SM Energy Reports A Tyler Well; 2/3 Of Bakken Wells To DRL Status; Fracking Accelerating Fertilizer Plant Expansion -- September 24, 2014

Watch for the weekly natural gas fill rates. Looking for "100" to break even; less than 100 is not a good sign. EIA link here. Next data release, Thursday, September 25, 2014.

Active rigs:

	9/24/2014	09/24/2013	09/24/2012	09/24/2011	09/24/2010
Active Rigs	193	187	188	195	141

Wells coming off the confidential list Thursday:

• 23844, 497, OXY USA, Nels Wold 1-36-25H-141-97, St Anthony, t3/14; cum 29K 7/14;
• 27572, drl, Hess, EN-Jeffrey A-155-94-2734H-7, Alkali Creek, no production data,
• 27925, drl, XTO, Willey 31X-3H, West Capa, no production data,

Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Fifteen (15) new permits --

• Operators: Zavanna (4), Oasis (4), Newfield (3), Whiting (3), Mountain Divide
• Fields: Stony Creek (Williams), Camp (McKenzie), South Tobacco Garden (McKenzie), Glass Bluff (McKenzie), West Ambrose (Divide)
• Comments:

Five (5) producing wells completed:

• 11841, 22, SM Energy, Grassy Butte 21X-21F, Tyler, this was an old Madison well which was spud in 1986 and last produced in 1995; the total Madison cum was 61K; proposed stimulation with ~ 3,000 gallons of 15% HCL, if temporary production is successful, will go to permanent production;
• 27131, 1,162, BR, CCU COrral Creek 31-28TFH, Corral Creek, t8/14; cum --
• 27499, 666, Slawson, Alamo 8-19-18TF2H, Big Bend, t6/14; cum 21K 7/14;
• 26892, 905, Slawson, Alamo 5-19-18TFH, Big Bend, t6/14; cum 35K 7/14;
• 26891, 847, Slawson, Alamo 4-19-18TFH, Big Bend, t6/14; cum 33K 7/14;

In addition to an earlier list of HRC wells transferred to another operator, another eight HRC wells were transferred to Energyquest II, LLC, all in Bottineau County.

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From Seeking Alpha: 
Back to OPEC?

Report: U.S. crude could fall $30 below international prices without exports

• The going rate for U.S. crude oil could tumble $30 below international benchmarks in the coming decades if U.S. policymakers don’t reverse a ban on exporting crude oil, according to a report by Wood Mackenzie.
• The falling prices could be made worse by new drilling technology that may double recovery rates and add an additional 1.5M-3M bbl/day of new oil production - as much as 25% more oil than is expected today - the report says.
• The report is not specific about the kinds of technologies that could draw more oil from the ground, but it cites companies such as EOG Resources that in the early phase of testing new methods now.

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Fertilizer Plants

It looks like the Spiritwood investors were ahead of the pack. ChicagoBusiness/Bloomberg is reporting:

Talks to create the largest nitrogen fertilizer company are the latest example of how the boom in natural gas from fracking is transforming not just the world of U.S. energy but other industries too.
Norway's Yara International ASA and Deerfield-based CF Industries Holdings Inc. said yesterday they're in preliminary discussions about a combination. Both make crop nutrients using gas as a raw material. There's more gas than ever in the U.S. as new drilling techniques open up shale deposits.

“Besides the obvious petrochemical investments occurring in North America to take advantage of low cost gas, the rapid development of unconventional energy resources is buoying other industrial markets,” Paul Bjacek, an analyst at Accenture Plc, said yesterday in a blog post.

Cheap gas has spurred more than $124 billion in new factories for chemicals, according to the American Chemistry Council. There's $12.7 billion of fertilizer plants planned to come into production through 2020, Mark Gulley, an analyst at BGC Financial LP in New York, said in a report last week.

Gas is used to capture nitrogen from the air in the Haber process, named after German chemist Fritz Haber who developed the technique in the early 20th century. The advantage of doing that in the U.S. is stark: CF's operating profit margin was 43 percent last year while Yara's was 9.2 percent, according to data compiled by Bloomberg.

While North America accounts for about 16 percent of Yara's revenue, the company is trying to boost that with a planned joint venture with BASF SE in Texas. Yara's desire to lock in cheaper gas was clear when it tried unsuccessfully to buy Terra Industries Inc., said Colin Isaac, an analyst at Atlantic Equities LLP in London.

