Monday, June 18, 2018

The Permian Could Be A Disaster For Some Operators In The Short Term -- June 18, 2018

On June, 2018, this "headline" at the blog:
Reading Between The Lines, The Permian Could Be A Disaster For Some Operators In The Short Term (One To Two Years) Including Apache 
Now, over at Permian discount could rise to $20 per barrel.

I'm not sure it was even that bad for the Bakken during the early days when takeaway capacity was lacking.

From the article:
That only magnifies the recent conclusion that some analysts have come to, which is that the Permian is now made up of “Haves” and “Have Nots.” That is, shale companies that have lined up pipeline capacity under contract should emerge from this period unscathed, while those shale companies, often smaller ones, that have failed to secure pipeline space are suffering from the discounts. Goldman has Buy ratings for Occidental Petroleum, Pioneer Natural Resources and WPX Energy because of either secure pipeline contracts or because production is hedged at fixed prices for the next year.
Goldman Sachs analysts recently met with Permian producers, and came to the conclusion that drilling activity has not slowed all that much. Even for a handful of drillers without secure pipeline space, the fact that oil prices have moved up significantly over the past year means that they still think they will spend within their cash flow, even after taking into account the discounts. Obviously, the shale industry is not monolithic, and some drillers are leaving open the option to cutback, but Goldman said one of its key takeaways was that the pace of drilling is continuing at a high rate.
No companies are mentioned by name in this article, unless I missed something.

Austin Chalk

"Analysts" are suggesting frackers will move to the Austin Chalk next. The Austin Chalk is tracked here, Louisiana and Texas.

Three Words I Love To See In One Sentence Regarding The Bakken: Massively Increasing Production -- June 18, 2018

Readers may remember this post regarding Continental Resources from just five days ago, June 13, 2018: "all of CLR's optimized completions now exceed 1.1 million bbls EUR type curves." I don't know if folks realize how incredible that data point is.

Apparently someone does. From a contributor over at SeekingAlpha:
  • Continental Resources is massively increasing its production
  • higher production is accompanied by lower costs which results in accelerating profitability
  • the company's stock price is massively outperforming its peers and a good place to be during an oil bull market
Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

So let's see what Leo Nelissen has to say.
The most recent investor update from Continental Resources provides an amazing overview for investors. The presentation is very unbiased given that almost everything was based on simple facts and numbers. However, the biggest variable is the oil price which is influencing many ratios/indicators.
Annual free cash flow is one of those indicators. Until 2015, free cash flow had been negative due to massive outspend and investments with oil prices close to $100 per barrel. In 2016, free cash flow started to bottom along with the oil price. Initially, this was mainly thanks to divestitures. However, over the next 6 months, it is expected that free cash flow will reach the $800-$900 million range supported by a higher oil price (based on $60 per barrel) and increased production of close to 300,000 barrels per day. 
And more:
Total production in the first quarter came in at more than 161,000 Boepd. This is a 48% production increase compared to the first quarter of 2017. On top of that, the company mentions a favorable tailwind from an increasing Bakken oil differential which has improved by 47% to $4.31 per barrel.
When it comes to profitability, the company mentions a rate of return of about 140% in the Bakken area. This can increase to 180% if oil goes above $70 again.

The Market, Energy, And Political Page -- The UK Blinks -- Steps Back From Ban On Petrol/Diesel Vehicles -- June 18, 2018

I think it can be argued that "the cost of renewable energy" is widening the economic gap between the US and the EU. See this post. From an earlier post:
Politically and economically, the EU, link here:
Now this:

The link to the Financial Times story is here. The most remarkable thing about this story -- the "ban" wasn't even going into effect until 2040, but major policy decisions were going to be made now that would affect 2040 goals. Something tells me the Queen wasn't going to give up her multiple limousines.

Germany will be the next to re-consider. If not, Germany will no longer be economic engine driving the EU.

Active Rigs In North Dakota To 64 -- June 18, 2018

Active rigs:

Active Rigs64572878189

Six new permits:
  • Operator: Whiting
  • Field: Truax (Williams)
  • Comments: Whiting has permits for a 6-well Vance Federal pad in SWSW 9-154-97; see graphic;
The 6-well Vance Federal pad: based on name of the wells, I think two of the horizontals will run south and four of the horizontals will run north --

Missouri River Continues To Rise; Additional Water Will Be Released At Garrison Dam -- June 18, 2018

This is an update from an earlier post. From The Bixmarck Tribune:
The Missouri River will rise another foot and a half near Bismarck this week as the U.S. Army Corps of Engineers again steps up releases from the Garrison Dam, which is cresting 7.25 feet below 2011 flood levels.
Water released will go from 44,000 cubic feet per second to 52,000 cfs over the next three days, reaching the 52,000 cfs rate on Wednesday and continuing at this rate into early July. That is equal to 388,987 gallons per second. The increase is due to continued rapid snowpack melt and rainfall runoff.
Now for some fun.

We've done this before.

  • one cubic foot of water = 7.48 gallons
  • 50,000 cubic feet of water = 374,000 gallons
  • the USACOE will release 374,000 gallons of water every second starting in two days and going into early July -- let's say, maybe a month of an increased rate
  • but I digress
  • in one second: 374,000 gallons of water
  • one minute: 22 million gallons of water (enough water to frack two Bakken wells)
  • one hour: sixty times that much or enough water to frack 120 Bakken wells
  • one day: 24 x 120 Bakken wells = 2,880 Bakken wells
  • the oil industry will probably frack about 1,500 Bakken wells this year
I remember when folks worried whether there would be enough water in North Dakota to frack all those wells

Disclaimer: I often make simple arithmetic errors, and I often round numbers.

