Monday, January 2, 2017

Flashback -- Not So Long Ago -- January 3, 2017

Screenshot from four months ago:

Poor Little Fool -- Nothing About The Bakken -- January 2, 2017

If you came here for the Bakken, scroll down or go tot he sidebar at the left. 

Washington Post will report Tuesday that Russians did not hack Vermont utility. Hillary, Obama, DNC, are being played for fools.

Poor Little Fool, Ricky Nelson

Seventeen US intelligence agencies were apparently aware of Russians hacking the election, at least according to Hillary, but not one of the seventeen agencies ever told Hillary.

Meanwhile, I'm watching Tinker, Tailor, Soldier, Spy for the 150th time. It helps put things into perspective. I quit watching the Rose Bowl early in the 3rd quarter, I was so irritated with USC (my alma mater was USC), and then I learn a) it was the greatest Rose Bowl ever; and, b) USC won. I'm still glad I quit watching: I would not have been able to handle the tension.

On another note, I hear that:
  • Grand Forks, ND, is -34 degrees;
  • the entire state of North Dakota is snowed in;
  • snow fall records have fallen and it's only two days into the new year; and,
  • unlikely snow fall records this year will ever be broken.
Weather folks telling us to expect 6 -12 inches of snow in the south:
The latest GFS model forecast total snowfall by midday Sunday shows the possibility of 6-12 inch snowfalls across portions of about ten southern states, including Oklahoma, Missouri, Arkansas, Tennessee, Mississippi, Alabama, Georgia, the Carolinas, and Virginia. 
I'm glad we're spending all this money fighting global warming.

And on another note, apparently customs computers are "down" and airline traffic has turned into a real mess (and this is over at CNN).  The question I have: with the Obama administration and John Kerry, specifically, advocating "open borders" why do we even have customs and passport control any more?

Reader Looks For Assistance; Note Issue Here; Can Be Worked Anonymously At Discussion Group If Interested -- January 2, 2017

From a reader over at the discussion group:
Our lease says we are to be paid at the well head with no deductions for transportation.  And for a year that was the case. But when oil prices dropped the oil company started deductions about 20%.  I am interested if others are having this happen and if there are any class actions.  We have talked to an attorney, but hasn't been very effective.
I'll post the note here and over at the Discussion Group, but it's been my experience that we won't get much response. This issue has come up a couple of times before, most "famously" with Chesapeake many, many years ago. 

Futures Don't Mean Squat, But Consumer Confidence At 15-Year High; EU News Better Than Expected -- January 2, 2017

Disclaimer: this is  not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have read here. This is also not a dance site, but having said that, I'm a strong "believer" in Zumba.

Futures mean squat, but I don't recall seeing futures like this in my investing lifetime (of course, I have seldom looked):

California Dreamin', Sia

Global Warming HIts The Bakken, Bismarck, And DAPL; All-Time Snow Record Falls -- January 2, 2016


Later, 8:51 p.m. Central Time: two days into January and snowfall records have all been broken; these numbers are so huge, the snowfall records in North Dakota will never be broken again. And I hear it's -34 degrees in Grand Forks right now. I'm sure glad we're spending all that money fighting global warming. Wow, what a waste. 

Original Post
We'll post the snowfall finals later. The snow is still falling.

BNSF snowed in two miles west of Lemmon, SD.

Definition of A Fly-Over State
Completely Snowed In
Global Warming 101

It's rare to see an entire state shut down due to snow, especially in an era of global warming. For legend, this site:

Trump's Cabinet

On another note: new front-runner for Secretary of Agriculture -- former Georgia Gov. Sonny Perdue declined to confirm or deny reports Monday that he's now the leading candidate to serve as Donald Trump's agriculture secretary. I track the "cabinet" here.

Oasis To Report A Nice Well Tuesday -- January 2, 2017

Tuesday, January 3, 2016
  • 31333, 247 (no typo), Oasis, Johnsrud 5198 12-18 10T, Siverston, TF Bench 1, 36 stages, 4.1 million lbs, t7/16; cum 103K 11/16;
  • 32470, 328, Crescent Point Energy, CPEUSC Suitor 2-13-24-158N-101W, Little Muddy, t11/16; cum 2K 11/16;
  • 32682, 1,143 Hess, HA-Link-152-95-3526H-7, Hawkeye, 50 stages, 3.5 million lbs, t12/16; cum 10K over first 8 days;
Monday, January 2, 2016
  • None
Sunday, January 1, 2016
  • 32391, 1,059, Liberty Resources, Anderson 156-97-4-9-2MBH, Ray, 33 stages; 5.9 million lbs, t7/16; cum 75K 11/16;
Saturday, December 31, 2016
  • None.

32391, see above, Liberty Resources, Anderson 156-97-4-9-2MBH, Ray:

DateOil RunsMCF Sold

31333, see above, Oasis, Johnsrud 5198 12-18 10T, Siverston:

DateOil RunsMCF Sold

Back To Where It All Began -- The Bakken, EOG, And Parshall Oil Field -- January 1, 2017

Over the last couple of days I have been highlighting several EOG wells for various reasons. One thing I failed to notice, until today, is how close those wells are to the very first wells that EOG drilled in the Bakken that led to the boom starting the following year.

In the graphic below the production profile, the "discovery wells" are eight (8) miles southeast of recent EOG activity using significantly more sand and more stages to frack newer wells. Also, note again how far east these wells are. 

The two EOG wells that started it all:
  • 16164, 463, EOG, Parshall 1-36H, "Bakken SS", 640-acre spacing; TD = 11,325; TD, 5/13/06; frack completed November 5, 2006; 4 stages; 238,620 lbs sand; t6/06; cum 220K 11/16;
  • 16324, 883, EOG, Parshall 2-36H, "Bakken SS", 640-acre spacing, TD = 12,111, TVD = 9292; TD, on 9/13/06; perforated/fracked/completed March 26, 2007; t9/06; cum 360K 11/16;

16324, first year production profile (reminder: ceased drilling September, 2006; perfed/fracked/completed March, 2007):


Scorecard -- Top Ten Predictions For 2016 (Last Year) -- RBN Energy -- January 2, 2017

Natural gas: Arctic blast, huge draw, and prices falling. What gives? Richard Zeits over at SeekingAlpha

RBN EnergyRBN Energy takes a look at its 2016 "prognostications" and evaluates how well they did.

Active rigs:

Active Rigs3960171183183

For those interested in the Bakken, nothing that follows has anything to do with the Bakken. 

I think it's time for waffles. And another pajama day here in north Texas. Cold, wet, dark, loud.

By the way, speaking of waffles, we were introduced to the Waffle House phenomenon when we returned to the United States following a 13-year tour of Europe and Asia, courtesy of the United States Air Force.

We thought moving back to the states after being gone for thirteen years was going to be a shock. We had lost a decade of US "culture." I am still catching up to all the music that hit the charts from 1984 to 1997. But our return was less than a shock than it could have been. Our first stateside assignment after two years in Turkey was Alabama. Our teenage daughters (and my wife, for that matter) noted a lot of similarities between Turkey (the country) and Alabama (one of the 57 states).

Our biggest shock, and I think that's the correct word, was Waffle House. If you northerners have not had the chance to experience the Waffle House experience you are in for quite a treat. Even the Coen brothers were taken aback by the experience (video clip not shown due to language).

Waffle House is ubiquitous in the Deep South, but not as many here in north Texas. I am aware of two (and I assume there are many, many more). One is north of Ft Worth, near the Texas Motor Speedway (which seems fitting). The other, I keep forgetting, except I noted it yesterday when bicycling, is just down the hill from our nearby Wal-Mart.

Speaking of Wal-Mart. A lot of folks, me included, have problems with some  refugees coming to America wearing their native dress, suggesting there is little interest by some to become part of the American culture (which might be understandable). After seeing some of the body shapes and "un-dress" in Wal-Mart, I'm beginning to think the US would be well served if a certain segment of the population would start wearing the abaya. Just saying.

Too Big To Merge

Although the Washington Post slanted the story a different way, the fact is the merger between Blockbuster video and Hollywood Video was nixed by acknowledgement that the US government would probably not allow it based on anti-competition (monopoly) grounds.

I was always quite surprised that Cabela's thought it could buy Bass Pro Shops. Can anyone name any other national hunting and fishing mega-retail that can possibly come close to what Cabela's or Bass Pro Shops offer?

It turns out the FTC is taking a "second look."

Last "Man" Standing

I sent this in an e-mail to a reader, with some slight editing. It's not ready for prime time, but I want to post it before I forget it:
It looks like the GOP House is serious about ObamaCare being first thing on their agenda.

