Tuesday, January 14, 2014

Nocturnal Ramblings

I'm in an incredibly good mood. I must have forgotten to take my meds earlier today. It's almost 11:00 p.m. local time. I was up at 5:30 a.m. this morning so I could be in place at 6:15 a.m. to start the day with my granddaughters. I finally dropped them off with their mother (our daughter) at 9:00 p.m. local time. That's a long day; of course, they are in school from 7:15 a.m. to 2:45 p.m. but outside of those hours, they keep me very, very busy. Quality time only.

On days like these, I barely have time to keep up with business news. I'm glad I no longer watch television. I haven't watched television since July, 2013, except for a few sports events, and then the Golden Globe awards the other night, which I really enjoyed. (Fortunately, several readers watch the news for me, sending me stories and keeping me apprised what's going on in the real world.)

I own absolutely no mineral rights. I invest in several publicly traded Bakken operators, but those investments probably represent less than 1% of my total portfolio. If the Bakken went away tomorrow, I would be devastated but not for financial reasons. I think the Bakken is an incredible story on so many levels. When I started the blog I had no intention of including investment stories but I soon learned that one cannot understand the Bakken without understanding the "business" and thus all the investment posts. Now that I am retired I don't have as much money to invest but whenever I have any cash I invest it. I am an investor, in for the long haul. I seldom trade. I hate the cliche, but I've left a lot of money on the table because I don't buy and sell, but I can pretty much guarantee that I would not do too well if I tried to "time" buying and selling.

So, I pretty much just accumulate. I don't keep track of what I have and I don't keep track of what I've paid. I'm a pretty bad investor by those parameters, but 99% of my portfolio is managed by someone else, anyway (pensions, IRAs, social security, etc).

Having said that, the 1% that is related to the Bakken is a real hoot. I am absolutely convinced that, barring major geopolitical events (including Washington, DC-political events) we have only begun to see the Bakken potential. [One political comment: I am convinced that the administration would ban fracking in a New-York-minute if given the opening, but an outright ban would result in the end of the domestic oil industry. Oil would surge to prices we have not seen and OPEC would be in control once again. But that won't stop the administration; anti-fracking legislation is a given; to what extent it impacts the industry is yet to be seen. That "fact" doesn't impact the irrational exuberant mood that I am in regarding the Bakken. It is what it is.]

There is so much one could talk about when it comes to the Bakken but one thing that is never mentioned, it seems, is the cost of infrastructure. The operators are not idly sitting by, watching the "rail" story or the "pipeline" story play out. They are actively involved and they keep building out takeaway capacity. [The Denver conference at the end of the month on Bakken takeaway should be very, very interesting: see sidebar at the right for details on the conference.]

One of the things in the Bakken that I get the biggest kick out of is pad drilling. Apparently building a pad and building a road to that pad are inconsequential costs for the operators. No one ever talks about them. But let's suppose the cost of building pads and building roads to those pads is not inconsequential. Think about it. Three years ago, CLR was building a new pad for each well, and building a new road for each pad. Pundits talk about the cost of public roads in the oil patch; imagine the private roads to all those wells, all those pads.

But now, CLR has 90% of those roads built, I would argue, for the wells they will be drilling this year. Putting two, four, six, eight (who do we appreciate?) wells on each pad -- and the pads are built, the roads are built, and a walking rig is on the pad. Costs have had to come down over the past two years.

More later if the spirit moves me. All I can say is for investors, the recent pullback in the market is another buying opportunity. Disclaimer: that's just my personal opinion, coming from an investor with about the lousiest investment skills anyone could have. Don't take any advice from me regarding investments. Don't make any investment decisions based on anything you read here or anything you might have read here or thought you read here. 

So, unless the spirit moves me to write more later, I'm simply going to sit here and listen to the BeeGees through my geeky huge headphones, and move into my after-midnight music fugue. And forget about the Bakken.

For about thirty seconds.  

