The Million Dollar Way (The Bakken Oil Blog): 03/25/19

Monday, March 25, 2019

Flashback To 2016 -- Top Five Producers In The Bakken; Fast Forward To 2018

Link here to Motley Fool.

Summer, 2016.

I'll come back to this later. Family commitments call.

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Nothing New Here

For newbies.

Link here.

Quarterly Lease Sales -- North Dakota -- February, 2019

North Dakota lease sales.

On-line.

February, 2019.

Link here.

Dunn County (FBIR)

six tracts
all tracts were 80-acre parcels
bonus range: $97 - $302/acre (a real steal)
bidders: Beat Land Services (4); Lynx Oil; Northern Energy Corp

Golden Valley County (southwest North Dakota)

four tracts
all tracts were 160-acre parcels
bonus range: $106 - $130/acre
bidders: Northern Energy Corp (3); Lynx Oil

McKenzie County (Watford City)

four tracts
all tracts were 160-acre parcels
bonus range: $276 - $918/acre
bidder: Empire Oil Company (4)

McLean County (Minot)

two tracts
one tract: 77.24 acres -- bonus: $316/acre
one tract: 5.39 acres -- bonus: $1,509/acre
biddes: David L Herbaly as trustee of a family trust; Lynx Oil Company (the 5.39 parcel)

Mountrail Ccounty (Parshall)

two tracts, both 8-acre parcels
bonus: one at $251/acre and the other at $487/acre
bidders: Eugene Lewis; Western Shale Corporation

Monday, March 25, 2019, T+82, Part 2

Link here. New link for this data; also changed at "Data Links."

Link here. Quick, without looking, what is the graphic below about?

a) number of local/regional newspapers that got the Mueller story wrong
b) drought index
c) price of gasoline
d) price of milk
e) forest fire risk
f) renewable energy, including hydro and geothermal

Monday, March 25, 2019, T+82 -- Apple News+: Information Overload

Water: Saudi Arabia buying water-rights in southern California.

Fondomonte Farms, a subsidiary of Saudi Arabia's Almarai -- one of the largest food production companies in the world
alfalfa: export to Saudi Arabia to be fed to milk cows
Almarai: 93,000 cows in Saudi Arabia
Almarai: sells milk products throughout the world, including the US
alfalfa: a water-intensive crop
great background to the Colorado River story
big loser: Arizona
biggest loser: Mexico
while US Congress investigates Trump, and Jerry Brown promotes the "bullet train," Saudi Arabia is quietly buying up US water rights
great article; hopefully it won't be lost in the ethernet

Amy Klobucher, race, statistics, and four pinocchios.

Presidential politics: polling at Real Clear Politics -- Ms Klobucher is an also-ran at 2%. But she out-polls Hickenlooper; Inslee; Castro; Buttigieg, and Bugs Bunny. The latter needs to be fact-checked.

Red-Tailed Hawk: when they were living in the Boston area, the oldest granddaughter loved spotting red-tailed hawks.

Apple News: $9.99/month for 300 publications. Wow. Link here. Two words: information overload. Part of the list:

The Atlantic, Better Homes & Gardens, Bon Appétit, Condé Nast Traveler, ELLE, Entertainment Weekly,

ESPN The Magazine, Esquire, Food & Wine, Good Housekeeping, GQ, Health, InStyle, Martha Stewart Living,

National Geographic, New York Magazine, The New Yorker, O, The Oprah Magazine, Parents, People, Real Simple, Rolling Stone, Runner’s World,

Sports Illustrated, TIME, Travel + Leisure, Vanity Fair, Vogue, WIRED and Woman’s Day

The Wall Street Journal, Los Angeles Times and Toronto Star, Canada’s largest daily newspaper.

Apple News+ also provides access to premium online publications such as theSkimm, The Highlight by Vox, New York Magazine’s sites Vulture, The Cut and Grub Street, and Extra Crunch from Verizon Media’s TechCrunch.

Everything Apple announced earlier today at warp speed: in six minutes.

The market: "everything" was down today. Except NOG. Up 1.3%.

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.

Paradise

Most mornings my wife drives the older granddaughters to school and gets the youngest granddaughter, Sophia ready for "school." I drive Sophia to TutorTime.

I try to teach Sophia a bit about the weather, and weather terms, on the way to TutorTime. Today, on the way out to the car she noticed all the fallen limbs and leaves today after a pretty windy thunderstorm last night. But the morning itself was now incredibly beautiful with the bright morning sun in our eyes and not a cloud in the sky.

