EOG Well Produces 675,000 Bbls Of Crude Oil, 1.2 Billion CF Natural Gas In Nine Months -- Austin Chalk -- December 7, 2017

I occasionally update the Austin Chalk at this post. If the link breaks, the article is archived here.

Another nail in the "Peak Oil" coffin. 

From Rigzone: Texas' Austin Chalk booms while shale plays remain mostly dormant. Interesting, huh?

Somewhere down the line, someone coined the phrase, “Big oilfields only get bigger.” Now an adage, the observation was made when large oilfields had reached peak production, only to reveal later they had much more to give when new technology was applied.

The Austin Chalk formation, which sits right on top of the Eagle Ford formation, was a hot play in the mid-1900s, mid-1970s and 1990s. However, it was all but forgotten during the shale boom when the Eagle Ford formation took front and center. With the majority of shale plays still on the shelf, the Austin Chalk is back on the radar and stronger than ever, proving a prominent contender in the ever-growing oilfield category.

“Discussing the Austin Chalk again is very much a surprise to us,” said William R. Thomas, chairman and CEO of EOG Resources, Inc.

EOG is one of the largest operators in both the Eagle Ford and Austin Chalk plays.

“We, probably like the rest of the industry, had kind of written off the Austin Chalk,” Thomas said. “But we have discovered a new geologic concept in an existing play in the Eagle Ford. Our team has cracked the code on how to make our particular footprint in the Austin Chalk – a top-tier horizontal play, earning returns on par with the Eagle Ford, Permian and Bakken plays.”

Two of EOG’s wells, the Leonard AC Unit 101H and the Denali Unit 101H, produced an average of 2,175 and 3,130 barrels of oil equivalent per day over 30-day and 20-day periods, respectively. Its Kilimanjaro 101H well produced 675,000 barrels of oil and 1.2 billion cubic feet of gas in just nine months. The wells are located in the Giddings Field – the largest field in the Austin Chalk – in southeast Texas.

Noting that other operators have wells in the Austin Chalk that have produced 300,000 to 400,000 barrels of oil in their first years, David W. Trice, EOG executive vice president of Exploration & Production, called the discoveries “substantial.” “Based on the data we have, we think they are repeatable,” he said in a statement to stakeholders last year.
Other operators think so as well. Companies including EnerVest Ltd., GeoSouthern Energy, Blackbrush Oil & Gas, Gulftex Energy, Marathon Oil Corp. and WildHorse Resource Development have leased thousands of acres in the Giddings Field spanning seven counties, including the prolific Karnes, Fayette, Washington and Gonzales counties, near the state’s capitol.

The comeback? Much, much more at the linked story.

Forty Most Beautiful Actresses, Pre-1960

Wow, Wow, Wow -- December 7, 2017

The headline:

The lede:

China is backpedaling on its massive push for the coal-to-gas switch after the move created gas shortages in the north that left people freezing in the cold snap.

The Chinese Ministry of Environmental Protection said on Monday in an urgent letter to 28 cities in the north that residents now could continue burning coal or firewood to keep themselves warm in the areas where the switch from coal to natural gas and electricity has not been completed, Caixin reports, despite the ban on coal.

“It is not wrong for Beijing to push the coal-to-gas switch, but the process was a bit too fast and outpaced the market’s capacity,” Xu Bo, a researcher with CNPC’s Research Institute of Economics and Technology, told Reuters.

So big has been the drive to switch from coal to gas, that China has been buying up liquefied natural gas (LNG) cargoes on the spot market, pushing spot prices higher than the prices of the oil-indexed LNG cargos in the long-term delivery contracts. Last week, Asia’s LNG spot prices jumped to the highest since January 2015 due to the Chinese demand and strong oil prices.

Related story.

If you listen to the interview below, it sounds like New England has the same problem as China and is solving it the same way: using diesel fuel as heating fuel during the winter.

Huge Kudos To Texas DOT -- Nothing About The Bakken -- December 7, 2017

This is a huge "shout out" to the Texas DOT: thank you for all you've done. I am more than impressed.

We (Sophia and I, and our respective families) literally live at the intersection of three major Texas highways:

• Texas Highway 121 -- connecting Plano, TX, to Ft Worth, running northeast to southwest
• Texas Highway 360 -- connecting Grapevine to Arlington, Irving, the area between Dallas and Ft Worth, running north to south
• Texas Highway 114 -- connecting Los Angeles, CA, to Dallas, TX, running from the west to the southeast

When we arrived here in 2013, the first thing we were told was that the local community and commuters had lived through ten years of hell while TX DOT completely re-worked the interchanges for those three highways where they all converge on the south side of downtown, historic Grapevine, and just a mile or so west of the DFW airport.

