Tuesday, November 19, 2013

No Comment Necessary

Rigzone is reporting:
At a time when money is tight and spending cuts are front and center in Congress, the oil and gas industry is proving to be a boon to public sector coffers.
A combination of fees and royalty payments worth more than $14.2 billion – the second-highest  amount ever – has been paid to the federal government by oil and gas companies that drilled on public lands or U.S. waters during the fiscal year ending on October 1, 2013, according to the Congressional Joint Committee on Taxation.
The bounty, which was collected by the Interior Department, was $2 billion above year-earlier levels. Some of the increase can in part be chalked up to a combination of hydraulic fracturing and horizontal drilling that has led the current boom in onshore drilling and the Gulf of Mexico.
The rise in fees is also associated with a government decision dating back six years ago to increase offshore royalty rates to help fund conservation programs and local governments.
Finally, the rise in revenues paid by the oil and gas sector reflects how bonus bids from oil and gas auctions in the Gulf of Mexico were recorded by the government in 2012 and 2013.
Okay, one comment: how much did the Interior Department receive in fees and royalty payments from wind and solar energy? 

Twelve (12) New Permits -- The Williston Basin, North Dakota, USA; The New NG Processing Plant Will Almost Exceed Total NG Processing Capacity In All Of North Dakota in 2006 (One Year Before The North Dakota Bakken Boom Began)

The big news today: ONEOK announces a huge new natural gas processing to be built west of Watford City, southeast of Williston, North Dakota, again, in the heart of the Bakken. 
This will be a 200-million cubic feet per day (MMcf/d) natural gas processing facility – which almost exceeds the total natural gas processing capacity in North Dakota in 2006. In 2006, the total natural gas processing capacity in North Dakota was 227 million cubic feet per day

Active rigs: 184

Twelve (12) new permits --
  • Operators: CLR (6) EOG (3), Statoil (2), Whiting
  • Fields: Northwest McGregor (Williams), Parshall (Mountrail), Ragged Butte (McKenzie), Sanish (Mountrail)
  • Comments:
The wells coming off the confidential list were posted earlier; see sidebar at the right.

Wells coming off the confidential list Wednesday:
  • 25224, 110, Whiting, BSMU 3007, Big Stick, a Madison well, t8/13; cum 6K 9/13;
  • 25441, drl, QEP, Kummer 1-6-7BH, Grail,
  • 25519, drl, SM Energy, Walla 13-19H, Poe,

Why I Love To Blog -- Incredible Timing, November 19, 2013 -- A Must Read: ONEOK Announces 7th NGL Processing Plant In The Bakken; Another ~ $Billion Investment In The Bakken

For quite some time I have mentioned that we won't see a decrease in flaring until we see an increase in natural gas processing capacity.

In fact, yesterday, I wrote a very, very long post on exactly that subject: suggesting it was not a shortage of pipeline to wells, but a shortage of natural gas processing plants and capacity

I suggested that the operators had done their part, putting their wells on natural gas pipelines, but the "system" had let them down by not providing adequate natural gas processing coverage.

When I wrote that post, I also did not know (and could not find) the status of the ONEOK Bakken NGL pipeline.

A reader just sent me the following story. One word: I.N.C.R.E.D.I.B.L.E.

From an ONEOK press release:
ONEOK today announced plans to invest approximately $650 million to $780 million between now and the second quarter 2016 to:  
  • Build a new 200-million cubic feet per day (MMcf/d) natural gas processing facility – the Lonesome Creek plant – and related infrastructure in McKenzie County, N.D., in the Bakken Shale in the Williston Basin; the Lonesome Creek plant is the partnership's sixth new natural gas processing plant built in the region since 2010 and seventh plant overall; and
  • Complete a second expansion of the Bakken NGL Pipeline, which will increase the pipeline's capacity to 160,000 barrels per day (bpd) from 135,000 bpd.
Flashback. Back on April 26, 2013, the question was asked where the next natural gas processing plant would be built. The opinions then:
  • northeast McKenzie County, in Watford City area: 36%
  • on the Fort Berthold Indian Reservation: 12%
  • just off the reservation, to the west: 10%
  • western Mountrail County, in the Stanley area: 24% (MDW voted this choice)
  • in Whiting's Pronghorn Prospect, Stark County: 17%
I don't know where "Lonesome Creek" is but KXNET is reporting that the plant will be twelve (12) miles west of Watford City. That is in McKenzie County, right on the highway, and in an very active area:

See first comment; I brought that comment up here because comments are not "searchable." That comment:
Not sure if this matters at all but approximately 12 miles west of Watford City would be just 4 miles west of Arnegard and this is where the Northern Border NG Pipeline crosses US Highway 85 running from northwest to southeast. May be just a coincidence. 
According to wiki: 
Northern Border Pipeline is a natural gas pipeline which brings gas from Canada through Montana, North Dakota, South Dakota, Minnesota, and Iowa into the Chicago area. It is owned by TC PipeLines, LP and ONEOK Partners and is operated by TC PipeLines, LP .
I will correct the location if given better data.

So, to update, the ONEOK natural gas processing plants:
  • Grasslands Facility (McKenzie County, built prior to 2006; expanded in 2008)
  • Garden Creek I
  • Garden Creek II
  • Garden Creek III
  • Stateline I
  • Stateline II
  • Lonesome Creek (the sixth one since 2010)
The Garden Creek plants are co-located northeast of Watford City.

The Stateline plants are west of Williston.

Operators In The Area

Triangle USA Petroleum
XTO Energy, Inc
KOG Oil & Gas
Slawson Exploration
Zenergy, Inc

More On This Announcement

From the press release (linked above):
The new Lonesome Creek plant is expected to cost approximately $320 million to $390 million.  When complete, the new plant will be the partnership's largest natural gas processing plant in North Dakota and will increase the partnership's total natural gas processing capacity in the state to approximately 800 MMcf/d. 
In addition to the Lonesome Creek plant, ONEOK Partners also expects to invest approximately $230 million to $290 million for related expansions and upgrades to its existing natural gas gathering and compression infrastructure.  The Lonesome Creek plant and related infrastructure are expected to be completed by the end of 2015 and will be supported by acreage dedications from producers.
To accommodate NGL volumes produced from the new Lonesome Creek plant, ONEOK Partners expects to invest an additional $100 million to increase capacity on its Bakken NGL Pipeline, an approximately 600-mile pipeline completed in April 2013 that transports unfractionated NGLs produced in the Williston Basin to the partnership's 50 percent-owned Overland Pass Pipeline.
From the KXNET link above:
ONEOK currently processes 50 percent of the natural gas in the Bakken, 30 percent of that is being flared right now, but once this new plant is up and running the company plans to reduce that number to 10 percent.
They're also investing in an expansion to their Bakken NGL Pipeline.
"Spending about 100 million dollars just on that pipeline expansion itself where we'll be looping the pipeline to increases it's capacity from an expected 135,000 barrels per day to 160,000 barrels per day," Spencer said.
The plant will be located 12 miles west of Watford City and is expected to be complete by the end of 2015.
North Dakota's Natural Gas Infrastructure


There are in fact three Bear Paw/ONEOK plants in this document (p. 9): one at Lignite, Burke County, and one at Marmarth, Slope County, plus one more, the Grasslands facility in McKenzie County. The Grasslands (McKenzie) facility appears to be in the same area as the newly announced facility.

A map in this document shows nicely the Northern Border Pipeline mentioned by a reader above.

Enterprise Product Announces Eighth NGL Fractionator On Texas Gulf Now Operational

Enterprise Products' eighth NGL fractionator at Mont Belvieu Complex begins operations: Co announced that the eighth natural gas liquids fractionator at the partnership's Mont Belvieu, Texas complex is now operational.
The new unit, which has the capability to fractionate up to 85,000 barrels per day of NGL, increases total NGL fractionation capacity at Enterprise's Mont Belvieu facility to ~ 655,000 BPD.
The partnership's eighth fractionator will accommodate increasing NGL production from domestic shale plays, including the Eagle Ford in South Texas, and other basins in the Rocky Mountain and Mid-continent regions.
Rising NGL production from the shale plays continues to provide a low-cost feedstock advantage for the global petrochemical industry, which currently favors natural gas-derived feedstocks over more expensive crude oil-based derivatives.

From Drudge: Feds Open Tesla Battery Fire Probe

Detroit News is reporting:
The National Highway Traffic Safety Administration said Tuesday it is opening a formal investigation into 13,100 Tesla Motors Model S electric vehicles for battery fires — one month after it declined to do so.
“The National Highway Traffic Safety Administration is deeply committed to safeguarding the driving public. The agency has opened a formal investigation to determine if a safety defect exists in certain Tesla Model S vehicles. The agency’s investigation was prompted by recent incidents in Washington State and Tennessee that resulted in battery fires due to undercarriage strikes with roadway debris,” NHTSA said in a statement.
The auto safety agency in October said it would not open a formal investigation after a fire in Kent, Wash., occurred when debris struck the underside of a Model S sparking a battery fire. After a fire in Mexico and a fire earlier this month near Smyrna, Tenn., the agency said Tuesday it had decided to open a preliminary investigation.
Unsafe at any speed. 

Random Update On Stockyard Creek

Wow, Stockyard Creek just east of Williston is really turning out to be quite a field. It's a small field, and multiple operators keep adding wells. In addition to the recent Bakken wells, there are a lot of great Madison wells.

I'm waiting for these wells to be reported:
  • 22958, conf, Zavanna, NSI 23-24H, Stockyard Creek, it will be a nice well:
DateOil RunsMCF Sold

24198, conf, KOG, P Evans 154-99-2-4-9-16H, Stockyard Creek:

DateOil RunsMCF Sold

Update On Japan's Solar Initiatives; It Just Keeps Getting Worse And Worse For The Japanese; Is Japan Losing It?

Reuters is reporting:
The failure of solar developers to deliver on planned projects in Japan will cost the country's utilities close to $3.5 billion annually in additional coal and gas imports to generate power.
Japan's government banked on solar power to help meet the shortfall in electricity supply after the Fukushima disaster in 2011 shattered public confidence in nuclear energy. The country's reactors are shut while the government struggles to convince the population the plants are safe to restart.
To encourage solar investment Tokyo introduced generous subsidies more than a year ago, sparking a rush from developers who came forward with plans that would have supplied the equivalent to 21 nuclear reactors.
But in contrast to the experience in countries such as Spain and Britain, where subsidies sparked solar booms that strained government finances, in Japan developers are struggling to deliver.
"Japan's Energy Crunch" is one of the "big stories" I follow on the sidebar at the right.

But back to the original story: "... developers who came forward with plans that would have supplied the equivalent to 21 nuclear reactors...." through solar panels. Say what? There's not enough surface area in China, much less Japan, for enough solar panels to produce as much electricity as 21 nuclear reactors. LOL.

One Step Forward, Two Steps Back: Massachusetts Won't Support The President On Individual Mandate Delay; California Is Hesitant


December 6, 2013: this is simply insane. The Oregon state legislature legal counsel says that the state overstepped its legal authority allowing insurance companies to roll-back their canceled policies. This is the state that can't even get its own state-run health care website up and running -- the only state, as far as I know. This is simply insane.

December 4, 2013: Talk about tilting at windmills. By the time this is resolved, new policies will be in force. If folks really, really, really want their old policies back, wait until the see the "new, revised, improved premiums." The Journal reports that states are divided on letting insurers extend old health policies. But it's a non-story. The insurers won't do it. Example: the map shows that the North Dakota commissioner will allow it, but BC/BS says that's BS.

