Permian Basin Wolfcamp: $61,600/Mineral Acre -- And One Can Still Get Bakken Acreage For $6,000/Acre

Motley Fool has an interesting piece this week. The lede:

I think that LINN Energy LLC  and, by association, LinnCo LLC are hiding something big. And that's a good thing. Because that means investors still have a chance to invest in either company before the big reveal. 

So, what is LINN Energy hiding? The remarkable untapped value of its horizontal acreage in Texas' Permian Basin. The company believes that it holds about 60,000 net acres that have horizontal potential for the Wolfcamp formation.

Later, in the article, a bit of asset juggling:

The reasons this is still a big secret is because the drilling shift from vertical to horizontal in these areas of the Permian Basin is still in its infancy. That's actually creating some crazy shifts in reporting as one of LINN Energy's peers, for example, was forced to erase 185 million barrels of oil from its books as it can't yet book the horizontal inventory because there isn't enough data. That said, early data is so compelling that the company believes that it will likely add back nearly 600 million barrels of oil equivalent over the next few years as it drills more horizontal wells. Similar horizontal potential exists at LINN Energy and by association is available to LinnCo investors as well.

But this is pretty easy to understand:

Just today LINN Energy's partner on its first horizontal well, Diamondback Energy, announced that it was adding to its acreage position in the play. The company is picking up 2,825 net acres in the play, and it's paying $174 million for those acres. The company hopes to eventually buy out its partners on the 6,450 gross acres that are associated with this asset package, and it's willing to fork over a total of $397 million to buy out those partners. To put those numbers into perspective that's more than $61,500 per acre.

Actually, I did the math. The Motley Fool numbers are slightly off: $174,000,000 / 2,825 acres works out to $61,592.92 which is closer to $61,600 than $61,500. And it's that kind of math that gets analysts in trouble. LOL. 

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you may have read here. Regardless of what Linn is or is not doing, and regardless of what Motley Fool says about it, I was more interested to see how much folks are willing to pay for a mineral acre in a field that is 50 years old and, up until a year ago, considered to be dead or dying. I don't invest in LINN Energy, never have, and probably never will.

Predictable

I don't know if folks remember the story yesterday with regard to the Winter Olympics. Putin's games were all about the Russian hockey team. And Russia lost to America. And then they lost to Finland. And Russia did not even make the quarter finals.

With Putin fuming, is there any wonder a Russian 17-y/o figure skater took gold, stealing it from the reigning grand champion, from South Korea? This is as predictable as the earth getting colder. LOL.

The judges:

One of the nine judges who picked a young Russian skater over two more refined competitors for the Olympic gold medal Thursday night was suspended for a year for trying to fix an event at the 1998 Winter Olympics in Nagano.

And another is the wife of the former president and current general director of the Russian figure skating federation. Another Olympics, another huge skating controversy involving the countries of the former Soviet Union.

So, two of the nine judges probably got personal phone calls from Mr Putin a couple of hours before the event. 

With hundreds of nations participating in the Winter Olympics, and I can name a dozen counties with an ice-skating interest, I find it amazing that Russia had two of the nine judges.

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Also Predictable

More and more stories will come out about the websites:

Last fall, when healthcare.gov was all but useless for two months, a handful of states that decided to build their own Obamacare enrollment websites grappled with their own problems. Home-grown exchanges in such places as Kentucky and California worked relatively smoothly, but in other states, including Oregon and Maryland, the insurance portals looked as bad as healthcare.gov, or worse.

The federal site has been in better shape since its Dec. 1 reboot. The same can’t be said for some of the states trying to repair their own malfunctioning sites. Cover Oregon has resorted to an analog solution, taking applications offline with paper applications. (A beta site that brokers can use opened Feb. 18 to mixed reviews.) The exchanges in Maryland and in Massachusetts—the state that was the model for the Affordable Care Act’s reform—have also been plagued with problems.

Congressional Republicans are calling for probes of the failures in these three blue states, which together were awarded more than $500 million since 2010 to establish new insurance marketplaces, according to grant data from the Center for Consumer Information and Insurance Oversight, the federal agency in charge of the portals. More than half of that went to Oregon, which in turn spent $40 million to hire contractor Oracle.

In the aggregate, the 14 states (plus the District of Columbia) that built their own exchanges are doing better than the federal marketplaces, according to recent estimates by consulting firm Avalere Health. The company gauged the latest public enrollment figures through the end of January against Avalere’s projection for each state exchange’s total sign-ups for 2014.

State-run marketplaces are 72 percent of the way to their target, compared with 48 percent for the federal site, according to Avalere’s data. But almost all that difference comes from California, the largest state and, by Avalere’s measures, the most successful. The Covered California exchange enrolled 728,000 by the end of January, which already exceeds Avalere’s projections. Take the Golden State out of the mix, and the other 15 state exchanges are about where healthcare.gov is: halfway to the target.

Despite its website woes, Oregon has also reached roughly half of Avalere’s projected enrollment. Massachusetts is the laggard, with a little more than 8,000 newly insured through its exchange, 17 percent of Avalere’s projection. Maryland, at 38 percent, lands somewhere in the middle. Besides California, a couple of states that enthusiastically embraced Obamacare, including Colorado and Washington state, have robust enrollment in their insurance portals to show for it.

The Farmers Get It: "Extraordinary Sites" List Is Bad, Bad News

The Dickinson Press is reporting:

“This is an insult to landowners,” Bowman said. “The biggest part of the area they are looking at is in my district. I can say this: If they ram this down our throats, we’ll shut down everything in western North Dakota. I’ll get a group of landowners together and shut down hunting on a huge area of private land. You can call me a radical, but that might be the last alternative we have.”

Opponents of the potential policy argue that it would be an overreach of government control over private property similar to an eminent domain power play. Backers of the proposal say it’s a needed measure to protect certain North Dakota landmarks and wild places from an onslaught of development of lands above the Bakken oil shale in the western part of the state.

I think the farmers, hunters, and everyone else realize that once the extraordinary sites is approved, the oil and gas industry won't be the only thing banned from the sites -- everything will be subject to approval, even farming, hunting, windmills. Oh, windmills? -- no, they will be fast-tracked.

For Investors Only

The real question is why Wal-Mart wouldn't partner with Amazon. Seriously. Everyone else (except Apple) will eventually partner with Amazon. Yahoo!Finance is reporting:

Amazon.com Inc. is in talks to bring listings for J. Crew khakis, Ralph Lauren polo shirts and Lord & Taylor suits to its site, according to people familiar with the talks.

The discussions, which seek to win over retailers that have largely shunned the online marketplace, involve about 10 well-known retailers, these people said, including Abercrombie & Fitch Co. and Neiman Marcus Group Inc.

Amazon wouldn't sell the goods directly; the listings would be links to the retailers' own sites. The arrangement would generate traffic for the retailers, while providing Amazon with more customer data and a new enticement for its Prime shipping program as it plans to raise rates.

Having said that, being re-directed to another site is generally an unsatisfactory experience. A better way would be to make it an "Amazon" experience. Even buying one-cent books from other re-sellers through Amazon seems like an all-Amazon experience. 

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Seventeen companies announce increased dividends or distributions including Wal-Mart, Xcel Energy, T-Rowe Price (from 38 cents to 44 cents), Allstate, and my favorite, Tootsie Roll.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you may have read here. Anything other than the Bakken may be tongue-in-cheek and/or completely wrong. And even what I write about the Bakken is subject to error. 

Abraxas Petroleum Corp. announces 2013 year end reserves grew 3% over 2012 to 31.0 MMBoe with 11.3 MMBoe of reserve additions more than offsetting 9.1 MMBoe of divestitures; provides production and CAPEX update.  Three percent?

Newmont Mining misses by $0.11, misses on revs: Reports Q4 (Dec) earnings of $0.33 per share, $0.11 worse than the Capital IQ Consensus Estimate of $0.44; revenues fell 12.4% year/year to $2.17 bln vs the $2.19 bln consensus.

This will be kind of interesting to watch over the next twenty years: whether its better for a state to fill its coffers by taxing oil (North Dakota, the Bakken) or by taxing recreational drugs (Colorado, marijuana). The AP is reporting that that the Colorado pot market exceeds all tax hopes. I would think it would only be natural to legalize heroin and tax that also, if taxes from marijuana are working out so well.

Vaca Muerta: How To Win Bigger Than The Bakken -- Seeking Alpha -- February 21, 2014

Locator: 10001VACA.

Updates

February 25, 2024: XOM mulling decision to sell assets in Vaca Muerta.

August 2, 2023: dead.

September 29, 2021: not dead.

September 20, 2020: it's dead. 

May 7, 2020: may be living up to its namesake -- "dead." Link here, from Rigzone. If that site disappears, try here.

December 4, 2018: 60,000 bopd by 2022. Okay.

October 29, 2018: Vaca Muerta shale output projection revised -- upward! YPF SA will produce more oil and gas than originally planned over the next five years as shale output from the Vaca Muerta formation picks up 

October 25, 2017: ExxonMobil and Vaca Muerta update.

May 4, 2017: Vaca Muerta to reach 113,000 bopd by 2018 -- Wood Mackenzie. 

April 25, 2017: update; lacks infrastructure; drilling costs 30% + than in the US

March 29, 2017: update on Tenaris, $2.3 billion investment in Argentina’s Vaca Muerta shale formation to drill 150 wells in the world’s second-biggest reserves of shale gas and fourth-biggest of shale oil.

September 14, 2016: BP interested in Vaca Muerta; the Permian is too expensive; 

June 22, 2016: the Vaca Muerta, more "muerta" than "viva"?

June 13, 2016: an update of the four shale basins in Argentina. Reports that COP will begin exploring one of them: Magallanes. 

June 4, 2016: XOM getting ready to invest $10 billion + in Vaca Muerta. 

March 9, 2016: update on the Vaca Muerta during the Saudi Surge / Slump. 

August 17, 2015: the dead cow looks like ... well, ... a dead cow.

July 16, 2015: Argentina's state oil company YPF, Pan American Energy and Wintershall will invest $38 billion over 35 years in the country's vast but mostly untapped Vaca Muerta shale formation.

January 19, 2015: the Vaca Muerta is a success. 

Oil production in the Argentine province of Neuquen rose 6.75 percent in the second half of 2014 from the first half, due in part to increased output at the Vaca Muerta shale field.

Original Post 

This was the top story released by SeekingAlpha today. The headline caught my eye. Let's see what it's all about. The article is about a penny stock operating in the Argentina shale. I don't care about the investment angle; the update on Argentina shale, the Vaca Muerta might be worth the read. And then again, probably not.

Previous posts on the Vaca Muerta:

• EOG: Argentina may be a better bet than Brazil
• EOG to drill in Argentina, not the Bakken (one of my more embarrassing mistakes)
• CVX in the Vaca Muerta