Petro-Hunt, MRO Reporting A Nice Well Each; Emerald Oil Reporting Two Nice Wells; For Investors Only -- Five Reasons To Hold COP For The Long Haul

Wells coming off the confidential list Wednesday:
  • 24312, 2,120, Petro-Hunt, Brenna 152-96-14A-23-7H, Clear Creek,  Clear Creek, t10/13; cum 261K 2/16;
  • 25231, 1,115, Emerald, Slugger 1-16-21H, Charbonneau/Wildcat, northwest corner of McKenzie, near Antelope, Sather Lake; t8/13; cum 144K 2/16;
  • 25232, 1,098, Emerald, Talon 1-9-4H, Charboneau, t8/13; cum 156K 2/16;
  • 25346, 2,374, MRO, Abner 21-13TFH, Reunion Bay, 30 stages, 2.3 million lbs, t11/3; cum 191K 2/16;
  • 25466, 148, Whiting, Williams 24-25, Bonnie View/Wildcat, southwest corner of the state, Red River wells in this area; t11/13; cum 25K 2/16; pretty much off-line these days;
  • 25546, 546, Slawson, Payara 3-21H, Van Hook, t10/13; cum 22K 11/13;
  • 25904, 951, CLR, Jefferson 5-17H, Crazy Man Creek, 30 stages, 3.7 million lbs, t1/14; cum 136K 2/16; pretty much off-line since July, 2015; in February, 2016, a sundry form: now on a pump;

24312, see above, Petro-Hunt, Brenna 152-96-14A-23-7H, Clear Creek:

DateOil RunsMCF Sold

25231, see above, Emerald, Slugger 1-16-21H, Wildcat

DateOil RunsMCF Sold

25232, see above, Emerald, Talon 1-9-4H, Charboneeau:

DateOil RunsMCF Sold

 25346, see below, MRO, Abner 21-13TFH, Reunion Bay:

DateOil RunsMCF Sold


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

There are a few contributors at SeekingAlpha I recognize and trust. Michael Fitzsimmons is one. I agree with every one of the five (5) reasons he provides for holding COP for the long haul.

The same could probably be said for EOG.

My hunch: before the year is out, COP will acquire significantly more shale acreage in one of the three big domestic plays. You read it here first.

A Note to the Granddaughters

I doubt anyone will read this far down. The above notes were posted earlier, and now later, I will add this post for personal reasons.

My only purpose in life is taking care of my granddaughters. Yes, I have a number of other things that keep me busy, but at the end of the day (and the beginning of the day), my number one priority is 24/7 care for the granddaughters. When my daughter is off from work and she has the girls, I am "free" and I enjoy that free time. But I prefer being with the granddaughters over anything else.

My days start at 6:15 a.m. with them when one is getting up (the other sleeps in until 7:00 a.m.). Their mom heads off for work about 6:15 five days out of seven; the days vary. Their dad is often on the road, working very hard and very, very long hours.

The day starts at 6:15 with me getting them breakfast; my 6-minute soft-hard boiled egg is second to none.  The day ends at 8:30 p.m. It's a long day, to say the least. I am free between 7:30 a.m. and 2:30 p.m. when they are at school.

I am addicted to the blog, and can't wait to get information posted as quickly as possible. I make a lot of typographical errors but go back and clean them up when I see them. I appreciate folks not writing to tell me of inconsequential typos -- they will be taken care of. But I do need to know if I make a major error. I do most of the posting when the granddaughters are in school, but will continue to post later in the day if there is time. But after 2:30, time with the granddaughters takes priority over the blog and the Bakken will simply have to wait.

Most nights I am exhausted but music rejuvenates me and even when alone, I love to put the big headphones on. Two years ago big headphones were about as geeky as they could be, but now I see they are the "in" thing. It's hard to believe that a $500 pair of headphones can be that much better than the $50 pair I am wearing. So, now I will listen over and over to Norah and Billy Joe and Foreverly. And tomorrow, I will listen over and over to something else.

