For The Archives -- Flashback -- Dallas Morning News -- June, 2013

Link here.

What A Treat -- A Mike Fitzsimmons Seeking Alpha Posting From 2013 Still Accessible -- March 14, 2018

Goldman Sachs has been both bullish and bearish with regard to the Bakken over the years.

It is interesting to go back to 2013 and see the Goldman Sachs forecast then.

The forecast:

The Bakken in the graphic above includes Montana and North Dakota; I do not know if it includes that part of the Bakken in Canada.

The curve was affected by price, of course, which was affected by the Saudi Surge, announced in November, 2014, and lasted almost exactly two full years.

At the time that article was written, WTI was selling for $103/bbl.

All things being equal, the curve will move to the right.

I posted this, not so much for the Goldman Sachs prognostication but, to note the Bakken formations/sub-formations recognized by Goldman Sachs analysts and the size of the spacing units.

Comments From A Different Planet

The comments at this CarpeDiem post are instructive.

There are two issues that seem to keep popping up when naysayers comment on the Bakken: a) low production/well/day; and, b) the cost of wells.

COST/VALUE
1. First, the cost of wells. Operators are no longer drilling $10 million wells for $10 million. In other words, some wells will still cost $10 million but, comparing apples to apples, the $10 million wells in the past have now come down significantly in cost.

2. The North Dakota Bakken boom is now in its 6th year; it started in 2007. In Montana, the Bakken boom began in 2000. To date, operators have not written off or downgraded the value of their North Dakota shale assets. Bonuses paid for leases in the North Dakota continue to reflect no loss of interest in the Bakken.

PRODUCTION
3. With regard to productivity for the most recent month: the previous month, May, 2013, was the wettest month on record in North Dakota -- again, repeat, the wettest month on record -- not just for a few years, or a decade, but on record. Road restrictions were in place in May, 2013. These road restrictions were extended into June. I don't know the current percent, but at one time (recently) as much as 70% of all oil in North Dakota is trucked at some point, generally from the pad to the nearest pipeline terminal. Even if the distance is one mile from the pad to the pipeline terminal, it still takes a truck to get on to the pad to empty the tanks. With a measly 1.25% increase in daily production (June over May, 2013), despite all the huge wells that have been reported in the past six months, and then knowing about the road restrictions due to extremely wet weather, the dots all connect. In addition, if operators are meeting their contracts, they may be choking back their wells for any number of reasons.

4. There are a gazillion examples, but to get an idea of what "choking back a well" can do, look at #19104 at this post. This well has produced as little as 2,003 bbls back in September, 2011, and produced more than 11,000 bbls in just six days in June, 2013. That wasn't nature, folks; that was the CEO of QEP managing his assets.

Month-to-month variability is interesting to follow but longer intervals are needed to really see what is going on.

5. I think some of the folks who comment on the Bakken are also unaware of EOG/CEO's recent comments: he says ALL, not most, not some, but ALL of EOG's Bakken wells now show 100% return on investment. A year or so ago, I thought wells were paying for themselves at the wellhead when they hit 100,000 bbls cumulative which was 12 - 24 months. Now, costs of wells have come down significantly, wells are hitting 150,000 to 200,000 bbls in 12 - 24 months, and the price of oil is significantly higher this year than last year, based on NYMEX numbers. In addition, a year ago, Bakken was selling to a discount to WTI and WTI was selling to a discount to Brent. WTI and Brent are near parity now, and Bakken sold at a premium, albeit for a very short period, to WTI.

My two cents worth.

First Full Month Production From This QEP Grail Well Not Yet Reported; Still On Confidential; Better Get A Cup Of Coffee: This Is A Long Post

This should be a fun well to watch come off the confidential list; it should come off the confidential list on August 11, 2013 -- hey, that's this weekend. We will see tomorrow (Monday).

24827, conf, QEP, Hemi 2-27-34BH, Grail:

Date	Oil Runs	MCF Sold
6-2013	52639	9090

But it gets better. I suggest that readers over the age of 65 with a heart condition should be sitting down:

24826, conf, QEP, Hemi 1-27-34BH, Grail:

Date	Oil Runs	MCF Sold
6-2013	47290	12506

These two wells are on the same pad. There is a third older well on the pad:

19104, 1,203, QEP, Henderson 16-34/27H, t5/11; a Three Forks well, cum 215K 6/13;

The initial Three Forks zone to be targeted was set at 9 feet thick. 

