Almost There: Killing the US Coal Industry -- Killing It Softly

Updates

September 22, 2012: it's absolutely amazing how MDW stays a jump ahead of some of the bigger stories, some of the bigger blogs. But enough of this congratulatory back-slapping. The Daily Caller.com reports that more than 200 coal-fired generators are slated for shutdown.

Within the next three to five years, more than 200 coal-fired electric generating units will be shut down across 25 states due to EPA regulations and factors including cheap natural gas, according to a new report by the American Coalition for Clean Coal Electricity (ACCCE). 

“This is further evidence that EPA is waging a war on coal, and a war on affordable electricity prices and jobs. EPA continues to ignore the damage that its new regulations are causing to the U.S. economy and to states that depend on coal for jobs and affordable electricity,” said Mike Duncan, president and CEO of ACCCE, in a statement. 

However, ACCCE notes that EPA policies may have played a role more than 4,800 megawatts of announced closures not included on in their report which would bring total shutdowns to 241 coal generator in 30 states — more than 36,000 MW of electric generation or 11 percent of the U.S. coal fleet. 

This is simply great, great news for ONEOK and the natural gas industry in North Dakota. For others, maybe not such a good story. For investors: one huge opportunity, especially if President Obama is re-elected. This is not rocket science.

Original Post

This was first posted at Yahoo!Finance In-Play late last night/early this morning. I forgot to post it then.
So, here the story is, expanded:

Market forces and environmental regulations that are driving a steady decline in coal-fired power generation across the U.S. have prompted PPL Montana to mothball a 154-megawatt coal plant in Billings, company officials said. 

The 44-year-old Corette plant will shut down indefinitely in April 2015, PPL spokesman David Hoffman said Thursday. That's when new federal pollution rules kick in that Hoffman said would have cost the company $38 million in upgrades. 

The announcement comes as coal fired generation is on a steep decline across the country, with 57 plants generating a combined 8,990 megawatts expected to retire this year, according to the Energy Information Administration. Competition from cheap natural gas is one of the primary reasons as many electric companies and utilities abandon older, less-efficient coal plants in favor gas plants.

In light of earlier articles posted, I found this interesting:

Subsidies to wind power projects also have put coal at a disadvantage, and the company already had been forced to idle Corette for three months this spring, Hoffman said. 

Killing me softly. With his song.

A Note for the Granddaughters

Killing Me Softly (With His Song), Roberta Flack
Roberta Flack's Killing Me Softly reached #1 in 1973. It coincided with my coming-of-age years. I loved it then; I love it more now. A lot of forks in the road of life. Robert Frost, The Road Not Taken.

The Honda Civic -- Idle Chatter -- Absolutely Nothing To Do With the Bakken

A Note to the Granddaughters

Idle chatter.

Earlier this summer I got into a conversation with a young man who managed an automobile service center, out in southern California. He happened to mention that he had the opportunity to be in one of the pits during a NASCAR race; his father's company was a NASCAR sponsor.

That conversation led to a conversation about the new Honda Civic I bought for my daughter last summer. I can't remember; it seems I've told this story before on MDW; if I have, I apologize.

I don't get to drive it very much now that my daughter has it, but, wow, is it ever fun to drive. I have owned two Saabs, one Mercedes, one BMW (all while living and stationed overseas with the US Air Force; I never could have afforded those vehicles in the US). I also drove a friend's Porsche 911 in the winding hills of the Eifel, West Germany and now western Germany. So, I can compare the 2012 Honda Civic with any number of other cars and can honestly say, it has been my favorite. I enjoy it even more than my memories of the Porsche.

I bring this up because I see a story today that Honda says it hopes to double car sales in four years.

I was taken back to that conversation with the young man mentioned above while reading the article. He had mentioned that the Honda engine is used in all race cars in a certain circuit -- I had forgotten which. Google led me to this article, written in 2011:

A.J. Foyt will do anything to win next season -- even if it takes a Japanese engine manufacturer to put him in Victory Lane. Yes, IndyCar's career leader in victories and a major proponent of American racers said Tuesday his team will go with the Honda engine in 2012.  

