Wednesday, July 1, 2015

Off The Net Until 10:00 P.M. Tonight -- July 1, 2015

But I will leave you with this link -- talk about a lot of story line:
  • US crude oil production jumps (despite all efforts to rein it in)
  • about 50% of US crude oil production comes from shale; about a third of that comes from the Bakken
  • US crude oil stores jump (unexpectedly; Reuters had predicted a decrease)
  • refinery operations near capacity
  • gasoline stores decrease
Disclaimer: I often have my facts wrong. I often make factual and typographical errors. If this information is important to you, go to the source.


Wednesday, July 1, 2015: Part VI -- Weather, Tesla Charging Stations

This is a huge day. The "Global_Warming_2014_2015" tag has come to an end. As of July 1, 2015, the tag will be "Global_Warming_2015_2016."

The Telegraph is reporting unexpected high temperatures in Europe are causing power outages:
In the west of France, in Brittany and the Pays de la Loire, there was a massive power cut which saw between 600,000 and a million homes left without electricity between Tuesday night and the early hours of Wednesday morning after high temperatures affected power equipment. State authorities said it was “exceptional” for the weather to have such repercussions on power supply to homes. The heatwave sparked a further power cut in the western town of Vannes early on Wednesday morning, leaving up to 120,000 homes without electricity at 7am.
Meanwhile, here in southern California, on the radio, there was an "ISO" alert -- southern Californians need to turn off the lights, shut off the a/c when not home; delay use of appliances where possible -- the grid may be unable to hold. I see it's called a "flex alert":
With a heat wave gripping parts of Southern California, the manager of the state’s energy grid has issued a “flex alert,” urging residents to conserve electricity between 2 p.m. and 9 p.m. to reduce strain on the system. 
The flex alert went into effect Tuesday and was to remain in effect through Wednesday, according to the California Independent System Operator.
According to Cal-ISO, a flex alert is issued when the state’s power grid is under stress due to elevated demand or transmission system outages.
Cal-ISO predicted peak energy demand for the day to hit 44,700 megawatts around 6 p.m.
*************************
Autos

Auto sales were posted earlier, but Tesla is not feeling the love. The Wall Street Journal is reporting: wealthy European Tesla owners are a bit miffed when it comes to waiting to get their high-priced batteries-on-wheels (BOWs) charged.
AMSTERDAM—Matthijs van Seventer won’t take his Model S electric sedan to the Tesla charging station in the southeast part of the city if he is in a hurry. The chargers are typically loaded with taxicabs serving Schiphol airport.
“It’s barely viable,” he said standing near a row of superchargers, which for Tesla owners are the equivalent of gas pumps to quickly recharge their battery-powered vehicles. “When I arrived there was just one spot left.”
Mr. van Seventer’s frustration reflects a rare rift in what has typically been a cozy relationship between Tesla Motors Inc. and its thousands of owners around the world.
Free charging at company-run stations is one of a handful of unique incentives aimed at Tesla owners.
BOW chargers:
  • can't find them (hidden behind taxi stands)
  • can't use them when queues are three, or four, or five cars deep
  • 30-minute charging? drivers go inside for a 45-minute lunch break, leaving car at charger even after fully charged
  • owned by rich folks who are not used to waiting
  • owned by rich folks who don't like hanging out at taxi stands
By the way, I traveled through Schiphol airport on numerous occasions when stationed overseas, particularly when I was sent on temporary duty to England. It was my favorite airport to transit, and I tried hard to get the USAF travel office to route me via Amsterdam and NOT Heathrow. The USAF travel office often acted as if they had not heard of Schiphol. Wow, the good ol' days.

Although I wasn't looking for one, after four days driving cross-country, racking up 1,600 miles on a major thoroughfare, most of it on I-40, from Dallas to Los Angeles, I did not see one sign pointing out a Tesla charging station. And had there been one in Needles, CA, and if needed, that would have been waiting 30 minutes in 115-degree temperature in a remote part of the desert waiting for the Tesla to be charged.