Now it gets really, really interesting:

19104, the Henderson well, was taken off-line for the past four months, but is back on line now; it was taken off-line, I assume, while the other two wells were being fracked.

When it came back on line, look at what it produced in 6 days: 11,183 barrels. Either it was re-fracked (?) or fracking the other two wells on the same pad made a huge difference. [Later: Don points out that it's possible that the wells were placed on a pipeline and the chokes were wide open; or similarly, the tanks on the pad would have been empty after four months of being off-line and they could have opened the choke to fill the tanks. Also note the significant change in the natural gas to oil ratio.]

11,183 bbls in 6 days translates to 56,000 bbls in 30 days:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	6-2013	6	11183	11053	0	2186	2186	0
BAKKEN	5-2013	0	0	0	0	0	0	0
BAKKEN	4-2013	0	0	0	0	0	0	0
BAKKEN	3-2013	0	0	0	0	0	0	0
BAKKEN	2-2013	28	0	228	0	0	0	0
BAKKEN	1-2013	31	4373	4371	1584	4345	4345	0
BAKKEN	12-2012	31	5677	5717	2044	6151	6151	0
BAKKEN	11-2012	30	6187	6025	1977	6235	6235	0
BAKKEN	10-2012	31	5659	5657	1830	4758	4758	0
BAKKEN	9-2012	30	5501	5619	1867	6553	6503	50
BAKKEN	8-2012	31	6088	5974	1937	6688	6608	80
BAKKEN	7-2012	31	6376	6436	2097	7576	6276	1300
BAKKEN	6-2012	28	6222	6262	1989	6885	6435	450
BAKKEN	5-2012	29	6787	6905	2179	7305	7275	30
BAKKEN	4-2012	29	7578	7554	2439	7008	7008	0
BAKKEN	3-2012	9	2399	2131	1007	2370	2370	0
BAKKEN	2-2012	28	7134	7398	2536	7233	1133	6100
BAKKEN	1-2012	26	7695	7889	2576	9894	9894	0
BAKKEN	12-2011	31	11563	11252	4178	16532	16532	0
BAKKEN	11-2011	27	10286	10993	3631	12857	12557	300
BAKKEN	10-2011	24	9663	8994	3197	11237	8587	2650
BAKKEN	9-2011	7	2003	3126	707	2215	965	1250
BAKKEN	8-2011	31	12911	12709	4673	15804	14894	910
BAKKEN	7-2011	31	14569	13851	6561	19215	19215	0
BAKKEN	6-2011	20	11528	12017	4658	15134	15079	55
BAKKEN	5-2011	30	22168	21520	13581	26896	25545	1351
BAKKEN	4-2011	28	15177	15790	6065	19567	15884	3683
BAKKEN	3-2011	21	16029	15038	9946	18778	17842	936

Prior to being taken off-line, for whatever reason, it was producing "only" 5,000 bbls/month.

And, if you have read this far, one more tidbit. Note: this well was taken off-line for four months. I forget, but a company, I think it was Triangle Petroleum, just mentioned that it can leave wells on-line while simultaneously fracking wells on the same pad. Not that it makes much difference, I suppose, when a well will be producing for 35 years in the Bakken, for individual mineral owners it has to be nice when a well is not taken off-line for several months.

This, obviously, has a number of story lines. Maybe we will know more tomorrow.

There are four other completed QEP wells in this section.

Memo to self: go back to the file report and note the QEP discussion about commingling; should be posted.

Idiocy -- Nothing About The Bakken In This Post; President's Poll Numbers Plummet

This is the second time I've seen a reference to "400" by the activist environmentalists. I think I've even blogged about this meaningless number. [Later: yes, here it is -- an earlier post on "400." Wow, what a great search engine.]

This time: "400 reasons to stop pipelines." 

