Week 10: March 7, 2021 -- March 13, 2021

Graph of the week:

• Gasoline demand;

Most fascinating story of the week:

• Something fishy going on with Brent;
• Burlington Northern contributes 25% of Buffett's earnings;
  

Top story of the week:

• Biden is still president;
• Dal and Cowboys reach deal: $160 million / 4-years; biggest NFL deal ever;
  
• Tariffs on Scotch suspended;
  
• US shuts down Canadian oil by killing Keystone; prefers Russian oil with greater CO2 emissions;
  
• Denmark banks will pay people to buy homes;
• Gasoline: fundamental set-up for surge in price; and, here, here, here; and California;
  

Top international non-energy story of the week:

Top international energy story of the week:

• Saudi Arabia's exports continue to fall;
• Shell game; going green; doubles profitability trading oil this past year. Sorry. Not sorry;
• Re-surging interest in Canadian oil;

Top national non-energy story of the week:

• Dow continues to set all-time records;
• South Dakota attorney general pleads not guilty to three misdemeanor charges related to "hit and run"
• Prediction: Governor Cuomo out of office by the Ides of March
  

Top national energy story of the week:

• Ovintiv selling assets in the Eagle Ford;

Top North Dakota non-energy story;

Top North Dakota energy story:

• January crude oil production decline due to weather; not rig count -- NDIC;

Geoff Simon's top North Dakota energy stories:

• Spring load restrictions now in place;

Geoff Simon's "quick connect" headlines here.

Operators:

• Most fascinating small "player" in the Bakken: NOG;
• CLR with three more permits in Long Creek Unit; and, here; altogether, 10 more added since original update;
  

Operations:

• Deep and deeper: CLR releases results of two "deep" wells;
• Comparing rigs this week; one year ago;

Permitting:

• Projections for 2021; Rystad: drilling years in the Bakken, projection doubled in the last six months;

Fracking:

Pipelines:

Bakken economy:

Commentary:

• Projected number of new permits, CY21;
• Crude oil issues to watch over the next twelve months;
• The price of oil -- for the archives;
• The blinding speed of the US shale revolution;
• Reader presents his/her take on the Bakken;
• US shale: folks are starting to "get it"; "woke";
• Going to the moon! Why US shale keeps exceeding expectations;
• Everything points to huge crude oil demand by end of the year;
• Idle rambling on the price of oil;

Ovintiv Selling Assets In Eagle Ford? -- March 12, 2021

Updates 

March 13, 2021: Ovintiv nears south Texas asset sale for over $800 million. Link here.

• Denver-based Ovintiv; on a multi-year debt reduction plan it outlined in February, 2021;
• this sale will generate about $1 billion
• Ovintiv's shares have already gained over 90% this year;
• prospective buyer: Pontem Energy Capital; run by Felix Energy founder Skye Callantine, Jeff Bartlett and Cameron Brown;
• yes, an Eagle Ford position; bought in 2014 for about $3.1 billion from Freeport-McMoRan, Inc
• unable to find net acres in Eagle Ford
• if paid $5,000 / acre in 2014:
• $3.1 billion / $5K = 620,000 net acres
• at $800 million / 620,000 net acres = $1300 / acre

Original Post

Crude Oil Issues To Watch Over The Next Twelve Months -- March 12, 2021

Regular readers know my argument, "rigs don't matter (don't take that out of context)." 

This is really quite fascinating. 

Scrolling through social media tonight, it is obvious that the argument is not settled. I think this will be fascinating. It will be interesting to see what plays out over the next twelve months:

• global supply / demand;
• US supply / demand;
• North American supply by basin;
• Canadian supply;
• CBR vs pipeline
  
• whether oil companies focus on FCF or expansion;
• the price of oil one year from now;
• canary in the coal mine: whether President Biden grants a waiver for leasing on federal land in New Mexico;
• the DAPL;
• whether US shale can "turn on a dime" (I think it can)
• will rig counts increase appreciably?
• will pace of permitting increase in the Bakken in 2H21?
  

From social media tonight, not in any particular order:

The Price Of Oil -- For The Archives -- March 12, 2021

On March 10, 2021, a reader asked me "where" I thought crude oil was headed (with regard to price). My reply:

I've said often on the blog it's a fool's errand to try to predict the price of oil.

Having said that, the tea leaves suggest WTI / Brent are going to go much higher.

1. Saudi Arabia can't survive on $60-oil.
2. WTI/Brent are not back to where they were pre-pandemic.
3. Pre-pandemic we had a president who wanted much lower oil prices.
4. Post-pandemic we have a president who may not know what he wants, but his policies will push oil prices higher, all things being equal.
5. "Inflation" will push commodities higher.
6. US gasoline demand, according to GasBuddy, is already higher than pre-pandemic and most states have not lifted restrictions; summer driving season has not begun; and internationally, most countries are still in worse shape than the US with regard to Covid-19.
7. Articles in the mainstream media are being written by millennials; they are completely misreading the EV story. They appear to have no clue how 99% of electricity is generated.
8. Across the board, US E&P companies say they are more interested in focusing on growing free cash flow, not growing production.
9. If WTI can hold above $60 with these huge builds (last week, 20+ million bbls; this week, 14 million bbls) imagine what WTI should command once refiners get back on line and inventories drop.

I'm sure others can come up with nine reasons why WTI/Brent will slump to $20 this year. 

Scrolling through social media tonight, it appears I am exactly correct. There are those who can argue that the price of oil with increase significantly by the end of the year; other say that we've seen the high and are now in a trading range, with a possibility that the price of oil will trend lower going forward.

From social media this evening:

Active Rigs Drop To 14; No New Permits -- March 12, 2021

Active rigs:

$65.61	3/12/2021	03/12/2020	03/12/2019	03/12/2018	03/12/2017
Active Rigs	14	56	64	60	45

No new permits.

Fourteen permits renewed:

• BR (8): permits for five Gorhman wells and permits for three CCU Badger wells, all in Dunn County;
• Hess (5): permits for five SC-Bingeman wells in NWSW 9-154-98;
• Koda Resources: one Porter permit in Williams County;

***************************************
EVs

For the archives.

RIDE down 16% today.

Lordstown Motors Corp.

Link here.  

TSLA down today but not much. Trading at $700. Two months ago, $880. Fifty-two week high, $900.

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.

For The Archives: Colorado Braces For Worst Winter Storm in 135 Years -- March 12, 2021

First group:

• 10-Year Treasury: link here. Up almost 11 basis points; now at 1.633%.
  
• DXY: link here. Up slightly, at 91.75.
  
• Silver: link  here. Down a bit, at $25.635.
  
• CBOE volatility index: link here. Up a bit, at 22.24.
  

Second group:

• 30-Year Treasury: link here. Up over 11 basis points, may trend toward 12 basis points; now at 2.397%.

Dow in record territory again.

NASDAQ off around 200 points. 

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Texas Freeze: Big Energy Wins

Link here. 

As oil and gas majors surprisingly stand to profit in the long-term from the Texas storm last month, several regulators emerge largely unscathed. In the wake of the severe winter storm that hit Texas in February, causing blackouts and water shortages across the state, reforms to avoid the deadly cost of extreme weather conditions could mean regional oil majors bounce back big in the future. 

As smaller companies are hit hard following grid failures in the storm, people look to bigger firms, such as Vistra, NRG, Exelon and Calpine to provide a more stable source of energy. 

This is likely to lead to bigger energy companies across the state acquiring smaller, local companies that people no longer trust to supply their power. 

The four major Texan companies, together, own around half of the total capacity of the grid, with the remaining share relatively fragmented. 

One company, Brazos Electric Power Cooperative Inc., has already filed for bankruptcy and several look to follow soon due to defaulted power payments. According to CNBC, Texas energy companies have failed to pay the $345 million required in damages from last month’s storm. 

In total, electricity providers are thought to have dodged $2.46 billion in power and service charges according to the Electric Reliability Council of Texas (ERCOT). ERCOT has threatened to name the firms in question if they do not meet payments in the future.

*************************************
US Shale Could Disrupt OPEC+ Plans
Link here.

US shale could disrupt OPEC+ plans.Current oil prices are high enough to warrant increased U.S. shale activity in the second half of the year if prices hold around these levels, according to JP Morgan.

“At current prices, most U.S. onshore operators are economic, leaving a vast group of operators, from large public companies to private players, in good position to ramp up activity in 2H21 and build solid momentum for higher volumes in 2022,” analysts at JP Morgan said in a weekly note as carried by Reuters.

Early on Friday, the spot U.S. benchmark WTI crude was trading at $65.76.

Following the largest ever annual collapse in U.S. crude oil production in 2020, the U.S. shale patch is not rushing to ramp up production in 2021, even though oil prices have rallied by 30 percent this year. U.S. producers, especially large listed companies, are expected to stick to capital discipline and reward shareholders rather than ramp up production.

However, smaller privately held oil firms are benefiting from higher oil prices as their primary way of generating cash is increased production.

This could spoil the oil management policy of the OPEC+ group again. [It's hard to believe that "smaller privately held oil firms could have that kind of effect on OPEC+.]

*************************************
Global Warming Hits Colorado

Link here.  

 

 From the files, earlier this year:

**************************
Charged 

SD: Attorney General

Projected Number Of New Permits, Calendar Year, 2021 -- March 12, 2021

A reader pointed out that Rystad's update in "remaining years of drilling in Tier 1 at 2019 and 2020 pace," emphasizing "pace" of drilling in those years. 

In general, drilling is directly correlated with number of new permits. 

I forget what year it occurred, but somewhere between 2014 and 2016, NDIC doubled the length of time a spudded well needed to be completed, from one year to two years. 

Permits are good for one year, but easily renewed.

Anecdotally, it appears that operators are renewing expired and expiring permits. 

One of the most important concepts I've learned about the oil and gas business:

• the importance of E&P companies to manage their assets
• a key component of managing assets is not drilling out your entire inventory as quickly as possible regardless of value of one's assets -- unless one plans to liquidate the business 

It's also important for other reasons to extend the number of years of drilling activity, regardless of the reason. 

Permitting

2021:

• as of March 11, 2021: 70 calendar days
• 149 permits to date, CY 2021
• projection: 777 new permits this calendar year

Past years, total number of oil and gas permits, followed by annual crude oil production -- and then production that year / permits that year:

• 2021: projected -- 777 permits
  
• 2020: 763 -- NDIC pending -- per EIA: 431,720,000 -- 565,819 bbls / new permit
  
• 2019, 1,397 -- 524,421,345 bbls -- 375,391 bbls / new permit;
  
• 2018: 1,466 -- 466,419,743 bbls -- 318,158 bbls / new permit;
• 2017: 1,189 -- 394,759,760 bbls -- 332,010 bbls / new permit;
• 2016: 818 -- 380,372,587 bbls -- 465,003 bbls / new permit;
• 2015: 2,055 -- 432,526,847 bbls -- 210,475 bbls / new permit;
• 2014: 3,012 -- 397,209,473 bbls -- 131,875 bbls / new permit;
• 2013: 2,671 -- 314,043,664 bbls -- 117,575 bbls / new permit;
• 2012: 2,522 -- 243,363,503 bbls -- 96,496 bbls / new permit;
• 2011:1,916  -- 153,075,204 bbls -- 79,893 bbls / new permit;

Comments:

• NDIC is yet to post 2020 production; the data posted for 2020 comes from the EIA;
  
• 2016 is a particularly interesting year; at a time of very low prices, E&P companies circled their wagons and drilled only their best prospects; that looks like that's going to be true for 2020, also;
  
• throw out 2016 (and 2020), and the trend is very interesting
• based on 2016 data, I would suspect two things for 2021 (note: 2021, not 2020)
• bbls / permit could exceed 400,000 bbl
• publicly traded companies are going to show impressive FCF numbers

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. 

************************************
Annual Production -- NDIC

The most interesting column in the spreadsheet below: column #5, daily oil per well.

What A Great Way To Start The Weekend -- March 12, 2021

After posting this, I will be off the net. Short bike ride, and then I will be back.

From a reader -- parsing this and posting spin-off blogs from this one slide should keep me busy over the weekend.

Missing from this chart:

• #1: mosquitoes

The most interesting things about this slide:

• North Dakota is not particularly huge in land area, compared to Alaska, Texas, California, Montana;
• North Dakota climate fairly harsh;
• #5 in bison -- that needs to be fixed
• and still #1 in honey, after all these years -- whoo-hoo!
• the number of female primary producers 
• missing in this list, unfortunately, but not for lack of trying: hops

Most Incredible International Financial Story Today? -- Denmark -- Banks Will Pay You To Buy A Home -- March 12, 2021

Link here to Bloomberg.

It’s the latest sign that long-term subzero rates are forcing Denmark to reshape its finance industry. The country’s banks have already taken a world lead in imposing negative retail deposit rates, while Danish homeowners have access to mortgages at negative interest rates.

Denmark’s pension industry, twice the size of its economy and ranked the best in the world alongside that of the Netherlands, is now taking another step into uncharted territory. 

The Danish regulator has decided it’s no longer feasible for funds to promise savers in guaranteed-return products that they’ll get at least 1%. So from July 1, funds will only be allowed to guarantee savers minus 0.5%.

(Savers opting for riskier pension plans that track market rates aren’t affected by the change.)

A negative return guarantee “is a weird concept,” said Per Ploughmand Baertelsen, assistant director general at the FSA in Copenhagen. But that’s what savers need to accept, if they want to place their money into products “with zero risk, or low risk.”

The decision may well accelerate a shift away from such guaranteed-return pensions in Denmark, which currently account for two-thirds of obligations to customers. The majority of premiums are now paid into products that are at the mercy of the market. Many funds are also actively advising customers to switch to market-based products.

Denmark boasts the world’s longest stretch of negative rates, after first imposing them in 2012 to maintain the krone’s peg to the euro. On Thursday, the central bank took further steps to manage the exchange rate by stabilizing money market rates.

What's wrong with this picture?

I assume this is on par with the return on US social security administration investments.

Re-Posting Two Deeper Wells Released By CLR -- March 12, 2021

As an investment, I have no idea whether one would recommend CLR or not. It matters not to me. I have no dog in that fight. What impresses me is how CLR keeps pushing the envelope, and the revenue stream that Harold Hamm is building for himself. Where the H1 and H2 are present and economic, the H1 and H2 density will equal that of the middle Bakken.

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.

Re-posting: these are first bench and second bench wells.

Rystad:

• in 2019: estimated 8 years left of drilling in the Bakken
• 2020: estimates 15 years of drilling in the Bakken; comparable to other US basins, except for 25 years in the Permian (considering federal ban on much of the Permian, that makes sense)

Friday, February 12, 2021: 7 for the month, 40 for the quarter, 40 for the year.

• 36475, F/A, CLR, Jack 5-4H1, Murphy Creek, first production, 8/20; t--; cum 74K 1/21;
  

Wednesday, February 10, 2021: 6 for the month, 39 for the quarter, 39 for the year.

• 36732, F/A, CLR, Vardon 8-14H2, Siverston, first production, 8/20; t--; cum 113K 1/21;
  

The CLR Vardon wells are tracked here.  The Vardon well released earlier this week:

• 36732, F/A, CLR, Vardon 8-14H2, 33-053-09152, Siverston, first production, 8/20; t--; cum 113K 1/21; fracked 1/6/20 - 1/23/20; 10.5 million gallons of water; 89.3% water by mass; target: second bench target zone located between the Internal 1 and the Internal 2 shale. 28,734 over 22 days extrapolates to 39,183 bbls over 30 days:
  

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2021	31	13416	13428	10664	29771	29205	299
BAKKEN	12-2020	31	18445	18494	13022	38767	38007	512
BAKKEN	11-2020	30	16889	16837	14108	35937	34581	1116
BAKKEN	10-2020	31	16741	16724	16718	36361	35655	571
BAKKEN	9-2020	30	19063	19213	17874	35764	34829	809
BAKKEN	8-2020	22	28734	28491	18956	37160	32001	5159

• 36475, F/A, CLR, Jack 5-4H1, Murphy Creek, first production, 8/20; t--; cum 74K 1/21;
  

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2021	31	13513	13412	23400	9977	9570	0
BAKKEN	12-2020	17	6302	6358	13777	3392	3189	0
BAKKEN	11-2020	30	14127	14266	27737	8561	7301	868
BAKKEN	10-2020	25	7732	7712	17478	5264	4467	486
BAKKEN	9-2020	30	17916	17859	37582	11948	11276	279
BAKKEN	8-2020	19	14423	13994	27636	9380	9278	102

CLR's Jack wells are tracked here. 

Previously posted, February 12, 2021:

• 36475, F/A, CLR, Jack 5-4H1, Murphy Creek, first production, 8/20; t--; cum 61K 12/20; fracked 2/11/20 - 2/20/20; 7.9 million gallons of water; 88% water by mass; compared to others, a lousy geology report:
  

• target: early Devonian Three Forks B1
• spud: 0130, October 6, 2019
• reached KOP: 1118, October 9, 2019
• lateral
• begun: 1930 hours, November 15, 2019,
• gas:ranged from 8- 8,361 units
• gas buster; flare: averaged 10 - 25' gas flare
• two hot zones
• Upper Marker (TF MRK1): 15' into the Three Forks
• second hot zone: ~ 20' into the Three Forks

Same Ol', Same Ol' -- CLR Posts Two Nice Wells -- March 12, 2021

NOG: 4Q20 and full year 2020 results

• press release (some numbers rounded):
• 4Q20 production: 36K boepd; up 23% from 3Q20
• FCF: $80 million
• reduced debt;
• announced entrance into the Marcellus Shale;
• closed on seventh Permian acquisition since entry into the basin, September, 2020
• Zacks:
• EPS: 64 cents vs estimate of 67 cents
• compares to 50 cents one year ago

AAPL: dividend update.

BAC: dividend update. 

Shale giants proving OPEC right: Bloomberg via Rigzone. Headline quite misleading. But then again, it's a Bloomberg story. 

Shell game: going green? Not so fast. Shell's sprawling and secretive oil-trading unit almost doubled profitability year-over-year. Shell disclosed this data for the first time ever. One has to ask why? Why now? I think the answer is obvious.

Hike in federal onshore royalty rate: over at Rigzone. 

• from 12.5% to 18.75%
• would match the offshore rate
• like everyone else, the greenies may not like oil but they love the royalties;
  

Got oil? New Mexico not so green after all; seeks exemption from president that bans leasing on federal land. Not news. Sorry. Not sorry. Link here. 

Gasoline: fundamental set-up for summer gasoline is the most bulliish nearly a decade. Link here.

*********************************
Back to the Bakken

Active rigs:

$65.77	3/12/2021	03/12/2020	03/12/2019	03/12/2018	03/12/2017
Active Rigs	15	56	64	60	45

Two wells coming off the confidential list --

Friday, February 12, 2021: 7 for the month, 40 for the quarter, 40 for the year.

• 36475, F/A, CLR, Jack 5-4H1, Murphy Creek, first production, 8/20; t--; cum 74K 1/21;
  

Wednesday, February 10, 2021: 6 for the month, 39 for the quarter, 39 for the year.

• 36732, F/A, CLR, Vardon 8-14H2, Siverston, first production, 8/20; t--; cum 113K 1/21;
  

The CLR Vardon wells are tracked here.  The Vardon well released earlier this week:

• 36732, F/A, CLR, Vardon 8-14H2, 33-053-09152, Siverston, first production, 8/20; t--; cum 113K 1/21; fracked 1/6/20 - 1/23/20; 10.5 million gallons of water; 89.3% water by mass; target: second bench target zone located between the Internal 1 and the Internal 2 shale. 28,734 over 22 days extrapolates to 39,183 bbls over 30 days:
  

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2021	31	13416	13428	10664	29771	29205	299
BAKKEN	12-2020	31	18445	18494	13022	38767	38007	512
BAKKEN	11-2020	30	16889	16837	14108	35937	34581	1116
BAKKEN	10-2020	31	16741	16724	16718	36361	35655	571
BAKKEN	9-2020	30	19063	19213	17874	35764	34829	809
BAKKEN	8-2020	22	28734	28491	18956	37160	32001	5159

• 36475, F/A, CLR, Jack 5-4H1, Murphy Creek, first production, 8/20; t--; cum 74K 1/21;
  

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2021	31	13513	13412	23400	9977	9570	0
BAKKEN	12-2020	17	6302	6358	13777	3392	3189	0
BAKKEN	11-2020	30	14127	14266	27737	8561	7301	868
BAKKEN	10-2020	25	7732	7712	17478	5264	4467	486
BAKKEN	9-2020	30	17916	17859	37582	11948	11276	279
BAKKEN	8-2020	19	14423	13994	27636	9380	9278	102

CLR's Jack wells are tracked here. 

Previously posted, February 12, 2021:

• 36475, F/A, CLR, Jack 5-4H1, Murphy Creek, first production, 8/20; t--; cum 61K 12/20; fracked 2/11/20 - 2/20/20; 7.9 million gallons of water; 88% water by mass; compared to others, a lousy geology report:
  

• target: early Devonian Three Forks B1
• spud: 0130, October 6, 2019
• reached KOP: 1118, October 9, 2019
• lateral
• begun: 1930 hours, November 15, 2019,
• gas:ranged from 8- 8,361 units
• gas buster; flare: averaged 10 - 25' gas flare
• two hot zones
• Upper Marker (TF MRK1): 15' into the Three Forks
• second hot zone: ~ 20' into the Three Forks

RBN Energy: the economics and potential benefits of compressed natural gas.

ESG is quickly becoming one of the most frequently used acronyms in energy-company Zoom calls and quarterly earnings calls, joining the ranks of oldies-but-goodies like WTI, Bcf, and NGLs. Everyone — including investors — is pushing hydrocarbon producers, midstreamers, and end-users to improve their “environmental, social, and governance” performance nowadays. It’s not always easy, though, especially when the greener, pro-planet thing to do is a lot more expensive.

The good news is that there are at least a few potential win-win opportunities out there where companies can both reduce their carbon footprint and save money. In today’s blog we’ll discuss why, in some situations, CNG makes sense as a clean fuel for use as a potential replacement for diesel, propane, and fuel oil in a wide range of energy, mining, forestry, and utility settings.