The Bakken Goes Boom -- A Look Back -- 2016, 2018

These should download as PDFs on your desktop. 

Link here to Jackson, 2018.

Link here to Conway, 2016.

Break Even Costs? Where Does One Even Start? -- December 18, 2018

Disclaimer: there may be some hyperbole in this post, but I think it's pretty accurate. I am inappropriately exuberant about the Bakken. 

The well:

• 17498, 498, MRO, Chimney Butte 34-11H, API: 33-025-00804, Bailey, t11/08; cum 344K 10/18;

So, this well was drilled back in 2008, at the beginning of the Bakken. At that time, it may or may not have been a good well. It may have paid for itself; it may have been a financial disaster. Who knows? But 2008? That's ancient history for the Bakken. Those costs have long been "booked." But the well did what it was intended to do:

• provide the company with knowledge about the geology of the drilling unit; and,
• hold the lease by production (and the well held the lease for ten years) until the company was ready to drill in the area again

Production after the initial frack:

BAKKEN	7-2009	29	2463	2490	685	1136	1136	0
BAKKEN	6-2009	30	2792	2758	760	1521	1521	0
BAKKEN	5-2009	31	3493	3571	770	1838	1838	0
BAKKEN	4-2009	30	3491	3605	738	2143	2143	0
BAKKEN	3-2009	31	3575	3420	600	2142	2142	0
BAKKEN	2-2009	28	3400	3399	553	1714	1714	0
BAKKEN	1-2009	30	4915	4829	862	2635	2635	0
BAKKEN	12-2008	26	3431	3808	200	1156	1156	0
BAKKEN	11-2008	28	7753	7263	2327	4010	822	3188
BAKKEN	10-2008	22	2846	2703	135	1468	0	1468

Then in late 2017/early 2018, MRO went back into the area and drilled a few more wells. See graphic at this post.

And then look what this well did when MRO went back into drill some more wells in that area.

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	10-2018	31	22300	22476	16006	23094	21357	130
BAKKEN	9-2018	30	30240	30365	45535	22432	18788	1531
BAKKEN	8-2018	31	35012	35191	30227	22880	9632	10784
BAKKEN	7-2018	28	32033	32078	35087	20329	5166	12950
BAKKEN	6-2018	28	40585	39571	79992	39267	6	36507
BAKKEN	5-2018	0	0	0	0	0	0	0
BAKKEN	4-2018	0	0	0	0	0	0	0
BAKKEN	3-2018	0	0	0	0	0	0	0
BAKKEN	2-2018	0	0	0	0	0	0	0
BAKKEN	1-2018	0	0	0	0	0	0	0
BAKKEN	12-2017	0	0	0	0	0	0	0
BAKKEN	11-2017	0	0	0	0	0	0	0
BAKKEN	10-2017	0	0	32	0	0	0	0
BAKKEN	9-2017	29	675	690	356	638	0	397
BAKKEN	8-2017	31	828	914	335	722	0	45

This well was a stripper well by 2017, producing less than 1,000 bbls/month. But then in 2018, production jumped to 41,000 bbls/month.

The company did not have to pay exorbitant costs for a new lease; did not have to prepare a new pad; did not have to build a new 10-mile road out out to the pad; did not have to re-negotiate new leases with a gazillion mineral rights owners; did not have to run a new electricity line out to the site; did not have to bring out a new fractionator; and, it's possible frack water/produced water/crude oil pipelines were already in the area.

For the cost of a re-frack, MRO got a huge well. The original frack was an open-hole frack with less than 500,000 pounds of sand. Most of the cost of this well back in 2008 was the cost of drilling, not much cost in fracking it. Now in 2018, no costs of drilling, but simply fracking. That's not quite true.

MRO put a rig back on this site. In 2008, setbacks were 500 feet. Now, under new rules, the horizontal could be extended. MRO redrilled part of the lateral, drilling a sidetrack, straightening out the heel portion of the well, and extending the original length. Pretty cool, huh?

The frack data is not posted by NDIC yet but according to FracFocus, this was a small/medium frack: 5.7 million gallons; 89.4% water.

Frack sand is plentiful; has come down in cost. This was a small/medium re-frack. This well will go on to produce for 35 years. It will undergo multiple re-works; small re-fracks; major re-fracks; probably see more target zones drilled; and, benefit from neighboring fracks.

How does one even begin to calculate the break even costs of Bakken wells? The experts still use the same methods that were used by folks calculating break-even costs in conventional drilling.

By the way, how does one even "appraise" these Bakken wells? This is absolutely fascinating. When a grandfather has a trust, and the trust "goes" to his six grandchildren, for tax purposes, etc., the wells must be appraised at some point. How do they even begin to appraise these wells? I have no idea.

Full production profile for this well can be found here.

Eleven New Permits -- November 26, 2018 -- US Oil Output Rising At Its Fastest Pace In 98 Years

For the archives, from Investor's Business Daily, "how fracking turned OPEC into the walking dead."

The river of oil now hitting the market from U.S. fracking has stunned global energy markets. The U.S. has already leapfrogged both Russia and Saudi Arabia as the No. 1 producer. Will U.S. oil lead to OPEC's demise?

For the first time since World War II, the U.S. is on the verge of being a net oil exporter — something that, just five years ago, would have been considered impossible.

As Javier Blas of Bloomberg notes, U.S. oil output is rising at its fastest pace in 98 years. Meanwhile, both Russia and the Saudis are also pumping at record levels. The U.S. is tipping the scale. Since 2010 in the West Texas Permian Oil Basin alone, some 114,000 new wells have been drilled, bringing millions of barrels of new oil to the market. Other parts of the U.S. are undergoing the same transformation.

That's bad for OPEC.

"The U.S. energy surge presents OPEC with one of the biggest challenges of its 60-year history," wrote Blas. "If Saudi Arabia and its allies cut production ... higher prices would allow shale to steal market share. But because the Saudis need higher crude prices to make money than U.S. producers, OPEC can't afford to let prices fall." This, of course, has caught the 28-nation Organization of Petroleum Exporting Countries by surprise. Even just a few years ago, the consensus was that fracking and its related technologies would add a decent amount of oil to the market, but nothing like what's happening now.

