Saturday, December 30, 2017

They Must Be Reading The Blog -- December 30, 2017 -- Global Warming Hits The Bakken -- Record Cold Weather Reported Across North Dakota

I really have to thank the reader who brought this to my attention. About two weeks ago a reader noted that nuclear energy, coal, and natural gas had maxed out in New England and the region was responding by increasing the amount of oil being used to generate electricity. It was then noted that renewable energy (mostly wind) was not up to the task. As energy demand increased during the day, renewable energy actually decreased -- it appears that wind turbines were either less efficient or coming off-line during the day when electricity was most needed.

Now, Don alerts me to this Washington Examiner story, "coal to the rescue as record cold grips the East."
Coal-fired power plants are king again as sub-zero temperatures sent demand for heating and electricity soaring on the East Coast Friday in the largest energy market in the nation.
Coal outpaced both natural gas and nuclear power plants in the PJM market, which extends from the Midwest to Washington, according to real-time updates provided by the grid operator PJM Interconnection.
Coal provided nearly 20,000 megawatts more electricity throughout the day Friday than its primary rival natural gas and over 10,000 megawatts more than nuclear power plants.
One megawatt of electricity can provide 750-1,200 homes with power, depending on how much demand there is on the system, according to experts.
The PJM breakdown looked like this: Coal at 45,842 MW; nuclear power at 35,514; and natural gas at 25,927. Renewables provided 3,086 MW. Coal, nuclear and natural gas are the three dominant sources of 24-hour power on the grid.
And renewable energy? In MW:
  • coal: 45,842 (42%)
  • nuclear: 35,514
  • natural gas: 25,927
  • renewables: 3,086 (2.8%)
  • total: 110,369
It would be interesting to get the nameplate capacity / percentages for the energy mix. Something tells me the renewable folks would tell us that nameplate capacity for renewable energy was close to 25%. There's a huge difference between nameplate capacity and what renewables actually produce.

This is very, very early in the season. Cold weather like this generally does not appear until mid- to late-January and February. A lot of folks in the northeast are going to be spending their Trump tax savings on expensive spot electricity made more expensive by renewable energy initiatives.

By the way, this is interesting: were it not for coal, some localities may have been in deep trouble. Secretary of Energy Rick Perry has a good case for allowing coal utilities to claim a premium for maintaining "emergency" supplies of coal (previously reported).

Meanwhile, in North Dakota, record cold weather is being reported:

This Should Give You A Charge

If you want to read some great comments to a very "strange" article, read this short article, and then read the comments.

Week 52: December 24, 2017 -- December 30, 2017

In the draft version of the top stories for 2017, for the category, "North Dakota, energy" I suggested the successful opening of the DAPL. Now, today, the last edition of The WSJ for the year has this op-ed: "North Dakota's Pipeline Payoff":
The Dakota Access Pipeline marks six months of operations on New Year’s Day, and new data show that North Dakota is already enjoying major benefits from the $3.8 billion project.
The pipeline has significantly lowered energy transportation costs and energy companies to move their oil to the Gulf Coast, where it fetches a higher price. So it’s little surprise that energy production has surged since the Dakota Access Pipeline opened.
The Bakken strikes back, version 2
Active rigs in North Dakota drops below 50 
What does Whiting see in Alger / Robinson Lake?
Bakken wells turned off when oil prices drop
CLR with two nice wells in Brooklyn oil field
Case study: Kukla well, #16422
CLR shows major improvement in oil production -- Mike Filloon

Random update of re-fracked QEP wells in Heart Butte

Operators who may have benefited by scrapping hedges 
WTI closes out the year at $60.10 
NDSG releases rare earths study 
Whiting discovers new oil and gas pool in western North Dakota 
Record cold in the Bakken (for this time of year) 

Random Update Of A Huge North Dakota Jim Creek Duperow Well -- December 30, 2017

When folks think of oil in North Dakota, they naturally think of the Bakken. But there are several other notable formations. The other day I posted some incredible wells from the Devonian

A reader noted a great Duperow well:
  • 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
I'm Movin' On

Quick: name the television commercial currently featuring this song. 

.. and what one word connects these two songs?

Continuing To Make America Great -- December 30, 2017

Ronald Reagan did it his way. Donald Trump is doing it his way. And now, Warren Buffett is doing it his way. From The Wall Street Journal:
The real winner of Warren Buffett‘s 10-year bet against hedge funds is Girls Inc. of Omaha.

