Monday, February 12, 2018

1Q18 GDP Now Forecast To Be 4.0% -- February 12, 2019

Latest forecast: 4.0 percent — February 9, 2018. Link here.
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 4.0 percent on February 9, unchanged from February 6.
The nowcast of the contribution of inventory investment to first-quarter real GDP growth inched down from 1.25 percentage points to 1.24 percentage points after this morning's wholesale trade release by the U.S. Census Bureau.
It may be unchanged from February 6, but it has come down a long way since the February 1, 2018, forecast, when it was a staggering 5.4%.

The Tesla Page

You may want to archive this article:  Tesla Model Y: Factory Site, Timing Of Production, And Competitive Landscape. See how things work out. Everything suggests we are coming to an inflection point.

Another article to archive, which suggests, also, a coming inflection point:
  • Tesla Model 3 targets hinge on battery assembly system stuck in Germany.
  • 2,500 cars per week Q1 target requires a new assembly line, but it's nowhere near Tesla's Gigafactory. 
And finally this one. This one is the least of the three -- glossing over the negatives: long on Tesla.


Later, 3:05 p.m. CT: from the Financial Times --
BMW is on the verge of signing a landmark deal for the long-term supply of battery metals lithium and cobalt, as it moves to secure raw materials for its push into electric vehicles over the next decade. 
The German carmaker, which has been an early mover among established manufacturers in embracing electrification, said the contracts will guarantee supply for the next five to 10 years. 
Last year BMW’s competitor Volkswagen launched a tender for five years supply of cobalt and invited suppliers to its headquarters in Wolfsburg. Discussions are understood to be ongoing with suppliers of the metal. 
The price of cobalt and lithium have more than doubled over the past year due to rising sales of electric vehicles, which topped 1.2m in 2017. [The spokesman] would not reveal the names of the suppliers or the total volumes involved. 
He said the total amount will be “far below” the 100,000 tonnes of cobalt suggested in German media — an amount that would be more than the entire output of the refined cobalt market last year 
Original Post 

Lithium: not good news for Tesla. China's lithium exports surging due to EV demand. This is not Tesla buying this lithium -- it's all those competitors.
Japan was by far the largest importer, taking 12,021t, a rise of 272pc on 2016 and accounting for 62pc of China's total exports. South Korea imported 3,800t in 2017, up by 29pc year on year, and Germany imported 874t, up by 24pc from 2016. 

Hess Will Spend Almost Half Its Entire 2018 CAPEX In North Dakota

Previously posted with one additional data point (in bold). Hess will spend almost 50% of its entire 2018 CAPEX in North Dakota:
Hess: from Reuters via Yahoo!Finance, Hess plans $2.1 billion budget for 2018, unchanged from 2017.
  • mostly in North Dakota and Guyana, keeping its budget unchanged from 2017 amid a battle over corporate strategy with activist investor Elliott Management Corp.
  • Hess Corporation will spend $900 million to drill 120 wells with six drilling rigs and completing 85 wells in 2018 in the Bakken
  • executives across the U.S. oil industry have been feeling pressure to focus on profitability and shareholder returns, a departure from their long-established practice of boosting production regardless of the cost
  • Hess said it expects it can be "cash generative" after 2020 with oil prices of $50 per barrel. The company has not made a profit since 2014
  • Hess has recently been in the news: the recently announced Hess-Targa Resources joint venture

Closing Out The Poll -- February 12, 2018

I haven't watched CNBC since Thursday, more than a week ago, I believe, it was February 1, 2018, when the market plummeted. I knew that all of last week would be crazy on CNBC with all the volatility of the market, so I stayed away from CNBC.

I plan to stay away from CNBC for the next three or four weeks until I see what the new "normal" for the market is. A half-percent move on a 26,000-point Dow is 130 points, so one would assume any move less than 100 points in either direction (up or down) is simply background noise. Once I get a feeling for the new "normal" I will return to CNBC. Until then, ....

To avoid CNBC and the market, I also need to avoid Yahoo!Finance which is difficult because that's where I get my WTI prices for the daily morning and afternoon post.

I assume the blog will suffer to some degree by not following business news; but, we'll see.

Having said that, I'm tired of the poll on the blog right now, so I will close it out.

In the poll, I asked readers what they thought should replace GE on the Dow 30. The results of that poll:
  • another FANG (Facebook, Netlix, Alphabet): 23%
  • a railroad (UNP, CSX, Norfolk Southern): 9%
  • manufacturing (Corning, Cummins, StanleyBlack&Decker): 29%
  • teleccommunications (T, CMCSA): 6%
  • Banking (BAC, BK): 18%
  • other, including: Google, TSLA, an airline, Deere: 6%
I agree that it should be another manufacturing company.

I see analysts are suggest a target price of $14 for GE. Today, it was down on an "up" day for the market, at about $14.81.

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

The Apple Page

Surfing around the net to see what folks are saying about Apple's new smart speaker, the HomePod, my thoughts: something tells me that:
  • a) the HomePod is going to be huge for Apple
  • b) with the HomePod plus all the other interactive speakers out there, Bose radio/cd player is in real trouble
We have three Bose radios. I love Bose. But I wonder if I'm of an older generation that loved Bose but the younger generations coming up will spend their "speaker" money on Sonos, Google Home Max, HomePod, etc.

I've never seen the Bose Radio priced differently than $499. I think the Bose radio has been priced at $499 since the day it first became available. I see a "discount" on-line distributor has the Bose radio for $399 -- but that's an exception. 

Enerplus Has Permits For Another 10-Well "Lizard" Pad; WTI Pulls Back: Again, Below $60; Active Rigs Steady At 58 -- February 12, 2018

Active rigs:

Active Rigs583641137189

Ten (10) new permits:
  • Operator: Enerplus (10)
  • Field: Antelope (McKenzie County)
  • Comments: Enerplus has permits for another 10-well "lizard" pad in SWSE 8-151-94; 
Operator transfer: approximately 101 wells transferred from Whiting to Rimrock
  • these are some well-known wells; originally "the KOG portfolio"
  • all in Dunn County
  • names include: Charging Eagle; Moccasin Creek; Two Shields Butte; Skunk Creek;
  • oldest permit: 17600
  • most recent permit: 32536
One permit renewed:
  • Whiting: a Kaldahl permit in Williams County
No permits canceled.

No producing wells (DUCs) reported as completed.

New permits (see graphic below):
  • 34575, loc, ERF, Tegu, Antelope,
  • 34576, loc, ERF, Lizard, Antelope,
  • 34577, loc, ERF, Cayman, Antelope,
  • 34578, loc, ERF, Gecko, Antelope,
  • 34579, loc, ERF, Basilisk, Antelope,
  • 34580, loc, ERF, Frilled, Antelope,
  • 34581, loc, ERF, Anole, Antelope,
  • 34582, SI/NC, Komodo, Antelope,
  • 34583, SI/NC, ERF, Alligator, Antelope,
  • 34584, SI/NC, ERF, Crocodile, Antelope,
The graphic:

The MPO - SD Mississippi Lime Merger -- Mike FIlloon -- February 12, 2018

Link over at SeekingAlpha: summary --
  • MPO's Mississippi Lime core production results show there is little viability in the play
  • while payback times are short, depletion and costs associated with produced water disposal are an issue
  • the merger seems to be a good idea for both MPO and SD, but not good for investors
  • there are too many issues with the play (earthquakes) and we think the acreage has little value
From the article:
Chesapeake, Sandridge, Range Resources, and Devon all had or have significant acreage in the Mississippi Lime. We have seen the majority of players give up on this geology. There is some interesting geology near the Nemaha Uplift, but as a whole, this play produces too little oil and too much water.
Filloon's conclusion:
MPO's well economics are difficult, even with a low D&C cost. Using an oil price of $55/bbl. we can decrease by $3/bbl for differentials. We can pull $12/bbl for costs (LOE, taxes, etc). Oil revenues in 16 months are a little over $2 million. Natural gas revenues add another $1. The $3 million generated versus a D&C of $2.5 million looks good until we figure in costs for SWD. Disposal wells cost another $1.2 million.
The key to the data is oil production at the end of 16 months. Although the payback time is important, oil production once payback is reached helps define a plays viability. MPO is motivated to merge given the synergies, but the play will be difficult to develop even if oil prices move higher. Sandridge is motivated to obtain the NW STACK acreage. While the combination improves the situation for both operators, we believe much of the acreage has little value going forward.
Much more at the link.

