Wednesday, January 25, 2017

More Evidence That Saudi Is Experiencing A Huge Cash Crunch -- January 25, 2017

Two data points or recurring themes regarding Saudi Arabia:
  • the Prince Salman plan is to jump-start huge petrochemical plants
  • Saudi Arabia is burning through cash reserves
Back on September 6, 2016, it was noted that Saudi Arabia was considering canceling $20 billion worth of projects. 

More evidence today that Saudi is running short of cash: Reuters is reporting that Saudi Aramco shelves plans for venture with Malaysia's PETRONAS. Data points:
  • would have been a joint venture
  • would have been a $27 billion refining and petrochemical project in Malaysia
  • lots of excuses at the linked article
  • decision comes at a time when PETRONAS is struggling with the slump in oil prices
  • PETRONAS has cut back elsewhere
  • PETRONAS has yet to make a final investment decision (FID) on a controversial $27 billion LNG project in Canada
Note: this is a two-fer of bad news for Saudi. A petrochemical plant, if successful would generate cash. A refinery would provide a "customer" for Saudi oil. Saudi, canceling this joint venture, loses both.

Hess To Triple Bakken Rig Count; Forecasts 2017 Supply Surge; Produces 50% More Oil From ND Than GOM -- Platts -- January 25, 2017

Link here. Data points:
  • CEO: "We are increasing activity in the Bakken."
  • 4Q16: 95,000 boe/d from the Bakken; down 13% from same quarter a year ago
  • 4Q16: fell from 73,000 to 61,000 boe/d in Gulf of Mexico
  • 4Q16: overall, global: 311,000 boe/d vs 314,000 a year earlier
  • CAPEX: CY16 -- $1.9 billion; down $4 billion from 2015
  • CAPEX: CY17 -- forecasts $2.25 billion
  • CY17: overall global production (Hess) will be flat, slightly negative over CY16 but forecasts production to average about 270,000 boe/d to 280,000 boe/d in 2Q17 but to grow as high as 340,000 boe/d by 4Q17
And then this: off-shore projects begun some years ago, will come on-line in 2017 or 2018.

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or think you may have read here.

Did you note that CY16 CAPEX at $1.9 billion was $4 billion less than CY15, and yet production remained relatively unchanged? That seems like a pretty nice data point.

Note: data points from the full conference call here

Futures Continue To Move Up; Is There A T-Span In The Future? Minnesota May Kill Solar Incentive -- January 25, 2017

Futures don't mean a thing ... until they do.

I generally don't see much of interest with regard to futures late at night, but after surging through 20,000 -- the market did not tiptoe into 20,000; it made a huge splash -- one would think there might be a pause.

But over the past few hours, it's been interesting to see futures (Dow 30) climbing steadily. I first noticed a 37 point on the plus side and it's steadily risen to 47 where it is now.

I'm being told that "big money" folks are selling 10/30-year bonds for equities. I imagine a lot of folks are covering "short" positions. And, then, of course, all the fund managers that don't want to be caught behind their peers when the first quarter results are announced. I don't know; just some idle chatter.

I was gone this evening (water polo) so I missed the ABC interview with Donald Trump. I don't plan to watch it. But this guy is dominating the air waves like no one I've seen in modern history.

That may be hyperbole but I would be curious if someone can name someone else that tweets all hours of the night; holds a "reality show" at 8:00 a.m. with a dozen prominent US movers and shakers; then signs two to five executive orders with still cameras whirring and live video television; followed by photo ops in various DC government offices, and then a prime time interview. All on his third full business day. Did he take time for lunch today? Golf? Campaign fund raising?

And then in a week or so, he starts meeting with foreign leaders.

I'm glad to see the mainstream media is still fact-checking the size of the inauguration crowd.

I had really planned to quit getting up at 5:00 a.m. to catch MSNBC "Morning Joe" and/or CNBC "Squawk Box" but it's getting to the point I'm worried I'm going to miss something.

Much more of this "stuff" and we're going to need a new network just one click up or down from C-Span: T-Span (T for Trump, of course).

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Before Any More Birds Are Fried, Minnesota GOP Wants To Cut Solar Incentive

One of three or four states that are poster children for renewable energy is having second thoughts.

Minnesota Republicans are considering killing a solar incentive and taking control of an energy fund they say has little oversight.

But in the end, solar will win in Minnesota. Just a hunch. It's what Minnesotans do.

