Update On The DAPL -- January 27, 2017

I posted this over at "Cabinet" shortly after Donald J Trump was elected president thinking it would be relevant / important at some later date:

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US Army Corps of Engineers

This may be of interest in 2017:

• Secretary of Defense: President-elect Trump will nominate General (ret) James Mattis
• US Secretary of the Army: Eric Fanning, as of May 17, 2016, appointed by the President; no fixed term
• US Under Secretary of the Army: Patrick J. Murphy, as of January 4, 2016; appointed by the President; term length -- no fixed term
• Assistant Secretary of the Army (Civil Works): Jo-Ellen Darcy, appointed by President Obama, 2009; current activities -- cleaning out her office; updating her resume
• US Army Corps of Engineers: Lieutenant General Todd T. Semonite, assumed command May 19, 2016;

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DAPL Update

I posted that "chain of command" so that folks reading the story at The Williston Herald updating the DAPL could keep the players straight. 

The green light is on for the red-lighted Dakota Access pipeline, but the picture is still murky when it comes to how things will unfold from here.

A memo prepared by the U.S. Army Corps of Engineers sometime in December and contained in the paperwork filed Jan. 6 in U.S. District Court helps shed some light on what may occur, and also contains information that has, until now, been veiled from public view.

An official with the agency could not be reached to verify the exact timeframe of its preparation, but the memo references a December 2, 2016, meeting with the tribe in its conclusions, and Assistant Secretary to the Army Jo Ellen Darcy’s announcement was made December 4, 2016.

In the nine-page memo, Col. John W. Henderson of the Omaha District wrote that denying the easement would require a finding that the crossing was inconsistent with some aspect of the authorized purpose of the Lake Oahe project, or violated some other required parameter. An Environmental Assessment had already shown the former not to be the case, and Henderson lays out the remaining parameters that were met point by point.

The memo also mentions a December consultation with the tribe, held to discuss additional safety precautions that could be taken at the disputed crossing, as well as the risks in light of those additional steps and whether to issue the easement.

The three points are close in wording to what was ultimately published in a Federal Register notice that announced the start of a public scoping session for an Environmental Impact Statement to consider alternate routes.

Craig Stevens, with the MAIN Coalition, said the memo clearly shows that politics overrode an open and transparent public process, superseding it by political decisions that lay outside the known regulatory process.

“This memo demonstrates that the Army Corps of Engineers worked diligently — and in accordance with the law — to ensure the Dakota Access Pipeline was sited and constructed in the most environmentally and culturally sensitive manner possible,” he said.

It also showed, Stevens said, that the U.S. Army Corps of Engineers was going to issue the easement in December, until the Obama administration intervened.

“It’s now clear, and certainly unfortunate, that former assistant secretary of the Army, Jo Ellen Darcy, and other appointees in the Obama administration blocked the Corps’ work purely for political reasons,” he said. “We are pleased that President Trump is clearing the way for this and other important energy infrastructure projects to move forward.”

Much more at the link. 

Week 4: January 22, 2017 -- January 28, 2017

President Trump has completed his first full week.

This  past week, I've entertained a discussion on the rebalancing supply/demand crude oil issue at several posts: here; here; and, here;

For the archives: the stock market (Dow 30) hit 20,000 on the third full business day of President Trump's presidency.

From the HAL earnings conference all: not a single asset outside the US that competes with US opportunities.

Bakken 2.0
Emerald Oil transfers 130 wells to Petro-Hunt Dakota, LLC 
Unfettered, North Dakota could produced 2 million bopd

Operations
Oasis corporate presentation, earnings conference call
CLR wants to place 23 wells in one spacing unit
Hess will triple number of rigs in Williston Basin ; and, here;
EOG with permits for a 13-well pad
New operator in the Williston Basin: Bruin E&P Partners
Forecasting EURs in the Williston Basin 

Fracking
Sand
Frackers reporting weak sales

Pipelines
With President Trump's executive orders, Keystone XL and DAPL back in play  

