Tuesday, February 27, 2018

WPX Energy To Sell Assets In Northwest New Mexico; Will Continue To Focus On The Bakken And The Permian -- February 27, 2018

This was done quickly; there may be typographical and/or factual errors, from PennEnergy: Oklahoma-based WPX Energy sells northwest New Mexico assets.
The Daily Times of Farmington reports the Tulsa, Oklahoma-based WPX Energy Inc. recently announced the sale of the last of its Four Corners assets to the tune of $700 million.
The company says WPX sold its holdings in the Gallup oil play to an undisclosed third party in a transaction that is expected to close by the end of March.
WPX spokesman Kelly Swan says the sale involves some 150 oil wells on about 100,000 acres.
Swan says WPX has been shifting its focus and funneling its resources to its operations in the Permian Basin of southeast New Mexico and west Texas and in the Williston Basin of North Dakota over the past few years.
  • $700 million / 100,000 acres = $7,000 / acre

Problems In Paradise -- Production Hell? Getting Worse? -- February 27, 2018

There's been a flurry of tweets the last few days about the possibility / likelihood that Tesla is going to miss its already reduced goals/deliveries when their 1Q18 report is released. We won't know for awhile. But more and more tweets suggesting there may be problems.

Now these two independent tweets from late this afternoon:

US Consumer Confidence Jumps To A 17-Year High -- February 27, 2018 -- GDP Estimate Slips Well Below 3%

When it rains, it pours.

In the last hour or so:
U.S. consumer confidence jumped to a 17-year high as optimism about employment prospects grew and Americans began seeing additional money in their paychecks from recently enacted tax cuts, data from the New York-based Conference Board showed Tuesday.
More at the article.

By the way, talk radio suggests that Americans across the board are excited about seeing less money being taken out of their paycheck by the IRS. In some cases the amount of money being "returned" to workers is substantial, but my hunch is that most Americans "hate" the IRS so much than even if they saw one more dollar being returned to them, they would be happy. Even if pesky Pelosi calls it "crumbs" (let them eat bread), the average American worker sees it as something else.

Other details from the linked Bloomberg report:
  • share of respondents expecting stock prices to increase in the year ahead fell to 41.3 percent from a record 51 percent;
  • 25.8 percent of consumers said they expect better business conditions in next six months, up from 21.5 percent in previous month;
  • share of households who expect incomes to rise in next six months rose to 23.8 percent, highest since 2001, from 20.6 percent; and,
  • buying plans for homes, major appliances and new cars increased
Bloomberg did not take the opportunity to suggest this was making America great again. They must assume the average reader can connect the dots.

GDP Now Not Reflecting That Consumer Sentiment

Latest forecast: 2.6 percent — February 27, 2018.
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.6 percent on February 27, down from 3.2 percent on February 16.
After this morning's Advance Economic Indicators and durable manufacturing reports from the U.S. Census Bureau, the nowcasts of the contributions of real nonresidential equipment investment and real inventory investment to first-quarter real GDP growth declined from 0.45 percentage points and 1.20 percentage points, respectively, to 0.37 percentage points and 0.95 percentage points, respectively.
The nowcast of first-quarter real residential investment growth declined from 0.6 percent on February 16 to -4.5 percent on February 26 after housing market releases from the Census Bureau and the National Association of Realtors.

US Natural Gas Exports Hit An All-Time High -- HFIR Energy -- February 27, 2018


Later, 7:58 p.m. Central Time: this really should be a separate stand-alone post, rather than an update, but I don't want to put two natural gas stories on separate posts so close together, so bear with me.

The original post is a very, very important post -- it's a US-centric post. This "update" is a more global look provided by Platts:
There was a certain air of triumphalism surrounding Anglo-Dutch major Shell’s statement in February that the world’s growing supply of LNG would be “comfortably” absorbed by rising demand in 2018, and that the much anticipated glut would never materialize.
This glut has been much predicted, predicated on the apparent surplus of new LNG capacity coming on stream versus predictions of demand rising, but at a slower rate than supply.
If Shell’s position holds, it is an important development because it could launch a new round of multi-billion dollar investments in LNG capacity, targeting an increasingly tight market between 2022-25.
This would have profound effects on the fortunes of many countries, not least those on LNG standby such as Mozambique and Tanzania, not to mention Qatar’s expansion plans for the giant North Field, Russia’s Arctic LNG 2, and the raft of developers waiting to export the growing volumes of “free” associated gas emanating from the latest shale boom in Texas’s Permian basin.
Of equal importance is that Shell’s statement justifies past spending because higher LNG prices mean that overspent LNG projects in Australia may be back in
the money, while US LNG gets a wide open arbitrage to Asia.
As US LNG production ramps up, producers there will be heavily dependent on this opportunity, which they hope will exist not as a function of below cost-recovery, must-run LNG production in the US — the glut scenario — but high prices in Asia as a result of strong demand growth.
 Much, much more at the link.
 Original Post