Fun With Phonics


The Political Page, T+23 -- February 12, 2018 -- Breaking News: Crisis At CNN

From Vanity Fair (I did not know that Vanity Fair was still alive and kicking -- alive perhaps, but not kicking) comes this story:
But despite the so-called Trump Bump, CNN appears to be re-thinking at least some elements of its digital strategy.
I’ve learned that CNN, a key property in AT&T’s planned takeover of CNN’s parent company, Time Warner, is targeting big savings on the digital side, with as many as 50 jobs around the globe scheduled to be eliminated this week, according to people familiar with the matter, who noted the exact number could still be in flux.
The cuts will affect employees who work in premium businesses including CNN Money, video, product, tech and social publishing, these people said.
Several high profile digital initiatives are being scaled back, including CNN’s virtual reality productions and its efforts on Snapchat, where CNN recently nixed a live daily webcast after just four months.
CNN’s business-oriented MoneyStream app, as BuzzFeed reported earlier this month, is in the gutter as well. A team that works on the digital extensions of documentary-style TV shows, such as Anthony Bourdain’s Parts Unknown and Lisa Ling’s This is Life, as well as the Brooke Baldwin series American Woman, is also being reorganized.

The budget measures seem to take some heat off the ambitious digital futurism that CNN was preaching just under a year ago.
A March 2017 Hollywood Reporter cover story portrayed the network as taking on Vice and BuzzFeed in the battle for digital dominance. Just like with Vice and BuzzFeed, however, the past year has turned out to be a cruel one for just about any business that relies, in part, on revenue from digital advertising. Those three organizations fell short of their revenue projections—part of a larger industry reckoning that has hit digital brands from Mic to Mashable and many others. (CNN missed its target by tens of millions of dollars, according to a person with knowledge of the numbers, who noted that the business line was nonetheless still profitable.)
After all, a lot can change in a year. That Hollywood Reporter cover featured not only Zucker and Bourdain and Jake Tapper, but also You Tube star Casey Neistat, the founder of Beme, which CNN had just acquired for $25 million. Last month, CNN revealed that Neistat had left the company and that Beme was effectively shut down. One insider familiar with the digital strategy described these various changes as a “rightsizing” of resources.
Notes to the Granddaughters

The Edge of Evolution: The Search for the Limits of Darwinism, Michael J. Behe, c. 2007

The malaria parasite is the center of Behe's argument in this book regarding the "limits" of Darwinism.

Behe certainly must be a thorn in the side of Richard Dawkins. Be that as it may, Behe said something about malaria piqued my interest.

Curious to "fact-check" Behe I came across this article:
In 1951, the criteria for eradication as put forth by the National Malaria Society was: "Malaria may be assumed to be no longer endemic in any given area when no primary indigenous case has occurred there for three years." Since then, the definition has evolved a bit. The term "elimination" is used when malaria transmission is no longer occurring in a specific geographic area. "Eradication" is used to describe elimination of malaria transmission worldwide.
CDC’s predecessor, the Office of Malaria Control in War Areas, had been established in 1942 to limit the impact of malaria and other vector-borne diseases (such as murine typhus) during World War II around military training bases in the southern United States and its territories, where malaria was still problematic.The center was located in Atlanta (rather than Washington, DC) because the South was the area of the country with the most malaria transmission.
These efforts were so successful that at the end of the war and at the founding of CDC, one of the initial tasks was to oversee the completion of the elimination of malaria as a major public health problem.
The National Malaria Eradication Program was a cooperative undertaking by state and local health agencies of 13 southeastern states and the Communicable Disease Center of the U. S. Public Health Service, originally proposed by Dr. L. L. Williams. The program commenced operations on July 1, 1947. It consisted primarily of DDT application to the interior surfaces of rural homes or entire premises in counties where malaria was reported to have been prevalent in recent years.
By the end of 1949, more than 4,650,000 house spray applications had been made. It also included drainage, removal of mosquito breeding sites, and spraying (occasionally from aircrafts) of insecticides. Total elimination of transmission was slowly achieved. In 1949, the country was declared free of malaria as a significant public health problem. By 1951, CDC gradually withdrew from active participation in the operational phases of the program and shifted its interest to surveillance, and in 1952, CDC participation in operations ceased altogether.
The role of CDC became one of surveillance within the U. S. and of assistance in the world-wide efforts to eliminate or control malaria in the economically underdeveloped areas of the world.
I was fact-checking the temperatures required for malaria propagation:
Once adult mosquitoes have emerged, the ambient temperature, humidity, and rains will determine their chances of survival. To transmit malaria successfully, female Anopheles must survive long enough after they have become infected (through a blood meal on an infected human) to allow the parasites they now harbor to complete their growth cycle ("extrinsic" cycle). That cycle takes 9-21 days at 25°C or 77°F.
Warmer ambient temperatures shorten the duration of the extrinsic cycle, thus increasing the chances of transmission. Conversely, below a minimum ambient temperature (15°C or 59°F for Plasmodium vivax, 20°C or 68°F for P. falciparum), the extrinsic cycle cannot be completed and malaria cannot be transmitted. This explains in part why malaria transmission is greater in warmer areas of the globe (tropical and semitropical areas and lower altitudes), particularly for P. falciparum.

