Thursday, August 18, 2016

Error On Daily Activity Report? Were Two New Permits Not Reported? BR With Five New Permits; No Producing Wells Reported As Completed; Open Season For Dakota Access Pipeline -- August 18, 2016


Later, 8:19 p.m. Central Time: a reader sent in a comment wondering about the two Halcon permits and their relationship to Crescent Point Energy pads. It turns out, Crescent Point Energy has two wells in the same field (the Church oil field) and almost right next to the Halcon permits that were canceled. The two Halcon permits were for wells to be drilled in section 33-158-100. Meanwhile, Crescent Point has a producing well (#27468) in section 32-158-100, about a half mile to the west; and a producing well (#23586) in section 31-158-100, about a mile and a half to the west from the two canceled Halcon permits.

Original Post
Active rigs:

Active Rigs3374193183199

There are no wells coming off the confidential list Thursday.

Seven new permits:
  • Operators: BR (5), Hess (2)
  • Field: Killdeer (Dunn), Ross  (Williams)
  • Comments: all BR permits are on the Lincoln Hill pad. It looks like there is an error on the daily activity report. Two permit numbers are missing from the report. the report showed only the BR permits, not the two Hess permits. 
Halcon canceled two permits: two Stromme Trust permits in Williams County

No producing wells completed.

"Open Season" For The Bakken Pipeline System

From Zacks which looks like a press release from ETP:
Dakota Access LLC and Energy Transfer Crude Oil Company LLC , an arm of Energy Transfer Partners, L.P. ETP, together declared the supplemental binding open season for Bakken Pipeline. Both Dakota Access and ETCO are involved in the operation and development of the pipeline. The open season started on Aug 12, 2016.

Both Dakota Access and Energy Transfer Crude Oil Company revealed that the incremental carrying capacity for the pipeline will be decided on shippers’ commitment.

The open season is meant to judge shippers’ demand for the pipeline from Bakken/Three Forks play to multiple markets. It is to be noted that Bakken Holdings Company LLC has a 75% interest in each of ETCO and Dakota Access. The residual 25% interest belongs to Phillips 66 PSX.
Investors should also know that Energy Transfer Partners LP has a 60% ownership interest in Bakken Holdings while the remaining 40% is in the possession of Sunoco Logistics Partners LP SXL.

When A Pay-Off Is Not A Ransom: When It's "Contingent" -- August 18, 2016


Later, 9:27 p.m. Central Time: it took a few days but the White House wordsmiths finally found the right word: "leverage." Everybody knows knew. This, too, will be another non-story.
Original Post
And so it goes. From The New York Post. This story will be headline news everywhere by this time tomorrow, except on NBC, MSNBC, CNN, HLN, ABC, CBS, and a few other mainstream outlets.

It will be interesting to see if / when I see this story on-line at the following site, updating at 4:50 p.m. Central Time:
  • Los Angeles Times: if there, not seen (it's probably there, but it did not appear on opening page by Friday morning, August 19, 2016, after story everywhere else; updated 8:29 a.m. Central Time, August 19, 2016)
  • Fox News: yes, among the top four stories -- probably the first of the group to post the story
  • The New York Times: yes, 8:44 p.m. Central Time, update; sticks with "AP" word: "leverage," not "ransom"
  • Washington Post: yes, 7:45 p.m. Central Time, update
  • Wall Street Journal: 7:45 p.m. Central Time, update; not ransom, "leverage"
  • The [London] Guardian: if there, not seen
  • The [London] Telegraph: yes, a top story 
This story will be dead by Monday, August 22, 2016. Move on. 
Everyone Knows

If the NYT does not print this story, then the NYT considers it a non-story.

If it's a non-story, it means that "everyone" knew what was going on. No reason to cover it in the NYT. Call it what you want, it is what it is, and everyone knows.

Oh, good. It gives me an opportunity to post this video:

Everyone Knows, Leonard Cohen

My hunch is that this story is something President Obama is not even thinking about. At most it's a joke told while golfing, that he got four Americans released by using Iranian cash.

Shares Of Energy Stocks Rising; WTI Rising -- August 18, 2016

I'll be off the net for awhile, but one last thought before going.

If folks take notice, not only is WTI rising, but shares of oil companies are also hitting new 52-week highs. The "stock market" usually "looks" out about six months, "they" say.

