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Mark Anthony, is an IT professional and who had a scientific research background before joining the information revolution. Visit his blog: Stockology (http://stockology.blogspot.com/)
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  • The Real Economy Of Bakken Shale Wells Of Continental Resources 18 comments
    Dec 12, 2012 2:54 AM | about stocks: CLR, EOG, CHK, COG, UNGQ, ANR, ACI, BTU, WLT, ARLP, KOL

    I have repeatedly made the point that shale oil and gas producers tend to exaggerate the EURs (Estimated Ultimate Recovery) of their shale wells and then under-estimate the armortization costs, in order to show more pleasant financial results to the shareholders.

    The Charlotte 2-22H Well of the Continental Resources

    Let me do a case study on one particular Bakken shale well owned by Continental Resources Inc (NYSE:CLR), the Charlotte 2-22H well. CLR pitched this well in its 10/09/2012 investor presentation (page 63). It must be one of the best performing CLR wells.

    Fellow SA writer Richard Zeits quoted CLR describing this well:

    The Charlotte 2-22H tested at an initial one-day rate of 1,396 Boe/d and is assigned a EUR of 561 MBoe; the well had cumulative production of 87 MBoe in the first 9.8 months, or just under 300 Boe/d average.

    The well might had a peak 24 hours production of 1396 BOE. But it was an unstable and non-representative production volume to be used for EUR projection. I find a reference of the production in the first 35 days. During the first 5 days, oil produced was 3434 barrels and gas produced was 3449 MCF. Using 5.8 MCF of gas equivalent to one barrel of oil, the total production in 5 days was 4029 BOE. That's averaging roughly 806 BOE per day.

    Modeling Shale Well Decline Using Modified Arps Formula

    I discussed the Arps Empirical Formula in the past. The industry uses the Arps Type Curve formula to project a well's future productions. The problems with using the original Arps formula are:

    • For the initial few months of production, almost any parameter will be able to fit with the production data. So the industry tends to fit the curves using a very high b-factor, in order to project a lower long term decline rate and a higher EUR.
    • The Arps formula itself is divergent when a b-factor higher than 1.0 is used, resulting in a cumulative production that approaches infinity when integrated over long time.
    • The Arps formula has a long term decline rate that approaches zero. In reality, terminal decline rate is roughly 7% or higher. The terminal decline rate does not approach zero in long term.
    • The long term productivity of shale wells routinely come up far short of what's being projected using the Arps formula, as the production declines faster than the formula predicts.

    To adjust for problems above, I adopt a modified Arps formula to model shale well declines. The adjustment is simply multiply the original formula by an additional slow decaying factor Exp(-Beta*T).

    (click to enlarge)

    The original Arps formula, and my modification is explained above.

    Modeling the Charlotte 2-22H Bakken Shale Well

    Using proper parameters, I can model the well's actual production with a perfect match, see my modeling curve as superimposed on the original chart taken from CLR's presentation:

    (click to enlarge)

    My model used the following parameters:

    • IP = 903 BOE per day.
    • D = 0.027 / Day.
    • B-Factor = 1.465 (typical value used)
    • The decay factor Beta = 0.0002 / Day.

    Note that the IP I used is pretty close to the first 5 day average of 806 BOE per day, as mentioned above. My model is validated by matching the actual production in the first 10 months.

    Based on my calculation, my spread sheet gave these projections:

    • First year cum. production is 96.949 MBOE. PR=129.62 BPD
    • Two year cum. production is 132.88 MBOE. PR=76.78 BPD
    • Five year cum. production is 187.45 MBOE. PR=33.46 BPD
    • Ten year cum. production is 227.787 MBOE. PR=14.54 BPD
    • First year production rate decline is -85.65%.

