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dbbolt

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  • Bill Powers: Give Up The Shale Gas Fantasy And Profit When The Bubble Bursts [View article]
    A good interview would include some questions about where this drilling technology is moving and whether the early rapid decline rates continue to be the rule. Fracking technology is rapidly evolving and the decline rates are not as steep as they were. More sand and water volume used has resulted in better returns per well. This is being accomplished at the same price or lower per well. Whether a company gets pay back on the well in 6 months or 10 years, the business decision should be focused on profit. If the well pays the right amount of profit, even if it declines production rapidly, companies will continue to drill.

    The fact that the author as well as his supporters don't mention the improvements in yields tell us all we need to know about their credibility. The idea that they don't discuss the imact of natural gas pricing on the equation is also telling. I would expect a responsible company shut down producing wells and stop drilling new ones until pricing allows them to produce at a reasonable profit. I would also suggest that the business deals consumated by Chesapeake over the past few years are not good indications of where the industry is headed since they are not a poster child for a well run E&P.
    Nov 5 10:49 AM | 1 Like Like |Link to Comment
  • Kodiak Oil And Gas Valuation Is Double Similar Canadian Producers [View article]
    The simple point brought up by our "worthless opinions" is that there are other factors behind the metrics which cause one stock to be valued higher than others. KOG has consistently been one of the best in class operators in terms of wells and has some of the best acreage. Isn't that mostly what we are betting on in the oil patch? Who has the best property and is most efficient at getting oil out and shipped? Legacy has not shown that they are at the top of the options yet. Maybe they will. The case above does not really get at the basic measures of where a company is going long term. The hope to "get back to 2011 levels" is really a great selling point for someone touting the superior nature of the Canadian E&P's.
    Jul 12 01:05 PM | Likes Like |Link to Comment
  • Linn Energy: Added Debt Is Greater Than The Dividend Plus The Reserve Addition Value [View article]
    You have suggested more than once in your replies that LINE has been getting more gassy each year since 2008. Here are the figures from the chart in your article:
    2008 -58% NG
    2009 - 57% NG
    2010 -52% NG
    2011 - 47% NG
    2012 - 52% NG
    Which part of your own chart was confusing to you?

    This is just one of many inaccuracies and misleading comments in your treatise. In the end, you do not come off as a credible resource on MLP's which truly do require a different analysis than traditional Corporate structures. I am not completely sure whether LINE will be able to pull off the combination with Berry just as I am not sure that NG prices will start to rise soon enough to make my NG investments winners. I do know that this is one article which has not helped me in my analysis.

    For those interested in MLP's please read some of the fine articles on SA explaining the differences from traditional corporations. The numbers will not add up unless you understand how they work. If they are confusing or make you uneasy, stay away from them. There are plenty of other investments out there.
    Jun 27 08:55 AM | 4 Likes Like |Link to Comment
  • Get Ready For The Big One - Bakken Flooding Coming This Year? [View article]
    Nobody really cares about your short position. The problem is that you stated that heavy flooding was expected in drilling areas while the general topography does not support that contention. You talk about issues with flooding having a substantial effect on KOG and TPLM, then when someone who lives in the area points out the sections you have concern about are 500 feet above the river, you respond by referencing flooding issues occurring in the past with Continental and Northern which are completely separate companies.

    Bad weather, frost issues and mud can have some effect on drilling but those effects will be reduced going forward as the drilling of multiple wells from one pad eliminates much of the movement of drill rigs. For anyone actually paying attention to the drilling plans for KOG, they will be pushing most of their drilling to the 2nd and 3rd quarter to reduce the impact of weather. You (and your apostles like Joe Kelly)have to expect some push back when your suggestions about flooding are innaccurate.

    The exchanges on SA are aimed at providing insights to folks and the success of this forum over others like Yahoo is the trust that people have done their homework. The back and forth exchanges are how we fine tune what the insights mean to our investments. Rather than getting defensive, take a step back and fact check. It didn't take much effort to corroborate the statements made above. I have read your articles with interest in the past, but this one was a little disappointing.
    May 8 03:24 PM | 1 Like Like |Link to Comment
  • Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
    "Best Bakken Wells Of 2012" was the title of Mr Filloon's last article. Just saying...
    Apr 4 05:23 PM | 1 Like Like |Link to Comment
  • Corporate Decline Rate And Sustainable Growth - Kodiak, Sundance And Austex [View article]
    Suggesting that there is a "typical" decline rate to shale well production suggests that you are fairly shallow in your knowledge of this type of production. For those who are interested in understanding and learning about shale oil recovery and investing, I suggest you read Michael Filloons articles in SA. Good balanced broad based analysis.

    As for this article, the rate at which a well declines depends on a wide number of variables including: the initial choke of the well, the number of stages, the length of the laterals, amount and type of proppant, the volume of water and the quality and thickness of the reservoir. Comparing all the companies with a broad brush suggests that they all do their well drilling and fracking the same way. There is a wide variation in fracking practices and reservoir quality and thickness so there is no "typical" decline rate. Just as important, this is relatively new technology and every year brings better knowledge about how to get a longer life flow out of wells and how to drill more economically.

