Trying To Get A Handle On $3.1 Billion for 45,500 Net Acres -- Even If It Is The Eagle Ford; EOG 1Q14 Earnings Conference Call

Updates

May 8, 2014: a reader points out something critical that I missed when trying to sort out the valuation for Halcon:

Regarding your post about HK being valued at $2.2billion, remember to keep in mind that's just the equity valuation. They have another ~$3.2b in net debt (very little cash) giving it an enterprise value of roughly $5.4b. 

That's an excellent point; a huge oversight on my part. A "huge thank you" to the reader. I used to "know" that about enterprise value and then forgot. Use it or lose it, I guess; that's why I post -- to help me learn; to help put the Bakken in perspective. 
 

Original Post

 
Reported earlier, Encana paid $3.1 billion for this in Eagle Ford --

The deal will give Encana 45,500 net acres in Karnes, Wilson and Atascosa counties in south Texas. The properties produced the equivalent of about 53,000 barrels of oil per day in the first quarter.

For comparison purposes, Halcon produces an average of 36,622 barrels of oil equivalent per day, in the Bakken (more overall, see below). Halcon has 142,000 net acres in the Bakken, and much more elsewhere, see below. Halcon's market capitalization is $2.2 billion.

One can argue that the difference between 37,000 boepd and 53,000 boepd is significant or not significant (I tend to argue the latter), but the difference between 45,000 net acres of prime real estate is vastly different than 142,000 net acres. 

When I see something that seems very strange or unusual, I can only assume I made an error somewhere but that's the data I'm working with. Some say the Eagle Ford is better than the Bakken on a "per acre" valuation but $3.1 billion for 45,500 net acres vs $2.2 billion for 142,000 net acres seems to jump out at me.

Oh, by the way, the $2.2 billion market cap that Halcon has also includes 307,000 acres in the Tuscaloosa Marine Shale (Louisiana) and another 100,000 net acres in El Halcon, in the Eagle Ford. Yes, this all does not make sense. I must be missing something. Encana buys 45,500 net acres for $3 billion and Halcon with over 500,000 acres in some pretty good shale including the Bakken, the Eagle Ford, and the Tuscaloosa Marine and is valued at $2.2 billion. Again, I can only assume I'm missing something.

Oh, back to that 53,000 boepd for the new Encana acreage vs 37,000 boepd for Halcon -- overall, Halcon has over 40,000 boepd. The delta between 53 and 40 narrows.

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EOG's 1Q14 Earnings Call -- Transcript
SeekingAlpha

Operations In The DJ Basin (Colorado), Powder River Basin (Wyoming)

• adding 735 high-rate-of-return net drilling locations in the sweet spots of four plays
• estimated reserve potential of 400 net million boe
• ten solid years of drilling inventories in these four plays
• two of these four plays in the DJ Basin
• two plays in the Powder River Basin
• EURs of 850,000

Eagle Ford

• on track to drill 520 net wells this year
• 26 rigs
• a number of Eagle Ford wells have IP rates in excess of 4,000 bopd
• largest growth asset with the high after-tax rates of return
• 564,000 net acres; most leases held by production
• will generate a free cash flow this year and every year through 2024
• ten years of growth before EOG even begins to see production level out

The Bakken

• this past year, increased drilling density from two to four wells/spacing unit
• the majority of wells in Core and Antelope Extension were based on 1,300 feet between wells
• now testing tighter spacing, down to 700 feet
• six rigs; plan to add a seventh this summer (2014)
• EOG has not determined years of inventory; still sorting out spacing

Leonard Shale

• testing 32-acre spacing across different zones

Oil

• worldwide analysis: bullish on oil

Natural gas

• pricing to remain between $4.50 and $5.00
• caveat: operators remain disciplined; don't ramp up drilling activity

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Politics

Was this the 2014 "malaise speech"?

Acknowledging that despite a list of accomplishments that there is still a “disquiet around the country” as well as “an anxiety, and a sense a frustration,” Obama said that “the challenges out there remain daunting and we have a Washington that’s not working.” [Comment: as far as I can tell, only one "accomplishment: ObamaCare.]

“Those who don’t believe government can do anything are empowered, gridlock reigns, and we got this downward spiral of even more cynicism and more dysfunction, and we have to break out of that cycle and that’s what this election is all about,” Obama said, according to a pool report, in remarks that lasted about 15 minutes. [Comment: exactly who are empowered?]

He added, “Because I’m optimistic about America’s prospects…don’t buy this notion purported here that that somehow America is on a downward trajectory. [Comment: Carteresque?]

By every indicator we are better positioned than any country on earth to succeed in this knowledge economy in the 21st century. [Comment: in addition, there's an energy revolution in the US that the president has never acknowledged.]

But what is absolutely true is that if we don’t make good choices we could decline, and we’re not going to make good choices unless we break out of this cycle in which dysfunction breeds cynicism, and we have to break out of it.” [Any specifics? Which good choices?]

A 2014 "malaise speech" or an emperor with no clothes?

I wonder what radio talk shows the president has been listening to because I don't think I've read any polls on "dysfunction breeding cynicism" in the US. The only place I hear that kind of talk is on conservative talk radio. I assume he is getting some internal polling numbers.

Tioga Gets State's First LNG Production Facility; Encana Buys Into The Eagle Ford, Price Suggests Bakken Way Undervalued; Encana Will Double Oil Output With Purchase; To Stop Global Warming, A War On Allah?

Updates

May 17, 2014: this was from a discussion board elsewhere, minimally re-edited, provides some update on the project:

The CEO of both Prairie and NDLNG in Tioga named Pat Hughes. I was pleased to see the company is local to ND, headquartered in Watford City and began as a housing company. 

Pat's presentation (references a video, no linked) is clear and well organized. It lasts about 15 minutes followed by a question and answer session. 

Of significance to me is that the equipment for the first 10,000 gals per day is already being installed for cooling gas to minus 260 degrees Fahrenheit (I assume). Another unit is being manufactured (I think they said by Hess) to be delivered this summer and to produce another 66,000 gals per day.  