    The EUR estimate can be estimated in two ways:

    1. Use 20 BPD daily production rate as the cut-off. I project that the well drops to below the cut-off production in 2880 days or 7.89 years. The cumulative production will be 214.5 MBOE.
    2. Use my 500 days of IP production rule. But since the initial production drops too fast, let's apply this rule after the first 90 days. By the end of 60 days, the cumulative production is 44.166 MBOE and the production rate is 314.8 BPD. So 500 days at 314.8 BPD will produce another 157.4 MBOE. The total is an EUR = 202 MBOE. Only 5.8% lower than above estimate.

    CLR projected a much higher EUR of 561 MBOE. I do not think their projection is supported by actual data. The original Arps formula would project EUR = 474 MBOE in 15000 days or 41 years.

    The Economy of This Bakken Shale Well

    What's the profitability outlook of this Bakken shale well?

    Based on most recent CLR quarterly report, I estimate that direct well drilling cost is $11.65 per well. Figuring in overhead and production maintenance costs, I think a lifetime cost of $13M per well is a very conservative estimate. Let me do the calculation using $13M and $15M cost per well. Realized revenue was $65 per BOE.

    Just for comparison, let's say CLR borrows $13M from millionaire Joe at a moderate 5% interest. Joe will be earning 5% interest from day one. CLR will be paying the interest and principal from the oil and gas revenue. Let's see how they perform over time.

    (click to enlarge)

    The above chart shows the relative financial performances. The two thick lines represent the accumulative production, with the scale on the right side. The thin lines represents the financial performances.

    I did the calculation using both the original Arps formula, and the modifies formula. The blue lines represent the original Arps formula, which tend to over-estimate. The pink lines use modified formula.

    The red line shows interest and principal accumulated if the money is lent out at 5% interest rate. The horizontal axis is in days.

    As can be seen, CLR would pay off the loan after 3280 days. That's the break even point after a full NINE years. After that point, any revenue earned less the production and maintenance cost would be the profit that gets into CLR's pocket. However, by then, there is not much profit to be made at all: The well will be producing 16.9 BOE per day. That's already below the 20 BPD production threshold I used above for the end of the well's useful lifespan.

    CLR is definitely not making a profit if my calculation is right. I said $13M per well lifetime cost was conservative. Let's see what happens if the cost is $15M per well instead:

    (click to enlarge)

    The above is the same calculation, but done assuming the lifetime well cost is $15M instead of $13M.

    The result is even gloomier for CLR. They are still under water at the far right edge of the chart, which is for 5000 days or 13.69 years.

    By the end of 5000 days, CLR still owes the bank $2.837M debt. Mean while the millionaire Joe who loaned out the $15M have happily earned compounded interest of $14.264M during the same time.

    Discussion and Investment Implication

    After the above discussions, if you have $13M or $15M of cash, do you think you get a better deal simply saving the money in a bank account earning 5% interest, or is it a better deal to invest the money in a shale company to drill a Bakken oil shale well?

    I think the answer is obvious. Bakken shale wells are simply non-economical at current oil price and at current well productivity.

    Why do investors continue to pile on Bakken shale companies like CLR and EOG Resources (NYSE:EOG)? Why the investment community dedicates 75 times more capital money in the shale development sector, than in the US coal mining sector? I believe this is the biggest investment mistake in the history of energy investment! It creates an excellent investment opportunity in the coal sector.

    I stated that the US natural gas industry and coal industry each produces an equal amount of fossil energy. There is no reason why the coal sector deserves only 1/75th of the investment capital of the NG sector, especially when current coal price is at or nearly the profitable level, while the NG price is deeply non-profitable.

    My statement is based on that:

    • US produces roughly 1 billion tons of coal per year. Each ton contains 20 MMBTU of energy. Total is 20 quadrillion BTU.
    • US produces roughly 24 TCF of natural gas per year. Each MCF contains 1 MMBTU of energy. Total is 24 quadrillion BTU.

    But since most of the NG industry has given up on conventional gas and concentrated their effort on shale development, it is fair to compare coal with just the shale gas industry:

    • US produces 9.25 TCF of shale gas and 360M barrels of shale oil, which is equivalent to 5.8 MCF per barrel. The total is 11.34 TCFE of gas. Total energy is 11.34 quadrillion BTU.

