Gasoline Stocks Plummet -- Platts, Rigzone

Updates

April 25, 2013, 7:26: CNBC will have a segment on rising oil prices. CEO of Gulf Oil: price for gasoline will continue to go down; winter grade to summer grade switch. Not a demand-led drop; clearing out winter-grade stock to make room for summer-grade stock. Demand is down 2%. Production is strong. Gasoline prices could go below $3/gallon by Labor Day. Industry looking for relief from Jones Act (adds 10 to 15 cents/gallon). Industry looking for relaxation on states' red tape hindering CNG and LNG stations. Administration's attitude toward the industry: fundamental dislike of oil and gas industry; fundamental lack of understanding of commodity trading. Keystone XL would eventually drop price of gasoline by about 30 cents/gallon.

Original Post

Rigzone is reporting:

Oil futures shot to their highest price in almost two weeks Wednesday, after a closely watched report said gasoline demand rose to its highest level in more than five months.

The weekly report from the Energy Information Administration also showed oil stockpiles last week rose less than expected, while gasoline inventories fell sharply.

"We're in positive territory" year over year, said Gareth Lewis-Davies, analyst at BNP Paribas. "This is not typical of what we've seen." 

Analysts expect gasoline demand to continue rising in the coming months as the summer driving season kicks in. That should trigger an increased need of crude oil from refiners. European refiners are also expected to exit a period of prolonged maintenance in the coming weeks that could contribute to demand.

No explanation how oil supplies rise, but gasoline supplies plummet.

Platts is reporting:

U.S. gasoline inventories plunged 3.93 million barrels during the week ended April 19 to 217.8 million barrels, the lowest level since the week ended December 7, according to data just released by the U.S. Energy Information Administration (EIA) Wednesday. Analysts polled by Platts on Monday had expected a 700,000-barrel decline in U.S. gasoline inventories.

The drop in inventories came amid a sharp jump in implied demand for the fuel, which rose 366,000 barrels per day (b/d) to 8.750 million b/d, even as production ticked upward by 93,000 b/d to 8.995 million b/d.

I've commented often on deltas between analysts' expectations/estimates and actual results, but this really defies ... I don't know what it defies, but it must defy something. A 700K decline is quite different than a 4 million-barrel decline. Wow.

Oil stocks increased; see linked article.

How does one explain increased oil stocks, but plummeting gasoline stocks? Wrong kind of oil (heavy vs light) in the pipeline for refineries. 

Bakken Well Costs

From the Hess 1Q13 earnings transcript:

Well cost for the first quarter averaged $8.6 million per well, down 36% from $13.4 million per well in the first quarter of 2012 and down from $9 million per well in the fourth quarter of 2013.

Not trivial.

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Back on January 24, 2010:

This may or may not be important in the future as a trend (cost and time to drill a horizontal Bakken well), but I don't want to lose the link. If you scroll to the top of that link, Slawson reports that it has put in a horizontal well in 16 days and for less than $3 million. The rule of thumb for a horizontal well in North Dakota: 30 days (it used to be 45 days) and $4 - 6 million.

I believe wells in 2010 were generally short laterals.

I recall many discussions over the past two years that a long lateral at $10 million was about the same as a short lateral for $5 million. So, when I see the Hess 1Q13 quote of $8.6 million per well in 2013, I find it quite interesting. Mike Filloon recently said that well costs were coming down faster than folks generally realized.

For Investors Only: Tomorrow Morning, Before Market Open: Carbo Ceramics (90 cents) Reports

... and COP ($1.39) ....

... and XOM ($2.04) ....

.... and NBL ($1.19) ....

UPS ($1.01) will be the big story on CNBC.

All the above will be reporting before market open.

KEG (Key Energy Services, 4 cents) will report after market close.

This list is provided by Yahoo Earnings Calendar which has been known to have errors.

Results

Noble Energy beats by $0.23, beats on revs: Reports Q1 (Mar) earnings of $1.48 per share, $0.23 better than the Capital IQ Consensus Estimate of $1.25; revenues rose 5.1% year/year to $1.14 bln vs the $1.09 bln consensus. 

CARBO Ceramics misses by $0.14, misses on revs (CRR): Reports Q1 (Mar) earnings of $0.76 per share, $0.14 worse than the Capital IQ Consensus Estimate of $0.90; revenues fell 9.5% year/year to $147.7 mln vs the $153.36 mln consensus.

UPS beats by $0.02, reports revs in-line; reaffirms FY13 EPS guidance: Reports Q1 (Mar) adj. earnings of $1.04 per share, $0.02 better than the Capital IQ Consensus Estimate of $1.02; revenues rose 2.3% year/year to $13.43 bln vs the $13.43 bln consensus. The quarter benefited from a stronger than expected post-holiday season in January as UPS e-commerce solutions resonated with customers. In the U.S. Domestic segment, daily package volume grew 4.4% and operating profit improved 9%.

