Saturday, December 27, 2014

Plans To End The Blog Scuttled -- December 27, 2014

This is not an investment site. Do not believe anything you read at this post or the blog. Nothing has been verified. This blog is for entertainment purposes only. If this information is important to you, go to the source. The author of this blog is inappropriately exuberant about the Bakken and most of the opinions expressed by the author are not shared by others who are certifiably sane.

For those keeping score at home:
  • Average price of WTI at Cushing, based on daily price, source: EIA; most recent data through December 22, 2014: $61.017
The "magic number" in 2015: $55.08.


The Party's Over, Willie Nelson

Non-Bakken News As This Site Comes Down

December 28, 2014: FoxNews is reporting:
Reaction in the three-state region surrounding Vermont Yankee is mixed as the nuclear plant prepares to send its last electrons to the grid in the coming days.
In Vernon, where Vermont's lone nuclear reactor is located, many residents fear more damage to the local economy and to the tax base.
At the plant, employees are readying for retirement, unemployment or transfers to other nuclear plants owned by Vermont Yankee parent Entergy Corp.
Anti-nuclear groups in the region are getting ready to celebrate with a party Jan. 3 at the St. James Episcopal Church in Greenfield, Massachusetts.
So, no coal. No nuclear. No crude oil. No natural gas. We're getting down to trees. And used McDonald's French fry oil for Willie Nelson's bus.

President's Obama's A-Team Taking On The JV Team In The Mideast

The New York Times is reporting:
Maj. Gen. Michael K. Nagata, commander of American Special Operations forces in the Middle East, sought help this summer in solving an urgent problem for the American military: What makes the Islamic State so dangerous?
Trying to decipher this complex enemy — a hybrid terrorist organization and a conventional army — is such a conundrum that General Nagata assembled an unofficial brain trust outside the traditional realms of expertise within the Pentagon, State Department and intelligence agencies, in search of fresh ideas and inspiration. Business professors, for example, are examining the Islamic State’s marketing and branding strategies.
“We do not understand the movement, and until we do, we are not going to defeat it,” he said, according to the confidential minutes of a conference call he held with the experts.
“We have not defeated the idea. We do not even understand the idea.”
Fortunately for President Obama's A-Team: this is just the JV team.

Wells Coming Off Confidential List Through The End of The Year

Active rigs in North Dakota:

Active Rigs173187186196158

There is no evidence that operators have moved to the sweet spots of the Bakken in light of the price slump. Remember, these wells coming off confidential list this week were drilled six months ago; and, had been planned at least a month or two prior to that. 

Wells coming off the confidential list over the weekend, Monday, and through the end of the year:

Wednesday, December 31, 2014 
  • None -- there was no June 31
Tuesday, December 30, 2014
  • 26623, 1,095, Liberty Resources, Erling 14-7H-0607-15895-MB, Temple, t7/14; cum 69K 10/14;
  • 26624, 1,001, Liberty Resources, Alvin 14-7H-1819-15895-TF, Temple, t8/14; cum 46K 10/14;
  • 26825, 955, Liberty Resources, Yogi 14-7H-0607H-15895-TF, Temple, t7/14 cum 50K 10/14;
  • 26826, 729, Liberty Resources, Edna 14-7H-1819-15895-MB, Temple, t7/14 cum 36K 10/14;
  • 27382, conf, XTO, Berquist 31X-2C, Garden, no production data,
  • 28154, 1,361, XTO, Gilbertson 34X-26G, Charlson, t11/14; no production data,
  • 28178, conf, Hess, HA-Rolfsrud-152-96-1720H-2, Westberg, no production data,
  • 28433, drl, Zavanna, Tomahawk 10-3 4TFH, East Fork, no production data,
  • 28621, drl, Slawson, Mooka 5-29-20TFH, Big Bend, no production data,
Monday, December 29, 2014
  • 24355, 807, CLR, Sutton 3-10H, Oliver, t11/14; cum 3K 11/14;
  • 27428, drl, WPX, Roggenbuck 4-9HX, Van Hook, no production data,
  • 27737, conf, Oasis, Montague 5601 41-34 6T, Cow Creek,  no production data,
Sunday, December 28, 2014
  • 27429, 692, WPX, Roggenbuck 4-9HA, Van Hook, t11/14; cum --
  • 28604, A, CLR, Jamestown Federal 6-17H, Banks, no IP, no production data,
  • 28605, A, CLR, Jamestown Federal 7-17H, Banks, no IP, no production data,
Saturday, December 27, 2014 
  • 27790, drl, XTO, Johnson 43X-27H, Murphy Creek, no production data,
  • 28378, 1,011, Newfield, Loomer 150-99-2-11-4H, Tobacco Garden, t8/14; cum 38K 11/14;
  • 28457, 489, CLR, Gladys 1-20H, Rainbow, t9/14; cum 20K 11/14;
  • 27425, 267, CLR, American Eagle, Rick 13-31-164-101, Colgan, t11/14; cum 7K 11/14;

26623, see above, Liberty Resources, Erling 14-7H-0607-15895-MB, Temple:

DateOil RunsMCF Sold

26624, see above, Liberty Resources, Alvin 14-7H-1819-15895-TF, Temple:

DateOil RunsMCF Sold

26825, see above, Liberty Resources, Yogi 14-7H-0607H-15895-TF, Temple:

DateOil RunsMCF Sold

26826, see above, Liberty Resources, Edna 14-7H-1819-15895-MB, Temple:

DateOil RunsMCF Sold

 28378, see above, Newfield, Loomer 150-99-2-11-4H, Tobacco Garden:

DateOil RunsMCF Sold

28457, see above, CLR, Gladys 1-20H, Rainbow:

DateOil RunsMCF Sold


December 28, 2014: the graphic below of the Parshall oil field is quite incredible. We will never know but my hunch is the Parshall will be developed "differently" than originally planned because of the slump in the price of oil. Regular readers will know what I'm talking about.  I had six metrics that I was going to be follow: I can't link them now; I've been taking down posts as I take down the blog, and I've forgotten what the six were, but whatever they were, a seventh metric will be: tracking operators of note. The operators that will be canaries in the coal mine will be: price paid for Fidelity's acreage; OXY USA's future in the Bakken; how EOG develops its acreage in the Bakken; Slawson (not publicly traded, so a bit more difficult to follow); Oasis; maybe, Whiting; CLR to some extent.

December 28, 2014: just to clarify -- shutting down the blog has nothing to do with anything that was said. It has to do with the risk of hacking (see below). Some folks have written suggesting that maybe they said something that concerned me; nope, it was all about hacking. 

December 28, 2014: as expected, I'm getting a fair number of e-mails about the blog "going off the air." I appreciate that. I won't reply to any e-mail now. I apologize. I'm at a Starbucks and do not have a power cord for my computer so I am on limited power. I will probably reply to some of the e-amail later. I apologize for not replying to everyone.

December 28, 2014: I'm going on hiatus with regard to the blog for awhile. I don't know if after this week I will start it up again or not, but there have been a few indications that the site could be hacked (again) and I don't want to go through that (again). So, we'll see. The number of page views would have gone over 7 million in early January, 2015, but the risk of hacking was not worth waiting for that milestone.

For all I know the Bakken will implode and the state will go broke, but the more I've learned about the Bakken in the last few weeks suggests that the Bakken is in much better shape than people realize. Investors in companies that are operating in the Bakken are doing badly, of course, and I can list a lot of bad things going on in the Bakken, but what list I develop would hold true for the entire oil and gas industry.

Elsewhere people are noting that their royalties are $50/bbl instead of $75/bbl, neglecting to note that most of them inherited their mineral rights, and $50/bbl is still a huge chunk of change. The state of North Dakota could lose its 6.5% production tax revenue, but the state has SO much money in the bank that they won't spend anyway, so what does it matter. Hillary defined the 2010's pretty well: "what does it matter?"

There seems to be an undercurrent of anxiety and perhaps better said, apathy or ambivalence, not only among folks invested in oil and gas, but by everyday folks not invested in the oil and gas industry, about exactly what is happening. I don't think folks really think this low gasoline price is going to last more than a short period of time -- at best/worse, I give it no longer than 3 years.

Having said that, the amount of oil coming out of unconventional oil just in the states is incredible (and that doesn't include all the new plays that I seldom covered), nor does it cover the Canadian oil sands. It's very possible, the price of gasoline could stay "affordable" for a very, very long time.

It's interesting: I have not seen this discussed yet. The Saudis need $87-oil to balance their budget; they have a huge cash reserve so they can go forever giving their oil away. However, if at some point they want to balance their budget, they need to get back to $87 oil. However, that's in "today's dollars" and "today's government budgets." I have not seen any government budget decrease over time in a growing country. In other words, over time, literally every year, Saudi's $87 oil will need to go up a bit. 

Meanwhile, the cost of drilling the Bakken, Permian, and the Eagle will go down. I think that's why I'm going on hiatus. I know I'm right on that and I get tired of the pushback from pessimists. LOL. Actually, that's just one irritant.  The real reason has to do with the issue of hacking. 