The weekly natural gas data will be released tomorrow or Thursday; I believe Thursday. I forget. The weekly petroleum report comes out on Wednesdays, but I think the natural gas data comes out on Thursday. Whatever.

Over at SeekingAlpha in a report dated today, February 27, 2018
  • we expect a -84 Bcf change in the storage report for the week ended February 23, 2018
  • a storage report of -84 Bcf would be compared to -7 Bcf last year and -118 Bcf for the five-year average
  • LNG exports hit an all-time high yesterday
  • but LNG demand won't increase from this level until 2019
  • the elephant in the room for the rest of 2018 will still be just how fast lower 48 production grows
Also from the report:
After a month of delay, Cove Point LNG is kicking into high gear. Yesterday's reading had US LNG exports coming in at ~4 Bcf/d, the highest in history. Total US gas exports, as a result, pushed passed 8 Bcf/d marking a milestone.
And these milestones are not subtle. Look at these two graphs:

And this graphic released earlier today:

The Vultures Are Circling -- February 27, 2018

On my drive up to Lewisville this evening to take our oldest granddaughter to water polo practice I was thinking about vultures. We have a lot of vultures of one sort or another in Texas. Especially in the summer. Years ago when running to keep in shape to meet USAF standards, I often saw dozens of vultures roosting on those high-voltage transmission towers.

But I wasn't thinking about Texas vultures tonight. I was thinking about the vultures circling Venezuela. Over on Twitter there has been more and more chatter in the last couple of days regarding Citgo failing and Russia (Rosneft, specifically) getting ready to pounce. Then, earlier today a tweet suggesting that the US was ready to intervene to keep Russia from getting a toehold inside Venezuela. The tweet suggested that China wouldn't let Russia or the US get the booty without a fight.

So, early this afternoon, tweets suggesting that the US, Russia, and China were getting ready to go head-to-head/toe-to-toe on Venezuela or Citgo or some piece of either or both. It's complicated.

Now, tonight, on twitter again, this story from The [London] Financial Times: Swiss trader seeks go-ahead to buy Venezuea-Russia oil loan.

I said it was complicated.

Washington approval of the Swiss request could avert Russia (Rosneft) from taking over a stake in Citgo refineries in the US.

First thought: wow, I'm glad we have adult leadership in the White House, starting with the President. Can you imagine President Obama: "I can guarantee you that Russia won't get Citgo. I keep my word. I bring a gun to a knife fight. I said you could keep your insurance plan. I said you could keep your doctor. I absolutely, positively guaranteed that the Russians were not meddling in our presidential elections. So, tonight, I can, again, absolutely, positively guarantee you that the Russians won't own a refinery in the US."

So, back to the story:
Commodity trader Mercuria has asked the US Treasury for permission to buy out a $1.5bn loan between Russia’s Rosneft and Venezuela’s state oil company, which had raised the prospect of Moscow taking control of refineries on US soil. 
The cash-strapped Venezuela state oil company PDVSA, which has borrowed more than $6bn from Kremlin-controlled Rosneft, caused consternation in Washington last year after putting up a stake in its US-based refining subsidiary, Citgo, as collateral against a portion of the loan. 
The move by Switzerland-based Mercuria would see the trader put up the money to buy out the $1.5bn loan tied to Citgo, before syndicating it to other investors, according to people familiar with the proposal. 
If approved by the US Office of Foreign Assets Control, the deal could avoid a potential diplomatic tangle in the event that PDVSA defaults on its loans, with the US seen as unlikely to approve Rosneft taking over the 49.9 per cent stake in Citgo’s plants. Both Russia and Venezuela are subject to US sanctions, with Rosneft and PDVSA executives singled out for attention from the Treasury. 
Mercuria, which has a deal to supply Citgo’s three US-based refineries with non-Venezuelan crude oil, is attempting to structure the deal so as not to breach US restrictions on providing new finance to Rosneft.  
There is so much more at the linked article.

This is complicated.

And it's going to get more complicated.

We haven't heard from the Chinese yet.

And again, this is a $1.5 billion deal -- and that's just a start. The Venezuelans have at least $6 billion in loans from Russia.

They're Reading The Blog Over In Germany -- LOL -- February 27, 2018

This is really quite incredible. Someone in NATO must be reading the blog. Just ten days ago I posted a long note about military expenditures. I was surprised how much Saudi Arabia spent on defense spending and absolutely aghast to see how little Germany spent on defense. From that post:
What about Germany? Germany is #9 on the "money" list, spending less than even France, the UK, or Japan. But wow, look at this: based on GDP ranking, it would be ranked #19 on the list of the top 20 countries. No wonder Bernie and Trump are so mad.

Only Canada, coming in last, spends less on a GDP basis. From the bottom up:

  • Canada's military defense spending: 1.0%
  • Germany (less than Brazil): 1.2%
  • Spain: 1.2%
  • Brazil: 1.3%
  • Italy: 1.5%
Now, today, from channelnewsasis.com this incredible story: less than half -- again, less than half -- of German submarines and warplanes are ready for use.  Not 1% or 5% or 10% but fully half of German submarines and warplanes are not ready for use. In the US, military commanders would be fired if even 10% of their command was unprepared for their mission. From the linked article:
Missing spare parts and quality defects at a time of increased operations mean less than half of Germany's submarines, warplanes and some other key weapons are ready for use, according to a government report on Tuesday.
The defence ministry delivered a 106-page report about the still "unsatisfactory readiness" of many key weapons systems to parliament on Monday, amid growing public outcry about the military's failure to get a handle on the issue.
It confirmed the gist of a parliamentary report released last week that cited big, persistent gaps in military personnel and equipment.
The report said readiness was improving slowly, with 550 more weapons available in 2017 than in 2014. But more time and money were needed to recover from decades of spending cuts.
Wow! What can I say? Absolutely incredible. But because the situation is actually "improving" and it appears they are using the word loosely, nothing will be done. I doubt Angela Merkel has even read the full report -- perhaps the executive summary and that would be it.

Five New Permits; Four Permits Renewed; Two Producing Wells Completed -- February 27, 2018

API, weekly crude oil inventories: a slight build of 0.933 million bbls; forecast a build of 2.7 million bbls.

Active rigs:

Active Rigs574138119194

Five new permits:
  • Operators: CLR (3); Whiting (2)
  • Fields: Willow Creek (Williams County); Pembroke (McKenzie County)
  • Comments:
Four permits renewed:
  • Whiting (2): a Roggenbuck permit, and a Ray permit, both in Mountrail County
  • NP Resources (2): two Ellison Creek Federal permits in Billings County
Three permits canceled:
  • Petro-Hunt: an M. Thorson permit in Burke County
  • Whiting: Roggenbuck permit in Mountrail County
  • Hess: an SC-hoving permit in Williams County
Two producing wells (DUCs) completed:
  • 29559, 19, Statoil, Heinz 18-19 6H, Patent Gate, t1/18; cum --
  • 32976, 55, BR, Dodge 3A TFH, Dimmick Lake, t1/18; cum --
Dry hole:
  • 34208, dry, Ballard Petroleum, Nelson Trust 11-20; a Madison well; Wildcat;

EOG Posts 4Q17 And Full Year (2017) Results

Disclaimer: done quickly; there will be typographical and factual errors. If this is important to you, go to the soure.

Link here.

  • 4Q17, income: $4.20/share (non-GAAP: 69 cents/share)
  • 4Q16, income: a loss of 25 cents/share (non-GAAP: a loss of one cent/share)
  • full year, 2017: $4.46/share (non-GAAP: $1.12/share)
  • full year, 2016: a loss of $1.98/share (non-GAAP: a loss of $1.61/share)
Operational highlights:
  • crude oil and condensate increased 20% year-over-year; 335,000 bopd in 2017
  • total NGLs grew 8%
  • natural gas volumes decreased 6% primarily due to the sale of Barnett and Haynesville dry gas assets in late 2016
2018 capital plan:
  • expects to grow crude oil volumes by 18%
  • generate double-digit ROCE
  • cover capital investment and dividend payments within discretionary cash flow
  • EOG can deliver on its 2018 plan at oil prices below $50
  • EOG can generate significant free cash flow at a $60 oil price
  • CAPEX expected to range from $5.4 to $5.8 billioin
  • EOG expects to complete approximately 690 net wells in 2018, compared to 536 in 2017
  • at least 90% of completed wells in 2018 will be "premium"
  • EOG has an inventory of approximately 8,000 such wells
  • 11 years of premium inventory

Catching Up On The New Yorker -- Nothing About The Bakken -- February 27, 2018

After decades of subscribing to The New Yorker, I finally bailed. Just too much TDS. But I do try to look at it on a weekly basis. Because of winter weather, I did not bike to the library, 3.8 miles away by car, probably about 4.0 miles by bike. It's been a long time since I've been to the library but I was eager to catch on what I had missed. Or had not missed. 

From The New Yorker.

January 1, 2018
  • Letter From France: "The Home Front: Leila Slimani's dark exploration of our most intimate taboos, "Lauren Collins, p. 34.
    • Slimani just won the Goncourt, France's most prestigious literary prize, which counts among its laureates Proust and Malroux.
    • The Goncourt has, more often than not, gone to a middle-aged white man and so the committee had also broken from history in consecrating Slimani as the face of French literature. At thirty-five, she was the second Moroccan and the twelfth woman to receive the award (and the first to do so four months pregnant). 
    • Chanson Douce, her second novel, sold six hundred thousand copies in its first year of publication, making Slimani, who lives in Paris, the most-read author in France in 2016.
  • A Reporter At Large: "The Glut Economy: will the booms and busts of the energy industry always dominate Texas? Lawrence Wright, p. 42.
January 8, 2018
  • A Reporter At Large: "Making China Great Again: how Beijing learned to use Trump to its advantage," Evan Osnos, p. 36.
    • Looks like a nice update of China. Discusses China's "Belt and Road Initiative."
  • Portfolio: "A New Silk Road: China is investing billions in building pathways to Europe, Central Asia, and the Middle East," photographs by Davide Monteleone, p.46. 
    • The photographs were uninspiring; a real let-down. To say the least.
  • A Critic At Large: "Been There: the presidential election in 1968," Louis Menand, p. 69.
    • Might be an interesting read. 
    • Unfortunately the book reviewed is one by Lawrence O'Donnell who is on my list of most "fake" journalists.
January 15, 2018
  • The cover features Kaepernick -- one more reason why I won't re-subscribe to the magazine.
    • Nothing of interest. Amazing to the degree to which the editor is afflicted with TDS.
 January 22, 2018
  •  The cover was a blank and so were the contents. $8.99 at the newstand.
January 29, 2018
  • An article glorifying prisoners. $8.99 at the newstand.
February 5, 2018
  • Nothing. Still $8.99 at the newstand. But if you are affected by TDS, you will still love the magazine. It's your weekly fix.
February 12 & 19, 2018 (two issues); hope there's something in this issue. We've suffered through three consecutive issues in which only the cartoons justified the price. Sort of.
  • A long, long article on polar explorers. Might be interesting. 
  • The Critics, Life and Letters: "It's Still Alive: two hundred years of "Frankenstein." 
    • Finally, something of interest.
February 26, 2018
  • Annals Of War: "Escaping ISIS: how a small group of immigrants helped save their people back home. 
    • ISIS intended to wipe out the Yazidi religion in Iraq. Yazidis in America had a plan, so they started driving to Washington.
  • Wow, it never quits, TDS. Now a long article on beauty pageants and, of course, Trump. By Jeffrey Toobin, a regular. I guess if you are a regular for the magazine and write anything negative on Trump it will get published. Tedious.
Tulip Season

They are outdoors during the day, if the weather is fine, but they come in at night, when they are watered, and fed, and read a story about the Bakken.

Cleaning Out The In-Box -- February 27, 2018

Biofuels. From oilprice.com: watch for biofuels policy changes. Trump not happy with bankrupt Pennsylvania refinery attributing its problems to biofuel rules. Iowa vs Pennsylvania. Electoral votes: Iowa (6) vs Pennsylvania (20). We've talked about this refinery before; it ranked first among refineries in use of Bakken oil. It reinvigorated the economy of Pennsylvania.

Tesla. From a contributor over at SeekingAlpha: folks plunking down $50,000+ for the Model 3 may be in for a shock when a "variant" of the same model is released for $35,000. Some folks doubt one will be able to tell the difference between the $50K model and the $35K model. This would be like Apple releasing a "variant" of the iPhone X for $500 vs the current price of $1,000, and making no discernible changes in the "variant" simply because the iPhone X ($1,000 model) was not selling well.

China coal. No links. Too many stories coming out right now about China's energy needs. Coal will be huge player.

US coal. It seems I posted this story or one similar to it; can't remember. The WSJ is reporting that US coal industry is seeing a resurgence in jobs, production. Due to exports to Europe -- how's that emphasis on renewable energy working out? So much for the Paris accords.

Fracking sand. In short supply but some reason for optimism. From the Emergent Group a few days ago (no link):
Life in the Permian, where some operators pump more than 5,000 tons of sand per well to help free trapped hydrocarbons, may not be as cutthroat as it was for characters of the fictional West Wing of the White House.
But tight supplies are causing some angst in the basin.
The 100-mesh sand appears to be the most desired. [Yes, it seems 100-mesh is part of the mix in almost every Bakken frack.]
Additional supplies are expected to come online with sand suppliers such as Badger Mining Corp., Emerge Energy Services, Hi-Crush Partners, Smart Sand, Unimin and U.S. Silica planning to add new capacity.
Peak oil. Asia set to lose three (3) milion bopd of oil production. Yes, the article is from that "peak oil" site, oilprice.com.

The right whale on verge of extinction. The right whale was saved by Rockefeller and "big oil." But time may be running out. The Boston Globe is reporting that "after a year of record deaths, right whales produced no new calves, which could be catastrophic."

GE: Jeff Immelt laughing all the way to the bank. Jack Welch, probably not. Reuters is reporting that GE will restate two years of earnings. Tick-tock. Jeff, you will recall, was the economic czar for President Obama.

GM on the move. Profits from GMC's hulking trucks support GM's longer-range bets on electric and autonomous cars, says The WSJ. The headline needed to add the word "China."

Beyond the pale. I've posted this previously, but it was still in the in-box. Clearing it out now.

Wow -- Percent Of S&P 500 Firms Beating Sales Estimates Highest In A Decade -- Making America Great Again -- February 27, 2018

Wall Street Journal: percent of S&P 500 firms beating sales estimates highest in over a decade

This all happened in the year after President Obama left office and Trump was sworn in. I am amazed how fast the US economy turned around. This is absolutely stunning. Think about that: percent of S&P 500 firms beating sales estimates highest in over a decade. Highest in a decade. From a reader: This is what an organically growing economy looks like. First time we've seen it since the late '90's.
Full article is here.

If you subscribe to The WSJ, you may want to bookmark "The Daily Shot."

The Literary Page

Crusoe: Daniel Defoe, Robert Knox, and the Creation of a Myth 
Katherine Frank
c. 2004

Chapter One: Two Writing Men, London, 1719

Defoe: poor; in debt; surrounded by women (wives, sisters) in his rented home north of London; 60 years old; stole the name Robinson Crusoe from childhood friend, Timothy Cruso (without the "e")

Robert Knox: well-off; retired sea captain; nearly 80, writing letters to his cousin, Reverend John Strype, also about 80 years old; Knox has no wife or children; in home north of London, but a bit south of Defoe

1660: Robert Knox, age 19, and his father, taken captive on Ceylon; would not see England again for 20 years

Robert Knox escaped in 1680, or thereabouts, and published a bestseller in 1861

Among its many early buyers and readers was a young London wholesaler of hosiery and cloth in Freeman's Yard named Daniel Foe.

In 1719, by then, had reinvented himself as Daniel DeFoe.

Robinson Crusoe written in four months.

Chapter Two: Crusoe's Secret, London, 1719 - 20

The Life and Strange Surprising Adventures of Robinson Crusoe -- published April, 1719

Becomes an overnight sensation. DeFoe sold the book and the rights to a printer for 50 English pounds.

