Monday, December 8, 2014

Anticipation -- December 8, 2014

This really is a great article, and says so many positive things about NDIC. John Kemp, Reuters at Rigzone is reporting:
Fortunately, drilling activity in North Dakota can be tracked in real time. North Dakota's Department of Mineral Resources (DMR), which regulates oil and gas drilling in the state, publishes comprehensive data on drilling permits in its Daily Activity Report, a monthly summary entitled the Director's Cut, as well as a daily list of rigs operating in the state, all on its website (
The department also publishes comprehensive monthly data on the number of wells and their daily output. In addition, public data is available on prices that Bakken producers are able to realise for their crude from buyers such as Plains Marketing, which posts standardised buying prices on its website (, as well as from the DMR.
It is a very, very good article, pretty much devoted to the Bakken. And best of all, it corroborated my comments regarding permitting.
The first point to note is that while oil prices have been falling since mid-June, the volume of drilling activity, as measured by applications for new permits, has shown no sign of slowing so far.
In October, exploration and production companies filed for permits to drill 328 new wells, the second-highest number on record.
In the weeks since then, there has been no clear evidence of a slowdown, according to the daily lists published by DMR.
The sharp drop in prices should eventually feed through into less drilling and slower output growth, but there is no sign of that happening yet. Prices will affect drilling only with a lag, since most rigs are contracted weeks and months in advance and are likely to continue operating until their current work programmes are complete. Once the current drilling programmes are complete, however, exploration and production companies are likely to contract for much smaller ones in future if prices do not rise.
Actually, it appears the number of permits have started to slow down in the past six business days; we will know by the end of the month.


Christmas (Baby Please Come Home, Darlene Love

This will be Darlene Love's last year in which she will perform her Christmas classic on the David Letterman show. On her Facebook page, on December 2, 2014, she said there were 17 days left until she appeared for the last time on David Letterman -- that would make it Friday, December 19, 2014, I would guess, but don't hold me to that.

TPLM CEO's Thoughts On The Current Slump In Oil Prices -- December 8, 2014

For folks interested in how one CEO thinks about the current slump in oil prices, highly recommend that you read the TPLM 3Q15 transcript of their earnings call.

So, at this point, after reading the transcript, what would be the best thing to take a look at right now?

I don't know the answer to that. I know that watching my older granddaughter at water polo right now is pretty rewarding.

Just trying to put things into perspective.

With regard to the comments made by the TPLM CEO, I think this graph is most enlightening, WTI spot price at Cushing, as reported by the EIA:

Point A:  $71/bbl, August 18, 2006

The Peak: $145/bbl, July 3, 2008 (two years later, more than doubled)

The Trough:$30/bbl, December 23, 2008 (yeah, that got someone's attention -- and you know -- we all survived)

Point B: $112/bbl, April 27, 2011 (quadrupled less than 3 years)

The Bakken was clearly in the EXPLORATORY phase between 2006 and 2011. Shoot, the North Dakota Bakken did not "begin" until mid-2007 and, based on rig counts, was most active in 2011. The growth in activity between 2007 and 2011 was incredible, despite the volatile swings, and one can argue, the Bakken, as a whole is in a lot better shape today than it was in 2007 - 2009.

And maybe I'm just whistling past the graveyard.

What A Mess -- Coal -- December 8, 2014

There are too many parts to this coal story, so I won't comment on it, but to simply link it.The Casper StarTribine is reporting:
An Australian company behind two proposed coal ports in the Pacific Northwest recently sold its North American assets to a Denver private equity firm in an apparent bid to stave off a cash crisis, regulatory filings show.
Ambre Energy, of Brisbane, will sell two Rocky Mountain coal mines and its stake in export docks planned for Oregon and Washington to Resource Capital Funds for $18 million, according to company filings with Australian regulators.
Resource Capital Funds is a long-standing investor in Ambre, maintaining a voting position on the company's board and loaning its Australian partner at least $95 million.
The deal came as Ambre racked up debt, and it followed Oregon regulators' rejection of the company's plans to ship nearly 9 million tons of coal annually from facilities on the Columbia River.

