Surge In Shale Production Has Led To A Glut Of Natural Gas In Argentina -- Will Cut Back On Conventional Drilling; Focus On Shale -- May 10, 2019

Okay, this is a very, very interesting story. One really needs to read the entire story linked at Platts to get the full story. I may have to re-do this entire post ...  in fact, forget this entire post ... just go to the linked Platts story; don't pass "go" -- just go to the story ...

Earlier today I posted a link to a story whose "analysts" said that the shale boom was about to go bust (no timeline given). Apparently Argentina did not get the memo. From Platts S&P Global (see link above), data points:

• Argentina's largest fossil fuel producer, YPF, will now focus on shale for production growth
• will shift away from conventional oil and gas
• the shift is aimed at reversing an expected decline in production this year
• YPF's production dropped almost 12% year-over-year, 1Q19
• dragged down by -- wow, look at this -- a 20% plunge in natural gas production
• the plays are mentioned 
• shale oil production is offsetting the conventional production decline
• YPF is running six shale oil pilots and expects to go into full-scale development on two of them in 2020 and 2021
• partnering with Schlumberger, Equinor, Chevron
• expects to take its Vaca Muerta rig count to 18 by the end of the year; up 14 from current level
• target: drill more than 100 horizontal wells this year 
• to handle the expected increase in shale oil output, the company is expanding the oil treatment capacity at a plant in Loma Campana to 130,000 b/d from 75,000 b/d by the end of the year, and building two others with 50,000 b/d of capacity each 

But then look at this:

With gas, the company is scaling back investment plans, which is one of the reasons for the drop in production.

A surge in gas production over the past few years, led by Vaca Muerta, has created a glut of supply, forcing YPF and other companies to slow production, and even temporarily shut wells. A setback stems from the sharp seasonal fluctuations in domestic demand, which go to more than 140 million cu m/d in the cold season from 90 million cu m/d in the October to April warm and mild seasons.

Spanish Harlem, Rebecca Pidgeon

Venezuelan Refineries Have Shut Down Over 90% Of Operations -- Argus Media -- May 10, 2019; In A World Of Kardashian, Be A Katie Melua

Link here.

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Katie Melua

Link here.

If you are having a bad day, her bio put things into perspective.

Are there really nine million bicycles in Beijing?

Nine Million Bicycles, Katie Melua
From wiki, regarding Nine Million Bicycles:

In 2005, Melua was criticised by writer and scientist Simon Singh for inaccurate lyrics referring to the size of the observable universe ("We are 12 billion light-years from the edge. That's a guess — no one can ever say it's true").

Melua and Singh met, and Melua re-recorded a tongue-in-cheek version of the song for BBC Radio 4's Today program that had been written by Singh:

"We are 13.7 billion light-years from the edge of the observable universe; that's a good estimate with well-defined error bars

and with the available information, I predict that I will always be with you."

Melua later said that she 'should have known better' as she used to be a member of the Astronomy club at school. 

Memo to self: Simon Singh needs to get a life. LOL.

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 A Most Peaceful State

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 think you may have read here.

It's funny how things play out. I should be a "nervous wreck" / "severely depressed" with all that's going on in Washington (DC); in the Mideast; in Korea; the Mueller Report; global warming; solar minima; the stock market; Venezuela; measles. A year ago, same circumstances, I would have been in a "bad state." Perhaps not suicidal but certainly it would have crossed my mind.

But about 72 hours ago, I found myself in a "peaceful state" I don't recall ever having been in before. I can only assume this is the kind of feeling people experience when successfully meditating. Tonight I am in that state again -- and on no meds, no alcohol, no nothing, just naturally at peace. It is truly bizarre. It's as if I've stepped through some imaginary looking glass. Into a "twilight zone," but the good kind.

And then, out of nowhere, in that/this state of peacefulness I stumble on this song. Over at YouTube, a listener captured this song perfectly, "in a world of Kardashian, be a Katie Melua."

