Wednesday, October 30, 2013

For Archival Purposes: Analyst Thinks California Is Back In The Oil / Fracking Business; If So, It Won't Be Any Time Soon

Rigzone posts an analysis by John Kemp, a market analyst. He thinks now that California has approved fracking with stricter regulation, the state is back in the oil / fracking business.

The first few paragraphs of this five-page internet article:
LONDON, Oct 30 (Reuters) - California's lawmakers have ensured the state will remain a major oil and gas producer by approving new legislation allowing hydraulic fracturing and acid treatments to rejuvenate its ageing wells in exchange for strict controls and tougher enforcement. 
Senate Bill No 4 (SB 4), which Governor Jerry Brown signed into law on Sept. 20, directs the state Department of Conservation and other agencies to adopt new rules and regulations covering well construction, fracturing and other well stimulation treatments by the start of 2015
The chemicals used will have to be disclosed to regulators and published, subject to special treatment for trade secrets. Penalties for violating certain regulations on oil and gas operations were increased from $25,000 per violation to between $10,000 and $25,000 per violation per day. 
In another concession to environmental and community groups worried about the safety of fracturing and acidizing, the law directs the state's Natural Resources Agency, which focuses on environmental protection rather than oil and gas production, to conduct an independent scientific study into the hazards and risks.
I'm sure the anti-oil lobby can delay the publishing of these "new rules and regulations" well past the "start of 2015."

Posted for archival purposes only.

Daily Activity Report For Tuesday, October 29, 2013 -- Late Posting; Twenty-Six New Permits -- If Not A Record, Nearly A Record -- The Williston Basin, North Dakota, USA

Due to my traveling, I completely forgot about posting the daily activity report for yesterday, Tuesday, October 29, 2013. And what a day to miss: 26 new permits, five producing wells completed, and two of those made the "high IP" list.

This is really quite remarkable: 26 new permits. That certainly is a record, or nearly a record, for number of new permits in one day.

Twenty-six (26) new permits --
  • Operators: Hess (5), XTO (11), HRC (4), CLR (6)
  • Fields: Heart Butte (Dunn), North Tioga (Williams), Lindahl (Williams), Robinson Lake (Mountrail), Grinnell (McKenzie), McGregory Buttes (Dunn)
  • Comments:
Wells coming off the confidential lists for the last several days are posted; see sidebar at the right.

Five (5) producing wells completed:
  • 24469, 2,521, Statoil, Viking 16-15 2TFH, Poe, t9/13; cum --
  • 24865, 803, True Oil, Nelson 41-24-24-23H MB1, Red Wing Creek, t9/13; cum 2K 8/13;
  • 25685, 92, Corinthian Exploration, Corinthian Brandjord 9-4 1H, North Souris, t9/13; cum --
  • 23096, 825, QEP, MHA 1-06-05H-149-92, Heart Butte, t9/13; cum --
  • 23094, 2,512, QEP, MHA 2-06-05H-149-92, Heart Butte, t9/13; cum --
One well name change suggesting Slawson is targeting the middle Bakken with this well:
  • 24796, conf, Slawson, Blackdog 3-13-14H, Stockyard Creek,

The Dog Ate My Homework

Alaska has thrown in the towel, at least temporarily on ObamaCare citing the dog ate my homework a faulty calculator. A faulty calculator. One can download a calculator free at google. Yes, I know we're talking about a slightly more sophisticated calculator, like subtracting $100 from bronze, silver, gold, and platinum insurance plans, but for $150 million and rising, one would think that a calculator would be the least of the problems.

Washington State has/had the same problem, according to the source, but whereas Alaska underestimated subsidies, Washington State overestimated subsidies.

As a public service reminder, Consumer Reports recommends folks stay away from ObamaCare on-line enrollment sites.


Reuters is posting an incredible story on how bad the ObamaCare website story really is.

This may be the first Obama scandal that the administration cannot ride out simply by ignoring it. The administration ignored every past scandal until the next scandal came along and folks forgot about the previous scandal. There's something to suggest that this debacle won't go away simply by ignoring it. It is now a cocktail party subject, with folks checking their iPhones to see if the ObamaCare website is up and running.

