OKE Reports Earnings, 4Q15; Best Martini; Best Pancakes

OKE earnings.

The Tulsa, Oklahoma-based company said it had profit of 12 cents per share. Earnings, adjusted for asset impairment costs and to account for discontinued operations, were 45 cents per share.

The results missed Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was for earnings of 46 cents per share.

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I'm in an incredibly good mood. This has been a good six months.

• I now know how to make perfect pancakes; I can now make pancakes that are the best in the world; I also know how to best re-heat pancakes made earlier for breakfasts later in the week
• I now understand martinis and can make the best martini, better than at best restaurants; this one was hard
• I have finished reading a number of books; I'm back on course for reading after a lull
• I saw my dad on his 94th birthday
• I saw water polo at the international level, including teams and players that will be in the Olympics this summer
• I have found a great source for herring in wine sauce
• I have taught our 18-month-old granddaughter to say "yep" instead of "no"
• I was able to buy our 12-year-old granddaughter a "professional" flute (the price of a small used car)
• Because of our 12-year-old granddaughter I now know the difference between PADI and NAUI for scuba diving, although I don't know if I'm ready to get certified

Reason #458 Why I Love To Blog: The London Telegraph Addresses The "Fracklog" -- February 22, 2016

If you have time to read just one article this week, read the linked article below. A huge thanks to a reader for sending it to me. This is for the archives; it will be interesting to look at this article five years from now.

Again, The [London] Telegraph does such a great job reporting, putting the US media to shame. Even Bloomberg doesn't report this well. The Telegraph is reporting (archived):

The current crash in oil prices is sowing the seeds of a powerful rebound and a potential supply crunch by the end of the decade, but the prize may go to the US shale industry rather Opec, the world's energy watchdog has predicted.

America's shale oil producers and Canada's oil sands will come roaring back from late 2017 onwards once the current brutal purge is over, a cycle it described as the "rise, fall and rise again" of the fracking industry.

"Anybody who believes the US revolution has stalled should think again. We have been very surprised at how resilient it is," said Neil Atkinson, head of oil markets at the International Energy Agency.

The IEA forecasts in its "medium-term" outlook for the next five years that US production will fall by 600,000 barrels per day (b/d) this year and 200,000 next year as the so-called "fracklog" of drilled wells is finally cleared and the global market works off a surplus of 1m b/d.

But shale will come back to life within six months - far more quickly than conventional mega-projects and offshore wells - once crude rebounds to $60. Shale output is expected to reach new highs of 5m b/d by 2021.

This will boost total US production of oil and liquids by 1.3m b/d to the once unthinkable level 14.4m b/d, widening the US lead over Saudi Arabia and Russia.

Fatih Birol, the IEA's executive director, said this alone will not be enough to avert the risk of a strategic oil crisis later in the decade, given the exhaustion of existing wells and the dangerously low levels of spare capacity in the world.

"Even if there were zero growth in demand, we would have to produce 3m b/d just to stand still," he said, speaking at the IHS CERAWeek summit of energy leaders in Texas.

Mr Birol said investment in oil exploration and production across the world has been cut to the bone, falling 24pc last year and an estimated 17pc this year. This is a drop from $520bn to $320bn a year, far below the minimum levels needed to keep up with future demand. 

I'm not sure what to make of this caption at the linked article:  

Abdalla el-Badri, secretary-general of Opec, says his group and US shale producers may not be able to 'live together'.

That sounds like a desperate fight to the finish coming from a country whose very existence depends on $100 oil.

I do know what this means:   

Opec has failed to stop US shale revolution admits energy watchdog 'This cycle is very nasty. It sets the seed for a very high price in the future,' said Opec's secretary-general.

Much, much more at the link.

In 2025, we will be asking why "we" focused on global warming when "we" should have been preparing for a relative shortage of oil.

this is so cool, by the way. I would like to think that Lynn Helms would get the credit for coining the word "fracklog." Whoever it was, as far as I'm concerned, the word "fracklog" originated in the Bakken. Hoo-wah!

