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Thursday, August 16, 2018

Director's Cut -- June, 2018, Data -- Note NDIC Comment -- At Very End Of Post

Director's Cut -- June, 2018 Data

Comment to explain small drop in production:
Oil production dropped slightly in June due to ongoing gas capture challenges and transportation problems caused by rainy weather

Lynn Helms, director of the ND Department of Mineral Resources, said oil producers "tapped the breaks" in June, leading to a 21,000 barrel per day decrease in average production. More than half the reduction occurred on the Ft. Berthold Reservation where gas capture challenges are greatest.  
Helms said producers are mindful of the state mandate to capture 85% of the gas associated with oil production, and meetings have been occurring regularly with midstream operators to address the issue.

Link here.

See this post.

Disclaimer: the Director's Cut summary that I try to do every month is done very, very quickly. There will be typographical and/or factual errors. That's why I have the link. If this information is important to you, go to the link.

The number is: 1,225,510 bbls/day 
  • Crude oil: 1,225,510 bopd
  • Natural gas: 2,300,103 MCF/day = 383,287 boepd
  • Total: 1,608,797 boepd
    • Previous record (last month): 1,632,024 boepd
Crude oil production:
  • June, 2018: 1,225,510 bbls/day
  • May, 2018:  1,246,355 bbls/day
  • April, 2018: 1,225,391 bbls/day (preliminary) (all-time high was 1,227,483 bbls/day back in December, 2014)
  • Delta, month-over-month: - 20,845 bbls; down 1.7% --
Natural gas production:
  • June, 2018: 2,300,103 MCF/day (383,287 boepd) -- string of new records broken
  • May, 2018: 2,315,391 MCF/day (385,834 boepd) -- a new all-time record
  • April, 2018: 2,242,093 MCF/day (374,000 boepd) -- record at the time
  • March, 2018: 2,119,751 MCF/day (353,000K boepd) -- record at the time
Well Completions:
  • June, completions, preliminary: 63
  • May, completions, preliminary: 42 (preliminary); actual -- 72 (final)
  • April, completions, preliminary: 69 (preliminary); actual --> 86 (final)
  • March completions: 75
  • February completions: 74
  • January completions: 65
DUCs + inactive wells:
  • DUCs, waiting on completion: 993, up 38 from the end of May to the end of June
  • inactive well count:  1,458, down 111 during same time period
  • May, 2018, DUCs and inactive wells: 2,451
  • see "DUC commentary," dated June 29, 2018 
Flaring:
  • statewide: 83% (no change)
  • statewide, Bakken: 84%
  • FBIR Bakken: 79% -- federal; atrocious, compared to state
  • ND goal: 88% capture; increasing to 91% beginning November 1, 2020
Comment of interest:
  • Competition with the Permian and Anadarko shale oil plays for capital and workforce continue to limit drilling rig count.

The Market, Energy, And Political Page, T+3 -- August 16, 2018

Judges: wow. Look at the lopsided votes
The Senate on Thursday confirmed the 25th and 26th appellate court judges during President Donald Trump's tenure, as Republicans continued reshaping the federal judiciary at a record clip.
The Senate approved A. Marvin Quattlebaum Jr. by a vote of 62 to 28, and backed Julius Ness Richardson on a vote of 81 to 8. Both will join the U.S. Court of Appeals for the 4th Circuit.
The GOP-controlled Senate has been approving appellate court judges at a rapid pace, already setting a record for the most confirmed during a president's first two years in office.
GOP leaders are installing jurists favored by conservatives who are likely to influence decisions on immigration, voting rights, abortion and the environment for decades.

Chinese LPG requirements: Wow -- trade wars? What trade wars? China Gas will boost LPG imports threefold. Link here.
  • China Gas plans to increase its annual imports of liquefied petroleum gas from 2.8 million tons to 10 million tons during the next five years as it enters the petrochemicals industry
  • the company’s plans also have to do with higher demand, with LPG sales to households forecast by China Gas to increase from 4 million tons in financial 2017/18 to 4.5 million tons in the current financial year, and further to 5 million tons in financial 2019/20
  • how much of this increase in imports will come from the U.S., a major LPG supplier to China, remains to be seen and depends on the outcome of the trade war between Washington and Beijing -- this quote was not cited -- personal quote from the writer of the article?
  • Comment: the trade war will be over long before five years are up 
Soybeans: see this Forbes article.