Compared to the 20,000 barrel per day capacity (input I think) of the MDU refinery producing diesel, it is pretty minor. I don't really know how many gals per day of diesel will come out of the refinery--but could be as much as 800,000 gals per day (assuming almost all the input were converted to diesel--I don't think that is possible or anywhere near possible--but it gives me some idea of the relative scale of the two projects.
Then too, Hughes says that the planned 76,000 gals per day of LNG would be able to replace up to 44,000 gals of diesel per day. 

I am impressed by how "turnkey" this project sounded. Prairie has about 150 employees now and will employ about 30 more in Tioga with the plant as I recall the interview. Prairie is largely a trucking company as I understood him, so transport, storage, and delivery of product will also be a goodly part of the whole project.

Original Post

Rigzone is reporting:

North Dakota LNG, LLC, the newest member of Prairie Companies, LLC’s, portfolio of oil and gas service businesses, joined North Dakota Governor Jack Dalrymple and other state officials at an event Wednesday in the State Capitol Building to announce the arrival of a liquefied natural gas (LNG) production facility. Located in Tioga, North Dakota, the plant will be the first-to-market in the state to produce 10,000 gallons per day starting this summer (2014). 

A phase two facility is scheduled to be operational in the fourth quarter of 2014 and capable of producing 66,000 GPD.

NDLNG targets the drilling, fracking and transportation sectors of the unconventional oil and gas industry and will help meet the need for a cost-effective power source by converting natural gas feedstock into value-added liquid fuels.

Also:

Currently, operators producing oil and gas from unconventional reservoirs in the Bakken face high fuel costs and environmental scrutiny from their use of diesel-powered equipment and flaring of natural gas generated by their drilling activities.

Therefore, significant demand exists for locally produced LNG derived from North Dakota’s abundant natural gas reserves that will help operators not only reduce energy costs but also lower carbon emissions.

NDLNG will also offer North Dakota’s agricultural industry an alternative fuel choice to propane. Leveraging LNG will garner farmers and ranchers lower operating costs, reduced emissions, and the ability to use a 100 percent locally produced fuel.

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In a sense, this is a wash for those following the Eagle Ford, one company simply selling assets in the Eagle Ford to another company, but it's important for the archives. Reuters is reporting:

Canada's largest natural gas company Encana Corp said on Wednesday it is buying producing assets in the Eagle Ford shale field in Texas from Freeport-McMoRan Copper & Gold for $3.1 billion, nearly doubling its oil output.

Encana has been concentrating on five shale fields that are rich in oil and natural-gas liquids to lessen its dependence on lower-value gas. This transaction will add a sixth focus area and is aligned with Encana's growth strategy, the company said.

Calgary-based Encana has been focusing on five shale fields - Montney in British Columbia, Duvernay in Alberta, the DJ Basin in Colorado, the San Juan Basin in the U.S. Southwest and the Tuscaloosa Marine Shale in the U.S. South. It has sold natural gas properties in Wyoming's Jonah field and other acreage in East Texas to reduce its dependence on pure gas assets.

The deal will give Encana 45,500 net acres in Karnes, Wilson and Atascosa counties in south Texas. The properties produced the equivalent of about 53,000 barrels of oil per day in the first quarter.

I did a lot of back-of-the-envelope calculations on this one; the numbers were such that I felt uncomfortable posting them here. But every way I did the calculations suggest that the Bakken is really, really undervalued.

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It looks like the war on coal won't be enough if we're gonna beat global warming. President Obama also needs to declare a war on God, or Allah, or at least on nature, or more specifically, El Niño. Yahoo!News is reporting:

About half of the surface warming that's helping shrink Greenland's glaciers is due to temperatures in the tropical Pacific Ocean, not greenhouse gases, a new study reports.

Sea-surface temperatures in the Pacific are already known to influence global weather patterns at lower latitudes. For example, the El Niño cycle shifts rainfall around the world, delivering precipitation to western North America and causing drought in Australia and Central America.

The new findings could explain why Greenland and the Canadian Arctic are getting hotter more quickly than other regions of the planet. The feverish temperature rise has puzzled scientists: The most up-to-date climate models, such as those in the fifth assessment report of the Intergovernmental Panel on Climate Change, fail to reproduce the rapid warming seen in the Arctic.

"We know that global warming due to human impacts can't explain why it got warm so fast," said lead study author Qinghua Ding, a climate scientist at the University of Washington.

 As noted, the next community organizer that runs for President needs to call for a war on Allah.

To Whom?

Previously reported, but a reminder to me to come back to this.

Oasis sells non-core Sanish assets.

QEP sells non-core Fat Cat acreage in west-central Williams County.

Halcon looking to sell all non-core assets. 

Halcon Earnings, 1Q14

Updates

May 13, 2014: 1Q14 Halcon transcript -- 

• almost 75% production growth qoq -- despite very harsh winter
• 25,000 bopd
• IPs improving, 10% better qoq
• in the Fort Berthold area, slickwater fracks continue to outperform the 801K EUR that the company released just a few months ago
• will test slickwater in Three Forks/Fort Berthold, but company thinks "hybrid" fracks will work better
• currently drilling 6 new wells from a single pad; 660 feet apart; IP from one of these wells set a company record of 4,225 boe
• Williams County slickwater completions outperforming the 477K EUR previously set
• El Halcon in East Texas, almost exponential; growing over 800% qoq; 10,000 boepd
• added some TMS acreage; now 316,000 TMS acres
• this is surprising: water is a cost that Halcon struggles with (as do all operators, I assume); it depends on where one is in the basin
• lessons learned in the Bakken will be taken to the TMS
• going from 4 rigs in the Bakken to "three to four rigs" but will complete just as many wells
• will concentrate on Fort Berthold this year; Williams County yet to have its day in the sun
• near the end, mentioned "coil fracking" in passing; so slickwater, coiled, and hybrid all mentioned in this conference call; no major change for Halcon how they complete their wells

Later, 11:40 p.m. central time: is the Bakken grossly undervalued compared to the Eagle Ford?

Later, 11:18 p.m. central time: production surges as earnings beat street -- Motley Fool.

Halcon Resources produced an average of 36,622 barrels of oil equivalent per day. That was above the high end of the company's guidance, which helped it top earnings estimates. Production was also 41% higher than last year's first quarter, as the company's focus on technological innovation yielded strong well results.

The company also was able to push its total operating costs lower by 8% year over year. On top of that, Halcon Resources was able to realize a higher average prices per BOE than in last year's first quarter. The combination of higher production and energy prices along with lower costs had a noticeable impact on the company's bottom line. This was evidenced as net cash provided by operating activities surged from $45.7 million in last year's first quarter to $159.5 million this quarter.

I guess the bad weather in North Dakota was fickle, hitting other operators in the Bakken but sparing Halcon. 

Later, 11:17 p.m. central time: Halcon looking to sell all non-core assets.  As previously announced, the company agreed to divest non-core assets in East Texas for $450M, subject to closing and post-closing adjustments. The transaction is expected to close in May, with an effective date of April 1. The company continues to evaluate all remaining non-core properties for additional divestiture opportunities during 2014.  

Original Post

I will have to wait to see how analysts see this report.

Reconciliation table for additional information), net income was $11.9 million, or $0.03 per diluted share, for the three months ended March 31, 2014. Halcón reported a net loss available to common stockholders of $77.9 million, or $0.19 per diluted share for the quarter. The reported net loss available to common stockholders for the quarter includes a non-cash pre-tax impairment charge of $61.2 million, primarily related to non-core asset sales.

Opening paragraph:

Halcón generated total revenues of $275.1 million for the three months ended March 31, 2014, an increase of 44% compared to the three months ended March 31, 2013. Production for the quarter was above the high-end of guidance and increased to 36,622 barrels of oil equivalent per day (Boe/d), 41% higher than the same period of 2013. First quarter 2014 production was 85% oil, 6% natural gas liquids (NGLs) and 9% natural gas.

Briefing.com confirms that this was a beat by 1 cent.

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.

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A Note to the Granddaughters

Casablanca has always been my favorite movie. When I get into a Casablanca phase, I find myself watching it several times a week for several weeks. The movie may not be as good, and the movie may not have the star power that Casablanca had, but the Great Gatsby story, in some ways, might be better than the Casablanca story. For one thing, the latter is autobiographical and an autobiographical story is (should) always be better than a concocted story, no matter how good the fictional story.

I guess one way to find out whether the Great Gatsby is as good as Casablanca is to see how often I find myself watching it during my GG phase. 

Young and Beautiful, The Great Gatsby, Lana Del Rey

US Oil Tank Car Rules: Same As Canadian Annoucement Earlier, BUT Voluntary In US

U.S. takes voluntary approach on crude oil tank car rules

• The U.S. Department of Transportation announces steps to improve the safety of shipping crude oil by rail, but unlike its Canadian counterpart, is taking a voluntary approach to the phase-out of older tank cars known to be vulnerable in derailments.
• The agency recommends energy producers that ship by rail discontinue the use of older DOT-111 model tank cars; in contrast, Transport Canada two weeks ago required a three-year phase-out of older tank cars.
• DOT is matching Canada’s requirement that railroads disclose to state and county emergency management officials the routing, volume and frequency of crude oil shipments.

Highlights From CLR's 1Q14 Earnings Press Release

Updates

May 8, 2014: I thought the press release was a bit "weak," but I really had no idea what to expect from investors, but the reaction does not surprise me, down over $7, down over 5%. 

If I remember, I will post an observation comparing EOG's strategy vs CLR's strategy, or so it would seem.

Original Post

Remember, this is a press release.

• adjusted net income: $272 million; $1.47 per diluted share
• 14-well Hawkinson density test production performance remains strong after 150 days of production
• strong early performance at Rollefstad density plot; eight (8) new wells have combined initial production of 22,460 boe per day (2,800/day/well = 84,000/month/well)
• EBITDAX for 1Q14 was 9% greater than 4Q13 (previous quarter); 25% greater than 1Q13
• CLR: 152,500 boepd

Other interesting notes:

CLR is in the process of adding company storage for 240,000 bbls, "providing greater flexibilitiy and improved balancing of crude oil sales logistics; will fill this storage during summer of 2014

Daily production by region, 1Q14 (numbers rounded):

• North Dakota Bakken: 84K (55% of total CLR production)
• Montana Bakken: 14K
• Bakken total (from above two): 98K (64% of total CLR production)
• Red River: 14K
• ND/MT total: 112K (74% of CLR total production)
• SCOOP: 29K
• NW Cana: 6K
• Total of SCOOP and Cana (from above two): 35K (23%)
• Arkoma: 3K
• Other: 3K

So, for me, now easier to remember: for CLR, 75% from ND/MT; 25% from Oklahoma area.

CLR continues to test completion techniques: fluid type, increased proppant, shorter stage lengths. Early results:

• slickwater increases production by approx 30% (another company reported same results)

Using slickwater,

• the 30% increase is above CLR's blended average EUR of 603,000 bbls; 
• increased cost/well: as much as $2 million more above company's goal ($8 million/well now, and $7.5 by year-end 2014)

Back of envelope: 30% of 603,000 = 181K bbls of increased productivity over life of well; at $75/bbl = $14,000,000. So, upfront costs increase by $2 million but at $75/bbl, could result in as much at $14 million more over the life of the well.

What to do? What to do? CLR will continue testing enhanced production methods on 20% of wells drilled in 2014.

See the press release of details on the increased density projects:

• Hawkinson unit
• Tangsrud unit
• Rollefstad unit

For investors: I've followed the Bakken closely since 2007; I've paid a bit of attention to how investors interrupt quarterly reports. I have no idea how investors will respond to this report. CLR has seen market value increase significantly over past six months; it will be interesting to see what the market does tomorrow based on this report. I honestly have no idea, and no opinion, except to say it's a very mixed bag. 

Two Well Name Changes That Might Be Significant ... Or Not

In today's daily activity report, the NDIC releases two name changes, both regarding Luff Exploration:

• 16093, 190, Luff Exploration, Paul White 1-35H (was Paul White 1-35), Corey Butte, a Red River well,  t5/06; 107K 3/14;
• 16384, 28, Luff Exploration, Kate White 1-34H, (was Kate White 1-34), Ash, a Red River well, t1/07; cum 18K 3/14; 

Note: both of these name changes involved adding "H" designation; according to the well files, this may simply be administrative housekeeping since both were re-entry wells with horizontal laterals placed back in 2007. The most recent sundry forms were dated 2011 for the purpose of getting designated "stripper" wells.

