Tuesday, July 31, 2018

Three DUCs Reported As Completed -- July 31, 2018; German Nuclear Reactor Damaged During Ramp Up To Back Up Renewable Energy

Fast and furious: we'll come back to these stories later, as time permits --
  • Apple, Inc: best "June" quarter ever; AAPL should hit $200/share by end of August; when it hits $203/share, Apple's market cap is $1 trillion dollars; Amazon market cap is about $870 billion;
  • huge US crude oil inventory build, API: WTI slumps -- a build of 5.95 million bbls -- that's a pretty big build during height of US driving season; EIA reports tomorrow
  • critics want US military to buy less Russian oil; as much as 40% of oil used at US installations in Europe is -- OMG -- Russian oil -- truly amazing, huh? I thought US / Trump was being tough on Putin -- all talk?
  • peak oil? what peak oil? Guyana elephant bigger than initial estimates
  • nuclear reactor damaged during ramp up to back up renewable energy
Nuclear energy demand in Germany fell by nearly 11% in 2017. One reactor was shut down at the end of December, but that decrease was only slight. A bigger factor was the extended downtime at Brokdorf, a reactor that made history last year by being the first nuclear plant to shut down specifically because of damage caused by ramping. Other reactors, such as France’s Civaux, have also experienced difficulties possibly related to load-following, but ramping was never clearly reported as the cause for any other reactor -- a reader sent me that -- neither of us could make that up -- 
Back to the Bakken

Active rigs:

Active Rigs63613574193

Three new permits:
  • Operator: WPX
  • Fields: Squaw Creek (McKenzie); Heart Butte (Dunn)
  • Comments: 
Five permits renewed:
  • EOG (3): three Hawkeye permits in McKenzie County
  • Statoil: a Martin permit in Williams County
  • Enerplus: a Wallaby permit in McKenzie County
One permit canceled:
  • Abraxas: a Lilli-George permit in McKenzie County
Three producing wells (DUCs) reported as completed:
  • 32755, 1,400, XTO, Bear Creek 31X-3BXC, Bear Creek, t5/18; cum 31K 6/18;
  • 32756, 1,223, Bear Creek 31X-3F2, Bear Creek, t5/1; cum 21K 6/18;
  • 33257, 1,649, Whiting, Wold Federal 44-7-6TFXH, Banks, t7/18; cum -- (#19468)
One permit reinstated:
Hess: a CA-Anderson Smith permit in Williams County

AAPL -- Crushes Estimates -- Shares Surge -- Best June Quarter Ever -- July 31, 2018


August 2, 2018: Wall Street Journal when Apple hits $1 trillion market cap.

Original Post

3:44 p.m. CDT: shares up over $5.00 / share.


It's 3:30 p.m. -- do you know what Apple's earnings are?

Somebody knows something. Shares jump. Up $3.99 before CNBC announced.
  • holy mackerel -- every number is incredible:
  • EPS: $2.34 vs $2.18
  • revenue beat: $53.27 billion vs $52.34 billion
  • average selling price of iPhone incredible
  • guidance, for next quarter: $60- $62 billion
  • 38% gross margin guidance 
  • Cook: underlying demand is even greater 
  • iPhone X most popular version in urban China
  • $724 average selling price -- $30 above Wall Street estimate -- huge
  • Chinese growth, 19%
  • global services growth: 31% 
  • cash hoard falls $23.5 to $243.7 billion
  • iPhone shipments for the quarter down slightly; remember: Apple getting ready for huge new release of new iPhones -- including one to replace the iPhone X
Pre-release share action:
  • AAPL closed slightly up during regular hours, but essentially flat --
  • AAPL is up slightly after hours, but essentially flat --
  • because the movement on AAPL was so minimal during regular hours and now after hours, less than 30 minutes before earnings announcement, my hunch: AAPL is going to move $3 to $5/share one way or the other once the numbers are released (posted, 3:19 p.m. CDT, July 31, 2018); if history is any guide, AAPL will drop $3/share (or more) once earnings are released
  • if shares drop today, AAPL shares will gradually recover over the next few weeks
  • if shares jump today, AAPL shares will continue to surge through the end of the week
Pandora: Leading up to release of Apple's earning: Pandora -- (posted 3:12 p.m. CDT, July 31, 2018)
  • shares surge 5%; shares have dropped about 25% this past 12 months
  • active listeners (subscribers) greater than expected
  • revenue beat: $384 million vs $373 million forecast
  • EPS beat by one penny: a loss of 15 cents vs a forecast of a loss of 16 cents
  • I don't believe Apple breaks out Apple Music data
  • an increase in Pandora listeners is a good omen for all music platforms
Cheesecake Factory: "Penny, Penny, Penny -- what happened?" asks Sheldon.  Cheesecake Factory reports a huge miss; shares down 5% in after hour trade. Adds to 2% loss during regular hours.

Apple -- Before Earnings Release

Some of this was previously posted.

Earnings forecast: $2.18. Range: $2.10 - $2.28/share.

