The Million Dollar Way (The Bakken Oil Blog): 03/15/13

Friday, March 15, 2013

Some Nice Bakken Links for Friday Night; Whiting -- Fracking The "Oreo Cookie Halves" To Develop the Creamy Filling; Lower Bakken Silt Discovered By Whiting

A reader sent in several links regarding the Bakken.

A big "thank you" to a reader for sending these stories/links. Some of this information has previously been reported.

1. Conoco update in the Bakken; record well in the Bakken; earmarks $4 billion for the Bakken through 2017. For newbies, Burlington Resources (BR) is wholly-owned subsidiary of COP.

2. Previously reported; from another site: New Bakken formation -- Whiting to drill up to 15 wells to test Lower Bakken Silt oil zone at Hidden Bench; see below.

3. Top three Bakken wells by IP rate:

While ConocoPhillips brought in what appears to be the best initial production rate, or IP, for oil produced in a 24-hour period of any well in North Dakota to date with its McKenzie County Brazos 24-34H well in 2012, Whiting Oil and Gas appears to be running a close second — and third — based on limited research of the North Dakota Oil and Gas Division’s data base by Petroleum News Bakken. Whiting has three wells in the Twin Valley field in northern McKenzie County called the Tarpon wells. Two of those Tarpon wells rank second and third behind ConocoPhillips’ Brazos 23-34H well in terms of oil IP rates.

20636, 5,130, BR (COP), Brazos 24-34H, Charlson, t6/12; cum 59K 1/13;
22361, 4,971, Whiting, tarpon Federal 21-4-3H, Twin Valley, t12/12; cum 64K 1/13;
20589, 4,815, Whiting, Tarpon Federal 21-4H, Twin Valley, t10/11; cum 302K 1/13;

In light of recent comments by Director, NDIC, this update may be particularly timely; it is possible the record IP and/or production from a new well will be reported soon.

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With regard to the Whiting story testing the Bakken Silt:

The company is so confident about transforming the Silt into production that it plans to invest millions of dollars “bracketing” the formation with as many as eight wells above and seven wells below the Silt.

The wells, to be drilled on 160-acre spacing, might even improve current production from the Middle Bakken zone, the company said.

Previous ‘Silt” drilling failed Whiting said it previously attempted to drill into the Lower Bakken Silt but ran into difficulties when the drill bit got stuck in the formation. “So our approach here is essentially to drill both above it in the Middle Bakken and below it in the Three Forks and essentially frack simultaneously to develop this zone,” Mark Williams, Whiting’s senior vice president of exploration and development, told analysts March 4 at the Raymond James Institutional Investors Conference in Orlando, Florida. [Fracking the "Oreo cookie halves" to develop the cream.]

At Hidden Bench, Whiting could increase the density of the middle Bakken and/or Pronghorn formation wells, as well as target the Lower Bakken Silt.

In addition to this information, there is much, much more information at the link.

Director's Cut, March, 2013, for January, 2013, Data

Link here to the NDIC site.

For additional commentary at Petroleum News, click here.

Highlights:

2nd time in last few months that production dropped from previous month; due to weather
about 410 wells awaiting completion
new metric: 90 new wells/month needed to maintain current production

Flaring

Additions to gathering and processing capacity are helping with the percentage of gas flared holding at 29%. The historical high was 36% in September 2011.

Oil

Jan: 738,022 bopd (decrease; see director's comments; high was in Dec, 2012)
Dec: 770,111 bopd (5% increase over previous month; 3% over previous high)
Nov: 733,078 bopd (~ 2.0 % decrease; see comments from director below)
Oct: 747,212 bopd
Sept: 729,248 bopd

Producing wells

Jan: 8,322 (preliminary) (new all-time high)
Dec: 8,2237
Nov: 8,101
Oct: 8,035
Sept: 7,899

Permitting

Feb: 185 (note the decrease)
Jan: 218 (note the increase)
Dec: 154 ( significant decrease)
Nov: 211 (all-time high was 370 in Oct 2012)
Oct: 370 (all-time high)
Sept: 273

Pricing

Feb: $88/bbl (no change)
Jan: $88/bbl (note the nice increase)
Dec: $77/bbl
Nov: $81/bbl
Oct: $87/bbl
Sept: $85/bbl

Rig count

Feb: 183
Jan: 185
Dec: 184
Nov: 186
Oct: 188
Sept: 190

Comments:

January: Winter Storm Gandolph followed by over a week of sub-zero temperatures and wind chills. Rig count remained the same but well completions plummeted 26% to 85. That represents one-half of the previous 12-month average and the below the threshold needed to maintain production (90 wells).