Six (6) New Permits -- Williston Basin, North Dakota, USA

Active rigs:

	5/7/2014	05/07/2013	05/07/2012	05/07/2011	05/07/2010
Active Rigs	191	184	212	177	111

Six (6) new permits --

• Operators: XTO (3), Abraxas (3)
• Fields: Siverston (McKenzie), North Fork (McKenzie)
• Comments:

Wells coming off the confidential list were posted earlier; see sidebar at the right.

One (1) producing wells completed:

• 26638, 426, CLR, Cecelia 1-27H1, Stoneview, t4/14; cum --   

Wells coming off confidential list Thursday:

• 21733, 1,118, CLR, Polk 1-33H, Banks, t3/14; cum 29K 3/14;
• 24669, 895, Oasis, Bud L 5501 44-21T, Missouri Ridge, t10/13; cum 20K 3/14;
• 25041, drl, QEP, Lawlar 4-5-8BH, Grail, no production data,
• 25077, 320, Oasis, Martell 36-25HTF2, Glass Bluff, 36 stages; 3.7 million lbs; Three Forks;  t2/14; cum 5K 3/14;
• 25799, drl, CLR, Vibe 1-26H1, Leaf Mountain, no production data,
• 26090, 210, OXY USA, Francis Brownell 1-16-21H-143-98, Little Knife, t11/13; cum 10K 3/14;
• 26344, drl, Statoil, Cvancara 20-17 5H, Alger, no production data,
• 26470, 1,013, Newfield, Wisness State 152-96-21-16-1HX, Westberg, t2/14; cum 26K 3/14;

More on the Oasis Martell well:

• Glass Bluff formation is in the far northwest corner of McKenzie County; Foreman Butte is to the southeast
• oil and gas shows in the middle Bakken
• the Pronghorn (Devonian) member forms an unconformity between the lower Bakken and the Three Forks and is present in the  Foreman Butte field and surrounding fields
• oil and gas is present in the Pronghorn with a porosity of 12 - 15%
• the 1st bench of the Three Forks was the target: 7 - 12% porosity; hydrocarbon saturation actually appears to be about half what it was in the Pronghorn;
• the Nisku (Devonian): 7 - 18% porosity; hydrocarbon saturation similar to 1st bench Three Forks in this area; gas shows were "minimal" but similar to the other formations for this well with the exception that the target formation averaged greater than 500 units for the majority of the well, and spiked regularly as high as 1,000 to 2,500+ units
• one trip flare was in excess of 10 feet; smaller flares 2 - 5' observed later

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21733, see above, CLR, Polk 1-33H, Banks:

Date	Oil Runs	MCF Sold
3-2014	24145	36303
2-2014	4429	6501

26470, see above, Newfield, Wisness State 152-96-21-16-1HX, Westberg:

Date	Oil Runs	MCF Sold
3-2014	16964	0
2-2014	8744	0

QEP To Sell Some Non-Core Assets; $3,000/Acre Of Moderately-Good Bakken?

Back to this later, but for now, just the press release:

QEP Resources, Inc. announced that its wholly owned subsidiary, QEP Energy Company, has entered into three definitive agreements to sell non-core oil and gas properties in the Midcontinent and Williston Basin for a combined purchase price of approximately $807 million, subject to customary purchase price adjustments.

Two of the agreements provide for the sale of oil and gas properties in the Cana-Woodford and Granite Wash plays in the Western Anadarko Basin in Texas and Oklahoma for a combined price of approximately $772 million (combined, the “Midcontinent Divestitures”). The Midcontinent Divestitures are expected to close on or before June 30, 2014, in each case subject to customary closing conditions and purchase price adjustments. The Midcontinent Divestitures contain an estimated 463 billion cubic feet equivalent of proved reserves as of December 31, 2013 and current production of approximately 109 million cubic feet equivalent per day (MMcfe/d) of which approximately 37% is liquids.

The third agreement provides for the sale of a non-core position in the western Williston Basin, known as “Fat Cat,” for a price of approximately $35 million and is expected to close in early June.

It's hard to tell from the most recent presentation how man acres are in west-central Williams County, but let's say it represents 10% of their total 116,000 net acres in the Bakken. That would be about 12,000 acres. $35 million / 12,000 acres prices moderately-good Bakken at $3,000. Some of it appears to be producing acreage.

QEP has three plays in the Williston Basin:

• Fat Cat, west-central Williams, moderately good; will be sold
• South Antelope, eastern McKenzie County; very, very good acreage; about 45% of their acreage after Fat Cat sells
• Fort Berthold, the reservation; very, very good acreage; about 55% of their acreage after Fat Cat sells

Slide 7 of QEP's 1Q14 Operations Update. The presentation did not include net acreage in each of the plays (although I could have missed that). Two earlier presentations did not include an acreage breakout by play, and none of the three updates said anything about Fat Cat. In all presentations, one slide was devoted to each of the two other plays, South Antelope and Fort Berthold.

Afternoon Musings And News; The Watchdog On The Road To New England; "Marginal Profits" -- Whatever That Means, From Tesla

At the time I am writing this, the market had just closed. It was a great day with the Dow up 118 points and oil up 1.25%. Several companies reported their earnings for the day; we are still waiting for CLR and QEP to report.

Meanwhile, while waiting:

A reader sent this story from Connecticut. He noticed that with the legislative changes regarding recycling and burning trash to generate electricity, it is likely that the state has taken more electricity off the grid.

For me linked that story just keeps on giving. I particularly enjoyed this paragraph:

One of the most controversial sections dissolves the Connecticut Energy Advisory Board, a panel created in the 1970s that reviews energy issues and develops plans to ensure citizens and businesses have access to a safe, diverse and reliable energy supply."I believe they deserve better than to be eliminated in an amendment without any advance notice," said Rep. Mary Mushinsky, D-Wallingford.