Trans Mountain Pipeline expansion project: update here. Protest camp is being dismantled by the Royal Mounted Canadian Police. Also here. It appears we are talking about eleven (11) malcontents holding up this construction.

Natural gas fill rate (link here):


Trump's "State Of The Union" Cabinet Meeting -- August 16, 2018

Truer words never spoken: this should scare all Americans: if the Dems take the US House this fall in the mid-term elections, Maxine Waters becomes chairperson of the US House Financial Services Committee.


Update

Later, 2:42 p.m. CDT: CNBC doubts Kudlow's analysis was correct; suspect it was scripted (their words, not mine). Talking head analyst said Kudlow was lying. My words, not his. But now we know: CNBC says the data they (and we) follow coming out of China is meaningless. Kudlow feels the data suggests Chinese economy is "going south." CNBC analyst says the Chinese economy is doing just fine. Both have the same Chinese data. Watching two different movies, Adam Scott would say.

Original Post

From Trump / Kudlow, 11:30 a.m. CDT, cabinet meeting on the state of the union; though it led off with US economy and I think that was the focus.

By the way: check Kudlow's biography -- it is quite interesting to say the least. 
  • US economy
    • discussing NAFTA
    • Trump told his lieutenants: Trump wants a deal with Mexico, but if they can't get a good deal, don't make the deal
    • manufacturing numbers / industrial growth growing faster than anyone can remember; faster than anyone can find numbers
    • currently in a genuine economic boom no one thought possible
    • unemployment rates at all-time lows for Asian-Americans; African-Americans; and Hispanic-Americans
    • real disposable income -- take-home pay growing at 3.1% -- huge number -- real disposable income is the only important number -- real disposable income -- Reagan: take-home pay
    • confidence is incredibly important
    • less than 1% growth on a 12-month basis prior to  Trump taking office
    • investment dollars from around the world are coming into the US
    • anyone who says this is a one-time blip -- is not credible
    • Kudlow: US economy is "crushing it"
    • never seen income numbers like this; after-tax income
    • Kudlow: durable, lasting, and most people thought could not happen
    • Trump asks/comments on China: how are we doing vis a vis China
    • China: spanning 6 - 9 months
    • Chinese economy is heading "south"
    • retail sales slumping
    • business investment is collapsing
    • industrial output is falling, plateauing at a low level
    • Chinese are selling their own currency; some currency manipulation but Kudlow played it down -- said Chinese selling currency was the real cause
    • Chinese moving their dollars out of Chinese investments into American investments
    • economy looks terrible -- Kudlow said that loud, clearly
    • I don't think I've seen Kudlow so incredibly bullish on the American economy
Wow, CNBC cuts away when the Cabinet press conference continues

