Tuesday, August 28, 2018

Back To Burnaby; Back To Court -- August 28, 2018

From The Vancouver Sun:
A long-awaited court decision coming Thursday will dictate the future of the controversial $9.3- billion Trans Mountain oil pipeline expansion.
The outcome will provide either relatively smooth sailing, at least legally speaking; or more bumpy waters; or, potentially, the project’s death knell.
It’s the biggest legal decision yet of challenges by First Nations and other critics of the approval by Justin Trudeau’s federal Liberal government and the National Energy Board.
The mega-project — supported by business groups in B.C., as well as some unions and First Nations — will triple capacity and is meant to open new markets for crude from the Alberta oilsands in energy-hungry Asia.
The Federal Court of Appeal decision has ramifications for further delays of the expansion, which the company has said has already been delayed by protest and permit challenges.
The court will decide whether several First Nations, including the Tsleil-Waututh and Squamish, were adequately consulted, as well as whether orcas have been properly protected.
Other challenges in B.C. Supreme Court have already been rejected, including by the Squamish Nation and the City of Burnaby.
George Hoberg, a professor at the University of B.C.’s School of Public Policy and Global Affairs, said Thursday’s decision is crucial.
“The City of Burnaby decision … that was small fry compared to this.”
Hoberg anticipates three possible outcomes: the project gets the general blessing of the court, validating the review and consultation process; the review process is criticized but not invalidated; or approval is quashed.
In 2016, in a similar challenge of Enbridge’s $7.9-billion Northern Gateway oil pipeline, the federal court found inadequate First Nation consultation, which all but ended that project.
Much more at the link.

In fact, the Northern Gateway was effectively killed by PM Trudeau. From an earlier post:
September 2, 2016: from The Vancouver Sun -- 
Enbridge’s proposed Northern Gateway plan is, at least for now, dead in the water after Prime Minister Justin Trudeau released a letter of instruction Friday telling his transport minister to ban oil tanker traffic on British Columbia’s north coast.
A ban would prevent hundreds of tankers each year from carrying diluted bitumen extracted from Alberta’s oilsands and piped to northern B.C. from being shipped for export overseas.
“It will mean that Northern Gateway will never happen,” said Gerald Graham, a Victoria consultant specializing in oil spills for more than 40 years.
Thursday: will be able to say, "what goes around, comes around"?

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Church Burning In Texas Carries Hefty Penalty

I was part of the jury pool on this one; not selected most likely because I was "seen" as being too harsh when it came to the punishment phase of the trial.

From the Star-Telegram:
The vandalism that ruined much of St. Stephen’s Presbyterian Church in Fort Worth was described by its pastor as “disturbingly violent.”
The century-old church near TCU was vandalized and set on fire about 4:30 a.m. on Jan. 8, 2017. The fire was put out quickly but the church was badly damaged, forcing officials to cancel Sunday morning services that week.
The man responsible, Thomas Britton, 56, was sentenced to 40 years in prison on Thursday. The jury took five minutes to reach a decision, according to a news release from the Tarrant County District Attorney’s Office.
56 years old. 40-year prison sentence. Pretty much a life sentence.

Read more here: https://www.star-telegram.com/news/local/community/fort-worth/article217239370.html#storylink=cpy

Oil And Gas Lease Results -- August, 2018

Link here for August, 2018 (on-line).

Burke
  • 6 tracts
  • 80 and 160 acre tracts
  • bonus, $26 - $104/acre
Dunn
  • 1 tract
  • 8 acres: NE4-18-141-97
  • $507/acre
  • Interwest Petroleum Corporation
Hettinger
  • 2 tracts
  • Kadrmas, BJ
  • $8 and $16
McKenzie
  • 18 tracts
  • mostly 80  - 160 acres
  • bonuses, $46 to $110
  • mostly Northern Energy Coporation
  • Slawson picked up a 160-acre unit; bonus of $110/acre
Williams
  • 2 tracts
  • $247 an $251/acre
  • Prudent Resources and Norra Resources
  • both 40-acre tracts

