Friday, August 31, 2018

Saudi's August Production Numbers "Released" -- August 31, 2018

Here's the headline:


Here are the numbers:
Saudi Arabia increased production from 10.40 million bpd in July to 10.48 million bpd in August.
10.48. Not 10.47 or 10.49, but 10.48. "False precision."

Here are some more numbers:
  • global supply / consumption: 100 million bopd
  • North Dakota production: 1.2 million bopd
  • Saudi Arabia: difference between 10.48 million and 10.40 million = 0.08 million = 80,000 bbls
  • DAPL: 470,000 bopd =  80,000 bbls every four hours
And, again, the article did not mention that August is the hottest month in Saudi Arabia where they convert oil to electricity to run their air conditioners.

The metrics at this post are probably better metrics to track.

Not Out Of The Woods Yet -- Saudi Foreign Exchange Reserves Decline -- Saudi-US Oil Imports -- August 31, 2018

Link here. Not out of the woods yet. After turning around in April - June, 2018, Saudi's reserves fell significantly in July despite robust oil prices:

Link here.


CLR's Collison Wells In Avoca Oil Field

Updates

December 1, 2018: graphic updated --


Original Post

Being drilled as we speak.

The wells:
  • 23397, 969, CLR, Collison 1-23H, Avoca, t12/12; cum 221K 10/18;
  • 34926, drl, CLR, Collison 9-23H1, Avoca,
  • 34925, drl, CLR, Collison 10-23H1, Avoca,
  • 34924, drl, CLR, Collison 11-23H, Avoca,
  • 34923, drl, CLR, Collison 12-23H1, Avoca,
  • 35053, drl, CLR, Collison 13-23HSL, Avoca, 
  • 35054, drl, CLR, Rader 4-24HSL1, Avoca,
For newbies: pay attention to the "chronologic numbers." In the wells above, the chronologic numbers are 1, 9, 10, 11, 12, 13, and 4.

The graphic:


The Energy, Market, And Political Page, T+18 -- August 31, 2018

All major indices have just turned green.

WTI has dropped slightly below $70.

Analysts' forecast for average price of Brent crude in 2019: link here.
  • overall respondents, 44%: between $70 - $80/bbl
  • 23%: $80 - $90/bbl
  • 23%: below $70/bbl
  • 14%: above $90/bbl
  • in other words, all but 23% said Brent will be where it is today or higher in 2019
  • Fitch Solutions Macro Research: $82/bbl -- 2019
  • Bloomberg Consensus: $69.50/bbl -- 2019
  • short-term, Fitch said, Brent will struggle for direction, but the long-term trend will be toward $91 in 2022
The market (I assume this is going to be a light volume trading day -- four day weekend):
  • Dow, irrelevant: up 15 points
  • NOG: down 2.5 cents, about a percnet
  • OAS: down 9 cents, about 3/4th percent
  • CVX: down 1%, struggling
  • TSLA: down to $301
  • AAPL: remains on a tear -- up another $2.55
  • AMZN: monopoly? up $15 - that should put Amazon over $1 trillion market cap .. let's see ... nope, at $983 billion; Apple?  $1.099 trillion market cap
  • GOOG: monopoly? down $8
  • NFLX: up almost $3
Apple: the September roll-out is going to be huge. I think it's going to be the second- or third-largest roll-out of Apple products since the original iPhone announcement. I listened to a panel of talking heads yesterday, including Gene Munster, on CNBC regarding Apple. Munster gets it; the CNBC  talking heads did not. It almost seemed most of the CNBC talking heads still used a Blackberry (see this link).
One debate centered on "form factor." Apparently Apple will come out with a "bigger" iPhone -- panelists not sure consumers would like a larger format. If Apple comes up with a multi-phone / one telesphone number solution, this would be huge. Technically Apple is there with a pocket-size iPhone and a super-size iPad but convert that iPad to an iPhone with the same telephone number as the pocket-size iPhone -- you have instant "Schwab office of the future / Cisco Telepresence."
Another debate centered on hardware. The CNBC analysts appeared not to understand the Chinese market.
Another debate centered on the Apple ecosystem with one CNBC analyst actually saying that "the Apple ecosystem seems pretty good." 
One almost gets the feeling that these CNBC analysts hold a lot of GE stock. GE is the parent company of Apple competitor Microsoft and is the parent company of NBC and CNBC. I would assume CNBC employees all use Microsoft products.
The rollout, as rumored, here.
  • three new iPhones (no home button; and nearly all screen)
  • a larger 6.5-inch version of the iPhone X with three rear cameras (?)
  • Apple Pencil support (?)
  • a less expensive 6.1-inch version shipping in October
  • since its debut, the iPhone SE -- its most affordable option -- the one I have and love -- could be stuffed into a smaller body of an iPhone 5; a 4-inch refreshed SE could retail at $349 -- over 24 months, $29/month -- ATT would give them away with a data plan contract
  • the Apple Watch 4
  • new iPad Pros
  • refresh the Mac line
  • MacBook Air replacement (?)
  • a whole lot more
  • the article fails to mention a re-freshed iMac Mini

Bullish For Oil: US Crude Oil Supply Drops Below 23 Days -- Not Seen Since 2014 / 2015 -- August 31, 2018

From the EIA.

Going into Labor Day 2018, the US has finally dropped below 23 days of crude oil supply. We last saw that back in 2014 / 2015.  If this is not bullish for oil, I don't know what is. If it trends toward 20 days or less, "Katie, bar the door."

Disclaimer: there may be exceptions. I may have missed something, but "generally," it's an accurate statement.

Recent data first, then scroll down to see 2014/2015 data.

Recent data:

2014/2015 data:



PGA Dell Technologies Championship -- Top 70 Advance -- August 31, 2018

For Labor Day weekend, the PGA tournament begins today, Friday, a day later than usual and runs through Monday, a day later than usual. Leaderboard here.

Tiger Woods will get all the press today. Television ratings will rise and fall with Tiger. At this moment in time, Tiger Woods is projected to be #31 in the field when the Tour Championship begins play -- in which only the top 30 will be golfing.

