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Saturday, June 7, 2014

Story Of The Year If This Pans Out? Fracking-Grade Sand In Southwestern South Dakota? -- June 7, 2014

Updates

July 30, 2017: a June 30, 2015, story suggests South Dakota Proppants is still in business.

July 30, 2017: a 2014 story from The Rapid City Journal says sand in western South Dakota, mostly the Black Hills is not suitable for fracking. Thank goodness. 

July 1, 2015: from Linked In, undated, I believe

July 6, 2014: an update in the Rapid City Journal. I don't think there was anything new except to say that if the company started activity today, it would take about two years before the Bakken would see any sand from the Black Hills. Given the federal government and the native Americans and the South Dakota state tourism board, I'm not holding my breath.  

Original Post

One of my weaknesses is my hyperbole, and this may be another case of hyperbole, but on a quiet Saturday night, this article certainly got my attention. NaturalGasIntel.com is reporting:
Denver-based South Dakota Proppants (SDP) is proceeding with plans to develop a mine on federal lands in southwestern South Dakota to supply sand used in hydraulic fracturing (fracking) for shale oil/natural gas production in the Williston and Denver Julesburg (DJ) Basins in North Dakota and Colorado.
Earlier this year, the South Dakota Department of Environment and Natural Resources released a study by the University of South Dakota concluding that the state's grains don't meet American Petroleum Institute (API) specifications for proppant sand. SDP Managing Member Patric Galvin said he knew differently, but for proprietary reasons he kept quiet, he told NGI's Shale Daily on Thursday.
Galvin said his company plans to submit a mining plan in South Dakota to create a $66 million, 1 million ton/year fracking sand mine on 950 acres of public access U.S. Forest Service (USFS) lands that he estimates have 70 million proven recoverable tons of "high quality fracking sand." He said it will take 24 months before product will be available for commercial shipments.
The company has begun the permitting phase, which will be headed by the USFS, with help from the state, including DENR, whose earlier study did not include the lands SDP is pursuing. Subsequently, the state geologist and DENR confirmed Galvin's analysis that sand at his proposed site does meet API specifications for proppant, adding that the SDP samples appeared to be of "better quality" than the ones the state study had examined.
I told the reader who sent this to me that any time I see USFS (US Forest Service) and fracking-grade sand in the same story I get concerned but if this pans out, it's going to be quite a story.

Back-of-the-envelope:
  • one million tons = 1 million x 2,000 pounds = 2,000,000,000 lbs / 4,000,000 (amount of sand to frack one Bakken well) =  500 wells
If I did the math correctly, that's not a trivial amount of sand.

The article has these data points:
The U.S. market currently uses 53 million tons of proppant annually with the market growing at about 3% per year, Galvin said. Since activity in the Williston represents one-third of the nation's largest shale developments, he estimates that about 20% of the 53 million tons are being used in the Bakken/Three Forks plays.
An average fracking job requires from 5,000 to 8,000 tons of sand for each well.
"Some companies are increasing the size of the wellbore to lower the pressure at the end of the pipe and provide more flow as the horizontal runs are getting to be very long," Galvin said. "This increase will require more sand as well, so the need for increased volumes-per-well is also on the horizon."
The bulk of the proppant used in the Bakken comes from Ottawa, Canada and Wisconsin, requiring rail transportation that costs about $35-40/ton more than shorter, truck shipments, Galvin said. Truck transportation of sand to the Bakken from South Dakota would cut the cost of the product an average of $8-20/ton, "making [our] sand the low-cost provider for the surrounding oil basins," he said.
The South Dakota mine site would be located about 300 miles to either the Bakken or Niobrara oil/gas drilling sites.
Somewhere my math must be off. The article says "an average fracking job requires 5,000 to 8,000 tons of sand for each well. A ton is 2,000 lbs. 5,000 tons is 10 million pounds which is seldom the amount seen in the Bakken except for the new completions used by EOG. Unless they're using a different size ton in South Dakota.

Go to the linked article for the data points. I might have made a mistake somewhere along the line.

