Friday, July 27, 2018

This WIll Send Atmospheric CO2 Surging -- July 27, 2108 is reporting:
Japanese utilities have resorted to starting up old crude oil- and fuel oil-fired power plants and ramping up the capacity of already operating oil-powered facilities as utilities try to cope with record demand amid a two-week heat wave that has killed more than 80 people across the country.
In the wake of the Fukushima disaster in 2011, Japan switched off most of its nuclear power plants to have operators inspect and upgrade them. At present, just six out of 40 available nuclear reactors are operational in the country.
The heat wave of the past two weeks has made households and businesses crank up air conditioning, and demand for electricity is on the rise and power prices have hit record highs. To cope with the surge in electricity demand, utilities are returning to the use of mothballed fossil fuel-fired power plants that have been placed on standby, or are ramping up the capacity at operational fossil fuel plants.
Kansai Electric Power, a utility operating in the western industrialized area which was also the hardest hit by the heat wave, has started up two old oil-fired plants with a total capacity of 1.2 gigawatts (GW), a spokesman for the company told Reuters on Friday.
So many story lines in this article -- don't even get me started.

The Katie Ledecky Page

Day 3 of the Swimming National Championships, Phillips 66, Irvine, CA. It appears Katie Ledecky did not swim today.

Random Look At Some Incredible MRO DUCs In Bailey Oil Field -- July 27, 2018

These were the three DUCs reported as completed on July 27, 2018 (permit numbers in red in the graphic below):
  • 33583, 5,694 (no typo), MRO, Sundby 24-11TFH, Bailey, API - 33-025-03307, fracked 5/7/18 - 5/29/18; 9.4 million gallons of water; 89.5% water; , t6/18; cum -- (#16860)
  • 33597, 3,513, MRO, Stanton 41-3H, Bailey, API - 33-025-03309, 11 million gallons of water; 91.38% water, t5/18; cum 17K after 15 days;
  • 33599, 3,000, MRO, Gravel Coulee 14-11 TFH, Bailey, API - 33-025-03311, 7 million gallons water; 87.2% water, Bailey, t6/18; cum --  (#17498)
Three other DUCs from the same pad as the Sundby and Gravel Coulee (permit numbers in blue in the graphic below):
  • 33582, 5,305, MRO, Morrison 24-11H, Bailey, API - 33-025-03306, t6/18; cum --
  • 33581, 6,573, MRO, Olea 24-11TFH, Bailey, API - 33-025-03305, t6/18; cum --; IP MCF: 4,461; therefore, IP BOE: 6,573 + 743 = 7,316 boe IP; 90% crude oil; 10% natural gas; at "FAQ" see question #9: record IP to date, MRO, it appears holds the most records;
  • 33580, 3,276, MRO, McFadden 14-11H, Bailey, API - 33-025-03304, t6/18; cum --
Older wells in the area of interest:
  • 16860, 348, MRO, Stohler 41-3H, Bailey, t2/08; cum 387K 5/18; this well was taken off line 3/18, and remains off line through 5/8; huge jump in production back in 11/14 -- re-fracked 7/14; API - 33-025-00681;
  • 17498, 498, MRO, Chimney Butte 34-11, Bailey, API - 33-025-00804, re-fracked 3/24/18 - 4/2/18; 5.7 million gallons of water; 89.5% water, t11/08; cum 184K 5/18; this well has been off-line since 10/17, and remains off-line through 5/18; now back on-line as of 6/18; huge jump in production 6/18; see this post;
The graphic:

MRO With Some Incredible DUCs -- July 27, 2018

Active rigs:

