New Website Featured -- June 26, 2018

A reader sent me a note earlier asking if I would link her website after seeing my post on horses. The website is now linked at the sidebar at the right, under "non-Bakken featured blogs" about a third of the way down the page.

Fake News Is Bad Enough; I Don't Know If Poor Reporting In The WSJ Makes It Even Worse -- June 26, 2018

This was buried in an earlier post but is so important.

Earlier this week there was an article in The WSJ regarding OPEC and US shale. Many folks who commented on the article thought is made no sense whatsoever. I didn't pay much attention to it, especially after reading this in the comment section:

One reporter has been writing about energy for the WSJ for three months. But she has a BA in Literature (Magna Cum Laude) from Harvard so I guess that qualifies her to write about energy.

The other reporter has been covering energy for the WSJ for 1 yr and 7 months. Prior to that role he was a Legal Reporter.   But he has a Master's degree in Journalism so I guess that qualifies him. 

So it's no surprise that they sound like they know little about the energy business.  It is a common occurrence in the Wall Street Journal.  This is what I am paying over $400 per year for.  And they cannot even get the print version to me on a regular basis. 

Such Incredible BS -- June 26, 2018

Earlier it was reported that oil production in the Neutral Zone was being halted by Saudi Arabia and Kuwait for "technical reasons." What BS.

The reporting must have been done by Baghdad Bob (actually it was "Robert").

The "technical reasons"?

Saudi Arabia and Kuwait have some "political" difficulties.

It sounds like Kuwait made the decision to half production, but I have no idea. From the linked article:

He said the two sides were “tackling the matter” and production would resume “as soon” as they reached an agreement. Kuwait said in late 2016 it was preparing to restart production at oilfields in the zone after production was previously halted.

At the time the closure of the fields, mainly Khafji and Wafra, had become a political sticking point.

Khafji was shut in October 2014 for environmental reasons and Wafra has been shut since May 2015 due to operating difficulties.

Before its closure Khafji, operated by Kuwait Gulf Oil Company and a Saudi Aramco subsidiary, was producing between 280,000 and 300,000 barrels per day.

The Wafra field has an output capacity of about 220,000bpd of Arabian Heavy crude.

US oil major Chevron operates the field on behalf of the Saudi government.

Meanwhile, US shale companies "motor ahead" despite the OPEC+ announcement. From The WSJ earlier this week:

U.S. shale companies, which profited by continuing to pump oil as the rest of the world cut its production, are again poised to benefit as the Organization of the Petroleum Exporting Countries boosts its output.

OPEC’s decision last week to increase production modestly is seen as an attempt to keep prices elevated without creating a spike. The move eased concerns among the member countries about tightening supply and the potential for a price spike, but it also lifted the stock prices of U.S. oil producers, which have learned to survive at whichever price OPEC pursues.

U.S. production has grown at a record-setting pace this year, hitting 10.9 million barrels a day this month after oil prices exceeded $70 a barrel for the first time since 2014. That makes the U.S. the world’s No. 2 oil producer behind Russia, but ahead of Saudi Arabia.

By the way, the majority of Bakken oil enters the LLS pipeline system (via DAPL) and prices close to LLS. Right now, LLS is selling for about $5 / bbl more than WTI. Transportation is a "wash." WTI is at Cushing. LSS is in Louisiana.

Royalty checks may not reflect the spot price because operators "contract" prices months earlier. 

As usual, the article didn't say much, but the comments were very interesting. Note this comment:

One reporter has been writing about energy for the WSJ for three months. But she has a BA in Literature (Magna Cum Laude) from Harvard so I guess that qualifies her to write about energy. The other reporter has been covering energy for the WSJ for 1 yr and 7 months. Prior to that role he was a Legal Reporter.   But he has a Master's degree in Journalism so I guess that qualifies him.  So it's no surprise that they sound like they know little about the energy business.  It is a common occurrence in the Wall Street Journal.  This is what I am paying over $400 per year for.  And they cannot even get the print version to me on a regular basis. 

Ideology Meets Reality -- And Reality Sucks For Some -- June 26, 2018

I think we are going to see more of this. Reality. From EnergyNews.

As long as there is not a nationwide standard, states that "market" themselves as "clean energy states" are going to find themselves drawing the "short end of the industrial/manufacturing" straw, as they say.

Wind / solar is much more expensive than coal or natural gas.

Wind / solar is not dependable. It certainly is not dispatchable.

States with mandated high renewable energy requirements will lose out to states with lower (or no) mandated renewable energy requirements.

States that want to "normalize" the cost of renewable energy to fossil fuel energy will require wealth redistribution -- the state will need other people's money to subsidize the cost of renewable energy.

That's reality.

Ohio apparently is getting a dose of reality.