********************************
Speaking of the Good Ol' Days

When I was earning my first real salary and newly married and no children and living in southern California, I enjoyed looking for $50-bottles of wine. It did not take me long to learn that it was easy to find good wine. The hard thing was to find "great wine" at "inexpensive" prices. Somewhere along the line I ran into a wine connoisseur who raved about "two-buck-Chuck." And although I don't drink much wine any more, when I remember, I buy "two-buck-Chuck."

It looks like it may be as good as, or even better, than I realized, on so many levels. See story at Business Insider. These are the same guys that feel stock splits are silly. [I am in the camp, that all things being equal, I like stock splits.]

Wednesday, July 1, 2015 -- Part V: Global Miscellaneous

Updates

Later, 10:55 a.m. Pacific Time: about two hours after posting the note below, I hear on the radio that the Greek Prime Minister is now trying to walk about his incredible mistake. He says the referendum will still take place, but he will ignore the results. Even if his country votes "NO" to austerity, "YES" to saying sayonara to the EU, he says he will remain "at the bargaining table." He's not about to give up $8.1 billion dollars.  Being late on a car payment or a house payment doesn't lead to bankruptcy; it simply leads to a reminder the bill is still due and interest is accruing. It's a process. Certainly a nation's destiny is more important than a car or a house.
 
Original Post

As they say in some parts of the US: the Greek prime minister screwed the pooch. [Can I say that on the internet?]

Just when the Greek prime minister had the EU, IMF, EC, Hollande, AND Merckel on the ropes, letting the country default, scaring the heck out of everyone, Alexis Tsipras calls a "national referendum."

Now, the GPM is at the mercy of "his people" who will likely vote "NO" on further austerity measures, by 60 - 40. The referendum is Sunday.

Today, Hollande (France) says it's "everyone's" duty to "save" or "keep" Greece in the union. The markets are up on the news that the Greek drama will go into additional acts.

But the ever-smiling Tsipras has really stepped in it. What will he do? When his nation overwhelmingly votes "NO" on further austerity measures on Sunday. He called that referendum just hours before the creditors were ready to capitulate.

Putin knows chess. It does not look like Tsipras knows Texas hold 'em.

Wednesday, July 1, 2015 -- Part IV: The Atlantic Monthly Vs Reality; The Bakken Still Has Bragging Rights -- Williams County Trounces Cass County

On June 29, 2015, The Atlantic Monthly famously said the Bakken boom was a bust.
On June 30, 2015 -- yes, that would be one day later than the Atlantic Monthly's story (talk about poor timing): KXNET reported that 1Q15 taxable sales in North Dakota are higher than a year ago. Now remember:
  • the Bakken has been at this for eight years
  • Bakken production plateaued at 1 million bopd with the Saudi surge
  • Bakken crude was selling for as low as $38 on the spot market
  • active rig counts dropped from 200 to 76 in a relatively short time
And then we have this from the linked story:
The first quarter of 2015 saw a jump of 2.26 percent compared to last year. One of the biggest increases was in the retail industry. Tax Commissioner Ryan Rauschenberger said the increase came as a surprise considering the low price of oil during the beginning of the year. 
Now how in the world did this happen? Oh, that's right. It was a mild winter in North Dakota; folks went shopping.

This is from The Bismarck Tribune.

The 1Q15 numbers at the North Dakota state website:

Of the 50 largest cities in North Dakota, the highest percent increases for the first quarter of 2015 (compared to the first quarter of 2014) were as follows:
  • Walhalla – Increase of 39.77 percent
  • Linton – Increase of 19.65 percent
  • Cavalier – Increase of 18.15 percent
  • Larimore – Increase of 17.72 percent
  • Minot – Increase of 10.76 percent
Full report here: North Dakota 1Q15 taxable sales PDF.