    So the disparity is even more extreme. The entire US coal industry produces TWICE as much energy as the shale oil and gas industry. Yet the investment community dedicates only 1/75th of capital in the US coal sector while wasting 75 times money in shale players.

    My advice: Get out of shale plays and get into the coal plays.

    Disclosure: I am long JRCC, ANR, ACI, BTU.

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Comments (18)
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  • pemdas1
    , contributor
    Comments (157) | Send Message
     
    I think you are on to something. WS article today cites Deutsche Bank study that E&P companies face big funding gaps, even if cap ex is held flat next year, and oil is $90 and gas $4. Sees the sector spending 152% of cash flow.
    More pain for the E&P industry unless prices rise significantly.
    12 Dec 2012, 08:08 AM Reply Like
  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    Author’s reply » Pemdas1:

     

    Even rising commodity prices will not save the shale industry.

     

    On the shale oil end, oil is a global market so there is a limit how much oil price can rise. A moderate oil price rise plus further cost cutting will allow shale oil companies make a moderate profit. But not enough to fend off a looming debt crisis.

     

    On the sahel gas end, as natural gas is a local market, and in the rest of the world gas prices are well into the $10+/mmBtu, gas price may rise to $10+/mmBtu level. Producers may be able to see a profit if the high price is sustained. But there can not be growth, as production growth kills the price. So again, I see it is very hard for the industry to fend off a debt crisis.

     

    The shale industry collectively owe half a trillion dollar worth of debts. If we assume a moderate 5% interest rate, the burden of interest alone will be $25B per year. From roughly 9 TCF of shale gas produced per year (as I said the number can not grow much as over-expansion kills the price), or maybe we assume 10 TCF, the industry need to earn $2.50/mmBtu just to pay the debt interest.

     

    If we armortize the half trillion debts for 30 years pay off, then the annual interest and principal payment will be $32.21B. That requires that the industry earn $3.22/mmBtu just to pay debt interest and principal. Anything beyond the cost and beyond the $3.22/mmBtu needed to service the debts, is the profit.

     

    The danger is if you look those figures, suddenly all the assets that producers hold, those acreages of reserves yet to be developed, suddely is worth a lot less, maybe only 1/10 of what they are recorded on the books. If so, many of the producers will have negative equity value. This could drive many bankruptcies. Using an analog, if you have a mortgage on a house, and if your house is burned down, and there is no insurance to pay for it. Will the bank allow you to continue to pay the mortgage for 30 years? Will you choose instead to just fine a bankruptcy to get rid of the debts? Half a trillion dollars of debts owed by the industry, with assets worth way much less than that, is a very dangerous thing. Will banks panic when they see that picture?
    12 Dec 2012, 12:36 PM Reply Like
  • Dr. Stephen Leeb
    , contributor
    Comments (335) | Send Message
     
    I have not gone through all the math, but at least at first glance this seems like a superb piece of work. Many thanks for sharing.
    12 Dec 2012, 06:19 PM Reply Like
  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    Author’s reply » Update:

     

    I LOVE IT!

     

    Comes out that the ND state DMR publishes a monthly file listing individual Bakken well productions. For example this is for Sep, 2012:

     

    http://1.usa.gov/W7clPM

     

    Modify the above file name accordingly for other months.

     

    I was able to get the Charlotte well monthly production data by looking at the data month by month:

     

    =======Well Name==================...
    (Confidential Prior to Nov-2011)
    Nov-11 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 - - - 14419 - 21856 (Banks Confidential)
    Dec-11 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 5918 5934 23 6298 8278 8278
    Jan-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 6076 6255 23 5876 5454 5454
    Feb-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 6817 7096 29 6440 7508 7508
    Mar-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 7191 6701 31 7391 10166 10166
    Apr-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 5686 5437 30 5775 7445 7445
    May-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 3611 3997 25 3681 3478 3478
    Jun-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 5515 5626 30 5551 7962 7962
    Jul-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 4483 5334 31 4615 4299 4299
    Aug-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 3316 4252 31 3126 2356 2356
    Sep-12 CHARLOTTE 2-22H SWSW 22 152 99 MCK 21128 3523 3527 30 3291 4260 4260

     

    No data is available prior to Nov, 2011. But CLR already shows the first 9.8 months production in the presentation. The production started in the last 5 days of April, 2011 so I do not miss any data.

