4/4 Bakken Wells to DUC/DRL Status; Ten (10) New Permits -- North Dakota, October 14, 2015

Wells coming off confidential list Thursday:

• 28535, SI/NC, Hess, HA-Sanford-152-96-1819H-5, Westberg, no production data,
• 28896, SI/NC, Oasis, Kemper 6193 14-14B, East Fork, no production data,
• 30721, drl, XTO, Tobacco Garden 24X-32AXB, Tobacco Garden, South Red River B, t6/15; cum 17K 8/15;
• 30767, SI/NC, Statoil, Judy 22-15 7TFH, East Fork, no production data,

Active rigs:

	10/14/2015	10/14/2014	10/14/2013	10/14/2012	10/14/2011
Active Rigs	66	190	183	192	195

Ten (10) new permits --

• Operators: Slawson (8), CLR (2), 
• Fields: Big Bend (Mountrail), Banks (McKenzie)
• Comments: it looks like Slawson's permits are for an 8-well pad in section 15-151-92; based on the names of these wells, it appears three will run east under the river (long laterals); three will run south (long laterals); and two will be short laterals.

Whiting renews four (4) P Bibler permits in Williams County; Emerald Oil renews six (6) permits (Mortimer Duke, Coleman wells) in McKenzie County

HRC cancels three permits in Williams County (G Larsen, Oyen, and Hagen).

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Mideast Update

Israel has been off the front pages ... until today. SecState is flying to Israel to "calm nerves" over rising violence internally. Some time ago I mentioned that Saudi's cash flow could impact the amount of money being sent to Palestine. Some are concerned this may be the "third intifada." One wonders if Palestinian frustration is simply coincidental or a dot to be connected. With all that's going on in the Mideast right now, for SecState Kerry to be flying to Israel should give pause to those paying attention. And for those not paying attention, what does it matter anyway?

Meanwhile, Cuban soldiers have been spotted in Syria. Folks smarter than I are suggesting that Cuban soldiers a) will advise Syrian troops; and, b) will drive Soviet tanks. It speaks volumes that Fox News has reported this but The New York Times has not.

EIA's Short-Term Energy And Winter Fuels Outlook -- October 14, 2015

Released last week, this screenshot is from EIA's short-term energy and winter fuels oulook:

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Notes For The Granddaughters

I have finally finished John Le Carre's Tinker, Tailor, Soldier, Spy. I didn't outline it in the conventional fashion but annotated it well enough to be able to go back and read it again, to see things I missed the first time. I do believe that seeing the movie resulted in my liking the book that much more. I would argue that Tinker is on my list of top ten movies. At the moment, it is #1, although it could quickly fall to #2 behind Birdman. [Casablanca, #1 for so many years, is still on the top 10 list, but could fall off if I don't watch it again. And soon.]

Having finished that book, I am ready to move on. Of course, I'm always reading a book on science. The current one is Atom: An Odyssey From The Big Bang To Life on Earth ... And Beyond. The title is perhaps a bit pretentious. I started reading the book some time ago -- on one of my cross-country trips, I suppose -- but never finished it. I accidentally purchased a second copy and told our older granddaughter she could donate it to her school library. It was then that she told me she was a member of the school's Library Club, or as my wife now tells me, "Oh, yes, that's her 'book club.'" I was not aware she was a member of the Library Club. I knew she was in math club and science club -- I guess the math club is a sprout off the science club -- but did not know she was also in the Library Club. And she's first chair, flute, in the middle school band, something she has become very competitive about, and will fight to keep first chair.

I would know none of this except driving her to school daily, and taking her to water polo practice twice a week, etc., things come out in dribs and drabs as they say in the Midwest.