Illicitly ran as 78 serial installments in a newspaper called The Original London Post. Continued to run until late March, 1720 (the installments began October 7, 1719).


Will be completed elsewhere.

The Market And Energy Page, T+37 -- February 27, 2018

Wow, this is so cool. I said this would happen -- I can't remember if I posted it or merely mentioned it in an e-mail to a reader, but I suspected this would happen. The WSJ is reporting that dividends are climbing amid competition from bonds.
More than a fifth of the S&P 500 have boosted their payouts this year, but higher bond yields threaten to diminish the allure of high-dividend stocks.
More than a fifth of the companies in the S&P 500 have boosted their dividends to shareholders so far this year, while none have slashed their payouts, a first since 2011, according to S&P Dow Jones Indices. The increases are getting bigger too, with companies on average raising their payouts by 14%, the biggest jump since 2014.
Barack Obama And Slow Growth

Is Barack Obama to blame for slow growth? That's the question The WSJ is asking. President Donald Trump’s economists may be right about the direction of President Barack Obama's policies but wrong about the magnitude, according to this article.

A quick reading suggests that the writer is either an apologist for Obama or at least trying to "justify" Obama's actions. The author seems to be saying exactly what we've all been saying for years, to explain how Obama crippled the US economy. Obama's motives seem unclear to many. For those folks, all I can say is, they need to replace their "Chuck Schumer" filters on their reading glasses.

The article begins:
One of the great economic puzzles of the last decade is why growth since the last recession has been so weak. Last week, President Donald Trump’s economic team pointed the finger at President Barack Obama.
There’s a tradeoff between growth and fairness, and Mr. Obama erred too far in favor of the latter, argued Mr. Trump’s Council of Economic Advisers its first Economic Report of the President.
Mr. Obama’s “efforts to strike a new optimum on the frontier of social protection and economic growth may have sacrificed too much of the latter in pursuit of the former,” the report declares. The typical household earned less in 2016 than in 2001 and “Obama’s tax and transfer policies worsened the wound,” Kevin Hassett, the council’s chairman, told reporters.
Mr. Hassett probably has the direction right: Mr. Obama raised marginal tax rates, inundated business with rules and lawsuits and expanded “means-tested” benefits (i.e., that phase out as incomes rise). Textbook economics predicts all these things ought to discourage work and investment. But his report does not prove these policies explain the magnitude of the growth shortfall, and is silent on the harm some of Mr. Trump’s own policies could do, in particular restricting legal immigration.
Economic growth since the trough of the recession in 2009 has been the weakest of any expansion since 1949. But an aging population means the economy can’t grow as fast as it used to. Moreover, financial crises usually beget weak expansions and the U.S. actually did better than all but one of the seven largest advanced economies.
Mr. Obama’s macroeconomic policies—those aimed at the economy as a whole—were relatively mainstream and made the recovery faster than otherwise: fiscal stimulus, bailouts of tottering financial companies and car manufacturers, and support for the Federal Reserve’s aggressive monetary easing.

The "Beast From The East" Hits The United Kingdom -- February 27, 2018

Pic of the day, from the Sun:

Idle chatter: in an e-mail exchange, I was reminiscing about my "cold weather" experiences in North Dakota, Germany, and England. In reply, a reader wrote:
I remember -40 in 1966 in MN and about -40 in 1981 in ND and almost as cold in MN about 2002 or so. 
Bottom line: he "catastrophic anthropogenic global warming" of the past 15 years, if there ever was any, is absolutely, positively over and it never had anything to do with CO2....or a "melting Arctic" (as either a cause or an effect).

Cyclical weather, as we've both known for years, is mostly the sun and associated magnetism, cosmic rays, and orbital patterns in the solar system and how these causes effect ocean currents and volcanism (unless you're selling grant paid for "science" papers, solar panels, wind mills and  pollution credits). Amazing how so many otherwise intelligent people fell for the hoax.
As I've said before: the marketing of solar panels reminds me of marketing "aluminum siding" when I was growing up in North Dakota some decades ago.

Back to the Bakken

Active rigs:

Active Rigs574138119194

RBN Energy: rising Canadian production, takeaway constraints, and WCS price discounts, part 5.