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Tuesday, January 10, 2017

Update On Permian Valuation -- January 10, 2017

From Reuters via Rigzone, data points:
  • Parsley Energy acquires 23,000 net leasehold acres, producing and undeveloped acreage
  • $607 million 
  • located in Midland and Southern Delaware Basins near its existing operations
  • overall, 2016 CAPEX: $500 million
  • 2017 CAPEX: $900 million at top end; $750 million at low end
  • 2017 production estimate, all acreage: 60,000 boepd, a 60% increase over 2016
Back-of-the-envelope: new Permian acquisition, $26,000 / acre. This is a lot "cheaper" than the $44,000 / acre it paid in August, 2016, for acreage in Midland.
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Three Permits For Re-Entry -- January 10, 2017

No wells coming off the confidential list Wednesday.

Active rigs:


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Active Rigs3658167193181


Three permits for re-entry (see below):
  • 02302, re-entry/conf, Enduro Operating, Newburg-Spearfish-Charles Unit J-714,
  • 02359, re-entry/conf, Enduro Operating, Newburg-Spearfish-Charles Unit E-717,
  • 02657, re-entry/conf, Enduro Operating, Newburg-Spearfish-Charles Unit J-712,
Three permits renewed:
  • Hunt (2), two Patten permits in Mountrail County
  • Petro-Hunt, a State permit, in section 31-154-94, McKenzie County
Nine permits cancelled:
  • CLR (4): two Blaine permits and two Cass permits, all in Williams County
  • Triangle (3): three Lee permits in McKenzie County
  • Whiting (2): two Charging Eagle permits in Dunn County
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Spearfish Re-Entry Wells

For newbies: if interested in looking at some "monster" wells in the Newburg-Spearfish-Charles unit, see this link where you will find these examples:

Spearfish
  • 1645, 30, Enduro Operating, Newburg-Spearfish-Charles Unit Q-715, Spearfish/Charles pool, t11/57; cum 1.14 million bbls 9/16; still producing about 250 bbls/month
  • 1853, 31, Enduro, Newburg-Spearfish-Charles Unit H-718, Newburg, t5/58; cum 521K 8/16;
  • 1864, 25, Enduro, Newburg-Spearfish-Charles Unit N-716, Newburg, t6/58; cum 805K 8/16;
  • 1877, 25, Enduro, Newburg-Spearfish-Charles Unit O-709, Newburg, t6/58; cum 632K 8/16;
  • 1940, 132, Enduro, Newburg-Spearfish-Charles Unit S-715, Newburg, t8/58; cum 114K 8/16; 
  • 1941, 66, Enduro, Newburg-Spearfish-Charles Unit O-717, Newburg, t7/58; cum 624K 8//16;
  • 1943, AB/52, Enduro, Newburg-Spearfish-Charles Unit R-7101, Newburg, t7/58; cum 531K 10/00
  • 1954, 33, Denbury Onshore, Croak A 1, South Westhope, t8/58; cum 518K 8/16;
  • 1985, 123, Enduro, Newburg-Spearfish-Charles Unit T-712, Newburg, t10/58; cum 661K 12/01;
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Almost Tossed Into Recycling Before Opening -- Looked Like Junk Mail -- January 10, 2017

For Texas residents, don't toss this away as junk mail:






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Memes Without Supporting Evidence

Global warming.

Hacked e-mail cost Hillary the election. 

And for those confused, like I was, the difference between a meme and a trope.
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American Airlines Announces New Direct Flights To Billings, MT -- January 10, 2017

In DFW-area news this morning: American Airlines announces more direct flights to Billings, MT.
It looks one-way prices during low-season is about $200/one-way. From LAX to Billings, MT, about $175 during low season. Interesting. I'm planning a Montana-SD-ND trip later this spring. Possible include Colorado, but with direct flights at relatively low cost, may fly directly to Billings, skip Denver. To Bozeman from DFW, about $350 during low-season, one way.

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Two Under-Reported Stories In The Energy Sector

Based on fairly extensive surfing of the net over the past month or so, there seem to be two under-reported international energy stories: India and Mexico.