"They were the watchdogs that worked in concert with the state to press us for energy efficiency and to question the energy plan for the state.'

Based on what I'm hearing coming out of Connecticut, it doesn't sound like this Board did much to help the residents. They were the watchdogs on the road to New England.

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SandRidge Energy, Inc. beats by $0.05, beats on revenue

• SandRidge Energy, Inc. (SD): Q1 EPS of $0.07 beats by $0.05.
• Revenue of $443.05M (-13.4% Y/Y) beats by $36.62M.
• Shares +1.8%.
• Press Release

Remember, this was a terrible, terrible winter which is being used to blame all the bad earnings reports. But a lot of energy companies did very well this quarter. Or at least better than expected.

Richard Zeits on SandRidge this quarter. 1Q14 a slight bump in the road due to weather; 2Q14 will be better.

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. 
 
Reporting Wednesday. Note to readers: I drove straight through from Williston, ND, to Grapevine, TX, 1,408 miles, leaving at 4:00 a.m. Monday morning, arriving home at 9:30 p.m. Tuesday night. On Monday I stopped for breakfast, lunch, and had it been England, afternoon tea, with friends in Bowman on the way home. I took power naps along the way. No problems. It was a great trip. So, today I am relaxing. I will blog slowly, and won't get to e-mails, comments, news, etc., until later. It will be a slog to catch up on everything. But I am buoyed by the earnings being reported by companies I follow. It should be noted that of the companies I list below, I have invested in almost none of them -- in fact, I think I have invested in only three; it's possible I sold one of them but don't remember. So, just because I list a company, it doesn't mean I have "skin in the game," as they say. I follow them because they help me put the Bakken in perspective:

• Calumet Specialty CLMT (9 cents): actual -- 50 cents.
• CenturyLink CTL (61 cents): after market closes
• Chesapeake CHK (48 cents): 54 cents; stock surges;
• Devon Energy DVN ($1.26): beats by 7 cents; revenue jumps
• Duke Energy DUK ($1.12): swings to loss, but beats by 5 cents; wrote down value of coal-powered plants;
• Enbridge ENB.TO (57 cents): beats by 3 cents;
• WPX (2 cents): actual, 9 cents or 21 cents, depending; huge beat from what I can tell; 
• HK (2 cents); 3 cents (but there's another number suggesting a loss of 19 cents/share available to shareholders);
• CLR ($1.54): misses, but not bad; $1.47
• QEP (25 cents): misses by 3 cents; comes in at 22 cents;
• Sanchez Energy SN (24 cents): after market closes
• SandRidge SD (3 cents): beats by 2 cents; stock up about 2%
• Tesla TSLA (1 cent): beats expectations but stock plummets;

Wow, Tesla, talk about burning through cash, from the linked article at MarketWatch:

Revenue for the latest quarter was $620.5 million, up 10% from a year earlier but less than 1% from the fourth quarter of 2013.

The company forecast a marginal profit for the second quarter excluding certain costs.

Research and development costs rose to $81.5 million in the latest quarter from $54.9 million a year ago. The company said it expects R&D expenses for the second quarter to grow by 30% from the first quarter.

In a letter to shareholders, Tesla Chief Executive Elon Musk said the company plans to start work developing two sites for a proposed large-scale battery factory, or “gigafactory.”

Mr. Musk said discussions with battery supplier Panasonic and other potential production and supply partners “continue to go well and we are pleased with the high interest level in the project.” But the company didn’t disclose commitments for funding.

 From Tesla's press release: The company forecast a marginal profit for the second quarter excluding certain costs. That would be like XOM saying if we do not count drilling new wells and work over costs associated with old wells, we would expect a marginal profit.

Tesla might do fine, but I keep seeing A123 flash before my eyes.

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Wow, talk about burning through cash. The US Air Force spent $150/gallon of "green" aviation fuel. One can only assume the general officer who approved this boondoggle will a) be promoted; and, b) be given the Medal of Honor Medal by President Obama. I can only say I am glad I am no longer part of this one-esteemed military branch. FreeBeacon is reporting:

The Department of Defense (DOD) paid $150 per gallon for alternative jet fuel made from algae, more than 64 times the current market price for standard carbon-based fuels, according to a report released on Wednesday. The Government Accountability Office (GAO) noted in its report that a Pentagon official reported paying “about $150 per gallon for 1,500 gallons of alternative jet fuel derived from algal oil.”

Before this is all over, maybe Tesla will run on algae-generated electricity stored in Musk batteries.

Update On The Quest For Bakken Maps: NOTE CORRECTION

Updates

Correction:  The referenced map shows well sites with "spud date ranges," not "IP ranges." Again, the map apparently does NOT show "IPs" but rather spud dates, which makes a lot more sense. If I'm misreading this, I will correct it. 
 

Original Post

Over at the discussion group, a couple of folks have been talking about maps of the Bakken. A reader provided:

This is the link for the map that I found that provides the IP of Bakken wells drilled to day:

http://www.ndoil.org/?id=288

And if that doesn't work go to this link and then click on the top of the page where it says "purchase Bakken Map":

http://undeerc.org/bakken/

The map is very nice and printed on heavy paper and shipped in a protective mailing tube all for 10 bucks. This is done North Dakota-style giving you a great value for your buck.
The information provided will probably help most people that want a better understanding of the big picture. You can see where the drilling is consolidated and where the activity ends in all directions plus a whole lot more.

Neither the reader nor I have any affiliation with this; this is not a paid advertisement or an infocommercial.

By the way, the reader is still looking for a source for a large wall map of the Bakken oil fields in the Williston Basin.

More later. Gotta run.

Musings And Wanderings -- Just Go Away, Put Up Or Shut Up

There is so much coming out of the global energy revolution, I don't have time to post them all.

So, I have to pick and choose. I apologize. I'm missing some big stories.

Devon buys 50,000 shale acres for $249 million. Reuters reports over at Rigzone:

Devon Energy Corp on Tuesday said it acquired 50,000 acres and some production in the Cana-Woodford Shale in Oklahoma for $249 million in cash from Cimarex Energy Co. The deal includes current production of 5,800 barrels of oil equivalent per day, Devon said.

I follow the Woodford here.

