Tuesday, July 16, 2019

Bakken Podcast Link -- May, 2019, North Dakota Production

A reader provided a link to a podcast that was produced before the release of today's Director's Cut but is still relevant (perhaps more relevant), see comment below:  https://twitter.com/RTDukes/status/1144670377597112321.

If Beto Were A Singer From Wales

Delilah, Tom Jones

Norwegian Ice-Breaker Unable To Get To North Pole -- Arctic Ice Thicker Than Expected -- July 16, 2019

Link here.
15 July 2019 – The Norwegian icebreaker “Kronprins Haakon” (Crown Prince Haakon), on a mission to the North Pole for the Institute of Marine Research, was forced to turn back north of Svalbard after meeting considerably thicker and more massive ice masses than expected, which the vessel was not capable of breaking through.
Tesla. On a completely different note, to expand on the earlier note today regarding Tesla. I think it was pretty obvious in that note, but to be very explicit about this: if Tesla as an automobile company fails, I think folks will look back on his decision to concentrate on sedans first as his big failure. Granted, he had plenty of interest, over-subscribed demand, and demand he could not meet, but that was short term. Long term focusing on sedans will be seen as a mistake. Model X, a crossover, was too little (literally) too late. He needs cash now to keep going and SUVs are high margin, and in huge demand. The fact that he is now cutting the price of sedans suggests he can now meet demand, but folks are not interested in sedans any more. Look at the monthly automobile sales figures.

Tesla. On another note, something we talked about a long time ago, Tesla is not an automobile company. It is a battery company disguised as an automobile company. He is using automobiles as a "vehicle" to sell batteries. We will see more of that in the future. Tesla batteries used outside of automobiles, and when used in automobiles, used by other manufacturers.

DAPL? Protesting the DAPL? Think again. Link here. A reader noted that the "Protect" signs were also used at Standing Rock. Nice to see that protesters are into recycling. LOL. By the way, George Soros is in the back row, fourth from the left.

Flaring In The Bakken -- May, 2019, Data

See comments below. Reader provides link to podcast regarding the Bakken:  https://twitter.com/RTDukes/status/1144670377597112321.

From the Director's Cut for May, 2019, flaring:
  • with natural gas at $1.95 / mcf, the oil-to-gas price ratio at Watford City, ND, is 25 to 1
  • statewide gas flared volume decreased 15,700 mcfpd month-over-month
    • produced, April, 2019: 2,833,131 mcfpd
    • produced, May, 2019: 87,471844 mcf for the month
    • produced, May, 2019: 2,821,672 mcf/day
  • 15,700  / 2,833,131 = 0.554% or about half a percent
  • capture rate:
    • statewide capture: 81%
    • non-FBIR Bakken: 85%
    • FBIR Bakken: 69%
    • goals: a capture rate of 88%
Glad to see the BLM all over this one.

I have no idea what the "new rules" regarding flaring are but if interested, there is a tag, flaring_new rules.

Working On Her Multiplication Tables

Turned five years old about two weeks ago.

Marketing 101 -- Nothing About The Bakken -- July 16, 2019

Marketing 101: how one company blew it. Nike would have had a slash on that sole. IBM should have had its logo on the bottom of that shoe. There were many ways to have done this.

On second thought: IBM, stripes? Maybe.

Saudi To Pay US For Protection? This is pretty funny. Trump is getting Mideast countries to  start paying for US "protection." LOL.

Five New Permits In The Bakken -- July 16, 2019

WTI: slumps. Tension in the Mideast dries up; Barry is a non-story.