By county:
  • Cass County: $673,603,504
  • Williams County: $880,758,741
  • Stark County: $301,268,910
By city:
  • Fargo: $586,272,823
  • Williston: $703,517,913
  • Dickinson: $279,965,591
But Williston/Williams County bragging rights may not last long. Fargo's quarter-over-quarter was a 3% increase; Williams County declined by a whopping 13%; and, Stark Coutny by 9%.

For those interested, here are:

Wednesday, July 1, 2015 -- Part III - Global Energy; Oil Stockpiles Rise; Gasoline Stockpiles Fall; Refineries At Full Capacity

All that complaining by Saudi Arabia about losing market share? Look at the numbers (most recent data is April 15, 2015, but that is still six months after the Saudis made their announcement last October):


Look at it another way. Saudi's gain was clearly at the expense of Iraq.

Saudi oil imported into US: $35 billion, 5-year program, giving away their oil for $50/bbl, and Saudi manages to .... drum roll ... barely get back to "average." Talk about the Red Queen.


North Dakota produces about one million bopd. Unfettered, North Dakota could easily produce 2 million bopd, completely displacing Saudi oil. It would make no sense to do that, of course, but it helps me put things in perspective.

************************************
WTI Slumps

Reuters is reporting:
Oil prices slumped on Wednesday, with U.S. crude headed for its sharpest daily loss since early April, after the first rise in crude stockpiles in the United States in more than two months.

The dollar's rally on Greece's debt default, Iran's renewed efforts to reach a nuclear deal with the West to freely resume its crude exports, and signs of OPEC output at three-year highs, further weighed on the market.
The U.S. Energy Information Administration (EIA) said crude inventories rose by 2.4 million barrels last week, the first weekly build since April and versus a 2-million-barrel draw forecast by analysts in a Reuters poll on Tuesday.
The EIA also said gasoline stockpiles fell by 1.8 million barrels, indicating strong demand for fuels from the peak U.S. summer driving season, even as crude inventories rose.

Wednesday, July 1, 2015 -- Part II -- US Economy; Chicago Public School System Not Doing As Well As US Auto Industry

Note: the month of June ended yesterday. US automakers have sales figures out first thing next business day. Meanwhile, strictly controlled US imports of crude oil -- most recent data is still dated April 15, 2015, and here it is July. 

Auto sales:

Fiat Chrysler sales rise 8 percent on strong Jeep sales:
Sales of Fiat Chrysler's Jeep brand jumped 25 percent in June, led by a 39 percent surge in mid-sized Cherokee sales, the company said on Wednesday.
Chrysler 200 sedan sales rose 153 percent to 18,560 vehicles. Private industry data reviewed by Reuters showed that in the first half of the year, a large portion of Chrysler 200 sedan sales were to rental agencies.
Sales of the Chrysler brand rose 28 percent, despite Town & Country minivan production slowing as the plant where it is made is in transition to a new model.
Ford:  Ford U.S. Sales Up on Strong Customer Demand for Newest Products – F-Series, Mustang, Edge, Explorer, Transit Vans --
  • Ford brand SUVs sales up 10 percent, delivering best June sales performance since 2002
  • sales of all-new Ford Edge up 30 percent
  • new Explorer up 30 percent versus last year 
  • Ford F-Series achieves record average transaction pricing, while all-new F-150 turns twice as fast on dealer lots than industry’s half-ton pickup segment
  • Ford Transit commercial vans post best June sales since 1999 
  • Ford Mustang has best June performance since 2007 
  • Lincoln delivers best June retail sales results in eight years 
  • Ford Motor Company total U.S. sales increase 2 percent last month 
EV sales: June / to date this year --
  • Tesla Mode S: 2,800 (deliveries) / 11,600
  • Nissan LEAF: 2,074 / 9,816
  • Chevrolet Volt: 1,225 / 5,622
  • BMW i3: -- / 3,905
  • Ford Fusion Energi: -- / 3,563
  • Fiat 500e: 363 / 3,384
  • Ford C-Max Energi: -- / 2,876
  • Toyota Priius PHV: 464 / 2,890
***********************************
Chicago
The AP is reporting that the Chicago public school system is not doing quite as well as the US auto industry:
The interim CEO of Chicago Public Schools said Tuesday 1,400 jobs will be "impacted" after Illinois lawmakers failed to provide relief and the financially struggling district had to borrow money to make a $634 million contribution to its teacher pension funds.

