Thursday, July 16, 2015

Graphic Depiction Of US Refinery Runs -- July 16, 2015

I first made note of this on July 5, 2015, but did not have a graph to show the data.

Bloomberg now provides the graph. Maybe I'm over-reading the graph, but it appears the general trend for refinery runs from 2010 to 2013 was fairly flat (strong fluctuations but the overall trend was flat). Then in 2013, a longer upward trend and then seeming to bring the 2013 - 2014 to a new baseline.

Now, look at the most recent data - the first six months of 2015 -- another rise similar to the one we saw in early 2013.

Again, maybe I'm over-reading the graph. You can see the original without my marking at this link.

The Utica - A Huge Story -- July 16, 2015

This is a huge story. A reader alerted me to the story yesterday. Now I see the full story that Rigzone is reporting:
The size of the Utica shale play’s technically recoverable resources is larger than previously thought, a recent study by West Virginia University (WVU) has found. WVU found that the Utica play contains technically recoverable resources of 782 trillion cubic feet (Tcf) of natural gas and around 1.9 billion barrels of oil. That’s higher than the U.S. Geological Survey’s (USGS) 2012 estimate of technically recoverable resources at 38 Tcf of gas and 940 million barrels of oil.
The study results indicate that the Utica – which spans West Virginia, Kentucky, Pennsylvania, Ohio and New York – is comparable to the Marcellus shale play in terms of size and potential recoverable resources. The Marcellus is the large U.S. shale play and second largest shale oil and gas play in the world. Most of the Utica play lies beneath the Marcellus. The interval between the Marcellus and deeper Utica plays ranges from 4,000 feet in Ohio to more than 6,500 feet in West Virginia. The drilling depth of the Utica ranges from less than 4,000 feet in Ohio to more than 12,000 feet in West Virginia, which is over two miles below the surface.
The results of the Utica Shale Play Book Study, a two-year geological study undertaken by the Appalachian Oil and Natural Gas Research Consortium, a program at WVU’s National Research Center for Coal and Energy, were presented at a July 14 workshop in Canonsburg, Penn. “The revised resource numbers are impressive, comparable to the numbers for the more established Marcellus shale play, and a little surprising based on our Utica estimates of just a year ago which were lower,” said Douglas Patchen, director of the consortium and well-known expert on the Appalachian Basin.
The resource estimates for the Utica went up significantly over the past year, partly due to the fact that researchers had more up-to-date information.
Researchers had twice the amount of data this time as they did last year, letting them do a better job of fitting curves for estimated ultimate recovery rates. The production from newer wells is doing much better than older wells, either because of improvements in technology or because producers are better at finding the sweet spots.
Hohn imagines that improvements are coming after oil and gas companies – who likely first tackled the Utica using petrophyiscal models from other shale reservoirs – eventually found the techniques that worked best for the Utica.
The technically recoverable resources are part of original gas-in-place estimates of approximately 3,192 Tcf and original oil-in-place of approximately 82,903 million barrels of oil. Hohn said that the researchers did not find the playwide oil recovery factor of around three percent and gas recovery factor of around 28 percent in sweet spot areas to be out-of-range or unusual, given the permeability and porosity of the play. A recovery rate range of 10 to 20 percent in the Appalachian region, even for conventional reservoirs, is not uncommon.
This reminds me of the early days of the Bakken when the USGS severely underestimated the size of the Bakken.

What peak natural gas?

Of course, the state of New York bans fracking so any natural gas from the Marcellus or Utica is technically not recoverable in that state. At least for the time being.

Federal Lease Sales Noted In North Dakota -- July 16, 2015

The Bismarck Tribune is reporting:
A Bureau of Land Management oil and gas lease auction Tuesday netted $36,805 in revenues from the sale of six federal leases in North Dakota, totaling 1,595 acres.
BTA Oil Producers of Midland, Texas, submitted the highest per-acre bid at $110 per acre for a 120-acre parcel located in Golden Valley County.  It was also the highest single-parcel bid, coming in at $13,200.
BLM oil and gas leases are awarded for a period of 10 years and for as long thereafter as there is production in paying quantities. The lease revenue and the 12.5 percent royalties collected from the production of those leases is split between the federal government and the states.
This is different from the state lease sales. State lease sales are held quarterly; the last one was May, 2015.

COP Raises Dividend; Terminates Contract For Deepwater Drill Ship Originally Scheduled For Gulf Of Mexico -- July 16, 2015

From Seeking Alpha:
  • ConocoPhillips says it will reduce future spending on deepwater drilling, due to low crude oil prices.
  • COP says the most significant spending reductions will come from its program in the Gulf of Mexico, where it will terminate its contract for an Ensco deepwater drill ship which was scheduled to begin drilling later this year.
  • COP says its decision to cut deepwater spending will strengthen its ability to achieve cash flow neutrality in 2017, even if lower commodity prices persist.
  • However, COP raises its quarterly dividend to $0.74 from $0.73, which will cost an additional $12.3M per quarter.
From an earlier article last October:
It usually takes about six years before deep-water discoveries become commercial bounties, and during that time oil markets could take prices up or down, and technological breakthroughs could lower costs. But oil companies will still have to accomplish engineering feats to exploit the next generation of oil fields. 
Six years. We're being set up for $200-oil. I explain what I mean by this at this post.

Along that same line, Reuters/Rigzone is reporting:
Mexico auctioned only two of 14 blocks in a pivotal oil and gas tender on Wednesday, falling far short of the government's modest expectations as it begins to open up the long-nationalized industry to private investment.
Both the shallow water exploration and production contracts were awarded to the same consortium made up of Mexico's Sierra Oil & Gas, U.S. firm Talos Energy and Britain's Premier Oil.
The other 12 blocks received no bids, or none that cleared the bar set by Mexico's finance ministry. All told, it was an inauspicious start to the rollout of President Enrique Pena Nieto's signature economic reform.

Note: this is not an investment site. See disclaimer.


TECO shares jump; rumors of being bought; (Tampa Electric). Later, TECO confirms it is exploring a sale:
Utilities have been looking at mergers and acquisitions for growth as they grapple with tepid sales and rising costs from new regulations and the need to upgrade aging infrastructure. This week utility owner Black Hills Corp said it had agreed to buy SourceGas Holdings LLC for $1.89 billion.
Teco, which was valued at about $4.4 billion before Thursday’s move, is Florida’s third-largest investor-owned utility behind NextEra Energy Inc.’s flagship Florida Power & Light and Duke Energy Corp.’s Florida utility.
Teco’s Florida utility borders those of Duke and FP&L. Both may be suitors for Teco, along with Dominion Resources Inc., Southern Co., and perhaps CenterPoint Energy Inc.
Speaking Of Buyouts: Goldman Has Seven Oil And Gas Buyout Targets
EOG, CLR On The List

From SeekingAlpha:
  • Global oil majors have $150B of firepower than can be used for M&A and have the ability to defer another $325B in capex on marginal projects; with so much cash available for potential deals and up to 15M bbl/day of production potentially available for purchase, Goldman Sachs analyst Ruth Brooker sees a pickup in M&A activity in the oil and gas space coming soon.
  • The firm thinks shale production has the potential to double by 2025, and Brooker argues majors likely will take the current opportunity to increase their exposure to U.S. shale at historically low prices.
  • Goldman sees seven companies as most likely to draw buyout attention from the majors: EOG, PXD, CLR, COG, NBL, APC, RRC
I would add Oasis and maybe even Whiting, although the latter is less likely now that three years ago.

APC has a market cap of almost $40 billion and an enterprise value of over $50 billion; and, EOG has a market value of $45 billion. 

For The Archives: Argentina

Reuters/Rigzone is reporting:
Argentina's state oil company YPF, Pan American Energy and Wintershall will invest $38 billion over 35 years in the country's vast but mostly untapped Vaca Muerta shale formation, the governor of Vaca Muerta's home province of Neuquen said on Wednesday.

Eight (8) New Permits -- North Dakota, July 16, 2015

Active rigs:

Active Rigs74192189213178

Seven (7) wells coming off the confidential list Friday:
  • 28500, 1,104, Whiting, P Thomas 154-98-16-33-27-4H3, Truax, 25 stages, 4 milion lbs, t1/15; cum 48K 5/15;
  • 28670, 843, EOG, Parshall 84-2827H, Parshall, t1/15; cum 49K 5/15; 
  • 29528, drl, Enerplus, Muskrat 150-94-04B-09H, Spotted Horn, no production data,
  • 29657, drl, Newfield, Olson 152-96-30-31-2H, Westberg, 5K first 12 days;
  • 29873, SI/NC, BR, Kirkland 41-28MBH, Pershing, no production data,
  • 29964, drl, SHD, Magnum 36-13-TF2, Clarks Creek, no production data,
  • 30004, drl, XTO, Porcupine Federal 44X-2C, Bear Creek, no production data,
Eight (8) new permits --
  • Operators: XTO (4), Oasis (4)
  • Fields: Grinnell (Williams), North Tobacco Garden (McKenzie)
  • Comments: permits for two 4-well pads (see graphic below for the XTO wells in Grinnell oil field)
Two Tyler wells (finally/officially) abandoned, not unexpected:
  • the MRO Powell well, a wildcat, Slope County
  • the MRO Rundle Trust well, a wildcat, Slope County
Permits for XTO's proposed 4-well pad in Grinnell oil field:

Idle Rambling, Including "Oilmen" With Waylon Jennings -- July 15, 2015

I Came To Believe, Johnny Cash

I have too much to write. I won't get to all of it. I won't remember all that I want to write.

I had a wonderful trip back from Los Angeles to Grapevine (Dallas area, Texas). I drove alone. May will stay in California for awhile; our granddaughters are there for one more week.

What a great road trip. I drove straight through, taking naps along the way. I left at 4:00 p.m. Pacific Time, on Tuesday, and arrived home at 5:00 a.m. Central Time, early this morning. I'll get the mileage later.

I had a number of CDs that helped me get through periods of lousy radio reception. I had forgotten I had this Johnny Cash CD, released in 2014, of recordings from the early 1980s that had been previously released. Except for maybe three songs I did not particularly care for (but even those three were very, very good), I was blown away by the album. From wiki:
Out Among the Stars is a posthumous studio album from Johnny Cash, released through Legacy Recordings on March 25, 2014. The recordings come from lost 1980s sessions with famed countrypolitan producer Billy Sherrill which were shelved by Cash's record company, Columbia Records, and discovered by Cash's son John Carter Cash in 2012.
Cash also recorded the 1981 album The Baron with Sherrill in an attempt to turn around his dismal album sales but the strategy did not work, leaving his record executives eager to end his affiliation with the label. 
The album also doubles as a posthumous release for singer June Carter Cash, Johnny Cash's wife, who is featured on vocals on two tracks, and for Minnie Pearl and Waylon Jennings, who provide vocals on two other songs.
Much could be said about the album, but I will simply say this: it was great to hear Waylon Jennings' voice again.

I will use the album as a jumping-off point for another post later on, if I remember.

I'm Moving On, Johnny Cash, Waylon Jennings

I was driving alone, so I could set the speakers in the minivan the way I wanted, and could play the music really loudly. I heard things in the album I would not have heard otherwise.

My Route

San Pedro -- short segment on I-110 north to California Highway 91; then north on I-605 (memo to self: in the future, avoid at all costs); then east on I-210 (even worse than the 605, and this was 4:00 p.m., hardly rush hour).

North on I-15. The temperature peaked at about 94 degrees, well below the 115 degrees we experienced coming out a couple weeks earlier. Traffic heavy. Over the Cajon Pass (if that's the correct name), traffic was at a complete standstill for about 3 miles on the southbound side; my direction was moving nicely. They are widening the uphill side of the interstate from about 3 or 4 lanes to 5 or 6 lanes it appears.

At Barstow, somewhere around Barstow, I turned right on I-40, headed toward Albuquerque, and not north on the I-15 to Las Vegas. Perhaps another time (although I took that route about a year ago).

I'll come back to this later, but Needles has an interesting history which I noted in one of the books I was reading on the trip back. I bypassed Bullhead City and drove straight on Kingman.

I opened the windows driving through the Flagstaff area: the smell of pine in this area is the absolute best along this route. The skies were clear; I watched for "shooting stars" but saw none.

I needed to get home quickly so no side trip to the Grand Canyon. I slept somewhere in a rest stop in this area. I never limit my naps when traveling. I nap as long as I want. If I wake up and drive one mile and still feel sleepy, I pull off and sleep again. If I'm not asleep in 15 minutes, I start driving again. I never, never drive sleepy.

The truck traffic on I-40 was quite heavy. I love driving with the trucks. Very, very professional driving. I do what I can to stay out of their way. I drive very slowly, generally about 59 mph or 61 mph.

Later in the trip, when the speed limit was 75 in Texas, the minivan was feeling so good, it was hard to stay below 75, but that was for only very short periods, when I was "in the groove." More on that later.

I traveled most of Arizona through the night.

I traveled all of New Mexico in daylight. I think the stretch between the Arizona state line and Albuquerque is the most beautiful stretch in the whole Los Angeles -- I-40 -- Dallas drive. Wow, that's beautiful. I drove that segment slowly, only about 59 mph on the freeway. Traffic was relatively heavy. I missed the monsoons that come up in the western part of the state later in the afternoon this time of the year.

Somewhere in this stretch of New Mexico I took a long rest area stop to do some serious reading. I wrote some notes which I will transcribe later.

From Albuquerque to Amarillo it seemed to drag a big. Wow, it felt good to cross into Texas. That's when I found the Johnny Cash CD -- I did not know I had it with me, and I don't recall having listened to it before. Johnny cash mentions Texas in the very first line in the very first track of that album, and I played the album literally as I was just entering Texas. What a coincidence. "Out Among the Stars" was perfect for nighttime driving just as I enter Texas in the dark of the night: it's midnight at a liquor store in Texas... and then a "Ferguson story."

And then it began. Three hundred sixty three miles of being "in the groove." The last 350 miles between 10:00 p.m. and and 5:00 a.m. was pure bliss. The music was loud, I had just filled the minivan with gasoline at $2.49/gallon (compared with $4.69/gallon when I left San Pedro) and the minivan felt as good as it had ever felt. The air was a bit cooler at about 75 degrees if I recall. The highway between Amarillo is a state highway, four-lane divided, with a speed limit of 75 mph slowing to 55 or less going through the few towns along the way.

The road was essentially empty; an occasional 18-wheeler passed at 80 mph, I suppose. I probably drove some of the stretch at 70 mph, enjoying the curves, the pitch-black night (I don't recall the moon being out). Again, I watched for meteors; saw none.

I got lost somewhere northwest of Ft Worth -- relatively lost -- I don't have GPS. I had to stop to check the map. Relatively lost because I knew that if I stayed north and east of Ft Worth I would eventually get to landmarks I recognized. A few miles north of the NASCAR Texas Motor Speedway and I knew exactly where I was.

I stopped along the way once to get some more gas. I prefer never to let the tank get much below 3/4's full when I'm driving cross country. Frequent stops allow me chance to get out and stretch. I almost never get down to less than half a tank. Also, paying $20/"fill-up" seems less painful than $60/"fill-up."


When driving along for 30 hours or more, one gets a chance to think about a lot of things. I will expand on some of those thoughts later, especially my thoughts regarding the Bakken. But that will have to wait; I'm off to see our youngest granddaughter, age one year, to take her swimming.

Note: this has not been proofread. I assume there are typographical and factual errors which i will correct later.

By the way, this song on the album reminded me of a rockabilly song out of Europe. After re-listening to the latter, maybe the similarity is not as much as I had originally thought.

Regardless, while searching for another video, I came across this, which is pretty good:

Oilmen, Waylon Jennings

This Will Be Short And Sweet -- July 15, 2015

Tweeting now:  President Obama says during El Reno prison visit: 'These are young people who made mistakes that aren't that different from the mistakes I made' - @jbendery. Comment: fortunately the statue of limitations has run out. It also explains why President Obama has not said anything about the woman shot in the sanctuary city of San Francisco by a 5-time deported illegal alien -- he apparently never shot and killed anyone. But it does beg the question: exactly what laws did he break?

An interesting (dismal?) perspective on status of McDonald's restaurants. I saw this story earlier this morning and then the story seemed to have disappeared. It took quite awhile to find it again. It turns out this story was originally posted on April 17, 2015, and was re-posted erroneously, or was being re-cycled. Regardless, it helps me connect some dots which I will get back to later. [Update, 9:12 p.m. central time: the story was there all the time; I just couldn't find; linked by Drudge. And yes, there it is, saying it was posted "11 hours ago." Same story as the April 17, 2017, story with some editing. CNBC recycling their stories for some hidden agenda?]

In the Los Angeles Times: grocery chain Haggen laying off workers as it struggles in Southland.
Haggen Inc., the supermarket chain that bet big on California, is laying off employees and cutting worker hours as it struggles to make headway in the highly competitive Southland grocery market.
The Pacific Northwest chain this year bought 146 Albertsons, Vons, Pavilions and Safeway stores, including 83 in California, mostly in the south. It has spent the last few months converting them to the Haggen brand and keeping most of the store employees. 

Haggen, which has about 10,000 employees overall, did not specify how many workers would be affected, nor did it confirm that there have been layoffs. Local employees said some workers have been laid off, including store clerks.
Haggen is introducing its brand to California at a time when grocers are facing heightened competition for food shoppers. Analysts said Southern California is one of the nation’s most competitive grocery markets, though statistics aren’t publicly available.
Farmers markets are springing up all over the Southland. Smaller chains, including Trader Joe’s, also have been expanding while big-box retailers such as Wal-Mart and Target have been scaling up their food offerings.
Online players Google and also have been pushing grocery delivery. Last month, German discount grocer Aldi said it planned to open 45 Southland stores starting next March.
Many, many story lines. Southern California is also known for a lot of "job actions" against employers over the years. There is a new Wal-Mart across the street from the huge shopping mall in Torrance. I never thought there would be a Wal-Mart in that area. The grocery store chains in the southland have historically done everything possible to keep Wal-Mart from coming in.

Check out Cummins: huge dividend increase. I'll get back to this later, if I remember.

Check out Netflix: also a huge story. This has been one of my favorite stories to follow on the blog. I do not invest in Netflix. You may have to google "Netflix dashes past 65m subscriptions" to get aritcle.

Jobs: first time unemployment applications plunge by 15,000; now down to 281,000. The four-week figure rose 3,250 to 282,500.

Citi posts highest profit in eight years due to cost cutting.

MDU to impose fee on customers who install solar/wind with intent to sell electricity back to utility.

That typhoon off the western coast of Mexico / south of Baja California seems to be moving farther south, perhaps a bit farther off to the west, away from the coast.

Weekly NG fill rate: 99. In the East Region, stocks were 65 Bcf below the 5-year average following net injections of 57 Bcf.

Gasoline demand, at the link scroll down:

Back To The Bakken

Active rigs:

Active Rigs74192189213178

Niobrara: June, 2015, production down 4% month-over-month, but still 19% higher than year-over-year. Huge story line.

RBN Energy: NGL Prices and Petchem Margins In a Low Crude Price World.
Massive infrastructure investments in petrochemical steam crackers and export terminals for propane, butane and ethane are in the works. But the market has changed since the investment decisions for many of these facilities were made. Instead of the low ethane prices the petrochemical market is enjoying today (about 19 cents/Gal), prices could ramp up to 50 cents/Gal by 2020 as new steam crackers and ethane export facilities come online. If ethane prices increase and crude oil prices remain below $65/bbl, the feedstock cost advantage of ethane versus naphtha that the new petrochemical facilities expected likely would not materialize. Lower crude oil prices would also cap production growth of all NGLs, limiting the volumes to be exported through the new terminals. Today we review Part 2 of our Drill Down Report on NGL Infrastructure.
Another great post by RBN Energy. A very negative outlook for NG bulls.