Off The Net Tonight -- November 3, 2020

I won't be following the news tonight, and won't be opening any e-mail that is political in nature tonight. I may do a bit on the Bakken but mostly I'm going to be listening to Jerry Jeff Walker.

Good luck to all.  

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Yup!

This was over at oilprice earlier today. For all I know, the article is still there. I haven't read the article, don't know what it's all about, but I can guess. OPEC is facing a crisis. (US shale may be facing a crisis, also, but that's a story for another time). WTI is flirting with $39 and trending up. OPEC basket is below $36 and trending down.

I haven't bothered to look why the OPEC basket is plunging (that could change by the end of the week), but think about it:

• the two major producers (Russia and Saudi Arabia) need the income; they can't keep cutting production all by themselves to prop up prices;
• US oil imports from Saudi Arabia plummeted; absolutely unexpected; hurricane-related; who knows? who cares? the US is clearly self-sufficient when it comes to energy;
• Iraq apparently has decided that Saudi Arabia won't call the shots any more; Iraq will produce what it wants to produce -- it's become an existential issue for Iraq --
  
• From October 30, 2020, Iraq: crumbling economy becomes a threat to OPEC+ production cuts.

Iraq may be the world's third-biggest oil exporter, but its economy is cratering after the coronavirus pandemic sapped global demand for energy and caused prices to collapse. 

The state's finances are so dire it can't pay teachers and civil servants on time, threatening a repeat of the upheaval that last year brought down the government and saw hundreds of protesters killed. 

That's created a dilemma for 46-year-old Abdul Jabbar, a chemical engineer and career oil man who's now caught between the demands of an angry population and the pledges made to allies in OPEC. 

The group of oil producers is trying to bolster a fragile market by reining in supply and it needs major producers like Iraq to toe the line. For Iraq, restraining supply carries a massive economic and political cost. But breaking ranks is risky too: it could mean lower prices for everyone. 

Some Iraqis want the government to put them first by simply pumping more oil, a move that could unravel the finely calibrated output agreement; if a producer as significant as Iraq flouts the pact, there'd be little to stop smaller ones doing the same.

Libya: every time I see an analyst mention Libya, I roll me eyes, but I have to admit that right now, Libya is a real thorn in Saudi Arabia's side. Libya is not subject to quotas or cuts, and is now back to producing upwards of 800,000 bopd or about 10% of Saudi Arabia's production. Scary. For Saudi Arabia. 

If Biden becomes president, "Katie, bar the door." The Biden wing is a huge Iranian supporter and the first thing Biden et al will do is lift sanctions. 

So, this remains the most fascinating international energy story.  

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Lolita

I've tried more than once to read Vladimir's Nabokov's Lolita. It becomes boring very quickly and very difficult to follow. It turns out a movie version exists. I watched the movie on TCM today. Absolutely fascinating. Then read the wiki "plot." I may try reading the book again. 

This "hit" resulted from this google search: Salinger Nabokov pedophile: https://pdfs.semanticscholar.org/3c8a/9ee20a3c2d0b4bfd520ee3e6a4270764056e.pdf.

Closer Look At The Fourteen CLR Brangus/Charolais Permits In Today's Daily Activity Report -- November 3, 2020

In a long note like this, there will be content and typographical errors. In addition, some assumptions could be wrong. The permits are confidential.

Fourteen new permits, #37945 - #37958, inclusive, see daily activity report dated November 3, 2020:

• Operator: CLR
• Field: Elm Tree (McKenzie)
• Comments:
• CLR has permits for fourteen wells, all sited in NESW 14-153-94:
• the fourteen permits will be placed from 2506' FSL to 2515' FSL, and from 2420' FWL to 1900' FWL;
• fourteen wells will run in a single horizontal line from 2420' FWL to 1900' FWL; north to south, the northernmost will be only 15' from the southernmost; east-to-west, each well is 40' from each of its neighboring well. This is the closest I've seen surface well spacing in the Bakken; generally, the surface spacing is at least 50 feet (in one direction) and more than ten feet separation in 90° in corresponding direction;
• the wells:
• Brangus FIU (7)
• Brangus Federal (6) 
• Charolais South Federal (1)

The graphics:

 

In the graphic below, I suggested that all Brangus wells will run north. Based on their names (FIU vs Federal), it's possible the FIU wells will run south and the Federal wells will run north.