Williston Home Shortage Tsunami Coming -- Realtor -- February 12, 2018 -- Debbie Downer And Old News

Second In The Series

From The Williston Herald: why is building houses so difficult in Williston? Two reasons:
  • not enough builders; builders currently swamped with new orders; backlog
  • the city is running out of "buildable" lots" 
Doesn't sound like the Bakken is "dead" to me.

First In The Series
From The Williston Herald:
Unfortunately, homes like that in the FHA sweet spot — between $250,000 to $340,000 — are few and far between, area realtors say, and that has the city headed for another housing crunch, this time for single-family homes.
“For lack of a better term, I foresee a Williston home shortage tsunami coming,” said John Voll, a realtor with Bakken ReMax Realty. “I’ve never been busier than I am right now, for this time of year.”
Normally the type of activity he’s seeing waits until March or so. But not this year.
“I was listing houses between Christmas and New Year,” he said, “which is unheard of. There is a lot of activity out there.”
Most of Voll’s prospective homebuyers are young families buying a first home, who have been in Williston for three or four years. They’ve had a job long enough to get loan approvals, and they’ve decided they’d like to stay.
On The Other Hand ...

See first comment. I completely blew this one. This is from 2016 -- this is not a new article. I will leave it for the archives. 

Two Williston hotels are closing -- at least for now --
  • the Missouri Flats; and, 
  • the Marquis Plaza and Suites
Story over at The Dickinson Press.

Something tells me they'll be back. Possibly as low income housing or long-term affordable housing.

Later (February 13, 2018) -- I was so struck by this "old news" that I had to go back and look at Debbie Downer again, and yes, indeed, this story -- dated September 27, 2016 -- has been posted at the newspaper for at least the past couple of days. Of all the newspapers I read on-line, Debbie Downer consistently finds these kinds of stories to re-post about the Bakken, without noting that they are old stories. Talk about biting the hand that feeds you.

They Must Be Reading The Blog -- We Talked About This Five Days Ago -- The Huge (Unexpected) US Crude Oil Build -- Zeits -- February 12, 2018


Later, 11:28 a.m. Central Time: from Bloomberg's gadly -- OPEC's oil price nightmare is coming true. US shale production is surging on higher crude, now the fear is waning demand growth.
The latest surge in U.S. oil output will probably hasten the country's rise to the top of the producer pile. More important, it's starting to look as though at least half of OPEC's nightmare scenario for 2018 -- a surge in shale output and slowdown in demand growth -- is coming true.
Last week's avalanche of releases from the U.S. Department of Energy showed daily oil production above 10 million barrels a day for the first time since 1970.
A massive week-on-week jump of 332,000 barrels a day must be treated with caution, though. U.S. drillers didn't have a sudden rush of enthusiasm as WTI prices broke through a psychological $65 ceiling. Rather, the weekly data, which aren't revised retrospectively, are catching up with monthly estimates that give a more accurate picture of output.
For much of last summer, the weekly data were heavily criticized for over-estimating U.S. output growth. Now, the reverse is true.
Later, 11:17 a.m. Central Time: from the WSJ, OPEC revises crude supply forecasts on higher US production. Traders have grown increasingly concerned that burgeoning US production could once again flood the market.
In its closely watched monthly oil market report, the Organization of the Petroleum Exporting Countries said supply from producers outside the cartel should increase by 1.4 million barrels a day this year. Almost all of it comes from the U.S., where growth is expected to be 1.3 million barrels a day
Original Post
We talked about this five days ago

Link to SeekingAlpha: a big build in petroleum inventories sends a warning signal. From Richard Zeits - the summary --
  • last Wednesday the EIA reported a 1.9 million barrels increase in U.S. commercial crude inventories
  • on the surface, the headline build in crude might appear modest
  • however, the report in its entirety raises some concerns with regard to how tight the market for crude oil and petroleum products currently is. 
"The headline build in crude might appear modest." But this is the problem: the goal has been to decrease the inventory glut. This is going the wrong way. The time to "re-balance" has been extended by another two weeks, and now the tea leaves suggest US crude oil production will increase with WTI solidly above $55.

