Friday, July 18, 2014

Twelve (12) New Permits, The Williston Basin, North Dakota; July 18, 2014

Active rigs:

Active Rigs195189208180132

Twelve (12) new permits --
  • Operators: Hess (7), KOG (4), Triangle, 
  • Fields: Alkali Creek (Mountrail), Blue Buttes (McKenzie), Truax (Williams), Rawson (McKenzie)
  • Comments:
Wells coming off confidential list today were posted earlier; see sidebar at the right.

Two (2) producing wells completed:
  • 24507, 679, CLR, Norfolk 5-1H, North Tobacco Garden, t7/14; cum --
  • 25753, 1,093, Statoil, Margaret 5-8 3TFH-R, Spring Creek, t6/14; cum --
All But Eight (8) States At Risk For Earthquakes
All But Eight (8) States Ban Fracking

FoxNews is reporting:
A new study by the U.S. geological society suggests 42 states have a reasonable chance of experiencing damaging ground shaking from an earthquake in the next 50 years.
The 8 states that did not have significant hazard levels are Florida, Iowa, Kansas, Louisiana, Michigan, Minnesota, North Dakota and Wisconsin.
The 16 states at highest risk are Alaska, Arkansas, California, Hawaii, Idaho, Illinois, Kentucky, Missouri, Montana, Nevada, Oregon, South Carolina, Tennessee, Utah, Washington and Wyoming.

Another Inversion

Reuters is reporting:
U.S. drugmaker AbbVie Inc bought Dublin-based Shire Plc on Friday in a 32 billion pound ($54.7 billion) deal that will allow it to slash its tax bill by relocating to Britain.
The London-listed company, which makes expensive medicines to treat rare diseases, fought off four earlier bids from AbbVie until the U.S. firm raised its price to 52.48 pounds per share - made up of 24.44 pounds in cash and 0.8960 new AbbVie shares.
Chicago-based AbbVie is buying Shire to cut both its U.S. tax bill and its reliance on arthritis drug Humira, the world's top selling medicine which loses U.S. patent protection in 2016.
AbbVie, which generates nearly 60 percent of its revenue from Humira, had until Friday to announce a firm offer for Shire, extend the deadline or walk away under UK takeover rules.
It now plans to create a company listed in New York, incorporated in Jersey, the Channel Islands, and tax-domiciled in Britain, which will pay an effective tax of about 13 percent by 2016, sharply lower than its current rate of about 22 percent, making the deal one of the biggest driven by the tactic known as tax inversion.
Right, wrong, or indifferent, I find it fascinating that the guys with the green eye shades thought of this.

Global Investment In Clean Energy Fell 12 Percent In 2013; The Bakken Perspective -- July, 2014


Later, 2:20 p.m. PDT: it appears EU is getting prepared for Russia to turn off their natural gas in January (2015). The EU does not need to be concerned; they have plenty of wind/solar energy, and I assume France will go back into Libya. If one does a google search one will be reminded that back in March (2014) "everyone" was talking about how the Ukraine crisis would affect Russia's natural gas exports to Europe this summer and next winter. Yesterday, in the Budapest Times, it is clear that increased sanctions on Russia (following the Malaysia Airlines kill) could truly imperil some eastern European countries this winter. Regardless of where one stands on any of these issues, this is a very good article bringing the situation up to date (though not mentioning Malaysian Airlines, the article was probably written before the kill).

Later, 1:13 p.m. PDT: in the original post below I mentioned that Enbridge and Warren Buffett appear to know how to make money in renewable energy (wind/solar). I really don't follow wind/solar specifics all that closely, so it was kind of interesting to note that the ONLY Bakken "company" to hit a new high today was Enbridge (ENB). This week ENB dedicated a new wind farm. The press release:
EDF EN Canada Inc, a subsidiary of EDF Energies Nouvelles, and Enbridge Inc. dedicated the 300 megawatt (MW) Blackspring Ridge Wind Project today. Located in Vulcan County, Alberta, the project is the largest investment in wind energy in Western Canada.
I track Enbridge here.
Original Post

Exxon and BP had it right (as in "correct") from the beginning.

There are an incredible number of opportunities for investors to make money -- ah, to become wealthy -- investing in "green" energy. Enbridge and Warren Buffett have found ways to make money on wind/solar.

But "green" energy (wind, solar) will never come close to meeting global energy requirements. Ultimately it will be nuclear energy, but that may not be for a century or so.

