Bakken Crude Price Disparity Expected To Narrow

The wide disparity between prices paid for light sweet Bakken crude oil and West Texas Intermediate crude, which rose to as much as $27.50 a barrel, now appears to be heading back to a more normal discount of $7.50, according to one analyst, Marty Beskow with Northland Capital Markets in Minneapolis.

“We believe the large Bakken discount is only temporary and will be helped in the near term with a significant amount of rail capacity coming online over the next few months,” Beskow said, “to take away more of the crude to the highest paying markets, which is currently LLS (Louisiana).”

Even though it costs more—between $9 and $15 a barrel—to send crude oil to the St. James, LA terminals by rail, the premium pricing there is about $20 more a barrel.

“Once the added rail capacity comes on,” Beskow said, “we believe Bakken discount will revert to normal.”

He pointed out that at least three refineries, each having a capacity of 100,000 BOPD, might be idled for between one to four weeks for routine maintenance. No formal announcement has been made yet.

He estimates that if WTI is trading at $90.00 a barrel, Bakken oil will have a 17% average spread, with prices averaging $78.75 a barrel.

GOP presidential candidate Rick Santorum was briefed by Tioga geologist Kathy Neset and others during his visit to North Dakota oilfields earlier this month. Santorum praised the efforts of the industry in state, where daily production has now exceeded 550,000 BOPD.

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ND Lease Sale Nets $85.2 Million; Results From Four Counties Posted Here

Bids for oil and gas leases in several North Dakota counties came in very high during the Feb. 7 auction by the ND Dept. of Trust Lands, with bonuses totaling $85,282,326.

Here are results from counties we were not able to get into the latest print edition of Oil Patch Hotline.

Billings County: Bids averaged $193/acre with bonuses totaling $1.1 million for leases on 5,902 acres. The highest bid came from Empire Oil Co. of Williston, which paid $4500/acre for 16 acres in Sec. 2, T141N-R100W. It also posted the second highest bid of $3900/acre for 80 acres in Sec. 24, T141N-R100W.

Mineral Land Services was third highest bidder, paying $220/acre for nine parcels totaling 1,040 acres in sections 11, 16 and 26, T138N-R100W.

Dunn County: Bids averaged $717 an acre, with bonuses totaling $2.8 million for leases on 3,957 acres. The highest bid came from Hess Corp., which paid $2500/acre for 160 acres in Sec. 8, T145N-R97W.

Three different buyers paid $1100/acre for several parcels. Titan Resources bought all of Sec. 36, T145N-R93W, while HERCO paid that amount for 320 acres in Sec. 5, T145N-R92W. Altair Corp. topped the bidding for 240 acres in sections 14 and 23, T144N-R94W.

Pacer Energy LLC was high bidder at $1,000/acre for 240 acres in Sec. 33, T146N-R92W.

Golden Valley County: Bids averaged $225/acre and totaled $1,036,387 for leases on 4,593 acres. Yates Petroleum dominated the bidding in that county, coming in with a high bid of $375/acre for 160 acres in Sec. 10, T138N-R103W. The second highest bidder was White Butte Resources, which paid $350/acre for 320 acres in Sec. 4, T138N-R103W.

Yates posted the third highest bid, at $300/acre, for eight parcels totaling 1280 acres in sections 16 and 36, T140N-R103W. Yates posted a high bid of $250/acre for 153 acres in Sec. 6, T138-R103W.

Stark County: Bids averaged $1,795/acre, with bonuses totaling $3.4 million for leases on 1,922 acres. The high bidder was Empire Oil Co. of Williston, which paid $7,000/acre for six parcels totaling 480 acres in sections 10 and 11, T139N-R99W. The second highest bid came from Stratex Oil and Gas, Inc., which paid $240/acre for 81 acres in Sec. 5, T138N-R99W. It also paid $125/acre for eight acres in Sec. 3-T137N-R94W.

Yates Petroleum Corp. paid $110/acre for 475 acres in sections 4, 6, 28, and 33, T137N-R99W and T138N-R99W.

