Idle Chatter Regarding The Bakken -- May 14, 2018

I was traveling last week which put me behind in my blogging. Readers sent me a lot of links and a lot of comments. I'm almost caught up.

This was a comment sent be a reader that caught my attention. I'm sure many readers have similar thoughts:

General comment. How big a deal is re-fracking of existing wells going to be and what kind of long term impact on reserves will there be?

Looking at the GIS Map at NDIC you see lots of horizontal legs all over the place. How many of those wells are 10 years old or were drilled before the latest enhanced completion techniques applied?

I don't know how widespread the effort is among producers and I don't know how much effort CLR has put into this re-frac effort but I recently looked at the results of Bridger 44-14H and in my uneducated opinion was easily impressed.

During the month of March in 26 days the well produced 13,665 BBL of oil and 19,800 MCF of gas. When the well was first completed 10 years ago the most productive month May-08 of the new well was 7,422 BBL oil and 5,364 MCF gas.

In the last 217 days of production the well has produced 140,222 BBL oil and 162,209 MCF gas. In the first 2,655 days of production (9 1/4 calendar years) the well produced 138,952 BBL oil and 128,205 MCF gas.

I agree completely. I think you are right on track ....

For newbies.

How big a deal is re-fracking of existing wells going to be and what kind of long-term impact on reserves will there be?

I suppose the answer depends upon whom you ask. If you ask Art Berman, he will likely tell you that a) the Bakken is all  hype; b) the best days of shale are behind us; c) fracking is overblown; d) "shale" was not a "revolution; and, e) technology won't "save us." All of that comes directly from Art's webpage, or what I infer from his articles over the years.

For me, I am inappropriately bullish on the Bakken.

This is where I start from and am willing to back away from some of this if data shows I am wrong. There is nothing new here. This has all been posted before:

• the Bakken has the highest TOC by percentage of any oil play in the world; TOC is the most important of the four variables in an oil play
• CLR once said there was a trillion bbls of OOIP; subsequently backed off to 500 billion bbls
• Price said there was ~ 500 billion bbls OOIP in the Bakken
• the life history of a well is important, this is all primary production: 
• drilling to depth but not completed
• constrained
• first frack/completed
• workovers
• neighboring wells fracked
• re-fracked when neighboring wells fracked
• mini-fracks 
• major re-fracks
• repeat
• in the core Bakken: no less than 24 wells per 1280-acre; some areas many more wells
• at the beginning, during the boom, 2007 - 2010
• monthly IPs: 5,000
• EURs: 350,000
• now: 
• monthly IPs: 30,000
• EURs: 1.5 million bbls
• operators won't drill a well unless EUR of 1 million bbls
• 24 wells x 1 million bbls = 24 million bbls in 1280-acre drilling unit
• percent production: no one talks about this any more; not sure where we are
• at the beginning, during the boom, 2007 - 2010: 1 -3% OOIP would be produced by primary production
• my numbers suggested closed to 5 - 7% at that time; and, I posted that
• subsequently, Whiting suggest 7% OOIP was being produced by primary production; suggested we would see 12%
• some might suggest we are at 12% production of OOIP
• the question: what is the OOIP in the Bakken
• 50 billion bbls, at 12% = 6 billion bbls
• 100 billion bbls, at 12% =
• 150 billion bbls, at 12% = 
• 500 billion bbls, at 12% =
• 1,000 billion bbls, at 12% = 
• the Bakken is producing 365 million bbls/year
• no one disagrees that the Bakken will produce at least 365 million bbls/year for ten years
• = 3,650 million 
• so, at ten years = 4 billion bbls, and at 50 billion bbls, at 12% = 6 billion bbls
• repeat, at ten years, 12% primary production on 50 billion bbls OOIP = 6 billion bbls

• USGS: most recent USGS analysis was done with the middle Bakken at 75% where it is today; probably less than 10% where upper bench of Three Forks is today; did not even consider the lower benches of the Three Forks

Disclaimer: I am inappropriately bullish about the Bakken.

Disclaimer: my numbers are based on unfettered production; geopolitics and national politics can change everything; a Hillary-ban on fracking would obviously change everything

Disclaimer: I often make simple arithmetic errors

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on anything you read here or think you may have read here.

Barrels Of Oil Per Well Per Month In The Bakken -- May 14, 2018

After posting this earlier, I was curious how production / well in the Bakken was trending (see that data below the graphic):

B is for Bakken. B is for Best. Bakken is the top producer of crude oil among US shale plays -- ranked by "productivity of new wells." This has been previously posted.

