The Million Dollar Way (The Bakken Oil Blog): 06/24/15

Wednesday, June 24, 2015

Exxon Temporarily Shuts Down Off-Shore Production Off Santa Barbara -- June 24, 2015

I think I forgot to post this story yesterday. The Los Angeles Times is reporting:

ExxonMobil has shut down oil production at its three platforms off the Santa Barbara County coast a month after a corroded pipeline owned by Texas company Plains All American Pipeline burst, effectively cutting off the flow of Exxon’s crude.

The oil giant halted operations at the Heritage, Harmony and Hondo offshore platforms late last week after it exhausted storage space at an onshore facility near El Capitan State Beach, company spokesman Richard Keil said Tuesday.

The company had hoped to avoid a shutdown by using a fleet of 6,720-gallon trucks to make as many as 192 daily trips on U.S. 101 to ship the oil to nearby refineries. (See "we got us a convoy.")

A Santa Barbara County official rejected that "emergency" proposal for an expedited trucking permit this month.

Random Update On The CLR Hawkinson Wells In Oakdale Oil Field, Dunn County -- June 24, 2015

A reader asked if there was anything new on the CLR Hawkinson wells in Oakdale oil field, Dunn County.

A quick look and my general observations:

there are eleven Hawkinson wells on various multi-well pads
there are two singletons: one was the first; the other is brand new, still on confidential list
it does not appear these wells have been choked back; certainly they have not been taken off line
in the aggregate, these wells are much, much better than their IPs would have suggested
some wells are still shown to be "F" - flowing on their own without AL (artificial lift - pump)

I went through these quickly. I may have missed something. I might come back to these later when I get caught up with other stuff.

I track the Hawkinson wells here. Cumulative production has been updated; note the new singleton.

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This Is Not An Investment Site, But These Are A Couple Of Cool Stories

First, Disney. It appears the heirs to the mousey kingdom are making a lot of money. The kingdom is making so much money, not only is the company going to raise its dividend, but it's going to start paying its annual dividend semi-annually (twice a year) instead of just once a year. Apparently the vault is running out of room. Bloomberg is reporting:

Walt Disney Co. raised its dividend by 15 percent following record results and said it would begin paying investors twice a year.

Disney has posted record profit for the past four years as investments in films and theme-park attractions drew more customers to its properties. It has two of the top four domestic films of 2015 in “Avengers: Age of Ultron” and “Cinderella.” Such hits reap returns long after they’ve left theaters through merchandise sales, TV airings and theme-park attendance.

The company has more than doubled its dividend since 2011. Still, Disney’s projected yield, based on the new annual rate of $1.32 a share, is 1.2 percent. That compares with the current 2 percent for the Standard & Poor’s 500.

Maybe I will turn this blog into an investment site, but it will be a bit different than all the rest. I will point out, after the fact, which companies one should have invested in, like five years ago.

Meanwhile, Netflix is going to make its shareholders feel richer by taking a page from the AAPL playbook: split 7 - 1. The writer at the linked article, no doubt an MBA from a prestigious East Coast school of business and who now writes for one of the best financial "magazines," noted:

What happens when a company split its stock is that price of a single share falls, but the value of the company doesn't change at all.

I wonder who reads the Business Insider did not know that. Unless, of course, the company is either Apple or Netflix in which case the company is growing every day, every hour, and perhaps, even every minute. But, yes, in principle, the writer is correct: the split does not change the value of the company in and of itself.

However, the writer did say something that was definitely wrong:

The reason to buy or not buy (or sell!) a stock is because of what you think the company is worth, meaning how much a company makes in profit, or what you think it could make in the future, and so on.

I doubt not one person in 10 buys a stock in a company based on what the company is worth. I doubt not one person in 10 could ever sit down and actually do the math to figure out what a company is worth. No, folks don't buy or not buy a stock based on what they think the company is worth, they buy or don't buy on whether they think someone else will come along and pay a higher price for the same share of stock. Look at Tesla. It goes up and down every day. I doubt one person in ten who buys Tesla stock is running the figures each day to determine what the company is worth. Right now, some would say it's not worth a whole lot and that's why they've shorted the stock.