Occidental Petro beats by $0.14, misses on revs: Reports Q1 (Mar) earnings of $1.69 per share, $0.14 better than the Capital IQ Consensus Estimate of $1.55; revenues fell 6.3% year/year to $5.87 bln vs the $6.47 bln consensus. Our Q1 domestic production of 478,000 barrels of oil equivalent per day, of which 342,000 barrels per day were liquids, set a record for the tenth consecutive quarter. Our total company production of 763,000 barrels of oil equivalent in Q1 of 2013 was 8,000 barrels higher than production in first quarter of 2012.

XOM: raises dividend from 57 cents to 63 cents. From Reuters: First-quarter profit for the world's largest publicly traded oil company totaled $9.5 billion, or $2.12 per share, compared with $9.45 billion, or $2 per share, a year earlier. Analysts, on average, expected the Irving, Texas, company to report a profit of $2.05 per share. From Yahoo!Finance, In-Play: Exxon Mobil beats by $0.07 (XOM) 89.43 : Reports Q1 (Mar) earnings of $2.12 per share, $0.07 better than the Capital IQ Consensus Estimate of $2.05; revenues fell 12.3% year/year to $108.81 bln vs the $125.86 bln consensus.

 ConocoPhillips reports EPS in-line: Reports Q1 (Mar) earnings of $1.42 per share, excluding items, in-line with the Capital IQ Consensus Estimate consensus of $1.42.

Hess 1Q13 Transcript -- It's All About The Bakken

At SeekingAlpha.com.

Some excerpts regarding the Bakken:

Lastly, we are continuing to make excellent progress toward delivering our production growth forecast of 5% to 8% per year compounded annually. To that end, net production from the Bakken Shale oil play in North Dakota, our principal engine of growth, averaged 65,000 barrels of oil equivalent per day in the first quarter, an increase of 55% over the year ago quarter. We continue to forecast Bakken production this year to average between 64,000 and 70,000 barrels of oil equivalent per day.
Our average well cost from drilling the Bakken in the first quarter was $8.6 million, a decline of 36% from the first quarter last year and a continuation of a steady downward trend since the beginning of 2012. We believe our operating performance in the Bakken ranks among the best.

We continue to make excellent progress towards our mid-decade goal of achieving net production of 120,000 barrels of oil equivalent per day from the Bakken. First quarter net production was 65,000 barrels of oil equivalent per day, up 55% from the first quarter of 2012 and in line with our previous guidance for 2013.

As a result of our transition to pad drilling, as previously discussed, production will be relatively flat through May as we continue to build the inventory of drilled but not completed wells. Production will increase substantially in the second half of 2013 as we ramp up our completion activity. We remain confident in our 2013 Bakken production forecast of between 64,000 and 70,000 barrels of oil equivalent per day.

In terms of individual Bakken well performance, we are focused on driving high returns, which, as you know, is a function of both well cost and well productivity. Well cost for the first quarter averaged $8.6 million per well, down 36% from $13.4 million per well in the first quarter of 2012 and down from $9 million per well in the fourth quarter of 2013.

The continued quarter-and-quarter in cost has been driven by our application of Lean manufacturing techniques. Our productivity continues to be the highest in industry, as 10 of the top 25 wells in the North Dakota Bakken play in 2012 were Hess wells. Therefore, considering well cost and productivity coupled with higher margins from our infrastructure, we believe we're one of the most competitive Bakken operators, and there is much more optimization to come.

Zacks: the Bakken is the reason for Hess' success!

In the reported quarter, Exploration and Production (E&P) business posted profits of $1,286 million which more than doubled from the year-earlier profit of $635 million.

Quarterly hydrocarbon production was 389 thousand barrels of oil equivalent per day (MBOE/d), down 2.0% year over year. Lower production was due to the impact of asset sales and lower production from the Valhall Field in Norway. This was partially offset by higher Bakken production year over year.

For Newbies: A Nice Overview of the Bakken -- E&P Magazine

E & P Magazine provided a nice overview/history of the Williston Basin Bakken in its March 1, 2013, issue.

It begins:

In less than a decade, increased production, takeaway capacities, and operator effort in the Bakken have bumped North Dakota up in the rankings to become the second leading state in crude oil production.

In his 2005 State of the State address, US Senator John Hoeven, then North Dakota governor, said the state’s “single greatest challenge is the ability to move power to markets outside of North Dakota.” Although at the time he was referring to the state’s abundance of coal and wind energy and the creation of a transmission agency to manage the use of both, it was in some ways prophetic.

It's a great overview; recommended reading.