Tuesday, December 24, 2013

Merry Christmas To All

Random Update On A Red River Well

While updating the 3Q13 wells, this one caught my attention (no IP):
  • 24670, no IP reported, Whiting, Plienis 24-24, Camel Hump, a directional Red River well; TD 12,517 feet (TVD, 12,449 feet); 15 days to drill to total depth; [these are really deep wells, one hits the middle Bakken about 9,000 in the Williston Basin]; reached total depth February 22, 2013; cum 58K 10/13;

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
RED RIVER10-20133177007983665328403227
RED RIVER9-20132856675653718222402172
RED RIVER8-20133172517570574291402852
RED RIVER7-20133184958127615352703466
RED RIVER6-20133096259429557384803789
RED RIVER5-2013311118711359689461104550
RED RIVER4-20132976576640980312003062
RED RIVER3-20130000000

This well is certainly as good as any number of middle Bakken wells and at considerably less cost (deeper depth, but no fracking).

Was this well an aberration, an anomoly? Let's look at it's sister wells to the west:
  • 23533, 560, Whiting, Katherine 33-23, a Red River well, Camel Hump, t12/12; cum 84K 10/13;
  • 22750, 455, Whiting, Rieckhoff 44-22, a Red River well, Camel Hump, t8/12; cum 109K 10/13;

Update On EOG's Waterflooding Experience In The Bakken

From a recent EOG presentation:
Specifically on the waterflood, we have a waterflood pilot going on now in the Bakken and there has been a bit of -- quite a bit of studies from the universities and we have done our own in-house study. And when you put water on the Bakken, it absorbs the water and it expels oil, in the lab. So that's good in the lab but you got to figure out how to do it in the field. And we did our first pilot on our -- when we were on our 640 acres between spacing, one well per section and basically, we just did not get any answers there.
It basically told us that 640 acre spacing is much too wide to try that kind of process.
So as we go into the core well per section, kind of senior that we're in now and we're doing a better job with the frac connecting up more reservoir, we'll go back in and retry these waterflood efforts there. But I think we're optimistic that in the better plays, again that's the advantage of having a better rock, the better the rock is the more conducive it is the secondary recovery. So in the Eagle Ford, we're doing dry gas injection pilots there and in the Bakken we're doing a waterflood pilot. So in at least those two plays we're optimistic that we'll find some mechanism to enhance the recovery over time. We haven't proven it yet but that is a process we're very much engaged in.

Increased Drilling In The Parshall Oil Field

This is really quite dramatic. I wish I had kept screen shots of the Parshall and Sanish oil fields over the past two years.

I have often noted that there have been about seven rigs operating in the Sanish oil field, day in, day out, over the past two years, while there have been periods of no rigs in the Parhsall oil field, immediately east to the Sanish; and even when there was activity in the Parshall these past two years, there was only one rig.

A reader noted that he/she is seeing more drilling "south of Parshall."

Wow, talk about increased drilling.

First of all, the Sanish, Whiting's cash cow: it appears there are about five rigs operating in the Sanish, down from the usual six or seven I am used to seeing.

On the other hand, the Parshall, owned by EOG, has a whopping eight (8) rigs in the field. I have never seen this many rigs in this field in the entire six years that I have been blogging about the Bakken. This is quite incredible.

In addition, all eight rigs are operated by EOG.

In the last earnings conference call, EOG said it was going to ramp up in the Bakken, now that EOG is reporting 100% payout on Bakken wells in one year or less. EOG said they perfected their completion techniques in the Eagle Ford and is bringing those lessons learned back to the Bakken.

In addition, I think I posted a note on EOG in the last couple of days regarding the impact a new CEO will have on EOG's activity in the Bakken.

From a very recent EOG presentation:
In the Bakken/Three Forks we have just recently increased our inventory due to the success of downspacing from 7 years to 12 years. We are very focused right now on the core area where we have 90,000 acres. We're in there drilling our downspace wells basically four wells per unit and we're using the new completion technology. We brought the technology that we've learned from these other shale plays from the Bakken, from the Eagle Ford and from the other places and we're doing a lot better job at completing these new wells, a lot more sand, a lot more stages, a lot better distribution in the frac along the laterals and the IPs of the wells are excellent and more importantly the decline rates on these newer wells are much shallower. So we're now generating 100% rates of return on our Bakken drilling.
We're having really good success in our Antelope area and the Three Forks really. We've had a really good second bench and a lot of first bench wells there. And this is an example in the Core and Antelope area of just the improvements we've had on completion technology, went from 58% improvement just due to completion. This is normalized on 9200 foot lateral, so not a longer lateral, it's just really completion improvement and the 30 day IPs are up 50%, so tremendous improvements technically in the wells.
This is an independent analysis of the top 10 Bakken horizontal wells. EOG has seven of those and I think that will grow as we continue to use this new completion technology. This is an independent analysis of the average 30 day IPs from the top 20 operators. EOG is about 50% better than the average operator on the Bakken well.