Mr. Buffett bet $1 million in 2007 that an index fund would outperform a basket of hedge funds over a decade. The proceeds would go to charity, and Mr. Buffett designated his local Girls Inc. affiliate as the recipient if he won. When the closing bell rang at the New York Stock Exchange Friday, the famed investor locked in his victory.

Mr. Buffett, the chairman of Berkshire Hathaway Inc., has said throughout this year that he is confident he would win. From the start of the bet through the end of 2016, Mr. Buffett’s S&P 500 index fund returned 7.1% compounded annually. The competing basket of funds of hedge funds selected by asset manager Protégé Partners returned an average of 2.2%.

And because of a twist in the bet’s history, Girls Inc. of Omaha is likely to get much more than $1 million.

Mr. Buffett and Protégé Partners originally put about $320,000 each into bonds that would appreciate to $1 million over the course of their wager. But the bonds appreciated much faster than expected as interest rates fell so the two sides agreed to go for a bigger prize. In late 2012, they agreed to buy 11,200 shares of Berkshire B shares, which cost $89.70 at the end of 2012. They’ve climbed 121% since then.
It will be interesting to see Warren Buffett's "return on investment" from end of 2016 to end of 2020." 

Market And Energy Page, T+343 -- December 30, 2017

Road to New EnglandISO New England electricity prices are starting to spike, as usual. Note that nuclear and coal have maxed out. Natural gas has dropped back a bit suggesting natural gas is in short supply, and, most interesting, of course, renewable energy electricity is declining -- renewable energy simply is not dispatchable: more than enough when it's not needed; can't ramp up when it is needed.

DAPL: wow, this is cool. On today's WSJ op-ed page, a huge headline, short piece, "North Dakota's Pipeline Payoff."
The Dakota Access Pipeline marks six months of operations on New Year’s Day, and new data show that North Dakota is already enjoying major benefits from the $3.8 billion project.
The pipeline has significantly lowered energy transportation costs and energy companies to move their oil to the Gulf Coast, where it fetches a higher price. So it’s little surprise that energy production has surged since the Dakota Access Pipeline opened.
Between September and October alone, oil production grew by 78,000 barrels a day, the biggest month-over-month increase North Dakota has ever seen. The state peaked at around 1.185 million barrels a day that month—135,000 barrels more than it produced daily before the pipeline was operational. Compared with January 2017, North Dakota has an additional 15 drilling rigs currently in operation.
And there are 114 comments! Whoo-hoo. Any article in the WSJ with more than 4 comments is impressive, and seldom do I see articles with more than a couple of dozen comments.

New Knights

From the AP:
The New Year’s Honors List made public late Friday revealed that Beatles drummer Ringo Starr and Barry Gibb, the oldest and last surviving of the brothers who made up the pop group the Bee Gees, have been tapped as knights.
Long, long overdue.
Winter Trout Fishing In Texas

I was completely unaware of this going on, literally, in our backyard -- if one considers our backyard a few hundred miles distant. 

Our older granddaughter did not know where they went fishing, but three hints: a) about 2 hours to get there; b) first, southwest out of the Ft Worth, TX, area, and then northwest, but basically west of Ft Worth; and, c) something about the Brazos River. And when you google that information it takes you to .... ta da .... Possum King Dam and the Brazos River near Graham, Texas. And she was exactly right on the driving instructions and the time it takes to get there.
Yesterday, the two older granddaughters went trout fishing for the first time. Thoroughly enjoyed it. At the end of the day, s'mores at the fire pit. 

Another Great Day In North Texas

Sophia and I spent the entire day together yesterday. Sophia is our 3.5 year-old granddaughter. Wow, we had fun. We had so much fun she didn't even want to go to Menschie's -- her favorite ice cream joint (okay, frozen yogurt that tastes like ice cream and has a gazillion toppings from which to choose). We topped off the day by going to PlayPlace -- McDonald's. She treats PlayPlace just like her personal playground. I sit in the main restaurant area and watch her through the ceiling-to-floor window. She takes off her shoes and socks (so she won't slip on the floor) and when we get home, we wash her feet, just like washing her hands.

Today, we will be going to Denton, TX, to watch our oldest granddaughter in an intramural water polo tournament. The drive up and back will take longer than the two 25-minute games. LOL. But I take Arianna an hour early so she can get ready and I spend my time reading.

