Monday, December 1, 2014

It's Gonna Get Ugly; Statoil -- Rigzone -- December 1, 2014

I don't believe I posted this link to an article on Norway / oil for a couple of reasons. One reason: it didn't seem to mirror what I had been reading about Statoil recently, and the article seemed to have been written before the current slump in the price of oil.

I thought maybe I had been missing something, or misreading something about Statoil over the past year, but obviously not. Reuters via Rigzone is reporting, in a fairly long article:
After the failure of its risky exploration strategy this year, Norwegian oil firm Statoil is cutting costs as fast and deep as it can to preserve cash for dividends – and may be jeopardising future production in doing so, industry insiders say.
Statoil took a big gamble by committing major resources to what it hoped would be new discoveries in Angola, the Norwegian Arctic and the U.S. Gulf of Mexico.
They all failed, leaving two Tanzanian gas fields its only major finds in 2014. With no new prospects to drill, and a 35 percent drop in the price of oil since June, the company is now paying hundreds of millions of dollars to cancel or suspend a third of its exploration fleet in order to find the cash it needs to pay its dividend, which so far this year equalled nearly all of its 30.9 billion crown ($4.46 bln) net profit.
"They have gambled on the wrong horses," says Hilde-Marit Rysst, the head of labour union SAFE, which has thousands of employees with Statoil and its contractors. "They have spent too much and made too many commitments."
Statoil's problems are several but the root of them can be simply put: it spent too much money on long drilling contracts in exploration areas before ensuring there would be enough work. Additionally, it took out those contracts at the top of the market, paying record day rates to secure capacity. 
Much more at the linked article.

For more on Statoil (wiki).

Musings Written A Monday Evening, -- December 1, 2014; To Be Posted On A Long Tuesday

I linked to a similar story some days ago (about the proposed refinery on the reservation being put on hold). Here's an update with a bit more information. I particularly enjoyed the last paragraph:
The tribes broke ground for the Thunder Butte Petroleum Services project in May 2013. It is planned on land about 2½ miles west of Makoti, in southwest Ward County. It would be the first refinery in the United States in more than 30 years, according to the federal Interior Department.
".... the first refinery in the United States in more than 30 years." And that's the problem with the Federal government; can't even keep track of new refineries (one) in the last 30 years, and that was west of Dickinson supposedly ready for business this week. Maybe I misread something. If I did, I will correct it. Maybe they meant the first new refinery in Ward County, North Dakota, in 30 years. Whatever.

Just for the fun of it. Flashback to 2011, and then flashback to 2008.

Yellow River, Christie


I knew that the O'Bama administration was out of control with regard to spending, but I never checked in to see how bad "my" condition was in. Wow, zerohedge is reporting the US debt has increased 70% under Barry.

My hunch is that if Hillary can get herself re-elected, she will simply hit the re-set button and bring US debt back to zero (on paper). I don't know how she plans to do it, but what does it matter? One way to do it, would be to "re-label" US debt as something else, maybe "long-term, on-going American investment" chits (LTOGAI chits) -- pronounced "left to go" chits.

Speaking of "left to go" chits, it looks like Trump's Taj Mahal in Atlantic City, New Jersey, doesn't have much time "left to go," either. Unless, Carl Icahn, like a deus ex machina, can step in at the last moment, it's sayonara. It's hard to say exactly where the blame lies (note, the US economy was not mentioned). Certainly the 800-lb gorilla sitting in the casino's lobby didn't help prevent this trainwreck:
Trump Entertainment has been in talks with its union and state officials on ways to save the casino and its 3,000 jobs. They hinge on the union withdrawing its appeal of a court-ordered cost-cutting plan that terminated the contract with Local 54 of the Unite-HERE union, freeing the company from costly health insurance and pension costs.
 Did y'all notice that The Donald bailed early; only "owns" ten percent of his eponymous casino?

Hoods and Hammers

"Hands Up, Don't Shoot (HUDS) -- pronounced "hoods." With the cold-blooded killing of a young man in St Louis, it won't be long until we have "Hoods and Hammers." 

Speaking of train wrecks, there was another BNSF derailment -- sit down; this derailment a) did not occur near Casselton, ND, derailment capital of the Peace Garden State; and, b) did not involve Bakken crude oil. When you read the article note that emergency responders were on-scene, making cotton candy (spun sugar). Not really (I made that part up), but had they had the training they could have. If this had happened in the south, they would have had sweetened hominy grits for breakfast.

Memo To Saudi: Active Rigs In North Dakota Jump Six (6) Over The Weekend -- December 1, 2014; Ten (10) "High IP" Wells; 5/6 Wells Go To DRL Status

Saudi Texas, over at Carpe Diem.
  • September, 2014: 3.25 million bopd; not seen since at least 1981; fourth consecutive month over 3 million bopd
  • state production has doubled in less than 3 years
  • if Texas were a country, it would rank #7 in oil production
Would have made a great Secretary of Energy. Bloomberg is reporting:
“Will this industry slow down? Certainly,” [CLR/CEO Harold] Hamm said today in a telephone interview. “Nobody’s going to go out there and drill areas, exploration areas and other areas, at a loss. They’ll pull back and won’t drill it until the price recovers. That’s the way it ought to be.”
You're The Reason God Made Oklahoma, David Frizzell and  Shelly West

CNBC has been in Williston over the weekend/today -- I don't know for how long. I won't be posting any links to any of their stories specific to the Bakken (if I do, it will be very few). I think there are too many unknowns at the moment to start pinging with all the various videos. We will know more six months to a year from now. I'm not a bit worried, though I could be whistling past the graveyard as they say. However, I do have a comment: if the Chinese were to flood the US or the EU with solar panels, selling them below US/EU/Siemens/GE cost, one can assume what the US and the EU would do. I'll come back to this later when I'm in the mood. I am surprised by my own conclusion. But too busy to get into this now. 

Active rigs:

Active Rigs189191182196161

Compare with last Friday, two or three days ago, depending how you count. This is incredible, considering how miserably cold and messy the weather has been in the Bakken. The good news: the 8 - 15 day forecast looks great for North Dakota.

For newbies, the "active rig count" is taken directly from the NDIC website. It is subject to .... if this information is important to you, scroll through the list on a daily basis.

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

Wells coming off the confidential list Tuesday:
  • 26844, drl, XTO, Roxy 21X-6A, West Capa, no production data,
  • 27491, conf, Murex, Joey Danyale 27-34H, Writing Rock, producing, a very nice well; now off confidential on 12/9/14
  • 27548, drl, CLR, Lansing 3-25AH, Banks, no production data,
  • 27709, drl, BR, Haydon 44-22TFH-ULW, Elidah, no production data (wow, the Elidah is active)
  • 27951, 793, CLR, Raleight 5-20H1, Dollar Joe, t10/14; cum 1K 9/14;
  • 28216, drl, XTO, Rieckhoff 21X-3G, North Tobacco Garden, no production data,
  • 28286, drl, XTO, Carus 24X-36C, Lost Bridge, no production data,
Three (3) new permits --
  • Operators: Whiting -- all three
  • Fields: Arnegard (McKenzie), Sanish (Mountrail)
  • Comments:
Fifteen (15) producing wells completed:
  • 23301, 3,042, Statoil, Timber Creek 13-24 2H, Alexander, t10/14; cum 7K 10/14;
  • 25530, 1,383, Zavanna, Sylvester 32-29 2H, Springbrook, t11/14; cum --
  • 27003, 3,182, Statoil, Brown 30-19 3H, Alger, t11/14; cum --
  • 27307, 2,244, BR, Copper Draw 21-27MBH, Johnson Corner, 4 sections, t10/14; cum 5K 10/14;
  • 27309, 2,004, BR, Copper Draw 21-27TFH, Johnson Corner, 4 sections, t10/14; cum 9K 10/14;
  • 27696, 2,204, BR, Haymaker 41-15TFH-A, Elidah, t11/14; cum --
  • 27749, 602, EOG, Wayzetta 51-33H, Parshall, one section, t11/14; cum --
  • 27750, 467, EOG, Wayzetta 58-33H, Parshall, one section , t11/14; cum --
  • 27751, 799, EOG, Wayzetta 59-3334H, Parshall, two sections, t11/14; cum --
  • 27777, 359, Oasis, State 5792 31-15 7B, Cottonwood, t8/14; cum 17K 10/14;
  • 27860, 2,351, KOG, P Wood 154-98-16-23-14-1H3, Truax, t10/14; cum 4K 10/14;
  • 27861, 1,946, KOG, P Wood 154-98-16-23-15-1H, 4 sections, Truax, t11/14; cum --
  • 27862, 2,205, KOG, P Wood 154-98-16-23-14-1H3A, Truax, t10/14; cum --
  • 27863, 2,080, KOG, P Wood 154-98-16-23-14-2H3, Traux, t11/14; cum -- 
  • 28235, 683, Statoil, Myron 9-4 7H, Squires, t11/14; cum --
Two operator transfers to note, both from Newfield to KOG:
  • 19859, 1,102, KOG/Newfield, Chameleon State 153-97-16-21-1H, Banks, t7/12; cum 98K 10/14;
  • 22621, 1,561, KOG/Newfield, Chameleon State 153-97-16-21-2H, Banks, t7/12; cum 79K 10/14;

Memo To Saudi: Active Rigs In North Dakota Jumped By Two Today -- December 1, 2014

Considering the miserable weather and how incredibly cold it is, I find it quite remarkable. All things being equal (forgetting about the slump in oil prices), I would have expected the number of active rigs to decrease today. Whatever. And yes, it may be temporary. By next spring, the Bakken may be closed. Whatever.

Here are some ND temps, sent to me earlier today by Don:
  • Northgate (Burke county): -26
  • Tioga: -24
  • Garrison: -23
  • Jamestown and Belcourt: -22
  • Minot AFB and Glenburn: -21
  • Williston, Mohall and Rolla: -20
  • Minot and Willow City: -19
  • Bismarck, Carrington, Hazen and Linton: -18
Active rigs:

Active Rigs187191182196161

As Long As The Saudis Want To Give Their Only Resource Away -- December 1, 2014

I don't think there is any fracking in Arizona. Nonetheless, a really, really big earthquake has just been reported -- magnitude 4.7 in the Flagstaff region. Really, really big? The 4.7 is 10 - 1,000 times "bigger" (shaking amplitude) than the really, really small quakes being reported in fracking country. LOL.
The U.S. Geological Survey says the magnitude-4.7 temblor that hit Sunday night was centered 7 miles north of Sedona and 6 miles underground.

