Saturday, September 20, 2014

Correction: Hamm's Beer Is Still Around -- September 20, 2014

A reader corrected me. The other day I mentioned that Hamm's beer was no longer around. How wrong I was: Hamm's is still around (link:

We have a store down the street that features a huge beer selection. First thing I'm going to do tomorrow (if they are open on a Sunday in Texas, in a previously dry county) or Monday is stop by the store and see if they have Hamm's. This should be fun.

A huge "thank you" to the reader for catching my error. Wow, just one more reason why I love blogging.

Idle Chatter On Costs Of Completed Wells In The Bakken -- September 20, 2014

About a week or so ago, a reader sent me an e-mail regarding the high cost of a CLR well in the Bakken. I replied at the time:
It probably was an expensive well. The operators all say they are bringing prices of completed wells down, to the neighborhood of $7 - $8 million but I don't put much faith in those estimates. The biggest problem is figuring out what is being paid for; too many things that can be hidden in numbers like that. I think we will continue to  see "cost containment" in the corporate presentations, but with a) huge proppant volume; and, b) slickwater adding 35% to the average EUR in the Basin, I think the emphasis is going to be on raising EURs this year and next (despite the cost) and then get back to trying to contain costs. Operators will see savings in pad drilling and leasing costs, offsetting completing/fracking costs.
I wrote that on September 18, 2014. Tonight, while reviewing the most recent CLR presentation, my thoughts were confirmed. Slide #50 of the presentation shows the cost of completed CLR wells. Between 2012 and early 2014, operators were talking about decreasing the cost of completed wells. CLR was reporting the following:
  • 2012: $9.2 million
  • 2013: $8.0 million
  • 1H14: $7.8 million
  • But then, starting earlier this year, the price of completed CLR wells increased from $7.8 million to $10 million, due to higher proppant volumes and slickwater. 
It looks like we're back to $10 million wells. Remember, these are long laterals. I believe wells were costing in the neighborhood of $4 - $6 million for short laterals when the boom first began in the Bakken. In other words, the costs of completed wells is still in the same ballpark as when the boom began, but the wells are much, much better, and the time from spud to first production has decreased significantly.

Whiting has differentiated itself in the Bakken as the "low cost operator' in its corporate presentations. It will be interesting to see if that continues to be a bullet in their presentations once they acquire KOG, with their very expensive wells.

Slides 20 - 21; Updated Bakken OOIP And Estimated Recovery; CLR Analyst Day Presentation

CLR, Investor and Analyst Day, September, 2014
Updated Bakken OOIP and Estimated Recovery
Slides 20 - 21

Did CLR change the size of the Bakken Pool reservoir. At least two earlier CLR presentations suggested a trillion-bbl reservoir.
Slide 20: CLR updated estimates
  • 413 - 643 billion bbls OOIP (P50 - P10)
  • estimated recovery factor: ~ 15%
  • potentially recoverable reserves: 62 - 96 bbls of oil (note -- not boe, but "bo") 
Slide 21: Potential undrilled net wells
  • 2012, analyst day: 9,200 wells
  • 2014, analyst day: 11,800 wells of 600K+ boe
  • 8+ years of 600K+ boe wells

Slides 13 - 17, The Lower Three Forks; CLR, Investor And Analyst Day, September, 2014

CLR, Investor and Analyst Day, September, 2014
Middle Bakken, TF1, and Lower TF (TF2, TF3, TF4)
Slides 13 - 17

Slide 13: middle Bakken and TF1
  • 2003: 0 Bakken wells; 0 TF wells
  • 2014: 6,808 Bakken wells; 2,495 TF wells
  • OOIP and type curve EUR models support up to 8 wells per zone
Slide 14: lower Three Forks (LTF) -- TF2, TF3, TF4
  • 73 wells completed in LTF to date; 59% are CLR-operated
  • as of September, 2014: TF2 - 53 wells; TF3 - 18 wells; TF4 - 2 wells
  • Slide 15: 603K boe model for LTF
  • in the sweet spot of the Bakken; along with the middle Bakken
  • all of Williams County, northeast McKenzie, west Mountrail, northwest Dunn
Slide 16: defining the LTF fairways -- graphic
Slide 17: current Bakken Petroleum System
  • inner area: Watford City, Stockyard Creek area: MB, TF1, TF2, TF3; maximum overpressure + structure
  • near inner area: Williams County, sliver of McKenzie; much unexplored northwest Dunn: MB, TF1, TF2; maximum overpressure
  • outer fairway of North Dakota:  all of Divide County, extends into eastern Montana, all of McKenzie, all of Dunn; transitional area
  • eastern Montana fairway: current Montana play; MB or TF1; more normally pressured area

Recovery Rate Of Original Oil In Place Through Primary Production In The Bakken, A Poll -- September 20, 2014

I'm going to do a longer post on this subject in a few days. Hopefully my patience will hold. Before posting the "story," I am curious what readers think.

