Another Revenue Stream for Mineral Rights Owners

Back on September 28, 2011, I posted a story about a new liquid natural gas pipeline stretching between Tioga and Sherwood, North Dakota. At that time, my emphasis was on the need for additional housing for workers needed for all these projects in the Bakken. I wasn't even thinking about an additional revenue stream for mineral rights owners because I was not aware how "valuable" liquid natural gas was compared to dry natural gas.

Coincidentally, we now have a much better explanation of what this pipeline is all about.

RBN Energy has posted this story for Friday, April 27, 2012.

First, the key point from my September posting:

77-mile natural gas pipeline to be buried between Tioga and the Alliance mainline at Sherwood, North Dakota, on the Canadian border. Aux Sable Liquids Products has a natural gas liquids processing plant in the Sherwood area.

Now, from the RBN Energy article:

But there is another way of getting NGLs out of the Bakken.  It is an alternative with significant advantages, but does not seem to get the airplay of some of the other projects.  And that’s because it doesn’t fit neatly into one of the traditional hydrocarbons asset buckets.  It is not an NGL pipeline, but it moves 80,000 barrels of NGLs each day.  It takes wet gas with only superficial processing, but processing is an integral part of the integrated system.   It has one operational lateral already moving product out of Mountrail and Ward Counties, and has another lateral going into the Tioga plant next year.  Of course, this is the Alliance Pipeline - Aux Sable system.

In June 2011, Alliance Pipeline announced plans to build an 80 mile lateral pipeline and associated facilities connecting Hess’s Tioga, ND gas processing facility to the Alliance Pipeline near Sherwood, ND.  The line will have a capacity of 106 mcf/d and is expected to be in service by July 2013.

Dry natural gas: < $2.00/MMbtu.
Liquid natural gas: >$13/MMbtu.
I do not even recall this in the monthly Director's Cut.

For Investors Only: Another Look At CRR

In light of my earlier posts on Liberty Resources, one might be interested in re-visiting CARBO Ceramics (CRR).

Earnings report.

Transcript.

5-year chart.

52-week range: $85 - $185. Today's close: $87, down $2.00.

Another superficial Motley Fool article, but a viewpoint.

Human Interest Article From the WSJ -- Williston, North Dakota

Earlier today I posted a very small opinion piece from the Wall Street Journal. In that opinion piece, the editor notes that the Williston Chamber of Commerce is no longer answering its phone.

It turns out that a WSJ staff writer had written earlier that the Williston Chamber of Commerce was no longer taking phone calls. Here's the story. A subscription may be required to access the article but generally googling the headline will get you the article: "Oil Fuels Population Boom in North Dakota City."

There is nothing in the article that regular readers don't already know but it's fun to read the names of local people who were interviewed for the article, names Williston readers will recognize: Chuck Neff, Tim Conlin.

Highlights From the Newfield Earnings Transcript

Link here.

Regarding the Bakken:

In the Bakken play, our operations are gaining steam after our brief slowdown in late 2011. This slowdown allowed us to reduce the backlog of uncompleted wells and improve our execution in the field. From the beginning of the year, we have completed 8 new wells. The average initial production rate from these wells was more than 2,600 barrels of oil equivalent per day. With the exception of one well, these were all super extended lateral wells. The one 5,000 foot lateral was actually one of the higher IP rates at nearly 3,000 barrels of oil equivalent per day. We expect that our Bakken production will grow about 35% over our 2011 levels.

Our drilling team is transitioning our operations to pad-based drilling in 2012. About 2/3 of our planned wells in the Bakken will be from multi-well pads. Our most recent laterals, 11,000 feet in total length with up to 40 frac stages, have been drilled in as few as 24 days. This compares to an average of 35 days in 2011 and more than 40 days in 2010. We've also reduced the number of days between rig release and first production, from 62 days in 2011 to about 40 to 45 days year-to-date.

The very first question: how much is a Bakken well costing Newfield? So in general, I'd say we're sitting at about 640 acres, somewhere around $6.9 million or so completed on a 12 80; 10,000-, 11,000 foot lateral, somewhere around $11 million or so.

Data Points Regarding Liberty Resources: Linked Article Is A Must-Read

Liberty Resources: fracking expertise

I post a lot of stories every day, and don't always get a chance to read everything I link. I finally got back to this story. If you have time to read only one story today, this is the story (at the link below) that I would read. My notes are from the first part of the linked article; much more at the link.

I'll know you've read the linked article if you can tell me what the breakeven price for a Bakken well is ($/bbl). I think newbies will be surprised.

The "nut" of the problem/solution:

While we have great confidence in our ability to design fracture treatments for the Bakken, execution represents a potential problem. The rapid growth in demand for hydraulic fracturing services has led to three things: 1) constricted availability of supply to get wells fractured; 2) high prices for fracturing services; and 3) relatively low service quality. Based on our background in oilfield service and supply, we decided to form a company that could supply these services in a timely fashion with high quality and reliability. In March of this year, we formed Liberty Oilfield Services, which recently began fracturing operations in Williston. Liberty Oilfield Services will be the fracturing entity for the majority of our development. We have had great early success in building the team for this company, starting with hiring two individuals we knew well as our service leadership: our business manager for Liberty Oilfield Services has a PhD in hydraulic fracturing, and our operations manager has a distinguished career in operational excellence. 

Link to article.

I blogged about this the other day. I said I would get back to the article if I had time. Here are some data points from the first part of the article. Go to the link for a whole more.

• Chris Wright wanted to start a new company: felt he could assemble a team with expertise in fracking
• CEO feels that fracking will be the discriminator in the Bakken (cost and effectiveness)
• Mark Pearson: former president and CEO of CARBO Ceramics, the world's largest manufacturer of proppants
• Paul Vitek: was CFO for CARBO Ceramics for more than 20 years
• Liberty Resources is a portfolio company of Riverstone Holdings: had the resources necessary for the Bakken -- moving too rapidly to rely only on funding from individual investors
• first land acquisitions with Zavanna, LLC
• improved Zavanna's well performance by a factor of 2 or 3 times
• Liberty Resources now has nearly 44,000 net acres in the central basin of the Bakken -- all of this since founding the company in September, 2011
• who is the operator of these wells? 2 Liberty Resources wells; 2 Zavanna wells; controls drilling and fracturing of all four wells; 20% of our development is non-operated