Switch to Fox Business News
  • fire in California -- Zinke
    • policies were the cause that made this so bad; gross mismanagement
    • brush and dead timber at record levels
    • 5.7 million acres burning
    • $3 billion
    • special interest
    • not a global warming thing; it's a management thing
    • fallen trees are not removed; leave them to burn 
    • US imports timber
    • US timber being wasted; rotting in the forest
    • unconscionable
    • not even talking about cutting down trees
    • talking about trees that have fallen and are dead
  • Violent crime -- Trump
    • ICE thanked by Trump
    • Hard to believe CNBC cut away from
  • New school year -- protection from shootings, other violence -- Trump
  • ICE
  • many new initiatives
  • local school districts / communities make own decisions
  • feds doing what they can where they can
  • keeps guns out of hands that shouldn't have them
  • education -- Betsy Devos
    • opening statement -- platitudes
    • weakest speaker so far
  • Comments:
  • This portion -- Devos -- is very, very boring -- but the press complains that they don't get enough time with President Trump or his cabinet -- I think this is going to be a full hour. 
  • This is an important update; similar to annual "state of the union" address.
  • Back to the economy.
  • Chinese - American trade wars.
  • One can argue whether it's a trade war.
  • The press is calling it a trade war.
  • So, let's go with that: call it a trade war.
  • During any war, the president would ask for an assessment from his "generals." 
  • In a shooting, military war, he would get his briefing from military generals in uniform.
  • During an economic war, this "general" would be the economic professionals -- and, true to form, he called on "General Kudlow" to provide an assessment. The 30-second elevator speech: the US economy has never been stronger; and the Chinese economy is "going south." 
  • Kudlow said that so forcefully it is impossible to "feel" it by reading press reports; one has to hear him say it out loud. Kudlow's soundbite will not be heard on nightly news tonight.
  • The political pablum continues. 
  • Prescription drug prices -- Trump says he not happy. Trump made some phone calls and prices came down. Nothing like this has ever happened before; behind the scenes Trump says the Democrats have said they were happy that drug prices were coming down
    • spokesman says administration making progress
    • many companies take back price increases
    • most say they will not be increasing prices any more this year
    • import drugs from other countries -- not under patent protection -- but will compete with single-drug companies; first time in history
    • first time in history: US will negotiate drugs prices through Medicare Advantage  
    • drugs: $400 billion segment of the economy
    • pharmaceutical lobby: most powerful lobby -- Trump says he doesn't need their money
  • Jess Sessions
    • opiod abuse
    • indicted 170 physicians in this area
    • Trump wants lawsuits against distributors including companies moving Fentanyl
    • sounds like Trump even wants to go after US doctors/hospitals making addicts out of patients undergoing routine orthopedic surgery
    • example: if a patient goes in to have a broken arm fixed, and comes out an addict, the patient would have legal issue against the physician, hospital -- very interesting -- could be deep pockets for ambulance chasers / lawyers in the asbestos liability issue
Dow holding: still up 410 points

  • North Korea --
    • many months of no new missile testing, launching
    • human remains returned, measured in dozens (55)
    • more in the works, not dozens, but hundreds
    • Trump says relationship is good but relationship is being hurt a little bit because of China
    • $500 billion a year for China year after year after year -- decades -- Trump
    • "we rebuilt China" -- Trump
  • Turkey -- Mnuchin:
    • American pastor -- Trump asks for update unrelated to the American pastor
    • sanctions on Turkey going well
    • doubled up tariffs on steel and aluminum; steel already; aluminum to go into effect this week or soon
    • US very clear on sanctions to Turkey 
    • will do more if pastor not released quickly
    • Iran nuclear sanctions roll-out going well
    • very focused on tax cut and jobs
    • focus on tax cuts for individuals
  • VA
    • Choice passed for vets

Wow, this reminds me of our weekly meetings with our commanding generals. Incredibly similar. Amazing. Same kind of table. Same flags. Same relative size of room. Strap hangers have very little space. Goes around the table calling on each primary; occasionally a secondary is called upon. Right away, one gets a feeling for who the best. Despite being up all night tweeting, Trump is engaged, very engaged. Not yawning. Never looked at watch. Hair on back scalp looks a bit disheveled. 
  • Obamacare done. Eliminated it piecemeal because Congress failed by one vote to kill it.
  • Farmers
    • responding well
    • soybeans cuts happened long before the Trump administration
    • reminds Americans of the 275% Canadian tariff on US dairy
    • farmers are picking up
    • more political pablum
    • says farmers "believe" what Trump is doing is correct
Back to NAFTA -- Trump
  • a fair NAFTA or no NAFTA
  • NAFTA trade deficit not sustainable
  • now talking with Mexico
  • hoping with breakthrough with Mexico in next few days
  • Trump: if no breakthrough -- don't make the deal; Trump has options (alternatives
  • the primary knows the alternatives
  • if deal made with Mexico, Canada is likely to follow through
General Kelly spotted -- at far end of table on same side as Trump
  • Back to trade
    • EU automobile tariffs; discussed again last week; 
    • Canada: US not negotiating with Canada right no
    • ends on a weak note -- sounds like EU automobile tariff issues just getting started; EU has $151 billion trade advantage every year on car tariffs
Lots of yelling at the end as press tries to get in questions; Trump's "room monitor" outshouts the press, so we can't even hear the press yell their questions








Off The Net -- Have A Great Day -- 9:32 A.M CDT -- August 16, 2018

Chain of Fools, Aretha Franklin

Best video segment I've seen on Aretha Franklin: on DVD, Muscle Shoals

In Case You MIssed It -- Two Incredible Wells Reported By Enerplus Today -- August 16, 2018; Unemployment Numbers Blow Through Consensus On The Good Side -- Making America Great Again

This page will not be updated.

