Tuesday, June 24, 2014

Update On Effectiveness Of Rigs Drilling In The Bakken Shale -- The Manufacturing Phase In Drilling Out The Bakken -- June 24, 2014

We've discussed this before (see the tag). The industry refers to it as "rig efficiency." I like to refer to it as "rig effectiveness." To me there is (more than) a slight difference.

Over at Rigzone there is a five-page article on the effectiveness of rigs in drilling tight / unconventional oil. This is another must-read, must-bookmark articles. It begins:
At the drilling automation conference there were some interesting discussions of what producers want from modern drilling rigs and how equipment and operational changes made in recent vintage rigs have influenced their efficiency, and thus the cost of drilling shale wells.
One drilling contractor stated that 80% of wells in major shale basins are now being drilled from pads. Embracing pad drilling has as an objective, the pulling of lower-quartile performing rigs up closer to those rigs in the top quartile of performance.
An official of a shale producer commented that one aspect of drilling efficiency, besides reducing the time required to drill wells, was to increase their standardization such that every well becomes the best well the company ever drilled in the basin.
This representative began his presentation by saying that in the past, if you asked a producer about the best well he had drilled in a field, he would give you a low number of days. But the reality is that had you asked him to give you the history of the days needed to drill all the wells in that field, you would find that the days-per-well number would jump all around with only a few wells being the best or close to the best well drilled. He referred to this phenomenon as selective memory failure because producers always focus on their best well and not their average well or the variability of drilling performance.
What producers are really trying to accomplish in their focus on rig efficiency is to eliminate the drilling-time variability. In other words, producers want all wells to be their best wells drilled.
Minor Note On The Torquay (Three Forks)

Some time ago I posted a fairly substantial update on the Torquay (Three Forks) prompted by news from Crescent Point. Since then others have also written about the Torquay. I don't think this link says anything that hasn't been posted on the MDW blog, but it has nice graphics and it puts everything together. The site is aimed for investors. My site, on the other hand is not an investment site. So, without further ado: The Oil Voice article on the Torquay

"When It Rains, It Pours -- June 24, 2014, After Close Of Business -- Huge News Reports Coming In -- This Is One Of The Biggest -- After Almost Forty Years, The Oil Export Ban Is Lifted


June 26, 2014: hey, not so fast. RBN Energy provides background, insight, analysis to this storyUnfortunately RNB posts are generally only available for a short period of time before they disappear, and become available only by subscription. Memo to self: post saved.

Original Post
The WSJ is reporting:
The Obama administration cleared the way for the first exports of unrefined American oil in nearly four decades, allowing energy companies to start chipping away at the longtime ban on selling U.S. oil abroad.
In separate rulings that haven't been announced, the Commerce Department gave Pioneer Natural Resources Co. and Enterprise Products Partners LP permission to ship a type of ultralight oil known as condensate to foreign buyers.
The buyers could turn the oil into gasoline, jet fuel and diesel. The shipments could begin as soon as August and are likely to be small, people familiar with the matter said. It isn't clear how much oil the two companies are allowed to export under the rulings, which were issued since the start of this year.
The Commerce Department's Bureau of Industry and Security approved the moves using a process known as a private ruling.
I'll never be able to find it but I posted some time ago that this is exactly how I expected this to play out. There would be no way the Obama administration could ban the ban on oil exports, but in "private rulings," taking each case on a case-by-case basis. But here it comes.

This is the report that Bloomberg alluded to in an earlier link this evening. Lots of news all of a sudden: it seems when it comes to the Bakken and the oil industry in general, "when it rains, it pours."

In addition to all this, in the past week Yahoo!In-Place has been posting several pipeline deals, too many to count, and almost none of which I posted simply because too many deals, simply too much to keep track of. But it is starting to make sense. If the Obama administration is giving the light to exports, the operators need a lot more pipelines than currently in place.

Condensates are a huge "by-product" in the Bakken. And if the "Sleeping Giant" is really there, the story becomes even bigger. All of this certainly explains this story that was posted earlier. It explains why EPD is "going north to the Bakken."

