Thursday, July 23, 2015

Plans Going Ahead To Put In As Much As 80 Million Bbls Of New Storage Along Gulf Coast -- July 23, 2015

Sometime I think if it weren't for states like Texas, Louisiana, North Dakota, Oklahoma, and perhaps a handful others, the US would be in sorry state with regard to energy. is reporting:
The midstream company planning to build one of the largest crude oil storage facilities on the Gulf Coast said Thursday that it had reached a deal to fund the first phase of construction on the project in southwest Houston.
Fairway Energy Partners LLC said in a release that Houston private equity firm FBR & Co. agreed to fund the first leg of the Pierce Junction storage facility, which will convert three underground salt caverns near the intersection of the 610 and 288 Freeways into crude oil storage.
Fairway is backed by Haddington Ventures LLC, a Houston investment firm that manages a host of energy storage and processing projects around the U.S.
Fairway said it expected Pierce Junction to be in service by the end of 2016. The financial terms of the deal were not released.
The project, first proposed in 2011 when the shale drilling boom was beginning to flood U.S. storage with crude oil, will hold up to 20 million barrels of crude oil. According to the Wall St. Journal, that could account for more than a quarter of the new capacity planned for the Gulf Coast by the end of next year.
The first phase of the project will build out 10 million barrels of storage in the caverns and construct 21 miles of pipelines connecting the facility to two other storage hubs in southeast Houston.
A quarter of new storage = 20 million bbls; suggests that we are looking forward to 80 million bbls of new storage capacity along the coast.

US storage by PADD here. PADD 3, which includes the Gulf Coast currently has about 300 million bbls of storage; PADD 2 which includes Cushing and the Bakken has about 150 million bbls.

Comment: folks don't building something if they don't think it will be needed. When someone or something continues with plans to build 80 million bbls of new storage along the coast, it speaks volumes. There are probably a handful of countries that could even consider this now: US, Saudi Arabia, and...that's about it. The 21st century is going to be known as the Age of Energy Shifts and the US will be smack dab right in the center.

Can A Cop Order You To Get Out Of Your Vehicle

Here's one link that answers the question; I'm sure there are other answers.

Years ago when I was going to graduate school in Los Angeles, my parents flew out to visit. One evening about 7:30 p.m. I was driving Mom and Dad around downtown Los Angeles, just looking around. The streets were empty, which is typical for some of these major urban centers after most businesses have closed. I came to a dead-end street and made a legal U-turn. Soon after the U-turn a black-and-white cruiser with two officers pulled me over. Of course I immediately questioned the legality of my U-turn. I had been taught when stopped by police to stay in the car with both hands clearly visible on the steering wheel, and that's the pose I took.

Either through a loudspeaker or a loud voice, I forget, I was ordered out of the car and told to stand against the passenger side of the vehicle, feet on the sidewalk, hands on the roof of the car, and spread my legs. I was then given a pat down.

When all was clear, the policeman relaxed, told me to turn around, and asked where I was from. He had noticed the North Dakota license plates on my 1973 Chevy Nova SS.

It turns out he was from a small town in North Dakota and simply wanted to talk about his home state. About that time, my dad from the back seat heard the conversation, stuck his head out the window, and said, "Hey, I know your dad."

I had no problem with that. The policeman had no clue who I was and certainly did not want to be surprised by an armed man with evil intent. I thought it was a great experience; provided a great story told many times since. But the bottom line, I will do what a cop tells me to do.

It doesn't change my thoughts regarding the Sandra Bland video.

Easier To Buy Than To Build -- July 23, 2015

Two days ago I posted:
With regard to oil, this is where we are:
  • service companies have hit bottom, and are starting to recover
  • too early to tell which drillers will survive, which won't; we'll know by this time next year (2016) 
  • cheaper to buy pipelines than build new ones
Now, this article sent to me by a reader. Yes, it is easier to buy existing pipelines than to build new ones: 
Houston-based midstream companies are facing an unexpected level of resistance from regulators in the construction of pipelines across the U.S., and are thus pivoting away from organic projects and looking to M&A to achieve distribution goals.
As one example, on the road to New England:
Just this week, town councilors in Londonderry, New Hampshire unanimously voted for a resolution opposing Kinder Morgan's proposedTennessee Gas Pipeline.
And so, echoing what I wrote two days ago:
"With the realization that the (shale) boom isn’t all things to all people, now some of the midstream organic projects have run into regulatory delays. You’re not able to put capital in as quickly, so this might be where you see M&A. M&A might be the only means by which you can meet (the) distribution demand."