From the linked story:
This year, the bills skyrocketed. The government spent $27.7 million more in April, an additional $58 million in May and, in its latest outlay, $18.2 million in mid-September.
According to the government records, that brought the total spending for CGI's work on to $196 million. Adding in potential options, the contract is now valued at $292 million.

The changes to the contract came in response to more detailed requirements about how the site should operate, said a person at CGI familiar with the work. 
When CMS awarded CGI Federal the first $55.7 million delivery order in 2011, "most of the regulations and guidance implementing the Affordable Care Act had not yet been finalized," said the person with knowledge of the award.

Natural Gas Corridors In The United States

From The Wall Street Journal (the link will probably break soon):
Operators of some of the largest U.S. truck fleets, including Lowe’s Cos., Procter & Gamble Co. and United Parcel Service Inc., are accelerating a shift to natural gas fueled trucks, betting on new engine technology that promises to drop the cost of shifting from diesel fuel.
Home-improvement retailer Lowe’s wants its delivery company to shift all of its several hundred trucks to natural gas by 2017. P&G already has 7% of its trucks on gas and could reach as much as 20% within two years. UPS says it plans to buy 1,000 natural gas trucks by the end of next year. FedEx Corp. plans to shift 30% of its long-distance trucks to natural gas over the next decade.
For related stories, see the articles at the "tags." Natural gas corridors will now be tracked at "The Big Stories." 

New "Screen Shot" For "The Million Dollar Way" When The Webmaster Is Off The Net

At 5:37 p.m., October 29, 2013, I checked the ObamaCare site. The state sites are up and running. The federal site is "down." Ms Sebelius says that the federal site has never "crashed." She said that during her testimony earlier today. While testifying, the system "crashed," "went down," whatever. Perhaps it was hacked. The security system has never been tested "end-to-end," but folks who worry about the security of Facebook, Google, and Apple, are happily providing the government site with social security numbers and other "private" information.

The government said it would be up "soon." So I checked. I assume this will become the next cocktail chatter, folks checking on their iPhones to see if the system is up.

If you check, be sure to go to a state that has the federal site. Again, the state sites are up and running. The site run by President Obama/Ms Sebelius is "down at the moment."

If you want to hear a recording, "you might" call the 1-800 number. And then, again, "you might" not.

Thirteen (13) New Permits; Some Great Wells Reported; Update On A Well That Was Being Re-Fracked

Someone recently asked if I had any update regarding any MRO wells that were going to be re-fracked. Look at the note at the bottom of this post.  

I don't see any wells coming off the confidential list Thursday.

Active rigs: 182

Thirteen (13) new permits --
  • Operators: Oasis (5), Abraxas (4), Slawson (2), OXY USA (2)
  • Fields: North Fork (McKenzie), Camp (McKenzie), Big Bend (McKenzie), Fayette (Dunn), Manning (Dunn)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right. 

Six (6) producing wells completed:
  • 25186, 2,170, QEP, Bert 1-2-11BH, Grail, t10/13; cum --
  • 24299, 1,687, HRC, Fort Berthold 148-95-13A-24-3H, Eagle Nest, t9/13; cum --
  • 23505, 2,147, HRC, Fort Berthold 152-93-17D-08-7H, Four Bears, t9/13; cum --
  • 23554, 2,909, HRC, Fort Berthold 152-94-14D-11-4H, Antelope, t8/13; cum 40K 8/13;
  • 25235, 2,285, BR, Everglades 21-3TFH, t8/13; cum --
  • 25279, 2,966, BR, CCU Williams 24-20MBH, t10/13; cum --
There were five well name changes, none seemed significant, except American Eagle's Wade well in Divide County will now be an Olaf well. 

