Sunday, August 20, 2017

The Energy And Market Page, T+212 -- August 20, 2017

The Mideast
Just a month ago, I wrote:
Off the radar scope, the current allied military push on the ISIS capital of Raqqa (Raqqah). Iraqi news service reported a week or so ago that the allies had re-taken Mosul, the most important city held by ISIS at the time.
Tonight, The Los Angeles Times is reporting:
Fresh off their victory in Mosul, Iraqi forces Sunday launched their campaign to reclaim the city of Tall Afar, Islamic State’s last major bastion in the northern part of the country.
Its loss would deny the group a major resupply — or escape — route to the border with Syria, 60 miles to the west. The jihadis have long been able to cross the border with impunity.
The US Marines should get much of the credit. The LA Times did not mentions the US Marines. I'm not surprised.

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The Market And Energy Page

Futures are up a bit; at least the Dow 30 is. [That was earlier; now down.]

Sempra said to have the inside track for Oncor; $9.3 billion. Let's see if Warren refuses to get into a bidding war; he said his $9 billion offer was as high as he would goReuters wonders. A contributor over at SeekingAlpha explains how Sempra and Oncor are a good fit.

Shell loads Libyan oil for the first time in five years.

Dow Chemical may exit Argentina natural gas play.

Pennsylvania coal company to open second coal mine since Trump took office. Reported at Fox 'cause others won't report it.  A reader sent me the link; I would have missed it. My e-mail reply is "not ready for prime time," but here it is:
This is really an interesting story.

Either:
a) Trump's economic policies really do make a difference;
b) Trump (or his advisors) saw this coming (resurgence of coal) and simply caught the wave.
Considering that big changes in steel manufacturing really can't happen "overnight" it's hard to believe that simply "talking about" ending the war on coal could make things happen so quickly.

One wonders if knowing he got elected, he would allow the energy industry (i.e., shale, and the pipelines) to move along more quickly by removing regulations, etc., and that subsequently would end up widening the gap between EU (and China) and the US on energy prices. Our energy prices would be so low compared to the rest of the world that steel could make a comeback and metallurgic coal would follow.

I think he and his advisors interpreted the "energy" tea leaves very, very correctly -- that if Trump could get into office a lot of other things would naturally happen -- like resurgence of coal.

I don't know, but considering very little has really happened yet, it's interesting that another coal mine is already opening (at least the announcement).
By the way, speaking of steel, Fortescue Metals Group, Australia, "soars" 5% after reporting a net profit of $2.09 billion compared to slightly less than $1 billion last year, thanks to a rebound in the price of iron ore, required for steel manufacturing. Fortescue is the world's largest producer of iron ore. 

Water bottles okay in national parks ... again, a huge "thank you" to President Trump. Google: The Trump administration has ended a six-year-old ban on selling bottled water at some national parks that was aimed at easing plastic pollution and the huge amount of waste being recycled.

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Oops! We Did It Again

US Navy ship, USS John S. McCain, collides with merchant ship near Strait of Malacca, ten sailors missing, five injured

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Incredibly Cool

First span of new "NYC" bridge built to carry millions -- now opening. Data points:
  • NY governor Andrew Cuomo's signature public works project
  • $4 billion -- yes, billion -- bridge
  • to bridge the Hudson River -- bridging NYC with the suburbs
  • will replace the 62-year-old Tappan Zee
  • westbound span opens later this week
  • eastbound span to open in the spring (2018)
  • 3-mile bridge; links Westchester County to the NY State Thruway across the widest point in the Hudson
  • one of the largest public infrastructure projects underway in the US
  • a model of the latest engineering
  • will carry more than 50 million vehicles/year
  • Manhattan 25 miles to the south
Nice human interest story on the Tappan Zee here
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Trudeau To Asylum Seekers: Tough Love

Crossing into Canada illegally will not "fast track" immigration, says prime minister. Hmmm...tough love. Sounds like Trump. Trudeau is not "Obama" on this issue.

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Jerry Lewis Dead At 91

It seems like I grew up with him. I thought he was older. For the archives.

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For The Granddaughters

Roasting bell peppers.

Preparing them:



After roasting them, and removing the skin, some of the peppers:


I have no idea why shy looked so stern.

