Has Wall Street Finally Discovered The Bakken?

Related links: is something going on with Oasis? At that link, there is another link; be sure to follow that story also.

Now, another story suggesting that Wall Street has finally discovered the Bakken: every investor should own oil shale stocks at SeekingAlpha.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here. 

Whilst GS's remarks, and their mention of some specific stocks, were received positively by the Street, the firm was only confirming what many followers of the shale oil drillers have known for some time - that the best oil shale drillers are set to enjoy many years of strong and increasingly profitable growth.

Indeed, Goldman's comments are not optimistic. Industry insiders would argue that Goldman Sachs and many other analysts don't typically highlight the real strength of the multi-year growth model that's driving the business. True, it is becoming generally known that efficiency and savings from pad-drilling, upgrades to completion techniques and improvements in down-spacing are all combining to propel growth over the coming years. Many analysts are now incorporating these factors into their assumptions and estimates. However, what the analyst community has yet to bring into the public domain is the fact that, on top of these various positives, there is a new game-changing fracking methodology in town. This will be looked at later.

 This story and others like it explain to me why The Oil Drum went belly up. It also is one more nail in the coffin in those skeptics who got the Bakken wrong.

Price Of Fracking Sand Could Go "Parabolic" -- Mike Filloon

Mike Filloon at SeekingAlpha.

I first addressed better source rock stimulation in November of 2012. EOG Resources pioneered fraccing shorter and wider fractures.

Before this, operators were trying to create longer fracs in an attempt to garner increased shale surface area contact deeper into the shale. It was believed this would maximize recoveries, but it also created issues. Longer fractures are further from the well bore. This distance is difficult to bridge, as it has to push proppant over a greater distance. Less proppant is secured in the fractures and this increases crushing and closure of those fractures. This significantly decreases EURs. Thinner fractures also have less surface area, which creates greater pressures. These greater pressures require more resilient ceramic proppant, which is approximately 10 times more expensive than sand. Since EOG Resources creates shorter, wider fracs, it reduces that pressure allowing for the use of all sand fracs. The increased void created by this completion design requires more proppant.

In some cases, these wells use up to a million pounds of sand for every 1000 feet of lateral. EOG first used this in the Eagle Ford and Permian Basin.

Monday; Spearfish-Like Oil Heavily Discounted At Gulf Coast

Active rigs: 184

RBN Energy: Brent and WTI take separate paths.

The Brent premium to West Texas Intermediate (WTI) on Friday (October 18, 2013) was $9.14/Bbl – indicating a new disconnect between US crude prices and international levels. Unlike last time a big Brent premium to WTI opened up in 2010 the price of Light Louisiana Sweet at the Gulf Coast is still tracking with WTI rather than following Brent. This suggests that the US Gulf Coast is long crude at the moment and that imports of Brent priced crude are not required. Today we discuss the current Gulf Coast crude market.

Note: "imports of Brent-priced crude are not required."

I think we may close the nominations for the 2013 Geico Rock Award and simply give it to the publisher of The Dickinson Press. 

More from the RBN Energy story:

This sudden divergence in the Brent price runs counter to the thinking of many analysts. That is because it signals that US Gulf refineries currently have adequate crude supplies and do not need imported barrels – certainly of light crude but also of medium grades as well -  i.e. any crudes with prices linked to Brent. If there were demand for these imported barrels then theoretically the price of LLS would be tracking closer to Brent because those imports would compete with LLS for the attention of Gulf Coast refiners.

With LLS at a near $6/Bbl discount to Brent the Gulf Coast is not attracting imports.

Why is that such a shock? After all, US production has been increasing in leaps and bounds and we know that a lot of shale crude has been arriving at Gulf Coast refineries from North Dakota, the Permian Basin and the Eagle Ford. The reason for the surprise is that Gulf Coast refineries were (up until early October) running at over 90 percent of capacity and although more domestic crude is making its way to the region, most believed that refiners still need plenty of imported supplies to make up their feedstock requirements.

