Enerplus "Stringed Instrument" Pad Will Be Huge -- Monday, September 27, 2021

WTI: will it hit $75 today; pre-market up 1.3%; up almost a dollar; trading just below $75 at $74.93.

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. 

A quick look at the news this morning suggests:

• ten year treasury: moving higher and really, really helping the market (especially the banks)
• re-opening trade -- WTI flirting with $75; oil and oil services surging; Goldman Sachs has lifted substantially its Brent crude forecasts to $90/bbl by year-end; will continue into 2022, 2023 and what it calls the mid-cycle price; link here.
  
• some mainstream media starting to link renewable energy policies with current energy crisis
• op-ed in Financial Review does just that: Europe's renewables generated current energy crisis; 
  
• one respected pundit calls for a "natural gas reserve" for Europe, the UK
• hush: isn't this a bit late?
• hush: they had one until faux environmentalists shut it down; it was called Groningen
• the UK gasoline crisis is not getting better;
• China's sudden thirst for energy seems to have surprised analysts; link here or direct link to a Bloomberg paywall; 
• the Chinese winter has not started yet, but China's thirst for more energy right now is a big, big deal; all of this in context with the Winter Olympics in China in February 2022; link here;
  
• Equinor has quietly increased significant amounts of oil to Asia; link here;
• India: may need additional two-million bpd refining capacity by 2030; link here to Reuters;
  
• many years of underinvestment; discussed often on the blog; I never bought into them; looks like it may happen: Hess sees tight oil market in near term; underinvestment risk ahead; link to Reuters; reminder: Reuters is London-based; has great world view, but at same time, sees things through European socialist spectacles. [The Economist is so much worse; explains why it never shows up on my twitter feed];
  
• one begins to wonder what might happen if gasoline prices spike here in the US, from current average of around $3.10 / gallon to $5.00 / gallon
• indications some folks are again hoarding basic non-perishables
• Costco in some regions limiting volume purchases of some paper items
  
• in the US equity markets; there appears to be a sector rotation; folks are selling small amounts of AAPL to buy moderately into oil sector
• overnight futures starting to drop back; those who thought the market might close "green" today may be surprised; watch for day's lows to occur at 10:30 a.m. CT
  

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. 

Asymptomatic Covid: is it just me or are we seeing an increasing number of television presenters with a hacking cough; JoBid had a hacking cough there for awhile; folks commented on it; seems to have resolved; hosts on The View were said to have been coughing at the time two tested positive for Covid-19;

CNBC: because I generally don't watch the network at dawn but wait until later, I had not noticed but isn't Becky Quick looking a bit older; Joe seems not to have aged; Andrew Ross Sorkin's hair looks incredibly black -- incredibly black, but most noticeable, not one grey hair along the temples where one would expect it; I watch the screen; no volume or captions; way too political and nonsensical; video now airing highlights of the Ryder Cup (numbers to recall, all in yards: 345 71 47). I did turn on the volume for that; well-worth hearing the conversation; these guys knew what they were talking about;

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Back to the Bakken

Enerplus: the Enerplus "String Instrument" pad is going to be huge. See below. Tracked here. 

Active rigs: no one knows. My best guess*:

$74.93	9/27/2021	09/27/2020	09/27/2019	09/27/2018	09/27/2017
Active Rigs	24*	11	57	65	57

Wells coming off confidential list today; ditto, but NDIC says these will report today:

Monday, September 27, 2021: 31 for the month, 42 for the quarter, 222 for the year:

• 37029, conf, Enerplus, Fiddle 149-94-02C-01H-TF,
• 37028, conf, Enerplus, Mandolin 149-94-02-01H,

Sunday, September 26, 2021: 29 for the month, 40 for the quarter, 220 for the year:

• 38181, conf, Petro-Hutnt, Hurinenko 144-98-2B-11-1HS,
• 37245, conf, MRO, Armstrong 14-34H,

Saturday, September 25, 2021: 27 for the month, 38 for the quarter, 218 for the year:

• None.
  

RBN Energy: OPEC's giants claiming ground despite uncertain crude oil market.

Producers of crude oil face historic insecurity about their market. Not only is there still uncertainty stemming from COVID, oil demand is also under pressure as governments and international organizations push to replace fossil fuels with energy forms free of hydrocarbons. Members of the Organization of the Petroleum Exporting Countries (OPEC) face special challenges from measures taking shape to discourage oil use. Their economies, more than most others, depend on oil sales and many members of the exporters’ group have limited sources of replacement income. Yet OPEC producers do not lack leverage in a market expected to grow at diminishing rates and eventually shrink. Many of them can produce crude oil much less expensively than counterparts elsewhere and some of them plan to profit from that advantage by increasing output, even as the market flattens, and are investing to raise production capacity to ‘get while the getting is good.’ In today’s RBN blog, we look at capacity-boosting plans within OPEC, explain why most members cannot take part in the effort, and describe how this developing priority might intensify market competition.

A bit of "Oil-101":

In fact, analysis of undeveloped reserves suggests that six OPEC members face trouble clearing even the geologic hurdle, the one we’ll examine most closely. To assess this requirement for raising production capacity, we look at reserves-to-production (R/P) ratios. Because dividing reserves by annual production yields a quotient measured in years, R/P ratios are sometimes called reserves lives indexes and are taken to mean time remaining before resource exhaustion. But that can be misleading because oil fields don’t follow formulas. Reserves estimates change as knowledge grows about productive reservoirs and production doesn’t decline in a straight line as oil-bearing rock — the reservoir — depletes. Typically, a field peaks relatively soon after production starts then falls rapidly before flattening later in its life and beginning a slow decline that can last for a long time. Also, output can jump during a field’s life in response to techniques such as water or gas injection and enhanced recovery. For these and other reasons, a mature oil field — or a long-producing country with many such fields — can have an R/P ratio of 9-10 for much longer than 9-10 years. Regardless, an R/P ratio in that low range usually indicates that there has already been extensive field development and so there is limited potential to increase capacity by drilling more or installing surface equipment. Conversely, much higher R/P ratios imply room for further development of existing reserves and, therefore, potential for net capacity hikes to the extent that new production offsets declines from existing wells.

In Figure 1, we calculate R/P ratios for all 13 OPEC members with reserves and production data from the 2021 BP Statistical Review of Energy published in July. We use data for 2019 instead of 2020 because last year’s production suffered from oil-demand losses related to the coronavirus pandemic, making the prior year more reflective of long-term trends. The table shows reserves estimates (A) divided by the product of daily production (B) multiplied by 365 which yields annual production (C) to derive R/P ratios. The R/P ratio range among OPEC members is huge, from Angola’s and Equatorial Guinea’s 15 (blue ovals) to Venezuela’s whopping 925. We should point out that Venezuela’s R/P ratio is distorted by production suppressed by the economically beleaguered country’s inability to invest in its oil fields and by inclusion in its reserves number of heavy oil in the mostly undeveloped Orinoco Belt. Subtracting Orinoco reserves of 262,000 MMbbl leaves conventional reserves of 41,800 MMbbl and lowers Venezuela’s R/P ratio to a still high 127. That happens also to be the R/P ratio of Iran, another country with high reserves and suppressed production — in Iran’s case by international sanctions limiting exports and oilfield investment. Venezuela and Iran are the two countries mentioned earlier that, because of investment restrictions, are unlikely to raise production capacity soon despite their high R/P ratios. For countries with low R/P ratios, raising capacity is not impossible, but the resulting production increments probably would not be large. An alternative, not practicable on a large scale for many of the low-R/P countries, is to find new fields or extend existing fields through costly and risky exploration and development.

Figure 1. OPEC Reserves, Production, and R/P Ratios in 2019. Source: BP

 Much, much more at the link.