Week 37: September 13, 2015 -- September 19, 2015

This has been a very interesting week for those who enjoy reading tea leaves. There are reports out there that clearly suggest Saudi Arabia is ready to ... well, I don't know what they are ready to do ... apparently they have clearly stated that they have destroyed the US shale gas industry, but I don't know what that means for Saudi Arabia. The production numbers coming out of the Bakken and the number of new permits this past week certainly doesn't suggest the Bakken is dead. But in the big scheme of things, I suppose, not much has changed, and most of us still think it's going to get much worse before it gets better.

Graphics
Monthly US crude oil production 
Daily production -- must see 

Operations
EOG's Riverview sets a new Bakken record
EOG update and Zeits' update on the Bakken in general
Director's Cut: ND production unchanged (down 0.8%) month-over-month

Pipelines
Is the Sandpiper dead?

Bakken economy
Western North Dakota television market one of the fastest growing in the US 
Direct air flights from Fargo to Seattle in the works
Ports-To-Plains conference to be held in Williston, October 6 - 8, 2015; also here

Miscellaneous
Samson Resources files for bankruptcy protection  
Whiting can survive on $50 oil - Zeits

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.... and yes, I think the book in the foreground is upside down...

Was The Sandpiper Keystoned? -- September 18, 2015

I'm not sure what this means, but it seems concerning. WDIO is reporting:

The Minnesota house speaker is questioning whether the Dayton administration quietly supported environmental groups fighting the Sandpiper Oil Pipeline.

The Minnesota Court of Appeals reversed a decision by state regulators to grant a "certificate of need" for the Sandpiper Oil Pipeline.

Here's more of the background, as reported by the Park Rapids Enterprise:

A judicial panel overturned a state commission decision that a crude oil pipeline across Minnesota is needed, at least until the project's environmental impact can be studied.
It was not immediately clear what impact Monday's Minnesota Appeals Court decision could have on construction of the Sandpiper pipeline.

The decision means that the Minnesota Public Utilities Commission cannot issue a "certificate of need" to a subsidiary of Enbridge Energy Partners until the environmental study is complete. The PUC on June 5 voted to issue the certificate that the court now has overturned.

There was no immediate response from Enbridge or the PUC about how the ruling will impact the pipeline construction timetable or whether Monday's decision will be appealed to the state Supreme Court.

So, it's dead.

The crude oil unit trains will keep rolling through Minneapolis-St Paul. 

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And So Is Minnesota

Link here.

Typical wages in Minnesota and across the country remain flat despite a low unemployment rate and economy that's largely recovered from the recession, according to new data released by the U.S. Census Bureau Thursday. The numbers point to continued income equality in the state and nation, largely based on race.

The median household income in Minnesota was $61,481 in 2014. That's just $30 more than the 2013 numbers and only slightly up from the 2010 household income.
Minnesota also continues to struggle with racial income disparities. The median household income for whites ($61,481) and Asians in Minnesota is twice that of African-American households ($27,026). American Indian households also had less income, with median earnings of $32,764 (casinos?).

Median household incomes for whites in the state rose almost $7,000 between 2010 and 2014 while household income for black or African-American residents rose just over $150.

The median household income for African-Americans in Minnesota dropped by almost $4,000 between 2013 and 2014, according to the Census data.

"There remains to be a lot of individuals in our economy that are not experiencing the kind of improvement that even these kinds of overall figures would suggest," Hine said.

The poverty rate for African-Americans has increased by 5 percent in Minnesota, or about 20,000 people. The new data shows that about 113,000 black Minnesotans now live below the poverty line. 

But "no" on jobs if connected to Big Oil.  But $15 / hour for those flipping burgers.

Seventeen (17) New Permits -- North Dakota, September 18, 2015

Active rigs:

	9/18/2015	09/18/2014	09/18/2013	09/18/2012	09/18/2011
Active Rigs	67	199	180	194	199

Seventeen (17) new permits --

• Operators: BR (7), MRO (6), Whiting (3), Oasis, 
• Fields: Corral Creek (Dunn), Reunion Bay (Mountrail), Banks (McKenzie), Missouri Ridge (Williams),
• Comments: 

Five (5) permits were renewed, including --

•  one by Cornerstone (a Tafelmeyer in Burke County), two by Enduro (both in Bottineau County); and, two by EOG (both Austin wells in the Parshall oil field, Mountrail County).

