Friday, December 2, 2016

4Q16 GDP Forecast: 2.9% -- GDP Now -- December 2, 2016

GDP NowLatest 4Q16 forecast: 2.9 percent — December 1, 2016.
The GDPNow model forecast for real GDP growth in the fourth quarter of 2016 is 2.9 percent on December 1, up from 2.4 percent on November 30.
After this morning's construction spending report from the U.S. Census Bureau, the forecasts of fourth-quarter real residential investment growth and real government spending growth increased from 7.1 percent to 12.4 percent and 0.1 to 0.6 percent, respectively.
The forecast of real nonresidential structures investment growth fell from 1.4 percent to -3.4 percent after the same report. The forecasts of real consumer spending growth and real nonresidential equipment investment growth increased from 2.2 percent to 2.5 percent and 4.6 to 6.6 percent, respectively, after this morning's Manufacturing ISM Report on Business from the Institute of Supply Management and the incorporation of earlier released November data in the model's estimate of its dynamic economic activity factor. The factor is used to forecast yet-to-be released monthly source data for GDP.
US Crude Oil Imports From Saudi Arabia Have Hardly Changed

The average amount of US crude oil imports from Saudi Arabia in the month of September = 1.269 million bopd. [Ten-year average 2006 - 2015, inclusive.] Source.

September, 2016: 1.209 million bopd.

Week 48: November 27, 2016 -- December December 3, 2016

Top story of the past week? North Dakota was named to the number one spot on Fast magazine's list of states with the best business prospect in 2017. If Bakken 2.0 hits its stride by June, 2017, there is no question in my mind that North Dakota will see activity that has not been seen in years. Goldman Sachs supply-demand graph. There are three likely "bands":
  • $45 - $55 oil, 75% likelihood: slight increase in activity
  • $56 - $65 oil, 20% likelihood: significant increase in activity
  • trending toward $75 oil, 5% likelihood: a second Bakken boom
Possibly that was the top story of the week, but for me, this was unquestionably the top story of the week: the report that the breakeven costs in the Bakken a) compare favorably with those in the Mideast; and, b) the Bakken has some of the lowest break even costs among the various unconventional oil plays in the US.

Internationally, of course, was the story that OPEC agreed to a production cut/freeze for the first time in eight years.

Active rigs jump to 40 in North Dakota
Crescent Point Energy reports a 70-stage fracked well
Crude oil production in North Dakota for September, 2016
Bakken crude oil receiving terminal proposed for Washington State 

Fracking sand 101

North Dakota borrows another $7 million for DAPL-related security costs
US Army Corps of Engineers closes protest camp -- but won't enforce 
Another pipeline expansion proposed for the Bakken

WHS Wind Ensemble names the 2016 - 2017 Governor's Band
BHI will build a new fracking and cementing services company with BJ Services name 
US stock market: the Trump rally; the OPEC rally
Winter storm Blanche hammers North Dakota
Saudi Arabia and the Red Queen
US LNG exports continue to surge

North Dakota -- #1 On The Business Prospect List -- Fast Magazine -- December 2, 2016

This is quite interesting. I don't know if folks are acquainted with Fast magazine -- a very legitimate, credible magazine. For North Dakota to be on the short list, much less #1, that's quite impressive. From the Williston Herald linked via a tweet:
Although oil prices plunged from $100 a barrel to $40 two years ago, studies have continued to predict a positive economic outlook for North Dakota. 
A recent study conducted by Fast Company, a business magazine that focuses on technology, business and design, ranked North Dakota No. 1 for best economic prospects for 2017.
This is the Fast magazine story, posted three days ago. Based on data from:
  • Bureau of Labor Statistics;
  • the Bureau of Economic Analysis;
  • the Kauffman startup Index; and, 
  • Zillow
The top ten states with best economic prospects for 2017:
  • North Dakota at #1
  • Oklahoma
  • Texas
  • Michigan
  • California
  • Montana
  • Ohio
  • Washington
  • Minnesota
  • Massachusetts
NDIC Daily Activity Report

Active rigs:

Active Rigs3964189192182

Four (4) producing wells (DUCs) reported as being completed:
  • 26974, 1,269, Kostelnak 145-97-29B-32-2H, Little Knife, t11/16; cum --
  • 30432, 2,563, Statoil, Jack 21-16 2H, East Fork, t11/16; cum 4K over first 31 days;
  • 31867, 1,079, CLR, Nashville 5-21H, Catwalk, t11/16; cum --
  • 31868, 607, CLR, Nashville 4-21H1, Catwalk, t11/16; cum --
And that's all there was.


