The Million Dollar Way (The Bakken Oil Blog): 04/19/13

Friday, April 19, 2013

Random Update Labor Force: North Dakota

Compare Williston's labor force estimates with those of Minot, Grand Forks, Bismarck, February, 2013.

http://www.ndworkforceintelligence.com/gsipub/index.asp?docid=543

Fargo civilian labor force: 60,230
Williston civilian labor force: 40,688
Minot civilian labor force: 36,107
Bismarck civilian labor force: 34,301
Grand Forks civilian labor force: 29,493
Dickinson civilian labor force: 21,176

Eleven (11) New Permits -- The Williston Basin, North Dakota, USA -- Statoil With Two Huge Wells

Active rigs: 185

Eleven (11) new permits --

Operators: XTO (3), Slawson (2) BR (2), Samson Resources (2), Oasis, Williston Hunter,
Fields: Heart Butte (Dunn), North Fork (McKenzie), Mohall (Bottineau), Cottonwood (Burke), Ambrose (Divide), Corral Creek (Dunn)
Comments: XTO still active

The wells that came off the confidential list today were posted earlier; see sidebar at the right.

Producing wells completed:

24709, 1,085, Whiting, Kinnoin 41-14H, Sanish, t3/13; cum --
23121, 758, SM Energy, Holm 14X-12HA, Siverston, t2/13; cum 17K 2/13;
23589, 272, Samson Resources, Bakke 3229-2TFH, Ambrose, 4 sections, t3/13; cum --
23591, 383, Samson Resources, Bakke 3229-3H, Ambrose, 4 sections, t4/13; cum --
22730, 2,235, Statoil, Holm 9-4-3TFH, Alger, t2/13; cum 5K 2/13;
22806, 3,464, Statoil, Cheryl 17-20 3TFH, Banks, t2/13; cum 12K 2/13;
23025, 228, Petro-Hunt, Pesek Trust 151-102-35D-26-2H, Nameless, t4/13; cum --
22450, 1,357, Marathon, Nicky Kerr 14-8H, Bailey, t3/13; cum --

For Archival Purposes: The Effect Renewable Power Is Having On Germany's Utilities

Platts is reporting:

In the US, natural gas prices now above $4.00/MMBtu but less than that for many months have pulled down power prices. In the Electric Reliability Council of Texas power market, natural gas and coal-fired capacity both met around 36% of market’s power needs in March, while wind generation met a surprisingly high 15.2%. The average on-peak power price in March was $34.50/MWh in Texas, one of the lowest average wholesale power prices in the country.

In the UK, however, natural gas prices have been in the $10.70/MMBtu range, and wholesale power prices, in dollars, have been running at above $80.00/MWh. The UK has been investing in very expensive offshore wind capacity, and it has been burning more coal. But UK generators have not been able to avoid using expensive gas-fired capacity.

What is happening in the power sector in Germany, though, is considerably different.

At the link, the rest of the story: how renewables are affecting Germany.

A look at a given day’s dispatch of power is instructive.

On March 19, 2013, a Tuesday, German power demand was met by 47,600 MW of baseload capacity, of which 20,000 MW was lignite-fired, 15,500 MW coal-fired, and 12,100 MW nuclear. Baseload power prices that day were pegged at Eur 42.50/MWh, or roughly $55/MWh.

The amount of wind power used to cover the remaining demand that day was roughly 6,000 MW of wind, while 7,000 MW of solar was used for approximately the two peak hours. The peakload price of power that day was Eur 48.29, or $62.99/MWh.

A month later, all hell seemed to break loose, price-wise.

How it is affecting Germany's largest generator of electricity:

Last November the chairman of E.ON, the big German electricity and gas utility, told shareholders that his company’s gas-fired facilities had become “barely profitable,” and natural-gas fired power was being replaced by renewable sources, which, he noted, are fed into the grid as a priority when demand is highest.

The utility RWE has the most installed capacity of any generator in Germany, with 31,000 MW. Of that total 9,799 is fired by lignite, 9,555 MW by coal, and 5,228 MW by natural gas. RWE has just 313 MW of renewables.

Because the utilities are no longer profitable (or just barely) they cannot build more wind farms.

[US: "typical" home (not necessarily average), 1,000 kwh/month x 10 cents/kwh = $100/month.]