The third quarter earnings for past years have been circled in the graphic below; easy to read.

But let's look at revenue (link here):
  • average: $52.34 billion
  • range: $49 - $53.49 billion
  • $52.34 billion will be the best quarter ever except for first quarters which is always Apple's best quarter, with three exceptions:
    • 4Q17: $52.6 billion
    • 2Q17: $52.9 billion
    • 2Q15: $58 billion -- iPhone 6 and IOS 8.0 released in September, 2014, perhaps the biggest update since the iPhone was first released
If AAPL meets consensus, it will be the second best showing for the 3Q in the last several years:

Brent Crude Has Biggest Monthly Drop In Two Years -- CNBC -- July 31, 2018

Brent crude has biggest monthly drop in two years -- CNBC -- crawler, 1:38 p.m. CDT, July 31, 2018.

I don't know how accurate that CNBC crawler is but that is what is being reported.

Generally, Saudi Arabia / OPEC needs to adjust their prices relative to WTI and Brent. If Brent crude had its biggest monthly drop in two years, one would assume Saudi Arabia's OSP (official sales price) will also have to drop. Saudi Arabia extra light is selling for $75.65; it's heavy oil is selling for less, $72.90. 

This is an oilprice screenshot of crude oil prices for selected crude oils:

Note: OPEC basket dropped only 16 cents from yesterday, but crude oil prices have been very volatile today.

Saudi Arabia: from a July 29, 2018, post:

Saudi Arabia says it needs $70 oil. I assume Saudi Arabia is "talking their book" and, in fact, needs a lot more than $70 / bbl of oil. My hunch is that they need $80 (maybe more) to break even. Look at that deficit -- historical, tectonic move -- and the sizer of the projected GDP decline is unprecedented and staggering.

Iran: Iran's rial is in free-fall. Previously posted but a new link here. Note: sanctions have not even gone into effect yet --
Iran’s currency plunged to another record low on Sunday, dropping past 100,000 rials to the U.S. dollar as Iranians brace for Aug. 7 when the United States is due to reimpose a first lot of sanctions on their economy.
Bottom line: I think both Saudi Arabia and Iran are in deep, deep trouble, much deeper than they are willing to admit, but each for different reasons. As despotic regimes, it matters not to their leaders how severely affected their citizens are, but food for thought:
  • Saudi Arabia can probably handle protests, civil disobedience; Iran probably cannot
  • Arab funding for Palestine will drop off a cliff
  • Iran's ability to fund conventional terrorism and nuclear weapon development will be strained and constrained
  • Russia not in a position to provide much financial aid to Iran
  • US has deep pockets with which to protect Saudi Arabia militarily
Weekly API Data

US crude oil API inventory data will be released at 3:30 p.m. CDT (link).


CNBC crawler: US and China seek to restart trade talks - report.

When It Comes To Renewables, We Never Seem To Get The Full Story -- July 31, 2018

I often use the "formula" that 1 MW of electricity will "supply" 1,000 US homes. Apparently I am "way wrong."

From Boiseweekly:
In another life, I was a business reporter, and one of my beats was energy. When writing those stories, I almost always used the handy formula 1 MW = 1,000 homes. I probably would have continued using it if not for a startling number from Idaho Power: If all of the solar projects currently planned in Idaho come to fruition, nearly 2,000 new MWs of energy would begin flowing onto the grid in 2016. According to my math, that would be enough to supply 2 million homes, or 400,000 more homes than there are people in the state of Idaho. It would keep the lights on in almost every U.S. Census-designated housing unit in Cook County, Illinois (which includes the Chicago Metro Area). It could supply Seattle residents six times over.

That couldn't be right.

Then we learned not all MWs are created equal. According to the Solar Energy Industries Association, the number of homes powered by a MW of solar energy depends on average sunshine, electricity consumption, temperature and wind. Nationally, that's 164 homes per MW—a far cry from the ratio of 1 MW:1,000. Website commodities-now.com has a more precise—and circuitous—way of finding how many homes are supplied by a MW, with a formula that includes regional yearly average usage, the type of power plant and how efficient it is. The spread ranges from 400-900 homes per MW hour, with coal at 60 percent capacity or more, and solar at less than 25 percent. So 1 MW of solar could equate to 164 homes; 400-900 homes; or 1,000 homes.
The author completely failed to mention the concept of dispatchable energy. 

The above discussion has to do with rotating turbines or sunshine-fueled solar panels. If the wind stops and/or it's the middle of the night, .... well, you get the idea ...

A completely different discussion has to do with battery storage of renewable energy. When someone says they have a battery that can store 2 MW of electricity, one can assume 1 MW will support 1,000 US homes. The next question is "for how long?"

I was not able to find the answer in this article. Of course, in this case, the battery-stored-electricity is not to meet entire demand but to simply provide a bit of extra "oomph" during high-peak, high-cost periods. Proponents of this project suggest consumers will save money.

The next question, then, of course, how much would be saved by the average consumer. Can't find that answer in the article.

