Random Look At Oasis Activity Just North Of Williston; Lower Tyler Formation 100 Feet Thick

There's a lot of activity just north of Williston. Oasis crews must be stumbling over each other just to get to their rigs.

This is less than one mile north of the current northern edge of Williston:

Those are three Oasis rigs, one each on three different pads. The pad to the west is a 3-well pad; the middle pad is a three-well pad, and the pad to the east is a two-well pad.

Of these, one well has been completed; a well on the far west pad:

• 22414, 2,448, Oasis, Tufto 13-24H, Cow Creek, t5/13; cum 77K 1/14; 

This is a middle Bakken well, but note this from the well report:

The Tyler formation was located at 7,585 feet MD... the upper Tyler was ... the second portion of the Tyler consisted of black carbonaceous, dense shale starting at 7,700 feet MD and lasted for roughly 100 feet to 7,800 feet MD as it transitioned into a gray limey mudstone. Gas in this area rose to 84 units and oil shows revealed a dull yellow gold streaming cut and pale yellow fluorescence. Gamma averaged 133 API with a max of 453 API. NOTE: due to the oil cuts and quality of the sahle this area may warrant further study. [Caps and italics were those of the geologist's.]

Kind of exciting, huh?

But there's more.

Look at #14723. This well is a re-entry Madison well. This well, originally named the Zinke & Trumbo Kermit #1-13H, was a Madison well first drilled in 1997 and then re-entered and a new lateral drilled in the 2003 time frame. According to the well file at that time of re-entry:

"The Zinke & Trumbo Kermit #1-13H is an effort to further develop the Nesson reservoir at Cow Creek Field. Plan called for a long lateral leg to be drilled into an undrilled quarter section that is interpreted to contain a thicker, more porous reservoir in a structurally advantageous position. The plan was to re-enter the exisiting Kermit #1-13H horizontal well bore and sidetrack it up dip to the north.

The original well, drilled as a "grass root" horizontal well, was drilled by Chesapeake Energy in 1997 and has produced approximately 74,000 bbls of oil from the Mississippian Nesson porosity. It is still producing approximately 25 bopd (before re-entry)."

The well now, to date:

• 14723, 279, Oasis, Kermit 1-13H, Madison (re-entry), 165K 1/14; producing around 700 bbls per month. It will be interesting to see the production from this well after seven Bakken/Three Forks wells are fracked in the same section. It is possible the well will be taken off-line when the Bakken wells are being fracked.

So, this section:

• Madison proved
• Tyler needs to be re-evaluated
• middle Bakken and Three Forks being targeted now
• middle Bakken proven with high IP on first middle Bakken well in this section

I didn't look at the Lodgepole, but Oasis is known to be interested in evaluating the Lodgepole north of Williston (at least it has been). 

Disclaimer: I have no formal training in any of this. There may be typographical errors and there may be interpretive errors. This is for my own use but folks are free to read it at their leisure if they stumble upon it. Do not make any life-changing decisions based on anything you read at this blog or think you have read at this blog.

$75 Oil -- A Three-Page Article In Barron's

When you get to the linked article, do a word search for "China" in the article. You won't find it. In case the link is broken, it has to do with a front page story at Barron's suggesting $75-oil sometime in the next five years. [If the link is broken, google: "The long-term outlook for global oil prices is lower" Barron's.]

I did not do a word search for India. My hunch: that country is not mentioned either.

I lost interest in the article as soon as I came across this statement: "For the first time in its 150-year history, the internal combustion engine can be run efficiently on alternative fuels from a number of sources, including natural gas. As these alternatives are increasingly introduced, global consumption of oil will slow its growth and flatten out." Really?

First of all, I'm not convinced an internal combustion engine can be run as efficiently [as gasoline] on alternative fuels from a number of sources. When you do the math, be sure to include infrastructure development. [Close parsing of the sentence: the author did not say natural gas was as efficient in an internal combustion engine as gasoline, but he certainly leads the reader to assume that. It's a cute debating trick they teach at Harvard.]

Second, I'm not even sure natural gas will be a major source of fuel for internal combustion engines in the time frame discussed in this article.

But the headline will get folks to buy the weekly. Perhaps. Or stop their subscription.

[Saudi won't sell oil for $75. Canadian oil sands can make money at $75 but it's close. Operators in the Bakken can make money at $75/bbl but they won't find investors to finance their operations; the margins will be too close. Anyone following the oil industry knows that oil companies are having more and more challenges replacing reserves. There was a story along that line with regard to XOM, and Statoil is definitely having problems with finding new oil reserves.]

The comments to this article at Barron's are pretty much evenly divided, but those suggesting this article is lame, dreamy, seem to have the facts on their side.

But, let's say the author is correct: oil goes to $75 over the next few years. So much for "Peak Oil" theory.

More importantly: this reminds folks why it's important to remain diversified when investing. If oil does indeed go to $75 because of supply/demand issues (and not because of a global depression/severe recession) equities (the stock market) should take off. Seventy-five dollar oil would be huge for the American economy. 

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A Note to the Granddaughters

I just watched "Breakfast at Tiffany's" on Blu-Ray. I don't recall ever seeing it before; it came out in 1961.

Immediately after watching it, these were my notes to my wife:

I just finished watching "Breakfast At Tiffany's" on Blu-Ray, $7.50, Target.

I had a $5.00 gift card so it cost $2.50.

Movies have really gotten better over the decades. This was an important movie to see (I don't recall having seen it before; it came out in 1961 when I was ten years old and certainly would not have been a movie I would have sought out).

It was incredibly corny, stereotypically insensitive (Asian stereotype). Not much of a plot. It's amazing, however, how much a song can do to carry the movie, "Moon River."

I am way too sentimental. LOL. A side of me you seldom see, I suppose. It's hard to believe Truman Capote could write this, though I understand the movie is only loosely based on his book and he was upset with the movie. Maybe I will have to read the book. "The Great Gatsby" reads a lot better now that I've seen the movie. And I still owe you one, to read "The Prince of Tides."

Saturday Morning Musings

Disclaimer: long posts generally have typographical errors. This post has been spell-checked only once. I assume there are spelling and grammatical errors. These are my opinions only. This is for my use only. If you happen to come across this post you are free to read it and cut/paste at your heart's content. But don't make any investment decisions or life-changing decisions based on anything you read here or think you may have read here.

For an equities investor in the oil and gas sector, this may have been one of the more interesting weeks in some time.

I have been blogging daily on the Bakken since 2007. The current "milliondollarway" blog has been on-line since 2009.

I recall, in the early days, how enthusiastic I was about the Bakken. Much of that enthusiasm -- okay, ALL of that enthusiasm -- was based on almost no knowledge of the oil and gas industry, and certainly NO knowledge of the Bakken. But with the help of readers, Teegue's discussion group, and, the Bakken Blog, I have learned a lot. If I had to identify "the one thing" that got me most interested in doing a blog was another blog's subject line: "What in the world has Anschutz found?", back on September 17, 2009.

Over the years, my original intentions to talk only about the Bakken have evolved.

The first realization: I could not talk about the Bakken without following "the stock market." Folks can do a lot of talking but when their money is on the line, it speaks volumes. Over time, that fact evolved: I realize, now, how much all of this has helped me be a better investor in general, not just in the oil and gas sector. Disclaimer: this is not an investment site. This is not an investment site, but I have learned a lot.

The second evolution had to do with digressions on non-Bakken subjects, notably ObamaCare and global warming. Initially, I did this because these were "hot button" issues for me, but I've noticed two things. First, blogging only about the Bakken, regardless how exciting it might be, gets boring for me after awhile (and probably for the reader also) and blogging about "hot button" issues keeps me on edge, something that helps when blogging 24/7. (Caffeinated coffee all helps. Memo to self: insert a big "thank you" to Starbucks here.)

The second thing I've noticed is that ObamaCare and global warming put the Bakken into perspective.

My attitude, comments, feelings, etc., on both ObamaCare and global warming have also evolved over the years.

That was prologue. I said earlier: "I have been blogging daily on the Bakken since 2007. The current "milliondollarway" blog has been on-line since 2009. I recall the early days, how enthusiastic I was about the Bakken. Much of that enthusiasm -- okay, ALL of that enthusiasm -- was based on almost no knowledge of the oil and gas industry, and certainly NO knowledge of the Bakken."

I do not recall any week since 2009 that has been more exciting for me, as an investor in the oil and gas industry, than this past week.

First and foremost: some months ago, an analyst said this has been the longest stretch of high-priced oil the US has ever seen. He did not define "high-price" but I assume he means over $90. Oil has spiked much higher over the years, but on a continuous basis, this is the longest period of time it has remained at a high level. I think six months ago Joe Kernen, one of the few intelligent anchors on CNBC, opined almost daily that if oil was "fairly" priced it would be $60/bbl. For six months, we've heard how oil would drift back to $80, if not $60. And come Monday, it may plummet. Or next month. Or next year.

But right now, it is what it is. When WTI hit $98, I thought we were in an "under-$100" trading range, and was very, very surprised to see oil go over $101 this week. For all practical purposes, WTI, May, 2014, futures closed Friday at $102.

I do not think it is due to geo-politics. I did not post the story, and I may not have the link any more, but this past week a Forbes columnist, speaking about the bull market, said that everything that is "known" is priced into the market. The Crimean is a "known." We don't know how it will play out, but the Crimean is a known, which pretty much means Putin/Obama/Crimean/Ukraine/NATO/Russia is baked into the price of oil. The Forbes columnist says what is not known is NOT baked into the price oil.

So, if that's true, what is driving oil over $100? It's not the weakness of the dollar. The dollar rose slightly or remained flat, during the rise in the price of oil, so it's not the weakness of the dollar driving the price of oil.

I can go through a laundry list of likely reasons (which I recently did) but I'll cut to the chase. I think it has to do with the drawdown at Cushing. The Keystone XL 2.0 South is draining Cushing; Keystone XL 2.0 North which was meant to replenish Cushing is not on-line, and probably never will be. Bakken oil should be replenishing Cushing via railroad and existing pipelines, but operators are getting better returns shipping Bakken oil to the east coast and the west coast.

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The second thing that made this an unusual week: the accumulating data that is coming out of the daily activity reports. As of March 30 for this year and the previous two years, this many permits have been issued, and this is how many permits were projected at that time:

• 2014: 668 -- 2,740 (rounds to 2700)
• 2013: 619 -- 2,539 (rounds to 2500)
• 2012: 520 -- 2,132 (rounds to 2100)

In addition, more and more multi-well pads, all of which bring down cost/well.

Likewise, the monthly dockets have been incredible. I pretty much thought the dockets were going to be winding down a bit after a couple of dockets earlier this year, but today's docket told me how wrong I was. The frosting on the cake that was this week in the Bakken: the April, 2014, NDIC hearing dockets. And the candle on the frosting on the cake to this week: case 22272.

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This past week was also a huge week for geo-politics. I assume most of the TV chatter is on western Europe, the Ukraine, the Crimean. The sleeper is Brazil with a worsening drought and corresponding drop in hydroelectric power. Their oil industry is facing some serious headwinds. But Brazil is a bit more long-term, and not quite as important to the oil and gas industry as its neighbor, Venezuela. The tea leaves suggest Venezuela is about ready to implode. If it does, it could take its oil economy with it, turning Venezuela into the Libya of the western Hemisphere: unreliable oil exports.

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There are more and more stories coming out in the mainstream media how relatively inexpensive US energy is going to transform global economics. We've talked about that before. What's new is this: refineries are producing at well less than their capacity, and gasoline and diesel fuel exports are surging. That caught me off guard; I've only seen one analyst talk about that which means not many know about it, or many analysts want to keep it a secret. Bakken oil is not the preferred oil for Texas coast refineries. Bakken oil tends to track Brent oil at least to some degree. There are three headwinds affecting adequate oil reaching the Texas coastal bend: a) Cushing reserves are being drawn down without significant refill upstream; b) the recent Houston Ship Channel closure (albeit transient); and, a potential loss of Venezuelan oil.

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One last thing: the US driving season has yet to begin, and Californians are now paying more than $4.50/gallon for gasoline.

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It was a very exciting week. The big question: what was President Obama's real reason for visiting Saudi Arabia this week. Sure the "Syrian thing" is made worse by events in the Ukraine but one wonders if President Obama is more concerned about California politics than a Syrian civil war. Californians are now paying, as noted above, $4.50/gallon of gasoline, industries are moving out of state (mostly to Texas), and ObamaCare is taking its toll. Any interruption in Saudi oil production would be a huge pill for Californians to swallow.

This Is The Cat's Meow: Royalties Within Reach: A Handbook For Mineral Rights Owners

I own no mineral rights.

I did not order this book and I did not pay for it.

I heard about it from the author some months ago, and sight unseen, I posted a link for readers if they wanted to buy a copy.

I have now downloaded a copy that the author sent me. I am completely blown away. First impressions: this is an incredible book.

I have just gone through the April, 2014, NDIC hearing dockets, and managing your own mineral rights is clearly not something for the uninformed. Anyone who "has one well" in the Bakken will have four wells for sure before it's over, probably eight, maybe 12, and possibly as many as 32. Or more.

Anyone with one well needs professional help. And before one starts working with a professional, I would highly recommend knowing what to ask, what to look for. This handbook may be the best out there. I would not know. I don't review mineral owners' handbooks, but this looks like the real deal.

I will post several times throughout the weekend on this book.

Again, I have no hidden agenda; I have no financial relationship with the author. I have never met him/her (to the best of my knowledge; I have spoken with landmen in the Bakken, and did not collect business cards, and my memory is such I would not remember with whom I spoke).

Early on when I posted the link to this book, someone was concerned that the author's name was not provided. I addressed that. I hope the author does not identify himself.

This is from the book, from the author:

I’ve worked as a landman in the Williston Basin for more than seven years. I have daily interaction with mineral owners like you and understand your concerns and questions. I decided to write this book as a platform to educate mineral owners on how to be their own advocate.

Oil companies frequently make mistakes when calculating royalties. Many of these
companies are short-staffed and often operate wells in which dozens, and in some
cases hundreds, of individuals are owed royalties from a single producing well.

This book is one-of-a-kind; you won’t find a similar resource on Amazon.com. In fact, if you do a google search for “mineral rights,” nearly every hit is a website for a company seeking to purchase mineral rights from uninformed owners. Purchasing this book is an important first step in ensuring you have the knowledge and resources to understand and protect your rights.

Be your own advocate. Maximize the minerals you are fortunate to own!

I will be writing more on this handbook as I go through it; I only downloaded it earlier this morning.

Again, I have no hidden agenda. I have no direct financial interests in the Bakken, and the only reason I qualify that statement with "direct" is because I accumulate shares in publicly traded companies that operate in the Bakken.

The link to the book is at the sidebar at the right.

This is an eBook. It is the first non-iBook eBook that I have ever downloaded. I have never downloaded an eBook from Amazon.com. It is incredibly easy. It downloaded in a few seconds; I don't know how long it took because I was doing something else on the blog while it was downloading.

I can't recall for sure, but I think the author says he/she will be offering this book in print edition, also.

This Might Take Some Time -- Yes, It's All About The Bakken -- A 1,000 More Slawson Wells? Case 22272; Order 24606 -- April, 2014

Updates

June 21, 2014: a reader sent the NDIC order for this case. Order 24606. 
 

Original Post

From the NDIC hearing dockets, April, 2014:

Case No. 22272:

Application of Slawson Exploration Co., Inc. for an order authorizing the drilling, completing and producing of multiple horizontal wells, in Big Bend-Bakken on (everything in bold is my estimate -- not from the NDIC)

• the following 320-acre spacing unit: the W/2 of Section 10, T.151N., R.92W.; one unit, 4 wells

• the following 640-acre spacing units: the SESE, Lots 5, 6, 7, 8, and 9, plus those portions of the bed of the Missouri River and the accretions to Lots 5, 6, 8, and 9 lying within the Fort Berthold Indian Reservation in Section 11, and the S/2 S/2 and Lots 5, 6, 7, and 8 of Section 12, T.152N., R.93W.; Section 31; the S/2 of Sections 34 and 35, T.152N., R.92W.; Section 22, T.152N., R.91W.; and Section 35, T.151N., R.92W.; about 8 units x 4 wells = 32 wells

• the following 960-acre spacing units: Section 13 and the S/2 S/2 and Lots 5, 6, 7, and 8 of Section 12, T.152N., R.92W.; and Section 18 and the SE/4, SESW, and Lots 7, 8, 9, 10, and 11 of Section 7, T.152N., R.91W.; 3 units x 6 wells = 18 wells


• the following 1280-acre spacing units: Sections 13 and 24; Sections 14 and 23; Sections 25 and 36; and Sections 26 and 35, T.152N., R.93W.; Sections 13 and 14; Sections 14 and 15; Sections 18 and 19; Sections 20 and 29; Sections 21 and 28; Sections 22 and 27; Sections 23 and 26; Sections 24 and 25; Sections 29 and 30; and Sections 30 and 31, T.152N., R.92W.; Section 33, T.152N., R.92W. and Section 4, T.151N., R.92W.; Sections 8 and 17; Sections 9 and 16; Sections 19 and 30; Sections 20 and 29; Sections 21 and 28; and Sections 27 and 34, T.152N., R.91W.; Section 33, T.152N., R.91W. and Section 4, T.151N., R.91W.; Section 32, T.152N., R.91W. and Section 5, T.151N., R.91W.; Sections 1 and 12, T.151N., R.93W.; Sections 2 and 3; Sections 6 and 7; Sections 8 and 17; Sections 9 and 16; Sections 13 and 14; Sections 19 and 20; Sections 20 and 21; Sections 21 and 22; Sections 23 and 24; Sections 26 and 35; Sections 27 and 34; Sections 28 and 33; and Sections 29 and 32, T.151N., R.92W.; Section 36, T.151N., R.92W. and Section 31, T.151N., R.91W.; Sections 2 and 3, T.151N., R.91W.; about 40 units x 8 wells = 320 wells

• the following 1600-acre spacing units: Sections 16 and 17, and the E/2 of Section 18, T.152N.,R.92W.; Sections 11 and 12, and the E/2 of Section 10, T.151N., R.92W.; and Section 25 and the E/2 of Section 26, T.151N., R.92W. and Section 30, T.151N., R.91W.; 3 units x 8 wells = 24 wells


• the following 1920-acre spacing units: Sections 27 and 28 and the N/2 of Sections 33 and 34, T.152N., R.92W.; Sections 3 and 4, T.151N., R.92W. and the S/2 of Sections 33 and 34, T.152N., R.92W.; 3 units x 8 wells = 24 wells


• the following 2560-are spacing units: Sections 13, 14, 23, and 24, T.152N., R.93W.; Sections 13 and 24 T.152N., R.93W. and Sections 18 and 19, T.152N., R.92W.; Sections 25 and 36, T.152N., R.93W. and Sections 30 and 31, T.152N., R.92W.; Sections 15, 16, 21, and 22; Sections 17, 18, 19, and 20; Sections 20, 21, 28, and 29; Sections 22, 23, 26, and 27; Sections 23, 24, 25, and 26, T.152N., R.92W.; Sections 34 and 35, T.152N., R.92W. and Sections 2 and 3, T.151N., R.92W.; Sections 24 and 25, T.152N., R.92W. and Sections 19 and 30, T.152N., R.91W.; Sections 31 and 32, T.152N., R.92W. and Sections 5 and 6, T.151N., R.92W.; Sections 32 and 33, T.152N., R.92W. and Sections 4 and 5, T.151N., R.92W.; Sections 8, 9, 16, and 17; Sections 19, 20, 29, and 30; Sections 20, 21, 28, and 29; Sections 21, 22, 27, and 28, T.152N., R.91W.; Sections 32 and 33, T.152N., R.91W. and Sections 4 and 5, T.151N., R.91W.; Sections 33 and 34, T.152N., R.91W. and Sections 3 and 4, T.151N., R.91W.; Sections 1 and 12, T.151N., R.93W. and Sections 6 and 7, T.151N., R.92W.; Sections 2, 3, 10, and 11; Sections 7, 8, 17, and 18; Sections 9, 10, 15, and 16; Sections 13, 14,and Sections 28, 29, 32, and 33, T.151N., R.92W.; about 18 units x 12 wells = 216 wells


• the following 3200-acre spacing units:Sections 11, 12, 13, and 14, and the E/2 of Sections 10 and 15, T.151N., R.92W.; and Sections 25 and 36 and the E/2 of Sections 26 and 35, T.151N., R.92W., and Sections 30 and 31, T.151N., R.91W. 3 units x 16 wells = 48 wells

Total: 686 wells, give or take 200 wells. 

700 wells x $8 million = $5,600 million which, I think, is $5.6 billion.