For Newbies -- August 20, 2017 -- One Of The Peculiarities Of The Bakken

There are now enough wells drilled throughout the Bakken that one can do this:
  • find a recently fracked Bakken well that has a huge initial production
  • go to the NDIC map and find a horizontal well parallel to the recently fracked Bakken well
  • check FracFocus to see if the older Bakken well was re-fracked
So, let's do that.

These two wells were recently fracked by Oasis and will come off the confidential list this week:

32241, see below, Oasis, Forland 5198 41-33 3B, Siverston:

DateOil RunsMCF Sold
6-20172858449766
5-20173387787928
4-20174418083282
3-20174202385555
2-2017730611303

32242, see below, Oasis, Forland 5198 41-33 4T, Siverston:

DateOil RunsMCF Sold
6-20172674943014
5-20173583987549
4-201742072123402
3-20173056466825
2-201721185692

Let's check a nearby Bakken well that was fracked some time ago. In this case,
  • 21657, 1,844, Oasis, Forland 28-33H, Siverston, t3/12; cum 332K 6/17
There is no report at FracFocus to suggest this well was ever fracked after the original frack in 2012. So what was the production profile for this well over the past 12 months?

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN6-20173020037198932128547223469230
BAKKEN5-20173122370226253107246142458320
BAKKEN4-20173016423153553657422371220710
BAKKEN3-20170000000
BAKKEN2-20170000000
BAKKEN1-20170000000
BAKKEN12-201610001000
BAKKEN11-20165954141402942740
BAKKEN10-2016292359229793955425329213
BAKKEN9-201627190920231155480245320
BAKKEN8-201631228421981060775874480
BAKKEN7-20163123012439885648861780
BAKKEN6-201630237124691035636960690

In this case, this well was producing about 2,000 bbls / month; it was taken off-line for five to six months, and then brought back on line, and produced about 22,000 bbls in one month -- equal to what this well would have produced in one year. 

The graphic:



Just one of the peculiarities of the Bakken, I guess. Take a Bakken well off-line for a couple of months, in this case five or six months, and watch production jump 10-fold. Rinse. Repeat.

Wells Coming Off Confidential List This Week -- August 20, 2017

Friday, August 25, 2017
  • 26924, SI/NC, Hess, AN-Gudbranson-153-94-2215H-7, Elm Tree, no production data,
  • 32241, 1,825, Oasis, Forland 5198 41-33 3B, Siverston, 50 stages; 4 million lbs; small and large sand; ceramics33, t2/17; cum 156K 6/17; (21657)
  • 33212, SI/NC, XTO, Lundin 11X-4AXD, North Fork, no production data,
  • 33347, SI/NC, MRO, Houser 14-36H, Reunion Bay, no production data,
Thursday, August 24, 2017
  • 32242, 1,598, Oasis, Forland 5198 41-33 4T, Siverston, Three Forks 1st bench, 50 stages; 3.9 million lbs, small, medium, ceramics, API: 33-053-03816; no frack data at FracFocus, t3/17; cum 137K 6/17; (21657)
Wednesday, August 23, 2017
  • 33211, SI/NC, XTO, Lundin 11X-4E, North Fork, t4/17; cum --
Tuesday, August 22, 2017
  • 30482, 870, Oasis, Cook 5300 12-13 6B, Willow Creek, 50 stages; 6 million lbs, t2/17; cum 20K 6/17; (27353 - TA)
  • 32952, 2,071, Hess, BB-Lars Rothie-151-95-2932H-2, Blue Buttes, Three Forks, 50 stages, 7 million lbs, t7/17; cum --
  • 33210, SI/NC, XTO, Lundin Federal 11X-4B, North Fork, no production data,
Monday, August 21, 2017
  • 30072, SI/NC, BR, Elizabeth Stroh 24-7MBH, Cabernet, no production data,
  • 32953, 2,219, Hess, BB-Lars Rothie-151-95-2932H-3, Blue Buttes, 50 stages, 7 million lbs, small/large, t7/17; cum --
  • 33209, SI/NC, XTO, Lundin Federal 11X-4F, North Fork, no production data,
  • 33243, SI/NC, Kraken Operating, Fairbanks 20-17 2H, Oliver, no production data,
Sunday, August 20, 2017
  • 30071, SI/NC, BR, Cecilia Stroh 24-7MBH, Cabernet, no production data,
Saturday, August 19, 2017 
  • 32954, 2,042, Hess, BB-Lars Rothie-151-95-2932H-4, Blue Buttes, Three Forks, 50 stages, 7 million lbs, small/large, t7/17; cum --
  • 33244, SI/NC, Kraken Operating Fairbanks 20-17 3H, Oliver, no production data,
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32241, see below, Oasis, Forland 5198 41-33 3B, Siverston:

DateOil RunsMCF Sold
6-20172858449766
5-20173387787928
4-20174418083282
3-20174202385555
2-2017730611303

32242, see below, Oasis, Forland 5198 41-33 4T, Siverston:

DateOil RunsMCF Sold
6-20172674943014
5-20173583987549
4-201742072123402
3-20173056466825
2-201721185692

30482, see below, Oasis, Cook 5300 12-13 6B, Willow Creek:

DateOil RunsMCF Sold
6-20171347612970
5-20171198722
2-201756370

The Political Page, T+212 -- August 20, 2017 -- GDP Growth -- Making America Great

It's been my impression that actual results don't always meet forecasts when it comes to forecasting quarterly US GDP, but here it is for what it's worth.
From a reader:
The Atlanta Fed estimated US 3Q17 GDP growing at 4.0 percent -- from Reuters

This is hard to believe. Remember all these headlines?
 
--- BUSINESS INSIDER: The clearest part of Trump's economic plan is also the most delusional part.
Three percent GDP growth. Three percent GDP growth. Three percent GDP growth.

Get it stamped on your brain. Get it tattooed somewhere. Have some T-shirts made, because this is team Trump's goal for the economy. In a time of extreme policy confusion, 3% GDP growth is one of the only firm targets we have to hang onto.

The problem is that in interview after interview, Donald Trump and his surrogates have demonstrated that they have no idea how to get there.
--- CNBC: Trump needs GDP growth, but one of his favorite policies works directly against him
 
--- THE HILL: Why is Trump's 3-percent growth target pure folly? Because math. ---

--- VOX. Trump: I will achieve 3 percent growth! CBO: No, you will not. ---
By the way, something that is not being talked about very much: most agree that the way economists measure GDP is no longer valid. It completely misses productivity gains because of technology. Most pundits agree that GDP growth would be significantly higher if measured "properly."

With all the anti-Trumpers out there, it's a given that the way GDP is measured will not be changed during the Trump administration. This, by the way, works in the favor of investors vs savers. 

Filloon: Permian Update -- August 20, 2017

Disclaimer: same as usual.

From Mike Filloon at SeekingAlpha, summary:
  • recent Delaware core completions have raised the bar with respect to production per foot
  • the Midland Basin is excellent, but the Delaware seems to have better geology and the best source rock outperforms
  • the most recent results have been better than expectations, but the question seems to focus on repeatability
  • operator hedging in the Permian is being done at lower oil prices, which seems to show operators can hold on at today's prices.  These hedges will continue to decrease the chances of a break out in oil prices
  • Even with payback times decreasing in the Delaware, we expect a test of 52-week highs in the USO this year
More:
Enhanced completions continue to better unconventional well economics in the United States. While there are considerable differences in the bullish and bearish narratives for oil prices, production numbers are concrete. 
We continue to see operators increase production, and many have been able to decrease proppant volumes. Either we have hit a peak in production per foot or operators do not need to pack as much sand in frac's. Enhanced completions are the new normal.
Operators are moving to plug and perf with cement liners. Ceramic proppant is being pushed out given the expense.  It was once thought frac sand could only be used in more shallow plays. Worries that sand would crush out and stop production, are not a concern with newer designs. We have covered enhanced completions in several plays. 
Summary:
In summary, we think economics from core plays will continue to provide a ceiling for the USO and oil prices in general. There is still considerable inventory in very good geology.
This means we will see operators continue to hedge at $50/bbl. We expect this oil price ceiling will slowly increase in the coming months, as Permian operators get hedge positions in for 2017 and 2018.
When oil reaches $54 to $55, other plays like the Bakken will begin to increase hedging and provide a new ceiling. It will take an additional, unforeseen catalyst to push oil to $60.
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From Sophia's Art Studio

"Leprechaun Behind a Tree"
Sophia, age 3.
August 20, 2017

Making America Great, Images And Graphs -- November, 2016 -- November, 2017

This was in draft. It appears that I originally drafted it August 20, 2017, to be posted later. I'm posting it now simply to close out several posts in draft.

