The Energy And Market Page, Part 2, T+244 -- September 21, 2017

Unemployment claims: huge, unexpected drop. The forecast was for first time claims to actually increase from 284,000 to 303,00 -- an increase of almost 20,000 first time claims. In fact, the number dropped. And it did not drop by an insignificant amount. The drop was huge. The number of first time unemployment claims dropped 23,000. If one adds the 20,000 forecast to the 23,000 decrease, the analysts were a) off in the direction of the move; and, b) off by more than 40,000 claims. 

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or think you may have read here.

Surprise! Anadarko to spend $2.5 billion on "massive" share buyback -- Reuters via Rigzone. Data points:

• amounts to 10% of its outstanding shares at current prices
• this was announced yesterday
• APC: rose 2.4% yesterday

Oasis Midstream Partners begins trading today (OMP). Hess Midstream (HESM) is also trading.

Investment tip: I do not hold shares in CP or CNI and have no plans to do so. I am posting this for two reasons. The first reason is because a "talking head" on CNBC this morning recommended CP because of huge amounts of fracking sand coming from Canada. I was unaware of that; decided to check. It turns out the analyst was likely to be correct. At Athabasca Minerals check out the "Tech Report" pdf where the company discusses its frack sand initiative that began in 2014.  From the PDF, this connection with Canadian National Railway:

The Firebag Project is composed of three components; the mine site where the raw silica sand is mined, the Lynton trans-loading area, and the yet to be defined site in the Edson/Hinton site, where the ROM silica sand will be processed to produce a marketable frac sand product.

For the purposes of this report, the Edson/Hinton area will be referred to as the Edson area due to the uncertainty of the location of the processing plant at the time this report was authored. Also, in the cost analysis, the travel time of the rail cars on the Canadian National Railway Company (CN) rail line is to the town of Edson, Alberta.

The other reason is because I accumulated BNI (Burlington Northern) for years until Warren Buffett bought the company, and then I switched to another US railroad which has, all of a sudden, shown a bit of life. Again, see the disclaimer. I was more interested in the veracity of the analyst regarding Canadian fracking sand and less interested in the investment side of the story, but that was rewarding also. Both CNI and CP are trading near their 52-week high; the former was down insignificantly yesterday; the latter had a nice 1% jump yesterday.

As long as I'm rambling -- as long as Minnesota continues to block the expansion of the Enbridge crude oil pipeline and until the Keystone XL is built (if it's ever built), the Canadian railroads might be beneficiaries. 

"Westbound Trains To Willmar Could Be Going In Either Direction" -- Memo To Minnesota Activists -- January 9, 2016

First, the link to the DOT-111 wiki page: "and a maximum capacity of 34,500 US gallons" although 25,000 gallons is probably a good "rule-of-thumb" number to use for Bakken crude if one wants to be extraordinarily conservative when doing back-of-envelope calculations. Also, "25" is easier to deal with than "34."

750 bbls x 24 gallons/bbl = 31,500 gallons.

Now, the excerpt from a StarTribune article:

Overall, the report said, 28 to 48 oil trains pass through Minnesota each week, unchanged since last spring. Each train carries 1 million gallons of Bakken crude oil or more. 

Doing the math, 1 million gallons/25,000 gallons = 40 DOT-111 tank cars.

Unit trains leaving the Bakken were often 100 cars in length, and BNSF routinely has 118-car unit trains (grain, coal, oil, freight). I don't know how many cars there are now in a typical BNSF unit train leaving the Bakken.

Whew! That's out of the way.

The linked StarTribune article reports that BNSF has completed their upgrades, and that highly-explosive Bakken oil that once went through the heart of the Twin Cities has now been re-routed back to the usual routes northeast of the cities:

Most of the North Dakota crude oil trains crossing Minnesota no longer pass through west metro suburbs and downtown Minneapolis.

BNSF Railway, the largest Bakken oil hauler, notified Minnesota officials in December that it has shifted crude-by-rail traffic back to its usual route via Detroit Lakes, St. Cloud, Anoka and northeast Minneapolis. 

The shift had been expected; with the end of construction season, traffic is back to more traditional routes.

Whew! I'm glad that's over. Talk about a non-story after all that Dayton noise earlier this year. 

