Monday, October 14, 2013

Seven (7) New Permits; Four Wells Coming Off The Confidential List Tuesday

Active rigs: 183

Seven (7) new permits --
  • Operators: QEP (3), Triangle (2), Fidelity, Whiting
  • Fields: Heart Butte (Dunn), Stanley (Mountrail), Timber Creek (McKenzie)
  • Comments: Whiting has a permit for a wildcat in Golden Valley
Wells coming off the confidential list over the weekend have been posted; see sidebar at the right.

Wells coming off the confidential list Tuesday:
  • 22666, drl, Enerplus Resources, Pinto 149--93-29A-32H, Mandaree, no production data,
  • 24394, 399, Liberty Resources, Anderson 152-103-28-33-1H, Glass Bluff, t5/13; cum 27K 8/13;
  • 25100, 1,707, MRO, Cora 31-14TFH, Reunion Bay, t8/13; cum 7K 8/13;
  • 25177, conf-->loc, KOG, P Wood 154-98-4-26-35 13H, Truax, no production data,

Unitization -- What It Means For Mineral Owners

Earlier it was posted that QEP is looking to "unitize" the Grail-Bakken field in the Williston Basin, North Dakota.

I was hoping someone would ask the question: what does this mean for mineral owners? And someone has asked the question. I am not a mineral owner, so I prefer to let others answer.

You can join in the discussion over at the discussion group (open to all, no registration required, but all comments are moderated, meaning there could be a delay before comments are posted, among other things).

Not knowing a thing about unitization other than the little bit from other websites, two things come to mind:
  • the rules for the entire field would now be uniform, making permitting process more streamlined
  • unitization would allow operators to be more effective/efficient in developing the field (maximizing production from each mineral acre)
Assuming that every last acre in the Grail is now held by production, I can't imagine unitization would adversely affect mineral rights owners all that much, but I don't know. Hopefully folks will provide some insight.

I have blogged about unitization in the past; some of these posts are very old, and I'm almost embarrassed to bring them to your attention again. I am learning as I go along, and some of these posts are, well, quite embarrassing:

EOG -- For Investors

For investors, there is another article on EOG at SeekingAlpha. I have not read it. I scanned it and noted the author does mention the Bakken.

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

The Spraberry Trend In The Permian


February 26, 2018: EIA update.

May 16, 2017: USGS releases its 2017 assessment of the Sprayberry.

June 21, 2016: update on the Permian, Forbes

August 18, 2014: Motley Fool recycles/repackages story on Spraberry/Permian

July 13, 2014: Rigzone update on the Permian; an important article. 

Jim Cramer's The Street: Spraberry (Permian) is bigger than both the Bakken and the Eagle Ford. When someone says any field is bigger than the Bakken, I tell them: "show me the numbers." The USGS says the Bakken is the largest continuous reservoir in the lower 48 and the USGS numbers are significantly lower than CLR's estimates.

Other sources

The Spraberry -- wiki

Cool story on the Permian, May 11, 2016.
Original Post
I have tried to avoid talking about this oil company and this oil field, but a reader alerted me to an article today, and I said I would post it/link it.

SeekingAlpha reports on Pioneer Natural Resources and the Spraberry Trend in the Permian. There are several oil plays in the Permian, and it is confusing for me to keep track of them all.

As I noted in an earlier post, this is the "analogy":
  • the Williston Basin::the Bakken/Three Forks
  • the West Texas Permian Basin::Wolfcamp, Spraberry, Cline, Delaware, others
  • the West Gulf::Eagle Ford
The importance of the linked SeekingAlpha article is the information about the Spraberry, not the oil company featured. (Remember, my site is not an investment site. I started the site to help me understand the Bakken, and to understand the Bakken better, it helps to compare it to other fields.)

Note the graph.

The estimates of recoverable oil are very, very conservative based on the Bakken estimate. Harold Hamm, CLR, suggests there is 903 billion bbls of original crude oil in place in the Bakken. In some places, only 1% may be technically recoverable; in other places EOG says it is recovering 8% and possibly more. If five percent (5%) of Bakken OOIP is recovered that could amount to 45 billion bbls of crude oil in the minds of some. That is still less than the 50 billion bbls of potentially recovered oil in the Spraberry Field as noted in the graph at the linked article.

