E&P Profits Shrink But Solidly Profitable -- RBN Energy -- September 27, 2017

Active rigs:

$51.79↓	9/27/2017	09/27/2016	09/27/2015	09/27/2014	09/27/2013
Active Rigs	59	32	71	190	184

RBN Energy: latest E&P profits shrink after strong 1Q17, but industry remains solidly profitable.

The 43 U.S. exploration and production companies (E&Ps) we’ve been tracking racked up $160 billion in losses in 2015-16, but they turned things around in the first quarter of 2017, posting profits of $9.1 billion, or $9.12 per barrel of oil equivalent (boe), during that three-month period.

At first glance, the second quarter might seem like a return to tough times; profits by the group fell more than 80%, to only $1.7 billion, or $1.71/boe. However, when $6.3 billion in impairments by ConocoPhillips ­­­­— most of them tied to $16 billion asset sales and a write-down of the Australia Pacific LNG project — are excluded, second-quarter profits by our universe of Oil-Weighted, Diversified and Gas-Weighted E&Ps totaled $8.0 billion, or $8.02/boe, a decline of only 11.6% from the first three months of 2017. Today, we begin a review of E&P performance and profitability with a big-picture look at key elements of their income statements.

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Oil Trending Higher

Looking through the headlines suggests why WTI is heading toward $52:

• nothing more than an echo chamber; "everybody" talking about oil trneding toward $60
• weak dollar
• Turkey threatens to shut off oil from Kurdistan
• re-balancing is working (see echo chamber, above)
• talk that OPEC will extend cuts; maybe deeper cuts
• Zacks reports that there was an unexpected draw in US crude oil inventories
• Harold Hamm suggesting that IEA is mis-forecasting

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Duvernay Field: Canada's Biggest Shale Oil Reserves

From Reuters via Rigzone, data points:

• by-line: Calgary, Alberta
• the Duvernay field in Alberta holds Canada's largest marketable resources of unconventional light shale oil and condensate -- national energy regulator
• first time that the National Energy Board has done a detailed study of resources in the 50,193-square-mile Duvernay play
• covers around 20% of Alberta
• 3.4 billion bbls of marketable light oil and condensate (compare with Bakken's 50 billion recoverable crude oil)
• 6.3 billion bbls of natural gas liquids
• 77 trillion cubic feet of natural gas (well below Montney and Liand, see below)
• recoverable boe equivalent to 25 years of Canada's annual consumption
• note: Canada's Montney and Liand Basin shale deposits: 449 Tcf and 216 Tcf natural gas, respectively
• Alberta can use this light shale oil to dilute its huge resources of bitumen

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Uber -- Not So Uber Any More

Out of London. Now Uber pulls out of Quebec -- doesn't want to comply with new regulations

Finally, on another note regarding Uber, connecting some dots. Some time ago it was reported that Prince Salman made a huge investment in Uber as part of his Vision 2030. It was never explained, and it never made sense to me. Now we know. In the news that Saudi Arabia will now allow women to drive (in a couple of years, not right away), it turns out that Saudi Arabia was trying to find a way to "resolve" issues with their policy of not allowing women to drive. Their answer: Uber.

Not stated was the problem with the "Uber solution." Saudi also bars women traveling without their husband (or other trusted male escort, generally a family member) from associating with men. And since Uber drivers in Saudi Arabia would all be male ... well, you see the problem.

One wonders if it's just a matter of time before Prince Salman dumps his Uber shares.

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Trade War -- Trudeau Vs Trump

The data points:

• Wilbur Ross, US Secretary of Commerce, solidly behind this
• has nothing to do with NAFTA
• a specific complaint from Boeing
• Involves Bombardier
• US considers 220% tariff on Canada's Bombardier jets
• will take several months
• for investors? an open-book test