Tag: Business

Parts of Southwest N.D. on Cusp of Grain Harvest

Kelly Herberholz made the first cut of this year’s harvest a week ago.

Since then, he and his father, Joe, have slowly been chipping away at their crop throughout central and western Hettinger County. Kelly estimates they have at least 300 acres done and that much of their spring wheat is running between 35 and 45 bushels an acre.

“We need more than that though,” he said with a short laugh.

Southwest North Dakota farmers are on the verge of what appears to be an above-average small grains harvest in a year where prices are well below average.

“There’s some good-looking crop out there. Now if we could just get a price for it,” CHS Southwest Grain General Manager Delane Thom said Friday. “A 50-bushel spring wheat crop is barely a break-even number.”

On Friday, 14 protein spring wheat closed at $3.85 a bushel at the Southwest Grain terminal near Taylor. Milling quality durum was $5.90.

As farmers like Herberholz are quietly chipping away at their spring wheat crop in Hettinger County — where the wheat is furthest along — he and others say and are awaiting higher temperatures this weekend that could turn a crop nearly ready to cut into one that’s falling into the hoppers of combines throughout the area.

“If the sun would come out, I think we’d all go,” Herberholz said.

This weekend — with temperatures forecast in the high 80s and low 90s, with a chance of thunderstorms on Sunday evening — could go a long way toward getting farmers in the field.

Tom Snell, who runs Snell Harvesting of Ellinwood, Kan., has 18 combines in Regent ready to go whenever the wheat is. He said they took a couple of their John Deere harvesters out north of the small town on Friday to try areas for one client.

Snell said he has seen some good crops throughout the Great Plains this summer and while this year’s North Dakota crop isn’t going to be a “bin buster,” he believes it’ll be a good one. And he wants to help get it off the field and into those bins as soon as possible.

“When it’s getting this close we’re no different than a farmer,” Snell said. “As quick as you can, you want to get going.”

Thom said he recently drove through much of southwest North Dakota.

He said crops didn’t fare well along the Highway 12 corridor between Bowman and Lemmon, S.D.

“It’s extremely dry down in that country,” Thom said. “A lot of that crop was rolled up for hay because the hay crop was short. The further north you get of that line, the better it looks.”

He estimates that five major hail events during the summer took out anywhere between 30,000 to 50,000 acres of cropland throughout the area, all the way from Scranton to Glen Ullin and, of course, north to Killdeer, where a devastating storm ripped through the Dunn County city and surrounding countryside on July 10.

Thom said crops north of Interstate 94 are at least three weeks away from being ready to harvest.

“Where it hailed it out, it hailed it out,” he said.

Thom said that in recent weeks, many farmers have been selling year-old wheat at his elevator in what he says is effort to clear storage space.

“There has been a fair amount of old crop movement, of wheat specifically,” he said. “That’s kind of an indicator that there’s got to be a pretty normal crop out there.”

Farmers aren’t the only ones preparing for harvest, however.

Mick Lewton, store manager of West Plains Implement in Dickinson, said his business has done about all it can do to prepare for one of the busiest parts of its year. He said the Case IH ProHarvest support team is also mobilized at the shop.

“It takes a little while to prepare for, but we’re about as good as we’re going to get right now,” Lewton said.

Federal Commodities Regulator Believes US Oil Industry Can Wait for Prices to Improve

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One of the nation’s leading commodities market regulators said Monday he’s confident the American energy industry can remain stable through the current period of lower oil prices, despite what overseas competition believes.

Christopher Giancarlo, a commissioner on the U.S. Commodity Futures Trading Commission, discussed North Dakota’s role in world oil markets with Sen. Heidi Heitkamp and two of the state’s energy industry leaders at the Dickinson Public Safety Center before getting an oil rig tour in Dunn County.

“Some of our overseas competitors are hoping we can’t wait it out — that we can’t wait out the low prices,” Giancarlo said. “I think they’re going to be surprised when they see this type of ingenuity, preparing ourselves for the lower prices. We can wait it out.”

Giancarlo received a crash course in the state’s oil and gas industry Monday as part of a visit to the upper Midwest that also included agricultural stops in western South Dakota and northwest North Dakota.

“You can’t really understand how to assist a business with the regulatory concerns if you don’t actually understand how they make their money, how they get up in the morning and put food on the table at night,” Giancarlo said.

‘All about survival’

North Dakota Petroleum Council President Ron Ness and Justin Bethancourt, the Bakken operations and maintenance superintendent for ConocoPhillps in Dickinson, gave Giancarlo a nuts-and-bolts walkthrough of how the North Dakota oil industry came to be and how its economy has been shaped by the most recent boom of the past decade.

Giancarlo said a sluggish world economy is keeping oil prices from climbing back to levels seen when the Bakken oil play boomed. He said volatile currency prices around the globe have spilled over into commodity prices of all kinds and has forced producers to hedge their risks.

“You guys have done enormous, fantastic work in supply — both in terms of discovery and production, and then also in terms of productivity and efficiency,” Giancarlo said. “So the supply side of the equation is in really good shape. The problem is the demand side. The demand side is caught in this sort of sluggish global growth that we’re seeing across the western world, across the developing world. Part of the times we live in right now is that anxiety over that missing global growth.”

Ness and Bethancourt said an oil producer’s ability to drill more than a dozen oil wells on a single well pad, an unheard of practice of at the start of the Bakken oil boom, has helped drive profits while lowering production costs.

“I do come away proud of American ingenuity,” Giancarlo said. “The ability to first ramp up and then build this amazing infrastructure. Then, almost as a reward for their success, to see the fall in prices and then once again readjust to that is tremendous. I don’t know if any other country in the world could have done what we’ve done. But we’re a victim of our own success in some ways.”

Ness said oil companies involved in the Bakken shale play are in a better place now than they were at the beginning of 2016.

“The independents, their stock value has been decimated, their balance sheets have been decimated,” he said. “If you would have been here in January or February, we were at risk of losing two or three of our top-five producers to bankruptcy.”

Ness added later that one of the latest trends in the state’s energy market is that operators are selling interests in their drilled-but-uncompleted wells to hedge funds as a way to finance wells that haven’t been brought into production.

“At this point, it’s all about survival,” he said.

Saudi Arabia’s role 

Heitkamp and Giancarlo also delved into Saudi Arabia’s role in guiding the world oil markets. The senator said she frequently hears from North Dakotans who are quick tell her the Saudis are forcing oil prices down in an effort to push the American shale producers out of the market.

“I think the Saudis have been driving the market down. I’m not convinced the Saudis can drive the market back up,” she said. “At some point, they’re going to have more competition than what they want.”

Giancarlo and Heitkamp both said the Saudis, much like North Dakota, are creating value-added industries to help them move past this period of lower oil prices instead of relying solely on crude oil production.

Heitkamp said she also believes the Saudis have recalibrated their long-term price expectations.

“They’re looking at this as transitional,” she said. “They’re trying to figure out what the new Saudi economy is going to look like. They look at the long-term trends in supply and demand.”

Giancarlo added that the Saudis are fine with prices where they are right now “because it’s causing all this pain in the most innovative oil production area in the world, which is right here. It’s causing a lot of pain. It’s an ideal situation for them to be in. They want to maintain their distribution relationships.”

Whiting CEO: We believe in the Bakken

Volker says oil companies still profiting despite lower oil prices

BISMARCK — The chief executive of North Dakota’s largest oil producer said Wednesday that his company is still making big money on Bakken and Three Forks wells despite the industry’s economic downturn.

Whiting Petroleum Corp. President and CEO Jim Volker said during the second day of the Williston Basin Petroleum Conference that he foresees a gradual upturn for the state’s oil industry as crude prices steadily creep upward and more drilled but uncompleted wells are slowly brought into production.

“We’re a big believer in the Bakken, not only its future but even where we are today,” Volker said. “This is why we believe so much in the Bakken. We put our money where our mouth is here.”

Volker pointed to technological improvements for allowing production companies to operate with fewer rigs, allowing them to continue investing in the North Dakota Oil Patch — even if it’s not at the same rapid pace as years prior.

Volker said even at Wednesday’s price of about $50 a barrel — a comment that drew applause from the crowd — a Whiting well is still projected to produce a future net revenue of $27 million at a cost of about $7 million.

