More Than Just The Bakken in the Bakken -- North Dakota, USA

Link here.

Magellan Petroleum Corp., Portland, Maine, has signed a letter of intent with Vaalco Energy Inc., Houston, to begin developing the Bakken formation and deeper horizons in the East Poplar Unit and Northwest Poplar field in Roosevelt County, Montana.

This is an old story (July 18, 2011). I thought I had posted it, but if I have, I cannot locate it, so here it is (again?).

This is what I find most interesting about the story and why I wanted to make sure I posted it:

Magellan will retain its current ownership for all formations above the Bakken, including the currently producing Charles and Tyler formations.

Magellan said the partnership with Vaalco is another step, with a strong and experienced partner, toward monetizing the asset not only from the Bakken but also from the Three Forks, Red River, and associated deeper formations.

Reading between the lines of the CHK conference call transcript, I am thinking that CHK may be thinking the same thing. 

Unitization in the Bakken -- Bakken, North Dakota, USA

Updates

January 24, 2020: "rule of capture," and Pennsylvania; Pennsylvania state supreme court.  

Original Post 

I see that folks have been searching "unitization North Dakota Bakken oil."

A "cut and paste" from FAQ #35:

35. What is unitization? This appears to be best the answer from a reliable source [link no longer exists] posted July 1, 2011:

"Basically, under untization, the spacing units disappear and the entire  field boundary lines become a big spacing unit, where all the owner within  the field share in production from the entire field, which is allocated to  the owners by an agreed upon formula. The field becomes one big "spacing  unit," because the oil is being artificially forced across would would have  been the old spacing unit boundaries by the secondary recovery methods  (i.e., waterflood, CO2 etc.).  There will be a hearing or a number of  hearings with the DMR.

The state law requires that 60% of the mineral ownership approve of the  unit, and I believe votes are weighted by amount of acreage owned in the  unit. Most of the larger, older, conventional (i.e., non-Bakken) fields have  been unitized in ND -- Beaver Lodge, Blue Buttes, Fryburg, Big Stick.  The only one I'm aware that was defeated by the mineral owners was in Little  Knife field (Madison pool), and I think most would agree that such action  left a lot of recoverable oil in the ground.

Don't hold me to this, but if you are leased -- and your leases are not currently held by production -- if your leases are included in the unit (and  assuming the unitization plan is approved), they will be considered to be under production, as you will receive royalties pursuant to the formula."

An earlier source said this, which I posted August 2, 2010: Whatever unitization is, it remains a "non-issue" in North Dakota as of 2010. Seriously, here the discussion begins [link no longer exists]. Unitization is similar to pooling, but it occurs when producer(s) are ready to use enhanced oil recovery to maximize production from a common reservoir. With the Bakken being one huge continuous "reservoir" it's  hard to see how unitization could work, unless they do it by field, an arbitrary designation, in my mind, when it comes to the Bakken. Sixty percent of royalty owners (weighted) must agree to unitization before the NDIC will authorize it. To date, unitization has not occurred in North Dakota (August 2, 2010).

The NDIC hearing docket for August, 2011, will consider unitization of Lost Bridge-Bakken.

The writer of the link from August 2, 2010, has raised a very interesting issue. This brings a whole new question regarding "how do I know a neighbor's well isn't taking oil from my site?" The Texas Railroad Commission recently upheld / clarified a ruling that says a neighbor cannot sue for oil production / loss from a horizontal that comes right up to the section line. The commission said that if the neighbor is worried about a neighbor's well taking oil from his/her site, he/she better drill his/her own well. One can argue that the effectiveness of fracking extends only about 500 feet (radius) from the bore hole, and that may be true of the enhanced recovery, but that question will probably be raised. As noted earlier, the Texas Railroad Commission is similar to the NDIC in North Dakota, and most states follow the rules set by Texas regarding oil / mineral rights.

Idle Chatter: Average American Barely Holding On?