But, again, back to the subject at hand. As I was saying, I finished Tinker and ready to move on. I am falling back into my Hemingway phase. I am re-reading Islands in the Stream and annotating that also, something I did not do the first time I read the book. I don't remember much about the book except that I recall that I did not like it. I'm re-reading it a second time to see why I should have liked it. To accompany it, I am eager to read a Gellhorn-related book, and on my shelves I have found a brand-new copy of Selected Letters of Martha Gellhorn, c. 2006. I bought it years ago from Half-Price Bookstores so I assume I bought it when we lived in San Antonio some years ago. $14.98.

Five pages into the book and I'm eager to watch Midnight in Paris, again.

And, yes, MIP is on my top ten movie list, also.

New Post-Boom Low For Active Rigs In North Dakota -- October 14, 2015

I think this is the most interesting story right now -- with regards to national politics.

The president has said he will not debate or discuss or negotiate with Congress on this one: raising the debt limit.

But, as I understand it, this is the problem: the debt limit is not raised by "default." The people's house, the House of Representatives, you know, the folks that are up for re-election every two years, the folks who control the purse strings, they have to have a bill written ... and with no "effective" speaker in the people's house, there is some doubt that a bill will actually be written in time for the House to vote by November 5, 2015. [My hunch: the date is "fake," anyway.]

President Obama may be "right" again: he will not have to debate or discuss or negotiate with Congress on raising the debt limit because, in fact, there will be no debt limit bill to sign or veto.

So, the new poll: will Congress pass a bill to raise the debt limit by November 5, 2015? Yes, or no.

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New Post-Boom Low

Active rigs:

	10/14/2015	10/14/2014	10/14/2013	10/14/2012	10/14/2011
Active Rigs	66	190	183	192	195

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Note For The Granddaughters

Our 9-year-old granddaughter reminded me that today she gets out of school at 3:30 (not 2:45) because she has a student council meeting. She is in fourth grade. This is her first year at this school. She is already on student council. Years ago her dad predicted that Olivia would grow up to become dictator of some small country. She's on her way.

Out older granddaughter, a few years ago, while living in Boston, was also active in school / student government. In third or fourth grade, probably fourth grade, the students were complaining that they hardly had enough time to eat lunch. I forget, but I think their lunch period was about 15 minutes and they felt they needed a half hour. Our older granddaughter, a fourth grader as I was saying, started a petition to get the school lunch period lengthened. I remember her taking the clipboard with the petition and pages of signatures to school every day. It took her about two weeks to get all the signatures she felt she needed.

She turned the petition in and surprise, surprise! The elementary school principal -- a very, very nice, dedicated young man -- took her seriously and took her petition seriously. He agreed that the lunch period was too short.

The next day he announced that the lunch period would be extended to a full half hour. The students cheered.

But recess would be cut by 15 minutes.

LOL.

That granddaughter lost all interest in student government and has moved on to other endeavors.

Moral of the story: you can't outfox an elementary school principal.

Wednesday, October 14, 2015 -- Part V -- Who Do You Support?

It's well known that President Obama has no "Syria strategy." He himself has said as much.

It is also well known that President Obama called ISIS a "junior varsity" team (he did not use the other "T" word). He tried to walk back that "JV" comment but it's become another Obama meme (of which he has more than most politicians).

It was entertaining, to say the least, listening to NPR, this morning, describe the current situation in Syria. I believe this is what I heard:

• Russia is bombing anti-Syrian rebel forces backed by (and sort of trained by) the US
• the US is dropping ammunition to anti-Syrian rebel forces and targeting ISIS
• Russia has a strategy: take out anti-Syrian forces; shore up Bassar al-Assad, an ophthalmologist by training, and then offer to discuss with the US -- who do you support: the ophthalmologist or the beheader?
• the US has no strategy
• President Obama, however, does have a strategy: run out the clock; he has said as much -- saying he will leave this quagmire to the next president

That's pretty much what I heard. I could be wrong. This is not a military site. Don't make any military plans based on this. If this stuff is important to you -- apparently it is not important to some -- go to the source. NPR.

By the way, just for clarification: NPR - national public radio. CBR - crude by rail.

By the way, the new word for 2015: deconflict. The NPR piece this morning suggested that the analyst enjoyed hearing that word. Deconflict. Sounds so peaceful.