Those I follow most closely that are currently in the top 30 are:
Bryson  DeChambeau; Dustin Johnson, Justin Thomas, Bubba Watson, Jason Day, Justin Rose, Phil Mickelson, Francesco Molinari, Rory McIlroy, and that's about it.  (Note again: Tiger Woods, at this moment in time, is #31, "on the bubble," as they say.
It will be interesting to see how that changes by Monday evening.

The Market, Energy, And Political Page, T+18 -- August 31, 2018

EU suggests ending all car tariffs with the US. I said the same thing some months ago -- exactly why are there any tariffs between any country (China, Mexico, Canada, US, EU, South Korea, et al) if we're calling it "free trade. Link at WSJ. Any US politician who says "free trade" is alive and well and doesn't need to be changed, needs to be asked if he/she knows the Canadian tariff on US dairy products. I think it's 275%. Trump says it's 375%.

Japan: appears to be giving up the fight to import Iranian oil. Even if they "skirt" US-imposed sanctions on Iran, Japan won't find bankers willing to help them. The bankers will be sanctioned by the US.

US oil: how are US oil companies doing? Very, very, very well. From RBN Energy (see link below):
Our universe of 44 E&P companies earned $10 billion more and generated nearly $7 billion in additional cash flow in the second quarter of 2018 compared with a year earlier.
All but one producer were in the black for the period; EQT Resources reported the sole loss because of write-downs related to the closing of its acquisition of Rice Energy.
The primary determinate of the improved peer group profitability was the $5.77/boe in additional revenue the peer group received ($34.29/boe vs. $28.52/boe) due to stronger oil prices.
However, a near $5/boe reduction in write-downs provided a significant uplift to second-quarter pre-tax operating income.
Reductions in normal depreciation, depletion and amortization ($0.37/boe) and exploration expenses ($0.42/boe) also added to the bottom line.
Lifting costs — $0.94/boe higher — were the only expense that impaired profitability: production costs were $0.50/boe higher, while oil and gas price-influenced production taxes added another $0.44/boe to lifting costs. All this resulted in pre-tax operating profits of $9.86/boe and $23.30/boe in cash flow.
As I've said before: if you read RBN Energy daily and view Vern Whitten's aerial photographs you will know everything you need to know about the Bakken. Period. Dot.

*******************************
Back to the Bakken

No wells come off the confidential list today.

Active rigs: NDIC site down?

WTI: $69.98

RBN Energy: US oil producers continue to chart path to long-term growth. For anyone interested in US oil, this article needs to be archived; read closely; printed out and read again. Five years from now, folks will re-read this article and will say, "could've; would've; should've."
In the first half of 2018, the U.S. E&P sector continued to reap the benefits of its dramatic evolution from decades of “boom or bust” exploration to large-scale, manufacturing-style exploitation of premier resource plays. Upstream companies halved their break-evens and reserve replacement costs through technological innovation, financial discipline, and ruthless portfolio paring, which allowed them to generate record domestic oil production in 2018 on half the capital outlays expended in 2014.
As a result, the 44 E&Ps we track reported $21 billion in pre-tax operating profits in the first half of 2018, up from $6.2 billion in the first six months of 2017, and over $50 billion in operating cash flow, up from $39 billion a year ago. Most notably, these companies are on pace to garner an astonishing $30 billion in free cash flow. Today, we discuss the ongoing effort by leading E&Ps to maintain financial discipline in a period of strong oil and gas prices.

The Trans Mountain Pipeline Winners: Canadian Rail -- August 31, 2018 -- An Open Book Test

See this note for background.

Updates

Later, 7:00 p.m. CDT: Bloomberg -- "NAFTA crunch caps a pretty dreadful week for Justin Trudeau." Yeah, like that's an understatement. Trudeau is doing to Canada what Obama did to the US. The bad news: no term limits in Canada. From the linked article:
This has not been a good week for Justin Trudeau.
It began with a surprise U.S.-Mexico trade pact that excluded Canada from a Nafta rewrite, sending the prime minister’s negotiating team scrambling to strike a deal ahead of the Trump administration’s deadline.
Then a key pipeline he spent billions to nationalize got sideswiped by a court decision, and the most important ally in his climate change plan abandoned him. And now the White House has informed Congress of its intent to sign an new agreement with or without the northern nation.
While the 46-year-old leader has had plenty of political stumbles during his first mandate, the events of the last few days are among the heaviest blows Trudeau has taken on core economic files. They come just as his Liberal government prepares to reset its parliamentary agenda going into an election year.
“The opposition are going to try and paint this as an example of incompetence,” said Robert Bothwell, a professor of Canadian history and international relations at the Munk School of Global Affairs at the University of Toronto.
So much more at the linked article. 

Later, 10:04 a.m. CDT: Trudeau's political future is toast. From Bloomberg, Trudeau's grand bargain unravels after Alberta's carbon plan nixed.
Canada’s precarious relationship with its vast oil riches flared up again Thursday after a federal court struck down Prime Minister Justin Trudeau’s approval of a key pipeline, reviving fears about the country’s ability to get its resources to market.
While the government pledged to press ahead with the C$4.5 billion ($3.5 billion) Trans Mountain expansion, the leader of oil-rich Alberta pulled out of Trudeau’s marquee national climate plan in protest after the ruling. Indigenous groups and the City of Vancouver had mounted the challenge, and their success highlights the extraordinary political, legal and social battles that a divided Canada has faced for years in developing the world’s third-largest crude reserves.
Note the Bloomberg price: $3.5 billion.Where did that come from. Without the delay, it's a $7.4 billion project; with a delay to 2021, Kinder Morgan estimates a $9.3 billion project. This is the first time I've seen a $3.5 billion price tag.

Original Post

For Canada, the judge killing the Trans Mountain Pipeline expansion is akin to what happened to San Francisco in 1906; it is akin to a 8.0 earthquake hitting downtown Los Angeles. Pundits have not yet figured that out.

This morning's on-line edition of the WSJ did not mention the judge's ruling. I'm sure it is there, but it was not easily found. Suggesting to me that, again, pundits do not know how really, really serious this is for Canada.