From the linked article:
The build in crude inventories reported last week must be taken in the context of refiner demand.
Refiner utilization jumped unexpectedly last week. Crude inputs into refineries were 0.8 million barrels higher week-on-week, resulting in a 5.6 million barrels ("MMb") increase in demand for crude, as compared to the previous week.
In the meantime, exports of crude oil and imports of crude oil were in-line with their respective two-month averages.
Even in this context, the build in crude inventories last week does not raise any major red flags. If anything, the data point shows a healthy balance between refiner demand and crude supply.
However, the big combined inventory build in crude and key refined product categories - which added up to 10.7 million barrels last week - is difficult to ignore.
Much, much more at the link including the rest of the story:
  • Commercial crude oil: +1.9 MMb
  • SPR crude oil: +0.5 MMb
  • Gasoline: +3.4 MMb
  • Distillate fueld oil: +3.9 MMb
  • Kerosene/Jet Fuel: +1.0 MMb
This note:
The magnitude of the recalibration is quite remarkable and illustrates the fact that many forecasts for U.S. crude production - including the STEO - were caught behind the curve and now have to undergo significant adjustment. Market perception with regard to U.S. production growth trajectory is in the process of changing.
And then look at the graph:

From natural natural / wiki: Condensate produced from oil wells is often referred to as lease condensate. 

From the EIA, at natural gas / wiki -- a footnote:
A final point to consider involves the distinction between the very light grades of lease condensate (which are included in EIA's oil production data) and hydrocarbon gas liquids (HGL) that are produced from the wellhead as gas but are converted to liquids when separated from methane at a natural gas processing plant. These hydrocarbons include ethane, propane, butanes, and hydrocarbons with five or more carbon atoms – referred to as pentanes plus, naptha, or plant condensate. Plant condensate can also be blended with crude oil, which would change both the distribution and total volume of oil received by refineries.

Chesapeake Energy Exits Mississippi Lime -- Richard Zeits -- February 12, 2018

Link here to SeekingAlpha.

  • Chesapeake received an estimated $1,000 per acre for its Miss Lime acreage, excluding production
  • the price received is reasonable and the transaction as a positive, albeit hardly material, development for the stock
  • given the improvement in oil prices, Chesapeake is likely to put additional asset packages in the Mid-Continent on the auction block
  • Chesapeake Energy announced last week its exit from the Mississippian Lime, the play that the company helped to pioneer several years ago
  • we interpret the $0.5 billion price received for the properties as a success for Chesapeake
From the article:
Why are the buyers willing to pay half a billion dollars for properties that are producing less than 5,000 barrels of oil per day, have been extensively drilled and have a high operating cost?
Several factors could be the reason:
  • A large portion of production is obviously quite mature and is characterized by a relatively low decline rate - which makes it more valuable.
  • The buyer may find some promise in other zones on this stacked-pay acreage, which is held by production and represents a long-term exploration option in the event oil prices move significantly higher.
  • The acquirer may be betting on achieving a meaningful increase in production volumes via workovers (which, arguably, were not the top capital allocation priority for Chesapeake).
  • The sale includes production infrastructure that was originally configured for larger volumes and may have some value.
Assuming that the market value of the existing production is $250 million, the price received for the acreage is $1,000 per acre. We note again that the acreage has been significantly exploited. While several new play concepts have been advertised by Chesapeake and its peers, the success of those new plays is yet to be demonstrated. In this context, the price per acre received is quite reasonable.

This Is Why We Measure The Temperature In Fahrenheit Degrees -- It Doesn't Feel As Cold -- February 12, 2018

Currently in the Bakken, it is 20 degrees below zero Fahrenheit, but if we measured the temperature in Celsius degrees, it would be much colder: a minus 29 degrees Celsius.

WTI Snaps Back -- February 12, 2018 -- RBN Provides Great Update On Permian Takeaway

Via Twitter:
Global Warming Update

Global warming smacks the Olympics: from Bloomberg:
And from the AP. I guess they were hoping for a "warmer" Olympics.

As Don noted: the first word in "Winter Olympics" is ....

Hubbert's Theory: Put To Rest

From Mark Perry, the Texas miracle: only five countries now produce more oil than Texas. And based on the data provided in the RNB Energy post today, Texas may soon produce more oil than Canada. Then only Russia, Saudi Arabia, Iran, and Iraq would produce more oil than Texas.

Mark has an interesting graph at the link which should pretty much ends the discussion on peak oil.

