On Tap For Wednesday --

Chesapeake: quarterly profit; output up 9%; earned 2 cents vs a lot of 21 cents last year; stripping out hedging, one-time expenses, Chesapeake said it had a profit of 30 cents a share on revenue of $3.42 billion, beating analyst expectations for profit of 25 cents a share on revenue of $2.85 billion.

Comcast: profit rises 17 percent in 1Q13;

Devon Energy: $1.3 billion loss; due to low prices of natural gas;

Enbridge Energy Partners: 21 cents vs 28 cents a year ago; year of transition; should improve in 2013

FreightCar America (RAIL), after market close: not a good year.

• 1Q13: loss of $0.22
• 1Q12: gain of $0.81
• 4Q12: loss of $0.08

“As I have previously stated, continued uncertainty in the freight railcar market will make 2013 a challenging year,” said Ed Whalen, Chief Executive Officer. “We remain focused on factors within our control, including: executing our railcar diversification strategy; the successful start-up of our Shoals, Alabama facility; improving the results of our Services business; and continuing to prudently manage our costs. I am confident that FreightCar America’s market position, strong balance sheet and the execution of our strategic initiatives will enable the Company to capitalize on its long-term opportunities and the eventual freight railcar market recovery.”

NOG, May 6.

MDU transcript.

For The Archives: The Saudi Perspective, 2013, 2014

Updates

January 7, 2014: CNS News is reporting -

Saudi Arabia’s Prince Alwaleed Bin Talal, a billionaire businessman and nephew of Saudi King Abdullah, said the production of shale oil and natural gas in the United States and other countries, primarily done through fracking, is a real competitive threat to “any oil-producing country in the world,” adding that Saudi Arabia must address the issue because it is a “matter of survival.”

New shale oil discoveries “are threats to any oil-producing country in the world,” said Prince Alwaleed in an interview with The Globe and Mail. “It is a pivot moment for any oil-producing country that has not diversified. Ninety-two percent of Saudi Arabia’s annual budget comes from oil. Definitely it is a worry and a concern.”
Alwaleed also commented that many Saudi leaders did not comprehend the threat posed by oil and natural gas production from shale. However, he said he would use his influence to keep pressing the issue.

Original Post 

Rigzone is reporting:

Saudi oil minister Ali al-Naimi on Tuesday called the U.S. push for energy independence "naive," saying the country will continue to need Middle Eastern oil long into the future.

Naimi said he welcomed the surge in U.S. domestic energy production from shale oil and gas fields, which he said will add depth and stability to global oil markets.

Despite the domestic production gains, U.S. imports of Middle East oil in the second half of 2012 were higher than any time since the 1990s, Naimi said.

Naimi, meanwhile, emphasized that Saudi Arabia remains able to sustain its reserves at the current 266 billion barrels and said that could increase, especially if technology for extracting "tight" shale oil and gas improves.

No plans to increase Saudi production beyond what it is producing today, about 10 million bopd.

Wells Coming Off The Confidential List Wednesday; KOG With A Gusher On 320 Acre Spacing, Only 16 Stages

• 23130, drl, Hess, SC-Norman 154-98-3130H-4, Truax,
• 23225, 2,169, KOG, Moccasin Creek 4-3-34-3H3, Moccasin Creek, spacing: W2; t2/13; cum 28K 3/13; Three Forks; 16 stages; 2 million lbs; all ceramics, I believe;
• 23649, 2,650, BR, Kummer 31-30MBH, Blue Buttes, t3/13; cum 5K 3/13;
• 23887, drl, Statoil/BEXP, Eveland 30-19 1H, Briar Creek,
• 23977, 765, KOG, Grizzly 147-103-16-21-16-1H3, Mondak, t2/13; cum 11K 3/13;
• 24039, drl, SM Energy, Broderson 2X-278HB, Siverston,
• 24083, drl, MRO, Kevin Schmidt 44-32H, Murphy Creek, 

Note the spacing on #23225: W2 (320 acres)

OBSERVATION 1: Random Observations Regarding the USGS 2013 Assessment of the Bakken: TOC

Newbies should go back and read this post of November 1, 2011.

There are numerous factors affecting the quality of an oil basin. Total organic content (TOC) is one of the Big 5.

A bit more about TOC at this link. Now, how does the Bakken stack up against, let's say, Saudi Arabia?

There are five areas in the world where "world class" source rock exists:

• The Bakken
• Norwegian Sea (North) and North Sea
• Venezuela
• Saudi Arabia
• Norwegian Sea (South) and The Netherlands

For comparison, TOCs:

• Bakken: as high as 11%
• United Arab Emirates: 0.3 to 5.5%
• Saudi Arabia: 2 to 5%
• Trinidad: 2.2%
• North Sea: 5.6% 

When I first came across this information, I about fell off my chair: the Bakken has a TOC average of 11 percent, compared to Saudi with varying reports of 2 - 5 percent. Wow.

So, that was from the earlier post, back in 2011.

Did the USGS 2013 Survey of the Bakken-Three Forks have anything to say about the TOC of the Bakken? Yes, based on new information, and I quote from the first page:

"The upper and lower shale members are the primary source rocks for the Bakken TPS, with present-day total organic carbon (TOC) values from less than 1 weight percent to 35 weight percent (Lillis, 2013)."

A TOC of 35% is the highest I have ever seen reported for the Bakken. As noted above, the 30-second sound bite: the average TOC for the Bakken is 11 percent. Most sources quote TOC as high as 16 percent in the Bakken, and there is one source that quotes a TOC as high as 20%.

Again, more recent data suggests the TOC in the Bakken can be as high as 35%. That must be some kind of record.

The four-page USGS 2013 assessment does not provide more detail regarding TOC. It does not matter. But it does put the Bakken into perspective for some folks. Like me. [Ryder Scott, June-August 2011, Vol 14, No 2, states that "a total organic carbon (TOC) of 2 percent is considered a sufficient screening criterion for oil shale plays. However, both the Bakken and Arthur Creek ["Northern Territory, Australia] have been reported to contain much higher TOCs. Greater TOC and shale thicknesses are correlated to higher production." -- Ryder Scott. See comments below.]

Thirteen (13) New Permits -- The Williston Basin, North Dakota, USA; Petro-Hunt Cancels 22 Permits On The Reservation; One Dry Hole (A Madison)

Active rigs: 188 (steady, nice, slight increase; anything above 185 is nice to see with regard to keep roughnecks employed)

Petro-Hunt cancels twenty-two (22) permits, all in Dunn County, all on the reservation, I believe. I assume this has to do with the company recently selling some of their assets.

Thirteen (13) new permits --

• Operators: KOG (4), BR (4), G3 Operating (3), Whiting, CLR,
• Fields: Juno (Divide), Eagle Nest (Dunn), Corral Creek (Dunn), Truax (Williams), Sanish (Mountrail)
• Comments: G3 continues to be active; it certainly looks like folks are going after their sweet spots now that they have figured out what they've got

The one well coming off the confidential list today was reported earlier today; see sidebar at the right.

And there was one DRY hole:

• 21777, DRY, Petro Harvester, Lodoen 6-1HSWSW 6-162N-79W, Sergis, a Madison well, Bottineau,  this looks like simply a Madison vertical well drilled to 3,500 feet and came up empty. This well was about 50 miles north-north-east of Minot; there is still a rig-on-site farther east, a Legacy well that will be targeting the Spearfish, I assume (#25214)

Two New Pipelines Will Flood Marathon Petroleum Refinery In Galveston; This Is Simply Incredible

Marathon Petroleum has acquired a new Galveston Bay refinery, in Texas City, Texas: 475,000 bopd.

The location couldn't be better.

Two pipelines from the Permian Basin (Midland-Odessa, northwest Texas) will bring oil to the Houston-area refinery:

• Longhorn Pipeline, Magellan Midstream Partners: came on-line earlier this month
• Permian Express Pipeline, Sunoco Logistics: will come on-line next quarter

MDU Has Huge Quarter; Raises Guidance

Press release. Comments at earnings central.