The Financial Post did have a long article on the ruling.It may or may not be behind a paywall now. It wasn't overnight. I can still access it this a.m. From the article:
  • clarity on the cost -- the court decision is expected to cause further delays to the project and drive up its final price tag, previously estimated at $7.4 billion. Kinder Morgan’s disclosures had shown the price could rise as high as $9.3 billion if construction wraps up in 2021. The court just cost Canada another billion or so in costs because this won't be completed by 4Q21
  • in addition, all the lost crude oil royalty income is .... incalculable ....
  • former Saskatchewan premier Brad Wall said the duty to consult with Indigenous people is critical but added, “the benchmark keeps changing.”
  • Wall said Justice Dawson is the same judge [and, of course, Trudeau was well aware of that] who ruled Ottawa did not fulfill its duty to consult during Enbridge Inc.’s Northern Gateway pipeline project application, which he said is all the more frustrating since both Ottawa and Kinder Morgan attempted to work the recommendations from that process into its consultations with First Nations
  • “If I were a betting man, I’d say 2021 or after that,” Galison said
  • by that time, Scotiabank commodity economist Rory Johnston said the amount of crude oil moving on railways cars would continue to grow without new export pipelines as the current export system is full and in apportionment
  • “You need two of the three (currently proposed pipelines) to clear our egress issues,” Johnston said, referring to the Trans Mountain expansion, Enbridge’s Line 3 project and TransCanada Corp.’s Keystone XL project
  • without new pipelines in 2023, he said railways would be moving 700,000 bpd out of Canada — a massive increase over current out-bound rail shipments of 200,000 bpd, which itself is an all-time high

Thursday, August 30, 2018

Four-Week Jobless Claims Average -- Lowest Since 1969 -- Making America Great -- And Keeping Yet Another Campaign Promise; Hillary's Campaign Promise: Putting A Lot Of Miners Out Of Work

Earlier this evening when it was noted that Denmark became a net importer of oil for the first time, I wrote:
On May 18, 2013, I wrote:
So, How Did That Renewable Energy Plan Work Out? Europe May Be The Only CONTINENT In The Universe To Depend On Imported Energy. 
Backtrack to: Europe At A Tipping Point, one of "the big stories" that I have been following since the beginning of the blog.
Now this, which I think is a portent of the future:


And then this screenshot from the Drudge Report -- great juxtaposition:


The jobless report (the link is blocked by "blogger"): jobless claims lower than expected, four week average hits lowest level since 1969.
New claims rose by just 3,000 to a seasonally adjusted 213,000 last week. After three consecutive weeks of declines, economists had forecast a rise to 214,000, according to Bloomberg.
Jobless claims are an indication of layoffs and have been closely watched this year for signs that trade disputes might weigh on the U.S. labor market. So far, there are no signs that tariffs have cost the U.S. economy any jobs.
The four-week moving average of claims, which smooths out weekly volatility and is considered by many economists to be a more reliable gauge of conditions, fell by 1,500 to 212,250. That is the lowest level since December 1969, according to the US Labor Department.
Other than one's family, shelter and food, I'm trying to think of one thing that is more important than being employed.

Okay, So Which Is It? -- August 30, 2018

From Snowboarding:


From the Almanac:


Algore's prediction: the Arctic will be ice-free by November, 2018.

Trudeau's prediction: my political future is toast.

Whistling Past The Graveyard -- SeekingAlpha -- Update On The Trudeau Pipeline Expansion Project

See this post for background to this story.

From SeekingAlpha, "be happy, don't worry."
  • Trans Mountain expansion faced a big setback today when the Federal Court of Appeal quashed the government's approval to build the expansion;
  • but valuation matters and Canadian heavy oil producers have already discounted the wider-than-normal spreads into the current price;
  • crude by rail (CBR) remains the key catalyst to narrowing the discount near term, and this setback for Trans Mountain can actually push producers to ink multiyear crude by rail deals;
  • With TMX now uncertain, Canadian oilsand capex will keep decreasing, which would push lower Canadian oil production, resulting in less global oil supplies. This could tighten global oil balances further;
  • Because of the discounted valuations, we're bullish on Canadian heavy oil producers as we don't believe this is a material setback on fundamentals. Rather, it's only a setback on sentiment
The writer of that story is betting on the wrong horse. The winner in this race: the Canadian railroads. 

Eh, What Just Happened? -- August 30, 2018

Update

August 31, 2018: a reader who is well versed in legal matters and who has followed this case closely (he/she has relatives in Burnaby) sent me a note with comments and questions. I won't post that but here is "my-not-ready-for-prime-time" reply. From the reply you can probably guess the issues in the original note:
1. I was a bit hasty in suggesting inadequate documentation by the pipeline companies regarding First Nations. You are correct.

2. I strongly believe that the judge in this case had her decision made long before the final judgement was published. It was just a matter of framing it (the arguments/conclusions) to fit the decision.

3. Legally, I am sure the contract reads that the deal is consummated pending a majority vote by the Kinder Morgan shareholders (that occurred yesterday after the judge's verdict; the timing was coincidental). So, even if money has not traded hands, it's a legally binding contract, I'm sure. But it's a man-made contract (not on two stone tablets) so there would be ways, I assume, to "renegotiate."

4. However, Canada needs the pipeline more than anyone is suggesting. They can get the oil out on rail if no other alternatives, but this is a huge sovereign issue -- as I've said, Canada is getting the reputation that a) it's greenness is killing the economy; and, b) "the country can't close a deal."

5. I'm sure some cartoonist will come up with a name for the pipeline that Orca killed.

6. Speaking of which, Trudeau's second mistake (his first mistake was using the orca to kill the Enbridge pipeline some years earlier): he knew this case was in court and would likely suffer the very same fate (nothing was different between the two cases). He should have published an executive order once Canada bought the pipeline stating clearly that Canada would take all necessary precautions to save the Orca and would donate "X" amount of money to environmental clubs dedicated to saving the whale.  The judge only said the company's response was inadequate. An executive order and a tweet by Trudeau would have solved the problem. Assuming, of course, the judge was unbiased going into the case -- a huge, huge assumption.
Original Post 

Wow, I knew this was going to be a huge story, but I think it's a bigger story than most realize. This is going to be fascinating to watch.

See this post for background.

I haven't read the newest stories yet, but as you go through this, remember:
  • Trudeau killed the Enbridge Northern Gateway pipeline to British Columbia some years ago by playing the "orca" card -- when it was "cool" to be against pipelines;
  • he had to have known that the "orca card" would kill Trans Mountain;
  • when he convinced Canadians to buy the Trans Mountain Pipeline he did not tell them that the environmental study was so flawed, one could drive a Canadian Pacific locomotive through it;
  • nor did Trudeau tell them that the case was in court and it wouldn't take a rocket scientist to see the flawed environmental study;
  • and the flawed environmental study involved exactly what? yes, you guessed it, the "orca"
  • the "orca" killed the Enbridge Northern Gateway;
  • it will take some interesting legal footwork by Trudeau's government to convince folks that, "hey, this time it's different"; the Enbridge pipeline would have killed the killer whale but the Trans Mountain would not
  • bottom line: Trudeau knew all about the orca issue and he knew it from the beginning when he convinced Canadians to buy the pipeline
The interesting thing is that Trudeau could have stopped this from going to court in the first place with some legislative language. But I think he was in India when this story was developing some months ago.

If the articles mention the environment at all, they don't mention (or hardly mention the "orca") and they don't reference the case that set the precedent -- the Enbridge Northern Gateway case.

Alberta pulling out of federal climate change plan until pipeline construction resumes, CBC.
  • "we are winning: several BC First Nations celebrate Trans Mountain victory
  • the ruling suspends construction on the pipeline indefinitely
  • this story says it is a $7.4 billion project
five things about the Trans Mountain pipeline ruling, Vancouver Sun
  • this source says it is a $9.3 billion project
  • fails to mention the real reason the project was killed
a video, Global News
another video, Global News
another video, Global News
fighting words, CTV

I wonder if Trudeau can sell the pipeline back to TransCanada?

The Road To Denmark -- Reality Struck Home Sooner Than Expected; New Hampshire Helping To Save The World From Global Warming --- August 30, 2018

Texas oil production: drops for first time since February, 2017. The slowdown comes as oil prices in west Texas have fallen to near four-year lows. From SeekingAlpha. This is a pretty cool story -- production drops for free market reasons.
  • the state is not slowing down progress with too many regulations;
  • no war; no terrorists;
  • no policies out of Washington, DC;
  • simply low prices due to production more than infrastructure can accommodate
Denmark: become net oil importer for first time in 25 years. From oilpriceOn May 18, 2013, I wrote:
So, How Did That Renewable Energy Plan Work Out? Europe May Be The Only CONTINENT In The Universe To Depend On Imported Energy. 
Backtrack to: Europe At A Tipping Point, one of "the big stories" that I have been following since the beginning of the blog. Back to the oilprice article:
For the first time since 1993, Denmark is on track to become a net oil importer this year, as oil production in the Danish part of the North Sea will be lower than the country’s consumption, the Danish Energy Agency said on Thursday, revising down its oil production forecasts.
The new forecast by the agency is a change from last year’s assessment and forecasts, which had expected that Denmark would continue to be a net oil exporter for a number of years.
Now, the country is expected to be a net oil exporter for a single year, in 2024, when oil production is forecast to exceed consumption due to expected start-up of new developments.
Comment: wow.
New Hampshire? How is renewable energy working out for you? Folks there are paying some of the highest energy bills in the country. Faux environmentalists stopping natural gas pipelines and state government mandating renewable energy. Recipe for disaster. And I thought New Englanders were known for common sense.

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Back to the Bakken

Active rigs:

$70.078/30/201808/30/201708/30/201608/30/201508/30/2014
Active Rigs62543376194

Three new permits:
  • Operator: Newfield
    Field: Siverston (McKenzie)
    Comments: Newfield has permits for a 2-well pad and a third well either near or on the same pad (a Goliath well and two Dahl wells) in section 5-150-98
One permit renewed:
  • BR, a State Dodge permit in McKenzie County
Four producing wells (DUCs) reported as completed:
  • 32701, 443, Peregrine Petroleum Partners, Burlington Fee 9-16-1H, Hay Draw, t7/1; cum --
  • 33609, 1,387, Hess, SC-Gene-154-98-0805H, Truax, t8/18; cum --
  • 34621, 3,298, Whiting, Loken 41-17-2H, Pembroke, t7/18; cum --
  • 33260,  A, Wold Federal 44-7-2H, Banks, 4 sections, t--; cum --

Wow, Wow, Wow -- WTI Just Went Over $70 -- August 30, 2018

About two months ago we were told WTI was in "severe backwardation -- meaning that "going forward," the price of WTI was expected to decline. Ever since that "severe backwardation" announcement, it seems, the price of WTI has been trending up.

Today, WTI went over $70 and is now solidly over $70.

See this post.

Military Pensions Could Rise By Biggest Percentage Amount In Seven (7) Years -- Making America Great Again -- August 30, 2018

From Axios:
In a letter sent to House Speaker Paul Ryan on Thursday, President Trump announced that a majority of civilian federal employees will not receive pay increases next year, undoing the original 2.1% pay increase that was set to take effect in 2019.
The details: The president explained the change is an effort "to put our Nation on a fiscally sustainable course, and Federal agency budgets cannot sustain such increases." No change has been announced for pay increases of military troops, which are still on track to receive a 2.6% bump according to the Military Times, marking their biggest pay raise since 2009.
Okay.

Now we go to military pensions. Two parts: 
The 2019 Cost of Living Adjustment (COLA) is heading towards a 3% increase based on July’s inflation data. July’s CPI-W rose by 3.16% on an adjusted basis over the previous 12-month period. July is the first of three months the does count towards 2019 COLA measurement. COLA increases are based on the inflation measurement period of the 3rd quarter (July, August, and September).
The 2019 COLA is expected be announced in mid-October 2018. There are still two months go but all signs point to the biggest COLA increase in 7 years.
One wonders if the decision to scrap the civilian federal employee raise was "necessary" to cover the military? Just rhetorical.

I believe the COLA affects the following on these dates:
  • Retired military veterans, VA rates for compensation and pension for disabled veterans and surviving families will be effective December 1, 2018 and will be reflected on the first check to be paid on December 31, 2018.
  • Social Security benefits will be effective beginning with December 2018 benefits, which are payable in January 2018.
  • Federal SSI payment levels will begin on December 29, 2018.

Cue Up Discovery Channel Documentary On Orca, The Killer Whale -- August 30, 2018

Trudeau killed Enbridge Northern Gateway because of the killer whale ("orca") issue. Previously posted.

See this note also.

It's going to take some fancy legal footwork for a court to overturn precedent -- Trudeau and the court killed the Northern Gateway by throwing out the "killer whale card."  

As Hunter S. Thompson would say: this is the "nut" of the ruling today: no one can contest that increased shipping will have adverse effect on killer whales off the coast of British Columbia, but most damning, the pipeline company punted or ignored the issue, almost "contemptuously" if the transcript can be believed.

From the ruling:
[432] Bearing in mind that the primary focus of the applicants’ concern about the Board’s assessment of Project-related marine shipping is the Board’s assessment of the adverse effects of the Project on Southern resident killer whales, the previous review of the Board’s findings demonstrates that the Board considered the Project’s effects on the Southern resident killer whales, including the environmental effects of malfunctions or accidents that might occur, the significance of those effects and the cumulative effects of the Project on efforts to promote recovery of the species. The Board found the operation of the Project-related tankers was likely to result in significant, adverse effects to the Southern resident killer whale population.

[433] Given the Board’s finding that the Project was likely to result in significant adverse effects on the Southern resident killer whale, and its finding that Project-related marine vessel traffic would further contribute to the total cumulative effects (which were determined to be significant), the Board found that the increase in marine vessel traffic associated with the Project is likely to result in significant adverse effects on the traditional Indigenous use associated with the Southern resident killer whale.

[434] The Board then considered mitigation measures through the limited lens of its regulatory authority. It found there were no direct mitigation measures Trans Mountain could apply to reduce or eliminate potential adverse effects from Project-related tankers.

[435] The Board stated that it considered all reasonable alternatives to Project-related marine shipping that would reduce the impact on SARA-listed species’ critical habitat. This would include the critical habitat of the Southern resident killer whale. As part of this consideration, the Board directed Information Request No. 2 to Trans Mountain. In material part, Trans Mountain responded that the only known potential mitigation measures relevant to the Salish Sea to reduce the risk of marine mammal vessel strikes would be to alter the shipping lanes in order to avoid sensitive habitat (that is areas where whales aggregate), and to set speed restrictions. Trans Mountain advised that shipping lanes and speed restrictions are set at the discretion of Transport Canada.
[436] Thereafter, the Board issued an Information Request to Transport Canada that, among other things, requested Transport Canada to summarize any initiatives it was currently supporting or undertaking that evaluated potential alternative shipping lanes or vessel speed reductions along the southern coast of British Columbia with the intent of reducing impacts on marine mammals from marine shipping. Transport Canada responded that it was “not currently contemplating alternative shipping lanes or vessel speed restrictions for the purpose of reducing impacts on marine mammals from marine shipping in British Columbia”. However, Transport Canada noted it was participating in the Enhancing Cetacean Habitat and Observation Program led by Port Metro Vancouver.

[437 Transport Canada’s statement that it had no current intent to make alterations to shipping lanes or to impose vessel speed restrictions would seem to have pre-empted further consideration of routing alternatives by the Board.

[438] This review of the Board’s report has shown that the Board in its assessment of Project-related marine shipping considered:
  • the effects of Project-related marine shipping on Southern resident killer whales;
  • the significance of the effects;
  • the cumulative effect of Project-related marine shipping on the recovery of the Southern resident killer whale population;
  • the resulting significant, adverse effects on the traditional Indigenous use associated with the Southern resident killer whale;
  • mitigation measures within its regulatory authority; and,
  • reasonable alternatives to Project-related marine shipping.

Trudeau Batting A Thousand; What Goes Around Comes Around -- August 30, 2018

See this link for background.

Part 2 of this note is here.

Canada: the country that can't close a deal.


Oil: Canada's big income generator. Now landlocked. Four Canadian pipelines killed outright or stalled.
  • Enbridge: Northern Gateyway -- killed by Trudeau.
  • Enbridge Line 3: stalled in Minnesota by friends of Trudeau, Obama
  • TransCanada: Keystone XL, killed by Obama
  • TransCanada: TransMountain stalled but ....
... death knell for Trans Mountain Pipeline expansion project? Some will say yes, some will say no.

But here's the CTV headline: court ruling quashes approval of Trans Mountain.

You can go with the headline or read all the "what ifs", "buts" and, "maybes" in the story ....

This may be most concerning:
The Federal Court of Appeal has quashed Ottawa's approval of the contentious Trans Mountain pipeline expansion.
The decision means the National Energy Board will have to redo its review of Kinder Morgan Canada's project.
In a written decision, the court says the energy board's review was so flawed that the federal government could not rely on it as a basis for its decision to approve the expansion.
Wow, what if the new review suggests that the project could do irreparable harm to British Columbia?

I can't imagine this getting resolved within two years, and, wow, the First Nations have huge leverage and are in a win-win -- either they kill the project and get a psychological victory, or they cash in. Not telling what they will do, but I can guess.

Investors? Yawn. Apparently the share price was baked into the court ruling. On a down day for the market, TRP is down about half a percent. Yawn.

Back to Trudeau. Maybe time to "work" with Trump on trade.

********************************
Idle Rambling

There seems to be a consistent story line when it comes to oil companies / pipeline companies and "First Nations" (generic): a failure on the part of the oil companies / pipeline companies to maintain really, really good notes and really, really good documentation.

It seems that "First Nations" seldom enter the process early on -- for whatever reason -- and then only after the decision affects them ("First Nations") do they get actively involved.

The oil companies / pipeline companies need to aggressively get the "First Nations" involved from the get-go and if they get no cooperation, get the courts involved early, and keep great, great documentation.

And, as noted, early in the blog -- wow, I must have written this a decade ago -- "First Nations" can and will claim "ownership" on any land in the western hemisphere.

The Market, Energy, And Political Page, T+17 -- August 31, 2018

Idle chatter. It appears to be a quiet day, so I will interrupt it with my incessant chatter.

Sector rotation: the Dow (irrelevant) is down 100 points. AAPL, meanwhile, hits a new high, rising another $1.77, trading at $224.76. Pretty impressive. 

NYC: back to normal. Long Island customers will only pay $110/MWh today. Link here.

Natural gas fill rate, link here:

T+17, Iran sanctions. First round went into effect on August 7, 2018; second round set to begin November 4, 2018.

Selfish: for selfish reasons I would like to see Melania, the First Lady, out and about a bit more. She keeps a very, very low profile and I don't blame her. I hope she is enjoying life. I assume she is doing just fine. I really, really would enjoy seeing her out and about. But, having said that, not seeing her is so much better than the alternative, seeing Bill Clinton, First Man, dominating the news, had Hillary been elected. And if it weren't for the 22nd Amendment, we would still be seeing Michelle and her garden. Speaking of which, I assume the garden has now become a putting green.

Oil:


Global warming:


The Hippocratic oath: "first, do no harm."

The market:

Oh, before I begin, the disclaimer -- this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here. I am now posting financial "stuff" because:
  • at least one of my siblings appreciates it (I think she's the only family member that actually reads the blog)
  • my wife has successfully completed an in-depth financial course and may someday actually read the blog
  • in September, I will step down as CEO and chairman of our financial affairs "entity" and hand over CEO responsibilities to my executor; I will remain as chairman; due to non-disclosure agreements, nothing else can be said at this time
Now, back to the market, for my one sister who reads the blog and my executor, not intended for anyone else; whether or not I have holdings in those mentioned, I enjoy following them:
  • all major indices: red; profit-taking; background noise
  • AAPL; flat; it had a good run; Apple is now a mature company; generally it will trade in a "trading range," and will show volatility leading up to quarterly earnings; growth will be tough; it's a value stock now; hard to call it FANG; lots of cash so dividend increases likely and overall return will be nice but not great; stay with what you have, but don't add to your portfolio; up as much as $4.00 today; apparently Warren Buffett's BRK added another 5% to their overall AAPL holdings;
  • ENB: down along with the overall market; Line 3 is the concern here; buying Spectra was huge and could offset problems associated with Line 3;
  • SRE: nice; on a down day for the market (albeit not much), SRE is showing some life, up about 0.65%); paying 3%
  • D: ditto SRE; I think I read somewhere Dominion Energy is the fastest growing utility in the US; paying almost 5%; wow;
  • COP: movers and shakers in the oil sector consistently say good things about COP; up a bit today and paying 1.6% but expectations for dividend increases are often cited
  • CVX: flat today, slightly red; paying a remarkable 3.76%;
  • XLNX: down slightly today; a real sleeper; paying almost 2%;
  • PLUG: what can I say; stay away;
  • BRK-B: might as well invest in Schwab Total Stock Market Index Fund (SWTSX) -- easy to remember -- "SW" = Schwab; "TS" = total stock' and "X" = mutual fund; the only difference: no avuncular advice
  • UNP: off its recent high; paying 2%; trucking industry with challenges; truckers have "last mile" niche but rails will get the rest;
  • Midstream MLPs: not for the faint-hearted; I love the two I have; would have preferred a third, but more trouble than they are worth? Some analysts suggest MLPs have seen their worst days after FERC changed the rules; 
  • OAS: actually "green" today; 
  • NOG: flat 
  • S: up a bit today; may still have legs before merger?
  • BABA: volatile; long-term? No dividend
  • YUM: hold, but don't add. Pays $1.7%; watch for another year, then decide
  • AMZN: share price hit $2,000 but still hasn't hit market cap of $1 trillion, and pays no dividend
  • SLB: up a bit today; pays 3%; time to move on;
  • TSLA: oh, TSLA, almost forgot; how could I forget, $302, well off it's high of $389 and well short of the one analyst's target: $4,000 
  • ETP and ETE: SeekingAlpha


Idle Rambling On A Day When No Wells Come Off The Confidential List -- August 30, 2018

Updates

September 13, 2018: when will the longest expansion on record end? See this post.

Later, 1:32 p.m. CDT: below, in the original post, I suggested breaking up the red line into two lines, a yellow line for the Obama-expansion (beginning in 2009 and extending to 2016; and a red line for the Trump-expansion (beginning November 8, 2016 and extending to the present day. A reader asks (rhetorically) if I could name one thing that Obama did that resulted in the "Obama-expansion." I could not. The stimulus, perhaps, but if folks remember, the stimulus was highly targeted and highly flawed. On the other hand, "everyone" can list any number of things that the Trump administration specifically did that led to the Trump-expansion. The corporate tax bill (and all that was associated with that bill) was perhaps the one biggest line-item that can be tied directly to the current US economic expansion. Going farther, the lack of any specific Obama initiative that could "explain" the Obama-expansion confirms that even an incredibly "poor" president cannot stop the United States economy. It just won't grow as fast as it otherwise might.

Original Post 

Time to say what I've been thinking for quite some time, but first this graphic from John Kemp over at twitter:


"Everyone" is talking about how long the current period of economic expansion has lasted, saying that it is now the longest on record. Some think the economic expansion still has legs; but others, think it will "soon" come to an end. CNBC is generally talking the market down (my two cents worth). It's my perception that even those who think the expansion will "soon" come to an end, don't think it will be as "soon" as next year (2019).

I have not followed economic cycles. I know nothing about them except what the "average" person on the street might know.

A couple of things from the graph:
  • first, and I was surprised by this, the current expansion is still almost a year shorter than the longest one (the one that began in 1991)
  • most surprising: how short the periods of economic expansion lasted after WWII
    • 1945: 3 years
    • 1949:  3.5 years
  • so much changed after 1933, I don't think it's worthwhile to go back farther than 1945 when considering economic cycles; some might argue going farther back than 1969 is even going back too far
I'm absolutely convinced that the current economic expansion had two (2) periods, both set in motion by entirely different events.

The current expansion is said to have begun in 2009 and has gone on without interruption; it began after coming out the second worst downturn in US history; at some point, the economy had to turn.

Had the pundits been correct, the market (and possibly the economy) would have tanked immediatly after Trump's election (November) and it was going to take two to three years to recover.

Had that happened, the graphic above would show:
  • economic expansion for 6.5 years -- not atypical for for modern-era America -- ending in late 2016
  • the next economic expansion would have begun in 2018; we would now be into our first year of another period of new economic expansion (all things being equal)
  • "all things being equal" -- had the market tanked in 2016/2017, it is unlikely Trump would have gotten the tax cut or the other changes that propelled the economy we are seeing now; he likely would have been impeached by now if the Trump election had put the US into a depression
  • however, assuming that "all things being equal" -- that Trump persevered and his policies went into effect, the economy would have righted itself, and taken off
Bottom line:
  • I would suggest breaking up the red line in the graphic above that begins in 2009 into two separate lines:
  • the first segment would begin in 2009; end in 2016
  • the second segment would begin in 2017 and extend to the present day
If one does and if one considers a typical economic expansion cycle to last six years in the modern era, we still have four years of this economy growing.

My two cents worth.

WTI Flirting With $70; Active Rigs Jump To 63 -- August 30, 2018

Jobless claims, link here:
  • consensus: 214K
  • prior: 210K
  • actual: 213K
  • so, the number comes in 1,000 less than forecast -- right in line
Personal income and consumer spending: right in line

Market, just before the open --  all indices red, but not particularly remarkable; a typical back-and-forth; background noise

Enbridge: from SeekingAlpha 

Flaring: in the Permian; same problem the Bakken had. Next, satellite photographs of Texas at night.  Texas regulators' response: so what? We've been through this before. It will take care of itself. In the Bakken, flaring bad. In the Permian, flaring is the cost of doing business. And so it goes.

Produced water: in the Permian. This IS a problem. 

Appalachia: Eclipse and Blue Mountain merge; creating a $1.4 billion company.

Methanol: new plant in Texas reached milestone -- data points --
  • Beaumont, TX
  • 5,000-metric ton per day (1.8 million metric tons per annum)
  • successfully ramped up to full utilization 
  • achieved provisional acceptance
  • Consolidated Energy Ltd (CEL)
  • analyst: North America is oversupplied in natural gas; methanol is a great way to monetize that resource
Day late, dollar short: OPEC will discuss in December if it needs to ramp up production to make up for Iranian shortfall due to sanctions. Inshallah.

No wells coming off confidential list until this weekend. There was no "February 30" six months ago.

Active rigs:

$69.978/30/201808/30/201708/30/201608/30/201508/30/2014
Active Rigs63543376194

RBN Energy: Hurricane Harvey and the important of the Gulf coast refined product infrastructure to the US, part 2.

Wednesday, August 29, 2018

Mexico To Join OPEC? -- August 29, 2018

The analogy:
  • Saudi Aramco is to Saudi Arabia as PEMEX is to Mexico. 
Mexico would leave the IEA and "move closer" to OPEC.

A Reader Has A Question About The Confidential List -- August 29, 2018

Updates

August 30, 2018: a reader provided this link to the NDIC that might help answer the question --
https://www.dmr.nd.gov/oilgas/webhelpfaq.asp.
All information furnished to the director on permits, except the operator name, well name, location, permit date, confidentiality period, spacing or drilling unit description, spud date, rig contractor, central tank battery number, any production runs, or volumes injected into an injection well, shall be kept confidential for not more than six months if requested by the operator in writing. The six-month period shall commence on the date the well is completed or the date the written request is received, whichever is earlier. If the written request accompanies the application for permit to drill or is filed after permitting but prior to spudding, the six-month period shall commence on the date the well is spudded.
Original Post 

A reader noted that two wells that came off the confidential list (after being SI/NC) and were producing (albeit very little) were now back on confidential list.

The reader asked:
Why does a well suddenly go on confidential status?
The Kennedy 5-8 and Miles 5-8 are all confidential as of today.
My reply, not ready for prime time:

1. In fact all of these wells are now on confidential status. They were once on the SI/NC list but are now back on the confidential list:

  • 33220, 1,111, Miles 8-6H1, Dimmick Lake, t7/18; cum --
  • 33221, 1,696, Miles 7-6H, Dimmick Lake, t7/18; cum --
  • 33222, 1,173, Miles 6-6H2, Dimmick Lake, t8/18; cum -- 
  • 33223, IA, Miles 5-6H, Dimmick Lake, t--;
  • 33224, 1,133, Kennedy 8-31H1, Dimmick Lake, t7/18; cum --
  • 33225, 1,592, Kennedy 7-31H, Dimmick Lake, t8/18; cum --
  • 33226, 962, Kennedy 6-31H2, Dimmick Lake, t8/18; cum -- 
  • 33227, A, Kennedy 5-31H, Dimmick Lake, t--; cum --
2.  One can still access the information for all these wells that was previously published, so all the old information is still there but any new information after today is now confidential.

3. I didn't check them all, but #33223 and #33227 did not yet publish their frack data; I think the rest did.

4. So my hunch is that CLR put all these wells back on confidential while before releasing frack data on the last two wells (#33223 and #33227). It's been my experience that this is quite common. Wells can only be on the confidential list for 6 months. In the old days when they drilled and completed all at once, the wells were usually on confidential from time of spud to time of completion because they could get everything done within 6 months.

5. Now, with the new rule that companies have two years to complete a well after first spud, they find it more important to put the wells on confidential list when they are getting ready to frack. There's not much information that is new to anyone with regard to drilling. However, everyone is trying different ways to frack, and it now makes sense to put the wells on confidential (or back on confidential) once they start fracking.

6. The rules regarding when the clock starts ticking may have changed with the other rule change (two years to complete) -- I don't follow the rules that closely. But I've seen this often and in fact, I have many examples on the blog where a well was confidential, then went to SI/NC, and then back to confidential.

7. "Teague" once said that wells couldn't do this but that was before the 2-year rule. That was just before I was voted off the island.

8. So, my hunch is that the last two wells being fracked (or already fracked -- I'll check FracFocus later -- I bet they are already fracked) are now on confidential, not wanting others to know what the completion strategy was. [Yes, I just checked FracFocus: #33227 was indeed fracked, 1/21/18 - 2/11/18. I assume #33223 has also been fracked.]

WTI Had A Great Day; Slawson Getting Active Again In The Bakken -- August 29, 2018

WTI: wow, up 1.7% today, up $1.16, and closed trading at about $69.69.