Christmas Toy Donations -- December 2, 2016

Sophia is now 2.5 years old. She knows how to use a cell phone. She can make phone calls -- although the calls are pretty random. She can find the photo app on an iPad and swipe through the photos. On YouTube she can point to the video she wants to watch.

Hold that thought.

The manager in our apartment complex does the usual "Christmas toy" thing every year -- inviting residents to bring in a toy or two that can be donated to various organizations at Christmas. This year I had Sophia help me. I simple went to Amazon and then "brought down" a page of toys for boys and/or girls in various age ranges, and then I had Sophia point to the one(s) she would like. If the toy was within my price range, I placed it in the "cart." After we filled the electronic cart, I pushed a few more buttons, and with Prime, the toys will be here in two days and in the manager's office in three.

Easy as 1-2-3.

WHS Wind Ensemble Named The 2016 - 2017 Governor's Official State Band -- December 2, 2016

From The Williston Wire:
Gov. Jack Dalrymple has announced that the Williston High School Wind Ensemble and the Sheyenne High School Concert Choir have been selected to serve as the 2016-2017 Governor's Official State Band and Chorus.
"Congratulations to the Williston High School Wind Ensemble and the Sheyenne High School Concert Choir for being named this year's Governor's Official Band and Chorus," Dalrymple said.
"These are two very accomplished organizations and they will represent North Dakota with pride and enthusiasm." The WHS Wind Ensemble is directed by Eric Rooke.
Perhaps the WHS wind ensemble will be in Washingon, DC, when the ND governor submits the state's single ballot for president (in an election in which no one garners 270 electoral votes, each state will get one vote; that vote will be submitted by the "leader" of the state delegation). 

Record Snowfall In The Dakotas

It's not often that both North and South Dakota make the IceAgeNow news but they did today: record snowfall

Send in the Kennedy grandchildren.

Possible Halo Effect Of An EOG Well Recently Brought Back On Line -- December 2, 2016

Check later:

Start before 25005; 25005; 25006; 25007; 25008; 25009; 25010; 25011; 25012; 25016; 25033; 25034; start with 25035. 


December 17, 2016: this is a very interesting subject. I've long wondered how far out -- radially -- fracking is effective. The payzones in the Bakken are very thin -- 50 to 80 feet -- so I'm not going to worry about horizontals separated vertically. I'm simply concentrating, for now, on horizontal wells in the same payzone (generally the middle Bakken).

When the Bakken boom began a lot of folks were to led to believe or believed for some reason that the Bakken would "average" about one well per section. Based on some early CLR wells, it was clear to me that there would be multiple wells in each section and I blogged about that early on. I was the first one to talk about that on a blog on a regular and a frequent basis.

As the horizontals increased in number in one section, the question naturally arose, how close can a horizontal be drilled without impacting a neighboring horizontal. A section is 5,280 feet x 5,280 feet. Generally speaking, we are now seeing spacing of six horizontals across one section/one payzone which works out to about 800 feet separation.

So, let's say the separation gets down to 500 feet between horizontal wells (again, horizontally, not vertically). If the data confirms that if a new frack has no effect on an older well 500 feet away -- again, no effect -- then the question naturally arises: can the horizontal separation between horizontals be decreased further.

Caveat: higher intensity fracking became more common in 2016. One would assume that would extend the radial efficacy of fracking.

More rambling: it's important to remember proved reserves are based on potential for economic recovery. One begins to wonder if high-intensity fracking might increase/expand the number of "sweet" spots in the Bakken, if that makes sense. We're already seeing that in stories about the Permian: that better technology / improved completions have increased the inventory of future drilling sites for companies operating in the Permian.

To me this is very confusing. I have two problems: I have trouble understanding it, or conceptualizing it; and, I have trouble articulating it. For now, all I can do is wait and watch, or is it, watch and wait?

December 16, 2016: from a reader with regard to the halo effect:
You are the only one pushing the "halo effect" narrative.  It is probably just pressure buildup from the well being off line.  Would get the same effect even if no nearby frack, just gave the well a rest and brought it back on line.  Easy to test. 

Go look at what happens when CLR brings wells back on line from shut in (with no nearby drilling).  Bet you see a "halo effect" there also.  Which just means there is no such thing as halo effect.  Bashing the nearby well doesn't make the existing well produce better.  All you see is a temporary blip up from shutin in during completions. 

It's crazy to think there is some super secret halo effect that companies don't talk about, but Bruce Oksol has detected.  After all there are all kinds of companies touting their advances in proppants and other aspects of well design.  If there were a halo effect, we would hear it on the investor calls.  And service companies would spread the knowledge all over the place.

How many times must you be told this?  The answer, my friend, is blowing in the wind.
Later, 4:06 p.m. Central Time: I have added this to my FAQ list, #81, following a comment from a reader  --
81. What do you mean by "halo effect" when neighboring wells are fracked? When existing, neighboring wells are very, very close to new wells that are being fracked in the same formation, common sense suggests that some of the "new" fracking might extend to the older, existing wells.
In fact, there are numerous examples in which an existing well shows increased production after a neighboring well is fracked.
However, I have always had a concern that the increased production is simply a result of increased pressure building up while the existing well is taken off-line during the fracking of the neighboring well.
Once the older well is brought back on line the increased production is simply due to pressure that has built up and once the well has been back on line for a few months, production returns to what it would have been regardless.
That's why I call it the "halo effect" -- it is very likely that it is simply a build-up in pressure and has nothing to do with the fracking of the neighboring well per se. So, for now, the "halo effect" is simply an observation and I am not making any conclusion why it is happening. But yes, my initial enthusiasm regarding the "halo effect" and what I originally implied, may be (and is likely to be) completely wrong, and due more to my inappropriate exuberance about the Bakken than a rational explanation.
Regardless of the reason for the "halo effect," it will often result in increased "mailbox money" for a few months (all things being equal) when the well is brought back on line, but don't expect it to necessarily continue forever.

Original Post
I will come back to this one later. It shows the halo effect of fracking, I believe:
  • 16795, 1,519, EOG, Austin 4-09H, Parshall, open hole frack, 2.6 million lbs; t12/07; cum 656K 10/16; API: 33-061-00570;
Monthly Production Data

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Screenshot of the area under discussion:

Random Update Of An EOG Well Brought Back On Status -- December 2, 1016

This is the well that was taken off-line for quite some time while EOG fracked wells in the immediate area. The well went back on status in early 2016. Over the next few months, we will see the results of this well and area wells. I don't see any evidence of any halo effect.
  • 17011, 1,663, EOG, Parshall 4-20H, t7/08; cum 431K 5/17; IA as of 5/14; shut in while EOG executes a downspacing and infill drilling program; dated August, 2014; active as of 3/16;
Of interest: it looks like an open hole frack with 1.8 million lbs proppant; no record of the frack at FracFocus.

Of interest: of the newer wells that have been fracked and the date reported, note the number of high-intensity wells.

Monthly Production Data since 2/14:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Screenshot of the area under discussion:

The section in which #17011 is sited is part of three different sized-drilling units: a 640-acre unit; a 1280-acre unit; and a 2560-acre unit. In time, it will also be part of a 5120-acre unit.

There are no less than thirteen (13) horizontal wells that are in this section, in part or whole:
  • 28404, TATD, EOG, Parshall 31-1820H, producing as of 1/17; still on confidential;
  • 28402, TATD, EOG, Parshall 30-1820H, producing as of 1/17; still on confidential;
  • 27391, TATD, EOG, Parshall 68-1820H, producing as of 1/17; still on confidential;
  • 28401, 1,611, EOG, Parshall 153-1820H, Parshall, t1/17; cum 57K 5/17;
  • 27390, 918, EOG, Parshall 69-1820H, Parshall, t1/17; cum 81K 5/17;
  • 27445, 766, EOG, Parshall 158-20H, Parshall, t1/17; cum 54K 5/17;
  • 27444, 335, EOG, Parshall 78-20H, Parshall, t1/17; cum 22K 5/17;
  • 17011, 1,663, EOG, Parshall 4-20H, one section, t8/08; cum 431K 5/17; API 33-061-00635;
  • 28602, 1,031, EOG, Parshall 154-1721H, 44 stages,  8.9 million lbs, t2/15; cum 247K 5/17;
  • 28603, 942, EOG, Parshall 99-1721H, 53 stages, 12 million lbs, t12/14; cum 157K 5/17;
  • 27123, 1,083, EOG, Parshall 42-2117H, 44 stages, 11.3 million lbs, t2/15; cum 337K 5/17;
  • 28014, 221, EOG, Parshall 67-2117H, 45 stages, 11.4 million lbs, t2/15; cum 110K 5/17;
  • 27124, 1,053, EOG, Parshall 43-2117H, 28 stages, 5.7 million lbs, t2/15; cum 147K 5/17;

Sunni Caliphate's Footprint Continues To Shrink -- December 2, 2016

I track the Sunni caliphate (aka ISIS, aka ISIL, aka IS, aka EIEIO) at this post.

In today's Wall Street Journal there's an update of sorts. I don't think the update is all-encompassing as the articles I want to post at the link above. I'm trying to keep things on that page to a minimum; otherwise there will be too many balls to juggle and I will the bubble (mixing metaphors).

But the WSJ has a neat map and a neat update of where "we" are in the Mideast with regard to ISIS, so it's worth capturing to at least some degree.

The map:

Custer's Trial: A Life o the Frontier of a New America
T. J. Stiles (winner of the Pulitzer Prize)
c. 2015

Not quite ready for this. Seems a bit tedious. There are no reviews of this book over at

Random Update Of ONEOK -- December 2, 2016

ONEOK was a big name in the Bakken, early on. I track it here. I haven't updated ONEOK in a long time. Now this, from Zacks:
Shares of ONEOK Inc. OKE scaled a new 52-week high of $56.00 on Dec 1, before closing at $54.42. Over the past 52 weeks, ONEOK Inc.’s shares have ranged from a low of $18.84 on Dec 18, 2015 to a high of $56.00 on Dec 1, 2016. The average volume of shares traded over the last three months is approximately 1.9 million.
One year ago, ONEOK trading under $20.

Now, ONEOK trading at $55. 

$12 Coffee? November Unemployment Rate "Tumbles" To 4.6% -- Yahoo!Finance -- December 2, 2016

The magic numbers:
First time claims, unemployment benefits: 400,000 (> 400,000: economic stagnation)
New jobs: 200,000 (< 200,000 new jobs: economic stagnation)
Economists estimate the labor market needs to create about 125,000 jobs a month to keep the unemployment rate steady, though estimates vary -- Reuters.
Today's November, 2016, numbers:
  • new jobs: 178,000
  • forecast: 180,000
  • hoping for: 200,000
  • unemployment rate ticks down to 4.6% (Yahoo!Finance says the rate "tumbled"; says the number of jobs added was a "tad lighter" than forecast)
How did the market react to that news? Meh. No change. Dow 30 futures still down about 30 points.

Starbucks CEO To Focus On High-End Coffee Shops

From The Wall Street Journal:
Howard Schultz is stepping down as chief executive of Starbucks Corp. to lead an effort at the company to build high-end coffee shops that will charge as much as $12 a cup, his next attempt to revolutionize the way Americans consume coffee.
This simply tells me how much money is floating around the US.  A lot of people have a lot of money. There are a lot of six-figure income folks that don't want to sit and drink coffee with teen-agers.
Starbucks’s move toward high-end coffee, a project referred to internally as “Siren Works”—after the mythological creature in the coffee chain’s logo—is aimed at refreshing its brand, which has been facing increasing competition from specialty roasters such as Stumptown and Intelligentsia, as well as from mass coffee purveyors like Dunkin’ Donuts, which has been introducing more drinks such as cold-brewed coffee.

Oilman For SecState? Political Page -- December 2, 2016

Add to the list of those Donald Trump may be considering for Secretary of State: Rex Tillerson, CEO of Exxon Mobil.

If this is true, this sends a huge statement. Presidents Bush and Obama were interested in globalization and nation-building. Think SecState Hillary Clinton and John Kerry.

