Thursday, April 4, 2013

For Archival Purposes Only; Compare To Bakken -- Midstates Petroleum to Buy Producing Properties in The Anadarko Basin

Rigzone is reporting:
Midstates Petroleum Co. agreed to buy producing properties as well as developed and undeveloped acreage in the Anadarko Basin in Texas and Oklahoma for $620 million in cash in a deal that expands the oil  oil producer's resource potential and footprint.
Shares tumbled 5% to $7.02 in recent trading. The stock has dropped 7.8% in the past three months.
The deal adds about 36.4 million barrels of oil equivalent proved reserves that are 45% oil and 21% natural gas liquids, of which 34% are proved developed producing. It increases net current daily production by about 8,000 Boe per day and enhances drilling inventory with more than 700 repeatable horizontal drilling opportunities. 
The transaction also expands Midstates' acreage position with about 140,000 net acres with multiple objectives and adds roughly 280 gross producing wells that are more than 80% operated.
Quick back-of-the-envelope: $620 million / 140,000 net acres = $4,400/acre, much of which is producing.

Some notes from the company's presentation on this acquisition:
  • short laterals; relatively shallow; cost $3 million/well
  • 50% oil; 25% NGL; 35% gas (does not add to 100 because of each product provided; but at most, oil was estimated to be 50%; range was 45 to 50%; I believe the Bakken exceeds 90% for oil)
  • sand fracks; 15 to 17 stages
  • average finding and development: $18 to $24 / boe
Key statistics from Yahoo!Financial (data lags actual) (many figures rounded)
  • recent share price: $6.67
  • p/e: N/A
  • forward p/e: 20
  • market cap: $500 million
  • total cash: $20 million
  • total debt: $700 million (before this acquisition)
  • operating cash flow: $140 million (before this acquisition)
  • levered free cash: -$600 million
Compare with TPLM, a Bakken-centric company
  • recent share price: $6.20
  • p/e: N/A
  • forward p/e: 11
  • market cap: $275 million
  • total cash: $45 million
  • total debt: $60 million 
  • operating cash flow: -$11 million
  • levered free cash: -$17 million
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you read here. I post these comparisons to get a feeling of the various companies. In this case, I have a pretty good feeling for TPLM but had not followed MPO. This gave me a chance to compare the two, and they may or may not be a bit comparable in the eyes of others. In addition, acquisitions give me a sense for what mineral acreage is selling for these days. But this is definitely not an investment analysis. I'm just trying to keep up with what's going on in the Bakken. 

From Investopedia:

Definition of 'Levered Free Cash Flow': The amount of cash that is left over for stockholders after interest on company debt has been paid out. Levered free cash flow plays an integral role in a business because cash can be used to pay dividends, pay for expansion or take on more debt for growth opportunities.

Investopedia Says Investopedia explains 'Levered Free Cash Flow': Levered free cash flows are important to a company because it signals what sort of cash position it is in after interest on its debt has been paid off. For example, if a company generates large quantities of cash, most of which has to be used to pay off interest on debt, the cash generated might not be enough to sustain proper future operations.

Time For A New Poll

But first the results of the present poll in which respondents were asked whether they understood the reasoning behind overlapping 2560-acre spacing units. So, do respondents feel they understand the reasoning behind 2560-acre spacing units.
  • Yes: 63%
  • No: 37%
I'm too tired to go through all the nuances of overlapping 2560-acre spacing units. For a good discussion, visit this site. Teegue is exactly correct, from the viewpoint of the mineral rights owner. And whether you agree or disagree with him, he brings up a lot of good points.

Now, for the new poll.

Senator Heidi Heitkamp recently visited the oil patch. She said she would use her position to influence policy change to help solve the housing crunch in the Bakken. Is this good news or bad news from your point of view?

Wells Coming Off The Confidential List Friday

Friday will be a big day. The March jobs report will be out. The consensus: 200,000 new jobs created, but folks are whispering that maybe only 150,000 new jobs were created. The unemployment rate is expected to be unchanged at the much-disbelieved 7.7%. [Update: the numbers were horrendous.]


