Week 48: November 25, 2012 -- December 1, 2012

Bakken operations
Basin Power Electric Cooperative to triple capacity at new Watford City site
Tectonic changes in crude oil movement
ONEOK won't go forward with Bakken Crude Express Pipeline
TAM International setting up Bakken regional headquarters in Dickinson
Enbridge Announces Enbridge Rail 
Trican, another well services company, opens in Minot
First Bakken unit train arrives in Tacoma, Washington

Bakken deals
Magnum Hunter Resources to acquire 20,000 acres from Samson Resources for $30 million in cash

North Dakota State Budget
Random update

Economic development
John Deere expands in Valley City
Mid-America Region survey: North Dakota number one in expanding economy
Update on the 90-day hotel going up in Alexander

Human interest
The first Bakken well

Williston Wire Stories -- The Bakken

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

North Dakota named best-run state, 24/7 Wall Street, a respected financial news outlet.

A record 634 North Dakotans reported incomes of more than $1 million on their 2011 individual tax returns; up from 532 in 2010; largely due to royalties paid to mineral owners by oil companies. Average adjusted gross income in North Dakota increased from $53K in 2010 to $61K in 2011.

North Dakota's airline industry is booming; boardings are up almost 20%. Minot's boardings increased by 53% this past October compared to October one year earlier.

Employment is soaring in the Bakken: employment in the state's oil patch has increased by about 50 percent over the past three years.

The reason NDIC approved a series of 14 wells on two overlapping 2,560-acre spacing units was to minimize the effects on the city of Ambrose. Samson Resources is doing the drilling.

Alexander Lodge, a crew camp, officially held its grand opening; $75/night special through the end of the year. 360 private bedrooms with 10 rooms in each individual housing unit.

ALCO Store opens in Tioga; staff of 40.

Only Two (2) New Permits; Slawson, BR, and Whiting Each With a Nice Well

Maybe a reader will know the answer to this question: 

Burlington Resources has a permit for another "Midnight Run" well in the Union Center oil field. There is a "new" abbreviation in the name: "ULW" ---

• #24537, loc, BR, Midnight Horse 11-1MBH-ULW

I'm curious if anyone knows what the designation "ULW" means. 

Thank you.

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New permits -- 

• Operators: BR, Slawson
• Fields: Union Center (McKenzie)
• Comments: Slawson has a permit for a wildcat in McKenzie County

Wells coming off the confidential list were reported earlier; see sidebar at the right

Producing wells completed:

• 22410, 212, Slawson, Ann Nelson (Federal) 3-31-30H, Ross, t10/12; cum 4K 9/12;
• 21398, 1,063, Slawson, Wolverine Federal 4-31-30TFH, Elm Tree, t9/12; cum 40K /12;
• 20823, 2,880, BR, Arches 44-35TFH, Keene, t6/12; cum 76K 9/12;
• 23580, 1,295, Whiting,  Iverson 41-14H, Sanish, t10/12; cum --

Pick a Number, Any Number: In This Case: 15

Link here to SeekingAlpha.com: Whiting is worth $15 billion.

Whiting's market value today is about $5 billion.

What is Whiting worth? I think one can make a case for almost any number between $4.9 billion to $100 billion. I did the math on the back of an envelope, then lost the envelope, and don't want to go through the exercise again. Trust me. Somewhere between $4.9 billion and $100 billion.

SeekingAlpha.com's $15 billion is at the lower end of that range.

Another Solar Company Goes Bust

To the list of "36" in the original post, we can now add another solar company that has gone bust: Twin Creeks Technologies. This is their $26 million website. I assume this link will break soon -- the website is a single page, completely white except for a "sunburst" icon and "twincreeks technologies" all in lower case. That's the website. I can't make this stuff up. Here's the story:

Mississippi taxpayers may have only an empty Senatobia building and some solar panel equipment to show for nearly $26 million in loans provided to Twin Creeks Technologies.

The California-based solar technology firm is liquidating, and a company that bought Twin Creeks' assets does not intend to take over its agreement with Mississippi. The contract called for Twin Creeks to invest at least $132 million and create at least 500 jobs.

Federal money --> solar company start-ups --> executive compensation --> executives donate to election campaigns of their choice if they desire --> election over --> 38 solar companies declare bankruptcy. I'm sure that did not happen, but it would be a great novel. Or a Harvard business school case study of moving money around in a society with "eyes wide shut."

In-Play: Abaxas Guidance

Abraxas Petroleum Corp reports that it expects 4Q12 production to average between 4,300-4,500 BOEPD: Abraxas expects 4Q12 production to average between 4,300-4,500 BOEPD. The variance in guidance is due to the timing of completion and productivity of recent Bakken and Eagle Ford wells. Abraxas expects 2013 production to average between 4,900-5,200 BOEPD, which equates to approximately 21-28% growth over 2012. The Company is also actively marketing numerous assets which it deems non-core, assets with a low working interest or assets with little associated production that are not reflected in this guidance.

