Friday, November 16, 2012

Wow, It Never Quits -- Another North Dakota Story -- CO2-EOR

Link to

The link will take you to an article that, except for one or two readers, will cause your eyes to glaze over.

I probably would have never read it, except a) if I hadn't, Don would have sent it to me anyway; and, b) it's Friday night and not much going on. So, with nothing else to do I read it.

It's about enhanced oil recovery (EOR) using CO2. See: your eyes are already starting to glaze over.

This is how it starts:
As oil has become increasingly difficult to find and harder to get to in recent years, attention has turned to developing ways to ensure the reservoirs that are found are exploited as fully as possible.
When it comes to boosting oil recovery from North Sea fields, no one currently beats Norway, especially Norwegian oil major Statoil, which announced in August its intension to improve the rate of recovery of oil from its field on the Norwegian Continental Shelf to 60 percent. But the UK is making an effort to catch up by using an enhanced oil recovery technology that has long been in use across the Atlantic.
Enhanced oil recovery using carbon dioxide (CO2-EOR) is a process that involves injected CO2 gas into oilfields deep beneath the seabed in order to force out additional volumes of oil.
And then it only gets "worse." Your eyes are now definitely glazed over. 

And then this, halfway through the article:
"Most of the CO2 which is used at the moment comes from natural accumulations of CO2 which are ultimately from volcanoes, so they are naturally trapped in structures below ground in the southern U.S. or in the Colorado plateau. The main exception is a project based around a power plant in North Dakota which gasifies lignite (brown coal) and strips off the CO2 from that and sends that CO2 for enhanced oil recovery into Saskatchewan, Canada through a pipeline," Haszeldine explained.
Did you catch that? You have got to be kidding. An article on CO2-EOR in Yorkshire, England, and Norway, and then all of a sudden, from out of nowhere:
The main exception is a project based around a power plant in North Dakota which gasifies lignite (brown coal) and strips off the CO2 from that and sends that CO2 for enhanced oil recovery into Saskatchewan, Canada through a pipeline."
Wow, do I love to blog. I never know where I'm going to end up.

By the way, Hess/North Dakota is also shipping ethane by pipeline to Alberta for polyethylene production [this was corrected from original post; see comment below].

By the way, did you see the recovery rate Statoil is seeking in the North Sea? Sixty percent. In the Bakken, the USGS's estimates are based on about 3 percent recovery. There are indications that some Bakken operators are getting up to 8 percent (primary) recovery. Yes, it's only beginning in the Bakken. 

Friday Night Ramblings -- The Bakken, But Nothing New regularly posts uplifting updates regarding the Bakken and just as regularly there is one informationally-challenged individual who never fails to comment. I can't even succinctly summarize his/her arguments/comments because they ... well, they just don't reflect reality.

One of the more interesting arguments is that all the good wells have been drilled, all the sweet spots have been found. The reality is, if nothing else, it appears most operators have been getting better at completing Bakken wells. As time goes on, we will see more and more data validating that observation.

Back in November, 2009, Hess drilled EN-State B-155-93-1609H-1 in section 16-155-93, Alger field. It was a very long lateral, almost 21,000 feet, and Hess reached total depth in 18 days. And that was back in late 2009. The IP was a moderately impressive 531 bbls/24 hours. To date that well has produced 137,876 bbls of oil. Although wells are increasing in cost, at the time this well was drilled, the general consensus was that wells were well on their way to recovering costs when 100,000 bbls had been produced. Yes, the decline rate is horrendous, but this well is still producing about 2,500 bbls/month (at $50/bbl --> ~ $125,000/month and at very little cost.

[Most natural gas from this well is being sold, but a bit is still being flared. This naturally begs the question whether the well is producing at maximum rate. The NDIC has rules about flaring and production.]

[In addition, I was unable to find the frack data for this well; it may be there, but if it is, I missed it. But back in 2009 they were fracking with less proppant and fewer stages than in 2012. All things being equal geologically, the wells should be even better going forward.]

So, back in 2009, Hess drilled the State B well in section 16, which has now produced almost 150,000 bbls (remember, this figure is only through September; it is now almost the end of November).

And today, Hess was issued permits for four more wells in this section: #2, #3, #4, and #5 in the EN-State B-155-93-1609H-1 series of wells.  So, we will get to see if, as some have suggested, "they" have drilled all the good wells in the Bakken. I can hardly wait to see how these four wells compare with the "original" well in this section.

That 2009 well is expected to produce oil for 39 years -- that's the average lifetime projected for a Bakken well. But the lifetime of a well is inconsequential. The total recovery is the key, and the period of time it takes to reach total recovery. Regardless how long a Bakken well produces, the estimated ultimate recovery (EUR) is what is important, and whether it can produce that total in a reasonable length of time. I don't know what the average EUR is/was for a legacy formation, such as Red River, or Madison, but it appears that 150,000 to 250,000 bbls is about as good as they get, and the average is well below that, and it takes 30 years to reach those totals. A Bakken well reaches 150,000 in under two years in most cases. EURs are estimated to range from 400,000 to one million bbls for Bakken wells, the latter in the best Bakken locations.

Check out "monster wells" to get some idea of the potential of the Bakken as well as other formations. 


Some folks might have noticed this announcement earlier today:
KOG announced that it has completed its offer to exchange $800 million aggregate principal amount of its unregistered 8.125% Senior Notes due 2019 for $800 million aggregate principal amount of its outstanding 8.125% Senior Notes due 2019. 
$800 million. Hey, folks, in my book that's $1 billion.  Don reminded me that just a few years ago one could have bought a share of KOG for 60 cents.  Not too shabby. And except for a few fields, most sections still have just one well in them. The Bakken is just beginning.

They say it will take at least 48,000 wells to drill out the Bakken (that number has been increasing, and will probably continue to increase). I suppose about 5,000 total Bakken wells have been drilled to date.  Through December 31, 2011, according to the NDIC, 3,578 Bakken wells had been drilled.  Close to 2,000 more Bakken wells will be drilled this year. North Dakota now produces more oil than California with less than 8,000 active wells; someone has said that California has about 60,000 active wells.

A new hotel is going up in Alexander, North Dakota, right in the center of one of the sweet spots in the Bakken. They are putting that hotel up in 90 days. Modular concept. It is designed to be in place "permanently." But it can be moved if necessary. This is the kind of entrepreneurial thinking that makes the Bakken so exciting.

It seems like just the other day that we read the announcement that Love's was putting a truck stop in north of Williston. That truck stop opened this past week.  A year ago folks were clamoring for a truck reliever route, or another bypass around Williston. Some weeks ago, that bypass was being used. Not perfect, but infrastructure keeps moving along.

Crude-by-rail? Who would have thought? CBR has completely changed the way we think about moving oil in a fast-moving economy.

SandRidge Considering Sale Of Its Permian Assets...

... to pay for developing the Mississippi lime.

Link to Oil & Gas Journal.

Eight (8) New Permits; A Nice Whiting Well; Active Rigs Decreasing Again

Bakken Operations

Active rigs: 187, decreasing from a recent 191;

Eight (8) new permits
  • Operators: SM Energy (4); Hess (4)
  • Fields: Alger (Mountrail), Siverston (McKenzie), Colgan (Divide)
  • Comments: Again, another day with no OXY USA or Newfield permit
Wells coming off confidential list were posted earlier; see sidebar at the right.

Five producing wells completed:
  • 22076, 248, Cornerstone,
  • 22042, 107, Cornerstone,
  • 22882, 1,533, Whiting,
  • 23358, 920, Whiting,
  • 21202, 978, KOG,

Kinder Morgan (El Paso) Pipeline, Tucson to Mexico; Update

Link to Oil & Gas Journal.

Parts of this story were first posted back in October, 2012.

Data points:
  • El Paso Natural Gas Co., LLC, affiliate Sasabe Pipeline Co will build a 60-mile, 200-million cubic feet/day capacity pipeline from existing pipelines near Tucson, AZ, to the US-Mex border at Sasabe, AZ
  • Sasabe Pipeline will connect with Sempra International in Mexico
  • requires cross-border presidential permit (here we go again)
  • Mexico awarded Sempra a contract to build and operate a 500-mile, $1 billion project connecting northwestern states of Sonora and Sinaloa
  • the Sempra pipeline will supply natural gas for power plants for the next 15 years
  • permit applied for in April, 2012; hope to get approval in earl 2013 (a full year)
  • hope to start construction first quarter 2014; September, 2014, in-service date
  • Kinder Morgan owns EPNG (posted recently)
  • 25-year transportation agreement; $200 million project

Targa Resources to Buy Bakken Assets; Crude Oil Pipeline, Storage, Natural Gas Pipeline, Processing Plant


December 5, 2013: Targa calls off plans for CBR terminal at Port of Tacoma, Washington State. Victim of Sierra Club.
Original Post

Link to Oil & Gas Journal.
Targa Resources Partners LP plans to buy Saddle Butte Pipeline LLC’s Williston basin crude oil pipeline and terminal system along with its natural gas-gathering and processing operations for $950 million.
Data points:
  • 155 miles of crude oil pipeline: McKenzie, Dunn, and Mountrail counties
  • combined crude oil capacity of 70,000 bbls (Johnsons Corner Terminal, 20K, expanding to 40K) and Alexander Terminal (30K)
  • 95 miles of gas-gathering pipelines
  • 20 million cubic foot/day gas procession plant; expanding to 40 mcfd
  • Targa will require CAPEX of $250 million in 2013 to support system expansion to meet producer activity
Comment: perhaps in the big scheme of things this may not be such a big deal, but from where I sit, this is huge. these operations are not static; they are growing.... growing to meet producer activity. It is all quite incredible. The Bakken continues to impress. 

Headlines From the Williston Wire

No links. It is easy to subscribe to the Williston Wire.

50,000 more oil workers needed in the Bakken oil patch by 2015 -- that's about two years form now.

Delta flights from MSP to Williston inaugurated.

Love's Travel Stops has opened in Williston.

Chester's opens in Love's Travel Stop.

Targa Resources will acquired 100% of Saddle Butte Pipeline, LLC's, ownership of its Williston Basin crude oil pipeline and terminal system, yada, yada, yada, for just under $1 billion ($950 million is the number quoted). The deal includes 155 miles of crude oil pipelines.

Williston Amtrak employee earns the corporation's highest honor: Nancy Olsen joined Amtrak in 1973.

Hmmmm.....Williams County voters defeated a measure to "extend" a half-cent sales tax for infrastructure --- comments redacted....Crosby also defeated a one-percent sales tax measure for St Luke's Hospital .... again, comments redacted ....

Plans for a 65-unit affordable apartment building on hold in Williston ..... the North Dakota Housing Finance Agency needs to raise $4.4 million to capitalize the Housing Incentive Fund, a program that supports the development of affordable rental housing. I remember the comments from a reader suggesting that additional affordable housing not needed in informationally-challenged reader, no doubt. "Ordinary North Dakotans - waitresses, teachers, nurses, bank tellers, and elderly and disabled households - are struggling to pay market rate rent,"

Bakken Oil Patch Will Need 50,000 More Workers By 2015

Link here to KFYR television, via the Williston Wire.
According to the Department of Mineral Resources, 50,000 more workers will be needed in the energy industry by 2015. Five colleges are teaming up to enhance their energy programs to meet the growing demand.

Welders, carpenters and truck drivers. There are a wide array of high-wage careers available in western North Dakota. And Bismarck State College is teaming up with Williston State, Fort Berthold, Sitting Bull and Turtle Mountain Colleges to provide necessary training.

"This is probably one of the biggest and most important partnerships that we`ve had with the state institutions. And it should have happened a long time ago," said Fort Berthold Community College President Russell Mason.

Another Example of the Bakken As ... Laboratory: Alexander Hotel Will Be Ready For Occupancy -- 90 Days After Ground-Breaking


November 25, 2012: update.

Original Post

What a great story, sent in by a reader, from the Bismarck Tribune:
The Shut Eye Hotel in Alexander will be done in 90 days rather than the typical hotel construction period.
The hotel is being built at 205 29th St. N.W. by Banyan Investment Group, a hospitality company, and Proteus On-Demand builders.
The hotel is made up of modular rooms bolted together and wrapped in a steel skin. That’s what makes it so fast to build, but guests will be unable to tell it’s made up of multiple structures, said Chris Cooper, vice president of special projects for Banyan Investment Group.
Cooper also said the hotel structure is engineered to stand up to wind and snow. [Let's hope.]
Even though the hotel is not being built to be temporary, it can be relocated if necessary because of it’s modular design, Cooper said.
For newbies: Alexander is about halfway between Williston and Watford City. I posted a photo of a sign announcing a new truck stop just south of Alexander, maybe a year ago. 

There certainly is a sense of urgency in the Bakken. This would not happen in Boston.

Speaking of the Keystone XL, This Day in History

A reader sent me this fascinating bit of trivia, in light of the failure of the US government to find a compromise enabling the president to issue a permit for the Keystone XL.

On this date in history, President Nixon, yes that one, approved construction of the Alaskan Oil Pipeline.

Through a bit of serendipity and coincidence, I actually got to see some of the pipeline project while under construction when I had the unique experience --  unique, for me -- of flying into Prudhoe Bay in a different life. The wildlife loved the warmth of the pipeline. Smile.

I don't have any problem with some folks wanting the Keystone XL pipeline to avoid the Sandhills. I just found it incredible that "they" couldn't come up with a solution, allowing the permit to be issued.


Prudhoe Bay. Polar.

Sandhills. Polarizing.

Oh, the first act in the Senate after the election: allowing 42 (or whatever it was) polar bear carcasses to be shipped from Canada back to the continental states. The polar bears were shot in 2008 when it was still legal to shoot this species endangered by the global warmth, something Mr Gore had been warning us about since 1992. From the AP, via Hot Air:
In its first roll call since September, the Senate voted 92-5 on Tuesday to debate a bill to ease restrictions on hunters and fishermen and allow 41 U.S. hunters to bring home polar bear carcasses trapped in Canada due to a ban on trophy imports. …
The idea was that the bill would pass easily post-election. Reid said it was “one of the most popular bills” the Senate had considered in the last session. …
Tester’s bill combines 19 measures favorable to outdoorsmen. In addition to dealing with the polar bear hides, it would allow more hunting and fishing on federal lands, let bow hunters cross federal land where hunting isn’t allowed, encourage federal land agencies to cooperate with state and local authorities to maintain shooting ranges, exclude ammunition and tackle from federal environmental laws that regulate lead, boost fish populations and protect animal habitat. A similar bill passed in the House earlier this year.
I can't make this stuff up. 

Oh, but there's  more. Scientists say the polar bear is doing just fine (well, the polar bears that are still alive, not the 42 polar bears that are now carcasses): they are increasing in number.

What a great country.

$9.00 Corn; Almost Half of US Corn --> Burned In SUVs; Let Them Eat Cake


November 20, 2012: why Deere leapt into Buffett's headlights, WSJ.

Original Post

I don't know if folks saw this yesterday, all the hand-wringing over "$9 corn." Apparently this is unheard of, $9 for a bushel of corn. I don't follow corn, but the hand-wringing was quite remarkable. I forgot where I heard it. It was not on television. But apparently $5 corn is high; $9 corn is unthinkable. Again, I don't follow corn, so I don't know. But more to follow, I'm sure.

Now I see that the president won't ease mandate on corn --> ethanol rules.  But this is sheer craziness:
This year’s U.S. corn harvest is forecast at 10.725 billion bushels, the smallest in six years because of the drought. About 4.5 billion bushels will be used to make ethanol in the year starting Sept. 1, or about 42 percent of the 2012 crop, the USDA estimated on Nov. 9.
I believe they feed corn to chickens, but I could be wrong. With genetic engineering, maybe chickens only need steroids. Be that as it may, my hunch is that the price of chicken will go up a bit next year, so much for a chicken in every pot. Unless, of course, the Great Recession of 2013 holds prices down.