Whiting produced more than 4.1 million barrels of crude from nearly 1,500 active North Dakota wells in January 2016. In Stark County, the company had 131 wells that produced around 180,000 barrels.

“This is all happening with improvements in technology and improvements in the way we drill and complete,” Volker said. “Not only are we cleaner, we’re more efficient and we’re doing it for less money.”

Don Hrap, president of the Lower 48 states for ConocoPhillips, echoed that in his keynote address later in the day, as he said innovation and entrepreneurialism created out of necessity by the 2015-16 oil price downturn will make the industry “smarter, better and more efficient.”

“I think that technology innovation is what brought us this renaissance and also it’s what’s going to support us as we move forward,” Hrap said.

Hrap showed charts detailing the ups and downs of oil over the past 150 years, and said while this recent price drop is one of the most sustained in history, it could lead to more level and sustainable long-term prices.

“As we adapt and adjust, we have a tendency to provide the supply that’s needed that kind of moves us to a lower price,” he said. “That’s important to us, because it says we can’t count on $100 oil. We need an industry that’s supportive of a price that’s more moderate.”

Volker, meanwhile, wrapped up his speech with a summary of how Whiting recently paid down $500 million in debt.

Paul Steffes, CEO of Steffes Corp., a Dickinson manufacturing firm heavily invested in the production side of the oil business, said hearing that “certainly makes me feel good.”

“They’re a major player in the Bakken, so it’s an important piece for North Dakota to see Whiting be healthy,” Steffes said.

Lynn Helms, director of the state Department of Mineral Resources, said Volker’s optimism about pushing forward with a slow ramp-up is “consistent with what all the other operators are saying.”

Volker pointed out Whiting’s obligation to continue drilling wells, especially those on federal and tribal land, or risk losing their leases. Helms said those comments prove that rigs will continue to operate in the state, even if there’s only around 30. North Dakota had 28 drilling rigs as of Tuesday.

“I think that’s going to help the state to stay in this 30-rig paradigm that we’re in, because those drilling obligations are really expensive to walk away from,” Helms said.

Cattlemen talk market volatility

Larry Schnell, owner of Stockmen’s Livestock Exchange in Dickinson, drew applause from his industry colleagues Friday when he said cattlemen are angered when traders use subtle deviations in the cattle markets and cause major price fluctuations that trickle down all the way to their operations.

“That’s why it’s so hard for us to accept that we should face the consequences of all the trading that takes place under the table, in the dark,” Schnell said. “That’s hard for us to accept. … These people here, they’re not a part of that. They only suffer the consequences of that trade.”

Many from the western North Dakota and South Dakota cattle industries gathered Friday morning at Stockmen’s to listen to Schnell and other industry leaders speak out on problems they see in the cattle markets at a forum hosted by U.S. Sen. Heidi Heitkamp, D-N.D.

Heitkamp, Schnell and five other panelists sat in the Stockmen’s sales ring — where cattle are typically showed for auction — as they discussed market concerns for more than two hours. Other panelists included Bowman rancher Steve Brooks, who is president of the North Dakota Stockmen’s Association; Justin Lumpkin, a U.S. Department of Agriculture marketing officer; Larry Kinev, president of the Independent Beef Association of North Dakota, and cattle buyer Fred Berger, of Mandan.

“What we were talking about here today isn’t, I think, about the high prices or the low prices,” Schnell said after the forum. “It’s about the volatility. It’s about the volatility where the market changes for what seems like no reason whatsoever.”

The managing director of commodity research for the CME Group, which operates the Chicago Mercantile Exchange, said the exchange is months away from fixing issues that cause excess volatility in cattle markets. David Lehman told cattlemen that the exchange, in the next couple of months, will implement market circuit breakers on live and feeder cattle to install limits on how cattle contracts are traded.

He said it should help ensure market integrity. The circuit breakers are intended to keep prices from skyrocketing or bottoming out based on volatile activity in the market regardless of the speed or way people are trading.

“Rather than a hard limit that stops the market, it halts the market,” Lehman said, adding it will trigger if live cattle prices move more than $1.50 during an hour, or $2.25 for feeder cattle.

