Finally, Cape Wind -- RIP -- December 2, 2017

I've blogged many, many times about Cape Wind. I actually heard developer Jim Gordon promote the off-shore wind farm while visiting Harvard University's school of business some years ago. One Harvard MBA student was very skeptical (as was I) about the viability of Cape Wind. That was about five years ago.

Today, Don sent me the link to a Boston Globe story: the Cape Wind project is finally dead.

But it’s finally over: Gordon filed a notice this week with the Bureau of Ocean Energy Management to end the firm’s Nantucket Sound lease.

Gordon also issued a brief statement, taking credit for sparking the discussion about offshore wind here.

He also took a jab at his opponents, in part for the significant funding they get from wealthy Cape homeowners. Their repeated legal challenges likely played a key role in the project’s demise.

We’re embarking on a new era. Wind turbines are on their way for deeper waters, south of Martha’s Vineyard. They won’t be Gordon’s. But at least he can take some credit, in his defeat, for being a pioneer.

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Tilting At Windmills

I am quite surprised how long Jim Gordon put up with this nonsense. This must have cost him the better part of the best years of his life. Of course he was well paid for this endeavor and I'm sure he met a lot of friends along the way, but at the end of the day, this is probably his legacy, a Don Quixote of the 21st century, literally tilting at windmills.

Out And About With Sophia In Southlake -- December 2, 2017

Sophia and I spent the day out and about in Southlake, TX, today.

I've mentioned this before. Downtown Southlake is a 12-square block (plus or minus a dozen city blocks) that is for all practical purposes, an outdoor upscale mall.

We spent the first hour at Barnes and Nobel, then Whole Earth Provision, a half hour at the city library, then Jamba Juice for a smoothie, over to the Apple Store, and then across the street to the newly opened Tesla showroom. It opened in September -- just a couple of months ago. I completely missed this one.

It was actually quite exciting to sit inside a Tesla. The showroom is spacious enough to hold three Teslas; I suppose they could squeeze in a fourth. There was one Model X (the SUV) and two versions of the Model S. Sophia sat in the back seat and then moved to the driver's seat in the Model S. She had a grand time playing with the "dashboard" and all the touch pad gizmos. It was very much like one giant iPad.

The car listed for $97,499. The manufacturer (or the EPA) noted that this car would save $3,750 in fuel costs over five years. I have trouble believing anyone buying a $100,000 car is worried about fuel costs, but for the record, $3,750 / 60 = a savings of $62.50/month or one sushi dinner for two each month.

The car really was elegant, but I have to admit I have nothing to compare it to. I do not recall ever sitting in the passenger seat of a $100,000 car being "driven" by a three-year-old. But for $100,000, one would hope it had a feeling of elegance.

The weather was beautiful today and we saw a number of Porsches, Lamborghinis, and Ferraris on the streets today.

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Tesla Derangement Syndrome

Speaking of Tesla, from a contributor over at SeekingAlpha: Tesla November a big stinker --

As we enter the final month of the year, things are not looking good for Tesla. The Model 3 ramp continues at a sluggish pace, and the latest estimates for November deliveries of current models was a big disappointment. With key borrowing and some material costs also soaring, Tesla is not likely to hold $300 a share if the bad news keeps piling up. 

Data points:

• estimates for Model 3 deliveries: and increase of 200 units to 345
• first five months, Model 3 total: 712 units
• Chevy Bolt: just under 3,000 units in November alone
• in the first five months, nearly 5,000 units
• Musk forecast: 100,000 to 200,000 units by 2H17
• sales of the higher-priced Model S and X: sales fell in October and November
• Germany has removed Tesla from its subsidies list due to vehicle prices being too high
• cobalt prices continue to soar, now more than $31/pound (as low as $10/pound early in 2016
• borrowing money is going to get more expensive

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The Apple Page

The Apple store, as expected, was incredibly busy today. Not the busiest that I have seen but, still, incredibly busy. I was surprised by the number of customers interested in the Apple Watch. The busiest part of the store was in the back where all the accessories for Apple products are sold, such as the wireless AirPods.

