Earnings Reports On Tap For Wednesday -- November 4, 2014

According to Yahoo!Finance:
Abraxas Petroleum (AXAS), before market open; 15 cents;
Calfrac Well Services (CFW.TO), before market open; 41 cents;
CenturyPoint Energy (CNP), before market open, 30 cents;
Chesapeake Energy (CHK), before market open, 33 cents;
Denbury (DNR), before market open, 26 cents;
Duke Energy (DUK), 7:00 a.m., $1.52
Enbridge (ENB.TO), before market open, 38 cents;
NRG Energy (NRG), before market open, 52 cents;
Steris (STE), before market open, 63 cents;

CLR, after market close, 81 cents;
Energy Transfer Partners (ETP), after market close, 65 cents;
Plains All American (PAA), after market close, 52 cents;
QEP, after market close, 44 cents;
SandRidge Energy (SD), after market close, 5 cents;
Tesla (TSLA), after market close, loss of one penny;

This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or think you may have read here. Do not make any travel plans based on what you read here. Most of my posts are done quickly; there are factual and typographical errors. If this information is important to you, go to the source. 

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Musings 

The 2014 Mid-Term Elections

We had out-of-town guests arrive tonight. They will be with us for a week which will put a crimp on my blogging.

I was most disappointed in not catching MSNBC analysis of the election results. I have only seen limited coverage on the internet. The big story is the GOP will control the Senate by two votes. Maybe three votes. Maybe four votes. That's the MSNBC headline story, I suppose.

But I have not seen any mention of the real story. This is the real story. The GOP may have a two vote margin (51 - 49) on paper, but in fact the delta is going to be much, much bigger. Of the 49 in Mr Obama's party, some of them will be up for re-election in 2016. One can assume that very few, if any of them, will want to cast any vote in support of any Obama initiative. Dems running for re-election this past month refused to admit they even voted for President Obama in 2014; you think they are going to vote with him during the next two years? And you know that no GOP senator up for re-election in 2016 is going to step out of line. McConnell will have the easiest job in the world.

Yes, on paper the tally may be 51 - 49 but in reality it's going to be 56 ayes; 3 nays; and 41 "present." The record will show that the vote was 56 - 3.

Oh, the other big story. With a 51 - 49 mix, Mr Biden won't be asked to make any tie-breaking votes. 

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Musings 

MDU 3Q14 Earnings Call

Based on comments on the message boards, there are a lot of smart folks out there when it comes to energy. I'm not one of them.  I'm simply learning as I go along. And trying to get a better understanding of the Bakken.

Based on the MDU transcript, and comments elsewhere, it appears that MDU is "cutting its losses" by selling Fidelity.

They have a lot of growth potential elsewhere; MDU was really starting to look like an E&P company.

MDU made mistakes in E&P /Bakken years ago and never recovered. Compounding this problem, I folks were starting to look at MDU as an E&P company. But it appears MDU doesn't have the expertise, experience, corporate culture, to go head-to-head with guys like Harold Hamm, the previous EOG CEO (Mark Papa), the previous CHK CEO (Aubrey McClendon).

MDU needs to get back to doing what they were doing before they got caught up in the Bakken (had they done that right in the beginning, things might have been different, but they didn't, and now they are cutting their losses [cutting Fidelity] before it becomes an even bigger albatross).

[If the can't find a suitable buyer, and the price of oil recovers, could Fidelity be spun off as a stand-alone company? A wholly-owned subsidiary? An MLP?]

By the way, this may be the start of consolidation in the US tight oil industry. There are just too many players. If there are 100 drillers, they are all drilling like their hair is on fire just to keep investors happy. And we end up with a huge glut.

Get down to 10 drillers and there is more latitude to slow down drilling, and quickly change the supply and demand equation.

These are initial thoughts; subject to change; thoughts/opinions may change as the dust settles. I'm learning as I go along.

Have I ever mentioned this is not an investment site? Well, it isn't. It isn't an investment site. Do not make any investment, financial, or relationship decision based on what you read here or think you may have read here. Do not make any travel plans based on what you read here. If this is important to you, go elsewhere for better analysis. This is simply idle chatter (see welcome/disclaimer).

From Lynn Helms/NDIC Regarding Slump In Oil Price And Other Musings-- October 16, 2014

Updates

October 17, 2014: the NY Times on the slump in oil prices.  My feelings, exactly, in general. 

Original Post

In a long post, there are typographical and factual errors. This is mostly an opinion page. If any of this is important to you, go to the source. This is not an investment site: do not make any investment, financial, or relationship decisions based on anything you read here or think you may have read here. 

Link here.

How crude prices will impact the Bakken was the main topic of discussion in this month’s Director’s Cut.

Lynn Helms, director of North Dakota’s Department of Mineral Resources Oil and Gas Division, gave his monthly director’s cut assessment of the Bakken and Three Forks formation, emphasizing the impact crude prices could have on the Bakken.

There are many facets that need to be considered when we look for such an answer, Helms said.

Brent crude prices have been dropping all summer, reaching a two-year low this week at roughly $84 per barrel. West Texas Intermediate, which trades lower than Brent, is closest in price to Bakken crude.

During the webinar, Helms noted that North Dakota sweet crude was being sold for less than $70 per barrel to the Flint Hills Resources Refinery in Minnesota.

To the question of when oil prices will rise, he seemed to answer honestly “We don’t really know where the oil prices are heading.”

With the decrease in crude prices, Helms said that a reduction in the state’s rig count at a pace of roughly 10 percent could be in the future. There are three counties—Bowman, Slope and parts of Divide—that aren’t economic with current oil prices, he said.

“The drop in prices puts eight to ten rigs in those counties at risk,” said Helms. Helms mentioned that Saudi Arabia needs $92 per barrel to satisfy their government needs, which in turn puts them under a lot of pressure as well to change their oil production plans.

“We’re in this together,” said Helms. “Not only is North Dakota under a lot of pressure, but so are all of the Organization of the Petroleum Exporting Countries. But, we are watching it [crude prices] and there are serious concerns out there regarding it.”

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My Thoughts

My initial thoughts, "not ready for prime time" were posted October 14, 2014, and have not been updated.

A reader sent me a fairly long commentary from a newsletter author who was very, very bullish on the Bakken (the author had an agenda, to sell newsletters, so the commentary has to be read with some circumspection).  I assume the commentary is meant only for subscribers so I won't post it (now) but this was my reply:

The most interesting thing: the cost of completing a well on a per bbl basis (break-even cost) was said to be ___.

That goes along with the ___ (or whatever it was the Reuters said) that was said to be the break-even cost in McKenzie County.

Several months ago I got an e-mail from someone "connected in the Watford City area who said the break-even cost in Watford City area is _____. He said I should not post that.

For a brief moment I posted the link to the Retuers article and _____ (per Lynn Helms) in McKenzie County (more accurately Watford City area), but I pulled it down once I got push-back from folks who appeared to be misinterpreting what I was trying to say. I did not want to muddy a very complicated issue.

