Wednesday, October 15, 2014

What We Will Be Talking About Thursday -- October 15, 2014

Apple presentation.


The fact that the second nurse to come down with Ebola called the CDC prior to flying to see if she would be "allowed" to fly. She was told it would be safe for her to fly. CDC confirms the phone calls and that they told her it was safe to fly. Sources everywhere but here is one.

The Wall Street Journal

Top story: the second Texas nurse infected with Ebola did in fact fly round-trip from Dallas to Cleveland despite a) a history of caring for Ebola patient who died; and, b) knowing she had a fever.

In an effort to control Ebola, new focus on controlling air travel. Maybe someone needs to control the CDC.

Risk of deflation feeds global fears.

Consumer spending fell in September.

VA officials, at risk of being fired, can slow-roll the process, giving them time in service to retire.

Saudi Arabia, feeling ISIS heat, sentences cleric to death.

Extreme weather: twelve killed in Nepal (Himalayan) snowstorm; four feet of snow in a area popular with trekkers.

Italy and France intend to run bigger deficits longer than previously pledged -- EU will not be happy.

Wal-Mart sees rough patch for sales, profits.

Oil's price drop will help refiners.

Many trading and brokerage firms saw a sharp increase in calls from worried clients ...

Baker Hughes poised to ride out storm; the oil-field-services firm looks to maintain its edge, as underlying trends appear promising.

The Los Angeles Times

Top story: Ebola nurse flew with symptoms; CDC said flying was okay. 

President Obama wants Ebola "SWAT" team ready to go anywhere.

Elizabeth Pena dies at 55; actress in "La Bamba," and "The Incredibles." 

Break-Even Point In The North Dakota Bakken -- October 15, 2014

Regular readers know I won't post what I think break-even point in the Bakken is; I've said it's readily available in the corporate presentations.

Reuters reports the break-even point in various counties in North Dakota based on comments from state officials.
Costs per well can vary widely across North Dakota depending on a variety of factors, including the type of sand used in the hydraulic fracturing process, geology, weather and waste disposal.
Operating costs across the state have risen, on average, 36 percent in the past year to roughly $15,000 per well per month, Helms said. The jump is primarily due to larger amounts of water being produced with the oil, necessitating higher disposal costs, in addition to high diesel costs to fuel on-site generators at remote wells.
Trying to assuage concerns on Wall Street that falling oil prices could imperil the state's Bakken oil boom, Helms said oil extraction in McKenzie County, the state's largest oil-producing county, wouldn't become economically unfeasible until $28 per barrel, far below current oil prices.
Yet, Helms admitted, production in at least three North Dakota counties, including Divide County where American Eagle Energy operates, is economically unfeasible now.
Roughly 60 percent of the produced oil in August left via train, with 34 percent via pipe and the rest via truck, regulators said.
Date-time stamp for this article: Wed Oct 15, 2014 4:04pm EDT.

I posted this earlier today (October 15, 2014) but for various reasons pulled it off the blog.  

Twenty (20) New Permits -- North Dakota -- Newfield And BR Each Report A Nice Well -- October 15, 2014

