Everything's Bigger In Texas -- Second-Longest Conveyor To Move Sand In West Texas -- February 3, 2025

Locator: 48463SHALE.

Link here. Original story at Texas Monthly with paywall.

Why US Shale Is Not Drilling -- Commentary -- March 6, 2022

Updates

March 11, 2022: there are operators that are trucking frack sand to the Permian from Oklahoma right now due to sand shortages ... link here. 

March 8, 2022: this is not 2017 / 2018. Taps are tapped. Labor, pipe, sand, tools, etc., all harder and harder to come by every week. Covid wrecked supply chains; government stimulus made it worse. Link here.

Original Post

Fracking sand:

• Fracking sand: getting sand to location is now a huge issue due to rail logistics. No source for this tweet. I am unaware of rail logistic issues. February 7, 2022. 
• Top story: we are out of fracking sand. February 26, 2022.  
• North American oil patch: "We are out of sand." Link here. February 25, 2022. 

Background:

• the fracking sand story, October 15, 2016.
• soaring cost of sand, April 23, 2017.
• to frack one well, 100 railcars and 200,000 truck loads (no typo), March 23, 2017.
• EOG: 23 million lbs to frack one well, December 31, 2016.

Rail:

• UNP: best performing stock this past week? March 4, 2022. What happened? There are two stories here.
  

Pet peeve: whining, and no analysis. Three problems with Javier Blas' tweet:

• one, no analysis; operators are not "not drilling" because they can't make money on $100 oil; they are "not drilling" for other reasons -- Javier: where's the analysis?
• two: in general, publicly-traded companies have a fiduciary responsibility to their shareholders first and foremost; not to any outside entity, or agency; why are they not drilling with $100 oil? Javier: where's the analysis?
  
• third: in general, most companies are in business to make money; companies are not "political." Companies work to adjust to all headwinds, including antagonistic government policies; companies are not "not drilling" because they don't like Biden, they are "not drilling" for other reasons. Javier: where's the analysis?
• I'm with Josh on this one.

I may or may not provide an essay / commentary with regard to my thoughts, but it seems most folks should be able to connect the dots.

The most difficult "dot" to connect / analyze is this week's list of wells coming off the confidential list and the initial production for those wells. 

But my guess is that some folks won't be able to connect the dots. So, if I get the time (and haven't lost interest) I'll post the commentary.

By the way, part of the commentary, and don't take this out of context: rigs don't matter; fracking is what matters. It used to be fracking spreads, but now it's fracking sand. 

Fracking: Errors In Reporting, Anomalies, Testing? -- August 12, 2020

We now have two interesting situations. 

In the first case, posted some time ago, FracFocus suggesting no sand was used in fracking these two wells (which I highly doubt):

• #34601, $34602 -- no sand in these two fracks?

And now, three wells in which the water by mass was only 60%. Normally, water by mass ranges from 88% to 92%:

• 35600, SI/NC, Enerplus, Alto 149-94-33C-28H-TF, Eagle Nest, t--; cum 124K 6/20; did not shut down; however, only 24 days in 6/20; a 28K month; from Fracfocus: 5.6 million gallons of water, moderate (almost small) frack; fourteen days to frack; water: 59.99% by mass; if that's accurate, that's remarkable; generally, water by mass runs 87% to 92%;
• 35599, SI/NC, Enerplus, Haze 149-94-33C-28H-TF, Eagle Nest, t--; cum 141K 6/20; did not shut down; 29 days in 6/20; a 34K month; from Fracfocus: 8.3 million gallons of water, moderately large frack; fourteen days to frack; water: 60.57% by mass; if that's accurate, that's remarkable; generally, water by mass runs 87% to 92%;
• 35598, SI/NC, Enerplus, Vapor 149-94-33C-28H-TF, Eagle Nest, t--; cum 93K 6/20; did not shut down, but only 10 days in 6/20; a 33K month; from Fracfocus: 8.5 million gallons of water, moderately large frack; fourteen days to frack; water: 60.66% by mass; if that's accurate, that's remarkable; generally, water by mass runs 87% to 92%;

North Dakota Fracking Sand -- August 1, 2020

Link here to KFYR-TV:

Usable oil sands have been found in North Dakota and can cut down some of the costs that oil companies are facing at a time when money is getting tight.

North Dakota geologists have found usable sand in the dunes of Mercer and McHenry counties, but this isn’t for laying on at the beach.

Oil producers need this specialized sand for the fracking process. It needs to have a high percentage of quartz, and this material has up to 80% of the mineral.

“It’s encouraging that the sands that we’ve been investigating are favorable for use as proppant sand,” said Fred Anderson, NDGS.

Whiting With Two New Permits: MRO Reports Two Huge DUCs -- July 21, 2020

EU stimulus package: close, but no cigar. $572 billion. Won't be nearly enough. "Green" focused. Really, really bad news. For the EU. LOL.

WTI: up 2.82%; up over a buck; trading at $41.96 and, then, a speed bump -- large, and again (how many times have we heard this?), an unexpected crude oil build. The API consensus, predicted an inventory draw of almost 2 million bbls. In fact a whopping increase in crude oil inventories: 7.5 million bbls. If they were basing their estimate on the declining number of rigs, it sort of expalins how they missed the number.

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

Back to the Bakken

ICYMI: Tesoro High Plains Pipeline shutdown; failed to obtain lease through reservation. Affects MRO / Marathon refinery in Mandan; posted earlier.