Ron Volk, a rancher from the Sentinel Butte area, said he understands the reasoning for implementing the circuit breakers but told Lehman he doesn’t believe it’ll be a permanent fix for the market’s instability.

“It seems to me like we’ve got a broken leg and you’re trying to throw a couple Band-Aids on it,” Volk said. “I don’t see it changing anything. It’s prolonging the broken leg. Now instead of putting a cast on, you may have to cut the leg off.”

Lehman said he agreed that “the leg is broken,” but said circuit breakers already help deter volatility in many markets, including oil and precious metals.

He said the circuit breakers are being put in place to limit moments like one that happened last week when 175 feeder cattle contracts — nearly three times the average daily trades made — were traded on the Chicago Mercantile Exchange and caused cattle prices to drop significantly.

“That set off a cascade pushing the market down until it found the other bids or offers that could match this 175-lot order,” Lehman said.

The problem, the panel said, is the volume of electronic trading happening by hedge funds or others who normally wouldn’t trade cattle futures, but do so based solely on market deviations.

Schnell believes it’s “nerds writing programs who are looking for an advantage.”

“What some of those algorithms trade on is only the knowledge of the trade, not knowledge of information,” Schnell said. “To us, that’s insider trading.”

Mike Heaton, a McKenzie rancher and member of the Independent Beef Association of North Dakota, said those outside of the cattle and agriculture industries trading live and feeder cattle and causing volatile prices swings in the markets, are comparable to parasites.

“There’s a whole other world out there of people living off of our industry,” he said. “When we get no return on it, they’re like the parasite that I get rid of in my cattle.”

Heitkamp said the Senate Agriculture Committee — of which both she and Sen. John Hoeven, R-N.D., are members — is holding a hearing about the volatility in cattle markets Thursday in Washington. She said part of the reason for hosting Friday’s forum was so she could get an idea of what North Dakota cattlemen believe are the biggest issues.

“The more this marketplace does not work for the people in this room, the more difficult it’s going to be to manage it,” Heitkamp said. “The more people who pull out, the more irrelevant it is.”

Herman Schumacher, a cattleman from Herreid, S.D., challenged Lehman on the constant cattle market fluctuations and said he believes the issue comes back to hedge funds and the meat packing industry trying to build a greater stake in the market.

“We’re fighting to try and not chicken-ize the cattle industry,” Schumacher said, referring to the influence large corporations have on the poultry trade.

Schumacher said he thought the input cattlemen from the area had at the meeting was beneficial as Heitkamp and others take their issues back to Washington next week.

“The only thing that keeps us separate from them (the commercial meat packing industry) are these cowboys that you had sitting there,” Schumacher said, pointing to chairs behind him.

JE Dunn building the state

With the oil boom in full swing, Marc Mellmer saw the possibilities for growth and looming building projects in western North Dakota, and he wanted JE Dunn Construction to be a part of it.

Nearly three years and more than 20 building projects later, the 31-year-old construction operations coordinator sits in his sensible, windowless office in one of the city’s newest buildings — one his firm had no hand in building, he notes with a laugh — and said despite the economic downturn in North Dakota set off by plunging oil prices, business is still looking good.

“I’ve been asked a million times, ‘Why would JE Dunn put an office in Dickinson, N.D.? That just seems crazy. Why would you do that?’” he said with a smile. “But our goal was to touch the entire state, and we’ll continue to touch the entire state and create relationships.”

This year, JE Dunn will begin or continue work on — among its many projects — the North Dakota governor’s residence and the new Bank of North Dakota Financial Center in Bismarck, Harold Newman Arena in Jamestown, and the Trinity High School reconstruction and expansion, a project near to Mellmer’s heart as he’s a graduate of the Dickinson Catholic school.

Mellmer graduated from Trinity 13 years ago and went on to earn his degree in construction management at the University of Minnesota. He was working for JE Dunn on the Sanford Health Clinic in Detroit Lakes, Minn., when he began pushing for the company to bid on projects in booming Dickinson.

“I requested that we begin to chase projects in western North Dakota, and it was made my primary responsibility to not only pursue the projects I wanted to back home, but also take them from the pre-construction all the way through the completion and warranty phase of projects,” Mellmer said.

So far, Mellmer and his team are doing just what he set out to do.

