Saturday, July 6, 2013

CLR's Investor Presentation, May 2013

#1 producer where it counts
  • #1 producer in the Rockies (according to RMOJ)
  • #1 producer in the Williston Basin (according to RMOJ)
  • #1 producer in the Bakken (according to RMOJ)
Proved reserves: 785 million boe year-end 2012; 54% YOY gain

Cash margins:
  • 1Q13: 74%
  • 2012: 73%
  • 2011: 75%
  • 2010: 73%
  • 2009: 69%
#1 producer, driller, and leasehold owner
  • 77,000 boepd net for 1Q13
  • 22 CLR operated rigs
  • 3,439 locations (net unrisked potential; based on 320-acre spacing)
  • 1.2 million net acres, 1Q13; 25% yoy since 1Q12
 MB +TF1: "massive field of unprecedented magnitude"
  • 24 billion boe technical recoverable: 24 BBoe = 2BBo (3.5%) +4 Bboe natural gas at 320-acre spacing; does not include any reserves from the lower TF benches
Prior to lower TF: 57 BBo in place (2010); 3.5% recoverable; 320-acre spacing

Now: estimate +57%; 903 BBo in place (2012)
  • 32 BBo recoverable at 3.5% (unless otherwise stated, CLR uses 3.5% recovery rate)
  • 36 BBo at 4%
  • 45 BBo at 5%
The slide shows four benches in the TF, and then the Nisku

Bakken producers at MB, TF1, TF2, and TF3

Special projects, tests, pilot projects
  • Productivity project: 20 gross wells; $123 million net cost
  • Pilot density projects (2): 34 gross wells, 3 -320-acre density tests; one 160-acre density test, $36 million, 13 gross wells; 
Cost per well (completed well cost):
  • non-operated CWC: $11.3 million
  • operated CWC: $9.2 million
  • targeted CWC: $8.2 million
  • actual CWC: $8.3 million (average) as of April, 2013
Bakken crude: America's premium light sweet crude
  • Bakken: almost 50% of each barrel of oil --> gasoline
  • WTI: about 30$ of each barrel of oil --> gasoline

US National Security Officials Among The Best In The World

From that CNN story on the aircraft mishap at San Francisco:
There are no signs of terrorism related to the crash, a national security official told CNN.
It is amazing how fast our national security officials can come to these conclusions. At the time of the story, the plane was still burning.

Along that line, this is an interesting tweet from the WSJ:
Breaking: 2 dead, up to 100 wounded in San Francisco plane crash.  
Generally speaking, if it is a mishap or an accident, "wounded" are referred to as "injured." In combat, fights, attempted homicide, and terrorist acts, the "injured" are referred to as "wounded." (From the  suffering from wounds; injured, esp in a battle or fight.)

Runaway Freight Train Carrying Bakken Crude Destroys Center of Canadian Town


July 9, 2013: the locomotive of this train was on first some hours earlier, Rigzone is reporting. Okay.

July 9, 2013: the train may have been tampered with. CNN is reporting:
The chairman of the company whose driverless train barreled into the small Quebec town of Lac-Megantic and unleashed a deadly inferno told a Montreal newspaper he believes it had been tampered with.
"We have evidence of this," Ed Burkhardt said in an interview published by the Montreal Gazette. "But this is an item that needs further investigation. We need to talk to some people we believe to have knowledge of this."
July 9, 2013: From Platts:
Analysts also pointed to the dearth of hard facts about the incident, including the question of how a cargo of crude, which is not particularly flammable, was ignited.
I've wondered the same; great question. Weren't just four (4) tank cars of the 73 tank cars involved? I can't remember; seems I read something along that line.
Original Post

The 73-crude-oil-tank train had come to a stop; the engineer had parked the train some distance from town, when he got out, waiting for "his relief," somehow the train "escaped." The story follows.