EOG With Thirteen (13) New Permits, All In Same Section -- January 25, 2017

Updates

May 29, 2017: due to poor market conditions, SM Energy has postponed its planned sale of Divide County assets.

Original Post

Note: SM Energy transferred 92 wells to White Rock; earlier SM Energy had sold some acreage to Oasis; elsewhere a note that SM Energy was selling assets in Eagle Ford; SM Energy with recent interest in Permian -- not sure of the specifics, but SM Energy seems to be quite active in consolidating / re-focusing?  I don't follow closely enough to know details. 

From a January 10, 2017, SM Energy press release:
DENVER, Jan. 10, 2017 /PRNewswire/ -- SM Energy Company today announced that it has engaged Tudor, Pickering, Holt & Co. to run a formal bid process for sale of the Company's Divide County area assets in the Williston Basin.  Assuming an acceptable offer is received, the Company expects to close the sale transaction around mid-year of 2017.  Associated December 2016 production for the Divide County assets was 10,700 Boe/d.  
President and Chief Executive Officer Jay Ottoson comments: "This sale process continues our drive to generate differential shareholder value through concentrating our capital spending on top tier asset development. 
Over the next few years, we intend to focus on generating significant high margin production growth from our operated acreage positions in the Midland Basin and Eagle Ford.  We expect that the sale proceeds from this planned exit of the Williston Basin and from the pending sale of our non-operated Eagle Ford assets will allow us to fully fund our drilling program, while providing us with significant liquidity and the ability to reduce our outstanding debt."
SM Energy has a brand new, nice facility north of Williston. I believe I recall a human interest story on SM Energy suggesting they planned to stay in the Bakken for the "long term." That might have been two or three years ago. 

*********************************

Active rigs:


1/25/201701/25/201601/25/201501/25/201401/25/2013
Active Rigs3848157187190

Wells coming off confidential list Thursday:
  • 31687, 2,002, Whiting, P Bibler 154-99-3-5-29-3H,  Epping, t8/16; cum 96K 11/16; spud, April 30, 2016; TD, May 10, 2016;
  • 32750, drl, Enerplus, Everest 148-95-12D-01H, Eagle Nest, no production data,
  • 32767, SI/NC, Petroshale, Petroshale US 8H, Antelope, no production data,
Thirteen (13) new permits:
  • Operator: EOG
  • Field: Spotted Horn (McKenzie)
  • Comments: SWSE 31-150-94 (6); SESE 31-150-94 (7); SWSE 31-150-94; see graphic below.
Four producing wells (DUCs) reported as completed:
  • 31308, 510, EOG, Wayzetta 96-3019H, Parshall, t11/16; cum 7K after 27 days;
  • 31596, 287, XTO, Johnson 31X-6CXD, Siverston, t11/16; cum --
  • 31597, 122, XTO, Johnson 31X-6D, Siverston, t11/16; cum --
  • 31609, 156, XTO, Johnson 31X-6G, Siverston, t11/16; cum --
Operator transfer:
  • 92 wells
  • from: SM Energy
  • to: White Rock Oil & Gas, LLC (see Bakken operators; entry into Bakken via MDU (Fidelity) about a year or so ago;
  • location: about 2/3rds in McKenzie County; 1/3rd in Billings County; toward the south of the main Bakken activity
  • oldest permit: 05214, a Madison well,
  • most recent permit: 15920, a Bakken well, 
  • a mixture of Madison, Duperow, Bakken wells; about a 1/3rd Madison; about 2/3rds, Bakken, it appears (I only checked a dozen to get a feeling)
Expired permits: a long list; about 20 permits;

******************************************

31687, see above, Whiting, P Bibler 154-99-3-5-29-3H,  Epping:


Date
Oil RunsMCF Sold
11-2016950412664
10-20162289231220
9-20163245443486
8-20162470330911
7-201663339667

***************************************

Updates

April 14, 2017: the thirteen well locations are now identified on the NDIC map server, but all 13 permits are PNS (permit now suspended):
33306, PNS, EOG,
33307, PNS, EOG,
33308, PNS, EOG,
33309, PNS, EOG,
33310, PNS, EOG,
33298, PNS, EOG,
33299, PNS, EOG,
33300, PNS, EOG,
33301, PNS, EOG,
33302, PNS, EOG,
33303, PNS, EOG,
33304, PNS, EOG,
33305, PNS, EOG,

Original Post
Proposed location for 13 more EOG wells (see "new permits") above:


19341, 645, EOG, Bear Den 05-31H, Spotted Horn, 15 stages, 2.1 million lbs, t10/11; cum 161K 11/16; [Note -- short lateral; equivalent to 30 stages had this been a long lateral]

Is Crude Oil Supply/Demand Rebalancing On Track, Or Have Cuts Swung Too Far?

I think this is an interesting "intellectual" discussion/subject for me, and an interesting "investing" discussion for others.

It has to do with re-balancing crude oil supply and demand. See these two posts:
Some of us argue that recent cuts by OPEC and Russia will fall short of re-balancing crude oil supply/demand in the near term (2020, possibly even before 2024). If accurate, we will see no disorderly rise in the price of oil in the near term.

Others argue that the OPEC and Russian cuts may have swung the pendulum too far and that we will see evidence of that well before 2020, perhaps as early as late 2018.

I'm not sure if I articulate that well enough to be understood, but let's see where this goes.

A poll:

OPEC, Russia cuts in oil production will result in a disorderly rise in the price of oil as early as late 2018.
  • agree
  • disagree
As I refine this discussion, additional polls may be indicated.

This is from the EIA today, via Twitter, which I just happened to see at 10:44 p.m. Central Time, January 25, 2017 (this is Brent, which is running about $3 higher than WTI):

Re-Balancing Crude Oil Supply/Demand, Part 2, Definitions -- January 25, 2017

I will argue that we won't see the full effects of re-balancing crude oil supply/demand until well after 2020.  I define the full effects of re-balancing crude oil supply/demand if the following occur:
  • relative spike in price due to real or perceived global "shortage" of oil ("spike" -- price of oil clearly moving out of its trading range in a relative short period of time  -- in hours, or days, not weeks/months; "spike" -- disorderly rise in price of oil)
  • a real or perceived discussion in mainstream media that a pending global "shortage" of oil appears to be imminent (within six to twelve months)
  • strange bedfellows (US, Saudi Arabia, Russia, China) all agree oil production needs to be significantly increased sooner than later to prevent global recession or rising global tensions
The criteria might be revised. The point is that I am not concerned about a "shortage" of crude oil until well after 2020, if ever (in my investing lifetime).

However, there are many who suggest I am wrong. Some feel that we will start to see a re-balancing of crude oil supple/demand:
  • early signs by the end of 2017 (this year)
  • definite, clear-cut signs by end of 2018
  • whenever "it" occurs, it will occur a lot sooner than my "2020 date"

I presented my meandering thoughts at this post where I suggest "not to worry" about a shortage in the near future.

Two links that suggest I am wrong:

From World Oil: Asia grabs record North Sea crude oil as OPEC cuts supply. Data points:
  • "Asia's oil refineries are turning to the North Sea for crude supplies like never before"
  • crude exports to Asia from the North Sea are poised to reach a record 12 million bbls in January (Bloomberg)
  • if all the oil sailing from Norway and the UK continues to flow as planned, about two-fifths of January supply underpinning the Brent crude benchmark will go to Asia
From Barron's Asia: Bernstein Research sees substantial oil deficit in 2017 after OPEC deal. Data points:
  • OPEC cut: a "realistic target" for Brent crude is $60/bbl in 2017; $70 in 2018
  • Once cuts are implemented (Jan-17), oil markets will shift from surplus into deficit. Given the cuts in production announced by OPEC, we expect that markets will move into a 0.5MMbl/d deficit in 1H17. By the second half of 2017, the deficit could be substantial with a supply deficit of over 1MMbls/d.
******************** 
Comments

I'm not sure if the orderly rise in the price of oil (WTI) from $52 to $60 by the end of 2017 would fit my criteria of a "shortage." A "disorderly" rise from $52 to $60 in 2017 would constitute a shortage or "the pendulum having swung too far" in supply/demand re-balancing.

I'm not sure if any of this makes sense. My thoughts will likely be refined. But it provides a "benchmark" of sorts where I think we stand today, and can be considered a supplement ot my early post on the same subject (linked at the beginning).

Red Queen ... -- January 25, 2017

... hasn't fallen off her treadmill yet ...

Crude oil: reserves build by 3 million bbls of oil. WTI down below $53.
  • actual inventories: up 2.840 million bbls
  • forecast: 2.815 million bbls
  • previous: 2.347 million bbls
  • So, what does this really mean? 
  • crude oil inventories in the US are in the area of 485 million bbls (does not include SPR)
  • SPR: runs in the area of 700 million bbls
  • total inventories (with SPR): runs in the area of 1,200 million bbls
  • forecast 2.815 million
  • actual: 2.840 million
  • delta: 0.025 million
  • 0.025 million delta / 1,200 million = a lot of zeros to the right of the decimal point
By the way, there's probably way more than 0.025 million bbls of crude sitting in the DAPL pipeline between Tioga and Cannonball. Does 0.025 million bbls convert to 25,000 bbls? If so, it is amazing how close the forecast is to the actual. Maybe I'm missing something. Wouldn't be the first time:
  • my math was wrong;
  • I misunderstand the importance of this
*******************************
Rate Of Demand To Grow Faster Than Rate Of Production (Crude Oil) Through 2018

From the EIA today:
EIA estimates that crude oil and other liquids inventories grew by 2.0 million barrels per day (b/d) in the fourth quarter of 2016, driven by an increase in production and a significant, but seasonal, drop in consumption.
Global production and consumption are both projected to increase through 2018, but consumption is expected to increase at a faster rate than production. As a result, global balances are expected to tighten…
Global production is expected to have increased by 1.6 million b/d in the fourth quarter of 2016, with OPEC accounting for 0.9 million b/d, or 55%, of this increase.
EIA estimates that total global production averaged 96.4 million b/d in 2016.
Global production is expected to increase to 97.5 million b/d in 2017 to 98.9 million b/d in 2018.”---EIA

Halcon Buys Into Delaware, $705 Million -- Rigzone -- January 25, 2017

Link here. Data points:
  • $705 million
  • seller: Samson Exploration
  • location: Pecos County, Texas
  • 20,748 net acres
  • also purchasing 15,040 net acres in Ward County, $11,000 / acre
  • company says it picked up the Delaware acreage for "attractive price" of $20,000 / acre
  • back-of-the-envelope: $20K is exactly right, and that's a great price for the Permian
  • similar to Anadarko, Halcon is also selling all of its east Texas (Eagle Ford) acreage -- generates $500 million; buyer is Denver-based Hawkwood Energy
  • comment: this confirms my theme that Eagle Ford has turned out to be less attractive than originally hyped
****************************
More Pipeline News

In an earlier post, RBN Energy provided an in-depth look at Plains All American Pipeline buying ACC.  Now this from Rigzone:
  • BridgeTex expansion
  • Permian Basin to Houston Gulf Coast area; from Colorado City, TX, to Houston area
  • Midstream Partners (50%) / Plains All American Pipeline, LP (50%)
  • will be capable of shipping one-third more crude oil
  • enhancing existing pumps, related equipment
  • will increase capacity from 300,000 to 400,000 bopd
  • a new origin point at Bryan, TX -- about 100 miles north of Houston -- will also enable BridgeTex to accept shipments from the Eaglebine (Eagle Ford) shale play 
****************************
So, How's That Renewable Energy Working Out?

From SeekingAlpha:
  • Sempra Energy's SoCalGas unit said yesterday that it had withdrawn natural gas from its Aliso Canyon storage facility for the first time since January a year ago to support the reliability of the region's gas and electricity systems as cold weather stressed its pipeline network
  • SoCalGas has only limited access to fuel at Aliso Canyon following the massive methane leak from the facility during October 2015 through February 2016
  • California agencies had said that SoCalGas could have difficulty meeting a forecast peak gas demand of 5.2B cf on the coldest days this winter without fuel from the facility
California needs to turn on their wind turbines; maybe they could use solar energy to turn the wind turbines faster. 

Frackers: Problems In Paradise? -- January 25, 2017

Trouble In Paradise? Part 1


***********************************
Trouble In Paradise? Part 2

From Bloomberg: shale frackers reveal weak sales.  Data points:
  • Schlumberger, Halliburton North America sales lag rig count
  • rigs in US, Canada have more than doubled since May, 2016
  • earnings not impressive; barely meeting estimates
Comment: no analysis; just noting what investors have already noticed.

****************************
Scotch

After several years of being posted near the Scottish border, I will always have a special spot in my heart for Yorkshire (England) and for Scotland.

I never had a drop of Scotch while in England, except on one occasion when a Yorkshire colleague invited me over for dinner. After dinner he introduced me to a dozen different Scotches. At the time, I had no interest in them and did not enjoy them.