BP May Delay $10 Billion Gulf Of Mexico Project -- Too Expensive

Updates

February 9, 2017: BHP Billiton approved its $2.2 billion share of investment for the second phase of the Mad Dog oilfield in the Gulf of Mexico.

Green Canyon deepwater area
new platform, 140,000 gross bbls of crude oil/day
production is due to begin in late 2021

April 22, 2013: Platts is reporting that BP may be taking a pause with regard to Mad Dog Phase 2 in the Gulf, not due to price of oil, but due to "re-design." This is according to a report from Citi.

Original Post

Yahoo!Finance is reporting:

BP is reviewing its biggest new oil project in the Gulf of Mexico, due to rising development costs across the industry, and could delay the $10 billion scheme.

British oil major BP said on Friday that rising costs made the current plan, under which construction would start this year, difficult to justify, becoming the latest company to reconsider the economics of a major project.

"The current development plan for Mad Dog Phase 2 is not as attractive as previously modeled, due largely to market conditions and industry inflation," it said in a statement.

The company wants to get its core Gulf of Mexico business, which accounts for around a fifth of its global output, back on track after the disastrous 2010 Macondo oil spill, which is still the subject of a court case in New Orleans.

And so it goes.

By the way, what would be the total dollars budgeted for 22 wells in a 2560-acre spacing unit (4 sections) in the Bakken? 22 x $10 million = $220 million.

Am I Missing Something?

Yahoo!Finance is reporting:

Exxon Mobil and Chesapeake Energy, two of the largest U.S. producers of natural gas, have admitted that unlocking gas trapped in shale-rock formation and selling it for $3.50 per million British thermal units (MMBtu) is proving more costly, on balance, than extracting $90 per barrel oil.

Not surprisingly, the companies are shifting drilling toward resources with greater potential for oil and natural-gas liquids.

They're just now noticing that?

EOG made the switch several years ago, and made it public what their plans were.

Williston Wire

Headlines only for the most part; it is easy to subscribe to the Williston Wire.

Not much new there today that hasn't already been posted.

Seven wells drilling under Williston. I particularly enjoyed this line:

"There are 7 well boars that drill underneath the city, and one of them goes right through the airport."

South of San Antonio, where I live, we have a problem with wild boars also. Hopefully drillers will put them into the Eagle Ford formation, also, about two miles down.

Oil Production By Top Five Oil Majors Decreased by 25% Since 2004

This comes from a guest post over at The Oil Drum:

The combined crude oil production of the five main international oil companies (Exxon, BP, Shell, Chevron and Total) hit an historic high in 2004. Since then, it has fallen by 25.8%, despite large increases in investments.

Total crude oil produced by the majors was 10.760 million barrels per day in 2004. In 2012, it reached only 7.981 million bpd. It has decreased by 2.779 million bpd in 8 years, as I have been able to calculate from figures that appear in the twelve latest annual reports of those five companies.

The majors are all facing a decline in their crude oil production, which began in each case before 2007. This comes despite extremely large growth in their investments, allowed by the significant increase in crude oil prices experienced since the late 2000s. Total, for example, has seen its production fall by almost 20% since 2007, although the French giant now has at least 40% more extraction wells.

Since 2004, the total oil production by the majors has only increased once, between 2008 and 2009, and by just 0.13 MB/D, despite the unprecedented level of sales and purchases of oil assets experienced in recent years. So-called production sharing contracts, which allocate a larger share of production to the host country when the price per barrel rises, do not appear to explain the lowering of production by the majors, far from it. The production share of the five majors in worldwide production dropped from 13.39% in 2004 to 9.98% in 2011. It diminished further in 2012.

Worldwide crude oil production rose by 4% between 2004 and 2011. It has hardly increased at all since 2006, however: since then it has been on an undulating plateau, within a small margin of less than 1.25%.

So, the question is: if worldwide crude oil production increased by 4%, but production by the top five oil majors decreased by 25%, who made up the difference?

Your Tax Dollars At Work: $600,000 For Each Car

Bloomberg is reporting:

Fisker Automotive Inc. spent more than six times as much U.S. taxpayer and investor money to produce each luxury plug-in car it sold than the company received from customers, according to a research report.

The Anaheim, California-based company made about 2,500 of its $103,000 Karmas before halting production last year, disrupting its plans to use a $529 million U.S. loan to restart a shuttered Delaware factory owned by the predecessor of General Motors Co. The Karma was assembled in Finland.