The graph above shows only one peak. In addition, there was a second peak, at this link. After 1980, Texas entered into a long decline in production (consistent with Hubbert's theory) but then surged after 2010). Hubbert's theory would never have predicted the surge in oil production after 2010 (as noted in the graph), so, in fact, with regard to Texas there are at least two points in which Texas reached "peak production," entered Hubbert's "terminal decline," only to come roaring back.

From wiki:
Peak oil is a concept, first presented in 1956, as the theorized point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time. It is often confused with oil depletion; however, whereas depletion refers to a period of falling reserves and supply, peak oil refers to peak, before terminal depletion occurs. The concept of peak oil is often credited to geologist M. King Hubbert whose 1956 paper first presented a formal theory.
By the way, same with both Russia and Saudi Arabia. At the link to Mark Perry's post (above), one will see that production from both Russia and Saudi Arabia hit a peak some time ago, only to come roaring back in the last few years.

It appears we will likely see that occur off Norway and probably in the Arctic.

Artificial Reef In The GoM: Courtesy of The Oil Industry

Link here. Another story we won't see on the evening news.

Back To The Bakken

Active rigs:

Active Rigs583641137189

RBN Energy: Midland crude production, takeaway capacity and price differentials.
Permian crude oil production continues to march steadily upward, headed toward 3.0 MMb/d sometime in the next few months.
Most of the recent growth responsible for pushing total U.S. output past 10 MMb/d has come from increases in Permian volumes. Pipeline capacity out of the super-hot play is on the ragged edge of maxing out, and a myriad of new projects to relieve capacity constraints are in the works. Why then has the price differential between Midland, TX, and the Gulf Coast dropped over the past few weeks? Why did the Brent vs. WTI/Cushing spread crater? And what does this all mean for Midland-to-Gulf Coast transport deals getting struck for $2.00/bbl or less?
Today, we look at these developments, try to make sense out of the Permian/Midland crude oil market, and consider what the future might hold for West Texas barrels moving to the Gulf Coast.
We’ve talked frequently about increases in Permian crude oil production and the need for new pipeline takeaway capacity here in the RBN blogosphere. In December (2017), we detailed the latest wave of Permian pipeline projects including briefs on
  • the planned Phillips 66/Enbridge Gray Oak Pipeline; 
  • Magellan Midstream Partners’ plan to build a set of connecting pipes between Midland, Corpus Christi and Houston; 
  • an expansion of the Magellan/Plains All American BridgeTex Pipeline from Midland to Houston; and, 
  • the latest from Enterprise Products Partners: the planned conversion of one of its NGL pipes out of the Permian to crude service, also targeting Houston.
Through all of this, Enterprise continues to ramp up volumes on its Midland-to-Sealy pipeline, which is said to be flowing more than 200 Mb/d with expectations to hit its 450-Mb/d full volume by June.
Also, EPIC is said to be laying pipe for its 550-Mb/d, 700-mile line from the Permian and Eagle Ford to Corpus Christi, and Plains announced the 185-Mb/d Cactus II expansion (to a total capacity of 575 Mb/d) from West Texas’s Orla, Wink South, Midland, Crane and McCamey points down to Corpus Christi.And the announcements keep on coming. Two weeks ago, Trafigura signed a long-term commitment with Plains to move 300 Mb/d of Permian crude to Corpus on Cactus II. We understand that this brings the Singapore-based global commodity trading company to 450 Mb/d of outbound capacity, making it the largest holder of takeaway out of the Permian. The capacity provides Trafigura with direct access to export dock capacity and the two 50-Mb/d condensate splitters at Corpus, where the trading company holds 100% of the capacity on units operated by Buckeye Partners and Magellan.
We don’t know the transport rate on that deal, but if announcements from Magellan and Plains for their new capacity on BridgeTex are any indication, the market for transport capacity from Midland to Houston is sub-$2.00/bbl. A January 30 (2018) BridgeTex press release indicated that 10-40 Mb/d from Midland to East Houston is going for $2.10/bbl, while the same volume from Colorado City, TX, to East Houston is priced at $1.85/bbl. We’ve heard numbers for capacity out of the Permian lower than that being talked about and done. For example, we understand that Chevron has taken out capacity on Enterprise’s Midland-to-Sealy line at something well below $2.00/bbl for a term of 15 years, which Chevron will need, given that it has announced it will be increasing its Permian rig count by 25% — to 20 from the current 16 — over the coming months.
And there’s talk of other projects offering Permian-to-Gulf Coast transport for $1.50/bbl or even lower. Clearly, there is a lot of competition among pipeline projects for locked-in Permian barrels these days.
Much, much more at the link.

All this pipeline and the Keystone XL is idled.