One (1) producing well was completed --

• 29889, 109, Enduro, LDCMU 9-32-H1, Little Deep Creek, a Madison well, t9/15; cum --

Comments: for all I know, by this time next year, the Bakken will be dead and abandoned having succumbed to the Saudi surge in production, seventeen (17) new permits in one day does not seem to suggest the Bakken operators have called it quits. In addition to the number -- 17 new permits -- it's important to note that the permits involved four different companies (and did not include CLR SM eenrgy, or EOG, among others still active in the Bakken). Also, note that the permits were across all four major Bakken counties (Mountrail, Dunn, Williams, and McKenzie) and in four different fields. A reminder to newbies: once permits are granted, it is the state's expectation that the wells will be drilled within 12 months, and many companies move much more quickly. In the current pricing environment and considering that most of the Bakken is "held by production," these companies are not permitting wells for the "fun of it." They are in survivor mode and every action speaks volumes. All well there has been a good showing of new permits, but seventeen in one day should catch your attention. Maybe the NDIC folks got these out of the way so they could go hunting next week.

Update On A Record Well In The Bakken -- September 18, 2015

Updates

January 2, 2015: production updated --

30286, 1.974, EOG, Riverview 102-32H, Antelope, s3/16/15; TD 3/20/15; MD 15,564', TVD 10,523'; short lateral, 23 stages, 12.8 million lbs, 320-acre spacing, W/2 sect 29-152-94, t6/15; cum 271K 11/15; 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
SANISH	11-2015	22	23234	24173	7765	67426	0	64716
SANISH	10-2015	31	39211	39182	10746	82984	53058	26345
SANISH	9-2015	30	45634	45278	11980	81474	56321	21521
SANISH	8-2015	23	39587	39590	11087	70189	10574	59278
SANISH	7-2015	31	86922	87531	22132	178373	0	177874
SANISH	6-2015	22	36401	35152	11454	346	0	0

From a sundry form: EOG is selling this crude oil to Shell Trading (US) Company at the lease. Shell will use Prairie Field Service as the crude transporter. Effective October 1, 2015.

From a sundry form: EOG is selling this crude oil to Enterprise at the lease. Enterprise will use Big Lease Trucking to transport the crude. Effective November 1, 2015.
There was vegetation fire in the area; well was shut in during a few days in August, 2015.

From a sundry form: "In order to increase frac volumes, EOG respectfully requests authorization to increase the hole size and lay 5 1/2" liner as described in the Preferred Option.

Original Post

I'm going to quit blogging! I have seen something so incredible, I cannot even get my hands around it as they say. This is so incredible. I thought I was overly exuberant about the Bakken, but I have been overly conservative. A reader brought this to my attention. This well is still on confidential status but look at the production in the first full month (for newbies, a well that produced 50,000 bbls in the first year back in 2007 was considered a good Bakken well. This well produced almost 100,000 bbls in the first month -- okay, a little hyperbole but 87,531 bbls of oil in the first full month of production.

• 30286, conf, EOG, Riverview 102-32H, Antelope, s3/16/15; TD 3/20/15; short lateral, tpending; cum -- 

Date	Oil Runs	MCF Sold
7-2015	87531	0
6-2015	35152	0

Note: this was a short lateral. I don't agree completely, but some folks feel that, all things being equal, a long lateral (two sections) should double the production of a short lateral (one section), which this one was. If so, this would have produced in excess of 150,000 bbls the first full month.

But I'm kidding. I will keep blogging. But it seems I've been way too conservative in my estimates of what the Bakken can do. I hope the roughnecks and frackers were rewarded for this incredible well. The well is still on confidential list so we don't know the completion history.

The original post on this well is linked here.

Random Update Of A Well Still Flowing Since Spud Six Years Ago -- September 18, 2015

The well:

• 17147, 2,101, XTO, Boucher 41X-21, Hofflund, t4/09; F; cum 690K 7/15;

This is a Three Forks well. There are some minor sundry forms but the last major sundry form was dated March 23, 2009. No work on this well since -- or at least not enough work to require a report. It is still flowing at 5,000 bbls per month. Very little water being produced. Multiple payzones were evaluated when drilling this well; middle Bakken was felt to be economical. Gas readings while drilling gradually increased to 750 to 10,000 units; it was noted that the "abnormally high readings while drilling the lateral tangent to casing point may have been due in part to the close proximity to the recently frac'd DeAngelis 41X-21. For most of the lateral, the high volume of gas required the mud to be diverted through the gas buster, resulting in consistently strong flares. Extremely stron glares, at times exceeding 50 feet, were observed with trip gas and downtime gas kicks." It was a challenge to control the gas.