It will be fascinating to watch. If they can kill it, regardless of what health insurance looks like in is place, the ONLY thing that Obama has for a legacy is gone. The textbooks will NOT have one PROGRAM that they can point to that Obama accomplished in his administration (that lasted).

I still think the GOP runs huge risks on this, but if they get this behind them within the first six months, the public might forget, but if this drags on and whatever replaces it is even worse, the media will have a field day. As it is, the media is going to be all over this.

The good news: I don't think anyone with any money or power supports ObamaCare. The health care industry does not support it; neither Trump nor 50%-plus of Congress supports it, and I doubt Schumer wants to stake his career on an Obama program. Pelosi may be the last "man" standing.

The Political Page -- January 2, 2016

It wouldn't be "themilliondollarway" blog without a political page. So, let's begin. First a song; this is the second of twenty songs that will be played continuously in our apartment unit until January 20, 2017. The first was at this post yesterday. Today:

The Washington Post is said to have retracted a story about the Russians hacking into the US national electric grid through a Vermont utility. In fact, The WaPo has not exactly retracted the story, but it has posted a huge correction, saying they lied. Okay, they did not use that exact word, but it is what it is.

They had the facts but "inflated" the story. Maybe it was just a "white" lie as they used to say. The headline remains "Russian operation hacked a Vermont utility" which, is of course, wrong on several levels. Now the "editor's note":
Editor’s Note: An earlier version of this story incorrectly said that Russian hackers had penetrated the U.S. electric grid. Authorities say there is no indication of that so far. The computer at Burlington Electric that was hacked was not attached to the grid. 
Again, there is no proof this came from "the Russians" -- whoever they may be. It was "off-the-shelf-malware" said to originate in Russia.

Fox News has rightly noted that when the Chinese stole over a million US government documents two years ago through hacking, the Obama administration did not even issue a press release. The government did offer credit monitoring for its former and current employees.

I am one of those folks who has that free credit monitoring. Whoopee.

It is correct to say that the expulsion of 35 Russian spies was unprecedented in modern history.

With regard to the Russian hacking story, the funniest part of the story is this: Hillary says seventeen (17) US intelligence agencies said the Russians were hacking into the DNC, and apparently told Hillary or the DNC until it was too late. I do know that the Russians were using subliminal techniques to tell Hillary not to campaign in Wisconsin based on how that turned out. Ouch.

 Tomorrow, we will have the third of 20 songs that are being played in our apartment unit continuously for the next 20 days.

Quatum Theory

Looking back on the Obama presidency, trying to explain it, is very much like quantum theory.

Take Valery Jarret's analysis of the Obama presidency ("it's been scandal-free"), like quantum theory, if it is not covered by the media it does not exist. Quantum theory says the same thing about particles: if they are not observed/measured/detected, they do not exist.

And just like quantum theory, Obama's actions and reactions cannot be explained.

DAPL Forecast Top Story; Global Warming Bringing Record Snow, Severe Cold -- January 2, 2017

I was awoken by a huge thunderstorm here in northern Texas. The thunder was severe enough to shake our apartment unit, but, surprisingly, I have not yet loss internet connection. That generally happens in thunderstorms of this magnitude. I'm keeping my fingers crossed that we don't lose internet -- that's just a figure of speech. Obviously if I had my fingers crossed, I wouldn't be able to blog.

But I digress.

Because the thunderstorm awoke me I turned on television to see what was going on. CNBC had some banal "documentary" -- the market is closed. I surfed through MSNBC "Morning Joe" on the way to the weather channel. Top story was the severe winter weather in Bismarck and Glen Ullin.

I guessed it's called Winter Storm Gregory. The last named storm of which I was aware was Winter Storm Decima. This is the storm that will last for a couple of days, apparently, and will drop a lot of snow on "the Dakotas and Minnesota." A lot of winter snowfall records are going to be broken over the next few days. In addition to snow, it's going to be very, very cold.

By the way, while blogging this, the Weather Channel has been showing a number of videos of snowfall in Bismarck, ND.

When I was growing up in Williston, we never got much snow (except in the late 1950's); we used to say it was too cold to snow. Apparently with global warming we now get both: severe cold and huge snowstorms.

This link will show you how severe the temperatures are right now (I'm not sure if this is a dynamic link or not).

The second big story was the huge thunderstorm hitting the DFW area. It's a pretty remarkable storm, even by Texas standards.

