Apparently QEP is building a shop in Parshall and a 40-acre staging area.
As you may recall, Questar spun off its oil exploration and production company, QEP, earlier this summer.
Some interesting earlier posts on Questar:
Sunday, November 14, 2010
Bakken Technology Transforming American Landscape
Great article in Wall Street Journal, dated November 13, 2010.
The article talks about horizontal drilling and fracture stimulation being used in new and old oil fields around the country.
Two things jumped out at me immediately:
EOG's CEO says the unconventional play is the most under-reported story on mainstream media. I agree. By the way, this doesn't sound like a CEO whose company just took a huge shellacking in the market due to huge loss due to focus on natural gas.
The article talks about horizontal drilling and fracture stimulation being used in new and old oil fields around the country.
Two things jumped out at me immediately:
- Total domestic on-shore oil production has not increased since 2002; and,
- As more and more states benefit from this technology, the more difficult the EPA will have in regulating the technology at the Federal level.
EOG's CEO says the unconventional play is the most under-reported story on mainstream media. I agree. By the way, this doesn't sound like a CEO whose company just took a huge shellacking in the market due to huge loss due to focus on natural gas.
Another Boring Commentary on Fossil Fuel vs Reality of Renewable Energy
I feel like I'm preaching to the choir, an analogy that works when writing this on a Sunday.
At SeekingAlpha there is another essay on oil vs renewable resources, dated November 14, 2010.
For newbies, two things:
1. Peak oil will occur between 2010 and 2030. Renewable replacement technologies will become available around 2040. (That's ten years too late.)
At SeekingAlpha there is another essay on oil vs renewable resources, dated November 14, 2010.
For newbies, two things:
- I am inappropriately bullish on oil; and,
- I consistently argue that folks are not being told the truth about renewable energy.
1. Peak oil will occur between 2010 and 2030. Renewable replacement technologies will become available around 2040. (That's ten years too late.)
Comment: my investing lifetime ends a bit sooner than that (although I will pass my portfolio down to my children and grandchildren). However, all indications are that there will be a real shortage of oil before 2020, and very likely a perceived shortage by 2015. See earlier commentaries at this blog. I think Ms Chu's focus on 2030 - 2040 does a disservice to investors and policymakers. It is too easy to blow off this analysis because it talks about something twenty to thirty years from now. My hunch: we will see a foreshadowing of 2030 - 2040 by 2015, and Bakken investors might see nice returns well before that.2. Ms Chu argues that "despite the excitement and hype surrounding a future of clean energy, a majority of current technology simply [fails economically and / or] lacks the infrastructure for a mass deployment ... even with government subsidies, tax breaks, and outright mandates."
Comment: Yup. I agree. Look at MDU trying to recoup costs associated with its two wind farms. It's not going well with regulators and the request for a rate increase will go over even less well with rate payers.3. Ms Chu notes that the supply chain of renewable technologies is not as green as we've been led to believe. Much of the renewable energy technology depends on rare earth elements which results in radioactive material as a waste by-product.
Comment: Yup. Ms Chu points out that uranium/radioactive waste by-products to support renewalble energy projects will make the Canadian oil sands look like "green energy."4. And, then my favorite. Because of the unpredictable nature of wind, utilities buying into wind farms must also build fossil fuel power plants to back up their wind farms when the wind ain't blowin' or when the wind is blowin' too hard and they need to feather the turbines (disconnect them from the generators so they don't damage the hardware). As an example, Ms Chu points out that "in China, the city of Juiquan ... needs to build 9.2 gigawatts of new coal-fired generating capacity as backup power for the 12.7 gigawatts wind turbines due to be installed by 2015. More wind farms would need more coal-fired power plants, with little or possibly no carbon reduction."
