Update On Conditioning -- Removing Volatile Gases From Crude Oil -- North Dakota -- April 3, 2014

Reuters/Rigzone is reporting:

North Dakota's oil producers are complying with new safety standards that went into effect on Wednesday to remove as many volatile gases from crude as possible, state officials told Reuters.

The new rules require the more than 1.2 million barrels of oil extracted each day from the state's Bakken shale formation be run through machines that remove ethane, propane and other volatile gases linked to recent crude-by-rail disasters in Quebec, Illinois and West Virginia.

Producers are now required to operate field equipment at oil wells at specific temperatures and pressures to remove those gases. Well sites are shut down if they are not compliant, according to the standards approved in December.

Late March field checks of equipment operated by all of the state's producers, ranging from the largest with Whiting Petroleum Corp to one of the smallest with Triangle Petroleum Corp, are compliant, the state's Department of Mineral Resources (DMR) said.

There had been concern that the costs of compliance would prove onerous for smaller producers, many of whom, for instance, did not previously turn heating elements on at well site equipment to remove gases.

Running the heaters, especially in the summer months when North Dakota temperatures routinely break 100 Fahrenheit was seen as a waste of money by some. The new standards, though, require all well site equipment to be run continuously at 110 Fahrenheit. Despite the higher cost, the new rules proved easier to comply with than strict new anti-flaring measures precisely because wellsite equipment is already common across the state's more-than 12,000 oil wells.

Flaring reduction, by contrast, requires an expansion of the state's natural gas pipeline system and construction of more processing plants, a timely and costly exercise.

Yes, there are some 100-degree days every summer, but to say that "temperatures routinely break 100 Fahrenheit" seems a bit hyperbole.

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Tar Sands In Uinta

Reuters/Rigzone is reporting:

When you see the term "oil sands," there is a good chance that you will associate it with the Canadian province Alberta.

MCW Energy Group is trying to extend the geographical focus southward.

"Companies ... have ... failed over 5 decades attempting to develop this valuable resource," said MCW’s communications spokesman Paul Davey, referring to oil sand and oil shale resources in Utah, Colorado and Wyoming. "All have ended in failure in terms of attempting to prove up a commercially viable extraction technology."

Last October MCW – founded by its CEO R.G. "Jerry" Bailey, a 50-year oil and gas industry veteran and former president of Exxon's Arabian Gulf operations – deployed its first oil sands extraction plant in Vernal, Utah, located in the Uinta Basin nearly 200 miles southeast of Salt Lake City.

The plant applies the company's continuous-flow, closed-loop method of extracting oil from oil sands.

Billing the facility as "America's First Environmentally Friendly Oil Sands Extraction Project," MCW contends its process uses no water or heat and leaves behind only "99 percent clean" sand.

Moreover, the company asserts that its per-barrel processing costs are dramatically lower: $30 compared to an average of $75 in Alberta.

The efficiency of MCW’s extraction technology is extremely high with an energy returned on energy invested (EROEI) of 22:1 as compared to Alberta’s steam-assisted gravity drainage (SAGD) efficiency average of 4:1, according to MCW.

MCW is delivering its maiden plant's relatively small production volumes to refineries near Salt Lake City, but the company is working to scale up the process with a 5,000 barrels per day (bpd) extraction plant and – it hopes – many others at oil sands and oil shale sites in the region and beyond. 

EROEI -- at wiki. 

• Coal: 80
• Nuclear: 50 - 75
• Oil production: 20
• Wind: 18
• Solar: 2
• Ethanol: 1.3 (I recall some folks suggesting the EROEI for ethanol could be less than 1).

Something tells me EROEI is an "inexact science."

Los Angeles Times Headlines For The Archives -- April 3, 2015

For the archives, this headline from today's Los Angeles Times: "Iran deal is key to Obama's vision of 'a world without nuclear weapons.'"

Now that he has an "agreement" with Iran on nuclear weapons, President Obama will probably conclude nuclear disarmament talks with Russia and China. And then in July, no doubt he will send SecState John Kerry to North Vietnam to personally oversee the end of their program.

Well, that was easy. 