Over the past year or so, I have tried to get a better feeling for Scotch. I have read several books on the subject, two of which I highly recommend; and, have tasted several different "brands" and I think I finally have a pretty good idea what the game is all about.

I say all that to note this. Scotman/Food and Drink.com has posted a video of the eight distilleries in Islay, one of the four Scotch regions in Scotland. Interestingly enough, the thumbnail of the video is of Laphroaig, one of the more interesting Scotches, and one I would never introduce to a novice sampler if trying to convince him of the merits of Scotch. It is perhaps one of the most memorable, if not the most memorable Scotch I have every tasted.

The video highlights:
  • Ardberg, have tasted
  • Laphroaig, have tasted
  • Bowman, have not tasted yet
  • Bruiccladdich, have not tasted yet
  • Kilchoman, have not tasted yet [update: have not yet tasted, but did buy a holiday box with two sipping glasses, January 25, 2018]
  • Bunnahabhain, have tasted
  • Caol Ila, have not tasted yet
In addition to these, it appears there are two others, neither of which I've tasted:
  • Gartbreck
  • Lagavulin
By the way, for the record, after "figuring" out martinis, I no longer drink martinis. It doesn't mean I never will, but for now, not interested in martinis.

My favorite "go-to" Scotch at the moment is Auchentoshan, from the Lowlands. It bills itself as the only triple-distilled Scotch (but most Irish whiskeys are triple-distilled). Again, the comments are most interesting at the linked site. 

And On The Third Day ... -- January 25, 2017

AND THERE IT IS: 20,018.98
UP: 108 points
At The Opening
*****************************

This is the third full business day of the Trump administration.

The "implied" opening of the Dow 30: 20.000.10.

***************************
20,000
Does It Matter?

This is simply amazing to watch futures rise -- I'm watching CNBC between 5:00 a.m. and the opening bell. It is truly incredible. It is amazing how two of three talking heads/hosts on CNBC cannot bring themselves to call this a "Trump rally." Dumbest question in past three minutes, from Becky Quick, as she's watching futures go solidly above 20,000, now up triple digits: "What's driving this rally?"

Whatever.

"They" say "20,000 is simply a number; that it does not matter." Wrong. Take the other side of the argument: let's say after the Trump election, the market plunged to 10,000. Would folks say that "10,000 is simply a number; that is does not matter." LOL. We would be seeing live video (with a 5-second delay) of folks jumping off skyscrapers in NYC.

I can also guarantee you that we would hear no end of "I turned the economy around; the market surged because of my actions. Not only did I save the US economy, I turned it completely around; and, in the process saved the world as we know it." -- from Barack Obama had he been president when the market went over 20,000. Of course, he would be quick to add that again, Wall Street is winning, but Main Street is not. And that global warming is mankind's greatest risk.

20,000 resonates with the public. Even folks who have no clue what the stock market is all about, they will hear about this milestone. I'm sure the networks tonight will not open with the story, but it will be hard to avoid the story if the market goes above 20,000 today. But mainstream media really won't want to cover it: it occurs when a billionaire is president, when Donald Trump is president; when all three branches of the government are in the hands of Trump, McConnell, and Ryan; and, not Hillary, Schumer, Pelosi, and Pocahontas.

I also love the meme that tax reform will favor the rich and won't do anything for the bottom 50% of Americans. Who don't pay any taxes. 

By the way, the market did not hit 20,000 tepidly; it cut through 20,000 like a knife going through soft butter.

 *************************************


The best thing about the Trump presidency is that his election opens the door for non-politicians to run for the presidency. So, whenever I see the following folks criticizing Trump, I simply say, "well, if you are so smart, why don't you run for president?
  • Michael Moore
  • George Clooney
  • Meryl Streep
  • Danny DeVito 
Actually, I'm wrong. The best thing about the Trump presidency is that Hillary is not president.

This is a great song as far as the title goes, and as far as the "melody" goes, but you don't want to listen too closely to the lyrics.

With that caveat, Hallelujah!