From the linked article:
The company has numerous partnerships with Rosneft, Russia’s state-owned oil company, and has lost more than $1 billion due to the sanctions the United States imposed on Russia, according to RT, a Russian state-owned news service.
Now, could we have an oilman in as SecState?

Harry Reid and Nancy Pelosi Cannot Complain

Good, bad, or indifferent, Trump takes a page from the Democratic playbook: the bully threatens US corporations with consequences if they relocate "off-shore."

Okay, let's be honest. When the Obama administration or members of his party threatened this, I was upset.

With Trump, not. He was very, very open about making America great again. The difference between President Obama and a future President Trump is the way each would go about doing that. Huge difference. With Trump there will be carrots and sticks. With Obama, it was all sticks.

DOE Approves Another LNG Export Terminal, Port Charles, Louisiana -- It Never Quits -- December 2, 2016

Data points:
  • Magnolia project
  • the project: 
    • a four-train LNG export terminal at the Port of Lake Charles
    • capacity: at least 8 million tonnes/year
    • will use the company's proprietary OSMR process technology
  • natural gas will arrive via the Kinder Morgan Louisiana Pipeline; 20-year deal
  • KBR is leading a joint-venture team with SKE&C for engineering, procurement, construction
  • project developer: Liquefied Natural Gas Limited (LNGL)
  • US DOE grants authorization for a proposed LNG terminal in Lake Charles, LA
  • will be allowed to export LNG to countries with which the US has not entered into a free trade agreement
See RBN Energy's list here. From that link/post:
  • LNG Ltd: has proposed the development of the Magnolia LNG project; as many as four 2-MTPA liquefaction plants, near Lake Charles

Reason #75 Why I Love To Blog -- December 2, 2016

Before reading the post below, if you haven't seen the earlier post on breakeven costs in the Bakken compared to the rest of US shale and the Mideast, go to that post, and then consider those numbers in light of the projections below. Just saying.

The Post

Earlier this morning I posted the link to Filloon's Bakken update. His final words: WTI still has room to run.
The short squeeze continues, and institutional dollars will begin to roll into energy names over the last two weeks of this month
Not less than fifteen (15) minutes later, I see this headline over at Rigzone: OPEC crude cut could push oil to $75 per bbl in 2017.

The story was actually posted last night but I general wait until the next morning to look at the Rigzone articles. In this case, I'm glad I did.

From the linked Rigzone article:
The International Energy Agency has estimated that as a group, OPEC currently produces 33.8 MMbpd. In the September meeting in Algiers, the cartel said member nations would target dropping that volume between 32.5 MMbpd and 33 MMbpd.

Designed to boost the oil market’s recovery, the production drop will “accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward,” OPEC said in a statement Nov. 30.

World oil demand is expected to grow by about 1.2 MMbpd this year and in 2017. OPEC said that underscores that a market rebalancing is underway, but both Organization for Economic Co-operation and Development (OECD) and non-OECD inventories remain well above average. Given the inventory overhang, a lack of investment in 2016 and 2016, as well as massive industry layoffs, OPEC said it’s vital that stock levels are brought down.
Looking Past 2017

Shale production to grow, offshore production to decline starting in 2018 -- Rigzone

But then in that same article:
With the announced OPEC production cut Wednesday, Rystad Energy expects global liquid production to remain at current levels into next year.
At the same time, demand is expected to grow by around 1.3 million barrels per day.
This means that the large amount of stored oil will decline considerably in 2017.

The Frack Spread -- Value Of NGLs Vs Natural Gas -- RBN Energy -- December 2, 2016

Mountains out of ant hills: $7,000,000. Over ten years. One thousand jobs.  $7,000/worker. $700/worker/year. $1.92/worker/day. Yup, that's the "corporate welfare," as many call it, that Carrier got. The state of Indiana is going to get significantly more back from each of those workers than $700/worker/year. The average family pays $1,530 in Indiana income taxes An employed worker will not be collecting welfare. And that's just the beginning. And someone not losing his/her job is priceless.

