North Dakota Bakken Crude Oil

[Marnos]

Sure, on to the next one. Just imagine how long it will take before that runs out. Probably not in most of our lifetimes.

Hard to say. You are probably right that it won't be North Dakota's last oil boom, it definitely isn't their first. Most people speculate that what is going on in ND could last 10-20 years but for all we know it could dry-up in as little as 5 if oil prices were back at $110 a barrel, given current technology.

No real predicting how long before it runs out, just depends on who you talk to. If you line all the industry experts up from end to end, they would not reach a conclusion. New reserves are continually being discovered, AND technology is making other reserves accessible which were not previously.

Ultimately, economics drive it all. Fracing is a technology that has been around since the late 40's, horizontal drilling has been around since about the 80's. However, it wasn't until oil got to around $100 a barrel that the widespread use of them became profitable.

However, both technologies have improved DRASTICALLY in the last few years. In 2011, it took about a month to drill a horizontal well. Fracing a well allowed for about 60%-70% recovery of the oil in that well (meaning 30%-40% was left in the ground). Break even point of this process $65-$70 a barrel.

These days it takes about a week to drill a horizontal well, and fracturing allows nearly full recovery. Break even point is about $45-$50 a barrel. Read an article the other day claiming its down to $30 a barrel which although technically could be true, it is unsustainable as it is resulting from the contractor doing work at well below cost right now.

[gokeefe]

These days it takes about a week to drill a horizontal well, and fracturing allows nearly full recovery. Break even point is about $45-$50 a barrel. Read an article the other day claiming its down to $30 a barrel which although technically could be true, it is unsustainable as it is resulting from the contractor doing work at well below cost right now.

I'll bet there are a lot of OPEC nations that have seen that information (and more) that don't like what they're seeing. This is going to require a major readjustment in lifestyles for a lot of them.

[Marnos]

These days it takes about a week to drill a horizontal well, and fracturing allows nearly full recovery. Break even point is about $45-$50 a barrel. Read an article the other day claiming its down to $30 a barrel which although technically could be true, it is unsustainable as it is resulting from the contractor doing work at well below cost right now.

I'll bet there are a lot of OPEC nations that have seen that information (and more) that don't like what they're seeing. This is going to require a major readjustment in lifestyles for a lot of them.

OPEC is pissed !! This current bust is a result of OPEC declaring war on American Shale Oil producer. Saudi Arabia increased production to intentionally drive prices down, thinking that it will force American Shale companies out of business. Most of their wells are conventional and costs of production are less.

American oil companies have taken a beating and are hurting, with thousands of people (myself included) out of work. Surprisingly though few of these companies have actually gone under. They are still here and they don't appear to be going away.

Meanwhile OPEC nations whose economies are so exclusively dependent upon oil business are supposedly hurting much worse. Or so the industry news would have you believe. I personally have my doubts. I have read lots of articles saying that Saudi is on the brink, that the OPEC alliance is about to break-up. However, every time they meet, they decided to keep production at current levels.

American oil industry will come back eventually, as these boom/bust cycles are really nothing new. When and for how long ? No one really thinks they have an answer.

What upsets me is that unlike steel and other industries, American oil is not protected from foreign imports through the use of tariffs, nor are they allowed to export and compete on the global market. No incentive to buy American and it is the American oilfield worker who is really paying the price.

[Gilbert B Norman]

An article appearing in Wednesday's Journal has laid to rest any notions that the Bakken region.is finished as an oil producer:

http://www.wsj.com/articles/shale-drill ... 1463514347" onclick="window.open(this.href);return false;

Fair Use:

WILLISTON, N.D.—Amid the abandoned worker camps, idled drilling rigs and empty field-office parking lots of western North Dakota, a shale industry reshaped by the oil-price collapse is beginning to emerge.

As the number of failed operators mounts, the surviving companies are laying the groundwork for what they forecast will be an era of slower but steadier growth in the state at the epicenter of the U.S.’s energy boom.

Cash-strapped operators are dialing back or abandoning North Dakota. But the survivors—many of which are bigger and more diversified players—are finding ways to make the Bakken Shale formation pay even at low oil prices by trimming budgets, improving field logistics and focusing on their best assets.

