More good stuff on the Bakken – 8/11
Here’s a few quick notes on interesting news that I won’t cover in a separate post:
7/25 – PR Newswire – More than 30% Growth in Shale Oil Output in Bakken, Eagle Ford: Platts’ Bentek Energy – In June ’14, increase of prior year June production was 28.9% in Bakken and 37.6% in Eagle Ford. Compared to where I was four years ago, if I saw that report fresh today, I would write a full length post on that one article. Today, that is old news for me.
Internal rate of return is above 50% in Bakken and 65% in Eagle Ford. The article explains what that means:
“To the average producer that means for every $1 million they sink into drilling a well, they can expect to recover at least $1.5 million in crude oil, liquids and natural gas over the course of a year.”
I don’t think that is how I’d calculate ROI. Looks like an ROI in excess of 100%.
In any event, drillers can recover their investment plus one-half over in just a year. Cost recovery in 8 months. Astounding.
Oh, that well will produce for many years to come.
7/27 – Say Anything Blog – Myths vs. Facts About Bakken Crude and Oil By Rail – Whether measured by volatility, corrosiveness, vapor pressure, or flamability, Bakken crude are far below the DOT requirements for transport by rail. Even DOT-111 tank cars are sufficient.
The problem, as pointed out by Million Dollar Way, is not setting brakes on engines before you walk away from the train or running over the train car in front of you that just derailed. It’s not the oil.
There are a whole bunch of things railroads carry everyday that are a problem if one train hits a derailed train at full speed.
7/26 – Grand Fork Herald – N.D. economic growth brings more deposits, diversification away from ag – State chartered banks have seen their deposits grow from $7.7B in 2006 to $13.7B in 2012. Essentially doubling in 6 years. Bet the data for ’13 and ’14 will show increasing rate of deposit growth. The unexpected challenge from that growth is trying to find some loans or investments that allow the banks to make enough money to pay their new depositors.
7/30 – Wall Street Journal – The Airport That Feeds the Oil Boom – Dateline Williston. Major article in WSJ describes the crunch of passengers at the airports in the oil boom area: Williston, Minot, Dickinson.
Minot has 15 daily flights.
In Williston, Delta has 4 daily to Minneapolis and United has 4 daily to Denver with another daily flight to Houston starting 8/19. Capacity load out of Williston is a staggering 85%. Over the course of a week, out of 2,800 seats available (8 flights x 50 seats x 7 days) there are only 420 empty.
That means that on the heavy travel days, there aren’t any open seats.
Downside of a million barrels a day
8/4 – Dickinson Press – A boom in rental rates: In the shadow of N.D.’s oil boom, Williston residents struggle to keep their homes – Rapid increases in rental prices are squeezing folks on a fixed income. The focus of the story is a retired woman whose rent was $550 eleven years ago and is increasing from $1,350 now to $1,550 next month.
For your perspective, it is my impression she is getting an astounding bargain for a two bedroom apartment in town. Published prices for a one bedroom is $2,394, although that is probably higher than the typical rent. As another guess, there would need to be several more years of $200 increases before her apartment rent is at market price.
Lots of people are talking about rent control, according to the article. That’s empty talk since state law prohibits any form of rent control. That’s also ironically strong anti-capitalism and anti-free market talk for an otherwise conservative state. Consequences of rent control would devastate the housing market.
Ironically, the woman discussed in the article is being subsidized by her landlord by hundreds of dollars every month.
Increases in land rental rates for mobile homes are increasing even faster, according to the article.
Yet this is another of the downsides of a rapidly expanding economy. There are many painful parts of radical growth.