Active rigs:
 

$41.96	7/21/2020	07/21/2019	07/21/2018	07/21/2017	07/21/2016
Active Rigs	11	55	67	59	31

Two new permits, #37729 - #37730, inclusive:

• Operator: Whiting
• Field: Sanish (Mountrail)
• Comments: 
• Whiting has two new permits 
• Foreman Federal, lot 3 section 4-152-92, 565 FNL 1665 FWL, Sanish oil field,
• Pennington, lot 1 section 4-152-92, 451 FNL 846 FEL, Sanish oil field

Four producing wells (DUCs) reported as completed:

• 35891, conf, Whiting, Sondrol 11-29H, Pembroke, producing, a 23K month;
• 35892, SI/A, Whiting, Rauser 11-29H, Pembroke, t--; cum 83K in 3.5 months; a 29K month;
• 34601, drl/A, MRO, Salveson USA 24-21H, Reunion Bay, t--; cum 170K 3.5 months; a 54K month;
• 34602, drl/A, MRO, Gerhardt USA 14-21H, Reunion Bay, t--; cum 145K 3 months; a 56K month;

Three permits renewed:

• Petroshale: two Anderson South permits, and one Petroshale US permit, all in McKenzie County;

Two permits canceled:

• Petro-Hunt: two Eric Stratton Federal permits in McKenzie County

Dry hole:

• 34677, dry, EOG, Clarks Creek 65-07H, McKenzie County

Producers now abandoned: 8, of interest:

• 10103, Liberty Resources, Iverson State A 1,  

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

Additional Information Regarding Some Of The Wells Above

The wells:

• 10103, PA/32, Liberty Resources, Iverson State A 1, Glass Bluff, t1/185; cum 13K 7/93; last produced in 1993; very erratic production for years; 

• 34677, dry, EOG, Clarks Creek 65-07H, McKenzie County, from the file report:
• spud December 25, 2020 (sic) (must have been 2019)
• KOP: 0700 hours, January 11, 2020
• curve began at 1730 hours January 11, 2020
• curve TD reaced at 0600 hours January 12, 2020
• lateral 
• begun at 0130 hours, January 15, 2020
• abandoned at 14,226' MD on 1/16/2020 due to lower shale strike 

• 34601, drl/A, MRO, Salveson USA 24-21H, 33-061-04204; Reunion Bay, t--; cum 170K 3.5 months; a 54K month; fracked 1/12/2020 - 1/26/2020, 8.3 million gallons of water; 99.99965% water by mass;

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	5-2020	31	35603	35645	20017	52348	0	50209
BAKKEN	4-2020	30	53827	53895	45437	65539	0	62381
BAKKEN	3-2020	29	46754	46820	44990	52231	0	49489
BAKKEN	2-2020	15	33998	33589	65974	40193	0	3821

• 34602, drl/A, MRO, Gerhardt USA 14-21H, 33-061-04205; Reunion Bay, t--; cum 145K 3 months; a 56K month; fracked 1/12/2020 - 2/10/2020; 7.7 million gallons of water; all water?

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	5-2020	31	31310	31352	16385	43477	0	41605
BAKKEN	4-2020	30	48352	48515	39310	58332	0	55495
BAKKEN	3-2020	30	55850	55549	43312	59891	0	56616
BAKKEN	2-2020	5	9038	8929	8337	9030	0	8507

FracFocus, screenshots:

34601:

34602:

Sand -- October 13, 2019

Source: frack sand, North Dakota, will download as a pdf.

From that source:

Crush resistance, of concern: in the 2011 study linked above, site #1 (north of the highway) did not meet "crush resistance criteria -- and it was a big miss) where site #7 did meet crush resistance criteria. Across such a wide area, quality of sand will likely vary. Sames from locations 2, 3, 5, 7, and 8 met criteria back in 2011. Sites 1, 3, and 7 are in the McHenry area.

Updates

Later, 9:44 p.m. CT: a reader wonders if DrillingInfo might be willing to help us sort out a cost/benefit analysis of brown vs white sand; and, of course, later, ceramic -- comment being brought up for here to make it easier to google --

I'm too lazy to Google for it right now, but I'm intrigued by the difference between white sand (Wisconsin, more expensive, more globular) and brown sand (Texas, less expensive at least down there, and more plate-y). In theory, globular should give better well performance initially and hold more of the fracture open longer. However, in the Permian, operators have decided that the cost difference is worth the performance drop (and can be made up by stuffing more cheap sand in).

But there is also an interesting example in the Deep Utica, where they tried "backing off" even more expensive ceramic proppant (to sand). [But they] found that the wells were so deep and prone to frac closure, that they needed the high strength (but unfortunately high cost) ceramic.

I would love to see a good statistical study (are you reading this comment, DrillingInfo?) that compares white and brown sand performance. Of course there have been many other confounding changes over time in well design and crew practice (and geology), but you could control for that with proper statistical analysis.

Right now, it sort of feels very seat of the pants, rather than statistically validated. Like if brown is fine, why didn't they test it earlier (what took them so long)? Also, have they really proved that the brown is the better choice in terms of NPV?

Later, 7:14 p.m. CT: see first comment -- this is really quite fascinating --

A truck every 10 minutes has been rolling out of the frac sand pit in McHenry County for the last two weeks. The plant appears to be running 24 hours a day for the last month.

The site is one mile east of the town of Denbigh, ND and 1/4 mile south of US Highway 2. Sounds like another plant is going to go up 1/2 mile north of US Highway 2 straight north of the current site. No end to the sand at these two locations. 

