Thursday, January 4, 2018

Predicting The Monthly Legacy Fund Deposit -- Something New, Something Crazy -- January 4, 2018


February 16, 2018: the official North Dakota state Legacy Fund deposit for January: $46,242,885.80. My average was off by $2,374,163 or 5% below the actual amount.

January 11, 2018: as of this date, this would be my projection -- Legacy Fund deposit for January, 2018, estimate --
  • high end estimate: $50.0 million
  • mid-range estimate: $43.9 million
  • low end estimate: 38.3 million

Price of Bakken
Legacy Fund Deposit Projected
Legacy Fund Deposit Projected
Legacy Fund Deposit Projected
Price WTI
Projection January 2018
High end
as of Jan 11


January 4, 2018: from a reader via e-mail --
I noticed your discussion about the Bakken/WTI price differential as a factor in predicting Legacy Fund deposits (see original post below).
The director uses the North Dakota Sweet price from Flint for his number. See this post to see how to access this data.
The prices received on our production has consistently tracked well above the NDS price for a long time now. In fact, for the last 3 months the price received has been about $1 or so above WTI itself. Since the DAPL came on, the differential with WTI seems to have disappeared. I think it must be due to Bakken oil being shipped to more markets now so the Flint average doesn’t seem to work anymore. 
Original Post

Some data points:
  • Historical price of WTI (EIA): link here
  • Price of Bakken oil: based on Director's Cut which comes out monthly; tagged;
  • Legacy Fund deposits: link here
The Chart:

Price of Bakken
Deposit, Reported
Price WTI

Director’s Cut
North Dakota State Legacy Fund
Deposit divided by price of Bakken oil
Based on average ratio and estimated price of Bakken oil
Last week of the month
WTI - Price of Bakken oil

EIA data 

February 2018

January 2018

December 2017

November 2017

October 2017

September 2017

August 2017

July 2017



















High end
Low end


I don't know if this chart will make sense to anyone. That's fine. I'm doing this for my own benefit to see if it's possible to "predict" the monthly deposits going into the North Dakota state Legacy Fund  with any degree of accuracy  (and I use the word "accuracy" quite loosely -- LOL).

This is simply some "back-of-the-envelope" doodling. It's for my benefit only. Most folks will think it's completely bogus. That's fine.

There are way too many variables to be able to predict the the monthly Legacy Fund deposits, not least of which:
  • which day of the month the deposits will be made
  • the price of WTI
  • the price of Bakken oil
  • how closely the monthly deposits track with the estimated price of Bakken oil
  • the crude oil and natural gas production data
This is the first time I've posted this graph. I will update it each time the monthly deposits into the Legacy Fund are released.

I think the the top half of the spreadsheet (above the asterisks) is self-evident and I won't add anything here.

The bottom half of the spreadsheet (below the cells with the asterisks)is a bit more confusing.
  • start with the far right column; that's the hypothetical price of WTI ($61 - $65/bbl)
  • from there, the estimated price of Bakken oil is derived (second column below the asterisks) based on the average delta between WTI and Bakken oil (top half of the graph)
  • the fifth column, labeled "Forecast" is the estimate of the deposits for future months based on the average ratio (from the top half of the spreadsheet) and the estimated price of Bakken oil
  • so, for example, based on a WTI price of $65, the estimated price of Bakken oil would be $53.81 (the delta, $11.19 is the average from the top half of the spreadsheet); in this case, the likely deposit for January, 2018, based on $62 WTI would be $43,868.722.22
Finally, two last boxes, the "high end" and "low end":
  • for the "high end" case, I took the product of the highest ratio (902,152.28) and WTI at $62 and got $55,933,441.62
  • for the "low end" case, I took the product of the lowest ratio (753,346.73) and WTI at $62 and to $46,707,497.49
This is simply an exercise to keep me entertained. I highly recommend no one pay any attention to this unless one has nothing better to do. 

Bottom line: it appears that the "likely" Legacy Fund deposit for January, 2018, will be:
  • high end: $46 million
  • most likely: $44 million
  • low end: $38 million
It is interesting to see the delta between the EIA price of WTI and the Bakken price quoted by Lynn Helms/NDIC in the monthly Director's Cut. This spread is much wider than what is being reported elsewhere. I can think of a number of reasons but this post is already too long, so simply this: "it is what it is."

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