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Note to the Granddaughters

It is an incredibly beautiful night for biking in the Dallas-Ft Worth Area. There's a debate in Dallas this past month on the bicycle helmet law. Dallas is the only city in the area that requires a helmet regardless of age. None of the cities I bike in require a helmet for adults. I don't wear a helmet, but if required, I would follow the law. Dallas plans to start up a "rent-a-bike" program similar to the one Boston has; it won't work if helmets are required. People generally don't walk around carrying bike helmets "just in case." I expect Dallas to repeal the helmet requirement for adults but to save face will issue a very, very strongly worded statement that the city highly, highly, highly encourages everyone to wear a helmet while riding. I wonder if adults are required to wear bike helmets in NYC where they frown upon adults drinking "Big Gulps."

But I digress. It's an absolutely beautiful night to ride, so I took a long ride up the highway to Grapevine, and found a wi-fi / computer friendly McDonalds on south Main, Grapevine. I've been here before. Very nice.

It's hard for me to blog without music. Wow, I haven't heard Mazzy Starr in in years. I enjoyed them many years ago, but over time lost track of them. Then this, out of the blue. I had not seen it and certainly have not played it -- although not that I'm listening to it, I seem to have a vague recollection that I've come across it before -- be that as it may, here it is (again?):

Seasons of Your Day, Mazzy Starr

Whoever posted it at YouTube, also posted this:
If psychedelic music had a voice in '90s post-punk, Mazzy Star may have been its strongest reincarnation. That doesn't necessarily mean that fans of the Jefferson Airplane and the Grateful Dead will find the band to their liking, however. Mazzy Star much preferred the dark side of psychedelia, as exemplified by the most distended tracks of the Doors and the Velvet Underground. Their fuzzy guitar workouts and plaintive folky compositions are often suffused in a dissociative ennui that is very much of the '90s, however much their textures may recall the drug-induced states of vintage psychedelia.
'Seasons Of Your Day' is full of solid songwriting, the six piece haven't bothered to conform to an audience, instead they've grown with them. Hope Sandoval's vocal chords are as dreamy as ever. Coupled with a country feel, this record is certainly not "alternative rock" as they're occasionally labelled. Given that it's been more than fifteen years since the group's last full length, it's amazing how cohesive this album is. After all, it was recorded over an extended period (and self produced) across locations in Norway, London and California.
The reviewer certainly name-dropped a lot of bands. He/she should have included Lana Del Rey. 

Random Update On A Couple Of Wells In The Williston Basin; It's Snowing Near Sheridan, WY -- The Winter That Never Ends

Under my page, "Things To Follow Up On:"

1. This item can now be removed. This well was reported as dry.
  • 26761, DRY, Flatirons Resources, Sundsbak 31-11, Torning oil field, a Madison well, completed 12/13;
2. I am leaving this one on the page, but maybe some knows whether this well was re-fracked or simply a workover or some other reason for the improvement in January 2014; the increase in production suggests a work-over, not a refracking, but Marathon had targeted a number of older wells for re-fracking some time ago:
  • 17310, 459/IA, Marathon, Eckelberg 41-26H, 49,138 bbls in 15 months; t8/08; cum 117K 11/13; taken off-line 7/13; went back on line 1/14; significant increase in oil production; no explanation in well file; production profile:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN4-2014301398138326095681695
BAKKEN3-2014311398141122696036738
BAKKEN2-201428133414121739070739
BAKKEN1-20142511819422377960654
BAKKEN12-20130000000
BAKKEN11-20130000000
BAKKEN10-20130000000
BAKKEN9-20130000000
BAKKEN8-20130000000
BAKKEN7-2013161582352910439
BAKKEN6-20133056546113019358
BAKKEN5-2013317158271462353316
BAKKEN4-20133089991821536416132
BAKKEN3-201331103792826839713675

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Global Warming

Regular readers know the fun I have with Patrick Kennedy (or whichever Kennedy it was) who said that due to global warming, the Kennedy children (and your children) would never see snow again. I can't make that up. He didn't say your great-great-great-great grandchildren, but your children. My children and grandchildren have seen a lot of snow since that comment was made. If the Kennedys have missed that snow (unlikely since Boston had an incredibly snowy winter, 2013 - 2014) they will get another chance. It's currently snowing near Sheridan, Wyoming, in the high country, which will continue into tonight and tomorrow. The Beartooth Highway south of Livingston, MT, could be closed tonight due to snow. Plan accordingly.