Both counties are reporting surging demand for fossil fuel energy.

Platts is reporting a podcast today ...
Mexico’s higher gasoline prices for consumers is having a ripple effect through North American gasoline markets as the US exports more product to its neighbor.
... which links to a earlier story:
US gasoline exports to Mexico hit record high on refinery issues, strong demand. 
When I say under-reported, I mean these stories are not often found in print editions of US "national" newspapers nor in regional newspapers.

From the earlier story at Platts:
Mexico's record-low refinery production and growing consumer demand helped push US gasoline exports there to a new high in October, a trend that has boosted prices in both countries.

Gasoline exports to Mexico climbed 1.86 million barrels to 12.08 million barrels in October, according to US Energy Information Administration data released Friday, the highest total since that data started being tracked in 1993.
The previous peak was 11.42 million barrels in December 2010.

Mexico is by far the largest importer of US gasoline, taking in 45.8% of the 177.4 million barrels of finished gasoline the US exported through October of this year.
With regard to India, a John Kemp graphic, via Twitter, is worth ten-thousand words. This is not a projection; this is "real":


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EVs Sold In 2016

Bingo Blackout! The 2016 table is complete.


Note the huge jump in month-over-month (December-over-November) deliveries for Tesla Models S and X. One would like to see a bit more about these numbers. Assuming the numbers are "real," and/or "accurate," it is due to Tesla's business model: subscriptions or ordering ahead-of-time, sight-unseen.
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$50 Remains The Sweet Spot For The Price Of WTI -- January 10, 2017

From Platts:



Ten plays noted, from most greatest-to-least "break-evens." All are below $50, though Duvernay is right at $50. The best is Permian Delaware at about $32. Compare with the Bakken at about $34.
  • Duvernay
  • Uinta
  • Anadarko Cleveland
  • SCOOP
  • Eagle Ford Oil
  • STACK
  • Bakken ($34)
  • Permian Midland
  • Denver-Julesberg
  • Permian Delaware 
I was familiar with all of these, and all of them are linked at the sidebar at the right, with one exception: Anadarko Cleveland.

Anadarko Cleveland has been mentioned on the blog several times:
The Duvernay is in British Columbia.

$50 WTI / $55 Brent:
  • won't help Saudi Arabia; currently Saudi Arabia's national budget based on $80 oil; historically had been at $100 oil
  • keeps US gasoline at consumer-friendly price
  • maintains US shale industry
  • investors in public companies in US shale E & P may not do as well as in other sectors
  • investors in public companies in US shale services may do better than in other sectors
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Short-Term Energy Outlook For US -- EIA

Crude Oil:
“The general decline in U.S. crude oil production that began almost two years ago is likely over, as higher average oil prices and improvements in drilling efficiency are giving a boost to output.”

“Final data are expected to show that U.S. oil production increased during the last three months of 2016, the first quarterly output increase since early 2015.”

“China’s oil production will continue to decline this year and during 2018 because of cuts in investment by oil companies.”
Gasoline/Refined Products:
“Despite higher pump prices, U.S. gasoline consumption is expected to reach a record high in 2017 because of a strong economy and higher employment.”

“Ethane is expected to account for almost half of U.S. liquid fuel consumption growth in 2018, as several petrochemical plants come online that use ethane as a feedstock in the manufacturing process.”
Natural Gas:
“U.S. natural gas production is expected to rise in each of the next two years, reversing the first decline in annual output in more than a decade that occurred during 2016.”

“U.S. natural gas exports are expected to continue growing over the next two years as several liquefied natural gas export terminals come online.”
Electricity:
“The average U.S. household will use 3% more electricity between December and March compared to the same period last year because of forecast colder temperatures than last winter.”
Coal:
“Coal is expected to make a modest comeback in 2017, accounting for a slightly larger share of U.S. electricity generation than natural gas in response to higher natural gas prices.”

