Thursday, October 3, 2013

Peak Oil? What Peak Oil? Additional Data Points Regarding The Permian -- Rosetta Resources

Updates

October 4, 2013: two things -- a reader sent me a note suggesting the Bakken numbers could be much, much bigger than what I posted below. I agree. I was concerned with even posting the numbers below, much less even bigger numbers. I am very serious about the Bakken posts (the non-Bakken posts are often hyperbole and venting). I don't need to exaggerate regarding the Bakken, so I tend to hold back on what I'm really thinking.

Another reader sent me the PDF link to Mr Rolfstad's newest presentation on the Bakken. Readers may want to note the number of wells that folks are now talking about.

Original Post

SeekingAlpha is reporting:
While at the first glance the 40,000-acre position may appear modest in size, one should keep in mind that even under the conservative 40-acre development scenario, it would take over a decade to complete the drilling with a six-rig program, assuming current drilling pace of ~16 wells per rig-year. One would need to double the timeframe if the development proved to be feasible on 20-acre spacing.
Most importantly, Rosetta estimates that on its entire position in Reeves County, it has over 100 million barrels of oil equivalent in place per section (one square mile). The estimate is truly staggering. To put it in perspective, if only 10% of total oil and gas originally in place could be recovered, gross revenue from each square mile could exceed $600 million over the life of the property (using $90 per barrel oil price realization and $5/MMBtu "wet" gas price realization and assuming reserve mix of 67% oil and 33% gas). By comparison, in its current estimates, Rosetta assumes average recovery factor of approximately 3.8%.
Don, who sent me the link, asks rhetorically: whatever happened to "peak oil"? Oh, yeah -- horizontal drilling and fracking. 

In the best Bakken, 14 wells x 500,000 bbls EUR / 1280-acre units = 7 million bbls/1280-acre units or 3.5 million bbls/section. Of course, in the best Bakken, EOG is suggesting as many as 34 wells in one 1280-acre unit.

In the Permian, in the linked article above, 100 million bbls OOIP/section x 10% recovery = 10 million bbls/section.

So, some idea of the amount of oil that could be produced in these plays.

First Unit Train Set To Roll From Western Canada

Rigzone is reporting:
The terminal in Bruderheim, Alberta, which will be expanded to 100,000 bpd by the second half of next year as a second supply pipeline is connected, initially will load only "dilbit" oil, or heavy bitumen crude from Canada's oil sands region mixed with 30 percent light condensate, Gary Kubera, chief executive of privately owned Canexus, said in an interview.
The facility is the first of a half dozen or so Canadian projects that have emerged over the past year to help carry more of the booming production from the Alberta oil sands by rail as producers seek alternatives to congested export pipelines. Shipping by rail is more costly, but also more flexible.
At present, the oil sands are only served by manifest trains hauling smaller loads, a less cost-effective mode of transport, but around 550,000 bpd of unit-train crude-by-rail projects - terminals that can load up to 120 rail cars a day - are due to start up in Western Canada by the end of 2014.
The Canexus terminal, which has been shipping 25,000 to 30,000 bpd of crude from Bruderheim on manifest trains since 2012, has already secured customer commitments for about 35 percent of its capacity. The company expects 70 to 80 percent of capacity to be under contract by the end of the year.
"The first unit train is set to run by the end of November," according to Kubera.

Twelve (12) New Permits -- The Williston Basin, North Dakota, USA; Statoil With Two Huge Wells; A CLR Charlotte Well Comes In Nicely; EOG With A Huge Hawkeye Well; Zenergy With A Huge Slagel Well

Active rigs: 185

Twelve (12) new permits -- 
Operators: XTO (4), Statoil (3), OXY USA (2), SM Energy (2), Whiting,
Fields: Fayette (Dunn), Siverston (McKenzie), Lonesome (McKenzie), Alger (Mountrail), Ragged Butte (McKenzie), Poe (McKenzie)
Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right.

Three (3) producing wells were completed:
  • 23608, 1,303, CLR, Charlotte 5-22H, Banks, 4 sections, t6/13; cum 41K 8/13;
  • 23946, 2,747, Statoil, Sanders 34-27 2H, Ragged Butte, t9/13; cum --
  • 24085, 3,243, Statoil, Sax 25-36 3H, Banks, t9/13; cum --
Well Name Change:
  • 25077, the Martell 36-35H2 is now a Three Forks well -- Martell 36-25HTF2; Glass Bluff 
Wells Coming Off The Confidential List Friday
  • 24337, 2,519, EOG, Hawkeye 3-2413H, Antelope, middle Bakken, 28 stages; 9.7 million lbs sand; 133K in less than four months; t5/13; cum 88K 8/13;
  • 24362, drl, Statoil, Knight 35-26 4H, Banks, no production data,
  • 24702, 3,000, Zenergy, Slagle 12-1HST, Camp, middle Bakken; 32 stages; 3.3 million lbs; t7/13; cum 41K 8/13;
  • 24738, drl, HRC, Fort Berthold 152-94-15B-22-6H, Antelope, no production data,
  • 24981, drl, BR, CCU Four Aces 44-21TFH, Corral Creek, no production data,
  • 24991, drl, BR, Cleo 31-1TFH, Croff, no production data,
*******************************

24337, see above, EOG, Hawkeye 3-2413H, Antelope:

DateOil RunsMCF Sold
8-2013464210
7-2013491300
6-2013237090
5-2013133790


24702, see above, Zenergy, Slagle 12-1HST, Camp:

DateOil RunsMCF Sold
8-20133042829717
7-201395060

EOG's Hawkeye Wells; Note The Extended Long Laterals First Started Showing Up January, 2013

Hawkeye Oil Field Wells
This Page Started Out As Hawkeye wells, regardless of oil field, but now this page tracks the Hawkeye oil field.