Yara was trumped by CF's $4.7 billion offer for Terra in a deal that closed in 2010.
“To meet their ambition of being global, Yara needs to have a meaningful business in the U.S.,” Isaac said.

Hess Announces Plans For A Bakken Master Limited Partnership -- September 24, 2014

Reuters is reporting:

Hess Midstream Partners, a master limited partnership (MLP), filed for a $250 million initial public offering representing an interest in Hess Corp's North Dakota oil and gas storage facilities and processing plants, according to a regulatory filing on Wednesday.

This is not an investment site. Do not make any investment or financial decisions based on anything you read here or think you may have read here.

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Flights Into North Dakota

Frontier Airlines will discontinue flights from Denver to Bismarck and Minot.

United Airlines has flights from Denver to Bismarck and Minot.

Update On Density Pilot Projects In The Bakken, September 24, 2014

CLR Corporate Presentation
Other Posts On This Presentation

September, 2014

Slides 25 - 34

Six producing density pilots

CLR: 4

• 1,320 feet: Hawkinson, Rollefstad, Tangsrud
• 660 feet: Wahpeton

KOG: 2

• 800 feet: Polar and Smokey

Seventeen (17) future pilots in progress/announced

• CLR: Mack, Lawrence, Hartman 660's
• COP: 6 density pilots
• KOG: 1 density pilot
• OAS: 2 density pilots
• WLL: 5 density pilots

Testing: 4 - 8 wells per zone (formation, bench)

LTF: 15 of the 23 pilots include wells in the lower Three Forks

Hawkinson:

• staggered, not stacked
• industry's largest microseismic project
• full DSU development validated (4 zones on 1320-foot spacing)
• average well performance exceeds 603K boe model by 50%
• project ror>100%
• no lateral communication on 1320-foot spacing in middle Bakken and Three Forks

Slide 27 is incredible, for the Hawkinson:

Note the 250K EUR at 400 days (~ one year) for Three Forks vs 210K EUR for the middle Bakken; the area average is much higher for the middle Bakken than the Three Forks at the current time (3 wells MB vs ~ 8 TF wells which includes all 3 benches

Active Rigs Down To 193 -- September 24, 2014, North Dakota; RBN Energy Has A Great Essay On Tertiary Production/CO2 EOR

Active rigs:

	9/24/2014	09/24/2013	09/24/2012	09/24/2011	09/24/2010
Active Rigs	193	187	188	195	141

Comment: When I see the number of active rigs drop from 200 to 193 in just a few days, I at least have to ask the question: is there a particular reason? Probably not. Just one of those things. But remember, it's the best time of the year in North Dakota to be drilling. Why would the operators be stacking rigs? What has changed in the past few weeks? Two things: price of oil and new flaring rules are about to go into effect.

It is my impression that the price of oil, in the short term (less than 6 months), has no effect on CAPEX or the drilling plans for operators.

[Later: see comments below.]

RBN Energy: this is a must-read essay today. I remember talking about EOR, primary production, secondary production, tertiary production when I first started blogging. I did not understand the jargon. Since then I feel comfortable with it. But RBN Energy has done a great job putting it all together. RBN Energy posts will quickly disappear, available to subscribers only.

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Crying Wolf Once Too Often

Bloomberg is reporting:

Federal Reserve Chair Janet Yellen says she wants investors to be prepared for the possibility that the Fed will raise interest rates sooner than they currently project. Her words are going unheeded.

Volatility across stocks, bonds and currencies worldwide is close to record or multi-year lows, even after Yellen cautioned last week that the Fed's commitment to keep interest rates near zero for a "considerable time" could change if U.S. economic performance continues to exceed expectations.

If she wants to keep her job, she won't be raising rates before the 2016 election. If she wants to have any kind of legacy, she will be very, very careful about raising rates. Ever.

This is  not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here. Some "stuff" I post does not seem related to the Bakken, but trust me, it does.

Yesterday it was reported that you can now invest your money into US Treasury bonds and get a "negative yield." Put $1,000 into US Treasury bonds now, and when they mature in 10 years, collect your $999. I see the market is up about a 100 points today. 

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Jobs Report

"From the beginning" I have never wavered in my thoughts about the media spin following every weekly jobs report.

It appears the media is starting to walk back that spin. The WSJ is reporting:

If they were judging the economy by the monthly jobs report, working Americans would be popping champagne corks. Total employment has risen every month for more than four years. According to the Current Population Survey, more than eight million jobs have been created since the trough, while the number of unemployed has been cut by nearly six million. The unemployment rate has declined to 6.1% from 10%, and the number of Americans enduring long-term unemployment (27 weeks or more) has fallen to three million from 4.3 million in the past 12 months.