These articles are hard to read quickly (much obfuscation) but if spelled out, this is what I take away from the article:

• Ohio wants to back away from "required/mandated" standards to "targets"
• Ohio wants to lower the standards/targets 
• the top renewable energy standard/target would decrease from 12.5 percent to 8.5 percent
• the top energy efficiency target would fall from 22.2 percent to 17.2 percent

And a target is just that. A target.

Oh, by the way, Ohio sits on one of the world's largest supplies of natural gas. Just saying.

Reality.

Fracking, Proppant, And Water

Disclaimer: I often make simple arithmetic errors. 

This updates previous posts on the same subject.

This is mostly for newbies, but feedback from those in the field will tell me how far off I am.

This is my 30-second "elevator talk" regarding completion strategies in the Bakken right now.

Length of laterals:

• the standard is a "long lateral"; some call it an "extended reach";
• two sections "long"
• about 9,000 feet horizontally

Number of stages:

• 50
• less than 40 catches my attention; suggests something out of the ordinary; I check the sundry forms to see if there might be an explanation; below 20, "definitely" a failed frack
• up to 60, occasionally
• over 60, catches my attention

Water (gallons, data from FracFocus):

• 8 million to 12 million gallons; generally 10 million gallons
• less than 8 million gallons gets my attention
• up to 12 million gallons doesn't necessarily surprise me; 
• up to 20 million gallons definitely gets my attention

Water (by percent, weight, data from FracFocus):

• 86%
• below 84% gets my attention
• above 90% really gets my attention

Sand/ceramic (by percent, weight, data from FracFocus):

• 14%
• for all practical purposes, the difference between 100% and water volume by weight
• a very small percent of overall mix is the proprietary "cocktail" to help "lubricate" the movement of oil to the well bore
• generally about 14%
• above 16% gets my attention
• below 10% really gets may attention

Middle Bakken vs Three Forks

• perhaps the Three Forks requires less water, less sand/ceramic

Sand/ceramic per stage

• 10 million lbs / 50 stages = 200,000 lbs/stage

Sand/ceramic per foot (which most folks like to use)

• 10 million lbs / 9,000 feet = 1,100 lbs / foot (about half what they are using in the Permian, based on what Mike Filloon posts)

To determine amount of sand, until the official report comes out, using data from FracFocus:

• a gallon of water = 8.35 pounds
• calculate amount of water in pounds (e.g., 10 million gallons x 8.35 pounds = 83.5 million lbs)
• if weight of water in percentage is 86%, then 14% (by weight) is sand/ceramic
• ask yourself: if 86% is percentage weight of water in total frack, how much was total completion mix (water + sand/ceramic)?

• example:
• 86% of the total frack was water by weight
• water weighed 84 million lbs
• 86% of what = 84 million lbs 
• what = 84 / 0.86 = 97 million lbs
• continuing
• 14% of the total frack was sand/ceramic by weight
• 14% of 97 million lbs = 14 million lbs sand/ceramic 
• I think my method works but my thinking could be faulty
• This would be an estimation only

Checking my work:

• in my example, total frack mix (water + sand/ceramic) = 97 million lbs
• 86% of that was water, or 83 million lbs
• 83 million lbs of water / 8.35 pounds (per gallon of water) = 10 million gallons, and that's where we started 

********************************

Real World Example

Let's see how well the information above works. We will look at this well that came off the confidential list June 28, 2018, FracFocus data embedded:

• 30230, 1,006, Nine Point Energy, Simpson 151-102-5-8-4H, Elk, t1/18; cum 65K 5/18; taken off line as of 5/18 after strong production; FracFocus data: fracked 11/11/17 - 12/9/17; 13.291 million gallons of water; 91.46% water; sand, 8.2%;

Calculations:

• 13.291 million gallons x 8.35 pounds = 110.98 million lbs
• 91.46% of what = 110.98 million lbs
• total frack mix weighed: 121.3425 million lbs
• of that, 0.082 x 121.3425 = 9.95 million lbs sand
• 9.95 million lbs / 200,000 lbs = 49.75 = 50 stages

Let's look at the frack report in the NDIC file report for this well, #30230:

• 50 stages; 10.02 pounds sand (7 million lbs mesh; 3 million lbs medium)

 
 

Weekly US Crude Oil Inventory Number Plunges -- API -- June 26, 2018; T+28

API: US crude oil inventory plunges. Forecast for a 2.5 million bbl draw; in fact, the actual draw was 9.228 million bbls. If the EIA number confirms a similar draw tomorrow -- one word, wow. Hold on to your wallet when stopping to fill up with gasoline.

WTI: surges. Up almost 4%. Closes at $70.77.

LLS: closes at $75.66.

Canadian dollar: holds at US 75 cents.

Stunned? Surprised? I don't know but here it is: remember -- this is the US District Court for the District of California -- a BusinessWire story -- the court has issued a ruling dismissing the climate change lawsuits filed against Chevron Corporation by the cities of San Francisco and Oakland. A lot of legalese, but basically a frivolous suit thrown out. 

