US Will Help Brazil Develop Their Oil Assets For Future US Imports

See link.

Now, with a seven-year offshore drilling ban in effect off of both coasts, on Alaska's continental shelf and in much of the Gulf of Mexico — and a de facto moratorium covering the rest — Obama tells the Brazilians:

"We want to help you with the technology and support to develop these oil reserves safely. And when you're ready to start selling, we want to be one of your best customers."

Obama wants to develop Brazilian offshore oil to help the Brazilian economy create jobs for Brazilian workers while Americans are left unemployed in the face of skyrocketing energy prices by an administration that despises fossil fuels as a threat to the environment and wants to increase our dependency on foreign oil.

I cannot make this stuff up. 

EOG Featured on CNBC's "Mad Money" With Jim Cramer -- March 21, 2011

This is at least the fourth segment on the Bakken that Jim Cramer has featured on his show in the last 30 days.

It is almost as if he has just discovered the Bakken.

For Investors Only: NOG -- Questions Regarding Valuation -- Bakken, North Dakota, USA

Updates

May 13, 2011: On wives, friends, and beauticians.

March 29, 2011: NOG bounces back. 

March 28, 2011: NOG provides operational update. Responds to recent "bear raid."

March 28, 2011: SeekingAlpha.com replies. All smoke, no gun.

March 24, 2011: NOG has leveled off; now going back up.

March 24, 2011: Bakken Shale Discussion Group weighs in. 

March 24, 2011: My hunch -- a lot of folks are waiting for NOG to level off and then they will buy back in. Traders only make money with volatility. This will be very interesting to follow.

March 24, 2011: The Wall Street Journal weighs in.  Be sure to read the comments.

March 23, 2011: Motley Fool says "no" to NOG.

March 23, 2011: It appears the article has its intended effects. It will be interesting to see how this all plays out. I would think that if the stock is oversold, the company would go back in and aggressively buy back stock, or there would be increased insider buying. If not, one has to wonder how relevant the research is. Regardless, it was good to see this happen: it keeps folks like me who are inappropriately exuberant about the Bakken grounded, cautious, and diversified. The next three quarters will be the most important quarters in NOG's relatively young history as a billion-dollar market cap company. My enthusiasm for NOG's unique business model has not waned one iota. 

March 22, 2011, 2200 hrs: here's another blog that has piggy-backed unto the original Street Sweeper blog questioning the valuation of NOG, and shorting the stock. The blog appears to be coming out of Australia, and it sounds like in addition to questioning NOG, he questions the entire Bakken. Again, I am glad the article on NOG came out: it keeps me grounded, cautious, and diversified. Also, if NOG pulls back significantly, it provides another opportunity to accumulate more shares.

ORIGINAL POST

Someone alerted me to this 2-part story regarding the valuation of NOG:

http://thestreetsweeper.org/undersurveillance.html?i=1665
http://thestreetsweeper.org/undersurveillance.html?i=1671

The story was picked up by a contributor to SeekingAlpha.com and can be found here:

http://seekingalpha.com/article/259340-will-growth-spurt-last-for-northern-oil-and-gas?source=yahoo

I have always been a fan of NOG's business model. It will be interesting to see how this plays out.

The contention is that NOG is not accounting for the huge decline rates in Bakken wells. The articles do not discuss the effect $100 oil has on the company, or the valuation. I would suspect many of these companies are being valuated on $60 or $75 oil at a time when more and more pundits see $100 oil for the foreseeable future.

Update: for traders, this may be an opportunity to sell and buy back in when NOG settles at its new "floor."

For long term investors, this could be typical volatility that will work itself out over time.

Update on the Scanlan 3-5H, #18770, Truax Field

Someone asked about the "Scanlan 3-5H."

Assuming we are talking about:

• 18770, 819, North Plains Energy, LLC, Scanlan 3-5H, Truax field, Middle Bakken; 21 stages; 2.1 million lbs

Here is the most recent NDIC data:

• This well was spudded on 6/4/10.
• The IP was tested on 9/8/10.  (Again, three months from spud date suggests a short, but not excessively long delay in fracking,)
• The IP was 819.

Production data:

• In September, 2010, for 23 days it produced 19,039 bbls;  published "runs": 18,400 and no natural gas produced or sold or flared
• In October, 2010, 27 days, it produced 11,789 bbls; published "runs" of 11,770 bbls; 102,000 cubic feet of natural gas produced; 77,000 cf flared; none sold
• In November, 2010: 18 days; 6,319 bbls produced; published "runs" of 6,252 bbls; 2 million cubic feet of natural gas produced; most of it flared
• In December, 2010: 31 days; 10,860 bbls produced; published "runs" of 10,483 bbls; 17 million cubic feet of natural gas, and all of it flared, not of it sold
• In January, 2011: 31 days; 9,474 bbls produced; published "runs" of 9,493 bbls; 21 million cubic feet of natural gas produced and all of it flared.

The well has produced a cumulative of 57,481 barrels (if I did not make any typos, adding up monthly production should total cumulative production), in less than five full months. Someone elsewhere has said he/she uses 100,000 barrels as the breakpoint for paying for the well (at the wellhead). For me, this would be a very, very good well. Maybe not great compared to some in the Bakken, but if this wells pays for itself in 18 months, and then runs for 25 - 30 years, that's not bad.

It is my understanding that "runs" is the amount of oil "run" into the pipeline to be sold.

As a rule of thumb, one can divide cubic feet of natural gas by 6,000 to get rough estimate of "oil equivalent."  Thus, 21 million cubic feet of natural gas equates to 3,500 barrels of oil equivalent.  I could be wrong on this last point and if I am wrong, I am sure that someone will write in to tell me I'm wrong. This sounds like a lot of boe but Lynn Helms says natural gas is not economical for North Dakota Bakken wells.

I also could have made typographical errors on this but I will correct them if I find them or someone points them out to me.

This well is still flowing on its own; no pump (or assisted lift) yet, although that will eventually happen (based on experience in the Bakken). Its total depth was 18,955 feet which means it was a long lateral, and its spacing is two sections (1280 acres).

Price of Oil Increased Today -- What's Driving the Price?

Commentary only; not about the Bakken.

What's driving the price of oil? This is a multiple choice question; there are no wrong answers. 

• Libya: 500,000 bbls/day lost to the European market (the actual number has fluctuated from 400K to 1.5 million based on agenda of the journalist reporting)
• Bahrain: unrest spreading and closing in on Saudi Arabia
• Japan: acknowledging that it needs to increase refining capacity
• China: suspending plans for 28 nuclear reactors (40 percent of the world's nuclear capacity); China had planned on building 110 reactors

One can make an argument for any one of the four, along with the US gradually ending its own domestic drilling program:

• Offshore Alaska -- decreasing production and new fields out of the question
• Onshore federal lands: bureaucratic delays in issuing permits
• Onshore non-federal lands: lawsuits to prevent development
• Gulf of Mexico: permitorium continues
• Converting 40% of corn (food) to ethanol

My hunch: unrest in the Mideast spooked the market but once that settled down, the fact that Japan is now acknowledging that it will need to increase the use of oil, natural gas, or coal; and China will need to do the same if they don't bring their nuclear reactors on line have both replaced the Mideast issue. (I am in the minority on this; pundits say it is the "western bombing on Libya." Remember, the max amount of oil taken off the market due to this is 1.5 million barrels/daily and that all went to Europe; and some feel it is closer to less than a million barrels/day.  North Dakota, alone, is producing 350,000 bbls per day.)

But short term, the story that the Japanese government is asking its refiners to increase production speaks volumes:

Japan’s government is pursuing a number of emergency measures to deal with fuel shortages that include shipping 38,000 kl (about 10,000 gallons) of oil products by sea from refineries in Hokkaido and western Japan to the Tohoku region, hard-hit by the recent earthquake and tsunami.

Minister of Economy, Trade, and Industry Banri Kaieda called on the Petroleum Association of Japan (PAJ) to implement the emergency steps after earlier urging oil distributors to release 1.26 million kl for supply to the market.

Kaieda also called for the operating rates of refineries in western Japan, which stand at around 80%, to be raised to at least 95%. 

Increasing refinery operating rates from 80 percent to full capacity is remarkable. 

Nordic American Tanker sent a letter to its shareholders with the following paragraph (this link is dynamic and may break):

(On Japan) As far as the impact on our industry goes, it is too early to tell, but if nuclear power becomes less attractive, then it is reasonable to assume that the demand for other energy sources such as oil will increase..."

Meanwhile, from Washington, I get a sense of "business as usual":

• A trip to Brazil (I still don't know why) [Update: here's the reason]
• Weekend radio addresses on education reform
• Supreme Court agrees that list of banks receiving bailout dollars must be released

It's very possible it is "business as usual," and maybe by the end of the month, things will be back to normal. But as I list the issues above (at the top of the page), one certainly gets a feeling of things running faster than normal (I didn't even mention the undeclared war on Libya -- 124 Tomahawks and counting; $100 million in missiles alone, so far).

I hope the price of oil doesn't get to $110. It will be blamed on speculators.