Monday, January 19, 2015

Oil Glut? What Oil Glut? -- January 19, 2015

From Rigzone - Oil, Gas Output Rises In Argentina's Vaca Muerta Shale Field
Oil production in the Argentine province of Neuquen rose 6.75 percent in the second half of 2014 from the first half, due in part to increased output at the Vaca Muerta shale field.
Vaca Muerta represented 18.08 percent of the province's overall oil output of 3.4 million cubic meters in the second half, up sharply from 11.58 percent in the first six months of the year.
Covering an area the size of Belgium, Vaca Muerta is one of the world' largest shale oil and gas formations and one that Argentina is anxious to develop. Neuquen's natural gas output rose 7.35 percent in the last six months of 2014 from 8.66 million cubic meters in the first half.
Production at Vaca Muerta made up 23.77 percent of Neuquen's overall gas production in the second half versus 19.51 percent in the first. Combined shale oil and natural gas output from the Vaca Muerta formation was about 33,000 barrels of oil equivalent per day (boepd) at the end of September, with a trend toward growth.
From Rigzone -  Keppel Sees Shallow-Water Projects Supporting Rig Demand amid Lower Prices
Singapore’s rigbuilder Keppel Offshore & Marine chief executive Chow Yew Yuen believes there are still pockets of demand for oilfield services in shallow-water reservoirs where hydrocarbon production remains economical at a fraction of the current oil prices.
With oil price falling drastically within a span of four to five months from $100 to under $50 a barrel at the turn of the new year, Chow acknowledged global exploration and production activity will slow as oil and gas companies look into cutting capital expenditure.
Some projects will move to the right [or be] put on hold,” Chow told reporters, citing projects in the deepwater basins as potentially among those coming under review.
That will potentially include Petrobras’ pre-salt discoveries off Brazil as other industry sources have indicated.
From Rigzone -  Russia's Rosneft Starts Oil Production At Arkutun-Dagi Field:
Russia's Rosneft has started oil production at the Arkutun-Dagi field, which is expected to produce 90,000 barrels per day at peak production.
The Arkutun-Dagi offshore field is part of the Sakhalin-1 project led by U.S. major ExxonMobil. 
The launch of the field, one of three operating at Sakhalin-1, should add to Russia's oil production, which hit a post-Soviet record high last year, averaging 10.58 million bpd. Two other fields in the Sakhalin-1 project, Chayvo and Odoptu, began production in 2005 and 2010, respectively.
Just keeping production levels stable is a challenging task for Russia, as its key fields in Western Siberia are depleting, while Western sanctions are making it all but impossible to raise foreign financing and bring in new technologies.
Sound bites:
  • Russia producing even more oil, even as the country hits new post-Soviet production records
  • Argentina's huge shale field is a success
  • Brazilian shallow-sea/deep-sea projects may be delayed
At Least It's Hard To Catch

Tweeting now: hospital confirms passenger who recently traveled to 'Ebola-affected country' hospitalized after landing at Newark, NJ, airport; being kept overnight 'in an abundance of caution.'... because it's hard to catch.

Rules On Roman Numerals And Why Super Bowl 49 Is XLIX And Not IL

This could have cost me a sushi dinner. I'm glad I didn't place the bet.

Companies Reporting Earnings Tuesday -- January 19, 2015; Don't Cry For Me -- Argentina's Bloody Hell


BHI, expectation, $1.07:
Baker Hughes, which agreed to a merger with rival Halliburton for $34.6 billion in November, reported fourth quarter earnings of $1.19 on an adjusted basis, ahead of analysts $1.10 consensus estimates for the period. 
HAL, expectation, $1.10:
Oilfield services giant Halliburton posted stronger fourth quarter revenue and earnings Tuesday, but warned that slumping crude oil prices had weakened its outlook for 2015.
The company said revenue rose 14.8% to nearly 8.8 billion from $7.6 billion in the fourth quarter of 2014. Net income climbed 13.8% to $905 million from $795 million in the year ago quarter. For the full year, revenue rose 12% to $32.9 billion and adjusted net income rose 28% to $4.02 a share.
NFLX, expectation, 45 cents, after market close.

