Wednesday, January 29, 2014

NOG Operational Update

Northern Oil & Gas announces 4Q2013 production is expected to average ~ 13,900 barrels of oil equivalent (Boe) per day, up 28% y/y: Co is providing a production and operations update for the quarter ended December 31, 2013.

Production and operations update
Northern's Q4 2013 production is expected to average ~13,900 barrels of oil equivalent (Boe) per day. This represents an increase of 28% compared to Q4 of 2012, and a sequential increase of 6.5% compared to the third quarter of 2013. Total production for 2013 was ~4.47 million barrels of oil equivalent, an increase of ~ 19% compared to 2012.

During Q4 of 2013, Northern added 173 gross (12.6 net) wells to production, with an additional 245 gross (15.2 net) wells that were drilling or awaiting completion as of Dec 31, 2013. During 2013, Northern added 531 gross (40.0 net) wells to production. As of Dec 31, 2013, Northern's total producing well count was 1,758 gross (146.2 net) wells.

Northern expects its Q4 2013 realized price per barrel of oil equivalent, including the effect of settled derivatives (hedges), to be in a range of $74.50 - $75.00. The expected realized price per Boe reflects an approximate crude oil differential to WTI of $15.00 per barrel and an ~$3.00 per barrel loss on settled crude oil derivatives during the quarter.

Northern expects its fourth quarter 2013 lease operating expense (LOE) per barrel of oil equivalent to be in a range of $8.75 - $9.00, a reduction of ~7% compared to Q3 of 2013.

This Story Came Out Before The News That Someone Paid $34,000/Acre In The Bakken

A contributor over at SeekingAlpha looks at Surge Energy, KOG, and Halcon.

Disclaimer: This is not an investment site, but some days I wish it were. Having said that, do not make any investment decisions based on what you read here or what you think you may have read here.

For those who come here for investment advice, President Obama is hoping to initiate the plan that President Bush II proposed but instead of common stock, President Obama will ensure the full faith and credit of his administration, guaranteeing a fair return, let's say 2% on one's money. The Fed's inflation target is 2% so this will work out just about right. Again, this is not an investment site, and I do not know the particulars of the president's plan which he has cleverly called "myRA." 

It's better than nothing (some say). I did not say that. This is not an investment site. By the way, the maximum balance of $15,000 looks ridiculously small, but it appears once one gets to $15,000, it is expected that one would roll that over into a private sector IRA. This sounds like President Bush II's plan -- done a bit differently, but essentially the same idea.

Halcon presentations can be found here. A big thank you to a reader. 

$34,000 / Acre In The Bakken; January's BLM Minerals Lease Sale -- January 29, 2014

KXNET is reporting:
The Bureau of Land Management says its most recent sale of oil and gas leases in North Dakota totaled more than $17.5 million.
BLM says 40 federal leases were sold Wednesday.
The agency says Williston-based Diamond Resources Co. submitted a record high bid of $34,000 for each acre in a 53-acre parcel in Mountrail County.
Diamond Resources also purchased the highest single-parcel bid at more than $5 million for a 152-acre parcel in Mountrail County.
Let's do the math: $5,000,000 / 152 acres = $32,895/acre (rounded). 

At least three story lines come from this:
a) now we know why holding leases by production is so important;
b) if the acreage is worth this much, the Bakken operators are going to show some spectacular profits down the road -- no one paid this much for so little
c) this helps investors understand the value of the shares they hold in Bakken operators
Diamond Resources is probably buying the minerals for CLR.

According to my FAQ page, question 11:
The late summer QEP/Helis deal may have priced "core" Bakken at $30,000/acre (or more). -- August 29, 2012.
I know two people who, when they read this, will be sneezing coffee out their respective nostrils.


The worst case scenario for the sweet spots in the Bakken:
  • 8 wells on 1280-acre spacing (four middle Bakken wells, four Three Forks wells)
  • EURs of 300,000
  • $50/bbl oil 
  • The arithmetic:
  • 8 wells x 300,000 bbls (EURs) = 2,400,000 bbls
  • 2,400,000 x $50/bbl= $120,000,000
  • $120,000,000 / 1280 acres = $93,750 / acre
  • Even with each of the 8 wells costing $10 million, one still comes out to $31,250/acre
However, a couple things to consider:
  • in the best Bakken, EOG, CLR, and KOG are planning on many more than 8 wells/1280-acre unit (see pilot density projects)
  • no one thinks 300,000 bbls for average EURs is even close; across the Bakken, the average is closer to 600,000 (according to CLR) and Mike Filloon says that in the best Bakken, expect to see EURs of 1 million bbls
  • I doubt anyone thinks oil will average $50/bbl over the next 30 years
  • wells are coming down in cost, from $10 million to $8 million
See what $/acre one gets with the following assumptions?
  • 12 wells (still way below the current anticipated well density)
  • EURs of 450K (still way below the average of 600K)
  • $75/bbl (perhaps reasonable)
  • same cost per well

Fourteen (14) New Permits -- The Williston Basin, North Dakota, USA; KOG Will Report A Nice Well Thursday

Active rigs:

Active Rigs19018720416390

Fourteen (14) new permits --
  • Operators: Hess (4), Statoil (3), BR (3), Fidelity (2), MRO (2)
  • Fields: Alkali Creek (Mountrail), Alger (Mountrail), Hawkeye (McKenzie), Green River (Stark), Chimney Butte (Dunn)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right.

Triangle USA Petroleum renewed eight (8) permits, six Larsen wells and two Kittleson wells.

One producing well was completed:
  • 23278, 2,143, QEP, Paul 1-26/35H, Grail, t1/13; cum --
Wells coming off confidential list Thursday:
  • 23019, 754, CLR, Sacrament 3-10H, Brooklyn, no production data,
  • 24160, 863, Whiting, Pronghorn Federal 34-10PH, Park, Three Forks, 21,478 feet; t7/13; cum 23K 11/13;
  • 24161, 716, Whiting, Pronghorn Federal 41-15PH, Park, Three Forks, 21,030 feet; t8/13; 24K 11/13;
  • 24162, 1,327, Whiting, Pronghorn Federal 44-10PH, Park, Three Forks, 21,811 feet; t7/13; cum 30K 11/13;
  • 24848, drl, QEP, MHA 5-06-07H-147-92, Heart Butte, no production data,
  • 25009, 1,614, WPX, Olson 12-1HX, Van Hook, t12/13; cum 3K 11/13;
  • 25033, 507, Hess, LK-Thomas-145-97-3625H-4, Little Knife, no production data,
  • 25213, 1,415, Statoil, Alger State 16-21 6TFH, Alger, no production data, 
  • 25287, 2,109, KOG, Charging Eagle 1-14-11-2H, Twin Buttes, t12/13; cum 20K 12/13;
  • 25760, 1,757, MRO, Williams Kukla 24-34H, Murphy Creek, no production data;

MRO - Re-Fracking

Reminder: I follow this story here. (Actually, I follow the story when I remember.)

At this post I list the MRO wells that might be candidates for re-fracking.

Big Oil Struggles To Justify Soaring Project Costs; Puts The Bakken Into Perspective; The Red Queen?