The primary reading at these events? The WSJ. Today, in the "Review" section, a "Max Boot" reviews his five favorite books/biographies of "real-life" spies. No, George Smiley and James Bond are not included.

The five books:
  • Gentleman Spy, by Peter Grose, 1994. The biography of Allen Dulles, who started out in the Office of Strategic Services and was appointed director of the CIA in 1953.
  • The Billion Dollar Spy, by David E. Hoffman, 2015. The biography of Adolf Tolkachev -- the review is the most fascinating of the five.
  • The Very Best Men, by Evan Thomas, 1995. The book focuses on four early stars of the CIA -- Tracy Barnes, Frank Wisner, Desmond FitzGerald, and Richard Bissell.
  • Agent Zigzag, by Ben Macintyre, 2007. The biography of Edward Chapman. This spy sounds the most like a spy in a John le Carré novel.
  • The Good Spy, by Kai Bird, 2014. The biography of Robert Ames who would die in the Iranian-sponsored bombing of the US Embassy in Beirut in 1983.

Posting Some Comments Over The Past Couple Of Weeks That Did Not Get Posted For Some Reason -- December 30, 2017

Comments. For some reason these comments did not get posted. I'm going back through blooger to see if any other comments did not get posted. I try to post all comments and at least make a short reply. I apologize to folks who sent in a comment and I failed to post/reply. Here are the ones I have found so far. I will gradually go back and reply to them at the original post. 

At this post:
Texas reporting strikes again!
The production numbers cited in the article are incorrect!
Looking at just the FANG Reed well(s) this is actually three wells combined into one "Stacked Lateral."
"Stacked Laterals" are a regulatory tool for allocation of lease acreage and essentially combine multiple wells into one regulatory entity. This will appear as one or more wells with "inactive" status and one "Active" parent well that all the stacked laterals report production to.
So when the author claims the Reed well has made 674 MBO in 11 mo, that number is actually the total production of three horizontal wells, a Spraberry well, and two Wolfcamp wells (1 WCA, 1WCB).
This is a whole different issue than even allocated lease production...
If you want more proof refer to the P-16's for these wells.
If you want more resources to understand the nuances of Stacked Laterals please refer to the following at the RRC: 
At this post:
Correct. Vertical wells are hit or miss and VERY difficult to find even on 3D due to the very steep vertical nature of pinnacle reefs. There are a few more reefs drilled but thus far none with the oil accumulation near Dickinson.
At this post:
Speaking of CLR, remember the Whitman wells in Oakdale field? 2-34H has produced 1.59 million barrels of oil since Sept 2011. Drilling on 3-34H was stopped due to unsafe pressures and drilling conditions. It has finally been drilled to depth and completed. 61 stages, 14.5 million lbs proppant, 234 thousand barrels fluid. Production to date not impressive. At least not yet. 12,150 BBLS Oil in 21 days. 
At this post:
Not sure why RBN let out this fascinating solution for last mile logistics. Just another way in which costs are being crushed Disclosure- No interest in the company or its securities. I know a persons with shareholdings in company, 
At this post:
8499, 1652, Amoco, Jim Creek, cum 1,525,818, PA
At this post:
Have you heard much about microproppants? If only 10% of the proppant are smaller sized, (10 % Diamter of those sands) the well flow increases up to 20%. There are smalLas fractres that need microproppanta. 
At this post:
Have you heard much about microproppants? If only 10% of the proppant are smaller sized, (10 % Diamter of those sands) the well flow increases up to 20%. There are smalLas fractres that need microproppanta. 
At this post:
Considering White Butte has permitted these wells now, you have believe that they(and many others who have been waiting out the last few years) will start drilling again once 2018 begins. 
At this post:
Well, looks like I get to sweat it out for 3 weeks and hope JMU doesn't repeat........ 
At this post:
See that power prices were over $500 a megawatt hour this morning.

Zero Hedge -- December 30, 2017 -- Wow, Talk About Great Timing (I Guess)

I don't know if things have changed, but a year ago or so, CLR broke ranks with many of the other shale oil operators and went "naked" -- stopped all hedging. Yes, here it is -- back in late 2014 over at Reuters.
WILLISTON N.D. (Reuters) - Harold Hamm, the chief executive of North Dakota oil producer Continental Resources Inc, has stunned a bearish crude market by scrapping all of the company’s hedges - a bold bet that prices will recover soon after sliding some 25 percent.