Right now, there's a bit of a perfect storm with WTI pricing:
  • rebalancing has apparently already begun a bit, simply due to the usual market "supply and demand" conditions
  • this comes despite some countries producing at record levels (notably Saudi Arabia and Norway)
  • there is a bit of a short squeeze to be factored in (a lot of folks felt the situation was such, the price of oil would drop further; as it goes up, it creates a big a short squeeze on those who had bet "against" oil)
  • the talk of the late September OPEC meeting
Most surprising: despite the glut, which by any standard, still remains huge, the price of oil is rising. I do not know to what extent the strength/weakness of the dollar is playing into this.

Later, let's see what the pros wrote about WTI. I wrote my post about an hour ago (the date/time stamp will have the exact time. The note below was started at 4:10 p.m. Central Time, same day, from!Finance. Data points:
  • Brent oil topped $50 / bbl for first time in six weeks
  • continued optimism that top oil producers will agree to cap output next month
  • US shale firms place more bets on a booming formation in Oklahoma
  • Jones Energy is joining CLR in Oklahoma: Jones will acquire 18,000 net acres for $136.5 million ($7,600/acre)
  • companies are rushing to take advantage of the new plays as production in North Dakota's Bakken falls off

Sometimes It's In The Very Fine Print -- Downspacing In The Bakken -- August 18, 2016

I'm going over the most recent Mike Filloon contribution to SeekingAlpha again. I don't think he mentioned this in his narrative, and I don't think I've seen it elsewhere. Here's the graphic. See if you can spot something fairly significant.

The graphic is from Goldman Sachs Global Investment Research, undated. Besides the obvious multiple formations that are highlighted, note the second bullet:
Middle Bakken and Three Forks-1 zones have been largely derisked. Confidence in downspacing from 320-acre well spacing is key catalyst for more resource credit for the play.
That one line could be interpreted a number of ways. But I think it's pretty clear, based on "downspacing from 320-acre well spacing," that analysts have already factored in 320-acre spacing for the middle Bakken and the first bench of the Three Forks.

I think regular readers of the blog have felt we've "always been there" -- at 320-acre spacing for both the middle Bakken and the first bench. I assume the analysts mean two middle Bakken wells/section and two TF-1 wells/section or eight wells per the standard 1280-acre spacing unit in the Bakken. If so, yes, we've been there for quite some time. (In fact, I already have a tag, "320_Acre_Spacing." See tags associated with this post for similar tags and similar posts.)

The analyst's do not specify "good" Bakken from "better" or "best" Bakken. This seems to imply an average across the basin. In some areas we are well beyond 8 wells in one standard 1280-acre drilling unit. In fact, if we can drill along section lines (in an overlapping 2560-acre unit, for example), the better and the best Bakken should easily be able to support six MB and six TF-1 wells in a 1280-acre unit. With 660-ft spacing, it's more than that.

Just idle chatter. Don't quote me on this. Keep it a secret.

At FAQs, question #2 (FAQs are not always updated; FAQs have opinions and facts are interspersed and I don't necessarily point that out):
2. How many wells will "they" drill in a section? How many wells in all in the North Dakota Bakken? It is estimated that up to 50,000 wells will be needed for the Bakken Pool. -- current as of May, 2013. The number of wells per section continues to increase. Goldman Sachs has a graphic, 2016, suggesting 320-acre downspacing is the norm in MB and TF-1. Back in August, 2012, the NDIC dockets suggest there would be up to 16 wells in a 1280-acre spacing unit in the "core" Bakken. In the June, 2013, dockets, the "norm" for 1280-acre spacing units seems to be increasing to 10 wells but CLR is moving toward 17, 24, or more wells per spacing units. In late 2013, CLR had pilot projects for 34 wells in a drilling unit of 1280 acres (two sections). And:
In a January, 2013, presentation, the Director, NDIC, suggested that it may take as many as 48 wells/spacing unit to drill out some areas of the best Bakken. At the time he said that, most spacing units were two sections. Therefore, Lynn Helms was suggesting as many as 24 wells/section in the best part of the Bakken which includes productive formations from the middle Bakken through ALL lower benches of the Three Forks.

China To Be #2 In Shale Gas Production By 2040; Apparenlty Canada, Argentina Will Be #3, #4

Data points for shale natural gas from Rigzone: China will be world's 2nd largest shale gas producer by 2040.