Permian pipeline project announced: will cross an international border. Oh-oh. From oilprice.com: Kinder Morgan, flush with new cash from Canada -- having sold the Trans Mountain Pipeline project to Mr Trudeau-- announces a new Permian pipeline project. By the way, if I'm not mistaken, a Kinder Morgan subsidiary may have sold the project to Canada, but the company will still get first shot at the contract to build it. What a hoot. If built, Canada will eventually sell it back to Kinder Morgan, no doubt. Now, back to the linked article:

• Kinder Morgan will team up with Apache Corp and a Blackstone subsidiary
  
• a US$2-billion, 2-billion-cf gas pipeline project from the Waha area to the Gulf Coast and to Mexico
• will be interesting to see if the new Mexican president will "buy into this" project with all the animosity between the two countries
• scheduled to begin operations in 2020
• the article suggests that the Permian play is an oil-dominated play (I tend to disagree; makes me wonder about the writer's credentials)
• this is KMI's second such project in the Permian
• two months ago KMI started construction of the Gulf Coast Express Project
• US$1.75 billion; 1.98 billion cubic feet of natural gas from the Permian to Agua Dulce in Tex
• should be operational in late 2019
• already fully subscribed for the long term

*********************************

Screen Shot Of The Day

*********************************** 

Peak Oil? What Peak Oil?

First it was the Permian. Then the Gulf of Mexico. Now it's Norway that is setting new production and discovery records.

From oilprice.com: Norway's oil discoveries on track for best year since 2010. A nice reminder that Statoil is now Equinor. From the linked article:

[C]ompanies [exploring on the Norwegian Continental Shelf] are on track to find nearly 1 billion barrels of oil equivalents this year.

These calculations show that the resources found per well could reach their highest since 2010—the year in which the giant Johan Sverdrup oil field was discovered in the North Sea with resources estimated at between 2.1 billion and 3.1 billion barrels of oil equivalents.

Johan Sverdrup—with production start planned for late 2019—will be one of the most important industrial projects in Norway in the next 50 years and will be the main contributor to Norway’s rising oil production until 2023.

Peak oil? What peak oil?

*************************************

Peak Natural Gas? Nope, Not Yet

 We should see the official EIA data tomorrow. From SeekingAlpha today:

North Dakota's policy / guidance regarding flaring at this site. It may show up on your desktop as a pdf.

**************************************

Peak Water

Keeping to its announced schedule, the US Army Corps of Engineers is releasing 60,000 cubic feet per second from the Garrison Dam in an effort to low flood waters in the Bakken. Today's report:

Six New Permits -- June 26, 2018 -- Saudi Arabia, Kuwait Halt Production In Neutral Zone Due To "Technical Difficulties"

Breaking just before close of business, from oilprice.com --

I can't wait to see what the "technical problems" really are.

*************************************

Back to the Bakken

Active rigs:

$70.68↑↑	6/26/2018	06/26/2017	06/26/2016	06/26/2015	06/26/2014
Active Rigs	64	59	30	75	192

Six new permits:

• Operators: XTO (4); CLR (2)
• Fields: Grinnell (McKenzie); Avoca (Williams)
• Comments: XTO has permits for a 4-well Ruby State Federal pad in SWSE 36-154-97;

Sixteen permits renewed:

• XTO (4): four Twin State Federal permits in McKenzie County
• Rimrock (4): three Two Shields Butte permits and one Moccasin Creek permit, all in Dunn County
• Whiting (3): one Kessel Federal permit(Billings); one Drew TTT permit (Mountrail); and, one Long permit (Williams)
• Hess (2): two RS-State E permits in Mountrail County
• Zavanna (2): two Rover permits in Williams County
• Resource Energy Can-Am: one Bervik permit in Divide County

Again, no DUCs reported as completed. This is one of the longest stretches I've seen in the past two years with no DUCs being reported as completed.

Mineral Acre Values In North Dakota -- June 26, 2018

Updates

August 18, 2018: was Whiting the buyer of 55,000 Oasis acres for $130 million in that first deal mentioned below?

Original Post

 

A reader asked me about the value of mineral acres in Montana, right across the state line from North Dakota. I don't follow Montana, so could not give him a good answer.

However, this might help. From SeekingAlpha, Oasis sells some non-core Bakken assets:

• current deal: $283 million / 65,000 acres = $4,500 / acre
• overall goal: $500 million  / 200,000 acres = $2,500 / acre

Disclaimer -- June 26, 2018

I'll be off the net for awhile.

Again, for everyone, please read the "welcome / general disclaimer" regarding this site.

I'm posting this because I want to remind folks that I'm doing the blog simply for my own benefit, but thought other folks might be interested. That paid off in spades, as they say. I've learned a lot from readers who have sent me information.