Peaceful like the Garden of Eden.

To enjoy this, you really have to play it very, very loudly: 


In a Gadda Da Vida, Iron Butterfly
By the way, speaking of all the fun in Syria: Russia and the US -- two nuclear super-powers --  pounding the heck out of a country with not a whole lot going for it, can only bring me to this: napalm.

Ride of the Valkyries, Apocalypse Now
It was my understanding that the ammunition President Obama was dropping to the anti-Syria rebels was/were bullets. Simply bullets. Perhaps this explains why the administration was buying all that ammunition across the US these past few years.

There is some irony that the president wants the US to be one huge "gun-free zone" but Syria is now "anything but." Maybe the president's inner self was simply born to be wild.

Born To Be Wild, Steppenwolf
And yes, I do have the perfect video to accompany the news report that Iran has test-fired a new intra-regional ballistic missile but that will have to wait.

Wednesday, October 14, 2015 -- Part IV; Blue Skies

This is the big story that everyone seems to be missing (except Forbes).

One year ago, there were 190 rigs actively drilling for oil in North Dakota; today: 67.

One year ago, the term "fracklog" did not exist; today there are almost 1,000 DUCs in the Bakken.

One year ago, producers were pumping as fast as they could; today, they are choking back.

One year ago, producers were pumping as fast as they could, getting 105 bbls/well/day; today they've cut back to get 94 bbls/well/day. We haven't seen 94 on a sustained basis since the early days of the boom.

One year ago, there were upwards of 300 new oil permits each month; now, half that number.

One year ago, North Dakota was producing 1.1 million bopd; today North Dakota is producing 1.2 million bopd.

Look at that: one year ago, 192 active rigs, and all that truck traffic, and North Dakota was producing 1.1 million bopd. Today, a year later, more oil is being produced, fracking is at a standstill, and only 67 rigs are actively drilling (readers will tell us the number is actually lower -- many of the rigs are being moved and not drilling at the moment).

Meanwhile, Saudi Arabia is barely able to increase production despite maximum efforts including an increase in the number of their rigs.

Unfettered, North Dakota could easily produce 2.2 million bopd (Bentek). (I think that was low-balled, by the way.)

At 2.2 million bopd, drilling in the Bakken was estimated to continue through 2030, and production through 2100.

At 1.1. million bopd:

• activity in the North Dakota oil patch will become "business as usual"
• active drilling will be extended by decades
• production will be extended well past 2100
• resources will become available for increased oil and gas infrastructure
• resources will become available for oil and gas projects, like petro-chemical plants
• resources will become available for non-oil projects
• crummy motels in Williston will close; the better motels will become better
• crummy man-camps and crummy motels-on-the-prairie will close; the nice man-camps will become nicer
• there will be less traffic on all those new four-lane divided highways and bypasses in western North Dakota
• even with relaxed flaring rules, there will be less flaring

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Blue Skies From Now On

Blue Skies, Willie Nelson and Kenny Rogers  

But doesn't that just blow you away? 67 rigs vs 200 rigs a year ago; 1,000 DUCs; wells being abandoned; permits being canceled; wells being choked back; and North Dakota production in August, 2015, exceeded North Dakota production in August, 2014. 

And QEP getting read to site 24 wells in one section. Just saying. 

Wednesday, October 14, 2015 -- Part III; Trainwreck; The Road To New England

High Voltage Transmission Lines From Canada? 

CBR? Pipelines? New England Has It All

New England looks to Canada for more power. The Wall Street Journal is reporting:

New England’s most populous states are looking to tap Canadian dams and rivers for more of their electricity, a change that officials say would help cut greenhouse-gas emissions and help keep some of the nation’s highest power prices in check.

Canada, with plenty of water and just 35 million people, gets 63% of its power supply from hydroelectric dams, and is adding more with an eye on exports. Getting that power to New England is no easy task—one power-line proposal in New Hampshire has drawn criticism from locals—but policy makers in the region have long been tantalized by the prospect of plentiful, cheap Canadian power.