Back to the Bakken

Active rigs:

Active Rigs5669582974

Six new permits: #36738 - #36743, inclusive:
  • Operators: XTO (3), Lime Rock (2), Iron Oil Operating
  • Fields: North Fork (McKenzie), Fayette (Dunn), Ellsworth (McKenzie)
  • Comments:
    • XTO has permits for a 3-well Edwards Trust pad in section 19-149-97, North Fork oil field; 
    • Lime Rock Resources III-A has permits for a 2-well Reube Schneider pad in section 27-143-96, Fayette oil field
    • Iron Ore has a permit for an Ellsworth permit in lot 3 / section 3-148-101, Ellsworth oil field;
Five producing wells (DUCs) reported as completed:
  • 35463, 602, Whiting, Urban 44-11-6H, East Fork, t6/19; cum --;
  • 35458, 1,051, Whiting, Urban 44-11-3TFH, East Fork, t6/19; cum --;
  • 31563, 1,137, Slawson, Submariner Federal 5-23-20TFH, Big Bend, t6/19; cum --;
  • 31562, 2,514, Slawson, Submariner Federal 3-23-20H, Big Bend, t6/19; cum --;
  • 31561, 2,175, Slawson Submariner Federal 6-23-20TFH, Big Bend, t6/19; cum 7K over 9 days;
Nine permits renewed:
  • Hess (4): four LK-Quilliam permits in Dunn County
  • XTO (3): three Harley Federal permits in McKenzie County
  • Resource Energy: one Curtis permit in Divide County
  • Whiting: one Wright permit in McKenzie County

"Meager May" -- July 16, 2019

A reader noted that the Director's Cut for May, 2019, could have been labeled "Meager May" based on both the crude oil and the natural gas production numbers.

Initial thoughts -- not ready for prime time.

I can't disagree. I was expecting more.

It's particularly troublesome that both oil and natural gas production failed to increase significantly when one also considers the number of producing wells:

Producing wells:
  • May, 2019: 15,698 (preliminary, new all-time high)
  • April, 2019: 15,503 
  • March, 2019: 15,353 -- well below the all-time high of 15,409 in January, 2019
  • February, 2019: 15,154
  • January, 2019: 15,409 
That's huge. A jump from 15,503 to 15,698 is an increase of 1.26%.

So what happened?

First, expectations.

I think a lot of us, including me, forget these are May, 2019, numbers, not July numbers. Huge spring rains resulted in the typical and not unexpected road restrictions. It's one thing to drill a well to depth; it's quite another thing to put all those water and sand semis on the road during the monsoon season in North Dakota. In addition, I'm convinced the counties are much more aggressive in "declaring" and enforcing road restrictions (and there's nothing wrong with that).

Now, the other reasons.

I think folks forget that operators can control individual well production from corporate headquarters electronically.

Look at the price of oil in May, and more importantly, look at the trend: the price of oil (WTI) was lower in May ($50.50) than in April ($52.50) and it was even lower in June ($43.10).

Oil companies contract with refiners six months out. Once operators meet their commitment, they can adjust additional production based on price and refiners' needs. My hunch is that Bakken operators are easily meeting their commitments to refiners and are adjusting their production accordingly.

Some operators may even find it advantageous to store their oil (via DUCs) and buy "cheap" oil on the spot market to meet commitments to refiners. This is getting way beyond my headlights, but the bottom line for me is this: the production capacity is well beyond just what takeaway capacity is.

But this might be the biggest reason for "Meager May": we are in the "manufacturing" phase of the Bakken, no longer the boom. The Bakken has moved dramatically from single well to multi-well pad production, and when a new well is drilled, not just one neighboring well comes off line during new operations, but an entire pad "goes down."

It doesn't take the "loss" of many pads to have an incredible effect on overall production.

From the Director's Cut, the number of wells that were off-line for operational reasons:
  • awaiting completion (DUCs): up by 23 to 985
  • estimated inactive well count: down 69, to 1,556
The "raw data" for DUCs and inactive wells is tracked here

New wells (or DUCs), on a well-by-well basis, contribute much more to overall production than legacy (older) wells.

My hunch: the significant increase in number of DUCs is the major reason for "Meager May," and the significant increase in DUCs could have been due to rainy spring road restrictions as much as anything else.

I will be interested in what professional analysts have to say. 

You can bet Wall Street pundits will have lots to say about this, and even The Bismarck Tribune will voice concern.  