Way Beyond My Comfort Zone But "Hey, Why Not"


January 7, 2014: whoopee! Just as I said, regarding the Kinder Morgan Energy/tank company story. Motley Fool has a piece on this same story and comes to same conclusion!  
So while Enterprise and Buckeye stick closer to the mainstream in the midstream sector, Kinder is again cutting a slightly different path. Keep an eye on this transaction and its performance after it's consummated. Kinder might just use its "bird's eye" view of the oil and gas industry to put more money to work in the Jones Act area if the deal works out well. 
Flashback, May 1, 2013, posted December 31, 2013:  
Oil traders including commodities giant Trafigura and Australian bank Macquarie have quietly begun shipping U.S. crude oil from Texas to Canada, raising the ire of U.S. East Coast refiners who may pay four times as much for a similar voyage.
In the latest oil trading trend to emerge from the unexpected boom in U.S. shale production, the firms have hired at least seven foreign-flagged tankers to run the route to Canada this year, most of them for the first time, according to market sources and data analyzed by Reuters.
U.S. refiners, however, are required by a shipping law from 1920 known as the Jones Act to use more costly U.S.-owned and operated ships if they want to tap into the oil bounty emerging from the Eagle Ford fields of Texas, highlighting the uneven playing field that is taking shape in the Atlantic basin.
Although the law itself has long been a bone of contention in the industry, the emergence in recent months of such a prominent example of how the Jones Act "penalizes" domestic firms is reopening old wounds, according to John Auers, senior vice president of refinery consultants Turner, Mason & Co.
"They're resentful of it, they think it's unfair - they've told me that," Auers said in an interview.
The trend was highlighted on Monday by U.S. government data showing crude oil exports to Canada leapt to a 13-year high of 124,000 barrels per day, double rates from last year. Much of that was in the form of shipments by rail, pipeline or barge, which have been steadily rising for months. But that data did not include details on the mode of transport, masking the swift rise of seaborne traffic.
The latest such cargo is aboard the Everglades, which loaded a 500,000-barrel cocktail of light, sweet crude in Nederland, Texas late last week. The tanker, Macquarie's first U.S.-to-Canada shipment, on Tuesday was rounding Florida en route to the Come-by-Chance refinery in Newfoundland, which is now run by South Korea's national oil company.
Original Post
I wasn't going to post the link to this story until I saw the article at SeekingAlpha.

Here is the link to the Kinder Morgan story I was not going to post: 
Kinder Morgan Energy will spend $962 million in cash to buy two tanker companies as the transportation and storage company expands its shipping business.
American Petroleum Tankers has a fleet of five tankers that can hold 330,000 barrels of cargo.
State Class Tankers has commissioned the construction of four tankers that hold 330,000 barrels of cargo. They are expected to be completed in 2015 and 2016. 
This is the link to the Seeking Alpha story:
On Monday, Kinder Morgan Energy Partners announced that it would acquire two oil tanker companies from private equity firms. While the market neither cheered nor booed the acquisition with units trading in line with the broader market, I do believe this acquisition is a strategic mistake for KMP and am disappointed they made the deal. I do not consider these transactions to be a reason to sell as I believe KMP remains at major discount to its fair value, but nonetheless, it is a disappointing action that could be problematic if it is a sign that KMP plans to move more significantly into the tanker industry.
Might there be an opening KMI has spotted? Think Jones Act. The Gulf Coast is going to be flooded with light light sweet oil in 2014.

I particularly enjoyed the concluding paragraph of the SeekingAlpha story:
KMP should stick to its core competency of pipeline transportation where there is far better growth potential. The cheap valuation in this deal is another sign that the tanker market is in secular decline. Given its strong dividend and undervalued unit price, I am not selling my KMP, but I am deeply disappointed in this unusual strategic miscalculation.
Let's see: the writer is complaining that Kinder Morgan bought the tankers for a low price.   One of the themes of this blog has been that companies tend to stagnate when they fail to identify what "business" they are in.

With this transaction, Kinder Morgan suggests to me it sees itself in the oil transportation business, not the pipeline business. Huge aha! Burlington Northern did that several years ago when it realized it was not in the railroad business but in the transportation business. That insight moved the company to a whole new level.

US Companies Are Showering Cash On Shareholders -- Obamanomics?

