Wednesday, November 29, 2017

Has The Bleeding Stopped? Saudi's Foreign Exchange Reserves Increase Dramatically In October, 2017

Link here, Saudi Arabia foreign exchange reserves:

October, 2017:
Foreign Exchange Reserves in Saudi Arabia increased to 1850247 SAR Million in October from 1819581 SAR Million in September of 2017. Foreign Exchange Reserves in Saudi Arabia averaged 2221323.34 SAR Million from 2010 until 2017, reaching an all time high of 2796941 SAR Million in August of 2014 and a record low of 1569145 SAR Million in April of 2010.
I believe the exchange rate is about 25 cents for a Saudi Rial.
  • 1,850,247,000,000 rials in October, 2017
  • 1,819,581,000,000 rials in September, 2017
  • Delta: 30,666,000,000 
  • $0.27 for 1 SAR
  • $8,279,820,000
This is interesting. Over the past year or so I have noted that Saudi Arabia's drop in foreign exchange reserves has been about $3 billion to $8 billion month-over-month. So the jump in reserves of about $8 billion puts things into perspective.

Some links to come back to:
  • Saudi foreign reserves continue slide; lowest since April, 2011 -- Reuters
  • the mysterious (and continuing) falling Saudi foreign reserves -- CNBC 
  • an oil giant is still burning through its cash pile -- Bloomberg 
I have googled at length for an analysis to explain the increase in reserves in October, 2017.

One reader, Don, again, has it correct, and has provided an answer. I won't post that answer for awhile pending more data from readers or the media. 

One more check: I spoke too soon -- here's an update, just two days ago: Reuters has an October update. I'm going biking, but there are several story lines here. The biggest story line: selling just before the market took off! Liquidating reserves just before the US market took off, although they have had a good run since Trump was elected. But they left a lot -- and a real lot -- of money on the table.

But there's much more to the story. Don got it just right.

Making America Great -- Another Natural Gas Pipeline Approved To Flow -- November 29, 2017

FERC gives Transcontinental Gas Pipeline permission to begin flows on its Virginia Southside II expansion project in the mid-Atlantic US. Data points:
  • 241 million cf/d
  • $191 million project
  • designed to provide additional service to southern Virginia, including deliverability to Dominion Virginia Power's new 1,580MW combined-cycle natural gas-fired power plant in Greensville County, VA, when that plant comes on line
  • $1.3 billion Greensville County power plant to begin commercial operations in late 2018; construction began in June, 2016 
Yup, making America great.

Meanwhile, the Keystone XL is pretty much dead.

North Dakota And New York Have Something In Common -- November 29, 2017

Some years ago a reader from New York complained that North Dakota was "taking" more federal money than the state sent to Washington (DC). Not so fast. Of the top ten states ranked on how much each state citizen sends to Washington (DC), North Dakota is #5, right behind Massachusetts (#4) and only two behind New York (#3).  The top four are NJ, CT, NY, and MA ... and then comes ND.

And the difference between New York (-$2,425) and North Dakota (-$2,253) is statistically insignificant and probably not reproducible. 

In fact, of the top ten states sending more money to DC than getting in return, five flyover states are on the list. Most surprisingly, New Hampshire is #8: my hunch is that a lot of wealthy Bostonians are residents of New Hampshire.

One word: Bakken.

Here's the list from The WSJ:

By the way, guess which "state" fares the best? Yup, Washington, DC (#51) at an incredible $40,082 per resident. The next closest, New Mexico (#50) gets $8,072 for each citizen.

The average for the US: each US citizen on average gets back $1,350 in "federal balance of payments." North Dakota and New York are both on the wrong end of the list. LOL.

Here's the list of those 41 - 50, pretty much the south and deep south:


Almost every American Airlines pilot will be on vacation during Christmas. I can't make this stuff up.

Seven New Permits -- November 29, 2017; WTI Holding At Slightly Lower Prices -- But At $58, That's Fine

Active rigs:

Active Rigs553964185191

Seven new permits:
  • Operators: Oasis (5); EOG (2)
  • Fields: Willow Creek (Williams); Parshall (Mountrail)
  • Comments: note the chronological numbers for the two EOG wells (#470, #471); 1,084 permits so far this year, 37 of them were Willow Creek permits; Truax (53); Spotted Horn (30); Siverston (15); Sanish (21); Sand Creek (29); Reunion Bay (65); North Fork (23); Lone Tree Lake (62); Elm Tree (21); Blue Buttes (32); Banks (73); Alkali Creek (23)
Six producing wells (DUCs) completed:
  • 25370, 1,292, HRC, Fort Berthold 152-94-13B-24-2H, Antelope, Sanish pool, t10/17; cum 33K 10/17;
  • 31155, 1,572, HRC, Fort Berthold 152-94-13A-24-7H, Eagle Nest, t10/17; cum 15K after 21 days;
  • 31156, 1,450, HRC, Fort Berthold 148-95-13A-24-8H, Eagle Nest, t10/17; cum 12K after 16 days;
  • 33143, 1,245, BR, Croff 22A MBH, Croff, t10/17; cum --
  • 33144, 318, BR, Mathistad 22A MBH, Croff, t10/17; cum --
  • 33145, 585, BR, Croff 22B UTFH, Croff, t10/17; cum --
Quick Commentary

There has been a post in the past few days about the inroads that US shale (and specifically the Bakken) is making in Asia. It's quite a story. Bottom line: Asia will import much more American oil next year and much of it may come from the Bakken (from CLR, if you want a name).

Today on CNBC it was noted that the oil ministers at the OPEC meeting in Vienna discussing production quotas have become quite concerned about losing market share in Asia.

For newbies, it appears that a $7 spread in WTI-Brent is the "cut-line" for Bakken taking Asian market share from OPEC.

Could be wrong; just a gut feeling.

Random Update Of UND EERC's CO2 Injection Project -- November 29, 2017

See this post from November 6, 2017.

Now an update.

A reader sent the following photos with this comment:
Drilling a 6,000-foot well to test CO2 injection from power plants in Mercer County, north of Golden Valley. Moving to Center, ND, in Oliver County after this for the same reason. Will be logging both wells for hydrocarbon shows.
A few observations:
  • note how quickly from permit to execution -- I'm impressed
  • Neset Consulting Services -- great Bakken story in itself  
  • how few vehicles on site -- how efficient the operation seems to be in terms of personnel
The photos:

Spot Electricity In Australia -- $14,000/MWh -- Reader -- November 29, 2017 -- Elon Musk Batteries NOT Working?

Australia has become the poster child for idiotic green energy policies.

I link electricity demand / prices for New England, California (demand, price), and Australia at my "Data Links" page.

Generally, it appears in the US, one can expect (today) about $20 - $50/MWh spot electricity.

A reader watching the Australian situation writes (just a few minutes ago):
I've been keeping an eye on the Australia electricity situation as a "canary in the coal mine" scenario with their advanced adoption of sun/wind generation. 
Well, in a few hours, as per the AEMO website, spot electricity will cost $14,000 MWh for the entire afternoon in Victoria and South Australia
In addition, Level 2 notice was sent out by the AEMO asking (begging?) for restricted consumption and every available generating source to fire up. 
The weather today is to be hot - 94 degrees - and cloudy.
Final note ... future contracts for summer quarter for SA and Vic are $173 and $149 per MWh
There is no way a modern society can function at those prices.
That is no exaggeration. Look at these two screen shots: one for South Australia and one for Victoria. Right now, in South Australia, the spot price is $188/MWh and in a few hours the spot price will be $13,000/MWh:

Similar graphic for Victoria:

I thought Elon Musk has solved that problem by placing the world's largest battery in South Australia. He won the bet by getting the battery built; he didn't say anything about solving the energy problem for South Australia.

Natural Gas
Meanwhile, a reader provided this map -- it's going to be cold over most of the US next week. We'll see how natural gas holds up.  

The Energy And Market Page, Part 2, T+312 -- November 29, 2017

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

UNP: recently hiked its dividend 10%. Earlier this morning, shares hit a new 52-week high, but in afternoon trading really took off. Whoo-hoo. UNP shares jumped almost 4% (up $3.38) and are now trading above $121.

AAPL: on the other hand, not doing so well; two bad days in a row during which the market has surged. Down another 2.5% this afternoon, trading about $169. Hackers reported, and Apple confirmed, a security flaw but Apple has already released a patch to fix the vulnerability. It seems it would be a stretch that this issue is affecting Apple to this degree but I suppose it's possible. If so, the issue should be short-lived.

PLM: a cobalt shortage? From The WSJ, Supply will react too. Companies that operate copper and nickel mines, where cobalt is co-produced, are targeting expansion, and there are some pure-play cobalt mines being planned that could start producing shortly after the projected shortage hits. Comments? 130 -- a huge number of comments; a lot of folks interested in this topic. Gist of comments: it's all about Tesla, and that's why there were so many comments.

Tagged, lost decade. From The WSJ, US economy reaches its potential output for the first time in a decade. Let's see. Who was president this past decade? Oh, that's right.  U.S. GDP growth revised up to 3.3% rate for third quarter, with more business investment in equipment and software, and heftier government spending. Those commenting have it exactly right -- at 3.3% the US has not reached its potential. Reaching full potential -- at least 5 - 7% growth. Seriously.

The Literary Page

In one paragraph, Jean Moorcroft Wilson explained the origins of WWI in her biography of Siegfried Sassoon. A few quick wiki checks to fill in the gaps and I now have my world view of the origins of WWI -- something I couldn't figure out despite years of reading about WWI off and on. Pretty impressive that an authority on war poets could explain this much history in one paragraph. My world view may be wrong, but I at least have the scaffolding now to begin any serious re-reading of WWI history.

The Energy And Market Page, T+312 -- November 29, 2017

From Bloomberg:
America’s largest oil refinery, located in Port Arthur, Texas, is owned by Saudi Arabia’s state-run oil company, Aramco, and since it first bought a stake in 1988, the Motiva refinery guaranteed the kingdom a strategic foothold in the world’s largest energy market.
The tankers carrying millions of barrels a month of Arab Light crude from Saudi export terminals to Port Arthur were testament to the strength of the energy and political ties binding Riyadh and Washington.
All of a sudden, there are very few Saudi ships arriving in Texas. Since July, Aramco has constricted supply, attempting to drain the crude storage tanks at Motiva -- and many others across America -- part of a plan to lift oil prices, even at the cost of sacrificing its once prized U.S. market.
While Motiva is most affected, the rest of the U.S. oil refining system, from El Segundo in California to Lake Lake Charles in Louisiana, has also taken a hit.
The result: Saudi crude exports into America fell to a 30-year low last month.
"The drop is huge," said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. "It’s not just that Saudi exports are low, but they have been low for several months.

Jumpers and Hunters

Had I "sped-read" a passage in the the biography of Siegfried Sassoon I would have missed this passage describing Sassoon's enlistment with the cavalry unit, the 1st/1st Sussex Yeomanry:
Sassoon, who brought his precious hunter Cockbird with him, in their desperation to keep the few horses they had managed to requisition , are reputed to have hidden them in cellars.
In context, one can quickly figure out what a "hunter" is. But I did not know more than that.

For those interested in "hunters" vs "jumpers," see this link.

US Crude Oil Inventories Down By Another 3.4 Million Bbls -- November 29, 2017 -- Time To Re-Balance Drops One Week To 41 Weeks

The EIA's weekly petroleum report has been posted.
  • US crude oil inventories: decreased by 3.4 million bbls; now at 453.7 million bbls
The narrative looks great ... until you look at the graph:

Other data from the report:
  • refineries continue to increase their operating capacity, now at 92.6%
  • gasoline production, pretty much unchanged, at 10.2 million bbls/day
  • distillate fuel production, pretty much unchanged, at 5.3 million bbls/day 
  • total gasoline inventories increased by 3.6 million bbls last week; in the middle of the average range
  • distillate fuel inventories increased by 2.7 million bbls last week but still int he lower half of the average range
  • the "gasoline demand" graph will be released tomorrow
Refinery throughput, via Twitter:

Time to re-balance:

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
Week 14
August 2, 2017
Week 15
August 9, 2017
Week 16
August 16, 2017
Week 17
August 23, 2017
Week 18
August 30, 2017
Week 19
September 7, 2017
Week 20
September 13, 2017
Week 21
September 20, 2017
Week 22
September 27, 2017
Week 23
October 4, 2017
Week 24
October 12, 2017
Week 25
October 18, 2017
Week 26
October 25, 2017
Week 27
November 1, 2017
Week 28
November 8, 2017
Week 29
November 15, 2017
Week 30
November 22, 2017
Week 31
November 29, 2017

Newfield Reports A 62-Stage, But Moderale Proppant Three Forks Well -- November 29, 2017

Three wells coming off confidential list today:
  • 33062, SI/NC, XTO, Jorgenson Federal 44X-5FXG, Lost Bridge, no production data,
  • 32059, 720, Newfield, Moberg Federal 149-95-29-32-20H, Bear Den, Three Forks, 62 stages, 7.6 million lbs, t9/17; cum 18K 9/17;
  • 31421, SI/NC, Hess, EN-Leo E-154-94-2434H-9, Alkali Creek, no production data,  

Random Example Of Activity In Eastern McKenzie County -- November 29, 2017

This is a good example to give one an idea of what a few rigs can do.

In the old days (2007), one rig drilled one well, taking about 45 - 60 days, and then took a few days to tear down, move a mile down the road to the next section to the next well site, and then re-build the rig, and then drilling a second well, taking another 45 - 60 days. And then repeat.

Now, one rig will drill a well in seven days, and then, without tearing the rig down, simply "skid" the rig 50 feet over to drill the next well. In the time it used to take to drill one well, with pad drilling one rig might be able to drill 6 wells (or more).

Similar savings in time are met with pad fracking.

The graphic:

The rig locations on the graphic above:
  • 34103, conf, MRO, Dye USA 14-14TFH-2B, Reunion Bay,
  • 21172, conf, MRO, TAT USA 12-23H, Reunion Bay,
  • 32974, conf, MRO, Jorgenson USA 12-23H,
  • 31776, drl, HRC, Fort Berthold 151-94-26B-35-12H, Sanish pool;
  • 30543, drl, HRC, Fort Berthold 151-94-26A-35-6H, Sanish pool;
The production data will not be updated on this page. Production data will be updated elsewhere. 

The Trump Rally May Not Be Over -- November 29, 2017

Plans to spend more time with his family. Matt Lauer.

Mr Wobegone? Also, gone.

GDP, 3Q17: revised upward -- second estimate at 3.3% for 3Q17. This is a 3-year high.

Weekly petroleum report: pending; released 10:30 a.m. Eastern Time.

Market: the Trump rally may continue today based on futures.

ESPN: lays off 150 people today.

Oil majors just got the memo: "It's all about shale." -- Reuters --- pressured for profit, oil majors bet big on shale technology (spoiler alert: article is light on examples that get me excited).
Now, oil majors that were slow to seize on shale are seeking further efficiencies by adapting technologies for highly automated offshore operations to shale and pursuing advances in digitalization that have reshaped industries from auto manufacturing to retail.
If they are successful, the U.S. oil industry's ability to bring more wells to production at lower cost could amp up future output and company profits. The firms could also frustrate the ongoing effort by the Organization of the Petroleum Exporting Countries (OPEC) to drain a global oil glut.
Hebron, just in time for Christmas. Exxon Mobil's Hebron oil project off the coast of eastern Canada has produced its first oil -- Reuters via Rigzone.
At its peak Hebron will produce up to 150,000 barrels per day (bpd), Exxon said. It will help Atlantic Canada offshore production climb 44 percent to 307,000 bpd by 2024, according to estimates from the Canadian Association of Petroleum Producers.
Cars. I've never been particularly interested in cars but with all the Tesla excitement, I've enjoyed watching the new muscle cars rolling out. Two links covering the Los Angeles car show: Automotive News; and, Motor Trend.

Back to the Bakken

Active rigs:

Active Rigs553964185191

RBN Energy: the rejuvenation of natural gas processing plants, part 2.
NGL prices have been rising fast since the middle of this year, but the same cannot be said for the price of natural gas. So how does this market scenario play out for gas processors who make their money extracting NGLs from gas? It plays out pretty darn good. In Part 1 of this series, we looked at how the relationship between the price of NGLs versus natural gas can be assessed by the Frac Spread, and concluded that things are definitely looking up for gas processing economics.
But we also concluded that the Frac Spread misses the impact of a few key factors, including the BTU value and composition of the inlet gas stream. So today we’ll see what it takes to incorporate those factors into our assessment and, in the process, do a deep dive into the math of gas processing to examine the relationship between volumetric capacity, gallons of NGLs per 1,000 cubic feet of natural gas (GPMs) and moles.
Today, we continue our latest expedition into the wilds of gas processing. In Part 1, we reviewed the calculation methodology, the history and the pros and cons of the Frac Spread — the difference between the price of natural gas and the weighted average price of NGLs on a BTU basis. We noted that while the Frac Spread is a good indicator of the relative health of natural gas processing over time, it is not representative of the specific processing margin for a particular stream of input gas. That is because the Frac Spread does not take into account the quality of the gas being processed either in terms of the liquids content or the BTU content, nor does it factor in things like the operating efficiency of the plant or help determine if ethane rejection makes sense. (We’ll get to these issues in later episodes of this blog series.) These factors and others ultimately determine the quantity of NGLs that a given inlet gas stream can produce from a given gas processing plant.
To incorporate these factors into gas processing margin calculations, we first have to understand how liquids content and BTU content are measured and then how to convert between gas volumes and liquid volumes, since we transform the input gas stream into both liquid and gas outputs in our processing plant.