The Million Dollar Way (The Bakken Oil Blog): 11/08/18

Thursday, November 8, 2018

WTI Testing $60-Support; Welcome To Pad Drilling And 20 Million Lbs Sand/Well -- Twenty Wells Coming Off Confidential List -- November 8, 2018

Active rigs:

$60.72😕	11/8/2018	11/08/2017	11/08/2016	11/08/2015	11/08/2014
Active Rigs	66	53	38	64	193

Seven new permits:

Operators: Oasis (4), Nine Point Energy (2); XTO (1)
Fields: Banks (McKenzie); Capa (Williams); Rosebud (Williams)
Comments: Oasis has permits for a 4-well A. Johnson / Joplin pad in 33-153-97; Nine Point Energy has permits for a 2-well State pad in 25-154-102

Twenty wells released from tight hole status; the CLR Miles well was previously reported:

33221, 1,696, CLR, Miles 7-6H, Dimmick Lake, 4 sections, 63 stages; 12.9 million lbs, t7/18; cum 68K 9/18;
33898, 861, Kraken, Hash 22-15 4H,Winner, 60 stages; 15.4 million lbs, t7/18; cum 65K 9/18;
33899, 904, Kraken, Nash 22-15 3TFH, Winner, t7/18; cum 65K 9/18;
33900, 472, Kraken, Nash 22-15 2H, Winner, t6/18; cum 13K 9/18;
34494, SI/NC, WPX, Howling Wolf 28-33HF, Wolf Bay, no production data,
34515, 623, Kraken, Lyman Tracy 20-17 1TFH, 60 stages; 20 million lbs, Burg, t6/18; cum 65K 9/18;
34516, 629, Kraken, Deacon 19-18 1H, Burg, t6/18; cum 71K 9/18;
34517, 819, Kisner 24-13 1TFH, Blue Ridge, 60 stages; 15 million lbs, t7/18; cum 57K 9/18;
34518, 758, Kraken, Shannon 23-13 1H, Blue Ridge, t7/18; cum 55K 9/18;
34530, 1,061, Kraken, Nash-Burgess LE 22-15 1H, Winner, t7/18; cum 75K 9/18;
34531, 855, Kraken, Nash 22-15 5TFH,Winner, t7/18; cum 61K 9/18;
34534, 718, Kraken, Longhorn 4-9 5H, Ellisville, t9/18; cum 12K after 27 days;
34535, 650, Kraken, Longhorn 4-9 4TFH, Ellisville, t9/18; cum 11K after 27 days;
34536, 658, Kraken, Longhorn 4-9 3, Ellisville, t9/18; cum 10K after 27 days;
34537, 538, Kraken, Longhorn 4-9 2TFH, Ellisville, t9/18; cum 11K after 27 days;
34626, 1,070, Kraken, Longhorn LW 4-9 1TFH, Ellisville, t9/18; cum 16K after 27 days;
34723, 832, Kraken, Anseth 29-32 2H, Squires, t9/18; cum 10K after 15 days;
34724, 825, Kraken, Anseth 29-32 3H, Squires, t9/18; cum 12K after 16 days;
34725, 863, Kraken,, Anseth 29-32 4H, Squires, t9/18; cum 12K after 16 days;
34726, 865, Kraken, Anseth-Sukut LE 29-32 1H, Squires, t9/18; cum 11K after 15 days;

Comments on the Kraken wells above:

I'll have to go back and check but I think these are wells originally permitted by CLR and acquired by Kraken Operating. These wells are north of Williston, about halfway between Williston and the Canadian border. This area is very underdeveloped. The existing wells are mediocre at best; it will be interesting to see if Kraken can make this area work. I will have to look at a "heat" map later, but I certainly don't recall this area as being particularly remarkable.