CLR With Fourteen New Permits, All In Elm Tree; Ten Permits Renewed -- November 3, 2020

MDU: preview (November 3, 2002; will report November 4, 2020):

• consensus EPS: 63 cents vs 47 cents last year
• consensus revenue: $1.6 billion (+2.3% y/y)
  

Oil prices today:

Active rigs:

$37.06	11/3/2020	11/03/2019	11/03/2018	11/03/2017	11/03/2016
Active Rigs	14	57	66	55	36

Fourteen new permits, #37945 - #37958, inclusive:

• Operator: CLR
• Field: Elm Tree (McKenzie)
• Comments:
• CLR has permits for fourteen wells, all sited in NESW 14-153-94:
• the fourteen permits will be placed from 2506' FSL to 2515' FSL, and from 2420' FWL to 1900' FWL;
• fourteen wells will run in a single horizontal line from 2420' FWL to 1900' FWL; north to south, the northernmost will be only 15' from the southernmost; east-to-west, each well is 40' from each of its neighboring well. This is the closest I've seen surface well spacing in the Bakken; generally, the surface spacing is at least 50 feet (in one direction) and more than ten feet separation in 90° in corresponding direction;
• the wells:
• Brangus FIU (7)
• Brangus Federal (6) 
• Charolais South Federal (1)

Ten permits renewed:

• Bruin (3): three FB Leviathan permits in McKenzie County
• Whiting (2): two Gullikson permits in McKenzie County
• Rimrock (2): one Hammerhead permit and one Tiger permit, both in Dunn County;
• Oasis (2): one Dahl permit in McKenzie County and one Barron permit in Burke County;
• Newfield: one Bice permit in Dunn County

Chinese Flu Watch -- Texas -- What's Going On In Lubbock? Is Lubbock, TX, Channeling Medora, ND? -- November 3, 2020

Lubbock, TX, is out in the middle of nowhere. It invented social distancing. Unless Jerry Jeff Walker showed up. But look at this. One of the smaller counties in Texas in terms of population, and Lubbock sits at the top of the list for new deaths reported yesterday. Link here: set filter to "yesterday," arrange list by "new deaths." Up plus 6.

• Houston's county, Harris: +3
• Dallas: +1
• Ft Worth's county, Tarrant: 0
• Rocky Horror Picture Show's county, Denton: 0

Arranged by new deaths in past 24 hours:

And at new cases, Lubbock County is at #3, trailing only Dallas and El Paso.

OPEC In Deep Doo-Doo -- Aramco's Profit Plunges -- November 3, 2020

I don't know when I first saw it coming. Certainly it was by 2016. But OPEC is in deep doo-doo and the House of Saud is in extremis. 

Data points:

• 3Q20:
• Saudi Aramco's net profit slightly less than $12 billion;
• net profit down almost 45% y/y;
• free cash flow: $12.4 billion
• forced to pay a dividend of almost $20 billion for the quarter
• first nine months of the calendar year:
• net profit down almost 50%;
• net profit down to $35 billion;
• average production: 9.2 million bpd;
• most interesting:
• the $75 billion dividend paid by Saudi Aramco will not be able to cover Saudi's budget deficit;
• the House of Saud won't be able to plug its deficit with the Aramco dividend as it did last year; 
  
• tea leaves: 
• Aramco's earnings could take a bigger hit before the year is out (exhibit A: OPEC basket today plunges below WTI);
• Aramco:
• its own budget commitments;
• must meet requirements to buy petrochemicals giant SABIC
• future? prices are too weak for OPEC to relax production cuts by another two million bopd next January
• could it get worse? Yup. A Biden presidency.
• the Biden wing supports Iran
• sanctions on Iran will be lifted on humanitarian grounds
• huge hit for Saudi Arabia when Iran gets back into the market
  

Link to Charles Kennedy.