Active rigs: 189

RBN Energy: Part 5 in the series. It certainly does not seem that operator are concerned about all the obstacles that seem to be placed in their way.
Hardisty is the largest oil storage hub in Canada with over 21 MMBbl of tank capacity owned by seven companies. The largest player Enbridge has more than 12 MMBbl of storage with the majority being leased to third parties including a sizeable chunk to investment bankers JP Morgan. Western Canadian Select (WCS) the benchmark Canadian heavy crude is blended at Husky’s Hardisty terminal. Today we detail these two companies’ operations at Hardisty.
n July of this year (2013) Husky broke ground on a project to add two 300 MBbl storage tanks at the Hardisty terminal to provide additional access to the Enbridge Mainline in anticipation of new crude production flows from their Sunrise oil sands plant in northeast Fort McMurray. 
The Wall Street Journal

Front page: health-insurance deadline extended in late push to boost numbers.   No one should complain. The industry needs at many folks paying premiums as possible. Unfortunately, folks are tracking the wrong metrics. No one will know the demographics of the newly insured until July, 2014, or thereabouts.
The deadline was originally set for midnight on Monday, but changes made over the weekend to the federal HealthCare.gov website will allow users to sign up for the first wave of coverage through Tuesday, people familiar with the matter said. Insurers said they received no warning about the deadline change and hadn't prepared for it.
Blue Cross & Blue Shield of North Carolina wasn't informed of the delay until Monday, and had already planned to close its offices and call centers Tuesday, said Michelle Douglas, a company spokeswoman. Federal officials on Monday confirmed the move. The site had a surge of more than 850,000 visits by midafternoon, federal officials said. Continued bottlenecks in the federal website serving customers in 36 states prompted officials to delay the deadline, the people familiar with the matter said.
The change, made with no official announcement, is the latest in a string of policy shifts meant to help consumers who were stymied by website glitches or whose existing plans were canceled because they didn't comply with the law. But the changes also have led to confusion among consumers, taken insurers off-guard and compressed an already-tight timeline for the industry to put coverage in place by Jan. 1.
So much for folks at BCBS getting Christmas Eve off or going home early.

Bloomberg is also weighing in on this story:
U.S. Health Secretary Kathleen Sebelius urged the industry on Dec. 12 to be lenient with Obamacare customers who miss today’s deadline for enrolling in the program or are late with their initial payment. The request included honoring late sign-ups with retroactive coverage, letting people pay only part of their premiums and covering treatments for patients who go to out-of-network doctors and pharmacies.  
I know the IRS is very lenient when people are late with their payments. LOL.


More positive economic news. Consumers stepped up spending in November -- up 0.5%.

Wind farms in Maine stir a power struggle. A little bit of NIMBY?
The recent appetite for wind power comes largely from Massachusetts and Connecticut, where laws require rising use of renewable power. The two states combined have 70% of New England's population but little available open space on land to build wind farms.
Developers have turned to Maine, where they say land is expansive and strong winds are more abundant. Maine already leads the region with more than 400 megawatts of wind power installed, according to the American Wind Energy Association, which said 1 megawatt of wind power can cover about 290 homes. Recently signed long-term contracts with utilities in Massachusetts and Connecticut could more than double that output in the next few years if the projects all come to fruition.
Plenty of locals welcome the development, helped by financial rewards tied to the projects, and the wind industry counted strong Maine support in a recent poll. Governors in Massachusetts and Connecticut said the recent deals will add clean energy to the grid at cost-effective rates.
But the situation has prompted some soul-searching as a number of residents worry more wind turbines will turn the woodsy state into New England's utility closet. Vocal opponents also question wind power's environmental merits and say turbines aren't worth spoiled views or noise. 

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. 
U.S. companies are showering cash on shareholders, powering the stock market's record-breaking rally. Share buybacks and dividends are reaching levels unseen since before the financial crisis, as persistent economic uncertainty prompts cash-rich companies to reward shareholders rather than invest in other activities. U.S. companies in the S&P 500-stock index bought back $128.2 billion of their own shares in the third quarter, according to S&P Dow Jones Indices. That is the highest level since the fourth quarter of 2007.
Someday, we will refer to this period as Obamanomics, where the gap continues to increase between the "haves" and the "have-nots." This was not supposed to happen. 

Reported previously: natural gas prices climb to almost 2 1/2 year high. Didn't Buffett just make a big purchase in a large natural gas company called XOM?

A problem for the Fed: low inflation. When you read this story, recall that gold has plummeted in price over past month or so.
That inflation has been so low this year is a surprise. The economy has expanded about as fast as economists polled by The Wall Street Journal near the beginning of the year had forecast. Job growth has been stronger, and the unemployment rate lower, than anticipated. So, if anything, inflation ought to be higher than was expected.
Instead, it has been lower. The Commerce Department reported Monday that its index of consumer prices excluding food and energy, the "core" measure that the Fed prefers, was up just 1.1% in November from a year earlier. The headline index was up an even scantier 0.9%, as energy prices drifted down. Back toward the start of the year, economists forecast that core inflation would be up 1.8% in the fourth quarter, with the headline up 1.9%. 
This news makes the market look even better. Especially with companies like ATT paying 5%.

Despite low inflation, federal workers, active duty military and retirees will see a 1.5% increase in their pay or COLA, it appears. I could be wrong on that; I don't follow it very closely.

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. 

Catty: I don't think I've ever seen so many typographical errors in an on-line story as this one by Bloomberg at Yahoo!Finance. Perhaps it will be cleaned up, but I am appalled that Bloomberg would let this get posted; it's worse than my blog. LOL.