Wednesday, March 7, 2018

For The Record: The NDIC Daily Activity Report #17512 Is Dated Incorrectly

I assume NDIC will correct that date on Daily Activity Report #17512. Right now that report is dated March 6, 2018. It should be March 7, 2018.

North Dakota State Budget
Counting On Interest From The Legacy Fund

Revenues on track with forecasts.

From The Bismarck Tribune:
The last fiscal month of revenues and transfers wavered 0.2 percent below the forecast, totaling $110.8 million, according to a preliminary statement. Overall, state revenues are 1.7 percent over the forecast, at about $1.6 billion with $2.7 billion left to collect this biennium based on the forecast.
Corporate income tax figures to date suggest a 70 percent overage from the forecast ...
... from an estimated end balance of $112 million, $65 million should carry over into the 2019-21 general fund, with $47 million to go into the budget stabilization fund.
And then this:
Senate Majority Leader Rich Wardner, R-Dickinson, said he's pleased for the immediate future but said planning for next biennium is the challenge.
"The interest from the Legacy Fund does help us meet some of our ongoing expenses that we need to meet next biennium," he said, also noting increased oil revenue.
"Interest" on deposits in the Legacy Fund. Imagine how much the Legacy Fund would generate if it were invested in equities rather than bonds. Even Warren Buffett knows that.

Gasoline Demand -- Short-Term Leveling Off; Latest 1Q18 GDP Forecast Drops Below 3% -- March 7, 2018

Some years ago a similar "anomaly" occurred and it suggested the downturn in gasoline demand might be foreshadowing some economic downturn. I've long forgotten how that turned out.

Now we see a similar "anomaly."

This, I can say, I had not expected. At all. It may be nothing; it may be something. I don't know. 

See the graphic below. I don't think this foreshadows an economic downturn. I don't know what it means, if anything, but I'm guessing it is due to some "one-off" -- perhaps the winter storms. I really don't know.

But if the "2018 gasoline demand" drops below that of a year ago, that would be cause for concern, I would think.

Having said that, the data in the graphic above and the most recent 1Q17 GDP forecast are certainly very coincidental, for lack of a better word.

Latest 1Q18 GDP forecast: 2.8 percent — March 7, 2018 (link here):
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.8 percent on March 7, down from 3.5 percent on March 1.
The nowcasts of first-quarter real consumer spending growth and first-quarter real nonresidential equipment investment growth declined from 2.9 percent and 10.1 percent, respectively, to 2.6 percent and 6.9 percent, respectively, after the light vehicle sales release from the U.S. Bureau of Economic Analysis on March 2. The nowcast of the contribution of net exports to first-quarter real GDP growth declined from -0.43 percentage points to -0.59 percentage points after this morning's international trade release from the U.S. Census Bureau.
A little voice from the deep recesses of my mind just whispered to me: combine the "gasoline demand" graphic above and the most recent GDP Now 1Q18 forecast and the recent turmoil in the White House associated with talk of tariffs and the resignation of Gary Cohn and a narrative starts to develop.

Not to worry. The incredible jobs data tell a different narrative, and the Trump tax cuts are just beginning. Idle chatter.

Weekly Petroleum Report -- Fourth Of Four Charts -- March 7, 2018

John Kemp regularly posts modified EIA graphs to accompany the EIA's weekly petroleum reports. He may post as many as a dozen or so such graphs every week after the report is released.

Today I took particular note of four of his graphs.  The first three graphs have to do with gasoline, but to spread this out, I'm posting one at a time.

This is the fourth (and last) graph of the four.

Everybody's making a big deal that US crude oil inventories have decreased significantly since last year at this time. Is it a big deal? Maybe it is, maybe it isn't? If you are dying of thirst, stranded on a over-turned boat in the middle of a body of water, would it matter if it was the Mediterranean Sea or the Pacific Ocean. (Yes, I know the analogy is just the opposite of what we're talking about, but you get the idea.) Last year the "glut" was 300,000 bbls over the 10-year median. This year, the "glut" is 200,000 bbls over the 10-year median. If the decline were continuing at the same rate, then it might mean something, but the decline is not continuing. It has leveled off (in fact, it's been going up the past three weeks, or so).

It's also important to note that the 10-year median has been artificially "elevated" by two of the ten years -- during the Saudi Surge, when Saudi opened the spigots (2015 - 2017). Knock that median down a bit and the "glut" is even worse than that shown in the graph above.

The most recent "re-balancing data" is at this post, and it's trending in the wrong direction.

