Week 33: August 16, 2015 -- August 22, 2015

Wow, what a week. Earlier I suggested that the market (the Dow) might lose 1,000 points in less than a week and wow, if I wasn't just about right. What an opportunity for long-term investors.

I also learned a bit more about the global crude oil trading market, and one of these days, I may even remember the definition of contango.

I end the week with a great Politico story with this graphic (sorry about all the white space -- that's how Politico posted the graphic):

The WTI oil crawler suggests oil broke through the $40-floor today. Peak oil? What peak oil? This is absolutely insane.

I particularly enjoyed two posts this week: the "crack cocaine and heroine" post and the Mexican swap post. Also, RBN Energy on the Mexican swap.

From The Big Lebowski
Gasoline demand is hitting new all-time records. See this post.

The top stories in the Bakken this past week:

Operations
The Bakken -- update
One-sixth of the Bakken has been drilled
Bakken rig effectiveness
XTO reports several nice wells 
HRC reports a huge well in Eagle Nest
EOG, HRC, Whiting all report huge wells
Bakken update -- Mike Filloon

CBR
CBR volumes falling 

Fracking
Portable frack-sand delivery systems

Diesel
Good news for farmers in the Bakken 

Bakken economy
North Dakota's financial update 
Bakken utilities get new federal loans
Per-capita spending at Wal-Mart: ND in top ten

Bakken investors
Samson Resources seeks bankruptcy protection

Miscellaneous
Major permit numbering problem over at NDIC
When will the rigs come back? 

US Petroleum Demand Up In July -- OGJ, August 21, 2015; Production Hits Record Levels; Active Rigs Slump Over 50%

Earlier today I noted that 2007 must have been a pretty good year. Now this article pops up from The Oil & Gas Journal, dated August 21, 2015. As I read through this, all I can think of is the "crack cocaine and heroin" post the other day. The story at the link:

Total petroleum deliveries, a measure of demand, rose 2.2% from July 2014 to average nearly 19.6 million b/d last month.

“Demand for and production of oil and refined products grew across the board over the last year. In fact, demand for and production of oil and refined products were the highest July in 8 years, since 2007.”

Gasoline demand rose 2.1% last month from July 2014 to just above 9.4 million b/d, and distillate demand rose 1.1%.

US crude oil production increased 8.8% from July 2014 to an average of 9.5 million b/d—the highest July level since 1920. [Peak oil? What peak oil? Memo to Jane Nielsen.]

Natural gas liquids production averaged nearly 3.4 million b/d, marking the highest for the month on record and the new all-time record. 

According to the latest reports from Baker Hughes Inc., the number of oil and gas rigs in the US in July was 866, 53.8% below the year-ago level. Last month’s count was the second lowest count since January 2003.

US total petroleum imports in July averaged nearly 9.4 million b/d, down 1% from the previous year. Meanwhile, crude oil imports in July fell 5.5% from a year ago to average 7.2 million b/d.

At an average of nearly 10 million b/d, production of gasoline in July was the second highest level ever for the month.

Refinery gross inputs in July rose 0.1% from last year to a record high for the month at nearly 16.9 million b/d. The refinery capacity utilization rate in July averaged more than 90% for the fourth consecutive time this year at 94%.

API’s latest refinery operable capacity was 17.956 million b/d.

Crude oil stocks ended in July at nearly 460 million bbl, the highest July inventory level in 85 years, since 1930. Stocks of motor gasoline ended down 0.2% from last year to 216.5 million bbl. Distillate, jet fuel, and “other oil” stocks were up from year ago levels.

Flat out production, flat out refining, and gasoline stocks actually down 0.2% from last year. Apparently folks like inexpensive gasoline. I vaguely remember a chapter on elastic and inelastic demand in some economics course I took in high school. It now makes sense. Fifty years later.

A Completely Unnecessary Post -- But It Made My Day -- August 21, 2015

Updates

December 23, 2015: Vitol will be the first (?) to export US light crude oil under the relaxed rules on US exports. 
 

Original Post

 

This is one of those posts that is absolutely unnecessary but it helps me understand the global oil market. And it reminds me what contango means. It's not the Argentina national dance.

The link is here but requires a subscription. Vitol buys out oil tank partner's stake in VTTI BV for $830 million. Ah, but one can access it without a subscription through googling.

In a long note like this, there will be factual and/or typographical errors. If this information is important to you, go to the linked articles.

Some data points:

• Vitol is the world's largest energy trader
• with a purchase announced today, Vitol now has greater control of the global network of almost 400 crude oil tanks
• a glut of crude oil globally has led oil traders to look for additional space to store supplies
• access to oil storage facilities gives traders greater flexibility
• Kinder Morgan and 3i infrastructure have also bought storage facilities in recent months
• private equity players have been looking at a BP-owned terminal in Amsterdam
• futures today suggest more oil may be moved into storage, allowing tank operators to earn higher fees

Why Vitol is in the news today:

• Vitol paid $830 million for MISC Berhad's 50% stake in the VTTI BV oil storage business
• buying the Petronas-controlled shipping group's half of hte venture gives Vitol greater control over a global network of almsot 400 tanks
• VTTI currently has storage capacity of 35.5 million bbls (North America, United Arab Emirates, Amsterdam-Rotterdam-Antwerp oil hub, and in Malaysia)
• VTTI started building a new facility in Cape Town in July; South Africa has emerged as an increasingly important way station for oil, with traders able to easily flip bbls east and west from that location depending on regional demand
• South Africa's giant Saldanha Bay storage facility, 45 million bbls, was filled to capacity last month

A Bloomberg link here provides more background in a general sense. Some data points:

• storage companies include Vopak NV, Kinder Morgan, Oiltanking GmbH, Magellan Midstream
• US stock levels of crude oil at an 80-year high, 459 bbls, may soon test the limits of the US tank capacity
• RBN Energy has provided updates on new storage facilities along the Gulf Coast
• storage facilities take advantage of contango: a relatively rare situation in which forward prices are higher than current prices
• recently, the one-year forward -- a measure of contango -- stood at a minus $12.59/bbl, close to the highest since crude prices started falling last year
• generally, storage fees in the US run 20 to 50 cents/bbl/month
• Vopak: world's largest independent oil storage company; owns 210 million bbls of crude oil/refined products; enough to supply German for three months

And this post has already paid off for me. Saldanha Bay was mentioned in the Bloomberg article. Until today, I had not heard of Saldanha Bay.

This little bit of trivia should make me a hit at tonight's social event. LOL.

XTO, Statoil With Nice Wells -- August 21, 205

Active rigs:

	8/21/2015	08/21/2014	08/21/2013	08/21/2012	08/21/2011
Active Rigs	76	193	185	197	193

Four (4) new permits --

• Operators: CLR (3), Hess
• Fields: Rattlesnake Point (Dunn), Beaver Lodge (Williams)
• Comments: I track Rattlesnake Point oil field here. 

Fidelity renewed two wells, both in Mountrail County, a Hansen well and a Sandy well.

Whiting canceled a BSMU well in Billings County.

Four (4) producing wells were completed:

• 29007, 2,009, XTO, David Federal 21X-20B, Lost Bridge, t8/15; cum --
• 29006, 743, XTO, David Federal 21X-20E, Lost Bridge, t8/15; cum --
• 29008, 1,908, XTO, David Federal 21X-20F, Lost Bridge, t8/15; cum --
• 29483, 3,711, Statoil, Bures 20-29 5H, Alger, t7/15; cum --

Operator transfer -- Sedalia Energy transferred about 80 wells to Petro Harvester; all of these are older wells in Burke County; their permit numbers suggest they pre-date the Bakken. The few of them I looked at were Madison wells.

Rattlesnake Point

Locator: 10001RATTLESNAKEPOINT.

Updates

 

August 19, 2023: the new CLR Veigel permits.

 

The Mountain Gap wells are tracked here Production data for Mountain Gap wells may not be updated on this page.

Original Post

Current status:

 

Permits

2017 (conf in blue means they were SI/NC at one time; now back on conf)

• 33579, conf, CLR, Mountain Gap 11-10H1, link here;
• 33561, conf, CLR, Mountain Gap 12-10H, link here;
• 33560, conf, CLR, Mountain Gap 6-10H1,
• 33559, conf, CLR, Mountain Gap 5-10H, from FracFocus, fracked 12/12/17 - 1/8/18; 9.65 million gallons of water; water at 78% by weight; sand at 15% by weight; 
• 33558, conf, CLR, Mountain Gap 4-10H2,
• 33557, conf, CLR, Mountain Gap 3-10H,
• 33556, conf, CLR, Mountain Gap 2-10H1,

2016 

• 33123, conf, CLR, Mountain Gap 10-10H, link here;
• 33122, conf, CLR, Mountain Gap 9-10H2,
• 33121, conf, CLR, Mountain Gap 8-10H1, see update here; fracked 10/8/17 - 10/18/17; 10.4 million gallons of water; by weight, 85% water; 15% sand; link here;
• 33120, conf, CLR, Mountain Gap 7-10H, see update here; link here;
• 32781, 1,067, CLR, Bridger 11-14H1, 1,127 bbls over 4 days in 6/17; t12/17; cum 140K 6/18;
• 32740, 1,485, CLR, Bridger 10-14H2, was a DUC; now on CONF; and 23,385 bbls in 8/17; t9/17; cum 202K 6/18;

2015 

• 31847, 1,515, CLR, Bridger 9-14H1, was a DUC; now on CONF; and 33,124 bbls in 8/17; t8/17; cum 181K 6/18;
• 31846, 1,389, CLR, Bridger 8-14H, was a DUC; now on CONF; and 32,268 bbls in 8/17; t8/17; cum 168K 6/18;
• 31845, 879, CLR, Bridger 7-14H2, was a DUC; now on CONF; and 24,435 bbls in 8/17; t8/17; cum 174K 6/18;

2014 

• 29713, IA, CLR, Thorvald 3-6H, Rattlesnake Point, t--; cum --
• 29712, IA, CLR, Cuskelly 3-7H, Rattlesnake Point, t--; cum -- 
• 29711, CONF, CLR, Cuskelly 4-7H1, Rattlesnake Point, t--; cum --; producing nicely; 
• 29710, CONF, CLR, Thorvald 3-6H, Rattlesnake Point, t--; cum --; producing a bit
• 29709, loc, CLR, Thorvald 5-6H2,
• 29708, loc, CLR, Cuskelly 5-7H2,
• 29554, 1,018, CLR, Bridger 4-14H2, t1/16; cum 278K 6/18;
• 29553, 1,160, CLR, Bridger 5-14H, t9/15; cum 319K 6/18;
• 29552, 1,977, CLR, Bridger 6-14H1, t9/15; cum 228K 6/18; jump in production after neighboring wells fracked;
• 29551, 1,311, CLR, Bonneville 4-23H, 55 stages; 9/3 million lbs, t8/17; cum 143K 4/18;
• 29550, 1,407, CLR, Bonneville 5-23H1, was a DUC; now on CONF; t8/17; cum 157K 4/18;
• 29549, 1,518, CLR, Bonneville 6-23H1, was a DUC; now on CONF; and 10,023 bbls in 8/17; t8/17; cum 165K 4/18;

2013

• None

2012 

• 22203, 1,430, CLR, Cuskelly 2-7H, t3/14; cum 174K 4/18;

Updates

June 27, 2018: huge Mountain Gap wells being reported. See this post.

October 22, 2017: lots of activity in this field in 7/17 - 8/17; data updated. 

August 22, 2015: see first comment --

Some interesting things going on with all these new wells you talk about. None of the nine new wells have ever been on confidential so you have access to their well files.

The 6-well pad is on a 2560-acre unit; the last three Bridger wells are on a 1280-acre spacing unit. The Bonneville wells are being drilled right now as 2 MB wells and 1 TF1 well. The Bridger wells appear to have been fracked? They are MB TF1 & TF2 wells. Oil has already been hauled off for two of the Bridger wells with the note on the form that this is NOT the first sale of oil, also noted something about coil tube sale? What does that mean?  [Comment: readers will have to weigh in; I do not know but I will see what I can find out.]

Of the new wells, same layout MB TF1 & TF2, it appears that they must be in a big hurry to drill as it looks to me like the day NDIC approved the permits the surface casing for all three had already been set? If I read the file correctly.

Also if you look in the new files the plan and profile for the wells on the drilling unit show a detail I don't think I have seen before. There are ovals drawn perpendicular to the well bore and the further north they go the larger they become. You suppose those ovals represent the frack effort they intend to achieve?

Also note on the gas capture form they estimate that the initial daily flow of oil, not counting gas, is just over 2,100 barrels a day each for all three. (I don't understand gas production numbers.) That would be a high IP rate for a CLR well let alone that rate for any period of time. Maybe for design purposes they overstate anticipated production? When you look at the area map of these wells you realize the north end of these wells are not far from the south end of a very special Whitman well in the Oakdale field. It will be interesting to follow over the next year or so to see how these wells turn out. [Comment: lots of observations and comments; I will do what I can. Hopefully, other readers will weigh in -- provide some thoughts.]

Original Post (August 21, 2015)

Rattlesnake Point is a very irregularly shaped field, fairly small (15 sections), and not very active except in a couple of locations. It is located in the northwest corner of Dunn County. The most active area is in section 23-146-96, in the southeast corner of Rattlesnake Point where there are no less than eleven (11) wells (or permits) currently sited and CLR added another three to this section on August 21, 2015, three more Bridger wells.

I track the Bonneville and Bridger wells here.