Hey, It's Just A Blip
Don't Worry, Be Happy

The spin never ceases to amaze me. Reuters reports that US retail sales recorded their largest decline in 11 months in December and then call it a blip. The link:
U.S. retail sales recorded their largest decline in 11 months in December as demand fell almost across the board, tempering expectations for a sharp acceleration in consumer spending in the fourth quarter.
Economists, however, cautioned against reading too much into the surprise weakness, noting that holiday spending made it difficult to smooth December data for seasonal fluctuations.
Isn't that true every December? Why was this December different?  

One thing that is different: China's GDP is slumping also -- now down to 7.2% -- not much better than the 5% the US reported last quarter (after several revisions, several adjustments, several panicky phone calls....
Global Warming Hits Brazil
But It's Bloody Hell For Argentinian Women

Reuters is reporting:
Rolling blackouts swept across parts of Brazil on Monday as the grid operator ordered select power cuts to avoid a larger crisis, drawing attention to a fragile electric system that is buckling under the strains of record-breaking heat and dryness.
Grid operator ONS said it orchestrated 2,200 megawatts of controlled outages in eight states as the hottest day of the year in Sao Paulo, where the temperature hit 36.5 Celsius (97.7 Fahrenheit), and other southeastern cities led to surging demand from air conditioners and other power-hungry appliances.
Brazilian officials have repeatedly denied the need for energy rationing, even as the driest spell in more than 80 years drains hydropower reserves and forces the use of more costly thermal plants.
The drought has also raised the specter of water rationing in Sao Paulo, Brazil's business hub and South America's largest metropolitan area. 
This has to wreak havoc with the manufacturing industry. 

California went through a period of water rationing some years ago and managed quite well.

As we used to say in North Dakota, "it could be worse." In fact, in Argentina it is worse: the country has run out of tampons. I can't make this stuff up. Reuters is reporting:
Argentines have been complaining for a while now about the country's product shortages. And, until recently, the government has managed to brush aside such protests, which have centered around Argentina's import restrictions.
Well until, that is, the country's 20.6 million women couldn't find their favorite tampons earlier this month - during the height of summer. 
"For 20 days, we simply couldn't source any tampons from wholesalers," said Ariel, a 29-year old pharmacy owner. 
To be sure, Argentina's tampon squeeze is a far cry from shortages plaguing Venezuela and Cuba. But it has managed to launch a debate about the country's tight control of imports and foreign currency.(Imports were down 11 percent during the first 11 months of 2014, the latest period for which data is available.) 
"... a far cry from shortages plaguing Venezuela and Cuba." Really? I had not heard of the tampon shortage in any other country until now, though I vaguely recall this was an issue for the Russians many, many years ago. Just for the fun of it, do a google search -- Argentina tampon shortage -- you will be quite amazed.

Back To The Drawing Board For The Nation's Fastest Growing Micropolitan Area -- January 19, 2015 is reporting:
Officials are updating a comprehensive plan for Williston that is just a few years old, saying the original plan did not take into account the rapid growth that the oil patch hub has experienced.
The original plan, developed in 2008-2010, assumed there would be a population of 30,000 people in 2020. The city’s population has already surpassed that as people from around the country flocked to the western North Dakota oil patch in search of jobs.
Williston’s population has doubled since 2010, and the city’s physical size has tripled through annexation. It is the nation’s fastest-growing micropolitan area, an entity with between 10,000 and 50,000 people, according to the Census Bureau.
Back to the drawing board; the "old" plan just wasn't keeping up.

Wells Coming Off The Confidential List Over The Long Weekend -- January 19, 2015

Done in a hurry; typographical and factual errors may be present. This page will be updated later. 

Seven (7) new permits --
  • Operators: Hess (6), Whiting
  • Fields: Blue Buttes (McKenzie), Pleasant Hill (McKenzie)
    Comments: Clearly, the operators are circling the wagons
Interesting: two (2) OXY USA wells have been approved for "tight hole" status -- the Federal Bud wells in Dunn County.

