20% Tax On All Mexican Imports? -- January 26, 2017 -- Hardball With Donald J Trump

By now, I'm sure everyone in the western hemisphere has heard that President Trump is considering slapping a 20% tariff on all Mexican goods imported into the US.

I completely missed this one; Bloomberg didn't. Via Twitter: this would be a "huge gift" for the Canadian oil patch. What country just submitted a new permit application for the Keystone XL?

Something tells me the President of Mexico is going to beg to have the meeting with President Trump re-scheduled.

From the Bloomberg link:

• tax could make Mexican oil less competitive versus Canadian
• proposal comes days after Trump revived Keystone XL
• the proposal would apply to countries with which the US has a trade deficit, which would "seemingly" exempt Canada; the US ran a surplus of nearly $12 billion Canada in 2015
• Canadian heavy oil competes with Mexican oil in the US refining market
• in October, 2016:
• Canada: 3.24 million bbls to the US
• Mexico: 555,000 bbls to the US
• could it also apply to Saudi Arabia? US has a trade deficit with KSA to the tune of $31 billion
• Western Canadian Select crude oil priced in Alberta: $40.28 (today)
• Mexican Maya sold in the US for $46.50 (today)

NOTE: unlikely to happen. 

***************************

US Crude Oil Imports

Link here. 
Source, Monthly (October, 2016) in thousands of bbls/month (rounded)

• all countries: 300,000 
• OPEC: 100,000
• Iraq: 16,000
• Saudi Arabia: 32,000
• Venezuela: 23,000
• Non-OPEC: 200,000
• Canada: 112,000
• Mexico: 20,000

Back-of-the-envelope:

• Mexico: 20,000,000 bbs/month = 650,000 bbls/day
• Canada: monthly record -- 127,444,000 bbls in January, 2016 = 4.1 million bopd
• $53 x 1.20 =  $64/bbl

******************************

Mexico Crude Oil Exports To US

Thousand bbls/month:

NDIC Hearing Dockets -- February, 2017; Two New Operators/Lessees? CLR With Request For 23 Wells On One Spacing Unit

Link here.

The highlights of the February hearing docket agenda are at this link.  

Operators in this list I do not recall having seen before:

• Trendwell Energy Corporation: according to NDIC, has two (2) permits in North Dakota
• DW Slate: mentioned once below; I do not find this operator listed at the NDIC "Well Search" site; google search reveals that DW Slate LLC is a corporation entity based in NYC, and named as a lessee in 4 oil and gas leases; locations at this thedrillings.com site; 

Disclaimer: I often do these in haste; there will be factual and typographical errors. If this information is important to you, go to the source. My notations on the screenshots below are not "official." They are simply my thoughts and could be very, very wrong.

Wednesday, February 22, 2017 (eight pages)

25567, NDIC, terminate or other appropriate action of the Zenith-Tyler "A" Unit, Stark County, operated by New Millennium Resources.
25568, NDIC, Grinnell-Bakken, to review the status of the progress towards developing sections 30/31-154-96, McKenzie County
25569, QEP, Spotted Horn-Bakken, amend; extend timeframe in which development must occur in the E/2 of a 2560-acre unit, until December 31, 2017, McKenzie County
25570, BR, Twin Valley-Bakken, terminate a 2560-acre unit; change it to two 1280-acre units; 7 wells on each; McKenzie
25571, BR, Westberg-Bakken, establish an overlapping 2560-acre unit, 1 well; McKenzie
25572, BR, Elidah-Bakken, establish an overlapping 5120-acre unit; 2 wells; McKenzie
25573, MRO, Antelope-Sanish, establish a 2560-acre unit; 1 well; McKenzie County
25574, MRO, Reunion Bay-Bakken, establish a 2560-acre unit; 1 well; Mountrail County
25575, MRO, Bailey-Bakken, reduce setbacks, Dunn County
25576, MRO, Bailey-Bakken, establish two 2560-acre units; 1 well; establish three 2560-acre units; 2 wells; Dunn
25577, NDIC, treating plant
25578, BR, pooling
25579, BR, pooling,
25580, BR, pooling,
25581, BR, commingling,
25582, SM Energy, commingling,
25583, SM Energy, commingling,
25584, SM Energy, commingling,
25585, SM Energy, commingling,
25586, Cornerstone Natural Resources, pooling,
25587, Cornerstone Natural Resources, pooling,
25589, Cornerstone Natural Resources, pooling,
25590, Cornerstone Natural Resources, pooling,
25591, Cornerstone Natural Resources, pooling,
25592, Cornerstone Natural Resources, pooling,
25593, Cornerstone Natural Resources, pooling,
25594, Hess, pooling,
25595, Hess, pooling,
25596, Hess, pooling,
25597, Hess, commingling,
25598, Hess, commingling,
25599, Hess, commingling,
25600, Hess, commingling,
25601, Whiting, SWD
25602, Petro-Hunt, Little Knife-Bakken, 5 wells on a 1280-acre unit; Dunn County
25603, Marathon Oil, Bailey-Bakken, i) 8 wells on a 1280-acre unit; ii) 10 wells on another 1280-acre unit; and, iii) 11 wells on another 1280-acre unit, Dunn County
Note: not much else of interest, except commingling and pooling cases

