Friday, July 26, 2013

The Father Of Fracking Passes On

Platts memorial essay

The AP/Yahoo!News is reporting:
[George Mitchell's] technological breakthrough also transformed economies in states like North Dakota, Texas and Pennsylvania is expected to migrate through the world. [sic]
For the entire oil and gas age, drillers had searched for hydrocarbons that had seeped out of layers of sedimentary rock over millions of years and collected into large pools. Once found, they were easy to produce. Engineers merely had to drill into the pools and the natural pressure of the earth would send huge volumes of oil and gas up to the surface.
These pools are exceedingly rare, though, and they were quickly being tapped out as the world's consumption grew, raising fears that the end of the oil and gas age would soon be at hand and raising prices to alarming levels.
Mitchell's idea: Go directly to the sedimentary rock holding the oil and gas, essentially speeding up geological processes by thousands of millennia.
He figured out how to drill into and then along layers of gas-laden rock, then force a slurry of water, sand and chemicals under high pressure into the rock to crack it open and release the hydrocarbons. This process, horizontal drilling and hydraulic fracturing, is the now-common industry practice known generally as fracking.
Engineers after Mitchell learned to adapt the process to oil-bearing rock. The U.S. is now the world's largest producer of natural gas and is on track to overtake Saudi Arabia as the world's biggest oil producer by the end of the decade, according to the International Energy Agency.
An important bit of trivia in the article:
In some areas fracking has been blamed for air pollution and gas leaks that have ruined well water, but the Obama administration and many state regulators say the practice is safe when done properly.
The naysayers should note:
The firm spent nearly two decades developing horizontal drilling and hydraulic fracturing, finally finding success in North Texas' Barnett Shale formation in the 1990s.
"There's no point in mincing words. Some people thought it was stupid," Dan Steward, a geologist who began working with the Texas natural gas firm Mitchell Energy in 1981 told The Associated Press in an interview last year. Steward estimated in the early years, "probably 90 percent of the people" in the firm didn't believe shale gas would be profitable, and that Mitchell's company didn't even cover the cost of fracking on shale tests until the 36th well was drilled.
So, since the 1990's -- twenty years of horizontal fracking and not one proven, significant mishap due to horizontal fracking per se, as far as I know.  (Don't confuse drilling with fracking when snoping.)

36 wells before they started covering costs.

Something tells me he never worried about the "Red Queen" while becoming a billionaire, number 239 on this year's Forbes' rankings.

The Wall Street Journal also reported

So Much For Protecting Whistle-Blowers. LOL is reporting:

The folks from the Sunlight Foundation have noticed that the website, which was set up by the Obama transition team after the election in 2008 has suddenly been scrubbed of all of its original content. They noted that the front page had pointed to the White House website for a while, but you could still access a variety of old material and agendas. They were wondering why the administration would suddenly pull all that interesting archival information... and hit upon a clue. A little bit from the "ethics agenda":
Protect Whistleblowers: Often the best source of information about waste, fraud, and abuse in government is an existing government employee committed to public integrity and willing to speak out. Such acts of courage and patriotism, which can sometimes save lives and often save taxpayer dollars, should be encouraged rather than stifled. We need to empower federal employees as watchdogs of wrongdoing and partners in performance. Barack Obama will strengthen whistleblower laws to protect federal workers who expose waste, fraud, and abuse of authority in government. Obama will ensure that federal agencies expedite the process for reviewing whistleblower claims and whistleblowers have full access to courts and due process.
And so it goes.

The Detroit Bankruptcy Will Be Interesting To Follow; Meredith Whitney Says It Is A Game-Changer

Back in March, 2013 (just a few months ago), had an interesting article suggesting that the "successful" bankruptcy of Central Falls, Rhode Island, may have changed everything about cities declaring bankruptcy. Here is an excerpt:
Many fiscal observers point to Vallejo as Exhibit A of why municipal bankruptcies are a bad idea. The city’s credit rating plummeted, all but killing its borrowing ability. Cuts to services and public safety led to increased crime and prostitution. Even now, the city faces a looming collective bargaining battle with labor unions, and its 2013 budget draws several million dollars from rainy day reserves.
But the landscape may be changing. Since Vallejo, other cities have used bankruptcy filings to help restructure burdensome debts, overhaul pension obligations and renegotiate labor contracts. A handful of California cities are now using bankruptcy to take on that state’s goliath pension system; the outcomes of those cases could spread far beyond California, changing the way other municipalities view bankruptcy. Filing for Chapter 9 will almost certainly remain a decision of last resort, but the stigma may not be what it once was. There’s a growing sense among some leaders that municipal bankruptcy -- unthinkable just a few years ago -- may be a valuable tool in a city’s financial toolbox.
A big part of the shift has to do with pensions. Employee pensions and other retiree benefits aren’t the only cause of municipal distress, but they’re a major factor. Cities’ obligations to retired employees are gobbling up a larger and larger share of local budgets. In San Jose, Calif., for example, the city’s pension payments jumped from $73 million in 2001 to $245 million in 2012, roughly 27 percent of that city’s general fund budget. But tinkering with those obligations can be next to impossible. Fiscally distressed cities have sought relief by raising taxes and cutting services, but they often hit a brick wall when it comes to contract adjustments. And even in cases where they can negotiate a new labor agreement, existing pension agreements have legally been untouchable.

That was until Central Falls, R.I., declared bankruptcy. [Central Falls was first mentioned at the MDW blog on December 18, 2010.] The finance-strapped town of 20,000 people, located on the northern outskirts of Providence, had been trying to renegotiate its pension contracts for months with no success. When it filed for bankruptcy protection in August 2011, the slate was essentially wiped clean. The city immediately moved to change its labor and retiree agreements. The new deal hammered out by Central Falls and the unions was essentially what the city had wanted all along, says Ted Orson, the attorney for the city’s receiver. The final agreement slashed pensions by 55 percent (although funding from the state’s general assembly reduced that cut to 25 percent for the first five years).
The difference, Olson says, is that Central Falls was the first city to use bankruptcy to make good on its promise to cut pension benefits. “Up until Central Falls, there was never what we call an ‘or else,’” Orson says. “There wasn’t any leverage to make concessions. However, after Central Falls, when [the labor unions] saw what happened, they understood it’s better to negotiate a better agreement than to be in a position where something can be forced on you and you might not like what it is.”
Go to the linked article for more on this. 

Of course, Yahoo!Finance has a much more superficial article regarding the interview with Meredith Whitney, but you can probable read all about it in her new book.

There are a handful of pundits/talking heads that seem to be a bit more reliable than Art Carney these days.

Does This Not Tell Us All We Need To Know About ObamaCare?

ObamaCare call center will hire only part-time workers so as not to have to provide health care insurance.

I can't make this stuff up. So, perhaps a poll next week. Who offers better health care coverage?
  • Wal-Mart
  • ObamaCare Call Center 
Having said that, the Wal-Mart story is very, very interesting. Forbes is reporting:
According to the 2013 Walmart “Associate’s Benefit Book”— the manual for low-level Walmart employees—part-time workers who got their jobs during or after 2011 will now be subject to an “Annual Benefits Eligibility Check” each August.
Employees hired after Feb. 1, 2012, who fail to average the magic 30-hours per week requiring a company to provide a healthcare benefit, will lose their healthcare benefits on the following January. Part-time workers hired after Jan. 15, 2011, but before Feb. 1, 2012, will be able to hang onto their Walmart health care benefit if they work at least 24 hours a week.
Anyone hired before 2011 will not be cut off from the company provided health insurance.
Of course, Walmart carefully controls employee work schedules and will have the opportunity to design worker hours in a manner that will keep employees at a level below the threshold required to accomplish company healthcare benefits pursuant to the law.
While there have been increasing reports of American employers reacting to the requirements of the Affordable Care Act by making plans to cut employee work hours so that these companies may deny health insurance as a benefit of employment—particularly in the restaurant and fast food industries—it appears that Walmart has been planning this move all along.
However, that's NOT the story.

