The Million Dollar Way (The Bakken Oil Blog): 08/17/12

Friday, August 17, 2012

$7.5 Million Pea and Lentil Splitting Facility, Williston, North Dakota

This story is too good to pass up. I feel remiss in not having posted it earlier. [The story was written up in haste so if I made mistakes, let me know.]

Last autumn when I was in Williston, I was introduced to some Turkish families. It was a real pleasure to meet them, even using a Turkish greeting from my days in Turkey to say "hi." To say the least, they were quite surprised. I don't recall if I was told why they were living in Williston. If I was told, I forgot. Now, as I'm writing this, I vaguely remember my sister telling me; she was the one who introduced their translator to me.

A reader sent me a comment tonight that explains everything, this is back in 2009:

Gov. John Hoeven today joined local officials and company representatives for the grand opening of United Pulse Trading Inc., a $7.5 million pea and lentil splitting facility in Williston, N.D. The new facility is capable of cleaning, calibrating, peeling, splitting and color sorting 75,000 metric tons of peas and lentils, making it the largest lentil and pea splitting company in the Americas. Hoeven was joined for the ribbon cutting by president and CEO of Alliance Grain Traders, Murad Al-Katib, Williston Mayor Ward Koeser, and other local officials.

Incredible.

More of the story:

United Pulse is a subsidiary of Saskatchewan-based Alliance Grain Traders Income Fund, the largest lentil exporter in the world. Because North Dakota is the leader in pea and lentil production for the nation, Alliance Grain Traders' expansion into the state was an ideal next step. The State provided $400,000 in interest buydown from PACE and Flex PACE, as well as the North Dakota Development Fund, to assist the company in the purchase, renovation and expansion of the Missouri River Ag Processing facility formerly owned by Superior Grains of Crosby. United Pulse also recently completed a $1 million rail line, dramatically increasing its loading capacity, and has purchased 20 more acres in the Williston Industrial Park for expansions.

"Tonight's Grand Opening marks the completion of the first phase of a multi-phase investment in the state," said Murad Al-Katib, president and CEO of Alliance Grain Traders. "Support from the state and the economic environment in North Dakota is very positive for us. Williston will be a base from which we continue to build our investment in this sector and in the state."

Alliance Grain Traders operates 13 other processing plants in Canada, Turkey and Australia and exports to 85 countries. Al-Katib says the company's future growth plans are focused on North Dakota, as well as Australia and Turkey, with investments planned in lentils, peas, durum wheat milling and beans.

Here's the link. Another link.

Their website.

My dad and I would drive past the industrial park almost every night on our evening drives. The plant is located out by Sanjel and Halliburton in the industrial park east of Williston. Incredible. Simply incredible.

File # For the Well That Blew Out Tuesday, Southeast of Williston

Someone was asking about the well that blewout earlier this week southeast of Williston.

Based on what little I know:

Most likely Zavanna's Nelson 3-10 1H, file # 20085. It's in Long Creek but doesn't have a rig on it on the NDIC GIS map server. One would think there would be a rig on it. But there are no Zavanna rigs in the area with a rig on it on the GIS map server.

A reader did confirm that it was the Nelson 3-10 1H; it was a work-over rig which explains why there was no "rig icon" on the GIS map server. Unfortunately there was one death during the evacuation. Very, very sad.

Link here.

For Newbies: Most of the Monster Wells Have Been Updated

For newbies: you might enjoy looking at "monster wells" in the Williston Basin. Scroll down to "Bakken Formation" at the link. I have updated most of the Bakken wells. We are approaching one million bbls cumulative for several Bakken wells.

KOG: $560K For 80 Bakken Acres

August 16, 2012, North Dakota state's on-line auction:

KOG: 80 acres, southeastern Williams County; $7,000/acre --> $560,240 plus fees.

If you can believe it (that's rhetorical, not literal), 1,079 companies viewed the property; 23 registered to bid; nine (9) bidders in the end.

Source: Petroleum News.

Turkish Construction Company: New Entrant Into The Bakken Oil Patch; First US Project Appears to Be In Williston

This is why I love to blog! What a great story!

I was stationed in Turkey for two years with the US Air Force. We (the entire family) loved it. At least two of us would return in a heartbeat if offered another opportunity.

So, when a reader sent me this story, I couldn't wait to get it posted.

A Turkish construction (?) company has leased some mineral rights in North Dakota. Their stateside address is in Virginia, but their first US project appears to be in Williston.

In addition to leasing,

Serka Services has established a subsidiary, SRK Hospitality, LLC, that is in the process of permitting to build both a hotel and a restaurant in Williston -- the first of several commercial projects per Petroluem News Bakken sources.

With regard to the leasing, some data points:

this was the August 7, 2012, state lease; and, the federal govt's July oil and gas lease sale for ND/SD
Serka is the newest player in the Bakken
Serka Services, LLC, a US subsidiary of Istanbul, Turkey-based Adali Holding
Adali: long-time construction and services contractor for US military
Serka offered the highest bid/acre in both the federal and the state sales
State sale, August 7: highest bid; $10,500/acre for 22.5 acres in McKenzie County -- Serka
State sale, August 7: second, third, and fourth highest bids: $8,250 (62 acres); $8,100 (100 acres), and $8,100 (100 acres) -- Serka
State sale, August 7: fifth highest bid: $8,000 for three parcels (98, 28,and 103 acres) -- Liberty Resources
Federal sale, July 17: $11,000/acre for an 80-acre US Forest Service parcel in Billings County -- Serka

Quotes:

"...there were no surprises in the lease auction results, no "gotchas," except for the emergence of a major new bidder, everything went "as expected..."
"...the amount offered for the 22.5 acres in McKenzie County was "not a surprise. You could tell they really did their homework. None of the acreage Serka selected is on the fringe; they knew exactly what they were targeting. They are stand-up guys; really good people to work with...honest, friendly.."

Again, I may have made errors; I do these quickly; go to the link for the full story.

Interestingly, when I first posted the story about the latest ND lease sale, I saw "Adali Holding." I did not recognize that name, but failed to take the time to research them.

As a side note, from their website:

Adali Group, which acted as a US Army Contractor previously, focused on the Department of State projects in 2011 with Pernix-Serka joint venture. Incirlik Eagle Housing Phase III 05.20.2010.

We lived in Turkish-built housing at the Incirlik Air Base. It was called "Eagle Housing" because the F-15 that the US flew out of Incirlik is known as the F-15 Eagle. (Also Eagle for US mascot; "rank" of senior officer in the USAF and and Army). Incredible story. Thank you to the reader who sent me this story. It brings back fond memories, and adds a new dimension to the Bakken.

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

Wells coming off the confidential list today were posted earlier.

About 70 wells were affected by an operator transfer from Eagle Operating, Inc., to Williston Hunter ND, LLC. Most of these were very, very old wells, but there were some good Madison wells in that mix. For example:

4724, 110, Shong et al 1, Eden Valley, a Madison well, t8/69 (the year I graduated from high school); cum 190K 6/12; it's been pumping between 250 and 300 bbls/month since 1977. It's been producing oil for more than 43 years. Just saying. 300 bbls x $50/bbl --> $15K/month for very little expense. It's biggest expense is probably getting rid of salt water. Anyway, enough of that.

Ten (10) new permits were issued:

Operators: Petro-Hunt (3), Hess (3), BEXP (2), MRO, Slawson
Fields: Strandahl (Williams), Antelope (McKenzie), Manitou (Mountrail), North Tobacco Garden (Mckenzie), Last Chance (Williams)

New 120-Unit Apartment Building To Go Up In Watford City

This link will likely break soon.

Lutheran Social Services (LSS) will soon begin construction of a new 120-unit apartment complex in Watford City pending a final decision by the Watford City City Council to allow the project to use $11 million in city revenue bonds on behalf of LSS.

Data points:

similar to a project by LSS in Watford City 3.5 years ago
using city bonds allows LSS an opportunity to obtain a lower financing rate; no risk to the city
16 units: target low-income; in range of $400 to $600/month
rest of the units: market rate, range upward from $600/month to $1,850/month

Random Update on Three BEXP Wells: The Next Big Thing To Talk About in the Bakken: Re-Work and 8,000 BOPM

Updates

November 7, 2012: nine wells sited in section 9-152-98; two more wells on the 3-well pad (discussed in the original post) that is now a 5-well pad

24243, conf, BEXP, Enderud 9-4 3TFH, Banks,
24244, conf, BEXP, Banks State 16-21 2TFH, Banks,

In that same section:

22938, conf, BEXP, Banks State 16-21 4TFH, Banks,

22939, conf, Enderud 9-4 4TFH, Banks,

22940, conf, Banks State 16-21 3H, Banks,

17514, 486, BEXP, Wil E Coyote 9-2H, Banks, t2/09; cum 40K 9/12; this was the 1st of possibly 25 wells to be drilled in Banks oil field by Panther Energy LLC; target was upper Three Forks;

Later, 9:30 p.m.: in the main post below I talk about re-fracked Marathon wells. A reader was nice enough to provide some background to the re-fracks in the comment section. Those comments were important enough to be brought up here for easier access. The reader also had some questions regarding a Denbury well.

I have royalty interest in three of the wells that were refracked, so I know a little bit about the back story on them.

They were all single stage fracks with much less water and sand (only) than many of the modern multi-stage fracks. These refracks were all done on a 20-stage basis. Marathon's standard is now 30 frack stages.

Concerning costs it used to be said that a refrac was in the $200,000 to $300,000 range but that was single stage fracks from a long time ago. I am hearing now that $2 to $3 million can be spent just on fracking with the variables being: amount of stages; sand, coated, or not; ceramic proppants or not.

I have seen articles suggesting 5 to 6 refracs will be possible on a well. I am not sure if that is reflected in overall EUR's of the wells or if each refrac expands that number.

It is also interesting that one of Marathon's test wells is near these refracked wells and is a single stage Lodgepole trial. I wish they would re-frack that well in multi-stages to see if the Lodgepole is economical. A little more horsepower, with more stages could prove to be fruitful.

Encore who was bought by Denbury also did a refrack near this area in the past. I am interested if anybody knows of well that has been refracked that was also a multistage frack?

So, there you have it. Tons of great information. If anyone knows about the Denbury well in this area, let us know. Thank you.

Original Post

Elsewhere I track these wells, but knowing most folks don't surf through the site, I thought I would bring these forward: three typical BEXP wells that are well over 100,000 bbls before the first year is up.

20630, 3,179, BEXP, Banks State 16-21 1H, Banks, Bakken. Right in the bull's eye of the Bakken, northeast McKenzie County; t9/11; cum 163K 9/12; on same pad as:
19876, 2,879, BEXP, Enderud 9-4 1H, Banks, 36K in first month of production (less than 30 days of production); t10/11; F; cum 139K 9/12] 39-stage frac; 4.1 million lbs sand frac including 2.5 million lbs ceramic
20631, 3,166, BEXP, Enderud 9-4 2H, Banks; t9/11; cum 143K 9/12;

Using 100,000 bbls as the milestone at which these wells are well on their way to being paid for, these wells are now generating a fair amount of cash with very little expense.

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Re-Fracking (see comments and intro at top)

Also, bringing this forward, an update on some re-worked wells:

This is the next big thing we will be talking about in the Bakken. It started coming up as a subject in the 2Q12 earnings conference calls:

Elsewhere (this link is now broken) they were talking about refracking wells, back on December 18, 2011, when I posted this note:

Back in July, 2011, I posted a story about Marathon (MRO) talking about refracking. I went through the MRO wells and came up with a list of 25 wells that MRO might refrack. I went through that list tonight and came up with six wells, that based on production only, that suggests these wells have been re-worked or refracked:

17753: looks like it was re-fracked/re-worked July 11

17844: looks like it was re-fracked/re-worked May 11

17971: definitely refracked or re-worked

17865: off-line now; being re-worked?

17712: probably refracked/reworked in June 11

17713: probably refracked/reworked July/Aug 11

August 17, 2012: Here's an update of those six wells -- very, very nice outcome....

17753: back on line as of August, 2011, and produced 3,100 bbls in June, 2012.
17844: only on-line for 9 days in May, 2011, and is now producing 4,000 bbls/month (June, 2012).
17971: looks like it was off-line for several months last summer, and is now producing 2,500 - 3,000 bbls/month (June, 2012)
17865: was off-line last autumn for several months; it is now back on-line and produced more than 6,500 bbls in May, 2012, and almost 5,500 bbls in June, 2012
17712: this well was off-line late autumn, 2011; it is now back on line producing in excess of 3,500 bbls/month (June, 2012)
17713: this well was off-line for almost three months last summer. Before going off-line it produced 1,800 bbls/month; the first month back on-line, almost 8,000 bbls/ month. It is now pumping 3,500 bbls/month.

Wow! Is This Accurate? -- Unemployment Rate Rose in 44 States Last Month

Remember the "hey, initial claims rose last week, but that's a sign of strengthening economy" from Reuters just a couple days ago --

This was Reuters actual quote: "Jobless claims trend shows job market slowly healing."

I thought that was the end of this week's reporting on the job situation, leaving us with a feel-good story that the economy was on a roll, and that the job market was "healing," albeit slowly.

Now this, which I haven't seen published in the mainstream media, yet: unemployment rates ROSE in 44 states in July. Can that be accurate? According to Reuters, things were looking so good -- talk about rose- colored glasses.

Unemployment rates rose in 44 U.S. states in July, the most states to show a monthly increase in more than three years and a reflection of weak hiring nationwide.

The Labor Department said Friday that unemployment rates fell in only two states and were unchanged in four.

Unemployment rates rose in nine states that are considered battlegrounds in the presidential election.

I assume CNBC interviewed the labor secretary this morning when the report came out. If so, I missed it. I don't mean I "missed" her explanation or the interview, it means I "didn't see" that interview.

Let's see. I wonder if the article tells us which two states share the good news? If it's there, I couldn't find it. I think one of the states might be California based on this news story, but it's all very confusing to me. Unemployment can actually go up if more people enter the market than there are new jobs to accommodate them.

I think people re-enter the job market when a) the economy improves; and, b) when unemployment benefits run out. The majority of first-time job applicants, I assume, are in May and June, after high school and college graduation. In July we were well past that moment. And, then, of course, the automobile manufacturers were back up to "full" speed, but I would assume they just called back their already-hired workers.

All I know is that the unemployment rate rose in 44 states last month. It's probably a sign of a "healing" economy.

Motley Fool On TPLM

Link here.

Data points:

new investor interested in TPLM
Rockpile: wholly-owned drilling subsidiary
links to the Dwyer well

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this blog. I will not be trading TPLM in the next 72 hours. Probably not even in the next month.

Headline in Oil and Gas Journal: Whiting Pursues Red River Formation in Williston Basin

Link here. I think the general information was in their 2Q12 conference call which I've already posted; this provides a bit more specific information.

Data points:

Whiting has identified 50 vertical Red River prospects in its "Big Island" prospect
the "Big Island" is a 122,109-net acre play extending into Wibaux County, Montana
note the word "prospect" as used in this context; not drilling location; each prospect averages two drilling locations each -- let's see, 2 x 50 --> 100
so far, Whiting has drilled five (5) successful Red River wells in Big Island; all in Golden Valley so far
Schaal 22-15H: Whiting's first Red River horizontal well

Whiting will target multiple objectives in Big Island. At this link, one can see that Whiting has already had several successful Madison wells in this prospect. Also, note the size of prospect has grown by a few acres.

