Where Are All The $70-Brent Bulls Now? -- May 20, 2021

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. 

Over on twitter earlier today, someone asked, "where are all the $70-Brent bulls now?"

My reply: "Quietly buying Chevron stock."

Brent today: flat, down 3 cents. Trading at $65.

See ten-year history here.

April 12, 2020: Brent was selling for $9.12 / bbl. Tht was one year ago. 

Whoever asked "where are all the $70-Brent bulls now?" is asking the wrong question. And it leads right into the next subject.

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IEA: To Get To Net Zero ...

... "we" need to end all new oil, gas, and coal development ... now." 

I wonder if anyone has actually thought about this?

This is not Elon Musk tweeting about Dogecoin. This is the IEA -- the IEA -- providing a "full" talking paper on net zero energy (NZE). 

I think this is very, very clever.

I wish I had more time to talk about this. I'll eventually get to it. 

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Traffic In Europe Accelerating

Link here.

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Summertime ...

... and the living is easy.

Summertime, George Gershwin, Lana Del Rey

While My Guitar Gently Weeps, Dhani Harrison

BlueOvalSK -- May 20, 2021

Updates

Later, 9:56 p.m. CT: I recently saw the new Mustang EV -- whatever it's called -- Mach E or something  -- oh, there it is, 2021 Ford Mustang Mach-E SUV. After seeing it in the wild, and then looking at a 30-minute YouTube video on the Mach-E, my initial thoughts were overall "neutral" with regard to the Mustang EV, but now that I've had some time to think about it, a few further thoughts:

• Ford will sell every Mustang EV it builds;
• demand will outstrip supply; a lot of money will be left on the table due to supply constraints;
• see today's news re: Ford and shutting down plants across the nation;
  
• the margins will be very, very slim:
• the design will change significantly over time:
• automobile purists and aficionados -- if there are such things -- will be incredibly disappointed
• more on that later when I have more time to write
• Ford hopes to offset slim margins on the vehicle by becoming the #1 battery maker in the world

Later, 9:50 p.m. CT: My reply to the reader who sent me the article below regarding BlueOvalSK.

There are so many story lines here but due to family commitments my time is severely limited and thus my limited comments. 

Four thoughts on this entire industry, not just Ford.

• the strategic decisions these companies are making will make or break many (most?) of these companies. Strategic: 20+ years.
• margins are going to be lousy on EVs. Margins on ICE vehicles are going to be huge, unless state and national governments "determine" winners and losers, which they very well might.
• if the grid doesn't move step-in-step with the EV industry, everyone is "hoping" it -- the infrastructure -- will work. I've not seen anything that suggests the infrastructure will be there in lockstep with the EV rollout.
• it's gonna take a lot of natural gas to make all that electricity. I'm lovin' it. 

Japan is already preparing for electricity shortages this summer and there is almost no EV penetration in Japan.

Texas is warning about electricity shortages this summer and there's even less EV penetration in Texas than there is in Japan. 

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Original Post

Due to family commitments for the next ten days, I won't be able to spend much time on these stories or the blog in general. 

A reader sent me this article; it will end up behind a paywall if it already isn't. But the story will be easy to find elsewhere. 

Ford is forming a joint venture that will build two North American factories to make batteries for roughly 600,000 electric vehicles per year by the middle of this decade.

The deal with battery maker SK Innovation of Korea, announced Thursday, sets up a potential confrontation between the companies and the United Auto Workers, which issued a statement saying Ford has a moral obligation to make sure plant workers are paid union wages.

The UAW and President Joe Biden have advocated for union jobs in new factories as the country transitions from gasoline-burning vehicles to those powered by electricity. The issue almost certainly will be part of negotiations on a new UAW national contract in 2023.

The joint venture called BlueOvalSK is the start of Ford’s plan to vertically integrate key parts of the electric vehicle supply chain. The companies say they have signed a memorandum of understanding, but details on the ownership structure and factory locations have yet to be worked out.