Eleven (11) New Permits -- July 23, 2015

Active wells:

Active Rigs70194209182138

Wells coming off confidential list Friday:
  • 28185, drl/NC, XTO, Nelson Federal 21X-5E, Antelope, no production data,
  • 28418, 2,110, MRO, Cole USA 24-11TFH, Chimney Butte, t5/15; cum 26K 5/15;
  • 28803, drl/NC, CLR, Alpha 5-14H, Camp, no production data,
  • 29974, drl/NC, Enerplus, Thread 149-93-04D-03H, Mandaree, no production data,
Eleven (11) new permits --
  • Operators: CLR (9), SM Energy (2)
  • Fields: Sanish (Mountrail), Musta (Divide)
  • Comments: see graphic below for the CLR permit location
Seven (7) producing wells completed:
  • 25584, 1,131, Whiting, Moccasin Creek 14-33-28-3HS, Moccasin Creek, t6/15; cum --
  • 28791, 923, Abraxas, Jore Federal 2-11-8H, North Fork, t6/15; cum --
  • 28792, 993, Abraxas, Jore Federal 2-11-7H, North Fork, t6/15; cum --
  • 28793, 890, Abraxas, Jore Federal 2-11-6H, North Fork, t6/15; cum --
  • 28794, 992, Abraxas, Jore Federal 2-11-5H, North Fork, t6/15; cum --
  • 30128, 390, EOG, Fertile 60-0410H, Parshall, t7/15; cum --
  • 30572, 1,269, Whiting, Roggenbuck 11-25-3H, Sanish, t6/15; cum --
Three confidential wells were reported as plugged or producing (I normally don't include this data) but due to interest with "current" activity, I will at least post the number of new producing wells for awhile and see if it proves worthwhile.

The nine (9) new CLR permits are for wells in the area noted below:

Great Video Of A Unique Well In North Dakota -- July 23, 2015


October 3, 2017: update regarding this well. Sent in by a reader, see first comment.  Scroll down to the original post below to see the video.
This well is no longer a dual completion.
They eliminated the one tubing string and are producing from only one of the two formations. The second Ampscot pumping uni has been removed. They first attempted to commingle the two formations as they both produced well, but the iron-laden production water from the sweet Bakken formation didn't play nice with the sour Madison formation- making iron sulfate, which tends to make terrible deposits and plug everything up.
I'm glad I captured it when I did. I have yet to see another dual completion well in North Dakota. 
Based on the NDIC scout ticket, it appears the middle Bakken was shut in on/about 9/7/2016; the Madison continues to produce.

NDIC File No: 16255     API No: 33-025-00587-00-00     CTB No: 116255
Well Type: OG     Well Status: A     Status Date: 10/16/2008     Wellbore type: Horizontal
Location: NWNW 25-142-97     Footages: 200 FNL 300 FWL     Latitude: 47.095941     Longitude: -102.925283
Current Well Name: KADRMAS 11-25H
Elevation(s): 2648 KB   2627 GL     Total Depth: 19331     Field: RUSSIAN CREEK
Spud Date(s):  5/1/2007
Casing String(s):  9.625" 2337'   7" 11286'  
Completion Data
   Pool: BAKKEN     Perfs: 11286-19331 OH     Comp: 7/17/2007     Status: SI     Date: 9/7/2016     Spacing: 2SEC
   Pool: MADISON     Perfs: 9560-9568     Comp: 10/9/2008     Status: AL     Date: 11/18/2009     Spacing: NW
Cumulative Production Data
   Pool: BAKKEN     Cum Oil: 35044     Cum MCF Gas: 12089     Cum Water: 58660
   Pool: MADISON     Cum Oil: 136433     Cum MCF Gas: 89622     Cum Water: 43803
Production Test Data
   IP Test Date: 7/17/2007     Pool: BAKKEN     IP Oil: 72     IP MCF: 77     IP Water: 21
   IP Test Date: 10/9/2008     Pool: MADISON     IP Oil: 45     IP MCF: 30     IP Water: 0
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Original Post
What an incredible "treat" for readers of the blog. A reader has sent comments and a video regarding a dual completion well, the Kadrmas 11-25. The reader is aware of no other dual completion well in North Dakota. In the video below, note that two 912 Amscots pump from the same wellhead:

Dual Completion Well; Two Pumps On Same Wellhead

Note: the middle Bakken was drilled first; a little over a year later, the Madison was drilled.

See original post and first comment at this link:


By the way, some of these posts are very old. After they were posted, my site was hacked and the URL "stolen." If you click on a link and get a message that the page does not exist, do not despair. If it's a link to one of my posts, the post is still there. Simply insert "the" in front of the URL. I changed the URL "milliondollarway....." to "" and have had no further problems. I'm correcting the links as fast as I can.

 See graphic below where to insert "the."

