Tuesday, September 4, 2018

Predicting The Price Of OIl Is A Fool's Errand -- September 4, 2018

Quick! What's the price of Brent today?


Here's the oilprice headline today:

.... Barclay's is lifting its average Brent price forecast by $25 / bbl.

Talk about click bait.

No time frame in the headline.

From the headline, I was expecting $95 oil by the end of the year (LOL).

So, what's the story?
Oil prices will be much higher over the next few years than previously thought, according to a new report from Barclays.
The investment bank significantly raised its pricing forecast for 2020 and 2025 in its annual medium-term oil report. Barclays expects Brent to average $75 per barrel in 2020, up from a previous estimate of $55, while prices may average $80 in 2025, up from $70 previously.
The bank noted that the market is dramatically different than it was at this point last year when it issued its previous medium-term report. U.S. shale drillers are maintaining capital discipline, which could lead to lower than expected production levels. OPEC and Russia have demonstrated resolve and laid the groundwork for long-term market management, which could keep supply off the market for years to come.
As usual, the "scary" headline to be followed by a story that wouldn't surprise anyone.

This Made My Day

I was searching to see the cost of drilling a vertical well in North Dakota these days -- this is a screenshot of the search --

The UK Will Be Burning A Lot Of Coal This Winter -- Platts -- September 4, 2018

Previously posted, but this could be a most interesting UK story this winter. At Platts. The UK is going to be burning a lot of coal this winter.

The concluding paragraph of the article:
The coal switching price was surpassed during the so-called "Beast from the East" weather system in March (2018) when the gas system came under considerable strain and pushed gas prices up to such an extent that coal was more profitable. With this threshold already having been reached in September, the outlook for coal looks favorable should the capacity and flexibility exist for this type of generation.

In light of the earlier story about Mexico and NG storage this is most interesting and something that completely blows me away (what are/were the Brits thinking?):
The absence of long-term storage in the UK following the closure of Rough, coupled with the option for storing gas in continental Europe greatly diminished with higher transportation costs in both directions, has meant the UK's import dependency has suddenly come into focus.
In order to source gas for the winter, buyers have increasingly been looking to European hubs in order to hedge positions, and consequently are at the mercy of European prices.
And this:
In terms of gas fundamentals, the expiry of long-term interconnector transportation contracts at the end of September, as well as declining domestic production and a bullish fuels complex, have pushed up the price of gas for this forthcoming winter, with both Q4 18 -- of which front-month October is a component -- and the Q1 19 contract climbing 44% and 37% since April, respectively.
In order to source gas for the winter, buyers have increasingly been looking to European hubs in order to hedge positions, and consequently are at the mercy of European prices. Transportation costs are also being passed on to buyers, for those buying in the UK from those supplying at the interconnector.
Search "UK natural gas" for much more."

Active Rigs At 62 As We Enter Autumn In North Dakota -- September 4, 2018

Tesla bonds: hit all-time low?

UK and natural gas this winter: so much for CO2 and global warming. The Brits are going to use a lot of coal this winter. Natural gas getting too expensive; coal is cheap. Link at Platts (beware: lots of jargon):
Bullish NBP spot and winter contract gas prices have focused the power market's attention on the UK's coal-fired power plants, which have recently become more economical to run in the summer as well as in the winter.
The gap between prompt NBP gas and the coal switching channel indicates that, if and when needed, thermal generation is going to be predominantly coal-fired this winter, with higher gas prices opening the way for increased coal-fired generation, despite a strong hike in carbon prices.
Data show 35% efficient coal-fired plants are competing with 45% gas-fired plants.
The UK month-ahead coal-switching price for 45% efficiency was 68.43 pence/therm on Monday, slightly lower than the NBP day-ahead contract assessment of 69.70 p/th.
However, UK month-ahead CSP for 50% efficiency was 78.19 p/th. Platts CSPI is the theoretical threshold at which gas is more competitive than coal in power generation.
When the gas price is higher than the CSPI, CCGTs are more expensive to run than coal-fired plants.
"Despite the gains in carbon over recent months, coal generation has been supported this week by particular strength in the gas market," according to S&P Global Platts Analytics.
"We forecast gas to lose ground this winter too, with the Q1-19 Clean Dark Spread above the Clean Spark Spread. As a result we expect coal generation to be stable year-on-year this winter, despite the closure of 2GW of capacity, while gas generation is forecast to fall more than 3 GW vs Winter-17."
Back to the Bakken

