It's Always Something -- December 16, 2014

Rigzone is reporting:

Environmental permit delays are likely to set back the Brazilian offshore drilling activities of French oil company Total SA by about a year.

Total, which has stakes in 13 Brazilian offshore blocks and runs drilling activities in seven of them, is grappling with the a slow environmental approval process that has become a recurring complaint for many in the industry.

"Environmental licensing takes a long time. Drilling will only take place in 2016 or 2017. Licensing makes things a little harder ... exploration and production is a long-term job, that takes a long time in general."

Oil prices have fallen to their lowest levels in six years, prompting oil firms to seek cut costs and improved efficiency. Lower prices could force oil companies to reconsider some investments. Even so, Brazil continues to be a "priority" for Total. 

And so it goes. It's always something.

3/4 Wells Go To DRL Status; Fourteen (14) Wells Approved For "Tight Hole" Status; Eighteen (18) New Permits -- Wednesday -- December 16, 2014

Wells coming off the confidential list Wednesday:

• 28220, drl, Slawson, Stallion 6-1-12TFH, Big Bend, no production data,
• 28283, 786, Hess, BW-Hedstrom-149-100-1201H-3, Ellsworth, t11/14; cum 2K 10/14;
• 28311, drl, XTO, Hoffmann 14X-12B, Siverston, no production data,
• 28369, drl, BR, CCU Pullman 6-8-7MBH, Corral Creek, no production data,
• 28439, conf, Liberty Resources, Gohrick 158-95-17-8-4MBH, McGregor, producing,

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 28283, see above, Hess, BW-Hedstrom-149-100-1201H-3, Ellsworth:

Date	Oil Runs	MCF Sold
10-2014	1712	0

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

Eighteen (18) new permits --

• Operators: HRC (8), CRL (8), Whiting (2)
• Fields: Four Bears (McKenzie), Crazy Man Creek (Williams), Antelope (McKenzie), Sanish (Mountrail), Banks (McKenzie)
• Comments: Two more Antelope oil field wells

Active rigs:

	12/16/2014	12/16/2013	12/16/2012	12/16/2011	12/16/2010
Active Rigs	183	191	181	199	165

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For Investors

EOG declares its quarterly dividend; it appears to be unchanged from the previous quarter.

Apple Not Guilty In Huge Case -- December 16, 2014

Tweeting now: Jury finds Apple not guilty of harming consumers in iTunes DRM case; says iTunes 7.0 was a 'genuine product improvement' - @verge

Over at MacRumors:

Jury deliberations for the iPod antitrust lawsuit Apple faced in court last week began on Monday, and it appears the jury has already reached a verdict just a day later. As reported by The Verge, the jury has sided with Apple, finding the company not guilty of harming consumers with anticompetitive practices.

In the class action lawsuit, the plaintiffs argued that Apple had deliberately crippled third-party music services by locking iPods and iTunes to its own ecosystem, which in turn artificially raised the price of Apple's products. At issue was a specific iTunes 7.0 update that disabled the DRM workarounds put in place by RealNetworks, a competing music service, allowing its music to be played on the iPod. 

Yes, Virginia, this is huge.

I don't know if you've ever served on a jury on a big case, but after weeks of hearing testimony, the jury begins to deliberate. The first thing the jury needs to do is get organized, select a foreman, go over the rules of a jury, determine seating arrangements, and order lunch. To come to a verdict in one day suggests they must have done all that and then took a preliminary vote -- when it was unanimous, the foreman must have said, "that's a wrap."

Abraxas, December, 2014, Corporate Update; Silver Linings Among The Clouds, December 16, 2014

Link here.

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Silver Linings Among the Clouds

The headline is scary but close reading of the story makes the story less scary than it sounds:

The Energy Information Administration (EIA) foresees a pull back in onshore drilling activity because of less-attractive economic returns in both emerging and mature oil production regions.

As of Friday, however, projected oil prices "remain high enough to support development drilling activity in the Bakken, Eagle Ford, Niobrara and Permian Basin, which contribute the majority of U.S. oil production growth."   

EIA now expects U.S. crude oil output to average 9.3 million b/d in 2015, an increase of 0.7 million b/d from 2014, but down from the projected growth of .09 million b/d that EIA had forecast in November.

Random Look At How Incredible The Antelope Oil Wells Are In The Reservation; CLR's Changing Completion Strategies -- December 16, 2014

Updates

July 27, 2015: the CLR Salers Federal wells are a major topic of discussion by Micheal Filloon, this date, particularly with regard to the halo / communication effect of fracking neighboring wells.
 

Original Post

 

There is so much in the Bakken I simply cannot keep up. Hopefully, the slump in oil prices will slow things down.

Just how good are the wells and just how fast are completion strategies changing? Over at the sidebar at the right, I have a link to oil fields in the North Dakota Bakken.

A couple days I started updating the Antelope oil field in the reservation (NOT the Antelope Creek oil field west of Watford City). I updated a lot of the field, but there is much more left to do. In the process I came across a Continental Resources well with an example of their new completion strategy:

• 28330, 1,716, CLR, Salers Federal 3-27H, six days to vertical depth; six days to drill the lateral, target zone 11 feet to 23 feet below the top of the middle Bakken (so I assume the middle Bakken thickness in this area ranges from 20 to 40 feet), background gas was averaged about 650, though there were spikes to 2750; 50 stages; 19 million lbs; 14 days spud to TD, t10/14; cum 41K 10/14;

I don't recall the largest amount of sand EOG has used on a well, but 19 million lbs of sand/ceramic has to be a record for sand/ceramic mix. EOG uses only sand as far as I know. Almost all off the proppant used by CLR in #28330 was sand, however, I believe less than 2 million lbs ceramic;

NDIC File No: 28330     API No: 33-053-05917-00-00     CTB No: 128330
Well Type: OG     Well Status: A     Status Date: 9/18/2014     Wellbore type: Horizontal
Location: NENE 27-152-94    Latitude: 47.962331     Longitude: -102.688017
Current Operator: CONTINENTAL RESOURCES, INC.
Current Well Name: SALERS FEDERAL 3-27H
Total Depth: 20534     Field: ANTELOPE
Spud Date(s):  6/8/2014
Completion Data
   Pool: SANISH    Comp: 9/18/2014     Status: F     Date: 10/2/2014     Spacing: 2SEC
Cumulative Production Data
   Pool: SANISH     Cum Oil: 40983     Cum MCF Gas: 47241     Cum Water: 17612
Production Test Data
   IP Test Date: 10/2/2014     Pool: SANISH     IP Oil: 1716     IP MCF: 1193     IP Water: 670

Monthly Production Data

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
SANISH	10-2014	31	32388	32759	15252	43189	24922	18267
SANISH	9-2014	8	8595	7748	2360	4052	0	4052

Regular readers might be surprised at what CLR is doing.

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Here's an EOG well in the same field:

• 24337, 2,519, EOG, Hawkeye 3-2413H, 28 stages; 10 million lbs sand, t5/13; cum 452K 10/14;
• EOG says it will be utilizing "up to 4 NGL stripping skids on this pad in an effort to reduce VOC volumes. Spud date, December 16, 2012; TD, January 11, 2013. Thickness of middle Bakken appears to be about 50 feet at this location.  

Yes, that's almost a half-million bbls in less than 18 months (including one month with NO production; and with three months on-line for only about 50% of the time). And, yes, it's tracked on the "Monster Well" page.

NDIC File No: 24337    
Well Type: OG     Well Status: A     Status Date: 5/15/2013     Wellbore type: Horizontal
Location: SESE 24-152-95    Latitude: 47.964492     Longitude: -102.771760
Current Operator: EOG RESOURCES, INC.
Current Well Name: HAWKEYE 3-2413H
Total Depth: 20626     Field: ANTELOPE
Spud Date(s):  12/8/2012
Completion Data
   Pool: SANISH     Perfs: 10816-20572     Comp: 5/15/2013     Status: F     Date: 5/17/2013     Spacing: 2SEC
Cumulative Production Data
   Pool: SANISH     Cum Oil: 451928     Cum MCF Gas: 894900     Cum Water: 59607
Production Test Data
   IP Test Date: 5/17/2013     Pool: SANISH     IP Oil: 2519     IP MCF: 4060     IP Water: 669

Monthly Production Data

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
SANISH	10-2014	31	13034	12257	3269	55690	43161	9010
SANISH	9-2014	30	14109	14406	3349	50355	33802	13126
SANISH	8-2014	31	16476	16508	4166	60760	27406	32735
SANISH	7-2014	26	16956	16835	3479	60252	24858	34905
SANISH	6-2014	30	18214	18241	2846	50086	17343	32150
SANISH	5-2014	31	24017	23957	3524	65169	26116	38433
SANISH	4-2014	27	31057	30927	3828	48901	10965	37403
SANISH	3-2014	0	0	0	0	0	0	0
SANISH	2-2014	21	16165	16329	1976	37920	202	37623
SANISH	1-2014	31	24436	24815	2953	51779	415	51217
SANISH	12-2013	31	27300	27301	2940	51362	590	50772
SANISH	11-2013	30	31877	32028	3214	59465	0	59316
SANISH	10-2013	31	40483	40529	3815	71259	0	71106
SANISH	9-2013	30	43917	43941	3907	76231	0	76087
SANISH	8-2013	31	45849	46421	4712	78445	0	78292
SANISH	7-2013	31	49395	49130	6144	69907	0	69753
SANISH	6-2013	12	24333	23709	1802	3898	0	3842
SANISH	5-2013	17	14310	13379	3683	3421	0	3342

