Wednesday, October 1, 2014

North Dakota Oil Production Likely To Start Falling -- Rigzone, Reuters -- October 1, 2014

For those who have forgotten why the poll regarding future oil production in North Dakota is posted a the sidebar on the right, this long article from Rigzone should help:
North Dakota's oil producers will struggle to comply with aggressive rules taking effect on Wednesday designed to curb the wasteful burning of natural gas, hindered by lengthy federal reviews of crucial pipelines.
The No. 2 U.S. oil state is pushing to resolve a problem commonly known as flaring, an environmental and economic squandering akin to burning cash.
Energy companies have been preparing since June for the deadline requiring them to capture 74 percent of natural gas extracted alongside crude oil from thousands of wells.
The standards get tougher in January.
But the energy industry and state officials say they are bound to fall short of the goal through 2015, flaring gas in excess of targets and consequently having to trim oil production to comply with penalties built into the new standards.
The main reason, according to Reuters interviews and reviews of regulations, is simple: a Byzantine web of state and federal agencies who must sign off on new pipelines. Too few pipelines and a lack of plant capacity to prepare gas for transport means North Dakota flares enough natural gas in one month to heat more than 160,000 homes for a year.
The pipelines are caught between state officials whose top energy policy goal is to cut flaring, and federal agencies, which weigh historical and ecological issues, including protection of habitats for rare plants and animals.
A Story We Won't See In The Minneapolis StarTribune

The AP is reporting that states are thinking twice about wind farms:
A decade ago, states offered wind-energy developers an open-armed embrace, envisioning a bright future for an industry that would offer cheap electricity, new jobs and steady income for large landowners, especially in rural areas with few other economic prospects.
To ensure the opportunity didn't slip away, lawmakers promised little or no regulation and generous tax breaks.
But now that wind turbines stand tall across many parts of the nation's windy heartland, some leaders in Oklahoma and other states fear their efforts succeeded too well, attracting an industry that gobbles up huge subsidies, draws frequent complaints and uses its powerful lobby to resist any reforms. The tension could have broad implications for the expansion of wind power in other parts of the country.
"What we've got in this state is a time bomb just waiting to go off," said Frank Robson, a real estate developer from Claremore in northeast Oklahoma. "And the fuse is burning, and nobody is paying any attention to it."
Today, many of the same political leaders who initially welcomed the wind industry want to regulate it more tightly, even in red states like Oklahoma, where candidates regularly rail against government interference. The change of heart is happening as wind farms creep closer to more heavily populated areas.
Opposition is also mounting about the loss of scenic views, the noise from spinning blades, the flashing lights that dot the horizon at night and a lack of public notice about where the turbines will be erected.
Much more at the link. 
A Note To Readers And To The Granddaughters 

A few days ago I posted this note:
I am really, really enjoying Judith Nies' 2014 Unreal City: Las Vegas, Black Mesa, and the Fate of the West. The book provides a superficial, but informative, history of Hopi/Navajo conflicts, the Mormons, coal, water, and the growth of Phoenix, Los Angeles, and Las Vegas in the 1950's. I first mentioned the book a few days ago. It is a short book, and so easy to read, one could read it in one setting, but it is so enjoyable to read, I wish it would not end, and that's why I'm reading it slowly. It reads like a very, very long New Yorker article.
Huge caveat: Bill McKibben endorses this book. I'm only halfway through but I have found the book very informative;  I don't know how the last half will go or how the book will end. So, if you are really, really someone who is wary of Bill McKibben (as I am), don't say I didn't warn you.

On another note, while I was in Chuck Wilder's bookstore in Williston (Books on Broadway) during my most recent visit to the Bakken, I happened to see (and ended up buying) Surfaces and Essences: Analogy as the Fuel and Fire of Thinking by Douglas Hofstadter and Emmanuel Sander, c. 2013.

It's a really, really geeky, nerdy book that seems to be written for PhD types in education, the folks who think about how to teach pre-schoolers, kindergartners, and elementary children how to do better in modern math or Mandarin or advanced physics. It's a great book to read when trying to fall asleep at night. But I slog through it because I'm like the little boy whose bedroom is filled with horse manure but keeps digging, hoping to find a pony. 