Eighteen (18) New Permits -- The Williston Basin, North Dakota, USA

Active rigs: 185 (steady)

Eighteen (18) new permits --

Operators: G3 Operating (4), BR (4), BEXP (3), Hess (3), XTO (2), Whiting, Legacy Oil
Fields: Sanish (Mountrail), North Fork (McKenzie), Capa (Williams), Robinson Lake (Mountrail), Eagle Nest (Dunn), Alger (Mountrail), Red Rock (Bottineau),
Comments:

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

Permitting:

With 521 permits for oil and gas wells so far this calendar year (does not include salt water disposal wells), this puts the state on track for 2,570 permits for calendar year 2013.

At the same point one year ago, 392 permits had been issued, which put the state on track for 1,934 permits for calendar 2012. The state ended up issuing 2,251 permits in 2012, of which 30 or so were eventually canceled.

LNG Corridors

This story was linked at another stand-alone post.

This particular post may become "LNG Corridor Central" if the news and/or blog warrants. For now, this is a nice update, from the linked story:

Today there are 28 public LNG refueling stations in the United States, according to the U.S. Department of Energy.

LNG is denser than compressed natural gas, which fuels many buses and garbage trucks. That means trucks require fewer fuel storage tanks to go the same distance. Also, LNG stations are cheaper to build than CNG stations because they do not tap into gas lines. Much like diesel, the liquid fuel is trucked in.

The number of stations Blu will open this year is about equal to the 50 to 60 stations Clean Energy is planning. Clean Energy already has 70 LNG stations, though most will only start operating when there are a sufficient number of trucks that need them. Shell has said it plans to build about 100 LNG fueling stations in the United States, but has not given a timeline.

Blu's eventual plan is to build about 500 LNG stations in the United States, according to another person familiar with their strategy. When asked about that figure, a Blu spokesman said the company was committed to building a network of fueling stations, but that the exact number would depend on a number of factors.

Almost As Good As The Bakken Oil Express Video -- The Chinese Coming To America To Fuel Our Trucks

A huge "thank you" to a reader for alerting me to the story. This is another big story.

Reuters is reporting:

ENN Group Co Ltd, one of China's largest private companies, is quietly rolling out plans to establish a network of natural gas fueling stations for trucks along U.S. highways.

With plans to build 50 stations this year alone, ENN joins a small but formidable group of players -- including Clean Energy Fuels Corp and Royal Dutch Shell Plc -- in an aggressive push to develop an infrastructure for heavy-duty trucks fueled by cheap and abundant natural gas.

Clean Energy is backed by T. Boone Pickens and Chesapeake Energy Corp. The move is yet another example of China's ambition to grab a piece of the U.S. shale gas boom.

Just last month, Sinopec Group said it would pay $1 billion for some of Chesapeake's oil and gas properties in the Mississippi Lime shale.

The natural gas bounty is also expected to help wean the U.S. transport industry off its dependence on diesel fuel made from imported crude oil, and the trucking industry is in a big push to use more of the domestically produced fuel.

Go to the link for a great photo.

I had trouble understanding the reason that "China" bought natural-gas heavy shale in America. It certainly makes sense now, doesn't it.

And who is going to use that natural gas? FedEx, for one. MSNMoney is reporting:

FedEx CEO Frederick W. Smith said he expects up to 30% of long-distance trucks to be powered by liquified (LNG) or compressed natural gas (CNG) over the next 10 years.

While there is ample research to show that the use of natural gas in transportation can reduce carbon emissions significantly, the high costs associated with these vehicles and relative scarcity of fueling stations have hindered their adoption up to now.

Here, we take a look at the key factors expected to drive adoption rates of CNG/LNG vehicles in the transportation industry over our forecast period. This trend is expected to improve EBITDA margins for the FedEx Ground segment, which makes up more than 67% of Trefis' current price estimate for the stock.

This story was also sent by the same reader, as the ENN story above.

Disclaimer: this is not an investment site; do not make investment decisions based on what you read at this site.

Both Senate and House Have Bills To "Jump-Start" The Keystone

No links. But the story is easily found if interested.

This "news" (Senate/House bills) isn't big enough for a new episode of "As The World Turns," but for newbies, you can catch re-runs, starting with episode 50 at this link. If you go to that link, you will have to scroll down a bit to get to episode 50.