One-Half Of New Bakken Wells To DRL Status; WPX With A "High IP" Well; Eight (8) New Permits -- North Dakota, USA -- December 8, 2014

Wells coming off the confidential list Tuesday:
  • 27179, 767, EOG, Austin 90-01H, Parshall, 25 stages; 7.7 million lbs; drilling rig, 10 days, reported gas units low; one section, t6/14; cum 91K 10/14;
  • 27180, 480, EOG, Austin 91-01H, Parshall, one section, 25 stages; 7.7 million lbs; drilling rig, 12 days; gas as high as 3,000 units; one section; t7/14; cum 69K 10/14;
  • 27240, drl, Slawson, Waterbond 3-27-34H, Van Hook, no production data,
  • 27491, 208, Murex, Joey Danyale 27-34H, Writing Rock, a Three Forks B1 well; gas units max about 1,000 units; 14 days spud to TD, 37 stages; 3 million lbs, t8/14; cum 25K 10/14;
  • 27928, drl, XTO, Gilbertson 11X-26F, Charlson, no production data,
  • 28102, 2,917, WPX, Lucy Evans 29-32HB, Antelope, a Sanish well, t11/14; cum 2K 10/14;
  • 28355, drl, BR, CCU Pullman 3-8-7MBH, Corral Creek, no production data,
  • 28577, drl, XTO, Rieckhoff 21X-3E, North Tobacco Garden, no production data,
Eight (8) new permits --
  • Operators: Hess (5), OXY USA (3)
  • Fields: Blue Buttes, Fayette (Dunn)
  • Comments:
Wells coming off confidential list over the weekend, today were posted earlier; see sidebar at the right.

The commission received seven (7) permit requests from XTO to drill wells on one pad, SWSW 36-148N-96W, Dunn County, Bear Creek oil field; to be called TAT State Federal 14Xwells: 14X36A, 36E, 36B, 36C, 36G, 36D, and 36H. I assume these 7 wells will be placed on the same pad where this well is currently located:
  • 18797, 1,743, XTO, TAT State Federal 14X-36F, Bear Creek, Three Forks, 24 stages; 2.7 million lbs; gas units spiked to over 10,000 units, t3/12; cum 229K 10/14;
Active rigs:

Active Rigs191193181202165

EOG To Divest Majority Of Canadian Interests -- December 8, 2014; TPLM's Conference Call -- 3Q15 Results

Press release here
EOG Resources, Inc. today announced the divestiture of all its assets in Manitoba and certain assets in Alberta in two separate transactions that closed on November 28 and December 1, 2014.
Approximate proceeds from the divestitures were US$ 410 million, net of customary transaction adjustments. As a result of these transactions, approximately US$ 150 million of restricted cash related to future abandonment liabilities was released. The proceeds and cash will be utilized for general corporate purposes.
Current forecast production from the divested assets is approximately 7,050 barrels of crude oil per day, 580 barrels of natural gas liquids (NGLs) per day and 43.5 million cubic feet of natural gas per day.
Net proved reserves divested are estimated to be 7.7 million barrels of oil, 0.8 million barrels of NGLs and 78.7 billion cubic feet of natural gas. EOG divested 1.3 million gross acres (1.1 million net), 97 percent of which were in Alberta. Of the approximate 5,800 producing wells sold, 5,255 were natural gas.
EOG has retained approximately 382,200 gross acres (282,100 net) in Alberta, British Columbia and Saskatchewan. EOG will maintain an operations office in Alberta.
"This decision is consistent with EOG's focus on its outstanding U.S. crude oil opportunities. We plan to reinvest some of the proceeds in these high return assets, while retaining our position in the Horn River Basin and other exploration areas," said EOG Chairman and CEO William R. "Bill" Thomas.
TPLM: 3Q15 Conference Call

Link here. Data points follow. In a long note like this, typographical and factual errors may occur. If this information is important to you, go to the linked article. Some numbers rounded.

