Six DUCs Reported As Completed; Petro-Hunt Has Another Big Charlson Field Well -- September 26, 2017

Active rigs:

$52.07→	9/26/2017	09/26/2016	09/26/2015	09/26/2014	09/26/2013
Active Rigs	59	34	71	190	184

Seven new permits:

• Operators: BR (6); Liberty Resources
• Fields: Pershing (McKenzie); North Tioga (Burke)
• Comments:

Two permits renewed:

• CLR: one Bob permit in McKenzie County
• Oasis: one Jensen permit in Williams County

Three permits canceled:

• Petro-Hunt: a Setterland permit (Burke County); a Hoiby permit (Mountrail County); and, a Sabroskky permit (Dunn County)

Six producing wells (DUCs) reported as completed:

• 30685, 1,380, Petro-Hunt, USA 153-95-9C-4-3H, Charlson, t8/17; cum --
• 32543, 310, BR, Lassen 1-26UTFH, Blue Buttes, t8/17; cum -- ; (24136; 18025)
• 32544, 284, BR, Lassen 3-1-26UTFH, Blue Buttes, t8/17; cum -- ; (24136; 18025)
• 32445, 224, BR, 2-1-26MBH, Blue Buttes, t8/17; cum -- ; (24136; 18025)
• 32746, 160, BR, Lassen 4-1-26MBH, Blue Buttes, t8/17; cum -- ; (24136; 18025)
• 32747, 547, BR, Lassen 5-1-26UTFH, Blue Buttes, t8/17; cum -- ; (24136; 18025)

Enhanced Completions In The Bakken Could Cap Upside -- Filloon -- September 26, 2017

Over at SeekingAlpha, summary:

• Bakken core wells show a lower level of oil production than other plays, but decreased well costs provide economic benefits
• lateral lengths in North Dakota mostly range between 8,000 and 12,000 feet
• current enhanced well results support production at $50/bbl (after differentials) but it is likely higher prices will be needed to support growth
• enhanced well results have improved economics significantly, and are the reason there is much dissension in current break evens

Key point:

Enhanced completions are in the early stages of development. Since results continue to improve, there is not reason to believe this will not continue in the immediate future. This continues to pressure oil prices and the U.S. Oil ETF. It is obvious that operators can produce a profit at much lower oil price than just two years ago. If improvements continue, we could see lower for longer with respect to WTI.

Other data points:

• at 250K over 19 months, a marked improvement over last year
• plug and perf with cemented lines with tighter-space perf clusters
• well design is outpacing lower quality geology
• well design is driving US production growth; EOG is acting as the flagship

The graphic: the arrows point to the wells that interest me --

 

The Political Page, T+249 -- September 26, 2017

Global warming hits Arizona: Arizona Snowbowl is the first to start snowmaking in the country.

Arizona Snowbowl fired up the snow guns this weekend, marking the earliest artificial snowfall in the country! Not to mention this being the earliest start to the snowy season in Arizona.

This historical contest is usually won by Colorado ski parks Loveland Ski Area and Arapahoe Basin. This is the first instance where Snowbowl has beaten them both.

Montana update: I will be driving from Portland, OR, to Flathead Lake, during the second week of October. Long-range forecasts: no snow; low of 39 degrees at night; high of 70 degrees during the day over Lookout Pass, Idaho.

All lives matter: the Smithsonian in Washington, DC, finally found room to honor Clarence Thomas in its year-old African American history museum. The museum did not have room for the Supreme Court justice at its opening. Reminds me of the Hall of Fame. In this case Clarence Thomas did not make it in his first year of eligibility but made the Hall of Fame in the second year of his eligibility. Speaking of which, where is his nemesis, Ms Anita Hill, these days? Wiki says she is a university professor at Brandeis University. 

The Energy And Market Page, T+249 -- September 26, 2017

Equifax CEO: out.

Opening market: WTI unable to hold above $52. Dow 30 up 50 points. Mid-morning trading with 115 NYSE issues trading at 52-week highs, including: Home Depot, Phillips 66, Royal Dutch Shell, Valero,

• new lows:6

Tales of three plays: recent articles suggest the Permian is doing well; Bakken is doing quite well. Now the third of three plays, the Eagle Ford. Bloomberg has a story suggesting things are slowing in Eagle Ford.

If Texas’s Permian Basin is Exhibit A for the U.S. oil boom that refuses to die, then the Eagle Ford, a smaller shale patch some 400 miles to the east, represents all those places that have been left behind.

It’s not that the oil rigs totally disappeared after crude prices abruptly collapsed in 2014. But it’s awful quiet. The wells here aren’t the kind of gushers that make it attractive to keep pumping at $50 a barrel.

As the shale drillers moved on to richer fields, the South Texas landscape became pockmarked with abandoned structures. This nimbleness—the ability to just pack up and leave at a moment’s notice—may give U.S. oil companies a competitive advantage against their more rigid state-run OPEC rivals, but there is a human cost to it all.

Natural gas plunges on big injection, surging production -- Zacks. Data points:

• rose by 97 Bcf above forecast of 89 Bcf
• "worse": the increase was higher than both last year's addition of 54 Bcf and the 5-year average net injection of 73 Bcf
• result: the current storage level -- at 3.408 trillion cubic feet -- has widened its surplus to the five-year average of 67 Bcf (2% increase) 
• stocks are still below the year-ago figure
• demand side helped by hot weather in the East (air conditioning) and sharply higher power consumption in Florida as demand returned to pre-Irma levels

Oil Prices To Remain Flat -- Boston Energy -- September 26, 2017

Active rigs:

$52.20→	9/26/2017	09/26/2016	09/26/2015	09/26/2014	09/26/2013
Active Rigs	58	34	71	190	184

RBN Energy: recent developments in Russia crude and refined product exports.

Snagged: Bass Pro completes $4 billion acquisition of Cabela's.

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Prepare For Oil Shortage -- Citigroup

Link: https://www.bloomberg.com/news/articles/2017-09-25/citi-says-get-ready-for-an-oil-squeeze-than-an-opec-supply-surge.

Thesis:

• five countries in the OPEC group may be already pumping at maximum capacity: Libya, Nigeria, Venezuela, Iran, and Iraq
• rather than a surge in output, there's "a risk of a market squeeze" emerging as early as 2018

My comment: any shortfall less than 3 million bopd will easily be met by US. I lean with Boston Energy, see below.

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Oil Price Outlook Unchanged -- Boston Energy

Link: http://www.rigzone.com/news/article.asp?hpf=1&a_id=151853&utm_source=DailyNewsletter&utm_medium=email&utm_term=2017-09-26&utm_content=&utm_campaign=feature_2. 

Overall:

• outlook for oil prices has not changed
• oil prices likely to remain flat well into 2018
• surplus oil inventories ahve declined significantly but a large surplus to the five-eyar average will likely remain for the rest of the year
• a significant increase in inventories is even likely in 2018 with the seasonal decline in global demand
• but in 2020 and beyond, the risk of an oil shortage remains high
• forecast:
• near $50/bbl: into 2018
• average bout $51 in 2018 (vs average $50 in 2017)
• Brent/WTI spread:
• through August, $2.01
• spread dramatically in the aftermath of Hurricane Harvey
• inventory rebalancing is underway, but at a much slower pace than originally anticipated
• OPEC had forecast an increase in oil prices to $60-65/bbl with re-balancing

US production growth will keep surplus inventories high

• see link, lots of data
• US production remains robust; will meet all US demand well into 2018
• US producers have adjusted their 2017 capital budgets to a $51/bbl WTI oil price but left their 2017 production guidance intact
• increased drilling efficiencies, resulting in better breakeven prices:
• Permian Delaware and Midland sub basins: $33/bbl
• Williston Basin: $33/bbl
• Eagle Ford: $34/bbl
• then this:
• But in the long run, Pioneer Resources, a leading producer in the Midland basin, said in a recent presentation “$50 oil isn’t going to get it done” because it doesn’t generate enough cash flow and the industry has too much debt. “U.S. production may grow for 2-3 years and a few independents may grow, but we are in a $60 long term price environment.”

Non-OPEC production outlook flat outside the US

• see link

OPEC production is higher than it anticipated when it announced its cut

• see link
• Iraq is the biggest cheater, consistently exceeding its limits
• 4.45 million bopd vs quota of 4.35 million bopd
• plans to increase production to 5.0 million bopd

Adequate future world oil supply requires higher prices

• see link

My comment: fundamentals suggest that prices for crude oil will remain flat but the question is whether speculators will push the price of oil toward $60 over the next 12 months.