Ten permits renewed:

Oasis (9): four Borden permits; two Wren Federal permits; two O M Erickson permits; one Fraser Federal permit, all in Williams County
Hunt: one Palermo permit in Mountrail County

NOG: 3Q18 Earnings

NOG press release: Third quarter production averaged 26,708 Boe per day, an increase of 74% year-over-year and 27% sequentially.

increasing fourth quarter production guidance to a range of 35,000 - 36,000 boepd, an increase of over 100% year-over-year and 30% sequentially
Northern has reactivated its existing stock repurchase program, which had $108.3 million in remaining authority. Northern has agreed to repurchase 7.36 million shares from certain shareholders in the fourth quarter
third quarter net income was $19.0 million, and adjusted net income was $34.5 million
adjusted EBITDA increased 174% year-over-year and 39% sequentially to $97.9 million (non-GAAP)
3Q18 production averaged 26,708 barrels of oil equivalent per day, totaling 2,457,119 boe, comprised of 84% crude oil
3Q18 net income increased to $19.0 million, or $0.06 per diluted share, compared to a loss of $16.1 million, or ($0.26) per diluted share in the third quarter of 2017
3Q18 adjusted net income increased to $34.5 million, or $0.11 per diluted share, from $2.2 million or $0.04 per diluted share in the third quarter of 2017
adjusted EBITDA increased to $97.9 million, compared to $35.7 million in the third quarter of 2017
Northern’s third quarter 2018 crude oil differential was $4.16 per barrel below the NYMEX daily average for the period, compared to $6.22 in the third quarter 2017, an improvement of $2.06 per barrel
lease operating expense of $7.39 per Boe for the quarter declined 17% year-over-year and 3% sequentially, bringing year-to-date LOE at the low end of the company’s 2018 guidance.General and administrative (“G&A”) expense of $1.90 per barrel increased 12% sequentially due primarily to costs associated with recent significant transactions

At 11 cents, I think "in-line." That appears to be what the "market" thinks also; down 5% before market closed and before results known. After-hour trading, and after results known, down another penny. Trading at $2.98.

The Market, Energy, And Political Page, Part 4, T+2 -- November 8, 2018

Dow (irrelevant): not only is the Dow holding today after the huge jump yesterday (500 points?) and is now up another 100 points. Which "house" holds the purse strings? Yup, the US Congress. Who holds the US House now? Yup. Something tells me the movers and shakers like Nancy Pelosi. Her #1 concern: health care. Remember: the state of California has at least 37 military installations and Trump has said over and over and over that he plans to have the strongest US military ever. Think:

Bolton: hardest hard-line we've had in years
Nikki Haley: earned her stripes in the UN; could join Bolton
Trump: ready to take on China
White House: huge number of staff with military backgrounds
Pelosi: feels the wins that the Dems had in the midterms were all decided by folks voting "healthcare issues"
I'm not sure if there are any sectors bigger than defense and health in the US; could be wrong

WTI: now below $61 -- according to CNBC -- I see $61.12 over at oilprice

The Market, Energy, And Political Page, Part 3, T+2 -- November 8, 2018

From oilprice:

Data points:

China's crude oil imports in October: 9.61 million bopd (almost equal to the entire amount produced by any of the three -- the US, Russia, Saudi Arabia) -- and that's just imports
independent refiners (teapots) driving demand -- drove demand before import quotas expire
last month, China said it will raise by 42% the oil import quota for non-state refiners (teapots) for 2019, as new refinery capacity is planned to enter into operation next year
China increasing more Canadian WCS vis a vis WTI due to $50 price spread

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US Coal

Take any two consecutive years in the graphic below and see if you can find any two consecutive years in which more coal plants were closed that in the current two consecutive years, 2018 - 2019.

Another open book test?

From twitter today:

For more on PJM, click on the tag below, "PJM."

The Market, Energy, And Political Page, Part 2, T+2 -- November 8, 2018

WTI: that credible floor trader -- perhaps lost a bit of credibility -- earlier in the week the credible floor trader suggested WTI's low was in, at $61.31. Today, WTI is trading at $61.19, at least according to CNBC. OIlprice has WTI at $61.40. Commentary by CNBC:

US crude oil production is surging
US now producing more oil than either Russia or Saudi Arabia

US production, EIA estimates, link here:

Days of supply. I haven't looked at this graphic in a long time. This is the real problem (for oil bulls) -- currently about 26 days, up from recent "low" of 23 days. One has to go all the way back to 2015 to find the number of days of supply as low as 21 days -- which is required (actually lower) if one wants to see the price of crude oil increase (all things being equal):

Best thing on twitter today:

Apparently he's well-like, also, in addition to all his other "positives."

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Obesity Rates By State -- Rankings

From The Bismarck Tribune / source: wallethub -- interactive map and link to report at the linked article:

Least "obese" states -- adults and children:

51: Colorado -- best state with regard to this metric
50: Massachusetts
49: Hawaii
48: California
47: Montana
46: New Mexico
45: North Carolina
44: North Dakota

Others of interest:

37: Minnesota
27: Texas

Very obese:

14: Iowa
1: Mississippi

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Vaqueras y Vaqueritos

We definitely need to get Sophia enrolled.