The importance of this article suggests to me that the US is not going to run out of oil in my investing lifetime. In fact, with natural gas, conservation, electric vehicles, wind, and solar, the US could be sitting in an energy sweet spot for decades to come.

Testing ObamaCare On-Line; Deductibles


October 15, 2013: talk about perfect timing. I posted the note below yesterday. Today, Bloomberg is reporting that more patients are now paying up-front before seeing their physician, as deductibles spread. Exactly as noted below. And once the 47% who would never vote for Mitt Romney now learn how insurance works, I assume most new ObamaCare enrollees will cancel after about three months of paying their premiums. Again, the better plans have $12,000 of annual deductibles. From the linked article:
When Barbara Retkowski went to a Cape Coral, Florida, health clinic in August to treat a blood condition, she figured the center would bill her insurance company. Instead, it demanded payment upfront.  
Earlier in the year, another clinic insisted she pay her entire remaining insurance deductible for the year -- more than $1,000 -- before the doctor would even see her.
“I was surprised and frustrated,” Retkowski, a 59-year-old retiree, said in an interview. “I had to pull money out of my savings.”
The practice of upfront payment for non-emergency care has been spreading in the U.S. as deductibles rise. Now, the advent of the Patient Protection and Affordable Care Act is likely to accelerate that trend.
Many of the plans offered through the law’s insurance exchanges have low initial premiums to attract customers, while carrying significant deductibles and other out-of-pocket cost sharing. The second-lowest tier of Obamacare plans in California, for example, carries a $2,000 annual deductible.
My original post was wrong on one count: I thought clinics would waive the deductible, happy to get the 90% from the insurance company. But I guess the clinics have learned that insurance companies do not pay until after the deductibles are met. 

Original Post
I went to both the California and the Texas on-line health care exchanges where one can see the cost of the health care programs offered and then check to see if one is eligible for subsidies (I am not eligible for subsidies).

The interesting thing: I was able to shop for a health care policy BEFORE submitting my income data or any personal data in both Texas and California. In fact, one can play around with various ages and sexes just for the fun of it. Here is the Texas site. Make up your family, your ages, and start shopping.

It was interesting to see how much health care in either state is going to cost. The "best" plans in California and Texas are both about $1,000/month with a $12,000 annual deductible for two adults, husband and wife, each over the age of 55. We would pay $1,000 a month and then pay no costs after the $12,000 annual deductible is paid. 

Forbes suggests that the Obama administration knew that folks would be shocked at how expensive health care was going to be:
On average, the cheapest plan offered in a given state, under Obamacare, will be 99 percent more expensive for men, and 62 percent more expensive for women, than the cheapest plan offered under the old system. And those disparities are even wider for healthy people.
Forbes suggests that is the reason the Obama administration requires one to enroll before one can begin shopping. One has to supply personal information including social security number and income before beginning to shop.

It's an interesting article.

Two points that the article may or may not discuss; I scanned it quickly:
  • Obamacare will not cover the poorest of the poor. One has to have some income to qualify.
  • even with subsidies, the poorest of the poor who are eligible are unlikely to sign up
Here's the example Forbes provided:
So, by analyzing your income first, if you qualify for heavy subsidies, the website can advertise those subsidies to you instead of just hitting you with Obamacare’s steep premiums. For example, the site could advertise plans that “$0″ or “$30″ instead of explaining that the plan really costs $200, and you’re getting a subsidy of $200 or $170. But you’ll have to be at or near the poverty line to gain subsidies of that size; most people will either not qualify for a subsidy, or qualify for a small one that, net-net, doesn’t make up for the law’s cost hikes.
Forbes focused on whether one would qualify for the subsidy in the first place. The fact is, once you have your insurance policy, rich or poor, you have the same co-pays and/or deductibles as everyone else in any given plan. My hunch is that anyone who qualifies for a $30 premium (regardless of the true cost of the plan) is not going to be able to make the co-pay or the deductible. My hunch is that that clinic will waive the co-pay/deductible; the clinic will be happy to get 90% of the cost of the visit back from the insurance company. But that assumes the individual who qualifies for the $30 premium actually pays the premium. My hunch is, at best, a healthy individual on the margin (financially) will pay two or three months before dropping out. The only financially marginal enrollees will be folks with pre-existing conditions in which they will get thousands of dollars of care in exchange for a $30 premium. It doesn't take a rocket scientist to note this system will not last long.

