The Number Of Active Rigs Rising Slowly In The Bakken -- October 24, 2016

If you haven't read Mike Filloon's most recent Bakken update, released just before midnight last night, go there now. By midnight there were no comments, but now there are enough comments to make the column even more interesting.

Huge story coming out of Oilprice today but nothing new for those who are paying attention. But we are seeing the numbers. Some data points:

• LNG is the big winner as countries around the world "leave" coal and warm to natural gas and green energy
• oil prices put the oil industry at a value of $1.7 trillion -- almost 3x larger than the $660 billion in revenues generated from all major metals and minerals combined
• for comparison: gold -- the largest raw metal market by dollar value -- one-tenth the size of Big Oil
• iron -- the second most popular mined and traded metal -- generates a piddly $115 billion (by comparison) in revenues for companies and governments
• oil is the most-valuable commodity on Earth after food and drugs
• transportation will drive further oil demand
• air passengers will double by 2035; and unlikely that fuel demand will decrease despite better fuel efficiency
• as much as environmentalists look "scornfully" upon oil, the Obama administration notes that oil produces roughly 20% less CO2 than burning coal (and it was coal that powered the industrial revolutions of the UK, the US, China, and India)
• India -- ah, yes, India -- 20% of India's population -- about 3/4th of the US population does not have access to electricity
• India's answer: coal
• and, eventually India will move from coal to natural gas
• Pakistan: LNG (see RBN Energy blog today -- linked below)
• globally: oil demand will continue to rise

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Back to the Bakken

Active rigs:

	10/24/2016	10/24/2015	10/24/2014	10/24/2013	10/24/2012
Active Rigs	34	68	194	180	190

RBN Energy: low, stable LNG prices could help shrink global supply glut. This is quite an interesting article. The following caught my attention:

... and the widening gap between liquefaction capacity and LNG demand have spurred serious competition among LNG suppliers and prompted a number of countries and utilities that already import some LNG to import more, mostly for power generation. Other nations not yet importing LNG are taking a fresh look at the idea, now that the market promises to be flush with supply and that, with the liquefaction glut and increased competition among LNG suppliers, prices are likely to remain relatively low. Interest in LNG is also being boosted by national climate-change commitments ... 

A number of new, land-based LNG import terminals are being built, existing import terminals are being expanded, and floating storage and regasification units (FSRUs)––vessels that, as their name suggests, can receive LNG and convert it back to gaseous methane––are under development on just about every continent. Pakistan, India and a few other Asian nations are building land-based LNG import terminals and/or FSRUs; Indonesia alone is planning a number of FSRUs ... In Latin America, a joint venture of Golar LNG and GenPower Participacoes SA is planning a 1,500-MW power plant ...

Even Africa is getting into the act, because while the continent as a whole produces more gas than it consumes, Africa’s gas reserves are concentrated in only a few countries; most of the rest have little or no native gas.

Again, most of [Africa's] planned LNG imports are tied to power generation. For example, a consortium led by French LNG giant Total has been working with Ivory Coast officials on a plan to establish (as soon as mid-2018) an FSRU that would feed a new gas-fired power plant. South Africa, meanwhile, is looking to import enough LNG to power several new power plants (starting with two plants totaling more than 3,000 MW) to help reduce its dependence on coal.

Wall Street's 15 favorite energy stocks as oil prices rebound. Link here. Iraq says it won't go along with the cut. That's just posturing / negotiating -- Iraq may or may not go along with the "grand compromise," but to get them involved in the discussion they want some concessions.

As a reminder, a reader provided an interesting commentary and some nice links regarding the rig count and the DUC situation.

The WSJ seems to be forecasting something that's already happening ... aggregate DUCS over the 4 oil basins (ie the Bakken, Niobrara, Permian, and Eagle Ford) have now been lower in each of the last 6 months, as oil well completions started picking up when oil prices first started rising in the spring, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) has generally slowly declined since December 2013, as new natural gas drilling fell to record low levels...

• http://www.eia.gov/todayinenergy/detail.php?id=27932
• http://www.eia.gov/petroleum/drilling/
• graphs here: http://www.eia.gov/petroleum/drilling/pdf/duc_supplement.pdf

Sounds like sour grapes. From The Wall Street Journal today: how zombie companies are killing the oil rally.

Their owners may be bankrupt, but the sprawling mines of Wyoming’s Powder River Basin are still churning out coal. It is the same story in oil fields along the Gulf Coast and with shale-gas wells in the Rocky Mountains.

Energy investors have long hoped that falling prices would solve themselves by driving producers into bankruptcy and stanching the flood of excess supply. It turns out that while bankruptcy filings are up, they have barely impacted fossil-fuel markets.

About 70 U.S. oil and gas companies filed for bankruptcy in 2015 and 2016. They now produce the equivalent of about 1 million barrels a day, about the same as before they declared bankruptcy, according to Wood Mackenzie. That represents about 5% of U.S. oil-and-gas output.

Comments that I have made many, many times:

• I have no idea why folks want $5.00 gasoline
• the sweet sport for WTI is $46 to $52 for American consumers, the economy, and the oil sector
• Peak Oil, as a relevant theory, is dead
• bankruptcies that "save" these companies ensure that many folks still have jobs, and those folks are paying taxes, are paying into Social Security, are eating at restaurants across the country; and, are keeping unemployment numbers from being worse than they otherwise would be
• can you imagine Williston's economy if companies were not allowed to go through this process?

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 The Market

Already we're seeing stories that the ATT - Time Warner deal is doomed. It is.

T-Mobile's revenue jumps almost 20%; added 2 million customers (generally, the numbers range from 500,000 to 1 million for these telecoms, it seems). Shares up almost 4% in pre-market trading. T-Mobile said it benefited from the launch of the iPhone 7 in 3Q16. Earned 27 cents/share vs 22 cents forecast. But look at this: revenue of 42 cents/share vs 15 cents/share a year earlier.  

Meanwhile, TD Ameritrade and Toronto-Dominioin buy Scottrade for $4 billion.

Dick's Sporting Goods appears to have won a bankruptcy auction for Golfsmith.

Mid-day trading: yup, WTI dropped below $50. 

Futures: up a whopping 87 93 102 points. WTI could drop below $50 today.

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Chart Of The Week

From the linked Oilprice article above.