Week 10: March 5, 2017 -- March 11, 2017

Just when the Saudis thought it couldn't get any worse, the price of WTI closes below $49. Saudi responds by telling the US shale industry "they won't get a free ride." Whatever that means. Saudi is in deep doo-doo.

That OPEC cut? Turns out that OPEC exported more oil in February than the cartel did in January. Saudi and company caught with hands in the proverbial cookie jar. So much for their announced cuts.

The Australian Climate Institute announced it was closing its doors. Funding has dried up.

Meanwhile, the owner of President Obama's biomass refinery in Hawaii announced that the refinery will be closed. Apparently no one is willing to pay $26 / gallon for algae-produced jet fuel.

Meanwhile, another huge oil discovery was announced in Alaska this past week; the largest on-shore conventional crude oil discovery in 30 years. Peak oil? What peak oil?

"Every" operator is leaving the Canadian oil sands as fast as possible; "every" operator salivating over the Permian.

EOR
Top story of the week: EOG announces natural gas EOR

Operations
North Dakota crude oil production 4% higher month-over-month despite fewer wells; also here;
Oasis acquires 156 SM Energy wells
Flashback: a short lateral that produced 90,000 bbls in one month
Whiting continues to report very nice Rolla Federal wells; and, here
Random update of a Newfield Lost Bridge Federal well
North Dakota's quarterly lease auction; you, too, can buy into the Bakken for $1/acre

Pipelines
"Final" challenge to DAPL thwarted by judge
Enbridge and Spectra Energy acquisition closes
 
Flaring
Where is all that natural gas going?

Fracking
Cost of sand going parabolic
Random note on volume of sand used in fracking
Fracking volumes in the Bakken 
How far might fracking interference extend?

Bakken economy
Williston is #4 on the list of the wealthiest cities in the US: New York City is #15; Dickinson is #14
North Dakota #2 overall; #1 in economic growth

Miscellaneous
#1 hit on the blog this past week
Bakken 2.0? That's what Bloomberg calls it

Train Hauling Ethanol Derails In Iowa; Fire; Mass Evacation Order (Two People Apparently Lived Near The Event) -- No One Injured -- March 10, 2017

Union Pacific train hauling ethanol derails, burns in Iowa.

I'm willing to bet 10 - 1 that mainstream media does not cover this derailment to extent a CBR train derailment would be covered. It's rhetorical. Please don't place any bets. Betting  on such things is probably illegal in most states. Just saying.

Link here.

If a train had to derail, happy to see it happen in Iowa, ground zero for ethanol by rail.

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Sophia: Note To The Granddaughers

Memo to self: file under "Wife Will Kill Me."

Tomorrow morning our 2 1/2 year-old Sophia has gymnastics and swimming lessons.

Her dad is out of town and her mom will be at work. I will take her to her classes.

I plan to give her the card below, and tell her to hand it to the person at the desk. I will stand outside the glass doors and then watch the events unfold.

My wife will kill me, but it should be lots of fun. I can guarantee you that Sophia will do as instructed. She is a very, very smart kid. She has to be, to survive me.

NDIC Daily Activity Report Posted, But Mis-Dated; Mis-Numbered -- March 10, 2017

Active rigs;

	3/10/2017	03/10/2016	03/10/2015	03/10/2014	03/10/2013
Active Rigs	45	33	113	191	187

Five permits renewed:

• HRC (3): three Fort Berthold permits, Dunn County
• BR (2): a Rollacleetwood permit and a Cleetwood permit, both in McKenzie County

And, that was it, except for a laggard -- an SM Energy well transferred to Oasis (#20867, Stepaniek -- must have been in that 156-well transfer the other day, but somehow overlooked)

Williston Made The CNBC List -- March 10, 2017

Dickinson made the list, too.

Watford City, ND, did not make the list but I don't know if there was a population minimum (I could not find the answer  in the full report, but the smallest cities, it appeared, had populations of at least 9,000. Watford City, using the 2010 census, would not have met that threshold). 

The list: the fifteen wealthiest US cities.  

Link here.

Of the top 15 US cities, Williston, ND (Boomtown, USA) comes in #4.

Dickinson, ND, barely broke into the top 15, but beat out New York City.

Cities not on the list: Dallas or Houston; Odessa; Seattle; Chicago; Los Angeles; San Diego; Omaha; Williamsburg.

States not on the list: Washington State; Maryland; DC; Virginia; Nebraska; New Mexico; Middleburg (VA); Ohio; Illinois; Pennsylvania; New Jersey; North Carolia. Except for New York City, no city in New York state made it.

No city in southern California made the list.

Only one city in Texas made the list, falling short of two cities in North Dakota.

Four states had two cities on the list: North Dakota, Colorado, California, Florida.

Only four cities broke the $1 million mark.

Had they only listed the top 10, Williston would have made it.

Had they only listed the top 5, Williston would have made it.

This is not total wealth, this is annual income. 

How much you have to earn to be in the top 1% in the wealthiest US cities:

#1	Jackson	Wyoming	$1,650,902
#2	Bridgeport	Connecticut	$1,390,965
#3	Summit Park	Utah	$1,206,863
#4	Williston	North Dakota	$1,066,541
#5	San Jose	California	$964,238
#6	Naples	Florida	$959,229
#7	Midland	Texas	$885,806
#8	San Francisco	California	$785,946
#9	Key West	Florida	$773,711
#10	Boston	Massachusetts	$701,776
#11	Hailey	Idaho	$690,535
#12	Boulder	Colorado	$683,648
#13	Edwards	Colorado	$680,688
#14	Dickinson	North Dakota	$674,032
#15	New York City	New York	$672,795

Another One Bites The Dust -- March 10, 2017

I may have to start a whole new page: "Another One Bites The Dust." Two stories in a row, sent in by different readers and we're only into day 49 of President Trump's administration.

From The [London] Guardian: Climate Institute to shut down, citing lack of funds for independent research. Chairman says cost of inaction on climate change is clear and issue shouldn’t be used to fight "political and ideological battles."

I'm not sure why "the world" would even need a "climate institute." The science is settled:

• the world is undergoing climate change (as usual)
• the world is facing another round of global warming (the sixth known "round" of global warming; this is the first one to occur during modern times)
• humans are respiring, pushing more and more CO2 into the atmosphere
• Venus has a lot of CO2 in its atmosphere and look what happened to that planet
• it looks like earth doesn't need a "climate institute," Venus does
• we need to send Tom Steyer, Algore, Michael Moore, George Soros, BO, HRC, and about 6,000 others to Venus to "fix" that planet

Data points from the article:

• Australian
• founded in 2005
• twelve years of "independent advocacy and research" 
• proud of its achievements
• Australia prospering in a zero-carbon global economy -- say what?

Australia is facing an energy crisis brought on by that country going "all-green" (actually 40%); Elon Musk says he can fix Australia's "green problem" in 100 days. Previously reported.

Oh, no! The institute's CEO is moving to Fiji to host the 23rd UN convention on climate change.

Please, Mr Trump, do not go.

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Olivia On Her Way To Tutor Time

She will be three years old this summer. On her way to Tutor Time this morning:

President Obama's Biomass Refinery In His "Home State" Will Be Closed; Another One Bites The Dust -- March 101, 2017

Will shutter. As in will be closed. It appears Honeywell got all the tax credits it needed out of this project. Time to move on. Maybe they can convert the site to a outdoor water park. The piping would all be in place, read to go.

This is how it all started:

• 2011
• under President Obama
• US Dept of Energy
• $25 million award to Honeywell
• biomass demonstration project 
• $26/gallon algae jet fuel for the US Air Force / US Navy

The story:

UOP has begun construction in Hawaii of a biofuels demonstration unit that will convert forest residuals, algae and other cellulosic biomass into green transportation fuels. Backed by a $25 million U.S. Department of Energy award, the Honeywell UOPIntegrated Biorefinery will upgrade biomass into high-quality renewable gasoline, diesel and jet fuel.

The project is part of the DOE’s efforts to help spur the creation of the domestic biofuel industry, drive domestic job creation and reduce U.S. dependence on foreign oil.

The project will also support the Hawaii Clean Energy Initiative goal to achieve 70 percent clean energy by the year 2030. Located at the Tesoro Corp. refinery in Kapolei, the Integrated Biorefinery will be used to demonstrate viability of the technology, test the fuels produced and evaluate the environmental footprint of the fuels and the process technology. The project, which will generate more than 80 new jobs during construction, is scheduled to begin initial production in 2012. It is expected to be fully operational by 2014.

UOP: Universal Oil Products.

Now, five years later: shuttered.

And all that stuff about "reducing US dependence on foreign oil"? Back in 2011, the Bakken was just beginning to hit its stride. Harold Hamm did more to reduce US dependence on foreign oil than any government program.

Another One Bites The Dust, Queen

The Political Page, T+49, Part 2 -- March 10, 2017

Somehow this can only be seen as positive news. From The Washington Post: EPA environmental justice leader resigns, amid White House plans to dismantle program.

Mustafa Ali, a senior adviser and assistant associate administrator for environmental justice, has served more than two decades at the agency, working to ease the burden of air and water pollution in hundreds of poor, minority communities nationwide. He helped found the EPA’s environmental justice office during the early 1990s and became a key adviser to agency administrators under Republican and Democratic presidents.

.... "working to ease the burden of air and water pollution in hundreds of poor, minority communities nationwide...." --- where was he when Flint, MI, made the decision to convert to lead-contaminated water, a fairly basic commodity in the US?  [Later, that didn't take long. A quick google search answered that question. He should have been fired a long time ago.]

Two decades. These guys are called "lifers" in the military. Time to go. Don't let the door hit you on the way out. I was a lifer. I don't recall if the door hit me on the way out. I loved the service. Best "professional/job" decision I ever made. I would  have stayed longer had there not been a mandatory retirement age. I probably left at an age when I was doing my best work. My hunch is that Mustafa was at the top of his game, also. I was working for half-pay by that time. When I left, the USAF hired a contractor to do what I was doing and paid that contractor 1.5x what I was getting paid. Funny how governments work. 

The good news: it sounds like "they" don't plan to replace Mustafa with a contractor.

Peak Oil? What Peak Oil? Huge Discovery In Alaska -- March 10, 2017

From E&P Magazine. Data points:

• Repsol, Armstrong Energy LLC
• 1.2 billion bbls of recoverable light oil
• claim: "largest US onshore conventional hydrocarbons discovery in 30 years"
• parsing: conventional
• fact: pales in comparison to Permian and Bakken (unconventional)
• Horseshoe No. 1 and 1A: drilled during the 2016-2017 winter campaign
• Nanushuk Play
• the two wells extend the "Pikka Area" by 20 miles
• first production NET 2021
• potential: 120,000 bopd

Comment: Repsol and Armstrong talking their book. A nice discovery but that's about all.

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

Australia's Energy Crisis

From an earlier  post: South Australia: 40% renewable energy grid; fails. I think everyone knows the story. Elon Musk says he will solve the Australian power crisis in 100 days. No doubt, using renewable energy. LOL.

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Beautiful Day In North Texas

View from the patio, sort of looks like housing in Moscow, doesn't it? Certainly not a lot different than our military housing when we lived in/at/on Rhein-Main Air Base, Germany, co-located with Frankfurt, Germany, international airport, one of the busiest airports in the world.

Jobs -- Trump's First Full Month -- Smashing Success -- Bloomberg -- March 10, 2017

Link here.

• participation rate: increased 63%; highest since last March -- smashing success (this statistic was buried near the end of the article -- I guess there was just too much good news to get into the lede)
• "the number of people out of work, a figure repeatedly highlighted by Trump as a sign of economic malaise, fell by 176,000" -- Bloomberg  
• payrolls gain 235,000 (forecast for 190,000) -- smashing success
• average hourly earnings increased almost 3% -- smashing success
• jobless rates ticks down to 4.7% -- smashing success
• the 235,000 increase followed a 238,000 rise in January -- smashing success
• numbers coincide with surge in economic optimism -- smashing success
• closer and closer to full employment, Moody's -- yes, smashing success
• private employment; biggest gain since July, 2016 -- again, smashing success
• construction jobs rose by 58,000, the strongest in almost a decade, that would be the entire Obama administration, a trillion dollars in stimulus, and another ten trillion dollars in debt
• manufacturing payrolls gained 28,000, the most since August, 2013, which was the second Obama term
• retail positions fell by 26,000 -- tectonic changes in the way Americans shop
• global warming had much to do with this -- I can't make this stuff up - that's what Bloomberg says

Analysts said this won't last.

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The Bull Market

Previously posted:

The bull market, in four data points:

• the market low was in early 2009 just after Barack Obama takes office
• four years later, in 2013, the S&P is back to where it was when George Bush left office
• by 2016, three years later, the S&P rose 13%; most of it coming in the last year when we finally had hope and change -- President Obama was on his way out
• between November 2016 and today, about four months, the S&P has surged 31%

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

Friendship Day At Middle School Today

Why I Love To Blog -- Reason #56 -- March 10, 2017

Early yesterday I made an off-the-cuff remark suggesting that US shale production was adding 1 - 2 million bopd of crude oil. I did not do any research to come up with that number; I simply made a WAG based on what was being reported on the blog over the past twelve months. Last night an oil analyst for Reuters based in London posted this:

US crude oil production forecasts (link here):

• last March (2016): 8.29 million bopd
• December, 2017 (latest EIA forecast): 9.53 million bopd
• 1.24 million bopd (increase in forecast for US production) 

Wow: Reuters/EIA -- 1.24 million bopd; I suggested 1 - 2 million bopd. Pretty close. And before the year is over, I bet we're closer to 2 million bopd than 1 million bopd. 

The Political Page, T+49 -- March 10, 2017

Raqqa: no links. Too depressing. So much for the US Marines crushing ISIS in their capital. The politicians have gotten involved and are squabbling on how to "do" it. I have not read the stories but I assume the Turks are upset that the Kurds are going to get the credit for destroying ISIS. The good news: the current administration is less likely than others to let the US Marines get bogged down in nation-building. 

First world problem: restaurants in blue states are adding a 3% to 4% surcharge to cover mandated minimum wage laws. The story is at the WSJ. I don't have a dog in this fight but it sort of begs the question why they don't add a 3% to 4% surcharge for increased utility costs due to cover government mandated non-dispatchable energy; or, in California, a 10% to 15% surcharge to help pay for the bullet train; or, in New York, a 20% surcharge to fix the streets that one drives on getting to the restaurant. And the list goes on. But let's look at the 3% surcharge.

[Note: to be clear -- this is not about whether I support the surcharge or my thoughts regarding the minimum wage, it's simply a) whether I can handle the 3% surcharge; and, b) my current dining / pricing experiences.]

For me, my go-to restaurant when I'm biking, or traveling cross-country: McDonald's. I get the "American meal: regular hamburger, small fries, small drink." Almost everywhere outside of the blue states the price is $3.13. A 3% surcharge will add 9 cents. I can handle that.

When May and I go out for breakfast, our go-to restaurant is a French restaurant on Main Street, Grapevine, about $15 for the two of us. A 3% surcharge would add 45 cents. We can handle that. We generally leave a 20% tip, sometimes more. May's mom was a waitress.

And when we go out for sushi at our go-to upscale restaurant in the local area, it will cost us upwards of $56 which includes a martini for me (we haven't gone out for sushi in about two months, and I have not had a restaurant martini in maybe a year). A 3% surcharge would add a $1.68 to a $56 bill. We usually leave a 20% tip, sometimes more. Did I mention that May's mom was a waitress? When our favorite waitress at our sushi restaurant said she was moving we gave her a very nice monetary wedding present. Looking back, those were good days. I remember that waitress often brought us something special from the menu and did not add it to the bill, and it was not unusual to get dessert even if we did not order it. She always brought us two spoons when we ordered only one ice cream for dessert. She knew.

Now, our favorite sushi restaurant is a sushi buffet restaurant near the University of Texas Dallas where our middle granddaughter plays soccer. Olivia likes to arrive an hour early; we drop her off; have sushi; and get back in time for the game. I've never paid attention to the price of the luncheon buffet; I honestly don't know what it is but I think it's about $10.95. Sake is probably $4 and the waitress now refills the sake carafe without any additional charge. She also gets a 20% tip. By the way, she is now our favorite waitress. We don't get there often -- the restaurant is not in our neighborhood -- but she always remembers us and knows what we like.

But for those who feel insulted by the 3% surcharge can easily solve that problem. If one is being charged for labor, then simply don't leave a tip. Or reduce the tip by 5%.

Oh, that reminds me. Two weeks ago (?) -- it's a long story -- I watched NASCAR's Daytona race at an Applebee's. The hamburger was $9.95, if I recall. I did not see what the small draft beer cost. I forget the price of the meal. I do remember leaving a $10 tip. Parking was free. No tip at the door for the maitre d' for a good table. No charge to watch the race on big screen television. No surcharge to joke with the bartender (I sat at the bar). No charge to use the bathroom (not unusual to see that in Germany). For me, watching the NASCAR's opening race on big-screen television enjoying a Texas hamburger was easily worth $100. I think my total cost, with tip, came to under $20.

If I recall, a day at Disneyland, just to get in, is around $110/day. Food is extra. With or without the 3% surcharge.

I assume most blue-state folks who complain about the 3% labor surcharge will send a note to a friend using their $800 iPhone with a $200-monthly-data plan.

Customer loyalty. It works both ways. I used to be a huge fan of Omaha Steaks. I was careful with my budget; it can be "expensive" but their products are incredibly good. Over time, my "reward points" were quite sizeable. I very seldom used the "reward points" and when the Omaha Steaks person would suggest I should use my "points" I said I felt I was getting a pretty good deal anyway and thought it "unfair" to take advantage of the points since I would be ordering regardless. So the points built up and built up. Then, for various reasons, maybe I was traveling or my interest waned or our freezer was overfilled, I quit ordering from Omaha Steaks for a couple of months. That's when I got an e-mail telling me that my "points" would expire. What? My points would expire? Again, as a rule, I did not use my points. Maybe I was saving them up for a huge steak extravaganza for my 100th birthday.  Whatever.

But that did it for me with regard to Omaha Steaks. I haven't ordered from Omaha Steaks in about six months and have no plans to restart. I see -- from the e-mails I get -- that my "points" continue to dwindle. This is a good example of where their data mining technology failed them. Had they looked, they would see that I was one of their customers that "never" used the rewards that built up. (Yes, at some point I was probably going to buy that huge steak extravaganza after several years of not using the points, and that was, no doubt, their concern.)

I wonder what would have been the outcome had I received a note from the company saying:

"We see you have not ordered anything in several months. You have enough points for four free hamburgers. Unless you tell us not to, we would like to send you the free hamburgers with no shipping costs. No strings. And we won't deduct your points. We're simply doing this because you have been a great customer and we hope to hear from you soon."

The bull market, in four data points:

• the market low was in early 2009 just after Barack Obama takes office
• four years later, in 2013, the S&P is back to where it was when George Bush left office
• by 2016, three years later, the S&P rose 13%; most of it coming in the last year when we finally had hope and change -- President Obama was on his way out
• between November 2016 and today, about four months, the S&P has surged 31%

The Energy And Market Page, T+49 -- March 10, 2017

Mid-Afternoon

WTI: down 65 cents; and now trading below $49. 

Opening

How did the market react to the incredible jobs report today?  Pre-market futures for the Dow: up 70 points. Market opening: up 68 points.

WTI on opening: up slightly; still under $50.

MRO: up another 2%.

Facebook: at 139, nearing/hitting it's all-time high.

Animal spirits. This is what is meant by "animal spirits": those who dither are going to lose. And everyone knows it.

• western countries will compete again
• competition among US states will be seen again
• competition among US corporations will continue

Countries / states with high taxes will lose. Countries / states with high energy costs will lose. Countries / states that don't leverage tech will lose.

Retail: seventeen retail stores at risk of bankruptcy -- FBN.

Oil. Alaska. Huge find. Stand-alone post coming.

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Futures

Jobs. February jobs report on tap today.

WTI: the bleeding has stopped. Flat to up slightly; pre-market trading at $49 and change.

Dow: futures are up 70 points, which would put the open at 20,900. Considering everything, that's not bad.

US crude oil production forecasts (link here):

• last March (2016): 8.29 million bopd
• December, 2017 (latest EIA forecast): 9.53 million bopd
• 1.24 million bopd (increase in forecast for US production)
• global production: 100 million bopd (rounding)
• 1.24 / 100 million = 1.24% of global production
• Saudis complaining that US oil companies are taking advantage of OPEC cuts
• cry me a river 
• on the other hand, 1.24/8.29 = a 15% increase in US production
• that's not bad
• a 15% increase in US production -- almost all of it on-shore shale at this point
• the revision specifically excludes production from the Gulf of Mexico (which, of course, makes no sense to me)
• that's not trivial
• and Snopes said the Bakken "might have some oil" 

Which reminds me -- whatever happened to Jane Nielson? From an earlier post:

This still remains one of my favorite posts. Jane Nielson says:

Frequent Internet users are getting emails about the Bakken Formation in North Dakota and Montana, supposedly a great oil bonanza just waiting to be tapped if only nasty enviros would let it happen. The emails and websites say that Bakken would solve all our petroleum “needs.” (What, me worry about  global warming?)

Don’t believe it. There’s some oil to be gotten out of Bakken, and it’s going to be exploited. But the “bonanza” is nothing but hype.

By the way, what's a "frequent internet user"?

Pipeline: underutilized pipeline serving the Great White field on the US side of the Gulf of Mexico.  could offer Mexico an opportunity to ship oil from their fields to the US.

More Pipelines In South Texas? Friday, March 10, 2017

Active rigs:

	3/10/2017	03/10/2016	03/10/2015	03/10/2014	03/10/2013
Active Rigs	44	33	113	191	187

RBN Energy: emerging natural gas supply constraints and premium pricing in south Texas, part 2.

U.S. natural gas exports drove a significant portion of overall gas demand growth in 2016 and are expected to continue being the primary demand driver over the next several years.

Much of this export demand will be emerging along the Texas-Mexico border and at planned LNG export terminals along the southern Texas Gulf Coast. But production in the South Texas region is not expected to grow nearly as quickly or robustly as demand, setting the stage for supply constraints and premium pricing in the South Texas market and making the area a target destination for producers and pipeline companies.

For example, on Wednesday, Enterprise announced the possibility of a new pipeline from Orla, TX, in the Permian Basin to Agua Dulce in South Texas. So how will all of this play out? Today, we continue our series analyzing the gas supply and demand balance in South Texas, this time with a look at the demand side and the resulting market balance.

Scott Adams: could cognitive scientists eliminate ISIS?