Thursday Links -- Minimal Blogging Today -- Traveling

RBN Energy: Eagle Ford and condensates.

Last week (February 2013) EOG Resources told analysts that most Eagle Ford oil production should be classified as condensate rather than crude oil. They backed up their assertion with a chart of production quantity and API quality indicating 70 percent of production is condensate. Current forecasts indicate that translates to condensate production of over 500Mb/d in South Texas during 2013. Today we examine the evidence that EOG presented.

Before reading the next excerpt, you may want to go back and read the posts regarding the current poll (gasoline prices and killing the Keystone XL).

What are the implications? First – as EOG implied on its earnings call – the returns for Eagle Ford condensate producers are likely to be lower than they would be if more of their production was crude. Second all the production from the Eagle Ford that makes its way to Gulf Coast refineries will be very light and will challenge refineries equipped to handle heavier crudes or even “conventional” light sweet crudes. In response to the light crude challenge refiners are already making new investments. In January 2013, Valero announced a refinery upgrade due online in 2015 at their 160 Mb/d Houston refinery to allow it to run additional light Eagle Ford crude. The refinery already runs light sweet crude but Valero is investing in a 90 Mb/d crude topper unit to separate out crude components that are too light before they enter the crude unit. Flint Hills is making a similar investment at their Corpus Christi refinery.

Under the circumstances the best market for US condensate today appears to be exporting it to Canada as diluent for heavy Canadian bitumen crude. That market is expanding with increased bitumen production but transporting enough condensate to meet Canadian demand requires new pipeline capacity – some of which is being built and some is of which is still waiting for permitting. We will look more closely at the Canadian diluent supply situation in an upcoming blog.

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SeekingAlpha: increasing LNG exports -- a reality. A really nice update and overview of new LNG exporting facilities, from Richard Zeits.

Oil Investment Sinkhole Problem -- The Oil Drum

I'll post the link to this story, but I'm too far behind to post comments or thoughts. So, just the link; read at your leisure. From The Oil Drum:

At least part of problem is that Saudi Arabia is reaching limits of various types. One of them is inadequate water for a rising population. Adding desalination plants adds huge costs and huge energy usage, but does not increase the standards of living of citizens. Instead, adding desalination plants simply allows the country to pump less water from its depleting aquifers.

To some extent, the same situation occurs in oil and gas fields. Expensive investment is required, but it is doubtful that there is an increase in capacity that is proportional to its cost. To a significant extent, new investment simply offsets a decline in production elsewhere, so maintains the status quo. It is expensive, but adds little to what gets measured as GDP.

The world outside of Saudi Arabia is now running into an investment sinkhole issue as well. This takes several forms: water limits that require deeper wells or desalination plants; oil and gas limits that require more expensive forms of extraction; and pollution limits requiring expensive adjustments to automobiles or to power plants.

There are plenty of comments that could be made, but again, I'm too far behind to do much more than just post the link. 

Wells Coming Off Confidential List On Thursday

22627, 551, Triangle, Triangle 149-101-1-12-3H, Antelope Creek, t1/13; cum 3K 12/12;
22651, 219, WPX, Charles Blackhawk 31-30HB, Heart Butte; t11/12; cum 25K 12/12;
23319, drl, BEXP, Porter 35-26 1TFH, Alexander, no production data

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22651, 219, WPX, Charles Blackhawk 31-30HB, Heart Butte; t11/12; cum 25K 12/12:

Date	Oil Runs	MCF Sold
12-2012	16223	0
11-2012	7258	0

Note this from today's daily activity report:

Whiting Oil renewed seven (7) permits in Dunn and McKenzie County, Tarpon Federal and Charles Blackhawk wells, respectively.

Update On That Nantucket Wind Farm: Cape Wind; Massachusetts Looking To Pay 3X More/KWH of Electricity

Updates

December 2, 2017: dead, RIP.  

Original Post

 
A New Bedford, Massachusetts, paper is reporting:

Cape Wind is poised to take another step in securing the financial underpinnings for its proposed Nantucket Sound wind farm.