This (the slump in the price of oil) could get very, very nasty before it's all over.

My optimism may be very, very misplaced.

But there's a lot of other stuff that the writer did not say (in the commentary you sent me) that furthers the optimist's argument and my own optimism.

I'm looking for two years of angst.

Folks with long horizons and ability to stomach this could do quite well.

In the near term: Alaska is not coming back; California is not coming back. Deep-sea drilling could be in deep trouble (no pun intended); certainly off-shore US is not going to expand under current administration with this glut of oil. The Wyoming, Louisiana, and Oklahoma shale plays pale in comparison with the Bakken, Permian, and Eagle Ford. Canadian oil sands have greater challenges than US shale. There will be no other "elephant oil fields" discovered in the US North America (the map at the new dinosaur wing at the Los Angeles Science Museum pretty much proves that).

No one talks about legacy conventional field in North America.

At the end of the day, it seems we are left with the Bakken, Permian, and Eagle Ford.

But I'm always an optimist and I could be badly wrong.

Much more could be written.

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The Jobs Report

Now, somewhat related: the jobs report. Again, an e-mail to a friend:

First time unemployment claims (October 16, 2014, report): 14-year-low.

At some point, there has to be some point at which we reach "steady state."

That is, at a certain point, I would assume there will always be "unemployment claims" even at full employment. In addition, the number of applications provided each week is a raw number, not percentage of Americans, or percentage of total able-bodied that could be in the work force, or percentage of actual work force ... etc.

In other words, this has be an extremely good report (they said no state sent in estimates) and the period included nothing unusual.

Investors may be anticipating a global slowdown, certainly a recession in Europe, but with a glut of oil in the US (gasoline solidly below $3.00/gallon is now likely) and 14-year low in first time unemployment claims, one starts to wonder if we might be seeing a divergence -- a huge divergence -- developing between Europe and the US.

If the US accelerates (and, yes, I saw Wal-Mart's projections yesterday) and the EU continues to lag (which is pretty likely), the gap between the US and Europe will widen. It's hard to believe, that if this is accurate, that the North American energy revolution was not responsible for all of this. Energy keeps getting less expensive here and it keeps getting more expensive elsewhere.

The winners: China and the US.

China is buying cheap oil as fast as they can and storing it in tankers off-shore.

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Additional Thoughts

I still maintain that the Bakken is uniquely positioned for crude oil requirements in the northeast US and for California.

The RBN Energy post today reminds us that Saudi Arabia oil imports into the US will never go to zero.  

Musings On The Slump In The Price Of Oil -- Not Ready For Prime Time -- Will Be Edited -- October 15, 2014

Updates

October 25, 2014: Forbes provides their list.

October 17, 2014: the NY Times on the slump in oil prices.  My feelings, exactly, in general. 
 

Original Post

This is a note I sent a friend yesterday afternoon. The note has not been edited yet for the blog. It is not ready for prime time. But I see some stories coming out today in the mainstream media and I want to get my own "musings" posted so I have the time-date stamp.

Here are my thoughts on the slump in price of oil.

Some thoughts, random.

1. I think there may be a disconnect in price between WTI and Brent (OPEC/Europe/Asia).  WTI used to follow Brent. 

We now have a high-producing country that bans exports (the US) and a country (Saudi) that will try to corner the European/Asian market. It will be a dirty fight between Russia and Saudi for the EU and Asia. [Update: crashing oil prices could crush Putin; a trapped bear is something to fear.]

In the US, the Northeast and California are the places to watch. If the US no longer needs imports, the Northeast US and California will have to get their oil from somewhere else. It seems the Bakken has the inside track (CBR to Vancouver; ship to San Francisco) to California; there are NO pipelines into California. It used to be all ships -- Alaska or Saudi. Alaska is decreasing; Saudi is more expensive than Bakken.

In the Northeast: the CBR is now entrenched between the Bakken and the Northeast and the Enbridge pipelines are coming (some already in place).

Texas, by default takes most of the rest of the country.

2. If you were XOM, would you rather hassle with terrorists and Ebola overseas, or just move to Canada, Bakken, Texas?

3. My hunch is that deep sea drilling could take a huge hit at low oil prices. Deep-sea drilling, in fact, may be the story no one is yet reporting. Brazil could be in deep trouble. Statoil, Norway, could be in deep trouble; they were having problems and now with slump in price, things are exacerbated. Britain's domestic oil and gas industry (North Sea) suffers, but their citizens will have a better winter, price wise for heating oil / natural gas. [This is the reason I posted this note earlier than expected. I wrote the note early on October 14 (yesterday), and sent it to a friend to review. I was going to spend more time on it, but stories are starting to appear that validate my thoughts. This was the story that forced me to post this before editing: from SeekingAlpha, falling prices are the last straw that break off-shore drillers' backs.]

4. Russia is in deep trouble. Russia may have to make huge concessions to companies like Schlumberger and XOM to keep them there. Sanctions complicate things.

5. I know I look through Bakken-colored glasses, but when I look around, the Bakken seems as good as any place to drill; better than most.

6. Canadian oil sands have always been said to be the high-cost play. If so, the Canadian oil sands are the "canary in the coal mine." If Canadian oil sands keep operating, it tells me that companies are able to adjust (at least in the short term) to very low prices.

7. Saudi can't do much but react in the short term. My hunch is the Hawks in Saudi will win out and they will severely cut production to get price back up. It takes the US out of their portfolio, but US imports from Saudi had been dropping anyway.

8. Unrest in Venezuela could be interesting if oil industry falters there.

9. Mexico: I don't know.

10. The most interesting development might be the dichotomy between North America and OPEC/Brent.  It's a very artificial commodities market when that part of the world producing half the global oil is not exporting oil (banned in US; pipeline/CBR constraints in Canada).

[Update: compare this list with Forbes list posted October 24, 2014.)

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Musings -- January 7, 2015

A Note I Sent To Don

Not Ready For Prime Time

The last few days looking at daily activity reports made me think of this. This could be the year we finally see clarity which oil companies will be the big Bakken players.

