Friday, July 12, 2019

Breaking News -- Trump Wins Again -- July 12, 2019

Link here.

It was also reported this week that Trump won another court case, this time in the 4th Circuit Court regarding renting out rooms in his hotels to foreigners.

I am unable to keep up with all the "wins" Trump has had.

Two words: Robert Mueller. 

Four words: Making America great again.

Idle Rambling Regarding The US Equity Market -- Not Ready For Prime Time -- July 12, 2019

An e-mail I sent to someone much more knowledgable about the market than I am:
It would be interesting to see an analysis of the type of stocks that folks bought this week.

To some extent, one wonders if folks are finally getting tired of their returns in savings accounts at banks, money market accounts, bonds. Are folks finally throwing in the towel?

Even very, very conservative investors can find very, very good companies with little volatility paying great dividends.

It would be interesting to see if the majority of money that went into the market bought growth stock (little to no dividend but hopes for great appreciation) or value stock (little volatility but safe dividends). [And, yes, I'm using an incorrect definition for growth/value stocks but one gets the idea of what I'm asking.]

The recurrent buzz seems to be that we are headed into a recession; if so, money going into the market this week should have favored value stock (or "safe" stock vs "more speculative" stock).

One way to sort that out, I suppose is to find some "value" mutual funds and some "growth" mutual funds. And see how they did this week.

If both "value" and "growth" did equally well, then it appears everyone simply threw darts at a dartboard.
Let's see what google has to say? The google phrase that was searched:
stock market this week "value" vs "growth" stocks
A screenshot:

Disclaimer: this is not an investment site. Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or what you think you may have read here.  I'm writing a bit more about the market today a) because all-time highs are being reached; b) for the archives to help put the Bakken into perspective; and, c) because I'm bored at the moment.


If I had a dime for every time I heard that US shale operators are struggling for free cash flow, I would have a lot of dimes.

To put that in perspective, Netflix has never, never, never had free cash flow. At least that's what I've heard. Next time someone asks whether I would invest in a particular stock, the first question I'm going to ask: what's the free cash flow. NOT!

Utility Dividends

This is pretty cool.

COP's dividend: 2% ($1.22 annually for a $61-stock); 1.22/61 = 2%

If CVX dividend was 2% of its price, CVX would be trading at: $238/share. CVX annual dividend of $4.76 divided by $238/share = 2%.

CVX closed at $125 today.

A talking head said that COP was the "cheapest" Big Oil stock out there.

My retort: compared to what?

Yes, the P/E for COP is 10 and the P/E for CVX is 17, but if one looks at the dividend ...

Disclaimer: see above.

Beating That Dead Horse -- Once Again -- July 12, 2019

Let's see:
  • global economy: getting worse; getting better; staying the same -- depends on what you read)
  • US stock market surges; all indices hitting all-time highs
  • Mideast tension: crude oil tankers being seized by various nations around the world
  • Mideast tension: US drone shot down by Iran
  • OPEC: agrees to extend cuts for another year, +/-
  • Gulf of Mexico tropical storm to linger over the coast this weekend 
  • huge draw in US crude oil (though it appears the way inventories are defined has changed)
And the headline: the price of oil rises due to decline in rig count. Okay.

Going into the weekend, it appears to me that the price of oil was essentially flat despite many factors. A decline of four rigs week-over-week was meaningless in the big scheme of things.

Had oil dropped a penny, I guess the headline would have been: oil prices fall amid further rig count decline.

US Labor Secretary Resigns 
Over Handling of the Jeffrey Epstein Case

The worst piece of news that Epstein could have received today with regard to his hopes of being granted bail?

A cabinet member in the Trump administration resigning due to Epstein.

I can't imagine any judge risking his/her career by granting bail to Epstein. If a US cabinet member resigns in the space of 72 hours once the story broke, it can't be good news for Epstein.

Two words: Roman Polanski. 

Fourteen Permits Renewed; Nine New Permits; Seven DUCs Completed; And, A Pronghorn In A Wheat Field -- July 12, 2019

Note: some good comments from a reader in the comment section below. I accidentally deleted one of the reader's comments but was able to copy it and post it as coming from me. It is noted in the comments below that that particular comment is from the reader although it is published by me. Sorry about that. 

Original Post

US equity markets. At the close, going into a weekend when anything can happen:
  • S&P 500 surges: gains almost 14 points to close at an all-time high of 3,014
  • DOW surges: gains almost 244 points to close at an all-time high of 27,332 (day before Trump appears to have more electoral votes than Hillary: 18,259; that's a 49% gain since November 8, 2016)
  • NASDAQ: gains 48 points to close at 8,244
Shopping: I will buy Sophia a new pair of shoes over the weekend.