The Bakken Is Evolving -- July 16, 2019

North Dakota crude oil production for May, 2019, posted here

Based on preliminary numbers for May, 2019:
  • crude oil production: 1,393,284 bopd
  • natural gas production: 2,821,672 mcfpd = 470,200
  • total boe: 1,863,484 boe
  • percent of this boe as natural gas: 25.2% (I go to the first decimal point to show that the 25% was not rounded up or down)
Re-posting -- regarding natural gas production:
  • May, 2019 (preliminary): 2,821,672 mcfpd
  • April, 2019 (final): 2,833,131 mcfpd (this is now the all-time high)
  • we'll see if that record holds when the "final" figures come out next month
    • to go from 2,821,672 to 2,833,132 mcfpd, is a 0.4% increase

Goldman Sachs Hikes Quarterly Dividend From 85 Cents To $1.25 -- July 16, 2019


Later, 9:47 a.m. CT: I was wondering why Tesla was having a bad day. This is the reason -- Tesla "adjusts" prices again --  hikes starting prices for Model X, S, and slashes price of Model 3:
Tesla, who wants you to know that they are definitely, certainly not facing a demand problem, has again dropped the price of its Model 3 while bumping up starting prices of its Model S and Model X in what appears to be a push to drive more Model 3 sales and higher margin Model S and X sales.
The move comes days after the company reported record Q2 deliveries, according to Reuters. On Tuesday, Tesla limited variants of its Model X and Model S to "Long Range" and the more expensive "Performance" models.
The company also slashed the price of its now entry-level "Long Range" variants. This means that the new starting price for these models has gone up to $84,990 for the Model X and $79,990 for the Model S.
Tesla: obviously a luxury car; nothing to do with "saving the world." But at $40,000, Tesla is "giving away" it's Model 3. In China, the starting price for the Model X is $115,068. Am I missing something here?

The reason Tesla is "pushing" the Model 3? I would argue that it's across the board, all automobile manufacturers, not just Tesla: no one wants sedans any more. The Model 3 is a "cheap" sedan. Time to phase it out. It was a mistake. No one wants it. The risk for Tesla is that the Model S is also a sedan.  Folks want SUVs and cross-overs. The X is a cross-over, but, wow, the back seat is tight. I think when folks actually compare the X to other cross-overs / SUVs they will be disappointed; they will have to give up a lot to drive a Tesla. For $100,000 one can get an incredibly nice "real" SUV or crossover.
Original Post
Wow, wow, wow -- earlier we noted how strong the banks' 2Q19 earnings were. After we posted Citi and Wells Fargo, JPM came out, and then this:
  • Goldman Sachs, link here
    • early winner of earnings season
    • surpassed expectations on both top and bottom lines, but also hiked its quarterly dividend to $1.25 from 85 cents
NOTE: to repeat, Goldman Sachs hiked its quarterly dividend to $1.25 from 85 cents. That's a huge jump and the company wouldn't have done it had it not thought things were going to continue to go very well this next year. Just saying.

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 think you may have read here.

GS: surges. Up 2.5%. Up over $5/share, now trading at $217.

How are the others doing?
  • NOG: after a bad day yesterday up 1% today; it's not that the oil companies won't do okay over time, it's just that there are so many other better places to put your money right now; see disclaimer
  • JAG: up a bit, after a bad yesterday
  • SRE: down slightly; essentially flat
  • CVX: down a third of a percent
  • D: haven't looked at this one in a long, long time -- trading near its 52-week high
  • Vicki's company: down about a percent today
  • TSLA: not having a good day
  • T: flat
  • DE: flat
  • TSCO: after a great day yesterday, up 1% today
  • XLNX: having a rough day

Natural Gas Production -- July 16, 2019

A reader noted this in a comment earlier -- how much natural gas was being produced in the Bakken -- actually in same ballpark as the Fayetteville natural gas play, which at one time was one of the bigger natural gas plays in the US. 

Link here.

At the link, compare natural gas production in the Bakken with:
  • Fayetteville (Arkansas)
  • Niobrara (Colorado and Wyoming)
  • Woodford (Oklahoma)

Also, look at the amount of natural gas production in the Permian compared to that of the Utica.

Director's Cut Released -- North Dakota Crude Oil Production Up Slightly -- July 16, 2019

For flaring data, see this post.