For example:

• we know Fidelity is out of the Bakken
• OXY USA is still a mystery. They want out, but they continue to drill and get new permits.
• Hess and Oasis remain really, really active. I think Oasis is going to be a big player, if not merged with someone
• KOG, of course, is gone, and at one time (a year or so ago), it seemed Whiting wanted out but with buying KOG it is clear they intend to stay (unless bought out by someone bigger). 
• CLR will always be here
• EOG will always be here. My hunch is that EOG might be in the mood to buy Fidelity; not particularly good acreage, but they have relatively small amount of acreage compared to others
• Hess will remain huge (the last thing I read on Hess suggests the Bakken may be their biggest play
• SM Energy closes their Tulsa office, and exits Oklahoma; will focus on Bakken and Eagle Ford (that speaks volumes by the way)
• WPX will continue to "fight" with the Indians on Fort Berthold
• BR will keep busy in its locations
• XTO seems happy. 
• Statoil seems content (happy). Before it's all over, Statoil (Norway) may need more Bakken
• MRO seems happy -- especially with re-fracking
• QEP seems happy in the Grail area; it will be interesting to see their long-term game plan
• Newfield, surprisingly, is still here and getting more active, if anything
• Not publicly held, Petro-Hunt seems busier than ever in the Bakken
• Not publicly held, Slawson, so-so. 
• I think every thing else (Triangle, Emerald, Halcon, etc) are small potatoes. Small companies could be bought; unlikely to go into bankruptcy; probably sell before it comes to that. But another three months of daily activity reports (and hearing dockets) and watching to see who gets permits will tell the story

2. The permits, more and more, are for wells on six-well pads.

Instead of six wells on six different pads with three or four rigs, an operator will simply go to one pad for six wells with one rig. And they will drill those six wells in the amount of time it used to take two or three or four sequentially. The number of rigs, in my mind, reflects the amount of activity (busy-ness, trucks on the road, number of workers, etc) but the number of rigs reflects less accurately actual production. 

3. Another note: a story today talked about $8 - $10/bbl when shipped by rail, and thus another reason why the Bakken is hurt. I think the $8 - $10 / bbl figure is high, but if that is an issue, we're going to see less production in the Bakken, so operators can fill cheaper pipelines.

4. I don't know if you saw the story today -- but again, a story that folks forget about and I haven't written about in a long time: heavy vs light oil. US refiners need heavy oil -- much of which they get from Venezuela. That's why they are still interested in Keystone Canadian oil. The article did talk about mixing Bakken light oil with heavy oil to more nearly match Saudi oil "heaviness/lightness."

5. But of all the above, I'm most interested in watching the "Darwinian" survival of the fittest. For those operators who have the cash/credit facility/liquidity they could pick up some nice acreage. This will be interesting to watch.

6. By the way, SM Energy closing their Tulsa office, and exiting Oklahoma -- I have to check where SCOOP is in relation to where SM Energy was in Oklahoma, but as good as Harold Hamm says the SCOOP is, the  much smaller in scope. It's possible SM Energy didn't have enough acreage in Oklahoma to make it cost-effective to stay there (different than Hamm/SCOOP but it is interesting that they are leaving Oklahoma and there are NO (okay, few) transportation problems/costs getting their oil to Cushing.

Time For A Good Sweating In The Oil Market -- Reuters -- Rigzone

Link here:

U.S. demand for petroleum products has experienced an unprecedented and broad-based decline over the last eight years as soaring oil prices have forced consumers to become more efficient and seek cheaper alternatives.

Consumption of oil-based products has fallen in every major category - from gasoline, diesel and jet kerosene to heating oil, fuel oil, petrochemical feedstock, petroleum coke and asphalt, according to the U.S. Energy Information Administration.

In every case, consumption has fallen in absolute terms and the decline is even steeper compared with the growth in population and the size of the economy since 2005. The extent of demand destruction varies from a relatively small reduction in motor gasoline and diesel to steep falls in the use of heavy fuel oil, petroleum coke, asphalt and oil-based products as feedstock for making petrochemicals.

The final two paragraphs:

In the next couple of years, there will be plenty more headlines about cancelled projects and producers struggling to break even, as well as signs of recovering consumption. For oil bulls, that is reason to hope prices will soon recover. But it is more useful to see it as a necessary adjustment and reaction after several years of exceptionally high prices.

Only lower prices can slow the shale juggernaut and high-cost offshore exploration while slowing consumption losses in the advanced economies and encouraging faster demand growth in emerging markets.

Unmentioned in the article are the high CAPEX wind, solar, renewable energy projects. But back to fossil fuel: I think "demand destruction" is huge. It will be interesting to see the changes in the US if oil drops "permanently" to $80/bbl or less. I'm thinking Dwight Eisenhower and the nifty fifties.

The Jobs Report -- September 5, 2014 -- So Horrendous, Economists On Both Sides Of The Aisle Don't Believe It

One word: wow.

And it's a record: almost 100 million Americans NOT in the work force. Link here. Rate matches 36-year low.

I am off to a very late start this morning. I read the news on my iPad earlier this morning, still in bed, and was "shocked" when I read the numbers. I thought maybe I was over-reacting. It turns out I was not "off the mark."

I'm not alone; not by a long shot. CNBC is reporting: don't believe weak August jobs data -- economists.

"I don't believe it."

"This is anomalous."

"There's going to be an upward revision."

That's how three top economists reacted on CNBC to the much-lower-than-expected August jobs report, shortly after it was released Friday.

The U.S. economy added only 142,000 nonfarm payrolls last month, the Labor Department said, while the unemployment rate fell slightly to 6.1 percent. 

"I don't believe this data. It's not consistent with anything," Moody's Analytics Chief Economist Mark Zandi said in a "Squawk Box" interview.

He puts together the monthly ADP private sector jobs report, which on Thursday said jobs grew in August by 204,000.

And they say I have rose-colored glasses:

• Despite the payroll weakness, Krueger said he's thinks "the underlying trend is still 200,000 jobs of month." 

Yes, this was a horrendous job report, but before I comment, let's check out two other news stories. First, the breaking/braking news. Reuters couldn't even spin this report: US job growth brakes to eight-month low; labor force shrinks:

U.S. employers hired the fewest number of workers in eight months in August and more Americans gave up the hunt for jobs, providing a cautious Federal Reserve with more reasons to wait longer before raising interest rates.

Nonfarm payrolls increased 142,000 last month after expanding by 212,000 in July, the Labor Department said on Friday. The jobless rate fell one-tenth of a percentage point to 6.1 percent, but that was partly because people dropped out of the labour force.

Then, one paragraph later, the news is no better. The previous two months' figures were revised downward:

Data for June and July were revised to show 28,000 fewer jobs created than previously reported. In addition, manufacturing saw no job growth and retail payrolls declined for the first time since February.

Now, the Yahoo!Finance story: millions of job openings; so why aren't companies hiring?

The number of jobs added to the U.S. economy in August came in lighter than expected at 142,000 (analysts were looking for 230,000), according to the Labor Department.

Other data reveals plenty of help is wanted, but employers aren't hurrying to hire.

Even though there were 4.7 million jobs openings in June, the most since 2001, employers are waiting longer to fill them than they have in more than a decade, according to an index created by University of Chicago economist Steven Davis.

It's taking 25 working days on average to fill vacancies, a 13-year high, according to the Dice-DFH Vacancy Duration Measure. And for companies with 5,000 employees or more, it's taking more than twice that long -- an average of 58.1 working days.

The reasons given by an "expert":

• the economy remains sluggish, so employers don't feel desperate
• anecdotal evidence that employers are relying on social media -- taking longer to hire
• pretty significant changes in the labor market ... make employers more cautious (think the rules they have in Germany protecting workers from being let go; once hired, never fired)

CNBC, just before the government released the official figures:

August's nonfarm payrolls are expected to show a seven month of 200,000 plus hiring, a sign that the labor market is finally on the mend.