Link here: barrels of crude oil per well per day -- average (obviously):

• 2018, two months of data: 84 bbls of crude oil / well / day
• 2017: 79 
• 2016: 80
• 2015: 96
• 2014: 101
• 2013: 96
• 2012: 92
• 2011: 75
• 2010: 65
• 2009: 52
• 2008: 44
• 2007: 34
• 2006: 33
• 2005: 30

Monday, May 14, 2018

Zeits: takes a look at what effect the Trump decision on Iran will have on domestic production. A must read. This, from the middle of the interview:

SA: This recent article notes that the Permian may soon become a testing ground for oil producers to limit methane emissions. What does that mean for the companies active in that area, and how does that impact investors in those names?

LS: First, I want to point out that North Dakota has done a stellar job of achieving reduced methane emissions in an oil industry that developed there virtually overnight. The Permian faces the same issues: a great deal of natural gas is produced in association with the oil. Thus, reducing natural gas emissions means more natural gas pipeline capacity is needed - into markets that are not exactly screaming for it - or shutting in profitable oil wells.

Just as critical a concern that caught everyone by surprise is the lack of oil takeaway capacity. There are only a few refiners located in the Permian, so companies depend on trucks, gathering systems, and large pipelines to move oil to refining markets or export. We’re at the limit of that capacity.

The need for both Permian oil and gas takeaway capacity suggests a growth opportunity for pipeline and midstream companies, which - investors and their tax advisors should note - are usually structured as master limited partnerships. Examples are Magellan Midstream  and Energy Transfer Partners.

Wow, that was my thought some months ago: that everyone was caught by surprise in the lack of oil takeaway capacity. There are only a few refiners located in the Permian, so companies depend on trucks, gathering systems, and large pipelines to move oil to refining markets or export. [The Permian is] at the limit of that capacity.

*****************************

Back to the Bakken

 Active rigs:

$70.81↑	5/14/2018	05/14/2017	05/14/2016	05/14/2015	05/14/2014
Active Rigs	60	51	27	83	189

RBN Energy: the ethane price implications of rejection economics.

After years in the doldrums, ethane prices are increasing, not so much in absolute terms, but where it counts — relative to the price of natural gas. That means less ethane will be rejected — sold as natural gas — and more will be recovered as liquid ethane and sold as a petrochemical plant feedstock. As still more new ethane-only petrochemical plants come online over the next couple of years, ethane demand will increase, boosting ethane prices and resulting in still less ethane rejection. Does that mean ethane rejection will be a thing of the past? No, not even close. U.S. natural gas production, especially gas with a high ethane content, is growing so fast that ethane supply will continue to outstrip demand for the foreseeable future, with important consequences for ethane prices.

• Bakken: produced - 80,000 bbls/day; rejected: 100,000
• Marcellus/Utica: produced - 300,000; rejected: 300,000 
• PADD 4:  produced - 120,000; rejected: 180,000
• PADD 3: produced - 1,200,000; rejected -- 0
• everything else: produced - 345,000; rejected 20,000
• total: produced - 1,545,000; rejected 600,000
• Gulf Coast: demand: 1,800,000

Bring A Gun To A Knife Fight -- Macron -- May 14, 2018

Shouldn't be too difficult: Kim Jong-Un says he will dismantle "their" nuclear test site. The Brits have this link. Considering that it's buried under a mountain and likely completely destroyed, this shouldn't be too difficult. Simply post a sign on the road to the mountain: "Closed. Nuclear Site Dismantled By God Upon Instructions From Trump." The Japanese probably wish Fukushima was under a mountain.

Over-qualified woman withdraws her name as nominee for US ambassador to Singapore. Stories everywhere. No links needed. Rose from typist to top US executive. Alt-left can't handle that. Not supposed to happen. All the time raising five kids. It was the last fact that probably doomed her nomination.

Too cold or too much snow. Regardless, the annual faux environmental expedition to study the Great Ice Patch has been canceled for this summer. The snow was simply too deep and wasn't going to melt before summer vacation was over. Google "great ice patch."

#1, again. I've posted many lists over the years where North Dakota is ranked #1 among the 57 US states. A reader caught this one last week: the link is here. I assume the ranking is based on "per capita," if not, it's worse/better than I thought in my home state. If the link breaks, it's under MSN: Health and Wellness -- again, I can't make this stuff up. As the reader noted, Texas did not even make the top 20. Nor did California.

Bringing a gun to a knife fight. No link, the blogger app blocks Fox News.

