Follow-Up On That $181 Million Nuverra Lawsuit -- February 25, 2015

I had forgotten all about this one. 

The original story was posted here. At that time, despite the $181 million lawsuit, "...based on the pre-award analysis of the case, Heckmann Water Resources exposure in this matter was not expected to exceed its available insurance limits of $16 million."

Here is the follow-up in a Nuverra press release, dated July 16, 2014:

Nuverra has agreed to fund $5.5 million of the total settlement amount to fully resolve the matter. The settlements were fully approved by the District Court of Dimmit County on July 15, 2014. Terms of the settlements, including the total settlement amounts and the portion paid by the Company’s insurer, are confidential. These settlement agreements include all plaintiffs and the Company’s insurer and release Nuverra and all of its subsidiaries from all past and future claims or liabilities related to this matter.

The Company will take a charge related to the settlement in the second quarter ended June 30, 2014, which will include the $5.5 million one-time cash payment and related legal fees and defense costs. 

Surprise, surprise -- came in well under the "available insurance limits."

I wonder how the jury came up with the initial $181 million, rather than, let's say, $179 million or $183.5 million. Ya gotta love these Texas juries.

Eight (8) New Permits -- February 25, 2015

Dividends of note:

• Home Depot increases dividend from 47 cents to 59 cents
• Comcast increases dividend from 22.5 cents to 25 cent

Reporting tomorrow:

• Northern Oil & Gas, forecast 19 cents; big beat, 95 cents; press release here; shares up;
• SandRidge Energy (SD), forecast 0; big beat; 8 cents; press release here;
• Sempra Energy (SRE), forecast $1.09; nice beat; beats by 14 cents at $1.23; Zacks here;
• WPX Energy (WPX), forecast a loss of 15 cents; huge beat; earns 3 cents/share; Zacks here;
• Bonanza Creek Energy (BCEI), forecast 27 cents; miss, 24 cents; press release here;
• CLNE, forecast 67 cents; after market close:
• Herbalife, forecast $1.22, AP story here; huge beat, $1.42/share;
• Southwestern Energy (SWN), forecast 50 cents; beat, 52 cents; press release;

From Kemp, Rigzone, via Bakken.com:

North Dakota’s oil producers have pulled back to the core areas of the Bakken formation to cut costs and maximize output amid the slump in prices.

The number of active rigs in the state has fallen to just 121, from 190 a year ago, according to an active rig list published by the state’s Department of Mineral Resources (DMR) on Wednesday.

The rig count is now below the threshold of “at least 130″ DMR Director Lynn Helms identified last month as needed to sustain output at the current level of just over 1.2 million barrels per day.

But more important than the raw number is their distribution across the state, with drilling now increasingly concentrated in only the most promising areas.

Of the 121 rigs active on Wednesday, 115 are drilling in just four counties at the heart of the Bakken – Dunn, McKenzie, Mountrail and Williams.

Active rigs:

	2/25/2015	02/25/2014	02/25/2013	02/25/2012	02/25/2011
Active Rigs	121	190	181	204	169

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

Eight (8) new permits --

• Operators: BTA (3), Whiting (2), SM Energy (2), Oasis
• Fields: Beaver Creek (Golden Valley), Sanish (Mountrail), Poe (McKenzie), Baker (McKenzie)
• Comments:

One permit canceled: another Zavanna Usher permit in McKenzie County.

Seven (7) producing wells completed:

• 29018, 2,129, Whiting, Mrachek 21-26-4H, Nameless, t2/15; cum --
• 29198, 2,248, Whiting, Mrachek 21-26-5H, Nameless, t2/15; cum --
• 27605, 1,272, BR, Bullrush 34-10TFH-A, Elidah, t2/15; cum --
• 28287, 2,285, BR, Shenandoah 24-36MBH, Keene, t1/15; cum --
• 29490, 2,285, Whiting, Fladeland 31-12TFH, Sanish, t1/15; cum --
• 28365, 1,320, BR, CCU Pullman 6-8-7TFH, Corral Creek, t1/15; cum --
• 28074, 1,643, BR, Shenandoah 14-36MBH, Keene, t1/15; cum --

Wells coming off the confidential list Thursday:

• 26954, drl, CLR, Ryden 2-24AH1, Jim Creek, no production data,
• 27038, drl, SHD, Canon 12-36H, Clarks Creek, no production data,
• 28848, drl, MRO, Sydney 14-9TFH, Bailey, no production data, 

RBN Energy: holding by production, part 1.

