Tuesday, August 6, 2013

With Or Without US Support, King Coal Will Do Just Fine


August 24, 2013: Barron's on Peabody. Coal will do just fine.
Additional coal demand is coming from Japan and Germany, which are shunning nuclear power. And the need for electricity continues to grow in emerging markets such as China and India, where coal-fired plants are the cheapest source of electricity. "Demand continues to grow globally and in the U.S.," says Peabody's chairman and CEO, Gregory Boyce.
There is worldwide demand for roughly eight billion tonnes of coal annually. (A metric tonne is equal to about 1.1 ton, or short ton, the standard in the U.S..) In the next four years, he estimates, annual demand could increase by 1.2 billion tonnes. "A year from now, pricing is going to be higher than it is today," he says.
August 11, 2013: a nice article at The Oil Drum about coal, supporting my worldview. 
This collapse of hope for a potential resource has led the Polish Government (who are responsible for ensuring that the country has enough fuel at a viable price) to move back toward the greater use of lignite as a power source. Coal is the fuel for the power stations that produce 90% of the country's electricity, and lignite is readily and cheaply available. Prices for lignite (a brown coal that is softer and not yet fully geologically morphed into the harder black coal most envisage when coal is discussed) are quoted as giving a price of $2.00 per gigajoule, roughly a fifth of the cost for black coal. The country has large deposits of lignite, much of which is available for surface mining, at relatively low financial cost.
The government decision underscores a point that I have made a number of times, namely that as other fuel costs increase more and more countries will move to the use of coal, where it is domestically available and relatively inexpensive in financial cost, to produce.
August 9, 2013: wow, that didn't take long. Coal companies rally today.
Coal stocks jumped Friday after credit rating agency Moody’s raised its coal industry outlook to stable from negative.
Moody’s report sums its view: “Business Conditions Hit Bottom.” Moody’s said it “does not expect industry fundamentals to deteriorate further over the next 12 to 18 months, though business conditions remain very weak.”
Look at the numbers:
Alpha Natural Resources and James River Coal each rose nearly 12%. The largecap U.S. coal players also rallied: Arch Coal was up 10%, Peabody Energy jumped nearly 9% .
Original Post
Before reading this long article, please read the back story. Bloomberg is reporting:
The world’s richest nations, moving to combat global warming, are cutting government support for new coal-burning power plants in developing countries, dealing a blow to the world’s dominant source of electricity. 
Don sent me that article, outlining tectonic shifts in the coal industry. The article bounces all over.  

The story does not support the lede, or Bloomberg's thesis.

As I read through the article for the umpteenth time, trying to come up with an analogy, it finally came to me. There is actually a bit of irony.

Go back to the demise of the Keystone XL 1.0 and 2.0.

Killing the Keystone was a seminal event; years from now, economists and historians will note the tectonic change that occurred when the Keystone XL was killed: the resurgence of America's railroads. Regardless of how the Keystone plays out, the fact remains: the way America moves crude oil is forever changed.

And it all goes back to the man who killed the Keystone: President Obama.

So, it is ironic that it is very likely that President Obama will also inadvertently completely change the way coal is moved globally and the way utility plants are financed. There will be new winners and new losers.

According to the linked Bloomberg article, President Obama is leading the effort to deny financing for new overseas coal-powered utility plants by pledging that the US government would no longer finance overseas coal plants through the US Export-Import Bank. The World Bank and the European Investment Bank have since followed suit.

Sounds like the death knell for coal? Not really.

First of all, according to Bloomberg again, this action will have minimal (if any) effect on the biggest user of coal, China. Not only can the Chinese finance their own coal plants, China can and will finance coal plants for other countries (see below).

Second, the Bloomberg article clearly states the initiatives by the US and Europe to minimize kill financing will have "limited" effect:
China can finance its own projects, and India has only relied on export financing in a few cases. As a result, the changes are likely to impact other nations in Africa and Asia, and … it turns out .. the US/Export-Import Bank, the World Bank, and the European Investment Bank, all said they would continue to finance coal plants in these emerging nations.
So again, lots of rhetoric, little follow-through.

In fact, I'm trying to figure out exactly what projects the US, Europe, and the World Bank won't finance: China and India don't need outside financial help, and all three "banks" have said they will make exceptions for most countries that are going to build coal plants anyway.

What is likely to happen, according to the Bloomberg article:
… other lenders, especially export-credit agencies from Japan or China, could step in and replace the World Bank, the US, and Europe.
So, just as killing the Keystone shifted the transportation of crude oil to railroads, killing western financing of overseas coal plants will simply shift the access to credit to China and Japan.

