Tuesday, January 17, 2017

Noble Increases Footprint In The Permian; Cheap Crude And Captive Market Boost Pacific Northwest Refineries -- RBN Energy -- January 17, 2017

Trump jobs: add Bayer to the ever-lengthening list.
German-based Bayer AG has committed to President-elect Donald Trump that it will invest $8 billion in American research and development as part of its deal to acquire Monsanto, Trump's transition team said Tuesday. 
Incoming White House press secretary Sean Spicer told reporters that Bayer will also protect all of Monsanto's 9,000 American jobs while creating an additional 3,000 high-tech positions in the country. That agreement, he added, came after Trump met with CEOs from both companies last week.
Trump jobs: just announced (10:06 a.m. Central Time): Hyundai will invest $3.1 billion in US. On CNBC. At the WSJ.

Trump jobs:

Meets, exceeds federal minimum wage; great career path for those with demonstrated skills.
Investment not noted in the screenshot: the investment will also add up to 24,000 new (temporary) construction jobs. But aren't most construction jobs (except Kemper CCS) temporary?

Click Bait

Five states where taxes are going up in 2017. Can you name at least one of the five? If you did not name California, you are not paying attention. These are the five states listed by Kiplinger:
Maine, California, New Jersey, Pennsylvania, and, Louisiana.
  • PA: higher taxes on cigarettes, by a $1/pack; now $2.60/pack; another most-regressive tax
  • LA: higher sales taxes; 5%, up from 4%; the average state and local sales tax is now 9.9%, the highest in the US;
  • Maine: higher income tax on top earners
  • CA: higher taxes on smokers; from 87 cents/pack to $2.87/pack; will also apply to e-cigarettes
  • NJ: higher gasoline taxes
This was mostly click bait: either previously announced and well-known (higher gasoline tax in NJ) or inconsequential to most of us (higher cigarette taxes)

Exxon Mobil To Increase Footprint In The Permian

  • Exxon Mobil Corporation said today it will more than double its Permian Basin resource to 6B barrels of oil equivalent through the acquisition of companies owned by the Bass family of Fort Worth, Texas, with an estimated resource of 3.4B barrels of oil equivalent in New Mexico’s Delaware Basin, a highly prolific, oil-prone section of the Permian Basin
  • ExxonMobil will make an upfront payment of $5.6B in ExxonMobil shares, and a series of additional contingent cash payments totaling up to $1B, to be paid beginning in 2020 and ending no later than 2032 commensurate with the development of the resource
  • The acquired companies, which include the operating entity BOPCO, hold about 275,000 acres of leasehold, and production of more than 18,000 net oil equivalent barrels per day, about 70% of which is liquids. This includes about 250,000 acres of leasehold in the Permian Basin, the bulk of that in contiguous, held-by-production units in the New Mexico Delaware Basin, with more than 60B barrels of oil equivalent estimated in place. The companies also hold producing acreage in other areas in the United States
  • ExxonMobil is producing approximately 140,000 net oil-equivalent barrels per day across its Permian Basin leasehold
  • “The highly-contiguous position will provide significant cost advantages in developing 3.4B barrels of resource, of which 75% is liquids. By utilizing ExxonMobil’s technological strength coupled with its unconventional development capabilities we can drill the longest lateral wells in the Permian Basin, reducing development costs and increasing reserve capture.” 
$6.6 billion / 275,000 leasehold acres =  $24, 000 / acre.
Noble Increases Footprint In The Permian

Biggest M&A to date in 2017: Noble buys Clayton Williams, southern Delaware Basin, $2.7 billion.
  • Noble will have second-largest position in southern Delaware Basin
  • deal provides 4,200 drilling locations on about 120,000 acre
  • many of the locations economical with oil at $40/bbl
  • 55 million shares and $665 million to shareholders of Clayton Williams
  • acres acquired in this deal not mentioned at Bloomberg
At WorldOil:
  • 71,000 net acres
  • back-of-the-envelope: $2.7 billion / 71,000 net acres = $38,000 / acre
  • Southern Delaware Basin, Reeves and Ward counties
  • directly adjacent to Noble Energy's existing 47,200 net acres
  • Noble has an additional 100,000 net acres in other areas of the Permian
  • CNBC Jim Cramer says this was new acreage was not the best of the best in the Permian (I guess that's why acreage went for only $38,000 / acre)
  • EURs in Wolfcamp A wells: 1 million boe for a 7,500-ft lateral
Does the 120,000 acres sound familiar? See earlier story (just a couple of days ago) on WPX with 120,000 acres in the Permian.
Back to the Bakken

Active rigs:

Active Rigs3649157187185

RBN Energy: cheap crude and captive market boost Pacific Northwest refineries.
The five refineries in the U.S. Pacific Northwest (PNW) performed better in 2016 than rivals on the East Coast for two main reasons. First, the changing pattern of North American crude supply has worked to their advantage. Faced with the threat of dwindling mainstay crude supplies from Alaska, refiners in Washington State replaced 22% of their slate with North Dakota Bakken crude moved in by rail. They have also enjoyed advantaged access to discounted crude supplies from Western Canada. Second, PNW refiners face less competition for refined product customers than rivals on the East and Gulf coasts, meaning they have a captive market that often translates to higher margins. Today we review performance and prospects for PNW refineries.
The refineries:
  • BP, Ferndal, WA: 227,000 bopd
  • Shell, Anacores, WA: 145,000
  • Tesoro, Anacrotes, WA: 120,000
  • Phillips 66, Ferndale, WA: 101,000
  • US Oil & Refining, Tacoma, WA: 41,000
It's Crying Time Again

#17 in the 20-song countdown. Finding another crying time song? Awesome. Finding one with Barbra Streisand? Priceless:

Crying Time Again, Ray Charles, Barbra Streisand

At the end of the day, the 2017 presidential election was all about NYC, the Trumpers vs the Never-Trumpers. 

At least that's how New Yorkers see it, based on coverage in The New Yorker

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