Active rigs:

Active Rigs163187187200164

Wells coming off the confidential list over the long weekend, Tuesday:

Tuesday, January 20, 2015
  • 26533, 941, Newfield, Rolfsrud State 152-96-29-32-10H, Westberg, t11/14; cum19K 11/4;
Monday, January 19, 2015
  • 26308, 729, Hess, LK-Alwin-147-97-1324H-5, Little Knife, no production data,
  • 27375, drl, Petro-Hunt, Sherven Trsut 153-95-27D-5H, Charlson, no production data,
  • 28093, drl, Hess, GN-Earecen-159-98-2734H-1, Big Stone, no production data,
  • 28507, 871, Hunt, Alexandria 161-100-21-16H-1, Alexandria, t10/14; cum 16K 11/1;4
  • 28656, A,  CLR, Topeak 6-12H1, Brooklyn, no test date, s7/14;
  • 28742, drl, XTO, Johnson 24X-31E, Siverston, no production data,
  • 28816, 907, CLR, Brooks 3-4H, Pembroke, t12/14; cum --
Sunday, January 18, 2015
  • 27654, drl, Petro-Hunt, Jonsrud 151-96-4A-10-1HS, Clear Creek, no production data,
  • 28092, drl, Hess, GN-Njos-159-98-2635H-1, Big Stone, no production data,
  • 28361, 7, Enduro Operating, MRPSU 29-44, Mouse River Park, a Madison well, t9/14; cum --
  • 28657, 766, CLR, Topeka 7-12H, Brooklyn, t11/14; cum 5K 11/14;
  • 28675, 68, Legacy, Legacy Et Al Bernstein Barbot 12-8H, Red Rock, a Spearfish well, t8/14; cum 8 11/14;
  • 28708, drl, MRO, Brink 24-20TFH, Bailey, no production data,
Saturday, January 17, 2015
  • 26534, 1,155, Newfield, Rolfsrud State 152-96-29-32-2HZ, Westberg, t11/14; cum 14K 11/14;
  • 27874, 1,064, Petro-Hunt, Wollan 152--96-27A-5H, Clear Creek, t11/14; cum 19K 11/14;
  • 28025, 442, Fidelity, Donnie 11-14H, Sanish, t9/14; cum 32K 11/14;
  • 28348, drl, BR, Copper Draw 41-27TFH, Johnson Corner, no production data,
  • 28358, drl, MRO, Reidun 21-27TFH, Bailey, no production data,
  • 28551, drl, XTO, HM Hove 34X-33C, West Capa, no production data,
  • 28743, drl, XTO, Johnson 24X-31F, Siverston, no production data,

What's The Definition Of "Insanity" Again -- Doing The Same Thing Over And Over, Expecting A Different Result? -- January 19, 2015

The other day I happened to see this article in Business Insider: The Swiss Franc Chaos Shows Why Negative Interest Rates Don't Work.
Not long ago, a theory was floated that in order to avert an economic crisis, all central banks had to do was cut interest rates below zero and this would boost growth. That theory was then put to the test in the eurozone and Switzerland. And now, it's failing.
In June 2014, the European Central Bank (ECB) decided to cut its deposit rate (the interest rate that it pays on reserves held by the central bank) to -0.10%. In September, this was cut again to -0.20%.
The theory was that charging banks for holding money with the central bank would force them to seek better returns elsewhere, either through investing in productive assets in the monetary union or transferring their money to safe assets overseas.
In the first case, the additional productive investment would help drive up growth directly, whereas in the second, the capital outflows would help weaken the currency and make the region's exports more competitive, also improving its growth prospects.
So what happened?
Well, the investment channel didn't exactly deliver. Data released in December showed Euro-area investment contracted for a second consecutive quarter, falling 0.2% in the three months to the end of September after a 0.6% fall over the previous period.
I wasn't going to post the link or the article; it didn't excite me, but then this article today about Denmark over at Bloomberg:
Denmark moved to quash speculation it may follow Switzerland and abandon its euro peg, delivering a surprise interest-rate cut to prevent the krone gaining further.
"We have the necessary tools to defend the peg,"Karsten Biltoft, head of communications at the Copenhagen-based central bank, said by phone.
Since the Swiss National Bank shocked markets on January 15 by jettisoning its three-year-old euro peg, Scandinavia's biggest banks have fielded calls from hedge funds and other offshore investors asking whether Denmark could be next.
"The comparison that is made between Denmark and Switzerland I think is somewhat off," [a spokesman] said. "I don't think you can make a comparison between the two cases."
So what is the "tool" that Denmark says it has to save "its peg to the Euro"? 
The Danish bank today cut its deposit rate to minus 0.2 percent, matching a record low, from minus 0.05 percent and lowered its lending rate to a record 0.05 percent from 0.2 percent.
Today's cuts "underline the fact that the inflow has been pretty massive since they decided to move on a Monday. We should price in a probability of a new cut on Thursday, especially if the FX intervention continues." 
What's the definition of insanity, again?

