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