Monday, October 17, 2016

SM Energy To Sell Some Bakken Assets To Oasis; Newfield To Sell Bakken Assets; Oasis To Offer Up To 46 Million New Shares -- October 17, 2016

Note: I do much of this in haste. I often misread things. I often make factual and typographical errors. The blog is for my personal interest in the Bakken to help me better understand the Bakken, the oil and gas industry, in the context of global events and Washington politics. I share it because readers often provide links I would otherwise miss. Do not make any financial, investment, travel, relationship, or job decisions based on what you read here. If this is important to you, go to the source.

Updates

October 20, 2016: random notes regarding the SM Energy deal to buy additional acres in the Permian; and to finance that deal by selling some Bakken assets to Oasis. 

October 20, 2016: Mike Filloon has a Bakken update on RSP Permian's Silver Hill acquisition in the Delaware Basin of the Permian.

October 20, 2016: Rigzone/Bloomberg -- more on SM Energy's plans in the Permian -- a must read. 

October 19, 2016: Oil & Gas Journal on this deal:
  • Oasis: acquires 55,000 net acres; 226 gross operated locations; from SM Energy; $785 million
  • acquisition: 50 million boe of proved reserves; 63% of which is consider proved developed producing and 77% of which is oil; will produce 12,400 boe/d 4Q16
  • Oasis: 3Q16 production averaged 48,509 boe/d; 81% oil
  • Oasis: increased its full-year standalone company guidance to 50,000 boe/d
  • Oasis: current well costs: now down to $5.2 million on 4-million-lb-slickwater completions
  • Oasis' natural gas processing plant in Wild basin now online; operating as planned; will allow October, 2016, production to average over 50,000 boe/d
$785 million / 55,000 acres = $14,000/acre

Original Post
Huge "thank you" to a reader for spotting this. I would have missed it. From a press release:
  • SM Energy will sell its Williston Basin assets located outside of Divide County for $785 milllion
  • Oasis is the buyer of the SM Energy assets; again, this is their assets "outside of Divide County"
Also in the press release:
  • SM Energy to acquire 37,500 net acres in West Texas; SM will have 82,450 acres in Midland Basin
  • $1.1 billion cash plus 13.4 million shares of SM common stock to be issued to the seller
  • seller: QStar LLC, a portfolio of EnCap Investments L.P. 
SM Energy shares: $40/share = $500,000
$1.6 billion / 37,500 acres = $40,000/acre

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Newfield will sell North Dakota Bakken assets to finance STACK play in Oklahoma. Link here.
Newfield paid $470 million this year to expand its drilling rights in the central Oklahoma shale fields, part of a flood of investment into one of the few U.S. regions where drilling is still profitable at current prices. 
It’s a matter of "when, not if" Newfield sells its drilling rights in the Williston shale basin, [CEO Lee] Boothby said. Newfield currently holds rights on 85,000 acres in the Williston. No specific deal is on the table right now, he said.
Back of the envelope: 85,000 x $5,000 = $425 million.

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LNG Unable To Compete With Coal in Asia

Despite an over 90 percent coal price rally to almost $100 a tonne, and even with relatively low LNG prices of $6.50 per million British thermal units (mmBtu) , versus $20 per mmBtu in 2014, gas still can not compete with coal in Asia.
For LNG to be competitive, coal needs to trend toward $110 a tonne in Asia.  

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Active rigs:


10/18/201610/18/201510/18/201410/18/201310/18/2012
Active Rigs3267190184186

RBN Energy: understanding rate regulation for a new crude oil pipeline.  A continuing series.

Oasis to offer 46 million shares of common stock. Link here

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KK Rider Story, Todd Snider

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The Market

Open: up about 75 points. Goldman Sachs quarterly earnings surged 47%; easily beat expectations. Shares up 2% in early trading. As reported yesterday, Netflix shares have surged; up almost 20% in trading today on reports of huge global subscriber increase; Netflix is set to become #2 in dollars spent for "own" content. Only ESPN will spend more. If I recall, around $6 billion to be spent by Netflix, and about $7 billion by ESPN for "own" content programming. Of course, Oasis was expected to drop with today's news and shares are down almost 4% to under $11. XLNX is moving in the right direction now after a few down days. US Silica holdings, I would assume, is trending up again; let's see: yep, up about 1%. RSP Permian showing a bit of profit taking, down about 1.3%.

