A Cute Little Story -- August 6, 2021

I've talked about this before. A lot of folks see the year of the plague, 2020, as a "black swan." A reader called me out on that telling me I don't understand the meaning of a "black swan." That's fine. A lot of folks think of Covid-19 as a "black swan."

I don't see Covid-19 / the year of the plague as a "black swan."

Nor do I see it as bad news except in one arena, which I won't go into now; I don't want to digress.

Covid-19 / the year of the plague has been incredibly important, beneficial, and rewarding on so many levels. 

First of all, at this point in my life, after "family," investing may be the most important and interesting aspect of my life. This has been a most rewarding period for investors and it will only get better. Not all the reasons for this are intuitive. 

Wow, it's been simply incredible on so many levels. 

But let's narrow this down to one small arena: the Bakken, or perhaps a bit more encompassing, the US unconventional oil sector. 

The Bakken revolution began in Montana, 2000.

The Bakken revolution began in North Dakota, 2007.

I started blogging in 2007, but the current blog only goes back as far as 2009.

I'll have to go back and look but the Permian shale revolution took off in 2010 time frame or thereabouts. 

So, by 2019, the chaos of 2007 - 2010 had morphed into an orderly development of the Bakken over the next few years. A USGS assessment was completed in 2013, and an update to include the first bench of the Three Forks was scheduled for 2020.

Then, 2020, the year of the plague. Everything came to a stop. Literally.

That gave all of us a chance to take a collective breath.

It took a few months, but when folks realized "we" weren't "going to open" for another year or so, the smart CEO's initiated new short-term planning (how to survive during the lockdown). mid-term planning (how do we "come out" of the lockdown -- I'm thinking of SAM -- hard seltzer misstep), and then long-term planning (compressing 2020 - 2035 into 2020 - 2025). 

So, 2020, the plague year, gave "everyone" a chance to take a deep breath. 

Break, break.

"Everyone" says that the days of drilling in the Bakken will eventually come to an end so companies like CLR need to look elsewhere for new plays.

2020 gave them an opportunity to look around; there wasn't much else to do.

The two things oilmen like to do: drill wells and make deals. There wasn't much drilling during the year of the plague. 

And that brings us to Louisiana.

For those who have kept up with the blog, they know what I am talking about. Later, I will provide the links to bring everyone up to speed. 

But to get started, this "blog" may be a great spot to start. The link will download as a pdf.

Look at the date that blog was posted: May, 2019.

Wow.

2019: the last year before the year of the plague. Everything came to a stop.

2021, and then 2022, even more so, price of oil improves and the economy opens up. 

West to east, south Texas to Louisiana: the Louisiana-Mississippi Stack Play (I think Harold Hamm loves anything with the word "stack" in it. His favorite breakfast is probably a stack of pancakes.)

It appears in the LAMS, the Austin Chalk overrides (sits atop) the Tuscaloosa Marine Shale,  with Austin Chalk as the source rock sitting between the two, at least according to the second slide.

Colloquially, from Texas east to Louisiana, geologists / oilmen refer to it as the "Austin Chalk Trend, (slide 5).

Slide 13: the Austin Chalk geographic regions:

• TX-South
• TX-Central
• TX-East
• LA-West
• LA-East: the predominant play in the LA-East block is the "LAMS Stack Play" straddling the Louisiana-Mississippi state line

Slide 15 is interesting. You know, I've designated the history of the Bakken from Bakken 1.0 to Bakken 4.0.

Slide 15, Austin Chalk play concepts:

• Austin Chalk 1.0: vertical wells, feast or famine
• Austin Chalk 2.0: horizontal, across naturally occurring fracture lines, focus where you find them
• Austin Chalk 3.0: frack, thick saturated porosity

Time, slide 16:

• 2016: EOG commences leasing
• 2017: EOG spuds early well
• 2018: MRO commences leasing
• 2018: COP commences four-well-drilling program
• 2018: MRO spuds early well
• 2019: EOG permits a new well, bringing us up to the date of the presentation

The next few slides show more of the geology / strata / source rock.

 "The Austin Chalk in the Tuscaloosa trend of Louisiana is a high TOC source rock."

"Log analysis in the eastern portion of the Louisiana Austin Chalk requires a different approach."

This presentation centered on LAMS, LA-East.

We are interested in LA-West: the hydrocarbon kitchen for Austin Chalk, TMS, Tuscaloosa, lower Cretaceous and Smakover, straddling the Texas/Louisiana state line, four parishes to the north of the gulf coast.

Slide 21: interesting. EOG has projects to the east and to the west, but apparently (at the time of the presentation) nothing in the center, over the TX/LA state line.

Slide 28: spend some time on this slide --

• the far left vertical blue line runs along the TX/LA state line, north to south;
  
• Equinor has two blocks on this line
• parishes from south to north:
• Cameron: on the coast
• Cal-cashew
• Beauregard
• Vernon
• the two Equinor blocks sit right on Vernon Parish -- wow
• remember, Equinor was huge in the Bakken, and Equinor exited the Bakken
• the vertical line in the middle has two MRO blocks
• farther east: EOG, COP, DVN, XEC, and ATS -- a lot of familiar (and big) names

TMS:

• Amelia Resources:
• kickstarted Encana who ultimately became largest leaseholder
• technical transfer
• first 60,000 acres

Austin Chalk:

• Amelia Resources:
• kickstarted ConocoPhillips (COP) who is one of the largest leaseholders in the play
• technical transfer
• first 85,000 acres

Slide 36: look how long it took to drill a well in the Austin Chalk, 2019 -- upwards of 50 - 70 days.

Slide 37: Austin Chalk atop the Tuscaloosa Marine Shale geology

Slide 47: oil needs to stay above $60

Now the cherry on top.

Imagine this at the El Rancho, in Williston, some years ago:

Harold Hamm, CLR, talking with Sven, Equinor.

Sven: "You know, Equinor is leaving the Bakken, and actually, leaving America. We enjoyed it. Sad to leave."

Harold: "Yeah. It's been a great ride. If you ever get back, look us up in Oklahoma."

Sven: "Not! Maybe Florida, California, Texas --- but not Oklahoma. But thanks for the invite."

Harold: "By the way, before you go. Do you have anything we might be interested in?"

Sven: "Let me tell you a story. Have you heard of Louisiana?"