“Higher coal use by the U.S. electric power sector in 2017 is expected to result in an increase in domestic coal production this year.”
Renewables:
“The amount of U.S. electricity generated by utility-scale solar energy is on track to double from 2015 levels to 1.2% in 2018, while wind power’s share of total generation over the same period is expected to increase from 4.7% to 6%, close to hydropower’s share of 6.5%.”
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Hey, This Is Texas! Of Course This Facility Is The Largest Of Its Kind In The Universe -- January 10, 2017

This could be the biggest non-Bakken story of the year to date.

Updates

October 31, 2017: EIA update on Petra Nova. 
The Petra Nova facility, a coal-fired power plant located near Houston, Texas, is one of only two operating power plants with carbon capture and storage (CCS) in the world, and it is the only such facility in the United States.
The 110 megawatt (MW) Boundary Dam plant in Saskatchewan, Canada, near the border with North Dakota, is the other electric utility facility using a CCS system.
Petra Nova’s carbon-capture system is designed to capture about 90% of the carbon dioxide (CO2) emitted from the flue gas slipstream, or about 33% of the total emissions from Unit 8. The post-combustion process is energy intensive and requires a dedicated natural gas unit to accommodate the energy requirements of the carbon-capture process.
 The carbon dioxide captured by Petra Nova’s system is then used in enhanced oil recovery at nearby oil fields. Enhanced oil recovery involves injecting water, chemicals, or gases (such as carbon dioxide) into oil reservoirs to increase the ability of oil to flow to a well.
By comparison, Kemper had been designed to capture about 65% of the plant’s CO2 using a pre-combustion system. The capital costs associated with the Kemper project were initially estimated at $2.4 billion, or about $4,100 per kilowatt (kW), but cost overruns led to construction costs in excess of $7.5 billion (nearly $13,000/kW). Petra Nova CCS retrofit costs were reported to be $1 billion, or $4,200/kW, and the project was completed on budget and on time.
April 13, 2017: press release, no link -- "Secretary Perry celebrates successful completion of Petra Nova carbon capture project." Data points, same as those previously posted, but these new ones or important enough to be reposted:
  • joint venture: NRG Energy (US) and Nippon Oil (Japan)
  • funded in part by US DOE; originally conceived as a 60-MW electric capture project
  • expanded to a 240 MWe Houston-area power plant; quadrupling the size of the capture project without additional federal investment 
  • 5,000 tons of CO2 captured daily; EOR at the West Ranch Oil Field
  • to boost production from 500 bopd to 15,000 bopd
  • estimate: 60 million bbls of recoverable oil from EOR operations
January 10, 2017: also in Financial Times.  Additional data points:
  • the project is called Petra Nova
  • $1 billion project
  • capturing CO2 from the equivalent of 240 megawatts of power generation
  • covering costs by using gas for oil production
Original Post

At Reuters via Rigzone:
  • operations have begun
  • NRG Energy and JX Nippon Oil & Gas Exploration
  • $10.4 billion carbon capture facilty
  • Texas coal-fired power plant
  • emissions are being used to extract crude from nearby oilfield
    • 80-mile pipeline (yes, at least one state can still build pipelines) to the West Ranch Oil Field
    • West Ranch Oil Field opened in 1930; produces 300 bopd
    • with EOR, production should jump to 15,000 bopd within three years
  • unlike wind and solar projects, this project will NOT result in higher utility costs for consumers
  • CO2 extraction = EOR (enhanced oil recovery) -- several readers have spent several years waiting for this news -- time to break out the champagne
  • largest of its kind in the world
    • US DOE funded $190 million for the project's construction
    • Japan: $250 million in loans
    • NRG / JX Nippon: split the remaining $600 million
    • Mitsubishi: engineered the plant
    • at its peak: 1.6 million tons of CO2/year (4,000 tons/day) -- 90% of NRG's nearby power plant, the largest in Texas
  • since opening December 29, 2016: 111,000 tons of CO2 (111,000 / 12 days = 9, 250 tons/day (I may have done the math wrong, but the first ten days, the average collected more than doubled expectations
  • the other science project, the incredibly expensive Kemper, MS, plant is yet to come on-line
    • cost $7 billion (so far) 
  • the Texas plant: $1.04 billion
  • uses a different process to capture CO2
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ND Oil Cities Poised For More Growth -- January 10, 2017

DAPL wind child to be life-threatening. Story at Bismarck Tribune.

