The Million Dollar Way (The Bakken Oil Blog): 10/26/22

Hess Corporation (NYSE: HES) today announced two new discoveries at the Yarrow-1 and Sailfin-1 wells on the Stabroek Block offshore Guyana. The discoveries, which are the eighth and ninth this year, will add to the block’s previously announced gross discovered recoverable resource estimate of approximately 11 billion barrels of oil equivalent.

The Yarrow-1 well encountered approximately 75 feet (23 meters) of high quality oil bearing sandstone reservoirs. The well was drilled in 3,560 feet (1,085 meters) of water and is located approximately 9 miles southeast of the Barreleye-1 discovery.

The Sailfin-1 well encountered approximately 312 feet (95 meters) of high quality hydrocarbon bearing sandstone reservoirs. The well was drilled in 4,616 feet of water and is located approximately 15 miles southeast of the Turbot-1 discovery.

Press release:

3Q22, key developments:

announced Yarrow-1 and Sailfin-1 as the 8th and 9th discoveries this year on the Stabroek Block, offshore Guyana; adds to the previous gross discovered recoverable resource estimate for the Block of approximately 11 billion barrels of oil equivalent (boe)
total cash returned to stockholders in the quarter through share repurchases and dividends amounted to $265 million;
approximately 1.4 million shares of common stock were repurchased for $150 million in the quarter

3Q22 financial and operational highlights:

net income was $515 million, or $1.67 per common share, compared with net income of $115 million, or $0.37 per common share, in the third quarter of 2021
adjusted net income1 was $583 million or $1.89 per common share, compared with net income of $86 million, or $0.28 per common share in the prior-year quarter
oil and gas net production, excluding Libya, was 351,000 barrels of oil equivalent per day (boepd), up 32 percent from 265,000 boepd in the third quarter of 2021
Bakken net production was 166,000 boepd, up 12 percent from 148,000 boepd in the third quarter of 2021;
Guyana net production was 98,000 barrels of oil per day (bopd), compared with 32,000 bopd in the prior-year quarter
E&P capital and exploratory expenditures were $701 million compared with $498 million in the prior-year quarter
cash and cash equivalents, excluding Midstream, were $2.38 billion at September 30, 2022

2022 updated guidance:

net production, excluding Libya, is forecast to be approximately 370,000 boepd in the fourth quarter and approximately 325,000 boepd for the full year
full year E&P capital and exploratory expenditures are expected to be approximately $2.7 billion, unchanged from previous guidance

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MRO Raises Dividend

Rambling -- Links To Articles -- Some Get Posted, Some Don't -- October 26, 2022

Commentary not ready for prime time.

A huge "thank you" to readers who send me links to articles of interest. It's very hard to explain why I post some and not others. Even if I don't post an article (or a link) I always go to the article and it becomes part of "the blog's DNA" even if it doesn't get published. The most recent example: several readers have alerted me to the oilprice article coming out of Germany, a wind farm being taken down to be turned back into a lignite coal mining operation.

I would assume the biggest reason some of these articles don't get published: it takes time and it distracts me from the central purpose of the blog: to track the Bakken.

I used to post a lot of articles on "global warming," but I seldom post those articles any more. I have my "world view" of global warming as do most folks who follow the subject to any degree, and links to "global warming" articles tend not to interest me any more. I know the scam.

In addition, I don't remember exactly "when," and I don't remember exactly "why" it happened, but outside of the Bakken, I have only two real interests with regard to the blog:

family notes for the archives; after I die, perhaps my great grandchildren will be interested in some of the family notes and photos I post; and,
investing: about a year ago, I suppose, I became very interested in getting much more serious about investing. I've been investing since 1984, but not with any real plan per se. But now, with a revenue stream that has built up over forty years of investing (dividends, and to some extent, capital gains) I have had to get serious about a plan. Surprisingly, developing (and sticking to) a plan has made investing much more interesting.

So, whenever a reader sends me a link, I am looking for an investment angle.

One exception, but that exception has also evolved. I am still fascinated by Covid-19, not the politics, but the science from sources I trust.

The "evolution"? Now that I'm following the science much more closely and "following the money," I've become interested in the science as well as the investment opportunities. For the science, my only real source are books on the subject (not "mainstream media" articles) and CDC data as well as worldometer data.

The CDC has added "Covid tracker, weekly."

Wuhan flu. The blog. Coronavirus: statistics. Seasonal flu: CDC.
Covid Data Tracker Weekly Review: link here, new. Coovid data tracker: by community, new

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The Book Page

For anyone interested in geopolitics and the "big picture" I heartily recommend Peter Zeihan. I have read his most recent book (2022). I follow Peter Zeihan over at twitter and he recently mentioned his 2016 / 2017 book on shale. He mentioned it in such a way that I don't think he was promoting that book or trying to sell it, simply to say that he had noted something as far back as the mid-20-teens and global energy was now playing out as he envisioned, and with it, the changing global politics.

I've just started reading the book and am really, really impressed. The importance of the book is this: it validates his views and his "predictive" abilities, if that makes sense.

Again, my 2022-summer reading program and my 2022-autumn reading program are linked.

I just added my Covid-19 library page.

Weekly EIA Petroleum Report -- October 26, 2022

Link here.

US crude oil inventories increased by a modest 2.6 million bbls; US inventories are just fine, only two percent below thee five-year average, and "locally-produced" oil has gone up significantly over the past five years.

there are seven days in the week
the US is releasing about one million bbls / day from the SPR
seven x one = seven million bbls from the SPR -- and yet, the commercial inventories increased by only 2.6 million bbls; in other words, five million bbls / week of SPR oil is going somewhere: to US refiners and/or exports to Europe;

refiners are cutting back on refining; some of it may have to do with scheduled maintenance, after the summer driving season and heading into historically low-demand months of autumn / winter;

anytime I see refiners dropping below 90% of their operating capacity gets my attention. Eighty-nine percent is noteworthy.
Less than 89% is more than noteworthy, for me. Last week? 88.9%.
My hunch: if you asked SecEnergy Granholm for that number she would not know it without looking it up. Some say refining is the problem / bottleneck as the explanation for the stubbornly high prices despite more-than-adequate supply; I used to say that, also.
I'm not so sure any more. Regardless, Valero told SecEneergy Granhalm that "shuttered" refineries are not going to re-open;
do you want to see panic in Los Angeles? Watch what happens if some company announces another refinery is to close in California.

gasoline inventories decreased a bit but are only six percent below the five-year average; not a big deal;
the real metric to follow is not how much gasoline "we" have but how many days supply we have;
the days of crude oil supply? Creeping up; trending toward 28 days which is way too much if, as an investor, one likes to see higher prices; ninety-nine percent of Americans should be happy to see this number growing (for them, trending toward 30 would be nice);
the real problem is distillate, heating oil, diesel -- see this post;
distillate fuel inventories changed very little; up by 0.2 million bbls -- probably not statistically significant and probably not "reproducible" if someone were to re-measure;
whatever the number is, distillate fuel inventories remain a whopping 20% below the five-year average and I think I read somewhere, the US has about 25 days of diesel fuel available. The fact the hurricane season is coming to an end, suggests the diesel fuel inventories will be down (as much as 20% for the foreseeable future) but still way more than needed. I'm not convinced diesel fuel inventories are driving the high price of diesel.
propane, interestingly enough is 3% above the five-year average -- and farmers use a lot of propane -- but mostly at harvest, which is now pretty much done for the season and for the year; again, for reasons that might not make sense to some, but make sense to me, propane is still priced at historic highs;
airlines are doing fine: jet fuel supplied was up only 3.3%l; jet fuel price data is here but the data is several months old;

Most "analysts" -- 90% of whom are like me -- no training, no education but great at sitting in armchairs at home and commenting -- suggest that next summer there will be a severe shortage of oil and the price of gasoline will surge.

Speaking of which, the current average price of gasoline in Los Angeles, California, according to the AAA is $5.713 for regular.

Twenty-five-thousand miles per year x 25 miles per gallon x $6 / gallon = 1,000 gallons = $6,000 / year or $500 / month.

Minimum wage, $15 / hour; $500 = 30 hours, or about one week every month just for gasoline?

Average utility bill in a Los Angeles apartment: $250 / month; more in the summer for a/c; much less in the winter months.

One would assume a single home would run twice that?

Commentary -- Not Ready For Prime Time -- October 26, 2022

The note below was generated following several discussions with different folks.

It is not ready for prime time and subject to editing.

There are two issues that have perplexed me for quite some time.

1. The shortage of workers in the US.

2. The supply chain shortage.

My nephew was in town. He and his wife are software engineers at a large IT corporation in Minneapolis area. They have worked themselves to pretty high levels in the organization.

He and I talked at length on lots of issues over the past two days.

He has thought about those two issues because at his level, they affect him and his company significantly.

For two years they have been unable to fill employee positions and it does not seem to be getting any better. Much of what I wrote about this subject on the blog yesterday was from our conversation Monday evening.

Second issue: the supply chain issue has really perplexed me and I asked him about that. I could not believe that free market capitalism couldn't have solved this problem over the past two years.

From his vantage point, the supply chain issue does not begin in the US. It begins in 3rd world countries where the basic materials like lithium (and silicon? ) come from.

I posted a chart yesterday on the blog; these raw materials come from China and Russia and Africa. And the vast majority is from China.

I know that a significant percent (50%) of Americans think the Covid-19 vaccines are worthless, and even if not worthless, probably no more effective than the "seasonal flu" vaccines, which are perhaps only 45% to 50% effective. Whatever that means. But that's fine.

However, it's very clear that the vaccines in the US do work. Even if only 50% effective -- again, whatever that means -- vaccines interrupt the spread of infection.

Interestingly, even more important, is this, the perception of things working. The fact that "we" have vaccines and we have antiviral medication to treat folks with viral pneumonia (regardless of virus) gives the government and businesses and childcare centers and schools "wiggle room" / options to stay open even if there are periodic spikes in the number of infections.

It allows "us" -- the US -- to go back to work without forcing a net-zero policy which China has. China has only one option, one tool in their toolbox, and it's a hammer. Shut down the entire city or the entire factory even if only a handful of folks test positive, never mind if they are symptomatic or even infectious.

One can't get to "net-zero" --whatever that means -- and so whenever there's even a small outbreak, the school that is affected, or the factory that is affected, in China, must shut down.

So, if China is providing 50% of the world's lithium at half a dozen mines and there's even a very, very small outbreak at one of the mines, that mine is shut down.

When a Foxconn factory is subject to shut down due to a small outbreak, it makes headlines, Tim Cook is on the phone, and the government and Foxconn try to figure out how to keep operations going.

On the other hand, when a mine is shut down, "no one" knows about it. There are no headlines and some US CEO with "no name" recognition calls and the Chinese mine operator won't even take the phone call.

Now, the really, really bad news. China has its own Covid-19 vaccine and it's considered completely ineffective. No matter how ineffective the US vaccines are, the Chinese vaccines at orders of magnitude less effective. The Chinese vaccine doesn't work and everyone knows that. In other words, we have a country -- China -- that supplies the world with the majority of raw supplies; has an impossible net-zero policy; and no vaccine.

RBN Energy talks about it today in their daily blog, and it's been discussed elsewhere but "no one gets it" yet. The earliest "they" talk about any relief is 2025.

US Supreme Court And The Trail Of Tears -- October 26, 2022

Link here.

Anticipation: October 26, 2022

Link here.

The graph below is amazing. One has to go all the way back to 2008 to see profits at $40 billion which was the previous record before 2022:

2Q22: $62 billion
3Q22E: $51 billion
2Q08: $41 billion

No Wells Coming Off Confidential List -- October 26, 2022

Weekly EIA petroleum report: pending.

December 5, 2022: harsh Russian oil sanctions begin. Analysts feel Russia won't have buyers for all its oil.

Europe, natural gas, record LNG at sea and Europe already has maxed out its storage.

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Back to the Bakken

The Far Side: link here.

Active rigs: 43.

WTI: $86.18.

Natural gas: $5.525. See above.

No wells coming off confidential list.

RBN Energy: US lithium production and processing projects, part 2. Archived.

The world will need extraordinarily large quantities of lithium to support the development of renewable energy, batteries and electric vehicles (EVs). The problem is, much of the supply chain for lithium and many other important energy-transition minerals is either owned or controlled by China, whose strategic and economic interests are directly at odds with the U.S. and its allies. In response, the Biden administration and Congress have been taking steps to reduce our dependence on Chinese supplies by providing financial incentives to encourage the development of more domestic mineral production and processing capacity. But that development can only happen if the projects can clear the often-daunting regulatory and legal hurdles they almost always face. In today’s RBN blog, we discuss a few of the leading U.S. projects being planned and the challenges they face in moving forward.
The sole operating lithium production site in the U.S. is Albemarle Corp.’s Silver Peak facility in Nevada. There, brine is evaporated over a period of 18 to 24 months and the concentrate is run through a conversion unit to make lithium carbonate. Silver Peak currently produces about 5,000 metric tons per year (MT/year) of lithium carbonate, or enough to help make about 80,000 EV batteries — enough to supply about one-tenth of the 800,000-plus EVs expected to be sold in the U.S. this year. Albemarle plans to double the capacity of the facility by 2025.
As for new U.S. lithium projects under development, the one that’s garnered the most attention is Lithium Americas’ planned Thacker Pass project in Humboldt County, NV.

Thacker Pass still faces a number of legal challenges from environmental groups and Native American tribes.

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Wednesday, October 26, 2022