Friday, February 26, 2021

Free Cash Flow -- EOG Vs CLR -- 4Q20 -- EOG's Focus on "Double-Premium -- Whatever That Is -- February 26, 2021

Free cash flow:

  • EOG: $666 million 4Q20; annualized: $2.7 billion for the full year;
  • CLR: $275 million full year;

Market cap:

  • EOG: $37 billion
  • CLR: $9 billion

EOG's "Double-Premium" strategy: for the life of me, I can't figure out what "they" mean by "double premium." Apparently I'm not the only one. From twitter today:

And then this from Onvintiv CEO over at Twitter. This has to be the funniest thing I've seen since Trump's "covfefe" tweet, link here (this link is worth the cost of the subscription to this blog):

The Cube™, lol: three layers of capital destruction. LOL. 

From NGI, "double the premium (archived):

The 2021 capex plan is designed to maintain oil production at the 4Q2020 rate of 434,000-446,000 b/d.

The budget also is designed to fund a growing exploration inventory. However, even if commodity prices were to improve, don’t look for EOG to boost spending or build volumes, Thomas said. 

The focus instead is centered around “double-premium” oil and gas potential, with wells needing a minimum 60% after tax real rate of return, i.e. ATROR. That would be an average flat $40/bbl West Texas Intermediate oil price and $2.50/Mcf Henry Hub natural gas.

About 500 net wells are scheduled for completion this year, nearly all in the Permian Basin’s Delaware sub-basin, as well as the Eagle Ford and Powder River Basin. In addition EOG is “accelerating leasing and testing of numerous high‐impact exploration projects,” such as Dorado, while funding international efforts and various environmental programs.

“The 2021 capital plan is consistent with the strategy we have followed over the last year of not growing production in an oversupplied market,” Thomas said. “We are focused on increasing returns, generating free cash flow and maintaining our productive capacity while the oil market rebalances.

Again, I have no idea what EOG means by "double premium." It sounds like they hope to generate increased free cash flow without a significant increase in production.

Graphics from EOG

Transcript, EOG.

Comments Regarding The Blog -- February 26, 2021

A few comments regarding recent comments.

In the last few days there have been some comments regarding non-fossil fuel energy: hydrogen, wind, solar, ammonia, biofuel, etc. 

Before we get too far afield, a few reminders to readers.

First comment

  • I am inappropriately exuberant about the Bakken;
  • with regard to energy, I really don't care about anything but oil and natural gas, preferably shale;
  • articles and blogs posted on non-shale energy subjects on the blog are posted simply to keep the Bakken in perspective;
  • investing and science projects are two separate things; just 'cause folks are investing in hydrogen, e.g., doesn't mean it will succeed as a going concern;
  • folks who think EVs are "the answer" haven't thought this through;
  • bottom line: I won't live long enough to see a viable alternative to ICE's around the world; in other words, fossil fuel will still be important for decades to come;
  • more could be written but I'm sure folks can fill in the gaps;
  • most likely I will not post comments in response to this; there are way too many other sites that can carry that water, as they say;

Second comment:

  • I wish there was an "app" that tracked spelling and grammatical errors over time;
  • I started the blog in 2007, but the current blog only goes back to 2009, about twelve years of blogging;
  • in 2007 I was 56 years old; I am now almost 70 years old;
  • anecdotally, it seems Sophia -- my editor -- is catching more typographical and spelling errors now than ten years ago; if there was an "app" that tracked such things it might be a great way to track my cognitive strength (or deterioration);
  • as I stated in the long version "disclaimer" and "welcome" I prefer readers not point out minor typographical / spelling errors; there would simply be too many; however, if one spots what appears to be a major error that affects the content of the article, please let me know. 

Third comment:

  • again, this is not an investment site:
  • I really don't care how companies do one way or the other; I track them because it helps me make sense of the Bakken; I only hope companies do well to keep their employees and pay them better and better wages;
  • I do invest in companies that are in the oil business, shale and non-shale, but have no particular investing interest in the Bakken;

Fourth comment:

  • comments for this particular posting are closed;
  • I won't post comments addressed to this post;
  • comments, in general, are posted only if they move the discussion forward;
  • I generally don't post comments from "anonymous"; even if folks use fake names, that's better than "anonymous"

Fifth comment:

  • my "favorite" companies in the Bakken: CLR, Slawson, Hess, Petro-Hunt, MRO, for different reasons;
  • at one time, EOG and Oasis were two of my "favorite" companies in the Bakken; no longer;
  • "favorite": has nothing to do with investment reasons but for helping me understand the Bakken;

Sixth comment:

  • it's a fool's errand to predict the price of oil going forward;

Seventh comment:

  • it's obvious we can drill our way to lower gasoline prices

Eighth comment:

  • I spoke about this a decade ago, and I'm not going to go through it again, but manmade global warming is a scam; in fact, the whole concept of global warming is probably a scam, but if there is global warming it's not caused by man;

Ninth comment:

  • I will quit now but may add more later.
  • if you want to understand my "moral compass," watch "The Andy Griffith Show" on a regular basis.

Hess With Five New Permits; Fifteen Permits Renewed;

Before I get started, a memo to self: some comments regarding recent comments -- I will post those comments later, if I remember. 

Back to the Bakken

The daily activity report was not posted yesterday, so this will be a combination of yesterday's daily activity report and today's (Friday's) daily activity report.

Active rigs:

Active Rigs1551665740

Five new permits, #38176 - #38180, inclusive:

  • Operator: Hess
  • Field: Antelope (McKenzie County)
  • Comments:
    • Hess has permits for five AN-Norby wells in lot 1, section 4-152-94;
    • all will be sited 381' FNL and between 344' and 476' FEL;

Fifteen permits renewed:

  • NP Resources (6): two Ellison Creek Federal permits, Billings County; four Mosser Federal permits in Billings County;
  • Whiting (5): one Bartleson permit in Mountrail County; one Armas permit in Mountrail County; two Borseth Federal permits in McKenzie County, and one Roggenbuck Federal permit in Mountrail County; and one Armas permit in Mountrail County;
  • BR (3): one Mazamaphantom permit; one Phantom Ship permit; and, one Rollacleetwood permit, all in McKenzie County;
  • Slawson:  one Armada Federal permit in Mountrail County

One producing well (a DUC) reported as completed:

  • 37253, drl/A, EOG, Liberty LR 54-1416H, Parshall, first production; t--; cum --;

Ammonia As The Fuel Of The Future -- February 26, 2021

RBN Energy has talked about hydrogen and ammonia as energy/fuel options, and recently a reader has been sending me items regarding ammonia.

Interestingly enough, there's a fairly recent article on ammonia asking whether ammonia is the fuel of the future.

Link here, from the American Chemical Society, February 19, 2021. Hard to get much more current than that.


From the linked article:

Chemical companies smell an opportunity. Several firms are developing green ammonia, a route to ammonia in which hydrogen derived from water electrolysis powered by alternative energy replaces hydrocarbon-based hydrogen, making ammonia production virtually carbon dioxide–free. They are also investing in carbon capture and storage to minimize the carbon impact of making conventional ammonia, creating what the industry refers to as blue ammonia.

Tony Will, CEO of the world’s largest ammonia producer, CF Industries, sees a fundamental shift in the industry’s prospects. “Up to this point, we have made a business by selling the nitrogen value of the molecule,” he says. “What’s really exciting about this is now there is an opportunity and a market that values the hydrogen portion of the molecule.”

But establishing an ammonia fuel industry won’t be easy. By most estimates, green ammonia will cost two to four times as much to make as conventional ammonia. And some of the technologies needed to harness the molecule, such as ammonia-burning engines, are still experimental. Governments and the marketplace will have to decide if green ammonia is worth the effort.

Nature has given ammonia attributes that seem to make it a perfect commodity for a future hydrogen economy.

The bottom line for me: we will never run out of energy. Period. Dot.

It's just a matter of how much we want to spend on it.

No Wells Coming Off Confidential List; WTI Drops Back A Bit -- February 26, 2021

Enviable position: are there only two western countries that have both vast crude oil reserves as well as a robust domestic refining sector capable of satisfying national needs for gasoline, diesel, and other petroleum products? See below.

: all that talk about $100 oil? Not so fast.

China: crude oil reserves in storage near limit; reserves have reached a level equal to 100 days of imports. That number includes both SPR and commercial inventories.. To compare, US data (numbers rounded):

  • the US produces around 10 million bopd
  • in non-SPR  storage: around 600 million bbls
  • in SPR storage: around 600 million bbls; capacity -- 800 million bbls
    • maximum total withdrawal capacity: 4 million bopd

XOM: writes off one-third of its reserves. .

Dividends: E&Ps may have found a new way to keep investors happy. Link:

  • maintain quarterly / annual dividends at just the minimum that keeps long-term investors from selling; then,
  • pay generous special dividends when free cash flow surges

Apple: iPhone 12 series still strong despite weaker demand.

  • 2021 iPhone shipment estimates dropped from 236 million to 230 million
  • 230 million: a 13% increase, y/y (2021/2020)
  • Apple likely to discontinue iPhone 12 mini production 2Q21
  • makes up just 6% of iPhone 12 sales in the US in October/November, 2020
  • maybe only 5% of all iPhone 12 sales in January, 2021

Back to the Bakken

Active rigs:

Active Rigs1551665740

No wells coming off the confidential list today

RBN Energy: eastern Canadian refineries shift to more domestic slates, part 3

Canada, like the U.S., is in the enviable position of having vast crude oil reserves as well as a robust domestic refining sector capable of satisfying national needs for gasoline, diesel, and other petroleum products. Refiners in both countries have also benefited in recent years from increasing oil production within their borders. Growth in the Alberta oil sands in particular has given refineries in both Western and Eastern Canada increased access to domestically sourced bitumen and upgraded synthetic crude oil. Today, we continue our series on Canada’s refining sector with a look at the refineries in the eastern half of the nation, and their increasing use of Canadian oil.