Saturday, February 18, 2017

The Way The New York Governor Thinks When It Comes To Energy -- February 18, 2017

Keep energy prices artificially high:
  • ban fracking
  • ban new pipelines
  • shut down nuclear reactors
  • ban coal
  • "cap-and-trade"
  • over-regulate the energy sector
Help the poor pay for artificially high-cost energy:
  • expand subsidies for the poor using other people's money
Article here.


Back of the envelope (all assumptions except for one or two data points; use your own numbers if you want):
  • population of NY state (2015): 20 million (wiki)
  • 20 million / 1.5 people per household (assumption)
  • 13 million households (calculator)
  • Assume: 35% of households do not pay state taxes (another assumption) (after posting this, I thought it would be fun to google this -- result at this link; but I learned something new: New York City has an income tax, also; no wonder none of the San Antonio Spurs want to play for the New York Knicks)
  • 0.65 x 13 = 9 million tax-paying households (calculator)
  • total program benefits: $260 million (linked article)
  • amounts to $30/year/household -- the upper income will pay a great share (calculator)
  • so, we're talking about $12/year for an "average" household to pay for this program (comment)
  • doesn't amount to a hill of beans and it keeps the folks with pitchforks off your doorstep (comment)

Don't You Just Love It! -- The Political Page, T+29 -- February 18, 2017

This was an ad that accompanied the story on President Trump's rally in Florida, February 18, 2017, as published in The [London] Daily Mail.

Lady In Red

Lady In Red, Chris DeBurgh

Insanely Great

From Dan Neil's weekly automotive review in The Wall Street Journal. This week: Ford F-350 - the country boy's Rolls-Royce. Link here.

Best part of the story:
And here, dear readers, I mean to make you uncomfortable, especially those who scream bloody murder over tax credits for electric vehicles. This category of truck qualifies for an insanely generous federal tax credit to small-business owners who claim its use is more than 50% business-related.
Which in no way explains why you see so many of these guys launching pleasure craft down at the marina. Boats didn’t all of a sudden get heavier, you know.
In the case of our test specimen, it is possible to deduct the entire $78,585 in the first year of ownership under the Section 179 deduction privilege rules. You don’t find that the least bit Keynesian? [Note: the "credit" is a tax deduction as the writer says, but by using the word "credit," he caused a lot of confusion.]
Next best part of the story: the range is almost 700 miles. Yup, almost 700 miles between fill-ups. But the 48 gallons of diesel fuel will cost you about $100, about 15 pennies a mile.

But isn't this insanely great: "... it is possible to deduct the entire $78,585 in the first year of ownership under the Section 179 deduction privilege rules?

The Pickup Truck Song, Jerry Jeff Walker

Whiting's Wells In The Bakken -- SeekingAlpha -- February 18, 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. In a long note like this there will be typographical and factual errors. My notes are taken from the linked article and may not reflect what the author of that article wrote or intended. I am posting this for my use; if this is important to you, I would recommend you skip this post and go to the linked article. 

I'll have to come back to this later; family activities today. This is not a "Filloon" article but it is very, very similar to what Filloon does, so I will tag it with "Filloon."

Over at SeekingAlpha: leave no well left behind. Archived.

  • Whiting's recent portfolio of mega frac wells in the Bakken is producing impressive results among wells with 3 to 12 months of production, tracking a 947 MBOE type curve
  • WLL's more recent larger fracs of 7 to 15 million lbs of sand are clearly enhancing the early track of MBOE, many of them tracking a 1,200-1,500 MBOE curve
  • Whiting's larger production numbers will stabilize the production drops from its portfolio of 1,500 wells and push the company to break even on a faster pace given NYMEX at $60/bbl
  • 750,000; 900,000; and 1.5 million boe EUR curves
  • the author's results line with up within 2% or better of the data Whiting presents
  • the curves assume a 30-year life-cycle for the wells
  • 85-90% of the oil / gas will be produced in the first 15 years
  • Whiting has a number of older wells near 10 years old now that are producing 1,500 to 2,000 bbl/month on a consistent basis
  • many of these older wells will be re-fracked or worked over to enhance their current track of 300 or 400 mboe EUR
  • most important, these wells prove that Bakken wells have a minimum 15-year life minimum; some analysts suggest Bakken wells will only last ten years
  • apparently controversy regarding Whiting's December, 2016, presentation was focused on the company's use of the 900 mboe type curve and more recently its use of a 1.5 million EUR ttyp cure
  • anyone who has followed the Bakken since 2007 knows these EURs are "believable"
Data :
  • data has been collected on wells since 2015 
  • what is clearly making a difference is doubling the amount of sand
  • operators doubling up on sand: Whiting, CLR, MRO, Oasis, Burlinton Resources (subsidiary of COP) and EOG
  • the whole industry is moving to the "mega-fracks"
Summary data points:
  • all Whiting wells that were fracked in 2016, the average mboe EUR is tracking 952,000, therefore in line with Whiting's claim of 900 mboe
The 1.5 million boe EUR controversy:
All this fuss in the December piece about Whiting's wildly inflated claims of 1,500 MBOE carries some merit, but it's impact is very, very small. Whiting never claimed that ALL of its production would run at 1,500 MBOE, just some of the larger fracs from 2016. Looking closer at the 1,500 club reveals some interesting patterns. First, the 1,500 MBOE wells are actually popping up faster and more frequently now, especially in the last six months of 2016. Below is the table of the current members tracking a 1,500 MBOE curve and its current production as of 12/31/2016. Some of the numbers are eye-popping. Specifically, all of the Rolla wells seem to be screaming right out of the gate in terms of performance, with monthly oil volumes of 45,000 bbls or greater.
But even back in 2015, there are a few scattered 1,500 MBOE babies, in particular Flatland Federal in TRUAX field in McKenzie county. This well is a monster, generating nearly 600,000 barrels of oil equivalents in just over 15 months. If every well in the Bakken behaved this way, OPEC would be out of business tomorrow. Flatland Federal could be tracking (continuing its current pace or slope) nearly 2 million barrels of oil equivalent or more once the data is all in. Keep in mind the data behind these 1,500 MBOE wells is early, just 15 months or less, but unless these curves all start rolling over (many of them have not), it looks as though Whiting's production profile is going to greatly benefit even with fewer wells being drilled under a constrained capex/NYMEX environment.
As for Whiting's 1,500 MBOE claims, I would conclude this. It is early. That is the largest caveat. I would have preferred if it jumped to claiming 1,200 MBOE before making the leap from 900 to 1,500 MBOE! But, in its defense, it now has 20, that's right 20 wells that are tracking at or above 1,500 MBOE, albeit with half of them producing for four months or less. Not many operators can say that. Not Continental, and not Oasis. Yes, there is more data coming in, but Whiting has a very good start. However, there are some "doggy" or dodgy wells that were heavy fracs and are tracking a 600 or 500 MBOE curve with 10 million lbs of sand. Whiting should explain what is going on with these.
It is mostly in areas of Stark and Dunn Counties, and a few in Williams County. What this is telling me is that even if you force 10 million pounds of sand down a hole with massive pressures and temperatures, if the payzone/real estate was average or non-prime, to begin with the larger frac just enhances the original production profile. In support of this idea, if one looks back at 2015, there are a decent number of wells that performed at 900 MBOE or higher and only had fracs of 2 or 3 million lbs of sand. It wasn't the frac that generated that performance, it was the shale/rock payzone characteristics. Whiting needs to be careful of where it spends every $ of capex per pound of sand. Quantity is not always quality.
In summary, if Whiting continues at this pace, its well performance per well will have jumped roughly 100% on an average MBOE from 2015 wells to 2016 wells, from 560 MBOE TO 951 MBOE. The larger sand fracs have a clear advantage in production, as evidenced by the recent set in 2016, with some wells easily producing 1,200 MBOE (tracking after 6-12 months) and others tracking north of 1,500 MBOE. The claims in prior articles of Whiting's overstated data and inferior real estate look to be nothing more than misunderstood statistics and superior short sightedness. As more data arrives in 2017 behind this new crop of wells, it looks as if the company will benefit greatly at both the top line and the bottom line if the marginal frac cost is controlled on carefully selected leases.

Just For Something Different -- February 18, 2017

Random look on what's going on in the air this early Saturday morning:

This is another great site for same data.

Week 7: February 12, 2017 -- February 18, 2017

I'm not sure if there were any major energy stories this past week: sort of quiet in the big scheme of things. Despite another huge build in US crude oil reserves, the price of WTI held at about $53. The tea leaves suggest OPEC will extend production cuts into the second half of the year; original plan was for cuts to the end of June, 2017.

Perhaps most surprising to me is that few DUCs are being completed. The inventory of DUCs is decreasing but to some extent that is simply because fewer wells are being drilled. The number of active rigs dropped quickly from 40 to 36  earlier but by the end of the week had recovered to 40 active rigs, exactly the same number exactly one year ago (February 17, 2017).

Marathon continues, it seems, to have an active re-frack program. That may be true of other operators, also, but I have not tracked re-fracks for other operators.  Examples of re-fracked MRO wells that were noted this past week include:
Oasis appears to be re-fracking older wells when neighboring wells are fracked for the first time.

It appears the DAPL is quietly moving along; it's hard to say how this will play out.

For investors, it was a huge week: the equity markets have been on a tear. All three indices hit all-time records this past week on multiple days. CNN even called it the "Trump rally" and said it was the best rally since LBJ and JFK.

It does appear that a new chapter in the "global warming" story will be written in 2017 - 2018.

Monthly production data released here; and, here; the Director's Cut here;
Oasis Rolfson S wells are going to be huge wells
Is CLR getting ready to frack the Anna pad in Last Chance oil field?

Essay, RBN Energy
Six DUCs completed
Five DUCs completed

DAPL law enforcement costs -- $33 million that won't be going to ND public schools
US District Court judge denies latest challenge to the DAPL
One of many articles on legacy of Standing Rock protest
State Department took four years to study 3-mile section of pipeline
Update on Enbridge Alberta Clipper pipeline
For the archives: existing pipelines under the river/lake
For the archives: Native Americans actually have ownership stake in one pipeline under the lake

CLR reports a 62-stage, 14-million-lb frack, #31670, Rath Federal

Bakken economy
One step closer to new middle school for New Public School District 8 outside Williston, ND
Williston State College sets enrollment record

For the archives: is the Bakken a bust?

EIA's forecast for US crude oil production through 2040