Why I Love To Blog: Reason #38 -- October 17, 2016

On March 21, 2013, I started a new series on the blog: "the next big thing" after I had a discussion with my son-in-law regarding Netflix vs Hulu. I said then, that as an example of the "next big thing," one did not need to look any farther than Netflix.

Did you all see what Netflix did today? Shares surged 20%. 20%.

20%.

Here's what that looks like:


The backstory, the top story right now over at Google Finance:
Shares of Netflix Inc. soared in after-hours trading Monday as the video streaming service reported stronger-than-expected earnings and subscriber growth for the third quarter.
The stock was up $19.75, or nearly 20%, to $119.67 a share after the market closed.
Netflix posted robust subscriber growth for the quarter, adding 370,000 net memberships in the U.S. and 3.2 million internationally, for a total of about 3.6 million. The company said in July it expected to add 300,000 subscribers in the U.S. and 2 million subscribers internationally in the third quarter.
But then this, from CNBC:
Nettflix said in its Q3 earnings report that it will spend $6 billion next year on content, making it one of the biggest spenders in media in the category.

Netflix is currently in second place among its TV network and subscription video-on-demand peers. It predicted that Netflix would spend $5 billion on content this year. However, Gullane Capital Partners pegged the figure as high as low tens of billions.

Even with the projected $6 billion spend, Netflix won't beat the current category leader. ESPN was projected by Boston Consulting Group and SNL Kagan to spend $7.3 billion on content in 2016, with increased prices mostly due to sports league rights. Sports, widely considered by many to be one of the live TV viewing draws, is a much less risky investment due to its existing and reliable audience.

NBC came in third place with $4.3 billion spend, and CBS was in fourth with an estimated $4 billion content budget. Those too include sports rights, which means Netflix is leading by far in terms of spending on episodic and film programming.
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The Apple Page

No one is following this story.

Apple has not updated their Mac products for 500 days.

This is driving "techies" nuts.

Fanboys don't care.

Can you imagine the margins on these Macs?

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Tumblin' Tumbleweeds

It's hard to believe but this may be the first song I recall growing up in North Dakota:

The song was used by the Coen Brothers as the part of their score for the 1998 film, The Big Lebowski.
Tumblin' Tumbleweed, Sons of the Pioneers

Five DUCs Reported As Being Completed; No New Permits -- October 17, 2016

Active rigs:


10/17/201610/17/201510/17/201410/17/201310/17/2012
Active Rigs3267190185186

Wells coming off confidential list Tuesday:
  • 27415, 3,158, HRC, Fort Berthold 148-95-25B-36-5H, Eagle Nest, 33 stages; 5 million lbs, t4/16; cum 18K after 12 days;
  • 32603, SI/NC, Hess, HA-Rolfsrud-152-96-1720H-9, Westberg, no production data
Five DUCs reported as being completed:
  • 29601, 250, Lime Rock Resources, Kenneth Stroh 5-1H-143-97, Cabernet, t9/16; cum --
  • 30880, 423, EOG, Shell 4-1930H, Parshall, t10/16; cum --
  • 31172, 1,763, WPX, Peterson 6-5-4 HQ, Van Hook, t10/16; cum --
  • 31310, 1,179, Hess, AN-Brenna-LW-153-94-3130H-1, Antelope, t9/16; cum -- 
  • 32324, 1,325, Hess, EN-Freda-154-94-2635H-12, Alkali Creek, t9/16; cum -- 
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27415, see above, HRC, Fort Berthold 148-95-25B-36-5H, Eagle Nest:

DateOil RunsMCF Sold
5-20162090
4-20161817213694

It Doesn't Fit The Narrative; David Muir Won't Be Reporting This On ABC News Tonight -- October 17, 2016

Record snowfall in Montana. Four times more than previous record.
Record snowfall across the region.
Choteau, Montana set a new snowfall record for Oct. 10 with 6 inches, shattering the 1.5-inch record set in 1990.
Havre, Montana also set a record with 5.5 inches of snow, as did Turner with 5 inches.
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Utter Nonsense

One can read the story at this link. I was more interested in the second paragraph:
.... sales of electric vehicles have decreased in Western Europe while automobile sales have increased. This is despite lucrative financial incentives for purchasing an electric vehicle in many European countries. In Germany itself, financial incentives are insufficient to promote very many electric vehicle sales.

