Price of Oil in Free Fall

Previous floor for oil was $60. I thought the new floor of $80 would hold (I was wrong).

Oil tied to value of dollar.

Free fall to $60 suggests a) the Euro is in much deeper trouble than anyone yet realizes; b) economy, especially in Europe, and probably US, is in much worse shape than people willing to admit; and, c) another buying opportunity.

I don't think Canadian oil sands are viable under $60/bbl of oil. The Bakken is viable down to $40 but I think we will see production even in the Bakken slowed if oil goes to $60/bbl.

Oil stored in Cushing, OK. I wonder if it's time for oil storage units in North Dakota?  Any purpose for additional storage units? Probably not. But that's something NDIC/Bismarck legislators/Bank of North Dakota ought to think about. After all, the grain co-ops seemed to have worked nicely over the years.

Bottom line: some folks might be seeing some great opportunities with the pullback.

Update: shortly after posting the above, White House Paul Volcker said about the same thing. The beginning of the demise of the Euro?  Will Germany be the first to opt out?

Barrons: Platts Publishes First Daily Spot Price for Bakken Crude Oil

From a Platts press release:  "Beginning today, U.S. Midwest and Canadian oil producers, refiners, traders and other market observers can benefit from the launch of the first open-market spot price assessments of crude oil from the Bakken Shale formation stretching across central United States and parts of Canada."

For more information:  http://www.platts.com. This is a subscription site, and I had a devil of a time finding any useful information on the Bakken, but then I don't have a whole lot of time to search a "busy" site and I don't pay for subscriptions (yet). Maybe I should.

I know I'm wearing rose-colored glasses (or would they be oily-sheen-glasses) when it comes to the Bakken, but I am convinced that the Canadian oil sands and the Bakken shale are still bigger stories yet to be played out. Color me irrationally exuberant.

Back of the Envelope: Whiting

In the month of March, 2010, Whiting's eighteen (18) wells in the Sanish generated $27 million in cash flow (at $70/bbl) at the wellhead; that works out to $323 million in cash flow for the year going forward if things stay steady.  (Does anyone really think Whiting's production in the Bakken will stay steady for the next year?)

According to Yahoo!Financial, Whiting's operating cash was $600 million for the trailing 12 months. Back of the envelope calculations suggest half of all of Whiting's cash flow is coming from a few wells in the Williston Basin.

And some folks think the Bakken is over-hyped.

By the way, Whiting's forward P/E is about 12, and share price is dropping significantly today. Just saying.

Maybe the boom is over.

Sorenson 11-3H, Whiting #17912

This looks like a pretty good well, still on the confidential list. It looks like it had first few days of production in February, 2010, with runs of about 15,000 barrels of oil (for the month of February). Then, for the full month of March, 2010, the Whiting Sorenson 11-3H, 3-152-91, had runs of 46,000 bopd.

At $70/bbl that translates to about $3 million at the wellhead for the month of March. This well is still confidential, but it looks like a long lateral running to the northwest into sections 35 and 36, 153-91.

Wind Projections = IPs

Wind projections miss estimates.

I guess wind projections are a lot like "IPs."

Over-promising and under-delivering.