For the archives, previously posted, but quick reminder. For month of November, 2018:

• Saudi Arabia produce record volume, 11.1 - 11.3 million bopd some days; not yet known if a record will be set for the entire month
• Russia: post-Soviet high, 11.41 million bopd in October, up from 11.36 million bopd in September
• US: similar

Making American great -- it just doesn't quit. Rigzone is reporting that one-half of the $360 million required to widen/deepen the Corpus Christi Ship Channel has now been secured. It's easy to become "numb" reporting/hearing these numbers. They never seem to end. $360 million for just one project in Corpus Christi. I don't think Amazon HQ2 comes close to that kind of money. $360 million -- that's close to half a billion dollars. It's probably no big story, just another oil and gas story but I think it's a pretty big deal. And just think, every ten years or so, after every "hurricane of the century," they can clean it up, dredge it, and make is usable again. Just tongue-in-cheek. Don't take me seriously. My wife doesn't. According to the linked article:

President Trump and the US House will shoulder $230 million of the estimated $360 million to complete CIP and the port will cover the remaining $130 million.

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Back to the Bakken

Active rigs:

$51.63	11/26/2018	11/26/2017	11/26/2016	11/26/2015	11/26/2014
Active Rigs	62	53	37	65	183

Eleven new permits:

• Operator: CLR (6); Hess (5 -- one of the Hess permits was from a day earlier)
• Fields: Epping (Williams); Baskin (Mountrail)
• Comments: CLR has permits for a six-well Sodbuster pad in Lot 3, section 6-155-99; Hess has permits for a 5-well EN-Farhart pad in lot 1, section 4-156-93;

Six permits renewed:

• Crescent Point Energ (4): two CPEUSC Holmes and two CPEUSC Ruby permits, all in Williams County
• Petro-Hunt (2): two Noonan Federal permits, both in McKenzie County

Four producing wells (DUCs) reported as completed:

• 33940, 3,655, MRO, Axell USA 34-19TFH, Reunion Bay, t10/18; cum --
• 33481, 1,748, Whiting, Wold Federal 42-1-1H, Sand Creek, t9/18; cum 20K after 25 days; the Wold wells in Sand Creek are tracked here;
• 34703, 1,707, Whiting, Stettner 11-24-2H, Robinson Lake, t9/18; cum 6K after 29 days;
• 34702, 592, Whiting, Stettner 11-24TFH, Robinson Lake, t9/18; cum 6K after 29 days;

Temporarily abandoned:

• starting to see some "recent" permitted wells go to TA status including --
• 30079, TA, Nine Point Energy, Arnegard 150-100-23-14-10TFH
• six Lime Rock Resources wells, four in Dunn County (five Sharon Rainey and one William Sadowsky); two in Billings County (State Gresz wells)

Nothing New Under The Sun -- November 22, 2018

The article at the link below was from November 30, 2014. 

We've seen this movie before: The [London] Telegraph (link here).

Saudis risk playing with fire in shale-price showdown as crude crashes A deep slump in prices might heighten geostrategic turmoil across the Middle East

Saudi Arabia and the core Opec states are taking an immense political gamble by letting crude oil prices crash to $66 a barrel, if their aim is to shake out the weakest shale producers in the US. A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals.

Caliphate leader Abu Bakr al-Baghdadi has already opened a “second front” in North Africa, targeting Algeria and Libya – two states that live off energy exports – as well as Egypt and the Sahel as far as northern Nigeria.

“The resilience of US shale may prove greater than the resilience of Opec,” said Alistair Newton, head of political risk at Nomura.

Chris Skrebowski, former editor of Petroleum Review, said the Saudis want to cut the annual growth rate of US shale output from 1m barrels per day (bpd) to 500,000 bpd to bring the market closer to balance.

“They want to unnerve the shale oil model and undermine financial confidence, but they won’t stop the growth altogether,” he said.

There is no question that the US has entirely changed the global energy landscape and poses an existential threat to Opec. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria.

The country had a trade deficit of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance by 2018, one of the most extraordinary turnarounds in modern economic history.

“When it comes to crude and other hydrocarbons, the US is bursting at the seams,” said Edward Morse, Citigroup’s commodities chief. “This situation is unlikely to stop, even if prevailing prices for oil fall significantly. The US should become a net exporter of crude oil and petroleum products combined by 2019, if not 2018.”

From the EIA, an explanation.

US crude oil production and imports.

Net oil and gas exporter in five years. Article written February 11, 2018. Same thing, from CNBC/Department of Energy.

Texas Gulf coast exports more oil than it imports for the first time, August 23, 2018.

The US to be the world's biggest exporter of oil, May 6, 2018.

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The Movie Page

If you are into this kind of movie, The Girl in the Spider's Web, is incredibly good. Quick notes.

It took me about "half the movie" before I was able to "warm up" to the new Blomqvist and Lisbeth.

This is a sequel, but a completely different story line.

The first in the series, The Girl With The Dragon Tattoo, had a much, much better story line, but the sequel is much, much better with the gadgetry and giving more depth/time to Lisbeth and her one-man tech support team.

Some very, very clever devices in the sequel; much better than the first movie.

In the first movie, both Lisbeth and Blomqvist were 3-dimensional; I had empathy for both. In the sequel, no chemistry between the characters and me. Nor did I see any chemistry between Lisbeth and Blomqvist in the second movie.

I was never on the "edge of my seat" watching the sequel; one knew who would be standing at the end of the movie; we simply watched to see "how" it would end. 

The Girl in the Spider's Web makes Tom Cruise/Mission Impossible series look like kid's play. Lisbeth and her one-man tech support team easily, easily out-cruises Tom Cruise and his "army" of support.

No disguises of note in the sequel; disguises in the first Girl were superb.

Gadgetry in the sequel made the gadgetry in a James Bond look like a high school science project.

No humor in either Tattoo or Spider's Web.

Much more eroticism in the first movie; no eroticism in the second movie that I can recall.

You can watch the sequel without seeing the first, but I would not recommend it.

One huge fault: why did Lisbeth not kill her nemesis/her most violent adversary when she had the chance? Yes, I know "the movie" needed him, but Lisbeth did not.

