Jodi Quinell, With Genscape

And the Bakken keeps breaking it’s own production records! Genscape reports North Dakota rose by a record 54,000 barrels per day in May and are well on their way to one million barrels per day. We’ll explain more and introduce you to Jodi Quinell, Genscape’s resident Bakken expert on this week’s Hegg Bakken Report!

Hegg Bakken Report: Recently a press release came out and the title of the press release said Crude Oil Production in the Bakken increased 54 million barrels a day in June and that was according to Genscape, and so I did a little research and went to the website Genscape.com. Greeted with a nice clean website and once we started digging into it, we see a much bigger picture than just Bakken crude and we’ll tell you more about that as today we visit with Jodi Quinell with Genscape. Jodi, thanks for joining us on the program today.

Jodi Quinell: Yes, thank you for having me.

Hegg Bakken Report: Genscape; what is Genscape and what is it that you do there?

Jodi Quinell: Basically Genscape is a data, energy information company. We specialize in crude oil, but we also cover the tar market, the gas markets, a lot of different agriculture markets and things like that. So we cover a wide range of commodity markets and we try to provide the most up-to-date real time information possible.

Hegg Bakken Report: The information that you provide, who finds that important, who utilizes you’re services?

Jodi Quinell: A lot of producers, as well as traders, large hedge funds, banking institutes that are investing in commodities, those sorts of people really value that real time information and data.

Hegg Bakken Report: Okay, so generally the information that you provide leads to decisions where money change – lots of revenue change hands in those markets.

Jodi Quinell: Yes, exactly.

Hegg Bakken Report: Writers call you – you have an energy intelligence group. Who comprises that group?

Jodi Quinell: Well, we have an oil and energy intelligent group; I’ll speak on that. We have one for all the various commodity groups. But our oil and intelligent group is comprised of about 25 individuals who are constantly looking at and evaluating the data that we are receiving from our real time monitors.

So we have monitors on various crude oil pipelines in the U.S., as well as we have cameras that are taking pictures of railcars leaving load stations, as well as the various on-loading stations, we also have cameras there.

We do flyovers of storage facilities twice a week in some cases, where we are actually talking infrared, as well we pictures of the various crude oil storage tanks. So that group is comprised of individuals that are consistently monitoring that real time information, as well as making sense of the information as well.

Hegg Bakken Report: You spoke of flyovers. I think just, I got a press release from you this morning. You did one of the Keystone project and there is some new data there, which is a whole another story, but that’s just part of what you do.

Jodi Quinell: Yes, exactly.

Hegg Bakken Report: Now back to the press release that came out in mid-August, you made public of finding that crude oil output in the Bakken region of the Dakota’s, Montana, Canada went up by – particularly North Dakota went up 54,000 a day to reach 860,000 barrels a day. Now other than the obvious, what is the significance of this finding?

Jodi Quinell: Yes, so really what we are trying to do here is when we release those press releases that we are utilizing out real time monitors. So we are utilizing our flow data on the pipelines as well as from the warehouse facilities and we are coming up with how much crude production left the basin in the various months and we are predicting that before the North Dakota Industrial Commission comes out with their numbers. So usually about a week before we released this press release about what we think that number will be.

And discontinued growth from the Bakken is a hell of a key story that we continue to see. We saw a little big of sluggish growth. We still continue to see growth, but we saw some sluggish growth in the beginning of the year, because of some of the weather related issues that we see up in North Dakota. They had a pretty significant snowstorm in April and then some of the wet weather that you guys haven’t experienced in May, has caused some slowdowns in product. But it’s just that continued growth that we see from the base and it just seems like every month it increases in production.

Hegg Bakken Report: Having said that, where do you see the Bakken in six month?

Jodi Quinell: Yes, so we see Bakken around 950,000 barrels per day in six months and climbing too just over a million barrels per day, which is pretty significant number to reach by May 2014.

Hegg Bakken Report: That’s amazing. These numbers are just staggering and they keep increasing as the time goes on. How will – what you said with getting up to a million barrels a day, 2014, how does that compare to Texas, as well as some of the other oil producing counties in the world?

Jodi Quinell: Yes, so Texas currently is a large producer of oil. They produced about 2.6 million barrels per day, was the latest figure as of August or yes basically as this month or sort of the average to August was 2.6 million a day and we see that because there is growth in the Eagle Ford, the Permian region, we see that going to duple 8 million barrels per day by the end of 2017.

So Texas is one of those large growth areas, but it’s also a lot bigger state compared to North Dakota and it has various producing basins as well.

Hegg Bakken Report: We are visiting with Jodi Quinell with Genscape and your peers call you the residing Bakken expert. Have you ever – have you had the privilege of coming up to North Dakota and seeing it first hand?

Jodi Quinell: I have yes and it’s a very interesting place. As well I get to see all the pictures of our flyovers and as we take pictures of some of the infrastructure that’s going up there, it’s been pretty exciting to watch all that happen.

Hegg Bakken Report: It certainly has and living here, having been born and raised here, everyday there is something new and working with, you know talking to the state government and finding out how they are helping out with the infrastructure here, the roads and highways and things. It has been as you said very interesting.

Moving on today Jodi, do you see any new fields like the Three Forks coming online that would increase our production capabilities?

Jodi Quinell: Yes, I think definitely that Three Forks is the big area right now that’s being explored and it’s not just one layer of the Three Fork space. Continental Resource is exploring four different layers of the Three Forks that potentially could be productive.

So I think you know a lot of exploration activity around that will continue and results have been pretty positive from all of those four different layers. So I think that’s where we’ll see a lot of the exploration activity in the next year or so.

Hegg Bakken Report: Our former Governor is on the Board of Directors at Continental Resources, and he has called this a technology boom as much as it is an oil boom. Do you know of any more new technology that’s being looked at to help us recover more from those formations?

Jodi Quinell: I think really it’s the horizontal drilling and the multi stage fracturing that continues to push us to develop these Shale plays, and you know through finding those technologies, making them better here and there.

One of the big things that we are seeing now in the Bakken that’s helping to accelerate growth is moving to pad drilling. So we are hearing that a lot of companies are moving from the exploration phase, where they are just drilling one well per pad and now drilling up to four wells per location. So that reduces your drill time, it reduces your rig moved, you can share our central facilities such as tanks to store the oil, as well as pipeline hookups to get your gas to market. So I think that’s where we’re seeing a lot of the improvement now, it’s just with that pad drilling going on.

Hegg Bakken Report: You also reported that oil transported by rail fell from 84% to 70% of Bakken June output and what was that, do you have any idea?

Jodi Quinell: Yes, so the main reason that we’ve seen kind of this switch from moving on to rail to moving more oil by pipeline is because of the spread between Brent and WTI. So that spread in April was around $11, and it’s come in pretty significantly since then to where it’s about $3 or $4 currently.

Hence rail transportation costs more, so you are looking in the range of anywhere from I would say $8 to upwards of $20, depending on your end location to move my rail. Whereas to move by pipeline it’s cheaper, so it’s about $3 or $4. So when that spread doesn’t incentivize the high cost of transportation for rail, we’ve seen some producers move over to move their crude by pipeline.

The nice thing about rail though is that you can choose your end market. So you could go to the East Coast or West Coast, the Gulf Cost, you have that optionality to go to the various markets, but it does cost a little bit more. So when the spread is not there, we see them move towards the cheaper cost of transportation, which is that pipeline and that’s what we’ve seen recently as that spread between Brent and WIT has come in.

Hegg Bakken Report: Is that why Bakken crude – is that part of the reason why Bakken crude sells at a different price to West Taxes intermediate?

Jodi Quinell: Yes, that’s kind of there. I mean the main reason why we’ve seen, and have historically seen deep discounts of Bakken crude to WTI is because of limited transportation. There wasn’t enough capacity to get the crude to a market.

As we built, the rail facility has been built out, the pipeline infrastructure, we’ve seen that Bakken price come a lot closer to WTI and in some cases we even see that trade over WTI and just because of that ability to move the crude out of the basin has been the main factor for some of those discounts and then for some of those elevations of the discounts that we’ve seen recently.

Hegg Bakken Report: Is transportation a big reason why we’re – will Bakken crude ever reach what West Texas crudes trades for.

Jodi Quinell: Yes, like I said, we’ve seen it happen. Where we’ve seen it actually trade over WTI, we’ve seen it trade out of the premium to WTI. That was a result of, okay; we have all this crude production. Now we can get it to market and this was when the spread between Brent and WTI was wide. Now we can get it to market on the east and west coast that are trading closer to a Brent price. So they are trading, at the time we are trading $10 or $11 over WTI. So because we are able to get it to those markets via rail, we could see that premium happen.

Hegg Bakken Report: So you spoke of Continental Resources. Their CEO and Founder Harold Hamm just this week made a statement that it’s too late for the Keystone project. Obama probably won’t approve it, and it’s too late, oil producers are going to find other ways. What do you think those other ways would be other than rail or trucking?

Jodi Quinell: Yes, I think you know the biggest thing and there is a lot of projects up there is using rail, utilizing the rail stabilities and building out that infrastructure. We saw it happen in the Bakken and I think that kind of what Canadian producers are looking at right now, is how can we get this crude oil out via rail to the U.S. So I think that’s what we’ll see a lot of happen over the course of the next year, if indeed that Keystone line doesn’t get approved.

Hegg Bakken Report: How long have you been with the Genscape Jodi?

Jodi Quinell: I’ve been with Genscape for little over a year now.

Hegg Bakken Report: Having a time of your life I would imagine, studying all this interesting stuff.

Jodi Quinell: It certainly is a very exciting place to be.

Hegg Bakken Report: I bet it is, I bet it is. And where is your offices located, where are they – where are your offices located.

Jodi Quinell: Yes, so I’m located in Boulder, Colorado. We also have office locations, our headquarters are in Louisville, Kentucky. We also have offices in Huston and Boston, Massachusetts, as well as over in Amsterdam.

Hegg Bakken Report: Wow, and you’re on Genscape.com and you are also very involved with all the social medias. If somebody listening would like to find out more about you, they can, you got several ways, Facebook and YouTube and Twitter, as well as Genscape.com.

So folks who are listening, they want to find out more, they can utilize those services and we appreciate you taking time out of your day Jodi, and perhaps we’ll visit with you down the road. We’re not even half way to the projected 40,000 wells. I’m sure there is going to be a lot more information coming out this area.

Jodi Quinell: Yes, thank you very much for having me.