The Million Dollar Way (The Bakken Oil Blog): 07/21/17

Friday, July 21, 2017

Largest Petrochemical Plant Of Its Kind To Be Built Near Houston; LyondellBasell; $2.4 Billion -- Making America Great Again -- 2,500 Construction Jobs -- July 21, 2017

Updates

July 22, 2017: after posting the LyondellBasell article below, I thought back to this article just a couple of days earlier:

RBN Energy: Really? New US cracker demand, exports will strain ethane supply. Really? Remarkable. Absolutely remarkable.

The last couple of years have been a wild ride for the U.S. ethane market, but look out ahead. It’s going to get crazy.

The onslaught of new, ethane-only crackers is upon us at the same time overseas exports are expected to ramp up.

At first glance, it might appear there is enough ethane to meet all that demand, coming from molecules that today are being rejected — that is, sold as natural gas rather than liquid ethane. But the big question — will it be enough? Because not all that rejected ethane has access to pipeline capacity needed to get it to market, at least not right now. In today's blog, we begin a new series on rising ethane demand, how the new demand will be met, and what it all means for ethane prices.

Ethane is a unique market — it’s the only energy commodity that can morph from being sold as natural gas to being sold to petrochemical plants as a liquid feedstock.

Original Post

A huge "thank you" to the reader who sent me this. From Chron.com, the data points:

Houston petrochemical company, LyondellBasell ("Pat, I would like to buy an 'L'.")
to build a $2.4 billion plant near Houston Ship Channel
would be the largest factory of its kind in the world
2,500 construction jobs; 160 permanent positions
represents a continuation of the petrochemical boom along the Gulf Coast
of the $185 billion in petrochemical plants completed since 2010 or planned through 2023, $70 billion of those along the Texas Gulf Coast
direct result of the shale-drilling boom which produced large amounts of ethane

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US Will Dominate Energy -- Rick Perry

For various reasons I did not want to post this story but on second thought there were some important points to bring out. The reader who sent me this article mentioned this about the journalist who interviewed Rick Perry for the article below: Ms Zito was one of the few reporters that covered the election correctly; she was on the ground in western Pennsylvania and got a great feel for Trump's support.

From The Washington Examiner, meeting with SecDOE Rick Perry outside Pittsburgh earlier this week:

BRUCETON, Pa. — The National Energy Technology Laboratory in suburban Pittsburgh is one of 17 government-funded national labs within the Department of Energy and is also part of a fascinating chapter in American history, not just in the development of energy, but also of science.

The complex, atop a rolling Appalachian ridge, once housed the head of the Ordnance Engineering Group for the Manhattan Project and the researchers and scientists who helped design the trigger for the first atomic bomb. SecDOE Rick Perry visited for a tour of the lab that is working to expand the possibilities for horizontal drilling and hydraulic fracturing for natural gas in shale. He praised work the lab is also doing to identify and extract rare-earth elements from coal and coal byproducts.

Two things come to mind immediately:

the new attitude in Washington: America's exceptionalism
fracking: for the US, no looking back

Random Look At Statoil Roscoe, #17755, In Banks Oil Field -- July 21, 2017

Link here.

Jump In Production, BR, CCU Boxcar, #17756 -- July 21, 2017

Idle chatter regarding a well with jump in production about six-and-a-half years after the original frack.

This well was originally drilled/fracked/completed back in September, 2009. Note the incredible jump in production in April, 2016. It was obviously re-fracked but there is no sundry form showing a re-frack and there is no data over at FracFocus. There is a sundry form regarding a flare in 2016, but only because there was a minor mishap at the time.

17756, 550, BR, CCU Boxcar 21-15H, Corral Creek, t10/09; cum 300K 5/17;

There are suggestions coming out of the Bakken that the well progression in the Bakken is this:

original frack
"mini-frack" at five to seven years after original frack
full re-frack at 10 to 15 years after original frack

I cannot take credit for coming up with this "progression." A reader sent me a link some months ago that put me onto this. The link was to a "proposal" made by an oil service company in the Bakken that was released in 2015.

If the "mini-frack" was "simply" a workover, there might not be any need for a sundry form, or any need to send data to FracFocus. I don't know. Just idle chatter. But I am coming across any number of examples of where it appears a well has clearly been re-fracked and FracFocus has no data. Maybe the paperwork "is in the mail." Or maybe we could call this a "no-sundry-form-work-over" (NSFWO).

Disclaimer: this is simply idle chatter. Do not quote me on any of this. I may be missing something obvious or misreading something. If this is important to you, go to the source.

Selected production profile:

BAKKEN	1-2017	31	7034	7047	2132	7096	7078	0
BAKKEN	12-2016	28	7334	7321	3341	6526	6511	0
BAKKEN	11-2016	30	6943	6858	2097	6587	6572	0
BAKKEN	10-2016	31	6716	6453	2524	6978	6963	0
BAKKEN	9-2016	30	0	257	5165	8265	8251	0
BAKKEN	8-2016	31	8991	8846	4863	7118	6465	642
BAKKEN	7-2016	8	2348	2335	1231	1653	1649	0
BAKKEN	6-2016	12	6309	6341	2888	4984	4984	0
BAKKEN	5-2016	20	9001	9102	3833	5798	5798	0
BAKKEN	4-2016	21	16679	16681	8221	10011	9072	940
BAKKEN	3-2016	3	917	1095	398	681	480	200
BAKKEN	2-2016	7	4605	4435	1899	3096	0	3079
BAKKEN	1-2016	1	45	0	0	2	0	0
BAKKEN	12-2015	1	3	0	13	4	0	2
BAKKEN	11-2015	1	17	0	83	2	0	0
BAKKEN	10-2015	25	1231	1359	213	88	26	0
BAKKEN	9-2015	30	1437	1346	261	79	5	0
BAKKEN	8-2015	31	1603	1776	277	128	51	0

Ten New Permits; EIght Permits Renewed -- July 21, 2017

Active rigs:

$45.60	7/21/2017	07/21/2016	07/21/2015	07/21/2014	07/21/2012
Active Rigs	58	31	68	196	207

Ten new permits:

Operators: BR (6); XTO (4)
Fields: Corral Creek (Dunn County); Siverston (McKenzie County)
Comments: BR has permits for a 6-well Gopher pad in SWNE 15-147-95; XTO has permits for a four-well Lund pad in SESE 8-150-97

Eight permits renewed:

Crescent Point Energy (5): four Legacy Et Al Berge permits, Bottineau County; and, one CPEUSC Makowsky permit in Williams County
Oasis (3): two Jensen permits and one O M Erickson permit, all in Williams County

Legacy Fund Data Through June, 2017

Source here.

most recent deposit, June 21, 2017: $37 million
total deposits since inception: $3.9 billion
net assets in the fund, as of January, 2017: $4.3 billion
height of the boom: $90 million / month being deposited
currently: about $30 million / month being deposited

Meanwhile, on June 5, 2017, The Grand Forks Herald reported that for the first time ever, ND legislators will tap the earnings from the fund.

purpose: to help balance the budget; 2017 - 2019 budget
amount: $200 million

Options for strategic management of the fund:

one option -- spend all the earnings; deposits would still total $20 billion by 2060 -- no one advocates this option
second option -- at the other extreme: reinvest all earnings; doing so, the fund would balloon to $102 billion by 2060
middle of the road options

reinvest 75% of the fund's earnings; spending 25%; balance of $65 billion by 2060
other option: "reinvest, replace, and spend": $50 billion by 2060

Typical political talk: "no one advocates the option of spending all the earnings." LOL. Total earnings to date in the Legacy Fund: $400 million. In its first move on these earnings, the legislature will spend 50% of these total earnings on one item: balancing the budget. It appears no one advocates spending all the Legacy Fund earnings but it's already happening.

Week 29: July 16, 2017 -- July 22, 2017

Folks are making a big deal out of the fact that OPEC production will increase in August, suggesting the cartel deal to cut production is falling apart. The deal is probably falling apart (Ecuador was the first to publicly leave) but the Mideast always increases production in August. So, we move on.

For the archives, in less than five years, the US could produce 40% of the world's total natural gas. For the archives, this was also the week that Senator McCain was diagnosed with an aggressive form of brain cancer.

The biggest story for me this past week was the DAPL update; the fact that this story was not easy to find suggests it may not be all that significant. Be that as it may, for me, someone who is inappropriately exuberant about the Bakken, this was a huge story.

Operations
High production jump for #23279
Analysis of oil production by field

Bakken 2.0
Much more oil is recoverable

Fracking
Random look at several high-intensity fracks
CLR getting ready to frack several wells in Divide County?

Bakken economy
Paving project west of Williston awarded to Northern Improvement
Hallmark Card on Main Street, Williston, will close

Every Arab For Himself -- Oilprice -- July 21, 2017

From Oilprice.com via Yahoo!Finance: OPED deal at breaking point as compliance falls.

OPEC data was mixed this week reminding us of two important themes - 1, OPEC members are pushing the limits of the current output agreement and 2- recent gains in Libya and Nigeria could be hard to maintain.

On the first item, preliminary estimates see July OPEC production +145k bpd m/m which would represent a new YTD high in the cartel’s output and sow additional doubts about their ability to coordinate supply cuts.

Meanwhile Iraq is publicly promoting its plan to ramp production up to 5m bpd by year-end (from 4.4m bpd in June) and Ecuador stated that they will no longer participate in cuts in an effort to strengthen their finances.

As for the second item, Nigeria’s production and export woes were headline news this week due to pipeline vandalism. All-knowing prompt brent spreads digested the week’s news flow and moved slightly higher. Brent rallied to -55 cents on Friday forecasting a reasonably strong supply/demand balance in coming month.

Oilprice.com was the "original" peak oil site.

Finally. Clearing Out The In-Box -- Update On The DAPL -- Previously Posted -- July 21, 2017

I've posted this link twice, but never did the usual "cut and paste" nor did I make any comments. I was hoping folks would read the linked article for themselves, and then later I would come back and post it at length.

This will probably be the top story coming out of the Bakken this week, when I post the top stories for the week tonight or sometime over the weekend.

I am more than a little surprised that this news item was hard to find. It is a huge story and yet it received almost no coverage.

So, again, here it is, from indianz.com, the headline regarding DAPL, posted July 18, 2017: Trump administration officially rescinds pro-treaty rights legal opinion.

Now remember, the story is being posted at an anti-DAPL "news site":

The Trump administration has quietly killed a legal opinion that tribes were using to fight the Dakota Access Pipeline.

On February 6, the Department of the Interior put a "temporary suspension" on the M-37038 opinion. A day later, the Trump team approved the final portion of the pipeline over the objections of the Standing Rock Sioux Tribe and the Cheyenne River Sioux Tribe.

Both tribes had relied on M-37038 -- which was issued by the Obama administration -- in their legal battle against the controversial Dakota Access crude oil pipeline. One of the key findings in the opinion was that the final portion in North Dakota impacts their treaty rights and that the U.S. Army Corps of Engineers "must consider" those rights before moving forward.

"Since the tribes retain rights associated with Lake Oahe, the Corps must consider the possible impacts of its DAPL permitting decisions on these reserved hunting, fishing, and water rights," the 35-page opinion stated.

And even though a federal judge concluded that the Army Corps in fact failed to fully consider those rights, the "acting" Solicitor of the Interior rescinded M-37038 earlier this month. A July 7 memo said the opinion offers little value in light of the ongoing lawsuit.

I'm sure one can spin the story a gazillion different ways but the headline and the lede seem to make things fairly clear where this "lawsuit" stands. Again, a huge "thank you" to the reader who sent me the link.

Snarky Comment On Goldman Sachs -- July 21, 2017

Unless you've been under the Geico Rock for the past week, you are aware of Goldman Sachs earnings this past quarter. Not good. It's been fun to watch the news on Goldman Sachs since they reported.

I see that some readers are going back to an earlier post on Goldman Sachs, dated May 11, 2017, in which I wrote:

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 a Goldman Sachs announcement is akin to sorting out a vision from the Delphi oracle.

And so it goes.

The Energy And Market Page, T+182 -- July 21, 2017

Wow, wow, wow. Encana shattered earnings: 34 cents vs forecast of 4 cents. From 24/7 Wall Street:

Calgary-based energy producer Encana Corp. on Friday reported second-quarter adjusted earnings per share of $0.34, shattering the consensus estimate of $0.04 per share.

Revenue climbed to $1.08 billion, well above the consensus estimate of $796.65 million. In the year-ago quarter, Encana posted EPS of $0.10 and revenue of $364 million.

Operating expenses fell to $762 million from $1.27 billion in the second quarter of 2016, and operating income totaled $321 million after posting a loss of $912 million a year ago. Net earnings totaled $331 million compared with 2016 second-quarter loss of $601 million.

Cash flow from operations improved to $351 million from $278 million, juiced by a corporate margin of $12.09 per barrel of oil equivalent, up by 25% year over year.

See this post on Encana from late last year. Is the Encana story all about the Permian? If so, portends well for others. Encana shares are up 2.5% on a down day for the market.

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

OPEC cut (wink, wink): OPEC production forecast to rise in July. But remember, summer production generally goes up -- Arabs love using crude oil to power their air conditioners, just like Americans love using coal to power their Teslas.

Smoke and mirrors: Saudi will cut imports to US to make it look like production cuts being made.

WTI: down $1.32.

Manufacturers' optimism: at 91.4% Apparently this is the highest that American manufacturers' optimism has ever been. Via twitter. No link.

The Open -- Friday, July 21, 2017

Only one well coming off confidential list today:

32742, 1,996, Hess, HA-Grimestad-152-95-3031H-8, Hawkeye, Three Forks, 60 stages; 4.2 million lbs, large (40/70); small (30/50); t5/17; cum 8K after 4 days;

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Headline

Sean Spicer resigns? Apparently. Not a happy separation. Having said that, I always thought Spicer talked too much when giving answers to rabid press.

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The Open

Slow, slow start to the day for the Bakken. Best bet: watching The Open. Live on television. Wind gusts up to 35 mph; hats blowing off players; players with long hair will be handicapped (am I allowed to use that word?). Was supposed to have been a beautiful day; no precipitation (yet) but a miserable, miserable day. The clouds are so low and so dark it almost looks like dusk. Matt Kuchar who shot a T1 65 in the first round, hit an incredibly disappointing 71 today. Phil Mickelson, +8. Most scoring worst today than yesterday. One exception, Zach Johnson, 75 yesterday; 66 today. Leaderboard.

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Supply And Demand -- Ethanol

From the EIA today:

Through the first six months of 2017, U.S. weekly ethanol production averaged 1.02 million barrels per day (b/d), an increase of 5% over the same period in 2016. On a weekly basis, U.S. ethanol production set a record of 1.06 million b/d in the week of January 27, 2017, and it has averaged near or above 1 million b/d in every week of 2017 except for a few weeks in April, when ethanol plants typically undergo seasonal maintenance. If ethanol production remains relatively high through the second half of the year, as EIA’s Short-Term Energy Outlook (STEO) expects, 2017 will set a new record for annual fuel ethanol production. --- EIA

The real world:

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Third Party Payers -- It's Not Just The Health Sector

When a reader sent me a link to a story suggesting the new Apple iPhone could cost upwards of $1,000, I replied (not ready for prime time):

Apple broke the code on iPhone pricing -- 3rd party payers, just like the health industry.

Very few people actually pay the advertised price. The phones are greatly subsidized by the phone company with which one signs a contract for about two years. This will be a huge price to pay for ATT, Verizon. It's very possible they will have to extend the contract for 3 years to pay the $1000 and give the phone away for free to Sophia.

Like health care, if there's a third party payer, the provider can charge whatever they want. In fact, the higher the cost, the more "loyal" the customers become.

Flashback From August 17, 2012 -- July 21, 2017

From a short post on August 17, 2012:

I really appreciate "straight talk":

EOG: near term, horizontal oil production in US (2 million bopd by 2015) will NOT affect 90 million bopd global production; only three consequential horizontal plays in North America: Eagle Ford, Bakken, and Permian (all others are either inconsequential or really NGL plays) -- Mark Papa, EOG/CEO

Hmmm....

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The Political Page

Making America Great Again: Trump's first quarter -- boom --

mining: +22%
construction: +6%
manufacturing: +5%
finance, insurance: - 2%

Food stamps: food stamp use lowest in 7 years; many reasons.

Dems in debt: DNC finished June, 2017, $3.3 million in debt. Come on, Maxine -- declare for 2020, and the donations will come pouring in. LOL.

Update On Takeaway Capacity In The Niobrara -- July 21, 2017