I'm Here -- But I Have Several Things To Do Before The Morning Note -- March 23, 2020

I have Sophia for the entire week. We stopped at a grocery store to pick up cinnamon rolls. We didn't need anything else. But I did pick up some pork to make pulled pork today. Other than cleaning supplies and eggs, the store had everything one might need, but the store was pretty bare. I assume deliveries will begin again today. 

Drop off a rental car.

Pick up a piece of new Stickley furniture -- a very small end-table -- ordered some time ago.

I haven't yet decided if I will have Enterprise drive me home after I drop off the rental car, or walk. It would be about a 60-minute walk and Sophia would be with me. She would ride on my shoulders most of the way. So, we'll see.

So, blogging today may be significantly delayed.

Just remember: Saudi started this -- quibbling over a few hundred thousand bbls of crude oil per day.

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Back to the Bakken

Active rigs:

$22.19	3/23/2020	03/23/2019	03/23/2018	03/23/2017	03/23/2016
Active Rigs	49	69	60	49	32

Wells coming off the confidential list today, over the weekend, --

Monday, March 23, 2020: 55 for the month; 226 for the quarter, 226 for the year:

• 35776, 2.424, Whiting, Anderson 34-21-2H, Glass Bluff, t9/19; cum 92K 1/20; 25K month;
• 35384, SI/NC, CLR, Palmer 6-25H, Haystack Butter,
• 31792, drl, Petro-Hunt, USA 153-96-13A-24-7H, Keene,

Sunday, March 22, 2020: 52 for the month; 223 for the quarter, 223 for the year:

• 36449, PNC, Crescent Point Energy, CPEUSC Chase Douglas 2-32-29-159N-100W MBH, 
• 36443, PNC, Crescent Point Energy, CPEUSC Chase Douglas 32-29-159N-100W MBH, 
• 35163, A, CLR, Uhlman Federal 11-7H1, Banks, t--; cum 31K over 30 days;
• 34848, SI/A, CLR, Pittsburgh 5-18H1, Banks, t--; cum 29K over 31 days;
• 34846, 777, CLR, Patterson Federal 8-13HSL1, Banks, t11/19; cum 70K 1/20;
• 31793, drl, Petro-Hunt, USA 153-96-13A-24-1HS, Charlson, t--; cum --;

Saturday, March 21, 2020: 46 for the month; 217 for the quarter, 217 for the year:

• None. 

RBN Energy: the impending slowdown in oil, gas, and NGL production -- a slow-motion train wreck.

Statewide shelter-in-place orders, worldwide business shutdowns, market meltdowns, medical calamities. Much of what is going on right now is unprecedented in the modern era, and there are no guideposts to help predict what happens next to the world as we knew it. But in the boom-bust energy sector, it is déjà vu all over again. We have seen steep drops in prices, drilling activity and production enough times to have some idea about how this is likely to play out. Granted, this time around it is particularly bad, but that doesn’t change the sequence of events that we are likely to experience over the coming months and years. Today, we’ll look back at what happens to Shale-Era basins after a price collapse, focusing on the inherent lag between a major reduction in activity level and the inevitable production response.

Anybody who thought the $4.85/bbl increase in crude oil prices on Thursday was anything other than a head fake was kidding themselves. The price of CME/NYMEX Cushing WTI crude oil for April delivery (the last day of trading for the contract) fell by the end of the day to $19.46 before the settlement was posted at $22.43/bbl, down $2.79/bbl. The WTI May contract closed at $22.63, down $3.28/bbl. Forget fundamentals. Crude oil prices are now totally dependent on the next news flash, press release, rumor or stock-price shock. About the only thing we can be sure of is that it is likely to be a long while before we see the sunny side of $50/bbl crude oil again.

Producers are responding to that harsh reality by cutting their capex budgets even deeper than their initial 2020 plans. Even before last week’s price carnage, the 42 E&Ps that we cover in the RBN blogosphere had announced that their total capital spending would be cut by 26% from previous guidance and a reduction of 36% versus 2019. No doubt we’ll see many more cuts in the coming weeks. But there are a couple of important things to note. First, with only a few minor exceptions, E&Ps are still drilling, collectively planning to spend tens of billions of dollars to bring more oil and gas to the market. Second, these companies are in survival mode. Consequently, those billions are being spent drilling the sweetest of the sweet spots using the most productive drilling and completion equipment out there, so volumes are not falling off nearly as fast as are capex dollars. For example, on March 16, EOG Resources announced a 31% capex reduction but said that it expects 2020 production to be flat compared to last year. Granted that’s down from their previous guidance of 10%-14% growth, but it is not a decline. When all the guidance comes in with first-quarter results, we expect that our universe of companies will come in collectively somewhere around a 6-8% decline in production targets.

Down, but not out.