Can China and Japan do it? Early in the article:
The US, Europe, and The World Bank pumped more than $10 billion into such initiatives in the past five years." Sounds huge, doesn't it? $10 billion in the past five years.
But then later in the same article:
There’s also the possibility that other lenders, especially export-credit agencies from Japan or China, could step in and replace the World Bank, U.S. and Europe. Japan’s Bank for International Cooperation, its export financing body, has provided more than $10 billion in financing for overseas coal projects, more than any other individual nation.
Japan is in a world of financial hurt, and it will need to invest its money somewhere. When the US pulls out, the Japanese can enter. 

When the Keystone XL was killed, the movers and shakers simply shifted to rail. Huge success. The Obama gift that keeps on giving.

So, back to coal. China and Japan are looking at opportunities. Are their opportunities for coal investment?

First, of all, China wants to ramp up its clean-coal technology export business and the environmental activists are already concerned that China will simply step in when the US steps out. And get this: not only does China finance these new projects, they use their technology. The Chinese will do for clean-coal technology what the Bakken did for horizontal/fracking.

But don't we have enough coal plants already? LOL.

From the article: "The U.S. Energy Information Administration, in a July 25 report, projected world coal use would increase by a third -- to more than 200 quadrillion British thermal units a year -- by 2040 as developing nations boost its use."

"China and India imports have risen year-to-date and are on a pace to increase 15 percent this year to new record levels as the trends to urbanize, industrialize and electrify continue,” Boyce said in a conference call with analysts on July 23."
Coal is now used to generate 40 percent of the world’s electricity, and its use has grown more than 50 percent in the past decade, according to EIA. The U.S. is the world’s second-largest producer of coal, after China, followed by India, Australia and Indonesia. China is the world’s top importer of coal as well, followed by Japan, according to the World Coal Association.
Gregory Boyce, chief executive officer of Peabody, the largest U.S. coal producer, noted that German and Japanese coal use is climbing as they cut nuclear-power generation.
But you know, I don't know what it means to say "40%"  and "more than 50%" but I do understand this:
According to an analysis by the World Resources Institute [these are the activist environmentalists who are worried about global warming] in Washington, 1,200 coal-fired plants are proposed globally, with more than three-quarters of those planned for India and China alone. If all are built, which WRI says is unlikely, that would add more than 80 percent to existing capacity
China can finance its projects on its own, and India has only relied on export financing in a few cases. As a result, the recent changes are likely to impact other nations in Africa and Asia, which don’t have the same access to credit. Each group said in some instances it would still finance coal, and activists are worried about those exceptions.
Over the next few months we will read a lot of stories about the Pacific Northwest closing their ports to coal export but the Pacific Northwest is not where the action is. The five major US coal exporting ports are on the East Coast (4) and the Gulf of Mexico (1). The Panama Canal will be wide enough by this time next year to handle the new huge ships.

It looks like things will come together in 2017. The US will have a new president. Pent-up demand for US coal will reach a fever pitch; the "new and improved" Panama Canal will be able to handle huge ships; and, the Chinese will be building and/or financing as many as 1,200 coal-fired plants around the world.

Meanwhile, the president will keep making speeches, and the world will keep moving, with or without him.


I don't know how long and how often I've been blogging about a number of analysts missing the China story. I posted a short note about this story, again, earlier today, based on a note I received from a reader relating a story from a cousin visiting China recently.

Now, even more confirmation. Forbes is reporting:
I had the chance in April to interview Ford’s Asia-Pacific president David Schoch at Auto Shanghai, China’s biggest auto show this year, and he predicted good things for the company in the country in 2013. “I expect to outpace the market,” Schoch said, based in part on a lineup of new models.
Happily for Schoch and Ford, the company is doing just that. Ford said on Tuesday July sales in China, the world’s largest auto market,  soared 71% from a year earlier to 72,834 wholesale units. For the first seven months of the year, Ford sold 50% more vehicles than a year ago, or 480,555 units. That compares with an approximately 12% rise in passenger car sales in China during the first six months of the year, the latest available period.
Ford’s gains were led by the Focus, whose shipments increased 70% in the first seven months from a year earlier to 218,617 units, the company said.
Something tells me GM is not going to sell a lot of Volts in China this next year. 

And, again, if I ever get caught up, more on this story. It could be a busy weekend of blogging.

So, How's Solar Working Out For Investors?

Reuters couldn't have been more blunt:
First Solar Inc on Tuesday reported quarterly earnings and revenue well short of expectations and slashed its outlook for the year due to construction delays for a large project and a decision to sell two projects only after they are finished.
The company's shares slid 9 percent in extended trade.
More on this later, if I get caught up. I think there's a bigger story here. 

TransCanada To Build New Export Facility To Deliver Natural Gas To Malaysia; Keystone XL Killed But The Beat Goes On


June 14, 2017: TransCanada moves ahead with $2-billion NGTL system expansion. Data points from Oil & Gas Journal:
  • NOVA Gas Transmission Line (NGTL)
  • $2 billion expansion; adding to the system's current %5.1 billion near-term capital program
  • in the aggregate: 273 km of pipeline; 150 MW of compression at five compressor stations, new meter stations
  • construction expected to start in early 2019
  • initial projects to be in service in 4Q19
  • expansion needed due to growing producer demand to link Montney, Duvenay, and Deep basin production to the NGTL system and move to intra-basin and export markets
  • the 24,012-km NGTL system gathers 75% of Western Canada Sedimentary Basin gas production in Alberta and northeastern British Columbia 
Original Post

Reuters is reporting, but it looks like a standard press release from the company:
TransCanada Corp said on Tuesday it has signed an agreement with Malaysian-owned Progress Energy to transport two billion cubic feet per day of natural gas to underpin the $1.5 billion extension of its NGTL pipeline system in British Columbia.
The extension will also include an interconnection with TransCanada's planned Prince Rupert Gas Transmission project, which will supply natural gas to a proposed liquefied natural gas (LNG) export facility in Prince Rupert, BC.
Malaysia's Petronas acquired Progress Energy in a $4.9 billion deal last year. Petronas has applied to Canada's National Energy Board for a license to export nearly 20 million tonnes of LNG a year from the West Coast.
The 305 kilometre (189 mile) pipeline extension, called the North Montney Mainline, will reach the export delivery facilities in 2019, pending regulatory approvals.
The Keystone XL may have been killed, but the TransCanada beat still goes on. Good for them.

The Beat Goes On, Sonny and Cher

Earnings Announcements And Market Action

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

Overall market down today; crude oil flat. 

EOG: crude output up 35%; beats; shares surge after-hours almost 5%;

OAS: beats by $0.05, beats on revs : earnings of $0.65 per share, excluding non-recurring items, $0.05 better than the estimate of $0.60; revenues rose 70.8% year/year to $254.6 mln vs the $245.88 mln consensus.
Increased average daily production to 30,171 barrels of oil equivalent per day, a 48% increase over the second quarter of 2012. Average daily production was relatively flat as compared to the first quarter of 2013 and within the Company's guidance range of 29,000 to 31,000 boepd.
DNR: beats by $0.06, reports revs in-line: Reports Q2 (Jun) earnings of $0.41 per share, excluding non-recurring items, $0.06 better than the estimate of $0.35; revenues rose 8.0% year/year to $645 mln vs the $641.41 mln consensus. Denbury's estimated 2013 production is unchanged from previous estimates. Denbury's full year 2013 capital expenditure budget is unchanged from the previously disclosed amount of $1.06 billion; transcript;

MRO: press release; 60 cents vs 54 cents 2Q12;


Don sent me this item from Denbury's 2Q13 transcript at SeekingAlpha:
We've said for some time we expect to generate significant and growing levels of free cash flow in 2017 and thereafter, following substantial completion of our CO2 infrastructure. For the last few months, we've been conducting internal analysis of our options for distributing that free cash flow to shareholders, including consideration of possibly forming an MLP. In addition to review and analysis of the various organizational structures, we've also been evaluating whether we could potentially accelerate the cash distributions. 
Both of these are still being analyzed, and I think one of the most significant benefits of these discussions is they highlight our planned transition to an income and growth company made possible by the unique characteristics of our business model and strategy. In our interactions, many of you have expressed your opinions, and these have been and will continue to be helpful for us. 
However, there's still an extensive amount of work to be done, and so, we will not be able to provide you with further guidance on this subject on today's call. Instead, we plan to present our conclusions and plan to you at our annual Analyst Meeting on November 11 in Houston, which is also when we plan to provide you our initial estimates for 2014 production.
This is a huge story, and fits my worldview of the oil and gas industry based on what I'm seeing in the Bakken. More on this later, if I ever get caught up. Again, for investors only. And this is not an investment site. I do this for education and entertainment. I certainly wouldn't make any investment decisions based on anything I post here. Go to the linked sources for full story. Check out the Bakken Shale Discussion Group if you want the best information about the Bakken. 

Thirteen (13) New Permits -- The Williston Basin, North Dakota, USA; Four Wells Make The "High IP" List; Ten Wells Coming Off Confidential List Wednesday; Zenergy Reports A Huge Well In/Near Williston

Active rigs: 183

Thirteen (13) new permits --
  • Operators: Petro-Hunt (4), Slawson (3), OXY USA (3), Ballantyne, Zavanna, True Oil
  • Fields: Cabernet (Dunn), East Fork (Williams), Sanish (Mountrail), Coulee (Bottineau(, Patent Gate (McKenzie), Red Wing Creek (McKenzie), East Tioga (Mountrail)
  • Comments:
Wells coming off the confidential list were reported earlier; see sidebar at the right.