Active Rigs62603573193

Five new permits:
  • Operators: Nine Point Energy (4); Liberty Resources
  • Fields: Pronghorn (McKenzie); Gros Ventre (Burke)
  • Comments: Nine Point Energy (previously Triangle) has permits for a 4-well Helling pad in Lot 4, section 7-150-101
Eight permits renewed:
  • Hess (6): six EN-Jeffrey permits in Mountrail County
  • North Plains Energy: a State permit in Divide County
  • Denbury Onshore: a CHSU ML permit in Bowman County
Four producing wells (DUCs) reported as completed (see this post for a look at the three incredible MRO DUCs):
  • 33031, 106 (no typo), BR, State Veeder 2A MBH, Blue Buttes, t6/18; cum --
  • 33583, 5,694 (no typo), MRO, Sundby 24-11TFH, Bailey, API - 33-025-03307, t6/18; cum -- (#16860)
  • 33597, 3,513, MRO, Stanton 41-3H, Bailey, API - 33-025-03309, t5/18; cum 17K after 15 days;
  • 33599, 3,000, MRO, Gravel Coulee 14-11 TFH, Bailey, API - 33-025-03311, Bailey, t6/18; cum --  (#17498)
Yet another SM Energy well in Divide County transferred to Petro-Hunt.

Global Discoveries Recover -- July 27, 2018


July 30, 2018: the increase is led by discoveries in Guyana.

One day later, July 28, 2018: crude oil supply crunch might be looming -- WSJ. Dearth of investments in oil projects mean a spike in prices above $100 could be on the horizon. Think about this: BHP takes a $10 billion bath on shale E&P. Do you blame oil companies for being hesitant about investing in new projects? Sure, the sector looks good under a Trump administration, but under anyone other than Trump, all bets are off. Best example: the US refinery industry bet on the completion of the Keystone XL, never, never, ever expecting "a President Obama" to kill the project. These two comments from readers at the linked article:
The shale boys saved Obama from a total economic meltdown - now they shift into high gear. Amazing what creative people combined with private property can do. Meanwhile our "carbon footprint" keeps declining thanks to natural gas and not the government.
The shale drilling did save Obama from a complete economic meltdown - but he spent much of his 8 years fighting the pipelines to deliver the oil, he kept the USA from exporting LNG for 7 out of 8 years - but he worked really, really hard to make sure Iran pumped as much oil as possible ( so much for global warming) - makes one wonder whose side he was on? 
Today: global oil discoveries see remarkable recovery in 2018. This goes back to that discussion some years ago that "we" were going to run out of oil because oil companies had cut back on exploration. I never accepted that premise.
Global discoveries of conventional oil and natural gas are seeing an exciting recovery with discovered resources already surpassing 4.5 billion boe in H1 2018, Rystad Energy analysis shows.
The average monthly discovered volumes YTD are estimated at 826 million boe, up approximately 30% compared to 625 million boe in 2017.
Re-posting, the original post:
Crude oil E&P: we've talked about this before -- folks worried that the oil industry has fallen behind in exploration -- I consider it a meme and a false narrative. I'm not worried, one way or the other.  Unfortunately, this article does not put "$37 billion" into perspective (except for past three years), from Rigzone, majors on pace to approve $37 billion in projects during this calendar year (2018).
... over 30 percent ($12 billion) of these had already been approved during the second quarter.
BP, Eni, Royal Dutch Shell, Total, ExxonMobil, and Chevron  approved over $77 billion worth of greenfield projects from 2015 to the first quarter of 2018.
Of this figure, BP approved the most at $27.6 billion, followed by Eni at $25.4 billion, and Shell at $11.1 billion.
So, $77 billion / 13 quarters = $6 billion quarter (from 2015 to 1Q18, inclusive = 13 quarters). This calendar year, $37 billion / 4 quarters = $9.25 billion / quarter.

Even this arithmetic doesn't do much for clarification or perspective -- but it is what it is.

Another link

Norway’s Equinor and the Canadian province Newfoundland and Labrador have agreed to develop a deepwater oil project off Canada’s eastern coasts that will cost US$5.2 billion, according to the Premier of Newfoundland and Labrador, Dwight Ball.
Equinor Canada is the operator of the Bay du Nord oil discovery, made in 2013 and estimated to hold more than 300 million barrels of light, high-quality crude oil.
The province of Newfoundland and Labrador is now buying a 10-percent equity stake in the Bay du Nord oil project, which is expected to be sanctioned in 2020 and aims for first oil in 2025.
Bay du Nord is the first remote, deepwater project in the province’s offshore. It is located 500 kilometers (311 miles) from shore at a depth of around 1,200 meters (3,937 feet). The Bay du Nord project opens a new basin—the Flemish Pass—and is the first project to be negotiated under Newfoundland and Labrador’s generic oil royalty regulations.
The good news: no pipeline through Burnaby will be needed.