First some very sad news. It was reported that Roger Ebert passed away Thursday. I didn't get to see him often on television (we were overseas much of that time), but I always enjoyed his reviews. Wow, another legend. Only 70 years old. To a 30-year-old, that might seem "old," but to those of us in our 60's, that's not that far away. I have no idea what DVD featuring a Robert Ebert commentary would be the best, but if you haven't listened to the Robert Ebert commentary on Casablanca, you need to  -- ASAP. I never tire of watching it. I watch it once or twice a year. Yes, it's that good.


Okay, the wells coming off the confidential list today. We start with the much-talked-about, seldom-seen OXY USA wells:
  • 22997, TA, OXY USA, Thunderbird 1-15-22H-141-94, wildcat, as far south in Dunn County as you can get; about two miles south of Murphy Creek; south end of Murphy Creek with minimal activity; 15-141-94 with no activity except for this one OXY USA well; temporary abandoned while OXY decides what to do with it; Three Forks target; it looks like it was going to be a long lateral (drilled to depth, it appears) and to be fracked with 21 stages; no geologist's report at NDIC yet. This well is on the southeast fringe of the Bakken; Three Forks is more likely to be found here.
  • 23290, 904, Hess, BB-Olson 150-95-0817H-3, Blue Buttes, t3/13; cum 6K 2/13;
  • 23489, 26, Surge, Scandia C SENE 34 00 SENW 35H, Souris, Spearfish/Madison, t12/12; cum 5K 2/13;
  • 23551, drl, Hess, EN-Hanson S-156-94-3130H-4, Manitou,
  • 23705, 856, CLR, Pocasset 1-29H, Oliver, t1/13; cum 18K 2/13;
  • 23757, 874, SM Energy, Prochnick 15-35HSB, West Ambrose, t2/13; cum 12K 2/13;


23489, see above, Surge, Scandia C SENE 34 00 SENW 35H, Souris, not hooked up to a natural gas line:

DateOil RunsMCF Sold

 23705, see above, CLR, Pocasset 1-29H, Oliver, hooked up to a natural gas line:

DateOil RunsMCF Sold

23757, see above, SM Energy, Prochnick 15-35HSB, West Ambrose, not on a natural gas line yet;

DateOil RunsMCF Sold

Did Forum Communications Website, The Oil Patch, Launched One Year Ago Disappear?


April 5, 2013: again, a huge "thank you" to a reader for alerting me to the website (see comments below). I think I've found it -- -- and not all that difficult to sign into. It turns out that my log-in for The Dickinson Press works for this site, as well as others. I've been exploring the site; I can't complain. It seems to have fair and balanced reporting. 

April 5, 2013: see first two comments. It appears the website is still there; I just didn't find it under the ULR posted by the Dickinson Press or others. A huge "thank you" to the reader.

Original Post

I recall visiting the site only once. I had the same experience Rob Port had, and never visited again. Then, for whatever reason (boredom?) I decided to check up on the website. I can't find it. If it is gone, I can understand why. Perhaps it has a new name.

But if you google "forum communications oil patch news" you will get a lot of announcements that the site has launched, but you won't find the site (at least not on the first few pages).

For Investors Only: Buy Bakken On the Pullbacks -- Mike Filloon

Bakken update by Mike Filloon at SeekingAlpha. For investors only.

