Twenty-Two (22) New Permits -- North Dakota -- June 19, 2015

Active rigs:

	6/19/2015	06/19/2014	06/19/2013	06/19/2012	06/19/2011
Active Rigs	77	189	186	213	173

Twenty-two (22) new permits --

• Operators: EOG (10), HRC (8), Statoil (2), SM Energy (2)
• Fields: Antelope (McKenzie), Spotted Horn (McKenzie), Stony Creek (Williams), McGregory Buttes (Dunn), Whiteaker (Divide), Moraine (Divide)
• Comments: EOG with permits for a 10-well pad (see below)

It would be interesting to hear folks opine on these 22 new permits -- what it means?

Four (4) producing wells completed:

• 27953, 248, CLR, Cincinnati 2-30H1, Indian Hill, 4 sections, t6/15; cum --
• 27952, 1,152, CLR, Cincinnati 3-30H, Indian Hill, 4 sections, t6/15; cum --
• 29817, 737, Hess, SC-Norma-154-98-0706H-8, Truax, t6/15; cum --
• 28861, 568, Hess, EN-Hermanson-LE-155-93-3501H-7, Robinson Lake, t5/15; cum --

I often make errors in these graphics. I use them to help me understand the Bakken. They are for my use only; use them anyway you want, but don't quote me on them. If this is important to you, go to the source. Note the location of Clarks Creek near this proposed pad.

 

Released After Most News Outlets Shut Down For The Weekend -- Remember That Great Jobs Report Yesterday? -- Not So Fast -- June 19, 2015

The AP is reporting: Unemployment rates rose in half of US states last month. And that's just half the problem; the other half concerns the type of jobs available. They spun the story as best they could.

In fact, only nine states, in fact, registered an improvement in employment rates.

Unemployment rates rose in 25 U.S. states last month, driven higher in many cases by more people who began looking for work but didn't immediately find jobs.

Rates fell in 9 states and Washington, D.C., and were unchanged in 16 states, the Labor Department said Friday.

I wonder if they mentioned the nine states?

More from the story:

California added the most jobs last month, gaining 54,200. Yet its unemployment rate ticked up to 6.4 percent from 6.3 percent. That's because more than 70,000 people started looking for work last month, and about 13,000 didn't find jobs.

New York added 42,700 jobs, the second-most, while its unemployment rate was unchanged at 5.7 percent. Texas gained 33,200, the third-highest, though its rate also ticked up, to 4.3 percent from 4.2 percent.

To be considered unemployed, one must actively be looking for work, but apparently during most of the Obama presidency folks weren't even looking for work because there were so few jobs available. In addition, at some point, when the money starts to run out, folks have to look for work no matter how few jobs are available.  

As long as I'm rambling, I have trouble believing folks who want to work make their decision to look for work based on reports in mainstream media whether more or less jobs are coming available. I don't know. For me, there are too many ways to massage the numbers, too many ways to spin the story. 

I'm pretty much stuck with one data point: whether unemployment is increasing or decreasing, and in this AP story, the unemployment rate dropped in only 9 states. Maybe we shouldn't even track the unemployment rate, just track the number of folks actually working. But then we get into "under-employed" issues, like lawyers driving taxis.

North Dakota?

Nebraska has the lowest rate, at 2.6 percent, though it ticked up from 2.5 percent the previous month. In April it displaced North Dakota as the state with the lowest rate. That's because North Dakota has lost oil and gas drilling jobs as energy companies have been forced to cut back in the wake of last year's drop in oil prices. North Dakota's rate is still very low, at 3.1 percent.

3.1% -- that's pretty high for North Dakota. Remember, 4% is considered "full employment." By the way, that 3.1% was unchanged from the month before.

Oh, back to the nine states? New, previous.

• Arizona: 5.8 down from 6.0
• Connecticut: 6.0 down from 6.2
• Indiana: 5.1 down from 5.4
• Massachusetts: 4.6 down from 4.7
• Montana: 3.9 down from 4.0
• Nevada: 7.0 down from 7.1
• Rhode Island: 5.9 down from 6.1
• Tennessee: 5.8 down from 6.0
• Washington State: 5.4 down from 5.5

I have opined before that 6.0% is the new "full employment." With technology and the much-improved safety net, I don't see a whole lot of difference between 4% and 6%. 

Whatever.

I'm surprised how well Hawaii is doing. Stable at 4.1%. Minnesota, 3.8%. 