Before I forget: a huge "thank you" to all those who write me." 

I don't change/edit old posts or remove them except under exceptional circumstances. The blog evolves. My understanding of the Bakken revolution evolves. Much of what I wrote back in 2011 or before was wrong, naive, or perhaps even silly. But it is what it is, as they say. A lot of the links in the very old posts are now broken; when I find a broken link I try to correct it if possible.

I am inappropriately exuberant about the Bakken. Not a day goes by that I'm not thinking of the truckers and the roughnecks in the trenches.

I have no hidden agenda with regard to the Bakken. I don't have an agenda with non-Bakken stories, but I do have strong opinions about non-Bakken subjects that I discuss. I post non-Bakken energy stories, to include notes on renewable energy, to help put the Bakken in perspective. It is often difficult to separate opinion from fact on the blog. But I don't intentionally post "fake news," but I suppose that's in the eye of the beholder.

I post non-energy stories (mostly political stories) only to keep me interested in continuing the blog. If I only blogged about the Bakken, it would become dry, and very unrewarding for me.

I post quickly, often misread stories that I link. I make many factual/typographical errors. I appreciate readers calling attention to factual errors. I don't need help on typographical errors unless they significantly effect the content. I will eventually correct typographical errors as I find them. I will correct factual errors if they are brought to my attention.

I often make simple arithmetic errors. 

I may add to this later.

For now, I am signing for awhile. I will be back later this afternoon.

Please do not respond to this note; I won't see comments/replies for awhile.

Mont Belvieu Update -- RBN Energy -- June 26, 2018

Baker Hughes: orphaned again. Does anyone want Baker Hughes? From Reuters:

General Electric Co said on Tuesday it will spin off its healthcare business and divest its stake in oil-services company Baker Hughes, leaving the once-sprawling conglomerate focused on jet engines, power plants and renewable energy.

 ******************************

Back to the Bakken

 
Active rigs:

$68.69↑	6/26/2018	06/26/2017	06/26/2016	06/26/2015	06/26/2014
Active Rigs	64	59	30	75	192

RBN Energy: more on Mont Belvieu's fractionation capacity and related NGL assets. Archived.

The NGL storage and fractionation complex in Mont Belvieu, TX, now offers 2.1 MMb/d of fractionation capacity — the largest concentration of fractionators in the world.

As impressive as that may be, though, NGL production growth in the Permian Basin, the SCOOP/STACK and other liquids-rich plays is quickly ramping up the demand for fractionation services and challenging Mont Belvieu’s ability to keep up.

A number of new fractionators are being added, but will they come online soon enough? Today, we continue our review of fractionators, NGL and purity-product storage and other key infrastructure within and near the NGL Capital of the World.

This is the third episode of our blog series on a fast-shrinking gap between Mont Belvieu’s fractionation capacity and the volume of mixed NGLs that need to be fractionated.

It’s an important issue –– natural gas processors, NGL shippers, Gulf Coast steam crackers, and exporters of NGL purity products like ethane, propane and normal butane depend heavily on the big players in Mont Belvieu to efficiently receive and store mixed NGLs (y-grade), fractionate y-grade into purity products and either distribute those to U.S. end-users or pipe it to nearby marine terminals for loading onto ships.

There Will Be Very Little Blogging This Morning -- See More Later This Afternoon -- June 26, 2018

A reminder to newbies: I post results of wells coming off the confidential list at "new wells reporting." I do this almost every day without exception (of course, the weekend data doesn't come out until Monday. The "new wells reporting" is linked at the sidebar at the right.

Today for example:

Tuesday, June 26, 2018: 170 wells for the month; 259 wells for the quarter

34190, SI/NC, Missouri River Resources, FBIR Packineau 14X-4F HTF,  Squaw Creek, no production data, 

32095, IA, CLR, Candee 7-9H, Chimney Butte, barely producing, API: 33-025-03042; fracked 3/12/17 - 3/27/17 -- 7.97 million lbs; 83.44% water; I've seldom seen this phenomenon before -- a well coming off confidential status, that has been fracked but frack report not in the file report; and the well goes immediately to IA; nothing in the well file that I could see to explain this; two other Candee wells in immediate area are great wells and are producing very, very nicely; were off line for a very short period of time while #32095 was being fracked;

This is entirely anecdotal; I have done no statistical analysis. More and more wells (as a percentage) coming off confidential list are going directly to DUC status.  And, very, very interestingly, there has been a sudden drop-off any any reports of DUCs being completed. Those numbers were always small, usually one or two every couple of days, but recently I have not seen any.

• I have a hunch why this is occurring, but not ready for prime time. Maybe I'll talk about it later. Hint: strategic planning by operators
• price of oil going forward
• refineries at 97% operating capacity