The project, which is expected to cost $2.6 billion, will be financed through a combination of equity from investors and loans from banks and other institutions.

The company will tap the Bank of Tokyo-Mitsubishi UFJ as the lead bank in securing debt for the project, Cape Wind President Jim Gordon said at a renewable power finance conference last week in New York.

The multinational bank, which is based in Japan, is expected to coordinate $1.8 billion to $2 billion in debt financing for the project, according to Power Intelligence, a financial publication specializing in the energy industry.

The bank is also expected to convert a federal production tax credit into cash.

I doubt this is of much concern:

Cape Wind officials have said they hope to begin construction this year, which is necessary for the company to benefit from the federal production tax credit that expires Dec. 31.

If construction does not begin this year, Congress will extend the law. In any event, it doesn't take much to "start" construction. 

This is the real drop-dead date: if the project is not started by the end of 2015, prior agreements with utilities terminate. And another Solyndra?

The possibility of a loan guarantee for the project has drawn criticism from Cape Wind's opponents and Republicans who point to $535 million in federal loans to bankrupt solar energy giant Solyndra.

Cape Wind officials are also still looking for a buyer for about a quarter of the wind farm's power, although the company could move forward with a smaller project if necessary.

National Grid has agreed to buy 50 percent of Cape Wind's power and NStar has agreed to buy 27.5 percent of the power, both at a starting price of 18.7 cents per kilowatt-hour.

An annual 3.5 percent increase will kick in starting in 2014, raising the cost of Cape Wind's power over 19 cents per kilowatt-hour. [For newbies: coal and natural gas: about 6 cents/kwh.]

If Cape Wind does not begin construction by the end of 2015, the power purchase agreements with NStar and National Grid will be terminated, according to an amendment to the National Grid contract filed last week.

While Cape Wind supporters say the price is small when mixed with the cost of other sources of power the utilities buy and spread across all of the companies' customers, opponents of the project continue to rail against what they see as the project's exorbitant cost to consumers.

Apple Accounts for 20% Of All Domestic Consumer Technology Sales (Based on Revenue) Sold In 2012

AppleInsider is reporting:

New data released by The NPD Group on Tuesday revealed that Apple accounted for 19.9 percent of all domestic consumer technology sales, based on revenue, from last year. That number was up from the 17.3 percent share Apple took in 2011.

Apple's revenue easily beat out rival Samsung, which came in second with 9.3 percent, up from 7 percent in 2011. The rest of the top five saw their share of revenue fall in 2012: HP dipped from 8.9 percent in 2011 to 8.2 percent last year, while Sony and Dell both slid to 4.4 percent and 3 percent, respectively.

Together, Apple and Samsung accounted for $6.5 billion in increased sales in 2012. Meanwhile, the rest of the consumer technology industry saw sales decline by almost $9.5 billion in the U.S.

For Investors Only: Tesla Quarterly Loss Wider Than Expected; Guidance: Slight Profit Next Quarter

CNBC is reporting:

Tesla reported a wider-than-anticipated net loss for the fourth-quarter as higher production costs offset better-than-anticipated revenues.

The electric-car maker reported a fourth-quarter non-GAAP net loss of 65 cents per share on revenue of $306.3 million. A year earlier, the company lost 69 cents per share on just $39 million in sales.

Analysts had expected the company to report a loss of 53 cents a share on $298 million in revenue, according to a consensus estimate from Thomson Reuters.

Research and development costs were $62 million in the quarter on a non-GAAP basis but Tesla expects R&D spending to fall about 15 percent in the first quarter.

The company also expects to continue to make production improvements and should be "slightly profitable" in the first quarter.

We'll see. I notice they didn't mention which year that "first quarter" would be in.

Global Warming Shuts Down Schools In Flagstaff, NM; Postpones Tucson Golf Tournament; Do Not Travel Advisories In Wichita, KS, Due to Global Warming

Arizona Daily Sun is reporting:

The mid-morning lull in the snow over Flagstaff doesn't mean the storm is over.
That's what the National Weather Service in Bellemont is reporting in its most recent bulletin.