The headline "seems worse" than the details; essentially flat unemployment numbers and a few more jobs being added, and more folks looking for work.

One Little Story WIth So Many Story Lines -- Including A Bakken Tie-In -- June 19, 2015

This is another minor story in the big scheme of things, but lots of story lines, for starters:

• despite gloom and doom in the energy sector, a lot of "stuff" is still going on
• a lot of that "stuff" is opportunity for some clever/smart CEOs
• the US may not be able to export crude oil, but the US can export refined products

A reader sent me this link. See if you can spot the Bakken connection. Argus Media is reporting:

PBF Energy will buy ExxonMobil and PdV's joint venture 189,000 b/d refinery in Chalmette, Louisiana, a deal that gives the US independent refiner greater access to lucrative export markets.

The $322mn plus working capital deal includes the refinery and associated pipeline and terminal assets. PBF Energy will have access to LOOP and 80 percent ownership of the Collins Pipeline Company and T&M Terminal company, which offer access to the massive Colonial produces pipeline system in Collins, Mississippi.

Note the word "massive." Not often used in "straight" news stories.

LOOP?  Regular readers know. Newbies can start here. 

Wow, the story lines abound in this one linked story, again:

• the Bakken connection
• CBR may be more expensive but it is more flexible than pipeline
• the Bakken affects the way some CEOs are making decisions
• consolidation in the oil and gas industry; big companies getting bigger

Continuing:

[PBF's CEO] O'Malley had long lamented the size and range of PBF Energy's refining capacity. The refiner commands the US Atlantic coast's only coking capacity and one of the largest on-site rail facilities in the region, increasing the crude flexibility of its system.

But that flexibility depends on sufficient discounts between western Canada and the US midcontinent to the US Atlantic coast to cover rail shipping prices, a costly delivery method. Rail arbitrage for Bakken, a favored domestic crude for PBF, was closed for a third of the first quarter this year.

PBF looked for refining assets in the midcontinent, in the challenging California refining sector and at Citgo facilities on the US Gulf coast as the company tried to break out of the Atlantic.

"If it's in the United States, we want to look at it," O'Malley told reporters in November.

As if that were not enough, two more pearls for story story lines:

• how California regulators are affecting the California oil and gas industry
• Venezuela's state-owned oil and natural gas company desperately needs cash (can you say $50 OPEC oil which Saudi Arabia likes)? 

Continuing:

The opportunity (to buy in California) appeared to fade with PdV's decision late last year to not sell its US refining subsidiary, Citgo.

PBF cooled bullish talk on operating in California, where regulators have made operating steadily tougher for refiners, around the same time.

 A lot of story lines in that article; lots of swirling tea leaves. I particularly liked:

• the Bakken connection; the CBR story
• Venezuela's state-owned oil company in desperate need of cash
• the effect California regulators are having on its own state's ability to sustain normal operations

Economics Of The EOG Shale Oil Well -- Seeking Alpha -- June 19, 2015

Link here.

I've not read the article yet.

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At Least Not "In So Many Words"

The AP is reporting:  According to the Kremlin, a Russian loan was not discussed in Tsipras-Putin talks.

Blink, blink.

I suppose it depends on what the definition of "talks" is.

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EIA "Energy Cookie"

Today's EIA "energy cookie":

Iran holds the world's fourth-largest proved crude oil reserves and the world's second-largest natural gas reserves.

Despite the country's abundant reserves, Iran's crude oil production has substantially declined, and natural gas production growth has been slower than expected over the past few years. International sanctions have profoundly affected Iran's energy sector and have prompted a number of cancellations or delays of upstream oil and gas projects. --- EIA

But if Valerie Jarrett gets her way, things will change. A lot.

Director's Cut -- April, 2015, Data

Bakken price in May: $44.70
Fracklog: 925 (an increase of 45); I had thought it would have been closer to 1,000
Completions: 94 -- a very, very low number; many wells going to SI/NC status
To maintain production near 1.2 million bopd: 110 - 120 completions needed each month
Statewide flaring: 18%

Director's Cut is out.

I track the "cuts" here. 

Disclaimer: this update is always done in haste; typographical and factual errors are likely. This is for my use only. If this is important to you, you should go to the source. 

Comments on today's Director's Cut can be found here: link here. 