A year or two ago, it was the "year of CBR." Quickly, and sooner than I thought, it looks like we may be heading for the "year of the pipeline."

And don't forget the "Sleeping Giant."

Going North to the Bakken; The Rush Is On

North To Alaska, Johnny Horton

Legacy Oil & Gas Buys Corinthian: A Cross-Border Spearfish Play

Press release here: http://www.legacyoilandgas.com/upload/news_release/179/ce6ffda927ba/news-release---june-24-2014.pdf

More of the background to this story here. A big "thank you" to "anon 1" who has, over the years, sent in some good stuff.

Too many things happening tonight to do much more than post the basics. All I can say is that the Spearfish appears to be getting a bit more interesting every day.

WTI Oil Price Up After WSJ Report On US Condensate Exports

More on this tomorrow, as more details emerge. Several story lines. Bloomberg is reporting early this evening that the price of oil "jumped" on news after WSJ report on US condensate exports.

Actually, the "jump" at 80 cents/bbl is not that impressive ...

Marathon's Second Tyler Well (The Powell) Comes Off Confidential List Wednesday; Huge Jump In Active Rigs In North Dakota -- Back To The Future At 194 Active Rigs; Halcon With A "High-IP" Well; June 24, 2014

Pipeline story: this information was posted / linked earlier today, but it's a big, big story -- it's now being posted over at Seeking Alpha:
  • North Dakota's governor wants to double the state's pipeline capacity over the next two years as part of a plan to curb wasteful gas flaring and reduce the reliance of Bakken producers on rail and trucks to get their oil to market.
  • Oil production in North Dakota has more than tripled in the past decade to 1M boe/day, but the state's pipeline capacity is only ~780K boe/day; Gov. Dalrymple says the state should boost capacity to 1.4M boe/day by 2016.
  • The governor's overtures were timed with Enterprise Products Partners' plans to build a first-of-its-kind 1,200-mile pipeline from North Dakota's Bakken oil fields to Cushing, OK. [My estimate of cost: $400K/mile x 1,200 miles = $480 million = a cool half-billion dollars?]
  • ONEOK, Enbridge, MDU Resources and other pipeline operators have been working to build natural gas networks in the state, but they have been constrained by cold weather and right-of-way issues.
  • While environmental groups worry about flaring, many residents see traffic as a reason to build pipe; a local officials says citizens "are less worried about global warming then they are about the 1,100 trucks that go by their mailbox every day."
Wells coming off the confidential list Wednesday:
  • 25366, 382, OXY USA, State Jaeger B 5-27-34H-144-97, Cabernet, t12/13; cum 14K 4/14;
  • 26096, 70, OXY USA, State Jaeger b 7-27-34H-144-97, Cabernet, t12/13; cum 904 bbls;
  • 26335, drl, MRO, Powell 31-27TH, Wildcat, no production data, the second Tyler well "everyone" is waiting for;
  • 26366, 143, OXY USA, Keary Kadrmas 2-32-29H-142-96, Russian Creek, t12/13; cum 11K 4/14;
  • 26423, drl, KOG, P Manning 154-99-2-2-11-15H3, Stockyard Creek, no production data,
  • 26962, drl, BR, Norman 11-4TFH ULW, Fancy Buttes, no production data,
  • 27021, drl, Hess, HA-Nelson A-152-95-3427H-6, Hawkeye, no production data,
  • 27312, drl, Slawson, Nighmaker 4-8-17TFH, Big Bend, producing,
Active rigs in North Dakota:

Active Rigs194185210170122

Eight (8) new permits --
  • Operators: BR (3), WPX (2), MRO, Cornerstone, American Eagle
  • Fields: Blue Buttes (McKenzie), Mandaree (Dunn), Bailey (Dunn), Skjermo (Divide)
  • Comments: Cornerstone has a permit for a wildcat in Burke County; see "R" designation for three of the BR permits
Three of the new permits:
  • 28709, conf, BR, Harley 11-21TFH-R, Blue Buttes, 
  • 28710, conf, BR, Harley 11-2MBH-R, Blue Buttes, 
  • 28711, conf, BR, Harley 21-2TFH-R, Blue Buttes, 
Note the "R" -- revised or re-entry? Revised. I only read one file report, but I assume all thee are the same. Apparently the original siting was farther from the pipeline that was already there (or something to that effect); the operator respectfully asked that the original permit be canceled; they revised the permit request and here they are. Not a big deal.
Wells coming off the confidential list were posted earlier; see sidebar at the right.