A small town in Quebec can probably provide more than 50 better reasons to lay pipelines in lieu of more crude-by-rail traffic. That's how many folks were killed in a freight train disaster. Countless others were seriously burned and their lives will be changed forever. And, the town itself, was destroyed.

But if you are worried about the number "400" join the activist environmentalists or donate some money to Algore. And whatever you send to Algore, match it with a contribution to the Salvation Army. The SA needs it more than Al.

***********************

Speaking of idiocy: feds will establish diversity data for every neighborhood in America. Williston is going to have a very,very, very tough time diversifying its neighborhoods based on race.  If the feds have this kind of money to spend, there's plenty of fat left to cut. By the way, the feds can easily do this: zip+four; Zillow; and, of course, O'BamaScare. Absolutely everyone in America will have to fill out census data to obtain medical care. Even if they opt out of any federally-mandated program, the first time they show up in any emergency room or clinic, they will be filling out for DHHSF-1040, revised, which will include fields for voting history, and where one's mother was born. More than likely the form will require the passwords to your on-line bank accounts.

************************

I haven't watched CNBC in quite some time. When I watch CNBC, I enjoy Squawk Box but only because of Joe Kernen. But even Squawk Box is filled with too much fluff. The rest of the day is a joke. The noon hour "power lunch" is a soporific oxymoron. Jim Cramer is a momentum trader; though if one follows him long enough, one can see he does have a balanced portfolio, if not a balanced mind. Fast Money is very, very good (except on Fridays, when it is co-opted by options traders). Kudlow drives me nuts; his guests are too fair and balanced. Too political. So when I hear that CNBC ratings are sinking, it's not surprising. Being a sister to MSNBC might explain a lot. So, it was not surprising to see a story about their only "star" suggesting she may be ready to jump ship. My hunch: she will stay with CNBC for a bigger salary. She should have learned from Erin Burnett. Does anyone even watch Ms Burnett any more. I was among her top-five fan base and I don't even look for her any more. Of course, I don't have cable.

For the record, I do not care for Ms Maria. I have only begun to tolerate her over the years because a) there's no one else to compare her to; b) Joe Kernen is only on in the morning; c) Ms Burnett is gone. The latter, without question, was the best and the brightest. And the best-looking, though most disagree with me. I assume those who disagree with me have "something for" Andrew Ross Sorkin.

**********************

On a lighter note. Last evening, at Nelson's at The Terrnea on Palos Verdes Peninsula, I had a Uinta Hop Notch -- my first ever. Wow! I was impressed. The table attendant told me I got the last bottle. Later I talked to the bartender, asking about beer favorites among his patrons. Among the IPAs, it was a toss-up between two. I believe the other was Green Flash West Coast IPA (but don't quote me on that). Be that as it may, the Uinta Hop Notch was top notch, and it was outselling West Coast (or whatever #2 was). The Uinta was incredible. I told the bartender, that after awhile all beers start tasting the same, and then one tastes a world-class beer and one's impression changes. I was very, very impressed. Unfortunately, I bet it is not easy to find Uinta Hop Notch in the Dallas area. We will see.

The only disappointment: the label says the beer was brewed with renewable energy, specifically solar and wind. But, of course, in this PC world, what would one expect.

****************************

 

President O'Bama's poll numbers plummet. McClatchy is reporting:

Stung by Americans’ persistent worries about the economy and a capital gripped by controversy and gridlock, President Barack Obama is suffering his lowest job approval numbers in nearly two years, according to a new McClatchy-Marist poll.

The plummeting numbers – still higher than those of Congress – come after weeks of rising gasoline prices, revelations about domestic spying and turmoil in the Middle East.

The disappointing results come as the White House this week looks to turn the national conversation back to the economy. Obama will deliver the first of a series of speeches Wednesday aimed at offering his vision for boosting economic growth, even as the new poll found that just 37 percent of the respondents approved of his handling of the economy, while 56 percent disapproved.

Overall, the poll found Obama’s job approval at 41 percent last week, a sharp drop from April’s 50 percent and his worst showing in the poll since 39 percent in September 2011. Forty-eight percent disapproved in the latest poll, up from April’s 46 percent.

Read more here: http://www.mcclatchydc.com/2013/07/22/197361/poll-obamas-job-approval-plunges.html#.Ue4yxFMYKfR#

Rigzone Essay On The Bakken; Some Spectacular IPs Could Be Seen In The Three Forks

I linked a long Rigzone article on an earlier post, but it is such an incredible interview, I decided to post it again, with additional excerpts.

On April 30, 2013, I said that "another Bakken" had been discovered with the reassessment of the Three Forks. At the time I wrote that headline, I was a bit worried that I had stretch it a bit. It turns out Rigzone picked up on the theme:

Q: What's the next Bakken?  

A: That's a tough one. In a sense, we've already seen it with the Three Forks reappraisal. But it would be exceedingly difficult to replicate the Bakken, with its vast areal extent and thick pays. 

I find that very, very interesting. With prospects like the Eagle Ford, the Permian, the Cline, the experts are still betting the Bakken will be the "gold standard."

And take a look at this. If you think IPs are already spectacular, Rigzone is suggesting we haven't seen anything yet. And although this is not an investment site, it's interesting that in this very long internet article, CLR was the one Bakken-centric company highlighted.

Q: The US government recently more than doubled its estimates for Bakken and Three Forks to 7.4 billion barrels of undiscovered and technically recoverable oil and 6.7 trillion cubic feet of natural gas. How is the industry responding to this? How are investors responding?

A: Some operators had already been developing the Three Forks formation ahead of the USGS revised estimate for the Greater Bakken play. That drilling in fact provided much of the knowledge about the Three Forks that led to the USGS upgrade. We're already seeing stepped-up drilling in the Three Forks, and some of that will entail dual horizontal laterals, a real milestone that could yield spectacular IP rates. Accordingly, Wall Street analysts are upgrading their guidance on companies such as Continental Resources that are leading the Bakken charge.

Rigzone Essay On The American Shale Revolution: Exceedingly Difficult To Replicate The Bakken; Don't Hold Your Breath On The Monterrey Shale; Beware Of Saudi

Rigzone has a long article on the Bakken boom, the next Bakken, and whether Saudi will let it continue (although not much of an answer is provided).

Three excerpts that sound very, very familiar; MDW has said the very same thing; no links now, but they are there. .

First question/answer:

Q: Can the US really compete with Saudi Arabia in terms of production?

A: Sure, just as long as the Saudis will allow it. Don't forget the Kingdom is still the world's swing supplier, a role it's held since the late 1970s. It's important to remember that the Saudis not only have the largest proved reserves of oil, it's also the largest repository—by far—of low-cost oil reserves. Much of Canada's oil sands and US tight oil requires $75 per barrel or more to be economically viable. Saudi Arabia also needs $75 per barrel, but that's to support its current domestic budget. The Kingdom's lifting costs are somewhere around $5 at last report. So Saudi Arabia could easily flood the market, as it did in the early ‘80s, if it lost too much market share, dropping oil prices to $50 or less, and US drilling and production would collapse. Ideally, growing demand from China and other Asian markets will help sustain Saudi production levels and oil prices even as the Americas become self-sufficient in oil.

Second question answer:

Q: What's the next Bakken?

A: That's a tough one. In a sense, we've already seen it with the Three Forks reappraisal. But it would be exceedingly difficult to replicate the Bakken, with its vast areal extent and thick pays. 

Third question/answer:

Q: How excited should investors be about the Monterrey Shale?

A: Some restraint is in order. While preliminary estimates put potential Monterey Shale technically recoverable resources at more than 15 billion barrels, it's hardly a slam dunk. There has been a flurry of leasing and some drilling to date, but as of yet no operator has “cracked the code” for the Monterey. Even apart from the substantial technical challenges and complicated geology and petrophysics, a bigger hurdle would be the widespread and entrenched anti-oil development attitudes industry faces in California, which already has the most stringent regulatory regime in the nation. Furthermore, that anti-oil stance will just gain momentum with the anti-frac campaign that the environmental pressure groups are pushing now.

What We'll Be Talking About This Summer (2013) In The Bakken

This summer this is what we will be talking about:

• The "Helms Surge"
• A trillion-barrel reservoir
• The 2013 USGS assessment of the Bakken
• A miserable spring: spring will be delayed: sloppy, muddy roads; road restrictions prolonged
• Rig count going over 200 
• 24 wells on 2560-acre spacing units; 12-well pads; walking rigs
• the Keystone XL

***************************
Prelude

It's impossible for me to put the trillion-barrel reservoir into perspective, comparing it to other oil plays around the world. There are too many variables: basins vs fields; light oil vs heavy oil; liquid vs gas, variable total organic content (TOC). For me, the Bakken is what it is. I no longer need to compare it to other plays. I will continue to post updates about other plays because it helps me understand the Bakken and put the Bakken into perspective.

***************************
Commentary

It goes without saying that I have a huge amount of respect for the relationship among the citizens of North Dakota, the elected state officials, and the NDIC.  [In the political arena, I have one hero: Byron Dorgan.] The citizens and state leaders allowed a significant portion of western North Dakota to be a laboratory for unconventional/tight oil exploration and production. A lot of decisions were probably made on the fly based on best available understanding of the geology. Understanding the geology continues to evolve.

Constrained predominantly by workforce, it now becomes apparent how incredibly fast the infrastructure went in to accelerate development. That last comment is based on fact. To the best of my knowledge, in 2009, there were no CBR terminals in North Dakota, and no one outside the industry was talking about CBR terminals anywhere in the states as a matter of daily conversation. Today, there are at least twenty CBR terminals in North Dakota, and CBR terminals from Canada to Mexico are a daily news item. We now find out this doesn't just happen. Bakken operators are now talking about railing oil to the Port of Vancouver, Oregon, and then carrying the oil by ship down the coast to California.

It would be faster, less expensive, and more convenient to rail directly to California but the permitting process for new CBR terminals in California is too onerous to consider. [My hunch is that the oil companies would be willing to go through the onerous permitting procedure but do not want to make this issue just one more issue for activists to lobby against. They saw what happened to the Keystone XL.]

*************************

The Trillion-Barrel Reservoir

CLR is testing lower benches of the Three Forks. This has been covered in multiple postings starting back in August of 2012.

It is difficult to find all those postings, so I'm bringing them forward, with some updates.

First, back in August, 2012, it was noted that CLR, in a corporate presentation, was suggesting a 903-billion-barrel-original-oil-in-place-Bakken-source-rock reservoir. This was based on new estimates of the oil reservoirs in the lower benches of the Three Forks. New estimates of the oil reservoirs in the Three Forks increased the total estimate to 903 billion barrels. Rounding, of course, takes us to 900 billion bbls, but that's close enough to one trillion for me. I assume this estimate is controversial. Even Leigh Price had the estimate in the 500-billion range.

Following that corporate presentation, CLR announced its intentions to test the lower benches of the Three Forks with the Charlotte wells in the Banks oil field, one of the sweet spots in the center of the Bakken.

In January, 2013, I posted a CLR graphic and updated the Charlotte wells with information known up to that point.

This was the graphic:



By the way: not mentioned before, but at least one Charlotte well is on 4-section spacing, on a stand-up 2560-acre spacing unit; sections 15, 22, 27, and 34.

The narrative has been updated (one can compare this with the original at the link):

 The "Charlotte" wells are sited in either section 22 or 27-152-99, Banks, but all probably drilling 22/15-152-99:

• 19918, 496, Charlotte 1-22H, middle Bakken, SWSE 22-152-99; Banks, 30 stages; 2.5 million lbs; t6/11; cum 150K 10/12; total depth: 21,090 feet;
• 23664, 657, Charlotte 3-22H, Banks, TF3, SESE 22-152N-99W, t11/12; cum 30K 2/13; 30 stages; 2.9 million lbs; 55% sand; [Update: see press release, December 3, 2012]
• 21128, 692, Charlotte 2-22H, Banks, TF2, SWSW 22-152-99; 30 stages; 2.3 million lbs; t10/11; cum 87K 2/13; total depth: 21,358 feet; 2-section spacing; 30 stages; 2.28 million lbs; "sand frac"; the target was the "Lower Three Forks" without more specificity.
• 23612, A-->DRL, Charlotte 4-22H, TF1, Banks; according to the file report, the target was 19 - 33' under the top of the Middle Bakken; drilling report: the target landing point was 52' below the top of the TF; 4-section spacing;
• 23608, loc --> conf, Charlotte 5-22H, Banks, ?TF4

From the geological summary section of the well file for #23664:

The objective of the Continental Resources Charlotte 3-22H was to successfully drill a horizontal production well into the Devonian age Three Forks "Third Bench" siltstone/dolomite in an effort to investigate the targeted stratum as an oil-bearing, gas producing zone of the Three Forks formation.

