Friday, September 22, 2017

Seven New Permits; Nine DUCs Completed; MRO Reports Two Huge Wells -- September 22, 2017

Active rigs:

Active Rigs573368196185

Seven new permits:
  • Operator: MRO
  • Field: Bailey (Dunn County)
  • Comments: MRO has permits for a 4-well pad in SWSE 35-146-94; and a 3-well pad in SWSW 36-146-94
Five permits renewed:
  • Hess (2): two TI-Beauty Valley permits in Williams County
  • Whiting (2): two MC MHA permits in Dunn County
  • QEP: one Vegas permit in McKenzie County
Nine producing wells (DUCs) reported as completed:
  • 29248, 784, Zavanna, Sigurd 5-8 1TFH, Crazy Man, t8/17; cum --; (#19982, #20375)
  • 29249, 350, Zavanna, Sigurd 5-8 3H, Crazy Man, t8/17; cum --; (#19982, #20375)
  • 29250, 540, Zavanna, Sigurd 5-8 5TFH, Crazy Man, t8/17; cum --; (#19982, #20375)
  • 29251, 557, Zavanna, Sigurd 5-8 7H, Crazy Man, t8/17; cum --; (#19982, #20375)
  • 29252, 548, Zavanna, Sigurd 32-29 2H, Crazy Man, t8/17; cum --; (#19982, #20375)
  • 29254, 881, Zavanna, Sigurd 32-29 6H, Crazy Man, t9/17; cum --; (#19982, #20375)
  • 29255, 294, Zavanna, Sigurd 32-29 8TFH, Crazy Man, t9/17; cum -- ; (#19982, #20375)
  • 32524, 2,535, MRO, Reno USA 24-9TFH-2B, Sanish, t7/17; cum --; (#32454, #32455, #32453, #32452, #20602, #19790)
  • 32525, 4,984, MRO, Kermit USA 14-9H, Sanish, t8/17; cum --; (#32454, #32455, #32453, #32452, #20602, #19790)
Statoil temporarily abandons nineteen (19) wells in McKenzie County, on the following pads:
  • Sax, Samson, Topaz, Enderud; all in/near T153N-98W, T153N-97W, T152N-98W
EOG abandons one Mountrail well:
  • 30950, Van Hook 71-141-1H

The Energy And Market Page, T+245 -- September 22, 2017 -- Polish Coal Oversupply Turns To Shortage

Link here.
Phillips 66 Partners LP will buy more assets from Phillips 66 for $2.4 billion, the Houston-based companies announced Sept. 22.

The deal is expected to close in early October, and it's the largest acquisition the master limited partnership has made in its four-year history. Prior to this deal, the MLP’s largest was a $1.3 billion drop-down announced last October.

Phillips 66 is dropping down its 25 percent interest in both Dakota Access LLC and Energy Transfer Crude Oil Company LLC — Bakken Pipeline joint ventures — and its 100 percent interest in Merey Sweeny LP, which owns fuel-grade processing units at the Phillips 66 Sweeny Refinery.
Cheaper to buy than to build?

Polish Planning

Polish coal oversupply turns to shortage.
Poland is facing a coal shortage before the heating season, which will test the government's long-term strategy of domestic coal dependency for power generation.

Polish coal producers may have gone too far in their efforts to redress production oversupply in 2012-16. They have reduced output capacity to a point where the government is concerned that production will not be able to satisfy domestic coal demand in the coming months.

Polish thermal and coking coal output in January-July fell by 5pc on the year to 38mn t, data from national statistics office GUS show. Falling supplies pushed stocks of unsold thermal coal below 1.5mn t in June last year, which was the lowest level since 2011. Producer stockpiles have declined, despite them mainly comprising low-calorie supply, which is usually blended with higher-quality coal.

Environmental Activisim -- A Reader Comments -- September 22, 2017

This is important enough to be posted more than once or twice. Expect to see this data posted at least a few more times over the next few months.

For now, no editing: simply re-posting data points that came in from a reader commenting on an earlier post.

The reader's comments:

Californians pay dearly for their environmental activism.
My comments:
  • these data points have great implications for a "Trump economy" vs a "Hillary economy" 
  • these data points have great implications for a "US economy" vs a "EU economy"
  • it won't happen "overnight" and it may never be "big enough" to amount to much, but there will be a perception that road and state highway infrastructure paid for by gasoline taxes at the pump will take a significant hit as more and more EVs (or perhaps even worse, hybrid EVs) come to market in California 
  • RBN Energy did not seem to come out and say this explicitly, but my reading of the tea leaves suggests that the price of gasoline in California suggests that production is barely -- and that may be a bit of hyperbole -- meeting demand. It would not take much to result in a shortfall of production in the near term (if one refinery goes down for any reason) but over the next decade, the tea leaves suggest to me that production of gasoline in California will not be able to keep up with demand; one wonders how much Sacramento analysts are counting on light rail; the "bullet train"; new CAFE standards; and, EVs to reduce gasoline demand -- I don't any of that happening; in fact, new CAFE standards are probably going to be pushed to the right (delayed)

Update On Preferred Route For Trucks Around Northeast Side Of Williston -- September 22, 2017

This is simply an update; nothing in stone (or, better said, nothing in asphalt or cement) yet.

From The Williston Herald:
City and county officials have signed off on a preferred route that will divert heavy truck traffic from downtown Williston.
The votes allow the state Department of Transportation to continue an environmental study on the area that will determine where exactly the road will go. 
The proposed 9-mile truck reliever route will connect U.S. Highway 2 and North Dakota Highway 1804 northeast of the city of Williston.
Actually in my mind, it makes more sense to say, the 9-mile route that will connect ND Highway 1804 east of Williston with US Highway 2 northeast of Williston, swinging north around Spring Lake Park, if that make sense.

This is the map that The Williston Herald posted to show the proposed routes and the preferred route (the thick black line).

I had a little trouble sorting out exactly where that thick black line ran, and tried to duplicate an "idealized" representation on a non-satellite Google map. This is my graphic and it may be very, very wrong. As noted, I had a bit of trouble sorting out the City of Williston map. 

Who Are You Gonna Believe? EIA Or OPEC? -- September 22, 2017

Over at Reuters via Twitter: OPEC says it is winning the battle to curb the oil glut (which, by the way, was a self-inflicted wound).
Output cuts by OPEC and other oil producers are clearing a supply glut that has weighed on crude prices for three years, ministers said at a meeting on Friday to review the pact that expires in March 2018.
The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since January.
The group is considering extending the deal beyond its March expiry, although two sources said Friday's gathering was unlikely to make a specific recommendation on an extension.
So, is OPEC winning that battle? Not if you look at US crude oil supply data for the past three weeks. 

EIA data shows that US crude oil inventories have increased significantly for each of the last three weeks. The time to re-balance, once down to 27 weeks is now back up to 46 weeks. This factoid has never been reported on CNBC to the best of my knowledge.

Source for the following data

First the graph:

Data for the past two years reveals that the current number of days of gasoline supply has hit a recent record (30.8 days) and rarely has it gotten above 31 days and never 32 days. So at 30.8 days, at the upper end of the range:

But then, compare the days of gasoline supply for the last two years with a more "historical look." This is for the 2006 - 2008 period. Note that, in general, we are talking about less than 20 days of gasoline supply in the US. Only twice did the supply hit greater than 22 days.

It may not sound like much, the difference between 30 days and 20 days but in weeks, the former rounds to about four (4) weeks and the latter rounds to three (3) weeks. A ten-day difference starts to approach two weeks, which is a very significant length of time for those studying "US logistics" for any product.

In general, starting about 30 years ago, it was determined that a two-week supply chain for almost any product in the US was "just about right." Prior to that time, it was felt that a longer period was needed to ensure adequate "product on the shelf." Today, storing stuff longer than two weeks at the retail point-of-sale is not economically sound.

Going forward:
  • demand is likely to taper off and won't pick up until the driving season begins next spring
  • supply is likely to remain about the same if WTI remains above $50
  • the question is, with a 30-day supply of gasoline and demand tapering off, how much increase in crude oil production will occur if the price of oil trends toward $60
  • I think the answer to the last question depends a lot on global demand, less on US demand for the next nine months

Are Higher California Margins Worth The Hassle For Refiners? -- RBN Energy -- September 22, 2017


Later, 11:27 a.m. Central Time: see first comment. I've brought the reader's comments up here for easier access:

The reader's comments:

Californians pay dearly for their environmental activism.
This is important enough to be posted more than once or twice. Expect to see this data posted at least a few more times over the next few months.
Original Post
Active rigs:

Active Rigs573368196185

RBN Energy: Are higher California margins worth the hassle for refiners? Bottom line:
Caught in a stifling regulatory environment and with the state chipping away at their market share in favor of electric cars and renewables, California’s refiners have to weigh the rewards of higher margins today against a questionable future tomorrow.
During years like 2015 when the Torrance refinery was offline, higher margins benefited those refineries left standing. And similar price spikes are bound to recur whenever unexpected outages bring down one or more plants in the future.
But such boosts in margin are limited and random in nature and arguably don’t compensate for an environment in which plant upgrades and expansions face a minefield of regulatory constraints. Unfortunately, the situation is unlikely to improve as electricity and renewables grab a bigger bite of the transport fuel market.
Saudi: their challenges never end. Russia is now adding more pipeline to China, stepping up race with Saudis -- Reuters via Rigzone.
Chinese oil refineries are gearing up to receive more Russian oil transported through an expanded Siberian pipeline network from January, likely cementing Russia's position as China's largest oil supplier in a close race with Saudi Arabia.

The planned ramp-up in pipeline supplies agreed in contracts signed in 2013 comes amid a pledge by producers to cut output to tighten global markets and illustrates the nip-and-tuck contest between the world's top oil exporters, Russia and Saudi Arabia, for dominance in the biggest crude importer, China.
Russia's top oil producer Rosneft said it is set to supply under government agreement 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or 600,000 barrels per day (bpd), an increase of 50 percent from this year, after completion of the second East Siberia Pacific Ocean (ESPO) pipeline, which has a main spur to Chinese border town Mohe.
"Rosneft has enough resources to supply under all its existing contracts, including the planned increase of supplies to China by 10 million tones next year," Rosneft said in a statement emailed to Reuters on Thursday.
Top state oil firm PetroChina has designated three refineries in northeast China as the main receivers of Russian oil, with one of them undergoing an $880 million upgrade.

Thursday, September 21, 2017

Fracking Regulation / Oversight -- Back To Square One -- September 21, 2017


September 22, 2017: yesterday Argus Media had a short article on this story (see below for story and link). When I read the article, it did not make sense to me, nor did it seem to be the complete story. I thought there must be more. In fact, there is. It turns out there is quite a bit more to it and this whole issue is a long way from being settled. The good news is that previous changes were accomplished by executive orders / rule-changing under the Obama administration, not by Congress.

A much more complete story is now posted by The Oil & Gas Journal.
A federal appeals court in Denver dismissed six environmental organizations’ appeal of a district court’s decision invalidating the US Bureau of Land Management’s regulation of hydraulic fracturing at oil and gas operations on onshore public lands. But the US 10th Circuit Court of Appeals also vacated the lower court’s ruling in the Sept. 21 decision and dismissed the appeal without prejudice, leading at least one environmental group to say that the decision affirmed BLM’s authority to regulate fracing.

The presidents of the Independent Petroleum Association of America in Washington and the Western Energy Alliance in Denver separately applauded the court’s decision to dismiss the appeal, which was pending as a new US president was elected and his administration began to rescind BLM’s fracing regulation.

“Given these changed and changing circumstances, we conclude these appeals are prudentially unripe. As a result, we dismiss these appeals and remand with directions to vacate the district court’s opinion and dismiss the action without prejudice,” Appeals Court Judge Mary Beck Briscoe wrote in the decision.

IPAA and WEA originally sued to overturn the BLM final fracing rule on Mar. 20, 2015. Judge Scott W. Skavdahl of US District Court for Wyoming set the regulation aside more than a year later after finding the agency did not have the necessary congressional authority to impose it.

“Today’s court decision confirms what IPAA has advocated all along: Dismissing the appeal would protect independent producers from the uncertainty of whether it was necessary to comply with regulations that are certain to be revoked,” IPAA Pres. Barry Russell said. “All three judges ruled unanimously that it would be a waste of judicial resources to proceed with this case.”  
Original Post
From Argus Media:
US court scraps limits on fracking oversight.
The decision marks a major victory for environmentalists, who said that keeping the 2016 ruling intact would have stripped the government's authority from regulating fracturing.
Sierra Club staff attorney Nathan Matthews said the decision would reinstate regulations that were developed under former president Barack Obama but never came into force.
Affects Federal and tribal land. 