Read GDP, historical:


Unemployment:


The graph above is hard to interpret. At least it was for me. Two points are being made:
  • after the November, 8, 2017, election, the overall U3 unemployment plummeted
  • the Journal focused on the unemployment rate of those who "flipped" -- those who had voted for Obama in the previous election, but voted for Trump in this election -- although the bold red line catches one's attention, it appears that "all" voters participated in better employment picture
But then, connect that bold red line to specific states -- Michigan, Wisconsin, Pennsylvania -- the three states that gave the election to Trump were "in" that red line. See graph below.


June 20, 2017:


July 7, 2017:

McGregor Oil Field

May, 2017, and June, 2017, data for top producing oil fields in the Bakken. Ranked by greatest increase in field production, by percentage, month-over-month, column 10.

Field
May 2017 Prod
May Wells
May Oil / Well / Month
Percent Change Apr-to-May
Change in # of wells
June 2017 Prod
June Wells
June Oil / Well / Month
Percent Change May-to-June
Change in # of wells
McGregor
67,570
41
1,648
-14.64%
0
150,444
47
3,201
122.65%
6
Chimney Butte
309,533
81
3,821
73.06%
0
428,056
83
5,157
38.29%
2
Eagle Nest
444,943
97
4,587
2.36%
0
605,165
101
5,992
36.01%
4
Lost Bridge
346,933
68
5,102
17.38%
4
466,193
73
6,386
34.38%
5
Elm Tree
483,522
62
7,799
19.72%
8
599,055
63
9,509
23.89%
1
Grinnell
143,053
60
2,384
-14.42%
4
176,416
60
2,940
23.32%
0
Pershing
88,664
39
2,273
-10.08%
0
107,479
39
2,756
21.22%
0
Todd 
102,636
56
1,833
-8.19%
0
117,161
59
1,986
14.15%
3
Camel Butte
178,363
41
4,350
10.16%
4
200,069
41
4,880
12.17%
0
Bailey
321,556
149
2,158
18.63%
0
347,829
149
2,334
8.17%
0

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McGregor Oil Field

McGregor oil field was a fairly "regular" rectangular oil field until the Bakken when additional sections were added. For the most part, prior to the Bakken, it was a 2 section x 6 section field, running north/south. Now it's a bit more irregular and encompasses fifteen sections. It is located on the Nesson Anticline, about five or six miles north-north-west of Tioga.

There are a number of operators in the field, but for the most part, Liberty Resources "owns" the field and accounts for the huge increase in production, on a percentage basis, month-over-month, May, 2017, to June, 2017, as seen in the chart above.

Area of most activity in the McGregor oil field at the time of the original post, August, 2017:

Making America Great Again -- Joblessness Falling In Trump-Supporting States -- August 20, 2017

Active rigs:


8/20/201708/20/201608/20/201508/20/201408/20/2013
Active Rigs533275191184


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Making America Great Again

Jobs. From The Wall Street Journal:  Joblessness Falls Quickly in Several Trump-Supporting States.
Swing states that played a key role in electing Donald Trump president have posted some of the biggest declines in unemployment during the early phase of his administration.
Six states voted for President Barack Obama, a Democrat, in 2012 and then Mr. Trump, a Republican, in 2016: Ohio, Michigan, Florida, Iowa, Pennsylvania and Wisconsin.
The median unemployment rate of those switchover states has fallen far faster than the national median this year, according to an analysis of data released by the Labor Department on Friday. The median rate of those states stood at 3.9% as of July, down from just under 5% in December. By comparison, the national median fell to 4.1% in July from 4.7%.
Among the switchover states, Wisconsin and Michigan have seen unemployment fall the quickest this year. Over the past three months, the average jobless rate in Michigan fell nearly 1.2 percentage points, to 3.9%, compared with the final quarter of 2016, just before Mr. Trump took office. Only three other states in the U.S. saw a deeper drop in joblessness.
The rate fell 1 percentage point in Wisconsin to 3.1%. That drop ranked seventh in the U.S. Florida, where joblessness stood at 4.2% in July, ranked 12th with a 0.7 percentage point drop.
Most switchover states are in the Midwest, where the economy has diversified in recent years but still remains big in manufacturing.