Sunday, December 3, 2017

MIT Says EIA Vastly Overstates Bakken Potential -- Bloomberg -- December 3, 2017

Memo to self: file this Bloomberg/MIT article under -- "garbage in, garbage out." Same with all the anthropogenic global warming studies.

The reader who sent me this article disagrees with the premise of the MIT study. I wholeheartedly agree. This is not a "study"; it's an op-ed piece.

The article begins:
Turns out, America’s decade-long shale boom might just end up being a little too good to be true.
Researchers at MIT have uncovered one potentially game-changing detail: a flaw in the Energy Department’s official forecast, which may vastly overstate oil and gas production in the years to come.
Because it's MIT's opinion that:  The culprit, they say, lies in the Energy Information Administration’s premise that better technology has been behind nearly all the recent output gains, and will continue to boost production for the foreseeable future. That’s not quite right. Instead, the research suggests increases have been largely due to something more mundane: low energy prices, which led drillers to focus on sweet spots where oil and gas are easiest to extract. [Sounds like Art Berman was their primary consultant for the study.]
“The EIA is assuming that productivity of individual wells will continue to rise as a result of improvements in technology,” said Justin B. Montgomery, a researcher at the Massachusetts Institute of Technology and one of the study’s authors. “This compounds year after year, like interest, so the further out in the future the wells are drilled, the more that they are being overestimated.”
There is so much one could write about this but I simply don't have the time (nor the interest).

For me, this was an op-ed piece, not a study.

And, at the end of the day, it sounds like -- when one reads the article closely -- the MIT "researchers" don't understand what's going on in the Bakken. It's fortunate that there are folks who do understand what's going on in the Bakken, like me. LOL. 

But let's say the MIT "researchers" are correct: at the end of the day, does it matter? And if it matters, how does it matter? And if it does matter, how much does it matter?

Technology: How Big Oil Is Transforming Shale

What perfect timing. This is almost a reply to the MIT "study." Here are some examples of the technology being deployed in on-shore shale plays. Well worth the read. 

Another NFL-Free Sunday -- December 3, 2017

I spent the day out and about with Sophia so I don't know what's going on in the NFL today. Don sent this link: Ravens, NFL scramble as fans stay home.
But with six wins and five losses, the Ravens are fighting for a wild card spot in the playoffs. If the season ended now, they would capture the sixth and final American Football Conference spot, good for a first-round matchup with the Tennessee Titans.
And despite that possibility, Ravens fans are staying home. Wow. In a reply e-mail to Don, I said:
It's my understanding that TV is not airing the national anthem, so the players are not getting national attention, but the fans are seeing it and are not happy. I assume a lot of fans are showing up late simply so they don't have to watch players kneeling.
Anyway, enough of that. On to bigger and better things.

Later: wow, this is truly amazing:

The photo is a bit disingenuous: the game is not underway; players are running out on to the field (I assume the teams remained in their locker rooms during the national anthem). At best, the seats began to fill in after the national anthem -- the fans voting with their feet their displeasure over kneeling. At the link, one will see even huge swaths of empty seats in the lower sections along the 50-yard line.

Cleaning Out The In-Box

A huge thanks to all those readers who continued to send me stories/links when I took the day off on Friday. An earlier post explains why I had to take that day off.

There are just too  many stories/links that readers sent me; if I post them as I go along with current news, a lot of stories will be significantly delayed.

So, I will post the headlines/links so that, at least for the archives, the stories are available.

Bakken Beginning To Thrive Again

From The West Fargo Pioneer:
Hess' 2017 net production in the Bakken has been 105,000 barrels a day, which Lohnes said could grow to 175,000 barrels in a couple of years. The company is looking at adding more drilling rigs next year to deliver about 100 new wells, increasing production by about 10 percent.
Part of what continues to make the Bakken attractive are efficiencies gained since 2010 that make it less costly and more productive to drill, Lohnes said. The drilling cycle time has dropped from an average of 50 days to just 15 days, while initial well production is up more than 300 percent. 
For CLR, Oasis, Slawson, XTO, WPX, et al, one word: ditto.

Bakken On Its Way To Two Million BOPD

Bakken, 2 million bopd. I often mention that, unfettered, North Dakota could produce 2 million bopd, doubling current production. That's not a number picked out of "thin air" (a phrase coined by Shakespeare, by the way). It's based on a study some years ago. Now, it appears that others are suggesting the same thing. A reader linked this RBN Energy article which I had previously posted, but provided these comments:
North Dakota governor Doug Burgum stated he wants the Bakken to produce 2 million bopd. Soon politicians will be able to spend again. Takeaway capacity of almost 3 million bopd with pipeline and CBR and this is w/o Keystone XL.

Projection of 1.4 million bopd by end of 2020. I don't think it will take that long.

Now with tax cuts. Bring on another refinery and a cracker plant.
I agree.

Bakken Trades At Premium To Cushing

This is a great article for newbies, from Hellenic Shipping
Benchmark WTI and Bakken delivered to the Texas coast are both trading at a $4/bl premium to WTI Cushing for January amid rising pipeline access for Permian crude to reach the Gulf coast.
For January delivery to Magellan’s east Houston terminal, West Texas Intermediate (WTI) started the trade month today between $3.90 and $4.20/bl over the Cushing benchmark. Light sweet Bakken crude for January delivery to Nederland or Beaumont, Texas, is valued about 10¢/bl under WTI Houston.

Today, Argus launched an assessment for Bakken crude delivered to Nederland or Beaumont via the Energy Transfer Crude Oil pipeline (ETCOP) by way of the 525,000 b/d Dakota Access pipeline (DAPL). The assessment reflects the Bakken value relative to CMA Nymex WTI plus an Argus WTI differential to CMA, and includes transactions done as a differential to CMA Nymex WTI plus the balance of trade month prices (Balmo) for the Argus WTI differential to CMA price. Typical US pipeline spot market trades are done as an instantaneous exchange of the grade for Domestic Sweet (DSW) crude in Cushing to establish a differential to the light sweet benchmark WTI. But trading Bakken as a differential to the calendar month average may be preferable in an export market as it does not require the exchange of the Cushing grade.

Bakken last traded at Beaumont at $5.20/bl premium to December WTI on 17 November, when December WTI Houston was $5.29/bl over the benchmark. December WTI Houston ended the trade month at an average premium to Cushing of around $5/bl.
BridgeTex To Expand
Takeaway Capacity In The Permian Increases

From Zacks.

Magellan Midstream Partners, L.P. MMP along with Plains All American Pipeline, L.P. PAA, its joint venture partner in BridgeTex Pipeline Company, LLC, announced plans to increase the capacity of the BridgeTex pipeline by 40,000 barrels per day (bpd). The joint venture also announced an additional open season to evaluate the demand for increased capacity, which will give potential customers an opportunity to come out with binding commitments by Dec 30, 2017.

Japan Could Invest In Mideast Oil Projects

From Japan News: OPEC nations must speed up reforms to break from dependence on oil.
Japan is an oil-importing nation, but it should welcome, to a degree, the coordinated production cuts that have brought price stability.

Most recently, the market price has recovered to around $60. Despite this, the decision to continue the output cuts stems from the severe deterioration in the finances of major oil-producing nations, including Saudi Arabia.

These nations are now paying the price for extending loose fiscal policies, such as making a wide range of public services free of charge, while oil prices were high.

The underlying structure of oil dependence and financial difficulty being felt by oil-producing nations is much the same. These nations must not waste the extension of the coordinated output cuts, and effectively use this period as much as possible to rebuild their finances and nurture new industries.

The dominant view is that oil prices will nosedive again when the coordinated output cuts end.

If oil-producing countries in the Middle East and elsewhere press forward with structural reform of the industry, they will gain some reserves for adjusting their oil production.
This could contribute to the stability of both the crude oil market and international financial markets, such as stock markets. There are expectations Japan will proactively support these reforms through direct investment and technical cooperation projects in Middle Eastern nations.
That's a nice op-ed but I doubt it will amount to much. I don't know much about Japan and petrochemicals, but when thinking about petrochemicals, Japan is not the first country I think of.

Futures Mean Squat -- But, Having Said That --- December 3, 2017


Later, 7:15 p.m. Central Time:

Original Post

Assuming ABC News doesn't report another inaccurate news report, it could be an exciting day on Wall Street tomorrow. Tonight, the futures:

And, WTI is down slightly, trading just slightly below $58.

CNN reports why Wall Street is euphoric over the tax plan (and, of course, as usual, it's a superficial explanation, fits CNN's theme, and completely misses the real reason why Wall Street is euphoric. As I understand it, corporations won't see their tax breaks until 2019 -- at least the "big" tax break -- but those individuals paying federal taxes (about 50% of the US population) will see tax breaks next year. (No one knows whether individual tax breaks will take effect for the 2017 or the 2018 calendar year.)

Between now and the end of the year, any significant move down in the market will represent a huge buying opportunity, unless there are major geopolitical events that cause the market to plunge. But even then, it's likely a plunge in the market would be a buying opportunity.

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

The Trump Rally

From an earlier story, for the archives.
The Dow has spiked nearly 6,000 points since President Trump's election last year, notching 80 daily record highs since then.

The S&P 500 and Nasdaq are also near all-time highs. The latter is up a whopping 30% since the election.

"Investors are feeling golden," said Sam Stovall, chief investment strategist at CFRA Research. "Until you get signs that this economy is likely to roll over and die, investors believe stocks remain the place to be."

The boom in the stock market is a clear reflection of improvements in the U.S. economy. New numbers published on Wednesday show the U.S. grew at a brisk 3.3% pace between July and September, the best growth since 2014 and the second-straight quarter of 3% growth. [And first estimate for 4Q17 GDP is an incredible 3.5%.]

The global economy is also gathering momentum. Most major countries are growing at the same time for the first time in years.

Among Many Nice Wells Coming Off Confidential List This Week, EOG Will Be Reporting Four Spectacular Clarks Creek Wells -- December 3, 2017

Disclaimer: I often make simple arithmetic errors. In a long note like this there will be typographical and factual errors. If this is important to you, go to the source.

I track the EOG Clarks Creek wells here.

33050, conf, EOG, Clarks Creek 75-0719HX, Clarks Creek. 7/17: 60,170 + 85,764K/6001 = 60,170+14,204 = 74,464 boe in one month sold:

DateOil RunsMCF Sold

32794, conf, EOG Clarks Creek 74-0719H, Clarks Creek. 7/17: 66,039 + 94,086K/6001 = 66,039 +15,678 = 81,717 boe in one month sold:

DateOil RunsMCF Sold

32796, conf, EOG, Clarks Creek 73-0719H, Clarks Creek. 7/17: 59,709 + 84,999K/6001 = 60,170+14,164 = 73,873 boe in one month sold:

DateOil RunsMCF Sold

32795, conf, EOG, Clarks Creek 110-0719H, Clarks Creek.7/17: 50,738 + 72,096K/6001 = 50,738+12,014 = 62,752 boe in one month sold:

DateOil RunsMCF Sold

Wells Coming Off Confidential List This Week -- Decemer 3, 2017

Wells coming off the confidential list this next week:

Monday, December 11, 2017
33562, conf, MRO, Lois USA 14-34H, Reunion Bay, no production data,
33216, conf, Kraken Operating Feller 22-15 3H, Lone Tree Lake, no production data,
32316, conf, EOG, Van Hook 71-1411H, Parshall, nice production;
31630, conf, Oasis, Lawlar N 5199 41-23 3T, North Tobacco Garden, very nice production;

Sunday, December 10, 2017
33600, conf, Resonance Exploration, Resonance Senescall 6-36, Sergis, producing, albeit not much;
33217, conf, Kraken Operating, Feller 22-15 4H, Lone Tree Lake, no production data,
32315, conf, EOG, Van Hook 70-1411HX, Parshall, a nice well;

Saturday, December 9, 2017
33412, conf, MRO, Winona USA 21-2TFH-2B, Antelope, no production data,
33050, conf, EOG, Clarks Creek 75-0719HX, Clarks Creek, a huge well, 60K in each of two months;
32794, conf, Clarks Creek 74-0719H, Clarks Creek, a huge well; 66K in one month; 51K in next month;
31836, conf, Whiting, Evitt 34-12H, Truax, a huge well;

Friday, December 8, 2017: 36 for the month; 146 for the quarter
33414, SI/NC, MRO, Wilbur USA 31-2TFH, Antelope, no production data,
33413, SI/NC, MRO, Chauncey USA 31-2H, Antelope, no production data,
32796, 2,518, EOG, Clarks Creek 73-0719H, Clarks Creek, 4 sections, GL, 55 stages; 13.2 million lbs, t6/17; cum 220K 10/17;
32795, 2,204, EOG, Clarks Creek 110-0719H, Clarks Creek, 4 sections, GL, 60 stages; 17.5 million lbs t6/17; cum 204K 10/17;
Thursday, December 7, 2017
33208, 1,244, Whiting, Evitt 14-12-4TFHX, Truax, Three Forks, 39 stages; 9.3 million lbs; t6/17; cum 90K 10/17;
33134, 1,063, Liberty Resources, T. Haustveit E 156-95-26-3MBH, 27 stages, 8 million lbs, Beaver Lodge, t6/17; cum 99K 10/17;

Wednesday, December 6, 2017
33415, SI/NC, MRO, June USA 31-2H, Antelope, no production data,
32612, 1,179, HRC, Fort Berthold 148-94-35D-26-13H, McGregory Buttes, Three Forks, 34 sstages; 5.1 million lbs; t7/17; cum 85K 10/17;
32611, 1,482, HRC, Fort Berthold 148-94-35D-26-12H, McGregory Buttes, 33 stages; 5 million lbs, t7/17; cum 106K 10/17;
32608, 1,196, HRC, Fort Berthold 148-94-35D-26-11H, McGregory Buttes, 4 sections, 34 stages; 5.1 million lbs, t7/17; bcum 103K 10/17;
31835, 1,582, Whiting, Evitt 34-12TFH, Truax, Three Forks, t6/17; cum 112K 10/17;
30169, 1,155, Oasis, Cook 5300 41-12 11T, Willow Creek, Three Forks, 50 stages; 19 million lbs,, with ceramic, large; t6/17; cum 63K 10/17;
28701, 480, Oasis, Cook Federal  5300 41-12 10BX, Willow Creek, 4 sections, 50 stages; 20.1 million lbs; large sand; small ceramic, t6/17; cum  109K 10/17;27352, 268, Oasis, Cook 5300 12-13 7T, Willow Creek, Three Forks, 50 stages; 6 million lbs, large, small, some resin coated, t6/17; cum 65K 10/17;
Tuesday, December 5, 2017
33416, SI/NC, MRO, Miles USA 41-2TFH, 2B, Antelope, no production data,
33340, dry, Armstrong Operating, Frenzel 1-35, Wildcat, no production data,
32902, SI/NC, BR Lovaas 4-8-12 MBH, Blue Buttes, no production data,
31434, SI/NC, Slawson, Osprey Federal 2 SLH, Big Bend, no production data,

Monday, December 4, 2017: 18 for the month; 128 for the quarter
33066, SI/NC, XTO, Deep Creek Federal 44X-5C, Lost Bridge, no production data,
32903, SI/NC, BR, Lovaas 5-8-12 UTFH, Blue Buttes, no production data,
31612, SI/NC, BR, HE 3-8-20UTFH, Elidah, no production data,
31611, SI/NC, BR, HE 4-8-20MBH, Elida, no production data,
31433, SI/NC, Slawson, Osprey Federal 7-26-29TFH, Big Bend, no production data,

Sunday, December 3, 2017: 13 for the month; 123 for the quarter
32904, SI/NC, BR, Lovaas 6-8-12MBH, Blue Buttes, no production data,
31850, 1,191, Whiting, 3J Trust 24-8-2PH, Bell, 45 stages; 9.4 million lbs, t6/17; cum 76K 10/17; already shut in as of 10/17;
31613, SI/NC, BR, HE 2-8-20MBH, Elidah, no production data,

Saturday, December 2, 2017: 10 for the month; 120 for the quarter
33323, SI/NC, WPX, Mandaree South 25-36HZ, Spotted Horn, no production data,
33065, SI/NC, XTO, Deep Creek Federal 44X-5B, Lost Bridge, no production data,
31431, SI/NC, Slawson, Osprey Federal 6-26-29TFH, Big Bend, no production data,

Week 48: November 26, 2017 -- December 2, 2017

Biggest story in the Bakken this past week: MRO reports a well that produced 75,000 bbls in one month.  A close second was the report that Bakken gas flaring rebounds, a story that RBN Energy felt significant enough to devote an entire post to the news.

Politically, Heidi Heitkamp passed up an opportunity to help ND farmers.

The stock market surged this week, hitting new milestones on anticipation the US Senate would pass the GOP tax bill. They did. At the same time, WTI stayed steady.

All that talk about ND receiving more in federal handouts than it sends to Washington, DC? Poppycock: New York and North Dakota, per capita, are almost tied.

Meanwhile, the GDP estimate for 1Q17 jumped from 2.7% to 3.5% overnight based on consumer spending.

One of the bigger, if not the biggest energy story this past week: Saudi Arabia's foreign reserves actually increased, unexpectedly, and reversing a two-year trend. Here, and here

In the oil sector, this was a non-story: Nebraska regulators vote "no" with a 3-2 "yes" vote to approve the Keystone XL.

One of the bigger, if not the biggest, non-oil energy sector story this past week was the announcement that Cape Wind was finally dead.

In the Harold Hamm vs EIA forecasts: EIA - 1; Harold Hamm - 0. Having said that, the EIA was "way wrong" back in 2016.

Most concerning story this week? It appears an American business journalist thinks the US government somehow controls the nation's crude oil production.
MRO reports a well that produced 75,000 bbls in one month
Newfield's Moberg wells see significant jump in production
Oasis has three rigs working one drilling unit
Whiting has two rigs on the 15-well Mega-Pad in Banks Oil Field
CLR getting ready to frack more Burr Federal wells 

CLR completions strategy
Newfield reports a 62-stage frack

More nonsense: update on UND-EERC's science project to determine feasibility of storing "dirty" CO2 undergroung  

An October Surprise -- December 1, 2017

At this post, earlier this week, it was noted that Saudi Arabia's foreign reserves account had unexpectedly increased.

At the post was a link to a Reuters article with more information, and one of the few sources so far to report on this unexpected development.

Some data points:
The bank’s net foreign assets rose by $8.3 billion from September to $485.9 billion last month; they shrank by 9.3 percent from a year ago. The reserves peaked at $737 billion in August 2014 before starting to drop as oil prices plunged. 
The government has been liquidating the reserves to cover a big budget deficit caused by low oil export receipts, and to build up its top sovereign wealth fund, the Public Investment Fund, which is becoming a key force in developing the economy.
So, if I understand this correctly, Saudi Arabia is taking cash (liquidating) from its reserves to fund two items:
  • it's monthly expenses (executing the national budget); and,
  • the Public Investment Fund -- I assume this is to pay for Prince Salman's Vision 2030
So, if the kingdom is taking money out of reserves to pay for its budget (which I assume does not change much month-over-month regardless of how much they have cut the budget for the year) and to fund another slush fund (the Public Investment Fund), how did the foreign reserves account, not only reverse direction, but grow significantly in one month?

Reuters' explanation: the price of oil has gone up. LOL.

Here's the EIA chart, Brent spot price:

The spot price has increased significantly, but it's my understanding that sellers/buyers of oil work off six-month contracts. Of course, they can be rolling contracts, new ones signed each month, so one probably needs to go back a few more months than that posted above. But one assumes that when oil was $40 / bbl some months ago, buyers would set a ceiling not a whole lot higher than that ... one can argue this all day long, but without the figures we will never know. The bottom line for me is that contracts are set for weeks and months in advance and using the spot price to explain Saudi Arabia's good fortunes in October, 2017, sounds a big disingenuous.

At the same time, Saudi Arabia is supposedly exporting less oil over time to stay within the agreed quotas.

[Saudi consumes a lot of its own oil for air conditioning needs in the summer, and by October that is over. Saudi can now produce the same amount of crude oil but sell more overseas, but this is a "red herring" [unless Saudi is cheating]: it does not matter how much Saudi is producing; it matters how much they are exporting.

We won't know for the next few months whether the increase in foreign exchange reserves was a one-time event (an anomaly as NASA would call it) or if it truly was due to rising price of Brent, and status quo on exports.

Getting back to the two areas where liquidated foreign reserves go:
  • executing the national budget
  • funding the slush fund
As noted earlier, one would expect the monthly cash flow for the national budget would not change much month-over-month. That leaves the slush fund. I would assume the same thing: that the prince has an execution plan and that funding the slush fund should not change a whole lot month-over-month.

So, for me if this turns out to be a one-time event, an anomaly, the question needs to be asked. Was there a one-time event in October that might explain this?

A reader suggests that it might have been related to the purge. That makes a lot of sense -- except the purge seems to have taken place on/about November 4, 2017. It could have been going on for some weeks earlier, and it was only being reported by November. That's a tough one. But it's very possible, the prince was using a silk glove in September and October to get wealthy princes and even-wealthier tycoons to pour cash into the foreign reserves account, and then used an iron fist in November for those who were not paying their fair share.

How much money do these wealthy tycoons have?
Alwaleed is the richest Saudi, with a $28 billion fortune that dwarfs King Salman's net worth of $17 billion. Kamel and Ibrahim are also billionaires. Since the arrest, there have been news reports of frozen bank accounts. But the crown prince may be eyeing more than these notables' money.
Wiki has a list but appears to be somewhat out of date, based on Alwaleed's wealth as reported by The Washing Post (the link above).

Back to the data points at the very beginning of this long note: the foreign reserves account rose by $8.3 billion. It should have decreased by about $3 billion. That's a spread of $11 billion, easily covered by Prince Alwaleed, with or without his consent. LOL. And that's just one of several wealthy tycoons and wealthy princes.

I'll leave it there. If Saudi's foreign reserves continues to grow (or at least not continue to hemorrhage) then perhaps there is a secular (long term change) that explains the October surprise. I'm kind of hoping it's an anomaly -- makes for good speculation. LOL.