ND oil cities poised for more growth; have big needs. Story at Bismarck Tribune.

Five stories with regard to the market caught my attention this morning;
Disclaimer: this is not an investment site.

Oil cut. Russia cuts oil output by 100,000 bopd in early January.  Early this morning on the CNBC crawler, WTI at about $52 and Brent about $55.

Job cuts: not everyone is adding jobs. Big Box stores struggling. Today, Wall Street Journal reports that Wal-Mart plans new round of job cuts. There are many, many factors, but some folks will argue that this was predicted when Wal-Mart did the politically-correct thing to raise the minimum wage.  The jobs cuts apparently not so much at the retail stores themselves, but at its headquarters in Arkansas and "regional support personnel."
The world’s biggest retailer plans to eliminate hundreds of jobs before the end of its fiscal year on Jan. 31, both at headquarters and regional personnel that supports stores, these people said. Many of the eliminations will affect Wal-Mart’s human resources department, a large team that some senior executives believe should be more efficient or whose duties could be handled by outside consultants, said these people. Other departments could be affected as well, say these people.
It appears the focus on "job cuts" is just a bit of smoke. The fire is e-commerce competition from Amazon.

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Back to the Bakken

Active rigs:


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Active Rigs3758167193181

RBN Energy: DCP Midstream LLC, DCP Midstream Partners LP join forces.
The recently announced combination of DCP Midstream LLC and DCP Midstream Partners LP creates the nation’s largest natural gas processor and natural gas liquids producer at what may be a particularly opportune time.
The newly formed DCP Midstream LP, operating as a master limited partnership, owns 61 gas processing plants with a combined capacity of 7.8 Bcf/d—enough to process more than 10% of current U.S. production—as well as 12 fractionation plants, 59,700 miles of gas gathering pipelines and 4,600 miles of NGL pipelines.
Better yet, many of these assets serve some of the U.S.’s most prolific and promising production areas, including the Midland and Delaware basins within the Permian; the Denver-Julesburg (DJ); and the side-by-side SCOOP and STACK plays. In today’s blog, we review the combined entity’s assets and prospects for growth in what soon may be happier times for NGL processors.
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US Small Business Optimism Surges By Most Since 1980 But Every Breath You Take, I'll Be Watching You -- President Obama -- January 10, 2017

US small business optimism surges by most since 1980. From Bloomberg:
Optimism among America’s small businesses soared in December by the most since 1980 as expectations about the economy’s prospects improved dramatically in the aftermath of the presidential election.
The National Federation of Independent Business’s index jumped 7.4 points last month to 105.8, the highest since the end of 2004, from 98.4. While seven of the 10 components increased in December, 73 percent of the monthly advance was due to more upbeat views about the outlook for sales and the economy.
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21st Century Version Of Book Burning in the Us

Over at The New York Times.
Milo Yiannopoulos — the infamous internet troll, Donald J. Trump supporter and editor at Breitbart News — has compared Islam unfavorably to cancer, mocked transgender people and suggested that women who are harassed online should stay off the web. Last July, he was permanently barred from Twitter for violating the platform’s rules against hate speech and harassment.
So when Threshold Editions, a conservative imprint at Simon & Schuster, gave him a six-figure publishing contract, the blowback was swift and furious. There were calls for a boycott of all of the company’s books, a vast catalog of some 2,000 titles from 50 imprints. Some of Simon & Schuster’s authors — including Karen Hunter, Danielle Henderson and Bradley Trevor Greive — denounced the publisher on social media. The Chicago Review of Books said it would not review any of the company’s books this year.
This also explains why it's hard to find Michael Savage books at your local bookstore. 

Cookbooks will sell well this year. Cupcakes. 

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The Farewell Speech

#10 in the 20-song countdown. This is quite incredible how this matched up. President Barack Obama will give his "last" major speech before he leaves office. In Chicago. His hometown.

This will be his theme put to music. I'll be watching you.

Every Breath You Take, The Police
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