Five (5) producing wells completed:
  • 25207, 2,219, HRC, Fort Berthold 148-95-27B-34-4H, Eagle Nest, t5/14; cum --
  • 25698, 1,056, Hess, AN-Evenson 152-95-0310H-5, Antelope, a Sanish well, t6/14; cum --
  • 25981, 1,461, XTO, Inga Federal 41X-29C, Haystack Butte, t5/14; cum --
  • 26174, 1,324, Hess, SC-5WX-152-99-0310H-1, Banks, t6/14; cum --
  • 27026, 1,034, Whiting, Bartleson 44-1-2TFH, Sanish, a single section, t5/14; cum --
OXY USA has cancelled four wells in Dunn County:
  • 26642, PNC, OXY USA, Raphael Stroh 3-24-13H-143-97, Fayette,
  • 26643, PNC, OXY USA, Raphael Stroh 4-24-13H-143-97, Fayette,
  • 26648, PNC, OXY USA, State 2-25-36H-143-97, Fayette,
  • 26649, PNC, OXY USA, State 3-25-36H-143-97, Fayette,

North Dakota Ethane Now Reaching Feedstock Facilities In Alberta, Canada -- June 13, 2014; Bakken Impacts International Economies

I'm still getting caught up with stories sent to me by readers some time ago. This one is a huge story. The WSJ is reporting, from June 13, 2014:
NOVA Chemicals Corporation announced that the first barrels of ethane supplied from natural gas associated with oil production from Bakken Shale are being utilized at its Joffre, Alberta complex.
The ethane was produced at Hess Corporation's Tioga, North Dakota plant and transported across the border into Alberta via the Vantage Pipeline.
The Vantage Pipeline connects to the Alberta Ethane Gathering System (AEGS) in Empress, Alberta, for the final journey to Joffre. 
The Vantage Pipeline has an initial design capacity of 40,000 bpd but is expandable to greater than 60,000 bpd, a volume that reflects more than 20% of Alberta's existing installed ethylene production capacity.
Ethane extracted from associated gas produced from Bakken Shale is expected to be a growing and stable feedstock supply source for the Alberta petrochemical industry.
"The introduction of Bakken Shale-based ethane into the feedstock diet at Joffre marks an important milestone in the diversification of our ethane sources for the region and our NOVA 2020 strategy to capitalize on North American demand," stated Todd Karran, NOVA Chemicals Acting CEO and CFO.
"The new supply sources we recently began to use, together with those currently in development, should enable us to run our existing polyethylene plants at full capacity, as well as support our PE1 Expansion project in Joffre and position us well for potential further growth."
We Need The Kurds To Save Iraq -- John Kerry

How bad are things in Iraq? Pretty badly if we're relying on the Kurds "to save Iraq."  Reuters is reporting:
U.S. Secretary of State John Kerry urged leaders of Iraq's autonomous Kurdish region on Tuesday to stand with Baghdad in the face of a Sunni insurgent onslaught that threatens to dismember the country.
Security forces fought Sunni armed factions for control of the country's biggest oil refinery on Tuesday and militants launched an attack on one of its largest air bases less than 100 km (60 miles) from the capital.
At least three story lines:
  • no matter how you spin it, things are going badly for the home team
  • SecState confirms that the home team is on its own; the US is not sending in any reserves or substitutions; there is no bench
  • SecState should have played professional basketball (see photograph at the linked article); everyone would have been better off
Actually there's a fourth story line, the most important story line. Did anyone else catch it? If not, re-read the very first phrase in the very first sentence in the very first paragraph. One word ... drum roll ... autonomous.

That says it all.

This will be John Kerry's quid pro quo to the short guy in the photograph: "If you save Iraq, I will personally bring to the floor of the UN a binding mandate to declare Kurdistan a sovereign nation. If you say "no," I will orate for two hours on global warming. Now, how about a game of one-on-one?"

Oasis Reports Two Bakken Completions In Montana (Richland (County)

The Fairfield Sun Times is reporting

Richland County, west of McKenzie County in North Dakota, Oasis reports two completions:
Freesia Federal 2658 13-11H, TD = 20,950 ft; 1,266 bopd;
Matador Federal 2658 43-7H, TD = 19,915 ft; 737 bopd;
These are both nice IPs for Montana completions.

Pipeline Story Out Of North Dakota -- June 24, 2014


 December 12, 2014: EPD cancels 1,200-mile pipeline from Stanley, ND, to Cushing, OK.

Original Post 

This is pretty cool. Reuters is reporting at Yahoo!Finance:
North Dakota intends to nearly double its pipeline capacity within two years as part of a plan to curb the wasteful flaring of natural gas in the bustling Bakken oil field, the state's governor said on Tuesday.
While oil production has more than tripled in the past decade to 1 million barrels of oil equivalent (boepd) per day, making North Dakota the fastest-growing economy in the United States, the pipeline network for transporting natural gas has lagged.
Aiming to change that, Governor Jack Dalrymple said the state wants pipeline capacity to increase to 1.4 million boepd by 2016, up from roughly 780,000 boepd currently.
"We will reduce flaring," the governor told executives, regulators and investors at a pipeline summit he hosted in the state's capital. "It's just that simple."
And who better to answer the call? EPD. Reuters over at Yahoo!Finance is also reporting:
Enterprise Products Partners LP said on Tuesday it would build a 1,200-mile pipeline from North Dakota's Bakken oil fields to Cushing, OK.
The pipeline, Enterprise's first in North Dakota, would help transport more of the state's crude oil to Cushing, a key gathering and distribution hub for oil produced around the United States.
The pipeline would originate in Stanley, North Dakota, and be 30 inches in diameter. It will have a daily capacity of 340,000 barrels of oil and should be online by the end of 2016, said Brent Secrest, vice president of onshore crude oil, pipelines and terminals for Enterprise.
Before pulling back slightly at the end of the day, EPD traded at a new 52-week high. It yields almost 4%; for long-term investors, it's return is much, much higher.

Disclaimer: this is not an investment site. Do not make any investment decision based on what you read here or what you think you may have read here. 

In "actual dollars and cents" a lot of shares lost quite a bit, but the overall market was down less than a percent.  

This Is Really Cool -- No Pun Intended -- A Two-Fer For The Kennedy Clan

Trading at new highs today: AXAS (again), BK (again), BP, CFN, CHK (hmmm?), DVN, EPD (nice), LNg, NOV, OKE, PAA, PSX. 

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.


For the Kennedy children and grandchildren who might never get to see snow again, here's another opportunity, and as a "two-fer": a skiing vacation in Australia. What's not to like?

News.com.au is reporting:
It's here. The megablizzard. Snowpocalypse now. This baby has been on the weather charts all week and it’s howling its way through the Australian Alps as you read this.
Experienced weather watchers are calling it the storm of the century. They’re saying it could snow on and off, but mostly on, for the next 10 days. And now the megablizzard has arrived.
The NSW resorts of Thredbo and Perisher received 40cm and 50cm respectively overnight. Hotham, Falls Creek and Mt Buller (pictured at the linked site) in Victoria all reported similar totals.
A spokesman for Thredbo confirmed to news.com.au that as of about 3:30 p.m. (local time), 80cm of snow had now fallen in the past 24 hours. “It’s an incredible amount for June, I’m not sure it’s a record, but it has set us up for the rest of the season,” he said.
By the way, 80 cm of snow = 31 inches of snow.