Over at twitter it's being reported that North Dakota oil production:
  • May, 2019: 1.393 million bopd
  • April, 2019: 1.392 million bopd
Those numbers, of course, were rounded. The preliminary crude oil production for April, 2019,was:
  • 1,391,188 bopd (preliminary, crude oil production, April, 2019)
If the final number actually hit 1.392 million bopd, we had a huge jump in April. 

I don't yet see the Director's Cut which is slated to be released in about 40 minutes.

With regard to crude oil production, yesterday before the Director's Cut was posted, I wrote this:
  • Crude oil production in March, 2019: 1,391,760 bopd (final) (preliminary was: 1,390,138 bopd, so it's very likely "final" April, 2019, will be closer to 1,392,810 bopd)
The May, 2019, summary:

Crude oil production:
  • May, 2019: 1,393,284 bopd (preliminary)
  • April, 2019: 1,392,485, bopd (final) (see above: I predicted: 1,392,810 -- off by 385 bopd -- whoo-hoo!)
    • April crude oil production "increased" by 2,347 bopd or 0.1688%
Crude oil production:
  • May, 2019 (preliminary): 1,393,284
  • April, 2019 (final): 1,392,485
  • January, 2019, all-time high: 1,403,808 bopd
Delta, crude oil:
  • May, 2019 (preliminary):1,393,284
  • April, 2019 (final): 1,392,485
  • delta, month-over-month, bbls: 799 bopd
  • delta, month-over-month, percent: 0.00%
Natural gas production:
  • May, 2019 (preliminary): 2,821,672 mcfpd
  • April, 2019 (final): 2,833,131 mcfpd (this is now the all-time high)
  • we'll see if that record holds when the "final" figures come out next month
    • to go from 2,821,672 to 2,833,132 mcfpd, is a 0.4% increase
  • April, 2019 (final), likely an all-time high: 1,864,595 boe
  • May, 2019 (preliminary): 1,863,484 boe (once the "final" figures are posted a month from now, it's likely we will see a new all-time BOE daily production number;
Producing wells:
  • May, 2019: 15,698 (preliminary, new all-time high)
  • April, 2019: 15,503 
  • March, 2019: 15,353 -- well below the all-time high of 15,409 in January, 2019
  • February, 2019: 15,154
  • January, 2019: 15,409
  • June: 129
  • May; 140
  • April: 129
  • March: 133 
  • February: 109

Notes From All Over -- Part 3, July 16, 2019 -- Global Energy Consumption In 2018 Grew At Fastest Rate In A Decade

Flashback: making America great. This was back on February 28, 2019 --
The U.S. carbon dioxide emissions reduction over the past decade has been the largest cut in emissions in the history of energy, Dr. Fatih Birol, the Executive Director of the International Energy Agency (IEA), said at a press conference in Washington D.C.
In the last 10 years, the emissions reduction in the United States has been the largest in the history of energy,” Birol said at a joint press conference with U.S. Secretary of Energy Rick Perry.
But despite that, atmospheric CO2 has hit another high (FWIW). But it's due to coal-burning in China and India. Link here.

But look at the lede, ignoring the meaningless global warming narrative:
  • energy consumption in 2018 rose at the fastest rate in a decade
I equate energy consumption with quality of life. Energy consumption rose most outside the US and western Europe. Quality of life improving for hundreds of millions.

I was correct. I thought the rate of growth was greater as seen at the graphic at this link. There's no way wind/solar will be able to keep up with global demand.

