Magnum Hunter To Leave North Dakota; Reminder: Hearing Docket Agenda Should Be Released By Monday -- September 26, 2014

Magnum Hunter is looking to divest its Bakken assets in North Dakota -- Seeking Alpha:

The largest asset of the three is Magnum Hunter's interest in the properties in the Western part of Divide County operated by Baytex Energy. As a reminder, Baytex had an open data room and sold its assets to SM Energy. SM agreed to pay $330 million for Baytex's approximately 61,000 net acres and 3,200 boe/d of net production (91% oil, 1,500 Btu rich gas).

Magnum Hunter is also attempting to sell some other peripheral properties in North Dakota that likely include non-operated interests in properties operated by Crescent Point and SM Energy. In my understanding, the Divide County assets expected to be divested by year-end are producing ~1,100 boe/d net. Based on this metric and using the valuation in Baytex's sale to SM Energy, the $100 million divestiture proceeds should be achievable.

Following the anticipated divestitures, Magnum Hunter will still have a significant, albeit mostly non-operated, position in the Bakken. Magnum Hunter currently receives net production of almost 3,000 boe/d from its interests in properties operated by Samson (private) and another ~200 boe/d from properties operated by Continental Resources.

Magnum Hunter-operated assets (Williston Hunter) are relatively small and currently produce ~350-400 boe/d.

Magnum Hunter values its interest in Samson-operated properties in the $300-$400 million range. Based on the slide at the Seeking Alpha link, the assets are firmly designated for sale, but Magnum Hunter does not appear to be far along in the process.

It's hard to sort out the value per acre, but one method would suggest about $5,000/acre in Divide County, some of it already producing.

The divestitures are needed by Magnum Hunter to raise cash to expedite development of its natural gas assets in the Marcellus and Utica in the east:

The spectacular success of Magnum Hunter's dry gas Utica delineation well in West Virginia brings a new meaning to the company's decision to narrow its strategic focus to the Appalachia region. With ~80,000 net acres prospective for the Marcellus and ~118,000 net acres prospective for the Utica/Point Pleasant, Magnum Hunter has critical mass and sufficient asset platform to build upon.

Week 39: September 21, 2014 -- September 27, 2014

Special: CLR corporate presentation
The Hawkinson pad
Update on density pilot projects
Recovery rate of 20%?
Updated OOIP and recovery rate
The lower Three Forks

Operations
Reader provides fascinating update of Hess EN-Freda and EN-Leo wells
How soon does one frack a well after reaching total depth
Costs of a completing a well in the Bakken

Fracking
Sand vs ceramic: (c)rude awakening
Fracking extends all of 300' from the wellbore

Flaring
New rules go into effect October 1, 2014
ONEOK announces another natural gas processing plant 

Pipeline
Tallgrass Energy to expand crude oil pipeline system
Enbridge Sandpiper delayed; could be dead

Bakken economy
Starbucks in Williston
Tractor Supply to open in Dickinson; also here
Williston Wal-Mart: 10 trailers/day
Richardton, ND, approves sand fracking off-loading terminal
Update on propane terminal at Hannaford, ND

Bakken 101
What "DRL" status means  

Miscellaneous
Update/overview of ONEOK
Rigzone takes an updated look at the Bakken
Technology could boost tight oil recovery by 25% -- Wood McKenzie
Full-field development
Field development: Vern Whitten's photography
Field development: CLR's Jersey pad example

Investment
Hess announces plans for a Bakken master limited partnership

Gasoline Prices Drifting Downward -- September 26, 2014

The AP is reporting much of the country is seeing gasoline priced below $3/gallon:

The price of a gallon of gasoline may soon start with a "2'' across much the country.

Gasoline prices typically decline in autumn, and this year they are being pulled even lower by falling global oil prices. By the end of the year, up to 30 states could have an average gasoline price of less than $3 a gallon.

The average in Springfield, Missouri, is already below $3, according to Tom Kloza, chief oil analyst at the Oil Price Information Service and GasBuddy.com. Several other cities are on the brink.

In the Grapevine, TX, area, the price of the least expensive gasoline is about $3.19. I wouldn't be surprised to see $2.99/gallon before Halloween.