Five (5) producing wells completed:
  • 22939, 3,042, Statoil, Enderud 9-4 4TFH, Banks, t7/13; cum --
  • 23558, 2,320, Statoil, Jake 2-11 2TFH, Last Chance, t7/13; cum --
  • 23647, 2,886, BR, Lillibridge 24-22TFH 3NH, Johnson Corner, t7/13; cum
  • 23648, 2,725, BR, Copper Draw 24-22MBH 3SH, Johnson Corner, 4-section, t7/13; cum --
  • 24305, 1,577, MRO, Helgeson 41-30H, Bailey, t7/13; cum --
Wells coming off the confidential list Wednesday:
  • 22543, 1,038, OXY USA, State 2-25-36H-144-97, Cabernet, t2/13; cum 61K 6/13;
  • 23184, drl, Hess, SC-Tom 153-98-1514H-1, Truax, no data,
  • 23396, 314, Fidelity, Schmidt 11-2H, Dutch Henry Butte, t3/13; cum 27K 6/13;
  • 23676, 134, OXY USA, Charles Davis 1-4-9H-142-94, Murphy Creek, t2/13; cum 7K 6/13;
  • 23713, 319, Fidelity, Diamond J 41-20H, Sanish, t2/13; cum 20K 6/13;
  • 23829, 266, Samson Resources, Thomte 0508-6TFH, Ambrose, t5/13; cum 14K 6/13;
  • 24670, no IP yet, Whiting, Plienis 24-24, Camel Hump, a Red River well, first produced 4/13; cum 28K 6/13; 
  • 24742, 911,  Zenergy, K2 Holdings 31-32H, Todd, t5/13; cum 29K 6/13;
  • 24771, 964,  Slawson, Serpent (Federal) 4-36-31TFH, Van Hook, t4/13; cum 40K 6/13;
  • 24803, 363,  CLR, Dragseth 1-4AH, Winner, t4/13; cum 21K 6/13; 

22543, see below, OXY USA, State 2-25-36H-144-97, Cabernet:

DateOil RunsMCF Sold

23396, see below,  Fidelity, Schmidt 11-2H, Dutch Henry Butte:

DateOil RunsMCF Sold

23676, see below,  OXY USA, Charles Davis 1-4-9H-142-94, Murphy Creek:

DateOil RunsMCF Sold

23713, see below,  Fidelity, Diamond J 41-20H, Sanish:

DateOil RunsMCF Sold

24670, see below,  Whiting, Plienis 24-24, Camel Hump:

DateOil RunsMCF Sold

 24742, see below,  Zenergy, K2 Holdings 31-32H, Todd:

DateOil RunsMCF Sold

24771, see below,  Slawson, Serpent (Federal) 4-36-31TFH, Van Hook:

DateOil RunsMCF Sold

24803, see below,  CLR, Dragseth 1-4AH, Winner:

DateOil RunsMCF Sold

WTI, Bakken, And LLS Crude Oil Pricing -- Platts; Spreads Are Narrowing As The Industry Responds To Regional Imbalances; Foreign Oil Being Pressured

NOTE: of the many stand-alone posts so far today, this may be one of the more important stories. Definitely a link folks should check out.

Platts is reporting

Some very nice graphs showing the various spreads.

WTI & Brent trends, according to Platts:
  • The WTI/Brent spread collapsed during the second quarter of 2013 as more crude flowed into the refinery-rich Texas and Louisiana Gulf Coast, with increased production at Eagle Ford and Bakken shale plays and the Permian Basin, and new pipelines provided a valve for the glut of crude stored at the NYMEX injection point in Cushing, Oklahoma.
  • With Bakken now coming in via rail from North Dakota, and taking into account the greater amount of gasoline and diesel extracted from a barrel of Bakken compared with the lower yield of the two products from a barrel of Alaska North Slope, the value of Bakken is upgraded by about $3-4/bbl, according to Tesoro calculations
WTI & LLS trends, according to Platts:
  • The Light Louisiana Sweet differential -- a benchmark for light, sweet crude on the Gulf Coast -- began 2nd quarter at WTI plus $17/barrel on April 1, and closed out at WTI plus $7.20/b on June 28
  • Improved infrastructure also caused LLS to reach lows not seen in years, as light, sweet crude from the Bakken and Eagle Ford shale plays are competing with LLS at the Gulf Coast refiners
  • On June 28, LLS was assessed by Platts at WTI plus $7.20, its lowest since January 18, 2011, when it was WTI plus $7.15
WTI & Mars trends, according to Platts:
  • The benchmark for heavy, sour crudes on the Gulf, Mars, finished the quarter at WTI plus $1.60 after beginning April at WTI plus $13.05 
Increased pressure on Mars, according to Platts:
  • In addition to a narrowing WTI/Brent spread, the Mars differential found increased pressure as a result of more Permian Basin and Canadian sour crudes making their way to the Gulf Coast
  • The Mars differential declined to its lowest level in over two years, when it was assessed at WTI plus 70 cents/b on June 26 -- lowest since December 31, 2010, when it was plus 60 cents
Bottom line: spreads are narrowing as the industry responds to regional imbalances.

