Random Update Of Completed DUCs from 3Q15

I'm still trying to get a handle on whether DUCs are such a big deal or not. I really don't know. I struggled with that question back in December.

Last night, I updated the wells that came off the confidential list in 4Q15. One can scroll through that list and see how many wells are still SI/NC (DUCs).

This morning, I updated the DUCs that came off the confidential list in 3Q15. One can scroll through that list and see how many wells are still SI/NC (DUCs).

Since the last update (and I don't recall when that update was done), these are the DUCs that have been completed (I may have missed a few but, if so, I will pick them up next time):


30884, 1,097, XTO, Sorenson 31X-28G, Siverston, t12/15; cum 2K 4 days;
30682, 841, MRO, Bingo 24-10TFH, Reunion Bay, t1/16; cum 1K 2 days;
30681, 1,827, MRO, Marjorie 14-10H, Reunion Bay, t12/15; cum 14K 24 days;
29797, 2,084, BR, Morgan 24-21MBH, Pershing, t12/15; cum 15K 7 days
29796, 1,723, BR, Kirkland 24-21MBH, Pershing, no production data, t12/15; cum 16K 21 days;
29780, 745, Abraxas, Ravin 8H, North Fork, t11/15; cum 24K 46 days;
29795, 1,283, BR, Morgan 24-21TFH, Pershing, t1/16; cum 1K 38 days;
29779, 833, Abraxas, Sten-Rav 1H, North Fork, t11/15; cum 31K 12/15;
29579, 1,270, XTO, Satter 31X-1CXD, Sivertson, t12/15; cum 4K 8 days;
29990, 686, Abraxas, Stenehjem 5H, North Fork, t11/15; cum 28K 12/15;
29578, 1,479, XTO, Satter 31X-1G2, Sivertson, t12/15; cum 8K 12 days;
30453, 841, Hess, EN-D Cvancara S-154-93-0904H-9, Robinson Lake, t8/15; cum 50K half-months only;
30718, 1,030, Hess, EN-D Cvancara S-154-93-0904H-8, Robinson Lake, t9/15; cum 61K 12/15;
30787, 1,592, XTO, Rita 44X-34CXD, Tobacco Garden, t12/15; cum 4K 5 days;
30940, 2,405, BR, CCU Bison Point 34-34MBH, Corral Creek, t12/15; cum 7K 10 days;
30697, 2,044, MRO, Mikkelsen 11-14H, Reunion Bay, t12/15; cum 21K 21 days;
29389, 1,045, XTO, Johnsrud Federal 34X-14G, Bear Den, t10/15; cum 3K 4 days; no production last two months
29390, 1,067, XTO, Johnsrud Federal 34X-14C,  Bear Den, t10/15; cum 10k 15 days over three months;
29392, 614, XTO, Johnsrud Federal 34X-14D, Bear Den, t11/15; cum 9K 10 days over three months;
29433, 1,464b cum 23K 14 days over 2 months;
29517, 2,669, BR, LaCanyon 8-8-34MBH ULW, Blue Buttes, t8/15; cum 51K 12/15;
29577, 1,290, XTO, Satter 31X-1D, Siverston, t12/15; cum 1K 4 days;
29494, 274, XTO, Rita 44X-34H, Tobacco Garden, t1/16; no production data,
29493, 1,489, XTO, Rita 44X-34BXC, Tobacco Garden, t1/16; no production data, 
26774, 419, Zavanna, Double Down 24-13 4TFH, East Fork, t1/16; cum --  
26773, 687, Zavanna, Double Down 24-13 3TFH, East Fork, t1/16; cum 11 bbls 3 days
30454, 1,516, Statoil, Panzer 22-23 6H, Alger, t1/16; no production data,
29875, 1,483, BR, Morgan 41-28TFH ULW, Johnson Corner, t11/15; cum 19K 21 days over 2 months;
26772, 2,058, Zavanna, Double Down 24-13 2H, East Fork, t1/16; cum --
30455, 660, Statoil, Panzer 22-23 7TFH, Alger, t1/16; no production data,
29874, 2,004, BR, Morgan 41-28MBH, Pershing, t12/15; cum 19K 15 days over 2 months;
30361, 1,239, CLR, Patterson Federal 6-13H, Camp, t1/16; cum 647 bbls 3 days over 4 months
30057, 499b cum 6K 18 days;
29962, 142, SHD, Magnum 36-11-TF2, Clarks Creek, t11/15; cum 9K 42 days over 3 months
30056, 357, SM Energy, Jessica 3B-26HN, West Ambrose, t12/15; cum 5K 18 days
30055, 508, SM Energy, Ashley 3-26HS, West Ambrose, t12/15; cum 11K 27 days over 2 months;
30054, 281, SM Energy, Rilye 3B-26HS, West Ambrose, t12/15; cum 6K 18 days;        

Trends:

• even though these wells have been completed, look at how few days they have been on-line; they are completed and then "shut in" for many days each month 
• pad drilling
• big names like EOG, Statoil, not often seen 

Week 7: February 14, 2016 -- February 20, 2016

For me, without question, unfortunately, the top "story" this past week was learning that Bakken crude oil was selling for $16 / bbl. That's 38 cents a gallon. What does a gallon of milk cost. With oil so cheap, why is gasoline still (relatively) so expensive? Venezuela raised the price of gasoline to 15 cents/gallon from one-tenth of a penny per gallon, the previous day.

The real top story, however, might be the fact that Watford City's new high school opened last week, a $53 million project. Wow.

Operations
38 active rigs; is this the low?
Although daily production down slightly, ND crude oil production in December exceeded previous month

Pipelines
Is the Enbridge Sandpiper pipeline dead?

DUCs
Random update of completed DUCs in 4Q15 since previous update 
Fracklog at 945, down slightly

Refinery operations
Calumet has completed its expansion at Great Falls
MDU and Calumet regarding the Dickinson refinery (same link)

Bakken economy
Watford City's new high school opens
Update on mandated closure of man-camps
Renaissance On Main nearing completion
Free tuition for WSC students extended to four area county high school graduates  

Miscellenous
Crude oil build and increasing gasoline demand 
The crude oil build and the pricing of Bakken oil 
US gasoline stocks surge  

Ramblings On A Saturday Morning -- Sort Of About The Bakken -- February 20, 2016

Updates

March 19, 2016: in the original post below I give a fair amount of space to the announcement that Carrier (the HVAC company) is moving to Mexico, lock, stock, and barrel, -- or should I say, and air conditioner? Whatever. Today in The New York Times a look at the personal pain this move is causing. There's a simple fix for this and it doesn't involve tariffs, but if I can think of if, so can the best and the brightest at Foggy Bottom and the Commerce Department.
 

Original Post

 

I'll get this off my chest and then get back to what I had planned to do. Yesterday I linked a pretty good Chicago Tribune article with regard to what the headline writer called the "Bakken bust."

Having just visited the Bakken I was able to see firsthand how little "visible" activity there was. What is not being reported is the incredible amount of infrastructure that is now in place. Folks, I think, forget, (I certainly do) that the US still imports 5 million bopd. The shale oil in Texas, Oklahoma, and North Dakota is not going to go away (except that amount being lifted to the surface).

From what little I know about the oil and gas industry it looks like the only other major US source of oil is federal Gulf of Mexico oil which will hit record production in 2017. So, just how much oil are we talking about? I assume it's a gazillion bopd that will end on-shore drilling as we know it. So, let's look. From the EIA two days ago:

U.S. Gulf of Mexico (GOM) crude oil production is estimated to increase to record high levels in 2017, even as oil prices remain low.

EIA projects GOM production will average 1.63 million bopd in 2016 and 1.79 million bopd in 2017, reaching 1.91 million b/d in December 2017. GOM production is expected to account for 18% and 21% of total forecast U.S. crude oil production in 2016 and 2017, respectively.

Production in the GOM is less sensitive than onshore production in the Lower 48 states to short-term price movements. However, decreasing profit margins and reduced expectations for a quick oil price recovery have prompted many GOM operators to pull back on future deepwater exploration spending, reduce their active rig fleet by scrapping and stacking older rigs, and restructure or delay drilling rig contracts. These changes added uncertainty to the timelines of many GOM projects, with those in the early stages of development at greatest risk of delay or cancellation.

What? Less than 2 million bopd by the end of 2017. Under incredibly adverse pricing conditions right now, the Bakken is producing 1 million bopd from an area smaller than my little finger compared to the size of the US Gulf of Mexico. Seriously. Bakken operators have dropped from 200 rigs to 40 rigs, and they have limited drilling to a couple of areas around Williston and Watford City, and they are still producing one million bopd. If the Gulf of Mexico is forecast to move toward 2 million bopd by the end of 2017, I would assume something similar in the Bakken. It appears that in both the Bakken and the GOM the costs have been "sunk" as they say. Now it's simply a matter of managing production. 

Much more could be written, but time to move to the second issue.

As noted above, the oil isn't going anywhere. There are something like 13,000 wells that need to be managed in North Dakota, all of them within a couple of hours driving time from Williston, Tioga, and Watford City. Those 13,000 wells will require a minimum workforce to maintain those wells. Fracking of DUCs continues and that will require a minimum workforce, and it's hard to imagine there being no active rigs in the Bakken. One cannot outsource drilling Bakken oil to Mexico. One cannot move the Bakken shale to south of the border where it can be drilled more cheaply. The Bakken is the largest continuous reservoir of oil ever discovered in the lower 48 and it isn't going anywhere.

But elsewhere, there is a real "bust" going on and those are the jobs in the heartland of America that are being moved to Mexico. The other day I mentioned that the air conditioning company Carrier was leaving Indiana -- completely leaving Indiana -- to move to Mexico. I was unaware that a second company in Indiana was doing the same thing. Along with Carrier, the company that provides microprocessor-based controls for the HVAC and refrigeration industries for Carrier, will be moving to Mexico:

In a move guaranteeing that 2,100 workers will be out of a job, two Indiana plants have plans to move operations to Mexico.

The companies, who make products for heating, ventilating and air conditioning (HVAC), will begin layoffs within the next two years.

Carrier Corp. said it would shutter its Indianapolis plant employing 1,400 workers and move its manufacturing to Mexico. The plant's workers would be laid off over three years starting in 2017.

United Technologies Electronic Controls (UTEC) also announced Wednesday that it will move its Huntington manufacturing operations to a new plant in Mexico, costing the northeastern Indiana city 700 jobs by 2018. Those workers make microprocessor-based controls for the HVAC and refrigeration industries.

Carrier Corp. and UTEC are both units of Hartford, Connecticut-based United Technologies Corp.

Carrier's president of North American HVAC systems and services, Chris Nelson, said the company is closing the Indianapolis plant in response to "the continued migration of the HVAC industry to Mexico." He said that migration has included the company's suppliers and competitors.

United Steelworkers president Chuck Jones said Carrier's move is disgraceful considering that it has been in Indianapolis since the early 1950s. He said the 1,400 affected workers are scared.

Based on that article, it sounds like the entire American HVAC industry is moving to Mexico: "the continued migration of the HVAC industry to Mexico."

Again, ObamaCare was not mentioned in the article.

It is likely that we may see more jobs moving to Mexico even as some American jobs are returning to the US from China. This may be completely unrelated, but it should be noted that over the past ten years the US has been improving the infrastructure required to get energy (natural gas) to Mexico. With adequate (and inexpensive) energy in Mexico, the country will be able to increase its manufacturing capacity.

The best way to encourage Mexicans not to cross the US border illegally is to provide them jobs in their own country. It looks like Carrier and UTEC are doing just that since the politicians refuse to address the issue. 

Oh, by the way, back to the EIA article on "record" production forecast for the Gulf of Mexico by the end of 2017. Here's the graph (color me very, very unimpressed). The record production might be 100,000 bopd more than what it was in 2009 before the Obama administration .... don't get me started ... if that's what the EIA is banking on going forward, I'm not worried about the Bakken in the long term.

If it reaches a "record high" in 2017, does that suggest production could level off after that, perhaps decrease, because of all the canceled / deferred deep-sea projects.

By the way, I've searched the web and can find no stories telling us where President Obama is today. On a day when so much is happening (South Carolina, Nevada, a funeral, just for starters) it is interesting that the president cannot be located. Doubly interesting considering his narcissism.

Random Update On DUCs From 4Q15 -- February 19, 2016

I'm still trying to get a handle on whether DUCs are such a big deal or not. I really don't know. I struggled with that question back in December.

Tonight, I updated the wells that came off the confidential list in 4Q15. One can scroll through that list and see how many wells are still SI/NC (DUCs).

Since the last update (and I don't recall when that update was done), these are the DUCs that have been completed (I may have missed a few but, if so, I will pick them up next time):

30940, 2,405, BR, CCU Bison Point 34-34MBH, Corral Creek, t12/15; cum 7K 10 days;
30938, 2,445, BR, CCU Bison Point 24-34MBH, Corral Creek, t1/16; cum --
30937, 2,164, BR, CCU Bison Point 24-34TFH, Corral Creek, t1/16; cum 3K 15 days;
31004, 207, XTO, Rita 44X-34HXE, North Tobacco Garden, t1/16; cum --
30788, 679, XTO, Rita 44X-34D, Tobacco Garden, t1/16; cum --
30673, 503, Hess, BL-Odegaard-165-95-2116H-7, Beaver Lodge, t12/15; cum 8K 14 days;
30674, 458, Hess, BL-Odegaard-156-95-2116H-8, Beaver Lodge, t1/16; cum --
30672, 565, Hess, BL-Odegaard-156-95-2116H-7, Beaver Lodge, t12/15; cum 12K 21 days;
31245, 825, XTO, Sorenson 31X-28D, Siverston, t11/15; cum --
30671, 619, Hess, BL-Odegaard-156-95-2116H-6, Beaver Lodge, t12/15; cum 13K 26 days;
30167, 423, Hess, AN-Prossr-152-95-1102H-10, Antelope, Sanish pool, t1/16; cum 8K 17 days;
30164, 1,113, Hess, AN-Prosser-152-95-1102H-7, Antelope, Sanish pool, t12/15; cum 24K 12/15;
30165, 1,376, Hess, AN-Prosser-152-95-1102H-8, Antelope, Sanish pool, t12/15; cum 31K 28 days;
31177, 329, CLR, Jefferson 10-17H1, Crazy Man Creek, t12/15; cum 2K 13 days;
30166, 1,134, Hess, AN-Prosser-152-95-1102H-9, Antelope, Sanish pool, t12/15; cum 29K 25 days;
31175, 359, CLR, Jefferson 8-17H1, Crazy Man Creek, t12/15; cum 6K 20 days;
29278, 945, Hess, BL-Iverson C-155-96-1423H-5, Beaver Lodge, t11/15; cum 42K 12/15;
31098, 444, Hess, BL-Iverson C-155-96-1423H-2, Beaver Lodge, Devonian, t12/15 cum 12K 29 days;
30913, 2,453, XTO, Johnsrud Federal 34X-14F, Bear Den, t1/16; cum --
29862, 2,035, XTO, Johnsrud Federal 34X-14AXB, Bear Den, t1/16; cum --
29861, 2,661, XTO, Johnsrud Federal 34X-14A, Bear Den, t1/16; cum --
30684, 1,005, MRO, Charlie 24-10H, Reunion Bay, t12/15; cum 6K 12 days;
30041, 2,240, XTO, Deep Creek Federal 43X-5G, Lost Bridge, t11/15; cum 16K 21 days;
30043, 2,238, XTO, Deep Creek Federal 43X-5H, Lost Bridge, t12/15; cum 14K 18 days;
28896, 1,486, Zavanna, Blackjack 24-13 1H, East Fork, t12/15; cum 4K 10 days;
28895, 1,135, Zavanna, Blackjack 24-13 2TFH, East Fork, t1/16; cum --
30047, 1,186, XTO, Thorp Federal 11X-28E, Little Knife, t10/15; cum26K 12/15;
30046, 1,686, XTO, Thorp Federal 11X-28A, Little Knife, t9/15; cum 30K 12/15;

Remember, these are wells that came off the confidential list between October 1, 2015 and December 31, 2015, inclusive. It is not yet the end of February and these wells have already been completed.

Three trends:

• pad drilling
• Hess is keeping on top of things, as is XTO, other operators in the Bakken, not so much
• some great IPs

Also note: EOG is not on the list.

Not Ready For Prime Time -- Thoughts On DUCS -- NY Times And Comments -- December 27, 2015

Note: this has been sitting in draft for two months now.  I didn't know what to do with it. It rambles. It is very poorly written. It is not ready for prime time. It was a response to a reader some months ago who sent me a New York Times article. But I'm tired of sitting on it, so I will post it to simply get "rid of it." 

This was my unedited reply to a reader regarding an article in the New York Times on the subject of DUCs. Prior to posting, the reply will be edited for punctuation, grammar, etc., but I plan to keep the basic observations unchanged:

Another great article in the Times. Years ago, once I realized that the front page of the Times was their op-ed page, it was much more enjoyable to read the newspaper. They really do write well, and if weren't so dang expensive (something like $7.00 now) I would subscribe to the Sunday edition.

The Sunday Times was required by our 10th grade social studies teacher for which I am eternally grateful.

Nice, nice article on DUCs. Many, many story lines.

1. This article suggests DUCs can be brought on line quickly; others say not. I'm in the camp that DUCs can be brought on very, very quickly. Anyone who says otherwise, in my mind, has not been paying attention and/or following the Bakken very closely. In this case the Times got it right.

2. The writer says this but I don't think he/she offers his/her own conclusion:

Some analysts say oil companies like Anadarko, EOG Resources and Continental Resources may collectively risk suffocating the very price revival they anticipate by releasing abundant new supplies once prices inch up. Others say the eventual impact would be small and short-lived, but since the industry has never used this strategy before, no one can be sure. 

There are two issues here.

The first issue has to do with profit, price, etc. The price one sells oil for does not matter: the only two things that ever matter is survivability and profitability, and profitability is based on margins, not the price of oil. Right now, the only issue is survivability.

The second issue has to do with volatility of the price of oil and the geopolitics of oil (using oil as a weapon which the Mideast has historically done): the US is now the swing producer for light oil and as such, especially with all those DUCs, and all those fields not now being exploited.

Barring a major geopolitical event anywhere -- but particularly in the Mideast -- and especially now with the ban on US crude oil exports repealed -- it's hard not to see the global oil market as a much more efficient market, responding much better to real supply and demand, rather than responding to rhetoric from self-serving dictators and oligarchies, which was often the norm in the past. Saudi simply had to say it was going to increase / decrease production and commodity markets reacted even before anything "concrete" had happened.

3. I think the Times writer focused on the profitability and survivability of US oil companies (the article is in the "energy and environment section"; it seems as if the article should have been in the business / finance section). In the "energy and environment section" the article should have been focused on a bigger picture -- what DUCs mean for the global energy environment. I have little interest in individual companies in the oil and gas industry (with regard to the blog) except as a means of following the industry to see how this will all play out.

4. I'm surprised we haven't seen more articles on what inexpensive energy means to growing economies and to the US. All this natural gas and all this oil at really inexpensive prices is coming from a reliable source, and from a country with a democratic model of government. This should be an incredibly good news story and yet this seems to be another article on whether individual companies will survive, or how they will survive, and their profitability.

5. I plan to write a post on whether "DUCS" in the Bakken are that big a deal. I was going to post the question / essay this weekend, but I need at least one more month of data from the Director's Cut -- to see the status of Bakken DUCs after another month. As you know, NDIC gave operators an additional year to complete their wells. And yet, after reviewing the SI/NC (DUCS) for the past year, I don't think DUCs mean a thing in reality. Allowing an extra year was incredibly important to the oil companies in North Dakota "just in case," but in fact it appears that companies are not delaying completion all that long. In the good ol' days, they drilled a well and completed it as quickly as logistically possible and NDIC / operators crowed optimistically how fast they could get oil to the market from the initial spud -- often measured in weeks. It looks like the little I know about it, the DUCs are adding a few months; big deal. Not.

6. The DUCs also solved another problem: the perception that the US was running out of storage space. That turned out not to be true, and even if it was, it is now resolved with the repeal of the ban on US crude oil exports. There is a huge amount of storage capacity globally and if Cushing starts to fill up again, there are many places to store it overseas. Vitol with its new storage facilities in South Africa is that story. In the old days, oil arriving at the Gulf Coast, was transported north by pipeline to Cushing. Now, new pipelines and flow reversal of existing pipelines mean that Cushing oil is now going to the Gulf Coast.

7. This is a great story for New Yorkers who had not yet heard of DUCs, unlike those who have been following the US shale story closely. But as the writer said, "... since the industry has never used this strategy before, no one can be sure" -- or another way of putting it: we are in uncharted water.

8. I think it's a fascinating story. At the end of the day, it's not about the price of oil, it's about the margin. This is a great time to be a privately-held company in the oil and gas industry if one has the deep pockets and/or financial backing of bankers/private investors (hedge funds) to keep going for the next year or two. Publicly-traded companies are looking at each quarter and that has to be very, very challenging.