Fathomless ignorance. The president's fathomless ignorance about Yemen only ended with the implosion of a little country on the southwestern edge of the Arabian peninsula. One can only imagine  where his fathomless ignorance about Iran's nuclear program could take us.

First of all, there is no deal. And from there, it only gets worse.

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Also for the archives, this headline also from today's Los Angeles Times: "Latest loss of economic momentum may be 'temporary blip.'" Eight years into the recovery, a gazillion dollars in stimulus, and with the following headlines, the Los Angeles Times says this may only be a 'temporary blip":

• record 93 million Americans NOT working
• record 12 million African-Americans not in the labor force
• record 56 million women not in labor force
• January, February jobs numbers revised down dramatically
• Fed cuts growth forecast to zero

The numbers regarding the labor force have been growing worse over the past several years, but that last bullet is most incredible, coming eight years into the "recovery": the Fed cuts the US growth forecast to zero.

With all the US has going for itself and with limitless energy dirt cheap, the US economy should be on a tear -- we should be seeing a huge expansion. Instead, the Fed cuts the US growth forecast to zero. Wow.

Gasoline Demand, Natural Gas Fill Rate -- April 4, 2015

Sweet. I'm still looking for new gasoline consumption records over Memorial Day weekend this year.

Dynamic link; scroll to bottom at the link. 

Natural gas fill rate: -18 (dynamic link; scroll to bottom at link)

Natural gas weekly update; EIA link here.

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Cocktail Hour Trivia

Quick: what's the memory capacity of a human brain?

Before answering, the most common external drive for your laptop computer has a capacity of one terabyte. A terabyte is 1,000 gigabytes.

So, now back to the human brain -- what's the accepted memory capacity?

About 2.5 petabytes or 2.5 million gigabytes.

2,500 terabyte external drives. From Scientific American:

If your brain worked like a digital video recorder in a television, 2.5 petabytes would be enough to hold three million hours of TV shows. You would have to leave the TV running continuously for more than 300 years to use up all that storage.

Disclaimer: I often make simple arithmetic errors, especially when working with large numbers.

Week 13: March 29, 2015 -- April 4, 2015

The big story remains the slump in oil prices. We are now entering the 3rd of five consecutive months required for a huge tax break for Bakken operators if the price of oil remains below $52 or something like that. Active rigs are down to 94 in North Dakota.

Glut
Russian oil production hit post-Soviet high in March, 2015
Another look at Hubbert's curve
Samson Resources may reorganize through bankruptcy
Fourteen permits canceled
15 of 20 wells go to DRL status

Operations
Some incredible wells are being reported
How much US oil comes from fracking? 50%
Whiting: full steam ahead; company can grow despite low oil prices
Oasis may "spin off" an MLP
A well worth following

Refinery
Update on the Dickinson distillery 

CBR
North Dakota's new CBR rules take effect April 1, 2015
Why bitumen/dilbit by rail is not necessarily safer than Bakken CBR
EIA will now track and report CBR on a monthly basis

Flaring
NDIC severely penalizes five oil companies for excessive flaring
XTO requests flaring waiver for 140 wells 

Fracking
No sand being trucked to the Bakken -- anecdotal note
Frack sand CEO comments on fracking

Bakken economy
Record number of births in Williston in 2014 
North Dakota ships more oil to the eastern US than all other areas in the US combined
Williston region with more job openings right now than this time last year
Port of North Dakota (Minot) announces expansion
Six of the top fifteen fastest growing counties in the US were in North Dakota last year

Another Example Of Choked Back Wells -- North Dakota -- April 3, 2015

There is a lot of activity in this area and it's always possible the well was taken off-line for operational or flaring reason, but note that after a great January, 2015, the well was only on-line for 9 days in February:

• 27579, 1,920, BR, Sequoia 31-4MBH, Hawkeye, t9/14; cum 43K 2/15:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	2-2015	9	8818	8841	1405	10972	10962	0
BAKKEN	1-2015	30	20335	20107	3932	25295	21755	3511
BAKKEN	12-2014	0	0	0	0	0	0	0
BAKKEN	11-2014	0	0	0	0	0	0	0
BAKKEN	10-2014	1	0	0	0	2	0	0
BAKKEN	9-2014	25	13962	13962	4113	21999	0	21937

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Another BR Sequoia well off-line for much of February; maybe for operational reasons. Imagine the production if on-line for a full month:

• 27578, 1,296, BR, Sequoia 31-4TFH, Hawkeye, t9/14; cum 34K 2/15;

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	2-2015	15	12785	12730	3338	13602	13586	0
BAKKEN	1-2015	20	10998	11082	2359	9850	9832	0
BAKKEN	12-2014	0	0	0	0	0	0	0
BAKKEN	11-2014	1	207	0	0	2	0	0
BAKKEN	10-2014	1	996	1188	0	1182	0	1179
BAKKEN	9-2014	8	8845	8653	2050	13638	63	13555

 

Three (3) New Permits -- North Dakota

Active rigs:

	4/3/2015	04/03/2014	04/03/2013	04/03/2012	04/03/2011
Active Rigs	94	190	185	207	170

Three (3) new permits --

• Operator: Newfield (3)
• Field: Westberg (McKenzie)
• Comments:

And that was it.

Random Excerpt From An Oasis Mallard Well In Alger Oil Field -- April 3, 2015

A portion of the geologist's report from:

• 26382, 331, Oasis, Mallard 5692 21-20 9T2, Alger, TF2, 36 stages; 4.3 million lbs, t8/14; cum 12K 1/15;

This, of course, pertains to this particular well, this particular area, but it provides newbies an idea of the various payzones in the Bakken.

The Mission Canyon Formation (Mississippian - Madison Group) was observed at 8,494' TVD (- 6,190). Representative samples consist of a light brown and gray microcrystalline limestone with trace-light brown oil stain. Some samples contained moderate traces of algal material. Increases in background gasses from 50 to 100 units and several shows above 120 units supported possible trace intercrystalline porosity, not visible in sample.

The Middle Bakken Member of the Bakken Formation (Late Devonian-Early Mississippian) was drilled at 9,845' TVD (-7,541'). Representative samples consist of a medium gray to light brown, calcareous silty sandstone with moderate intergranular porosity and a trace light brown oil stain. Samples in this interval exhibited fast, diffuse, off white cut fluorescence. Moderate hydrocarbon show and heavy gases (C1-C4) were observed throughout this interval, peaking at a show of 121 units.

The Lower Bakken Shale (LBS) of the Bakken Formation (Late Devonian – Early Mississippian) is a dark brown and black carboniferous shale deposited in an open marine environment. The Lower Bakken Shale is well known for its hydrocarbon content and is commonly thought to be a “charge zone” for the Three Forks. During drilling of the LBS, observed at 9,900’ TVD (-7,596’), gas shows peaking at 223 units and abundant black oil stain was observed in all 40’of this interval.

The Three Forks Formation (Late Devonian) has been divided into three potential productivity zones or “benches” of interest by Oasis. Each bench is divided by a “claystone” member that is lower in porosity and very silty, making them of less interest as potential pay zones. The Three Forks was deposited as a result of a second-order stratigraphic sequence regression within the Kaskaskia major sequence in a supratidal marine environment, resulting in evaporates, bio-turbated and wave-sorted clastics, and paleosols.

The First Bench of the Three Forks Formation is located just below the Pronghorn Member of the Bakken Formation. The first bench is well known for interbedded shale and dolomite, characteristically having good porosity and common hydrocarbon show in sample cuttings. Samples while drilling were observed as an off-white and rare pink dolomitic mudstone, with moderate to rare intergranular porosity, interbedded with mint green shale containing abundant disseminated pyrite and very little visible porosity. The First Bench was drilled at 9,945’ TVD (-7,641’), though no gas shows were observed due to a broken trap motor. Hydrocarbon cuts exhibited moderate white streaming cut fluorescence.

The Second Bench of the Three Forks was the primary target for the lateral portion of the Mallard 5692 21-20 #9T2 and was entered at 9,990’ TVD (-7,686’). Three distinct lithologies were observed during drilling of the lateral, with various interbedding of the first two throughout the 30’ thick section, represented in a type log for the Second Bench of the Three Forks. The first lithology was observed at the C and E markers and consisted of a very clean, sucrosic white and pinkish orange dolomite with moderate intergranular porosity. This lithology was observed several times throughout the lateral and produced moderately quick and predictable drilling rates.

The second lithology observed in the lateral corresponded to the B and D markers, with high gamma characteristics. It consisted of a dolomitic siltstone, light to medium gray in color with very silty tendencies. Very little porosity was visibly observed in this lithology with slow and weak hydrocarbon cut shows. Drilling in the B and D sections of the target zone produced fair drilling rates and little bouncing of azimuth or inclination.

The third lithology was observed in the lower portion of the target zone and in the last third of the lateral. A red-orange silty mudstone with low porosity was described as microcrystalline with a sucrosic texture. This lithology became the most commonly observed in the lateral as drilling to the east progressed.

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The Clues Are Hard To See

I track this story elsewhere, but an update --

April 3, 2015: this provides some insight into the incredible lack of psychological insight investigators have. WTOP is reporting:

The co-pilot of the doomed Germanwings flight repeatedly sped up the plane as he used the automatic pilot to descend the A320 into the Alps, the French air accident investigation agency said Friday.

The chilling new detail from the BEA agency is based on an initial reading of the plane’s “black box” data recorder, found blackened and buried at the crash site Thursday.

It strengthens investigators’ initial suspicions that co-pilot Andreas Lubitz intentionally destroyed the plane — though prosecutors are still trying to figure out why. All 150 people aboard Flight 9525 from Barcelona to Duesseldorf were killed in the March 24 crash. 

Let's review the clues:

• history of psychiatric depression requiring 18 months of intensive therapy
• suicidal ideation
• 11 months as a flight attendant when flight training interrupted due to severe depression
• likelihood of losing his job due to eye problems (likely to have been psychosomatic)
• "fear of flying"
• sexual identity issues
• broke up with his girlfriend almost immediately before the flight
• doctor's recommendation that he not fly (had this come to attention of his employer, it should have ended his flying career)
• he said that all he ever wanted to do in life was fly for Lufthansa
• not yet flying for Lufthansa per se, but a subsidiary airline
• a loser

From The Williston Wire -- April 3, 2015

Posted some time ago, but I finally got around to posting it today:

As Williston prepares for another year of record births, Mercy Medical Center celebrated March 24 the completion of a new Women's Health Clinic. A record 804 babies were born in Williston in 2014, and practice manager Tim Olson said officials project that births could exceed 900 this year. The newly renovated clinic adds two new OB/GYN physicians and a nurse practitioner to serve the rapidly growing community.

For long-time residents of Williston and/or those who called Williston their home in the 1950's, this is interesting:

The North Dakota Department of Transportation has finished installing new street lights the corners of 11th Street and 9th Avenue and 11th Street and 6th Avenue West.

Elsewhere:

Shopko Hometown has officially opened its doors in Tioga and Wolf Point. Both of the new Shopko stores are located in former ALCO buildings, which were closed due to bankruptcy proceedings.

Shopko Hometown stores are scaled-down versions of the company's "big box" stores. Shopko is also opening stores in Bowman, Rolla, and New Town.

Clock Continues To Tick -- Two-Year Tax Break For North Dakota Oil Producers -- April 3, 2015

Updates

May 10, 2015: with WTI solidly at $60 for past few days, it's hard to imagine coming in under $52.29 for the month of May, but maybe there's something in the fine print I don't understand.  

Original Post

Reuters is reporting:

The clock kept ticking in March on a potential $5.3 billion, two-year tax break for North Dakota's oil industry after a state-calculated average of the month's crude price fell below $52.59 per barrel.

The state waives its 6.5 percent oil extraction tax if the monthly price of benchmark West Texas Intermediate (WTI) crude at the Cushing, Oklahoma, transport hub falls below an inflation-adjusted limit, set at $52.59 per barrel for 2015, for five consecutive months.

