Statoil's Huge North Sea Field Profitable At $25 Oil; Big Shift In Energy Fundamentals -- RBN Energy -- August 30, 2016

Samson Resources signs new Chapter 11 exit plan -- WSJ. 

Tulsa, Okla.-based Samson is battling junior creditors in bankruptcy court and must either defeat them or win them over in order to make the restructuring proposal a reality.

The agreement signed Friday pledges investors holding 39% of Samson’s second-lien loan claims to support a new chapter 11 plan that should be filed within days.

When it filed for bankruptcy protection in September 2015, Samson was weighted down with about $4.9 billion worth of debt. It had a deal in hand, but falling energy prices continued to chop into the value of Samson’s assets and the pact fell apart.

Although is it increasingly difficult for a one-man band to keep this data updated, I track Bakken operators at this post. 

Statoil slashes CAPEX but will still see a 40% increase in initial daily production capacity from that field.

Norway’s Statoil AS A has slashed billions of dollars off planned spending on the giant Johan Sverdrup field in the North Sea, ensuring it should remain profitable even if oil prices fall to around half current levels.

The state-controlled oil producer also forecast as much as a 40% increase in initial daily production capacity from the field.

Again, note: Statoil's Johan Sverdrup field in the North Sea should remain profitable at $25 oil.

The WSJ sees the other side of the coin:

The recalibration of one of Norway’s biggest-ever oil projects—a rare example of a major investment that has gone ahead since the collapse in oil prices in the past two years—shows the pressure oil producers including Statoil are still under with oil prices hovering below $50 a barrel.

I guess it depends how you want to see / tell the story.

For the WSJ, the emphasis is on Statoil slashing CAPEX.

For Saudi Arabia: Statoil's giant oil field should still be profitable if oil prices fall to $25 oil. Twenty-five-dollar oil is an existential issue for Prince Salman.  

See the RBN Energy story below (and the Richard Zeits' article yesterday): $50 oil is the new $80.

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ATT Just Got Better (Or Bigger)

Zacks: 

Telecom and pay-TV behemoth, AT&T Inc. has inked a deal with HBO that will enable it to deliver Time Warner Inc. TWX-owned HBO’s content across multiple platforms through satellite, online streaming and cable-based U-verse. Notably, AT&T is launching its online streaming service Over The Top (OTT) DIRECTV Now by the end of this year owing to the gaining popularity of the business model across the millennial population.

The online streaming service is gaining momentum as is evident from the growing success of companies like Netflix Inc. NFLX, which is a leading player in this segment. This has resulted in massive subscriber losses for the pay-TV operators.

To counteract the churn rate, many pay-TV operators are implementing this model and AT&T is no exception. We believe that the addition of HBO’s content, which features immensely popular TV series like Game of Thrones, will help the company gain subscribers in its new platform. However, AT&T is a late entrant in this industry and it remains to be seen whether it can compete against the already established players in this segment.

And while we are on the subject of ATT, here's another Obama administration ruling that was overturned by the court:

A federal appeals court threw out a government lawsuit against AT&T Inc. that alleged the company misled wireless subscribers by selling them unlimited data plans and then quietly slowing down service if they consumed high amounts of data.

Monday’s ruling, from the San Francisco-based Ninth U.S. Circuit Court of Appeals, is a blow to the Federal Trade Commission, which filed the suit in 2014 seeking potential refunds for consumers. 

Although the FTC has broad authority to police unfair and deceptive commercial practices, it doesn’t have authority over “common carrier” phone services such as the landline services traditionally offered by AT&T. The commission had said it could pursue the company, however, because it involved data services, but the appeals court rejected that argument.

The ruling further solidifies the FTC’s diminishing authority in the telecommunications space. The consumer protection agency already was facing reduced enforcement powers thanks to open-Internet rules the FCC put in place last year. Those rules imposed common-carrier obligations on broadband services, including wireless.

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Back To The Bakken

Active rigs:

	8/30/2016	08/30/2015	08/30/2014	08/30/2013	08/30/2012
Active Rigs	31	76	194	185	191

RBN Energy: Big shift in energy fundamentals. RBN Energy seems to agree with Richard Zeits. $50 oil is the new $80 oil.