Active rigs:

Active Rigs3964189192182

RBN Energy: The frack spread remains painfully low, but help is on the way.
The frac spread—the difference between the value of a typical basket of NGLs and the price of natural gas, in $/MMBtu—has averaged a paltry $2.28 for the past two years, by far the longest period of depressed NGL values since the start of the Shale Revolution. That’s bad news for natural gas processing economics, which are most favorable when NGL prices are strong and natural gas prices are weak. But things are about to get a lot better. Today we consider the currently low frac spread, what it means for natural gas producers and processors, and why a big turnaround may be in the offing.
The frac spread (short for “fractionation spread”) and its kissing cousin, the NGL-to-crude ratio, have been frequent topics in the RBN blogosphere, and for good reason. From the beginning, an underlying principal of RBN’s analysis of drill bit hydrocarbons (gas and liquids produced at the wellhead) has been our belief that the relationships between crude oil, natural gas and natural gas liquids (NGLs) have become far more important in the Shale Era than they were a generation ago. Now, what happens in oil markets impacts gas and NGL markets, and vice versa.
The NGL-to-crude ratio is a weighted average of OPIS/Mont Belvieu NGL prices divided by CME/NYMEX front month crude oil futures. The NGL mix that we use to calculate the ratio is 42% ethane, 28% propane, 11% normal butane, 6% isobutane, and 13% natural gasoline.
For many years the NGL-to-crude ratio averaged about 60%, staying within a 50%-to-70% range most of the time, and rising to a frothy 76% in September 2011.
But, as we’ve discussed often, rapidly growing natural gas production and increasingly oversupplied market conditions depressed natural gas prices in the early days of the Shale Revolution, which gave producers the incentive to shift their attention and resources toward “wet” gas shale areas that produced significant volumes of NGLs. The resulting NGL supply growth crushed NGL prices, which pushed the NGL-to-crude ratio down to a new plateau: since 2012 the ratio has averaged just over 40%, and even the collapse in oil prices since mid-2014 hasn’t changed the ratio much. (As of November 30, 2016, with NGL prices up in sympathy with the new OPEC deal, it stood at just 45.4%.)
The Market

On a day in which the market is down -- one of the very few down days in the Trump rally -- and a trivial day at that, down only 30-some points, how many new highs, new lows? NYSE:
  • new highs, 76: BHI, HP, UPS,
  • new lows, 66

Bakken Update: The Saudi Big Short Squeeze -- Filloon -- December 2, 2016

Over at SeekingAlpha. Summary:
  • Since the OPEC Algiers meeting in September, it has been manipulating oil prices to its advantage
  • The OPEC cut isn't the issue as it caused oil prices to increase so operators would hedge then pushed prices down to create a larger move after its cut
  • There is no organization to provide oversight to OPEC and even if there was the world feels comfortable with OPEC moves to manipulate prices
  • The new Saudi Petroleum Minister has changed how it looks at oil prices and will continue to do anything with in its means to inflate prices 
From the article:
OPEC despises market manipulations with a negative effect on prices.
Oil hedging helped to keep the frac'ers in business when oil prices pulled back. This was part of the reason OPEC was wrong about the effectiveness of flooding the market. It believes the US effects oil prices in a negatively. It blames unconventional US production for today's low prices. Some of this is true, and there is no doubt it has a point, but OPEC has a motive for punishing the US oil industry.
In September, OPEC agreed in principle at a meeting in Algiers to reduce output for the first time since the 2008 financial crisis. Although the details were not released, it was strung out until December. This is important, because the initial announcement pushed oil prices to $52. US E&Ps added significant hedges as seen earlier. We didn't know there was a deal until Wednesday's Vienna meeting. The time between release provided an excellent opportunity for OPEC. The release of negative statements pushed oil prices lower. Iran, Iraq and Saudi Arabia all participated. We may include Russia as well.
It pushed oil prices down below $43/bbl as short positions were added. This provided an excellent opportunity for a short squeeze, and rhetoric was used until the last minute. It is possible the details weren't worked out until Wednesday, but it would seem the Saudi Big Short Squeeze was initiated to create an exaggerated move to the upside.
If accomplished, oil prices could climb and hold above current hedges of US operators. If so, OPEC may have a new mandate. The production cut in concert with a Trump presidency, might continue to move the markets higher. The short squeeze continues, and institutional dollars will begin to roll into energy names over the last two weeks of this month