Friday, August 16, 2019

"Recession Just Around The Corner" -- Never Mind -- August 16, 2019

Talk of recession ... well, that didn't last long.


From oilprice.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, career, or relationship decisions based on what you read here or think you may have read here.

Bonus: $16,000 / Acre -- Eagle Nest Oil Field -- Dunn County

See this post for background.

From that post:
Dunn County
  • 4 parcels
  • all parcels bought by Enerplus Resources
  • parcel size: 160 acres (2); 75 acres (2)
  • bonus paid: $15,776 / acre
  • parcels:
    • Lots 1, 2 - section 16-148-95
    • NW4 - section 16-148-95
    • Lots 3, 4 - section 16-148-95
    • SW4 - section 16-148-95
The graphic:


The wells in the graphic:
  • 25210, 2,789, Bruin, Fort Berthold 148-95-22C-15-5H, Eagle Nest, t4/14; cum 384K 6/19; showed significant jump in production, 6/17;
  • 25209,
  • 25208, 2,7149, Bruin, Fort Berthold 148-95-22C-15-4H, Eagle Nest, t4/14; cum 318K 6/19; showed several moderate-to-significant jump in production since it was first completed;
  • 25207, 2,219, Bruin, Fort Berthold 148-95-27B-34-4H, Eagle Nest, t5/14; cum 275K 6/19;
  • 26323, 3,138, Bruin, Fort Berthold 148-95-22C_15-9H, Eagle Nest, t4/14; cu 449K 6/19;
  • 26322, 3,317, Bruin, Fort Berthold 148-95-27B-34-8H, Eagle Nest, t4/14; cum 389K 6/19;

  • 22531, 754, Enerplus, Emerald 148-95-03A-10H, Eagle Nest, t10/12; cum 289K 6/19; a steady Eddy that suggests easily a doubling of the EUR if it were re-completed with current completion strategies;


  • 22300, conf, Bruin, FB Belford 148-95-22D-15-2T, Eagle Nest; Bruin must have gotten tired of typing out "Fort Berthold"; now abbreviate it, "FB" (no, it does not stand for FaceBook)
  • 18969, 802, Bruin, Fort Berthold 148-95-27A-34-1H, Eagle Nest, t9/12; cum 306K 4/19; went off line 4/19; a steady Eddy that suggests easily a doubling of the EUR if it were re-completed with current completion strategies;
  • 22301, conf, Bruin, FB Belford 148-95-22D-15-3B, Eagle Nest; look how old this permit is;
  • 18968, 875, Bruin, Fort Berthold 148-95-22D-15-1H, Eagle Nest, t9/12; cum 308K 4/19; went off line 4/19; a steady Eddy that suggests easily a doubling of the EUR if it were re-completed with current completion strategies;
  • 36307, drl, Bruin, FB Belford 148-95-22D-15-6T, Eagle Nest;
  • 22298, IA/1,095, Bruin, FB Belford 148-95-22D-15-6T, Eagle Nest; t10/12; cum 223K 6/19; offline as of 2/19;
  • 36306, drl, Bruin, FB Belford 148-95-22D-15-7B, Eagle Nest;
  • 36305, loc, Bruin, FB Belford 148-95-22D-15-8T, Eagle Nest;
  • 36304, loc, Bruin, FB Belford 148-95-22D-15-10B, Eagle Nest;
  • 36303, loc, Bruin, FB Belford 148-95-22D-15-13T-LL, Eagle Nest;
  • 36302, loc, Bruin, FB Belford 148-95-22D-15-14B-LL, Eagle Nest;
  • 22299,

Quarterly Lease Sales Results For August, 2019 -- Bowman County; Golden Valley; Billings County Particularly Active; Dunn Went For $16,000 / Acre

President Trump looked into buying Greenland; it looks like Northern Energy Corporation is looking to buy Bowman County, North Dakota.

Quarterly lease sales results have been released for August, 2019. Link here.

Billings County
  • 8 parcels
  • inexpensive parcels were 80-acre parcels
  • expensive parcels were 8-acre parcels
  • three parcels with bonuses of $5 / acre
  • four parcels with bonuses between $750 and $802 / acre
  • one parcel with a bonus for $1,001 / acre
  • bidders: Great Plains Land Services; North Energy Corporation
Bowman County
  • 473 tracts
  • most tracts were 40-acre and 80-acre tracts
  • almost all parcels bonuses for $1 / acre; 
  • Northern Energy Corp was the bidder for around 450 of the 473 tracts
  • the dozen or so parcels not bought by Northern Energy Corp were by The Triple T (It Takes TIme); Yockim Resource Exploration Co; Anderson Oil Ltd; Inland Oil & Gas; Interwest Petroleum Corp; and, Kenneth O'Sullivan
Dunn County
  • 4 parcels (see this post for graphic)
  • all parcels bought by Enerplus Resources
  • parcel size: 160 acres (2); 75 acres (2)
  • bonus paid: $15,776 / acre
  • parcels:
    • Lots 1, 2 - section 16-148-95
    • NW4 - section 16-148-95
    • Lots 3, 4 - section 16-148-95
    • SW4 - section 16-148-95
Golden Valley
  • 130 parcels
  • almost all were 80-acre; and, 160-acre parcels
  • bidders: almost all -- Northern Energy Corp
  • bonus: almost all were $1.00 / acre
  • a few parcels were bought by Interwest Petroleum Corp; The Armstrong Corp; and, Great Plains Land Services;
McKenzie County
  • 4 parcels
  • parcel sizes: 160 acres (2); 138 acres; 24 acres
  • bidders: Andesite Energy (3); Oasis
  • bonuses paid by Andesite: $668 / acre; $700 / acre; and, $1,151 / acre
  • Oasis paid $3,301 / acre for the 138-acre tract
Mountrail County
  • 1 parcel
  • Northern Energy Corp
  • 80-acre parcel
  • bonus: $1,541 / acre
Ward County (Minot)
  • 69 parcels
  • almost all of them: The Triple T, Inc
  • almost all 80-acre and 160-acre parcels
  • bonuses: almost all were $1 or $2 / acre
  • a few outliers, A Triple T, Inc, bonus of $23 / acre; $13 / acre; $12 / acre
  • the three parcels not picked up by Triple T were picked up by Kenneth O'Sullivan;

Number Of Wells In The Bakken Off-Line, Inactive, DUCs Are Near An All-Time Record -- August 16, 2019

I track DUCs and wells off-line for operational reasons here.

In March, 2019, a record number of wells were either DUCs or off-line for operational reasons: 2,665.

The following two months, the numbers dropped.

However, in the most recent reporting period, June, 2019, the number of wells off-line again increased. As of June, 2019, 2,536 wells are off-line. That's about three years worth of drilling in the Bakken. About 850 wells are drilled, completed, brought on line each each in North Dakota with WTI in the $55 range. 

I don't have the ability or time to track production of wells coming back on line on a statistical meaningful and accurate way, but this is my gut feeling. When middle Bakken and Three Forks first bench wells are taken off line for operational reasons and then brought back on line:
  • less than 1% come back with a production rate less than what it was before they went off line;
  • 50% come back at the same production rate compared to when they first came off line;
  • 40% come back with a slight-to-moderate increase in production; and,
  • 10% come back with a huge jump in production.
The first six months, and especially the first three months after a DUC is completed, the production of that well is at its best. I have come to expect a crude oil production rate of 20,000 bbls/month in the first full month of production after a DUC is reported as completed.

Back of the envelope:
  • inactive well count: = 1,500: 90 bbls/well/day = 135,000 bopd being stored underground;
  • completed DUCs = 1,000; 700 bbls/well/day = 700,000 bopd being stored underground
  • total: 835,000 bopd
  • 835,000 / 1,400,000 = 60%
Disclaimer:
  • my assumptions are often wrong
  • almost nothing is static in the Bakken
  • I often make simple arithmetic errors
  • in a note like this, there will be factual and typographical errors
  • in a blog like mine, it is difficult to separate fact from truth, as Sleepy Joe would say
  • in a blog like mine, it is also difficult to separate fact from opinion
  • I am inappropriately exuberant about the Bakken

What A Doofus -- August 16, 2019

North Dakota just set an all-time record for crude oil and natural gas production.

Wow, what a doofus. From February 28, 2017.


Six New Permits -- August 16, 2019

Active rigs:

