Tuesday, April 16, 2013

Canada Is Open To Future Acquisitions By Chinese Energy Companies

Rigzone is reporting:
Canada is open to future acquisitions by Chinese energy companies, its trade minister said, in a clear signal Ottawa wants deeper ties with Beijing despite controversy over CNOOC Ltd.'s recent acquisition of Canada's Nexen Inc.
Canadian trade minister Ed Fast said Tuesday during a visit to Beijing that Canada was one of the world's most open investment destinations, and that it was committed to diversifying resource exports away from heavy reliance on the U.S.
And more:
Energy ties between Canada and China have come increasingly into the spotlight in recent months. That is particularly so as the Obama administration deliberates whether to approve the proposed Keystone XL oil pipeline, which would carry heavy crude from Canada's Alberta province to U.S. Gulf Coast refineries.
U.S. President Barack Obama rejected a version of the pipeline in early 2012 on environmental grounds, and a decision by the administration on a revised proposal is expected this summer.
Mr. Fast said Canada would press ahead with diversifying exports away from the U.S. regardless of the Obama administration's eventual decision on the pipeline, but said Keystone's approval would be important to shoring up North American energy security

Alaska Lowers Oil Production Taxes --

Rigzone is producing.
The tax cut will benefit energy companies that are active on Alaska's North Slope, such as BP PLC, ConocoPhillips and Exxon Mobil Corp.
"The changes to Alaska's severance tax create an environment that ConocoPhillips believes should lead to increased investment and additional production," a spokeswoman for Houston-based ConocoPhillips said Monday.
The oil companies had complained that the higher tax rate, established by former Gov. Sarah Palin, made Alaska less attractive for investment than other regions, such as North Dakota.
The linked article provides more specifics. 

For Investors Only: CSX Beats

From Yahoo!In-Play:
4:08PM CSX beats by $0.05, beats on revs; CSX increases quarterly dividend 7% to $0.15 per share, announces new share buyback: Reports Q1 (Mar) earnings of $0.45 per share, $0.05 better than the Capital IQ Consensus Estimate of $0.40; revenues fell 0.3% year/year to $2.96 bln vs the $2.92 bln consensus. CSX announces new share buyback program, targets $1 billion over 24 months.

Director's Cut: April 16, 2013, For The Month of February, 2013

New production numbers are preliminary and subject to revision.

New all-time high for production: 778,176 bopd -- compare to January: 737,787 bopd. That's a five percent increase.

The number of producing wells is also at a new all-time high: 8,492

  • March: 218
  • February: 185
  • January: 218

The number of completions is well above the threshold needed to maintain production so oil production rate rose sharply, up 5.6%. The number of well completions doubled in February, over January, to 170.

The NDIC estimates that at the end of January there were about 375 wells waiting on completion.

One can find the Director's Cut at the NDIC home page.

Wells Coming Off The Confidential List Wednesday; BR With a 2-Acre Unit Gusher;

Wells coming off the confidential list on Wednesday:
  • 22090, 1,085, G3 Operating, Fort Berthold 152-93-17C-08-4H, Four Bears, t1/13; cum 25K 2/13;
  • 23491, 32, Surge, Scandia 2S SENE 34 03 SENW 35H, Souris, a nice Spearfish well, t12/12; cum 8K 2/13
  • 23623, drl, Abraxas, Lillibridge 20-17-2H, Pershing,
  • 23665, 2,525, BR, Kummer 11-30MBH, Blue Buttes, 2-section spacing; t3/13; cum--
  • 23838, drl, BR, Waterton 21-29TFH, Keene

22090, see above, G3 Operating, Fort Berthold 152-93-17C-08-4H, Four Bears:

DateOil RunsMCF Sold

23491, see above, Surge, Scandia 2S SENE 34 03 SENW 35H, Souris:

DateOil RunsMCF Sold

Ten (10) New Permits -- The Williston Basin, North Dakota, USA

Active rigs: 186 (steady)

Ten (10) new permits --
  • Operators: Oasis (5), Whiting (3), G3 Operating (2)
    Fields: Camp (McKenzie), Delhi (Golden Valley), Robinson Lake (Mountrail), Antelope (McKenzie), Lonesome (McKenzie)
Producing wells coming off the confidential list for the past four days were posted earlier; see sidebar at the right.

