2012-02-10

2012 February 10

The Master Resource Report  2012-02-10

Shale Oil recovery factor

On February 9th Mark Papa, Chairman and CEO of EOG Resources gave a presentation at the Credit Suisse Energy Summit 2012. The presentation’s audio and slides are available on the investor relations page of EOG Resources. There were several key points made during the presentation concerning both shale oil and shale gas.

He flat out said no one is making money on gas under $4 and that there is a big difference between producing lots of liquids in the form of NGL’s and oil. He pointed out that many companies don’t break their oil out from the all liquids volume they quote. Volume does not equal profits was his point.

But the most interesting was this piece of data from the slides. EOG is only recovering 4-10% of the oil in place in these two key oil plays. This reinforces the point that the volume of oil in the ground is secondary to the flow rates coming out of the ground. It also indicates there is great opportunity for those who can improve this performance.

Current Low Recovery of Oil-in-Place

• Eagle Ford ≈ 4% RF

• Bakken ≈ 10% RF

Mr. Papa also mentioned that Bakken crude for delivery to Clearbrook, Minnesota was priced about $40 below Light Louisiana Sweet at $117 delivered to the Gulf coast. There is more on this problem in this week’s report.

Note: Currently clients and advisors at Ravenna Capital Management do not hold positions in EOG Resources.

Definition:

Oil shale:  A sedimentary rock containing kerogen, a solid organic material. This is not oil.

Shale oil: Oil produced from shale rock.

The Donald strikes again (no not Donald Duck)

Bloomberg: “Donald Trump, billionaire U.S. property developer and reality-TV star, described Scottish First Minister Alex Salmond as “hell-bent on destroying Scotland’s coastline,” with plans for an offshore wind farm to be built near the site of Trump’s golf resort in Aberdeenshire, Scotland and has allocated “a substantial amount of money to launch an international campaign” to fight the plan, the Financial Times reported, citing a letter from Trump to Salmond.

“With the reckless installation of these monsters, you will single-handedly have done more damage to Scotland than virtually any event in Scottish history,” Trump wrote in the letter, according to the FT. “I am doing this to save Scotland,” he wrote, the FT said.”

So what would he have done if BP rolled in one or two of their offshore platforms within sight of his golf course? After all he is a strong proponent of “Drill Baby, Drill Baby”. Then again maybe he is concerned the wind turbines would capture the wind coming from him and he wouldn’t get paid.