Happy Birthday To Some Very, Very Old Wells In North Dakota -- August 28, 2018

This tells me how long Bakken wells are going to be producing:
  • 2942, 276, Denbury Onshore, Cedar Creek Unit 8B 32X-03A-7, Cedar Creek, an Ordovician well; t7/61; cum 1.145 million bbls 6/18; producing for 57 years and still going strong;
  • 2895, 162, White Rock, Beckedahl C-1, Sherwood, a Madison well; t5/61; cum 1.475 million lbs 6/18; producing for 57 years and still going strong;
  • 2881, 276, Denbury Onshore, Cedar Creek Unit 8B 44X-03A-6, Cedar Creek, an Ordovician well; t7/61; cum 847K bbls 6/18; producing for 57 years and still going strong;
  • 2478, 402, Petro Harvester, M. R. Skalicky 1, Portal, a Madison well; t11/59; cum 221K 6/18; producing for almost 59 years and still going strong;
  • 2286, 142, Taqa USA, V. Harris-Montana 1, Sherwood, a Madison well; t5/59; cum 306K 6/18; producing for more than 59 years and still going strong;
  • 2269, 162, White Rock Oil & Gas, Rusch, Sherwood, a Madison well; t4/59; cum 1.476 million bbls 6/18; producing for more than 59 years and still going strong;
  • 1479, 178, Condor Petroleum, John C. Moberg 2, North Tioga, a Madison well; t8/57; cum 307K 6/18; producing for more than 61 years and still going strong;

A Short-Lateral EOG Parshall Well Goes Over One Million Bbls -- August 28, 2018

The well:
  • 17120, 2,051, EOG, Austin 10-34H, t8/08; cum 199K 6/18; INACTIVE as of 4/16; active as of 7/16; bump in production late 2016 for no apparent reason; producing about 3,500 bbls/month (6/18)
BAKKEN5-201731480848094691683146924
BAKKEN4-201730486649491851306110913
BAKKEN3-20173151795244115134411540
BAKKEN2-2017284866487080134211700
BAKKEN1-201731571256831051809153188
BAKKEN12-201631514253717881962175616
BAKKEN11-2016305319528111152038182727
BAKKEN10-2016314982480716161985919876
BAKKEN9-2016304353433920831802160221
BAKKEN8-2016313798387936291582135737
BAKKEN7-20161826472545391710229120
BAKKEN6-20160000000
BAKKEN5-20160000000
BAKKEN4-20160000000
BAKKEN3-20162417241799179161114613
BAKKEN2-20162922772204632134193125

For Newbies: Two Wells With Jump In Production Without Re-Frack -- #20097; #23041 -- August 28, 2018

For newbies, example of jump in production in two XTO wells in Siverston oil field that were not re-fracked, at this link.

Electricity Costs -- NYC -- During The Late Summer Heat Wave -- August 28, 2018

Link here for New York state and NYC. Click on the area of the map that interests you.

ISO New England, a bit farther north, see graphic below, link here. And, yes, it will cost $300/MWh if one chooses to do laundry at noon. From wiki:
In the U.S., it costs approximately 45 cents to dry a load of laundry in an electric dryer, based on a 5,600-watt dryer, 40-minute run-time, and a 12-cent-per- kilowatt-hour rate. A kilowatt-hour (kWh) is equal to the energy of 1,000 watts working for one hour. 
My math suggests at $300/MWh that same chore will cost about $1.00.

Air conditioning


Taxes And Royalty Income -- North Dakota -- August 28, 2018

I was waiting to post this at a more appropriate time, but I don't want to forget to post this, so I'm doing it now.

A huge "thank you" to the reader who sent me this some months ago. Hopefully, I will remember to re-post this next year during tax season:
One thing that you may have mentioned and that does strike me is that oil companies are now collecting the ND state tax, deducting it from the royalty checks, and have been doing this for several  years. 
And this is at the highest possible marginal rate.  
This has to be a windfall for ND as many  people receive a substantial refund if they file, so those people that live out of state and don’t file are paying much more in taxes on their royalties  (in many cases) then they actually owe
Five years ago ND was collecting nothing from the non-residents not filing so one would think this would be a windfall – an overly high tax rate and the fact taxes are now actually being collected.

CLR With Permits For A Palmer Federal / Palmer Pad In Haystack Butte -- August 28, 2018

Active rigs:

$68.538/28/201808/28/201708/28/201608/28/201508/28/2014
Active Rigs61553076195

Five new permits:
  • Operator: CLR
  • Field: Haystack Butte (McKenzie)
  • Comments: CLR has permits for a 5-well Palmer / Palmer Federal pad in NENW 25-149-98
One permit renewed:
  • Liberty Resources: a Robert W permit in Burke County
One producing well (DUC) reported as completed:
  • 33804, 894, XTO, Lund 44X-8H,  Siverston, t718; cum --

The Market, Energy, And Political News, Page 2, T+14 -- August 28, 2018 -- More "False Precision" -- API

API: weekly crude oil change -- absolutely flat -- a build of 0.038 million bbls which works out to 38,000 bbls -- absolutely impossible precision.

I was out doing errands all day so I have to work fast to catch up. Huge "thank you" to reader(s) for sending me links.