Back to the Bakken

Royalties: ND Supreme Court sides with state in suit between state and Encana/Newfield over deductions from natural gas royalties.

Active rigs:

Active Rigs5667582873

Nine new permits, #36726 - #36734, inclusive:
  • Operators: CLR (8), WPX (1)
  • Fields: Siverston (McKenzie County), Little Knife (Dunn County), South Fork (Dunn County)
  • Comments:
    • CLR has permits for a 5-well Vardon pad in section 14-150-97, Siverston oil field
    • CLR has permits for a 3-well Marshall pad in section 24-145-97, Little Knife oil field
    • WPX has a permit for a single Skunk Creek well in lot 2 / section 1-1-48-93; South Fork oil field
Fourteen permits renewed:
  • XTO (7): seven Prairie Federal permits in McKenzie County
  • Petro-Hunt (6): twoArsenal Federal permits; two Eric Stratton Federal permits, and two Mongoose permits, all in McKenzie County
  • Hunt: an Oakland permit in Mountrail County
Seven producing wells (DUCs) reported as completed:
  • 34559, 83, XTO, Bobcat Federal 11X-2F2-S, Bear Creek, t5/19; cum --; neighboring wells include #18112 (jump in production; #18089 back on line)
  • 34360, 83, XTO,  Bobcat Federal 11X-2E-S, Bear Creek, t5/19; cum --;
  • 34359, 456, XTO, Bobcat Federal 11X-2A-S, Bear Creek, t5/19; cum --;
  • 34356, 1,305, XTO, Bobcat Federal 14X-35A, Bear Creek, t6/19; cum --;
  • 34358, 30, XTO,  Bobcat Federal 14X-35EXH, Bear Creek, t5/19; cum --;
  • 34911, 2,137, Hunt, Halliday 146-93-13-1H, Wolf Bay, t6/19; cum --; some huge wells in the general area;
  • 34912, 1,134, Hunt, Halliday 146-93-13-1H, Wolf Bay, t7/19; cum --;
Projected Number of Permits for Calendar Year 2019

For the number of days in the calculations below, I'm using "number of days" through Sunday, July 14, 2019, this weekend.

It's possible I have made simple arithmetic errors.

The number of permits issued each month by the NDIC may differ from what I have in my database, but if so, it will be very, very close, and won't affect the overall results.

Based on the number of permits in each of the following months, the number in bold is the projected number of permits for calendar year 2019 had the rate for the entire year remained the same as that one month. For example, based on the number of permits issued in April, 2019, had that been the "rate" for the entire calendar year (2019), 1,578 permits would be issued for calendar year 2019.
  • January, 2019: 1,495
  • February, 2019: 1,434
  • March, 2019: 1,578
  • April, 2019: 1,582
  • May, 2019: 1,660
  • June, 2019:  1,557
  • July, 2019 (through July 14, 2019): 1,877 (it will be interesting to see if the number of permits for July, 2019, reverts to the "mean" so far this year)
Based on the number of permits issued for the first calendar quarter of 2019, the number in bold is the projected number of permits that would have been issued for the entire calendar year had the rate been the same as that for the corresponding quarter. In other words, based on the number of permits issued in 1Q19, there would be 1,497 permits issued for the entire calendar year had that rate remained throughout the year.
  • 1Q19: 1,497
  • 2Q19: 1,071
  • For the first fourteen days of 3Q19: 1,877
I've checked this several times and I believe the numbers are accurate.

One can check the above projections with the actual number of permits issued in North Dakota over the past several years at this site:
  • 2019 (estimate): likely to be somewhere between 1,400 and 2,000
  • 2018: 1,466
  • 2017: 1,189
  • 2016: 818 (price of oil tanked due to Saudi opening their spigots)
  • 2015: 2,055
  • 2014: 3,012
  • 2013: 2,671
  • 2012: 2,522
  • 2011:1,916
For newbies:
  • North Dakota regulators generally approve permit applications in about 30 days
  • permit applications should not be affected by the weather unless there is a lot of site visitation of which I am unaware, but certainly the 1,071 permits projected based on 2Q19 vs the 1,497 permits projected based on 1Q19 appears to validate that assumption; in ND, Jan-Feb-Mar are severe winter months; whereas Apr-May-Jun are much better weather months
  • a permit is "good" for one year, but is easily renewed
My hunch:
  • most operators determine CAPEX, number of rigs, permit applications, etc, six to twelve months prior to execution
  • CAPEX is adjusted semi-annually when things are going well; quarterly when things seem a bit more bleak; and monthly, when things are going to hell in a handbasket
  • the number of rigs and frack spreads correlate directly with CAPEX
  • permit applications may or may not correlate with CAPEX; I don't know
  • I would think operators would have a stack of permits in the hopper in draft status/nearly complete well in advance of submission; 
  • it appears NDIC can issue as many as 20 or more permits in one day based on historical data; in other words, it's not the NDIC holding things back once operators decide to proceed (obviously the NDIC is not accomplishing the entire process in one day, but the point is that the number of permits issued in one day is not capped by the regulator)
  • the weekly rig count, week-over-week, is meaningless in the Bakken
  • the monthly rig count, month-over-month, may be slightly more meaningful than the weekly change
  • the monthly permitting activity gives one a much better idea of activity (and dare we say, production?) in the Bakken
If I could only choose one metric to follow the Bakken, it would be the rate of change (increase/decrease) in number of permits on a monthly basis