Wednesday, July 1, 2015 -- Part I: The Bakken

IPs for wells coming off confidential list today have been posted.

Active rigs:


7/1/201507/01/201407/01/201307/01/201207/01/2011
Active Rigs76189192215172

RBN Energy: natural gas from Texas to Mexico.
Natural gas exports to Mexico are on a tear, and there’s every reason to believe the market will continue to grow. In essence, parts of the Eagle Ford and Permian Basin are becoming the go-to fuel source for new power plants and industrial facilities south of the border, as evidenced by a Howard Energy Partners plan to build new, connecting pipelines to deliver large volumes of gas directly from South Texas to emerging demand centers in and around Monterrey, Mexico. Howard’s also been addressing some of Texas’s gas gathering and processing needs. Today, we consider the latest plan to add gas pipeline capacity across the Rio Grande.
Despite Mexico’s long-term potential as a world-class natural gas producer, the U.S.’s vecino del sur (that’s “southern neighbor” to our monolingual readers) is becoming increasingly dependent on Texas, New Mexico and Rockies gas to meet its fast-growing requirements. 
Mexico’s most promising shale plays (the Burgos and Sabinas basins just south and west of the Eagle Ford) are said to be geologically complex (in other words, tough to figure out from a gas-extraction perspective). These areas also lack the road and water infrastructure that development would require, and (thanks to drug-cartel gangs) they can be pretty risky places to do business. So for muchas mañanas to come, U.S. gas producers will be playing a critical role in supplying the fleets of new gas-fired power plants that the Comisión Federal de Electricidad (CFE, Mexico’s state-owned electric utility) and independent power companies are building and planning.
Mexico’s appetite for imported gas has been growing even more quickly than many had predicted; according to the U.S. Energy Information Administration (EIA), U.S. producers sent an average of 2.57 Bcf/d south of the border in March 2015 (the latest month for which those figures are available), up 37% from the 1.87 Bcf/d exported in March 2014. (According to a published report, Mexican imports spiked to 3.4 Bcf/d on June 12, 2015 --57% higher than the 2.17 Bcf/d average in June 2014—and it’s widely expected that deliveries of U.S. gas to Mexico will surpass 4.5 Bcf/d over the next few years.)
Seems like Mexico can’t build new capacity from the U.S. quickly enough; as soon as a new pipeline comes online, it gets filled and U.S. gas export levels ratchet up to another new high. (Kinder Morgan’s new Sierrita Lateral from near Tucson, AZ to the Mexican border being a recent example.)
That brings us to Howard Energy Partners (HEP), which has been artfully assembling a gas gathering, processing and transmission network that—with HEP’s latest plan—will extend deep into northeastern Mexico’s state of Nuevo León, whose capital is Monterrey (Mexico’s third-largest city).
Over the past four years, HEP (which is “financially partnered with” EnLink Midstream and Alinda Capital Partners) has built up significant but geographically focused midstream gas assets in South Texas, including its Webb County, TX hub system in the southern Eagle Ford (near the Mexican border; Webb’s county seat is Laredo—hence our blog’s title). The system consists of more than 280 miles of gathering pipelines (for rich and lean gas), and 200 MMcf/d of gas processing capacity (at HEP and EnLink’’s new Reveille plant; black plant icon on the map); producers Escondido Resources II and Laredo Energy hold long-term gas gathering and processing contracts at Reveille.
Coincidentally, Seeking Alpha had a similar story yesterday:
  • Natural gas exports to Mexico are expected to increase by over 2.1 bcf/d in 2015 to about 4 bcf/d.
  • The first US LNG export facility (Sabine Pass) is expected to go online at the end of 2015.
  • Approximately 7 bcf/d of US LNG export capacity is already under construction. Most is expected to come online in late 2017 to late 2018.
  • Approximately another 7 bcf/d in US LNG export facilities already have long-term delivery contracts. Experts believe they will make the financial decision to build in 2015 despite low oil. 
Fracking, from San Antonio Business Journal:
Six-year low crude oil prices may have decimated new drilling activity, but market indicators show there is a more intense use of frac sand in the new wells that remain in the Eagle Ford and other shale plays.

