The Million Dollar Way (The Bakken Oil Blog): 10/22/19

Tuesday, October 22, 2019

Six New Permits -- October 22, 2019

IPO: ever since it was announced I was highly skeptical the IPO would ever see the light of day (one post here, back on February 19, 2018). The IPO was delayed at the last minute earlier this week and now news is trickling out why that occurred (hint: not enough interest). Today there is a story that Saudi Arabia is issuing $250 billion in bonds to shore up its foreign reserves assets. I was going to post a "tea leaves suggest" that the IPO is not going to happen, or if it does, it's going to be watered down to something very, very small and listed only on some obscure Mideast bourse. But zerohedge beat me to it and probably did a better job than I would have:

Saudi Aramco’s IPO looks doomed to failure as it targets a $2 trillion flotation.

Tepid oil prices, the fraught politics of the Middle East and the demonization of fossil fuel producers in response to climate change fears have all made the initial public offering (IPO) a mission impossible.

The kingdom had looked poised to list up to 2 percent of its shares on its domestic market within weeks. But the long-delayed partial privatization of the world’s largest state-owned oil company now faces another indefinite postponement after the devastating attacks last month on some of its most important facilities at Abqaiq and Khurais in the Eastern Province of Saudi Arabia.

API weekly inventory data:

forecast: 2.232 million bbls
actual: 4.45 million bbls

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Back to the Bakken

Active rigs:

$54.22	10/22/2019	10/22/2018	10/22/2017	10/22/2016	10/22/2015
Active Rigs	61	71	54	34	69

Six new permits, #37106 - #37111, inclusive:

Operators: BR; Crescent Point Energy
Fields: Twin Valley (McKenzie); Marmon (Williams)
Comments:

BR has permits for a 5-well Carlsbad pad in section 17-152-97, Twin Valley oil field
Crescent Point Energy has a permit for a CPEUSC Njos well in section 26-157-100, Marmon oil field;

Thirteen permits renewed:

EOG (7): seven Burke permits in Mountrail County
QEP (2): two MHA permits, one in Mountrail County; one in Dunn County
Whiting: a Cvancara permit in Mountrail County
CLR: one Elveida permit in Divide County
NP Resources: one Trotter Federal permit in McKenzie County
Petro-Hunt: a Mongoose permit in McKenzie County

Notes From All Over, Part 2 -- October 22, 2019

First things first: World Series -- first game tonight.

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

The market, before the opening --

AAPL remains on a tear; up a bit in pre-market trading; now over $241 with upgrades from analysts
UNP: no trading yet, but was up 3.45% yesterday; jump $5.57 yesterday
TSLA: down a percent yesterday; getting some of that back today
F: most interesting automobile company right now; up slightly in pre-market trading
GM: will start building premium electric pickup trucks and SUV's starting in late 2021
PFE: up slightly in pre-market trading

Ex-Div today: 53 (filtered from 80 today entries) -- nothing of interest.

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The Word For The Day: Gabion

So much is packed into this article, and there's even a tie-in with Fargo, ND, over at wiki:

The HESCO MIL is a modern gabion primarily used for flood control and military fortifications. It is made of a collapsible wire mesh container and heavy duty fabric liner, and used as a temporary to semi-permanent levee or blast wall against explosions or small-arms. It has seen considerable use in Iraq and Afghanistan. It was developed in the late 1980s by a British company of the same name.

Originally designed for use on beaches and marshes for erosion and flood control, the HESCO MIL quickly became a popular security device in the 1990s.

HESCO barriers continue to be used for their original purpose. They were used in 2005 to reinforce levees around New Orleans in the few days between Hurricane Katrina and Hurricane Rita. During the June 2008 Midwest floods 9,000 yd of HESCO barrier wall were shipped to Iowa.

In late March, 2009, 11,700 yd of HESCO barrier were delivered to Fargo, North Dakota, to protect against floods. In late September, 2016, 10 miles of HESCO barriers were used in Cedar Rapids, Iowa, for the fall flood of 2016.

Specifically, the brand name for the barrier is "Concertainer" (a portmanteau of "concertina" and "container"), with HESCO Bastion being the company that produces it.

I was reading The Ancient Celts, Barry Cunliffe, c. 2018, page 329, when the author discusses Caesar's use of the word oppidum, briefly, a large Celtic settlement in Gaul in the middle of the first century BC.

Oppidum was distinguished from:

vici: villages
aedificia (edifice): farmsteads
civitates: towns within the provincia
urbs (urban): specifically for a few larger residential sites

The author considers oppidum to be a portmanteau word but I don't see that. Latin op might be construed to mean "work/works" such as a settlement, but that's a stretch. And the Latin pid doesn't exist except as a derivation of ped, feet, or similar.

Oppida were not Celtic capitals. There were too many of them to be capitals, although they may have had "regional authority."

There really is no connection between the HESCO MIL and oppidum but simply due to the peculiarities of a google search, the former popped up which then led to gabion.

Damn The Torpedoes -- Full Speed Ahead -- CLR In Haystack Butte -- October 22, 2019

See this from a year ago: CLR wants to put up to 23 wells in one drilling unit. July, 2018, hearing dockets, case #26772.

So, how does that unit look today, sections 4/5/8/9-148-97, Haystack Butte?

With these eleven sites, almost halfway there:

Williston Basin International Airport -- Off To A Great Start -- October 22, 2019

Larger planes to serve XWA soon: from KUMV-TV, both Delta and United will soon replace their 50-seat planes with larger aircraft.

UA: a 76-passenger plane
Delta: a 70-passenger plane

Emplanements up 22 percent in Williston

for 2019, year-over-year

Toby Rice And EQT -- Random Note -- October 22, 2019

Feisty mood.

See the comments at this post, and also see this post.

Subsequent to the linked posts above and a comment from a reader to the first linked post, I received the following from a reader who is much more knowledgeable than I am regarding the shale revolution, particularly with regard to natural gas and the northeast US. From that reader:

The points you raised regarding existing wells/new wells/ wide ranging impacts on company finances are precisely in line with what the new CEO of the country's biggest gas producer has been saying.

A big motivation for Toby Rice to take over the running of EQT was Rice's strident claims (validated by operational data) that a MUCH higher degree of skill was required to juggle SO many interconnected factors in unconventional production.

This has come to pass as wells became closer, product prices hit rock bottom, technological advances - especially in completions - continue apace, capital allocation (and revenue stream) will become "lumpy" as long delays are required to plan/drill/complete/bring to market the hydrocarbons.

You are 100% correct in framing the situation as you have, with the added note being the Bakken operators are somewhat farther along compared to the now-in-the-limelight Permian boys.

I didn't really know much about Toby Rice and EQT. RBN Energy has talked about EQT on many occasions.

So, time to take a look at Mr Rice and EQT.

Unfortunately this is behind a paywall but I'm sure one can find other articles on Rice Energy.

From June 24, 2017, a really, really long time ago:

Eighteen months ago, the Rice family was pressured to sell shares in their family gas company at all-time-low prices as the natural gas market tanked.

Now the Rice family is selling again. But this time, it is the entire company, and under much more favorable circumstances. On Monday, rival Appalachian gas producer EQT Corp. said it would buy Rice Energy Inc. for $6.7 billion in a deal that is poised to deliver more than $1 billion to the family, whose members make up much of Rice’s management and control roughly 18% of the company’s shares, according to securities filings.

The merger, which will create one of country’s largest natural gas producers, shows how the shale boom continues to mint great fortunes even after the bounty of oil and gas around the world depressed energy prices.

With gas in particular, timing is everything. Prices for the fuel, which is used in heating and to generate electricity, is prone to wild swings as unpredictable as the weather.

In late 2015, the warmest winter on record pulled down gas futures to all-time, inflation-adjusted lows, dragging down Rice’s stock. To avoid a margin call, the family sold a slug of shares they had borrowed against. Had they been able to hang on to those five million shares, the family would now be nearly $100 million richer.

Under terms of the EQT deal, Rice shareholders are due $5.30 in cash and about one-third of an EQT share. Based on EQT’s closing stock price the day before the deal was announced, that equates to about $27.05 for every Rice share.

Still, the family is likely one of the gas boom’s biggest winners just a decade after Daniel Rice III and his sons created the company from scratch. Their expertise in oil and coal helped them scout land in the early days of the shale-gas boom in Pennsylvania.

Mr. Rice honed his expertise at BlackRock Inc., where he was a mutual-fund manager specializing in energy when his family started the gas company. One early move was a deal to drill in areas controlled by a coal company that Mr. Rice’s BlackRock fund invested in.

Much, much more at the link if one can get to it.

Did the Rice family do the right thing?

Share price of EQT:

October 27, 2014: $53.70
October 30, 2017: $34.18
Closing price yesterday, October 21, 2019: $9.55

Many, many observations but I'm sure everyone has there own observations. But it's an incredible article over at the WSJ on this family. What a great country. Absolutely amazing what an individual can do in this country.

Random Note: 320-Acre Spacing In The Bakken -- October 22, 2019

Perhaps the most interesting "development" coming out of the Bakken yesterday: the 320-acre spacing for these PetroShale wells:

Seven producing wells (DUCs) reported as completed:

35703, 1,572, PetroShale, Thunder Cloud 2TFH, McGregory Buttes, t8/19; cum 23K over 24 days; spacing: 320 acres;
35700, 1,008, PetroShale, Thunder Cloud 1MBH, McGregory Buttes, t8/19; cum 19K over 22 days; (18017 -- 9,000 bbls in one day, 7/19); spacing: 320 acres;
35701, 840, PetroShale, Thunder Cloud 1TFH, McGregory Buttes, t9/19; cum 21K over 23 days; spacing: 320 acres;
35702, 1,528, PetroShale, Thunder Cloud 1MBH, McGregory Buttes, t9/19; cum 24K over 24 days; spacing: 320 acres;

I expected this in Clarks Creek, but never expected it in McGregory Buttes. Obviously it was in the monthly dockets but I had completely forgotten.

PetroShale: I finally had to look up the website to make sure I was spelling "PetroShale" correctly.

Back to McGregory Buttes and the graphics. There are very, very few 320-acre units in the Bakken. Also, at this point, none of these 320-acre spacing units are part of any large drilling unit.

In the graphics below, the 320-acre spacing units are shaded in light purple.

Six Wells Coming Off The Confidential List Today -- October 22, 2019

Oh-oh: "majors" are exiting Kazakhstan. Link here. Data points:

Royal Dutch Shell has pulled out of a Khazar offshore project next to the giant Kashagan field
a multinational consortium including Shell is also dropping plans for the adjoining Kalamkas block
Shell writes off almost $1 billion on this debacle
Kalamkas-Khazar project costs estimated at $5 billion with production starting in the late 2020
but look at this: energy companies have spent more than $50 billion on developing Kashagan which has been plagued by delays and cost overruns
Kashagan is linked at the sidebar at the right; I was skeptical from the get-go on this one.
Kashagan? put a fork in it; it's done
peak oil? hardly?

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Back to the Bakken

Six wells coming off the confidential list today -- Tuesday, October 22, 2019: 76 for the month; 76 for the quarter:

35398, conf, Hess, RS-Aadnes-157-91-2829H-4, Ross, no production data, 3
35209, conf, Whiting, Moline 21-14-2H, Tyrone, a big well;
34943, conf, Whiting, Moline 41-15-2HU, Tyrone, a big well;
33787, conf, Crescent Point Energy, CPEUSC Elena 6-22-15-157N-100W TFH, Marmon, no production data,
33026, conf, CLR, Hereford Federal 11-17H, Elm Tree, producing,
30645, conf, CLR, Sorenson 9-16H1, Alkali Creek, producing,

Active rigs:

$53.79	10/22/2019	10/22/2018	10/22/2017	10/22/2016	10/22/2015
Active Rigs	62	71	54	34	69

RBN Energy: the bottom line on natural gas egress from western Canada, part 7.

The Western Canadian natural gas market remains a challenging environment from every angle: rising supplies, lack of available pipeline export capacity, and demand that can’t seem to rise fast enough. This has resulted in a price environment which, of late, has become the weakest in North America. The long-term solution to anemic prices and future supply growth is to increase pipeline export capacity from the region and ensure that demand continues to grow. We conclude this series today with a look at how forecasted supply and demand growth will stack up against planned export pipeline capacity additions to determine if the embattled region’s prospects can turn around in the next few years.

Notes From All Over, Part 1 -- October 22, 2019

First things first: the EF-3 tornado that hit Dallas Monday night was all over the national news last night. The devastation was much worse than most imagined. There were several tornadoes in that 24-hour period from Texas to Arkansas. This particular tornado followed a major thoroughfare, on a 17-mile track from the southwest to the northeast, covering that length in about 30 minutes. The swath appears to have been about a half-mile wide. A category 4 hurricane has wind speeds of 130 - 156 mph; this tornado, and EF-3, had wind speeds of 140 mph.

EVs: we have a huge new sprawling "outdoor" retail area going up in the area just to the south of where we live -- about five minutes away on my bicycle. Name a retail outlet and one can probably find it in this area. Generally, the one retail outlet we don't see in these developments is a service station. Interestingly enough, my favorite service station brand just opened this past month: QT. Quick Trip. Least expensive gasoline in the area, generally speaking. Also, largest selection of different coffee choices and huge, huge selection of one's favorite breakfast items and snacks. I'm not seeing new EV charging stations going in. Anywhere. With a Tesla dealership just a few miles to the northwest (in Southlake, TX) this region of the US must have one of the highest concentrations of Teslas per capita -- and to the best of my knowledge, only one Tesla charging station -- about ten units in a parking lot in a shopping mall in Southlake.

Politics: new Iowa poll -- USA Today -- three days after the most recent debate, again, this is Iowa, link here:

Biden: 21%; pretty much unchanged since the debate; Iowans just don't warm up to this 3rd-rate candidate
Pocahontas: at 20.7% -- pretty much unchanged
Buttigieg: media buzz -- he is surging after the debate -- in fact --

CBS/YouGov, before the debate: 14%
Emerson, around the time of the debate: 16%
USA Today, immediately after the debate: 13%
I just love the media spin; Buttigieg surging; LOL

Sanders: imploding; down to 14.3% in Iowa; tied with Buttigieg
Harris: for all the media attention in Iowa, an appalling 3.3%
Steyer, Iowa: 2.7%
Iowans love to hunt: Beto "hell, yes, we will take your guns" -- 1.0%

Politics:

Julian Castro: campaign going broke; two months from now -- out of the race