Comment: Yup. Why not just build the "clean" coal-powered plants and forget about the wind farms in the first place? Oh, that's right. Wind farms make us feel good; and, speculators can trade carbon credits. "Clean coal" is not an oxymoron. "We're" working on it in North Dakota near South Heart, a town significantly smaller than Juiquan.Ms Chu reminds us that, according to the International Energy Agency (IEA), the demand for oil, the price for oil, and global dependence on OPEC will continue to rise through 2035. As noted above, I can't get my hands around a date 25 years in the future. I think we will see a foreshadowing of all this a lot sooner.
Saturday, November 13, 2010
Saturday Night Ramblings Regarding American Oil and Gas (AEZ) -- Bakken, North Dakota, USA
This is just some idle chatter, some rambling on a Saturday night, looking forward, looking back, at American Oil and Gas. There is nothing new here; nothing to help the investor; nothing except a bit of history, I suppose. Maybe it's just nostalgia on a Saturday night.
Looking Forward, Looking Back, Slim Dusty
This August 26, 2010, Wall Street Journal article provides a nice summary of the chronology of American Oil and Energy (AEZ) and how the deal finally got done for Hess to acquire AEZ. That deal has not yet closed.
The article states that at the time of the deal, AEZ controlled 85,000 net acres in the North Dakota Bakken (85,000 / 640 = 133 sections = just a bit less than four townships. Most of that acreage is in the four townships on either side of State Highway 85, starting thirteen miles west of Ray and continuing into Ray. [Hess, by the way, controlled about 510,000 acres in North Dakota prior to the AEZ deal.]
What this particular article omits is how AEZ sold all of its Niobrara holdings to become a Bakken pure play as recently as March, 2010. This link, by the way, is one of the best for those who enjoy reading how a company survived a very rough patch. [This was one of the better oil and gas blogs. Unfortunately it seems to be inactive right now; the most recent post is dated March 26, 2010.]
Growing up in Williston, and going to college in southeastern South Dakota, I traveled that road countless number of times. Even before college, going to Minot or Bismarck on a regular basis for shopping or other reasons meant taking that road. I also spent many hours on that stretch hitchhiking, though generally leaving Williston, or outside of Ray, trying to catch that one last ride home. North Dakota is generally thought of as being very flat and nearly treeless and this stretch along highway 85 is particularly flat and treeless, although not as flat as the eastern side of the state and one does start to see some rolling hills. After thirty years in the service and having hitchhiked cross-country three times, I feel I've been everywhere, but my thoughts often return to that stretch of road.
I've Been Everywhere, Hank Williams
When the most recent oil boom started back in 2006 or so in North Dakota, there was no activity in this part of the Bakken but I always thought it would be just a matter of time before one would start seeing rigs and wells. There was always one or two rigs in the area or far off in the distance, but nothing like what we are seeing now.
One has to wonder what AEZ knew about the geology of the four townships AEZ now "owns" or if it was more luck than anything, considering that this is all part of the Bakken. Probably a lot of both. Almost all of AEZ's wells/permits in the Bakken are "wildcats."
When Hess agreed to acquire AEZ, or when AEZ agreed to be bought out by Hess, Hess agreed to commit $30 million in working capital credit to American Oil & Gas to finance AEZ’s intended exploration and production, as well as other costs related to the acquisition.
And AEZ, it appears, has really put that capital to work. It is amazing to look at the NDIC GIS map server and see all the activity -- all AEZ -- along that stretch west of Ray.
Tonight, there are no less then nine (9) confidential wells stretched out along a west/east line about ten miles long with three rigs on site. AEZ has four active rigs drilling in North Dakota as of today.
From the viewpoint of someone who did not invest in AEZ, it is somewhat sad to see that company absorbed by Hess. It's always exciting to see a small company report a great well; such a well can make such a huge difference to a small company. The same wells for a large company don't result in the same emotional "high."
Back-of-the-envelope calculations:
This August 26, 2010, Wall Street Journal article provides a nice summary of the chronology of American Oil and Energy (AEZ) and how the deal finally got done for Hess to acquire AEZ. That deal has not yet closed.
The article states that at the time of the deal, AEZ controlled 85,000 net acres in the North Dakota Bakken (85,000 / 640 = 133 sections = just a bit less than four townships. Most of that acreage is in the four townships on either side of State Highway 85, starting thirteen miles west of Ray and continuing into Ray. [Hess, by the way, controlled about 510,000 acres in North Dakota prior to the AEZ deal.]
What this particular article omits is how AEZ sold all of its Niobrara holdings to become a Bakken pure play as recently as March, 2010. This link, by the way, is one of the best for those who enjoy reading how a company survived a very rough patch. [This was one of the better oil and gas blogs. Unfortunately it seems to be inactive right now; the most recent post is dated March 26, 2010.]
Growing up in Williston, and going to college in southeastern South Dakota, I traveled that road countless number of times. Even before college, going to Minot or Bismarck on a regular basis for shopping or other reasons meant taking that road. I also spent many hours on that stretch hitchhiking, though generally leaving Williston, or outside of Ray, trying to catch that one last ride home. North Dakota is generally thought of as being very flat and nearly treeless and this stretch along highway 85 is particularly flat and treeless, although not as flat as the eastern side of the state and one does start to see some rolling hills. After thirty years in the service and having hitchhiked cross-country three times, I feel I've been everywhere, but my thoughts often return to that stretch of road.
When the most recent oil boom started back in 2006 or so in North Dakota, there was no activity in this part of the Bakken but I always thought it would be just a matter of time before one would start seeing rigs and wells. There was always one or two rigs in the area or far off in the distance, but nothing like what we are seeing now.
One has to wonder what AEZ knew about the geology of the four townships AEZ now "owns" or if it was more luck than anything, considering that this is all part of the Bakken. Probably a lot of both. Almost all of AEZ's wells/permits in the Bakken are "wildcats."
When Hess agreed to acquire AEZ, or when AEZ agreed to be bought out by Hess, Hess agreed to commit $30 million in working capital credit to American Oil & Gas to finance AEZ’s intended exploration and production, as well as other costs related to the acquisition.
And AEZ, it appears, has really put that capital to work. It is amazing to look at the NDIC GIS map server and see all the activity -- all AEZ -- along that stretch west of Ray.
Tonight, there are no less then nine (9) confidential wells stretched out along a west/east line about ten miles long with three rigs on site. AEZ has four active rigs drilling in North Dakota as of today.
From the viewpoint of someone who did not invest in AEZ, it is somewhat sad to see that company absorbed by Hess. It's always exciting to see a small company report a great well; such a well can make such a huge difference to a small company. The same wells for a large company don't result in the same emotional "high."
Back-of-the-envelope calculations:
- 1) EURs in the Bakken / well = 300,000 to 700,000 bbls
- 2) WLL putting in as many as six wells /section in the best Bakken
- 3) Assume AEZ puts in four wells/section
- 4) 4 wells x 133 sections x 500,000 bbls/well = 266,000,000 bbls EUR
- 5) At $60/bbl = $16 billion
- 6) Hess bought AEZ for $465.26 million
- 7) $465 million will buy about 80 wells at current prices
- 8) I usually make simple calculation errors
American Oil and Gas Reports a Nice Well; Oasis Reports From the Cottonwood
They are calling this the "American Field." American Oil and Gas reports a nice well, 18931, a wildcat, Johnson 15-35H, 1,860.
Meanwhile, Oasis reports a "typical" well from the Cottonwood, 18657, Ernst 6092 42-13H, 696.
By the way, the Cottonwood oil field was discovered by Fidelity, a subsidiary of MDU, but sold their Cottonwood acreage (and most of their ND holdings at that time, I believe) to Oasis. That was about a year or so ago; I forget the actual time frame.
Meanwhile, Oasis reports a "typical" well from the Cottonwood, 18657, Ernst 6092 42-13H, 696.
By the way, the Cottonwood oil field was discovered by Fidelity, a subsidiary of MDU, but sold their Cottonwood acreage (and most of their ND holdings at that time, I believe) to Oasis. That was about a year or so ago; I forget the actual time frame.
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