Fisker was allowed to keep using money from its Energy Department loan after violating its terms multiple times, according to a report released April 17 by PrivCo, a New York- based researcher specializing in closely held companies. It said it based its report on documents, including the loan agreement, obtained through the U.S. Freedom of Information Act.

Energy Dept spokesman disagrees with some of the report, but apparently everyone agrees that the endeavor cost the government about $600,000 to make a $100,000 car for the elite. My opinion, of course. And, yes, I know start-up costs explain much of this, and when the car went into mass production, the cost/car would come down.

Of course, those start-up costs were spent on a car assembled in Finland, the foreign country that borders Russia, not a county in California.

CBR Has Doubled In Past Two Years

CarpeDiem is reporting:

The Association of American Railroads released its weekly report today on US rail traffic. For the week ending April 13, US railroads shipped 17,913 carloads of crude oil, an increase of 51.2% compared to the same week last year. Year-to-date, more than 200,000 carloads of oil products have moved by rail, which is a is 56.4% increase over last year, and more than double the 99,890 carloads of oil shipped in 2011 over the same period.

Go to the link for the rest of the story, links to original sources, and graphs.

Global Warming, North Dakota, Agriculture, Corn, Rotating Crops

The Dickinson Press is reporting:

In North Dakota, there were 2.2 million acres of corn planted in 2011 and 3.6 million acres the following year.

“Corn has become more popular as growers have moved away from the traditional wheat-fallow system to more intense and diverse rotations and looked for warm-season grass crops to fill a particular rotational need,” Carr said.

The success of corn in North Dakota has made it a popular rotational crop, said Roger Ashley, Dickinson Research Extension Center agronomist.

“Producers have found corn to be an excellent fit in the rotation following wheat, barley, pea and other crops,” he said. “However, we don’t like to see wheat or barley grown after corn because of the increased risk of fusarium head blight in wheat and barley. We can get away with following wheat or barley after corn in some years, but when weather conditions are right for the infection and spread of this disease at flowering and early grain fill of wheat or barley, the disease can cause significant damage.”

According to the USDA, last year in southwest North Dakota, Hettinger County planted the region’s highest number of corn acres — 29,200 acres.

Go to the link for additional information.

That surprises me. Hettinger County is a moderate size county, significantly smaller than some of the larger counties in the oil patch (Dunn, Mountrail, McKenzie, Williams). But the reason it is surprising, it is in the far west of North Dakota. I would have expected the greater corn acreage to have been in the southeast.

But another great story. By the way, this goes along with an earlier story that suggested that durum wheat will be moving farther west into Montana due to warmer weather.

Friday Morning Links

Updates

April 22, 2013: it looks like the Obama government knew more about the Islamic terrorists (Boston Marathon, April 15, 2013) than first told (?).

According to The New York Times, the terror suspect's application, presented on September 5, also prompted the FBI to do 'additional investigation' of him this year. They didn't reveal how far the probe had gone or what it covered.

Tamerlan's papers were submitted just days after his brother, Dzhokhar A. Tsarnaev, 19, had his own citizenship application approved. According to the Times, officials with Homeland Security contacted the FBI late last year to learn more about its interview with the terror suspect and the agency reported its conclusion that he did not present a threat.

However, immigration officials did not move to approve or deny the application, choosing instead to leave it open for 'additional review.'

Original Post

First, with regard to the Boston Marathon Bombing: it should be noted that the suspect on the run in the Boston area can feel pretty safe knowing that most law-abiding non-law-enforcement citizens do not have any guns. It should make him feel much safer if he gets outside the cordoned-off area. Just saying. Something tells me the gun law that was voted down this past week would not have made much difference. Unless the gun control bill also included a ban against pressure cookers and terrorists agreed to turn in their pressure cookers. Even a CNBC talking head suggested the same thing (with regard to a Bostonian feeling a bit safer if he/she had a gun while hunkering "down in place").

Along that same line, Senators need to read the fine print in the immigration bill in light of new events. The bill contains 400 waivers, exceptions, and exemptions.

And finally, the decision to allow Arab terrorists the opportunity to test expedited entry into the US seems a bit ill-timed.

But I'm probably over-reacting.

