WTI Could Hit $70 Briefiy By End Of The Week -- April 19, 2018

Permian: this story seems to be everywhere. I sort of blew it off, but then it showed up in the WSJ which brings a bit of gravitas to the story. The headline: is the US shale boom hitting a bottleneck? Congested pipelines, shortages of materials and workers stand in the way of Permian Basin's continued growth. The story has precisely 150 comments so far; that's a lot of comments; stories like this in the WSJ generally have less than five comments and often zero. Running through the comments, the common thread: a nice problem to have; will be solved.

This past weekend I drove through Odessa-Midland-Pecos on I-10. This is exactly what I saw, from a comment to the linked story above:

A trip on US Highway 285 from Fort Stockton TX to Carlsbad NM would show just how crazy it has gotten in the Permian.

It's 140 miles of boomtown, with dozens of hand-lettered signs at each intersection showing the way to new wells or water supplies, temporary pipelines stretched on the desert soil, RV "parks" laid out on bulldozed, treeless sand, and thousands of big trucks bringing supplies and pickups carrying workers.

The turnoff to Mentone, tiny county seat of the least-populated county in Texas, is now a traffic jam much of the day. You'll either love it or hate it, depending on your politics and connection to the oil business.

That was my exact experience. I think the activity must be 10x, 20x, maybe more than what the Bakken was at the height of the boom. Mostly because the geographic area of the Permian is so much bigger than the Bakken footprint. 

One person completely mis-read Mark Papa's comments about a year ago when the latter suggested the US shale was at its peak.

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Other

Jobless claims (link here):

• consensus: 230K
• actual: 232K
• change: -1,000

KMI: dividend increase. 

China: CNOOC sells LNG in first auction as China looks to avoid new gas crunch.

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Back to the Bakken  
Where Fracking Is Never Out of Fashion

Active rigs:

$69.27↑↑	4/19/2018	04/19/2017	04/19/2016	04/19/2015	04/19/2014
Active Rigs	59	50	29	93	188

RBN Energy: natural gas-weighted E&Ps continue to grow despite lackluster prices, part 4.

Four years ago this month, crude oil was selling for north of $100/bbl and natural gas prices were more than 50% higher than they are now.

But while hydrocarbon prices sagged later in 2014 — and through 2015 and early 2016 — the declines didn’t deal a crippling blow to U.S. exploration and production companies. Instead, most of the upstream industry weathered the crisis remarkably well. Amidst that striking recovery, the 10 gas-focused E&Ps we’ve been tracking have engineered the strongest return to profitability.

After $40 billion in pre-tax losses in 2015-16, they reported a collective $5.2 billion in pre-tax operating income in 2017, with all 10 producers in the black, as well as a 150% increase in cash flow over 2016, to $11.7 billion. However, gas prices have languished below $3.00/MMBtu since early February 2018 — their lowest level since mid-2016 — which means that the gas producers don’t have the tailwind that higher oil prices have been providing to their oil-focused and diversified competitors.

Today, we conclude our blog series on E&Ps’ 2018 profitability outlook and cash flow allocation with a look at companies that focus on natural gas production.