The Million Dollar Way (The Bakken Oil Blog): 04/03/21

Saturday, April 3, 2021

The Permian Is Back! April 3, 2021

No rental cars available at Midland International Air & Space Port .... be sure to scroll the social commentary to get a flavor of the activity in the Permian ....

Link here.

Sunny, Bobby Hebb:

US Factories Desperate For Workers -- April 3, 2021

Link here.

Reading between the lines suggest issues with:

qualifications and experience;
work ethic; and,
drugs.

Just saying. But I may be biased. And old school. From the linked article:

Wages at his trailer factories are already far above state or federal minimums. The average starting pay is $19 an hour, while workers with skills such as welders make $24 an hour or more. “People talk about the oil boom in the Dakotas - how workers would get in their car and drive out to get jobs,” he said. “We have the same thing here, a jobs boom. But nobody’s coming.”
Many employers see a mismatch between those now out of work and the jobs in their plants.
“It isn’t Home Depot, or Starbucks, or a hotel,” said Kevin Kelly, chief executive of Emerald Packaging Inc. in Union City, California. He estimates one in five new workers quit within days and complain about the environment.
“They’re not used to machines that need to be greased,” he said, “and the smell of things like ink.” Emerald produces plastic bags for precut vegetables, which are custom printed with images and product information.

How To Butterfly A Leg Of Lamb -- I Needed A Break -- April 3, 2021

Don't you just miss her voice? Fearlessly plunging knives where blades have not gone before.

Highway 61 Revisited:

This is a cover but it's as good as it gets. Goes by "Chan" (Shawn).

The Four Recent Permian Deals -- April 3, 2021

Note: this was done quickly; not fact-checked. Various sources come up with different numbers; numbers change over time as the deals come to closure. This is for my benefit to try to make sense of these deals. If this is important to you, go to the source. If there are significant errors, feel free to let me know.

Note: these deals are not "apple-to-apple" comparisons.

Note: the Permian "basin" is composed of two basins, the Midland and the Delaware.

Note: I don't follow the Permian, so there will be more typographical and content errors than usual.

Note: there are so many disclaimers here, you might as well skip this page and move on.

The four deals:

COP -- Concho

Permian net acres: 550,000
deal: $10 billion

CVX -- Noble

Permian net acres: 92,000
deal: $5 billion; with hefty debt, $13 billion

Pioneer -- Parsley (no federal acreage)

Permian net acres: 267,000
deal: $4.5 billion

Parsley, just months earlier had expanded in the Delaware by buying Jagged Peak Energy
$1.6 billion for Jagged Peak (one source); another source: $2.2 billion;

Pioneer -- DoublePoint Energy (probably no federal acreage)

Permian net acres: 97,000
deal: $6.4 billion

Background

Permian: is tracked here.
Delaware Basin: is tracked here.
Midland Basin: is tracked here.

COP - Concho -- 2020

From SeekingAlpha, link here from March 31, 2021:

In a financial and operational update, ConocoPhillips says it still sees FY 2021 capital spending of $5.5B and guides for full-year adjusted operating costs of $6.2B.
The company expects full-year production excluding Libya of 1.5M boe/day, with Q1 volumes of 1.47M-1.49M boe/day, including ~50K boe/day of unexpected weather impacts caused by Winter Storm Uri.
Total average realized prices for the quarter are expected in the $43-$45/boe range. ConocoPhillips says it expects to report ~$300M in Q1 pre-tax restructuring charges related to the acquisition of Concho Resources.
The company also expects to incur $300M in losses from commodity hedging positions. Conoco says the expected total impact to cash from operations from the transaction and restructuring expenses in combination with the hedging impacts is a reduction of ~$1B, including ~$800M related to settling all oil and gas positions acquired from Concho.
ConocoPhillips says the new merged entity will be the largest independent oil and gas company, and Wood Mackenzie says the combination "bodes well for the Permian's longer-term outlook."