Yet average Americans remain gloomy about the current economy and anxious about its future. According to a Pew Research Center report released this month, only 21% rate current conditions as excellent or good, versus 79% fair or poor. Only 33% say that jobs are readily available in their communities; when asked about good jobs, that figure falls to 26%. Only 22% believe the economy will be better a year from now; 22% think it will be worse, while fully 54% think it will be the same. 

Like CO2 ppm and global warming, there seems to be no linkage between the "jobs reports" and the economy. I did not say there is no linkage between "jobs" and the economy. I said there is no linkage between "jobs reports" and the economy. Big difference.

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Getting His War Footing

George W. Bush took his case to the UN before he started bombing. The "latte" president took  his case to the UN after he started bombing. And that's the way it should be. Why tell your enemies what you plan to do? Good for the war president. Finally getting his war footing. I never understood why Bush tryed to get the support of the UN, giving his enemies time to prepare. Mr Obama is a voracious reader and an intellect. Somewhere along the line, I am sure, perhaps as a community organizer, he read "Machiavelli" or The Art of War by Sun Tzu; on the other hand George W. Bush was said to have never been intellectually curious and probably never read either. I never understood why George W. Bush embedded media into the Army ground troops. My hunch is that President Obama will not be embedding any of the press in single-seat fighter squadrons or be placing them on cruise missiles (though he might wish he could in some cases).

The Bomb Run Sequence From Dr Strangelove

What the peace president has unleashed (and, no, this footage won't be seen on NBC tonight):

B-1, B-2, and B-52 - Heavy Carpet Bombing No civilian casualties
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Californians Growing Weary Of ObamaCare

Wait Until ObamaCare Actually Kicks In 

Most Of ObamaCare Law Is Waived Or Delayed Until 2016

The Sacramento Bee is reporting:

The Affordable Care Act continues to divide Californians, who remain skeptical four years after its passage despite the state’s relatively smooth launch in which more than 1.2 million people enrolled in health insurance coverage.

A new survey released late Tuesday found some 42 percent of state residents generally view the law favorably, while 46 percent harbor unfavorable opinions. Support is down somewhat since May, before a wave of targeted TV ads began in a handful of competitive congressional districts.

My generation was very familiar with the Edsel and what the "Edsel" has come to represent, as The Washington Post put it awhile back, "the flop heard around the world." The article begins:

Fifty years ago today, Don Mazzella skipped out of school to see the hot new car that everybody was talking about, the hot new car that almost nobody had actually seen.

Ford Motor Co. had proclaimed it "E-Day," and Mazzella and two buddies sneaked out of East Side High School in Newark, N.J., and hiked 13 blocks to Foley Ford so they could cast their gaze upon the much-ballyhooed new car that had been kept secret from the American public until its release that day.

It was called the Edsel. 

My hunch is that if Jay Leno did his famous "Jay Walk," he would find hardly anyone under the age of 35 who would be able to talk intelligently about "the Edsel."

My hunch is that, for the younger generation, "the Edsel" will be replaced by "ObamaCare." People will recall Nancy Pelosi's famous comment, that like the Edsel, no one has seen it (the ObamaCare law) and they won't know what's in it until it is passed by Congress.

I can't make this stuff up.

Everybody Knows, Leonard Cohen

My Love for Evermore, The Hillbilly Moon Explosion

Read more here: http://www.sacbee.com/2014/09/23/6730622/poll-obamacare-support-sliding.html#storylink=cp

MDW Shorthand -- September 24, 2014

A reader recently asked what the "drl" and "no production data" means in my shorthand, as in this example:

• 25173, drl, WPX, Morsette 35-26HZ, Spotted Horn, no production data.

I discuss my "shorthand" at this link: http://themilliondollarway.blogspot.com/2013/09/shorthand.html.

With regard to "drl" and "no production data," this is the story.

Remember, I have no background in the oil and gas industry and no formal training. This is how I understand it and I am very possibly wrong; certainly I am wrong in some of the details and nuances.

Also, remember that what one sees on this blog or other blogs or at the NDIC site lags what is happening in the field. In addition, the NDIC can only report what it knows, and generally what they report is based on paperwork or some kind of electronic report. Such reports are not always filed in a timely manner. What  is happening in the field, on the drilling pad, may not be reflected in Bismarck.

In addition, this is all dynamic. As soon as something is reported, it is likely to change.