I think I've found the pony. I've read a lot of pop literature on physics and at least three biographies of Albert Einstein. But I've never gotten a feel for how he thought, how he made the leaps he made. I am definitely not recommending anyone go out and buy this book. But if this is at all intriguing, see if your local library has a copy, or your local Barnes and Noble and go directly to the middle of chapter 8, p. 451 and start reading "Physics and Logical Thinking." Several pages later, starting on p. 462 the authors talk about Einstein. It could all be apocryphal except for the fact that the authors include quotes from Albert Einstein himself on how he thought about special relativity problems before he sat down and tried to solve the problem(s).

Go to and read the 1-star and 2-star reviews. This pretty much sums up the book:
I agree with the preponderance of reviews here that say this book is too long and rambling by a factor of five, maybe by a factor of ten if you already know some linguistics or psychology. The title might be "Why we are clever authors."

An excellent short section about whether squares are rectangles should be required reading for all teachers of mathematics. A magnificent long chapter on how Einstein used analogical thinking to arrive at his brilliant physical principles is worth the price of the book. It should be required reading for all teachers of physics.

The Strangest Thing -- I Had A Dream -- I Dreamt President Obama Honored An Oilman With A Medal -- October 1, 2014

It's been a long day. I did a lot of blogging. Swimming. Then a small Omaha steak dinner. Then started watching No Country for Old Men. Drowsy. Started to nod off. Then got a call from our younger daughter. Long phone call. Nodded off. Dreamt that President Obama honored someone with an energy medal of some sort. Woke up. Caught a second wind, as they say. Turned No Country for Old Men back on; can't skip all the trailers, so had to sit through all that again. While waiting to get through all this checked in on Rigzone. Saw this story. Went outside to see if hell had frozen over. Then checked the calendar to see if it was April 1.

Rigzone is reporting:
As the U.S. drilling boom helps drive global crude prices to two-year lows, the Obama administration has awarded the country's first medal for energy security to oil historian and business founder Daniel Yergin.
Yergin, 67, received the Schlesinger Medal for Energy Security from Energy Secretary Ernest Moniz in a ceremony on Wednesday.
The annual award is named after James Schlesinger, who in 1977 became the first U.S. energy secretary.
Yergin advised Schlesinger as the country went through an oil price shock resulting from the Iranian revolution. Since then he has given advice to every administration, including President Barack Obama's.
Yergin co-founded Cambridge Energy Research Associates in 1982, a consulting company later bought by IHS, which now has 650 global energy researchers. His books on the history of energy include "The Prize" and "The Quest."
"Energy to me combines everything from geopolitics and how nations behave to technological innovation and entrepreneurship," Yergin said in an interview before receiving the medal. "It's a great window to look at the world."
He now urges U.S. policymakers to lift a 40-year ban on crude oil exports, saying a glut of crude would choke the boom if the action is not taken.
Congress passed the ban after the Arab oil embargo stirred fears of an energy shortage. Yergin is also working on a new book about the changing balance of world power, with a focus on energy.
The North Dakota and Texas shale boom has helped make the United States far more energy-secure than in 2008, when oil hit a record price of $147 per barrel, compared with $95 today. But Yergin warned in the interview that companies and policymakers should brace themselves for change.
Gonna go back to sleep. Heck of a dream. I want to see how it ends.

I also dreamt that they're going to start drilling in France again. LOL. Rigzone is reporting:
Sustainably high oil prices have lured small oil explorers back to Alsace, the cradle of the French oil exploration industry that gave birth to corporate giants such as Schlumberger.
The activity near the Rhine on the German border does not amount to an oil boom. The region provides 1 percent of French oil production, which is just under 2 percent of European output.
Nonetheless, 13 wells are pumping, two exploration permits have recently been granted and more are being reviewed by the French administration. "For us, Alsace was a sleeping beauty," said Stephane Touche, whose company Millennium Geo-Venture holds the two recent exploration permits and has applied for five more.
Among its advantages, the region's oil reserves are already completely mapped and are very close to the surface. Oil leaks have long provided a favourite mud-bath playground for wild boars in the Alsatian forest.
Oil production in Alsace started in the 18th century and peaked in the 1920s, when more than 650 wells and four refineries supplied 5 percent of French oil needs and provided work for 3,000 people around Merkwiller-Pechelbronn, 50 km north of Strasbourg. In that era, the Schlumberger brothers carried out the first electrical well log and created the company. 
Much more at the link. 