Williston Wire Headlines; Crude-By-Rail-Barge-Project Planned

Headlies only; no links. It is easy to subscribe to the Williston Wire.
  • The first story is a biggy. Williston Holding Company has purchased four of the most well-known restaurants in Williston, and four that my dad and I used to frequent often:
Trapper's Kettle Restaurant
Gramma Sharon's Family Restaurant
J Dub's Bar & Grill
Williston Brewing Club in leased space in the El Rancho hotel
  • Heidi Heitkam (US Senator) says she will influence public policy to help with the housing problem in the Bakken oil patch. Watch your wallets.
  • Williston episode of "American Journey" on Headline News was show's highest rated
  • Renae Mitchell is making a living photographing oil wells in the Bakken
  • High-density drilling may re-define Bakken's potential
  • Drilling more with fewer rigs
  • Takeaway in the Bakken is sufficient for the next two years. I've heard that story before
  • Indigo Resources Ltd will build a rail-to-barge facility in Osceola, Arkansas, to move Bakken and Canadian crude to the Gulf Coast; a 610-acre site on the Mississippi River with 3,000 feet of river frontage, three sets of manifolds, five rail loops, and 16 miles of track with room for 100+ car unit trains; the site has direct rail access to Minot and Tioga, with shipments moving as much as three times faster than long rail hauls to the Gulf Coast
  • The Casper Star Tribune also reports on Harold Hamm's new pipeline to Cushing; previously reported
  • North Dakota passes two laws aimed at eliminating unnecessary bureaucratic delay for pipeline projects; sounds like the same kind of sound thinking that created the Bank of North Dakota decades ago
  • McKenzie County's landfill was supposed to last 50 years. With the boom, the 50-year life expectancy for the landfill went to .... drum roll .... 2 years. No typo. From 50 years to 2 years. I guess that's one way to define a boom. Maybe The Atlantic Monthly will do another story
  • Crosby city residents overwhelmingly approved a one percent sales tax to help St Luke's Hospital during a time of transition, to include assuming ownership of the local nursing home
  • Many critical access hospitals in North Dakota losing money, including McKenzie County
  • Wildcat Pizzeria to open in Dickinson
  • The Oilfield Cowboy has spent a lot of time around oilfields in Louisiana and Oklahoma but says he has never seen a boomtown like Williston
  • The Beatles will be performing tonight in Williston. Oh-oh, strike that. The Abbey Road Band, a four-man live tribute band will be performing in Williston tonight. The Beatles can't perform. Paul McCartney had a conflicting engagement.

I Completely Missed This One ...


April 4, 2013:  This is actually quite funny.  I came back to correct a typographical error and ended up re-reading the original post. This time "... more than 25 million important-sounding "middle man" positions will be created in the white-collar sector for nonabled persons, providing them with an illusory sense of purpose and ability."

I don't know if I'm in the mood or have the energy to find the link to the story but it turns out, seriously, the 60-age form necessary to enroll in ObamaCare was known by the administration to be so challenging that it has planned to hire tens of thousands of "navigators" -- I kid you not, "navigators" -- to help people fill out this form. Wow, if reality doesn't follow satire in this administration. The administration may not create 25 million "navigators" but they will hire tens of thousands of former ACORN workers, no doubt, to help people a) sign up for ObamaCare; b) register to vote; and, c) make plans for their end-of-life event. Sort of like wedding planners.

Original Post

Signed by President Clinton back in 1998, Congress passed the "Americans With No Abilities Act" according to The Onion, which is reporting:
On Tuesday, Congress approved the Americans With No Abilities Act, sweeping new legislation that provides benefits and protection for more than 135 million talentless Americans.
The act, signed into law by President Clinton shortly after its passage, is being hailed as a major victory for the millions upon millions of U.S. citizens who lack any real skills or uses. 
Under the Americans With No Abilities Act, more than 25 million important-sounding "middle man" positions will be created in the white-collar sector for nonabled persons, providing them with an illusory sense of purpose and ability. Mandatory, non-performance-based raises and promotions will also be offered to create a sense of upward mobility for even the most unremarkable, utterly replaceable employees.
I now understand why the 2% sequester was needed.

Now, I'm trying to decide whether to walk to Starbucks for wi-fi this evening or suffer the alternative.

Eleven (11) New Permits -- The Williston Basin, North Dakota, USA

This week's national job's report: horrendous.

Active rigs: 186 (steady)

Eleven (11) new permits --
  • Operators: Marathon (5), Oasis (3), Whiting, EOG, Williston Exploration
  • Fields: Willow Creek (Williams), Squires (Williams), Sanish (Mountrail) Parshall (Mountrail), Big Bend (Mountrail), Rocky Ridge (Billings), Bailey (Dunn)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right.