Oil:

• April, 2015: 1,168,502 (prelminary)
• March, 2015: 1,190,502 (final); 1,190,582 bopd (preliminary)
• February, 2015: 1,178,082 bopd (revised, final); 1,177,094 (preliminary)
• January, 2015: 1,191,198 bopd (all time high was last month)
• December, 2014: revised, 1,227,483 bopd (preliminary - 1,227,344 bopd - preliminary, new all-time high)
• delta:

Producing wells: 

• April, 2015: 12,537 (preliminary -- new all-time high)
• March, 2015: 12,443 (final revised -- new all-time high)
• February, 2015: 12,199 (final revised -- new all-time high)
• January, 2015: 12,181 (preliminary -- new all-time high)
• December, 2014: 12,134 (preliminary, new all-time high)
• November, 2014: 11,951 (revised); 11,942 (preliminary, new all-time high)
• October, 2014: 11,892; revised 11,942 (preliminary, new all-time high)
• September, 2014: 11,758 (revised); 11,741 (preliminary; new all-time high)
• August, 2014: 11,565

Permitting: drilling permit activity decreased slightly from February to March and significantly more from March to April as operators positioned themselves for low price 2015 budget scenarios.

• May, 2015: 150
• April, 2015: 168
• March, 2015: 190
• February, 2015: 197
• January, 2015: 246
• December, 2014: 251
• November, 2014: 235
• October, 2014: 328
• September, 2014: 261
• August, 2014: 273
• All-time high was 370 in 10/2012
  

Pricing:

• Today, 2015: $48.00
• May, 2015: $44.70
• April, 2015: $38.33; $36.25 (lowest since February, 2009, and January, 2015) (all-time high was $136.29 7/3/2008)
• March, 2015: $31.47
• February, 2015: $34.11
• January, 2015: $31.41
• December, 2014: $40.74
• November, 2014: $60.61
• October, 2014: $68.94
• Sept, 2014: $74.85
• August, 2014: $78.46

Rig count:

• Today: 79 - lowest since December, 2009 (all time high was 218 on 5/29/2012)
• April: 91 (lowest since January 2010)
• March: 108
• February: 133
• January: 160
• December, 2014: 181
• November, 2014: 188
• October, 2014: 191
• Sept, 2014: 193
• August, 2014: 193
• July, 2014:  192

Director's comments:

Rig counts continue to fall. The active rig count is 5 to 8 rigs below what operators indicated would be their 2015 average if oil price remained below $65/bbl. The number of well completions dropped sharply from 244 (final) in March to 94 (preliminary) in April.

Drilling rig count:

• dropped 8 from April to May, has since fallen 4 more from May to today
• dropped 17 more from March to April 8
• dropped 25 from February to March
• dropped 27 from January to February
• dropped 7 from November to December
• dropped 21 from December to January
• dropped 23 from January to date of previous month's Director's Cut

Rig utilization:

• no change
• 20,000+ feet rigs: 45% 
• shallow well rigs: 25% 

Well completions:

• April: 94 (preliminary -- astounding drop)
• March: an astounding 194 (final)
• February: 42
• January: 63
• December: 173 (preliminary)
• November: 48

Weather:

• one significant precipitation even in Dickinson
• 10 days with wind speeds in excess of 35 mph (too high for completion work)
• no days with temperatures below -10F

Wells waiting to be completed:

• At end of April, an estimated 925 wells were waiting to be completed, an increase of 45
• At end of March, an estimated 880 wells were waiting to be completed, a decrease of 20
• At end of February, an estimated 900 wells waiting to be completed, an increase of 75
• March, 2015, Director's Cut -- 825 wells -- an increase of 75-- January data
• Previous Director's Cut -- 750, a decrease of 25
• Red Queen: 110 - 120 completions per month to maintain 1.2 million bopd

Flaring:

• down slightly at 18%
• Tioga gas plant steady at 84% of full capacity (83% last month)
• expansion of gas gathering from south of Lake Sakakawea is still delayed

Gas capture statistics:

• statewide: 82% (October 2014 target was 74%; January 2015 capture target is 77%)
• FBIR Bakken: 88% (83% last month; 79% before that; 77% the month before)
• percent of flaring was unchanged; the volume of flaring decreased 13.9 MMCFD (huge change; last month, there was an increase of 7.7 MMCFD)

Fracking policies/regulations:

BLM revised final regulations for hydraulic fracturing on federal and Indian lands were published in the CFR on 3/26/15 so they will go into effect 6/26/15. North Dakota and Colorado have intervened in the Wyoming legal challenge of the rules a nd plan to seek an injunction or temporary restraining order to prevent the rules going into effect until the case is settled.