The Wall Street Journal is reporting, on-line front page:
Chevron Corp., Exxon Mobil Corp., and Royal Dutch Shell spent more than $120 billion in 2013 to boost their oil and gas output—about the same cost in today's dollars as putting a man on the moon.
But the three oil giants have little to show for all their big spending. Oil and gas production are down despite combined capital expenses of a half-trillion dollars in the past five years.
One of the biggest problems: Costs are soaring for many of the new "megaprojects" to tap petroleum deposits needed to replenish depleting fields. Plans under way to pump oil using man-made islands in the Caspian Sea could cost a consortium that includes Exxon and Shell $40 billion, up from the original budget of $10 billion. The price tag for a natural-gas project in Australia, called Gorgon and jointly owned by the three companies, has ballooned 45% to $54 billion.
Exxon is borrowing more, dipping into its cash pile and buying back fewer shares to help the Irving, Texas, company cover capital costs. Exxon has said such costs would hit about $41 billion last year, up 51% from $27.1 billion in 2009.
As they pursued the big-bet strategy, the three oil giants arrived late to the shale boom in North America, where they missed out on profits raked in by smaller, nimbler companies that pioneered how to extract oil and gas from the dense rock.
Exxon and Chevron are pressing ahead with their megaprojects, confident they will boost production within three years.
By 2017, Exxon will pump a million new barrels of oil per day and the equivalent in natural gas, showing the company's ability to deliver big projects on time, executives say. Exxon's output started to rebound in late 2013 after a two-year decline, helped by new crude from a $13 billion oil-sands project in Canada. The project's cost rose $2 billion since 2011 because of regulatory hurdles and permit delays.
Oil-industry experts say it will be difficult for the oil giants to spend less because they need to replenish the oil and gas they are pumping—and must keep up with rivals in the world-wide exploration race.
Chevron has been especially aggressive, promising a 25% increase in oil and gas output by 2017. Last year, the San Ramon, CA, company poured $42 billion into oil and gas projects, more than double its 2010 total, even though Chevron is half as big as Exxon or Shell by annual revenue. Chevron plans to spend an additional $40 billion in 2014.
The spending surge has drawn attention from U.S. securities regulators, who have demanded more disclosure from Chevron about whether the jump will get even bigger and affect the company's liquidity. Chevron told regulators it will provide more details.
Chevron's most gargantuan projects, from Australia to the Gulf of Mexico, haven't generated any cash flow yet—and might not until next year. The lag between the upfront investment in the projects and their output is pressuring Chevron's bottom line.
Analysts expect the company to report that profits fell about 20% to $21 billion in 2013 from $26.2 billion in 2012.
The Gorgon natural-gas project is one of the most extreme examples of the runaway costs that haunt Chevron, Exxon and Shell. The three companies teamed up in 2009 to build the plant on an island reserve 40 miles off Australia's coast, aiming to tap a natural-gas trove estimated at 40 trillion cubic feet. Gorgon could be productive for decades and feed energy-hungry Japan, South Korea and China. Chevron staked more than $18 billion of its own money on Gorgon, one of the company's biggest projects ever, owns nearly half of the project and runs it. Exxon and Shell own a 25% stake each.

Truck Drivers Needed In The Bakken; Global Warming Hits The South

This caught me by surprise. The grapevine suggested the need for truckers in the Bakken was dropping off, but The Dickinson Press is reporting that MBI held job fair in Fargo looking for truckers:
The company actually has more than 90 truck-driving openings up for grabs, mostly in western North Dakota, and it sponsored a mini job fair Tuesday to try to fill them.
It was the company’s first recruitment effort in Fargo.
Go to the link for more information.

MBI Energy Services is based in Belfield, North Dakota. This is their website.


Global Warming Hits The Southeast -- the headlines --
  • 18,000 Super Bowl tickets still available
  • Arctic blast stuns the south
  • Atlanta drivers abandon cars
  • sleep in grocery stores
  • 18-hour commute
  • school children stuck overnight in school buses
  • officials caught off guard
  • Algore avoids Atlanta, stays home
Really, caught off guard?! This Arctic blast was forecast for at least a week. I guess all that global warming talk went to their heads.

That last one about Algore -- just a rumor.