So, let's see the numbers. Some data points:
  • world's natural gas production is set to grow 62% by 2040
  • world's natural gas production will grow from about 350 bcf/d to about 550 bcf/d by 2040
  • shale gas resources will be the largest component of this increase
  • global shale gas production is projected to increase from about 40 bcf/d in 2015 to about 170 bcf/d by 2040
  • shale gas production will account for about 30% of global production by 2040
  • the US will remain the top shale gas producer
  • 2015: shale gas accounted for about 50% of US natural gas production
  • 2040: US shale gas will more than double from about 40 bcf/d to about 80 bcf/d 
  • 2040: US shale gas will account for 70% of total US natural gas production (currently about 50%)
  • 2040: China -- shale gas would account for about 40% of its total natural gas production
  • 2015: China has drilled 600 natural gas wells in the last five (5) years
  • 2015: China, producing 0.5 bcf/d of shale gas 
  • 2040, shale gas:
  • 2015, shale gas:
    • US: 40 bcf/d
    • Canada: 4 bcf/d
    • China: 0.5 bcf/d
    • Argentina: 0.07 bcf/d
The Art Page

I've often said that if I had all the money in the world, I would move to Boston, or the North Shore, or to the tip of Cape Cod. Maybe not year-round, but I would certainly have a house there. I miss some of the winters.

I also miss the art.

Today, The WSJ has a great review of a current exhibit at the Peabody Essex Museum in Salem, MA. We visited often. We had a membership. We loved it.

Today's review is on American Impressionism: Childe Hassam and the Isles of Shoals.
Six miles off the Atlantic coastline, where New Hampshire abuts Maine, is the archipelago known as the Isles of Shoals. The largest of its nine landmasses is Maine’s Appledore Island—95 weather-beaten acres of rocky coves, tidal pools and knobby shrubbery, all anchored by nature-cleaved mounds of white-and-gray granite. From 1848 to 1914, its western shores were the site of Appledore House, a grand, rambling hotel owned and operated by the family of the poet, artist and naturalist Celia Thaxter (1835-1894).
Thaxter, Appledore’s resident cultural luminary, lived in an adjacent cottage. Vacationers craned to spy, through Thaxter’s vine-cloaked, wraparound porch, the celebrities at her summer soirĂ©es, including writers Nathaniel Hawthorne and Ralph Waldo Emerson and painters William Morris Hunt and Frederick Childe Hassam.
But like the artists who frequented Appledore, resort guests were probably more transfixed by the views from their own porches: surf driving against rocky shores; active, New England skies; the surrounding smaller islands and distant, hazy mainland horizon; glorious sunsets.
These sweeping vistas entranced Hassam (1859-1935), who nearly every summer visited and painted Appledore between 1886 and 1916. And those pictures are the subject of “American Impressionist: Childe Hassam and the Isles of Shoals,” a handsome exhibition of more than 40 marine oils and watercolors at Salem’s Peabody Essex Museum. Curated at PEM by Austen Barron Bailly, the museum’s curator of American art, the show was co-organized with the North Carolina Museum of Art in cooperation with the Shoals Marine Laboratory.
Hmmm. Some days, life seems too short. Some days, too long. Today life seems too short. If I did not have Sophia to care for, I would be on my way to Salem, MA.

A Note To The Granddaughters
Follow Your Passion

I guess it was last night, driving home from dropping off Sophia from a trip to the grocery store, I thought about the incredible experiences I had at Los Angele County hospital many decades ago. I saw cases on a daily basis that I would never see again, and at the time, did not think much about them. I did not have anything with which to put them into perspective.

I saw the results of the Los Angeles knife and gun club in the emergency room on Saturday nights. I saw newly diagnosed diabetics in keto-acidotic comas that my professor thought hum-drum. I saw one active case of tetanus, something I bet 99% of US physicians have never seen, much less treated. With the immigrants coming up from Mexico I saw infectious diseases that 95% of US physicians have probably never seen. I remember participating with paramedics with the Los Angeles Fire Department, racing to a "man down" call when the truck would slow down. I asked why we were slowing: "there is still active shooting. We want to arrive AFTER the police arrive." Oh.

I made diagnoses of appendicitis but they would not be operated on until hours later -- often after rupture -- because surgeons and operation units tied up with life-and-death motorcycle accidents and the aforementioned knife and gun club casualties.

I was the only non-nurse attendant in more than one delivery. As a student, I was the lone medical attendant with a woman who delivered her baby in the car in the parking lot. I was walking to my dermatology rotation. My preceptor, a male, wanted to date me. I declined.

In one 24-hour period I saw more "new" cases than I would see in a year some years later while serving with the US Air Force, but then the Air Force had its own rewards and challenges, very unlike USC-LAC, but just as compelling. I love that word, "compelling." It fits so often when I can't find the word I'm looking for. 

Before I married, I often thought I would have loved to remain at LAC-USC, living in the hospital or in an RV outside, just for the energy the environment gave off. Excitement was/is the wrong word. I think television medical shows changed remarkably, and for the worse, when they switched from an "individual" focus to an "ensemble" focus. I do not care for "Marcus Welby, MD," what little I remember of that show. For some reason, I have fond memories of "Dr Kildare" although I don't remember a single episode, and honestly don't remember if I ever watched more than a handful. Back in 1966, when it premiered, I would have been 15 and way too busy to watch much television.