Company executives wouldn’t say whether jobs at the factories would be union. Ford North America Chief Operating Officer Lisa Drake said the companies are still in the memorandum of understanding phase. “We don’t have our labor strategy defined yet. That will be determined by the joint venture itself once that entity is set up” this summer, she said.

SK Innovation already has a U.S. battery factory in Commerce, Georgia, and says it’s expanding production in Europe and China. It plans to be one of the top three electric vehicle battery suppliers in the world by 2025, according to a statement. The company has a contract with Ford to make batteries for a new electric F-150 pickup truck, which is due in showrooms by next spring. Ford’s F-Series pickups are the top-selling vehicles in the U.S.

The UAW has been vocal as General Motors and now Ford have announced plans for joint ventures with battery companies to supply what’s expected to be a growing electric vehicle market. Biden plans to spend $15 billion to build a half-million electric vehicle charging stations by 2030 as well as offer billions in unspecified tax credits and rebates to cut the cost of the vehicles and make them more appealing to buyers.

The strategy is a key component of his plan to fight climate change by cutting U.S. greenhouse gas emissions at least in half by 2030, as well as create “good-paying union jobs” in a clean energy economy.

But the union, which represents about 150,000 U.S. workers at Ford, General Motors and Stellantis (formerly Fiat Chrysler), fears that automakers will try to use joint ventures to keep the plants outside of the national union contracts with the three companies.

Full Circle -- Back to Black -- May 20, 2021

This may be the biggest Bakken story of the year. After entering the Permian not too long ago, Oasis surprised many by exiting the Permian in early/mid-2021, acquiring more net acres in the Bakken and becoming once again a pure Bakken play. This speaks volumes about the Permian and the Bakken. 

I love it.

Back to Black, Amy Winehouse

Disclaimer: not ready for prime time. I was rushed when I read through the press release and rushed when I posted the note. I may be completely wrong; I may have missed something; I may have seen something that is not there. If this is important to you, go to the source.

For newbies: this is an incredible turn of events. Much can be learned from this. Hopefully, I will find the time to comment on this but my hunch is there will be much written about the press release. 

Sidebar: at the sidebar I have a link to something I call -- WTI beatdown. Bakken or the Permian.

Updates

May 21, 2021: one day later -- investors love the announcement that Oasis is pulling out of the Permian. 

Later, 11:53 p.m. CT: social media; from a guy who really knows this stuff.

Original Post

I checked a few publicly traded companies at market close, and it appeared "most" oil companies were relatively flat today, up/down about 0.35%.

But Oasis was up almost 2% at market close. After the market closed, it remained unchanged. At least that's what I thought I saw. 

The press release had a release time of 4:41 p.m. -- after the market closed. But it was early enough in the day to suggest to me that the "news" -- if not all the details -- were well known to analysts who follow Oasis well before the market closed. 

Hold that thought.

A reader sent me this link. Thank you so much. I wouldn't have seen it until tomorrow at the earliest. So, a huge thank you to the reader.

Due to family commitments, I won't be able to post as much as I usually do. 

Full circle. One can follow the story here.

Here's the link, again: https://seekingalpha.com/pr/18327960-oasis-petroleum-inc-announces-strategic-sale-of-permian-assets-and-updates-2021-outlook.

I believe Oasis' Permian acres were in the Delaware Basin. 

From the link, a press release:

Oasis Petroleum Inc. announced today it has entered into a series of definitive agreements to sell its entire Permian Basin position for total gross potential consideration of $481MM.

The total consideration consists of $406 million at closing and up to three $25 million annual contingent payments in 2023, 2024 and 2025 if WTI averages over $60 per barrel in each respective calendar year.

The primary transaction is expected to close around June 30, 2021, subject to customary closing conditions, and two smaller transactions have already closed. Oasis has updated its 2021 outlook to reflect the divestment.