Hallelujah, Leonard Cohen

**********************************
Changing Landscapes

Trump presidency: key words, phrases, observations
  • "bully pulpit" not "bully"
  • bilateral negotiations not multilateral
"It is our true policy to steer clear of permanent alliance with any portion of the foreign world": it was George Washington's Farewell Address to us. The inaugural pledge of Thomas Jefferson was no less clear: "Peace, commerce, and honest friendship with all nations-entangling alliances with none."
  • "make America great again," has been changed by President Trump to "make America greater than ever before" 
  • jobs first - benefits second; turns around elitist priority, benefits first - jobs if possible
  • take President Trump literally but not seriously
  • on immigration: President Trump plagiarized President Bill Clinton, 1995
 *******************************
How Not To Negotiate

This is why multi-national trade negotiations processes don't work (source for photo):

***********************************
Schooled

Becky Quick, CNBC: schooled by President Trump's National Trade Council, Peter Navarro on trade negotiations. The media is simply not keeping up. She said that it would take "a long time" to negotiate bilateral trade agreements (her statement was laughable). Peter Navarro countered: name one multi-national trade agreement that did not take years to negotiate. She was unable. Were we into six years of negotiating the trans-Pacific trade deal? NAFTA? diplomatic negotiations dated back to 1990 among three nations; ceremonially signed in 1992; became effective in 1994.  

*********************************
Illegal?

Some folks are opining that it will not be legal for US/Trump to require US steel for pipelines.  Again, shortsighted; ways to get around this. If nothing else, tax incentives: the government could provide incentives for using US steel.

Deeper Look At RBN Energy's Post On The Permian's Alpha Crude Connector Pipeline -- Bakken Thoughts -- January 25, 2017

From RBN Energy: an analysis of Plains All American's Alpha Crude Connector (ACC) deal

Plains All American Pipeline
  • to acquire Alpha Crude Connector (ACC)
  • ACC
  • extensive, FERC-regulated crude oil gathering system in the Permian's Delaware Basin
  • $1.215 billion
  • RBN Energy: right-place / right-time; addresses a fast-growing need for pipeline capacity across an under-served area
  • when you read that line, think Bakken, Keystone XL, and DAPL
  • ACC  has multiple connections: flexibility -- Midland, the Gulf Coast, Cushing
Background: a review of the Permian Basin production trends
  • elsewhere, lower crude oil prices have resulted in lower production
  • not so in the Permian: rising production
  • particularly good: the Permian's 10,000-square-mile Delaware Basin sub-region, and particularly the northern Delaware
  • improving technology wringing remarkable volumes of crude from Bone Springs, Avalon, Leonard, and Wolfcamp
  • break-even costs have dropped from $60/bbl in 2013 to $30/bbl
  • Permian is now the best return on investment anywhere in the US
  • will continue, but assume takeaway capacity keeps up
Enter ACC
  • RBN Energy map at the link
  • runs through the heart of the northern Delaware in southeastern New Mexico and West Texas
  • vast majority of the pipeline is in Lea and Eddy counties (southeastern corner of New Mexico
  • also in northern Culberson Coutny, TX
  • a mainline from southwestern Lea County through northeastern Loving County (TX) to the Wink area in central Winkler County (TX)
  • various elements of of ACC came on-line between late 2015 and late 2016 (really, really recent)
  • promoters/developers: Frontier Energy Services (Energy Spectrum), 50%; Concho Resources , 50%
  • Concho's net investment: $130 million; total investment estimated to be $260 million
Valuation of ACC (from $260 million to $1.215 billion)
  • huge amount of time and scrutiny by federal government
  • much of the pathway is through BLM land
  • this was a huge, huge deal; think how Keystone XL and DAPL played out in comparison
Storage rates
  • Frontier got creative with its storage rates
  • ACC installed 320 Mbbls of storage; received FERC approval to sell storage service to shippers at market-based rates; normally FERC services have pre-defined fixed rates, so this market-based crude storage is a relatively unusually approach amongst ACC's peers
Gravity bank (gravity refers to API rating of oil)
  • Frontier also implemented the first "gravity bank" that RBN Energy is aware of in the Permian
  • like most crude basins, crude quality in the Delaware Basin varies from one zone to another and from one field to another
  • generally, refineries and crude pipelines seeks crude that has an API gravity of less than 45 degrees
  • generally, refineries impose penalties for lower-quality crude oil, but do not reward for high- -quality crude oil; WTI is 39 degrees; 
  • Frontier changes all that: penalties/rewards directly to the shippers; no profit to the pipeline
  • as far as RBN Energy knows, ACC is the only pipeline in the Permian that uses a gravity bank
Optionality for shippers
  • ACC notable for being able to offer shippers optionality (as you read that, think the Bakken: CBR, Hiland, DAPL, Keystone
  • right now, too much takeaway capacity in the Permian
  • ACC makes up for that excess capacity by being able to ship almost anywhere:
    • Plains' 450 Mb/d Basin Pipeline from Wink, TX
    • Sunoco Logistics Partners' 150 Mb/d pipeline from Lea County, NM
    • Enterprise Products Partners' 100 Mb/d pipeline from Hobbs, NM
    • from Midland, there are pipelines to Cushing, OK; Houston, and Nederland, TX
    • also offers two major refineries int he region: HollyFrontier's 120 Mb/d refinery in Eddy County, NM and Western Refining's 200 Mb/d refinery in El Paso, TX 
    • also to Genesis Energy's Wink rail terminal

Again, Break-Even Costs For Shale Drop To $30/BBl -- January 25, 2017

20,000. Very, very possible today. 

MSNBC "Morning Joe":
  • Trump has definitely shifted the conversation
  • Trump "never sleeps"
  • Trump: "predictably unpredictable"
  • the flurry of the activity in the past two days is not a "one-off" -- it's going to continue
  • Trump is keeping everyone off-balance
  • if Obama is watching, he is being schooled; biggest lesson -- put American first; less golfing; and, less political fund-raising in California
  • one of the most liberal talking heads on "Morning Joe" actually gives credit to the US military men and women in Afghanistan; first time I've heard anyone on "Morning Joe" actually acknowledge the work these folks are doing
  • by the way, did any news outlet ever report that Rep John Lewis attended the inauguration? Absolutely amazing how that story was apparently killed by producers of all network news shows. 
Obama: not mentioned once during the segment of "Morning Joe" that I watched. Two business days into the new administration and Obama not even mentioned. I think President Obama was talking about Bush II for six years into his presidency. 

Twitter. Speaking of which -- that "Trump never sleeps" -- let's see if he has tweeted this morning? Last one was nine hours ago: "Big day planned on national security tomorrow (Wednesday). We will build the wall!" Maybe he will remind folks that Congress authorized "the wall" (although it was called a "fence" at the time) over a decade ago.

The RBN Energy blog today is particularly noteworthy; on the Permian; highly recommend reading.

************************************
Back To The Bakken

Active rigs:



1/25/201701/25/201601/25/201501/25/201401/25/2013
Active Rigs3848157187190

RBN Energy: an analysis of Plains All American's Alpha Crude Connector deal.
Plains All American Pipeline announced on Tuesday that it has agreed to acquire Alpha Crude Connector (ACC), an extensive, FERC-regulated crude oil gathering system in the Permian’s super-hot Delaware Basin, for $1.215 billion.
At first glance that might seem to be a lofty price, but the development of the ACC system appears to be a classic case of right-place/right-time because it addresses a fast-growing need for pipeline capacity across an under-served area. And, with its multiple connections, ACC is an attractive source of crude to fill currently underutilized downstream pipelines headed to Midland, the Gulf Coast to Cushing. Today we review Plains’ newly announced agreement to acquire the ACC pipeline system in southeastern New Mexico and West Texas.
Let’s begin our look at Plains’ new ACC deal with a review of Permian Basin production trends. The Permian has proven to be a hydrocarbon superstar. Falling crude oil prices may have hurt most crude-focused plays in the U.S., but Permian production has continued rising; output there now averages ~2.1 million barrels per day (MMb/d), according to our friends at PointLogic, up from ~1.6 MMb/d in mid-2014, when crude prices started their long decline.
These production gains came as exploration and production companies (E&Ps) focused on their most prolific “sweet spots” and worked to further reduce their drilling and completion costs.
The Permian’s 10,000-square-mile Delaware Basin sub-region, and particularly the northern Delaware, offers many of what seem to be the sweetest of the sweet spots. E&P companies have been perfecting their drilling and completion technologies and wringing remarkable volumes of crude from the area’s Bone Springs, Avalon, Leonard, and Wolfcamp formations.
As a result, break-even costs in the area have dropped from $60/bbl in 2013 to as low as $30/bbl, ranking the area among the best return on investment anywhere in the U.S.
These outstanding returns will drive continued increases in Delaware Basin production. That assumes, of course, that there are cost-effective means to transport those incremental crude volumes to market.  Historically, a significant portion of the oil produced in this area has been transported by truck to takeaway pipelines that began near the edges of the northern Delaware—a costly and cumbersome way to do business.