Mostly mined in Wisconsin and other northern states, frac sand is mixed with water and different chemicals to fracture shale formations in order to unleash oil and natural gas reserves.

A June 11 report from global investment bank Jefferies shows that overall demand for frac sand is down in 2015 due to low oil prices but its use per well has been steadily increasing over the past three years.

Jefferies reported that hydraulic fracturing wells in the United States currently use an average of 4.2 million pounds of frac sand per well but there is a "rising intensity" across different shale plays and that demand per well is expected to grow.

A recent report about frac sand by the Chicago-based Heartland Institute confirms the trend noting that silica sand made up 9.5 percent of fracking fluid a few years ago but can now represent up to 20 percent of fracking fluid during horizontal drilling activity.
Regular readers of the blog were aware of this for quite some time. For newbies, the history in North Dakota:
  • at the beginning of the boom, open hole fracks with less than 500,000 lbs proppant
  • operators took baby steps to one million lbs proppant
  • Statoil surprised the industry with consistent early use of 4 million lbs of proppant which they still tend to use
  • EOG blew the industry standard away when they started using 8 to 10 million lbs of sand (only) in 2014
  • the record amount of sand EOG has used in one well is about 20 million lbs, and that was a simply long lateral (2014)

Discussion Group -- July 1, 2015

There are five new postings over at the Discussion Group. I will not be able to get to them right away because I am traveling.

New posts concern:
  • the Moline wells
  • lack of drilling in certain sections under the water in Deep Water Creek Bay oil field
  • leasing on expired leasing in Williams County
Perhaps readers have some answers / comments to the new posts.

With regard to the question about area south of well #19919, see graphic below. Most of the area in question is on land near the water or under the water. The area in question is spaced at 1920 acres. If I am reading the GIS map correctly, sections 1/2/3-150-91 are in one 1920-acre drilling unit. The reader is wondering why there has been no permits issues for this area.




Drillers Saving $120 Million / Well Due To Reduced Tax Rate -- Bakken.Com -- June 30, 2015

Disclaimer: I often make simple arithmetic errors. I also post quickly which often results in factual and/or typographical errors. I correct them when I find them or am alerted to them. If this information is important to you, go to the source. I have no formal background

A huge "tip of the hat" to a very astute reader who questioned the math in this article. I agree. First, the article being reported by Bakken.com -- the headline: Bakken tax trigger saves oil companies $120 million per well.
A significant number of wells have been completed while North Dakota’s small oil tax trigger was in effect, says Tax Commissioner Ryan Rauschenberger.
According to the Bismarck Tribune, the small tax trigger ends at the end of June and throughout its duration, oil companies completed close to 600 wells. The small trigger, which went into effect February 1 due to low oil prices, reduced the extraction tax from 6.5 percent to 2 percent.
For each well completed during this period, oil companies saw an average tax savings of roughly $120 million. However, the tax break only applies to the first 75,000 barrels produced.
According to that article, the oil companies "are saving $120 million per well." And then, the writer goes on to say that the tax savings only relates to the first 75,000 bbls of oil per well.

Let's do the math: $120 million / 75,000 bbls = $1,600 / bbl of crude oil. If the tax rate was 0% on the first 75,000 bbls of oil, and the price of oil was $1,600 / bbl, then the oil companies would pocket $120 million in tax savings per 75,000 bbls of oil. Obviously that's incorrect. By a huge margin.

Here's the original article from The Bismarck Tribune:
Tax Commissioner Ryan Rauschenberger says he’s surprised by the strong number of wells that were completed in the past five months while a small oil tax trigger was in play.
The trigger ends Tuesday, but in the meantime, oil companies fracked 586 wells and Rauschenberger expects another 20 could be added by the deadline.
The small trigger went into effect Feb. 1 because of low prices, lowering the extraction tax from 6.5 percent to 2 percent. Overall, oil companies will realize somewhere around $120 million in total tax savings on those wells. The tax break is only on the first 75,000 barrels and ends at the end of this year.
Okay, now let's do the math.
  • 586 wells x 75,000 bbls x 4.5% savings  x $/bbl = $120 million
  • $ / bbl = ($120 million)/(586 x 75,000 x 4.5%)
  • $ / bbl = $120 million / 1,977,750
  • $ / bbl = $60 / bbl
Much more reasonable.

In other words, the oil companies saved $120 million / 586 wells = $200,000 / well.

Significant? Yes.

$120 million / well? Hardly.

Considering a well only costs $10 million to drill/complete, a $120 million tax savings per well would be pretty remarkable.

More from the article:
Raschenberger said other factors besides the trigger encouraged companies to complete the wells, including the state's one-year deadline to complete wells after drilling and reduced service costs as the number of drilling rigs continues to decline in a low-price market.
There were 72 rigs drilling as of Thursday, down more than 110 rigs since Christmas. Some 950 wells were reportedly drilled but not fracked as of the end of April, according to the North Dakota Department of Mineral Resources.
This is the last time the small trigger will go into effect. The Legislature took it off the books in favor of an overall reduction in the extraction tax from 6.5 percent to 5 percent, which goes into effect Jan. 1 on all wells.
Some time ago a reader asked about the source for the state's requirement that wells be completed within one year after drilling. Here's another source. 

By the way, back to that statement: For each well completed during this period, oil companies saw an average tax savings of roughly $120 million.

Knowing that  the article might disappear into the ethernet, here's a screen shot from Bakken.com:

Tuesday, June 30, 2015

Six (6) New Permits; Starting To See New Wells Completed -- June 30, 2015

Active rigs:


6/30/201506/30/201406/30/201306/30/201206/30/2011
Active Rigs75191189215173

Six (6) new permits --
  • Operators: CLR (6)
  • Fields: Banks (McKenzie), Chimney Butte (Dunn)
  • Comments:
Nine (9) wells coming off the confidential list Wednesday:
  • 28417, 2,355, MRO, Haley USA 24011H, Chimney Butte, 30 stages, 3.9 million lbs, t41/5; cum 36K 5/15;
  • 29465, SI/NC, BR, Teton 7-1-3TFSH, Camel Butte, no production data,
  • 29576, drl, XTO, Satter 31X-1H, Sivertson, no production data,
  • 29658, 2,344, Newfield, Moberg Federal 149-95-29-32-13HLW, Bear Den, 38 stages, 3.7 million lbs, t3/15; cum 32K 5/15;
  • 29757, drl, MRO, Packineau USA 21-3H, Reunion Bay, no production data,
  • 29821, SI/NC, EOG, Fertile 74-0905H, Parshall, no production data,
  • 30054, SI/NC, SM Energy, Rilye 3B-26HS, West Ambrose, no production data,
  • 30084, 1,248, Hess, BB-Sivertson-LN-151-95-1719H-1, Blue Buttes, 35 stages, 2.4 million lbs, t4/15; cum 25K 5/15;
  • 30115, SI/NC, BR, CCU Dakotan 3-8-17MBH, Juniper, no production data,
Two (2) producing wells completed:
  • 24868, 553, Hess, EN-Fretheim A 155-93-3334H-9, Robinson Lake, 4 sections, t6/15; cum --
  • 28860, 405, Hess, EN-Hermanson-LE-155-93-3501H-8, Robinson Lake, 4 sections, t6/15; cum --