WTI Remained Solidly Above $50 Today -- September 21, 2017

Silly rabbit! That didn't work out either. From The WST today
Silly Rabbit! Original Trix with artificial colors is back after customers revolt using radishes and turmeric instead of Red 40 and Yellow 6 didn’t work for children and adults alike.
Active rigs:

Active Rigs573368196185

Three new permits:
  • Operators: Kraken Operating (2); Lime Rock Resources
  • Fields: Burg (Williams); Stanley (Mountrail)
  • Comments:
One producing well (DUC) reported as completed:
Four permits renewed:
  • Hess: four CA-Stangeland permits in Williams County

The Political Page, T+244 -- September 21, 2017

NFL tickets for the 49ers - Rams game, tonight's Thursday night football game:
As of Wednesday, resale tickets were being offered on StubHub for as low as $14 to see the team host the Los Angeles Rams at 7 p.m. That price is just cheaper than buying a pair of $7.50 pretzels through the Levi's Stadium app and comparable to the price of a beer and a hot dog at the the three-year-old arena. According to the team's seat licensing map, the cheapest original face value for any seat is $85.
Where did "Kaepernik" come from? Oh, that's right. San Francisco. 

From NY Daily News:The Colin Kaepernick effect, and the great regret of the San Francisco 49ers.
Why? Because the 49ers don’t have a capable quarterback on their roster. C.J. Beathard is San Francisco’s rookie backup, who has yet to take a single snap. Brian Hoyer is the 49ers starter, but in two games this season, the nine-year journeyman who has played for seven teams, has only thrown for 292 yards, with two interceptions.
When tickets to the game are going for $14, I think there's more to this than just a lousy quarterback.  But this being San Francisco, I assume if Kaepernik suited up for the game (for either team) the arena would be sold out.


I keep seeing this poll being quoted: 42% of Americans don't want tax cuts.

About 42% of Americans don't pay federal taxes and receive benefits from those who do pay taxes. These 42% assume that if taxes are cut, their benefits are cut.

This is not rocket science. Those citing the poll seem to suggest they are surprised by the poll.

Well, duh.

.... And For The 1% That Pay 50% Of Federal Taxes

Tesla obsoletes its cheapest car -- The Verge, data points:
  • Tesla will stop making its Model S 75 this weekend
  • currently the least expensive Model S available, starting at $69,500
  • once the "S 75" is gone, the least expensive Tesla will be the Model S 75D (dual motors: one motor on both the front and rear axles); starts at $74,500
  • Model X also comes with dual motors
  • the only rear-wheel drive Tesla will sell will be the entry-level version of the Model 3
  • despite the heavily advertised $35,000 price tag for the Model 3, customers will more likely pay upwards of $50,000 to get the options they want
  • customers with preorders cannot even take delivery of the $35,000 base version yet
Re-posting Tesla guidance regarding production:
What is the most current Tesla guidance for Model 3 production? According to the linked SeekingAlpha article, posted July 31, 2017:
  • July, 2017: 30
  • August, 2017: 100
  • September, 2017:1,5000
  • December, 2017: 20,000 
So, did Tesla meet its August guidance? No. Tesla delivered 75% of what it said it would.

Daimler: First European Company To Make EVs In US -- Making America Great -- September 21, 2017

A huge "thank you" to Don for sending me the link to this story.

This may be the biggest story of the week, but there have been so many incredible stories since November 8, 2016, it's really quite hard to keep up.

But here's another story.

Daimler (Mercedes-Benz) has announced it will compete with Tesla mano a mano. Data points at Bloomberg:
  • at its Alabama factory; Tuscaloosa, AL; yes, the Alabama factory that is in the US
  • $1 billion investment
  • 600 jobs in the region
  • plug-in vehicles AND batteries will be made at the factory
  • this will be Daimler's fifth battery plant globally
  • SUVs -- will take on Tesla's Model X
  • first Europe company to assemble plug-in autos in the US
  • Daimler in talks to expand its joint venture in China
  • Tesla still dominates US battery-electric vehicle sales
From the article:
Mercedes, which topped BMW as the top luxury auto brand in the U.S. last year, started assembling vehicles in Alabama 20 years ago. The factory has since emerged as one of the brand’s main manufacturing hubs worldwide, with some 70 percent of assembled vehicles slated for export to global markets. About 3,700 employees produce the GLE, GLE Coupe and GLS SUVs at the site, which added the the C-Class sedan for the North American market in 2014.
Daimler had at least three options where to invest this $1 billion: Germany, China, the US.

Daimler chose the US.

Daimler got the memo.