Thursday, February 23, 2017 (eight pages)

25604, Resonance Exploration, Westhope-Spearfish/Madison, amend, establish an overlapping 320-acre unit, 1 well; Bottineau County
25605, XTO, Bear Creek-Bakken, amend, establish an overlapping 1920-acre unit; 3 wells; created an overlapping 3840-acre unit; one well; Dunn County
25606 Trendwell Energy Corp, Woburn-Madison, establish two 1280-acre units; 1 well; Burke County
25607, Statoil, Avoca-Bakken, amend, establish an overlapping 2560-acre unit; 1 well; Williams County
25608, Statoil, file #31973, inadvertently drilled outside of setbacks; relief requested; Williams
25609, DW Slate LLC, Eagle Nest-Bakken, establish a 320-acre unit; 2 wells; establish an overlapping 640-acre unit; 2 wells; Dunn County
25610, Abraxas, #32098, an exception to the field rules, McKenzie
25611, CLR, #32805, an exception to the field rules, Dunn
25612, NDIC, Alkali Creek-Bakken, appropriate spacing for a 2560-acre unit; Mountrail, McKenzie
25613, CLR, Elm Tree-Bakken, create an overlapping 1920-acre unit; 2 wells; McKenzie
25614, CLR, Elm Tree-Bakken, two wells, exception to field rules, McKenzie
25615, White Owl Energy, treating plant, Williams County
25616, NDIC, treating plant
25617, Newfield, Northwest McGregor-Bakken, legalese, Williams County
25618, Trendwell, pooling,
25619, Trendwell, pooling,
25620, WPX, pooling,
25621, XTO, pooling,
25622, CLR, pooling,
25623, CLR, Elm Tree-Bakken, 23 wells on an existing overlapping 2560-acre unit, sections 14/23/26/35-T153N-R94W (see graphic below), McKenzie County
25624, CLR, Rattlesnake Point-Bakken, 7 wells on an existing 1280-acre unit; Dunn County
25625, Resonance, pooling,
25626, Resonance, pooling,
25627, Crescent Point, Ellisville-Bakken, 9 wells on each of five 1280-acre spacing units; Williams County
25628, Crescent Point, Winner-Bakken, 9 wells on each of nine 1280-acre spacing units; Williams County
25629, Crescent Point, Dublin-Bakken, 9 wells on each of three 1280-acre spacing units; Williams County
25630, Sinclair, Sanish-Bakken, risk penalty legalese, Mountrail County
25631, Sinclair, Sanish-Bakken, risk penalty legalese, Mountrail County
25632, Sinclair, Sanish-Bakken, risk penalty legalese, Mountrail County
25633, Sinclair, Sanish-Bakken, risk penalty legalese, Mountrail County
25634, Sinclair, Sanish-Bakken, risk penalty legalese, Mountrail County
25635, EOG, commingling,
25636, Henry Hill Oil Services, SWD
Note: not much else of interest, except commingling and some continued case

Friday, February 24, 2017 (three cases)

25637, RIM Operating, Lakeside-Midale/Nesson Unit Area, unitization of all of section 11-163-89, within Lakeside Field in Burke County

25638, plan to be signed by owners of interest related to same case, #25637

25639, conversion of Mesa 44-11H (file/permit #17013) in section 11-163-89, SWD

Briefs -- January 26, 2017

Miami-Dade mayor drops sanctuary policy: Trump tweet.

