Bakken Oil Safety

March 9, 2015 Elizabeth Alford

Train Derails in North Dakota — Bakken Oil Safety

Two separate accidents across the Williston region on Saturday have added to the growing concern about Bakken oil safety and is fueling the intense debate about the way oil is produced, contained and transported in the United States.

In a new series of posts, we will examine this issue and try to separate the facts from the hype and the science from the scare tactics.

Explosions Galore

An explosion erupted at 3:00am at an oil and gas waste disposal site north of Alexander, N.D. in McKenzie County. There were no injuries reported, but the massive fire spread to eight storage tanks and was so intense that emergency crews decided to let it burn itself out. The flames subsided by mid morning just as three oil tanks operated by Marathon went up in flames another 53 miles away, near the small town of Killdeer. These incidents were only a few weeks after eight tanks were destroyed in the same area as 1500 barrels of crude blazed across the street from an Enbridge facility.

Crude by Rail

A top concern when thinking about Bakken oil safety is the transport of crude by rail.

“According to one report, “there were 117 crude-by-rail spills in the United States during 2013, a near-tenfold rise since 2008 (...) and there were more such spills in 2014 than in any year since the federal government began collecting data on spill incidents in 1975.”

With oil production currently at all time highs, the amount of crude traveling the country will escalate and, many fear, so may the number of accidents.

Just in the last few weeks, there have been a number of news reports of these accidents:

3/8/15:Train carrying crude oil derails in northern Ontario more
3//7/15 Train carrying crude oil derails in Canada more
3/6/15: Oil train carrying Bakken crude explodes in Illinois more
2/14/15 Train carrying crude oil derails in Canada more
2/17/15: WV derailment carries Bakken crude in more

Next in the series: Is Bakken crude really more dangerous?

Oil Bust Brings Opportunities

March 5, 2015 Elizabeth Alford

With the free fall of oil prices in 2014, producers are scrambling to get their bearings and stabilize their plans while awaiting the recovery. Intuitively, a downturn doesn't feel like a positive thing, but for those willing to look a little closer, it's not all doom and gloom.

In other areas of life, times of struggle often produces important changes that strengthen a person or organization and solidify solutions for a healthier future. This is the posture being taken by many industry leaders during the current oil bust. Even though the decisions can be tough, many understand that a downtime can also hold opportunities.

Recently at the NAPE Business Conference in Houston, several speakers added to the optimistic refrain as they talked about these opportunities. Most prevalent was the opinion that the current squeeze forces companies and individuals to become more efficient. In the middle of a boom, things are going ninety miles an hour and things can be taken for granted. A downturn allows some time, space and energy to focus on fundamentals.

This is a wake up call, of sorts, for producers to take a hard look at their systems, processes, personnel, technology and strategies outside of the frenetic pace they were in a year ago. “When you’ve been chasing wells fast and hard, this downturn gives you a chance to develop”, said Gary Evans (Chairman/CEO, Magnum Hunter). Leaders anticipate that smart producers will develop new technological advances and become leaner and stronger over the coming months.

“Kurt McCaslin, (VP Operations, Anadarko) added, “All those people who were chasing rigs have been redeployed to chase costs and inefficiencies. There was an initial culture shock, but this has turned into mining the opportunity, not only for improving the company, but also for workers to strengthen their own skill base.”

Certainly there will be operators that succumb to the current oil bust and don’t make it. So, what will distinguish the winners from the losers? This panel’s consensus was that it’s all about relationships, reputation and execution.

During a recent analyst meeting, Rex Tillerson - Chairman and CEO of ExxonMobil led a discussion that included his company’s strategies as they face the current pricing instabilities.

“Tillerson commented that, “Yeah, it provides us a whole lot of different kinds of opportunities, not just in terms of accessing new resources through various means. But getting the cost structure back to where we believe it’s more appropriate. So, yeah this provides us a whole host of opportunities to strengthen our underlying fundamental business and be well positioned than for whatever happens in the future.”

photo credit: Gerd Altmann CC0

Oasis Petroleum Announces 35% Growth

March 4, 2015 Elizabeth Alford

Oasis Petroleum announced 2014 results and rolled out updated projections for the new year.

The company increased its net income by 122% from $228.0 million in 2013 to $506.9 million in 2014 and ended the the year with $45.8 million of cash and cash equivalents.

Other 2014 highlights include:

Increased average daily production 35% from 2013 to 45,656 Boepd
Q4 2014 average daily production of 50,143 Boepd
Completed and placed on production 195 gross operated wells during 2014
Increased total estimated net proved oil and natural gas reserves by 24%

Bakken Highlights

The following table describes the Company's producing Bakken and TFS wells by project area in the Williston Basin as of December 31, 2014.

“Thomas B. Nusz, Oasis’ Chairman and CEO commented, “Capitalizing on our premier position in the Williston Basin, we have grown volumes by over 35% in 2014, including production in the fourth quarter of 2014 of 50,143 Boepd. While we are excited about the strong growth and the potential of our significant inventory position, we have turned our attention to managing the business in light of the current challenging market environment.”

2015 Projections

Citing lower commodity prices, Oasis Petroleum announced it will be reducing its 2015 capital spending by 12% over 2014 and expects the total to reach $705 million. Additionally, the company expects to complete 79 gross (63.3 net) operated wells and 2.6 net non-operated wells in 2015.

Whiting to Reduce Bakken Rig Count

March 3, 2015 Elizabeth Alford

In its fourth quarter earning report, Whiting Petroleum announced a record 2014 and revealed a 2015 spending plan that includes reducing Bakken rig count.

In spite of low crude prices, Whiting ended the year with a Q4 profit of $58 million with cash flows totalling $419 million. Oil production was at record numbers for both the quarter (up 13%) and the entire year, which averaged 41.8 MMBOE and was up 22% over 2013.

In July of 2014, Whiting Petroleum announced plans to acquire Kodiak Oil & Gas for $3.8 billion. The deal made the combined company the largest Bakken/Three Forks producer, unseating Harold Hamm’s Continental Resources from the top spot.

“James J. Volker, Whiting’s Chairman, President and CEO, commented, “2014 was a strong year for Whiting. We set records in production, proved reserves and discretionary cash flow. In the wake of our acquisition of Kodiak Oil & Gas, we became the largest Bakken/Three Forks producer in the Williston Basin.Our 2015 capital budget of $2.0 billion reflects a disciplined approach to maintaining our financial strength while preserving our long-term growth plans.”

2015 Spending Plan

Looking to the new year, Whiting plans for the following:

Reduce its capital budget to $2 billion
$1.8 billion of the 2015 capital budget will go towards exploration and development activity
$59 million is allocated for land and $123 million for facilities
Production forecast of 59.0 MMBOE, an increase of 42% over 2014
Reducing Bakken rig count from 16 to 10
Completed well cost in the Bakken will average $7 million, down from $8.5 million in 2014

Read the full report at whiting.com

Governor Dalrymple Commits to Infrastructure

February 26, 2015 Elizabeth Alford

Governor Dalrymple of North Dakota signed legislation that grants massive emergency funding to counties and cities statewide in order to bolster the lagging infrastructure.

On Monday, the ND Senate unanimously approved SB 2103 for roads and other critical infrastructure throughout the state with the bulk of the resources allocated to its oil producing counties. The $1.1 billion is in addition to a $2.3 billion infrastructure spending package that is already in place.

The bulk of the money is targeted to fix roadways and bridges that have not been able to keep up with the increased traffic of heavy oil field equipment that the shale boom has brought to the Bakken area. Many of the region’s oil-producing counties still use hundreds of miles of gravel roads as main transportation routes often seeing as many as 1,000 vehicles a day, compared to fewer than 50 before the boom. Lawmakers hope this legislation will improve the infrastructure for what is hopefully another 20- to 25-year production in the play.

“Speaking with the Dickenson Press, Watford City Mayor Brent Sanford said, “The traffic flow will be better. It will be safer. So this is really a great investment for public safety.”

Related ND News: No Income Tax for North Dakota?

Senate bill 2103 allocates the nearly $1.1 billion as follows:

$450 million for the Department of Transportation
300 million for the state’s top 10 oil-producing counties
$140 million for cities within the top 10 oil producing counties
$8,750,000 to school districts in oil-producing counties
$215 million for hub cities: Williston, Dickinson, Minot and Watford City.
$112 million for non-oil-producing counties.
$16 million for townships in non-oil-producing counties.

Read the entire bill at legi.nd.gov