Wednesday, August 24, 2016

Creative Bookkeeping -- DUCs -- August 24, 2016

Watch it again:

Telstar, The Tornados


August 25, 2016: this is another perspective regarding CLR from a contributor over at SeekingAlpha who is shorting CLR. Among many reasons he cites for shorting the stock is this one:
The U.S. has agreed, along with Canada and Mexico, to generate half of its electricity from renewable sources by 2025.  
It is incredibly important to note that this "renewable" energy includes hydroelectric power and nuclear power.

September 6, 2016: on August 25, 2016, CLR was trading for $48.83. Today, CLR is trading for $50.41. CRL did get down to $47.72 on September 1, 2016, but when one bases his "short" on policies mandating electricity from renewable sources by 2025, one assumes he is shorting CLR for the long term. We will continue to monitor. The screen name for the SA contributor is "Esekla" who describes himself as a contrarian with an interest in tech, but nothing about oil. Again, this is the original link

Original Post
I love "the business of business."

CLR is, I think, doing something interesting. Obviously all the operators are doing this but CLR puts it right there out in front of you. Some may think it's creative financing. I think its simply "creative."

I'm looking at this from the viewpoint of the shareholders (including the directors of the companies).

This has to do with DUCs.

Regardless of how the company is doing -- good, bad, or indifferent -- a company with DUCs has already sunk money into those wells. If those wells were drilled a few months ago, they are history. The capital required to drill those wells was factored into an earlier financial quarter.

So, those DUCs are simply sitting there. What it cost to drill those wells is now history, part of a previous quarter, and perhaps part of an earlier fiscal year.

So, CLR starts "from scratch." Instead of suggesting these wells cost $6.2 million, CLR simply states that these wells have an "incremental" cost of $3.6 million (or whatever it costs to frack/complete the well).

It's not quite "accurate," but with creative financing, one can almost say CLR is going to "bring in" scores of Bakken wells with EURs of 900,000 boe (mostly oil) for about $3 million / well.

That may be why CLR is up more than 160% in the past year, or whatever it is.

Note: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here. If this is important to you go to the source.

By the way, healthcare insurers do the same thing. If they get a bill in March of any given year, it behooves them to simply "deny it" and request the hospital, physician, or "patient" resubmit. By the time the claim is resubmitted, the healthcare insurer has managed to move the claim, or the expense, into the next quarter. Sure, it all eventually catches up with them, but when earnings are reported on a quarterly basis, anything that can be done to push expenses into the next quarter seems like something a company might want to do. In some cases, the healthcare insurer comes out even better than expected: some claims may not be resubmitted. 

Eighteen Permits Renewed; Four New Permits -- August 24, 2016

Active rigs:

Active Rigs3274192183188

Wells coming off confidential list Thursday:
  • 31362, SI/NC, Statoil, Samson 29-32 6H, Banks, no production data,
  • 31597, SI/NC, XTO, Johnson 31X-6D, Siverston, no production data,
Four new permits:
  • Operator: Oasis
  • Field: Banks (McKenzie)
  • Comments:
Wow, another big mistake at a previous activity report. Remember those two Statoil wells reported as PNC? In fact, they were completed DUCs:
  • 29681, 2,078, Statoil, Richard 8-5 8TFH, Banks, t7/16; cum --
  • 29682, 2,166, Statoil, Richard 8-5 3TFH, Banks, t7/16; cum --
Eighteen permits renewed:
  • Hess (9): five LK-Hay Draw permits in Dunn County; four Jeffrey permits in Mountrail County
  • Whiting (5): three Evitt permits (Williams County) and two 3J Trust permits (Stark County) renewed
  • BR (4), two Boxcar permits, and two Audubon permits, all in Dunn County
Whiting canceled four permits: three Chameleon State (McKenzie County) and one Wolkenhauser (Burke County).

One producing well completed:
  • 29146, 457, Triangle Petroleum, J Garvin Jacobson 150-101-8-5-7H, Pronghorn, t8/16; cum -- 

Chameleon, Boy George

Another Bust For US Government Sale Of Gulf Of Mexico Leases -- August 24, 2016

I thought I had blogged about this earlier, but can't find it now. The results are now in, and it doesn't look good -- or it looks great -- depending on what side of the fence you stand on.

The AP is reporting:
The federal government says three companies are bidding on acreage in the Gulf of Mexico off Texas — and they've made a total of 24 bids on 24 tracts out of more than 4,000 offered.
That's even fewer than last year's sale, which was the smallest ever for the western Gulf.
Last year, five companies made $22.7 million in high bids — also one per tract, on 33 tracts.
The three companies bidding are BP Exploration and Production Inc., BHP Billiton Petroleum Inc., and Exxon Mobil Corp. BP bid on 13 tracts, BHP on nine tracts and Exxon Mobil bid on two.
Wow, lots of story lines there.