Thursday, August 16, 2018: 38 wells for the month; 92 wells for the quarter
  • 33291, 1,395, Enerplus, Ft Berthold 150-94-32C-29H, Spotted Horn, a very nice well; t2/18; cum 104K; over 100K in exactly four months; only 40 stages; only 7.99 million lbs of small sand; but it works out to 200,000 lbs/stage -- at the upper end for the Bakken;
  • 33135, 1,591, Enerplus, Mandaree 150-94-32C-29H TF, Spotted Horn, a very nice well, another 100K+ well in less than six months; t2/18; cum 108K 6/18; 108K in just over four months; only 41 stages; only 8.2 million lbs sand (all small sand); but it works out to 200,000 lbs/stage -- at the upper end for the Bakken; CLR often uses about 167,000 lbs/stage;
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Jobs 


Weekly report
  • consensus: 213 to 220K
  • actual: 212K
  • prior: 214K (revised)
  • change: down 2,000 from previous week
  • previous weeks have set all-time records, so I assume this continues the trend
  • the range was 213K to 220K; not only did the actual number come in below the consensus, it was a whopping 8K below the high end consensus number

The Market, Energy, Political Page, T+3 -- August 16, 2018

Holy mackerel: is anyone paying attention? I wasn't. A reader alerted me. Look at AAPL:
  • AAPL futures: up another $1.14 -- now trading at $211.34 
    • euphoria begets euphoria
    • and Abraham beget Isaac (1 Chronicles 1:34-36) -- one of Trump's favorite books in the bible, but I digress
  • why (the jump in AAPL)?: Chinese-US trade talks resume
  • Tim Cook had dinner with Donald Trump this past weekend
    • Tim's #1 concern: his #1 market ten years from now -- that would be China
    • Tim's #2 concern: quarterly earnings reports
    • three business days later, the press reports that US-Chinese trade talks resume
  • on a side note: AAPL pays its dividend today -- 73 cents/share, I believe, could be wrong; 
    • for every thousand shares, one account will grow by $730 -- is that correct? that sounds like a lot; whatever
  • if AAPL opens at its current price, it will set another all-time record

******************************
Walmart

 
Holy mackerel: is anyone paying attention? Apparently a lot of nimble traders. WMT is up 10% in early trading. Look at these numbers -- 
  • 2Q18, comparable store sales: up 4.5%
    • consensus: 2.2% growth
    • wow -- talk about a huge miss by the analysts
  • CEO says this is the best quarterly comp sales results in a decade (need to fact check)
    • adjusted earnings of $1.29/share, beating estimates of $1.22
    • full year guidance raised from $4.90 - $5.05, up from previous guidance of $4.75 - $5.00
  • bright spot: e-commerce
    • Amazon? Monopoly? What monopoly? 
  • Walmart looks to grow sales by 40% for the full year -- I could be way wrong, but I doubt Amazon is going to grow sales by 40% for the full year -- but if they do ---wow, wow, wow -- think about twhat this means for the US economy -- making America great again
  • most of its sales: groceries and household staples
    • fresh food sales: best grocery comp sales in 9 years
  • but rolling out "premium" brands
    • more than 1,000 new brands have been added to Walmart.com this year which is a key focus for the company
  • Omni-channel: key area for Walmart, especially online grocery service
  • tariffs? Walmart noted it but sounds unconcerned. Remember: Walmart, at one time, had a huge focus on "Buy American." I doubt that culture has changed much. From the CFO:
" ... in all of our markets where we have stores and eCommerce operations, the majority of our merchandise is purchased locally in that country. In fact, we buy more merchandise, by a wide margin, in the U.S. than from any other country. 
******************************
Mid-Morning Trading

