RBN Energy: Rocky Mountain bets on Canadian crude beat waxy wagers.
Rockies refineries have enjoyed higher margins than their counterparts anywhere else in the U.S. except California over the past four years, despite being typically smaller and less sophisticated plants. Attractive margins resulted in new investment by their owners — concentrating on the flexibility to process different crude types rather than just boosting capacity — because regional product demand is relatively stagnant. Today, we describe how some of those investments have paid off handsomely so far while others aren’t looking so savvy.
Previously, we detailed record 3-2-1 crack spread margins for refineries in Petroleum Administration for Defense District (PADD) 4 over the past four years, with refiners in the Rocky Mountain region processing imported Canadian crude enjoying the highest average returns in the country and those processing domestic crude performing second only to California. The main reasons for the robust performance of Rockies refineries, which are less complex than those in other regions, were access to abundant crude supplies and higher-than-average prices for refined products. In this second installment, we take a deeper look at the success of two Rockies refinery upgrade plays in recent years.NOG earnings: fourth quarter highlights --
- daily production in the fourth quarter exceeded prior guidance, increasing 9.3% sequentially and 22.3% year over year to average 16,742 barrels of oil equivalent per day, for a total of 1,540,237 boe Northern beat its prior expense guidance with lower production expenses, production taxes, and general and administrative expenses on a per Boe basis
- fourth quarter oil differential was $3.51 per barrel, an improvement of $2.71 per barrel compared to the third quarter
- Northern added 7.1 net wells to production during the fourth quarter, bringing year-to-date well additions to 16.9 net wells
Flashback? USGS -- how much oil and gas is actually in the Bakken Formation?
- USGS estimated that there may be 4.4 to 11.4 billion bbls of undiscovered, but technically recoverable oil in the Bakken formation (2013 survey)
- mean estimate of 7.4 billion bbls
- approximately 450 million bbls of oil were produced from the Bakken and Three Forks formations between 2008 and 2013
- ratio: 7.4 billion bls/ 450 million bbls over six years = 16.4
- today: 2,190 million bbls (over six years) x that ratio = 35,916 million bbls (35 billion bbls)
- 35 billion bbls is very much in the ballpark of 50 billion bbls (10% primary recovery of a 500-billion reservoir)