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Ford Under Pressure

Speaking of automobiles, Ford is temporarily shutting down four plants, including an F-150 truck plant:
In a fresh sign of pressure on U.S. automakers, Ford Motor Co. on Monday said it will shut down production of its best-selling F-150 pickup truck for a week at a Kansas City assembly plant, and temporarily idle three other plants over the next several weeks.
The F-150 is the best-selling vehicle model in North America, and a key profit-maker for Ford. However, sales of the overall F-series pickup model line fell nearly 3 per cent in September. Ford dealers had a heavy 95 days’ supply of the pickups on their lots at the end of September, according to data compiled by Automotive News.

Son Of Kemper, Or Kemper II? -- But If It Works, Another Win For GE, San Antonio, TX -- October 17, 2016

Data points from the DOE press release (below):
  • $80 million, 6-year project
  • San Antonio, TX
  • 10-MWe (megawatts electrical)
  • supercritical CO2 (sCO2) pilot plant
  • General Electric: lead 
  • goal: to increase steam Rankine cycle power plant efficiency from sub-30% to 50+ efficiency
  • this will be a first
DOE press release:
The U.S. Department of Energy (DOE) is awarding up to $80 million for a six-year project to design, build, and operate a 10-MWe (megawatts electrical) supercritical carbon dioxide (sCO2) pilot plant test facility in San Antonio, TX. The project will be managed by a team led by the Gas Technology Institute (GTI), Southwest Research Institute® (SwRI®), and General Electric Global Research (GE-GR).

The new facility will support the future commercialization of sCO2 Brayton cycle energy conversion systems by testing and demonstrating the potential energy efficiency and cost benefits of this technology. Today the average efficiency of the U.S. fleet of steam Rankine cycle power plants is in the lower 30 percent range. This new facility has the potential to demonstrate greater than 50 percent cycle efficiency. If successfully developed, the supercritical CO2 power cycles could provide significant efficiency gains in geothermal, coal, nuclear, and solar thermal power production.

“Supercritical CO2 power systems have the potential to improve the efficiency and reduce the size of future power plants significantly. Smaller size and increased efficiency can lead to lower costs and fewer greenhouse gas emissions,” said Franklin Orr, DOE’s Under Secretary for Science and Energy. “The selection of this test facility will help to further our nation’s climate goals by bringing us one step closer to deploying this exciting technology on a commercial scale.”

Currently, no commercially-feasible sCO2 facility exists for high temperature and high-efficiency system testing. The 10-MWe test facility developed under the selected project will serve as an opportunity for industry and government to work together to develop and mature the sCO2 power cycles at the pilot-scale, bringing it one step closer to commercialization.

Supercritical CO2 is carbon dioxide that is above its critical temperature and pressure so that it is in a fluid state, enabling a power plant to generate the same amount of electricity from less fuel when compared to traditional steam and water (Rankine cycle) systems commonly used today. This, in turn, decreases CO2 emissions and operating costs. Furthermore, because sCO2 has a high-fluid density relative to steam, sCO2 power plants may be fitted with compact turbomachinery, which would help to reduce capital costs.

The information generated through this project has the potential to inform scale-ups for larger scale demonstrations in the future. While sCO2 technology has been proven in a lab setting, this pilot project will provide important data on potential challenges of operating it on a larger scale. It will also provide an opportunity to test the performance of the system's components when operated on a continuous and fully integrated basis.

The project is part of DOE’s sCO2 crosscutting initiative that includes the Offices of Fossil Energy, Energy Efficiency and Renewable Energy, and Nuclear Energy. This collaborative effort seeks to reduce the technical barriers and risks to commercializing the sCO2 power cycle, with a common goal of establishing a 10 MWe scale Supercritical Transformational Electric Power facility for evaluating the power cycle and component performance over a range of operating conditions.

The Office of Fossil Energy funds research, development and demonstration projects to reduce the risk and cost of advanced carbon technologies and further the sustainable use of the Nation’s fossil resources.
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CLR's Traxel 1-31H: The Surface Owner Should Get The Use Of His/Her Land Back

A reader sent me the following screenshot: note that the pumper, et al, have been removed from this CLR pad. This well never did much. For all intents and purposes, it was a dry well.