So here's the poll, based on your knowledge of the Bakken, what do you think is the recovery rate of original oil in place through primary production from the Bakken?
  • 1%
  • 3%
  • 5%
  • 8%
  • 10%
  • 15%
  • 20%

Reason #435 Why I Love To Blog -- September 20, 2014; GE, Dresser-Rand, and Siemens


November 19, 2017: Minnesota pushes back on wind; GE, Siemens, and Vestas all doing poorly, due to wind energy; and US considering ending wind subsidies in new tax bill. 

December 12, 2015: new GE facility north of Williston, Oppidan, developer

September 23, 2014: Siemens lost a decade to GE by focusing on renewable energy in Germany.

September 22, 2014: much more detail regarding the Siemens-Dresser-Rand deal over at Rigzone:
Germany's Siemens has agreed to buy U.S. oilfield equipment maker Dresser-Rand for $7.6 billion in cash, aiming to catch up with arch-rival General Electric in a booming U.S. shale gas market.
The acquisition, which ranks among the biggest in the history of the German industrial group, will strengthen Siemens' position in the United States, its weakest region, and focus the group more tightly on its industrial customers.
Siemens embarked on a corporate overhaul in May dubbed "Vision 2020", seeking to make up ground on more profitable competitors such as Switzerland's ABB as well as U.S-based General Electric (GE), while reducing its exposure to more cyclical consumer businesses where it has had limited success.
A booming U.S. shale gas market has driven a surge in investment by energy companies, creating demand for the compressors and turbines made by companies such as Dresser-Rand.
Annual capital expenditure on oil, gas and coal has more than doubled in real terms since 2000 and surpassed $950 billion in 2013, according to the International Energy Agency.
The Dresser-Rand deal will eclipse Siemens' acquisitions of recent years. It bought Dade Behring for $7 billion in 2007 under Kaeser's predecessor Peter Loescher - now the chairman of Sulzer - in a deal that was widely criticised as overpriced.
Siemens filled another gap in its energy equipment portfolio earlier this year, buying small gas-turbine assets from Rolls-Royce for 950 million euros. CEO Kaeser indicated at the time that expansion in the United States was next on the agenda.  
September 21, 2014: It looks like GE lost this one. It looks like Siemens will buy Dresser-Rand for $7.6 billion an an all-cash deal. Regardless of who bought Dresser-Rand, I saw this as a huge deal for the fossil fuel industry. I always equated Siemens with wind energy -- looks like they've seen the light also: a) Europe is a drag on their profits (so they are coming to the US); b) the future is in fossil fuel, not renewables.

September 21, 2014: wow, that's incredible. I have taken photographs (and a video) of the very, very small GE facility in Williston located about a block east of the "Million Dollar Way" (2 & 85) north of Williston. This is the link, again, of the new GE facility proposed for Williston (see comments below): That really is quite incredible.
Original Post

I've talked about GE relative to fossil fuel vs renewable energy in the past, mostly as sarcasm with regard to the GE CEO being the president's first economic adviser. A reader sent me the link to this story which continues the theme. Investor's Business Daily is reporting:
GE reportedly held talks with Dresser-Rand for a possible takeover and could spark another bidding war with European rival Siemens.
The U.S. conglomerate hasn't made an official offer for the the oil and gas equipment maker, according to the Financial Times, but is weighing a bid that would value the company at over $80 per share.
GE shares were flat on the stock market in after hours trading Friday but Dresser-Rand shares jumped 3.3% to 82.55 after closing up 9%.
GE has been shedding media and financial assets to focus on expanding its industrial segments, including its oil and gas business. Last year, it completed a $3.3 billion deal for oilfield pump maker Lufkin Industries.
Earlier Friday, the Financial Times and Bloomberg said Siemens was considering a bid for Dresser-Rand, with sources telling Bloomberg the deal was valued at $85 per share.
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. I post these stories to help put the Bakken into perspective.