Richard Zeits On Halcon

Over at Seeking Alpha, Richard Zeits' summary on Halcon:
  • Halcón's downdip wells in the East Texas Eagle Ford are performing admirably, which suggests that the best wells are still ahead.
  • The Reveille #1H produced over 40,000 barrels of oil in 42 days, setting a new productivity record in the play.
  • The Keystone #1H is another notable test which confirms the excellent quality of Halcón's acreage in Burleson County. 
The narrative:
Among the most recent results, I should note the Keystone #1H well located in the center of Burleson County, which produced ~20,000 barrels of oil in less than a month. This very impressive well is "on strike" with two other strong producers: Halcón's Reveille #1H well and Clayton Williams' Pivonka E Unit #1 well.The Keystone well, therefore, de-risks a large portion of Halcón's acreage in Burleson County, where the company has just started its drilling activity.
The following graph shows renewed growth momentum in Halcón's monthly production volumes in El Halcón. My well-by-well contribution analysis indicates that gross production rate in El Halcón in April increased by over 28% from the average production rate in Q1. The growth rate may, in fact, be even greater, given that not all wells may have been reported.
Much more at the link. The page is there on a limited time only.

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. 

Also, the Fly On The Wall noted that at least one analyst has raised the target price for Halcon:
Wunderlich raised its price target for Halcon Resources shares to $9 citing potential catalysts from the company's upcoming Tuscaloosa Marine Shale well results. The firm keeps a Buy rating on the stock.  

Older articles on asset sales by HK: first, the asset sale last fall, and second, the asset sale this spring:

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Man-Made CO2 66 Million Years Ago?
or, Unexplained Global Warming?

Daily Digest.com is reporting:
During an expedition in southern Saskatchewan, Canada, a joint research team from McGill University and the Royal Saskatchewan Museum discovered the first fossil-record evidence of forest fire and subsequent regrowth and recovery of flora, revealing a snapshot of the ecology and climate on earth just before the mass extinction of the dinosaurs.
The researchers’ discovery revealed that at the forest fire site, the plants are dominated by flora quite similar to the kind that begin forest recovery after a fire today. Ancient forests recovered much like current ones, with plants like alder, birch, and sassafras present in early stages, and sequoia and ginkgo present in mature forests.
“We were looking at the direct result of a 66-million-year old forest fire, preserved in stone,” said Emily Bamforth, of the Royal Saskatchewan Museum and the study’s lead author. “Moreover, we now have evidence that the mean annual temperature in southern Saskatchewan was 10-12 degrees Celsius warmer than today, with almost six times as much precipitation.”
 McGill is one of the world's premiere universities.

Monthly Costs For Maintaining An Active Well; Did Ballard Get A Madison Well North Of Glenburn? If So, The Third Time's A Charm

Some time ago a reader asked a very general question. I thought it was too general to be able to get a good answer, but another reader provides a very nice response. The original question, over at the "Discussion Group" asked about the average cost of maintaining an active well. This was another reader's response:
Most companies estimate production costs at $6,000 to $8,000 per month per well...or $70,000 to $100,000 per year.  
Keep in mind that a majority of wells require a week or more of maintenance each year with a workover rig with support equipment and crew at $10,000 plus per day.  
You also have significant power costs in addition to general lease operations. A 6-8 well pad could easily require $750,000 to $1 million per year to keep everything in top
condition to maximize production without any major operational downhole problems. 
This is very, very much appreciated. Thank you.

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Does Ballard Have A Productive Well North Of Glenburn?

On a completely different note, another reader over at the "Discussion Group" reports that  a local farmer from the Glenburn area says that Ballard Petroleum struck oil north of Glenburn. There is a Ballard wildcat north of Glenburn:
  • 27319, 600, Ballard Petroleum, Fines 24-19, wildcat, north of Glenburn, 19-159-81; Chatfield, Madison pool, t6/14; cum 137K 5/17;
A bit further north there are to more Ballard wildcats:
  • 27703, conf, Ballard Petroleum, Mddaugh 33-23, wildcat, north of Glenburn, 23-160-81,
  • 27704, conf, Ballard Petroleum, Drovdal 13-2, wildcat, north of Glenburn, 2-160-81,
Ballard Petroleum has five permits in North Dakota. The first two permits: two wells drilled in 2012 -- both dry, both Madison wells.

The Ten (10) New XTO Permits In The Bakken

Remember this story over at Seeking Alpha this past week: ExxonMobil's 570,000 acres going into development mode? The very next day, June 5, 2014, XTO was granted ten (10) new permits in the Bakken -- I think that might be a record or a near-record for XTO for the number of new permits in one day.

These are the ten (10) new permits:
  • 28544, loc, XTO, Schettler 14X-9A, Cedar Coulee,
  • 28545, loc, XTO, Schettler 14X-9E, Cedar Coulee,
  • 28546, loc, XTO, Schettler 14X-9B, Cedar Coulee,
  • 28547, loc, XTO, Schettler 14X-9F, Cedar Coulee,
  • 28548, loc, XTO, Schettler 14X-9C, Cedar Coulee,
  • 28549, loc, XTO, Schettler 14X-9G, Cedar Coulee,
  • 28550, loc, XTO, Schettler 14X-9D, Cedar Coulee,
  • 28551, loc, XTO, HM Hove 34X-33C, Cedar Coulee,
  • 28552, loc, XTO, HM Hove 34X-33G, Cedar Coulee,
  • 28553, loc, XTO, HM Hove 34X-33D, Cedar Coulee,
Every section in the entire Cedar Coulee oil field has at least one producing horizontal well ... with one exception, section 9-147-96. That one section really stands out on the GIS server map. There are wells sited in this section but no horizontal laterals run through this section. That changes with these six XTO Schettler wells. 

The Hove wells will be in section 33-155-96 where this is but one other horizontal, from a well sited in the section to the north:
  • 17823, 617, XTO, Smouse 31X-28, West Capa, 9 stages, 726,000 lbs proppant, t7/09; cum 79K 4/14;

McKenzie County Coming To Terms With Address, Locations Of Temporary Living Units, Emergency Response

The AP, with a Bismarck byline, is reporting that McKenzie County getting a handle on addresses and locations of all the temporary housing units in the county, necessary if emergency responders are going to respond in time. It's an interesting story with several story lines:
The new rules require that "man camps," temporary housing complexes for oilfield workers, and RV parks obtain permits and addresses, enabling 911 dispatchers to pinpoint where people are temporarily living.
Officials also decided not to kick people off land for not having a permit, knowing they would set up somewhere else, but rather work to get them the right paperwork.
Samuelson noted locals weren't keen to permits: "If you wanted to put a pig farm next someone else's farm, you could do it." But after the storm, he said, they may be rethinking their position. "We used to be rural," he said. "We aren't any more."
McKenzie County's population was pegged last year at about 9,300 people, nearly double from a decade earlier and the highest since 1930. North Dakota is now the nation's second top oil-producing state, behind only Texas, and McKenzie County alone accounts for a third of the state's oil output. 
"McKenzie County, with no planning and zoning, was kind of a free-for-all," said Kenan Bullinger, the director of the state Health Department division that regulates temporary housing. "I think they do have a handle on it now."

Weekend Musings -- June 7, 2014 ...Or Maybe June 8, 2014 By The Time I Finish; Oil / Natural Gas Production Drop On Federal Land, But Huge Increase From Private Sector

Easy money: Investors might want to look at two items and connect the dots. The first one is slide 18 of CLR's June corporate presentation, debt maturities summary:
  • 2019, $300 million, 8.25%, called 10/1/14
  • 2020, $200 million, 7.35%, callable 10/1/15
  • 2021, $400 million, 7.125%, callable 4/1/16
  • 2022, $2 billion, 5%, callable 3/15/17
  • 2023, $1.5 billion, 4.5%
  • 2024, $1 billion, 3.8%
  • 2044 (no typo), $700 million, 4.9%
CLR can call the higher-paying bonds, and replace them with lower-yielding bonds.

So the question is this: how long might the good times last? Possibly for a very long, long time. Even if the US starts raising rates, the Europeans are planning on doing just the opposite. Reuters is reporting:
Euro zone interest rates will diverge from those in the United States and Britain for a number of years, European Central Bank (ECB) Executive Board member Benoit Coeure told France Inter radio on Saturday.
Speaking after the ECB this week cut rates to record lows, Coeure said they would remain around that level for a long time, whereas central banks in the United States and UK would at some point raise rates. "Clearly what we wanted to indicate on Thursday is the fact that monetary conditions will diverge between the euro zone on one hand and the United States and the United Kingdom on the other for a long period, which will be several years," he said.
And, actually, I'm not convinced the US Fed will raise rates significantly any time soon.

By the way, the European Central Bank says they will be paying "negative" interest rates on savings going forward.

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What's wrong with this picture? Nothing if your goal is to kill the domestic oil and gas industry.

Forbes is reporting:
From 2009 -2013 on FEDERAL land natural gas production is down by 28% and crude oil production is down by 6%

But on private land or land owned by a state government, natural gas production  from 2009-2013 is up 33 % ( this even with the lousy NG price for 3 of these years ) and crude oil is up a whopping 61%.
The 33% increase in natural gas production comes in spite of severely depressed natural gas prices during those years, although that might be improving somewhat. 

Fortunately, presidents come and go. XOM, CVX, and COP will be here forever. Can you imagine the price of gasoline if ...

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Investing in EOG? A little late? Or maybe never too late? I don't know. EOG has appreciated 62% in the past year (according to Yahoo!Finance); AAPL about 48%.  So, is EOG still a buy? Achilles Research thinks so. Amazing.

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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China's new map. Rigzone is reporting a number of stories of interest. I particularly enjoyed the article on "China's Nine-Dash Line":
China claims sovereignty over all the islands, rocks and reefs in the four main groups, while Vietnam, the Philippines, Malaysia and Brunei each claim some of them.
Much of the dispute revolves around the "Nine Dash Line", which appears on China's official maps and encompasses almost the entire South China Sea.
The Nine Dash Line made its first appearance in official atlases issued in 1948, though the territorial claims on which it rests go back much further. It has been subject to only minor modifications since then.
The number of dashes - which roughly indicate the boundary - has varied between nine and 11 at various times and currently stands at 10 after a new dash was added east of Taiwan in 2013.
China has included the Nine Dash Line on illustrative maps used in disputes with the other coastal states, and it is now used in passports issued by the People's Republic. But the exact status of the line remains "ambiguous", according to Euan Graham at Britain's Royal United Services Institute ("China's new map: just another dash?" September 2013).
The latest edition of the official atlas designates the line as a national boundary and uses identical shading to the lines on China's land borders. Exactly what China is claiming, however, remains somewhat mysterious, even to experts.
Meanwhile, President Obama visits Standing Rock Indian Reservation this next Friday, June 13th.

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Another break for western Canadian oil sands. Reuters is reporting that western Canadian oil industry might have lucked out again: finding rich deposits of light oil / condensate to dilute their heavy oil.
Canada is enjoying an unexpected boom in production of ultra-light crude known as condensate, defying long-held predictions of dwindling supply.
This surprising bounty from one corner of Alberta, better known as the home to Canada's vast tar-like oil sands reserves, is a boon for firms like Vermilion Energy Inc and Chevron who have built up positions in the Duvernay, now hotly tipped as one of North America's most exciting shale plays with vast reserves waiting to be tapped.
It also is fuelling hope of cost relief for traditional heavy oil sands companies such as Cenovus Energy Inc, who in the past have paid premiums of up to $25 a barrel to buy imported condensate used to dilute their viscous oil sands production so that it can flow through pipelines.
The activist billionaire environmentalist and big Obama contributor, My Steyer, is probably thrilled. This will make it easier to ship western Canadian oil through "his" TransMountain pipeline, west under the Canadian Rockies, to the Pacific coast, to China.

Income inequality: speaking of activist billionaires investing in the oil and gas industry, I find it somewhat ironic that with increasing talk-inside-the-beltway about income inequality, the rich are getting significantly richer, the poor are getting significantly poorer, and the unemployed are .... well, staying unemployed under this administration. I read this morning, somewhere, that Mr Gates, of Microsoft fame, could buy every house in Boston, and still have $1 billion left over. Unfortunately, that one billion would not be enough to pay the property taxes, but I suppose he could rent them out.