     

    I will come back with more comment on the data.
    13 Dec 2012, 02:35 AM Reply Like
  • dbbolt
    , contributor
    Comments (31) | Send Message
     
    Kudos on all the effort. Based on your math it does seem that this well will not be as profitable as the driller predicted. I am not so sure what that says about the Bakken wells overall. Lots of math, and I'll say I did not go back to check it all or the sources. I do think the reference to an 85% Production Rate Decline in the 1st year is wrong based on your numbers.

     

    However, I find it hard to believe that these drillers haven't done similar analysis and come up with different conclusions. I know you are real excited about this chart for this well, but statistics can be made to say a lot of different things when too much is read into a small sample. I have a healthy fear for those who seem a bit too excited about their own initial findings and I tend to want to see things over a longer term. Anyway, your past writings encouraging investment in Patriot Coal come to mind.

     

    As for the concept of moving to coal from the Bakken, I am not so sure that would be a good move to make. Clearly there is money to be made in short term trading of coal, but this will be a tough industry to imagine a sustained move up. I am quite sure that the choice between coal and Nat Gas is clearly in NG's favor. Maybe someone should do a "true cost analysis" on the coal industry considering the cost of mining of coal, cleaning the sites as well as the aftermath of burning it to help us decide.

     

    Fracking is still in the learning stage and the flow rates and depletion rates of the different wells are all over the place. Due diligence on these companies is a must so that one can respond to a drop in the yields if it occurs. I continue to watch the bakken stocks closely and monitor the charts, but at this time I suspect that prudent investing in shale oil will be a long term winner.
    13 Dec 2012, 04:53 PM Reply Like
  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    Author’s reply » dbbolt:

     

    My analysis is correct and can be backed up by actual Bakken well production data. Actually after I have done the above analysis, I went to look for a good typical Bakken shale well with long history, and I find one such well to study:

     

    Sveen 14X-34 well, well number 16055, operated by XTO Energy

     

    See information about this well:
    http://bit.ly/UdR850

     

    I can model that well perfectly using the same method I describe. The well has actually produced 280 MBOE since 2006. My model projected 265 MBOE. I am writting up an instablog on it.
    14 Dec 2012, 10:22 AM Reply Like
  • Morrison International Acco...
    , contributor
    Comments (470) | Send Message
     
    Has to be the most crucial piece I have read since I have started Seeking Alpha. Now I wonder to invest in fundamentals (What you have presented) or investor psychology, which says buy natural gas in any form.

     

    I think the fundamentals will take a longer time to show up as few will believe anything until these wells actually start missing their targets consistently and the news actually reporting it. CNBC, CEO's and politicians all point to natural gas as the savior of economy right now.
    17 Dec 2012, 06:53 AM Reply Like
  • dbbolt
    , contributor
    Comments (31) | Send Message
     
    It will be interesting to see how you spin your numbers on the XTO Sveen well. I downloaded a random Dunn county KOG well as well as the XTO well and the numbers show the expected quick drop from the high 1st couple of months to a steady rate which continues to the present. There is no dramatic or even steady decline of any normalized numbers. These wells are still producing within 25% of the average rate of oil from the initial drilling. I focus on the oil production and depletion rates because these wells are focused on drilling for oil and not gas since the profit is in the liquids. The gas, by the way seems to follow a similar decline rate in both of the cases, not far off the oil decline.

     

    There were a couple of months for each well where there appears to be a shut down where the numbers dwindle down very low. Without normalizing for a daily rate, this would look problematic. These numbers pop back up over average as soon as what ever problem is fixed.

     

    This brings us back to the problem with people using small samples like mine or yours to make sweeping statements about the economics of the Bakken. You clearly have time to do the work, so go out and analyse 100-1000 wells. Do it right without slanting the data to meet your points. Pick best in class rather than mediocre producers since the potential economics of this area should be based on those who know how to drill and frack, a very specialized facet of the oil business.

     

    I would love to have a solid analysis of the economics of shale oil wells. I do suspect that some of the predictions of the media of how much oil they will produce are overstated. I am very skeptical that XTO, KOG, NOG, CLR, etc. all have their heads in the sand about the economics of the Bakken. That being said, I am still waiting for that solid analysis and yours does not meet the sniff test.

     

    Most importantly, people read your stuff, and seem to make some decisions based on your writings. You owe them a fair and balanced evaluation of your subjects. Emotions should not play a part in stock analysis. Your continued comparison of the Bakken to the coal industry suggests that your trying to find numbers to prove coal is better than gas rather than looking for investments to stand on their own merit. I am sure that readers will look forward to your in-depth analysis of the economics of the Bakken.
    17 Dec 2012, 10:48 AM Reply Like
  • Morrison International Acco...
    , contributor
    Comments (470) | Send Message
     
    Great comment, I learn so much from SA's comment section.

     

    You guys keep it coming.
    17 Dec 2012, 11:12 AM Reply Like
  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    Author’s reply » dbbolt:

     

    You are telling a fairytale when you said you spotted a well which remains at a steady rate till today, after the quick initial decline. Obvious you could not name the well to allow other to check your claim. Every shale well is know to decline continuously. There is no such thing as a constantly producing shale well.

     

    The few wells I picked out to study are exceptionally good wells by the industry's standard. The average wells perform much worse. I am not going to do a thorough survey of thousands of wells. Others have done that, including the USGS and EIA. Read:

     

    http://seekingalpha.co...

     

    The Fracking Tales Of Natural Gas Producers
    17 Dec 2012, 11:29 AM Reply Like
  • dbbolt
    , contributor
    Comments (31) | Send Message
     
    Fairytale? I said there was no dramatic drop. But let's have the numbers speak for themselves. Here is the one random well I picked: Heart butte field, Two shields butte 14-33-28h, KODIAK OIL & GAS (http://bit.ly/yvMlHo) INC., Dunn County, North Dakota, 149N-92W-33.

     

    No mystery here. After 5 months of fairly high bbls/day, the well settled in to up and down but fairly steady production rates. The monthly average for barrels per day (8/1/2009 - 5/1/2011): 832 424 381 349 309 270 249 199 281 229 173 241 218 199 203 192 483 190 182 176 160 257. The overall average was 282 and the last month in the data provided by your site (5/2011) was 257.

     

    Almost all wells in the shale fields have a high initial flow then settle in. The question we need to answer is how long will that production last? Your projections for the Charlotte well was that rates will be dropping to 14 bpd after 10 years and that the first year production rate drop was 85+%. Based on the numbers you published on the Charlotte well there was a 76% drop over 5 years. My read on that well suggest to me a poorly fracked well or some other problem; Continental was not an A player with their early efforts. My read on your math is suspect at best.

     

    Lets take YOUR example, the XTO well. The initial rate (BPD) is 245 then the monthly bpd rate calculates as follows (10/1/2006 - 5/1/2011): 184 385 290 224 200 177 161 148 135 181 124 170 123 113 110 111 103 97 95 90 81 82 81 75 70 73 80 79 73 72 73 74 70 68 33 138 171 144 145 129 106 85 170 128 116 107 98 83 89 91 83 64 37 87 101 95 with an average of 120 bpd. Numbers are a bit up and down and there may have been issues in the well or they may have re-fracked at some point. Closing in on 5 years and the daily rate is just below the long term average and about 62% below the first 6 month average. Down, yes, but not a steady precipitous drop.