Financial Times is reporting:
The so-called “green jobs” boom in renewable energy has not lived up to the hype. As government policy flip-flops in favour of one form of energy to another – one minute offshore wind, the next minute, fracking – investors are losing faith. 
In March, SSE, the big energy company, announced a freeze to its bills until 2016, at the expense of 500 jobs and its involvement with several offshore wind parks. In the past year too, the second phase of the world’s largest offshore wind farm, the London Array, was scrapped; energy group RWE ditched its Atlantic Array and Scottish Power Renewables dropped plans for an Argyll Array.
Global investment in clean energy fell 12 per cent in 2013 according to Bloomberg. [Comment: rule of thumb -- for every MW of "clean energy," the fossil fuel companies need to add one-half MW of fossil fuel energy to back up solar/wind; there is, as yet, no economic way to store electricity on a grand scale. For that reason, the fossil fuel companies are less concerned about renewable energy than they let on. The real concern: the grid. It ain't gonna hold. Germany is learning that lesson the hard way.]
So are we watching the nails go in the coffin of an unaffordable technology? And has the green jobs bubble burst along with it?
Before answering those questions:
The UK government’s Energy Act 2013 and Electricity Market Reform were intended to bring some calm. But the early response from the market has not been positive.
Dan Lewis, energy policy adviser to the Institute of Directors, says: “It’s quite hard to go to the market and say ‘I need to raise this much cash for these types of projects – oh and by the way, we’re seeing subsidies cut across Europe, so we don’t know what it is going to cost’.”
Back to the question: are we watching the nails go in the coffin of an unaffordable technology (wind and solar)? Probably not (hope springs eternal):
Even while investors come to terms with yet more policy change, it is not time for fossil fuels to dance on the grave of renewables just yet. [Comment: the operative phrase -- "not yet."]
Neil Robertson, chief executive of energy sector skills body, EU Skills, argues that renewable energy is just not “scaling up as fast” as once expected.
“When you look at it in the cold light of day, we’ve still got an ambitious agenda here.” 
The UK has a legal obligation to meet 15 per cent of its energy demand from renewable sources by 2020, up from only 4.1 per cent in 2012. [Comment: and if they get there, the UK will intentionally and severely cripple their economy.]
According to EU Skills, there are 34,500 people now working in wind, wave and tidal energy; by 2023 the group expects this to increase to 52,540, even accounting for the recent “marked scaling back of ambition.” Meanwhile, the UK solar sector is thought to employ a further 15,620 people.
I guess this was a press release from "EU Skills."

So, all of the EU and UK: 70,000 people working in renewable energy over 30 - 50 years of development with all kinds of tax credits and incentives for the industry.

The "male surge" in the Bakken in five years: up 50,000 in one small area in one small state in one country despite a war on fossil energy.

Comment: I found it interesting how the key takeaway in that article -- global investment in clean energy fell 12% in 2013 -- was glossed over. It was a throwaway line. A long, long article, and minimal discussion of what it really means when global investment in clean energy falls 12 percent. Considering all the ink spilled on clean energy, all the Algore PowerPoint presentations, all the hand-wringing over global warming, all the tax credits and incentives, and still: global investment fell 12 percent. Imagine if your net worth, or your salary, or your portfolio fell 12 percent in one year. It wouldn't be a pleasant sight.

Terrifying (Their Word, Not Mine)

Even as nations cut back on investments in green energy, the oil and gas industry is growing so fast that there is a dire need for skilled labor in that sector. The Financial Times is reporting that shortages of skilled labor are "terrifying" (their word, not mine):
But with seasoned oil workers so difficult to come by these days, her job is becoming harder. “People are inundated with offers,” she says.
The skills shortage in the oil patch is frequently cited as one of the biggest challenges facing the industry. In what has been called the “Great Crew Change”, the older generation of geoscientists and petroleum engineers who were hired before the sweeping lay-offs of the 1980s are now approaching retirement age and will soon leave the world of work. But it is still unclear who will replace them. The pool of potential talent is too small, and companies are scrambling to cope with the crunch.
A 2011 survey by Schlumberger Business Consulting (SBC) highlights the problem. It said more than 22,000 senior “petrotechnical professionals” would quit the industry by 2015 – equating to a net loss of more than 5,500 people. Recruitment of new graduates would offset this reduction in the total number of oil workers, but “will not fill the experience gap”, it noted. SBC’s 2012 survey delivers an even starker message: by 2016, it said, the shortage of experienced oil industry professionals will reach 20 per cent of the talent pool.

