Wells Coming Off Confidential List This Week -- February 19, 2018

Friday, February 23, 2018:33819, 728, Mabel Levings 14-23HY, Mandaree, minimal production, Three Forks B1, 41 stages; 6.1 million lbs; t11/17; cum 11K 12/17;
33508, 704, Lime Rock Resources, State 6-25-36H-144-97, Cabernet, for a Cabernet well should have been a bit better; 50 stages; 6 million lbs; t8/17; cum 60K 12/17;
33437, SI/NC, MRO, Tipton 34-11H, Bailey, no production data,
33436, SI/NC, MRO, Gifford 34-11TFH, Bailey, no production data,
33132, 1,223, Whiting, Nelson 11-18H, Truax, a very nice well; 34 stages; 9.7 million lbs, mesh and large only; t9/17; cum 105K 12/17;
31081, 539, Bruin E&P, Fort Berthold 148-94-35C-26-10H, McGregory Buttes, Three Forks;; producing, but expected better; t9/17; cum 30K 12/17; from the geologist's report: the primary pay zone was 21' to 36' under the top of the Three Forks; ability to detect 0 to 10,000 gas units which translates as 0 to 100% typical naturally-occurring hydrocarbon mixtures; background gas levels were low; the target window was 15' thick, 34' below the Three Forks top; two trips were required; the majority of the well bore was drilled within the target window with 96.1% (9,568') drilled inside the target window and 3.9% (389') outside.
23963, SI/NC, WPX, Arikara 15-22HX, Reunion Bay, no production data, 

Thursday, February 22, 2018:
33507, 560, Lime Rock Resources, State 5-25-36H-144-97, Cabernet, not bad, but for a Cabernet well should have been better; 100% of the lateral exposure to the ideal geological target window; no shale strikes or sidetracks; t8/17; cum 62K 12/17;
33352, 2,159, Whiting, Nelson 21-18-2TFH, Truax, 44 stages; 10.3 million lbs, t9/17; cum 101K 12/17;
23966, SI/NC, WPX, Arikara 15-22HY, Reunion Bay, no production data, 

Wednesday, February 21, 2018::
33583, SI/NC, MRO, Sundby 24-11TFH, Bailey, no production data,
33443, SI/NC, MRO, Marlene 34-11TFH, Bailey, no production data,
33435, SI/NC, MRO, Hugo 34-11H, Bailey, no production data,
31858, 1,118, Whiting, McNamara 41-26H, Sanish, 45 stages; 10.4 million lbs; large/medium/small, t9/17; cum 116K 12/17;
31672, 1,076, CLR, Rath Federal 7-22H, 56 stages; 17 million lbs; TD=25,305 feet, t9/17; cum 59K 12/17;

Tuesday, February 20, 2018:
23967, SI/NC, WPX, Arikara 15-22D, Reunion Bay, no production data,
33542, SI/NC, BR, Outlaw Gap 14-23MBH-A, Sand Creek, no production data, 

Monday, February 19, 2018:
33581, SI/NC, MRO, Olea 24-11TFH, Bailey, no production data,
33544, SI/NC, BR, Outlaw Gap 24-23MBH-A, Sand Creek, no production data,
33543, SI/NC, BR, Outlaw Gap 24-23TFH-A, Sand Creek, no production data,

Sunday, February 18, 2018:
33580, SI/NC, MRO, McFadden 14-11H,  Bailey, no production data,
33497, 925, Liberty Resources, Kaitlyn 158-93-30-31-4MBH, East Tioga; 27 stages; 6.5 million lbs; t8/17; cum 73K 12/17;

Saturday, February 17, 2018:
33868, 1,698, Abraxas, Yellowstone 4HR, North Fork, 41 stages; 7.4 million lbs; t12/17; cum 28K after 22 days;
33599, SI/NC, MRO, Gravel Coulee 14-11TFH, Bailey, no production data,
33582, SI/NC, MRO, Morrison 24-11H, Bailey, no production data,
30320, 528, Nine Point Energy, Anderson 148-100-7-6-4H, Buffalo Wallow, 30 stages; 6.5 million lbs, large/small, t8/17; cum 60K 12/17;
29550, 1,407, CLR, Bonneville 5-23H1, Rattlesnake Point, Three Forks B1, 55 stages; 9.4 million lbs, t8/17; cum 85K 12/17;

Glut Or No Glut -- Idle Chatter On A Monday Night -- Not Ready For Prime Time -- Feburay 19, 2018

Updates

February 20, 2018: oilprice.com talks about this also. And here we go again, Saudi Arabia is redefining "surplus" (as I noted below) and apparently getting ready to move the goal posts:

Other analysts have gone further. Citigroup and Goldman Sachs both estimate that the surplus has probably already been eliminated, meaning that the oil market has already reached the long-sought “balance” for which OPEC is aiming.