Back to Kadrmas 11-25H:

NDIC File No: 16255    
Well Type: OG     Well Status: A     Status Date: 10/16/2008     Wellbore type: Horizontal
Location: NWNW 25-142-97     Footages: 200 FNL 300 FWL
Latitude: 47.095941     Longitude: -102.925283
Current Operator: OXY USA INC.
Current Well Name: KADRMAS 11-25H
Total Depth: 19331     Field: RUSSIAN CREEK
Spud Date(s):  5/1/2007
Casing String(s): 9.625" 2337'   7" 11286'  
Completion Data
   Pool: BAKKEN     Perfs: 11286-19331 OH     Comp: 7/17/2007     Status: AL     Date: 8/30/2007     Spacing: 2SEC (1280 acres)
   Pool: MADISON     Perfs: 9560-9568     Comp: 10/9/2008     Status: AL     Date: 11/18/2009     Spacing: NW (160 acres)
Cumulative Production Data
   Pool: BAKKEN     Cum Oil: 34,265     Cum MCF Gas: 9042     Cum Water: 56164
   Pool: MADISON     Cum Oil: 110,127     Cum MCF Gas: 68167     Cum Water: 22732
Production Test Data
   IP Test Date: 7/17/2007     Pool: BAKKEN     IP Oil: 72     IP MCF: 77     IP Water: 21
   IP Test Date: 10/9/2008     Pool: MADISON     IP Oil: 45     IP MCF: 30     IP Water: 0

Recent production data:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

From the file report, after the Bakken was drilled:
Anschutz Exploration Corporation provides the summary description of the work performed to test the Fryburg, and install a dual completion for the Fryburg and Bakken for the Kadrmas 11-25H. Due to the complexity of the work, additional detailed doucmentation has been provided....

Starting September 30, 2008: The Bakken was isolated via an RBP at 9690', the Fryburg was perfed and tested. With the Bakken isolated by said RBP, the Fryburg was produced via pump/rods from 10/16/08 - 12/3/08.

Starting Deembert 3, 2008: The Bakken was put back on line, and was produced under a packer at 10,052' while preparations to set up a dual completions were made. The Bakken was produced from 12/19/08 - 11/3/09, and was isolated from the Fryburg via a packer at 10,052'.

Starting 11/18/09: The well was set up as a dual completion, Fryburg and Bakken; to be produced independently via rod pump and isolated via 2 production packers.

At no time were the Fryburg and Bakken commingled. Anschutz went to significant lengths to ensure that commingling did not occur. Durng the Fryburg test, the Bakken was isolated by an RBP. When the Bakken was put back on line, it was produced under a packer located below the Fryburg interval. During the Dual completion set up, all intervals were killed with water. In its current state, the intervals are isolated by 2 packers. -- received June 30, 2010.


Mission Canyon Fryburg, cased hole, 15% acid, 10/10/2008

Middle Bankken, open hole, 1.2 million lbs; ~ July 17, 2007

Be Advised

Note: in a long note like this, and due to its technicality, there will be factual and typographical errors. I have no background or training in the oil and gas industry. If this information is important to you, go to the source.

Why I Love To Blog, Reason #45,398 -- July 23, 2015

Readers and I noticed this quite some time ago, that diesel was cheaper than gasoline, something not seen in quite some time. I first noted that phenomenon on my cross-country trips in states like California. Since it was an anomaly in California, I assumed it had to do with the relative degree of economic activity. At the time diesel was first less expensive than gasoline occurred sooner in California than other states I was driving through, (Texas to California; and, Texas to North Dakota), but now it appears to be a nationwide phenomenon:

Today's EIA "energy cookie:"
On July 13, the U.S. average diesel fuel retail price fell below the average regular gasoline retail price for the first time since the week of August 10, 2009.
From August 2009 through June of this year, retail diesel fuel sold at an average premium of 34 cents per gallon over regular grade gasoline, with the difference reaching more than 90 cents/gal in January.
Tight diesel markets over the past six years have reflected growing diesel demand from developing economies and the switchover to ultra-low sulfur diesel (ULSD) for home heating oil in northeastern states, where more than 80% of U.S. use of oil for space heating occurs. Over the same period, gasoline demand has generally been weak, reflecting increasing vehicle fuel economy and changing consumer driving patterns. --- EIA
I'm having a bit of trouble understanding EIA's rationale for the switch: growing diesel demand (and now the price of diesel is lower than gasoline) and gasoline demand has generally been weak (and that's why gasoline is priced higher?). Doesn't make sense. I must be mis-reading the explanation which is not unusual for me.