Mr Buffett saw this coming. Mr Buffett lives in the heart of corn country. Mr Buffett bought a bit of Deere this past quarter (reported earlier):

Here are two recent catalysts for Deere:
  • Warren Buffett's Berkshire Hathaway took an almost 4-million-share stake in this agricultural equipment maker in the third quarter.
  • The worst drought in 50 years has led to predictions of the poorest corn crop in over a decade. There are increasing predictions of $9 to $10 a bushel of corn for those farmers who have product to deliver (the rest will get crop insurance, so it's a win/win situation). This should bode well for tractor demand.
The article was written before the author had knowledge that the government had no plans to ease up on corn --> ethanol --> SUV support program, and so you might as well add that as another bullet.  (GM makes a lot of SUVs, doesn't it?)

What a great time to be a farmer. 

Oh, some back of the envelope calculating:

$337 million / $35 billion market cap: 1 percent of John Deere bought by Mr Buffett

4 million shares bought / 400 million shares outstanding --> 1 percent of John Deere.

Double Speak (Nothing To Do With The Bakken)

Date for completing the bullet train tracks to nowhere pushed back a full year, but "we're still on schedule." Things I can't make up.
The high-speed rail authority adds 12 months to the schedule for 130 miles of Central Valley track, meaning it would be finished by December 2017 rather than a year earlier. 
"We are going to get lower bids, save some money and still meet all of our deadlines," he said. "It is a good business move."
Construction industry experts have said that the job of building the $6 billion of track through the Central Valley would require spending $3.5 million per day, one of the fastest rates of transportation project spending in history. The authority put the number at $2.7 million per day, still high by U.S. standards.

Warren Buffett Buying and Selling

Dumps GE and Johnson & Johnson.
According to the filing, Warren Buffett's holding company cut its stake in pharmaceutical giant Johnson & Johnson by 95% and its GE position was slashed by 88%. As of the filing period, Berkshire held just $34 million worth of JNJ and under $12 million of GE. 
Among the stocks that were purchased during the quarter were Deere & Co.,...  It is likely that these positions were initiated by either Combs, Weschler, or both, and not the work of Buffett. 
The relatively small position sizes would suggest that the Oracle of Omaha did not choose the stocks himself, as he normally is only involved in purchases of $1 billion or more. The Deere position was valued at $337 million .... market cap for Deere is around $35 billion.
Warren's folks must think GE is having trouble getting its footing in the energy sector. GE liked wind. Also, I can only assume that the feds cutting back on defense spending will hurt GE. But then ... my hunch: Warren is looking forward to next summer when there should be lots of good buys.

Nothing To Do With The Bakken, But Interesting Front Page WSJ Story on Delta

Delta flies new route to profits: older jets, front page, section A, WSJ.
The nation's second biggest carrier stunned the industry by becoming the first airline to buy an oil refinery, in a bid to trim its highest and most volatile operating cost, aviation fuel. It runs a huge maintenance subsidiary that tends to its own planes and does third-party work, while other airlines have scaled down or bailed out of that business. And the Atlanta company has retained its status as the only major U.S. airline that is mostly nonunionized, giving it more flexibility than its rivals even as it pays most workers more.
One may want to read that last line again. Especially the Twinkies' unions.


And speaking of Twinkies -- the PC. Dell, H-P --- staggering losses for Dell

Decade of Energy, Finally? -- More Evidence -- Neither Article Is Worth Reading For Those Interested Only In The Bakken -- For the Bakken, Move On

Page 3 -- we've talked about page 3 before. Section C of the WSJ: Houston lawyers ride new gusher, a full half-page story above the fold, and then right below the fold, KKR pitches its new fund business -- but doesn't mention the Bakken. I assume it's the same KKR at "Huge." Could be wrong.

Minot Schools Overflowing With Students -- More Evidence of Phenomenal Growth

Link to Minot Daily News.

Factbox: Drilling in North Dakota -- Federal Vs State/Private Land

Link here to Minot Daily News.

187 rigs drilling in North Dakota. Three or four drilling on federal land.

