Update On Kashagan -- October 23, 2014

Rigzone is reporting (some figures rounded):

Kazakhstan expects annual oil output to reach as high as 100 million tonnes after 2020 when the giant Kashagan oilfield resumes pumping compared with less than 82 million this year.

Kazakhstan, already the second-largest oil producer after Russia among the former Soviet states, aims to produce 90 million to 100 million tonnes of oil starting in the third decade of this century

The Kazakh government expects output to total 82 million tonnes this year and next.

Kazakhstan produced 81.7 million tonnes in 2013.

For January to September, output fell to 60 million tonnes from 60.5 million in the same period of 2013.

Production at the Kashagan reservoir, the world's biggest oil find in recent times, started in September last year but was halted just a few weeks later after the discovery of gas leaks in the pipeline network of the $50 billion project. Replacing the pipelines at the oilfield, which lies in the Caspian Sea off western Kazakhstan, will cost another $1.6 billion to $3.6 billion.

Mirzagaliyev confirmed earlier official estimates that Kashagan's production could restart in the second half of 2016.

The conversion factor varies based on the specific gravity of the particular petroleum under discussion, but as a rough approximation there are 7 boe in one metric tonne.

100 million tonnes * 7 = 700 million boe annually / 365 = 2 million bbls/day.

Note: I often make simple arithmetic errors. If this information is important to you, go to the linked source.

The delta between current production of about 80 million tonnes now and 100 million tonnes when Kashagan comes on line is 20 million tonnes, or about 140 million boe, about 400,000 boe/day.

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Global Warming

Climate Change

Extreme Weather

Whatever

The (London) Express is reporting:

John Coleman, who co-founded the Weather Channel, shocked academics by insisting the theory of man-made climate change was no longer scientifically credible. 

Instead, what 'little evidence' there is for rising global temperatures points to a 'natural phenomenon' within a developing eco-system.

In an open letter attacking the Intergovernmental Panel on Climate Change, he wrote:

• "The ocean is not rising significantly.

• "The polar ice is increasing, not melting away. Polar Bears are increasing in number.

• "Heat waves have actually diminished, not increased. There is not an uptick in the number or strength of storms (in fact storms are diminishing).

• "I have studied this topic seriously for years. It has become a political and environment agenda item, but the science is not valid."

I don't think this story is particularly new; I've seen variations of this story for some time now, I believe.

Increased Density Drilling -- The Discussion Continues -- October 22, 2014

A reader sent me a nice Bloomberg article on increased density drilling:

Based on tighter spacing being tested now in Texas, 16 wells could be drilled on the same parcel at a cost of $5.5 million each. Even if each well yields less, about 400,000 barrels, that’s still a recovery rate of 6.4 million barrels from the same land at a cost of $88 million. Profits in this scenario at today’s oil price would amount to $424 million, or almost triple.

To counter production declines in individual wells, companies are using a combination of methods, including drilling wells that extend farther underground horizontally and using more sand to prop open cracks during fracking. Data from EOG’s tight well spacing tests in Texas’s Eagle Ford are showing the tactics are helping producers keep per-well recovery the same, or even higher.

Tighter spacing was the primary reason EOG boosted its estimate for how much oil and gas it may be able to get out of the Eagle Ford by 1 billion barrels in the past year. The company’s use of spacing and other techniques has helped top operators such as EOG reduce their costs to $46 a barrel in the formation, according to Wells Fargo & Co. That’s about 32 percent below the average across the area estimated by ITG. 

Did you all see the "break-even" cost being suggested?

This is an excellent article, especially for newbies. I don't agree with some of the assumptions but at least an article like this puts everything on the table for those new to the discussion.

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Speaking of Increased Density 

Four more permits today for little Stockyard Creek east of Williston. Zavanna permits. More later.
 

Flaring Update -- October 22, 2014

From Bakken.com:

This July, North Dakota set goals to reduce flaring in the state significantly by 2020. The state planned to gradually reduce the amount of natural gas that each well site is allowed to burn off each quarter. According to the U.S. Energy Department, North Dakota was on track to meet these goals as of August. 

In August, the state reported flaring 28 percent of its natural gas, getting pretty close to its goal of a 26 percent flare-rate by the fourth quarter of 2014. Oil production itself rose in August as well, making it more difficult to reach its flaring goals.

From the Director's Cut for August data (October 15, 2014):

• NDIC now breaks down location of captured gas: statewide (72%); statewide Bakken (72.5%); non-FBIR Bakken (74.4%); FBIR Bakken (64.5%)

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Toward A Cashless Society

To be brutally frank, I never thought Apple would deliver on ApplePay in my lifetime. I thought there were too many hurdles. Even if Apple did it in my lifetime, I thought it would be another decade. But here it is, seemingly overnight, and folks are now paying with ApplePay on their iPhones. I saw one transaction today.

I'm sure everyone saw the amateur video in which a customer paid with ApplePay at a McDonald's.

A couple of minutes ago a reader said he received an e-mail from Wal-Greens saying they were now accepting ApplePay.

I replied:

I think Apple will change the way things are paid for in this country.

There are some glitches, to be sure (Bank of America / Apple reported a glitch today), but those glitches will be worked out.

The glitch, by the way, "proved" that there is no way for anyone to hack one's credit card number: neither Bank of America or Apple could verify a glitch had occurred; neither could access the credit card number. In the end, they had to take the word of the customer and the "evidence."

Apple may have the only"really" secure way to pay right now. The banks all went along, but the scuttlebutt is they had no choice. Once one credit card signed on with Apple, they all had to.

And that will be the same for retailers. I have a soft spot in my heart for Apple for many, many reasons, but none of them have to do with investing. I have never invested in Apple (I missed that one).

Maybe I should re-phrase that first sentence: Apple has, in one stroke, changed the way we will pay for things in the future, not just in the US, but worldwide. Literally overnight. I don't know when we first heard about ApplePay -- two years ago? Whatever.

This is revolutionary. 

I remember two or three years ago, after every quarter, the headline on some business page: What will Apple do next? I haven't seen that headline in a long time.

By the way, this speaks volumes about "focus." Either Tim Cook or someone else at Apple talked about "focus." Paraphrasing Steve Jobs, Tim Cook, or someone else: focus is when you can remain on task even when confronted with something else that is so much bigger and better. Apple put aside tablets some years ago to focus on phones. Then they got back to tablets. Or maybe it was the other way around, I forget. I think they put aside ApplePay until they got the phones and the tablets right. Then they worked on ApplePay. Sure, they can do all this in parallel, but some things have to be developed first, and ...

Comparing Legacy And Corinthian Wells Targeting The Spearfish In North Dakota: A Random Update -- October 22, 2014

A reader noted this less-than-spectacular well in the Spearfish, coming off the confidential list today. There are two names that make up most of the Spearfish activity in North Dakota right now: Legacy and Corinthian. My understanding is that Legacy bought Corinthian acreage earlier this year, but permits are still being issued for both Legacy and for Corinthian.

A reader noted this less-than-spectacular well that was reported today:

• 28112, 11, Legacy, Legacy Berge 13-31H, North Souris, a Spearfish well, t6/14; cum --

I was curious: are the IPs of the wells significantly different between Legacy and Corinthian, and are their significant differences in IPs in the various Spearfish fields? The IPs are listed below for wells whose permits were issued in the given year. I did not include wells with permits from 2104; too many of them would not yet be completed.

About all I can tell, is that the "Corinthian" wells have marginally better IPs than the "Legacy" wells; and the North Souris oil field is probably a bit better than Red Rock.

I only looked at a couple of well files; it looks like these wells are being completed with 24 - 26 stages, and 200,000 lbs of proppant, compared to 2 million lbs and more of proppant in Bakken wells.

Maybe other readers have a different perspective. 

In a long note like this, there will be typographical errors. If this information is important to you, go to the source.
2013

"Corinthian" wells
26035, 75, North Souris,
26150, drl, North Souris,
26036, 45, North Souris,
26573, 116, North Souris,
27052, 155, North Souris,
27051, 259, North Souris,
26942, conf, North Souris,
26941, 99, North Souris,
26762, 99, North Souris,
26724, 74, North Souris,
26714, 74, North Souris,
26713, 74, North Souris,
25813, 205, North Souris,
25697, 130, North Souris,
25696, 167, North Souris,
25685, 92, North Souris,
25643, 114, North Souris,
25561, 136, North Souris,
25560, 90, North Souris,
24940, 27, North Souris,
24883, 314, North Souris,   (North Souris average: 123)
26474, 52, Souris,
26492, 26,  Northeast Landa
26181, 11, Northeast Landa,
26349, 167, Northeast Landa,
26343, 34, Northeast Landa,
26336, 10, Red Rock,
26162, conf, Wildcat,

"Legacy"
27210, 89, North Souris,
26004, 99, North Souris,
26003, 99, North Souris,
25993, 27, North Souris,
25523, 77, North Souris,
25054, 95, North Souris (North Souris average: 81)
25558, conf, North Souris,
26255, 100, Red Rock,
25517, 138, Red Rock,
27212, 100, Red Rock,
27211, 51, Red Rock,
25816, 34, Red Rock,
25752, 115, Red Rock,
25751, 56, Red Rock,
25750, 54, Red Rock,
25712, 38, Red Rock,
25702, 138, Red Rock,
25273, 75, Red Rock,
25214, 65, Red Rock,
25024, 132, Red Rock,

2012

"Corinthian"
24680, 114, Northeast Landa, 
23895, 133, North Souris,
23894, 146, North Souris,
23815, 134, North Souris,
23811, 134, North Souris,
23704, 141, North Souris,
23581, 189, North Souris,
23143, 189, North Souris,
23075, 80, North Souris,
23073, 140, North Souris,
22969, 105, North Souris,
22964, 139, North Souris,
22321, 149, North Souris,
22257, 139, North Souris,
22254, 140, North Souris,

"Legacy"
24177, 15, wildcat,
23399, 79, North Souris,
24148, 132, Red Rock,
22364, 138, Red Rock,


2011
"Corinthian"
22123, 128, North Souris,
22121, 94, North Souris,
22064, 110, North Souris

"Legacy"
21504, 126, North Souris,
21951, 157, North Souris, 
21821, 180, North Souris,
21820, 83, North Souris,
21549, 88, North Souris,
21482, 30, Red Rock,
21922, 94, Red Rock,
21921, 97, Red Rock,
21887, 182, Red Rock,
21389, 104, Red Rock,
21323, 125, Red Rock,

And So It Begans, The Evening News -- October 22, 2014

Bloomberg is reporting:

OXY said profit from the California oil producer it’s spinning off to shareholders next month fell during the third quarter as crude prices slid and production costs increased.

California Resources Corp. (CRC-W), as the unit will be known when it becomes a stand-alone company, had net income of $188 million during the July-to-September period, compared with $235 million a year earlier, Houston-based Occidental said in a statement today.

From a press release, ONEOK increases it's quarterly cash dividend:

The board of directors of ONEOK, Inc. today increased ONEOK's quarterly cash dividend by 1.5 cents per share, or 3 percent, to 59 cents per share, effective for the third quarter 2014, resulting in an annualized cash dividend of $2.36 per share. The dividend is payable Nov. 14, 2014, to shareholders of record at the close of business Nov. 3, 2014. 

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Wells coming off confidential list Thursday:

• 27965, drl, XTO, Kathy 31X-15H, Tioga, no production data,
• 27983, drl, Statoil, Paulson 36-1 8TFH, Briar Creek, no production data,

Active rigs in North Dakota:

	10/22/2014	10/22/2013	10/22/2012	10/22/2011	10/22/2010
Active Rigs	193	182	185	195	151

Fifteen (15) new permits:

• Operators: Slawson (5), Zavanna (4), Whiting (2), Abraxas (2), Crescent Point, Zargon
• Fields: Big Bend (Mountrail), Stockyard Creek (Williams), Timber Creek (McKenzie), North Fork (McKenzie), Little Muddy (Williams), Mackobee Coulee (Renville)
• Comments:

Six (6) producing wells completed:

• 26267, 1,672, Petro-Hunt, Van Hise Trust 153-95-28D-21-6H, Charlson, t9/14; cum --
• 26801, 663, Hess, SC-Tom-153-98-1514H-6, t9/14; cum --
• 27226, 1,051, Hess, BW-R Peterson-149-99-1102H-3, Cherry Creek, t9/14; cum --
• 27297, 589, Hess, EN-Ortloff-156-94-2635H-4, Big Butte, t9/14; cum --
• 27592, 780, Slawson, Challenger Federal 5-29-32TFH, Big Bend, t8/14; cum 10K 8/14;
• 27593, 519, Slawson, Challenger Federal 3-29-32H, Big Bend, t9/14; cum 12K 8/14;

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