In so doing, Hamm, who last month called OPEC a “toothless tiger”, appears to be bracing for a price war with the world’s biggest exporter, Saudi Arabia. The OPEC-leader and other key members of the oil exporter group have so far shown no real sign of moving to cut production to lift prices.

Conventional wisdom among oil analysts is that Saudi Arabia, frustrated by a global supply glut caused by soaring output in the United States, is prepared to let prices fall to squeeze U.S. shale oil producers out of the market.

We have elected to monetize nearly all of our outstanding oil hedges, allowing us to fully participate in what we anticipate will be an oil price recovery,” Hamm said in a statement on Wednesday when the company posted third-quarter results.
The price war with OPEC began in November, 2014, when Saudi Arabia announced it would flood the market with oil, in a not-too-weil-veiled attempt to crush US shale operators.

This week, from Bloomberg: as oil rises, shale drillers with few or no hedges stand to gain.
As the price of oil rises, heavily-hedged shale drillers may find it harder to meet investor demands for payback, boosting the value of producers that haven’t locked in returns for future production.
When West Texas Intermediate breached $60 a barrel, it was good news generally for U.S. shale producers. But the higher the price, the less gain will come to companies that hedged their production as crude held below $55 for 10 months of the year.
At least 60 percent of next year’s crude output has been hedged, more than in previous years, according to RBC Capital Markets LLC. The result: Rising crude prices will boost the profile of companies with fewer hedges, according to a report by Cowen & Co. Among the winners:  EOG Resources Inc., Anadarko Petroleum Corp.,  and Continental Resources Inc.
Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or think you may have read here.

By the way, google "Continental Resources" naked ends all hedges to see all the nay-sayers with regard to CLR's decision back in 2014 - 2015.

Zacks On NOG
Why Northern Oil and Gas (NOG) Could Be Positioned for a Surge 

See disclaimer above. From Zacks:
Northern Oil and Gas, Inc. NOG is an exploration and production company that could be an interesting play for investors. That is because, not only does the stock have decent short-term momentum, but it is seeing solid activity on the earnings estimate revision front as well.

These positive earnings estimate revisions suggest that analysts are becoming more optimistic on NOG’s earnings for the coming quarter and year. In fact, consensus estimates have moved sharply higher for both of these time frames over the past four weeks, suggesting that Northern Oil and Gascould be a solid choice for investors.

In the past 30 days, one estimate has gone higher for Northern Oil and Gas while none have gone lower in the same time period. The trend has been pretty favorable too, with estimates increasing from 1 penny a share 30 days ago, to 2 cents today, a move of 100%.

Current Year Estimates for NOG Meanwhile, Northern Oil and Gas’ current year figures are also looking quite promising, with one estimate moving higher in the past month, compared to none lower. The consensus estimate trend has also seen a boost for this time frame, increasing from 4 cents per share 30 days ago to 5 cents per share today, an increase of 25%.
All I can say is this: if one is a trader (not an investor) in oil and gas, one must be very, very nimble and prepared for significant volatility.

Global Shale Reserves -- December 30, 2017; Another Win For Trump

From The Wall Street Journal, global shale reserves as estimated by the EIA:

One can see how conservative these estimates are. Some have suggested with 10% primary recovery (which now appears to be low) and 500 billion bbls original oil in place, the Bakken alone has 50 billion bbls recoverable shale oil. Yes, I know. Don't get me started.

Also: "The numbers from the rather dated US Energy Information Administration-commissioned study are estimates of technically recoverable RESOURCES, NOT RESERVES. One might expect a financial paper to know the difference.." -- Comment at the linked article.

The earliest the Russians will start seeing significant shale oil production is the mid-2020's according to the linked article, at which time it will account for about 2.5% of Russian crude oil production.

Bottom line: a story well ahead of its headlights.