A bunch of rambling while I listen to Norah and Billy Joe. 

Eighteen (18) New Permits -- The Williston Basin, North Dakota, USA; Abraxas Comes In With An Excellent Lillibridge Pad -- A Huge Congrats To The Roughnecks! QEP With Two Huge Wells; BR, Statoil Each With A Huge Well (All Based On High IPs)

The Director's Cut was posted earlier today.

I track projections here just for the fun of it. As it stands now, if December production is 2.8% greater than November production (on a daily basis), North Dakota will hit the 1 million bopd milestone. Last year the weather cooperated and December's production (in 2012) was 4.58% greater than November's production. However, November was one of two months in 2012 when daily production actually dropped month-over-month. There was some bad weather in December, 2013, so it is unlikely that North Dakota will hit the one million bopd milestone in December, 2013, and January, 2014, was a bear for weather also. So, we'll see.

Meanwhile, the daily activity report today is coming up next.

Active rigs: huge drop from 193 to 188.

Eighteen (18) new permits --
  • Operators: CLR (6), HRC (5),  Oasis (5), Hess (2)
  • Fields: Cottonwood (Burke), Big Gulch (Dunn), Eagle Nest (Dunn), Chimney Butte (Dunn)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right. 

Eleven (11) producing wells completed:
  • 25290, 741, KOG, Charging Eagle 14-14-24-16H3, Twin Buttes, t12/13; cum --
  • 25609, 1,018, Abraxas, Lillibridge 20-17-8H, Pershing, t12/13; cum --
  • 25608, 1,048, Abraxas, Lillibridge 20-17-7H, Pershing, t11/13; cum 9K 11/13;
  • 25607, 1,086, Abraxas, Lillibridge 20-17-6H, Pershing, t11/13; cum 5K 11/13;
  • 25606, 1,298, Abraxas, Lillibridge 20-17-5H,Pershing, t11/13; cum 11K 11/13;
  • 25306, 2,460, QEP, Paul 1-26-35BH, the Helis Grail, t12/13; cum --
  • 25305, 2,243, QEP, Paul 2-26-35BH, the Helis Grail, t12/13; cum --
  • 25631, 128, Samson Resources, Comet 2635-2H, Ambrose, t12/13; cum --
  • 22524, 48 (no typo), Cornerstone, Funk 2-27-34H, Carter,  t8/13; cum 8K 11/13;
  • 25655, 2,856, BR, Washburn 43-36TFH, Charlson, t12/13; cum --
  • 24360, 4,884, Statoil, Knight 35-26 2H, Banks, t12/13; cum --
Although that's a huge IP for Statoil, it is not the record. Statoil reported an IP of 5,417 on September 26, 2013: #23992, Beaux 18-19 7H, Banks oil field.

With regard to #22524, the Funk well. From the file report:
  • the primary pay zone was 10’ to 26’ below the base of the Lower Bakken Shale
  • this pay zone was picked for its production potential and quality of reservoir rock

For Investors Only: Bret Jensen On EOG

I recognize and appreciate a few contributors over on SeekingAlpha. Bret Jensen is one of them.

He has a very short piece reminding us that Barclays picked EOG as the energy pick of the year (2014):
Some of the E&P names have sold off recently as oil prices have declined to near six month lows. Investors with "dry powder" can now find more attractive entry points on a variety of major producers. One E & P play seems to be popping up on a couple of "2014Top Picks" in energy lists and has declined some ~$20 a share from its recent highs is Eagle Ford & Bakken producer EOG Resources.
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 My welcome/disclaimer explains why I post these investment stories. 

North Dakota Crude Oil Production Hits New All-Time High; Decreased Completions Despite Same Number Of Rigs Probably Reflects Pad Drilling

The Director's Cut is posted.

