Monday, September 28, 2015; Shell Calls It Quits In The Arctic; Apple Reports Record Weekend

Apple reports record sales of iPhone 6S, 6s Plus in first weekend:  13 million vs previous record of 10 million (2014) -- though most recent numbers included China whereas not so in 2014;

Shell Oil in Arctic: not enough there to justify drilling. Will quit drilling; call it quits. See more at the bottom of this post -- scroll down.

Alcoa to split into two companies.

Russia surprises US with accord to fight ISIS. President Obama may agree to keeping Assad in power.

Williams and ETE reach deal.

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Active rigs in North Dakota:

	9/28/2015	09/28/2014	09/28/2013	09/28/2012	09/28/2011
Active Rigs	70	190	184	190	195

RBN Energy: 7th of 8 in the series on propane.

This is the seventh episode in the series. Episode 1 provided an overview and introduction to the analysis – beginning with the dramatic increase in propane production over the past 7 years.

Total U.S. propane output has increased by nearly 70% from an average of 0.8 MMb/d in 2008 to 1.4 MMb/d during the 1^st half of 2015. Most of that growth has been driven by production from gas processing plants that has more than doubled from 0.5 MMb/d in 2008 to 1.1 MMb/d in 2015. The overall growth in propane has outpaced domestic demand such that as much as 50% of the total is now exported to balance the market – even as inventories are at all time high levels. [Back on September 23, 2015, Jack Kemp reported: Record propane stocks show first weekly drawdown since March; graphs are incredible; huge records being set.]

RBN’s analysis for PERC sought to understand changes to the propane market since the disruptive winter of 2013-14 as well as how susceptible today’s market is to similar events and what actions should be taken to reduce the risk of it happening again.

Our approach to the analysis involved developing a monthly model of U.S. propane supply, demand, logistics and pricing at the PADD (Petroleum Administration District for Defense) level using historic propane market data.

In Episode 2 we outlined supply and demand scenarios for the model based on oil price Growth and Contraction as well as Normal and Severe weather patterns. Episode 3 took a closer look at propane production by PADD region – noting the dramatic growth in the Northeast as well as the Midwest.

Episode 4 detailed regional historic and future projected propane demand by PADD and Episode 5 looked at the main domestic propane demand sectors. Episode 6 highlighted how new infrastructure has improved interregional connectivity across the propane market. This time in Episode 7 we consider how developing regional supply/demand balances and infrastructure could be impacted by a worst-case combination of low propane production and severe weather.

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$7 Billion, 7-Year Disappointment

FuelFix is reporting:

Royal Dutch Shell on Monday said it was abandoning a $7 billion, seven-year quest for crude under Arctic waters, after an exploratory well failed to find significant amounts of oil and gas.

Shell’s exploratory oil well in the Chukchi Sea north of Alaska encountered “indications of oil and gas” but the company said they were “not sufficient to warrant further exploration” — a significant blow for the Anglo-Dutch firm that had hoped to find a multibillion barrel crude reservoir in those remote waters.

“Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.,” said Marvin Odum, the Houston-based director of Shell Upstream Americas. “However, this is a clearly disappointing exploration outcome for this part of the basin.”

Shell said in a statement that it would cease further exploration activity off the coast of Alaska “for the foreseeable future.” “This decision reflects both the Burger J well result, the high costs associated with the project and the challenging and unpredictable federal regulatory environment in offshore Alaska,” the company said.

Shell also will take a financial charge from the decision, since the firm’s Alaska assets have a carrying value of about $3 billion and the company still has an additional $1.1 billion already committed in existing contracts for rigs, ships and other assets. Shell could pare its potential $4.1 billion write down by putting some of those contracted vessels to work elsewhere or subcontracting them to others.

The full extent of the financial damage will be described on Oct. 29, when Shell announces its third-quarter earnings. But the blow could be especially significant when cast against falling earnings. Shell’s second quarter profit was $3.8 billion, compared with $6.1 billion for the same period last year. First quarter earnings were $3.2 billion, down from $7.3 billion in the first quarter of 2014.

Shell was pursuing a major Arctic oil discovery after spending a record-setting $2.1 billion to buy 275 Chukchi Sea oil and gas leases in a 2008 government auction.
Because of the costs of extracting oil and building the infrastructure to deliver it to market, Shell CEO Ben van Beurden bluntly warned earlier this year that the economics of Shell’s Arctic project would only work “if the structures are full of oil.”

For $7 billion, an operator could drill 1,000 wells in the Bakken with an almost-predictable guaranteed return.