The Million Dollar Way (The Bakken Oil Blog): 10/02/19

Wednesday, October 2, 2019

Politics -- Nothing About The Bakken -- October 2, 2019

Disclaimer: I am a huge Trump supporter. I also like Big Oil. And Little Oil.

A most interesting snapshot of California polling. Link here.

I can hardly wait for the next two Trump rallies:

somewhere in Minnesota, October 10, 2019
Dallas, a week later

If Bernie drops out, who gets his voters? his million$$? his donor list? Steyer? My hunch: 16% of the Democrat electorate simply sits this one out.

Scandals that have legs:

Best bang for the buck: Alexa over at Amazon Echo. Period. Dot.

The Age Of Gas (Natural Gas, That Is) -- October 2, 2019

A reader sent me a couple of long e-mail notes. I did not know exactly how to post the information. There was a lot there.

For now, I've posted it at a sister site, "wells of interest," although it has nothing to do with specific wells.

It's an incredible amount of information provided by a reader and I will eventually move the post to this blog.

For those interested, this is the link.

There are so many story lines.

The story line that jumped out at me:

As the reader noted, the 21st century will be the age of gas. There will be winners and losers.

Winners: Asia, for sure.
Losers: Europe, for sure.
Winner/loser/the jury is still out: the US -- depends on where the next president wants to take us. The Dems want to ban fracking.

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What Jumps Out In The Video Below?

If you think you know, use google maps to find out where West Windsor Plainsboro High School is.

What a great country.

From West Windsor Plainsboro High School South, West Windsor, New Jersey:

Classical Gas, Mason Williams

There will always be a special spot in my heart for New Jersey. Wow, such bittersweet memories.

Not Smiling So Much Any More -- October 2, 2019

Link at the Des Moines Register.

Ruby Montoya.

Jessica Reznicek.

Admitted to their involvement.

DAPL.

Sabotage included burning at least five pieces of heavy construction equipment.

Buena Vista County, Iowa. My mother was raised in Storm Lake, Buena Vista County, Iowa.

Oxyacetylene cutting torches.

Up and down along the pipeline route across Iowa and South Dakota.

2017.

In Buena Vista County alone, damage estimated to exceed $2.5 million.

Prior to 2016, they said they began their initiative which resulted in at least $3 million in damages.

Arson.

Felonies.

Facing: decades in prison.

Montoya: arrested in Arizona. Awaiting her court appearance.

Reznicek will go on trial on December 2, 2019.

If they were undocumented persons from Honduras they would probably be home-free.

Something tells me they won't interfere with the Keystone XL and their friends won't interfere with pipelines in Texas.

The Extraordinary Bakken; In Less Than A Year, This Well Produced More Oil Than The Preceding Nine Years -- October 2, 2019

30-second sound bite: this well produced more oil in the past year than it did the entire preceding nine years and it was not re-fracked. It was simply taken off line for two months and then put back into production (wink, wink, or tongue-in-cheek).

Note: in a long note like this there will be typographical and factual errors. I may have made huge errors in simple arithmetic.

Note: I am using $30/bbl for price of crude oil in some examples; in others, $40 oil. I am making assumptions in some examples.

The definition of an ideal well: a well that pays for itself in six months and then provides free cash flow for the next 35 years.

The following well is NOT an ideal well. It took many years to pay for itself. But in the past year it appears to have generated millions of dollars in free cash flow.

This gets back to a discussion we had months ago. This was addressed by the CEO of some oil company operating in the Bakken some months ago when asked about the "return on investment." I don't remember his specific words, but they were something to the effect that in some cases the return on a well in the Bakken can only be defined as "infinite." Some readers took issue with that. That's fine.

Yes, I know how the return can be calculated, but this is the problem. How do you "carry this on your books" when considering return on investment?

The well:

17799, 457, BR, Guadalupe 11-23H, Charlson, t3/09; cum 542K 8/19; not re-fracked; for full production profile, see this post;

This well produced 230,608 bbls between 3/09 and 5/18 when it was taken off line for two months. By 5/18, production had leveled off at about 1,500 bbls/month. Forgetting about the natural gas, at $40/bbl crude oil this well had produced $9.25 million in revenue. Probably about what the well initially cost.

It was then taken off line for two months. It came back on line in July, 2018, about a year ago. In the past year, this well produced 311,226 bbls. As far as I can tell it was not re-fracked.

At $40/bbl = $12.5 million this past year. For a well that had zeroed out. For a well that was taken off line. For a well that was no longer producing (wink, wink).

So many story lines. Back in 2009 this well might have been considered "uneconomic." But the operator keep it on line.

Now, let's say the original owner of these minerals never sold his 160 acres of minerals (the typical size of a farm in this area). This is a 640-acre-spaced well. The owner controlled/owned 25% of the production, and probably received 18% royalties for the production.

