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Tuesday, October 8, 2019

A Random Update Of Permits In The Bakken So Far This Calendar Year -- October 8, 2019

2019 Permitting In North Dakota 
99% Bakken 

Projection: Based on the number of permits in each of the following months, the number in bold was the projected number of permits for calendar year 2019 had the rate for the entire year remained the same as that one month. For example, based on the number of permits issued in April, 2019, had that been the "rate" for the entire calendar year (2019), 1,582 permits would be issued for calendar year 2019.

  • January, 2019: 1,495
  • February, 2019: 1,434
  • March, 2019: 1,578
  • April, 2019: 1,582
  • May, 2019: 1,660
  • June, 2019:  1,557
  • July, 2019: 1,671
  • August, 2019: 1,495
  • September, 2019: 1,107
  • first 8 days of October, 2019: 1,688 

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Original Post
 
Disclaimer: I did this quickly. There will be factual / typographic errors. The numbers were counted quickly and may be "off" by two or three at the most, good enough for government work.

To date, for 2019, there have been 1,162 oil and gas permits which extrapolates to 1,509 for the year which is about average for a "good" year in the Bakken.

Of the 1,162 permits, this is how some of the numbers play out:

Company
As Of October 8, 2019
CLR
159
Hess
125
XTO
118
Whiting
82
BR
79
MRO
71
RimRock
65
Enerplus
57
WPX
52
Kraken
45
Slawson
44
Equinor
32
Bruin
29
EOG
14

CLR, not unexpectedly led at 159 permits. I was surprised to see Hess at #2 and pretty much in the same ballpark with 125 permits, and then even XTO. After that it drops off fairly quickly.

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More On Permitting

See this post.The update:

Projected Number of Permits for Calendar Year 2019

For the number of days in the calculations below, I'm using "number of days" through Sunday, July 14, 2019, this weekend.

It's possible I have made simple arithmetic errors.

The number of permits issued each month by the NDIC may differ from what I have in my database, but if so, it will be very, very close, and won't affect the overall results.

Based on the number of permits in each of the following months, the number in bold is the projected number of permits for calendar year 2019 had the rate for the entire year remained the same as that one month. For example, based on the number of permits issued in April, 2019, had that been the "rate" for the entire calendar year (2019), 1,578 permits would be issued for calendar year 2019.
  • January, 2019: 1,495
  • February, 2019: 1,434
  • March, 2019: 1,578
  • April, 2019: 1,582
  • May, 2019: 1,660
  • June, 2019:  1,557
  • July, 2019: 1,671
  • August, 2019: 1,495
  • September, 2019: 1,107
  • first 8 days of October, 2019: 1,688 
Based on the number of permits issued for the first calendar quarter of 2019, the number in bold is the projected number of permits that would have been issued for the entire calendar year had the rate been the same as that for the corresponding quarter. In other words, based on the number of permits issued in 1Q19, there would be 1,497 permits issued for the entire calendar year had that rate remained throughout the year.
  • 1Q19: 1,497
  • 2Q19: 1,071
  • 3Q19: 1,428
I've checked this several times and I believe the numbers are accurate.

One can check the above projections with the actual number of permits issued in North Dakota over the past several years at this site:
  • 2019 (estimate): 1,497
  • 2018: 1,466
  • 2017: 1,189
  • 2016: 818 (price of oil tanked due to Saudi opening their spigots)
  • 2015: 2,055
  • 2014: 3,012
  • 2013: 2,671
  • 2012: 2,522
  • 2011: 1,916
For newbies:
  • North Dakota regulators generally approve permit applications in about 30 days
  • permit applications should not be affected by the weather unless there is a lot of site visitation of which I am unaware, but certainly the 1,071 permits projected based on 2Q19 vs the 1,497 permits projected based on 1Q19 appears to validate that assumption; in ND, Jan-Feb-Mar are severe winter months; whereas Apr-May-Jun are much better weather months
  • a permit is "good" for one year, but is easily renewed
My hunch:
  • most operators determine CAPEX, number of rigs, permit applications, etc, six to twelve months prior to execution
  • CAPEX is adjusted semi-annually when things are going well; quarterly when things seem a bit more bleak; and monthly, when things are going to hell in a handbasket
  • the number of rigs and frack spreads correlate directly with CAPEX
  • permit applications may or may not correlate with CAPEX; I don't know
  • I would think operators would have a stack of permits in the hopper in draft status/nearly complete well in advance of submission; 
  • it appears NDIC can issue as many as 20 or more permits in one day based on historical data; in other words, it's not the NDIC holding things back once operators decide to proceed (obviously the NDIC is not accomplishing the entire process in one day, but the point is that the number of permits issued in one day does not appear to be capped by the regulator)
Thesis:
  • the weekly rig count, week-over-week, is meaningless in the Bakken
  • the monthly rig count, month-over-month, may be slightly more meaningful than the weekly change
  • the monthly permitting activity gives one a much better idea of future activity (and dare we say, production?) in the Bakken
If I could only choose one metric to follow the Bakken, it would be the rate of change (increase/decrease) in number of permits on a monthly basis

Having said that, even the number of permits issued each year is coming down, and production continues to rise.

2 comments:

  1. Interesting in that, on a personal note. Have been having conversation with mineral rights buying company, in last 2 weeks.
    They did an in-depth analysis of my holdings (which I appreciated) and their overall consensus was that everything in the Bakken is headed down.
    Their bean counters grossly under valued the potential future returns, where all these data points suggest at least maintaining the status quo for 2020
    At that point I told them have a nice day and moved on

    At the least I appreciate your open/honest reporting of the current and near future status/potential, as much as one can guess. You seem to have "Good Tea Leaves"

    ReplyDelete
    Replies
    1. I think it all has to do with timelines/horizons. Lots of volatility in the near term; lots of geopolitics; lots of manipulating by the East Coast movers and shakers, but long term it seems to me that oil and natural gas will do just fine. That's why I follow the stock market -- gives me an idea of how investors think this will play out. COP wouldn't have increased their dividend by 38% if they didn't think they would have the free cash flow.

      Delete

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