Canada At Risk Of Becoming The Venezuela Of The North -- February 22, 2016

I always said the western Canadian oil sands would be "the canary in the coal mine." Bloomberg is reporting:

The growth engine of Canada’s energy industry is poised to shut off next decade, according to the International Energy Agency.

Production gains from the oil sands in northern Alberta will slow dramatically or come to a halt as crude prices remain low and costs too high for one of the world’s most expensive sources of oil, the agency forecast Monday in a report on the global medium-term crude market. Environmental concerns, a lack of new oil pipelines and uncertainty about policy in Alberta are also causing companies to slow development work.

“We are likely to see continued capacity increases in the near term, with growth slowing considerably, if not coming to a complete stand still, after the projects under construction are completed,” the agency said.

Oil sands producers were pulling out of projects in the face of competition from U.S. shale even before the current global market rout took hold more than 20 months ago. Suncor Energy Inc. and Total SA scrapped the Voyageur upgrader in 2013.

With U.S. crude trading about 70 percent below its mid-2014 high, companies continue to shelve oil-sands work. Royal Dutch Shell Plc made the rare move of canceling a drilling development under construction last October, Carmon Creek.

Canada runs the risk of becoming the Venezuela of the north.

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Americans Set Driving Record

The Los Angeles Times editors must be having apoplexy. This wasn't supposed to happen. By 2015, the entire east coast and west coast of the US were either going to be flooded due to rising water (global warming) or converted to 100% mass / public transportation with bullet trains and light rail. Instead the urban centers on the east coast (from NYC to Boston) and San Diego to San Francisco contributed to a new American record. The LA Times is reporting that Americans drive 3.1 trillion miles in 2015, a new record:

Driving in the U.S. set a new record last year: 3.1 trillion miles, according to the government.

The previous record was 3 trillion miles set in 2007, before the Great Recession led to a sharp reduction in driving. The numbers come from the U.S. Department of Transportation's Federal Highway Administration.

Miles driven in California jumped an unadjusted 11.3% in December from the same month a year earlier, leading the nation. It was followed by Hawaii, which had a 7.2% increase, and Arkansas, where miles driven rose 6.2%.

This is music to/for my ears. A few years ago, on the blog, I said I was saddened by the fact that our granddaughters and their boyfriends would not experience the thrill of muscle cars or drive pick-up trucks because they would be unable to afford high-priced gasoline. That was when the peak oil theory folks had me convinced that the earth was running out of oil, oil was priced at $140/bbl, and gasoline was hitting $5/gallon on the west coast.

It is amazing how fast free-market capitalism can change things.

The American driving experience is part of what makes America great.

A huge "thank you" to a reader for sending me this story. I can go to bed happy tonight.

No New Permits; Whiting, Halcon, CLR Each Report A Nice Well Tuesday; Four More Bakken DUCs -- February 22, 2016

Wells coming off the confidential list:

• 28717, 3,638, Whiting, P Johnson 153-98-1-6-7-16HA, Truax, t8/15; cum 172K 12/15; see separate post here;
• 29572, 1,145, HRC, Fort Berthold 148-04-33D-28-7H, McGregory Buttes, t8/15; cum 60K 12/15, and off-line for the past two months;
• 29748, 881, CLR, Helena 5-7H1, Brooklyn, t9/15; cum 42K 12/15;
• 30326, SI/NC, BR, Old Hickory 41-32TFH, Sand Creek, no production data,
• 30797, SI/NC, XTO, Big Gulch Federal 41X-16A, Haystack Butte, no production data,
• 30958, SI/NC, EOG, Van Hook 66-3606H, Parshall, no production data,
• 31583, SI/NC, Newfield, Larsen 152-96-16-21-5HLW, Westberg, no production data,

No new permits.

Petro-Hunt cancels three permits: two Carlson permits and one Setterlund permit, all in Burke County.

Three (3) producing wells completed:

• 28099, 174, Hess, EN-Dobrovolny A-155-94-2413H-7, Manitou, t1/16 cum --
• 29768, 1,037, Hess, EN-L Cvancara-155-93-2627H-10,  Robinson Lake, t2/16; cum --
• 30456, 1,558, Statoil, Panzer 22-23 8H, Alger, t1/16; cum --

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 29748, see below, CLR, Helena 5-7H1, Brooklyn:

Date	Oil Runs	MCF Sold
12-2015	11695	14317
11-2015	11079	11746
10-2015	7450	9241
9-2015	10772	8510
8-2015	484	0

29572, see below, HRC, Fort Berthold 148-04-33D-28-7H, McGregory Buttes:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	12-2015	0	0	0	0	0	0	0
BAKKEN	11-2015	6	4871	4975	3337	3546	3033	471
BAKKEN	10-2015	24	15263	15489	19672	16524	13773	2583
BAKKEN	9-2015	30	31621	30845	45238	31264	21841	9213
BAKKEN	8-2015	29	8175	8124	12609	8992	5432	3357

28717, see above, Whiting, P Johnson 153-98-1-6-7-16HA, Truax:

Date	Oil Runs	MCF Sold
12-2015	27919	21773
11-2015	36212	30947
10-2015	42168	12274
9-2015	40949	540
8-2015	24313	0

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Active rigs:

	2/22/2016	02/22/2015	02/22/2014	02/22/2013	02/22/2012
Active Rigs	39	127	187	183	203

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The Medical Page 

Sad story on so many levels. CBSLocal is reporting that a city in the state that won't allow fracking wants to have tax-payer funded heroin-delivery centers. Whatever. I was unaware of the heroin epidemic in Ithaca, NY. I'm surprised this wasn't part of ObamaCare. It appears we've lost the war on drugs.

Meanwhile in Canada, the headline: colonoscopy should not be used to screen adults for colon cancer. Incredibly, the story did not say that at all. Here's the linked story:

The Canadian Task Force on Preventive Health care recommends that colonoscopy should not be used to screen adults for colon cancer. Instead, they suggest testing for microscopic amounts of blood in the stool.

Colon cancer screening programs aim to identify and remove polyps that can sometimes become cancerous. Currently, all Canadian programs recommend screening using stool tests, with so-called guaiac fecal occult blood testing (gFOBT) or fecal immunochemical testing (FIT).

Today in the journal CMAJ, the Canadian Task Force on Preventive Health Care, an independent panel of clinicians and methodologists, presents its updated recommendations for screening for colon cancer in adults aged 50 years and older who have no symptoms and who are not at a high risk for colon cancer.

Opposition to colonoscopy as a primary screening test for colon cancer stems from the lack of evidence showing it to be any better than other screening methods, the Task Force says.

The task force makes a strong recommendation for screening adults aged 60 to 74 with FOBT or FIT every 2 years or flexible sigmoidoscopy every 10 years, and they make a weak recommendation for using a similar approach in adults aged 50 to 59.

The task force recommends against screening adults aged 75 years and older because existing studies do not demonstrate an improvement in colon cancer mortality from such screening. 

One could almost argue that after age 75 screening for almost any disease in low risk patients is unwarranted or in patients without signs or symptoms of underlying disease. 

That's a whole lot different that saying Canadian Task Fork does not recommend using colonoscopy to screen adults for colon cancer.

The Canadian recommendations are about the same (one can argue, "even stronger" than) the US American Cancer Society recommendations. I'm disappointed with the way Reuters Health wrote the Canadian article.

Hmmmm....Haven't We Been Sayng This For Quite Some Time? -- February 22, 2016

UPI is reporting:

The expected decline in U.S. crude oil production boosted market sentiments of a return to balance, pushing crude oil prices sharply higher Monday.

The International Energy Agency said in a report published Monday it revised its total global output forecast lower. In a midterm market report, the IEA said 4.1 million barrels of oil will be added to the global market between now and 2021. That's significantly lower than the 11 million bpd added in the six-year period ending in 2015.

In the United States, which in part helped pushed markets toward the supply side, IEA said oil production reaches its peak of 14.2 million bpd by 2021, but short-term output fades through 2017 under pressure from low crude prices.

So many numbers, so many forecasts. Time will tell. It's data like this that catches my attention.

