Three Wells Coming Off The Confidential List Today -- January 23, 2020

LNG: in uncharted territory. Rigzone.  LNG industry set six new records in 2019 --

• a sustained growth trend including a more than 50% increase in global capacity
• global LNG supply was up 11.8% from the previous year
• new investment: 40% higher than the previous record set in 2005
• US, Russia, and Mozambique set individual country-level highs
• level of liquefaction investment without long-term contracts or underpinned by sales to affiliates hit record territory last year
• new  liquefaction start-ups last year represents an all-time high, narrowly beating the previous record set in 2009
• cluster of start-ups in Australia, Russia, and the US
• Australia bypassed Qatar in 2019 as the world's top LNG exporter
• Europe set LNG import records every single month in 2019 and for the year as a whole 
• China: imported record LNG volumes for the fourth consecutive year in 2019, taking 13.4% more LNG from the previous year
• China overtook Japan as the world's top LNG importer in December, 2019; 
• Japan likely to remain the world's leading LNG importer on a total annual basis through 2020;
• Japan's overall LNG imports have been trending downward since 2015 

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Back to the Bakken 

Active rigs:

$55.72	1/23/2020	01/23/2019	01/23/2018	01/23/2017	01/23/2016
Active Rigs	54	63	57	38	47

Three new wells reporting today -- Thursday, January 23, 2020: 83 for the month; 83 for the quarter, 83 for the year:

• 36291, drl, Rimrock, Two Shields Butte 3-24-12-2H3, Mandaree, the final of four north-drilling wells in the Two Shields Butte DSU; Three Forks formation first bench; target zone 28' thick; 12 drilling days;; gas ranged from 50 to 400 units;
• 36261, drl, WPX, Mandaree Warrior 14-11HA, Squaw Creek, 98.7% of the lateral was drilled within the middle Bakken target; and, 1.3% drilled outside the target;
• 35461, 1,157, CLR, Weisz 2-11HSL, four sections, 43 stages; 10.5 million lbs; Beaver Lodge, t11/19; cum 42K 11/19; a 33K month; final vertical and curve on a 3-well pad, the first lateral drilled; "batch drilling"; all three vertical and curve sections were drilled prior to drilling the Weisz 2-11HSL lateral; 112.6 drilling hours; gas shows were very good; average background of 800 units with a peck show of over 8,000 units; a 15 - 20' trip flare was observed; 12 drilling days from spud to TD; within the middle Bakken for 82% of the lateral wellbore;

RBN Energy: natural gas buyers party like it's 1999.

After holding above $2/MMBtu in the first half of January, the CME/NYMEX February natural gas futures contract caved in this week, closing Tuesday and Wednesday at $1.895/MMBtu and $1.905/MMBtu, respectively. The last time we saw prices this low was in March 2016. But to see such levels trading in January, typically one of the coldest and highest-demand months of the year, you’d have to go back more than two decades — to 1999. Today, we explain the fundamentals behind the price collapse earlier this week and its implications for the 2020 gas market.

The U.S. natural gas market has been in a precarious state for some months now. We discussed some of the fundamental challenges facing the market in a couple of late-injection-season blogs.

At the time, Lower-48 dry gas production volumes had been ascending for several months straight (since July 2019) and peaked in late-November above 96 Bcf/d. Lower-48 consumption — from power generation, industrial and residential/commercial (res/comm) customers — was high and setting records of its own. But the consumption gains were modest compared with the supply increases, and were undercut by summer weather that was milder than the previous year. Also, some of the LNG export demand from new liquefaction trains that had been expected much earlier in the year came too late in the injection season to affect the inventory build-up. All that led to the market by October wiping out any remaining storage deficit versus the previous year and the five-year average, and further, amassing a large surplus in storage compared with a year earlier. Prompt-month prices, which already were trading lower than 2018, peeled even lower and by October/November were skimming near multi-decade lows for that time of year — and not just for a day here and there, but on a monthly and seasonal average basis.

Despite these bearish factors, the bulls in the market held on. The coldest, highest gas-demand months of the year were still ahead, after all — there was still the possibility that an exceptionally cold winter could reverse their fortunes. Plus, as absolute temperatures dropped heading into winter and seasonal wellhead freeze-offs took effect, production receded from the peak seen in late November, providing some support to prices.

Well, now, it’s fair to say that any bullish optimism hinging on prolonged winter heating demand has evaporated in recent days.