But as success draws near, oil prices are still not where OPEC wants them. The group is considering changing the way it measures “balance” in the market, for several reasons.

First, what constitutes the five-year average for inventories has changed significantly, with that period of time increasingly encompassing surplus years.

The level of inventories that was “average” for the period of 2011-2015 is substantially lower than the “average” for 2013-2017 — the latter period includes more than three years in which the market suffered from a glut.  [The "trillion-dollar-mistake" Saudi Arabia foisted on itself trying to break the US shale industry.]

In other words, the five-year average inventory level is a moving target, and because it has been rising quite a bit, bringing global inventories down to that threshold is not as impressive as it would be if using an older five-year period. [Exactly what I've been saying for quite some time.]

As a result, Saudi oil minister Khalid al-Falih suggested that OPEC would meet to discuss using a different metric. ["Move the goal posts.] One option would be to use the “forward demand cover,” Bloomberg reports, or the number of days that the current stock of inventories could supply the global market. This would arguably be a more accurate measurement because it would incorporate the fact that demand has climbed significantly in recent years.

Again, look at the range we're talking about -- it's pretty narrow -- between 60 and 65 days of inventory:

Original Post

Disclaimer: in a long note like this there will be typographic and factual errors. I have not yet had the chance to double-check much of this. I often mis-read things. I often see things incorrectly. I often make simple arithmetic errors. I am inappropriately exuberant about the Bakken. I am inappropriately bullish when it comes to oil. If this is important to you, I would go to the source. Finally, the purpose of posting this is articulated in my welcome page/full disclaimer page, linked at the top of the blog. 

Huge Bloomberg article: when success isn't enough. Saudi Arabia says re-balancing has worked. Bloomberg says "OPEC has almost cleared the oil glut, but Saudi Arabia wants to go further." The article includes this graphic:

So, what's wrong with that graph? Huge "fake news." What's wrong with the graph? There are three things wrong with that graph.

Yup, you guessed it. This is the first problem: the graph only shows the numerator. We don't have the denominator. All we have is the IEA telling us what that organization considers "surplus" or "glut." The denominator is the total amount of global oil sitting in storage. The graph doesn't provide that information, nor is there any other graph accompanying the article that provides that information. The x-axis is  from 0 to 400 million bbls. But does 400 million bbls represent 1% of total inventory or 10% or 50%? Does the 400 million bbls represent two days of global demand or ten days or fifty days. The graph tells me nothing except that the glut has dropped from 350 million bbls to 50 million bbls. But I still don't know how many days inventory the world has.

The second problem with the graph has already been intimated: it is simply the "surplus." But how is "surplus" defined?

But this is the most glaring problem with the chart. It only goes back to February 2016! Give me a break. That's two years and almost all of that time has been spent burning off the glut caused by the Saudi Surge, Saudi's "one-trillion-dollar mistake. They announced the surged in November, 2014; it really didn't star to take effect until March, 2015, and when the Saudis threw in the towel, announcing in November, 2016, they were going to cut back on production, it took until May, 2017, to really see the effect, and we still -- nine months later -- still have a surplus.

That graph is meaningless.

Fake news. Or rather, "incomplete data."

At a minimum we need to see historical data going back ten years and we need to see it measured in days of supply. We need to see the historical denominator: the the global inventory of crude oil, not just the surplus. We also need to see "projections." It's hard to find that data if one doesn't subscribe to sites that have that data.

So, we will do the best with what we have.

From here on out, we're talking OECD inventories.

How much oil is currently in OECD inventories. About 3 billion bbls in round numbers (I'm sure you can find any number you want -- no matter what number you find, it's not very accurate. We've been through this before. But for our purposes, 3 billion bbls is good enough, in the graphic below, from this source:

Now, we have the numerator and the denominator.

300 million bbls / 3 billion bbls = 0.1 or 10%. That was a huge number, ten percent.

100 million bbls / 3 billion bbls = 3%. I don't know about you, but for me 3% is practically a rounding error when the accuracy of the numerator and denominator are largely suspect. The law of large numbers probably helps us out.

I can't get my hands around big numbers. So when I come to stuff like this, I put in amounts I can understand. Let's say I was living on the margin and I only had $10 left in my pocket to get through the week. If I was lucky and found a dollar lying on the ground, I would have 10% more than I did a moment earlier. If I found only a quarter, I would have 2.5% more. Ten percent seems a lot more than 2.5% but in fact, my $11 isn't going to go much farther than $10.25.