After 1967, the only television I watched was what came on between 10:30 p.m. and when the local network signed off for the night, about 12:00 midnight or 1:00 a.m., I suppose.

#PinalCountyMatters -- August 18, 2016

You might see this on Jeopardy this week or next week:

The category: ObamaCare.

The answer: Pinal County, Arizona.

The question: What is (and always start your "answer" with a "what is") the first US county to be offered absolutely no insurance coverage under ObamaCare?

Pinal County: Pinal County is a county located in the central part of the U.S. state of Arizona. It is immediately south and southeast of Phoenix and Scottsdale. As of the 2010 census, the population was 375,770, making it the third-most populous county in Arizona. The county seat is Florence.

From 12NewsNBC:
PINAL COUNTY, Ariz. - Pinal County could become the first county in the United States to lose Affordable Care Act coverage after Aetna's announcement that it's pulling out of Arizona.
Aetna's withdrawal follows the exit of UnitedHealthcare and Humana from Arizona. Blue Cross Blue Shield of Arizona and Health Net announced in June they would end coverage in Maricopa and Pinal counties.
The mass exit by the health insurers, all citing financial losses, will force tens of thousands of Arizonans to look for new coverage next year from a dwindling pool of providers. Several rural counties have just one health insurance option on the Obamacare marketplace next year.
Maricopa County is a county located in the south-central part of the U.S. state of Arizona, and encompasses Phoenix, Scottsdale, and Mesa. As of the 2010 census, its population was 3,817,117, making it the most populous county in the state, and the fourth-most populous in the United States.

The tea leaves suggest we have reached a tipping point regarding ObamaCare. I now track these stories at a link at the sidebar at the right.

The next question: snowbirds from North Dakota with BC/BS, are they covered by their insurance when in Phoenix for six-to-nine months every year? 

CLR To Sell 80,000 Non-Core Assets In The Bakken -- August 18, 2016


August 23, 2016: it appears the Rainbow Project is included in the CLR sale.
August 21, 2016: A reader asks a very interesting question, see first comment at this post:
How do I find out if the Rainbow Project was sold by Continental resources in this last sale of 80,000 acres for $222 million.
The Rainbow Project was mentioned at the blog at this link:

There was also a note on the Rainbow Project at this link:

According to Business Wire, The Rainbow Project is located in Sections 17, 18, 19 and 20 in T158N R98W.

Personal comment: if this is the area under discussion, it certainly seems like an area that CLR might sell.
Perhaps a reader might have an answer. Unless one has "inside information" or "unique access" to the buyer or seller, my hunch is that the answer to the question will be somewhat difficult to find in the short run. Within a few weeks, we should start seeing transfer of wells from CLR to another operator. 

Original Post 

CLR to sell 80,000 net mineral acres in the Bakken for $222 million About $2,750/acre. Enough cash to complete 70 wells. Each completed well will produce at least 100,000 bbls in first six months. At $30/bbl, about $210 million at the wellhead. My own back-of-the-envelope calculations. Others will have different numbers. Because there's only a gazillion different assumptions and methods to do the calculations.

Active rigs:

Active Rigs3374193183199

RBN Energy: new crude oil pipeline from hubs to refineries. Another nice data point: even short inter-state pipelines can cost upwards of $2 million / mile.
In recent years, Valero has invested more than $200 million on changes that allow the Home of the Blues refinery (our nickname for it, not Valero’s) to process more light sweet oils like those readily available from Cushing, the “pipeline crossroads of the world” and the planet’s largest crude oil storage and distribution hub. 
The Valero refinery currently gets the majority of its crude from the St. James, LA hub via Capline, a 1.2-MMb/d (but lately very underutilized) pipeline that moves crude north from St. James to Patoka, IL; crude bound for Memphis hops off Capline in Collierville, TN, then flows west on Valero’s 52-mile, 210-Mb/d Collierville Pipeline. 
The question for Valero became, why source crude from St. James (a smaller hub that receives heavier Gulf of Mexico and imported crude, as well as lighter oil –– by rail –– from North Dakota) when you could access the much larger, more liquid hub at Cushing –– and the wider variety of lower-cost light crudes available there? 
As we said in our first look at Diamond two years ago, to take advantage of what for a while were big discounts for Bakken crude, Valero was moving significant volumes of North Dakota oil by rail to St. James, and from there via Capline and Collierville to Memphis, a round-about and (as Bakken differentials to Louisiana Light Sweet withered away) increasingly expensive delivery approach (then estimated at more than $15/bbl  from Bakken to St. James to Memphis). 
This Diamond is no zirconium –– that is, it’s not cheap (an estimated $900 million). But when it finally comes online (in late 2017, a year later than originally scheduled due to permitting delays), the pipeline will enable Valero to receive Bakken, Denver-Julesburg, Permian, Anadarko and other light crudes from the Cushing hub for far less per barrel.
Nigeria: A Loss Of 750,000 BOPD; Highest Since 2009

From the EIA today:
Crude oil production disruptions in Nigeria reached 750,000 barrels per day (b/d) in May 2016, the highest level since at least January 2009. The increased disruptions come as militants continue to focus attacks on oil and natural gas infrastructure in the West African region. Nigeria is a member of the Organization of the Petroleum Exporting Countries (OPEC) and was Africa's largest oil producer until Angola's oil production surpassed Nigeria's earlier this year. --- EIA

Jobs: jobless claims at 262,000 vs 265,0000. That's a decrease of 4,000 from previous week
Claims have now been below 300,000, a threshold associated with a strong labor market, for 76 straight weeks. That is the longest such stretch since 1973, when the labor market was much smaller. 
You have to scroll well down into the article to see this buried near the end: "The four-week moving average increased 7,750 between the July and August survey periods, suggesting another month of strong job gains."

In Massachusetts, it was reported today that the unemployment rate has dropped to 4.1% -- the lowest in 15 years. There are some good things happening out there. 

For Newbies -- A Reminder

For some great graphics of the Bakken, see Mike Filloon's most recent contribution at SeekingAlpha.

The Market

I see that SolarCity is restructuring Cutting CEO pay to $1 is a stunt; even Steve Jobs understood how that could be turned into a great deal.

Closing: it looks like the market will finish fairly flat, up about 8 points, but that's better than being down 8 points. NYSE:
  • new highs: 162, a huge increase from the opening; add EOG (a huge whoop); ONEOK (a huge whoop); Tenaris (wow); and, yes, XLNX did trade at a new high; but it's not on the NYSE (I forgot, that's why I had not seen it among the new highs)
  • new lows: 8

Mid-day trading: the Dow 30 has turned negative, down 24 points. NYSE:
  • new highs: 140, a huge increase from the opening; add Schlumberger (a huge whoop);
  • new lows: 5; add Ruby Tuesday
Opening: Futures indicated a "down" market, but in fact, the market is up a bit on the opening. Up about 11 points at 10:00 a.m. Central Time.  NYSE:
  • new highs: 66, including -- BRKB (a big whoop); CLR (wow); Enerplus (another wow); WPX (a big whoop); XLNX for some reason is not listed -- it is clearly trading at its 52-week high, though it may have hit this number before; it's all-time high (excluding the bubble back in 2000 - 2001) was around $53.84; currently at $52.63.
  • new lows: 2 

It's interesting to follow Wal-Mart over the years. If there is one thing they seem to have done well is minimize stepping in their own poop over "politically-correct" issues. In the "politically-correct" issues -- like minimum wages -- they've managed those minefields with finesse. (I know no one agrees with me; that's fine.)

What makes me think about this is Target. Among all the big-box stores they seemed to have stepped in it repeatedly.

It began with their response to the credit card breach back in 2013. It could have happened to any other retailer (but it didn't; not in the same sense, coming after Black Friday; by a retailer that seemed least likely to have such a breach) but what made it worse, was the way Target handled it.

Now, we have the self-imposed PR disaster regarding their bathrooms. How in the world does a big box store get more stories written about their bathrooms than their earnings? Remember the brouhaha over Wal-Mart announcing several store closures and then said it had to do with substandard plumbing in their bathrooms. That story had no legs; it did not last. But the Target story continues.

Today, the first headline: Target will install single stall bathrooms in all their stores. That sounds pretty good.

But then this headline, over the The Christian Science Monitor: Target to expand single-stall restrooms without budging on bathroom policy. Of course, now that they've gotten themselves into this situation, it's not easy to get out. Target now has a third option: a private bathroom for those who feel uncomfortable using the traditional bathroom facilities.

Interestingly, most Target stores already had private bathrooms: 1,797 stores. This new initiative only affects 297 stores, and the headlines continue.

It seems they would have been better off putting in private bathrooms in those 207 stores and making no public announcement. I doubt most folks choose their big box store based on corporate bathroom policies. Except when the headlines start appearing.

On another note, WMT earnings were out today and they were stellar.