$54.928/16/201908/16/201808/16/201708/16/201608/16/2015
Active Rigs6158553274

Six new permits, #36859 - #36864, inclusive:
  • Operators: MRO, Whiting, Enerplus
  • Fields: Antelope-Sanish (McKenzie); McGregory Buttes (Dunn), Sanish (Mountrail); Squaw Creek (McKenzie)
  • Comments:
    • MRO has permits for a two well Papa George USA / Rock Woman USA pad in lot 2 / section 4-151-94; Antelope-Sanish;
    • Whiting has permits for a two-well Satterthwaite pad in lot 3 / section 7-153-92, Sanish oil field;
    • Enerplus has a permit for an Iron well in section 32-148-93, McGregory Buttes
    • WPX has a permit for an Omaha Woman well in section 25-149-95, Squaw Creek
Two permits renewed:
  • Whiting: a Dietz permit and a Solberg permit, both in Stark County
Five producing wells (DUCs) reported as completed: to be completed later --
  • 34401, 2,357, WPX, Lion 18-19HC, Mandaree, t7/19; cum --; check #17658; #20517; perhaps others;
  • 34867, 3,490, Hess,  BB_Eide-151-95-3328H-13, Blue Buttes, t7/19; cum --; check #24128; #21429;
  • 34866, 2,943, Hess  BB_Eide-151-95-3328H-12, Blue Buttes, t7/19; cum --;
  • 34865, 3,080, Hess  BB_Eide-151-95-3328H-11, Blue Buttes, t7/19; cum --;
  • 35013, 2,161, WPX, Spotted Horn 26-35HW, Squaw Creek, t8/19; cum --; neighboring well #20238 showed a moderate jump in production, 6/19;

Rig Counts From Twitter -- August 16, 2019





Breakeven Costs In The Bakken -- August 16, 2019

Updates

Later, 1:41 p.m. Central Time: I found what I was looking for, from May 10, 2019:
In the Whiting earnings call, the CEO said the rate of return on "parent-well-uplift" is "infinite." I thought that was hyperbole and at the linked post, I suggested what he might have met.

Having thought about that, technically speaking, he is absolutely correct. The rate of return associated with that well was based on projections and actual production from the well without extra production as a result of the "halo" effect. If one continues to separate all those costs / the rate of return from "halo" production, then, yes, of course, the rate of return is infinite. That production was never anticipated; it was never factored into the original rate of return. The real question, of course, does it "move the needle"?
Later, 11:55 a.m. Central Time:
Google: How much does it cost to produce a barrel of oil in Saudi Arabia? The marginal cost (the cost of producing an additional barrel of oil) is lowest in Saudi Arabia at US$8.98 per barrel; the highest in the U.K. at US$44.33. -- June 28, 2018.
The Motley Fool has an article on this question, March 19, 2017. The Motley Fool needs to do a column on "You Won't Believe What It Costs/Bbl To Drill Oil In The Bakken!"
Later, 11:50 a.m. Central Time: in reply to the reader's comments in the original post -- I believe the NDIC has factored a lot of those questions into their analysis. The bigger question is this: how much lower can the breakeven cost go? I will comment on that later. I think a CEO of one of the Bakken operators actually touched on this some months ago. In some cases, the marginal cost trends toward $0.00 (no typo).

Original Post 

I really don't have time to go into this now. I'll throw out some data points, some reader's note, etc., etc., and let readers think about these things. I may or may not get back to this.

First, break-even prices as reported in The WSJ just a few days ago, August 11, 2019:


Second, the break-even prices as reported in the Director's Cut, yesterday, for June, 2019, data (look at the breakeven price for oil in Mountrail County):


Third, comments from a reader:
More than a quick glance at the table [above] that shows well breakeven prices by ND counties and one has to question its utility.
Take the "Statewide" value, for example.
What weighting is applied to come up with $12/bo? If the same weighting is applied uniformly, for each county, don't we already have an apples and oranges issue to sort out? Then put a statewide value in the same column? New wells, in one county may be predominantly Red River, another Madison or Bakken. Wildcat or exploration vs. development wells.---I believe you actually just found a Wildcat well.
Fourth, the Bakken heat map (linked at the side bar at the right.


Finally, the activity in one county in the Bakken, McKenzie County.

The entire county:


West-central McKenzie County:


Northeast McKenzie County:


Still Looking For That Optimum Well Spacing Density -- RimRock's KOG Skunk Creek Wells -- Updated -- August 16, 2019

Production data for the Skunk Creek wells has been updated In addition, a new map of the area of interest has been posted at that same link. This post will not be updated. Updates are at the linked site.

Of note:
Off line:
  • 19587, 2,665, Rimrock/KOG, Skunk Creek 12-10-11-9H, South Fork;  t10/11; cum 367K 3/19; off line as of3/19;
  • 22162, 1,749, Rimrock/KOG, Skunk Creek 16-2-3-13H, South Fork, t12/12; cum 246K 6/19; -- off line as of 6/19;  
Off line for a month, but now back on line:
  • 19817, 212, Rimrock/KOG, Skunk Creek 2-8-17-7-15H, South Fork; t1/12; cum 201K 6/19; choked back a bit; very unusual production profile; 
Graphics:




14-well density and counting.

Lies, Lies, And More Lies -- An Update On That UK Grid Failure -- August 16, 2019

From iceagenow:
A huge power failure in the UK on 10 Aug 2019 cut power to trains, traffic lights and millions of people at home. Two power plants caused the failure. The official report claims that the Little Barford gas-fired station in East Anglia failed first, then, 2 minutes later, an offshore wind farm (Hornsea) in the North Sea failed 2 minutes later.
This is a lie, says WUWT (WattsUpWithThat).
The truth as revealed by detailed research by blogger is that the wind farm clearly failed first, and caused the whole event. Like the captain of the Titanic aiming for a transatlantic speed record, the UK national grid were aiming for a record percentage of power from wind. They reduced the safety margin of grid inertia for this purpose, and the result was disaster:
... the blackout’s primary cause was the sudden loss of output from Hornsea wind farm, though the precise cause of that remains unknown at this stage: likely candidates are a failure at the offshore transmission platform where the voltage is boosted to 220kV, somewhere along the cable to shore, or at the grid connection point (at Killingholme on the Humber) onshore. The really damning evidence comes in this tweet that shows grid frequency based on 1 second data. 
So much more at the link. The story is tracked here.

***********************************
The Sports Page
$330 Million Contract 
What A Great County
Probably Won't Catch Bryce Kneeling

Bryce Harper.

Last night's win.
The Cubs got yet another gem from Yu Darvish on Thursday night, and they led 5-0 going into the eighth inning.
At one point in the bottom of the ninth, the Cubs had a 99.4 percent chance of winning the game.
That's when the bullpen meltdown began. With one out, a David Bote error allowed the gates to open. Rowan Wick, Pedro Strop, and then Derek Holland proved unable to stop the bleeding.
The Phillies pulled to within 5-3, and with one out and the bases loaded Bryce Harper stepped in against Holland. First comes the power, then comes the glory ... a grand slam homer ...
And more:
Prior to tonight, the Cubs had won 489 straight games when leading by 4+ runs in the 9th or later, the longest active streak in the NL.That's also the first Phillies come-from-behind, walk-off grand slam since September of 1983. 
From wiki:
Harper won the National League (NL) Rookie of the Year Award in 2012 and tied for the NL lead in home runs in 2015. He was named the NL Most Valuable Player for 2015 by unanimous decision of the Baseball Writers' Association of America; at age 23, he became the youngest MLB baseball player to win the award.
As a free agent during the 2018–19 offseason, he signed a 13-year, $330 million contract with the Phillies, the richest contract in the history of North American sports at the time. 
*********************************
Give Me Room


Once they go to EVs, Slim will have to change the lyrics.

Hurricanes And Fake News -- August 16, 2019

Global warming ... climate change ... extreme weather ... whatever ...

First, this link: no hurricane activity for next ten days or so.


Now this, posted by hurricane watchers on August 8, 2019: their first comment --
On average, only two named storms develop in the Atlantic before August 1st arrives. The 2019 Atlantic Hurricane season has started off close to normal, with the development of Andrea, Barry, and an additional tropical depression. Barry was the most notable of the three systems, briefly reaching hurricane status as it made landfall over Louisiana in mid-July.
It should be noted that there was great controversy whether Barry actually reached hurricane status. Whether it was or not, from a forecasting point of view, another hyped story. There were any number of reports suggesting that the data was fudged -- they only needed to fudge the wind by a few knots -- to classify it as a hurricane. And that's how we get fake statistics. Barry will always be counted as a hurricane ... over time ... the controversy will be long forgotten ... Weather Channel got a lot of mileage out of that "hurricane."

August history?
August normally sees three new named storms form. Any storms that do form this month will likely develop in three regions of the Atlantic basin - the Gulf of Mexico and northern Caribbean, the area of the central Atlantic east of the Lesser Antilles, and the western Atlantic stretching from the Bahamas northward along Florida and up to the Carolinas.
Interestingly enough, the writers had to stretch the data a bit for last year, trying to "tie" a September storm as an "August" storm:
 Last August featured the development of three named storms, one of which had a major U.S. impact after the calender flipped into September.

Transportation Services Index And The Cass Freight Index; Western Star; Australia; And All That Jazz -- August 16, 2019

A new link at "Data Links" has been added: the Transportation Services Index.

From an earlier post: A reader sent me the link to the Cass Freight Index. The index is posted here.