It's the first time since 2005 that IndyCar owners have had a choice of engines, and Foyt is the third prominent team owner to announce his choice. 

He joins Chip Ganassi as the second to go with Honda, the sole engine supplier for the IndyCar Series since 2006. To the Houston native, the reasoning was simple.

In addition to the peppy and responsive engine, the handling of the Honda Civic is incredible; it truly does drive like a sports car.  I bought the base model, the least expensive model available.

For a family car I will stick with the Chrysler minivan (we've owned three and have had at least one Chrysler minivan since we bought our first one in 1996 when we finally returned from overseas after serving in Europe and Asia for fourteen continuous years (I counted only thirteen years, but my wife says it was fourteen years).  But if I was going to get a car for myself, it would be the Honda Civic.

Wind Energy Withering Without Windfall -- The New York Times

This is the third story on the withering wind energy industry in about as many days. This one is in the New York Times. The first article was in the Des Moines Register. I believe Iowa leads the nation in wind energy. The next article posted was in the Wall Street Journal -- the most reliable, fact-based, unbiased daily print/newspaper out there. (The New York Times has some of the best writing, also, but the front page is the first page of their editorial section; once one realizes that, the New York Times is fine.) But I digress.

So, now the third major story in about as many days. The wind energy industry is withering without its windfall of taxpayers subsidies, grants, loans, tax breaks, whatever.

Last month, Gamesa, a major maker ofwind turbines, completed the first significant order of its latest innovation: a camper-size box that can capture the energy of slow winds, potentially opening new parts of the country to wind power.  

But by the time the last of the devices, worth more than $1.25 million, was hitched to a rail car, Gamesa had furloughed 92 of the 115 workers who made them. 

Similar cuts are happening throughout the American wind sector, which includes hundreds of manufacturers, from multinationals that make giant windmills to smaller local manufacturers that supply specialty steel or bolts. 

In recent months, companies have announced almost 1,700 layoffs. At its peak in 2008 and 2009, the industry employed about 85,000 people, according to the American Wind Energy Association, the industry’s principal trade group. About 10,000 of those jobs have disappeared since, according to the association, as wind companies have been buffeted by weak demand for electricity, stiff competition from cheap natural gas and cheaper options from Asian competitors. 

Chinese manufacturers, who can often underprice goods because of generous state subsidies, have moved into the American market and have become an issue in the larger trade tensions between the countries. In July, the United States Commerce Department imposed tariffs on steel turbine towers from China after finding that manufacturers had been selling them for less than the cost of production.

So, I guess we'll blame this on the Chinese. What "we" can't blame on the former president, we blame the Chinese.

Earlier, MDW noted that the subsidy amounted to 2.2 cents/kwh -- almost negligible but apparently makes all the difference in the world.

In the linked article at the New York Times, this data point:

On top of the business challenges, the industry is facing a big political problem in Washington: the Dec. 31 expiration of a federal tax credit that makes wind power more competitive with other sources of electricity.  

The tax break, which costs about $1 billion a year, has been periodically renewed by Congress with support from both parties. This year, however, it has become a wedge issue in the presidential contest.

You have got to be kidding. One billion dollars ($1 billion) a year? Bill Gates or Warren Buffett or Apple, Inc. or Chevron or BP (of "gulf spill" fame) could come up with $1 billion in pocket change. If an industry the size of the wind industry can't survive without a $1 billion tax credit ...

As I mentioned earlier, the $1 billion is nothing compared to the nation's $16 trillion deficit. My issue with wind turbines is that they have no redeeming value. None.

Coal-Powered Cars -- An Inconvenient Truth -- The Congressional Budget Office

Link here, to Reuters, to some sobering news with regard to coal-powered cars.

U.S. federal policies to promote electric vehicles will cost $7.5 billion through 2019 and have "little to no impact" on overall national gasoline consumption over the next several years, the Congressional Budget Office said in a report issued on Thursday. Consumer tax credits for buying electric vehicles, which can run as high as $7,500 per vehicle, will account for about 25 percent of the $7.5 billion cost, the CBO said.