From the press release:

“This is our strongest first quarter performance since 2008,” said David L. Goodin, president and chief executive officer of MDU Resources. “All of our businesses are performing well and are executing their growth plans.

“Our exploration and production business increased oil production 46 percent from the same period last year,” Goodin said. “Just as important, we have achieved an important goal of balancing our oil and natural gas production. Each contributed about 46 percent of production, with natural gas liquids making up the remainder.”

The Bakken continues to be the largest oil play for Fidelity Exploration & Production Company, with first quarter oil production increasing 63 percent from the first quarter of 2012. Continuing success in the company's Paradox Basin asset, where production grew substantially from the same quarter a year previous, also was a significant contributor to the company's overall production growth.

Fidelity plans to invest about $400 million this year, about half of that in the Bakken, with a target of increasing year-over-year oil production by 25 to 30 percent, on top of the 36 percent increase achieved in 2012.

Some Idle Back-Of-The-Envelope Calculations; Some Idle Rambling

How long will the Bakken last?

Occasionally I'm asked "how long the Bakken will last?" I refer those who ask that question back to the "Basic Analysis of the Bakken" posted a couple of years ago (2010). The link can be found at the sidebar about a third of the way down.

New numbers and old numbers, new estimates and old estimates, they all keep dovetailing very nicely.

For the past six months, the North Dakota Bakken has been producing about 20 million bbls/month. Some say in another year or two, "we" will get to one million bbls/day or about 30 million bbls/month.

The USGS 2013 survey of the Bakken released today estimated about 7 billion bbls of recoverable oil in the Bakken/Three Forks.

At a steady state of 20 million bbls/month, it takes about 4 years to produce one billion bbls. For 7 billion bbls of recoverable oil, that works out to about 30 years (rounded).

At a steady state of 30 million bbls/month, it would take about 3.75 years to produce one billion bbls. For 7 billion bbls of recoverable oil, that works out to about 20 years (rounded).

How many wells will need to be drilled? The USGS: Continous wells AU has a 350,000 bbls per well and well drainage of 320 acres.

• 7 billion bbls/300,000 bbl-EUR = 24,000 wells (rounded)
• 7 billion bbls/500,000 bbl-EUR = 14,000 wells (rounded)
• At 2,000 wells/year: 7 to 12 years of drilling

Is the boom over?

Some folks have suggested the boom is over, that we have moved into steady-state production. That may be; I don't know. But here's an interesting metric from the "Basic Analysis of the Bakken":

"The increase in jobs and and the demands upon the local area will continue throughout the drilling phase of the industry's development, which will last for the next 15 - 20 years. However, when the industry transitions from the drilling to the production phase, demand for labor in the industry will fall by 90%. ... but then by 2030, 7,200 mining industry jobs will be phased out."

So, I guess that's one metric, or one definition, to tell us when we've moved from the drilling phase to the production phase: the demand for labor in the industry will fall by 90%.

Hmmm.......seven years will go by very, very quickly. It's already been about seven years since the boom began in North Dakota (2007).

Random Update of EOG's Super Long Laterals In Clarks Creek/Antelope Area

Original post here. That's where you will find updates.

• 22484, see below/conf, EOG, Hawkeye 102-2501H, Clarks Creek,
• 22485, see below/conf, EOG, Hawkeye 102-2501H, Clarks Creek,
• 22486, 2,421, EOG, Hawkeye 102-2501H, Clarks Creek, total depth 25,101 feet; t9/12; cum 272K 3/13;
• 22487, drl, EOG, Hawkeye 102-2501H, Clarks Creek,

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

22486, 2,421, EOG, Hawkeye 102-2501H, Clarks Creek, 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	3-2013	31	36630	37198	8201	57544	0	57404
BAKKEN	2-2013	28	22101	21977	5978	32810	0	32671
BAKKEN	1-2013	30	33396	32927	9032	55877	0	55739
BAKKEN	12-2012	31	55366	55608	14629	92144	0	91989
BAKKEN	11-2012	27	47558	48594	10382	57300	0	57178
BAKKEN	10-2012	31	54884	54013	15946	155	0	0
BAKKEN	9-2012	9	21959	20698	10781	444	0	402

22485, see above, EOG, Hawkeye 102-2501H, Clarks Creek,

Date	Oil Runs	MCF Sold
3-2013	43188	0
2-2013	29909	0
1-2013	17721	0

22484, see below/conf, EOG, Hawkeye 102-2501H, Clarks Creek,

Date	Oil Runs	MCF Sold
3-2013	40438	0
2-2013	27380	0
1-2013	17147	0

US Government Agency Announces "Another Bakken" Discovered In North Dakota! USGS Doubles Estimate of the Bakken: 7.4 Billion Bbls Of Recoverable Oil; And That's The Mean; Top Line Is 11.4 Billion Bbls; Both Numbers Considered Conservative By Some

The Official USGS Survey
The USGS Report on the Bakken 
(PowerPoint Presentation) 

Observations

Observation 1: TOC
Observation 2: The Four Benches of the Three Forks  
Observation 3: The relative size of the Bakken compared to the two Texas basins
Observation 4: The Pronghorn Member
Observation 5: The "F95" for the Bakken Formation actually decreased slightly
Observation 6: Where is UND / UND-EERC?

Other Sources

Unofficial: a trillion-bbl reservoir?

Updates

September 26, 2019: estimates, updated.

June 16, 2018: the next USGS survey of the Bakken/Three Forks was scheduled for 2020. North Dakota congressional representatives successfully lobbied the USGS to begin the survey sooner. That was announced on December 11, 2017. This suggests to me that the USGS should begin the new survey not later than by the end of 2018. Let's hope.

May 10, 2013: back-of-the-envelope calculations. The four counties with the most activity: Dunn, McKenzie, Mountrail, Williams, around 10,000 square miles. One section is a square mile. It's pretty much agreed there will be four wells in each section in this part of the Bakken: 40,000 wells. EURs/well of 500,000 are certainly likely. 40 x 500 = 20,000 x 1,000 x 1,000 = 20 billion bbls of oil in these four counties.

Now, let's say someone suggests 4 wells/section throughout the entire 4-county area is a little optimist, then we have one-half of Burke County (500 sq miles); Divide County (1,000 sq miles); Stark County (1,000 sq miles -- where Whiting's Pronghorn Prospect is): 2,500 sq miles = 2,500 sections. Let's say just two wells per section at 300,000 bbls EUR. 2 wells/section x 2,500 sections = 5,000 wells x 300,000 bbls = 5 x 300 = 1,500 x 1,000 x 1,000 = another 1.5 billion bbls, which is extremely conservative.

So, very, very conservative, 20 billion bbls. USGS says 7.3 billion, and Lynn Helms says the 5% probability figure of 11 billion bbls is a reasonable target. And I do believe that folks like Harold Hamm were looking at 20 billion bbls recoverable from the middle Bakken alone, even before considering the Three Forks. 

May 10, 2013: I just noticed that Lynn Helms, Director, NDIC, released a press release on the USGS 2013 survey of the Bakken. He said he was happy with the survey, stating clearly that the figure of 11 billion barrels of recoverable oil was an appropriate target. The mean of 7.38 billion bbls was not mentioned, suggesting that Lynn Helms feels strongly that 11 billion bbls is the more likely figure.

May 6, 2013: Minneapolis StarTrib article on assessment.

Later, 5:27 pm: Carpe Diem's take on the new assessment.

“These world-class formations contain even more energy resource potential than previously understood, which is important information as we continue to reduce our nation’s dependence on foreign sources of oil,” said Secretary of the Interior Sally Jewell. “We must develop our domestic energy resources armed with the best available science, and this unbiased, objective information will help private, nonprofit and government decision makers at all levels make informed decisions about the responsible development of these resources.”

Does this mean SecInterior Sally Jewell will support fracking?

Later, 2:59 pm: The Oil & Gas Journal is reporting: 

The Bakken and Three Forks formations in North Dakota, South Dakota, and Montana hold an estimated mean of 7.38 billion bbl of undiscovered, technically recoverable crude oil, the US Geological Survey announced.