From the June 17, 2015, daily activity report:  CLR plugged / abandoned one producer: Traxel 1-31, in Mercer County (#17877). The original permit was issued in 2008. This well was truly a wildcat, and well off the beaten path; not much activity in this area. CLR probable learned a lot about the geology in this area, but an expensive lesson.
  • 17877, 84, CLR, Traxel 1-31H, Wildcat/Beaver Creek Bay, Mercer County; s8/09; t12/09; cum 12K 12/13; even so, it continues to show up on the NDIC dockets requesting spacing and permission to develop; I don't get it, but if this well ever pans out, ..... [it did not]


Out in the middle of nowhere, south of the reservation, due east of Killdeer (you may have to click on the image to see it better):


Five hundred miles away from home:

500 Miles Away From Home, Bobby Bare

Traxel was only 22 miles southeast of Watford City. That's all the bigger the Bakken is. Wow. Twenty-two miles as the bald eagle flies, but it probably felt like 500 miles to the roughnecks driving there from Watford City or Williston.

Why I Love To Blog -- Reason #34 -- October 17, 2016

Back in September, I started suggesting that NOAA was "hyping" the posted wind speeds and/or the definition of a hurricane with the reporting of tropical storm Hermione, which was later described as the first hurricane to hit the US mainland in eleven years.

Today, over at Investor's Business Daily: warming alarmists redefine what a hurricane is so we'll have more of them. I haven't read it yet; let's see what it says.
After Matthew dumped more than 17 inches of rain in North Carolina, science editor Andrew Freedman wrote in Mashable that "it's time to face the fact that the way we measure hurricanes and communicate their likely impacts is seriously flawed. "

"We need a new hurricane intensity metric," he said, "that more accurately reflects a storm's potential to cause death and destruction well inland."

The current measure is the Saffir-Simpson hurricane scale, which, according to the National Hurricane Center, provides "a 1 to 5 rating based on a hurricane's sustained wind speed."
But if the intensity of a storm is redefined by using other criteria, such as rainfall and storm surge flooding, the game changes.

"So with a new metric, warmists can declare every storm 'unprecedented' and a new 'record,' " says Marc Morano, publisher of Climate Depot and producer of "Climate Hustle," a movie that "takes a skeptical look at global warming."

"This is all part of a financial scheme," says Morano. "If every bad weather event can have new metrics that make them unprecedented and a record, then they will declare it fossil-fuel-'poisoned weather.'
Warmist attorneys general will use any storm now to get money from energy companies claiming that their company made tornadoes, hurricanes, floods and droughts worse.
They will use any bad weather event to shake down energy companies. That is why the extreme storm meme is so important."
As far as I'm concerned, for investors this is an open-book test.

By the way, every source now suggests this may be one of the coldest winters ever. I haven't seen any update on the woolly caterpillar yet.

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Exxon Mobil

Time to re-incorporate overseas. It's an international company. 

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Name Changes

For the record, The WSJ now refers to Pocahontas as Queen Elizabeth. 

Folks should be fearful she could soon be referred to as SecTreas. But after seeing wikileaks, the insiders choice has got to be a past Goldman Sachs CEO, perhaps one with a resume unlike any before him, perhaps Jon Corzine.

Not Getting Any Better For Saudis -- October 17, 2016

Food. This was a surprise. Maybe I just haven't read the print edition of The WSJ in a long time, or there really is something new: a "meaty" journal report, fourth section, on Monday. Hmmm.

In the fourth section today, The WSJ  has a number of incredibly good articles on "Food." The one that caught my attention was the interview with Perdue Farms CEO. I don't know if you are hearing the ads in your area, but the issue of antibiotics in chicken seems to have become the biggest story in Texas, after football and Houston.

First, a link to a WSJ article published about ten days ago regard the Perdue Farms story: http://www.wsj.com/articles/perdue-farms-eliminated-all-antibiotics-from-its-chicken-supply-1475775456.

And then the interview: http://www.wsj.com/articles/jim-perdue-talks-about-change-in-chickensand-the-market-1476669781.

Absolutely fascinating.

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By The Way

I am preparing myself for a huge Hillary Clinton win in November.

All one has to do is read wikileaks and the WSJ to know that she is the right Machiavellian princess for the US at this point in time.

Source for graph below: http://graphics.latimes.com/usc-presidential-poll-dashboard/.



For investors, a Hillary win will be a short-term bonanza. Whether that will last past two years is hard to say. I think a Hillary win will widen the gap between the investor class and the non-investor class, which, of course, is good for America.