Marathon has temporarily abandoned:
  • 16987, TA/373, MRO, Willard Kovaloff 21-17H, NENW 17-144N-95W,  Murphy Creek, t6/08; cum 102K 8/13; it was taken off-line for all practical purposes in November, 2011.  This wells was fracked with one (1) stage using 543,300 lbs of sand; an open hole frack, 6/16/2008. Then this note dated 5/9/12:  "After fracking the first stage, plug and perf tools were lost in the well at 13,878 feet. Work was done to try and retrieve; to no avail. Frack was stopped at that time. Flowed back some water, but no oil. One stage was fracked using 67,452 lbs of proppant. 

To the best of my knowledge, there is no Bakken operator with the name noted below, so I assume whoever sent me this letter anonymously is, in fact, a figment of one's imagination.

October 29, 2013

From: Bakken's Best Oil & Gas Exploration Company
To: [redacted]

Dear Jim,

As you know, you've been receiving in excess of $80,000/month (on average) in royalty payments for the well drilled in section [redacted] for the past year or so. It is an incredible well and we had hoped to drill several more Bakken and Three Forks wells on that drilling unit. That well is too remote to economically lay a natural gas pipeline.

Based on the NDIC ratio of 80-1, and the amount of natural gas flared from the existing well, you would be receiving about $56/month if we gathered, processed, transported, and sold the "wet" natural gas from that well, in addition to the (average) $80,000/month you have been receiving for quite some time.

As you know, you collect royalties on any flared natural gas after the initial natural gas royalty-free period.

We notice that you have joined the class action suit, claiming that we underpaid you for the natural gas that was flared after the initial natural gas royalty-free period.

Our records show that we made all the correct payments during this time period. It appears we will sort that out later.

For now, however, as you know, operators desire a good working relationship with mineral owners. I assume you are also aware that there are thousands, maybe tens of thousands of well sites that need to be drilled. Many of those sites are located in areas with better prospects than "your" well.

Although we had planned to drill upwards of ten more wells on that spacing unit, netting you untold millions of dollars in royalties, we have decided to move the rig elsewhere and concentrate on wells and areas where natural gas pipelines exist. This has nothing to do with the class action lawsuit, per se. It simply brought to our attention that you want us to be good stewards of the environment. So, we will drill where it makes sense to lay natural gas pipelines, construct natural gas processing plants, and where we have customers for that natural gas (which is becoming more and more difficult to the relative glut of natural gas in the United States).

We don't expect to get back to your area for several years. Off the record, we have learned that the Sierra Group might have found a pair of breeding sage grouse on your land, and it is our expectation that over the next few years, the environmental groups will succeed in their efforts to get this area declared a "safe zone." By that time, the decline rate of a Bakken well will mean that your royalties will .... well, you get the picture.

Sincerely yours,

CEO, Bakken's Best Oil & Gas Energy


Disclaimer: I'm pretty sure the letter above is fictitious. There is no group that I know of by the name, "Sierra Group."The writer probably meant to say "Sierra Club."


Okay, if you've read this far: it is a fictitious letter. Completely made up. Consider it an op-ed piece.

An Indication Why New York State Has Been Ambivalent Regarding The Marcellus

[Note: I don't want to get too far off course from the Bakken, but if folks are curious about the "wet" natural gas industry, the current corporate presentation by Range Resources is outstanding. In the post below, I was only concentrating on one small story line. In fact, the entire presentation is full of "wet" natural gas data, some of which is applicable to the Bakken.]


It's always been an enigma to me why New York State has been so ambivalent about fracking. Yes, I know the environmental / political controversy regarding fracking, but when there is a lot of money involved, sane men and women usually come to some sort of compromise. But, so far, New York State has not moved on approving fracking, though there are stories that New Yorkers may yet see fracking in their state.

Assuming there are sane men and women in New York, one has to ask the question why the state ha not come up with some sort of compromise.

Take a look at Range Resources' most recent corporate presentation, which can be found at the company's website.

Go to slides 11 - 14 of that October, 2013, presentation (I assume this presentation will change in the next month or so).

The map shows very little of the surrounding states, but even so, it is obviously the "Marcellus" and "Pennsylvania" are almost synonymous. The Marcellus extends into Ohio and West Virginia, but nothing compared to Pennsylvania.

But here's the bigger story: not only does it hardly extend into New York, what little extension there is into New York, the gas in place (GIP) is not very impressive.