Miscellaneous
Halcon selling it Eagle Ford assets to buy acreage in the Permian
Break-even costs for sale drop to $30/bbl 
Happy 51st birthday to an Enduro Operating well

Eighteen Permits Renewed; Oasis With Three New Permits -- January 27, 2017

Active rigs:

	1/27/2017	01/27/2016	01/27/2015	01/27/2014	01/27/2013
Active Rigs	38	47	154	187	190

Three new permits:

• Operator: Oasis
• Field: Banks (McKenzie)
• Comments:

Eighteen (18) permits renewed:

• BR (8): three Cleetwood permits, one Lassen permit, one CCU Burner permit, in McKenzie County; one CCU Golden Creek permit, one CCU Audubon permit, and one CCU Boxcar permit, in Dunn County
• QEP (6): six Tipi V permits in McKenzie County
• Enduro (2): one NSCU permit, Bottineau; and, one MRPSU permit in Renville County
• Lime Rock (2): one State permit and one Kary permit, both in Dunn County

One producing well (a DUC) reported as completed:

• 31226, 1,509, XTO, Harley Federal 24X-15A, Sand Creek, t1/17; cum --

Operator transfer:

• about 130 wells
• from: Emerald Oil, Inc
• to: Petro-Hunt Dakota, LLC
• oldest permit: 05748
• most recent permit: 30580
• location: most in McKenzie County; several in Stark County; and a couple in Billings County
• some familiar names: Clark Griswold; Noonan; Mortimer Duke; Mongoose; Joel Goodsen; Excalibur; Lloyd Christmas; Billy Ray Valentine; Talon; Slugger; Pirate; Dean Wormer; Ty Webb; Caper; Hot Rod; and so on

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Bakken Operators

Over at Bakken Operators, note:

Emerald Oil (VOG acquires Emerald Oil, announced July 11, 2012)

• transfers about 130 wells to Petro-Hunt Dakota, LLC; daily activity report, January 27, 2017
• Files for bankruptcy; reached a deal with Latium Enterprises Inc. of England prior to filing; see below, for Latium Enterprises, Inc.
• 122,000 net acre position in the core of the Williston Basin -- presentation, 1Q15; 
• January, 2014: acquires 20,800 net acres in Williams, McKenzie; $3,650/acre; around 70,000 net acres total in the Bakken
• August, 2013: sees 2,850 boepd exit rate in December, 2013;
• June, 2013: a two-rig program
• EOX will sell Colorado acreage; focus on its 48,800 net acres in the Bakken, January 8, 2013
• EOX: effective September 4, 2012; acquired 4,500 net acres; $3,200/acre; McKenzie County; ~ 48,000 net acres in the Bakken?
• VOG to acquire Emerald Oil; will operate as Emerald Oil. July 11, 2012.
• For date regarding VOG/Emerald as of this date (July 11, 2012), scroll down to VOG.  
• On date of announcement, July 11, 2012: Williston  Bakken - 43,500 net acres; Niobrara - 45,000 net acres; Central Montana Heath -- 33,500 net acres
• First operated well to be in Dunn County, North Dakota
• Single-rig drilling program
  

Petro-Hunt

• acquires about 130 wells to Petro-Hunt Dakota, LLC; daily activity report, January 27, 2017
• private, so details not easily found
• very, very active in permitting in last half of 2012
• sold 81,000 acres to HK in 2012
• rumored to have 600,000 acres in the Bakken prior to the Halcon deal; see comment at the link
  

Poll -- Who Do You Think Initiated That Hour-Long Telephone Call This Morning? -- January 27, 2017

Oil

  

On CNBC, moments ago, 12:07 p.m. Central Time, it was noted that WTI had a significant (2%) pullback and WTI was trading back below $53. A 30-second debate:

• the bull: we're barely into the OPEC cuts; we've yet to see full effects; oil will test recent high, $56.02 in near future
• the bear: if "we" test $52.50, go below, watch out. (WTI is about $52.85 right now.)

The better case: the bull.

