Week 45: November 8, 2015 -- November 14, 2015

The top story of the week: oil nears $40/bbl.

I think this is the most under-talked about story in the Bakken right now, the fracklog. Everyone is concentrating on the "number," when, in fact, that's just a small part of the overall story. Here some things to keep in mind when thinking about these 1,000+ wells waiting to be fracked:

• they are all in the sweet spots of the Bakken
• operators have spent 7+ years perfecting completion techniques, resulting in huge 90-day production, and then 1-year production profiles
• every well in the Bakken -- especially in the sweet spots -- will create a halo effect on neighboring wells 
• the infrastructure is most robust in the sweet spots of the Bakken
• 3 - 5 days to frack; once decision is made to frack, oil will moving fairly quickly after that

Operations
Spectacular production! 
Water-flooding the Bakken 
The Red Queen has not fallen off the treadmill; it will take awhile for the Red Queen to fall off her treadmill;

Fracking
Fracklog at 1000+ -- SeekingAlpha
Halo effect 
Increased volumes of fracking sand being ordered from suppliers
Halo effect?
Fracking led to a lot of jobs

Refining
Update on the Dickinson refinery 

Miscellaneous
Keystone XL analysts need to be looking west, not east
Number of North Dakota millionaires jump
Random fallout from the Keystone TKO

I Would Love To Point Something Out, But My Opinion + $1.98 Will Get You A Starbucks Coffee -- November 15, 2015

The Wall Street Journal is reporting:

The world’s biggest energy companies have doubled down on their promise to protect dividends, despite a precipitous drop in profits this year, driven by a steep decline in oil prices.

In the first nine months of the year, the four oil companies known as the supermajors— Royal Dutch Shell PLC, Exxon Mobil Corp. , Chevron Corp. and BP PLC—have seen their collective earnings fall by more than 70% from a year earlier. Over the same period, they have handed out nearly $28 billion to their shareholders, a roughly 10% increase from the 2014 period.

“The dividends and payouts to shareholders have no reason to be as volatile as the oil price,” said Patrick Pouyanné, chief executive of France’s Total SA, the world’s fourth-largest oil company by production, at a conference in Abu Dhabi this week.

He added that it would be a “terrible mistake” to remove dividends and a sign that “we aren’t good at our business.”

Oil prices are currently trading slightly above $40 a barrel—their lowest levels since August—and more investment banks, energy companies and analysts don’t see the price rising above $60 a barrel until 2017. The International Energy Agency said Tuesday oil prices would slowly rise to $80 a barrel by 2020, but also outlined a scenario in which they stayed at $50 a barrel.

This has raised questions on a potential cash crunch at oil companies, a problem the firms acknowledge and say they are taking steps to address. The companies say they retain robust balance sheets that give them flexibility to raise more funds to help cover costs when needed.

Much more at the link.

And the usual disclaimer. Yada, yada, yada.

The Wall Street Journal is also reporting that things don't look so rosy for Houston's pensions:

Houston is weathering a prolonged plunge in oil prices, but the city may have an even bigger problem: its pensions.

Though economic growth has only slowed, not stalled, in Texas’ largest city, its finances are showing what several investors and analysts describe as warning signs.

Those include a rapidly growing gap in funding its retirement plans for public workers and a limit on its revenue-raising capabilities imposed by a voter-approved cap on property taxes.

The $3.2 billion pension-funding gap is threatening Houston’s Aa2 credit rating from Moody’s Investors Service, hurting demand for its debt and emerging as an issue in the city’s mayoral race.

Moody’s this summer warned it may downgrade the city’s debt if Houston fails to address its pensions, noting the cap limits the city’s financial flexibility.

Much more at the link.

Peak Oil? What Peak Oil? -- November 15, 2015: It's Pretty Impressive To Do With 70 Rigs What It Used To Take 200 Rigs And With 1,019 Wells Drilled To Depth But Not Fracked

This year, September, 2015:

• rig count: 71
• producing wells: 13,025
• 1,162,253 bopd
• October, 2015 permitting: 152

One year ago, September, 2014:

• rig count: 193
• producing wells: 11,741
• 1,184,635 bopd
• October, 2014, permitting: 328

Delta: 1,184,635 - 1,162,253 = 22,382 / 1,184,635 = a whopping 1.9% increase, year-over-year.

Pricing:

• Last year, spot price, November 14, 2014: $58.75
• This year, spot price, November 13, 2015: $31.25

Reporters With Blind Spots -- November 15, 2015; Cheap Gas Means One Meal Out/Month For Family Of Four -- Big Deal

Another example of a reporter (or reporters) having a blind spot):

Headline in yesterday’s WSJ, November 14, 2015, front page, below the fold: “Cheaper Oil Fails to Yield Holiday Cheer for Retailers.”

The writers note that the protracted slide in oil prices is delivering little of the expected benefit to US retailers. There are two points to make here. First, the price of oil, which we’ve talked about many times before. Second, the blind spot, which we've also talked about before.

12,000 miles per year — at least that’s what everyone tells their insurance company. At 30 mpg that works out to about 400 gallons of gasoline / year. At $3.59 / gallon that works out to $1,436. At $1.89 / gallon that works out to $756. The delta is $680 or $60 / month or $2 / day, exactly the cost of a tall Starbucks coffee. Sixty bucks is one meal for a family of four at Applebee’s. Inexpensive gas is not the issue.

By the way, with gas so inexpensive, people are driving more, so let’s say that 12,000 miles/year becomes 14,000 miles / year. That works out to 467 gallons / year or $882 (at $1.89/gallon). $1,436 - $882 = $550 / year extra, even less than the $680 quoted above.

Bottom line: analysts are putting too much emphasis on the price of gasoline. I can guarantee you that the savings in energy won’t trickle down to how much you pay for a bag of potato chips.

What surprises me is that even the Wall Street Journal misses the bigger story. Let’s say that retailers are not seeing the benefits of cheaper gasoline. Why? One word: ObamaCare.

Almost everyone who puts 12,000 miles on their SUV are also seeing a $500 increase in their ObamaCare monthly premiums.

Another example of East Coast reporters, young, no families, no experience running a business and completely missing the impact ObamaCare has on middle America. A blindspot.

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OPEC: A Sham

We are now seeing that OPEC was a sham ever since it was created; it is run by Saudi and Saudi alone.

When "OPEC" controlled things, the various members produced well beyond their quotas and Saudi simply looked the other way; they were making so much money, anyway.

Now that we have a real glut and every last OPEC country wants quotas / production cut way back, there's only one country -- Saudi Arabia -- saying they won't cut production.

It was always obvious to anyone paying attention, but it's now obvious to even those who don't pay attention, there is no OPEC. Simply Saudi Arabia.

Venezuela. Tick, tick, tick.

Eleven Wells Came Off The Confidential List Saturday; QEP With Four High-IP Wells; Liberty Resources With Two Nice Wells; CLR With One Nice Bakken Well -- November 15, 2015

Monday, November 16, 2015

• 31099, SI/NC, Hess, BL-Iverson C-155-96-1423H-4, Beaver Lodge, no production data,

Sunday, November 15, 2015

• 29277, SI/NC, Hess, BL-Iverson C-155-96-1423H-3, Beaver Lodge, no production data,
• 31065, SI/NC, SM Energy, Stever 1-16H, Poe, no production data,

Saturday, November 14, 2015 (considering the current environment, this is fairly noteworthy)

• 20929, 639, CLR, Foster 1-28H, Crazy Man Creek, t8/15; cum 20K 9/15;
• 28579, SI/NC, Petro-Hunt, Dolezal 145-97-7D-6-1H, Little Knife, no production data,
• 28820, 755, Triangle Petroleum, Simpson 151-102-5-8-10TFH, Elk, t5/15; cum 28K 9/15;
• 29310, 1,015, Liberty Resources, ND State 158-95-21-28-2MBH, McGregor, t6/15 cum 81K 9/15;
• 29313, 527, Liberty Resources, ND State 158-95-21-28-1MBH, McGregor, t5/15; cum 43K 9/15;
• 29714, 2,014, QEP, MHA 8-06-01H-149-92, Heart Butte, t6/15; cum 53K 9/15;
• 29715, 1,624, QEP, MHA 6-01-01H-149-92, Heart Butte, t6/15; cum 54K 9/15;
• 29716, 1,910, QEP, MHA 6-32-29H-150-91, Heart Butte, t6/15; cum 58K 9/15;
• 29717, 800, QEP, MHA 8-32-29H-150-91, Heart Butte, t6/15; cum 42K 9/15;
• 31066, SI/NC, SM Energy, Rini 1X-16HB, Poe, no production data,
• 31098, SI/NC, Hess, BL-Iverson C-155-96-1423H-2, Beaver Lodge, no production data,

******************************************

29717, see above, QEP, MHA 8-32-29H-150-91, Heart Butte:

Date	Oil Runs	MCF Sold
9-2015	20324	10127
8-2015	15612	8214
7-2015	1255	0
6-2015	4310	0

29716, see above, QEP, MHA 6-32-29H-150-91, Heart Butte:

Date	Oil Runs	MCF Sold
9-2015	21349	11379
8-2015	19965	12740
7-2015	10189	0
6-2015	6623	0

 29715, see above, QEP, MHA 6-01-01H-149-92, Heart Butte:

Date	Oil Runs	MCF Sold
9-2015	13791	7406
8-2015	16083	7998
7-2015	20170	0
6-2015	4007	0

29714, see above, QEP, MHA 8-06-01H-149-92, Heart Butte

Date	Oil Runs	MCF Sold
9-2015	17356	9763
8-2015	18417	9688
7-2015	17197	0

29313, see above, Liberty Resources, ND State 158-95-21-28-1MBH, McGregor:

Date	Oil Runs	MCF Sold
9-2015	7533	8176
8-2015	10668	2539
7-2015	12481	14726
6-2015	6834	10307
5-2015	4478	1643

29310, see above, Liberty Resources, ND State 158-95-21-28-2MBH, McGregor:

Date	Oil Runs	MCF Sold
9-2015	15635	11580
8-2015	14377	1408
7-2015	15711	20461
6-2015	25996	33096
5-2015	8004	5502

28820, see above, Triangle Petroleum, Simpson 151-102-5-8-10TFH, Elk:

Date	Oil Runs	MCF Sold
9-2015	4817	0
8-2015	5734	0
7-2015	8283	0
6-2015	2599	0
5-2015	6157	0

20929, see above, CLR, Foster 1-28H, Crazy Man Creek:

Date	Oil Runs	MCF Sold
9-2015	10160	0
8-2015	8531	0
7-2015	425	0