Monday, June 14, 2021

Random Notes From All Over -- June 14, 2021

First things first: S&P and NASDAQ rally to records ahead of Fed meeting. Looks like the rally could continue tomorrow.

AAPL: nice day.

CNBC today: all-star investor Rich Bernstein warns bitcoin is a bubble, sees oil as the more (most?) ignored bull market.

North Dakota has been the #2 crude oil producer in the US for nine years now.

Investing: for those with a brokerage account in a regional bank, one piece of advice -- run, don't walk, to Schwab. 

Even if your account is worth only $1,000, it will cost you to $250 to close your account held at a small regional bank. And that's just the beginning of fees. 

Schwab: no fees of that nature. Schwab has no fees simply to maintain an account. For years, before Schwab was available, I paid Merrill Lynch $65 annually for an account. Good, bad, indifferent, that was it, $65 / year. When my father died, his account at the local bank was divided among his five children. It was an incredibly small account.

One day I got a notice from the bank asking me how I wanted to pay the $75 account fee. Considering the bank account was nothing more than a bookkeeping account, I was appalled, having to pay $75 per year to maintain it -- more than what it cost me at Merrill Lynch. It turned out -- that $75 fee was a quarterly fee.

My dad had been paying more than 4x what a Merrill Lynch account would have cost him, and divided among his five children when he died, overnight the bank was getting $375 / quarter simply for bookkeeping. And, yes, I ran, I did not walk, to Schwab. Zero dollars for same service that was going to cost me $300 / year for a brokerage account. The fees remain in place; nothing has changed; except I don't have my brokerage account there any more. And it cost me $250 to close the account.

Director's Cut: I won't be finishing it until tomorrow. At the earliest.

CLR With Three New Fuller Permits -- June 14, 2021

Say what? US shale oil production set to grow b 38,000 bopd next month. Source.

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

Active rigs:

$71.13
6/14/202106/14/202006/14/201906/14/201806/14/2017
Active Rigs1912616255

Three new permits, #38369 - #38371, inclusive:

  • Operator: CLR
  • Field: Little Knife (Dunn)
  • Comments:
    • CLR has permits for three Fuller wells sited in Lot 3 seciton 2-146-97;
    • the wells will be sited 350 FNL and between 2320 FWL and 2230 FWL

Nine permits renewed:

  • BR (6): six Tailgunner permits in McKenzie County
  • Slawson (3): two Genekat Federal permits and one Genesis Federal permit in Mountrail County;

EIA Dashboards -- June, 2021 -- Charts Posted

EIA dashboards:

Bakken:

  • oil: down 13, from 2,413 to 2,400
  • natural gas: down 18, from 3,210 to 3,192

Eagle Ford:

  • oil: up 1, from 2,334 to 2,335 (about a "hundred" less than the Bakken)
  • natural gas: up 23, from 7,980 to 8,003


Permian:

  • oil: down 5, from 1,240 to 1,235 (about "half" of that of the Bakken; are you kidding me?)
  • natural gas: down 21, from 2,250 to 2,229 (actually less than the Bakken, say what?)

Director's Cut -- April, 2021 -- Data Posted -- IN PROGRESS

Sorry for the delay getting the summary posted, but Sophia and I will be in the pool for the rest of the day. LOL.  The Texas grid (ERCOT) is holding! What a great state!

Link here. It may download as a pdf.

Director's Cut: posted, link here. The Director's Cuts are tracked here.

Inactive wells (tracked here):

April, 2021:

  • inactive: 2,088
  • DUCs: 731 (note: this is an increase from the month before)
  • total off line for operational reasons: 2,819
  • producing: 16,374 (preliminary)

March, 2021:

  • inactive: 2,351
  • DUCs: 628
  • total off line for operational reasons: 2,979
  • producing: 16,212 (final)

The usual disclaimer applies: in a long note like this, done quickly, there will be content and typographical errors. If this is important to you, go to the source.  