Over the summer, as BNSF worked on a $326 million system upgrade in Minnesota, it shifted most oil trains — about 11 to 23 per week — to tracks through Willmar, Dassel, Delano, Wayzata and St. Louis Park. This sent trains through the downtown, past Target Field and across Nicollet Island, worrying some local and state officials, including Gov. Mark Dayton.

This may be the most important data point for activists:

Although the report says those trains are “westbound to Willmar,” BNSF spokeswoman Amy McBeth said they could be going in either direction.

When demonstrating, it's important that activists don't get on the track facing only one direction; they could get hit by a unit train coming the other way.  

Random Fallout From The Keystone TKO -- November 7, 2015; More CBR Likely

Updates

November 12, 2015: "look west, not east" updated here. 
 

Original Post

 

Comment: normally I put my comments at the end of the story but I doubt many folks read that far down, so in this case, I'm moving the comments up here.

As you read the stories from the Minneapolis StarTribune and the Calgary Herald linked below, one wonders if folks are focused on an issue that no longer matters for North Dakota.

TransCanada never had any plans to include Bakken oil for the Keystone XL. The requirement to add an entry port in the Keystone XL for Bakken oil was made possible only through the action of the same Montana senator who coined the word "trainwreck" in describing ObamaCare. TransCanada reluctantly agreed, but one can bet that they never would have mixed Canadian heavy oil with Bakken light oil, except under great duress.

The Bakken operators are counting on two new pipelines, the Sandpiper and the Dakota Access, which go east, not south, both of which will probably suffer the same fate as the Keystone.

It doesn't matter. Bakken oil production will fall to 750,000 bopd (from current one million bopd) by the end of 2016 if things don't change, and at 750,000 bopd there is so much excess capacity, rail and pipe will be competing for any business.

Commentators are looking east when they should be looking west. The tea leaves tell me that California is in a world of pain when it comes to oil. The Bakken contributes a small amount, but a significant amount of oil, to California, but with the loss of the Keystone, and the likely loss (and definite delay) of the Sandpiper and the Dakota Access, this is an incredible opportunity for Enbridge CBR and Warren Buffett CBR to start looking at increased shipments to the Far West. Again, all things being equal, California is going to need more Bakken oil.

By the way, those popping sounds you heard last night were the corks flying out of champagne bottles in Omaha, NE, following the Keystone TKO.

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The Keystone TKO and CBR

The Keystone TKO will result in increased CBR, according to The Calgary Herald:

Rejection of the Keystone XL pipeline will complicate and add cost to getting western Canadian oil to U.S. markets but it isn’t expected to actually prevent any shipments reaching south of the border, observers say.

The decision announced Friday by U.S. President Barack Obama was greeted with disappointment by Calgary oil producers, industry insiders and local business people who observed that Canadian crude is being singled out by the United States with a trade impediment while other countries have free rein.

Suncor Energy Inc. president and chief executive Steve Williams said in a statement that the U.S. decision, made seven years after Calgary-based pipeline firm TransCanada Corp.’s initial application, hurts Americans as much as it does Canadians.

“Clearly we’re disappointed in today’s decision. Keystone XL is important infrastructure not only for producers in the U.S. Bakken (centred on North Dakota) and Canada as it would provide expanded connectivity to the Gulf Coast, but also for U.S. refiners as it would provide security of supply from a longtime energy provider and trading partner,” he said.

The Calgary-based company, Canada’s largest oil producer by market capitalization, says it has 600,000 barrels per day of current access to world markets, including 80,000 bpd of rail loading capacity, as an alternative to the 830,000-bpd Keystone XL.

Analyst Stephen Paget of FirstEnergy Capital said the rejection will lead to more crude-by-rail shipping, a transport mode which has expanded enormously over the past three years despite higher costs while KXL awaited the presidential permit required for a pipeline that crosses the Canada-U. S. border.

I assume many operators were waiting for the decision before making their own decisions regarding CBR. One can assume the Sandpiper and the Dakota Access will suffer the same fate. See below.

The Minneapolis StarTribune is reporting:

The rejection of Keystone XL is a setback for North Dakota’s oil industry, even though falling oil prices and the drop in Bakken drilling and oil production have lessened the immediate need for it.