Yesterday while at the gas station, noticing several others filling up with -- or at least buying some -- gasoline, all of whom appeared to be average Americans, making average income, not driving really fancy cars, but cars one now expects to see in America, I began to think that, "you know, these folks probably were able to handle $4.00 gasoline for the first few weeks, maybe even the first few months, expecting that over time the price would fall again, but the price hasn't fallen all that much, and it's now been many months, a year? Longer? And I bet a lot of average Americans are truly just hanging on, financially, due to any number of reasons, but certainly the price of gasoline is not helping."

Then today, the top story at Yahoo!Finance: Americans cut spending for the first time in 20 months.

Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months, a troubling sign for an economy that is barely growing.

Consumer spending dropped 0.2 percent in June, the Commerce Department said Tuesday.

Some of the decline was caused by declining food and energy prices, which had spiked in recent months. When excluding spending on those items, consumer spending was flat.

The article mentions that high gas prices and unemployment have squeezed consumer spending.

It looks like Americans can hang on for about two years when the economy turns. That's an interesting number for me; every time we moved to a new assignment in the military, it took me about two years to recover financially.  Our assignments averaged about 2.5 years over the course of my military career, until I was able to "homestead" at my last assignment. But I digress.

And, just yesterday, I linked this story: the double dip recession is already here.

I posted this on June 19, 2011, with updates periodically, and a major update on July 29. But this was the June 22, 2011, update:

June 22, 2011: The comments to this article are very interesting. It is very, very scary that the Fed chairman was unable to instill any confidence in the investing community. It is clear that he sees a second lost decade, and most of it revolves around lack of a sound energy policy.

Brutally honest, Bernanke admitted that he had no clue what was actually causing the current fragility in the U.S. economic recovery.  While the FOMC statement assigned blame outside of the U.S., pointing at Japan along with rising food and oil prices, Bernanke was put on the spot by a reporter who noted the inconsistency behind that explanation and a lowering of long term forecasts.  Bernanke took the hit, admitting only some of the factors were temporary and that he didn’t know exactly what was causing the slowdown, but that it would persist.  “Growth,” said Bernanke, “will return into 2012.”

I still feel strongly that policies at the top could have prevented this, but I'm probably naive and in the minority.

For Investors: SeekingAlpha Article Comparing Pure Play Bakken Stocks

Article compares BEXP, Oasis, NOG, and KOG.

Nice summary and can't disagree with author's bottom line.

SM: Incredible Second Quarter -- Bakken, North Dakota, USA

This is a great way to start off the week: SM reports outstanding numbers for 2nd quarter (2011); and, raises guidance significantly.

Last year, 2nd quarter, the company reported earnings of 28 cents/share.

This year, 2nd quarter, the company reported earnings of ... drum roll ... $1.86/share.

The Company has scheduled a teleconference to discuss these results and other operational matters on August 2, 2011, at 8:00 a.m. Mountain time (10:00 a.m. Eastern time). 

The call will be webcast live and can be accessed at SM Energy’s website at www.sm-energy.com. An audio recording of the conference call will be available at that site through August 9, 2011.

SM Energy sees production increasing as much as 40% in 2012. Couple that with increasing price of oil, and ...

Very nice analysis by Steve Zachritz at SeekingAlpha.com. With regard to the Bakken:

• 2 rigs running, going to three rigs in 3Q11.
• 204,000 net acres split between Divide, Williams, McKensie, Dunn and Billings Counties, ND along with some Montana acreage as well. Aside from Divide county, much of the rest of its acreage is being or has been proved up by the Bakken players list.
• Focus near term will be Raven (what we normally think of as Rough Rider) and the stuff up in Divide (not sure that I care much for Divide, yet, but time will tell and it is cheaper to drill there due to depth).

 The comment that it is going to 3 rigs in 2011 is "old" news, but specifying the third quarter (which we are now in) is "new" news.