Friday, September 21, 2012

Update on Norway's Naming of Their Off-Shore Fields

Link to
The names of many fields in Norway are taken from Norse mythology, with strong roots and steeped in national tradition, according to a Norwegian Ministry white paper "An industry for the future – Norway's petroleum activities."  
While this tradition should be continued, the strongest names from Norse mythology are already in use, which means that new types of names should be considered, the report said. "The names given to larger fields in new areas should reflect the industry's importance, both for specific regions and for the nation as a whole," the report said. 
"The Ministry therefore plans to make adjustments in the naming of petroleum deposits, to ensure that they fit into a national context and history."
And the first field to be renamed under new naming scheme:
The Ministry reported Sept. 11 that it renamed Draupne as Ivar Aasen. Aasen was a democratic and national strategist who lived in Norway during the 19th century. 
Aasen was also a poet and linguist who established New Norwegian, one of two official written forms of the language, based on how Norwegians really spoke.
Nothing to do with the Bakken but probably of interest to folks of Norwegian heritage in North Dakota. Including me.

International Energy Services Company Buys Mitchell's Oil Field Services; Founded in Sidney, MT, in 1977 -- Williston Basin Bakken

Link to Rock Hill Herald (Rock Hill, South Carolina) Also at
Wood Group has agreed to acquire Mitchell's Oil Field Services, Inc., a provider of maintenance, installation and fabrication services in the oil-rich Bakken shale region for an initial consideration of $135 million. Further earn out payments due in the period to 2015 based on Mitchell's future performance may be payable. 
Mitchell's Oil Field Services, founded in Sidney, Montana, in 1977, provides maintenance, installation and fabrication services to the North Dakota and Montana onshore oil & gas market. Mitchell's is owned by Stone Arch Capital, a Minneapolis-based private equity group,, and management. 
Wood Group (John Wood Group PLC) is an international energy services company with $6.0bn sales, employing more than 41,000 people worldwide and operating in 50 countries. The Group has three businesses – Engineering, Wood Group PSN and Wood Group GTS - providing a range of engineering, production support, maintenance management and industrial gas turbine overhaul and repair services to the oil & gas, and power generation industries worldwide.

Tremendous Investment Opportunity

Investors who live outside of California have to love this: investors making money off solar while California residents pay the tab.

Link here to Los Angeles Times.
Driven by the Obama administration's vision of clean power and energy independence, the rush to build large-scale solar plants across the Southwest has created an investors' dream in the desert. 
Taxpayers have poured tens of billions of dollars into solar projects — some of which will have all their construction and development costs financed by the government by the time they start producing power. Banks, insurers and utility companies have jumped in, taking advantage of complex state and federal tax incentives to reap outsized returns. 
Among the solar prospectors in the Mojave are investor Warren Buffett's Berkshire Hathaway Inc., General Electric, JPMorgan Chase & Co., Morgan Stanley and technology giant Google Inc
The cost for decades to come will also be borne by ratepayers. Confidential agreements between solar developers and utilities lock in power prices two to four times the cost of conventional electricity. The power generated by the mega-plants will be among the most expensive renewable energy in the country.
As long as you are not a resident of California, what's not to love?

BRK-B hit a new 52-week high today. Just saying.

Disclaimer: this is not an investment blog; don't make any investment decisions based on what you read here.

Go to the linked story to see how much Californians get to pay for this privilege of going green.

Nineteen (19) New Permits -- Williston Exploration Reports a Tyler Well in Billings County

No wells came off the confidential list today, but two producing wells were completed:
  • 18216, 30, Williston Exploration, Vanvig 1, a Tyler well, Billings County; wildcat; t7/12; cum 4K 7/12; a vertical well; total depth about 8,000 feet; 40-acre spacing; about twelve miles directly south of Medora, ND; about 37 miles southwest of Dickinson;  [big "thank you" to reader who noticed major error on my part regarding location of well; it should be correct now]; 
  • 21276, 871, Enerplus, Duet 148-93-18C-07-1H, McGregory Buttes; Dunn; t8/12; cum --
There were nineteen (19) new permits:
  • Operators: CLR (8), Whiting (5), BEXP (4), OXY USA (2)
  • Fields: St Anthony (Dunn), Manning (Dunn), Hoot Owl (Golden Valley), Park (Billings), Sanish (Mountrail), Hamlet (Willams), Alger (Mountrail), Sandrocks (McKenzie)
Whiting has a permit for a wildcat in Golden Valley County; CLR has a permit for a wildcat in Williams County.