Canceled permit:
  • 24495, PNC, Sinclair, Uran 2-27H, Mountrail County.

LA Op-Ed Being Posted For Archival Purposes

I suppose the writer of this Los Angeles Times op-ed walks to work (and in Los Angeles, that borders on the writer being a saint). Three other points folks seem to forget:
  • plastic comes from heavy oil, like the kind from Canada; plastic does not come from light oil
  • one can buy heavy oil from Canada (currently about $60/bbl) or Venezuela (currently about $110/bbl)
  • US refineries along the Gulf Coast are predominantly heavy oil refineries
In case the link is broken it's an op-ed "demanding" that President Obama kill the Keystone XL. But that's sort of old news coming from the LA Times, so that's not why I'm posting it.

I'm posting it because I get a lot of e-mail from folks telling me that, in light of the fact that the earth in fact has not been warming for the past sixteen years, it is no longer "global warming," but rather "climate change."

This is the start of the LA Times op-ed, just so there's no confusion:
If Obama OKs the Keystone XL, it will exacerbate global warming and put the U.S. on the hook for spills and environmental degradation, all in service to one of the planet's dirtiest fuels.
Just for the record: the LA Times still refers to "it" as "global warming."

A big "thank you" to a reader for alerting me to the article. The writer also noted that the president is talking about gun control today when North Korea has announced it has rockets (and perhaps nukes) pointed at US military bases in the Far East. This is South Korea's "Cuban missile crisis" and the president is talking about gun control. Okay. [For the record, the best think the US can do with regard to North Korea is ignore it. Negotiating with the North Koreans in the past brought us to this point. the show of force was just about right. Just enough to let the North Koreans we can get there pretty quickly but then pull back and let North Korea make the next move. Sort of like chess. The US/South Korea have a full board of pieces; North Korea has two pieces, a nuclear queen and a king, and it's North Korea's move. The clock is ticking.]

OPEC Announces Cut In Production: Reasons Are Very, Very Dubious

Bloomberg is reporting. The headline suggests that Bloomberg is very suspicious of reasons provided by OPEC for cut in production. This is not rocket science.
The Organization of Petroleum Exporting Countries will cut crude shipments next month as global refinery maintenance peaks, according to tanker tracker Oil Movements.
The group that supplies about 40 percent of the world’s oil will reduce crude exports by about 120,000 barrels a day, or 0.5 percent, to 23.7 million a day in the four weeks to April 20, the researcher said today in an e-mailed report. The figures exclude Angola and Ecuador.
“Refiner crude demand is lower right now,” Roy Mason, the company’s founder, said by phone from Halifax, England. “It reaches a seasonal low in April.”
In medicine, the most un-useful bit of information: when the cause of death was reported as "cardio-respiratory arrest."

In the oil industry, the most un-useful bit of information: when OPEC tells us they will be cutting back production because refineries are using less. 

Well, This Wasn't Supposed To Happen

March was very, very cold indeed.

The network trusted by more liberals than any other is reporting:
March 2013 was the joint second coldest in Northern Ireland since records began, alongside 1919, 1937 and 1962.
According to figures from the Met Office the mean temperature for the month was a cold 2.8C.
March was also colder than any of the preceding winter months of December, January and February.
December and January each had a mean temperature of 4.3C, while February was slightly cooler at 3.9C.
The amount of sunshine during the month was just 51.5 hours, well below the average 97 hours.
Later this week, the global warming activists will be explaining how rising CO2 was responsible for the coldest March in Ireland since 1962, and tied with the second coldest March in 1919 and 1937 -- you know those are all interesting years: WWI; the eve of WWII, the Cuban Missile Crisis; and, now this spring: the Korean War, chapter 2. 

I do not recall the years 1919, 1937, and 1962 as years of high CO2 discharged by human activity.