However, that comment about "gasoline demand has generally been weak," must be in the eye of the beholder. Judge for yourself, the data is at this source:

Maybe I'm biased (yes, I know I'm biased) but the flat line from 2009 to 2015 is still higher than every year except for a three- or four-year period in the early 2000's. I have trouble calling gasoline demand "weak" in the US. [Especially in light of the increasingly higher CAFE standards; the increased interest in electric vehicles; the increased ridership on bullet trains --okay, I'm joking about bullet trains.]

When I read statements like that ("gasoline demand is weak") coming from the EIA, I am reminded of what someone told me the other day:
"Bruce, remember the EIA is an agency of the US Department of Energy. It should be above politics, but remember, it reports to a cabinet official who sits at the table when policy decisions affecting energy are being made. And "strong gasoline demand" does not fit the administration's story."
That was paraphrased.

There is some conspiracy thinking out there that the administration manipulated oil prices down to $50 to force Iran to come to the bargaining table. I find that ludicrous, but there are some smart people who actually believe that. Of course, at the other end of the spectrum, when we get back to $150 oil, someone will blame it on speculators.

Something To Hide

There's only one way to interpret this story:  HHS Rejects Planned Parenthood FOIA Request Because It’s ‘Not Newsworthy’.

Current and past directors of HHS and their staff have been complicit in illegal practices involved in the selling of baby parts by Planned Parenthood. One begins to wonder if over the years there was some big money from pharmaceutical companies supporting Planned Parenthood operations.

Does anyone remember The Immortal Life of Henrietta Lacks? It would be interesting if Rebecca Skloot would be willing to write the Planned Parenthood and cancer research story? 

Random Update On Hess In The Bakken -- July 23, 2015

Great article. Link sent by a reader who recently moved from North Dakota to Texas and still working for the same North Dakota company. I find it amazing how far the tentacles of some North Dakota companies reach. I digress. Here's the story being reported in the Bakken Magazine:
Even before oil prices took a nosedive that sent shock waves through the U.S. oil and gas industry, Hess Corp. was on the road to improving efficiencies and cutting costs in its Bakken operations.
The early pessimistic outlook for the Bakken has given way to the view that producers such as Hess in the Williston Basin of western North Dakota will rebound in an even-stronger, more-competitive position as infrastructure catches up to production, efficiencies improve and cost savings are realized.
“That’s the way that we’re looking at it,” says Gerbert Schoonman, vice president at Hess responsible for the company’s Bakken assets. “We are in a fortunate situation in that we’ve got a very strong position in what we call the heart of the Bakken.”
For Hess, lower prices haven’t meant a retreat from the Bakken, but instead a concentration of activity among its 610,000 net acres in the areas where the best rock for drilling exists.
“Hess has got more locations than anybody else in DSUs (drill spacing units) in the heart of the Bakken,” Schoonman notes. “As a consequence, we didn’t reduce very drastically. We only went down from 17 rigs to eight rigs.”
While some producers elected to back off on well completions, Hess did not. The company doesn’t want to risk losing the gains it made after it began implementing lean manufacturing methods in 2009, an approach emphasizing the introduction of process improvements while eliminating waste.
“The reason Hess decided to execute on continuing their completions was we want to maintain a capability within our teams and have a steady stream of completions that were executed at less than $3 million per well,” says Schoonman. “The cost of completions has come down even more since the start of the year because we’ve become more efficient at it and better.”
As an example of how lean has benefitted Hess, Schoonman says it once took them an average of 40 to 45 days to drill a well in the Bakken from spud to rig release.
“At the end of the fourth quarter last year, we were already down to an average of 19.5 days,” he notes.
“It didn’t stop there because we were able to migrate the rigs we were using and the people operating them. We’re now seeing very significant numbers of wells already at less than 15 days from spud to rig release.”
Much more at the link.

Remember, I track Hess at a link at the sidebar at the right, along with most other Bakken operators. 

Minor Notes -- July 23, 2015; Looks Like Off-Shore Is Off-Limits

Is anyone even aware that the American men's soccer team got beat by Jamaica earlier this week, 2-1?

After watching an exciting American women's soccer team earlier this month trounce Japan in the finals to take the World Cup, talk about a huge let down to see the US men's team (ranked #1?) lose to Jamaica (ranked #76) in a semi-finals game. The WSJ is reporting:
ATLANTA—In what has to be considered the darkest night of Jurgen Klinsmann’s four-year run as head coach of the U.S. Men’s National Team, the reigning Gold Cup champions were unceremoniously bounced from the biennial confederation championship in a shocking 2-1 upset by Jamaica.
The Reggae Boyz, ranked 76th in the world, stunned the U.S. with two first half goals scored within five minutes of each other on two costly mistakes by a U.S. team that last month knocked off world champion Germany. This was just the second win for Jamaica over the U.S. since 1988 and the first ever on U.S. soil.
Not Gonna Happen This Year
Winter In The Arctic Is Just Weeks Away

