Thursday, May 19, 2016

Speaking Of Thermometers -- May 19, 2016 -- Temperature At Grand Forks, ND, Dropped To 23 Degrees This Morning (Water Freezes At 32 Degrees)

I guess it depends where you put the thermometers when calculating the average global temperature. is reporting:
The temperature at the Grand Forks International Airport dropped to 23 degrees this morning, breaking its 1945 record of 24, according to the National Weather Service’s Grand Forks office.
The Friday low in Grand Forks dropped to 28 degrees, according to NWS, just shy of the 1945 record low of 25 but well below the average of 40.
The thermometer topped out at 46 degrees, according to NWS readings, below the average high of 67.
Snow fell sporadically throughout Friday morning and afternoon, though not enough for accumulation.
Meanwhile, Langdon, ND, reported a low of 19 degrees, the coldest temperature reported in the state. That was a possible record low, but NWS doesn’t keep records for many smaller communities, said meteorologist Vince Godon of the Grand Forks office.
Meanwhile, in India: 123.8 degrees Fahrenheit, somewhere in India; previous record, 123.08 degrees. According to the linked article, the heat will get worse over the next few days.

Sports Authority To Close All Stores
Update, May 19, 2016: Sports Authority will close all stores.

Job Watch

From advisorperspectives:
In the week ending May 14, the advance figure for seasonally adjusted initial claims was 278,000, a decrease of 16,000 from the previous week's unrevised level of 294,000. The 4-week moving average was 275,750, an increase of 7,500 from the previous week's unrevised average of 268,250.
GDPNow: May 17, 2016 -- 2.5%

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.5 percent on May 17, down from 2.8 percent on May 13.

The second-quarter forecast for real residential investment growth declined from 5.3 to 2.5 percent after this morning's housing starts release from the U.S. Census Bureau, the forecast for real consumer spending growth ticked down from 3.7 percent to 3.6 percent after this morning's Consumer Price Index release from the U.S. Bureau of Labor Statistics, and the forecast for the contribution of inventory investment to second-quarter growth declined from -0.24 percentage points to -0.39 percentage points after this morning's industrial production release from the Federal Reserve.

The latter decline was concentrated in motor vehicle and parts dealers' inventories.

Thursday, May 19, 2016

From the interview with Prime Minister Trudeau of Canada:
The prime minister, elected to a stunning majority in October, also said that while community consultation was vital, Aboriginal groups did not have a veto over pipeline development.  
Prime Ministers come and go, about every four to eight years. Aboriginals are called "aboriginals" for a reason.

DUCs Across The US

Rystad estimates 3,000 DUCs across the US.
  • Permian: 1,200
  • Eagle Ford: 1,000
    Bakken: 850
    Niobrara: 620
  • All else: 270
Nice graphic at the linked site.

Back to the Bakken

One well comes off the confidential list Friday:
  • 31787, SI/NC, XTO, Lund 21X-17F,  Siverston, no production data,
Six new permits:
  • Operator: Statoil
  • Fields: Alexander (McKenzie), Camp (McKenzie), Patent Gate (McKenzie), Poe (McKenzie)
  • Comments:
Oasis renewed seven (7) permits, seven Kjorstad permits in Williams County

Four (4) producing wells completed:
  • 29132, 863, Hess, BW-Erler-149-99-1522H-5, Cherry Creek, t5/16; cum --
  • 29967, 1,086, XTO, Odegaard State 31X-16G, Midway, t4/16; cum --
  • 31598, 336, Hess, EN-Cvancara-155-93-1522H-6, Alger, t5/16; cum --
  • 31599, 466, Hess, EN-Cvancara-155-93-1522H-5, Alger, t5/16; cum -- 
Active rigs:

Active Rigs2682191189209

OXY May Acquire Apache -- May 19, 2016


Later, 3:55 p.m. Central Time: sounds like someone screwed up, letting "the proverbial cat out of the bag." From The Street:
A representative for the website told Real Money they decided to pull down the story after Occidental denied the rumor.
(To be sure, Occidental told Reuters it had no knowledge of any pending transaction.)
A representative from Apache told Real Money that it does not comment on M&A rumors.
Meanwhile, Melissa Schoeb, a spokeswoman for Occidental, said the company has no knowledge of the Oil and Gas People report. This latest rumor lends some weight to talk of consolidation in the oil and gas space following nearly two years of low oil prices.
On Monday, for example, Range Resources announced plans to acquire Memorial Resource Development in a deal valued at $4.4 billion, inclusive of debt. Some have speculated that Royal Dutch Shell's solid earnings of late puts it in a strong financial position to make an acquisition. And Apache was approached by Anadarko Petroleum last November but ultimately rejected the offer to explore a tie-up.  
Original Post
Zacks is reporting that Apache may get acquired by Oxy. I don't know much about either, but the little I know suggests that this is not surprising.
The estimated deal value could be at least $25 billion.   
The source mentioned that the deal will be beneficial for both players as the combined entity would be a major energy firm. It is to be noted that the merged company will likely produce 1.1 million barrels of oil equivalent every day which is below 50% of the production of Chevron Corporation, one of the largest integrated energy companies in the world.
OXY is said to have denied knowledge of this story.

Some key statistics for OXY from Yahoo!Finance (numbers rounded):
  • enterprise value: $60 billion
  • debt: $8 billion
  • cash: $3 billion
  • operating cash flow: $3.5 billion
From wiki (numbers rounded):
  • US operations: 300,000 boepd, about 50% of its total global production 
    • 260,000 boepd from the Permian Basin
      • 145,000 boepd of that 260,000 boepd in the Permian Basin from CO2 EOR
Back in November, 2015, Anadarko had approached Apache about a possible merger.

I think if one wants to "understand" Apache, the best place to start is to read up on the Permian.

Notes to the Granddaughters

In this week's The New Yorker issue a Jonathan Franzen writes about "The End of the End of the World: an uncle's legacy and a journey to Antarctica." The caption to the artist's drawing of the Antarctic icebergs reads: "I had never before had the experience of beholding scenic beauty so dazzling that I couldn't process it, couldn't get it to register as something real."

Wow, did I "connect" with that. I immediately thought of my first day in Point Barrow, Alaska, decades ago. That, too, was so dazzling I could not process it. I wasn't smart enough then (or now) to phrase it quite that way, but Jonathan Franzen said it perfectly: "unable to process it." In addition to everything else, I also couldn't process the "midnight sun," watching the sun simply stay "hung" for 24 hours for a day or two.

On my bike, rarely, I have a dazzling experience, also, but it's always "olfactory." When big machinery is breaking new ground / turning (relatively) virgin prairie for a new development, the smell of the earth is incredible. It brings back memories that cannot be processed. The smell does not elicit a specific memory or "vision" but it elicits something visceral that overwhelms me -- at least for a few minutes.

I was going to keep a list of the various smells that affect me that much while riding -- freshly mown hay is another example -- but then I couldn't put a list together. It was too short. Maybe the ozone smell after a rainstorm. But after that it becomes difficult. A freshly bathed infant but that was years ago.

Speaking of biking and the smell of fresh earth: it is incredible how much development is occurring northwest, north, and northeast of DFW airport. One of my biking destinations is downtown Southlake, TX, which is exactly a five-mile bike ride one direction. The map below is very, very busy, but it gives you an idea how much activity is going on.

The big news is the new TD Ameritrade "campus" that will be going up soon. TD Ameritrade has outgrown its space in Fort Worth and needs to expand.

Other highlights on the map:
  • a ten-year, $17 million highway project to widen the 4-lane divided highway to a 6-lane highway
  • two new hotels: a Westin Hotel, and a Cambria Hotel and Suites
  • Granite Properties office building
  • a $65 million renovation project at The Vista at Solana business park
Grapevine, where we live, is south and east of Southlake. According to their publication released today, the city purchased a 185-acre tract of land in December, 2013. In a little over two years, the city has brought in new building and property investments of $100 million and over 500 jobs with $40 million annual payroll. Some highlights: Kubota Tractor Corporation moved its headquarters from California to Grapevine, TX; Mercedes Benz will build two facilities for their regional Parts Distribution Centers: one to support sales and distribution of spare parts; the other a Learning & Performance Center which is relocating from Houston, TX. 

I see Morley Safer died today, 84 years old. If I can reach his age, I have about 20 more great years of experiencing those smells that are impossible to process.

We're Getting Closer And Closer To That 10-Million Bbl Threshold -- May 19, 2016

I don't know, but if not, it seems very close:

... and this is despite the millions and millions of EVs being sold by MuskMelon.

With Iowa Likely To Keystone Another Bakken Pipeline, It's Time For NoDak Operators To Start Thinking Big -- May 19, 2016

I have to find the guy who said that when he was confronted with a problem he could not solve, he made it "bigger." A bigger problem, he thought, was easier to solve, and in the process would solve the original problem. [Later: yes, there it is -- that thought about making a problem bigger has been variously attributed to Einstein and to Eisenhower. I forget with whom I first associated it. I think it was Eisenhower.]

On another note, from an EIA tweet this morning:

Speaking Of Big Problems

I would normally be updating my notes on Nick Lane's The Vital Question now but I forgot my book either at home or at Sophia's house. I was reading it to her while we were relaxing on the pool deck last night.

The good news: when I couldn't find that book on the way out of the house this morning, I grabbed another book that had just arrived from Amazon: John Hands' 2015 Cosmo Sapiens: Human Evolution from the Origin of the Universe. 

This looks like it will complement nicely Nick Lane's book and Lawrence Krauss' 2001 Atom: An Odyssey From The Big Bang To Life On Earth ... And Beyond.

The two big problems that had to be solved with regard to evolution of life:
  • information transfer 
  • energy
Watson and Crick and DNA sucked out all the oxygen in the room, and probably delayed work on the "energy" question. But now, some fifty (seventy?) years later, researchers are starting to get a handle on the energy question.

Wow, I can't wait until Sophia is old enough to start talking about biology and chemistry. I think I will start with her by having her draw "pictures" of atoms. LOL. She's pretty good at drawing circles so drawing atoms should not be that difficult.

On another note, we had a wonderful evening last night. The city where we reside had a special art exhibit reception featuring artwork from elementary, middle school, and high school students. The artwork at the convention center/visitors bureau will be on display for ten days.

Each art teacher in the area were limited to a very limited number of pieces to exhibit. In her fourth grade class (three classrooms) our middle granddaughter was one of only five students to have one of her paintings selected. I spoke with her art teacher at the reception last night. He was about 29 years old; very, very good looking; slim, athletic; a long-term resident of north Texas; first year at this particular school; and needless to say, very, very well appreciated.

He said he did not look at the names of the student artist when making his selections. At the end, he came down to two choices in front of him. Out of curiosity he looked to see who had painted the two pieces. One was an "incredibly good portrait"; the other was something one might see in a museum of modern art. He chose the latter.

Our middle granddaughter did not know what had been selected until she saw it last night. She was quite surprised: she said that the piece he selected was just some doodling. LOL. The art teacher said he chose it because portraits at this age and at these types of exhibitions are fairly common. He was looking for something with more imagination, something that seemed to "stretch" the artist's imagination.

We spoke about that when I took her to school this morning. She was not at all aware of the back story. I told her that it reminded me of a story about an art exhibit she would not have known about. I mentioned the first exhibit of Monet's paintings and how they had been rejected at first. She said she knew all about that story and impressionism. LOL. Fourth grade. Wow.

Looks Like Iowa Will Keystone The Dakota Access Pipeline -- May 19, 2016

Iowa utilities regulators have declined to act quickly on a request to allow a Texas company to begin construction on an oil pipeline across Iowa. Reporting almost everywhere, but here is the FuelFix link:
Iowa utilities regulators have declined to act quickly on a request to allow a Texas company to begin construction on an oil pipeline across Iowa.
Dakota Access had asked the Iowa Utilities Board to start Tuesday on the 1,150-mile pipeline that will carry a half-million barrels of oil a day from northwest North Dakota across South Dakota, Iowa and into south-central Illinois.
Construction begins this week in the other states and the Dallas-based company says it must start in Iowa now or risk running into winter and another farm planting season.
This essentially gives organizers a full year to gain momentum to keystone the pipeline.  Iowa farmland is worth an incredible amount/acre. Community organizers only have to alarm farmers that the value of their land could plummet if affected by an oil pipeline break.

A half-million bopd? That represents about 50% of current North Dakota production and would be the final nail in the CBR coffin. It doesn't take a rocket scientist to figure out who is watching this development closely.

Other than affecting a few thousand jobs and one company, it will have no material affect on the Bakken or CO2 emissions.

Random Look At Two EOG Wells In Clarks Creek -- May 19, 2016

See also this post:

Some background to this EOG well:
  • 22486, 2,421, EOG, Hawkeye 100-2501H, Clarks Creek, 47 stages, 14 million lbs, Three Forks; 1920-acre spacing; t9/12; cum 702K 3/16; only 22 days 3/16:
That's pretty impressive. Think about this -- this was back in 2012 --
  • a three-mile long lateral (about as rare as hen's teeth in the Bakken)
  • 1920-acre spacing when norm was 1280-acre; and EOG doing mostly 640-acre spacing in the Parshall oil field
  • 47 stages back in 2012 when 24 stages or less was probably the norm
  • almost 14 million lbs of proppant (13,952,857 lbs, to be exact) at a time when most were probably using about 4 million lbs of proppant; earlier, the standard was maybe a million lbs
  • a Three Forks well
From the file report:

Sundry form received April 25, 2016: EOG expects to take this well off-line on/about March 21, 2016, through May, 2016, due to completion operations in the area. Offset frack on the West Clark 1 SWSW pad began on April 7, 2016; expect to conclude near the end of May. On a separate note, due to a casing repair necessary on the West Clark 105-0136H, EOG requested a 14-day extension to the 60-day shut-in lease stipulation.

March 18, 2016: upcoming activity in an adjoining section -- EOG drilled four horizontal wells within the SW half of section 1-151-95. The laterals of the wells drilled in section 1-151-95 are within 700 feet of the referenced well bore (this well). EOG planned to commence completion operations o/a March 5, 2016, and estimated 21 days to completed. Then this: the additional time required is needed to build reservoir pressure in order to support clean out of the 3-mile long lateral.

I assume the reference to "four horizontal wells within the SW half of section 1-151-95" has to refer to wells on the 15-well pad, though I could be wrong. I'm not sure why they would say "upcoming activity in an adjoining section, unless they mean that because #22486 originated in a section to the north, section 1-151-95 was the adjoining section.

#22486 sits on a 6-well pad:

The sister well that was completed about the same time:
  • 22487, 67, EOG, Hawkeye 02-2501H, Clarks Creek, middle Bakken, 69 stages, 27 million lbs, stimulated 11/17/13; trip gas as high as 5,657 units, t12/13; cum 620K 3/16; only 22 days in 3/16;

Thermometers -- May 19, 2016


May 20, 2016: from a reader, more specific bankruptcy notes with regard to North Dakota --
Many operators who file bankruptcy are in arrears on royalty payments. A new law goes into effect at the end of February in North Dakota that allows a royalty holder to file a security lien when the royalty has not been paid when due. The royalty owner must file the lien with the state and record the lien in the county where the well is located within 90 days of production to have a lien. With good records and timely filing and recording, mineral interest owners can gain a secured position in a bankruptcy proceeding. This greatly increases a royalty holder’s chances of a full recovery because secured creditors are paid before unsecured creditors.
May 20, 2016: from a reader, this link regarding royalties and bankruptcies --

From the linked article, which seems very, very good and is worth looking at -- 
E. How Does This Affect my Royalties?
Because Texas royalty owners may have a secured claim to sales proceeds, and because of the possibility of terminating the lease if it is worded properly, the effect on royalty payments is often not as large as many would fear. Particularly in a Chapter 11, the operator usually quickly gets permission from the court to continue to pay royalty owners during the bankruptcy.
However, there is no one-size-fits-all outcome on royalty payments, and it can vary from a complete stop of payments, if they have not stopped already, to proportional payments, to full payments.
The payment for any royalties overdue at the time the bankruptcy is filed are considered claims against the bankruptcy estate, and may take a substantial amount of time to collect, if at all. If your operator has stopped paying royalties and eventually files a voluntary Chapter 7, your chance of getting 100 cents on the dollar is poor.
May 20, 2016: from -- 
Halcon Resources Corp announced yesterday that it is filing for Chapter 11 bankruptcy protection as part of a restructuring agreement with creditors—a move that could wipe out $1.8 billion, or 65 percent, of its debt and $222 million of preferred stock equity.
The agreement would also reduce Halcon’s ongoing annual interest burden by more than $200 million. The shareholders affected by the restructuring include those holding 3rd Lien Notes due 2022, Senior Notes due 2020, Senior Notes due 2021, Senior Notes due 2022, Convertible Notes due 2020, and Perpetual Convertible Preferred Stock.
The affected stakeholder would then receive shares of common stock, warrants, and/or cash.
Halcon is expected to operate as usual during the restructuring process, and pay all suppliers and vendors in full for goods and services provided.

Later, 2:45 p.m. Central Time: see comments. Folks are asking how the Halcon bankruptcy will affect royalty payments.
Original Post
I was going to do a post on thermometers. I haven't gotten around to it, but if I find some time, I might do just that.

I'm trying to sort out the "thermometers" in the Bakken.

Halcon might be one. I was thinking about that the other day and now this headline today: Halcon reaches pact with creditors on prepackaged bankruptcy plan. The plan would wipe out $1.8 billion in debt and help it survive the drop in crude prices.
The bankruptcy marks a setback to Halcón Chief Executive Floyd Wilson's long-running goal to build and then sell the company to the highest bidder, a plan that mimicked Wilson's 2011 sale of Petrohawk to BHP Billiton for more than $12 billion at a 65 percent premium to its shares.
Yet almost from the beginning, Halcón was saddled by high costs and high debt, despite having some quality acreage. Indeed, the value of Halcón's holdings in North Dakota's Bakken shale formation have long eclipsed the market value of the company.
Halcón's restructuring plan will eliminate about $222 million of preferred equity, and reduce the company's annual interest payments by more than $200 million. 
Another "thermometer" might be EOG.

Egyptian Commercial Airliner, 66 On Board, Crashes; May 19, 2016

Commercial Egyptian airliner, 66 on board, crashes over Mediterranean Sea -- about 3 hours 20 minutes into 4-hour flight. Headline: "swerved and plunged." [Later: "terrorism suspected."] Those long US TSA lines? DFW hit by "TSA flu."

Question of the day: if the raise President Obama just gave mid-level managers across the US is such a great deal, why did he wait seven years to do it?

Wal-Mart profit, revenue beat expectations; US sales up more than expected. Shares rose more than 9% in pre-market trading. Is Wal-Mart profiting at Target's expense? Target points to weakening sales; retailer says decline due to consumer caution and wet weather in latest quarter. Anecdotally this seems to be one of the wetter springs we've had in north Texas. Pouring rain today means they aren't pouring cement.

Retail Gap open to selling on Amazon; to ignore rise of Web-based rival would be delusional -- CEO.
  • Later, May 20, 2016: Gap to close 75 stores.

All that talk about Apple's commitment to "high-end" phones? Microsoft apparently agrees. Microsoft will unload its low-end phone business acquired from Nokia.

Price of gasoline, all things being equal, won't be going down. President Obama's EPA ready to propose increased mandates for ethanol-laced gasoline.

That oil glut / rebalancing discussion? Not so fast. Crude oil futures, the "WTI crawler," down over 2%. Otherwise futures show a flat market; oil down 2.5%. Oil said to be down talk of Fed talk to raise "rates." "Oil outages" not living up to hype. [Later: this article pops up -- Total CEO: oil demand is strong, but year-end is too early for re-balancing.]

National polls: Trump, 42%; Clinton, 37%. Las Vegas DEM convention will be "must-see" TV. In politics, like sports, it's all about mojo, the trend, peaking too soon. 

Back to the Bakken

Active rigs:

Active Rigs2682191189209

RBN Energy: market impact of 2016 Northeast natural gas production trends.