The EIA provides inflation-adjusted gasoline prices here. 

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A Note to the Granddaughters

Perhaps one of the best cross-country trips I have ever taken was the trip we took this past summer with both granddaughters from Dallas, TX, to Los Angeles, CA, with a two-day stop in the Grand Canyon area.

I picked up two books on Mary Colter. I never would have expected that reading about Mary Colter would help me appreciate a scene in Inside Llewyn Davis that takes place in a Fred Harvey restaurant in Chicago.

But I digress. The other day a book by Judith Nies, Unreal City: Las Vegas, Black Mesa, and The Fate of the West, c. 2014, was featured at the local library. The inside cover has a map of the Grand Canyon area to include the Black Mesa Coal Field. Having just spent two wonderful days in the  Grand Canyon, I was curious to know more of the history.

I have only read the introduction and the first two chapters. I don't know where the book will take me, but it is fascinating reading. With the Navajo Generating Station recently in the news, the book is incredibly timely and topical.

The author begins the story with a fund-raising event in Phoenix, back in 1982, with Robert Redford (the actor), Arizona's governor Bruce Babbitt, Senator Barry Goldwater, representatives of the Hopi Nation, and executives of the five companies that owned Peabody Coal through a private holding company (Peabody Holding Company): Newmont Mining, Boeing Corporation, Equitable Life Insurance Company of New York, Bechtel, and Fluor Engineering.

Yes, the book likes quite fascinating.

Ten (10) New Permits -- North Dakota; Dickinson Airport Update; Oil Closes Higher Last Day Of The Week -- September 26, 2014

The Dickinson Press is reporting more federal (free) money for Bakken airports:

Dickinson’s only airport is too small and handles too many passengers, those who operate the facility said Thursday.

However, updates to the Dickinson Theodore Roosevelt Regional Airport could cost up to $150 million, according to the facility’s master plan, and North Dakota and local leaders said it needs to plan for more unexpected growth.

The biggest hurdle will be determining the fund shares between federal, state and local governments. The FAA has awarded the authority with more than $1.9 million, which Hoeven advocated for on the airport’s behalf.

Construction is not expected to begin until 2017, though that is “an aggressive goal,” Schauer said. Updates would take five to six years.

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Crude Oil Prices

Crude oil climbed higher despite a stronger dollar index. The energy component gained strength on this morning's Q2 GDP data that showed the best quarterly increase in GDP since 4Q2011. Prices rose as high as $93.86 and settled 1.1% higher. Today's advance brought gains for the week to 2.2%.

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Canadian Natl Rail: Northern Frac Proppants II the latest frac-sand producer to open new plant on CN's Wisconsin rail network; CN is on track to generate 2014 frac-sand revs of CAD300 mln - a year ahead of schedule: Co reported the opening of Northern's new state-of-the-art frac- sand production plant at Alma Center, Wis. CN now serves 13 frac-sand mines with more than 10 million tons of annual production capacity. Northern's production facility, located on CN's rehabilitated Whitehall Subdivision, will have an annual production capacity of one million tons of high-grade sands.

• "Our unique frac-sand franchise and end-to-end service focus are paying off and should help us generate C$300 million of frac-sand revenues in 2014 -- a full year ahead of CN's 2015 C$300 million target -- on roughly 82,000 carloads of product. This would represent a strong increase over 2013 revenues of C$200 million on 55,000 carloads of frac sand."

This is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here.

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Friday's Daily Activity Report

Active rigs:

	9/26/2014	09/26/2013	09/26/2012	09/26/2011	09/26/2010
Active Rigs	190	184	187	191	141

Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Ten (10) new permits --

• Operators: Enerplus (4), BR (2), EOG (2), Hess, OXY USA
• Fields: Spotted Horn (McKenzie), Corral Creek (Dunn), Parshall (Mountrail), Sandrocks (McKenzie), Manning (Dunn)
• Comments:

New Poll: Will New Flaring Rules Affect North Dakota Crude Oil Production

We will close out this poll quickly (for obvious reasons) in which we asked whom you would prefer to have dinner with:

• Mason Inman: 4%
• Warren Buffett: 30%
• Harold Hamm: 66%

Speaks volumes. The only real choice was between Warren Buffett and Harold Hamm, of course. The former would have chuckled a lot and talked in platitudes and generalities; Harold Hamm would have kept on topic. For me, the choice was easy, very, very easy.

