Wednesday, March 6, 2019

Making America Great -- To Infinity And Beyond -- March 6, 2019

Updates

Later, 8:02 p.m. Central Time: over at Financial Times, "Big Oil" is becoming "Big Shale." Or as Art Berman would say, "big retirement party."
ExxonMobil and Chevron, the two largest US energy supermajors, both raised their guidance for the amount of oil they expect to squeeze out of the Permian Basin, the heartland of the US shale boom, over the next five years.

In the process they sent a signal to Opec countries that any hopes that the shale revolution might falter are grossly misplaced. v The scale of the revisions are hard to overstate, with “Big Oil” increasingly becoming “Big Shale”. Operators are bringing expertise and efficiency earned over decades in far-flung corners of the globe to an area previously dominated by wildcatters and domestically-focused US oil companies.

By 2024 Exxon and Chevron now expect to be pumping almost 2m barrels a day combined from the Permian, which straddles Texas and New Mexico. That is 60 per cent more than previously forecast.

The Permian as a whole will already produce about 4m b/d this year, meaning that this one region — if it were an Opec country — would be the third-largest producer in the cartel, behind only Saudi Arabia and Iraq.

For Opec this spells trouble. Members, including Saudi Arabia, have consistently downplayed shale’s longevity, arguing that higher prices are still needed to foster investment in production and avoid a future supply crunch. It is a line of reasoning still favoured by many oil company chief executives too. But it looks, at best, outdated.

While the shale industry has undoubtedly relied on a gusher of Wall Street money to grow, often leaving investors disappointed by its ability to generate cash, Big Oil is now leading the way not just in getting production up, but in getting costs down.

Chevron says that returns on its shale investments are now “north of 30 per cent”, even with lower prices. Exxon says it could make a return of 10 per cent even if oil fell to $35 a barrel.
Original Post 

This is really quite incredible, today's corporate presentation by ExxonMobil.

But first a quick observation. Look at this screenshot, taken from an early slide in the presentation:


What do you notice? Finally, someone has quit mixing "Latin" abbreviations with "Anglicized" abbreviations. For eleven years doing the blog, I've been bugged by using the Latin "M" for a thousand and "MM" for a million but "B" for billion.


Finally, Exxon does it right:
  • "K" for "thousand"
  • "million" for "million"
  • "B" for "billion"
But the "oebd" is a bit backwards -- "oil equivalent bbls day" instead of the industry standard of "boepd" - bbls oil equivalent per day.

Perhaps Exxon has done this for years, but this is the first time I've noticed it.

Okay, now back to the presentation. Some data points:
  • Permian production guidance:
    • one year ago at the 2018 Investor Day presentation: 600,000 boepd by 2025
    • one year later at the 2019 Investor Day presentation: greater than 1 million boepd by 2024
  • seven new facilities online and 6 more on schedule (as forecast one year ago)
  • global demand going forward takes "AGW" into consideration
    • without AGW: new supply of 550 billion bbls of oil and 2,100 trillion cubic feet of natural gas required
    • with 2-degree Celsius "AGW": 370 billion bbls of oil; 1,750 trillion cubic feet of natural gas
  • fuel oil demand drops off the chart! -- slide 10
  • robust results even at $40-oil
  • plan to grow earnings ~3x by 2025 at $60/bbl flat price
    • for the archives: today, EPS = $4.88 (Yahoo!Finance); 3 * $4.88 =  $14.64 (I'll believe it when I see it)
I'm going to quit here, about slide 15. There are 122 slides in the presentation.

Sixteen Reasons, Connie Stevens

Four New Permits -- March 6, 2019; Jobs Added In January, 2019, Incredible -- Revised To 300,000 From 213,000 -- And That Didn't Get The WSJ Headline -- Sad

US jobs: private sector added 183,000 jobs in February. Nice, close, but no cigar; slightly less than the 185,000 forecast. But, as usual, during the Trump administration, the real news was not given the headline -- look at his -- amazing -- January jobs added was revised from 213,000 (a good number) to 300,00 -- an incredible number. Trump: making American great. Again.