Original Post

Well costs in the Bakken once infrastructure, leasing in place:

• drilling to depth
• fracking

The two -- drilling, fracking -- use to be about 5050 for a $8 million well. Over time, drilling costs have come way down. Drilling is now about 1/3; completion about 2/3rds of the complete cost to bring a Bakken well to production.

Drilling costs have come way down in the Bakken, due to two reasons:

• day rates down significantly
• significantly less time to drill to depth

Fracking costs:

• fracking spread contracts
• sand/water

I don't know the relative cost of fracking spread contracts vs sand/water but if costs can come down on either sand or water there will be a savings.

Sand: today it is being reported there may be source for fracking sand in North Dakota. From The Grand Forks Herald:

A deposit of sand in north-central North Dakota could be a boon to the state's oil industry.

The sand – a variety specifically needed in the process of hydraulic fracturing – has been found in McHenry County, roughly 160 miles west of Grand Forks between the towns of Rugby and Minot.

Another has been found in Mercer County, northwest of Bismarck.

Fred Anderson, a North Dakota Geological Survey geologist, said the sand could be a "game-changer" for the state.

“The reduction in cost would be high,” Anderson said. “It’s a huge deal for the state of North Dakota."

Asgard Resources, of Williston, has received a permit to dig sand in McHenry County.

Fracking Strategies In The Bakken -- March 4, 2019

Fracking strategies in the Bakken are tracked here.

It is very hard to generalize -- it depends a lot on the field (location) and a lot on the operator.

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

Shale Companies Risk Drilling Wells Too Close Together

From The WSJ:

Shale companies, adding ever more wells, threaten future of U.S. oil boom. Newer wells drilled close to older wells are generally pumping less oil and gas and could hurt output, leading frackers to cut back on the number of sites planned and trim overall production forecasts. 

It's a nice article for newbies who want to learn more about tight oil. The discussion is on "parent-child wells." As usual, the comments put the article in perspective.

Comments:

• as noted by another reader, The WSJ has generally reported only negative stories about the shale revolution
• I'm not seeing this problem (too many wells) in the Bakken; the NDIC and the oil companies seem to be managing the drilling units very, very well
• I think to say this about the Permian (too many wells) is premature -- that play has barely begun
• too many folks still look at tight oil drilling through the bifocal lenses of conventional drilling
• the oil companies will sort this out
• I'm inappropriately exuberant about the Bakken

From an investment point of view, one reader was upset that shares in EOG have not "moved" -- the reader says that based on that observation, he implies that he would not invest in shale, and suggesting that the majors (conventional oil) do much better. He should look at XOM:

• XOM: 
• $100/share, June, 2014
• today: $80/share
• EOG: 
• $117/share, June, 2014
• today: $97/share

Had that reader bought shares in January, 2016, he could have bought EOG for $70/share and sold for $130 in October, 2018.

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

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

Central Texas Frack Sand Mine Hours Drop 10%

That's the headline from Energent today. This was previously reported from another source. This is not a breaking news story.

The lede:

In 2019, Texas will reach over 130 million tons of production per year of frack sand nameplate capacity, of which 85% will come from Permian and Eagle Ford facilities, as new construction projects wind down and ramp to full utilization.

Energent is closely monitoring regional operations in central and south Texas as mines shut down in the first half of 2019. Pioneer Natural Resources and Covia Holdings Corporation reported future closures scheduled in the first half of 2019 through company press releases.

Pioneer is divesting their Brady assets as the company shifts to West Texas supply.

Additionally, Covia announced the idling of their Voca facilities in November of 2018. These facilities have a combined frac sand capacity near 10 MMTPY.

Other notable sand operators in central Texas are U.S. Silica, Permian Frac Sand, Erna Frac Sand, and Superior Silica Sands.

Geologists Looking For Fracking Sand Source In North Dakota -- Fracking Sand Costs -- Transportation -- August 26, 2018

Cost of sand / transportation:

• Wisconsin sand producers seek transportation relief; Transport Topics, July 30, 2018
• the cost of mining frack sand in Illinois, June 10, 2018: $110 / ton; $40 of the $110 is "pure profit"
• $40 / ton, WSJ, March 23, 2017
• Permian, $350K of sand / well; SeekingAlpha, March 7, 2017
• Hi-Crush buys Permian Basin Sand, March 1, 2017
• $30 - $40 / ton; John Kemp, February 22, 2017
• Hi-Crush: $64 / ton -- 2016
• cost of shipping from mid-Wisconsin to northeast Colorado, $175 / ton; reader; August 26, 2014 
• this article,  Wisconsin sand producers seek transportation relief; Transport Topics, July 30, 2018:
• complaining about lack of rail competition
• nominal rail cost has doubled since 2001
• a lot of complaining, but no cost / ton / distance provided

So, in round numbers, maybe:

• $60 / ton for fracking sand (up from $20 / ton at the beginning of the Bakken boom)
• $150 / ton for shipping by truck (?)

But here's the best analysis, perhaps, from a PDF that I cannot link, a PLG presentation at JPMorgan, January 11, 2018:

Notice the cost to get the sand the last mile!

Now the article sent to me be a reader, data points:

• operators looking for "local" source of fracking sand to cut down on shipping costs
• operators using an average of 2,500 to 5,000 tons / well
• from the article:

Fred Anderson, geologist with the North Dakota Geological Survey, authored a study in 2011 that said North Dakota sand sources approach oil industry standards for use in fracking but are lower in overall quality than other U.S. sources.

There's a renewed interest in that research, however, as demand for sand increases and companies experiment with lower-cost options.

"They're accepting sands that we probably never would have accepted 10 to 15 years ago," said Monte Besler, owner of FRACN8R Consulting in Williston.