From the February, 2021, 1Q21 earnings call, slides:

Concho acquisition:

23 billion boe of <$40 COS pro forma;
earnings/loss:

$1.0 billion loss;
$0.97 EPS loss;

cash flow from operations (CFO): $5.2 billion
free cash flow: $0.5 billion
paid $1.8 billion in dividends
repurchased $0.9B worth of common shares

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CVX -- Noble

CVX - Noble:

Chevron to buy Noble Energy. From SeekingAlpha:

in the first significant M&A action since the coronavirus outbreak, Chevron agrees to acquire Noble Energy in an all-stock deal valued at $5B, or $10.38/share, a 7.6% premium over Noble's Friday closing price of $9.65
including Noble's hefty debt load, the deal would be valued at ~$13B
buying Noble enhances Chevron's presence in the Permian Basin with 92K largely contiguous and adjacent acres, and in Colorado's DJ Basin, and brings assets in the eastern Mediterranean and West Africa.
Chevron expects the acquisition to generate $300M in annual run-rate cost synergies before tax and be accretive to free cash flow, earnings and book returns one year after close.
Noble is Chevron's first major strategic move after walking away from a bidding war for Anadarko Petroleum last year.

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Pioneer -- Parsley

Pioneer - Parsley:

From SeekingAlpha, October 20, 2020:
[Scott Sheffield] has agreed to purchase [his son's energy company] in an all-stock deal valued at about $4.5B. Adding debt to be assumed by Pioneer brings the value to $7.6B. The deal price works out to a 7.9% premium to Parsley's closing share price on October 19, 2020.
Parsley owners are to receive 0.1252 shares of Pioneer common stock for each share of Parsley they hold.

Annual synergies of $325M are seen, and the deal is expected to be accretive to cash flow per share, free cash flow per share, EPS, and corporate returns, beginning in year one.

The combined company will have about 930K net acres in the Permian basin, and a production base of 328K barrels of oil per day, and 558K barrels of oil equivalent per day.

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Pioneer -- DoublePoint Energy

Pioneer - DoublePoint Energy:

Pioneer to acquire DoublePoint Energy assets, press release here:
bolt-on acquisition
Midland Basin
$6.4 billion
97,000 high quality (tier 1) net acres
back of the envelope: $6.4 billion / 97,000 net acres = $66,000 / acre
27.2 million shares of Pioneer common stock
$1 billion in cash
$0.9 billion in debt and liabilities
forward:
the deal "will lead to an increase in the expected per share variable dividend beginning in 2022" -- raise your hand if you think you will see an increased dividend in 2022.
At almost $70K/net acre, social media is having a field day with this one. Lots of talk that "we're" back to lack of fiscal discipline in the shale sector.

Gasoline Demand Continues To Trend Higher -- Nothing To See Here -- Not Unexpected -- April 3, 2021

Link here.

Keeping Track -- US Stateside Military Bases Become Housing Centers For Migrant Children -- April 3, 2021

Three US military bases now housing sites for migrant children:

Fort Bliss, TX
Joint Base San Antonio, TX
Camp Roberts, CA -- two hours northwest of Santa Barbara, CA, where all the rich folks live; they're gonna love this; on top of this, there is talk that these have become super-spreader sites; Dr Fauci says he has nothing do with southern surge or the military sites. And so it goes.

Another Incredible MRO Well Goes From DUC Status To Confidential -- April 3, 2021

These wells are tracked here; this page will not be updated. I remember when I first started the blog, I was told by "experts" that once wells starting producing, they would not revert to confidential status.

We've proved that wrong many times. Here's another one.

This well was a DUC, then reverted back to the confidential list:

37323, loc/NC, MRO, Oscar Thorson USA 41-8TFH-2B, 33-061-04659, Reunion Bay, first production, 10/20; Reunion Bay, t--; cum --; fracked 9/16/20 - 9/26/20; moderate frack, 7.5 million gallons; but again, note the "extremely low fresh water": 59.6% (no typo) water by mass; but 25.1% produced brine water by mass; extrapolates to 83,117 bbls over 30 days:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	11-2020	0	0	676	0	0	0	0
BAKKEN	10-2020	18	49870	49194	71407	62825	43525	16557

That was the last update, back in November, 2021. Note: it was a DUC.

This well is back on the confidential list, and this is the "run" data:

Date	Oil Runs	MCF Sold
2-2021	31131	54199
1-2021	45732	67215
12-2020	57961	73471
11-2020	676	0
10-2020	49194	43525

Not To Scare Anyone, But ....