Meanwhile, tied for the second or third most inept president of the United States, President Obama is speaking global warming fundraising out in California, "Forward On Climate -- Reject The Keystone XL" in professionally-made signs. Then he will go golfing in nice sunny weather. Better than shooting basketballs. What? Not worried about the jobs report? Apparently not.

Another Keystone XL Workaround -- Harold Hamm Sees The Writing On The Wall -- Even If Keystone XL Is Approved, He Can Get His Pipeline In Sooner; Keystone XL Wounldn't Carry Bakken Light Sweet Regardless


April 12, 2013: a more detailed look at the Double H pipeline in Fallon County, Montana.  The Fallon County Extra is reporting:
The pipeline, unofficially called the Double H, is proposed to stretch 462 miles from the Bakken oilfield location of Dore, North Dakota to Guernsey, Wyoming where it will connect with the Pony Express pipeline. The Pony Express formerly transported natural gas, but is being retrofitted to handle crude oil and would then transport the crude oil all the way to Cushing, OK, a storage and trading hub for crude oil. The oil purchased from Cushing is usually refined at Gulf Coast refineries.

The pipeline is to use 12” diameter pipe which will stretch across 48.4 miles of Fallon County. Its initial capacity was listed as 50,000 barrels per day (bpd) with a planned expansion of 80-100,000 bpd.
Hiland estimated the construction time in Fallon County to be between four and five months. 
Original Post
Don sent me two stories.

First, President Obama's stimulus program to study condom use, at a cost of only $423,000, resulted in no new jobs.
The stimulus project yielded a total of 0.00 jobs created, according to the federal government. "No jobs created/retained," the form says under "Description of Jobs Created."
Results of the study have not been posted on the internet.  So, $423,000 resulted in no new jobs, but a lot of fun for two university researchers.

That's your government-run public sector at work (other work includes killing the Keystone XL pipeline, not once, but twice).

Meanwhile, in the private sector, one individual, Harold Hamm, using no government money, stimulus or otherwise, will be laying new pipeline segments to move a bunch of oil from the Bakken to Cushing, Oklahoma (where they hardly need any more oil, but I digress). The new pipeline will be called the Double H pipeline.

The Billings Gazette reports the story. The article refers to "Door, North Dakota" which is probably "Dore, North Dakota."

Butte Pipeline runs from Baker, MT, to Guernsey, WY.  At the link one can access a PDF of the map of the pipeline.

So, it appears, Harold Hamm will run a pipeline from Dore, ND, where there is already a huge CBR facility (one of the first), connect with Butte Pipeline, and then the 250 miles through southeast Wyoming from Guernsey to hook up with the Tallgrass Pony Express pipeline which runs from Colorado across Nebraska's Agallala aquifer. This was a natural gas pipeline that is being converted to carrying crude; to be on-line in 2014. Nebraska laws did not affect it because it was not a new pipeline. As my daughter would text, LOL. [Irony: when the president approves the Keystone XL, Nebraskans will have two new crude oil pipelines crossing the aquifer instead of just the one. Such sweet irony.]

So, the only portion I don't know about: is a new pipeline (a very short section) needed in northeastern Colorado to connect with the Tallgrass pipeline? Probably. And, of course, the pipeline from Dore, ND, to Baker, MT, if indeed that's the plan (there are existing ND/MT pipelines running from the Bakken to Baker, MT, including the Belle Fourche pipeline).

So, two new sections Harold Hamm needs to lay:
  • Dore, ND, to Baker, MT (assumption)
  • Guernsey to Tallgrass Pipeline (probably two states, Wyoming and Colorado) 
It will be interesting to see how much pushback Harold Hamm gets on this project. TransCanada and President Obama succeeded where no predecessors had been able: paint the US domestic pipeline system as a most dangerous system, one which needed to be stopped at every point possible. Reading the linked Billings Gazette story brings that point home.  I've never seen a president so successful at denigrating American industry.

By the way, Harold Hamm will be using $300 million of private sector money to finance his new pipeline, and unlike the president's condom stimulus program, Hamm's project will result in hundreds of new jobs, albeit temporary. But every construction job is temporary. Even building houses.

