyone believes the shift could have major long-term implications for U.S. energy policy.
Like fracking.

Just saying. 

For Doubting B. Thomas: Apple Hits An All-Time High

From MacRumors:
Apple's stock price closed at an all-time high of $636.34 today, passing the prior all-time closing high of $636.23 set four months ago on April 9th. The next day, April 10th, the stock hit an intraday high of $644 and the company's market capitalization breached $600 billion before falling back. Apple's stock price is up nearly 60% on the year, outperforming the NASDAQ by more than 3:1 and the Dow Jones Industrial Average by more than 6:1. 
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this blog. 

Any bet that the iPhone is the #1 smart phone in the Bakken?

For Doubting B. Thomas: Busiest McDonald's, Wal-Mart, and Gas Station in the World

From Williston, the heart of the Bakken, Motley Fool reports:
This summer I visited the Williston Basin twice and had a chance to see first hand the massive boom that was going on there.  I fueled at the busiest gas station in the world.  I ate at the busiest McDonald's in the world.  I bought a T-shirt at the busiest Wal-mart in the world.  All this in the town of Williston with a population of under 100,000 permanent residents. As far away as Devils Lake, we watched heavy truck traffic on the newly repaired U.S. Highway 19 as we hooked Walleye over flooded railroad tracks.
Devils Lake is pretty much 250 miles due east of Williston. 

But that's not why I posted this note. Rather, this:
Among those who follow the energy industry, the Bakken Oil Shale might seem like old news. But for everybody else, it is still only on the periphery of their investing consciousness.  This is good for those who want to establish positions in some of the wonderful companies associated with the Williston Basin oil shale plays as many stocks are not pricing in relatively easy-to-predict future free cash flows. 
That is so true: once one gets east of Minot, the likelihood of finding someone who has heard of the Bakken drops off precipitously. For investors, the "easy money" has been made in the Bakken.


Disclaimer: this is not an investment site. Do not make any investment decision based on anything you read at this site.


However, having said that, in the big scheme of things, investments in Bakken-centric equities are no doubt trivial compared to the immensity of the market. As Motley Fool says: for everybody else, the Bakken is still only on the periphery of their investing consciousness. My hunch is that a sizable percentage of folks living in Fargo, North Dakota, could not fully explain the Bakken, much less any one in New York City.

Go to the link to see what Motley Fool has to say.

Director's Cut, August, 2012; Less Than 50% of Bakken Oil Production Is Now Moved by Pipeline

Wow, the comments by the Director are some of the most interesting ever. Two things jumped out at me: remember all those slides that said pipeline takeaway capacity was adequate? See the comments below. Huge story. Should be a headline story in the Dickinson Press/InsideClimate News. The second point that jumped out at me: 347 wells waiting to be fracked.

Oh, a third point: the Bakken is an OIL field, not a natural gas field, and yet, the rate of increase in the production of  natural gas is exceeding the rate of increase in oil production in the Bakken. Or something to that effect; see comments.

Director's Cut, PDF here.

Production hits all-time high in North Dakota (again):
  • May, 2012, oil: 639,277 bopd
  • June, 2012, oil: 660,332 bopd (new all-time high)
  • May, 2012, producing wells: 7,205
  • June, 2012, producing wells: 7,352 (new all-time high)
Permitting (all time high: 245, 2 Nov 10)
  • May, 2012: 180 drilling
  • June, 2012: 204 drilling
  • June, 2012: sweet crude,  $72.58
  • May, 2012: sweet crude, $79.44
  • April, 2012: sweet crude,  $78.17
  • Mar, 2012: sweet crude,  $76.29
  • Feb, 2012: sweet crude, $83.26
  • Jan, 2012: sweet crude, $88.09
  • Dec, 2011: sweet crude, $88.75
  • Nov, 2011: sweet crude, $88.54
Director's comments:
The idle well count stayed about the same indicating an estimated 347 wells waiting on fracking services. This is expected to lead to significant production increases throughout the summer as additional fracking crews are added.  
Crude oil takeaway is now less than 50% of daily production, but rail and truck transportation are adequate to keep up with near-term production projections. The number of rigs on federal surface is steady at 3.

Daily natural gas production is increasing at the same rate slightly faster than oil production. this indicates that gas/oil ratios may be increasing and more gathering and processing capacity will be needed. Construction of processing plants and gathering systems is in full swing due to the dry summer weather. 
See the Director's Cut at the link above for EPA issues, comment period on fracking, and mailing addresses to make your voice heard.