For CLR, twenty million lbs of sand = 10,000 tons

• product at $60/ton = $600,000
• transportation at $150/ton = $1.5 million
• sand + transportation: upwards of $2 million 

At a more conservative 5,000 tons, the cost can come down to $1 million (sand + transportation).

Whiting Bucks Trend: Reducing Proppant In The Bakken; Bakken Holds On To Top Spot Among IRRs -- Platts -- August 24, 2018

If I had time to read only one Bakken story today, this would be it. A huge thanks to Geoff Simon for spotting it and sending it on.

Link here. Data points:

• Whiting reduces frack sand by 30% per well
• reduces capex by about $400K per well
• Bakken holds on to top spot among IRRs -- "So, what don't you want." Link here.
  

But, wow, look at this:

Whiting is one of the largest producers in North Dakota's Bakken Shale where it holds more than 400,000 acres. In the company's Hidden Bench play, located in the core of the Bakken in McKenzie County, it has been able to reduce proppant by about 50% and still maintain similar rates of production. It discovered that it could achieve the same production levels on new wells using 7.3 million pounds of sand as it did with 15.2 million pounds.

If the only thing you have is a hammer, everything looks like a nail.

If you "work smart," you may not need a hammer.

This is an incredibly good article. Archived. 

Update On Fracking Sand -- July 14, 2018

Disclaimer: this is not an investment site. I do not know if the linked article is a "sponsored" article over at Yahoo!Financial.

It comes from FreighTech / FreightWaves / Benzinga: an industry shift -- an update regarding fracking sand and ceramics. Some interesting data points:

• railroads shipping crushed stone, sand, and gravel, in 2018, so far in 2018, year-over-year comparison:
• UNP: up over 14%
• BNSF: up almost 12%
• Canadian Pacific: an incredible 20% (actually almost 21%)
• but, UNP giving guidance that this may not continue; many operators now switching to "brown sand" found nearer the oil fields
• US Silica: suggests that 2018 frack sand demand will hit 100 million tons, up from 66 million tons in 2017; and, 33 million tons in 2016
• US Silica: operators will move to regional ("brown sand") to reduce costs
• Hi-Crush: "Permian Pearl" sand --produced at the Hi-Crush Kermit facility will begin displacing lower quality regional brown sand by next year; Hi-Crush Kermit production: 3 million tons/year
• others suggest that oversupply of frack sand will send frack sand prices plunging
• "supplies are tight now" and "pricing is high but that could change quickly" -- some suggest as soon as later this year
• it appears the only major unconventional play not with no "regional mines" is the Bakken (see the linked article)

Frack Sand Update -- May 29, 2018

From SeekingAlpha: Summary:

• three public capable frac sand companies face increased competition from a new, gigantic entrant.
• the three companies have navigated the downturn and transportation constraints to serve the skyrocketing Permian oil and gas market
• important factors going forward will be the crude oil price, continued transportation constraints, the Dunes Sagebrush Lizard, new OSHA regulations, finding enough truckers, and managing logistics. 

Best update I've seen. Archived.

Linked for educational purposes, not for investment purposes.

Wisconsin Permits Another Fack Sand Terminal --

Color me surprised. It never surprises me, how many Native Americans live within three miles of where folks actually want to work. Or how trout seem to be everywhere and yet I've had little success with trout fishing over my lifetime.

From The Lacrosse Tribune: Wisconsin DNR gives OK for another frack facility.

The Wisconsin Department of Natural Resources issued a permit Monday allowing OmniTRAX Logistics Services to fill just over 4 acres of wetlands in order to install nearly 10 miles of track in a loop along the banks of Halls Creek, a Class II trout stream that feeds into the Black River.

OmniTRAX says it will use the terminal to fill more than 80 rail cars per day with sand from a nearby mine. Sand will be processed near the mine and brought to the rail terminal by a nearly 2-mile-long conveyor that will pass under two public roads. The company says it intends to ship about 3 million tons of sand each year to Montana and Texas, where it will be used to extract oil in a process known as hydraulic fracturing.

Midwest Environmental Advocates objected to the permit on behalf of the Ho-Chunk Nation, which has land less than three miles from the site.

I assume the Midwest Environmental Advocates would have no trouble with bald eagle slicers and dicers on that land if a wind energy company sought a permit for the very same area.

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

Where Have We Heard This Before?

Reluctantly, Britain's Foreign Secretary, in 1839, agreed to a "limited war" with China over the opium trade, siding with Big Opium. From The Opium Wars, Hanes III, c. 2002:

Further complicating the strategy against China was the weakness of Prime Minister Melbourne's Whig government, which held power by a tiny majority. With the government threatening to fall at any moment, was this really a good time to launch a foreign adventure, no matter how limited in scope?

Plus, the Exchequer was basically broke. Unbalanced budgets had produced huge deficits of £1 million pounds or more per annum for the past three years. Melbourne believed that a weak Parliament would never grant the fund to reimburse the traders for the £2.5 million of lost opium, much less an even more expensive war halfway around the world.

Goaded by is Secretary of State for war, however, the legendary 89-year-old historian Thomas Babington Macaulay, Melbourne came up with an ingenious way to fight a war against th Chinese -- make them pay for it.

After a brief conflict, which Melbourne expected would be a quick and efficient rout, China would be forced to pay reparations, which would serve as reimbursement for the opium it had confiscated. 

The plan had a neat tautology to it.

The Brits prepared for war. 

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

Time For A Little Chemistry

Link here.

Acetic anhydride. An incredibly simple molecule. Acetylation.

From wiki: Because of its use for the synthesis of heroin by the diacetylation of morphine, acetic anhydride is listed as a U.S. DEA List II precursor, and restricted in many other countries. Acetic anhydride is a versatile reagent for acetylations, the introduction of acetyl groups to organic substrates. In these conversions, acetic anhydride is viewed as a source of CH3CO+.

I find this fascinating:

The isolation of morphine was the beginning of alkaloid chemistry, which has yielded many important medicinal substances.

Although a satisfactory theory of analgesic structure or action still eludes us, experimenters have developed a number of synthetic analgesics related to morphine.

The oldest is pethidine (also known as meperidine, Demerol and about 40 other names).

It was synthesised in 1939 by the German chemist Otto Eisleb. It is less potent than morphine, but is still widely used for the relief of post-operative pain. By replacing one of the -OH groups with a methoxy group, morphine is converted into codeine, another powerful painkiller. When mixed with paracetamol it goes by the trade name Tylenol. When ingested, the -OCH₃ group is converted back to -OH, regenerating morphine.

US Civil War and morphine.

RBN Energy Takes A Look At FERC Ruling On MLPs -- March 19, 2018

Existential: they must be reading the blog. I've been referring to the Saudi fight against US shale oil as an existential issue for years. I'm sure others have said the same thing, but I don't recall linking a story with a headline using that phrase. Well, here it is. In the Financial Times,

"Saudi Arabia's existential crisis returns as US shale booms anew. Kingdom seeks higher prices that risks greater North American production."

The good news:

Saudi Arabia is mostly relying on stronger global economic growth, rising oil consumption and natural decline rates at existing fields to drive demand for the kingdom’s crude, according to two people briefed by Saudi officials. Prince Mohammed himself believes prices will be “significantly” higher next year because of these factors alone, one person says.

Unfortunately the tea leaves suggest Russia my flex its muscles. [One hour later: wow, was I wrong -- it's being reported that Russia's energy minister says Russia will stick with the cuts, and even extend them into 2019, if necessary. This suggests to me that "everyone" sees WTI floor at $60 / Brent floor at $65 and OPEC/Russia see huge risk of increasing production.]

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

US Appeals Court Approves ETP's Bayou Bridge Pipeline Construction

Link here.

The disputed 162-mile (261-km) pipeline is an extension to an existing line, which transports crude from Nederland, Texas, to Lake Charles, Louisiana. The new segment would extend the system to St. James, Louisiana, and have capacity to transport up to 480,000 barrels per day of oil.

The project is 60 percent owned by ETP with the remainder controlled by refiner Phillips 66.

Energy Transfer Partners on Friday said it was pleased with the court ruling and would begin mobilizing for construction activities as soon as possible.

One of the three judges that heard the appeal filed a dissent, agreeing with the District Court's ruling that the U.S. Army Corps of Engineers had violated the law when issuing permits for the pipeline.

HAL announces a new sand transload facility in El Reno, OK. The property was purchased back in 2015 for $3 million. The terminal now has 10 sand silos with 5 unloading bays. Each silo probably stores 3,000 tons of frack sand. The double-loop track has 16,267 feet of rail; handles 2 - 3 unit trains of frack sand.
 

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

Back to the Bakken

Active rigs:

$62.31↑	3/19/2018	03/19/2017	03/19/2016	03/19/2015	03/19/2014
Active Rigs	58	47	32	107	195

RBN Energy: FERC's move on MLPs and cost-of-service rates puts Wall Street in a tizzy.

The aftershocks are still being felt from last Thursday’s decision by the Federal Energy Regulatory Commission (FERC) that interstate gas and liquids pipelines’ cost-based tariff rates can’t include anything for income taxes if the pipelines are owned by master limited partnerships (MLPs) — and most are. Many investors did freak out — no other phrase sums it up better — when they heard that news. Share prices for midstream companies plummeted in midday trading, and we imagine that many angry calls were made by investors to their financial advisers. “Why didn’t we know about this?!” In fact, FERC’s action was harsher than expected by most experts. But the impact of the change is likely to be less far-reaching than the Wall Street frenzy would have you believe, at least for most MLPs. And, by the way, the issue at hand — whether and how to factor in taxes in calculating MLPs’ cost-of-service-based rates for interstate pipelines –– has been around for decades. Today, we discuss FERC’s new policy statement on the treatment of income taxes and what it means for natural gas, crude oil, natural gas liquid (NGL) and refined product pipeline rates; and for investors in MLPs that own and operate the systems.

It’s worth noting that Thursday was what the ancient Romans called the ides of March. That was a real bad day for Julius Caesar (“Beware the ides of March … You too, Brutus?”) For some pipelines and their investors, FERC’s abrupt chopping out of a big chunk of pipeline cost of service probably felt pretty similar to Caesar’s surgery. FERC had been working for a year and a half to respond to a July 2016 federal appellate court ruling saying that collecting income taxes in pipeline tariff rates — on top of how the return on equity investment is calculated for an MLP’s pipeline rates — amounts to a double recovery of cost. So FERC took a lot of comments, struggled with it, and ultimately on Thursday said, “Yep, it sure is.”

Existing Frack Sand Transloading Terminal In Van Hook Changing Hands -- March 17, 2018

It was a bit difficult sorting out this press release. I don't think it's a new terminal, but simply one that is changing hands.

Link here.  From a press release --

THE WOODLANDS, Texas, March 16, 2018 -- Smart Sand, Inc. announced  that it acquired the rights to operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation.