While Mr. Marnos will be disappointed to learn that employment will not return to "pre-bust" levels, shareholders will be happy to learn that as oil pushes towards $50bbl, that it will be profitable to resume large scale Bakken production again.

The "bust" has simply meant that the producers are becoming "lean and mean" in contrast to the free spending halcyon days.

Additional pipeline capacity seems to be "off the table" at this time, and hopefully the two major rail players, BNSF and SOO, have used this lull to strengthen their Rules for handling crude. Maybe phrases such as "boomtrain" will disappear from the lexicon.

[gokeefe]

Exxon Mobil increased net production in the Bakken and another shale play in Texas called the Permian by nearly 25% last year. “With cash operating cost at less than $10 per barrel, our Bakken and Permian developments remain attractive and competitive even in the current environment,” CEO Rex Tillerson told investors on a conference call in March.

This quote absolutely buries it. That's the lowest number I've ever seen. The previous lowest cost number was $30 per barrel with a possible "future" low of $20 per barrel. Rail is by far the best logistics choice for this kind of production that may have somewhat irregular business cycles.

[Gilbert B Norman]

Gotta love how the Journal's Editorial Board wishes all of with stakes in the railroad industry "Happy New Year":

https://www.wsj.com/articles/north-dako ... 1514591716" onclick="window.open(this.href);return false;

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The Dakota Access Pipeline has also reduced oil-train traffic within the state. The last time oil production was this high, North Dakota saw as many as 12 trains, or 1,200 cars, pass through daily. Today, only two trains do. That’s a victory for the environment and public safety, given that oil-spill accidents occur with much greater frequency on railways than in pipelines

Some are going to say "the railroads had it coming" what with Megantic and the others - including well run Class I's such as BNSF. I must wonder if after factoring in the Capital costs of the pipeline, will lower costs result. As far as the Board's contention that pipelines are safer to the environment, I think there should been more of a factual review.

[gokeefe]

Here's a different angle to consider. Increased production overwhelms available capacity (again). Shale is projected to increase by an additional 1,000,000 bpd in the U.S. this year alone. DAPL is not going to increase in diameter anytime soon.

[Gilbert B Norman]

Not sure if The Times "computer police" is on patrol, but this interesting Opinion piece appeared Sunday:

https://www.nytimes.com/2018/09/01/opin ... round.html" onclick="window.open(this.href);return false;

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.Some of fracking’s biggest skeptics are on Wall Street. They argue that the industry’s financial foundation is unstable: Frackers haven’t proven that they can make money. “The industry has a very bad history of money going into it and never coming out,” says the hedge fund manager Jim Chanos, who founded one of the world’s largest short-selling hedge funds. The 60 biggest exploration and production firms are not generating enough cash from their operations to cover their operating and capital expenses. In aggregate, from mid-2012 to mid-2017, they had negative free cash flow of $9 billion per quarter.

Reviewing these thoughts (again; Opinion), I would think that pipeline interests would "think twice" about further expansion into areas, such as the Bakken, where rail is the prevalent transport. However, when the time comes that the majors realize that MBS and Vladimir is the cheapest source for petroleum, "the party's over".

[gokeefe]

It's hard to accept the opinion of a short seller on an industry in which he has a financial negative interest.

[Gilbert B Norman]

An article appearing today in The Journal seems to contradict the position taken by the Times' columnist. While "bittersweet" to rail interests, the gist is that Bakken production is up but there are now pipelines available to transport the crude:

https://www.wsj.com/articles/the-hottes ... 1539086401" onclick="window.open(this.href);return false;

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.Several factors account for the Bakken’s recent rise, Mr. Prudencio said. U.S. oil futures surpassing $70 a barrel have spurred more drilling across the country. Additionally, cheaper acreage and improved crude transportation have made the area more attractive than some other major shale fields.

Namely, the Dakota Access Pipeline has made it cheaper to send crude to other parts of the country. Previously, much of the oil produced was transported by rail.

[Gilbert B Norman]

I'm simply posting what to me is a biased piece of journalism with a simply "We report, you decide"

https://www.eenews.net/stories/1060092773" onclick="window.open(this.href);return false;

Fair Use:

..The Lac-Mégantic disaster was the most tragic and visible consequence of a surge in crude-by-rail traffic that had gripped U.S. and Canadian energy markets by July 2013. The accident thrust a critical — but previously unremarked — facet of the shale drilling industry into the spotlight, forcing regulators, railroad executives and activists to reckon with the rise of "virtual pipelines" of rail tank cars.