TransCanada submits new application for Keystone XL: via Twitter.

Trump administration fires US Border Patrol chief, a former FBI agent, appointed days ago by former president; political appointee. After chief fired, Trump signs EO on "barrier."

Mexican peso in free-fall.

John Kemp says treaties don't allow tariffs as proposed: via Twitter.

Trump "delays" signing EO on voter fraud: via CNN. 

Steady At 38 Active Rigs; Four DUCs Reported As Completed -- January 26, 2017

Active rigs:

	1/26/2017	01/26/2016	01/26/2015	01/26/2014	01/26/2013
Active Rigs	38	48	156	187	190

No wells coming off confidential list Friday.

Three new permits:

• Operator: Whiting
• Field: East Fork (Williams)
• Comments:

One permit renewed: a Petro-Hunt USA permit in McKenzie County.

One permit canceled: a BR Cleetwood permit in McKenzie County.

Four producing wells (DUCs) reported as completed:

• 31308, 510, EOG, Wayzetta 96-3019H, Parshall, t11/16; cum 7K after 27 days;
• 31596, 287, XTO, Johnson 31X-6CXD, Siverston, t11/16; cum --
• 31597, 122, XTO, Johnson 31X-6D, Siverston, t11/16; cum --
• 31609, 1,326, XTO, Johnson 31X-6G, Siverston, t11/16; cum --

NDIC Hearing Dockets For February, 2017, Highlights

Link here.

These are only the highlights of the February hearing docket agenda.  A summary of the full agenda is here.

Disclaimer: I often do these in haste; there will be factual and typographical errors. If this information is important to you, go to the source. My notations on the screenshots below are not "official." They are simply my thoughts and could be very, very wrong.

Wednesday, February 22, 2017 (eight pages)

25603, Marathon Oil, Bailey-Bakken, i) 8 wells on a 1280-acre unit; ii) 10 wells on another 1280-acre unit; and, iii) 11 wells on another 1280-acre unit, Dunn County
Note: not much else of interest, except commingling and pooling cases

Thursday, February 23, 2017 (eight pages)

25623, CLR, Elm Tree-Bakken, 23 wells on an existing overlapping 2560-acre unit, sections 14/23/26/35-T153N-R94W (see graphic below), McKenzie County
25627, Crescent Point, Ellisville-Bakken, 9 wells on each of five 1280-acre spacing units; Williams County
25628, Crescent Point, Winner-Bakken, 9 wells on each of nine 1280-acre spacing units; Williams County
25629, Crescent Point, Dublin-Bakken, 9 wells on each of three 1280-acre spacing units; Williams County
Note: not much else of interest, except commingling and some continued case

Friday, February 24, 2017 (three cases)

25637, RIM Operating, Lakeside-Midale/Nesson Unit Area, unitization of all of section 11-163-89, within Lakeside Field in Burke County

25638, plan to be signed by owners of interest related to same case, #25637

25639, conversion of Mesa 44-11H (file/permit #17013) in section 11-163-89, SWD

*****************************
Case 25623

25623, CLR, Elm Tree-Bakken, 23 wells on an existing overlapping 2560-acre unit, sections 14/23/26/35-T153N-R94W (see graphic below), McKenzie County. Three graphics of this 4-section  (2560-acre) stand-up drilling unit. Note all the other pads in the immediate area. I did not check but I assume move of these are 1280-acre spaced wells.

Note: for newbies who might have a few wells in the better part of the Bakken, you, too, will participate in this many wells sometime in the future. The graphic does not include additional units that will permit wells to recover oil along section lines, so it is likely that there will eventually be even more wells in this area.

