Monday, January 11, 2016

Reuters Predicts Minimal Decrease In Shale Production Month-Over-Month -- January 11, 2016

If this turns out to be accurate -- that US shale production falls 120,000 bopd month-over-month -- as reported by Reuters/Rigzone -- that's trivial. Even if the entire decrease was due to the Bakken/North Dakota, it wouldn't be remarkable. If the 120,000 bopd is spread across the Bakken, the Eagle Ford, and the Permian (not to include the half-dozen other shale plays, the decrease is exceedingly trivial -- considering.

Reuters/Rigzone is reporting:
U.S. shale oil production is expected to fall for a seventh month in a row in February, declining at about the same rate as the month before as drillers manage to eke out a few more barrels from each new well, U.S. data showed on Monday.

Total output was set to decline by 116,000 bpd to 4.8 million bpd in February compared with January, a U.S. Energy Information Administration's (EIA) drilling productivity report said. Production was estimated to have fallen by about the same margin in January, despite some expectations that the decline rate would begin to quicken as companies slash spending.
If true, the decline would take U.S. shale output to 638,000 bpd below the March 2015 peak, a far slower drop than many analysts had expected just a few months ago.

Shale firms' resilience in the face of crashing crude oil markets has added to the selloff, pushing prices to near 13-year lows this week.
Bakken production from North Dakota and Montana was set to fall 24,000 bpd, while production from the Eagle Ford in South Texas was expected to fall 72,000 bpd. But some regions were still growing, 18 months into the oil slump.
Production was forecast to rise by 5,000 bpd in the Permian Basin in West Texas and eastern New Mexico, the data showed.
Future Xylophonist

Monday, January 11, 2016; Alcoa Reports Earnings; The Bakken Has A New Operator: Petroshale (USA)

Alcoa reports:
Reported an earnings beat in its Q4. Earnings of 4 cents per share on revenues of $5.25 billion topped the 3 cents per share and $5.2 billion, respectively. This marks Alcoa's first earnings beat in the last 3 quarters.
But this was huge:
A bigger development for down the road, however, is Alcoa's decision to split into 2 separate companies: Alcoa, which will continue to deal in the raw materials side of the business; and an as-yet unnamed company that will take over the Aerospace and Automotive side. This business would include the $9 billion in airline contract orders announced by CEO Klaus Kleinfeld. The split is expected sometime in the second half of calendar 2016.
Zacks says "4 cents is a beat" but in fact that's what was posted over the weekend: analysts forecast 4 cents. I would say Alcoa met expectations. Which is a whole better than missing. LOL.

Tomorrow, I will be interested in:
  • CSX: after market close, analysts forecast a profit of 46 cents
Exactly one year ago: CSX reported fourth quarter earnings per share of $0.49, up 17% from $0.42 in the same period last year. This represents a new fourth quarter record for the Company. Revenue grew 5% in the quarter, to $3.2 billion, also a fourth quarter record, with broad based growth across nearly all of our markets, reflecting continued economic momentum. 
Back To The Bakken

Active rigs:

Active Rigs55167192182197

One well coming off the confidential list Tuesday:
  • 29765, SI/NC, Hess, EN-L Cvancara-155-93-2627H-7, Robinson Lake, no production data,
Two (2) new permits --
Seven (7) permits were renewed, all in McKenzie County --
  • CLR, 3, all three permits for Rollefstad Federal wells
  • EOG, 2, both Mandaree permits
  • Petro-Hunt, a State permit
  • Hess, a BW-Hedstrom permit 
One (1) producing well completed:
  • 29796, 1,723, BR, Kirkland 24-21MBH, Pershing, t12/15; cum --

Oil Company Forfeits Oil / Well For Drilling "Wrong" Location -- Denver Post -- January 11, 2016

Disclaimer: in a long post like this, there will be typographical and factual errors. In addition, I provide a lot of information from the file report which I may have misread or misunderstood. See further disclaimer further below. If this information is important to you, go to the source. I am posting this only for my benefit to help me better understand the Bakken. Do not quote me on any of this that I have come to any conclusion on this well. 

From The Denver Post:
North Dakota regulators ordered a Denver company to forfeit crude oil that was obtained from an area where it did not hold a lease. 
The North Dakota Industrial Commission on Monday ordered Gadeco LLC to forfeit the 800 barrels of oil. Proceeds from the sale of the oil will go into the state's general fund. 
State Mineral Resources Director Lynn Helms says the company drilled into an area in Williams County in error
He says the company spent more than $8 million drilling the well, which is now plugged. 
Helms says it's the first time such an incident has happened in North Dakota.
This is the well:

NDIC File No: 21173     API No: 33-105-02293-00-00
Well Type: OG     Well Status: DRY     Status Date: 2/19/2015     Wellbore type: Horizontal
Location: NENW 25-155-99     Footages: 460 FNL 2475 FWL     Latitude: 48.225525     Longitude: -103.356239
Current Operator: GADECO, LLC
Current Well Name: GOLDEN 25-13H
Elevation(s): 2357 KB   2334 GR   2334 GL     Total Depth: 19920     Field: EPPING
Spud Date(s):  10/9/2011
Casing String(s): 9.625" 2225'   7" 11392'  
Completion Data
   Pool: BAKKEN     Perfs: 11392-19920     Comp: 5/24/2012     Status: DRY     Date: 2/19/2015     Spacing: 2SEC
Cumulative Production Data
   Pool: BAKKEN     Cum Oil: 800     Cum MCF Gas: 101     Cum Water: 0
Production Test Data
   IP Test Date: 5/24/2012     Pool: BAKKEN     IP Oil: 46     IP MCF: 7     IP Water: 20
Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

I've gone through the file report and there were two issues:
  • paperwork
  • location
The paperwork issue was related to the delay in activity for "long" periods of time on this pad. 

Disclaimer: I went through the paperwork quickly and may have missed something. I have no formal training in the oil and gas industry and no formal training in reading file reports, so I may have missed something or misread something. 

Disclaimer: Perhaps others have the back story, and I am way beyond my comfort zone here, but I will post some comments, some of which appear to be factual, but may, in fact, be opinion. If this information is important to you, do not rely on this. Go to the source. In addition, please feel free to read this, but do not "quote me" on this as having made any conclusion or determination. I am simply thinking out loud.
  • It appears the well was sited as stated on the NDIC-approved permit application.
  • It appears the bottom hole ended in the section as requested on the NDIC-approved permit application.
  • The well was fracked back in 2012, open-hole, with about 1.8 million lbs of proppant.
  • 20-stage frack; the company was required to cement the 20th stage; not located in drilling unit;
  • There was a long period of inactivity on the well -- greater than a year, and less than two years.
  • NDIC notified the company that the failure to produce oil or natural gas for greater than one year, constitutes an abandoned well.
  • There were some paperwork / documentation issues.
  • It's my impression that the NDIC works with oil companies to resolve paperwork / documentation issues.
  • A sundry form reiterated that it was a location problem and in that sundry form referenced the KOP.
  • The well was sited about 460 feet south of the approved drilling unit.
  • I'm not exactly sure what the rules are regarding where the KOP and the lateral horizontal must begin (ECP/ICP) but this case may provide some insight.
  • The linked article states this was the first time this has ever happened in North Dakota; based on one sentence in the 190+ page file report suggests that it may have been discovered due to simple serendipity.

Glad To See CNBC Talking Heads Reading The Blog -- January 11, 2016

Gasoline demand: Don sent me this note; he knows I don't have cable television so I am unlikely to see CNBC:
A broker on CNBC earlier today said that gasoline consumption should be going up, because the price is dropping. Instead gasoline consumption was going down during most of 2015, and that trend continues in 2016. The broker still maintains that the people are driving less and saving cash / or paying off bills.
This updates my recent commentary on this subject. I'm glad to see a CNBC talking head is reading the blog. LOL. 

FERC Wants To Know Why Electricity Transmission Is So High In New England -- January 11, 2016


Later, 2:24 p.m. Central Time: see one of the comments below. I brought the comment up here for easy googling (comments aren't google-searchable):
A few weeks back I did some quick research on residential utility rates since Pennsylvania is touting their low cost as an inducement to both commercial and residential growth.
It is pretty easy and effective by just googling in 'utility rates' and the state.

Several Pennsylvania utilities charge 6 cents or less per kW.

The great commonwealth of Massachusetts - where the Attorney General, no less -- released a report denying the need for new natural gas pipelines - has rates at 18 cents/kW.
New restaurants and senior citizen residential complexes are forced to emplace underground propane tanks - to be resupplied via trucks - to accommodate their heating needs.
And then folks wonder why the roads are in such bad shape in Boston with all those propane and heating oil trucks (and recycling trucks) driving on them, needlessly, day in and day out.

Original Post
Background posts:
Now, the latest update:
The cost of moving electricity from one place to another, which appears on your electric bill as transmission, is much higher in New England than in other parts of the country, and the Federal Energy Regulatory Commission wants to know why. [Comment: LOL.]
In an order issued on Dec. 28, FERC commissioners wrote that New England transmission rates appear to be “unjust, unreasonable and unduly discriminatory or preferential” and called for an investigation. [Comment: an investigation shouldn't take long; find a mirror.]
The commissioners wrote in their order that the owners of transmission towers in New England appear to set rates with no meaningful justification and no real opportunity for them to be challenged. “The rates appear to lack sufficient detail in order to determine how certain costs are derived and recovered,” according to the commission order. “ [Comment: really?]
Rate protocols should afford adequate transparency to affected customers, state regulators or other interested parties, as well as provide mechanisms for resolving potential disputes,” the order states, adding that, “integrity and transparency ... are critically important to ensuring just and reasonable rates.” [Comment: really? In New England?]
The commission has set in motion a process that could lead to a settlement with the transmission owners and ISO-New England, the grid operator; or it could lead to hearings, legal arguments and an eventual order dealing with the transmission costs and how they are set.
Why do I get the feeling that after this is all said and done, things will be worse?

I want to know why potato chips are so expensive.

For The Archives

At least three good articles from the December 21 & 28, 2015, issue of The New Yorker.
  • "The Siege of Miami," Elizabeth Kolbert, rising seas threaten Miami
  • "Negotiating the Whirlwind," David Remnick, a John "Served in Vietnam" Kerry profile; a very, very long article at eleven pages; look for a book on Kerry by Remnick in 2017
  • "Drunk With Power," Kelefa Sanneh, a book "review" of The War on Alcohol, by Lisa McGirr, an analysis of US alcohol prohibition, January 1, 1920, to 1933. Memo to self: re-watch The Great Gatsby for the umpteenth time. Ms McGirr notes the same thing the narrator in The Great Gatsby noted: with Prohibition, folks began drinking more than ever. 
From the Kerry profile, so much to write about. Very, very interesting. It could be the prologue or the introductory chapter to a 6-volume biography of John Kerry (Kerry would no doubt suggest a minimum of eight volumes). The number of blind spots demonstrated by the writer, David Remnick, was incredible. But that did not detract from the article. One learns how naive Kerry really has been over the entirety of his life, and will continue well into retirement. Near the end,
"When he retires, Kerry said, he'll write a book and stay involved, 'somehow' in pubic affairs, particularly environmental issues."
Remnick does not mention that Kerry is the nation's #1 fanboy of manmade global warming (MMGW).

However Remnick does mention that Kerry and his wife have no shortage of places to hide out.
Kerry and Heinz have no shortage of residences; in addition to the houses in Georgetown (1) and Nantucket (2), they live in an eighteenth-century five-story pile on Louisburg Square, in Beacon Hill (3); in a family compound on Naushon, a private island off Cape Cod (4); in a fifteenth-century English farmhouse that was reassembled on the bank of Big Wood River, in Sun Valley (5); and on a ninety-acre farm called Rosemont, outside Pittsburgh, where Heinz spent time with her first husband (6), H. John Heinz III, ... who died in 1991.
A 15th-century English farmhouse that was reassembled on the bank of Big Wood River, in Sun Valley. Sun Valley

It's not just the number of homes, it's the size of the homes for a couple with no children living with them: a five-story home on Beacon Hill? Really? And a 90-acre hobby farm outside Pittsburgh? Really?
It's not just the number of homes or the size of the homes; it's the "locations" which sound like homes where the Princess of Monaco or where one of the thousand princes of Saudi Arabia would live: on Beacon Hill. On a private island off Cape Cod. In Georgetown. In Nantucket. Sun Valley. A 90-acre hobby farm.

And they say there is no royalty in the US. Give me a break.

It's not just the opulence for the sake of opulence, but the hypocrisy, talking about MMGW and maintaining a minimum of six homes and the carbon footprint that entails.

But other than that, a pretty good article. But as I said earlier, a lot of blind spots. By both the writer and the subject of the profile

Monday, January 11, 2016 -- Active Rigs Back Down To 56

Wells coming off confidential list over the weekend, Monday have been posted

Back to the old "IP" story. Note the IPs for these two wells, both tested during the same month (July, 2015) and their total production to date:
  • 29224, 1,890, Whiting, P Jackman 156-100-2-18-19-16H, East Fork, t7/15; cum 59K 11/15;
  • 30220, 745, Triangle, Eckert Foundation 152-102-22-15-1H, Elk, t7/15; cum 79K 11/15;
Active rigs:

Active Rigs56167192182197

Monday, January 11, 2016

Alcoa to report later today, from the Wall Street Journal:
Alcoa Inc. has struck a $1.5 billion long-term supply contract with General Electric Inc.’s aviation unit, underscoring the aluminum producer’s efforts to offset difficult conditions in its raw-aluminum business.
Under the deal, New York-based Alcoa will supply advanced nickel-based superalloy, titanium and aluminum components for engines and for engine parts made by GE.
Alcoa shares rose 1% in recent premarket trading.
The announcement comes ahead of what is expected to be Alcoa’s worst quarterly report since early 2014, due after the market closes Monday, including a 17% drop in revenue from a year earlier and earnings of two cents a share, according to a poll of analysts. Raw-aluminum prices have fallen over 25% to about $1,500 per ton in the past year.
As usual, it will be first major U.S. company to report, setting the tone during a volatile time for the stock market.
Front page, on-line edition, but way, way at the bottom, from The Los Angeles Times, google in North Dakota, an oil boomtown doesn't want to go bust.
It may be tempting to write off Williston as another boomtown heading for a bust, a story that has defined the American West, whether the resource was fur, gold or timber.
But Williston believes it can build something more enduring. The way city officials tell it, closing the camps is a show of faith in the future.
"It's very difficult to build a sustainable community on man camps," said Ward Koeser, who retired as mayor in 2014.
The city used its newfound wealth to build a $70-million high school, a $68-million recreation center, and new water and sewer systems. It renovated Main Street and created a city position for someone to write parking tickets. Highways have been widened, and an airport is under development.
The biggest transformation may be in the city's housing stock. As the population tripled to more than 36,000, developers built about 10,000 houses and apartments.
Active rigs:

Active Rigs58167192182197

RBN Energy: Zombies: Shrinking Cash Flow And Rising Debt Turn Some E&Ps Into The Walking Dead. Folks may be interested in the chart showing the walking dead.

Politically Correct

From CNN:
Police are hunting for a gunman who shot and killed a fellow passenger on board a train in Oakland, California.
Description of the suspect, in broad daylight or at least a well-lit train, with at least one witness.
The suspect was wearing blue jeans, military-style boots and a dark jacket. 
So politically correct we don't know whether the suspect is male, female; tall, short; thin, fat; white, black; hat, no hat; tattoos, no tattoos; long hair, short hair, no hair. But we do know the suspect was wearing --OMG -- "military-style" boots. 
From The Boston Globe 

Shire finalizes deal to buy Baxalta with $32 billion offer.

David Bowie dead, cancer, at age 69.

Burdened students confront candidates on college loans.   

Boston Globe delivery problems persist. For the second consecutive week, thousands of Sunday newspapers did not reach subscribers. The Globe continues to print daily "apologies" to its subscribers. Comment: there's a huge backstory here that is not being reported.

The LA Times

Google: The Saudi-U.S. relationship: Shakier than ever.
Saudi Arabia's royal family is frightened — and that's a problem for the U.S.-Saudi relationship.
The Saudis are surrounded by enemies.
To the north, Abu Bakr Baghdadi, leader of Islamic State, has promised to overthrow the Al Saud dynasty, which he calls “the serpent's head.” To the south, Sunni-led Saudi forces are at war against Shia Muslim rebels in Yemen. To the east, the Al Saud face the rival they fear most, Shia-ruled Iran.
The Saudis have problems at home, too.
Fearing subversion from both Islamic State and Iran, the government has cracked down on Sunni and Shia dissidents alike, jailing writers, journalists and human rights lawyers as well as potential terrorists.
The plummeting price of oil has blown a hole in the government's budget while the population, accustomed to subsidized housing and utilities, keeps growing. And the family faces a succession crisis; 80-year-old King Salman, who ascended to the throne last year, is described privately by diplomats as nearly senile.
Once their regime was a pillar of conservative stability; now fear has made them unpredictable.
The Birther Problem

The Ted Cruz birth problem remains, perhaps, the top story in GOP politics. Who wudda thought? Legally, he's good to go. But he was a Canadian citizen, also, up until 18 months ago. He renounced his Canadian citizenship in 2014, when he was ready to announce he was running for president. That's a problem.
Speaking of Problems

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 0.8 percent on January 8, down from 1.0 percent on January 6. The forecast for the contribution of inventory investment to fourth-quarter real GDP growth declined 0.2 percentage points to -0.8 percentage points after this morning's wholesale trade report from the U.S. Census Bureau.
Nominee For Geico Rock Award

StarTribune has nominated Cathy and Kevin Palmer, Blaine, MN, for the Geico Rock Award, 2016. Apparently the couple had not heard about really, really inexpensive natural gas.

Technically it's not a nomination but it certainly reads like a nomination.

They spent $5,700 on six solar panels to provide 17% of their electricity needs (of course, that's a hypothetical number and we all know that reality will never match a high-pressure salesman's projections).

Assuming they have a $300/month utility bill, 17% of $300 = $51.

$5,700 / $51 = 111 months = 9 years. So, assuming everything works as advertised their solar panels will pay for themselves in about 10 years.

If their monthly utility bill is $150 (see below), then 17% of $150  = $25.

$5,700 / $25 = 228 months = about 20 years

For $35,000 they could have gone fully solar.

By the way how much is an "average" utility bill in Blaine, MN? Hard to say. This was from a comment at a message board back in 2011:
We're in a split-level from the early 1990's in Blaine. It's about 1800 square feet. We've got the original furnace and air conditioner in our house, so probably not very efficient. We also haven't done much to make our house more efficient (probably could use some more/better insulation in a few places). We are fairly aggressive with a programmable thermostat (80 in summer, 60 or so in winter during the day). We also replaced the fridge, which probably saves $6-$7 a month in electricity (plus the new one is bigger and actually keeps things cold).

Gas averages about $55/month. But, it's highly variable (about $20 in summer, tops out around $150 in winter). Electric is about $50/month and more consistent. Water/sewer/garbage are all billed through the city and come out to about $36/month. We do have the smallest garbage bin available which saves a small amount of money per month.
That was back in 2011, when natural gas was selling for $4.00 / million BTUs, vs $2.00 today.

By the way, on a percentage basis the amount of energy that solar contributes to total US consumption still rounds ... drum roll ... 0.0%. To the first decimal place, solar contributes 0.0% of energy consumption in the US. Wind: 2%. And this is after decades of advocacy, tax credits, and government mandates:

There is talk that the amount of energy that solar contributes to total US consumption by 2030 could triple. 

This is truly disturbed.

Sounds of Silence, Disturbed