So, if you put your money into a Danish bank, you are guaranteed a savings rate of minus 0.2 percent. And a strongly likelihood of a worsening recession.

Snapshots In Time -- US Gasoline And Ethanol -- January 19, 2015

Spend some time looking at these snapshots in time. They really are quite phenomenal. The first one especially. Maybe not unprecedented. I don't know. But certainly in my short lifetime what seems to be happening seems remarkable. It's hard to believe we haven't entered a brave new world with regard to fossil energy: the demise of coal, the rise of natural gas, the glut of gasoline.

The obvious question: just how much less expensive can gasoline get? Some see $25 oil.

Snapshots in time:

Source: EIA (a dynamic link).

Has the US ever gone over 9.5 million bopd gasolind demand? Yes, starting back in 2003 there were many periods in which demand for gasoline in the US fluctuated around 9.5 million bopd.
  • fourth week in August, 2003: 9.668 bopd
  • second week in August, 2004: 9.521 bopd
  • third week in August, 2005: 9.471
  • first week in August, 2006: 9.697
  • third week in August, 2007: 9.762
  • the last week of August, 2014: 9.480 million bopd
I am unaware of any weekly period in which gasoline demand went over 9.5 million bopd over the Memorial Day Weekend, but it certainly looks like we could do that later this spring. 

With an improving economy and gasoline prices staying low, one can easily imagine the US going over 10 million bopd for the first time in its history in 2015 (weekly average). One wonders if the move to grant drivers licenses to undocumented residents of California might provide the final bit pushing us over the 10 million bopd threshold. With gasoline stocks soaring, I can only imagine increased marketing by downstream companies pushing their products.

Ah, The Irony Of It All

Last week a dozen earthquakes were reported in Connecticut and the governor has banned fracking (see disclaimer).  Now, today, it is being reported that there was a 3.0-magnitude earthquake -- OMG, 3.0 -- between Colorado Springs and Pueblo, Colorado

Earthquakes are as common as precipitation in southern California from Connecticut to Colorado, where there is almost no fracking, and no earthquakes in North Dakota, the center of modern-day fracking.

The Word For The Day: Trope

Trope: A literary trope is the use of figurative language – via word, phrase, or even an image – for artistic effect such as using a figure of speech. Kenneth Burke has called metaphor, metonymy, synecdoche and irony the "four master tropes."

I think we all "know" irony and metaphor even if we don't always use the former correctly. The word "metonym" is less well known but used all the time, such as "Wall Street" to refer to the US financial sector, or "Hollywood" to refer to the US film industry.

I see "synecdoche" often but never seem to remember what it means. Very similar to synonym but a bit more imaginative, such as "hired hands" for workers; "bread" for food; "cat" for lion, and so forth.

Early on with the blogging I discussed how "the Bakken" was used in at least three different contexts. I began using "the Bakken" as a literary trope for US unconventional oil some years ago.

Amount Of Crude Oil Flowing Through Nebraska Triples -- FuelFix -- January 19, 2015

FuelFix is reporting:
The number of trains carrying at least a million gallons of crude oil across eastern Nebraska each week has more than tripled since the summer.

BNSF said it is moving about a dozen oil trains through eastern Nebraska each week. That’s up from three trains a week last summer.
Railroads went from hauling 9,500 carloads of crude oil in 2008, to 435,560 in 2013, as production boomed in places like North Dakota that didn’t have adequate pipeline capacity.
That number of shipments continued to grow last year, but final 2014 carload statistics aren’t yet available for crude oil.
With prices for gasoline this low, it's very possible demand will grow, necessitating increased shipments of crude oil.

Let's see: a dozen trains this past month, up from three trains last summer. That seems like a quadrupling, not a tripling. Three times four (3 x 4) =12. Quadrupling means four times as much. Hmmm.

A Primer On The Politics Of Fracking 

The first mention of fracking begins at 4:30 into the video, but I think one loses a bit of the story if one does not watch the video from the beginning.

Fracking: produces enough natural gas to make America independent of sheiks, caliphs, and Scandinavians.