The U.S. shale revolution brought drilling and production to places such as North Dakota's Bakken Shale that lacked the network of infrastructure to move the product away. Rail filled that void.

At its peak four years ago, crude-by-rail traffic topped 1.1 million barrels per day. If that all fit into a single train moving 50 mph, it would block traffic at rail crossings for nearly 30 minutes.

The swell has since subsided, due to a build-out of pipelines and changing market dynamics. From North Dakota to Virginia, a spate of derailments and fires grabbed headlines and forever changed how many communities came to view railroad tracks crossing through town. Terminals once used to load and unload crude into tank cars go unused, and tens of thousands of empty cars sit idle in the countryside. Crude-by-rail shipments stand at a quarter of their 2014 heyday

[NRGeep]

I'm simply posting what to me is a biased piece of journalism with a simply "We report, you decide"

https://www.eenews.net/stories/1060092773" onclick="window.open(this.href);return false;

Fair Use:

..The Lac-Mégantic disaster was the most tragic and visible consequence of a surge in crude-by-rail traffic that had gripped U.S. and Canadian energy markets by July 2013. The accident thrust a critical — but previously unremarked — facet of the shale drilling industry into the spotlight, forcing regulators, railroad executives and activists to reckon with the rise of "virtual pipelines" of rail tank cars.

The U.S. shale revolution brought drilling and production to places such as North Dakota's Bakken Shale that lacked the network of infrastructure to move the product away. Rail filled that void.

At its peak four years ago, crude-by-rail traffic topped 1.1 million barrels per day. If that all fit into a single train moving 50 mph, it would block traffic at rail crossings for nearly 30 minutes.

The swell has since subsided, due to a build-out of pipelines and changing market dynamics. From North Dakota to Virginia, a spate of derailments and fires grabbed headlines and forever changed how many communities came to view railroad tracks crossing through town. Terminals once used to load and unload crude into tank cars go unused, and tens of thousands of empty cars sit idle in the countryside. Crude-by-rail shipments stand at a quarter of their 2014 heyday

"The cars they were using were basically designed to carry things like corn oil."

Christopher Hart
NTSB chairman 2015-2017
Seems prudent to transition to CPC-1232 tank cars from the porous DOT-111's. The stats of a few less accidents, (but still too many) is a red herring given the ignored in article Saudi flooding of oil market coinciding with drop off in ND crude production. Pipelines also chronically leak methane.

[Gilbert B Norman]

Mr. Geep, it was inevitable that a pipeline system would be built in the Bakken region, just as there has been in the Permian, which I guess has been "depriving" "my Union Pacific (author holds Long position UNP)" of a like amount of revenue that BNSF and SOO have enjoyed from the Bakken.

That the inevitable attrition of business, first from any fracking not being competitive with MBS and "Czar Vladimir" @ $50bbl, has resulted in the retirement of DOT-111 tanks from revenue service. This further means that BNSF and SOO need "regroup" and concentrate on the Bakken market where the new Dakota Access pipeline does not serve. They can show the potential customers that a new pipeline must factor in their capital costs and "the rails go anywhere", as well as what we have done to improve our safety, and that if a pipeline has a spill, it can go weeks until some kid and his dog come back from playing and soaked in "gunk".

Mr. O'Keefe is the "perennial optimist" around these parts; but I'd l like to join him in thought that all is not lost for the railroads handling Bakken.

[gokeefe]

In regards to Bakken crude by rail I think it is notable that although they are well off the peak that there is still some being moved that way. Without the railroad further exploration and production would not be economical due to the pipeline capacity constraints.

[Gilbert B Norman]

https://www.macrotrends.net/1369/crude- ... tory-chart" onclick="window.open(this.href);return false;

This graph, along with others at the site, will tell you everything you'd, absent being in the industry or a trader, want to know about the history of oil prices.

What is funny, even with our present "full economy", and the re-imposition of trade sanctions against the Islamic Republic of Iran, oil prices are in a "correction". This should mean that, considering the high capital investment required, the zeal to lay pipelines though the Bakken should cool.

So who's there to pick up the slack, without any additional capital investment?