New Record? Four Million Covid-19 Vaccinations Were Given Yesterday, Good Friday, April 3, 2021

		A	B	C	D	F
		Doses of vaccine distributed to health facilities	Change from day before	Vaccinations given	Change from day before	Percent of distributed vaccine that is actually administered	Doses received in past week, current Monday from previous Tuesday	Average number of doses given / day in past seven days
Saturday	April 3, 2021	207,866,645	3,147,310	161,688,422	4,081,959	77.78%
Friday	April 2, 2021	204,719,335	4,222,700	157,606,463	3,975,059	76.99%
Thursday	April 1, 2021	200,496,635	4,914,910	153,631,404	3,358,112	76.63%
Wednesday	March 31, 2021	195,581,725	6,130,440	150,273,292	2,670,947	76.83%
Tuesday	March 30, 2021	189,451,285	8,804,720	147,602,345	1,789,510	77.91%
Monday	March 29, 2021	180,646,565	100	145,812,835	2,350,144	80.72%	23,912,010	3,416,001
Sunday	March 28, 2021	180,646,465	2,340	143,462,691	3,281,956	79.42%
Saturday	March 27, 2021	180,644,125	3,142,350	140,180,735	3,496,047	77.60%
Friday	March 26, 2021	177,501,775	3,976,440	136,684,688	3,379,393	77.00%
Thursday	March 25, 2021	173,525,335	4,302,210	133,305,295	2,831,442	76.82%
Wednesday	March 24, 2021	169,223,125	6,244,285	130,473,853	1,982,059	77.10%
Tuesday	March 23, 2021	162,978,840	6,244,285	128,491,795	1,982,059	78.84%
Monday	March 22, 2021	156,734,555	0	126,509,736	2,028,324	80.72%	20,886,720	2,983,817

Update On Two Wells -- An Old CLR Whitman Well; And, A Newer Petro-Hunt Well -- April 3, 2021

It appears this well has recently been fracked and on line for a few months, before coming off line again (putting a pump in?)

34294, F/A, Petro-Hunt 154-95-36D-35-2H, single section spacing; first production, 3/20; t--; cum 61K 12/20; off line 12/20; remains off line 2/21; frack data still not available at NDIC;

This well has just gone over 500K bbls crude oil cumulative:

17061, 664, CLR, Whitman 11-34H, Oakdale, t6/08; cum 500K 2/21;returned to production, 7/20; producing about 1,000 bbls/month; this well is thirteen years old;

Update On Natural Gas Pipelines Along North Dakota / Minnesota State Line -- April 3, 2021

Available at The Grand Forks Herald but you will hit a paywall. The story is here without a paywall.

After a three-month winter break, work on the $8.5 million Dakota Natural Gas pipeline project in Traill County, N.D., ramped up again in March.
The project, which unanimously was approved by the North Dakota Public Service Commission in September, will connect to the Viking Gas Transmission line in western Minnesota and deliver natural gas to commercial and residential customers in the Traill County, in cities of Hillsboro and Mayville and to rural customers along the route.
The 63-mile pipeline will be made of steel, except in Hillsboro and Mayville, where it will be high-density plastic.
About 750 commercial and residential customers in Traill County will be able to access the pipeline if they choose to do so.
Last year, Dakota Natural Gas finished a $4 million pipeline project in Drayton, N.D., where customers included American Crystal Sugar Co.
Meanwhile, representatives of Dakota Natural Gas also are studying the possibility of installing natural gas pipelines to the Traill County cities of Portland and Hatton.
Nearly all of the pipeline on the North Dakota side of the Traill County project has been laid, and work soon will begin on the Minnesota side.

Finally Some More In-Depth Analysis Of The Pioneer - DoublePoint Energy Deal -- April 3, 2021

See this link. Once at the link, keep scrolling down. The contributor tweeted a series of tweets with a pretty good analysis. In fact, this is as good an analysis that I have seen so far. This one sets the gold standard; let's see if anyone can improve upon it.

This page won't be updated. The Pioneer - DoublePoint Energy deal is tracked elsewhere.

This is the 14-tweet thread that was posted by "WAR52." There may be errors in transcribing. If this is important to you, go to the link at the beginning of the post.

The PXD deal is seeing more discussion after their AMC release and minimal presentation on acquisition of DoublePoint ... the day before a long Easter weekend.

Plenty of detractors due to a perceived high price received by DP, which has been derived from metrics that are often not reliable as true indications of value.
Quick metrics like $/acre using $6.4 B for 100K acres = $65,000/acre, but that does not account for production and the nature of the Permian as a multiple formation play potentially.
At the time of their debt offering late last year, DP had estimated proved reserves of 300 mmboe, something like 25% of which were producing. It claimed > 1,000 "locations," which are obviously a subject for more detailed analysis.

I suspect that estimates of $30,000/acre come from taking a roughly $10/boe proved acquisition price to come up with $3.5 B for the value of the acreage, including zones that may produce on existing HBP acreage. Without further geologic and other information like that provided by Tom Loughrey (LFE) or Enverus Energy, and/or that which PXD could provide but so far has not, speculation reigns.
Looking at the claims that PXD makes about the deal being "accretive" to cash flow, it seems to me that mgt intends to focus on the very short term increase that comes from acquiring high rate, high decline assets early in their development.
As long as that run rate > PXD s existing rate (at a lesser decline), the initial units/share will look attractive, but for how long? If new wells have 50-70%+ declines, new drilling is required to replace reserves, and PXD will ramp drilling down initially to create "FCF" that enhances their message about adhering to the 'Shale 3.0' model.

Delaying CAPEX would have had to have been built into their acquisition economics, lowering it according to their new "plan" and increasing the true cost being paid (?). PXD does not discuss the fact that DP has a very high working and net revenue interest across its 3,000 locations (not 1,000 as mentioned above), but the pace of drilling those should lower than value on a PV basis unless higher oil prices are incorporated. In that regard, it is important to note that DP had/has a significant portion of its production hedged -- 67% in 2021 according to Fitch, at $46.59, with 30% hedged at $41.66 for 2022. This obviously reduces the impact that oil price increases will have in '21, at least if those hedges are still in place within PXD.
Acquisition economics would have taken that into account as well, but I have not seen any commentary about that yet.

Looking at it from the standpoint of PXD, the potential advantages of scale, timing of CAPEX and the ability to create larger and more drilling units due to combining adjoining acreage could be a big advantage (if true), and the extent of new inventory of high rate producers could allow PXD to satisfy investors' demand for cash flow and returns.

On the flip side, that merely creates a bigger treadmill in the absence of price increases.

Personally, I don't think the deal would have been done at all on a cash basis; the attractiveness of a large, highly liquid security allows PXD to pay more (even though it shouldn't), and the question will be whether the PE sellers hold onto their shares for any substantial period of time, or whether they are sellers into the market.

Given that DP was formed fairly recently, there might be less urgency to liquidate their shares after a big "win," but obviously PE firms have relied on public, retail investors to "unload" on in recent years. Time will tell, but clearly PXD is fairly uniquely positioned as a low debt, dominant producer, where many other companies would have been more leveraged and less pervasive as PXD, who has been active in the PB for 30-40 years in some form.

Best, succinct reply to that multi-tweet post is from another tweet:

The year is 2050 and PXD has 15 years of inventory left. Stock analysts across the country, in unison, ask, "why, though?"

If Bored, This Should Give You Something To Do Today -- April 3, 2021

Link here.

At the site, really, really simple:

click on start;
go to the right of the map, and note the "ship's controls."
start with power -- power up a bit and get the shipping moving;
once the ship is underway, begin to use rudder control.

WSJ In-Depth Report: Ports Of Los Angeles, Long Beach -- April 3, 2021

From Geoff Simon: Medora's Burning Hills Amphitheatre Almost Lived Up To Its Name -- April 3, 2021

I have no dog in this fight, but if "they" don't want to tempt Mother Nature again, perhaps a new name for the amphitheater would be in order.

From Geoff Simon this week:

Flames from a wildfire in the Badlands surrounding Medora threatened the historic community and the Burning Hills Amphitheatre, but an all-out effort by firefighters prevented any serious damage.
The fire is believed to have been sparked by a downed powerline, and is estimated to have burned about 3,000 acres of grass and brush in the rugged hills around Medora.

The community was evacuated as a precautionary measure, but Randy Hatzenbuhler, President of the Theordore Roosevelt Medora Foundation, said the town and properties associated with the Medora Musical were not damaged.

Connecting The Dots -- The Global Economy Is Surging -- That's My Take -- April 3, 2021

See this link.

East Coast Singapore: "Ships as far as one can see; nothing to see here, but this is the most I have seen in fifteen years."

A reader replied: "I'm confused about the point you are making. Is this economic slowdown with ships sitting idle, or the opposite ... a sign of the economy bouncing back?"

This tells me that this individual can tweet but a) he/she cannot think for himself/herself; and/or, b) he/she cannot connect the dots.

With regard to those ships off the coast of Singapore, "we're" seeing the same thing in the US west coast ports. Posted numerous times in the past six months.

US Auto Sales: Toyota's US Sales Jumped 22%; Hyundai's US Sales Jumped 28% -- April 3, 2021

Re-posting.

Re-posting:

US auto sales surge, as more states come out of the lockdown. Data points:
1Q21 sales rebound but volumes were capped by global semiconductor chip shortage;
Covid-19: folks pivoting to personal vehicles; wow! Who wudda thought?
March auto sales could exceed pre-Covid levels;
GM: 1Q21 sales rose 4%
units sold: 642,250
increased demand for its Escalade sport utility vehicle; and, Encore subcompact crossover SUVs;
average transaction price: $40,353;
Fiat Chrysler: 1Q21 sales rose 5%:
units sold: 469,651
Fiat is now a unit of Stellantis NV
Ford: 1Q21 sales up 1% (held back by semiconductor chip shortage)
units sold: 521,334
retail sales rose 23%
I'm not sure of that difference, 1% sales vs 23% retail sales, but I think I understand; if so, that's remarkable; stunning;
higher demand and tight supply has allowed automakers to raise prices in the United States, with average price of a new vehicle reaching $37,314 in the first quarter, up nearly $3,000 from a year earlier and over $4,000 higher than 2019
BUT LOOK AT THIS:
Toyota: US sales jumped 22% to 603,066 vehicles;
Hyundai: US sales surged about 28% to 167,130 vehicles

Notes From All Over -- Saturday Morning Edition -- April 3, 2021

Big Oil wins one: federal appellate court rules in favor of five major oil companies; not to blame for global warming. Link here.

France: another lockdown. The gap will continue to widen between the countries that have opened up and the countries that go back into another lockdown (or remain locked down).

Example: US auto sales surge, as more states come out of the lockdown. Data points:

1Q21 sales rebound but volumes were capped by global semiconductor chip shortage;
Covid-19: folks pivoting to personal vehicles; wow! Who wudda thought?
March auto sales could exceed pre-Covid levels;
GM: 1Q21 sales rose 4%

units sold: 642,250
increased demand for its Escalade sport utility vehicle; and, Encore subcompact crossover SUVs;
average transaction price: $40,353;

Fiat Chrysler: 1Q21 sales rose 5%:

units sold: 469,651
Fiat is now a unit of Stellantis NV

Ford: 1Q21 sales up 1% (held back by semiconductor chip shortage)

units sold: 521,334
retail sales rose 23%
I'm not sure of that difference, 1% sales vs 23% retail sales, but I think I understand; if so, that's remarkable; stunning;

higher demand and tight supply has allowed automakers to raise prices in the United States, with average price of a new vehicle reaching $37,314 in the first quarter, up nearly $3,000 from a year earlier and over $4,000 higher than 2019
BUT LOOK AT THIS:

Toyota: US sales jumped 22% to 603,066 vehicles;
Hyundai: US sales surged about 28% to 167,130 vehicles

Saudi Arabia: crude oil production increases every year about this time in preparation for summer heat / air conditioning.

When you see headlines that Saudi Arabia wants to increase production keep that in mind. Production numbers are important for some reasons, but actual exports important for other reasons. See this link. Also, this link. Example of an echo chamber.

Rigs, frack spreads, link to S&P Global Platts:

Bakken lagging in rig counts (remember: spring road restrictions)
Permian Basin, Eagle Ford each add four rigs
US rig fleet is up 113 in 2021
frack spread count hits "magical" 200;

Apple, Tesla batteries, link here. Good, bad, or indifferent, this is pretty amazing. I don't care a whit about the emission story here, this is why this is important: Apple is getting off the grid which is incredibly unreliable in California, and getting more and more expensive. Getting off the grid is the story here. Also, by getting off the grid, Apple is "giving back" more electricity to the surrounding community. A win-win for everyone. By the way, what's a "whit"?

Apple's newly announced California solar farm will use 85 of Tesla's 60MV battery packs to help power ‌Apple Park‌.

According to Apple, the new solar farm, initially spearheaded by the company in 2015, will store enough battery to power more than 7,000 homes.

Apple is constructing one of the largest battery projects in the country, California Flats — an industry-leading, grid-scale energy storage project capable of storing 240 megawatt-hours of energy, enough to power over 7,000 homes for one day.

This project supports the company's 130-megawatt solar farm that provides all of its renewable energy in California, by storing excess energy generated during the day and deploying it when it is most needed.

MDU's Knife River acquires Oregon aggregates business, link here to press release.

acquires Mt Hood Rock
provides construction aggregates in the eastern Portland area, including Gresham, Troutdale, Happy Valley, and Sandy
this is really, really cool: our younger daughter, son-in-law, and two grandsons live in Portland/Gresham; we know Troutdale, Happy Valley, and Sandy very, very well;

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Oldest Granddaughter Accepted To USC

Our oldest granddaughter was accepted to the University of Southern Califonria. She did it on her own. We did not have to pay USC $200,000 to consider her application.

Most remarkably, she did this without being on the row team.

CLR's Long Creek Unit Update; Pay Attention To #20206 -- April 3, 2021

This page won't be updated; CLR's Long Creek Unit is tracked here.

I don't see any rigs in CLR's Long Creek Unit on the NDIC GIS map but there does appear to be some new activity posted on the map. I can't say for sure, but I think this is new. I would assume means these wells have been spud, and the "surface" well drilled. I don't know. Just my thinking.

The wells:

36986,
36985,
36984,
36983,
36982,
36981,
36980,

The well to watch:

20206, 954, CLR, Truman 1-23H, Long Creek, t11/11; cum 299K 1/20; taken off line 2/20; remains off line 2/21;

It will be interesting to see if these daughter wells do better than the parent well. The experts tell me that won't happen.

Tesla Blows Through Analysts' Forecasts -- April 3, 2021

Re-posting as a stand-alone.

Color me impressed, what semiconductor shortage? Tesla's numbers. Earlier I suggested the number to watch was 160,000. Elon Musk blew past that number with reports that 184,800 Tesla vehicles were delivered in the first quarter. That's really, really impressive on so many levels. Analysts had projected only 168,000, which would have been a good number. He now says he wants to increase global deliveries by more than fifty percent this year. Right now, and for quite some time to come, it looks like Tesla's biggest competitors are Ford Motor Company and Volkswagen AG. From the linked WSJ article:

Deliveries of Tesla Model S and Model X vehicles in the first quarter totaled around 2,020. Tesla handed over about 182,780 Model 3 sedans and Model Y compact sport-utility vehicles combined. Tesla doesn’t disclose deliveries by region.

Tesla also said it produced 180,338 vehicles in the quarter, all of them Model 3s or Model Ys.

The company said the new Model S and Model X have been “exceptionally well received,” adding that it is in the early stages of boosting production after installing and testing new equipment.

The strong delivery numbers are poised to underpin what Wall Streets expects to be robust first-quarter earnings for Tesla, due in a few weeks. Sales are expected to top $10 billion, helping generate around $470 million in profit, according to a FactSet survey of analysts before the latest delivery figures were posted.

Tesla is aiming to open two new vehicle factories this year, one near Austin, Texas, and the other outside of Berlin. That plant will be the company’s first in Europe, the world’s largest electric-vehicle market as of last year, and is seen as key to improving Tesla’s fortunes in the region.

Tesla registrations in Western Europe slipped roughly 11% last year compared with 2019, as auto makers such as Volkswagen and Renault SA gained traction in the all-electric vehicle market.

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Saturday, April 3, 2021