I thought that the result was incredible. The interchange involving those three major highways seemed to be brilliant.

There were a few choke points, and, a few "nice-to-have" things yet to complete but essentially it was a pretty good system. Actually better than pretty good; very good.

Over the past four years TX DOT has been working those choke points and the "nice-to-have things" to really complete the project.

This past month, it appears, almost everything is complete.

Additional ramps and interchange changes where 114, 360, and 120 come together right off Hall Johnson, where we live, have been completed. It seem "perfect." And now I see TX DOT is already adding more changes which will make the interchange even better. And they do this without interrupting the flow of the three highways.

The major choke point was a two-mile stretch on Texas Highway 121 northeast of Grapevine through Lewisville on the way to Plano.  They've been working on that stretch for the past year, and this past week a major portion -- probably 90% -- was completed. We went from two lanes in one direction to four lanes with additional lanes for off-ramps, on-ramps, and frontage roads, with the result that in each direction there are six to eight lanes where there used to be two to four lanes. The bottle neck routinely took 30 minutes (when there was an accident, the logjam could be several hours); tonight, for the first time ever for me, the two-mile stretch was a blur, and traffic was able to travel the posted speed limit of 70 mph at rush hour.

I am truly blown away how clever Texas DOT was to figure out how to do all this and do all this without major interruption of traffic during construction. And it appears they completed everything ahead of schedule.

Lights on the Hill, Slim Dusty  

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The Tax Page

It appears that the mainstream media does not understand the tax policy of the US.

Journalists (and the headline writers) seem to be amazed that companies like Apple will get a huge tax break.

Case in point: headline -- Analysis: Apple poised for $47 billion windfall from GOP tax bill. It appears by some calculations that Apple has been overpaying its fair share by billions and billions of dollars every year.

Europe's Energy Situation Only Gets Worse -- December 7, 2017

Updates

Later, 9:24 p.m. Central Time: why I love to blog. At the end of this post I talked about Poland and coal. Don sends me this big of trivia and I love it. The Navios Helios is on its way to Poland (or maybe it's already there) carrying US coal:

• track the ship
• Reuters story on Trump coal going to one of our best allies and trading partners, Poland
• German website with same story -- ya gotta love it 

Don says that much coal -- tons and tons and tons -- probably emits about as much CO2 as one day's emissions from the Bali volcano. From Vox:

 Original Post

Over at "Big Stories," I link to "Europe at a Tipping Point." The original post was dated May 18, 2013, and has been updated infrequently since then.

With regard to energy, Europe is a mess when it comes to energy. It is playing out differently than I expected but the outcome will be the same: Europeans are:

• going to face ever-increasing prices for electricity, at least relative to the US
• will face brown-outs/black-outs when energy is needed most simply because renewable energy is not dispatchable

Europe is in a real quandary. They have plenty of electricity from wind and solar when things are going well, but they need natural gas and coal plants to back up wind and solar. But playing back-up doesn't pay the bills for the coal plants. Bloomberg suggests that coal plants in Europe will bleed cash for the next decade.

The dilemma was spelled out in the first two paragraphs:

Almost all coal plants in the European Union will be outspending their income by the end of the next decade, relying on subsidies to stay open to back up wind and solar generation.

About 54 percent of the region’s plants already fail to break even, according to a report by London-based Carbon Tracker Initiative published Friday. The facilities are kept online by government handouts running into millions of euros for some stations just to be available in case they are needed to meet spikes in demand.

The article doe NOT mention natural gas.

The article says that Europe is depending on better battery technology to make wind and solar energy work. That seems to be a huge gamble. The biggest players -- Toyota, GM, Apple, Sony -- have spent billions of dollars over the past three decades trying to improve batteries. From what little I know not much progress has been made, and what progress is made will come at a huge cost paid for by the citizens.

If coal is phased out and battery technology does not improve significantly that leaves natural gas. Western Europe does not have any natural gas. I guess that's why it was not mentioned in the Bloomberg article.

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Europe and Coal

Sometime in 2018 we will look at EU coal import data for the full year, 2017. I think it will show that Germany imported more coal in 2017 than in the previous couple of years. If not, it will be close. But a bigger story, if that is even possible, involves Poland. See the Polish story here. 

Active Rigs Steady At 53; Five New Permits -- December 7, 2017

 Exxon up date at SeekingAlpha -- Mike Filloon:

• Exxon's oil production per location increased approximately 25% from 2015 to 2016
• Exxon has shifted its development to Midland County, Texas, from McKenzie County, North Dakota
• Exxon seems more concerned with lateral length than enhanced completion designs, and this is probably why production hasn't improved more
• we believe there is further upside to XOM's well design in 2018

In summary, Exxon has been more focused on increasing lateral length. It has not been as active in North Dakota and has been ramping up in Texas.

