Week 33: August 13, 2017 -- August 19, 2017

Shale oil: record after record after record being set.

EIA adds Anadarko to weekly production report -- perhaps the biggest story of the week.

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Bakken deals
Whiting to sell some Fort Berthold area assets

Operations
Active rigs continue to slide; down to 53
Production data for June, 2017, posted
ND well with highest monthly rate of any well in ND history?
Active rigs trending down in North Dakota
QEP reports several nice Foreman wells
Random example of peculiarities of the Bakken 
$10,000 for a mineral acre in the Bakken

Fracking
Update on fracking sand strategies

Pipelines
DAPL upends region's dependence on CBR
Bakken and Canadian producers wrangle for pipeline space

CBR
Struggling 

Other formations
Two interesting wells targeting the Madison 
Watch for increased activity targeting the Madison formation

Bakken economy
Water Resource Recovery Facility, Williston, $105 million, ribbon-cutting
Cardon Global opens new office in Williston; to oversee new Williston airport (same link)
Federal funding now reaches $73 million for this $112 million project

Williston Wire -- August 18, 2017

Ribbon cutting ceremony:

• Water Resource Recovery Facility, Williston (Boomtown)
• $105 million
• Thursday, August 31, 2017; 8:30 a.m.

Hub City funding

• Williston will host legislators in bid to "earn" Hub City funding

Williston school district continues to grow: enrollment expect to top 4,000

Divide County elementary school: new school should be ready for opening day

Tioga school district: prepares for slight increase in enrollment, up slightly from last year at 455; 268 of those at Central Elementary School

Cardon Global opens new office in Williston

• Cardon Global, parent of Cardon Development Group
• selected by City of Williston in 2015 to oversee planning and development of the ew Williston Basin International Airport
• Cardon Global also selected by the city to create a 10-year, strategic economic plan

Watford City medical center

• Crestwood donates $150,000 to new medical center

Watford City: groundbreaking for Veterans Memorial Park

The Importance Of FERC -- Reminder: We Now Have A Quorum -- August 18, 2017

Story here. The court ruling today:

A federal appeals court ruled against the Constitution Pipeline Friday, in a challenge it brought against New York State’s denial of a water quality permit.

The decision is a major blow to the embattled project, which was planned to run 121 miles, carrying natural gas from the Marcellus Shale in northeastern Pennsylvania through New York State.

What next?

In an email, Williams spokesman Keith Isbell signaled the company’s next move may be to bring the matter before the Federal Energy Regulatory Commission (FERC).

“In today’s decision, the Second Circuit recognized the jurisdiction of the D.C. Circuit, and the D.C. Circuit has recently acknowledged FERC’s authority to make the ultimate decision under the Natural Gas Act,” Isbell writes. “While we would have preferred an immediate path to construction, we are pleased with the court’s resolution of this jurisdictional issue.”

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Easier To Buy Than To Build

Link here.  Calpine sold to private equity firm in deal valued at $17 billion. The story:

Calpine announced on Friday morning that it has agreed to a sale to Energy Capital Partners in a deal valued at $17 billion. Energy Capital will pay $15.25 a share in cash, about a 50 percent premium to Calpine's share price before reports surfaced in May that the power company, one of the nation's largest, was considering putting itself up for sale.

Calpine's stock climbed sharply in after-hours trading. Calpine and Energy Capital must get regulatory approval from the Public Utility Commission of Texas, among other agencies.

If the deal goes through, it will result in a more than $9.1 million payoff for Calpine CEO Thad Hill, who owns nearly 600,000 shares of the company's stock.

Calpine, which employs about 800 in Houston, has struggled in recent years in the face of persistently low electricity prices, a surge of renewable energy and the high costs of operating fossil fuel power plants. The company reported a second-quarter loss of $219 million, significantly larger than its $29 million loss in the second quarter of 2016.

From the Calpine website:

Nice Turn In WTI Price; Nine New Permits -- August 18, 2017

Active rigs:

$48.73↑↑	8/18/2017	08/18/2016	08/18/2015	08/18/2014	08/18/2013
Active Rigs	53	33	74	193	183

Nine new permits:

• Operators: Hess (7); Petro-Hunt (2)
• Fields: Blue Buttes (McKenzie); Charlson (McKenzie)
• Comments: Hess has permits for a 7-well Sigrid-Loomer pad in NWNW 8-150-95; Petro-Hunt has permits for two more USA wells in Charlson -- always exciting to see USA wells in the Charlson

Two permits renewed:

• Whiting (2): an Iver & Minnie permit, Stark County; and, a permit for Sikes State, Mountrail County

One permit canceled:

• QEP: canceled a Vegas permit in McKenzie County (#33037)

The Market And Energy Page, Part 6, T+210 -- August 18, 2017

When will tight oil make money? A great analysis from Wood Mackenzie. Three reasons why one would not expect to see positive cash flow in the shale oil industry (think Amazon in the early years):

• early life
• high growth
• capital intensive

Operators have spent a lot of money:

• acquiring positions
• investing in infrastructure
• getting up the learning curve

The shale oil industry is in early stages; much of this is structural, not cyclical.

The analyst gets specific regarding oil prices:

• $50 oil or better: positive cash flow
• $45 - $50 oil: operators will make production/growth targets but at expense of cash flow
• below $45: operators will have to change their behavior, but it would take a full 12 months of $45-oil, and Wood Mackenzie thinks that is unlikely to happen

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 think you may have read here.

US Petroleum Demand: Highest In 10 Years -- Highest In A Decade -- Highest Since 2007 -- US Crude Oil Production? Highest In 45 Years -- NGL Production? Highest On Record -- Making America Great Again

As you read the note below, think about this: this is not being reported in the mainstream media. CNBC does not report it. I don't think FBN even reports it but I don't listen much to FBN -- even more political than CNBC and that says a lot. 

From Oil & Gas Journal, data points:

• July data
• total US petroleum deliveries: up almost 5% from a year ago
• averaging: 20.7 million b/d
• highest July deliveries in 10 years
• increased 1.6% over previous month (June, 2017)
• year-to-day: total petroleum deliveries up 1.3% compared to same period last year

Meanwhile, gasoline deliveries hit new records also (same link):

• all-time high in July; not just a 10-year high, but an all-time high
• increased 1% from July, 2016
• average nearly 9.7 million b/d
• 2016: 9.2 million b/d - the second highest year-to-date level

Domestic crude oil production? Yup, more records (same link):

• in July, 2017, last month -- production increased from the prior month, the prior year, and the prior year-to-date to reach the highest July output level in 45 years
• averaged 9.4 million b/d in July, 2017, up almost 10% -- astounding -- from July, 2016
• US crude production has been above 9 million b/d for the sixth consecutive month 

NGLs? Glad you asked (same link):

• highest July output level on record

Color me impressed. A huge shout-out to all the roughnecks and truck drivers that made this possible. Good on you.

What A Doofus

The Market And Energy Page, Part 5, T+210 -- August 18, 2017

Foot Locker: getting hammered, down 25% in early trading. One word: Amazon.

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 think you may have read here.

Re-balancing. For me, re-balancing means getting back to 22 days of gasoline supply; it peaked at 34 days. It appears we have hit a new record "low" for number of days of US gasoline supply since the Saudi Surge began and then the OPEC cut (wink, wink).

It's possible I missed something, but it appears the most recent data shows that US days of supply of crude oil excluding the SPR is now down to 26.7 days. We have to go all the way back to October, 2015, to see 26.7 days or lower.

There doesn't seem to be much difference between 34 days and 22 days but the former is almost 5 weeks, whereas the latter is barely three weeks.

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Cooking School

Middle granddaughter (on the left) and friend. Pastry school all week; two different pastry chefs and two students. Pretty good ratio. I've been enjoying great desserts all week.  Sur La Table, Southlake, TX.

Her dad makes sure that the granddaughters are "booked" for something each week during the summer. Both granddaughters were enrolled in rock climbing last week. The week before that, the National Junior Olympics water polo in southern California (Huntington Beach, CA). Earlier in the summer, the older granddaughter attended two weeks of Spanish Camp in Minnesota while the middle granddaughter was at soccer camp. One week of computer coding camp before that. Last year, the summer included two weeks of sailing lessons, but no time this year for sailing. Oh, yes, scuba diving instruction last summer, also, which I almost forgot. Busy, busy summers.

I'm hoping to get the older granddaughter working in the Bakken oil fields next summer. LOL.

Sophia, the 3-year-old? TutorTime all day long and then swimming every afternoon/evening with me. Well, almost every afternoon/evening.

The Market And Energy Page, Part 4, T+210 -- August 18, 2017

Why I love to blog: I mentioned this just the other day. Now Argus Media reports:

An expected surge in visitors for the 21 August eclipse helped send Portland, Oregon, suboctane gasoline prices to a four-month high yesterday.

Portland suboctane gasoline ... buoyed in part by anticipation of increased traffic to Oregon to glimpse the first US coast-to-coast eclipse in 99 years. The full eclipse is expected to pass over a large part of the state just south of Portland.

Expectations of upcoming maintenance at a refinery in the Pacific Northwest have also bolstered prices, traders said, but many attribute the daily gains in the Portland gasoline market to anticipation of increased fuel demand from eclipse visitors.

As many as 1.5mn additional people could be in Oregon for the eclipse beyond normal summer traffic, an Oregon State Police spokeswoman told Argus.

"This is incomparable to increased visitors during holiday periods," she said. "I cannot think of anything else like this."

Pipelines, refineries, terminals, delivery trucks and fueling stations are not set up for what could be a 20pc increase in demand over a short period of time.

"Maybe at an individual station, but not a region," Lenard said. "Fuel is a huge concern. Markets have adjusted much higher in the Pacific Northwest. I have heard that some gas stations out there have quadrupled their plans for supply. This is a very unique event."

A significant factor is the availability of tanker trucks to refill underground storage tanks, Lenard said.

"Fuel is not like an extra case of soda — you cannot just stick it in the back room," he said.

Gasoline and diesel supplies may be "stretched thin" in Oregon communities near the path of totality, auto club AAA Oregon said.

"Earlier in the week, we had stations temporarily run out of fuel in central Oregon, and that is the area that seems to be the most impacted by the eclipse," a AAA spokesman said. "This is like a 4 July holiday weekend and a snow event all rolled into one, with the kind of traffic gridlock we are expecting."

On 21 August the eclipse will cast a 70-mile shadow across 14 US states, ranging from Oregon to South Carolina.

The Market And Energy Page, Part 3, T+210 -- August 18, 2017

DAPL upends region's dependence on oil: from The Financial Post --  As Dakota Access comes online, America's most pipeline-constrained shale play sees new life. The completion of the Dakota Access pipeline in June has upended the region’s dependence on rail — good news for Calgary's Enerplus.

Ian Dundas expects to see far fewer oil trains rumbling across the sprawling farmlands of North Dakota in coming years.

Dundas is the chief executive of Calgary-based Enerplus Corp., one of the first companies to enter the Bakken, an oilfield spanning southern Saskatchewan, North Dakota and Montana. In the absence of available pipeline capacity, companies operating in the region had for years moved oil on an existing rail network in Canada and the United States. As production boomed, producers began investing more in oil-by-rail terminals, paying a premium to get their product to market.

But the completion of the highly contentious Dakota Access pipeline in June, a major oil conduit carrying some 570,000 barrels per day of crude from North Dakota to Illinois, has upended the region’s dependence on rail.

The pipeline has dramatically reduced shipping costs for Bakken companies, bringing overall costs in line with other U.S. shale producers, like those in the highly prolific Permian Basin in Texas and New Mexico.  

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 think you may have read here.

STACK. From an analyst's press release:

Despite the fact that the Oklahoma STACK oil and gas play is still evolving and its total potential is undetermined, evidence thus far indicates the play is delivering impressive results, leading operators to commit significant 2017 CAPEX to its development, according to new analysis from IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions.

“The Oklahoma STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher County) play is early in its development but wells have shown great productivity,” said Imre Kugler, associate director, energy research at IHS Markit and author of the IHS Markit Plays and Basins: Oklahoma STACK analysis. “Questions still remain regarding potential across various horizons; however, for operators with acreage and capital to test the play, economic upside exists so the biggest six operators in the play are on track to invest more than $2.5 billion during 2017.”

Whether the play will be a major contributor to domestic supply is still undetermined, Kugler said. “To date, fewer than 1,000 wells have been brought online in the liquids-rich STACK play, but estimated break-evens for first quintile wells in the play are quite low and competitive with top Permian plays. First quintile wells in the STACK for both short- and long-laterals are estimated to break even under $30 per barrel.”

The early stage of the STACK play equates to some variance in well performance as operators seek to optimize development. The spread between first and second quintile wells is wider when compared with the relatively more well-known Permian plays, with second quintile STACK wells estimated to break even near $41 per barrel for longer laterals, and $55 per barrel for shorter laterals, IHS Markit said.

The Market And Energy Page, Part 2, T+210 -- August 18, 2017

Rick Weiss. Say what? A Harvard University study in 2012 called "it" just right:

Global oil supply capacity is growing at an unprecedented level, and could result in an overproduction glut and steep dip in oil prices, according to a June 2012 study from Harvard University's Kennedy School of Government.

Contrary to the idea among some that global oil supply is running out, additional production of 17.6 million barrels of oil per day (bopd) could come online by 2020, boosting global production capacity to 110.6 million bopd, even with depletion rates for currently producing oilfields and reserve growth.

"This would represent the most significant increase in any decade since the 1980s," said Leonardo Maugeri, author of the study "Oil: The Next Revolution -- The Unprecedented Upsurge of Oil Production Capacity and What It Means for the World."

Field-by-field analysis of global oil exploration and production projects suggests unrestricted, additional production of over 49 million bopd of crude oil and natural gas liquids could come online in 2020, the equivalent of over half the current world production capacity of 93 million bopd.

In the comment section, Rick Weiss:

One should be aware of possible incompetence in the report. Crucial errors were summarized in David Strahan’s blog (http://www.davidstrahan.com/blog/?p=1576) as follows (quoted from that blog). Plenty of ink has already been spilled by oil depletion experts exposing some of the wildly optimistic assumptions contained in Maugeri’s report. More damning is that the work is shot through with crass mistakes that render its forecast worthless.  

But this is what caught my ire/attention:

Maugeri claims this looming glut has three legs: booming upstream investment by the oil industry; the rise and rise of unconventional production such as US shale oil; and a tendency among forecasters to over-estimate massively the rate at which production from existing oil fields declines. The first point is uncontroversial, the second is moot, but the third is the most important; without it, Maugeri’s glut evaporates. 

Second leg: the rise and rise of unconventional production such as US shale oil, which Rick Weiss called "moot." LOL. 

Rick's bottom line: " ... wildly optimistic assumptions contained in Maugeri’s report. More damning is that the work is shot through with crass mistakes that render its forecast worthless."

Must have been advising Goldman Sachs lately.

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Oil Demand Peak? Peak Oil Supply?

From Rigzone, a great article for the archives:

The oil industry is quite familiar with the concept of a “Peak Oil Supply” but people find it hard to believe that there is another side of the theory, which is “Peak Oil Demand”. This article will examine why the concept of peak oil supply failed to materialize and why one should believe the concept of peak oil demand will materialize.

Archived.

The Market And Energy Page, T+210 -- August 18, 2017

Deere: buying opportunity?

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 think you may have read here.

Energy costs across the US: the best and worse places in the US to buy energy. States with highest total energy costs (full list here):

1. Connecticut ($380 average monthly energy bill)
2. Alaska ($332)
3. Rhode Island ($329)
4. Massachusetts ($327)
5. Wyoming ($320) -- winter heating bills, but still -- with all that coal?

States with the lowest total energy costs:

51. DC ($219) -- standard of living?
50. Washington ($226) -- hydroelectricity; some wind
49. Colorado ($228)
48. Oregon ($246)
47. Illinois ($247)

What to watch today? The 10-year Treasury. Could drop to 2.10%

Henry Hub: emerges as the global natural gas benchmark -- from The WSJ.  Henry Hub is helping to set prices around the world as wave of US natural gas reaches Europe, South America, Asia. Pretty amazing. Just a few years ago, it was forecast that US would be a net importer of natural gas; now, the US is not only a net exporter of natural gas, but will eventually become #1 in natural gas exports. Location of Henry Hub? Erath, Louisiana -- an unassuming confluence of pipelines in the heart of Cajun Country.

In the first half of the year, there was a 31% increase in the volume of Henry Hub natural gas futures traded outside of typical U.S. trading hours, compared with the same period last year, according to CME Group, which owns the New York Mercantile Exchange. That is a sign that traders abroad are increasingly dabbling in the U.S. gas benchmark.

Boo-hoo. Also from The WSJ today -- wrong-way natural gas bet fueled Goldman's second quarter swoon. A $100 million loss from gas-price water contributes to worst-ever quarter for commodities unit. I wonder if Rick Weiss was their lead analyst?

Goldman wagered that gas prices in the Marcellus Shale in Ohio and Pennsylvania would rise with the construction of new pipelines to carry gas out of the region, said people familiar with the matter. Instead, prices there fell sharply in May and June as a key pipeline ran into problems.

Goldman said in July that the quarter ended June 30 was the worst ever for its commodities unit, which has been one of the firm’s most consistent profit centers and a training ground for many of its top executives, including Chief Executive Lloyd Blankfein. 

Reminder: speaking of pipelines, MDU (WBI Energy) expanding natural gas transportation infrastructure in northwest North Dakota. This is not new; it may have been posted previously. I forget. From MDU Resources in June, 2017:

MDU Resources Group, Inc. (NYSE: MDU) announced today that subsidiary WBI Energy, Inc. plans to expand its Line Section 27 natural gas transportation system in the Bakken producing area in northwestern North Dakota.

The $27 million to $30 million expansion project will involve construction of approximately 13 miles of 24-inch diameter pipeline and associated facilities. When the expansion is complete, the transportation capacity on WBI Energy’s Line Section 27 will be over 600,000 dekatherms per day. The targeted in-service date for the project is fall 2018, which is the same timeframe for completion as WBI Energy’s $55 million to $60 million Valley Expansion project near Fargo, North Dakota.

The Political Page, T+210 -- August 18, 2017

ObamaCare: Iowa's only insurer seeks 57% rate increase. The good news? Only affects about 14,000 Iowans and most of the "shock" will be absorbed by taxpayers across the US who will provide subsidies pretty much making the premiums moot for those who qualify.

Active Rigs At 53 -- August 18, 2017

Active rigs:

	8/18/2017	08/18/2016	08/18/2015	08/18/2014	08/18/2013
Active Rigs	53	33	74	193	183

RBN Energy: NGL pipelines out of the Permian, part 5.