Aramco reported a net profit of $11.8 billion for the third quarter of 2020, down by 44.6 percent on the year as low oil prices continued to bite into its financial performance.

The company also said it had free cash flow of $12.4 billion at the end of the three-month period and declared a dividend of $18.75 billion for the quarter.

For the first nine months of the year, the hit from low oil prices and depressed demand was stronger. Net profit was down by close to 49 percent to $35.015 billion.

In oil production, the Saudi major reported an average daily of 9.2 million bpd for the first nine months of the year as it continued capping output in compliance with the OPEC+ agreement.

Earlier this year, Aramco declared an annual dividend of $75 billion. That amount, however, will not be sufficient to cover the Saudi budget deficit, Moody’s said in a report last month. Now, with oil prices still low and likely to go lower still if the surge in Covid-19 cases continues in Europe and the United States, Aramco’s earnings will take a bigger hit.

This means that the government in Riyadh will not be able to plug the budget hole with the Aramco dividend as it has done previously.

“The government is unlikely to be able to repeat the maneuver beyond 2021,” Moody’s said in the report. Aramco will have its own capital expenditure needs and its commitment to buy petrochemicals giant SABIC to look after, according to the ratings agency.

US crude oil imports from Saudi Arabia: huge plunge, not since the 1980s have we seen numbers this low. 

From the "milliondollarway" archives:

This might be good time to re-read this interesting story in Foreign Policy, May 5, 2020; still not behind a paywall; the writer of that article: Jason Bordoff, a former senior director on the staff of the US National Security Council and special assistant to President Barack Obama ... I first linked this article in September, 2020. It will be interesting to see how this plays out.

One Well Coming Off The Confidential List; OPEC Basket Plunges Below WTI -- November 3, 2020

OPEC basket, link here: $35.89. OPEC basket plunges below WTI. 

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Back to the Bakken

Active rigs:

$38.18	11/3/2020	11/03/2019	11/03/2018	11/03/2017	11/03/2016
Active Rigs	14	57	66	55	36

One well coming off the confidential list -- Tuesday, November 3, 2020: 2 for the month; 26 for the quarter, 691 for the year

• 35809, loc/NC, Petro-Hunt, Sabrosky 144-97-7C-6-3H, Little Knife, no production data;
  

RBN Energy: global demand swings amplify US gas (LNG) market seasonality.

2020 has been as anomalous as it can get for energy markets, but that’s especially the case for the LNG sector, which was battered by COVID-related demand destruction. 

U.S. export volumes, in particular, experienced wild swings this year, going from steady increases and close to 100% utilization over the past few years as new export capacity was added, to operating at barely 30% of capacity this past summer as national lockdowns decimated demand and led to historically low gas prices abroad. 

Contracted cargoes were canceled en masse for the first time since the U.S. began exporting in 2016, amounting to over 500 Bcf between June and September that was pushed back into the U.S. natural gas market and into storage. But these events only exaggerated what was already a growing risk; with each new train being commercialized, domestic markets are increasingly exposed to the demand swings and other fundamentals in the export markets it serves. Today, we look at how seasonal demand patterns in the U.S.’s primary destination markets could translate to increased volatility at home.

Chinese Flu -- All Eyes On Medora, ND -- November 3, 2020

Link here. 

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Jerry Jeff Walker Tribute

Wow, are you kidding me? I had not seen this. It was just posted a few days ago, October 24, 2020 -- slightly longer than two hours -- Todd Snider's single man's (?) tribute to Jerry Jeff Walker. I have not see this yet. I'm watching it now.  It may or may not be worth watching but something tells me this is from "his heart." [Later, 10:41 p.m. -- holy mackerel -- it is worth listening to. Wow.]