The updated assessment represents a two-fold increase from the 2008 estimate of 3.65 billion bbl in the Bakken, it noted.

The update includes the Three Forks for the first time.

USGS’s latest assessment found that the Bakken has a 3.65 billion bbl estimated mean resource—unchanged from 5 years ago—and Three Forks has an estimated mean 3.73 billion bbl. The formations’ combined estimate ranges from 4.42 million bbl, with a 95% chance of production, to 11.43 billion bbl, with a 5% chance.

Other data points:

• 6.7 Tcf of associated / dissolved natural gas
• 0.53 billion bbls of natural gas liquids 

The narrative continues:

Gas estimates ranged from 3.43 Tcf (with a 95% chance of production) to 11.25 Tcf (with a 5% chance) and 0.23 billion bbl (95%) to 0.95 billion bbl (5%) of NGLs. These estimates represent a nearly three-fold increase in mean gas and NGL resource estimates from the 2008 assessment, due primarily to the inclusion of Three Forks Formation, USGS said.

Later, 12:17 pm: Tweets keep coming. Bits and pieces starting to flow re: USGS estimate: Hoeven: 7.4 billion is a mean number. Top line is 11.4 billion barrels.  Hoeven says both numbers likely conservative. Just between you and me, there is a huge difference between 7.4 billion and 11.4 billion. Using a calculator, I get a difference of 4 billion. The four-billion-delta exceeds the 3.6 billion bbl USGS estimate in 2008. In other words, the USGS has just announced "another Bakken" has been discovered in the United States. It is located, coincidentally enough, in western North Dakota.

Original Post

The Grand Forks Herald is reporting:

The U.S. Geological Survey said today there is nearly twice as much recoverable oil in the Williston Basin than its estimate of five years ago.

The USGS has determined that there are approximately 7.4 billion barrels of oil that could be pumped from western North Dakota and eastern Montana.

The last USGS study, released in April 2008, identified 3.65 billion recoverable barrels of oil in the Bakken formation. The new estimate includes oil that could come from the Three Forks formation in addition to the Bakken formation.

Some have already noted: 3.65 x 2 = 7.3. The new estimate is 7.4. So I don't quite understand the GFH's reporter saying that the "7.4 is nearly twice as much." The fact is: 7.4 is more than twice as much. And then we find out that 7.4 is the "mean" number; in fact, the top line was significantly higher. [Later: now that I see more data, as provided by The Oil & Gas Journal, it makes sense why the GFH reporter said "nearly twice as much."]

We'll have to wait to see the report for the full details.

If the recovery rate is 5%, then we're talking 148 billion bbls of original oil in place.

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

Later, 11:57 am:

Platts is now tweeting:

USGS estimates about 7.4 billion barrels of undiscovered/technically recoverable oil lies in the Bakken and Three Forks tight oil formations.

I wonder where that "undiscovered" Bakken/Three Forks oil is? I assume much of it is under Harold Hamm's oil rigs, and much of it is under the multi-well pads going in. As my daughter would text: LOL.

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

A reader sent me a very lengthy comment regarding the USGS 2013 Survey of the Bakken/Three Forks. I am including it here for archival purposes. It will be interesting to come back in five years and re-visit this analysis:

Some thoughts regarding the recent USGS assessment of the undiscovered oil and gas in the Bakken/Three Forks.

It seems to me, based on current development, the estimate is conservative, but 7.4 billion barrels is a lot of oil! It would take average production of over 600,000 barrel of oil per day in North Dakota to produce this amount in 30 years.  We know it is likely total production for the Bakken zones will continue beyond 30 years but it seems obvious there will need to be very high production in the next 10 years or so to get a 600,000 barrel average over the long term.

It also appears, USGS did not re-visit their 2008 Bakken only numbers even though new fracking and completion techniques have revolutionized development in the past five years.  They added the 3.7 billion barrel estimate for the Three Forks with very little direction as to “sweet spots” or the role of the various “benches” in this zone.  The only conclusion has to be the Three Forks contains a little more producible oil than the Middle Bakken alone. 

I have difficulty matching the USGS study will current production results and actual drilling/permitting programs. For example, the Nesson-Little Knife Assessment Unit is an area almost 150 miles north to south and from 25 to 40 miles wide.  Since the south 20 miles of this unit has not shown much promise in the Middle Bakken, I only included the 130 miles (N-S) and 30 miles average east to west.  This results in 3900 square miles or 1950 1280 acre production units.  The USGS Middle Bakken study shows 1.149 billion bbls of recoverable oil in this unit.

Divide 1950 units into this estimate and it results in a little less than 600,000 barrels per 1280 acre unit.  The USGS also referred to something less than 300,000 barrels ultimate recovery for a well draining 400 acres in “sweet spots.”  Is the USGS assuming two 300,000 barrel wells per unit or three 200,000 barrel EUR wells per unit?  Scanning the area from north of Dickinson to the north end of the Nesson Anticline and reviewing current production results, drilling and permitting, 2 or 3 Mid Bakken wells per unit with a total EUR for the entire 1280 acre unit of less than 600,000 barrels doesn’t seem to match with reality.  Many units approach or exceed this total in their first two or three years of production. 

I did a similar study of the Central Basin Assessment Unit.  This unit may make sense from the geological perspective but actual drilling and production results vary greatly.   A large portion of the this AU in North Dakota is in the “sweet spot."

The Montana segment has had less drilling and less impressive production results so far.   In North Dakota this AU has about 1,625 1280 acre drilling units.  If you allocate 90% of the undiscovered oil in Central Basin Unit to the North Dakota units, you again get about 600,000  barrels of recoverable Middle Bakken oil from each 1280-acre unit.  From an economic unit perspective this would be about two Middle Bakken wells per unit.

Continental Resources would be through drilling with one per unit with their 603,000-barrel-per-well estimate. (I think this is very optimistic, but 350,000 to 450,000 bbls of oil per well in “sweeter spots” seems more reasonable). 

I will concede that the 2013 USGS numbers might be “spot on.”  Time will tell.  For me, I will pay attention to what current operators in the Bakken are doing.  These operators most certainly have their own set of numbers for the acreage they control.  The actual pay-out of these wells will determine future development. Theory and analysis are important but cannot replace actual results. 

Perhaps clarification from USGS concerning recovery by 1280-acre unit will help in understanding their methodology. 

Finally, I’ll say it again:  “7.4 billion barrels is a lot of oil!"

It sure is. 

He Always Said His Worst Fault Was Laziness

When asked about second term failures, President Barack Obama responded by saying, "Maybe I should just pack up and go home. Golly."

That would fit his style.

I honestly can't think of any president who would have said that. 

Link. 

President Barack Obama admitted in an interview with ABC's Barbara Walters, screened on Friday night, that his worst character fault is "laziness" and he is really a big "softie" and not at all "Spock-like."

Asked by Walters to name "the trait you most deplore in yourself," the president -- who was interviewed alongside his wife Michelle -- responded, "laziness."

I think the president is already aware of his legacy. 

Random Update on Target Logistics Going Global

Unfortunately this is probably a dynamic link and will change over time, or be lost forever, but for now, it's interesting.

The link takes you to an update regarding Target Logistics global reach, but more importantly is the human interest story at the sidebar at the right at the link which features Target Logistics' man-camp in Dunn County. I assume this is the one north of Dickinson, the one that Stark County commissioners would not approve inside their county.

And so it goes.

A huge "thank you" to a reader for sending me the link. It's been awhile since I last posted about Target Logistics, another company that contributed to the success of the Bakken despite unnecessary obstacles.

For Investors Only: Jeffries Oil and Gas Picks

247WallStreet is reporting Jeffries oil and gas companies list:

Chesapeake leads the list.

Bakken-centric companies on the list:

• CLR
• EOG
• Oasis

For Oasis:

Oasis Petroleum Inc. is another Bakken shale success story. This is clearly evidenced by looking at production, which grew 82% year over year, while reserves have grown at a compound annual rate of 121% since 2009. The Jefferies target is $50. The consensus target is $44.