Making America Great Again! -- Huge ADP Jobs Report; Nine New Permits; Nine Permits Renewed: Eleven DUCs Completed; MRO With Five Huge Wells -- Many Of Them Three Forks Wells

ADP data:
  • forecast: 195,000 new jobs for February, 2018
  • actual: a whopping 235,000 new jobs
From The Financial Times:
Non-farm private employers added 235,000 jobs last month, according to a report from payroll processor ADP. The figure easily topped expectations for a gain of 200,000 and is the fourth month in a row that job gains came in above 200,000.

The data - which come ahead of Friday’s closely watched monthly jobs report from the labour department - also revised up jobs gains for December to 244,000.
Back to the Bakken

"Arctic" rigs:

Active Rigs604435114191

Nine new permits:
  • Operators: Whiting (5); Petro-Hunt (4)
  • Fields: Sand Creek (McKenzie); Charlson (McKenzie)
  • Comments: Whiting has permits for a 5-well Wold Federal pad in SESE 1-153-97; Petro-Hunt has permits for a 4-well USA pad in SESW 34-154-95;
Nine permits renewed:
  • Sinclair (6): six Lizzie Rae permits in McKenzie County
  • EOG (2): two Austin permits in Mountrail County
  • Hunt: one Oakland permit in Mountrail County
Eleven producing wells (DUCs) reported as completed:
  • 30252, 1,823, CLR, Monroe 9-2H, Banks, 4 sections, t1/18; cum 11K over 9 days;
  • 30254, 1,302, CLR, Monroe 8-2H, Banks, 4 sections,  t1/18; cum 7K over 10 days;
  • 31415, 1,836, Hess, EN-Kulczyk-154-94-2029H-7, Alkali Creek, t2/18; cum --
  • 31417, 1,824, Hess, EN-Kulczyk-154-94-2029H-5, Alkali Creek, t2/18; cum --
  • 31427, 1,251, CLR, Stangeland 8-7H, Crazy Man Creek, 4 sections, t2/18; cum --
  • 31428, 633, CLR, Stangeland 9-7H1, Crazy Man Creek, 4 sections, t2/18; cum --
  • 33400, 3,017, MRO, Ernst 14-7TFH, Bailey, t2/18; cum 12K over 7 days; (#16654, #16993, #17797, #18382)
  • 33401, 3,161, MRO, Kenneth 24-7TFH, Bailey, t1/18; cum 4K over 4 days;
  • 33402, 3,040, MRO, Bethol 34-7H, Bailey, t2/18; cum --
  • 33403, 3,484, MRO, Stroup 34-7TFH, Bailey, t2/18; cum 5K over 4 days;
  • 33534, 5,113, MRO, Bronett 14-7H, Bailey 4 sections, t1/18; cum 27K over 11 days - extrapolates to 73K over 30 days;

Weekly Petroleum Report -- Third Of Four Charts -- March 7, 2018

John Kemp regularly posts modified EIA graphs to accompany the EIA's weekly petroleum reports. He may post as many as a dozen or so such graphs every week after the report is released.

Today I took particular note of four of his graphs.  The first three graphs have to do with gasoline, but to spread this out, one graph at a time.

In the third in a series of posts, here is my take on one of those four graphs, the third of three graphs on US gasoline.
Three of the four graphs I'm in this series had to do with gasoline and/or refining. This is the last of the three.

This one simply blows me away. I don't think anyone is making a big deal of it but unless I'm misreading it, this is the first (or possibly, the second) time refiners have set a record this year in gasoline production. It occurred at the very same time as it did one year ago.

I assume refiners are getting ready for driving season but if so, they are more than ready. Last year, refiners set records throughout the year with gasoline production except for a period after the two devastating Texas and Florida hurricanes.

Notes to the Granddaughters

I don't recall exactly when, but sometime in the past few weeks, I started watching my favorite DVDs again. It coincided with my decision to stop watching television during this unprecedented volatility in the equity market accompanied by inane and banal talk emanating from talking heads.

One of my favorite DVDs is The Great Gatsby. I've blogged about it often, and have read the book several times. I'm still fascinated by the book. Woody Allen's Midnight In Paris is a real hoot for any Gatsby fan. It is clear that Woody Allen "knew" F. Scott Fitzgerald and Ernest Hemingway and Gertrude Stein and .... very, very, very well.

So, today, what a pleasure to have run across Gatsby: The Cultural History of the Great American Novel, Bob Batchelor, c. 2014.

More later. I am curious about "irony" in The Great Gatsby, something Harold Bloom deems quite important.

Weekly Petroleum Report -- Second Of Four Charts -- March 7, 2018

John Kemp regularly posts modified EIA graphs to accompany the EIA's weekly petroleum reports. He may post as many as a dozen or so such graphs every week after the report is released.

Today I took particular note of four of his graphs.  The first three graphs have to do with gasoline, but to spread this out, one at a time.

In the second in a series of posts, here is my take on one of those four graphs.

This is a most incredible graph.

This is why it is so incredible. Take a look at this graph -- gasoline production data.

In that graph, one can see that gasoline production is likely to test last year's record production.

Refinery throughput appears to continue to set all-time (seasonally-adjusted) records.

This is why this graph is so incredible: US refiners are operating at 88% capacity (and, at least one refiner wants to expand operating capacity of the largest US refiner in the US).

Notes To The Granddaughters

I don't recall having ever read anything by William Faulkner and that's saying a lot. Starting back in 2000, I voraciously started reading, ultimately putting together a reading program of which I am quite proud. Going through my journals (literally scores of journals devoted to literature) I have nothing on Faulkner except a listing of the top 100 best English novels as compiled by Time Magazine critics Lev Grossman and Richard Lacayo back in 2009, from a list of novels dating back to 1923.

The list is alphabetical, not ranked in any order. Faulkner is on the list with Light in August and The Sound and the Fury.

It's time, I guess, for me to read a bit about, and perhaps read a bit of, William Faulkner.

I will start with William Faulkner: The Yoknapatawpha Country, Cleanth Brooks, c. 1963. The first thing I noted: what little I have read reminds me a lot of Rob Roy and Sir Walter Scott. Wow.

Nothing new under the sun.

I can't wait to really get into this book.

Weekly Petroleum Report -- First Of Four Charts -- March 7, 2018

John Kemp regularly posts modified EIA graphs to accompany the EIA's weekly petroleum reports. He may post as many as a dozen or so such graphs every week after the report is released.

Today I took particular note of four of his graphs.  The first three graphs have to do with gasoline, but to spread this out, one at a time.

In the first in a series of posts, here is my take on one of those four graphs.

The graph says it all: tell me again why the price of gasoline in the US isn't falling more quickly (later we will see graphs that add even more "punch" to this question)? It looks like refiners cannot help themselves -- at the beginning of the year, refiners were providing gasoline at record levels and although it has fallen off its highs from last year (2017) production is back on track to test last year's record production.

Exports? Gasoline exports? A drop in the bucket. Exports don't explain the increase.

Muscle Shoals

I'm back in my Roy Orbison phase, specifically his last (?) album, Mystery Girl.

I had noticed this before but one track from the album, "The Only One" is definitely a Muscle Shoals song.

I've talked about Muscle Shoals before. Had it not been for the blog, and had it not been for a reader who introduced me to Muscle Shoals I never would have discovered "it" on my own.

As one point of departure, see this site, "Muscle Shoals: Red Bull Music Academy Daily."

It is difficult to find the dots connecting "Muscle Shoals" with "The Only One" but I think I have found it.

See Craig Wiseman and "Big Loud" at this link.

WTI Sinks -- March 7, 2018 -- For The Granddaughters: Pangolins and Palindromes

Now that the data has finally sunk in -- it took about two hours -- the price of WTI plummets. There are many, many reasons for this, but this must be one of the bigger reasons: re-balancing is trending in the wrong direction; re-balancing is now back up to 29 weeks.

In addition, refineries are only operating at 88% capacity and yet US gasoline inventories are at record highs. Driving season may not "save" the crude oil bulls. Saudi has to be alarmed. The kingdom recently cut their price to regain market share in China/Asia.

After the weekly petroleum data was released by the EIA, the price of WTI slumped 3% and is now at risk of closing below the floor ($60/bbl).

I have a lot of graphics to post, but I'm in the mood for something else right now, so I will post those graphics later.

Notes For The Granddaughters


No, I did not know what that meant either until I looked it up.

I came across it in a short note on the pangolin in the current issue of  London Review of Books. I canceled my subscription to The New York Review of Books because the editor is still affected with TDS. I just couldn't take it any more. Unfortunately the New York Review might be better and more relevant for my tastes than the London Review which I have not yet canceled. The jury is still out on whether I cancel the London Review also.

  • prelapsarian: characteristic of the time before the Fall of Man; innocent and unspoiled; in the context of the word as originally "invented," it does not fit this short essay very well, but that's another story
  • pangolin: a scaly anteater (more below)
  • Harare: the capital and most populous city of Zimbabwe
Data points:
  • pangolins: currently  the most trafficked animals in the world, their scales used in traditional Chinese medicines and their flesh eaten as a delicy
  • roasted pangolin meat is thought to stimulate lactation and improve blood circulation
  • Beijing customs have seized more than tonne of scales being shipped into China; each tonne is the equivalent of 1,660 animals
  • prelapsarian
  • pre-historic, in fact
  • more than 80 million years old
  • humans: 8 million years old
  • eight species of pangolin: two are listed as Critically Endangered in the IUCN Red list of Threatened Species
  • global warming won't kill them but the Chinese will
More about pangolins from wiki
  • one extant familiy
    • one Asian genus with four species
    • one African genus with two species
    • another African genus with two species
  • with their keratin scales, they are the only known mammals with this feature
  • the tongue of a pangolin is longer than its body; the tongue is kept furled in an interior pounch near its hip
Bonus Note For The Granddaughters



Until this week, I knew nothing of significance about CRISPR. For whatever reason I mentioned CRISPR to our 14-year-old granddaughter on the way to school the other day, and she became incredibly animated. She loved "CRISPR" and knew more about it than I did.

Whatever she knows about CRISPR she learned on her own. I doubt they have yet studied it in high school, although it's possible it's been mentioned

I'll have fun talking to her about CRISPR over the next few weeks.

CRISPR is part of the DNA genome. Back in 1993, a biologist studying bacteria in Spanish swamps, found bacteria whose DNA contained repeated sequences of DNA that did not correspond to anything previously seen.

Because of the nature of these repeated sequences (clusters, regularly interspersed, and short palindromic repeats) he labeled them CRISPR for short.

It turns out that these palindromic repeats of "meaningless" genome were actually pieces of viral DNA -- viruses that had invaded bacteria as pathogens (bacteriophages -- to eat bacteria).

It is hypothesized that by incorporating this "meaningless" viral genome, bacteria are more quickly able to defend against a virus from attacking it (a second time).

And like everything else in biology, there is more to the story.

Molecular biology dogma: DNA makes RNA makes protein.

CRISPER makes RNA but this RNA does not make a protein. By itself, the CRISPR-RNA is worthless.

But, as it turns out, as in a Rudyard Kipling "just so" story, bacteria also contain an enzyme (or protein) called Cas9 -- short for CRISPER-associated protein 9. If the biologists had had a sense of humor, it would be easier to remember as"Mama Cass protein" -- CRISPR-associated protein that loves to eat.

But a very special way of eating.

As noted above CRISPER-RNA by itself is worthless.

But with the Cas9 enzyme "stuff happens." Cas9 enzyme is a "cutter."

CRISPER-RNA guides Cas9 enzyme to the virus with the corresponding DNA genome.

At the viral DNA genome, the Cas9 enzyme gets to work, cutting out the viral genome that corresponds to CRISPR-RNA.

Pretty clever, huh?

Know who connected the dots, figured this out?

A Danish yogurt company. Yup, Danisco -- a Danish yogurt company.

Danisco is now owned by Dow Dupont.

Researchers now use CRISPER-Cas9 to target any region/gene in any DNA genome and cut it out / remove it. By removing a gene, researchers are better able to discern the purpose of a previously non-understood gene.

If a bacteria is able to do what a bacteria normally does and now loses a certain function because it has lost a certain gene, scientists have a pretty good idea of what that gene must be responsible for.

Likewise, researchers can do that to any mammalian genome.

Much, much more to the story but I now have enough to share with our granddaughter and still be able to keep up with her.

This was from "Diary" in the current issue of London Review of Books. Another source is here.

Random Look At A Re-Entry, Re-Fracked CLR Bridger Well -- March 7, 2018

This is (another) great example of Bakken 2.0 and how traditional methods of "evaluating" an unconventional play simply don't work. It's my contention that Wall Street analysts have not yet noted this. One can be sure that the Saudis understand this as do the Russians. 

I track the Bridger wells here, though that page has not been updated in a long time.

The well:
  • 17089, 400, CLR, Bridger 44-14H, Rattlesnake Point, 33-025-00731, a very nice well; t4/08; cum 247K 1/18; 
Note the permit/file number -- #17089. This well was originally drilled back in 2008 -- before the Bakken boom hit its stride. This well was recently put back on the confidential list and today it comes off the confidential list.

As an aside, when I first started following the Bakken, I was told by a Bakken "expert" at another discussion group, that a North Dakota well could only be on the confidential list once. So much to learn. And I probably only know 1% of all there is to know.

So, what's going on? I don't know.

Let's explore together. As noted, the well has been producing since 2008. The first six months of production data:


Not very exciting, huh?

Now, look at this. Incredible, huh, for a re-entry, a re-fracked well?


PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

From the file report:

The newest data has not yet been scanned in by the NDIC. The cover page says the well is still confidential but I assume we will see the updated file in the next week or so.

The most recent geologist's report was received by the NDIC on October 3, 2016. It was spud September 17, 2016, and drilling ceased on September 19, 2016 or two days of drilling. From the file report:
  • the Bridger 44-14H is a horizontal re-entry well targeting the middle Bakken porosity
  • the rig started drilling ahead in the re-entry middle Bakken lateral at a MD of 20,845' on September 18th, 2016, at 9:44 p.m. CDT
  • gas ranged from 1,400 to 2,100 units 
From an earlier sundry form:
  • CLR planned to re-enter and deepen the existing lateral of the Bridger 44-14H; plans to extend the existing lateral by 336 feet to a TVD of 11,090 feet
  • that was an open hole frack with slightly more than a million lbs of sand
The sister well on the same pad as #17089:
  • 32740, 1,485, CLR, Bridger 10-14H2, Rattlesnake Point, 41 stages; 10.2 million lbs, t9/17; cum 137K 1/18;
The nearest well to the west of these two wells, on another pad, is:
  • 31847, 1,515, CLR, Bridger 9-14H1, Rattlesnake Point, 40 stages; 15.1 million lbs, t8/17; cum 125K 1/18; 
One can assume the re-entered Bridger 44-14H was fracked with a similar amount of sand.

Note the production profile. If one simply looks at the "IP test date" and the current date, one misses much of the story. According to the "IP test date" this well has been producing for eight months. In fact, only five months suggest some level of "unconstrained production":

Monthly Production Data
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Aha! It just dawned on me. There's another way to find frack data. Let's see if FracFocus has any new data.

Yup, there it is, fracked 4/28/17 - 5/19/17.
  • water : 85% of total proppant by weight
  • water: 10,332,000 gallons
  • sand: 14.76% by weight
  • a gallon of water weighs 8.345404 million pounds
  • 10,332 million gallons of water weight 86.224714 million pounds
  • 85% of what = 86.224714 million lbs
  • 101.4408 million lbs total proppant (sand+water+all that other stuff)
  • 14.76% of 101.4408 = 15 million lbs of sand 
  • my numbers may be off a bit but the neighboring wells were fracked with 10 million lbs and 15 million lbs of sand
  • with the exception of sand, there was very little additional cost to re-frack this well; the frack spreads were already in the area
  • in the process, CLR essentially got a new well
  • CLR did not have to drill a new well: it did not have to build a new pad; it did not have to pay a bonus for a new lease; it did not have to wait for permits; minimal cost in re-evaluating the well; developing design plans, etc
  • absolutely (well, almost absolutely) no risk of a dry hole (yes, a few re-entry wells are failures)
  • a lot of the extra cost of the sand and re-frack was already "covered" by fracking neighboring wells (I won't go through the details)
  • they simply drilled less than two more days, extending the horizontal in the process 
  • the Bakken 10,000 to 20,000 wells that are candidates for re-works; mini-refracks; re-entry - extension; big re-fracks; etc; and, that's even before we get to tertiary production (EOR)
  • and, yes, I'm inappropriately exuberant about the Bakken

EIA Confirms API Data -- US Crude Oil Inventories Continue To Increase -- March 7, 2018

The weekly petroleum report:
  • US crude oil inventories: increased by 2.4 million bbls; now at 425.9 million bbls
Market response: WTI drops over 1%; now trading below $62

Other data from the weekly petroleum report:
  • refineries: operating at 88% of operable capacity; still well below their potential
  • despite decreasing gasoline production, still well above the "average" range
  • other data pretty much uninteresting or unchanged 
Re-balancing: moving in the wrong direction -- back to 29 weeks -- the highest in eleven (11) weeks -- it was 30 weeks back on December 20, 2017.

Weeks to RB
Week 0
Apr 26, 2017

Week 24
October 12, 2017
Week 25
October 18, 2017
Week 26
October 25, 2017
Week 27
November 1, 2017
Week 28
November 8, 2017
Week 29
November 15, 2017
Week 30
November 22, 2017
Week 31
November 29, 2017
Week 32
December 6, 2017
Week 33
December 13, 2017
Week 34
December 20, 2017
Week 35
December 28, 2017
Week 36
January 4, 2018
Week 37
January 10, 2018
Week 38
January 18, 2018
Week 39
January 24, 2018
Week 40
January 31, 2018
Week 41
February 7, 2018
Week 42
February 14, 2018
Week 43
February 21, 2018
Week 44
February 28, 2018
Week 45
March 7, 2018