And, yes, this video will be re-posted before the weekend is out. That's a fact.

Michael Shermer, TED

Eight New Permits -- May 10, 2019

Active rigs:

$61.666	5/10/2019	05/10/2018	05/10/2017	05/10/2016	05/10/2015
Active Rigs	66	60	50	28	84

Eight new permits:

• Operators: Cresent Point Energy (7); WPX
• Fields: Blue Ridge (Williams); Squaw Creek (McKenzie)
• Comments: 
• Crescent Point Energy has permits for a 7-well Chase Douglas pad straddling lots 2, 4, 5 / section 5-158-100 in Blue Ridge oil field
• WPX has a permit for a single Badger well in section 23-149-94, Squaw Creek oil field

Seven permits renewed:

• XTO (3): three Lawlar permits in McKenzie County
• Lime Rock Rcources (2): two Robert Sadowsky permits in Dunn County 
• Newfield: a Moberg Federal permit in McKenzie County
• Resource Energy Can-Am: a Grays State permit in Divide County

Coal: Making America Great -- May 10, 2019

Link here.

From the story:

Turkey's imports of coking coal rose in March, underpinned by higher volumes from the US and Canada.

Total imports edged up to 573,405t in March from 541,538t in February, considerably higher than 329,120t a year earlier.

Australia remains the largest supplier, but volumes dipped to 317,254t in March from 358,846t in the previous month.

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AI

Voice recognition for transcription still has room for improvement.

Shortly after dropping our car off for some very minor maintenance yesterday, we were telephoned to say the car was ready. I missed the call, but received the voice mail.

As part of my phone service, voice mail is also transcribed.

This is a screenshot of the voice mail I received:

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The Book Page

I can't say enough about this book. I checked it out of library to study the waterways of the New York City - New Jersey area. It is an excellent source.

But the telling of this part of the war for independence is absolutely incredible. This would certainly be worthy of a young military officer to read before going to any single service (US Army, Navy, or Air Force) command and staff school. Possibly light reading for one going to senior service school.

Valiant Ambition: George Washington, Benedict Arnold, and the Fate of the American Revolution, Nathaniel Philbrick, c. 2016.

Re-Posting -- US Shale Oil - Second Least Expensive Oil In The World -- May 10, 2019

From oilprice.com:

U.S. shale oil—which just four years ago was the world’s second most expensive oil resource—is now the second cheapest source of new oil supply globally, just behind the giant onshore oil fields in the Middle East, Rystad Energy said on Thursday.

North America’s tight oil has reduced costs over the past four-five years and has proven to be a competitive source of oil supply even when oil prices are not very high, according to the energy research firm.

Rystad Energy estimates in its latest cost of supply curve update that the average Brent Crude breakeven price for tight oil is now US$46 a barrel, just four dollars above the average $42 per barrel breakeven oil price for the giant onshore fields in Saudi Arabia and other Middle Eastern countries.

US oil: second least expensive in the world. In. The. World. But California prefers Saudi oil.

I think the biggest story line is the "minimal" difference between breakeven costs.

It would be interesting to see how Rystad determines "breakeven costs" for Saudi Arabia. $42 seems very high for actual production costs for Saudi Arabia (I would have assumed in the $5 to $10 range) and $42 is way to "cheap" for Saudi's budgetary requirements (publicly stated to be around $80).

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Break-Even Costs

In the Whiting earnings call, the CEO said the rate of return on "parent-well-uplift" is "infinite." I thought that was hyperbole and at the linked post, I suggested what he might have met.

Having thought about that, technically speaking, he is absolutely correct. The rate of return associated with that well was based on projections and actual production from the well without extra production as a result of the "halo" effect. If one continues to separate all those costs / the rate of return from "halo" production, then, yes, of course, the rate of return is infinite. That production was never anticipated; it was never factored into the original rate of return. The real question, of course, does it "move the needle"?

A Plastics Plant In North Dakota? -- May 10, 2019

Updates

June 6, 2109: Lebow-Bakken Midstream complete Series A funding.

Original Post

 

Feedstock, water, workforce, tax incentives, what more could one want?

https://bloximages.chicago2.vip.townnews.com/willistonherald.com/content/tncms/assets/v3/eedition/c/43/c433bbe2-9a91-597c-b6d6-986fae284ed8/5cd4d09ec60e5.pdf.pdf

https://bloximages.chicago2.vip.townnews.com/willistonherald.com/content/tncms/assets/v3/eedition/7/a1/7a178f5e-fce8-5395-827a-1e17c4bd5e3b/5cd4d0a8ef2bd.pdf.pdf

Tax incentives? See this story at The Bismarck Tribune. 

A bill approved in the recent legislative session adds a sales tax exemption for certain natural gas processing facilities.

The goal is to produce a supply of ethane, propane and other products that could attract a plastics manufacturing plant to North Dakota.

The incentive applies to so-called straddle plants, or processing plants located on or near a natural gas transmission line. The plant removes excess natural gas liquids from the processed natural gas in the pipeline.

The tax exemption also applies to a facility known as a deep cut fractionator that processes the natural gas liquids to produce ethane, propane, butane and other products. To qualify, the facility must produce at least 45,000 barrels per day of ethane.

North Dakota already had a sales tax exemption for a petrochemical plant, but it has never been used.

Link at The Williston Herald:

A reader suggests a Fortune 500 company is far down the road looking at North Dakota as a site for the plant. 

Here We Go Again -- May 10, 2019

This post is not quite "ready-for-prime-time." I'm starting to feel the pressure of time. In a few minutes I need to stop by the grocer to pick up donuts to bring to my Firestone folks. Wow, they do a great job on our cars. More on that later. Then I need to drive the oldest granddaughter to school. She normally takes the bus but today she has a lot of "stuff" to bring to school. And then errands. Mother's Day is Sunday. 

Link here -- "the shale boom is about to go bust."

Consider the source. This linked site is a "peak oil" site.

Biggest problem with the article: no time line as to when "shale" will go bust. This year, next year, five years from now, 35 years from now? The article does not say. As least as far as I could tell.

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 think you may have read here.

Note: I would never, never recommend anyone invest in oil companies. However, oil companies are providing great jobs for millions of workers; the CEOs and directors are doing very, very well; mineral owners love their "oil checks." In other words, investors may or may not do well, but a lot of people working in the industry are actually doing quite well.

Again: I am not convinced the average investor can make money investing in oil. But talking about profits and losses as ways to evaluate investment opportunities went out the window with Amazon, Tesla, GM, and any number of other publicly traded companies. 

Second biggest problem with the article: opinions interspersed with facts -- and impossible to separate the two (facts/opinions). I do the same thing: intersperse facts with opinions.

Third biggest problem: a lot of the statements -- which read like facts, but cannot possibly be -- are completely wrong. The analysts seem to misunderstand "shale."

At some point, common sense suggests we will see peak production in "shale" but it will be a chicken and egg question: will "shale" end even as the world needs more oil, or will the world simply need less oil from shale.

Right now, production from "shale" basins is "advancing" by any metric one wants to measure.

Chevron, OXY, Anadarko, Warren Buffett are probably not investing for the short term.

Be that as it may, here's the headline.

Considering that the "shale boom" is about to go bust, oil prices certainly aren't going anywhere. "We" came close to seeing WTI drop below $60. US crude oil inventories are off the charts -- now over 460 million bbls in storage, when historically, 350 million bbls would have been more than enough, and 300 million bbls is what we generally had in storage. Crude oil supply -- at about 30 days -- is near a(n) historic high, link here.Gasoline supply used to be 18 - 21 days; now it's routinely 28 days, a full week longer, link here. In fact, this post needs to be updated.