For EOG:

EOG Resources Inc. makes the list and looks to be on the path to super major status. The Jefferies price target for this top name is $155. The consensus target is $148.75.

Jeffries comments regarding CLR are most interesting.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you're read here.

Random Note On Canadian Oil Sands Production

I'm not going to bother to look for a link, but it's been said over and over, with or without the Keystone XL pipeline, the Canadian oil sands will keep producing more and more oil. Here's just one random headline supporting that contention: Cenovus Energy increases oil production from the Canadian oil sands in the most recent quarter. The Oil and Gas Journal is reporting:

Cenovus Energy Inc., Calgary, reported a 15% increase in its western Canadian oil production in the quarter ended Mar. 31 on strong performance by its Christina Lake oil sands project.

The increased crude oil output was offset by a 27% decline in the average crude oil sales price the company received compared with the same period a year earlier, but the lower oil prices benefited refining operations, Cenovus noted.

Combined oil sands production at Foster Creek and Christina Lake averaged 100,347 b/d, up 22% from the 2012 first quarter. Christina Lake output rose 79% to an average 44,351 b/d net while Foster Creek was down 2% on greater than expected downtime on some production wells.

Conventional oil production, including Pelican Lake, averaged almost 80,000 b/d in the quarter, a 7% increase.

How coincidental, a link. The Oil and Gas Journal is, again, reporting: 

Defeating the proposed Keystone XL pipeline project would not keep Canada from producing crude oil from its oil sands, Natural Resources Minister Joe Oliver said during a visit to Washington.

“Several of the project’s opponents believe it would be a decisive body blow which would keep the oil sands in the ground. That’s simply wrong,” he said in remarks at the Center for Strategic and International Studies on Apr. 24.

Oliver called on the Obama administration to approve the project and allow construction to begin on the pipeline’s final 875 miles.

“This project is completely in step with the long and productive US-Canadian energy relationship,” Oliver said. “Rejecting it would be a serious reversal of that relationship.”
He disputed environmental organizations’ charges that the crude would be exported once it reached the US Gulf Coast, saying it simply would replace heavy oil US processors now import from Venezuela, which has become a much less reliable supplier.

Global Warming: So Cool -- The Debate Has Been Going On Since 1955

Note To The Granddaughters
For background to this post, one might want to look at my notes elsewhere and scroll down to the chapter on "Cyclogenesis/Weather Forecasting." My notes are for me and may not make sense to others; if interested in the topic, you will really enjoy the book.

Then, the second bit of data that folks should review: the #1 greenhouse gas is water vapor. Anthropogenic CO2 is inconsequential as a greenhouse gas. That is not to say antrhopogenic CO2 is not important for other reasons, but it is inconsequential as a greenhouse gas. I've been saying that for a couple of years now. One can find references across the internet to back it up. One can also references across the internet to refute it.

I am reading a most delightful, a most interesting, a most incredible book: George Dyson's Turing's Cathedral, c. 2012.

During and shortly after WWII weather forecasting became very important, rivaling the development of thermonuclear weapons, both of which (thermonuclear weapon development and weather forecasting) pushed the development of the computer.

I was quite surprised to see the extent that weather forecasting had on the development of the computer. It is covered in Chapter 9, Cyclogenesis, in Dyson's book, pp 154 to 174.

Between 1945 and 1955, meteorologists, using computers for the first time, were getting better and better at weather forecasting. The goal was to make weather forecasting deterministic, and weather forecasts to "infinity."

From page 171:

[John] von Neumann, while a master of simplifying assumptions, was realistic about the obstacles.

"Even if we were adequately informed, the inclusion of turbulence and radiation in the prediction equations would be quite involved," he announced.

Nearly all the phenomena under consideration were unstable, and minute differences could be amplified into large effects.

"For example, only about 1/100,000 of all the water on earth occurs in vapor form in the atmosphere; yet the presence of water vapor makes a difference of 40 degrees C in the average temperature of the earth, " he observed. "This is more than twice the difference between the temperature at the time of maximum glaciation and that at the time of total deglaciation of the earth."

"Man-made" CO2 represents but 3% of all greenhouse gases, not including water vapor. Water vapor is the number #1 "greenhouse gas" by a huge margin; again, anthropogenic CO2 represents but 3% of all greenhouse gases.

The book continues:

The twenty-nine attendees, although hopeful about modeling the climate, acknowledged the problem to be highly complex.

"Consideration was given to the theory that the carbon dioxide content of the atmosphere has been increasing since the beginning of the industrial revolution, and that this increase has resulted in a warming of the atmosphere since that time," the proceedings report.

"Von Neumann questioned the validity of this theory, stating that there is reason to believe that most of the industrial carbon dioxide introduced into the atmosphere must already have been absorbed by the ocean."

The debate was on.

Sigmund Fritz, of the US Weather Bureau, added that "the effects of plant life must also be taken into consideration."

William von Arx, from Woods Hole Oceanographic Institution stressed that "the balance depends on the buffer capacity of the seawater," and noted that "there is a significant amount of carbon dioxide locked up in the plankton cycle."

And much more. Worth the read. Regardless which side of the debate you are on.

The conference referenced above was in 1955. Al Gore is said to have been in attendance. He was seven years old at the time.

For Investors Only: EPD and SM Energy Report Today

EPD, before market opens. Net income up 16%; earnings increased 14%. At Wall Street Cheat Sheet: EPD delivered a profit and beat Wall Street’s expectations, BUT came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company.

SM Energy, beats by $0.24, beats on revs: Reports Q1 (Mar) earnings of $0.82 per share, excluding non-recurring items, $0.24 better than the Capital IQ Consensus Estimate of $0.58; revenues rose 28.3% year/year to $484.2 mln vs the $461.3 mln consensus. Q1 production was 10.35 MMBOE with average daily production of 115.0 MBOE/d. Co sees Q2 production of 10.5-11.0 MMBOE, with average daily production of $115-121 MBOE/d. Co sees FY13 production of $42.8-44.5 MMBOE with average daily production of 117-122 MBOE/d.

California Lawmakers Provide Good News For The Bakken

Earlier this morning, RBN Energy provided a bit of insight regarding the narrowing of the Brent/WTI spread. 

The Brent/WTI spread of $15 covered the transportation costs of railing Bakken crude to the east coast.

As the Brent/WTI spread narrows, it becomes less attractive for the refineries on the east coast to buy Bakken oil. Brent will be cheaper.

Bad news for the Bakken.

Rail will allow the flexibility for Bakken oil to be railed to California.

Will California need it?

Yes.

California is getting closer and closer to putting a moratorium on fracking. After sixty years of safely fracking in California, the lawmakers there feel the technology needs to be studied. And, apparently fracking in California can only be studied once fracking is halted in California.

I can't make this stuff up.

By the way, RBN Energy does not think the Brent/WTI spread will continue to narrow all that much, and, in fact, will increase once again. Regardless, changes in oil shipments won't happen overnight. There are a lot of contracts in place.

WTI/Brent Spread Narrows to Recent Low -- Implications For The Bakken -- Not Good -- RBN Energy; Tuesday Morning Links

RBN Energy: the narrowing WTI/Brent spread is not good news for the Bakken.

WSJ Links

Section D (Personal Journal):

Section C ( Money & Investing):

• Corn prices. I think you can find any story you want on corn prices going forward, but this one looks most likely: late spring, lots of flooding; late planting; high corn prices; and we don't even have to mention the ethanol support program. Corn prices surge on planting fears.

• Heard on the street: Hess shows that timing really is everything with shale.

Being a late developer can be embarrassing. Just ask Hess.

The oil company, engaged in a proxy battle with Elliott Management, reported last week that first-quarter earnings more than doubled, boosted by proceeds from disposals. A $265 million sale of acreage in Texas' Eagle Ford shale basin was one of the smaller ones.

Sanford C. Bernstein analyst Bob Brackett has characterized the Eagle Ford as "reigning supreme" relative to other shales. And yet, Hess seems to have lost money there—indeed, it justifies the sale chiefly on the grounds that it will curb further spending there.