Wells coming off the confidential list over the weekend, Monday have been posted, with their IPs.

As long as the Saudis want to give their oil away for $60 -- how long have I been saying that? Now Bloomberg is reporting:
China is emerging as the winner from OPEC's battle with rival oil producers as the world's biggest energy consumer stockpiles crude.
The nation's efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects Ltd. That's more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week. Brent crude has slumped 41 percent from its peak in June.
This link was posted earlier; a story that needs to be closely read. See below.

For me, I think there are two stories that need to be followed, with regard to the Saudis:
  • were the Saudis surprised to see the price of oil fall this far, this fast, this soon?
  • exactly what is meant by protecting "their" market share?
I noted earlier (on more than one occasion) that it should be relatively easy for one (1) to two (2) million bopd to come off production (and I've listed the areas that would be hit first). Here's one example, in Yahoo!In-Play today:
Marathon Oil announced that the Jisik-1 exploration well has discovered multiple stacked oil and natural gas producing zones (MRO): Oil and natural gas shows were noted over an extensive gross interval of both Jurassic and Triassic reservoirs. A drill-stem testing program yielded a sustained flow rate of 6,100 barrels per day of oil, and multiple non-associated gas zones flowed at a combined rate of approximately 10-15 million cubic feet per day, without stimulation, together with associated condensate, all of which were equipment constrained.
The Jisik-1 well will be suspended for potential future use as a producing well.
Something tells me that this well's production would not be suspended if oil was (were?) selling for $200/bbl.

This well is in the semi-autonomous region of Kurdistan.


Active rigs:

Active Rigs185191182196161

RBN Energy: crying time at OPEC? Not as long as they don't mind giving their only resource away.


I apologize. This will be the third time I've linked this article. The Telegraph is reporting -- the Saudis risk playing with fire. (Again, for newbies: the indentations are quotes from the linked article -- in other words, their words, not mine.)

First: the comments that follow the article at the link are incredibly inane. Whatever.

Second: how big is the the "Bakken"? (Remember my three-part definition of the "Bakken.")
There is no question that the US has entirely changed the global energy landscape and poses an existential threat to OPEC. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria.
Third: compare The Telegraph writer's list to the vulnerable spots around the world to my list, posted several times in the past few weeks:
  • North Sea (off-shore)
  • ultra-deepwater ventures in the Atlantic off Brazil and Angola (off-shore)
  • Canadian oil sands
  • the Arctic
Fourth: countries that could ignite/implode
  • Nigeria, a full-blown economic and political crisis could turn the north into a Jihadi stronghold under Boko Haram
  • The Maghreb: The growing Jihadi movements in the Maghreb (western and northwestern Africa) – combining with events in Syria and Iraq – clearly pose a first-order security threat to the Saudi regime itself; parts of Libya have pledged support to ISIS
  • Algeria (part of the Maghreb): represents a new worry; the Bouteflika regime goes into its final agonies. “They have an entrenched terrorist problem as we saw in the seizure of the Amenas gas refinery last year. These people are aligning themselves with Islamic State as part of the franchise." Algeria exports 1.5 million bopd of petroleum products
  • Iraq: open question what will happen
  • Libya: open question what will happen 
And the article concludes:
The Sunni Salafist tornado sweeping across the Middle East – so strangely like the lightning expansion of Islam in the mid-7th century – is moving to its own inner rhythms. It is not a simple function of economic welfare, let alone oil prices. 
Fifth: the break-even costs. By the way, I consider the issue of "break-even" costs very similar to IPs and rig counts; the break-even costs are useful as a single data-point but not particularly useful in the big scheme of things, despite all the interest. In addition, IPs and rig counts are subject to error, misinterpretation, and manipulation, but "break-even" costs are much more so.

Just one item, as an example, from the linked article, that is incredibly important in the Bakken:
The “full cycle” cost for shale production is $70 to $80, but this includes the original land grab and infrastructure.
“The remaining CAPEX equired to bring on an additional well is far lower, and could be as low as the high-$30s range,” he said.  
The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.” 
By the way, ask an analyst: is the break-even cost the "break-even cost of one week ago" or the "break-even cost of one month from now"? That makes a huge, huge difference. 

By the way, that $28/bbl break-even price is the lowest I have heard; several months ago, it was said to be $37/bbl -- from a reliable source.

Interestingly enough, one country was barely mentioned in that linked article. One individual, by name, was not mentioned at all.

On another note, CNBC sees "barbarity and looting" in Venezuela's future.

Flashback, November 25, 2014: OPEC's most important meeting in years.


A big "thank you" to RBN Energy for the idea. It's hard to find really good Emmylou Harris songs on YouTube.

It's Crying Time Again, Emmylou Harris and Buck Owens