Mergers -- Nothing About the Bakken

I don't know if folks recall this story from the New York Times back in 2005:

Blockbuster Inc., the video rental giant, dropped its bid yesterday to acquire the Hollywood Entertainment Corporation, the second-largest video rental chain, citing the likelihood that the Federal Trade Commission would reject the deal on antitrust grounds. 

I remember the story very, very well. Endless opportunities and vendors for television shows and big-screen movies, and yet the FTC was worried about anti-trust issues with regard to two video rental companies. (Are either of them even around any more?)

I am reminded of the story because the American Airlines - US Airways merger is expected next week according to a news station in Dallas-Ft Worth.

99-cent video rentals and the FTC is worried about antitrust, but no such worry for $800-seats on airlines. Extra for bags.

Marathon Reports Earnings

Rigzone is reporting:

Marathon Oil Corp.'s fourth-quarter earnings fell 41%, partly due to write-downs and other charges, and the company fell short of analysts' expectations as high taxes and exploration costs offset increased oil and gas sales.

Marathon Oil spun off its downstream and petroleum assets in 2011, creating Marathon Petroleum Corp., in order to focus its drilling efforts on oil-rich unconventional fields in the U.S. The company's profits from oil and gas operations have risen in recent quarters as its production has exceeded expectations.

In the fourth quarter, the company reported a profit of $322 million, or 45 cents a share, down from $549 million, or 78 cents, a year earlier. Taking out items such as impairment, pension settlement and unrealized gains on crude-oil derivative instruments, earnings from continuing operations fell to 55 cents from 78 cents. Revenue jumped 11% to $4.24 billion. Marathon's fourth-quarter results came in 12 cents under the 67 cents per-share forecast of analysts polled by Thomson Reuters, who had anticipated revenue of $3.93 billion.

MRO continues to trade near it's 52-week high, dropping a bit today. Unremarkable.

Louisiana LNG to Japan -- Another Incredible Story

"Anon 1" sent this very incredible story.

JapanToday is reporting:

The operator of Japan’s crippled Fukushima nuclear power plant said Wednesday it plans to buy 800,000 tons of light liquefied natural gas (LNG) annually from the United States as it looks to cut its fuel bills.

Tokyo Electric Power (TEPCO) said it had agreed to buy 400,000 tons a year from Mitsui & Co trading house, and was in final talks with Mitsubishi Corp trading firm for the same amount. Both will come from the U.S. Cameron liquefaction project to be operated in Louisiana.

The power company says it wants the LNG every year for two decades, starting 2017, and has already secured a further 1.2 million tons of light LNG, mainly from North America.

Just the beginning. 

Decline Rates and EURs; Bakken-Type Curves; Economics

Updates

 April 11, 2013:

From the Oasis corporate presentation, September, 2012, a PDF, slide 26, middle Bakken type curve and economics.

• Average EUR type curve: 600K bbls (range 450K to 750K)
• Average cost of well: $8.8 million
• Average cumulative Mboe, at 365 days: 111K
• Price of oil: $90 --> $10 million at the wellhead
• 111/600 = 18.5%

Original Post

Another article on the dreaded decline rate of the Bakken. I debated whether linking it or not.

Let's say for point of argument that the average Bakken well has an estimated ultimate recovery of 400,000 bbls of crude oil.

The Bakken produces the majority of that oil in the first few years, and then tapers off. But the EUR, for the sake of this argument, will be 400,000 bbls of crude oil.

Now, for sake of argument, let's say there was no decline rate but the EUR remained the same. The initial production would be lower but production would not vary, and the wells would produce 400,000 bbls of crude oil.

So, I don't get it. With regard to EURs, who cares what the decline rate is?

Actually, I can't think of a better scenario. Operators and their investors get their money back in two or three years; they don't have to wait twenty years for payback.

I wonder if everyone on the East Coast would be happy if Bakken-centric oil companies would simply store oil on site, and put the identical amount of Bakken oil into the pipelines each year for forty years with EURs of 400,000 bbls of crude oil. Thus, no decline rate coming out of the Bakken.

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

The Bakken-centric operators certainly don't seem too worried about the dreaded decline rate. In the North Dakota state lease yesterday, companies were still willing to pay $13,000/acre for good Bakken acreage.  Without the Bakken, these acres would be going for $25/acre. Last month, one operator paid a record $19,500/acre in the better Bakken at the Federal lease sale.

Again, I don't know why non-operators are so worried about the decline rates. One would think if anyone should worry, it would be the folks paying the bonuses for these leases.

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

Here's a well with a typical Bakken decline rate:

• 17152, 937, EOG, Wayzetta 15-05H, Parshall, short lateral, t7/09; cum 573K 12/12;

The first six months of production:

BAKKEN	12-2009	31	21623	21810	83	9566	8810	601
BAKKEN	11-2009	30	21606	22067	76	9485	9152	183
BAKKEN	10-2009	31	21848	21542	95	9485	8760	570
BAKKEN	9-2009	30	21370	21262	106	8882	8226	506
BAKKEN	8-2009	31	20265	20389	110	9033	7819	1062
BAKKEN	7-2009	27	19031	18179	1288	8077	6402	1546

The last (most recent) twelve months of production:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	12-2012	31	5687	5690	46	3397	3242	0
BAKKEN	11-2012	30	5648	5642	16	3257	3107	0
BAKKEN	10-2012	31	5849	5859	136	3269	2753	364
BAKKEN	9-2012	30	6042	6055	119	3538	3388	0
BAKKEN	8-2012	31	6294	6537	51	3636	3481	0
BAKKEN	7-2012	31	6638	6438	22	3655	3067	433
BAKKEN	6-2012	30	6510	6534	22	3451	3202	99
BAKKEN	5-2012	31	6621	6614	5	3514	3360	0
BAKKEN	4-2012	26	5773	5748	85	3484	3280	80
BAKKEN	3-2012	31	8958	9018	25	6049	5874	24
BAKKEN	2-2012	29	8645	9070	34	6085	5941	0
BAKKEN	1-2012	31	9523	9138	112	6323	6098	77

Again, it's the EUR that's important; not the decline rate. This well is a SHORT LATERAL. It was completed in July, 2009 -- it has produced about 3.5 years. Bakken wells are expected to produce 39 years. But again, regardless how long they produce, it's the ultimate recovery. And this is PRIMARY RECOVERY.

Global Warming to Hit Boston, New England This Weekend -- Finding Nemo

Boston's Winter Storm of the Century: Nemo

Updates

February 9, 2013: Boston nearly sets all-time record; currently Nemo ranks #5. And I think the traffic ban was the single most important factor that prevented more problems; along with shutting down the bus and subway system at the same time. People hunkered down and most did fine. The coastal areas were hit hardest with storm surge.

February 9, 2013: 40 inches of snow in Connecticut; at least five deaths;

February 9, 2013: Nemo sets a new, all-time snow record for Portland, Maine. The previous record was set in 1979. The "global warming" house of cards continues to topple. It is generally agreed that the warming stopped sixteen years ago.

February 9, 2013: It is being reported that total snowfall for this winter in Boston is now slightly above average for this time of the year, and there's at least six more weeks of winter.  Mother Nature having the last laugh.

February 8, 12:37 am: Christian Science Monitor, up to 36 inches; winds of 65 mph; coastal floods;

February 7, 11:48 pm: CBS New York, blizzard warning. 

February 7, 11:47 pm: weather channel update; historic storm?

February 7, 2:15 pm, CNBC weather: the talking head question -- "why is it so difficult getting a handle on this storm -- lots of snow, or no snow?" Okay, so the storm is less than 48 hours away and "they're" finding it difficult to even determine if there will be snow in NYC from this storm. On the other hand, with absolute surety they tell us the global temperature will be 3.5 degrees warmer in 2035.

February 7, 3:49 am statement:

Locations... much of New Hampshire eastward to central and
southern Maine excluding the immediate coast.

* Hazard types... heavy snow possible... with blowing a drifting.

* Accumulations... snow accumulation of 14 to 24 inches.

* Timing... snow will begin falling late tonight and continue
through at least Saturday morning. Snow will be heavy at times
Friday night into Saturday morning. The snow should taper off
and end Saturday afternoon.

Original Post

Headlines for Nemo:

• Blizzard to bury Boston
• Snow watch: 2 feet possible in 24 hours
• Storm of the century for Boston

So, a year ago, to the best of my knowledge, no one predicted that the storm of the century would hit Boston in February, 2013, but yet, we know with certainty that the earth's temperature will increase 3.5 degrees by 2035 (the new slogan: "3.5 in '35"). Back in November, 2010, the Christian Science Monitor reported:

Global temperatures are projected rise 3.5 degrees C. over the next 25 years, the International Energy Agency said Tuesday, meaning that governments worldwide will have failed in their pledge to hold global temperature at a 2-degree increase.

So, a year ago not only did the East Coast state governments not prepare for Hurricane Sandy, but to the best of my knowledge there has been no planning this entire past year for this weekend's storm which we now learn at the last minute could be the winter storm of the century. Talk about a snow job. But yet we know that because we failed to pledge to hold the earth's temperature to only a 2.0-degree increase through 2035, we are now doomed to a 3.5-degree increase. ("We" failed to pledge when Canada withdrew from the Kyoto Protocol.)

So, 3.5 degrees. Not 3.3 degrees or 3.7 degrees, but 3.5 degrees. Over 27 years or more -- depending how long ago this dire prediction was first forecast.

And I'm not exactly sure how much the difference between 3.5 degrees and 2.0 degrees really means -- for the arithmetically challenged, that's a 1.5 degree change. Over the next 25 years.

And still, no one has said what the "correct" temperature is for the earth is; and, who sets the thermostat. But whoever sets the thermostat, it appears there is good news for the faux environmentalists -- records indicate the earth quit warming 16 years ago. Now, we just have to worry about the earth cooling. Whatever.