Active rigs:

Active Rigs62563375196

One new permit:
  • Operator: Behm Energy
  • Fields: Pronghorn (McKenzie) -- wildcat
  • Comments: Behm Energy has a permit for a wildcat vertical well in SENE 29-150-101; see graphic below;
Twenty permits renewed:
  • QEP (9): seven Kirkland permits in McKenzie County; and two MHA permits in Dunn County
  • PetroGulf (4): four Three Tribes permits in McKenzie County
  • Whiting (3) two Koppinger permits and one Cymbaluk Federal permit, all in Stark County
  • Enerplus (3): a Platinum permit; a Silver permit; and, a Titanium permit, all in Dunn County
  • Petro-Hunt: a USA permit in McKenzie County

Behm Energy has a permit for a wildcat vertical well in SENE 29-150-101.

The three vertical wells in the graphic above, still producing:
  • 11371, 87, Murex, Cahill-Helling 13-20, Pronghorn, a Madison well, TD - 9,760 feet, t5/85; cum 202K 7/18;
  • 11150, 119, Murex, Helling 1-19, Pronghorn, a Madison well, TD - 9,714 feet, t12/84; cum 139K 7/18;
  • 11781, 62, Murex, Sanders 24-19, Pronghorn, a Madison well, TD - 9,670 feet, t12/85; cum 260K 7/18; 
Cost: from a 2016 article -- the average drill cost per foot was lowered from $245 to $143. The article concerned drilling horizontal wells, but at least this gives me an estimate. A 10,000-foot well x $140 = $1.4 million.

2,000 bbls/month * 12 months = 24,000 bbls x $50/bbl = $1.2 million. Ballpark figures.

High School Literature

I've long forgotten the names of most of my teachers in middle school and high school. I certainly had some wonderful teachers. I remember one of my English teachers -- maybe my junior year in high school -- I've long forgotten -- but wow, I remember the literature she had us read. I only realize now how fortunate I was.

I was reminded of that tonight when I caught the 1934 movie, Imitation of Life on TCM. Wow, what an incredible movie.

I was unaware of the novel that the movie was based upon. Here's the wiki lede on the author of the novel:
Fannie Hurst (October 19, 1885 – February 23, 1968) was an American novelist and short-story writer whose works were highly popular during the post-World War I era.
Her work combined sentimental, romantic themes with social issues of the day, such as women's rights and race relations. She was one of the most widely read female authors of the 20th century, and for a time in the 1920s she was one of the highest-paid American writers, along with Booth Tarkington.
Hurst also actively supported a number of social causes, including feminism, African American equality, and New Deal programs. Although her novels, including Lummox (1923), Back Street (1931), and Imitation of Life (1933), lost popularity over time and were mostly out-of-print as of the 2000s, they were bestsellers when first published and were translated into many languages.
She also published over 300 short stories during her lifetime. Hurst is known for the film adaptations of her works, including Imitation of Life (1934), starring Claudette Colbert, Louise Beavers, Fredi Washington, and Warren William; Imitation of Life (1959), starring Lana Turner; Humoresque (1946), starring Joan Crawford; and Young at Heart (1954), starring Frank Sinatra.

The Road To Mexico -- September 4, 2018

A very convoluted story but the gist of this story, the nuances, and the tea leaves suggest:
  • Mexico's new socialist president will manage the country's oil and gas sector with laser-like focus
  • business in Mexico's oil and gas sector effectively comes to a standstill for the next three years
  • the country will rely on ever more natural gas imports
  • gasoline is going to get very, very expensive 
Story over at ArgusMedia:
Mexico's first natural gas storage tender scheduled for this month may be delayed ahead of the country´s political transition, gas pipeline administrator Cenagas. [sic]
"The tender is ready…the only thing missing is whether the new administration wants to continue with the project," [according to a spokesperson]. "We have to show [the new government] that the project aligns with the country's energy security needs."
Comment: when one reads the background to this story, it's obvious that the project aligns very closely with the country's energy security needs. It's clear that AMLO is looking at the list of winners and losers.
Under Mexico's gas storage policy published in March, Cenagas must keep at least 45 Bcf (1.26 Bcm) of gas in storage by 2026, and secure access to operational capacity through reservation agreements with LNG storage terminals.
The much-anticipated tender will cover storage in the Jaf field that has been deemed economically unviable.
Mexico said it plans to tender its first strategic storage project at a depleted natural gas reservoir in Veracruz state.
The Centro Nacional de Control del Gas Natural (Cenagas) this week published the preliminary bid documents for the tender, expected to launch later this year. The auction is to award a service contract to build and operate a 10 Bcf storage facility at Jaf, a depleted dry gas field in central Mexico. 
The Jaf field had an original volume of 21 Bcf, according to a fact sheet published by Cenagas. The field was in operation from July 2009 to December 2014, producing a total of 11 Bcf.
Jaf is located on a block operated by state oil company Petroleos Mexicanos (Pemex), which drilled five wells in the field. Last year Mexican authorities determined that the field was no longer economically viable for exploitation as an oil and gas project.
The eventual developer of the storage site at Jaf would also be responsible for interconnecting the facility with the Sistrangas, Mexico’s main gas transmission system. The nearest pipelines on the system are 3.6 miles from the reservoir site, including a section of pipes that connects with the Cempoala compressor station.
Mexico’s natural gas storage policy, published earlier this year, mandates that Cenagas develop 45 Bcf of strategic inventories on the Sistrangas.
The Jaf tender is the first of these strategic projects, which would be reserved for supply emergencies. The full 45 Bcf must be in operation by 2026 at the latest.
Mexico currently lacks underground gas storage facilities, relying instead on tankers at liquefied natural gas (LNG) terminals for short-term balancing. The storage policy mandates that Cenagas hold operational inventories at LNG terminals at least until the underground facilities come online.
Much more at the link.

In Business News Today: The Biggest Story Not Being Reported -- September 4, 2018 -- Passenger Car Sales Drop 20%; SUV Sales Rose 20% -- Bigger Margin?

Ford F-Series, vans combine for best sales since 2005.

Since 2005.

Link here.

This is simply a re-print of the press release, but from 24/7 Wall Street:
Ford's August sales increased by 4.1% year over year to 218,504 Ford and Lincoln vehicles, compared with August 2017 sales of 209,897.
Passenger car sales fell 21.3% in the month while sport utility vehicle sales rose 20.1%.
Total retail sales rose 1.1% year over year in August to 165,794 units, and fleet sales jumped by 15% to 52,710 units.
Truck sales rose 5.7% for the month, and sales of F-Series pickups increased by 6.3% to 81,839 units, the best total for the month since August 2005.
If used for business, it's my understanding that Pa Jones can deduct the entire cost of his pick-up truck from his business profit in the year the truck was bought. Meanwhile, Ma Jones can do the same thing were her SUV. Best August since 2005. How many years ago was that? Wow.

The most under-reported story of the day.

And SUVs and pick-up trucks use a heck of a lot more gasoline / diesel than passenger cars.

Holy Mackerel!

TSLA sinks: shares are down $12/share; down over 4%; trading well below $300.

And now, Mercedes-Benz will launch an EV directly competing with Tesla

Maybe this is the reason TSLA sunk today. Link here; the writer calls the results "mixed." The results don't look to "mixed" to me.
The results? Mixed.
Now entering September, we're in the last month of the third quarter. Through the first two months of the quarter, Tesla has apparently missed its goal to produce 6,000 Model 3s a week by the end of August, according to an Electrek report.
However, in its early-August earnings report, management said it expects to produce 50,000 to 55,000 Model 3 vehicles. So far, the company has cranked out nearly 35,000 units -- 15,000 shy of its range.
15,000 / 50,000 = 30% shy? Wow.