JE Dunn came to the area in 2011 to build the Mercy Medical Center Birthing Center in Williston, where they’ve had an office since 2012. Not long after that, the company was awarded building contracts for the $70 million Williston Area Recreation Center and the $100 million CHI St. Joseph’s Health campus in Dickinson.

“When we were about halfways through St. Joe’s hospital project, we decided we needed to open an office in Dickinson,” Mellmer said. “What anchored those projects like that were not only the fact that we were building those two big jobs, but also servicing those buildings and staying close to the owners and being committed to the area — to both Williston and Dickinson — after we completed the projects. And then the smaller projects started to spawn off of the two big anchor projects.”

Mellmer said what makes the JE Dunn Dickinson and Williston offices unique within the company is that they chase projects across in the entire state.

“The logistics of the North Dakota offices are different than the logistics of any of our other offices in the country,” he said. “They’re all in metropolitan areas, where you have a certain radius of work that keeps the business afloat. We think of North Dakota as a client. That’s been our motto from day one.”

JE Dunn, which is headquartered in Kansas City, Mo., has 22 offices in cities across the nation. It’s two smallest are Dickinson and Williston. Between the two Oil Patch hubs, the firm has about 20 full-time employees, and Mellmer said at any given time, it can employ 10 to 15 more specialists working in the state for up to two years at a time. Most of its work is done by local subcontractors.

“We thought it was in the best interest of us and our clients to open a physical office and hire local people to work for JE Dunn,” said Mellmer, a Dickinson native. “And also import our people to become local residents of western North Dakota and commit to the area.”

The newest employee is Michael Murphy, a project engineer and recent graduate of North Dakota State University who’s doing pre-construction work on the planned Newman Arena

Murphy, from Fargo, works in the Dickinson office but said he’ll be traveling around the state regularly once the arena project begins. He said he was convinced to join JE Dunn after speaking to the firm’s representatives at a job fair.

“The Dickinson area, at the time, was a very expanding market,” he said. “With the recent oil declines, the construction is still going strong. Being a new hire here, it’s a good opportunity.”

Other employees, like project coordinator Melissa Gjermundson, have been around the area their entire lives. She said working for JE Dunn has been a good fit.

Gjermundson came on board after spending time working for Dickinson’s planning and zoning office, Marathon Oil Co., and as a Dickinson Police Department dispatcher. She met Mellmer while working for the city shortly after its leaders decided to build the Public Safety Center — the new police and fire station that’s now the workplace of her former dispatch co-workers. At JE Dunn, she primarily works with subcontractors.

“I make sure they get their contracts,” she said. “I make sure they’re compliant and I make sure that they get paid.”

Having a strong stable of subcontractors is vital to JE Dunn’s success in western North Dakota, Mellmer said.

When the firm moved first started working in North Dakota, he said the oil boom made it difficult to hire top-quality subcontractors.

“The biggest successes were building the hospitals and the Williston recreation center at the peak of the boom, when contracting was at it’s highest level of difficulty,” Mellmer said. “From then, being able to transition to do smaller projects and more of what I’d call normal-size projects for western North Dakota, we’ve made a really smooth transition to become economic in building those projects and really creating relationships with our owners of these smaller projects, which seem to be difficult for a large corporation.”

Because the firm planted roots during the oil boom, Mellmer said he knows projects will become fewer and farther between with the state in an economic slowdown. He said that just means JE Dunn will have to venture out of western North Dakota more often and seek contracts in cities like Fargo and Grand Forks.

“That’s where we hold our ground and stretch our wings even further, and chase projects down every rabbit hole,” Mellmer said.

He said JE Dunn doesn’t view itself as a construction firm that only chases huge projects, and notes that the slowdown has afforded it the opportunity to do work that means a big deal to some small towns.

He pointed to the projects such as a new classroom and library at the Home on the Range near Sentinel Butte, the Killdeer Aquatics and Wellness Center that’s nearing completion, and the Flasher High School and Gymnasium.

All are small projects compared to JE Dunn’s usual scale, but Mellmer described them as fun and a positive experiences because of the response the firm receives from the small communities.

“We’re not too big or too proud to chase and work in any town, on any project, of any size,” he said.