Tweeting now:  Global oil demand to cross "symbolic" 100 mil b/d mark by end of decade. For the record, US solar energy set an installation record in 2015. Rounding to the nearest tenth of a percent, solar electricity now accounts for 0.0% of all US electricity consumed.

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Smart Fone Fatigue

My Samsung clam shell appears to be back in vogue: http://www.ft.com/intl/cms/s/2/01ba2970-9e70-11e5-8ce1-f6219b685d74.html#axzz40vWhh2rM. 

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Daytona 500

Wow, I missed a great NASCAR race yesterday. I was at an international FINA Water Pole event.

56 seconds at the end:


2:18 minutes with commentary by Jeff Gordon (repeats the above):


Correct me if I'm wrong, but the commentators were talking about Hamlin in 4th position on the outside with two laps to go, and unlikely to be able to move up. Then Hamlin gets the "push" from #4 (Harvick) and moves to the front position with three wide: Kenseth on the outside, Hamlin in the middle, and Truex on the inside. Kenseth gets tapped, loses it/saves it but drops all the way back to 14th when the race ended. It's a Toyota - Toyota - Toyota top 3 finish, and then Harvick in a Chevrolet.

Why I Love To Blog, Reason #3 -- February 22, 2016

Updates

February 26, 2016: Bloomberg graphic -- collapse of the drilling industry in the US. For me, it's not the rig count, but the production data that is important. 

 

Original Post

 

Part of this was addressed on the long rambling note from Sunday, but I've discussed this for quite some time. In fact, I was just getting ready to do another post on whether rig counts matter in the Bakken any more but Don beat me to it by sending me this link, from Investor's Business Daily:

But U.S. oil output, though off peak levels, has held up remarkably well. That’s in large part because Continental Resources, Concho Resources and other shale producers are becoming, well, more productive with every well. They focused on the best wells, kept the best crews, while employing new technical advances and practices. They’ve also been able to squeeze suppliers and services firms such as Baker Hughes, Schlumberger and Halliburton.

• Bakken Shale new wells should produce 737 barrels per day in March, up from 558 bpd in March 2015. That’s a 32% increase — 88.5% vs. March 2014.
• Eagle Ford new wells are expected to generate 812 barrels per day in March, up from 665 bpd a year earlier. That’s a 22% jump.

But think about this. At the peak of the boom, operators were drilling/completing about 200 wells/month using upwards of 200 rigs and producing about 1,000,000 bopd.

Now, it looks like operators in the Bakken can drill about 100 wells each month with 30 rigs.

Think about that: at the height of the boom, operators drilled about 200 wells each month with 200 rigs.

Now they're drilling about 100 wells each month with only 30 rigs.

At the height of fracking, there was a backlog of about 240 wells that needed to be fracked. Now there are, by design, upwards of a 1,000 wells waiting to be fracked.

And these wells are sitting in the sweetest of sweet spots and with the halo effect are going to increase production from older wells.

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Here are some cherry-picked examples of how oil productivity is increasing in the Bakken. The first column is the name of the oil Bakken field; the second column is the November, 2015, oil/well for that oil field, and the third column is the December, 2015, oil/well. (Note: this is not statistically significant or meaningful; it is simply interesting. There are many other fields that showed a decrease in production/well. In addition, these are ALL wells; if we were simply comparing new wells in 2016 with new wells in 2013 the numbers would be even more remarkable):

Field	November  Oil/Well/Month	December  Oil/Well/Month
Antelope	5,842	6,004
Corral Creek	4,889	5,162
East Fork	4,357	5,167
Mandaree	3,587	4,645
Camel Butte	8,691	10,249
Pershing	4,674	6,792
Long Creek	7,781	8,311
North Tobacco	3,490	5,128
Tyrone	2,864	3,640

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From above:

Now, it looks like operators in the Bakken can drill about 100 wells each month with 30 rigs.

Think about that: at the height of the boom, operators drilled about 200 wells each month with 200 rigs.

Now they're drilling about 100 wells each month with only 30 rigs.

That data was taken from 1Q14 and 1Q15. Those were the number of wells coming off the confidential list in January, 2014, and January, 2015, so it would reference the number of wells drilled earlier, so it's not exactly exact. But exact enough for government use. LOL.

Whatever.

The immediate question is how can this be? Why would they only drill 200 wells with 200 rigs each month and drill 100 wells now with only 30 rigs.

Some quick reasons to explain this:

• there were many more operators drilling during the boom and they had their won "spread out" schedule (smaller operators with two rigs might only drill sporadically)
• even big operators drilled at their own pace
• resource constraints (trucks, manpower, electricity access -- yes, electricity hook-ups were a chokepoint for getting new wells on-line
• infrastructure has come a long way: there used to be long waits for material, sand, water; many wells were delayed simply because there were delays "completing the wells" for lack of sand, etc. 
• pads have been completed; all roads are in much better condition 
• flaring rules have been relaxed; takeaway capacity is not an issue
• weather / environmental conditions affect everything
• operators are getting better at drilling; geologists understand the middle Bakken a whole lot better
• the best-of-the-best drillers were kept; others were laid off during the slump 

There might be a bit of hyperbole involved with regard to the number of rigs; six months ago, the number of rigs were probably closer to 60 in number rather than 30, but the general points remain intact.

Monday, February 22, 2016; Update On Rocky Mountain CBR

Active rigs:

	2/22/2016	02/22/2015	02/22/2014	02/22/2013	02/22/2012
Active Rigs	39	127	187	183	203

RBN Energy: Update on Rockies CBR (archived).

According to the latest Energy Information Administration (EIA) monthly Drilling Productivity Report, crude production from the Niobrara shale in Colorado and Wyoming peaked at 491 Mb/d in April 2015 and is forecast to decline by ~100 Mb/d to 388 Mb/d through March 2016 – in response to falling crude prices and lower drilling activity. Meantime midstream companies are still building new pipeline capacity out of the region with the Saddlehorn and Grand Mesa projects set to add 350 Mb/d of takeaway capacity this year (2016). The pipeline build out has already caused a shift of crude shipments away from crude-by-rail (CBR) that peaked in December 2014. Yet as we describe today - rail terminals and infrastructure are still under construction in the region.

In Part 1 of this series we noted that CBR volumes are falling across the U.S. and Canada. The decline is mostly in response to narrower spreads between U.S. domestic crude benchmark West Texas Intermediate (WTI) and international equivalent Brent. The lower the spread between these two, the lower the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines.

When WTI was discounted to Brent by upwards of $25/Bbl in 2011 and 2012 because of congestion caused by a lack of pipeline capacity,  it made sense to use rail to get stranded crude to market. We described the resulting increase in U.S. CBR shipments from 33 Mb/d in January 2010 to a peak of 928 Mb/d in October 2014 (according to  EIA). As new pipelines have been built out to provide less expensive options to get stranded crude to market so the WTI discount has narrowed and CBR traffic has declined. After crude oil prices collapsed into the mid-$30s and Congress repealed regulations limiting U.S. crude exports in December 2015, WTI began to trade at a slight premium to Brent that averaged $0.26/Bbl in January 2016. Primarily in response to the narrowing spread - CBR volumes fell during 2015 but not as fast as you might expect – dropping only 20% between January and November 2015 (latest EIA data) even though the economics often made no sense.

As we discussed in Part 2 – looking at the epicenter of the CBR boom in North Dakota – the slower than expected decline in rail shipments is mostly because committed shippers and refiners continued to use rail infrastructure that they invested in and because some routes still do not have pipeline access. This time we look at CBR traffic out of the Niobrara shale region in the Rockies.

Note: it is my opinion that CBR is not dead. It is my opinion that the Sandpiper (Enbridge) and the Dakota Access (ETP) are both dead. We've seen that movie before (the Keystone XL) and these are simply the sequels. If Hillary Clinton is elected president, it will pretty much be the final nail in that coffin (or two coffins, as the case may be). 

A Reminder Of A Recently Added Link: ShaleProfile -- February 22, 2016

A reader reminded me of http://shaleprofile.com/. It's a lot of fun. And it's still the top link on my "Data Links" page, though that could change in the future.