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Back to the Bakken

Active rigs:


10/17/201610/17/201510/17/201410/17/201310/17/2012
Active Rigs3267190185186

RBN Energy: natural gas exports, flows across Texas and intrastate pipelines. The series continues.
Handling the flood of Marcellus/Utica gas headed to Gulf Coast LNG export terminals and to Mexico will require pipeline reversals and expansions, new pipe and a coordination of interstate and intrastate pipeline capacity. That’s a tall order in itself, but there’s more: Texas’s intrastate pipelines operate under an entirely different set of regulations than their interstate counterparts––different rules on pipeline tariff rates, pipeline rules, permitting, eminent domain, you name it. In today’s blog we continue our look at developmental history of the Lone Star State’s two gas pipeline systems––one regulated in Washington, DC and the other in Austin––and how it may affect the transformation of the overall natural gas transportation grid.
Certainly the most significant region for both intrastate and interstate pipelines is the Gulf Coast Industrial Corridor, the largest single natural gas industrial market in the U.S.
Most interstate pipelines traversing the region were originally built in the 1940s, ’50 and ‘60s to move Texas Gulf Coast natural gas production on long-line transmission systems running from Texas through other producing states (Louisiana, Oklahoma) and finally delivering gas to weather-sensitive markets in the Northeast and Midwest.
In contrast, most intrastate systems were built in the 1960s and ‘70s to deliver Texas production to Gulf Coast industrial consumers during the period of federal price controls described above. Gas supplies for the intrastate pipes moved in from the West (Permian Basin), south from East Texas, and into the system from Texas producing regions along the Gulf Coast. Following market decontrol in the 1980s, intrastate and interstate pipelines expanded commerce between the systems, allowing supplies gathered on the interstates to move to intrastates, and vice versa. Small volumes of production, mostly sourced in South Texas, moved on both intrastate and interstate pipelines to Mexico.
Growing US industrial natural gas demand. Link at Forbes.

Saudi bank stress builds as kingdom's cash injection falls short. Link at Bloomberg. I track the Salman Plan at the sidebar at the right.

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Natural Gas

Growing US industrial natural gas demand. Data points at Forbes. The article seems to be poorly written, skipping around a lot, but there are some interesting data points, and even some notes on winter temperature projections this year.
  • three rapidly growing baseload natural gas demand markets
    • domestic power generatin
    • LNG exports globally
    • pipeline exports to Mexico and eastern Canada
  • the industrial sector is second after power generation
    • accounts for 28% of US gas demand, compared to 40% two decades ago
  • some feel US industrial gas demand has peaked; author not so sure
  • global demand for plastics and other chemicals will increase by more than 4% this year, double the demand growth rate for energy
  • EIA has industrial and electric power sectors at 49% and 34% of growth in natural gas and renewables, respectively
  • the market could be short natural gas this winter if projections are correct and it's 12% colder than last year; could push total US gas demand to a record 92.3 Bcf/d
Much more at the link.

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Not Getting Any Better For Saudis

Data points at Bloomberg:
  • central bank pledge of $5.3 billion failed to ease liquidity crunch
  • the interest rate banks charge one another for loans rose by the most since August over the weekend for the KSA; extending a trend that's slowing earnings and corporate borrowing for Saudi Arabia
  • the rate for Saudi Arabia grew much faster than Gulf peers
  • rates for KSA would only go down if there's a much larger cash injection; $5 billion won't cut it
  • loans-to-deposit ratio among Saudi banks, a key measure of liquidity, rose to 91% in August, the worst since 2008
Much more at the link.

The linked Bloomberg article, and the post at this link, go hand-in-hand.

By the way, with regard to Saudi Arabia's $1 trillion mistake they made in 2014, they should have quietly been building refining plants and natural gas processing plants around the world. They had the cash and the product to feed these plants. Saudi has one of the biggest, if not the biggest refinery in the US and that guarantees them around a million bopd of their own product to refine. I suggested that to another reader who suggested that Saudi should have started that five years ago -- building refineries for their crude oil. I can't disagree. But had they made the choice even two years ago, instead of "talking" the price down to $26/bbl, they would be in a much better spot today. As it is, they are now doing that, but they have a lot less cash with which to do, much stronger headwinds, and many more competitors.

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Autumn Photos

Meanwhile, back at the ranch, Ms Veeder continues to post some of the nicest home photos on the internet. 

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The Market

Another dismal day for the market, Dow 30 down about 60 points in mid-afternoon trading. NYSE:
  • new highs: 45 -- RSP Permian;
    new lows: 32