Venezuela: oil discovered in 1914; free economy: by 1950, Venezuela had the 4th highest per capita income in the world; squandered it all. Hugo Chávez asked "so, what don't you want?" The masses said they don't want a free economy; they wanted free money; they wanted other people's money. Bernie Sanders, Occasional Cortez, and Pocahontas have said the same thing: they don't want a free economy; they want free money; free college; free medical care; free everything. And so it goes.

Biggest surprise all day: the markets held after a huge run-up yesterday. One would have thought a lot of profit-taking today. But all four major indices held, all closing higher, albeit barely in most cases.

Making America great again.
Disclaimer: this is not an investment site. Do not make any investment, financial, relationship, travel, or travel decisions based on anything you read here or think you may have read here.

The market:
  • all four major indices -- already at record highs -- or flirting with record highs -- closed higher today
  • AAPL hit an intra-day high
  • S&P 500 closes at record, briefly hits 2,900 for first time ever;
  • UNP: hit an all-time high yesterday; some profit-taking today
  • YUMC: up almost 4% today
  • CNBC: XLNX "breaking out"
  • MLPs: talking head "somewhere' suggested MLPs may be an area of interest in the short term
  • most stocks of interest flat to slightly down today; oil and oil service stocks definitely down
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Fitzsimmons On PSX

So, the big question on the Q2 conference call was what to do with all the cash that will be generated?
As discussed, the company wants to build up its cash to a more comfortable level ($2-3 billion) after draining it to buy back $3.3 billion in shares from Berkshire Hathaway.
There also was talk of paying down a bit more debt.
But as can be seen from the $1.3 billion in net income in Q2 alone, while generating $2.4 billion in CFO during the quarter, it won't take long for PSX to increase its cash on hand and reduce debt.
So then what? Obviously, more buybacks and dividend increases. As Garland said on the conference call, "what a great problem to have." He expands on the subject by giving the 10,000-foot view summarizing PSX's cash generation and allocation numbers:
I think the portfolio is going to generate $5 billion to $6 billion of cash. We've got $1 billion of sustaining capital. We want to fund kind of another $1 billion to $2 billion of growth, so call it, $2 billion to $3 billion of capital. So that takes care of that. We've got $1.5 billion dividend today and that leaves room for another $1 billion to $2 billion of share repurchases and that kind of all balanced within our means.
Note that the company had only 464 million shares outstanding at the end of Q2. So "$1 billion to $2 billion", call it $1.5 billion of cash, amounts to an incremental ~$3/share annually. Considering the current quarterly dividend of $0.80 ($3.20 on an annual basis) equates to a roughly $1.5 billion commitment, the outlook for both dividend growth and share buybacks is obviously excellent.
I say this because if, for example, all the excess capital were allocated to growing the dividend only, the dividend could roughly double.

The Market, Energy, And Political Page, T+14 -- August 28, 2018

Making America great again: it's ironic that Trump will be impeached in 2019 when the US is doing so incredibly well. On top of everything else, look at the consumer confidence index today. Something tells me the GOP will suffer immensely if they let the charade go through when the economy is doing so well; as Larry Kudlow says, the "US is crushing it"
  • highest level since October, 2000 -- two lost decades: Bush II and Obama
  • when you look back on Obama: one word -- lazy; what was he doing for eight years? [by the way, Obama himself characterized himself as "lazy" soon after he entered office]
  • when you look back on Bush II: intellectually "un-curious"; in street language: "didn't have a clue"
  • I digress
  • back to today's consumer confidence index
  • Americans are happy with an index of 100
  • I would be happy with an index of 100 after all we've been through
  • what was the estimate? 126.7. LOL. Analysts thought consumer confidence would fall slightly from last month's 127.4. (The "decimal" precision is "false precision" -- something even Sophia at age four years knows, but I digress again)
  • the analysts: weren't they paying attention to two things?
    • retail sales
    • connecting retail sales and decreased gasoline demand
  • so, if the estimate was 126.7, what was the actual number? An incredible 133.4
  • repeat: 133.4 -- the best in almost two decades
  • "lost decade"
  • the first time I tagged a post with "lost decade" was back on January 3, 2011; it wasn't until almost five years later that mainstream media was starting to write about the "lost decade" -- which they associated with Bush II; it will be another five years before the mainstream media starts associating the second lost decade with Obama (second lost decade, tag)
  • like posts on global warming, talking about the second lost decade gets tedious
Trade wars: some think China has more staying power than the US. Remember this: US retail is starting to put in their orders for Christmas now; by the end of August, maybe September at the latest, US retailers will have put in their buy orders. 

Look At The Incredible Permian Pipeline Buildout -- August 28, 2018; CLR -- 61 Stages, 20 Million Lbs

WTI: $69 -- watch -- ...