April, 2021, data. This is all preliminary data for April, 2021. When the final number is tallied (next month), it will reveal a slight increase in production month-over-month):

This is cool: with only sixteen active rigs, North Dakota remains #2 in the nation with regard to crude oil production. New Mexico, with 72 active rigs is #3. Link here, for May, 2021 data

Crude oil production:

  • April, 2021: 1,121,551 bopd (preliminary)
  • March, 2021: 1,108,906 bopd (final)
  • delta: 12,645 bopd
  • delta in percent: +1.14 percent

Month Year

Bbls crude oil produced per day

Rig Count Current Month

Rig Count Prior Month

Rig Count Two Months Prior

April 2021

1,121,551

19

15

15

April 2020

1,219,086

17

35

52

April 2019

1,391,188

65

63

66

April 2018

1,224,948

62

60

59

April 2017

1,050,630

50

50

46

April 2016

1,041,007

27

29

32

April 2015

1,168,636

83

91

108

April 2014

1,001,149

189

188

193

April 2013

793,249

187

186

186

April 2012

609,371

211

209

205

April 2011

351,183

175

173

171

April 2010

284,345

114

107

102

Notes From All Over -- Afternoon Edition -- June 14, 2021

Line 3: Minnesota Court of Appeals, today, Monday, June 14, 2021, Flag Day, affirmed state regulators' key approvals of Enbridge Energy's Line 3 oil pipeline replacement project. Link here. I assume that's why ENB is up a bit today when most of the other oil-related issues are flat to negative. Also at Reuters but I assume the headline pretty much tells the whole story. The vote: 2 - 1.

Pedal to the metal: Bloomberg says biggest foreign buyers of US fuel are about to "step on the pedal." This is more evidence of a "perfect storm" brewing. This is going to be fascinating to watch. The countries: Brazil and Mexico. Both of which should be energy independent but are not. 

Can you say "free cash flow"? EIA says DUCs fell by 247, month-over-month; now down to 6,521.

Can you say "free cash flow? Natural gas jumps 1.5% to seven-month high ($3.348) amid sweltering heat in Texas and the west. The heat, interestingly enough, seems to hit every year about this time. We saw it rarely in North Dakota but still referred to it as summer. The Texas grid could fail -- if Texans don't cut back on electricity -- ERCOT tells us. I thought all those new wind farms would solve this problem. Wait until all those EVs start getting plugged in.

Didn't get the memo twenty years ago: Mexico's trucking sector asks to delay low-sulfur diesel rule. Reuters.

Montney shale:

Notes From All Over -- Mid-Day Edition -- June 14, 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

CNBC: 95% of "talk" seems to be about bitcoin and SPACs. From an observant twit over at twitter:

"Shame on CNBC and financial media for giving all of these SPAC garbage company CEOs so much time to promote their companies to na├»ve investors who never read SEC filings or provide any healthy skepticism." 
I was appalled by Phil LeBeau's "neutral-at-best" reporting on the resignation of both the CEO and CFO over at Lordstown. GM still maintains its huge holding in RIDE, mentioned by Phil LeBeau who made no comment regarding same. Can you imagine if Elon Musk resigned from Tesla? But RIDE is doing just fine judging by the market. Phil LeBeau implied that "Lordstown was Steve Burns and Steve Burns was Lordstown" and Steve Burns just left (Lords)town. No reaction from Phil LeBeau; he simply read the headline. 
An independent director, Ms Angela Strand, is now the interim CEO. Link here. Bio here. Her education: B.Sc. in communication (talking head) and an MBA in Marketing from the world-famous University of Tennessee. 
Does anyone remember Murphy's Law? She's now running a start-up with no product and some would say no strategy with a market cap of $1.7 billion. She is a named inventor with seven issued patents (medical devices? I don't know). 
Is this an opportunity for GM to ride in as the shining knight? I bet there's a lot of discussion.

Market: talk about the importance of diversification. LOL. It's not diversification. It's luck. On one of the worse days for the Dow in some time, my portfolio is having one of its best days ever. LOL. Being overweight in oil-related companies at this point in time probably has something to do with it, but having said that, most oil-related holdings are not doing all that well.

  • It helps that AAPL is having a good day. 
  • Warren Buffett is having a downright awful day, BRK-B down $4.05, down 1.41 percent. 
  • UNP stemming its recent slide; flat to very slightly positive. 
  • ENB finally goes over $40.
  • other pipelines flat to slightly negative

Notes From All Over -- Mid-Morning Edition -- Part 2 -- June 14, 2021

Ledecky: this is just a reminder to check the results when I get caught up. "Olympic Talk" at NBC Sports. Link here

PGA: how in the world does a player lose the championship in the last round leading by four strokes going in, and playing an incredibly weak field? Not only did the third round leader come in second but he allowed five other players to catch him

After shooting 65, 66, and 68, in the first three rounds (par 71), he shot ... drum roll ... 75 in the fourth round. The winner and the other five shot 68, 66, 67, 67, 68, and 68 in the final round. Wow, 75. If anyone saw his pre-fourth round interview one knew he was destined to lose. No wonder the Greeks believed in gods. 
Chesson Hadley was -14 going into the four round; through #14 in the final round, he was still two strokes head and shooting a -13. Then came hole #15 and the fire ants. LOL. 
How others saw it.

