Monday, May 12, 2014

Bakken Production To Hit 1.1 Million BOPD In June -- EIA

Reuters is reporting:
Oil production across U.S. shale fields will likely rise by 75,000 barrels-per-day in June after rising nearly as much in May, monthly estimates from the Energy Information Administration (EIA) showed on Monday.
The largest increase will be recorded in the south Texas Eagle Ford shale, where output will rise by just over 26,000 bpd to about 1.4 million bpd between May and June, according to EIA's drilling productivity report.
Bakken oil production will rise to just under 1.1 million bpd in June, some 22,000 bpd above a month earlier. The Permian basin in West Texas and New Mexico will produce 1.5 million bpd next month, about 21,000 bpd higher than May figures.
Remember: the "Bakken" includes that produced in eastern Montana. Remember, also, North Dakota has some production from formations other than the Bakken, e.g., the Madison and the Red River.

The North Dakota NDIC Director's Cut is due out any day now. His production numbers will be for the month of March, 2014. 

The most recent data available for North Dakota, February, 2014:  951,340 barrels/day (preliminary)(all-time high was 976,453 in 11/13).

Projections, at 2% increase each month --
  • March, 2014: 951,340 x 1.02 = 970,367 bopd
  • April, 2014: 970,367 x 1.02 = 989,775 bopd
  • May, 2014: 989,775x 1.02 =1,009,570 bopd
By the way, back on April14, 2014, someone reported that the Bakken (including both Montana and North Dakota) had already hit the 1-million-bopd milestone.  But I can't recall if that was ALL oil or just Bakken oil. Machts nichts.

ObamaCare 2015 Premiums Starting To Rollout

CNBCis reporting:
The first suggested Obamacare premium prices for 2015 don't look so scary, but a few states could soon be in for some nasty sticker shock.
Health insurers that are still processing enrollments from Obamacare signups are at the same time setting their premiums for 2015 individual policies—and setting the stage for more debate about the Affordable Care Act.

Virginia and Washington state have disclosed proposed premium rate increases for insurers for 2015, and more states could be following suit this week, according to media reports.
Any hike will be problematic, coming so soon after some folks just signed up. 

EOG Reports A Huge Well In The Bakken Tuesday

Tuesday, May 13, 2014
  • 25663, 219, EOG, Wayzetta 37-1617H, Parshall, t12/13; cum 91K 3/14;
  • 25776, drl, Statoil, Bugs 27-22 7H, Poe, no production data,
  • 26265, drl, Petro-Hunt, Van Hise Trust 153-95-28D-21-4H, Charlson, no production data,
  • 26376, conf, KOG, P Vandeberg 154-99-1-1-12-16H3, Stockyard Creek, no production data,
  • 26713, 74, Corinthian Exploration, Corinthian Lochner 16-33 2H, North Souris, producing, very nicely, t12/13; cum 13K 3/14;
  • 26820, 20, Enduro, RPSU 30-14, Mouse River Park, a Madison well, t12/13; cum 2K 3/14;
  • 26879, drl, XTO, FBIR Guyblackhawk 24X-27A, Heart Butte, no production data,

25663, see above, EOG, Wayzetta 37-1617H, Parshall:

DateOil RunsMCF Sold

Quite A Day On Wall Street

CLR Announces A Private Placement Of $1.7 Billion In Unsecured Notes

From the press release:
Continental Resources, Inc. announced today the pricing of its private placement of $1.0 billion of new 3.800% senior unsecured notes due 2024 and $700.0 million of new 4.900% senior unsecured notes due 2044. The 2024 notes were sold at 99.644% of par, resulting in a yield to maturity of 3.843% with respect to the 2024 notes. The 2044 notes were sold at 99.717% of par, resulting in a yield to maturity of 4.918% with respect to the 2044 notes. The offering is expected to close on May 19, 2014 , subject to customary closing conditions. Continental intends to use the net proceeds from this offering to repay in full amounts outstanding under its revolving credit facility, to finance the redemption of its 8 ¼% senior notes due 2019 and for general corporate purposes.
So, for slow readers like me, it appears I can buy a $1000 note (if available, and if available in that denomination), I guess for about $99.70 and receive almost 4% for notes that mature in 2024, and almost 5% for notes that mature in 2044.

If I am reading this correctly, US Savings Bonds currently have a fixed rate of 0.5%, but it's in really small print and I may be misreading it. But if that's really what US Savings Bonds are returning ...

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.

$1.7 billion for wells that cost $7 million will get CLR about 243 wells, net. Disclaimer: I often make simple arithmetic mistakes.

Disclaimer: if I don't know very much about investing or the Bakken, I know even less about bonds and notes. The above is just idle rambling; not to be taken literally. 

How Impressive Is The Oil Production Coming Out Of Dunn, McKenzie, Mountrail, Williams Counties In North Dakota? Production From Two North Dakota Counties (M&M) Surpass California, Alaska; May 12, 2014


May 13, 2014: Rob Port was very, very nice to credit me/this blog when he linked this post over "Say Anything Blog." 
Original Post

A reliable source provided the following information, data from official sources:
Check out these two items that were just released in the last few weeks. We wouldn’t have been close to either of these lists five years ago.

1.      The 2013 population growth for the top 25 non-metro counties in the US was released. ND had the top six and ten of the top 25. McKenzie and Williams lead the list.

2.      20 counties in the US have half of the 2013 US daily oil production. McKenzie county was 5th, Mountrail 6th, Dunn 10th, & Williams 12th. These are the big four I constantly tell people have nearly 90% of ND’s production and activity. Interesting to me was there were no Texas counties ahead of McKenzie & Mountrail counties. That was a surprise to me.

McKenzie & Mountrail counties (M&M’s) had surpassed Alaska (4th leading oil producing State) and was just even with California (3rd leading oil producing state) last November. The counties dropped back quite a bit this winter and we fell behind them. Feb’s numbers that were just released showed the M&M’s did pass Alaska again, but is still a little behind California. We should pass them again in the next couple months. Two counties in ND as the second leading oil producer in the US is mind-boggling!!
A huge "thank you" to the reader for sending this to me. It really is quite remarkable.

The data:

Natural Gas Liquids Stripping Units Now In The Bakken; Sanctions Don't Work -- A History Lesson


Later, May 15, 2014 see "Note to the Granddaughters," below -- sanctions don't work. Now, Business Insider is reporting a huge gas pipeline deal with China.
Original Post

The Bismarck Tribune is reporting:
Mark Peterson is one of several entrepreneurs touting a new technology meant to reduce natural gas flaring and add value to mineral rights owners. However, there’s no way for him or mineral owners to know whether proper royalties were paid between the time the units started operating and when the state learned about them. 
Natural gas liquid stripping units have been around for decades but have not always been affordable or easy, said Lynn Helms, the North Dakota Department of Mineral Resources director. Peterson wanted to change that.
Go to the linked article for the rest of the information. This is critical information for mineral owner.

Jobs graph says it all -- job growth during the recession, 2007 - 2014, California vs Texas. Before you go to the link, take a guess what the graph will look like. It would be interesting to see a similar graph comparing North Dakota with Minnesota.

Unemployment, March of each year indicated, Minnesota vs North Dakota:

A Note to the Granddaughters


May 13, 2014: in response to US sanctions on Russia over the Ukraine, Russia will deny the use of the International Space Station to Americans, and will no longer sell rocket engines to the US that were used to launch military satellites into space. Wow, this sounds just like Jefferson's Embargo Act of 1807.

Original Note

President Jefferson's Embargo Act of 1807 was supposed to bring economic pain to the warring nations of Great Britain and France. Whether it did or didn't is debatable. What is clear, the embargo destroyed the economy of Salem, Massachusetts. From Brenda Wineapple's biography of Nathaniel Hawthorne:
In 1807, sixty-one ships left Salem, Massachusetts, for the West Indies and South America, sixty-three for Europe, ten for India and China; later that year President Jefferson levied the embargo that would bleed the town. In 1808, no ships sailed from Salem. Docks stood idle, planks soggy with disuse, and soup kitchens soon fed over a thousand of the unemployed. 
We never learn, do we? But it makes us feel good, I suppose. 