Having said that, even the number of permits issued each year is coming down, and production continues to rise.

More On Coal -- July 11, 2019

In an earlier post on coal, I suggested "the numbers don't add up."

It looks like, with today's news (the news coming out of Germany), there is more data / more information / more data points to suggest that "the numbers don't add up" is accurate.

I'm currently involved with family commitments but when I have time I will come back to this.

The four links that will be discussed:

Notes From Down South And Far West -- UPS/Clean Energy Fuels Agreement -- July 12, 2019

This seems like a pretty big story.

Let's see if the market agrees.

CLNE: maybe, maybe not. Wow, CLNE has fallen off a cliff the past five years.

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

From the EIA, link here:
On May 22, 2019 United Parcel Service (UPS), a global provider of shipping and delivery services, announced that the company would increase its use of renewable natural gas (RNG) in the United States. UPS purchased 170 million gasoline gallon equivalent (gge) from fuel supplier Clean Energy Fuels to meet this commitment, which supports UPS’s sustainability goals. RNG consumption has increased significantly in recent years, and according to UPS, this agreement will be the largest commitment to RNG to date by any company in the United States.
On May 23 - 24, 2019, there appears to be a slight jump in CLNE but then it's been downhill ever since.

The sites are in the south and far west:

Wow, it seems like it's taking forever to get these NG corridors established. T. Boone Pickens has been at this since 1988.
  • 1996: Pickens and Littlefair spin off a natural gas fueling business from Mesa Petroleum – 3 fueling stations, 1 employee and a repair truck. The new company is named Pickens Fuel Corp.
  • 1997: Pickens Fuel Corp., forerunner of Clean Energy Fuels, opens doors in Seal Beach, CA. Pickens Fuel Corp buys SoCal Gas Company’s 33 natural gas fueling stations for $3.6 million. During the second half of the year, Pickens Fuel Corp. sells the equivalent of 2 million (GGEs) gallons of gasoline in natural gas fuel.

Newfield's Berg Federal Wells Updated; One Well Shows Nice Jump In Production -- July 12, 2019

Newfield's Berg Federal wells updated now that recent fracks completed. The Berg Federal wells are tracked here.

One older well showed a nice jump in production, but did not last particularly long:
  • 22583, 1,010, Newfield, Berg Federal 149-97-30-31-3H,  Haystack Butte, t4/13; cum 200K 5/19; off-line as of 9/18; on line as of 12;18; nice jump in production; 
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

It Appears A Couple of Whiting's White Wells To Be Completed -- July 12, 2019

This well has just come off line:
  • 18298, 3,422, Whiting, Kannianen 44-33H, Sanish, t1/10; cum 702K 5/19; off line as of 4/19;
Other wells in the drilling unit:
  • 20840, 3,376, Whiting, Maki 41-33XH, t2/12; cum 631K 5/19; remains on line;
  • 25323, 468, Whiting, Maki 42-33XH, t9/13; cum 218K 5/19; remains on line;
  • 19174 2,090, Whiting, annianen 43-33H, t910/10; cum 391K 5/19; went off line as of 4/19;
  • 35945, SI/NC, Whiting, White 43-33H, Sanish, no production data,
  • 36025, SI/NC, Whiting, White 43-33-2TFH, no production data,
  • 20437, 134, Whiting, White 43-33TFH, Sanish, t12/11; cum 171K 2/19; went off line asof 20/19;
  • 25350, 1,501, Whiting, Carl Kannianen 24-33H, Sanish, t8/13; cum 207K 4/19: offline as of 4/19;
  • 25384, 384, Whiting, Hartstrom 24-33H, Sanish, t10/13; cum 185K 4/19; offline as of 4/19;