"The decision to exit the Permian Basin while building scale in the Williston Basin is fundamentally based on aligning Company resources with our core competitive strengths and strategic focus of building a sustainable enterprise which generates significant free cash flow for the benefit of the Company and shareholders," said Danny Brown, Oasis' Chief Executive Officer. 

NOTE: when the CEO referenced "building scale in the Williston Basin," he is referencing the FANG-QEP-Oasis deal in the Bakken, on/about May 3, 2021. The link is here. In that deal, Oasis acquired 95,000 net acres for $745 million, or about $8,000 / acre.

"The successful conclusion of our Permian divestiture process allows us to bring substantial value forward from an asset that was difficult to scale, strengthens our balance sheet from already peer-leading levels, and allows us to focus our attention on driving significant value from our world-class Williston acreage position, where we see great upside opportunity and long-term running room.  

The combined Williston and Permian transactions are highly accretive, position Oasis to take advantage of expanded scale, result in very low leverage, and demonstrate our commitment to shareholders. We believe Oasis represents a compelling investment opportunity, and we will continue to be aggressive in pursuing strategies to unlock value."

Transaction Highlights:

• Positions Oasis exclusively in the Williston Basin, where the Company expects to drive significant value creation through its size, scale and robust inventory life as one of the basin's largest operators;
• Divests non-strategic Permian position consisting of approximately 24k net acres and 1Q21 production of 7.2 MBoe/d;
• Purchase price of $481MM values production at $67k/Boepd and 1Q21 annualized Adjusted EBITDA at 4.6x;
• When combined with the recent Williston acquisition, the transactions result in paying approximately 1.7x for $145MM – $165MM of net EBITDA;
• OMP retains midstream assets in Panther DevCo and expects to benefit from incremental activity based on plans from the new operator;
• Lowers full-year G&A by approximately $1MM – Oasis expects cash E&P G&A per boe of $1.30 – $1.40 in 4Q21;
• Reduces Oasis' pro forma leverage to approximately 0.3x, based on 1Q21 annualized Adjusted EBITDA to Oasis and pro forma for the recently announced Williston acquisition, which remains well below Oasis's 1.0x target and far below peers.

Much more at the link.  

The article will be archived. 

Hunt Oil Company Seeks Authorization To Drill Ten Wells On An Overlapping 2560-Acre Unit -- May 20, 2021.

From the June, 2021, hearing dockets agenda.

This is a permit, not a case:

• 28834, Hunt Oil Co, Bailey and/or Lake Ilo-Bakken, establish an overlapping 2560-acre unit; sections 3/10/15/22-145-93 (no typo); ten wells on said unit; Dunn County;

Existing wells in that drilling unit:

• in Bailey oil field, two horizontal wells each with a lateral that is running due north;
• 18222, 756, Hunt Oil Company, Quill 10-3H 1, Bailey, t11/09; cum 269K 3/21;
  
• 21567, 471, Hunt Oil Company, Quill 2-10-3H, Bailey, t5/12; cum 241K 3/21;
• in Lake Ilo oil field, one horizontal well with a single lateral running north to south;
• 19401, 415, Hunt Oil Company, Halliday 1-15-22H 1, Lake Ilo, t1/11; cum 247K 3/21;
• 22402, 324, Hunt Oil Company, Halliday 2-15-22H, Lake Ilo, t7/12; cum 202K 3/21;

The graphic:

June, 2021, NDIC Hearing Dockets Posted

Link here. 

The NDIC hearing dockets are tracked here.  

The usual disclaimer applies. As usual this is done very quickly and using shorthand for my benefit. There will be factual and typographical errors on this page. Do not quote me on any of this. It's for my personal use to help me better understand the Bakken. Do not read it. If you do happen to read it, do not make any investment, financial, job, relationship, or travel plans based on anything you read here or think you may have read here. If this stuff is important to you, and I doubt that it is, but if it is, go to the source.