Comment And Commentary -- July 18, 2014; First Time In Decades, One Step Closer To Drilling Off-Shore

It appears President Obama found the "all the above energy list" hanging on the refrigerator, next to a "selfie" he took of himself and Michelle. Bloomberg is reporting that the POTUS is taking steps to drill off-shore:
The Obama administration took a step toward allowing oil and gas drilling off seven Atlantic Coast states for the first time in decades, establishing guidelines for seismic testing that would gauge offshore reserves.
The decision today doesn’t authorize the tests, done by ships towing guns that blast high intensity sound waves into the water. The Interior Department will consider applications for testing in light of safety standards to mitigate risks to ocean life, the head of the agency’s Bureau of Ocean Energy Management said.
Environmental groups criticized the action, saying tests would pose serious risks to species including sea turtles and the right whale and could lead to drilling in a region that has been off-limits to oil exploration since the early 1980s.

I guess this is how far "we've" come. A commercial airliner carrying 298 people can be shot down with a missile and:
  • it's called a tragedy by The Wall Street Journal 
  • the POTUS notes the event in an opening sentence at a fund-raising event and then begins his speech with the already-written jokes
  • the financial markets swoon for 8 hours, and then move to new highs
  • oil hardly moves; in fact, one day later, oil declines in value
  • headline over at CNN one day later: "blown out of the sky"
  • headline over at FOX News one day later: "we just shot down a plane" -- Russian separatists
  • headline over at NY Times: jetliner "explodes" over the Ukraine ("explodes"?)
  • headline over at LA Times: Malaysia defends flight path
  • headline over at WSJ: US Says missile downed Malaysia Airlines plane over Ukraine
  • banner over at Drudge Report: Russia denies
  • top story over at Yahoo!Finance: Malaysia Airlines faces a difficult future 
  • Free Beacon: POTUS fundraises; Putin runs amok (it's actually worth reading)(the writer describes the "emperor with no clothes")(Putin is "old school"; POTUS is "no school")
A third of the Malaysian travelers were AIDS researchers.
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. 

Books: incredible offer -- 600,000 books (and growing library); unlimited; $9.99/month Inc on Friday unveiled a subscription service that allows customers to read as much as they choose from its library of more than 600,000 e-books.
Subscribers to the Kindle Unlimited service, which costs $9.99 per month, can read the e-books on Amazon's Kindle reader or on any device that supports the Kindle app.
I missed this in all the other news yesterday: the Dow finished higher yesterday, setting yet another record. CNBC has an article on the "stealth" correction -- I won't be reading that article. Another story from Yahoo!Finance:
The Fed's Beige Book showed a pickup in economic activity overall and a stronger labor market. Manufacturing, consumer spending and tourism were the strongest sectors, while New York, Chicago, Minneapolis, Dallas and San Francisco regions were the strongest regions.
Meanwhile, Federal Reserve Chair Janet Yellen was back on Capitol Hill today for her second day of testimony to Congress. Yellen didn’t rock the boat when it came to equity valuations, like she did on Tuesday. However, she defended the central bank's independence when grilled by Republican lawmakers about legislation to make the Fed more transparent.
Larry Kudlow On ObamaNation, The Economy, and Malaysian Airlines

When Reagan went to Reykjavik to meet with Mikhail Gorbachev, he believed the resurgent American economy would hammer the nails on the coffin of Soviet communism. And he explained to Gorbachev that if the Soviets didn't come to the negotiating table with nuclear weapons, the U.S. would out-produce them on nukes and with technological superiority. Similarly, Reagan would not give up his vision for strategic missile defense.

We know that the Malaysian plane was brought down by a ground-to-air missile fired from Russian-made SA-11 weapons run by pro-Russian Ukranian rebel terrorists. We also know that Russia is fighting a proxy war with the U.S. in Ukraine, and that Russian special forces are leading the terrorist movement in Ukraine. We can add to this the proxy war fought by Russia in the Middle East, with its main ally Iran, and the fact that Russia is engaging in state-sponsored terrorism. 

Whether President Obama understands all this, I don't know. His policies have been alternatively passive (Libya, Egypt), incoherent (Russian reset), and feckless (Syria). But the fact that the current U.S. economic recovery is the slowest in post-WWII history — spanning 70 years — is surely a key factor in Vladimir Putin's adventurism.
At 2.1 percent average real growth [in ObamaNation], the U.S. is lagging far behind the 4.1 percent average recovery pace of the post-war business cycles. The Reagan recovery averaged 5 percent annual growth at the same point as the Obama recovery
This brings us back to Reagan's link. Putin may recognize that Russia's economy is a thin deck of cards. But he surely doesn't fear the weak American economic position. Ditto for the broken economic dictatorships in North Korea, Iran, and Venezuela, and the rising economic dictatorship in China. They don't fear us. 
Yesterday I talked about "disconnects." This is another disconnect: US growth is anemic (as Kudlow notes above) but the stock market is setting new records (highs). Having said that, I'm actually more optimistic than a number of pundits; I think there are some "things" going on just below the surface that make me very optimistic. 