Five permits were cancelled:
19059, PNC, SM Energy, Koeser 16-10H, Siverston;
20177, PNC, Crescent Point, Stockman 159-99-32D-29-1H, Burg;
20573, PNC, KOG, Tracey 5-29H, Wildrose;
22411, PNC, True Oil, Federal 24-31 31-30H, Buffalo Wallow;
22412, PNC, True Oil, Federal 24-31 6-7H, Trailside: still shows as "LOC" at NDIC site;

Bakken Premium to WTI Should Last Into 2013 -- SeekingAlpha

Bakken spot crude prices have traded at a premium to West Texas Intermediate spot crude prices since September 4. Bakken spot crude has not consistently traded at a premium to WTI since October of 2011 and has spent much of the last year trading at a discount of $10 or more. Over the last two weeks Bakken spot crude prices have traded at an average premium of $5 per barrel over WTI. The factors that have created the premium pricing are likely to stay in place into 2013.  
Two factors have led to shifting the spread between Bakken oil and WTI from a discount to a premium.  
The most important is new rail take away capacity to the East and West Coasts now has more shipping capacity for oil than oil production in the Bakken. Since there is currently excess take away capacity in the Bakken the pipelines now have to compete with the rails for oil and have to pay the going rate. 
The second factor is oil production growth in the Bakken has begun to slow more than expected. The North Dakota Industrial Commission announced that the rig count has dropped to 194 rigs, which is the lowest level since July of 2011 and below the all-time high of 214 reached in May. They also announced that daily oil production for the state in July averaged 674,000 barrels of oil per day. This was less than expected and only marginally higher than June. Bakken oil companies are concerned about well costs which are close to double what they were in 2009. 
Actually, the record number of active rigs was 218, albeit for only a day or two, if that, back in May.

The big story is, of course, the rail story, but we've beaten that story to death.

The declining rig count is getting more air time than it deserves. A better metric is overall production, and as noted above, the July numbers were not encouraging. The better metric is not how many rigs there are, but how many wells are being completed each month, and overall production.

Someone noted -- and it's rarely reported; I've only seen one report -- that the wells completed so far in 2012 are about 30% less productive than the wells completed in 2011. I think it's too early to tell, but anecdotally, the trend does suggest the wells this past year are not as productive as wells completed a year earlier.

So, back to better metrics: the number of wells being completed, and overall production. The latter is, of course, easy to measure. The number of wells being completed each month is also easy to measure, but pad drilling will affect those numbers. Wells are being drilled to total depth in record time (less than 15 days) but due to pad drilling, by the time all four wells on the pad are fracked/completed, one can be into another month, or even worse, for shareholders, into another quarter.

I don't think the decreasing rate of production is due to declining number of rigs. I think it's due to a) pad drilling; and, b) less productive wells (for whatever reason).

It will be interesting to watch this play out.

Apple iPhone 5 Update on Launch Day

This is a most interesting statistic via MacRumors:
Given that the iPhone 4S was launched just one year ago and many consumers are locked into a two-year service agreement with their carrier, we thought the vast majority of the upgrades would come from iPhone 4, previous iPhone generations or non-iPhone users. However, our survey indicates the opposite. In fact, our survey found that 50% of the iPhone 5 buyers upgraded from the iPhone 4S, 11% from the iPhone 4, 3% for 3GS and 36% from non-iPhone users. 
The writer was surprised that so many folks locked into an early model, opted to buy the iPhone 5 anyway -- 50%, in fact.

However, more than a third of iPhone 5 buyers were from non-iPhone users. The non-iPhones being given up: Nokia and HTC.

That's a huge statistic. Combine that with total number of iPhone 5's sold; not trivial.

Let me know if CNBC highlights that little nugget.

Back to that that statement suggesting "many consumers are locked into a two-year service agreement with their carrier, we thought the vast majority of the upgrades would come from iPhone 4." This is a good example of non-Apple fans not understanding the cult of Apple. Folks locked into a two-year service agreement will keep the first phone and give it to another member in the family; meanwhile the consumer will upgrade to the new iPhone.

