Sunday, February 16, 2014

Mike Filloon On The Smaller Bakken Operators; Soaring Grocery Prices

It's been a long time since we've heard from Mike Filloon. And, as usual, very, very good.

The contribution is from SeekingAlpha.

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

Filloon mentions these are the Bakken operators he likes for 2014:
  • Triangle (TPLM) 
  • Kodiak (KOG) 
  • Abraxas (AXAS) 
  • Oasis (OAS) 
  • Whiting (WLL)  
In addition, he likes Emerald Oil (EOX) and devotes the article to Emerald.

Incidentally, Filloon says this early on in the article:
As you can see in the above diagram, the Wahpeton pad tests 8 wells per interval. Four source rock (sic) were targeted, from the middle Bakken to the third bench of the Three Forks. Continental probably has more well data than any other operator in the Bakken. It's choice to drill the tightest spacing to date (and most expensive pad) in this area shows confidence. Continental has alluded to Wahpeton as a success and it's reason to pursue this spacing using three pads. Each pad is near the Hawkinson, Rollefstad and Tangsrud pads.
That's interesting. I was always under the impression there was one source rock, the Upper Bakken which "fed" the underlying formations.

By the way, there were a lot of typographical errors in this article.

Readers need to know that the article will only be available for a limited time.

The best part of the article is Filloon's optimism on southern ops in the Bakken. To date, I have not been particularly impressed, but Filloon is very, very optimistic. He noted that along with Whiting, Oasis has also invested in the southern edge of the Bakken.

A Note to the Granddaughters -- Science

The photo is a bit too dark but it will be a nice reminder of how we spent a recent afternoon. We were studying electric circuits. The older one was putting together a circuit that would  produce different alarm sounds by waving her hand over a photo-receptor. Electricity was one of my weaker subjects in high school, and I have learned more about electricity working with our 10-year-old granddaughter than all I learned in high school. The younger granddaughter, by the way, is drawing a cartoon of her grandfather -- that would be -- getting electrocuted. LOL.

 Electric Circuits -- February 16, 2014

A Note to the Granddaughters: Price Of Bread in 2014

I am not sure what to make of this. CBS News is reporting:
Food prices soar as incomes stand still.
While the government says prices are up 6.4 percent since 2011, chicken is up 18.4 percent, ground beef is up 16.8 percent and bacon has skyrocketed up 22.8 percent, making it a holiday when it's on sale.
"Oh my god!" Singer said as she spied bacon for $3. "The things that are going up in price are the things I absolutely need to buy," she said. "It's the meat, it's the milk, it's the eggs and it's getting out of hand."
So many comments, I don't know where to begin. That's been my impression also, the soaring food prices.  Bread is most interesting: generally, bread costs between $3.00 and $4.00 per loaf here in Dallas, Texas, area. But one can find store-brand white bread for 99 cents. In San Antonio it was 88 cents, but there's a huge difference between $1 and $4 and the product is not that much different.

I also noted that food prices are about 50% higher in southern California (Los Angeles) compared to Texas. The only two differences between Texas and California grocery stores is this, as far as I know: southern California grocery stores are highly unionized and southern Californians keep preventing Wal-Mart form moving in.

I really don't know.

Another observation. The article suggests that CBS is surprised that the government says prices in general are only up 6% since 2011 whereas food prices are up around 20%. Why should that be surprising? Does one really believe the 6%? It seems to me that most numbers provided by this administration -- from jobs to global warming to health care -- have been way off the mark.

Food prices up 20% since 2011? It would be interesting to see what the real tax increases have been on Americans since 2011 -- including the biggest new tax, Obamacare.

Permanently Colder -- All Due To Global Warming


February 17, 2014: the original post was done somewhat tongue-in-cheek, but a reader sent me a very nice scientific analysis of what is going on. The article is based on research supported by NASA. Folks might want to keep it bookmarked for future reference.
Original Post

I can't make this stuff up.

Now they tell us that the colder weather we've experienced the past couple of years is going to be "permanent." AFP via Yahoo!News is reporting:
A warmer Arctic could permanently affect the pattern of the high-altitude polar jet stream, resulting in longer and colder winters over North America and northern Europe, US scientists say.
The jet stream, a ribbon of high altitude, high-speed wind in northern latitudes that blows from west to east, is formed when the cold Arctic air clashes with warmer air from further south.
The greater the difference in temperature, the faster the jet stream moves.
According to Jennifer Francis, a climate expert at Rutgers University, the Arctic air has warmed in recent years as a result of melting polar ice caps, meaning there is now less of a difference in temperatures when it hits air from lower latitudes.
So, if I'm reading this right, global warming is really only going to affect the Arctic; it's going to be "permanently" cooler in the northern hemisphere, outside of the Arctic. And, of course, the Antarctic has been getting colder, at least based on an increasing volume and expansion of ice.

I can't make this stuff up. Algore was right on the global warming part; he was just wrong on the "location." It will only be warmer in the Arctic; everywhere else .... colder. 

