No Wells Coming Off The Confidential List -- August 31, 2021

Feelin' good: think about it. Resident Biden can say he was first US president ever (fact check, please) to govern a US when not at war somewhere in the world. Well, I guess we sort of have that Korean War that has not formally ended (fact check, please). Last US flight out of Kabul was August 30, 2021, a day ahead of the deadline.

Prediction: next week, Wednesday, September 8, 2021 -- there will not be one mention of Afghanistan on ABC Nightly News with David Muir. If I'm wrong, I'm wrong by a week or so. We seldom heard about Afghanistan when there WAS a US presence in that country.

Well, that was fast: Pemex says it has restored all of the 420,000 bopd of oil production that was taken off line by the fire. Link here.

Apple, Inc.: acquires classical music service Primephone, will fold it into Apple Music. Link here.

Ten-year treasury: yield is up a bit today, and now at a negative 0.394%. In other words, if you are buying these bonds, you are paying the government about half-a-percent to hold that money for a year. One more thing: that's the German ten-year bond.

Ten-year treasury: in the US, the TYT is paying 1.28%. Up until yesterday, the yield had been increasing ever so slowly suggesting a move toward 1.4%. Today, back below 1.3%.

Shale operators: switching from DUCs to drilling. Link to ArgusMedia. 

US shale producers remain determined to restrain spending until oil market fundamentals strengthen, despite record cash generation so far this year.

But tight oil output is now rising, as well productivity gains deliver more supply from less investment. "We can do what we once had to do with 10 rigs with eight now in the Midland basin," Diamondback Energy chief financial officer Kaes Van't Hof says. "We're decreasing the number of rigs and crews we need to execute this year's capital plan," and "slightly increasing our Permian oil production guidance, which should not be taken as a conscious decision to grow", the firm's chief executive Travis Stice says.

Output from the seven major shale formations covered by the EIA's monthly Drilling Productivity Report (DPR) is accelerating as production from new wells exceeds legacy declines from existing wells (see graph). DPR-7 output rose by nearly 17,000 b/d in July and is expected to grow by over 31,000 b/d in August and nearly 48,000 b/d in September, the latest EIA report says. Most of the increase is from the Permian basin in Texas and New Mexico, where output rose by nearly 48,000 b/d in July, but net decline rates are also slowing across other shale regions.

Much of the output growth from new wells comes from a huge surplus of drilled-but-uncompleted (DUC) wells that accumulated in 2019 before the Covid-19 pandemic struck, as operators drilled more wells than they brought on stream. Drilling and completion activity slumped to barely a quarter of pre-pandemic levels by July last year after oil prices collapsed. But completions were the first to recover, rising to 80pc of pre-pandemic levels by last month, compared with just 50pc for wells drilled (see graph).

Shale firms completed 60pc more wells than they drilled over the past 12 months as they drew heavily on their DUC well inventory to keep spending in check. Bringing DUC wells on stream costs about 60pc of the expenditure that was required for drilling and completing new wells in 2020, consultants Rystad Energy say. But most of the DUC well surplus has been used up and firms are now drilling more wells to offset legacy declines. Rig counts are rising faster than completion crews (frac spreads) as the balance of activity tilts back to drilling new wells in the second half of this year. The number of US onshore rigs drilling for oil is up by 13pc from the end of May, oil service firm Baker Hughes says, compared with a 4pc increase in frac spreads logged by industry monitor Primary Vision (see graph).

Most of the bigger companies remain cautious about growing output. "We have no intention of adding incremental barrels... until demand-side fundamentals improve and it becomes evident that Opec+ spare capacity is effectively absorbed by world markets," Devon Energy chief executive Rick Muncrief says.

Much, much more at the link. 

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Back to the Bakken

Tribes ask for six-month extension: the US Army Corps of Engineers has decided to extend its timeframe for completing a court-ordered environmental study on the DAPL, according to information posted on the federal agency's Dakota Access project page. Link here.  Link to Williston Herald. 

According to court records, the Corps had been asked by tribes to extend the schedule by six months, and the federal agency said then it was considering granting the request. The decision will put publication of the Dakota Access pipeline’s final EIS somewhere around September of next year.

The outcome of the study will be a deciding factor in whether the U.S. Army Corps of Engineers reissues the easement for the Lake Oahe crossing, which was revoked last year.

Judge James Boasberg ruled that due to its controversial nature, NEPA required the Corps to complete the longer Environmental Impact Statement instead of the shorter Environmental Assessment when evaluating the pipeline’s easement to cross 90 feet below Lake Oahe.

Active rigs: current tally posted COB on daily activity report. 

	8/31/2021	08/31/2020	08/31/2019	08/31/2018	08/31/2017
Active Rigs	24*	10	64	63	55

No wells coming off the confidential list today.

RBN Energy: the liquefaction train ramp-up process and timelines.

The year-on-year gain in U.S. LNG feedgas demand has been the single biggest factor behind the soaring natural gas prices and storage shortfall this year. And there is more of that demand on the horizon. Cheniere Energy’s Sabine Pass Train 6 and Venture Global’s new Calcasieu Pass facility are due to start service in the first half of 2022. However, feedgas volume is likely to ramp up ahead of the new year as both projects progress through the commissioning phase and aim to export their first commissioning cargoes before the end of the year. How soon could that incremental feedgas demand show up? Getting a handle on the timing requires an understanding of how a liquefaction plant works and the various steps of the commissioning process. Today, we start a short series on what’s involved when bringing a liquefaction plant online and what that can tell us about the timing of incremental feedgas flows this fall/winter.

Turning back to the topic of today’s blog — the commissioning stages and timing of new feedgas demand this fall — when we last discussed the process of starting up new liquefaction trains back in 2019, LNG feedgas deliveries were just topping 5 Bcf/d, but there was no less than 30 million metric tons per annum (MMtpa), equivalent to ~4 Bcf/d of liquefaction capacity, that was scheduled to come online over the course of that year. There’s nowhere near that amount of liquefaction due online in the next few months or even in the next couple of years. Nevertheless, feedgas requirements of LNG export facilities have been just as big a driver of the Lower 48 gas market this year as they were back then and will continue to be closely watched heading into this winter.