     

    This is a new industry and some companies like Brigham and Kodiak have a good history of effective fracking. All drillers are still learning the best formula of water, proppant and stages which will produce the longest lasting well. I am not convinced that the ultimate output will be as high as predicted. I am convinced that you are wrong on the economics overall though I would love to see an unbiased review of the best in class wells. I own Bakken companies but wouldn't touch some of them because they really don't have the technique down yet.

     

    By the way, did you know that your link above was to another one of your articles? You suggest that I go to another article by you to get independent corroboration of your theories? Really, getting beyond the amount of natural gas which comes out of these wells, there is undeniably a growing supply in the US. Suggesting that coal is the future may erode your credibility a bit. I am not saying that coal may not present a possible trading option, or that it will go away completely. However, someone just voted in Obama and he hates coal so it may not have a clean path back to glory. To real investors, that stuff matters as well.
    18 Dec 2012, 01:04 PM Reply Like
  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    Author’s reply » dbbolt:

     

    OK, the well you mentioned is this webb:

     

    TWO SHIELDS BUTTE 14-33-28H SESW 33 149 92 DUN 18051 3619 1763 31 3241 2348 1020

     

    Found on page 67 of the most recent report, Oct-2012:

     

    http://1.usa.gov/ZHznRP

     

    As of Oct. 2012, the combined production is 129.8 BOE/Day. It's almost half lost since your "last data" of May 2011 at 257 BPD.

     

    Is that still production holding steady? I think the decline is rather steep. Especially we are talking about 3 years after the well started.
    18 Dec 2012, 01:26 PM Reply Like
  • dbbolt
    , contributor
    Comments (31) | Send Message
     
    I went back and plugged in all of the new data; thanks for the source. The decline averages around 1% per month, and the 117 BPD (oil only in my example since these are drilled as oil wells) figure for Oct 2012 is down about 50% from the current overall average of 137/ month. I suspect we will see some leveling of this rate, since the last few months have been around .6% decline; less than 1%. I also suspect we will see re-frac or some other stimulation done on wells to boost recovery before then, but to be fair, we'll assume the decline will follow even worse than the current curve.

     

    I pegged my long term estimates at 2% decline per month to represent the worst case scenario. I then projected out the cumulative total and the bpd rate out till the 10 bpd was reached. The 10 barrel per day figure comes around 13 years from the start. That may follow your original curve or not, I don't know.

     

    However, this is about making money, and KOG is one of my holdings so this one is close to home. I pegged the price of oil at $72, although that is probably low and will continue to rise as the new pipeline capacity is put in place. I also ignore the value of any other BOE such as the gas. Not a small piece, but lets use it for expenses to take them out of the picture. Assume the well cost $10,000,000; KOG is running less than that now. Anyway, at about 1 year and a half in we are break even and 1 year 9 months the well passes your money in savings at a 5% rate. It continues to do better out to about 100 months where the savings begins to ear more per month than the well. Projecting out more than 200 months and the well is still ahead of the bank. That is without any new stimulation or sale of the well as happens in the twilight years. I expect some pretty good cash flow and profits from this one and I suspect the folks at KOG had similar projections. I am through with this analysis and wish you luck as you fine tune. Don't lose sight of the big picure.

     

    Anyway, I hope you get more investment clarity from your decline theories. It is all about making money picking good stocks. I do hope it works out better than Patriot Coal did for you and your followers. Meanwhile, it looks like a good time to buy well managed Bakken and other shale oil plays. That is, if you believe that we'll benefit from having our oil supply in the US and that we will be using oil rather than coal to drive our cars. Arch Coal may also be worth watching from a TA point of view if it bounces of $7.40. Good luck Mark!
    20 Dec 2012, 01:51 PM Reply Like
  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    Author’s reply » dbbolt:

     

    Can you even do the math correctly? Where do you get the 1% per month decline? It's much steeper than that. Please show me your number and show how you calculated that 1%/month.