The REAL story is that Wal-Mart had this figured out from the get-go. It was to their advantage that ObamaCare passed. They will transfer the cost of health care from Bentonville to Washington, DC.

The full story at the link is absolutely fascinating. 

This should be the end of bashing Wal-Mart for not providing adequate health care coverage for their workers. Wal-Mart will now make sure their employees get the best care available through the Federal government.

New Poll; Only Three (3) New Permits Today -- The Williston Basin, North Dakota, USA

Active rigs: 180 (deep decline; down near it's post-boom low of 179).


New poll: will we go below 179 active rigs next week?

Results of the current poll in which we asked whether you would support North Dakota bailing out Detroit by buying US-backed bonds with 5% (or greater) interest?
  • Yes: 9%
  • No: 91%
So, the new poll. We will see how it goes.


Only three (3) new permits today --
  • Operators: Oasis (2), Whiting
  • Fields: Alger (Mountrail), Cottonwood (Burke), Pleasant Hill (McKenzie)
  • Comments:
Wells coming off confidential list were posted earlier; see sidebar at the right.

Looks like it was a quiet day in Bismarck today. 

Domestic Demand For Ethanol Is At An 11-Week Low; Cue Up Connie Francis

See earlier story.

This was predicted just a couple days ago:
In addition, domestic demand for ethanol production also shrank as ethanol output for the reporting week ended July 19 fell 23,000 b/d to an 11-week low of 853,000 b/d, Energy Information Administration data showed Wednesday in its latest weekly report.
That was at Platts.

At the earlier post:
The Oil & Gas Journal is reporting:

The increase for gasoline with a 10% ethanol blend could be as little as 20¢/gal, but only “under somewhat unrealistic and favorable assumptions regarding enormous gains in market penetration and consumer acceptance for E85,” it said. A spike of 50¢-$1/gal is more likely, the July 22 study added.
That paragraph can be hard to understand.

It says: the price of gasoline will increase by as little as 20 cents/gallon next year, simply due to the President's mandate to increase the price of gasoline.

However, that 20 cents/gallon is based on wildly optimistic assumption. Most likely the increase, again, according to the experts, the increase in gasoline will be 50 cents/gallon at the pump, and it is very possible gasoline could increase by $1/gallon at the pump simply due to presidential whimsy. Yes, I know it took Congress to pass the legislation but the president advocated for it, and signed the bill. This is not rocket science.
The writing is on the wall. Cue up Connie Francis.

Coal, North Dakota, Pollutants -- North Dakota Bowls Two Perfect Games

It's my nature to avoid spending time on these documents, but this one is interesting:
Look at page 8 of the document where coal powered plants were reviewed state-by-state.

NORTH DAKOTA posted a perfect score.  If it were bowling, North Dakota just bowled two perfect games (two 300-point games). If baseball, a no-hit shut-out. If football, the other team forfeited by not showing up. If NASCAR, North Dakota lapped most and many others DNF'd.

Go down the list: it appears NEW YORK STATE was the absolute worse. I could be wrong. I didn't spend a lot of time cross-checking.

And the New Yorkers are concerned about fracking in North Dakota. Give me a break.

The Hillary-Weiner Dots Are Starting To Connect

The other day I mentioned that the dots between Hillary Clinton and Anthony Weiner were starting to connect.

Now, the dots connecting Hillary's position in the Mideast -- which has always seemed strange to me -- are starting to connect. My hunch: there's an incredible amount of Palestinian money behind some of this.

If the second link is broken, google Weiner Hillary Abedin Huma.

One almost wonders if the Jewish-Hamas "fight" is being played out in New York City.

Whiting's Second Quarter, 2013

I've been going through the WLL presentations and posting some notes, so Mike Filloon's article on WLL's completion techniques could not have come at a better time.

Mike Fillon on WLL's completion techniques.

Whiting's drilling program in the Bakken.

Some random notes on Whiting's financial presentation.

Takeaway capacity in the Bakken.

Mike's lede at the SeekingAlpha article:
Whiting has made some big changes recently, and it seems to be paying off. It sold some assets and plan to use the cash to ramp up its Bakken and Niobrara plays. It is improving its completion design, and using significantly more proppant. Its well results are improving and this could be just the beginning of an escalation in share price.
Whiting opened up the Bakken's Q2 with a big beat on both the top and bottom lines. This was the fourth consecutive quarter Whiting beat EPS estimates. It beat by $.12 on the top line, reporting an EPS of $1.02. Revenues came in at $663.3 million versus the Street's estimate of $617.16 million. Whiting announced a new production record, 4.8% better than Q1 of 2013. It was 15.7% better than Q2 of 2012. The production split is 87% liquids.
As usual, Mike has an incredible article. I would be hard pressed to be convinced anyone knows the Bakken better than he knows it -- other than insiders.

TakeAway Capacity In The Bakken -- WLL's Corporate Presentation

July, 2013, presentation, slide #18.

Total takeaway capacity (rail + pipeline) exceeds production but not by much.

Production significantly exceeds pipeline capacity.

Confirmed pipelines (including those yet to be completed) will never catch up with forecast production.

Pipeline capacity (confirmed and proposed) will match productivity for a short period in late 2015/early 2016, but won't meet production needs then again until 2029.

Rail takeaway (CBR) capacity (A = actual; E = estimated)
  • 2010A: 400,000 bopd
  • 2011A: 510,000 bopd
  • 2012A: 1.2 million bopd
  • 2013A/E: 1.2 million bopd. May's production: 877,563 bopd.
  • 2014E: 1.6 million bopd
  • 1015E: 1.8 million bopd
CBR capacity peaks out at 2.1 million bopd in 2017.

Whiting's 2Q13 Corporate Presentation -- Some Interesting Data Starting To Fall Out -- The Fog Is Starting To Clear

The current corporate presentation can be found at Whiting's website.

Some numbers rounded.

Rocky Mountains production: 70,000 boepd.

Total primary net locations in the Bakken: 1,249
Total prospective net location in the Bakken: 663

The drilling plan remains the same as in the June, 2013, presentation

Current drilling program, identified primary locations:
  • Southern Williston (Lewis & Clark, Pronghorn): 3 pronghorn sand/1280
  • Western Williston (Cassandra, Hidden Bench, Tarpon, Missouri Breaks): 4 MB, 3UTF/1280
  • Sanish (Sanish, Parshall): 3.5 MB, 3UTF/1280
Current drilling program, prospective locations:
Williston Basin New Objectives
Missiouri Breaks UTF: 3/1280
Hidden Bench Lower Bakken Silt/High Density Pilot: 4 Bkn Silt; 4MB/1280
Cassandra LTF: 4LTF/1280
Tarpon LTF: 3LTF/1280
Williston Basin Higher Density Locations
Pronghorn Sand Higher Density: 3 add'l pronghorn sand/1280
Sanish higher density and infill: 3 add'l MB/1280
 OOIP by zone/1280-acre spacing unit in million boe
Middle Bakken
  • A Zone: 6
  • B Zone: 7
  • C Zone: 6
  • D Zone: 11
Three Forks: 9
Summary, OOIP:
  • Middle Bakken sub-total: 30
  • Total Bakken shale sub-total: 19 (probably not much interest; < 2% recovery)
  • Three Forks sub-total: 9
Total OOIP/1280-acre spacing unit in Williston Basin Bakken pool: 58 mmboe

  • 1) all zones not found throughout the Williston Basin
  • 2) Whiting feels D Zone is underexploited

No comments for now. Simply some back-of-the-envelope calculations
  • Subtracting out the Bakken shale sub-total of 19, back to 39 million boe/1280-acre spacing unit
  • Recoverable, primary: 5% -- 1.95 million bbls/1280-acre spacing unit
  • Seven wells/1280-acre spacing unit at 500,000 bbls oil EUR = 3.5 million bbls/1280-acre spacing unit

Good, Bad, Indifferent ...

...does anyone else feel that something is not quite right when the Federal debt has not changed in 68 days?
U.S. federal debt has been stuck at $16,699,396,000,000.00 for 68 straight days, according to the Daily Treasury Statement on July 24. That amount is exactly $25 million less than the legal borrowing limit of $16,699,421,000,000.00 set on May 17, 2013. 
When a number, any number like this, stays at exactly the same amount for 68 straight days, I can only think that some shenanigans are going on.  The government says they are moving funds around to keep the debt limit where it is, but this is very, very good footwork -- especially for bureaucrats.

Texas Or Louisiana?

A reader asks: where will this plant be built -- Louisiana or Texas:
South African-based energy and chemical company, Sasol and INEOS Olefins & Polymers USA (INEOS) today announced the signing of a Memorandum of Understanding (MOU) with the intent to form a joint venture to manufacture high density polyethylene (HDPE).
I am betting on Louisiana but Rick Perry has lured a lot of new companies to Texas (from Bloomberg/BusinessWeek):

Some Random Notes From Whiting's 2Q13 Financial Presentation

2Q13 Financial Presentation (some numbers rounded)

Slide 12: Lease expenses/bbl
  • 2007: $14.50
  • 2008: $13.81
  • 2009: $11.71
  • 2010: $11.06
  • 2011: $12.56
  • 2012: $12.57
  • 1Q13: $12.71
  • 2Q13: $12.14
This is for all of WLL's acreage, not just the Bakken.

Slide 15: Collars
  • Q3: $48 - $91
  • Oct: $48 - $91
  • Nov: $48 - $86
  • Dec: $80 - $122 (for a small volume, at this point)
  • 1/14: $80 - $122 (for a small volume, at this point)
  • 2/14: $80 - $122 (for a small volume, at this point)
  • 3/14: $80 - $122 (for a small volume, at this point)
Slide 16: Natural gas contracts for 2014: $5.50/MMBtu

Slide 19: Net cash provided by operations, three months ended June 30 --
  • 2012: $282 million
  • 2013: $442 million (57% increase)
Slide 12: EBITDA/Realized price (some numbers rounded; percents taken from the slide)
  • 2007: $31/$54 (58%)
  • 2008: $45/$69 (65%)
  • 2009: $26/$45 (57%)
  • 2010: $42/$61 (68%)
  • 2011: $51/$74 (68%)
  • 2012: $46/$70 (66%)
  • 1/13: $50/$75 (67%)
  • 2/13: $51/$76 (67%)
Maybe a comment on this later. I'm passing my thoughts on to someone else to take a look at before I make a (bigger) fool of myself.

The Energy News For Canada Keeps Getting Worse: Now -- Oil Leaks Appear Unstoppable

Keystone XL killed.

Runaway freight train destroys city.

Collapsing prices for Canadian crude.

And now this: unstoppable oil leaks, as reported by The WSJ.
Canada's largest independent oil producer has been unable to stop a series of leaks from underground wells, according to regulators in Alberta, raising questions about a technology the industry has championed as less environmentally disruptive than the open-pit mining of oil sands.
Four separate leaks, the first of which was reported on May 20, comprise the equivalent of 175 barrels of oil and spread over at least 100 acres on the grounds of a Canadian air-force base in northeastern Alberta, according to preliminary figures from the chief provincial regulatory body. While the amount of oil is relatively small, it has contaminated a vast area of boreal forest, including killing some wildlife. It also represents a relatively rare case in which a producer hasn't been able to immediately identify the cause of a leak and correct it, drawing special scrutiny from regulators and environmentalists.
"We don't know when they're going to get control of it," said Alberta Energy Regulator spokesman Bob Curran.
More ammunition for US activist environmentalists who want to stop Canadian crude in its tracks.

$60 Million For Oil Patch Communications

The Bismarck Tribune is reporting:
Western North Dakota cities and law enforcement agencies will have more than $58 million heading their way for infrastructure and equipment.
The North Dakota Board of University and School Lands approved the money Thursday from the Oil and Gas Impact Grant Fund.
State Land Commissioner Lance Gaebe told the board the requests included nearly $39.7 million for oil patch communities for infrastructure upgrades.
An additional $14 million was to be split among the oil patch hub cities of Dickinson, Minot and Williston.

Friday Morning Links, News, & Views

Active rigs: 184

Wells coming off confidential list have not yet been posted by NDIC.

RBN Energy: the competitive market for Canadian LNG exports

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

Helmerich & Payne beats by $0.10, reports revs in-line : Reports Q3 (Jun) earnings of $1.44 per share, excluding non-recurring items, $0.10 better than the Capital IQ Consensus Estimate of $1.34; revenues rose 2.5% year/year to $840.2 mln vs the $844.98 mln consensus.

Enterprise Products begins open season for proposed expansion of Panola NGL Pipeline system: Co announced the start of a binding open season to seek shipper support for a proposed expansion of the portion of its Panola Pipeline Company, natural gas liquids ("NGL") system between Carthage and Lufkin, Texas. The project is designed to support Haynesville and Cotton Valley oil and gas producers by providing enhanced access to the NGL fractionation complex in Mont Belvieu, Texas. Originating near Carthage in Panola County, the NGL pipeline system extends 181 miles, serving multiple destination points at Mont Belvieu, including facilities owned and operated by Enterprise.

WSJ Links

In Arena, nice essay on the aggressive selling of Wm Faulkner's estate, and a review of the new Woody Allen movie. If I started going to movies again, I would like to see the new Woody Allen movie. 
For baseball enthusiasts, this is a great article -- Tampa Bay's Jose Molina is earning playing time because he is uniquely gifted at fooling umpires by framing pitches.

Disclaimer: this is not a sports blog. The author has no formal training in sport reporting, and knows very little about any of the sports he writes about. Do not make any Las Vegas bets based on anything you read here or what you think you may have read here. 

Back to the story:
Judging by the traits most fans notice, Molina fits the profile of a seldom-used backup. But when it comes to convincing an umpire that a ball is a strike, Molina is a magician.

"It just seems like every pitch you throw, he's able to catch it clean, frame it and make it look like a strike," Rays pitcher David Price said. "We love him for it."
Molina, one of three brothers that have all played catcher in the major leagues, is on pace to start 89 games at the position this season, which would represent a career high. Last year, the Rays started him 80 times and used him in 102 games, which marked his career high in games played.
Remember the link/story about aluminum prices and warehouse shenanigans? Apparently the federal government is not pleased either; investigation begins. 
His improbable, late-career emergence doesn't reflect a change in his ability so much as it highlights a change in the way the Rays—and a growing number of other teams—value what he does best.
Teams have long understood that catchers who receive the ball in a way that makes umpires more likely to view borderline pitches as strikes can be an asset. But only recently have researchers begun to quantify just how valuable that skill can be and just how much better some catchers are at it than others.
The most influential work on the subject was written by Mike Fast for Baseball Prospectus in September 2011. Using pitch location data, Fast determined the number of extra strikes each catcher got over a five-year period. Based on the estimated run value of each extra strike, he found that Molina had saved his teams 73 runs, more than any other catcher despite playing less often than many.
Great to see: Fox Sports will take on ESPN.

Canadian energy news keeps getting worse. Now it's an unstoppable oil leak (make that plural, leaks).
There is a very interesting story on the jobless (and the jobless rate) in Spain. If you bother to read the article, think of some similarities in the US, albeit on a different scale.