Notes From All Over -- Part 2, July 16, 2019

Coming to a theater near you: if the opposition party takes the White House and Congress  in 2020, I suspect we will see the same story here in the US. From Germany Bloomberg reports:
Oil and gas companies that supply Europe’s biggest energy market fuels for cars, trucks and heating may be soon be required to pay for carbon pollution allowances if a panel advising the government gets its way.
Chancellor Angela Merkel this month started talks on how to force the transport and building industries to pay for their pollution, widening the number of sectors required to participate in the European Emissions Trading System, or ETS. Merkel hasn’t decided yet whether to push for extending the ETS to those industries or to impose a new tax on carbon. A panel advising Merkel and her ministers favors using the cap-and-trade market.
Germany should copy Europe’s ETS and apply it nationally to heating and road emissions, Klaus Schmidt, the group’s co-chairman told reporters on Monday. Setting up separate platforms for trading permits in those sectors would enable the market to squeeze out polluting technologies like road and heating fuels. That’s provided floor and ceiling prices are set, he said.
By compelling oil and gas companies like Royal Dutch Shell Plc, BP Plc, Total SA, Wintershall AG and Gazprom PJSC or their German units to buy pollution certificates, Merkel’s coalition would potentially retain the ability to steer CO2 reduction with precision by controlling auction volumes.
The new engines arrived yesterday (July 15, 2019): engines for the new AF One arrived at a local, small airport in the Fort Worth, TX, area. Under tight security and little fanfare, the new engines were flown in and trucked to an undisclosed location. 
And, now, look at this -- this story from almost exactly one year ago:
The Air Force on Tuesday awarded a $3.9 billion contract to Boeing for two next-generation Air Force One planes. The fixed-price firm award follows a February handshake deal between President Donald Trump and Boeing CEO Dennis Muilenburg to cap the program at that figure. A Defense Department contract announcement labels the award a “definitized contracting action” — the label given to contracts where the exact terms have not been specified — and obligates $64 million at this time. A new paint job is expected. (Much more at the link, including the cost savings Trump demanded.)
One artist's rendering (I am not making this up);  just in time for 2020 election. LOL:

Majors Airport, wiki: Originally named Majors Field, it is home to L3 Technologies Mission Integration Division (MID), which performs aircraft modification. What a great country.

Four Wells Coming Off The Confidential List Today -- July 16, 2019

Wells coming off the confidential list today -- Tuesday, July 16, 2019: 26 for the month; 26 for the quarter;
  • 35524, SI/NC, MRO, Mason 14-31TFH, Killdeer, no production data,
  • 35495, 2,059, CLR, Burian 4-27H1, Three Forks First Bench, 62 stages; 10 million lbs, St Demetrius, t1/19; cum 97K 5/19;
  • 35080, IA, CLR, Carson Peak 7-35H, Oakdale, t--; cum --;
  • 31804, SI/NC, EOG, Riverview 36-3031H, Clarks Creek; no production data;
Active rigs:

Active Rigs5869582974

RBN Energy: NuStar Energy's crude gathering system in the Permian's Midland Basin, part 11.
With Permian crude oil production now topping 4 MMb/d — and likely to surpass 5 MMb/d in short order — producers in the play are working closely with midstream companies to help ensure there is sufficient capacity in place to efficiently transport their crude from the lease to larger shuttle systems, regional hubs and takeaway pipelines. Sometimes, gathering systems need to be built from scratch, but in most cases, it is more cost-effective to expand existing systems that are already connected to key infrastructure downstream. Today, we continue our series with a look at a big pipeline network that NuStar Energy acquired two-plus years ago and has been expanding and improving ever since.

Notes From All Over -- Part 1, July 16, 2019

  • Wells Fargo's top and bottom lines beat estimates. Link here
    • earnings, $1.30 vs estimates of $1.15 
  • Goldman Sachs, link here
    • early winner of earnings season
    • surpassed expectations on both top and bottom lines, but also hiked its quarterly dividend to $1.25 from 85 cents
Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, career, or relationship decisions based on what you read here or think you may have read here.

US equity markets: futures suggest the three indices will again set all-time intra-day records; if so, this will be the fifth time in about ten days this has happened for at least one of the three indices on any given day (if that makes sense)

Director's Cut, May, 2019, data to be released at 9:00 a.m.

Earnings: we've been inundated with stories that 2Q19 earnings will be awful. And then about 48 hours ago, we were told "to watch the banks." The banks, we were told, would report great earnings. Well, yesterday, Citi early in the earnings season, surprised analysts on the upside; now, today, the same thing with JP Morgan. Link here. Data points:
  • surpassed analysts' expectations 
  • earnings: $2.82/share vs $2.50/share forecast -- Finance!Yahoo could have inserted "whopping" in this story -- that's a huge beat
  • helped by a nearly $800 million tax boost (the president, of course, not given any credit)
  • revenue: almost $30 billion vs almost $29 billion forecast
  • JP Morgan second bank to report earnings this week, and the second to beat estimates
  • Jamie Dimon: guidance -- upbeat; sees more of the same going forward
  • credit card sales saw double-digit growth, as did merchant processing volumes
  • "healthy consumer spending" -- again, the president not given any credit -- it's the economy stupid
  • mobile customers up 12% year-over-year
  • the bank has opened over 2 million accounts digitally
  • great news for investors: investment banking revenue fell 9% -- brokers, banks, etc., due to competition, charging less for their services 
  • but apparently this was not good enough for investors: right now JPM is down almost 2%; LOL -- Trump: "welcome to my world" 
FWIW: US sees drop in CO2 emissions. But look at the reason -- "global warming" has become "global cooling. Link to the story here. Key paragraph in entire story:
The EIA is basing this optimism for lower CO2 emissions on the mild temperature forecasts for the remainder of the year, which it expects will keep energy demand below that of 2018. 
Atmospheric CO2, link here:

  • For those keeping score at home, the "number" was 410.79
  • the narrative is starting to change. Note this at the linked story:
    • April: coldest April since 1880
    • May: there have been three previous months of May that were hotter (since 1880)

Let Me Go My Merry Way, Charlie Rich

Prince Andrew: I did not have sex with that girl.

2Q19 Earnings

CLR: mixed; EPS way down from last year, but only missed estimates by a penny; on the other hand, revenues up.

ETP: nice.

Oasis: beats. Barely.

Morgan Stanley: mixed; shares up slightly so investors must have liked the results; but not a particularly good story;

Baker Hughes (GE): beats; shares up 5% on the news

Whiting: huge, unexpected loss. Forecast to earn 30 cents; in fact, lost 28 cents. Cut one-third of its work-force. Banks are probably "driving" the company. 

AAPL: July 30, 2019, after close; EPS forecast, $2.10; a year ago: $2.34;  

Suncor: 5% rise in 2Q19 operating profit and higher upstream production.

July 25, 2019:
  • GOOGL: jumps 9%; up $103/share; sales beat expectations; 
  • AMZN: shares down about 1.5%, hardly concerning; "Amazon reports disappointing Q2 results"; revenue growth accelerating but costs associated with same-day delivery cut into EPS -- hardly a concern;
  • INTC: shares jump 5%; up $2.65 to trade at $54.81; beats on 2Q19 results; raises guidance
  • CMCSA: shares down a percent; earnings beat; revenue light as video subscriber loss grows
  • FSLR: delays report; will report August 1
  • TMUS: shares down 1.5%; strong earnings trumped by silence on Sprint merger deal
  • SBUX: up 6%; soars to all-time high on strong earnings
  • BAX: reported earlier; shares up 1.5% today; boosts full-year outlook after topping 2Q19 estimates
TSLA: the stock of the day -- plunges 12% after earnings come out; loss of $1.12; consensus, a loss of only 40 cents; but the big problem: margin of 19%; only good news: free cash flow greater than forecast

F: beats on both top and bottom line but shares plunge 7% due to weak guidance

FB: beats; shares up about 1%

BA: huge loss; much worse than expected; MAX 737 a disaster

CAT: down 5% after reporting miss; down $7 to $131.

EW: huge earnings; outlook -- stock jumped as much as 13%; up $25; hitting all-time high of almost $220.

HAL: jumped 9% today after announcing earnings.

SLB: earnings of 35 cents in line with estimates; the bottom line, however, declined from 43 cents a year ago; revenues of $8.269 billion almost identical to last year; beat estimates of $8.115 billion

UNP: huge beat

BK: beats on earnings; but a mixed report overall;

BAC: beats on earnings; net income rose 13% year-over-year.

IBM: met on revenue; beat on earnings.

Deere and Tractor Supply: see this note.

JP Morgan: huge beat; see this note;

Citi: beat

July 16, 2019: QCOM, BK, railroads --