Open hole frack with 900,000 lbs of sand in six stages.

Sometimes paperwork fails to catch up with what is happening in the field; in this case I do not see any evidence this well is on a pump.

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Unemployment

Wow, this article has some interesting data points. This one caught my eye. Despite a gazillion dollars in stimulus and eight years into the recovery, 36 states -- thirty-six states -- have higher unemployment now than they did prior to the onset of the great recession. Thirty-six states. For most of us, there are only 50 states (for the president, there are 57 states.)

Sinclair says that 36 states still have higher unemployment rates than they did before the Great Recession began in December 2007. And 14 have rates much higher than the 5 percent that the Fed says is consistent with a healthy economy, including Alabama, Arizona, California and North Carolina.

Another lost decade.

The writers were quick to point out that despite the bust in the Bakken boom, North Dakota's unemployment rate dropped to 2.9%, down from 3.0% in the previous month.

The article noted:

Still, North Dakota, which has benefited from a boom in oil and gas drilling, is one of three states to lose jobs in the past year. The other two are West Virginia and Alaska.

By the way, West Virginia is reeling due to the war on coal and won't recover in my lifetime, but the state will still continue to vote for Obama environmentalists.

North Dakota has the second lowest unemployment rate -- not the lowest -- and is second to that industrial state of the midcontinent, Nebraska, even though Nebraska's unemployment rate rose from 2.7% to 2.8%. 

So Cool! -- September 18, 2015

I mentioned in an earlier post that I thought it was busier in Williston last week than it was when I was last there, April, 2015.

I bring this up because a reader tells me that a long-time resident along US Highway 85 in southwest North Dakota, the southern gateway to the Bakken -- 70 years old, lived there all his life, says that, and I quote: "He has seen more OIL equipment movement in the last 30 days ... not hot and heavy like before, but more stuff then 6 months ago." (Oh, by the way, I always stop at the Belfield truck stop on the east side of the highway when heading toward the Bakken. In April there were no -- or at least so few they did not register -- big trucks at that truck stop. This time, in September, still not very busy, but so much busier than in April.)

Wa-hoo! That was my same impression. It's nice to see I wasn't dreaming. Now, put this in perspective. In April, folks are just coming out of hibernation in North Dakota (except in Fargo where they need to keep the roads open for Minnesotans year 'round). September is still summer -- or at least what passes for summer -- in North Dakota, and so the activity should be greater. But a long-time resident, 70 years old, would subconsciously take that into consideration.

Some observations: no one sees any 18-wheelers in the Bakken any more. The big rigs are rarer than sage grouse. To some extent that reflects less drilling and much, much less fracking activity. However, much more fluid is being moved by rail and pipeline and thus naturally truck traffic would be much, much less. In addition, the four-lane bypasses around Watford City, Alexander, and Williston have dispersed the big rigs. In addition, it is impossible to even begin to articulate how many big trucks have been taken off the road because of the huge new rail yard east of Williston. It would be fun to have been able to compare this rail yard to the Port of North Dakota in Minot. I guess it's called North Dakota Port Services now. It looks like the Williston rail yard is bigger than the NDPS in terms of miles of rail siding, but the NDPS is co-located with the BNSF Gavin yard.

But when driving downtown Williston it is a steady stream of vehicles. And driving up from Rapid City to Williston, I saw a lot of big rigs taking oil equipment up north.  

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How's That Plan To Give Saudi Oil Away Working Out?

But notice, also, the decline from the Gulf of Mexico, in terms of percentage.

For the US, the percentage of crude oil coming from the Gulf of Mexico went from 27% to 16% since the beginning of the shale boom. For natural gas, even more striking: from 26% to 5%. At 5%, natural gas from the Gulf of Mexico is inconsequential.

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But Is It Illegal?
Is It Criminal?

Updates

September 30, 2015: maybe it wasn't criminal, after all. WSJ  is reporting: automakers may have been exempt under Clean Air Act.

September 18, 2015: lost in translation? Volkswagen could face $18 billion EPA fine.

Original Post

This is so cool. CNN Money is reporting:

Diesel cars from Volkswagen and Audi cheated on clean air rules by including software that made the cars' emissions look cleaner than they actually were, according to federal and California regulators.