I said to Sophia: "Isn't this a beautiful day. Is this paradise?"

Sophia replied, very quietly, almost soft enough so that maybe I wouldn't hear, perhaps thinking I was crazy. She said, "This is Texas."

Monday Night Links -- March 25, 2019

Updates

April 5, 2019: no link; from analyst over at twitter today; company estimates PEMEX produced 1.7 million bopd in March, 2019. Note recent production history below. "Current production" said to be 1.8 million bopd so if the 1.7 million bopd is correct, Mexico's oil production is going in the wrong direction.

Original Post

From oilprice:

Mexico: But this is the big one, something we've been talking about for quite some time. This has to be very, very concerning on so many levels -- not least of which is the US southern "border" -- which is pretty much just a line on the map any more. Mexico scrambles to save its sinking oil company. See "road-to-Mexico." This story is mostly a re-cap of past stories, same subject. As you read this story, remember the current Mexican president's past rhetoric regarding Big Oil, and the policies of his party. Some data points:

a six-year plan (central planning, Marxism, Soviet Union: all liked multi-year plans); includes:
monetization of promissory notes worth $1.8 billion;

a pledge to crackdown on corruption and fuel theft, saving the company$1.7 billion
tax relief amounting to $4.7 billion to the end of 2024

goal:

see investments n PEMEX to increase to $15 billion from $10 billion this year (numbers rounded)

recent production history

2004: 3.4 million bopd
currently: 1.8 million bopd
short-term goal: 2.5 million bopd

proven oil reserves

1997: 50 billion bbls
2017: 7 billion bbls
one word: ouch
to put that in perspective, the most conservative estimates of the Bakken: 50 billion bbls

challenges:

private sector uncertainty
unclear how the relationship between the private sector and a socialist president will unfold

debt: $106 billion

PEMEX is the most indebted company in the world

Bloomberg: tax breaks do not go far enough

Fitch downgraded PEMEX's debt rating two notches to BBB-
price of PEMEX bonds with expiration debt of 2027 fell 0.9% to $97.39; an indication that the market is not fully convinced that the tax breaks will prove sufficient

Wow -- a debt of $106 billion and the "reforms" and tax breaks -- we're talking maybe $10 billion. PEMEX has to hope Saudi gets this right.

But look at this:

Exxon expects demand for high-sulfur fuel oil to fall 25% (IMO 2020);
"sour is out; sweet is in"

This is the problem they will talking about next: Mexico has the "wrong" kind of oil -- heavy and sour. The US needs "heavy" oil to balance the light oil for refining but the sulfur is bad news. The "sweet spot" in the graph below is the upper left hand corner: WTI, Bakken, Niobara, Oklahoma sweet, Eagle Ford. Mexico's major oil, Mayan, is high in sulfur.

Link here for this graphic:

BR With Eight New Permits; And, BR Reports A Completed DUC -- March 25, 2019

Active rigs:

$59.07	3/25/2019	03/25/2018	03/25/2017	03/25/2016	03/25/2015
Active Rigs	68	60	49	32	98

Nine new permits:

Operators: BR (8); Slawson;
Fields: Dimmick Lake (McKenzie); Big Bend (Mountrail)
Comments:

BR has permits for an 8-well Maverick/Stortroen pad in Dimmic Lake oil field, section 12-151-97;
Slawson has a permit for a Periscope Federal well in Big Bend, section 15-151-92

Two permits renewed:

SHD: a Maya permit in McLean County
Whiting: a Pronghorn State Federal permit in Billings County

One producing well (DUC) reported as completed:

34253, 207, BR, Raider 4A MBH, Twin Valley, t2/19; cum --;

March 25, 2019, T+82, Part 1

Although the entire market is down, TSLA is having a particularly bad day:

TSLA: down over 2%; down about $5.75; now trading below $260
WTI: at $58.21 is down slightly today but many of the majors are doing well

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.

Earlier post: the big question: when did Mueller know that he would report "no collusion"? When did he know and what was the "tipping point"?

Later, a reader writes: the bigger question is how things would look this morning if Mueller said that Trump colluded with Russia to swing the election, and he clearly obstructed justice. Instead, we get a definite, no wishy-washy, "there was no collusion."

Talk radio:

Robert Kraft: long, long apology over the weekend
Robert Kraft: says he did nothing wrong
Talk radio: exactly what is he apologizing for?