PGA: the winner -- a 22-year-old European golfer; this was only his second showing ever in the PGA. He is now a member of the PGA through 2023; he flew in from South Africa the day this championship started. He is now invited to play the Masters. So, wins a PGA championship only his second time out. Pretty amazing. Caught the announcers by surprise based on their limited post-play analysis. Apparently they had no bio of Garrick Higgo in front of them.

Apple, Inc: drops mask requirement for vaccinated customers for all its store in the US. Link here.  

Radioactive waste: North Dakota's oil industry no longer has to ship all its radioactive waste out of state now that a disposal facility in McKenzie County has started operating, and more sites could be on the way. Link here. Link to The Bismarck Tribune here.

Oil price hits pandemic (?) high as investors bet on green energy: link to The WSJ

This is a very interesting story. It encapsulates the recent confusing (?) statements released by the EIA. Wall Street's preference for renewables could mean oil producers will now struggle to meet demand. Many, many story lines here. 

Turkey: looks to US energy majors (think Chevron, Exxon Mobil) to extract its Black Sea gas. Link here

Enough is enough: the twitter chatter on this issue continues. See earlier posts. 

Nothing is undermining confidence and faith -- yes, faith -- a religious term -- in the efficacy of the vaccine like the G-7 behavior. Everyone was vaccinated; everyone was tested daily; and, yet, participants posted six-feet apart and wearing masks when not six feet apart. Link here.  In addition, much "internal" hypocrisy noted with released photos and videos. 

Reality sucks: in EIA net zero 2050 scenario, 75% of light duty vehicle sales are electric by 2030 in advanced economies. 

The gap between reality and ambition for deep decarbonization remains worringly large ...  link here, or go direct to article in Foreign Policy

Backwardation: this is really, really cool. For those, like me, who can never understand backwardation or contango, this is really cool. 

Finally, maybe I will keep it straight. Right now, due to what appears to be a "perfect storm," there really could be a huge jump in the price of oil in the short term due to surge in demand plus shortage of supply. Long term, the buzz is that there will be a glut of crude oil. Defines backwardation. Link here. For me, backwardation vs contango: win-win for me. Play it either way. 

The "perfect storm": link here.  

Several factors are behind the rally in spreads: 1) positioning, linked to index roll in WTI contract, 2) demand recovery, particularly in the US but also in Europe, 3) Iranian oil isn’t returning to the market as fast as expected, 4) OPEC+ firmly in driving seat for 2022

Commodity, backwardation, contango: by the way, there seems to be a disconnect with regarding to thinking about backwardation and contango as it relates to crude oil -- crude oil is no longer thought to be a typical commodity. Counterintuitive. May need some explaining.

Notes From All Over -- Mid-Morning Edition -- Part 1 -- June 14, 2021

Today's "photo of the day", link here:  photo pending.

Apple's "monopoly" on apps? Not so fast: Facebook says it may jump in. 

Brent: over the weekend, as a side note, I mentioned that Brent is "no long Brent." Today, over at twitter, one of the best energy tweeters:

Norway's Johan Sverdrup is being touted as an unlikely savior for Europe's light sweet market, following the recent abortive attempt to add WTI to Dated Brent. Link here. Link to source article here.

One hundred years in the Permian: the Oilman Magazine.

The first commercial discovery oil well in the Permian Basin was named for W.H. Abrams, leasing agent for the Texas & Pacific Land Trust. The well first produced oil in February 1920 at a depth of 450 feet; but in June 1920, a better showing of oil was found at 2345 – 2410 feet. On July 16th, 1920 the well was “shot” with nitroglycerin. 
As a crowd of 2000 people looked on, a great eruption of oil, gas, water, and smoke shot from the mouth of the well almost to the top of the derrick. Shortly after, the well flowed at a rate of 129 barrels daily, but soon settled down to 20 barrels per day. From this well and a well nearby, the Rio Grande Oil Company laid the first commercial oil pipeline in the Permian Basin. 
The first load of oil went through the pipeline on April 3, 1922. W.H. Abrams No. 1 was re-designated on May 1, 1968 as Westbrook Southeast Unit No. 701, formed to increase oil recovery from the Westbrook Oil Field by water flooding. This enhanced oil recovery technique has produced 67 million barrels of the more than 100 million barrels of oil recovered from this field. Designated as major fields, only a small number produce 100 million barrels of oil or more. 
Fifty-six major fields are located in the Permian Basin, the fourth largest oil producing area in the US. (1967, 1996).