Updates

October 28, 2016: ten Hawkeye oil field permits were renewed today

Permits



2017 (none as of August 31, 2017)

2016
32745, PNC, Hess, HA-Greimestad ..
32744,
32743,
327425, 1,996, Hess, HA-Greimestad-152-95-3031H-8, t5/17; cum 206K 8/19;
32741,
32682,
32681,
32680,
324465, PNC, Hess, HA-State ..

2015 Permits
31933,
31932,
31931,
31930, 630, Hess, HA-Grimestad-152-95-3031H-4; t7/16; cum 184K 9/19;
31766,
31765,
31764,
31763,
31762,
31761,
31647,
31646,
31560,
31559,
31558,
31557,
31556, 319, Hess, HA-Chapin-152-95-2932H-6; t3/16; cum 169K 9/19;

2014 Permits
29409,
28763, 1,492, Hess, HA-Thompson-152-95-1720H-10, t6/15; cum 206K 9/19;
28762,
28761,
28760,
28487,
28486,
28485,
28484,
28483,
28142,
28141,
28140,
27815,
27801,
27800,
27799,
27693,
27580,
27579,
27578,
27472, 1,370, Hess, HA-Thompson-LW 152-95-2017H-1, t11/14; cum 292K 9/19;

2013 Permits
27025,
27024,
27023,
27022, 1,279, Hess, HA-Nelson A-152-95-3427H-5; t9/14; cum 222K 9/19;
27021,
26983,
26982,
26981,
26980,
26840,
26787,
26786,
26785,
26664,
26663,
26662,
26380, 1,371, Hess, HA-Chapin-LE-152-95-3229H-1, t5/14; cum 297K 9/19;
26013,
26012,
26011,
25867,
25866,
25865,
25146,
25145, 1,053, Hess, HA-Mogen-152-95-0508H-5, t12/13; cum 339K 9/19;
25144,
24726,
24725,
26928,
26927,
26600, 1,764, BR, Sequoia 24-9TFH, t8/14; cum 256K 9/19;
26599,
26598,
26170,
26169,
26168,
26167, 2,044, BR, Crater Lake 21-14MBH, t3/14; cum 325K 9/19;
26144,
26143,
25161,
24898, PNC, BR, Badlands 11-15TFH,

2012 Permits
24641, 680, Hess, HA-Nelson 152-95-3328H-5, Hawkeye, t9/13; cum 159K 9/19; intermittent production;

24640, 1,381, Hess, HA-Nelson 152-95-3328H-4, Hawkeye, t9/13; cum 276K 9/19;
24629, 2,949, BR, Badlands 31-15TFH, Hawkeye, t8/13; cum 148K 9/19;
24628, 2,971, BR, Badlands, 21-15MBH, Hawkeye, t8/13; cum 190K 9/19;
24627, 2,982, BR, Badlands 21-15TFH, Hawkeye, t9/13; cum 202K 9/19;
24626, 2,924, BR, Badlands 41-15MBH, Hawkeye, t8/13; cum 235K 9/19;
24625, 2,854, BR, Badlands 41-15TFH, Hawkeye, t8/13; cum 219K 9/19;
24624, 2,919, BR, Badlands 31-15MBH, Hawkeye, t8/13; cum 219K 9/19;
23822, 697, Hess, HA-State 152-95-1621H-2, Hawkeye, t5/13; cum215K 9/19;
23821, 1,034, Hess, HA-State 152-95-1621H-3, Hawkeye, t5/13; cum 224K 9/19;
23820, 50 (no typo), Hess, HA-State 152-95-1621H-4, Hawkeye, t7/13; cum 183K 9/19;
23072, 1,089, Hess, HA-Dahl 152-95-0706H-3, Hawkeye, t12/12; cum 409K 9/19;
23071, 1,224, Hess, HA-Mogen-152-9500805H-3, Hawkeye, t12/12; cum 437K 9/19;
22982, 868, Hess, HA-Nelson A-152-95-3427H-2, Hawkeye, t9/12; cum 294K 9/19;
22972, SI/NC,
22801, 983, Hess, HA-Link-152-95-3526H-2, Hawkeye, t9/12; cum 301K 9/19;
22635, 1,114, Hess, HA-Swenson-152-95-1819H-5, Hawkeye, t5/13; cum 271K 9/19;
22420, PNC,
22417, SI/NC,
22416, SI/NC,
22415, SI/NC,
22367, PNC,
22366, 1,336, Hess, HA-Swenson 152-95-1819H-3, Hawkeye, t5/13; cum 164K 9/19;

2011 Permits
21122, 428, Hess, HA-Chapin-152-95-3229H-2, Hawkeye, t5/12; cum 152K 9/19;
20755, 381, Hess, HA-Dahl-152-95-0706H-2, Hawkeye, t3/12; cum 376K 9/19; a bump in production in 5/17;
20739, 826, Hess, HA-Thompson-152-95-1720H-2, Hawkeye, t5/12; cum 272K 9/19;
20738, 1,496, Hess, HA-Mogen-152-95-0805H-2, Hawkeye, t12/11; cum 651K 9/19;


Original Post
 
Hess Hawkeye well (not an EOG Hawkeye well):
  • 28142, 1,110, Hess, HA-Swenson-152-95-1819H-7, Hawkeye, 35 stages; 2.4 million lbs; Three Forks, 9 days to reach TD; upper Bakken might have oil here; 100% in the second bench;  t2/15; cum 11K in five days; cum 252K 9/19;
I'll clean up this post later. See also this post on Clarks Creek. For now:
  • 24337, 2,519, EOG, Hawkeye 3-2413H, Antelope, middle Bakken, 28 stages; 9.7 million lbs sand; 133K in less than four months; t5/13; 2 sections; TD = 20,626 feet; cum 799K 9/19;
  • 22484, 2,946, EOG, Hawkeye 102-2501H, Clarks Creek, Bakken, Three Forks; 3 standup sections, 1920 acres; TD = 25,451 feet;  producing, first short month at 17,147 bbls, January, 2013; t1/13; cum 600K 9/19; extended long lateral (3 sections long); 
  • 22485, 1,926, EOG, Hawkeye 01-2501H, Clarks Creek, Bakken, middle Bakken; producing, first short month at 17,721 bbls, January, 2013; TD = 25,827 feet; 3 stand-up sections, 1920 acres; extended long lateral (3 sections long); t1/13; cum 694K 9/19;
  • 22486, 2,421, EOG, Hawkeye 100-2501H, Clarks Creek, Bakken, 3 standup sections, 1920 acres, Three Forks; 47 stages; 14 million lbs sand, extended long lateral (3 sections long); t9/12; cum 213K 1/13; TD = 25,101 feet; F; t9/12; cum 781K4/19; offline as of 4/19; remains off line 9/19;
  • 22487, 67, EOG, Hawkeye 02-2501H, Clarks Creek, t12/13; cum 851K 9/19; 3-section spacing; 69 stages; 27.6 million lbs; 1,741 acres in the spacing unit; sister well to this well announced earlier with 200,000 bbls in less than 5 months; another 15,000-ft horizontal; trip gas over 4,000 units; extended long lateral (3 sections long); GL;
This is an important note: this is the first time I noted that EOG is drilling three stand-up sections; these are what I call extended long laterals, one section longer than the "standard" long laterals. Note that four of the five wells above are about 25,000 feet total depth, three sections "long"; and/or 1920 acres stand-up.  Generally, we've only seen long laterals (as in #24337 above) two sections, 1280-acres, and about 20,000 feet total depth.

There have been other extended long laterals, out to 25,000 feet, but most, if not all of them were due to geographical constraints, that it, drilling under the river or the lake. See the Liberty wells in the link below. Prior to these wells, I think this might have been one of the longest, if not the longest in the Bakken

Chariots On Fire

Wow! I thought we were done with all these stories -- but, not so fast!

Now Tesla's are bursting into flames.

Yahoo!News is reporting:
Tape of a Tesla on fire is giving new meaning to the term "hot wheels." The video was shot on Tuesday after a Model S sedan went up in flames. The driver was traveling down a highway in Washington State when he hit some metal debris. Fortunately he pulled over and got out of the vehicle safely. Soon the luxury electric ride was a fireball.
As the video went wild on YouTube, Tesla's stock began tanking. It dropped more than 6% on Wednesday and moved lower again on Thursday.
In an e-mail sent to The New York Times, Tesla spokeswoman Elizabeth Jarvis-Shean wrote that the fire was caused by the “direct impact of a large metallic object to one of the 16 modules within the Model S battery pack.”
The e-mail went on to say, “Because each module within the battery pack is, by design, isolated by fire barriers to limit any potential damage, the fire in the battery pack was contained to a small section in the front of the vehicle.”
Sounds like everything was under control. Right? But the video appears to show anything but containment of the flames. Perhaps that's why investors began selling Tesla stock.
Fire containment:

Fire containment, according to Tesla spokesperson

Yes, indeed, it does appear that the fire was confined to one of 16 modules. Once the firemen put out the fire, the driver got back in and drove home. The remaining 15 modules had adequate power remaining. The driver will probably have his 6-y/o son replace the burned battery, Lego-like.

It should be noted that when a conventional automobile runs over a nail, a flat tire often ensues, but seldom a fire. At least in my experience.

Analysts have been predicting a pull-back in the price of Tesla shares. Analysts are getting better and better every day.

Flashback, someone noted:
"The Tesla Model S was deemed the safest automobile ever by the National Highway Traffic Safety Board, that's no exaggeration and I'm no spokesman; in the simulated collision tests the Model S charted the best outcome of any other car especially those with a combustion engine."

Great Video, Great Story: Philadelphia Refinery Opens Rail Yard To Receive Bakken Oil; Will We See Another "Cushing" Hub?

BakkenShale is reporting:
Philadephia Energy Solutions has built a state-of-the-art crude by rail unloading facility that can handle up to three unit trains.
The company’s two refineries south of Philadelphia, Point Breeze and Girard Point, are the largest consumers of Bakken crude. Rail receipts of 160,000 barrels arrive on a daily basis.
At the link is the video.

A big "thank you" to a reader for sending me this link.

