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.

Oil Bulls Have A Nice Day; XTO WIth Permits For A 5-Well Pad In Grinnell Oil Field -- July 30, 2018

Active rigs:

Active Rigs63613573191

Seven new permits:
  • Operators: XTO (5); Lime Rock (2)
  • Fields: Grinnell, Alger
  • Comments: XTO has permits for a 5-well Michael State Federal pad in NWNE 16-154-96; Lime Rock has permits for a two-well Anderson pad in SWSW 12-155-92;
Three permits renewed:
  • Newfield (2): two Bernice permits in McKenzie County
  • Enerplus: a Mars permit in Dunn County
Three permits canceled:
  • Oasis: two Jensen permits and one O. M. Erickson permit, all in Williams County
Five producing wells (DUCs) completed:
  • 31294, 878, Slawson, Serpent Federal 7-36-32TFH, Big Bend, t5/18; cum 54K 6/18; (#21570)
  • 32899, n/d, CLR, Dvirnak 9-7H, Jim Creek, t--; cum --
  • 33648, n/d, CRL, Ransom 9-30HSL, Elidah, t--; cum --
  • 33649, n/d, CRL, Ransom 8-30HSL2, Elidah, t--; cum --
  • 33650, n/d, CRL, Ransom 7-30H, Elidah, t--; cum --

US Germans Following The "Road To Germany" -- July 30, 2018

A recurring theme on the blog is that the "global warming" movement is a scam. It is simply cronyism, transferring US wealth from gullible Americans to friends/lobbyists in the wind/solar business through the Federal government, literally a type of money laundering, or wealth transfer if "money laundering" is too inflammatory. [Money laundering? See this post, and perhaps even better, this link.]

This is why faux environmentalists are faux:
  • solar and wind energy will never be able to meet significant demands for electricity; solar and wind will simply have a niche role; and,
  • the only thing that can supplant fossil fuel and lower CO2 emissions -- for what it's worth -- is going to be nuclear energy
In fact, we are now starting to see the demise of nuclear energy worldwide (previously posted; see below). And in the US? Nuclear energy is dead -- 2017.

Now this article from Iowa: NextEra will retire an Iowa nuclear plant in less than two years. Wow. Another nuclear plant to be retired. Data points:
  • Duane Arnold nuclear plant
  • 601 MW
  • at $2.5 million / MW, it would take a $1.5 billion wind farm to replace that one nuclear reactor; apparently there is already adequate wind energy to cover this nuclear plant closing
  • the #1 buyer of electricity from this nuclear plant, Alliant Energy, will buy its electricity from NextEra wind farms
  • utility customers in Wisconsin are promised to see lower utility bills -- LOL -- let's come back to this in ten years
  • the college students in Madison, WI, will feel good with the deal, although their parents who actually pay the utility bills may not have the same feeling
  • short term, Alliant will have to pay $110 million for this deal -- I assume these "costs savings" will be passed onto their customers
Wisconsin, Iowa: huge, huge German-ancestry population. They may want to click on "road-to-Germany."  

It will be interesting to see what the rate is next year and five years out. In 2011, Wisconsin paid an average of 13 cents/kwh. Now, in 2018, Wisconsin, the average rate is 15.21 cents.

From 2018,, the ten states with the lowest cost for electricity:
Highest electricity rates -- wow, look at Massachusetts, which is likely to get Amazon HQ2:

Energy Demand By Source

With demise of nuclear energy, fossil fuel demand will grow.

Coal isn't going away.

Crude oil will continue to grow.

Renewables will really grow, but remember: renewable energy includes hydroelectric power.

Nuclear power doesn't grow much either. And then this, US nuclear power industry on verge of collapse, July 12, 2018.

It's hard to read, but I do believe the rate of growth of natural gas is actually steeper than renewable energy in the out-years.

Bakken Casualties -- Motorcylcists -- July 30, 2018

Another motorcycle fatality in western North Dakota, this one near Killdeer. I think this is the fourth motorcycle casualty reported in the Bakken in the past month. Link at The Bismarck Tribune.

Disclaimer: this is not an investment site. 

So, how's the market doing today?
  • Dow: down about 46 points; other indices also in the red; NASDAQ down 1%
  • WTI: drops back below $70, but still up 1.86% for the day
  • CVX: up 1.31%
  • COP: up 1.26% -- I still highly recommend folks read the most recent COP earnings transcript to learn more about the Bakken;
  • OAS: up 1.85%, but off it's recent highs
    NOG: up an astounding 4.46%, now trading near $3.40
  • SRE: flat;
  • Chesapeake: surges after announcement to sell assets in the Utica;
  • AAPL: down about a percent; going into tomorrow when earnings reported after-hours;
    TSLA: well below $300 -- the threshold at which traders get back into this trading stock; now, below $290 and it continues to drop; now down about 3%; volume? way down; traders waiting? certainly reminiscent of share price action, March - April, 2018; one wonders if the June, 2017, peak was "too far, too fast"? trading range since then, but recent trend concerning for those with large positions in TSLA
Disclaimer: this is to an investment site. This is the same idle chatter I would have if I were at the "deli" in Williston, ND.