Not "200,000 plus" but almost barely half of that at 142,000. So, I take that as "a sign" that the labor market is finally NOT on the mend. LOL.

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1. The most incredible story line in this jobs report: no one believes the government figures.

2. Readers can already guess my comments regarding the reasons cited by the "expert" on why employers are slow to hire. There was no mention of the 800-pound gorilla. The phrase used by the expert, "pretty significant changes in the labor market," is code for the 800-pound gorilla that was not mentioned.

3. Hidden in the report: the previous two months' numbers were revised downward 28,000. Also, hidden: manufacturing saw no job growth and retail payrolls declined for the first time since February. (By "hidden," I mean: a) overshadowed by other worse news; b) not the headline story; and, c) talking heads did not mention this bad news. So most Americans are not aware how bad this report was.

4. It goes without saying why the unemployment rate ticked down to 6.1. Of course that's bad, bad news: when no one is hiring and job creation declines this much (so much that economists don't believe the government's figures), it means only one thing -- which talking heads mention: folks are dropping out of the job market, despite the fact that long-term unemployment benefits no longer exist. And yes, the dots do connect. 

5. For investors: a reminder. Ms Yellen is more concerned about jobs than about inflation. How do you spell "quantitative easing"? 

6. With regard to #5 above, one might want to look at what the European Central Bank did overnight. President Obama's worse second-to-worse nightmare: US bonds start paying a negative rate of return. His worse nightmare: rain disrupting his golf plans.

7. Now, back to that question -- with all those job openings, why aren't employers hiring? This is what is not being reported. As an example, contractors out in California send out one driver, and pick up as many undocumented workers as they need to do whatever jobs need to be done in construction, agriculture, etc. I can guarantee you those undocumented workers are paid in cash and no paperwork is generated to show any jobs created. The guys in Washington know that; the guys in California know that. President Obama's promise to "dreamers" to sign an executive order by the end of summer: another "line in the sand" that came and went, blown away. No such executive order signed and by most accounts, summer is over.

8. President Obama is, at best, jobs-neutral. More likely he is anti-jobs, based on his attitude toward the oil and gas industry, perhaps one of the two bright spots in the US economy, the other being agriculture. Of course, he won the war on coal some time ago, although like the Cold War (which he appears to have brought us back to) will be in the news after he leaves the Oval Office.  [Regular readers are aware that Russia has "invaded" Eastern Ukraine and the US has announced it will hold "military exercises" in Western Ukraine, and thus the digression about the Cold War.]

9. Service jobs? You have to be kidding. The million-man march yesterday struck fast-food restaurants demanding $150/hr wages. Oh, my error. $15/hr. Significantly more than the president's $10.10. The $15/hour would be on top of expenses driven by the 800-pound gorilla, which, by the way, is on hold (delayed by executive order) and won't kick in until 2015 and 2016 and 2017 and ...

10. Some past links:

• June 9, 2014: the AP admits the "new norm" may be higher than 5% unemployment.

• February 7, 2014: horrendous report. By the way does anyone still believe the government's official unemployment rate -- job gain horrendous, more folks entering the labor force (now that extended unemployment benefits lapsed), and official unemployment rate is at its lowest since October, 2008?

11.The report is even worse than the raw numbers. Remember: it is a fact that this is the slowest recovery ever in US history. We are five years into the recovery; for the past year, we keep getting spin that things are improving. And now this: US job growth brakes to eight-month low; labor force shrinks; and retail payrolls declined for the first time since February.

12. For investors: look at #5 again. I just checked the market. It looks like investors see the same thing from this report that I see: they love it. The market, after a bad opening, is now rising. But remember, this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here.

13. Let me know if I've forgotten anything.

14. Chuck Todd will interview President Obama on Sunday; my hunch is that this topic will not be covered; if it is, it will be in passing, superficial, and spun. Chuck Todd will not utter the words, "Sir, we are into the fifth year of the recovery and ...."

15. I assume the numbers will be revised upward by 100,000 come next month. The administration will have noted they forgot to count job growth in California, Nevada, Texas, and North Dakota.

Okay, these are the things I forgot to mention in the original post. Coming in from readers:

1. The most incredible data point was something NOT mentioned: George W. Bush was NOT blamed for this latest report.

2. With regard to the "expert" talking about major labor changes in the US -- regular readers are aware of the adverse ruling regarding McDonald's with regard to unionization.

As we noted, McDonald's was dealt a serious blow in late July after the National Labor Relations Board ruled that both the McDonald's Corporation and its franchisees were jointly responsible for the treatment of its workers. This precedent set workers at McDonald's and other fast-food restaurants on a course toward unionization, a long elusive goal and means by which employees could more effectively file unfair practice complaints.

3. Fascinating story regarding McDonald's and minimum wage. Yahoo!Finance is reporting:

As fast-food workers and their champions protest in 150 cities today in pursuit of a $15 minimum wage (with some arrests reported already), a wide gulf remains between the company line and the aspirations of the protestors. You'll no doubt be hearing about the demonstrations, which unions have encouraged two million home-care workers to participate in, as well as the calls for civil disobedience by organizers.

What you probably won't be hearing is the case against the minimum wage campaign. Enter Ron Piazza. The Wire caught up with him last month to talk about the business of fast food as well as his take on the ongoing efforts by fast-food workers and activists to push for a large minimum wage increase.  

Piazza says his managers make roughly $55,000 per year, which he notes is more than a teacher ("a noble profession"), and that his employees can flourish no matter "what schooling you have."

"People think we're a dead-end job. Well, I'm not a dead-ender. I've got 585 employees and 55 managers, they're not dead-enders." 

As for the minimum wage, Piazza sees it as a disincentive for hard work. For an example, he went through the hypothetical hiring of someone who makes an $8 an hour minimum wage and, at the end of two years, makes $10 an hour after learning more of the job and moving up. 

I've mentioned several times that a minimum wage of $15/hour for fast-food restaurants will hasten the day of automation -- I guess I missed this. They've been using automation in fast-food restaurants (McDonald's) since 2011. SelfServiceWorld is reporting:

I like to imagine a world where I could get my standard fast-food order – a grilled chicken sandwich with only mustard and cheese –sans the eye roll and sigh from the teenager behind the counter or drive-thru. If only I lived in Europe, where McDonald's already has self-ordering kiosks deployed in more than 800 restaurants, I could be as picky as I want without feeling guilty. I could even pay with my debit card without help from employees, freeing them up to do more important tasks like make food –which would reduce customer wait times.

Idle Chatter On Pace Of Drilling In The Bakken -- August 14, 2014

Over at the discussion board, a writer asks:

I have been keeping an eye on Whiting's presentations for awhile. Whiting shows the potential for six more middle Bakken wells along with a couple of "new objective wells" (per drilling spacing unit, see page 9 of most recent presentation).

