How The Exxon Case Unraveled -- August 31, 2016

The market:

Closing: recovers a bit. Now down about 55 points. NYSE:

• new highs: 101 -- add WPX Energy;
• new lows: 14

Mid-day trading: the market continues to follow the computer algorithms -- down 114 points (Dow 30). NYSE:

• new highs: 82 (not sure why it could be less than earlier reporting, although it's probably because the previous report included the "hangover" from Tuesday)
• new lows: 23

Opening; down a bit, and then kept heading down. Down 61 points (Dow 30) by late morning. NYSE:

• new highs: 169 -- BRK-B (a big whoop; now holding over $150); Loews; OXY (another big whoop); Yelp
• new lows: 6 (including our old favorites, ITT and Noble Energy)

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

Saudi says it won't flood market with oil prior the September talks. Yahoo!Finance --

Saudi Arabia, the world’s biggest oil exporter, won’t boost output to capacity and flood the market, the kingdom’s Energy Minister Khalid Al-Falih said weeks before OPEC meets to discuss ways to stabilize prices.

Saudi Arabia isn’t concerned about global demand in spite of a drop in oil prices and a slower economy, Al-Falih said in an interview with Al-Arabiya television. The country is able to pump as much as 12.5 million barrels a day of oil, he said in comments broadcast during an official visit to buyers in Asia, its biggest market, including China.

There are so many story lines here, but it's not worth spending time on them. It is what it is.

Let's not forget Uganda oil. Bloomberg. Data points.

• three oil companies to begin drilling in Uganda in 2020
• London-based Tullow Oil; Paris-based Total SA; Chinese-owned CNOOC
• $8 billion
• 500 wells, pipeline infrastructure, central processing facilities ($16 million / well and support)
• 1.7 billion bbls recoverable oil (at 1 million bopd -- the Bakken rate -- the play will last less than five years
• 230,000 bopd
• companies will make final decision within 18 months; licenses would run for 25 years (with option for nationalization without compensation, no doubt)

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

Back to the Bakken

Active rigs:

	8/31/2016	08/31/2015	08/31/2014	08/31/2013	08/31/2012
Active Rigs	33	76	194	185	192

RBN Energy: what will it take to break Canada's infrastructure logjam?

Western Canada has extraordinary oil and natural gas resources, but producers there have been suffering from a long list of woes. Oil sands producers need higher oil prices to justify expansion projects, and face shortfalls in pipeline takeaway capacity to refineries in Eastern Canada and export markets on both coasts. Natural gas producers can move gas east, but face stiff competition from the Marcellus and Utica plays; meanwhile, their efforts to expand LNG exports from British Columbia have been stymied by the new glut in worldwide LNG supplies and low LNG prices. Today we discuss the challenges in advancing Canadian oil and gas infrastructure projects.

Canadian energy production and the pipelines, rail facilities and other infrastructure needed to move oil and natural gas to market have been frequent topics in the RBN blogosphere. In an earlier post, we considered the challenges faced by oil sands producers in Alberta, namely that 1) their hydrocarbon-extraction process is more complicated and costly than their shale-play counterparts; 2) the oil sands are farther away from most major refinery centers than most U.S. shale plays; 3) oil sands producers need to either add diluent to their bitumen to allow it to flow through pipelines, or transport low-viscosity bitumen in special “coil” rail cars that can be heated before unloading; and 4) existing pipelines out of the oil sands to the U.S. Midwest and Gulf Coast—and the existing Trans Mountain Pipeline to British Columbia (BC)—had been bumping up against capacity limits, resulting in significant, margin-erasing price discounts versus West Texas Intermediate (WTI), at least until incremental pipeline capacity started coming online in early 2015.  

We also noted that—for these and other reasons—RBN’s forecast for Alberta production in 2021 is far less upbeat than the recent 4-MMb/d estimate of Canada’s National Energy Board (NEB); we see the province’s production (now about 3.1 MMb/d) rising to only 3.4 MMb/d over the next five years under our Growth Scenario (with $65/bbl in 2021) and staying flat at best under our Contraction Scenario.

How the Exxon case unraveled. WSJ op-ed.