It Appears A Whiting Sorenson Well Soon To Be Fracked -- July 12, 2019

This well has just come off- line:
  • 17912, 2,581, Whiting, Sorenson 11-3H, API: 33-061-01029, Sanish, t2/10; cum 866K 4/19;
Other wells in same drilling unit:
  • 36212, same pad, SI/NC, Whiting, Sorenson 11-3HU, API: 33-061-04434, Sanish,  no production data, FracFocus shows no frack data;
  • 25331, to the east, 566, Whiting, Viola Pennington 11-3H, Sanish, t9/14; cum 294K 4/19; off line, 4/19;
  • 25176, to the south, 327, Whiting, Murray 13-3H, Sanish, t8/13; cum 234K 4/19; off line, 4/19;
  • 25164, on the east side of the section, 768, Whiting, Hauge 41-3H, t5/13; cum 378 4/19; off line, 4/19;
  • 18109, runs north, from the south, 2,409, Whiting, Tollefson 44-10H, Sanish, t9/09; cum 669K 4/19; off line, 4/19;

Notes From All Over -- Part 1, -- Chinese Crude Oil Imports Staggering -- July 12, 2019

Staggering. From twitter today --

  • WTI: slightly above $60
  • Dow: solidly above 27,000
  • S&P 500: solidly above 3,000; "poised to open at new record high"
  • NASDAQ: closing in on 8,000 
Tesla: for the archives -- to see if this analysis is accurate -- 
  • Tesla deliveries in 1Q19 surprised everyone
  • analyst suggests it was a one-time beat -- and it was a beat because the bar was set so low
  • guidance, 1Q19: 90K to 100K vehicle deliveries
  • actual, 1Q19: 95,200 vehicle deliveries
  • guidance for full year, unchanged, between 360,000 to 400,000 vehicles
Politics, new polls out (link here). I don't see any significant change over the next few months; everything points to a brokered convention.
  • Biden: significant drop; now at 26.8% (when he first announced, he polled at about 35%)
  • Harris: stays at 15% but drops to fourth place (Peggy Noonan predicted her "surge" after the first debate would be temporary)
  • Bernie: tied for second place after recovering a bit to 15.2% (I think the highest he has ever polled is about 17%)
  • Pocahontas: tied for second with crazy Bernie, at 15.2%
  • Buttigieg: another flash in the pan, stays at 5.3%
  • Beto: drops another 0.5%; now at 2.2%; he's done; stick a fork in him
Caleb and the Giant Raft

Active Rigs In North Dakota Hit New "Recent" Low: 55 -- July 12, 2019

Wells coming off confidential list today -- Friday, July 12, 2019: 15 for the month; 15 for the quarter;
  • 34351, 1,969, CLR, Morris 6-23H, Oakdale, t4/19; cum 63K 5/19;
  • 31807, SI/NC, EOG, Riverview 23-3031H, Clarks Creek, no production data,
Active rigs:

Active Rigs5567582873

RBN Energy: are E-fracks a fix for a Permian gas constraints and giveaway prices?
Persistent natural gas takeaway constraints out of the associated gas-rich Permian have pushed Waha Hub prices to between $1 and $9/MMBtu below the Henry Hub benchmark for most of 2019. Concerns about gas flaring have flared. Tanker trucks transporting diesel fuel to drilling and completion operations in West Texas and southeastern New Mexico are clogging the region’s roads. And diesel’s not cheap, especially if you’re using thousands of gallons of it a day. With Permian wells producing far more natural gas than takeaway pipelines can handle, and with gas essentially free for the taking, is this the year when electric fracs — hydraulic fracturing powered by very locally sourced gas — gain a foothold in the U.S.’s hottest shale play? Today, we look at the economic and other forces at play in the e-frac debate.
Last week, Waha basis averaged $2.25/MMBtu and the Henry Hub daily prices averaged $2.24/MMBtu — in other words, folks selling gas at the Waha Hub had to pay someone a penny per MMBtu to take the gas off their hands. This seemingly crazy situation has become all too common in the Permian in recent months. The issue is pipeline takeaway capacity — there’s simply not enough of it. And with Permian gas production now rising past the 10-Bcf/d mark, the only near-to-mid-term hopes are (1) that new pipeline capacity and gas demand will become available in Mexico (allowing more gas to flow south across the border); (2) that the next big gas pipeline from the Permian to the Texas Coast (Kinder Morgan’s Gulf Coast Express, or GCX) starts up a few weeks earlier than its promised October 2019 online date; or (3) that regulators continue to allow more gas flaring.

While the Permian produces extraordinary volumes of hydrocarbons — all that natural gas, plus more than 4 MMb/d of crude oil and lots of NGLs — it consumes a lot of energy too, mostly in the form of diesel fuel to power the trucks, drilling rigs, hydraulic fracturing pumps, compressors and other equipment needed to keep the oil patch humming. Refineries within or near the Permian meet a portion of the region’s diesel needs, but rising demand for the fuel has been spurring the development of new infrastructure — and the repurposing of existing assets — to bring additional fuel into the Permian from refineries along the Gulf Coast.