Selected --
  • Dow: up 330 points
  • NASDAQ: up 52 points
  • S&P 500 (the only one that really matters): up 20 points
  • WTI: flat at $65 -- many, many reasons -- the relatively large plunge of 4% in past few days has to be due to fundamentals like US crude oil inventories, but some of it, maybe a dollar or so per bbl has to be related to the very strong dollar; another dollar or so due to fears of Turkish contagion
  • AAPL: up an astounding $2.00, a 1%jump -- it's astounding because --
    • it didn't take part in the "correction"
    • it continues to rise despite being a huge, mature fashion company
    • it continues to rise despite the Chinese trade war
  • WMT (after reporting best sales in a decade): up an astounding 10%; up $8.72 cents; still trading below its 52-week high of $110; trading at around $98; 
  •  I won't look at the others of the high volatility over the past few days; will look at everything when the dust settles -- but, wow, what a buying opportunity
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 what you think you may have read here.

***************************
Jobs

  • consensus: 213 to 220K
  • actual: 212K
  • prior: 214K (revised)
  • change: down 2,000 from previous week
  • previous weeks have set all-time records, so I assume this continues the trend
  • the range was 213K to 220K; not only did the actual number come in below the consensus, it was a whopping 8K below the high end consensus number
***************************
Commodities

A reader sent me a link to this Bloomberg article, more on the China trade war.

This was my unedited, not-ready-for-prime-time reply:
Thank you. I don't follow commodities (other than oil, natural gas) as a rule, and don't really understand the nuances. So, I'm probably "missing" much of the point of the article.

However, this paragraph jumped out at me:
The People’s Republic accounts for about half of global consumption of most metals. 
As we’ve argued before, that’s hard to square with levels of demand in comparable industrial economies, even when you strip out the effects of export trade. 
It’s at least as probable that the numbers have been driven by the orgy of fixed-asset investments that’s caused Beijing to build railways and pipelines to nowhere, the world’s most sophisticated long-distance electricity transmission network, and enough copper-wire-filled homes to house half its population over the past decade.
Translating: China's consumption of metals -- assuming the data is correct -- is way out of bounds -- what one would expect a country of China's size/GDP to be consuming. China is consuming way more metal than it can possibly use, if I am reading the Bloomberg article correctly.

"... to build railways and pipelines to nowhere...." --- if that's accurate, and, "... enough copper to wire half its population over the past decade ..." that suggests to me that China is spending a lot of its "trade imbalance" dollars on public works projects to keep its millions of young men gainfully employed.
Now adding: this paragraph --- repeating --
The People’s Republic accounts for about half of global consumption of most metals. As we’ve argued before, that’s hard to square with levels of demand in comparable industrial economies, even when you strip out the effects of export trade. It’s at least as probable that the numbers have been driven by the orgy of fixed-asset investments that’s caused Beijing to build railways and pipelines to nowhere, the world’s most sophisticated long-distance electricity transmission network, and enough copper-wire-filled homes to house half its population over the past decade.
-- is something I would expect to read in a blog. But this is done by a recognized professional, reliable, credible source, Bloomberg, adding gravitas to that paragraph.

By the way, if you go to the linked Bloomberg article, it will take you to other great stories that substantiate their claims, especially the "railways and pipelines to nowhere."

We've seen this movie before: five-year planning at the central (Federal) level -- China, Russia, Venezuela, Cuba -- vs free market capitalism in the US.

We have some bridges to nowhere, but very few -- and they were pork-barrel projects sponsored by a few key US senators in return for their votes for something more important for Congress at large.

By the way, there is a new theme in those Bloomberg articles, something I was unaware of: the Chinese labor force is declining for the first time in a decade (or something like that) just as China introduces its "Belt and Road" vision. Even with that decline in the labor force, I still maintain China needs to keep its young male population gainfully employed.

But now we have three reasons why China needs to get back to the bargaining table regarding trade:
  • keep the young male population gainfully employed
  • fund the state's "Belt and Road" vision (just like Saudi Arabia's Vision 2030)
  • keep their Chinese bankers from committing suicide as the banks start to fail

August 16, 2018

The NDIC Director's Cut is scheduled to be released this afternoon, 3:00 p.m. 