The US says Shell does NOT YET HAVE AUTHORITY to drill in the Arctic. Reuters/Rigzone is reporting:
The U.S. Interior Department on Wednesday granted Royal Dutch Shell two final permits to explore for crude in the Arctic this summer, but said the company cannot drill into the oil zone until required emergency equipment arrives in the region.
The department's Bureau of Safety and Environmental Enforcement (BSEE) conditionally granted Shell permits for exploration in the Chukchi Sea off Alaska, in a season which sea ice limits from July until October.
But Shell must have emergency equipment to contain a potential blown-out well deployable within 24 hours before drilling into the oil zone.
Shell discovered weeks ago that the Fennica icebreaker that holds the required equipment, called a capping stack, had a three-foot (1-meter) gash in it.
Shell last week sent the Fennica, which it is leasing, to Portland, Oregon, for repairs. Fixing the gash and sending it back could take weeks more.

Expensive Parking Lot: The Caribbean

Reuters/Rigzone is reporting:
Imagine parking your $300 million boat for months out in the open sea, with well-paid mechanics hovering around it and the engine running.
The Gulf of Mexico and the Caribbean Sea have become a garage for deepwater drillships -- at a cost of about $70,000 a day each. It’s either that or send your precious rig to a scrapyard. The dilemma underscores how an offshore industry that geared up for an oil boom is grappling with a bust. Rig owners are putting equipment aside at unprecedented numbers as customers including ConocoPhillips pull back from higher-cost deepwater exploration.
That’s helped make Transocean Ltd. and Ensco Plc two of the three worst performers in the Standard & Poor’s 500 Index over the past year.
“Most contractors have never seen an environment like this, where demand is falling as quickly as it is,” David Smith, an analyst at Heikkinen Energy Advisors in Houston, said in a phone interview. “It’s been a big headache, and the problem is that we’re not halfway through.”
A growing glut of newly built exploration vessels looked worrisome enough before the oil rout. Now it’s beginning to look disastrous.
It looks increasingly obvious that off-shore drilling is off-limits: either it's uneconomical (COP pulling out of the Gulf) or illegal (Obama administration).

Random Look At Three New EOG Permits -- July 23, 2015

Years ago when I was first starting to blog, I spent a lot of time learning what the names of various wells meant, the numbering system used by operators, etc., which was:
  • helpful for figuring out formation targets when the wells were still confidential; and,
  • helpful with small-talk at cocktail parties in the Bakken.
Most interesting to me was the numbering system used by EOG. Generally, wells numbered 1 to 99 were thought to be middle Bakken wells, and wells numbered 101 to 199 were thought to be upper Three Forks wells. The numbering system was being developed before there was much public talk about the lower two or three benches. Some of the numbers did not match the final target, but often the final target was changed after the initial permit was approved.

Regardless, over time, that exercise outlived its purpose:
  • I had a pretty good feeling for what formations were being targeted and by which operator; and,
  • I quit going to cocktail parties in the Bakken. It appeared women were not interested in such trivia. 
Having said that, it was interesting to see some new EOG permits now with 4XX -- I'm not even going to hazard a guess what formations EOG is targeting with those permits. This is where the new EOG wells will be sited:

I follow the Austin wells here. I have not updated that site because there are just so many Austin wells and I have only so much time. The purpose of the blog is to help me understand the Bakken. I try to keep things updated but understanding the Bakken is more important than OCD updates.

By the way, understanding the Bakken requires putting the Bakken into perspective and that's why I report on ObamaCare, jobs, economy, the stock market (follow the money), politics, culture, etc).

I also track Austin wells at the "monster" well page.
Some of the wells in the immediate location of the proposed EOG Austine 43X 3-well pad:
  • 17120 (same section): 2,051, EOG, Austin 10-34H, one section, open hole, 2 million lbs, t8/08; cum 875K 5/15;
  • 17111 (section immediate to the west): 1,341, EOG, Austin 24-33H, one section, open hole 1.6 million lbs, t6/09; cum 779K 5/15;
  • 17078 (section immediate to the east): 1,212, EOG, Austin 25-35H, one section, open hole 1.9 million lbs, t10/08; cum 408K 5/15;