November 21, 2013: this may be the last update on this subject. The issue is dead. The president said it was "okay" to reinstate policies that have been canceled, but insurance industry, including the state regulators, said a) they won't do it; b) there is not enough time; c) it would raise raise rates; and, d) whoever thinks otherwise is an idiot. Reuters is reporting.
State insurance commissioners told President Barack Obama on Wednesday that his effort to stem a wave of insurance cancellations caused by his signature healthcare law could lead to higher premiums.
Obama met with representatives from the National Association of Insurance Commissioners to discuss the "fix" he came up with last week to calm the uproar surrounding millions of cancellation notices sent to holders of individual health insurance policies no longer legal under the healthcare law, known as Obamacare.
While taking responsibility for the troubled rollout of his law and apologizing for the promises he made that were not being kept, Obama sought last week to address the problem of canceled plans by giving insurers the option to extend them By one year, even if they did not meet minimum standards under the law. 
The insurance market in the United States is heavily regulated at the state level. While individual state commissioners have no legal obligation to go along with Obama's wishes, the White House move effectively put the onus on them for cancellations caused by the administration's law. 
Comments after the meeting reflected continued skepticism by some of the commissioners.
Original Post

Last week, the president agreed to a partial rollback/delay in the individual mandate.

Within two hours of that announcement, the Washington state insurance commissioner replied, and I'm paraphrasing, "not only no, but hell no."

It appears the Massachusetts insurance commissioner has taken the same stand. Yahoo!Finance is reporting:
Massachusetts' top insurance official said Monday that the state won't allow consumers to keep health insurance policies that fall below the minimum requirements of the federal health care law.
State Insurance Commissioner Joseph Murphy said in a letter sent Monday to the Obama administration that substandard insurance policies are "virtually non-existent" in Massachusetts because of its first-in-the-nation health care law that took effect in 2007.
In a reversal of policy, Obama announced last week that millions of Americans would be allowed to renew individual coverage plans that otherwise would be cancelled under the federal law in 2014.
Murphy wrote that unlike most states, Massachusetts has had a minimum benefit level for six years and that almost all health insurance policies are at or above the new national standard.
"To change course at this time, and delay certain market reforms, could cause confusion and significant market disruption," Murphy wrote.
Murphy said in an interview that about 100,000 Massachusetts residents will need to change to what he called a slightly modified health insurance plan. For example, some consumers might have to change to a lower deductible, he said.
That pretty much settles it. If Washington State (west coast) and Massachusetts (east coast) won't "go back to the past," no state will. It would create an incredible amount of confusion. Folks thought insurance companies were thrown under the bus when President Obama made the announcement; fortunately for the insurance companies, the regulators/commissioners are providing top cover.

Meanwhile, California is dithering; can't decide. Insurance commissioner is hesitant:
California's health insurance exchange remained hesitant to embrace a controversial request from President Obama to extend canceled insurance policies for another year.
The state exchange, called Covered California, said Monday that it won't decide until later this week whether 1 million policyholders with expiring policies can keep their coverage for 2014.
The list:

The good news: more than 100 million Americans have enrolled in ObamaCare and the on-line exchange was just rolled out last month in all 57 states. -- President Obama, Mail On-Line, November 18, 2013.  The roll-out must have gone much better than originally reported.

Is the president losing it?
President Barack Obama told a conference-call audience of progressive volunteers on Monday evening that 'more than 100 million Americans' – in a nation of less than 314 million – have successfully signed up for health insurance via the Affordable Care Act.
And at a time when his signature legislative initiative's website has made the White House the butt of jokes, the website hosting the conference call was plagued with its own connection errors and other malfunctions.
A weary-sounding Obama made his gaffe during the call, hosted by Organizing For Action, the nonprofit successor to his campaign organization Obama For America. The group claimed 200,000 people managed to listen, aided by an RSVP process that included a fundraising solicitation.
On the other hand, I suppose "progressive volunteers" will believe almost anything.


As long as we're piling on, the former HHS secretary Tommy Thompson says ObamaCare is "fundamentally flawed." It won't work without young people. Tommy is wrong. It won't work even with young people: the fatal flaw -- no lifetime caps.


I can't resist. The story above, about California unable to decide, and still thinking about Lou Reed. In case you missed this story. Governor Moonbeam of California signed law allowing "transgender" all grades / school students to use athletic dressing rooms/rest rooms of personal choice. USA Today is reporting:  
California on Monday became the first state to enshrine certain rights for transgender K-12 students in state law, requiring public schools to allow those students access to whichever restroom and locker room they want.
Take a walk on the wild side, ahead of his time:

Take a walk on the wild side, Lou Reed

Lola, The Kinks

Random Update Of Profitability And Trends Among International Oil Companies

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. By continuing to read, you have agreed to accept terms spelled out in the "disclaimer."