The regulators say that the software on the cars turns on emission controls only when it detects that the car was being tested. 

Aren't these German? The country that is so concerned about the environment? The hypocrisy. Shocking!

The question is whether the law required that emission controls be turned on whenever the car was in operation. I doubt the law was that specific.

I wonder if Volkswagen and Audi will be subject to the same fine levied on GM for killing hundreds of people due to a faulty ignition switch, of which GM was aware.

Later, such an incredible understatement: " "I personally am deeply sorry that we have broken the trust of our customers and the public," Volkswagen CEO Martin Winterkorn said in a statement." He needs to resign immediately; if he were Japanese ...

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Something Tells Me SecDef Is In Over His Head

The Wall Street Journal is reporting that Putin has moved tactical jets into Syria. Their mission, my hunch: shoot down drones -- target practice. They certainly wouldn't be doing this because they are at war with anyone, but it offers them a really, really good opportunity for target practice.

Russia has moved its first fighter jets to a growing base in Syria, defense officials said Friday, raising new concerns Moscow is preparing to play a direct role in helping embattled President Bashar al-Assad against Islamic State militants.

Moscow’s military moves came as U.S. Defense Secretary Ash Carter spoke to his Russian counterpart about Russia’s deepening role in Syria, ending a long pause in high-level military ties between the two countries.

Defense officials said at least four tactical fighter jets had arrived at the rapidly expanding airfield on the Syrian coast south of Latakia. Over the past two weeks, defense officials said, Russia has dramatically stepped up development of the airfield by sending in housing for up to 2,000 people, attack helicopters, choppers to transport troops around the country, and artillery.

The arrival of the jet fighters is the most concerning development for the U.S., which regularly flies surveillance flights and airstrikes against Islamic State forces in Syria.

If George W. Bush were president, The New York Times would be comparing the movement of Russian tactical fighters into Syria no different than Russian moving nuclear missiles into Cuba during the "Cuban missile crisis." But he's not, and they won't.

For those paying attention, Putin has been methodical in his stepping-stone advancement. He establishes a hard base in Syria. Kerry/Obama make a speech. Putin moves in special forces. Kerry/Obama make a speech. Putin flies in cargo planes to the new base. Kerry/Obama make a speech. Putin flies in state-of-the-art tanks. Kerry/Obama make a speech. Putin flies in tactical fighters. It's Friday; no speech.

With the Crimean and the Ukraine behind him, Putin probably feels it's time to move further south. Europe is pre-occupied; NATO is in disarray; and President Obama is padding his resume for a second Nobel peace prize. 

Friday, September 18, 2015 -- Long, Meandering Note

Disclaimers:

This is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read here. I am not a trader. I invest for the very long term.

I have no formal training, education, or background in the oil and gas industry.

I often make factual and typographical errors.

I often make simple arithmetic errors.

I am inappropriately exuberant about the Bakken.

I have no formal training, education, or prior experience in raising grandchildren.

I am heavily invested emotionally in Big Oil.

I hate blind spots. And I have many.

******************************************

Some weeks ago I posted a really, really good post on recovery rates in the Bakken. Unfortunately it was all wrong. Actually, what I posted was correct, except that it was based on a slide that I misinterpreted. A reader caught my mistake (thank goodness) and I immediately pulled that post down. I can't remember, but I believe in my welcome/disclaimer I talk about my philosophy on updating posts and/or removing posts. In general, I will not "hide" my corrections and, in general, I will not remove earlier posts.

*********************************************

So, we start again. Some weeks ago I posted a really, really good post on recovery rates in the Bakken. Unfortunately it was all wrong. Actually, what I posted was correct, except that it was based on a slide that I misinterpreted. A reader caught my mistake (thank goodness) and I immediately pulled that post down.

I bring that up because today over at Seeking Alpha, Richard Zeits has a great article on the potential of US shale. This is a keeper; I assume it will be archived by Seeking Alpha in the near future, with access only for paying subscribers.

There is so much in that article, I'm not going to cut and paste much here. But for those who want to cut to the chase, here is what I overheard at Cashwise in Williston on my most recent visit there:

"All" (except the USGS and a lot of other folks) agree the Bakken has 500 billion bbls original oil in place (currently being depleted by about one million bopd). At one time, Harold Hamm went out on a limb and suggested 903 billion bbls but that has been pulled back to 500 billion bbls (publicly).

When we first started talking about the Bakken, we were talking about 1 - 3% recovery rates (primary production). Early on, I provided evidence and calculations that the recovery rate was actually closer to 8%. After that, one major operator in the Bakken did "admit" that recovery rates in the Bakken were in the 5 - 8% range. There are now folks who feel the recovery rate is or will be 20% (primary production).

When we first started talking about the Bakken, we were talking about EURs of 350,000 bbls, and it quickly went to 500,000 bbls. EURs greater than 500,000 were thought to be exceptional. Now, I can't imagine any operator drilling any well in the Bakken without an expectation of 500,000 bbls even outside the core. Whether one gets 500,000 bbls from wells outside the core will depend on the price of oil some years from now.

Zeits is now taking about 2-million-barrel EURs. 

In the sweet spots of the Bakken, it appears that EURs of 1 million bbls are now the expectation. At one time, a lot of folks thought the sweet spots were limited in the Bakken. In fact, it has become somewhat of a surprise how much of the Bakken is composed of those so-called "sweet spots."

*********************************************

After reading the Zeits article over at Seeking Alpha (linked above and discussed above), if you haven't already, be sure to look at EOG's most recent presentation. This, too, is a keeper, and will probably be lost in the ether some months from now. [Later, see this note also.]

When looking at this, remember this is EOG only (for the most part).

Before looking at the presentation, it might be helpful to look at the history of EOG in the Bakken, at this link.

The most recent update I had at that link:

• 1Q14: down to 90,000 acres of Core Bakken; Antelope Extension: 20,000 acres; Core well -- 92% oil, 2% gas, 6% NGL; Antelope well -- 78% oil, 11% gas, 11% NGL; source: EOG

Now, compare the new data, at slide 5 (EOG marks it slide 4) of the linked presentation (note: I often make mistakes in interpreting data; I often make factual and typographical errors; it is difficult to separate fact from opinion; I often round numbers; it is difficult to separate my observations from the presented data; these comments are for my use to help my better understand the Bakken; feel free to read them and comment on them but don't quote me on any of this stuff; if it's important to you, go to the source:

• EOG has expanded its core acreage from 90,000 acres to 120,000 acres in the Bakken this past year
• EOG has 110,000 non-core acres in the Bakken
• EOG in the Bakken, core + non-core = 230,000 acres
• At one time, EOG had around 600,000 acres in the Bakken
• I understand the difference between core and non-core, but I don't differentiate between the two (for the most part)
• 230,000 acres / 640 acres = 360 sections
• 120,000 acres core / 640 acres = 200 sections (rounded up from 187)
• 110,000 acres non-core / 640 acres = 175 sections (rounded up form 172)
• 187 sections x 8 wells = 1,407 wells
• 175 sections x 6 wells = 1,050 wells
• EOG says: 187 sections --> 590 remaining drilling locations or 3 more wells per section
• EOG says: 172 sections --> 950 remaining drilling locations or 5.5 more wells per section
• Then note the small print (asterisked): as of January 1, 2015, Bakken/Three Forks); and assumes no further downspacing, acreage additions, or enhanced recovery. Comment: one can assume two of those three assumptions will go by the wayside, and probably all three.
• Years of drilling: note that non-core is missing an estimate. Core area says 590 remaining locations over 14 years = 40 wells / year. In the non-core area, 950 / 20 wells / year would get you almost 50 years of drilling. 
• And then finally this: if EOG has about 250,000 net acres, it is a relatively small player compared to what CLR and WLL hold; and really a small player if one considers the entire size of the Bakken. Both CLR and WLL have around a million acres in the Bakken (if I recall correctly) and Hess has about 650,000 acres (based on old data; I don't have current figures for Hess)
• one last comment: both Zeits and I agree that in the core, one has to assume EURs of one million bbls; with almost 600 drilling locations in the core Bakken, EOG should uplift through primary production 600 million bbls of oil. Note that EOG comes up with 620 million boe for all their core Bakken wells, not just their remaining wells. 