Pretty poor excuse for an article from Business Insider. They're starting to look like my blog.

Eight (8) New Permits -- June 24, 2015; More Evidence "New" Production Has Come To A Stop In The Bakken

Active rigs:

	6/24/2015	06/24/2014	06/24/2013	06/24/2012	06/24/2011
Active Rigs	77	194	185	210	170

Eight (8) new permits --

Operators: Crescent Point (3), MRO (2), Slawson, Sinclair, Hess
Fields: Ellisville (Williams), Colgan (Divide), Van Hook (Mountrail), Big Bend (Mountrail), Sanish (Mountrail), Beaver Lodge (Williams)
Comments: this is a nice mix; this is a very positive sign

Wells coming off the confidential list Thursday:

28596, drl, Hess, EN-Vachal-155-93-0532H-3, Alger, no production data,
29977, drl/NC, XTO, Star Federal 21X-14A, Grinnell, no production data,
30196, SI/NC, XTO, Evelyn 31X-3H, Lindahl, no production data,
30296, SI/NC, EOG, Fertile 63-1004H, Parshall, no production data,

Open Season

"Open season" means something different to environmentalists than it means to pipeline companies.

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Random Update On A DJ Pipeline

From a press release.

Saddlehorn is a limited liability company owned by Magellan Midstream Partners, L.P., Plains All American Pipeline, L.P., and Anadarko Petroleum Corporation.

Saddlehorn will construct, own and operate the approximately 600-mile pipeline that will transport various grades of crude oil from the DJ Basin, and potentially the broader Rocky Mountain and Bakken area resource plays, to storage facilities in Cushing, OK, owned by Magellan and Plains.

The 20-inch pipeline from Platteville, CO, to Cushing, OK, ultimately has the capacity to transport up to 400,000 barrels per day (bpd), with the initial capacity expected to be closer to 200,000 bpd.

It was in the news today because the owners have decided to extend the pipeline about fifty (50) miles north of Platteville, CO, to Carr, CO.

The Carr extension project is currently estimated to cost between $80 million and $100 million.

The Platteville to Cushing pipeline is expected to be operational during mid-2016 and the extension to Carr is anticipated to be in service by the end of 2016.

So, there are some nice data points.

Despite the slowdown in oil production due to the decrease in the price of oil, Magellan, et al, has decided to extend the pipeline by 50 miles at a very significant cost.

The cost of a pretty routine pipeline seems to be in the neighborhood of $1 to $2 million per mile.

Random Update Of Three (3) New HRC Wells North Of Williston -- June 24, 2015

A reader asked about the three new HRC wells in Tyrone oil field, 2-156-101.

The two earlier wells in the drilling unit 2/11-156-101:

25562, 1,208, HRC, Borrud 156-101-2A-11-2H, t8/13; cum 154K 4/15; choked back in March/April, 2015, probably for operational reasons (fracking nearby wells)
19048, sited in section 11, runs north into section 2; 705, HRC, Borrud 156-101-11D-2-1H, t8/11; cum 152K 4/15; chocked back in March/April 2015, probably for operational reasons (fracking nearby wells)

The three new wells sited on the north end of the 2/11-156-101 drilling unit are back on confidential status but some information has been released:

29238, conf, HRC, Borrud 156-101-2B-11-3H, middle Bakken, 1280-acre,

Date	Oil Runs	MCF Sold
4-2015	14393	7663

29239, conf, HRC, Borrud 156-101-2B-11-4H, middle Bakken, 1280-acre,

Date	Oil Runs	MCF Sold
4-2015	23332	14904
3-2015	5046	2292

29240, conf, HRC, Borrud 156-101-2B-11-5H, middle Bakken, 1280-acre,

Date	Oil Runs	MCF Sold
4-2015	19236	9900

Really Cool -- A Rig Spotted Outside Of Dickinson -- June 24, 2015

I assume the rig is there; don't know for sure. From a reader:

According to the NDIC, Stark County will have the Armstrong Operating drilling a Wildcat just southwest of Dickinson adjacent to their wells out by the golf course. It has a spud date of 6/22/2015, but no file has been started. The rig is Canelson 40 and shows a start date of 6/16/2015.