I do not know the nuances, but apparently there is "confidential" and "tight hole." For purposes of this discussion, I assume them to be synonymous; NDIC switched to "tight hole" a long time ago; I almost always use "confidential."

It's a long note; I don't proofread long notes for a day or two (sometimes never); expect typographical and factual errors. I rely on readers to catch significant errors.

For purposes of this discussion we will assume that we can stop the clock instantaneously at the moment the "drl" status occurred.

Let's get started. [This is now question #68 as the FAQ post.]

The clock is stopped.

Generally, most operators ask and are given permission to put their permits/wells on confidential status. When they do that and when the permit/file is put on confidential status is a conversation for a later time (hopefully never).

By North Dakota law, the well has to come off confidential status six months later (interestingly, there are some nuances to this, also, which is not germane to this discussion).

At six months, after the well comes off confidential status, it has to go to some other status. It would be nice if the well was completed and producing by that time in every case. If that were the case, the well would go to A (active) status, an initial production (IP) would be reported, and we would start seeing production numbers.

However, if the well is not completed, regardless of whether it is producing oil or not (yes, a well can be producing oil even if it is not completed), it will likely go to drill (drl) status. [Alternatively, it could become inactive, or even temporarily abandoned, I suppose.]

But in the Bakken, 99% of time that a well comes off confidential status will go to drill status if it is not completed.

If there is production data, it will be reported. If there is no production, then "no production data" is my shorthand.

At this point (remember, the clock is still stopped), there are two possibilities for a well on drl status. The well might be fracked/completed in the field, but the paperwork has not caught up with the folks in Bismarck. If the well is fracked/completed, it is likely that there is already production, and if so, that is reported. If you see significant production from a well on drl status you can assume it has been completed, and fracked if necessary (an occasional Bakken well is not fractured).

If however, there is "no production" reported, then very likely the well has been drilled to total depth (vertical + horizontal) but has not (yet) been fracked.

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Coffee break.

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Once the well is on drl status, it can remain on that status for eternity. That seldom happens in the Bakken.

Let's say the clock is stopped in Bismarck; they still see a well on drl status. But in the field, the clock has started again.

More than likely, the operator will complete the well. In the Bakken, this generally means that the operator will frack the well. Once the frack is complete, the operator will "test" the well for production and report an "intial production (IP)" number to the NDIC in Bismarck. I almost always place the IP in red/bold. 

At the moment the well is completed/fracked/tested (and there are probably some nuances in the reporting date here also), the company has until the end of the following month to report the IP results.

So, for example, if a well is completed/fracked/tested on July 16, 2014, the report has to reach Bismarck by August 31, 2014 (I may have some minor facts wrong here, but in general, I believe this to be accurate).

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Bathroom Break

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To summarize: the clock is stopped in Bismarck, and this well is shown to be on drl status. The clock is now running in the field, and the operator now has a completed/fracked/tested well that is producing Bakken crude oil.

The information is sent to Bismarck at the latest possible date but reaches Bismarck by August 31, 2014 (in this example).

Now, start the clock again in Bismarck. The NDIC folks receive the data, and will post it as soon as possible. It appears that production data is updated monthly in Bismarck. If so, one might not see production data at the NDIC site until the September, 2014, reporting period (in this example).

So, in this case, the well came off the confidential list on the day the well went to drl status. (The NDIC provides the date when wells come off the confidential list.) The well was completed/fracked/tested on July 16, 2014 (in this example) but I did not see it at the NDIC site until the September, 2014, data was released.

Again, once the well is on drl status, if there is production, that production must be reported to the NDIC but, obviously, one cannot report September data until after the end of the month. The company may or may not sell produced oil; if it is sold, it is found in the "runs" column.

Again, "produced oil" is only the oil that has been produced. If it is stored in tanks and not sold, it is only "produced oil." Once the oil is put in the pipeline and sold and "run" to the refinery, and/or put into a truck and "run" to a storage area, then it is referred to as "runs."

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Currently, mostly due to operational constraints posed by pad drilling, 50% - 75% of Bakken wells go to drl status. It appears that about 90% of wells on drl status are completed/fracked/tested/reported within three months of being placed on drl status. I track all Bakken wells, and I post new results daily, and I post that data in a quarterly format. When I go back one quarter (three calendar months) to update the IPs of the previous quarter, it seems 90% of wells on drl status have reported an IP by then.

The number of wells going to drl status is increasing, not decreasing in North Dakota, based on data from the Director's Cut from the past three or four months. I would be surprised if this "improves."