Wednesday, May 5, 2010
NDIC Hearing Dockets for May, 2010, Posted
An abbreviated summary for the NDIC hearing dockets scheduled for May, 2010, has been posted. Again, this is for my own use, and there may be typographical errors. For the official dockets, go to the NDIC website.
SM (St Mary) Energy
Earnings
December, 2010 Corporate Presentation
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Feature Article In Oil And Gas Investor, August 2, 2014
Doubling Down On Divide County: SM Energy Bets on More Aces in Bakken Frontier
Link here.
SM Energy Co.’s buyout of Baytex Energy Corp. in North Dakota further demonstrates Bakken and Three Forks producers’ confidence in what had been considered the play’s frontier—Divide County.
A neighbor to SM’s and Baytex’s leasehold in SM’s “Gooseneck” play area in central Divide County is Denver-based American Eagle Energy Corp. “The perception of Divide County had been that it is not as good a performer,” Tom Lantz, American Eagle chief operating officer, said in Oil and Gas Investor’s April 2014 cover story, “The Williston Basin.” “The reason is that the reservoir in our area is normally pressured, while it is over-pressured in the deeper part of the basin. That pressure is what drives those spectacular initial rates you are used to seeing there.”
But the Bakken and Three Forks are at a shallower depth—about 8,000 feet—in Divide County, rather than at about 11,000 feet in the center of the Williston Basin in McKenzie County to the south, so the cost of drilling is less, Lantz said.
Also, because it is shallower and under less weight, less-expensive sand appears to work fine as proppant, rather than ceramic. Ultimate recovery is some 450,000 barrels of oil equivalent (BOE) per well landed in Three Forks and 350,000 BOE from wells landed in Bakken in American Eagle’s leasehold—less than the more than 600,000 BOE proved by wells in the basin’s center. But, Lantz said, American Eagle’s Divide County wells cost some $6 million rather than $9 million. “The economics are very good.”
Houston-based SM’s $330.5-million offer for Baytex’s North Dakota position involves 89, producing, operated wells, all in Divide County except for five in Williams County. SM will gain 61,000 net acres in the two counties, primarily in Divide and 70% held by production. Four additional Baytex wells are in confidential status and an additional five are being drilled, according to state records. Baytex has permits for five more wells not yet spud.
Calgary-based Baytex began drilling in North Dakota in October 2009. The deal will bring SM’s Bakken and Three Forks production from 16,500 barrels of oil equivalent a day to 19,700, 91% oil. The deal is to close in this quarter. SM will gain proved and probable reserves of 53.5 million BOE.
In the Gooseneck area, Baytex’s leasehold is in the middle and east of the SM position and is to bring SM’s exposure to this Three Forks play—with potential upside from successful completions in the overlying Bakken as well—to 97,000 net acres.
SM has been testing completions in Gooseneck with more sand per foot of horizontal wellbore. For example, on a roughly 10,000-foot lateral, SM had used some 192 pounds of sand per foot, the company reports; the new completion uses 265 pounds per foot. For the same length of lateral and when factoring in SM’s savings from a program toward reducing drilling days, the old well cost about $7 million; the new well, $6.2 million, it reports. Peak production from the new well is about 440 BOE a day; the old well, about 330. In short, the company reports, sand per foot has grown 38% and peak production has grown 33%.
News
May 17, 2017: postpones decision to sell assets in Divide County due to poor market conditions (SM Energy has elected to leave North Dakota; to focus on Eagle Ford)
January 7, 2015: SM Energy announces it will exit mid-Continent (Oklahoma); close Tulsa office; concentrate on core assets in the Bakken and the Eagle Ford.
May 12, 2014: mentions that it has sold non-core Bakken assets; may be down to 159,000 net acres in the Bakken.
April 5, 2012: update on SM wells in Poe oil field.
March 12, 2012: update on SM and Stark County.
February 1, 2011: SeekingAlpha on SM: well-positioned.
January 31, 2011: SM raised $350 million through senior notes; originally was to be $250 million.
January 25, 2011: Preliminary production and proved reserve estimates for 2010
- Increased Bakken/TFS by 40% on sequential basis (4Q over 3Q)
- Replaced nearly 350% of its production through drilling
December 23, 2011: SeekingAlpha/Zack's rating on SM.
Original Posting
Strong earnings report for 1Q10
Net income for first quarter, 2010, was $126 million ($1.96/share) vs a net loss of $88 million ($1.41/share) for the same period one year ago.
St Mary's average realized sale price for oil/gas was $72.73/$6.15 this past quarter vs $34.40/$4.00 one year ago.
Daily production of oil actually decreased seven (7) percent, from 18 million bopd to 17 million bopd, year over year.
Yesterday I noted the "marketing expense" associated with EOG and its five-fold increase year-over-year. So, what did St Mary report for marketing? On the revenue side, marketing revenue almost doubled from $14 million to $23 million. Interestingly enough, that was offset by an equal amount in marketing expense: $13 million same period one year ago, and $22 million first quarter this year.
However, much of St Mary's gain came from selling non-core assets for a one-time gain of $121 million. Without that $121 million gain, this year's first quarter income would have been $239 million, but again, better than last year's revenue of $199 million.
With regard to NDIC hearing dockets, St Mary is more active than usual this month (May) compared to past several months. St Mary had nothing before the commission in March and April, but did have some cases in February.
Tuesday, May 4, 2010
American Energy: Request for Another 15 Wells in Williams County
In the April hearing dockets before the North Dakota Industrial Commission, American Energy requested permits to drill sixteen (16) wells in Williams County.
The company maintains the pace.
In the May hearing dockets, American Energy, Case #12691, has requested permission to drill fifteen (15) wells in Williams County. The wells would all be wildcats in T156N-97W, T156N-98W, and T157N-97W. This entirely undeveloped area is just a couple miles directly north of Ray.
As a reminder, American Energy recently sold all assets, including producing wells, in Wyoming, to focus entirely on the Bakken.
And except for this case, the rest of the hearing dockets was fairly mundane: many requests to extend fields, for pooling, and many requests to drill one to three wells, but that was about it.
The company maintains the pace.
In the May hearing dockets, American Energy, Case #12691, has requested permission to drill fifteen (15) wells in Williams County. The wells would all be wildcats in T156N-97W, T156N-98W, and T157N-97W. This entirely undeveloped area is just a couple miles directly north of Ray.
As a reminder, American Energy recently sold all assets, including producing wells, in Wyoming, to focus entirely on the Bakken.
And except for this case, the rest of the hearing dockets was fairly mundane: many requests to extend fields, for pooling, and many requests to drill one to three wells, but that was about it.
Housing Challenge in Dickinson
We have seen several stories about the housing problem in Williston. The same goes for Dickinson, ND: now, a 100-man camp, strictly controlled, about four miles north of Dickinson.
Again, after initial publication these stories are often archived and can only be accessed through paid/free subscription.
Again, after initial publication these stories are often archived and can only be accessed through paid/free subscription.
EOG's Missed Estimates: What Are Marketing Costs?
As noted earlier, EOG missed analysts' estimates for the 1Q 2010.
EOG's Form 10-Q is posted and superficial reading raises one question. First, I will provide the data, and you can see where I'm going for yourself:
Form 10-Q, Part I. Financial Information, page 3 of 38.
Item 1. Financial Statements: Consolidated Statements of Income
Operating Revenues
2009, 1Q, operating revenues: $1.158 billion
2010, 1Q, operating revenues: $1.371 billion
Operating Expenses
2009, 1Q, operating expenses: $0.877 billion
2010, 1Q, operating expenses: $1.151 billion
Net Income
2009, 1Q, operating income: $0.159 billion
2010, 1Q, operating income: $0.118 billion
All pretty straightforward so far, eh?
Now, let's go back to look at "operating expenses."
One line item jumps out at me.
2009, 1Q, marketing costs: $0.032 billion
2010, 1Q, marketing costs: $0.169 billion (5-fold increase)
Difference between 2009 (1Q) and 2010 (1Q) marketing costs: $0.137 billion.
Add the difference ($0.137 billion) to 2010 (1Q) operating income and one gets $0.306 billiion. (In fact, the increase in marketing costs represents about one-half of the operating income).
Average number of shares outstanding (rounded):
2009, 1Q: 250,000
2010, 1Q: 250,000
As reported:
2009, 1Q: $0.159 billion/250,000 = 64 cents/share
2010, 1Q: $0.118 billion/250,000 = 47 cents/share
If one adds the difference in the "marketing cost increase" ($0.137 billion) to income, one gets: $0.255 billion.
Now, income per share would have been: $0.255 billion/250,000 = $1.02/share (without that huge marketing expense).
The $1.02 share is more than double the reported income/share reported by EOG for 2010, 1Q.
So, the question is:
What is included in "marketing costs" that decreased income/share by more than half? What else is included in marketing costs?
All I have is the Form 10-Q, and I read through it very quickly, so I may have missed it, but I couldn't find anything about "marketing costs" in the narrative. In addition, although I didn't read the entire earnings conference call, I don't recall the company highlighting any explanation for "marketing costs."
Some might argue that with increasing production, marketing costs would increase, but I would ask, "why?" And if so, does a five-fold increase make sense?
Revenue did increase significantly from 2009 to 2010 from gathering, processing and marketing (from $0.037 billion to $0.172 billion) and it takes money to make money, but without further information, I still have no idea why the huge increase in marketing costs this past quarter.
One last thing: actually there is one other item that jumps out at me. This one is on the revenue side. In 2009, 1Q, EOG reported a staggering $0.351 billion in "gains on mark-to-market commodity derivative contracts" compared to a paltry $7.8 million for the same item in 2010. Had their been no difference the comparison of income/share between 2009 and 2010 would have been even more noticeable -- but the other way. Take out the $0.351 billion in 2009, 1Q, and income per share in 2009, 1Q, would have been: it looks like EOG would have reported a loss in 2009, 1Q.
A loss in 2009, 1Q? Take out the "derivative contracts" ($1.158 billion - $0.351 billion) and one gets $0.807 billion. Expenses that quarter were $0.877, and thus a loss for the bottom line.
To be continued and refined. This is a first draft. My opinions only. Take them for what they are worth.
It doens't bother me that marketing costs increased. What bothers me is that a) the company does not discuss this in the narrative in the 10-Q but, again, I may have missed it. I looked at it very quickly. And b) why do analysts who call in for the conference call not ask these same questions, including a little bit more on mark-to-market commodity derivatives?
And last year, 2009, EOG would have reported a loss in the first quarter had they not had that huge "mark-to-market commodities derivative" gain. Were we still in a volatile period with depressed oil prices then? Most likely.
Yesterday the P/E for EOG was about 50. The P/E for Newfield was about 19.
EOG's Form 10-Q is posted and superficial reading raises one question. First, I will provide the data, and you can see where I'm going for yourself:
Form 10-Q, Part I. Financial Information, page 3 of 38.
Item 1. Financial Statements: Consolidated Statements of Income
Operating Revenues
2009, 1Q, operating revenues: $1.158 billion
2010, 1Q, operating revenues: $1.371 billion
Operating Expenses
2009, 1Q, operating expenses: $0.877 billion
2010, 1Q, operating expenses: $1.151 billion
Net Income
2009, 1Q, operating income: $0.159 billion
2010, 1Q, operating income: $0.118 billion
All pretty straightforward so far, eh?
Now, let's go back to look at "operating expenses."
One line item jumps out at me.
2009, 1Q, marketing costs: $0.032 billion
2010, 1Q, marketing costs: $0.169 billion (5-fold increase)
Difference between 2009 (1Q) and 2010 (1Q) marketing costs: $0.137 billion.
Add the difference ($0.137 billion) to 2010 (1Q) operating income and one gets $0.306 billiion. (In fact, the increase in marketing costs represents about one-half of the operating income).
Average number of shares outstanding (rounded):
2009, 1Q: 250,000
2010, 1Q: 250,000
As reported:
2009, 1Q: $0.159 billion/250,000 = 64 cents/share
2010, 1Q: $0.118 billion/250,000 = 47 cents/share
If one adds the difference in the "marketing cost increase" ($0.137 billion) to income, one gets: $0.255 billion.
Now, income per share would have been: $0.255 billion/250,000 = $1.02/share (without that huge marketing expense).
The $1.02 share is more than double the reported income/share reported by EOG for 2010, 1Q.
So, the question is:
What is included in "marketing costs" that decreased income/share by more than half? What else is included in marketing costs?
All I have is the Form 10-Q, and I read through it very quickly, so I may have missed it, but I couldn't find anything about "marketing costs" in the narrative. In addition, although I didn't read the entire earnings conference call, I don't recall the company highlighting any explanation for "marketing costs."
Some might argue that with increasing production, marketing costs would increase, but I would ask, "why?" And if so, does a five-fold increase make sense?
Revenue did increase significantly from 2009 to 2010 from gathering, processing and marketing (from $0.037 billion to $0.172 billion) and it takes money to make money, but without further information, I still have no idea why the huge increase in marketing costs this past quarter.
One last thing: actually there is one other item that jumps out at me. This one is on the revenue side. In 2009, 1Q, EOG reported a staggering $0.351 billion in "gains on mark-to-market commodity derivative contracts" compared to a paltry $7.8 million for the same item in 2010. Had their been no difference the comparison of income/share between 2009 and 2010 would have been even more noticeable -- but the other way. Take out the $0.351 billion in 2009, 1Q, and income per share in 2009, 1Q, would have been: it looks like EOG would have reported a loss in 2009, 1Q.
A loss in 2009, 1Q? Take out the "derivative contracts" ($1.158 billion - $0.351 billion) and one gets $0.807 billion. Expenses that quarter were $0.877, and thus a loss for the bottom line.
To be continued and refined. This is a first draft. My opinions only. Take them for what they are worth.
COMMENT
It doens't bother me that marketing costs increased. What bothers me is that a) the company does not discuss this in the narrative in the 10-Q but, again, I may have missed it. I looked at it very quickly. And b) why do analysts who call in for the conference call not ask these same questions, including a little bit more on mark-to-market commodity derivatives?
And last year, 2009, EOG would have reported a loss in the first quarter had they not had that huge "mark-to-market commodities derivative" gain. Were we still in a volatile period with depressed oil prices then? Most likely.
Yesterday the P/E for EOG was about 50. The P/E for Newfield was about 19.
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