What We Will Be Talking About Thursday; Another #1 For North Dakota -- October 1, 2014

North Dakota's answer to the rail backlog: build a bigger mill! This is an incredibly good story. The Dickinson Press is reporting:
Agriculture officials and wheat producers are welcoming a planned expansion to the North Dakota Mill and Elevator in Grand Forks.
The $27 million expansion, approved by the North Dakota Industrial Commission in mid-September, is the result of increased demand from customers, mill officials said. The addition will increase its capacity by 11,500 hundredweight of flour produced per day to roughly 49,500 hundredweight, making it the largest single milling operation in the country, said Vance Taylor, the mill’s president and general manager.
The expansion will mean the addition of at least six jobs, Taylor said.
Taylor hopes to finish the expansion by the fall of 2015. Current flour production won’t be affected by construction, he said in a press release.
Taylor believes there’s a Nabisco facility in Toledo, Ohio, that’s roughly the same size as state mill currently, but the expansion will make North Dakota’s the largest in the country.
Six more jobs than the Obama administration has created, some might suggest. Certainly not me.

Henry VI, Part III -- Shakespeare
Yes, I know -- insensitive

Secret Service chief fired; fastest firing in this administration. Fortunate for her this was not in the land of ISIL.

Regular readers know what's coming next:

Immigrant Song, Karen O, Trent Reznor, Atticus Ross

Yes, I know -- insensitive

This is a biggie. This would have been the top story in The Los Angeles Times today had it not been for the Secret Service story. California public service pensioners at risk when a city declares bankruptcy:
A federal bankruptcy judge dealt a serious blow to California's public employee pension systems by ruling Wednesday that payments for future worker retirements can be reduced when a city declares bankruptcy -- just like its other debts.
U.S. Bankruptcy Judge Christopher Klein ruled that bankruptcy law supersedes California pension laws that require cities to fund their workers' future retirement checks.
"I've concluded the pension could be adjusted,” Klein said.
tockton does not want to reduce its pension payments, but Klein ruled that it can be on the table in the bankruptcy proceeding. The judge must still rule whether to accept Stockton's bankruptcy plan, which does not include the cuts.
The decision came after a large creditor of Stockton, which filed for bankruptcy protection in 2012, asked the judge to reduce the amount the city owes to the California Public Employees’ Retirement System, the nation's largest public pension fund.
Until now, CalPERS had argued successfully in the bankruptcy cases of other California cities that amounts it requires for public worker pensions could not legally be reduced.
I assume this has an appeal process.  Certainly public service pensions are 100% safe in California. If I were this judge, I would request Secret Service Ferguson City police protection. Wow.


5 Of 6 Bakken Wells To Go To DRL Status Thursday; October 1, 2014

Active rigs:

