Thursday, April 8, 2021

Last Post For The Night -- Most Important Story Of The Year? April 8, 2021

Signs that Costco thinks the pandemic is over. And if Costco thinks the pandemic is over, the pandemic is over. 

Link here to  CNN:

Costco diehards, don't fret: The beloved food court, known for its $1.50 hot dog and soda combo and giant menu boards, is coming back to life, albeit slowly.

Costco shut down seating areas in food courts when the pandemic spread through the United States last March. It pared back the menu to hot dogs and pizza for takeout only. 
Signs of life started to emerge in the summer when the chicken bake returned. Now, the return to normal is gaining steam. Costco recently began adding back ice cream and smoothies to the menu and is bringing back tables and chairs in stores that have outdoor seating areas. The company also is bringing back churros to the menu and plans to resume indoor seating as more states loosen Covid-19 safety restrictions.

This story caught my eye. I was in our local Costco on Saturday, the day before Easter Sunday. I've never seen it so busy. Masks were still required, but that was about the only pandemic-related precaution. Folks were streaming in. Check-out lines stretched to the back of the store. As I walked out, I noted that the indoor food court was not back to normal, but folks were standing in long lines to order their drinks, hot dogs, and pizza. I thought it would be just a matter of time before the food court was re-opened at pre-pandemic standards. 

Liberty Pipeline Project Killed; Follows The Cancellation Of The Red Oak Pipeline -- Implications For The Bakken? -- April 8, 2021

Wow, this story has so many story lines. I'm too exhausted to to through them tonight but I will link / post the story and see what comes of it over the next few days. 

The story: another pipeline is dead. Philliops 66 pulls out of deferred Liberty Pipeline project. This is NOT good news -- if the DAPL is shutdown .....

From the linked S&P Global Platts article: 

Phillips 66 Partners is officially pulling out of the long-deferred Liberty Pipeline project that was designed to move 350,000 b/d of crude oil from the Rockies and Bakken Shale to the benchmark Cushing, Oklahoma, hub, the company said.

The Phillips 66 Partners-led pipeline project was put on indefinite hold more than a year ago when the pandemic crushed global crude oil demand and, since then, the US energy sector has kept tight reins on capital spending.

Phillips 66 Partners will record an estimated impairment of between $180 million and $210 million in the first quarter for pulling the plug on the long-dormant project, it said in a statement April 5. The pipeline would have stretched 700 miles from Guernsey, Wyoming, to Cushing, including a connection to a previously proposed Platteville, Colorado, terminal.

Phillips 66 Partners' joint-venture partner Bridger Pipeline and its parent, True Companies, did not respond to requests for comment, but Bridger already is exploring pipeline alternatives with new partner Tallgrass Energy through recently launched open seasons.

The decision on the Liberty Pipeline is not surprising considering that Phillips 66 in October canceled the planned Red Oak Pipeline from Cushing to the Texas Gulf Coast. Red Oak and Liberty were both proposed and, subsequently, deferred at the same times. So, when Red Oak was killed, it seemed like a similar result for Liberty could follow.

Both the Red Oak and Liberty pipelines were originally scheduled to be in service in the first quarter of 2021.

From a June 11, 2019, post

A new Bakken pipeline. Details:

  • Liberty Pipeline, a joint venture between two companies:
    • Phillips 66
    • Bridger Pipeline
  • The project:
    • origin: the Bakken; southwest corner of North Dakota
    • via: Guernsey, WY
    • terminal: Cushing, Oklahoma
    • route not yet clear
    • proposed capacity: 200,000 bbls
    • cost: $1.6 billion
  • in-service date: as early as 1Q21 (hope springs eternal)

700-mile pipeline project; at $1.6 billion, that works out to $2.3 million / mile. I've been using a back-of-the-envelope figure of one million dollars / mile pipeline all these years -- it looks like that figure is obsolete, at least for longer pipelines which would also need pumping stations, other infrastructure support much shorter pipelines might not require. I don't know. But $2.3 million / mile is eye-catching. 

Maybe I'm missing something but killing a pipeline that would serve both the Powder River Basin and the Bakken is very, very interesting. Others have the same thought.



T-Mobile Vs Cable? For The Archives -- April 8, 2021

For the archives. I saw this story over at MacRumors the other day but I didn't understand how the technology worked and decided not to post the story/the link until more information came out.  

Yahoo!Finance dumbed it down for folks like me to understand. It looks like T-Mobile has come up with a way for homeowners to cut the cable (think Spectrum) and / or dish the Dish, bringing 5G internet directly to one's home through a router placed against an outside window, with speeds up to 100 megabits per second with unlimited data and no caps.

