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Thursday, December 28, 2017

SandRidge Kills Bonanza Creek Deal -- WSJ -- December 29, 2017

Link here.
Oil-and-gas company SandRidge Energy Inc. is terminating its agreement to buy Bonanza Creek Energy Inc., after getting pushback from some of its biggest stakeholders, including activist investor Carl Icahn.
“After consultation with SandRidge’s largest shareholders, it became clear that the company would not receive approval for the transaction,” SandRidge said Thursday.
Mr. Icahn, the company’s biggest shareholder with a 13.5% stake, and other SandRidge investors had taken issue with the cash-and-stock deal, which was valued at about $750 million when it was announced in November. Investors said the deal made little sense and was too costly, especially because they believed shares of SandRidge were undervalued.

Saudi Arabia's Foreign Reserves -- November, 2017 Data

The data has just been posted. It looks like Prince Salman was able to extract a significant amount of cash from his princes. Link here:


Active Rigs Drop Below 50 In North Dakota -- December 28, 2017; Gasoline Demand Increases

Active rigs:

$59.8912/28/201712/28/201612/28/201512/28/201412/28/2013
Active Rigs493861173187

Two new permits:
  • Operator: Petro Harvester
  • Field: Flaxton (Burke)
  • Comments:
No other data points.

***************************************
Gasoline Demand Graph Posted

Link here.


The Market And Energy Page, T+341 -- December 28, 2017 -- Chicago PMI Surges Beyond Forecasts; NYSE Closes At Record High; 71st Time This Year -- Has Never Happened Before

The market and economic indicators: Chicago PMI at six-and-a-half-year high. 67.6 vs 62.5 consensus. Stock market to close at 71st record high for the NYSE -- this has never happened before. From the website:
The ISM-Chicago Business Survey, a regional view of the national economy, is a time-tested, market-moving report. The CHICAGO Report is released to the public 8:45 a.m. CT on the last working day each month. The Chicago Business Barometer, summarizing current business activity, also is known as Chicago Purchasing Manager Index or Chicago PMI. The Barometer is considered to be a leading indicator of the USA economy.
Again, this begs the question: what was President Obama doing for eight years?

Gasoline demand: link here.

******************************
Power Plants Bloom Even As Electricity Rates Drop

A glut of gas from U.S. shale fields is fueling a power-plant construction boom in several Northeastern states, despite fierce competition that has caused wholesale electricity prices to plummet.

The key for electricity producers is location. Having access to transmission lines to move megawatts to market is vital; but in addition by building close to natural-gas reserves, power producers can more easily access cheap fuel supplies.

In Pennsylvania and Ohio, which sit above the prolific Marcellus Shale formation, companies including Invenergy LLC and Calpine Corp. CPN 0.07% are building gas-fired power plants capable of generating a combined 8.6 gigawatts when they come online between now and 2020, according to federal data.
That output, which is enough to power up to 8.6 million homes, would require about 1.5 billion cubic feet of gas a day—roughly the equivalent of the daily flow through a major pipeline.The build-out comes as American shale drillers continue pumping so much gas that the price of the fuel has plunged from highs of over $13 per million British thermal units in 2008 to less than $3 per million BTUs today.

“The economics are compelling for gas-fired power,” said Andrew Slaughter, head of the Deloitte Center for Energy Solutions.

The power is bound for PJM Interconnection LLC, a power grid that serves some or all of 13 states, including Illinois, Michigan and New Jersey as well as Ohio and Pennsylvania. Competition among wholesale power producers in the market served by PJM—which stands for Pennsylvania, Jersey, Maryland—has become so fierce that a megawatt hour traded for $29.23 last year, the lowest level since 1999, as far back as the grid’s independent market monitor tracks prices. 
Much more at the link.

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Gloom And Doom

This story has been told and re-told many times the past several weeks. Apparently once one writer sees an interesting article, other writers pick up on it and re-write the same story. From Bloomberg: all that new shale oil may not be enough as big discoveries drop.
Discoveries of new reserves this year were the fewest on record and replaced just 11 percent of what was produced, according to a Dec. 21 report by consultant Rystad Energy. While shale wells are creating a glut now, without more investment in bigger, conventional supply, the world may see output deficits as soon as 2019, according to Canadian producer Suncor Energy Inc.