ND Oil Well Completions Slow Sharply -- John Kemp, Reuters, July 22, 2015

Talk about amazing timing. This story was posted yesterday by Reuters:
LONDON, July 22 (Reuters) - No new well completion reports have been filed in North Dakota since July 10, the longest gap this year, according to daily activity records published by the state's Department of Mineral Resources (DMR).
Completions, rather than wells drilled, provide the best guide to short-term changes in output, since operators can always delay completing a well and putting it into production, either because they are waiting for completion crews to be available or to wait for better prices.
Completion is usually defined as a single operation including the stimulation and testing of a well as well as the installation of surface production equipment ("Dictionary of petroleum exploration, drilling and production" 2014). North Dakota's regulators consider a well completed when the first oil is produced through wellhead equipment into tanks from the ultimate producing interval and after the well has been cased.
Well operators must file a completion report with state regulators within 30 days of the completion date, and in some circumstances immediately (
"In no case shall oil or gas be transported from the lease prior to the filing of a completion report unless approved by the (DMR) director," according to state rules.
Okay, so that was posted yesterday. It was probably written during the past couple of days by John Kemp while he was putting the data together and last edited his final draft on July 20th or July 21st.

Then this, yesterday:

The NDIC reported a record number of well completions in one day: 28 well completions reported yesterday.

I cannot verify that is a record but based on what I know about the Bakken, it appears to be a record. 

There is another data point that I did not mention from that same NDIC report yesterday: the number of wells that were reported as "producing or plugged."

I don't post that data, "producing or plugged" wells from the daily activity report, mostly because it does not add much to my knowledge base of the Bakken. It is interesting for mineral rights owners of individual wells but in the aggregate the data does not help me better understand the Bakken, the purpose of this blog. I reported years ago when first blogging that 99% of all "producing or plugged wells would eventually be shown to be "producing." I waited until the IPs were reported to post the new wells.

However, a reader yesterday noted that there was a fairly large number of "producing or plugged" wells on the daily activity report that also showed the 28 completions. There were nine (9), including Hess, Oasis (with 5 of the 9), BR, and EOG.

Remember, a few data points:
  • for the past two months, the NDIC has reported 925 wells waiting for completion
  • operators are drilling about 100 new wells/month, I suppose (based on 70 active rigs)
  • the number of permits on a monthly basis is holding steady, perhaps creeping up slightly
  • operators are expected to complete wells within one year of spudding
  • winter is just around the corner.
One NDIC report does not a Bakken summer make, so it will be interesting to see whether the number of completions reported in one day was a one-off (an anomaly) or whether John Kemp had the misfortune of posting a great article that was out of date the very day it was posted.

By the way, look at this story that was just posted the other day suggesting shale well completions were rising, once again. 

Is Nigeria The First Saudi-Engneered Casualty In The Oil War? -- July 23, 2015

Bloomberg at SeekingAlpha:
  • Eni is considering selling all or part of its onshore Nigerian operations as it seeks to divest non-core businesses amid a drop in oil prices
  • a deal could raise $2B-$5B
  • Eni’s wholly owned subsidiary in the country operates under a joint venture agreement with Nigeria’s state oil company NNPC and ConocoPhillips (COP).
One can track US crude oil imports from Nigeria here, currently about 70,000 bbls/day compared to about 1.2 million bopd from Saudi Arabia.

From wiki:
The petroleum industry in Nigeria is the largest on the African continent. As of 2014, Nigeria's petroleum industry contributes about 14% to its economy.
As of 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue, as well as generating more than 14% of its GDP. It also provides 95% of foreign exchange earnings, and about 65% of government budgetary revenues.
Nigeria's proven oil reserves are estimated by the U.S. United States Energy Information Administration (EIA) at between 16 and 22 billion barrels but other sources claim there could be as much as 35.3 billion barrels. Its reserves make Nigeria the tenth most petroleum-rich nation, and by the far the most affluent in Africa. In mid-2001 its crude oil production was averaging around 2.2 million barrels per day.
Wow, old, old data. More from wiki:
Nigeria's petroleum is classified mostly as "light" and "sweet", as the oil is largely free of sulphur.
Nigeria is the largest producer of sweet oil in OPEC. This sweet oil is similar in composition to petroleum extracted from the North Sea.
This crude oil is known as "Bonny light". Names of other Nigerian crudes, all of which are named according to export terminal, are Qua Ibo, Escravos blend, Brass River, Forcados, and Pennington Anfan.
As recently as 2010, Nigeria provided about 10% of overall U.S. oil imports and ranked as the fifth-largest source for oil imports in the U.S. However, Nigeria ceased exports to the US in July, 2014 because of the impact of shale production in America; India is now the largest consumer of Nigerian oil.
For newbies, Bakken oil is "light" and "sweet," just like Nigerian oil. The one thing the US does not need is more light, sweet oil.

It will be interesting to follow the US crude oil imports from Nigeria. There should be minimal changes for the next six months as contracts play out. 

