San Antonio Spurs Defeat Rockets; Win Semi-Finals -- Now, the Warriors For The Conference Championship -- May 11, 2017

It can be safely predicted that whichever team wins will go on to win the NBA championship. See this post why Gregg Popovich should be named Coach of the Year. Every. Year.

Game 1, Warriors - Spurs, Sunday, 2:30 p.m. Central Time.

Never gets old:

Walk, Don't Run, The Ventures

Bakken 2.0 -- Re-Fracks -- May 11, 2017

I haven't seen any reports in the media yet on this but it appears there is a new "phenomenon" in the Bakken. Some operators are fracking older wells in the same area where several DUCs are being fracked. The most recent example that I've come across is the XTO Ames well in Grinnell oil basin but I've run across others examples.

There are not many examples and the number of re-fracks won't move the needle for the operators or for the media which does the reporting, but for individual mineral owners, it will result in a nice boost in their monthly royalties.

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Gasoline BOBS -- RBOB and CBOB

A primer at this post. As we move into the summer driving months, I thought a primer on RBOB might be in order. Not for readers, for me. I can never remember this stuff. LOL.

Watch for continued excess amount of available gasoline going into the driving season this year (at a time when gasoline demand has fallen).

Making America Great Again -- China, US Agree On LNG Exports -- May 11, 2017

The Chinese president must have had a nice time at Mar-a-Lago some weeks ago despite the Syrian missile interruption.

The WSJ is reporting that the US and China have agreed to expand certain US exports -- including LNG. Data points:

• in addition to LNG, the joint communique will highlight agriculture, other areas yet to be leaked announced
• teaser: maybe beef will be included (my hunch is "yes" -- the Chinese middle class is growing) [Update, May 12, 2017: the answer is "yes."]
• China has huge coal-related pollution problem; looking to stem that pollution
• China imported 33% more LNG than the year before; now the world's third largest importer of LNG
• but to date, China how now received much LNG from the US; that could change
• it looks like that will change under President Trump

Reality Sucks -- Bloomberg -- May 11, 2017

Saudi Arabia facing the inevitable:

• lower for longer
• possible oversupply of oil in 2018
• US production is rising faster than anyone predicted
• OPEC and its allies are digging in for a long war of attrition against shale
• Riyadh initially thought US could not recover quickly enough (Middle Ages mentality vs 21st century technology)
• shale has defied the naysayers
• by the time OPEC meets in Vienna later this month, US production will be approaching 9.5 million bopd, higher than in November when OPEC started a two-year price war (the first trillion-dollar mistake)
• the rebound has been powered by turbocharging output in the Permian 
• cartel's cut (wink,wink): 1.2 million bopd
• shale production: has risen 600,000 bopd
• Saudi now looking to extend cuts beyond 2017, well into 2018
• OPEC's own monthly report suggested that production from non-members would rise 64% faster than previously forecast (Middle Ages mentality vs 21st century technology, entrepreneurial spirit, and hedging)

But look at this:

• analysts now suggest the real battle will be in 2018, when US production could start flooding the global market as it did in 2014 (by 2018 a lot of new off-shore production will be coming on line; the Permian will be hitting its stride)
• "the US is set up for strong supply growth next year"
• rig spree + efficiency gains
• break-even prices for some shale producers: $20

Bottom line:

"The supply and demand balance for 2018 looks very bad,” said Fared Mohamedi, chief economist at consultant The Rapidan Group in Washington. “That’s when the big fight is going to happen."

All I know is that right now, the US has about 530 million bbls of crude oil in storage and 32 days of supply; historically, the US has had about 350 million bbls of crude oil in storage and 21 days of supply.

$6.3 Million Pipeline Being Considered In Watford City Area -- May 11, 2017

Updates

May 20, 2017: this is pretty cool. In the original post at $6.3 million, I suggested the pipeline would be 6 miles long. It turns out the pipeline will be two 2.6-mile pipelines (2 x 2.6 = 5.2 miles) -- I wasn't too far off. LOL. Much more at the link:

• Arrow Field Serices, a Crestwood subsidiary
• formal name of this short dual pipeline/NG processing plant: Bear Den West gathering pipeline and processing plant
• 7 miles southeast of Watford City
• both pipelines will be in the same ditch
• one pipeline will carry up to 30 million cubic feet of natural gas/day
  the other pipeline will carry up to 5,000 bbls of other products
• timeline: start in May; finish in August
• the gas processing plant is too small to be regulated by the PSC; comes under jurisdiction of NDIC
• Lynn Helms says without the pipeline, takeaway capacity is constrained; could result in more flaring

Original Post 

PennEnergy, data points:

• proposed $6.3 million pipeline project
• Arrow Field Services (that name sounds familiar)
• proposed: two natural gas transmission lines from a proposed processing plant in McKenzie County
• the pipelines would be southeast of Watford City
• no more specifics given
• at a million dollars/mile, we're talking about a 6-mile pipeline

Whoopee!

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A Note For The Granddaughters

Wow, I'm in a great mood.  I grade every day on a scale of 1 - 10, mostly based on weather and biking. A "10" is a perfect day, of course, and rarely, I give a day an 11 or a 12. Tonight might be a 12.

I take off points for a) temperature (either too hot or too cold); b) precipitation/humidity; and, c) wind.

This evening the temperature is perfect; it must be about 76 degrees outside right now. I just checked: it's officially 83 degrees "but feels like 79 degrees." No wind. Sun setting. Nice billowy / puffy clouds to the south. We can see lightning off in the distance. A huge thunderstorm / hailstorm is predicted overnight. Our area should not see the worst.

It's a great night to be on the patio. We have a patio outside our little apartment which I occasionally enjoy. But we are not allowed to barbecue out there, and it's a bit small to be really enjoyed. Whatever.

The evening is a 10. Really an 11 or a 12.

Just A Matter Of Time -- May 11, 2017

Germany's SolarWorld files for insolvency as prices fall.

German solar panel maker SolarWorld AG has filed for insolvency, citing the effect of falling prices in the industry.

The company said late Wednesday its management had concluded that "due to the ongoing price erosion and the development of the business, the company no longer has a positive going concern prognosis."

It added that the firm is "over-indebted" and therefore obliged to launch insolvency proceedings. The company filed for insolvency Thursday at a court in Bonn, where it is headquartered.

Solar panel makers in Europe have long struggled with tough competition from manufacturers in China in particular.

And reality.

Consider The Source -- May 11, 2017

Rystad via Twitter:

Meanwhile, elsewhere, and consider the source --

Goldman Sachs now bullish on oil -- at least for the next 6 to 12 months -- oilprice.com.

He pointed to the futures market, where the curve could be headed into backwardation – a situation in which near-term oil futures trade at a premium to contracts further out. That structure points to concerns about a deficit in the short run, which is why front month contracts would trade at a higher price than deliveries six or twelve months away.

A deficit in the short term? What universe is he living in?

Putting some of the jargon aside, Goldman is simply arguing that the oil market will be much tighter this year than most people seem to think. The investment bank forecasts returns on commodity prices on the order of 13.3 percent over the next three months and 12.2 percent over the next 12 months.

It's been my impression that trying to decipher Goldman Sachs reasoning is akin to sorting out a vision from the Delphi oracle.

Meanwhile, the forecast for non-cartel production growth quadrupled in size since November, 2016. Read that again:
the forecast for non-cartel production growth quadrupled in size since November, 2016
From Financial Times.

Higher than expected production from the US and other countries outside the cartel is offsetting curbs from some of the world’s biggest producers, Opec said, keeping global oil inventories stubbornly high and pressuring prices. 

Opec’s latest monthly forecasts revised up production growth from outside the group by 58 per cent to almost 1m barrels in 2017, and said the world will require only 31.9m barrels a day of its crude on average this year.

Again, by OPEC's reckoning: non-OPEC production (e.g., Bakken, Eagle Ford, Permian) will / has increased production by almost 60 percent -- increased production by another 1 million bopd -- pretty much off-setting any OPEC production cuts.

And more:

That means demand for Opec’s oil is only 200,000 b/d higher than current levels of output, according to the data from consultants and energy analysts submitted to the group, despite making output cuts that are at least six times as large. 

Although Opec’s figures suggest stockpiles will still drop in the second half of this year, it is dependent on output not rising further. The total production figure includes Libya and Nigeria, however, who are exempt from output cuts and whose production is set to recover in coming months after disruptions. 

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Pricing Mineral Acres In The Eagle Ford

One can get Bakken acreage for as little as $1/acre. What's the Eagle Ford doing? From Oil & Gas Journal:

• 111,000 net acres for $265 million 
• $2,400 / acre
• buyer: WildHorse Resource Development Corp
• seller: Anadarko Petroleum Company

And, oh, by the way, the Bakken is 93% oily; the Eagle Ford is not.

Just A Matter Of Time: "Every Arab For Himself" -- May 11, 2017

On April 30, 2017,  I posted a a commentary that could have been titled: "every Arab for himself." Compare that post with this op-ed over at CNBC: This oil rebound is just another fake-out. Here's where prices are really headed."

It's Just A Matter Of Time, Randy Travis

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The Never-Ending Story

The Kashagan is followed here.  

The EIA provided an update today:

Kazakhstan is a major oil producer. The country’s estimated total petroleum and other liquids production was 1.698 million barrels per day (b/d) in 2016. Oil field development in Kazakhstan reached two milestones in 2016.

In October 2016, Kashagan field resumed production after years of delays. In July 2016, the Tengizchevroil consortium made a final investment decision on a project to increase liquids production at the Tengiz field by about 260,000 b/d. --- EIA

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Indonesia

Had it not been for the blogging, I would not have known (for quite some time) that Indonesia is now a net importer of oil. This is not a new story. But apparently for some it is a new story but this article provides a bit of background. From Bloomberg:

Red tape, rising costs and declining crude prices are throttling exploration in Indonesia, the former OPEC member that now produces less oil than it uses.

Only 20 percent of the 287 onshore rigs operated by contractors for local and foreign explorers are at work, compared with 60 percent in 2012.

Four out of six offshore rigs are operational. The decline in drilling reflects uncertainty over regulation, a complicated permits system as well as high production costs that have deterred investments for new exploration.

It’s a challenge the government needs to tackle for success in its plan to overhaul the nation’s energy policy and lure as much as $200 billion to the sector over the next decade as domestic demand rises. A 2015 auction of oil and gas blocks failed because the terms offered weren’t attractive for bidders.

Much more at the link. Including Bloomberg's masthead.

Twenty-Four Permits Renewed; Eleven New Permits -- May 11, 2017

Jobs: making America great again. Not only has the economy hit full employment, but the trend suggests it will only get better.

Active rigs:

	5/11/2017	05/11/2016	05/11/2015	05/11/2014	05/11/2013
Active Rigs	51	27	85	192	185

Eleven (11) new permits:

• Operators: BR (5); MRO (4), Newfield (2)
• Fields: Sand Creek (McKenzie); Reunion Bay (Mountrail); Bear Den (Dunn)
• Comments:

Twenty-four (24) permits renewed:

• EOG (12): twelve Riverview permits (McKenzie County); 
• BR (8): six Abercrombie permits; one Abersom permit; one Aberlid permit (McKenzie County
• Statoil (2): two Raymond permits (McKenzie County)
• HRC (2): two Fort Berthold permits (Dunn County)

Four producing wells (DUCs) reported as completed:

• 30007, 2,106, Enerplus, Arctic 150-94-36BH, Spotted Horn, t4/17; cum --;
• 30511, 2,474, MRO, Goldberg USA 24-33TFH, Reunion Bay, t2/17; cum 44K 3/17; (16778)
• 31744, 818, XTO, Cheryl Federal 24X-12A, Grinnell, t4/17; cum --  (20582: see this post)
• 32133, 885, BR, CCU Atlantic Express 42-19 MBH, Corral Creek, t4/17; cum --;

EOG Question From A Reader -- May 11, 2017

A reader sent this in as a comment.

EOG currently has zero rigs in the Bakken, any thoughts when they may start up again??

I'm curious if anyone has any thoughts or insight.

Later: it's all about a) DUCs in the Bakken; and, b) a focus on Texas, for now. See comments.

May 14, 2017: not only does EOG have a lot of DUCs, but now as they start to frack those DUCs, EOG has a lot of wells that have gone inactive. When looking for something else, I was surprised to find many EOG wells that had been taken off-line (with "IA-waivers") since 2014 and many additional wells taken off-line recently.

It appears EOG could keep up its Bakken production with simply completing its DUCs and returning many, many wells back to production. 

Tesla: Slammed -- May 11, 2017

I posted this earlier but did not pay much attention to it. I read the article, but considered the source, and left it at that.

Tesla: over at SeekingAlpha, a contributor argues that it's energy business has collapsed.

But then, for a similar story to appear at another source suggesting the same thing certainly got my attention. From The Street:

Tesla's (TSLA) acquisition of Solar City appears to have masked a decline in the company's power storage business, according to the company's latest 10-Q filing.

Tesla reported that energy generation and storage revenue rose $191.2 million, or 841% in the quarter ended March 31, compared with the same period a year earlier.

However, "this was primarily due to the inclusion of revenue from SolarCity, which we acquired on November 21, 2016, of $208.7 million, partially offset by a decrease in energy storage revenue of $17.4 million," the company said in its filing. That's a far less rosy situation than was forecast by CEO Elon Musk in August 2015, on the company's second-quarter earnings call shortly after Tesla introduced its Powerwall and Powerpack products for residential and commercial customers.

I've gone back and archived the SeekingAlpha article.

May 11, 2017 -- Active Rigs In North Dakota At 51

Active rigs:

$47.90	5/11/2017	05/11/2016	05/11/2015	05/11/2014	05/11/2013
Active Rigs	51	27	85	192	185

RBN Energy: US distillate exports from gulf coast to Latin America on the rise.

U.S. exports of diesel and other distillates averaged 1.2 million barrels/day (MMb/d) in 2016, more than eight times their 2005 level and up slightly from 2015, another in a series of record-busting years for distillate exports. So far, 2017 looks like another winner. This year, though, a lot more distillate is being shipped south from Gulf Coast marine terminals to nearby Central America and South America, and less is being floated across the Atlantic to Western Europe. Today we consider recent trends in U.S. distillate exports and the significance of the export market to U.S. refiners.

Way back in the 1970s—literally a lifetime ago for many RBN blog readers—U.S. exports of diesel and other distillates averaged less than 3 Mb/d. That’s no typo; daily distillate exports on a typical day back in the Disco Era were less than 3,000 barrels. Today, in the Shale Era, that many barrels of distillate are being exported from U.S. marine terminals every three and a half minutes or so. (We did the math—2016 distillate exports averaged 1.2 MMb/d; divide that by 24 (hours in a day), then by 60 (minutes in an hour) and you get 826 barrels/minute.) It goes without saying, then, that distillate exports play a key role in the profitability of U.S. refineries, especially (as we’ll get to) those along the Gulf Coast, the send-off point for the vast majority of U.S. refined products shipped overseas. The same is true for gasoline exports.

The Energy And Market Page, T+111 -- May 11, 2017

Closing

Surprise beat: EEP. But the bottom line, however, decreased from the year-earlier level of 17 cents per unit. The decrease mainly stemmed from lower income by both the liquid and natural gas segments. And so ENB and EEP were down following that report.

Snap, crackle ... and bust: the first time I saw what Snap provided, I was sure it was doomed. It's product was a) a fad; b) easily copied by almost anyone; c) catered to the demographic that spends daddy's money; and, d) daddy ain't gonna spend a lot of money on this "app." It's possible Snap, Inc could re-invent itself but if it remains a one-trick pony, the nag will end up in the glue factory.

Opening

DOW 30: down 130 points. CPI, jobs data driving overall market. Macy's results not helping -- shares down 12% after earnings release.

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Futures

CPI: a stunner! Up 0.5%.

WTI: the trend is your friend. Oil futures trading nicely. Oil "leading" the market at the opening. Trading now at $47.87.

Tesla: over at SeekingAlpha, a contributor argues that it's energy business has collapsed.

Macy's: getting clobbered. Down almost 12% in pre-open trading.

Snapped: SNAP drops 20%. Lousy earnings. Said much of the $2.2 billion loss was due to "Cost' of going public. LOL.

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Shale Oil And Gas Drowning Out US GOF Shallows

At Rigzone:

Short-term contracts, dismantled infrastructure and lagging dayrates have long challenged shallow water drilling on the U.S. side of the Gulf of Mexico – but it’s the natural gas-belching shale plays that may finally turn the tide away from the shelf.

In January 2007, there were 82 jackup rigs drilling in the shallow water of the U.S. Gulf (GOM). By January this year, that figure had dwindled down to 12. At the end of March, 11 jackups remained on the shelf, according to Rigzone Data Services.

Memo to self: update note to Jane Nielson.

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Study Buddies

I do not know which of the two older granddaughters took this picture of their mom and the youngest sister, Sophia.

I'm not sure how much this was "posed," because once Sophia knows she is getting her picture taken, she generally breaks into a big smile, and puts down whatever she is doing.

The Politial Page, T+111 -- May 11, 2017 -- First Time Claims Drop Again -- Trump's Making America Great Again

Jobs: first time unemployment claims --

• prior: 238K
• forecast: 244K
• consensus range: 241K to 245K
• 4-week moving average, prior: 243K
• actual: everyone off! claims down, not up
• new claims: 236K; down 2,000 vs forecast for an increase of 3,000
• 4-week moving average: 243.5K
• continuing claims: decreased by 23,000.

The continuing claims drawn by workers for more than a week decreased by 23 thousand from a 17-year low to 1.964 million. (Source: dynamic link.)