So, we have the markers: $52.50 on the low end; $62.05 on the high end.

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Visuals

As I watch UK PM Theresa May at White House press briefing, one can't help remembering that the following have had strong women leaders:

• UK
• Germany
• Israel
• Brazil
• Thailand
• India
• Argentina
• Philippines

and, many others. But not the US. Just an observation. Not a "value" comment, just an observation.

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Comment

Updates

 

Later, 8:34 p.m. Central Time: I am not particularly pleased with the way the Trump administration, or more accurately, President Trump handled the "wall" issue early this morning -- prior to the phone call. I can understand his frustration and I can understand the frustration of many Americans on this issue but it seems it could be handled much better. President Trump needs to transition from "candidate Trump" to "President Trump."

Original post

Canceled Meetings

That "canceled' meeting between POTUS and POMEX? Not so fast. They had an hour-long telephone call earlier this morning. I think folks need to put this whole North American "family" spat in context. If one actually reads President Trump's tweet prior to the canceled meeting, one actually gets to the nub. Something tells me that it will take very, very little to bring POMEX and POTUS together on this issue. Very, very little. 

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POMEX - POTUS Flap

One wonders who initiated the phone call.

Call Me, Blondie

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Perils of Pauline

Two steps forward, one step back. That's what the POMEX-POTUS "flap" feels like.

I haven't watched the HBO television series in a few weeks, but this really, really reminds me of Julia Louis-Dreyfus in "VEEP." The latter is a 30-minute sitcom that shows a Vice-President and a staff who consistently find themselves "stepping in it" and then figuring out how to recover. Both in the sitcom and in real-life, things move at lightning speed. The politicians need to stay ahead of the narrative that the media will provide by the end of of the day.

In the real-life POMEX-POTUS flap, one can imagine that in the background, Trump's staff spent hours (days?) putting together the agenda and the logistics of the Trump - Nieto meeting. Everything was literally in place. All that was left to do was to start brewing the coffee.

But then, out of nowhere, the president can't sleep, gets up early, tweets an "unfiltered" note about who is going to pay for the wall.

An hour later, the alarm clocks of his staff ring, and literally the alarm bells go off. Bannon is laughing; Ivanka is hysterial; Jared is on the phone. Melania is driving Baron to school, completely oblivious. For the next hour, Trump's staff is busy trying to "recover"; trying to reach Nieto, and trying to get things back on track. Meanwhile, other staff members reach Trump and thirty minutes later, they arrange an hour-long telephone call.

My hunch is Trump's staff knew that POTUS needed to have that conversation. Who called whom? I'm not sure that's the big question. I think the bigger question is: was there an intermediary? If there was, who was it?

My hunch: there was an intermediary. Carlos Slim. [After listening to his remarks at the UK PM Theresa - POTUS, I'm not so sure there was any intermediary. POTUS was very, very clear on his feelings about the US - Mexico situation; he did not come across as someone needed an intermediary.]

Flashback, 1992:

Case Study: Exelon's Entry Into US LNG Export Market -- January 27, 2017

I track list of potential new LNG export facilities at this site.

Over at Crain's, an update on the LNG export market, with an Exelon case study. Data points:
Exelon:

• awaiting federal permission to build a $3 billion LNG export plant in Brownsville, Texas
• until recently, regulatory barriers prevented US gas suppliers from fully participating in global markets
• Obama set precedent: began approving non-FTA export facilities
• first such export facility began exporting out of Louisiana last year
• US with price advantage
• US: sells at $3.20 per million BTUs; $10 in some overseas markets
• LNG exports could help ease pressure on Exelon's generating profits
• but securing approval could take year! -- I thought Trump was working to stop these delays
• by time approval given, could be too late; by then export markets could be glutted with US LNG
• risks: China may be miffed that Trump pulled out of the Trans-Pacific Partnership 
• not mentioned: the expansion of the Panama Canal 

Update Of Oasis -- Motley Fool -- January 27, 2017

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have read here. Data points from Motley Fool:

2016:

• 2016, drilling budget: $200 million, "which was 57% lower than it spent in 2017." (sic)
• 2016 drilling budget roughly matched anticipated cash flows at $35-oil
• that spend would not be enough to keep production from declining
• anticipated: a fall from 50K boepd to as low as 46K boepd, year-over-year
• this was a very modest forecast (6% decline forecast) vs 10% and 14% decline anticipated by CLR, Whiting, respectively
• actual production decline:
• Oasis beat expectations; despite huge cut in drill spend, production guidance was 50K in 3Q16 -- incredible 
• Oasis took advantage of that free cash flow; lowered total debt by $100 million
• Oasis took strong balance sheet / surging stock price to acquire 55,000 net acres in the Bakken
• acquired that acreage from SM Energy 
• SM Energy deal added 12K boepd to Oasis production; increased drilling inventory by a whopping 25%

2017:

• will ramp up activity
• will double its rig count (Hess also plans to triple its rig count in the Bakken this year) as long as oil stays above $50
• will add a 5th rig in 2018
• on pace to deliver a compound annual production growth rate in the mid-teens through the end of next year; absolute production growth of 65% by the end of 2018 when factoring in the SM Energy transaction

Compare with CLR:

• Oasis: mid-teens, then 65% production growth company-wide
• CLR: will see only an increase of 4% this year (compared to Oasis "mid-teens" production growth
• Continental plan requires $55 oil, and half of its well completions will come from the higher-return STACK and SCOOP plays in Oklahoma ("higher-return" -- financial return)

Compare with Hess:

• Hess production will be up 5% this next year (again compared to Oasis "mid-teens" production growth (all forecast; estimates; mid-points)

Gasoline Demand: An Under-Reported Story? -- January 27, 2017

Yesterday we saw a surge in first time unemployment claims, up 22,000, far surpassing what analysts had forecast.

Let's see the data on "gasoline demand" over same period.

Wow, wow, wow! Look at the incredible plunge in "gasoline demand" over the past couple of weeks. The steep (negative) slope of the curve is truly amazing, when the backdrop is the media narrative of an improving economy.

Remember: gasoline is at historically, ridiculously low prices. The price of gasoline is not driving demand down. 

The graphic compares current data with data from one year ago.

By the way, when looking at the graph above, put that in context with the first estimate of the 4Q16 GDP: it came in very, very weak, at 1.9%; below 2.4% expectation; and, that was less than the 2.9% predicted earlier in the month.

How does current data compare with data January, 2008, just before the economy tanked; in January, 2009, when things were looking incredibly bad -- folks were truly worried about implosion of the US economy; and now, in January, 2017, when things are supposed to going so well.

January, 2008:

January, 2009:

January, 2017:

Impact Of Changes To Mexican Heavy Crude Benchmark -- RBN Energy; Fracking Sand Update -- January 27, 2017

Updates

Later, 11:25 a.m. Central Time: that "canceled' meeting between POTUS and POMEX? Not so fast. They had an hour-long telephone call earlier this morning. I think folks need to put this whole North American "family" spat in context. One wonders who initiated the phone call.

Original Post

 

Futures: again, this has been quite fascinating, watching futures go from "red" to "green" but not by much; and, then all of a sudden, at 7:01 a.m. Central Time, futures jump from 4 to 29 points in early trading (CNBC). After GDP report comes out, Dow 30 goes "red."

CVX earnings: wow, huge miss. 22 cents forecast vs 64-cent estimate; shares down 3% on news;

First estimate 4Q16 GDP: 1.9% --  source here --  after report Dow 30 futures went negative. MSBNC: "tepid." On January 3, 2017, the "GDPNow" forecast:

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2016 is 2.9 percent on January 3, up from 2.5 percent on December 22.