When you get there, it might be tricky for first time user. If you want specific operator, specific formation, specific year, you must use the drop-down menus, and click on "ALL" to clear the board. Then click on what you want (operator, formation, year) and hit "Apply."

Then click outside the area to clear the drop-down menus.

Now, have fun moving the icon/arrow/cursor over the various fields in the Bakken.

Mideast On The Brink: Three New John Kemp Tweets -- February 22, 2016

Mideast on the brink is tracked here.

Tweeting now:

• NORTHERN THUNDER: Saudi Arabia plans military drill involving 150K troops and 300 aircraft with allies starting Friday
• Russian playbook is to use massive military manouevres to cloak mobilisation of forces for offensive operations
• Mass military manouevres will certainly ratchet up tension across the Middle East at the end of the week

One may want to take a look at this NewChina (xinhuanet.com) post:

Despite Saudi Arabia's official line that an upcoming massive military drill targets no third party or directed at any specific operation, analysts say that the primary aim of the maneuver is to tilt the balance in Syria and Yemen in its favor.

The drill, code-named "Ra'ad Al-Shamal" (Northern Thunder), is set to begin on Friday. The three-week event will bring together Gulf Arab countries as well as Jordan, Egypt, Sudan, Tunisia, Morocco, Mauritania, Djibouti, Comoros, Pakistan, Malaysia, Senegal, Chad, the Maldives and Mauritius.

The massive war games will involve some 150,000 troops, 300 aircraft, hundreds of tanks and other advanced weaponry, according to Saudi defense officials.

The Saudi state news agency said the drill would send a "a clear message" that the kingdom and its allies "stand united to confront all challenges and maintain peace and stability in the region."

Many regional observers and analysts believe that Saudi Arabia's decision to organize such massive war games is closely related to the situation in Syria and Yemen.

In Syria, government forces, backed by Russian airstrikes, have recently recaptured cities and towns in the north from Saudi-backed rebels. 

The only additional item of interest for me is whether the Saudis will fly their military aircraft after dark. 

For those who may be unaware: Russia and Saudi Arabia are long-time, historical rivals.

In addition, just as a reminder how bad things are going for the Saudis (who are no longer in control of their destiny), the Saudi oil minister will attend the annual IHS CERAWeek conference in Hoston this week. This is the first time he has attended this conference since 2009.

During his keynote on Tuesday at the annual IHS CERAWeek conference in Houston, Naimi will be addressing U.S. wildcatters and executives who are stuck in a zero sum game.

"OPEC, instead of cutting production, they increased production, and that's the predicament we're in right now," Bill Thomas, chief executive of EOG Resources Inc, one of the largest U.S. shale oil producers, told an industry conference last week, referring to 2015.

It will be Naimi's first public appearance in the United States since Saudi Arabia led the Organization of Petroleum Exporting Countries' shock decision in November 2014 to keep heavily pumping oil even though mounting oversupply was already sending prices into free-fall. 

Naimi has said this was not an attempt to target any specific countries or companies, merely an effort to protect the kingdom's market share against fast-growing, higher-cost producers. 

It just so happens that U.S. shale was the biggest new oil frontier in the world, with much higher costs than cheap Saudi crude that can be produced for a few dollars a barrel.

This all dovetails nicely with my posted commentary yesterday morning. 

Monday Morning, February 22, 2016

In that long post from the other day, one of the themes I explored was the suggestion that I did not think Saudi's rivals inside OPEC were its main concern. Today, in this tweet, there are suggestions that I was right on the mark, tweeting now:

• OPEC crude oil output capacity to rise by just 800,000 b/d over next 6 years, IEA says 

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Confidential Wells Reporting Today

Initial production for wells coming off the confidential list over the weekend, and today have been posted. Only one of the 11 wells coming off the confidential list had an IP (a CLR well in the Brooklyn oil field); there were nine (9) more DUCs.

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That Vanishing Economic Recovery

Like father, like son:

Talking Dust Bowl Blues, Woodie Guthrie


Motorcyle (The Significance of the Pickle) Song, Arlo Guthrie