Tuesday, July 21, 2020

Huge Day Tomorrow -- July 21, 2020

Huge day tomorrow, Wednesday, July 22, 2020:
  • EIA weekly petroleum report, 9:30 a.m. CDT
  • gasoline demand; weekly report
  • after market closes:
    • TSLA, 2Q20 earnings
    • MSFT, 2Q20 earnings 
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Toll House Tuesday

Now, on to Waffle Wednesday. 


A Thank You To Readers And A Note On Record Amount Of Oil To Be Burned By Saudi Arabia To Power Air Conditioning -- July 21, 2020

First things first: a huge "thank you" to readers, again. A reader caught a huge mistake in an article that I linked. I completely missed it so I consider that an error on my part also. And it was a huge error (pipeline capacity stated to be 250 million bopd when in fact closer to 25 thousand bopd). But the error was quickly noted and corrected.
But that's only half the story. The other reason to thank readers: folks don't alert me to minor typographical errors that don't affect the story and which I generally eventually find and correct later. Sometime much later. But it's nice to not be "nickeled-and-dimed-to-death" on every inconsequential typographical error.
But please let me know if I make any significant errors, typographical or otherwise.
And so we move on.  


One of the reasons I love to blog: had I not blogged about the Bakken, I never would have paid attention to this. I must have first learned about it ten years ago; I forget. But here we go again. Another "summer story" in which Saudi Arabia uses record amounts of crude oil to produce electricity for air conditioning. From Bloomberg:
As the Middle East enters the hottest days of summer, Saudi Arabia is set to burn potentially record amounts of crude oil to run its power plants and keep its citizens comfortably air-conditioned.

Electricity consumption always soars around July and August, when temperatures in the kingdom can rise above 122 degrees Fahrenheit. That compels the government to use crude or fuel oil in addition to the much cleaner natural gas that normally fires the plants.
But this year the urge to drain oil is even stronger because of higher demand, with the coronavirus pandemic forcing many Saudis to cancel their summer holidays abroad.

Another difference is that record cuts to Saudi Arabia’s oil production since April -- part of a push by OPEC members to prop up prices in the face of the virus -- have reduced its supplies of gas, most of which come from the same wells as crude.

The extra oil going toward power may limit the price impact of OPEC’s plan to taper output restrictions from next month. The kingdom pumped 7.5 million barrels a day in June, the fewest since 2002, according to data compiled by Bloomberg.
Of those, it exported 5.7 million barrels daily, while keeping most of the rest for domestic refineries.

“They can simply import more gas or burn more crude in power generation,” said Carole Nakhle, chief executive officer of London-based consulting firm Crystol Energy.
The second option is more likely and easier since the region has been doing this for years and decades and there is plenty of oil around today.”

Each August, Saudi Arabia uses 726,000 barrels of crude daily for power generation, according to average numbers over the past decade from the Riyadh-based Joint Organisations Data Initiative, which collates statistics among energy producers.
That’s more than double the amount for the cooler months of January and February. The record came in July 2014, when the Saudis burned 899,000 barrels a day.
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ISO New England Today

Whiting With Two New Permits: MRO Reports Two Huge DUCs -- July 21, 2020

EU stimulus package: close, but no cigar. $572 billion. Won't be nearly enough. "Green" focused. Really, really bad news. For the EU. LOL.

WTI: up 2.82%; up over a buck; trading at $41.96 and, then, a speed bump -- large, and again (how many times have we heard this?), an unexpected crude oil build. The API consensus, predicted an inventory draw of almost 2 million bbls. In fact a whopping increase in crude oil inventories: 7.5 million bbls. If they were basing their estimate on the declining number of rigs, it sort of expalins how they missed the number.

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Back to the Bakken

ICYMI: Tesoro High Plains Pipeline shutdown; failed to obtain lease through reservation. Affects MRO / Marathon refinery in Mandan; posted earlier.

Active rigs:
 