In April, 2018, the mom-and-pop mineral owner would have received roughly:

1,157 bbls x 0.25 x 0.18 x x $30 = $1,500.

Not bad but not great. The mom-and-pop mineral owner probably thought this was pretty much what this well was going to be from here on out.

Then, in August, 2018:

28,578 x 0.25 x 0.18 x $30 = $38,580.

That was a check for one month.

For the entire past year:

300,000 bbls x 0.25 x 0.18 x $30 = $400,000 in royalties this past year alone.

Oh, one more thing. The owner with mineral rights for this well now has another dozen or so wells. Those wells are spaced at 1280- and 2560-acres so the decimal will be less, but all the same.....

So many story lines.

Again, this well was not re-fracked according to the NDIC and according to FracFocus. I don't think it was re-fracked.

This well has not been refracked:

Recent production:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2019	31	8220	8416	2909	35274	35169	28
BAKKEN	7-2019	31	9802	9556	2530	30326	30058	191
BAKKEN	6-2019	30	13347	13680	2269	33120	33046	0
BAKKEN	5-2019	23	14244	14229	1350	24852	24066	729
BAKKEN	4-2019	30	22406	22430	1996	23490	22854	562
BAKKEN	3-2019	31	29673	29576	2600	25049	24972	0
BAKKEN	2-2019	28	28054	28231	2077	27395	27325	0
BAKKEN	1-2019	31	29921	30008	2390	29361	29284	0
BAKKEN	12-2018	30	29567	29553	2462	27767	27693	0
BAKKEN	11-2018	30	28924	28924	2715	26246	26172	0
BAKKEN	10-2018	31	26945	26520	2271	27609	27532	0
BAKKEN	9-2018	30	25088	25570	2155	26978	26904	0
BAKKEN	8-2018	31	28814	28578	2947	32269	32192	0
BAKKEN	7-2018	31	16221	15949	2552	17136	17059	0
BAKKEN	6-2018	0	0	0	0	0	0	0
BAKKEN	5-2018	0	0	0	0	0	0	0
BAKKEN	4-2018	30	797	1173	73	1025	951	0
BAKKEN	3-2018	31	1376	1157	112	1981	1904	0
BAKKEN	2-2018	28	1290	1186	123	1742	1672	0

Initial production when this well was first drilled / completed back in 2009:

BAKKEN	10-2009	31	4657	4443	279	6258	0	6258
BAKKEN	9-2009	28	4289	4597	256	6494	4948	1546
BAKKEN	8-2009	31	5468	5305	419	8661	7609	1052
BAKKEN	7-2009	31	6383	6446	579	8164	5829	2335
BAKKEN	6-2009	23	5908	6000	588	7737	5963	1774
BAKKEN	5-2009	31	7296	7028	568	8979	8247	732
BAKKEN	4-2009	30	8520	8716	871	9571	4969	4602
BAKKEN	3-2009	29	9594	9177	1774	8376	0	8376

Records Being Broken Across The US -- The US Shale Revolution -- October 2, 2019

A reader sent me this:

I know you covered the EIA 914, but one big story has been missed. Texas crossed the magic 5MM bopd line, finally.

https://www.eia.gov/petroleum/production/

Other magic number records that may break later this year:

GOM: 2 MM bopd

ND: 1.5 MM bopd

NM: 1 MM bopd

On the gas side:

NM just cracked 5 BCF/d for the first time;

ND is very close to breaking 3 BCF/d (maybe next month);

PA is close to breaking 20 BCF/d (probably early next year, maybe this year); and,

even TX is not that far from breaking 30 BCF/d (probably next year).

https://www.eia.gov/petroleum/production/#ng-tab

WTI Drops Below $53; Whiting With Four New Permits -- October 2, 2019

Active rigs:

$52.44	10/2/2019	10/02/2018	10/02/2017	10/02/2016	10/02/2015
Active Rigs	59	65	57	33	68

Four new permits, #37030 - #37033, inclusive:

Operator: Whiting
Field: Sanish (Mountrail)
Comments:

Whiting has permits for a four-well KR State pad in the Sanish oil field, in section 16-153-92

Four permits renewed:

Hess: three TI-Beauty Valley permits in Williams County and one BB-Federal B permit in McKenzie County

The only well that came off the confidential list today was a DUC.

I'm Lovin' It -- October 2, 2019

From the EIA, sent to me by an alert reader:

In the graphic above:

the blue bar: the relative cost to build the plant
the red bar: the relative cost to build the plant and operate it for 60 years

Bernie Sanders' Campaign Suspended -- October 2, 2019

Another one bites the dust.

Another One Bites The Dust, Queen

Reality Sucks -- News From Norway -- October 2, 2019

Wow, this is really interesting.

From what I recall, for now, but links as I find them.

First, for those following this story, you might remember that Norway, to do its part in the war against global warming was going to divest itself of all holdings in oil companies.

Okay.

And, most folks know that Norway has so much money from state oil, that it's the richest country per capita in the universe -- except for maybe one or two other countries.

And because it's so rich, Norway can divest all its holdings in oil companies.

But then something happened.

Norway had to take some money "out of savings" to meet their budget/expenditures -- low price of oil was crimping their style.

I thought that was pretty much the end of that story.

Now I read that Norway has decided to divest only a small part of its total oil holdings.

Reality sucks.

Some links:

October 1, 2019: Norway unexpectedly withdraws cash from massive wealth fund;
October 1, 2019: never mind; will shield the biggest oil companies form divestment;
November 16, 2017: Norway to ditch oil holdings. The announcement, apparently, sent shock waves through the investment community.

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Waiting for Tesla

Later, 4:29 p.m. CT: finally, the numbers are out. Link here.

deliveries in 3Q19:

Elon Musk's goal: 100,000
Wall Street estimates: 95,700 - 98,000
EV site, estimate (see below): 55,000
actual: 97,0000
Model 3 deliveries per Tesla's press release: 79,600

shares of TSLA dropped 4% in after-hours trading
Tesla expected to report 3Q19 earnings later this month (October, 2019)

analysts expect a loss of 42 cents/share

Link here.

Still waiting for press release or media report -- 10:41 a.m CT, October 2, 2019 --

Disclaimer: in a long note like this with a lot of numbers there will be typographical and factual errors. If this information is important to you, go to the source.

After these numbers were released, TSLA continued to drop slightly.

The Tesla numbers (July, August, September, 2019):

Model 3: 13,450; 13,150; 20,250 -- subtotal: 46,850
Model X: 1,225; 1,825; 1,650 -- subtotal: 4,700
Model S: 975; 1,050; 1,100 -- subtotal: 3,125
total for 3Q19: 54,675

Total for year so far (nine months): 138,575

Model 3: 114,500
Model X: 13,725
Model S: 10,350

TSLA shrs today: down 1.5% -- hardly anything when the overall market (the Dow) dropped another 500 points.

Elon Musk wants to report 100,000 cars delivered in most recent report. Consensus: 98,000 delivered EVs. That would be a huge Tesla record.

But investors want to see 100,000+.

EV sales here.

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US Auto Sales for 3Q19

GM misses 3Q19 consensus. And this was mostly before the strike.

Ford and Chrysler beat. Whoo-hoo! Link here.

Also, here:

Profits matter, not units sold -- ask Elon Musk. Not to be taken out of context (some numbers rounded).

total vehicle sales, down 5%
high-margin trucks: up almost 10% (actual, 8.8%)
oh, oh -- high margin SUVs" down over 10% (actually, down 10.5%)
cars, not unexpected; time to get out of this business, at least for now, or move to "all EVs": down almost 30% (actual, 29.5%)
van sales: the world's best selling cargo van, the Ford Transit -- turned in a new record -- sales were up 21% -- sets an all-time third-quarter record
SUVs

SUV sales down, but look at this: Expedition sales expanded 48%!
maybe this is the reason for lower SUV sales: Ford completed its sell-down of 2019 models
And then we see this: Lincoln SUVs report the best third quarter sales since 2003 led by the new Nautilus
Nautilus sales jumped 24%, on top of the 15% gain in the second quarter

pricing much improved; a $2,200 increase per vehicle, year-over-year

Starbucks Makes It Right-- October 2, 2019

Starbucks always tries to make it "right" with their customers.

Last month, Starbucks announced and followed through with plans to end selling print editions of The WSJ, The NYT, and the local newspapers (which pretty much means the death knell of newsprint).

They did this, I am told by the local manager, because "no bought" these newspapers any more. They read them, but they didn't buy them. They would take them off the newsstand, read them, and then return them to the newsstand.

But Howard Schultz didn't want to "punish" everyone for the few that abused the system. So, now we see this:

By the way, this also suggests that those "rumors" that Starbucks didn't want to encourage folks from sitting too long in their coffee shops were entirely wrong. If Starbucks doesn't want to encourage folks hanging out at Starbucks all day long, would they offer:

comfy chairs?
fast, unlimited wi-fi?
almost-free refills?
no questions asked even if you don't buy anything?
no questions asked even if you only order free ice water and hang around all day?
unlimited access to digital Baltimore Sun?
free, unlimited access to non-gender-designated rest rooms?
pretty good coffee at steep prices?

EIA's Weekly Petroleum Report -- Remember, Everyone Says Inventories Are Going To Drop -- October 2, 2019