EV sales are tracked here. Toyota Prius Prime and Nissan Leaf were first to report; both were unremarkable. No other EVs have reported yet.

  • Toyota Prius Prime
    • August, 2018 -- 2,071 (9% increase, year-over-year)
    • August, 2017 -- 1,899
    • August, 2016 -- zero
  • Nissan Leaf
    • August, 2018 -- 1,315 (14% increase, year-over-year)
    • August, 2017 -- 1,154
    • August, 2016 -- 1,066

Fond Du Lac Chippewa Reached Agreement With Enbridge Over Option 1 For Line 3 Route Completion -- September 4, 2018


September 6, 2018: from SeekingAlpha --
The agreement gives ENB easements for six existing oil pipelines through 2039; the company plans to build the new pipeline in an expanded right of way adjacent to existing pipelines on the reservation.
Original Post 

See post and map at this link. From that post:

Line 3: Chippewas are working with Enbridge to get this done --
The Fond du Lac Band of Lake Superior Chippewa said they are willing to allow Enbridge Energy to route the new Line 3 oil pipeline through the reservation.

The update from August 31, 2018:
Enbridge Energy and the Fond du Lac Band of Lake Superior Chippewa have reached an agreement to build the Line 3 replacement oil pipeline through the band's reservation near Cloquet in northeast Minnesota.
The financial terms of the deal are confidential. But the agreement provides Enbridge with easements through 2039 for the six existing oil pipelines that cross the reservation. The easements were scheduled to expire in 2029.
Enbridge will construct the new pipeline in an expanded right-of-way next to the existing pipeline corridor. The Calgary-based company will also remove the old pipeline from the reservation after the new line is built and in service.
Enbridge up 19 cents, about half a percent in early morning trading, September 4, 2018, first full trading day after announcement.

By the way, a reader provided this "flashback":

"LaDuke" is a Chippewa word that loosely translates to "show me the money." Some folks have wondered whether Ms Winona is a native American, but her high cheekbones -- at least according to Pocahontas, Democratic Senator, Massachusetts -- suggest that she is.

It's Official: Justin Trudeau Owns The Trans Mountain Pipeline -- September 4, 2018

Link here.
The transaction was completed through Trans Mountain Corporation, a subsidiary of the Canada Development Investment Corporation. The total purchase consideration was $4.5 billion in cash.
Meanwhile, CBR, the technology faux environmentalists love -- carbon-spewing diesel locomotives -- LOL: Canadian CBR exports set record in June, surpassed 200,000 bopd. That nearly doubles last year.

Think about that. 200,000 bopd. Trivial. The Bakken produces that much oil in four hours every day. And that Canadian CBR? We're not talking four counties in North Dakota: we're talking practically the entire Canadian oil sector, much of which has been shut down due to pipelines being delayed or shut down completely.

My hunch: if there is no movement with regard to the Trans Mountain Pipeline and if the tea leaves suggest that the earliest -- assuming all goes well -- this pipeline expansion could proceed is in 2021, there will be a huge surge in Canadian CBR. And those trains will enter somewhere along the northern tier (Montana, North Dakota, Minnesota) and will chug through Minneapolis and onto Chicago. 

Another Fool

It's a fool's errand to predict the price of oil.

From oilprice:

If oil goes higher this winter, all things being equal, it will be on the "back" of "heavy oil."

See light / heavy oil at this wiki link.

Making America Great Again

By the way, from the linked oilprice above:
“The fundamental picture is the strongest I've seen in quite some time," Kilduff said. "Everybody has got a job, everybody is driving to that job, and they're going to continue to drive to that job no matter what gasoline costs."
Best indication that there are a gazillion jobs out there: Ford F-Series, vans combine for best sales since 2005, F-Series sales increase for 16th consecutive month.

