Miscellaneous Monday Night Notes -- November 30, 2015

Enbridge buys another small wind farm; Enbridge is tracked here. Works out to about $2 million / MW, wind.

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From MarketWatch:

Kinder Morgan Inc, and Brookfield Infrastructure Partners LP said Monday they will jointly acquire a 53% equity interest in Myria Holdings Inc.'s Natural Gas Pipeline Company of America LLC, or NGPL, for $242 million. Kinder Morgan will pay about $136 million and increase its ownership interest to 50% from 20%. Brookfield will pay about $106 million and increase its ownership interest to 50% from 27%. The deal values NGPL at about $3.4 billion including debt. NGPL, operated by Kinder Morgan, is one of the largest interstate pipeline system in the U.S., with about 9,200 miles of pipeline. 

$242 million / 53% of 9,200 miles = $50,000 / mile?

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Update on Hess, per Zacks:

Hess is undergoing a transition from an integrated oil and gas company to a predominantly exploration and production entity, thereby shifting its growth approach from high-impact exploration to low-risk unconventionals, and a smaller, more focused exploration portfolio. The company divested its downstream businesses that included energy marketing, terminals, retail marketing and refining operations. In view of the global economic slowdown and new refining capacity entering the world market, the aforesaid decisions will help enhance Hess’ shareholder value.

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on anything you read here or think you may have read here. 

Saudi Arabia And Iran Become "Unwitting" Allies In Push For Market Share -- November 30, 2015

This is a nice analysis by Bloomberg of where Saudi Arabia and Iran stand with regard to current glut of global oil, as reported in Rigzone:

Almost by accident, OPEC adversaries Saudi Arabia and Iran are about to work as a team.
When the Saudi kingdom decided last year that OPEC should keep pumping to counter a surge in U.S. shale oil, Iran spearheaded resistance to the idea, saying output cuts were needed to buoy prices. Still a critic, Iran is nonetheless poised to amplify the strategy as it ramps up crude exports with the end of sanctions.

“Iran’s return is effectively the Saudi policy on steroids,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “The policy is that low-cost Middle East crude should be gaining market share, and that it’s shale and other expensive non-OPEC supply that should be cut. So to use the Saudis’ own logic, as far as Iranian production goes -- bring it on.”

By rebuffing calls to cut supply, the Organization of Petroleum Exporting Countries has sought to protect its market share by battering other producers with lower prices. That’s paying off, according to the International Energy Agency, as some U.S. shale drillers scale back and global oil majors slash investment, leaving OPEC to fill the gap. The 12-member group is likely to keep its output policy unchanged when it meets in Vienna on December 4, 2015.

OPEC’s rivals may face renewed pressure next year as Iran revives shipments constricted by three years of sanctions over its nuclear program. Iranian Oil Minister Bijan Namdar Zanganeh has called on other member states to pare output to accommodate its return, and insists the country will restore production regardless of the impact on prices.

While Venezuela and Algeria have also called for cuts to quotas, the Saudi-led organization is likely to stay the course, according to all 30 analysts and traders polled.

Curbs on Iranian oil sales to Europe and Asia will be lifted once the country dismantles atomic equipment in line with the terms of a deal struck with world powers in July. That could happen around the end of the first quarter, Societe Generale estimates. Iran can expand output by 500,000 barrels a day -- from about 2.8 million currently -- within a week of restrictions being removed, and by 1 million barrels a day within six months, according to state-run National Iranian Oil Co.

Venezuela: tick, tick, tick.

Ten (10) New Permits; BR Reports Two High-IP Wells -- November 30, 2015

Active rigs:

	11/30/2015	11/30/2014	11/30/2013	11/30/2012	11/30/2011
Active Rigs	65	185	191	182	198

Ten (10) new permits --

• Operators: Hess (6), Whiting (4)
• Fields: Alkali Creek (Mountrail), Twin Valley (McKenzie)
• Comments: all six Hess permits are EN-Freda permits, on a single pad in 26-154-94 -- see graphic below; the EN-Freda wells are tracked here; the four Whiting permits are on a single Rolla Federal pad in 3-152-97

Two producing wells completed:

• 29803, 2,325, BR, Morgan 14-21MBH, Pershing, 4 sections, t11/15; cum 3K 9/15 2 days
• 29867, 3,126, BR, Kirkland 14-21TFH, Pershing, 4 sections, t10/15; cum 14K 8 days;

Wells coming off the confidential list Tuesday:

• 30088, SI/NC, Sinclair, Highland 5-9H, Sanish, no production data,
• 30678, SI/NC, Statoil, Charlie Sorenson 17-8 8TFH, Alger, no production data,
• 31019, SI/NC, EOG, Shell 42-3229H, Parshall, no production data,
• 31027, 796, Hess, EN-Frandson-154-93-2116H-6, Robinson Lake, 4 days to drill the lateral, 88% in zone; 100% in good rock, background gas low, 35 stages, 2.4 million lbs, t10/15; cum 21K 9/15; 22 days
• 31028, 596, Hess, EN-Franson-154-93-2116H-8, Three Forks, 7 1/2 days to drill the lateral, 62.5% in target zone, 100% in good rock, background gas very low, Robinson Lake, t10/15; cum 14K 9/15; 26 days
• 31074, SI/NC, SM Energy, Loren 1B-16HS, West Ambrose, no production data, 

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31028, see below, Hess, EN-Franson-154-93-2116H-8, Robinson Lake:

Date	Oil Runs	MCF Sold
10-2015	14129	0

31027, see below, Hess, EN-Frandson-154-93-2116H-6, Robinson Lake:

Date	Oil Runs	MCF Sold
10-2015	21105	0

The Glut Of Oil Blamed On Quiet Weather -- November 30, 2015

Extreme weather? Climate change? Global warming? Remember all those warnings about extreme weather due to climate change? In fact, not one significant hurricane has hit US soil in ten years, and now Bloomberg is reporting that the glut of US oil is, due, in part to the lack of severe Gulf storms. Who wudda thought? Bloomberg/Rigzone is reporting:

Oil bulls can say farewell to another quiet Atlantic hurricane season in the Gulf of Mexico, which ends Monday without a storm-induced price rise to lift crude from its once-in-a-generation slump.

Barely an oil worker was evacuated from the Gulf of Mexico and the biggest storm this year -- the strongest hurricane ever in the Western Hemisphere, actually -- tore through the Pacific. The subdued June-November season overlapped with a four-month stretch of oil prices averaging less than $50 a barrel, the longest run since the global financial crisis. As well, the epicenter of U.S. production has moved onshore to shale fields spanning North Dakota and Texas.

“Once upon a time we would have been watching very closely to what’s happening in the Gulf of Mexico,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We’ve seen a few disasters from hurricanes, but the shale phenomenon has really taken the sting out of lost Gulf production.”

Aided by shale oil developments, U.S. production is at such a rate that oil stockpiles are more than 100 million barrels, or about one-third, above the five-year average, buffering the impact from hurricanes. While prices surged 44 percent in 2008 after Hurricane Ike struck, markets barely blinked four years later after Hurricane Isaac hit and curbed more than 90 percent of crude output in the Gulf of Mexico.

The hurricane season officially ends today.

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Done?

Oil & Gas Journal is reporting:

Wildlife recovery in Prince William Sound has been extensive enough to warrant closing federal and state legal actions against ExxonMobil Corp. from the March 1989 grounding of the tanker Exxon Valdez and subsequent crude oil spill into the sound, the US Department of Justice and Alaska Department of Law jointly announced.

A 1991 civil settlement required ExxonMobil to pay the state and federal governments $900 million over 10 years to reimburse past costs and fund restoration of injured natural resources. The two governments said the Exxon Valdez Oil Spill Trustee Council, which it formed soon after, used money from the settlement for significant restoration in areas where the spill had an impact.

The governments took preliminary action that year to preserve a potential reopener claim ...

During this period, however, continued wildlife monitoring showed that the harlequin ducks and sea otters which had looked vulnerable to the lingering oil in 2006, have recovered to pre-spill population levels and are no longer exposed to oil more than populations outside the spill area, the two governments said.

Based on that information, they and their departments and agencies on the trustee council decided that legal requirements for pursuing a reopener claim are not met, they said.

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A Throwaway Article

But the headline is correct, and the comments are worth Last summer, when oil prices were still above $100 a barrel, people had a theory for why they would never fall much below that number.

Many major oil-exporting countries had "fiscal break-even" oil prices - prices required to balance their budgets - near that level. The International Monetary Fund (IMF) put Saudi Arabia's at $98.

Faced with oil supply that exceeded demand, these countries would cut production to shore up oil prices and their finances, keeping crude prices high. How wrong they were.

The folly of relying on fiscal break-even figures to forecast future oil prices was driven home at the now infamous November 2014 Opec meeting, when its members, led by Saudi Arabia, refused to cut at all.

My favorite comment:

The IMF put Saudi oil price at $98 break even. That's wrong. The Saudis can make money at $5 to $7 a barrel, from what I read in a magazine for the oil industry.

In fact, the IMF is correct.

This comment is perhaps most accurate:

There is a point at which the price of oil is below the variable cost to pump it out of an existing well, that point is exceedingly low. There is a point at which it doesn't pay to drill at an already identified source of oil, that point is moderately low. There is a point at which it doesn't pay to look for new sources, that point is fairly high.

Producers are going to continue to optimize their returns by pumping out of existing wells and holding off on new drilling and new exploration, as far as balancing the budgets of nations is concerned, the price of oil will ignore their problems. 

The Shifting Sands Of Fortune -- EIA -- November 30, 2015

The graphics are most staggering at this EIA site.

This one deserves some attention:

It is best to go to the linked EIA site where one can enlarge the graphic above and make some interesting observations.

By the way, this is quite exciting. The above graphic was a screenshot, but the EIA has announced that one can "embed" its graphics into one's website directly. Life just keeps getting better.

From wiki:

The Hubbert peak theory says that for any given geographical area, from an individual oil-producing region to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve. It is one of the primary theories on peak oil.

Choosing a particular curve determines a point of maximum production based on discovery rates, production rates and cumulative production. Early in the curve (pre-peak), the production rate increases because of the discovery rate and the addition of infrastructure. Late in the curve (post-peak), production declines because of resource depletion.

The Hubbert peak theory is based on the observation that the amount of oil under the ground in any region is finite, therefore the rate of discovery which initially increases quickly must reach a maximum and decline. In the US, oil extraction followed the discovery curve after a time lag of 32 to 35 years. The theory is named after American geophysicist M. King Hubbert, who created a method of modeling the production curve given an assumed ultimate recovery volume.

Note: on December 18, 2018, wiki had not changed one word of that lead-in to the page on Hubbert Peak Theory (link here).

How has the theory held up? Also, from the same link:

A 2007 study of oil depletion by the UK Energy Research Centre pointed out that there is no theoretical and no robust practical reason to assume that oil production will follow a logistic curve. Neither is there any reason to assume that the peak will occur when half the ultimate recoverable resource has been produced; and in fact, empirical evidence appears to contradict this idea. An analysis of a 55 post-peak countries found that the average peak was at 25 percent of the ultimate recovery.

EURs in the Bakken have been increasing ever since the boom began.

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Some Observations On Growth In US Reserves, Year-Over-Year

The industry definition of reserves and related terms:

• reserves: those quantities of petroleum which are anticipated to be commercially recovered from known accumulations from a give date forward. 
• contingent reserves: those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from undiscovered accumulations
• commerciality: it is recommended that, if the degree of commitment is not such that the accuulation is expected to be developed and place on production with a reasonable time frame,the estimated recoverable volumes for the accumulation be classified as continent resources. A reasonable time frame for the initiation of development depends on the specific circumstances but, in general, should be limited to around 5 years... reserve quantities would then represent the estimated recover resulitng from the imlementation of that plan. [An exception:gas fields in which there are contracts for the out-years.]

When I look at the map of the US above, the change in reserves from 2013 to 2014, this does not mean that original oil in place has increased or decreased over the past year, rather the data has to do with what is likely to be recovered over the next five years.

1. Oil losers

• Gulf of Mexico
• California
• Alaska
• Utah

2. Oil winners

• Texas
• North Dakota
• Oklahoma
• Colorado
• New Mexico

3. Most interesting -- look at this -- the natural gas winners include North Dakota; it may be trivial compared to the state of Texas, but it is huge for a state like North Dakota with a small population

4. There are not many states or areas that are losers in both oil and natural gas, but Alaska is a huge loser in both -- dark red.

5. The tale of two states: New York and Pennsylvania. It's all politics. 

Monday, November 30, 2015

Active rigs:

	11/30/2015	11/30/2014	11/30/2013	11/30/2012	11/30/2011
Active Rigs	64	185	191	182	198

RBN Energy: Permian Delaware and Midland Crude Gathering Build Out Continues.

While crude oil takeaway capacity out of the Permian Basin from major hubs is probably overbuilt for the time being that is not the case for gathering systems bringing barrels from the wellhead to mainline terminals. Production in the Permian has slowed since the drop in oil prices reduced drilling activity but is still increasing from sweet spots in the Midland and Delaware basins in West Texas where pipeline gathering can save producers as much as $2/Bbl in trucking fees. Today we continue our review of gathering infrastructure build out to deliver more crude to takeaway hubs in the Permian.

In Episode 1 we summarized the changing balance over the past year between Permian crude production and pipeline takeaway capacity out of the region. Since the summer that balance has favored producers because major pipeline capacity opened up since the end of last year (2014) to East Houston (the 300 Mb/d Plains All American/Magellan Midstream Partners BridgeTex pipeline), to South Texas and Corpus Christi (the 250 Mb/d Plains Cactus pipeline) and to Nederland/ Port Arthur, TX (the 200 Mb/d Sunoco Logistics Permian Express II pipeline).

With the impending addition of the 540 Mb/d Enterprise Products Partners Midland to Sealy pipeline expected online in mid-2017 overall crude takeaway capacity out of the Permian is looking overbuilt given that production in the basin has slowed down (although still increasing) from the dramatic growth seen between 2012-2014. Yet Permian wells remain among the most productive in U.S. shale plays and drilling continues in the sweet spot areas of the play – the Midland and Delaware basins. As a result there is considerable pipeline infrastructure build out continuing to connect new production to the big takeaway pipeline hubs. We began an update on the Permian gathering projects first detailed last summer in our “Come Gather ‘Round Pipelines” series with additions by Occidental, Plains, Blueknight Energy Partners, Navigator Energy Services and Medallion Midstream. Today we conclude that roundup of projects currently under construction.

From In-Play:

Tallgrass Energy Partners increases its revolving credit facility from $850 million to $1.1 billion: The firm has increased its revolving credit facility from $850 million to $1.1 billion, and has an option to further increase the revolving credit facility by up to an additional $400 million of commitments to $1.5 billion. As of Sept. 30, 2015, TEP had $696 million drawn on its revolving credit facility. Tracked here.

OPEC ready to rumble over Saudi Arabia output. Story at WSJ. All talk. Saudi won't budge.

It looks like Libya will belong to ISIL. Story at WSJ. Pretty good for a JV team.

Even as foreign powers step up pressure against Islamic State in Syria and Iraq, the militant group has expanded in Libya and established a new base close to Europe where it can generate oil revenue and plot terror attacks.

Since announcing its presence in February in Sirte, the city on Libya’s Mediterranean coast has become the first that the militant group governs outside of Syria and Iraq. Its presence there has grown over the past year from 200 eager fighters to a roughly 5,000-strong contingent which includes administrators and financiers, according to estimates by Libyan intelligence officials, residents and activists in the area.

On even of Paris climate conference, the UK decides not to fund Shell carbon capture scheme. Too expensive, even if it means the earth is lost to global warming.

Meanwhile, in California, if you install solar roof panels, as far as the state is concerned, you don't count:

California's aggressive push to increase renewable energy production comes with a catch for people with solar panels on the roof: You don't count.

If a home or business has a rooftop solar system, most of the wattage isn't included in the ambitious requirement to generate half of the state's electricity from renewable sources such as solar and wind by 2030, part of legislation signed in October by Gov. Jerry Brown.

That means rooftop solar owners are missing out on a potentially lucrative subsidy that is paid to utilities and developers of big power projects.

It also means that utility ratepayers could end up overpaying for clean electricity to meet the state's benchmark because lawmakers, by excluding rooftop solar, left out the source of more than a third of the state's solar power.