Thursday, June 16 and June 17, 2021
Supplemental

The NDIC hearing dockets for June, 2021, were posted approx two weeks ago.

The NDIC released additional cases for June 16 and June 17, 2021:

• all were continuation cases;

Thursday, June 17, 2021
Supplement

The NDIC hearing dockets for June, 2021, were posted last week. 

The NDIC released three additional cases for June, 2021. Again, these are cases, not permits:

• 28845, NP Resources, Bicentennial-Bakken, establish a 320-acre unit; one vertical well; S/2 section 28-144-103, Golden Valley;
• 28846, NP Resources, Beaver Creek-Bakken, establish a 320-acre unit; one vertical well; N/2 section 6-142-102, Billings County;
• 28847, CLR, sixteen wells on an existing 2560-acre unit; sections 29/32-146-95 and sections 5/8-145-95, Dunn County;

Thursday, June 17, 2021
Four Pages

These are cases, not permits:

• 28830, Liberty Resources, use the Haley 158-93-29-32-10MBH, file #35883, as an injection well for an enhanced pilot operation in the East Tioga-Bakken pool; sections 29/30/31/32-158-93; Mountrail County;
• 28831, Liberty Resources, Enget Lake-Bakken, establish an overlapping 3840-acre unit; one well; sections 14/15/16/21/22/23-58-93; Mountrail County
• 28832, Slawson, Big Bend-Bakken; i) establish an overlapping 640-acre unit; six wells on that unit; N2 sections 13/14-151-92; ii) establish an overlapping 960-acre unit; five wells on said unit; S2 sections 13/14-151-92 and the S2 section 18-151-91; iii) two additional wells along the center line of an existing 1920-acre unit; Mountrail County;
• 28833, CLR, Hardscrabble and/or Indian Hill-Bakken to establish two overlapping 5120-acre units; two wells; sections 13/24/25/36-153-102 and sections 18/19/30/31-153-101 and sections 17/18/19/20/29/30/30/31/32-153-101; Williams and McKenzie Counties;
• 28834, Hunt Oil Co, Bailey and/or Lake Ilo-Bakken, establish an overlapping 2560-acre unit; sections 3/10/15/22-145-93 (no typo); ten wells on said unit; Dunn County;
• 28835, NDIC, confiscation of assets on Henry Torstenson 2, file # 11926, McKenzie Corner
• 28836, CLR, pooling,
• 28837, CLR, pooling,
• 28838, Slawson, pooling,
• 28839, Liberty Resources, pooling,
• 28840, Liberty Resources, pooling,
• 28841, Liberty Resources, pooling,
• 28842, KODA Resources Operating, LLC, pooling,
• 28843, McKenzie County Grazing Association; convert file #9362, Burning Mine Butte 9-21 to a freshwater well;
• 28844, McKenzie County Grazing Association; convert file #9310, Federal Rivet 6 1 to a freshwater well;

Wednesday, June 16, 2021
Two Pages

Note: the Cartwright-Bakken and the Randolph-Bakken oil fields are very small, non-descript fields on the south side of the river, near the Montana state line. One field is seven sections in size; the other is eight sections in size. 

These are cases, not permits:

• 28821, Whiting, Cartwright-Bakken; created a standup 1920-acre unit; three wells; sections 1/2/13-150-104; far western ND, just south of the river; McKenzie County;
• 28822, Whiting, Randolph-Bakken; create a laydown 1920-acre unit; four wells; section 24-150-104 and sections 19/20-150-103; far western ND, just south of the river; McKenzie County
• 28823, Whiting, Randolph-Bakken; create a standup 1920-acre unit; three horizontal wells; sections 5/8/17-150-103; far western ND, just south of the river; McKenzie County
• 28824, Whiting, Randolph-Bakken; create a standup 1920-acre unit; four horizontal wells; sections 6/7/18-150-103; far western ND, just south of the river; McKenzie County
• 28825, Kraken, Ellisville-Bakken; create a 1920-acre unit; four horizontal wells; sections 8/17/20-159-99;Williams County;
• 28826, Kraken, Ellisville-Bakken; created a 1920-acre unit; four horizontal wells; sections 10/15/22-158-99, Williams County;
• 28827, Hess, Robinson Lake and/or Sanish-Bakken; terminate an existing 3840-acre unit; establish a 1280-acre unit; six wells; establish a 2560-acre unit with one horizontal section line well;  sections 1/12-152-103 and sections 6/7-152-102; Mountrail County;
• 38828, Hess, pooling;
• 38829, Hess, pooling;

Tuesday, June 15, 2021
One Case

This is a case, not a permit:

• 28145, a continuation case, Lime Rock Resources, risk penalty legalese

EIA's May, 2021, Dashboards Have Posted -- A Reminder

A reminder: the May, 2021, "dashboards" have posted.

• EIA pdf, Bakken: https://www.eia.gov/petroleum/drilling/pdf/bakken.pdf
• EIA, pdf, Permian: https://www.eia.gov/petroleum/drilling/pdf/permian.pdf
• EIA, pdf, Eagle Ford: https://www.eia.gov/petroleum/drilling/pdf/eagleford.pdf

Only One Well Coming Off Confidential -- A Slawson DUC -- May 20, 2021

IEA: net zero, no new oil exploration. Links everywhere. No time to expand due to family commitments today. Maybe later. Most of us "blew off" that story. Now that I've had 24 hours to think about it, see what others have said, this will turn out to have a more interesting backstory than most realize. Memo to self: the global response to Covid-19 provided a great teaching opportunity.

• IEA report.
• The Guardian.
• Reuters.
  

Asia: dismisses the IEA report cited above. 

Got corn? Link here.

• US corn export shipments up 45% on week;
• outstanding sales 62% above previous year; 53% above 5-year average;
• total commitments jump 73% on year, 46% above 5-year average;
• main destinations: China, Mexico, Japan, Colombia, and Israel

Jobless, weekly report, link here:

• initial claims: 444,000; better than the 452,000 Dow Jones estimate;
• delta, estimate vs actual: 8,000 (1.8% miss); hardly noteworthy:
• continuing claims rose by 111,000 to 3.75 million (that number runs a week behind)
• I doubt this had any impact on the market.

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.  

Hurricane season: begins in eleven days a reader tells me. I did not fact check. With another full year of the oceans getting ever warmer, this, again, should be the worst year on record for hurricanes. Later: right on cue -- link here.

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Back to the Bakken

Active rigs:

$62.89	5/20/2021	05/20/2020	05/20/2019	05/20/2018	05/20/2017
Active Rigs	19	14	66	61	51

One well coming off the confidential list -- Thursday, May 20, 2021:

• 36125, drl/NC, Slawson, Stallion 3-1-12H, Big Bend, no production data; the Slawson Stallion / Zephyr wells are tracked here; that site needs to be updated;

RBN Energy: hydrogen markets looking for regulatory attention.

When it comes to hydrogen regulation, there are two buckets. The first includes safety and environmental regulations related to building and operating facilities that produce, transport, store, and consume hydrogen. There’s not much mystery here, just a multitude of rules from various organizations in place to cover the physical side of the hydrogen industry. That said, as hydrogen use is expected to grow over time, this bucket of regulation is likely to expand and maybe morph. The second bucket includes rules that are designed to provide market structure and incentives for hydrogen. This bucket is mostly empty, though, and for hydrogen markets to succeed, it will need to be filled up. Put another way, hydrogen needs rules and incentives that make it clear the powers-that-be want hydrogen to be around and thriving. In today’s blog, we look at existing hydrogen regulations and highlights the gas’s need for further regulatory incentives and clarity.