Thursday, February 15, 2018

Why I Love To Blog -- Reason #3 -- February 15, 2018

Earlier today Don sent me this link (which I quietly posted at the time but I assume most missed it), from CNBC, Boeing wants to produce a plane every ten (10) hours by 2020 (according to the CEO, and he's likely to be in a position to know), only one data point needs to be added:
  • the world's aircraft fleets are "going to double in size" over the next 20 years
Don made the profound observation (in case anyone missed it), Boeing ain't building airplanes to park 'em. This is is going to have a profound effect on crude oil demand. The US government sets CAFE standards for private automobiles, but there are no CAFE standards for commercial aircraft, and it's unlikely we'll see "electric" airplanes any time soon. Don't even get me started.

But back to the #3 reason I love to blog. Don sent me that link earlier today, and make the comment that this would have a profound effect on crude oil demand.

Now, less than six hours later, this headline from  the most bullish indicator for long-term oil demand --
The rise of electric vehicles has prompted many analysts to start trying to pinpoint the year in which global oil demand will peak and start to decline irreversibly in the face of electrification and improved vehicle efficiency. While forecasts range from “in a decade” to “not in your lifetime,” transportation above ground — not the ‘flying cars’ hype, but airline travel — is expected to continue to grow for decades to come.
Air carriers use a middle distillate of oil — jet fuel — and as far as demand for air travel goes, jet fuel demand will be the fastest-growing transportation fuel at least until 2050, because current forecasts by international agencies only try to predict oil demand until that date.

On the one hand, global demand for air travel is set to grow with increased globalization and leisure travel, as well as with the expanding middle class in emerging economies with higher income to spend on business and tourism travels by plane. On the other hand, unlike with EVs, currently there aren’t viable alternatives to jet fuel that are cost competitive and feasible on a commercial scale. So the fuel for growing airline traffic will come from a middle distillate of crude oil.
Airline traffic figures for 2017 are in, and they show high passenger traffic demand, with economic growth picking up globally. Air cargo demand was also strong on the back of robust global demand for manufactured goods.

Mr Bojangles, Jerry Jeff Walker and Todd Snider

Wow, This Is Crazy -- Everyone Said The Bakken Was Dead; Moody's Downgraded Williston Because The Bakken Was Dying -- Now, The Brand New High School Not Big Enough; Two New Elementary Schools Needed -- How Will Debbie Downer Report This? -- February 15, 2018

This is absolutely crazy. Headline says it all.

From The Williston Herald:
  • the brand new high school (not even open for one year yet? maybe two years?) already deemed too small?
  • two new elementary schools to be built in Boomtown
Company to get the jobs: JE Dunn Construction. Woo-hoo!

The new Williston High School -- I think this is the first year it's been open; maybe two years -- it's huge -- it was designed during the boom -- one would assume they would have overbuilt based on data during the boom -- and here it is -- the high school needs an addition!

If you want to see the high school, go to this link, and then go to slide #25 or 35 slides. Another incredible Vern Whitten photograph.

I wonder if / how Debbie Downer will report this?

By the way, this comment from a reader close to the action in Williston just came in as a comment to another post:
Word has it around Williston there is a lot of hiring going on for completion personnel for major uptick here this spring.  
"Completion personnel" (frack spreads) -- talking about completing DUCs. I assume December is a slow month for completion. Once spring road restrictions are lifted, watch for some amazing numbers.

Director's Cut Has Been Posted; North Dakota Crude Oil Production Data For December, 2017, Has Been Released; Crude Oil Production Decreased 1.3% Month-Over-Month; Producing Wells At An All-Time High; Natural Gas Production Slightly Below All-Time Record

Link here. NDIC site for calendar and links for past and current Director Cuts here.

The usual disclaimer applies. I do "this" quickly and there will be typographical and factual errors. If this is important to you, go to the source.
The Data

Natural gas production: in April, 2017, it was reported that North Dakota produced a record amount of natural gas: in that month, natural gas production jumped 6% more than 1.8 billion cubic feet / day. What was North Dakota's natural gas production two months ago, November, 2017? Yup, another all-time high: 2.1 billion cubic feet / day. But for December, 2017, gas production dropped 0.7% month-over-month.

Oil production
  • December, 2017: 1,181,319 bopd
  • November, 2017: 1,196,976 bopd
  • Delta:  a decrease of 15,657 bbls / day
  • Delta: a decrease of 1.3%
Gas production: 2.081 bcf/day (all-time high was 2.096 bcf/day last month (November, 2017)

Producing wells:
  • December, 2017: 14,293
  • November, 2017: 14,338 (an all-time high)
  • Delta: a decrease of 45 wells; about a 0.3% decrease
  • January, 2018: 106
  • December, 2017: 86
  • November, 2017: 119
  • October, 2017: 147 
  • September, 2017: 104
  • August, 2017: 101
  • July, 2017: 146 (huge jump)
Oil price (WTI), breakeven price statewide = $21
  • Today: $49.25
  • January, 2018: $54.75
  • December, 2017: $49.56
  • November: $49.75
  • October: $43.56
  • September: $39.56
  • August: $37.93
  • July: $35.83
Rig count:
  • today: 57
  • January, 2018: 56
  • December: 52
  • November: 54
  • October: 56
  • September: 56
  • August: 56
  • July: 58
  • June: 55
Wells not producing, total: about 2,375 not producing; that exceeds the number of wells completed in any year during the boom
  • waiting on completion: 877, down from 6 the end of November to the end of December
  • estimated inactive well count: 1,469, down 23 from the end of November to the end of December
Takeaway capacity:
  • December: takeaway capacity including CBR to coastal refineries is more than adequate 
  • November: takeaway capacity including CBR to coastal refineries is more than adequate
  • October data: including CBR to coastal refineries is more than adequate
  • September data: including CBR to coastal refineries is more than adequate
  • August data: including CBR to coastal refineries is more than adequate
  • July data: including CBR to coastal refineries is more than adequate
  • June data: including CBR to coastal refineries is more than adequate
  • May data: including CBR to coastal refineries is more than adequate (major change in verbiage)
Natural gas capture, has been getting "worse" and FBIR was a major issue; the trend has improved; it looks like ND has "turned the corner" on this issue
  • statewide: 87% (previous -- 86% [trend has improved)
  • FBIR: 80% (much improved; previous -- 75%)
  • goal: 88% through October 31, 2020; then 91%
  • comment: October, 2017, was terrible; it's getting better on FBIR

XTO Reports Four Completed DUCs; WTI Back Over $61 -- February 16, 2018

Active rigs:

Active Rigs553841137185

Five new permits:
  • Operator: MRO
  • Field: Reunion Bay (McKenzie County)
  • Comments: Marathon Oil has permits for another 5-well pad in NENW 28-151-93
Four permits re-instated:
  • SM Energy: four permits (Jeffrey, Kade, Macey, and Kelly), all in Divide County
Four producing wells completed:
  • 30719, 2,046, XTO, North Tobacco Garden 24X-32A, Tobacco Garden, t7/17; cum 117K 12/17;
  • 30720, 1,276, XTO, North Tobacco Garden 24X-32E, Tobacco Garden, t8/17; cum 59K 12/17;
  • 32303, 2,300, XTO, Lund 41X-17G, Siverston, t1/18; cum --
  • 32307, 2,653, XTO, Lund 41X-17HXE, Siverston, t1/18; cum --

NOG Reports 4Q17 And 2017 Full Year Results; Tesla -- A "Going Concern"? -- February 15, 2018

From a press release, no link, easily found.
  • daily production in the fourth quarter exceeded prior guidance, increasing 9.3% sequentially and 22.3% year over year to average 16,742 barrels of oil equivalen per day, for a total of 1,540,237 boe
  • Northern beat its prior expense guidance with lower production expenses, production taxes, and general and administrative expenses on a per boe basis
  • fourth quarter oil differential was $3.51 per barrel, an improvement of $2.71 per barrel compared to the third quarter
  • Northern added 7.1 net wells to production during the fourth quarter, bringing year-to-date well additions to 16.9 net wells
Tesla By The Numbers

Link here.

Cash burn rate:
  • 4Q17: $915.2 million (yes, just short of one billion dollars)
  • 3Q17: 1.251 billion (yes, well over one billion dollars)
  • 4Q16: $461.4 million (only half a billion dollars)
  • burn rate: "frighteningly large"
  • auditor: should have serious concerns calling Tesla a "viable enterprise"
Debt, long-term debt and capital leases:
  • $9.46 billion, end of year, 2017 (almost double from year earlier)
  • $5.97 billion, end of year, 2016
  • assuming a profit margin of $10,000 / car, just to cover the current debt, one million cars must be sold
Sales, Model S shipments -- Tesla's best bet for cash flow being sacrificed for ramping up the Model 3
  • 4Q17: 15,200
  • 3Q17: 14,065
  • 3Q16: 15,300
  • Tesla shipped fewer Model S's in 4Q17 than it did in 3Q16 (4Q16 not used for comparison purposes because Tesla had production problems in 4Q16
  • the Model S, Tesla's cash cow, is being sacrificed for the Model 3
Profit margins, automotive gross margin:
  • 13.8% in 4Q17
  • 18.7% in 3Q17
  • 22.2% in 4Q16
  • Elon has thrown out a target figure of 25% for AGM in the past, but at just over half that rate, Tesla cannot possibly be profitable
  • gross profit, 4Q17, $438 million, was less than half its combined R&D and operating expense spend of $1.04 billion
  • a company that produces that much red ink is not sustainable
  • auditor: needs to use "going concern" language in the auditor's statement
Disclaimer: this is not an investment site. Do not make any relationship, job, travel, investment, or financial decisions based on what you read here or think you may have read here. If this is important to you, go to the source.

Tesla's Gigafactory Problem

Link here.

Key data point at the link: Tesla apologists obfuscate "battery designation" with "numerical designations" that mean nothing
  • "old" batteries: "the old form factor"; #18650; supplier: Panasonic; likely contracted for minimum number of batteries to be sold
  • "new" batteries: "the new form factor"; #2170
From Tesla:
  • [our cash cows], the Model S and Model X, will be "supply-limited"; hence, Tesla expects to deliver only 100,000 units (Model S and Model X) in 2018 -- again, these are the cash cows for the company
  • Q: you could deliver more than 100,000 units (S, X) but you are constrained by the "old" battery; is that correct? A: yes; we felt that expanding that supply of "old" batteries with Panasonic was "worth the risk"
Comment: it seems that it would be easier for Panasonic to increase/extend production of the "old" batteries to allow more cash cows (Models S and X) to be sold; but for some reason, Tesla felt that was a "risk they did not want to take" -- why?
  • Tesla avoided answering the "why", instead answering: "Tesla is keeping the course on Model 3"; that's "where the majority of the effort is"
  • author at the link opines that even if profit were not an in issue, Tesla may be capacity-constrained because of "old" battery shortages/constraints
On profits:
  • "deep discounting has eroded the gross margins significantly"; margins have reached "an abysmal 13.8% -- this is identical to the other article posted above some days ago; "this gross margin is a far cry from corporate goal of 30%+ margins
  • "we argue that Tesla's Model S and Model X combined sales may appear stagnated for at least six quarters but, in reality, they would have declined substantially if not for the aggressive discounting"
Look at the profits (actually the ever worsening deficits):

Then this:
As we have pointed out in a recent article, demand indicators are suggesting that Tesla may see a 20% drop in shipments in Q1. As a result, we are hard-pressed to see Tesla selling even 80K units in 2018 if the company were to shoot for respectable gross margins around 25% level. In our view, 18650 battery capacity for 100K cars is not a limitation for Tesla.
  • the "old" battery; Panasonic may not want to make any more than originally contracted; no one will want the "old" technology; the only buyer would be Tesla
  • the "new" battery is already being produced at the Gigafactory; not interested in expanding "old" battery production
The writer:
In an ideal world, Tesla would have liked to transition the Model S and Model X to the 2170 format sooner to get to the cost and performance benefits touted by Tesla. However, we believe Tesla was unable to do so because of preexisting volume purchase commitment agreements with Panasonic. Panasonic needed those commitments to get a reasonable ROI on the existing 18650 capacity.
Which brings us to this:
  • writer predicts that Tesla will post its first $1-billion-loss quarter in 1Q18 or 2Q18
Much, much more at the link.

Bottom line for the consumer: if one has put down $1,000 for a Tesla Model S or Model X, will one get the "old battery" or the "new" battery? I think the answer is fairly obvious.

The Market And Energy Page, With Some Politics Thrown In, T+25 -- February 15, 2018

Guns: more Minnesotans own guns; violent crime remains low
Minnesota set a record last year for the number of gun background checks the FBI conducted in the state. More people are carrying guns than ever before, but the crime rate remains relatively low. 
Non-energy: if FBI director Christopher Wray doesn't have the "right" answers for President Trump regarding the Florida shooter, someone needs to resign.

Apple: I've taken a month off from non-energy business news so I am missing a lot. I will still -- maybe 45 seconds/day -- look for some specific non-energy business item on the net but that's about it. A couple days ago I said that Apple's HomePod was going to be huge (posted earlier). Apparently Warren Buffett agrees -- he took advantage of the sell-off and bought huge amount of shares of AAPL, while selling a boatload of IBM. There may be some hyperbole in there and some inaccuracies but I won't be checking. If this is important to you, go to the source. Meanwhile, back to APPL. After the news, APPL jumped about $6/share after several earlier days of gains. Apple has a lot going for it right now and more and more, the iPhone is becoming less of a story for those paying attention. [February 17, 2018: AAPL is now Warren Buffett's largest equity holding, surpassing Wells Fargo. Wow.]

Treasuries: now that I am not watching television business news, I do check the yield on 10-year Treasuries on the internet. As a long term investor in the market, I have "positive" feelings about the yield "curve" as they say. I wish Louis Rukeyser was still with us. I haven't seen/heard Cramer in ten days or so; don't miss him. The last time I saw him he was ranting and raving about the market plummeting; he needed to help long-term investors instead of ranting and raving. So, I haven't seen him in the past ten days or so and don't miss him.

Boeing: not this year, not next year, but the following year (2020), Boeing plans to be producing one "plane" every ten (10) hours. Meanwhile, not this year, not next year, but the following year (2020), Elon Musk will be ramping up to 1,000 cars/week after having missed almost every other forecast for the past three years. He will probably be talking about boring a tunnel "under the sea" between Newark, NJ, and Land's End, England. There may be some hyperbole in there and some inaccuracies but I won't be checking. If this is important to you, go to the source. I haven't checked shares of Boeing airlines, but my hunch is they are doing quite well, thank you very much.

Biking: I was out biking today -- a bit longer than usual because the weather was so nice. Observations:
  • McDonald's is busier than ever; most of it drive-through; some Uber deliveries
  • lots and lots of commercial/retail construction in the Grapevine, TX, area
  • many, many new service stations and/or renovation of same; service stations at both of the McDonald's in the local area undergoing major renovations; one may be complete - I haven't been there in quite some time
  • trucks -- the 18-wheelers -- their drivers continue to impress me. I have no problems with trucks while biking -- I give them huge leeway and signal my intentions very clearly -- always letting the drive know I will give him/her the right-of-way by a wide margin even if it means sitting through another light or two
  • cars seem more dangerous than 18-wheelers
Boring Under The Sea

Back to the Future, 1985

CLR Announces 4Q17 / Full Year 2017 Results -- Preliminary

From the press release with my comments. No link, easily found.

2017 Preliminary Results:
  • production of 286,985 barrels of oil equivalent (boe) per day in fourth quarter 2017, up 37% year-over-year from fourth quarter 2016 -- wow
  • oil represented 59% of production in fourth quarter 2017, compared to 55% in fourth quarter 2016
  • production of 242,637 boe per day for full-year 2017, up 12% from full-year 2016 -- wow
  • lowered debt by $261 million in fourth quarter 2017 and by an additional $95 million in January 2018
2018 Projected Capital Budget and Guidance:
  • $2.3 billion capital expenditures -- about the same as Hess
  • estimate $3.0 to $3.2 billion of cash flow from operations and $800 to $900 million of free cash flow at $60 per barrel WTI and $3.00 per Mcf Henry Hub
  • budget expected to be cash neutral in the low-to-mid- $40 's WTI
  • 17% to 24% year-over-year production growth to 285,000 to 300,000 boe per day
  • 10% to 15% projected return on capital employed (ROCE)
Continued Improvement in 2018 Differentials and Operating Expenses Expected:
  • ($3.50) to ($4.50) per bo oil differential
  • $0.00 to +$0.50 per Mcf natural gas premium
  • $3.00 to $3.50 per boe production expense
  • $1.70 to $2.30 per boe total G&A