Hess 4Q13 On The Bakken


Later, 9:47 a.m. CT: Don correctly points out that it is possible that Hess has taken some of their acreage off the books, or let permits expire, on marginal acreage. If so, it seems to be a fair amount (from maybe 900,000 to 645,000 net acres); it's hard to believe that there would be that much acreage that would be marginal in the area the Hess operates in North Dakota. Regarless, "snapshot" still serves a purpose.
Original Post

NOTE: if one checks "Spotlight"tab at the top, and scrolls down to Hess, note that Hess Bakken acreage has significantly decreased since 2010:
  • 4Q13: January 29, 2014, corporate earnings: 645,000 acres in the Bakken: to ramp up in the Bakken. CAPEX will stay flat at $2.2 billion in 2014 (same as 2013) but will drill 225 operated wells vs 168; 17 rigs (2014) vs 14 rigs (2013). Will focus on unconventional shale. 4Q13: average well cost, $8 million vs $11 million (2012); forecasts 80K to 90K boepd in 2014; 9 wells for typical 1280-acre unit; will test tighter well spacing; Tioga Plant expansion to be complete 1Q14; forecast 150K boepd (2018) -- represents an increase from guidance of 120,000 boepd (2016).
  • Hess Bakken Investments II, LLC: the Hess operator for Rocky Mountain assets in North Dakota, Wyoming, and Colorado; founded in 2009; Tracker Energy (TRZ) formally changed to Hess Bakken Investments II, LLC, in 2013;
  • November, 2012, NOG says Hess has 800,000 acres
  • September (2012) Power Conference presentation: 900,000 acres; 16 rigs
Yahoo!Finance is reporting:
In North Dakota, the Corporation holds approximately 645,000 net acres in the Bakken oil shale play. Net production from the Bakken averaged 68,000 boepd in the fourth quarter, which reflects the previously announced downtime associated with the Tioga Gas Plant expansion.
Full year production averaged 67,000 boepd, an increase of 20 percent from 56,000 boepd for 2012.
Hess brought 46 operated wells on production in the quarter and 168 wells for the full year, bringing the cumulative total to date to 722 wells.
Drilling and completion costs per operated well averaged $8.1 million for the year, a reduction of 26 percent from $11.0 million per well in 2012.
Infrastructure investments in 2013 included the Tioga gas plant expansion project, which is expected to be completed and operational in the first quarter of 2014.
In 2014, Hess plans to increase the rig count in the Bakken to 17 from 14 but is maintaining capital spending at $2.2 billion, which is consistent with 2013 capital spend.
Production is expected to average between 80,000 boepd and 90,000 boepd in 2014, an increase of 19 percent to 34 percent from 2013. The Corporation is increasing its peak net production guidance for the Bakken to 150,000 boepd in 2018 from prior guidance of 120,000 boepd in 2016, based upon performance to date and a current design of 9 wells for a typical 1,280 acre drilling unit. During 2014, the Corporation plans to pilot test tighter well spacing to determine whether there is additional upside in the estimates for future production and resources.

Wednesday, The Morning After The Speech, And The Market Plummets; Argus Leader, 1 -- USDA, 0

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.

Active rigs:

Active Rigs19018720416390

RBN Energy: propane exports exceed 400,000 b/d for first time.
We’ve been talking a lot over the past year about the need for increasing exports to balance the U.S propane market as growth in production from gas processing plants outruns domestic demand.  U.S. propane production from gas processing has increased by over 100 Mb/d since January 2013, and there’s lots more to come.  For the first time U.S. propane exports exceeded 400 Mb/d in October 2013 thanks to growing U.S supply and infrastructure developments including dock expansions by Enterprise and Targa.  But just after exports ramped up, the propane market was hit by a couple of wild cards – a late and very heavy crop drying season and a series of record cold temperature events. In today’s blog, we continue our series covering the record setting 2014 NGL markets.
The Wall Street Journal

Front page, on-line: North Dakota reacts to drilling critics: extraordinary sites. Slippery, slippery slope.