Be that as it may.

Time for a new poll.

There are several ways the question could be asked and several different polls that could be taken but I think I will keep it as simple as possible.

The question has to do with daily crude oil production in the Bakken.

I believe North Dakota crude oil production first hit the 1 million bopd back in April, 2014, and every month since then the month-over-month crude oil production has increased (there could have been an exception, I forget) and has remained over 1 million bopd since then.

Lynn Helms (Director, NDIC) warns that daily production could take a dip once the new flaring rules take effect. The new rules take effect October 1, 2014, but there are suggestions that the operators have cut back significantly in the past few months as they get ready for the new rules. Two data points jump out at me:

One data point: the number of wells waiting to be fracked have jumped significantly over the past three months.

Second data point: the number of active rigs have fallen precipitously this past week (from 200 last week to 190 today):

	9/26/2014	09/26/2013	09/26/2012	09/26/2011	09/26/2010
Active Rigs	190	184	187	191	141

A reader tells me that this precipitous drop is due mostly to timing of surface rigs -- those smaller rigs that spud the well and drill down about 2,000 feet. The reader says that most of these rigs spud on Sunday and then gradually become inactive later in the week. We'll get a chance to see when the active rig numbers are posted in a couple of days.

One also wonders if some rigs are being moved to Montana. It's my understanding that Montana has not imposed new flaring restrictions.

So, with all of that as preamble, the poll:

Will we see a decline in daily crude oil production in North Dakota month-over-month before the end of November, 2014? Remember: the NDIC reports lag by about six weeks, so we won't see the November, 2014, data until January 15th, or thereabouts.

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Speaking of Polls

Gallup.

Compare.

The Bakken Economy Update -- The Williston Wire -- September 26, 2014

Headlines only; it's easy to subscribe to The Williston Wire.


Ground breaking held for new $105 million waste water treatment plant in Williston. The plant is on the north side of the river, at the base of the only bridge across the Missouri River in this area, and the bridge that will be widened to a 4-lane in the next few years.

Tractor Supply opens in Dickinson (previously reported; KMart and Bonanza close.

Three years ago, Carmel Schwab sold 134 homes in the heart of the Bakken - in just one year. After relocating to Williston in 2010 to help run Aberdeen, S.D.-based Centennial Homes' first location in North Dakota oil country, she proved she had the muscle to be a tour de force in the housing market. Schwab said her family and friends thought she was crazy to move to western North Dakota, leaving behind two grown children and a comfortable life in Bismarck."I like crazy busy - that's my personality," she said. 

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The Bismarck Tribune reminds readers new flaring rules go into effect October 1, 2014. 

The first target is to capture 74 percent of the gas by October 1, 2014. This date was chosen because Oneok's Garden Creek II plant was scheduled to be constructed and ready for service at that time. Oneok announced on Aug. 26 that the 100 million cubic feet per day natural gas processing facility became operational; it is just one of the many investments being made by midstream companies to capture the gas and combat flaring in North Dakota. With gas capture goals spread over October through January 2016, the state's Department of Mineral Resources (DMR) Director Lynn Helms said the order is a continuous rollout of "increasing and tightening" flaring restrictions.

The plan to reduce flaring

The NDIC order allows all infill horizontal wells within the Bakken and Three Forks pools to produce at a maximum efficient rate for 90 days.

The first 14 days of flowback gas can be removed from the operator's total monthly volume calculation.

The following 76 days would allow an operator to become connected to a gathering facility or utilize remote capture processes in order to hit the gas capture target. If unsuccessful, the operator can face production restrictions.

The company will only be allowed to produce up to 200 barrels of oil a day if it can capture 60 percent of the gas through remote capture. If it fails to even utilize that technology, the restriction tightens to 100 barrels a day until it implements a solution.

The order delineates between the first wells on a pad and infill wells. The first wells completed in the pool can produce at a maximum efficient rate indefinitely, but those flaring totals will be considered when auditors review overall performance at attempting to capture the gas.