The well was placed at a surface location 200' FSL and 990 FEL, Section 22, T152N R99W.

Drilling was successfully completed on the Charlotte on October 4, 2012, at a bottom-hole location of 229' FNL and 1280' FEL, Section 15, T152N R99W, in McKenzie County, North Dakota.

Total depth: 21,325'.

From the geological conclusions section of the well file for #23664:

The conclusions section was quite long and I will paraphrase: a) from a drilling standpoint, the objectives were met, but drilling was very, very difficult, particularly near the bottom of the third bench stratum; b) from a geological standpoint, it appears the jury is still out how good the well will be. At least that's how I interpreted the long narrative.

************************
What does this all mean?

What does this all mean? At this point, we know this: CLR has successfully drilled into the deepest formation in the Bakken-rock-sourced-pool, the lower Three Forks, specifically the "Third Bench."

KXNet is reporting:

"This is one of those signposts in the Bakken Petroleum System, one of those significant wells that everybody will look back to and say that was a major event in terms of figuring out the Bakken Petroleum System," says North Dakota Oil and Gas Director Lynn Helms.

The well Helms is talking about is a Continental Well like the one you see here. It's called the Charlotte 2-22 (sic, and I believe that's an error; should be the Charlotte 3-22, but I could be wrong) and it's in McKenzie County just northwest of Watford City.

It's the first well to have success drilling down to what's called the third bench. It's the deepest anyone has drilled and recovered significant oil in the Bakken.

"If this covers a significant aerial extent, then were not just talking about billions of more recoverable barrels in the USGS assessment or in our assessment, we're also talking about extending the development phase of this Bakken/Three Forks development which now sits at about eighteen years of development drilling, it could be extended by decades if there are additional benches that have to be drilled," says Helms.

Caveats:

• very, very difficult to drill in the TF3 based on this first well
• nice initial production, but EUR yet to be determined (i.e., profitability)
• does not prove the three benches are payzones throughout the Bakken

***************************

USGS Survey later this summer

By the way, in the KXNet linked article, Lynn Helms provided another important data point.  I had completely forgotten this:

• New USGS Survey requested, April 5, 2011
• USGS to reassess the Bakken, March, 2012

The new USGS survey was scheduled to be released by the end of 2013. Lynn Helms suggested that the survey could be released early, in mid-2013. 

************************
Disclaimer

Disclaimer: some of the information above is opinion and may be completely wrong. There is plenty of source material to review to cross-check. I did update the information on this page from an earlier post.

Pipelines Will Be The Energy Story of 2013 - Yes, Again

Draft.

In progress.

There was a snippet of a WSJ Transcript interview the other day suggesting that pipelines will be the energy story of 2013. Based on comments I have received, and my own internal polling, it appears that 73% of MDW readers "get it"; 22% do not "get it"; and, 5% don't really care.

That snippet was very short, but here were some of the data points:

• domestic light oil production will exceed all light oil imports as early as July, this year
• domestic light oil exceeding light oil imports will be due to pipelines, not rail
• 20 major -- repeat, major -- pipeline projects being developed and started this year (2013) into Houston: 4 million bbls into Houston
• another 20 major -- repeat, major -- pipeline projects on the board for 2014: another 4 million bbls into Houston 
• total US imports is about 8.5 million bopd (both light and heavy)

Those data points were at the link.

Anything written after those data points are personal observations and could be way wrong, but at least where I'm wrong, readers will correct me.

Some observations and/or assumptions on my part:

• the Bakken represents only 12% of total US production; to date, it is mostly the Bakken that is utilizing rail in addition to pipe (about 60/40); the other US fields still use pipeline
• the interview leads with 40 pipeline projects in 2013 and 2014; because the Keystone XL is not (yet) approved, the interview could not include the northern segment of the Keystone XL; the interview might have included the southern section which is being built
• heavy oil (Brent oil, California oil, and Alaska oil) goes to the east coast and west coast
• the heavy oil refineries are concentrated on the coasts
• the light oil refineries are concentrated along the Gulf Coast (Texas and Louisiana)
• Venezuela oil is heavy oil and could be off-loaded either at the Gulf Coast or East Coast for about the same transportation price
• the Seaway story has two parts: a) capacity was increased from 150,000 to 400,000 bopd; b) the flow was reversed in direction; dismissing one "part" is almost as bad as missing both "parts" of the story
• mineral rights owners in the Bakken tell me their oil is being sold at a discount because a) there is a glut of oil at Cushing; and, b) the oil is being transported by rail
• if there is a glut at Cushing, all things being equal, the Bakken operators have to choke back their spigots
• if Bakken oil is selling at a discount for any reason, Bakken operators might do what North Dakota farmers have done for years: store their commodity locally waiting for better prices; farmers store their grain in co-op elevators; oil companies store their oil in the ground (as original oil in place); unlike farmers, oil companies don't even have the expense of "harvesting" their commodity and then paying for "storage" while waiting for better prices
• if overnight, the glut at Cushing goes away (or diminishes), the Bakken operators can open their spigots; I could be wrong, but I don't think it costs a lot of money to open spigots on an oil well
• so, if global demand for oil is decreasing (recession in Europe and slowdown in China), all that US light oil (Bakken and other WTI oil) will "flood" the entire oil market and will depress oil prices; all things being equal that should happen; except all things are not equal: Saudi still sets the price of global oil and Saudi won't accept oil below a certain price; it now turns out that Saudi quietly cut production in December; and, that global recession in Europe -- yup, it's true, but that slowdown in China, like Mark Twain's death, greatly exaggerated: see "China's surprisingly strong data fans optimism" by that most fair and balanced media outlet, the BBC, just two days ago; and this article, "Don't bet on Chinese slowdown in 2013," reported today, in that most conservative of publications, the WSJ;
• one can argue that WTI won't flood or upset the pricing dynamics of global oil supply and demand (again for two reasons: Saudi supply goes down; Chinese demand goes up)

So, enough of this.

Now back to that poll, where 73% understand why pipelines will be the energy story of 2013, and why 23% don't get it.

The 73% who "get it" understand this story is not about the pipelines themselves, although that is a huge story in its own right; the story is about the derivatives or the secondary effects of the 40 major pipeline projects coming on-line over the next two years.

So, given ...

• increased takeaway capacity out of the Bakken moving forward
• that increased takeaway capacity will be predominantly pipeline, not rail; rail becomes less expensive)
• the glut at Cushing diminishes; the Bakken operators can open the spigots
• Chinese economy improving
• Saudi anticipating lower oil demand, already cuts production; Brent rises 
• the WTI/Brent spread narrows
• huge backlog of fracking/completing Bakken wells at the end of 4Q12

... who are the winners?

• the mineral owners in the Bakken, including the state; if the demand is there for light oil, the spigots will open. 
• Delta Airlines: the airline that rails Bakken oil to its east coast refinery. With increased takeaway capacity, pressure on rail to lower prices; no doubt they've hedged their contracts for 2013 even if Bakken oil sells higher;
• Enbridge, EPD, EEP, now that the "seed corn" is starting to produce
• fracking companies; oil services companies
• Bakken operators 
• refiners? I don't know. I don't know enough about the refining industry. [Update: Mike Filloon is a bit hard to read on this; he has been bullish on refiners due to the WTI/Bakken spread, and knows that spread will now narrow. But my interpretation of what he writes is that he remains bullish on the refiners.]

... who are the losers?

• theoretically, the Bakken rails, but probably won't be noticeable for several years (in fact, it's possible, existing rail/CBR terminals will see increased activity, but additional pipeline capacity will put pressure on rail)

To be continued.

In Progress.