Reuters is also reporting:
Philadelphia Energy Solutions' 350,000 barrel-per-day Pennsylvania refinery is now processing a fifth of all oil produced in North Dakota's prolific Bakken shale oil formation and the plant could take more from there or other sources.
Just a year after the company bought the plant, rescuing it from the threat of a shutdown due to the high cost of imported crude, the refinery is sucking up 190,000 bpd of North Dakota Bakken crude, CEO Philip Rinaldi said on Wednesday.
About 160,000 bpd of that crude was arriving direct to the refinery on two unit trains a day while the other 30,000 bpd was coming by rail then barge, he said at an event in Philadelphia marking the opening of a rail offloading point at the refinery.
PES had previously said it expected to rail in 140,000 bpd of Bakken crude to the refinery. PES is a joint venture of Carlyle Group and Energy Transfer Partners.
 Flashback: May 17, 2013 -- they thought they were nuts --
When two executives of a Philadelphia-based petroleum midstream and processing company last year proposed developing a crude-by-rail terminal to deliver domestic light sweet crude oil to five area refineries clustered along the Delaware River, the response from some was less than encouraging.
"They said we were nuts," recalled Erik Johnson, vice president and general manager of Canopy Prospecting Inc. 
"Crude oil to U.S. East Coast refineries has typically been delivered by water-borne methods since the early 1900s," he explained. "Some people who are currently retired and had spent a career in refining thought that rail-borne crude deliveries was an antiquated idea and not viable." 
Lending credence to some refining veterans' lackluster response was a chain of recent events. The fortunes of the region's oil processing facilities had taken a downward turn. For starters, Sunoco had announced that it would close or sell its Marcus Hook and Philadelphia refineries. Subsequently, ConocoPhillips (now Phillips 66) announced plans to immediately idle its Trainer refinery and sell the asset as a terminal or refinery. 
Together, these refineries accounted for nearly 700,000 barrels per day of processing capacity – roughly one-half of the refining capacity in the Northeast
"It did not look like bidders were emerging for any of the refineries, and the area would be lucky to keep one of them open," Johnson recalled.
That article continues:
Bakken crude shipments to Philadelphia will originate at Enbridge's Berthold terminal, which abuts BNSF Railway's mainline railroad. Johnson was quick to point out the terminal will actually be accessible via four other railroads in addition to BNSF.
"Philadelphia is not a one-railroad town," he said. "We have competitive railroad access."
Philadelphia lies within the Conrail Shared Assets Operations service area, which provides shippers access to the region by way of the CSX and Norfolk Southern railroads, Johnson said. In addition, shipments on the Canadian Pacific and Canadian National railroads can be directed eastbound onto the Conrail system at Chicago.
Another Cushing?
Having access to an independent facility enables a producer to market its crude oil to multiple refineries for the best price, Johnson explained. Refiners wishing to run different crude slates will have options from various producers, he added. In fact, the Eddystone terminal will be equipped to handle light sweet crude oils from other plays beside the Bakken. Under Phase 1 of the project, the terminal will be equipped to accept "Bakken-esque" crudes with API gravities ranging from 35 to 45 and 0.2 percent or lower sulfur content.
As a result, fungible crudes that could be traded under this "Philly Light" spec include production from Eagle Ford, Niobara, Permian Basin and Canadian Light Synthetic Crude sources. Johnson likened the Eddystone terminal to a Swiss city known as a neutral venue where diplomats from around the world meet to broker deals on behalf of their respective governments.
However, he acknowledged that a component of the project's second phase could help the burgeoning facility become a smaller, East Coast version of a place well-known to energy industry dealmakers: the U.S. oil trading hub at Cushing, Okla.
After Eddystone adds segregated storage capacity in the second phase, it will also be able to accept non-fungible slates – that is, crude oils that cannot be substituted for one another. "We're able to create a kind of mini-Cushing here, eventually," said Johnson. "There's a lot that can be done. It all depends really on where the market will take us."

3Q13 Earnings


All 3Q13 earnings will be reported at this page; link will be on sidebar at the right, under "Earnings Central." When we start to see earnings reports for any quarter, the "Earnings Central" link is moved to the top of the sidebar until the earning seasons is over.

I don't have time to check/update earnings on all companies listed below. If you see one that I have missed, feel free to send it in (anonymous comment or by e-mail) and I will post it.

Comment:

Miscellaneous articles:
  • Some suggestion that 3Q13 will be a tough quarter for earnings.
General update (dates subject to change)
  • AAPL: revenue up; profit miss
  • Alcoa: Alcoa beats by $0.05, beats on revs; reaffirms 2013 forecast for 7% aluminum demand growth: Reports Q3 (Sep) earnings of $0.11 per share, excluding non-recurring items, $0.05 better than the Capital IQ Consensus Estimate of $0.06; revenues fell 1.2% year/year to $5.76 bln vs the $5.66 bln consensus. Results were led by continued strength in Engineered Products and Solutions and Global Rolled Products, despite traditional third quarter weakness. Global Primary Products overcame falling metal prices and lower premiums to deliver significant performance improvement through productivity gains.
  • Wells Fargo: beats by 2 cents; 13% rise in third quarter profits


EPS estimates in parentheses following the ticker symbol (according to Yahoo!Finance)

American Railcar Industries:

APA: beats earnings; misses on revenue;

AXAS:

AMZG: stellar;

BAX ($1.19): EPS in-line; revenues in-line/missed based on source

BCEI: 

BEXP: see STO below

BHI (0.78): beats by 2 cents; jumps almost 8%;

BK ( ): both revenue and earnings beat;

CHK (0.24): Nov 6

CLNE:

CLR (  ):  November 6, close of trading;

CNP ( ):  

COP (1.46): Oct 31

Crescent Point:

CRR ( ): 

CVX (2.88): as predicted, misses by 14 cents, but still disappointing; losses due to refining; output increases.

DNR: November 5

DVN: 

ECA: 

EEP ( ): 

ENB: 

EOG (1.93):  November 7, 9:00 a.m. Analysts looking for a good number; transcript;

EOX (Emerald): 

EPD ( ): 

ERF: 

GEOI (bought by Halcon [HK], below)

GMXR:

HAL (  ): 

HES (1.47): earnings disappoint; revs beat; transcript;
Hess reported adjusted third quarter 2013 earnings of $1.18 per share, lagging the Zacks Consensus Estimate of $1.45. The underperformance was mostly due to lower production resulting from various asset sales.

Total revenue in the quarter decreased 22.8% year over year to $2,698 million from $3,494 million. Revenues, however, topped the Zacks Consensus Estimate of $2,694.0 million.

The company is gradually transforming into a pure play exploration and production (E&P) entity from an integrated oil and gas company. As part of this strategy, Hess has sold assets worth billions of dollars, as it looks to exit the downstream business. Since the first quarter, the company has classified its Marketing and Refining business as discontinued operations.
HP ( ): 

HK (Halcon; previously GEOI): misses by 2 cents; see more at my HK page;  

Kinder Morgan - KMP ( ): 

KOG (0.20): misses big; average forecast of 23 cents; actual, 12 cents;

Legacy/Bowood: 

LINE: 

MDU (0.46): beats estimate on earnings; transcript;
  • adjusted earnings per share of 49 cents compared to 38 cents last year, 29 percent increase 
  • GAAP earnings per share of 44 cents compared to a loss of 16 cents last year 
  • E&P earnings substantially higher; oil production grew 37 percent
  • construction business continues growth with combined 18 percent earnings increase and higher backlog
  • midstream asset drives earnings growth at pipeline and energy services; diesel topping plant construction progressing on time
  • utility electric retail sales increased 5 percent
MHR (Magnum Hunter): 

MMR (McMoRan) ( ): 

MPC (Marathon Petroleum) ( ):  earnings crash at Marathon Petroleum -- Zacks;
Marathon Petroleum reported earnings per share – adjusted for special items – of 59 cents, underperforming the Zacks Consensus Estimate of 65 cents and way below the year-ago period adjusted profit of $3.31. WOW!