Chinese-Controlled CNOOC In Deep Doo-Doo In Canada -- July 23, 2015

This is being reported in The Wall Street Journal today:
China’s Cnooc Ltd. knew it was buying into trouble when it acquired Canada’s Nexen Inc. in 2013. It is now finding out just how much.
Weeks after the state-controlled oil company bought Nexen for $15 billion, its executives were in Calgary with a blunt message for the Canadian company, which had struggled for years to extract crude from the oil sands in the Alberta wilderness.
Two years later, Cnooc is still trying to fix Nexen, its troubles compounded by low crude prices.
And now Cnooc must explain an oil spill: This month, a pipeline Nexen installed last year ruptured, spilling nearly 31,500 barrels of a mixture of crude oil, wastewater and sand in northern Alberta.
The nice thing about this article is it helps me sort out the three big Chinese oil companies: CNOOC, Sinopec, and China National Petroleum Corp.

Back to CNOOC:
Buying Nexen appeared to fulfill the Chinese conglomerate’s three-decade mission to become a global oil company. Nexen gave Cnooc stakes in:
  • Canada’s oil sands; 
  • North Sea wells off Scotland; 
  • Yemen; and, 
  • an increased Gulf of Mexico presence.
Call me naive but every one of those appear to have been a bad investment:
  • besides cost of extraction, oil from Canadian oil sands is landlocked with no Keystone XL
  • recent news regarding UK off-shore wells is not good
  • Yemen? what more needs to be said?
  • Gulf of Mexico: with $50 oil, not economic and huge environmental risks
Not only that, but:
Nexen was the highest-priced of those acquisitions, and its Canada project shows how wrong some of those bets have gone. Its oil-sands project, called Long Lake, is one of the least productive oil-sands operations in northern Alberta—Canada’s oil-sands center—based on key benchmark measurements, according to BMO Capital Markets, Bank of Montreal’s investment-banking unit.
Back to the spill:
The spill [31,000 bbls] is among the largest onshore in recent years.
By contrast, a 2010 leak that flowed into Michigan’s Kalamazoo River was estimated at 20,000 barrels. Nexen’s spill has been contained to a field along the pipeline and hasn’t contaminated water sources.
The pipeline may have been leaking for up to two weeks before the leak was detected after it returned to service on June 29 following routine maintenance.
The leak shut production of some 9,000 barrels a day.
Nexen was already weighing on Cnooc’s bottom line. Cnooc has pledged to cut capital expenditures around 30% this year, after reporting nearly $700 million in impairment losses for 2014 that it blamed on operations in North America and the North Sea. Its energy-sales revenue fell 40% in the first quarter.

Single Payer US Health Care; Now Down To Three Major Health Care Insurers -- July 23, 2015

Anthem will buy Cigna for almost $50 billion. Hold that thought.

I think this is a most interesting story that is being played out before our collective eyes.

This is the theme, posted on June 28, 2015.
It won't happen overnight, and it might not happen for 5 years, or even 10 years, but I will live long enough to see one federal exchange for ObamaCare.

And that, folks, is the National Health Service.

And that, folks, is a single payer, using five big US health insurers to distribute the money from the consumers to the health care providers.
Again, that was posted less than a month ago.

Before going to the new story today, here are previous posts for background:
Okay, as predicted as long ago as 2013 by yours truly, what has been announced so far:
  • Centene Corp will buy HealthNet
  • Aetna will buy Humana
And this week it is announced that Anthem will buy Cigna for $48 billion.

Note also that it appears the regulators are letting all these mergers go through, and yet will not allow HAL to buy BHI on monopoly grounds.

Back to Anthem/Cigna. If you have read this far, which I doubt, consider this:
Anthem Inc. is nearing a deal to buy Cigna Corp. for more than $48 billion in a transaction that along with a previously proposed combination of rivals would shrink the five largest U.S. health insurers to just three.
Anthem, based in Indianapolis, is expected to pay about $188 a share for Cigna, of Bloomfield, CT, according to people familiar with the matter. A deal between the two companies could be announced as soon as Thursday afternoon. 
The tie-up of Anthem and Cigna would accelerate the rapid-fire reconfiguration at the top of the U.S. managed-care industry. The biggest companies are seeking more cost efficiency and scale as the health-care landscape changes because of the Affordable Care Act and other factors.
One last name to watch:
Of the five largest health insurers, only UnitedHealth Group Inc., the largest by revenue, is sitting out the merger wave, at least so far.
The WSJ says regulators may not approve all these mergers. So, we'll see. But it doesn't really matter. If the mergers are not approved, the weakest of the large companies will gradually implode, while the larger ones simply steal their customers. 

The regulators will simply slow the inevitable.