So, that leads us to the next question. How far does 3 billion bbls (the total amount in OECD storage) take us?

Well, fortunately we have a graph for that. Not only that, but we have some projections from the EIA which I trust a whole lot more than the IEA (or OPEC or Saudi Arabia). Here's that graph.

Note:

• first, the graph goes back farther than February, 2016, at the end of the Saudi Surge but still nowhere near burning off all that excess
• second, we now have historical data before the surge -- we see three things
• ten-year minimums
• ten-year maximums
• the days of supply just before the Saudi Surge; during the Saudi Surge; and projections
• (by the way, it's now plan to see why we had $100-oil before the Saudi Surge -- OECD crude oil inventories were at 10-year minimums -- wow -- what a great graph
• third, we have a range of how long these inventories would last
• minimum: 55 days
• maximum: 65 days
• again, I don't know about you, but I don't see a whole lot of difference between 55 days and 65 days (yes, I know for traders this is huge, but ...)
• fourth, look at the current and near-term projections for days of supply: smack dab in the middle of the range (actually, a bit higher than the mid-point if you look really, really closely)
• [digress: so, go back to the incomplete data supplied by IEA above: they interpret the chart to suggest that the glut has been erased (down to 50 million bbls of excess inventory [1.7%; almost a rounding error]) and yet the EIA graph shows us smack dab in the middle, with about 60 days of supply]
• fifth, look at the projections and you will note two things (maybe three):
• we never get below 60 days of supply;
• the line actually inclines slightly; and,
• near the very end, the projection actually hits the maximum (where the light blue shaded are drops to 63 days and the green line actually approaches 63 days almost immediately thereafter)
• sixth, and then I'll quit with this graph: even with the Saudi Surge we only got to 65 days out vs the middle of the range, 60 days of supply -- you mean to tell me that's what all the fuss was about -- 65 days of supply vs 60 days of supply?

Finally, one more graph, saving the best to last. Look at the IEA graph again -- the "incomplete data" graph telling us there is only a 50-million-bbl inventory excess as of now.

Now look at this graph, from ycharts.com:

Holy baloney, Batman! For OPEC and the rest of the oil sector, the trend line is certainly going the right direction, but there's still a huge glut that needs to be burned off. What I find most interesting about this graph is that earlier we were talking about 3 billion bbls in OECD inventory, but this graph suggests as much as 4.5 billion bbls.

Again, this tells me no one really has a good handle on exactly how much crude oil there is in storage. There's a huge difference between 3 billion bbls and 4.5 billion bbls, especiall when the numerator is 50 million bbls. [I doubt all the crude oil in all the new pipelines across America has been tallied, just as one example.]

Lots of verbiage but the bottom line for me: the IEA graphic showing 60 days of supply is the most complete graphic and tends to be supported by the ycharts graph.

By the way, another interesting article from The Financial Times back on March 28, 2011: "OECD oil stocks data offer limited insight." Maybe the OECD data is better today than it was in 2011, but I have my doubts. It may be worse. 

Houston! The Shaden Has Set Sail! -- Supertanker Test Successful -- US Oil On Saudi-Supertanker Headed For China -- February 19, 2018

Updates

April 12, 2018: right on schedule. The Shaden should be in port Friday, April 13, 2018.

April 9, 2018: ping received April 9, 2018 -- tanker northbound along east coast of southern Taiwan.

March 28, 2018: in the Indian Ocean, heading toward Singapore, on its way to China.

February 25, 2018: updated position today suggests the supertanker will be going around the tip of South America rather than through the Panama Canal. 

February 24, 2018: updated position here.  

Original Post

 

See this post. This is really, really cool. Saudi-flagged supertanker picks up US oil along gulf coast (LOOP) and has now set sail for China. Link for the Bloomberg story here.

You can track the supertanker Shaden at this site. It took me a little bit of time to navigate (no pun intended) the site but when you figure it out, it's kind of fun. It will be interesting to see if it goes through the recently widened Panama Canal.

From the Bloomberg article:

The flood of U.S. oil exports stepped up a gear on Monday after the first fully laden supertanker sailed from an American port, alleviating a bottleneck that’s limited overseas shipments.

The Louisiana Offshore Oil Port, or LOOP, the only deep water port in the U.S. able to handle the industry’s biggest tankers, said in a statement it had successfully completed the first loading of a very large crude carrier. Shipping data compiled by Bloomberg show the tanker is the Saudi Arabian-owned Shaden, now heading to the Chinese port of Rizhao.