Overall, I think both the original Lisbeth and the original Blomqvist were much, much better; one might argue about Blomqvist, but no argument about Lisbeth. The original actress set the bar. It was not raised in this movie. 

Sloop John B, The Fendertones   Scott Totten, musical director of The Beach Boys is one of the vocalists. The video was posted back in 2014.

Peak Oil? What Peak Oil? EOR Is Already Here -- November 19, 2018

Link here. Why US oil production won't peak anytime soon.

The U.S. shale oil revolution continues to defy the skeptics, and the country is now producing a record 11 million barrels per day (MMbpd) of crude..... production has been up 18 percent since the start of this year alone. Output has exploded 120 percent over the past decade to heights not dreamed about. Production was long thought to have peaked at 9.6 MMbpd back in 1970.

Texas and North Dakota have been at the forefront, with the former now yielding more oil than Iraq, the world’s fourth largest producer.

Looking forward, given that the United States has accounted for 60 percent of new global oil supply since 2008, ....  how long can the United States continue to produce increasing amounts of oil?

It’s surely a difficult question to answer. The shale bonanza itself has proven that predicting future energy production is a fickle business. Back in 2007, for instance, no forecasting body was projecting how quickly a U.S. shale oil (and natural gas) surge would not just change the U.S. outlook but also transform energy markets around the world. Despite using the most advanced forecasting techniques possible, both the Energy Information Agency’sNational Energy Modeling System and the International Energy Agency’s World Energy Model were completely blindsided. 

[I think Harold Hamm used a hand-held calculator and maybe an iPad, first version.]

We do know, however, that false pessimistic predictions regarding the future ability of U.S. companies to produce more petroleum have been around since the inception of the industry,.... the record is known: “peak oil” theorists have been proven wrong every time.

[Insert here: "Shale is not a revolution, it's a retirement party." -- Art Berman, who gets big bucks for his prognostications.]

Indeed, too many fail to appreciate oil as an economic commodity powered by market changes, namely the constant advance of extraction technologies. The obsession with reserves (what’s currently available) instead of resources (what’s potentially available with price changes and better technologies) has made most Americans completely unaware of how much oil we have at our disposal. [This, by the way, was a most confusing issue when I first started blogging about the Bakken.]

Proved reserves can grow over time and estimates of the recoverable resource change as new information is acquired—through drilling, production, and technological and managerial development. For example, BP reports that the United States now has 50 billion barrels of proven crude oil reserves, a 66 percent boom over the past decade. [This alone is a very interesting statistic; some think the Bakken alone holds that much.]

The U.S. oil resource is measured in the hundreds of billions of barrels, maybe more. And it is obviously impossible to accurately predict “how much oil we have,” as some 95 percent of the immense, resource-rich U.S. Outer Continental Shelf is off-limits to oil and gas activity. [Peak oil, anyone?]

In fact, without drilling a single new well or making a new discovery, U.S. oil supplies could drastically be expanded. At least two-thirds of the total petroleum in a well is typically left behind after primary and secondary operations because it is too difficult or expensive to extract. [Remember all that talk about the "Red Queen" by the "oil peakers"?]

Now a tertiary technique that produces 0.5 MMbpd in the United States, CO2-based enhanced oil recovery (EOR) will grant us even more access to this hard-to-reach oil, while storing CO2 safely underground.

Like shale has been, large-scale CO2-EOR recovery is the logical next step in turning the “unconventional” into the “conventional” when it comes to crude oil extraction.

From twitter:

From the EIA, these are the weekly projections, not the actual production that will be reported some time later. Note: the EIA continues to estimate that US production is below 12 million bopd when the data certainly suggests to some that US production is now solidly above 12 million bopd:

To What Extent Might Coal Impact Natural Gas Prices This Winter -- RBN Energy -- November 14, 2018

Hang on to your hats:

The "shale price band." From The Financial Times. This is a pretty good article. Some data points:

• OPEC seriously under-estimated what US shale producers would add to global supply
• one year ago: OPEC forecast an additional 540,0000 bopd from the US, 2018 yoy
• in fact, the US added 1.5 million bopd, 2018, yoy
• shale oil and its light-end yield characteristics does not easily replace the heavier qualities of crude oil from the Middle East
• US shale oil is not necessarily the crude most desired by refiners, but that is irrelevant for US producers. They are driven by economics and will produce as long as the price is right
• in early October, data started to indicate that the US weekly statistical reports had been under-estimating production. That is when oil prices started to retreat and also when large speculators started to reduce their long exposure to crude oil futures
• by trying to control supply and support prices, Opec and its new partners have created better economics for the US producers and are back to facing a wave of supply increase that they did not expect and are struggling to control
• Comment: the US is nowhere near what it can produce -- the Permian is barely getting started; there are some interesting production profiles in the Bakken that have not been seen before 
• archived.

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Back to the Bakken

One well coming off confidential list today -- Wednesday, , November 14, 2018:

• 34453, SI/NC, XTO, Cherry Creek State 14X-36EXH-S, Pembroke, no production data, 

Active rigs:

$55.74😒	11/14/2018	11/14/2017	11/14/2016	11/14/2015	11/14/2014
Active Rigs	65	54	38	64	186

RBN Energy: how much could coal generation stem gas price upside in a cold winter?

The U.S. natural gas market enters winter this year in a delicate balance: production is at an all-time high and growing fast, but gas storage inventories are well below year-ago levels and the five-year average — and at an all-time low relative to consumption. If winter weather is normal or mild, the U.S. gas market will likely begin to settle into a period of sub-$3/MMBtu prices. But this year’s low inventory level means that colder-than-typical weather this winter could spell more gas price upside than the market has seen in many years. Today, we continue our review of the current gas market with a look at the relationship between gas- and coal-fired generation, and at how the combination of low gas storage inventories and low coal stockpiles might play out this winter.

Entering the winter (before forecasts turned cold), our NATGAS Billboard called for an end-of-March underground gas storage inventory level of about 1,250 Bcf (or 1.25 Tcf).

Even a moderately colder winter can add 400 Bcf of residential and commercial heating demand, and the upside to industrial demand could add another 100 Bcf.

But a colder-than-normal winter also adds demand in the power sector, more so now that increasing numbers of people are heating their houses with electricity, particularly in the South. We estimate that a moderately cold winter would add about 200 Bcf to gas demand for power generation, all other things being equal.

However, an atypically cold winter would quickly push coal inventories into uncharted territory, too. The coal demand upside in a moderately colder winter — before accounting for any additional market share gained from gas — would be in the neighborhood of 15 million tons. Current coal consumption rates average just under 2 million tons per day, so 15 million tons of extra demand divided by 2 million tons per day would reduce days of inventories by 7.5 days, taking coal inventories from just over 70 days of consumption to the low 60s — outside of the historical range. Layering in an additional 20 million tons of coal demand due to gas price upside (the coal equivalent of the 350 Bcf we discussed earlier) would bring coal inventories to only 53 days of consumption — likely an unsettlingly low level for utilities, even in an environment of declining coal demand.

Of course, the higher that gas prices climb, the more expensive it gets to source gas or coal from somewhere other than storage or stockpiles, and therefore the more comfortable utilities get with drawing down gas storage inventories and coal stockpiles to meet winter demand. We saw how gas and coal prices could spiral upward in the Polar Vortex winter of 2013-14. Gas prices rose and coal became more economic, but declining coal stockpiles — along with logistical constraints around delivering coal from mines in the West to power plants in the East — meant that coal generation didn’t prevent gas prices from climbing to $6/MMBtu in February 2014.

So this winter, the precise elasticity — just how high gas prices would need to rise to pull gas and coal out of inventory — will not be so predictable as it would be, for example, in response to a short-lived gas production outage. Rather, this elasticity will depend on the trajectory of winter weather (early versus late cold, extreme versus moderate cold, etc.), of gas supply growth (whether the market is comfortable that gas supply will be robust a few months down the line), and likely other factors. 

A somewhat unpredictable power-sector response means that we need to look elsewhere for factors that might stem gas price upside in a colder-than-normal winter. That brings us to a relatively new potential source of gas demand elasticity in the U.S.  — LNG exports — which we’ll cover in the final episode of this series.

Much more at the linked article. 

Energy: Has Any Politician Ever Been More Wrong Than Barack Obama Was About U.S. Oil Production And Energy Independence? A Resounding "NO!" -- IEA, IBD, And Anyone Else Paying Attention -- November 13, 2018

I haven't read this article yet -- too busy with family commitments, but it looks like a great article. If it says what I think it's going to say, I will certainly come back and post comments.

For now, enjoy. The link was sent to me be a reader. Much appreciated.

Link here to Investor's Business Daily.

Energy: Has any politician ever been more wrong than Barack Obama was about U.S. oil production and energy independence? Based on the latest report from the International Energy Agency, the answer is unequivocally no.

Idle Rambling On A Friday Night -- November 2, 2018

From SeekingAlpha on CLR. And that is taken from a Platts article.

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

Now, back to the linked article. Summary:

• Continental Resources doubles its estimate for oil recovery from North Dakota's Bakken shale, claiming 30B-40B barrels of the 250B barrels of oil in place will be recovered instead of the 20B barrels it estimated in 2011
• "With today's completion technology we are recovering 15% and potentially 20% of the oil in place on a primary basis," CLR President Jack Stark said during today's earnings conference call, "substantially higher than the recoveries that we thought possible back in 2011."
• "There's a lot more oil to come out of the Bakken," said Chairman and CEO Harold Hamm.
• Using a North Dakota industry estimate that ~50K potential wells remain to be drilled in the Bakken, Stark said each well would have to produce 570K barrels to reach CLR's new estimates for recoverable oil - "clearly a reasonable expectation for Bakken wells on average," according to Stark.
• North Dakota oil production averaged a record 1.29M bbl/day in August, and CLR says its output accounted for 12% of that production.
• Earlier: Continental Resources +2.5% as Bakken production reaches quarterly record (October 29, 2018) 

This is a keeper. Read those stats again.

OOIP: CLR is apparently sticking with 250 billions of original oil in place (OOIP) in the Bakken; that's a far cry from a trillion-bbl reservoir suggested at one time; but, I'm sticking with the Bakken being a 500-bbl OOIP reservoir, and wouldn't bet against a trillion bbls, but I'm inappropriate exuberant about the Bakken.

Primary production, defintion: in the early days of the Bakken, the consensus -- tight oil was called "tight" for a reason; drillers would only be able to recover 1 - 3% of OOIP in primary production. Primary production is all that production before enhanced recovery is required, such as water flooding and/or CO2 injection. Oil recovered after work-overs; re-fracks; etc, is still considered primary production. Primary production can go on for decades.

Primary production, Whiting, the early days: in the early days of the Bakken, the consensus was that drillers would get only 1 -3% of the OOIP by primary production. This blog was the first, as far as I am aware, that suggested drillers were getting as much as 4 - 6% even when pundits were still talking about 1 - 3%. Then Whiting, either intentionally or by mistake, mentioned in one of their conference calls that they were either already getting upwards of 12% or expected to reach that threshold before it was all over. That was a long, long time ago, and my memory may be faulty, but I vaguely recall something along that line.

Primary production, CLR, now: CLR says that "we are now recovering 15% of the OOIP and Harold Hamm thinks they could eventually get to 20%. Let's do the math:

• a EUR-type curve of 1 million bbls
• 15% of what = 1 million bbls
• OOIP: 6.7 million bbls  [check the math: 0.15 x 6.7 = 1 million bbls]
• so, let's go with 6.7 million bbls OOIP for any given well
• 20% of 6.7 million bbls OOIP takes us to 1.34 million bbls -- CLR is already reporting EUR-type curves of over 1.2 million bbls

Number of wells yet to be drilled in the Bakken: 50,000. The North Dakota Bakken boom began in 2007, and was headed for about 2,000 new wells/year but then plateaued at about 1,000 to 1,5000 new wells per year. Using 1,500 new wells / year, eleven years in the Bakken puts us at [11 x 1500] 16,500 Bakken wells. So, let's see what NDIC says. According to the most recent Director's Cut, there were 15,103 producing wells in August, 2018, which by the way, was an all-time record. Wow, not too far off the mark. So, we can safely say , one can expect about 1,500 new wells/year. 50,000 new wells / 1,500 = 33 more years of drilling.

Years of production: just for grins, let's assume the OOIP is actually 500 billion bbls -- again, I'm inappropriately exuberant with regard to the Bakken -- and let's assume that for whatever reason, North Dakota maxes out at 2 million bopd production. Let's do the math:

• 15% primary recovery
• 15% of 500 billion bbls = 75 billion bbls
• 75 billion bbls / 2 million bopd / 365 = 100 years of production
• Now if each well has a EUR of, let's say 1.5 million bbls, how many wells would that require?
• 75 billion bbls by primary recovery / 1.5 million bbls / well = 50,000 wells
• 50,000 wells -- interesting. We're back to the same number suggested above -- another 50,000 wells to drill out the Bakken

Disclaimer: math is not my first language. There will be simple arithmetic errors on this page. In addition, in a long note like this there will be factual and typographical errors. This is done for my benefit. No one should take any of this too seriously.

TGIF -- November 2, 2018

Jobs -- really, really making America great

• payrolls smash estimates with gain of 250,000 -- CNBC
• wage gains pass 3% for first time since recession
• Bloomberg -- same thing -- huge report

How does the market feel about this, know that this greenlights the Fed to raise rates?

• the market seems to love it
• yesterday, CNBC talking head almost giddy with his forecast that Dow would plummet with AAPL falling 7%
• having said that, if AAPL had surged today, the Dow (irrelevant) would have been off the chart
• in pre-market, AAPL down 6%, but Dow (irrelevant) up 208 points in pre-market trading
• as bad as AAPL is doing, it's not the worst news for investors this morning: Kraft joins Campbell's as the poster children for "things gone bad" / changing American tastes

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

Earnings:

• CVX: 3Q18 earnings -- pre-market trading, CVX up 2.23%. XOM/CVX here;
• EOG: reported; already posted; will review later. XOM/CVX here;
• XOM: 3Q18 earnings -- pre-market, XOM up 1.8%

XOM:

• revenue: $76.61 billion; huge beat; forecast, $72.45 billion
• profit: $6.24 billion
• per share: $1.46; huge beat; forecast, $1.21

Apple: thinking differently.

Keystone XL: update; posted.

COP departs Barnett: posted.

NOVA Gas: posted.

US, OPEC flood oil market: midterms? Sustainable? Posted.

Red Sea Project: remember the name -- Yanbu. Posted.

Iran sanctions, over at Rigzone. Posted.

Shell, re-posting. Shell produces one of it s strongest quarters ever. Rigzone. Posted.

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Back to the Bakken

Wells coming off confidential list today:

• No wells coming off the confidential list today.
  

Active rigs:

$63.51↓↓↓	11/2/2018	11/02/2017	11/02/2016	11/02/2015	11/02/2014
Active Rigs	68	55	35	69	193

RBN Energy: domestic light oil processing in the USGC: have we hit the limit? Wow! What a great article! Archived.

Refineries along the U.S. Gulf Coast (USGC), which account for half of the country’s total refining capacity, are generally among the most sophisticated and complex anywhere, with configurations that enable them to break down heavy, sour crude oil into high-value, low-sulfur refined products.

However, over the past eight years, the USGC has been flooded with increasing volumes of light, sweet crudes produced in the Eagle Ford, the Permian and other U.S. shale plays as new pipelines were constructed or reversed to the coast for domestic refining or export. Still more pipelines will be coming online over the next year. Today, we evaluate how much domestic crude oil has been absorbed into the USGC refining system, the implications to the overall crude slate qualities, and options for increasing domestic crude oil processing in the near term.

Commentary: Direction Of The Blog -- October 17, 2018

I started the blog in 2007, deleted it in 2009, and started over that same year.

I started the blog to better understand the Bakken. For some reason I had the feeling that the Bakken was going to be "different" than previous oil boom and bust stories. I knew nothing about "oil," and my intention was to simply track the Bakken on Microsoft Word documents and Xcel spreadsheets, but about the very same time, the USAF required that I learn how to set up a website.

So, there you have it.

Along with the Bakken there were a number of other energy stories and non-energy stories that interested me from the stand point understanding the issue. I posted on political issues because such issues are important to put things into perspective. I follow the US equity market because "following the money" often explains things that otherwise don't make sense.

I assume the blog will not change much but there is a possibility that I will blog less on some energy stories and will blog less on some non-energy stories. I can't think of anything "new" about which I would like to blog.

So, at 9:09 a.m., October 17, 2018, this is where I stand with regard to the blog:

• hopefully my emphasis on the Bakken does not change; I've met my objectives for starting the blog in the first place; my reasons for continuing the blog have changed; it's less about understanding the Bakken and more about simply chronicling an incredible story; the Bakken never ceases to amaze me; I hope I live long enough to see Bakken 3.0;
• other than the Permian, the other shale plays, including the Eagle Ford, interest me not, but I will update periodically if the news is important enough
• global warming: it's a political issue and pretty much no longer interests me; my blogging on global warming will probably decrease over time
• politics: hard to say where I will go with this; Trump has proved that America can be great again; we've seen how fast a dynamic country like American can turn under the right leadership; whether the general public accepts that and re-elects him (if he runs again) is "their" problem; I've lost interest; following the Clintons and the Trump story has taught me a lot about parsing sentences and learning the definition of one-syllable words
• in the energy sector what interests me most is the yawning and incredibly increasing gap between energy-rich and energy-poor countries. I think Europe is in a world of "hurt," and it will be interesting to follow that story
• Russia doesn't interest me except as it affects Europe
• Greece absolutely, positively does not interest me
• Saudi Arabia is absolutely fascinating; the rest of the Mideast, yawn
• global warming: it's a political issue and pretty much no longer interests me; my blogging on global warming will probably decrease even more over time; oh, I already said that
• future of wind energy: depends 100% on politics; no longer an economic or science issue; I get it; interests me not; ditto, solar, but even more so; 
• EVs: fascinating; will follow simply to see how this plays out; won't affect me; will affect my granddaughters
• Apple: generally only interested during earnings season; company's technology is evolutionary, no longer revolutionary, but I hope that changes
• Bakken 3.0: I've been struggling to "define" Bakken 3.0 -- but it finally hit me -- perhaps it was a note from a reader last night -- Bakken 3.0 will begin with the new USGS Bakken survey (which is way overdue)
• notes to the granddaughters; travelogues; books; social media; US "culture" -- that's what I really love to write about -- even more than the Bakken -- but I've found that "personal" blogs are enjoyed by generally only one person: the writer

It's now 9:29 a.m., October 17, 2018: that's where I am.

More later, perhaps.

Demes and memes.

Tight Oil / Shale -- Drive Majors' Output To New Highs -- Rigzone -- October 16, 2018

This is really quite amazing.

From 2000 (Montana) to 2007 (North Dakota) and then through 2012 (height of the boom) it was all about small private companies and small to medium-size publicly-traded companies.

The poster child for the Bakken: Harold Hamm.

Now, eighteen years into the US shale revolution, Rigzone is reporting that the majors are now reporting new production records -- due to tight oil / shale oil. Amazing, when you think about it.

Memo to self: note to Jane Nielson.

From the linked article:

U.S. unconventionals will be crucial for oil majors in the near future – and the majors are taking note.

In a new report released by Wood Mackenzie, the potential of unconventionals in the Lower 48 is examined by looking at five U.S. majors (BP plc, Chevron Corp., Equinor ASA, Exxon Mobil Corp. and Royal Dutch Shell plc).

“Following BP’s $10.5 billion deal with BHP, all of the supermajors have a footprint in the Permian Basin, and are poised to deliver an unprecedented phase of production growth that will see output reach new highs over the next decade,” Roy Martin, research analyst in WoodMac’s corporate upstream team.

How important is shale to the majors?

Without their volumes, collective production from the majors would enter long-term decline from 2020.  

The majors:

The big player here seems to be ExxonMobil, who has the most acreage, biggest resource and highest peak production.Martin said no other major has comparable diversity across the Permian, Bakken, Eagle Ford, Haynesville and Marcellus plays.

In the Bakken, XOM has XTO. From my perspective: blind luck, but I could be wrong. I often am. 

BP’s deal with BHP “transformational” and makes it possible for BP to overtake Exxon to become the leading shale gas producer.

Chevron’s dominance in the Permian (with 2.2 million net acres) has made its portfolio the most valuable.  

For the record, my favorite major (not to be confused with "my favorite Martian") is Chevron.

“Underpinned by its low-royalty Permian position, Chevron possesses the most attractive Internal Rate of Returns (IRR) on new U.S. conventional projects among the majors,” Martin said. “Its future investment in the resource theme of $54 billion is second only to ExxonMobil.”

Again, the emphasis is on the Permian. That's fine. North Dakota mineral owners are quietly going to the bank every month.

Meanwhile, over at oilprice.com:

As We Get Ready For Another Week -- After A Most Exciting Weekend -- Chaos Is Self-Organizing -- October 7, 2018 -- Everyone Stayed Home To Watch The End Of Carnival

Gasoline demand. Link here.

************************************ 

In The Eye Of The Hurricane

"No-drama Obama" vs "Trump chaos." Link here.

Another journalist with no science background. Even a college freshman is aware of the fact that "chaos is self organizing." LOL. The most recent example: the chaotic US Senate was able to get organized enough to have a fairly historic vote.

Self-organization, also called (in the social sciences) spontaneous order, is a process where some form of overall order arises from local interactions between parts of an initially disordered system. ... Chaos theory discusses self-organization in terms of islands of predictability in a sea of chaotic unpredictability.

Personally, I will probably be diagnosed with PTSD before the end of President Trump's first term, but OMG, the successes (not OMG, but rather CNN in this case, I guess).

And now this, from CNBC who, it seems, cannot stop trying to talk the market down:

• President Trump's corporate tax cut and his business deregulation efforts are not a "sugar high," says Kevin Warsh
• most economists "never thought the economy could grow this fast," says Warsh, who had been on Trump's short-list for Fed chairman (I think President Trump has said the same thing)
• "At the end of this year, we may be saying the economy is the strongest since 1999," Warsh predicts

Kevin Warsh? Former Federal Reserve governor and on the short list to be the new Fed chairperson (Jerome Powell was selected instead). I would assume he's pretty smart and would know something about the economy.

This reminds me of the octogenarians at every retirement seminar who shout from the back of the room, "boring is good."

No, "boring is not good." Boring is ... well, boring.

Is it just me but does it seem that whenever President Trump has a press conference or a photo op with a foreign leader he is about the most laid-back guy at the event? It's the US mainstream press that's chaotic, out of control. The foreign press still seems civilized and civil.

By the way, did President Trump go golfing this weekend? I didn't see any media report on that.

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

The Carnival Is Over

The Carnival is Over, The Seekers
Wow, so many memories.

Cleaning Out The In-Box, Part 2, October 6, 2018

Boom! From Rigzone -- $32 billion of oil, gas merger and acquisition deals in 3Q18 breaks record.

Blowback from Bloomberg: Trump request for maximum OPEC output may backfire. What could this possibly be about? The article is said to be in the "News" section of Bloomberg, but it's clearly an op-ed piece:

If OPEC is the central bank of oil, then the Trump administration is commanding it to run the printing presses at full speed.

The U.S. State Department took the unusual step of issuing a statement on Wednesday asking the cartel to boost production by tapping the supply buffer it maintains in case of unexpected disruptions. It even gave a figure for how much more the group could pump -- 1.4 million barrels a day.

If the Organization of Petroleum Exporting Countries were to fill this request -- and Saudi Energy Minister Khalid Al-Falih said on Thursday that it could -- the oil market would be in uncharted territory. Even during the worst crises of the past two decades, including the U.S. invasion of Iraq and Libya’s civil war, the cartel has never been forced to pump flat out.

If President Donald Trump gets what he wants from OPEC, it might not bring an end to the high oil prices he’s been complaining about for months. U.S. crude futures responded on Wednesday to the news that Saudi Arabia had joined Russia in pumping at close to record levels by rising 1.6 percent to $76.41 a barrel -- the highest since 2014.
In his 30 years covering the oil market, Jefferies analyst Jason Gammel said he can’t recall ever seeing anything like the State Department request.

“This is the lowest level of spare capacity in the global system relative to demand that I’ve ever seen,” Gammel said in an interview on Bloomberg television. “Spare capacity is moving to a precariously low point” and $100-a-barrel crude is a realistic possibility, he said.

Assuming Trudeau can close the deal; that the faux environmentalists don't shut this project down. From Rigzone -- LNG Canada raises the bar for Gulf Coast projects. We've discussed this before.

US natural gas revolution: at this post I noted I may not follow the natural gas fill rate any more; it seems to be irrelevant. A reader who is very, very knowledgeable about the Appalachian story wrote:

As per the RBN story, the ADDITIONAL 8 Bcf output expected in 5 years is about 25% MORE than Haynesville currently produces. 

Appalachia Rising!

Health insurance: $20,000 per year per employee. Previously posted? Can't remember. But if so, worth re-posting.

US Shale On Track To Deliver 1.5 Million BOPD Growth In 2018 -- Rystad Energy -- September, 2018

If you have time to read only one article this weekend, this would be the article.

A huge "thank you" to a reader for this link.

There are so many story lines in this article. This is just one of them.

Not only is the rate of growth steepest in the Bakken, but the Bakken leads significantly in 30-day production. This really is quite an interesting chart. Mid-Con: SCOOP/STACK?

I have archived this article. I will come back to it later.

Mother Nature Colludes With Trump To Destroy China's Soybean Crop -- Annie Wu -- September 20, 2018

Speaking of global warming, it looks like China is getting a boatload of global warming. LOL.

I can't make this up: Mother Nature colludes with President Trump to destroy China's soybean crop -- reported one day -- again, reported one day -- after Trump signs the executive order levying tariffs on China.

How does one get Trump, collusion, global warming, China, trade war, soybeans into one story? It would be the perfect political story. Not quite. To be the perfect political story, Stormy Daniels would have to be mentioned. 

A huge "thank you" to the reader for alerting me to this article.

This is one of those articles that overflows with irony.

Readers will recall that the hurricane of the century was forecast to hit Wilmington, NC, as a category 5, until Trump threatened Mother Nature with sanctions. Florence came to a halt, spinning herself into a non-story out at sea, and then hitting landfall as a category 1, quickly dropping to a tropical storm (rainstorm).

Meanwhile, China levies huge tariffs on US soybeans in retaliation for Trump's trade war -- which at the time were only gleams in his early morning tweets. How that worked out for China depends on which movie one is watching. The movie I'm watching suggests that was probably not China's best moment.

So, now global warming. Just when China doesn't need it, China gets hit with a dose of global warming.  Mother Nature colludes with Trump to take down China. I can't make this up. From Annie Wu:

From ntd.tv; 

Chinese soybean production has dropped precipitously as unusually frosty weather hit key agricultural regions in early September, damaging more than 2.5 million acres of soybean fields and reducing the harvest by an estimated 300,000 tons in the northeastern province of Heilongjiang.

So, there you have it. If China was already reeling from a self-imposed soybean shortage, now they have Mother Nature colluding with President Trump to make things even worse.

I'm only hoping the weatherperson in Raleigh, NC, who reports this story is named Stormy Daniels. Then we would have the perfect news article.

How's The Frost Down On The Pumpkin, Loretta Lynn and Conway Twitty
By the way, what are some numbers regarding soybeans and China? From the article:

On August 10, 2018, Reuters quoted a Chinese agricultural official as saying that Chinese soybean production typically falls short of demand by over 90 million tons, and that it relies on imports to make up the rest. In 2017, China consumed more than 110 million tons, of which it imported 95.53 million tons, or 87 percent of total consumption.

When I read the first time, I thought the article said Chinese demand was 90 million tons -- no, China typically falls short of demand by 90 million tons and relies on imports to make up the rest. Again, and this is hard to believe -- China consumes more than 110 million tons of soybeans but needs to import more than 95 milion tons. Sure, that works out to 87 percent, but, seriously, tell me: if you consumer 110 of anything and you need to import 95 of that, isn't that like you have to import it all. Wow.

I bet Trump knew those numbers. Larry Kudlow probably did not, but he does now.

Why The Europeans Tried To Convince The World The Need To Go To Renewable Energy -- September 20, 2018

Natural gas: before we go any farther/further ...

Disclaimer: I do not understand natural gas. Or much else for that matter.

Now back to natural gas.

It looks like one of the many stories that is not getting enough play in the national media, much less the international media, the US is awash in natural gas. It doesn't need nuclear energy. It doesn't need coal. And it sure as hell, as they say, doesn't need solar and/or wind. Natural gas in the Permian is now trading as low as 50 cents / unit. See RBN Energy today.

In the old days, if you opened a new account, the bank would give you a free toaster. Here, the banks are giving you a lifetime supply of natural gas if you open a new bank. Some banks are still throwing in the free toaster.

The US is awash in natural gas.

• in the northeast, they have so much natural gas they are shutting down new pipelines
• in the Boston area, there's so much natural gas, the old pipes can't handle all the pressure (resulting in Armageddon for some)
• operators in the Marcellus/Utica are diverting their natural gas to Florida (previously posted)
• in Texas, as noted, natural gas in the Permian is trading for 50 cents/unit
• California says it doesn't want any more natural gas
• the Pacific Northwest has more than enough hydroelectric power
• the upper midwest no longer needs to heat their homes in the winter -- global warming has solved that problem

The rest of the world is desperately short natural gas. Asians are paying $8 / unit for natural gas. The Germans are so hard-pressed they are selling their Faustian soul to help Russia finance a natural gas pipeline to Angela's penthouse on the Rhine.

The Germans and the EU saw this decades ago. The writing was on the wall. The US was going to have a glut of natural gas and the EU was going to go bankrupt paying for energy -- and that was before the aforementioned Merkel shut down the country's nuclear program, convincing Germans that coal was safer and cleaner.

The Germans were so concerned they begged Algore to write a book on global warming, hoping the US would be forced to give up fossil fuel and join the rest of the world with renewable energy. If everyone went to renewable energy, it would be an energy-level-playing field, they thought. Algore was promised a Nobel Prize if he would also do a PowerPoint Presentation.