Something tells me gullible council members of South South City, Nebraska, were sold a "white elephant," as they say. 

Off The Net -- Going Biking -- July 31, 2018 -- Contenders For Non-Operating Company In The Bakken This Year

Sophia and I are home alone for the next four days. Everyone is out of town this week.

Sophia spends her days at Tutor Time, 9:00 a.m. to around 4:00 p.m. everyday. During those hours I am free.

I start getting her ready for her day around 7:30 a.m. and so I can blog between 5:00 a.m. and 6:30 a.m. but after that I am off the grid until about 9:00 a.m.

After I pick her up, my time on the net is erratic and unpredictable. We generally go swimming for one hour, and then a small snack. Then an outing for an hour or so, and then back home. She will expect my full attention for an hour or so after we get home, but by 9:00 p.m. I should be able to get back to blogging.

When I am off the net, I am also unable to respond to e-mail.

All times are CDT, as is Chicago, which is one hour "behind" NYC.

I see NOG is up 9% right now.

Non-operating company in the Bakken this year, contenders:
  • W Energy Partners
  • NOG

Geo News Articles: ND Sand For Fracking; And, Duperow / Birdbear Updates -- July 31, 2018

Don sent me these links from current issue of Geo News. I haven't read them closely yet, but readers may find them interesting. I will get to them later today / this evening / overnight.

Depending upon how your system is configured, these links may "open up" on your desk top. They are PDF files. 

First: ND's Eolian sands for fracking?

Second: update on the Birdbear / Duperow formations


Quick scan of the Birdbear / Duperow article fails to mention type of oil. I assume sweet, light. The Duperow is tracked here / linked at the sidebar at the right. The Birdbear is tracked here / also linked at the sidebar at the right.
A quick look at the "sands" article garners these comments:
  • not gonna happen in ND
  • too little
  • this is just an update by the NDGS; more to follow
  • largest deposit in agriculturally-rich area southwest of Fargo -- and that's why it's not gonna happen
Notes to the Granddaughters

Highlight of the day for me: spotting a pair of woodpeckers in our backyard this morning.

I was unable to identify the specific type, but based on the huge amount of redness on the crown, they did not appear to be the "usual" Texas variety. If I'm wrong, they were ladder-backed woodpeckers, but I really don't think so. They most closely resembled pileated woodpeckers. It is said that pileated woodpeckers like huge sturdy trees, and these birds were only on the huge, sturdy trees in the back yard. But pileated woodpeckers are a northeastern USA bird, not Texan. Maybe on vacation? Pileated woodpeckers are found in eastern Texas piney forests, apparently.

Possibly the ivory-billed woodpecker, considered extinct, no verified sighting in over 50 years,

I remember reading about the ivory-billed woodpecker in The New Yorker many years ago -- here's the link. Wow, that was in 2001 -- eighteen years ago. We were still in the USAF -- moving from Virginia to Texas about that time.

AAPL Earnings Today After Market Close -- Your Guess -- July 31, 2018

This will be quick.

Your thoughts re: AAPL earnings today, regarding revenue, EPS --
  • both beat estimates
  • both miss estimates
  • one beats; one misses 
I guess there's a fifth choice, "in-line." I forgot to include that. Sorry. Not going to go back and correct that. 

See poll at sidebar at the right.

My hunch:
  • EPS: in-line -- within 2 cents either way (though, of course, the analysts will consider it a miss if even by a penny -- so I'm sort of cheating;
  • revenue: that's a tough one; if one thinks analysts are too focused on iPhone, then revenue will beat estimates; so, I will go with "slight beat" on revenues

The Market, Energy, Political Page, T+61 -- July 31, 2018

The market -- wow! All indices are green.

WTI: wow, down 2.2%;

  • ENB: up half a percent; paying just under 6%;
  • EPD: flat; paying 6%;
  • ETP: profit taking, down 1%; paying almost 12%;
  • TransCanada (TRP): up 1%, paying 4.8%;
  • KMI: flat; paying 4.4%
  • WMB: down about a third percent
  • BRK-B: down about a percent
  • NOG; was up 5% yesterday, now up another 5% -- astounding, considering
  • TSLA: up slightly but should be up a lot more considering it's $8 below $300 -- for this trading stock
  • COP: flat -- currently of the majors, it's fun to follow COP, CVX, Shell -- whether or not invested in them
  • CVX: flat
  • RDS-B: up half a percent
  • SHPG: about about a percent
  • EW: flat
  • XLNX: down about a percent
  • S: down a percent
  • UNP: up 1.5%; flirting with 52-week high; paying 2%
Solar panels are going to get really, really cheap: an unexpected windfall for US solar. The bigger story is why: China is ending solar panel subsidies. China has seen the light, and it's not solar energy. It's nuclear (for China); natural gas; and coal, pretty much in that order, short term/long term.

That 4.1% GDP growth in 2Q18: three words -- oil. gas. boom. Link here.