A Note For The Granddaughters
Annals of the Former World
John McPhee
c. 1998
DDS: 557.3 MCP 
Winner of the Pulitzer Prize

This is not an easy book to read. The paragraphs are way too long. Most pages have one, one-and-a-half, or two paragraphs. The writing is meandering. It is not tight. But, wow! Talk about an interesting look at geology in the 1980s and 1990s and how far we've come.

Plate tectonics was new; it was all the rage; and there were still detractors. The theory was not necessarily widely accepted. 

The table of contents and the index suggest there is only one full page devoted to shale oil, but what an incredible page. The author writes from Wyoming:
At all moments in the history of Lake Gosiute, it was replete with organic life, from the foul clouds of brine flies that obscured its salty flats to the twelve-foot crocodiles and forty-pound gars in the waters at their widest reach. For this was Wyoming in the Eocene, and the lake at varying times were ictalurid catfish, bowfins, dogfish, bony tongues, donkey faces, singrays, herring.

The American Museum of Natural History has a whole Gosiute trout perch in the act of swallowing a herring, recording in its violence two or three seconds from forty-six million years ago. In the museums' worldwide vertebrate collection, roughly one fossil in five comes from Wyoming, and a high percentage of those are from Gosiute and neighboring lakes. Around the shores were red roses and climbing ferns, hibiscus and soapberries, balloon vines, goldenrain. The trees would generally have been recognizable as well: pines, palms, redwoods, poplars, sycamores, cypresses, maples, willows, oaks. There were water striders, plant hoppers, snout beetles, crickets. The air was full of frigate birds. Dense beds of algae matted the shallows.

In all phases through the eight million years, quantities of organic material mixed with the accumulating sediments and (sic) are preserved with them today in the form of shale oil.

On the far side of the Uinta Mountains was another great lake, reaching from western Colorado well into Utah. Lake Uinta, as it has come to be called, and Lake Gosiute and several smaller lakes left in their shales a potential oil reserve estimated at about one and a half trillion barrels. This is the world's largest deposit of hydrocarbons. It is actually nine times the amount of crude oil under Saudi Arabia, and about ten times as much oil as has so far been pumped from American rock. 
Distinct in the long suite of cuts at Green River were the so-called mahogany ledges, where oil shale is particularly rich. They looked less like wood than like bluish-white slabs of thinly bedded slate.

Oil shale always weathers bluish white but is dark inside, and grainy like wood. The thinner the laminae, the higher the ratio of organic material. [This explains the Bakken.] The richest of the oleaginous flakes -- each representing the sedimentation of one year -- were fifteen-thousandths of a millimetre (sic) thick. [David] Love [of the USGS] dropped some hydrochloric acid on the rock, and the acid beaded up like an arching cat.

"It's actually kerogen," he said. "It converts to high-paraffin oil. It's not like Pennsylvania crude."

To mining engineers, oil shale had presented and as yet unsolved and completely unambiguous problem: how to remove the shale oil without destroying the face of the earth. So far, three principal methods had been considered.
None of the three mentioned sounded like hydraulic fracturing; and none of the three have been commercially successful.
The one-and-a-half-trillion-barrel estimate was somewhat extravagant, because it included every last drop -- referring, as it did, to all shale with any content of kerogen. In the richer rock -- in the shales that contained twenty-five to sixty-five gallons of oil per ton -- were nor more than six hundred billion barrels.

That would do. That was more petroleum in place than all the petroleum produced in the world to date. Love remarked that oil shale had been "trumpeted to the skies" but, with the energy crisis in perigee, both government and industry were losing interest and pulling out. Temporarily pulling out. Sooner or later, people were going to want that shale. 
The essays were written in 1981, 1983, 1986, and 1993.


From wiki:
The trivial (non-systematic) name for alkanes is paraffins. Together, alkanes are known as the paraffin series. Trivial names for compounds are usually historical artifacts. They were coined before the development of systematic names, and have been retained due to familiar usage in industry.
Cycloalkanes are also called naphthenes. It is almost certain that the term paraffin stems from the petrochemical industry. Branched-chain alkanes are called isoparaffins. The use of the term "paraffin" is a general term and often does not distinguish between pure compounds and mixtures of isomers, i.e., compounds with the same chemical formula, e.g., pentane and isopentane.