Under the Radar: China Surpasses US in PPP GDP; China -- World's Largest Car Market; #1 Mideast Oil Importer; To Use More Coal Than Rest of the World; Produces More Autos Than US

Quietly, under the radar, China is where the MDW predicted it would be much sooner than some others were predicting. The Washington Times is reporting:

China passed a milestone last year by surpassing the United States as the top oil importer from the Middle East, but oil is not the only fuel China is voraciously consuming these days. The Asian economic giant in recent years became the world’s biggest energy consumer overall, taking all sources of fuel into account, and it soon will use more coal than the rest of the world combined, the agency estimates.

China’s oil consumption is burgeoning as the result of millions more Chinese acquiring cars each year in what is now the world’s biggest and fastest-growing market for automobiles. Chinese auto production reached 16 million units last year, compared with 14.5 million in the U.S., the second-largest auto producer.

I remember making a comment about the Chinese economy as compared to the US some years ago for which Chester took me to task. One can't blame Chester. A lot of folks forget that China's GDP is growing anywhere between six and twelve percent per annum while the US GDP growth is flat. In fact, until the revision, the GDP growth for the US in 4Q12 was marginally negative.

It is now being reported that China has passed the US in purchasing power parity GDP. The nextbigfuture is reporting:

China ended 2012 with $15.4 trillion USD.

There is also the need to add $300 billion for Hong Kong and Macau's GDP. Hong Kong and Macau were turned back over to China in the late 1990s.

The US GDP was about 15.8 trillion USD at the end of 2012.

Now 3 months into 2013, China-Hong Kong-Macau has passed the USA in PPP GDP.

Other economists and academics have calculated that China passed the US in purchasing power parity in the 2009-2012 timeframes.

In other news, it was announced this week that the president will use a law already in effect to further slow down the US economy as reported by Bloomberg. I can't make this stuff up.

P-P-P-G-D-P-E-I-E-I-O. And so it goes.

Architect's Drawing of New Williston Basin Eye Clinic In Williston, North Dakota

This came in from a reader as a comment. As a stand-alone post, it will be easier to find by "search" and will reach more readers. From the reader regarding this pdf:

http://www.willistonnd.com/usrimages/2020professionalcenterpictures.pdf

The comment (with slight editing; the comment was posted without editing, however):

"Above is the link to the new Williston Basin Eye Clinic that will be built on the Mercy Medical Center grounds. Mercy is really going to be a nice looking campus if they keep this up. With the new 3-story addition and the new cancer center...now this building?"

Bakken Oil Express -- Reuters Video - A Must-Watch

Updates

March 15, 2013: Upon seeing the video linked below, one reader was surprised to see only two truck unloading stations at the terminal. See comments below. Apparently that is incorrect. Here are the data points regarding the Bakken Oil Express west of Dickinson:

BOE presently has 15 truck unloading stations, from which crude is transferred to large tanks capable of storing >400,000 barrels (and over 600,000 barrels by June, 2013). The storage tanks also receive oil coming directly by pipe from the oil fields. Outbound loading capacity onto rail cars through two railcar loading racks now exceeds 200,000 bopd.

Simply incredible.

Original Post

A huge "thank you" to a reader.

This is huge.

I have mentioned many, many times that there is seldom a day when I am not impressed or surprised or excited by something in the Bakken.

And today it is this video, a Reuters video: the Bakken Oil Express west of Dickinson. From the Reuters website:

For his video diary, Reuters correspondent Ernest Scheyder drove into the Bakken Oil Express, a sprawling project at the heart of the state's booming oil economy.

For an earlier post on the Bakken Oil Express, click here.

Two takeaways from the video:

the railroad infrastructure all financed privately, no government money
not one bucket of oil spilled in all these hundreds of thousands of barrels

Bakken Is Selling For A Slight Premium To WTI At Clearbrook

25 cent-premium. Ya-hoo.

And, unfortunately, I just missed it, but CNBC talking head says the price of oil is rising because, and this is the part I missed, "...Obama has said it is not yet off the table." I do not know what the reporter was referring to, what was "not yet off the table" with regard to oil. I do know the sabre-rattling in the Mideast is picking up again.

And, the price of natural gas is moving towards $4.00.

And now CNBC is reporting how many trucking fleets across the US are turning to natural gas.

Friday Links, News and Commentary

Active rigs: 187 (steady, very nice)

Wells coming off the confidential list today have been posted.

RBN Energy: Part II of Canadian condensate demand.

I only caught one snippet of CNBC this a.m. The television was on mute, but I saw Alan Greenspan as a talking head was there, and the crawler said Greenspan considered stocks undervalued. Okay.

This is not an investment site; don't make any investment decisions, or financial decisions, based on what you read, or think you read, on this blog.

WSJ Links

How to access WSJ links:

http://en.wikipedia.org/wiki/Google_News

The entire article at the link pertains, but a statement near the end of the article is particularly helpful:

On December 1, 2009, Google announced changes to their "first click free" program,which has been running since 2008 and allows users to find and read articles behind a paywall. The reader's first click to the content is free, and the number after that would be set by the content provider.

I find that the WSJ lets me click on about 8, maybe 10 articles, before I'm restricted. I subscribe to the WSJ but do not access it on-line; I only read the hard copy edition.

Generally, clicking on the links will not get you past the paywall; one needs to "cut and paste" the key words, generally highlighted, into the URL area and hit "return."

Now to the links:

Section M (Mansion): I generally never read this section. Did not read it today.

Section D (Arena): nothing particularly interesting.

Section C (Money & Investing): nothing; maybe I will come back to it later.

Section B (Marketplace):

Patriot Coal asks bankruptcy court to scrap retiree benefits and terminate retirees' current health benefits. ObamaCare arriving just in time.
Boeing fixes to be extensive. Linked article is different than the hard copy I have before me.

Section A:

Senate slams JP Morgan on "Whale"; no link; story everywhere; JP Morgan still made tons of money; risk-taking; had the "Whale" turned out differently, JP Morgan would be beatified (grammatically correct?)

Employers blast fees from new health law; here it comes, the small print:

Employers are bracing for a little-noticed fee in the federal health-care law that will charge them $63 for each person they insure next year, one of the clearest cost increases companies face when the law takes full effect.

Companies and other plan providers will together pay $25 billion over three years to create a fund for insurance companies to offset the cost of covering people with high medical bills.

The fees will hit most large U.S. employers, and several have been lobbying to change the program, contending the levy is unfair because it subsidizes individually purchased plans that won't cover their workers. Boeing Co. and a union health plan covering retirees of General Motors, Ford Motor Co. and Chrysler, among other groups, have asked federal regulators to exclude or shield their insurance recipients from the fee.

Insurance companies, which helped put the fee in the law, say the fee is essential to prevent rates from skyrocketing when insurers get an influx of unhealthy customers next year. The fee is part of a new insurance landscape created by the health law that will forbid insurers from denying coverage to people with pre-existing conditions.

For the record: I see nothing wrong with $63/employee; pretty inexpensive overall. It could be worse, Ole would say. But why stop at $63?

Page 3, and we've talked about page 3 before; two stories:

Livestock waste lands Iowa in hot water; with runoff from farms blamed for fouling drinking supply, the EPA pressures state to step up oversight of facilities; note how EPA handles a known water polluter vs fracking;

Boxing group bans headgear in bid to reduce concussions; interestingly enough, there was a study done many, many years ago that actually shows motorcycle helmets actually increases the healthcare cost and morbidity of motorcycle accidents (bottom line: motorcycle accidents convert deaths into quadriplegics)

Oil exports spur more questions about pipeline; Another reason to kill the Keystone XL 2.0: it would result in more jobs for Americans; improve the US trade balance; I can't make this stuff up:

Much of the crude oil that would flow down the proposed Keystone XL oil pipeline would likely be exported as refined products by U.S. companies—a prospect that is stirring further debate over whether the project serves the nation's best interest.

Backers of the pipeline, which would carry heavy crude from Alberta, Canada, through the Plains states to Gulf Coast refineries, say the exports would be good for the U.S. economy by creating refinery jobs and helping to reduce the trade deficit.

And, thus, "we" need to kill the pipeline. I can't make this stuff up.

Op-ed: the doctor won't see you now. He's clocked out.

Big government likes big providers. That's why ObamaCare is gradually making the local doctor-owned medical practice a relic. In the not too distant future, most physicians will be hourly wage earners, likely employed by a hospital chain.

Why? Because when doctors practice in small offices, it is hard for Washington to regulate what they do. There are too many of them, and the government is too remote. It is far easier for federal agencies to regulate physicians if they work for big hospitals. So ObamaCare shifts money to favor the delivery of outpatient care through hospital-owned networks.

The irony is that in the name of lowering costs, ObamaCare will almost certainly make the practice of medicine more expensive. It turns out that when doctors become salaried hospital employees, their overall productivity falls.

Physicians will lead better lives; it will all work out just fine. Don't worry; be happy. Actually, a lot more physicians will find it more lucrative to review claims for insurance companies rather than actually practice medicine. The best way to cut down health care costs for insurers and the US taxpayer is to make it more difficult to visit physicians in the first place. The physician's "tool" that adds most to the nation's health care costs: her pen. The one she uses for ordering diagnostic tests and prescribing medications.

The Million Dollar Way (The Bakken Oil Blog)

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