     

    I looked up that well, well number 18051, for Oct 2011 and 2012. The oil portion production slipped from 5663 to 3619 (for teh month). That's an average monthly decline of -3.7%/month.

     

    All the Bakken wells collectively decline roughly 4.55%/month. That's roughly equal to a -42% annualized decline.
    20 Dec 2012, 05:06 PM Reply Like
  • Morrison International Acco...
    , contributor
    Comments (470) | Send Message
     
    I appreciate all the work you guys are doing. Keep going at it, this is a good conversation!
    20 Dec 2012, 05:58 PM Reply Like
  • dbbolt
    , contributor
    Comments (31) | Send Message
     
    Mark,

     

    Sorry, I took a few weeks break from things. Sorry to see you are still fretting about oil well declines. I seem to be up quite a bit on these investments, but will sell in a flash if the technicals turn. That is apparently something you should have learned from your coal investments, always have stop losses. We all need to learn from our mistakes.

     

    Here's the thing, you believe that the bakken and all other shale plays are bad investments. You believe that the oil executives are "hiding" the facts on the wells and that they are unprofitable over the long run. Nothing I provide will result in a change of your mind. You are entitled to your opinion and you can invest where you want. Ultimately, the market will decide if the shale plays are legitimate or bogus and the charts will tell us before the news hits the wires.

     

    You can continue to write white papers on different companies, all in support of proving you were right on your original theory. (coal) You are even entitled to lead folks to invest heavily in companies which go bankrupt. You have to live with that burden since you are largely responsible for their losses. Writing articles on investing carries the responsibility that we need to be balanced and ready to consider alternatives. The idea that you think that an entire industry would continue to invest in wells which will not have an adequate ROI suggests that you are just a bit full of yourself. Admitting that one may have missed something in the numbers is tough to do for most people but clearly impossible for you.

     

    I have made money on both coal, oil and a wide variety of other industries. I will continue to do so as long as I keep emotions out of the equation. You will continue to find ways for the "numbers" to prove you are right in your theories. I suspect you did the same on your coal investments much to the detriment of folks who trusted you without question.

     

    On a positive note, it is a good time to invest in coal, so go out and buy KOL as it looks to be breaking up from resistance. Should be good for a ride to $30 from $26.5. You could also buy the Apr 30 calls for a possible double from .30 to .60. Just saying...
    8 Jan 2013, 03:18 PM Reply Like
  • dbbolt
    , contributor
    Comments (31) | Send Message
     
    This is the end of my responses to Mark since we both clearly have our positions set. I suspect that both Mark and myself are out of our depth in trying to gain insight from the numbers on random wells.

     

    However, for those interested in someone who actually knows something about shale oil plays and depletions, I would recommend Michael Filloon's articles on Seeking Alpha. I follow him and find him well balanced and informative. Here is his latest:

     

    http://seekingalpha.co...
    8 Jan 2013, 03:35 PM Reply Like
  • Percy12
    , contributor
    Comments (2) | Send Message
     
    Mark has it about right.
    I am a mineral owner and working interest owner in the Bakken, I'm not complaining. Two mile long lateral, 38 frac stages, $9.5MM.
    ROI less than 2 years. $78 and $86 bo 1st year.

     

    Not the same as "investing" in a well since I have no royalty overhead.
    But my favorite Bakken player is KOG and has been for several years now...I don't have a well with them but I do with my 2nd favorite and that is EOG...They have been selling my wells oil for over $100 for months and months now.....just down the road Brigham was selling my oil for $20 less per barrel in the same months......I have no stock in any company.....

     

    Maybe your math is good, but your number values are bad, very bad. My first long lateral well was $7.5MM You must be picking out the worst of worst problem child wells if you think they cost $13MM.

     

    Now of course you need to plug in the multi-pad well cost data. man, is that going to mess with your theory. I guess it has been 7 months since you last had a chance to change your mind about all of this.....You can still use like $70 oil if you want in your formula since we really can't count on this over $100 blip to keep going.
    10 Jul 2013, 04:37 PM Reply Like
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