Wednesday, July 26, 2017

US Gasoline Demand -- July 26, 2017


Natural Gas Glut -- July 26, 2017

Link here.
A $27 billion energy project in Canada just became the latest casualty of a worldwide glut of natural gas. Malaysia’s Petroliam Nasional Bhd abandoned on Tuesday its plans for the Pacific Northwest LNG terminal, a plant that would have liquefied Canada’s gas and sent the fuel by tanker from the western shores of British Columbia to buyers in Asia.
Petronas cited market conditions in its decision. Pacific Northwest LNG joins a growing list of projects that have been killed in recent months by plummeting LNG prices, throwing the economics of export terminals from Australia to Russia to Mozambique into question.
Prices have crashed as increasing volumes of gas from Australia and America’s shale formations hit the water, inundating the market with so much supply that analysts say demand may not catch up until the next decade.
See this post for suggested options for Petronas.

Also here.

If OXY Can Lift Oil In The Permian For $28, Using Same Accounting Methods, Bakken Operators Doing Even Better -- And Making OPEC Nervous -- July 26, 2017

From a comment at an earlier post, in full (I'm moving it here as a stand-alone post because it fits my worldview of the Bakken):
Some interesting comments on the Bakken in this article. From the article, it looks like shale is the only place where Hess and Anadarko are making money.

--- Hess Holds On to Mixing it Up ---

"Yet, also like Anadarko, Hess is holding its own where it counts: U.S. shale.

Production in Hess’s core Bakken basin beat guidance handily, at 108,000 barrels of oil equivalent per day. That should rise to somewhere between 110,000 and 115,000 in the fourth quarter.

More important than that is how Hess is getting to those higher levels….

With four rigs operating in the Bakken, the company had indicated it might add another two if oil prices warranted it — the implication being that those two might be needed in order to maintain momentum.

Hess now says that a move to more intensive fracking methods meant it could meet its targets with just four rigs. The company says its Bakken operations generate free cash flow even at today’s prices and that it would require only 2.5 rigs, on average, to hold production flat, down from 3.2 rigs a year ago.

That a U.S. E&P company is holding steady at sub-$50 oil in the Bakken — and not the red-hot Permian shale — should cause some nervous twitching over at OPEC’s offices. At $60 oil, which still wouldn’t salve the economic wounds of many petrostates, it’s a fair bet those other two rigs would be put to work quickly….

In short, Hess is increasingly a story of grinding out further productivity gains in the Bakken but using the cash this generates for now to fund the Guyana venture."
I've also read that some operators in the Bakken can meet their 2017 contractual agreements in the first six months of the year. Anyone following "wells of interest" can understand why I say that "new" bbls in the Bakken are being lifted for a lot less than $28/bbl, using OXY's accounting methods.

Disclaimer: I am inappropriately exuberant about the Bakken. Take my worldview with a grain of salt.


The Energy And Market Page, Part III, T+187 -- July 26, 2017

Oneok announces substantial increase in quarterly dividend. Link here

Warren Buffet / AEP to spend $4.5 billion on the largest wind farm in the US. Link here. True to type. Waits for the hard work to be done ... then buys the farm. LOL. AEP’s announcement comes less than a month after Oklahoma ended a tax credit for wind production, more than three years ahead of schedule. Governor Mary Fallin had said the industry no longer needed incentives.

From the linked article:
Construction on the wind farm began in 2016, and the plant is scheduled to go into service in mid-2020, Invenergy said in an email. The company is contracted to run the farm, which is using General Electric Co. turbines, for the first five years.

Motley Fool on Warren Buffett and AEP: link here. See also this post, two days ago.
The TCM Page

Psycho ... North by Northwest ... Vertigo ...

Talisker ...

Edamame ...

Ben ...
Ben Mankiewicz was born in Washington, D.C. He is the son of Holly (née Jolley) and Frank Mankiewicz, the cousin of the screenwriter Tom Mankiewicz, grandson of screenwriter Herman J. Mankiewicz, and great-nephew of screenwriter, producer, and director Joseph L. Mankiewicz.

He is the brother of NBC News reporter Josh Mankiewicz.

His cousin is filmmaker/television producer Nick Davis. He attended Georgetown Day High School, Tufts University, and Columbia University.
TCM Backlot ... advertisement --- included a woman from Grapevine, TX - where we currently hang our hats.