Is this just to keep investors happy or will they actually start drilling some of these so called high density infill wells? After much activity early on, by comparison, there seems to be very little activity in the Sanish field these days. 

This is somewhat of a rhetorical question and regular readers understand the issue and have their own opinions.

However, for newbies, the writer's question raises a number of issues and begs for some kind of response.

Whiting is an E&P company: exploration and production. If Whiting was simply a "production" company (for example, a MLP perhaps) then, yes, it should be maximizing drilling and production. However, they are also an exploration company. As a company, they have a strategic plan and finite resources (money, people, rigs, sand --- for example). The valuation of an E&P company is based on reserves in the ground as well as production. If Whiting announced they would drill their entire inventory this year, and by the end of 2015, they would have no more oil in the ground, their shares would plummet; and they would be out of business in a very short time. Managing their resources is as important as daily production; in fact, from my perspective, managing their resources is more important than daily production.

There are two very interesting "things" happening in the Bakken right now. First, the data now shows that larger amounts of proppant correlate with much better wells. EOG has demonstrated this over the past year -- it's been quite striking. For newbies, in the old days, fracking a well with less than one million pounds of proppant (sand, ceramic, or both) was the norm. Then BEXP (now Statoil) went to 4 million pounds (not many have followed) and then EOG blew open the door (pun intended) by using upwards of 10 million, 12 million, and 14 million pounds of sand. No one has followed EOG's example yet (if others have, I have not yet seen it).

The second "thing": the chokepoint in the Bakken is fracking sand. Almost no one knows this and, to the best of my knowledge, no one is reporting it in such blunt language (Mike Filloon comes closest). But this is a fact: there is a severe shortage of fracking sand in the Bakken. Operators are completing wells with less proppant than they wish because they cannot get enough.

Part of managing its resources includes managing sand allotment when completing Bakken wells. Operators are working furiously to come up with better completion techniques; the Bakken wells have improved immensely since 2000 (Montana) and 2007 (North Dakota) and are going to get better if optimal completion techniques are prescribed. But, right now, sand is the chokepoint.

With regard to Whiting and the Bakken, Whiting is now in a manufacturing phase. Early on, they drilled fast and furious to save leases; to gain experience; to get the cash flow necessary to moving forward. That was the boom. If one defines a boom as continued growth despite severe shortages of resources, the Bakken is still "enjoying" a boom, but in some fields, the Sanish for one, the operators have moved into a manufacturing phase.

It's interesting to look at the number of wells on the confidential list by operator:

• CLR: 306
• Hess: 250
• Statoil: 106
• Oasis: 92
• EOG: 29
• Whiting: 66

EOG has a fair amount of acreage in the Bakken, comparable to the others in that short list. EOG also has some of the most prolific wells in the Bakken. They are also blowing the doors off the formations with 10, 12, 14 million pounds of sand. But look at that: where CLR has more than 300 wells on the confidential list, EOG has a paltry 29. For me that speaks volumes.

Oh, one last thought. When I first started the blog, I was looking at the Bakken from the viewpoint of someone who had no mineral rights. Over time, I realized what I was missing. Everyone following the Bakken follows it for different reasons: surface owners see it one way; mineral owners see it another way; operators see it differently; investors in equities see the Bakken in a different light. Even among mineral owners, there is a difference of opinion how fast the Bakken should be developed. Some mineral owners tell me they wish "their well" had been drilled a couple years later when the technology was better -- compare some of those early short lateral wells with minimal fracking to the long lateral wells they are now completing with "heavy" fracking and slickwater.

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

Anyone not connecting these dots, is not paying attention:

• President Obama is on track to have more golfing rounds than Tiger Woods. 

• President Obama's SecDef: the world is exploding everywhere. 

• President Obama says "nyet" to Mr Maliki for urgent request to save his country.

• Mayhem in St Louis. 

• "The boy should be in school." SecState on photograph of 7-y/o holding up severed head.

• Phoning it in. 

****************************
A Note for the Granddaugters

Among several books I read during the past month in southern California (or at least parts of books) included a couple of biographies on Mary Colter; a biography on Fred Harvey (more on him later); and a most interesting book on the Celts: The Discovery of Middle Earth: Mapping the Last World of the Celts, Graham Robb, c. 2013.

I also added two new bird sightings to my "bird journal," such as it is: the juniper titmouse (Grand Canyon) and a small bluish bird, possibly a blue grosbeak, but not sure, since it was the first time I had seen this particular bird. We saw it in the marshes along the creek in the Red Rock State Park, south of Sedona, Arizona. That state park's visitor center had a special exhibit on the riparian biome. The first time I ever heard of the riparian biome was when reading about the Bakken (one such link here). It was a new biome for both our older granddaughter and me. Fascinating.

Looking Forward, Looking Back -- August 4, 2014

From the archives. (Same story at this website.)

Don sent me a link earlier today regarding an early story of the Bakken, which then then led me to a very nice analysis of the Bakken which was published at The Oil Drum in 2008. It is a very, very good overview of the Bakken. The author also lays out a very, very nice analysis of the likely amount of oil that the Bakken might produce.

It's a long article, and I heartily recommend newbies read it to help them put the Bakken - 2008 in perspective to the Bakken - 2014.

So, how much did the writer think the Bakken was capable of producing. From the article:

Will Bakken ever produce as much as 4.1 billion barrels (= 3,649+500 million barrels), the amount suggested by the USGS estimate? It seems very unlikely. Production so far has been 111 million barrels. If the industry is able to discover several more prolific areas such as the Elm Coulee field in Montana (43 million barrels, or 38% of the Bakken oil recovered to date), it might be possible to increase this recovery to 500 million barrels, or 4.5 times the current production. Is total production of 500 million barrels likely? It's difficult to say. The USGS estimate is vastly higher than this, so much less likely.

If 500 million barrels turns out to be the ultimate recovery, the recovery factor would range from 0.13% to 0.25% of estimated oil in place. This very low percentage recovery of the estimated oil in place is not unreasonable if one considers that many of the more marginal areas of the field are likely to be deemed sub-economic and will never be drilled and produced. Technology improvements that will inevitably be made during an era of high energy prices will undoubtedly render some of this more marginal oil recoverable, but the total recovery is still likely to be low.

It appears the writer suggested, back in 2008:

• 0.13% to 0.25%: recovery rate of original oil in place;
• not much more than 500 million bbls over the lifetime of the Bakken; 
• marginal areas of the field will be deemed sub-economic; and,
• although there would be technological improvements, making more marginal oil recoverable, the total recovery is still likely to be low

Where are we today?

• 1 million bopd (about 300 million bbls/year, I suppose, starting this year); and this is just North Dakota; The Oil Drum author was talking about the entire Bakken;
• a recovery rate of somewhere between 3% and 8% is the general consensus, but some think the recovery rate is more than 8%;
• even the "marginal areas" (whatever that means) are being drilled aggressively; whether they will be found to be sub-economic will not be know for awhile, but oil companies certainly think drilling at the edges of the Bakken are worth the effort/financial risk; and,
• this is all primary production; secondary and tertiary production will increase ultimate recovery

North Dakota produced 313,801,706 bbls of oil in calendar year 2013, according to the NDIC.