First Time Ever: Oil Beats Ag In North Dakota; The Boom Is Here To Stay: North Dakota Bakken Oil Production To Last At Least Five Generations -- ND Officials, July 18, 2014; The Bakken Pool -- 100 Billion Bbls Recoverable Oil?

Warning: I often make simple arithmetic errors. I am inappropriately exuberant about the Bakken. I have no formal training, education, or experience in the oil and gas industry. I often misinterpret what I read. On the blog I am serious about the Bakken and our granddaughters. Everything else is for entertainment purposes only, and most often cynical, sarcastic, tongue-in-cheek, over-the-top, and probably not worth reading. Comments are heavily moderated. I generally post only comments that pertain to the Bakken and add value. For every five comments I get, I generally post one. Have a great weekend everyone. Oh, this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here. 


July 20, 2014: one of several graphics posted some time ago. With the exception of the one small orange-infilled circle, all the rest of the estimates in the graphic below are of OOIP:

The largest circle is from the Leigh Price paper written back in 1999. The Harold Hamm / Continental Resources estimate, made in 2012 or 2013, suggested 903 billion bbls OOIP, more than twice Leigh Price's average of 413 bbls OOIP. Estimates of recovery conservatively run between 3 and 8 percent, though there are some reputable estimates of significantly more.  If I can, I will try to find the graphic comparing the Bakken with the rest of the tight-oil basins in North America.

The orange-infilled circle is the middle Bakken only (3.65 billion bbls recoverable, 2008 USGS estimate). With the upper Three Forks (TF1), the USGS upped their estimate to 7.4 billion bbls recoverable oil in 2010. Following that estimate, three more "sub-formations or benches" of the Three Forks were being targeted (TF2, TF3, and TF4). However, at the moment TF4 does not appear particularly promising.

Original Post 

Back on January 21, 2011, I wrote:
How many years do the analysts now say that it will take to fully exhaust the Bakken? It is now generally accepted by academic analysts that active drilling will continue until about 2030 and production will peak sometime after than and then decline until about 2100. How many years is it until 2100? 90 years.
That was a great post; one of my better posts. Mostly because I did not get off topic. Smile.


Today, two and a half years later, that prognostication has gone mainstream. Today's headline in The Dickinson Press: Bright Future: North Dakota officials project Bakken production through 2100 and leads with:
The boom is here to stay.
The North Dakota Industrial Commission projects that oil development in the Bakken will last at least five generations — with production lasting through 2100 and beyond.
Through 2100 and beyond. At least five generations. At least. [Memo to self: send e-mail note to Jane Nielson and a separate note to Snopes.]

It was also said that a 1% increase in production equates to another billion bbls. One percent of what = one billion bbls? Answer: 100 billion bbls. I believe we were once told that recoverable oil was about 3 billion bbls; then 7 billion bbls. I think the wildest estimates a couple of years ago was 24 billion bbls. Somewhere I've seen 45 billion bbls. But unless I'm misinterpreting what I read, 1% of 100 billion bbls = 1 billion bbls.

I think estimates in the Permian are also way underestimated, but the Sprayberry/Wolfcamp in the Permian is said to be the biggest oil field in the US at 50 billion bbls recoverable.  At that link, the graph says the estimate of recoverable oil from the Bakken is a meager 12.5 billion bbls. From October 14, 2013:

If the Bakken is really 100 billion bbls or almost 10 times the 2013 estimate above, and the Sprayberry/Wolfcamp is similarly underestimated, that puts the Permian at about 500 billion bbls recoverable.

Got oil?

Peak oil, anyone?

From The Williston Wire

North Dakota oil and gas industry surpasses agricultural industry in economic metrics. For the first time in North Dakota's history, agriculture is not the largest engine in the state's economy. That's what a statistical study by the U.S. Bureau of Economic Analysis found after examining economic trends in the state from 2011 through 2013. It's a startling development in that it's historic. But anyone who has been paying attention to the oil and gas boom in the western counties knew the day was coming when mining (oil, natural gas and coal) would knock off King Ag.

Two months in a row, ND oil production exceeds one million bopd; expects further surge before the summer is over.

Ground breaking for Watford City's new high school slated for July 21, 2014.