The Market, Energy, Political Page, T+57, Part 2 -- July 27, 2018

Saudi Aramco is considering a bond issue to buy a 70% stake in Sabic. Link here.
  • again, a 70% stake; essentially owning the company
  • $50 to $70 billion price point
  • huge implications for EU's petrochemical industry
From the linked article, three takeaways:
The money from the acquisition will flow into the Public Investment Fund, which is responsible for the distribution of funds that will go into all the ambitious Saudi projects aimed at steering the economy away from just oil and into new directions. Given that both Aramco and Sabic are state-owned companies, the transaction will effectively mean taking the money from one pocket and transferring it to the other.
There is one problem with bond financing, though: Aramco would have to disclose its financial position, which is currently as much of a mystery as the size of China’s strategic petroleum reserve. According to some, the company’s unwillingness to disclose financial information was among the reasons for the delays of the initial public offering. But lenders would want to know this information before they part with their money, which puts Aramco in a difficult position.
The WSJ’s sources note that neither Aramco nor Sabic are too thrilled with the idea of a tie-up. Still, they don’t really have a say, it seems: prince Mohammed’s diversification plans need cash and a bond issue is one relatively safe way to get it if the underwriters convince the lenders they can trust Aramco.
All things being equal, Saudi Arabia will have to increase oil production to meet ever-increasing domestic demand (refining) and maintain current levels of exports. 

The Market, Energy, Political Page, T+57 -- July 27, 2018

Cleaning up the desktop.

My "fitbit" -- exercise craze.

Making America great again. Free-market capitalism will solve the Permian pipeline problem:

What is he IS the adult in the room?

Someone else said it, not me:

A musical interlude:


The Market, Energy, Political Page, T+57 -- July 27, 2018

It's a tough market, LOL. EW, link here:
  • earnings crush expectations
  • earnings forecast: $1.24
  • earnings, actual: $1.32
  • but, huge revenues miss
  • revenues, forecast: $965 million
  • revenues, actual: $944 million
  • guidance: oh, oh - down to 93 cents to $1.03
  • guidance: oh, oh - revenues down to $900 to $950 million
  • shares plummet over 6%
XOM, link here:
  • "big miss" on earnings; beats on revenue
  • will  have to wait for earnings call to put this in perspective
  • forecast: $1.27/share
  • actual: 92 cents -- wow!
  • revenue forecast:$72.58 billion; actual, $73.5 billion
  • shares fall 2%
  • in line with what has been posted on the blog the past couple of years: XOM is under-performing relative to its international peer
CVX, link here:
  • shares up in pre-market trading: do traders know something?
  • Later, 7:35 a.m. CDT: shares just turned negative; don't see earnings yet; insiders must know
  • misses on both top and bottom lines
  •  EPS, big miss: $1.78 vs $2.09 forecast
  • revenue, big miss: $42.24 billion vs $45.59 billion forecast
Shell: also missed on earnings; beat on revenues; link here;
  • revenues: $96.8 billion
  • EPS; $1.10 vs $1.40 -- that's a pretty big miss (similar to Exxon's's, I suppose)
  • adjusted EPS was 30% higher than its adjusted EPS year-over-year
TutorTime Word Wall For Sophia

COP Earnings Transcript -- July 27, 2018 -- No One Is Talking About The Red Queen Any More

Note for newbies, putting Bakken production in perspective -- no one is talking about the Red Queen any more:
  • back in 3Q12, COP was producing 26,000 boepd with five rigs (and going to eight rigs) in the Bakken
  • now, 2Q18: two rigs in the Bakken and producing 82,000 bpd 
Lifting cost in the Eagle Ford: $2 / bbl