November, 20l3: 973,045 bopd (up 2.95% from previous month)
October, 2013: 945,182 bopd

Producing wells:
November, 2013: 10,023
October, 2013: 9, 923

November, 2013: 232
October, 2013: 267
All time high was 370 in 10/2012

Today, 2013: $71.25
December, 2013: $73,47
November, 2013: $71.42
October, 2013: $85.16

Rig count:
Today: 193
December, 2013: 190
November, 2013: 184
October, 2013: 183

Director's comments:
The drilling rig count was unchanged from October to November, but the number of well completions dropped from 166 to 138. NDIC estimates that at the end of November there were about 510 wells waiting to be completed, an increase of 50. The NDIC also notes that the rig count in North Dakota is increasing slowly.

Interestingly, there are now two (2) rigs activity drilling on federal land in the Dakota Prairie Grasslands. It had been zero.

Flaring is back up to 30% (up from 28%) mostly due to the temporary shut-down of the Tioga gas plant on November 25th for expansion. Flaring hit a historical high of 36% in 09/11.

I track projected estimates of future oil production at this site

Japanese Story

This story has nothing to do with the Bakken, but it has everything to do with North Dakota before the boom. The dots are not hard to connect (the Japanese story at the link and North Dakota before the boom).

Here's the Japanese story:
The Japanese now have one of the lowest fertility rates in the world, and at the same time, one of the highest longevity rates. As a result, the population is dropping rapidly, and becoming increasingly weighted toward older people. After peaking seven years ago, at 128 million, Japan's population has been falling — and is on a path to decline by about a million people a year. By 2060, the government estimates, there will be just 87 million people in Japan; nearly half of them will be over 65. Without a dramatic change in either the birthrate or its restrictive immigration policies, Japan simply won't have enough workers to support its retirees, and will enter a demographic death spiral. Yet the babies aren't coming.
The article had another story line which I won't go into.

The point is that before the boom, North Dakota was perceived as dying by some (even by North Dakotans themselves). Except for three or four or five or six cities most other North Dakota towns were continuing to decline in population. By North Dakota standards Grand Forks was a big city and perhaps not a dying city but it certainly was not a growing city in the "big" sense of the word. And after Fargo, Bismarck, Grand Forks, there was not much in terms of urban energy in North Dakota.

The oil boom has brought its problems, but in reality, the problems are only affecting five or six or seven or eight counties and only five or six or seven or eight "towns." The vast majority of North Dakota is not affected at all in any negative way. In fact, if the Bakken is affecting the rest of North Dakota, the Bakken is affecting the rest of North Dakota only in a positive way. [Indeed, the Bakken is also affecting the entire midwest region in a positive way. Just ask Warren Buffett and his thousands of investors.]

When out-of-state reporters want to focus on the bad things associated with the Bakken, they only have three or four or five or six towns to choose from: they don't visit the dozens of other towns and cities in North Dakota that are doing very, very well. When out-of-state reporters want to focus on the "bad road" situation they only have a small percentage of roads to complain about; 90% of North Dakota roads are in fine shape. In fact, the major roads in the Bakken are in very good shape based on my trip there just a couple of months ago. It's the back roads that the roughnecks and the occasional farmers have to put up with. Yes, occasional farmer: farms and ranches are huge in North Dakota.

Read the Japanese story at the link. It's quite a story.

Japanese Story

By the way, there is a movie called Japanese Story. It's an old movie now. It was released in 2003. My half-Japanese wife and I stumbled across it some years ago while browsing DVD rentals. It turned out to be an incredible movie. Toni Collette is gorgeous in her own way. For real movie buffs I can heartily recommend it.

The trailer:

Japanese Story, with Tony Collette

Tuesday; Number Of Active Rigs In North Dakota Remains High; Fracking Continues Through Cold Weather; Gen & Wyo Rail Doubles Year-Over-Year

Wells coming off the confidential list have been posted

Fracking resumes/continues. Samson Oil & Gas provides update of its North Stockyard project in the North Dakota Bakken:
Coopers 2-15-14HBK and Tooheys 4-15-14HBK: Fracture stimulation operations on the Coopers and Tooheys wells have been completed, and both of these wells are currently shut-in. The wells are located on the Tofte 2 pad and flow-back operations on these wells will commence around January 20th in conjunction with the Little Creature well flow back.
Genesee & Wyoming traffic in Dec 2013 was 155,769 carloads, up 109.0% y/y, and up 11.0% y/y pro forma for the RA acquisition.
Coal & coke traffic increased 5,776 carloads primarily due to increased shipments in G&W's Midwest, Central, Mountain West and Ohio Valley regions. Agricultural products traffic increased 3,758 carloads primarily due to increased shipments in G&W's Australia, Pacific and Ohio Valley regions. Metallic ores traffic increased 1,890 carloads primarily due to increased iron ore shipments in G&W's Australia Region. G&W's Other commodity group traffic increased 1,800 carloads primarily due to overhead Class 1 shipments. All remaining traffic increased by a net 2,227 carloads. 
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.

JPMorgan Chase beats GAAP by $0.06, beats adjusted by $0.06.

Wow, look at Delphi: Delphi Automotive approves an increase in the annual dividend rate paid on its ordinary shares to $1 per ordinary share from $0.68; announces new $1 billion share repurchUase program.

Active rigs:

Active Rigs19318420016379

RBN Energy: Continuation of the series on crude oil storage and takeaway in western Canada.
Spectra Energy purchased the 280 Mb/d Express pipeline from Kinder Morgan in December 2012. The Express originates in Hardisty and ships crude to Caspar WY where it connects with the Platte pipeline into the Midwest. The Express is small compared to the huge 2.5 MMb/d Enbridge mainline and the planned 1.1 MMb/d TransCanada Energy East pipelines but it is not the smallest export pipe from Hardisty. That honor belongs to the Inter Pipeline Bow River that ships less than 100 Mb/d of crude across the border into Montana. Today we continue our Canadian crude storage series describing Edmonton and Hardisty crude oil infrastructure.
Also note: in this blog we announce that everyone attending our School of Energy - Session A in March will be joining us for the Brad Paisley concert at the Houston Rodeo!
The Wall Street Journal

Health sign-ups skew older, raising fears over costsI have no idea why this is a concern. The insurers will be bailed out by the government. The insurers will simply become "pass-through" entities operating the national health care system for the federal government. But from the linked article:
One-third of health plan enrollees in new insurance marketplaces are 55 or older, the Obama administration said Monday, a figure that insurers said makes the pool older than they would need to sustain their coverage at current premiums.
Administration officials said they are pushing to enroll more young people before a March 31 deadline for most people to get coverage for this year, and some cushions built into the law mean it won't necessarily face trouble right away even if the 2014 pool of enrollees skews older.
Still, the release of the data, showing for the first time the age breakdown of people who had signed up for coverage through December, highlighted the challenge in persuading younger people who may not have a pressing need for health coverage to sign up for policies that can cost about $200 a month before subsidies. 
Of course it won't doom ObamaCare. As noted above, the insurers have a bailout clause.  Also, I'm not sure why one-third of enrollees are 55 years old or over comes as a surprise. Isn't that just about the "size" of the US population over 55? Of those over 26 years old (remember, those under the age of 26 can remain on their parents' insurance: one-third. From 26 to 55: one-third; over 55, one-third. Seems about right.