Reuters is reporting:
A driverless freight train carrying tankers of crude oil derailed at high speed and exploded into a giant fireball in the middle of a small Canadian town early on Saturday, destroying dozens of buildings and leaving an unknown number of people feared missing.
The disaster occurred shortly after 1 a.m. (0500 GMT) when the runaway train with 73 cars sped into Lac-Megantic, a picturesque lakeside town of about 6,000 people near the border with Maine, and came off the rails. Witnesses said the town center was crowded at the time.
Four of the cars caught fire and blew up in a fireball that mushroomed many hundreds of feet up into the air.
Montreal, Maine & Atlantic's vice president of marketing, Joseph R. McGonigle, said the train was transporting crude oil from North Dakota to Canada, likely to New Brunswick, news that is bound to revive questions about the safest way to carry the oil needed to service North America's economies.

Runaway, The Traveling Wilburgs/Del Shannon

Developing The Middle Bakken And The Multiple Benches Of The Three Forks: Idle Rambling On Well Density

A reader sent me the following note:
Hearing 20657 for CLR in Jim Creek actually includes two overlapping spacing units of 14 wells each. 
What really makes this case interesting, in my opinion, is that a year ago CLR got an overlapping spacing unit approved that fully developed the MB and TF with 320-acre spacing on both of these same units.

It now appears that CLR is attempting to add another two benches which would allow 28 wells (+/-) per unit. See Case 18102, Order 20371.

Also: note that the northern unit appears to be in a much sweeter area as it is closer to the Oakdale field. The southern unit is in an area that appears not to have any "good" Three Forks wells tbut maps show the thickness of the TF in that area to be as thick as any area.
These are the two cases the reader is referencing:
July 31, 2013 -- 20657: Application of Continental Resources, Inc. for an order authorizing the drilling, completing and producing of a total not to exceed fourteen wells on an overlapping 2560-acre spacing unit described as Sections 12, 13, 24 and 25, T.146N., R.96W., and Sections 7, 18, 19 and 30, T.145N., R.96W., Jim Creek-Bakken Pool, Dunn County, ND, eliminating ...

Jun 28, 2012 -- 18102:  Application of Continental Resources, Inc. for an order amending the field rules for the Jim Creek-Bakken Pool to create two overlapping 2560-acre spacing units comprised of Sections 12, 13, 24 and 25, T.146N., R.96W.; and Sections 7, 18, 19 and 30, T.145N., R.96W., Dunn County, ND,authorizing the drilling of multiple wells from each well pad within each overlapping 2560-acre spacing unit; eliminating ... 
My reply:
Great observation. I completely missed that typographical error. Last year, in case 18102, CLR mentioned two overlapping spacing units, and this year in case 20657, they describe two overlapping spacing units, but only mention "an" (as in one) overlapping unit. It appears they should have said "two" overlapping spacing units.

That was the first observation which I missed and you picked up on. Thank you.

The second observation which you noted and I missed, is how CLR is probably going to target deeper benches.

Your comments are excellent: that some areas seem better than others. I assume the operators have noticed the same thing and just as they were defining the sweet areas of the middle Bakken when the boom began, they have a  lot of work defining the sweet spots for the various benches.
I really appreciate readers sending in these observations. I hope I interpret their comments correctly.

This "idle rambling" helps me really understand the administrative process of developing the Bakken/Three Forks better.

In this case (actually two cases), mineral owners in this area now see that we are moving toward 28 wells in each 2560-acre spacing unit. And since these are overlapping spacing units, there will actually be additional wells in the original spacing units (which in this  area, are 1280-acre spacing units). One can easily see that if an individual is currently participating in ONE well in one of these sections, he/she may eventually be participating in thirty to forty wells (or more?) before it's all over. Obviously the participation will be greater in a 1280-acre spacing unit than in a 2560-acre spacing unit, but the newer wells seem to be getting better. Who's to say? With better wells and better prices for oil, future wells on 2560-acre spacing unit may return more dollars to mineral owners than old wells on 1280-acre spacing. 

The Canary In The Coal Mine -- WTI-Bitumen Spread

Early on in the Bakken, a lot of folks were concerned whether the boom could last if the price of oil fell. I always maintained that as long as they were mining bitumen in western Canada, the Bakken boom was "safe." The premise is that the margin on Bakken oil is much better than the margin on bitumen. If operators can make a profit, or stay in business long enough for the price to come back in the Canadian sands, they can do as well or better in the Bakken.

