Thursday, June 16, 2016

Flashback -- 1992!

Just how much oil might there be in the continental US (the lower 48)? Flashback to a Leigh C Price and Julie A LeFever article back in 1992, the concluding paragraph in the abstract:
Numerous other self-sourced, fractured shale reservoirs produce oil commercially. If the thin Bakken shales have generated 100 billion BO, then it is possible that the lower 48 states of the US contain an unrecognized oil-resource base in the trillions of barrels. 
Important, important phrases to emphasize from the above:
  • this was from 1992, well before we had the technology to reach this oil
  • note: the "thin" Bakken; the Bakken is incredibly thin compared to other plays like the Permian
  • Price and LeFever were very, very conservative in their OOIP in the Bakken, suggesting "100 billion BO." In fact, Leigh Price suggested 500 billion bbls of OOIP
  • Price and LeFever suggest trillions of bbls of oil-resource base -- this is not natural gas, but oil
To some, "trillions" might seem like hyperbole, but we all agree (now) that the Bakken probably has 500 billion bbls OOIP. The Permian, being much thicker, probably has much more. Then we have the Eagle Ford, and the Niobrara. And STACK and SCOOP in Oklahoma. And then about a dozen other plays that were jolted by the Saudi Surge.

So, "trillions" does not seem like hyperbole. And that paper was written back in 1992. Peer reviewed and published.

So, who was singin' in 1992?

In The Real West, Tish Hinojosa
Wow, I haven't seen "Tish" as a woman's name in a long, long time. I don't recall much about her any more but years and years ago I had a "crush" on a woman named "Tish." If I recall correctly we were both married at the time, and not to each other. But it was just a fantasy, nothing more. Trust me.

Tea Leaves -- June 16, 2016

It turns out that a gun shop actually reported Omar to the FBI. Earlier Attorney General Loretta Lynch overruled FBI Director James B. Comey on firearms sales to those on terrorist watch lists. Something tells me Comey isn't so "comfy" any more. In Washington, when things go this bad, heads have to roll. My hunch is that with the largest mass murder on Obama's watch, and the "stuff" that is coming out about how the FBI bungled this case, Comey will soon be asked to resign. And, of course, that's great news for Hillary.

Back To Energy

Over at Outrun Change, this from Forbes:
6/21 print edition – Rich Karlgaard at Forbes – Long Boom in Cheap Energy – He says the most significant technology trend in the last decade is not stuff you can do on your smart phone but actually in the area of oil-and-gas production.
He cites Mark Mills from the Manhattan Institute as saying the cost-efficiency of shale drilling has improved 400% since 2008. That means the combination of cost dropping and productivity improving has reduce costs by a factor of four. Awesome.
Then this:
The breakeven price used to be $80 per barrel. Mr. Mills says it is down to $50 now. It is headed for $40 and could eventually hit $20. That is an astounding amount of improvement in a decade or so.
And finally this:
He also said that for practical purposes over the next several decades, the amount of oil and gas available in shale rock is essentially unlimited. A large part of the huge potential for the future is more improvements in technology which will increasing the productivity.
Unfettered, the Bakken can easily produce 2 million bopd. That was the old estimate. If push came to shove, I think it could easily get to 3 million bopd. If there is 500 billion bbls original oil-in-place (OOIP), a 3% primary production rate gives us 15 bbls of oil and 1.4 million bopd for the next 30 years:
  • 500 x 0.03 = 15 / 30 years / 365 days = 1.4 million bopd for 30 years
  • 500 x 0.05 = 25 / 30 years / 365 days = 2.3 million bopd for 30 years
  • 500 x 0.08 = 40 / 30 years / 365 days = 3.7 million bopd for 30 years
 And this is just the Bakken.