    Most importantly from an investing standpoint, the economics of oil drilling is determined by the cost per well versus the amount of oil (or BOE where there is an oil gas mix) which flows out of the well and the price per barrel. The oil companies have done their math; it will probably surprise you to know there are actually people who calculate this stuff at Exxon, KOG and most of the other legitimate players. The pay back can vary by well, but they are clearly profitable.

    The last time some SA analyst put out this type of article without presenting the full picture or providing any balanced research, I decided to do an analysis on a random KOG well, since I held KOG stock and became uneasy about the economics based the the article.
    The well was selected basically by sticking an electronic pin in one of their fields and selecting the closest well: Heart butte field, Two shields butte 14-33-28h, KODIAK OIL & GAS (USA) INC., Dunn County, North Dakota, 149N-92W-33
    The well had a first month decline of 49% and continued to decline from 832 Bbls/day to 117 after 3 years and 2 months. Interestingly, the well pumped enough oil ($72/bbl estimated) to pay the drilling costs after 1 year and 6 months despite an 78% decline in output. Ultimately it has declined 86% from the initial flow rate.

    So how do we invest in this new technology? If the current trend holds, the decline rates on newer wells by quality players will not be as steep as past rates. The economics of wells in the Bakken will be tied to overall oil prices and the spread in price between WTC and Bakken as well as the amount of oil the well ultimately produces.

    As for the charts showing capex going through the roof "proving" the premise that it will take increasing funds to derive decreasing flows, I am not convinced. The increase in spending by the drillers may seem to be a desperate attempt to continue to achieve high growth in oil production by drilling more wells producing less oil. The companies may be as stupid or devious as Josh would have us believe.

    Or, it may be that they are beginning to lay the ground work for more efficient drilling which produces longer lasting and more productive wells. Once the "octopus" single pad drilling really begins to gain traction we should see a steep drop in the price to drill a well. This will encourage drillers to allocate more expenditures on more volume of water and a higher percentage of ceramic proppant which enables better working life and more oil. Read up on which companies are high quality and getting better at the technology. Do your own research and read Filloons many articles on the Bakken and fracking if you want to understand the technology. Still, don't swim against the tide, Mr Young may be pointing us to a sub-8 entry point in KOG. That would be sweet!
    Apr 4 05:02 PM | 2 Likes Like |Link to Comment
  • Regulatory Approval Of The Berry Petroleum Deal Makes 7.86% Dividend Payer Linn Energy A Buy [View article]
    KMP and EPD are pipelines (and very good investments) LINE is a producer and much more tied in to oil and gas prices. Hence the need for hedging. Comparing pipelines to oil & gas producers is like comparing a toll road operator to a car manufacturer.
    Line is in a long term consolidation and won't really move until oil prices do. However, when a stock stays flat but pays 7%+ distribution, you are making 7%. That's not bad, and the price will go up once oil & gas prices start to climb.
    Mar 22 04:04 PM | 3 Likes Like |Link to Comment
  • Clean Energy Boosted By U.S. Natural Gas Refueling Station Plans [View article]
    Read between the lines on all of Obamas speeches and you will realize that in his utopia (paid for by working Americans) everyone will be driving an electric car powered by windmills and solar. Anything that burns is bad and any large company (other than those he invests in) is corrupt. Natural gas burns cleanly and has become an inconvenient bump in his road to fantasy land. It won't stop him from taking credit for it, but he won't actually throw the research and funding behind a conversion.
    Mar 17 09:37 AM | 2 Likes Like |Link to Comment
  • Clean Energy Boosted By U.S. Natural Gas Refueling Station Plans [View article]
    When considering the energy majors, look at their recent buying. Exxon in particular has made large investments in Nat Gas companies. Any build-out of stations will start to push the price of NG up. They may decide to let the build-out be done by others and be the supplier of the NG without the capital expenditures. It would be a much better return on investment to let others open your market. Considering the number of stations needed to go nationwide, there is room for every company which starts to build the stations. The better question is whether CLNE has built up an advantage in the technology of efficiently putting in stations. I have not done research on CLNE's technology, but if they build for 2 million and ENN builds the same function for 1 million, the hot showers better have something special to double the number of customers and revenue. It is on my watch at this point.
    Mar 17 09:31 AM | 2 Likes Like |Link to Comment
  • InterOil: Asset Sell-Down Or 100% Takeover? [View article]
    Which are the facts and which are fiction? If you know energy, enlighten us. Are the reservoir figures bogus? Are the value of the resources figures low or high? Is there something missing from the analysis? Every little scrap of info helps in the DD. Terse pronouncements not so much.
    Feb 12 01:40 PM | 4 Likes Like |Link to Comment
  • The Real Economy Of Bakken Shale Wells Of Continental Resources [View instapost]
    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...
    Jan 8 03:35 PM | Likes Like |Link to Comment
  • The Real Economy Of Bakken Shale Wells Of Continental Resources [View instapost]
    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...
    Jan 8 03:18 PM | Likes Like |Link to Comment
  • The Real Economy Of Bakken Shale Wells Of Continental Resources [View instapost]
    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!
    Dec 20 01:51 PM | Likes Like |Link to Comment
  • The Real Economy Of Bakken Shale Wells Of Continental Resources [View instapost]
    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.
    Dec 18 01:04 PM | Likes Like |Link to Comment
  • The Real Economy Of Bakken Shale Wells Of Continental Resources [View instapost]
    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.
    Dec 17 10:48 AM | 1 Like Like |Link to Comment
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