We would have expected a greater increase in oil production per well due to the ramp-up in Midland County. That said, XOM still increased production per location by almost 25%. XOM's production per foot probably increases more than other operators next year. This provides interesting upside for Exxon with respect to its unconventional portfolio.

As it rolls out a design that better stimulates the source rock, production per foot improvements would be increased across a longer lateral length. It is just beginning to realize the economic benefits to the better geology in Texas. This also adds upside to a portfolio that can increase production relatively quickly. We expect costs to increase slightly in 2018 but also for revenues per location to more than offset. If oil prices continue to improve as expected, XOM will generate better returns in its US unconventional leasehold.

This should not be surprising: Exxon has to start developing their new fields in the Permian. 

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Daily Activity Report

Active rigs:

$56.62↑	12/7/2017	12/07/2016	12/07/2015	12/07/2014	12/07/2013
Active Rigs	53	39	64	188	193

Five new permits:

• Operators: Petro Harvester (4); EOG
• Fields: Parshall (Mountrail): Flaxton (Burke County)
• Comments: Petro Harvester has permits for a 5-well FLX pad in SWNE 17-163N-90W

Five permits renewed:

• BR: five Franklin permits in Dunn County

One permit cancelled:

• Hess: an EN-Weyrauch C permit in Mountrail County

No producing wells (DUCs) were reported as completed.

The North Dakota Devonian

Perhaps the best and most recent (2013). Google: geologic assessment of technically recoverable oil in the Devonian and Mississippian Bakken Formation; the first hit should provide a link to a PDF.

A more recent assessment of the Devonian in southeastern Saskatchewn. Google stratigraphy and reservoir characterization of the Upper devonian yang; one should be able to quickly find the link to a PDF for this article. This is a timely article with this note from earlier this week:

Kansas: ranked #1 worldwide of most attractive places for petroleum investment among 39 jurisdictions with small reserves. #2 -- Saskatchewan; #3 -- South Australia. 

From AAPG Datapages archives, dated 1987: overview of Duperow (Devonian) production in the Williston Basin --

The Duperow Formation (Frasnian) is present over a large area from the Sweetgrass arch in Montana to eastern North Dakota and from southern Saskatchewan to South Dakota. Sediments of the Duperow Formation are interpreted to consist of a series of consecutive shoaling-upward carbonate cycles deposited over a broad backreef area of the Devonian Elk Point seaway.

A representative cycle consists of a lower subtidal member, a middle intertidal member, and an upper supratidal member.

The Duperow Formation is productive in the U.S. portion of the Williston basin.

Production occurs anywhere in the section where there is porosity or intense fracturing, but is primarily from dolomitized stromatoporoid banks.

Production is coincident with the central portion of the basin.

The properties of Duperow hydrocarbons are variable and are interpreted to indicate two possible sources. The Bakken Formation may have sourced most Duperow reservoirs along the Nesson anticline. Other Duperow reservoirs in the Williston basin may have been self-sourced.

Three types of Duperow traps have been identified in the Williston basin.

• the first type is structural, which is the most productive and is common on the Nesson anticline

• the second type is structural-stratigraphic, which is the most commonly occurring trap and is present on the Billings nose

• the third type is stratigraphic-unconformity, which is uncommon and present only on the eastern flank of the Cedar Creek anticline.

Links:

• Overview of the petroleum geology of the North Dakota Williston Basin, North Dakota Geological Survey, undated, but appears to have been written in 2000; previously posted

Some impressive Devonian wells:

• 35, IA/263, Hess, Beaver Lodge-Devonian Unit H-310, Beaver Lodge, t3/60; cum 2.091440 million bls 6/17; still producing 775 bbls/month 6/17;  off-line as of 7/17;
• 718, IAW/188, Hess, Beaver Lodge-Devonian Unit F-311, Beaver Lodge, t6/65; cum 1.869286 million bbls 8/15;
• 1403, 351, Hess, Beaver Lodge-Devonian Unit B-304, Beaver Lodge, t11/57; cum 2.535723 million bbls 10/17; still producing almost 2,000 bbls/month, 6/17;
• 2009, 179, Enduro, North Dakota C A 2, McGregor, t12/58; cum 1.297038 million bbls; still producing about 650 bbls/month, 10/17; going on 59 years of age;
• 2150, 387, Amerada/Hess, Herfindahl + Davidson #1, Beaver Lodge, Devonian pool, Beaver Lodge field, s1/59; t4/59; AL; cum 918,970 bbls as of 7/74; last production numbers in 1974: 4,000 bbls/month; still listed as active;
• 2501, PA/115, Hess, BLDU G-311D, t1/60; cum 1.11 million bbls 4/01; last production in 1997;  SWD;
• 2515, PA/306, Hess, Beaver Lodge-Devonian Unit C-303, t2/60; cum 1.335636 million bbls; last produced 5/09 (55 years of production)
• 3900, 102, Hess, Beaver Lodge-Devonian Unit D-307, Beaver Lodge, t11/65; cum 1.05724 bbls 10/17; back on active status as of 8/17;
• 3983, 234, Enduro Operating, North Dakota C A 3, a Devonian well, vertical, 320-acre spacing, t1/66, cum 1.388897 million bbls; 10/17; celebrated its 51st anniversary January, 2017; still producing about 500 bbls/month, 6/17;
• 8499, PA/1,652, Citation Oil & Gas, Skachenko A 1, Jim Creek, Duperow pool, t10/81; cum 1.536 million bbls; last produced 11/11; 30 years of production (see first comment)
  

Thursday, December 7, 2017 -- More Truck Drivers Needed In Texas In 2018

"Pearl Harbor Day." This is an appropriate place for this story on Carl Vinson -- story sent to me by a reader.

North Dakota wells coming off confidential list today

Thursday, December 7, 2017: 32 for the month; 142 for the quarter

• 33208, 1,244, Whiting, Evitt 14-12-4TFHX, Truax, Three Forks, 39 stages; 9.3 million lbs; t6/17; cum 90K 10/17;
• 33134, 1,063, Liberty Resources, T. Haustveit E 156-95-26-3MBH, 27 stages, 8 million lbs, Beaver Lodge, t6/17; cum 99K 10/17;

Getty Center, LA: reports of fire engulfing the Getty Center seem to have been exaggerated. Radio report.

Al Franken update: pending

Jobs report and 4Q17 GDP forecast: link -- better jobs report than expected

• prior: 238,000
• consensus forecast: 240,000
• actual: 236,000
• 4-week average: 241,500 (down 750)
• 144th consecutive week claims remained below the 300,000 threshold, which is associated with a strong labor market 
• nonpayrolls probably increased by 200,000 in November after surging 261,000 in October 
• GDP Now forecast, December 5, 2017 -- 4Q17 forecast at 3.2%, down from 3.5% on December 1, 2017

Gasoline demand graph: link --

Houston: new US crude oil trading hub; competes with Cushing --WSJ --

• as US crude oil exports surge, analysts say Houston better reflects oil-price dynamics than Cushing
• much of the US crude oil destined for export bypasses Cushing completely and goes direct to Houston
• until recently, the price of WTI in Houston was about the same as the price at Cushing, plus the roughly $2-a-barrel cost of a ride south on a pipeline. But that difference has widened to more than $5 in recent weeks, as strong overseas demand pushed Houston prices higher.
• how bad is it?

“Cushing is becoming irrelevant,” said Philip Verleger, an energy economist who helped develop the Nymex oil futures contract in the early 1980s.

• not everyone agreess

Euan Craik, CEO Americas of Argus Media group, which compiles the Houston prices, said the two benchmarks are complements rather than substitutes. So far, there hasn’t been as much trading in a contract that only tracks Houston prices—most of the futures market activity is still linked to the Cushing price.

GE to cut 12,000 jobs in power business revamp: link here at Reuters -- mostly French, German, Swiss. GE rival Siemens [poster child for wind energy] is cutting about 6,900 jobs (about 2% of its global workforce)

Port of Vancouver oil terminal disapproved. Not unexpected. Like Hawaii, the northwest becomes more of an energy island. The good news: Washington State has plenty of hydroelectric power. For the archives; I'm not particularly interested. 

$60: JPMorgan's new "magic number" for shale oil -- Bloomberg via Rigzone --

• Permian: operators won't change course as long as WTO stays in the $45 - 55 range
• a one- to two-quarter run above $60 was the "consensus catalyst for another leg higher"
• with that said, some explorers say they plan to at a rig her or there, but very few mention rig drops
• JPMorgan expects production to remain "mostly flattish" -- industry copes with labor and equipment shortages
• for the archives: at the time this was posted, WTI has been trending down toward $56

So much for reform: it was Saudi Arabia's Crown Prince who bought a piece of art for almost one-half billion dollars.

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Back to the Bakken

Active rigs:

$56.09↓↓	12/7/2017	12/07/2016	12/07/2015	12/07/2014	12/07/2013
Active Rigs	53	39	64	188	193

RBN Energy: E & Ps face challenges in managing "last mile" logistics.