I can't make this stuff up. Ah, yes, global warming. Ya gotta love it.  And speaking of global warming, I gotta get on my bike and get home before it starts raining again.

Train Wreck

 Over at The Daily Signal, Sharyl Attkisson has an incredible, in-depth story on the "train wreck" some refer to as ObamaCare.

With a fist pump, President Obama hoped to have 26 million newly insured for healthcare. It turns out that the number is probably 4 million, and many of them will make not make monthly premium payments past the first six months. Of those, even fewer will renew if the premiums are higher as expected. And then, of course, there is "the big sting." The IRS computers have identified thousands of ObamaCare applications that do not match other federal data bases (a euphemism for "IRS Forms 1042"). The IRS will send a nice letter to these folks for an explanation.

This tells me all I need to know about how successful the program was in signing up paying customers:
Nobody from the White House responded to repeated requests for comment. A spokesman for CMS said there were no plans to release figures on paid enrollment, even though health policy analyst Robert Laszewski says the administration could provide the number in days or even hours if it wanted to.
The nice thing: folks living healthy life-styles who used to qualify for less expensive health insurance will not subsidize those who live unhealthy life-styles. If you fall into the former group, the next time you visit Wal-Mart, take a look around to see all the folks your health care premium dollars are subsidizing.  Even The Los Angeles Times is reporting that ObamaCare subsidies are on track to cost billions this year.

A streetcar known as Desire. A trainwreck known as Obamacare. 

Quick! Open-Book Test

In a Rigzone story yesterday, it was stated:
Estimates of how big Turkey's shale gas reserves are vary wildly.
One energy official said data from some international bodies suggested Turkey could have a massive 20 trillion cubic metres (cbm) of total reserves. Another industry expert said proven reserves so far stood at just 6-7 billion cbm.
Let's say, for argument's sake, Turkey has a "massive 20 trillion cubic metres of total natural reserves."

How much does the US have?

According to the article:
That compares with U.S. Energy Intelligence Administration's (EIA) assessment of 7,299 trillion cubic feet of estimated shale gas reserves in the United States, among the world's top producers of the commodity.
I have no idea why the writer switched from "cubic metres" to "cubic feet" in midstream -- yes, I know Turkey uses metric system and the US uses some other system -- but one would think ....

Anyway, I digress. The 7,299 trillion cubic feet converts to 207 trillion cubic meters

More On The Sempra Energy LNG Export Story

Earlier I had a post on the story that the US approved Sempra's LNG export project. Based on the number of headlines over at SRE / Yahoo!Finance, this is a pretty big deal. Since the approval was announced June 18, 2014, there are no less than a dozen headline articles. Of course, what made me look at it again, was today's posting by RBN Energy on natural gas exports to Mexico and a fairly long paragraph in that story on Sempra.

Most recently, Investor's Business Daily:
Sempra Energy, one of the largest natural gas transportation companies in the country, won approval last week for a liquefied natural gas (LNG) export facility along the Louisiana coast.
The Federal Energy Regulatory Commission voted unanimously for the Cameron LNG project, which is estimated to cost $9 billion to $10 billion. Some members of Congress were pushing hard for a quick approval so that natural gas could be shipped to Europe to help end Russia's energy dominance in the region.
On Thursday when the facility won approval, Sempra's stock jumped more than 1% on above-average volume.
Spectra plans to begin construction later this year and to begin liquefying natural gas in late 2017, becoming fully operational in 2018.
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. 
By the way, a thought in passing: Warren Buffett, back in 2013, I believe, talked about the big mistake he made buying COP back in 2008. That was so out of character: COP spun off PSX, perhaps one of the best investment stories in the past couple of years, and COP, itself, hit an all-time high yesterday. Warren Buffett sold his COP at a loss I believe, and did so prematurely, exchanging COP for XOM. This is so contrary to Warren Buffett's manatra of buying good companies for the long term. Idle chatter. Much more can be found by googling the subject.

Back to Sempra. 

