Bakken Update: EOG Has Several Catalysts For 2013 [View article]
Thanks Jeep,
Even with some of the worries floating around with the price of oil in 2013 (taxes, spending, slow growth) EOG might be one of the safer bets, and still offer very good upside with respect to growth in production. NGL pricing is starting to worry me a little for next year, EOG seems to always be ahead of the game with respect to the way these markets go, and I think they are doing it again. I have been real pleased with its ability to get oil to Louisiana. I am glad you brought up possible tax changes with respect to dividends. I am not much of a dividend investor, but don't think anything good will come from some of the changes going on with respect taxation. Any economic growth that we had hoped to get going forward could grind to a hault. It will be real interesting to see how investor respond to some of the changes proposed going forward.
Bakken Update: The Red Queen Is Just A Fairy Tale [View article]
From its most current presentation. WPX Energy states that producing and EUR of 805 MBoe with D&C at $10.5 million the NYMEX break even price is $52.50. At a 710 MBoe and $10.5 million the NYMEX break even prices is $59.70. http://bit.ly/RUzk0R
Bakken Update: The Red Queen Is Just A Fairy Tale Part II [View article]
Dave,
Jeep's response was as good if not better than I could have put it, and he is correct. If you were to take a few things from this article the first would be it does not take an $80-$90 oil price for an average Bakken well to break even. Another would be the average oil produced in the first year from Bakken wells are much higher than the Red Queen article stated. The last point is we are no where near the Red Queen affect. At some point we will see a topping out of production, It will just be much higher than the Red Queen article stated.
Bakken And Western Canadian Select Differentials Will Improve [View article]
mjones,
I got a response back on your question from Harry Johnson, who is very well versed in all things oil.
Harry Johnson July 3 at 8:42amYou have blocked this person Unblock Block this person Are you sure you want to block this person? You won't receive messages from someone once they are blocked.
Block Cancel As you might imagine, the export of crude requires a license (Part 754.2, Title 15). The export of crude and refined products is a political football; consequently, it is my guess that getting a license would be an arduous process. In all probability, several of the majors have a license, but have little interest in using it. North slope crude has been exported in modest amounts since Prudhoe Bay went on stream; however, there was a ban on the export of crude from the downstream end of the Alaskan pipeline until 1996. Since then, there have been exports of Alaskan crude to several Asian countries.
Bakken producers can't ship to the Pacific Coast because there are no pipelines, which leaves only two options: (1) use Warren Buffet's Burlington Northern railroad, or (2) truck it. Neither of these is economically feasible. Burlington charges around $20/barrel just to transport Bakken to a couple of points not far from the ND fields. Rumor has it that Bakken is being trucked to Cushing Oklahoma, but I find that hard to believe. It is a 2,000 mile round trip, the actual cost of which has to be at least $1.50/mile. Maximum load would be 150 barrels, so the cost to truck to Cushing would be a minimum of $20/barrel (which is probably why Burlington charges $20/barrel).
Hedging crude oil is a paper game. Physical delivery is a myth, which is why the contract can be so easily manipulated. Physical deliver can be made only at Cushing Oklahoma, so even if a Bakken producer could deliver he would come full circle back to the transportation issue. Repeal of the Jones Act, which requires U.S. flagged ships for traffic between U. S. ports, might make truck-to-barge-to-port... feasible, but that would take some study.
Bakken And Western Canadian Select Differentials Will Improve [View article]
Nick,
I think this issue has more to do with Saudi Arabia and the amount of production it continues. It is currently pumping 10 million Bbls. and should be at 8.5. I think the Saudis will continue to produce for several reasons. The first is pushing down oil prices puts pressure on Iran. The second reason is it puts pressure on major unconventional oil projects like the oil sands and Bakken that have higher costs per barrel of production. I could be wrong, and OPEC could announce a marked decrease in production any day, as my opinions are just that and anything could happen. I am somewhat worried about downward revisions to growth int he US and China as well. I am being cautious for the short term but long term many of these names are cheap.
To clarify where Kodiak's management has its wells producing with respect to IRRs, I will discuss current company estimates.
Polar/Koala/Dunn Co wells are estimated to produce EURs of 850 MBo. These wells will produce IRRs of: $95/Barrel = 69% $85/Barrel = 55% $75/Barrel = 43%
Wells in the Smokey Prospect are estimated to produce EURs of 750 MBo. These wells will produce IRRs of: $95/Bbl = 54% $85/Bbl = 44% $75/Bbl = 34%
Wells in the Grizzly and Wildrose prospects are estimated to produce EURs of 650 MBo. These wells will produce IRRs of: $95/Bbl = 42% $85/Bbl = 33% $75/Bbl = 25%
Currently Kodiak is spending the majority of its time and money on developing the Polar/Koala/Dunn Co (operated by XOM). The rest of the acreage is only being worked to get the acreage HBP. So right now I estimate that Kodiak will remain at the top end of these estimates.
Austex is currently using RRC estimates for wells in the Horizontal Mississippian. These estimates have IRRs at 60% to 90% using NYMEX Strip of $92.82/Bbl of oil and $4.27/Mcf. 60% is used EURs of 400 MBoe. A 90% IRR is for EURs of 500 MBoe.
In summary, I think Kodiak will continue to perform at the top end of EUR estimates. I estimate IRRs of approximately 55% at $85 oil and $2.50. I am unsure what Austex will do as I am unsure it can keep costs down as well as SD or RRC. I am also unsure it will produce as well, but only time will tell. If it does and we use $85 oil and $2.50 nat gas, IRRs could be iin the 60% range. Kodiak is currently producing 89% oil and approximately 96% total liquids. SD estimates an average Horizontal Mississippian well to have EURs of 456 MBoe. EURs are 204 MBo with respect to oil content.
I would like to make clear I do not have an opinion on Gale Force or Austex. I do not follow either company, but am interested to see how they do going forward.
Bakken Update: Poor Execution Is A Cause For Concern [View article]
hh77,
The best way to valuate the Bakken Core is to go over some of the latest "large" purchases. Kodiak purchased 13500 acres with approx. 300 barrels of oil production for 17407/acre. Enerplus purchase Ft. Berthold acreage with 8000 barrels of oil in production for 9800/acre Linn Energy and QEP Resources also purchased acreage what I believe some of the best acreage. I think this acreage is worth about $15000to $20000/acre undeveloped give or take a few thousand either way. This also depends on current production, etc. The high end is probably what a company would want but not get, and the bottom vice verse. Kodiak's purchase was a value in my opinion, but I guess the company was highly motivated to sell. Don't take this as gospel as there are so many different variables that could influence this price. Have a great day.
I wouldn't worry about a moratorium as of yet. The State of ND is just running tests to make sure there is no pollution. Right now the biggest worry is reserve pits. After the flood last year, quite a few of the pits flooded causing contamination. I would guess fraccing will not see big changes anytime soon.
Bakken Update: McKenzie County Production Year-Over-Year [View article]
Hi Carl,
That is something I have struggled with as I wanted a concrete number of initial production and how that would effect the EURs of each well. The reason I have not done much with EURs myself, is I would not want to mislead anyone into believing something I do not know for sure is correct.
How Eagle Ford Compares To The Bakken [View article]
Thanks Jeep,
Investing in both is a great idea, but companies in the condensate window seem to be better positioned given the EURs in this article being based on a short lateral.
Bakken Update: Continental Continues To Seek Better Differentials [View article]
Bakken Update: EOG Has Several Catalysts For 2013 [View article]
Even with some of the worries floating around with the price of oil in 2013 (taxes, spending, slow growth) EOG might be one of the safer bets, and still offer very good upside with respect to growth in production. NGL pricing is starting to worry me a little for next year, EOG seems to always be ahead of the game with respect to the way these markets go, and I think they are doing it again. I have been real pleased with its ability to get oil to Louisiana.
I am glad you brought up possible tax changes with respect to dividends. I am not much of a dividend investor, but don't think anything good will come from some of the changes going on with respect taxation. Any economic growth that we had hoped to get going forward could grind to a hault. It will be real interesting to see how investor respond to some of the changes proposed going forward.
Bakken Update: The Red Queen Is Just A Fairy Tale [View article]
Bakken Update: The Red Queen Is Just A Fairy Tale Part II [View article]
Jeep's response was as good if not better than I could have put it, and he is correct. If you were to take a few things from this article the first would be it does not take an $80-$90 oil price for an average Bakken well to break even. Another would be the average oil produced in the first year from Bakken wells are much higher than the Red Queen article stated. The last point is we are no where near the Red Queen affect. At some point we will see a topping out of production, It will just be much higher than the Red Queen article stated.
Bakken And Western Canadian Select Differentials Will Improve [View article]
I got a response back on your question from Harry Johnson, who is very well versed in all things oil.
Harry Johnson July 3 at 8:42amYou have blocked this person Unblock Block this person Are you sure you want to block this person? You won't receive messages from someone once they are blocked.
Block Cancel As you might imagine, the export of crude requires a license (Part 754.2, Title 15). The export of crude and refined products is a political football; consequently, it is my guess that getting a license would be an arduous process. In all probability, several of the majors have a license, but have little interest in using it. North slope crude has been exported in modest amounts since Prudhoe Bay went on stream; however, there was a ban on the export of crude from the downstream end of the Alaskan pipeline until 1996. Since then, there have been exports of Alaskan crude to several Asian countries.
Bakken producers can't ship to the Pacific Coast because there are no pipelines, which leaves only two options: (1) use Warren Buffet's Burlington Northern railroad, or (2) truck it. Neither of these is economically feasible. Burlington charges around $20/barrel just to transport Bakken to a couple of points not far from the ND fields. Rumor has it that Bakken is being trucked to Cushing Oklahoma, but I find that hard to believe. It is a 2,000 mile round trip, the actual cost of which has to be at least $1.50/mile. Maximum load would be 150 barrels, so the cost to truck to Cushing would be a minimum of $20/barrel (which is probably why Burlington charges $20/barrel).
Hedging crude oil is a paper game. Physical delivery is a myth, which is why the contract can be so easily manipulated. Physical deliver can be made only at Cushing Oklahoma, so even if a Bakken producer could deliver he would come full circle back to the transportation issue. Repeal of the Jones Act, which requires U.S. flagged ships for traffic between U. S. ports, might make truck-to-barge-to-port... feasible, but that would take some study.
Hope this helps. Use as you see fit.
Bakken And Western Canadian Select Differentials Will Improve [View article]
I think this issue has more to do with Saudi Arabia and the amount of production it continues. It is currently pumping 10 million Bbls. and should be at 8.5. I think the Saudis will continue to produce for several reasons. The first is pushing down oil prices puts pressure on Iran. The second reason is it puts pressure on major unconventional oil projects like the oil sands and Bakken that have higher costs per barrel of production. I could be wrong, and OPEC could announce a marked decrease in production any day, as my opinions are just that and anything could happen. I am somewhat worried about downward revisions to growth int he US and China as well. I am being cautious for the short term but long term many of these names are cheap.
Bakken Update: 2012 Stock Picks Revisited [View article]
Polar/Koala/Dunn Co wells are estimated to produce EURs of 850 MBo. These wells will produce IRRs of:
$95/Barrel = 69%
$85/Barrel = 55%
$75/Barrel = 43%
Wells in the Smokey Prospect are estimated to produce EURs of 750 MBo. These wells will produce IRRs of:
$95/Bbl = 54%
$85/Bbl = 44%
$75/Bbl = 34%
Wells in the Grizzly and Wildrose prospects are estimated to produce EURs of 650 MBo. These wells will produce IRRs of:
$95/Bbl = 42%
$85/Bbl = 33%
$75/Bbl = 25%
Currently Kodiak is spending the majority of its time and money on developing the Polar/Koala/Dunn Co (operated by XOM). The rest of the acreage is only being worked to get the acreage HBP. So right now I estimate that Kodiak will remain at the top end of these estimates.
Austex is currently using RRC estimates for wells in the Horizontal Mississippian. These estimates have IRRs at 60% to 90% using NYMEX Strip of $92.82/Bbl of oil and $4.27/Mcf. 60% is used EURs of 400 MBoe. A 90% IRR is for EURs of 500 MBoe.
In summary, I think Kodiak will continue to perform at the top end of EUR estimates. I estimate IRRs of approximately 55% at $85 oil and $2.50. I am unsure what Austex will do as I am unsure it can keep costs down as well as SD or RRC. I am also unsure it will produce as well, but only time will tell. If it does and we use $85 oil and $2.50 nat gas, IRRs could be iin the 60% range. Kodiak is currently producing 89% oil and approximately 96% total liquids. SD estimates an average Horizontal Mississippian well to have EURs of 456 MBoe. EURs are 204 MBo with respect to oil content.
I would like to make clear I do not have an opinion on Gale Force or Austex. I do not follow either company, but am interested to see how they do going forward.
Bakken Update: The Three Forks Has Huge Potential [View article]
I appreciate your help on getting me the info I needed to complete the article. Couldn't have done it without your help.
Bakken Update: Poor Execution Is A Cause For Concern [View article]
The best way to valuate the Bakken Core is to go over some of the latest "large" purchases. Kodiak purchased 13500 acres with approx. 300 barrels of oil production for 17407/acre.
Enerplus purchase Ft. Berthold acreage with 8000 barrels of oil in production for 9800/acre
Linn Energy and QEP Resources also purchased acreage what I believe some of the best acreage. I think this acreage is worth about $15000to $20000/acre undeveloped give or take a few thousand either way. This also depends on current production, etc. The high end is probably what a company would want but not get, and the bottom vice verse. Kodiak's purchase was a value in my opinion, but I guess the company was highly motivated to sell. Don't take this as gospel as there are so many different variables that could influence this price. Have a great day.
Gasfrac Energy: New Evidence Of Superior Production Results [View article]
Very good article, thank you for the information.
Small-Cap Bakken / Eagle Ford Growth Opportunities [View article]
The Frac Facts [View article]
I wouldn't worry about a moratorium as of yet. The State of ND is just running tests to make sure there is no pollution. Right now the biggest worry is reserve pits. After the flood last year, quite a few of the pits flooded causing contamination. I would guess fraccing will not see big changes anytime soon.
Bakken Update: McKenzie County Production Year-Over-Year [View article]
That is something I have struggled with as I wanted a concrete number of initial production and how that would effect the EURs of each well. The reason I have not done much with EURs myself, is I would not want to mislead anyone into believing something I do not know for sure is correct.
How Eagle Ford Compares To The Bakken [View article]
How Eagle Ford Compares To The Bakken [View article]
Investing in both is a great idea, but companies in the condensate window seem to be better positioned given the EURs in this article being based on a short lateral.