Gasoline demand, link here:

Active rigs:

$69.698/29/201808/29/201708/29/201608/29/201508/29/2014
Active Rigs61533076194

Five new permits: pending
  • Operator: CLR
  • Fields: Haystack Butte (McKenzie)
  • Comments: wow, CLR is on a tear -- permits for another 5-well Palmer pad in NWNW 25-149-98;
Nine permits renewed:
  • Slawson: one Wizard Federal; one Jugard Federal, four Vixen Federal; two Phatkat Federal; and, one Phoenix Federal permit -- all in Mountrail County
Five producing wells (DUCs) reported as completed:
  • 33264, 2,510, Whiting, Wold Federal 44-7-6XH, Banks, t8/18; cum --
  • 33265, 1,997, Whiting, Wold Federal 44-7-7H, Banks, t8/18; cum --
  • 33261, 1,091, Whiting, Wold Federal 44-7-3H, Banks, t8/18; cum --
  • 23556, 920, Slawson, Gabriel 1-36-25H, t7/18; cum 12K after 22 days;
  • 24519, 1,358, Slawson, Gabriel 5-36-25TFH, t7/18; cum --


Idle Rambling -- Looking At Price Of Oil -- August 29, 2018

Graph from this link:

If the graphic is hard to read:

From 2014 to 2016: "Saudi Surge: Saudi's Trillion-Dollar Mistake"

From 2016 to 2017: Saudis aggressive effort to re-set

From 2017 to present day: Trading range for WTI '' "Goldilocks"

Going forward:
  • current trading range: "Goldilocks"
  • trending toward $90: bullish for oil sector investors; little negative harm to overall economy
  • trending over $90 (in 2018 dollars): could negatively impact the economy 
  • below current trading range but above $50: oil companies will survive, perhaps thrive, but investors will be disappointed

Governor Cuomo: Your Long Island Constituents Are Paying Upwards Of $600/MWH Vs $30/MWH With Conventional Power Sources -- August 29, 2018

Link here.


If I am misreading the chart, I apologize.

If the graph is hard to read, click on it and will be a bit larger. Or go to the link. 

Oasis Starting To Frack The Lite Wells In The Sanish -- August 29, 2018

Oasis is starting to frack the Lite wells.

EOG's Riverview Wells In Clarks Creek Oil Field

This page will not be updated. The EOG Riverview wells in Clarks Creek oil field are tracked here.

There appears to be an interesting story here. EOG originally permitted about ten wells in the south, running north, and doing the same thing in the north, permitting ten wells in the north and running south. They then PNC'd ten to fifteen permits with plans to have, it appears about half the wells running north to south, and the other half running south to north, heel-to-toe/toe-to-heel in this drilling unit.

Look at the production data for #20513. Pretty nice.

The wells, from the north, running south:
  • 31813, conf, EOG, Riverview
  • 31814, conf, EOG, Riverview
  • 31815, conf, EOG, Riverview
  • 22200, 528, EOG, Riverview4-3031H, Clarks Creek, t7/12; cum 448K 6/18;
  • 22199, 1,088, EOG, Riverview 100-3031H, Clarks Creek, t6/12; cum 470K 6/18;
  • 31808, conf, EOG, Riverview
  • 31807, conf, EOG, Riverview
  • 31806, conf, EOG, Riverview
  • 31805, conf, EOG, Riverview
  • 31804, conf, EOG, Riverview
The wells, from the south, running north:
  • 20513, 2,365, EOG, Riverview 3-3130H, Clarks Creek, 49 stages; 9.8 million lbs, t3/13; cum 696K 6/18;
  • 32647, conf, EOG, Riverview
  • 32646, conf, EOG, Riverview
  • 32645, conf, EOG, Riverview

BR's Lovaas Wells In Blue Buttes Oil Field

The BR Lovaas wells:
  • 14399, in the section to the east; about a mile to the east of the other Lovaas wells; a Winnipeg/Deadwood well; now inactive;
  • 32903, 595, BR, Lovaas 5-8-12 UTFH, Blue Buttes, t11/17; cum 143K 6/18;
  • 32904, 897, BR, Lovaas 6-8-12 MBH, Blue Buttes, t11/17; cum 176K 6/18;
  • 23250, 2,806, BR, Lovaas 11-1MBH, Blue Buttes, t12/12; cum 307K 6/18;
  • 23249, 2,946, BR, Lovaas 11-1tFH, Blue Buttes, t12/12; cum 238K 6/18;
  • 20468, 2,976, BR, Lovaas 7-1-1UTFH, 2 sections, Blue Buttes, 26 stages; 7.1 million lbs (large to small); required a lateral; target was 29' thick, t1/16; cum 381K 6/18:
  • 30203, 348, BR, Lovaas 8-1-1MBH, Blue Buttes, t1/16; cum 411K 6/18;
  • 16531: a dual lateral, crossing the Lovaas wells -- struggling now; was a good well; did show a jump in production several years ago; 608, BR, Brown 44-1H, t6/07; cum 216K 6/18; 
****************************************

It looks like it's time to start tracking the BR Lovaas wells in Blue Buttes. To start, look at the phenomenal production of this well:
  • 20468, 2,976, BR, Lovaas 7-1-1UTFH, 2 sections, Blue Buttes, 26 stages; 7.1 million lbs (large to small); required a lateral; target was 29' thick, t1/16; cum 381K 6/18:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN6-20183099049957239911979119050
BAKKEN5-2018311174211666307414298142210
BAKKEN4-2018301040110515278612764113351355
BAKKEN3-2018311107510951242511983119060
BAKKEN2-2018281141711354197513541134710
BAKKEN1-201831116761159821661232512135113
BAKKEN12-2017311266012637210514990149130
BAKKEN11-2017301359113909188315669155950
BAKKEN10-201716498945191345535919613358
BAKKEN9-20171000200
BAKKEN8-20170000000
BAKKEN7-20170000000
BAKKEN6-20172470617482239420175201170
BAKKEN5-201731106271068733372854128048416
BAKKEN4-2017301173711612543032398323240
BAKKEN3-2017311278312957434942398423210
BAKKEN2-2017281661216819538445268451980
BAKKEN1-201726163201584029181092392391619
BAKKEN12-201615805684211240811480770
BAKKEN11-201630215912154450433512034561485
BAKKEN10-2016312402924012429639062389850
BAKKEN9-2016292056619966369027702276390
BAKKEN8-2016312443325031467834272341950
BAKKEN7-2016312600726007510336695366180
BAKKEN6-2016302469025232482029721265533093
BAKKEN5-2016312323822500464029403293260
BAKKEN4-2016191251112437246914937148890
BAKKEN3-2016171510914575271817613175710
BAKKEN2-20160000000
BAKKEN1-20161484248424275611798011763