Problems In The Permian? -- August 10, 2017

Updates

Later, 11:17 a.m. Central Time: Don helped me out with new airfields in the Bakken (see note below regarding the "talking head" that misspoke), with this link to the FAA. Don noted:

Minot got a runway,  Dickinson got runway expansion, and a terminal expansion ... at peak had Delta, United and a regional carrier. Bowman has a new 5700 ft CEMENT runway with lights ... and an all-new facility 4 miles east of town. And, of course, Williston is currently building a new international airport. 

 Original Post 

WTI: $50.13.

Jobs: 244,000 today, up 3,000 from last week's 241,000 (revised upward by 1,000). Narrative: jobless claims are now meaningless. Numerator/denominator (jobless claims/total employed) is at an all-time record low: employers no longer watching jobless claims -- their problem is this: employees unable to find qualified candidates for the jobs they need filled. 

Fed watch: likelihood of Fed raising rates in September, almost zilch. Maybe 0.25% in December, but that comes from a talking head at CNBC whose biggest concern seems to be NYC potholes (see below). 

Comment to start the day: the number of comments a WSJ story generates speaks volumes. There were 80 comments to the WSJ article on the Permian (see below) which suggests readers interested in the Permian were very surprised (concerned?) by this development. On the other hand, the WSJ story reporting that OPEC's production rose in July must have surprised no one: not one comment.

Talking head misspeaks: talking about infrastructure, talking head on CNBC says there has been no new airport built in the US in 23 years -- he needs to get out to the Bakken -- see the new Williston airport being built. Didn't Bowman, ND, get a new airport? At least a new runway. Minot with a new terminal a couple of years ago, I believe. I'm surprised he didn't say there has been no new refiney built in 50 years; in fact, at least one, again, in the US. Same talking head complains about lack of activity on roads: he needs to come to north Texas. He needs to get out of NYC. He didn't talk about the LNG export facilities -- his main concern: potholes in downtown NYC. Wow.

The Permian: for quite some time I've questioned the exuberant enthusiasm of operators who were willing to pay $40,000 / mineral acre to jump into the Permian. Lately there have been some "concerning" stories in the mainstream business media that suggest my thoughts may not be far off the mark. Today, in The Wall Street Journal: investors question oil output in Permian Basin. Worries mount after Pioneer reported its Permian wells are producing more gas than expected:

Investors helped turn West Texas’ Permian Basin into America’s fastest-growing oil field, but their confidence is cracking over whether drillers can keep production rising.

Questions mounted last week after Pioneer Natural Resources Co. PXD 1.60% reported that its Permian wells are producing more gas and natural gas liquids such as propane than expected. That worried investors, who care a lot more about oil.

Shares of Pioneer and other Permian producers tumbled as a result. Pioneer ended the week down 16%, while Parsley Energy Inc. PE -0.78% and Concho Resources Inc. CXO 0.76% both declined more than 9% over that stretch.

Most wells produce natural gas as a byproduct alongside oil, and that gas output tends to rise over time. That is because as a reservoir is depleted, its pressure drops and gas vapors separate from liquid—reaching the “bubble point” at which natural-gas production accelerates.

Pioneer last week indicated that some of its Permian wells are reaching this point sooner than it anticipated.

The Permian gas problem: RBN Energy seems to be all over this issue. Today, RBN Energy has a third installment on Permian natural gas (see below). 

OPEC cuts (wink, wink): OPEC says crude output rose in July. I'm shocked, shocked! In The Wall Street Journal today, "a blow to cartel's efforts to reduce output and drain a global supply glut." 

OPEC crude-oil production rose further in July, in the latest sign the cartel’s efforts to reduce output and drain a global supply glut are falling short.

The Organization of the Petroleum Exporting Countries’ output rose by roughly 0.5%, to 32.87 million barrels a day last month, up by 172,600 barrels from June. The uptick, which was smaller than the prior month’s increase, was driven by higher production in Libya, Nigeria and Saudi Arabia, according to OPEC’s closely-watched monthly market report.

The report comes as Saudi Arabia—OPEC’s largest member and the world’s biggest crude exporter—has been pressuring other members of the cartel for better compliance with an agreement to curb production output.

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Back To The Bakken

Active rigs:

$49.89↑	8/10/2017	08/10/2016	08/10/2015	08/10/2014	08/10/2013
Active Rigs	57	33	72	193	184

RBN Energy: Permian natural gas processing plants and NGL pipelines, part 3.

The year-ago completion of Energy Transfer Partners’ Lone Star Express NGL pipeline from West Texas to the Mont Belvieu storage and fractionation hub near Houston was a big deal. The new, 533-mile pipe increased effective NGL takeaway capacity out of the Permian by more than 25% and gave Energy Transfer a larger conduit for moving NGL produced at its Permian natural gas processing plants directly to the company’s still-growing complex of fractionators in Mont Belvieu. Energy Transfer also owns another big NGL pipeline out of the Permian: the Lone Star West Texas Gateway. Today we continue our blog series on the NGL side of the Permian with a look at what is currently the biggest fish in the play’s NGL pond.

All of the drilling going on in the Permian — 379 active rigs as of August 4, according to Baker Hughes — is focused on crude oil, but the 70,000-square-mile play in West Texas and southeastern New Mexico also produces large volumes of associated natural gas (about 6.5 Bcf/d as of this week and NGLs (nearly 800 Mb/d) that help to fatten producers’ wallets. The focus of this blog series is Permian NGLs: the natural gas processing plants that separate raw gas into dry gas and mixed NGLs and the pipelines that transport mixed NGLs (also known as y-grade or raw mix) to storage and fractionators, primarily in Mont Belvieu.