For March, the average calculated price was $47.76 per barrel, according to data from the North Dakota tax commissioner's office. The March average was a drop from the February average of $50.86 per barrel.

The tax break kicks in if the average monthly price is below that $52.59 level for the next two months. If it is off even one month, the clock resets. The tax returns if the average price exceeds that level for a subsequent five consecutive months.

The countdown has officially entered its fourth (?) month out of a possible five.

Lean Management For Hess -- April 2, 2015

Reuters is reporting:

Oil producer Hess Corp has turned to a manufacturing process developed by automaker Toyota Motor Corp to cut costs and boost production as crude oil prices lag.

Deploying a process called Lean manufacturing, and used by only a handful of other oil producers, the move has shaved roughly $400,000 off the cost of each North Dakota well in the past eight months, a savings that comes even as Hess adds more sand and frac stages on each well.

By mirroring Toyota, which pushed its employees relentlessly each day to focus on ways to produce cars cheaply and more efficiently, steps that helped it rival Detroit automakers, Hess hopes to emerge from the oil price slump stronger than peers.
The New York-based company believes that by using Lean manufacturing its 1,200 operated Bakken wells can remain profitable with U.S. crude oil prices above $40 per barrel, roughly $9 below current levels. 

Hess also said it could go so far as to survive with oil around those levels for the next eight years.

I think we're going to see a lot of this, also, going forward. Reuters is reporting:

The tech geeks are coming to the oil industry's rescue.

With the price of crude plumbing lows not seen since 2009, Royal Dutch Shell, Whiting Petroleum Corp and many others are turning to rocket fuel, Big Data, lasers, spectrometers and other new or revamped technologies to do more for less.

As North America's oil companies slash spending and lay off workers, established services firms and start-ups are hawking products that better assess oil and gas deposits, help drill fewer but bigger new wells, and boost output from old ones.

It is too early to judge whether the new tools can produce gains similar to those of the past six years, when well output kept rising at double-digit rates and the time needed to drill and frack new wells dwindled to about 10 days from 40.

Baker Hughes Inc saw more client inquiries about products that increase efficiency of existing wells in the first three months this year than in all of the past two years.

Russian Oil Production Hit Post-Soviet High In March, 2015

Reuters/Rigzone is reporting:

Russian oil output edged up 0.6 percent in March to a post-Soviet high of 10.71 million barrels per day on increased production at Gazprom and Rosneft.

The output topped December's high of 10.67 million barrels per day (bpd), the data showed. The data includes output for crude oil and gas condensate which reached 45.275 million tonnes in March, versus 40.696 million the month before.

Bone Spring Play In The Delaware Basin Could Be Huge For EOG -- April 3, 2015

EOG's Bone Spring play could hold massive amounts of upside potential for EOG -- Seeking Alpha.

Summary:

• EOG Resources is ramping up the development of the Second Bone Spring play this year.
• Additional drilling activity could give EOG a much better idea of its resource potential in the area.
• Even when realizing only $55 per barrel of oil, EOG's Second Bone Spring wells still generate a 35% BTROR. 

EOG Resources' development of the Second Bone Spring play in the Delaware Basin is going along nicely, which is why management plans to ramp up drilling activity in the area this year.

Last year, EOG Resources completed three net wells in the Second Bone Spring. Management hopes to bring that up to 37 net wells this year.

The Delaware Basin is one of the three basins that make up the Permian Basin, and is often considered one of the most prolific portions of the play. Even in this low price environment, EOG Resources still expects to generate a 35% before-tax return on its wells in the Second Bone Spring formation.

Initial oil production rates [24-hour] out of EOG Resources' wells range from 1,270 bo/d - 1,825 bo/d, very solid numbers. So far, management has located 90,000 net acres in the prolific Northern Delaware Basin capable of targeting the Second Bone Spring.

Currently, EOG Resources doesn't know what the resource potential of the area is, but it could be huge.

At the link, note all the pay zones in the Delaware Basin. 

I track the Delaware Basin over at the sidebar on the right.

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on anything you read here or think you may have read here.

Random Update On Oil And Gas Producers' Borrowing Bases -- Redeterminations Effective April 1, 2015

Disclaimer: this is not an investment site. Do not make any financial or investment decisions based on anything you read here or think you may have read here.

Earlier last month, many sources reminded us that the mid-year credit re-determinations would be reported in April, including Oil & Gas Investor:

Oil and gas producers’ bank-facility borrowing bases may decline an average of 30% during reserve-based redeterminations this and next month, forecasts Raymond James & Associates Inc. securities analyst Kevin Smith.

“Needless to say, just about everybody is making sizable spending cuts, though the magnitude varies, depending on each company’s balance-sheet flexibility, asset-base characteristics and management preferences,” Smith reports of producers’ response in advance of their twice-a-year meeting with bankers.

WTI has settled in at about $50 in the past month, but “the potential pain for U.S. E&P companies is far from over.” He forecasts that significant borrowing-base reductions could “kick off a wave of mergers, property deals and even some corporate restructuring.”

So, with that in mind, let's begin tracking that data if we happen to run across it.

First up, Eagle Rock Energy: decreased from $320 to $270 million, or 16%.

Second up, Mid-Continent Energy Partners: from $240 to $220 million, or about 9%.

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April 6, 2015

Callon Petroleum announces reaffirmation of borrowing base: Co announced that the borrowing base under its senior secured revolving credit facility remained unchanged at $250 mln following its lenders' regularly scheduled semi-annual redetermination process. There were no other changes to the terms of the credit facility resulting from this borrowing base redetermination.

Bummer -- April 3, 2015; Another Record For Number Of Americans Not In The Labor Force -- The Good News? Unemployment Rate Remains Unchanged

Updates

• Later, 1:36 p.m. CT: it took awhile for the media to pick up on this, but this is really a horrendous report -- the jobs report -- and coming just before summer when jobs should be picking up, not to mention eight years into the recovery and a gazillion dollars in stimulus. Here are the headlines that are now coming out with regard to the jobs report:
• record 93 million Americans NOT working
• record 12 million blacks not in labor force
• record 56 million women not in labor force
• January, February jobs numbers revised down dramatically
• Fed cuts growth forecast to zero

Something tells me Janet Yellen is not ready to raise rates quite yet.

I did not read all of the articles completely, but I bet none of them mentioned the anti-business climate in the US, exemplified mostly by a) ObamaCare; and, b) mandates to raise the minimum wage. 

[The numbers seem to call into question that McDonalads, Wal-Mart, et al are raising their wages because of the tightening labor market. Not likely.]
 
Original Post
Business Insider is reporting: huge miss on the jobs report.

The jobs report was a big miss. 

According to the Bureau of Labor Statistics, the economy added 126,000 jobs in March, way less than the expected gain of 245,000 jobs.

This ends the 12-month streak of payroll gains over 200,000, and is the lowest number of monthly job gains since December 2013.

The unemployment rate held steady at 5.5% in March.

The report showed that jobs gains continued to trend up in most industries, though jobs in the mining sector — which included oil-related jobs — saw a decline of 11,000 jobs in March. This sector has lost 30,000 jobs this year after adding 41,000 jobs in 2014.

Payroll gains in January and February were also revised lower, with February's gains falling to 264,000 from 295,000 and January's additions falling to 201,000 from 239,000. 

Over the last three months, job gains have averaged 197,000 per month. 

Remember the magic numbers:

First time claims, unemployment benefits: 400,000 (> 400,000: economic stagnation)

New jobs: 200,000 (< 200,000 new jobs: economic stagnation)

Economists estimate the labor market needs to create about 125,000 jobs a month to keep the unemployment rate steady, though estimates vary -- Reuters.

Eight years into the recovery, a gazillion dollars in stimulus, and average job gain for past three months is less than 200,000 -- a number widely accepted as required to prevent economic stagnation.

And this is why the unemployment rate remains unchanged:

More Americans dropped out of the labor force last month, as the number of people not in the labor force hit another record high in March.

According to Friday’s Bureau of Labor Statics jobs data 93,175,000 Americans were not in the work force in March, an addition of 277,000 to February’s level of 92,898,000.