Wells coming off confidential list Thursday:
  • 25833, 457, Fidelity, Weiler 21-16H, Heart River, Three Forks, initial production erratic, t5/13; cum 34K 8/14;
  • 26443, 908, Whiting, Ellison Creek Federal 21-1PH, Morgan Draw, Golden Valley County, Upper Pronghorn formation, targeting an 8-foot Pronghorn window; just below the Upper Bakken; the middle Bakken and Lower Bakken shale are not present here, gas units were low throughout; TF1, t4/14; cum 33K 8/14;
  • 27148, 1,920, BR, Old Arches 14-35MBH ULW, Keene, target middle Bakken, 20 feet thick; 13 feet below the top of the Upper Bakken shale; actual tops Upper Bakken shale 10,563; middle Bakken, 10,638; paragraph 4.2 in geologist report: (Target Zone: Upper Three Forks) -- was that an error; frack report says middle Bakken; permit app also says Bakken; 30 stages; 3.5 million lbs "other"; t8/14; cum 15K 8/14;
  • 27503, drl, Hess, BB-Budahn A-150-95-0403H-8, Blue Buttes, no production data,
  • 27731, 1,415, Newfield, Fleck 150-100-12-1-4H, Sandrocks, total drilling days, 25; middle Bakken; gas levels 1,000 to 4,000 units; an intermittent 2 - 10' flare; 38 stages; 4.3 million lbs sand; t8/14; cum 8/14;
  • 27769, drl, SM Energy, Tracy 13-35H, Camp, no production data,
Twenty (20) new permits --
  • Operators: CLR (6), QEP (4), MRO (2), Triangle (3), OXY USA (3), EOG, Whiting,
    Fields: Rattlesnake Point (Dunn), Heart Butte (Dunn), Murphy Creek (Dunn), Buffalo Wallow (McKenzie), Manning (Dunn), Clarks Creek (McKenzie)
    Comments: Whiting has a permit for a wildcat in Golden Valley County, 9-140-104;
Active rigs:

Active Rigs190184189195153

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

Do You Agree This Was Reason For Collapse? -- Fitzsimmons, Seeking Alpha -- October 15, 2014

Fitzsimmons over at SeekingAlpha: Libya's production was the single biggest factor causing collapse of share price of US fracking companies.
  • Libya was producing 1.65 million bpd of crude in 2010.
  • During parts of 2013, exports fell by ~1.4 million bpd.
  • Recently, Libyan production jumped by nearly 500,000 bpd from Q2 to Sept./Aug.
  • The rapid step-function changes in Libyan production was the single biggest reason behind the collapse of oil prices and domestic frackers' stock prices.
  • Meantime, ConocoPhillips looks very attractive after a $20 drop in the stock. 
This is not an investment blog. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you might have read here.

The October, 2014, Director's Cut Is Out -- North Dakota Bakken Has Now Produced One (1) Billion Barrels Of Crude Oil

I often make typographical and factual errors; if this information is important to you, go to the source, generally the NDIC.

Link here.

Only 6% of North Dakota oil is coming from legacy conventional pools.

A 1.6% increase month-over-month (the daily bopd).

Disclaimer: this update is always done in haste; typographical errors are likely. This is for my use only. Others should go to the source

  • August, 2014: 1,132,331 bopd (preliminary; new all-time high)
  • July, 2014: revised, 1,114,421 bopd
  • July, 2014: 1,110,642 bopd (initial report)
  • delta: 17,910 (daily bopd)
  • 17,910 / 1,114,421 = 1.6%
Producing wells: 
  • August, 2014: 11,563 (new all-time high)
  • July, 2014: 11,293
  • June, 2014: 11,079  
  • May, 2014: 10,902
  • September, 2014: 261
  • August, 2014: 273
  • July, 2014: 265
  • June, 2014: 247
  • All-time high was 370 in 10/2012
  • Today, 2014: $66.25
  • Sept, 2014: $74.50
  • August, 2014: $78.46
  • July, 2014: $86.20
Rig count:
  • Today: 190 (all time high was 218 on 5/29/2012)
  • Sept, 2014: 195
  • August, 2014: 193
  • July, 2014:  192
  • June, 2014: 190
Director's comments:
  • well completions increased from 197 in July to 270 in August with summer weather
  • drillers DID NOT outpace the completion crews: number of wells waiting completion (end of July) : 600 (a decrease of 30)
  • rig count in the Williston Basin is no longer increasing
  • US natural gas storage:  11% below five-year average
  • percentage of natural gas flared in North Dakota:  27% (up 1% from last month)
  • NDIC now breaks down location of captured gas: statewide (72%); statewide Bakken (72.5%); non-FBIR Bakken (74.4%); FBIR Bakken (64.5%)
EPA now looking to expand control/regulation of North Dakota oil and gas industry through "back  door" (my words, not NDIC words).

KMI Increases Dividend -- October 15, 2014

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

KMI increases dividend from 41 cents to 44 cents

How Serious Are Things In Washington?

No golfing on his schedule in quite some time.

He just canceled a fundraising trip. He must have been handed an intelligence report [on Ebola] that needs to be read. And with the Dow falling another 300 420 440 points, his donors might not be all that energized to open their wallets.

How serious is it? Spiraling out of control. And at least one CNBC anchor has said the US is "leaderless."

With Ebola, fortunately we  have ObamaCare. 

By the way, it now turns out that the second nurse who contracted Ebola called the CDC (the CDC confirms the calls) several times to ask if it was safe for her to fly despite the fact that she had a fever. Her temperature was 99.5 and because that did not hit the "risk factor" temperature of 100.4 she was "allowed" to fly by the CDC. Sources everywhere. 

Global Warming
Climate Change
Extreme Weather
Ice Age Now

Let's not forget global warming, the 25th issue on Americans' minds:

New Monthly Production Record For North Dakota; The August Production Numbers Are Posted -- October 15, 2014

Compare with July report (but July numbers are also in the graphic above):

August preliminary:
  • 35,102,258 / 31 = 1,132,331 bopd
July revised:
  • 34,547,044 / 31 = 1,114, 420 bopd
The raw data looks impressive, but the month-over-month increase seems to be only a 1.6% increase.

Reminder: I often misread data and I often make simple arithmetic errors. If this information is important to you, go to the source.

Total number of oil wells actually producing oil:
  • August:  11,563
  • July: 11,293
Per well:
  • August: 35,102,258 / 11,563 / 31 days = 98 bopd/well (steady for quite some time)
  • July: 34,547,044 / 11,293 / 31 days = 99 bopd
Global Warming: Now It's The Penguins In Trouble

Ice Age Now is reporting:
The growth of the ice sheet in Antarctica (South Pole), the habitat of the penguins, is about 16,500 square kilometers per year on average.
This is three times the area as compared to the measurements before 2007 and there is no end in sight.
The frozen surface of the sea around the Antarctic continent currently has the largest expansion in 35 years. This is a huge problem for penguins because they need open water where they can hunt fish.

Wednesday -- October 15, 2014

Active rigs:

Active Rigs190184189195153

RBN Energy: could a refinery re-start in the tropics?
In mid-September 2014 the joint venture partners in the shuttered St. Croix (U.S. Virgin Islands) HOVENSA refinery announced an agreement in principal to sell to a private equity fund. The refinery – shut since January 2012 - has been for sale since then but after losing $1.3 Billion in its last 3 years of operation has had trouble finding a buyer.
Today we look at the hurdles a new owner has to overcome.
The HOVENSA refinery used to supply most of its refined products to the East Coast. According to data from the Energy Information Administration (EIA) HOVENSA accounted for a monthly average 15 percent of all refined product imports to the U.S.
Atlantic Coast region – known as Petroleum Administrative District for Defense (PADD) 1 in 2010. That percentage dropped to 12 in 2011. The largest share of PADD 1 imports is from Canada with 28 percent in 2010 and 27 percent in 2011.
Since HOVENSA closed down in 2012, Canadian refined product imports to PADD 1 have risen to average 31% in 2012 and 37 percent in 2013. But as we described in blog posts back in July 2012, the advent of lower priced U.S. domestic crude has led to a recovery in East Coast refining – reducing the need for imports somewhat.
Booming refinery throughput in the Gulf Coast region has also expanded potential transfers of refined products from that region to PADD 1 but these are constrained by limited pipeline capacity between the two regions and the high cost of marine shipments arising from Jones Act regulations. The Jones Act requires shipments between U.S. ports to be made on U.S. flag vessels with U.S. crew and labor regulations, which increases the shipping cost by several $/Bbl compared to non-U.S. flag vessels.
The higher cost of Jones Act vessels has been exacerbated in the past two years by rising competition for tankers from producers shipping crude along the Gulf Coast and from the Gulf Coast to PADD 1 - increasing the freight cost further. As a result, prices for refined products on the East Coast have generally been higher than at the Gulf Coast and there have been periods of shortage – most notably during Hurricane Sandy in 2012 when the government issued Jones Act waivers to ensure adequate gasoline and heating oil supplies reached the Northeast.
So the HOVENSA refinery still has a potential market for refined products on the Atlantic Coast. And importantly in the context of the potential sale of HOVENSA - the refinery was previously and will continue to be - exempt from the Jones Act regulations – even though the USVI is a U.S. territory.
That means the refinery can ship refined products to PADD 1 at a lower cost than Gulf Coast refiners who are bound by the Jones Act provisions – a significant potential advantage for a new owner. Although the location of HOVENSA is not close to the U.S.; it is closer to Florida and New York than to the Gulf Coast.
US Energy Renaissance

