Thursday, November 6, 2014

Why US Drilling Won't Stop Any Time Soon; Continuation Of Series On Canadian Diluent Requirements -- RBN Energy -- November 6, 2014

Active rigs:


11/7/201411/07/201311/07/201211/07/201111/07/2010
Active Rigs193181188199155


Feeling the pain: some time ago, I posted my list of those "entities" that would feel the pain of the oil-price slump the soonest and the mostest. Venezuela led my list. Coming second or near the top were the deep-see drillers. Folks may find the news on RIG interesting today. I think OPEC is in better shape than most of us realize (except for Venezuela). Among the nations, Russia is perhaps in the worse situation. I always thought pushing a bear into a corner was very, very dangerous (another Obama misstep) and today we see the outcome. China? Looking good.

RBN Energy: why US drilling is not going to stop overnight. I think I sent a note to Don suggesting the same thing a couple of days ago. It's another great RBN Energy post:
CME Nymex West Texas Intermediate (WTI) crude prices were down 28 percent from their June high of $107/Bbl to $77/Bbl on November 4, 2014.
This price fall to three year lows has been prompted by a perceived oversupply of crude in world markets versus demand.
Driven by new technology and oil extracted from tight shale formations, U.S. crude production has risen by 1 MMb/d during each of the past three years – pushing out imports into the world market. With more barrels chasing lower demand for oil, prices have fallen. The pricing weakness is compounded by a perceived lack of discipline to reduce output by the traditional swing producers within OPEC – including Saudi Arabia. As we discussed in a recent blog, the actions of that nation appear to indicate a strategy to retain market share at the expense of higher prices, at least for the moment.
RBN Energy: the series on Canada's need for diluent continues --
The Edmonton region in Alberta is home to a growing crude gathering hub that brings in bitumen crude from the oil sands region 250 miles to the north. I
n order to get that crude to Edmonton and to markets in the U.S., producers must first blend it with diluent range materials so that it can flow in pipelines. In the early days much of the diluent required in the oil sands was delivered by rail and truck but now a growing “parallel” pipeline network is developing to source and distribute supplies as new production comes online. Today we look at the Edmonton diluent distribution system.
This series details infrastructure delivering increasing quantities of diluent to production locations in Western Canada. The first episode provided an overview of current and expected demand for diluent range materials for use by oil producers in the Western Canadian Sedimentary Basin (WCSB).
Total Canadian demand for diluent in 2014 is expected to average 380 Mb/d – meaning that with 160 Mb/d of local supply about 220 Mb/d will be imported – mostly from the U.S. By 2019 that import requirement number could more than double to 485 Mb/d (assuming that Canadian domestic production doesn’t increase dramatically – which it might.). Episode Two covered the Southern Lights and Cochin pipeline diluent routes from the U.S. to Western Canada. Diluent distributed to the oil sands production regions comes from the two regional oil gathering storage and distribution hubs at Hardisty and Edmonton, Alberta. We will look at Hardisty – where producer Husky blends the Western Canadian Select crude blend, later in the series.
This time -- at the link -- we take a deeper dive into the diluent distribution network in Edmonton with a look at Enbridge and Keyera.
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JOBS

Happy days are here again. Unemployment plummets to 5.8% for the month of October. The economy churned out a firm 214,000 net new jobs, less than the 235,000 expected. I am actually very, very impressed. Prior to the recent "Great Recession," full employment was said to be 4%. With all the technology coming on line, that alone would suggest that 6% is the new 4%. I consider 6% unemployment in the US full employment. Underemployment is another story. With regard to unemployment, the economy keeps showing improvement (albeit slowly, perhaps) and yet the number of folks who have dropped out of the workforce is at an all-time time, and yet I see help-needed signs everywhere. The safety net (unemployment benefits; spouse working; ObamaCare providing really cheap health care; Social Security [particularly disability]; seems to be working. Speaking of which, I understand President Obama made a speech yesterday saying he "heard" the 2/3rds of Americans who didn't vote. I don't recall but I think it was said that President Nixon was hearing voices near the end of his presidency, also.

By the way, speaking to a worker at a major US truck factory: the factory will be going to mandatory overtime. They have so many truck orders they have to go to mandatory overtime. It may start in December; it's still unclear when. The second part of the story: this particular international truck company, with manufacturing facilities in the US, accounts for 60% of current new truck building. I'm talking the big semi's, specialty trucks, not pickup trucks.