Thursday Morning Links; Scientists Find Hint of Dark Matter; Obama Changes HIs Mind on Korea


April 6, 2013: update on the Korean Missile Crisis - a) the US scuttles a long-planned ICBM test launch out of Vandenberg, CA; b) North Korea says its strategic objective is to gain more concessions form the West; c) past years suggest that food situation is now at its worst -- the end of a harsh winter; food supplies running out ahead of a new growing season; need food imported from the west. It will be interesting to see if President Obama gives into North Korea and everything returns to "normal." If so, this has turned out to be nothing more than another episode in this long story.

Original Post
First: the jobs numbers. Horrendous.

Active rigs: 185 (steady)

RBN Energy: will power plants switch back to coal this summer? This is a very, very interesting read. It will be fun to come back to the story six months from now.

Wells coming off the confidential list today have been posted.

WSJ Links

Section D (Personal Journal): several sports stories. No links now. May come back later.

Section C (Money & Investing):
Section B (Marketplace): nothing.

Section A

Jobless Numbers: Spike To Four-Month High; Huge Spike; Up 28,000; Horrendous

For newbies:
NUMBERS TO WATCH: The Magic Numbers
First time claims, unemployment benefits: 400,000 (> 400,000: economic stagnation) New jobs: 200,000 (however, now I see that the goal posts have been moved to 120,000) -- 
The unemployment numbers have been in a range for the past two years, but perhaps one can say that the first time claims, unemployment benefits, have been ranging from 375,000 down to 350,000, and whenever there is break below 350, 000 the mainstream media gets very, very excited.

So, where are we today?

This is simply not good.

Headline: jobless claims at four-month high, cast shadow over labor market.

Yes, it is the highest in four months, but you can go all the way back to November 17, 2011:
November 17, 2011: Seven-month low; 388,000. The four-week average is 396,750, the first time this average dropped below 400,000 since April, 2011.
So, we are no better off than November, 2011. That was a year before the last election.

Reuters is reporting: The number of Americans filing new claims for unemployment benefits rose to its highest level in four months last week, suggesting the labor market recovery lost some steam in March.

It is always a kick to see how the mainstream media spins these stories. And we see it in the first paragraph. I'm sure the CNBC talking heads are going nuts. The number rises to a 4-month high. The rise is huge. How does Reuters report it? Reuters says the new number "suggests the labor market is losing steam."


Losing steam?

And we are just at the beginning of the construction season.

No, this is not good.

Sam said, "green ham and eggs."

The Reuters story continues:
Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest level since November, the Labor Department said on Thursday. 
It was the third straight week of gains in claims. Coming on the heels of data on Wednesday showing private employers added the fewest jobs in five months in March, the report implied some weakening in job growth after hiring accelerated in February.
Economists polled by Reuters had expected first-time applications last week to fall to 350,000.
So, to recap:
  • when the numbers increase/decrease by about 2,000/week, this last week the numbers increased by a whopping 28,000
  • there was no Hurricane Sandy to blame the 28,000 debacle
  • economists had expected the number to FALL to 350,000
  • instead of falling, it rises
  • instead of barely rising, it spikes 28,000
And it will likely be worse when the numbers are revised next week. California's data was "estimated." For newbies, California's data is often estimated. Something fishy going on there.

Earlier this week someone on the Fed said they might start cutting back on quantitative easing (QE) later this summer. I don't think so.

The president is clearly in over his head; the unemployment numbers simply have not moved for the past two years, regardless of how Reuters, Yahoo, Bloomberg try to spin it.

Two other data points that are worth noting:
  • the four-week average rose an incredible 11,250 to 354,250
  • the number of folks receiving benefits decreased by 8,000 to 3.06 million. The decrease is because after 99 weeks the benefits run out. After 99 weeks.
No, this is not good.

And, not a surprise. And it's gonna get worse. The sequester cuts are yet to show up.

This is where I track jobs (the link will take you to the first page of several pages). Scroll down quickly through the site for the past two years, and you week see exactly how things are going.


Cue up Connie Francis.