Houston Business Journal is reporting:
Kinder Morgan Energy Partners LP said Oct. 14 that it will invest approximately $240 million to expand two terminals at the Houston Ship Channel.
The expansion will include the construction of 2.1 million barrels of storage between the Pasadena and Galena Park terminals.
It also includes building a new ship dock and infrastructure improvements at Galena Park, which will increase the terminal's vessel load rates to up to 15,000 barrels per hour.
Kinder Morgan announced a similar expansion last year.

Why is this important?
“The new tankage will provide refined product producers and traders the ability to send more barrels to the water for international exports or to the network of pipelines for domestic use,” John Schlosser, president of Kinder Morgan Terminals, said in a statement. “Kinder Morgan will now have nine ship docks on the Houston Ship Channel and will double the load rates on existing docks. We see continuing strong demand for transporting fuel to the Gulf Coast to reach export markets.”
Buried in the story, but perhaps just as important as it relates to Mexico:
Separately, Kinder Morgan also said  its Tennessee Gas Pipeline Co. successfully closed a binding open season for its South System Flexibility Project, awarding the natural gas supply arm of PetrĂ³leos Mexicanos 100 percent of the project capacity.
Kinder Morgan Energy Partners' Tennessee Gas Pipeline is a 13,900-mile pipeline that transports natural gas from Louisiana, the Gulf of Mexico and south Texas to the northeast section of the United States, including New York City and Boston.

Think about that. The Marcellus and the Utica are literally in New England's backyard and this Tennessee Gas Pipeline, all the way from Texas, is reserving 100% of the pipeline for Mexican natural gas. This should give folks an idea of a) how much natural gas the Northeast expects to use this winter; and, b) the pipeline constraints coming from the Marcellus and the Utica.

A Trapped Bear

Crashing oil prices could crush Putin Putin loses his closest friend: expensive oil.Vladimir knows what will move the price of oil higher.

Is Bismarck The Site? Two Headlines That Should Scare The Hell Out Of US -- October 15, 2014

I will close the most recent poll in which we asked where you thought the $4 billion plastics plant would be sited in North Dakota. I suggested Fargo would be #1 on the list and was wrong, wrong, wrong, and readers told me that immediately. [Remember: I specifically left Fargo off the list because I was so sure Fargo would be #1 -- shows you how little I know about manufacturing little plastic beads -- speaking of which -- if these little plastic beads could be made as hard as ceramic ....? Just joking.]

Here are the results of the poll (won't quite add up to 100 due to rounding):
  • Carrington: 4%
  • Jamestown: 18%
  • Devils Lake: 4%
  • Grand Forks: 9%
  • Bismarck: 31%
  • Minot: 33% 
Strong indications are it will be Bismarck. A huge thank you to a reader for providing the link. I assume that the company could still be looking but based on information provided by readers, Bismark-Mandan seems the best bet.

Is The Bakken A Pipe Dream? -- SeekingAlpha

Link here. This story is likely to be available through subscription only at a later date.
There are several shale deposits in the United States, which are believed to contain very high amounts of oil. The most famous of these are the Bakken Shale formation in Montana and North Dakota and the Eagle Ford shale formation in South Texas. In 1999, Leigh Price, a geochemist with the United States Geological Survey, estimated that the Bakken Shale contained between 271 and 503 billion barrels of oil. In April 2008, the North Dakota Department of Mineral Resources estimated that the portion of the Bakken Shale that is in North Dakota alone contains approximately 167 billion barrels of oil.
Unfortunately, not all of this oil can be extracted using current technology. Estimates of how much can be extracted vary widely, but the United States Geological Survey estimates that a total of 7.4 billion barrels of oil can be extracted from the Bakken and Three Forks formations in aggregate. According to the U.S. Energy Information Administration, the Bakken and Three Forks formations have total combined reserves of 2 billion barrels of oil. The Eagle Ford Shale in South Texas is similarly massive.
According to the Energy Information Administration, the proved reserves of the Eagle Ford Shale are 1.25 billion barrels of oil and 8.4 trillion cubic feet of gas. 
The oil that is found in these formations is much more difficult to extract than the oil found in more conventional deposits such as those found in Saudi Arabia or the Permian Basin. This is due to the geological characteristics of the regions. In tight oil deposits such as the Bakken, oil is encased in low permeability rocks. In order to extract the oil, the rocks must be broken apart. This is a technique known as hydraulic fracturing. In addition, accessing this oil typically requires the use of directional drilling techniques, which is a blanket term used to describe drilling an oil well in any direction other than vertically.
As might be expected, the difficulty of accessing this oil results in these wells being significantly more expensive to drill than a more conventional oil well. According to Morgan Stanley Equity research and the International Energy Agency, it costs $65 on average to produce one barrel of oil from North America's shale plays like the Bakken.
This estimate is supported by other sources. This makes producing oil in these areas more expensive than producing anywhere else in the world except from tar sands and in the Arctic.
The article has several flaws and several bad assumptions, but there are some interesting data points.  Regular readers of the blog will pick up on them immediately.

Two Headlines That Should Scare The Hell Out Of US

1. Second case of Ebola in Dallas from case #1 who came into the US from Ebolaland.

2. ISIS takes huge military base (unverified).

But the stories should scare US for two different reasons.

First: Ebola should be controllable / manageable in the US. The US is not west Africa. With Ebola, the only fear we have is fear itself. Unfortunately, we don't have an "FDR" in the White House. According to Gallup, 60% of Americans may agree with Jim Cramer who (on CNBC this morning) said the country is "leaderless."

Second: ISIS. I doubt many Americans are following this story. In fact, over at FoxNews (on-line) right now, not one story on ISIS -- except maybe deep down, one of the smaller headlines that few will even see. CNN is doing a better job reporting on ISIS/IRAQ. It's hard to believe that air strikes alone will turn this thing around. If ISIS streams into Baghdad -- like the Nazis streaming into Paris -- it will mark a huge turning point in the geo-political structure in the entire Mideast. The question at that point becomes whether ISIS will be happy with Iraq, or will be they be interested in more? History has shown how these questions are generally answered.

The younger generation won't remember how the Vietnam War ended for US: a) the president was picking bombing targets; and, b) US loyalists were air evacuated out of Saigon on helicopters.

Update, October 15, 2014, 1:28 p.m. CDT: it is being reported that US launched 23 air strikes October 14 - 15.  Again, the source is not reliable. But if accurate, that's amazing. That suggests that the coalition is running out of targets and/or 20 strikes in a 24-hour period is about the maximum that President Obama can manage by himself. I was on active duty in the Air Force during the US war on Afghanistan -- we ran out of targets very, very quickly. The same for ISIS: Toyota trucks with mounted armament, etc., do not represent a target.

More To Follow

I  have no idea how reliable this web site is; I'm not even sure who "runs it." But if this is accurate, a) Drudge Report will pick it up; and, b) it should scare the hell out of US.  It should be noted that CNN has not verified this story. CNN is confirming that ISIS has pretty much taken the entire province of Anbar where this base is located, and that the Iraqi Army is generally unable to stop ISIS. Something called "IraqNews" is reporting that the third largest Iraqi military base was taken by ISIS:
On Monday Iraqi military sources confirmed the fall of the military base of Hit, which includes a training camp and the base of the seventh division of the Iraqi army, after a major attack of the organization ISIS, using suicide car bombs and rocket-propelled grenades.
The military sources said that “the organization ISIS attacked the army base in Hit, the third largest military bases in western Iraq, from several axes, and carried out a series of suicide attacks on the walls of the base by car bombs, as well as a missile attack lasted about an hour which led to the storming of the base after the withdrawal of the army from it. “
In a related context, lieutenant colonel, Rahim Aljughaifi said that “ISIS  have seized the contents of the base and the training camp, including tanks, heavy weapons, munitions and stores, as well as spare parts and different military supplies,” adding that “the army had requested help of the international coalition during the attack on the base, but the latter did not respond’, asserting the control of ISIS on the three towns surrounding the base.”
Meanwhile, From Ebola Ground Zero (US)

A second individual in Dallas who cared for the first Ebola patient ever in the US has tested positive for Ebola.

For newbies, I live in the Dallas-Ft Worth metroplex. The big news coming out of Dallas is this: the local state health department in Texas can test for Ebola, but the CDC requires that samples be sent to Atlanta, GA, for testing. The locals say that sending samples to the CDC delay getting reports back to Texas.

Of course, conspiracy theories will start. Let's think about this. If you are the head of the CDC, and a sample in your laboratory comes back positive, who is the first person you are going to call? Yup, President Obama (obviously his staff will take the call, and who knows who will take the call if it comes in at 3:00 a.m. but that's another story). The first think the White House will say: "Hold that story -- hold the results -- until we can get a statement prepared. Give us 6 hours." The patient is already in isolation; holding the results for 6 hours won't make a difference medically, but the White House needs to get ahead of this to prevent panic in the street. Just saying.

Newbies to this site should be sure to read the welcome/disclaimer.

By the way, it now turns out that the second nurse who contracted Ebola called the CDC (the CDC confirms the calls) several times to ask if it was safe for her to fly despite the fact that she had a fever. Her temperature was 99.5 and because that did not hit the "risk factor" temperature of 100.4 she was "allowed" to fly by the CDC. Sources everywhere. 

Musings On The Slump In The Price Of Oil -- Not Ready For Prime Time -- Will Be Edited -- October 15, 2014


October 25, 2014: Forbes provides their list.

October 17, 2014: the NY Times on the slump in oil prices.  My feelings, exactly, in general. 
Original Post

This is a note I sent a friend yesterday afternoon. The note has not been edited yet for the blog. It is not ready for prime time. But I see some stories coming out today in the mainstream media and I want to get my own "musings" posted so I have the time-date stamp.

Here are my thoughts on the slump in price of oil.

Some thoughts, random.

1. I think there may be a disconnect in price between WTI and Brent (OPEC/Europe/Asia).  WTI used to follow Brent. 

We now have a high-producing country that bans exports (the US) and a country (Saudi) that will try to corner the European/Asian market. It will be a dirty fight between Russia and Saudi for the EU and Asia. [Update: crashing oil prices could crush Putin; a trapped bear is something to fear.]

In the US, the Northeast and California are the places to watch. If the US no longer needs imports, the Northeast US and California will have to get their oil from somewhere else. It seems the Bakken has the inside track (CBR to Vancouver; ship to San Francisco) to California; there are NO pipelines into California. It used to be all ships -- Alaska or Saudi. Alaska is decreasing; Saudi is more expensive than Bakken.

In the Northeast: the CBR is now entrenched between the Bakken and the Northeast and the Enbridge pipelines are coming (some already in place).

Texas, by default takes most of the rest of the country.

2. If you were XOM, would you rather hassle with terrorists and Ebola overseas, or just move to Canada, Bakken, Texas?

3. My hunch is that deep sea drilling could take a huge hit at low oil prices. Deep-sea drilling, in fact, may be the story no one is yet reporting. Brazil could be in deep trouble. Statoil, Norway, could be in deep trouble; they were having problems and now with slump in price, things are exacerbated. Britain's domestic oil and gas industry (North Sea) suffers, but their citizens will have a better winter, price wise for heating oil / natural gas. [This is the reason I posted this note earlier than expected. I wrote the note early on October 14 (yesterday), and sent it to a friend to review. I was going to spend more time on it, but stories are starting to appear that validate my thoughts. This was the story that forced me to post this before editing: from SeekingAlpha, falling prices are the last straw that break off-shore drillers' backs.]

4. Russia is in deep trouble. Russia may have to make huge concessions to companies like Schlumberger and XOM to keep them there. Sanctions complicate things.

5. I know I look through Bakken-colored glasses, but when I look around, the Bakken seems as good as any place to drill; better than most.

6. Canadian oil sands have always been said to be the high-cost play. If so, the Canadian oil sands are the "canary in the coal mine." If Canadian oil sands keep operating, it tells me that companies are able to adjust (at least in the short term) to very low prices.

7. Saudi can't do much but react in the short term. My hunch is the Hawks in Saudi will win out and they will severely cut production to get price back up. It takes the US out of their portfolio, but US imports from Saudi had been dropping anyway.

8. Unrest in Venezuela could be interesting if oil industry falters there.

9. Mexico: I don't know.

10. The most interesting development might be the dichotomy between North America and OPEC/Brent.  It's a very artificial commodities market when that part of the world producing half the global oil is not exporting oil (banned in US; pipeline/CBR constraints in Canada).

[Update: compare this list with Forbes list posted October 24, 2014.)

Musings -- January 7, 2015
A Note I Sent To Don
Not Ready For Prime Time

The last few days looking at daily activity reports made me think of this. This could be the year we finally see clarity which oil companies will be the big Bakken players.

For example:
  • we know Fidelity is out of the Bakken
  • OXY USA is still a mystery. They want out, but they continue to drill and get new permits.
  • Hess and Oasis remain really, really active. I think Oasis is going to be a big player, if not merged with someone
  • KOG, of course, is gone, and at one time (a year or so ago), it seemed Whiting wanted out but with buying KOG it is clear they intend to stay (unless bought out by someone bigger). 
  • CLR will always be here
  • EOG will always be here. My hunch is that EOG might be in the mood to buy Fidelity; not particularly good acreage, but they have relatively small amount of acreage compared to others
  • Hess will remain huge (the last thing I read on Hess suggests the Bakken may be their biggest play
  • SM Energy closes their Tulsa office, and exits Oklahoma; will focus on Bakken and Eagle Ford (that speaks volumes by the way)
  • WPX will continue to "fight" with the Indians on Fort Berthold
  • BR will keep busy in its locations
  • XTO seems happy. 
  • Statoil seems content (happy). Before it's all over, Statoil (Norway) may need more Bakken
  • MRO seems happy -- especially with re-fracking
  • QEP seems happy in the Grail area; it will be interesting to see their long-term game plan
  • Newfield, surprisingly, is still here and getting more active, if anything
  • Not publicly held, Petro-Hunt seems busier than ever in the Bakken
  • Not publicly held, Slawson, so-so. 
  • I think every thing else (Triangle, Emerald, Halcon, etc) are small potatoes. Small companies could be bought; unlikely to go into bankruptcy; probably sell before it comes to that. But another three months of daily activity reports (and hearing dockets) and watching to see who gets permits will tell the story
2. The permits, more and more, are for wells on six-well pads.
Instead of six wells on six different pads with three or four rigs, an operator will simply go to one pad for six wells with one rig. And they will drill those six wells in the amount of time it used to take two or three or four sequentially. The number of rigs, in my mind, reflects the amount of activity (busy-ness, trucks on the road, number of workers, etc) but the number of rigs reflects less accurately actual production. 
3. Another note: a story today talked about $8 - $10/bbl when shipped by rail, and thus another reason why the Bakken is hurt. I think the $8 - $10 / bbl figure is high, but if that is an issue, we're going to see less production in the Bakken, so operators can fill cheaper pipelines.

4. I don't know if you saw the story today -- but again, a story that folks forget about and I haven't written about in a long time: heavy vs light oil. US refiners need heavy oil -- much of which they get from Venezuela. That's why they are still interested in Keystone Canadian oil. The article did talk about mixing Bakken light oil with heavy oil to more nearly match Saudi oil "heaviness/lightness."

5. But of all the above, I'm most interested in watching the "Darwinian" survival of the fittest. For those operators who have the cash/credit facility/liquidity they could pick up some nice acreage. This will be interesting to watch.

6. By the way, SM Energy closing their Tulsa office, and exiting Oklahoma -- I have to check where SCOOP is in relation to where SM Energy was in Oklahoma, but as good as Harold Hamm says the SCOOP is, the  much smaller in scope. It's possible SM Energy didn't have enough acreage in Oklahoma to make it cost-effective to stay there (different than Hamm/SCOOP but it is interesting that they are leaving Oklahoma and there are NO (okay, few) transportation problems/costs getting their oil to Cushing.

Metric To Watch: Wells Waiting To Be Fracked -- October 15, 2014

When the August production figures come out today, this is the metric to watch: number of wells waiting to be fracked.

Wednesday -- October 15, 2014

West Capa oil field has been updated. If I recall, no new wells have been reported since I did the last update but there have been some significant increases in total production in some wells since the last update.

What surprises me most: this field is just across the river (in Williams County) from perhaps the sweetest spot in the Bakken (northeast McKenzie) and yet the wells in this field (the West Capa) do not seem as good as those across the river.

There is currently one rig operating in West Capa. There is another rig in the area, but it is in the Grinnell oil field just to the south.

What We Will Be Talking About Wednesday -- October 14, 2014

Note: again, in a long post there may be typographical and factual errors. I'll catch them in the morning. I was watching Argo [again] while posting some of this.  

Grinnell oil field has been updated.


Jim Cramer interviews Harold Hamm, CLR/CEO at this link: Huge "thank you" to a reader for alerting me to it.

The New York Times

Iraq's weapons of mass destruction. Link here.  


The Wall Street Journal

Global oil glut sends prices plunging. Who in the world would have ever believed we would have seen that headline! Started with the Bakken. Peak oil? What peak oil? Oil prices tumble, posting biggest one-day drop in two years. Overheard: crude consumption.

An awkward byproduct of the declining US inmate population is that states and localities are stuck with empty or under-utilized prisons that must be cared for but can't be easily sold or repurposed. Who in the world would have ever believed we would see this story!

US Supreme Court blocks some Texas abortion restrictions.

Ebola in west Africa, could hit 10,000 / week in two months. [Overnight, there was a second confirmed case of Ebola in Dallas. I wonder who the CDC who will blame this time?]

EU slipping into third recession in six years. How are those sanctions working out? How's that green energy working out? Merkel refuses to listen to ghost of Keynes.

President Obama pointed to some "important successes" after meeting with military leaders from around the world engaged in war against ISIS. This is confusing: Turkey continues its war against the Kurds, not ISIS. Actually, not.

Ireland to close tax loophole.

 Putting the Bakken Flaring Into Perspective

ExxonMobil and Shell are emitting more CO2 despite tapping less oil and natural gas. 
For every barrel they pump, the two biggest Western oil companies generated 10% more in greenhouse gases each last year than they did in 2011, according to company data.
“It’s a disturbing trend,” said Sister Patricia Daly, executive director of the Tri-State Coalition for Responsible Investment, a network of investors focused on social and environmental issues.
The rise in emissions reinforces the need for targets on reducing carbon, she said.
The coalition has filed proposals on behalf of Exxon shareholders asking the company to set targets for curbing greenhouse-gas emissions. The latest proposal, in June, received support from 22% of the shareholder vote.
Shell attributed its emissions increase to producing oil and gas that requires more energy to access, as well to lower production in Nigeria because of theft. Shell in its report projected that its direct emissions would rise in coming years “as our business grows and production becomes more energy intensive.” 
CSX: 3Q14 profit rose 12%.

Daimler generated more cash in the third quarter than expected as the German car and truck maker benefited from strong sales gains and improving profitability at its Mercedes-Benz luxury car business.

Low inflation is exacerbating the problems from slowing global growt,unnerving markets and putting the Federal Reserve in a bind.

The Los Angeles Times

Apple seeks to reverse slide in iPad sales. Link here. Thursday we will know what Apple has in store. 12:00 CDT.