Keep On Truckin' -- Or Perhaps Better Said, Keep On Piping -- February 15, 2018

From Rigzone:
While TransCanada Corp. continues to weigh whether to build its long-delayed Keystone XL oil pipeline, the company announced another major expansion of its natural gas system in Alberta.
TransCanada will spend $1.9 billion to expand its NGTL System, adding 1 billion cubic feet of daily shipping capacity. The company struck binding agreements with shippers that start in November 2020 and April 2021, with an average contract term of almost 29 years.
The expansion shows TransCanada isn’t sitting still while it considers whether to move ahead with Keystone XL. The company has been proceeding with preliminary work on the $8 billion, 1,200-mile project, but hasn’t officially announced a decision to build it. Activists haven’t given up trying to block it, with opposition groups filing a motion to invalidate a key permit last week. TransCanada made no significant new announcements about Keystone XL in its fourth-quarter earnings report on Thursday.
Even without Keystone XL, the company’s oil transport business posted strong results. The unit’s comparable earnings before interest, taxes, depreciation and amortization rose 33 percent, helped by higher volumes on the existing Keystone system and the start of operations on its Grand Rapids and Northern Courier lines.

The US Is Already The Swing Producer -- And The Most Responsive Producer -- February 15, 2018


February 16, 2018: without question, the linked article at the original post below may quite likely be the most important story of the month, if not the year. The writer opines that US crude oil production is likely to exceed what "everyone" is predicting. That opinion piece was written a couple of days ago. Today, this from The Street:

Oil companies targeting U.S. shale plays have largely surpassed expectations in 2017 in terms of production, Goldman, Sachs & Co. analysts said Friday, Feb. 16, and most notable among them are Occidental Petroleum Corp. and RSP Permian Inc. .

Overall, EOG Resources Inc. remains a leader in well performance in the Delaware Basin of west Texas and Eagle Ford Shale of south Texas, while Noble Energy Inc. has leading wells in the Delaware Basin and Denver-Julesburg Basin in Colorado.

But from a production rate of change perspective, others are more notable, suggesting the tides are shifting in some key U.S. resource basins.

Among those with leading well performance:
  • OXY/RSPP and ConocoPhillips
  • among those with below-average rates,  Anadarko Petroleum Corp. and  Devon Energy Corp. had favorable rate of change in the Delaware Basin, while Exxon Mobil Corp. saw below-average overall rates and rate of change in the Permian and the Bakken (on a lateral length adjusted basis)
Based on 2017 data available so far, Goldman saw eight key exploration and production companies, or E&Ps, that not only demonstrated peer-leading absolute oil IP rates in 2017, but also showed above-basin average year-over-year productivity gains
Other data points:
  • OXY is doing particularly well from a financial point of view
  • Occidental is well positioned from both an absolute and rate of change perspective in the Delaware Basin, which gives the analysts more confidence in the company's ability to increasingly be viewed as a leader in the play and potentially show above-guidance production in the second half of the year
  • RSP Permian is the most productive E&P in the Midland Basin and the fifth most productive player in the Delaware Basin in 2017; this supports Goldman's view that it has the highest concentration of core acreage among smaller mid-cap Permian E&Ps
In the Bakken, the news was not so good for XOM:
  • XOM lagged play play-level 2017 averages in the Permian (both Midland and Delaware) and in the Bakken
  • based on 2017 data thus far, XOM saw degradation in well performance in the Delaware and Midland Basins and did not see meaningful improvement [year over year] in the Bakken, where strong annual improvement was seen by seers
Finally, this from Goldman:
"While we see shale productivity gains continuing through the end of the decade, we note: (a) the rate of improvement is likely to slow as activity picks up (reverse high-grading); (b) beneficiaries will likely become more concentrated to those capable of widely applying leading data analytics to shale portfolios which can better inform how wells are drilled/fracked; and (c) the emergence of cyclical cost inflation and risk of regional bottlenecks in 2018 owing to labor/logistics availability/timing."
Later, 11:51 a.m. CT: I posted the article and then read it as I often do. I scanned it first, and then read it line by line, highlighting throughout, re-paragraphing, and then archiving.

This may be simply the best article all week -- all month? all year? -- putting global energy into perspective. It touches on the US, Saudi Arabia, Russia, China, all in one very concise article.

A huge "thanks" to the reader who sent this to me. It's behind a paywall, but googling key opening phrase and it can be found in full.

If you have time to read but one article on global energy this week, this would be the article. 

When you read this article, imagine the headlines it would generate in the US if it were Russia or if it were China or if it were Saudi Arabia or Venezuela or Canada that were in the position that the US currently finds itself. This is an incredible story. It began with the Bakken revolution.