Besides the embarrassment for Hess of losing money in the Rolls Royce of shale plays, the wider lesson for investors is that, despite the buzz, shale offers no free lunches. Oil isn't spread uniformly beneath the ground—that's why companies have to be good at pinpointing it. 

Ask OXY.

Section B (Marketplace):

• How the Boeing 747 got left behind. 

A drop in the global air-cargo business is hastening the decline of the 747 jumbo jet just as Boeing is preparing to launch a new plane that could ultimately replace it.

• Hummus is conquering America.

Prodded by the largest U.S. hummus maker, farmers in the heart of tobacco country are trying to grow chickpeas, an improbable move that reflects booming demand for hummus.

Long a staple of Middle Eastern cuisine, hummus is earning a growing following among Americans seeking more-healthful snacks. The chickpea dip is low in fat and high in protein. Sales of "refrigerated flavored spreads"—a segment dominated by hummus—totaled $530 million at U.S. food retailers last year, up 11% from a year earlier and a 25% jump over 2010, according to market-research firm Information Resources Inc.  

Hummus, done right, is incredible. And, Kraft will eventually market flavored/textured hummus to appeal to Americans. Done right, it really is delicious. 

Section A:

• California unions battle over shrinking pie.

The Service Employees International Union is locked in battle here with an unusual opponent: another union.

SEIU has enjoyed years of rapid growth even as organized labor has withered in the U.S. Now, it is competing with the National Union of Healthcare Workers to represent 45,000 nursing aides, pharmacy technicians and janitors at health-care giant Kaiser Permanente. The fight is playing out in cafeterias and break rooms, where NUHW supporters and organizers in bright red T-shirts have clashed in recent weeks with purple-clad SEIU backers.

The National Labor Relations Board will begin counting ballots of Kaiser Permanente workers on Wednesday. The board threw out the results of a previous election in 2010, which the SEIU won, after finding that the SEIU had threatened members who backed the NUHW.

• Boom times for a tiny Texas town.

It was a railroad that brought this tiny town -- Barnhart -- into existence in 1910, when it was named after the stationmaster, William F. Barnhart. Today that same railroad is putting the town on the map again—as an unlikely hub of the new American oil boom.

Hydraulic fracturing, or fracking, has created a surge of oil production from the Permian Basin, as drillers use water, chemicals and sand to crack open oil-bearing rocks deep underground. The heart of the West Texas oil region now produces about 550,000 barrels of oil a day, up 38% from three years ago.

That has given new life to Barnhart, an unincorporated town 250 miles west of Austin with only 200 residents, a post office, one taco truck and a filling station called the Big Red Barn. It has brought increased spending from oil field and rail workers, even as most of them have looked for housing in other nearby cities.

The turn in fortunes has been especially dramatic for the 113-year-old South Orient Railroad, which passes through Barnhart on its nearly 400-mile trek from Presidio on the Mexican border to a junction north of San Angelo, Texas.

• Op-ed: Obama is not the only bluffer.

Until not long ago, Israelis remained prudently coy about whether they would strike Iran's nuclear facilities. More recently, prominent Israelis have voiced doubts about whether Israel can strike those facilities, at least in any way that would make a lasting difference to Tehran's bid to acquire nuclear weapons.

Essentially, they're saying it's all a bluff.

The transition marks another decline in the quality of the Jewish state's deterrence. This would be bad news in better circumstances. Considering the way the Obama administration is acting with respect to Syria, it's much worse than that.

That's because President Obama has now made it clear that, when it comes to rogue regimes and weapons of mass destruction, he's exactly the bluffer he promised he wasn't. He warned repeatedly that the use by Bashar Assad's regime of chemical weapons against the Syrian people was a red line, a game changer, a thing "we will not tolerate."

And he responded to the regime's use of chemical weapons by doing nothing. This is supposed to be the guy who has Israel's back and will never allow Iran to get a nuclear weapon?  

• Op-ed: ObamaCare, the TrainWreck.

In recent weeks, there have been increasing expressions of concern from surprising quarters about the implementation of ObamaCare. Montana Sen. Max Baucus, a Democrat, called it a "train wreck."

A Democratic colleague, West Virginia's Sen. Jay Rockefeller, described the massive Affordable Care Act as "beyond comprehension."

Henry Chao, the government's chief technical officer in charge of putting in place the insurance exchanges mandated by the law, was quoted in the Congressional Quarterly as saying "I'm pretty nervous . . . Let's just make sure it's not a third-world experience." 

Op-ed: Can California dodge another TrainWreck?

Only One Well Comes Off The Confidential List Tuesday

23798, 355, CLR, Michelsen 1-34H, Frazier, t3/13; cum 2/13 --

Back To Winter -- As We Move Into May

Don writes to tell me they may see snow in southwest North Dakota tonight.

Meanwhile, USA Today is recapping the prolonged winter.

April has been a freakishly cold month across much of the northern USA, bringing misery to millions of sun-starved and winter-weary residents from the Rockies to the Midwest.

"The weather map ... looks like something out of The Twilight Zone," Minneapolis meteorologist Paul Douglas of WeatherNation TV wrote on his blog last week.

Record cold and snow has been reported in dozens of cities, with the worst of the chill in the Rockies, upper Midwest and northern Plains. Several baseball games have been snowed out in both Denver and Minneapolis. 

And AcuWeather is reporting:

Another blast of cold air will charge southward across the Plains this week, which will lead to more spring snow for Denver.

The Weather Channel: back to winter.

Minneapolis - The 70+ degree temperatures we've seen since this past Friday were nice while they lasted. Highs in the 40s and even upper 30s are expected Wednesday through Friday. Some snow is possible as well.

Nine (9) New Permits, Williston Basin, North Dakota, USA; BR With Two Nice Wells; G3 Getting Very Active

Active rigs: 185 (steady, down slightly)

Nine (9) new permits --

• Operators: G3 Operating (4), Slawson (3), Baytex, KOG,
• Fields: Antelope (McKenzie), Sanish (Mountrail), Ambrose (Divide), Marmon (Williams), Pembroke (McKenzie), Eagle Nest (Dunn)
  Comments: G3 is getting very active, also
  

Initial production for wells coming off the confidential list for the past several days were posted earlier; see sidebar at the right.

Producing wells completed:

• 23219, 624, CLR, Midred 2-19H, Brooklyn, 4-section-spacing, t4/13; cum --
• 23218, 725, Mildred 3-19H, Brooklyn, 4-section-spacing, t4/13; cum --
• 22966, 1,648, BR, CCU Golden Creek 24-23MBH, Corral Creek, unitized spacing, t4/13; cum --
• 22965, 2,896, BR, CCU Golden Creek 34-23MBH, Corral Creek, unitized spacing, t4/13; cum --

Southwestern, Chesapeake Close On $93 Million, 162,000-Acre Deal In The Marcellus

Rigzone is reporting.

Back of the envelope: about $575/acre.

I'm Not Convinced

http://www.minotdailynews.com/page/content.detail/id/575094/Refinery-groundbreaking-planned-for-May-8.html?nav=5010

Ground breaking for Native American refinery in the Bakken. 

For Investors Only: No Time To Blog, But Two Quick Links For Investors

http://gevo.com/?casestudy=usaf-a10-test-flight-powered-by-gevos-alcohol-to-jet-fuel-validates-military-application

http://gevo.com/about/our-business/isobutanol/

I post this for two reasons. One is obvious.

But the second reason is my "love" for the A-10, the Warthog, one of the coolest aircraft ever flown by the Air Force, albeit for a very short time. I'm glad to see the A-10 is still active. It's quite an aircraft.

Yoko Ono and Susan Sarandon Can Probably Rest Easier Now -- Fracking Didn't Contaminate Well Water in Pennsylvania

Gannett is reporting:

State environmental regulators looking into a high-profile case of methane contamination in northeastern Pennsylvania have concluded that gas drilling isn’t to blame.

Anti-fracking celebrities including Yoko Ono and Susan Sarandon visited the Susquehanna County village of Franklin Forks in January as part of a tour of natural-gas drilling sites. The stars met with Matthew and Tammy Manning, who blame the high level of methane in their well water on a natural gas driller, WPX Energy.