Talk radio call-ins: folks saying they did not vote for Trump; unsure of him after he was elected; but now Trump comes across as a sympathetic figure; Trump will gain votes.

Montana cold: if I remember, I will get back to this later.

Good luck to everyone.

Additional Data Regarding Selected Wells Coming Off Confidential List Today -- March 25, 2019

Disclaimer: in a long note like this, there will be factual and typographic errors. I do this for my own benefit; folks interested in this data should go to the source. I do this to help me better understand the Bakken.

Additional data for selected wells coming off confidential list today.

34794, 550, Kraken Operating, The Kraken 24-13 7TFH, first bench, 60 stages; 15.5 million lbs, Epping, t10/18; cum 80K 1/19; on a six-well pad; goal -- to land in the 11'-21' below the lower Bakken shale in the first bench of the Three Forks; the target formation was 24' thick with the top target window set 11' below the top of the Three Forks and the bottom of the window set 21' below the top of the Three Forks; in-zone statistics: above, 3.90% (394 feet); in the target zone, 76.3% (7,718 feet); and, below the zone, 19.8% (2,003 feet); average background gas around 1,500 units; max daily gas hit 5,027 units; the intro says this is a north-facing lateral well; the summary says it is a south-facing lateral well; but look at this, spud date was July 7, 2018; TD reached July 14, 2018;

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2019	31	16277	16244	43880	28497	16888	0
BAKKEN	12-2018	31	27454	27462	72226	28868	20996	0
BAKKEN	11-2018	28	29012	29007	81515	24725	14375	7574
BAKKEN	10-2018	9	7056	6964	27647	5292	1323	3752

34793, 616, Kraken Operating, The Kraken 24-13 6H, middle Bakken, 60 stages; 15.5 million lbs, Epping, t10/18; cum 97K 1/19; spud date, May 19, 2018; goal - to land in the drilling window 13' - 23' below the upper Bakken shale; the target formation was 42' thick, top of the target set 13' below the top of middle Bakken and the bottom of the window set 23' below the top of the middle Bakken; above target zone, 0% (0 feet); in drilling target zone, 80.92% (8,244 feet); and below the target zone, 19.08% (1,944 feet); background gas averaged 1500 to 2000 units, and max daily gas spiked to 7,661 units; reached TD on July 26, 2018.

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2019	31	21839	21783	51460	37000	21586	0
BAKKEN	12-2018	31	33333	33343	77661	34372	24899	0
BAKKEN	11-2018	28	35300	35273	85957	30401	16645	10456
BAKKEN	10-2018	9	7005	6914	29743	5254	1077	3948

34524, 1,076, EOG, Austin 426-1721H, Parshall, 38 stages; 9.5 million lbs, t9/18; cum 75K 1/19; look at this -- spud date, June 9, 2018; TD, on June 17, 2018; gas values were relatively low, averaging 268 units; max reading of 1,222 units throughout the lateral; the wellbore was kept within the target window "for the majority of the time."

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2019	31	14270	14327	4479	2913	2550	73
BAKKEN	12-2018	31	17371	17255	5310	1396	1086	35
BAKKEN	11-2018	30	18921	18968	6309	950	616	56
BAKKEN	10-2018	31	19632	19591	9643	3833	3168	356
BAKKEN	9-2018	6	4644	4346	4428	898	803	61

30364, 2,988, CLR, State Weydahl 7-36H2, 50 stages, 9.6 million lbs; Corral Creek, t1/19; cum 39K 1/19; it's a bit confusing which zone was the target; the legal name H2 but the sundry form says simply, the "Bakken" tested -- not otherwise specified; the geologic summary mentions all three -- the middle Bakken, the first bench, and the second bench; the permit says Three Forks B2;

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2019	30	38604	38508	35621	48799	45306	3493
BAKKEN	12-2018	0	0	0	0	0	0	0
BAKKEN	11-2018	0	0	0	0	0	0	0
BAKKEN	10-2018	0	0	0	0	0	0	0
BAKKEN	9-2018	2	595	595	2543	1047	0	1047

24978, A, CLR, Syverson 3-12H1, Three Forks, East Fork, t--; cum --; no frack data at NDIC file report; FracFocus, 33-105-03006: fracked late December, 2018, with small amount of water -- 5.9 million gallons of water; but this is interesting, water by mass was 76.76%. Generally I see water portion about 86 to 88%; minimal production data yet.

Conversational Rambling -- Shale Oil -- 2019 -- March 25, 2019

Not ready for prime time.

