Did QEP Overpay for the Bakken?

Not if you think Barclays might be right.

Growing global demand for oil will push prices to $125 a barrel sometime next year and possibly to $180 by the end of the decade, according to a Barclays research report Thursday.  

While domestic oil production has increased with the discovery of new ways to extract oil from shale and other tight formations, the decline in new production from existing fields internationally will continue to drive up prices, according to Barclays.  

Production is declining each year by close to four million barrels per day, while annual global demand is rising by more than one million barrels per day, even in the weak economic environment. Political tensions in the Middle East could disrupt supplies further, worsening the shortfall in the coming years.

So, those are the data points:

• lousy global economic environment
• annual global oil demand rising by one million bopd 
• annual global oil production decreasing by four million bopd
• unrest in the Middle East is a footnote; will it become a story?

How soon might we see a tipping point? In 3Q12 -- at the link. Wow.

If either the first or the last data point changes ....

Only In Boston: Home of 25 Universities/Colleges

On announcements throughout the city:

PlanetFitness: $10/month or $199.99 for 18 months. 

Scroll down for Bakken stories.

More on The PN - EOG Article; Recovery Rates in the Bakken

Before reading this post, be sure to read the earlier post on same subject.

That story is full of data points for the Bakken. Consider this:

Pointing to a chart that shows U.S. horizontal oil growth by play from 2005 to 2012 (adjacent to this article), Papa said, “The point we make is, there are only two plays that make a difference on a national scale — the red and the turquoise. The Eagle Ford and the Bakken.

There’s been a lot of sell-side news and specific company news about plays like the Woodford, the Mississippian, the Niobrara, and so on and so forth but they barely make a spec on this chart.”

“Our prediction is that over the next five years they (non-Bakken, non-Eagle Ford plays) will barely make a spec on this chart. And so for all the news that they are generating, they’re not going to be significant players on a national scale,” he said.

Next, he pointed to a chart that showed which companies produced the most crude from horizontal plays in the U.S. EOG topped the list. “As it stands right now, by a 2 to 1 ratio, EOG is the largest producer. … It’s no horse race at this point in time,” Papa said.
And then this:

He did, however, talk about oil recovery rates in the Bakken, putting them at approximately 10 percent versus 6 percent for the Eagle Ford.

In an earlier post (yesterday) I reminded readers that Harold Hamm thinks "the Bakken" has 900,000 bbls OOIP and has 45 billion bbls recoverable oil. That's a 5% recovery rate. I was going to point out that Bakken recovery rates seem to be closer to 8% than 5% but I've been warned about "gilding the lily." And I'm just an amateur at all this.

Of course, that 5% is across the entire Bakken, but it's still interesting to note that EOG suggests the recovery rate is significantly higher in the Bakken than the Eagle Ford.

Where Is EOG Headed?

This is a "cut and paste" from one of my earlier postings. It's that important (the PN link was sent to me by a reader: a huge "thank you.")

A reader sent me this story. It supplements an earlier EOG story: very important. 

In the latter link, Papa says there are only four plays worth discussing (the rest are all "insignificant"): the Bakken, the Eagle Ford, the Permian, and the Barnett.

In this newest link, Papa has revised his opinion: there are only TWO plays that are important: the Bakken and the Eagle Ford. 

This is an incredible story -- everyone needs to read.

EOG Resource’s top executive Mark Papa raised a few eyebrows Sept. 4 when he told attendees of Barclays energy conference that only two horizontal liquids plays in the U.S. matter — the Eagle Ford and the Bakken.  

The rest are “insignificant” in terms of future U.S. production, Papa says, including those his company is invested in, such as the Wolfcamp, Permian and Barnett plays. 

In fact, in 2013, it is “likely” the Houston-based company will be “stealing some capital from the Permian and … Barnett combos” for company operations in the Eagle Ford and Bakken, Papa said. 

This story, by the way, is at odds of so much that has been published about the Permian lately (one example). It appears Papa, like Wayne and Steve, is skating to where the puck will be. Again.

Now some comments.

I wonder if he's forgetting about the Utica?

When I posted the earlier story about Papa stating only four plays were discussing, a reader noted that was in EOG's best interests. Well, of course.

However, in his most recent remarks, he is even dissing a couple of EOG plays. Interesting.

Another data point: Mr Papa retires retires in mid-2013.  For some CEOs there is not a lot of difference between fading away and retiring. Something tells me that Mr Papa is not going to fade away. I look for him/EOG to make a move in the Bakken. It's possible the move will be in the Eagle Ford, but two other data points to consider:

a) EOG has been relatively "status quo" in the Bakken for the past two years; predictable and not particularly exiting for a blogger or an investor; and,
b) the QEP/Helis deal raised the bar both in estimated value of Bakken assets and in urgency to acquire such acreage

Remember: updates of "all" Bakken players can be found at the 2Q12 earnings page.  EOG must be doing something right: in 2Q12, EOG beat consensus estimates by 18 cents.

As long as I'm rambling, two more data points:

a) it's hard for me to believe that Chesapeake won't sell its North Dakota acreage;
b) although Congress may sort it out later, there's no guarantee: don't forget the "fiscal cliff" which will impact the wealthy significantly

Disclaimer: this is not an investment site; do not make any investment decisions based on what you read at this blog. This is certainly not a recommendation to trade in EOG. It's just idle rambling by someone who gets a kick out of the Bakken.

Three Pages of Beautiful Photographs of Southwest North Dakota -- And, Yes, Even a Bakken Story

Link here.

These photos are from 2011, but I came across them while looking for stories about this year's event: the 10th annual Medora Balloon Rally.

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CarpeDiem on jobs, jobs, jobs ...

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From the front page of the LA Times (this is a dynamic link, and will change), at the very top, no editing:

Higher taxes on top earners would be a major 2nd-term goal for Obama
By Christi Parsons, Kathleen Hennessey and David Lauter
Other priorities would include Iran, healthcare and immigration. Jobs probably wouldn't be high on the list.

This link will take you to the story. Incredible, isn't it?

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Speaking of jobs, which the administration is not, here's an interesting story about a boom in Bakersfield, California. Regular readers probably already knew this:

The state's economic recovery has largely been concentrated on the coast, leaving behind much of the hard-hit San Joaquin Valley. But Bakersfield, perhaps best known for oil, agriculture and country music, has reclaimed an old title: boomtown.

Bakersfield has been adding population and jobs at a brisk pace and is a few thousand jobs from matching its peak employment level of five years ago. A price-fueled energy bonanza, low corporate operating costs and an advantageous location are contributing to the area's good fortune.

Employment has grown across many sectors, including manufacturing. Even construction, which suffered mightily statewide during the housing bust, has strengthened. And unlike many struggling municipalities, in Kern County officials have recommended a budget increase that would allow hiring of more than 150 people.

Here we go!
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Random data points flash across my mind:

• 1917 to 1991: a country's potential was set back more than a century, and is still struggling
• 2008 to 2016: another revolution in the making, albeit peaceful, and be elected leadership

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A reader sent me this story. It supplements an earlier EOG story: very important. In the latter link, Papa says there are only four plays worth discussing (the rest are all irrelevant): the Bakken, the Eagle Ford, the Permian, and the Barnett.

In this newest link, Papa has revised his opinion: there are only TWO plays that are important: the Bakken and the Eagle Ford. This is an incredible story -- everyone needs to read.

EOG Resource’s top executive Mark Papa raised a few eyebrows Sept. 4 when he told attendees of Barclays energy conference that only two horizontal liquids plays in the U.S. matter — the Eagle Ford and the Bakken. 

The rest are “insignificant” in terms of future U.S. production, Papa says, including those his company is invested in, such as the Wolfcamp, Permian and Barnett plays.  

In fact, in 2013, it is “likely” the Houston-based company will be “stealing some capital from the Permian and … Barnett combos” for company operations in the Eagle Ford and Bakken, Papa said.

This will be re-posted as a stand-alone post. It was sent to me by a reader: a huge "thank you." This story, by the way, is at odds of so much that has been published about the Permian lately (one example). It appears Papa, like Wayne and Steve, is skating to where the puck will be. Again.