Screenshot #1:

Screenshot #2: 

Screenshot #3:

Hess Conference Call, Earning 4Q16, Seeking Alpha -- January 26, 2017

I posted some data points regarding Hess' plans for 2017 in the Bakken earlier this week. These are data points from the conference call, earnings 4Q16, over at Seeking Alpha:

Global:

• total global oil CAPEX spend, 2014: $700 billion
• total global oil CAPEX spend, 2016: $380 billion
• total global oil CAPEX spend anticipated for 2017: "modestly higher"
• implication: "this level of spend will not be enough to bring forward the necessary production over the next several years to meet future oil demand growth and offset production declines globally
• supply won't meet demand, due to OPEC, non-OPEC cuts, natural field declines
• increased US shale oil production can't make up that shortfall
• "leading to higher oil prices this year and into 2018"

Hess: four key areas

• the Bakken: will go from two rigs to six rigs over the course of 2017
• two offshore developments North Malay Basin and Stampede; on-line in 2017 and 2018, respectively
• world-class Liza and recent Payara oil discoveries in Guyana; Liza, first phase, mid-2017

Hess: spend

• 2017: CAPEX - $2.25 billion

Hess, production, global

• full year, 2016: 321,000 boe/d excluding Libya
• full year, 2017: slightly lower, 300 - 310,000 boe/d excluding Libya
• full year, 2018: strong production growth (Bakken, Valhall Field [Norway])
• late 2017, early 2018: 310,000 boe/d excluding Libya

Hess, production, Bakken

• 2016: 105,000 boe/d
• 2017: 100,000 boe/d

MLP IPO

• in 2017

Bakken operations

• anticipate average 13% uplift in EUR per well from 50-stage completions 
• 2017: forecast IP90s to average between 700 and 750 bopd, compared to 620 bopd in 2016
• 2016: from the Bakken, 105,000 boe/d, which met high end of guidance
• 2017: drill 80 new wells; bring 75 new wells on-line; $4.8 million/well (drill/complete)
• pilot study: 60-stage sliding sleeve may be approaching the technical limit and mechnaical design; now Hess wants to test technical limit of proppant (sand); will bring wells to $5.5 to $6 million
• IP180 uplift: hope to see 10% to 15%

Bakken operations, guidance

• $610 million for "Bakken operated"
• about $465 million of that for drilling and completion
• about $95 million is money spend for DUCs carried into 2018, and also pad building for future drilling
• $50 million for maintenance 

Well-to-well interference, from Q&A

Given our tight nine in eight spacing which is only about 500 feet between the wells, we are going to pilot those higher loading to find out where the optimum point might be to further increase value while not causing significant well to well interference. So when we know what is with the proppant loading that we have, we haven’t seen any significant well to well interference so that says you can probably get more proppant in the well and still be okay. So we are going to test the limits of that this year and see exactly how much that is. And so certainly on the sliding sleeve system, in terms of your question on where we are on technology, I think again as we approach 70 stages and got a lot number I think we are start to reach the technical limit there and next things will be proppant loading for us in the core of the core. But again that sliding sleeve system because it is so inexpensive and so efficient to install it is the highest optimum completion technique in the core of the core.

As you move outside the core which we will being testing that an in the later years 2018, 2019, data seems to indicate that maybe slickwater completions or even higher proppant loadings with plug and perf maybe the answer out there and that’s purely because there is a lot natural fracturing when you get out of core of the cores. So you are going to need more sand and more energy in the reservoir to connect all those fracture to that. So that’s kind of where I see it going.

Pricing

• it was hard to say for sure what prices Hess was expecting for WTI going forward, but it soundedlike melting up toward $60 by end of 2017, and toward $70 toward 2018 but it was not clearly stated and my bias may be showing. 

 

Tell Me Again Why We're Doing This? -- January 26, 2017

US expected to begin selling crude oil from the Strategic Petroleum Reserve this month. Really?

Link here.

Yesterday (January 25, 2017) the U.S. Department of Energy's (DOE) Office of Fossil Energy awarded contracts for the first of several sales of crude oil from the Strategic Petroleum Reserve (SPR).

A Continuing Resolution enacted in December 2016 included a provision for DOE to sell up to $375.4 million in crude oil from the SPR. This sale will be the first of several planned sales totaling nearly 190 million barrels during fiscal years 2017 through 2025.

As the largest stockpile of government-owned emergency crude oil in the world, the SPR was established to help alleviate significant oil supply reductions from occurrences such as major geopolitical events, severe weather, unplanned production curtailments, transport disruptions, and delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR held more than 695 million barrels of crude oil as of January 13, or about 97% of its design capacity (713.5 million barrels).