So, other than slide 5, are there any other interesting slides in that presentation? Let's see:

Slide 11 (as marked by EOG):

• completed well cost in the Bakken at $7.1 million; target = $6.5
• spud-to-TD: 8.2 days; record = 5.6 days

Slide 17 (as marked by EOG):

• EOG's Bakken play
• EOG's reserve potential in the Bakken: from 0.4 billion boe (2010) --> 1 billion boe (2015)

Slide 22: it is important to note that peer groups do not include CLR or WLL; does include Hess

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Apples And Oranges

When I was going to high school in Williston, back in the 60's, a $15 million project anywhere in the area would have been headline news. Of course, I would not have been paying attention; my interests were directed elsewhere. But in the 60's and through the 90's and even into 2005, a $15 million project would have been headline news. Now it's just another story in the Bakken. In this case, I'm referring to a project that will hardly be noticed: Kinder Morgan wants to turn a Hiland gathering pipeline into a transmission pipeline. This project will require no new pipeline (minimal digging, in other words); it will require new surface structures including a storage tank. I assume much of the $15 million will be related to salaries and wages.

A second point to take away from this announcement is that despite all the hand-wringing over the low price of oil and its effect on North Dakota, the Bakken keeps chugging along. And it's not going away. Maybe more on that later. The operators are putting this "breather" to good use: putting in more infrastructure. When I was back in Williston just a week ago, the landscape had hardly changed. One can drive for miles and miles and see very few wells. And on much of that landscape, when one sees a well, it is a well -- a singleton. Eventually, wherever there's a single well, there will be a pad with at least four wells. And in the really hot areas, where one sees a pad with four wells, one will eventually see a pad with twice or three times that number.

When oil prices fell -- the "official" date is October, 2014 -- the middle Bakken was well demarcated and operators knew pretty much what they had. However, they were just beginning to get a feeling for the upper bench of the Three Forks, and one can say that with a few exceptions, the second and third benches have not even been explored or evaluated. I'm not sure if the 2nd bench will be all that great, but in places the 3rd bench looks pretty good. But it's all relative and it all depends on the price of oil. So, until prices improve, it looks like the Bakken is in a holding pattern: putting in more infrastructure and drilling out the core middle Bakken. I'm not even sure the Three Forks, upper bench, is getting all that much attention.

The third point to take away from this announcement is the close working relationship among the oil and gas industry (the operators), the state (regulators vs development), landowners, and the public who are not directly involved. When you read The Dickinson Press article linked above, note the comments made about the commissioners who will be looking at this request. I find that very, very enlightening and very, very comforting.

****************************************

Other Big Projects

While I was in the Bakken last week, I was surprised at the new residential and commercial development still breaking ground. There was a new residential development project just breaking ground. Two new gas stations were going up: one on the west side of town, one on the southeast side of town. The latter was a brand new station replacing an old one in the same location. The former, the one on the west side, is going to be a huge station, well inside city limits along the bypass.

The truck bypass around Williston is a big, big deal; it will be built with lots and lots of cement.

The new airport is on track, though I don't think ground has been broken.

The huge new four-story renaissance building on south Main is nearing completion including below-ground parking, I believe. I don't know the specifics.

Much of Main Street renovation was complete and now they are working on the north end of Main Street, in the JC Penney block.

There's a huge new rail yard east of Williston that watered my eyes when I saw it; private endeavor.

The four-lane bridge crossing the Missouri southwest of Williston is coming along, and I'm betting that the next time I visit Williston it will be complete. I plan to visit Williston next spring, but, and this is a huge "but," my brother-in-law retires December 1, 2015, and he has always wanted to see Mount Rushmore. If I can swing the dates, I will try to get him and me up to the Bakken, Mount Rushmore, and Chief Crazy Horse in early December. If not, the road trip will have to wait until April, 2016.

My hunch is that when winter sets in, in a few months, Williston downtown will be "dead." Books on Broadway will be as bus as ever. I still say it's the best private bookstore I've seen. It's more than just a bookstore, with it's unique science sets and projects for students, unique gifts for all ages, and it's coffee bar. Plus good conversation when the employees have time to talk. I assume we will start to see change in ownership of hotels/motels; some will close; we will start to see stories about foreclosures, but there may be some pleasant surprises there; ... much more could be written... but next summer will be another huge summer.

The good news: Debbie Downer will never miss the opportunity to publish a negative article on the Bakken.

A new airport in Williston would have been a huge story if that was the only project being talked about, but it's just one of many.

Friday, September 18, 2015

Zeits: shale oil wells will get bigger.

Pipeline conversion requested near Stanley, North Dakota. A number of consequences will follow if approved (which is likely). Story at The Dickinson Press:

The operator of a gathering pipeline is seeking approval from the Public Service Commission to convert the existing crude oil pipeline to a transmission line, allowing companies to transport less crude by rail.