I don't know if this deserves a stand-alone post. This is poorly written, conversational in nature, but I'm posting it to remind me of the conversation I had this weekend. It will be interesting (at least for me) to come back to this conversation ten years from now, while looking out the window of my small one-room "apartment in a nursing home in north Texas.

Over the weekend I spoke to an individual who was the chief operations officer for a "mom-and-pop" Texas oil company some years ago. That company barely survived the Saudi deluge 2014 - 2016, and he moved on. He has not followed the oil industry particularly closely.

He reads much more than I do, but it is mostly "current events," a lot of surfing the net, not books. He was probably in his early 40s -- in round numbers, 40 years old. I am in my late 60s -- in round numbers 70 years old.

Some of his observations, our conversation.

He did not say anything that I had not heard before.

1. He suggested the oil sector today was much like the housing melt-down we had some years ago that caused the big crash. He reiterated the trope that no shale company has yet "made a penny." The shale oil companies were over-leveraged, lots of debt, and the banks must be terribly concerned. For argument's sake, I agreed, but noted that from owners and directors down to roughnecks and mineral owners, "everyone" was making money. The only two exceptions: investors and the banks. On that, we both agreed.

2. He talked about the shale sector as one entity; that it risked failing and taking investors and bankers along with it. Roughnecks, etc., would be laid off in huge numbers; the industry would implode. He referenced the US oil implosion of the 1980s. Whether it would affect the national economy (GDP) he was not sure. I pointed out that 'boom and bust" / wide swings in the oil sector were the norm in the oil industry. I said I doubted the entire sector would self-destruct. Some companies will fail/some will prosper. We saw this in 2014 - 2016 and in the big picture things seemed to work out relatively well, Perhaps very well for some. Really bad for others.

3. Back to #1. He noted that no shale oil companies had yet "made a dime." Or was it a "penny"? Whatever. I replied, "nor had Amazon." He jumped on that and he was correct. Two completely different situations. I pretty much dropped it, but he came back to Amazon. Two different situations.

4. Back to #1. He was unaware of the shift in corporate presentations of late: that the independent shale oil companies, like CLR, Whiting, etc., were now focused on free cash flow, reducing debt, etc.

5. Back to #1. He was unaware that companies like CLR now report that free cash flow from current operations will pay for CAPEX. To what degree that is true I don't know. I am eagerly looking forward to CLR's annual report for 2019. It's "show-me" time for CLR, WLL, others with regard to free cash flow.

6. He was unaware that in the Bakken there are about 2,000 wells that are offline for operational reasons and/or are drilled to depth and waiting to be completed. Two-thousand wells represents close to eighteen months, maybe two years, of new drilling in the Bakken. The numbers are even greater in the Permian.

7. I could tell he must be getting most of his information from the Art Berman School of Crude Oil Investing when he suggested that shale oil companies may not produce what they originally said they would produce. This follows that story some months ago that operators in the Permian were dialing back their EURs. The headlines, I pointed out, were very, very alarmist but when one read the articles, there wasn't much there. But it is the kind of story that will spook the banks.

8. Back to #7. I am absolutely convinced no one knows how much oil can be recovered from shale operations through primary recovery. I have no idea, but as a "wag," one can argue that with a conventional pool 50% of that OOIP will be recovered through primary production; the pool will deplete over time, but the depletion curve is not particularly steep. On the other hand, there seems to be no "agreed-upon" "wag" with regard to how much oil will come from shale oil through primary production. When the boom began in the Bakken, the "wag" was 1 - 3%. It quickly went to 8 - 12%. I thought I had linked it but can't find it now: with new completion strategies, if I read the article correctly, one operator suggested primary production could jump from 11% to 20% -- something like that. Don't quote me on that; I could be way off. The point is that I don't think anyone really knows how much shale oil can be recovered through primary recovery.

9. We do know that, unlike conventional oil, there is no smooth decline rate for shale oil. Mike Filloon has shown that in his graphs; the shale oil companies are not yet talking about that.

10. We talked about the huge CAPEX, long lead-times for conventional oil projects of the past (think Exxon offshore) versus the much smaller CAPEX, very short lead-times for shale. Exxon is finally getting the clue bug.

11. He was unaware of what Exxon and Chevron were doing in the Permian.

12. He was aware of (vaguely, I suppose) of IMO2020. Neither of us knew how that would play out. He was vaguely aware that "sour oil is out, sweet oil is in." That is great news for WTI but neither of us really knew how that would affect the Mideast. I didn't get into that, but I've made myself pretty clear regarding my thoughts about Saudi Arabia.