However, revenues – at $26,274.0 million – were up 23.6% year over year and also surpassed the Zacks Consensus Estimate of $23,293.0 million, backed by higher fuel sales volumes and throughput.

MRO (Marathon Oil): beats by 10 cents;

MUR ( ): 

NBL ( ):   Noble Energy beats by $0.01, beats on revs: Reports Q3 (Sep) earnings of $0.97 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.96; revenues rose 38.7% year/year to $1.39 bln vs the $1.38 bln consensus. Earnings conference call.

NBR: 

NFX:  

NOG: earnings in-line; beats on revenue;
  • 3Q13 production of 1,200,520 barrels of oil equivalent, or 13,049 average boe per day, a 20% sequential increase over the second quarter of 2013
  • oil and gas sales increased to $107.2 million, a 35% sequential increase over the second quarter of 2013
  • added 147 gross (12.1 net) wells to production during the third quarter of 2013
  • repurchased 2,036,383 shares of its common stock during the third quarter of 2013 at an average price of $12.82 per share
NOV:  

OAS (0.73): Nov 6, at the close 

OKE:  

OKS: 

OTTR: 

OXY (1.91): Occidental Petroleum Corp reported a 15 percent rise in quarterly profit on Tuesday as the fourth-largest U.S. oil company increased its oil and gas production in its home market. Transcript.
PAA: beats by 3 cents;

PSX ( ):  

QEP: misses on earnings; up yoy; reported weaker-than-expected third quarter results, hamstrung by lower production. 
The company reported earnings per share – adjusted for special items – of 36 cents, underperforming the Zacks Consensus Estimate of 40 cents. Revenues – at $772.8 million – also failed to surpass the Zacks Consensus Estimate of $799.0 million. 
However, QEP Resources’ performance improved considerably from the year-ago period amid a jump in commodity prices. Adjusted profit almost doubled from the third quarter 2012 level of 19 cents per share, while revenues were up 42.5%.
Range Resources: beats by 5 cents; another strong earnings report;

RIG ( ): 

SD: 

SLB ( ): beats by 5 cents; jumps more than 2%;

SM ( ): 

SRE ( ): 

SRGY:

SSN:

STO (BEXP):  

STR:  

T (  ): 

TPLM: 

UNP ( ): 

USEG: 

VLO: 

VOG: 

WDFC: 

WFT: beats by 2 cents;

WHX:  

WHZ:

WLL:  

WMB: 

WPX ( ): 

XOM (1.88): Oct 31

XLNX (.52): beats at 58 cents; guidance light; investors not happy after hours.

Around The Horn -- Day 3 Of US Government Shutdown

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

KOG trades at new high; up about 1%.

Oasis trades at a new high, up about one-half percent.

WLL is up over one percent, just below its 52-week high; there must have been some profit taking this past week.

CLR is up about a half a percent. This stock has really been on a tear the past few weeks. 

CVX, COP, XOM: all down slightly, except CVX which is down significantly from its 52-week high, now breaking below $120.

EOG down slightly, but near it's all-time high.

CHK is up slightly. It looks like it has found a new trading range.

SD: down a bit. Struggling to move higher after it's recent run.

AMZG up about 1.5% but below a nice entry point at $2.00.

TPLM is down a bit right now but it did open / trade at a new 52-week high. I remember not long ago someone suggesting $10 was the target; it is now trading in a range just above $10.

UNP is in its trading range well below its 52-week high.

I don't follow BNSF (BRK) much any more; BRK follows the market in general.

ENB, EEP are both in a trading range, well below their highs.

SRE continues to struggle. But paying 3%. I wonder if the Mexican economy can be seen as a proxy for SRE's prospects?

TransCanada is down almost a percent, and well off its highs.

The Significance Of The Four Proposed MRO Wells Targeting The Tyler In The Williston Basin

Last week I posted a bit of news regarding the Tyler formation. MRO's horizontal wells targeting the Tyler might represent the first time someone has tested the feasibility of treating the Tyler as an unconventional oil play in North Dakota.

Back in January, 2012, GeoNews provided a history of drilling in the Tyler formation in North Dakota. Links can be found at the sidebar at the right, under "Tyler/Heath."

To view the stratigraphy of North Dakota, click here. The Tyler is significantly more shallow than the Bakken/Three Forks and has a slightly more southerly/southwesternly "layout" compared to the Bakken.

Some data points from the GeoNews article:

The first horizontal Tyler well: Axem Resources' Tracy Mountain 12-36H drilled in the sourthern portion of the Fryburg field, July, 1992; two lateral legs (900 and 1,800 feet). Minimal production; converted to water injector.

The first economically successful well: Upton Resources' Federal 2-13; Tracy Mountain field, September, 2001; 3,000 ft lateral; cumulative > 220,000 bbls.

Since then, varying degrees of success.

"It is unknown to the author [of the GeoNews linked article] whether is was the failure of this last well [Upton Resources' Tracy Mountain Federal 1-18H] or the onset of the Bakken-Three Forks play that ended (at least temporarily] Upton Resources' horizontal drilling of the Tyler formation.