For newbies: CLR calls its southern extension of the Cana-Woodford the SCOOP. Could that be one reason (of many) why CLR is trading at a 52-week high today? 

Wow, the news coming out of the oil patch today is incredible. A reader mentioned President Obama's speech on global warming yesterday and then noted that it's snowing in North Dakota and will snow again in the ancestral home of the Sioux over the next 24 hours or so. I wrote back:

It's great to be back where I can get caught up in the news, etc.

With regard to global warming, he is simply talking to his base. But I do believe, the movers and shakers are not listening to him or his policies any more. He is doing everything he can to keep Benghazi and ObamaCare off the front page. That's fine with me.

I think every day, Obama becomes more and more irrelevant to more and more people.

The market, and especially, oil and gas, are surging. Can you believe the market today? I'm thrilled.

I don't think it will, but the Dow could easily hit another high by the end of the week, and oil is up 1.3% at the moment. Who would have thought?

Back to Devon and the Woodford. $250 million divided by 50,000 shale acres: $5,000/acre. A steal. It included almost 6,000 boepd = a cool half-million dollars / day, or about 180 million dollars a year. Of course, my math may be off.

By the way, how is renewable energy working out? Not so good in India.

Bloomberg reports:

Suzlon Energy Ltd. , the wind-turbine maker responsible for India’s biggest convertible-bond default, reached an agreement with investors to restructure $485 million of notes.

The board has approved the deal to issue new five-year convertible bonds maturing in the financial year ending March 2020, Pune-based Suzlon said in an e-mailed statement. The conversion price has been set at 15.46 rupees, it said.

They will be step-up bonds, meaning the coupon rate will rise over the five years, and the yield will average out to approximately 5 percent, according to the statement.

The deal is “an optimal solution to our last remaining piece” of a program to reduce liabilities, Kirti Vagadia, head of finance of the Suzlon Group, which also owns German offshore turbine maker Senvion SE, said in the statement.

The agreement with bondholders follows a year and a half of negotiations prompted by the company’s failure to repay $209 million of notes in October 2012. That default also triggered a clause allowing holders of a further $265 million of 2014 and 2016 bonds to demand immediate repayment.

This is a most telling story. Again, Reuters is reporting that despite the prospects of war in the Ukraine, the sanctions, political in-fighting within the EU, Europe simply cannot afford wind energy. Read the Reuters article. It's a long article. But while reading it, ask yourself, if wind energy is such a great solution, why is Austria willing to risk relations with the EU and a war in Ukraine bargaining with Russia for side deals on natural gas instead of getting with the program and going "renewable." Cause it's too expensive.

On days like this I wish Sam Kinison was/were still alive (adult language):

Sam Kinison, On Marriage and World Hunger

Perhaps this could be the theme song at the Democratic convention when Barack, or Bill, or Hillary, or whoever, comes up on stage for another global warming speech:

Just Go Away, Blondie
Play it loud. And look at those cupid lips. Andy Warhol considered Debbie Harry the most beautiful woman alive at that time. Or maybe one of the most beautiful. I don't remember the quote. Of course, Andy did not know my wife in 1973.

Active Rigs In North Dakota Surge: 191; This Month's Issue Of Foreign Affairs -- The US Energy Revolution

I blogged about this just a few weeks ago and even had a poll, about where folks thought the number of active rigs would go, up or down?

This caught my attention today:

	5/7/2014	05/07/2013	05/07/2012	05/07/2011	05/07/2010
Active Rigs	191	184	212	177	111

I thought we might go over 200 this summer. The tea leaves suggest we should for at least three reasons:

• more operators than ever in the Bakken
• the bigger operators have said they are increasing their focus (and number of rigs) on the Bakken
• infrastructure keeps getting better to support more rigs

Again, in the big scheme of things, whether there are 150 active rigs or 250 active rigs in North Dakota means nothing to me in terms of production. I've talked about that before. For me, the number of rigs gives one a snapshot of the activity in the Bakken. Remember, it takes 2,000 truckloads of sand or water or something (I forget if it's just water, or just sand, or both) but it takes 2,000 truckloads of material for every well. Even if there are 14 wells on each pad, it took 2,000 truckloads of material for each well. The more active rigs, the more folks employed, the more trucks on the road. But one might not see an increase in production for quite some time. I think it was almost 18 months between the pad was build, first well spud, the fourteenth well completed, and oil produced and sold on CLR's 14-well Atlanta pad in Baker oil field southwest of Williston. So, trying to correlate active rigs and production is difficult. For me, it's all about activity.

With 191 rigs today, Red River Supply, all things being equal, is going to be busier today than it was last week when the number of active rigs was in the low 180's.

The biggest story of the day? Canadian oil price is surging -- Canada is getting their oil to the market despite all the obstacles. What does that tell me? If Canada can get their stranded oil to the market, operators can get Bakken oil to the market.

By the way, Bakken oil is not the best fit for American refineries. Canadian heavy oil is. What does that tell me? That is huge for the Bakken. They need to mix heavy oil with Bakken light oil to make it work at a lot of US refineries in Texas, Louisiana. The more Canadian oil that gets to Cushing, the better it is for the Bakken.

There are some great stories coming out of the oil patch today.

Speaking of which, here's another great story.

When I was a student and an instructor at the US Air War College one of our major sources was Foreign Affairs. This bi-monthly (?) journal was required reading for all of us, and certainly any policy wonk in Washington, DC, who is worth his/her salt in the business subscribed to Foreign Affairs. This month's cover has a huge picture of a "flare" of sorts to accompany this month's subject: the US energy revolution. Here is the cover story: "Big Fracking Deal: Shale and the Future of Energy."

The shale revolution in oil and gas production is here to stay. It will spread more rapidly than most think. And all of that is a good thing for the world. -- Edward Morse

Here are the articles:

• "Power to the People," Gideon Rose and Jonathan Tepperman
• "Welcome to the Revolution," Edward L. Morse
• "The United States of Gas," Robert A Hefner III
• "Don't Just Drill, Baby -- Drill Carefully," Fred Krupp
• "Electric Avenue," David M. Levinson
• "Nuclear Freeze," Per F. Peterson, Michael R. Laufer, and Edward D. Blandford
• "Powering the Pentagon," Sharon E. Burke

If you are a reader and if you are interested in the macro-Bakken, this is a must read. If you don't subscribe, I can't imagine any library not having a copy. Hopefully, down the road, this issue and/or the individual articles will be wildly available.

