Monday, March 21, 2016

We May Already Have The Top Story Of The Week -- Premium Prices In The Permian -- Saudi Takes Notice? -- March 21, 2016

I thought we were well past this stage: "inflated" or "premium" prices in on-shore US oil, but here it is from Richard Zeits over at SeekingAlpha, using the same word I often use: exuberance:
Easy access to equity capital has driven acreage prices in the Permian Basin to all-time highs, despite the collapse in oil prices.
In the absence of a strong upcycle in oil, aggressive acreage valuations create a risk of mediocre full-cycle returns for acquirers.
Acreage-centered stock valuations may come under pressure if investors turn their focus to cash flow metrics.
So, what are "inflated" prices being paid? One example:
 Based on my analysis, Parsley's current price of $21.83 per share implies a valuation per undeveloped acre of ~$40,000+ per acre, assuming strip pricing for oil and natural gas. In other words, if one were to look at the valuation of the acquired acreage via the prism of Parsley's current stock price, the acreage experienced a 50% "appreciation."

Update On Bakken CBR
Palmero CBR Terminal Now On-Line

To get to this first figure, start with ND Geologic Survey (, and then click on "Pipeline Authority." Then ND Pipeline Authority, and finally, "oil transportation table." If the table is hard to read, it can be "blown up" at the source (last link) -- click on the table to enlarge it (to get back to blog, click on "X" in upper right-hand corner when the table shows up:

The Palermo CBR terminal is now shown as active (red line). For more on Palermo, see the link down below.

Northstar Transloading CBR, Fairview, MT, increased capacity from 20,000 to a whopping 180,000 bopd capacity in calendar year 2015 (blue line).

Both Crestwood Holt, Epping, ND, and Dakota Plains, New Town, significantly increased capacity back in 2014 (green lines).

Not shown is the Red River Oilfield Services CBR terminal east of Williston (scalable).

It appears there has been no increase in pipeline capacity since 2014 and the tea leaves suggest the Sandpiper (now scheduled to be on-line in 2019) is dead.

From KXNET last September, regarding the Palermo CBR terminal:
A new rail loading facility is on track to start shipping Bakken crude to the coast this winter.
The Phillips 66 terminal near Palermo will be moving by train about 150-thousand barrels of oil a week starting out.
The facility was built with expansion in mind and at full operation, the terminal could load two 110-car trains every day.
Linking into the Palermo BNSF mainline, the Phillips 66 rail loading facility will streamline the company's Bakken presence.
I track CBR terminals in the Bakken here.  

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