A Picture Of Me Without You, Lorrie Morgan

New WHS Opens Today -- Simply Spectacular -- August 24, 2016


August 26, 2016: from The Williston Wire, Watford City sets school enrollment record:
Ask any school administrator what they like to see when it comes to enrollment trends and the most common response is, "slow and steady."
And for Steve Holen, McKenzie County Public School District No. 1 superintendent, who has seen his district's enrollment nearly quadruple in the last six years, this year's record enrollment numbers are finally starting to reflect that slow and steady growth trend.
"On our second day of classes on Aug. 19, we had a record 1,448 students enrolled in the district's three schools," states Holen. "Last year at this time, we had 1,354 students, which was also a record at that time."
August 26, 2016: from The Williston Wire --
A new $70 million, technology-savvy, three-story Williston High School has opened its doors. Teachers moved into the 225,000 square-foot building sitting on almost 40 acres earlier this month, but the school's 1,200 students moved in this week to the 50 classrooms, designed with technology in mind.
The school was built as enrollment has climbed by about 40 percent in the past years with no let up is in sight, according to superintendent Michael Campbell.
He said early enrollment figures show there are 465 new students enrolled in grade K-12.
With 3,678 students last September, he said he expects the district to go over the 4,000 mark this fall.
"We might need another elementary school," Campbell said about the growing enrollment, which he said "is and isn't a surprise."
Original Post
Note: I'm sure the most asked question is the enrollment figures for the high school from 2013 on. The last figure I saw was for 2013: 960 high school students. If anyone has more current information, I'm sure readers would be interested.  But we have to compare apples and apples. I believe up until today ninth graders were not part of the high school. Today, ninth graders are. Update, see first comment: about 1,150. 

I hope to see this for myself, sometime in September.

From The Williston Herald:
Teachers moved into the 225,000 square-foot, three-story building earlier this month, but today is the big day, when the classrooms, designed with technology in mind, will be filled with students.
The modern building, with banks of glass windows, offers spectacular views, and not just to the outside. Everything — literally everything — is new, from the gymnasium to the field turf on the football field to the Coyote Cafe, featuring signs that tell students to “Relax” and “Enjoy.”
Paige O’Neill and Kailey Woodhams, both seniors, came in Tuesday to find their classrooms ahead of the first-day chaos.
Both girls had positive opinions on the new building, saying they liked the new, sleek look.
“I like how the desks are all the same; it makes the school look more pulled together and organized,” Woodhams said, adding that the size of the three-story structure will take some getting used to.
there are about 50 classrooms, along with various rooms where teachers can work or collaborate.
The school is divided into three main sections, one for the gym, one for art, music, theater and administration and one for the classrooms.
The one word that keeps popping up: "big."

Personal / Human Interest Story Out Of Williston, North Dakota -- A Teacher That Would Have Touched Many Williston Students -- August 24, 2016

From The Williston Herald:
A donation from the family of a beloved Williston music teacher will help pay for a piano and other needs for the Bakken Elementary band. 
Members of Kathleen Hovde’s family presented a $10,000 check to school administrators Monday morning at the school.
Hovde, 69, died on Memorial Day as a result of an ATV crash on her ranch near Epping.
She taught music for more than 40 years in northeast Montana and at Lewis and Clark and Wilkinson elementaries in Williston.
Hovde came out of retirement to teach at Rickard Elementary last year, and was planning on returning to the school this fall.
At 69 years of age. Good for her. A very sad, but truly touching story.


I Thought I Heard You Call My Name, Jessi Colter

Gasoline Glut On East Coast Persist; End Not In Sight -- RBN Energy -- August 24, 2016

Price of US oil falls 2% on "surprise" build in crude stocks. Now, why would that be a surprise? We've had almost daily reports that a) shale operators were going back into the oil patch; and, b) more rigs have been added each week over the past eight weeks. Or something like that. I don't recall the details. 

Boomtown USA's crew camps: shut down as of September 1, 2016. Let's see if the court lets this stand.

Starbucks: judge rules that Starbucks is not cheating customers by adding ice to drinks

Active rigs:

Active Rigs3174192183188

RBN Energy: gasoline glut on east coast; no end in sight.

Saudi Reserves

Just when Saudi thought things might be getting better.

As I've said for months, $40 oil will kill Saudi Arabia. They budget for $100 oil; they might be able to "swing it" on $80 oil (if they didn't have a Yemeni war to contend with; didn't have to provide domestic subsidies to keep peace in the tribes; and, if they didn't have to import everything they consume) but even $60 oil is not enough. The best they've seen recently is $50 oil and even that didn't last long.

So, how bad is it? June, 2016, was the sixth worst month in the last 30 months -- losing $11 billion from reserve assets.

From John Kemp yesterday:

The Market

Closing: down 70 points.
  • new highs: 101
  • new lows: 7
Mid-day trading: market down about 25 points. NYSE:
  • new highs: 74;
  • new lows: 5, including Noble Energy (NE)
Opening: futures were up slightly overnight, but the Dow 30  opens up 26 points down. T and XLNX are both up; SRE is down about 1%. NYSE:
  • new highs: 65; Best Buy;
  • new lows: 4