Back to the Bakken

Too many posts the past two days were getting too far afield of the Bakken. Sorry.

I have put most of them back in "draft" status. They will be re-posted over the weekend, after more Bakken stories are posted.

Friday Morning Links

Detroit on the verge of insolvency, again, WSJ.

Some data points:

• The city's meager revenues aren't enough to support services for its 713,000 residents living across 139 square miles.
• Detroit's operating deficit in the current fiscal year is projected at more than $100 million. If the city doesn't receive a promised $30 million in state aid by the third week in December, it would run out of cash. 
• Will start furloughing 11,000 workers.
• For fiscal year 2013, Detroit is expected to have $1.603 billion in revenue and $1.680 billion in expenses, leaving the city another $76 million in the red. The city's total debt is $8.2 billion, according to which includes bonds for general operations as well as the city's water and sewerage department. But that doesn't include other obligations such as pensions and retiree health care.

Some comments:

• the mayor says the population density is one problem: 5,000 people/square mile (compare to North Dakota: 10 people/square mile
• $8.2 billion/713,000 --> $11,500/person and that doesn't include "other obligations such as pensions and retiree health care"

One option is for the city to be absorbed by Wayne County. Okay.

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Obama's real fiscal problem, WSJ 

For each of the last three two-term Presidents, the economy went a long way to determining success or failure. George W. Bush's eight years ended in an economic panic that ruined his legacy. But note in the nearby table the tales of the Reagan and Clinton second terms. In the Gipper's last four years, GDP growth averaged 3.73% a year. In Bill Clinton's last four years, the economy averaged 4.45% growth.

Now look at Mr. Obama's first term. His average annual growth rate so far over his four years is 0.8%. Take out the negative growth of 2009, and it is still only 2.1% a year. Mr. Obama's great challenge for the next four years is leaving behind this Japan-like stagnation and getting the economy back to the growth of the Reagan and Clinton eras.

Costco's dividend tax epiphany, WSJ

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?

Specifically, the giant retailer announced Wednesday that the company will pay a special dividend of $7 a share this month. That's a $3 billion Christmas gift for shareholders that will let them be taxed at the current dividend rate of 15%, rather than next year's rate of up to 43.4%—an increase to 39.6% as the Bush-era rates expire plus another 3.8% from the new ObamaCare surcharge.

A constant theme at MDW: the gap between the "haves" and the "have-nots" is widening. These special dividends will widen the gap. The stock market is pulling back, providing great buying opportunities for folks like Warren Buffett.

Disclaimer: the MDW is not an investment site. Do not make investment decisions based on what you read at the MDW. Good luck to all. 

South Dakota Wind Headed For A Crash

Link here to The Dickinson Press.

Data points:

• developers are expecting a crash
• scrambling to finish projects by the end of the year
• 2.2 cents / kwh tax credit; due to expire at end of year

The linked story has the statistics for South Dakota. The tax incentives, spokesmen say, are critical if the wind industry is to survive.

California Electric Rates Already Twice That Of North Dakota -- California Rates To Increase Significantly This Year; Even More Next Two Years; One State With Renewable Energy Mandate; One State With Higher Population Density

Link to LA Times.

Almost 5 million Southern California Edison Co. customers in hundreds of cities and communities across the southern, central and coastal parts of the state will be hit with higher electric bills early next year and bigger hikes in each of the following two years.

The decision, which Edison says will add an average of $7 a month to residential bills for the first year, covers Edison's costs to provide service, which amounts to about half a ratepayer's bill. Other costs for buying fuel and contracting for power deliveries fluctuate and are passed directly to consumers.

The article does not mention the cost of mandated renewable energy which is two- to four-times the average cost of conventional energy (coal, natural gas), so I don't know if that makes a difference.

And then:

Business groups also complained that the jump in Edison's already steep electric rates could make it harder for them to keep operating profitably.

"California manufacturers already pay 50% higher electricity rates than the national average," said Gino Di Caro, a spokesman for the California Manufacturers & Technology Assn.

Is that accurate? Are California rates 50% higher than elsewhere? You can see for yourself at this link (this is before the newest rate increase).  This map might be easier.

Either map:

• North Dakota: about 7 cents/kwh (no renewable energy mandate); 
• California: about 14 cents/kwh (renewable energy mandate).

One would think that with a greater population density, i.e., more rate payers/square mile, the price/kwh should go down.

Population density:

• California, #11 in the US at 240 people/square mile (in SCE area, I would assume even more dense)
• North Dakota, #47 in the US at 10 people/square mile

But Californians, in the main, are content/satisfied: they just voted to raise taxes on themselves to pay for a bullet train to nowhere.  

Cue Connie Francis.