Why I Love To Blog -- Reason #24,832 -- Anschutz Resurfaces In North Dakota: A Huge "Shout-Out" To All The Mineral Owners In Slope County, "Good Luck -- May The Tyler Be With You!"

Just last week a couple of us conjectured that Anschutz was about to "re-surface" in North Dakota -- and indeed it has. I have to give credit to Don for anticipating this when he sent me the note last week. See new permits below.

Active rigs:

Active Rigs193185209175114

A summary for Friday's daily activity report was also completed (NDIC did not post Friday's report until today). 

Ten (10) new permits  --
  • Operators: BR (4), Enduro (2), American Eagle, Oasis, Whiting, Anschutz
  • Fields: Croff (McKenzie), Blue Buttes (McKenzie), Johnson Corner (McKenzie), Mohall (Bottineau), Golgan (Divide), Baker (McKenzie), Sanish (Mountrail)
  • Comments: 28350, Anschutz has a permit for a wildcat in Slope County; 29-134-104; Jacobson 1-29-134-104.
Wells coming off the confidential list were posted earlier; see sidebar at the right.

One (1) producing well was completed:
  • 25041, 3,128, QEP, Lawlar 4-5-8BH, Grail, t4/14; no production data yet;
And, again, the readers came through! A big "thank you" -- anticipating Anschutz in the Tyler -- this has to be exciting. Some folks may recall that it was Anschutz who discovered a great field in the Bakken back in 2010. 

Well Control Incident Northwest Of Tioga: Ron Burgundy 3-23-15H, Emerald Oil


May 13, 2014: the well is under control
Original Post
A big "thank you" to the reader who sent a preliminary note late Friday night regarding this incident.

The Dickinson Press is reporting --
State and local officials are responding to a well control incident at an oil and gas well northwest of Tioga, the Department of Mineral Resources said Monday.

Crews reported losing control of the well about 8 p.m. Friday and an unknown amount of oil, gas and water has been released, said Kris Roberts with the North Dakota Department of Health.
The release has been contained to the site, Roberts said.
The well, owned by Emerald Oil, is called the Ron Burgundy 3-23-14H well (#27334) and is eight miles northwest of Tioga, the Department of Mineral Resources said.  
The well is on a 3-well pad. 

Just Under The Radar -- SM Energy Mentions In Passing It Has Sold Some Non-Core Bakken Acreage -- DRAFT -- To Be Updated

This is the third example in about as many weeks of Bakken operators selling off non-core Bakken assets. This one has to do with SM Energy (a big "thank you" to a reader for noting it).

[QEP also sold some non-core Bakken assets recently.
Oasis also sold some non-core Bakken assets recently.
I track Bakken deals at the sidebar at the right.]

First, it is important to point that, at least for the time being, SM Energy remains interested in the Bakken. From the 1Q14 earnings conference call:
First, we had a good start to the year, and we are executing well on our 2014 business plan. In the first quarter, we came in at the top end of our production guidance range and we performed well on most of our guided cost metrics. Our plan for 2014 include a conducting a number of inventory enhancement tests in our core Eagle Ford and Bakken/Three Forks programs, and we are following through with this plan.
In the Bakken/Three Forks, we plan to conduct a number of tests beginning in the second quarter that include completions with higher sand and fluid volumes, downspacing tests in East Raven and testing new Bakken intervals at Gooseneck and Stateline. It will take some time to get results from all of these tests, but we expect that they will further improve the economics of both our Eagle Ford and Bakken/Three Forks programs and increase our inventory meaningfully in these plays.
Moving to the Bakken/Three Forks play on Slide 8. I think most of the investment community is aware that this winter was pretty rough in the northern Rockies. Some of our activities there, particularly our completion work, were impacted from a schedule standpoint. We completed 12 gross wells during the quarter, but later than we expected, which is the reason our rate in the Bakken was flat sequentially. In general, our assets are performing well and we're optimistic about proving up additional economic drilling inventory in the Bakken/Three Forks this year, as Tony previously discussed.
But then in the Q&A:
Q: .... some of the smaller FSO packages versus the Bakken stuff, is there any update on that or do you expect any proceeds of magnitude from these sales?
A: Nothing that we have not announced that I'm aware of.
Q:  Okay. Is that Bakken thing for sale?
A (President and COO): Well, yes.
A (CEO): It's done.
A (President and COO): Yes, that deal is done. It was not a material number, but $50 million kind of round numbers.
A (CEO): We'll get that in the second quarter.
A (President and COO): We get that in the second quarter. I think it closes in the second quarter.
Comment: $50 million seems like a significant amount but perhaps it was going to be presented in the second quarter after it closed.

Comment: $50 million seems like a significant amount but when one looks at the company's graphic of their acreage in North Dakota, it doesn't look particularly significantly. I can imagine the CEO/COO not giving much thought to the sale. From slide 12 of the March 24, 2014 presentation:

Of course, what is not shown is where the "other" acreage was that was sold.

The delta between "current" acreage of 159,000 acres and "focus area acreage" of 79,000 acres is 80,000 acres.

Compare with slide 17 from the February 23, 2012, 4Q11, presentation:

Note the solid vertical blue line: that is the Montana/North Dakota state line. At the end of 2011, the company had about 202,000 acres in the Bakken. Sometime between then and the end of 2013, the company had whittled its Bakken acreage down to 159,000 acres (including the sale of the Bear Den acreage). [Between the two presentations, SM Energy picked up a small amount -- 7,000 net acres -- of new acreage in their focus areas, the Gooseneck and the Raven.]

Assuming the 15,000 acres in the Bear Den was not part of the 80,000 acres (a big assumption but I think Bear Den is worth a lot more than $650/acre), then we have $50,000,000 / 65,000 = about $800/acre. Based on North Dakota state least sales over the past few quarters, $800/acre seems about right as an average for some of the outlying areas.

I have to run. I will update this later. But this provides a bit more detail on the SM acreage and the most recent conference call.

FERC Approves WMB Natural Gas Pipeline For New York City; For Investors Only: May 12, 2014; Has Coal Touched Bottom; Global Warming In Colorado; WMB, CHK, COP All At New 52-Week Highs

Top energy story for the day:
Williams Partners’ and its wholly-owned subsidiary Transcontinental Gas Pipe Line Company, LLC  today announced that the Federal Energy Regulatory Commission has approved its application to construct and operate two related projects designed to increase natural gas delivery capacity to Brooklyn and Queens in time for next winter’s heating season.
The Transco pipeline is the nation’s largest-volume interstate natural gas pipeline system; it is a major supplier of natural gas to New York City. Customers in a dozen states along the 1,800-mile pipeline route spanning South Texas to New York City receive natural gas shipped on the Transco system.
Thirteen companies announce increased dividends or distributions.

Samson Oil & Gas announces 100% increase in proved reserve value: Co announces estimated the company's Proved reserves to be 1.805 MMBOE and valued at $47.7 million.

Companies trading at new 52-week highs: CHK, COP, TRN, WMB.  CHK goes over $30.

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.  

Nebraska: Pipeline Vs Wind Farms
Outa Sight, Outa Mind vs In Your Face, Every Day

Having just spent a better part of a long day driving through western Nebraska this was a particularly timely. A big thank you to a reader for sending it to me. One can read it for free at the link below, or pay a few pennies to read it at the source.

From National Review On-Line, a nice little essay on energy in Nebraska: the Keystone XL vs wind farms. I like this bit best: 
There is almost no visible evidence of the pipelines. Now and then, you'll see an above-ground station. Otherwise, the pipelines are buried, "out of sight and out of mind," as Robert Milligan, who has a farm in this area, says.
You can see wagon ruts from the Oregon Trail (some 150 years after they first appeared). The pipelines, not really.
What is very much visible is the wind farm: the Steele Flats Wind Farm. The turbines are enormous, inescapable, "in your face," as Cynthia Milligan says. They utterly alter the landscape, and, in some eyes, blight it. [Wait until the turbines start to show inevitable wear and tear.]