U.S. crude oil prices languish below $50/bbl, but the oil-directed rig count is up by 90, an increase of almost 30% over the past 12 weeks.   Natural gas production is down less than 1% from the all-time high hit back in February even though the price of natural gas remains below $3/MMbtu.  The price spread between U.S. propane and international markets is far below a level that should justify exports, but LPG exports to overseas markets continue at astronomical levels –– approaching 700 Mb/d, most of which is propane. What’s wrong with this picture?  Why does it seem that relationships between energy production, demand and prices have broken down, or at least have undergone some fundamental shift?  That is what our upcoming School of Energy Fall 2016 is all about.   

At first glance, a number of energy market relationships may seem to have shifted, but the reality is that we are just looking at the market from a different perspective than ever before – the recovery from a Shale Revolution crude oil price crash.   Two years ago U.S. hydrocarbon markets entered Shale 2.0.  (Sorry about using such a tired old metaphor, but it works.)

Back in 2007-09 before the Shale Revolution started to impact markets (labeled Pre-shale), gas, NGLs and crude tended to move in tandem.  Moving in almost perfect correlation, all three of these markets blew out in the commodity run-up of 2008 and all crashed with the Great Recession.   

But by then shale had come to natural gas, and pricing for gas, NGLs and crude diverged (the Shale Gas era).  Natural gas oversupply kept prices low while crude and NGLs recovered along with the global economy.   That motivated producers to move to wet gas – containing lots of NGLs, because NGL prices were still strong.  U.S. hydrocarbon markets entered the Wet Gas era.

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Update On California's Bullet Train 

First Leg Ends In Almond Orchard In Middle Of Nowhere

From The Los Angeles Times:

The state’s plan to build an initial stretch of high-speed rail line, from San Jose to a map point in the midst of Central Valley farmland, came under renewed attack at an oversight hearing Monday. 

The apparent absurdity of the abbreviated route was not lost on supporters. 

“It seems odd,” acknowledged Dan Richard, chairman of the rail authority, “to be stopping in the middle of an almond orchard.”

The words of the rail authority chairman: "It seems odd to be stopping in the middle of an almond orchard."

I can't make this stuff up.

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More Good News For US Natural Gas Industry

Australian State Of Victoria Bans Fracking

Reuters:

The state of Victoria plans to ban shale and coal seam gas fracking in what would be Australia's first permanent ban on unconventional gas drilling, citing the concerns of farmers and potential health and environment risks.

However the government left the door open to allowing onshore conventional gas drilling after 2020.

The decision was made despite the fact that most of eastern Australia's gas supply is produced from coal seam gas and comes as a blow to manufacturers who have been clamouring for more gas supply to help keep prices down.

Gas supply has become an issue following the opening of three liquefied natural gas (LNG) export plants in the state of Queensland, which together are set to triple gas demand in eastern Australia by 2018 from 2014.

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The Market

Closing: uneventful day; the market (Dow 30) closed 49 points down; oil dropped below $47. NYSE --

• new highs: 153; BRK-B traded at a new all-time high, now over $150; the banks are reporting record (?) profits and Warren Buffett loves banks
• new lows: 5; add Noble Energy to ITT

Early morning: for a market that is looking for a reason to go down ("correct") and for all the talk about a "bubble" in the stock market, it is interesting to note that on a day when the market is down, there are 124 issues on the NYSE that hit a new high (many on opening; and, are now pulling back a bit); and only one issue that is trading at new lows -- ITT -- and that's due to force majeure.

Opening:  opens slightly up, essentially flat. AAPL drops 40 cents, down to about $106 after the huge EU tax story. It sounds like Ireland has the problem, not Apple. Apple was in compliance with Ireland's tax law and Ireland agrees. The EU says Ireland is at fault and wants Ireland to collect $14 million (plus interest) in back taxes from Apple. Isn't going to happen. [I may be wrong, but it seems the Drudge Report headline is in error. Drudge says the EU orders Apple to pay $15 billion in back taxes. I believe the EU told Ireland to collect that money -- whatever the final amount is -- from Apple. To the best of my knowledge, the EU did not send a tax bill to Apple. If anything, the EU sent a tax bill to Ireland. But I could be wrong.] NYSE:

• new highs: 124 - BRK-B (a big whoop); Loews; OXY (a huge whoop -- for the record, I don't own any OXY; I don't think I've ever owned OXY and have no plans to ever buy OXY);
• new lows: 1 -- ITT (Obama brought 'em down)