The graphic below shows the new rig in relationship to Dickinson.

In addition, just some of the "monster" wells in this area. I track "monster wells" here.

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Another Day, Another Dollar

We all have jobs to do, no matter how young, how old, rich or poor.

One of Sophia's chores is to inventory the refrigerator every so often with the help of her older sister. Sophia is only eleven months old but takes her job very seriously, vigorously throwing anything across the kitchen that does not meet her expectations.

Cashwise In Dickinson, North Dakota Opens

The Dickinson Press is reporting:

The Dickinson location has been in the making since March, when Coborn’s, a family owned St. Cloud, Minn.-based grocery retailer, acquired the site of the former Kmart in the Prairie Hills Mall.

Sellers, who was brought on to the project in April, said he has directed eight stores in the past and has opened 12.

He said the Dickinson store will be one of the largest Cash Wise locations at 100,000 total square feet with a 70,000-square-foot sales floor.

Next time I'm in the Dickinson area I will stop by; compare this Cashwise with the one in Williston.

It looks like Cashwise is along I-94 and I-98.

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EIA "Energy Cookie"

Today's "energy cookie":

Sanctions imposed by the United States and the European Union (EU) at the end of 2011 and during the summer of 2012, respectively, led to the displacement of more than 1.0 million barrels per day (b/d) of Iranian crude oil on the global market.

Iran's main buyers in Asia, Europe, and elsewhere have replaced Iranian crude oil with barrels from other members of the Organization of the Petroleum Exporting Countries (OPEC).

If oil-related sanctions are lifted, Iran will look to regain export market share, competing with other OPEC members with similar crude oil grades…Iran's crude oil and condensate exports averaged 1.4 million b/d in 2014. In 2011, prior to sanctions, Iran exported 2.6 million b/d, most of which went to Asia, particularly China (550,000 b/d), India (320,000 b/d), Japan (315,000 b/d), and South Korea (250,000 b/d). --- EIA

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For Those Who Need More Proof That Minnesota Is Anti-Business

The Park Rapids Enterprise is reporting:

Offutt says the episode has changed his attitude about investing in any new farming projects in Minnesota.

"I would say that the least amount of expansion in the state of Minnesota is the best for our company," he says. "There are other areas in the United States that are a lot friendlier to agriculture and agriculture production than the state of Minnesota is under its present situation."

So, who is Offutt? Perhaps one of those most familiar with good water stewardship.

The patriarch of the biggest potato producer in the world says his company is not the poor environmental steward critics have accused it of being in a snafu over Minnesota water permits.

Ron Offutt, emeritus chairman of the board of R.D. Offutt Co. in Fargo, N.D., says his company got ahead of itself in applying for more preliminary water well permits than it needed or wanted. But that was, in part, a reaction to a changing permit application process and a rare offer to explore buying land from Potlatch Corp., which has sold thousands of acres it had used as timberlands.

In April, Offutt's company appealed a Minnesota Department of Natural Resources decision to require an Environmental Assessment Worksheet for its 56 water permit applications. A court recently agreed to drop the appeal, after Offutt withdrew all but 18 of those applications. The withdrawal prompted some to question why the company was against the environmental assessments.

Fracking Rule On Hold -- June 24, 2015

A day late and a dollar short, my earlier post. To clarify: my earlier note was a day late, and a dollar short; the judge's ruling was right on time and worth a gazillion dollars to a lot of folks.

Don sent me the update. The Dickinson Press is reporting -- federal fracking rule on hold.