CO2? What CO2? Algore says CO2 from jets does not count. That's fortunate. How much CO2 will 240,000 commercial pilots dump into the atmosphere. From The BBC: Boeing says Asia needs 240,000 more pilots over the next two decades. The reason CO2 emissions from jets do not count, flying "takes cars off the road." Like all the cars that would otherwise be driving across the Pacific Ocean.

Total lack of shale: Last month BP said it would buy world-class unconventional assets from BHP in the Permian, the Eagle Ford, and the Haynesville basins for US$10.5 billion, which will add 190,000 boe/d of production and 4.6 billion boe of discovered resources to BP’s portfolio. But France? Nope. France's oil and gas major Total said it won't move into the Permian -- too expensive -- and Total will remain the "only" major without exposure to shale.

Pipelines: this is pretty cool. This past year there has been a lot of hand-wringing about lack of takeaway capacity in the Permian. I said a few weeks ago that free-market capitalism would solve this problem: not to worry. Now, from oilprice: the Permian could soon have too much pipeline capacity. 

OPEC: there story keeps changing. Now "they" say OPEC+ cut July output by 9% more than agreed upon.  OPEC is certainly not irrelevant but  ...

Speaking of OPEC, LOL -- Saudi Aramco -- now that the IPO is dead -- something movers and shakers knew from the beginning -- Elon Musk (Tesla) and Prince Salman (Vision 2030) would have been a good fit -- now, and I can't make this up, Saudi Aramco wants to become a found of ideas. From the WSJ:
Saudi Arabia’s state oil company is working to turn itself into an innovation powerhouse while its much-delayed plans to go public remain on hold.
The U.S. Patent and Trademark Office granted Saudi Arabian Oil Co., better known as Aramco, 230 patents last year, four times as many as in 2013 when it racked up just 57. That placed Aramco third among oil-and-gas exploration and production companies that year, far behind Exxon Mobil Corp. but close to Chevron Corp.
Aramco’s most recent patents have included fluids to break rocky oil formations using micro-particles, a docking station for mobile robots deployed in oil fields and techniques to remove carbon from fuels.
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Back to the Bakken

Wells coming off confidential list today (these will be the last wells coming off confidential this week. No new wells coming off the confidential list (except the following) until Sunday:

  • Tuesday, August 28, 2018 
  • 34233, SI/NC, Crescent Point Energy, CPEUSC Elena 3-22-15-157N-100W MBH, Marmon, no production data, 
  • 33926, SI/NC, MRO, Cantrill USA 11-29TFH, Reunion Bay, no production data, 
  • 33229, 1,085, CLR, Vardon 5-14H1, Siverston, Three Forks, 61 stages; 20 million lbs, a huge well; 80K in less than four months; t3/18; cum 89K 6/18; the Vardon wells are tracked here;
Active rigs:

$68.868/28/201808/28/201708/28/201608/28/201508/28/2014
Active Rigs61553076195

RBN Energy: Permian oil, gas and NGLs target export markets.
It seems like everyone wants production out of the Permian these days — at least everyone who works for a pipeline company.
The addition of five major greenfield crude oil pipes plus a host of expansion projects could bring Permian takeaway capacity up to 8.0 MMb/d from only 3.3 MMb/d today, with almost all of the incremental barrels destined for export markets. It’s a similar story for natural gas, with seven new pipes in the works to bring 2.0 Bcf/d each to Corpus Christi, Houston, or Louisiana, again with most of the molecules targeting exports.
Not to be left behind, at least 27 new Permian gas processing plants are in development, and five new pipeline projects could bring 1.6 MMb/d of y-grade NGLs to the Gulf Coast. It’s a darned good thing that everyone in the global energy markets wants all that Permian production, right? What will this mean for the Permian and, for that matter, for the rest of the U.S. and the world? The only way to answer that question is to get the major players together under one roof and figure it out. That’s the plan for PermiCon 2018. Warning! Today’s blog is a not-so-subliminal advertorial for our upcoming conference.
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Good Luck to Everyone Today

Snapshots In Time -- August 28, 2018

From tradingeconomics, Japan's Nikkei 225 stock market index:


From tradingeconomics, making America great again, the US Dow (irrelevant, of course, but fun to watch):


From SeekingAlpha:
  • Goldman now sees 2018-end 10-year Treasury yield at 3.10% vs. its prior forecast of 3.25%
  • sees 10-year German yield at 0.5%, U.K. yield at 1.45%, and Japan yield at 0.125%  at the end of 2018.
  • U.S. 10-year Treasury note yield down to 2.83%. 
  • Germany 10-year government bond yield at 0.35%. U.K. 10-year Gilt yield at 1.274%. Japan 10-year government bond at 0.097%.
  • comment: by the way -- the banks are competing for your money. BBVA Compass Bank is promoting money market rates at almost 2%. I assume other banks are doing the same.