The Million Dollar Way (The Bakken Oil Blog): 04/02/19

Tuesday, April 2, 2019

JAG -- Earnings Call -- 4Q18 And FY18

Jagged Peak is a pure play growth-oriented, independent oil and natural gas company focused on the development of its top-tier contiguous acreage position in the heart of the Delaware basin, a sub-basin of the Permian Basin in West Texas.

With approximately 75,000 net acres in the adjacent counties of Winkler, Ward, Reeves and Pecos, Jagged Peak has identified more than 2,000 drilling locations targeting significant original oil-in-place within multiple stacked hydrocarbon-bearing formations.

By using advanced drilling and completion techniques and leveraging our management team’s extensive experience and technical expertise we are positioned to execute on maximizing returns to shareholders.

Presentations: link here.

Updates

May 21, 2019: based on recent presentation, it looks like about 35,000 bopd, maybe 40,000 boepd, off 75,000 acres. The better operators in the Bakken are getting about that same amount of production out of 175,000 net acres. Just a rough guess.

May 21, 2019: from CNBC, April 9, 2019 --

Original Post

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

JAG.

Jagged Peak Energy, Inc.

Website here.

Permian play.

4Q18 and FY18 earnings call, link here.

core development: Whiskey River, Wolfcamp A
capital allocation, focused on three areas

Whiskey River: 50%; all but 1 of the Whiskey River wells will be on multi-well pads

Chochise: will bring on 7 wells in 2019; will commence drilling a 9-well co-development pilot that will come online in 1Q20

Big Tex: bring online 5 wells in a high-graded fairway; of the 5, one will target the Woodford interval; it was where their first successful test was in 2017; if the 5 are "good," then consider an additional 7 wells for 2H19

2019 rig program: 5 rigs throughout the year; one frack spread
may add spot frack crews to keep up with pace of drilling
it looks like optimizing a 4-rig or 5-rig / one frack spread
free cash flow: another 18 to 30 months before we might see FCF, and it is highly dependent on WTI price
Cochise, 9-well co-development pilot: 3 well pads; test 3 different landing zones in that particular area, so JAG will have the third Bone Spring and then 2 landing zones within the Wolfcamp A; will start drilling 3Q19; should be completed by late 4Q19 or early 2020
758 completed lateral feet in 2018
1,400 completed lateral feet in first six wells in 2019 due to design changes
$1,250 per foot completion
sand: all regional since May, 2018
analyst noted: more wells coming on line but BOE seems to be decreasing; response from JAG: due to delays inherent in pad driling
wrote off some acreage in 4Q18 after seismic work; suggested that it was a "thousand acres" but I may have that wrong

Much more at the link.

Tuesday, April 2, 2019, T+90, Part 2

Best barbeque restaurant in Ellis County, TX, south of Dallas/Ft Worth. The Vault.

And, then, of course, only in Texas, a "meat church" in downtown Waxahachie. Next "sermon":

If interested in any of these classes, here's the schedule.

If I had all the money in the world, I would:

have a penthouse suite in Tokyo
have a house on the ocean just south of Rockport, MA
have a house on the tip of Cape Cod, MA
have brisket and bourbon at least twice a month in Ellis County, Texas

If I had all the money in the world, I would not have enough time to do all the things I would love doing.

A better "alternative"? No matter how long the Lord plans for me to be on earth, instead of having all the money in the world, I would love one more year with Sophia. LOL. She told me all about her skiing trip in Utah this past weekend. She's four years, ten months old. She had two days of ski lessons in Angel Fire, New Mexico, over Christmas break; and, two days of lessons over spring break in Vail, Colorado. This past weekend, she skied two days with her sisters and dad in Park City, Utah. She kept up with her sisters on all the blue trails. One blue trail was particularly steep at the beginning so her dad "carried" her down the first part of the ski run.

Funny story. Dad and three daughters have boarded on the plane to depart Salt Lake City. The ages of the daughters: 15, 12, and 4.

At the last minute, their Dad realizes they've forgotten something in the rental car. He tells the girls to stay on the plane. He will try to make it back in time (of course he knows he won't) but if he doesn't he will catch up with them later.

The plane takes off. No one says anything. No one asks any questions. But we now have three minors traveling American Airlines unaccompanied, including a 4-year-old. LOL.

They arrived in DFW as scheduled and found their way to baggage claim and we picked them up. Their dad arrived home on the next plane.

All's well that ends well.

By the way, somehow out of all that, Sophia got her "wings."

Tuesday, April 2, 2019, T+90, Part 1 -- Rambling Thoughts

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.

Rambling thoughts. Not ready for prime time.

Ninety days into the "new" congress, and notable legislation acted upon or pending:

Okay, moving on.

Unless you've been under the Geico Rock, articles from the last few days suggest just how big the Chinese economy is, how big it's going to get, and how fast it's going to get there. These are stories just from the past three or four days.

I'll supply the links later if the spirit moves me.

First, just how big is it? If one measures an economy by CO2 emissions, China's economy is huge.

How big will it get? Look at how much more energy China will add over the next decade.

Finally, how fast will this happen? Fast, really fast. Headline story over at oilprice: China can't get enough of Brazilian crude oil. Sanctions on Venezuelan oil have shifted a lot of crude buyer's focus to surrounding focus to surrounding Latin nations, but can it keep with demand?

Two weeks ago the US stock market started falling because there were reports and concerns that the Chinese economy was slowing.

Yesterday the market surged, well over 300 points. Why? There were reports that the Chinese economy had bounced back and was going to do just great. By the way, speaking of which, the market is down today (profit-taking) but one large company is notably bucking the trend. Apple. Apple is up an astounding 1.5% on a down day for the market, and after a run-up last week. Huge presence in China. Just saying.

Now where was I?

There was a recent article out the other day about the number one issue that drove the US equity market during the 30 years that I was actively investing, from 1977 to 2007: OPEC. In a nutshell, during those 30 years OPEC controlled the global economy. That's not me saying that; it was a credible investor. I forget who it was. Doesn't matter. The meme matters.

OPEC now? Important but no longer drives the global economy. Today, what are the two "issues" that drive the US stock market? The Fed (whether it will raise rates or not) and the Chinese economy.

Regarding the Chinese economy, the issue driving the market now is a manufactured "crisis," the Trump trade wars with China.

The Fed? In the big scheme of things, most folks believe that the Fed is independent, not controlled by the president.

China "trade wars"? Controlled 100% by Trump.

On another note, Motley Fool. Pump and dump. Three stocks that could soar. A gazillion publicly trade companies and the very, very, very first company to pump and dump? Xilinx! Awesome. Link here.

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Waxahachie, Texas

Posten Gardens.

One million tulips.

If you grow them, they will come.

At night, the tulip elves come out and paint little splashes of color on the tulips.

One in a million, my favorite:

Whoo-hoo! WTI Flirting With $63-Oil -- April 2, 2019

Weekly API crude oil data: a "surprise" build; I'm shocked, shocked --

forecast: a draw of 425,000 bbls (note the false precision)
actual: a build of 3.0 million bbls (I'm shocked, shocked!)

Platts forecast, posted earlier:

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Back to the Bakken

Active rigs:

$62.74	4/2/2019	04/02/2018	04/02/2017	04/02/2016	04/02/2015
Active Rigs	65	60	50	29	94

Twelve new permits:

Operators: Enerplus (10); WPX; Hess
Fields: Mandaree (Dunn); Squaw Creek (Dunn); McGregory Buttes (Dunn); Spotted Horn (McKenzie); Baskin (Mountrail)
Comments:

Enerplus has permits for a 2-well "Salmon/Sturgeon" pad in section 3-148-94; Squaw Creek
Enerplus has permits for a 8-well "African" pad in section 3-148-94, in McGregory Buttes and Mandaree oil fields (see graphic below)

WPX has a permit for a single Pheasant well in section 4-149-94, in Spotted Horn, on the reservation
Hess has a permit for another EN-Chamley well in lot 3, section 5-156-93, in Baskin oil field

One producing well (DUC) reported at completed but still shows up as a DUC:

34846, SI/NC, CLR, Patterson Federal 8-13HSL1, Banks, no production data, Three Forks Bench 1, 2560-acre spacing;

The graphic (see Enerplus 8-well "African" pad noted above); in the graphic, I call it a 10-well "African" pad but noting above that the pad has a Sturgeon well and a Salmon well, both of which will run into Squaw Creek, which seems to make sense, two fish "running" into a creek:

Disclaimer: in a long note like this, there will be typographical and factual errors. The graphic may be completely wrong. Proposed pad location is not drawn to scale and may be incorrectly placed. If this information is important to you, go to the source.

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One Million Tulips, Waxahachie, Texas

March - April

First Year Open To The Public: 2019

Planted, October, 2018

Links:

first-ever
one million bulbs (we had lunch with the "developer"; pictured in the video; he looks just like his picture); Thijs van Zaal;
Facebook
Kubota

Deep Doo-Doo -- Saudi Arabia's Foreign Exchange Reserves -- February, 2019, Data

See also most recent US import data, posted moment ago.

US Imported Oil From Saudi Arabia -- Latest Data Just Posted -- January, 2019, Data

We keep hearing that Saudi Arabia continues to ship less oil to the US, resulting in higher gasoline prices (since oil itself hasn't inflated a whole lot), and irritating President Trump.

The most recent figures have just been released. The data lags by two months. So, as of the first of April we have the January, 2019, data.

The US actually imported slightly more oil from Saudi Arabia in January, 2019, compared to one year earlier, January, 2018: 711,000 bopd vs 710,000 bod.

It's hard to believe that "we" will see numbers too much lower. And to think, at around 500,000 bopd had President Obama not killed the Keystone XL the "Saudi Arabia shortfall" would have easily been made up by Canada.

From the EIA, most recent data, US imported crude oil from Saudi Arabia, in thousands of bbls daily:

Free Cash Flow For E&P Companies (Combined Total) At Record Highs -- April 2, 2019

See this post -- posted earlier today -- for background: tale of two shale revolutions, or better stated, the two different views of the revolution.

In that post, RBN Energy suggested that oil companies should report a return to nice profits. The RBN Energy note I get is always a business day delayed, so that blog was actually originally posted late last week.

Look at this, today, April 2, 2019, from the Rigzone staff: E&P cash surge could mean return to super profits. Link here.

The world’s public E&P companies saw their free cash flow surge to nearly $300 billion last year and 2019 may be just as promising, according to analysis by Rystad Energy, head of upstream research Espen Erlingsen.

Rystad looked at estimated global FCF for all public E&P companies since 2010. Their analysis shows that FCF peaked in 2011 but declined between 2012 and 2014 due to increased budget investments and more commitments.

The FCF was reduced considerably in 2015 as the oil price collapsed.

However, since 2015, FCF has had a gradual recovery to the all-time highs of today.

“Our analysis of the latest annual reports from the majors clearly indicates that ‘super profits’ are back for large E&P companies,” said Erlingsen. “Free cash flow before financing activities was at a record high in 2018, and the mega profits were typically used to pay down debt and increase payments to shareholders.”

And thanks to higher oil prices, lower development costs and lower investment activity, Rystad believes 2019 could be another “blockbuster year.”

“…almost 70 cents for every dollar in profits generated last year for these companies ended up in shareholders’ pockets,” Erlingsen said.

This will be re-posted at the linked post above to keep this all together in one spot.

Graphic from the story linked above:

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Apples and Oranges

A lot of stories out today about how incredibly profitable Saudi Aramco is. It is said that Aramco's profits are more than Apple and Alphabet (Google) combined.

That's fine.

I could be wrong but I believe Saudi Aramco is the state oil company of Saudi Arabia and there are no in-country competitors. I could be wrong.

If so, it hardly makes sense to compare the profits of Saudi Aramco with those of non-oil companies, like Apple and/or Google.

It would be interesting to see the total profits of all oil companies in Saudi Arabia with the total profits of all companies (public and private) in the US. Something tells me we might see a different picture. And, of course, that would be interesting, because up until recently, it was my understanding that Saudi had more oil reserves than the US and that Saudi produced more oil than the US. If accurate, US oil companies, up until recently, were producing less than Saudi Arabia, but making more in profits.

Of course, one challenge that Saudi Arabia has: a fair amount of Aramco's production is bought/sold/used domestically, and my hunch is that it is not being sold at global market rates.

The Tale Of Two Shale Revolutions -- Re-Posting -- For The Archives -- April 2, 2019

Updates

April 2, 2018: Look at this, today, April 2, 2019, from the Rigzone staff: E&P cash surge could mean return to super profits. Link here.

The world’s public E&P companies saw their free cash flow surge to nearly $300 billion last year and 2019 may be just as promising, according to analysis by Rystad Energy, head of upstream research Espen Erlingsen.

Rystad looked at estimated global FCF for all public E&P companies since 2010. Their analysis shows that FCF peaked in 2011 but declined between 2012 and 2014 due to increased budget investments and more commitments.

The FCF was reduced considerably in 2015 as the oil price collapsed.

However, since 2015, FCF has had a gradual recovery to the all-time highs of today.

“Our analysis of the latest annual reports from the majors clearly indicates that ‘super profits’ are back for large E&P companies,” said Erlingsen. “Free cash flow before financing activities was at a record high in 2018, and the mega profits were typically used to pay down debt and increase payments to shareholders.”

And thanks to higher oil prices, lower development costs and lower investment activity, Rystad believes 2019 could be another “blockbuster year.”

“…almost 70 cents for every dollar in profits generated last year for these companies ended up in shareholders’ pockets,” Erlingsen said.

This will be re-posted at the linked post above to keep this all together in one spot.

Graphic from the story linked above:

Original Post

For the archives.

Two posts re-posted.

First, the one in which someone suggests that the shale revolution could end very, very badly because shale oil companies are not making money; most of not made a dime since the revolution began. That post begins:

Over the weekend I spoke to an individual who was the chief operations officer for a "mom-and-pop" Texas oil company some years ago. That company barely survived the Saudi deluge 2014 - 2016, and he moved on. He has not followed the oil industry particularly closely.

He reads much more than I do, but it is mostly "current events," a lot of surfing the net, not books. He was probably in his early 40s -- in round numbers, 40 years old. I am in my late 60s -- in round numbers 70 years old.

Some of his observations, our conversation.

He did not say anything that I had not heard before.

1. He suggested the oil sector today was much like the housing melt-down we had some years ago that caused the big crash. He reiterated the trope that no shale company has yet "made a penny." The shale oil companies were over-leveraged, lots of debt, and the banks must be terribly concerned. For argument's sake, I agreed, but noted that from owners and directors down to roughnecks and mineral owners, "everyone" was making money. The only two exceptions: investors and the banks. On that, we both agreed.

2. He talked about the shale sector as one entity; that it risked failing and taking investors and bankers along with it. Roughnecks, etc., would be laid off in huge numbers; the industry would implode. He referenced the US oil implosion of the 1980s. Whether it would affect the national economy (GDP) he was not sure. I pointed out that 'boom and bust" / wide swings in the oil sector were the norm in the oil industry. I said I doubted the entire sector would self-destruct. Some companies will fail/some will prosper. We saw this in 2014 - 2016 and in the big picture things seemed to work out relatively well, Perhaps very well for some. Really bad for others.

And it goes on much longer.

Second, the post from earlier today, linking an RBN Energy post that suggests E&P profits are surging.

RBN Eenrgy: surging E&P profits, lower costs belie negative sentiment. Archived.

Crude oil and natural gas prices went through a lot of ups and downs in the 2014-18 period, but the general trend was down. The average price of WTI crude topped $100/bbl in the first half of 2014; by year-end 2018 it stood at $45/bbl. Similarly, the NYMEX natural gas price topped $6.00/MMBtu in early 2014 but fell to a low of about $2.50/MMBtu last year and averaged little more than $3.00/MMBtu. The 44 major U.S. E&P companies we track sought to weather this storm of declining prices by drastically repositioning their portfolios and slashing costs to stay competitive in a new, lower price environment. Their efforts appear to have worked: 2018 profits surged in comparison with 2017 results and approached returns recorded in 2014, when commodity prices were much higher. So why are E&P stock prices languishing? Today, we look at the divergence between investor sentiment and the actual financial performance of U.S. E&P companies.

U.S. exploration and production companies (E&Ps) have found it very difficult to shake the aura of doom and gloom that shrouded the industry after the 2014-15 oil price crash brought many to the brink of insolvency. Investor sentiment, as reflected in the S&P Oil and Gas E&P stock index, tells the tale. After reaching a high of more than 12,000 in mid-2014, the index plunged to as low as 3,600 in early 2016. With crude prices and profits rising after that, the index climbed back to about 6,600 in the fall of 2018, but plummeted nearly 40% to 4,000 — one-third of the 2014 high — in the second half of December (2018) on fears of a return to red ink as oil prices dipped to $45/bbl. But recently released 2018 financial results from our universe of 44 major U.S. E&Ps provided strong evidence that belied the negative sentiment about the sector.

Despite the fourth-quarter oil price decline, the industry roared back to profitability in 2018. More tellingly, the industry has streamlined its cost structure so dramatically that overall 2018 profits were just 20% below those generated in the $100+/bbl environment in 2014. Remarkably, the Diversified E&P Peer Group — whose portfolios are roughly balanced between oil and gas — generated $14.10 per barrel of oil equivalent (boe) in profits in 2018, 7% higher than the $13.20/boe the group netted in 2014, when revenues were much higher. And with first-quarter 2019 oil prices rising 30% — the largest quarterly increase since 2009 — the industry appears to be on track for solid profitability again in 2019.

Clarifying Terms From The NDIC -- April 2, 2019; The #1 Reason Why I Love To Blog About The Bakken

#1 reason why I love to blog about the Bakken: feedback from readers.

A shout out to a reader from yesterday who reminded me of something yesterday.

I have either been wrong all these years, or have simply forgotten, but without going into details, suffice it to say that when a well comes off the confidential list, even if the well is not completed and goes on the SI/NC list (a DUC), the NDIC file report is no longer confidential.

I assume everyone following the Bakken already knew this. This is nothing new. But I either missed this or had forgotten all about it.

The purpose of the note is not to correct my error (LOL) but to give a huge shout out / thank you to the reader who tactfully reminded me of my error.

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A Dare

I dare global warmists to read this (see link below) -- the site had been banned by Facebook, but apparently Facebook has reversed that decision, calling it a mistake.

The global warming post I dare global warmists to read at this link.

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Random Update, The Fannie USA Well That MRO Reported Today -- April 2, 2019

More information on that nice MRO well reporting today:

33668, 3,278, MRO, Fannie USA 21-1H, Reunion Bay, 45 stages; 8.5 million lbs, t2/19; cum 31K after 18 days; the geological summary is not yet posted;

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	2-2019	18	30597	30275	32558	23321	0	21264
BAKKEN	1-2019	2	0	0	150	30	0	30

The graphic:

18514, 33-061-01196; no re-frack (FracFocus; no sundry form):

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	2-2019	14	9024	8968	3785	8622	0	8079
BAKKEN	1-2019	6	1337	1299	4832	1309	0	1224
BAKKEN	12-2018	0	0	0	0	0	0	0
BAKKEN	11-2018	0	0	0	0	0	0	0
BAKKEN	10-2018	14	1189	1702	288	1385	606	638
BAKKEN	9-2018	28	2271	2321	455	2689	2355	36
BAKKEN	8-2018	31	2564	2392	554	3071	2472	263
BAKKEN	7-2018	31	2619	2604	524	3030	1915	776
BAKKEN	6-2018	30	2529	2587	498	2881	2389	164
BAKKEN	5-2018	31	2722	2769	514	3030	849	1836

33431:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	2-2019	21	34960	35087	44663	37834	0	35476
BAKKEN	1-2019	6	11459	10877	17200	10382	0	9627

23176: still off line; off lie since 11/18;

21458: still off line; off lie since 11/18;

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Continuation Of "The Dinosaur Story"

See this post for background.

"The Day The Dinosaurs Died: A young paleontologist may have discovered a record of the most significant event in the history of life on Earth." From The New Yorker. I posted this story from another source earlier this week (month?). Archived.

The "three-metre problem": in a century and a half of assiduous searching, almost no dinosaur remains have been found in the layers three metret nine feet, below the KT boundary, a depth representing many thousands of years. Consequently, numerous paleontologists have argued that the dinosaurs were on the way to extinction long before the asteroid struck, owing perhaps to the volcanic eruptions and climate change. Other scientists have countered that the three-metre problem merely reflects how hard it is to find fossils. Sooner or later, they've contended, a scientist will discover dinosaurs much closer to the moment of destruction.

The scientist: Robert DePalma, writing from a truck stop in Bowman, North Dakota.

DePalma: a loner, from the University of Kansas. Claimed to have discovered the answer.

Hell Creek geological formation, outcrops in parts of North Dakota, South Dakota, Montana, and Wyoming.

Hell Creek: at the time of the impact, Hell Creek -- steamy, subtropical lowlands and floodplains along the shores of an inland sea, the

1902: first Tyrannosaurus rex found here.

Discussion of the KT layer.

The story of Walter Alvarez, a young geologist, and his father Luis Alvarez, a nuclear physicist, and the discovery of the rare metal iridium in the KT layer, in the 1970s.

1991, David Kring, the smoking gun paper: the Yucatán peninsula -- exactly the right age, the right size, and the right geochemistry. The crater and the asteroid were named Chicxulub, after a small Mayan town near the epicenter.

2010: most considered the issued "dead" or solved; the end of the story. But a competing hypothesis persisted: the colossal "Deccan" volcanic eruptions, in what would become India, spewed enough sulfur and carbon dioxide into the atmosphere to cause a climatic shift. The three-metre gap could be explained if the "Deccan" hypothesis was correct.

2004: DePalma, 22-years-old, began excavating a small site at the Hell Creek Formation. The site had once been a freshwater pond.

Found microtektites. [Wow, Los Alamos all over again, for me.]

As he continued to dig, it dawned on DePalma that "he had made the most important paleontological discovery of the new century."

The short bio of DePalma.

Jack Horner comes across as a bit of an idiot and a jerk in one part of the story.

DePalma does not have a Ph.D.

Now, back to Bowman, ND.

An hour of driving back country. We do not know if he was in SD, ND, or MT.

The first fossil, a paddlefish. And then found a marine (salt-water) fish alongside the freshwater fish.

The story of finding the tektites. The interpretation: the whole site was the KT boundary. A tsunami wave hurled the salt-water fish into the freshwater pond.

DePalma's site: the whole KT boundary: the day of the impact; the day the dinosaurs died.

Eight Wells Coming Off The Confidential List Today; Surging E&P Profits -- RBN Energy -- April 2, 2019

OPEC: lowest production 2015 -- Reuters.

The combined production of all 14 OPEC members stood at 30.4 million bpd last month, down by 280,000 bpd compared to February and the lowest level of OPEC production since February four years ago, according to the survey.

Production in March beat the previous four-year-low record of the cartel’s oil production from February 2019. As per Reuters survey last month, OPEC’s oil production fell by 300,000 bpd in February compared to January to stand at 30.68 million bpd.

Platts forecast:

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