I would never have guessed: another booming American business -- Kentucky bourbon.
The world is developing a fresh taste for Kentucky bourbon.
In a $13.6 billion all-cash deal, Osaka, Japan-based beer and soft-drinks maker Suntory Holdings Ltd. agreed Monday to buy Beam Inc., BEAM the owner of Jim Beam, Maker's Mark and Knob Creek bourbons and the second-largest maker of American whiskey behind Brown-Forman Corp.
The acquisition would catapult family-owned Suntory from No. 15 in global liquor dollar sales to No. 3, behind only U.K.-based Diageo  PLC and France's Pernod Ricard SA, according to alcohol industry tracker IWSR.
Beam, based in Deerfield, Ill., currently is No. 4 globally. Beam is positioned squarely in a part of the liquor business experiencing a powerful global upswing: bourbon whiskey.
The traditional American spirit is made mostly from corn, aged in charred oak barrels and typically hails from Kentucky. Its popularity is building as some consumers grow tired of vodka, the top-selling U.S. spirit, and gravitate toward distillers of brown spirits with more than centurylong domestic roots. Long in the doldrums, U.S. bourbon has made a comeback in the past decade and production in 2012 rose above one million barrels for the first time since 1973. Distillers have invested roughly $300 million to boost capacity since 2011.
North American whiskey—including bourbon, Tennessee and Canadian whiskeys—accounted for more than half of the total growth in the $21 billion U.S. spirits market in the 52 weeks ended Oct. 12, 2013, according to store tracker Nielsen.
"Heard on the Street": Beam deal jacks up values.
North American whiskey is one of the most rapidly growing spirits in the U.S., particularly at the high end of the market. At Beam, comparable sales of Maker's Mark were up 17% year-to-date at the end of the third quarter, while sales of Knob Creek and Basil Hayden's were up 15% and 34%, respectively. That compares with 3% growth for Jim Beam. Timothy S. Ramey, an analyst with D.A. Davidson, says this trend has staying power. People's palates tend to move on a continuum toward greater complexity and depth of flavor as they age. The fact that 20-somethings are already drinking bourbon bodes well for the continued growth of the industry.
There appears to be a correlation here: 20-somethings not signing up for ObamaCare but increasing their consumption of bourbon.


Groups pledge $330 million to save Detroit's art collection.

West Virginia begins to lift water ban.  Another crisis, another day.

Two panels to investigate New Jersey bridgegate. Another crisis, another day. The problem went on for four days and a) no one told the governor "why"; and, b) the governor never asked. Apparently.

No criminal charges will be filed over IRS heightened scrutiny of conservative groups. And this is news? This is as newsworthy as learning that Jesse Jackson, Jr, now in prison, gets around $9,000 monthly in disability (while in prison) after developing a mood disorder following his sentencing. The United States: what a great country.

Supreme Court likely to limit presidential recess appointments. Along with executive orders and picking and choosing which laws to enforce, the US was looking more and more like a banana republic. Or perhaps an Islamic republic without the beheadings.

By not acting, the Supreme Court agrees that abortions beyond 20-weeks "constitutional."

The Los Angeles Times

Disclaimer: this is not an entertainment site. Do not buy any concert or movie tickets based on what you read here or think you might have read here. 

And still more stories on bourbon: at the Golden Globes parties, booze was promoted throughout the show and after.

CALPERS posts 16% return on investments -- best return since 1977. Unmanaged stock portfolios rose about 26% last year, and John Bogle's Vanguard Windsor had a return of about 39%. The North Dakota Legacy Fund probably had a return of less than 1% if the fund did not invest in equities. I have not seen the North Dakota Legacy Fund annual report yet.

In the US, rich kids getting skinnier, poor kids getting fatter.

The Boston Globe

From ancient fish, insight into origin of limbs
The 375-million-year-old fish Tiktaalik roseaewas first written into biology textbooks in 2006, when a team of three paleontologists discovered a fossil of the curious crocodile-like fish showing it had front fins resembling limbs, with elbows and primitive wrists. The same team announced Monday that Tiktaalik also had surprisingly large pelvic bones, suggesting the transitional creature was shifting toward “all-wheel drive” though it still lived in the sea.
Senate postpones action on jobless benefits. Memo to unemployed: develop a mood disorder.