Home Photovoltaic (PV) System -- For Archival Purposes Only

Link at The Oil Drum

Data points:
  • sunny San Diego
  • personal hobby
  • solar panels
  • batteries to store electricity
  • provides electricity for refrigerator, attic fan, television and associated entertainment components, two laptop computers, the cable modem and wireless hub, and a printer;
  • what is not provided for: heating water; washer; dryer; heater; air conditioner; all lights (interior/exterior); freezer (unless part of refrigerator); dishwasher; power tools; electric pencil sharpener; electric toothbrush; 
On the economic side, taking the advertised capacity for a lead-acid battery at face value, I can get a Trojan T-1275 for $235, and if treated gently it will provide an energy outlay of 750 full-cycle-equivalent discharges. Each full discharge has 12 V times 150 Ah, or 1.8 kWh. This works out to $0.17 per kWh
If I instead cycle at 50% and get 575 full-cycle equivalent outlay at a de-rated 1.5 kWh/cycle, the cost is about $0.28/kWh
Since my system uses the battery for half its energy needs, the effective cost of electricity for battery replacement alone is about $0.14/kWh, which is pretty close to the utility rate in San Diego.
Bottom line:
So why would anybody go this route? 
In remote locations, the cost of running utility power lines can be prohibitively expensive, quickly tipping the scales in favor of off-grid PV (the sunk investment in panels, etc. can be less than that in utility installation, in which case the cost of batteries offsets the steady utility bill). And I must say I enjoyed having power during the San Diego blackout of 2011. Moreover, I get pleasure out of having my own power generation capability. It’s part hobby, part independence, part practical. All cool.
  • some years ago (2010, time frame) when I was tracking the cost of solar energy, it was about 30 cents/kWh; not much change over the years
  • battery replacement: a) lump sum, front-end cost; b) disposal issues for the old batteries; c) batteries alone exceed slightly the total utility rate
  • part hobby, part independence, part practical; one could add: part tedious
Other sites of interest

Time For New Poll: Will XOM Buy More Williston Basin Bakken Acreage?

Results of the most recent poll which asked the question: is this good for North Dakota -- that the rig count was decreasing? The results, evenly split:
  • Yes: 48%
  • No: 50%
  • Not sure: 1%
New poll. With announcement this week that XOM is buying Denbury's acreage in the Williston Basin Bakken (both Montana and North Dakota), do you think XOM will buy more acreage in the Bakken within the next 12 months, or is this it for the next 12 months?

This Has Got To Be The Most Fun You Will Have All Day -- September 21, 2012


The story is being carried on the front page of the WSJ. Google Apple makes a wrong turn as users blast map switch

Then, go to MacRumors, and read the comments.

Be sure not to miss:

This will be the most fun you've had all day. In fact, I would skip the first two links and go directly to "tumblr."


And then back to "things not so funny." Remember that Chicago teachers' strike. Bottom line: the teachers' union pension fund will go broke at some time, taking the state down with it. Illinois' plan: federal government bailout.
Governor Pat Quinn's 2012 budget proposal: "significant long-term improvements in the state pension debt will come from seeking a federal guarantee of the debt."
California will follow suit, no doubt. Google an Illinois pension bailout?

And, eventually, NoDaks will join the other 48 states bailing out California and Illinois.

The Bakken Shale: A New Kingmaker in Energy Geopolitics

Google shale: a new kingmaker in energy geopolitics

This article is all about the geopolitics of the Bakken, but "the Bakken" is never mentioned.

It's a pretty nerdy article, probably not much interest to most of us. I actually read the whole thing looking for a Bakken reference. I guess the newspaper was not wide enough for a more accurate headline: Bakken Shale: A New Kingmaker in Energy Geopolitics.

And that's why the EPA wants to partner with North Dakota in developing the new kingmaker. Heaven forbid, a "kingmaker" that could threaten....

DNR's Bakken Gold Mine? Serendipity or Planned All Along?

This article is one of the best seen in the past two days on DNR. A must-read. Numerous data points, including:
Denbury's oil weighting shields it from the gas-price slump.  
In addition, 60% of its oil was sold at prices based wholly or partly on the Louisiana Light Sweet, or LLS, benchmark due to the proximity of many of its fields to the Gulf of Mexico Coast.  
This year, LLS has traded at an average premium of $16 a barrel to the more widely known West Texas Intermediate, or WTI, benchmark. This gap will likely narrow next year. But it still represents a competitive advantage, especially against many peers forced to sell their barrels from fields further inland at a discount to WTI.  
According to Sterne Agee & Leach, Denbury made the highest operating margin per barrel of oil equivalent in its peer group in the second quarter.
Did you all catch that? LLS has traded at an average premium of $16 a barrel to WTI. (Note: it may cost $12/bbl to ship Bakken oil to the Gulf coast, but that's still a $4 premium for Bakken light sweet.)

One of the things I've enjoyed about the Bakken is watching the business plans, the strategies of the various Bakken-centric operators evolve.

MDW was one of earliest blogs to talk about the various business plans/strategies; how various Bakken operators separated themselves from the pack:
  • NOG: non-operated rigs; picks and chooses among the best partners; nimble
  • WLL: northern ops; southern ops
  • CLR: everywhere in the Bakken; participated in one out of six wells drilled in the Bakken (operated and non-operated); may know the Williston Basin best
  • BEXP: maximize fast payback; push the envelope on fracking; change the way IPs were reported (despite the grief they got, others followed suit)
  • KOG: maximize the sweet spots in the Bakken; don't buy acreage just to buy acreage
And then you have DNR. I seldom talked about DNR at the blog. DNR never seemed to fit in with the Bakken. I never was excited about DNR as it pertained to the Bakken. It was known for EOR, and EOR in the Bakken is a long way off; further, EOR may not work as well in unconventional shale as in old fields.