Friday, June 19, 2015

Active rigs:

	6/19/2015	06/19/2014	06/19/2013	06/19/2012	06/19/2011
Active Rigs	78	189	186	213	173

RBN Energy: Developing NGL Supply/Demand and Price Scenarios

If it persists, the oil price crash may have undermined many of the assumptions behind massive infrastructure investments in steam cracker plants and export facilities for natural gas liquids (NGLs). These projects expected to take advantage of booming domestic NGL production and low NGL prices relative to crude. Yet take-or-pay commitments and committed investment in plant infrastructure means they may be exposed to  poor returns if crude prices remain low.

One complicating factor in the projection of ethane prices is “rejection” – meaning leaving ethane in the tailgate outlet gas stream from a processing plant – instead of recovering it for commercial use. Rejection typically occurs when the market price for recovering ethane is lower than for natural gas – making it more valuable left in the outlet stream of a gas processing plant. The “rejection” equation is also strongly influenced by distance to market because most demand for ethane is located at the Gulf Coast whereas production occurs in different regions across the U.S. So economic recovery of ethane must also factor in transport cost. The Drill Down provides a detailed explanation of the supply, demand and cost variables required to determine the ethane price forecast. The analysis is broken down by production region and details where supplies to meet Gulf Coast demand will come from as new steam crackers come online – based on the relative cost of transport and available capacity. The cost to produce and transport the last barrel of ethane required to meet prevailing demand sets the “clearing” price for ethane.  

It really is amazing: regardless of all that talk about "Peak Oil," whoever back in 1973 would have guessed there would be a glut of fossil fuel in 2015? I find it quite remarkable.

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Gloom and Doom

Bloomberg is reporting: The Shale Industry Could Be Swallowed by Its Own Debt.

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And It Continues

Bloomberg at Rigzone is reporting: Oil-Sands Megaproject Era Wanes as Suncor to Imperial Scale Down

The era of the megaproject in Canada’s oil sands is fading.

Crude’s price slump, pressure to get off fossil fuels and tax increases in Alberta are adding to high costs and a lack of pipelines, prompting producers from Suncor Energy Inc. to Imperial Oil Ltd. to accelerate a shift to smaller projects.

Companies are deferring new mines in favor of cheaper, bite-sized drilling programs that deliver quicker returns and require less labor. The moves will help reduce cost overruns and make Canadian companies more competitive with U.S. shale producers. The trade off will be reduced production growth and a smaller economic boost for the country’s oil patch.

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Meanwhile

BloombergBusiness is reporting: Enbridge Income to Buy Parent’s Pipelines for $25 Billion.

Enbridge Income Fund Holdings Inc. will buy Enbridge Inc.’s Canadian liquids pipeline business and certain renewable energy assets for $24.8 billio), freeing cash for its parent company.

Enbridge will continue to operate the pipeline assets.

The company said the deal will reduce its cost of capital and allow it to boost payments to shareholders. Enbridge will receive C$18.7 billion of units in the income fund, which will also assume C$11.7 billion of debt.

The sale to the income fund is the first in a two-stage reorganization Enbridge announced last year that will enable it to focus on developing faster-growing projects. The company also plans to sell U.S. pipeline assets to another affiliate, Enbridge Pipeline Partners LP.

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Tesla Battery Update: Panasonic

A contributor over at Seeking Alpha: Tesla's Battery Supplier Panasonic Forecasts Drastically Less Growth Than Forecast By Tesla.

Summary:

• In a recent investor presentation, Panasonic forecast auto battery sales growth of just 11 percent in the next 12 months even as Tesla's Model X is ramping
• While Tesla forecasts perpetual 50% annual sales growth, over the next four years, Panasonic forecasts a CAGR of just 16.5%
• Even in 2019, when the Model 3 is supposed to be in full production, Panasonic forecasts auto battery sales only 84% higher than in FY 2015
• Tesla  forecasts 50% growth in sales per year indefinitely, but Panasonic forecasts battery growth of less than a third much over the next 4 years.

We'll know a year from now how this all works out. For newbies: my world view of Tesla is that it is a battery company disguised as an automobile company surviving on tax breaks, subsidies, and grants. Just days after borrowing another $750 million (from seven banks, no less), Tesla "bagged" another $15 million in tax credits from the state of California.

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Office Depot Staples

Office Depot shareholders approve sale to Staples.