Quick: which is bigger? Saudi Arabia's Ghawar or the Permian? Answer in the linked article above. 

According to the Texas Railroad Commission (RCC), which gets its figures from the Federal Reserve Bank in Dallas, the greater Permian Basin now accounts for nearly 40 percent of all oil production in the United States and 15 percent of its natural gas. Last year, Forbes, based on numbers coming from Aramco, reported that the Permian had overtaken Ghawar in Saudi Arabia as the world’s top producing oil field in late 2018.

New Mexico (aka the Permian West): production of crude oil and natural gas in New Mexico reached new record in March, 2021. Link here, twitter. Direct link to original EIA article.

LNG: China's pivot to gas is fueling support in LNG demand.  

Chinese imports of LNG have seen a remarkable rebound during the past couple of months. Companies on the mainland imported 6.73 megatonnes in April alone which was the second-fastest annual growth since April 2019 and the third-biggest monthly volume ever. As inventories are being refilled and demand is set to soar due to warmer weather, imports are likely to increase.

The dreaded decline rate: Exxon sees US shale oil production decline per well. Lots of data, archived here.

Ten best dividend stocks to buy -- George Soros, link here. This article is dated June 11, 2021, but I think this article shows up periodically. Clickbait, perhaps, but some nice ideas.

Eight Wells Coming Off The Confidential List -- Flag Day -- Scaring The NYTimes Staff One Flag At A Time -- June 14, 2021

Active rigs:

$71.59
6/14/202106/14/202006/14/201906/14/201806/14/2017
Active Rigs2012616255

Eight wells coming off confidential list --

Monday,  June 14, 2021: 63 for the month, 84 for the quarter, 165 for the year:

  • 37772, drl/NC, MRO, Little Owl USA 31-6TFH, Reunion Bay, first production --; t--; cum --;
  • 37397, drl/NC, CLR, Rodney 10-29H1, Cedar Coulee, first production --; t--; cum --;

Sunday, June 13, 2021: 61 for the month, 82 for the quarter, 163 for the year:

  • 37771, drl/NC, MRO, Plenty Horns USA 31-6H, Reunion Bay, first production --; t--; cum --;
  • 37483, drl/NC, BR, F Jorgenson 1A TFH, Elidahe, first production --; t--; cum --;
  • 36934, 720, Oasis, Thelen 5297 43-34 10B, Banks, t1/21; cum 113K 4/21;

Saturday, June 12, 2021: 58 for the month, 79 for the quarter, 160 for the year:

  • 37770, drl/NC, MRO, Mabel USA 21-6TFH, Reunion Bay, first production --; t--; cum --;
  • 37398, drl/NC, CLR, Rodney 9-29H, Cedar Coulee, first production --; t--; cum --;
  • 36849, 2,591, Hess, EN-VP and R-154-94-2536H-13, Alkali Creek, t12/20; cum123K 4/21;

RBN Energy: post-pandemic E&P cash allocation shifts to debt repayment, shareholder return

The return of $70/bbl WTI raises an important question: With a lot more cash flowing in, will public E&Ps maintain the financial discipline they’ve tried to live by since the crude oil price crashes of 2014-15 and, more recently, the spring of 2020? We’ve said it before, but it bears repeating that many producers once prided themselves on the riverboat-gambling nature of their business but, after a major scare or two, came to adopt a far more conservative approach to investment based on their new eleventh commandant: “Thou shalt live within cash flow.”

Emerging from the pandemic, E&Ps’ 2021 capital investment announcements guided to maintenance-level outlays designed to maximize free cash flow for debt reduction and returning cash to shareholders through dividends and share repurchases. Still, old habits die hard, right? So, when oil prices strengthened and cash flow soared in the first few months of 2021, we wondered if producers would give in to temptation to reap short-term benefits from their accelerating output. Today, we analyze the actual first quarter cash-flow allocation of the 39 E&P companies we monitor and compare it with the deployment of cash flow in 2019 and 2020.