Something tells me this offers the opportunity for law enforcement agencies to really shake down the entire terrorist network in the Boston area.

WSJ Links

Will require subscription, though I have discussed google access before.

Section M (Mansion): I don't read.

Section D (Arena):

Section C (Money & Investing):

Schlumberger: black gold's blue chip.

The world's largest oilfield-services provider by market value shed around a tenth of its value in the past two months as crude prices retreated. After all, Schlumberger's share price, like its peers', is highly correlated with oil in the short run. If the way down for energy prices is deep and dark, then look out below.

But Schlumberger has a vaunted spot in its industry, not just because of its size but also its sophistication. It spends more on research and development than all of its competitors combined and is more geographically diversified, too. This creates the impression that it is better-insulated from a downturn.

Schlumberger's first-quarter earnings, due Friday, should be encouraging. It is seen reporting $1.00 a share, up from 97 cents a year earlier.

In-Play says SLB beat by 2 cents.

Section (Marketplace):

FAA expected to end grounding of Boeing 787. [Update: July 12, 2013 -- perhaps not so fast.]

$30 billion black hole in the Caspian Sea? Great update. I've followed this story for some time. Sounded like a disaster shortly after initial excitement.

For more than a decade, the promised bonanza from Kazakhstan's giant offshore Kashagan oil field has been a costly mirage for its developers. And the wait still isn't over.

The companies backing the project—which include Exxon Mobil Corp., Eni Spa, and Royal Dutch Shell PLC—in March missed the startup date Eni predicted last year. And now, after a decade of work and more than $30 billion in expenses, it isn't clear when one of the world's biggest untapped fields will produce its first drop of oil.

Eni CEO Paolo Scaroni said last month the operators "are going to begin production in June." A spokesman for the North Caspian Operating Company BV, which represents all of the oil companies in the project, says "we are confident that we will deliver oil in the course of this year," though he said he isn't sure when. A person close to KazMunaiGas, or KMG, the Kazakh state oil company that owns close to 20% of Kashagan, said it may be 2014 before significant amounts of oil flow.

Delays beyond Oct. 1 could subject the companies to new financial penalties on top of tens of millions of dollars worth of concessions they have already given the Kazakh government for missing earlier deadlines and cost overruns, according to energy consultancy IHS CERA. Setbacks could also heighten tensions with a frustrated Kazakh government, say several people close to the project—and will make it difficult for the firms to make more than a marginal profit from their investments.

Affidavit unsealed in probe of Pilot Flying J.

An affidavit filed in federal court in Knoxville, Tenn., asserts employees of truck-stop giant Pilot Flying J conducted a scheme to deceptively withhold diesel-fuel price rebates and discounts from Pilot Flying J customers without those customers' knowledge or approval.

The purpose of the alleged scheme, described in detail in the 120-page document, was designed not only to increase sales commissions, the affidavit says, but also to boost profitability of Pilot Flying J, the largest chain of truck stops in North America.

Pilot generally agrees to pay its trucking customers rebates based on volume purchases and other variables. The affidavit asserts that Pilot employees didn't pay the companies the full amounts they were owed.

Why jet owners don't want to be tracked.

Section A:

Factory overtime cranks up

Factory workers are racking up more overtime than they have in years, a trend that reflects strengthening demand in the U.S. economy and could eventually lead to more hiring.

Production and nonsupervisory employees in the U.S. manufacturing sector worked 41.8 hours a week on average in March, down slightly from February's 41.9 but still at a level rarely seen in recent times. Similar work hours were notched amid the economic boom of the 1990s and, prior to that, during the World War II-related production jump in 1945, according to the latest data from the Labor Department.

Companies often boost hours of existing employees rather than hire new ones when they are worried an upturn in demand may be temporary—and tend to bring in new workers only when the outlook improves. While this is bad news for unemployed workers, the existing workforce often welcomes the chance to fatten their paychecks.

Eric Stamper, a married father of a 9-month-old in Dayton, Ohio, said he is now working 15 hours of overtime many weeks—more than the roughly 10 hours of overtime that are typical for him. That is helping him save up to buy a new house and car.

There may be more to this story. Think ObamaCare.

Make it as painful as possible -- the Obama administration -- air delays loom as cuts kick in.

The Federal Aviation Administration has laid out final plans for implementing federal spending cuts at the nation's airports that could cause delays and cancellations affecting thousands of flights a day.