Most notable observation: one male customer, about 45 years old, bought four identical desktop iPads -- it was quite incredible. I don't think I've ever seen anyone purchase four desktop iMacs during one visit. These are not small boxes. He asked for help carrying them out to his car but was told that Apple employees can go no further than curbside out the Apple store. He was asked to bring his car around to the front of the store. It was a BMW -- sort of plebian compared to all the Italian sports cars seen driving in Southlake today.

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4Q17

Based on what I saw in Southlake today, and the GOP tax cut, and the stock market these past few days, it's going to be a huge retail season.

Harold Hamm Vs The EIA -- December 2, 2017

From a post, November 17, 2017:

Harold Hamm says folks like me are inappropriately exuberant about the Bakken
EIA's optimist forecasts are depressing US oil prices

A top story, week 39:

Harold Hamm opines that the EIA is mis-forecasting US crude oil production growth for next year; WTI climbs to $52 before dropping back to $51 and change.

From a post, September 24, 2017:

I think this is most fascinating, Harold Hamm's thoughts on EIA projections. See this post for background. Today, Bloomberg posted a longer article following Hamm's comments.

Hamm is arguing that the EIA is overestimating US oil production growth this year. And that once the market recognizes the US forecasting error, Hamm says, crude prices could rise to $60 a barrel from $50 now.

Flashback, a contributor over at SeekingAlpha, January 14, 2017, a lively essay, to say the least.

So, it is fair to conclude that the EIA's crude production forecasts are unreliable and may be off more than 600,000 b/d in just 3 months. I believe that EIA forecasts will substantially underestimate "Lower-48" production for 2017 given:

1. the data from North Dakota,
2. CLR's guidance,
3. the intentions of "Cowboyistan" to complete DUCs,
4. how fast they can be completed and start producing oil,
5. crude futures prices in the mid-$50s by June 2017, and
6. oil producer hedges the highest in almost 10 years.

I need to have more data to provide a more accurate forecast than "substantial" for saying how much U.S. crude production will increase in 2017. But I will keep a close watch on this data because it may be enough to offset the OPEC cuts, especially if they are only 50% compliant.

Google Harold Hamm vs EIA for 171,000 "results."

Way wrong: https://www.businessinsider.com.au/saudi-arabia-pushed-us-shale-to-become-more-efficient-2016-12.

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From John Kemp, via Twitter:

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Related Links

EIA data: https://www.eia.gov/petroleum/production/

US shale oil production to surge: https://oilprice.com/Energy/Crude-Oil/US-Shale-To-Surge-After-OPEC-Extension.html

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Commentary

I've been off the internet for about 36 hours, and have really just come back "to the grid," as they say, in the last few hours, so I missed some twitter tweets and new stories.

A reader must have been following my posts about Harold Hamm's comments on EIA's forecasts (see notes and links above). I had similar thoughts about Harold Hamm "talking his book" but did not post what I really thought -- I did make some comments in e-mails to readers. Here are some thoughts from a reader on all of this.

The reader noted that monthly EIA reports showed a massive crude oil build in September, 2017. Most of that build-up was due to the Permian (Texas and New Mexico) but the Bakken also contributed.

See EIA link above.

The reader thought it was very eerie that OPEC made its announcement to extend production cuts the very same day that the EIA released US shale oil production figures. From oilprice.com, linked above:

"Meanwhile, before OPEC went before the cameras for its official press announcement, word came from the EIA that U.S. oil production surged in September, jumping by a massive 290,000 bpd from a month earlier, hitting 9.48 mb/d.

That figure seems to put to rest a lot of questions about the EIA overestimating U.S. oil production in its weekly surveys, which have consistently come in much higher than the more accurate monthly figures.

The production numbers for September go a long way toward backing up the notion that the U.S. shale industry shifted into expansion after prices jumped above $50 per barrel.

The data release on the same day that OPEC agreed to an extension was probably met with some unease by the cartel.

Several [OPEC] members have been wary of incentivizing a strong drilling response from the Texas shale fields, so the fact that we now know that production ramped up dramatically in September as prices rose should dampen OPEC’s enthusiasm. If the OPEC/non-OPEC coalition keeps 1.8 mb/d of supply off of the market for another year, there’s no doubt they will bring the market back into balance and potentially even overshoot and push things too far. WTI could bounce above $60, which could spark an even stronger drilling response from U.S. shale, potentially undermining OPEC’s objective."