Speaking of income disparity, it's nice to see NPR.org present a positive story for a multi-millionaire getting another $126 million for six years of work:
One of the NFL's most dynamic young play-callers, Kaepernick received a $126 million, six-year contract extension Wednesday that keeps him with the organization through the 2020 season. The deal includes $61 million in guaranteed money, a person with knowledge of the contract said, speaking on condition of anonymity because terms weren't disclosed.
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India's electricity problem: one more note and then I will move on. Bloomberg Businessweek is reporting on India'a electricity problem. I knew it was bad, but not this bad. Here are the data points:
  • the government requires electricity distributors to sell power below cost
  • even so, 80% of electricity loss in India is due to theft
  • 319 million people in India have no access to electricity
  • the goal of the government: to reach all Indians using renewable electricity
  • the goal of the government: enough electricity so every Indian has enough electricity for at least one light bulb
Americans have no idea how good we have it. 

Meanwhile, President Obama will be visiting Standing Rock Indian Reservation next Friday. 

Increasing Amounts Of Sand To Complete Bakken Wells Will Generate More Activity For Rail, Road

Readers may have noted the amount of sand Oasis is now using to complete their wells, upwards of 4 million lbs. Don noted: with a semi-truck carrying 48,000 lbs, it will require 90 semi-loads of sand/proppant for one well. At 200,000 lbs for a hopper bottom train car, that works out to 22 train cars. And this is just one well. And it can't get their any other way than by rail, and then by truck.
  • 24927, 1,760, Oasis, Wayne Zumhof Federal 5300 44-15T, Willow Creek 1st Bench Three Forks, 36 stages, 3.8 million lbs sand/ceramic, t1/14; cum 32K 4/14;
  • 25221, 2,074, Oasis, Aspen Federal 5300 24-15B, Willow Creek, middle Bakken, 36 stages, 3.7 million labs sand/ceramic, t2/14; cum 54K 4/14;
  • 25740, 810, Oasis, Fairfax 6093 12-26B, Gros Ventre, middle Bakken, 36 stages, 4.5 million lbs sand; t12/13; cum 27K 4/14;
  • 26182, 140, Oasis, Morgan 6093 12-6 1H, Gros Ventre, 1st Bench Three Forks, 36 stages; 4.3 million lbs sand; t1/14; cum 13K 41/4;
EOG uses upwards of 10 million lbs to frack their Parshall wells (and sometimes more)

President Obama Chooses A Friday The 13th To Visit North Dakota ...

.... and the big news that day won't be his visit to Standing Rock Reservation.

Michelle gets a "big play" in the linked article regarding their visit to North Dakota, so I assume the visit is for Michelle to help the Native Americans eat a better diet. Or plant more gardens. It will be interesting if he stays overnight.

But, the big story next Friday: the Director's Cut could very well be released that day. There is a very, very good possibility North Dakota hit the one-million-barrel-of-oil-per-day-production milestone in April. If North Dakota did not hit the one-million mark it's not big deal, but it would be a surprise.

The last Director's Cut was released on May 13, 2014: at that time, the daily production only had to increase by 23,000 bbls/day to reach the million-bopd milestone. Generally, the data is revised upwards to reflect late reporting wells. If so, it means the delta to one-million-bbls will be even less.

Saturday, June 7, 2014 -- Twelve (12) New Permits Friday; New Operator In The Williston Basin

Active rigs:


6/7/201406/07/201306/07/201206/07/201106/07/2010
Active Rigs194189214171123


Twelve (12) new permits Friday --
  • Operators: CLR (8), Gadeco (2), Newfield, Roff Operating
  • Fields: Pershing (McKenzie),
  • Comments: this is Roff's first permit in North Dakota; it's a wildcat, #28571, Osterberg 2-16 H1, up in Renville County, not in area one would expect a Bakken; area better known for the Madison, note "H"; CLR's permits are for eight (8) wells in same section, the Bailey/Wiley wells; Gadeco's permits are for the Epping oil field, same pad;
Roff Operating: according to one website, "Roff Operating" has the same telephone number as Roff Oil & Gas, Houston, TX. Their website
Wells that came off the confidential list Friday were posted yesterday; see sidebar at the right.

One (1) producing well completed Friday:
  • 25985, 572, Hess, EN-Frandson-154-93-2116H-4, Robinson Lake, t5/15; cum 4K 4/14;