North Fork Oil Field


October 16, 2012: I see Abraxas has a 4-well pad in Pershing oil field --
23622, 1,225, Abraxas, Lillibridge 20-17-1H, Pershing, t7/13; cum 190K 12/14;
23623, 1,040, Abraxas, Lillibridge 20-17-2H, Pershing, t7/13; cum 137K 12/14;
23624, 1,235, Abraxas, Lillibridge 20-17-3H, Pershing, t7/13; cum 173K 12/14;
23625, 1,275, Abraxas, Lillibridge 20-17-4H, Pershing, t8/13; cum 94K 12/14;

Original Post
  • 21,000 net acres in the Bakken (ND + MT); 20,853, SeekingAlpha, 2011
  • BEXP presentation says Abraxas has 20,853 net acres
  • Nesson: 2,600 net acres; nice acreage
  • Carter: 3,200 net acres; northeast of best Bakken; +/- value
  • North Fork: 3,200 net acres; nice acreage
  • Elkhorn Ranch: 2000 net acres; southwest North Dakota
  • Elm Coulee: 440 net acres; where it all started in 2000
  • Harding: 5,800 net acres; Williston area; nice area
  • Sheridan: 3,000 net acres; Montana northwest of Williston (quality?)
File numbers for Abraxas go back to the 1980's.

The more recent Abraxas permits:
  • 19249, PNC, Bonetrail, Duperow Pool,
  • 19237, 862, Abraxas, Stenehjem 27-34-1H, Bakken, North Fork, t7/11; cum 125K 12/14;
  • 19331, PNC, Bakken, North Fork,
  • 19054, 1,008, Abraxas, Ravin 26-35-1H, North Fork, t1/11; cum 155K 12/14;
  • 22996, 761, Abraxas, Jore Federal 2-11-3H, North Fork, t10/12; cum 132K 12/14;
  • 22995, 1,160, Abraxas, Jore Federal 2-11-1H, North Fork, t6/14; cum 94K 12/14;
  • 22994, 1,049, Abraxas, Jore Federal 2-11-4H, North Fork, t5/14; cum 105K 12/14;
  • 22993, 790, Abraxas, Jore Federal 2-11-2H, North Fork, t6/14; cum 89K 12/14;
  • 21995, 706, Abraxas, Ravin 26-35-3H, North Fork, t2/13; cum 76K 12/14;
North Fork is literally in the heart of the Bakken, about 10 miles southeast of Watford City. It is the most irregularly shaped oil field I have "reviewed" to date. It is about 40 sections -- squeezed in between Croff, Bear Den, Haystack Butte, Pembroke, Siverston, and Pershing -- all very good fields, and just south of the heart of the Bakken, the northeast corner of McKenzie County.

Thursday Links: AXAS - Plenty of Water for Fracking; CBR Narrows the WTI-Bakken Differential; Permian Will Exceed Takeaway;

I will be out and about the rest of the day, so I am consolidating a bunch of links. A little bit for everyone. For newbies: I generally post a dozen stand-alone posts every day, so scroll down for new posts so far this morning. More will be coming this evening.

I will be out and about when I miss the announcement that Hillary has replaced Joe.  With Paul Ryan as the Republican VP selection, it's time for Barry to get serious. Enough of Joe's gaffes. If folks think Paul Ryan energized both camps, wait until Hillary is named.

RBN energy: CBR -- narrows the WTI-Bakken differential

Bentek: Permian oil will exceed takeaway capacity next year (Reuters: "outside the housing industry, the rest of the American economy has looked wobbly..." -- are they kidding?)
Crude oil production in the Permian basin -- a carbonate and sandstone prospect in Texas and New Mexico -- will rise by some 60 percent to reach at least 1.82 million barrels per day by the end of 2016, energy consultancy Bentek said on Wednesday.

Output will surpass existing pipeline capacity by early next year, Bentek added, while noting some 1 million bpd of new takeaway capacity is slated to come online by the end of 2014.
Don sends the following, page 14 of the AXAS presentation, August 9, 2012:
That's a good question, John.

North Dakota, luckily, is a very pro-business, pro-industry state, as you know. We have been a little bit more proactive in that ... we have actually discovered, if you will, a subsurface aquifer of water that's not quite potable, so you can't put it on your crops, you can't drink it .. but it's adequate for fracking wells. We are actually in the permitting process to drill a water supply well on our existing land [where] we own the surface. We're in the process of building a big, freshwater lake, which should be completed by next week. That well will be pumped into the lake. That lake will serve all 30+ wells that we plan to frack in the area by pipeline. We won't have to truck it. It's a tremendous cost-savings for us, and it also could be a source of revenue for selling water to other operatros in the area.
So, we don't see any issue with water in North Dakota. We don't see any issue with water in south Texas. There's plenty of subsurface water there, despite what the media would lead you to believe. So, we don't have the issues that you have in the Marcellus, plus most of the citizens in Texas and North Dakota support the industry, which again, you don't have up there, unfortunately. 
Seven more Americans killed in Afghanistan. Helicopter crash. Way overdue to get out of this quagmire.  Should have been out years ago.

Seventy-one percent of voters want more oil and gas development. Well, duh. The president's approval rating, down to about 43%.

The Good, The Bad, And The Ugly

EPA on verge to approve sorghum for ethanol.
The federal government is on the verge of approving a grain mainly used as livestock feed to make a cleaner version of ethanol, a decision officials say could give farmers a new moneymaking opportunity, boost the biofuels industry and help the environment.

A plant in western Kansas already is gearing up to take advantage, launching a multimillion-dollar renovation so it can be the first to turn sorghum — a plant similar in appearance to corn — into advanced ethanol. Advanced biofuels result in even less lifetime greenhouse gas production than conventional biofuels, measuring from the time a crop is planted to when the fuel is burned in a vehicle.
Theme by Ennio Morricone

Random Note for Newbies: Keep An Eye on the Three Forks

There has always been chatter that the Three Forks formation will produce wells every bit as good as the middle Bakken, and perhaps better.

As you scroll through this site, note the outstanding Helis Three Forks wells in the Grail oil field, and the nice TFS wells being reported by Whiting.

Most of the TFS wells will be in the south/southeastern edge of the Williston Basin profile.  Though somewhat dated, this article will help bring you up to speed on formations in the Williston Basin. For those serious about the North Dakota oil and gas industry, the link should be bookmarked.

The Economy: I Can't Make This Stuff Up

Note: results of wells coming off confidential list today have been posted.  Helis reports another nice well in Grail oil field. Whiting has a great TFS well.


Misery index: New Jersey employment now at 9.8%; highest since 1977.


Remember: the magic number is 400,000

The Reuters headline: "Jobless claims trend shows job market slowly healing."

Then the lede:
The number of Americans filing new claims for jobless benefits edged higher last week although a trend reading fell close to a four-year low, pointing to healing in the still-struggling labor market.
Then the second paragraph:
Other data on Thursday showed groundbreaking on new homes fell in July in a reminder of the housing market's weakness despite some recent signs of recovery.
Other data points from the article:
  • "economic growth could pick up in the second half...but even then, the recovery is seen to be lackluster and perhaps in more support from the Federal Reserve."
  • still looking at Fed action in September
  • four-week moving average...lowest since March
  • the last line: "outside of housing, the broader economy has looked wobbly this year...."
Outside of housing, the broader economy has looked wobbly. What?

No mention of the energy revolution in the mid-section of the United States. Incredible.

Outside of housing, the broader economy has looked wobbly. What?

New claims edged higher: trend shows job market slowly healing. Just in time for election cycle.  

What else the article did not mention:
Wal-Mart Stores Inc., the world's largest retailer,  reported second-quarter sales that trailed analysts' estimates amid slowing gains in the U.S
Maybe tracking Wal-Mart sales is the best indicator of the health of the economy. When the bellwether company in a depressed economy reports lackluster results, it can't get much worse.

Oh, the initial claims number rose 2,000, to 366,000. The article (op-ed piece?) failed to note that the jobless claims actually dropped by 6,000 last week, only to rise again this week. And Reuters sees this as signs of a healing economy?

Idle Chatter Regarding Recent Forbes Article On Warren Buffett


August 17, 2012: I posted the original post earlier this week. Now, on Friday, this "Daily Ticker" story: gasoline prices will continue to rise until US builds more refineries. We all know that ain't gonna happen. My hunch is that Warren knows that also. See original post.
Original Post
This is simply idle chatter. It was a reply I sent in e-mail in response to an article in Forbes on-line. It is nothing more, nothing less; it may not be ready for prime time, but I'll throw it out there for archival purposes. It has to do with the article in Forbes with regard to what is Warren Buffett doing with all that cash on hand?

Here's my reply:
I've always like Sosnoff in Forbes. I posted a link to one of his great oil articles over a year ago:
Sosnoff is one of the reasons I hated giving up my subscription to Forbes. But too much free stuff and I'm on the road a lot, missing my mail. I don't like to subscribe to magazines on the net.
With regard to Buffett and his cash:
1) I would really wonder about the regulators if they let him buy another railroad, especially Union Pacific, about the only true competitor of BNI. It would be a win-win for me. After he bought BNI (I kept the BKR-B stock) I started accumulating Union Pacific.
2) I think Warren Buffett is old school. He likes to keep cash on hand; he can sleep better at night. 
3) Buffett's biggest asset is that he doesn't worry about quarterly reports (or so he says); I don't think he even thinks in yearly increments; he has a longer term horizon. He may not "buy and hold" forever, but he certainly does "buy and hold" for a long time.
4) He missed technology (Apple, Google, Amazon). But he could have gotten sucked into RIMM, Facebook, Groupon if he had played momentum. If, in technology his only fault is not buying Apple, he more than made up for it by not buying Nokia, Sprint, RIMM, Facebook, and a host of others. I will give him a pass on Apple.

5) Back to your original question: what is Warren doing or going to do? I think he is looking at oil service companies. Outside of oil service companies, possibly refineries. Refineries have never been a winner long term, but one has to really look at what Tesoro is doing. "Everyone" is getting out of the refinery business except Tesoro, it seems. Not necessarily getting out, but spinning off, downsizing, selling, etc. Tesoro is buying BP in a crunch from what I can see. My hunch is he has a group of MBA's looking very, very hard at the energy picture knowing the demographics and energy needs of China. 
6) Warren, living in Omaha, Nebraska, must be inundated with news stories on the Mississippi Lime, assuming he reads the local news any more. He has to have seen that no matter how hard Obama stomped on the oil and gas industry, it was about the only industry that thrived; imagine what the industry could do with a little "cheerleader" support from the government.
Anyway, my 2 cents -- maybe I will post that.