Staggering -- December 17, 2015

Updates 

December 28, 2015: This is why 110 round-trip flights per day will be needed --

Mrs Rojas, 36, is one of an estimated 45,000 Cubans to have left the island this year – the biggest annual exodus since the 1980 Mariel boatlift, which hauled 125,000 people across the Florida Straits. Many now are using a new route – flying in to Ecuador, which has lifted visa restrictions, and then travelling overland through Central America and Mexico. 

Original Post

 

Breaking news: US, Cuba agree to allow 110 round-trip flights per day on US airlines to Cuba, State Department official says.

Staggering.

It will be interesting to hear what size planes we're talking about.

Meanwhile, Zero Hedge says the humiliation is complete: SecState Kerry agrees that Assad "can stay." Decision made after meeting with President Putin. 

Staggering.

Another line in the sand blown away. It will be interesting to see if The New York Times reports this tomorrow. Methinks not.

Random Look At Some BR Wells In/Near Johnson Corner -- December 17, 2015

I've checked these several times, so I think they are correct, but in a long note like this, there may be typographical and factual errors. The format is a little different. After the file number and before the IP (in bold red), I posted the sections of the drilling unit noted on the permit application. If this information is important to you, go to the source.

Four-well pad (Blue Buttes):

• 32908,
• 32909, conf, BR, Lillibridge 3B UTFH, Blue Buttes, no production data,
• 32910, conf, BR, Lillibridge 3C MBH, Blue Buttes, no production data,  
• 32911, conf, BR, Lillibridge 3D UTFH, Blue Buttes, no production data,
• 32912,

Three-well pad:

• 28272, 27/28/33/34-150-96, Pershing, 2,685, BR, Copper Draw 11-27TFH ULW, t11/14; cum 91K 10/15;
• 28273, 15/22/27/34-150-96, Johnson Corner, 2,445, BR, Copper Draw 11-27MBH, t10/14; cum 205K 10/15;
• 28274, 15/22/27/34-150-96, Johnson Corner, 2,485, BR, Lillibridge 11-27MBH NH, t10/14; cum 151K 10/15;

Four-well pad:

• 27306, run north, 15/22/27/34-150-96, Johnson Corner, 1523, BR, Lillibridge 21-27TFH, t10/14; cum 100K 10/15;
• 27307, run south, 15/22/27/34-150-96, Johnson Corner,  2,244, BR, Copper Draw 21-27MBH, t10/14; cum 166K 10/15;
• 27308, run north, 15/22/27/34-150-96,  Johnson Corner, 1,683, BR, Lillibridge 21-27MBH, t9/14; cum 95K 10/15;
• 27309, run south, 15/22/27/34-150-96, Johnson Corner, 2,004, BR, Copper Draw 21-27TFH, t10/14; cum 154K 10/15;

Four-well pad:

• 23648, 15/22/27/34-150-96, Johnson Corner, 2,725, BR, Copper Draw 24-22MBH 3SH, t7/13; cum 202K 10/15;
• 23647, 15/22/27/34-150-96, Johnson Corner, 2,886, BR, Lillibridge 24-22TFH 3NH, t7/13, cum 185K 10/15;
• 23646, 15/22/27/34-150-96, Johnson Corner, 2,325, BR, Copper Draw 24-22TFH 2SH, t7/13; cum 207K 10/15;
• 23645, 15/22/27/34-150-96, Johnson Corner, 2,926, BR, Lillibridge 24-22MBH 2NH, t7/13; cum 235K 10/15;

Four-well pad:

• 28348, 15/22/27/34-150-96, Johnson Corner, 1,920, BR, Copper Draw 41-27TFH, t3/15; cum 109K 10/15;
• 28347, 15/22/27/34-150-96, Johnson Corner, 1,656, BR, Lillibridge 41-27MBH, t3/15; cum 114K 10/15;
• 28346, 14/15/22/23, Blue Buttes -- not in your drilling unit, 2,400, BR, Lillibridge 41-27TFH-ULW, t3/15; cum 118K 10/15;
• 28345, 26/27/34/35-150-96, Croff oil field, 2880, BR, Copper Draw 41-27MBH-ULW, t4/15; cum 121K 10/15;

An old singleton:

• 17271, runs north in 34/27; all of 27/34-150-96, Blue Buttes; 312, BR, Copper Draw 34-34H, Blue Buttes, t6/08; cum 295K 10/15;

Random Update On The Moab - Paradox; Note Oil Sands Development -- December 17, 2015

I track the Moab-Paradox Basin here. Now why would I bring that up tonight? Because a reader sent me this article from the Moab Sun News:

Matteson's company -- MDU -- recently announced the sale of subsidiary Fidelity Exploration & Production, which had been actively developing oil and gas projects in the Big Flat area west of Moab. In recent months, however, the pace of that work has slowed down, according to Matteson.

“They're certainly not doing any additional development,” he said. “I think the wells that have been developed continue to produce.”

Now that MDU has sold almost all of Fidelity's assets, Matteson quipped that the decline in oil prices is no longer having the same impacts on the parent company.

“Not as much as they were,” he said.

Looking at the bigger picture beyond Moab, the extent of low oil prices varies, and can depend on everything from a project's geological setting to the different types of drilling techniques that companies utilize.

“It's very difficult to give you one price point and say it affects everybody the same way,” Matteson said.

Indeed, while many of its neighbors in the Book Cliffs appear to be struggling, Canadian company U.S. Oil Sands of Calgary is moving forward with the development of its controversial PR Spring oil sands mine near the Grand and Uintah County lines.

The company initially hoped to begin commercial-scale oil production in the final quarter of 2015, although U.S. Oil Sands CEO Cameron Todd said his company is now on track to reach that milestone in the first three months of 2016.

Todd said the projected holdup is not due to the first assumption that comes to mind – namely, a drop in oil prices. Instead, he said, it's the result of “nagging delays,” including a lag in equipment deliveries, as well as the final engineering work on its piping and electricity, among other things.

With regard to MDU in the Moab - Paradox Basin, this could very well be the theme song:

Those Were The Days, Mary Hopkin

NIne (9) New Permits --Thursday, December 17, 2015

Nine (9) new permits --

• Operators: QEP (6), Slawson (3)
• Fields: Spotted Horn (McKenzie), Big Bend (Mountrail)
• Comments: the QEP permits are for six wells on Lot 10, section 1-150-95

Six oil and gas (6) permits were renewed --

• Hess (4), all EN-Madisyn in Mountrail County; and,
• MRO (2), an Alvina permit and a Whitney permit, both in Dunn County; 

One (1) producing well was completed:

• 30398, 1,891, Newfield, Gariety 150-98-6-7-4H, Siverston, 3 miles north/1 mile east of Watford City, 84% drilled in the primary 15-foot target zone, 100% of the time in the middle Bakken, t6/15; cum 114K 10/15; 

Active rigs:

	12/17/2015	12/17/2014	12/17/2013	12/17/2012	12/17/2011
Active Rigs	64	182	186	183	200

Wells coming off the confidential list Friday:

• 28281, 2,606, HRC, Fort Berthold 148-94-17C-8-7H, Eagle Nest, a Three Forks well, 33 stages, 5 million lbs, t6/15; cum 77K 10/15;
• 31143, SI/NC, XTO, Ryan 14X-9E, Siverston, no production data,
• 31244, SI/NC, SM Energy, Dusty 14B-9HS, West Ambrose, no production data,

*********************************

28281, see above, HRC, Fort Berthold 148-94-17C-8-7H, Eagle Nest:

Date	Oil Runs	MCF Sold
10-2015	14330	12884
9-2015	17516	14125
8-2015	13653	11147
7-2015	17906	0
6-2015	12695	0

Johnson Corner Oil Field

Johnson Corner is a very small field located about 14 miles westnorthwest of Watford City, one of the hotter plays in the North Dakota Bakken. It is only 8 sections in size, 1 - 2 sections wide and 4 sections long.

All sections are now held by production and most sections have eight to ten horizontals, including some running along the section line due to 2560-acre spacing throughout. The entire field is also spaced at 1280-acre drilling units.

It appears that the oil field is pretty much owned by Burlington Resources.

It's a confusing field to sort out: because the field is small and many of the wells are 2560-acre spacing, they could be sited in Johnson Corner oil but are considered part of another oil field. This must affect data for NDIC when determining how much oil comes from which oil fields. Whatever. Here is an example of many wells sited in one section. 

Sited in section 10-150-96, a vertical Madison/Bakken well:

• 9519, 206/15, Siana Oil & Gas, Tank 1-3, Johnson Corner, vertical Bakken/Madison; t11/82/t10/84; cum 57K 10/15; cum 33K 10/15;

The horizontals below are all in Johnson Corner but because the wells are on various 2560-acre drilling units, some end in Camel Butte oil field or Blue Buttes oil field. I could be wrong on this but that's what it looks like to me.The permit applications provide specifics. I think this information is correct but it is confusing and there may be errors. If this is important to you, go to the source.

Sited in section 10-150-96 and run north into Camel Butte, 2560-acre drilling unit, sections 3/10-150-96 & sections 27/34-151-96, except for 18047 which is a 1280-acre well:

• 18047, 1,620, BR, Teton 21-3H, Johnson Corner, t9/10; cum 207K 10/15;
• 29427, 2,766, BR, Teton 2-8-10MBH, Camel Butte, t7/15; cum 22K 10/15;
• 29428, 1,844, BR, Teton 3-8-10MBH, Camel Butte, t7/15; cum 16K 10/15;
• 29429, 2,124, BR, Teton 5-8-10MBH, Camel Butte, t7/15; cum 17K 10/15;
• 29430, 2,044, BR, Teton 6-8-10TFSH, Camel Butte, t7/15; cum 18K 10/15;

Sited in section 10-150-96 and also run north into Camel Butte, 2560-acre drilling unit; sections 3/10-150-96 & 27/34-151-96:

• 29461, 2,926, BR, Remingteton 8-8-10MBH ULW, Blue Buttes, sections 2/3/10/11-150-96, t7/15; cum 17K 10/15;
• 29462, 2,565, BR, Teton -8-10TFSH, Camel Butte, t7/15; cum 18K 10/15;
• 29463, 2.645, BR, Teton 7-8-10MBH, Camel Butte, T7/15; cum 19K 10/15;
• 29464, 2,525, BR, Teton 6-8-10MBH, Camel Butte, t7/15; cum 21K 10/15;

These four wells are sited in 4-150-96 but run into the sections as the wells above, 

• 29048, 2,112, Teton 2-1-3MTFH, sections 3/4-150-96 & 27/34 - 151-96, Camel Butte, t7/15; cum 29K 10/15;
• 29049, 1,560, Tetonorman 1-1-3UTFH ULW, sections 3/4/9/10 - 150-96, Johnson Corner, t6/15; cum 31K 10/15;
• 29050, 1,584, BR, Kings Canyon 2-8-34UTFH, Camel Butte, sections 3/10-150-96 & 27/34-151-96, Camel Butte, t7/15; cum 30K 10/15;
• 29051, 2,064, BR, Deking 1-8-34MBH-ULW, sections 27/28/33/34-151-96, Camel Butte, t6/15; cum 31K 10/15;

See also this post of other wells in / near Johnson Corner.

***************************

Bakken 101

The post above regarding Johnson Corner provides another data point regarding the Bakken. The NDIC tracks how much each oil field produces. This is a good example of how difficult it is to sort this out. In this case, because Johnson Corner is a small field and there are 2560-acre spacing units extending into neighboring fields, one can have a 4-section well draining oil from two different fields, from Johnson Corner and Camel Butte, for example. The well has to be "assigned" to one field or the other. So a Johnson Corner/Camel Butte well (50/50) might be "assigned" to Camel Butte. I'm not quite sure how the "assignment" is made but this field offers an opportunity to see if there is process.

US Crude Oil Imports Continue To Surge -- John Kemp -- December 17, 2015

Yesterday I posted John Kemp's weekly energy tweets. To the tweets -- which are re-posted below, I've added a link that is a must-read for those trying to understand the Bakken: John Kemp's article on surging US imports. His article is a bit superficial; it will be interesting if any of the other business media (Platts, Wall Street Journal, Bloomberg) pick up on it and discuss it. Here are the tweets with the link to the US crude oil import article by John Kemp:

Some interesting energy tweets from John Kemp today including the first one:

• US crude oil imports surged for the second week running to 8.3 million b/d, the highest so far this year, at 8.3 million bopd: full story here -- a must read; 
• US refiners processed a seasonal record 16.6 million b/d last week up by +300,000 b/d from 2014
• US gasoline consumption averaged 9.2 million b/d in last 4 weeks, an increase of just +61,000 b/d compared with 2014
• US gasoline stocks adjusted for consumption are exactly with 2014 and long run average:
• US crude oil stocks rose +4.8 million bbl last week and now almost +111 million above prior year level (the graph is staggering)
• US total crude and product stocks rose +5.0 million bbl last wk reversing adecline of -3.6 million bbl the prior wk (the graph is staggering)

The link to John Kemp's article is a must-read article. Because every paragraph was important, I could not post the entire article here. It has been archived for future reference.

Thursday, December 17, 2015

Miscalculation. It certainly appears Saudi Arabia completely miscalculated a year ago when they elected to maximize production in an attempt to increase market share. They made the decision when their analysis showed that prices would rebound within the year. Saudi Arabia's national budget is based on $100 oil. See story below.

US crude oil exports. Over the next few weeks we should start seeing stories about what it means for the US oil and gas industry once the repeal of the ban on crude oil exports goes into effect. A reader sent me a story last night suggesting there is "no" market for US light oil overseas -- or if there is, it is minimal. I did not link the article for various reasons, but mostly waiting to see what The Wall Street Journal has to say. Having said that, I have to agree that based on what I see, there is no overseas market for US crude oil in the short term. Remember, compared to Brent, WTI is landlocked, and there is a cost of getting WTI to ocean-going tankers. Then, there is the additional expense of shipping the oil across the Atlantic and Pacific oceans. Some analysts suggest WTI has to have a $4 premium to Brent to make WTI competitive; right now, WTI is selling about $1.10 less than Brent. The WTI-Brent spread will take on huge importance.

Batteries. The other day a reader sent me a short note suggesting the stories being posted by the solar industry touting improved batteries is a bunch of malarkey. I have to agree. Despite decades of research and billions of dollars and yen spent on better batteries, there is little to show for it, and there does not seem to be much on the horizon. The industry with the deepest pockets and the most interest in better batteries is the automotive industry. A scan of the headlines over the past year suggest that the automotive industry has switched its attention from better batteries to driverless cars. If you doubt me, just search the major business internet networks and scan through the past few months of headlines. You will see very few stories on better batteries and a whole lot more stories on driverless cars. With the price of gasoline as low as it is and tea leaves suggesting low prices could be here for quite some time, EVs and hybrids are getting less press. [Shortly after writing that, about an hour later, this story was posted: Google will make its driverless cars a stand-alone unit. Case made.]

Fed-fueled Santa rally. It's a strange world when global stock markets -- including US markets -- surge when the Fed raises interest rates. My hunch is that with a quarter-percent increase -- which had been baked into the market months ago -- the rally is simply the typical "Santa" rally and has nothing to do with what the Fed did. If the surge is related to the Fed rate, it's because there's a general feeling that it's "one and done." If nothing else, it should spur high-expense purchases (automobiles and houses) due to the fear of further rate increases.  

***********************************

UK to allow fracking under national parks. Reuters is reporting:

British lawmakers on Wednesday voted in favour of the use of fracking to extract shale gas under national parks, weakening a decision against fracking in national parks made earlier this year and giving shale gas explorers access to more resources.

Britain is estimated to have substantial amounts of gas trapped in underground shale rocks and Prime Minister Cameron has pledged to go all-out to extract these reserves, to help offset declining North Sea oil and gas output.

But the use of fracking, a process whereby water, sand and chemicals are injected to open up the shale rocks and release the trapped gas is opposed by environmental campaigners. Britain imposed a ban on fracking inside national parks in January under the Conservative-Liberal Democrat coalition government, in a concession to the opposition Labour Party which had called for tighter controls to be written into law.

Policymakers, who supported the rule change with a slim 37-vote margin, decided to loosen this rule on Wednesday by allowing shale gas explorers to undertake fracking at least 1,200 metres below the surface in national parks. The vote, which was held without a parliamentary debate, did not change a policy that bans fracking inside national parks. 

OPEC thought prices would have recovered by December, 2015. Wrong. Reuters is reporting:

OPEC producers see little chance of significantly higher oil prices in 2016 as extra Iranian production could add to surplus supplies and the prospect of voluntary output restraint remains remote.

OPEC delegates, including those from Gulf OPEC members, say higher oil prices are not around the corner yet, despite further growth in global demand and as a rise in non-OPEC supply is tempered by prices that have more than halved in 18 months.

Some see a more balanced market by 2017 even though they expect further pressure on oil which could send prices to test the mid-$30 a barrel range on market sentiment rather than fundamentals, before slowly rebounding by the second half of next year.

The comments, days after OPEC failed to agree a production ceiling for the first time in decades, show delegates in the producer group are pushing back their expectations of a stronger market. In August, Gulf delegates were hoping for oil at $60 a barrel by this month.

Active rigs:

	12/17/2015	12/17/2014	12/17/2013	12/17/2012	12/17/2011
Active Rigs	64	182	186	183	200

RBN Energy: update on ONEOK -- a new feature.

ONEOK Partners own and operate one of the largest natural gas liquid (NGL) networks in the U.S. Like most midstream Master Limited Partnerships (MLPs), OKS’ stock price has dropped by more than 50% since mid-2014.  This despite the fact that most of ONEOK’s revenues are not directly impacted by lower crude and natural gas prices. Today we introduce the first of our new Spotlight reports (a joint venture between RBN and East Daley) available exclusively to Backstage Pass subscribers- that feature deep-dive fundamental analysis of select energy players’ operating assets.

The first report features ONEOK and indicates that the company has a strong portfolio of fee based business fed by some of the most attractive producing basins in the U.S., particularly the Bakken which has the potential to amplify the company’s performance both to the upside and downside.

Before we get to our first report on ONEOK - please note that Spotlight analysis is provided for reference only, and should not be viewed as investment advice.  Neither RBN Energy nor East Daley Capital is an investment advisor.  Neither company provides investment, financial, tax, or other advice, nor does either company operate as a broker-dealer.  Neither company endorses the purchase or sale of any particular security or makes any other market recommendation.

Based in Tulsa, OK, ONEOK was founded as Oklahoma Natural Gas Company in 1906, one of the oldest corporations in Oklahoma. Today ONEOK, Inc. (OKE) is a major U.S. midstream company and together with its MLP OKS (see Masters of The Midstream for more on energy company partnership structures), owns and operates one of the largest natural gas liquids (NGL) networks in the U.S, including gathering and long-haul pipelines, natural gas processing plants, fractionators, storage and pipeline distribution systems.  The company also operates natural gas transmission pipelines, natural gas storage facilities and provides a range of services to energy markets.  ONEOK’s activities are focused on three regions - the Rocky Mountains (including a strong position in the Bakken), West Texas and the Mid-Continent.

ONEOK’s core assets are its NGL pipeline and gas processing/fractionation facilities. At the link, figure #1 is an overview map of OKS’ NGL pipeline assets. Regular RBN readers will recall that NGLs are extracted from “wet” gas at processing plants that are usually close by to production. These processing plants output dry gas for pipeline distribution to natural gas consumers and a mixture of NGLs known as “raw-mix” or Y-grade. The raw-mix is then typically shipped by pipeline to a fractionation facility closer to market that separates the 5 purity NGL products – propane, normal butane, iso-butane, ethane and natural gasoline. 

Geographically the OKS NGL system can be divided into northern and southern halves with the Bushton, KS fractionator as the demarcation point between the two. 

The northern half includes the 135 Mb/d Bakken NGL pipeline (aqua line on the map) - which is linked to the 255 Mb/d Overland Pass pipeline (50% owned by a JV with Williams) in northern Colorado. Both these systems transport raw-mix NGLs to the Bushton/Conway, KS market hub from production basins in the Rockies (Colorado and Wyoming) and the Bakken in North Dakota. The 134 Mb/d North System  transports NGLs (including purity propane) and petroleum products to Midwestern markets in Kansas, Iowa, Missouri, Indiana, and Illinois.

The southern half of the OKS NGL network consists of four main pipeline systems. First is the 240 Mb/d Arbuckle pipeline that transports raw-mix from production in Oklahoma and the North Texas Barnett shale to Gulf Coast fractionators (mainly located at Mont Belvieu, TX – where OKS own nearly 300 Mb/d of fractionation capacity).

Second is the ONEOK NGL system that can be divided into regional gathering pipelines which collect raw-mix from the SCOOP, Woodford, Mississippi Lime, Cana-Woodford and Granite Wash plays and deliver into OKS’ five Mid-Continent fractionation facilities (640 Mb/d capacity) and the Sterling system (yellow lines) that delivers raw-mix to Mid-Continent fractionation (600 Mb/d) and to Mont Belvieu (400 Mb/d).

The third and fourth NGL pipeline systems – the Mesquite and West Texas LPG were both acquired by OKS in late 2014. The West Texas pipe delivers raw-mix from the Permian to Mont Belvieu and the Mesquite delivers raw-mix from the Barnett Shale to Mont Belvieu.

Jobs. Bloomberg is reporting:

Jobless claims fell by 11,000 to 271,000 in the week ended Dec. 12, a report from the Labor Department showed Thursday. The median forecast in a Bloomberg survey called for 275,000. Last week coincided with the period that the government surveys businesses and households to calculate payrolls and the jobless rate for December.

The four-week moving average, a less volatile measure than the weekly claims numbers, was little changed at 270,500 last week after 270,750.