Chesapeake Energy -- Still On The Edge -- December 15, 2016

This was posted on the blog on October 21, 2016:

From Bloomberg/Rigzone: Chesapeake Energy declares "Propageddon" with record frack. Data points:

• first it was the single stage frack; then the multi-stage frack; then, the mega-frack; now it's the monster frack
• the era of the monster frack has arrived in North America -- Chesapeake singing its praises
• 25,000 tons of sand down one Louisiana natural gas well -- "propageddon"
• Black 2 & 11-15-11 1H: 50.185 million lbs of sand in the Haynesville shale region of Louisiana; the well's lateral length = 9,764 feet (typical for a Bakken well) 

More at the link.

In tomorrow's WSJ: Chesapeake Energy drills deeper for profit. Data points:

• Caddo Parish, LA
• Prop-a-geddon
• Haynesville Shale, near Shreveport, LA
• 2 miles deep, 2 miles horizontally (routine in the Bakken, not a big deal)
• 51 million pounds of sand -- Chesapeake thinks that's a world record

So, why in WSJ now?

• the article is about Chesapeake's viability -- recently sold 78,000 acres in the Haynesville to an unnamed private company fro $450 million (about $6,000 / acre)
• plans to sell an additional 50,000 acres in the same field in the coming months
• Chesapeake would retain roughly 250,000 acres

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Cushing Filling Up

Bloomberg update on Cushing. Data points:

• creeping near an all-time high
• currently at 66.5 million; within "a whisker" of  previous record, 68.3 million
• 1.22 million bbls added last week; 3.78 million bbls added the week before
• jump in inventories at end of year: oil companies looking to lower end of year taxes
• US refineries typically use less oil at beginning of year
• Saudi's cut will take time to be felt; Saudi won't start cuts until January, 2017; and, it takes 45 days for Saudi oil to reach the US

Oasis Reports A High-IP, High-Intensity Well -- December 15, 2016

Active rigs:

	12/15/2016	12/15/2015	12/15/2014	12/15/2013	12/15/2012
Active Rigs	40	64	182	191	181

Three (3) wells coming off confidential list Friday:

• 31919, 1.413, Oasis, Johnsrud Federal 5198 11-18 3BX, North Tobacco Garden, 4 sections, 50 stages, 20 million lbs, t6/16; cum 126K 10/16; 
• 32707, SI/NC, XTO, FBIR Blackmedicine 24X-21EXH, Heart Butte, no production data,
• 32709, SI/NC, Statoil, Heinz 1819 XW 1H, Alexander, no production data,

Five new permits:

• Operator: Kraken Operating, LLC
• Field: Lone Tree Lake (Williams County)
• Comments:

Four permits renewed:

• BR (3): one Merton permit and two Jerome permits, all three in McKenzie County
• Resonance Exploration: one Resonance Ballantyne permit, in Bottineau County

One producing well (DUC) reported as completed:

• 32032, 486, Hess, EN-Pederson-LW-154-94-0408H-8, Alkali Creek, t11/16; cum --  

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31919, see above, Oasis, Johnsrud Federal 5198 11-18 3BX, North Tobacco Garden:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	10-2016	31	27808	27750	24613	56347	39491	16856
BAKKEN	9-2016	30	24369	24337	23559	46182	11732	34150
BAKKEN	8-2016	31	24368	24243	24207	43761	26547	16904
BAKKEN	7-2016	31	25769	25919	25957	47076	44475	2291
BAKKEN	6-2016	26	23371	22911	38602	39569	26303	13006

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2-Year-Old In Noodle Town

Mission ...

.... accomplished:

US Natural Gas Stocks -- December 15, 2016

Also, take a look at ISO EXPRESS over the next couple of weeks, spot price for electricity in New England. I am told that $30 / MWh is a "nice" price for consumers. Watch the spot price for electricity at 6:00 a.m. on cold days. Better hope the wind turbines are turning.

From John Kemp, via Twitter:

Surge In Crude Oil Production In Two Oil Fields In North Dakota -- December 15, 2016

In North Dakota, crude oil production for the month of October, 2016, went above the 1 million bopd threshold again.

Two oil fields that saw a healthy surge in production were Twin Valley and Eagle Nest.

For an explanation of this spreadsheet, see this post:

	Sept 2016 Production	Sept Wells	Sept Oil / Well / Month	Percent Change Aug - to- Sept	Oct 2016 Production	Oct Wells	Oct Oil / Well / Month	Percent Change  Sept-to-Oct
Twin Valley	24,695	18	1,372	484.77%	153,902	18	8,550	523.21%
Eagle Nest	290,515	84	3,459	-7.85%	693,733	93	7,459	138.79%

As noted previously, the 523% increase in Twin Valley was due to Whiting shutting in all its wells in Twin Valley in September and then bringing them back on line in October.

The 139% increase in production in Eagle Nest can be explained by the phenomenal new wells that Halcon has been reporting. Eagle Nest oil field has been updated.

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Bury Their Future At Standing Rock 

A big "thank you" from a reader for sending me this link.

From Commentary Magazine.

The article provides a lengthy, in-depth history of the DAPL.

From the article:

Even [tribal leader] Archambault acknowledged to a crowd gathered after his victory:

“That pipeline had every right to go through, but because of the support that we have and the people who gather and are a part of this, we are able to build enough noise to help America understand.”

The article provides an overview of other issues regarding Native Americans.

Bottom line: the Native Americans, with the help of the Obama administration, buried their future at Standing Rock.

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Nice Work If You Can Get It

According to a friend of a friend of a friend who said something to a reader who sent me a note, apparently the going rate for DAPL protesting is:

• $19/hour protesting
• $1,000 up-front
• round trip plane ticket to Bismarck 

Actually, the correspondence is much shorter: protestor to non-protestor to reader to me. $19/hour is well above the $15/hour minimum wage some folks are advocating. The Bakken continues to be a great place to work. 

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The Literature - Political Page

Spanish Civil War

Syrian Civil War (think Aleppo)

I mentioned recently that I read an advance copy of Adam Hochschild's new book, SPain In Our Hearts: Aericans in the Spanish Civie War, 1936 - 1939, c. 2016.

I am in the process of transcribing my handwritten notes to my literature blog.

The parallels between the Spanish Civil War and the Syrian Civil War are interesting.

These are my initial notes, just from the introduction, early chapters. The notes may be difficult ot understand because they are as I originally wrote them, unedited:

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Importance of names

The Republic: democratically elected government but Popular Front wins parliament

• Republicans: liberals, socialists, communists
• but "Republicans" because elected to "Republic" -- a democratic govt

Military rebels: self-named the Nationalists

• military generals -- concerned that the Popular Front is the Spanish version (or will become the Spanish version) of the Russian revolution
• far-right fascists -- much strong connotations than generally used in English (I have to re-read that; I don't understand that note now)

The other problem: Nationalists -- military generals -- extreme atrocities.

 

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The reason the Spanish Civil war is so hard to understand:

1) hard to understand European situation in the 1930s
2) the names of the adversaries were confusing

The author got it exactly right, p. 41: "The conflict in Spain, remarkably, was at the same time, both a right-wing military coup and a left-wing social revolution."

p. 47: Stalin / Russia -- anxiety, concern about helping the Republic. The Spanish Civil War was probably confusing to Stalin / Russia, also.

p. 48 - 49: The Non-Intervention Committee in London, a sham (correlates with the Obama doctrine in the Mideast)

England pre-occupied with shocking romance between King Edward VIII and svelt American socialite Wallis Simpson

Franco: lower-ranking general

• great planner
• opportuniistic
• when higher ranking generals killed, he took lead -- waited until he saw whether revolution would have chance to succeed

No country willing to help Republic except Stalin/Russia.

Franco: Hitler / Mussolini competed to provide most support

• Mussolini: took Ethiopia -- wanted to enlarge circle of influence

p. 47: quick, nice summary of Stalin's concerns, anxiety (see above.

Hitler: saw advantages

• training for war
• U-boat base on Atlantic Coast
• Spain: crucial source of raw materials -- copper, iron ore, sulfur, etc.

Stalin saw all of this; he waited in vain for Britain or France to aid the Republic; never happended -- p. 49

Finally Russia sends aid. 

In Syria, "they" were waiting for US, EU, or Great Britain to act. No one acts. Obama actualy withdraws troops from Iraq. Vacuum leads to ISIS. Finally, Russia intervenes. 

First Time Unemployment Claims Decrease -- December 15, 2016

News release:

• 254,000; down 4,000
• 4-week moving average: 257,750, an increase of 5,250
• 93 consecutive weeks of initial claims below 300,000 -- longest streak since 1970 

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The Market

Well, that was east. The Fed raises "rates" yesterday; market takes a bit  of profit-taking; that's now old news, and the market is up again today.

NYSE:

• new highs: 114, including ONEOK Partners (OKS)
• new lows: 111

Than you, Mr Trump and Ms Yellen (I do not own any XLNX but I bought this some years ago -- buy and hold -- as a long term investment for one of my daughter's portfolio). This is not a recommendation one way or the other at this point. Just something for the archives.

