Connecting The Dots -- December 12, 2018

Three dots to connect.

• NOPEC.
• Qatar.
• Golden Pass LNG terminal in Texas. 

Link.

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Enbridge To Swap 50,000 Bbls Of Bakken For WCS

Link here.

Does A Government Shutdown Even Matter? -- December 12, 2018

Facts and/or what I recall as being factual:

• past government shutdowns have been "nothing burgers"
• "everyone" in government has been through this before; they know the drill
• government workers are so protected by the Deep State, that they will be protected and adequately compensated for any shutdown
• government workers already have unemployment forms on their desks, ready to be signed and filed the minute the government is shutdown; they will draw 90% of their government salary during their furlough
• 95% of government is deemed critical and won't be affected by a government shutdown anyway
• 75% of the government is currently funded
• so, we're talking about  5% of 25% of the government will be shutdown or 1.25% of the government
• the agency most affected by the shutdown, ironically, will be Homeland Security
• I doubt folks going to national parks in the middle of December will be inconvenienced
• the farm bill will be passed regardless; the farm bill has nothing do with a government shutdown

Idle Rambling On A Wednesday Night -- December 12, 2018

Updates

December 13, 2018: only hours after posting the note below regarding an upbeat article about Apple, Inc., I see that the lead story in today's WSJ is an Apple, Inc. story. Whoo-hoo. As my wife would say, "I'm always ahead of the curve." LOL. Purely serendipity. The screenshot:

The link to the story. Apple will build a new campus in Austin, TX, The company will invest $1 billion in a new facility and will open new offices in Seattle, San Diego, and Culver City, CA.

In Austin, where the iPhone maker already employs more than 6,000 people, the new 133-acre campus will initially accommodate 5,000 additional employees, with the capacity to grow to 15,000, with new jobs covering engineering, research and development, operations, finance, sales and customer support.

Apple said it added 6,000 jobs in the U.S. this year, bringing its American workforce to 90,000, and is on track to create 20,000 jobs in the country by 2023.
The company plans to invest $10 billion in U.S. data centers over the next five years, including $4.5 billion this year and next.

Original Post

I can't believe what a great mood I'm in. There is so much happening in the shale sector it's impossible to keep up. A reader just sent me a pipeline story out of the Bakken but I will post it in the morning. Too many short choppy posts today.

These are the stories that fascinate me right now:

• the incredible wells in the Bakken;
• Apple iPhones; and,
• Macron (France)

I haven't followed the equity market (Dow, NYSE, S&P 500, etc) for weeks now. I literally have no idea what it is doing. I have the feeling "it's different this time." but then I've learned over the years, "it never is (different)." My hunch is that the market will re-set, and then we will go from there. Drudge headlines suggest that a majority of CEOs think there will be a recession by 2020, and perhaps as "early" as next year. Someone has been predicting a recession since 2012, it seems, so eventually .... even a stopped clock has the right time twice a day. For an investor with a long horizon, a recession is simply a buying opportunity.

The Apple iPhone story is very, very interesting. Apple has, for a "limited time," slashed the price of the iPhone XR from $749 to $499 -- a savings of $250 on a $750 phone. My initial reaction was that this was bad news for Apple. I am not so sure. I am questioning my initial impression. Cutting the price of a new phone was unprecedented, especially during the holiday season. Certainly Apple would prefer not cutting prices at all, but now that they have, it is interesting to think about it.

The Apple links:

• iPhone XR sales might be better than expected -- 14 hours ago -- the inquirer.net
• bad news for Apple as iPhone XR price slashed -- two days ago -- Forbes
• iPhone XR may have been most successful iPhone X of all -- mashable 
• iPhone XR from $449 -- Apple ramps up iPhone sales push -- zdnet -- December 5, 2018

I went to the local Apple store today -- middle of the day on a Wednesday afternoon -- and as busy as ever. I went to the store specifically to reacquaint myself with the iPhone XS, iPhone XS max, and the iPhone XR. These were the three models most recently introduced. I spoke with one of the Apple folks at the store. Unfortunately he did not measure up to the usual Apple standard. He seemed bored, and most remarkably, he seemed unaware that the XR was "on sale." He also seemed unaware that the XR is the best selling model of the three. When I asked why that would be he replied very matter of fact: price. He said that the XR was the least expensive of the three, but compared to the XS and the XS max it was a pretty lousy phone. I'm not sure what he's talking about. When I read the reviews and read the specs, it sounds like the XR is an incredible phone and might be a better phone for the money than either of the other two.

So, Apple slashes prices on its most popular phone. Doesn't cut prices on its most expensive phones. I went to MacRumors to see if contributors there might have something to offer to explain Apple's decision. MacRumors did not have anything. Earlier I posted several links to stories about the XR sale, and some analysts see it as a bad omen; others think it's a great move.

Regardless, it's a real opportunity for consumers. All three phones are incredible. The XS and XS max are a bit too big for me. I would buy the XR in a New York minute if I was in the market for a new phone.

Some people argue that the fact that the XR was reduced in price proves that the market is saturated with smart phones. Others argue that the price point was wrong. If nothing else, this drop in price is a nice experiment. If the XR sales surge, then the price point was wrong and the market is not saturated (saturated means no need to upgrade; "everyone" has a smart phone by now, so in that sense the market is saturated; the question is whether the market to upgrade has been saturated). On the other hand if XR sales do not surge, that would suggest that the market to upgrade to the XR is saturated. Whether the overall market is saturated depends on how sales for the XS and XS max go.

I look forward to Apple's October - December, 2018, earnings call. Something tells me Apple will do just fine.

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 More Rambling

Does a government shutdown even matter? "If a tree falls in a forest and no one is around to hear it, does it make a sound?" 

Making money on $26 oil? 

The Market, Energy, And Political Page, Part 4, T+37 -- December 12, 2018 -- Apple Might Be Re-Defining Black Friday -- Thinking Differently

UK: With regard to the poll at the sidebar at the right in which we asked who would depart office first (France/Macron; UK/Therese May; US/ Trump) it is being reported that Theresa May withstood a "no-confidence vote" earlier today. It turned out to be  lopsided victory: 200 to 117.

Good for her; what a fighter!

I don't have a dog in the fight and have no idea what the heck is going on with regard to Brexit but I considered Ms May an underdog and it's always "fun" to root for the underdog. Having said that, for all I know, if I knew what was going on, I might not like her policies. Whatever. It is what it is.

Apple: we'll come back to this later, if I remember. Some links for now --

• iPhone XR sales might be better than expected -- 14 hours ago -- the inquirer.net
• bad news for Apple as iPhone XR price slashed -- two days ago -- Forbes
• iPhone XR may have been most successful iPhone X of all -- mashable 
• iPhone XR from $449 -- Apple ramps up iPhone sales push -- zdnet -- December 5, 2018

Samsung: by the way, remember all the jokes Samsung made about Apple when the latter did away with the "headphone jack." Here, hold my Coke.

Yes! Another Post On Chevron And Kazakhstan -- December 12, 2018

The Tengiz in Kazakhstan is linked at the sidebar.

Two recent posts on this subject:

• Chevron's short-cycle story, December 11, 2018
• Chevron, first of the majors to report 2019 CAPEX, December 10, 2018

I'm posting this again because it provides more data points regarding Kazakhstan. Data points from oilprice:

• Chevron, 2019 CAPEX; first annual increase since the 2014 oil price crash
• most of Chevron's investment geared toward short-cycle projects (i.e., shale)
• Tengiz field, western Kazakhstan steppe: Chevron to invest $4.3 billion in 2019 in the Future Growth Project
• Chevron "holds 50% in the operator of the Tengiz field, Tengizchevroil (TCO)
• other shareholders:
• Kazakhstan's state-held energy firm KazManayGas, 20%
• ExxonMobil Kazakhstan, 25%
• LukArco, 5%
• the numbers are a little hard to figure out, but eventually, the field should produce one million boepd (compare to Bakken currently producing 1.3 million bbls crude oil per day)
• Tengiz expansion
• ultimate total cost estimate: $36.8 billion
• Tengiz: deepest producing supergiant oil field
• Tengiz: largest single-trap producing reservoir in existence
• 2018: $3.7 billion
• for Chevron: two pillars for CAPEX spending
• US shale
• Tengiz, Kazakhstan field expansion
• for the Permian, in contrast: $3.6 billion
• for other US shale plays: $1.6 billion
• total 2019 CAPEX: $5.2 billion vs $4.3 billion in 2018

Saudi Foreign Exchange Reserves -- October, 2018, Data

Link here.

Active Rigs Trending In The "Wrong" Direction? Number Of North Dakota Active Rigs Jumps To 68 -- Highest In Four Years -- December 12, 2018

ISO New England: link here; spiked to $150/MWh; coal at 5%; later in the evening, around midnight, coal went to 8%; 

Natural gas: drops 7%; trading just above $4.00 right now;


Active rigs:

$51.15	12/12/2018	12/12/2017	12/12/2016	12/12/2015	12/12/2014
Active Rigs	68	51	41	65	181

Five new permits:

• Operators: Equinor (4); XTO
• Fields: Ragged Butte (McKenzie); Alkali Creek (Williams)
• Comments: Equinor has permits for a 4-well Stallion pad in 33-151-101; XTO has a permit for a Halverson permit in 33-155-95

Eleven permits renewed:

• White Butte Oil Operations (8): eight Jore Federal permits in McKenzie County;
• Oasis (3): three Lewis Federal permits in McKenzie County

Six producing wells (DUCs) reported as completed:

• 31772, 19 (no typo), BR, Ivan 7-1-29MBH, Elidah, t11/18; cum -- ; neighboring well, #19712, off line since 8/18;
• 34167, 1,550, Hess, SC-Hoving-154-98-1003H-3, Truax, t10/18; cum 3K after 3 days;
• 34478, 1,661, Whiting, Moen 41-2-5TFH, Stockyard Creek, t11/18; cum --; 
• 34957, 779, Whiting, Moen 41-2-1TFH, Stockyard Creek, t11/18; cum --;
• 34479, 1,578, Whiting, Moen 41-2-5H, Stockyard Creek, t11/18; cum --;
• 34477, 1,053, Whiting, Moen 41-2-6HU, Stockyard Creek, t11/18; cum --;
• neighboring wells to the Moen wells:
• 26421: definite jump in production; off line for less than a month;
• 20730: definite jump in production; off line for a little more than a month;

The Market, Energy, And Political Page, Part 3, T+37 -- December 12, 2018

The weekly US petroleum report, link here:

• US crude oil inventories: decreased by a miserable 1.2 million bbls
• US crude oil inventories: 442 million bbls; hardly any sign of re-balancing
• WTI: up slightly, at $52.48, after report released
• refineries operating at 95% capacity; unchanged
• both gasoline and distillate production pretty much unchanged from previous week, but both are about 0.5 million bbls/day more than historic norm of 10 million bbls and 5 million bbls respectively
• total products supplies averaged about 21 million bbls/day; up almost 6% over same four-week period last year
• jet fuel remains the outlier with production 3% more than comparable four-year period last year
• overall, a very, very uninteresting report
• gasoline demand: see below

Re-balancing spreadsheet: the ups and downs of the past four weeks (since I started tracing this again) works out to a delta of .... drum roll ... exactly 0.00 million bbls change in the US crude oil inventory. At this rate, there will never be any re-balancing.

Week	Date	Change w-o-w	In Storage	Weeks to RB to 350 Million Bbls
Week 0	November 21, 2018	4.9	446.90	N/A
Week 1	November 28, 2018	3.6	450.50	N/A
Week 2	December 6, 2018	-7.3	443.20	N/A
Week 3	December 12, 208	-1.2	442.00	Never
		Average: 0.0

By the way, take a look at operating capacity of refineries, and then take look at today's RBN Energy blog on what refineries will need to do to meet IMO 2020 mandates.

Gasoline demand, link here: 

The Market, Energy, And Political Page, Part 2, T+37 -- December 12, 2018

Take the $1.6 billion; build the wall; declare victory; and, move on:

But it is amazing how much we have given Iran over the years. Occasional-Cortex should add up all the foreign aid the US has given to North Korea and Iran over the years -- it would pay for "Medicare for all."

Liquor: From The Williston Herald: update on the proposed liquor license ordinance.

At a standing-room only meeting at Williston City Hall Tuesday, Williston Principal Planner Rachel Laqua presented changes to the current ordinance to city commissioners. Members of the Liquor Committee have been involved in discussions for a year to change the city's current ordinance, with the intention of streamlining the number of license types, modernizing the language of the ordinance, as well as moving from a population-based system to a more open, fee-based system, which would allow for a larger number of liquor licenses within the city.

I always find it amazing what gets folks excited. LOL. Standing room only.

Mexico: how to fast-track the new refinery -- skip the environmental impact study. 

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The Market, Energy, And Political Page, T+37 -- December 12, 2018

France: this is the question troubling me today. Did President Macron say:

• qu'ils mangent le gâteau; or,
• qu’ils mangent de la brioche?

Regardless, this was Pelosi's response: miettes de pain. Pronunciation here.

The wall: political theater. The president wants $5 billion. Congress will give him $1.6 billion. He's willing to veto any new spending bills unless he gets the $5 billion.

Migrants: just blew their story. Claiming "political asylum" they caravan migrants now say they will leave the caravan and return to their home countries if they each get $50,000 from the US. They will use the $50,000, they say, to start their own businesses in their home country. They say that's a small amount considering all the money US citizens stole from Honduras. No link. Story easily found.

Apple phone sales in trouble. I don't think I've ever seen this before. Going into Christmas season Apple has slashed prices. I think these are the $1,000-phones. They are now being advertised for $499 on the Apple site.

Wayfair. Apparently this is a big story in Boston. Wayfair is a huge e-commerce company headquartered in Boston. The company is getting yet another tax break from the state for agreeing to increase the number of jobs in the state. Meanwhile, over at social media sites, I continue to see the trope that the shale industry is going broke, that it cannot make money on $50-oil. In fact, many (most?) shale operators are doing just fine. Some went away, some reorganized after the Saudi Surge (2014 - 2016) but are now better prepared for the current turbulence. Many are paying dividends. Wayfair: in business since 2002, and has not yet turned a profit.

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.

Three Wells Coming Off Confidential List Today; One Will Be A DUC -- December 12, 2018

Hess: first to offer oil and gas apprenticeships in North Dakota. 

ISO New England: link here. Right on schedule --

• demand surge
• natural gas kicks in
• renewables unchanged
• request for Canadian hydro
• spot price spikes to $150/MWh
• to hold down costs, coal plants fired up
• coal well over 4%: 7% right now; 8% peak yesterday

Oil tankers find solace in shale -- Bloomberg.

Maiden LNG cargo leaves Corpus Christi -- Rigzone. See this link for background, interactive map.

ADNOC claims first.

Calling the move unprecedented, Abu Dhabi National Oil Co. reported Tuesday that it has safely completed the first co-loading of liquefied petroleum gas and propylene onto the same vessel. The products are typically shipped separately.

According to ADNOC, successfully loading approximately 12,600 metric tons of propylene and 33,000 metric tons of LPG onto a single vessel – docked in Ruwais,

Peak oil? Hardly. EIA says US domestic oil production rising despite low prices.

New refinery? Alberta may build one. 

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Back to the Bakken

Note: yesterday it was noted that MRO extended its core position in the Bakken. This announcement was made in the face of tanking WTI prices, trading at about $50 when the announcement was made. Speaks volumes.

Wells coming off the confidential list today -- Wednesday, December 12, 2018:

• 34115, 612, Lime Rock Resources, Neal 2-33-28H-144-95, Murphy Creek, 50 stages; 6 million lbs, 6/18; cum 58K 10/18;
• 34114, 457, Lime Rock Resources, Twist 2-4-9H-143-95, Murphy Creek, 50 stages; 6 million lbs, t6/18; cum 51K 10/18; 
• 33893, SI/NC, Hess, SC-5WX-152-99-0310H-4, Banks, no production data, 

Active rigs:

$52.60	12/12/2018	12/12/2017	12/12/2016	12/12/2015	12/12/2014
Active Rigs	65	51	41	65	181

RBN Energy: IMO 2020 and the need for increased global oil refinery runs.

The IMO 2020 rule, which calls for a global shift to low-sulfur marine fuel on January 1, 2020, is likely to require a ramp-up in global refinery runs — that is, refineries not already running flat out will have to step up their game. Why? Because, according to a new analysis, the shipping sector’s need for an incremental 2 MMb/d of 0.5%-sulfur bunker less than 13 months from now cannot be met solely by a combination of fuel-oil blending, crude-slate changes and refinery upgrades. The catch is, most U.S. refineries are already operating at or near 100% of their capacity, so the bulk of the refinery-run increases will need to happen elsewhere. Today, we continue our look into how sharply rising demand for IMO 2020-compliant marine fuel may affect refinery utilization.

This is the third blog in this series, and the latest of the many blogs about the ongoing effort by the International Maritime Organization (IMO) — a specialized agency of the United Nations — to ratchet down allowable sulfur-oxide emissions from the engines that power the 50,000-plus tankers, dry bulkers, container ships and other commercial vessels plying international waters.

The current 3.5% cap on sulfur content in bunker (marine fuel) in most of the world is set to be reduced to a much stiffer 0.5% on January 1, 2020. [There is an even tougher 0.1%-sulfur limit already in place in the IMO’s Emission Control Areas (ECAs), which include Europe’s Baltic and North seas and areas within 200 nautical miles of the U.S. and Canadian coasts.] There are three primary options shipowners have to achieve compliance with IMO 2020: (1) continue burning high-sulfur bunker (HSB; sulfur content up to 3.5%) and install an exhaust gas cleaning system (scrubber) to eliminate most of the sulfur dioxide emissions; (2) switch to marine distillates or low-sulfur bunker blends whose sulfur content is 0.5% or less; or (3) use alternative low-sulfur fuels like liquefied natural gas (LNG) or methanol.