The Company paid consideration of approximately $15.5 million to acquire certain assets at the Van Hook terminal, and has entered into a long-term lease agreement in connection with the transaction. As part of this transaction, Smart Sand and Canadian Pacific have entered into a long-term agreement to service Van Hook directly along with the other key oil and gas exploration and production basins of North America.  The Company expects to have the Van Hook facility operational in April 2018.

Monday, March 12, 2018

A story I never thought I would see over at NPR (link here; sent by a reader, thank you very much): America's oil boom is fueled by a tech boom. 

The U.S. is on track to become the world's biggest oil producer [this is forecast to happen in the next year or so, during the Trump administration], pumping out more crude than at its peak nearly a half century ago. For decades, few expected such a comeback, and it's all the more remarkable because the price of a barrel of oil is nowhere near what it was during the last, recent boom.

"This is an incredible statement, but we're probably making more money at fifty dollars a barrel than a hundred," says Kirk Edwards, president of Latigo Petroleum in Midland, the de facto oil capitol of West Texas.

ConocoPhillips has even boasted that his company can now break even when the price of oil is below $40 a barrel.

The flat, khaki-colored plains outside Midland are crowded again with rigs and pump jacks. Tommy Taylor of Fasken Oil and Ranch shows me a fracking operation where water, sand and chemicals are injected into the earth to separate oil from rock. Inside an air conditioned control center, called a frack van, men can monitor information coming out of the well.

"Look at all the computer screens," Taylor says. "We used to frack jobs on the tailgate of a pickup, and so we've come a long ways."

Fracking has been around for years, but companies have managed to continually increase its speed and efficiency, a trend sometimes referred to as "fracking 2.0." Plus, Taylor says, companies are getting more oil than they used to thanks to expanded use of horizontal drilling. That means drilling down, through layers of oil rich shale formation, and then drilling across, sometimes for miles.

And then this -- due to efficiencies, technology, and robots, far fewer people are required -- and thus all those concerns about there not being enough workers may be unwarranted.
Much, much more at the link.

What a Doofus  

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Sand. All those concerns about adequate supplies of fracking sand seem to be dissipating. I remember one analyst -- some years ago -- suggesting the cost of sand would go parabolic. If it did (go parabolic), that lasted for a very, very short time. The other day I mentioned that the Permian operators will source this sand from in-basin, which puts much less pressure on Bakken operators for their sand sourced in Minnesota and Wisconsin.  Today, the Emergent Group used the phrase "dramatic shift" with regard to frack sand.

Not all the frac sand mines proposed for the Permian Basin are online yet, but some operators are already reporting plans to source their sand locally.

A study just released by Energent, an energy market research consultancy, supports that trend, predicting operators will increasingly turn to in-basin frac sand.

By doing so, they will be able to save 40 to 50 percent on the cost of sand. This will result in potential savings of $500,000 or 10 to 20 percent per well.

Active rigs:

$62.18→	3/12/2018	03/12/2017	03/12/2016	03/12/2015	03/12/2014
Active Rigs	59	45	32	111	193

RBN Energy: midstream pay-to-play in the Permian's Delaware Basin.

Cleaning Out The In-Box -- February 27, 2018

Biofuels. From oilprice.com: watch for biofuels policy changes. Trump not happy with bankrupt Pennsylvania refinery attributing its problems to biofuel rules. Iowa vs Pennsylvania. Electoral votes: Iowa (6) vs Pennsylvania (20). We've talked about this refinery before; it ranked first among refineries in use of Bakken oil. It reinvigorated the economy of Pennsylvania.

Tesla. From a contributor over at SeekingAlpha: folks plunking down $50,000+ for the Model 3 may be in for a shock when a "variant" of the same model is released for $35,000. Some folks doubt one will be able to tell the difference between the $50K model and the $35K model. This would be like Apple releasing a "variant" of the iPhone X for $500 vs the current price of $1,000, and making no discernible changes in the "variant" simply because the iPhone X ($1,000 model) was not selling well.

China coal. No links. Too many stories coming out right now about China's energy needs. Coal will be huge player.

US coal. It seems I posted this story or one similar to it; can't remember. The WSJ is reporting that US coal industry is seeing a resurgence in jobs, production. Due to exports to Europe -- how's that emphasis on renewable energy working out? So much for the Paris accords.

Fracking sand. In short supply but some reason for optimism. From the Emergent Group a few days ago (no link):

Life in the Permian, where some operators pump more than 5,000 tons of sand per well to help free trapped hydrocarbons, may not be as cutthroat as it was for characters of the fictional West Wing of the White House.

But tight supplies are causing some angst in the basin.

The 100-mesh sand appears to be the most desired. [Yes, it seems 100-mesh is part of the mix in almost every Bakken frack.]

Additional supplies are expected to come online with sand suppliers such as Badger Mining Corp., Emerge Energy Services, Hi-Crush Partners, Smart Sand, Unimin and U.S. Silica planning to add new capacity.

Peak oil. Asia set to lose three (3) milion bopd of oil production. Yes, the article is from that "peak oil" site, oilprice.com.

The right whale on verge of extinction. The right whale was saved by Rockefeller and "big oil." But time may be running out. The Boston Globe is reporting that "after a year of record deaths, right whales produced no new calves, which could be catastrophic."

GE: Jeff Immelt laughing all the way to the bank. Jack Welch, probably not. Reuters is reporting that GE will restate two years of earnings. Tick-tock. Jeff, you will recall, was the economic czar for President Obama.

GM on the move. Profits from GMC's hulking trucks support GM's longer-range bets on electric and autonomous cars, says The WSJ. The headline needed to add the word "China."

Beyond the pale. I've posted this previously, but it was still in the in-box. Clearing it out now.

Update On East Coast Natural Gas -- RBN Energy -- February 21, 2018

Global warming? What global warming: from Rigzone:

Oil and gas will account for over half of the world’s energy by 2040, according to BP plc’s latest Energy Outlook.

The outlook’s ‘evolving transition’ scenario highlights that demand for oil will grow over much of the period to 2040 before plateauing in later years. All the demand growth is said to come from emerging economies, with the growth in supply driven by US tight oil in the early part of the outlook. OPEC is said to take over from the late 2020s as Middle East producers adopt a strategy of growing market share.

The transport sector will continue to dominate global oil demand, according to BP, accounting for more than half of the overall growth. Most of the growth in energy demand from transport, which flattens off towards the end of the outlook, comes from non-road (largely air, marine, and rail) and trucks, with small increases from cars and motorbikes.

After 2030, the main source of growth in the demand for oil is from non-combusted uses, particularly as a feedstock for petrochemicals.

Natural gas demand is anticipated to grow strongly over the period, according to the scenario, overtaking coal as the second largest source of energy. By 2040, the US is said to account for almost one quarter of global gas production, with global LNG supplies more than doubling.

Impact of oil on US economy: the headline story in today's WSJ -- America's emerging petro economy flips the impact of oil. 

SPR update, via Twitter:

Noble Energy: shares surge 8%? I heard that on the radio this morning. Don't know any more than that. Other sources suggest it's up almost 11%. Most likely due to the Delek-Noble Israel-Egypt natural gas story. Noble Energy, Israel’s Delek to supply gas to Egypt in $15 billion deal.

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

Frack sand shortage? Mike Filloon started talking about this years ago, and this particular story posted previously on the blog. Now, over at oilprice.com:

Halliburton said last week that its earnings could be negatively impacted because of bottlenecks related to the supply of frac sand used in shale drilling. The Wall Street Journal reported that Halliburton’s shares were briefly halted on February 15 after Halliburton’s CFO Chris Weber told an audience at the Credit Suisse Energy Summit that the company’s first quarter earnings could take a hit by a whopping 10 cents per share.

The reason, he said, was because of delays by Canadian rail companies that would slow the delivery of frac sand. Halliburton saw its shares drop by more than 2 percent on a day that saw broader gains to the S&P 500.

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Back to the Bakken

Active rigs:

$61.40↓	2/21/2018	02/21/2017	02/21/2016	02/21/2015	02/21/2014
Active Rigs	56	42	38	127	182

RBN Energy: East Coast natural gas prices hit all-time highs during "bomb cyclone."

After a three-year hiatus, winter returned to the U.S. natural gas market this year in the form of a “Bomb Cyclone” and more than a week of frigid temperatures.

The cold weather pushed Henry Hub prices above $6/MMBtu and East Coast prices higher than $100/MMBtu on some days.

This winter, the pain wasn’t just confined to New England.

Prices at Williams’ Transcontinental Gas Pipeline (Transco) Zone 5, which includes the Carolinas, Virginia and Maryland, hit all-time highs on January 5. Exports from Dominion’s Cove Point terminal in Maryland are only just getting started so it’s not liquefied natural gas (LNG) exports from the East Coast that are driving prices higher. Instead, it’s gas’s increasing role in winter power generation that has been putting pressure on East Coast gas pipeline deliverability.

Today, we begin a series explaining why prices have been so high on very cold days this winter and why more price spikes may be ahead. This winter, eastern gas prices have set records at some hubs and spiked near record highs at many others. Prices at Algonquin Citygate and Transco Zone 5 ran up to more than $100/MMBtu on January 5, and to $24/MMBtu during the week prior.

These price spikes have been driven by an increasing call on gas for power generation across the eastern U.S. On the coldest days, such as we saw when the Bomb Cyclone hit, the demand for gas as a generation and heating fuel exceeds pipeline capacity to deliver it, which begins a cascade of dominoes that results in skyrocketing prices.

How could such a calamity happen when Marcellus and Utica, two of the greatest gas producing fields in the world, sit right at the doorstep of this market? Although U.S. gas supply overall is more than plentiful, gas pipeline capacity into parts of the East Coast is not. Couple this with rising gas demand for baseload power generation and you have a recipe for price spikes, especially on the Transco system.

Either directly or indirectly, Transco serves almost all of the demand in the Carolinas and much of it from Virginia to New York City in its zones 5 and 6. We call the states in these two zones the Eastern Transco Corridor.

Update On Fracking Sand -- Financial Times -- December 9, 2017

Link here. Also, archived here. Paywall; you may need to google the article.

From The Financial Times: Going local for supplies sparks new frac sand boom. Market is stretched to full capacity amid US shale oil’s drive to extend output cheaply. 

Windblown dunes in west Texas are the latest front in the shale oil industry’s campaign to extract more barrels at less cost.

The industry is excavating dunes for frac sand, which is pumped into wells to crack open rocks and get oil and gas flowing. The deposits are in demand because they lie close by the hot Permian shale region, making them cheaper than sands carried in from older mines 1,000 miles away. Locally dug sand is influencing the economics of US oil production, helping shale supplies compete in world markets.

It is also worrying investors who own shares in railroads that haul sand and in sand miners that may be on the cusp of a glut. Sand was a critical ingredient of the shale drilling revolution. Without it, US oil production would not have nearly doubled in the past decade to an estimated 9.7m barrels per day.

Between 2012 and 2014, total US demand for “proppants” such as frac sand rose from 34m to 61.5m short tons, according to Rystad Energy, a consultancy. 