13. We are all watching different movies regarding the shale industry. I suggested that regulations/government policy will have a bigger effect on the shale industry than the other things we talked about. I was thinking of the "fracking bans" that threaten the industry, and the global warming arguments.

14. He saw "red flags" everywhere, again most of them planted by the ABSOCOI. I see the same "red flags," but am not concerned. I've seen the potential of shale; I'm really not that interested in the investment angle. The technology of shale production is what fascinates me. I would never, never recommend anyone invest in any oil company, shale or otherwise.

15. One could go on and on. I might come back to this. The point I'm trying to make is that I don't think anyone has any real idea what the US shale oil industry will look like ten years from now.

Disclaimer: I am inappropriately exuberant about the Bakken and the shale boom, in general. This is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here.

Frack Sand Revolution, Part 2 -- RBN Energy; Exxon/Chevron Battle It Out In The Permian; ND Rigs Back To 69; Seasonal Driving Restrictions Begin In The Bakken -- March 25, 2019

Housing starts:

January, 2019: jumped 18.6%, month-over-month;
February, 2019: up 12% -- I thought I heard that on talk radio; not confirmed; said housing sales (?) were up 12% month-over-month despite the cold weather [I definitely heard that, but must have been dreaming; Econoday calendar says this data will not be released until tomorrow, Tuesday, March 26, 2019;

The market:

futures overnight went to a Dow down 150 points
now, about an hour before the market opens, down about 50 points

Apple: presentation today, 12:00 noon Central Time.

Gravy train will not end: the Mueller team, $40 million to date, will now transition to the US House.

The big question: when did Mueller know that he would report "no collusion"? When did he know and what was the "tipping point"?

Later, a reader writes: the bigger question is how things would look this morning if Mueller said that Trump colluded with Russia to swing the election, and he clearly obstructed justice. Instead, we get a definite, no wishy-washy, "there was no collusion."

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.

Battle royale: Exxon, Chevron battle it out in the Permian. Featured story over at Rigzone. Archived.

Quick notes:

WTI misses milestone: comes close but did not settle above $60.
Murphy oil to focus on western hemisphere. Will sell two primary Malaysian subsidiaries, $2.127 billion deal.

Malaysian subsidiaries pump 16% of Murphy's annual output
all cash to be repatriated to the US
$500 million: share repurchases
$750 million: debt reduction, before dividend payments from 2019 - 2023
based on a flat $55-per-barrel WTI price
assumption: will be able to generate an 8% compound annual growth rate "during the same period" (2019 - 2023) from its three core-producing assets in onshore US; onshore Canada; and, offshore North America
quote:
“We will continue with our plans of investing in our high margin, oil-weighted Western Hemisphere opportunities, especially the Eagle Ford Shale and the Gulf of Mexico while maintaining our focused low-cost exploration program.”

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Back to the Bakken

Wells coming off the confidential list today/weekend -- Monday, March 25, 2019: 105 wells for the month; 325 wells for the quarter

34794, 550, Kraken Operating, The Kraken 24-13 7TFH, Epping, t10/18; cum 80K 1/19;
34793, 616, Kraken Operating, The Kraken 24-13 6H, Epping, t10/18; cum 97K 1/19;
34524, 1,076, EOG, Austin 426-1721H, Parshall, t9/18; cum 75K 1/19;
34523, 1,108, EOG, Austin 425-1721H, Parshall, t9/18; cum 75K 1/19;
33897, 955, Oasis, Berry 5493 44-7 14BX, Robinson Lake, t10/18; cum 111K 1/19;
28009, 1,591, NP Resources, Roosevelt 23-29-1PH, Roosevelt, t11/18; cum 56K 1/19;

Sunday, March 24, 2019: 99 wells for the month; 319 wells for the quarter

31800, 1,814, CLR, Mittlestadt 7-17H, Chimney Butte, t1/19; cum 31K 1/19;
30364, 2,988, CLR, State Weydahl 7-36H2, Corral Creek, t1/19; cum 39K 1/19;

Saturday, March 23, 2019: 97 wells for the month; 317 wells for the quarter

34644, 2,236, CLR, Anderson 11X-4HSL, Crazy Man Creek, t10/18; cum 143K 1/19;
24978, A, CLR, Syverson 3-12H1, East Fork, t--; cum --;