Wells Are Costing Twice What They Used To; Horizontal Legs Are Twice As Long

I normally wouldn't post this: regular readers see these numbers frequently on this blog.

But the story needs to be clarified in case newbies run across it. The story says that oil wells in North Dakota are now costing about twice what they did in 2007.

Wells in 2007 were short laterals (one section); wells in 2011 are long laterals (two sections).

That should be sufficient for most folks.

But then this: wells are offset 250 - 500 feet from a section line, meaning that a short lateral can leave 500 to 1,000 feet of a 5,280-foot long section untouched. Drilling a 1,280-acre unit, across a section line "captures" at least another 500 feet, maybe more. In addition, I believe that the state may be lowering the number of feet wells must be placed from a section line, but I don't know.

Rig Count -- Random Update

There are 199 active rigs in North Dakota today. Don and BHI tell me that there are 23 active oil rigs in Montana. Twelve of the Montana rigs are in Richland County.

The record number of active rigs in North Dakota in this current boom as been 218 rigs.

Just a Reminder --

I really appreciate "straight talk":

EOG: near term, horizontal oil production in US (2 million bopd by 2015) will NOT affect 90 million bopd global production; only three consequential horizontal plays in North America: Eagle Ford, Bakken, and Permian (all others are either inconsequential or really NGL plays) -- Mark Papa, EOG/CEO

Oh, Did "We" Fail To Mention ....

See if you can find "Keystone XL" in this article: US Reliance on Saudi Oil Heads Back Up.

The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow.

The increase in Saudi oil exports to the United States began slowly last summer and has picked up pace this year. Until then, the United States had decreased its dependence on foreign oil and from the Gulf in particular.

I went back and double-checked. Someone else (in the comment section) also noted that. The Obama administration favors Saudi regime over Canada. The dots continue to connect.

One could have written the lede this way, I suppose:

The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow.

The increase in Saudi oil exports to the United States began slowly lever since President Obama killed Keystone XL and has picked up pace since. Until then, the United States had decreased its dependence on foreign oil and from the Gulf in particular.

I can't make this stuff up.

Friday Morning -- Just Waking Up

Wells coming off confidential list have been posted: Zenergy, XTO, and BEXP all report nice wells. Scroll down to earlier posts. Remember: G3 Operating (GEOI) was acquired by Halcon in 2Q12, I believe.

Michael Filloon on Oasis.

Independent Stock Analysis: taking some time off.

From RBN Energy:

We just finished up the hottest July on record. Very high temperatures cause air conditioning demand to go ballistic. System operators struggle to generate enough power to satisfy peak load and call on expensive “peaker” generation units that set a high market price for power. With gas prices trading lower these days, the spread between high power prices and the cost of the gas fuel to generate that electricity (the spark spread) widens considerably during a heat wave. Today we look at spark spreads during July in New York City.

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A "throwaway" article in CNNMoney today resulted in coming across this commentary: No Plan B. If you go there, scroll down to the "original post."

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To be filed under "How Did This Happen?" US Reliance on Saudi Oil Heads Back Up.

The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow.

The increase in Saudi oil exports to the United States began slowly last summer and has picked up pace this year. Until then, the United States had decreased its dependence on foreign oil and from the Gulf in particular.

This reversal is driven in part by the battle over Iran’s nuclear program. The United States tightened sanctions that hampered Iran’s ability to sell crude, the lifeline of its troubled economy, and Saudi Arabia agreed to increase production to help guarantee that the price did not skyrocket. While prices have remained relatively stable, and Tehran’s treasury has been squeezed, the United States is left increasingly vulnerable to a region in turmoil.

How did this happen? The Keystone XL is not mentioned in this article.