“It is a good time to say ‘No, we don’t want a pipeline’ when you really don’t need it,” said Rudy Hokanson, a Minnesota-based oil analyst for Barrington Research.

But North Dakota officials believe that more Bakken pipelines still will be needed to carry future oil volumes.

Two proposed projects to transport North Dakota oil are under regulatory review — Enbridge Energy’s Sandpiper pipeline across North Dakota and Minnesota and Energy Transfer Partners’ Dakota Access line via South Dakota and Iowa.

Those projects, as well as Enbridge’s separate plans to replace and expand another Canadian oil sands pipeline through Minnesota, are facing opposition from an anti-pipeline activists who cheered President Obama’s decision Friday on Keystone XL.

One worrisome alternative to Keystone XL — an increase in oil trains from Canada through Minnesota — is not playing out. Canadian crude exports by rail have dropped by half in the past year after peaking at 165,200 barrels per day in the third quarter of 2014, according to Canada’s National Energy Board.

“Rail has never been a serious alternative to Keystone XL,” said Rep. Frank Hornstein, DFL-Minneapolis, who has worked on crude-by-rail safety issues. “That has been a talking point for pipeline advocates. It is not based on reality.”

That's good news that Frank is not worried about increased CBR. He can tell that to his constituents waiting in line at railroad crossings.

The AP says without Keystone, the oil industry must find new paths for oil. Really? I am not aware of any shortage in takeaway capacity; more Canadian oil than ever is reaching US refineries. Not only that but the general consensus is that US shale production is going to continue decreasing. All these stories are also stating that this will have an effect on the Bakken. The Keystone XL would have meant very, very little to the Bakken.

The Dickinson Press weighs in also. I did not read the editorial. My impression, probably wrong, is that the truth be told, the owners / editorial staff of organization that owns The Dickinson Press was against the Keystone XL from the beginning. I do not recall my original stance; readers can check the blog to see what my thoughts have been. I do know that from a common sense point of view, the whole issue was ridiculous. From a Bakken point of view, I never thought it was something that would help the Bakken. The risk was that a win for the faux environmentalists on this would spread to other pipelines, and it has. I think there is a very good chance that the Sandpiper and the Dakota Access will suffer the same fate. Fortunately, as I've said so many times, it really doesn't matter. When North Dakota production drops to 750,000 bopd there is going to be so much excess capacity, folks will wonder what all the fuss was about.

Bakken Economy Drives $326 Million BNSF Capital Projects In Minnesota -- October 7, 2015

The StarTribune is reporting:

The number of trains carrying oil from North Dakota and traveling through the west metro and downtown Minneapolis has temporarily been increased. More Bakken oil trains are entering the Twin Cities via the western suburbs, a route that sends an increasing amount of the hazardous cargo through downtown Minneapolis.

BNSF Railway, in reports filed with state officials, said the number of trains carrying at least 1 million gallons of crude oil is increasing through this rail corridor, starting with a modest gain in July followed by a larger bump in September.

Now, 11 to 23 oil trains each week pass through the western suburbs of Wayzata and St. Louis Park on their way to Minneapolis, up from a nominal number a year ago, according to BNSF reports obtained by the Star Tribune.

This route takes trains past Target Field, through the North Loop and across the Mississippi River at Nicollet Island. The oil trains are destined for eastern refineries.

Meanwhile, the Sandpiper (which would relieve some of this rail congestion) has been keystoned.

The good news: this is all temporary:

BNSF spokeswoman Amy McBeth said the rerouting of oil trains on the Willmar-to-Minneapolis corridor is a temporary change related to the company’s $326 million in capital projects in Minnesota this year. Upgrades are being made to rail lines across the state, but that work ends with winter’s arrival. 

Of course, if the Sandpiper had been in place, this would not have been an issue in the first place.

Regardless: $326 million in capital projects in Minnesota driven by the Bakken economy.

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Risks Exaggerated?

Oil & Gas Journal is reporting:

The high-growth business models of US independent operators are being tested by low oil prices and tougher access to capital. But two recent Wood Mackenzie Ltd. reports concluded that concerns surrounding October reserves-based lending (RBL) redeterminations have been exaggerated.

The reports appeared as Moody’s Investors Service predicted banks will lower their 2015 fall price decks by 15-25% from their spring 2015 assumptions, “significantly reducing RBL borrowing bases for some E&P companies.”

WoodMac’s Corporate Service Insight, “US Independents: How strong, for how long?”, examines the financial health of 26 independents, concluding that the larger producers have the required flexibility to tide them through the near term at the very least.

Fraser McKay, WoodMac corporate analysis research director, said, “Most companies in the peer group have rising absolute debt levels, and October’s RBL redeterminations have been latched onto as a potential catalyst for sector implosion. But at least two thirds of Lower 48 production is attributable to companies with no RBL exposure at all, or have no redeterminations until 2016.”

Of those larger producers with near-term debt redeterminations, WoodMac estimates most can accommodate a borrowing-base cut of over 50% before their situation becomes imminently critical.

Much more at the link.

See also this Wood Mackenzie on break-even prices. (I continue to link stories on break-even prices for crude oil, but I seldom read them and pay attention to them even less often. There are too many variables, and too much apples-to-oranges comparison.)

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Global Warming Scam

Link here. Another story we won't see on CBS/NBC/ABC Evening News.

Monday's Review -- March 23, 2015

Disclaimer: this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. My long notes often have typographical and/or factual errors. If this information is important to you go to the source. Do not past go. Do not collect $200. Skip this post. Go directly to the source.

This is going to be a long rambling post. Sorry.

Some days there is just too much to blog and this is one of those days. In addition, family commitments are such that a major portion of each of my days for the next two to three weeks could severely limit my blogging.

1. The Whiting story. This story seems to have more twists and turns than any story in the Bakken. It seems from "day 1" there was talk of Whiting looking to be sold. And we are still talking about it and a sale seems further away than ever. Note the disclaimer at the link and the blog's disclaimer. [Update: on DFW talk radio, it is being reported that WLL in pre-market trading is down 20% on Tuesday morning -- the morning after the announcement -- talk radio says this will have a ripple effect through the oil and gas industry.]

2. The Bakken as a laboratory. There are several stories coming out in the last 72 hours that look at the Bakken as a laboratory. These articles are very superficial but they might provide a bit of insight into the Bakken. This might be the most important for the general follower of the Bakken or the newbie: how Bakken operators are working to thwart OPEC. (The story is printed also at Rigzone.) I brushed over it in passing at this post but it deserves another "shout out." Perhaps if you have time to read only one article on the Bakken this week, this might be the one to read. From the linked article:

OPEC and lower global oil prices delivered a one-two punch to the drillers in North Dakota and Texas who brought the U.S. one of the biggest booms in the history of the global oil industry.

Now they -- the US drillers -- are fighting back.

Companies are leaning on new techniques and technology to get more oil out of every well they drill, and furiously cutting costs in an effort to keep U.S. oil competitive with much lower-cost oil flowing out of the Middle East, Russia and elsewhere.

“Everybody gets a little more imaginative, because they need to,” says Hans-Christian Freitag, vice president of technology for the drilling services company Baker Hughes.

Spurred by rising global oil prices U.S. drillers learned to tap crude trapped in shale starting in the middle of last decade and brought about a surprising boom that made the U.S. the biggest oil and gas producer in the world.

The increase alone in daily U.S. production since 2008 — nearly 4.5 million barrels per day — is more than any OPEC country produces other than Saudi Arabia.

But as oil flowed out and revenue poured in, costs weren’t the main concern. Drilling in shale, also known as “tight rock,” is expensive because the rock must be fractured with high-pressure water and chemicals to get oil to flow. It became more expensive as the drilling frenzy pushed up costs for labor, material, equipment and services. In a dash to get to oil quickly, drillers didn’t always take the time to use the best technology to analyze each well.

When I first start blogging, it took 45 - 60 days drill a well to total depth, and the majority of those were short laterals (about a mile). Now they are drilling two-mile lateral two miles down in ten (10) or less. Completion (fracking) tacks only a few additional days but may be delayed for weeks or months, for operational reason or financial reasons.

Different processes are being used for completion: keep your eye on coiled tubing.

When I first started blogging, I was used to seeing one (1) million lbs or less of proppant and 14 stages or less; now the standard seems to be around four (4) million lbs of proppant and 30 stages, but EOG is completing two-mile (long) laterals with 48 stages and upwards of 15 million lbs of sand.

When I first started blogging, there was a backlog of around 250 wells that needed to be fracked each month. The backlog was simply because of a shortage of frack spreads. The backlog increased over time, to 450 wells that needed to be fracked, and most attributed this to operational reasons (pad drilling). The consensus seemed to be that the frack teams could keep up but operationally (pad drilling) necessitated a delay in fracking. Suddenly, with the slump in oil prices the backlog went to 750 (in December, 2014) and then, incredibly, to 850 in the most recent report (January, 2015). North Dakota rules/regulations require that wells be completed / fracked within a year after they have been drilled. It will be interesting to see if a) that rule is not waived; and, b) if not waived, what happens this summer as the deadline approaches for an increasing number of wells.

3. Then there's this fascinating story: why is North Dakota so stable? Tectonically speaking. With regard to earthquakes. This is in the Pioneer Press:

Swarms of earthquakes have been rattling Oklahoma, Texas and other central states with a history of little or no seismic activity. The recent quakes, according to scientists, may be the fault of deep underground injections of wastewater left over from fracking.

But in North Dakota, where wastewater injection wells are abundant, the ground has remained largely unshaken.

So why are other oil-producing regions significantly more wobbly?

"It's actually a really good question," said Michael Stickney, director of earthquake studies for the Montana Bureau of Mines and Geology. "And I don't know that I have a good answer to it."

As it happens, a study published last month by researchers at the University of Texas at Austin explored the question, comparing drilling activity in Oklahoma and the Williston Basin, which holds the oil-rich Bakken Formation.

The study found no definitive explanation as to why earthquakes are rare in the Bakken, but one reason may be that higher volumes of wastewater are injected into some Oklahoma wells. 

Due to constraints of time, I will leave it at that. 

4. With regard to CBR, there has been a suggestion by our good neighbors in Minnesota, and specifically, a former writer for Saturday Night Live that trains should be re-routed around the Twin Cities. The Star Tribune via Bakken.com is reporting:

Government-ordered rerouting of private rail traffic is not exactly a snowball in hell. It is more like a blizzard in Bahrain — possible, but unprecedented.

In Minnesota and around the country, “rerouting issues ought to be high on everyone’s agenda,” said rail safety expert Fred Millar, who fought unsuccessfully against railroads to move chlorine trains out of the District of Columbia.

“But rerouting has been pushed off the table.”Congress created the Federal Railroad Administration in 1966. In nearly half a century it does not appear to have forced any railroads to reroute trains around big cities for safety reasons, despite computer modeling that estimates routing changes could lower citizens’ risks to hazardous materials derailments by 25 to 50 percent and reduce casualties in an actual derailment by half.

If CBR is important to you, a) be happy that Obama is preoccupied with Netanyahu and the Lynch-for-attorney-general nomination; and, b) Warren Buffett runs the Bakken Railroad.

4.  The 3% reduction in North Dakota oil production month-over-month (December, 2014 - January, 2015) means nothing. I won't be impressed with month-over-month production decreases until we see a) production decreases each month from here on out; or, b) production decreases of more than 5% month-over-month from here on out; or, c) a drop in production to less than 1 million bbls/day.

5. New metrics of interest to me: a) projected number of new oil permits for 2015; and, b) the number of wells waiting to be fracked each month. We are approaching the century mark: 100 active rigs in North Dakota. One-hundred rigs in 2015 can produce as much oil as 175 rigs did back in 2010.

6. Another story to follow: closing of man-camps. This was always the way it was planned. Man-camps during the boom, but once the boom ended, then workers in man-camps would migrate to fixed structures (motels, hotels, apartments, houses) as overall number of roughnecks and truck drivers in the Bakken decreased.

7. I am not going to the link the stories, but there is more and more "evidence" suggesting that Saudi Arabia is coming under more and more pressure from other OPEC countries and non-OPEC oil producing countries regarding the price of oil. "Everyone" blames Saudi Arabia for current slump in oil prices; Saudi Arabia refuses to take sole blame / responsibility. I can see Saudi Arabia's point, but I don't know why they are so defensive.

8. It seems there are two big stories that are inter-related and yet the mainstream media never connects the two. The first story is the slump in oil prices due to glut of global oil; the second is the unrest in the Middle East. If the prize for ISIS is Saudi Arabia, things could get very interesting very soon.

9. This will be a most interesting story to follow. Some say this will hurt the Seattle restaurant industry. Others say "not to worry." The Los Angeles Times is on record as saying the $15 minimum wage won't have any effect on restaurant industry in Seattle. Fox News is reporting:

Seattle restaurants are warning that the looming hike in the city’s minimum wage to $15 an hour could soon force them to cut back their staffs and raise prices. 

For an industry with a slim profit margin to start with, the wage hike could have a profound effect, even as supporters say it will benefit the economy in the long run. 

The increase, up from $9.32 an hour, is set to be phased in starting April 1. The initial minimum wage will be $11 an hour. Employers with 500 or fewer workers must increase their pay to $15 an hour by January 2019. Larger employers, having 501 or more workers, have just two years to raise their worker compensation to $15. 

If this law applies to McDonald's -- minimum wage of $15 / hour -- my hunch is that we will finally see iPad kiosk ordering. For the life of me, I've never understood why we haven't see this already.

Seattle's minimum wage increase is "somewhat gradual," compared to what they did in Oakland. Carpe Diem takes up the story from here. 

The TransCanada / BNSF Dots Are Connecting -- February 5, 2015

Last night a reader sent me a link suggesting that due to the six-year delay in getting the Keystone XL approved, TransCanada was ready to go to Plan B -- CBR.

Now, tonight, Don sends me the connecting dot: BNSF announces a $326 million plan to upgrade rail infrastructure in Minnesota. The Grand Forks Herald is reporting:

BNSF Railway Company allocated the $326 million as part of its $6 billion capital expenditure program for 2015. Maintenance and expansion of key routes in the state are part of the company’s effort to respond to increased rail congestion in the state.

Projects will include nearly 270 miles of track surfacing and replacement of 125 miles of track.

Commuter rail traffic that operates on the BNSF network of rail, such as Northstar and Amtrak, should experience less frequent delays as a result of expanded routes and traffic control projects. She also said the company is adding locomotives and staff to help address increasing demand from shippers from all sectors.

2015 will be the third year in a row the company has broken its all-time capital expenditure budget.  

Expansion has become necessary due to a spike in crude oil rail shipments. According to the Association of American Railroads, the amount of crude oil terminated carloads -- cars which were unloaded -- in the U.S. increased nearly sixfold from 2011 to 2013, from just less than 75,000 to nearly 450,000. McBeth said Minnesota has experienced a “significant” increase in rail traffic due to oil drilling in North Dakota’s Bakken oilfields.

The dots really do connect. By the time TransCanada talked to the press about CBR, one knows that TransCanada had already been in talks with BNSF. Or least was watching what BNSF was planning.

It's also possible that BNSF knows that the Keystone XL is dead in the water. BNSF would know that from a) reading the tea leaves -- even I can guess the Keystone XL is likely dead under this administration; and/or b) Warren Buffett called up President Obama to chat the other day.

Plenty of Money For Presidential Golf Outings; Not Enough Money for White House Tours; Not Enough Money For Easter Egg Roll; Still Unable to Fully Access NDIC Web Site; Parts Of It Seem To Be Coming Back Up, Albeit Very Slow; Was It A DOS Attack By The Chinese?

Updates

March 19, 2013: I can't make this stuff up. The White House can't afford White House tours any more, but not only can the White House afford presidential golf outings here in the US, it now turns out that the president will be golfing in Ireland in June, 2013.  Ireland is one of the PIIGS, by the way. As you can see by the link the PIIGS even have their own wikipage. Once you have your own wikipage, you are too big to fail. With Cyprus, C-PIIGS?

Original Post

Easter egg roll story here.

With regard to the NDIC web site: today's daily activity report has not yet been posted.

Cannot access Basic Services.

Later:  

I was unaware that there was even a golf story out there, but here it is. I assume the media will start adding up the cost of the golf trips vs the weekly cost of White House tours.

I can't make this stuff up.

While we're waiting for NDIC to be back up and running:

Bakken Oil Unit Train