ObamaCare: Another Win For Trump

From The Wall Street Journal today:
A federal judge in Washington ruled the Trump administration can make sharp cuts to subsidies Medicare pays some hospitals for pharmaceuticals, a blow to the American Hospital Association and others fighting in court and Congress to halt the reductions.
The hospital association and two other health-care trade groups had filed a lawsuit against the Department of Health and Human Services in an attempt to stop the cuts. But U.S. District Judge Rudolph Contreras on Friday dismissed the case, saying the plaintiffs cannot sue before exhausting other avenues to challenge the cuts, as required by law. The other trade-group plaintiffs were the Association of American Medical Colleges and America’s Essential Hospitals.
Judge Contreras’s ruling means Medicare can proceed with the cuts, scheduled to start Jan. 1. The administration estimates the cuts will reduce annual drug spending by Medicare and beneficiaries—who pick up some of the cost of certain drugs—by about $1.6 billion.
Flat out, this is a win for patients,” said Rena Conti, a University of Chicago associate professor who studies health policy.

Russian Shale: Bazhenov -- December 30, 2017

Back on December 8, 2012, this from the blog:
I've often said that the Bakken is now the "gold standard" for oil companies. This lede caught me by surprise:
Can Roseneft and Exxon Mobil help make Siberia more like ... North Dakota?
I kid you not. Page B16, WSJ, "Heard on the Street."  The article goes on:
When the Kremlin's oil champion and Big Oil's biggest sealed a strategic alliance in 2011, tight oil was little more than a footnote to ambitions in the Russian Arctic. But Friday's announcement of a deal to explore the enormous Bazhenov deposit makes Western Siberia suddenly much more important.
Like the Bakken shale under North Dakota, the Bazhenov is thought to contain vast oil reserves trapped in tight rock formations. At 570 million acres, its land mass is the size of Texas and the Gulf of Mexico combined, according to Sanford. C. Bernstein. Bazhenov could hold between 60 billion and 140 billion barrels of oil, and production could approach one million barrels a day, or around 10% of Russia's total, by 2020, analysts say. Commercial production in the Arctic will only just be getting started by then. [For newbies: the Bakken, much, much smaller, could hold 500 billion bbls of oil; without political interference the Bakken will easily hit one million bbls of oil per day; and that is about 12% of current US domestic production. Just putting things into perspective.]
Now, a front page story in The Wall Street Journal today:
This western Siberian oil field is called “Red Lenin,” but its reserves have a distinctly American ring: shale.

The future of the Russian oil industry could lie in the vast Bazhenov shale formation, the largest in the world. Russia has become the biggest global producer of crude oil with almost no contribution from shale, a sometimes technically difficult and expensive resource to pump.

Only Americans have really gotten shale right so far, but the Kremlin is taking the first steps to unlock Russia’s potential.

Companies like PAO Gazprom Neft GZPFY -1.08% are leading Moscow’s drive to replicate the U.S. shale boom, experimenting with a uniquely Russian state-controlled approach to fracking that contrasts with the free-for-all among independent producers in Texas and North Dakota.

“The Bazhenov is a huge prize,” says Alexei Vashkevich, Gazprom Neft’s exploration director.
And, yes, this field/formation has been linked at the sidebar at the right since 2012.

Reason #5 Why I Love To Blog -- December 29, 2017

On December 22, 2017, I wrote:
Not-ready-for-prime-time e-mail to a reader yesterday:
Know who is going to make a killing on the new tax plan?

Warren Buffett.
Today, over at Investopedia:
In fact, Berkshire may be the biggest winner overall from the Trump tax cut, per Barron's, quite ironic given that Buffett was one of the president's most vocal critics during the 2016 campaign.

he corporate tax cuts recently signed into law by President Trump, coupled with gains in Berkshire's equity investments and strong results from its operating divisions, could give Berkshire's book value a 13% boost in the fourth quarter, Barron's estimates.

Berkshire's outlook for 2018 is bright, Barron's adds, with a combination of solid economic fundamentals and a reduced federal income tax rate leading them to estimate that 2018 EPS easily will surpass $12,000 per class A share.

Given Thursday's close of $299,210 per share, that implies a forward P/E ratio of 24.9. Additionally, Barron's projects that Berkshire's book value per share will end the fourth quarter at about $211,000, giving it a price to book ratio of 1.4. 
Disclaimer: this is not an investment site. Do not make any investment, financial, job, relationship, or travel decisions based on anything you read here or think you may have read here.

For investors, 2017 was an incredibly good year. It's hard to believe that 2018 could be any better, but with:
a) the tax cuts; and,
b) the infrastructure bill
it's possible.

Speaking of Berkshire, one year ago, BRK-B, $163.83. Today, $198.22.
  • 198.22 - 163.83 =  34.39
  • 34.39/163.83 = 21%
Good, but perhaps not great. For 2017.