From the reader:

Kind of put egg on faces of people like Harold Hamm who doubted EIA.

John Kemp even tweeted people need to apologize to EIA (screen shot above).

Issue was that the two-month old reports from EIA (like the NDIC Directors Cuts) are more reliable but were running way less than their weekly numbers (which are not data, are models). But in September, 2017, the real data caught up to the models. Looks like US is really growing strong!

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Commentary Continued

The data and discussion continue to confirm my thoughts that none of us really understand shale. Some understand is less than others. It's been a common theme on the blog.

Giving Harold Hamm the benefit of the doubt, playing devil's advocate, the only way I can reconcile Harold Hamm's forecasts and his comments on EIA forecasts is that he was talking longer term. But if he was talking the same time frame as the EIA, one wonders how "the face of the Bakken" got it so wrong.

Having said all that, all things being equal, it looks like WTI at $55 is an incredibly bullish sign for the US shale industry.

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Final Thoughts

From that oilprice.com article, the last two paragraphs:

When asked about the rapid comeback of U.S. shale, Al-Falih cited the dramatic decline from conventional and mature oil fields, a depletion rate that means each year the market needs several million barrels per day of fresh supply.

He said he doesn’t think “shale can carry the load,” meaning that even a robust response from U.S. shale will be soaked up by the market due to growing demand and depletion from mature fields.

Presumably, however, OPEC and Russia concluded that they had to continue with the cuts to avoid a selloff in prices. They cited the enormous progress in cutting inventories, but said there is more work to do. They expect that to happen by mid-2018 or so. But will U.S. shale spoil these plans?

I'm not sure what Al-Falih meant by "several million bbls of fresh supply," but unfettered, the Bakken can ramp up to 2 million bbls from its current 1 million bopd.

The Permian and the Eagle Ford can easily ramp up an additional two million bbls/day.

One plus two = three. Not sure if three is the same as "several" but it's a nice start. And we haven't even talked about the SCOOP/STACk and several other US shale plays.

More Nonsense: "Our Government Has Not Agreed To Crude Oil Production Cuts" -- December 2, 2017

Investopedia  is usually pretty good explaining things so I was quite surprised by this:

Dow components Exxon Mobil Corporation and Chevron Corporation have underperformed throughout 2017 but could lift into market leadership in 2018, underpinned by a resilient crude oil market and strong U.S. economy, supercharged by tax cuts and deregulation.

However, buying these stocks too early could be hazardous to your bottom line because end-of-year tax selling may inhibit buying power until the calendar flips in January.

The WTI crude oil contract has lifted to a two-year high and could soon test resistance in the lower $60s.

Meanwhile, OPEC and Russia have just agreed to extend oil output curbs through the end of 2018, allowing U.S. energy companies to benefit from higher commodity prices as well as ramped-up production levels because our government has not agreed to similar cuts. Taken together, energy stocks at all capitalization levels could finally enter bull market advances. 

What the heck? "Our government has not agreed to similar cuts." What? What does "our government" have to do with setting quotas or mandates for crude oil production.

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Is The Worst Over?

When oil companies start increasing dividends one has to ask: is the worst over? There has been good dividend news from several oil sector companies this past week. Now, another good dividend story from Chevron.

Chevron Corp. may accelerate dividend growth over the next two years thanks to megaprojects that are already in the budget.

With earnings from massive Australian liquefied natural gas investments poised to swell cash flow, Chevron probably will have the bandwidth to lift payouts for 2018 and 2019 by more than a five-year annual growth rate of about 5 percent.

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More Nonsense

"Everyone" is worried about how to store "dirty CO2" and yet the issue of how to store nuclear waste seems a tad more concerning.

Today from The Bismarck Tribune--

A rare drilling rig is at work in central North Dakota this week, but crews aren’t looking for oil. They’re drilling two exploratory wells in the middle of coal country to help researchers determine the feasibility of storing carbon dioxide deep underground rather than emitting it into the atmosphere.