The Weather Service predicts that snow showers will redevelop over Flagstaff in late morning and early afternoon, yielding a storm total of 8 to 12 inches in the city.  As of 8 a.m., between 3 and 5 inches had been reported in Flagstaff.

CT Post is reporting that global warming shut down premier golf tournament in Tucson:

Nine flights headed to Tucson were diverted to Phoenix or other airports because of a winter storm that brought snow to southern Arizona.

Officials at Tucson International Airport said planes were being allowed to take off and other flights were cleared to land by early afternoon Wednesday.

Snowfall postponed first-round play Wednesday at southern Arizona's premier golf event in Marana, while winter weather canceled classes in Flagstaff, Bisbee and Show Low and battered other parts of the state.

Meanwhile, the National Weather Service is reporting (no link, it will change too soon):

Winter Storm Watches & Warnings are in effect for a large portion of the central U.S., as a powerful storm system is expected to bring more than a foot of snow along with strong winds to parts of the central Plains Wednesday into Thursday. Farther south, freezing rain is likely over parts of Oklahoma, Missouri & Arkansas, with severe thunderstorms & heavy rainfall possible over parts of the South. 

The Wichita Eagle, meantime, is reporting snow removal crews having trouble keeping up in Wichita:

City and state crews were working feverishly at midday to stay ahead of a wet, slushy snow that was making travel difficult as a major winter storm hit.

Joe Pajor, deputy director of public works for Wichita, said the city has a full snow emergency operation under way that will remain in place through at least Thursday night.

One hundred employees driving 100 pieces of equipment are splitting 12-hour shifts working 24 snow emergency routes, primarily the city’s high volume arterials. Crews are applying salt and sand the length of those routes, and plowing where appropriate, Pajor said. It takes eight to 24 hours to reach all those routes, depending on how much plowing is involved.

Proppant Potential In North Dakota

Link provided by Kent. Prairie Magazine reported back in November, 2012:

The North Dakota State Geological Survey recently completed a mapping project to investigate the potential for clay deposits located in the southwestern part of the state to be mined for the production of ceramic beads used as a proppant in hydraulic fracturing activities. Ceramic proppant is one of two types of proppants currently used in hydraulic fracturing activities in the Bakken region.

State geologist Ed Murphy collected approximately 200 rock samples from 61 sites in two kaolinite-rich geologic formations stretching across an area that includes the cities of Dickinson and Bowman. Collected samples were then analyzed for aluminum oxide content, which is a desired component for proppant material. According to Murphy, clay containing at least 20 percent alumina has the potential for use as a proppant. A small number of initial samples displayed an aluminum oxide content ranging from 26 to 38 percent. The larger sample pool showed to contain lower percentages of aluminum oxide, but Murphy believes the content could still be high enough to be useful. The state’s mapping project will serve to assist interested parties in further exploring the potential resource. “We’ve laid the groundwork for a company to come in and do a more detailed investigation,” he says. “Ultimately, they will need to do some small-scale mining and run that clay back into their plants” to see if it works.

It's possible this has been posted before (I don't remember) but it's relevant, again, in light of Minnesota's plan to consider a moratorium on mining fracking sand.

KOG Provides Year-End 2012 Proved Reserves and 4Q12 and Annual Sales Volumes

Press release at KOG homepage (link will probably break/change after some weeks):

138% Increase in 2012 Estimated Proved Reserves Quantities
Kodiak's estimated total proved reserves at December 31, 2012 were approximately 94.8 million barrels of oil equivalent (MMBoe), as compared to 39.8 MMBoe at December 31, 2011.  The 2012 total represents a 138% increase from 2011's estimated proved reserves on an equivalent basis, and is comprised of 80.9 million barrels of crude oil and 83.1 billion cubic feet (Bcf) of natural gas.  The 2012 reserve mix is 85% crude oil, along with 15% associated natural gas.  Approximately 46% of the 2012 total proved reserves are categorized as proved developed producing and approximately 54% are classified as proved undeveloped.  Substantially all of the Company's estimated proved reserves are located in the Williston Basin.  

For 2012 reserve quantities, Kodiak's estimated future cash flows, discounted at an annual rate of 10 percent before giving effect to income taxes (commonly known as PV-10 value), for proved reserves at year-end was $1.9 billion, as compared to $850.7 million at December 31, 2011, reflecting a 126% increase.  Approximately $1.4 billion of the PV-10 value is attributed to the proved developed producing reserves.   

Abraxas Provides 4Q12 and Year-End Production and Reserve Data; Operational Update

Abraxas provides 4Q12 and year-end production and reserve data; operational update

Williston Basin
Drilling continues on the Company’s Lillibridge East PAD with intermediate casing set on the 1H, 2H, 3H and 4H. The Company is currently preparing to drill the lateral on the 4H after which the rig will move to drill the laterals of the 3H, 2H and 1H. Abraxas owns an approximately 34% working interest in the Lillibridge East PAD. The Company recently completed the Ravin 3H and is currently finishing the fracture stimulation of the Ravin 2H. Flowback is expected to commence within the next few days from both wells. Abraxas owns a 49% working interest in both the Ravin 2H and 3H.

Non-Operated Bakken/Three Forks Sale Process
Abraxas recently retained E-Spectrum Advisors (formerly Energy Spectrum Advisors) to market its non-operated Bakken and Three Forks assets in North Dakota and Montana. The potential divestiture consists of approximately 435 boepd and 14,502 net acres. If the Company is successful in achieving an acceptable price for these assets, the proceeds will be used to pay down the Company’s revolver and redeployed into its core operated Bakken and Eagle Ford assets.

Nine (9) New Permits -- The Williston Basin, North Dakota, USA -- February 20, 2013

Williston Basin Operations

Active rigs: 184 (nice, up 2, but in a range)

Nine (9) new permits --

• Operators: QEP (4), EOG (2), American Eagle (2), Triangle
• Fields: Elk (McKenzie), Colgan (Divide), Grail (McKenzie), Parshall (Mountrail)
• Comments: QEP has four permits in the "Helis Grail"

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

Producing wells completed:

• 21977, 1,016, CLR, Florida 3-11H, Camp, 4-section spacing, t1/13; cum 311K 9/16;
• 23562, 1,147, Whiting, Roggenbuck Federal 41-24TFX, Sanish, t1/13; cum 127K 9/16;
• 23059, 644, Hess, LK-M Elisabeth 147-97-1522H-3, Little Knife, t1/13; cum 145K 9/16;
• 23058, 860, Hess, LK-M Elisabeth 147-97-1522H-2, Little Knife, t1/13; cum 215K 9/16;
• Follow-up this well in one year: 22720, 23 (no typo), CLR, Grant 1-16H, Corinth, a middle Bakken well; t11/12; cum 80K 11/17; fracked 2/13; 25 stages; 2.8 million lbs

Whiting Oil renewed seven (7) permits in Dunn and McKenzie County, Tarpon Federal and Charles Blackhawk wells, respectively.

The following permits were cancelled:

• 23733, PNC, Fidelity, Jerry, Stark County
• 24492, PNC, CLR, Raymond Federal, Williams
• 20434, PNC, Whiting, Ash Coulee, Billings
• 20344, PNC,Whiting, Gorrell, McKenize
• 20420, PNC,Whiting, Oneil Creek Federal 
• 23148, PNC, Hess, An-Mogen, Williams

Minimal Posting Today -- Traveling

Active rigs: 182 (steady)

Wells coming off the confidential list have been posted.

RBN Energy: overview of their recent conference.

WSJ Links: only one -- the op-ed piece, the president is raging against a budget crisis he created. At the end of the day, the sequester is simply about jobs in Washington.  It is my understanding that this administration has never submitted a budget to Congress. I recall over the years the blaring headlines when presidents did submit budgets to Congress: "the president's budget is DOA." And so it goes.