But the state Department of Environmental Protection said Monday that its 16-month investigation shows that WPX isn’t responsible. DEP says the methane in the residents’ wells is naturally occurring shallow gas, not production gas from the Marcellus Shale formation.

It is my understanding that hydrocarbons have their own "fingerprints." When the evidence gets to court, one can't make up data; the judge will ask for the equivalent of a "carfax." I doubt the judge will call either Yoko Ono or Susan Sarandon to the stand for expert testimony.

Show Me The Carfax

By the way, "we" have the same thing in North Dakota, naturally-occurring methane in some wells, and it occurs well outside the oil patch. In fact, to the best of my knowledge, there have been no reports of methane in any wells in western North Dakota. (And anyone who even whispers "methane in my well" will be stomped on by 354 Bakken millionaires.)

Bakken Companies Generating An Enormous Amount Of Cash Flow

Ya gotta love this. "V" as a frequent nay-sayer contributor over at Carpe Diem and Rune Likvern over at The Oil Drum might want to read this article over at Motley Fool. Bakken doubters consistently tell us Bakken wells are too expensive for drilling to continue.

Motley Fool lists five energy companies that are "generating enormous operating cash growth." Four of those five companies were Bakken companies: Magnum Hunter Resources, Oasis, Kodiak, and Heckmann.

A few weeks ago, I opined that it is my expectation that Bakken-centric companies are going to concentrate on their financial statements this year, preparing for a huge M&A year in 2014. Generating "an enormous operating cash stream" certainly fits.

KOG's CAPEX is $775 million, enough for 75 net wells. With the cost of wells coming down, KOG might be able to sneak in a few more wells. But think of this: with ten-well pads, KOG has a CAPEX that could support seven pads. I don't know about you, but seven 10-well pads is a lot of drilling. The Bakken oil patch, geographically, is simply not that big. I think it would be quite impressive to drive by seven 10-well pads in one day.

As long as I'm rambling, another thought.

KOG has about 8 rigs.

Eight rigs, eight 10-well pads: 80 wells. One rig/pad. And then you start looking at the cost savings operating eight pads vs 80 separate well pads.

Having most of their acreage held by production allows Bakken-centric companies to drill where it makes most sense without drilling simply to save a lease. And not having to negotiate new leases does two things: a) saves money; and, b) makes it easier to budget.

A Nice Graph

A nice graph.

For Investors Only: Inflation Is Causing A Problem For The Fed ....

Updates

May 8, 2013: The Fed's credibility is testes as inflation drifts below target. Reuters is reporting:

With the inflation rate about half of the Federal Reserve's 2.0 percent target, the central bank is facing a major test and some experts wonder whether it will eventually need to ramp up its already aggressive bond buying program.

The Fed cut official interest rates effectively to zero in late 2008 during the financial crisis. Since then, it has bought more than $2.5 trillion in bonds to bolster an anemic economic recovery and speed up the decline in unemployment.

Despite those actions, its favored inflation gauge, the Personal Consumption Expenditures (PCE) price index, has fallen to a 3-1/2 year low of 1.0 percent.

Further, by the Fed's own forecasts, inflation is likely to remain short of the central bank's target for years.

Don't bet against the Fed. 

Original Post

.... or better said, the lack of inflation is causing a problem for the Fed.

The PCE inflation index is the Fed’s preferred measure of inflation. And both PCE inflation, and the core measure that excludes food and energy, are moving away from the central bank’s 2% target. The data was released as part of the Commerce Department’s report on personal income and consumer spending on Monday.

“At this moment, we think that the Fed will continue QE3 at the current pace of monthly purchases until the end of September. However, if inflation continues to fall further, we think that would increase the possibility of extending QE3 well into 2014 without tapering it,” said economists at Nomura in a note to clients.

In fact, the real question may be, how much more can inflation soften before the Fed will accelerate the $85 billion a month in asset purchases it’s currently engaged in? So far, it’s not enough to prompt action, economists say.

This is actually quite incredible, when you think about it.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you've read here.

Notes From All Over: Midland And The Cline Formation

The Lubbock Avalanche-Journal is reporting:

Sweetwater, TX: About a year ago, talk began circulating in this West Texas town about a huge oil-producing formation called the Cline Shale, east of the traditional drilling areas around Midland.

Then the oilmen and their rigs arrived. Now homes and hotels are sprouting, “help wanted” signs have multiplied, and a major drilling company has cleared land to build an office and equipment yard.

“It is coming, and it is big,” said Greg Wortham, the mayor of Sweetwater, who also serves as executive director of the Cline Shale Alliance, a new economic development group.

The Cline Shale, thousands of feet underground in a roughly 10-county swath, is just one of many little-tapped shale formations in Texas and across the nation, geologists say. That means the potential for oil and gas discoveries is theoretically huge, and the reason is technology. The rock-breaking process known as hydraulic fracturing, coupled with the ability to drill horizontally underground, has allowed drillers to retrieve oil and gas from previously inaccessible areas.

Many shales will be too expensive or too small to develop, especially if oil prices fall or environmental regulations tighten. But in Texas, which is already the top oil-producing state, bullishness about a new era is pervasive.

It's a great article. 

Does this sound familiar:

Cities with fast-developing shales may find it hard to keep up with the boom.

If the Cline Shale gets going, “Where are the workers going to be? Where are you going to put them?” asked Diana Davids Hinton, a professor of history at the University of Texas of the Permian Basin and a co-author of Oil in Texas. Already, she noted, Midland’s hotels and schools are full.

In Sweetwater, Wortham acknowledged that housing remained a concern. However, he said, the schools and roads were well prepared, partly because the area had already experienced a build-out of wind farms.

“There’s a lot more traffic than there used to be,” he said. “And we haven’t started yet.”

Sweetwater, TX, is about 100 miles ENE of Midland.

The takeaway: over the next few years the competition for rigs and work force in the Bakken will increase. 

The Bakken Just Keeps Looking Better Every Day

Just the other day it was noted that the cost for Bakken wells, at least for Hess, is dropping significantly, and quickly.

Not so for the off-shore folks. Wouldn't this just ruin your day if you were the CEO of BP and were told this wonderful news? The Angola  project came in at $4 billion over budget.

A massive BP PLC oil development off the coast of Angola has come in $4 billion over budget after being delayed by a year, The Daily Telegraph reported Monday, citing an executive. 

The project, more than 100 miles offshore, was originally slated to start producing oil in late 2011 and to cost about $10 billion, the newspaper said. Instead, it began production in December, 2012 (over a year late). 

While analysts thought the project would cost nearer $12 billion, the total is now expected to be "up over $14 billion" once all the wells have been drilled and connected, Gerry McGurk, BP Angola's vice president, disclosed, according to the newspaper. 

Actually, the reality is a bit worse than the headline. The headline: $4 billion over budget. The reality "up over $4 billion more" than projected by the company. "Up over" leaves a lot of room for further upside adjustments.

And if it were a $1,000 billion project, the $4 billion would be a rounding error. But $4 billion is 40 percent -- repeat -- 40 percent -- of the company's anticipated cost. Meanwhile, at the first link above, the cost for a Hess well in the Bakken has dropped 36% over that same time period.

"The Red Queen" -- Part II

I've updated the original commentary regarding "The Red Queen."

The American Energy Revolution: From India's Perspective

Don sent me an interesting Forbes article.

I'm not as interested in the Indian perspective so much as what the article says about the American energy revolution.

China’s rise has come largely at Europe’s expense. Since 2004, China has gained market share in the export of goods and of manufactured goods, while Europe’s share is falling and the US has held steady. After losing 6 million manufacturing jobs in the last decade, the US gained half a million in the last 18 months, while Europe, Canada and Japan lost jobs or saw no change.

Sharma also points out that energy is emerging as an American competitive advantage. After falling for 25 years, the share of the US energy supply that comes from domestic sources has been rising since 2005, from 69 percent to around 80 percent, due to increasing production of oil and particularly natural gas. The textile business was one of the first to leave the developed world, but recently Santana Textiles moved from Mexico to the US due to lower energy costs.