There are two stories here. First the one from Platts. And then, the second half, a Motley Fool with another look at XOM.

This article, from Platts, is a bit tedious to read, mostly due to the typical Platts style for feature news. Nonetheless it has some interesting data.

This is the takeaway for me from this article: the IOCs have taken advantage of sustained high oil prices to move to "organic growth" if/when crude oil comes down in price.

The second takeaway: IOCs are losing ground in the oil market to national oil companies and to independents (a situation that has been masked to some extent by record high oil prices)

The IOCs include:
  • XOM
  • CVX
  • Total
  • Shell
  • BP
Interestingly, after the COP-PSX spin-off, COP is not in the mix.

Sustained high prices for oil for the IOCs have meant that IOCs could:
  • increase investment levels
  • increase share dividends
  • additional share buy-back schemes
But, Platts notes:
[The financial performance of the IOCs] does not show a simple linear improvement alongside these record high oil prices. Share buy-back schemes and higher dividends have in effect been a means of compensating shareholders for IOCs lack of growth, during a prolonged period of asset ratinalization and divestment.

The blog has noted some of the following in previous posts, particularly XOM's challenges..

In production terms, two trends:
  • IOCs have failed to increase production over the last six years
  • a rising proportion of gas as opposed to liquids
With regard to production:
  • Four of the five IOCs all reported lower output in 2012 than previously; Shell was the rare exception but even so, its increase in 2012 was still significantly lower than its 2015 production (3.2 million boepd vs 3.470 million boepd)
With regard to gas:liquids ratio
  • XOM: its reserve base is now more than 50% natural gas
  • BP: its reserve base has inched up to 38% natural gas
  • Chevron: alone among the five to keep its liquids output broadly stable over the last six years
Supply and Demand
  • Over the past six years: supply from the big five has dropped about 1.75% of today's crude market
  • Over the same time period: demand for crude oil has increased over 5% (from 85 million to almost 90 million bopd
Natural gas
  • XOM and Total natural gas production easily outstripped pace of demand growth
  • CVX and BP: natural gas output is lower than it was in 2006
The shift to gas and decline in liquids: profits are still huge, but the profits are not as buoyant as they otherwise could have been, if the IOCs had been more successful with crude oil

And then this bit of trivia:
"In October, Shell's ratio of gas to liquids output may be 50:50, but its exposure to the oil price is between 70-80%of all output because of oil-linked gas contracts." 

And a final note from me (not from Platts): I don't recall the details, and I don't know where this stands now, but my worldview was that Warren Buffett bought a lot of COP (many years ago) just about the time it was later learned that COP had overpaid for huge west Pacific natural gas reserves; subsequently Buffett sold some/most/all of his COP. Now he takes a big stake in XOM with similar natural gas:crude oil challenges. Again, that's just my worldview and could be greatly mistaken.  


From Motley Fool:
In the oil industry, we have a handy metric to determine how well a company is managing our money: return on capital employed, or ROCE. The ratio measures how much cash is going into the business versus how much is coming out. And this is important in industries that consume a great deal of capital such as airlines, semiconductors, or energy.
What Exxon has that its competitors don't is discipline. The company only allocates capital to its highest returning projects. If management can't find enough ventures that meet a very high bar for profitability, they will return excess capital to shareholders through dividends and buybacks. 
Exxon's rivals, in contrast as evident above, are a little too eager to redeploy that capital into lower return ventures. Guiding over a larger business empire may stoke boardroom egos, but merry executives never funded anybody's retirement. 
Sure, like its competitors, Exxon could grow faster. But that would require costly investments, and shareholders may be able to find better returns elsewhere. The fact that management acknowledges this reality is probably the main reason why Buffett chose Exxon Chief Executive Rex Tillerson over his peers. 