  • 1.125 boe for third quarter; 12,230 boepd
  • TD drill times: 14 days; down from 18 days in previous quarter
  • several recent wells: 10 days to reach TD
  • cost per well: $9.5 million and some less than that
  • will manage 4Q15 activity in line with slump in oil prices
  • increased pipeline capacity tied in with Enbridge
  • freshwater pipelines will mitigate winter weather and road delays 
  • 101 of 113 wells connect to gas sales
  • more efficient: recent TF wells delived a 55% improvement in 90-day production compared to the company's first three TF wells
  • past quarter: 17 Triangle wells; 26 third-party wells; total wells completed are up 26% over previous quarter
  • initiated first significant third-party wireline work (two cased hole wireline trucks)
  • $174 million 
  • of that, Triangle USA contributed $80 million
  • of that, RockPile contributed $94 million
Credit facility:
  • raised to $1 billion (doubled)
  • for next four quarters (full year): 5,700 boepd hedged
  • "... we do expect activity levels to soften across the industry ... difficult to predict the magnitude and duration of this reduction or the effect it will have on our business. However, we believe that any significant drop in activity will be manageable and could result in a strong recovery."
CEO's primary talking points on the slump:
  • the duration of low oil prices will be short-lived
  • Triangle is managing its business as if it will last 12 to 18 months or longer for prices to recover
  • CAPEX program will be released in January/February 2014; stand-alone leverage will be the primary determinant of capital spend next year
  • we will spend significantly less in FY16; we have no acreage HBP or rig contract issues that would force us to drill more than we want or that is economically justified
  • 1 rig or 3 rig? we don't know; currently 4 rigs but it will be much reduced in FY16
  • goal: free cash flow across our enterprise of $70 WTI and free cash flow neutral or as clase to free cash flow neutral as possible at $60 WTI
  • cost structure for each well has been based on $100-oil; that cost structure will not persist in a $65-oil world
  • with RockPile and Caliber, even if our boepd falls 50% next year, which would be a draconian outcome, that still means our integrated model provides us with a huge advantage
  • our business can comfortably endure an entire year of $60 oil while still growing total produciton, reserves, and staying with our internal generated leverage ceilings
  • CEO makes a great comparison between global oil and global natural gas -- something I had written in a personal note to a reader earlier today (before seeing this article)
  • the longer prices stay low, the more the pendulum will swing towards higher prices on either side. What that means is the period to take advantage of the current situation may prove short-lived
  • most of our near-term activity will be in McKenzie and Williams counties
  • will perform their first slickwater frack in January
Oh, The Irony Of It All

A personal note from a reader; I've edited it for obvious reasons. The reader says he got this from a local policeman over the weekend:
Over the weekend, there was a protest in one of our larger US cities; mostly white protestors, some blacks. Many of the protestors were filming the police, including one white female. She was holding her amera in the air when a black male grabbed her phone and took off into the crowd.

The white female approached one of the policeman (race n/a) and asked for help. The policeman raised his arms and said, "Don't call the police."

The white female was quite distraught: "It's your job to protect me and my property."

The policeman replied: "You are protesting against us, asking us NOT to do our job."

She walked away crying.

Lessons taught and learned:
  • one policeman is not going to rush in an obviously hostile crowd;
  • the police had orders to keep the protestors on the sidewalk; their priority was not to apprehend phone snatchers; in a volatile situation like that, property crimes take a backseat to the overall picture; and,
  • hate the police ... until you need them.

Eric and Barry's legacy.

Global Warming To Bring Huge Cold, Snowy Storm To Northeast US

A second nor'easter in two weeks will slug the Interstate 95 corridor starting Tuesday, prompting winter storm watches and warnings in six states. The storm is expected to arrive Tuesday with strong winds and 2 inches of rain from Maine to New Jersey.
A second nor'easter in two weeks. Wow. 

No, Virginia, The California Drought Not Due To Global Warming

Being tweeted now, 1:50 p.m. CT, December 8, 2014:  NOAA report says California drought mostly due to natural causes, not global warming - @capitalweather

No, Virginia, Ebola Is Not Easy To Catch

Being tweeted now, 1:50 p.m. CT, December 8, 2014: Ebola death toll in Sierra Leone, Liberia and Guinea reaches 6,331, as the number of cases in Sierra Leone overtakes number of cases in Liberia, World Health Organization says - @Reuters

A reminder:
Ebola was first identified in 1976 in an area of Sudan and in Zaire. Through 2013, the World Health Organization reported a total of 1,716 cases in 24 outbreaks. The largest outbreak to date is the ongoing epidemic in West Africa, which is centered in Guinea, Sierra Leone and Liberia. As of 1 December 2014, this outbreak has 17,590 reported cases resulting in 6,556 deaths.
So, from 1976 to 2013, 24 outbreaks, with a total of 1,716 cases in those 24 outbreaks. In comparison, for a disease that is not easy to catch according to the Obama administration, in the current outbreak, less than two years old: 17,590 cases (more than 10x as many as in the previous 37 years. No one seems to be asking: what's the difference this time?

Monday, Monday -- December 8, 2014; Berkshire Hathaway Up Nicely Today


Later, 11:04 p.m. CT: although the market pulled back, way back (about a hundred points), I see CNBC noticed the same thing I did: Berkshire Hathaway trading at all-time highs. Buffett's wealth balloons
Original Post

I have just finished the biggest part of the blogging day. So, you all may want to come back later tonight when I hope to have more updates.

Based on what I've read so far this morning, I'm in a pretty good mood. Oil continues its free-fall, now down over 3%, and the equity market is clawing its way back to positive territory. I find that interesting -- the near-term disconnect between the plunge in oil prices and the Dow trading at new highs. If the market has priced in $55 oil, it makes sense, doesn't it?

Remember: 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. Make no travel plans based on what you read here. I post quickly and frequently; typographical and factual errors are likely. If this information is important to you, go to the source.  

There is one man that has taken a huge bet on America. And he says that every year. He really said it when he bought BNI (BNSF) some years ago. So, in today's "down" market, I was curious how BRK-B was doing. I did not expect this. BRK-B is up almost 1.5% -- this is quite incredible. There are two headlines for BRK-B today:
  • Berkshire Hathaway wins Singapore license
  • Cheapt oil isn't the only reason Warren Buffett's latest fracking bet looks so risky
I'm curious. What was Warren's "latest fracking bet?" Oh, that? Lubrizol purchasing Weatherford International's engineered chemistry and drilling fluids. The writer is worried about CO2 fracking. Okay. Won't happen in Warren's investing lifetime.

The bigger story is the Singapore story. Just a few days ago, the blog mentioned Singapore in a different setting. Singapore was #71 on BloombergBusinessweek's list of 85 disruptive ideas over the past 85 years.

What is UNP doing? down almost 2% -- probably on back of continued slide in oil prices?

T? up slightly in a down market. And paying more than 5%. And a secure dividend.

ENB down almost 4%, but dividend will make big different.

The Market

The big question for many: how will the slump in oil prices affect the overall market and global economy. My thoughts:
1. I think the bigger companies, and Saudi Arabia, are protected with hedges through first half of 2015. [Later, see first comment -- generally integrated oil companies -- and probably countries -- don't hedge; they refine.]

2. In the short term (one year, maybe two years), regardless of where oil finally settles, there has been a massive "re-set" of market value of all oil companies. That won't change in the near term, and I think it has pretty much already reflected in the market.

3. In the long term (at least 2 years, maybe it will take 3 years), the price of oil will move back to $100-oil in 2014 dollars.

4. If one thinks the "re-set" for the oil industry has already taken place, then the oil sector (the "direct" oil sector) won't have much more negative impact on the market.

5. If the oil industry cuts back big time then the indirect industries are yet to be affected: making tank cars for the railroads, laying pipeline, etc.

6. However, in the big scheme of things, most of the world does not produce oil and most of the world is not directly involved providing resources for oil (China, being a a good example). So, one has to argue whether the huge drop in the price of oil will help the global economy or hurt it.

7. If oil levels out where it is right now, I'm betting the global economy benefits. Europe, China, India, and Japan will all benefit from lower oil prices.

8. For the US, I think folks are starting to see exactly how formidable the US is in regard to energy -- all forms of energy. Don sent me a link to a great story that supports that view; I will get back to it later.
The break means this post may be updated later.

The Real Cost Of Renewables -- December 8, 2014

I have a tag, "CostRenewables" at the bottom of the blog.

I most recently posted the "real cost of electricity" at this post.

A reader sent me this information. Though it's a bit dated, I doubt it has changed much, certainly not in a qualitative or relative sort of way:
Below are the statistics on the cost of power generation in 2011 from the Australian Government’s own Productivity Commission:
  • coal fired power station $79 per Mw/h (megawatt/hour) 
  • natural gas fired power station $97 per Mw/h – or 1.2 times the cost of coal power 
  • wind power $150-214 per Mw/h – or nearly 3 times the cost of coal power 
  • solar power $400-473 per Mw/h – or nearly 6 times the cost of coal power

Monday Morning -- December 8, 2014; North Dakota Taxpayers' Income Has Doubled Over The Duration Of The Boom (Since 2006)

This page is now completed; no new entries; errors will be corrected if noted.

There are going to be some huge wells reported today in the Bakken. I'll update them later, but here are the four I'm interested in today:
  • 28330, 1,716, CLR, Salers Federal 3-27H, Antelope, a Sanish well, t10/14; cum 41K 10/14;
  • 26608, 1,601, Enerplus, Courage 150-94-06A-18H, Spotted Horn, t6/14; cum 146K 10/14;
  • 27283, 4,523, Whiting, Skaar Federal 41-3TFHU, Twin Valley, t6/14; cum 144K 10/14;
  • 27284, 4,934, Whiting, Skaar Federal 41-3TFH, Twin Valley, t6/14; cum 176K 10/14;
Some quick comments:
  • spend a few moments looking at those numbers, and thinking about them
  • remember: Whiting said they were going to do some new completion techniques
  • remember: the Whiting, NCS, coiled tubing story, records set
  • how often does one see 41,000 bbls of oil in the same month as the test month? Answer: not often (#28330)
  • how often does one see 150,000 bbls in 4-5 months; answer: not often
  • how often does one see 175,000 bbls in 4 -5 months; answer: even less often
Totally Unexpected

Active rigs:

Active Rigs191193181202165

Totally unexpected. I was looking for 183.


RBN Energy: Permian pipeline projects continue despite price cash.

Hey, by the way, did you all see that story yesterday that the Bakken has regained its position as the largest "shale" play in the US? I assume the Permian is one of the "shale" plays in the US though it is historically not a shale play. And yes, there is a difference between "shale" and "tight" but I'm not going to go into that now.

North Dakota Taxpayers Are Paying More State Taxes

... but for a good reason. Look at this
Reported income by all North Dakotans has more than doubled to a record $30.4 billion since the infancy of the state's oil boom in 2006, tax return filings show.
Venezuela -- Oh, Oh

CNBC is asking: will low oil prices push Venezuela toward default? Regular readers know where I rank Venezuela on the "pain list" with regard to the slump in the price of oil.


Yesterday I posted a great story on the backlog of rail cars -- the link was sent by a reader. Today, coincidentally, over at Yahoo!In-Play:
Greenbrier announces orders for 14,100 railcars valued at $1.24 bln; orders include 11,400 units valued at nearly $1 bln, which GBX previously disclosed on 10/30 : Co announced that it received new orders in its first quarter ended November 30, 2014 for 14,100 railcar units valued at $1.24 billion.
  • Orders for the quarter include small-cube covered hopper cars for sand and cement transportation, boxcars, double-stack intermodal units, automobile carrying cars, gondolas and tank cars, both for crude oil and other commodity types.
Those are just new orders.

The Euro -- Oh, Oh

I can't recall if I've ever posted it, but I've always predicted it. A talking head over at CNBC is predicting the demise of the Euro within the next three years.

