Monday, May 11, 2020

ND Rig Count At 17; WTI Pretty Much Unchanged; Despite New Production Cuts From Saudi Arabia, OPEC Basket Drops In Price -- May 11, 2020

Headline writers continue to write the narrative they think should be playing out, but the numbers don't support the headlines:

Back To The Bakken

Active rigs:

Active Rigs1766605127

No new permits.

Five permits renewed;
  • XTO (3): three Beckert permits in Dunn County;
  • WPX (2): two Edward Goodbird permits in Dunn County; 
Eight wells approved for confidential status:
  • Nine Point Energy (3): Missouri wells in Williams County
  • Hess (3): two EN-Sorenson B and one EN-Ruland well, all in Mountrail County
  • CLR: one Marshall well in Dunn County
  • Whiting: one Oddie well in Mountrail County
Six producing wells (DUCs) reported as completed:
  • 35989, SI/A, Equinor, Sam 30-31 6TFH, Bull Butte, t--; cum 36K over 3 months;
  • 34410, SI/A, Crescent Point Energy, CPEUSC Dorothy 19-18-158N-98W MBH, Rainbow, t--; cum 18K over 31 days;
  • 36436, SI/A, Crescent Point Energy, EPEUSC Claire Rsoe 30-31-159N-99W MBH, Burg, t--; cum 11K over 53 days;
  • 34412, SI/A, Crescent Point Energy, CPEUSC Dorothy 4-19-18-158N-98W MBH, Rainbow, t--; cum 16K over 31 days;
  • 37078, conf, Whiting, Oddie 44-7HU, Sanish, t--; cum --;
  • 36504, drl/A, WPX,  Blue Racer 14-11HD, Squaw Creek, t--; cum 32K over 31 days;

Notes From All Over, Mid-Morning Edition -- May 11, 2020

Just breaking:

Saudi Arabia in deep doo-doo: see this post. Analysts are writing stories to fit "their" narrative, headlining that there was a "price rally" following Saudi's announcement that it was going to cut production.
In fact, no such thing, unless one calls a forty-cent rise on $20-oil a price rally. Give me a break.
Saudi overplayed their hand, and I don't see an end to their problems for the next year or so, assuming they ever recover. This was a huge debacle on so many levels.
More evidence Saudi having cash flow problems: suspends off-shore drilling rig. 
Offshore drilling company Noble Corp has said that its jack-up rig Noble Scott Marks, located offshore Saudi Arabia, will be suspended at the request of its client.
The rig is on a contract with Saudi Aramco, which, as Noble Corp. said in April, had recently requested for Noble to reduce the rig's dayrate from $159,000.
The offshore drilling contractor said Wednesday that the client had suspended the rig for a period of up to 365 days, with the suspension starting in the first half of May following the conclusion of the well in progress.
It did not provide info on the previous dayrate reduction request.
"During the suspension period, no dayrate will be paid. However, the company has the right to market the rig in pursuit of other work opportunities in the region," Noble Corporation said. The rig has a contract with Saudi Aramco until late October 2022. 
Saudi and off-shore drilling: we've talked about this before but the fact that Saudi Arabia was even engaged in very, very expensive off-shore drilling when it only cost $5/bbl to lift oil onshore spoke volumes about Saudi's aging fields. 

Medium to long term. Saudi says they will feel fiscally challenged for the medium term to long term. They did not get more specific. Most folks would suggest "medium term" means six months; long term, maybe a year or so. The Saudis have a peculiar way of looking at things, and"medium term" for them could certainly be measured in years. We'll see.

Quiet: I still think things are a bit too quiet in the Mideast right now. Iranian "friendly-fire" reported to kill nineteen over the weekend.

