What MDW WIll Be Talking About Monday Even If Others Aren't

***********************  Amazing
Talk about a slew of wells coming off the confidential list Monday; expect fully a third to be on DRL status:

• 21363, 155, Samson Resources, Biscayne 0310-04TFH, Ambrose, t7/12; cum 2K 7/12; 
• 21862, 389, CLR, Lindseth 1-32AH, Hanson, t6/12; cum 12K 7/12; 
• 22365, drl, Chimney Sweep, Hondl 21-1, Wildcat, Stark County,
• 22377, 1,482, SM Energy, Anderson 5-14H, Croff, t7/12; cum 22K 7/12; 
• 
  
• 20156, 686, EOG, Hardscrabble 8-0409H, Painted Woods, t412; cum 43K 7/12
• 20583, 128, EOG, Clearwater 27-3102H, Ross, t4/12; cum 61K 7/12; 
• 20831, 530, Whiting, Kubas 34-7PH/Kubas 34-7TFH, North Creek, t3/12; cum 16K 7/12; 
• 21769, drl, BEXP, Domaskin 30-31 3H, Alger,
• 21849, 28, Baytex, Thompson 2-11-161-99H 1BP, Garnet, t3/12; cum 13K 7/12; 
• 22015, 382, EOG, Sidonia 49-3019H, Clear Water, t4/12; cum 37K 7/12; 
• 22115, 1,505, Denbury, Lundin 41-14SWH, Siverston, t712; cum 24K 7/12; 
• 22125, 484, Whiting, Arndt 14-5TFX, Sanish, t3/12; cum 23K 7/12; 
• 22146, 669, Hess, BW-Stoveland 149-100-1003H-1, Ellsworth, t7/12; cum 15K 7/12; 
• 18968, drl, Petro-Hunt, Fort Berthold 148-95-22D-15-1H, Eagle Nest,
• 
  
• 21966, drl, CLR, Fairbanks 1-20H, Oliver, cum 14K 7/12; no IP yet;
• 22240, drl, Enerplus, Net 149-92-30B-31H, Heart Butte, cum 6K 7/12; no IP yet;
• 22541, 951, BEXP, Cora 20-17 2TFH, Poe, t7/12; cum 11K 7/12; 
• 21081, 2,053, KOG, P Peterson 155-99-2-15-22-15H3, Epping,

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

Cheering

For geeks, the new iPhone processor will be talked about Monday:

• Apple's new iPhone has 1 gigabyte of RAM
• The new A6 processor in the new iPhone: Apple design; prioritizes performance, power efficiency
• New A6 performance well ahead of previous iPhones; well ahead of Android's performance
• AAPL now equal to entire 1977 S&P market cap -- Barron's

Eric Fox's headline: major announcement at the Barclays CEO energy conference; not sure what major announcement he was talking about; it appears to be a summary of "all the above" at the conference with focus on KOG. Whatever. 

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

Whining

Replacement referees in the NFL? Aren't both sides equally affected?

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

Spoiled

Chicago teachers won't vote until Tuesday; too difficult to come in Sunday night and vote on new contract.

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

Blustering

Saudi Arabia says oil prices to high; will intervene to bring prices down. Iran says prices too low; didn't say what it would do to raise prices -- perhaps hold back on production/export -- oh, that's right. They already are -- through sanctions. Sort of.

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

Profit-Taking

Stock market futures down Sunday evening; oil futures up slightly. Considering the credit rating for the US has been lowered (again), it is surprising futures are not even worse. Just saying.

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

Ignoring Reality

Tight shale forecasts -- just a bit too ambitious? -- The Oil Drum

Wood Mackenzie is forecasting that tight oil production will rise from 1.5 mbd this year to 4.1 mbd in 2020, with the Bakken producing 1.3 mbd, the Eagle Ford 1.3 mbd, the Permian plays (Bone Spring, Avalon, Wolfcamp and Cline) will produce 440 kbd, and the Niobrara should be good for 90 kbd. With the decline in production from the impact of Isaac in the Gulf not yet over, it is not yet clear whether the plateau in US production that was starting to form will continue, or whether the gains in production that these projections require will continue.

Except for the part about "Isaac" everything else is "good." "Isaac" was hardly a speed bump; not sure why it was even referenced.

Whether or not the Bakken hits 1.3 million bold by 2015, the projection that the Niobrara will be good for all of 90,000 bopd is underwhelming, to say the least, and explains why no one is really all that excited about it. On the other hand what about Utica and the Mississippi Lime?

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

Lovin' It

Thousands of McDonald's restaurants are promoting the chain's coffee by giving away 12 ounce cups of the java every day from Sept. 23 to Sept. 29. No purchase is required to get the free coffee in the restaurants or drive throughs. The promotion is taking place along the East Coast of the United States and is being served in "Newman's Own" coffee cups. I assume the coffee is also "Newman's Own."

Speaking of which, I found one of the best McDonald's restaurants just a short bike ride from where I am staying. It's really quite incredible. And, it has no "McDonald's play places" -- catering to a different sort of consumer, I guess. Lovin' it. Michelle needs to visit. Apple slices have 15 calories.

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

Upsetting

Arizona at New England. USC at Stanford.

Economic Development in the Oil Patch -- Retail Moving Out of Town; On The Highways

Link here to the Bismarck Tribune.

A Minnesota-based investment company will spend $100 million to pull people into city-like shopping plazas and away from their traditional downtowns in some towns in the oil patch. Oppidan Investment Co. is just days from turning a shovel on an upscale shopping venue in Watford City and will wait for spring to begin work on retail projects in Stanley and Tioga.  

The company is centering the retail development around Coborn's Co. Cash Wise Foods grocery stores that are three to five times the size of grocery stores in those towns now. They'll be paired with liquor stores and retailers — McDonalds, gas stores, Alco, and hair salons, depending on the location.

Search "Oppidan" at MDW for more on this company in the oil patch.

Truck Driver Shortage Persists in North Dakota

Link here to a Bismarck Tribune story.

These two stories on the same day in the same paper speaks volumes about my feeling that companies "laying down rigs" to cut costs is a red herring of a story in the oil patch.

The two stories: the first one I just posted moments ago, about MRO stating they are laying down rigs to save costs. The second one, the one linked above: a shortage of truck drivers in the Bakken.

Trucking companies are facing a labor shortage exacerbated by the needs of the oil field, but its growing population has also made North Dakota a more attractive state for truckers.  

“The driver shortage is probably one of our biggest concerns,” said Tom Balzer, executive vice president of the North Dakota Motor Carriers Association. 

Randy Roberts, terminal manager for Midwest Motor Express in Bismarck, said companies are stealing drivers from one another and many drivers are more likely to travel an hour to the oil field to make $25 an hour.

If you still doubt that laying down rigs to cut costs is not a red herring of a story, go back and consider the QEP - Helis deal in which QEP paid somewhere between $20,000 and $40,000/acre depending on how one pencils out the numbers. And the shortage of truck drivers in the oil patch.

Laying Down Rigs to Cut Costs -- MRO

Updates

September 18, 2012: Give me a break on all this chatter about rig counts falling. After hitting a post-boom low of 189 or 188 (I forget which), it held steady at 192 for quite some time. Today, it is up to 196. If companies are laying down rigs, they are laying down older, less efficient rigs. Where it used to take them up to 60 days to drill to total depth (back when the boom began), they are now drilling to total depth in 15 days and taking hours to move to the next well instead of days, due to pad drilling.

CRC has it right: folks talking about the declining rig count are looking for signs that the boom is over. Despite data to the contrary.

Original Post

Link here to the Bismarck Tribune.

Laying down rigs will cut costs, but laying down rigs to cut costs is a red herring of a story in the Bakken. Regular readers know my position on this and why I saw that.

I've blogged about it several times. If I have time, maybe I will go back and tag those earlier blogs so it's easier for newbies to read why I think this.

Idle Ramblings On A Saturday Night and Into Sunday Morning

Another catalyst for the Bakken -- Motley Fool: infrastructure

The main driver to the increased Williston oil price has been the development of three types of infrastructure in the Williston region. First off, more rail lines and hubs have become active this summer, vastly increasing the number of barrels that can be hauled out of the region to refiners. Secondly, Tesoro, added 10,000 barrels of capacity at its Mandan facility. Finally, some small connector pipelines have come on line as well.

I suppose one could argue that it's a stretch to include the additional 10,000 bbls of capacity at a Mandan refinery as a significant contributor when production is over 670,000 bopd. The small connector pipelines may be a bigger contributor in helping oil move along.

Three types of infrastructure: pipelines, refineries (local and distant), and rail.

I think they can add a fourth: fertilizer factory (at Jamestown). Similar to the additional capacity at the refinery, I suppose.

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

EnerVest and The Season of Deals (?)

First, this story: Chesapeake sells some Permian acreage to Shell, Chevron, and EnerVest. Until that story, I had not heard of EnerVest, and now I see EnerVest is in the news again.

EnerVest Ltd., the biggest energy producer in Ohio, is selling a big chunk of its oil and gas holdings in the state's Utica Shale, a prize its executives predict will fetch more than $6 billion. 

Privately held EnerVest, with its publicly traded arm EV Energy Partners LP, plans to shed 539,000 acres above the Utica, a dense layer of rock that many believe holds great petroleum wealth. The firm is pursuing a sale by the end of the year that would be the largest in the company's 20-year history and mean a big payday for its institutional investors. 

EnerVest wound up with this would-be bounty almost by happenstance. The Houston-based company had been acquiring drilling rights to the Utica in Ohio since 2003 but had no intention of tapping it or any notion of its potential. Instead, it was targeting deposits at different depths than the Utica that were known to contain oil and gas, pursuing its usual strategy of buying drilling rights to traditional energy fields and coaxing greater output from them.

"EnerVest wound up with this would-be bounty almost by happenstance."

"We're not very smart," said John Walker, EnerVest's founder and chief executive, acknowledging that he hadn't foreseen the Utica's promise. "But good things happen when you have a lot of acreage."

Maybe I'm just showing my usual irrational exuberance about the Bakken, but it seems we are seeing a season of deal-making.  And it looks like folks are going to where the oil is (as opposed to natural gas) and where the business climate is favorable (as in Texas and North Dakota). So, we'll see.

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

Wide Moats

DNR

This appears to be a throw-away article by Motley Fool -- mentioning "wide moats" almost in passing, and then moving into marketing/imitation. The "wide moat" references DNR which caught my attention. With the recent chatter regarding XOM and DNR, there's a third observation that could be added, certainly when it comes to the oil and gas industry: the number and kinds of tools in one's toolkits. 

If it is becoming more and more difficult to find large new fields, returning to old fields with enhanced oil recovery expertise is another option. 

********************
How Big IS The Bakken

It can be interesting to go back and read some "old" SeekingAlpha.com articles on the Bakken. I recently posted this subject: "How Big IS the Bakken?" I see SeekingAlpha.com had the same question back in May, 2012.

As is true for many articles, the comments are often the best, and, in this case, even better, given 20-20 hindsight. As an example, someone noted that earnings estimates for one company were decreasing, probably because of a) increasing CAPEX; and, b) decreasing price of oil.

But my favorite comment came from "oilwizard":

Big oil fields get bigger...just the way it is. And after working the Bakken for over 20yrs (yep, drilled the first horizontal test in 1989); it [the Bakken] is a marvel of tech and tenacity. And it ain't done folks.  

It ain't done by a long shot.

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