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

COP, 2Q18, earnings transcript, at SeekingAlpha, and "slide deck" is here.
  • cash flow has been running high relative to the sensitivities we provided last November; why?
    • production is higher than we projected and the increases in production are coming mainly from high margin, unconventionals that currently have no cash tax
    • interest expense is lower as a result of the accelerated reduction in debt
  • reference point
    • at $50 WTI: we generate CFO of $7 billion
    • at $65 WTI: $10 billion
    • that turned out to be too low
  • recalibrated:
    • at $65 WTI: $11.5 to $12 billion depending on differentials
    • the market has not yet fully appreciated the cash-generating capability of our assets
  • strong benefit of our Brent-linked portfolio
  • bottom line: cash from operations exceeded CapEx by $1.2 billion
  • cash flow more than funded the dividend and share repurchases: together this represented a return of capital to shareholder of about 30%
  • operations, production by play:
    • Eagle Ford: 182,000 bpd (not specified whether bo or boe)
    • Bakken: 82,000 bpd
    • Delaware: 28,000 bopd
  • third quarter production guidance: 1.215 to 1.255 million bpd
    • third party outage in Canada will continue, but will be offset by additional high margin growth from the Big 3 unconventional plays
    • milestone: greater than 300,000 bpd from the Big 3
  • production growth in the Big 3
    • company's goals: 22% growth or better, year-over-year
    • actual in 1Q18: 20% -- company not happy; missed the 22% goal
    • now: at 37% growth, year-over-over
  • rigs:
    • Eagle Ford: 7 (up from 6)
    • Delaware:2 (down from 3)
    • Bakken: 2
  • but look at that: with 2 rigs in the Bakken -- 82,000 bpd; 3 rigs in the Delaware, 28,000 bpd
  • and it's going to get even better in the Bakken -- amazing side note
  • completions: COP refers to them as "Vintages"
    • Vintage 4 in the Eagle Ford; have just started using Vintage 4 completion strategies
    • now testing Vintage 5
  • manufacturing stage in the Bakken and Eagle Ford; not yet there in the Permian
  • Eagle Ford: lifting cost -- $2 / bbl and super-high margin -- that's why they are adding a rig ot the Eagle Ford and cutting back a rig in the Permian
  • why are they keeping rigs in the Permian? 
    • maintain leases there
    • to "do" the Permian efficiently
    • to continue to drill quad pads
  • an analyst questioned whether the Permian was still core to COP; the answer, "yes"
  • one less rig in the Permian will affect Permian production in 2019; not in 2018
  • analyst: "you're generating a ton of cash beyond even your buyback plan"
  • analyst: " wall of cash potentially over the next two or three years if oil prices stay at these levels
  • why they don't "build DUCs" -- it's not efficient "we drill a well, we think yoiu should complete the well. These are great wells, and so that's an extra 9,000 there. And then the last 9,000 bpd or so that makes the 25,000 bpd (across the Eagle Ford), the last third, is really three.... plus 15,000 in the Eagle Ford and a plus 10,000 in the Bakken ...
  • the Eagle Ford is really – the numbers are driven by new drills, but we are doing some recompletions, particularly in situations where we do what we call defensive refracs, where we have an area where we have a pressure depleted zone and we're drilling a new child well next to a parent well that sort of thing. But that's not a key driver in the volumes beat   

The Victorians
A.N. Wilson
c. 2003
pp. 230 - 231

From the chapter, "Clinging to Life":
If one had to isolate a single all-consuming idea which has taken hold of the human race in the post-politial era in which we now live, it is the interrelatedness of natural forms -- the fact that we are all on this planet together -- human beings, mammals, fish, insects, trees -- all dependent upon one another, all very unlikely to have a second chance of life either beyond the grave or through reincarnation, and therefore aware of the responsibilities incumbent upon custodians fo the Earth.

'Let it be born in mind,' Darwin writes in The Origin, 'how infinitely complex and close-fitting are the mutual relations of all organic beings to each other and to their physical conditions of life.'

This surely explains why, in our generation, Darwin has grown in importance and stature, whereas almost all his contemporary thinkers and sages are half-forgotten.

Herbert Spencer is all but unread. With the demise of European communism, it seems to many -- especially to the majority who have not read Marx -- as if The Communist Manifesto and Das Kapital are dead.

Freud, in many schools of psychology, is discredited; Hegel is of more interest to historians of philosophy than as a living inspiration to many of our contemporary philosophers.

Carlyle and Ruskin are unknown to general readers; Mill is read selectively by students, but is no household name. But neo-Darwinians -- Richard Dawkins, Daniel C. Dennett and the ret -- can still write bestsellers.