A federal judge issued a stay Tuesday of a U.S. Bureau of Land Management fracking rule, temporarily halting an Obama administration effort to regulate oil and gas operations on public land nationwide.

The BLM rule had been scheduled to go into effect today before U.S. District Court Judge Scott W. Skavdahl’s decision. The ruling amounted to a legal cease-fire and means permitting of oil and gas wells on federal land will proceed under current regulations for at least another month.

Skavdahl stopped short of issuing the injunction sought by industry groups and oil- and gas-producing states. But he left open the possibility of halting the Obama administration’s effort to police fracking until the matter can be decided in court, a process which could take years.

Wow, when you read the story, the judge played this just right.

GDP Forecast, 2Q15, Ticks Up -- Now At 2.0 -- June 24, 2015; Greek Deal Collapses

GDP New:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2015 was 2.0 percent on June 23, up from 1.9 percent on June 16. Following yesterday morning's existing-home sales report from the National Association of Realtors and this morning's reports on sales and prices of new single-family homes from the U.S. Census Bureau, the nowcast for second-quarter real residential investment growth increased from 7.0 percent to 10.0 percent.

By the way, the government is still massaging figures for 1Q15 GDP; this should be the last and final number. Reuters is reporting: U.S. first-quarter GDP revised to show slight contraction.

The Commerce Department said on Wednesday gross domestic product fell at a 0.2 percent annual rate in the January-March quarter instead of the 0.7 percent pace of contraction it reported last month.

It should be noted that the contraction was blamed on ... drum roll .. cold weather. ObamaCare was not mentioned. Cold weather in the first quarter is not new; we see that every winter. ObamaCare, on the other hand ... priceless.

Market freaks out, futures slump: Greek deal collapses. Creditors refuse terms. The new terms:

Greece gets more bailout money
Creditors get more promises

"The Greek deal collapses" was a [London] Telegraph headline. In fact, the AP story simply suggests more of the same, that "divisions exist." Remember, this is only June 24th; the IMF payment is due June 30th, and Greece has already telegraphed it "doesn't need no stinking IMF." Not in those exact words.

Disclaimer: this is not an investment site. Yada, yada, yada.*

By the way, remember all those stories about all the money being withdrawn from Greek banks by their citizens? And yet, the Greek government isn't putting an end to those withdrawals. The Greek government is getting the best of both worlds: a) they aren't putting an end withdrawals from their banks; to do so would be a political disaster; and, b) the deposits being taken from the banks are being replaced by non-Greek European funds. The net effect: a continuing bailout. Bloomberg is reporting:

That’s what it’s now doing. While Greece didn’t ask for an increase in assistance on Wednesday, according to a person familiar with the matter, it has needed fresh approval for a higher ELA limit four times in the past week. An ECB spokesman declined to comment on Greece’s ELA requests.

Via the Greek central bank, the ECB is replacing money withdrawn by depositors fearful that the government can’t agree a deal with its creditors, allowing lenders to rack up an overdraft of almost 90 billion euros ($101 billion) since February.

Quite a racket to say the least. The longer this drags out, the more money the Europeans are giving the Greeks.

*Do not make any investment or financial decisions based on what you read here or what you think you may have read here.

Wednesday -- June 24, 2015; New Federal Fracking Rules That Were To Take Effect TODAY -- US District Judge Scott Skavdahl, Casper, WY, Put Them On Ice

UPDATE on federal fracking rules: see this note.

North Dakota rig count appears to have hit bottom -- Reuters is reporting:

The drilling rig count in North Dakota's oil patch, a closely watched metric through which many attempt to divine future crude production, appears to have hit a bottom.

For the past three weeks the count has hovered between 76 and 79, after sliding only slightly from 80 at the end of May. On June 12, the count hit 76, the lowest level since 2009. The count bobbed slightly in the ensuing days, hitting 77 on Tuesday.

It has, in short, been the longest period since oil prices started to slide last fall that the rig count has stayed in the same range, offering many in and near the No. 2 U.S. crude-producing state's energy industry a bit of solace that a nadir has been reached. In early March, for example, the count was at 113.