FAA officials told airline-industry executives this week that the cutbacks, due to start Sunday, could delay as many as 6,700 flights a day at 13 of the nation's biggest airports, people familiar with the briefing said.

The projected delays, which are more detailed than any the government has so far provided, are mainly the result of furloughs for air-traffic controllers that will require them to take one day off without pay for every 10 work days. Nearly a third of the more than 23,000 daily U.S. flights could be affected.

The FAA has told airlines that on average each day, the furloughs could delay twice as many flights as during the most heavily storm-disrupted days last year.

Hmmmm. Sounds like the FAA got a telephone call asking why there haven't been any delays yet. Sounds like you want to take a non-stop, and you want to have internet access at the airport. Think Apple iPad.

Book review: foxhole conversion, but discomforting. A cancer diagnosis leads a poet to rediscover his Christianity, but belief occasions in him not comfort but continual unease. My Bright Abyss: Meditation, Christian Wiman.

For Investors Only: Schlumberger, BHI Both Beat By 2 Cents; Rises Pre-Market

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.

Yahoo!In-Play:

Schlumberger beats by $0.02, reports revs in-line: Reports Q1 (Mar) earnings of $1.01 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.99; revenues rose 7.6% year/year to $10.67 bln vs the $10.7 bln consensus.

IBM falls this morning in pre-market (down $9.00/4%) -- may miss on bottom line.

Yahoo!In-Play:

Baker Hughes beats by $0.02, reports revs in-line: Reports Q1 (Mar) earnings of $0.65 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.63; revenues fell 2.3% year/year to $5.23 bln vs the $5.18 bln consensus. Adj. EBITDA in Q1 was $893 million, an increase of $36 million QoQ.

World's Largest Solar Farm To Be Downsized --

A huge "thank you" to a reader for sending me this link. BloombergBusinessWeek is reporting:

NextEra Energy Inc., the largest generator of U.S. solar energy, said a project in southern California that was expected to be the world’s biggest will be less than half its initially planned size.

NextEra’s Blythe solar farm will be built in four phases totaling 485 megawatts of capacity, according to amended planning documents posted today on the California Energy Commission’s website. It was initially proposed as a 1,000- megawatt project.
NextEra is downsizing the project to streamline the permitting process and reduce its environmental impact, according to the filing. The capital cost may be as much as $1.13 billion.

NextEra received approval June 27 from a bankruptcy court to purchase Blythe from the former developer, the bankrupt Solar Trust of America LLC.

Not just slightly smaller; not "half" the original size; but, "less than half its initially planned size." Speaks volumes of the energy revolution in the US.

30-second sound bite: I believe an on-shore wind farm is valued about $1.5 million for megawatt. So, a 485-MW wind farm would have cost about $740 million. [On shore wind; off-shore wind is said to be up to 3X more expensive, though I am unsure of that figure.]

If this is accurate, that the 485-MW solar farm would cost as much as $1.13 billion is significantly more expensive which fits what I know: that solar is much more expensive than wind. $1.13 billion/485 MW works out to 2.3 million for megawatt.

Several story lines:

environmental impact. Interesting to note that folks are willing to admit that "green energy" does have an environmental impact
solar panels recently got very expensive due to tariffs on Chinese panels (in fact, if the panels doubled in cost, and NextEra had committed a certain amount of capital, to stay in budget, they would have had to cut the project in half
we now see the price of a large solar project
venture capitalists may be downsizing their interest in green energy in the US (which, of course, means, for green energy to survive in the US will require MORE government assistance

For more on the bankrupt SolarTrust, click here:

April 3, 2012: More on Solar Trust bankruptcy -- it turns out that that the federal government guaranteed $2.1 billion in loans to this company.

In keeping with the recent trend of so-called green companies going into the red, another solar energy company supported by President Obama's top administration officials declared bankruptcy today.

Solar Trust for America received $2.1 billion in conditional loan guarantees from the Department of Energy -- "the largest amount ever offered to a solar project," according to Energy Secretary Steven Chu -- for a project near Blythe, Calif., but declared bankruptcy within a year. It is unclear how much of the guarantee, if any, was actually awarded.
April 2, 2012: Just when I thought we had seen the end of solar energy bankruptcies, here comes another: Solar (Mis)Trust of America.