"In addition, the Tyler Formation has not been explored as an unconventional resource play. Our ongoing study of Tyler source rocks may reveal that the Tyler oil pool extends significantly beyond the Dickinson-Fryburg trend. Low porosity siltstone and limestone intervals in close vertical proximity to mature Tyler source rocks could be future horizontal well targets using multistage hydraulic fracturing recently developed for Bakken and Three Forks completions in the Williston Basin."

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A Note to the Granddaughters

The fun children have:

The Coliseum

Yesterday we unpacked a piece of furniture that needed to be assembled. The younger granddaughter happened to notice a piece of styrofoam in the box. She pulled it out and then, very insightfully, asked if there was a matching piece. And, of course, there was.

She immediately saw the possibilities.

She used the two halves of the styrofoam for a coliseum setting. Her hedgehogs were the audience. They sat above the arena in which a little lion/cat/kitten comes out from underneath the stadium seating to attack "something."

Never in a million years would I have imaged using styrofoam for a small coliseum. The imagination kids have is incredible.

Next Week: Unemployment Claims -- Should Be Very, Very Interesting -- So Much For The Recovery

Next week we will get a clue to the integrity of the weekly first time claims for unemployment benefits. The weekly number has pretty much been in a "range" of 3,000 to 5,000 up or down in any given week.

On Tuesday of this week, it was reported that 800,000 government workers were furloughed. Now it is being reported that these employees have begun filing for unemployment claims.
Federal workers who are furloughed because of the government shutdown began filing for unemployment benefits almost immediately this week, uncertain about when they would be able to return to work.
Employment agencies in the District of Columbia and Maryland said Wednesday that they have already seen an increase in online applications for benefits. Virginia is requiring federal workers to fill out a special paper application to mail to Richmond.
That last statement is interesting: "a special paper application." I assume this means that the federal government and the state governments are already trying to massage the data for next week. I can already see the headline: initial claims drop, pointing to a recovering labor market. Then, deep in the story, we will read that first time claims took a huge jump but that it was due to a one-off, the government shut-down. They really don't want to include the government shut-down numbers, but one can't have it both ways.

This will be very, very interesting. The weekly numbers move up and down about 3,000 to 5,000. Earlier this week, 800,000 government workers were furloughed. Next week we start to see the trickle down effect as government contractors start laying off workers. Then the following week, the trickle down effect as tertiary operations -- the restaurants and retailer that cater to government and contract employees -- start to lay off employees. 

By the way, the article gets even more interesting:
Maryland’s Department of Labor received 4,000 unemployment claims from federal workers Tuesday — more than the state usually receives all year from federal workers, said spokeswoman Maureen O’Connor. Another 2,000 applications arrived Wednesday from federal workers.
In Virginia, all federal workers will have to submit paper applications because the Virginia Employment Commission can’t access federal workers’ wage information the same way as other employers, said spokeswoman Joyce Fogg. But workers employed by federal contractors can apply online.
Eligibility for unemployment benefits during a temporary layoff or furlough depends on the worker’s earnings.
“If they receive unemployment benefits and are then paid retroactively, they would have to pay back what they received in unemployment benefits,” Fogg said.

Look How Far We Have Come -- A Random Look Back At An Early NOG Post

Look how far we have come: this is the original NOG post. This was first posted October 27, 2009, and has been updated numerous times. Remember: back then, wells paid for themselves when they hit 100,000 bbls cumulative. Now, whatever production they get, is almost pure profit.

Some wells did very, very well:
  • 16845, Slawson, Pathfinder 1-9H, 1,418, 179,783 bbls in 14 months; t7/08; cum 504K 8/13;
  • 18109, WLL / Tollefson 44-10H / 2 / 2,507; cum 493K 8/13; 
Both  of these wells have made the "Monster Well" list. 

And So It Begins: A Is For Atlas

The Rapid City Journal is reporting:
The National Weather Service in Rapid City is reporting that an early winter storm will bring snow and strong winds to the Black Hills region Thursday night into early Saturday morning.
The Black Hills is under a Winter Storm Watch as the first named winter storm of the season, Atlas, moves into the area.
Global cooling freezing. 

Winter arrived early this year.

"A" is for Atlas.

"A" is for Algore. A better name for this winter storm, perhaps.

In Lieu Of Today's Jobs Report --

... this, as reported by MarketWatch:
Because of a sharp decline in jobs during the recession, the number of nonfarm workers is up only 5% over the past 10 years. While the past decade’s painful recession and the slow job growth that has followed has hurt most Americans, certain occupations have experienced job losses that were severe.
24/7 Wall St. compared employment figures published by the Bureau of Labor Statistics (BLS) for hundreds of occupations from May of 2002 and May 2012. In that time, the estimated number of advertising and promotions managers fell by nearly two-thirds. Because of the housing crisis, many occupations in the construction sector were disproportionately hurt, while many manufacturing trades lost jobs due to structural changes in the economy. These are America’s disappearing jobs.
The graphic below suggests the extent to which the oil and gas industry "saved" the United States:
This graphic has changed little over the past eight months (maybe longer).

Note comparison "year-to-date" vs 2012.

Almost everything is in the red. The few "green" statistics are up 0.1% to 1.1% in many cases.

But petroleum and petroleum products are in the "green" and not by a paltry 1%. Or 2%. Or 5%. Or 10%. Or 25%. But a whopping 37.5% -- almost 40% increase over last year, and remember, CBR terminals probably reached their zenith a year ago.

There's another interesting story line here.

Remember the poll in which I asked whether there would be a railcar shortage for grain due to the oil industry? Not to worry. Grain shipments are down a whopping 15% this year compared to this time last year, and this is a cumulative/average, not a one-time snapshot.

Another interesting story line: the war on coal has resulted in less than a 5% decrease in shipments over last year. There is every possibility that could turn green a year from now as "we" export more coal.

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Later: I didn't think we were going to get a jobs report today, but there it is. US jobless claims edge higher.  The spin has not changed: "the number of jobless claims edged higher, but the numbers still point to a healing labor market." That's been the headline for two years. I can't make this stuff up.
The number of Americans filing new claims for jobless benefits edged higher last week but remained at pre-recession levels, a signal of growing strength in the labor market.
Initial claims for state unemployment benefits rose 1,000 to a seasonally adjusted 308,000, the Labor Department said on Thursday.
The data could provide some of the strongest guidance this week on the health of the U.S. economy as a partial government shutdown delays the release of economic data, including the monthly employment report which was scheduled to be released on Friday.
The big question: will the 800,000 furloughed workers be allowed to apply for jobless benefits?

The Barrycades

Compare this: 

Les Miserables, the Barricade Boys

with this: the Feds barrycade a parking lot.Vladimir must be laughing. It really is quite pathetic. The greatest nation on earth barrycading parking lots which require absolutely no funding.

And that will be his legacy, regardless of whose fault it is. Reid, Boehner, Pelosi, McConnell will long be forgotten; the barrycades could become the "public image of the shutdown."

As I replay the video, this is the thought I have: there has to be real concern that no one knows where the government shutdown will lead.

Business As Usual

From The Wall Street Journal today:
Within hours of when its season-opening concert by The Philadelphia Orchestra was set to begin, Carnegie Hall was forced to cancel that performance Wednesday after its stagehands, represented by IATSE/Local One, went on strike. The unprecedented walkout follows a week of terrible news for classical music in the U.S., in which the music director of the Minnesota Orchestra resigned over its musicians' contract disputes, and New York City Opera announced it was filing for bankruptcy, ending its 70-year run as "the People's Opera." The Philadelphia Orchestra, locked out of Carnegie and still recovering from its own bankruptcy, announced that it would instead present a free concert at its home in downtown Philadelphia. 
Carnegie says that the union's demands would compromise the hall's mission by diverting significant funds away from education into stagehand fees. "In opting to strike, the stagehands have rejected a proposed new agreement that includes annual wage and benefit increases and continued jurisdiction throughout Carnegie Hall's concert venues." Calling the demand "unprecedented," Clive Gillinson, the executive and artistic director of Carnegie Hall, adds that "the stagehands have one of the most lucrative contracts in the industry," and the planned activities for the education spaces "have nothing to do with the performance-related work they do in the concert halls."

Obama's Gift That Keeps On Giving; Price In Oil Jumps 2% Yesterday; Biggest Jump In Two Weeks -- WSJ

Yesterday I wrote: the spike in the price of oil yesterday by about $2.00/bbl was due to impending completion of the southern leg of the Keystone XL.

Today, in The Wall Street Journal:
U.S. oil prices rose 2% Wednesday, the biggest jump in two weeks, as traders and investors bet that the opening of a new pipeline will help alleviate a glut of crude in the Midwest.
Investors, traders and analysts in recent weeks have been focused on the race by pipeline operators to catch up with the oil-output boom in the U.S. For almost three years, U.S. oil prices have been depressed relative to world prices and Europe's Brent crude contract. That has been due largely to a lack of infrastructure, which has caused barrels to pile up in and around Cushing, Okla., the largest storage hub in the Midwest.
Oil futures prices on the New York Mercantile Exchange jumped after TransCanada Corp.  said the southern leg of its Keystone XL pipeline, which is to pump 700,000 barrels of crude a day from Cushing to oil refineries on the Gulf Coast, was nearly complete.
"This is going to add to the drain on Cushing quite a bit," said John Kilduff, founding partner of Again Capital in New York.
I really have to thank an alert reader who caught this story 24-hours early. It's an incredible story. Yes, it will drain a lot of oil from Cushing -- for round numbers: 35 million bbls storage capacity at Cushing; the Keystone XL will drain 5 million bbls/week from Cushing, and the initial fill will be 5 million bbls. Not trivial.

And without the northern leg, it will be hard to keep Cushing filled.

When that oil reaches the Gulf Coast, only Canadian oil, as I understand it, can be exported. American oil will be refined; refined products, like diesel and gasoline, can be exported.

Wow, the refusal to permit the northern leg of the Keystone XL -- the gift that keeps on giving. Wow, I love those activist environmentalists.

The US Is Now World's No. 1 Energy Producer

This is simply an incredible story. From The Wall Street Journal -- front section, second news story, second only to the government shutdown.
The U.S. is overtaking Russia as the world's largest producer of oil and natural gas, a startling shift that is reshaping markets and eroding the clout of traditional energy-rich nations.
U.S. energy output has been surging in recent years, a comeback fueled by shale-rock formations of oil and natural gas that was unimaginable a decade ago. A Wall Street Journal analysis of global data shows that the U.S. is on track to pass Russia as the world's largest producer of oil and gas combined this year—if it hasn't already.
The U.S. ascendance comes as Russia has struggled to maintain its energy output and has yet to embrace technologies such as hydraulic fracturing that have boosted American reserves.
"This is a remarkable turn of events," said Adam Sieminski, head of the U.S. Energy Information Administration. "This is a new era of thinking about market conditions, and opportunities created by these conditions, that you wouldn't in a million years have dreamed about."
I guess that's the difference between a US EIA bureaucrat and Harold Hamm. 

This is happening despite the US government trying at all levels, in cahoots with mainstream media and activist environmentalists to shut down the oil and gas industry and kill the coal industry. I particularly enjoyed this line:
The U.S. ascendance comes as Russia has struggled to maintain its energy output and has yet to embrace technologies such as hydraulic fracturing that have boosted American reserves.
"The US government" appears, also, to question whether it should "embrace" technologies such as hydraulic fracturing. The EPA/Department of Interior appear to be trying to turn the clock back as they regulate fracking.

"We" are only where we are due to free market capitalism, the vision of entrepreneurs, and the incredibly good work by roughnecks. The US government has impeded at every opportunity.