Those Who Like Cash -- Oh, Oh

The Wall Street Journal is reporting that banks are urging some of their largest customers in the U.S. to take their cash elsewhere or be slapped with fees, citing new regulations that make it onerous for them to hold certain deposits. This has been reported for the past two years in various forms and sources. One can thank US Congress. I'm only a spectator; no bank has asked me to take my cash elsewhere, and yes, I still have no-fee banking.

Reason #24,999 Why I Love To Blog -- Reader's Input -- December 8, 2014

Last night I updated the Whitman wells. (For newbies, note one of the wells has already produced in excess of 1.1 million bbls of oil). I didn't bother to note that I had updated the wells; I am always updating earlier posts and updated production numbers.

But I was tempted to note the update when I saw the production of those wells.

This morning, coincidentally, I received this note from a reader:
Speaking of big wells for CLR. Remember the Whitman in the Oakdale field? Part of the Hawkinson Whitman Eco pad a few years ago. 
Looks like CLR got approval to either extend or replace the Whitman TF1 well that was part of the 2560-acre spacing unit. 
Looks like future plans include drilling the Whitman 1280 out to 14 wells including the eco pad wells. See order #24085 and case #21756. 
Note the updated layout for the 14 wells on the new plan. Do you suppose this is one of those areas I have heard mentioned that could be profitable at $25.00 oil?
I am always busy first thing in the morning. I will come back to this one later.


In a long note like this, there may be factual and typographical errors; in addition, I often misinterpret file reports due to lack of formal training and/or education. If this information is important to you, go to the source. I was also in a rush to complete this, increasing the likelihood of errors. 

I don't have "Premium Services" so I don't have access to NDIC orders. But with Basic Services, I do have access to file reports.
Case 21756: Application of Continental Resources, Inc. for an order to establish appropriate spacing for the Whitman #3-34H well, (Well File No. 20212), located in the NWNE of Section 34, T.147N., R.96W., Oakdale- 
The 1280-acre unit: sections 34/3. [34-147-97 and 3-146-97 but this well is spaced for 2560-acres according to the scout ticket. The GIS map server also shows 2560-acre spacing; I can't tell for sure, but I believe this particular 2560-acre unit would be 34/35-147-96 and 3/2-146-96.

CLR provided a graphic of its drilling plans for the Hawkinson pad back in November, 2013. A lot has been posted over the past two years about the Hawkinson wells; a "Hawkinson" search on the blog will take you to any number of interesting posts on the Hawkinson.

Someone will  have to help me out on this one, note this about #20212: the horizontal never reached planned TD; the file report suggests the reason. So, now look at the length of the lateral: only about 2,000 feet. A typical short lateral in the Bakken is about 4,500 feet; the typical long lateral in the Bakken is about 9,000 feet. According to the well file:
Overall, the majority of the well was drilled in the target zone. Samples were mostly composed of a clean dolomite. 5% oil shows were observed until 12,500' MD. Oil shows then quickly rose to 30% and remained for the rest of the lateral. Gas shows ranged from 1500 - 3000 units from casing unitl 11,800' MD. Gas rose and was observed to be between 4,000 - 5,500 units, sometimes reaching 7,000 units. The well was TD at MD of 13,548' and a TVD of 11,427' after attempts to control and kill the flow and pressure failed.
So, here we have a well that is an incredibly short lateral, that has produced almost 100,000 bbls:
  • 20212, 482, CLR, Whitman 3-34H, 34-147-96, Oakdale, F, t9/11; cum 98K 10/14; the scout ticket says it is still flowing without a pump, and there are no sundry forms to suggest otherwise; in addition, there is no frack data, suggesting this well was not fracked? Also the permit application stated the target was the Three Forks but an early sundry form (dated 2010) made a pen/ink change, lining out Three Forks and writing in "Bakken." The geologist's report said the target was the "middle Bakken."
Production Profile

It's hard to believe this well was not fracked but I don't see the frack report. But remember, they had to "TD" the well when they could not control the pressure and the flow. Here's the production profile for first few months:


The production profile for the most recent months is also very interesting:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

With the slump in the price of oil, I don't think we can make comments about potential production as of October 1, 2014. (I'm not saying that correctly, but hopefully you know what I'm trying to say.)