Active Rigs191187186201143

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

Wells coming off the confidential list Thursday:
  • 26936, drl, Hess, SC-Norma-154-98-0706H-5, Truax, no production data,
  • 27030, 551, CLR, Myrtle 6-7H1, Northwest McGregor, t7/14; cum 12K 7/14;
  • 27351, drl, Hess, GN-Beulah-158-98-0508H-1, Rainbow, no production data,
  • 27585, drl, BR, Haymaker 11-15TFH, Elidah, no production data,
  • 27754, drl, BR, CCU Olympian 44-35TFH, Corral Creek, no production data,
Eleven (11) new permits --
  • Operators: Statoil (8), CLR (2), Whiting,
  • Fields: Sakakawea (McKenzie), Patent Gate (McKenzie), Banks (McKenzie), Bluffton (Divide)
  • Comments: Whiting has a permit for a wildcat in Golden Valley, 6-140-104; this will be near Camel Hump oil field to the north; in 1985, a Red River well was drilled in this same section (NE quarter); dry; Samson Resources, Waldahl 1;
Fifteen (15) producing wells completed:
  • 23890, 1,002, Slawson, MacCougar 2-30-19H, Big Bend, t8/14; cum 7K 7/14;
  • 25675, 2,921, Statoil, Lucy Hanson 15-22 5TFH, Catwalk, t11/13; cum --
  • 25823, 628, Slawson, Diamondback 3-21H, Van Hook, t7/14; cum 21K 7/14;
  • 26386, 352, Oasis, Hardy 5892 43-9H, Cottonwood, t8/14; cum --
  • 26482, 101, Oasis, Conry Federal 5992 43-21 1H, Cottonwood, t8/14; cum --
  • 26630, 630, CLR, Mack 11-2H1, Antelope, Sanish, t8/14; cum 2K 7/14;
  • 26631, 289, CLR, Mack 10-2H3, Antelope, Sanish, t8/14; cum 2K 7/14;
  • 26632, 202, CLR, Mack 9-2H2, Antelope, Sanish, t8/14; cum 1K 7/14;
  • 26633, 481, CLR, Mack 8-2H, Antelope, Sanish, t8/14; cum 2K 7/14;
  • 26778, 704, EOG, Mandaree 110-05H, Squaw Creek, one section, t9/14; cum --
  • 26876, 292, CLR, Lawrence 9-24H, North Tioga, t9/14; cum --
  • 27274, 346, Slawson, Cruiser 3-16-9H, Big Bend, t7/14; cum 33K 7/14;
  • 27594, 352, Slawson, Challenger Federal 6-29-32TFH, Big Bend, t9/14; cum 6K 7/14;
  • 27755, 2,100, EOG, Parshall 75-2127H, Parshall, ICO, t9/14; cum --
  • 27757, 1,174, EOG, Parshall 73-2127H,Parshall, ICO, t9/14; cum --

Breaking News -- Secret Service Director Resigning -- October 1, 2014

Secret Service director resigns. This president doesn't generally fire people (Sebelius might have been an exception) but in this case it was personal. Very personal. I don't think I've seen anyone in this administration fired this quickly: she was allowed to stay on long enough to testify before Congress, during which her aides were packing out her office (they had updated their resumes some weeks earlier), and then she was, as they say in merry olde England, "made redundant."


On September 16, 2014, I wrote:
EbolaWar; ObamaWar (Gulf War III); no boots on the ground; third televised ISIL beheading; OPEN BORDERS/OPEN ARMS; where are the undocumented children?
And now we have the first case of Ebola in the United States. Dallas, TX. 

Random Update Of A Great CLR Well East Of Williston, October 1, 2014

The Catwalk oil field east of Williston looks like it's going to turn out to be quite a nice field. I track the Catwalk here.

These are not the kinds of wells that I generally associate CLR with:
  • 27299, 1,216, CLR, Jenner 1-21H1, Catwalk, Three Forks B1 (TF1), 30 stages; 3.44 million lbs sand/ceramic, t5/14; cum 65K 7/14;
A couple of comments. This is a huge well for CLR (see production numbers below). Also, note that this is the first CLR well, and their first Three Forks well, in Catwalk. About two years ago, Lynn Helms suggested that it was likely the Three Forks (upper Three Forks, TF1) would be better than the middle Bakken. At the time, the lower benches were not widely discussed, even if known at the time.

Also, note that this well was not completed with the new completion techniques that CLR has been talking about.

Here are the production numbers:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Did Saudi Arabia Just Blink? October 1, 2014


October 2, 2014: everyone is reading the tea leaves to answer the question -- what will Saudi Arabia do. I go back and forth on the issue. Now Reuters/Rigzone weighs in: oil traders say OPEC may be heading for price war --
Saudi Arabia's decision to slash the official selling price for its oil has sparked trader talk of an emerging OPEC price cutting war, as members of the producer group could compete to defend their market share amid ample supplies and tepid demand.
Industry and trading sources in the Middle East say there was now a risk of a race to the bottom, at a time when many were calling for unity from members of the Organization of the Petroleum Exporting Countries (OPEC) as it faces one of the steepest price slides since the financial crisis.
The group's next meeting in November will be closely-watched to see whether it cuts supply. Benchmark Brent crude prices continued to slide towards $90 a barrel on Thursday, a level that leaves many OPEC members - and other large producers like Russia - with painful budget gaps.
Some OPEC countries are becoming more worried about the price drop and calling for supply cuts, but its core Gulf members are still betting winter demand will revive the market. "The Saudis will not cut unless it is a collective cut, they have to hear that others are saying that as well," one industry observer said, speaking on condition of anonymity.
October 2, 2014: Forbes comments on the Bloomberg / Saudi article asking the question, "is Saudi ready to unleash the oil weapon?" The short one-page article was disappointing. This is what I wrote a reader regarding the article:
The Forbes article was un-enlightening. What is the Saudi "oil weapon"? Flood the market with oil, and kill the Canadian oil sands, and hope to kill the Bakken? Or cut production significantly to hope to raise the price of oil?

I honestly don't know. I blogged that I thought Saudi was ready to cut back to keep prices up, but this Forbes article suggests Saudi's recent cutback was due to seasonal decline in demand (seen every year) rather than trying to raise prices.

So, it's still an enigma.

The bad news for oil bulls:

Saudi's 2014 budget requires $89 oil. Since oil has been so high most of the year, the rest of the year, their oil could be sold for as low as $39 and they would still average out to $89 oil for the year. Obviously they won't let oil get that low but they can certainly let oil drift a lot lower.

Human nature being what it is (greed), I doubt the Saudis will let the price of oil drift down too low.
Original Post
Readers know that from a global perspective I have been most interested in what Saudi will do in light of plummeting crude oil prices and the glut of oil reaching the market. As recently as two weeks ago, Saudi said they were "staying the course" with regard to oil production / exports.

Did Saudi Arabia just blink?

Bloomberg is reporting:
The worst is over for global oil prices, according to UBS AG and Barclays Plc. After the biggest quarterly drop in more than two years, Brent is set to recover as Saudi Arabia cuts output and demand climbs, they said.

Global demand growth slowed in the second quarter to the weakest since 2011, while U.S. output climbed to the highest in three decades, International Energy Agency and U.S. Energy Department data show. Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, cut production in August by the most in 20 months
It will maintain output at a reduced level until the end of the year as demand for winter fuel increases, a person familiar with its policy said September 26, 2014.
Brent futures slid in the third quarter on the London-based ICE Futures Europe exchange to below the $95-to-$100 range described as “fair” by Saudi Oil Minister Ali Al-Naimi at an OPEC meeting in June. Prices fell as Libya restored output to the highest in a year, China’s economic growth slowed, and crises in Iraq and Ukraine didn’t disrupt supplies. Brent’s premium to West Texas Intermediate, the U.S. benchmark crude, narrowed to the least in 13 months on September 29, 2014.
Saudi Arabia told OPEC its production fell by 408,000 barrels a day -- more than China’s demand is projected to expand this year -- to 9.6 million a day in August. The kingdom plans to keep output close to that level for the rest of the year, while the Paris-based IEA forecasts an additional 600,000 barrels a day of demand on average through December, compared with last quarter. 
The fourth quarter was the strongest demand period in each of the past five years, data from the IEA show. This year will be no different as consumption rises to 93.9 million barrels a day in the three months ending Dec. 31, before sliding to 92.8 million in the first quarter of 2015, it forecasts.
Saudi has a double-edged scimitar with which to deal. They need income from oil but their oil reserves are falling. To maintain the income they need with the price of oil plummeting, they need to drastically increase production, but that further erodes prices and depletes their reservoirs even more quickly. Some years ago, there were hints that Saudi Arabia might flood the market with oil to bring prices down to cripple/destroy the North American energy revolution, where it is very, very expensive to mine Canadian oil sands, and very expensive to to drill Bakken oil. But those efforts failed, partly because of the less expensive oil coming out of the Permian and Eagle Ford (relative to Canadian oil sands and the Bakken).

There have been rumors that Saudi money was financing "green" organizations trying to stop fracking in the US. If so, that effort may have slowed things down, but it did not stop the tsunami of North American oil. It appears that the "greens" have been highly successful in killing/delaying pipelines in the US, only to be "replaced" by CBR. This policy borders on insanity but that's a discussion for another day.

