Potpourri -- October 3, 2015

From Rigzone/Bloomberg: Jim Rogers says oil ignoring bad news usually means rebound near or put another way, "hope springs eternal."

Oil is holding near $45 while the bad news keeps coming. For investor Jim Rogers, that’s usually a sign a rebound is near.

The Organization of Petroleum Exporting Countries is still pumping near-record amounts of oil, China’s imports have slowed and U.S. crude stockpiles remain about 100 million barrels above the five-year seasonal average. Yet, U.S. benchmark prices have held steady for more than four weeks since plunging to a six- year low at the end of August.

“When there’s bad news and something doesn’t decline, it usually means it’s at a bottom and will be turning,” Rogers, who correctly predicted a commodities rally in 1999, said in an interview in Singapore on Thursday. “Whether we’re at a turning point or not, I don’t know yet, and I’m watching this very closely.”

I"ll sleep better knowing he's watching this, not only "closely," but "very closely." I think this is why Twitter has a 140-character limit; cuts down the fluff. (By they way, Twitter says it is considering increasing the character limit.)

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

Reuters Say It's a Record; Looks Flat To Me

From Rigzone/Reuters: the sky is falling, the sky is falling -- Russia oil output at post-Soviet high on foreign projects, Rosneft. Data points:

• September: 10.74 million bopd
• August: 10.68 million bopd
• Delta: 10.74 - 10.68 = 0.06 million bopd or 60,000 bopd (almost a rounding error)
• in percentages, 0.06 / 10.68 = 0.6% increase

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

Saudi To Maintain Spending

See Jim Rodgers Story Above 

But this story is probably the most important: Saudi Arabia will maintain spending. From Rigzone/Reuters:

Saudi Arabia is continuing with its investments in the oil and gas industry as well as solar energy despite the current drop in oil prices, the kingdom's oil minister was quoted as saying on Friday.

That part about solar energy? I think you can ignore. With regard to oil production, we'll let the numbers speak for themselves.

Week 39: September 27, 2015 -- October 3, 2015

Several top stories of the week that need special mention:
Williston named 2015 City of the Year
Update on the proposed $4 billion petrochemical plant in North Dakota; connecting the dots on this one; deal with CLR announced;

Operations
OXY: she's a mystery; a rumor

Bakken economy
Bloomberg on the real estate situation in the Bakken
Baker Hughes to lay off 117 employees at Dickinson facility
 
Bakken 101
Saving the Bakken through choking back
America's oil output refuses to collapse; here's why

Miscellaneous
Random look at some businesses in Williston  

Four (4) New Permits -- North Dakota, October 2, 2015

Active rigs:

	10/2/2015	10/02/2014	10/02/2013	10/02/2012	10/02/2011
Active Rigs	68	190	186	189	201

Four (4) new permits:

• Operator: QEP
• Field: Heart Butte (Dunn)
• Comments:

Five (5) producing wells completed:

• 29236, 795, Statoil, Smith Farm 23-14 8THF,  Cow Creek, t9/15; cum --
• 29733, 273, XTO, Eckert 41X-6G, Indian Hill, t9/15; cum --
• 29876, 31, Enduro Operating, NSCU H-717-H2, Newburg, a Spearfish/Charles well, t9/15; cum --
• 29957, 423, XTO, Eckert 41X-6H, Indian Hill, t9/15; cum --
• 29965, 916, XTO, Eckert 41X-6DXA, Camp, 4 sections, t8/15; cum -

Williston Named 2015 City Of The Year

Link here.

Maybe more later. I'm rushed. Going to a Friday night soccer game.

Did The Red Queen Just Fall Off Her Treadmill? -- October 2, 2015

Updates

Later, 1:45 p.m. Central Time: A reader wrote:
Choking, and the control of the flow, is not a new thing obviously, but this is the first I have read that talks about the effects of choking to improve the well. Less pressure rush at the beginning helps keep the sand in place (rather than being rushed out with the burst) allowing the well to produce more oil over time. From the article:

 "When Newfield Exploration Co. opened new wells in the Bakken formation in North Dakota, it found the pressure difference created flows so strong they would sweep along the sand meant to prop open cracks in the shale, said Danny Aguirre, the company’s head of investor relations. By using pressure control, Newfield gets more oil over the life of the well and can save money by not having to add as much artificial pressure, he said in an interview." 

I replied:

This might explain OXY's wells. You know that I give OXY a lot of grief for their lousy wells -- based on IPs. I may have been wrong all along -- when you go back and look at OXY wells one and two years out -- especially two years out -- they seem to compare well with Statoil wells, which compared to their huge IPs are relatively disappointing. I track OXY wells here.

The take-home from this is that the Bakken operators continue to learn....makes it exciting.  

Original Post

 

Bloomberg/Reuters is reporting:

Encana Corp. wants to ensure the shale-oil boom keeps booming. The Canadian producer is among a growing number of companies that are restricting initial output -- a process known as choking back -- in basins from North Dakota to Texas.

They’re conceding huge up-front gushers of crude in exchange for smaller production declines over time so that the wells ultimately generate more oil.

The strategy sacrifices one of the biggest benefits from shale. The early gushers paid back investments fast, allowing companies to pour capital into new projects. Instead, Encana and others envision a future with a more stable flow from wells, so that they don’t always have to keep drilling simply to maintain output.

The Red Queen (again):

Curbing initial production allows companies to maintain the pressure and integrity in their wells, which means output doesn’t fall as fast.

Shifting to the technique can avoid steep declines, a phenomenon known in the oil world as the Red Queen, the character in Lewis Carroll’s “Through the Looking-Glass” who tells Alice, “It takes all the running you can do, to keep in the same place.”

Choke management is among a number of strategies -- including moving to richer parts of fields, completing wells with more sand and water, and refracking -- that U.S. drillers have used to stave off a collapse in production.

Output has fallen just 5 percent from its peak even though companies have shelved more than half their rigs amid a price slump. The oil industry is “finding ways to continue marginal production in a way that would have defied probability and reasoning before companies took the kinds of actions they’ve taken,” said Ed Morse, the head of global commodity research at Citigroup Inc., in an interview.

Much, much more at the link. The article will be archived at the source.