Week 53: December 28, 2014 -- January 3, 2015

Operations
It's a shoot-out -- everyone is producing at record levels or above quotas: OPEC, Russia, US
American Eagle to suspend drilling in the Bakken
Oil and gas permits for 2014 in North Dakota: 3,012 (hits 3,000+ first time ever)
RBN Energy update on the Bakken
Random update of two huge EOG Wayzetta wells

Blog
Plans to shut down the blog (did not happen)

Miscellaneous
Relative IRRs and relative costs to complete a Bakken well
Heat map for the Bakken

Friday, January 2, 2015 -- 171 Active Rigs In North Dakota; Fourteen (14) New Permits

Fourteen (14) new permits --

• Operators: Statoil (7),  SM Energy (4), XTO (3), 
• Fields: Stony Creek (Williams), East Fork (Williams), Ambrose (Divide), Hofflund (Williams)
• Comments: all seven Statoil permits are on SWSW 32-156-100

Wells coming off confidential list the last two days were posted earlier; see sidebar at the right.

Three Oasis locations were resurveyed, all in McKenzie County.

Oasis changed the name of three wells suggesting a new target; one TF2 well is now a middle Bakken well. Same with CLR, changing the name of one well from a TF2 well to a middle Bakken well. However, CLR did change a middle Bakken well to a TF1 well, it appears. Both of the CLR permits were for wells in Dunn County.

Active rigs:

	1/2/2015	01/02/2014	01/02/2013	01/02/2012	01/02/2011
Active Rigs	171	183	183	197	156

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Russia Confirms Record Oil Production in 2014

This was reported earlier in a short blurb. Here's a much longer article confirming that Russia has hit a new post-Soviet oil production record. Reuters at Rigzone is reporting: 

Russia's 2014 oil output hit a post-Soviet record high average of 10.58 million barrels per day (bpd), rising by 0.7 percent helped by small non-state producers.

Oil and gas condensate production in December hit 10.67 million bpd, also a record high since the collapse of the Soviet Union.

The data showed Russia's so-called small producers, mostly privately held, increased their output by 11 percent to just over 1 million barrels per day. 

Exports to China reached a new high of 452,000 bpd, up 43 percent on the year as Russia seeks to diversify its energy customers.

By the way, the conversion factor 22.6 million tonnes (452,000 bpd): 50. 

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A Note to the Granddaughters

Because of out-of-town guests May and I did not have time to visit any fine arts museum in southern California. Today, on the spur of the moment, we got on I-110 in San Pedro, drove 45 minutes north (through central Los Angeles) to near the end of the I-110, getting off at Orange Grove boulevard, to end up at the Norton Simon Museum.

I had forgotten how really great the museum is. An hour or so of viewing the art, then lunch, than another hour of viewing before finishing in the museum store.

My recommendations for first time visitors to the Los Angeles area who want to visit a fine arts museum:

• J Paul Getty Center (great for young children who like to run)
• Norton Simon (boring for young children who like to run)
• J Paul Getty Villa (okay for children)
• LA County Museum of Art
• the Huntington Library in San Marino (near Pasadena) -- great garden

If you like cars, the Nethercutt Museum north of Los Angeles, and then the Petersen Automobile Museum in west Los Angeles. The Nethercutt is free but reservations ARE required. The Petersen is "getting better."

Shopping centers: Farmers Market, the Grove, and then the big shopping center in Costa Mesa.

Aquariums? The Cabrillo Marine Aquarium in San Pedro for a small regional aquarium. For a "major league" aquarium: the Long Beach Aquarium. Having been to both many, many times, I prefer the small Cabrillo Marine Aquarium.

From the Norton Simon:

The Stream of the Puits Noir at Ornans

It's A Shoot-Out -- January 2, 2015

Bloomberg is reporting:

Oil dropped to the lowest since May 2009 amid growing supply from Russia and Iraq and signs of manufacturing weakness in Europe and China.

Futures headed for a sixth weekly loss in New York and London. Oil output in Russia and Iraq surged to the highest level in decades in December, according to data from both countries' governments. Euro-area factory output expanded less than initially estimated in December. A manufacturing gauge in China, the world's second-largest oil consumer, fell to the weakest level in 18 months, government data showed yesterday.

Prices slumped 46 percent in New York in 2014, the steepest drop in six years and second-worst since trading began in 1983, as U.S. producers and the Organization of Petroleum Exporting Countries ceded no ground in their battle for market share.

OPEC pumped above its quota for a seventh month in December even as U.S. output expanded to the highest in more than three decades.

"The Chinese and European PMI figures signal weaker demand, while there's ever-increasing supply. Nobody is cutting back on output and now the Russians are posting post-Soviet production highs."

Yup, it's a shoot-out. 

Just to re-cap:

• OPEC pumped above its quota for a seventh month in December
• Russia is producing at post-Soviet production highs
• US producers expanded output to the highest level in more than three decades

Two cartels:

• OPEC opening the spigots
• the US embargoes own oil exports

Yup, it's a shoot-out.

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A Shoot-Out The Average Small Business Owner Lost

I wrote about this from the very beginning. US News is reporting just how expensive this "affordable" care is. It the link is broken; don't worry; I've written about numerous times on the blog. Basically, one is paying for catastrophic health care insurance for a very, very high premium (providing subsidies for others). Interestingly, but even those receiving subsidies need to meet the deductibles first; health care insurance companies will do very, very, very, well. (I assume they wrote the law.)

Disclaimer: this is not an investment site. This is all about the political side of ObamaCare, not investment opportunities. Do not make any investment, financial, or relationship decisions based on what you read at this blog.

Storage Tank Site Fire In McKenzie County, North Dakota? -- January 2, 2014

The Street is reporting:

A pipeline operator that runs several lines across the U.S. and Canada, restarted its North Dakota system after a fire at a truck-loading facility, according to a company spokesman, the Globe and Mail reports.

The fire started yesterday at the facility that was leased to its unit, Tidal Energy Marketing, a spokesman for Calgary-based Enbridge, told the publication. Eight out of 12 crude storage tanks, with a capacity of 400 barrels each, caught fire at the site, according to a manager at the Emergency Management Services for McKenzie County, ND.

North Dakota is home to the Bakken shale formation that contributes more than 1 million barrels a day to U.S. oil production. North Dakota Pipeline Co., an Enbridge unit, operates a 826-mile system from Plentywood, MT to Clearbrook, MN.

The Dickinson Press is also reporting it:

More than 1,600 barrels of crude were ablaze just south of Williston, N.D., on Thursday after storage tanks caught fire while trucks were delivering oil, but no one was injured and officials said they intend to let the blaze die out.

Maybe it's cheaper to burn Bakken crude oil than pay for its shipping. LOL.

Curiouser and curiouser (small tanks, not on NDIC maps; no one knows who owns them -- well, obviously someone does):

It was not immediately clear who owns the storage tanks that caught fire. The tank battery does not appear on state regulators' maps.

The crude damaged by the blaze is a minute proportion of the more than 1 million barrels produced each day in North Dakota, the second-largest oil-producing state in the United States.

The blaze started when two trucks were delivering crude to the 12-tank battery on Thursday afternoon, officials said. Nearby residents reported hearing and feeling an explosion.

Each tank has a capacity of 210 barrels. All 12 of the tanks contained crude, Perez said, and eight of them caught fire.

Trucks must be grounded each time they deliver crude, and it was not clear if both of the trucks were properly grounded on Thursday to divert electrical discharge.

Disclaimer: I know nothing more about this fire than what is being reported above.  

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GE? No, Gee Whiz It Could Be a Tough Year

Disclaimer: this is not an investment site. The following helps me understand the Bakken and has nothing to do with investing.

Zacks is reporting:

Zacks Investment Research now holds a pessimistic view on industrial titan General Electric Company, as evident from its recent downgrade to Zacks Rank #4 (Sell) from Zacks Rank #3 (Hold). The gloomy outlook comes on the heels of the disappointing guidance given by the conglomerate as it expects a downslide in oil prices to hurt its performance in 2015. 

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But Maybe Not For Everyone -- LINN Surges

Barron's is reporting:

Yet another company has joined the litany of energy names that are slashing drilling budgets in response to the oil price skid.

Linn Energy said it cut its oil and natural-gas budget by 53% to $730 million for the new year with plans to focus on lower-risk projects and expansions in California, among other areas. Linn and its sister company LinnCo LLC also slashed their annual dividends to $1.25 a share from $2.90.

For a master-limited partnership to cut its dividend is a disaster. The high yields are what lure investors to the stocks. Yet Linn’s share price has rallied today, recovering from a sharp pre-market decline to rise almost 12% in recent trading to $11.37 a share with more than 5 million shares changing hands.

Earlier this week, American Eagle Energy said it suspended its drilling operations and likely won’t resume them until oil prices improve, yet another energy company has fallen victim to falling oil prices.

Last month, Chevron suspended plans to drill for oil in Arctic waters. ConocoPhillips and BP are among many companies to announce pared capital-spending plans, while EOG Resources has said it would shed many of its Canadian oil and gas fields to refocus on the U.S.

Linn’s share price has dropped more than 65% over the past  four months.

I've been looking for snippets suggesting where companies might go in lieu of the Bakken. This story provides one very small snipped. You know it's going to be a tough year when California is considered "low-risk."

By the way, Rigzone is reporting that Linn Energy will cut its 2015 CAPEX by 53%. 

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Rail Shipments Back On Track

Bakken.com is reporting on a story out of Minnesota:

Last year grain elevators, ethanol producers and others were frustrated by a shortage of rail cars and long delays in shipping their products. And analysts predicted the backups would stretch out for years.

But now, with a decline in oil prices, an anemic export market for grain, a snowless December and beefed up staff at railroads, rail service is back on track.

“I think the way it’s going, the railways may be out looking for business pretty soon,” said Jeff Spence, grain division manager, for Crystal Valley Co-op in Lake Crystal (Minnesota).

Top Oil And Gas Prognostications For 2015 -- RBN Energy

This is a must-read.

RBN Energy has a recap of their top ten forecasts made in 2014 and how those turned out.

The post then goes on to provide the 6 - 10 top prognostications for 2015. The top five prognostications will be posted tomorrow.