ND Regulators Hold Hearing About Bakken Crude Treatment

September 25, 2014 Kirk Eggleston

Executives at top oil and gas companies in the Bakken are fighting back against North Dakota regulators, opposing the treatment of Bakken crude before it shipped via rail, according to the Wall Street Journal (WSJ). On Tuesday, the North Dakota Industrial Commission (NDIC) heard testimony from oil executives, who claim Bakken oil is sufficiently treated at the well site. The paper first reported the NDIC would be holding hearings in August concerning further treatment of Bakken crude, which has been linked to several explosions, resulting from train derailments. Just under 70% of Bakken crude is transported out of North Dakota by rail to coastal refining markets and hubs like Cushing, OK.

Critics believe Bakken crude is dangerous, and needs to undergo stabilization. In similar plays like the Eagle Ford Shale in South Texas, crude is routinely stabilized before transport. At the hearing, representatives from the Dakota Resource Council, a nonprofit environmental group, asked for a moratorium on drilling permits, according to the paper.

The most appropriate action is probably somewhere between a moratorium on drilling permits and letting industry write its own ticket. As a matter of public safety, a thorough analysis of this issue is not unwarranted, but extreme measures to completely halt new development should be met with total disregard.

An issue not often discussed surrounding this issue is pipelines. North Dakota is woefully behind on its pipeline infrastructure. There are bascially two reasons - economics and regulation. It's cheap to transport oil by rail, and pipelines are expensive to build. For the companies that build pipelines, it can sometimes be difficult to secure commitments, and furthermore, state and federal government regulations have made building pipelines more challenging.

Ultimately, the transport of Bakken crude needs to be viewed from a standpoint of both safety and economics. It seems like common sense, and it would be nice if both the oil companies and the regulatory bodies could get on the same page in this respect.

Bentek Energy: ND Bakken Hit 1.2 Million b/d - Aug. 2014

September 23, 2014 Kirk Eggleston

Crude oil production in North Dakota's section of the Bakken Shale averaged nearly 1.2 million b/d in August, according to consultancy Bentek Energy, a unit of Platts. That's a 227,000 b/d increase over August 2013.

Combined oil production from the Bakken and South Texas' Eagle Ford Shale rose by more than 78,000 b/d in August 2014. That's a 3.1% increase over July.

Bakken oil prices are on the downward trend, and fell to the mid $80.00 per bbl mark around the first of September. Eagle Ford oil prices have been below $100.00 per barrel since the middle of August.

According to Bentek Energy, increased production from shale will help keep storage levels at the Cushing, Oklahoma oil hub on pace with domestic refinery demand.

Continental Resources Appoints New President

September 19, 2014 Kirk Eggleston

Continental Resources appointed a new president and COO this week, following the reportedly unexpected resignation of Rick Bott last week.

The company provided few details when Bott left his position, other than he was leaving "to pursue other opportunities." Bott's replacement is Jack Stark, 59. Stark has been with Continental since 1992, and was formerly the company's Senior VP of Exploration.

Continental Stock Dips Slightly

In the midst of its leadership change, Continental also announced that it plans to increase its' portfolio-wide capital expenditures budget for 2014 to $4.55-billion ($2.85-billion in the Bakken). The reason for the increase has to do with Bakken well costs, which the company revealed this week are $10-million per well. That's more than $2-million per well, compared to the same time last year. This comes at at time when most operators in the area are reducing the well costs. According to Forbes, as a result of the higher than expected well costs, the company's stock dropped ~8% (about $5 per share) on Sept. 18th.

Continental is the largest oil producer in the Rockies, Bakken Shale play and the SCOOP play combined. It is the second largest producer in the Bakken, behind Whiting Petroleum, which just recently acquired Kodiak Oil & Gas.

Bakken Natural Gas - Too Much of a Good Thing?

September 17, 2014 Kirk Eggleston

The oil & gas renaissance in the U.S. has nearly catapulted the country to the top spot for oil production in the world, and most experts believe the U.S. will hit this target by next year. But is it possible that the country and the Bakken has too much of a good thing? When it comes to natural gas that may be the case.

According to the BP 2014 statistical world energy review, the U.S. is currently the top natural gas producing country in the world at 328 Bcf/d. Over the past five years, natural gas production has grown over 20% in the U.S., thanks in large part to the shale revolution. But the price of natural gas has struggled to break $4/mmbtu, and oil companies in North Dakota's and Montana's Bakken Shale and the Eagle Ford Shale in South Texas have flared much of their produced natural gas in favor of capturing oil, which is a much higher valued commodity. Currently, the WTI price of crude oil is hovering around $95/bbl.

In North Dakota, where production from the Bakken Shale is highest, the state flares just under 30% of its produced natural gas. Recently, the first of several new rules has been enacted in the state to combat flaring. The North Dakota Industrial Commission (NDIC), the state's regulatory body for the oil and gas industry, hopes to capture 90% of Bakken natural gas by 2020; however, serious infrastructure improvements, including gas gathering systems and natural gas pipelines will need to be implemented in the Williston Basin for this goal to be achieved. The alternative could mean operators will need to shut-in wells to meet flaring guidelines - that's bad news for them, the state and mineral owners.

What this boils down to is the U.S. has an abundance of natural gas, which is a good thing. The bad thing is the country lacks the infrastructure to capture all of it.

With world usage of natural gas accounting for 24% of all primary energy consumed, there is decidedly a market for natural gas. But the only effective way to transport natural gas to foreign markets is to liquify it, which is costly. Ultimately, natural gas production is subject to the free market. As long as the price stays low, there's less economic benefit for operators to produce it, and companies to transport it and market it.

Major Bakken Producer's President Quits - Continental Resources

September 12, 2014 Kirk Eggleston

The Bakken's second largest producer, Continental Resources, Inc., announced this week that President and COO W.F. "Rick" Bott, 54, has resigned to "pursue other opportunities." According to company officials, his duties will be absorbed by senior management. Bott joined Continental in 2012, and worked previously at Cairn India Ltd and in Devon Energy Corp's international division.

“Continental CEO Harold G. Hamm said, “we are grateful for his professional contributions and wish Rick the very best.”

During the second quarter of 2014, Continental Resources completed 224 gross (93 net) wells in the Bakken, and finished the reporting period with an inventory of approximately 84 gross operated (66 net) Bakken wells drilled, but not completed. Continental’s Bakken production totaled 108,573 boe/d (North Dakota: 94,702 boe/d, Montana: 13,871 boe/d) for the second quarter, which was an increase of 11% quarter-on-quarter and 23% year-over-year.

Continental says it is ahead of its five year plan to triple production and proved reserves from 2012 to 2017 and maintains its leadership position as the largest oil producer in the Rockies, Bakken Shale play and the SCOOP play combined.

Continental currently holds ~1.14-million net acres in the Bakken.