This suggests a reason why the governor has been ambivalent about fracking: there may not be all that much reason to go after the gas in New York State. It may not be worth the political cost. It's very clear, God favored Pennsylvania when it came to oil and gas.

Again, there has been a lot written about the ban on fracking in New York State. Like all the hand-wringing on flaring in North Dakota, fracking in New York State is a red herring, or a McGuffin.


For investors, the Range Resources presentation is very interesting.  Range Resources has 540,000 acres in the Marcellus; with assumed spacing of 80-acre units, Range has about 6,750 potential Marcellus Shale locations. Range has drilled only 7% of their potential locations.

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.

Oops! They Did It Again! SM Blows Past Analysts' Expectations. SM Reports Earnings: Beats By 46 Cents

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

Regular readers might remember that just a few days ago Whiting blew past analysts' expectation

Data points from the SM Energy press release:
  • record quarterly average daily production of 138.8 MBOE per day at top end of guidance range of 132 - 139 MBOE per day
  • quarterly production mix of 50% liquids/50% natural gas
  • quarterly GAAP net income of $70.7 million, or $1.04 per diluted share
  • adjusted quarterly net income of $105.4 million, or $1.54 per diluted share
  • record quarterly EBITDAX of $410.4 million
  • net cash provided by operating activities of $404.5 million exceeds capital expenditures of $387.4 million 
  • successful Wolfcamp B well (30-day peak initial production 1,226 BOE per day)
  • company adds acreage in Midland Basin with potential in multiple benches of the Wolfcamp interval 
Beats by 46 cents.
Independent energy company SM Energy reported third-quarter results today after the market closed, showing that it posted total operating revenues of $613.1 million, a robust 62% gain from the $379.0 million in the same period the previous year, and ahead of the $596.8 million Capital IQ consensus estimate.
With adjusted net income coming in at $105.4 million, or $1.54 per share, well ahead of the $9.7 million, or $0.14 per share in the same period in 2012, it easily outpaced by $0.46 the CapIQ estimates of $1.08 per share.
SM is trading at a new high, almost 5% higher today. 

Montana Update

The Fairfield SunTimes is reporting:

Two completions in Richland County, both by Continental Resources:
  • Clayton-Rita HSU, total depth of 20,250; an IP of 215
  • Gidley 1-18H, total depth of 13,124; an IP of 264

Wednesday. Another Stellar Obama Economy Jobs Report: "Average Monthly Growth Has Fallen Below 150,000."

I see "we" had another stellar month with regard to jobs. Data points as being reported by Reuters:
  • 130,000 jobs added; less than the 150,000 required
  • 200,000 is the magic number; at least 200,000 required to keep things going
  • so, 130,000 is about as bad as it gets -- until it gets worse
  • oh, it did get worse: last month's tepid report was revised....drum roll ... down
  • last moth: revised from 166,000 to 145,000
  • quote from link:
"Average monthly growth has fallen below 150,000," said Mark Zandi, chief economist of Moody's Analytics, in a statement. "Any further weakening would signal rising unemployment. The weaker job growth is evident across most industries and company sizes."

Active rigs: 182

RBN Energy: update on California's energy needs. Less natural gas will be used, but Southern California Gas and San Diego Gas & Electric (both subsidiaries of Sempra Energy) are developing proposals to expand their gas pipeline systems, especially the part that feeds the San Diego area. Those plans will roll out in the next few months. That seems to be counter-intuitive, but the RBN Energy folks explain why.

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

Twelve companies announced increased dividends/distributions including Burger King and Williams Partners.

While driving last night, I heard that ObamaCare was "enrolling" 17,000 applicants/hour but now, this morning from CNNMoney: the ObamaCare site had another "outage" overnight. I was aware that the site was overwhelmed and not working as advertised when it came on-line, but I was unaware that there were actual "outages." Connecticut had good news: the system was preventing completing the full registration process, but some functions were still working. Yes, the "sister" site that explains how ObamaCare works would still be up.

Two data points:
Another data point for one of the nominees of the 2013 Geico Rock Award, I'm sure.