Ford Is On A Roll; Manufacturing Stage Of The Bakken Boom; Legalese In The Bakken -- June 1, 2015

For some reason, the auto manufacturers scheduled their May numbers to be released on June 2, rather than on the first full business day of the new month, which would have been today. I assume it is due to Memorial Day sales. From Seeking Alpha:

• TrueCar estimates the average U.S. automobile transaction price rose 4% in May.
• Prices were up 0.5% compared to April's ATP, according to the research firm.
• The group of automakers with 4% or more gains in pricing includes Subaru, Fiat Chrysler Automobiles, and Ford.
• The ratio of incentive spending by automakers fell 10 bps to 8.2% during the month.

Ford is on a roll, and Americans are spending more money on cars, iPhones, and food. On the rest of the stuff American has to offer, not so much.

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Manufacturing Phase Of The Boom 

Okay, folks, pay attention. Another reader has sent a link to a story that I never should have missed. I've been slacking off. I was getting a bit bored with the whole energy story. I started the blog to educate myself about the Bakken and thought there was something to be gained by sharing it with the general public. Regular readers have become better educated about the Bakken than I have because a) they have better memories; b) aren't sidetracked by ridiculous articles on global warming or ObamaCare; and, c) gave up on Obama years ago. I'm a very, very slow learner, very gullible, and too optimistic.

Be that as it may, the aforementioned reader / link / story is from The Wall Street Journal: the shale oil boom shifts into higher gear. I skimmed the article, but need to go back and read the whole thing. From what little I read, it appears that we've talked about all of this numerous times in the past couple of years. I guess that's why I get bored. It's yada, yada, yada, Bakken, yada, yada, yada, Bakken.

What really got me excited about this article was the 250 comments (and counting). That's the most comments I have ever seen for any article in the WSJ on a subject like this. I may not be able to go through all the comments, but the comments, as is often the case, may be more interesting, and more valuable, than the article itself.

This is the type of comment that really gets me excited. It reminds me of something about the Bakken that I used to know and then forgot. I started the blog to educate myself about the Bakken. I feel more educated just from this one comment:

Great article, but I'm always surprised that the 3rd big innovation is never mentioned in these stories. Mitchell Energy fracked a lot of horizontal wells in the 90's and couldn't make a profit until they started using microseismic mapping. The same methods that map the San Anreas fault can map hydraulic fractures, but the microearthquakes are a million times smaller than damaging level (magnitude -1 to -3). Profit margins are so small that if the fractured zones overlap, frac fluid is wasted and if they have gaps, oil or gas is left behind. Only when the zones fit like a jigsaw puzzle is there a profit.

The next step is efficiently refracking old existing wells. So there is still room for lower break even prices.

Not only refracking old wells, but drilling first-time laterals in other formations following natural frack lines. 

I used to say the Bakken never ceases to amaze me. I need to adjust my horizon a bit: the Williston Basin never ceases to amaze me.

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Quiet Title Action

Okay, folks, pay attention again. This is another important story, the link sent to  me by another reader. I hope I understand the legal argument and outcome correctly.

I've always maintained there are three Bakkens:

• the geographical/geological Bakken where oil happens to be located and recoverable
• the political/commercial Bakken where government jurisdictions, the oil industry, and ordinary private citizens are working together for the best possible outcome with no evidence of corruption/influence peddling by the regulators or governmental agencies
• the Bakken as a laboratory where operators are using out-of-the-box thinking, trying new things, to get better production at lower cost. 

This article, in The Bismarck Tribune, is an example of the "second" Bakken. The Bismarck Tribune is reporting:

A federal court of appeals affirmed a North Dakota district court’s decision Monday to deny environmental groups from intervening in a quiet title case involving the federal government and four western North Dakota counties.

The U.S. Court of Appeals for the Eighth Circuit agreed with U.S. District Court Judge Daniel Hovland’s denial last fall of allowing three environmental groups, including the Badlands Conservation Alliance, the Sierra Club and the National Parks Conservation Association, from intervening in the case.

Billings, Golden Valley, McKenzie and Slope counties sued the U.S. government seeking to quiet title what they allege are right-of-ways along section lines of land owned by the federal government on the Dakota Prairie Grasslands. The state of North Dakota later filed suit, and the cases were consolidated.

The counties argue that section lines with few exceptions in North Dakota are subject to public easements allowing for right-of-way. The federal government doesn’t recognize these rights-of-way.

The groups contended they have environmental, recreational and aesthetic interests in the area. The court ruled that the groups failed to show they had a specific interest in the case.

The appeals court received the appeal in October following Hovland’s denial of the groups’ request to intervene.

The full opinion can be found at media.ca8.uscourts.gov/opndir/15/06/141785P.pdf.

Quiet title action: A special legal proceeding to determine ownership of real property.  A party with a claim of ownership to land can file an action to quiet title, which serves as a sort of lawsuit against anyone and everyone else who has a claim to the land.  If the owner prevails in the quiet title action, no further challenges to the title can be brought.

I hope I'm interpreting the article correctly. I often make simple mistakes reading simple English. 

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This Is Not An Investment Site

 

By the way, this is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read. 

North American Energy Revolution --> North American Manufacturing Revolution

This has been mentioned before. Rigzone is reporting:

America’s oil and natural gas boom has caused a rippling effect with all sectors experiencing a windfall. Energy-intensive manufacturing employment is set to increase by more than 1 percent in the United States through 2020, according to a report released by the U.S. Conference of Mayors.

Manufacturing employment in metropolitan areas has expanded by 1.7 percent per year on average over the past three years, with energy-intensive industries such as fabricated metals and machinery being crucial parts of that growth.

More than 196,000 jobs in metro areas from 2010 to 2012 were added in energy-intensive manufacturing sectors. These sectors encompass steel, iron, fabricated metals and machinery, which all have benefited from the natural gas boom, the report added.

Employment in these sectors increased by 9 or 10 percent, from 2010 to 2012, in all U.S. metropolitan areas.

“We’re all aware of the incredible impact the energy revolution is having on our national economy,” Virg Bernero, mayor of Lansing, MI, and chair of the conference’s advanced manufacturing task force, told reporters on the conference call discussing the report.

“The growing competitiveness and increase in employment from these manufacturing sectors are important to our cities and metro economies.” 

Much more at the link. 

XTO To Drill 300 Wells In Siverston Oil Field, NDIC July, 2013, Hearing Dockets

From the July, 2013, NDIC hearing dockets

Disclaimer: typographical errors may exist, and I may be interpreting the data incorrectly; refer to the source for accurate information. The source is at the NDIC website.

Application of XTO Energy Inc. for an order authorizing the drilling, completing and producing of a total of ten wells on each existing 1280-acre spacing unit in the following sections in Siverston-Bakken, McKenzie County.

In T.151N., R.98W:

• Sections 13 and 24; 
• Sections 14 and 23; 
• Sections 15 and 22; 
• Sections 25 and 36; 
• Sections 26 and 35; and, 
• Sections 27 and 34,

In T.150N., R.98W.:

• Sections 1 and 12; 
• Sections 2 and 11; 
• Sections 3 and 10; 
• Sections 4 and 9; 
• Sections 13 and 24; 
• Sections 14 and 23; 
• Sections 15 and 22; 
• Sections 16 and 21; 
• Sections 25 and 36; 
• Sections 28 and 33; 
• Sections 29 and 32; and, 
• Sections 30 and 31,

In T.150N., R.97W.:

• Sections 4 and 9; 
• Sections 5 and 8; 
• Sections 6 and 7; 
• Sections 15 and 22; 
• Sections 16 and 21; 
• Sections 18 and 19; 
• Sections 28 and 33; 
• Sections 29 and 32; and,
• Sections 30 and 31,  

In T.149N., R.98W:

• Sections 1 and 12.

In T.149N., R.97W:

• Sections 5 and 8; and, 
• Sections 6 and 7. 

I count 30 1280-acre spacing units.

Ten wells x 30 units = 300 wells.

In addition:

• 20662, XTO, amend Siverston-Bakken, establish an overlapping 1280-acre unit, 10 wells; and establish an overlapping 2560-acre unit, 1 well; McKenzie;
• 20663, XTO, Siverston, complete 10 wells on a 640-acre unit, McKenzie

I count 139 permits issued for Siverston Field to date. Of those 139 permits, 10 have been permanently canceled and 2 wells are inactive) bringing the number of wells on active, drl, conf status to about 127. 

For archival purposes, this is what the Siverston oil field looks like now. It will be interesting to see what it looks like in 10 years:

Mining and Longer Laterals in the Bakken, North Dakota, USA

Elsewhere they are talking about EOG infill wells in the Parshall oil field and the Van Hook oil field.

This may become a nice thread for newbies to get a feeling for what's happening in the Bakken.

The new buzz word in the Bakken is "mining." Just weeks earlier, the buzz word was "manufacturing." I don't know who first associated these concepts with the Bakken, but it might have been Harold Hamm.

Regardless, the point is that in several areas of the Bakken, it's no longer about "exploration." Rather, the Bakken is looking more and more like a "mining" operation. I've referred to it as "groundhog day." The trucks start fueling about 6:00 a.m. and the long line of trucks start heading out for the fields about 6:30. If you are on the road later than 6:30, be prepared for long waits at intersections requiring a left-hand turn.

The roads remain busy throughout the day, but activity seems to be a bit quieter near the city. And then starting about 6:00 p.m. the traffic starts increasing again, as trucks head back to the industrial parks.

Another observation at the link above, is the amount of acreage under water. This is not a big deal. I looked at this last year, and it appears all acreage can be reached from dry land, with the longest horizontal having to go maybe 2.5 miles. There could be exceptions. As noted, I do recall having posted a story about some extended long laterals. Here are a couple of those links:

EOG hits total depth with longest horizontal in the Bakken

Based on data at NDIC, EOG should have reached TD for the longest horizontal to date in the Bakken by now: #20037, Liberty LR 17-11H, 25,000 feet with extended long lateral under the river. 25,000 / 5,280 =  4.74 miles.  Vertical is about 10,000 feet, so the horizontal is about 15,000 feet, just under 3 miles. [Update: 790, s1/11; t6/11; cum 92K 11/11; 16K/month]

GMXR plans a 21,151 total depth well in the Bakken

The Company has completed the drilling of its first Three Forks horizontal well. The Wock 21-1-1H in Stark County, North Dakota reached total depth of 21,151’ with a horizontal lateral length of 10,281’, which included drilling a vertical pilot hole and performing additional testing. Oil shows were predominant in the vertical and horizontal lateral while drilling in the Three Forks formation.

The Halliburton Rapid Frac™ sliding sleeve system has been installed with stimulation expected the week of September 26th. The Wock 21-1-1H well is scheduled for a 41-stage completion with oil production expected by October 1, 2011.

Unless there's a typo in the press release, or on the NDIC GIS map server, I am missing something (which wouldn't be the first time). The press released called it the Wock 21-1-1H, and the GIS map server shows only one well with a name that close: the Wock 21-1-1H, file #21002. I know wells are re-named, and I may have missed that. Interestingly enough, the GIS map server does not show the horizontal for this well yet.