Massachusetts and Connecticut, home to most of New England’s population and power demand, could add enough new hydropower to supply millions of people through efforts under way in each state. Entergy Corp. threw those efforts into sharp relief Tuesday when it announced plans to shut its Pilgrim nuclear plant in Massachusetts by mid-2019 due to high operating costs and poor market conditions.

The shutdown “not only poses a potential energy shortage, but also highlights the need for clean, reliable, affordable energy proposals,” Massachusetts Gov. Charlie Baker, a first-term Republican, said in a statement. He cited a need for hydropower and renewable resources like wind and solar power.

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And Americans No Longer Care;

They've Moved On

ObamaCare bear market. The Wall Street Journal is reporting:

By liberal and media acclamation, ObamaCare is a glorious success, the political opposition is fading and the entitlement state has gained another permanent annex. The reality, for anyone who cares to look, is different and suggests that ObamaCare is far more vulnerable than this conventional wisdom.

As Exhibit A, note that participation on the federal and state insurance exchanges is badly trailing the original projections and declining over time. About 11.7 million people joined ObamaCare during the open sign-up period last year. But enrollment this summer slipped 15% to 9.9 million with “effectuated” coverage, meaning enrollees who were up to date on their nominal share of the premium after subsidies.

Some churn is inevitable, but the Congressional Budget Office estimated two years ago that some 13 million would participate in 2015, and its most recent revision in March of this year still pegged the figure at 11 million. The CBO nonetheless now projects ObamaCare will more than double in size in 2016 to 21 million, and such a growth spurt is probably necessary to stabilize the insurance markets.

But don’t count on the attrition problem going away given ObamaCare’s high and rising costs, as well as its low quality that is approaching Medicaid levels of coverage. The plans simply don’t offer good value for the money. [I've said from the beginning that ObamaCare is simply high-priced catastrophic health insurance.]

In a new working paper, Wharton economists Mark Pauly, Adam Levine and Scott Harrington estimate how much better or worse off the non-poor uninsured are under ObamaCare. They measure the cost of the plans, the benefits of consuming pre-paid medical care and out-of-pocket payments without obtaining coverage. They conclude that, “even under the most optimistic assumptions,” half of the formerly uninsured take on both a higher financial burden and lower welfare, and on net “average welfare for the uninsured population would be estimated to decline after the ACA if all members of that population obtained coverage.”

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6,000 Felons Head Back To Ferguson 

Just what Ferguson needs: 6,000 more felons: The Wall Street Journal is reporting on Obama’s Tragic Legacy for Black Americans -- adding to harmful policies on school vouchers and the minimum wage: a plan to free 6,000 federal inmates.

As Kanye West might say, I’m starting to wonder if the president much cares about the well-being of poor blacks.

Mr. West was remarking on the George W. Bush administration’s response to Hurricane Katrina, a natural disaster, but the current administration seems keen on facilitating man-made varieties.

At the urging of labor unions, President Obama has pushed for higher minimum wages that price a disproportionate percentage of blacks out of the labor force.

At the urging of teachers unions, he has fought voucher programs that give ghetto children access to better schools. Both policies have a lengthy track record of keeping millions of blacks ill-educated and unemployed. Since the 1970s, when the federal government began tracking the racial achievement gap, black test scores in math, reading and science have on average trailed far behind those of their white classmates. And minimum-wage mandates have been so effective for so long at keeping blacks out of work that 1930, the last year in which there was no federal minimum-wage law, was also the last year that the black unemployment rate was lower than the white rate. For the past half-century, black joblessness on average has been double that of whites.

Last week the Justice Department said it would release some 6,000 inmates from federal prison starting later this month. The goal, according to the White House, is to ease overcrowding and roll back tough sentencing rules implemented in the 1980s and ’90s. But why are the administration’s sympathies with the lawbreakers instead of their usual victims—the mostly law-abiding residents in low-income communities where many of these inmates eventually are headed? In dozens of large U.S. cities, violent crime, including murder, has climbed over the past year, and it is hard to see how these changes are in the interest of public safety.

I love the euphemism: "inmates from federal prison." Inmates? These are felons. To make this work, President Obama needed to grant all 6,000 a pardon, and expunge from their records any history of prison. As long as they are felons, they won't be getting any jobs.

President Obama has cleverly transferred the onus of support for 6,000 felons from the federal government to the states, to all the "Fergusons" across the country. 

Wednesday, October 14, 2015 -- Part II; North Dakota Poised To Thrive -- Forbes

Forbes: North Dakota is still poised to thrive. 

Perhaps no state benefited more from the energy boom than North Dakota. Long known more for its harsh weather, low population and featureless expanses than for anything positive, the massive deposits on the Bakken formation turned the state into the No. 2 energy producer in the country, trailing only Texas. The prairie state gained 45,000 energy jobs between 2007 and 2014. Now the decline in oil prices promises to eliminate quite a few of them.

But few North Dakotans seem to believe that the energy bust will turn the state once again into a poster child for stagnation. For one thing, North Dakota’s job base has also expanded well beyond oil, with a net growth of 155,000 jobs jobs from 2007 to 2014 — no small beer in a state with a population of 739,000. This growth started well before the oil boom, with employment surging by 50,000 jobs between 2000 and 2007. 

Transportation, logistics, wholesale trade and construction are among the industries that have added jobs, and the state’s technology industry has surged, doubling employment since 2009. The state’s engineer count has expanded 41% since 2009, almost seven times the national increase. Fargo, the state’s largest city but hundreds of miles from the Bakken, has thrived in large part due to the expansion in tech and business services. Overall Fargo has 38% more jobs than in 2000.

Transportation, logistics, wholesale trade and construction are among the industries that have added jobs, and the state’s technology industry has surged, doubling employment since 2009. The state’s engineer count has expanded 41% since 2009, almost seven times the national increase. Fargo, the state’s largest city but hundreds of miles from the Bakken, has thrived in large part due to the expansion in tech and business services. Overall Fargo has 38% more jobs than in 2000.

In the coming years, other industries may help pick up the slack from energy. One prime candidate is aerospace, where North Dakota is touting itself as the “Silicon Valley of drones,” an outgrowth of the conversion of the Grand Forks Airforce Base from launching bombers and tankers to drones. The country’s first drone-only business park is being built on an unused portion of the base. Other industries on the upswing include biomedicine and wind turbine parts.

By the way, did you all notice that the article in Forbes mentioned the Poppers and the "buffalo commons? I've talked about the Poppers and the "buffalo commons" many times on the blog. It's hard to believe the Forbes reference was coincidental. Hoo-ah!

Crude oil prices for 2016, Fitch Ratings report:

States like Texas and Oklahoma that rely on oil and gas development to boost their revenues could struggle to grow their economies in 2016 as crude prices have remained stubbornly weak, according to a Fitch Ratings report released Tuesday.
Fitch said most of these state budgets include price forecasts for crude in 2016 that aren’t supported by a much-watched federal government projection for next year.
In its most recent Short-Term Energy Outlook, the U.S. Energy Information Adminsitration said it expected WTI to average just $53.57 per barrel, an almost 25 percent reduction from its forecast in January 2015 of $71.

In its Biennial Revenue Estimate, the Texas state comptroller’s office said it anticipates crude prices in 2016 to average $64.52, nearly $11 more than the EIA forecast. Oklahoma’s state budget assumes oil prices around $57. And Alaska and Colorado have the least conservative forecasts at about $65 and $68, respectively.

Feds order probe into soaring electricity prices in downstate Illinois. Crain's is reporting:

Federal energy regulators smell a rat in downstate Illinois. The Federal Energy Regulatory Commission has taken the unusual step of ordering a formal investigation into the results of a power auction last spring that caused the energy price paid by Ameren Illinois customers to jump 31 percent beginning in June. After several months of informal probing, FERC, which oversees the functioning of wholesale power markets, gave its enforcement staff subpoena authority on Oct. 1.