With frac sand use — and costs — on the rise in the Permian, a number of exploration and production companies (E&Ps) are becoming more involved in managing sand acquisition and logistics. It’s not an easy job, because even though a greater share of the frac sand used in Permian wells is expected to come from local, West Texas sand mines in the coming year, those “last mile” logistics — the delivery of sand by truck from the mine, plus unloading and storage of sand at the well site — are especially complex. Today, conclude our series on frac sand with a look at the challenges E&Ps face when they assume supply chain responsibility for sand.

E&Ps in the red-hot Permian and other U.S. shale and tight-oil and gas plays have had remarkable success the past few years in ratcheting down the cost of drilling and completing new wells and to increase hydrocarbon production per well. And, as they have gained a more nuanced understanding of their hydrocarbon resources, producers and their pressure pumpers have been implementing increasingly sophisticated and well-specific completion strategies to wring ever-increasing volumes of crude oil, natural gas and natural gas liquids from their wells. These gains have been particularly significant in the Permian, where E&Ps have largely figured out how to optimize production from the region’s multiple, stacked pay zones. Two key elements of their success are drilling longer horizontal wells or laterals (now often 7,500 or 10,000 feet, and sometimes longer) and intensifying completions with the use of more pressure, more frac sand per linear foot of lateral and more frac stages.

Trucking: this interesting note regarding truckers from today's RBN Energy article:

Frac sand truckers can (and do) put in a lot of hours. Federal Motor Carrier Safety Administration (FMCSA) rules limit truck drivers like those hauling sand in the Permian to a 14-hour workday and no more than 11 hours of that on the road — after that 14-hour mark is hit, a driver must take at least a 10-hour break. There’s also a weekly cap (no more than 70 hours) and after that mark is hit the driver must take a 24-hour break.

Drivers must maintain written logbooks to track their hours — officially known as “records of duty” (RODs) — so they can prove they’re abiding by the FMCSA limits, but as you might guess, an independent trucker making a lucrative hourly rate may be tempted to fudge his (or her) log hours. Well, starting in a few days (December 18, 2017), drivers will be required to install and use an Electronic Logging Device (ELD), which, as its name suggests, electronically tracks when and where a truck is driven, who’s driving it etc.

(Trucks that already have been using a much simpler automatic on-board recording device, or AOBRD, can continue using that until December 18, 2019; by then they will need to install an ELD.)

The ELD requirement will pretty much put an end to drivers putting in more than 14 hours a day or 70 hours a week, which means that even more drivers will be needed to replace the “lost” capacity enabled by the paper logging process.

As the driver capacity issue is further stretched, the law of supply/demand takes over and the trucking companies will likely need to offer even higher pay to attract more drivers to the Permian and other shale plays.

How to move frack sand, also from the linked article:

The industry has gravitated to two types of containerized solutions for the sand to minimize dust.  First, there are a number of metal sand box (“sand in a can”) solutions in which metal boxes are filled at the transload site or local mine with more than 20 tons of sand and trucked to the well site on a flatbed truck. These boxes can be unloaded quickly at the site with a large forklift truck and the sand then can be fed directly into the mixer with minimal dust. The second solution is to use mobile silos that are moved to each new well site. Sand is trucked to these silos via a pneumatic or bottom-dump truck with around 24 tons of sand in each truck and either moved via air pressure into the silo or dumped onto a mostly closed conveyor system. There are advantages and disadvantages to both containerized processes and the companies responsible for choosing the systems have preferences for which to use for each well situation.

The good news is that these containerized solutions to the silica dust problem may also improve the efficiency of frac sand deliveries — by reducing the time it takes to move sand from the truck.  The time that drivers spend waiting in line to make their deliveries will be trimmed as well. That, in turn, will increase the productivity of each driver (more deliveries per week) and hold down the need for more drivers. Innovation continues for all the possible solutions, with a focus on improving the cycle time for the truck at the well, on further reducing dust, on ensuring safety for the workers and on minimizing the need for more truckers.

Geology, the Devonian: a few items over the past few days have mentioned the Devonian. I'll probably re-post this at a stand-alone post, but I don't want to lose the link, so here it is:

• Overview of the petroleum geology of the North Dakota Williston Basin, North Dakota Geological Survey, undated, but appears to have been written in 2000; previously posted

Map of the day via Twitter. States with populations less than Los Angeles Counties:

US LNG export capacity: note how huge Sabine is --

Cold in Europe? Italy at pre-alert level for natural gas withdrawals, from Twitter: