Was Occasional-Cortex On The Board? -- February 21, 2019

I can't wait to read about this ... later. Link here.

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TSLA Drops Well Below $300

Consumer Reports disses. Significant reliability problems. Must have been the cold weather.

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US Crude Oil Exports

I missed this earlier, but fortunately caught it in a tweet from Crudehead / #OOTT.

Then, later a reader sent me this note:

Oil exports of 3,607,000 barrels per day are not unremarkable...in fact it tops the previous record by 12%:

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCREXUS2&f=W

(Ok, i missed this the first time I looked at it, too ... it took a CNBC headline to clue me in ... Imust be slowing down in my old age...)

That caught my attention. I really didn't pay attention until the reader sent me the above note but think about that ... the US is producing about 12 million bopd and is now exporting almost 4 million bopd.

Not only is the US exporting record amounts of crude oil, but just as important we aren't importing much. The money in both directions is important, but even more importantly, we are no longer being held hostage to some foreign country or cartel supplying that oil.  

4 million bopd x $50/bbl  = $200 million/day = $73,000 million / year

$22 trillion / $73 billion =  220 x 10^11 / 73 x 10^9 = 3.01 x 10^2 = 301 years. Sort of puts the $22 trillion US debt into perspective. 

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For The Granddaughters 

My Playlist At Midnight

The Last Train To Clarksville, The Monkees
Yellow River. Living next door to Alice. Pussycat. Lights on the hill. Filmed on Bruce Highway. Great name for a highway.

Got my mind set on you. Twist in my sobriety. Sealed with a kiss. Sixteen reasons. Runaway. And then this. Mr Lonely. Red River Ball. We'll sing in the sunshine. I go to pieces.

Nothing has haunted me so much as this clip in a long, long time. Knowing the plot of this movie, I could never, never watch it. It would be way too painful. 

Making America Great -- Another Record -- February 21, 2019

From twitter:

For Newbies: A Rattlesnake Point Well -- February 21, 2019

This page will not be updated.

This page is for newbies.

We've discussed wells in Rattlesnake Point ad nauseum on the blog. I'm simply updating wells that caught my interest over the past six months or so.

The real purpose of this post: to remind newbies that it is absolutely impossible to predict how the Bakken or any given well in the Bakken will turn out.

When I first started blogging, I was told that I was cherry picking (I plead guilty as charged) and that many wells were uneconomical. And by implication, the Bakken would fail.

I argued that even these uneconomical wells played a role. Three important roles:
held the lease by production, no matter how low the production, as long as it kept producing
provided geologists with lots of information about the geology
provided operators an opportunity to improve their drilling/completion strategies
I never, never thought, at the time, about the halo effect, work-overs, mini-re-fracks, or major re-fracks.

But look at this well. In addition to the reasons already mentioned, look how this well "turned around."

The well:

• 17089, 400, CLR, Bridger 44-14H, t4/08; cum 358K 12/18; and then back on confidential; re-fracked 4/17;

Full production profile at this post.

It's IP was pretty poor, even for the time:

• 24-hour: 400 bbls
• 30-day: 8,000 bbls
• 90-day: 18,000 bbls

But it plateaued fairly quickly and, though low, was a steady Eddy when it came to production.

By seven years or so, it looked like a pretty miserable well. I did not check but very likely put on "stripper well" status.

Then, all of a sudden it shows a bit of life. In late 2015 the well shows a small jump in production, and it stayed there for about one year.

But then it was taken off-line for a year so.

And then it was re-fracked in early 2017:

• 40 stages; 14.3 million lbs
• "new IP": 1,344
• it was a re-entry well
• the re-entry was drilled in the existing horizontal lateral at the 20,845-foot point. 
• TD was reached at 21,158' (the horizontal was extended by 313 feet)
• "Lateral 1 was in the very upper part of the middle Bakken and in the Lower Bakken formation."

After the re-frack, this well turned out to be a very, very good well. I assume it will have work-overs, mini-re-fracks, and perhaps major refracks over the next 30 years. This well was first drilled in 2008 but really wasn't much of a good well until the re-frack, 2017. Technically, this well is ten years old, but from the "real" frack, it is only two years old. All infrastructure costs were sunk (road, pad, pipelines, etc) a long time ago. For the cost of extending the horizontal 300 feet and a big re-frack, CLR essentially got a brand-new well. In addition, the geologists and drillers learned more about the Bakken.  

Selected production profile:

BAKKEN	11-2017	30	16622	16901	19907	19639	19639	0
BAKKEN	10-2017	31	22673	21904	16941	24616	22715	1901
BAKKEN	9-2017	27	18302	18465	15589	19122	16196	2926
BAKKEN	8-2017	31	27510	27488	27427	28501	21738	6763
BAKKEN	7-2017	5	2102	2047	837	1178	85	1093
BAKKEN	6-2017	1	519	230	1306	317	0	317
BAKKEN	5-2017	0	0	0	0	0	0	0
BAKKEN	4-2017	0	0	0	0	0	0	0
BAKKEN	3-2017	0	0	0	0	0	0	0
BAKKEN	2-2017	0	0	0	0	0	0	0
BAKKEN	1-2017	0	0	0	0	0	0	0
BAKKEN	12-2016	0	0	0	0	0	0	0
BAKKEN	11-2016	0	0	0	0	0	0	0
BAKKEN	10-2016	0	0	0	0	0	0	0
BAKKEN	9-2016	0	0	0	0	0	0	0
BAKKEN	8-2016	0	0	0	0	0	0	0
BAKKEN	7-2016	6	335	644	87	433	66	367
BAKKEN	6-2016	30	2106	2220	602	2532	159	2373

By the way, #31847, Bridger 9-14H1, exactly parallels this well, separated vertically, but hardly horizontally. #31847 is a Three Forks first bench well.   

Hess With Permits For A 5-Well Pad In Dollar Joe -- February 21, 2019

Active rigs:

$56.83	2/21/2019	02/21/2018	02/21/2017	02/21/2016	02/21/2015
Active Rigs	66	55	42	38	127

Five new permits:

• Operator: Hess
• Field: Dollar Joe (Williams County)
• Comments: Hess has permits for a 5-well GO-Dahl pad in SESW quadrant of section 22-156-97;

Three permits canceled:

• XTO: three Lonnie Federal permits in Williams County

Two permits renewed:

• Newfield: two Obenour permit in McKenzie County

One producing well (a DUC) reported as completed:

• 35395, 360, Behm, Nygaard 29-8V, Pronghorn, target: the Red River D; t1/19; cum -- ; TD = 13,970 feet, a vertical well; 
• for an example of "monster Red River wells," see this post; notice to newbies -- this is not likely to be a monster well; Red River "monster wells" are few and far between;
• Geologic markers for this well:

 

For The Record -- And For The Kennedy Grandchildren -- February 21, 2019

Link here.

St. Paul and Minneapolis declared snow emergencies Wednesday as a winter storm dropped up to 10 inches on the metro area, making this the snowiest February on record in the Twin Cities by a wide margin.

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Winter Storm Quiana

Hammering the southwest.

Desert southwest snow. Being measured in feet.

I could be wrong, but it seems many all-time snow records in the US fell this winter. Could be wrong. But lots of snow. 

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These Guys Come And Go

Flashback from 1970

I "grew up" with Dr Paul Ehrlich. Remember him. I graduated from high school in 1969. My first year of college, 1969 - 1970, a fairly impressionable kid. An one of those I remember who impressed me was Dr Paul Ehrlich. I was fortunate to be so busy in college I was unable be come an activist. Wow.

From Deplorable Climate Science:

To think that the oceans would be dead in as little as ten years. Wow. Ehrlich? Still kicking at age 86.

Reason #45 Why I Love To Blog -- February 21, 2019

The other day I mentioned that Algeria was the country most likely to be affected by the glut of light oil.

I was close, but no cigar.

For newbies: again, the current glut of oil has to do with the "right" kind of oil for the US, not oil "overall."

It turns out that Nigeria is likely to be affected first.

From oilprice: Nigeria could soon start cutting oil production. Saudi Arabia says it will stomp on Nigeria, enforce OPEC production cuts. Wow. Nigeria must produce a lot of oil. Let's look. The data points:

• production cut quota of 2.5% of 1.7 million 
• a cut of 40,000 bopd

But apparently Nigeria, actually increasing production by another 200,000 bopd or about 10% of Nigeria's total production.

Whatever.

Two things.

First: Nigeria's oil has an API that translates to "medium-high oil," the very same API range as that of Saudi Arabia.

That's the very same segment that the world wants.

Second: I think this is the bigger story. If Saudi Arabia is going to stomp on a fellow OPEC member who had a quota cut of 40,000 bopd -- that is further evidence that Saudi Arabia is in deep trouble. Saudi Arabia cannot even afford competition from a small player any more.

Nigeria's oil:

EIA Weekly Petroleum Report -- February 21, 2019

Link here.

But first, let's see what WTI is doing: down 16 cents; right at $57

• EIA weekly crude oil inventories: increased by 3.7 million bbls
• EIA weekly crude oil inventories: 454.5 million bbls; at 6% of five-year average; and the 5-year average keeps increasing
• refineries operating at an incredible low 85.9% capacity (second week in a row that we have seen incredibly low operating rate)
• both gasoline and distillate production decreased modestly last week, most background noise
• but again, imports up over 1.3 million bopd -- suggesting that the refiners still need that heavy oil to offset all the light oil from the Permian
• having said that, crude oil imports are still down 10% compared to same four-week period last year
• everything else seems unremarkable

To re-balance:

Week	Date	Change w-o-w	In Storage	Weeks to RB to 350 Million Bbls
Week 0	November 21, 2018	4.9	446.9	N/A
Week 1	November 28, 2018	3.6	450.5	N/A
Week 2	December 6, 2018	-7.3	443.2	N/A
Week 3	December 12, 2018	-1.2	442.0	Never at this rate
Week 4	December 19, 2018	-0.5	441.5	Never at this rate
Week 5	December 28, 2018	0.0	441.4	Never at this rate
Week 6	January 4, 2019	0.0	441.4	Never at this rate
Week 7	January 9, 2019	-1.7	439.7	A long, long time
Week 8	January 16, 2019	-2.7	437.1	Won’t happen in my lifetime
Week 9	January 24, 2019	8.0	445.0	Won’t happen in my lifetime
Week 10	January 31, 2019	0.9	445.9	Won’t happen in my lifetime
Week 11	February 6, 2019	1.3	447.2	Won’t happen in my lifetime
Week 12	February 13, 2019	3.6	450.8	Won’t happen in my lifetime
Week 13	February 21, 2019	3.7	454.8	Won’t happen in my lifetime

In the past thirteen weeks, there were only five weeks in which crude oil inventories actually dropped, and of those five weeks, only one was remarkable: week 2 -- a drop of 7.3 million bbls.

The US crude oil inventory has actually increased significantly since 3.5 months ago, from 447 million bbls to 455 million bbls.

Where In The World Are Amad And Abqaiq?-- February 21, 2019

Updates

March 1, 2019: the Amad has reached South Korea. Meanwhile, the Abqaiq must be out at sea; we have had not updates since February 19, 2019, which is typical once the ships are out at sea (unless one wants to pay for the satellite information -- and I don't).

February 25, 2019: Bloomberg has almost exactly the same story -- an op-ed -- as the story linked in the February 23, 2019, note (below) but with a few more details about "heavy vs light."

February 23, 2019: one wonders what the Abqaiq might be doing. LOL. This story might explain some things:

They are slowly plowing their way across thousands of miles of ocean toward America’s Gulf of Mexico coastline. As they do, twelve empty supertankers are also revealing a few truths about today’s global oil market.

In normal times, the vessels would be filled with heavy, high sulfur Middle East oil for delivery to refineries in places like Houston or New Orleans. Not now though. They are sailing cargo-less, a practice that vessel owners normally try to avoid because ships earn money by making deliveries.

The 12 vessels are making voyages of as much as 21,000 miles direct from Asia, all the way around South Africa, holding nothing but seawater for stability because Middle East producers are restricting supplies. Still, America’s booming volumes of light crude must still be exported, and there aren’t enough supertankers in the Atlantic Ocean for the job. So they’re coming empty.

“What’s driving this is a U.S. oil market that’s looking relatively bearish with domestic production estimates trending higher, and persistent crude oil builds we have seen for the last few weeks,” said Warren Patterson, head of commodities strategy at ING Bank NV in Amsterdam.

“At the same time, OPEC cuts are supporting international grades like Brent, creating an export incentive.”The U.S. both exports and imports large amounts of crude because the variety it pumps -- especially newer supplies from shale formations -- is very different from the type that’s found in the Middle East. OPEC members are likely cutting heavier grades while American exports are predominantly lighter, Patterson said.

Original Post

Amad (link here): within a few days of its destination, South Korea.

Abqaiq (link here): this tanker departed Saudi Arabia half-ful with crude oil destined for Venezuela. Venezuela needs foreign oil to dilute its very heavy oil so that it can be used in its own refineries. It appears that Saudi Arabia may have provided them that oil. Or it's also possible, Saudi Arabia topped off the tanker with Venezuelan oil and is now on its way to South Africa.

With regard to the Abqaiq, perhaps this is a related story from The WSJ today:

Venezuelan oil supplies hit five-year high as buyers become elusive. U.S. sanctions, announced January 28, 2019, are stifling crude sales and could continue to drive up oil prices.

Last week, Venezuelan crude inventories reached 32.8 million barrels, a record high in data going back to January 2014 .

A lot of extraordinary graphs at the linked site. Archived.

Update On Saudi Production -- Kemp -- Reuters -- February 21, 2019

Link here.

The enlarged group agreed to cut by a total of 1.2 million barrels per day (bpd) in the first six months of 2019, with reductions to be shared between OPEC (0.8 million bpd) and its Russia-led allies (0.4 million bpd).
In the event, Saudi Arabia cut its own output by 380,000 million bpd in January, exceeding its pledged share of 320,000 bpd and accounting for more than half of the total cuts achieved by OPEC in the first month.
Saudi Arabia’s aggressive reductions have compensated for poor compliance with the agreement by some other OPEC and OPEC+ members (“OPEC oil output falls by 890,000 bpd in January”, Reuters, Jan. 31).

The kingdom has gone further and pledged to reduce its output by more than 1 million bpd from 11 million-plus in November to only 9.8 million in March, Oil Minister Khalid al-Falih said in a recent interview with the Financial Times.
The kingdom’s shift has helped to boost front-month Brent futures prices by more than $15 a barrel (30 percent) since late December and push the six-month calendar spread from a $1.70 contango to 45 cent backwardation.

My 10-second sound bit on global production:

• US, Russia, Saudi Arabia all producing about the same
• each producing about 11 million bopd
• total global production: 100 million bopd
• US production now at record high: 12 million bopd
• US production will peak at 12.4 million bopd
• now we see that Saudi Arabia will produce less than 10 million bopd in March (non-air conditioning season in Saudi Arabia in March)

The graphic below is an old graph posted many times on the blog, but one has to go all the way back to 2009 to see Saudi Arabia production drop to 10 million bopd -- this is quite stunning

I've talked about this on numerous occasions over at "The Big Stories."

It looks like I will have to update that chart. LOL See graphic below from this link:

From this link:

I remember all that talk early in the Bakken boom that Saudi Arabia would produce 12 million bopd.

From this link, Saudi oil imported by the US:

Weekly Natural Gas Fill/Draw -- February 21, 2019

Weekly natural gas fill/draw, link here.

The winter of 2018 - 2019 was the transition year. A number of federal and state policy decisions over the years led to the record low natural gas inventories. The country seems to have adjusted. I assume that from here on out we will be fine.

New Unemployment Claims Drop A Stunning 23,000 -- Well Below Even The Lowest Estimate -- February 21, 2019

Jobs (link here):

• new claims
• prior: 239K
• consensus: 225K (a drop of 14K)
• actual: 216K

Jobs: from the link above, this "analysis":

Claims pivoted higher early in the year largely on the effects of the government shutdown. With those effects now having waned, claims data are pointing to continued and unusually strong demand for labor. Comment: yes, start with the "higher" unemployment claims in the first paragraph, saving the really, really remarkable news for the second paragraph.]

Initial claims fell a very sharp 23,000 in the February 16 week to a 216,000 level that is 4,000 under Econoday's consensus range. Yet the 4-week average, reflecting the prior shutdown-related increases, rose 4,000 to 235,750 (unsaid: skewed by the government shutdown).

What these results indicate for February's employment report, however, is perhaps unclear. The February 16 week was the sample week for the monthly employment report and comparisons with the sample week for the January report do point to easing strength, up 4,000 at the headline level in February and up a sizable 15,250 for the 4-week average. But the enormous strength of January's employment report, headlined by a 304,000 surge in non-farm payrolls, suggests that even a little softer results could still equate to a very strong employment report for February.

Jobs: what are others saying about this huge drop in unemployment claims. This was really quite stunning.

• not even linked at Drudge Report yet
• jobs story nowhere to be found at CNBC
• jobs story buried over at Fox Business: link here; 
• headline story over at CNBC: market falls 100 points after weak economic data; that data?
• US existing home sales fall sharply to 3-year low; house prices rose only modestly
• how bad were housing sales?
• analysts forecast an annual rate of 5.0 million units
• actual: 4.94 million units
• let's get a grip folks
• false precision: 5.0 - 4.94 million = 60,000 houses (1.2%)
• big story for past month -- partial government shutdown
• paperwork processing slowed; folks unable to qualify if laid off
• huge winter storms; kept people from housing market 
• and the snow continues, even in Las Vegas 

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Nuisance Suit Thrown Out By Federal Judge

Link at Reuters.

Two boys, ages 7 and 11, diagnosed with asthma, sued President Trump/EPA for rolling back global warming regulations.

Tossed.

Falling CAPEX But Solid Production Growth -- RBN Energy -- February 21, 2019

Jobs (link here):

• new claims
• prior: 239K
• consensus: 225K (a drop of 14K)
• actual: 216K

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Back to the Bakken

One well coming off the confidential iist today -- Thursday, February 21, 2019: 87 wells for the month; 190 wells for the quarter

• 33010, SI/NC, Petroshale, Petroshale US 12H,

Active rigs:

$57.11	2/21/2019	02/21/2018	02/21/2017	02/21/2016	02/21/2015
Active Rigs	66	55	42	38	127

  
RBN Energy: early E&P guidance shows falling CAPEX but solid production growth.

Once the “riverboat gamblers” of U.S. industry, executives at exploration and production companies got religion after the brutal oil price crash in late 2014 and adopted a far more conservative approach to investment based on their new 11^th commandment: “Thou shalt live within cash flow.” So it’s no surprise that early 2019 guidance issued by more than half of the 45 major E&Ps we track shows them cutting back capital investment in response to last fall’s decline in oil prices from a more optimistic scenario a year ago.

Nearly three-quarters of the 26 companies reporting their 2019 guidance are reducing exploration and development outlays, while only three of the remainder are budgeting increases greater than 10%. What is surprising is that these forecasts include solid production growth virtually across the board, especially for E&Ps that focus on crude oil. Today, we look at how a representative group of U.S. E&Ps are dealing with lower crude prices.