Allowing maximum production on the first well gives operators an opportunity to evaluate the system to determine how many wells it should drill and the necessary infrastructure.

"A lot of 8-inch pipe was laid in the ground over the last few years because we didn't do this and now we found out it was too small," Helms said. "So we don't want to compound that error."

The only exception to the rule on infill wells are those that prove to never be economic to connect to a gas facility, a scenario for just over 1,000 wells in the Williston Basin. Since most produce less than 100 barrels of oil anyway, restrictions wouldn't be necessary.

This blog was one of the first to note this and post this, by the way:

Flaring is significantly higher on the Fort Berthold Indian Reservation as it flared 33 percent of the natural gas produced in June versus an overall state number of 28 percent.

The higher percentage is due to topography and right-of-way delays.

The NDIC would prefer to see a cooperative effort with tribal leaders to enforce gas capture on the reservation, but the Three Affiliated Tribes proposed its own gas capture plan in August which requires operators to pay royalties and taxes on flared gas. The tribe feels the fees provide incentive for operators to capture the gas, but some in the industry question the motive.

I think the bottom line is this: 

• first wells on a pad: maximum production regardless of flaring
• infill wells: 6,000 bbls production/month; 60% must be captured

Market Shenanigans -- September 26, 2014; Update/Overview Of ONEOK

2Q14 GDP better than previously reported: this is the third estimate -- now at 4.6%, better than the 4.2% at the second estimate, and much better than the original 4% estimate. Forbes is reporting:

On Friday, the Bureau of Economic Analysis released its third estimate of real gross domestic product for the second quarter of 2014 — covering April, May and June of this year. The release showed output in the U.S. increasing at an annual rate of 4.6%. This is relative to the first quarter when real GDP declined a sharp 2.1%.

The revision is up from BEA’s 4.2% second estimate released last month as well as its 4% advance estimate out in July. The revision, BEA said in a release, was largely due to a larger than previously estimated increase in nonresidential fixed investment and exports. Of the revision the BEA wrote, “The general picture of economic growth remains the same” as when it released the second estimate.

The 4.6% growth in real GDP reflected growing personal consumption, private inventory investment, exports, both residential and nonresidential fixed investment, as well as local government spending. The gains were partially offset by an increase in imports, which negatively impact GDP, and a 0.9% decline in federal government expenditures.

At this rate, US GDP for the 2Q14 will be estimated to have exceeded that of China's 8% by the time elections roll around in November. The bad news, of course, is when the third quarter GDP estimate comes out: gonna be hard to beat a 4.6% growth in GDP.

By the way, this is the fastest (US) growth (4.6%) since 4Q11. That's very impressive. The EU, on the other hand, is in a heap of trouble.

The German-based bank changed its mind after slicing its 2015 GDP view for the bloc to growth of 1% from 1.5%, noting, “the growth picture combined with softer commodity prices is increasing the risk of a flatter profile to the inflation trajectory.”

The GDP growth delta between the US and the EU could get much worse based on the the cost of energy in the US vs the EU.

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Yesterday the market "plunged" over 250 points. The mainstream media 30-second soundbite: world turmoil (ObamaWar, Ukraine) "roils" the market. (Their word, not mine).

Today, the market  is back up over 115 points. I guess the "world turmoil" ended. LOL.

No, there's another reason for the 250 points lost yesterday and the 115-point gain at this point in time today.

It's hard for me to believe that the market took off based on the 2Q14 GDP revision of 0.4%. Insignificant.

This is not an investment site. Do not make any investment or financial decisions based on anything you read here or think you may have read here.

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ONEOK

This is a most comprehensive update on ONEOK over at Market Realist. When you get to the link, be sure you are at the very top, Part 1. It is very, very easy to scroll down through all 15 parts of the "series."

Why Williston Basin is key

According to the company’s 10-K annual report, OKS is the largest independent operator of natural gas gathering and processing facilities in the Williston Basin, which includes the Bakken Shale and Three Forks formation.

The company reported that its natural gas gathering system in this region alone includes more than 6,500 miles. This is approximately 35% of its total gathering pipelines.