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Back to the Bakken 

Active rigs:

$56.213/6/201903/06/201803/06/201703/06/201603/06/2015
Active Rigs67604435114

Four new permits:
  • Operators: Nine Point Energy (3), Whiting
  • Fields: Eightmile (Williams), Glass Bluff (McKenzie)
  • Comments:
    • Nine Point Energy has permits for a 3-well S Missouri pad in section 4-152-103 in Eightmile oil field
    • Whiting has a permit for a Martell well in section 3-151-103 in Glass Bluff oil field
Wells coming off confidential list today: pending

One permit reinstated: EOG, a Riverview permit in McKenzie County, #31809.

Four producing wells (DUCs) reported as completed:
  • 34176, n/d, CLR, Ravin 8-1H2, Dimmick Lake, t--; cum --;
  • 34177, n/d, CLR, Ravin 9-1H, Dimmick Lake, t--; cum --;
  • 34873, n/d, CLR, Ravin Federal 2-1HSL, Dimmick Lake, t--; cum --;
  • 35538, 1,833, CLR, McClintock 8-1H1, Pleasant Valley, t2/19; cum --: (#22031, the sister well, drilled back in 2012, is still off-line)
Change of operator: about 180 wells were transferred from Enduro Operating to Cobra Oil & Gas Corporation. For the most part these were old wells. There were very few in the 15XXX series and less than ten in the 2XXXX series. Wells were located throughout the state to include wells in Williams, McKenzie, Renville, Burke, Golden Valley, Divide, Billings, Bottineau counties. It looks like there were only two wells in Dunn County and one well in Ward County but it's likely I missed some. I went through the list fairly quickly.

Speaking of operator:

Operator, Jim Croce

Making America Great -- How Big Might This Deal Be? -- To Infinity And Beyond -- March 6, 2019

Link here. Data points, if US - China trade gets back on track --
  • 20-year LNG supply deal with Cheniere Energy
  • almost 2 million tons of LNG annually
  • would begin in 2023
  • "sizable portion" of the total US LNG production as of end-2019
Disclaimer: I often make simple arithmetic errors.

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Texas Power Grid Will See Record Demand This Summer

Link here
Texas' ERCOT power grid operator warns projected record demand for electricity and tight reserves this summer could result in a higher chance of alerts asking customers to conserve energy.

ERCOT says its current planning reserve margin - the difference between total generation available and forecast peak demand - is a historically low 7.4%.

A decline in natural gas prices due to record and growing production from shale formations such as the Permian Basin caused power prices in the Ercot North hub to drop to an average of just $33.86/MWh over the 2014-18 period vs. an average of $41.37/MWh during the five years ending in 2013 and $57.15/MWh during the period ending in 2008.

Some of the biggest power companies with operations in Texas include units of Sempra Energy, CenterPoint Energy, American Electric Power, NRG Energy, and Vistra Energy.
Taxi, Harry Chapin

Law Defining Mineral Ownership Under Lake Sakakawea Constitutional -- Dickinson Press -- March 6, 2019

Link here. Data points:
  • this was a "new" North Dakota law
  • the law was supposed to better define oil and gas ownership under Lake Sakakwea
  • the law was found to be constitutional -- East Central Judicial District judge
  • lawsuit brought by Rep Marvin Nelson, D-Rolla, former governor candidate Paul Sorum and others
  • taxpayers argued that they were seeking to prevent the state from "giving away" $2 billion in oil and gas mineral rights in coming years," challenging the law as unconstitutional
  • lawyers said it was not a giveaway but rather a process to define the boundary of the state's mineral rights
  • the law ought to clarify ownership of minerals under Lake Sakakawea through a review of the historic ordinary high water mark of the Missouri River as it existed before the Garrison Dam
  • the state of North Dakota prevailed
  • the law is constitutional
However:
  • the second portion of the ruling fell in favor of the taxpayers
  • the law would reduce state revenues by $205 million by refunding oil royalty, rent and bonus payments
  • the judge said that applying the law retroactively to oil and gas revenues earned from wells drilled since 2006 is unconstitutional
  • the statute of limitations: three years
  • the court preserved $205 million for the state taxpayers
Unclear
  • whether the ruling meant that the state would have to be refund payments from the past three years

Market -- March 6, 2019

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or think you may have read here.

Dow: down slightly in early trading. 

TSLA: up $1.45, trading at $277.27.
  • Tesla competitor Nio abandons factory plans; steep financial loss; shares plummet; link here
  • Tesla faces the same headwinds as Nio in China: smaller subsidies for EVs going forward
  • Nio Inc:
    • Chinese EV carmaker
    • abandons plans to build its first factory
    • will instead contract out to a larger automker
    • shares fell more than 17% in early trading
    • the company had a quick start to 2019
    • employs several hundred people at US HQ in San Jose, CA (Silicon Valley)
    • it began selling its 7-seater SUV, the ES8, in China in June
    • ended the year delivering 11,348 cars to customers
    • Palo Alto-based Tesla and Nio locked in a race for China
    • China remains the world's single-biggest market for electric cars
    • scheduled to release its 5-seat ES6 SUV later this year
    • reason for slowdown in deliveries: yup, you guessed it -- smaller Chinese subsidies for EVs
    • again, renewable energy can't compete without subsidies (upstream, midstream, downstream)
    • with the one-child rules for decades, why would anyone in China need a 7-seater SUV?
    • 2018:
      • revenue: $720 million
      • profit/loss: $1.4 billion loss
GE: down another 5% in early trading.

NOG: down 2% in early trading; now, trading below $2.27.

CVX: flat to slightly red

SRE: flat to slightly red

*********************************
Re-Posting
The Word For The Day: Trope

Originally posted January 19, 2015.
Trope: A literary trope is the use of figurative language – via word, phrase, or even an image – for artistic effect such as using a figure of speech. Kenneth Burke has called metaphor, metonymy, synecdoche and irony the "four master tropes."

I think we all "know" irony and metaphor even if we don't always use the former correctly. The word "metonym" is less well known but used all the time, such as "Wall Street" to refer to the US financial sector, or "Hollywood" to refer to the US film industry.

I see "synecdoche" often but never seem to remember what it means. Very similar to synonym but a bit more imaginative, such as "hired hands" for workers; "bread" for food; "cat" for lion, and so forth.

Early on with the blogging I discussed how "the Bakken" was used in at least three different contexts. I began using "the Bakken" as a literary trope for US unconventional oil some years ago.
I am re-posting this because of this in Richard Rhodes' The Making of the Atomic Bomb, c. 1986, page 461, around April, 1943, shortly after Robert Oppenheimer move to Santa Fe:
[Robert Serber] was already calling the bomb "the gadget," its nickname thereafter on the Hill (Los Alamos), a bravado metonymy that Oppenheimer probably coined.
I'm wondering if "the gadget" is more of a synecdoche for the "nuclear bomb being developed" rather than a metonym. 

Weekly EIA Petroleum Report -- Re-Balancing Won't Happen In My Lifetime At This Rate -- March 6, 2019

Link here
  • US crude oil inventories surged: increased by 7.1 million bbls from the previous week
  • US crude oil inventories surged: at 452.9 million bbls, US crude oil inventories now 4% above the 5-year average, and the 5-year rolling average continues to increase
  • refineries: at 87.5% capacity; better than previous few weeks, but still well below what they could be doing
  • US oil imports up by 1,084 million bbls/day -- probably the continued need by refineries for "heavy" oil
  • over the past four weeks:
  • gasoline product supplied: 8.9 million bbls/day (magic number: 10 million bbls/day)
  • distillate fuel product supplied: 4.1 million bbls/day (magic number: 5 million bbls/day)
Re-balancing. In the past 15 weeks, the "number" has actually gotten worse. Last week, the average increase was 0.3 million bbls. This week, the average increase has jumped to 0.7 million bbls. So, not only is the inventory dropping, but the rate of increase has actually increased:

Week
Date
Change w-o-w
In Storage
Weeks to RB to 350 Million Bbls
Week 0
November 21, 2018
4.9
446.9
N/A
Week 1
November 28, 2018
3.6
450.5
N/A
Week 2
December 6, 2018
-7.3
443.2
N/A
Week 3
December 12, 2018
-1.2
442.0
Never at this rate
Week 4
December 19, 2018
-0.5
441.5
Never at this rate
Week 5
December 28, 2018
0.0
441.4
Never at this rate
Week 6
January 4, 2019
0.0
441.4
Never at this rate
Week 7
January 9, 2019
-1.7
439.7
A long, long time
Week 8
January 16, 2019
-2.7
437.1
Won’t happen in my lifetime
Week 9
January 24, 2019
8.0
445.0
Won’t happen i my lifetime
Week 10
January 31, 2019
0.9
445.9
Won’t happen in my lifetime
Week 11
February 6, 2019
1.3
447.2
Won’t happen in my lifetime
Week 12
February 13, 2019
3.6
450.8
Won’t happen in my lifetime
Week 13
February 21, 2019
3.7
454.8
Won’t happen in my lifetime
Week 14
February 27, 2019
-8.6
445.9
Won’t happen in my lifetime
Week 15
March 6, 2019
7.1
452.9
Won’t happen in my lifetime












0.7



Trade Deficit -- Congress Is Not Worried -- Why Should The Rest Of Us Be Worried? -- March 6, 2019

From the AP: US trade gap jumped to 10-year high; record gap with China.

From twitter today:


I know Mark Perry over at Carpe Diem is not concerned about US trade deficits.

Likewise, economists across the board and folks much smarter than I are not concerned about the US $22 trillion deficit. President Trump is an exception.

Why should the rest of us be worried?

"God grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference." -- The "Serenity" Prayer -- Reinhold Niebuhr.

The Big Stories

 The Next Big Thing

Energy And The Western Hemisphere
Energy and The Mideast 
US Energy Revolution
The continued irrelevancy of the EU.

Turkey: the real poor man of Europe.

Making America great again.
  • Shale oil.
  • Off-shore oil.
  • Natural gas
  • LNG and LNG export terminals.
  • Diluent.
  • Pipelines.
  • Ethane and ethane exports. 
Geo-political
US Economy
Flood Myths
*****************************************

The Big Stories: 2013 - 2018

The Road To Mexico

When Mexico implodes: link here. Tracking:
The Mexican Peso Crisis, 1994. At wiki.

Rapid depreciation, 2015: link here.

Gasoline prices, January 1, 2018: Mexican government no longer sets gasoline prices; determined by market. It appears gasoline in Mexico costs about what it costs in California (4/19).

AMLO assumed office, December 1, 2018.

Peso History (link here):

Updates

August 23, 2019: no growth, 2Q19

June 22, 2019: says "no" to deepwater

June 14, 2019: AMLO cancels auctions to choose partners for joint ventures

June 6, 2019: Pemex -- junk status

May 27, 2019: AMLO is seeking $7.3 billion in tax breaks for Pemex for calendar years 2020 and 2021. Obviously an unspecified tax break has already been granted for 2019.

May 22, 2019: nice update on Mexico; things are probably worse than we realize;

March 6, 2019: Mexico will depend on US natural gas despite energy sovereignty push. Link here. My hunch: Mexico will be importing more natural gas and more refined products from the US four years from now that what it imports now.
U.S. natural gas pipeline exports to Mexico have been growing, thanks to expansion of cross-border pipeline capacity, the EIA has estimated. The rise of liquefied natural gas (LNG) exports and pipeline exports to Mexico resulted in the United States being a net natural gas exporter for the second year in a row in 2018. Exports of natural gas to Mexico by pipeline exceeded 5 Bcf/d in July 2018, the EIA said earlier this year.
February 4, 2019: Mexico ends green energy initiatives. Renewable industry stunned.

Original Post
 
The "road-to-Mexico" tag is here. Mid-February, 2019, these recent posts:
The tea leaves suggest Pemex is at best on life support in the ICU.

By the way, before I forget, has anyone seen the most recent headlines regarding the surge of illegal immigrants coming across the southern border?  These are the headlines in the last 24 hours -- one seventeen minutes ago -- (note the sources: Washington Post, NPR, and Axios):


If Pemex fails, Mexico fails, and Mexico will look a lot like Venezuela.