Recession: everyone's talking about the next recession -- even Jamie Dimon talked about it, yesterday. Said it won't happen in 2019. Could happen in 2020, later. Hellooooo --- it's an open book test ... when we go into a full-fledged recession ... veryone in DC will know exactly when the market will correct. In fact, Mueller probably knows best. In fact, we might know as early as early-November, 2018. Market corrections can occur overnight. Recessions, by definition, I believe, require two consecutive quarters of negative growth.

Race To Build Crude Oil Export Terminals Off Texas Coast -- July 31, 2018

BP: profit surges --
  • hikes dividend for first time since 2014
  • underlying replacement cost for 2Q18: almost $3 billion -- quadruple the figure year-over-year 
  • BP brought on seven major projects in 2017, as well as three that have been brought online this year in Russia, Egypt and Azerbaijan and another three to go before the year's end
BP: from twitter --
BP's muscular trading arm posted a rare loss in the second quarter. They were reported to be on the wrong side of the Brent-WTI blowout in early June.

Back to the Bakken

Wells coming off confidential list today:
  • 34024, 906, NP Resources, Gracie State 142-100-21-16-2H, Tree Top, Three Forks, 35 stages; 4.4 million lbs, t2/18; cum 65K 5/18;
  • 33366, SI/NC, WPX Energy, Hidatsa North 14-23HZ, Reunion Bay, no production data,
  • 31519, 1,535, CLR, Lansing 9-25H,Banks, 54 stages; 8.9 million lbs, t3/18; cum 93K 5/18;

Active rigs:

Active Rigs63613574193

RBN Energy: contenders in the race to build crude oil export terminals off the Texas coast.
As Gulf Coast marine terminal owners consider ways to at least partially load Very Large Crude Carriers (VLCCs) at their facilities, a handful of midstream companies also are planning offshore terminals in deep water that would allow the full loading of VLCCs via pipeline.
Projects under development by Oiltanking and others for sites along the Texas coast would appear to have at least two legs up on the Louisiana Offshore Oil Port, or LOOP. For one, they’d have more direct access to the Permian, Eagle Ford and other crudes flowing to coastal Texas. For another, the new terminals would be focused on crude exports — no double-duty for them. Today, we begin a review of the projects vying to be the first LOOP-like project in the deep waters off the Lone Star State.
U.S. crude exports hit the 3-MMb/d mark a few weeks back (the week ending June 22), and while they’ve since retreated slightly, there’s every reason to believe that export volumes will be ratcheting up in the months and years to come. They’ll almost have to, really.
The three production-forecast price scenarios that we assessed in our most recent update — crude prices flat at $70/bbl or $55/bbl to 2023, or (like the forward curve) ramping down to $55/bbl over the next five years — would result in crude production growth of between 2.0 MMb/d (under the flat-at-$55 scenario) and 5.0 MMb/d (under the flat-at-$70 scenario). That’s on top of the 11 MMb/d the U.S. is already producing, which is twice the 5.5 MMb/d rate back in 2010.
U.S. refineries already are operating at close to full capacity with a mix of domestic and imported barrels that fits their hardward (sic) configurations, cranking out increasing volumes of gasoline, diesel and jet fuel for export, and while at least a few refinery expansion projects are being planned, they would only be capable of absorbing a small portion of the incremental crude production we’re likely to see.
So export the U.S. must.

NOG Announces Largest Aquisition In Its History -- 10,600 Acres For $300,000,000


October 1, 2018: NOG announces that acquisition of W Energy has closed.
The acquired assets consist of approximately 27.2 net producing wells and 5.9 net wells in progress, as well as approximately 10,633 core net acres in North Dakota, which the company estimates will provide approximately 51.9 net future drilling locations. 
 Closing consideration consists of approximately $114.8 million in cash and 51,476,961 shares of Northern common stock.
Original Post
Please go to link instead of reading this post -- this link takes you to the press release.

Breaking: after announcement, in pre-market trading, NOG is up over 4% after being up over 5% yesterday.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

Disclaimer: please go to link instead of reading this post. I have combined notes from the press release with my own calculations. I am known to make simple arithmetic errors and make assumptions that are incorrect, or misread something. I will adjust the data below as more information becomes available. In a long note like this there will be typographical and factual errors. 

Press release. Data point
  • definitive agreement with W Energy Partners
  • largest acquisition in NOG's history
  • 6,750 boepd production ($40 x = $270,0000 daily, or about $8 million / month)
  • 10,600 net acres "in the core of the Williston Basin"
  • $100 million and 56.37 million shares
  • $3.40 x 56.37 million = $191 million, let's call it $200 million
  • $300 million / 10600 =  $28,000 / acre (compare with previous acquisition, upwards of $40,000 / acre)
  • with recently announced Pivotal acquisition "will allow NOG to generate significant free cash flow and substantially reduce leverage" --Pivotal acquisition? See below.
  • currently 295 million shares outstanding 
  • 56.37/295 = 19%
  • cash on hand: $90 million
  • debt: about $1 billion 
  • current revenue: about $238 million
  • announcement prior to market open; futures not yet posted for NOG
  • it's very possible, W Energy picked up their acreage in ND for $2,500 / acre or less than $30 million total, and now selling / flipping for $300 million
2Q18 production
  • preliminary estimate of production exceeded expectations
  • increased 52% year-over-year
  • increased nearly 17% sequentially
  • now averaging approximately 21,045 boepd
CY18 cash
  • expects to exit 2018 with free cash flow
  • expects to have approximately $100 million in cash at end of year
The Pivotal Acquisition 

From the blog, July 18, 2018 -- just earlier this month
NOG: announces acquisition of producing wells, about 4,100 boepd; $68.4 million in cash plus 25.75 million shares (x $3.40 = $88 million) for a total of about $150 million. Net acreage not mentioned. Recently, NOG paid upwards of $40,000 / acre. NOG also announced it has reduced annual interest payments by over $5 million and will reduce overall debt by over $63 million through a new deal and other agreements. The most recent deal: exchange 8% senior unsecured notes due 2020 by issuing over 3 million shares of common stock; this will reduce debt by almost $10 million. In pre-market trading, NOG was up almost 5%, trading near $3.40. It's 52-week high is $3.72.
The Seller

W Energy Partners: from Oil & Gas Journal, June 8, 2016:
W Energy Partners has been formed as an exploration and production company seeking to acquire nonoperating working interest in acreage and production in the Williston basin.
Crestview Partners III LP, New York, and affiliated private equity funds will invest as much as $150 million in W Energy, which is based in Dallas.
John Wunderlick, the new company’s chief executive officer, formed a predecessor company, W North Fund LP, in 2011. Earlier he worked in land and business development at Petro-Hunt LLC.
Shane Hannabury, W Energy president, was a partner in the predecessor company and earlier worked as an investor at EnCap Investments.
Comment: in late 2014, and extending through 2016, only recovering in early 2017, the Saudis made their $1 trillion mistake, flooding the market with oil. The price of oil plummeted and the oil sector in the Williston Basin went into a tailspin. It seems to me that W Energy Partners came together at exactly this time to take advantage of a huge, huge opportunity, buying mineral rights, acreage, assets at rock-bottom prices. If my hunch is correct four thoughts:
  • these guys were really, really paying attention
  • these guys knew the underlying value in the Williston Basin
  • these guys knew that the "recession/depression" in the Williston Basin was going to be short-lived 
  • comparisons with the Permian begin again
Since 2012

NOG (from "Bakken Operators")
  • July 31, 2018: NOG to aquire 10,600 acres for $300 million; $28,000 / acre; W Energy deal
  • July 18, 2018: NOG to acquire "large package of producing wells" from Pivotal Petroleum Partners; appears no acreage involved?
  • April 26, 2018: NOG acquires 1,300 incredibly good Bakken acres for an incredible $49 million ($40 million in cash; 6 million shares in NOG)
  • March, 2018: $120 million public offering; NOG to raise $120 million in new public offering? Mostly for acquisition and drilling program. If acquisition alone, in North Dakota, back-of-the-envelope: $120 million / $2,000-acre = 60,000 acres. My last update shows NOG with 145,000 net acres (2017); has had as much as 180,000 net acres (2012)
  • 3Q17: 145,749 net acres; link here16,285 bopd in 2015; 165,000 net acres in 2015;
  • 1Q17: 13,299 boepd; EURs tracking 1 million boe; 30-day IPs now (2016) average 1,485 boepd; net income for 1Q17 was $16.9 million; adjusted net income was a loss of $0.1 million; adjusted EBITDA for the quarter was $29.6 million
  • 1Q14: 13,287 boepd (20% increase q/q); 185,000 net acres (company's press release);
  • 2013 average: 12,261 boepd; 187,000 acres.
  • 3Q13 press release: 13,000 boepd;
  • March, 2013 update: 12th largest leaseholder in the Bakken; 180,000 net acres; 106 net wells; currently drilling 157 gross (12 net) wells); proved reserves, 68 million boe; still says has potential to acquire 3,000 to 5,000+ acres/quarter; I don't see much change since last presentation.
  • 4Q12 update: 10,000 boepd; 106 net wells; 
  • November, 2012, corporate presentation: 184,000 net acres;
  • 2Q12: 180,000 net acres; average cost: $2,184/acre for most recent 7,060 net acres in key prospect area; 16 net wells in 2Q12;
  • June corporate presentation: 177K acres; average cost: $1,832; $15 - $20 million/quarter in 2012 for acreage acquisition
  • 1Q12 results: 173,000 net acres; average cost: $1,672/acre; acquired 10,278 net acres in 1Q12; 
Comments / Back-of-the-Envelope Calculations Re: The W Energy Partners Deal

NOG says it will have positive cash flow by end of 2018 and $100 million in cash due to the new acquisition, if I recall correctly.  Is that possible -- cash flow positive?

Disclaimer: I know very little about reading financial statements, balance sheets. It's possible I mis-read / did not understand the corporate presentation. Some assumptions were made.