I Never Promised You A Rose Garden, Trudeau's favorite singer

They had Obama in their corner; and the "world order" was almost ready to claim victory.

Then Trump came along.

Now that the US is not going down the renewable energy road, the rest of the world has a choice: depend on really, really expensive non-dispatchable intermittent solar/wind energy; or start building natural gas import terminals (which, by the way, Germany is now doing). Australia has also decided. Canada: eh, what just happened?

The renewable energy ploy almost worked. Jerry Brown, if elected to a fifteenth term as California governor, will continue to press the issue out west. And there's no doubt in my mind he will win. Anyone who can convince voters to pay $100 billion for a train to nowhere and one they won't see in their lifetime (or their children's lifetime for that matter) and who plans to launch a CO2-monitoring satellite will be able to convince Californians to build more dicers, slicers, and condor fryers.

Switching gears.

What does 50-cent natural gas mean for the Permian?  A couple reminders for newbies: the Bakken is pretty much a pure-crude-oil play. The Marcellus/Utica play is pretty much a pure-natural-gas play. The Eagle Ford, about 40-40-20 with the "20" being condensate. The Permian, probably 50-30-20, but it can actually be almost anything -- the Permian is so huge. But, for those folks who recently paid $95,001 for a mineral acre in the Permian, natural gas at 50 cents -- ouch.

Remember, you can still buy into the Bakken for under $100/acre.

The Permian:

• short term, one year out: a lot of companies are going to struggle; I think a lot will go bankrupt
• mid-term, out to five years: a lot of companies drilling today won't be in the Permian in 2023
• long-term, out to ten years: those who survive will be doing very, very well

Now, for the best part. RBN Energy.

RBN Energy features a song to accompany their daily energy blog. Yesterday I spent a fair amount of time listening to some Guy Clark music. I forget what particular song, but possibly "Desperados Waiting for a Train."

In today's RBN Energy blog, the featured song is Guy Clark classic, "LA Freeway."

LA Freeway, Jerry Jeff Walker

The "A-Ha!" Moment -- When Will The Bull Market End? When Will "The Longest US Economic Expansion On Record" End? -- September 13, 2018

Updates

September 16, 2018: in the original post, I noted that CNBC anchors continue to try to talk the market down, asking almost daily when the economic expansion will end and/or the bull market will end. It will end this autumn when the GOP loses the US House (and very possibly the US Senate). We may not see the numbers change overnight but once a) taxes are increased; b) regulations are back in vogue; and, c) and the transfer of wealth through global warming scams returns, the gains seen under Trump will disappear. This is not rocket science.

Original Post 

This is really, really cool.

"Everyone" recalls how "everyone" anticipated the market crashing if Trump were to be elected president.

Now, fast forward to September 13, 2018.

I don't know if readers are following the #1 recurring story on CNBC or not, but this is the #1 recurring story on CNBC. The issue comes up almost every day and has been coming up almost every day for the past year.

Quick! What is that issue?

A: this is the "longest bull market" on record. When will it come to the end, and what will bring it to an end.

A: sometimes they call it the "longest economic expansion" on record. But the same question: when and what will bring the "longest economic expansion" to an end?

Every time the talking heads get into the discussion, which is almost every day, the talking heads go through a litany of possibilities, things that will end the "longest economic expansion."

So, let's say the list is made of sixteen items. Not worth going through the list -- it's always the same old thing (s).

But interestingly, the list of sixteen does not include the "elephant in the room."

I'll let you think about it for a day or so, and then if I remember I will provide the "elephant-in-the-room" answer.

Hint: it's not rocket science.

Another hint: once you have the answer, you will know the date the bull market will end; when the "longest economic expansion" will end.

By the way, I feel strongly that technically, this is the "longest economic expansion" on record but that's only because the "interruption" in this economic expansion was so short, it was never seen. It lasted less than 24 hours.

See my comments/rationale at this post.

"The longest economic expansion on record" is a meme, a trope, and is not quite accurate. At least not in the movie I'm watching.

In case you don't like clicking on links, here is that post:

"Everyone" is talking about how long the current period of economic expansion has lasted, saying that it is now the longest on record. Some think the economic expansion still has legs; but others, think it will "soon" come to an end. CNBC is generally tries to talk the market down (my two cents worth). It's my perception that even those who think the expansion will "soon" come to an end, don't think it will be as "soon" as next year (2019).

I have not followed economic cycles. I know nothing about them except what the "average" person on the street might know.

A couple of things from the graph:

• first, and I was surprised by this, the current expansion is still almost a year shorter than the longest one (the one that began in 1991)
• most surprising: how short the periods of economic expansion lasted after WWII
• 1945: 3 years
• 1949:  3.5 years
• so much changed after 1933, I don't think it's worthwhile to go back farther than 1945 when considering economic cycles; some might argue going farther back than 1969 is even going back too far

I'm absolutely convinced that the current economic expansion had two (2) periods, both set in motion by entirely different events.

The current expansion is said to have begun in 2009 and has gone on without interruption; it began after coming out the second worst downturn in US history; at some point, the economy had to turn.

Had the pundits been correct, the market (and possibly the economy) would have tanked immediatly after Trump's election (November) and it was going to take two to three years to recover.

Had that happened, the graphic above would show:

• economic expansion for 6.5 years -- not atypical for for modern-era America -- ending in late 2016
• the next economic expansion would have begun in 2018; we would now be into our first year of another period of new economic expansion (all things being equal)
• "all things being equal" -- had the market tanked in 2016/2017, it is unlikely Trump would have gotten the tax cut or the other changes that propelled the economy we are seeing now; he likely would have been impeached by now if the Trump election had put the US into a depression
• however, assuming that "all things being equal" -- that Trump persevered and his policies went into effect, the economy would have righted itself, and taken off

Bottom line:

• I would suggest breaking up the red line in the graphic above that begins in 2009 into two separate lines:
• the first segment would begin in 2009; end in 2016
• the second segment would begin in 2017 and extend to the present day

If one does and if one considers a typical economic expansion cycle to last six years in the modern era, we still have four years of this economy growing.

My two cents worth.