"There could not be a better time to offer this service as domestic production surpasses 10 million barrels per day in the ever-dynamic global crude oil market," said LOOP LLC President Tom Shaw.

LOOP said the "shipper of record" was the trading arm of Royal Dutch Shell Plc. However, data compiled by Bloomberg showed the Shaden was booked last month by Unipec, China’s biggest oil trader. a unit of the country’s refining giant China Petroleum & Chemical Corp., or Sinopec.

LOOP didn’t disclose what kind of oil the Shaden loaded, but traders said it was unlikely U.S. shale oil. It’s more likely to be a mix of crude pumped out of the U.S. Gulf of Mexico.

Putting The $7-Billion Saudi Solar Power Project Into Perspective -- February 19, 2018

Link to Saudi's $7-billion solar project. Apparently not enough.

Today, oilprice.com is reporting that Saudi Arabia plans to build sixteen (16) nuclear reactors within the next 20 - 25 years -- total cost: over $80 billion. [By the way, isn't that what the California bullet train is now expected to cost?]

Saudi Arabia currently uses about 25 percent of its oil production domestically, and as the World Nuclear Association recently noted, while production is unlikely to rise substantially, this is not the case with demand for electricity, which is booming.

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Tulip Season

The Market And Energy Page, T+29 -- February 19, 2018

Oil companies starting to buy back their shares. Whoo-hoo!

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

From The Wall Street Journal today: oil companies starting to buy back their shares.

Several oil and gas producers, including Pioneer Natural Resources Co. and Anadarko Petroleum Corp., have started the year by initiating or enlarging share-repurchase programs. The buybacks reflect oil prices that have climbed enough for them to drill profitably and shareholders who have urged companies to focus more on the bottom line.

It also suggests that energy producers think their shares, which have lagged behind the broader market, are underpriced.

Buying back stock reduces the number of shares in the market, boosting the value of those remaining. Doing so is a reversal from the past three years when energy producers pumped new stock into the market to raise cash so they could pay down debt and keep rigs drilling.

It would be nice to see more dividend increases also (some companies have already reported that they will increase dividends or distributions).

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The SandRidge / Midstates Merger -- Michael Fillon

Link here at SeekingAlpha.

Simply not appealing.

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Photograph By Sophia

Update On Another "Never-Ending" Story -- The Saudi Aramco IPO -- February 19, 2018

I don't track the IPO in any particular place yet, but there is a tag, SaudiAramcoIPO.

I've stated many times, there is a continuum with regard to the IPO, from the far left (it won't happen at all) to the far right (it will be an incredible success, listing on the NYSE, and over-subscribed, with Warren Buffett buying as much as he is allowed).

I tend to rest along the continuum near the left, that the IPO won't happen at all. The tea leaves suggest that, at best, the IPO might be listed only on the Riyadh bourse, as they say, watered-down and with very strict investing rules. In fact, googling Riyadh bourse today brings up this as the first hit:

• Saudi bourse adjusts rules to attract foreign funds, ease Aramco IPO, dated January 10, 2018

Then, the second one:

• Saudi Aramco's IPO is a mess, my kingdom for a horse, October 19, 2017

And then the third hit:

• Saudis weigh sole listing of Saudi Aramco shares on Riyadh stock exchange, February 18, 2018 (yesterday)

And when do analyst think the listing could occur? It could be years from now, in today's news. For it to be listed on the NYSE, the Kingdom is going to have to be a lot more transparent about its holdings and its operations. There is one particularly questionable data point: year after year after year -- perhaps decades -- the Saudis have never officially changed their recoverable reserves estimates. At least I read that once upon a time.

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A Fixer-Upper At The North End Of Main Street

Grapevine, Texas

Andeavor To Invest $150 Million In Belfield, North Dakota, NGL Logistics Hub -- Gathering, Processing, Transporting -- February 19, 2018

Updates

Later, 11:59 a.m. Central Time: speaking of Andeavor, this short note from Reuters via Twitter:

Independent refiner Andeavor said on Friday it plans to run its 10 U.S. refineries up to 96 percent of their combined capacity of 1.1 million barrels per day (bpd) in the first quarter of 2018.

The company also said during a conference call with Wall Street analysts that its refineries ran at 97 percent of their combined crude oil throughput capacity in the fourth quarter of 2017. For all of 2017, the refineries operated at 95 percent of combined throughput.

The company has a heavy overhaul schedule for 2018; in the final stages of completing a turnaround at Los Angeles that was started some time ago; doing a turnaroudn at Martinez.

Andeavor is integrating refineries into a single plant in Carson and Wilmington, California, adjacent industrial suburbs of Los Angeles
The 269,200 bpd Carson refinery and the 94,900 bpd Wilmington refinery adjoin each other.