Tuesday -- December 16, 2014; Active Rigs Up To 184; Russia Might Default

Active rigs:

	12/16/2014	12/16/2013	12/16/2012	12/16/2011	12/16/2010
Active Rigs	184	191	181	199	165

RNB Energy: natural gas pipeline projects in the Northeast -- an update on the Constitution Pipeline, the Northeast Energy Direct project, and Access Northeast, all of which are planned to help move Marcellus gas into the heart of New England.

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Clarity

The fog is starting to clear. This is getting pretty cool. Looking back ten years from now, the current slump in oil prices will be something historians will still be writing about.

Saudi Arabia has talked about "protecting their market share."

There have been a lot of stories about Russia growing closer to China with all those energy deals over the past year. That's like raising a red flag in front of a bull for Saudi Arabia when it comes to protecting their market share.

Prices began to collapse immediately after Saudi made the announcement over Thanksgiving, 2014. Less than three weeks later, there is serious talk about Russia defaulting.

If Russia defaults, oil companies (mostly US) are going to extract huge concessions from Russia if the oil companies even agree to stay. In the meantime, I don't suppose a lot of westerners drilling in Russia are really going to work for free. All that talk about Russia maintaining 2014 production going into 2015 seems a bit questionable, doesn't it.

[As a side note, back on November 23, 2014, I talked about the amount of oil the US imports from Russia despite sanctions. Sounds like Saudi actions cause more pain than US sanctions.]

With regard to Saudi's action, there are six dots to connect. Things are becoming much clearer.

On a side note, I don't watch television any more (except for occasional NASCAR, NFL, and college football), so let me know if CNBC is more worried about a) Greece defaulting; b) Russia defaulting; or, c) what Herb Greenberg is saying about Starbucks.

I Can See Clearly Now, Johnny Nash
Of course, some folks can't see clearly at all. Despite "Islamic" being in their name, ISIS is not Islamic. LOL. When you listen to the speech, see if he could be describing the Palestinians under Arafat when that "state" was just getting started? It's interesting which religions the president goes out of his way to defend.

Three Metrics -- December 16, 2014

IPs
Active rigs
Wells waiting to be completed

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Putting Things Into Perspective

Do me a favor. Go to this link on wind energy. Then, when you get to the link, scroll down a bit, and on the left you will see a drop down menu in which you can "select a state." Select Massachusetts and you will see the wind energy data for Massachusetts, current as of 3Q14. For all of their talk about "green energy," Massachusetts has:

• installed wind capacity: 107 MW
• wind capacity under construction: 0 MW
• in 2013, wind energy provided 0.6% of all in-state electricity production
• in 2013, more energy was wasted in Massachusetts on writing about wind energy than actually producing wind energy

Now, to put that into perspective, look what just one utility in western North Dakota will be doing:

Basin Electric Power Cooperative will double its power derived from wind energy by 2016.

Basin is expecting its load to grow by more than 1,883 megawatts by 2035, CEO Paul Sukut told members at the cooperative’s annual meeting on Wednesday. About 1,600 megawatts of that new demand will be coming from the Williston Basin.

By the end of the year, Basin will be generating or purchasing 5,478 megawatts of power. With the projected increase in demand, that will be above 7,000 megawatts per hour in 20 years. 

But just look at that. For all their talk, Massachusetts has zero, nada, zilch wind projects under construction; and the entire state has just 107 MW in wind generated electricity, accounting for 0.6% all electricity generated in the state.

But here:

Basin currently has 712.7 megawatts of wind generation. It will purchase power from other generators to increase that number to 1,400 megawatts of wind generation over the next two years.

And that "Williston Basin"? Basically that's Williams County and McKenzie County. Williston and Watford City.

I am not in favor of wind on so many levels, for so many reasons, but if that's what the folks want, that's what they will get. I'm just amazed at what North Dakotans are quietly doing day in and day out while folks in Massachusetts talk a good story.

How Will Production Respond To The Slump In Oil Prices: An Historical Perspective -- December 16, 2014

Another must-read article, John Kemp over at Rigzone provides an historical analysis:

Since 1974, there have been four episodes in which oil prices declined sharply over a relatively short time (ignoring the brief price spike and equally rapid reversal in 1990 associated with preparations for the first war between the United States and Iraq).