So, this was a nice article to see (sent to me by Don -- thank you). The Calgary Herald is reporting:
Alberta bitumen passed the $85 per barrel mark this week.
That's almost double what Alberta was getting for its raw bitumen in January, when prices were about $45 per barrel. And since all prices are based on U.S. dollars, and the loonie has dropped in value compared to its American counterpart, Thursday's price of $85.50 looks even sweeter.
The most important international benchmark, West Texas Intermediate (WTI) oil at Cushing, OK, was trading for $101 per barrel. And Western Canada Select (WCS), the benchmark blend that includes bitumen, was $91 per barrel at the Hardisty terminal, according to trading data from Flint Hills Resources.
The resulting differential of just $10 per barrel is considered excellent for western Canadian producers, and an improvement over the $16.50 average differential last month. In January, it was as high as $40.
An earlier article noted how bad the spread can be

Analyst Warns On OXY; Analyst Bets On OXY To The Upside; Analyze This -- For Investors Only

I hate videos without the transcript.

On the price of oil: $106 in the near term ... then $110.

How much is on fundamentals, not on speculation (Egypt)?

Technicals: it should still move toward $110 on fundamentals. 

But watch out. Speculators: extremely long; hitting new records; makes analysts cautious. But fundamentals support higher prices.

One stock: OXY Petroleum. Confirmed for a 10% move up. But investors need to be careful -- a "bearish backdrop." OXY flirting with $100. If it breaks past its all-time high of $114, it could have massive upside to $153. Same with oil. But if OXY were to move back to the $80's, watch out. If it then moved to the mid-70's, OXY could actually go back to single digits. Extreme volatility.

Comment: well that's a pretty safe bet by this analyst -- OXY shares could pop to $153 or fall all the way back to single digits. LOL. I think I just wasted five minutes.

Disclaimer: this is not an investment site. Do not make any investment decisions on anything you read here or anything you thought you might have read here.

Week 27: June 30, 2013 -- July 6, 2013

Perhaps the most frequent item blogged about this past week: the price of oil as it increased in price to finish the week over $103.

Five Bakken wells with revenues over $17 million in less then two years - Filloon
Random update on two Emerald wells
Montana completions: Oasis drilling double lateral wells (two horizontals from same well)
Samson Resources to request some very large spacing units in Divide County
Slawson to drill wells with multiple laterals; vertical open to the Lodgepole formation
XTO to drill as many as 10 wells on one 640-acre spacing unit (one section)

Other formations
Random look at an old Madison well; >750,000 bbls since 1972

Random update on BNSF capital improvements; many of them along the Montana border with North Dakota

Economic development
New $12 million water treatment plant for Parshall
Washington State: more refineries preparing for Bakken oil
Homebuilding on the upswing in Carpio, north of Minot

July dockets posted: XTO to drill another 300 wells in Siverston oil field
Breitling Oil & Gas could be bought by a Chinese company
WTI over $103/bbl at the end of the week
Review: the "central corridor"
Trivia on naming Burlington Resources wells

Saturday Morning Links, News & Views

WSJ Links

Wow, what a great way to start! The travel section in Section D (Off Duty) has an article on "truly novel bookstores" around the world. And the very last one highlighted, is the largest, and it is in Los Angeles where I just happen to be for a couple of weeks. 

Christie's puts ten (10) products from Apple's history, including an Apple 1, Apple SE and Apple Lisa, on the auction block.

An end to another column in Review; this is very sad. Matt Ridley has written his last "Mind and Matter" column, and it's a good one. I may re-post it as a stand-alone post.

Not much in Business & Finance today; just this one article: Apple and Samsung: some phones are smarter than others.

Lead story in the Front Section has a headline that surprises me: job gains show staying power. Considering it's a WSJ article, it's a pretty shallow analysis.

The violence is spreading in Egypt; stories everywhere, no links necessary. By the way, whatever happened to Syria. Will the Egyptian story be on the front page two weeks from now?

The strike in San Francisco is over, but the bargaining is not. The union and the transit agency are still working on the new contract.

Update on the Detroit "bankruptcy" or whatever it's being called: the city sues a bond insurer amid an effort to reach deal with creditors.
In the latest move, the city sued Syncora Guarantee Inc., a bond insurer, over access to the city's casino tax revenue, estimated at $170 million a year. The city claims Syncora improperly told a bank controlling the funds to keep the money from Detroit.
The city sees the insurer as a roadblock to a proposed deal to pay UBS AG and Bank of America Merrill Lynch more than 70 cents on the dollar on nearly $340 million in secured debt, according to people familiar with the matter. In exchange, the city would get back $11 million a month in tax revenue from the city's three casinos originally used as collateral to back the debt.
The pending deal would be the first time one of the city's creditors has agreed to new terms since Emergency Manager Kevyn Orr took office in March. Mr. Orr may have a tougher time reaching agreement with the city's unsecured creditors, who he has offered roughly 10 cents on the dollar.
In the middle are insurers like Syncora trying to recoup as much as they can of what the city owes. The insurer is concerned it may have to make up the difference between what the city is willing to pay its secured creditors and the amount originally owed by the city, a person familiar with the matter said. 
Meanwhile, China is taking a tough line with the EU on solar-panel tariffs.

Op-Ed. With the economy improving in many states, these same states are back to spending levels that got them in trouble in the first place:
Oil-rich North Dakota is also celebrating Christmas early. The Republican legislature and Gov. Jack Dalrymple approved budgets this spring for the next two years that pump up spending by more than 50%. The budget finances a massive expansion of Medicaid and pork projects, such as the purchase of a marina at a state park. "It's hard to imagine Democrats would have spent this much," laments Rob Port, the state's top taxpayer watchdog and creator of the popular political blog, Say Anything

Science Is About Evidence, Not Consensus -- Matt Ridley, WSJ

Link here.
And that is where the problem lies with climate change. A decade ago, I was persuaded by two pieces of data to drop my skepticism and accept that dangerous climate change was likely. The first, based on the Vostok ice core, was a graph showing carbon dioxide and temperature varying in lock step over the last half million years. The second, the famous "hockey stick" graph, showed recent temperatures shooting up faster and higher than at any time in the past millennium.
Within a few years, however, I discovered that the first of these graphs told the opposite story from what I had inferred. In the ice cores, it is now clear that temperature drives changes in the level of carbon dioxide, not vice versa.
As for the "hockey stick" graph, it was effectively critiqued by Steven McIntyre, a Canadian businessman with a mathematical interest in climatology. He showed that the graph depended heavily on unreliable data, especially samples of tree rings from bristlecone pine trees, the growth patterns of which were often not responding to temperature at all. It also depended on a type of statistical filter that overweighted any samples showing sharp rises in the 20th century.
I followed the story after that and was not persuaded by those defending the various hockey-stick graphs.
They brought in a lake-sediment sample from Finland, which had to be turned upside down to show a temperature spike in the 20th century; they added a sample of larch trees from Siberia that turned out to be affected by one tree that had grown faster in recent decades, perhaps because its neighbor had died. Just last week, the Siberian larch data were finally corrected by the University of East Anglia to remove all signs of hockey-stick upticks, quietly conceding that Mr. McIntyre was right about that, too.

Random Update Of Two Emerald Wells

Though it is still on the confidential list, it is being reported that Emerald's third operated Bakken well (Caper 1-15-22H) produced 16,137 BOE during the first 11 days:
  • 24922, conf, Emerald Oil, Caper 1-15-22H, Boxcar Butte
and, Emerald's 2nd operated Bakken well (Arsenal 1-17-20H) produced 22,558 barrels of oil equivalent (BOE) during the first 30 days of production:
  • 23909, drl, Emerald Oil, Arsenal (Federal) 1-17-20H, Charbonneau,
Source: corporate press release

Another One Bites The Dust -- Solar Panel Maker Conergy Files For Insolvency is reporting:
German solar panel manufacturer Conergy said it will file for insolvency on Friday, the latest victim of ferocious competition from Asia in the industry.
A reminder, posted almost exactly one year ago, there was another solar company that suffered a similar fate about a year ago. South Korea's Hanwha bought Q-Cells, the flagship German solar business.