KOG's P Thomas Wells

22074, 496, Whiting/KOG, P. Thomas 153-98-5-10-11-8H3, Truax, t6/13; cum 143K 12/18; offline since 10/18; remains off line as of 12/18;

22086, 2,052, Whiting, P. Thomas 153-98-5-3-2-1H3, Truax, Three Forks, 28 stages; 4 million lbs, t4/13; cum 190K 12/18;
23708, 937, Whiting/KOG, P. Thomas 153-98-5-10-11-8H, Truax, t6/98; cum 224K 12/18; offline since 10/18; remains off line as of 12/18;
23709, 2,157, Whiting/KOG, P Thomas 153-98-5-10-11-1H, Truax, t6/13; cum 281K 12/18; offline since 10/18; remains off line as of 12/18;
24405, 2,367, Whiting, P. Thomas 153-98-5-3-2-1H, Truax, 28 stages; 3.9 million lbs, t4/13; cum 246K 12/18;
24406, 2,076, Whiting, P. Thomas 153-98-5-3-2-8H, Truax, t4/13; cum 266K 12/18;
25535, 2,083, Whiting/KOG, P Thomas 154-98-14-33-28-4H3, Truax, t5/14; cum 202K 12/18;
25536, 2,042, Whiting/KOG, P Thomas 154-98-14-33-28-4H, Truax, t5/14; cum 125K 12/18;
25537, 2,200, Whiting/KOG, P Thomas 154-98-14-33-28-4H3M, Truax, t5/14; cum 182K 12/18;
25538, 1,705, Whiting/KOG, P Thomas 154-98-14-33-28-3H, Truax, t5/14; cum 114K 12/18:


22074, see above, KOG, P. Thomas 153-98-5-10-11-8H3, Truax:

DateOil RunsMCF Sold

23708, see above, KOG, P. Thomas 153-98-5-10-11-8H, Truax:

DateOil RunsMCF Sold

Corinthian Exploration With A Nice Spearfish Well

Original Post

When you look at the ticket stub below from the NDIC, see if you notice something about a Spearfish well that you often don't see in a middle Bakken well.

NDIC File No: 23704     API No: 33-009-02278-00-00     CTB No: 222257
Well Type: OG     Well Status: A     Status Date: 2/13/2013     Wellbore type: Horizontal
Location: SWNW 2-163-77     Footages: 1980 FNL 800 FWL     Latitude: 48.975171     Longitude: -100.617541
Current Well Name: CORINTHIAN BOWERS 5-2 1-H
Elevation(s): 1675 KB   1660 GR   1660 GL     Total Depth: 5784     Field: NORTH SOURIS
Spud Date(s):  11/26/2012
Casing String(s): 8.625" 524'   5.5" 5894'  
Completion Data
   Pool: SPEARFISH     Perfs: 3604-5855     Comp: 2/13/2013     Status: AL     Date: 2/16/2013     Spacing: ICO
Cumulative Production Data
   Pool: SPEARFISH     Cum Oil: 18909     Cum MCF Gas: 5898     Cum Water: 16354
Production Test Data
   IP Test Date: 2/16/2013     Pool: SPEARFISH     IP Oil: 141     IP MCF: 0     IP Water: 207
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

At 19,000 bbls in the first 4.5 months, this Spearfish well looks to be as good as a middle Bakken well.

The total vertical depth of this well was 3,015 feet (no typo). A typical Bakken well will go down 9,000 to 11,000 feet. The total depth was 5,900 feet, so the horizontal, including the kick-off point/curve was about 3,000 feet. The "standard" Bakken well will run a horizontal three times that long, 9,000 feet, or almost two miles.

It was fracked with 167,551 lbs of sand (no typo), 19 stages. Total water used was 1,660 bbls (about 70,000 gallons). A typical Bakken wells uses about 4 million gallons of water, and about 4 million lbs of sand (EOG is testing with 10 million lbs of sand. Again, look at the amount of sand (almost none, compared to a Bakken well; and the water, almost none).  According to a very unreliable source: A water tanker truck, of the largest 18 wheeler kind, can carry about 30 tons of water. Which is about 8000 gallons. So, was this about 10 truckloads of water?  A Bakken well in comparison would require 500 truckloads of water. [This was corrected; see first comment.]
Disclaimer: I may be completely wrong on everything I said on this page. I often read things incorrectly. I often screw up simple arithmetic; don't even get me started on math. 
But that's not all. What else did you notice about this Spearfish well compared to a typical middle Bakken well?

Bingo! Good for you. I saw that, too: minimal decline rate. Production did decline but not all that much on a percentage basis. My hunch is that it has probably already leveled out. 
Again, I may be completely wrong on everything I said on this page. I often read things incorrectly. I often screw up simple arithmetic; don't even get me started on math. Let me know if I'm seeing something wrong.