Shell plans boat to tap gas fields.
Shipyard workers in South Korea are building a hull for the Anglo-Dutch company that stretches more than 1,600 feet from bow to stern. The boat will drop anchor in a natural-gas field, chill the gas into liquid and pump it into tankers.
The vessel, christened Prelude, will produce enough natural gas to supply Hong Kong for a year, according to Shell. The company says the giant project will help Shell develop gas fields that are too small or far-flung to justify the pricey pipelines and onshore processing plants needed for offshore gas fields.
Thank goodness for fracking.
Freezing temperatures are creating near-record demand for natural gas in the U.S. as shivering Americans turn up the heat and plug in their electric blankets.
Natural-gas prices have jumped in response, topping $5 per million British thermal units for the first time since 2010 as fuel has been pulled from underground storage vaults to keep furnaces running and electric utilities humming.
But compared with past cold snaps, such as in 2000, the price surge has been muted, according to utilities and other big gas users. That is good news for businesses and consumers. Manufacturers that consume large amounts of the fuel—steelmakers, for example—say they have trouble planning for sharp price changes. And homeowners on fixed incomes can be hit especially hard when utilities raise prices. 
I've mentioned this several times, if not on the blog, in e-mail correspondence, that this is the longest sustained period of "high prices" for oil (if not natural gas). It is a lot easier to manage sustained high prices than extreme volatility. See EIA for natural gas prices going back to 1973.


I knew they had a good quarter; I just didn't realize it was this good. DuPont 4Q13 profit doubles.  Pundits "blaming" the market's three-digit pullback today on earnings are full ... hot air. It's all about emotion surrounding "tapering," Ben's swan song today. By the end of the week (in two days), it will be forgotten. It's possible that the durable goods report, plunging 4.3% is the real culprit behind the market fall. But I  think it's tapering.

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. 

 The Los Angeles Times

I was curious how this would turn out.
A jury finds that the Democrat lied about his address on voter registration and candidacy papers in 2007 and 2008 and voted fraudulently in five elections. He could get more than eight years in prison. 
Jail time? Not gonna happen. The courts have told Gov Brown to empty the overcrowded jails. If he does get prison time, six months, then probation.


The man "who lived in "permanent present tense":
If you know that a small seahorse-shaped structure deep in the brain -- the hippocampus -- is crucial to committing new facts and skills to memory, you have not only your hippocampus to thank; you also owe a debt of gratitude to Henry Gustav Molaison, known to brain scientists worldwide as the amnesic patient "H.M."
A new study shows that in death as in life, the man who lived 55 years virtually unable to form new memories deepened our understanding of what it takes to make them. More specifically, it clearly shows that after surgery to remove H.M.'s hippocampus and surrounding tissue as a treatment for epilepsy in 1953, portions of the structure remained in both hemispheres of his brain.


Politico is reporting:
A federal appeals court has rejected the Obama Administration's attempt to keep secret the government's data on how much individual retailers take in from the food stamp program. 
In a ruling Tuesday, the U.S. Court of Appeals for the 8th Circuit turned down the U.S. Department of Agriculture's arguments that a provision in federal law protecting retailers' application information from disclosure also barred disclosure of how much the feds pay out to specific businesses.
"Because the retailer spending information is not 'submit[ted]' by 'an applicant retail food store or wholesale food concern...' the information is not exempt from disclosure.
The judges acted on an appeal filed by South Dakota's [Sioux Falls] Argus Leader newspaper after the USDA turned down the paper's Freedom of Information Act request for Supplemental Nutrition Assistance Program payments to individual retailers on an annual basis from 2005 to 2010. A district court judge agreed with the federal government's argument that part of the food stamp program statute barred such disclosure, making the data exempt from FOIA.
It probably would have been best to get this information out back in 2011 when the president's ratings were sky-high. Now, Argus Leader has opportunity to publish a Pulitzer-winning story just as we go into the election cycle. 

Good for the Argus Leader. I really don't care about the story, but I have fond memories of the Sioux Falls newspaper. Glad to see it's still in the hunt.