For more, see Art Berman's School of Peak Oil.

Meanwhile, Argentina never got the memo from Art Berman, Nick Cunningham et al. Due to its shale oil and natural gas production, mostly in Vaca Muerta, it now has such a glut of oil and natural gas, it has to cut back production until processing facilities and storage facilities can be put in place to handle all the production. This is absolutely incredible. 

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Cheap Oil

From oilprice.com:

U.S. shale oil—which just four years ago was the world’s second most expensive oil resource—is now the second cheapest source of new oil supply globally, just behind the giant onshore oil fields in the Middle East, Rystad Energy said on Thursday.

North America’s tight oil has reduced costs over the past four-five years and has proven to be a competitive source of oil supply even when oil prices are not very high, according to the energy research firm.

Rystad Energy estimates in its latest cost of supply curve update that the average Brent Crude breakeven price for tight oil is now US$46 a barrel, just four dollars above the average $42 per barrel breakeven oil price for the giant onshore fields in Saudi Arabia and other Middle Eastern countries.

US oil: second least expensive oil in the world. In. The. World. But California prefers Saudi oil.

This story will be re-posted. Many, many talking points.

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Meanwhile ... Indications The Boom Is Over

Schlumberger subsidiary cuts jobs in the Permian. 

Product & Logistics Services LLC (P&LS), a subsidiary of Schlumberger Limited, is ceasing operations at its facility in the Permian Basin, resulting in layoffs of 124 employees, according to a letter sent this week to the Texas Workforce Commission (TWC).

The trucking company said it would be “closing employee-serviced operations out of Monahans, Texas, and surrounding areas.” Monahans has been dubbed ‘the center of the Permian Basin.’

"Parent-Well-Uplift" And Infill Density -- May 10, 2019

This is really, really cool.

The "mainstream" analysts are catching up with two phenomena in the Bakken that we've been discussing for a long, long time: the "halo" effect" and infill density.

For recent commentary on the former, see this link.

For infill density, see this screenshot from twitter today:

Wow, CLR brought up this issue years ago and I've posted too-many-to-count graphics on infill density -- years ago. And now we're starting to see "mainstream" analysts do some good statistical research.

For newbies, this was the concern: that daughter wells -- new wells -- would diminish, negatively impact, even perhaps "ruin" existing wells, or "parent wells. I think a lot of folks in North Dakota at the beginning of the boom expected to see one well in every section (640 acres). Many were surprised to see as many as four in a one-mile square, but then to see reports that there could be as many as 24 wells (or more) in a 1280-acre drilling unit was beyond the pale.

Folks with nice wells were legitimately concerned that new wells placed too closely to these existing nice wells would "hurt" the old wells.

Anecdotally, I was seeing just the opposite and I posted any number of blogs about that.

Now we have a "professional" providing more than just anecdotal evidence.

Look at that graphic. We're talking 660'-spacing. Instead of placing horizontal wells one mile apart, operators are seeing no adverse impact even placing the wells 660 feet apart.

In fact, if one looks closely, the daughter wells are doing slightly better than parents wells but I doubt this is statistically significant. Without seeing the study itself, I assume this is from the Permian. Z4 tags "JAG" -- a Permian operator.

Hey, by the way, look at the EUR of those JAG wells: 1.21 million boe. 

Wow, I can't remember how many years ago -- maybe 2009, 2010 -- I noted that fracking was effective 500-feet radially -- meaning that horizontals could be placed 500 to 1,000 feet apart. I may have this wrong, but at 660-feet spacing, if the horizontals are 660 feet from each other, it suggests fracking is most effective 330-feet radially. We're talking horizontal through the seam because vertically things are affected by different geology: dolomite (sand) in the producing seam; shale (rock) in the generating seams.