For investors, there was a throwaway line in the last day or two, over at SeekingAlpha that Bakken operators (or at least some of them) will replace biotech as Wall Street's darlings this year.

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.

As long as I stumbled into the arena, let's see how the market is doing today. It opened high, and then Janet Yellen spoke. The market fell and then it rose quickly. So what is it doing now, around lunch time: the market is up an incredible 114 points. This was not unexpected when I saw the earnings reports coming out this morning. And the other news. Oil is up almost 2%, folks. We're going to see some new highs today in the oil and gas sector. I hope you all remember what Saudi announced the other day regarding pricing (again, a huge "thank you" to Ed for alerting me to that; other than Ed noting it, I doubt many people have noted it; I would have missed it).

So, back to the market:

Fourteen (14) companies announce increased dividends or distributions. Again, this is longer list than usual. The list includes Baxter, with a significant increased, from 49 cents to 52 cents.

Trading at 52-week highs: BRK.A, BHI, CHK, CLR, COP, ECA, ENB, NRG, OKE, STO, WMB, XOM, SRE, That's an incredible list, and, of course, many other energy companies are trading near their 52-week highs. And, 10-1, I bet CNBC talking heads are not talking about the oil and gas surge, or the US energy revolution. Why? It doesn't fit the Obama game plan.

By the way, the price of oil is rising, hardly due to the strength of the dollar.

This should be huge. It's taken a long time to climb that wall, but CVX is back to near its all-time high:

Chevron reaches settlement agreement with Patton Boggs Law Firm; Patton Boggs to pay $15 mln to Chevron, withdraw from Ecuador litigation: Co announced it has reached a settlement agreement with Patton Boggs LLP, a lobbying and law firm headquartered in Washington, D.C. Chevron had filed counterclaims in federal court against Patton Boggs for its role in a lawsuit against the company in Ecuador. In today's settlement, Patton Boggs has resolved those claims by withdrawing from the fraudulent Ecuador litigation, issuing a statement of regret, assigning its interests in the litigation to Chevron, and making a payment to Chevron of $15 million. Chevron, in turn, has agreed to release all claims against Patton Boggs and its partners.

Is WPX a sleeper today? I have to go back and look at that. The earnings suggest a huge story, but I didn't hear much about it. So, what do investors think? They must be seeing what I thought I saw: WPX is surging, up over 3% today. Any analysis? None yet. The announcement and the conference call. Hopefully someone will contribute something worthwhile over at SeekingAlpha on WPX this week. Here's the blurb from "Business Wire" (by the way, there's no hidden agenda on my fascination with WPX today; I don't recall if I "hold" any WPX; I can't remember if I invested in this one or note, but I don't think I do. For a disclaimer, I'll simply say I don't think I invest in WPX and I certainly have no plans to do so in the near future, if ever):

WPX Energy today announced its unaudited operating and financial results for the first quarter of 2014. First-quarter net income attributable to WPX of $18 million benefitted from a 52 percent increase in the company’s net realized average price for domestic natural gas sales and a 35 percent increase in total product revenues.

Domestic natural gas production was nearly identical to the sequential quarter, while domestic oil production climbed almost 40 percent vs. a year ago to 19.3 Mbbl/d primarily from increased volumes in the Williston and San Juan basins.

Consistent with WPX’s guidance and goals for 2014, the company now has 16 rigs deployed across its growth areas and has announced a transaction that bridges the majority of the company’s 2014 capital funding gap. 

WPX reported unaudited net income attributable to WPX Energy of $18 million for first-quarter 2014, or income of $0.09 per share on a diluted basis, compared with a net loss of $116 million, or a loss of $0.58 per share, in 2013.

A 44 percent increase in domestic natural gas revenue, a 34 percent increase in domestic oil revenue and higher gas management margins drove the net profit.

Excluding unrealized mark-to-market gains (losses) and the impact of New York tax reform legislation enacted in the first quarter, WPX had adjusted income from continuing operations of $44 million, or income of $0.21 per share on a diluted basis, for first-quarter 2014, compared with an adjusted loss from continuing operations of $51 million, or a loss of $0.25 per share, for the same period in 2013. 

I think the expectations were a two-cent/share income before the report. So, I don't understand how the analysts could be off that much (actual: 9 cents or 21 cents) if I'm reading the reports correctly. In addition, the surge in income needs to be compared to a loss of almost 60 cents/share same quarter one year ago. 

By the way, what stands out in the story above? This:

" ... while domestic oil production climbed almost 40 percent vs. a year ago to 19.3 Mbbl/d primarily from increased volumes in the Williston and San Juan basins."

And what stands out in that one phrase? Two things. First, it's all about oil. Second, California is not mentioned. The announcement that OXY USA is moving its corporate headquarters from Los Angeles to Dallas is another tea leaf telling us how incredibly unimportant California has become with regard to the US energy revolution now that the activist environmentalists have won in the land of fruits and nuts. 

From Heffner's essay in Foreign Affairs:

The United States' growing economic advantage could last until the middle of this century of beyond.

Unless, that is, it is squandered. In California and New York, two of the country's largest economies, antifracking (note how they spell "fracking") activists and state politicians have managed to slow the development of shale resources to a snail's pace. Both states contain large shale formations (the Monterey in California and the Marcellus in New York), the developmetn of which would provide a major boost to both state and national economic growth. Politicians need to recognize ...

Los Angeles and California are each desperately courting the OXY California spin-off to remain in California. So, we'll see. OXY California will be the most interesting company to watch over the next five years. It will start to trade publicly in 3Q14, I believe.

A pretty picture:

Gap Between US Oil, Canadian Oil Narrows -- WSJ; Keystone? Who Needs The Keystone

Updates

May 12, 2014: The New York Times sees it differently.
 