The Nebraska Public Power District set a goal: By 2020, 10 percent of energy should come from renewable sources. The relevant boards in this part of Nebraska held hearings last spring. The subject was the wind farm. Arguments flew back and forth, naturally. Also naturally, there was an element of NIMBY: "Not in my backyard." This affects families high and low. In Massachusetts, the Kennedy family objected to the Cape Wind Project -- which would spoil the view from their storied compound.

Here in the Diller-Steele City area, Kevin McIntyre objected to the Steele Flats project. For one thing, he didn't want to put up with the noise of the turbines. He was quoted by the Beatrice Daily Sun as saying, "I want to go out on my back deck and sit in peace and quiet and listen to the cows or to the birds. We all pray for rain at church. I'm going to pray for lack of wind."
Other residents were friendlier to the turbines, including those who would have them on their property: They would receive about $7,000 per turbine, per year. The turbines are expected to be in place for 20 years.

There are 44 of them. They went up last summer and fall. They were installed by NextEra Energy Resources, a company out of Florida. The company got in under the wire: At the end of the year, Congress let the tax subsidy for wind expire. But those who began construction before December 31 get to enjoy their subsidy for the next ten years.
These turbines are enormous, as I said. You almost have to see them to understand how dominating they are. Each turbine is 426 feet tall -- taller than the capitol tower in Lincoln, as Cynthia Milligan points out. (Nebraska's capitol is the second-tallest in the country, after Louisiana's.)  

Don sent me a number of stories on coal. The good news: presidents come and go. Coal will be here forever.

Peabody Energy is upgraded by Morgan Stanley: Commenting on the 2014 outlook for the industry, Kurtz wrote, "We believe coal burn will increase by 63 mt in 2014. While production should be able to keep pace, this is a major change from the heavy destocking environment dogging the market since 2012."

Barron's calls a "bottom" in coal, due to the Polar Vortex.

Colorado's Global Warming Ice Age

Reuters is reporting:
A mid-May snowstorm dumped as much as 3 feet of snow on Colorado's Rocky Mountains on Monday while the U.S. Midwest braced for hail and other severe weather, forecasters said.
Snowplows cleared the way for the Monday morning rush hour after the storm, which is expected to taper off by midday, blanketed Denver with more than 4 inches and the mountains northeast of Steamboat Springs with 36 inches  of snow, said Jim Kalina, a meteorologist with the National Weather Service in Boulder, Colorado.
I had hoped to change the "Global_Warming_2013_2014" tag to "2014_2015" in June but I may have to wait until the end of July. Just saying. This has been one heckuva winter.

A Note for the Granddaughters

This is so cool. I just discovered Brenda Wineapple's 2003 biography of Nathaniel Hawthorne. It turns out I've read another of Wineapple's biography, one on Gertrude Stein.
A few weeks ago I happened to pick up another biography: Sister Brother: Gertrude and Leo Stein by Brenda Wineapple. Now, about one-third of the way through, I realize that the first third of the book could have been subtitled "The Boston (or Harvard) Years." This first third of the book dovetails nicely with Richardson's William James, who in fact was one of Gertrude Stein's professors. She eventually received a "B" from his one semester course that she took. She did "A" work in the first half of the semester, but "C" work during the latter half, during the opera season.
I might be back in a Boston/Harvard/Salem phase with discovering this new biography. I've read the first two chapters and the book is delightful. It's a big book and one I can enjoy for a few weeks, I suppose.

My "library" blog is here

Number Of Active Rigs In North Dakota Continues To Inch Up; Eagle Ford EURs For Current Wells At 168,000 -- EIA


May 12, 2014: with regard to the EIA estimate of Eagle Ford wells to be 168,000 bbls. This is really a good example of how one can lie / mislead with statistics.  The analyst took all wells from the very beginning of the Eagle Ford, all the way back to 2008, and then forward to 2013 (at least with 4 months of production).

Folks need to remember two things when a new formation is discovered: a) it takes time to figure out how to develop the field; complete the wells; etc; and, b) it takes time to delineate the new basin. In fact, EOG says it has not even definitively delineated the Bakken as to density of wells yet, and EOG has been drilling in the Bakken since at least 2007. The wells drilled in 2007 in the Bakken were certainly not as good as the wells they are drilling in 2014. Two things: first, they are still trying to figure out the best completion/fracking methods; and, second, for the next few years, operators will be concentrating on the sweet spots, drilling where they should get the best wells.

If the first Eagle Ford wells are averaging 168,000 bbls, one can only imagine how good Eagle Ford wells will be five years from now.

If one wants to see some miserable wells in the Bakken, look at the history of Bakken wells in 2006.
Original Post
A reader alerted me to this. It will be interesting to see how this plays out: the EIA estimates the average Eagle Ford well at 168,000 bbl, for the wells drilled 2008 - 2013. Why is this important? It affects policy planners and banks' eagerness to lend.
Van Wagener calculated the Eagle Ford per-well average EUR from 5,384 wells. That group came from a database of 6,594 wells, from which the analyst excluded 927 with less than 4 months of production data and 283 for which monthly production wasn’t successfully fitted to a hyperbolic decline curve.
Seven counties in the Eagle Ford play had more than 400 oil and natural gas wells at the time of the analysis. Among those, DeWitt County had the highest mean EUR per well, 334,000 bbl among 453 wells, followed by Karnes County with 226,000 bbl among 975 wells. Other mean per-well EURs and well totals were Gonazales County, 198,000 bbl, 486 wells; LaSalle County, 153,000 bbl, 755 wells; Dimmit County, 137,000 bbl, 820 wells; McMullen County, 127,000 bbl, 455 wells; and Webb County, 80,000 bbl, 593 wells.
AFP/Yahoo!News is reporting: Russia could cut off natural gas to the Ukraine as of June 3. The move would impact 13 EU nations. At some point Germany (and the Germans) are going to get tired of paying the bills for the rest of the EU. I assume President Obama is going golfing.
Gazprom chief executive Alexei Miller said Ukraine must pay upfront for its June deliveries because of outstanding debts. He added that Kiev had until the morning of June 3 to make the payment "or Ukraine will receive zero cubic metres (of gas) in June," Interfax reported.
Active rigs:

Active Rigs193185209175114

RBN Energy: Large-scale ethane exports could ruin a good thing.
Hmm, all that would make the economics of producing ethylene from ethane a little different from today’s ethane price of about 30 c/gal.  Of course, we are not saying this is going to happen.  But based on our analysis it seems like a possibility.  It would not be the first time petrochemical buyers overbuilt capacity and killed the goose laying the golden egg.
The Wall Street Journal

The ante has been raised: pro-Russian separatists in eastern Ukraine have declared victory. I assume President Obama will draw another line in the Black Sea.

US firms pack up for tax benefits. I think US firms have been more than patient working with Congress trying to get the tax breaks to even the playing field; but if those tax breaks are not forthcoming, US firms are going. Overseas. Great for investors.

Back to square 1? Not it's back to net neutrality?

Fox changing the way it does business. Finally.

The Tao of Gregg Popovich. A fairly lightweight article by WSJ standards, but nice nonetheless.

This is interesting. US pension funds face record amounts of capital flowing back from private-equity investments that is upsetting the careful portfolio balance these funds maintain to achieve steady returns over decades to pay thousands of retirees. 
U.S. pension funds face a dilemma that might be considered a nice problem to have: record amounts of capital flowing back from private-equity investments.
Strong markets have given the private-equity firms backed by pension money the ability to sell companies, which generates cash for investors.
These funds last year returned $134.6 billion to pension funds and other investors, according to Cambridge Associates LLC, topping 2012's record of $115 billion. But all that cash coming back from private-equity investments is upsetting the careful balance of investments that pension funds must maintain to achieve steady returns over decades to pay thousands of retirees.
 The Los Angeles Times

100-degree heat wave to hit southern California.

California puts $750 million in tax credits into retaining corporations now that they've lost both Toyota and OXY Petroleum. Someone pointed out that "maybe taxes do matter." When one looks at the incentives to get the $750 million, one will see they are so restrictive; DOA.