The Federal Energy Regulatory Commission voted unanimously today to let Sempra’s Cameron LNG project in Louisiana move forward. The company said it plans to start building the estimated $9 billion to $10 billion terminal later this year.
“This is a landmark project that will bring economic prosperity and create thousands of jobs in Louisiana,” Sempra Chairman and Chief Executive Officer Debra Reed said in a statement. “Today’s approval is another important step in delivering natural gas to America’s trading partners abroad.”
Democrats and Republicans in Congress have pushed to expedite approval of the export terminals to send the fuel to Europe and reduce Russia’s energy dominance after it annexed Ukraine’s Crimea region. The Republican-led House Energy and Commerce Committee in April approved and sent the full House a bill that would speed Energy Department approval of LNG export applications.
Cameron “will position America as an energy superpower,” Senate Energy and Natural Resources Committee Chairman Mary Landrieu, a Louisiana Democrat, said today in a statement. 
And, of course, it might just save Landrieu her job. But I thought the US was already an energy superpower.

Tuesday, June 24, 2014; Bullish Natural Gas Story With Regard To Mexico

Active rigs:

Active Rigs190185210170122

RBN Energy: another great story and one that should make natural gas bulls happy -- the Mexican market for US natural gas will remain robust.
According to Mexico’s Secretaria de Energia (SENER), higher gas demand from Mexico's electric power and industrial sectors and increased US gas production caused gas exports to Mexico to double from 2009 to 2013 (when they averaged 1.8 Bcf/d), and gas exports are seen doubling again—to 3.8 Bcf/d in 2018.

More than 70% of the projected growth in Mexican gas demand will come from the electric power sector; that sector’s gas consumption is seen growing from 2.7 Bcf/d in 2012 to 6.1 Bcf/d in 2027, by which time gas-fired units and renewables are expected to dominate Mexican power generation.

The expectation that, despite its hopes of increasing domestic gas production, Mexico will import increasing amounts of US gas is made evident by the recently announced plan by Comision Federal de Electricidad (CFE) to develop five US-to-Mexico gas pipeline projects by the end of 2017 at a cost of more than $2.2 billion. 

US gas exports to Mexico also could be boosted by the possible development of LNG export capability along Mexico’s West Coast. Sempra LNG developed and since 2008 has operated Energia Costa Azul (ECA), an LNG terminal on the Pacific Ocean near Ensenada, Baja California that can import and process the LNG equivalent of 1 Bcf/d. Now Sempra LNG is not only exploring the possibility of adding liquefaction capability at ECA—that is, enabling ECA (the only LNG import terminal on the West Coast--to export LNG—it may develop a greenfield LNG liquefaction and export terminal on the eastern side of the Gulf of California. Sempra is already developing the Cameron LNG export terminal in Louisiana. Like Cameron, the Mexican LNG export facilities would source their gas from US shale plays.
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

The Wall Street Journal

I guess this is why the new GOP House leader wants to do away with the Ex-Im Bank: rampant fraud.

A must-read: how Target lost its way under ousted CEO.

Home sales higher in May -- previously reported; an important story for the economy.

"US Supreme Court Backs Most EPA Carbon Controls." But with limits. Which opens the doors for continued litigation.

Two women crack top 10 in CFO pay: Oracle's Safra Catz, #1 with a package valued at almost $45 million; Accenture's Pamela Craig, #8.

The Los Angeles Times

The most interesting thing about The Times today are the stories not seen in the front section on-line: not one mention of the uncivil war in Iraq or the 7.9 magnitude earthquake in Alaska. Earthquakes always get the attention of Angelinos.  The uncivil war in Iraq is particularly interesting today in that the fight for the refinery still rages -- sort of Iraq's "LA freeway SUV chase."

A Note to the Granddaughters

I htought the story was about lawyers. I was wrong. The Wall Street Journal is reporting that, despite global warming apparently, the great white shark population is surging. With global warming and acidification of the ocean, this was not supposed to happen. But it is.

"After decades of decline, the numbers of great white sharks are spiking according to a new study from the National Oceanic and Atmospheric Administration."