The apparent stabilization has produced a palpable sigh of relief around North Dakota's western oilfields, where newspapers [and the MillionDollarway blog] print the number daily.

Now, on to President Obama's "war on fracking." Bloomberg is reporting:

The U.S. government says it can set standards for more than 100,000 wells that make up 11 percent of the nation’s natural gas output and 5 percent of its oil. The states argue they’re doing plenty to make sure fracking is done safely, so oversight should be left to them.

With the new rules set to take effect Wednesday, U.S. District Judge Scott Skavdahl in Casper, Wyoming, may decide in court who is right. Producers say they can’t afford the increased costs and lengthy delays they fear will accompany the new federal rules. Drillers are already struggling because of falling oil prices, which has led to a spate of bankruptcies and missed bond payments. Oil dropped from more than $100 a barrel to as low as $44 in March, undercutting the “shale gale” that drove U.S. production to near record levels.

Active rigs:

	6/24/2015	06/24/2014	06/24/2013	06/24/2012	06/24/2011
Active Rigs	77	194	185	210	170

RBN Energy: Why Are WTI Prices Stuck at $60/Bbl? (Archived)

Prices for prompt delivery of West Texas Intermediate (WTI) crude as quoted on the CME/NYMEX futures exchange fell by 60% from their high over $107/Bbl in June 2014 to a low under $44/Bbl on March 17, 2015. After recovering about 37% in April and May WTI prices have remained stuck close to $60/Bbl ever since - closing yesterday (June 23, 2015) at $61.01/Bbl.

With market contango narrowing, inventory levels falling, and refinery throughputs rising – why aren’t prices moving higher faster?

Today we review the fundamental data.

For the past year oil market analysts have been busier than shrinks after Thanksgiving – trying to explain what happened and what comes next - since crude prices started falling in June 2014. As we explained last fall the root cause for the price meltdown was a worldwide increase in crude supplies coupled with a downturn in demand.

Crude from U.S. shale based production has been increasing at the rate of 1 MMb/d a year for the past three years - pushing out imports into the world market and creating increased competition between producers to retain their market share and placing downward pressure on prices. When producer group OPEC failed to signal any intent to try and prop up prices at their Thanksgiving meeting the rout gathered pace.

With too much crude and too few buyers the market condition known as contango developed where future prices are expected to be higher than spot prices today – encouraging the use of storage to “save” cheap crude today for use when prices recover.

Without new sources of demand or supply interruptions, a contango market keeps downward pressure on today’s market prices as storage fills up and becomes more difficult and expensive to find – increasing the contango spread required to cover storage costs.

In March of 2015 we described how sky-high inventory levels were still keeping up the downward pressure on crude prices. More recently we posted a blog at the beginning of June (2015) suggesting that low crude prices were here to stay in a new era of abundance.

Other analysts contend that the narrowing contango, falling inventory levels and increased refinery demand seen recently – coupled with a slow down in crude production – are signs that prices should recover further this year. In this two part blog series we look at the impact of evolving fundamental signals on prices.

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This Is How Wal-Mart Will Pay Higher Wages

Reuters is reporting: Wal-Mart to impose charges on suppliers as its costs mount --

"It is not the way Walmart has done business in the past," Jetta said. "This approach suggests that they are seeking areas to offset their increased investment in wages, as well as offset their lack of organic revenue growth."

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Netflix To Split 7 -1

CNBC is reporting:

In soaring almost 100 percent this year, Netflix shares have reached nearly $700. As of last week, Netflix was the third-most expensive stock in the S&P 500.

I've talked about Netflix for quite some time.

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Disclaimer

This is not an investment site. Do not make any investment or financial decisions based on what our read here or what you think you may have read here.

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Collapse

The Greek deal has collapsed. Creditors refuse new terms. The new terms:

a) more bailout money for Greece
b) more promises from Greece

The Million Dollar Way (The Bakken Oil Blog)

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