First Mention Of The Southwestern Production Corp On The Blog -- September 4, 2018

From the September, 2018, dockets:
  • 26909 (case number, not permit number), Southwestern Production Corp, Tracy Mountain-Tyler, establish a laydown 320-acre unit; S/2 of section 21-138-102, ; one well; Billings County;
This is the first mention of Southwestern Production Corp on the blog, though the company has has been active in North Dakota since at least 1992, with about 25 permits/wells, all in Tracy Mountain oil field.

These are about the only wells still producing as of 7/18:
  • 13460, 12/92; Tyler; cum 201K
  • 15147, 9/01; Tyler; cum 278K
  • 14853, 11/99; Tyler; cum 228K
  • 14611, 11/97; Tyler; cum 372K
  • 16219, 8/06; Tyler; cum 121K
  • 13438, 11/92; Tyler; cum 235K (on its last legs with 15 bbls over 10 days in 7/18)

Welcome To The Bakken -- Post #26899 -- September 4, 2018

AMZN: trillion-dollar market today. Then dropped back a bit. So two US companies hit the milestone -- Apple and Amazon. Whoo-hoo.

Link here. On a down day for the market -- early trading -- Ford holds on -- flat, maybe slightly green. MarketWatch story here.

WTI: up almost 2% today. A dime over $71. 

So, I don't forget:
  • Mad as hell: EU beef imports from Argentina increased by 10 percent and accounted for 17 percent of total imports, followed by Uruguay with 7 percent market share and Botswana with 2.65 percent. Imports from the United States increased by 180 percent, but still only represent 0.5 percent of total EU beef imports; the Marshall Plan; NATO support; US bases in Germany; and, in return, 0.5% of total EU beef imports; and the only person in the US who cares? Trump. Free trade? I don't think so. Link here. At the link, search for "0.5."
  • Still mad as hell: those Canadian tariffs on US dairy products
  • Idlib: back to the future; Obama drew a "reddish" line; Trump will draw a "red" line; John Kerry faults Obama on his "reddish" line -- the Syrians saw Obama's "reddish" as "yellow" -- proceed with caution, but proceed; Inshallah; Idlib on the blog in 2015; also, here;
  • Trust but verify: XTO in the Grinnell; no wells in 30/31 -- what gives? See this post.
  • SPR release: Saudi Arabia buying -- speaks volumes, doesn't it? 
  • Ford: September sales to be released about 9:15 a.m. EDT today

Back to the Bakken

Wells coming off the confidential list over the long weekend and today:

Tuesday, September 4, 2018 
  • 33923, SI/NC, MRO, Maleckar USA 31-30H, Reunion Bay, no production data,
  • 33122, 955,  CLR, Mountain Gap 9-10H2, Rattlesnake Point, some production; t6/18; cum 16K 7/18;
Monday, September 3, 2018
  • 34597, SI/NC, MRO, Sheldon USA 21-30TFH, Reunion Bay, no production data, 
  • 32529, drl, Petro-Hunt, USA 153-95-4A-9-8H, Charlson, no production data, 
  • 30522, 804, CLR, Burr Federal 15-26H1, Sanish, 4 sections, t6/18; cum 21K 7/18;
  • 29710, IA, CLR, Thorvald 3-6H, Rattlesnake Point, four sections, some production, the Thorvald wells are tracked here;
Sunday, September 2, 2018
DateOil RunsMCF Sold

Saturday, September 1, 2018

Active rigs:

Active Rigs63563375196

RBN Energy: to put this next story in perspective, see this post from yesterday. MPLX's strategy to pipe more northeast field condensate and heavier NGLs.
The Utica and “wet” Marcellus plays in eastern Ohio, northern West Virginia and western Pennsylvania are producing increasing volumes of natural gas liquids and field condensates that need to be moved to market. In response, MPLX, a master limited partnership formed by Marathon Petroleum Corporation (MPC) six years ago, has been implementing a multi-part strategy to develop new or expanded pipeline takeaway capacity through the Midwest to deal specifically with the heaviest NGLs — natural gasoline and other pentanes — and with field condensates. That work is now largely done, the results have been positive, and MPLX is now undertaking the next phase of its strategy that will further expand the system’s capacity and add a new element: the ability to transport batches of two other, lighter NGLs — normal butane and isobutane — on a few of the same pipelines. Today, we discuss the next steps the company is taking to facilitate the transport of liquid hydrocarbons out of the Utica and Marcellus.
Two years ago we discussed the fact that while most of the market talk about the Utica and wet Marcellus focuses on either natural gas or lighter NGLs like ethane, propane, and butanes (normal and iso-), the side-by-side regions produce sizable volumes of natural gasoline (an NGL also known as plant condensate) and superlight crude (also known as field condensate or lease condensate), both of which are important products that have the potential for value uplift. Plant condensate/natural gasoline, separated out at gas plants and fractionators, is used as a gasoline blending agent, a feedstock for steam crackers and as a diluent — that is, blended into heavy bitumen crudes in Western Canada to reduce viscosity and enable them to flow more easily through pipelines. Field condensate, which is produced at the lease, can be blended into crude oil, run as a feedstock at refineries and condensate splitters or used as diluent, among other things. Also, recall that condensate splitters are simple refineries that process condensate into its component fractions — mostly NGLs, naphtha and distillate or jet kerosene. We noted that most condensate and natural gasoline was being transported within and out of Marcellus/Utica production areas via truck, rail or barge.
The Book Page

River: One Man's Journey Down the Colorado, Source to Sea, Colin Fletcher, 1997.

Whitewater rafting levels of difficulty at this link.
  • international system: I - VI (level 1 - 6)
  • Grand Canyon only: 1 - 10 rapids scale
The Grand Canyon continues to use an older river rating scale that was developed before the International scale was introduced. A class V ( highly technical & difficult, etc.) on the international scale is equivalent to a 10 on the Grand Canyon scale.

From the book, in Marble Canyon:
  • Soap Creek Rapid: 6,5,5,5
  • House Rock Rapid: 9,8,7,7
  • North Canyon Rapid, at Mile 20, the brink of the Roaring Twenties: 5
  • 21 Mile Rapid: 5
  • 24 1/2 Mile Rapid: 6,6,5,5, +)
  • 25 Mile: 7,6,5,5
  • Nankoweap, Mile 52, Mile 1000 of the author's journey: the end of Marble Canyon
Entering the Grand Canyon
  • in the first twenty miles, only three rapids; the highest rating, 6
  • first day, Unkar: 7,7,6,6
  • next day, seventeen miles; eleven riffles and eleven rapids; four of hte rapids rated "8" or higher
  • Hance: 10,9,9,8,+; vertical drop 30 feet
  • then into the Inner Gorge; Precambrian rocks plunged steep into the river
  • Sockdolager: 8,8.9,8; 19 foot drop
  • Grapevine: 8; 18 foot drop
  • through the Inner Gorge; three more rapids; then Bright Angel Creek
  • Phantom Ranch
  • Horn Creek Rapid: 9,10, 8,8; 10 foot drop); not recommended between 4000 and 10,000 cfs)
  • Hermit Rapid
  • Crystal, the first of the Canyon's two monsters; more than a hundred miles below Glen Canyon Dam;: 10,+
  • 104 Mile Rapid: 7,6,6,5
  • Specter: 8,7,6,5
  • Deubendorff: 9,8,8,7,+
  • they are on their sixth day below Crystal
  • Havasu Creek
  • Havasu Rapid
  • Lava Falls Rapid, the quintessential "10" rapid with a 34-foot vertical drop; awestruck
  • four more days of rapids, but no challenges
  • Diamond Creek Wash
  • the last few rapids; none rated above "6"
  • Gneiss Canyon Rpaid
  • Separation Canyon (p. 300)
  • Grand Wash Cliffs, forty miles away, three days travel; easy
Out of the Grand Canyon