Investors that come to this site are always focused on the price of oil, perhaps overly concerned. I know I am.
But for all the volatility in the price of oil, it seems to have found a trading range of $70 to $80. I forget, but I think I opined some months ago that the floor would be $80, maybe I said $70. I forget.
Heading back toward the $60 range this past week, the price of oil seems to have, at least temporarily reversed course, and is now up a bit, back above $75. Good news for oil investors.
But is there really much difference, other than psychological, to an individual investor whether the price of oil is $72 or whether it is $82? I have said many times that there is much more to the business end of the oil industry than the price of oil. In fact, as long as oil stays in a $10 trading range, I doubt the price of oil has much effect on the bottom line of a well-run oil company.
(Note: the price paid for North Dakota oil is generally significantly less than the benchmark price we see on the television crawler; probably closer to $55.)
To start with, most of these companies hedge. That is, they sell contracts for their oil months in advance. The price at which they will sell their oil is set six months to one year out.
On another note, I think most folks were surprised to see how much the loss of one pipeline affects the bottom line of Bakken oil companies (see recent Enbridge stories). That certainly had a greater effect than the daily volatility of the price of oil. Due to one pipeline being shut down for a few days (weeks?), some Bakken producers are expected to miss their third quarter production estimates. I opine they may miss their annual production estimates.
However, all things being equal, it's NOT about the price of oil within a $10 trading range. Rather, it's about three things: a) how well the oil company runs its business from a financial point of view; b) the company's business model; and, c) the increasing amount, on a daily basis, of the amount of oil a handful of companies are pumping out of the Bakken. The average amount of oil produced in North Dakota during calendar year 2009 was 6.7 million barrels. In July of this year (2010), North Dakota produced almost 10 million barrels.
Yes, a drop in the price of oil costs "us" a significant amount, but for long-term investors, the increasing production is going to be the bigger story. Again, assuming oil stays above $70.
Wednesday, September 22, 2010
More Good News From the Oil Patch: Bakken, North Dakota, USA
From the Bismarck Tribune online: the North Dakota budget -- the government anticipates $70 oil and a $1 billion budget surplus. North Dakota's two-year budget is slightly under $9 billion.
From the Dickinson Press online: the 1.6 million foot-long Bison Pipeline is nearing completion, dateline Bowman, North Dakota. This is a natural gas pipeline and a huge story.
October 30, 2010: Update on progress and taxes to the county.
This is another huge story, this time from the Minot Daily News online: Halliburton will build a huge -- 38-acre -- site at the new Minot industrial park. It's all about fracking. More on that later. This new endeavor comes on top of a recently $20 million expansion of the Halliburton site in Williston.
My Home In North Dakota, Adam Taylor
From the Billings Gazette online: Montana's unemployment rate rises to 7.4% -- more than double the rate in North Dakota.
NOTE: most of these stories will be available on the web for a short period of time. Many of them will not be accessible some weeks from now. The links will be broken. Googling the topic will generally find the an alternate source for the story.
From the Dickinson Press online: the 1.6 million foot-long Bison Pipeline is nearing completion, dateline Bowman, North Dakota. This is a natural gas pipeline and a huge story.
The 30-inch-diameter pipeline will carry gas from the Powder River Basin of Wyoming to North Dakota, where it will connect with the Northern Border Pipeline and then on to Chicago for distribution to markets in the Midwest, for a total distance of 302 miles.
The project’s capacity is designed to carry approximately 477 million cubic feet per day.
Updates
October 30, 2010: Update on progress and taxes to the county.
A 302-mile pipeline that is being built across the southeastern corner of Montana will have little effect on the state — unless you happen to live in Carter County.
TransCanada Corp., the company building the $600 million Bison Pipeline, estimates that it will generate property tax revenues of $8.8 million a year in Montana when complete. And nearly all of the pipeline’s 97-mile route through Montana is in Carter County. It also passes through tiny slivers of Fallon and Powder River counties.
*****
This is another huge story, this time from the Minot Daily News online: Halliburton will build a huge -- 38-acre -- site at the new Minot industrial park. It's all about fracking. More on that later. This new endeavor comes on top of a recently $20 million expansion of the Halliburton site in Williston.
Halliburton spokesman Brent Eslinger said his company intends to invest approximately $15 million for operational and maintenence facilities, parking areas and an administrative building at the Energy Park. Work is scheduled for completion in the first quarter of 2011. According to Halliburton, the facility will bring 250 jobs to Minot.From the Williston Herald online: a nice story on the boom that a Bakken town is experiencing.
From the Billings Gazette online: Montana's unemployment rate rises to 7.4% -- more than double the rate in North Dakota.
NOTE: most of these stories will be available on the web for a short period of time. Many of them will not be accessible some weeks from now. The links will be broken. Googling the topic will generally find the an alternate source for the story.
ObamaCare (Not About the Bakken): Children-Only Health Insurance
This site is devoted to the Bakken. I have fond memories of the state I call home, and I am inappropriately exuberant over the activity in the Williston Basin.
I appreciate those who stop by to see what's going on in the Bakken and every morning the first thing I do is check the site to see what readers are seeing as the lead story. I hope it will be a positive story on the oil industry in western North Dakota.
But I usually rant at least once a day (occasionally more often) about some non-Bakken topic. I assume most of my readers do not appreciate such posts on a site that bills itself as "all Bakken all the time." But I do my best to minimize the number of such posts and readers can be assured that before the day is over there will be not less than three new Bakken posts. (By the way, I spend a lot of time updating old posts; what you see posted as the lead stories each day is about ten percent of what I post behind the scenes. This site has an incredible amount of archived information, most of it linked on the sidebar at the right. The site is optimized for the Firefox browser and if you know how to use the two Firefox browser "search" options, you can generally find what you are looking for if it concerns the Bakken and has relevancy to more than just one or two readers.)
My rant for the day comes from the Los Angeles Times website: health insurers in California will stop selling child-only health policies starting tomorrow (Thursday, September 23, 2010) because the insurers fear runaway costs.
Except for reproductive issues and mental health care issues, men and women between the ages of fourteen years of age and fifty-five years of age have minimal health care costs. For young families, their health care costs revolve around their infants and young children, which require multiple well-baby and well-child visits during the first six years of life, and that's just for healthy children and preventive medicine care. In addition, adults are generally covered for medical care stemming from two major health risks: car accidents (through their automobile insurance) and workplace injuries (through OSHA regulations and workmen's compensation).
Insurers say they cannot afford the terms of the new health care program and the bill did not provide a back-up plan, or Plan B as soccer moms would call it.
And so it goes. Sad.But.Predictable.
[Update: one day after posting the above, the Washington Examiner goes into greater detail on just how bad ObamaCare is.]
I appreciate those who stop by to see what's going on in the Bakken and every morning the first thing I do is check the site to see what readers are seeing as the lead story. I hope it will be a positive story on the oil industry in western North Dakota.
But I usually rant at least once a day (occasionally more often) about some non-Bakken topic. I assume most of my readers do not appreciate such posts on a site that bills itself as "all Bakken all the time." But I do my best to minimize the number of such posts and readers can be assured that before the day is over there will be not less than three new Bakken posts. (By the way, I spend a lot of time updating old posts; what you see posted as the lead stories each day is about ten percent of what I post behind the scenes. This site has an incredible amount of archived information, most of it linked on the sidebar at the right. The site is optimized for the Firefox browser and if you know how to use the two Firefox browser "search" options, you can generally find what you are looking for if it concerns the Bakken and has relevancy to more than just one or two readers.)
My rant for the day comes from the Los Angeles Times website: health insurers in California will stop selling child-only health policies starting tomorrow (Thursday, September 23, 2010) because the insurers fear runaway costs.
Major health insurance companies in California and other states have decided to stop selling policies for children rather than comply with a new federal healthcare law that bars them from rejecting youngsters with preexisting medical conditions.This was predictable. I was just surprised that health insurers would be so audacious to take such action with such clarity and transparency.
Anthem Blue Cross, Aetna Inc. and others will halt new child-only policies in California, Illinois, Florida, Connecticut and elsewhere as early as Thursday when provisions of the nation's new healthcare law take effect, including a requirement that insurers cover children under age 19 regardless of their health histories.
Except for reproductive issues and mental health care issues, men and women between the ages of fourteen years of age and fifty-five years of age have minimal health care costs. For young families, their health care costs revolve around their infants and young children, which require multiple well-baby and well-child visits during the first six years of life, and that's just for healthy children and preventive medicine care. In addition, adults are generally covered for medical care stemming from two major health risks: car accidents (through their automobile insurance) and workplace injuries (through OSHA regulations and workmen's compensation).
Insurers say they cannot afford the terms of the new health care program and the bill did not provide a back-up plan, or Plan B as soccer moms would call it.
And so it goes. Sad.But.Predictable.
[Update: one day after posting the above, the Washington Examiner goes into greater detail on just how bad ObamaCare is.]
Tuesday, September 21, 2010
Current Director's Cut (NDIC)
This has been previously posted.
The current NDIC Director's Cut is dated September 14, 2010. You can find it at the NDIC home page.
Jun Oil 9,434,312 barrels = 314,477 barrels/day
Jul Oil 9,952,296 barrels = 321,042 barrels/day -- all time record high -- almost 10 million bbls/month
Jun Producing Wells = 4,977
Jul Producing Wells = 5,051 all time record high
Jun Permitting: 128 drilling permits
Jul Permitting: 145 drilling permits -- all time record high
NDIC Director still voices his concern about EPA regulation.
The current NDIC Director's Cut is dated September 14, 2010. You can find it at the NDIC home page.
Jun Oil 9,434,312 barrels = 314,477 barrels/day
Jul Oil 9,952,296 barrels = 321,042 barrels/day -- all time record high -- almost 10 million bbls/month
Jun Producing Wells = 4,977
Jul Producing Wells = 5,051 all time record high
Jun Permitting: 128 drilling permits
Jul Permitting: 145 drilling permits -- all time record high
NDIC Director still voices his concern about EPA regulation.
KOG Operational Update, September, 2010
Bottom line: KOG is still testing the production potential in the acreage it owns. If these wells "hit," and we should know by the end of the year, watch the share price pop.
From the KOG "investorroom":
KOG currently operates a two-drilling-rig program in the Williston Basin. One rig is currently in Dunn County and the other is in McKenzie County.
Basin-wide, KOG has five operated wells awaiting completion. One should be completed by the end of September; a second one by mid-October. The remaining three awaiting completion are part of a four-well pad currently drilling in Dunn County (the only driller I know who has four-well pads is CLR -- the Eco-Pad, but there may be others I am not aware of).
KOG projects six wells to be completed in the fourth quarter. The five long laterals will be completed with 24-stage fracturing and the sixth, a short lateral, will be completed with 12-stage fracturing. Four wells target the Bakken formation; two target the Three Forks Sanish.
Since commencing Williston Basin drilling activities in November, 2008, KOG has drilled 19 wells, has completed 14 wells, and is currently drilling two.
Queen's "Rockin' the Bakken" Winter Tour, Their Homage to the North Dakota Rough Neck:
We Will Rock You, Queen (Note for newbies: just a little humor. As far as I know, Queen did not visit the Bakken)
Current wells, Dunn County:
Moccasin Creek 13-34-28-1H, long lateral, 22 stage, IP of 1,906; 17k in first 19 days. This well was offset from MC 13-34-28-2H which recorded KOG's strongest 30-day production number from any well since KOG began drilling in November, 2008. It's 24-hour IP was 2,055; it was a truncated long lateral and was fractured with 15 stages. The first 30 days oil production of this well was 38k, an average of 1,259 boed for the first 30 days.
Two Shields Butte 14-21-33-15H, a long lateral, reached total depth in early September. This was the third well drilled from the current four-well pad and is waiting completion. The wells drilled from this pad are significant in that one of the laterals was drilled within 1,350 feet of an existing lateral as part of ongoing tests to evaluate the optimal well bore density within 1,280-acre drilling units.
In addition, one of the wells was drilled into the TFS, 65 feet below the Bakken formation wells, and the lateral section is separated from one of the Bakken wells by 700 feet. All four wells from this pad should be completed by the end of 2010.
Current wells, McKenzieCounty:
There are four wells of interest. The Grizzly Federal 1-27H-R, a long lateral, 24-stage fracturing, is currently being completed.
The Grizzly 13-6-RH was re-entered (the press release does not elaborate); it's a short lateral expected to be completed in mid-October.
KOG spudded the Koala 9-5-6-5H in early September; it will be a long lateral to test the Middle Bakken formation. This is the first KOG well drilled in its Koala Project area and will be followed by Koala 9-5-6-5H3, another long lateral to test the productive potential of the TFS formation. Completion is expected by end the end of 2010.
From the KOG "investorroom":
KOG currently operates a two-drilling-rig program in the Williston Basin. One rig is currently in Dunn County and the other is in McKenzie County.
Basin-wide, KOG has five operated wells awaiting completion. One should be completed by the end of September; a second one by mid-October. The remaining three awaiting completion are part of a four-well pad currently drilling in Dunn County (the only driller I know who has four-well pads is CLR -- the Eco-Pad, but there may be others I am not aware of).
KOG projects six wells to be completed in the fourth quarter. The five long laterals will be completed with 24-stage fracturing and the sixth, a short lateral, will be completed with 12-stage fracturing. Four wells target the Bakken formation; two target the Three Forks Sanish.
Since commencing Williston Basin drilling activities in November, 2008, KOG has drilled 19 wells, has completed 14 wells, and is currently drilling two.
Queen's "Rockin' the Bakken" Winter Tour, Their Homage to the North Dakota Rough Neck:
Current wells, Dunn County:
Moccasin Creek 13-34-28-1H, long lateral, 22 stage, IP of 1,906; 17k in first 19 days. This well was offset from MC 13-34-28-2H which recorded KOG's strongest 30-day production number from any well since KOG began drilling in November, 2008. It's 24-hour IP was 2,055; it was a truncated long lateral and was fractured with 15 stages. The first 30 days oil production of this well was 38k, an average of 1,259 boed for the first 30 days.
Two Shields Butte 14-21-33-15H, a long lateral, reached total depth in early September. This was the third well drilled from the current four-well pad and is waiting completion. The wells drilled from this pad are significant in that one of the laterals was drilled within 1,350 feet of an existing lateral as part of ongoing tests to evaluate the optimal well bore density within 1,280-acre drilling units.
In addition, one of the wells was drilled into the TFS, 65 feet below the Bakken formation wells, and the lateral section is separated from one of the Bakken wells by 700 feet. All four wells from this pad should be completed by the end of 2010.
Current wells, McKenzieCounty:
There are four wells of interest. The Grizzly Federal 1-27H-R, a long lateral, 24-stage fracturing, is currently being completed.
The Grizzly 13-6-RH was re-entered (the press release does not elaborate); it's a short lateral expected to be completed in mid-October.
KOG spudded the Koala 9-5-6-5H in early September; it will be a long lateral to test the Middle Bakken formation. This is the first KOG well drilled in its Koala Project area and will be followed by Koala 9-5-6-5H3, another long lateral to test the productive potential of the TFS formation. Completion is expected by end the end of 2010.
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