A 20-year-old Frenchman born in Chechnya rampaged through a festive Paris neighborhood Saturday evening slashing passers-by with a knife, investigators said. The man, identified as Khamzat Azimov, killed one person and wounded four others in a festive area near Paris’ old opera house. Police shot him to death as he charged them.

Comment: good for them. I did not know French police were allowed to carry guns.

Zip Codes -- Video Of The Week -- May 13, 2018

When I get this far behind and current events are moving this fast, I find myself unable to blog because I don't know where to begin.

Perhaps to get started, all I can do is a) look at what tomorrow will bring; and, b) clean out the in-box.

Tomorrow

Dow futures have been edging up all evening; currently up 81 points which is really quite remarkable considering how far the market has come so far in the past ten days.

I've been wanting to post this graphic for quite some time, but there never seemed a "right" place for it. It hardly matters any more but here it is:

It should come as no surprise that companies are increasing their dividends. Going back over the past ten days, the numbers of companies announcing increased dividends is simply staggering. A very, very short list of such companies, these were simply chosen because I once invested in these companies or still hold shares in them.

• CAH, from 0.4624 to 0.47630; Friday, May 11, 2018
• PSX, from 0.70 to 0.80; Thursday, May 10, 2018
• BAX, from 0.16 to 0.19; Wednesday, May 9, 2018
• AAPL, from 0.63 to 0.73; Wednesday, May 2, 2018
• XLNX, from 0.35 to 0.36; Monday, April 30, 2018
• XOM, from 0.77 to 0.85; Thursday, April 26, 2018
• PSXP, from 0.678 to 0.714, Thursday, April 19, 2018
• KMI, from 0.125 to 0.200, Thursday, April 19, 2018
• EPD, from 0.425 to 0.4275, Wednesday, April 11, 2018

Tesla: it's being reported that three more high-level Tesla executives have departed in the past ten days. First, April 26, 2018, it was being reported that Tesla lost its third autopilot executive in less than two years. Then on Friday, May 11, 2018, the WSJ reported that Tesla's top engineer overseeing vehicle development would be taking "a leave of absence from the company at a crucial moment when the electric-car maker is struggling to boost production of the Model 3 sedan. When I last checked there were 100 comments (exactly); I read about 30 of them; none of them were "positive." And now this, being reported yesterday, May 12, 2018, in the WSJ:

A senior Tesla Inc. executive, who was the company’s main technical contact with U.S. safety investigators, has left for rival Waymo LLC, according to people familiar the decision. Matthew Schwall, who had been the director of field performance engineering at Tesla, exited the company as the National Transportation Safety Board has been investigating multiple crashes involving the electric vehicle.

Tesla, from Fortune, link here:

Elon Musk has said the “short burn of the century” is coming soon to investors betting against Tesla. He’s rapidly losing top deputies to help him deliver on that prediction.

Doug Field, senior vice president of engineering, is taking time away from the company to recharge, according to a company spokesman. His sabbatical is significant: Musk has said he regards Field as “one the world’s most talented” engineering executives. He’s one of only four executive officers named in the company’s recent proxy statement.

Field’s break follows a broader exodus of top executives. Matthew Schwall, Tesla’s primary contact with U.S. regulators, just joined the safety team at Waymo, the self-driving-car company started by Google. Jim Keller, the head of the driver-assistance system Autopilot, left last month for Intel. In March, Tesla confirmed two of its top financial executives had parted ways, and in February, sales chief Jon McNeill defected to Lyft.

And we move on.
Ebola: a new Ebola outbreak hits the Congo. The last time this happened, President Obama embargoes the news. Let's see what happens this time.

Gold: there's gold in them thar hills. The Mitchell Republic is reporting that a Canadian firm hopes to mine gold in the Black Hills. The only question: who will destroy the environment first, the protestors or the mining company?

Clowns: meanwhile, pretty much in the same area as that gold in them thar hills, the Clown family wants to set the record straight regarding Crazy Horse. I can't make this stuff up. Link at The Dickinson Press. Must have been a slow news day. The Sarcasm family and Irony family can't be far behind.

Photo of the day (link here). One would think the homeless could visit for free.

Has anyone really thought about this? Ten times larger than Hiroshima. I can't provide the link because the "blogger" app blocks Fox News. I'm sure you can google "North Korea's nuclear blast ten times larger than Hiroshima" and find an article. The dots all connect. The only question: who opened the bigger bottle of champagne last week, the CIA or the NSA?

Nena was first on the scene:

99 Luftballons, Nena
Remember the 57 US states? I can't make this stuff up. A huge "thank you" to a reader. Link here.

Okay, we're going to quit here. If it gets too long the readers who sent me all the links won't read far enough down the post to see their links.