How Oil Companies Survived Two Death-Star Events -- January 2, 2017

You've seen much of this page before. There were a number of essays that the graph generated. The third essay was never written because I did not know what I was going to write or how I was going to tell the story how remarkable it was that oil companies survived the two incredible collapses in the price of oil. The graph below suggests that those events were unprecedented.

One "crash" in the price of oil was attributed to the global recession, market meltdown, and financial crisis of 2008 - 2009. The other "crash" was attributed to Saudi Arabia's trillion-dollar mistake to announce that it would no longer cut production to maintain crude oil prices.

In the big scheme of things I was amazed how well the oil sector managed. I wanted to write about that but I was unable to articulate what I was thinking.

Fortunately, The Wall Street Journal has posted a story that explains how the oil companies survived, and how they are now reaping benefits of their actions.
Oil-and-gas companies that sold shares to raise cash during a vicious collapse in the price of crude finished on top in 2016, rewarded when U.S. oil prices finally turned and closed the year 45% higher.

More than 70 North American energy companies sold about $57 billion worth of shares in so-called follow-on stock offerings during the past two years. Many of these shares spent stretches trading below their offering prices, hurting investors who wagered on companies that failed to find footing as well as those who sold out before shares rebounded. A handful of the stock sellers went bankrupt as the price of oil fell by more than half.

But most survived, defying widespread predictions that the plunge in crude and high levels of debt would force many more producers out of business.
It's a great article that should generate a lot of discussion in business schools and corporate boardrooms.

Source: EIA.

Original Post

First Essay 

Looking at the far right side of the graph, three lines, A, B, and C. Essentially those are the three possibilities for 2017:
A) price of oil creeps up, trending toward $75/bbl by the end of the year
B) price of oil remains at present level, $53 +/- $5 per bbl
C) price of oil trends down, toward $40 but not much lower
Likelihood, my opinion:
A) 20% chance
B) 75% likelihood
C) 5% chance
A) if the price of oil trends toward but without going over $75: huge win for almost anyone involved in production of oil, including passive investors; consumers see more expensive gasoline but probably not enough to send economy into recession, but nonetheless, painful
B) win-win for everyone, US producers and global consumers; at $50 - $55 barely adequate for Russia, Saudi Arabia, but better than C)
C) not good for anyone, except consumers, but particularly ominous for Saudi Arabia, Russia
Saudi Arabia and Russia would almost be forced to do "anything" to prevent C). Because oil at less than $40 becomes an existential issue for Saudi Arabia, my hunch is that Saudi Arabia would probably do almost anything to keep the price of oil from trending down again.

Second Essay: Opportunity

The run-up in price the price of oil between 2007 and 2009 (just before the "crash") was critical for the Bakken to boom. Had this run-up not occurred, one can argue the Bakken boom would not have occurred; it most likely would have been significantly delay.
The second opportunity came during the sustained increase in the price of oil after the "crash", from 2009 to 2014. Again, had this price increase not occurred, it's unlikely the Bakken boom would have been sustained.
If folks remember: it was incredibly expensive to explore, drill, frack, obtain leases, put in the roads, put in the pads, obtain the sand, etc., etc., in the early days of the boom. At $50-oil this boom could not have occurred.
Now, in 2016, going into 2017:
  • upfront leases -- incredibly expensive -- are a thing of the past
  • oilfield services are so much less expensive
  • sand is easily obtained, and much less expensive
  • operators using more sand (cheap) and less ceramic (expensive)
  • roads, pads, pipelines, rail -- the infrastructure is all in place (yes, more will be added, but hardly "needed"; and whatever infrastructure is added/"needed" pales in comparison to the story in 2007
  • wells were much less productive in the early days
  • wells costs have come way, way down (less then half?) and production has increased immensely in the first 90 days, and the first full year
  • EURs have gone from 350,000 boe to 1.5 million boe
  • pad drilling, DUCs, permits-in-hand, walking rigs, more effective rigs, better completion techniques now in place
  • work force incredibly experienced; based on accuracy of drilling; speed of drilling
  • geologists understand the Bakken; just before the 2014 crash, the middle Bakken was pretty much all mapped out but the Three Forks first bench hardly explored (by comparison); second, third, and fourth benches hardly explored at all -- handful of deeper wells in the Bakken pool
$100-oil was needed to light the Bakken boom.

Later, thoughts about the slump in the price of oil in 2008 - 2009; and in 2014 - 2016. [Update: that essay is at the top of this post.]