Three Wells Coming Off Confidential List Friday -- June 16, 2016

Wells coming off confidential list Friday:
  • 31996, drl, Hess, CA-Stangeland-155-95-2128H-8, Capa, no production data,
  • 32077, drl, BR, CCU Badger 2-3-14MBH, Corral Creek, no production data, 
  • 32177, SI/NC, XTO, Tobacco Garden 31X-29D, Tobacco Garden, no production data,
Five (5) new permits --
  • Operators: Whiting (4), Oasis
  • Fields: Banks (McKenzie), Heart Butte (McKenzie), North Tobacco Garden (McKenzie)
  • Comments:
Six permits renewed:
  • HRC (2), two Fort Berthold permits, both in Dunn County
  • Zavanna (2), two Rover permits, both in Williams County
  • WPX, a Mandan permit in Mountrail County
  • Texakota, a H. Borstad permit in Williams County
Active rigs:

Active Rigs2878187185214

Update On Four EN-Pederson Wells In Alkali Creek -- June 16, 2016

Some time ago, a reader asked about wells in a certain area. I tracked them at this post. Three of the four wells have now been completed and are producing; one of the four went to SI/NC. The wells in question:
  • 32029, 1,258, Hess, EN-Pederson-LW-154-94-0408H-5, Alkali Creek, 4-section spacing; sections 4,5,8, and 9; t1/16; Three Forks, 50 stages, 3.5 million lbs; cum 79K 4/16; API: 33-061-03842;
  • 32030, 917, Hess, EN-Pederson-LW-154-94-0408H-6, Alkali Creek, 4-section spacing; sections 4,5,8, and 9, a middle Bakken well; 35 stages, 2.5 million lbs; t2/16; cum 38K 4/16;
  • 32031, 1,275, Hess, EN-Pederson-LW-154-94-0408H-7, Alkali Creek, 4-section spacing; sections 4,5,8, and 9, Three Forks, 50 stages, 3.5 million lbs; t2/16; cum 63K 4/16;
  • 32032, SI/NC, Hess, EN-Pederson-LW-154-94-0408H-8, Alkali Creek, 4-section spacing; sections 4,5,8, and 9;
End Of The Road For This Well

After following this well for quite some time through a complicated course, it looks like the company has cut their losses, and capped and buried this well, calling it a dry well. I began following it on August 19, 2014:

August 19, 2014, waiting for frack data to see where this horizontal ended up:
  • 27209, dry, Petro-Hunt, USA 153-95-4B-9-2HR, Charlson, Three Forks B2, sections 4, 5, 8, 9 - 153-95; TVD, 9,978; TD, 19,839; 2560-acre spacing; azimuth 214 degrees; orig app permit name: USA 153-95-4B-9-1HS, February 14, 2014: request rec'd to change well to be under spacing order #22895, 1280-acre spacing; so I believe the "R" is a revised request/permit to change from 2560-acre spacing to 1280-acre spacing; same date, request rec'd to change name to "2HR" -- same target; it looks like TD was reached at a measured depth (MD) of 8,767 feet on March 18, 2014; in limestone; depths, prognosis: Lodgepole - 9,061; Bakken Shale - 9,767; Middle Bakken - 9,791; Target Horizon - 9,814; geology report said this was a Middle Bakken well; frack data not yet posted; [Updates: 7/15 -- still on DRL status;] API 33-053-05540.
  • This is a complicated well; from the geologic summary: the initial phase of this well was to be an intersection well intended to intersect the USA 153-95-4B-9-2H (#26446 -- DRY, cease drilling, February 14, 2014; circulation was lost at 8,540 feet an the well was abandoned) vertical in order to cement and plug the well beneath the surface where it packed off. Then a sidetrack out of the cement to drill a vertical and curve, landing thirty feet into the middle Bakken formation. This well spudded February 19, 2014, and reached a TD of 8,768 feet MD on March 18, 2014. 
  • The well was abandoned and plans are to ski the rig and intersect the wellbore and plug it shut, then sidetrack and re-drill the well.

OPEC Turmoil Could Turn Balanced Market Into Shortfall -- IEA -- June 16, 2016

Link here.

Data points, observations, comments from the linked article follow:
  • world oil production will nearly match consumption in 2017; will end several years of oversupply
  • to meet demand, OPEC needs to pump an extra 650,000 bopd over the year -- Bloomberg
  • to do that would require solutions to Nigeria's militant attacks; Libya's political divisions; and, Venezuela's economic crisis -- Bloomberg is optimistic on any of these
  • by end of next year (2017), OPEC would need to pump nearly 1 million bbls above last month's production level to keep the market balanced 
  • Nigeria: production at a 28-year low of 1.4 million bopd (about 500,000 bbls below full capacity)
  • Libya: at 270,000 bopd in May, just a fracked of the 1.6 million bopd it pumped under Qaddafi in 2011
  • Venezuela: at 2.3 million bopd last month, the lowest since 2009; on track to drop another 100,000 bopd
  • Iran: could provide some relief; currently around 3.7 million bopd
  • global supply: after two years of oversupply, the west has more than 3 billion bbls in storage (sounds like a lot; 3 billion bbls / 100 million bbls = 30 days) -- but that oversupply is said to be "enormous" and "dampens the prospects of a significant increase in prices"
  • OPEC: will pump 33.3 million bopd in 2017 compared to 32.6 million bopd in May, 216 -- IEA
  • but Bloomberg notes that if OPEC output falls short of IEA estimates, those stockpiles would start to shrink rapidly (yes, 3 billion bbls / 100 million bbls = 30 days)
Oilprice pretty much says the same thing. Is talk about "re-balancing" oil supply and demand in the near future similar to all that talk about "Peak Oil" some years ago? I'm not so sure. 

The Dirty Little Secrets -- And There Are Many -- Of Wind Energy -- June 16, 2016

I have no earthly idea why The Huffington Post would print this op-ed on wind. If the link breaks, I have the article archived.

Could Minnesota's Dithering Cost Them The Sandpiper? That's Very Possible If Dakota Pipeline Succeeds In Iowa -- June 16, 2016; PDX Pays $15,500/Acre In The Permian

Active rigs:

Active Rigs2878187185214

RBN Energy: could the Bakken end up with too much pipeline capacity? From the article, which is the first of a 2-part series:
Assuming construction starts in early summer, the Dakota Access Pipeline (an Iowa issue) and Energy Transfer Crude Oil Pipeline (a pipeline reversal, Illinois to Texas) are planned to be operational late this year.
DAPL will give the Bakken sufficient pipeline (and in-region refinery) capacity to receive more than 100% of the Bakken’s crude output.
That won’t make the Bakken’s vast CBR capacity superfluous—far from it.
For one thing, only a few Bakken producers would have direct access to DAPL, and some don’t have access to existing pipeline out of the region either. For another, many producers that signed take-or-pay contracts for CBR capacity have time left on their deals, and would be unlikely to double-pay for takeaway capacity (that is, pay their CBR obligations and pay to use a pipeline). And one more thing: CBR, unlike pipelines, provides that destination flexibility we mentioned earlier. Still, DAPL (with its large capacity—nearly 45% of current Bakken production—and its access to the Midwest and Gulf Coast) is sure to further reduce CBR’s role in the Bakken. As of February 2016, only 42% of Bakken production was moving out of the region on the rails, down from a high of 78% in April 2013.
Perhaps the bigger question is whether DAPL’s completion late this year (again, assuming all goes well on its federal permits and during construction) will affect the need for another out-of-the-Bakken pipeline project—Enbridge’s proposed 616-mile Sandpiper Pipeline from near Tioga, ND, to Enbridge’s crude terminal in Superior, WI.
Sandpiper’s planned capacity varies by segment: It would be 250 Mb/d from Tioga to Berthold, ND; 225 Mb/d from Berthold to Clearbrook, MN; and 375 Mb/d from Clearbrook to Superior. From Clearbrook and Superior, Bakken crude could be transported by Enbridge and other pipelines to refineries in the Midwest and eastern Canada. Development of Dakota Access and Sandpiper had been running neck-and-neck for some time (each of them do sound like entrants at the Belmont Stakes), but DAPL pulled ahead in the stretch when changes in Sandpiper’s regulatory-approvals timeline in Minnesota slowed that project’s pace. (We understand that Enbridge now expects Sandpiper to come online in early 2019.)
Sandpiper would provide Bakken producers with access to a different set of refineries. Whether that is enough to push the Enbridge project over the finish line remains to be seen, given what may be an emerging surplus of Bakken pipeline takeaway capacity.
Flaring? From yesterday's Director's Cut, North Dakota is now down to 9% flaring which meets the April, 2020, target. The "red star" in the screen shot from an earlier post shows us where "we" are now with regard to flaring:

I always said that if they quit drilling, they would eliminate flaring.

Other News

Pioneer Natural Resources buys Devon assets. Link here
Pioneer Natural Resources Co. is purchasing drilling rights from Devon Energy Corp. in a Texas shale field that’s home to some of the buyer’s biggest gushers.
Investors panned the $435 million transaction that is being financed with new Pioneer stock that will dilute the value of their holdings. Pioneer was one of the worst-performing oil producers in the S&P 500 Index on Thursday, declining more than 5 percent after announcing the deal late Wednesday to acquire Devon’s rights to explore 28,000 acres in Permian Basin in Texas. [$435 million / 28,000 = $15,500 / acre.]
Pioneer, which in recent years cast off a far-flung portfolio of international oil fields to concentrate almost exclusively on Texas shale, said most of the acquired rights lie adjacent to -- or in some cases, directly below -- assets the company already owns.
Pioneer expects wells it drills in those zones to generate pre-tax returns of 50 percent or more, according to the statement announcing the deal. The 28,000-acre package is in a section of the Permian known as the Midland Basin, where Pioneer has been drilling 2-mile-long oil wells expected to yield a million barrels each.
That's the "standard" in the Bakken, "2-mile-long" horizontals, with an EUR of one million bbls in the better spots.

As far as "investors panning the investment," the Alaska Purchase was also panned by the US population as Seward's Folly.

$15,500/acre, though, certainly speaks volumes.

See another note on PDX below.

Update on Canadian Wildfires

Update on the Canadian wildfires, from Seeking Alpha:
  • A shutdown of Suncor Energy's MacKay River oil sands facility near Fort McMurray, Alberta, is being prolonged by an Enbridge pipeline connected to the facility has clogged after heavy oil cooled in the system, Reuters reports.
  • The pipeline clogged after last month's Alberta wildfire forced oil sands producers to shut facilities, including thermal projects that require ongoing heat to operate effectively.
  • It is not yet clear how long repairs would take, but the extended shutdown is a setback for SU, which last week cut its full-year production guidance but said it expected all its operations in the area to be at normal rates by the end of June.
  • Separately, ConocoPhillips  says 73% of wells at its Surmont oil sands project in Alberta are back in production or injecting steam, with no unexpected complications affecting the effort, after being shut down due to the fires.
The Economy

But this will help: rising rents and healthcare costs will support underlying US inflation. I can't make this stuff up.
Comments From Pioneer's CEO

Link here.
Sheffield said the industry has too much debt, and estimates more than $100 billion needs to be removed before balance sheets can get back in order.

“There’s been more bankruptcies [this cycle] than in any downturn I’ve ever seen – 77 North American E&P [exploration and production] companies have filed for $52 billion worth of bankruptcies,” said Sheffield. “The [oil] majors have more debt than I’ve ever seen, even though they’re in great financial shape.”

Sheffield said the Permian Basin is “set for explosive growth” in the next few years, with its players having the best balance sheets and the Permian currently having the most rigs. However, $50 oil isn’t going to get it done.

“Based on what we’ve done at Pioneer and looking at the entire shale play, if we had $50 oil flat, in my opinion, U.S. production will continue to decline,” said Sheffield. “We may grow for two or three years and a few independents may grow, but you don’t get enough cash flow.”

So what’s the magic number? What’s the inflection point?

“I think the world is going to need Permian Basin oil production, and it’s not going to grow until you get to $60 long term,” he said. “When oil moves toward $60 per barrel, I believe a good $10 of it for a lot of companies will go toward paying off debt, or they’ll start selling assets at decreased divesture prices. That extra $10 will be a huge difference for companies that have great balance sheets today. That’s why I’m a firm believer we’re in a $60 long term oil price environment.”
Kurds: Our Oil Is Worth $1 Billion / Month

Link here.
Iraq's Kurds are ready to strike an agreement with the central government in Baghdad on a deal to increase oil exports, if it guarantees them a monthly revenue of $1 billion.

Iraq's central government in March stopped oil exports through a Kurdish pipeline to pressure the local authorities to resume talks about an oil revenue sharing agreement.

Iraq's state-run North Oil Company normally exported 150,000 barrels a day through the pipeline that comes out at the Mediterranean port of Ceyhan, in Turkey. The pipeline also carries oil produced in the Kurdish region in northern Iraq and sold independently from the central government.

KRG spokesman Safeen Dizayee said in an interview in the Iraqi Kurdish capital Erbil on Tuesday that the Kurdish authorities would be willing to sell the oil through Baghdad if they get a share from the federal budget amounting to a $1 billion a month.

Not Only The Most, But Also The Worst -- June 18, 2016

The other day, the screenshot from a mainstream media outlet:

Now this screenshot from USA Today:

From the USA Today story that accompanied that photo:
Since 2009, Obama has issued 66 proclamations to fly the flag at half-staff, exceeding President George W. Bush's 58 and Bill Clinton's 50, according to a USA TODAY analysis of presidential proclamations.
66 vs 58 for George W. Bush, and President Obama still has 217 days left in office. Just trying to run out the clock.

But according to USA Today, it's really not as bad as it seems. A lot of President Obama's proclamations to fly the flag at half-staff were due to annual observances like Memorial Day.
Annual observances such as Memorial Day and Pearl Harbor day have contributed to that total, as have the deaths of notable public figures like Sen. Robert Byrd, Sen. Ted Kennedy, former first lady Nancy Reagan and Supreme Court Justice Antonin Scalia.
I can't make this stuff up.

His Economic Legacy Ain't So Hot Either

From Breitbart:
The Obama Administration is already under fire for producing an average real GDP growth of just 1.55 percent for their its 7 years in office.
That ranks the Obama presidency as the fourth from the bottom for the 43 Presidents of the United States, Obama’s performance ranks above only Herbert Hoover at -5.65 percent, Andrew Johnson at -0.70 percent and Theodore Roosevelt at 1.41 percent.
It turns out that the GDP under the Obama presidency was worse than reported
The Commerce Department is set this July to publish a stunning 2 percent downward revision of gross domestic product (GDP) during the Obama Administration term in office.
The Department’s Bureau of Economic Statistics (BEA) regularly makes small revisions to its published statistics as more information becomes available over time. But in a massively large adjustment, the BEA just revised downward — by $346 billion — the real (after-inflation) GDP for 50 states and the District of Columbia, covering the 11-year period from 2005 through the end of 2015.
So, is the revised number going to be 0.98 of 1.55% or something else. If it's 0.98 of 1.55% this isn't much of a story. 1.55% goes to 1.52. If on the other hand..... wow.

Thursday, June 16, 2016 -- A Delay In Blogging Today


June 16, 2016: The headline in today's Los Angeles Times on the surge in unemployment claims -- unemployment figures show healthy job market despite rise in new claims. I can't make this stuff up. Incredible spin. 
The number of people seeking U.S. unemployment benefits rose last week, but to a low level that indicates employers are still cutting relatively few jobs. 
Weekly applications rose by 13,000 to a seasonally adjusted 277,000, the highest in four weeks. The less-volatile four-week average declined slightly to 269,250.
The figures are a reassuring sign that the job market may be healthier than other recent data suggest. Businesses cut back sharply on hiring in April and May. Employers have added an average of only 116,000 jobs in the last three months, half of last year's average of 230,000. 
Again, this article and all the rest do not mention how horrendous a "116,000" number truly is. Economic growth requires at least 200,000 new jobs each month. The articles do not mention that these numbers are so bad, Janet Yellen has pretty much telegraphed she won't be raising rates for some time unless political pressure is such that she has no choice.
Original Post
I can see already that there is going to be too much to blog about today and we are going to be out and about much of the day. So, I'm here, but it might be awhile before I start blogging and even longer before I catch up.

I should do what these guys do: write the article ahead of time and fill in the data later. Here's the headline: application for US unemployment aid rise to still-low level.

Sounds like something from Dr Seuss or from the Oval Office.

So, I thought, "to a still-low level." Can't be all that bad. I thought it might be oh, maybe, a rise of 1,000, or 2,000, or maybe even as much as 4,000. But, wow, the number actually surges: 13,000.

And look at this lede:
The number of people seeking U.S. unemployment benefits rose last week, but to a low level that indicates employers are still cutting relatively few jobs.
The analysis:
The figures are a reassuring sign that the job market may be healthier than other recent data suggests. Businesses cut back sharply on hiring in April and May. Employers have added an average of only 116,000 jobs in the past three months, half last year's average of 230,000.
This paragraph confirms the article was written before the numbers came out:
And fewer applications are also consistent with steady hiring over time, according to research by Michael Feroli, an economist at JPMorgan Chase. Applications tend to decline when workers who lose their jobs can more quickly find a new one.
There was one interesting data point missing, a data point that almost always shows up in these articles: what was forecast. 
From Fox Business: jobless claims rise more than expected.
Economists polled by Reuters had forecast initial claims rising to 270,000 in the latest week.
So, much worse than expected.
Four-week average: "slipped" 250 to 269,250. Well, we know where the four-week average will be trending next week, don't we.