Photo Of Another Bakken Well In The Sweet Spot Of The Bakken: Northeast Mckenzie County

The contributor writes:
The photo is of #24220, HRC's Berg Trust Federal 1-26-35H. HRC is drilling additional wells in the spacing unit, but is doing them from the southern side of the unit, where the Berg Trust is in the north side of the unit. 
He writes that this little corner of McKenzie County is a microcosm of the Bakken as a whole. Lots of different fields (North Fork, Pembroke, Haystack Butte, Siverston, etc), lots of different operators (XTO, Continental, Burlington, Newfield, Kodiak, Slawson), and even different spacing (640, 1280, 2560). The flaring is even radically different from one operator to the next. 

  • 24220, 2,078, HRC,  Berg Trust Federal 1-26-35H, Pembroke, middle Bakken, 30 stages; 3.3 million lbs sand; t3/13; cum 96K 12/13;

What Determines The Price Of Oil

On February 11, 2014, I wrote:
The most noteworthy data point this morning: the price of oil continues to melt up without a good explanation. I posted this two days ago, and the sentiment remains:
The major factors affecting the price of oil:
  • Mideast politics and hostilities (Syria, Iran, Israel); sabre-rattling
  • strength of the dollar
  • US economy six months out
  • Chinese manufacturing index
  • global economy six months out
Of the five, I think the US economy six months out as telegraphed by the Fed's actions is the most important (on the day of posting). On a day-to-day basis, all things being equal (e.g., no report of a war breaking out in the Mideast, it is the strength of the dollar).
I received a note from a reader suggesting that Mideast politics will be the major factor affecting the price of oil going forward, and sent a link to this article
  • Headline: Iran flexes muscles in Gulf 
  • Story: 
The Iranians now feel confident enough to attack Sunnis openly - scary for the Saudis. For the first time, the Iranians are attacking not just the Saudi government, but also the Wahhabi extremist Sunni sect that is the ideological underpinning of the Saudi regime. Wahhabis have been declared to be "worse than Jews" and heretical.
"If they refuse to convert (to Shi'ism) killing them is not a sin." Of course, to Shi'as, all Sunnis are heretical, as they in turn are considered heretical by the Sunnis, but until recently the ayatollahs have been cooperating with Sunni governments and terrorist organizations such as Hamas and Islamic Jihad to confront the Israelis and the West.
This tactic is apparently now ending, as the Iranians feel themselves capable of confronting their Sunni rivals as well as secular regimes and Western governments, given what they see (and proclaim) as their "victories" in the negotiations with the six powers.
It was just the other day that I suggested that one of President Obama's lasting legacies will be a Mideast nuclear arms race. Saudi Arabia will go nuclear before the decade is out. History will look back on this period as a lost opportunity: the Obama administration and Israel had a window of opportunity and did not take it.

A Note to the Granddaughters

I finished The Girl With The Dragon Tattoo this afternoon in between activities with the granddaughters. An incredible book. Very good. For me, I would not have enjoyed the book half as much (I might not even have completed it) had I not seen the movie first. 

The director said the movie was five acts which made it a difficult movie to write and film. According to wiki, a five-act play: exposition, rising action, climax, falling action, and dénouement. The challenge with Dragon Tattoo there were two stories, but the bookends story -- the libel suit was overshadowed by the story in the middle: the serial murder mystery.

I've moved on to The Great Gatsy, the book, and the 2013 movie.

Another "Keystone" Pipeline Delayed -- Here We Go Again; The US State Department Wants A "Do-Over"; Bill McKibben's Fingerprints Are All Over This One

The Obama administration appears ready to kill another shovel-ready project. Enbridge is reporting that its Clipper pipeline project has been delayed due to US presidential inaction. Among other things, the president was golfing in Hawaii. is reporting:
Enbridge is reporting that the U.S. State Department is taking longer than expected to review an expansion to an Alberta-to-Wisconsin pipeline.
But executives with the Calgary-based energy shipper said Friday they’re confident of getting a green light in time to expand the Alberta Clipper line to 800,000 barrels per day by the middle of next year.
Enbridge obtained a U.S. federal permit in 2009 before starting up the first 450,000-barrel-per-day phase of the line, but the State Department says it needs to amend its environmental review before allowing the expansions to go ahead.
So many story lines in this short article. But none of this worries me any more. The Australians have the solution:

World's Largest

The series on the I-98 is seeming less and less fictional every day. 

And, of course, there's always rail. LOL.

Seriously: the  Canadians and the Canadian government better get their act together; realize that the US is not the ally they can count on any more.