Will hold-by-production (HBP) drilling by producers acting to preserve their leases for the longer term end up sending U.S. oil and gas production volumes higher when energy fundamentals and prices suggest production should slow down? This has happened before, with one of the highest profile instances in the Haynesville Shale between 2009-13, leading to even lower natural gas prices. Could it happen again in the Marcellus this year?  Today we continue our look at HBP lease provisions with a focus on the Marcellus.

In Part 1 we looked at the HBP provision that is a standard component of oil and gas land lease agreements between producers and mineral rights owners in the U.S. Producers can pay bonuses of thousands of dollars per acre for rights to conduct exploration and production activities on parcels of private land. However lease agreements typically dictate that drilling rights expire after an initial term, (that varies by negotiation but is typically 3-5 years) unless the lease operator produces minimum commercial quantities of oil or gas from the acreage to hold the lease by production. Once HBP’d the lease begins a second term that lasts as long as minimum production continues.

We discussed how HBP clauses sometimes lead to “forced drilling” by producers to preserve drilling rights beyond the primary term. In the Haynesville, LA dry gas play there was a leasing frenzy in 2008-09 as producers rushed in to sign up landowners – typically with a 3-year initial term. Just as they began developing the shale in earnest, gas prices tumbled below breakeven levels ($4/MMBtu at the time in the Haynesville). But despite the poor economics, producers continued drilling because of the need to secure their leases by production. After the 3-year terms expired around 2011-12, new drilling and production declined. For reference, Figure 1 is the graph from Part I that shows the Haynesville lease timeline, production volumes, gas prices, and breakeven.

ONEOK To Halt Work On Three Mid-Continent Gas Plants -- February 25, 2015

Link here.

The three projects:

• In mid-2014, Oneok announced plans for the 200-MMcfd Knox plant in Grady and Stephens counties, Oklahoma. It was to spend $365-470 million by expected plant start-up in late 2016. The Knox plant was to increase Oneok’s Oklahoma gas processing capacity to 900 MMcfd. Estimated costs included $175-240 million to build the plant and $190-230 million to build related systems, including gas gathering pipelines and compression.
• The 100-MMcfd Bronco plant being built in southern Campbell County, WY, was to serve production from the NGL-rich Turner, Frontier, Sussex, and Niobrara shales. At its announcement in second-half 2014, Bronco was expected to cost $215-305 million to build towards a third-quarter 2016 completion. Oneok was spending $130-190 million to build the plant; $45-60 million to build a 65-mile, 10-in. NGL pipeline to connect it to Oneok’s Bakken NGL pipeline lateral; and $40-55 million to build related gas systems. 
• The 200-MMcfd Demicks Lake plant in McKenzie County, ND, is part of 500 MMcfd of processing under way in the county, including the 100-Garden Creek III plant that was to be completed at yearend 2014 and the 200-MMcfd Lonesome Creek plant scheduled for completion in fourth-quarter this year. 

I track the ONEOK natural gas processing plants in North Dakota at this post. 

A "Re-Set"? -- February 25, 2015

On February 23, 2015 I wrote:

I don't know when we will see the low in the price of oil, but whatever it is and whenever it occurs, that's the "re-set" as Hillary would call it. Whether the low is $50 or $40 or $20, at some point oil will hit its low. I'm pretty convinced that the low of $20 or $40 or won't last for years; possibly $50, but I doubt it; even $60 for several years seems a stretch. But whatever the low is, that will be the new "low," the new re-set going forward. If the the low hits $20, and oil goes back to $40 in 2017, that's a doubling in price. I'm not looking for those numbers, but just suggesting how the "re-set" becomes quite interesting -- for investors.  

An example of the "re-set" for investors: SM Energy surged 13% today.

See disclaimer. 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. I have never bought any shares in SM Energy and don't plan to do so in the near future.

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Tweeting now:

Guinea, Liberia, Sierra Leone report 99 new confirmed Ebola cases in week ending Feb. 22, per World Health Organization - @Reuters

At least it's hard to catch. 

Boston To Host Early Winter Olympics, June, 2015 -- Rumor; What Causes Reasonable People To Doubt Reason?

I was sent a rumor that Boston will be hosting an "early" Winter Olympics, June, 2015, in the MIT parking lot. This is the site for downhill ski races and the bobsleds:

The "early" Winter Olympics is contingent upon the light rail system (the "subway") being back on track (pun intended) by then.

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Omissions

The cover story in this month's issue of The National Geographic (March, 2015): "The War on Science" with this list on the cover:

• climate change: does not exist
• evolution; never happened
• the moon landing: was fake
• vaccinations: can lead to autism
• genetically modified food: is evil

I was surprised to see that these two were not added to the list:

• the Keystone XL: will add to CO2 emissions
• fracking: causes earthquakes

What's causing reasonable people to doubt reason, the editors ask? Exhibit A: