Monday, September 27, 2010

Multiple Wells Per Section

I remember three or four years ago all the excitement when the Bakken boom was moving from the Elm Coulee oil field in Montana to North Dakota. We, in North Dakota, were hearing stories that someday there would be a well in every section in the Williston Basin.

Wow, were we wrong!

Not one well in every section. It will be more like three or four wells in every section before it's all over.

I was just looking at the September NDIC hearing dockets in anticipation of the October schedule now starting to be released.

I was traveling at the time and didn't have time to make many comments on the September dockets, but I had a chance to take a look at the cases over the weekend. This is the trend: a) 1280-acre spacing; and, b) multiple wells on spacing units.

Here's an example:

CLR: seven (7) wells on each 1280-acre unit and multiple units
  • 13334: CLR, 7 wells, 1280-acre, Dunn, 2 units; 14 wells total
  • 13335: CLR, 7 wells, 1280-acre, Dunn; 2 units; 14 wells total
  • 13336: CLR, 7 wells, 1280-acre, Dunn; 1 unit; 7 wells total
  • 13337: CLR, 7 wells, 1280-acre, Dunn; 4 units; 28 wells total
  • 13338: CLR, 7 wells, 1280-acre, Dunn; 8 units; 56 wells total
  • 13339: CLR, 7 wells, 1280-acre, Dunn; 9 units; 63 wells total
  • 13340: CLR, 7 wells, 1280-acre, Dunn; 5 units; 35 wells total 
  • 13341: CLR, 7 increase density wells, 1280-acre unit, Divide; 7 wells total
  • 13342: CLR, 7 increase density wells, 1280-acre unit, Divide; 7 wells total
  • 13343: CLR, 7 increase density wells, 1280-acre unit, Divide, Burke, Williams; 7 wells total
EOG: multiple wells on smaller units
  • 13274: EOG, multiple wells on a 320-acre unit in Squaw Creek, McKenzie
  • 13275: EOG, 2 wells on one 640-acre unit, McKenzie
  • 13277, EOG, multiple wells on a 320-acre, Squaw Creek, McKenzie

Squaw Creek oil field:

By the way, Squaw Creek is a small oil field, comprising most of one township, T149N-R94W. It is only 23 sections located on the east side of the Fort Berthold Indian Reservation, south of Spotted Hawk (also a very interesting play) and west of Mandaree. I have to go back and check, but I believe this area is not too far away from the Arrow Pipeline initiative. Currently there are two rigs on site in this very little oil field, one well nearing completion, and several wells still on the confidential list. Interestingly enough, there are a few sections with 320-acre spacing in this oil field, and the rest is split evenly between 640-acre and 1280-acre spacing.

Sunday, September 26, 2010

Publications Regarding the Williston Basin

Bakken Publications: Geology
    Non-Bakken Publications
    Government
    Items of Historical Interest
    Videos

    See Comments Below For More Links

        Saturday, September 25, 2010

        Production vs Price: No Correlation?

        There is a very interesting graph at The Oil Drum.

        It suggests that the price of oil has no influence on world production of oil.
         
        Very, very interesting. And very big implications going forward.

        Think about that graph in the link above as you read the commentary by Dave Cohen, November,12, 2009. 

        I don't accept the "peak theory" as it is currently posited, but I do find these links very interesting.

        For Investors Only: Another Blog to Check Out

        I happened to come across this blog due to a bit of serendipity, perhaps fun to talk about how that happened at the coffee klatsch, but certainly not here.

        I am not sure if I will go back to the Calculated Risk blog very often. An initial survey of the site suggests that the global view of its author is different than mine, but the site provides a) some interesting perspectives that I have not considered in the past; and, b) some great charts, which I always appreciate, understanding that there are lies, damned lies, and statistics.

        You don't have to bookmark it; I've linked it at my Investors page.

        For Newbie Investors Only: MDU

        Update: a couple hours after posting the note below, I went back and looked at the dividend history. I "knew" what MDU's dividend history was but looking at it on the Yahoo!Financial charts really tells a story. Even when the market imploded in the summer/autumn of 2008, and again in March, 2009 (great buying opportunities by the way), MDU never missed a dividend and continued with their usual practice of increasing dividends. I have to admit, MDU is very, very enticing: a) in past two years, the share price of MDU has had a steady climb going into December (heating bills in the northern tier); b) Fidelity is getting back into looking for oil in the Bakken; c) the last time the dividend was raised was a year ago at this time (paid in December); d) if share price rises, dividend will have to be increased to maintain reasonable yield for a utility; and, e) once MDU starts moving, it could move quickly to $23 or $24 -- not a lot in raw numbers but more than 10% upward movement, with little downside risk.

        MDU will announce earnings on October 26, 2010. It's very possible that if there is going to be a pop in MDU's share price it will happen after that announcement. I expect that their outlook will be positive; a lot of negatives are behind them. (A lot of those negatives couldn't get any worse.)

        The Original Post

        I didn't post this Seeking Alpha story earlier this week because it didn't tell me anything really new.

        However, it's the end of the week, and time to wrap a few things up, bring a few open stories to closure.

        This is a nice update about MDU for newbies. Folks who have followed the oil industry in North Dakota should know the MDU story very well.

        I accumulated shares in MDU for twenty years; it was one of the first companies in which I ever invested. I don't remember exactly when, but I know my investment steps occurred in this order: a) get a job that had a retirement plan; b) life insurance (I was married with a family); c) mutual funds; d) individual stocks. It took me about ten years to get from (a) to (d). Two of my first individual holdings were MDU and BNI. BNI was recently bought out by Berkshire Hathaway. [At the time IRA, Roth IRAs, and 401(k)'s were not available. Had they been, they would have been part of step (a). For me those were added along the way.]

        MDU got caught up in the global recession and among the "Bakken companies," MDU seems to be lagging, at least with regard to share appreciation. It's been in a trading range for two years and even, going back five years, hasn't done much. It does pay a nice dividend, and its potential is huge, as noted in this very nice update at SeekingAlpha.

        I think MDU is yet to break out of this trading range, but I don't think there's any hurry. For investors, be ready to jump in when a) price of natural gas starts going back up (for a nice discussion, click here); and, b) when  we have several months, if not quarters of clear evidence that the global economy has turned. I think the best indicator for the latter is "rail car loadings," a favorite of Warren Buffet's, as long as rail car loadings are not simply a reflection of imports coming from China, which they appear to be right now. In fact, as I say again below, rail car loadings right now could be a contraindicator at worse, a "red herring," at best.

        Just out of curiosity, yes, here I go again, off on a tangent, what does the chart on rail car loadings look like? Intermodal traffic is up huge. (Which, by the way, really says volumes about the state of the economy in the US.)  Intermodal traffic refers to the movement of containers or vehicles transferred directly between ships and railroad, railroad and truck, or ships and truck.

        Wow, now I'm really getting off track. I reported back in July that the largest port in the US, the Los Angeles Port, set a new record in number of cargo containers ever handled in the month of June. An all-time record. Not just a quarterly record, or an annual record. But an all-time record. As noted in that posting, the port was an active port during World War II. The most recent statistics available show that the LA Port did even better in August, 2010, up 25%, the best showing since 2006. (Unfortunately, this is all due to "stuff" coming in from China, and now so much "stuff" going back to China. So, the railroads and the ports are doing well, but that doesn't necessarily mean US economy is doing well. In fact, ... well ... you can see the derivative itself....)

        Anyway, enough of this. Back to MDU. I'm not quite ready to jump back into MDU, but for someone new to investing, who might be a bit conservative, or a bit concerned about investing, MDU is a great place to start. The investment will be very safe (MDU is not going to go away); you will receive a dividend far surpassing what a savings account will get you; the dividend is generally increased year-over-year; and, MDU's potential is huge.