And, so this linked WSJ article is just so much music to my ears. I love it. Liam Denning noted the same thing: the Bakken and DNR just don't go together. The question is how much of this was planned, how much was serendipity. (Think EnerVest.)

My hunch: serendipity morphed into opportunity --> change in strategic plan by DNR. Somewhere in the past two years DNR realized it was sitting on a gold mine, but a gold mine not as big as ones in Wyoming and Texas. So, somewhere in the past two years, they made a strategic decision to show what they had in the Bakken and position themselves for a deal to trade the Bakken for older fields farther south, where DNR is establishing a pretty big moat.

[Note: CO2 EOR is not easy. Mixing water and CO2 and you get carbonic acid -- huge challenges with corrosion, and it appears DNR has broken the code.]

Folks like RBN Energy and Liam Denning will be much more articulate than I am, but I think you get the picture.

Go to the linked article (WSJ) -- it's agreat piece of writing. By the way, it's part of the WSJ "Heard on The Street." When I first subscribed to the WSJ (1983, Grand Forks AFB, Spruce Street -- I forget the house number; 107, I believe), the "Heard on the Street" format was different, placed differently in the paper. I think it was on the front page of section C. Regardless, it was my favorite column. On the back page of section C today, the column loses something.

For investors, the best data point in the linked WSJ article? This:
  • If you are betting on a gas rebound in 2013, Denbury isn't for you. 
Readers closely following the oil and gas industry, I'm sure, have noted an increasing number of stories suggesting the price of natural gas will rise nicely in 2013. I have my doubts; the price may rise, but it won't be significant.

Friday Morning Links; Human Interest Story on Williston Mayor; The EPA's Bottom Line -- The Feds Want To Partner With North Dakota

Despite the volatility of the price of oil this past week, CVX and XOM have held up very, very nicely. In fact, it appears CVX could hit a new all-time high today; and XOM looks like it will open higher, also flirting with it's 52-week high. BRK-B did hit a new high (owns BNI). Union Pacific Railroad has trended down the past week; stories pointing to further deterioration in the economy. Dividend plays seem to be doing well. Incredibly, T hit a new 52-week high today and pays 5%. I would not be a bit surprised if CVX pays a special dividend. Thank goodness the Justice Department would not allow another oil company to buy CVX -- someone could use CVX cash to help pay for the buyout. 2 billion shares x $3.00 --> $6 billion; CVX has $20 billion in cash. Disclaimer: this is not an investment site. Don't make any investment decisions based on what you read at this site. See "welcome" and disclaimer.

RBN Energy: The Permian -- primer on pipelines. This is another outstanding article by RBN Energy. The Permian is an old field but it has similar problems that the Bakken has. There is an interesting data point about crude-by-rail out of the Permian which will pertain also to the Bakken.

File under: Have We Finally Lost All Our Marbles?

ACLS stops father-daughter dances in Rhode Island. Sad. (I shouldn't have to point out this has nothing to do with the Bakken.)

Back to the Bakken -- To Infinity and Beyond

DNR Corporate Presentation

The DNR corporate presentation. Briefly mentions the XOM deal. (Thank you, Don.)

Reuters Profile of Harold Hamm as Mitt Romney's Energy Czar 

Link here. First paragraph: about the "controversial" Keystone XL. Nothing controversial about the high price of gasoline.

Said: The Pace of Development is Stunning
Unsaid: And We Need To Slow It Down; It Will Kill Renewables

From the Dickinson Press/InsideClimate News:
Jim Martin, regional administrator of the Environmental Protection Agency, said during the event’s regulatory panel that he’s been meeting with North Dakota officials about the challenges in the Bakken and how they can work together. 
“The bottom line is we want to work with you in identifying these issues and partnering to solve them,” Martin said. 
EPA representatives have made visits to North Dakota this year to gain a better understanding of the Bakken, Martin said. “The rapidity of development is stunning,” Martin said.
To repeat, in case you missed it the first time: "The bottom line is we want to work with you in identifying these issues and partnering to solve them." Through regulation. When Washington says "bottom line" they mean it. They won't give up. It's the bottom line.

Williston: Bust to Boom in 18 Years

Human interest story on the mayor of Williston and how he has seen the city go from bust to boom.

Note to the Granddaughters

This is where your great-great grandfather homesteaded; where your great grandfather grew up; and where your grandfather summered: Newell, South Dakota. My grandfather raised sheep just outside of Newell, South Dakota. [If the link is broken, it was a story in the Rapid City Journal about the plunging price for sheep with a great photo of the sheep corrals outside Newell.]