Hiland Crude is proposing to expand a 42.5-mile pipeline in Mountrail County, which has already been constructed and operating since the end of 2014 as a gathering pipeline.

The company proposes to convert the pipeline to a transmission line to accommodate customer requests to connect more oil with the Double H Pipeline, said Andrew McCraw, director of midstream project management for Kinder Morgan, which recently acquired Hiland.

The Double H Pipeline, which began operating earlier this year, also was acquired by Kinder Morgan and sends oil from western North Dakota to a hub in Guernsey, WY, which connects with refineries in Oklahoma and the Gulf Coast.

Reversing the gathering line and converting it to a transmission line would decrease the amount of oil being transported by rail and truck.

The $15 million project, known as the New Town Expansion, involves construction of additional above-ground facilities, but no additional pipeline miles would be constructed.

The proposal includes connecting to a storage tank owned by another company and modifying equipment so the pipeline could transport 36,000 barrels of oil per day, double the current capacity.

The article goes on to to explain pros and cons. Much information.

Note: I track pipelines of interest here. 

***************************************

Active rigs:

	9/18/2015	09/18/2014	09/18/2013	09/18/2012	09/18/2011
Active Rigs	67	199	180	194	199

RBN Energy: continuing series on propane.

Traditional domestic propane markets were dominated by seasonal consumer demand in the Northeast and Mid-Continent and petrochemical industry demand in the Gulf Coast region. Today domestic demand is still dominated by these two sectors although consumer use is declining slowly while new propane dehydrogenation (PDH) plants look set to boost chemical demand. Meantime the bounty of shale production has swamped domestic consumer needs – making exports by far the largest growth sector. Today we continue our deep dive review of the propane market.

This blog and others in the series are based on an analysis recently completed by RBN for the Propane Education and Research Council (PERC).  PERC engaged RBN to assess market developments that could impact the prospects of disruptions similar to the one that occurred in the Perfect Storm winter of 2013-14, and to suggest actions that could alleviate the risk of such market turmoil.  The project was completed in August and with the permission of PERC, this blog series summarizes some of RBN’s analysis and conclusions.

This is the fifth episode in the series. Episode 1 provided an overview and introduction to the analysis – beginning with the dramatic increase in propane production over the past 7 years. Total U.S. propane output has increased by nearly 70% from an average of 0.8 MMb/d in 2008 to 1.4 MMb/d during the 1^st half of 2015. Most of that growth has been driven by production from gas processing plants that has more than doubled from 0.5 MMb/d in 2008 to 1.1 MMb/d in 2015. The overall growth in propane has outpaced domestic demand such that as much as 50% of the total is now exported to balance the market – even as inventories are at all time high levels. RBN’s analysis for PERC sought to understand changes to the propane market since the disruptive winter of 2013-14 as well as how susceptible today’s market is to similar events and what actions should be taken to reduce the risk of it happening again. Our approach to the analysis involved developing a monthly model of U.S. propane supply, demand, logistics and pricing at the PADD (Petroleum Administration District for Defense) level using historic propane market data.

In Episode 2 we outlined supply and demand scenarios for the model based on oil price Growth and Contraction as well as Normal and Severe weather patterns. Episode 3 took a closer look at propane production by PADD region – noting the dramatic growth in the Northeast as well as the Midwest. Episode 4 detailed regional historic and future projected propane demand by PADD. This time we look at domestic propane demand sectors and the projected influence of weather on consumption.

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Not Surprising

We get our electricity through an NRG subsidiary. They promote intermittent energy. It is not surprising that they are the worst-performing utility. I am quite surprised how high my monthly electricity bills are for a small (700-square-foot) one-bedroom apartment. The headline at the link and the content of the story seems a bit confusing. It sounds like NRG is going to spin off their solar energy division, and not the other way around.

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Not Surprising

(And I Think It's Been Posted By The EIA Before)

Results from second-quarter 2015 financial statements of a number of U.S. companies with onshore oil operations suggest continued financial strain for some companies. Low oil prices have significantly reduced cash flow for U.S. oil producers, and to adjust to lower cash flows, companies have reduced capital expenditures and raised more cash from debt and equity…With fixed debt repayments and the large reduction in cash from operations for these companies, the ratio of debt repayments to operating cash flow has increased recently. For the previous four quarters from July 1, 2014 to June 30, 2015, 83% of these companies' operating cash was being devoted to debt repayments, the highest since at least 2012. -- EIA