I've talked about this before, oil as a commodity. It's the most unusual commodity. There are two cartels: a) OPEC; and b) the US, by virtue of its ban on exporting. Something has to give, and the US ban on oil exporting is not going to end any time soon.

The preeminent oil and gas consultant company has a great slide in one of their December, 2014, presentations: the amount of oil production projected for North America (Mexico, the US, and Canada). One slide and a number of observations. Most folks will concentrate on just one obvious data point, all data in bopd:
  • 2010: total North American production -- 10.5 million bopd
  • 2020: total North American production -- 16 million bopd
This is the second obvious data point:
  • 2010: total Canadian + Mexican production -- 5.2 million bopd
  • 2010: total Canadian + Mexican production -- 5.5 million bopd
  • yes: essentially flat -- Canadian production rises ever so slightly and Mexican production falls slightly but clearly
This is the third data point that doesn't jump out because of the way the slide is presented:
  • 2010: total US production -- 6 million bopd
  • 2020: total US production -- 11 million bopd
I have to look it up but I believe the US uses about 9 million bopd; add in 3 million for Canada and Mexico (I have no idea) and the 16 million bopd production in all of North America comes close to what North America is currently using. If I'm high on the Canadian/Mexican usage, throw in Central America for another million. Whatever. The point is, at current projections, there really isn't all that much oil for export from North America.

Which leads to another observation, or actually question? I thought the Canadian oil sands were huge. Why does Canadian oil production stay flat between 2010 and 2020?
Original Post
Over the past couple of years everything I have posted on the blog has been done in good faith, and for the purpose of getting a better understanding of the Bakken.

I now have a good feeling for the Bakken, so as of January 1, 2015, I will be closing the blog.

The Parshall is as active as I've ever seen it, with seven rigs, any number of wells on DRL status, and a like number of wells on confidential status:

This is really quite phenomenal.

This is a typical pad: one well completed; one well on confidential status; one well on DRL status, and the fourth well with an active rig:

A Note to The Granddaughters

Maybe later.

IRRs and Relative Costs To Complete Wells In The Bakken/Three Forks -- December 27, 2014

Warning: the percentages in parentheses below are for illustrative purposes only. Do not pay any attention to them. They are for my use only. There are way too many factors that affect IRRs to make them relevant in this setting. Again, the numbers inside the parentheses below are for my use only. Do not look at them. Do not make any financial, investment, or relationship changes based on anything you see inside the parentheses or anything you might see anywhere on this page or in the blog for that matter. If this information is even remotely important to you, check the source. Do not rely on anything in this blog to make any investment, financial, or relationship decisions. 

It should be noted that the information below comes from a third-party presentation that was undated. I assume that it is a recent publication -- mid-2014, but it could have been put together in 2008 but I doubt it. Folks have to remember I have no background in the oil and gas industry. If this information is important to you, go to the source. Do not rely on the information at this blog.

In an earlier post, breaking down the Williston Basin Bakken.

Now, some additional information in parentheses, bold.

In 2014, areas that are predominantly "hot" throughout:
3: West Nesson (35%)
5: Williams Core (30%)
6: Parshall Sanish (50%)
7: Fort Berthold (35%)
10: Nesson Anticline (Middle Bakken - 60%; Three Forks - 40%)
Significant portions of the following areas are also "hot":
2: Dunn County (30%)
11: Southern Bakken Fringe
12: Elm Coulee (25%)
Areas that are "hot" along the river:
8: West McKenzie
9: Williams Perimeter
Now, note the additional information in parentheses behind the areas above -- the number in parentheses, bold: IRR.  

The Bakken Nesson Anticline at 60% is the number one area based on IRR of all areas in either the Bakken or the Eagle Ford. The Eagle Ford Karnes Trough (condensate) is #2 at about 57%.

Another slide comparing costs to complete a well among the Bakken, Utica, Haynesville, and Eagle Ford, among the oil plays, the least expensive to drill a well: the Bakken Parshall Sanish (among all plays, oil, condensate, gas, the BPS was also the least expensive).

Among the oil plays, the least expensive areas to drill oil wells, in order: Bakken Parshall Sanish, Bakken Nesson Anticline, Bakken Dunn County, Bakken West Nesson, Bakken Northern Mountrail, Bakken Williams Core, Three Forks Nesson Anticline.

By far, the most expensive wells were in Three Forks Fort Berthold and Bakken Fort Berthold.  


It will be interesting to see this presentation updated in a few year. Two things change: a) technology; and, b) knowledge.

With regard to the second (knowledge), I feel pretty confident that the middle Bakken is pretty much fully delineated in the Williston Basin. However, I'm not convinced the Three Forks upper bench (TF1) is nearly as well delineated as some would lead us to believe. I feel quite strongly that the delineation of the lower benches of the Three Forks (most importantly TF2 and TF3) are only beginning to be delineated, and whatever exploration was going on with the high density pilots, the latter were severely impacted by the oil price slump that began in late 2014.

Heat Map For The Williston Basin Bakken -- December 27, 2014

In a recent post, thirteen (13) areas were delineated in the Williston Basin Bakken:
1. Sanish
2. Parshall
3. Nesson Anticline
4. Fort Berthold
5. West Nesson
6. Northern Mountrail
7. Williams County, core
8. Dunn County
9. Elm Coulee
10. Williams County perimeter
11. McKenzie County
12. North Williston
13. Bakken southern fringe
A reader sent me a presentation from the premier oil and gas industry consulting firm that also breaks the Williston Basin Bakken into three areas:
1. North Williston
2. Dunn County
3. West Nesson
4. Northern Mountrail
5. Williams Core
6. Parshall Sanish
7. Fort Berthold
8. West McKenzie
9. Williams County Perimeter
10. Nesson Anticline
11. Southern Bakken Fringe
12. Elm Coulee
13. Montana Frontier
There appears to be only one difference between the two groups: one analyst breaks Parshall and Sanish into two areas; the other analyst combines them. Both groups total thirteen. So, what is the "new" group in that second analysis? The Montana Frontier. 
The Montana Frontier is essentially Roosevelt County, Montana, west of Williams County (remember, Elm Coulee, is in Richland County, Montana, west of McKenzie County).

The analyst includes an incredible "heat map" of the Williston Basin Bakken.  The "heat map" is color coded, ranging from blue - through green - yellow - orange - red (the ROYGBIV rainbow) with "red" as the best ("hottest") plays.

Red: IP 30 (which I assume is initial production for first 30 days), maximum: 2,400 bbls/day.

The analyst notes that in calendar year 2008, only two areas were "red": areas 6 and 12. 

In 2014, areas that are predominantly red:
3: West Nesson (the entire north half) 
5: Williams Core
6: Parshall Sanish
7: Fort Berthold
10: Nesson Anticline
Significant portions of the following areas are also red:
2: Dunn County
11: Southern Bakken Fringe
12: Elm Coulee
Areas with red along the river:
8: West McKenzie
9: Williams Perimeter
Surprisingly, even a small area in the far north of Divide County, area 1, has some red.

By the way, back to the Montana Frontier. In the first list, the Montana Frontier was not mentioned. In the more recent presentation, the Montana Frontier was mentioned. Interestingly, there is a pocket of "red" right around Bainville, Montana (hard to tell for sure on the map, but I think I am correct). If so, that explains the recent article about the infrastructure problems around Bainville.

The big takeaway from this one slide: as the operators begin to "circle the wagons" in the Bakken, the "heat map" in 2014 is significantly different than the "heat map" in 2008. And not by a trivial amount. 

The presentation was undated (as far as I could tell, but the URL suggested it was a December, 2014, presentation. The slide in oil prices began in October, 2014.


The very next slide in that presentation is a "heat map" of the Eagle Ford. In the Bakken slide above, the "heat" goes up to 2,400 bopd for first 30-day IP.

In the Eagle Ford slide, the "heat" goes up to 3,000+ of boepd per month. The legend does not specify 30-day month, and it is clearly a condensate play, though one area has evolved into an oil play, the Hawkville Condensate to the far southwest.

Two observations with regard to the Eagle Ford heat map:
  • it explains the incredible number of articles RBN Energy has posted on the Eagle Ford condensate tsunami; and, 
  • possibly, whether one can reach any conclusion on the relative competition between the Eagle Ford and the Bakken with regard to oil if push comes to shove (oil below $50)
The Permian, of course, is a n oil play, but its horizontal component is "high cost" compared to the Bakken.

The Permian -- A Geologic Overview -- December 27, 2014

A three-part series from DrillingInfo. I assume these articles will eventually be archived.

Part I: The Midland Basin vs. the Delaware Basin – Understanding the Permian

Part 2: Permian Basin Geology: The Midland Basin vs. the Delaware Basin, Part 2

Part 3: Permian Basin Production -- Midland vs Delaware Basin, Part 3