Electric Companies Using The Most Coal Since 2011 -- Government Data, Bloomberg

Back on December 9, 2013, this blog headline: "death of king coal is premature" which, of course, should have been, "talk of death of king coal" but one gets the point. That story dealt with Asia and coal. It turns out that Asia is not the only continent turning to coal. Of course, Europe is, too, but now Forbes is reporting:
This wasn’t supposed to happen.
Cheap natural gas was supposed to be the answer to our dependence on dirty old coal. But now, it seems, coal is making a comeback. The bitter winter, the coldest in 30 years, has pushed natural gas prices to some of their highest levels in four years, and that has made coal attractive to utilities again.
Electric companies are generating more than 4.5 million megawatt hours a day using coal, the most since 2011, Bloomberg reported, citing government data. As a result, coal’s share of power production rose to more than 40 percent from 39 percent last year.
Cheap and abundant natural gas supplies from the hydraulic fracturing boom had made natural gas a cheaper and cleaner alternative to coal for the past several years. Economics, though, had to catch up at some point. With demand for gas rising this winter, pushing prices as high as $5.56 per million British thermal units at the end of January, coal is looking more attractive.

For Investors Only: Motley Fool On Oasis -- The Bakken, The Williston Basin, North Dakota, USA

Motley Fool is posting:
The North Dakota oil boom is far from over. In fact, we may still be in the early innings of this development, and plenty of catalysts could send Oasis shares higher in 2014. Here are three reasons to add it to your portfolio. 
It would be impossible for me to find it, but I believe Motley Fool has had articles suggesting that the Bakken has topped out. Motley Fool is a lot like Texas weather: unpredictable.

This is why Motley Fool picked up on Oasis: the "smart money" is moving into Oasis --
According to recent SEC filings, billionaire Ken Griffin of Citadel Investments increased his stake in the company last quarter by 35% to $141 million
Billionaire John Paulson, famous for predicting the U.S. sub-prime mortgage meltdown, is also bullish on Oasis' prospects. Last quarter SEC filings indicated that his hedge fund Paulson & Co. initiated a new position in Oasis worth $39 million. Other legendary hedge fund managers like Paul Tudor Jones, Jim Simons, and Steven Cohen also own sizable stakes in the company. 
The rest of the article was filler. 

Regular readers might remember this story: Motley Fool calls the Bakken, a "beast." 

Bakken: One Million Barrels Of Oil Per Day As Of February 10, 2014

A reader writes:
As of February 10, Bakken total production was 1.04 million barrels of oil per day (mmbopd), which is expected to increase to 1.06 mmbopd by March. 
The reader says he connects frack tanks to the water wells directly so that trucking in fresh water for fracking is not required. 
For newbies, "the productive Bakken" extends into Canada and Montana; probably not into South Dakota. 

The monthly Director's Cut production figures are for North Dakota only, and includes all oil produced from all formations. The Bakken is just one of several formations from which oil is produced in the Williston Basin.

For The Warmists: Duluth Sets New Record

Link here.
Duluth sets record for most subzero days in a season.

Today is the 60th day this winter that a subzero low temperature has been recorded at the Duluth International Airport, setting the city's record for most days with below-zero temperatures in a season.

The previous record of 59 days with subzero lows in a single winter was set in the winters of 1958-59, 1916-17 and 1874-75.

I Can't Make This Stuff Up: Government Motors Pace Car At Daytona Catches Fire

Link here.
The pace car caught fire during a NASCAR race on Saturday night.
Just before the final segment of the season-opening Sprint Unlimited exhibition race, pace car driver Brett Bodine pulled his blue Chevrolet SS pace car down to the apron when he had smoke inside the vehicle.
"Tower, we're on fire," Bodine radioed.
Not even an EV or a hybrid. How many years have "we" been manufacturing automobiles now, and government motor cars are still spontaneously setting themselves on fire? Apparently this was a 2014 production model.
Chevrolet officially unveiled the production model 2014 Chevrolet SS at Daytona International Speedway on Saturday and onlookers couldn’t help but notice the similarities to the model’s Sprint Cup Series counterpart that will officially debut in tonight’s Sprint Unlimited NASCAR race. Best described as a four-door Corvette, the SS is a rebranded Holden VF Commodore SS V from Australia. The SS is Chevrolet’s latest effort to capture the American rear-wheel-drive sport sedan audience and the start of the 2013 NASCAR season presented an ideal opportunity to roll out the street model.
The car should be a hit on New Year's Eve and/or July 4th, especially where fireworks are prohibited.

Random Update On Leasing In McKenzie County

This was a nice way to start the morning. A reader sent me this note:
I just wanted to inform you of the value of leases currently on the reservation in McKenzie County. We just had a significant amount of acres become available due to only what I can assume was a huge mistake by the oil company had on these acres.
The BIA conducted the bidding process and the winning bid was $27,300/acre with 22% royalty.
This was for more than 100 acres. We were simply amazed. These same acres generated a $500 per acre 18% royalty extension October 2010.
This is very much in line with earlier posts that producing acreage in the better McKenzie was going for $34,000 to $40,000/acre. 

I remember when royalties were as little as 1/8th. A huge congratulations to the mineral owner(s).