The important note about this story: technology is finally arriving that may force cable companies like Spectrum to actually get more competitive. And more customer-friendly.

What Happened To XTO In The Bakken? April 8, 2021

A reader asked: your post on drilling rigs today made we wonder, what happened to XTO?

My reply, not-ready-for-prime-time, right, wrong, or indifferent:

Great question.

1. If you can't get past the paywall on this article let me know, and I will send you the key points of the article some other way:


I think that article explains everything if one reads between the lines. Bottom line: Lynn Helms is working with XTO to get them to bring in two rigs.

2.  The good news: as recently as yesterday, XTO renewed four permits which tells me XTO is NOT leaving the Bakken:

  • XTO (4): four Don permits all in McKenzie County
  • Rimrock (2): a Bloodaxe permit and an Ironsdie permit, both in Dunn County
  • Petro Harvester Operating Co: an LIG2 permit in Burke County;

No New Permits; Active Rigs At Sixteen -- April 8, 2021

Jobless claims: change week over week, original data, raw data, not corrected for population nor for season. Update, in red, corrected for population: looking only at California (sort of closed); New York (closed); and, Texas (open for business). Note, like Texas, Florida is open for business, and also saw jobless claims drop week-over-week like Texas. FWIW. This data makes no difference to the average investor; if anything, it's nothing more than "political" fodder, Original chart from ZeroHedge, link here:

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Back to the Bakken


Active rigs
:

$59.60
4/8/202104/08/202004/08/201904/08/201804/08/2017
Active Rigs1636645849


No new permits

Six permits renewed:

  • Rimrock Oil & Gas: two Charging Eagle permits; two Skunk Creek permits; one Narwhal permit; and, one Westin TTT permit, all in Dunn County.

Oh, My Goodness -- Did AAPL Just Break Out? -- April 8, 2021

After being in a trading range for quite some time and well off its 52-week high, AAPL has just jumped almost two percent, adding over $2.35/share and trading at $130.29, but still off its all-time highs.

Several data points of which to be aware:

  • it was reported yesterday that analysts expect Apple to sell a record number of iPhones this year, easily eclipsing its record iPhone sales back in 2015; there had been rumors of an Apple iPhone supercycle beginning this year;
  • major smartphone manufacturer LG announced that it will exit the smartphone field immediately;
  • there was a report that despite semiconductor and other parts shortages, the iPhone will not be affected; and most other Apple products will not be affected or if they are, minimally affected;
  • Apple seems to have the higher "moral" ground when it comes to privacy and transparency;
  • yesterday it was announced that the public school system in Edinburgh, Scotland, will be providing an iPad for each student from ten to eighteen years of age.
  • AAPL one-year target: trending toward $160/share

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

EPD: paying 7.98%, EPD announced no change in its next quarterly payout. Link here

US Markets: after being mixed all day, all three major indices are now green. 

Another day, another record:

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Gasoline Demand

Link here. A disappointment based on preliminary data from other sources.

$40,000 / Acre (Permian) Vs $4,000 / Acre (Bakken) -- Enerplus / Hess -- April 8, 2021

Enerplus to acquire a bit of Hess acreage in the Bakken, a "bolt-on" acquisition. Link here and here. Data points, some numbers rounded:

  • seller: Hess Corp
  • buyer: Enerplus
  • value: $312 million
  • net acres: 78,700 net acres, Dunn County
  • 110 net tier one undrilled locations (77% operated)
  • adjacent to its current core Bakken acreage
  • 6,000 boepd
  • largely undeveloped land
  • drilling program projection
    • will expand Enerplus' drilling inventory by two to three years
    • Enerplus says it will have ten years of drilling activity
  • quality acres
    • in addition to these tier one locations, the acquisition also includes 120 net operated undrilled locations which are economic based on current crude oil prices
  • adds to Enerplus' five-year plan to modestly grow production
    • Enerplus raised its output guidance:
      • previous: 108,000 boepd
      • new: 115,000 boepd
    • partly due to higher-than-expected production in Pennsylvania's Marcellus region
  • CAPEX raised slightly:
    • previous: $350 million;
    • now: $400 million
  • Hess had not planned to drill this acreage until 2026.

Much more at the second link. 

Back-of-the-envelope: $312 million / 78,700 acres = $4,000 / acre.

Neither link mentioned whether acreage was federal or BLM (Ft Berthold Reservation) -- unless I missed it, but based on the graphic at the Enerplus press release, it appears that whereas much of Enerplus acreage is inside the reservation, none of the acquired Hess acreage is inside the reservation. If this is important to you, go to the source. I could be wrong on this.  

Deals of interest are tracked at the sidebar at the right.

Notes And Comment -- Mid-Morning -- Thursday, April 8, 2021

The market: investors continue to climb the wall of worry; YOLO, FOMO

Seventy years of drilling in the Williston Basin: the Bill Shemorry photograph collection.

New York state
: richest New Yorkers will now have a top tax rate of over 50%; more than most Europeans pay. Link here. I don't have a dog in that fight. I will report it, follow it, but have no interest. Folks are free to vote with their feet in these United States. Texas? No state income tax and the best highways in the country. And the best football stadiums I might add.

Fire in the hole! That huge Pemex refinery fire has been extinguished. First reports of fire here.

Mercedes, the automotive/trucking company I follow most: 1Q21 sales jump 22% after demand surges from China, North America. Link here

Mercedes looks like it is joining the cabal of automakers who have smashed expectations for Q1, as the auto industry posts its first YOY comps that are helped along by last year's global Covid lockdown. 

Sales were up 22% in Q1 thanks to not only easy comps, but also record demand out of China. Globally, Mercedes-Benz sold 581,270 cars and saw its China sales figures rise by 60%. China is the biggest market for the brand, according to Bloomberg. 

The manufacturer also saw a slight tick up in Europe, where sales rose 1.8% to a total of 192,302 cars. The company's global share of sales of plug in hybrids and full EVs was more than 25% in Europe. That number falls to about 10% worldwide.

Covid-19: a "biological Fukushima" in Brazil. Link here. This was "predicted" months ago; easily seen by anyone following the daily / weekly global stats. The first graphic at the link is breathtaking. If you have fear of heights and/or suffer from vertigo, do not click on the linked site.

The pandemic is over. Link here. Of course, to say that, one has to understand science, a bit of arithmetic, and forget personality politics. 

The curious Caracara: book review in The Wall Street Journal. Link here. The magpie on steroids. Although the "magpie" story appears to be a meme not grounded in reality.

Sweet Sixteen: Active Rig Count Jumps -- April 8, 2021

It wasn't so long ago that there were only twelve active oil and gas rigs in North Dakota. 

Today:16.  

Active rigs:

$59.23
4/8/202104/08/202004/08/201904/08/201804/08/2017
Active Rigs1636645849

The sweet sixteen:

The operators:

  • CLR (3): Gordon Federal, Rodney, Carus,
  • MRO (3): Denny, Hausauer, Burger,
  • Hess (2): EN-Rice, BL-Frisinger,
  • Slawson (2): Mauser Federal; Whirlcat Federal;
  • Whiting: Lacey
  • Petro-Hunt: Hurinenko
  • Oasis: Nikolai Federal
  • Enerplus: Ermine
  • Iron Oil Operating: Antelope
  • Crescent Point: CPEUSC Sylven

This is an extremely bullish line-up. I've always said the Bakken will be "back" if / when:

  • Slawson starts drilling again; and here we have, not one, but two rigs -- whoo-hoo!
  • the number of operators drilling increases significantly from three or four; ten operators in the list above, is very bullish;
  • operators like Iron Oil Operating show up on the list; and, then, of course, there's always...
  • ... Oasis.

Yet to be seen on the list:

  • WPX
  • Ovintiv
  • BR

Active Rig Count Jumps To 16; No Wells Coming Off Confidential List -- April 8, 2021

Wow, wow, wow -- time got ahead of me. It's 8:32 a.m. CT -- what is the market doing? Jobless report came out, FWIW (we've discussed this before) -- what is important is how the market reacts to the report and the spin.

So here goes, the markets:

  • Dow: in line with futures, down 30 points;
  • S&P 500: not following the 10:1 rule; up 12 points; suggests Dow should be much higher
  • NASDAQ: a bit better than futures; up almost 130 points;
  • WTI: down about 1%; trading at $59.23

Jobless headline: more Americans filed for weekly jobless claims than expected;

  • 744K vs 680K
  • unremarkable; but "scary" headline;
  • headline will be forgotten by 10:30 a.m CT
  • YOLO, FOMO, YASNY

Quick look:

  • AAPL: up 1.33%; up $1.76; trading near $130;
  • BRK-B: down one-half percent
  • OKE: down 2%
  • ENB: down one-half percent
  • MNRL: down 3%
  • XLNX: up 1%
  • AMD: up 1%
  • UNP: down half a percent

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Back to the Bakken

Active rigs:

$59.23
4/8/202104/08/202004/08/201904/08/201804/08/2017
Active Rigs1636645849

No wells coming off confidential list

RBN Energy: a look at Monolith's "Turquoise" hydrogen and carbon black plant in Nebraska.