Also, the company added that ONEOK Partners’ systems serve approximately three million acres, or 60%, of the five million available acres of natural gas production. Plus, approximately half of producers’ rigs currently operating in the Williston Basin are drilling on acreage dedicated to ONEOK. This would make OKS’s assets crucial to producers in the region.

Major producers operating in this region include Continental Resources, EOG Resources, and Kodiak Oil & Gas. All of these companies are components of the Energy Select Sector SPDR Fund.

Segment 10 of the 15-part series is on "ethane rejection," which is another "must-read" for those following the NG story in the Bakken. In addition, the site takes you to a link devoted entirely to "ethane rejection."

I track the North Dakota ONEOK natural gas processing plants in North Dakota at this post.

Ten (10) Wal-Mart 18-Wheelers EVERY DAY For Williston, North Dakota; Four-Part Series -- Yahoo!Finance

Yahoo!Finance: first in a four-part series on Williston. The first article is on the Wal-Mart town north of Williston (well, what used to be north of Williston):

This location is also one of the company's busiest stores. It closes for just twelve hours a week – from Saturday at midnight to Sunday at noon.

When it re-opens, crowds of people are waiting outside to do their week's shopping. The big rush of business had led some in town to complain that the store often runs out of key items, something Comer says the store has worked hard to correct.

Wal-Mart does that by unpacking ten trailers full of goods every day!

Initial Production Data For Wells Coming Off The Confidential List 1Q14 Has Been Updated -- September 26, 2014

Link to 1Q14 data here.

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Getting Their Customers Back Into The Showrooms

850,000 Customers

Ford Motor issues safety recall for certain 2013-2014 Ford C-MAX, Fusion, Escape and Lincoln MKZ vehicles in N America for restraints control module issue :

• Co is issuing a safety recall for ~850,000 (actual 850,050) 2013-2014 Ford C-MAX, Fusion, Escape and Lincoln MKZ vehicles in North America for a potential issue with the restraints control module. In the affected vehicles, the restraints control module may experience a short circuit. If a short circuit occurs, the airbag warning indicator will illuminate.

Too bad Tesla doesn't have showrooms.

Random Update Of A Halcon Well In Marmon Oil Field

I can only assume the paperwork has not been filed with the NDIC, but this well is still shown as on "DRL" status - not fracked. There is no frack data at the well file:

• 26210, drl, HRC, State 157-100-29A-32-3H, Marmon, cum 71K 7/14;

NDIC File No: 26210    
Well Type: OG     Well Status: DRL     Status Date: 9/15/2013     Wellbore type: Horizontal
Location: SWSE 20-157-100     

Footages: 155 FSL 1435 FEL     Latitude: 48.402255     Longitude: -103.629821
Current Operator: HRC OPERATING, LLC
Current Well Name: STATE 157-100-29A-32-3H
Total Depth:       Field: MARMON
Spud Date(s):  9/15/2013
Completion Data
   Pool: BAKKEN     Status: DRL     Date: 9/15/2013
Cumulative Production Data
   Pool: BAKKEN     Cum Oil: 70895     Cum MCF Gas: 77681     Cum Water: 151161

Monthly Production Data

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	7-2014	31	11151	10909	20220	9098	8880	1
BAKKEN	6-2014	29	11152	11751	23466	9791	9457	131
BAKKEN	5-2014	31	14757	14140	28278	18112	11418	6477
BAKKEN	4-2014	21	10190	10170	18497	13792	7168	6477
BAKKEN	3-2014	24	11450	12019	30784	15942	9297	6477
BAKKEN	2-2014	18	12195	11448	29916	10946	4343	6477

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While we are at it, here's another Halcon well which suggests the same thing, paperwork not being filed:

• 24739, conf-->loc-->DRL, HRC, Fort Berthold 152-94-15B-22-5H, Antelope, 5K first month; cum 92K 2/14; no indication this well has been fracked yet, but I assume it has (2/14); cum 148K 7/14;

NDIC File No: 24739    
Well Type: OG     Well Status: DRL     Status Date: 1/11/2013     Wellbore type: Horizontal
Location: NWNE 15-152-94     Footages: 251 FNL 2593 FEL     Latitude: 47.991476     Longitude: -102.695993
Current Operator: HRC OPERATING, LLC
Current Well Name: FORT BERTHOLD 152-94-15B-22-5H
Total Depth:       Field: ANTELOPE
Spud Date(s):  4/3/2013
Completion Data
   Pool: SANISH     Status: LOC     Date: 1/11/2013
Cumulative Production Data
   Pool: SANISH     Cum Oil: 147676     Cum MCF Gas: 143728     Cum Water: 29261