It's quite a story.

Catching Up Daily Activity Reports, Past Two Days -- November 6, 2014; Global Warming Is Going To Hit Hard Next Week

Remember, this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Make no travel plans based on what you read here. I post quickly and frequently; typographical and factual errors are likely. If this information is important to you, go to the source.

Earnings being reported Friday:
Enerplus (ERF.TO), before market open, 23 cents; 
Magnum Hunter Resources, before market open, a loss of 16 cents;

Wells coming off confidential list Friday:
  • 27540, drl, Petro-Hunt, Wollan 152-96-27A-35-1HS,  Clear Creek, no production data,
  • 27870, drl, CLR, Skar 4-28H1, Stoneview, no production data,
  • 28005, 986, MRO, Meehl 44-24TFH, Chimney Butte, t7/14; cum 12K 9/14;
  • 28148, drl, Hess, BW-Kraetsch-149-99-1423H-5, Cherry Creek, no production data,
  • 28215, 10, Enduro, NSCU N-711-H1, Newburg, Spearfish/Charles, t714; cum 1K 9/14;
  • 28234, drl, Statoil, Myron 9-4 2TFH, Squires, no production data,
Active rigs:


11/6/201411/06/201311/06/201211/06/201111/06/2010
Active Rigs189181187196155

From yesterday's daily activity report, producing wells completed:
  • 25672, 2,044, Statoil, Larsen 3-10 5TFH, Williston, t8/14; cum 4K 9/14;
  • 26813, 794, Hess, EN-Hermanson-LE-155-93-3501H-2, Robinson Lake, t10/14; cum 4K 9/14;
  • 27064, 760, Hess, EN-KMJ Uran-154-93-2734H-8, Robinson Lake, t10/14; cum --
  • 27065, 972, Hess, EN-KMJ Uran-154-93-2734H-7, Robinson Lake, t9/14; cum 14K 9/14;
  • 27134, 1,002, Hess, SC-Tom-153-98-1514H-7, Truax, t10/14; cum 10K 9/14;
  • 27225, 843, Hess, BW-Kraetsch-149-99-1423H-3, Cherry Creek, t10/14; cum --
  • 27227, 742, Hess, BW-Kraetsch-149-99-1423H-2, Cherry Creek, t10/14; cum 6K 9/14;
  • 27296, 863, Hess, EN-Ortloff-156-94-2635H-5, Big Butte, t10/14; cum --
  • 27494, 702, Hess, EN-L Cvancara-155-93-2627H-2, Robinson Lake, t10/14; cum 6K 9/14;
  • 27576, 1,808, Statoil, Barstad 23-14 3H, Alger, t11/14; cum --
  • 27577, 2,741, Statoil, Barstad 23-14 3H, Alger, t10/14; cum 5K 10/14;
From today's daily activity report, producing wells completed:
  • 26875, 260, CLR, Lawrence 10-24H2, North Tioga, t10/14; cum --
  • 27133, 344, Hess, SC-Tom-LS-153-98-1514H-1, Traux, t10/14; cum --
  • 27495, 716, Hess, EN-L Cvancara-155-93-2627H-3, t10/14; cum --
  • 28971, 497, Whiting, Miller 41-10TFH, t10/14; cum --
From yesterday's daily activity report, fourteen (14) new permits:
  • Operators: Oasis (5), Emerald (3), Whiting (2), EOG (2), Hunt (2),
    Fields: Missouri Ridge (Williams), Mondak (McKenzie), Parshall (Mountrail), Stanley (Mountrail), Timber Creek, (McKenzie), Ross (Mountrail),
  • Comments:
From today's daily activity report, nine (9) new permits:
  • Operators: Liberty Resources (4), Whiting (2) XTO (2), Hess,
    Fields: McGregor (Williams), Ray (Williams), Elsworth (McKenzie), Morgan Draw (Golden Valley)
  • Comments:
Wells released from confidential list today:
  • 26612, 1,507, Newfield, Hoffman 149-98-14-23-2H, Pembroke, t8/14; cum 37K 9/14;
  • 26716, 1,282, Emerald, Pirate 3-2-11H, Foreman Butte, t5/14; cum 37K 9/14;
  • 27161, drl, Hess, GN-Tom Jen-157-97-0409H-2, Ray,
  • 27247, 586, Petro-Hunt, L Hoiby 159-94-30D-19-4H, North Tioga, t8/14; cum 32K 9/14;
  • 27302, drl, Zavanna, Husky 33-28 4TFH, Williston,
  • 27607, drl, BR, Bullrush 34-10TFH-B, Elidah,
  • 27698, drl, BR, Haymaker 31-15TFH-B, Elidah,
  • 27744, drl, XTO, Brandvik Federal 44X-13H, Corral Creek,
  • 28011, drl, Denbury, CHSU 11-27 15, Cedar Hills, South Red River B,
  • 29917, drl, Emerald,Dagny Taggart 4-21-16H, Mondak, 
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Global Warming Hits Next Week
Should Be A Doozy 
Ice Age Now