When it comes to blogs on the developing hydrogen sector, many subjects can seem quite foreign to the traditional hydrocarbons expert. We have found ourselves spending a considerable amount of time over the last few months slowly peeling back the layers on this sector in an effort to be prepared should hydrogen enter a new phase of importance in the energy industry. Today’s blog is likely a much more straightforward one for the typical hydrocarbon-focused reader. That’s because, in our view, Monolith Materials’ unique process for transforming natural gas into “turquoise” hydrogen while sequestering the carbon, is easier to wrap your head around. This is not just because of the company’s clear goals and process, but also because what it does is proving to be economically viable. That’s not always the case when we discuss hydrogen, so covering Monolith’s operations is a welcome break. Today, we detail a truly one-of-a-kind method of low-carbon hydrogen production.

Hydrogen can be produced in many ways and we have covered the basics so far in our hydrogen blog series. Previously, we outlined how almost all the production of H2 in the U.S. is based on natural gas, through a process called steam methane reforming (SMR). Chief among the other methods is electrolysis, which we also covered in the same blog. Electrolysis has many advocates, given it requires only water and electricity to operate and doesn’t directly produce carbon emissions. 
Electrolysis projects are starting to proliferate around the world and, to a lesser extent, here in North America. The process we discuss today has some similarities to both SMR and electrolysis, so, without further ado, let’s take a look at Monolith Materials’ operations and technology.

Idle Rambling In Response To A Reader's Question -- April 8, 2021

A reader asks: Is there any future development in Williams County or is it anticipated that there is little productive acreage left to drill especially near Williston?

Let the conversation begin. I will start. Remember, I am inappropriately exuberant about the Bakken.

Answer: yes, Williams County will see continued "development" going forward.

Comments:

  • the pace of development depends almost entirely on the price of oil and relative "value" of the Bakken compared to other shale plays in the US;
    • the Powder River Basin appears to be the "new" Bakken
    • the Permian will be ... the Permian
  • operators are constantly looking for additional locations to drill; the Williston Basin's middle Bakken and Three Forks benches are pretty much mapped out; there is no longer any urgency to drill in the Bakken;
    • operators are "E&P" companies; they use their CAPEX for "E" and "P"
      • E: exploration: very little perceived need for further exploration in the Bakken
      • P: production: operators will manage their assets
        • "managing their assets": an incredibly important concept not often discussed; certainly not understood by many
  • things have changed (or so they say):
    • operators are focused on free cash flow, not focused on spending money looking for new locations;
    • for that reason, we won't see much activity above ground for the next couple of years, in terms of rigs
  • continued development:
    • fewer wells, but much, much better wells;
    • in Williams County, at $60-WTI, 30% of all middle Bakken wells that will eventually be drilled have been drilled; in other words, if WTI stays at $60 in today's dollars, for every 1,000 middle Bakken wells that will eventually be drilled, 700 new wells are yet to be drilled;
    • in Williams County, at $60-WTI, 10% of all Three Forks wells that will eventually be drilled have been drilled;
    • in Williams County, at $70-WTI, operators with few locations left (in the Bakken or elsewhere) will go back in and re-enter/re-frack wells completed before 2016; the re-entered / re-fracked wells will be much better than the original wells;
  • with regard to Williams County oil fields;
    • east and southeast of Williston: still much to be done but it will slow and measured;
    • CLR has a three-year development plan for the Long Creek Unit; upwards of 60 wells to be systematically drilled out over three years with just two rigs;

Analogy: farming

  • asking whether there will be any future "oil" development in Williams County is like asking whether there will be any future "farming" in Williams County;
  • Homestead Act of 1862
  • prior to Homestead Act, little farming activity west of the Mississippi (preceded by buffalo hunting, and then ranching; farming: difficult and margins slim; huge initial operating costs)
  • Homestead Act changed everything
    • burst of farming activity
    • infrastructure established (co-ops; railroads; grain elevators; processing plants)
  • by early 1900's farming "locations" tapped out
  • attention turned to:
    • managing assets: crop rotation; storage; 
    • better equipment (tractors; combines); better completion strategies (custom combining)
    • technology: improving yield per acre

Oil development in the Bakken:

  • how one sees the Bakken depends on where one stands;
  • this blog's primary audience: mom-and-pop mineral owners who inherited their minerals from their great-grandparents, grandparents, and parents -- those who receive mailbox money
  • the era of big, upfront lease money is over;
  • the era of huge, unexpected checks is over;
  • monthly checks will stabilize; will correlate to price of oil rather than new activity
  • farmers have good years; farmers have bad years; over the course of any decade, production from farming tends to improve, but in general, farmers probably have a pretty good idea of their annual income going forward based on decades of farming; if they don't, the banks do;
  • that's where we are with oil for mom-and-pop mineral owners.

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Portrait Of A Young Artist At Work