A Random Update To CLR's Weydahl Wells In Corral Creek -- June 18, 2018

A reader alerted me to a change in status of some CLR Weydahl and Brandvik wells in Corral Creek.

I posted the reader's note and my comment as an update at this post.

Smart Decision -- Hamm Pulls Out -- June 18, 2018

From SeekingAlpha:
  • Continental Resources says CEO and founder Harold Hamm has canceled a scheduled appearance at this week's OPEC meeting in Vienna, leaving only two U.S. shale executives set to speak at the event out of an original five
  • Hamm's withdrawal comes days after trade tensions between the U.S. and China intensified, with China imposing $50B in retaliatory tariffs on U.S. crude oil and other goods; CLR has been a key supplier of crude oil to China, shipping more than 1M barrels to the country since a U.S. crude export ban was lifted in 2015
  • Centennial Resource Development  CEO Mark Papa and ConocoPhillips CEO Ryan Lance earlier withdrew from the OPEC event; Pioneer Natural Resources  Executive Chairman Scott Sheffield and Hess CEO John Hess are still scheduled to attend

Wells Coming Off The Confidential List This Next Week -- June 18, 2018

Note: six months ago, it was Christmas, 2017

Monday, June 25, 2018:
33390, conf, MRO, Martha Grube USA 14-20H, Reunion Bay, no production data,

Sunday, June 24, 2018:
34189, conf, Missouri River Resources, FBIR Packineau 14X-4B HBK, Squaw Creek, no production data, 

Saturday, June 23, 2018:
33391, conf, MRO, Nugget USA 14-20TFH, Reunion Bay, no production data,

Friday, June 22, 2018:

Thursday, June 21, 2018:
34188, conf, Missouri River Resources, FBIR Packineau 14X-4A HTF, Squaw Creek, no production data,
33639, conf, MRO, Gretchen USA 11-30H, Antelope, no production data,
32821, conf, Crescent Point Energy, CPEUSC Manchuk 2-31-30-159N-100W, Blue Ridge; producing, 

Wednesday, June 20, 2018:

Tuesday, June 19, 2018:
34187, conf, Missouri River Resources, FBIR Packineau 14X-4E HBK, Squaw Creek, no production data,
33638, conf, MRO, Four Dances USA 41-25TFH, Antelope, no production data,
30558, conf, Bruin, Fort Berthold 148-95-13B-24-12H, Eagle Nest, very nice well;
20469, conf, BR, State Veeder 3A UTFH, Blue Buttes, no production data,

The Political Page, T+18 -- June 18, 2018

Developing countries and trade wars. Watch the entire video but as you watch it, be ready for 9:10 for something quite interesting.

Short Takes
Trade wars: this tells me all I need to know about the "trade war" between the US and China. For those who need to put the "trade war" into perspective, I suggest they read The Opium Wars by W. Travis Hanes, c. 2002. But I digress. Here's the graphic:


This is all I need to know about Comey, former FBI director, fired by the president for "insubordination." 

Now it is being reported that Comey is being investigated by the DOJ, again. Comey characterizes these investigations as "frivolous." Remember, Comey is not a politician. He is a lawyer and past director of the FBI. He should know that DOJ investigations are not "frivolous."

Feeling Good

Two lost decades: the Bush II and the Obama administrations.

Back on track.

Anti-Trumpers suffering profound cognitive dissonance. Unable to adjust.

Even Lindsey

The List

Fact checking media reports. The list.


A Note for the Granddaughters

LMK has now replaced RSVP.

Just saying.

Did North Dakota Just Set An All-Time BOEPD Production Record? -- April, 2018 Data

I'll let folks fact check me on this.

Disclaimer: I'm inappropriately exuberant about the Bakken. Take everything I say in this post with a grain of salt.

First, go back to the director's cut with the most recent data, April, 2018, data.

April, 2018, data suggests "we" came very, very close to setting a new all time crude oil production record in April, missing the record by 2,500 bopd or about 0.21%. That was missing the record by 2,500 bbls on total production of over 1.224 million bbls of crude oil. Per day.

However, if one adds in the natural gas production it is very, very clear North Dakota set a new all-time BOE production record of 1,598,948 boepd. Staggering.

Someone can fact check me on that, but for now, I will use that as the BOE all-time production record for North Daktoa, going forward.

Some other observations:
  • 374,000 boepd natural gas production / 1,598,948 boe total production = 23%
  • 374,000 boepd natural gas production / 1,224,948 bopd production = 31%
  • new Bakken wells, first six months of production: about a 94% / 6% crude oil / natural gas split
  • as wells mature, crude oil declines but natural gas production may increase
Other observations:
  • reminder, for newbies: the greatest production from Bakken wells occurs in the first six months of production
  • in April, there were over 900 DUCs (wells drilled to depth but not completed/fracked)
  • had three more DUCs been brought on line in April: 90,000 bbls of oil over 30 days =  3,000 bopd would have been added to total production, setting an all-time record (preliminary data)
  • in addition, in April, there were over 1,500 wells on inactive status (many Bakken wells -- and some very good Bakken wells -- are taken off line when neighboring wells are being fracked; they can be off line anywhere from a few days to a few months)
  • back in 2014, there were in excess of 175 active rigs drilling in the Bakken; in April, 2018, less than 60 active rigs drilling in the Bakken -- wow, staggering
Bottom line: the April, 2018, data was much more surprising than a lot of folks realize.