I have a lot of fun reading comments of "peak oil" proponents at other news sites and blogs and this article really has to give "peak oil" folks pause to think, assuming of course, they pause to think.

The interesting thing: for the most part this article is mostly about crude oil, and to some extent natural gas. But it doesn't even touch upon the other almost boundless energy source the US has if push comes to shove one hundred years from now: coal.

Also, not talked about in this article, the US is known for:
  • keeping its promises when working energy deals and delivery contracts
  • being politically stable
  • being fair and balanced in the business world
  • being very, very transparent
Of course, folks will dispute that, and take that out of context. "Fair and balanced"; and, "transparency" in the business world is relative. 

What a great entrepreneurial country.

Disclaimer: in a long note like this, there will be typographical and factual errors. In addition, I am having some difficulty seeing the screen due to glare from the sun. What a beautiful day in north Texas.

The other thing not mentioned in this article is how precarious the situation is in Saudi Arabia. I won't live to see it, but all indications are that Saudi Arabia will be a net importer of oil in less than twenty years, and unlike Russia, oil is Saudi's only source of revenue. 
Original Post
Richard Zeits opined on this (posted earlier) and RBN Energy has suggested much the same (posted at various times), so it's interesting to see the timing of this Financial Times article (sent to me by a reader, thank you):
US runaway crude oil production and total oil export growth is having dramatic impacts on global oil markets, positioning the US to be the major oil export hub in the world. No doubt there is much brouhaha over the US overtaking Saudi Arabia and Russia sometime this year as the largest crude oil producing country in the world.
But the fact is that it is already the world’s largest total producer of liquids, now marketing close to 15.5m barrels a day including crude oil, bio fuels and natural gas liquids.
By year-end, total US oil liquids output should be well over 50 per cent higher than either Russia or Saudi Arabia.
Also by this time next year, the US should add over 1m b/d not only to production, but also to exports, with total liquids exports at over 8.3m b/d, larger than either Russia or Saudi Arabia.
So much more at the article but that's all I will post. Will be archived, I'm sure.

By the way, this was the first comment to that article, from "A O Stahel,  a "peak oil" proponent:
Amazing how a seasoned analyst like Ed Morse can get it so wrong! 
There is only one central bank in the oil market and that is Saudi Arabia. 
They have set the floor at $60. Ed will learn that by December. And then there is record demand growth which in itself balances shale output growth. No word about that by Ed. 
But more importantly, the legacy pipeline of the $100 era is slowly drying up, creating an imbalance by 2019 and regardless of record shale growth. Only OPEC‘ spare capacity will be able to manage that short term. Lastly, the supply side has a natural decline rate which will sooner rather than later increase from 4 years of industry under-investment outside North America. 
All these factors matter to project future oil balances. 
Lastly, there is huge uncertainty among industry insiders about how fast and far US shale can grow, as discussed by Mark Papa or MIT, among others. Yes, shale will grow but by how much from here? Is 1.2 Mb/d yoy growth a starting point or its ceiling? It is a known unknown and so to state shale has become the swing barrel is premature, to put it mildly. 
In summary, to continue talking about record shale growth in isolation is a scary bias for a seasoned analyst. Time to read Daniel Kahneman‘s Thinking Fast and Slow!
My comments to that:
  • Saudi Arabia has not set the floor at $60; the market will set the floor (earlier this week, oil was trending well below $60)
  • Saudi Arabia cannot survive on $60-oil -- plain and simple
  • US shale operators can survive with $40 oil; they will thrive with $75 oil; and, will go absolutely bonkers with $100 oil
  • I'm a great admirer of Mark Papa and I take him seriously -- very seriously -- but I think he made his comments even before the full potential of the Permian was known -- but I could be wrong -- Mark Papa may have it right -- but the jury is still out 
  • with regard to that "legacy pipeline of the $100-era is slowly dying out" has become a trope; it is a meme that has become meaningless; the individual commenting forgot to note that XOM reported its best year in a decade, perhaps in its history when it reported that it replaced 183% (almost replaced its production by 2x; reserves surged by 19%); and most of that was off-shore
Water Boarding At Tutor Time

Wow, Natural Gas Drawdown Exceeds Forecast Significantly; Almost Doubles Last Year's Draw Down -- February 15, 2018

Note the forecast, and prior history for this time of year, and then the actual draw down in bold red:

Natural gas: Thursday, February 15: AEI natural gas storage report:
  • previous: -119 bcf
  • forecast: -179 bcf (private forecast)
  • actual: -194
  • compare: -120 Bcf last year and -154 Bcf for the five-year average (same link)
Don did the math: at the rate of draw down the natural gas storage facility will be empty in 9.7 weeks. That is only 5.7 weeks later than Punxsutawney Phil said winter "might" be over for the year.