Under ObamaCare, one can start to sign up now. As of January 1, 2014, the insurance companies underwriting these subsidized policies will start having to pay physicians, clinics, and hospitals for the bills that start to come in. I think by July 1, 2014, we will know how ObamaCare has worked out.

The good news: there are some incredibly inexpensive plans for healthy males and healthy females born after 1980.

Back to something else the Forbes article did not mention: once enrolled, the federal government now has additional digital data regarding your status, regardless of whether you complete the process to actually purchase insurance. Do you remember the story on the first ObamaCare enrollee? He enrolled, but said he did not purchase any insurance. He wasn't ready to buy any insurance; he just wanted to check things out. He was the $28,000/year free-lance movie director out in California, who, until now, had his health insurance paid for by his dad. My hunch is he will not purchase a health insurance policy in 2014. He's healthy.

The Kemper Clean Coal Plant: Great Story In The Wall Street Journal On Clean Coal Technology

This story is now tracked here

Link here: the cost of "clean coal."

Some data points and notes from the article:
Mississippi Power Co.'s Kemper County plant here, meant to showcase technology for generating clean electricity from low-quality coal, ranks as one of the most-expensive U.S. fossil-fuel projects ever—at $4.7 billion and rising. Mississippi Power's 186,000 customers, who live in one of the poorest regions of the country, are reeling at double-digit rate increases.

Meanwhile, the plant hasn't generated a single kilowatt for customers, and it's anyone's guess how well the complex operation will work. The company this month said it would forfeit $133 million in federal tax credits because it won't finish the project by its May deadline.

One of just three clean-coal plants moving ahead in the U.S., Kemper has been such a calamity for Southern that the power industry and Wall Street analysts say other utilities aren't likely to take on similar projects, even though the federal government plans to offer financial incentives.
Southern recently took $990 million in charges for cost overruns approaching $2 billion.
And this is amazing:
Southern last year decided against purchasing a 10-year-old gas-fired plant in Jackson, Miss., that would have generated about as much electricity as Kemper. Another company bought it for $206 million, billions less than Kemper will cost.
The Obama Legacy:
Rising on what was once farmland here, the 582-megawatt Kemper plant is designed to convert a low grade of coal, lignite, into clean-burning syngas, which is similar to natural gas. As part of that process, the plant will strip out and capture 65% of the carbon dioxide, a greenhouse gas, that would have been released into the atmosphere by burning coal. Turning coal to gas before burning it, or gasification, has proved necessary for capturing CO2 because efforts to cull it from plants that burn coal haven't been practical.
Keeping CO2 out of the atmosphere is a goal of the Obama administration's since greenhouse gases have been implicated in climate change. The government last month set limits on CO2 emissions from new power plants and cited Kemper as evidence that power plants could meet the new standards.
Some of the poorest people in the US, those who can least afford it, are now seeing first-hand what the "war on coal" means to them. As noted at the beginning of the article:
Mississippi Power's 186,000 customers, who live in one of the poorest regions of the country, are reeling at double-digit rate increases.

From Wiki

As of October 4, 2014:
The Kemper Project, also called the Kemper County Energy Facility, is an electrical generating station currently under construction in Kemper County, Mississippi. 
The station is scheduled to open in May 2015, more than a year behind schedule, at a cost of $5.53 billion, making Kemper one of the most expensive power plants per kilowatt in the United States.
Kemper will use a technology known as "transport integrated gasification" (TRIG) to convert lignite coal—mined on the Kemper site—into natural gas. The natural gas will then be used to power turbines to production electricity, which will be shipped to customers. The integrated gasification combined cycle used at the plant will utilize clean coal technologies.

Around The Horn -- 14th Day Of The 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. 

30-second sound bite: oil continues to slide toward the $100 support. Bakken operators are significantly outperforming the majors. Sweet. The market is extremely volatile today: futures were down as much as 128 points; during the day gradually clawed itself into the green.  This is a snapshot at noon. Things could be easily changed by the end of the day. [End of the day in brackets.]

KOG trading at a new high, up over 1%. I used to consider KOG the bellwether stock to track the Bakken. About a month ago (sometime in September, 2013), I began re-thinking this. I now consider HK the bellwether stock to track the Bakken. [Closes up 1.5%; new high, $12.77.]

HK is up about 1.4%; about $4.95. [Closes up almost 3% at $5.5.]

Oasis is trading at a new high, up over 2% today. [Closes up almost 4%, at new high.]

WLL is up 1.4%; near its 52-week high.

CLR is up a bit today; well off its 52-week high; has been on a tear past few weeks. [Closes up almost 1%; less than a buck off its all-time high.]

CVX, COP, XOM: CVX finally in the green; warned on 3Q13 earnings; COP up slightly, but trading at a new high; and XOM up slightly also.

EOG is up slightly; near its 52-week high. [Closes up over 1.1%; trades at a new high.]

CHK is down slightly; about a buck below its 52-week high.

SD is down about one-half percent; in a trading range.

AMZG is ten cents over a nice entry point of $2.00. [Closes at $2.12.]

TPLM is up about 2%; near its 52-week high. [Dropped back at close; up about 1.1% for the day.]

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

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? Down about a percent today. [Closes half-a-percent today.]

TransCanada is down slightly; well below its high.

Monday -- The 14th Day Of The Government Shutdown

Active rigs: 183

Special: for those who have been regular readers of the links to RBN Energy you already know about this -- the story posted in today's Wall Street Journal's "Heard On The Street": US shale storm hits Canadian gas.
Canada sits just across the border from the world's largest oil and gas market, and its biggest ally. But successful development of U.S. shale resources is spoiling it all. Alberta's oil firms suffer steep discounts already as they try to sell into a glutted U.S. market, not helped by opposition to the Keystone XL export pipeline.
Now, Canada's natural-gas sector is getting squeezed by its neighbor's newfound riches.
Historically, the northeastern U.S. sucked in gas from the Gulf Coast and Canada, especially during winter. For example, New York state imported a net 892 billion cubic feet from Canada in 2007, according to the Department of Energy. But the region's Marcellus and Utica shale basins are upending this. In 2011, the last year for which data are available, New York state took just 286 billion cubic feet from Canada.
For today's RBN Energy:
This is the fourth installment in our series covering fuel oil infrastructure on the Gulf Coast. In the first episode we provided definitions for some of the many types and grades of fuel oil). We discussed the main markets for fuel oil as a feedstock for refineries and as bunker fuel for ships. There is also demand for fuel oil or its derivatives in manufacturing industry and power generation. In episode two we looked at the Houston Fuel Oil Terminal Company (HFOTCO) that has been the dominant player in fuel oil blending, storage and export on the Gulf Coast for thirty years. In episode three we covered the brand new kid on the Houston Ship Channel block – Battlefield Oil Storage Company . This time around we start a two part review of fuel terminals in the Caribbean.
Global cooling:
  • record cold in Holland: it has never been so cold in the Netherlands on 11 October as this year. Friday's temperature at the official weather station in De Bilt rose to only 8.6°C. The previous record dates back to 1975 when it reached 9.7°C (9.0°C = 48°F).
  • early snow in Munich: Meteorologists warned us that snow was on the way and would fall below the 500 m elevation in southern Germany and elsewhere,” says reader Casper. “Moreover, they warned us that this winter could be one of the worst in 100 years for Central Europe.
The Wall Street Journal

Shutdown. Debt ceiling. Impasse. Deadlock. 

More jobs for Texas: GM on Monday will open a $200 million metal-stamping plant adjacent to its Arlington, Texas, factory. By locating parts near the assembly plant, GM hopes to save about $40 million a year in shipping costs.