NOG's February, 2018, corporate presentation at this link. At the link, click on the February, 2018 presentation for the PDF.

The numbers:
  • production
    • before the transaction, NOG said it was producing 21,000 boepd 
    • NOG says the W Energy transaction adds 6,750 boe
    • adds up to about 28K boe; let's say 30K boepd
  • revenue
    • revenue: $50/boepd x 30,000 boepd = $1.5 million / day  = $550 million / year
  • debt
    • debt before the announced W Energy Partners deal: $980 million
    • cash for W Energy Partners deal: $100 million
    • debt after the deal: $1.080 billion
  • debt servicing
    • 8% x total debt = $86 million -- slide 28 of the February, 2018, corporate presentation says NOG's interest expense is $70 million
  • 2018, after recently announced acquisition: $90 million (my estimate)
  • 2018, before newest acquisition: $86 million (my estimate)
  • 2017, $70 million (NOG presentation)
  • 2016, $65 million (NOG presentation)
  • 2015, $58 million (NOG presentation)
  • 2014, $42 million (NOG presentation)
  • 2013, $33 million (NOG presentation)
  • non-debt annual costs
    • capital expenditures, 2018 guidance range (slide 14 of February, 2018, presentation): $150 million
    • LOE and G&A: $11/boe * 30K boepd = $120 million
  • so, recapping those number -- major expenses, yearly, roughly:
    • CAPEX: $150 million
    • LOE, G&A: $120 million
    • Debt servicing: $90 million / year
  • total, major expenses: $360 million  / year
  • revenue: $550 million /year
  • this is all before taxes 
  • shares
    • outstanding, before the W Energy transaction: 295 million shares
    • W Energy acquisition adds 56 million shares
    • total outstanding shares after the W Energy acquisition: 350 million shares
  • P/E
    • EPS: [revenue before taxes ($550 million) - major costs ($360 million)] / 350 million shares
    • $190 million / 350 million shares = 55 cents / share
    • P/E = shares today / EPS = $3.70 / $0.55 = 7 
  • obviously this is way, way off, but it gives me a starting point from which to work
  • Oasis (OAS) has a P/E of 30 (July 31, 2018)

Wow, I Hate Waking Up At 1:00 A.M. To Post This But My iPhone Is Pinging With Alerts -- July 31, 2018

I saw the story earlier today but I'm so tired of the Keystone XL story I did not want another stand-alone post on the subject but something tells me if I don't post this story as a stand-alone, 37 readers are going to write me. So, here it is: the US State Department gives a "positive" environmental impact statement for the Keystone XL's new route through Nebraska.

A reader has also provided an even better article which includes a map of the new route, from the Lincoln (Nebraska) Journal Star (which I bet is owned by Berkshire Hathaway).

Really? This was what the fuss was all about?

The "green" -- mainline alternative -- in the map above s represented by the "rope" in the video below. The individual on the right portrays the Nebraska Supreme Court; and the individual on the left portrays the US State Department:

An Issue of Trust

I posted this story earlier today at a couple of older posts as updates feeling I had done my part at least archiving the story. I felt strongly that the story did not deserve a stand-alone post. I have more important things to do these days. Like check the Dow futures. 

Keystone XL milestones are tagged with this clever tag: Keystone milestones.

I didn't want a stand-alone post on this newest update because it seems we have been here before. My recollection is that under Hillary, the US State Department gave a "positive" report on the original route, but after months of prodding from the mainstream media and the US public (those few who were even interested) Hillary finally flip-flopped (though she claims the flip-flop was not a flip-flop but a nuanced reconsideration or something to that effect) and said she clearly opposed the Keystone XL. At least when she was campaigning in Nebraska and California and New York.

So, here we go again. The US State Department under ... Mr Pompeo (?) ... has signed off on the new route, and now we can expect continued lawsuits, op-ed pieces in The New York Times, fake news on CNN, and waiting with bated breath for the Nebraska Supreme Court to give its opinion which it has promised to do later this year, or if not then, sometime next year (that would be 2019 AD -- at least one reader has asked whether the Keystone XL saga began in BC or AD (BCE or CE).

Back on March 27, 2017 -- yes, more than a year ago, I posted this for the archives.
Trump administration approves federal application for Keystone XL pipeline. It's hard to believe but I had 49 episodes of "As The World Turns" following the Keystone XL story. The 49th episode is at this link.
Wow, this is funny. I put that part about Berkshire Hathaway owning The Lincoln (Nebraska) Journal Star in as tongue-in-cheek. It was a joke. But worried about being accused of fake news, I had my fact checkers look into this.

This is hilarious. The screenshot -- from this link -- otherwise people would think I'm making this up:

Note three items from the screenshot:
  • the date: June 26, 2018 -- like less than a month ago
  • this is the "top story" for that day in this newspaper
  • a picture of the man who says he pays less taxes (on a percentage basis) than his secretary for those who have not seen a picture of him (lately); with Trump's tax reform, my hunch is he pays even less taxes now
But, having said all that, the fact checkers tell me that Berkshire Hathaway does not own the Lincoln (Nebraska) Journal Star. The list of publications owned by Berkshire is at this wiki link. Again, I could be wrong; things change; I miss things. A lot of things.