Upcoming Events

Feb. 29–March 1: North American Crude Marketing Conference at the Hyatt Regency Houston. A discussion of crude price differentials will kick off the two-day conference, which is sponsored by Platts.

Francisco Blanch, a researcher for Bank of America Merrill Lynch, Richard Grissom, vice president of market analysis for Valero Energy Corp., and Edward Morse, commodities researcher for Citgroup Global Markets Inc., will lead off the panel discussion on light sweet crude differential pricing.

Reservations can be made online by clicking here or by calling 866-355-2930.

April 2–4: Bakken Investor Conference at the Sleep Inn and Suites at Minot, ND. Terry Hildestad, president and CEO of MDU Resources, will be the keynote speaker.

The conference will focus on issues facing operators and investors in the Williston Basin, with an emphasis on geology, capital markets, water reuse initiatives, and infrastructure development, along with housing and commercial development.

Also planned are presentations from exploration and production companies, which will update attendees about their operations in North Dakota.
More details on the conference can be obtained by visiting: http://bakkenconference.com.

April 3–4: Montana Energy 2012 conference and trade showin Billings, MT. Thomas B. Nusz, president and CEO of Oasis Petroleum, will be the keynote speaker. Other speakers for the day include Jim Orchard, an executive with Cloud Peak Energy; Dr. Patrick Barkey, director of the Bureau of Business and Economic Research at the University of Montana; and keynote luncheon speaker Dr. Michael J. Economides.

Among the speakers April 4 is Dr. Gerald Groenewold, director of Energy and Environmental Research Center, who will discuss research on carbon dioxide and enhanced oil recovery.

The two-day event at the Expo Center at MetraPark is sponsored by the Montana Petroleum Assn., Montana Contractors Assn., Big Sky Economic Development, and Kadrmas Lee & Jackson, an engineering firm.

For more information, visit: www.montanaenergy.net.

April 12–13: Platts 6th Annual Rockies Oil & Gas Conference at the Grand Hyatt Denver. On the two-day program are: Tim Maloney, business development manager for Bakken Express, LLC; Doug Williams, general manager for Willbros Engineers; Trisha Curtis, research analyst for Energy Policy Research Foundation, Inc.; and Kevin Williams, vice president of the northern business for DCP Midstream LLC.

David J. Stone and Roger Pinkerton, executives with Marathon Oil, also have top billing on the program, along with Jim Duncan, director of market research for ConocoPhillips. Keith Palmer, an executive with Alliance Pipeline is a speaker, along with Bill McAdams, president and CEO of Aux Sable Liquid Products.

Those looking for sponsorship opportunities can call Joshua Vernon at 781-430-2113.

For registration, visit: http://platts.com/ConferenceDetail/2012/pc218/index, or call 866-355-2930 and use registration code pc 218EM.

April 18: Second Annual D-J Basin and Niobrara Oil and Safety Conference and Exposition, at Aims Community College in Greeley, CO. The conference will focus on state-of-the-art safety and environmental issues.

Included in the lineup of speakers will be representatives from Occupational Health and Safety Administration, as well as Wyoming state OSHA. In addition to eight feature speakers, there are 18 breakout sessions planned.
The increased interest in this year’s conference and the quality of presentations will make this the premier professional conference for oil and gas safety professionals.

For more information on registration and hotel accommodations, visit: http://djsafetyexpo.com.

May 30-31: Bakken Tight Oil Congress 2012 in Denver, CO. Several top industry experts, including Stan Wilson with Continental Resources and Robin Pilcher, a geologist with Hess Corp., will be speaking.

The conference will focus on completions strategy, as well as hydraulic fracturing techniques, well spacing, and reservoir management. There will also be several presentations on geologic issues such as permeability, porosity, water saturation, and natural fractures.

Other speakers include Jon Payne, a geologist with Kodiak Oil & Gas Corp.; Timothy Benton, vice president of geosciences for GMX; and Rene LaPrade, senior vice president of operations for PetroBakken.

For sponsorship opportunities, visit: www.bakken-tight-oil.com or call 800-721-3915.

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