Wow: let's repeat that -- federal policies will have little to no impact on overall national gasoline consumption.

And then this:

The rest of the cost comprises of $2.4 billion in grants to battery makers and projects to promote electric vehicles as well as $3.1 billion in loans to auto companies designed to spur production of fuel-efficient vehicles.

We all know how that turned out. If you need help remembering, google Fisker Karma or A123 or Ener1 for starters.

From ClimateLawyers.com blog:

As if it wasn’t hard enough trying to displace the internal combustion engine as the motive force of the automobile, then this happens. First the plug-in hybrid Chevy Volt’s battery starts catching fire.  See Chariots On Fire.

Then battery-maker Ener1 files for bankruptcy protection. 

Last Thursday, the electric vehicle arena acknowledged more bad news. Fisker Automotive, maker of the electric sport coupe Karma and promisor of the Nina, issued a press release following a set of disquieting reports from various outlets. The sour news: “As a prudent business measure, project Nina has been temporarily put on hold until financing, either from the DOE or elsewhere, can be secured.” 

Fisker is the high end of electric vehicles. Its “plug-in extended range” Karma sedan seats four and retails between $96,000 and $109,000. It can do 0-60 in 7.9 seconds in full electric (Stealth) mode (the plug-in part). But turn on its gasoline engine, which turns its electric generator, and you’re down to 5.9 seconds (Sport Mode) (the extended range part). Motor Trend calls it “a sweetheart to hustle.” 

Nina is (was?) the more consumer-friendly version of a Fisker. It is to be (according to reports) a compact or midsize sedan, priced in the $40,000 range (after the $7,500 federal tax credit). It is to be built in a refurbished GM plant in Delaware, which Fisker bought out of GM’s bankruptcy in 2009. Predicted production levels were 100,000 vehicles per year. That goal is currently not realizable.

I can't make this stuff up.

Actually that ClimateLawyers.com blog is entertaining to read no matter what side of the issue you stand on.

The first linked article, about the CBO, is also entertaining. Deep in the article, this data point:

The U.S. government will spend anywhere from $3 to $7 for each gallon of gasoline saved by consumers driving electric vehicles. 

Proponents of government spending on advanced vehicles say the start-up costs will be high, but U.S. consumers could still recoup much of that investment over time. 

"The people the report often know the cost of everything and the value of nothing," said Dan Weiss, a senior fellow at the Center for American Progress. "They are overestimating the costs of these programs and undervaluing the benefits."

The federal government will spend anywhere from $3 to $7 for each gallon of gasoline saved by consumers driving electric vehicles.  

As I said up above: I can't make this stuff up.

What a waste.

XOM-DNR Deal: $15,000/Bakken Acre?

I plan on posting this twice.

I will post it now; it won't be quite ready for prime time, but I want to get it out there for a number of reasons.

The question is this: what did XOM pay for a DNR Bakken acre?

A reader who follows the North Dakota oil industry very, very closely comes up with these figures regarding the XOM-DNR deal.

1. He estimates that DNR should be able to clear $15/bbl from oil recovered in the Texas and Wyoming fields (Webster field and Hertzog field). This takes into account the cost of drilling, completing, EOR, pipelines, transportation, etc.

2. Webster field has 60 - 75 million bbls of recoverable oil.

3. Hertzog field has 20 - 30 million bbls of recoverable oil.

4. For argument's sake, let's say a nice round 100 million bbls of recoverable oil.

5. At $15/bbl, $1.5 billion.

6. $1.5 billion in oil from the EOR fields and $1.6 billion in cash -->  $3.1 billion

7. $3 billion / 196,000 acres --> $15,000/acre.

Bottom line: using assumptions in lines 1 - 3, one can come up with a figure of about $15,000/Bakken acre that XOM paid for DNR Bakken acreage.

So, we will see what the analysts come up with. In addition, it will be interesting to see what readers come up with.

The $15,000/Bakken acre seems about right.

Before the QEP-Helis deal, the record amount paid for a Bakken acre was $12,000 in a state lease auction (by my reckoning, it was a record in the public domain; there may have been other deals that I missed that were more, and I don't know about private deals).

DNR has some great acreage in the Williston Basin, including much in the heart of the Bakken, but also some acreage that probably will not amount to much.

Anyway, I'm curious if readers have an estimate on what XOM might have paid for these DNR Bakken acres.

Twenty-Two (22) New Permits; WPX, Whiting Have Nice Wells;

If this is not a record, it certainly is rare. Twenty-two (22) new permits:

• Operators: Denbury Onshore (6), Samson Resources (4), Hess (4), American Eagle (2), BR (3), BEXP (2), one SWD; 
• Fields: Robinson Lake (Mountrail), Colgan (Divide), Ambrose (Divide), Siverston (McKenzie), Keene (McKenzie), North Tobacco Garden (McKenzie), Poe (McKenzie), Crooked Creek (Dunn)

Wells released from confidential list:

• 21219, 401, WPX, Black Hawk 1-12H, Moccasin Creek, t6/12; cum 58K 7/12; 
• 21618, 504, CLR, Blaine 1-33H, Rainbow, t6/12; cum 15K 7/12; 

Producing wells completed:

• 19894, TA/794, Helis, Gabbert 4-2/11H, Grail, t2/12; cum 7K 7/12; not sure yet what this is all about;
• 21277, 752, Enerplus, Harmony 148-93-18C-07-2H TF, McGregory Buttes, t8/12; cum --
• 22868, 2,373, Whiting, Pennington 21-3H, Sanish, t8/12; cum --

These wells will be coming off the confidential list, tomorrow, Friday (maybe a mistake; they did not report on Friday morning; but they are on the confidential list and show a release date of 9/21/12)
21270, conf, Whiting, Brehm 13-27TFH, Sanish,
22011, conf, Petro-Hunt, Wold 160-94-32A-5-3H, North Tioga,
22310, conf, G3 Operating, Thome 1-31-30H, Climax,
20802, conf, Samson Resources, Charger 7-6-162-98H, 

Headline: Gasoline Could Be The October Surprise -- Lower Prices

Link here to Yahoo!Finance news.

And that would mean .... what?

Morse also said gasoline, rising rapidly in August and September due to refining issues and Hurricane Isaac, could start to decline. 

"The gasoline market should ease substantially by the middle of winter," he said. Morse said he expects to see gas prices head back to $3.50 per gallon, from the current national average of $3.85 per gallon.

Locally, just west of Boston, the price is generally $3.99/gallon, so maybe we'll see gasoline down to $3.75/gallon.

By the way, on another note, these "national average" prices are also misleading. I've talked about this before.

First, human nature is such that whether one is paying $3.50/gallon or $4.25/gallon, the typical driver will say they are buying "4-dollar gasoline." Daily and weekly fluctuations between $3.50 and $3.75 have little psychological impact; perhaps as one gets to $3.91 and higher, it might elicit an emotional comment.

Second, if the "national average" is not weighting prices for gasoline based on population density, the averages don't mean a whole lot. Folks on the northeast and west coasts are cynical when they hear the "average": they are paying much more than the average. Meanwhile, folks in the flyover states and the south are slightly more smug, noting they are paying less than the national average. But very few folks are paying the "average."

But the "average" price of gasoline dropping from $3.85 to $3.50 hardly seems worthy of an "October surprise" headline.

Kurdistan (No, This Is Not The Bakken) Well Tests At 42,000 BOPD

Link here to Oil and Gas Journal.

A group led by General Exploration Partners Inc. has tested the Atrush-2 appraisal well in the Kurdistan Region of Iraq at the combined rate of 42,212 b/d of oil limited by test equipment capacity.

49 days to drill and not all that deep.

Just putting some things into perspective. And it helps explain why "we're" in this part of the world.

Wal-Mart Discontinues Amazon's Kindles; Bets Against Amazon; Continues To Sell Apple iPads

Link here.

Update On OXY's Kary Side Track, File #22544

This well has perplexed at least one reader for quite some time.

• 22544, TA, OXY USA, Kary 2-24-13H-144-97 ST (re-entry; side-track); t2/13; cum 1,303 bbls; this was put back on the TA list on November 6, 2015 -- and it looks like it is headed for "plug and abandon."

It was perplexing because the GIS map server showed two laterals the file report did not provide any explanation. The sundry forms are now catching up with the status of the well.

Politicians Looking To Raise Prices At The Pump

Link here.

Remember: the administration's Secretary of Energy has said that the US needs to have gasoline prices similar to those in Europe for renewable energy to be competitive.

The linked article focuses on state revenue for the most part, but the writer does start and finish with comments about the Federal government.

This would be a good question for the presidential debates: would you support an increase in Federal gasoline tax, or a change in the way it is calculated?

My hunch:

• states raising taxes on gasoline: not gonna happen
• the federal government raising taxes on gasoline: not gonna happen

Mileage-based "road" tax, my hunch:

• California will adopt the tax, but won't take effect for six years once enacted (not earlier than 2020). Annual registration will include certifying the odometer. Procedures will be put in place to preclude annual lump-sum gasoline taxes for those who prefer to pay in "real-time."

Weekly Jobless Claims -- The Story Has Not Changed For Almost Two Years

Remember: the magic number is 400,000

Last week: 382,000 (up)

Moving average: 377,750 (up)

Updates

September 20, 2012: There's always some spin: "... but most states showed lower rates than a year ago ..."

Unemployment rates in August rose in 26 states from July, but most states showed lower rates than a year ago, the federal government reported Friday.

But rates rose in a majority of states (no spin, just a data point, for what it's worth), unless there are 57 states as the president claims.

I can't make this stuff up.

Original Post

Key words/phrases in the article to be linked:

• more Americans filed
• concern the labor market is slackening
• more claims than expected (not good)
• last week's numbers revised upward (not good)
• four-week moving average increased (not good)

I do believe we have seen those phrases in 90% of the weekly jobs reports since I started following this metric on/about January 21, 2011. I will let readers do the statistical study.

My favorite line that never fails to be posted: "the increase in new claims adds to concern that the labor market is slackening." These articles never say who is concerned: based on policy decisions of this administration .... permitorium in the Gulf; fiscal cliff; Damocles sword; permitorium off-shore Alaska; killing Keystone XL; EPA killing the coal industry;

But I digress.

Some observations, from the linked article:

• no unusual state data
• Chicago's teachers' strike had no effect (they were out of work for a week; probably paid union benefits; why would they claim jobless benefits? oh, that's right -- it's Chicago)
• no tropical storm to blame 
• the "four-week moving average, a less volatile measure than the weekly figures" continues to edge toward the magic number
• analysts suggest that hiring is the problem; if we start to see layoffs --> recession
• analysts suggest hiring will pick up to help with year-end holiday sales (okay)

Link to the Bloomberg article here.

Exxon Mobil Corp Buys Denbury Onshore Acreage In Williston Basin, North Dakota and Montana; Becomes Major Player in the Bakken; $1.6 Billion Deal; Almost 200,000 Bakken Acres

Updates

February 4, 2013: in the daily activity report, this date, the 104 wells that were transferred from DNR to XTO in this deal were listed


December 3, 2012: update on the deal; they've closed on Phase I; hope to close on Phase II by end of year; DNR held back 17.5% of assets; XOM held back on $350 million. Kubuki dance.

October 1, 2012: Zeits on the deal (SeekingAlpha.com).

September 21, 2012: Michael Filloon on the deal. Rigzone story here. Oil and Gas Journal story here. Stories from all over. Forbes: perhaps the best story. Serendipity or planned all along? A securities firm following DNR, suggests KOG is worth as much as $15 and Whiting $70 based on what XOM paid DNR. The Motley Fool's take on this deal: they stress that this deal keeps DNR focused on its strengths: CO2 EOR in older fields. Motley Fool says drilling the Bakken was not one of DNR's strengths. In fact, DNR reported some great wells this past quarter:

• 22115, 1,505, Denbury, Lundin 41-14SWH, Siverston, t712; cum 24K 7/12; 
• 22151, 1,538, Denbury, Tobacco Garden 41-18SH, Tobacco Garden, t6/12; cum 34K 7/12; 
• 21682, 1,454, Denbury, Lund 44-8SH, Siverston, t7/12; cum 6K 6/12;
• 21950, 712, Denbury, Johnsrud 21-13SEH, Siverston, t4/12; cum 16K 6/12;
• 21786, 1,494, Denbury Onshore, Rink 12-4ESH, Garden, t4/12; cum 19K 5/12; 
• 21682, 968, Denbury, Lund 44-8NH, t7/12; cum 21K 7/12;
• 21706, 2,002, Denbury Onshore, Lundin 11-13SEH, Siverston, t4/12; cum 31K 5/12; 
• 21425, 1,105, Denbury Onshore, Johnson 43-27ENG, Murphy Creek, t5/12; cum 6K 5/12; 
• 21424, 939, Denbury, Johnson 43-27WNH, Murphy Creek, t5/12; cum 8K 5/12;

These are very good wells.

Original Post

Link here. Also, google Exxon to buy Denbury's Bakken acreage for $1.6 billion

Exxon Mobil Corp. will spend $1.6 billion to boost its holdings in the massive Bakken oil field in North Dakota and Montana by 50 percent.  

Exxon said Thursday it will buy all of the Bakken shale assets held by Denbury Resources Inc. for $1.6 billion in cash. Denbury will also receive Exxon's interest in two fields in Wyoming and Texas. Exxon will acquire 196,000 acres, boosting its holdings in the region to almost 600,000 acres. 

The acreage acquired is expected to produce 15,000 barrels of oil and other hydrocarbons per day in the second half of this year.

Wow, earlier this week, September 15, I posted this (the entire blurb):

Wide Moats

DNR

This appears to be a throw-away article by Motley Fool -- mentioning "wide moats" almost in passing, and then moving into marketing/imitation. The "wide moat" references DNR which caught my attention. With the recent chatter regarding XOM and DNR, there's a third observation that could be added, certainly when it comes to the oil and gas industry: the number and kinds of tools in one's toolkits.  

If it is becoming more and more difficult to find large new fields, returning to old fields with enhanced oil recovery expertise is another option. 

*******************

Back-of-envelope (on acreage alone). This looks like a steal of a deal for XOM and/or DNR. MDW will have to wait for analysts to sort out how much XOM might have paid/Bakken acre.

$1.6 billlion / 196,000 acres: $8,200/Bakken acre, but there is already a lot of DNR production in North Dakota, and if the total deal is reflected in the press release, DNR also received an unspecified number of acres in Texas and Wyoming.

The acreage in Texas/Wyoming increases the value of the deal for DNR, but  decreases the cost to XOM on a per-acre valuation. Too complicated for me; and too many unknowns at this time.

The big winner: North Dakota oil and gas industry. XOM buying into the Bakken is not a trivial event.

Observations:

• It is interesting that "XOM" is listed as the buyer. XOM's operations in the Williston Basin Bakken are managed by XOM's wholly-owned subsidiary, XTO.
• XOM's market cap: $420 billion; cash-on-hand: $18 billion; operating cash flow: $55 billion
• DNR's market cap: $7 billion; cash-on-hand: $28 million; operating cash flow: $1.5 billion

Comment: I was sent a nice note by a reader noting my "XOM-DNR-moat-EOR toolkit" blurb on September 15, 2012. This was my minimally unedited reply:

But you know the interesting thing: this is where I am wrong: XOM did not buy the company -- it did not buy DNR for the EOR technology.  

XOM simply bought acreage in North Dakota Bakken -- I think that might be the story. 

Had XOM bought DNR, the whole company, then there might have been discussion why XOM bought DNR: Bakken acreage or EOR technology. 

In this case, unless I'm missing something, XOM simply bought more acreage, which I think is a bigger and more important story for the North Dakota oil and gas industry. XOM prides itself on finding elephant fields; some say there are no more elephant fields to find. If XOM buys into the Bakken, it suggests to me a) there are no more elephant fields to find; and/or, b) the Bakken is viewed by some as an elephant field that still confounds/surprises outsiders.