What else? How are the pipelines doing? Most of which I've lost interest in.
  • ENB: up a percent; paying just under 6%;
  • EPD: down a percent and a half; paying 6%;
  • ETP: up 1.3%; paying almost 12%;
  • TransCanada (TRP): flat, paying 4.8%;
  • KMI: down about 3/4th percent; paying 4.4%
  • WMB: up 1.6%; paying almost 5%; enters the DJ, exits the Four Corners Area;
  • BRK-B: up about half a percent
  • UNP: up about a quarter percent
  • CAT: up 1.3%
  • DE: down a quarter percent; well off it's 52-week high; a buying opportunity? a P/E of 25;
Stock picker's market.

Watch: CBS -- we've seen this movie so many times, it's an open-book test.

10-year bond: under 3% but just barely
TSLA bonds: just bounced off "threshold" of "88"

Speaking of Casualties: Netflix In Free Fall

A reader spotted this some weeks ago.

Disclaimer: cause and effect has not been proved.

Netflix announces that former-President Obama has signed with the network.

Netflix is now in free fall.

QEP Re-Fracks Its MHA Wells In Deep Water Creek Bay -- July 30, 2018

For newbies: I've always maintained the number of rigs in the Bakken was irrelevant with regard to the amount of production (do not take that out of context). For me, the purpose of tracking the number of wells was that it was a good indicator of the amount of activity in the Bakken. The other reason, of course: everyone tracks rig count, even if it really doesn't matter any more. LOL.

I digress.

If folks have been paying attention, the number of rigs in the Bakken has actually been decreasing these last couple of weeks after hitting a recent high of 70. And yet, we are going to see new production records for the next several months. What's going on? Re-fracks. And re-fracks are not reflected in rigs counts.

I assume QEP has been re-fracking for awhile; I don't know. But now we have some examples of QEP re-fracking. This was in a field not often followed by me. I will have to go back and check QEP's "Helis Grail" field. [Later: yup. QEP has begun re-fracking in the Bakken. Link here to Grail oil field.]

The well:
  • 20271, 592, QEP, MHA 5-13-14H-150-91, Deep Water Creek Bay, API - 33-055-00142; t12/17; cum 231K 5/18; no report of the re-frack in the file report, but at FracFocus, 10/16/17 - 10/25/17; 6.6 million gallons of water; 85% water;
Production profile:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

And I find this interesting. This well is pretty isolated. There are only three horizontal wells in this drilling unit.
  • 20271, above
  • 19683, on the same pad, and paralle with #20271, also re-fracked; 766, QEP, MHA 2-13-14H-150-91, Deep water Creek Bay, t12/11; cum 231K 5/18; huge jump in production; same profile as above;
  • 17940, a bit farther south on a separate two-well pad, also re-fracked, 1,217, QEP, MHA 1-13-14H-150-91, t1/10; cum 367K 5/18; production profile:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

QEP Begins Major Refrack Program In The Bakken -- July 30, 2018

Link here to Grail oil field.

For Newbies: The Burr Federal Wells -- July 30, 2018; Meanwhile, CLR's Oakdale Whitman Wells Are Being Re-Fracked


December 25, 2020: link here. A nine-year-old Whitman well produced in excess of 630,000 bbls of crude oil in the last twenty-six months.

December 19, 2018: updated here.

October 23, 2018: update here.

July 31, 2018: huge mistake on my part regarding the Whitman wells. See comment from reader. 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 1.597 million bbls 8/18; 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 

A reminder: the Burr Federal wells are being updated now that they are coming back on line after being off line while neighboring wells were being re-fracked. See this post. Other than a few exceptions, the older wells are showing an incredible jump in production after coming back on line. Two examples are given at the link. Truly amazing. Whether these wells are being re-fracked or not, I have not checked. At this point, at least for me, machts nichts; it hardly matters what explains this; it is a huge "win" for mineral owners, and the state of North Dakota.

Meanwhile, 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 452K 8/18; see production profile below; FracFocus: no re-frack; cum 502K 6/21;
  • 20210, 803, CLR, Whitman 2-34H, Oakdale, API - 33-025-01259; t9/11; cum 1.597 million bbls 8/18; 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; [Update: this well went off-line 9/17, and did not come back on line until 8/18; in 8/18, only four days of production of 2,075 bbls which extrapolates to 15,000 bbls in one month; cum 1.768492 million bbls crude oil 6/21;
  • 20212, 482 (1,008 reported on the sundry form), CLR, Whitman 3-34H, Oakdale, Three Forks first bench, 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; [Update: this well went off line 4/18 and came back on line 8/18; in 8/18 produced 4,731 bbls over 4 days which extrapolates to 35,000 bbls in one month]; interestig profile; see this post; cum 948K 6/21;
  • 38494, conf, permitted 8/18/21, CLR, Whitman FIU 7-34H1, Oakdale,
  • 38495, conf, permitted 8/18/21, CLR, Whitman FIU-8-34H, Oakdale,
  • 38496, conf, permitted 8/18/21, CLR, Whitman FIU 9-34H2, Oakdale,
  • 38497, conf, permitted 8/18/21, CLR, Whitman  FIU 10-34H, Oakdale,
  • 38613, conf, permitted 10/13/21, CLR, Whitman  FIU 10-34H1, Oakdale, NWNW 34-147-96; 543 FNL and 301 FWL;
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

WTI Back Above $70 -- July 30, 2018 -- 100% Of Wells Coming Off Confidential List Go To DUC Status

CAT: beats earning by 24 cents. Shares jump 3.3%, up almost $5/share. Also raising full year guidance. But look at that difference year-over-year -- that's the big story. One quarter ago, $1.35; this year, $2.82. Trump tariffs -- apparently CAT not affected. Tax reform -- probably a huge reason -- what companies are allowed to expense to expense in one year.  From
The new law increases the amount of business property purchases that you can expense each year under Section 179 to $1 million (from $500,000 previously). Normally, spending on business property (machines, computers, vehicles, software, office equipment, etc.) is capitalized and depreciated so that the tax benefit is spread out slowly over several years. Section 179 allows you to get the tax break immediately in the year the property is placed into service. 
But it can't be all related to tax reform. Look at sales, especially internationally where tax reform would not have made a difference:
Sales were up 24 percent from a year ago to $14 billion, driven by double-digit growth across all markets.
In the Asia-Pacific region, which accounted for nearly a quarter of company revenues, equipment sales surged 39 percent from a year ago, helped by increased construction activity and infrastructure investment in China. Sales got a lift from a stronger Chinese yuan, as well.
Texas pipelines: bigger oil pipelines are coming to west Texas to ease bottleneck. And with sub-headline Rebecca Elliott is our newest nominee for the Geico Rock Award: drillers are pumping so much oil and gas that pipelines considered more than adequate just a few years ago now are overwhelmed. Say what? That story has to be at least a year old, and now that's a headline over at WSJ.

Texas to 'shatter" oil production; with fewer rigs and workers. No one talks about the Red Queen any more. Over at Rigzone:
Six months ago, Texas was on the cusp of breaking oil production records. In June, crude oil production reached 4.3 million barrels per day, putting Texas on track to “shatter” the previous record of 1.263 billion (sic) barrels in 1972.
“We’re going to blow that record out of the water,” Karr Ingham, Texas oil economist and creator of the Texas Petro Index (TPI), said during a mid-year briefing in Houston July 26. “Both crude and natural gas production will easily set new annual production records in 2018.” 
Ingham called the natural gas production “extraordinary” considering about 92 percent of the active rigs in Texas are drilling for crude oil. He said natural gas production growth is largely accidental, produced from wells that are drilled to produce crude oil. 
Comment: same thing happened in the Bakken boom: natural gas was an irritating by-product.
Comment: I'm not sure what the writer means by "puts Texas on track to "shatter" the previous record. I would argue that 4.3 million bopd has already "shattered' the previous record of 1.3 million bbls in 1972. So much for "Peak Oil" theory.

Back to the Bakken

Wells coming off the confidential list over the weekend, Monday. As I mentioned over the weekend, I expected 50% to 75% of wells coming off confidential this week to go to DUC status. Today, all four went to DUC status:

Monday, July 30, 2018:
  • 34429, SI/NC, MRO, Otis 11-28TFH, Bailey, no production data,
  • 33393, SI/NC, WPX, Hidatsa North 14-23HD, Reunion Bay, no production data,
Sunday, July 29, 2018:
  • 34428, SI/NC, MRO, Klaus 11-28H, Bailey, no production data,
  • 33645, SI/NC, WPX, Hidatsa North 14-23HUL, Reunion Bay, no production data,
Saturday, July 28, 2018:
  • None.
Active rigs:

Active Rigs62613573191

RBN Energy: the next round of US liquefaction plants and LNG export terminals.
Federal regulators are preparing to accelerate their review of a wave of applications to build new liquefaction plants and LNG export terminals — most of them sited along the Gulf Coast and scheduled for commercial start-up in the early 2020s. Only a few of the multibillion-dollar projects are likely to advance to final investment decisions (FID), construction and operation, but even they will have profound impacts on U.S. natural gas production, pipeline flows, and the global LNG market. Today, we begin a look at projects still awaiting FIDs, their developers’ efforts to line up Sales and Purchase Agreements (SPAs), and the Federal Energy Regulatory Commission’s (FERC) push to review project applications in a timely manner.