The Energy And Market Page, T+212 -- August 20, 2017

The Mideast

Just a month ago, I wrote:

Off the radar scope, the current allied military push on the ISIS capital of Raqqa (Raqqah). Iraqi news service reported a week or so ago that the allies had re-taken Mosul, the most important city held by ISIS at the time.

Tonight, The Los Angeles Times is reporting:

Fresh off their victory in Mosul, Iraqi forces Sunday launched their campaign to reclaim the city of Tall Afar, Islamic State’s last major bastion in the northern part of the country.

Its loss would deny the group a major resupply — or escape — route to the border with Syria, 60 miles to the west. The jihadis have long been able to cross the border with impunity.

The US Marines should get much of the credit. The LA Times did not mentions the US Marines. I'm not surprised.

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The Market And Energy Page

Futures are up a bit; at least the Dow 30 is. [That was earlier; now down.]

Sempra said to have the inside track for Oncor; $9.3 billion. Let's see if Warren refuses to get into a bidding war; he said his $9 billion offer was as high as he would go.  Reuters wonders. A contributor over at SeekingAlpha explains how Sempra and Oncor are a good fit.

Shell loads Libyan oil for the first time in five years.

Dow Chemical may exit Argentina natural gas play.

Pennsylvania coal company to open second coal mine since Trump took office. Reported at Fox 'cause others won't report it.  A reader sent me the link; I would have missed it. My e-mail reply is "not ready for prime time," but here it is:

This is really an interesting story.

Either:

a) Trump's economic policies really do make a difference;

b) Trump (or his advisors) saw this coming (resurgence of coal) and simply caught the wave.

Considering that big changes in steel manufacturing really can't happen "overnight" it's hard to believe that simply "talking about" ending the war on coal could make things happen so quickly.

One wonders if knowing he got elected, he would allow the energy industry (i.e., shale, and the pipelines) to move along more quickly by removing regulations, etc., and that subsequently would end up widening the gap between EU (and China) and the US on energy prices. Our energy prices would be so low compared to the rest of the world that steel could make a comeback and metallurgic coal would follow.

I think he and his advisors interpreted the "energy" tea leaves very, very correctly -- that if Trump could get into office a lot of other things would naturally happen -- like resurgence of coal.

I don't know, but considering very little has really happened yet, it's interesting that another coal mine is already opening (at least the announcement).

By the way, speaking of steel, Fortescue Metals Group, Australia, "soars" 5% after reporting a net profit of $2.09 billion compared to slightly less than $1 billion last year, thanks to a rebound in the price of iron ore, required for steel manufacturing. Fortescue is the world's largest producer of iron ore. 

Water bottles okay in national parks ... again, a huge "thank you" to President Trump. Google: The Trump administration has ended a six-year-old ban on selling bottled water at some national parks that was aimed at easing plastic pollution and the huge amount of waste being recycled.

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Oops! We Did It Again

US Navy ship, USS John S. McCain, collides with merchant ship near Strait of Malacca, ten sailors missing, five injured. 

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Incredibly Cool

First span of new "NYC" bridge built to carry millions -- now opening. Data points:

• NY governor Andrew Cuomo's signature public works project
• $4 billion -- yes, billion -- bridge
• to bridge the Hudson River -- bridging NYC with the suburbs
• will replace the 62-year-old Tappan Zee
• westbound span opens later this week
• eastbound span to open in the spring (2018)
• 3-mile bridge; links Westchester County to the NY State Thruway across the widest point in the Hudson
• one of the largest public infrastructure projects underway in the US
• a model of the latest engineering
• will carry more than 50 million vehicles/year
• Manhattan 25 miles to the south

Nice human interest story on the Tappan Zee here. 

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Trudeau To Asylum Seekers: Tough Love

Crossing into Canada illegally will not "fast track" immigration, says prime minister. Hmmm...tough love. Sounds like Trump. Trudeau is not "Obama" on this issue.

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Jerry Lewis Dead At 91

It seems like I grew up with him. I thought he was older. For the archives.

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For The Granddaughters

Roasting bell peppers.

Preparing them:

After roasting them, and removing the skin, some of the peppers:

I have no idea why shy looked so stern.

For Newbies -- August 20, 2017 -- One Of The Peculiarities Of The Bakken

There are now enough wells drilled throughout the Bakken that one can do this:

• find a recently fracked Bakken well that has a huge initial production
• go to the NDIC map and find a horizontal well parallel to the recently fracked Bakken well
• check FracFocus to see if the older Bakken well was re-fracked

So, let's do that.

These two wells were recently fracked by Oasis and will come off the confidential list this week:

32241, see below, Oasis, Forland 5198 41-33 3B, Siverston:

Date	Oil Runs	MCF Sold
6-2017	28584	49766
5-2017	33877	87928
4-2017	44180	83282
3-2017	42023	85555
2-2017	7306	11303

32242, see below, Oasis, Forland 5198 41-33 4T, Siverston:

Date	Oil Runs	MCF Sold
6-2017	26749	43014
5-2017	35839	87549
4-2017	42072	123402
3-2017	30564	66825
2-2017	2118	5692

Let's check a nearby Bakken well that was fracked some time ago. In this case,

• 21657, 1,844, Oasis, Forland 28-33H, Siverston, t3/12; cum 461K 9/19;

There is no report at FracFocus to suggest this well was ever fracked after the original frack in 2012. So what was the production profile for this well over the past 12 months?

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	6-2017	30	20037	19893	21285	47223	46923	0
BAKKEN	5-2017	31	22370	22625	31072	46142	45832	0
BAKKEN	4-2017	30	16423	15355	36574	22371	22071	0
BAKKEN	3-2017	0	0	0	0	0	0	0
BAKKEN	2-2017	0	0	0	0	0	0	0
BAKKEN	1-2017	0	0	0	0	0	0	0
BAKKEN	12-2016	1	0	0	0	10	0	0
BAKKEN	11-2016	5	95	414	140	294	274	0
BAKKEN	10-2016	29	2359	2297	939	5542	5329	213
BAKKEN	9-2016	27	1909	2023	1155	4802	4532	0
BAKKEN	8-2016	31	2284	2198	1060	7758	7448	0
BAKKEN	7-2016	31	2301	2439	885	6488	6178	0
BAKKEN	6-2016	30	2371	2469	1035	6369	6069	0

In this case, this well was producing about 2,000 bbls / month; it was taken off-line for five to six months, and then brought back on line, and produced about 22,000 bbls in one month -- equal to what this well would have produced in one year. 

The graphic:

Just one of the peculiarities of the Bakken, I guess. Take a Bakken well off-line for a couple of months, in this case five or six months, and watch production jump 10-fold. Rinse. Repeat.

Wells Coming Off Confidential List This Week -- August 20, 2017

Friday, August 25, 2017

• 26924, SI/NC, Hess, AN-Gudbranson-153-94-2215H-7, Elm Tree, no production data,
• 32241, 1,825, Oasis, Forland 5198 41-33 3B, Siverston, 50 stages; 4 million lbs; small and large sand; ceramics33, t2/17; cum 156K 6/17; (21657)
• 33212, SI/NC, XTO, Lundin 11X-4AXD, North Fork, no production data,
• 33347, SI/NC, MRO, Houser 14-36H, Reunion Bay, no production data,

Thursday, August 24, 2017

• 32242, 1,598, Oasis, Forland 5198 41-33 4T, Siverston, Three Forks 1st bench, 50 stages; 3.9 million lbs, small, medium, ceramics, API: 33-053-03816; no frack data at FracFocus, t3/17; cum 137K 6/17; (21657)

Wednesday, August 23, 2017

• 33211, SI/NC, XTO, Lundin 11X-4E, North Fork, t4/17; cum --

Tuesday, August 22, 2017

• 30482, 870, Oasis, Cook 5300 12-13 6B, Willow Creek, 50 stages; 6 million lbs, t2/17; cum 20K 6/17; (27353 - TA)
• 32952, 2,071, Hess, BB-Lars Rothie-151-95-2932H-2, Blue Buttes, Three Forks, 50 stages, 7 million lbs, t7/17; cum --
• 33210, SI/NC, XTO, Lundin Federal 11X-4B, North Fork, no production data,

Monday, August 21, 2017

• 30072, SI/NC, BR, Elizabeth Stroh 24-7MBH, Cabernet, no production data,
• 32953, 2,219, Hess, BB-Lars Rothie-151-95-2932H-3, Blue Buttes, 50 stages, 7 million lbs, small/large, t7/17; cum --
• 33209, SI/NC, XTO, Lundin Federal 11X-4F, North Fork, no production data,
• 33243, SI/NC, Kraken Operating, Fairbanks 20-17 2H, Oliver, no production data,

Sunday, August 20, 2017

• 30071, SI/NC, BR, Cecilia Stroh 24-7MBH, Cabernet, no production data,

Saturday, August 19, 2017 

• 32954, 2,042, Hess, BB-Lars Rothie-151-95-2932H-4, Blue Buttes, Three Forks, 50 stages, 7 million lbs, small/large, t7/17; cum --
• 33244, SI/NC, Kraken Operating Fairbanks 20-17 3H, Oliver, no production data,

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32241, see below, Oasis, Forland 5198 41-33 3B, Siverston:

Date	Oil Runs	MCF Sold
6-2017	28584	49766
5-2017	33877	87928
4-2017	44180	83282
3-2017	42023	85555
2-2017	7306	11303

32242, see below, Oasis, Forland 5198 41-33 4T, Siverston:

Date	Oil Runs	MCF Sold
6-2017	26749	43014
5-2017	35839	87549
4-2017	42072	123402
3-2017	30564	66825
2-2017	2118	5692

30482, see below, Oasis, Cook 5300 12-13 6B, Willow Creek:

Date	Oil Runs	MCF Sold
6-2017	13476	12970
5-2017	1198	722
2-2017	5637	0

The Political Page, T+212 -- August 20, 2017 -- GDP Growth -- Making America Great

It's been my impression that actual results don't always meet forecasts when it comes to forecasting quarterly US GDP, but here it is for what it's worth.
From a reader:

The Atlanta Fed estimated US 3Q17 GDP growing at 4.0 percent -- from Reuters. 

This is hard to believe. Remember all these headlines?
 
--- BUSINESS INSIDER: The clearest part of Trump's economic plan is also the most delusional part.

Three percent GDP growth. Three percent GDP growth. Three percent GDP growth.

Get it stamped on your brain. Get it tattooed somewhere. Have some T-shirts made, because this is team Trump's goal for the economy. In a time of extreme policy confusion, 3% GDP growth is one of the only firm targets we have to hang onto.

The problem is that in interview after interview, Donald Trump and his surrogates have demonstrated that they have no idea how to get there.

--- CNBC: Trump needs GDP growth, but one of his favorite policies works directly against him

 
--- THE HILL: Why is Trump's 3-percent growth target pure folly? Because math. ---

--- VOX. Trump: I will achieve 3 percent growth! CBO: No, you will not. ---

By the way, something that is not being talked about very much: most agree that the way economists measure GDP is no longer valid. It completely misses productivity gains because of technology. Most pundits agree that GDP growth would be significantly higher if measured "properly."

With all the anti-Trumpers out there, it's a given that the way GDP is measured will not be changed during the Trump administration. This, by the way, works in the favor of investors vs savers. 

Filloon: Permian Update -- August 20, 2017

Disclaimer: same as usual.

From Mike Filloon at SeekingAlpha, summary:

• recent Delaware core completions have raised the bar with respect to production per foot
• the Midland Basin is excellent, but the Delaware seems to have better geology and the best source rock outperforms
• the most recent results have been better than expectations, but the question seems to focus on repeatability
• operator hedging in the Permian is being done at lower oil prices, which seems to show operators can hold on at today's prices.  These hedges will continue to decrease the chances of a break out in oil prices
• Even with payback times decreasing in the Delaware, we expect a test of 52-week highs in the USO this year

More:

Enhanced completions continue to better unconventional well economics in the United States. While there are considerable differences in the bullish and bearish narratives for oil prices, production numbers are concrete. 

We continue to see operators increase production, and many have been able to decrease proppant volumes. Either we have hit a peak in production per foot or operators do not need to pack as much sand in frac's. Enhanced completions are the new normal.

Operators are moving to plug and perf with cement liners. Ceramic proppant is being pushed out given the expense.  It was once thought frac sand could only be used in more shallow plays. Worries that sand would crush out and stop production, are not a concern with newer designs. We have covered enhanced completions in several plays. 

Summary:

In summary, we think economics from core plays will continue to provide a ceiling for the USO and oil prices in general. There is still considerable inventory in very good geology.

This means we will see operators continue to hedge at $50/bbl. We expect this oil price ceiling will slowly increase in the coming months, as Permian operators get hedge positions in for 2017 and 2018.

When oil reaches $54 to $55, other plays like the Bakken will begin to increase hedging and provide a new ceiling. It will take an additional, unforeseen catalyst to push oil to $60.

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From Sophia's Art Studio

"Leprechaun Behind a Tree"

Sophia, age 3.

August 20, 2017

Making America Great, Images And Graphs -- November, 2016 -- November, 2017

This was in draft. It appears that I originally drafted it August 20, 2017, to be posted later. I'm posting it now simply to close out several posts in draft.

Read GDP, historical:

Unemployment:

The graph above is hard to interpret. At least it was for me. Two points are being made:

• after the November, 8, 2017, election, the overall U3 unemployment plummeted
• the Journal focused on the unemployment rate of those who "flipped" -- those who had voted for Obama in the previous election, but voted for Trump in this election -- although the bold red line catches one's attention, it appears that "all" voters participated in better employment picture

But then, connect that bold red line to specific states -- Michigan, Wisconsin, Pennsylvania -- the three states that gave the election to Trump were "in" that red line. See graph below.

June 20, 2017:

July 7, 2017:

McGregor Oil Field

May, 2017, and June, 2017, data for top producing oil fields in the Bakken. Ranked by greatest increase in field production, by percentage, month-over-month, column 10.

Field	May 2017 Prod	May Wells	May Oil / Well / Month	Percent Change Apr-to-May	Change in # of wells	June 2017 Prod	June Wells	June Oil / Well / Month	Percent Change May-to-June	Change in # of wells
McGregor	67,570	41	1,648	-14.64%	0	150,444	47	3,201	122.65%	6
Chimney Butte	309,533	81	3,821	73.06%	0	428,056	83	5,157	38.29%	2
Eagle Nest	444,943	97	4,587	2.36%	0	605,165	101	5,992	36.01%	4
Lost Bridge	346,933	68	5,102	17.38%	4	466,193	73	6,386	34.38%	5
Elm Tree	483,522	62	7,799	19.72%	8	599,055	63	9,509	23.89%	1
Grinnell	143,053	60	2,384	-14.42%	4	176,416	60	2,940	23.32%	0
Pershing	88,664	39	2,273	-10.08%	0	107,479	39	2,756	21.22%	0
Todd	102,636	56	1,833	-8.19%	0	117,161	59	1,986	14.15%	3
Camel Butte	178,363	41	4,350	10.16%	4	200,069	41	4,880	12.17%	0
Bailey	321,556	149	2,158	18.63%	0	347,829	149	2,334	8.17%	0

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McGregor Oil Field

McGregor oil field was a fairly "regular" rectangular oil field until the Bakken when additional sections were added. For the most part, prior to the Bakken, it was a 2 section x 6 section field, running north/south. Now it's a bit more irregular and encompasses fifteen sections. It is located on the Nesson Anticline, about five or six miles north-north-west of Tioga.

There are a number of operators in the field, but for the most part, Liberty Resources "owns" the field and accounts for the huge increase in production, on a percentage basis, month-over-month, May, 2017, to June, 2017, as seen in the chart above.

Area of most activity in the McGregor oil field at the time of the original post, August, 2017: