Most Americans Aren't Familiar with Keystone

May 19, 2015 Elizabeth Alford

Oil pipeline safety continues to be a huge political issue in Washington, but a recent poll suggests that many Americans aren’t quite so concerned.

An energy poll by the University of Texas found that less than half of the 2000 people surveyed were even familiar with the Keystone XL Pipeline, the controversial pipeline that would carry millions of barrels of crude from Canada to Texas.

Ever since the pipeline was proposed in 2008, it has been a hot-potato topic and a litmus test for President Obama’s concerns on energy and environmental issues. Of particular importance is the issue of climate change, with many environmental groups believing that approving the construction of the pipeline would be bad news for the climate.

Surprisingly, the U.T poll also revealed that only 6% of the Keystone opponents listed climate change as their main cause for opposition. This seems very low, considering that climate change has been a key part of environmental groups opposition to Keystone XL.

“The Washington Post theorized that “many people may view climate change as more distant and feel that most benefits of tackling it wouldn’t arrive for many years. Issues like that may not resonate as much with people as would more direct, immediate, tangible matters like our pocketbooks and the well-being of our local communities.”

BNSF Railway Abandons Plans to Buy Tanker Cars

May 18, 2015 Elizabeth Alford

Citing ‘customer complaints’, the BNSF railway has abandoned plans to buy 5,000 crude oil tankers.

Typically, leasing companies or oil companies own the tank cars that move crude along the tracks and not the railroads themselves. But last year, BNSF requested proposals from railcar manufacturers to produce cars for them that were stronger and safer cars than the current DOT standards. The company had hoped that producing cars with thicker shells, reinforced ends and thermal blankets would reduce the risks of using trains to haul oil.

Over the past two years, BNSF Railway has been involved in a number of incidents including a derailment and fiery crash that caused the evacuation of a small town in North Dakota just last week. The company confirmed that the eight cars that derailed were the unjacketed CPC-1232 models that the federal government would like phased out by 2020 due to safety concerns.

Related: Bakken Crude Train Derails

“A company spokesperson commented about the company’s decision to scrap the plans by saying, “If our customers do not want us in this business, we’ll re-evaluate. We’ll do something else.”

The debate over rail safety is continuing to escalate and just last month, NTSB urged stricter standards due to findings from study of recent train derailment accidents. They concluded that the current fleet of DOT-111 tank cars rupture too quickly and result in spillage and ignition.

EOG Waiting Out Oil Prices

May 14, 2015 Elizabeth Alford

EOG Resources will continue to hold off on Bakken well completions until crude prices stabilize.

Pulling back, slowing down and waiting it out is the preferred strategy for oil producers looking for strategies during the current pricing crisis.

During an earnings call, EOG says that they are benefiting greatly from the pull-back in activity and progress is being made to lowering cost in each phase of their operations. The company announced a first quarter loss net loss of $169.7 million.

Bakken Activity

The slowdown in activity has allowed EOG to focus on three things in its Bakken operations

Operational efficiencies and lowering well cost. Currently, a typical 10,000 foot lateral is now drilled in just over 10 days.
Using new technical data from our integrated completion process to further adjust and tailor high density completion designs to specific formation properties. These modifications are leading to improved results.
Maintain a more stable production base with minimal downtime

“William Thomas, chairman and CEO commented that “the company has no interest in accelerating oil production at the bottom of the commodity cycle. “We continue to adjust to the lower oil price environment by reducing well costs and operating expenses and by making significant well productivity improvements through technology advancements.”

Other Bakken Highlights

Well costs are currently 14% less than the 2014 well cost.
2015 well costs will be as much as 20% below 2014 levels with a target of $7.4 million.
Began production on eight wells in two 500 foot space patterns in the partial area.
Initial per well production rates from a five-well pattern averaged 1,235 barrels of oil per day and a three-well pattern averaged 1,345 barrels of oil per day.
Focused activity on its Parshall Core acreage in the North Dakota Bakken where 500-foot spacing results were very encouraging. Operational improvements continue to generate efficiency gains and lower well costs. Average well costs in the first quarter were down 14 percent from 2014 levels.

“Billy Helms - EVP, Exploration & Production said that “For the Bakken, as we continue to experiment with our completion designs we’re seeing different areas of the field have different rock properties and we’re tailoring those completion designs to match those rock properties.”

Has the Bakken Peaked?

May 13, 2015 Elizabeth Alford

The Energy Information Administration ( EIA) is predicting that oil production in the Bakken will begin to decline in June.

Shale producers have been reducing rigs, cutting budgets and laying off workers for months to compensate for low crude prices. Over the past year, the Bakken rig count has dropped by more than half, but until now production has remained at record levels, with the EIA reported 1.2 million barrels a day in February.

Related: Record Production for Bakken

In the EIA’s monthly productivity report for May, the agency reports that oil and gas production has probably peaked and they expect a 31,000 Mbbl/d drop in oil and 30,000 MMcf/d f drop for natural gas throughout June.

The Bakken had 80 oil rigs running last week zero gas rigs. WTI oil prices continued to climb trading at $59.39/bbl on Friday afternoon, a $.63 increase from the previous week and gas futures trading increased to $2.88/mmbtu.

Bakken Man Camps Center of Ponzi-Type Scheme

May 12, 2015 Elizabeth Alford

$62 million dollars intended to go towards Bakken man camps were raised illegally, according to a complaint filed by The Securities and Exchange Commission.

The SEC has frozen the assets of North Dakota Developments, LLC ("NDD") and its principles, claiming they defrauded over 980 investors from 66 different countries. Court documents accuse Robert L. Gavin and Daniel J. Hogan of raising the money to build Bakken housing projects that were never finished. The pair lured investors with promises of up to 42 percent returns in the first year. They also claimed that the NDD would jointly manage all of the units of the short-term housing facility with hotel-like amenities and that many would be operational within months.

“The SEC alleges that, “despite the lack of profits, the Defendants made Ponzi-style payments to certain early investors by paying their “guaranteed” returns using funds provided by later investors. The SEC also alleges that instead of developing the projects as promised, the Defendants have misappropriated over $25 million of investor funds to pay undisclosed commissions to sales agents, make payments to Gavin and Hogan, make investments in unrelated Bakken area projects for Gavin’s and Hogan’s personal benefit, and to make the Ponzi-like payments.”

A court hearing has been scheduled for May 18, 2015, on the SEC's motion for a preliminary injunction.