Producing wells completed:
  • 21837, 1,398, MRO, Deep Creek USA 14-12TFH, Lost Bridge; t3/13; cum --
  • 23551, 402, Hess, EN-Hanson S-156-94-3130H-4, Manitou, t3/13; cum --
Operator Transfer: This might confuse a few folks: more than 10 pages of wells were transferred from BEXP to STO. I suppose there are about 50 wells per page = more than 500 wells.

So Much For Those Arctic Melting Stories

OMG.Yahoo is reporting:
The person who runs Alaska's biggest annual guessing game predicts a late outcome this year.
Cherrie Forness manages the Nenana Ice Classic, a contest to see who can guess when the ice will give way on the Tanana River in the tiny community of Nenana, about 55 miles south of Fairbanks. The game is a hugely popular form of wagering in Alaska and draws entries from across the state and elsewhere.

Forness says the ice on the Tanana River measured 50.3 inches Monday. That, combined with cold weather this month, is leading her to speculate that the ice might break up late this year, the Fairbanks Daily News-Miner reported.
And so it goes. 

Mexico: A Solid, Consistent 4% GDP Growth

Don sent me this story.

Long video; lots of data; about halfway through the comments on Mexico. Start at the 3 minute (3:00) mark.

Remember: while the US will flirt with 0 to 1% GDP growth under the current administration, Mexico is likely to have a solid, consistent 4% growth -- a big "thank you" to Don for noting this story. For investors only: look at SRE (not for investing purposes) but to see how SRE dovetails with the points made in this interview).

For Investors Only: Folks May Want To Remember That There Are Estimates of 50,000 Bakken Wells Before It's All Over

About 6,000 now?

"Every" Bakken well will eventually be on a pump, and many (most?) within the first few years.*

You may want to remember those data points when reading this SeekingAlpha article: General Electric to be the real deal in artificial lift.


*This statement is an opinion. It is based on the data from the following permits:
  • 18000 - 18099
  • 18100 - 18199
  • 19000 - 19100
Of those permits, all were Bakken except four non-Bakken permits (I might be off by two or three).

Of those 300 permits (296 Bakken permits):
  • 48 were not completed (PNC/EXP/LOC/CONF)
Of the remaining 248:
  • 40 were not on a pump
  • 208 were on a pump
Experts in the field tell me that paperwork for wells is often delayed, and thus a few of wells said to still be flowing, may in fact be on a pump.

There was also a suggestion (in the data of 300 wells) that the more recent wells are getting placed on pumps sooner than the earlier wells, but not enough data to say for sure, and not in the mood to collect more data; maybe some other time.

Again, I only went through the list once, and I went through it quickly, so there may be small errors.

North Dakota's "Oil Tax Fund" Tops $1 Billion -- With A "B"


April 17, 2013: a reader sent me this article suggesting the Legacy Fund advisory board is recommending some of the money be invested. 

Original Post

The Bismarck Tribune is reporting.

Some of these data points were provided at the linked article:
  • the Legacy Fund gets 30 percent of the state's oil tax collections
  • none of the Legacy Fund money can be spent until 2017; will require 2/3rds vote of legislature to spend it
  • the money is stashed under a mattress; it is not invested
  • April deposits were $80.5 million.
  • the fund was begun in September, 2011 -- about 18 months ago, I guess
  • the fund is slightly ahead of projections: original projections -- $620 million by June 30, 2013
Any safe utility pays 3%. Three percent of $1 billion = $30 million per year. Otter Tail pays 3.8%; MDU pays 2.8%.

So, not investing this money is costing the state $30 million per year.

Flaring is costing the state $26 million in tax and royalties per year.

And so it goes.

Disclaimer: my math could be wrong.

Activist Environmentalists Happy With $1 Million In Cash: Won't Contest Minnesota Refinery Upgrade

The Dickinson Press is reporting.

Opponents in the ring:
  • In the light trunks: MCEA and EIP (activist environmental groups)
  • In the dark trunks: Flint Hills Resources
What they want:
  • The light trunks: $1 million
  • The dark trunks: permission to upgrade its Pine Bend refinery in suburban Rosemount
So, what is Pine Bend?
It's one of the largest in the Upper Midwest and produces about half of Minnesota's transportation fuels and a significant share of the fuel used in the Dakotas and Wisconsin, Flint Hills spokesman Jake Reint said. It processes crude oil from Canada and North Dakota.
The proposed $400 million project is aimed at letting the refinery produce closer to its design capacity of 320,000 barrels per day.

Rocky Theme

From wiki:
The Pine Bend Refinery is the largest oil refinery in Minnesota, located in the Twin Cities suburbs of Rosemount and Inver Grove Heights next to southern split of U.S. Highway 52 and Minnesota State Highway 55. The refinery is notable for being the largest in the United States to be located in a state without any oil wells. Overall, it ranks 14th in the country as of January 1, 2005, with an input capacity of 265,000 barrels (42,100 m3) per day. 
The facility is owned by Flint Hills Resources, a subsidiary of Koch Industries (pronounced the same as "Coke"). It is colloquially referred to as the "Koch Refinery."

North Dakota Offers Tax Breaks To Operators Who Minimize Flaring

BloombergBusinessWeek is reporting:
The North Dakota House has endorsed a measure aimed at curbing the oil industry's practice of wasting natural gas at oil wells.
The House voted 93-0 Tuesday to allow tax cuts on natural gas if it's collected and used for agricultural, industrial or railroad purposes. North Dakota's Senate approved the measure earlier.
If this is the extent of the bill, huge (and great news): tax incentives to minimize flaring, but no threats of increased penalties if they don't  -- at least nothing is mentioned.

An early version of the bill had suggested that lawmakers would change the one-year limit on flaring to six months. I assume we will get the full story when this is signed into law.

A big "thank you" to a reader for sending the article to me.

More Evidence of the 29-Hour-Week As The Official US Work Week

The MDW started talking about this long before it became a mainstream issue: employers would start cutting hours now that the Federal government has defined the "official US work week" as 30 hours. Another employer has announced it will start cutting hours.

Breitbart is reporting:
Monday, Regal Entertainment Group, the largest movie theatre chain in the country, announced that thousands of employees will have their work hours cut -- as a direct result of the added cost of the new ObamaCare mandates that become effective later this year. 
In a memo to employees, management was blunt: “To comply with the Affordable Care Act, Regal had to increase our health care budget to cover those newly deemed eligible based on the law's definition of a full-time employee.” 
Fox News reports that, as a result of cutting employees' work hours (which is, of course, the same as a pay cut), full-time Regal managers have resigned in "a wave" after their hours and pay checks were slashed by as much as twenty-five percent
I am still willing to wager that ObamaCare implementation will be delayed until after the mid-term elections, or at least generous waivers will be the norm.  In addition to more stories like this, Ms Sibelius is simply not prepared to enroll tens of million of new healthcare beneficiaries later this year.

Not The Bakken, But Two More Pipelines From The Permian --

Oil & Gas Journal is reporting.

From the Permian, two new pipelines: a) Kinder Morgan announced a 277K bopd crude oil pipeline from the Permian to California last month; b) Plains All American announced a 220K bopd crude oil pipeline from the Permian to the Gulf coast, the Cactus Pipeline.

Cactus Pipeline data points:
  • in-service 1Q15
  • both sweet and sour crude oil
  • from the Permian Basin to the PAA-EPD Eagle Ford Joint Venture Pipeline
  • terminal: Three Rivers and Corpus Christi markets; can supply the Houston area through a connection to the Enterprise South Texas Crude Oil Pipeline
  • access to CBR at PAA's Gardendale station
  • access to the barge dock facility in the Corpus Christi area
  • pipeline capacity scalable
Again: CBR and barge.

Another Spring Snowstorm To Hit The Black Hills

Black Hills Fox is reporting:
Much of South Dakota could be in for yet another spring snowstorm. The National Weather Service has posted a winter storm warning for southwestern South Dakota for Tuesday afternoon through Wednesday night. The bad weather is expected to extend into the central and northeastern parts of the state. Forecasters say the storm could dump up to 15 inches of snow in the southwest, with lesser but still significant amounts in the other areas.

For Investors Only. Not Unexpected: Pullback Offers Opportunity -- SeekingAlpha, Mike Filloon

Link here to SeekingAlpha article.

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. 

In the Bakken, Triangle may be the cheapest of the small operators I like. It has good core acreage in McKenzie and Williams counties. It has additional upside in Montana that is also prospective the Red River formation. It has had excellent results for that area due to a good well design. The stock dropped over 11% today and is down from a high of $7.91/share. This stock was a good buy below $6, and has now fallen to $5.23/share. I currently own Triangle and added to my position earlier today.
Kodiak finally dropped below $8, and I started a position today. Although Kodiak is a high growth, levered name it is an excellent investment. It is a consistent operator, and has some of the best well results in the Bakken. There are multiple reasons to be bullish this stock. Management has done a very good job of adding very good acreage. It also continues to cut costs and has two 10 well pads in process. This will give a better idea of how good the Three Forks is in Williams and McKenzie counties. Kodiak's stock has value here, but could continue lower over the next few weeks so be prepared to add to the position.
The Niobrara has also been a hot spot in 2013, and today provided a buying opportunity. Bonanza Creek has been one of the best performers in small oil and gas this year. It continues to have great results, and does this with a very low well cost. In 2012, analysts discounted the Niobrara and this has been a mistake. I have a buy on Bonanza Creek at $34. I started a position today, and will continue to add shares if the stock pulls back.
Synergy Resources is also in the Niobrara. It has acreage in Wattenberg Field and the northern D-J Basin. Additional upside is found in its Nebraska acreage. It is prospective the Penn, Cherokee and Mississippi Lime formations.

KOG's Preliminary Operational Results for 1Q13 Available

KOG's preliminary operational results for 1Q13 available.
  • 22K boed (11boed one year ago); 
  • crude oil, 88%. 
  • beginning March, 2013, one full-time, 24-hr completion crew; 
  • will add a second crew in May, 2013; 
  • 7 operated rigs 9same); all in ND; 
  • continues with 12-well-test on a 1280-acre spacing unit in Polar/Smokey operating areas with two rigs operating in each area

Xcel Wants To Increase Electric Rate In North Dakota

The Minot Daily News is reporting:
Xcel's senior regulatory consultant David Sederquist delivered his presentation from Fargo's North Dakota State University, stressing the need for the increase. Citing infrastructural improvements, increases in energy consumption and various regulatory complainces, Sederquist also pointed out that North Dakota enjoys the third-lowest energy rates in the nation trailing behind hydroelectric-heavy and thus cheaper infrastructures in Oregon and Idaho.
The first question I would ask is a detailed breakdown of increased costs due to Minnesota's mandate for green energy. How much of the rate increase placed on North Dakota consumers is paying for Minnesota's legislative mandates. If the response was "we'll get back to you," I would table the meeting to reconvene once Xcel provides the document -- in English.

Somehow the argument that North Dakotans enjoy some of the best electric rates in the country does not seem to be a reason it's time to raise them. Maybe if we got rid of politically-correct mandates, rates could actually come down.

More Development in Dickinson

The Dickinson Press is reporting:
Both Minnesota-based Meyer Real Estate Group and Illinois-based The Highlands plan to create large neighborhood parks as a draw to their developments.
“We are going to have a nice new park,” said Mitch Rubin, development manager of The Highlands. “We’re working with the Parks and Recreation Department to bring that to life.”
The Highlands development is working to connect its future park with the existing Jaycee Park by building a bridge.
The Sundance developments Meyer is building will feature a lake in the middle of a park on the east side of Dickinson.
Sounds like Williston, two years ago, all over again. 

Minnesota-Based Xcel Proposes Three New Small Natural Gas-Electricity Plants in North Dakota, Minnesota

The StarTribune is reporting:
Xcel Energy on Monday proposed building three new electrical generators in Minnesota and North Dakota that would burn natural gas.
One unit in Burnsville and two near Hankinson, N.D., 70 miles south of Fargo, would supply power when customer demand is at its peak, and would not operate most of the time, the utility said in a statement.
A big "thank you" to a reader for alerting me to the story.

Tuesday Morning Links; I Probably Missed It But Not One Story On The Korean Missile Crisis

Wells coming off the confidential list are starting to get posted:
Active rigs: 186 (steady)

RBN Energy: the analyst is skeptical of the Sasol-proposed gas-to-liquid projects in Louisiana; huge cost, and relies on wide spread between natural gas and liquids; RBN Energy suspects the spread to narrow. 

WSJ Links

Section D (Personal Journal):

Section C (Money & Investing):
  • Citi's profit soars as shift pays off. I don't care about Citi, but this echoes all the good earnings reports on CNBC early this a.m. which makes me wonder if the huge sell-off was a huge opportunity for long-term investors. 
Section B (Marketplace):
  • Justices wary on gene patents. Where is the social contract?
  • Big spills from aging pipelines. One has to chuckle. When it came right down to it, the Keystone XL was really nothing more than new infrastructure replacing old. All we hear is that the country's infrastructure is crumbling and the government needs to spend more money on infrastructure. When the private sector is willing to spend billions infrastructure, the Dems go wobbly. 
  • So, the big story in Section B coming out of Korea today? The Korean Missile Crisis? Nope: South Korean retailing gets a new look. So much for the Korean Missile Crisis now that SecState Lurch has agreed to meet one-on-one with North Korea with conditions. 
  • Yup, here it comes. Blue Cross/Blue Shield will likely increase health care premiums 15% for small businesses. ObamaCare. Cue up Connie Francis.
  • High-speed wi-fi: a faster version of Wi-Fi will hit the market this year, giving users the power to download a television show's entire season in less than a minute. I assume the NSA and the IRS already have this ability. Times are a'changin'.
Section A:
  • Front page, the Boston Marathon terror, of course.
  • China's slow growth: less bling, more blah.
  • Gold plummets to two-year low. Inflation no longer a fear, but neither is growth likely. The Fed's Pyrrhic victory: see "Heard On The Street."

Samson Oil and Gas To Acquire A Net 1,225 Acres In Two 1280-Acre Spacing Units;

From Yahoo!In-Play:

12:53AM Samson Oil & Gas extends Central Bakken acreage : Co advises that it has agreed to acquire, in two tranches, a net 1,225 acres in two 1,280 acre drilling units located in the Rainbow Project, Williams County, North Dakota.
The transaction involves an acreage trade by the parties and a future carry of the vendor by Samson in the initial drilling program on the Rainbow Project. Samson will transfer 160 net acres from its 1,200 acre undeveloped acreage holding in North Stockyard and the vendor will fund its share (between 7.5% and 8.5%) of the North Stockyard initial infill program. Samson will acquire 950 net acres in the Rainbow Project from the vendor for this acreage trade and will provide a $1.2 mln carry to the vendor. For the first (10% carry) and second (2% carry) development wells to be drilled in the Rainbow Project Samson will have the ability, subject to the vendor acquiring additional acres, to acquire a further 274 acres by carrying the vendor for $0.7 mln in the second well in the project.
From Investor's Business Daily:
The Rainbow Project is located in Sections 17, 18, 19 and 20 in T158N R98W. The details of the transaction will be documented in a sale and purchase agreement to be entered into at or before closing.
Samson has assessed the project based on offset well data and believes that the project will support 16 wells, 8 in the middle Bakken and 8 in the first bench of the Three Forks. These wells would be expected to be configured as north-south orientated 10,000 foot horizontals.
Sixteen wells/4 sections = 4 wells/section. About right for this area.

The Rainbow Prospect is in the Rainbow oil field which is just a few sections short of a full 36-section township. The field is located pretty much straight north of Williston, at the far north of Williams County, almost at the Divide County line.  The northern area of this field is pretty much undeveloped, but the field has four producing wells, mostly in the south:
  • 22595, 580, Hess, GO-Darryl-158-98-0904H-1, Rainbow, t8/12; cum 54K 2/13;
  • 22161, 508, Hess, GO-Hill 158-908-3427H-1, Rainbow, t8/12; cum 54K 2/13;
  • 19835, 711, Hess, Skjei Midwest Trust 15-35H, Rainbow, t5/12; cum 73K 2/13;
  • 22241, 553, Hess, GO-Grimson 158-98-3625H-1, t7/12; cum 51K 2/13;
The Rainbow Project

Link over at oilandgas360, August 19, 2013:
Samson Oil & Gas Limited is an exploration and production company domiciled in Australia, but has all of its oil and gas assets in the United States. The Company’s executive management and technical staff are based in Denver, Colorado. Samson announced a new joint venture (JV) with privately-owned Slawson Exploration Company, Inc. an established Bakken operator, to advance its plan for full-field development.
Prior to the JV, Samson owned a 60% working interest in three sections along with a 30% working interest in seven producing wells (average 23% net revenue interest). Continental Resources owns the other 40% working interest.
As part of the JV, Samson sold half of its interest in the three northern sections of the field, or 345.6 net acres, to Slawson for $5.562 million in cash and other consideration, which values the acreage at $9,656 per acre.
Along with the cash, Slawson will assume operatorship of North Stockyard and take assignment of the drilling contract for the rig that is currently working in the field. The infill drilling program calls for six new horizontal Bakken wells and seven wells in the first bench of the Three Forks formation
Samson forecasts gross drilling and completion costs at $8.1 million per well ($2.0 million net to Samson). That cost is consistent with data reported by public companies, like Oasis Petroleum who guided to well costs of $8.0 million towards the back half of this year. The Company estimates a gross End Ultimate Recovery (EUR) per well of 440 MBOE, which is also consistent with that reported by other operators in the play. Samson projects the per-well PV10 for both Bakken and Three Forks infill wells to be $810 thousand, using oil and natural gas prices of $82.00 per barrel and $6.48 per Mcf, respectively.  
In early January 2013, the North Dakota Industrial Commission approved 160-acre spacing in the Bakken play, effectively quadrupling the number of potential well locations on existing acreage. Since then, Samson has been focused on increasing oil production from North Stockyard through expanded infill drilling. The JV with Slawson advances Samson’s objective by partnering with an established operator in the Bakken play who has the resources, expertise and relationships to drill and operate the infill wells.
The North Stockyard project is located in Williams County, North Dakota, in the heart of the Bakken play. In either close proximity and/or contiguous to North Stockyard are producing wells and acreage operated by other operators, including EOG, Kodiak Oil & Gas, Continental Resources, Hess and Statoil.
Samson appears to have an interest in what most would consider the “sweet spot” of the Bakken play. Management has been diligent in securing control of the North Stockyard acreage from the previous operator and persistent in moving its infill drilling program forward. Partnering with a known Bakken operator like Slawson is a wise move and we are optimistic that the infill drilling program will commence soon, as Samson has forecast oil production from the field to increase in the late third quarter into the fourth quarter of this year. 
Additional upside exists from an additional 24 gross infill wells in lower three benches of the Three Forks. This potential provides Samson with some near-term visibility beyond the initial infill drilling program.
To improve future visible growth potential, Samson has increased its leasehold in Williams County via the Rainbow Project, which includes an initial 52% working interest in 950 net acres with an option on another 1,250 net acres (44% working interest). The Company estimates the Rainbow Project holds potential for 16 infill wells, including eight in the middle Bakken and eight in the first bench of the Three Forks.