Mexican stand-off: stories to follow --

• Trump's favorability ratings
• effect on the market
• is the "war of words" really needed?
• who blinks first?
• Vicente Fox: on CNBC, the reason US automakers almost collapsed -- "US workers make high-cost cars of mediocre quality" -- Vicente Fox will help move the discussion
• the "wall" -- deploy the drones 
• by the way: Trump's 20% on imported goods echoed GOP plan; chairman of House Ways and Means supports it; 

North Dakota reservations hope Trump's presidency makes a difference -- article over at Reuters. 

Proppacalypse: frack sand demand on fire in 2017 -- Rigzone. Mike Filloon predicted this at least a year ago. Data points:

• rig counts plummeted almost 75% during the last two years
• sand demand dropped off about 40%
• proppant use in the US will reach above 2014 levels despite diminished activity of 60% fewer rigs
• proppant intensity has increased more than 50% in the Permian, Eagle Ford, the Bakken, since 2014
• 2016 forecast: demand would be up to 200 billion pounds; that cap was met by the beginning of December; now, forecast for 240 billion pounds for 2018, double the annual peak of 108 billion barrels
• demand could drive sand prices at least 60% higher: to ~ $40 per ton range

Proppants 101: for newbies -- a primer on sand.

Fracking sand, some data points from linked posts above:

• when you see a 100-unit train carrying sand, that amount of sand will frack one Permian well, maybe five Bakken wells at most
• there are about 900 DUCs in the Bakken: wells drilled to depth; waiting to be fracked
• Harold Hamm (on CNBC yesterday -- January 27, 2017) said there was no shortage of sand 

New player in the oil patch: Bloomberg's take on the GE-Baker Hughes merger.

Baker Hughes: "only higher oil prices will spur international spending." Baker Hughes suggests oil prices must go up 15% to drive new investment. $53 x 1.15 = $61.

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Back to the Bakken

Active rigs:

	1/27/2017	01/27/2016	01/27/2015	01/27/2014	01/27/2013
Active Rigs	38	47	154	187	190

RBN Energy: impact of changes to the Mexican heavy crude benchmark -- part 2.

A major component of the formula used to set the price of Maya—Mexico’s flagship heavy crude, and a key staple in the diet of many U.S. Gulf Coast refiners—was changed earlier this month, raising new questions about this important price benchmark for nearly all heavy sour crude oil traded along the U.S. Gulf, and points beyond. The change came as Maya production volumes continue to fall, and as Maya is facing increasing competition from Western Canadian Select (diluted bitumen) from Western Canada. Today we conclude a two-part series on Maya crude oil, the new price formula and its potential effects.

As we said, in Part 1, Mexico currently produces about 2.2 million barrels a day (MMb/d) of crude oil, about half of which (~1.1 MMb/d) is exported—three-fifths of which goes to the U.S.  P.M.I. Comercio Internacional S.A. de C.V. (PMI) is the crude oil marketing entity of state-controlled Petróleos Mexicanos (PEMEX) and manages the export of four distinct quality grades of crude oil, ranging from Altamira (an asphalt grade) and Maya on the lower end of the quality spectrum, to Isthmus in the middle, and Olmeca at the higher end. Most of Mexico’s crude oil exports to the U.S. Gulf Coast are Maya blends, as Mexico tends to retain most of its lighter grades (Isthmus and Olmeca) for domestic refinery consumption. However, the share of Maya exports headed for the U.S. has been falling fast—from 78% in 2013 to only 44% through the first nine months of 2016; the share of Maya bound for Europe has more than doubled over the same period and the share shipped to the Far East has more than tripled.

Canadian heavy sour crude oils such as WCS and Cold Lake are similar in quality to Maya but have historically been priced at significant discounts due to transportation constraints to reach the U.S. Gulf Coast. Should the Keystone XL Pipeline or other similar pipeline projects be constructed, the availability of these heavy sour crude oils in the Gulf Coast region could increase significantly, leading to more competition for Maya, more downward K factor adjustments, and higher volatility in the Maya price—all to the benefit of heavy-sour crude refiners. As previously discussed, PMI seems to be anticipating this eventuality and has been diversifying its Maya export destinations. Stay tuned for how these and other future events could impact the Maya pricing formula.