NOG Presentation Transcript

Two things I learned from this presentation:
  • another operator that says they have 22 years of drilling inventory
  • operators don't hedge simply to get best price; they hedge to protect liquidity
At SeekingAlpha.

Some data points:
  • production: 11,000 bopd
  • completing another 218 wells; 17 net wells (that's a lot of information they are privy to)
  • cherry-picked 100 acres at a time since 2006; started at $35/acre in Mountrail County
  • now: 182,400 acres; 121 net wells
  • 1,000 remaining sites at a paltry 4 mB/3TF wells per spacing unit; doesn't include ower units;
  • held by production: 70% in North Dakota
  • 25,000 units held with Slawson in Richland County, MT
  • recently acquired 2,000 acres at $2,500/acre; but equates to $125 million CAPEX to drill it
  • at least 22 years of drilling inventory
  • EOG, CLR, Slawson: 50% of their total net wells drilled to date
Definition of a "buy down":
an operator had about 75% working interest in six drilling spacing unit in one particular area. And they ask us to buy them down to 50% interest in unit because they wanted three net wells with exposure as they drilled those six units, so they could hold those units by production.
The buzz of the conference:
the new completion design by EOG where they are tripling, in some cases quadrupling, the amount of sand they are putting into these wells, which really is improving the EURs that we are seeing.
Information in real time:
We have working interest in the Continental Charlotte unit. That was their first big lower bench test where they drilled off three, all three of the lower benches of the Three Forks which was very exciting for us to participate in. We got to see that real time.
Hedging:
And again, we are basically hedged out pretty well through 2015 at about $90 a barrel, because we don’t believe that we are hedging to get the best price, we believing we are hedging to protect our liquidity position as we continue to develop this field.

Fargo Receives First-Ever State Grant To Study CNG For City Vehicles -- $50,000 Grant

PrairieBizMagazine is reporting:
In August, the city of Fargo, N.D., received the first grant ever awarded through the North Dakota Commerce Department’s State Energy Program to study the feasibility of using compressed natural gas (CNG) to fuel city vehicles. The $50,000 grant will be used to finance a feasibility being conducted by Wenck Associates Inc., to explore the costs and best practices of converting the city’s fleet, the costs of establishing the fueling infrastructure, safety requirements, overall short-term and long-term risks and mitigation strategies and the expected return on investment. The study is expected to be complete later this year.
Fargo was selected to receive the grant because city officials had already spent several years exploring the potential use of CNG as a method of lowering the city’s fuel costs and reducing vehicle emissions. The city has also carried out a successful effort to increase the use of public transportation within the past decade and as a result requires more fuel for its fleet. Ridership on the metro’s public buses has tripled since 2004, up to 1.2 million riders annually, and the city currently spends about $4 million each year on transportation fuel for its fleet, most of which is diesel for buses.

Thursday Morning News, Links, And Views

Active rigs: 186

RBN Energy: a nice discussion on how LNG exports might affect the price of natural gas and the US industrial revival. The linked article includes a nice graphic of all the existing/proposed US LNG export terminals -- and there are a lot.
Chemicals, gas-to-liquids (GTL), steel and other industries that consume large volumes of natural gas either directly or as a fuel, expecting the new era of low and stable gas prices to continue are planning tens of billions of dollars in new or expanded facilities in the U.S. But how many of those plans will become a reality? Could the much-anticipated industrial renaissance be undermined by the higher gas prices that might come with the approval of a few more LNG export terminals, new environmental regulations that spur still more gas-fired power generation, and higher natural gas exports to Mexico?
The Wall Street Journal

No movement in shutdown standoff. That suggests to me that internal polling does not yet show which side the American public is on. Again, when the major issue is opening national parks, and it took a special bill to pay the military, it put things into perspective. By the end of October, we are going to have a much bigger problem: debt ceiling. The president has said he will not negotiate on current shutdown nor on the debt ceiling. Speaks volumes about this president.

For those who support the president on this, this is very, very telling -- President Obama tried to shut privately owned Mount Vernon -- George Washington's home. Wow.  The pictures are worth a thousand words.

Les Miserables, the barricade scene
 
Switching gears, and just in time for Halloween:
George Bernard Shaw, often the most acerbic of critics, swooned over him. "Poe constantly and inevitably produced magic where his greatest contemporaries produced only beauty," Shaw wrote in 1909, the centenary of the writer's birth. 
By contrast, a less impressed T.S. Eliot chided Poe for his "carelessness and unscrupulousness in the use of words," though he acknowledged Poe's importance to French poets such as Baudelaire and Mallarmé. In 1875, Walt Whitman was the only major American literary figure who deigned to show up at Poe's reburial and monument dedication in Baltimore. Whitman later wrote that he detected "a demoniac undertone behind every page," but nevertheless appreciated "Poe's genius."
These assessments are part of a Morgan Library & Museum exhibition, "Edgar Allan Poe: Terror of the Soul," that includes Poe daguerreotypes and other images; manuscripts, letters and first editions, and even a fragment of Poe's original coffin.
One bit of trivia on Poe from the article:
For example, Mr. Kiely says, "he was the first serious critic of Dickens in the U.S.," and managed to guess the outcome of the murder plot in Dickens's serialized "Barnaby Rudge." As a result, Dickens eliminated the clues Poe had identified when he published it in book form. The two writers met in Philadelphia in 1842, the year Poe went bankrupt, and a letter from Dickens to Poe is in the exhibition.
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From Bloomberg: while the US dithers, China surges:
A Chinese services-industry index rose to a six-month high, adding to signs that the world’s second-biggest economy will sustain a rebound after a two-quarter slowdown.
The non-manufacturing purchasing managers’ index rose to 55.4 in September from 53.9 in August, the Beijing-based National Bureau of Statistics and Federation of Logistics and Purchasing said today. A number more than 50 indicates an expansion.