Monthly Production Data

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
SANISH	7-2014	28	14026	12937	2034	10286	0	10090
SANISH	6-2014	30	14068	14317	1904	7841	0	7631
SANISH	5-2014	31	11077	10688	141	4783	0	4566
SANISH	4-2014	27	15018	14516	2472	12197	0	12008
SANISH	3-2014	3	1346	1825	446	253	0	232
SANISH	2-2014	23	11700	11777	1674	17156	0	16995
SANISH	1-2014	31	16922	17379	2648	22031	0	21814
SANISH	12-2013	31	22448	22051	3308	20611	0	20394
SANISH	11-2013	30	29421	29177	4844	32733	0	32523
SANISH	10-2013	9	11650	11133	9790	15837	0	15774
SANISH	9-2013	0	0	0	0	0	0	0

 

Tractor Supply Coming To Dickinson -- September 26, 2014

Comment/Suggestion: the "homeless" problem in the Bakken should be a thing of the past. A state with a warmer climate and a friendlier drug policy is looking for new workers. CBSLocalDenver is reporting that Colorado is now the mecca for homeless. It's a pretty straight shot. Wal-Mart should offer one-way bus tickets at no cost.

Rocky Mountain High, John Denver

Bakken economy: The Dickinson Press is reporting that Tractor Supply is opening a store in Dickinson:

Tractor Supply Company opens Dickinson store Dickinson’s newest business will have its grand opening Saturday. The Tractor Supply Company in West Ridge officially opened its doors last Saturday after almost a year of construction, making it the latest addition to the growing development that already includes Menards, Wells Fargo and the soon-to-come Buffalo Wild Wings.

If this is the first time TSC has been in Dickinson that comes as a real surprise; TSC has been in Williston, like, forever. 

Active rigs:

	9/26/2014	09/26/2013	09/26/2012	09/26/2011	09/26/2010
Active Rigs	192	184	187	191	141

RBN Energy: six new North American propylene plants on the way; five in the US, one in Alberta

In Part 1 of their two part series RBN Energy explained how PDH plants transform propane into the more valuable propylene that is a feedstock for downstream petrochemical plants that manufacture a myriad of fibers and plastics.

About two thirds of propylene is used to make polypropylene - one of the best-selling plastics, second only to polyethylene. Propylene demand – tied closely to economic growth – is growing – driven mostly by Chinese economic expansion.

Previously almost exclusively made as a byproduct of olefin stream crackers or oil refinery gasoline cracking processes, greater volumes of propylene will soon be made “on-purpose” because olefin crackers are using lighter feedstocks like ethane that produce less propylene byproduct and refinery output of propylene is falling in the west as gasoline demand stagnates.

On-purpose propylene can be made with a number of feedstocks including coal and biomass, but in the U.S. abundant supplies of natural gas liquids (NGLs) from the boom in “wet”, high-BTU shale gas drilling, make propane the obvious choice. As a result, six new plants are planned in North America in the next five years that use PDH technology and will (if built) produce 9.4 billion pounds of propylene a year by 2019. In this episode we detail these new investments – summarized in the table at the link.

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Inquiring Minds Want To Know
Why didn't Apple simply market the new iPhone 6 and 6 Plus as really personal -- so personal they conform to one's body shape?

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Is Anyone Thinking?

Hungary shuts off natural gas supplies to Ukraine just as winter is coming on. Hey, I know what the Ukraine should do! Ask for help from Russia! Vladimir simply gives the EU just enough rope to hang themselves.

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A Note To The Granddaughters

The John Denver video above reminds me of my coming-of-age years. Between my freshman and sophomore years in college, I took the most difficult job I had ever taken -- it was in New Jersey. After perhaps the most grueling summer I ever had, and would ever had, driving back to college in Sioux Falls, this was the first song I heard on the radio:

Country Roads, John Denver