Original Post 

A reader alerted me to this story with a comment at an earlier post, and just minutes ago, another reader sent me the link. Huge story -- thank you to those noting it and letting me know.

From a news release from Andeavor Logistics:

North Dakota NGL Logistics Hub. Andeavor Logistics today (February 16, 2018) announced its intent to build and operate the North Dakota Logistics Hub to further participate in the natural gas liquids (NGL) value chain and provide logistics solutions for increasing Bakken NGL production.

The project will convert a segment of the Andeavor Bakkenlink crude oil pipeline into NGL service to enable the movement of mixed NGLs from a new third-party gas processing facility in central McKenzie County, North Dakota to a newly expanded fractionation complex at the Andeavor Logistics Belfield processing facility. [Comment: there's a lot packed into that once sentence.]

From the fractionation complex, products will be shipped to the nearby Andeavor Fryburg rail terminal for manifest and unit train rail movements and will be consumed within Andeavor's refineries as well as marketed, including international markets, by Andeavor.

Project volumes are supported by a long-term gas processing facility dedication and minimum volume commitment. The estimated capital investment is expected to be $140 to $150 million and partial commercial operations are estimated to begin in late 2018, with full operations commencing in the first quarter of 2019.

The project is expected to deliver annual net earnings of $15 to $19 million and $22 to $26 million of annual EBITDA, representing a 6 to 7 times multiple.

Andeavor was previously known at Tesoro, a company based in San Antonio, TX. I'm having trouble getting used to the name change.  

Comments:

• this supports my thesis that companies like Andeavor aren't spending 100's of millions of dollars in the Bakken if they thought it was a dying field. I think there is more to the Bakken than most folks realize
• this is another advantage of a relatively small geographic footprint: the Bakken may extend well into Canada, and a ways into Montana and South Dakota, but for the most part, the center of activity is in a very small geographic area; we're not talking a 100-mile pipeline to connect a lot of these new projects, something that would be required in the Permian, as just one example
• it's great to see all that CBR (crude-by-rail) being re-engineered to CPBR (crude products by rail); I think a lot of folks, including me, were anxious about that excess capacity being wasted (I'll still refer to it as CBR, for now)
• the other nice thing about this project: it's down in the southwest part of the state, taking some pressure off the Killdeer-Watford City- Williston axis

Putting The Bakken Into Perspective -- Update On "The World's Largest Oil Discovery In The Last 30 Years" -- February 19, 2018

Time to update "the world's largest [oil] discovery in the last 30 years" -- according to wiki.

The "never-ending" story is followed here. 

Kashagan oil field production to increase by 33% in 2018, according to Kazakhstan's oil ministry. The country (Kazakhstan) says the giant oilfield will produce 13 million tonnes, or 260,000 bopd in 2018. That was announced September 7, 2017. But nine months earlier, January 11, 2017, the oil ministry said the Kashagan would produce at its capacity of 370,000 bopd.

The Kashagan missed forecasts for 2017:

A unit of Kazakhstan’s third-biggest oil producer, KazMunaiGas, said in September that the oilfield will produce 270,000 barrels per day in the last quarter of this year.

That forecast was lower than that given by Energy Minister Kanat Bozumbayev, who said the field would increase production to 300,000-370,000 bpd by the end of this year from the 200,000 bpd currently.

Back-of-the-envelope:

• 1.33x = 260,000
• x = 195,000 bopd

Back in 2015, operators hoped to reach production of 300,000 bopd. Maximum production for Phase 1 is estimated at 370,000 bopd. Phase 2 would move production upwards of one million bopd but there has been no time line set for Phase 2.

The Wall Street Journal has a photo-essay titled "The Kashagan Debacle." I couldn't find the date of this article, but the small print says it was copyrighted 2018 (i.e., this year).

Key data points for the Kashagan:

• under $100/bbl, the companies running the North Caspian Consortium will incur losses
• it is estimated that production costs along exceed $50 / bbl
• the oil is a light oil (45 API) but is incredibly corrosive with a hydrogen sulfide content of 19% [see comment below; this has been moved up here for easier access; from a reader:
  Correct me if I'm wrong, but 19% H2S is 190,000 ppm. 1,000 to 1,200 ppm will kill you instantly.] And also incredibly corrosive to equipment.
• the field is heavily overpressurized which presents a significant drilling challenge
• OOIP, general consensus: 38 billion bbls
• recovery factor said to be relatively low (15 - 25%) due to reservoir complexity
• ultimate recoverable resources: 4 - 14 billion bbls