Pensions -- December 15, 2016

Updates

December 18, 2016: the long cold winter for California's pension fund is coming. Data points:

• only three sources for funds
• profits from the stock market
• worker contributions
• government contributions
• 2016: $7.2 billion in pension payments; more than 60% more than just nine years ago

Advice from CalPERS board member: "I think that we need to step back and breathe."

Perhaps better advice: "Hey. guys, let's work with President Trump, make America great again, and continue the Trump rally." Ha-ha -- like that will ever happen.

Original Post

Previously posted: Dallas, TX, faces bankruptcy due to city pensions. Two problems: guaranteed 8% annual return; no restrictions on lump sum withdrawals (this benefit has since been changed).

California: America's largest pension fund -- a 7.5% annual return is no longer realistic.  -- WSJ. Data points:

• the pensions are guaranteed
• any state shortfall must be picked up by cities

One can only assume CALPERS administrators are happy with the Trump rally; this rally would not have happened under a Hillary presidency.  The most disturbing "disclosure" in the recent Vanity Fair piece was how insular (autocratic? dictatorial? delusional?) Hillary had become.

California budget:

Natural Gas Net Balance Tightens Significantly In Just One Month -- RBN Energy -- December 15, 2016

Saudi's goal remains 12 million bopd. From Reuters (note the URL: http://sports.yahoo.com/news/exclusive-cost-pump-oil-policy-105546225.html).

Saudi Arabia has long said it could produce as much as 12 million barrels per day (bopd) of oil if needed, but that pump-at-will claim - which would require huge capital spending to access spare capacity - has never been tested.

Sources say the kingdom may have stretched its current limits by extracting a record of around 10.7 million bpd this year, which could be one reason why Riyadh pushed so hard for a global deal to cut production.

Riyadh, the world's top oil exporter, felt the burn of cheap oil this year when crude was trading below $50 a barrel, as the reality of its costly war in Yemen and the task of shaking up its economy to create thousands of jobs began to sink in.

"Twelve million bpd has been planned since 2008-2010 and every annual budget worked towards that goal," the source told Reuters on condition of anonymity.

To achieve that goal, the company has annual operating expenses (opex) of $20 billion and capital expenditure (capex) at around $40 billion, the source said. "When the 12 million bpd plan is achieved by 2018, the overall capex will fall to $20 billion," he added.

We're starting to get some big numbers: 

• defense / military: $80 billion
• oil opex and capex: $60 billion 
• via Twitter, David Sheppard calculates operating costs are $5 / bbl or $15 including capex

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Peak Oil 

Peak oil? Okay, this story was not about crude oil, it was about natural gas, but the point is made. Reuters is reporting that In the waters off Malaysia, Royal Dutch Shell is finding gas quickly and cheaply to replenish depleting fields where only a few years ago geologists had lost hope of discovering any new reserves.

The Anglo-Dutch group is combining the latest technology with the wisdom of industry veterans to unlock new oil and gas deposits where it already operates, usually within 20 km (12 miles) of existing platforms.

The result has been a string of finds which, while modest in size, can generate cash rapidly to suit an era of drastically reduced exploration budgets across the energy industry.

After a costly flop in Alaska, Shell has turned away from giant "frontier" projects, focusing instead on exploring closer to home, such as in Malaysia where it has been producing oil for more than a century. Many of its rivals are following suit.

"With new data, new seismic and new brain power you can find extraordinary amount of hydrocarbons for the future," Ceri Powell, Shell's head of exploration.

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Back To The Bakken

Active rigs:

	12/15/2016	12/15/2015	12/15/2014	12/15/2013	12/15/2012
Active Rigs	40	64	182	191	181

RBN Energy: US natural gas storage whipsaws prices -- again.

In December to date, US demand has averaged 92 Bcf/d, 10.3 Bcf/d higher than last year’s 81.7 Bcf/d in the same period. Add to that the incremental 0.6 Bcf/d in Mexican exports and 1.3 Bcf/d in LNG exports, and overall demand is running more than 12 Bcf/d higher than last year.

Moreover, based on the latest 15-day weather forecasts, our models are projecting demand remains well above 2015 levels for the balance of the month (see blue-dotted line in Figure 4). In fact, current forecasts are calling for the highest demand for December since the winter of 2013, assuming weather materializes as currently expected.

All in all, based on the current weather forecasts, December 2016 consumption should average close to 10 Bcf/d higher than 2015, and about 11 Bcf/d higher if you include exports. And on a net basis, including all supply and demand components, the net balance (supply minus demand) this month would be about 14 Bcf/d tighter than last year. That is a long way from where we were in November, when we were just 0.6 Bcf/d tighter year on year.