But I digress.

Back to the road to Mexico.

Platts is reporting that Mexico's decision to delay auctions on new oil and gas development until at least 2021 will result in billions of dollars in revenue losses and significantly stymie new production over the next decade, according to a member of the country's National Hydrocarbon Commission said Tuesday.

Another digression: we will probably never know but my hunch is that Commissioner Hector Moreira Rodriguez' time on the commission is soon to come to an end.

From the linked article:
  • delays in the country's oil and natural gas auctions will delay the new president's oil, gas proudciton goals
  • production exceeding 2 million bopd are now seen as unrealistic (put that in perspective: four small counties in North Dakota could produce 2 million bopd if unfettered)
  • it appears that Mexico will be "lucky" to hold output at 1.6 million bopd through 2024
  • every year, Mexico delays a bidding, it costs the country $1 billion 
  • in December, 2018, the new president said that Mexico would halt its hydrocarbon auction rounds by three years
    • really, really bad timing, because right now, the US more than ever, needs heavy oil that Mexico could provide 
There's an essay in a recent WSJ Review, page C6, February 16 - 17, 2019, featuring Jim Collins, a business guru known for his best-selling books Built to Last, Good to Great, and "other staples of the corporate bookshelf."

He's 61 years old. He's been around. He taught management at Stanford University in the 1990s. He is known for something called "Level 5 leadership."

Near the end of that essay:
Mr Collins, whose principles include "confront the brutal facts," is facing some of his own. He's afraid of disease (he recently lost two close friends to cancer) and is concerned that there might be a stretch of political or global turbulence ahead that none of us can accurately predict."
I'm thinking maybe Mr Collins might want to take a six-month sabbatical to study the southern border.

The Immigrant Song, Karen O with Trent Reznor and Atticus Ross

Feeling The Pain -- Purdue Pharma -- March 6, 2019

Yesterday I mentioned Purdue Pharma -- preparing to file for bankruptcy protection. I wrote about the OxyContin company some time ago, October 30, 2017.
Purdue Pharma bankruptcy: the company behind OxyContin is preparing a bankruptcy filing as it seeks to limit its liabilities from hundreds of lawsuits; I think I've blogged about Purdue before;
Re-posting:
****************************
Where The Boys Are
 
One article in this week's issue is worth the price of an annual subscription (if one can get past all the TDS but I cannot): "The Empire of Pain," by a reporter-at-large, Patrick Radden Keefe (he may want to "watch his back" and/or apply for membership in the Federal Witness Protection Program.

The article article is about OxyContin. From the article:
OxyContin's sole active ingredient is oxycodone, a chemical cousin of heroin which is up to twice as powerful as morphine. 
Who makes OxyContin?
Purdue Pharmacy -- a privately held company, based in Stamford, CT, that developed the prescription painkiller OxyContin. Upon its release, in 1995, OxyContin was hailed as a medical breakthrough, a long-lasting narcotic that could help patients suffering from moderate to sever pain. The drug became a blockbuster, and has reportedly generated some thirty-five billion dollars in revenue for Purdue.
1995 - 2015: 20 years.

Now the back story, involving three Brooklyn brothers, all physicians -- Arthur, Mortimer, and Raymond. All three have died (1987, 2010, and 2017, respectively). The family is one of America's richest families, with a collective net worth of thirteen billion dollars -- more than the Rockefellers or the Mellons.

From the article:
During the sixties, Arthur got rich marketing the tranquilizers Librium and Valium.

In 1952, the brothers bought a small patent-medicine company, Purdue Frederick, which was based in Greenwich Village and made such unglamorous staples as laxatives and earwax remover.

After Arthur's death, the two surviving brothers wanted to buy his stake in the company. The company, which had moved to Connecticut would eventually change its name to Purdue Pharma, had made a great deal of money under their stewardship. But such riches were about to seem paltry. By the time the brothers made their bid, Purdue was already developing a new drug: OxyContin.
That takes up up to page three (four if you count the full-page graphic) of the 16-page article (if you count the full-page graphic) and we haven't even touched on the last name of the brothers.

Sackler.