This Is Why Electric Bills Are Rising For MDU Customers In Montana, North Dakota -- July 23, 2015

The Billings Gazette is reporting:
Eastern Montana electric bills could rise $178 a year to cover the costs of expensive pollution controls that may have been unnecessary.
At issue are pollution controls installed by Montana Dakota Utilities to comply with the federal Mercury Air Toxics Standards, or MATS. MDU spent millions on the upgrades, and like a lot of coal-fired power plant owners, faulted the Environmental Protection Agency for not giving more consideration to the cost of compliance.
That’s exactly the kind of steep expense the U.S. Supreme Court cited in July when it faulted the EPA for not considering the expense of mercury pollution controls. A lower court is now weighing how the EPA must factor in MATS costs when determining what can be expected from power plants.
The ruling came too late to benefit MDU customers, said Mark Hanson, utility spokesman. The MATS still exist, even if the EPA is grappling with a way to balance cost with enforcement. MDU is determined to comply by year’s end.
“The rule is still in effect. We still have a deadline to meet.” Hanson said. “It’s tough to run your business when you don’t know what the rules are.”
The construction bill for MDU’s pollution controls is substantial. At the coal-fired Big Stone power plant in South Dakota, upgrades to address pollution haze and mercury cost $348 million, according to records filed with Montana’s Public Service Commission, the state’s utility regulator. MDU has a 22.7 percent share in Big Stone and is passing its share of the bill onto consumers with rate increases. There’s also $16 million in mercury pollution controls planned for the Lewis and Clark power plant in Sidney.
What is most interesting about these rate increases: these "taxes" are regressive in the sense that rich and poor alike face the same rate increase, on a percentage basis. Granted, wealthy folks may use a whole bunch more electricity charging their Teslas and watching multiple big-screen televisions in their McMansions, but the fact is, even the folks living on paychecks, month-to-month, will see a significant increase in their monthly bills.

And the folks most unable to afford the higher monthly rates will still vote for Hillary in 2016. 

Whiting Reports Two More Incredible Tarpon Federal Wells; Note The Number Of Stages-- July 23, 2015

I track Whiting's Tarpon wells here.
  • 28495, 3,606, Whiting, Tarpon Federal 24-20-2RH, Sand Creek, 90 stages, 3.5 million lbs, t1/15; cum 70K 5/15; choked back;
  • 28496, 2,959, Whiting, Tarpon Federal 24-20-3RTF, Sand Creek, 62 stages, 2.5 million lbs, t1/15; cum 55K 5/15; choked back;
Interesting completion: 90 stages and 62 stages, respectively, and yet a very, very modest amount of proppant.

Location of the Tarpon Federal wells posted here.

Thursday, July 23, 2015

Natural gas fill rate: 61. Wow, that is low. But it is still right at, or slightly above, the 5-year average. Note: In the East Region, stocks were 63 Bcf below the 5-year average following net injections of 41 Bcf.

Gasoline demand (at link scroll to very bottom): hits a new high -- 9.604 million bbls per day, slightly more than last week. 

Active rigs in North Dakota:

Active Rigs70194209182138

RBN Energy: the evolution of the natural gas benchmark -- the Henry Hub in Louisiana. (archived)
The Henry Hub in Louisiana is the best known natural gas trading location in the world. There is certainly no more liquid point in the industry.
An average of 350,000 Henry Hub natural gas futures contracts trade on the CME/NYMEX each day. The Henry price is used to compute locational ‘basis’ at all other natural gas trading points in North America and thus is the reference price for tens-of-thousands of derivative instruments and other commercial contracts. But the U.S. natural gas industry is changing rapidly.
Henry started out as a supply market hub but a natural gas demand renaissance in and around Louisiana is transforming it into a demand market hub. How will this impact Henry and can/will it endure as the national benchmark price? Today, we begin an in-depth series looking at Henry Hub, starting with its origins.
Other energy headlines today:

Jobs -- Most Interesting Comment By Reuters Today -- July 23, 2015

Reuters is suggesting the jobs numbers today don't mean a whole lot. What? New claims for unemployment benefits hit 255,000, the lowest level since 1973. Expectations: 285,000.
The number of Americans filing new applications for unemployment benefits last week fell to its lowest level in more than 41-1/2 years, suggesting job growth remained solid despite slowing in June.

Initial claims for state unemployment benefits declined 26,000 to a seasonally adjusted 255,000 for the week ended July 18, the lowest level since November 1973.
However, last week's drop likely exaggerates the strength of the labor market as claims are volatile during summer when automakers usually shut assembly plants for annual retooling.  
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell only 4,000 to 278,500 last week.
So, what's the story?

Remember the two words: "seasonally adjusted."

Historically automakers shut assembly plants for annual retooling. Haven't seen many stories of automobile manufacturers shutting down. So, if automobile shut-downs are in the complicated formula to determine the "seasonally adjusted" number, and the shut-downs did not occur....