The Market, Energy, And Political Page, T+2 -- November 8, 2018

Natural gas fill, link here:

Natural gas, Platts forecast, link here:

Platts forecast a net increase of 55 Bcf; off by 10 Bcf
from twitter:

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In Other News

Breaking news:

Relevancy: whenever I want to compare how the US economy is doing relative to the rest of the world, it becomes a meaningless exercise (at least for me). Here's why:

Immigration: the current issue of The Economist celebrates Australia as the one country that has solved the immigration problem. LOL.

I Was Wrong -- But Instead Of Correcting The Original Post -- Will Post Here -- The Widowmaker

In my earlier post I implied that a shortage of diesel fuel was a proxy for economic health of the US: higher demand for diesel fuel was due to higher truck traffic. In this case I was very, very wrong.

Here's the earlier post:

Making America great: note the price of diesel and the weekly petroleum report (below). Some would consider diesel fuel demand a proxy for the health of the US economy.

Diesel: I noticed the same thing in the north Texas (DFW) area -- the spread between diesel and gasoline -- if I recall correctly, unleaded regular is selling for $2.34 in the local area; diesel, around $2.99. See weekly US petroleum report here. Note distillate product increased 6% compared to same period a year ago. From twitter:

"Widowmaker." In trading circles, when the price spread of diesel (distillate fuel) / gasoline widens by a larger-than-normal gap, it is known as a "widowmaker." At this link, and as of moments ago, not behind a paywall.

The "widowmaker" paragraph was not part of the original note -- I added it after the fact -- and that's how I realized I had misinterpreted the data.

From the linked FT article, this was back in December, 2015:

They call it the oil market’s “widowmaker” trade for a reason.

A popular seasonal oil trade in the United States has just blown up in spectacular fashion, write David Sheppard and Anjli Raval.

The trade, where investors go short gasoline futures and long diesel – in the expectation that demand for the latter will be stronger in winter due to its dual-use as heating fuel – started as normal back in the autumn. US diesel futures slowly moved to a premium over gasoline, first 5 cents, then 10 cents, then 15 cents. It looked like it would keep on widening. In the past three years diesel’s peak premium has averaged about 50 cents a gallon – presenting a tempting opportunities for funds.

But this year it has gone wrong. Temperatures in New York have been unseasonally warm, hitting as high as 18 degrees centigrade earlier this week, reducing demand for diesel in the northeast region that still burns oil to heat many buildings.

Again, that was back in 2015. It will be interesting to see how this plays out in 2018.

But, wow, I love to blog. I learn something new every day. Some days I learn two new things.

The Bakken Never Ceases To Amaze Me -- Random Update Of A CLR Kennedy Well -- November 8, 2018

I've blogged many, many times on the CLR Miles-Kennedy wells in Dimmick Lake.

This is something I had not seen before.

Everyone following the Bakken knows the routine:

drill
complete/frack or go to SI/NC status, but eventually complete/frack
after completion, first one or two months of "constrained flow" while getting things in order
flow freely for about six months; max production first few months and then decline
place well on pump

There are exceptions. Occasionally a well is not placed on a pump at six months; rarely we see some wells go for years without being placed on a pump.

On the other hand, I seldom see a well be changed from a well to free flowing. But here is one case. (I will check the other wells in the area later.) This well was completed/fracked in early 2015. It was placed on a pump, but recently it was noted that:

production jumped; the well has not been re-fracked (see full production profile at this post)
the operator requested that the well be "changed from pumping to flowing

Sundry form, operator requests change from pump to flowing:

And the scout ticket verifies that was not a typographic error. Note that the well is on "F" status, flowing, no AL (artificial lift). Also note that although this is an "old well" (drilled back in early 2015) it is drilled on a large overlapping 2560-acre unit:

The well:

29124, 633, CLR, Kennedy 3-31H, Dimmick Lake, t3/15; cum 254K 9/18;

