CLR's Investor Presentation, May 2013

#1 producer where it counts

• #1 producer in the Rockies (according to RMOJ)
• #1 producer in the Williston Basin (according to RMOJ)
• #1 producer in the Bakken (according to RMOJ)

Proved reserves: 785 million boe year-end 2012; 54% YOY gain

Cash margins:

• 1Q13: 74%
• 2012: 73%
• 2011: 75%
• 2010: 73%
• 2009: 69%

#1 producer, driller, and leasehold owner

• 77,000 boepd net for 1Q13
• 22 CLR operated rigs
• 3,439 locations (net unrisked potential; based on 320-acre spacing)
• 1.2 million net acres, 1Q13; 25% yoy since 1Q12

 MB +TF1: "massive field of unprecedented magnitude"

• 24 billion boe technical recoverable: 24 BBoe = 2BBo (3.5%) +4 Bboe natural gas at 320-acre spacing; does not include any reserves from the lower TF benches

Prior to lower TF: 57 BBo in place (2010); 3.5% recoverable; 320-acre spacing

Now: estimate +57%; 903 BBo in place (2012)

• 32 BBo recoverable at 3.5% (unless otherwise stated, CLR uses 3.5% recovery rate)
• 36 BBo at 4%
• 45 BBo at 5%

The slide shows four benches in the TF, and then the Nisku

Bakken producers at MB, TF1, TF2, and TF3

Special projects, tests, pilot projects

• Productivity project: 20 gross wells; $123 million net cost
• Pilot density projects (2): 34 gross wells, 3 -320-acre density tests; one 160-acre density test, $36 million, 13 gross wells; 

Cost per well (completed well cost):

• non-operated CWC: $11.3 million
• operated CWC: $9.2 million
• targeted CWC: $8.2 million
• actual CWC: $8.3 million (average) as of April, 2013

Bakken crude: America's premium light sweet crude

• Bakken: almost 50% of each barrel of oil --> gasoline
• WTI: about 30$ of each barrel of oil --> gasoline

US National Security Officials Among The Best In The World

From that CNN story on the aircraft mishap at San Francisco:

There are no signs of terrorism related to the crash, a national security official told CNN.

It is amazing how fast our national security officials can come to these conclusions. At the time of the story, the plane was still burning.

Along that line, this is an interesting tweet from the WSJ:

Breaking: 2 dead, up to 100 wounded in San Francisco plane crash.  

Generally speaking, if it is a mishap or an accident, "wounded" are referred to as "injured." In combat, fights, attempted homicide, and terrorist acts, the "injured" are referred to as "wounded." (From the freedictionary.com:  suffering from wounds; injured, esp in a battle or fight.)

Runaway Freight Train Carrying Bakken Crude Destroys Center of Canadian Town

Updates

July 9, 2013: the locomotive of this train was on first some hours earlier, Rigzone is reporting. Okay.

July 9, 2013: the train may have been tampered with. CNN is reporting:

The chairman of the company whose driverless train barreled into the small Quebec town of Lac-Megantic and unleashed a deadly inferno told a Montreal newspaper he believes it had been tampered with.

"We have evidence of this," Ed Burkhardt said in an interview published by the Montreal Gazette. "But this is an item that needs further investigation. We need to talk to some people we believe to have knowledge of this."

July 9, 2013: From Platts:

Analysts also pointed to the dearth of hard facts about the incident, including the question of how a cargo of crude, which is not particularly flammable, was ignited.

I've wondered the same; great question. Weren't just four (4) tank cars of the 73 tank cars involved? I can't remember; seems I read something along that line.
  

Original Post

The 73-crude-oil-tank train had come to a stop; the engineer had parked the train some distance from town, when he got out, waiting for "his relief," somehow the train "escaped." The story follows.

Reuters is reporting:

A driverless freight train carrying tankers of crude oil derailed at high speed and exploded into a giant fireball in the middle of a small Canadian town early on Saturday, destroying dozens of buildings and leaving an unknown number of people feared missing.

The disaster occurred shortly after 1 a.m. (0500 GMT) when the runaway train with 73 cars sped into Lac-Megantic, a picturesque lakeside town of about 6,000 people near the border with Maine, and came off the rails. Witnesses said the town center was crowded at the time.

Four of the cars caught fire and blew up in a fireball that mushroomed many hundreds of feet up into the air.

Montreal, Maine & Atlantic's vice president of marketing, Joseph R. McGonigle, said the train was transporting crude oil from North Dakota to Canada, likely to New Brunswick, news that is bound to revive questions about the safest way to carry the oil needed to service North America's economies.

Runaway, The Traveling Wilburgs/Del Shannon

Developing The Middle Bakken And The Multiple Benches Of The Three Forks: Idle Rambling On Well Density

A reader sent me the following note:

Hearing 20657 for CLR in Jim Creek actually includes two overlapping spacing units of 14 wells each. 

What really makes this case interesting, in my opinion, is that a year ago CLR got an overlapping spacing unit approved that fully developed the MB and TF with 320-acre spacing on both of these same units.

It now appears that CLR is attempting to add another two benches which would allow 28 wells (+/-) per unit. See Case 18102, Order 20371.

Also: note that the northern unit appears to be in a much sweeter area as it is closer to the Oakdale field. The southern unit is in an area that appears not to have any "good" Three Forks wells tbut maps show the thickness of the TF in that area to be as thick as any area.

These are the two cases the reader is referencing:

July 31, 2013 -- 20657: Application of Continental Resources, Inc. for an order authorizing the drilling, completing and producing of a total not to exceed fourteen wells on an overlapping 2560-acre spacing unit described as Sections 12, 13, 24 and 25, T.146N., R.96W., and Sections 7, 18, 19 and 30, T.145N., R.96W., Jim Creek-Bakken Pool, Dunn County, ND, eliminating ...

Jun 28, 2012 -- 18102:  Application of Continental Resources, Inc. for an order amending the field rules for the Jim Creek-Bakken Pool to create two overlapping 2560-acre spacing units comprised of Sections 12, 13, 24 and 25, T.146N., R.96W.; and Sections 7, 18, 19 and 30, T.145N., R.96W., Dunn County, ND,authorizing the drilling of multiple wells from each well pad within each overlapping 2560-acre spacing unit; eliminating ... 

My reply:

Great observation. I completely missed that typographical error. Last year, in case 18102, CLR mentioned two overlapping spacing units, and this year in case 20657, they describe two overlapping spacing units, but only mention "an" (as in one) overlapping unit. It appears they should have said "two" overlapping spacing units.

That was the first observation which I missed and you picked up on. Thank you.

The second observation which you noted and I missed, is how CLR is probably going to target deeper benches.

Your comments are excellent: that some areas seem better than others. I assume the operators have noticed the same thing and just as they were defining the sweet areas of the middle Bakken when the boom began, they have a  lot of work defining the sweet spots for the various benches.

I really appreciate readers sending in these observations. I hope I interpret their comments correctly.

This "idle rambling" helps me really understand the administrative process of developing the Bakken/Three Forks better.

In this case (actually two cases), mineral owners in this area now see that we are moving toward 28 wells in each 2560-acre spacing unit. And since these are overlapping spacing units, there will actually be additional wells in the original spacing units (which in this  area, are 1280-acre spacing units). One can easily see that if an individual is currently participating in ONE well in one of these sections, he/she may eventually be participating in thirty to forty wells (or more?) before it's all over. Obviously the participation will be greater in a 1280-acre spacing unit than in a 2560-acre spacing unit, but the newer wells seem to be getting better. Who's to say? With better wells and better prices for oil, future wells on 2560-acre spacing unit may return more dollars to mineral owners than old wells on 1280-acre spacing. 

The Canary In The Coal Mine -- WTI-Bitumen Spread

Early on in the Bakken, a lot of folks were concerned whether the boom could last if the price of oil fell. I always maintained that as long as they were mining bitumen in western Canada, the Bakken boom was "safe." The premise is that the margin on Bakken oil is much better than the margin on bitumen. If operators can make a profit, or stay in business long enough for the price to come back in the Canadian sands, they can do as well or better in the Bakken.

So, this was a nice article to see (sent to me by Don -- thank you). The Calgary Herald is reporting:

Alberta bitumen passed the $85 per barrel mark this week.

That's almost double what Alberta was getting for its raw bitumen in January, when prices were about $45 per barrel. And since all prices are based on U.S. dollars, and the loonie has dropped in value compared to its American counterpart, Thursday's price of $85.50 looks even sweeter.

The most important international benchmark, West Texas Intermediate (WTI) oil at Cushing, OK, was trading for $101 per barrel. And Western Canada Select (WCS), the benchmark blend that includes bitumen, was $91 per barrel at the Hardisty terminal, according to trading data from Flint Hills Resources.

The resulting differential of just $10 per barrel is considered excellent for western Canadian producers, and an improvement over the $16.50 average differential last month. In January, it was as high as $40.

An earlier article noted how bad the spread can be.