Two Wells Coming Off Confidential List Today -- May 10, 2019

Wells coming off the confidential list today -- Friday, May 10, 2019: 35 wells for the month; 130 wells for the quarter

• 35304, SI/NC, Hess, BL-Domy-156-95-2932H-8, Beaver Lodge, no production data,
• 34635, SI/NC, Slawson, Wolverine Federal 9-31-30H, Elm Tree, no production data,

Active rigs:

$62.03	5/10/2019	05/10/2018	05/10/2017	05/10/2016	05/10/2015
Active Rigs	66	60	50	28	84

RBN Energy: E&Ps paring CAPEX despite strong 2018 profits, expected 2019 prices, part 3.

U.S. exploration and production companies (E&Ps) are tapping the brakes on their capital spending in 2019 after two years of strong investment growth and a return to profitability that in 2018 approached the level generated in the $100+/bbl crude oil price environment back in 2014. The pull-back in capex this year appears likely to slow the pace of production growth, and comes despite a 30% rebound in crude oil prices in the first quarter of 2019. What’s going on? Well, many investors remain skeptical about E&Ps, as evidenced by stock prices that remain in the doldrums, and to gain favor with investors, a number of E&Ps are returning cash to them in the form of share buybacks and higher dividends. Today, we consider the current state of investment in the E&P sector, how it’s affected by stock valuations and how it affects production growth.

In a number of blogs over the past three years, we’ve documented the dramatic recovery of the E&P sector from the financial crisis caused by the plunge in oil prices that began in late 2014. Through portfolio high-grading and an intense focus on operational efficiency, the 44 representative E&Ps we track demonstrated that they could grow reserves and increase production on lower capital budgets. The nearly 50% reduction in “finding and development” costs (the cost of “finding” an additional barrel through organic capital spending), excluding acquisitions — from $15.01/boe (barrel of oil equivalent) in 2014 to $8.41/boe in 2018 — helped the E&P sector roar back to profitability last year. Our universe of 44 E&Ps on average netted a healthy pre-tax operating profit of $11.03/boe in 2018, which compares with a barely breakeven profit of $0.07/boe in 2017 and is only 20% below the profit generated by the group in the $100+/bbl environment in 2014. And with first-quarter 2019 oil prices rising 30% — the largest quarterly rise since 2009 — the E&P sector appears to be in a position to report continued profit growth this year.

Global Warming, 2018 - 2019 -- A Lingering Winter -- May 10, 2019

Updates

Later, 9:20 a.m. CT: so much for all that global warming drought. First it was snow (see below); now it's floods. Beware the "solar minima."

Original Post

Minnesota: I find this absolutely stunning, incredible, ironic, and so much else. For this to happen at this point in time -- all the hyperbole about global warming. I was also impressed that a reader saw this coming a couple of days ago -- I think he saw it even before the National Weather Service confirmed it -- that we were about to see another winter snow record broken. And here it is: a May snowstorm breaks a 117-year-old Minnesota record. Wow.

While the calendar shows it's more than six weeks into spring, Mother Nature dealt a wintry blow to Minnesota with a winter-like storm that unleashed historic snow amounts in some locations on Wednesday into Thursday.

The same storm system that brought an outbreak of severe weather to the South-Central states through the first portion of this week created enough cold air to produce a zone of heavy accumulating snow on its northwestern side.

Snow fell along a zone from Sioux Falls, South Dakota, to Duluth, Minnesota. While not accumulating, snowflakes even managed to fall in parts of Minneapolis.

Through Thursday morning, Duluth was blanketed with 10.6 inches of snow for this event and 10.9 inches total for the month, leading to a number of broken snowfall records, according to data from the National Weather Service. One spot just southwest of Duluth reported 12 inches of snow as of Thursday afternoon.

Colorado: "Spring" snow for Colorado. Link here.

Snow is falling heavily in the mountains and roads are snow covered and slippery. Rain is changing over to snow in the Denver area and will accumulate to a few inches on grassy surfaces early Thursday.

The operative word is "heavily." LOL.

I find this fascinating.