It appears the sweet spots in the Bakken were  conveniently located outside Federal land. Intelligent Designer? I grew up hearing that North Dakota was truly "God's country."

The Lakota, no doubt, agreed: God's country.

One of the Bakken sweet spots is inside the reservation.


In my original post, I spoke of the Lakota, not thinking. See first comment below. The Lakota are not associated with the Fort Berthold Indian Reservation, one of the sweet spots of the Bakken. But, it was "fun" to reminisce about the Lakota, so I will leave that part in.

In western North Dakota, we were all very familiar with some big Lakota names: Sitting Bull (Hunkpapa); Crazy Horse (huge monument being carved in the Black Hills); Red Cloud; Black Elk (his spirituality and words captured by Neihardt); Spotted Tail.

So, it looks like I need to include a bit about the MHA to try to make up for my faux pas. To start, here is the link to the MHA Nation webpage. Probably the most famous name associated with the Mandan-Hidatsa was Sakajawea (various spellings) but she was not of the MHA Nation -- she was Shoshone. Interesting, interesting story. Incredible woman. But again, I digress. Don't get me started. Sorry.

But I digress. Sorry.

Twinkies Will Liquidate -- Unions Bluffed -- The Strike Lasted a Week -- Big Fail -- 18,500 Jobs


November 21, 2012: mediation efforts fail; company will ask again to liquidate

Later, 3:26 pm: I have a bet with a reader that Twinkies will be with us as long as there is talk of global warming.  My hunch is that a company like Nabisco will buy the better-selling Hostess-branded products and make a killing. I'm hoping to see these products in high school vending machines under some future administration. Or in college vending machines where Michelle's daughters can enjoy them.

Later, 12:34 pm: trying to pin the blame on hedge funds; won't work.  Even Romney/Bain could not have saved it.
The funds, Silver Point and Monarch, are what are known as distressed debt investors. They buy the debt of troubled companies--usually at steep discounts. Some consider them white knights who are willing to take make risky investments in companies on the verge of failure. Others say they are "vulture funds."
Only Silver Point and Monarch could have kept Hostess out of liquidation and kept the Twinkie bakery ovens firing. But they were, ultimately, unable to reach a deal with the unions that represents the workers who make and deliver products like Twinkies, Wonderbread and Ding Dongs.
Without large union concessions -- what some would say, total union capitulation -- the hedge funds decided Hostess would have to die. 
I'm curious if the rank and file felt these particular union bosses represented them?

My hunch: there are a lot more "legacy" brands/companies, if unionized, will find themselves in the same boat next summer. Health care and pensions are busting up companies, especially older companies that did not change with the times.

Original Post

Link here to Chicago Tribune.
Hostess Brands Inc., the bankrupt maker of Twinkies and Wonder Bread, said it had sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.

Hostess said a national strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that began last week had crippled its ability to produce and deliver products at several facilities.

Hostess Chief Executive Gregory Rayburn said in an interview on CNBC Friday morning that Hostess could not avoid liquidation, even if members of its bakers' union ended their strike immediately and went back to work.
The liquidation of the company will mean that most of its 18,500 employees will lose their jobs, Hostess said on Friday.
And so it goes. 

Foreshadowing the Great Recession: Banks Cut 160,000 Jobs; More To Come; Not All Layoffs Counted

Link here to Reuters/Yahoo.
Major banks have announced some 160,000 job cuts since early last year and with more layoffs to come as the industry restructures, many will leave the shrinking sector for good as redundancies outpace new hires by roughly two-to-one.
A Reuters analysis of job cuts announced by 29 major banks showed the layoffs were much bigger in Europe than in Asia or the United States. That is a particular blow to Britain where the finance industry makes up roughly 10 percent of the economy.
The tally of nearly 160,000 job cut plans, meanwhile, is likely to be a conservative estimate as smaller banks and brokers are also cutting staff or shutting up shop, and bigger banks have not always disclosed target numbers of layoffs.
The tally also does not include reports of 6,000 job cuts to come at Commerzbank, for example, which the German group would not confirm last week.