Marathon Oil Beats Forecasts

Link here:
  • better-than-expected quarterly profit (I thought all the naysayers said shale was not making money; Marathon must have missed the memo)
  • investors response: shares up more than 2% in extended trading
  • Marathon says it will raise spending slightly in 2018, while hewing closely to a strategy favoring shareholder returns
Disclaimer: this  is not an investment site. Do not make any investment, travel, financial, job, or relationship-related decisions based on anything you read here or think you may have read here.

Comment: that's an interesting comment in the Marathon note above that the company is hewing closely to a strategy favoring shareholder returns. I'm seeing this "across the board" when looking at business stories the past few weeks. Companies are under pressure from shareholders right now. My hunch is that investors -- long-term horizon -- :
  • want to see more than just high share prices; they want some tangible returns; not just paper profits, which can be quite ethereal
  • will move to bonds if yields continue to increase which appears likely
  • know that activist investors will step in if companies don't provide shareholder value
  • want to see some tangible return on the huge corporate tax cut Trump gave these companies
Higher bond yields will affect the market but my hunch is that long-term investors will do very, very well. 

OPEC's Shale Problem -- Richard Zeits -- February 15, 2018

Link over at SeekingAlpha.
  • OPEC's report implies an undersupplied market in 2018
  • however, the report takes an unusually pessimistic view on the trajectory of shale production
  • if one were to use more optimistic projections for U.S. volumes instead, OPEC's report flags the risk of an oversupplied market
From the linked article:
  • OPEC revised its US crude production forecast up by 0.15 million bbls/day, to 10. 22 million bopd in 2018
  • on the other hand, the EIA says, US current crude oil production, at 10.27 million bopd is already higher than OPEC's full-year forecast average
  • EIA actually estimates by end of 2018, US crude oil production would/could/should hit 11.3 million bopd
Much more at the link.

It will be fascinating to watch. 

Notes To The Granddaughters

Bakken Natural Gas Productioin Impacting Canadian Imports -- RBN Energy -- February 15, 2018

Jobs: link here --
  • forecast: 229K
  • actual: 230K 
  • increase of 7K from previous week; previous week revised to 223K
Solar: property taxes questioned in Ann Arbor, Michigan. From the linked article:

Back to the Bakken

Active rigs:

Active Rigs573841137185

RBN Energy: capacity, demand constraints throttle Canadian gas imports to Chicago area
Canada’s natural gas exports — which have been pushed out of the supply-rich U.S. Northeast in recent years — are also facing challenges in Western U.S. markets. Growing supply from North Dakota’s Bakken Shale is increasingly competing for capacity on the same transportation routes as imports and is targeting the same downstream markets.
Meanwhile, the rise of renewable energy in the West region from wind and solar farms is limiting gas demand in those target markets. What does that mean for imports from Canada?
There are three export pipes on the Canada side that move Albert supply to the western US border:
  • Enbridge's Westcoast Energy Pipeline, 1.3-Bcf/d; British Columbia to Washington state; 
  • TransCanada Foothills which connects to Kingsgate (Idah) and into the Northern Border Pipeline (MT, ND), 2.4-Bcf/d; 
  • Veresen/Pembina's Alliance Pipeline, North Dakota; 2.0-Bcf/d pipeline
So both NBPL and Alliance are effectively flowing near capacity and, if anything, imports are gradually losing ground to Bakken supply on these two pipes.
Alliance last March floated the idea of expanding its throughput to Chicago by 500 MMcf/d, and the open season for that is expected sometime this quarter. But as we detailed earlier, Bakken production is expected to continue growing, which means competition for any incremental transportation capacity is likely to be stout, with the effect of intensifying price competition between the supply regions. And, finally, as we noted above, there is still the pushback that both Canadian and Bakken gas are likely to face on the delivery end of these pipes from Marcellus/Utica gas that’s pushing west.