But this week, prices seem to be telling us that the Gulf Coast is awash with crude supplies. LLS crude is trading at a $3/Bbl premium to WTI – less than the cost of transport from Cushing to the Louisiana Gulf Coast (where LLS is delivered at St. James). The Houston price for WTI is tracking neck and neck with LLS. So Louisiana refiners are getting adequate supplies from local offshore production, barges from Corpus Christi or rail from North Dakota and have no need for Cushing barrels. In any case the current work to reverse the Ho-Ho pipeline means there is no pipeline link from Houston to St James. Even heavy crudes look to be over supplied at the Gulf Coast at the moment.

The price of two heavy sour grades – West Texas Sour and Southern Green Canyon  - were discounted last week by more than $7/Bbl to WTI due to low demand for these crudes by Houston refineries. In short – Houston and Louisiana Gulf Coast refineries appear to have plenty of crude.

Results And Closing Three Polls

Will oil drop below $100 by the end of October, 2013?

• yes: 39%
• no: 61%

Futures today: oil just below $100.

Are you affected by the government shutdown?

• yes: 18%
• no: 60%
• what government shutdown: 22%
• yes, I have a business near a national park: 0 votes

Apple Inc is committed to 100% renewable energy because ..

• it is the right thing to do: 6%
• it makes economic sense: 85
• it is good public relations: 67%
• one other over-riding reason: 19%

Wells Coming Off The Confidential LIst Over The Weekend, Monday; Some Huge Wells; Even OXY Has A Huge Well

Monday, October 21, 2013

• 23028, 803, OXY USA, State 3-16-21H-14-96, Fayette, t4/13; cum 31K 8/13;
• 24290, 276, CLR, Stedman 4-24H-1, Hebron, t8/13; cum 6K 8/13;
• 24414, drl, Statoil, Garmann 19-8 4TFH, Banks, no production data;
• 24628, 2,971, BR, Badlands 21-15MBH, Hawkeye, t8/13; cum 13K 8/13;
• 24749, 1,915, Newfield, Anderson Federal 152-96-9-4-11H, Westberg, t8/13; cum 15K 8/13;
• 25027, 281, Slawson, Jericho 4-5H, Big Bend, t9/13; cum 14K 8/13;
• 25214, 65, Legacy, Legacy Et Al Emery Norm 4-19H 2H, Red Rock, a Spearfish well; t6/13; cum 4K 8/13;
• 25233, 1,836, BR, Everglades 31-3MBH, Keene, t8/13; cum 14K 8/13;
• 25234, 2,879, BR, Everglades 41-3TFH, Keene, t8/13; cum --

Sunday, October 20, 2013

• 23306, 1,508, WPX, Blackhawk 1-12HY, Moccasin Creek, t8/13; cum 17K 8/13;
• 24297, drl,  HRC, Fort Berthold 148-95-13A-24-5H, Eagle Nest, no production data,
• 24844, drl,  CLR, Wahpeton 7-16H3, Banks, no production data,
• 25179, drl,  KOG, P Wood 154-98-4-26-35-14H, Truax, no production data,
• 25236, 2,594,  BR, Everglades 21-3MBH, Keene, t9/13; cum --

Saturday, October 19, 2013

• 21628, 273, CLR, Winkler 1-3H, Border, t7/13; cum 13K 8/13;
• 22665, drl, Enerplus, Mustang 149-93-29A-32H TF, Mandaree, no production data,
• 23027, 1,388, OXY USA, Dennis Kadrmas 3-9-4H-143-96, Fayette, t4/13; cum 52K 8/13;
• 24032, 744, Fidelity, Mularchek 6-7H, Heart River, t4/13; cum 44K 8/13;
• 24748, 2,095, Newfield, Anderson Federal l152-96-9-4-3H, Westberg, t8/13; cum 14K 8/13;
• 24941, 1,847, XTO, Sax 41X-26C, Siverston, t8/13; cum 14K 8/13;
• 24942, 2,035, XTO, SAX 41X-26H, Siverston, t8/13; cum 18K 8/13;