It’s part of a study nicknamed Project CarbonSAFE, led by the University of North Dakota’s Energy and Environmental Research Center and funded, in part, by the U.S. Department of Energy.

Researchers will investigate the geology more than a mile underground to determine if it is suitable for the storage of carbon dioxide captured from coal-based energy facilities.

I track this story here.  Washiington, Nevada, Illinois, North Carolina et al have huge radioactive waste problems. North Dakota? "Dirty CO2." Whatever.

CLR Completion Strategies In The Bakken -- December 1, 2017

Updates

December 1, 2017: from comments below, from a reader --  

The operators are routinely tight lipped about the details of completion practices, but info from third parties can often be pieced together to get a sense of what is going on.

The recent introduction of Microproppants seems to be opening up vastly more area of the rock - Stimulated Reservoir Volume (SRV) is the often used term - that is able to be propped.

Some engineers claim the increase in area can be tenfold from earlier fracturing.
In addition, both the near wellbore and far field diversion products have enabled WAY more complete rubbilization of the rock and to effectively control its spread both vertically and laterally. 

Original Post  
Based on two recently fracked DUCs, it appears that CLR is keeping number of stages in a moderate range (about 40) but significantly increasing the amount of proppant, using more of the latter in the middle Bakken compared to what is used in the Three Forks:

• 28998, 1,880, CLR, Radermecher 4-22H2, Camel Butte, 39 stages; 11 million lbs, t2/17; cum 244K 10/17;
• 28991, 2,120, CLR, Radermecher 2-22H1, Camel Butte, 39 stages; 17 million lbs, t2/17; cum 270K 10/17;

Back On The Net -- December 2, 2017 -- GDP Jumps 30% In One Day -- What Was Obama Doing For EIght Years? ABC Suspends Top Report For "Epic Failure"

Warning: it's possible a lot of the blogging over the next 48 hours will NOT be about the Bakken. The purpose of the blog was to help me understand the shale revolution (mission accomplished) and to put it in perspective (on-going). To some extent, one could argue, the latter (putting the Bakken in perspective) now takes precedence. So bear with me over the weekend. If anyone has problems with shortage of information on the Bakken over the next couple of days, I will gladly refund their subscriptions.

I'm back on the net.

Two nights ago, Thursday night, I decided to take Friday off. I knew I would not be able to handle the volatility and the nonsense that was sure to occur after that incredible surge in the stock market and the news that the senate was actually going to pass something.

And I succeeded.

I did not watch one minute of news yesterday; watched some golf (Tiger Woods Tournament) and the USC-Stanford football game last night.

I did not go on the internet except to correct some typographical errors on the blog.

This note from Zero Hedge shows, in hindsight, why I am so glad I took Friday off (see screen shot below). I cannot handle (emotionally?) huge drops in the stock market -- I'm not concerned about the portfolio. It will take care of itself. I will never see the money myself. It all goes to the daughters and granddaughters. What I can't stand is the nonsense that drives the volatility, and it appears there was a lot of nonsense yesterday. Sort of like those folks who love sausage but can't watch it being made.
 

Now that the tax bill is passed, I can die and go to heaven. I think many people would agree the political story is bigger than the tax story. If this Congress doesn't do anything else, that's fine.

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GDP Now: GPD Jumps 30% In One Day

Latest forecast: 3.5 percent — December 1, 2017

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 3.5 percent on December 1, up from 2.7 percent on November 30.

The forecast of real consumer spending growth increased from 2.6 percent to 3.1 percent after this morning's Manufacturing ISM Report On Business from the Institute for Supply Management, while the forecast of real private fixed-investment spending growth increased from 6.7 percent to 8.4 percent after the ISM report and this morning's construction spending release from the U.S. Census Bureau.

The model’s estimate of the dynamic factor for November—normalized to have mean 0 and standard deviation 1 and used to forecast the yet-to-be released monthly GDP source data—increased from 0.40 to 1.22 after the ISM report. The forecast of real government spending growth increased from 2.0 percent to 3.0 percent after the construction spending release. 

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Why I Took The Day Off

Update, December 2, following the ABC report on General Flynn (see graphic above):