But deep in the linked story:
Both Lee and BH [Berkshire Hathaway] Media were careful to clarify that this is not a merger or acquisition, and both companies' newspapers will retain local control over their news operations and editorial pages. However, Junck said the agreement does not bar the companies from merging in the future.
Disclaimer: I miss a lot of things.

Incredible Story: CLR's Whitman Wells in Oakdale Oil Field -- July 31, 2018

I originally posted this note over the weekend. A major error was noted by a reader. I found the entire "story" so interesting that I have moved the entire post here.

Hopefully, no errors of substance this time.

This is an incredibly interesting story on so many levels, but  a huge shout out to the roughnecks and the safety team for a successful re-entry in a very dicey operation. This story speaks volumes about the skills, professionalism, can-do attitude of the entire team involved in this operation, and probably indicative of most operations in the Bakken. So without further ado, the new post.


July 31, 2018: huge mistake on my part regarding the Whitman wells. See comment from reader at the original post. Corrections and clarifications have been made -- continue reading.

First correction is easy:
  • 20210, 803, CLR, Whitman 2-34H, Oakdale, API - 33-025-01259; t9/11; cum 1.595 million bbls 5/18; see production profile below; FracFocus: no re-frack; original frack, 24 stages; 2.4 million lbs sand; in addition to the 1.6 million bbls of oil, a cum of 1650315 MCF gas (275K boe natural gas -- so we're talking close to 2 million boe so far;
Second correction (not a correction so much as an update): as the reader noted, the original #20212 was not drilled to planned depth and not completed back in 2011 due to downhole issues. Last summer, CLR went back in, drilled to planned depth and fracked the well. From the file report:
  • spud date: January 19, 2011
  • original TD date: April 23, 2011 -- to 13,681 feet, equivalent to a short lateral
  • re-entry date: July 5, 2017
  • TD date: July 8, 2017 (only three days to drill to depth after re-entry)
  • TD: 21,230 feet
  • an Upper Devonian Three Forks well within the Rocket prospect
  • introduction: Well drilling operations ceased on April 23, 2011, after dangerous levels of oil and gas pressure rendered further drilling unwise at the time. The well has been in production in its incomplete form (13681' MD reached, open hole, no fracking) since that time and has produced approximately 120,000 bbls of petroleum.  
  • this report primarily concerns re-entry drilling information only, as complete data from the original drilling was generated by a different mud-logging company and is at points incomplete. Where available, salient points from the original drilling events have been included.
  • the well plan ... three scenarios were foreseen ... the rig operators prepared for all events, the high-pressure scenario being the most dangerous, but likely manageable...
  • original (back in 2011) drilling efforts ceased at 13681' MD for high (dangerous) levels of oil and gas pressures. As of 2017, these were deemed low enough for re-entry to attempt drilling to the originally planned TD point, hopefully to produce at least moderate amounts of oil, as indicated by original production levels.
  • background gas levels were initially 600 - 1200 units with circulation through the gas buster, which was activated after the first trip gas at 10,000 units. This well had been hard to control when the first segment was drilled in 2011, so all precautions for safety and control were observed.  
  • gas increased to 1800 - 2200 units at 17500' MD, when the formation took a relatively sharp turn and then rolled over, similar to the structure observed from the initial segment and may have signaled a fracture and/or stratigraphic trap of less, but still significant, production as the first one.
  • the Upper Devonian Three Forks formation was intercepted at 11596' TVD ( ~ 8618' SS).
  • it was determined initially that the ideal target would be approximately 15' thick, beginning 15' below the Three Forks top, and extending to 30' below the same reference point.
Original Post 

Is Something Going On With CLR's Whitman Wells?
Yup: A Re-Entry And Frack Of A Well That Was "Aborted" Back In 2011 Due To Dangerous Gas Levels

Section 34-147-96, Oakdale oil field; only three older wells sited in this section. One was off-line for a few months recently and is now back on line; the other two are now off line. FrackFocus will be checked.

The wells:
  • 17061, 664, CLR, Whitman 11-34H, Oakdale, API - 33-025-00723; t6/08; cum 446K 5/18; see production profile below; FracFocus: no re-frack;
  • 20210, 803, CLR, Whitman 2-34H, Oakdale, API - 33-025-01259; t9/11; cum 1.595 million bbls 5/18; see production profile below; FracFocus: no re-frack; original frack, 24 stages; 2.4 million lbs sand; in addition to the 1.6 million bbls of oil, a cum of 1650315 MCF gas (275K boe natural gas -- so we're talking close to 2 million boe so far;
  • 20212, 482, CLR, Whitman 3-34H, Oakdale, API - 33-025-01261; t9/11; cum 181K 5/18; see production profile below; well, isn't this interesting -- yup, this well was fracked 9/23/17 - 10/5/17; 9.8 million gallons of water; 84% water; 15% sand; sundry form in file report: 61 stages; 14.5 million lbs sand; 
The graphic:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

20210 (a huge, huge well):
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Monday, July 30, 2018

Williams Cos Enters The DJ; Exits The Four Corners Area -- July 30, 2018

Link at Oil & Gas Journal.
In two separate midstream transactions, Williams Cos. Inc., Tulsa, has entered Colorado’s Denver-Julesburg (DJ) basin and exited Williams Partners LP from the Four Corners Area (FCA) in New Mexico and Colorado.
Williams and KKR, joint venture, will purchase Discovery DJ Services, Dallas from TPG Growth
  • $1.73 billion
  • WMS: operator; own 40%; over time will get to 50%
  • KKR: 60%
  • Niobrara and Codell stacked-pay zones
  • Weld and Adams counties in Colorado
  • 130 miles of gas pipeline
  • 60 million cf/d (at Reuters)
  • plus much more  
Four Corners Area:
  • will sell Harvest Midstream Co to Hilcorp Energy Co
  • $1.125 billion
  • 3,700 miles of pipeline
  • 1.8 bcfd 

Just one of a hundred things I miss about North Dakota. Photo of the day.

This is what Sophia would be doing if she lived south of Bowman, ND. Wow, what a great photo.

The Decline Rate In The Permian -- July 30, 2018

This is pretty hilarious. Remember all those horror stories about the "decline rates" in the Bakken? I don't hear much chatter about decline rates in the Bakken any more.

But now we're starting to hear about decline rates in the Permian. From Rigzone: Permian decline rate inaccuracies risky for operators, investors. (Journalists show risk of letting others write the headlines):

From the linked article:
The Permian has thousands of vertical wells that have been producing for decades, but the relative immaturity of the Wolfcamp compared to other zones means pure field data for horizontal tight-oil wells goes back just eight years. Because of this, proxy values based on decades-old data from vertical wells and other shale plays have often been used to determine tight-oil terminal decline rates.
“The challenges of modeling tight well estimated ultimate recoveries (EURs) are growing and accurately selecting a representative terminal decline rate is not always straightforward,” Ryan Duman, principal analyst with Wood Mackenzie’s Lower 48 upstream team, said in a release. “It may have been historically, but using those assumptions for today’s Wolfcamp wells in the Permian may contribute to inaccurate volume assessments and valuations.”
While Wood Mackenzie’s analysis shows terminal decline rates for the Permian’s vertical wells is between five percent and 10 percent annually, the most common terminal decline value observed in mature horizontal Wolfcamp wells is 14 percent.
Once the decline rates are adjusted to reflect the more realistic 14 percent scenario, it’s realized that terminal declines are a long-term risk to production. By 2040, nearly 800,000 barrels per day of Permian production is lost.
Much more at the link.

Sounds like the Bakken to me, during the boom. 

A Note for the Granddaughters

One of the traditions with the granddaughters is reading Black Beauty, Anna Sewell, 1877. I first read it to the older granddaughter and then the middle granddaughter. I don't recall Olivia caring for the book all that much, but I must have read the book to Arianna, the older granddaughter, at least three times during pre-school and early elementary grades.

The took follows the life of a single horse from a young horse -- I don't recall if it went all the way back to his life as a colt -- through old age, and how his life changed throughout his life. It was told through the eyes of the horse. It's a beautiful book, a beautiful story.

The other night I read the first chapter to Sophia who just turned four years old in July, 2018. She isn't ready for Black Beauty but she "stayed with me" for the entire first chapter.

One of the reasons I love the book was reading about all the kinds of horse carriages. So, this passage in The Victorians, A. N. Wilson, c. 2003, pp. 261 - 262:
Mrs Warren reckoned in A House and Its Furnishing (1860s, England) that a six-roomed house could be run if you had an income of £200 per annumA New System of Practical Domestic Economy estimated that you should set aside 10 percent of your income on horses or carriages, which would mean you needed £1,000 for a four-wheeler with horses. (The coachman would be paid for out of the 8 percent you would spend on the wages of male servants.) If you had £600 a year you could keep two horses if your groom doubled as a footman. A gig cost £700: that is, a one-horse carriage -- a tilbury or a chaise.
This was the great era of 'carriage folk.' At the beginning of the [19th] century, elliptic springs had made this soon-to-be-obsolete mode of transport enjoy a magnificent flowering. The berlin, barouche, calèche, coupé, clarence, daumont, landau and phaeton all crowded the streets of London in the supposedly prosaic railway age.

In 1814, there were 23,000 four-whelled vehicles in the capital; by 1834, 49,000; by 1864 [think, US Civil War], 102,000, with a further 170,000 two-wheelers.

This represents a huge social class, as well as huge congestion in the streets; and it is this class, this immensely privileged class, probably more comfortable than any human class who had ever existed on the planet, whose offspring were the first with the leisure and time to have a childhood.
If I remember, I will keep the reader updated with the types of carriages mentioned in Black Beauty.