These price slumps occurred between (1) December 1985 and July 1986; (2) January 1997 and December 1998; (3) November 2000 and December 2001; and (4) July 2008 and February 2009 (http://link.reuters.com/weq63w).

In each case, the drop in prices was completed quickly, with the peak-to-trough move taking seven months, 23 months, 13 months and seven months respectively. In the first three episodes, prices fell by about half (58 percent, 57 percent and 46 percent) though the most recent instance during the financial crisis saw a larger decline of around 72 percent.

Each decline in prices brought a downturn in domestic oil and gas drilling. But with the exception of the slump in 1986, the downturn in drilling was proportionately smaller than the fall in prices.

The recent episode of price weakness has been typical so far. Prices have declined for just under six months. The total peak-to-trough move has been between 47 percent (for Texas sweet) and 55 percent (North Dakota sweet).

Crude production has risen by almost 600,000 barrels per day since prices started falling, and is expected to keep rising in 2015, according to the U.S. Energy Information Administration.

There are some important differences between the current slump and its forerunners.

First and foremost, all the previous episodes occurred against a backdrop of slowly declining domestic oil production rather than the boom that has occurred since 2011.

Second, the output from hydraulically fractured oil wells is initially much higher than from conventional wells but then declines more rapidly. So, production should be somewhat more responsive to the fall in prices and reduced rates of drilling than in previous episodes.

But anyone expecting the plunge in prices to translate quickly into an equally big decline in drilling rates and a sharp reduction in production is likely to be disappointed.

It looks like we're in for the long haul as long as Saudi doesn't mind giving its oil away at $60 / bbl, and leaving $138 million per day on the table.

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Here's Another Way "Production" Will Respond to the Current Price Slump

Retuers over at Yahoo!News is reporting:

Spain's Repsol has agreed to buy Talisman Energy, Canada's fifth-largest independent oil producer, for $13 billion, showing how the drop in oil prices is pushing energy companies to take the plunge on big M&A deals. 

A near halving in the oil price since June has lowered price tags on producers like Talisman, spurring renewed interest from Repsol which has long been searching for oil and gas assets in North America and elsewhere.

But analysts said the Spanish company had paid a hefty price for Talisman.

Push Comes To Shove: Deep-Sea Vs US Shale? US Shale Loses -- December 15, 2014

A must-read article for those following the Bakken closely. Many of these articles are archived and lost unless one has a subscription (just a word to the wise).

Rigzone is reporting:

U.S. shale projects may be vulnerable to short-term investment cuts in relation to deepwater projects, according to a December 9, 2014, report.

Oil and gas companies are facing reduced cash flow in 2015 due to the recent decline in oil prices to a five-year low. That dip has been blamed on reduced demand and global oversupply, with much of the oil production oversupply coming from U.S. unconventional production. As a result, companies will be scaling back or reprioritizing their spending.

However, recent analysis by Gaffney, Cline & Associates indicates shale activity will most likely suffer investment cuts first due to low oil prices, leaving the deepwater Gulf of Mexico and other deepwater plays relatively more protected.

Strong offshore Gulf of Mexico projects can be still viable down the $60/barrel, said paper co-authors Cecilia Jing Cui and Neil Abdalla.

Although pain is likely for areas like the offshore Gulf of Mexico in 2015, it should be much better placed to weather the storm of depressed oil prices in the short-term than the U.S. onshore unconventional industry, said Bob George, executive director and senior strategic advisor at GCA.

“Whilst high cost environments such as the deepwater Gulf of Mexico would appear to be vulnerable, and undeniably cuts should be expected there, economic rationality suggests that the brunt of cuts should be directed at onshore unconventional investments,” said George.

“However, in the short-term there is not always the operational flexibility to make decisions based solely on fundamentals.”

While shale operators can cut back or ramp up shale drilling in more rapid response to fluctuating oil prices, deepwater projects have a longer-term investment cycle, with investments of $1 billion or more and a five-year timeline before returns are seen, said George.

Deepwater projects already underway are less likely to be halted due to low oil prices, but the expected price of oil in 2020 poses a risk for deepwater projects.

There is more at the link.

It's easier to see how this might play out if an operator was involved in both deep-water drilling and unconventional on-shore drilling; it is more difficult when different operators are involved, one a deep-see driller; the other an on-shore conventional driller.

The article ends:

Earlier this year, GCA reported that shale “sweet spots” would still be viable at lower oil prices, but companies operating outside these areas could be pinched if oil prices continued to decline.

Deepwater Gulf of Mexico production is expected to set a new record in 2016 thanks to new developments and the expansion of older oil fields, Wood Mackenzie reported last month.

But production beyond the 2016 peak is expected to decline as legacy fields are depleted and a limited number of new projects are expected to come onstream.