However, a couple of observations with regard to CBR vs pipeline are in order. CBR is much, much more flexible than pipeline, and interestingly enough, the economics seem to work out. In addition, CBR over the long haul should provide a lot more jobs than pipelines. I would think the manpower needed to manage all those trains will always be significantly higher than a pipeline moving the same amount of oil. Monitoring and aintaining thousands of miles of double-track has to be a lot more expensive than monitoring and maintaining pipelines.

If one assumes the Saudis tried flooding the market with oil a few years ago to strangle the North American energy revolution; if the Saudis were the financial backers trying to stop fracking in the US; and, if the Saudis said as recently as two weeks ago that they were going to "stay the course" with their production plans, it appears with today's announcement that Saudi has a) blinked; and, b) thrown in the towel.

Why I Continue To Invest

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

But this Bloomberg story speaks volumes about the opportunities young investors with a long horizon have:
National Oilwell reported a fivefold annual increase in cash from operations last year. Williams said in July the Houston-based company was looking for ways to repatriate approximately $3.5 billion in cash overseas, which would give it “more flexibility” to buy back shares or boost its dividend. The company has more than tripled its dividend since 2013, raising the payments to 46 cents a share from 13 cents.
The buyback may be a concern for some investors that National Oilwell is “in some ways admitting” there are growth challenges or maybe not as many opportunities for acquisitions, Rob Desai, an analyst at Edward Jones in St. Louis, said in a phone interview. “They’re looking for other ways to use capital.”
I started investing back in 1984 or thereabouts; over all these years I have never recalled reports like this, where companies are reporting fivefold annual increases in cash from operations. Fivefold increases in cash and the shares are pummeled. Defies common sense or provides a buying opportunity, one would think. It will be interesting to see what Warren Buffett buys next. Or Bill Gross now that he has moved to Janus. Or Al Gore now that he has announced he will "pour $30 million into Seventh Generation."

This is an observation with regard to investing in general. I have never traded nor invested in National Oilwell and never plan to.

Apple has the same challenge: growing piles of cash. I assume Warren Buffett has that problem.

Global Warming
Climate Change
Extreme Weather

The note below was posted on the date of the original post. Now, today (October 9, 2014), ABC News is reporting:
This year's Atlantic hurricane season is shaping up to be one of the weakest in decades with only five named storms in the region so far this year.
That is the fewest named storms since the full Atlantic season of 1983, when there were four. The 1994 season also had only five named storms into October, then two hurricanes formed in early November of that year.
Forecasters have projected another two named Atlantic storms for the rest of this year's season that ends Nov. 30. But there are no signs of any new ones spinning off Africa's west coast during what is usually the season's peak period — mid-August to late October.
"The tropical Atlantic is just dead," said Max Mayfield, a former director of the U.S. National Hurricane Center in Miami.
A typical June-November hurricane season has 12 named storms, nine of them hurricanes and three of those major.
When this was pointed out to President Obama, he said, "Well, you know, no one has seen the bogeyman in decades, either, but we know he's there. It's baffling. So kids still need to beware. Likewise with climate change: just because there's been no evidence of global warming, and now climate change, or extreme weather for the past several decades, doesn't mean it's not there. I was telling Michelle just the other night, you know, Michelle, it's baffling. And I've got golfing tomorrow."

Dr Roy Spencer is reporting: almost ten years without a major hurricane. Cross off "extreme weather" from the list of changing war cries.

Oasis Helling Trust Wells Updated (No New News); Chrysler Sales Up Almost 20%; ObamaEconomy A Bust, But That's Okay -- Reuters; October 1, 2014

The NDIC daily activity report for yesterday has now been posted. A couple of observations. A reader told me just yesterday to watch the Zavanna wells east of Williston; two more Zavanna wells were reported at completed and producing in yesterday's report. In addition, SM Energy reports a couple of nice wells, and even OXY USA has a pretty good well.

Oasis Helling Trust Wells Update (not much new)

I see overnight someone was checking in on Oasis Helling Trust wells in Alkali Creek. I have just updated them; no real news. All appear to have gone from "loc" status to "drl" status. The Helling Trust wells will include middle Bakken, TF1, TF2, and TF3, wells, I believe. One can find the Helling Trust wells by using the "search app" on the blog (on Firefox, the "search app" is in the upper left hand corner of the blog).

This is what the Alkali Creek looks like "today" -- where the Helling Trust wells are located:

In the portion of section 22 that can be seen, there is a:
  • 4-well pad with a rig on site;
  • another 4-well pad with a rig on site;
  • a 2-well pad, both wells producing;
  • a toe of a long lateral coming from the north, producing;
  • another 4-well pad with a rig on site; and,
  • another 3-well pad with a rig on site, one well on DRL status, and one well on CONF status.
And, of course, just to the south of that, in the far northeast corner of section 27, two 3-well pads; and, in the far northwest corner of section 26, two 5-well pads (one pad, all five wells are producing; on the other pad, a rig is on site).

Comment: from the beginning I have been telling folks that if they "have" one well in the Bakken, they will likely have 4 wells, might have 8 wells, and could possibly have 12 wells. I really underestimated the numbers. Although we don't yet know which way all the horizontals will be going (north or south) there are 18 wells in section 22 that can be observed in that one screenshot, and we are a long way from drilling out all the formations at 330' or 660' spacing. But in just this one location, which is no longer particularly atypical for the Bakken, some mineral rights owners may be soon receiving royalties from as many as 18 wells.

Chrylser Doing Well; Ford Not So Much (the European exposure)

Chrysler sales up almost 20% in the month of September; a surprise for analysts. Nissan, also, showed almost a 20% increase in US sales. Surprisingly, Ford sales dropped almost 3% but this is probably due to its European exposure. I get a a skewed view of Ford because I spend much of my time in Ford country -- Texas.


I don't know if folks have noticed, but the housing market is not doing all that well despite reports of the Obama recovery -- a term used very loosely. Periodically, housing market data is good and we get the bullish headlines but in the big scheme of things, I haven't really had a "warm fuzzy" that the housing market has been doing all that well this past year. Everyone has her own opinion.  But my perception is that the housing market is not all that hunky dory.

Now, we get reports that the construction industry in general is not doing well at all. Reuters is reporting:
U.S. construction spending unexpectedly fell in August, hit by weaker private spending outside the housing sector and a pullback in public investments.
Construction spending dropped 0.8 percent to an annual rate of $960.96 billion, the Commerce Department said on Wednesday in a report that also revised downward spending estimates for the prior two months.
Economists polled by Reuters had forecast construction spending increasing 0.5 percent in August. [So, that's a swing of 1.3% with regard to expectations; actual. And worse, the expectations were for an increase; instead we get a decrease.]
The surprise decline was largely due to a 1.4 percent drop in money spent on private nonresidential construction, although outlays fell across the board with state and local construction down 0.9 percent. The declines, however, came after a month in which spending in most construction categories had posted strong gains.
But like the jobs report, look at the spin Reuters puts on the story: "The declines, however, came after a month in which spending in most construction categories had posted strong gains."

This is not exactly comforting news for folks looking for a "recovery" of some sorts. A good month, followed by a couple of bad months, and the numbers for the "good month," revised downward.

Reuters suggests most of the decline was due to nonresidential construction but something tells me it's all relative. 

It's possible the decrease in construction spending was due to the fact that contractors simply can't get their building materials to where they are needed due to the backlog in rail shipments caused by BNSF due to the Bakken oil boom due to bad decisions made by George W. Bush eight years ago. 

Sandpiper Sandbagged; Wednesday -- October 1, 2014


October 16, 2014: as noted below, farmers in Iowa are asking the governor to oppose a crude oil pipeline.
A coalition of environmental groups submitted 2,300 petitions to Gov. Terry Branstad on Tuesday asking him to oppose a crude oil pipeline proposed to cut diagonally across Iowa and affect properties in 17 to 19 counties.
Groups opposing the Texas-based Energy Transfer Partners L.P. proposed 1,100-mile Bakken oil pipeline through four states from North Dakota to Patoka, IL, include Iowa Citizens for Community Improvement, Sierra Club Iowa Chapter, the Women, Food and Agriculture Network, and the Food & Water Watch.
October 7, 2014: Sandpiper pipe stacking up. Looks and "feels" just like the Keystone XL, you know, the one killed by President Obama. The link is to the Park Rapids Enterprise.

October 5, 2014: Sounds just like the Keystone XL at Gascoyne, ND. Park Rapids Enterprise is reporting:
Pipes for the Sandpiper oil pipeline are piling up in northern Hubbard County on a site east of Lake George for the project.
Original Post

For those who have forgotten the reason for posting the Enbridge Sandpiper poll at the sidebar at the right, The Dickinson Press was kind enough to bring us up to date:
Enbridge Energy Inc. on Tuesday said its proposed Sandpiper oil pipeline between western North Dakota and Superior, Wis., won’t be completed until 2017, about a year behind the company’s original estimate.
Again, agricultural lobbyists in Wasington, DC; and farmers in Minnesota, Iowa, and Nebraska only need to visit St Paul if they want to see why agricultural shipments will be delayed this year. And next year. And the year after next....which would be 2017.

The pipeline delay will also mean automakers will also see backlogs in getting their products shipped to the west coast.

For investors in Enbridge, this is great news: CAPEX will be delayed; the company will build up its cash reserve, the same thing we saw with TransCanada after the Keystone XL was killed.

But remember, 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.


Active rigs:

Active Rigs190187186201143

RBN Energy: continuation of the series on CO2-EOR.
Enhanced oil recovery is like CPR and a pacemaker to an oil field on the brink of death. Once-vibrant wells whose production had declined to a trickle can be amazingly revived when “flooded” with large volumes of CO2. With continued injections of CO2, those higher production levels can be maintained for years on end. But CO2-EOR requires CO2—lots of it—and the number of mature oil fields that can benefit from EOR is limited by the amount of CO2 that can be produced and piped to where it’s needed. In today’s blog, we continue our look at the Rodney Dangerfield of crude oil production techniques.
The U.S. Department of Energy (DOE) estimates that well over half of the nation’s known oil resources remain “stranded” underground and will require EOR or other advanced techniques to be recovered for productive use.
As we said in Episode 1, primary recovery of oil from a conventional well (through natural pressure and pumps) typically removes only 10% of a reservoir’s total oil, and secondary recovery (mostly injecting water to displace oil and drive it to a production wellbore) removes another 20 to 40%, leaving as much as 70% of a reservoir’s oil in place
EOR—or tertiary recovery by injecting CO2—can un-trap a significant portion of what’s left. But going the CO2-EOR route is not for the faint-hearted. First of all, an oil field owner needs reliable access to large volumes of CO2—not just the natural or industrial source of the CO2, but a pipeline to deliver it to the oil field. The pipeline alone can cost tens or even hundreds of millions of dollars; then there’s the cost of the CO2 itself and the costs of injecting the CO2 (usually with intermittent injections of water), removing any CO2 from the oil produced, and recirculating the CO2 for another go-round. Large CO2 separation units can cost up to $50 million a pop. And CO2-EOR isn’t a sure thing.
It doesn’t work well on every field, and in some places it hardly works at all. As a result of the costs and the risks, most of the CO2-EOR projects out there (there are 110-plus, with more than half of them in Texas) are being undertaken by a relatively short list of companies that specialize in CO2-EOR or view it as an important element of their business. Occidental Petroleum (the king of CO2-EOR in the Permian) and Denbury Resources are two, but there are others.
By the way, it's my "feeling" that secondary recovery through waterflooding won't work in the Bakken.


Northern Oil & Gas announces increase to the borrowing base under its revolving credit facility agreement: Co announced an increase to the borrowing base under its revolving credit facility agreement with its bank syndicate.
  • The syndicate of 13 lenders completed its regular semi-annual redetermination of the borrowing base, resulting in an increase from $500 mln to $550 mln
... an increase from $500 mln to $550 mln, in case you missed it the first time.

Meanwhile, Oasis:
Oasis Petroleum Inc.  today announced that the lenders under its revolving credit agreement completed their regular semi-annual redetermination of the borrowing base, resulting in an increase to the borrowing base from $1,750 million to $2,000 million.  However, the Company elected to limit the lenders' aggregate commitment to $1,500 million.  The lenders' aggregate commitment can be increased to the full $2,000 million borrowing base by increasing the commitment of one or more lenders.  Oasis did not add any banks to the bank group.  The next redetermination of the borrowing base is scheduled for April 1, 2015.
I believe $2,000 million is $2 billion, but don't quote me on that.