“Tight rock is not going to solve the global supply-demand issue,” said Adam Waterous, chief executive officer at the Calgary-based Waterous Energy Fund, which invests as much as C$400 million ($265 million). “Its going to take a long time for those mega-projects to come back on.”

Hydraulic-fracturing technology made it possible to squeeze crude from tight-rock formations and turned the U.S. into the world’s top producer. But it also sent the global benchmark for oil tumbling from $115 a barrel in 2014 to less than $55 in October. That’s eroded the incentive for companies to invest billions of dollars on new reserves that take years to develop but can produce for decades.

Oil prices would need to climb to $80 and remain at that level for two years to justify the costly deep-water projects off the coasts of West Africa or Brazil, Waterous said. And even then, it could take a decade before crude from those investments would arrive on the market, he said. Prices topped $66 this week.
Personally, I find these stories tedious. One or two stories, fine. A half-dozen stories in as many days? Tedious.

See graphs, updates, and commentary at this December 22, 2017, post.
And, while we are at it, this is a real hoot, from FuelFix, November 26, a 2017, post.

By the way, a reminder in case you missed it. The biggest oil discovery in decades was made by an Exxon-Hess joint venture off the coast of Guyana in 2016. Here is an update of that discovery from Reuters, dated June 16, 2017, earlier this year.
  • Exxon Mobil and partners will spend $4.4 billion to develop the Liza oilfield off the Guyana coast
  • this is considered a megaproject
  • Liza oilfield: low-cost
  • should tap 450 million bbls of oil and pump about 120,000bopd when it comes online in 2020
  • Hess' share of the project: $1 billion
  • the Guyana announcement from Exxon and partners Hess Corp and CNOOC was the fifth deepwater project to gain approvals this year (2017)
BP and Reliance Industries also announced (this same week) that they would spend $6 billion to develop natural gas reserves off the Indian coast

Rare Earths In North Dakota -- Brand New Study Released By NDGS -- 2017

To access a free PDF copy of this report:
For complete listing of NDSG publications, etc. click here.

The Minot Daily News is reporting: North Dakota Geological Survey has just published a report on rare earths, a two-year study.
  • the study is the most comprehensive study of rare earths in coal ever done in western North Dakota and discovered that North Dakota lignites contain some of the highest concentrations of rare earth elements in the nation
  • North Dakota samples rank in the top 20 of coal samples nationwide for concentrations of rare earths, with one sample being the fifth highest concentration recorded at 603 ppm, twice the U.S. Department of Energy’s potential economic threshold
  • the US Department of the Interior state that the U.S. is 100 percent reliant on 20 minerals, and rare earth minerals are produced almost exclusively in China
  • coal and organic-rich rock samples were collected from 64 sites in McKenzie, Billings, Golden Valley, Slope and Bowman counties and an additional site in Morton County,” said Survey Geologist Ned Kruger
  • a total of 352 rock samples were analyzed for rare earths, of which 277 lignite samples averaging 120 parts per million total rare earth elements, twice the published average for U.S. coals.

Games Today -- NCAA Football -- December 28, 2017

Today, Central Time:
  • 12:30 p.m. -- Virginia, Navy -- not interested
  • 4:15 p.m. -- Virginia Tech (22) vs Oklahoma State (17) -- no interested
  • 8:00 p.m. -- Washington State (21) vs Michigan State (18) -- somewhat interested
  • 8:00 p.m. -- Stanford (15) vs TCU (13) -- not interested
Wow, that's a sad commentary on where my life is. LOL.

But I did watch Tinker, Tailor, Soldier, Spy again (for the umpteenth time) last night, and I saw something I had not seen before. A really brilliant bit of writing and filming.

Re-Balancing Now Down To 28 Weeks. The Weekly Petroleum Report -- December 28, 2017; Gasoline Demand Jumps

Data points:
  • US crude oil inventories decreased by 4.6 million bbls (elsewhere it was said that this was more than expected) -- now in the middle of the average range for this time of the year -- this is the first time this comment has been made in quite some time
  • refinery operating capacity: a nice jump -- nearing 96% (reported: 95.7%)
  • gasoline production increased, now at 10.2 million bopd
  • distillate fuel production also increased, now at 5.5 million bopd
  • gasoline inventories actually decreased, but distillate inventories increased
  • here's the "gasoline demand" graphic --

    Link here.

Re-balancing:

Week
Date
Drawdown
Storage
Weeks to RB
Week 0
Apr 26, 2017

529.0
180
Week 1
May 3, 2017
0.9
528.0
198
Week 2
May 10, 2017
6
522.0
50
Week 3
May 17, 2017
1.8
520.2
59
Week 4
May 24, 2017
4.4
515.8
51
Week 5
May 31, 2017
6.4
509.9
41
Week 6
June 7, 2017
-3.3
513.2
60
Week 7
June 14, 2017
1.7
511.5
57
Week 8
June 21, 2017
2.5
509.0
62
Week 9
June 28, 2017
-0.2
509.2
71
Week 10
July 6, 2017
6.3
502.9
58
Week 11
July 12, 2017
7.6
495.3
47
Week 12
July 19, 2017
4.7
490.6
43
Week 13
July 26, 2017
7.2
483.4
38
Week 14
August 2, 2017
1.5
481.9
46
Week 15
August 9, 2017
6.5
475.4
35
Week 16
August 16, 2017
8.9
466.5
30
Week 17
August 23, 2017
3.3
463.2
29
Week 18
August 30, 2017
5.4
457.8
27
Week 19
September 7, 2017
-4.6
462.4
32
Week 20
September 13, 2017
-5.9
468.2
39
Week 21
September 20, 2017
-4.6
472.8
46
Week 22
September 27, 2017
1.8
471.0
46
Week 23
October 4, 2017
6.0
465.0
41
Week 24
October 12, 2017
2.8
462.2
40
Week 25
October 18, 2017
5.7
456.5
37
Week 26
October 25, 2017
-0.9
457.3
39
Week 27
November 1, 2017
2.4
454.9
38
Week 28
November 8, 2017
-2.2
457.1
42
Week 29
November 15, 2017
1.9
459.0
43
Week 30
November 22, 2017
1.9
457.1
42
Week 31
November 29, 2017
3.4
453.7
41
Week 32
December 6, 2017
5.6
448.1
37
Week 33
December 13, 2017
5.1
443.0
36
Week 34
December 20, 2017
6.5
436.5
30
Week 35
December 28, 2017
4.6
431.9
28

Re-balancing projections are based on returning to 350 million bbls in storage (not including SPR) and starting from May 3, 2017. If the re-balancing were to go to 400 million bbls then re-balancing would project out to only eleven (11) more weeks.

What Does Whiting See In Alger / Robinson Lake -- December 28,107



From the January, 2018, NDIC hearing dockets:
  • 26334, Whiting, Alger-Bakken 8 wells on a 640-acre unit, section 13-155-93; Mountrail County
    26335, Whiting, Robinson Lake-Bakken, 11 wells on a 1280-acre unit, sections 24/25-155-93; Mountrail County
The graphic:

The existing wells:
  • 23566, 845, Whiting, Kjos 14-13H, Alger, t10/12; cum 87K 10/17;
  • 25385, 899, Whiting, Liebl 31-13TFH, Alger, t8/13; cum 92K 10/17;
  • 25386, 1,142, WHiting, Liebl 31-13H, Alger, t8/13; cum 126K 10/17; still F;
  • 21462, 866, Whiting, Klefstad 24-25H, Robinson Lake, t3/12; cum 177K 10/17;
  • 24736, 267, Whiting, Meiers 34-25TFH, Robinson Lake, t7/13; cum 61K 10/17;
  • 18700, 668, Whiting, Meiers 44025H, Robinson Lake, t5/10; cum 142K 10/17;
  • 24925, 262, Whiting, Meiers 43-25TFH, Robinson Lake, t7/13; cum 71K 10/17;
Comments: The existing wells are not good wells, and yet they are in the sweet spot of the Bakken. In addition, Whiting is going to significantly increase the number of wells in these two drilling units (one, a 640-acre unit; the other, a 1280-acre unit). One well is still flowing (at least according to NDIC) even though it was drilled four years ago. It will be very interesting to see how these new wells perform.

Thursday, December 28, 2017

Jobs: initial claims unchanged -- at 245,000. Four-week moving average minimally changed.

Active rigs:

$59.6812/28/201712/28/201612/28/201512/28/201412/28/2013
Active Rigs513861173187

RBN Energy: top 10 RBN blogs in 2017.