Catching Up From Friday; RBN Energy Updates Canadian Crude Challenges -- February 13, 2016

No new permits announced Friday.

Whiting renewed one permit, a Kaldahl permit in Williams County.

EOG canceled four permits, these were four Wayzetta permits in Mountrail County, section 25-153-90.

Seven (7) producing wells completed:

• 26774, 419, Zavanna, Double Down 24-13 4TFH, East Fork, t1/16; cum --
• 28894, 623, Zavanna, Blackjack 24-13 3H, East Fork, t1/16; cum --
• 29384, 1,931, MRO, Ulmer 24-21H, Bailey, t1/16; cum --
• 29765, 648, Hess, EN-L Cvancara-155-93-2627H-7, Robinson Lake, t1/16; cum --
• 29537, 681, Hess, EN-Sorenson B-155-94-3526H-6, Alkali Creek, t1/16; cum --
• 29766, 729, Hess, EN-L Cvancara-155-93-2627H-8, Robinson Lake, t1/16; cum --
• 30884, 1,097, XTO, Sorenson 31X-28G, Siverston, t12/15; cum 2K over four days;

Active rigs:

	2/13/2016	02/13/2015	02/13/2014	02/13/2013	02/13/2012
Active Rigs	41	137	188	183	205

RBN Energy: Higher Costs and Lower Prices Beat Down Canadian Crude Producers.

If you think that yesterday’s 13 year-low CME/NYMEX crude settlement price ($26.21/Bbl – February 11, 2016) is bad news for struggling U.S. producers then try putting yourself in Canadian producer’s shoes! The headwinds facing Western Canada’s heavy oil sands these days would try the patience of a saint. Prices for benchmark Western Canadian Select (WCS) blend in Alberta traded as low as $12.50/Bbl in January 2016 – clawing back to $14.06/Bbl on February 10, 2016. But by the time gathering, transport and diluent purchase costs are subtracted, the netback (market price less transport cost) at the lease is negative for many producers – especially when shipping by rail.  To be clear, that’s below zero at the wellhead!  Yet there are few signs that production is falling off – at least in the short term. Today we lament the ongoing plight of Canadian producers.

The last time we looked at the fortunes of Canadian crude producers was back in July 2015. Most production from our northern neighbors comes not from shale but from heavy oil sands in Western Canada – where output has been increasing steadily for decades. The heavy bitumen produced in this region is extracted using various technologies with some mined at the surface (mostly upgraded in the region to produce light synthetic crudes) and most of the rest extracted underground or in-situ using steam assisted gravity drainage (SAGD). Much of the recent expansion has involved SAGD – that requires high upfront expenditure in plants that produce steam used to heat and extract bitumen underground. These plants produce crude for decades once they are up and running. The bitumen produced is very heavy, which means high viscosity.

Consequently, it only flows when heated mixed with another hydrocarbon that reduces the viscosity. Practically speaking this means that it must be mixed with a lighter diluent hydrocarbon such as condensate or natural gasoline to make blended crudes - known as dilbit - in order to flow to downstream markets in pipelines.

Later in the article, and as you read this paragraph, note that Iowa is likely to block the proposed Bakken crude oil pipeline.