Bloomberg is reporting:
Remember how evidence was mounting last month that early snowfall was accumulating across Siberia? And remember how there’s a theory that says this snowfall signals a cold winter?
So in the two and a half weeks since, the news for the winter-haters has, unfortunately, only gotten worse.
About 14.1 million square kilometers of snow blanketed Siberia at the end of October, the second most in records going back to 1967, according to Rutgers University’s Global Snow Lab. The record was in 1976, which broke a streak of mild winters in the eastern U.S. In addition, the speed at which snow has covered the region is the fastest since at least 1998.
Taken together they signal greater chances for frigid air to spill out of the Arctic into more temperate regions of North America, Europe and Asia, said Judah Cohen, director of seasonal forecasting at Atmospheric and Environmental Research in Lexington, Massachusetts, who developed the theory linking Siberian snow with winter weather.
I don't know how many folks saw national / network evening news earlier this evening, but long piece on the severe Arctic blast that's going to hit next week. This is going to be a doozy. Maybe meteorologists will start naming Arctic blasts in lieu of hurricanes now that the latter seem to be a thing of the past. 

On Tap Today -- November 6, 2014; North Dakota's Wind Energy Continues To Grow

It's on! Who wins the price war? OPEC or Harold Hamm? Poll at sidebar at the right.

Harold Hamm goes out on a limb: scraps oil hedges 
In so doing, Hamm, who last month called OPEC a "toothless tiger", appears to be bracing for a price war with the world's biggest exporter, Saudi Arabia. The OPEC-leader and other key members of the oil exporter group have so far shown no real sign of moving to cut production to lift prices.
Conventional wisdom among oil analysts is that Saudi Arabia, frustrated by a global supply glut caused by soaring output in the United States, is prepared to let prices fall to squeeze U.S. shale oil producers out of the market.
Magnum Hunter: comments on Saudi price war
"The future of oil and gas in the U.S. is natural gas," says Gary Evans, Magnum Hunter Resources CEO, discussing what the low cost of shale means to the industry and U.S. economy.
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Coming off confidential list today:
  • 26612, 1,507, Newfield, Hoffman 149-98-14-23-2H, Pembroke, t8/14; cum 37K 9/14;
  • 26716, 113, XTO, Hansen 34X-10C, Temple, t9/14; cum --
  • 27161, drl, Hess, GN-Tom Jen-157-97-0409H-2, Ray,
  • 27247, 586, Petro-Hunt, North Tioga, t8/14; cum 32K 9/14;
  • 27302, drl, Zavanna, Husky 33-28 4TFH,
  • 27607, drl, BR, Bullrush 34-10TFH-B, Elidah,
  • 27698, drl, BR, Haymaker 31-15TFH-B, Elidah, Three Forks B1, 
  • 27744, drl, XTO, Brandvik Federal 44X-13H,
  • 28011, SI, Denbury, CHSU 11-27 15, South Red River,
Out-of-town family guests; blogging at a minimum; mostly reminders of things for me to watch later today. Remember, this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Make no travel plans based on what you read here. 

Trading at new 52-week highs today:BRK.A, DIS, EW, SRE, UNP, UPS. UNP is up almost 2% -- incredible. BRK-B is also up slightly and within 2 pennies of a new high.  

Earnings coming out today per Yahoo!Finance:
  • Crescent Point Energy (CPG.TO); before market open: 42 cents; adjusted profit rises 10%;
  • Wendys (WEN); before market open, 9 cents; turnaround in jeopardy; misses on earnings;
  • Windstream (WIN), before market open; 4 cents; misses by 1 cent;
  • Bonanza Creek Energy (BCEI); after market close; 53 cents;
  • KOG, after market close; 20 cents (Zacks); 15 cents; misses;
  • NOG, after market close; 26 cents; in-line; beats on revs;
  • RIG, after market close; 82 cents;
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Jobs

Upbeat report on unemployment numbers; expectations that employers added as many as 240,000 jobs in October (report comes out tomorrow);
Initial unemployment claims: expectation - 285,000. The report is here:
In the week ending November 1, the advance figure for seasonally adjusted initial claims was 278,000, a decrease of 10,000 from the previous week's revised level.
The previous week's level was revised up by 1,000 from 287,000 to 288,000.
The 4-week moving average was 279,000, a decrease of 2,250 from the previous week's revised average. This is the lowest level for this average since April 29, 2000 when it was 273,000. The previous week's average was revised up by 250 from 281,000 to 281,250.
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Natural Gas Fill 
Natural gas fill rate: 91 Bcf.  For background, see this post.
Working gas in storage was 3,571 Bcf as of Friday, October 31, 2014, according to EIA estimates. This represents a net increase of 91 Bcf from the previous week. Stocks were 238 Bcf less than last year at this time and 261 Bcf below the 5-year average of 3,832 Bcf. 
It appears the curve should start to plateau next week and in the next couple of week should start to turn negative.

Wild ride for natural gas this winter (2014 - 2015):
Natural gas futures swung wildly before closing lower for the first time in 10 sessions, signaling a volatile winter ahead for the commodity. The December natural gas futures contract closed at $4.255 per million British thermal unit, down 3.6 percent, after shooting up to $4.544 in overnight trading.
Natural gas had been up more than 25 percent from its October low.Traders said midday reports that temperatures may not be as severe as expected in a cold snap expected across the U.S. weighed on prices. "It's not going to go as far south, and it's not going be pure Arctic air by the time it gets to the East Coast," said John Kilduff of Again Capital.
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Miscellaneous

Harold Hamm goes out on a limb: scraps oil hedges 
In so doing, Hamm, who last month called OPEC a "toothless tiger", appears to be bracing for a price war with the world's biggest exporter, Saudi Arabia. The OPEC-leader and other key members of the oil exporter group have so far shown no real sign of moving to cut production to lift prices.
Conventional wisdom among oil analysts is that Saudi Arabia, frustrated by a global supply glut caused by soaring output in the United States, is prepared to let prices fall to squeeze U.S. shale oil producers out of the market.
Confident US shale producers think they can outlast OPEC moves
Saudi Arabia's rivals in the shale fields from North Dakota to Texas aren't flinching as the Persian Gulf kingdom wages a price war to reclaim market share and chill competition.
he U.S. companies believe they have a lot more staying power than many of Saudi Arabia's partners in the Organization of Petroleum Exporting Countries, or OPEC. Several producers plan on increasing production.  
Executives at several large U.S. shale producers, including Chesapeake and EOG Resources Inc. (EOG), have vowed to maintain -- and even raise -- production as they reported earnings this week. They say their success in bringing down costs means they can make money even if prices slump further.
Oklahoma to pass Alaska in oil production -- Harold Hamm; dots to connect:
  • California is an island when it comes to oil; there are no oil pipelines into California
  • California's sources for oil: a) state; b) Alaska; c) OPEC; d) rail/barge 
  • the US "bans" crude oil exports
  • Saudi Arabia cuts prices to maintain market share
Something going on here? Target closing another 11 stores.

Wind: The Bismarck Tribune is reporting:
Basin Electric Power Cooperative will double its power derived from wind energy by 2016.
Basin is expecting its load to grow by more than 1,883 megawatts by 2035, CEO Paul Sukut told members at the cooperative’s annual meeting on Wednesday. About 1,600 megawatts of that new demand will be coming from the Williston Basin.
“While it’s daunting to think about all the additional generation we have to bring on, we do have a very solid plan in place,” Sukut said.
By the end of the year, Basin will be generating or purchasing 5,478 megawatts of power. With the projected increase in demand, that will be above 7,000 megawatts per hour in 20 years.
Sukut said the cooperative continues to grow 3 percent per year while many providers’ growth is closer to .6 percent.
Compare these numbers with data coming out of other states.