A Reader Asks About Royalties -- August 14, 2015

Updates

Later, 11:02 p.m.: another reader writes --

I know my father has not received royalties on wells within 2 drilling units along the river for the past several months. Apparently, some issue with the State regarding the high water mark. The royalties are from one of the top five. (The one based in Norway).

Original Post

From the discussion group:

Anyone having trouble with royalty payment in the month of August 2015?  Everything was fine up until this month.  The company is in the top 5.

I'm sure folks who might want to make suggestions would be curious what you've done so far to contact the company.

Two quick comments (I don't have any mineral rights, so I don't have personal experience, but) based on comments I'm seen from other readers regarding royalties:

• First, don't bother to write a letter or even phone the company. Fax them your concern.
• Second, it is my understanding that if the amount payable is under a certain threshold, the operator does not have to pay it that month. The operator can wait "x" number of months until the threshold for the minimum payment is reached.  

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Putting Together New Patio Furniture

Putting the legs on:

Quality control; checking the finished chairs:

Job well done:

OFF THE NET

There is so much to do, so much to write about, but unfortunately I have to leave the net for awhile. Not sure when I will be on -- but it will be later today.

The Director's Cut data has been posted; done in haste. A lot of things posted this morning were done in haste, and there will be factual and typographical errors. If this stuff is important to you, go to the source.

If your source is Hillary's hard drive, you may be out of luck. There are reports that it was "professionally" wiped clean.

Do not make any financial or investment decisions based on what you read here or think you may have read here.

By the way, $500 million for Tesla was not enough. The Wall Street Journal is now reporting (no link; I'm sure you can find the story "everywhere":  

Tesla boosted the size of its stock offering, unveiled just a day earlier, by more than $140 million.The electric-car maker said it now plans to sell about 2.69 million shares, up from the 2.1 million shares it said it would sell on Thursday. At the offering price of $242 a share, the sale would raise about $652 million.

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Swaps Are "In"

Reuters is reporting that  U.S. approves landmark crude oil export swaps with Mexico. I've talked about this for quite some time. Swaps make a lot more sense than ending the ban on crude oil exports. This looks like the foot in the door for swaps on a regular basis. Swaps make much more sense if done for the "right" reasons and not simply to be politically correct or to line the pockets of speculators.

This may be one of the top stories of the month. I have yet to read the story; just the headline.

Director's Cut, June, 2015, Data; Peak Oil? What Peak Oil?

Updates

August 15, 2015: USA Today also has a story on North Dakota production. 

August 14, 2015: on August 10, 2015, just four days ago, the Obama Administration predicted that Bakken production would decrease by 27,000 bopd. In fact it rose by almost 9,000 bopd.

The Eagle Ford continues to represent a bulk of the overall oil output declines, projected to fall 56,000 b/d in September to 1.48 million b/d. The Bakken is expected to fall 27,000 b/d to 1.16 million b/d, and the Niobrara is expected to fall 18,000 b/d to 399,000 b/d.

Original Post

I track the "cuts" here. 

Disclaimer: this update is always done in haste; typographical and factual errors are likely. This is for my use only. If this is important to you, you should go to the source. 

Note: facts and opinions are interspersed in the note below. Do not make any investment or financial decisions based on what is posted below; there will be factual and typographical errors. If this information is important to you, go to the source. 

The June data is posted at this link: https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2015-07-10.pdf.

Important data points:

• Bakken price in July: $39.41
• Fracklog: 825 (60 less than at the end of May)
• Completions: 149 (116 in May, 2015) -- fewer wells going to SI/NC status
• To maintain production near 1.2 million bopd: 110 - 120 completions needed each month
• Statewide flaring: 17% 

Delta, crude oil production:

• 1,211,178 - 1,202,615 = 8,563 bopd
• 8,563 / 1,202,615 = 0.7% increase month-over-month

Oil:

• June, 2015: 1,211,178 (preliminary)(second highest; highest was December, 2014)
• May, 2015: 1,202,615 (final)
• April, 2015: 1,169,045 (final)
• March, 2015: 1,190,502 (final); 1,190,582 bopd (preliminary)
• February, 2015: 1,178,082 bopd (revised, final); 1,177,094 (preliminary)
• January, 2015: 1,191,198 bopd (all time high was last month)
• December, 2014: revised, 1,227,483 bopd (preliminary - 1,227,344 bopd - preliminary, new all-time high)
• delta: see above

Producing wells: 

• June, 2015: 12,864 (preliminary -- new all-time high)
• May, 2015: 12,679 (final revised -- new all-time high)
• April, 2015: 12,545 (final revised -- new all-time high)
• March, 2015: 12,443 (final revised -- new all-time high)
• February, 2015: 12,199 (final revised -- new all-time high)
• January, 2015: 12,181 (preliminary -- new all-time high)
• December, 2014: 12,134 (preliminary, new all-time high)
• November, 2014: 11,951 (revised); 11,942 (preliminary, new all-time high)
• October, 2014: 11,892; revised 11,942 (preliminary, new all-time high)
• September, 2014: 11,758 (revised); 11,741 (preliminary; new all-time high)
• August, 2014: 11,565

Permitting:

• July, 2015: 233
• June, 2015: 192
• May, 2015: 150
• April, 2015: 168
• March, 2015: 190
• February, 2015: 197
• January, 2015: 246
• December, 2014: 251
• November, 2014: 235
• October, 2014: 328
• September, 2014: 261
• August, 2014: 273
• All-time high was 370 in 10/2012
  

Pricing:

• Today, 2015: $28.50
• July, 2015: $39.41
• June, 2015: 47.73
• May, 2015: $44.70
• April, 2015: $38.33; $36.25 (lowest since February, 2009, and January, 2015) (all-time high was $136.29 7/3/2008)
• March, 2015: $31.47
• February, 2015: $34.11
• January, 2015: $31.41
• December, 2014: $40.74
• November, 2014: $60.61
• October, 2014: $68.94
• Sept, 2014: $74.85
• August, 2014: $78.46

Rig count:

• Today:  74 - lowest since November, 2009, when it was 63 (all time high was 218 on 5/29/2012)
• July: 73
• June: 78
• May: 83
• April: 91 (lowest since January 2010)
• March: 108
• February: 133
• January: 160
• December, 2014: 181
• November, 2014: 188
• October, 2014: 191
• Sept, 2014: 193
• August, 2014: 193
• July, 2014:  192

Director's comments: (Needs to be updated)

Operators are not committed to running fewer rigs than their planned 215 minimum as drill times and efficiencies continue to improve and oil prices continue to fall. This has resulted in a current active drilling rig count that remains 5 to 10 rigs below what was operators indicated would be their 2015 average if oil price remained below $65/bbl.

The number of well completions rose sharply from 116 (final) in May to 149 (preliminary) in June as a large number of NC status wells reached the 1-year deadline for completion or TA approval.

Drilling rig count: 

• rig count remains unchanged this month (June to July)
• dropped 5 from May to June
• dropped 8 from April to May
• dropped 17 from March to April 8
• dropped 25 February to March
• dropped 27 from January to February
• dropped 7 from November to December
• dropped 21 from December to January
• dropped 23 from January to date of previous month's Director's Cut

Rig utilization:

• no change
• 20,000+ feet rigs: 45% 
• shallow well rigs: 25% 

Well completions:

• June: 149 (preliminary)
• May: 116 (final)
• April: 102 (final -- astounding drop)
• March: an astounding 194 (final)
• February: 42
• January: 63
• December: 173 (preliminary)
• November: 48

Weather:

• one significant precipitation event in Minot and Williston
• 5 days with wind speeds in excess of 35 mph (too high for completion work)
• no days with temperatures below -10F

Wells waiting to be completed: (needs to be updated)

• At end of May, an estimated 925 wells were waiting to be completed, no change
• At end of April, an estimated 925 wells were waiting to be completed, an increase of 45
• At end of March, an estimated 880 wells were waiting to be completed, a decrease of 20
• At end of February, an estimated 900 wells waiting to be completed, an increase of 75
• March, 2015, Director's Cut -- 825 wells -- an increase of 75-- January data
• Previous Director's Cut -- 750, a decrease of 25
• Red Queen: 110 - 120 completions per month to maintain 1.2 million bopd

Flaring:

• capture target, current: 85%
• capture target, after October, 2016: 90%
• flaring today: unchanged at 18%; statewide capture 82%
• finally, the Tioga gas plant was down slightly to 90% of capacity (from 93% last month)
• expansion of gas gathering from south of Lake Sakakawea is still delayed; the project was approved, but it was approved too late for the 2015 construction season, resulting in a one-year delay.

Gas capture statistics: (needs to be updated)

• statewide: 82% (October 2014 target was 74%; CY 2015 capture target is 77%)
• FBIR Bakken: 84%
• NOTE: the daily volume of gas flared from May to June was up just 1.6 MMcfd; last month the volume of flaring increased 23.5 MMCFD (a reversal from last month when flaring had decreased month-over-month)
• NOTE: ONEOK announced plans to hook up 700 wells in the Bakken (natural gas hook-ups)

Fracking policies/regulations: (see source linked above; way too much to post)

Natural gas exploration in Emmons County: (unchanged)

The exploration well is no longer on confidential status as of 12/23/14; the well has not been completed yet, but appears to contain 2 pay sections totaling about 80 feet thick with very good gas shows.

The Red Queen Is Still On The Treadmill ; ND Produces Near Record -- August 14, 2015

NORTH DAKOTA oil production up +9,000 b/d in Jun (+0.7%) to 1.21 million b/d, second highest on record after December, 2014.

This is despite

• active rigs at 70 (record at 200+ during the boom)
• fracklog (back log of wells to be fracked) at 925
• operators choking back due to huge slump in oil prices
• operators choking back, shutting in wells due to NEW flaring regulations 

Director's Cut out.

Seeking Alpha Article On ONEOK's Recent Announcement To Hook Up 700 Wells In The Bakken -- August 14, 2015

On August 5, 2015, there was a story that ONEOK was going to hook up 700 wells in the Bakken. Today, there is an article in Seeking Alpha that provides some more background to this story:

The company plans to spend from $1.0B to $1.5B this year in growth projects, with much of that spending already done in the first half, but paid via short-term debt. These projects are largely to connect flare gas volumes in the Williston Basin and the Mid-Continent.

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What Happens To Excess CBR Tank Cars?

They get parked and smaller railroads are getting paid to store them. For example:

Gennessee and Wyoming, the nation’s largest short line rail road, is collecting as much as $5 a day on each of about 2,000 idle crude rail cars in Utah, the Midwest and Canada.