$41.967/21/202007/21/201907/21/201807/21/201707/21/2016
Active Rigs1155675931

Two new permits, #37729 - #37730, inclusive:
  • Operator: Whiting
  • Field: Sanish (Mountrail)
  • Comments: 
    • Whiting has two new permits 
      • Foreman Federal, lot 3 section 4-152-92, 565 FNL 1665 FWL, Sanish oil field,
      • Pennington, lot 1 section 4-152-92, 451 FNL 846 FEL, Sanish oil field
Four producing wells (DUCs) reported as completed:
  • 35891, conf, Whiting, Sondrol 11-29H, Pembroke, producing, a 23K month;
  • 35892, SI/A, Whiting, Rauser 11-29H, Pembroke, t--; cum 83K in 3.5 months; a 29K month;
  • 34601, drl/A, MRO, Salveson USA 24-21H, Reunion Bay, t--; cum 170K 3.5 months; a 54K month;
  • 34602, drl/A, MRO, Gerhardt USA 14-21H, Reunion Bay, t--; cum 145K 3 months; a 56K month;
Three permits renewed:
  • Petroshale: two Anderson South permits, and one Petroshale US permit, all in McKenzie County;
Two permits canceled:
  • Petro-Hunt: two Eric Stratton Federal permits in McKenzie County
Dry hole:
  • 34677, dry, EOG, Clarks Creek 65-07H, McKenzie County
Producers now abandoned: 8, of interest:
  • 10103, Liberty Resources, Iverson State A 1,  
**************************************
Additional Information Regarding Some Of The Wells Above

The wells:
  • 10103, PA/32, Liberty Resources, Iverson State A 1, Glass Bluff, t1/185; cum 13K 7/93; last produced in 1993; very erratic production for years; 
  • 34677, dry, EOG, Clarks Creek 65-07H, McKenzie County, from the file report:
    • spud December 25, 2020 (sic) (must have been 2019)
    • KOP: 0700 hours, January 11, 2020
    • curve began at 1730 hours January 11, 2020
    • curve TD reaced at 0600 hours January 12, 2020
    • lateral 
    • begun at 0130 hours, January 15, 2020
    • abandoned at 14,226' MD on 1/16/2020 due to lower shale strike 
  • 34601, drl/A, MRO, Salveson USA 24-21H, 33-061-04204; Reunion Bay, t--; cum 170K 3.5 months; a 54K month; fracked 1/12/2020 - 1/26/2020, 8.3 million gallons of water; 99.99965% water by mass;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-20203135603356452001752348050209
BAKKEN4-20203053827538954543765539062381
BAKKEN3-20202946754468204499052231049489
BAKKEN2-2020153399833589659744019303821
  • 34602, drl/A, MRO, Gerhardt USA 14-21H, 33-061-04205; Reunion Bay, t--; cum 145K 3 months; a 56K month; fracked 1/12/2020 - 2/10/2020; 7.7 million gallons of water; all water?
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-20203131310313521638543477041605
BAKKEN4-20203048352485153931058332055495
BAKKEN3-20203055850555494331259891056616
BAKKEN2-20205903889298337903008507

FracFocus, screenshots:

34601:

34602:


Looks Like Russia Can't Make It On $40-Oil, Either -- July 21, 2020

Link here. Russia, hit by coronavirus crisis, considers military spending cuts -- Reuters.
The Russian finance ministry has proposed the government cut state spending on the military by 5% between 2021 and 2023. The proposal, published on Monday, also includes budget spending cuts of 10% for the court system, the servicing of Russia’s debt and wages for civil servants
Russia, which flexed its military muscle with its 2014 annexation of Crimea from Ukraine and intervention in the Syrian conflict, dropped out of the list of the top five biggest military spenders in 2018 after its spending fell 3.5%.
Dropped out of the top five?

US, China .....

The Moscow Times said Russia returned to the "top 5" in 2019 after "briefly" falling tinto sixth place the previous year. If accurate, the top five for 2019, global share in parentheses:
  • the US (38%)
  • China (14%)
  • India (3.7%)
  • Russia (3.4%)
  • Saudi Arabia (3.2%)
Knowing the US spent $732 billion in 2019, one can work backwards from that. 

Or knowing that global military spending totaled $1.917 trillion in 2019 -- about what the market cap of Apple, Inc, is forecast to hit within the next year or so.

Russia: 4% of $2 trillion: $80 billion.

Market cap of EOG: $30 billion.

Second Bakken Pipeline Ordered To Shut Down -- WorldOil -- July 21, 2020

Updates

July 25, 2020: something tells me there is more to this story than meets the eye.

Original Post
 
Link here. Remember the DAPL? There's another one:
On July 2, a lesser-known conduit  called Tesoro High Plains was ordered shut for the first time in its 67 years of operation. Together, the two pipelines ship more than one-third of crude from America’s prolific Bakken shale formation to market. Their travails signal the ebbing of the oil industry’s sway in the U.S. heartland and underscore the growing heft and savvy of challengers who’ve become emboldened to demand higher compensation and safeguards.
In the case of High Plains, which delivers oil to Marathon Petroleum Corp.’s 74,000 barrel-a-day Mandan refinery, the U.S. Interior Department’s Bureau of Indian Affairs ordered it shut after determining the pipeline was trespassing on Native American land. The ruling also found the company responsible for $187 million in damages and gave it 30 days to appeal.

Somewhere Warren Buffett is smiling.

The Tesoro High Plains Pipeline has a capacity of 250 million bopd. Link from the Sidney Herald, October 1, 2016. Archived.
Tesoro has more than 1,000 miles of crude oil gathering and trunklines in the Bakken. Its High Plains Pipeline has a capacity of 250 million barrels per day, and it’s Bakken Area Storage Hub can hold more than 1 million barrels of oil. (sic)
Screenshot from the Sidney Herald ("We're gonna need a larger storage hub." LOL):


See first comment: 250 million bopd is a huge mistake by the reporter and the editor, and a huge miss by me (I will have to talk to Sophia about this). This source suggests the capacity is 90,000 bopd after it was expanded in 2015: https://www.gem.wiki/High_Plains_Crude_Oil_Pipeline

Random Update Of DUCs From 3Q19 -- July 21, 2020

Going through the list of wells that were reported as DUCs back in 3Q19. They are started to be completed/reported. A few examples, along with production data for the bigger wells. 

The wells:
  • 35898, 752, Slawson, Slasher Federal 4-27-22MLH, Big Bend, t11/19; cum 87K 3/20; off line 4/20; remains off line 5/20;
  • 35897, 2,116, Slawson, Slasher Federal 5-27-22TFH, Big Bend, t12/19; cum 73K 2/20; off line 3/20; remains off line 5/20;
  • 35037, 3,945, Hess, BB-Charlie Loomer-150-95-0718H-4, Blue Buttes, t10/19; cum 249K 5/20;  
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-2020313044330454685645859379537872
BAKKEN4-2020302727327316729440989330167936
BAKKEN3-2020252526925236610339115343674712
BAKKEN2-2020292919529254841740159356744447
BAKKEN1-2020313128031218938641018357135263
BAKKEN12-20193138996390381050249735441655525
BAKKEN11-2019272868028849905031714271884494
BAKKEN10-201921380933773413500334602334310080
  • 35702, 1,528, Petroshale, Thunder Cloud 2MBH, McGregory Buttes, t9/19; cum 74K 4/20; off line 5/20; but erratic production for quite some time; 
  • 35038, 4,226, Hess, BB-Charlie Loomer-150-95-0718H-5, Blue Buttes, t10/19; cum 214K 5/20;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-2020313254932498589749563410198507
BAKKEN4-2020161690416984661227131218545253
BAKKEN3-2020192314623124635935460311564272
BAKKEN2-2020292808028103908141017364374541
BAKKEN1-2020312516025100911434024296234366
BAKKEN12-2019312858228687986440521359834502
BAKKEN11-20193032284323241044833149284194697
BAKKEN10-20191526967267139338392782740111833
  • 35039, 3,771, Hess, BB-Charlier Loomer-150-95-0718H-6,  Blue Buttes, t10/19; cum 179K 5/20; 
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-2020312195121936882650188415368614
BAKKEN4-2020161520915286460327466221245318
BAKKEN3-2020232139721348594534482302964154
BAKKEN2-2020242055420623704929523262263269
BAKKEN1-2020312621126148886333438291134291
BAKKEN12-20193129763298311067440247357404471
BAKKEN11-2019302737727352847944047377616242
BAKKEN10-2019101655816402632923656165037127
  • 35040, 3,209, Hess, BB-Charlie Loomer-150-95-0718H-7, Blue Buttes, t10/19; cum 200K 5/20;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN5-202031200692011310639834946910014331
BAKKEN4-202030251872529311254665245358412881
BAKKEN3-20203132424323411366275362662149079
BAKKEN2-20202929455295291386262185552416885
BAKKEN1-20203133845337351529862039540157961
BAKKEN12-20193130734307931401654717485906078
BAKKEN11-2019302660126442698830107258114266
BAKKEN10-201931845182829717761239535
  • 35700, 1,008, Petroshale Thunder Cloud 1MBH, McGregory Buttes, t8/19; cum 86K 4/20; off line 5/20;

The Science Is Settled: Science No Longer Matters -- July 21, 2020

From the CDC:
"We did not find evidence that surgical-type face masks are effective in reducing laboratory-confirmed influenza transmission, either when worn by infected persons (source control) or by persons in the general community to reduce their susceptibility (Figure 2).
However, as with hand hygiene, face masks might be able to reduce the transmission of other infections and therefore have value in an influenza pandemic when healthcare resources are stretched."
The above quote is from the same CDC publication - their page 972, second column: link --
From current issue of Emerging Infectious Diseases

Notes From All Over -- They Must Be Reading The Blog -- $40 Oil Is Not Enough For Saudi Arabia -- July 21, 2020

Wow,  how long have we been saying this: $40 oil is not enough for Saudi Arabia. Now, from an oilprice contributor, we have this, although it's not much of a story:
Despite the relaxation of OPEC+ cuts, crude continued to trade within the $40-43 range. Yet, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, had highlighted that although OPEC itself does not have a price target, current prices are not sustainable for the industry, leading to potential insecurity of supply in the long term
CMarkits’ latest forecast sees an average price of $43 for Brent in July that may rise to $50 by December if demand continues to smoothly recover. Morgan Stanley had also raised its forecast for Brent by $5 to $40 in Q3, something we had predicted at the beginning of Q2.
"Insecurity of supply": code for "we'll do what it takes to drive oil prices up."

Saudi air conditioning: more than ever. I think we've talked about this each summer for the past ten years. Saudis stuck home for summer burn more oil for air conditioners -- Bloomberg, paywall, but the headline says it all.


OPEC basket: down slightly at $43.03.

WTI: up 3.14%; up $1.28; trading at $42.09.

NFL: no pre-season games. Season starts September 10, 2020 -- with or without fans. 
 
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Market Midday

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

Reason for AAPL's pullback today: ZeroHedge. It's all relative.

More On The Chevron - Noble Energy Deal -- Rigzone; WTI With Nice Jump -- July 21, 2020

CVX-Noble Energy: This may be the best analysis yet of this deal. It's a huge deal. Link here at Rigzone.
According to Chevron, the acquisition will add approximately 18 percent to its year-end 2019 proved oil and gas reserves at an average acquisition cost of less than $5 per barrel of oil equivalent (boe) and nearly 7 billion barrels of risked resources for less than $1.50 per boe.
The figures are based on Noble’s proved reserves at the end of 2019.
Chevron stated the deal boosts its U.S. onshore portfolio with assets in the DJ and Permian basins. The company pointed out the 92,000 acres in the Permian are “largely contiguous and adjacent” to its existing assets.
Moreover, it noted the agreement includes an integrated midstream business and established position in the Eagle Ford. Outside the U.S., Chevron will gain a large-scale, producing presence in the Eastern Mediterranean in Israel as well as West Africa assets in Equatorial Guinea.
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Back to the Bakken

Active rigs:
 
$41.977/21/202007/21/201907/21/201807/21/201707/21/2016
Active Rigs1155675931

One well coming off the confidential list -- Tuesday, July 21, 2020: 51 for the month; 51 for the quarter, 497 for the year:
  • 37268, loc/NC, CLR, Kate 15-19HSL, Big Gulch, no production data,
RBN Energy: Permian well shut-ins wind down but natural declines extend oil, gas downturn.
Associated natural gas production out of the Permian Basin rebounded sharply a few weeks ago, indicating production curtailments that went into effect in May in response to low crude oil prices are coming back online. Just as abruptly as gas production dived in early May, it lurched upward in late June, nearly back to where it was before the shut-ins began. But the rig count has continued falling to a record low, and indications are that many of the wells drilled over the past few weeks have not been completed. The meager drilling and completion activity suggests that the natural declines of existing wells, which were temporarily exaggerated by the shut-ins, will now be felt — and felt for as long as rig counts remain depressed — not just in the Permian but also in other oil-focused basins. Daily gas production volumes in the Permian in the past 10 days or so already are slipping, despite shut-ins tapering. Today, we examine the latest production trends in the Permian and what it will mean for the gas production outlook.

Notes From All Over -- The Insomniac's Edition -- July 21, 2020

Again: Jeff Bezos added $13 billion to his net worth yesterday, Monday, July 21, 2020; this was the largest single-day jump on the Bloomberg Billionaires index since it was created -- Twitter

Delayed: Amazon will delay Prime Day 2020 by three months; this year's "big deal" will launch in October, 2020. Link here. In addition, it appears India is a big deal for Amazon, see link.

India: becomes 5th largest economy; overtakes UK, France; purchasing power parity exceeds Japan, Germany; wikipedia already has it updated: US, EU, China, Japan, Germany, India, UK, France, Brazil, Italy, Russia. I'm always amazed to see Italy so high on the list;

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

Market:
  • NASDAQ sets new record; S&P turns positive for the year; google for link;
  • Ericsson leaps on soaring 2Q20 earnings; 80% of employees work from home;
  • Tesla reports tomorrow, Wednesday, July 22, 2020: four things to watch;
  • Pre-market trading: AAPL up again; could flirt with $400/share on opening 
  • behind a paywall, but headline says it all: Buffett's Berkshire Hathaway has lost more market value in 2020 than all but four publicly traded US companies; I don't recall if this was on a percentage basis or a "raw" dollar basis; link here;
  • Denbury Resources:
  • market cap: $130 million
  • cash on hand: $7 million
  • total debt: $2.3 billion
  • CLR: still has some decent acreage but unsustainable debt; SeekingAlpha;
Fracking bankruptcy: "fracking pioneer" BJ Services files for bankruptcy.