Cumulative production by formation, according to the NDIC, to date:

• Bakken: 831,017,850 bbls (moving toward 1 billion bbls of oil from the Bakken)
• Bakken/Three Forks:  3,590,399 bbls
• Three Forks: 145,747 bbls
• Sanish: 22,539,246 bbls
• Pronghorn: not yet separated out

Total: 857,293,242 bbls from the Bakken Pool (moving toward 1 billion bbls of oil from the Bakken)

In comparison, the next most prolific formation:

• Madison: 939,049,431 bbls; in continuous production in North Dakota since the 1950s

The Oil Peak folded up its tent a year or so ago; the Bakken seems to be getting busier.

Oh, back to that question whether the Bakken would ever produce 4.1 billion bbls of oil?

4.1 billion / 300 million = 14 years.

Or 4.1 - 857,293,242 = 3,242,706,758
3,242,706,758 / 365 million = 9 years.

The contributor who wrote the linked article at The Oil Drum: Piccolo, a petroleum engineer working in the petroleum industry. I can see why he/she used an alias. LOL.

By the way, how much OOIP was "Piccolo" willing to concede that existed in the Bakken?

0.20% of what = 500 million bbls (from "Piccolo").
The "what" = 250 billion bbls,
The general consensus is that the recovery rate, at minimum, is 3%, and might be 8%.

3% of 250 billion bbls = 7.5 billion bbls to be recovered at 3%.

7.5 billion bbls / EURs of 603,000 bbls = 12,438 wells at 2,000 wells/year = 6 years of wells. About two years of wells are already drilled. Something tells me the 3% recovery rate OR the 250-billion-bbl OOIP estimate is far too low.

Check out the original Leigh Price paper.

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

Looking Forward, Looking Back, Slim Dusty

Five-Year-Production-By-Well; Rambling, Random Update Of The Very First 24 Wells That I Reported On, Coming Off The Confidential List -- July 29, 2014

The First 24 -- 1H2010

Since January 25, 2010, I have recorded every well that has been reported in North Dakota. The list starts here (1H10) (click on "the list starts here").

For the past couple of days, I've been updating the very first wells, the wells that were reported in 2010, which correctly or incorrectly I list as 1H10 (which is linked above).

It takes a lot of time to do this manually, but I do it because it gives me a "feel" for the Bakken. I haven't completely finished the list but I've done a lot of it, updating the total amount produced by each well as of 4/14 or 5/15, which at the time of updating was the most recent data available from the NDIC.

If one scrolls through the list, it is incredibly interesting all the things one can note. Randomly, in no particular order or importance attached to any of the data points. These are some things that jump out at me:

1. How incredibly young the Bakken boom is. These wells were all tested (which means they were spud not too much earlier -- 6 months or so) in 2009 or 2010.

2. How incredibly few permits, once issued, were cancelled.

3. How few -- as in almost "none" -- wells were DRY. As I said from the beginning: there are "no" dry Bakken wells.

4. The incredible difference in production among Bakken wells compared to Spearfish wells, compared to Madison wells, compared to wells from other formations.

5. They may not be dry, but are they economical. I've discussed that before also. Even low-producing wells serve a purpose, and in the "old" days any producer "held a lease by production." Not how few -- none -- of the wells are abandoned or plugged. They are all active. 

6. Many of the early wells were short laterals; now the standard is long laterals, twice as long. I don't necessarily buy into it, but some folks suggest that a horizontal well twice as long will produce twice as much oil as a horizontal half the length, all things being equal. Again, these are mostly short lateral wells. I think most of these wells, based on the operator (except for EOG) were long laterals.

7. These wells were drilled when time was of the essence, to save the leases before they expired.

8. The technology back in 2009 and 2010 was definitely much different than the technology in 2014. Regular readers know how much better the technology has become. In the beginning of the boom, we talked about one-stage fracks. Then 8 stages; then 12 stages; now up to 24, and 36, and 60 stages.

9. The decline rates are atrocious, but they are improving over time, as the technology gets better.

10. When these wells were being drilled, the companies were barely into delineating the Bakken. To some extent, these were all "wildcats," although not in the strict definition, but operators were still sorting things out.

11. I have data that goes all the way back to 2006 but that data is on Excel spreadsheets and not posted on the blog; maybe someday I will update data from the beginning of the boom, but manually it takes a long, long time.

12. I don't think it's a stretch to say that every one of these wells might have had three times the production by now had they all been long laterals (and maybe they all were long laterals; I haven't checked); and using all the new technology and better completion methods.

So, scroll through the wells at the link (1H10, above) to get a feeling of what went on back then and the total production to date.

Here are the very first wells I ever recorded at the blog as they were being reported. The names of the wells do not matter. The third column is the oil field; the fourth column is month/year when the well was tested; the fifth column was the month/year when I updated total production; the last column, in 1000's of bbls, is total production to date (fifth column).

These happen to be all Bakken wells. By this point in the Bakken boom, they were not drilling much else. But look at those cumulative production numbers (last column). 

18369	BEXP	Rosebud	1/10	5/14	187
18324	BEXP	Painted Woods	1/10	5/14	213
18232	Hunt	Ross	1/10	4/14	337
18014	Zavanna	Stony Creek	1/10	4/14	145
18082	WLL	Alger	7/9	4/14	110
17996	EOG	Burke	7/9	5/14	20
17972	EOG	Parshall	8/9	5/14	297
17933	EOG	Parshall	8/9	4/14	250
17828	EOG	Parshall	8/9	4/14	132
17727	EOG	Sanish	8/9	4/14	149
17984	OXY USA	Simon Butte	8/9	4/14	56
18188	Slawson	Van Hook	9/9	4/14	222
18153	MRO	Big Bend	9/9	4/14	290
18298	Whiting	Sanish	10/9	4/14	565
17080	Whiting	Sanish	10/9	4/14	369
18209	Murex	Sanish	11/9	4/14	443
18233	Whiting	Sanish	11/9	4/14	216
17881	Tracker	Little Knife	12/9	5/14	189
18214	EOG	Ross	12/9	4/14	175
18301	EOG	Parshall	12/9	4/14	108
18262	Hess	Manitou	12/9	4/14	213
18238	Murex	Sanish	12/9	5/14	377
18213	Whiting	Sanish	12/9	4/14	446

I consider, right or wrong, that the wells paid for themselves when they hit 100K bbls total production.

You know, seriously, take a look at those wells. They were not cherry-picked. They were the first 23 or 24 wells that were reported at that time (some were reported by the operator and are "out of order" -- in other words, the sequence will not agree with NDIC's database).

But there is nothing cherry-picked; just as I got them and recorded them.

Look at those total production numbers. Remember, the consensus is that Bakken wells will go on producing for 39 years. The oldest well in that list (07/2009) is less than five years old.

A long, long time ago I talked about initial production (the first year or so) and the EURs. I will talk about that in a later post.

But again, these are the very first wells I ever posted as they came off the confidential list back in 2010. Now that the Bakken boom is seven years old in North Dakota, we can start looking at total production and EURs.

Over time, I will continue to post updates, the next 24, the next 24 after that, etc.

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

The First 30 Permits -- 2006

Now compare the wells above with the first 30 permits in 2006. (Remember: the Bakken boom began in 2007 in North Dakota):

16054	XTO/Headington		St Demetrius	10/6	5/14	32
16055	XTO/Headington		Capa	9/6	5/14	246
16056	Whiting	PNC	Duperow
16057	Whiting		Red River	4/7	5/14	7
16058	CLR		Tyler	7/6	5/14	23
16059	Petro-Hunt		Charlson	10/6	5/14	1444
16060	Whiting	PNC	Red River
16061	Berenergy		Madison	3/6	5/14	69
16062	Sinclair	TA	Red River	2/7	5/14	0.9
16063	Whiting		Birdbear	5/6	5/14	117
16064	CLR		Red River	8/10	5/14	42
16065	Onxy Oil	Dry	Madison
16066	Ballantyne	Dry	Madison
16067	Petro Harvester		Madison	8/8	5/14	60
16068	Whiting		Sanish	5/6	5/14	169
16069	Zenergy	Dry	Madison
16070	Oasis		Madison	4/6	5/14	57
16071	Armstrong		Duperow	1/6	5/14	93
16072	CLR		Midale/Nesson	3/6	5/14	85
16073	Kaiser-Francis	PNC	Duperow
16074	Jed Oil	PNC	Juno
16075	XTO		Bullsnake	6/6	5/14	62
16076	XTO		Mondak	6/6	5/14	66
16077	Slawson	Loc	Madison
16078	Kaiser-Francis		Duperow	5/6	5/14	28
16079	Kaiser-Francis	PNC	Duperow
16080	Hess		Beaver Lodge	6/6	5/14	28
16081	Whiting	PNC	Sanish
16082	Petro Harvester		Madison	2/6	5/14	166
16083	Hess		Capa	2/7	5/14	198

Comments:

Of the 30 wells listed above, 20 were non-Bakken wells.

Note how many non-Bakken wells were dry. There are "no" dry wells in the Bakken.

Note how poor most of  the non-Bakken wells turned out to be.

Note the Charlson Bakken well that has produced almost 1.5 million bbls of oil to date. 

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

The First 30 Permits -- 2007

The North Dakota Bakken boom began in 2007. These are the first 30 permits (but again, not all drilled/completed in this order):

Whiting	TAO	Madison	6/7	5/14	0.1
Eagle		Madison	3/7	5/14	118
CLR		Red River	6/7	5/14	82
CLR		Chimney Butte	6/7	5/14	123
CLR		Corral Creek	4/7	5/14	277
Fidelity	IA	Pierre	8/7		0
Fidelity	NG	Pierre	8/7	5/14	0
Fidelity	NG	Pierre	8/7	5/14	0
Fidelity	NG	Pierre	8/7	5/14	0
Fidelity	NG	Pierre	8/7	5/14	0
CLR		Red River	4/7	5/14	84
CLR		Red River	6/1	5/14	118
Whiting	Dry	Red River
Panamerican		Madison	4/7	5/14	28
PDC	EXP	Madison
OXY/Ansbro		Willmen	5/7	5/14	48
OXY/Ansbro		Madison	6/7	5/14	38
Hess		Red River	10/7	5/14	2
Whiting	PNC	Madison
Upton	PNC	Tyler
Upton	TA	Tyler			0.3
CLR		Red River	7/7	5/14	185
CLR		Red River	7/7	5/14	222
CLR	IA	Red River	8/7	5/14	386
Zenergy	PNC	Madison
BR		Blue Buttes	6/7	5/14	180
EOG		Parshall	7/7	5/14	445
CLR		Red River	6/7	5/14	318
EOG		Parshall	5/8	5/14	366
Nance	Dry	Madison

Comments:

1. 24 of the 30 were non-Bakken wells.
2. The Red River has some incredibly good wells, and they are much less expensive to drill.
3. EOG is starting to hit on some huge Bakken wells.

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

The First 30 Permits -- 2008

 

17000	CLR		Red River	12/9	5/14	254
17001	CLR		Red River	11/8	5/14	85
17002	CLR		Red River	12/8	5/14	34
17003	Kodiak		Twin Buttes	12/9	5/14	20
17004	CLR		Red River	6/8	5/14	94
17005	EOG		Parshall	7/8	5/14	369
17006	Samson	PNC	Baukol N
17007	Hess		Ross	5/8	5/14	130
17008	Marathon		Sanish	8/8	5/14	40
17009	Peak		McGregory Buttes	6/8	5/14	163
17010	Hess		Ross	5/8	5/14	132
17011	EOG		Parshall	8/8	5/14	415
17012	Hunt		Parshall	6/8	5/14	286
17013	Prima	IA	Midale/Nesson	7/8		47
17014	Hess	TA/ND	Wildcat
17015	XTO	IA	Manitou	7/8
17016	Armstrong	Dry	Madison
17017	XTO		Manitou	5/8	5/14	25
17018	Brigham		Alger	6/8	5/14	92
17019	EOG		Parshall	6/9	5/14	410
17020	Hess		Hawkeye	5/8	5/14	315
17021	Tracker		Murphy Creek	6/8	5/14	128
17022	Murex		Sanish	5/8	5/14	247
17023	Whiting		Sanish	5/8	5/14	683
17024	Peak		Mandaree	5/8	5/14	155
17025	PDC	PNC	Madison
17026	EOG		Parshall	10/9	5/14	50
17027	EOG	PNC	Wildcat
17028	EOG		Parshall	10/8	5/14	499

Comments:
1. We are now well into the Bakken boom which is just beginning.
2. Even so, 7 of 30 wells were non-Bakken wells.
3. Several of the Bakken wells have done very, very well (286K, 315K, 410K, 415K, 683K).
4. These wells are about 6 years old (as of 7/14).
5. Note again: almost every early Bakken well is still active; if nothing else, even these poorly performing wells hold the lease by production. I am told the rule of thumb in the Bakken is about $20,000/acre lease. If the company holds the lease, they are saving a ton of money.

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

The First 30 Permits -- 2009

17946	Newfield		Fertile Valley	9/9	5/14	34
17947	Timberline	Dry	Madison
17948	Encore	PNC	Birdbear
17949	EOG		Stanley	7/9	5/14	51
17950	EOG		Alger	7/9	5/14	111
17951	EOG		Parshall	6/10	5/14	50
17952	SM Energy		Siverston	6/9	5/14	149
17953	XTO/Encore		Killdeer	4/10	5/14	265
17954	Hess		Manitou	7/9	5/14	84
17955	CLR	PNC	Wildcat
17956	Hess		Big Butte	8/9	5/14	169
17957	PDC	EXP	Madison
17958	PDC	EXP	Wildcat
17959	PDC		Lostwood	7/10	5/14	26
17960	Williston Hunter/Eagle	WI	Madison
17961	OXY/Anschutz		Simon Butte	2/10	5/14	100
17962	Hess		Ross	6/9	5/14	126
17963	Hess		Manitou	5/9	5/14	102
17964	Whiting		Sanish	6/9	5/14	124
17965	CLR		Mary	6/10	5/14	92
17966	Marathon		Reunion Bay	6/9	5/14	121
17967	Marathon	Dry	Murphy Creek
17968	Zenergy	PNC	Elidah
17969	Baytex (formerly Samson)	PNC	Ambrose
17970	BR	TF	Keene	4/9	5/14	146
17971	Marathon		Murphy Creek	9/9	5/14	118
17972	EOG		Parshall	8/9	5/14	297
17973	BR	IA	Camel Butte	11/9	5/14	160
17974	BR	TF	Keene	6/9	5/14	393
17975	Zenergy		Eagle Nest	7/9	5/14	77

Comments:
1. Although they have been drilling the Bakken for about two years, there is no dramatic change yet.
2. Even so, 4 of 30 wells were non-Bakken wells.
3. Only a couple of the wells are interesting; it shows the tenacity of the operators to keep spending huge amounts of money to figure out the Bakken.
4. These wells are still about 6 years old (as of 7/14).
5. We now see an occasional Three Forks well; surprisingly there was a dry Bakken well.
6. Note again: almost every early Bakken well is still active; if nothing else, even these poorly performing wells hold the lease by production. I am told the rule of thumb in the Bakken is about $20,000/acre lease. If the company holds the lease, they are saving a ton of money.

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

The First 30 Permits -- 2010

18571	EOG		Clear Water	8/10	4/15	82
18572	Tracker	PNC	Little Knife
18573	XTO		Midway	7/10	4/15	115
18574	Slawson		Big Bend	12/10	4/15	172
18575	Slawson		Big Bend	6/11	4/15	298
18576	BR/Tracker		Little Knife	2/11	4/15	139
18577	Hunt		Ross	8/10	4/15	253
18578	Eagle		Madison	7/10	4/15	32
18579	SM Energy		Bear Den	12/10	4/15	363
18580	SM Energy		Dimmick	5/10	4/15	89
18581	Newfield		East Fork	4/11	4/15	75
18582	BR	Conf	Corral Creek
18583	XTO	EXP	Corral Creek
18584	CLR		Wildcat	7/10	4/15	90
18585	EOG		Ross	10/10	4/15	69
18586	CLR		Dolphin	7/10	4/15	134
18587	BEXP		Briar Creek	7/10	4/15	169
18588	Marathon		Bailey	6/10	5/14	111
18589	Slawson		Big Bend	5/10	5/14	407
18590	Slawson	IA	Big Bend	8/10	5/14	236
18591	Marathon		Murphy Creek	7/10	5/14	105
18592	EOG	PNC	Clear Water
18593	Oasis		Cottonwood	6/12	5/14	119
18594	EOG		Squaw Creek	9/10	5/14	128
18595	Slawson		Van Hook	7/10	5/14	318
18596	EOG	PNC	Clear Water
18597	EOG	PNC	Clear Water
18598	CLR		Hamlet	4/10	5/14	97
18599	Anschutz		Crooked Creek	1/11	5/14	105
18600	Cirque	EXP	Dimond

Comments:
1. Although they have been drilling the Bakken for about three years, there is no dramatic change yet.
2. However, now operators are drilling the Bakken almost exclusively; only one of the first 30 permits in 2010 was for a non-Bakken well.
3. Like 2009, only a couple of the wells are interesting, and then just barely; it shows the tenacity of the operators to keep spending huge amounts of money to figure out the Bakken.
4. These wells are still about 5 years old (as of 7/14).
5. The operators must be watching their permitted locations more closely; several Bakken permits were canceled.
6. Note again: every drilled Bakken well is still active. If nothing else, these performing wells hold the lease by production. I am told the rule of thumb in the Bakken is about $20,000/acre lease. If the company holds the lease, they are saving a ton of money.

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

The First 30 Permits -- 2011

20247	Newfield	PNC	Fertile Valley
20248	Murex		West Bank	10/11	5/14	87
20249	Murex	Madison	Madison	8/11	5/14	7
20250	XTO		West Capa	3/13	5/14	127
20251	CLR/Samson Resources		Kinberly	12/11	5/14	67
20252	HRC/Petro-Hunt		Eagle Nest	6/12	5/14	80
20253	Petro-Hunt		Eagle Nest	6/12	5/14	243
20254	EOG		Parshall	12/11	5/14	215
20255	EOG		Parshall	4/12	5/14	221
20256	CLR		Little Knife	7/11	5/14	135
20257	KOG		Mandaree	4/14	5/14	35
20258	KOG		Mandaree	4/14	5/14	39
20259	KOG		Mandaree	4/14	5/14	16
20260	EOG		Ross	1/12	5/14	295
20261	CLR		Little Knife	8/11	5/14	60
20262	Hunt		Parshall	7/11	5/14	131
20263	Newfield		Fertile Valley	9/11	5/14	68
20264	Newfield	PNC	Bar Butte
20265	CLR		Jim Creek	9/11	5/14	78
20266	SM		Banks	3/12	5/14	82
20267	Slawson		Van Hook	9/11	5/14	279
20268	Prima		Rennie Lake	11/11	5/14	44
20269	Petro-Hunt		Four Bears	6/11	5/14	241
20270	Petro-Hunt		Pronghorn	8/11	5/14	118
20271	QEP		DWCB	12/11	5/14	130
20272	Hess/Tracker		Truax	10/11	5/14	166
20273	XTO		Heart Butte	9/12	5/14	153
20274	MRO		DWCB	11/11	5/14	191
20275	Oasis		Wildcat	7/11	5/14	186
20276	Enduro/Sequel		Flat Top Butte	4/12	5/14	29

Comments:
1. Although they have been drilling the Bakken for about four years now, maybe, just maybe we are starting to see a trend: consistently good wells, in the 150K - 200K range after three to four years of production. .
2. Operators are drilling the Bakken almost exclusively; one one of the first 30 permits in 2011 was for a non-Bakken well.
3. Be very careful in looking at the total production; this is the first year in which there is a wide disparity when the wells were completed/tested. Two of the wells were completed just a month ago (4/14).
5. DWCB: Deep Water Creek Bay.
6. Note again: every drilled Bakken well is still active. If nothing else, these performing wells hold the lease by production. I am told the rule of thumb in the Bakken is about $20,000/acre lease. If the company holds the lease, they are saving a ton of money.

Wells with permits issued in 2012 are too new to be added to this group yet.