In the 1960s, the US Gulf of Mexico was the hub of the global petrochemical industry. This changed over the years, as it became cheaper to produce in Asia and the Middle East. The shale revolution has led to a revival of interest in the region. Dow Chemicals has re-started its Texas cracker plant in December last year—it had been moth-balled in 2008-09, when the slowdown began. Dow is also putting up another huge facility at Freeport, Texas, that is coming online in 2016-17. “The idea is to take advantage of the low prices, to serve the Latin American market from the US. We are also doing this in Saudi Arabia—using the oil to cater to the European markets,” says Vipul Shah, CEO and chairman, Dow India.

I am looking for a huge American resurgent after 2016. I hate to imagine the country could elect a more obstructionist president who was handed the most fortuitous energy gift of any US president in history, and failed to capitalize on it.

From a Platts Tweet -- June Gas Futures Rise On Expectations of Cooler Weather Extending Into June

NYMEX June gas futures rose early Monday on cooler weather in the short term, expectations of another smaller-than-average build to storage.

Who wudda thought?

WTI and Bakken Spread Narrowed Over The Past Year -- Dated Article But Good For The Archives

This article is dated, but nice for the archives.

The EIA is reporting: WTI and Bakken spread narrows over last 14 months.

Crude oil production in the Bakken grew from 274,000 barrels per day (bbl/d) in January 2011 to 673,000 bbl/d in January 2013, according to the North Dakota Department of Mineral Resources. However, new transportation infrastructure completed in the second half of 2012 helped ease the bottleneck in North Dakota and contributed to a narrowing of the price differential between Bakken and WTI.

Traditionally, the midcontinent pipeline system was configured to deliver crude oil imported to the U.S. Gulf Coast and domestic production from West Texas to the refineries in the Midwest via Cushing, Oklahoma. However, transportation constraints resulting from limited pipeline capacity into and out of Cushing have led to bottlenecks in the region. In February 2012, the discount between Bakken and WTI reached $28 per barrel as increasing Bakken production faced severe transportation constraints.

The addition of new rail takeaway capacity from the Bakken region in spring and fall of 2012 let Bakken crude oil bypass the bottleneck in Cushing, Oklahoma and reach refining markets on the East and West coasts, as well as the Gulf Coast. This takeaway expansion resulted in Bakken crude oil briefly selling at a premium to WTI, which unlike waterborne crudes imported by refineries of the East and West coasts is itself subject to transportation constraints at the Cushing, Oklahoma trading hub.

Pipelines are the most cost-effective way to transport crude oil in the United States, but they are expensive to build and may face regulatory hurdles. For these reasons, companies have turned to rail transport to deliver crude oil across the nation.

Total takeaway capacity from the Williston Basin grew from about 678,000 bbl/d at the end of 2011 to over 1.1 million bbl/d in 2012. Takeaway capacity via rail represented most of this expansion, increasing from an estimated 265,000 bbl/d in 2011 to approximately 660,000 bbl/d in December 2012.

Lots of graphs. Worth reading. 

Under The Radar: Natural Gas Exports to Mexico Hit Record in 2012 -- EIA

The EIA is reporting:

U.S. natural gas exports to Mexico grew by 24% to 1.69 billion cubic feet per day (Bcf/d) in 2012, the highest level since the data collection began in 1973. With imports now accounting for over 30% of its total supply, Mexico's natural gas use is also at its highest level ever.

Lots of graphs; expansion projects. Worth reading.

Disclaimer: this is not an investment site; do not make any investment decisions based on what you read here or what you think you've read here.

Monday Morning Links; Wells Coming Off Confidential List Have Been Posted

Initial production numbers have been posted for the wells that came off the confidential list since last Thursday. About a third of wells coming off the confidential list went to DRL status.

RBN Energy: overview of the Bakken NGL situation. Huge story. A must-read.

Natural gas liquids (NGL) production from the Bakken has increased from only 20 Mb/d two years ago to almost 50 Mb/d today.  And that is with nearly one-third of the natural gas in the region being flared and no outlet for ethane.  For years gathering, processing and pipeline constraints have held back production growth.  But that’s all changing.  ONEOK has completed their NGL pipeline and plant expansion project and more outlets are on the way.  Production could rise to more than 300 Mb/d by 2018.  In today’s blog, we examine the Bakken NGL situation.

Does anyone care any more? Another article on the safety of pipelines, and the Keystone XL in particular from The Brainerd Dispatch. Regional media links break often and break early, so a quick excerpt:

The still heavy dilbit requires extra pressure to move through the pipeline, and it is also more acidic and corrosive than conventional oil. This creates a greater danger of pipeline leaks with risks to ground water aquifers such as the Ogallala, over which the pipeline will pass.

In response, pipeline builder TransCanada notes that existing dilbit pipelines are operating safely. This includes the Alberta Clipper pipeline which brings dilbit from Alberta to Northern Minnesota.  The Alberta Clipper is a 1,607-km (1,000-mile) crude oil pipeline that provides service between Hardisty, Alberta, and Superior, Wis.,  A spur pipeline at Clearbrook, Minn., brings 300,000 dilbit barrels/day to our Pine Bend refinery, the source of most of Minnesota’s gasoline, diesel, and aviation fuel. Nebraska governor, DaveHeineman, has approved a revised route for the Keystone Pipeline. 

WSJ Links

Section R (Journal Report):

• Will longer hours boost (restaurant) sales?

The basic problem: Restaurants need to shoulder more expenses to keep the lights on longer—but the crowds usually aren't that big at odd hours, and customers don't end up spending very much. In fact, franchisees and industry experts say, some markets may not have enough all-night types to make the concept work at all.

Longer hours appeal mostly to "younger folks out and about, and they have cut back so much on restaurants," says Bonnie Riggs, restaurant-industry analyst at research firm NPD Group. "Maybe if you're in some big metropolitan or tourist areas it's worthwhile."

• Microsoft is leaving money on the table by not providing Office for Androids, iPads.

The idea is to convince buyers that Windows-based tablets can do more than rival devices and, consequently, that they can save money buying one product instead of a laptop and tablet. That sales pitch revolves around a key feature of Windows tablets: They are the only ones that run a full version of Office.

Particularly popular among business users, the Office suite includes Word, Excel, Power Point and other productivity apps. And it is a far bigger business for Microsoft than even Windows. Microsoft's Business Division, of which Office is the primary component, generates around 30% of sales and nearly half of operating income. Office is so popular, Morgan Stanley has estimated that even 30% to 40% of Mac users pay for it.

So the fact that Office isn't available for iPads and Android tablets, the most popular devices in the fastest-growing segment of the computer market, means Microsoft is leaving money on the table.

Section C (Money and Investing):

• In stocks, payouts trump potential.

Investors searching for higher yields are driving up the shares of dividend-paying companies, fueling a debate over whether these traditional haven stocks are getting dangerously expensive. Some buyers argue that dividend stocks have entered a period where demand for income will keep valuations high, perhaps for years, thanks to Federal Reserve easy-money policies that are expected to remain in place at least into 2015. Skeptics say the "this time is different" thesis will prove wrong, and that investors will discover they have overpaid.

Section B (Marketplace):

• Boeing's Dreamliner returns to service: my favorite airline -- Ethiopian Airlines.  

Section A:

• Real culprit behind smaller workforce: age.

Americans are leaving the labor force in unprecedented numbers. But the trend has more to do with retiring baby boomers than frustrated job seekers abandoning their searches.

The share of the population either working or looking for work in March hit its lowest level since 1979. The measure, known as the participation rate, now stands at 63.6%, down from 66% when the recession began. That represents close to seven million workers who are now "missing" from the labor force.

The April jobs report, coming Friday, probably won't repeat March's historic decline, when the labor force shrank by nearly half a million workers. But it likely won't show much improvement, either. The participation rate has trended downward through both the recession and the recovery, continuing to fall even as other measures of economic well-being have improved.

• Wow, that didn't last long. Air travel delays are easing. 

• Impact fees fracture Pennsylvania.

Unlike many communities focused on cutting budgets, this small township of hilly farmland an hour south of Pittsburgh recently splurged on a new firetruck, a police cruiser and a new pavilion, bathrooms and riding mower at its Wana B Park.

The shopping spree was financed by a $1 million check—nearly half as much as the township's $2.3 million operating budget—thanks to a state law passed last year to assess fees on natural-gas wells drilled into the Marcellus Shale formation. The township, which has 130 such wells on its 39 square miles, is among the state's most densely drilled areas.

Unlike most other states that require drillers to pay severance taxes based on the volume of gas produced, Pennsylvania's impact fee is based on natural gas prices and the year of production for each well. When the price of natural gas is between $2.99 and $5.00, the fee is $50,000 a well during the first year of production. Critics of the law faulted Pennsylvania for not raising even more revenue from fracking.

While severance taxes typically flow into a state's general fund, the impact fee is designed to send money back to areas most affected by drilling to pay for wear and tear on roads and new equipment.

• Tough slog for Obama's gun orders.

His nominee to lead the Bureau of Alcohol, Tobacco, Firearms and Explosives, which has long lacked a permanent director, awaits a Senate hearing. A $10 million budget allocation to research the causes and prevention of gun violence needs congressional approval. This comes on top of the biggest setback for the administration, the Senate's rejection this month of a proposed expansion of background checks for gun buyers.
The administration says many of Mr. Obama's 23 executive actions will have an effect, even as officials acknowledge that they can't accomplish all that legislation could.

Few of the measures were intended to bring wholesale changes, both gun-rights and gun-control advocates say, with many seeking to improve the effectiveness of existing laws and regulations.

The ACLU will love this, rifling (no pun intended) through medical records as part of a background check:

And the Department of Health and Human Services said it would write new rules to ensure that federal health-privacy law doesn't prevent states from providing records to the background-check system.

Cue up Connie Francis.

• Op-ed: on taxes.

It's not just rates that vary but rules that determine what's taxable and what isn't. Wisconsin has a 1,400-word regulation on when the sale of an ice-cream cake is taxable. If the ratio of ice-cream layers to cake layers is too high, sales tax has to be collected. Candy bars are taxable in New York, but not in New Jersey. In Texas, large pretzels are tax-exempt baked goods, but small pretzels are taxable snacks. Iowa charges a sales tax on decorative pumpkins but not edible ones.

Rhode Island taxes soft drinks but not bottled water. It taxes clothing accessories but not fur clothing. It taxes kidney-dialysis machines with or without a prescription, unless used at home, whereas prosthetic devices, eyeglasses and contact lenses are taxable without a prescription but tax-free with one.

• Op-ed: profiling.

But it is not good enough for the CFPB. In a quest to make sure that all individuals falling within the "protected classes" under the Equal Credit Opportunity Act get the same interest rate as those who are not covered by it, the agency wants financial institutions to guess your race, ethnicity and gender based on your name and the address on your application. Put bluntly, they want lenders to profile you.

It sounds bizarre. But during a conference call on March 21 to congressional offices explaining how auto lenders were supposed to comply with the Equal Credit Opportunity Act (as outlined in CFPB's Bulletin 2013-02), agency staff advised us that they would recommend that financial institutions use "proxies to give probabilities of the race, ethnicity and gender of borrowers" to guess if an applicant falls into a protected class, or not, for the purpose of setting interest rates. In other words, they would like lenders to use stereotypes associated with your name and location in order to monitor compliance with equal-opportunity requirements.

Does that mean a person named Jefferson who lives in the Bronx is to be presumed an African-American, but not a Jefferson in Wichita? Is Taylor Rosenstein living in Miami a woman or a man? He or she must certainly be Jewish, right?

Random Look At Two 9-Well Hess Pads in Robinson Lake; Potentially 18-Well Pads

 This started out as a 6-well pad, but three more wells have been added.

This started out as a 6-well pad, but three more wells have been added.

The original 6-well pad (the original post), 2560-acre spacing; this is the only 2560-acre spacing unit in the Robinson Lake. I assume there will eventually be overlapping 2560-acre spacing units in the rest of the Robinson Lake. Also, note how long ago the original Cvancara wells were put in -- back in late 2011, and they already had 2560-acre spacing units. The original wells are about 1.5 years old and already exceed 100,000 bbls total production:

• 19899, 603, Hess, EN-Fretheim A-155-93-3334H-3, Robinson Lake, t4/12; cum 82K 2/13;
• 19900, 1,037, Hess, EN-Cvancara A-155-93-3231H-3, Robinson Lake, t12/11; cum 129K 2/13;
• 19901, 668, Hess, EN-Fretheim A-155-93-3334H-2, Robinson Lake, t11/11; cum 112K 2/13;
• 19902, 1,132, Hess, EN-Cvancara A-155-93-3231H-2, Robinson Lake, t11/11; cum 151K 2/13;
• 19903, 795, Hess, EN-Fretheim A-155-93-3334H-1, Robinson Lake, t11/11; cum 133K 2/13;
• 19905, 1,341, Hess, EN-Cvancara A-155-93-3231H-1, Robinson Lake, t10/11; cum 199K 2/13;

Now, add three more:

• 24868, drl, Hess, EN-Fretheim A 155-93-3334H-9, Robinson Lake,
• 24869, 868, Hess, EN-Fretheim A 155-93-3334H-8, Robinson Lake, t8/13; cum 84K 6/14;
• 24870, 662, Hess, EN-Fretheim A 155-93-3334H-7, Robinson Lake, t8/13; cum 74K 6/14;

Also, note: for the Fretheim wells, the shorthand is Fretheim-1; Fretheim-2; Fretheim-3; Fretheim-7; Fretheim-8; and, Fretheim-9; suggesting that #4, #5, and #6 are yet to be filled in (and they were; see below). Doing the same for the Cvancara wells, and one quickly has an 18-well pad. Lynn Helms, Director/NDIC, recently mentioned that we will be seeing 18-well pads very, very soon.

25788, 762, Hess, EN-Cvancara A-155-93-3334H-6, Robinson Lake, t4/14; cum 35K 6/14;
25787, 758, Hess, EN-Cvancara A-155-93-3334H-5, Robinson Lake, t4/14; cum 36K 6/14;
25786, 1,121, Hess, EN-Cvancara A-155-93-3334H-4, Robinson Lake, t4/14; cum 51K 6/14;
28576, conf, Hess, EN-Fretheim A-155-93-3334H-4, Robinson Lake,
28575, conf, Hess, EN-Fretheim A-155-93-3334H-5, Robinson Lake,
28574, conf, Hess, EN-Fretheim A-155-93-3334H-6, Robinson Lake, 

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Likewise, this started out as a 6-well pad in Robinson Lake, but three more wells have been added. First, the original 6 wells:

• 19074, 629, Hess, EN-Frandson-154-93-2116H-1; RL, Bkn, t12/10; cum 107K2/13;
• 19075, 225, Hess, EN-Frandson-154-93-2116H-2; RL, Bkn, s8/10; t5/11; cum 91K2/13;
• 19076, 1,325, Hess, EN-Frandson-154-93-2116H-3; RL, Bkn, s8/10; t8/11; cum 215K 2/13;
• 19077, 717, Hess, EN-Trinity-154-93-2833H-1; RL, Bkn, s7/10; t2/11; cum 141K 2/13;
• 19078, 941, Hess, EN-Trinity-154-93-2833H-2; RL, Bkn, s8/10; t7/11; cum 150K 2/13;
• 19079, 1,125, Hess, EN-Trinity-154-93-2833H-3; RL, Bkn, s8/10; t8/11; cum 197K 2/13;

Now, these three wells have been added:

• 25203, conf, Hess, EN-Trinity-154-93-2833H-4, Robinson Lake,
• 25204, conf, Hess, EN-Trinity-154-93-2833H-5, Robinson Lake,
• 25205, conf, Hess, EN-Trinity-154-93-2833H-6, Robinson Lake,

Unlike the first 9-well pad discussed above, which was on 2560-acre spacing, this 9-well pad is on1280-acre spacing.