Fast and Furious

Hope springs eternal: either "these guys" have the crystal ball all of us want and don't have, or their timing was incredibly off .. the Rigzone staff: oil price rise to drive up drilling globally. The lede begins:
  • the rise in oil prices is feeding through into higher spending in the oil and gas sector.
  • Say what? Did anyone see the slump in oil prices yesterday? Certainly correction territory. If not correction territory for "price of WTI," it was correction territory for publicly traded companies in the US oil sector
  • From the article: globally, rotary rig counts have averaged 183 rigs higher in 2018 to date compared to same period, 2017
  • majority of additions: US shale
  • rig count has been trending lower in North Dakota
  • oil companies make few bids in US offshore lease auction -- previously reported, Reuters
Diamondback's Energen acquisition will create synergies in the Permian: the original story previously posted. This Rigzone story provides a bit of background. From the Rigzone staff
  • this is exactly what we saw in the Bakken boom at about the same point in the timeline
  • "it signals a shift in the US shale industry towards consolidation" -- that should have read, "a shift in the Permian." The Bakken already experienced that shift: six years ago
  • the synergies mentioned are pretty petty in the big scheme of things  
  • this was not a bolt-on acquisition: new acreage is not adjacent to existing Diamondback acreage
  • the biggest synergy? access to capital
The China trade war:
Nobody noticed:
  • Trump revokes security clearance for political hack, CNN spokesperson, and former CIA director
  • it should be noted that Brennan was never fired; Comey was; IG issued scathing report on Comey 
  • Omarosa who?
Disclaimer: this is not an investment site.

**********************************
Back to the Bakken

Wells coming off confidential list today --
  • 33291, 1,395, Enerplus, Ft Berthold 150-94-32C-29H, Spotted Horn, a very nice well; t2/18; cum 104K; over 100K in exactly four months; only 40 stages; only 7.99 million lbs of small sand; but it works out to 200,000 lbs/stage -- at the upper end for the Bakken;
  • 33135, 1,591, Enerplus, Mandaree 150-94-32C-29H TF, Spotted Horn, a very nice well, another 100K+ well in less than six months; t2/18; cum 108K 6/18; 108K in just over four months; only 41 stages; only 8.2 million lbs sand (all small sand); but it works out to 200,000 lbs/stage -- at the upper end for the Bakken; CLR often uses about 167,000 lbs/stage;
Active rigs: note -- essential where we were one year ago -- 55 - 57 active rigs in North Dakota

$65.138/16/201808/16/201708/16/201608/16/201508/16/2014
Active Rigs57553274194

RBN Energy: Trafigura's plan for a crude oil export terminal off the coast of Corpus Christi.
Since mid-July — only a few weeks ago — four proposals have been unveiled to build offshore crude export terminals along the Gulf Coast that would be capable of fully loading Very Large Crude Carriers. That’s an extraordinary burst of interest in new infrastructure development, and a signal that (1) more export growth is on the horizon and (2) VLCCs will play a much bigger role in transporting that crude. A leading contender in the race to construct new offshore terminals is Trafigura, the Swiss-based logistics and physical-trading giant, which in recent years has become a major player in U.S. energy markets. Today, we continue our review of made-for-VLCCs offshore terminals with a look at Trafi’s plan.
Every year, when Nobel Prizes are awarded for physics, chemistry, economics and other arts and sciences, it’s become relatively common for each prize to be shared by two or three very smart people who on their own — and almost at the same time — came up with the very same idea. This phenomena, known as either “multiple discovery” or “simultaneous invention” — appears to have a corollary in the more mundane world of crude oil exports. As we said in our intro, in the space of only three weeks, four companies (Enterprise Products Partners, Oiltanking, Tallgrass Energy and Trafigura) announced specific (or at least relatively specific) plans to develop offshore crude oil export terminals. At least two others (MPLX and Magellan) noted during their second-quarter earnings calls in this same period that they were interested in crude-export opportunities that (we surmise) could involve offshore terminals, and a Texas-based start-up (JupiterMLP) announced in May (2018) that it had begun engineering for a planned VLCC-loading terminal off the coast of Brownsville.