********************************************
A Shout Out To Truckers Around The World

The other day there was a WSJ article about the slowdown in truck manufacturing (Class 8 -- the semis). I spoke to an individual who works for a specialty truck company on the west coast two days ago: he is working mandatory overtime. In addition, the company has bought another site for possibly building another manufacturing plant sometime in the future. There are a couple of reasons why this new plant on the west coast might be needed: Asian and Australian companies.

Australian road trains

One comment:4:14 Saw that green one last night in a clip.. 86 wheels and tyres in service and probably two spares each per trailer? 5:44 Can you imagine that. Well the lights were green when I began to pull away officer.
Western Star Australia:


Western Star 2020:


Connecting the dots:
OzMan: Rock On in the Western Star:


Okay, just one more.

Lights on the hill:

Flaring -- August 16, 2019

From twitter this morning.


Again, the important graph is missing: radiant heat / production ratio. It looks like that ratio might actually be down.

I thought it interesting that the "Bakken [is/was] in full panic mode." Google search revealed .... nothing. The textbook on the shale revolution -- which will probably be the "shale bible" does not have "radiative heat" in the index. That book will be released on August 21, 2019.

By the way, an alternative spelling for "flaring": "opportunity."

Any permit for a greenfield plant to help manage this problem will be approved by the NDIC in a "New York minute."

Director's Cut, June, 2019, data, posted here. North Dakota sets all-time crude oil and natural gas production records.

One Day Later -- Five Wells Coming Off The Confidential List Today -- August 16, 2019

The net worth of every 2020 presidential candidate, Forbes, link here First of all, quick look, seems bogus:
  • Pete Buttigieg, net worth, $100,000. Must live in a huge house with a huge mortgage 
  • Andrew Yang, net worth, $1 million. No wonder he wants a thousand-dollar check from the government every month.
  • Bernie Sanders, net worth, $2.5 million. Three houses?
  • Beto, net worth, $4 million -- and exactly how?
  • Kamala Harris, net worth, $6 million, first one on the list that is believable.
  • Joe Biden, net worth, $9 million -- worked for the government his whole life, but compound interest on savings bonds for someone in his 70's
  • Tom Steyer, new worth, only $1.6 billion -- and begging for $1 donations
World E&P leaders ranked by production growth, link here. Royal Dutch Shell and Chevron make the list; COP and ExxonMobil do not.

New loading option at Houston: story here. I think I posted something along this line yesterday bur not sure. Whatever. It's here now.

GE: nearing insolvency? Link here from Bloomberg. I assume this is the top story over at CNBC this morning.

 **************************************
Back to the Bakken 

Most interesting story of the day (so far): for a site that wastes no time and spares no effort warning us the Bakken is dead, oilprice has not yet reported that the Bakken set all-time crude oil and natural gas production records in latest production report (data for June, 2019)

By the way, the all-time North Dakota production record:
  • was not trivial; a significant jump month-over-month;
  • occurred despite Baker Hughes reporting only 47 active rigs (or thereabouts) -- down from 200 rigs during the boom when production was much, much less
  • was predicted by Lynn Helms about six months ago
Memo to self: need to send notes to Art Berman and Jane Nielson.

Wells coming off confidential list today -- Friday, August 16, 2019: 33 for the month; 80 for the quarter:
  • 35350, SI/NC, Hess, RS-State D-155-92-0203H-4, Alger, no production data,
  • 34765, SI/NC, MRO, Kinney 24-36TFH
  • 32466, SI/NC, BR, CCU Audubon 8-8-22MBH, 
  • 32399, SI/NC, Slawson, Atlantis Federal 2 SLH, 
  • 26639, SI/NC, XTO, Badlands Federal 21X-13E, 
Active rigs:

$54.758/16/201908/16/201808/16/201708/16/201608/16/2015
Active Rigs6058553274

RBN Energy: owners commit to Capline reversal, Diamond expansion/extension.
Well, it’s finally going to happen!
Without major fanfare, Plains All American and Marathon Petroleum announced earlier this month that they have sanctioned the reversal of the 40-inch-diameter Capline crude oil pipeline, a move that will enable light crude to flow south on that pipe from the Memphis area to St. James, LA, starting late next year and light and heavy crude to do the same from Patoka, IL, by early 2022.
Also, Plains said it has committed to expanding the existing Diamond Pipeline between Cushing, OK, and Memphis, and extending that eastbound crude pipe from Memphis to a new interconnection with Capline. Light-crude service on the expanded, extended Diamond will commence in late 2020.
Today, we review the newly sanctioned projects and their significance to U.S. and Canadian producers, Louisiana refiners and Gulf Coast exporters.