The order says FERC investigators will probe any potential evidence of market manipulation or other rules violations.

The officials to be put under oath may well include executives with Houston-based Dynegy, which dominates the power generating market downstate and has acknowledged that a bid by one of its Illinois plants set the “capacity” price that caused downstate electric bills to surge.

At issue is the auction held in April by regional grid operator MISO Energy to determine the price consumers pay power plants for their promise to deliver during high-demand periods when they're most needed. Those capacity costs are embedded in the overall electricity price households and businesses pay.

In that auction, the cost of capacity in downstate Illinois in the year beginning June 1 spiked nearly 9 times to $150 per megawatt-day, from $16.75 the 12-month period before. That will cause the average Ameren Illinois household to pay more than $130 more for electricity this year.

After the price spike, Illinois Attorney General Lisa Madigan asked FERC to overturn the result and conduct a formal investigation. FERC said no to reversing the outcome, but yes to the probe.

Wednesday, October 14, 2015: A Great Day For Blogging, Though Blogging Will Be Delayed A Few Hours

Active rigs:

	10/14/2015	10/14/2014	10/14/2013	10/14/2012	10/14/2011
Active Rigs	67	190	183	192	195

RBN Energy: the Energy Transfer / Williams acquisition. First in a series. A keeper. Will be archived at the source.

In a $38 Billion transaction announced September 28, 2015, Energy Transfer Equity (ETE) agreed to gobble up The Williams Companies in a deal expected to close during the first half of 2016. The combination of these two companies creates a U.S. midstream giant that will own infrastructure including gas pipelines carrying as much as 45% of U.S. Lower 48 dry gas production, processing capacity producing16% of domestic natural gas liquids (NGL’s) and crude oil pipelines in the Permian, Eagle Ford and Bakken. Today we take a look at the liquids infrastructure assets in this giant deal and provide a download of RBN’s maps of the infrastructure involved.
The financial intricacies of the ETE acquisition of Williams (let’s call it “The Deal”) are complex to say the least. ETE is today the parent company of the Energy Transfer group and a publically traded Master Limited Partnership.

 ETE sits atop four companies – three of which – Sunoco LP (SUN), Energy Transfer Partners LP (ETP) and Sunoco Logistics Partners LP (SLX) – are also publically traded MLPs with the fourth being Energy Transfer LNG – the vehicle behind the group’s proposed Lake Charles LNG export terminal. The Deal calls for a new company called Energy Transfer Corp (ETC) to take over the reins from ETE at the top of the group – ruling over four MLPs with Williams Partners LP (WPZ) joining SUN, ETP and SLX as well as Lake Charles LNG (that will become an MLP when and if the terminal comes online (expected mid-2020). The big deal is that ETC is a C-Corp entity – meaning that it is treated as a corporation for tax purposes and therefore does not have all the tax advantages associated with MLPs. The advantage of C-Corp status is access to a broader spectrum of institutional investors (MLP’s are messy investments for tax reporting). C-Corp status also reduces some of the baggage associated with MLP structures that have lost significant market value since oil prices crashed in 2014. For example ETE rival Kinder Morgan transformed back to a C-Corp in November 2014 by acquiring its Kinder Morgan Energy Partners MLP in a $76 billion transaction. ETE’s acquisition of Williams leaves a considerably more messy mixture of C-Corp and MLP structures in place than the Kinder deal but one that the company claim has more optionality. That means the four MLPs under ETC retain much of their own identity and WPZ retains its name and public listing.

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Doing Just Fine, Thank You

Being reported by Reuters/Rigzone:

U.S. shale oil and gas producers have seen smaller-than-expected cuts to their credit lines, a sign that banks could be relaxing their lending standards to help companies avoid technical defaults.