Tuesday: Lease Sales Results Posted; Wildcatters Having Trouble Financing Operations In The Bakken

Active rigs: 183

RBN Energy: crude oil and diluent midstream hubs in Edmonton and Hardisty, western Canadian oil sands.
Crude oil and diluent pipelines running through the two largest Canadian marketing and transportation hubs at Hardisty and Edmonton in Alberta have current capacity of 3.9 MMb/d. That will double to 8 MMb/d by 2018 if currently planned projects are completed. Getting the resultant expanding flows of crude and diluent in and out of Alberta via these hubs poses the same challenge that Gulf Coast operators are facing from the flood of crude descending on them from the US and Canada. Today we begin a new series detailing midstream Canadian terminal operations at Hardisty and Edmonton.
November, 2013, lease sales results for North Dakota posted.

From Rigzone, less concern about fracking.
The often controversial practice of hydraulic fracturing appears to be gaining acceptance, according to a new survey released Monday.
The survey, conducted by the Robert Morris University Polling Institute, showed that of the people who had an opinion about fracking one way or the other, 56 percent supported it, while 44 percent were against it.
Support among those whose who supported it remained constant even for fracking within the locality where they lived.
The Wall Street Journal

The sanctions really were working. No wonder John Kerry and President Obama were  so anxious to ease sanctions. Iran's gas company faces collapse. Iran's national gas company said it is facing collapse, the latest sign of deepening economic distress from internatinal sanctions as Tehran seeks urgent relief in talks with world powers. Well, excuse me, it's not like Iran doesn't know what it has to do to have sanctions lifted. Quit whining.


As oil slumps, wilcatter struggles with shale debt
Floyd C. Wilson, chairman and chief executive of Halcón Resources Corp., was a pioneer in finding oil and gas in shale formations.
His previous company, Petrohawk Energy Corp., discovered the prolific Eagle Ford Shale in South Texas and became a Wall Street darling before being acquired by BHP Billiton Ltd. BHP.AU -0.13% in 2011. But analysts and investors have become concerned about Halcón's ability to find enough oil and gas to pay for aggressive drilling and production plans. Mr. Wilson and others now must struggle to convince investors they can find finance their expansion from revenues.
Mr. Wilson's troubles underscore a shift among investors and Wall Street analysts. Until recently, Wall Street was willing to back energy companies that promised rapid growth and planned to assemble oil and gas fields to sell, at a premium, to larger companies, which has been Mr. Wilson's forte.

Results Of The November, 2013, North Dakota Lease Sales

I had completely forgotten about these leases until a reader reminded me.

Link here.

Billings County
  • leases were going for between $750 and $1600 (bonus/acre)
  • bidders: Diamond Resources and Empire Oil
  • approximately 20 tracts, mostly 80-acre parcels
  • three 80-acre parcels
  • Diamond Resources
  • around $1500
Golden Valley
  • several 8-acre parcels for $90/acre
  • 160-acre parcels for $150/acre
  • Empire Oil, Trinity Western, Globex, Irish Oil, Cody
  • two 160-acre tracts
  • $9300
  • Northern Energy (both tracts)
  • six 80-acre tract and one 40-acre tract
  • $15 +/-
  • Empire Oil 
  • about 22 tracts; mostly 80-acre; some 160-acre
  • from $2 (no typo) to $140
  • three 80-acre tracts
  • from $2 to $95
  • Empire Oil and Wells Petroleum
  • four tracts (2 80-acre; 2 160-acre)
  • $3700
  • Crescent Point Energy

New Nitrogen-Based Fertilizer Plant To Be Built In North Dakota


April 2, 2014: plant put on hold; costs come in way above estimates
Original Post
Link here.

A joint venture between Northern Plains Nitrogen and Cheng Da, a Chinese engineering company.

The plant will be the first of its kind in North Dakota. It will use natural gas from the Bakken as feedstock. The plant, to be built near Grand Forks, is expected to be operational by 2017.

From wiki: Nitrogen fertilizers are often made using the Haber-Bosch process (invented about 1915) which uses natural gas (CH4) for the hydrogen and nitrogen gas (N2) from the air at an elevated temperature and pressure in the presence of a catalyst to form ammonia (NH3) as the end product.