Stumblin' In, Chris Norma, Suzi Quatro

Five New Permits; Eighteen Permits Renewed -- July 26, 2017

Note: see first comment. I'm moving this comment and link to a post of its own. 

Active rigs:

Active Rigs603373193207

Five new permits:
  • Operators: WPX (2): Oasis (2), Petro-Hunt
  • Fields: Mandaree (Dunn); Sanish (Mountrail); Charlson (McKenzie)
  • Comments:
Eighteen permits renewed:
  • Petro-Hunt (11): Robert The Bruce; Joel Goodsen; Dudley Dawson (2); Chip Diller (3); Hot Rod (2); all in McKenzie County; and Lloyd Christmas and Harry Dunne, both in Stark County (these were permits transferred from Emerald Oil to Petro-Hunt (see yesterday's daily activity report)
  • Hess (6): six EN-Jeffrey permits; all in Mountrail County
  • Thunderbird: one Frank permit in Stark County

We'll close out this poll in which we asked whether Jeff Sessions was history:
  • yes: 44%
  • no: 31%
  • why are you even asking? 25%
We'll replace that poll with another "political" poll in which we ask, whether President Trump will appoint Gary Cohn or re-appoint Janet Yellen for Fed chairperson when current term ends. The poll won't stay up long.

The Trump Economy -- It Simply Won't Quit -- A Snarky Post -- Nothing To Do With The Bakken -- July 26, 2017


Later, 8:41 p.m. Central Time: more on the Petronas story, sent in by a reader --

Later, 7:00 p.m. Central Time: more ...
Later, 4:59 p.m. Central Time: see first comment regarding Canadian natural gas --
Original Post

Facebook: all those cupcakes, fruitcakes, and snowflakes are using Facebook more than ever before -- to vent, to organize, to raise money -- how do I know -- Reuters just told me: Facebook profit, revenue smash estimates as mobile ad sales soar.

I do believe it was about a year ago that folks were wringing their collective hands, that until Facebook figured out mobile ads, it wasn't going anywhere. LOL.

Facebook's shares have climbed nearly 44 percent this year with the help of all those cupcakes, fruitcakes, and snowflakes. LOL. Facebook just keeps growing and growing; the number of users were up 17% year-over-year.

Net income rose to $1.32/share, up from 78 cents a  year earlier. Total revenue rose almost 45%.


And so it goes.

Flaring. What will Canada's prime minister do with all his natural gas? Flare it? LOL. It appears he has two choices: a) flare it; or, b) ship it on US pipelines to America's natural gas processing plants; to the east coast for export; to the Gulf Coast for export. What's happening? BBC just announced that Petronas will cancel it's humongous Canadian Pacific Northwest LNG project -- citing yada, yada, yada.

The big point to be made here is this: this is exactly what would have happened under an Obama third term / Hillary presidency. Sure, exports might be legal, but environmentalists would have found every which way to delay projects with a willing president supporting their efforts (especially if it involved political donations and funding of "the Foundation"). Think Solyndra and 36 other solar failures.

Earlier today I had a reader suggest that, to paraphrase, all this Trump economy stuff is simply due to monetary policy and has nothing to do with the personality in the White House. And so it goes.

Back to the Petronas story. Shipping Canadian LNG through the US might lower the value of our own LNG, but I doubt it. Posted recently: there may not be enough US natural gas to feed all the exports and petrochemical plants being built.

The Trump rally: I do believe the Dow 30 hit an all-time record, closing well above 21,700.  On November 4, 2016, the Dow closed at 17,888. On November 10, 2016, the Dow closed at 18,807 and hasn't looked back. Some would say it's all due to monetary policy. See Facebook story above.  

CNBC suggests the Trump rally is all about monetary policy: "Dow closes at record high after Fed leaves rates unchanged" but does suggest earnings may have played a role, "Boeing jumps." The funny thing is that no one expected the Fed to do anything different(ly). It's hard for me to accept that the Dow 30 surged (again) today simply because Yellen is a) confused; b) a dove; c) wants to keep her job.

By the way, speaking of Janet Yellen, I learned today that the Fed chairperson, once nominated and confirmed, cannot be "fired." That would make her about the only government employee that can't be fired. She's more bullet-proof than James Comey. I guess the president can't be fired; he can be impeached and found guilty but that's not exactly being fired.

Jobs: Amazon's fulfillment centers look like the 21st century version of rural Wal-Marts -- overing "jobs to sleepy towns."

WTI: closed up another 2% (rounding to nearest whole number). Still below $50.

Why I Love To Blog -- July 26, 2017


July 29, 2017: also in Oil & Gas Journal

July 28, 2017: see comments. There are three OneOK plants in the same section as the Oasis gas plant. The OneOK plants currently process some over 300 million cubic feet of gas per day.
When the expanded Oasis unit is completed this one square mile area will be  processing 650 MMCF per day.

Later, 9:22 p.m. Central Time: I even had a poll asking where the next natural gas processing plant would be; one of the four answers I suggested include northeast McKenzie County. Wow. The more I blog, the more I forget.

Original Post 

One of the problems with focusing one on subject and blogging so much on that one subject, I start to take things for granted. I often post so fast I really don't think about the implications until later. And sometimes I forget completely about something I posted. That's why I love to blog. Readers have a way of pointing out things I miss, don't see, or forget.

This is a great example. A reader just asked if I had posted anything on the announcement that Oasis planned to expand the natural gas plant near Watford City. As noted, I did link the article and made it very clear that it would be the largest such plant in North Dakota, but then I sort of just let it hang there.

But the note from the reader really brought this announcement home to me. Anyone that knows Tioga, ND, or knows the history of the North Dakota oil industry, knows how big a deal the Hess presence in Tioga is.

For the longest time, the Hess natural gas plant had a capacity of 110 million cubic feet per day. Then in 2014, the Hess plant expanded to 250 million cfpd which made it the largest natural gas plant in North Dakota at that time (and still holds true).

Now imagine that size plant being duplicated near Watford City. This really is a huge deal and I think my first post on the Oasis expansion failed to make that impression. I certainly did not have a mental image of what the expanded natural gas plant would look like.

The expansion will ADD 265 million cfpd to the Wild Basin plant near Watford City. It already has capacity for 80 million cfpd. At 345 million cfpd, this will certainly be a large operation.

So, there you have it. Why I love to blog and how much I learn from my readers.

More On The Wild Basin Gas Processing Plant

From North American Shale Magazine, data points:
  • published March 30, 2016
  • pipeline approved
  • 75,000 bbls-per-day pipeline in McKenzie County
  • from: Wild Basin
  • to: Johnsons (sic) Corner
  • the new 10.75 inch oil mainline has one lateral pipeline and is approximately 19 miles long

Google map:

Huge Decline In Crude Oil Inventories -- Less Than 40 Weeks To "Re-Balance" At This Rate

WTI: $48.58 (up 1.44% for the day)

From Reuters:
U.S. crude stocks fell last week as refineries hiked output and imports dropped, while gasoline stocks decreased and distillate inventories fell, the Energy Information Administration said on Wednesday.
Crude inventories fell 7.2 million barrels in the week ending July 21, more than the expected decrease of 2.6 million barrels. The decline was the fourth consecutive drop, giving support to the market.
This added to hopes a long-awaited rebalancing was underway in the oil market. Saudi Arabia said on Monday it would limit oil exports to 6.6 million barrels per day (bpd) in August, down nearly 1 million bpd from a year earlier.
The entire table has been updated/corrected due to a methodology error in earlier iterations. The "re-balancing" number I use is to get us back to 350 million bbls in storage (not including SPR):

Weeks to RB
Week 0
Apr 26, 2017

Week 1
May 3, 2017
Week 2
May 10, 2017
Week 3
May 17, 2017
Week 4
May 24, 2017
Week 5
May 31, 2017
Week 6
June 7, 2017
Week 7
June 14, 2017
Week 8
June 21, 2017
Week 9
June 28, 2017
Week 10
July 6, 2017
Week 11
July 12, 2017
Week 12
July 19, 2017
Week 13
July 26, 2017

Three Sisters Enjoying Cool Weather In Southern California

Are EIA Drilling Productivity Reports Misleading The Market? BTU Analytics -- July 26, 2017

Wow, talk about a great article, from BRU Analytics, sent to me by a reader: are EIA drilling productivity reports are misleading the market?
BTU Analytics would contend that those hoping that Permian productivity has hit a peak and thus US oil production forecasts are overblown are deceiving themselves. 
There are several potential flaws with modeling rig productivity utilizing [EIA's] approach. The first flaw is that it assumes all new production in period 2 originated from rigs active just two months prior. It’s no secret at this point that the industry has a tremendous ability to add rigs quickly to a region, but completion crews often fail to keep pace with producers in the basin. From 2009-2015, operators in the Marcellus and Utica outstripped the ability of infrastructure and completion crews to keep pace with drilling activity, leading to a peak of nearly 1,600 wells in excess backlog, and oil plays have been no different. The price crash in 2015 led operators to defer completions across all of the major oil producing areas, leading to an excess backlog that peaked in 2016 at over 2,000 wells in the Eagle Ford, Permian, Bakken, and Niobrara.
Archived: it's a great article.

This is one of the reasons I am not a fanatic about posting EIA drilling productivity reports. I post them periodically, but less and less it seems.

The Sports Page

From Business Insider:
Phil Mickelson is known far and wide for being one of golf's greatest champions — and one of the sport's biggest trash talkers. But the 47-year-old may have run his mouth one to many times at last week's Open Championship.
In 2013, Mickelson won his first and only British Open title after shooting a legendary final round of 66. The victory earned him the Claret Jug in addition to several privileges, including an exemption into the event through age 60 and a spot in the champions' section of the locker room.

It was that last perk that led to Mickelson's latest quip. The veteran was preparing for a practice round when he decided to mess with one of the game's elite players. According to The Telegraph:
"The 47-year-old was in his normal playful demeanor, spotting Jordan Spieth walking into the wrong section of the locker room and telling his young countryman: 'This right here is for past champions.'"
Spieth must have really wanted a spot in that champions' locker room, because he promptly delivered a performance for the ages at Royal Birkdale. The Texan was the only player in the field to shoot four rounds in the 60s, and on Sunday afternoon, he became just the sixth player ever to go wire-to-wire at the Open Championship.

Mickelson has referred to his British Open win as his "greatest accomplishment," however he didn't earn a spot in the champions' locker room until he was 43. Next year, Mickelson is going to have to share the area with the 24-year-old Spieth.
The article failed to mention that Phil missed the cut this year at The Open. I wonder if Phil congratulated Jordan. Pretty funny.

The Market And Energy Page, Part II, T+187 -- July 26, 2017


Later, 6:32 p.m. Central Time: I've been wondering why XLNX was not riding the coat tails of Nvidia; and then why XLNX was not riding the coat tails of Advanced Micro .... wonder no more ...  after a so-so day for XLNX, it soared near the end, and finished almost 3% higher. Whoo-hoo! [Later: perhaps now. Now I see that XLNX may have done it on its own -- Xilinx beats 1Q17 forecast -- 63 cents vs 60 cents forecast. Can't wait to see market tomorrow. Miss on revenues.]

Later, 5:20 p.m. Central Time: update on Foxconn building facility in Wisconsin. From jsonline, data points:
  • $10 billion investment
  • will require $3 billion in subsidies from state taxpayers 
  • southeastern Wisconsin
  • a virtual village: manufacturing plant(s); housing; stores; service businesses
  • spread over at least 1,000 acres
  • 1.5 square miles
  • 20 million square feet: 3x the size of the Pentagon; will be one of the largest manufacturing campuses in the US
  • will initially employ 3,000 workers; average wage/salary: $54K 
  • "The single largest economic development project in the history of Wisconsin, one of the largest in the history of the US."
  • "America does not have a single LCD plant to produce a complicated system. We are going to change that."
  •  this would not have happened under a third-term Obama presidency/Hillary unless it came with a lot of political donations and/or funding for The Foundation
Original Post
Inept? Hillary and company were unable to find Wisconsin during the 2016 presidential campaign. On the other hand, Apple and Foxconn appear to have had no trouble finding the state. In my mind, there is absolutely not one reason for Foxconn to build in Wisconsin, but it appears that this is a Trump-reward for the president carrying that state. According to CNBC, there are twenty states that have a better business climate than Wisconson. The state ranked 15th and 17th in education and technology/innovation, respectively. Hardly noteworthy. More at Crain's.

T: shares pop almost 5% on earnings beat. Posted 79 cent/share; better than the 74-cent forecast and better than 72 cents/share last year.

Fake news: with all the media hype about T-Mobile having the best network, it turns out to be "fake news." In most recent survey, T-Mobile ranks fourth -- which is almost dead last. Top three: Verizon, ATT, and Sprint. From Fortune.
The company's testing showed that all four major carriers–AT&T, Verizon, T-Mobile, and Sprint—improved average speeds in at least 20 markets in the first half versus the end of 2016. "Taken together, this suggests that investments are being made that counteract any demands on the networks from unlimited data plans," Hamilton said.
But, of course, T-Mobile cried foul. LOL.  Regardless of how they placed in the competition, they all get a participation trophy.

Nation's largest job fair. Data points:
  • Amazon
  • 50,000 job openings
  • 10 fulfillment centers across the US 
Boom: US new home sales rise for second straight month. "Out west" June new home purchases surged to a 10-year high. Ten years. Hmmmm..... the entire Obama presidency fits into that lost decade.

More On T

From the linked article above:
Digging deeper into the segment numbers, the company’s wireless business added 2.8 million net subscribers. Of that total, 2.3 million were in the U.S., while 476,000 were from Mexico. Notably, U.S. wireless subscribers achieved its best-ever postpaid phone churn of 0.79%, while Total postpaid churn was 1.01% — both above Street estimates.

The company lost only 89,000 postpaid phone subscribers. Not only did that total narrow its loss from 180,000 in the year-earlier-period, it also topped analysts forecast for a loss 256,000 postpaid subscribers.

On their own, these numbers aren’t breathtaking. But when taken into context with respect to dominance of T-Mobile, AT&T doesn’t appear to be in the sort of dire straits T-Mobile’s boastful CEO John Legere has implied. In T-Mobile’s own Q2 results released last week, the company added 1.3 million total net subscribers, of which branded postpaid net adds were 817,000 and postpaid phone net adds were 786,000.

T-Mobile management insisted they would capture more than 100% of industry’s postpaid growth, meaning there would be nothing left for either AT&T or market leader Verizon Communications Inc. But AT&T’s results, combined with the improving churn rate, suggests otherwise.
The company’s wireless business is making up for shortfalls elsewhere such as in the landline U-verse TV service, which shed 195,000 subscribers.

The Trump Rally Continues, The Political Page, T+187 -- July 26, 2017

I am adding one more thought to a note I posted the other day, the "trickle-down" effect:

From a few days ago with one new paragraph:
I think Jamie Dimon was right: with Trump's agenda, the economy will grow very, very fast; without Trump's agenda, the economy won't grow any more slowly; in other words, Dimon thinks that even if Trump's agenda is stopped cold, the US economy will continue growing.

1. ENERGY: I think cheap energy prices are percolating throughout the entire economy.

2. MONEY: Cheap money continues to percolate through the entire economy. Even Janet Yellen seems more dovish all of a sudden; she either sees something that scares her or she wants to keep her job.

3. REGULATIONS: I have a note from a businessman in ND who says the change in federal regulations are already affecting how fast contractors can get things done in ND. In some cases, EPA, etc. would have slowed project start dates as long as eleven years; they're now seeing these delays going down to two or three years.

4. ATTITUDE: Amazon, Apple, Google, Tesla, JPMorgan, etc., all have a huge appetite to keep growing. Making America Great may sound like a simple slogan but it too percolates through the whole economy. Folks don't want to be left standing at the depot when the train pulls out. And several trains have already left the station. Amazon hit new highs yesterday. NASDAQ hit the 50th record high since Trump's election or something like that.

5. BALKANIZED: Whatever the US does as a whole, the economy, like politics, is going to become more regionalized. Despite my continued negative comments on California has, it remains a growth engine in technology. Texas cannot be held back. RBN Energy said Florida got a new natural gas pipeline in for the first time in decades and I don't think Florida can be held back. Financial institutions in Boston -- not going to be held back. The recent CNBC story said Minnesota was a great place to start a new business and Washington State was the best state to start a new business, so even those states are doing something right.

6. TRICKLE-DOWN EFFECT: remember, this is about the economy, not the market. As the market continues to reach new highs, investors will take profits and put that money into the economy. Minimum IRA withdrawals will be one huge category, but even in areas where withdrawals are not mandatory, effects will be felt. Grandparents will give their grandchildren (and their grandchildren's parents) larger monetary gifts in a rising market.

7. I think if the economy were to turn real ugly, it would have to be a "black swan" as they say -- something that no one expects.
Disclaimer: this is not an investment site. Do not make investment, financial, job, travel, or relationship decisions based on what you read here or what you think you may have read here.

Jump In Production After Being Off Line For Less Than Two Months -- Whiting/KOG Koala Well(s) -- July 26, 2017

Another well of interest posted.

The Market And Energy Page, T+187 -- July 26, 2017

Bust? Even before it's announced, another reason for concern about Saudi Aramco's IPO. From The Wall Street Journal today:
US shale -- yup, US shale, again -- threatens chemical element of Saudi Aramco's IPO. Aramco will be fighting a war against the US on two fronts: oil and petrochemicals.

The shale revolution means the U.S. is already much less reliant on Saudi Arabia for its oil needs. Less appreciated is the threat it also poses to Saudi Aramco’s plan to diversify downstream into chemicals and plastics production, likely a central pillar of the energy giant’s pitch to investors ahead of its probable initial public offering next year.

Having ruptured the oil-and-gas industry’s economics, the U.S.’s shale bounty is now triggering a domestic investment boom as companies that use hydrocarbons as an input take advantage of low prices. Half of all capital investment in U.S. manufacturing in 2016 went to chemical plants, while nearly $200 billion of new projects are being planned or under construction. Net U.S. petrochemical exports could grow nearly 10-fold to $110 billion over the next decade, according to consultancy IHS Markit .

With U.S. producers set to dominate the petrochemicals sector in the Western hemisphere in the next 10 years, Aramco will need to pin its hopes on the Asian market, specifically China. But Asian refining capacity, much of it with new petrochemical plants attached, is rising fast—led by China itself, which is already flooding Asian markets with diesel.

China’s oil-refining capacity has risen sharply in recent years. In 2016, it was nearly 15% higher than the nation’s actual petroleum consumption. Chinese refiners have in turn been exporting their surplus, dragging down regional oil-product prices. The prospect of poor investment returns given this overcapacity is one reason why Aramco has been wavering over a planned $20 billion refining and petrochemical joint venture with Malaysia’s Petronas.
Boom. Scrolling through Yahoo!Finance In Play company after company reports earnings beating forecasts.

Market indices, futures: up, for all three indices. Wow, Dow futures are up another 60 points.

Ten-year bonds: 2.319%. Breaking below 2.30% is Rick Santelli's "concern."

Spratly Islands? China urges halt to oil drilling in disputed South China Sea. Personal note: it was back in 1993 - 1994, I first heard of the Spratly Islands. At Air War College, the Spratly Islands were  studied in depth over just this issue.

Divergence: crude oil wells -- DUCs increasing; natural gas wells -- the fracklog in the Marcellus is shrinking as drillers take advantage of higher prices.

Turning point: Bloomberg suggests that Anadarko's announcement to cut CAPEX may be a turning point for the global oil market. I agree. I think the Anadarko story is a bigger story than most think. But for reasons other than generally reported.

Hess Reports An Earnings Loss; Missed Expectations -- July 26, 2017

Hess: misses expectations of a loss of $1.32/share; in fact, earnings came in at a bigger loss, $1.46/share. However, Hess beat on revenues, coming in at $1.23 billion vs $1.19 forecast. Shares up almost 2% in pre-market trading.

Active rigs:

Active Rigs603373193207

RBN Energy: the surprising influence of China's independent refineries.
Their nickname — teapot refineries — may make them seem small and nonthreatening, but China’s privately owned, independent refining sector is anything but. Teapots have been growing in size and processing sophistication, and they now account for about one-quarter of total Chinese refining capacity. Their rise has raised the ire of China’s big national oil companies, who are pressing the government to rein in teapot refiners’ aggressive tactics and alleged circumvention of tax and environmental laws.
Today we look at the growing role of China’s teapot refineries, the challenge they pose to much larger competitors and the Chinese government’s recent efforts to put a lid on the teapots’ ambitions.
No wells scheduled to come off confidential list today.