And the Number Is: 4.1%-- July 27, 2018

4.1% -- vs 4.4% forecast. Though forecasts have been all over the board. CNBC is quite positive about this. Quite interesting.

See first comment: one can make an argument that 2Q18 GDP growth was close to 5% than 4% -- see first comment and reply --
GDP was much better than it looks...a $58.2 billion downward swing in inventory growth subtracted 1% from the 2nd quarter's growth rate
...but smaller inventories indicate that less of the goods produced during the quarter were being left "sitting on the shelf”, so their quarter over quarter decrease by $58.2 billion meant that real final sales of GDP were relatively greater by that much, or enough to boost growth in real final sales of GDP to a 5.1% rate...
Meanwhile ...

COP: 2Q18 earnings -- some incredible insight regarding the Big 3 plays

  • EPS forecast: $2.48
  • EPS actual: $5.07
  • but look at this: one year ago, EPS -- 40 cents/share; now $5.04 -- Whole Foods? Wow.
  • net income forecast, guidance, next quarter: $1.4 billion to $2.4 billion
  • net income consensus by analysts: $840 million
  • shares up 5% after-hours
  • takes on Apple for $1 trillion market cap bragging rights
Chesapeake: to sell Utica shale for $2 billion.
  • almost all of the proceeds will be used to pay down debt
  • shares jumped 7% after-hours
Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or think you may have read here.

Back to the Bakken

Wells coming off confidential list today
  • 33955, SI/NC, Crescent Point Energy, CPEUSC Bennnie 7-20-17-157N-99W TFH, Lone Tree Lake, no production data, 
  • 24519, SI/NC,  Slawson, Gabriel 5-36-25TFH, North Tobacco Garden, no production data,
Active rigs:

Active Rigs62603573193
RBN Energy: can planned fractionation capacity in Texas avert a crunch?
Fast-rising NGL production in the Permian, SCOOP/STACK and other plays is testing the ability of fractionators to keep up, and spurring the development of new NGL pipelines — and new fractionation plants, not just in the Mont Belvieu hub but elsewhere along Texas’s Gulf Coast. By our count, more than 1 MMb/d of new fractionation capacity is under development in the Lone Star State, and while some projects are more solid and certain than others, it’s fair to say we’re in for at least a mini-boom in fractionator construction after a multiyear lull. Today, we review the Texas fractionation projects being planned and begin assessing whether they will come online as quickly as they will be needed.
There is currently just over 2.1 MMcf/d of fractionation capacity in Mont Belvieu — 755 Mb/d at Enterprise (including 85 Mb/d that came online in June), 453 Mb/d at Cedar Bayou Fractionators, 420 Mb/d at Lone Star NGL, 340 Mb/d at ONEOK and 145 Mb/d at Gulf State Fractionators.
Within Mont Belvieu’s reach (via pipelines) are a number of ethylene plants (steam crackers) that consume the NGL purity products separated by fractionators (ethane, propane, normal butane, isobutane and natural gasoline), as well as marine terminals for purity-product exports.
These include the Enterprise Hydrocarbons Terminal (EHT), which (among other things) can load and export liquefied petroleum gas (LPG; propane and normal butane); Enterprise’s Morgan’s Point Ethane Export Terminal (ethane); Targa’s Galena Park Marine Terminal (Houston Ship Channel; LPG); and Energy Transfer Partners’ LPG export terminal in Nederland, TX. As for the rest of Texas, 12 companies or joint ventures own a total of just over 1 MMb/d of fractionation capacity currently in place, most of it within 100 miles of the Gulf Coast between Beaumont and the Corpus Christi area. More steam crackers are located along this swath of coast, as is Phillips 66’s Freeport (TX) LPG Export Terminal.
The future: If they are all built, the planned Phillips 66, EPIC and Permico fractionators by the early 2020s would add 730 Mb/d to the more than 1 MMb/d of existing fractionation capacity outside of Mont Belvieu — a second fractionator at EPIC and a third at Permico (both possibilities) would bring Texas’s “non-Mont Belvieu” fractionation capacity to nearly 2 MMb/d. When combined with the 2.1 MMb/d of existing capacity at Mont Belvieu and the 465 Mb/d of new capacity planned there, the state’s total fractionation capacity could top 4.5 MMb/d by 2021 or so.