Oh, one more thing. How many days did they have to pay for the rig? It was spud November 26, 2012; the rig was released December 1, 2012. That's barely enough time to drive into Williston and back to get a McDonald's hamburger before the well was completed. Five, six days?

Another Nice KOG Well

When you look at the ticket stub from NDIC below, take a look at the natural gas numbers (MCF producted, sold, and flared).

NDIC File No: 23709     API No: 33-105-02791-00-00     CTB No: 123709
Well Type: OG     Well Status: A     Status Date: 6/8/2013     Wellbore type: Horizontal
Location: SWNW 10-153-98     Footages: 2020 FNL 270 FWL     Latitude: 48.090935     Longitude: -103.279817
Current Operator: KODIAK OIL & GAS (USA) INC.
Current Well Name: P THOMAS 153-98-5-10-11-1H
Elevation(s): 2087 KB   2061 GR   2061 GL     Total Depth: 20950     Field: TRUAX
Spud Date(s):  2/6/2013
Casing String(s): 9.625" 2275'   7" 11285'  
Completion Data
   Pool: BAKKEN     Perfs: 11503-20818     Comp: 6/8/2013     Status: F     Date: 6/9/2013     Spacing: 2SEC
Cumulative Production Data
   Pool: BAKKEN     Cum Oil: 19080     Cum MCF Gas: 45546     Cum Water: 20052
Production Test Data
   IP Test Date: 6/9/2013     Pool: BAKKEN     IP Oil: 2157     IP MCF: 4815     IP Water: 1775
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

So, for newbies, back to the beginning. Did you take a look at the natural gas data (MCF produced, sold, and flared)?

The numbers tell me that the well is already hooked up to a natural gas line (gathering and processing) but the amount of natural gas from that well or that field or that pad or that general location exceeds what the local natural gas gathering and processing system can handle. Production exceeds capacity. That will be rectified within a few months.

Demand Is So Great, GM Cuts The Price On The Volt; Already Losing $5,000/Car, What's Another $5,000; Range Extended From 35 Miles To 38 Miles Last Year Won't Be Duplicated -- I Can't Make This Stuff Up

The timing is very interesting. (By the way, the linked article at PlugInCars reads like a GM press release).

I posted this about a week ago (July 30, 2013);
BMW launches its first mass-production electric car, and it doesn't cost much more than the Volt.
... the auto maker's first mass-production electric car, saying his company would need to boost sales of plug-in and battery electric vehicles dramatically by 2025 to meet regulatory requirements.
The BMW i3 is expected to go on sale in the U.S. in the second quarter of 2014 where it is expected to be priced at $41,350 before federal tax and other incentives. An optional "range extender"—a small gasoline motor—will likely boost the price tag to $45,000.
Personally, I still don't see the market for these high-priced, short-range, automobiles. I think consumers are going to get incredible deals, especially in leasing when these automobiles all hit the market.  Apparently these BMWs will compete with the Tesla S, another hot-selling electric car, priced at $65,000. I honestly don't get it. Of course, I walk or ride a bike whenever I can.
Yup. Volt got spooked by BMW. PlugInCars is reporting (as noted above, it sounds like a GM press release; my comments in brackets):
General Motors has announced it will drop the price of the base model Chevrolet Volt by $5,000 when the 2014 model year goes on sale later this summer.
Now in its third year of production, the popular [LOL] range-extended [LOL] electric car will now start at just $34,995, including a mandatory $810 destination fee, placing it within reach of more Americans than ever before.
That’s before taking into account any federal or state incentives. For example, the combined $7,500 federal tax credit and $1,500 rebate for plug-in owners in California drops the effective price of a new 2014 Volt to $25,994. Those in Colorado will be able to drive off the dealer's lot with $6,000 in state and $7,500 in federal tax credits, reducing the effective price to a staggering $21,495 and making it effectively cheaper [and "cheaper" is the correct use of the word] than a base-model 2013 Chevrolet Malibu in that state.
Unlike the 2013 model year, which received a slightly larger battery pack, an increase in EPA-approved all-electric range from 35 miles to 38 miles, some trim upgrades and some new color options, changes for the 2014 model are minimal.
That last sentence is hard to parse: note how they hid the fact that the "extended range" was for last year, not this year. And that extended range was from 35 miles to 38 miles.

Let's see. I can go out and buy a 2013 Chevy Volt for $39,995, or I can wait for the BMWi "which is expected to be priced at $41,350 before federal tax and other incentives" -- which means less expensive than $41,000 and the VERY SAME PRICE FOR A CHEVY VOLT.

Chevy Volt. BMWi. Decisions, decisions, decisions.


This is a no-brainer. German technology. US pricing. Gotta love it.


Back to the merits of the Chevy Volt. This line caught my attention:
Unlike the 2013 model year, which received a slightly larger battery pack, an increase in EPA-approved all-electric range from 35 miles to 38 miles, some trim upgrades and some new color options, changes for the 2014 model are minimal.  
If I read that correctly, last year's model increased the all-electric range from 35 miles to 38 miles, but for 2014, the range was not extended.


In the showroom:
Prospective buyer: wow, nice looking car? How far can you drive on a full charge?

Salesman: 38 miles.

Prospective buyer: 38 miles/gallon?

Salesman: No, a total of 38 miles per full electric charge.

Prospective buyer: Say what?

Salesman: Well, that is an increase from 35 miles the previous year?

Prospective buyer: you mean from 2013?

Salesman: no, the 2013 model increased its range from 35 to 38 miles from the year before. The model you are looking at stayed the same. No improvements. But the tax breaks are better. And, hey, we will send a technician out to your house and install $2,000 worth of charging equipment in your garage.
Prospective buyer: I don't have a garage; I live in a high rise. By the way, are they still catching on fire? You know, I would never want to put a Volt in my garage. If I had one.

By the way, the article said there were "minimal" changes between the 2013 and the 2014 model which tells me GM took all designers, engineers off developing this money-losing car and moved them elsewhere (or laid them off).

Finally, The Mainstream Media Gets It -- The Runaway Train Wreck Stories Gather Speed

Reuters is reporting:
Chalk it up as an unintended consequence of Obamacare: a growing number of U.S. employers are aiming to cut their healthcare costs by shifting retirees into the law's new public insurance exchanges, which launch this October.

Detroit, which filed for bankruptcy, hopes to push retirees who are too young for Medicare onto the new public insurance exchanges as a way of shedding healthcare liabilities. Chicago has proposed a plan to migrate most of its 30,000 under-65 retirees to the state exchanges by 2017. And, in the private sector, more than 60 percent of employers are reassessing their retiree health coverage as a result of the Affordable Care Act (ACA), according to a study to be released this week by Aon Hewitt, the benefits consulting firm.
Unintended consequence? This was obvious from the beginning that this would happen. Who wouldn't try to shift their costs to the federal government. Municipalities and states will shift their costs to ObamaCare, and some major corporations are already doing so. I forget now, but wasn't there a recent article suggesting that Wal-Mart would be moving its employees to ObamaCare. All of a sudden, mainstream media who used to beat up on Wal-Mart and its employee health care program all of a sudden became apoplectic -- suggesting that the Wal-Mart plan was WAY better than the federal government proposal. But I could be wrong on that. But I doubt it. Whatever.

Again, this was not unintended. The lobbyists knew exactly what they were doing when they wrote the bill that the legislators did not read before passing it, and they knew exactly what the INTENDED consequences would be.

Investors should be happy: they will see their larger corporations, the ones with the most employees, and who are most nimble (that is, can act quickly) shift a huge expense off their bottom line.

If there's any unintended consequence, I think it will be this: Wal-Mart could have problems finding older retirees to staff their stores. I assume many older retirees, between the ages of 57 and 65 working at Wal-Mart are doing so for the healthcare benefits.

More Than Enough Fracking Water In North Dakota; Lake Sakakawea Update; Five Feet High And Rising: Rising More Than Anticipated; Montana Snow Melt

Five feet high and rising -- I can't make this stuff up.

Regular readers know that there is more than enough fresh water for fracking in North Dakota. For background, there is a "FrackingWater" tag at the bottom of the blog.

For newbies, this is always kind of fun:
So, how much water is being released from the Garrison Dam today? Dynamic link here.

The answer: 20,000 cubic feet/second.

A cubic foot of water: 7 gallons.

So, in one second: 140,000 gallons of water released from the Garrison Dam today
In one minute: 8 million gallons of water released from the Garrison Dam today
In one hour: 500 million gallons of water released from the Garrison Dam today

Less then 4 million gallons of water are used to frack a well, but let's keep it simple:
500 million gallons / 5 million gallons = 100 wells

If I did the arithmetic correctly, enough water is released from the Garrison Dam each hour to frack 100 wells.

2,000 wells will be fracked this year. Less than a day's worth of discharge from the Garrison Dam should be enough water to frack all the wells that will be fracked in the North Dakota Bakken this year.
That was posted May 25, 2013.

So, how's the lake doing mid-summer, 2013? Rising. And you know what video that means. Yes, the linked article below really did say "five feet high and rising."

Five Feet High And Rising, Johnny Cash

The Minot Daily News is reporting:
The water level of Lake Sakakawea continues to trend above earlier projections, good news for lake interests.
The Aug. 1 runoff projections issued by the U.S. Army Corps of Engineers show an end-of-month elevation of 1,834.7 feet for Lake Sakakawea. That compares to a level of 1,833.0 feet projected one month earlier.
According to the Corps, total runoff into the Missouri River system for 2013 is now projected to reach 22.7 million acre feet. As late as May 1, the Corps was anticipating only 20.0 maf of runoff. The increase in runoff has led to lake levels becoming higher than what was expected early in the recreation season.
For example, the May 1 outlook projected Lake Sakakawea to dip to 1,830.0 feet by the end of August. The most recent projection calls for nearly a five foot increase over what was expected in early May.
So, lots of boating, lots of fishing, lots of fracking.

The Stories Just Keep Coming In: More "Below-Normal" Temperatures Being Reported

The Bismarck Tribune is reporting:
Below normal temperatures across South Dakota have been slowing crop development.
The U.S. Department of Agriculture says in its weekly crop report that rain showers were reported across most of the state, but a lack of moisture in some areas has been affecting crops. Statewide, there were 5.4 days suitable for fieldwork.
But we won't hear these stories on the CBS evening news. In fact, in New York City, Los Angeles, cable viewers might not be hearing any CBS evening news tonight.

Another Ethanol Plant Going Up In North Dakota; Other Farm News; North Dakota Plants 2/3rds Of The Nation's Canola

I am not a fan of ethanol, but as long as that's what the folks want, then we might as well take advantage of it here in North Dakota.

The Dickinson Press is reporting:
SPIRITWOOD — Officials this week plan to start construction on an ethanol plant in southeastern North Dakota that has been in the works for two years.
A ground-breaking ceremony is scheduled Friday for Minnesota-based Great River Energy's Dakota Spirit AgEnergy plant at Spiritwood.
The plant will cost about $150 million to build. Production is slated to begin in January 2015. The plant will employ about 36 people and will use about 23 million bushels of corn to produce about 65 million gallons of the alternative fuel each year.
Global warming has helped the North Dakota corn industry immensely over the past decade. Meanwhile, hard spring wheat is gradually moving west, into Montana.

*******************  CANOLA ********************

The Dickinson Press is reporting:
GRAND FORKS — Mid-summer heat hurt North Dakota’s canola a year ago. But this year’s crop seems to have weathered July just fine.
“We’re very pleased with the condition of the crop,” said Barry Coleman, executive director of the Northern Plains Canola Growers Association in Bismarck.
North Dakota is the nation’s dominant canola producer. Farmers in the state planted an estimated 860,000 acres of the crop this spring, or about two-thirds of total U.S. canola acreage.
Much of North Dakota was hit by warm weather in late June and late July this year, leading to anecdotal reports that some canola fields had been hurt. Too much heat during blooming can cause flowers to abort and reduce pod formation, as was the case in July 2012.

Tuesday Morning Links, News, And Views -- DNR Surges -- Active Rigs Up -- Part I

Futures: market down slight; oil up about 50 cents. See disclaimer.

Active rigs: 183

RBN Energy: propane exports surging.
Over the past six weeks, the price of Mont Belvieu propane has strengthened by more than 20%.  That’s not supposed to happen in the middle of the summer doldrums when the only growth market for propane is backyard BBQ grills.  Could supply be falling?  Not hardly.  The most recent Energy Information Administration (EIA) numbers show propane production from natural gas processing plants hitting another record, up 42% in the past four years.   You might think that kind of supply growth would crush prices.  But there is an escape valve for excess propane supplies:  Exports – and lots of them.  Fortunately international markets have been there to soak up the barrels.   Today we will examine how this is all shaking out in the U.S. propane market.
Reminder: several Bakken-related companies will be reporting earnings today, mostly after market close.

Denbury reports: Denbury Resources Inc. today announced adjusted net income (a non-GAAP measure)(1) of $151 million for the second quarter of 2013, or $0.41 per diluted share. Second quarter of 2013 net income (the GAAP measure) was $130 million, or $0.35 per diluted share, on record high quarterly revenues of $645 million. Investors must be pleased: the stock is up almost 5% in pre-market trading. Earnings beat by 6 cents.

The demise of Newsweek: I completely lost the bubble on this one. I've written about Newsweek before. It looks like this is, finally, the end of Newsweek. A long, long, 3-page article on how it happened in The New York Times.  Regardless of what digital did to Newsweek,  I always felt that its content did them in.

I received a very nice comment from a reader regarding China. As you all know, there is a very close relationship between China and Canada; many Chinese have emigrated to Canada over the years. Recently, the reader's Canadian cousin visited Canada with a friend who had lived and worked in China for many years. They toured much of the country by automobile, noting that gasoline prices were similar to those in Canada, that is, about 25% higher than in the US -- that is, very high gasoline prices. Unlike in America, where it is not uncommon for folks to complain about the high price of gasoline when filling up, the Chinese seemed to be happy they could travel on their own, and the price of gasoline was simply not an issue. And the roads? Four- and six-lane highways, including miles and miles of elevated highways (bridges) over agricultural land to minimize loss of farming land. A very nice note, confirming my thoughts about the Chinese economy.

By the way, did you all notice the recent article that China is considering relaxing its one-child law? They wouldn't be doing that if they didn't think the economy could support two-child families. They are probably hoping to increase the number of daughters; the male-female ratio is way out of line.