Wednesday, February 26, 2014

Eleven (11) New Permits -- The Williston Basin, North Dakota, USA

Active rigs:


2/26/201402/26/201302/26/201202/26/201102/26/2010
Active Rigs19318320416996

Eleven (11) new permits --
  • Operators: EOG (8), BR (2), Petro-Hunt
  • Fields: Parshall (Mountrail), Corral Creek (Dunn), Stockyard Creek (Williams)
  • Comments: EOG permits -- one 3-well pad; one 5-well pad; it never ceases to amaze me all the permits and all the different operators in Stockyard Creek
Wells coming off the confidential list were posted earlier; see sidebar at the right.

One producing well completed:
  • 25951, 2,688, BR, Capitol 44-7MBH, Westberg, t12/13; cum 14K 12/13;
Only one well coming off the confidential list tomorrow:
  • 25594, drl, XTO, Loomer 41X-4C, Tobacco Garden,

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Bakken Trip #3
Second Report

I guess it's cold out there. But the weather report seems worse than it feels, if that makes sense. I was surprised to see how "warm" it was today, up to 22 degrees. This is not to "take away" from what the men and women in the field are experiencing, especially the folks on the rigs, but for most of us in-town folks, it was an incredibly nice day. No wind makes a big difference. It is interesting how "relative" things are. Coming from one degree earlier to 22 degrees during the day, that 22 degrees felt good.

I spent the day checking on wells in the Stockyard Creek area; I hope to post some photos later. Nothing out of the ordinary. Most "enjoyable" was seeing the Statoil Pyramid pad northwest of Williston; it's quite a pad. Surrounded by green mesh link fence, and that surrounded by young "evergreen" trees that will someday completely hide the pad. When I get a good wi-fi connection, I will post video, photos. If one stays in downtown Williston, or on the east side of Williston, one would hardly know there's a huge oil and gas industry enveloping the area.

For Investors Only

Investor's Business Daily is reporting:
First Solar, the No. 2 company by market cap in IBD's No. 1-ranked industry group, saw its stock get burned after hours Tuesday, after the company posted Q4 earnings and revenue that missed views, as did its sales guidance.
The solar panel maker's stock was down 12% after its results, a day after the No. 1 company in that group, SolarCity (SCTY), also fell after hours when it surprised investors with word that it would delay its full earnings report to March 3. SolarCity rebounded in Tuesday's regular session, rising 3.4%.
Barnes & Noble beats by $0.26, reports revs in-line; reaffirms full year guidance: Reports Q3 (Jan) earnings of $0.86 per share, $0.26 better than the Capital IQ Consensus Estimate of $0.60; revenues fell 10.3% year/year to $2 bln vs the $2.01 bln consensus.

CenterPoint misses by $0.02: Reports Q4 (Dec) earnings of $0.26 per share, $0.02 worse than the Capital IQ Consensus Estimate of $0.28; revenues rose 2.2% year/year to $2.18 bln.

Target reports Q4 in-line with Jan 10 preannouncement; guides Q1 EPS below consensus; guides FY15 EPS below consensus: Reports Q4 (Jan) earnings of $0.81 per share, in-line with the Capital IQ Consensus of $0.81 (adj. EPS $1.30 vs. $1.20-1.30 guidance, lowered from $1.50-1.60 on Jan 10); revenues fell 3.8% year/year to $21.52 bln vs the $21.44 bln consensus, reflecting the impact of an additional accounting week in 20125 and a 2.5% decrease in comparable sales (in-line with preannouncement), partially offset by the contribution from new stores. 

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here. 

Chesapeake Energy misses by $0.12, beats on revs; Q4 daily production +2% YoY; Reports Q4 (Dec) earnings of $0.27 per share, $0.12 worse than the Capital IQ Consensus Estimate of $0.39; revenues rose 28.3% year/year to $4.54 bln vs the $4.4 bln consensus. 

Early trading: market up; oil up.

Oasis down almost 4%.

KOG down about 3%. Looks like some profit taking?

Is there any good news? SRE down slightly; MDU up slightly; WMB down about 2%. Looks like things getting off to a slow start.

The Age Of Natural Gas Is Here -- GE's Immelt

Updates

March 7, 2014: this is the age of natural gas. Natural gas will become Australia's #2 export, overtaking coal.

March 3, 2014: natural gas set new records in 2013 for both supply and demand. Forbes is reporting.
The heavily-hyped golden age of natural gas appears to have begun in earnest – at least in the United States – last year, according to new data released today by the U.S. Energy Information Administration.

Original Post
SeekingAlpha link here.
The most compelling part of Immelt's presentation were the facts he presented with respect to the impact abundant, clean and cheap natural gas is having here in the US. Natural gas has had a dramatic and unpredicted impact on electric power generation. As an example, when GE bought its wind energy business 10 years ago, electricity was $0.25 kw-hr versus $0.05 kw-hr today.
Over the past 10 years, leadership in environmental innovation has transitioned from Europe to the US and China. As a company with a ~$50 billion dollar energy business, GE can attest to the fact that this natural gas revolution is having a positive economic impact to its worldwide energy business. Immelt said GE now has a 50% market share of the heavy duty gas turbine business. And this is very much a global business: Immelt said GE will sell more natural gas turbines in Algeria over the next 3 years than it will in the US.
Bottom line: Natural gas has increased flexibility, availability, is cheaper and has a more diverse supply. Because of these advantages, nat gas is increasingly being used as a cleaner solution to worldwide economic and environmental issues. As a result, natural gas has moved from being viewed as a transition or "bridge fuel" to being viewed as a "baseline fuel" of the future.

Putting Really Important Things Into Perspective

Across the United States, I often have coffee and an old-fashioned donut at Starbucks. I believe the cost is about $3.89.

This morning at Cashwise (the grocery story formerly known as the Economart), I got a bigger maple bar donut (or whatever they are called) and a cup of coffee for $1.81.

In addition, Cashwise is open 24/7. Full menu at the deli. Free wi-fi. Ample parking.

And I like the maple donut way better than Starbucks' old-fashioned donut. The service was just as friendly.

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 The Bakken
Trip #3

I arrived in "the Bakken" yesterday afternoon. I plan to be here for several days. I forget when I was last here, but I think it was about six months ago. The most memorable trip I had in the Bakken was in the autumn of 2011 when I was here for three months. I believe my impressions of the Bakken in late 2011 and mid-2013 were about the same.

So, for my sake, I will label this Bakken trip as Bakken trip #3. 

My first impression this time: I have nothing but respect for the folks who are living and working in the Williston Basin on a daily basis. I have been across the United States on several cross-country trips over the past three years and I have spent considerable time in various places across the nation, and for pure unadulterated old-fashioned manufacturing, blue-collar, high stakes capitalism, I don't think there is anywhere else in the US that remotely compares to the Bakken.

I cannot articulate what I experienced, or what I felt driving into the Bakken yesterday.

I drove north on US Highway 85. My observations are only on the activity along the highway.

South Dakota line to Bowman: occasional small pumper along the road.

Bowman to Belfield: almost nothing until near Belfield when one starts seeing increased traffic and more oil activity along the road. The Whiting natural gas processing plant southwest of Belfield gets one's attention. There were two Belfield police cruisers parked; I am not sure anyone was in them. Decoys to slow down traffic.

In Belfield, the truck stop where I always stop was less busy than usual. I spent an hour talking to a 49-year-old African-American truck driver who will soon be ordained as a Pentacostal minister. He was one of the most unique men I had met in quite some time; I would have enjoyed spending an evening with him, or a weekend, but even more, he could easily be a life-long friend if situation were different. He had worked as far north in Canada as the roads will go; he is a trucker out of Michigan and is a "free-lance" trucker. He has probably seen it all.  He was very, very impressive. He was blown away how much "minute" has changed since he last saw it eight years ago. That was his pronunciation of "Minot." There must be a thousand stories to tell each day, coming out of the Bakken. 

Just north of Belfield, I stopped to photograph a herd of buffalo, or more correctly, a herd of bison. I will post the photograph later. I don't have much of a zoom lens and I could not get too close so I doubt it will be a very impressive picture. I took it for Kei, a California friend, who told me to "watch out for" (as "be careful of") of bison. I think she used the correct word. She is a very, very smart cookie. 

Belfield to mile marker 133 on US Highway 85: absolutely no evidence of much oil activity. I was on the road about 2:00 pm. Almost no traffic. Mile mark 133 is a few miles south of Watford City.

About five miles south of Watford City, everything changed.

Driving north into Watford, there is now a traffic light at the intersection of state highway 23 going around the city on the east side. I can't remember if the traffic light was there on my Bakken trip #2.

The traffic was as heavy as I have ever seen it in Watford City. It took five minutes to get through the town of Watford City -- that left turn is the chokepoint, but it moves very, very quickly. Five minutes to get through the intersection but probably a total of ten minutes to get from south side of Watford to north/east side of Watford. In the old days, it would have been a two-minute, maybe three-minute drive, so I guess one can say it now takes three to five times longer to get through Watford if just driving through on US Highway 85.

I have driven cross-country from Boston to Dallas, Dallas to Los Angeles, Dallas to North Dakota and back, and Los Angeles via Denver, Cheyenne, and Lusk, to Williston, and I think I have seen a fair amount of traffic. I have driven in the most congested urban areas of Boston and the most rural areas of western Nebraska.

I can only call the highway from the western side of Watford City to Alexander, a 19.7 mile stretch the "most interesting" road I have ever driven.

This is the unedited note I sent my wife after arriving at Williston, regarding this "most interesting stretch of road":
Today, I was going through Watford City at 5:00 p.m. -- without a doubt, the road from Watford City to Alexander was the MOST INTERESTING road I have traveled in all my cross-country trips (Boston to Dallas; Dallas to Los Angeles; Los Angeles to Williston).
It is impossible to describe the highway.
It was truly something out of the wild west. Absolutely unsafe. I have to agree; this is the most unsafe stretch of road in the US (of roads I've been on and I have been on a lot). There may be worse stretches in India, Italy, Africa, but this is truly incredible for America.
The traffic is solid in both directions. There is a solid double-yellow line separating two lanes going into Watford and one lane going from Watford (on west side of city). All traffic is traveling above posted speed limit.
One pick-up crossed over the double-yellow line, heading directly into on-coming traffic; made it safely; it was a wake-up call for me.
From Belfield to Williston I did not see one law enforcement office (sheriff, city cop, or highway patrol). (At Belfield, I may have seen two police cars but not sure if anyone in them).
They need at least six full-time patrol cars between Watford City and Alexander. It was out-of-control. Perhaps it was the 5:00 o'clock rush hour. But headlights were starting to come on; they are at all heights -- cars, pickups, semis. Full speed with no barrier between oncoming traffic.
It's a credit to everyone driving that there are not major accidents. Watford City to Williston is no longer a urban/rural environment. Along US Highway 85 it is strictly 100% industrial zone. Mostly huge trucks. Perhaps 60% huge trucks; 35% pickups; and 5% automobiles. It was quite a trip. Words really don't do it justice. 
The description may be hyperbole. I had driven pretty much straight-through from Los Angeles to the Bakken and that could have affected my observations. When I say it was "out of control" I don't mean that in a negative way. I'm not sure if that's the best way to describe it. But from an "out of control" point of view, consider these facts:
  • no traffic lights
  • rare warning signs
  • traffic flowing above the posted speed limit (this was winter, by the way)
  • 60% semi's, specialty trucks; 35% pickups; 5% automobiles
  • not one highway patrolman; not one city policeman seen
Therefore: no control. Folks were clearly on their own. Good, bad, indifferent. One gets on that road and one is in the "fast lane."

My wife asked, in a phone call, if I felt "unsafe." I did not feel unsafe, but the only word I could come up with was "uncomfortable." It was a feeling I have rarely experienced while driving anywhere. I am "uncomfortable" driving in downtown Boston and New York City. I was somewhat uncomfortable driving at the speed limit over the Black Hills on ice and snow (albeit pretty wells cleared), and I was somewhat uncomfortable driving in the small villages along I-70 on the way to Denver, but they were all uncomfortable in their own ways.

Watford City to Alexander was uncomfortable in its own way. An occasional trip is fine, when one has to take it to get from point A to point B, but I wouldn't want to take a "Sunday drive" to Watford city. On both my Bakken trips #1 and #2, I eagerly and easily took drives to Watford City just to visit the steakhouse/bank. Not any more.

Ironically, I think a highway patrol cruiser or two might make things worse. Folks would react to seeing a highway patrolman, and the rhythm of the drive would change. I don't know. Maybe the highway patrol should be there. But I can see how law enforcement could temporarily make a bad situation worse. I'm sure I'm wrong. But truck drivers might understand what I'm trying to say.

So, today, I will start exploring the Bakken. Slowly, in the Williston area.

Oh, I forgot. Again, everything described so far relates only to observations along the major highway going through the Bakken, north to south, US highway 85. We are talking about a very, very small geographical area. Fifty miles long? That was about it. This entire area should be zone/declared/defined an "industrial park."

Two years ago, out-of-state reporters talked about all the trucks. I thought there were exaggerating then. Now, the activity seems 10-times worse. One can only put so many vehicles on the road at one time, but the activity can still seem 10-times worse. I can't explain it. Maybe it will be easier to explain after I've been here a few days.

But I have incredible respect for the folks living and working in this immense industrial park. I don't think there is anything like it anywhere in the US, where everyday folks, like you and me, are driving automobiles through an industrial park with very, very little "oversight." By the way, I did not a) hear one horn honking; b) see one example of road rage; c) see more than one potential near-disaster.

I just saw one really bad example of a pickup truck endangering others due to illegal passing, but I was happy to see it: it was a wake-up call. They can't get that four-lane divided highway built fast enough.

Data Points From EOG 4Q13 Conference Call

Random data points from EOG's 4Q13 and full year 2013 earnings. As usual, numbers may be rounded.

Finances
  • 4Q13: net income of $2.12/share
  • full year: net income of $8.04/share
  • 4Q13 discretionary cash flow: $2 billion
  • For full year, EOG's net cash provided by operating activities exceeded financing investing cash outflows.
  • debt/total cap: 28%; debt reduced by almost $1 billion during 2013
Operations
  • best year on record
  • increased crude oil production growth targets three times 
  • ended year with total company production up 40% over 2012
  • a 44% average increase over the last three years
  • key assets: Eagle Ford, Bakken, and Leonard
  • biggest driver: Eagle Ford
Eagle Ford
  • biggest driver for EOG
  • for third time since EOG discovered oil in the Eagle Ford in 2010, EOG has increased the net reserve potential
  • EOG's estimated net reserve potential: 3.2 billion bbls equivalent; 45% increase over the previous 2.2 billion bbls
  • 7,200 net drilling locations (includes the 1,200 net wells drilled to-date)
  • 6,000 net wells remaining = 12-year drilling inventory
  • increased by 12% net recoverable reserve per well; up from previous 400,000 boe to 450,000 boe
The Bakken
  • in 2014, expect to again grow crude oil production
  • localized in two areas: Bakken Core and Antelope Extension; majority in the Core
  • downspace in each area
  • operate a 6-rig program
  • plan to drill 80 net wells this year, up from 54 last year
The Permian (Leonard)
  • the Leonard is EOG's third best play in terms of rate of return; drilling in two zones, A and B
  • CAPEX to remain flat
  • shift from Midland Basin to higher return plays in the Delaware Basin, the Leonard, and Wolfcamp
  • biggest increase in activity will be the Leonard where recent wells have been excellent
  • will develop A zone with 8 to 10 wells/section
Pricing
  • for March 2014, 181,000 bbls hedged at $96.55
  • for April 1 through June 30, 2014, 168,000 bbls hedged at $96.48
  • for second half of 2014, 64,000 bbls hedged at $95.18
  • natural gas hedged at $4.55 through end of 2014
  • for the sixth year in a row, EOG is not growing it North American natural gas production
Q&A
  • downspacing to 160 acres in the Bakken
  • new wells coming in extremely good
  • not ready to comment on how much new wells interfering with existing wells