Wuhan flu: I've always maintained that no matter what you read, if you read enough, you will come across items in news articles that you might otherwise skip. It happens to me frequently.
Two weeks ago I was back in my "evolution" phase and reading three of my favorite books on the subject. Somewhere along the line I came across pangolins, but now forget where. And then, lo and behold, there are now news stories suggesting pangolins may hold the secret to controlling coronavirus. LOL.
Bats, hydroxychloroquine, vitamin D, clotting in lungs, and now pangolins. Links everywhere but this is one. Pangolins remind many of armadillos. Pangolins and aardvarks are Old World while armadillos, sloths, and anteaters are New World; the New World and Old World varieties are of different lineages.
Wuhan flu: for some the mantra has changed from "flattening the curve," which we've done, to "not one more death." NY governor was strong proponent of  "not one more death."

Reading: I'm pretty much done with "evolution" for now. I am back into Scotch Irish history.

Tesla: I don't know where "it" stands, but it looks like Musk Melon could move Tesla headquarters to Texas pretty quickly.
Moving a manufacturing plant to Nevada, I would think, might take a bit more time. However, there are auto manufacturing plants in Texas, and my hunch there may be some unused capacity. It's hard to believe that Tesla would partner with an existing manufacture, say Toyota, but stranger things have happened. This, too, should be fascinating to watch. 
Tesla: apparently "loses" another European vice president as it begins construction on Berlin factory.

Tesla: Model 3 sales in China plunge 64% in April despite EV market recovery.

Wuhan flu: some folks have gone from "flattening the curve" to "not one more death." The tipping point for re-opening state governments. When states have to start laying off government employees, and, teachers. Tea leaves suggest college football and profession football (NFL) could fall victim to Wuhan flu. NY governor Cuomo was big proponent of "not one more death." My hunch he won't be using that phrase any more starting this week. Just in: NYC lock down "likely" to continue into mid-June, which means the end of June, which means, "we'll re-evaluate in June, whether we need to extend through July."  By the way, for those who even look at Snopes any more, that site says it is "mostly true" that NYC's death rate is 250x that of Tokyo. "Mostly true. Wow.

By the way, did VP Mike Pence show up for work today? Tweets over the weekend of on-again, off-again self-quarantining as more and more DC folks test positive for corona virus.
Speaking of which, assuming no vaccine (or a less-than-effective vaccine) and assuming the virus just doesn't fade away, almost everyone in American should eventually test positive. To date, I think the CDC says one million Americans have tested positive. That's over four months. Of course, testing is picking up, but at that rate -- oh, let's be generous -- let's say one million new positives every two months -- 300 million American / 2 months per million = 150 months before everyone finally tests positive.
Parr Park
Grapevine, TX

Saudi Says Economy In Trouble For Medium To Long Term; ND Rig Count At 17; Where's The Beef -- May 11, 2020

Focus on Fracking: weekly edition has been posted. Section on plastics particularly long.

Say what? Fauci says folks should not be wearing masks. I can't make this stuff up.

CLR: 1Q20 reports.

NOG: 1Q20 reports

Trump's farm support: government will start purchasing $3 billion worth of farm goods, next week; link here;

Where's The Beef: Omaha Steaks "temporarily" out of many of its beef offerings; link here; years of ordering from Omaha Steaks, I've never seen this before; never, never would have expected it:

Headlines out of Saudi:
  • official message:
    • low oil demand, prices, coronavirus impact as well as unplanned expenditure on health sector pressured state finances to a level that will be hard to deal with without affecting the economy on medium to long term 
  • Saudi reported a record $27 billion monthly drop in its net foreign assets
  • seeking to contain a deficit that could approach levels last seen after the previous oil crash (definition of insanity, previously posted)
  •  announces a one-million-bbl cut in production for month of June
    • some suggest this means Saudi will pump 7.492 million bbls in June (note the false precision)
  • austere measures
    • will triple VAT on its citizens from 5% to 15%
    • will cut cost-of-living allowances for government workers 
    • looking to shore up revenue and rationalize spending with initiatives totaling $26.6 billion; link here;
    • total savings announced represent about 10% of expenditure initially planned in this year's budget 
    • projects delayed
  • will also look at re-structuring "special" government employee salaries; these "special" government employees, such as Vision 2030 employees, often paid more than typical state employees
  • article mentions Wuhan flu oil demand debacle but does not mention that Saudi is responsible for the oil glut; interestingly, the article also fails to mention the huge loss of tourism dollars during month of Ramadan 
  • Saudi Aramco cuts domestic gasoline prices in half; link here; from 1.31 riyals/liter to 0.67 riyals per liter; a riyal, I believe is "worth" about 25 US cents; and, here;
ICYMI: Saudi Arabia running out of money. Link here The last time Saudi tried to break US shale, they kept at it for two full years, 2014 - 2016. This time, they barely lasted a month. The definition of insanity.

Iraq: like to try to take advantage of this situation; Iraq has its own problems; government seems to be in disarray

UAE: experiencing jump in Wuhan flu cases;

CLR: will curtail 70% of its crude oil production in May, 2020

Fake news: fake news has gotten so bad that The Bismarck Tribune now points out which of its postings on twitter link to "true" stories

Death: comedy veteran Jerry Stiller, "Seinfeld" star; dies at age 92; no mention of Wuhan flu;

China car sales: up 4.4% year-over-year vs -43.3% in previous month
  • Jan - Apr vehicle sales -31.1% y/y vs -11.3% a year earlier (note)
Back to the Bakken
OPEC basket: $22.91

Active rigs:

Active Rigs1766605127

Wells coming off the confidential list today --

Monday, May 11, 2020: 32 for the month; 82 for the quarter, 309 for the year:
  • 36579, drl, Tong 34X-9A, Midway,
  • 36577, drl, XTO, Tong 34X-9C, Midway,
  • 35879, SI/NC, Zavanna Usher 28-20 5HXW, Patent Gate, t--; cum 40K over 26 days; pretty nice;
  • 33807, drl, BR, CCU Gopher 6-2-15MBH, Corral Creek,
Sunday, May 10, 2020: 28 for the month; 78 for the quarter, 305 for the year:
  • None.
Saturday, May 9, 2020: 28 for the month; 78 for the quarter, 305 for the year:
  • 36637, drl, WPX, Nighthawk 6-34HY, Heart Butte,
  • 36575, drl, XTO, Tong 34X-9D, Midway,
  • 33808, drl, BR, CCU Gopher 5-2-15TFH, Corral Creek,   
RBN Energy: the baffling impact of oil futures on physical contract prices -- CMA roll adjust and P-Plus.
On April 20, that fateful day in crude oil markets when the CME May contract for WTI at Cushing collapsed to negative $37.63/bbl, the number of contracts involved in the chaos was relatively small. So you might think that most producers sat on the sidelines, watching Wall Street paper traders writhe in stunning financial pain. But not so. Almost all producers saw their crude prices that day crashing in exactly the same magnitude. That’s because the daily price of the CME WTI contract is part of the formula pricing used in a very large portion of crude oil contracts in U.S. markets, both directly and indirectly. There are two formula mechanisms that are commonly used in crude oil sale/purchase contracts that are responsible for that linkage: the CMA and WTI P-Plus. These arcane pricing mechanisms are complicated, but in order to understand U.S. crude markets, it is critically important to appreciate how they work. Today, we continue our deep dive into crude oil contract pricing mechanisms.
The CME NYMEX WTI crude oil futures contract is the underlying benchmark in nearly all U.S. domestic crude price contracts. Differences between futures and physical trading arrangements make pricing physical WTI barrels complex. Two formula mechanisms are commonly used in physical transactions that link directly to the NYMEX settlement prices — the CMA and WTI P-Plus — and so both contract types felt the impact of last month’s price collapse.
The CME NYMEX WTI futures contract is the most liquid — or most widely and actively traded — commodity futures contract in the world, and is so ubiquitous that it also underpins domestic U.S. crude contract markets. It’s a strange symbiotic relationship, in that not only do cash crude prices heavily influence futures prices, but the cash contract price for most U.S. crude is indexed to the futures price. Differences between futures and physical trading, as well as the delivery mechanism that links the two markets, make pricing physical WTI complicated.