Original Post

The Wall Street Journal is reporting:

Canadian oil prices are surging, narrowing the gap with U.S. crude, as new pipelines connect producers with previously hard-to-reach Gulf Coast refineries 2,000 miles to the south.

The price of Canadian oil has climbed nearly 60% since November, helping drive up shares of suppliers north of the border.

Until recently, crude from Alberta's oil-sands region sold at a steep discount to the U.S. oil benchmark because producers had difficulty getting it to buyers. In November, Western Canadian Select, the benchmark for crude produced from Canadian oil sands, traded US$40 a barrel below West Texas Intermediate, the main U.S. benchmark.

In past years, pipelines haven't kept up with the increased flow out of Canada. The torrent of oil from the U.S.'s biggest crude supplier got trapped in storage tanks across the Midwest, and rising production in the U.S. exacerbated the glut. But one of the worst chokepoints loosened in January, when a pipeline opened linking a major oil hub in Oklahoma to refineries in Texas and Louisiana. The price of Canadian oil has since risen to $80.67 a barrel as of Tuesday, about $18 below WTI. Traders say a gap of about $20 is right, given that WTI is a higher-quality grade of oil and doesn't need to be transported as far to U.S. refineries. 

Keystone? Who needs the Keystone? Presidents come and go. I don't talk about it much, but ... no, I'm not going to bring it up now....

The Bakken Crude Oil Bottleneck -- Update -- RBN Energy -- A Must-Read For All Bakken Enthusiasts; Washington, DC, Council With Nex Tax On Health Care Insurers -- How's ObamaCare Working Out?

Active rigs:

	5/7/2014	05/07/2013	05/07/2012	05/07/2011	05/07/2010
Active Rigs	191	184	212	177	111

RBN Energy: the Bakken bottleneck should open up this year.

New crude oil pipelines expected online this fall are set to unlock congestion in the Rockies that has built up over the past three years. During that time, growing volumes of Canadian, Bakken and local production have descended on the Guernsey, WY trading hub that is the regional crude distribution center. The new pipelines will increase takeaway capacity from North Dakota and Montana to Cushing via Guernsey. They will also make room for more Canadian barrels travelling to market through the Rockies and for rising local production. Today in the first of a two part series we look at the existing and new pipeline infrastructure into and out of Guernsey.

When tight oil shale production from the Bakken in North Dakota and Montana began to crank up in 2010, regional producers ran into pipeline takeaway constraints whether they tried to ship crude east on the Enbridge system via Clearbrook, MN to Chicago or south and west on True Company pipelines through the Rockies to Guernsey, WY.

By February 2012 that congestion was causing up to $26/Bbl price discounts for Bakken crude at the pipeline hubs of Clearbrook and Guernsey versus US domestic crude benchmark West Texas Intermediate (WTI) delivered to Cushing, OK.  That was on top of still more discounts being suffered by WTI. 

With limited pipeline capacity between Cushing and the Gulf Coast, a glut of crude built up in the Midwest and the price of WTI was discounted heavily versus crudes priced on an international basis on the East, West and Gulf Coasts.

These price discounts and transport constraints upstream of Cushing justified the development of rail loading terminals, first in North Dakota during 2012 and later in the Rockies in 2013 (and ongoing) to allow crude delivered by rail to bypass Midwest congestion and reach higher priced coastal markets.

Summary:

It remains unclear whether the new pipelines into and out of Guernsey and the expansion to White Cliffs out of the DJ Basin will completely relieve congestion in the Rockies if Bakken and Canadian production coming through the region do not leave room for rising local production. For the moment adequate takeaway capacity will rely on both the new pipelines and increased rail capacity to meet demand. And that’s where we’ll go in Part 2 of this series – to look at the growth of rail loading takeaway capacity in the Rockies and to compare the two transport alternatives.

The Wall Street Journal

Yes, I was waiting for this shoe to drop: for the first time in three years, the economy contracted 1Q14. Recovery? Now you know why the president is working so hard to get the economy off the front page with all that time spent on global warming yesterday. By the way, it was snwoing in North Dakota yesterday; relatively rare for this time of year. So, how's that Obama economy working out? The market responded. Janet Yellen is concerned. And oil and gas companies are surging. By the why, the economy is so bad, that even with near-record exports, the US economy contracted. I don't know one can spin that, but the Obama administration will do so. Having said that, I am more bullish on American than I have ever been. Presidents come and go. Eventually, America will get its mojo back.

*****************************

Yes, here it comes. Washington, DC, council approves tax on aid health care insurers to help pay for the health care exchange.

Ms. Kofman also said she believed the district should continue running its own exchange, noting the federal government's own difficulties serving 36 states through the HealthCare.gov website.

"If we relied on the federal government to set it up for us it would have been very difficult for people to get coverage for a very long time," she said.

The district's exchange has done relatively well among the state-run exchanges, with a high proportion of younger people who have signed up for private coverage through it. But its sign-ups are also limited by the district's size and the large number of residents who are covered through employer-sponsored insurance or Medicaid. Only around 10,000 people picked private individual coverage through the exchange this year, according to data published by the federal government.

10,000 enrolled in Washington, DC? Not going to cut it.

*********************************

The Los Angeles Times

Stanford University will sell off coal investments ... just because it will make them feel better.  Social investors, I guess. I assume they don't invest in tobacco, alcohol, firearms, oil and gas, either.

US rejects California design of driver's licenses for immigrants.

Federal authorities have rejected California's proposed design for a driver's license for immigrants in the U.S. illegally, saying it is not distinguishable enough for security purposes from permits given to citizens.

The Washington officials want the license to state clearly on its face "that it is not acceptable for official federal purposes" and to have a design or color that differentiates it at a glance from other licenses.

The current design does not differ from other California licenses except for a subtle mark on the front and a disclaimer on the back in small print: "This card is not acceptable for official federal purposes."

Officials said Tuesday that the decision by the U.S. Department of Homeland Security could delay distribution of the first licenses because immigrant-rights activists have vowed to fight proposals that would make them look significantly different from other licenses.

The activists consider conspicuous markings to be a kind of scarlet letter. They and others say such marks could lead to mistreatment.

I'm not even sure why California requires driver's licenses. I'm sure the next step for the state is to eliminate the requirement altogether.