***********************

Non-Dollar Assets DRN Received in the Deal

Acreage assets DNR received in the deal (a "cut and paste" from data Don sent me):

Webster Field - Gulf Coast Region: 

Webster Field was discovered in 1937 by Humble Oil and oil production from the field peaked in the late 1970s at over 67,000 bopd. Denbury is acquiring a nearly 100% working interest and nearly 80% net after royalty interest in the field which is located approximately eight miles northeast of both Denbury's Hastings CO2 flood and the Green Pipeline which transports CO2 from Denbury's source in Mississippi. Net to Denbury's acquired interest, the field is producing approximately 1,000 boepd, approximately 86% of which is oil. Conventional (non-tertiary) proved reserves are estimated at approximately 3 million barrels of oil equivalent, all of which are proved developed producing. 

Webster Field is similar to Denbury's Hastings and Thompson fields, producing oil from the Frio zone at similar depths, and is also believed to be an ideal candidate for a CO2 flood. Denbury estimates the field's original oil in place ("OOIP") at approximately 900 million barrels and the zones initially targeted for CO2 flood are estimated to have approximately 550 million barrels of OOIP. Based upon an estimated recovery factor of between 13% and 17% of the OOIP for the targeted Frio zones, Denbury estimates that a CO2 flood of Webster Field could potentially recover an estimated 60 million to 75 million barrels of oil, net to its interest. 

Hartzog Draw Field - Rocky Mountain Region:

Hartzog Draw Field, located in the Powder River Basin of northeastern Wyoming, was discovered in 1975 and oil production from the field peaked in 1978 at over 35,000 bopd. In the transaction Denbury is receiving an 83% working interest and 71% net after royalty interest in the oil producing Shannon Sandstone zone and a 67% working interest and 53% net after royalty interest in the natural gas producing Big George Coal zone. The field is located approximately 12 miles from Denbury's Greencore Pipeline which is under construction and anticipated to be completed in late 2012, and which will transport CO2 from Denbury's source near Lost Cabin, Wyoming to its Bell Creek Field in Montana. Net to Denbury's acquired interest, the field is producing approximately 2,600 boepd, approximately 52% of which is oil. 

Conventional (non-tertiary) proved reserves are estimated at approximately 7 million barrels of oil equivalent, all of which are proved developed producing and 58% of which is oil. Denbury estimates the Hartzog Draw Field's OOIP at approximately 370 million barrels and, based upon an estimated recovery factor of between 8% and 11% of this amount, that a CO2 flood of the field could potentially recover an estimated 20 million to 30 million barrels of oil, net to its interest.

**********************

How much did XOM pay for each DNR Bakken acre?

The question is this: what did XOM pay for a DNR Bakken acre?

A reader who follows the North Dakota oil industry very, very closely comes up with these figures regarding the XOM-DNR deal.

1. He estimates that DNR should be able to clear $15/bbl from oil recovered in the Texas and Wyoming fields (Webster field and Hertzog field). This takes into account the cost of drilling, completing, EOR, pipelines, transportation, etc.

2. Webster field has 60 - 75 million bbls of recoverable oil.

3. Hertzog field has 20 - 30 million bbls of recoverable oil.

4. For argument's sake, let's say a nice round 100 million bbls of recoverable oil.

5. At $15/bbl, $1.5 billion.

6. $1.5 billion in oil from the EOR fields and $1.6 billion in cash --> $3.1 billion 7. $3 billion / 196,000 acres --> $15,000/acre.

Bottom line: using assumptions in lines 1 - 3, one can come up with a figure of about $15,000/Bakken acre that XOM paid for DNR Bakken acreage. 

So, we will see what the analysts come up with.

In addition, it will be interesting to see what readers come up with.

The $15,000/Bakken acre seems about right. Before the QEP-Helis deal, the record amount paid for a Bakken acre was $12,000 in a state lease auction (by my reckoning, it was a record in the public domain; there may have been other deals that I missed that were more, and I don't know about private deals).

DNR has some great acreage in the Williston Basin, including much in the heart of the Bakken, but also some acreage that probably will not amount to much.