As in:
  • the Sackler Gallery, Washington, DC
  • the Sackler Museum, Harvard University, Boston
  • the Sackler Center for Arts Edcation, at the Guggenheim, NYC
  • the Sackler Wing at the Louvre, Paris
  • the Sackler institutes and facilities at Columbia, Oxford, and a dozen other universities
  • endowed professorships and underwritten medical research
  • Arthur's daughter Elizabeth is on the board of the Brooklyn Museum; where she endowed the Elizabeth A. Sackler Center for Feminist Art
  • endowed a professorship at Yale Cancer Center
  • Mortimer's third wife Theresa Rowling, founded Beespace, a non-rofit "incubator" that supports organizations like the Malala Fund (it takes forever to download but while you are waiting you can click on the "DONATE" button)
  • the number of rooms in different parts of the world named after the Sacklers is countless
The brothers:
  • all three attended medical school
  • all worked together at the Creedmoor Psychiatric Center in Queens
  • collectively published some 150 scholarly papers
  • particularly interested in the biological aspects of psychiatric disorders, and in pharmaceutical alternatives to mid-century methods such as electroshock therapy and psychoanalysis
  • made their fortune in commerce (mostly marketing and advertising) and not by practicing medicine
Fascinating article.

And it looks like Congress and the states attorneys general need to go -- but they won't.

Saudi In Deep Doo-Doo -- The Saga Continues -- March 6, 2019

See this post to bring yourself up to speed. My hunch: Vladimir Putin has seen this chart.

Now, the most recent data -- Saudi's foreign exchange reserves continue to dwindle (this is starting to look like Warren Buffett's Kraft-Heinz debacle). Link here:


This data is generally posted at the beginning of each month, and lags by two months. For example, data presented on March 1, 2019, reflects most recent data available, two months earlier: December, 2018.

Again, the critical number to watch: 180... with a bunch of zeroes. Going below 180.... will set a "modern" record low.

The ten-year graph:


Three Wells Coming Off Confidential List Today -- March 6, 2019

Hillary walks it back. Says she has "not closed the door" on running for the Democratic nomination. If Biden-Beto are not selected on the first vote at the DNC national convention, July, 2020, the nomination is up for grabs, and Hillary flies in to unite the warring factions. By that time, the mainstream media colluding with the US House of Representatives will have Trump on the ropes. 

Saudi Arabia: in deep doo-doo. Needs $100 oil; the kingdom says they re-set the budget to $80 oil; will be lucky to see $70 oil for 2019. and now this: analysts lower oil price forecast for 2019. But better than expected: a $2 decrease -- the analysts now forecast that Brent will average $73 per barrel this year, which marks a $2 decrease from their previous projection of $75.  

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

Wells coming off the confidential list today -- Wednesday, March 6, 2019: 24 wells for the month; 24 wells for the quarter
35094, conf, Hess, AN-Bohmbch-153-94-2734H-7, Antelope,
33659, conf, Oasis, Berquist 5298 11-27 3T, Banks,
32819, conf, CLR, State Weydahl 11-36H, Corral Creek,

Active rigs:

$56.023/6/201903/06/201803/06/201703/06/201603/06/2015
Active Rigs68604435114

RBN Energy: part 2, how will producers respond to the coming natural gas glut.
The forward curve for natural gas supports 2019 production growth that is likely to far outpace expected gains in gas demand. This impending supply/demand imbalance suggests that gas prices will be pressured lower. Lower gas prices will boost demand, but there are real limits to how much demand can rise in the short term. What will really be needed to balance the market is for producers in at least a few plays — the Marcellus and Utica among them — to rethink and rework their 2019 production plans. Which raises the questions, how much will production growth need to be cut, and where will the bulk of the pruning occur? Today, we continue our review of key themes and findings in East Daley Capital’s newly updated “Dirty Little Secrets” report on the midstream sector.

ISO New England -- Spike To $250/MWh -- March 6, 2019

... with 4% coal (generally 0 to less than 1%).

Link here.


Note: it was reported yesterday that license for the Seabrook Nuclear Power Plant in New Hampshire has been approved/extended through 2050.