Relevant portion of production profile; this well has not been re-fracked:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	9-2018	30	10389	10621	7793	18161	6461	11343
BAKKEN	8-2018	30	11832	11304	8442	19962	3341	16240
BAKKEN	7-2018	31	15389	15509	11442	27957	16422	11136
BAKKEN	6-2018	22	8243	8295	6875	16676	9031	7444
BAKKEN	5-2018	14	1600	1351	1309	2857	1944	913
BAKKEN	4-2018	0	0	0	0	0	0	0
BAKKEN	3-2018	0	0	0	0	0	0	0
BAKKEN	2-2018	0	0	0	0	0	0	0
BAKKEN	1-2018	17	2082	2326	975	6466	6466	0
BAKKEN	12-2017	31	4219	4209	1809	12711	12711	0
BAKKEN	11-2017	30	4794	4882	1978	12336	12336	0
BAKKEN	10-2017	31	4235	4035	2298	8587	8304	283

Maybe this happens a lot. Maybe I just haven't noticed. But this one is a new one for me. The Bakken never ceases to amaze me.

The Kennedy-Miles wells are tracked here.

The Market, Energy, And Political Page, T+2 -- Thursday, November 8, 2018

Sanders: I don't know if anyone else caught it, or saw the same thing I did, but the individual who seemed to most enjoy the give-and-take during President Trump's press conference Wednesday, following the midterm election results, was Sarah Huckabee Sanders. It was just a fleeting -- very fleeting -- moment when the television camera panned the audience to include Ms Sanders -- but in that fleeting moment, one could see she was really, really enjoying the show. Perhaps she was just happy she was not at the front of the room.

It's Only Thursday -- November 8, 2018

Thursday? It already feels like Friday. What a week!

Making America great: note the price of diesel and the weekly petroleum report (below). Some would consider diesel fuel demand a proxy for the health of the US economy.

Diesel: I noticed the same thing in the north Texas (DFW) area -- the spread between diesel and gasoline -- if I recall correctly, unleaded regular is selling for $2.34 in the local area; diesel, around $2.99. See weekly US petroleum report here. Note distillate product increased 6% compared to same period a year ago. From twitter:

"Widowmaker." In trading circles, when the price spread of diesel (distillate fuel) / gasoline widens by a larger-than-normal gap, it is known as a "widowmaker." At this link, and as of moments ago, not behind a paywall.

OPEC+ split? No link but over at twitter a link to an FT story suggesting Russian wants to continue with max crude oil production; Saudi Arabia wants to look at need to reduce production in light of inventories, price.

Earnings: I believe DNR and NOG report today. Others reporting: CNP, LNG, WIN, PLUG.

DNR easily beats forecasts; shares up 5%. Press release here.
NOG: forecast;
MRO: beats revenue and earnings estimates for 3Q18;

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 what you think you may have read here.

Natural gas fill rate: pending. Historically, according to a reader, the first weekend in November is the last weekend for the calendar year in which there is a "net increase in NG storage." After the first weekend, the heating season begins, and US natural gas inventories will start to decrease. The reader says that because of a mild autumn, we may see the natural gas fill rate extend through the second weekend of November this year. It should be noted that the weather forecast is for a very, very cold weekend across the eastern United States this weekend. Last week's report: a net increase in natural gas storage by 48 Bcf.

Weekly unemployment claims report: in-line with forecasts.

previous: 214,000
revised upward to 215,00
forecast: 210,000
actual: 214,00

Nuclear energy in Japan: worth a read. Some nice data points. Over at oilpprice.

Japan's effort to increase nuclear energy showing results
target: 20% of Japan's electricity provided by nuclear energy by 2030
will likely fall short; at best, 14%
to reach 20%, would require 30 more nuclear plants (or one really, really big one)
from the linked article:

Japan is currently on track to have nine reactors back up and running in the very near future, with 8 already functioning and one slated to begin operations later this month. Yes, this is a just a tiny fraction of the 54 nuclear power plants that were powering Japan until 2011, but it’s still much more than many experts expected after the lasting devastation of the Fukushima disaster and the subsequent widespread resentment of nuclear plants.

Now, nuclear has even finally managed to outpace the production of renewable energy plants in Japan (with the exception of hydroelectric power) for the first time since the 2011 disaster, thanks to major campaigning by the industry itself along with government support.

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Back to the Bakken

Wells coming off the confidential list today -- Thursday, November 8, 2018:

34494, SI/NC, WPX, Howling Wolf 28-33HF, Wolf Bay, no production data,
33221, 1,696, CLR, Miles 7-6H, Dimmick Lake, 4 sections, 63 stages; 12.9 stages, t7/18; cum 68K 9/18;