Let's go through that list again:

• major geopolitical events (I guess that would be the election of President Trump; BREXIT talk)
• severe weather (I guess all the winter storms this year)
• unplanned production curtailments (yeah, US producers cut back production last year; OPEC announces cuts in production for first half, 2017)
• transport disruptions (CBR derailments; it's been awhile)
• delivery outages (Keystone XL killed; DAPL killed)

Wow, glad we got that solved. 

The data:

• 2017 - 2015: nine years
• 190 million bbls / 9 years = 21 million bbls / year = 0.058 million bbls/day = 58,000 bbls/day
• SPR storage: ~ 700 million bbls
• By law: SPR must contain 90 days of import supply. Currently in excess of 140 days and has been as high as 160 days as recently

At the end of the day, the dollar amount and the bbl amount is so insignificant this comes across simply as an exercise giving the DOE something to do. No wonder Rick Perry wanted to do away with the DOE. 

Update On The Hartselle Sandstone -- Alabama -- 7.5 Billion Bbls Bitumen -- January 26, 2017

The original post on the Hartselle Sandstone at this link.

This analysis dated August 22, 2016. Abstract:

The Mississippian age Hartselle Sandstone of northwestern Alabama has been estimated to contain approximately 7.5 billion barrels of bitumen, with roughly 350 million barrels within 15 meters (50 feet) of the surface. No commercial development of these oil sands has occurred as of yet. With the increased desire for North American energy independence, the Alabama Oil Sands Program (AOSP) was established to provide a comprehensive, up- to- date geolog ical and engineering assessment of oil sands resources in Alabama, as well as a thorough evaluation of legal and regulatory issues surrounding development. The AOSP serves as a focus for oil sands activities and initiatives in the state to conduct complete geological, geochemical, geophysical, and engineeri ng analyses.

After a comprehensive review of the legacy data available at the Geological Survey of Alabama and the State Oil and Gas Board, a “fill in the gaps” approach is being used for the AOSP.

Previously sampled and tested outcrops have been revisited in order to implement modern testing methods to provide updated information about the hydrocarbons and physical properties of the Hartselle Sandstone. Additional sites have been identified and are being sampled and analyzed. A ground penetrating radar (GPR) survey has been conducted in the area of interest, in order to better define the vertical structure and possible hydrocarbon saturation down to an estimated depth of 200 m within the Hartselle Sandstone.

Additional analyses of newly acquired cores and subsequent chemical analyses of the rock and bitumen will help ground truth the GRP survey. With the acquisition of this new data, current reservoir models and reserve estimates can then be recalculated using up to date methodologies. Newer near-surface and in situ extraction technologies are being investigated for their applicability to small- to medium-sized deposits such as the Hartselle in Alabama. Thus, the AOSP will provide a comprehensive assessment of the potential for development of the Hartselle Oil Sands of Alabama.

A reminder to readers: the Gulf Coast refineries were optimized decades ago for heavy oil; that was the importance of the Keystone. The Hartselle Sandstone, a long, long way from development, if ever, is a similar source for heavy oil.

Peak oil? What peak oil?

Random Update Of REX -- The Massive Header Natural Gas System With Access To Almost Every Other US Market -- January 26, 2017

Data points from RBN Energy on the recently completed REX Zone 3 and the future of northeast natural gas markets:

• Tallgrass Energy: Rockies Express Pipeline (REX)
• brought on-line January 6, 2017: the last 350 MMcf/d of its 800-MMcf/d Zone 3 Capacity Enhancement Project
• boosted east-to-west takeaway capacity out of Ohio to 2.6 Bcf/d (~ 400,00 boe/d), up 45% from 1.8 Bcf/d previously
• fully-subscribed
• designed to serve Marcellus / Utica
• filled up almost instantaneously
• But note this:
• Northeast production did not increase! The natural gas came from other pipeliness.
• all Marcellus / Utica pipelines have at least partially reversed flows, but REX Zone 3 has been most significant
• huge volume
• 15-plus interconnects with major long-haul pipelines

REX: a massive header system with access to just about every other US market
Implication: Northeast pipelines are going to be competing for supply; REX appears to have the advantage.

Twitter Scan Suggests Conversation Has Changed -- Bullish On Oil-- January 26, 2017

Jobs: first time unemployment claims surge 22,000 to 259,000. I guess now that the election is over, the Department of Labor felt safe to report "real" numbers. Forecast: 244 to 250. Actual surges well past the high end of forecast. Not only that, but the prior week number was revised upward to 237,000. Four-week average down slightly to 245,500. 

All three indices hit record highs: Dow, S&P 500, NASDAQ. 

RIN Tin Tin: I really don't care about the issue with regard to Carl Icahn (conflict-of-interest issues generally don't bother me) in this story. I'm linking it to remind me about RINs which, once-upon-a-time, confused me.

US to begin selling oil from SPR today: comments here. 

Making America greater than ever before: "Fiat Chrysler profit means big checks for UAW workers" -- US News. Average worker bonus: $5,000. Ford will average $9,000 profit sharing for each of 56,000 employees.

BHI: reports much wider loss than forecast: 30-cent loss after adjustments vs 11-cent forecast. Revenue came in at $2.41 billion; forecast, $2.37 billion. BHI expects North American shale to lead industry recovery, from Reuters.

Meme: "a foreign country will always test a new president." On MSNBC "Morning Joe" it was noted that President Trump has not yet been tested by any foreign government. Note: the president has been in office for less than one week.

Huge whoop! Comcast (CMCSA) up over 2% in pre-market trading:

• best results in nine (9) years
• announces buyback
• increases dividend; up 15% to $1.26/share
• announces 2 -1 stock split

************************

Presidential tweet: 35 minutes ago ( ~ 5:10 a.m. Central Time) --

Ungrateful TRAITOR Chelsea Manning, who should never have been released from prison, is now calling President Obama a weak leader. Terrible!

The tweet, at face value, may or may not mean anything more than what it says but last night during the ABC interview, Trump said he was "touched" by the very thoughtful, long private letter that President Obama left the new president.

Human nature, being what it is, suggests to me that Trump had that letter in mind when hearing that an individual pardoned / sentence commuted by Obama is now dissing his/her benefactor.

************************************ 

Snowflakes and cupcakes: some folks just can't get over the fact Donald John Trump is president. Even after the record-setting Dow, S&P 500, and NASDAQ, Andrew Ross Sorkin says he is not impressed. And this guy is still on a business show? When pressed, he was unable to say what would excite him. 

On cue: last night before going to bed, I asked in passing, somewhat tongue-in-cheek, that President Trump must be getting eager to be out with the public again, to fly again, to take that first Marine One flight, that first AF One flight. Today, it was announced that President Trump is taking his first flight o AF One. I think "they" said it was to Pennsylvania. 

A quick run-through of Twitter this morning suggests the conversation has turned: bullish on oil in the out years. For example, this graph via Twitter:

*************************************

Back to the Bakken

Active rigs:

	1/26/2017	01/26/2016	01/26/2015	01/26/2014	01/26/2013
Active Rigs	38	48	156	187	190

RBN Energy: monitoring compliance with the OPEC/NOPEC deal to cut production.

Hiding non-compliance will be considerably more difficult this go-round than in the past, but it doesn’t mean that no one will try. Over the first three weeks of January, the agreement seems to be holding. There is no way for outsiders to precisely monitor how much oil is being produced daily in each country, of course, but we do know (from ClipperData’s tracking) that shipments from six leading OPEC producers in the Middle East (Saudi Arabia, Iraq, United Arab Emirates, Iran, Kuwait and Qatar) have dropped sharply––from ~19.4 MMb/d in December 2016 to ~18.5 MMb/d so far in January 2017. 

Exports from Saudi Arabia (the largest OPEC producer by far) were down more than 9% month-over-month, from ~7.4 MMb/d to ~6.7 MMb/d, accounting for the most of the Middle East’s cuts.

***********************************

The Market

Even after an incredible day yesterday, futures suggest the market will continue this impressive run.  WTI sits at $52.86.

Huge whoop! XLNX reported today:

• better-than-expected
• top and bottom line also witnessed impressive year-over-year improvement
• came in at 52 cents/share; estimate of 49 cents
• 6.1% increase y/y
• revenues up 3.4%
• fifth consecutive quarter of revenue growth 

Huge whoop! Comcast (CMCSA) up over 2% in pre-market trading:

• announces buyback
• increases dividend
• announces 2 -1 stock split