Then oil prices collapsed, bringing down sand consumption as well. Volumes are again on the upswing as drilling accelerates, oil wells get longer and more sand is used per foot of well.

Demand is forecast to surpass 100m short tons next year, Rystad says. “Right now, the market is really stretched thin,” says Thomas Jacob, a senior analyst at IHS Markit, a research company. “Everyone is running at full capacity.”

But this sand boom is different than the last.

In the first phase of the shale fracking boom, oil producers were notorious for prioritising production growth over investor returns. They sought premium sand supplies far from the oil patch in states such as Wisconsin. Its “northern white sand” was prized for hardness and roundness that made a porous latticework inside underground wells. But given its bulk, it also cost a fortune to ship. Northern white sand has averaged $41 per short ton at the mine gate this year, according to IHS Markit, but can cost $120 at a Texas well head after transport.

Cost-cutting among oil companies sparked a search for supplies lying around the Permian, known as brown sand. While finer in grain, it is also cheaper at $75-$80 per short ton at the well head, Mr Jacob says. Distances are short enough to make some deliveries economical by truck.

This is only a small part of the article; much more at the linked article.

The Energy And Market Page, Part 2, T+244 -- September 21, 2017

Unemployment claims: huge, unexpected drop. The forecast was for first time claims to actually increase from 284,000 to 303,00 -- an increase of almost 20,000 first time claims. In fact, the number dropped. And it did not drop by an insignificant amount. The drop was huge. The number of first time unemployment claims dropped 23,000. If one adds the 20,000 forecast to the 23,000 decrease, the analysts were a) off in the direction of the move; and, b) off by more than 40,000 claims. 

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

Surprise! Anadarko to spend $2.5 billion on "massive" share buyback -- Reuters via Rigzone. Data points:

• amounts to 10% of its outstanding shares at current prices
• this was announced yesterday
• APC: rose 2.4% yesterday

Oasis Midstream Partners begins trading today (OMP). Hess Midstream (HESM) is also trading.

Investment tip: I do not hold shares in CP or CNI and have no plans to do so. I am posting this for two reasons. The first reason is because a "talking head" on CNBC this morning recommended CP because of huge amounts of fracking sand coming from Canada. I was unaware of that; decided to check. It turns out the analyst was likely to be correct. At Athabasca Minerals check out the "Tech Report" pdf where the company discusses its frack sand initiative that began in 2014.  From the PDF, this connection with Canadian National Railway:

The Firebag Project is composed of three components; the mine site where the raw silica sand is mined, the Lynton trans-loading area, and the yet to be defined site in the Edson/Hinton site, where the ROM silica sand will be processed to produce a marketable frac sand product.

For the purposes of this report, the Edson/Hinton area will be referred to as the Edson area due to the uncertainty of the location of the processing plant at the time this report was authored. Also, in the cost analysis, the travel time of the rail cars on the Canadian National Railway Company (CN) rail line is to the town of Edson, Alberta.

The other reason is because I accumulated BNI (Burlington Northern) for years until Warren Buffett bought the company, and then I switched to another US railroad which has, all of a sudden, shown a bit of life. Again, see the disclaimer. I was more interested in the veracity of the analyst regarding Canadian fracking sand and less interested in the investment side of the story, but that was rewarding also. Both CNI and CP are trading near their 52-week high; the former was down insignificantly yesterday; the latter had a nice 1% jump yesterday.

As long as I'm rambling -- as long as Minnesota continues to block the expansion of the Enbridge crude oil pipeline and until the Keystone XL is built (if it's ever built), the Canadian railroads might be beneficiaries. 

More On The Texas Sand Mines -- Wow, I Love Free Market Capitalism -- Mine, Mine, Mine -- September 16, 2017

I most recently talked about Texas fracking sand just a few weeks ago. Now, another article from The Wall Street Journal:

Big oil-field sand suppliers, Wall Street firms and other investors have been buying up swaths of the West Texas desert.

These investors aim to mine and sell the sand to drillers in the region's booming Permian Basin, who need large quantities of sand to extract oil and gas from shale formations.

Texas energy producers have typically bought the millions of pounds of sand that each well requires from mines located far from their drilling fields. After oil prices collapsed in late 2014, though, cost-conscious drillers reconsidered their well designs and recipes for the slurries they blast underground to unleash fuel from shale formations.

Many West Texas drillers discovered that they could replace sand they had been shipping from mines 1,300 miles away in Wisconsin with finer grades found in dunes nearby. Doing so eliminates rail costs that sometimes are equal to or more than the sand itself.

Now investors are lining up to supply local sand to West Texas drillers.

"Local sand is a huge disrupter that is beneficial to the shale producers," said Ben "Bud" Brigham, an Austin geophysicist who built and sold two oil companies and now is plowing some of his profits into sand pits.

Mr. Brigham is using proceeds from his recent $2.55 billion sale of Brigham Resources to fund a Permian mining operation called Atlas Sand Co., which he expects to begin sand production in the second quarter.

The Atlas mine is one of at least 18 under way or proposed for the desert outside Midland, Texas.

The first, Hi-Crush Partners LP's 3-million-ton-a-year facility, began operations in July. More than a dozen plan to open over the next year. The prospect of tens of millions of tons of Permian sand coming to market could drive down sand prices that have been rising nationally.

Analysts say that prices rose to as much as $45 a ton earlier in the year, from as little as $15 a ton last year.

With competition heating up in West Texas, analysts say it's unlikely that all the planned mines will be get built. 

Much more at the link.