New Poll; Results Of Current Poll: Wednesday, November 15, 2017

Anticipating today:

• the Director's Cut, tentatively scheduled to be released yesterday, was not released; maybe today; it is very, very rare for the DC to come out later than the 15th of the month
• EIA's weekly petroleum report: released at 10:30 a.m. ET

Coming off confidential list today:

• 33534, SI/NC, MRO, Bronett 14-7H, Bailey, no production data, 
• 33000, SI/NC, Crescent Point Energy, CPEUSC Dressler 6-36-25-158N-100W, Dublin, no production data, 
• 32979, SI/NC, BR, Dodge 3D MBH, Dimmick Lake, no production data, 
• 32789, 1,016, QEP, MHA 2-27-34H-148-92R, Heart Butte, 51 stages; 10.5 million lbs, t5/17; cum 74K 9/17
• 31462, 2,748, HRC, Fort Berthold 148-94-36C-25-7H, McGregory Buttes, 33 stages; 4.9 million lbs, t5/17; cum 169K 9/17; see graphics at this site;
• 31346, SI/NC, Crescent Point Energy, CPEUSC Dressler 3-36-25-158N-100W, Dublin, no production data,

Dow futures are down 120 145 points (4:21 a.m. Central Time; updated). Think:

• oil woes
• Buffet slashes IBM holdings
• GE plummeting (although at $17.74, GE not contributing much to the Dow any more)
• Saudi Arabia liquidating (possibly a bigger story than we realize)
• profit-taking (can't wait for 2018 when tax bill might actually be signed)

US Frontier Airlines owner signs for 430 Airbus planes; $50 billion deal. This is the largest deal ever signed by Airbus at the Dubai Air Show. The 430 a/c will be split among Denver-based Frontier; JetSMART of Chile; Volaris of Mexico; and, Wizz Air of Hungary.

Mobile, Alabama wins. Final assembly of the Airbus planes being sold to Frontier et al will be done at the Airbus plant in Mobile, AL, same link.

Emirates: relies solely on the Airbus 380 and the Boeing 777; it is the largest operator of both. Huge maintenance savings by minimizing number of types of a/c. But two different companies -- compete for best price, same link.

Boeing signs deal to supply 225 Boeing 737 MAX 10 a/c to low-cost carrier FlyDubai (same link).

Elon Musk to launch spy satellite tomorrow (Thursday) night.

SpaceX has flown 16 Falcon 9 missions so far in 2017, all of them successful, and 13 of them have featured pinpoint first-stage landings. (During the other three missions, SpaceX did not attempt a rocket landing.)

These landings are part of SpaceX's effort to develop reusable rockets and spacecraft — technology that company founder and CEO Elon Musk has said will slash the cost of spaceflight.

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Back to the Bakken

Active rigs:

$55.10↓↓	11/15/2017	11/15/2016	11/15/2015	11/15/2014	11/15/2013
Active Rigs	54	39	64	186	183

RBN Energy: US supply-demand balance tightens, despite production surge.

The CME/NYMEX Henry Hub prompt natural gas futures contract last week settled at $3.213/MMBtu, the highest daily settlement since late May 2017. Despite natural gas production climbing nearly 3.0 Bcf/d over the past couple of months to record highs, the U.S. gas supply and demand balance has tightened considerably in recent weeks, particularly relative to last year at this time. Moreover, U.S. gas storage inventory has remained below year-ago levels and also moved below the five-year average level in recent weeks. That’s because gas demand has managed to more than offset the incremental supply in the market. How did that happen and what can it tell us about what to expect this winter? Today, we analyze recent shifts in gas market fundamentals.

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Poll Results

I never cared for this poll -- it was too hard to figure out what I was asking. I even thought of simply deleting the poll and not reporting the results, but I figured if I posted it, I had to post the results. I don't plan on looking at the comments.

The poll: with regard to global energy, I feel:

• much more optimist than I did two years ago: 77%
• about the same as I did two years ago: 20%
• much more pessimistic than I did two years ago: 2%

Hmmm .... interesting. That's how I felt -- with the majority --

• for investors, the price of oil was trending up (good)
• for consumers, there would be no shortage of oil, so even if the price of oil melted up, the price of gasoline would remain manageable
• for consumers: no shortage of crude oil, refined products
• for environmentalists: things have settled down; gradual transition from coal to natural gas; nuclear waste less of a long term problem as nuclear energy wanes
• for operators: those who wanted to ban fracking outright -- they were not successful; saner minds prevailed
• for those working in the oil sector: it appears the worst of the bust is over; things gradually turning around

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New Poll

Nebraska regulators tell us that they will release their decision "next week." I'm not sure if that is the last step required for final "approval" of the Keystone XL.

Unless you are living under the Geico rock, you are aware of the current debate in Washington, DC, over the GOP/Trump-inspired tax cut.

That leads us to the next poll. What will be "approved" first:

• the Keystone XL
• the Trump - GOP tax plan
• neither will be approved

For the poll, "approval" for the Keystone means that laying the pipeline will resume.

For the poll, "approval" of the Trump-GOP tax plan occurs when the Senate approves it. (The US House votes first; the Senate follows. It is assumed that if Congress approves the bill, Trump will sign it.)

The Market And Energy Page, T+298 -- November 15, 2017

Until I read The Birth of the Pill: How Four Crusaders Reinvented Sex: Jonathan Eig, c. 2014, I had no idea how important Puerto Rico is/was to the US pharmaceutical industry. I doubt 99.999% of Americans have any idea how big a role Puerto Rico has played and is playing in Big Pharma. Now this story, reported in most newspapers, but I first saw it in The Bismarck Tribune, of all places: the current medical crisis: a shortage of IV bags. 

I could link to any number of sources, but I will link The Washington Post: hospitals scramble to avert saline shortage in wake of Puerto Rico disaster. From the article:
first, an update to the story --

Update: The Food and Drug Administration has given Baxter International permission to import saline and other intravenous solutions from its manufacturing facilities in Australia and Ireland to ease shortages in the United States, according to letters that the company sent its customers on Monday. 

Note: BAX was selling for $33/share on year ago; currently, BAX is selling for $64/share. It pays a paltry dividend of 1%.

Now, back to the original Washington Post story:

The hurricane that wreaked havoc on Puerto Rico last month has disrupted production of widely used IV solutions. Several prominent hospitals across the country are scrambling to find alternative supplies, change the way they administer drugs and devise backup plans to make the fluids themselves.

The products affected are smaller-volume bags of sodium chloride, known as saline, and dextrose. These normally ubiquitous solutions are used to rehydrate patients and to dilute medications from antibiotics to painkillers to cancer drugs. Their manufacturer, Baxter International, has said that “multiple production days” were lost in the wake of Hurricane Maria, and it has set up an allocation system for hospitals based on past purchases.

So much is contained in those two paragraphs:

• does anyone recall W Edwards Deming, the father of "just in time" delivery? His principles work just fine ... until they don't
• as a general rule, take any product bought in the US, and there is a two-week supply
• (a rule of thumb is a principle with broad application that is not intended to be strictly accurate or reliable for every situation. It is an easily learned and easily applied procedure for approximately calculating or recalling some value, or for making some determination)
• the company has come up with ways to allocate the bags that are in short supply (can you imagine if the federal government stepped in to manage this crisis?)
• these are not the "big" bags of saline we see in all the television shows, but the little bags that are "piggy-backed" to the larger bags to administer IV medication; my hunch: intensive care nurses will figure this out and solve the problem just fine, thank you; I have huge respect for intensive care nurses 

Much more at the article: it won't be just IV bags in short supply; there are four dozen (48) FDA-approved drugmaking facilies in Puerto Rico; and at least six major US pharmaceutical companies.

myndnow also had a story on this crisis.

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Other Short Notes

Buffett adds more Apple, reduces IBM stake by another third. 

The wealthy did very, very, very well during the two "lost decades": the richest 1% now own half the world's wealth. They added to their pile in the past twelve months. Data points:

• total wealth in the world grew by 6%over the past 12 months
• total wealth in the world now at $280 trillion
• more than half of the new $17 trillion was in the US, which grew $8.5 trillion richer
• the top 1% now own 50.1% of the world's wealth, up from 45.5% in 2001
• Credit Suiss attributed much of this to President Trump -- yes, seriously
• millionaires
• expected to the best in the coming years
• 36 million millionaires in the world; numbers expected to grow to 44 million by 2022 -- only 5 years from now
• US, #1, with 15.3 million people worth $1 million or more
• Japan, #2, 2.7 million milliionaires
• UK, #3, 2.2 million
• China, #5, 1.9 million -- but that will grow to 2.8 million b 2022

Miscellaneous Notes, Part 3 -- November 15, 2017

US shale plays: where we stand --

• for all intents and purposes, there are only three (four if you count STACK/SCOOP) viable onshhore shale plays in the US -- the Bakken, the Permian, and the Eagle Ford
• the Eagle Ford is huge for some players, but in the big scheme of things, taking a back seat to the Permian and the Bakken, and possibly, even a back seat to STACK/SCOOP
• the Permian is turning out to be incredibly expensive for operators
• with DAPL flowing, Bakken light sweet oil is almost on par with Brent (according to some sources; I'm not totally convinced)
• from Bloomberg via Rigzone: operators drilling the Permian are finding out that it's a lot cheaper to drill in New Mexico.

Oil producers discouraged by the rising cost of accessing the vast deposits of the Permian Basin in Texas are sneaking into a geological back door, through neighboring New Mexico.

The state, which covers a smaller part of the oil-soaked shale formation, is the fourth-largest U.S. producer and luring industry giants including Exxon Mobil Corp., Chevron Corp., EOG Resources Inc. and Occidental Petroleum Corp. Their investments -- while small compared with Texas -- are increasing as activity in the rest of the Permian starts to slow down.

In just the past five months, drilling on the New Mexico side of the Permian expanded 25 percent to 75 rigs, while Texas contracted by 2 percent to 490, according to data compiled by Drilling Info Inc., an Austin-Texas based industry consultant. At the same time, the pipeline network is being expanded, which could mean more sustained growth in development and production.

New Mexico “may well be the next wave,” said Haag Sherman, chief executive officer at Tectonic Holdings LLC, a Houston-based investment firm overseeing $3.2 billion for clients. “If Exxon’s looking at it, that’s probably a good sign.”

Earlier this year, Irving, Texas-based Exxon, the world’s largest energy company by market value, jumped into New Mexico with a $5.6 billion acquisition of assets from the Bass family. Exxon said the quarter-million acres it bought will provide 20 years of drilling prospects.

• this is huge for New Mexico, an impoverished state by many standards
• much more at the link

US energy: from Rigzone -- I'm getting tired of these headlines, these stories -- the headline -- "IEA: it's too early to write obituary of oil." Well, duh.

Data points based on IEA's World Energy Outlook 2017 report (note what they don't mention in this article):

• global oil demand will continue to grow through 2040, but at a steadily decreasing pace
• until the mid-2020's, demand growth remains robust
• after mid-2020's, growth slows due to greater efficiency (that I can accept) and fuel switching (that I cannot accept)
• but look at this: demand trajectory to 105 million bbls / day through 2040
• I have trouble imagining how the oil companies can supply 105 million bopd -- currently it's about 100 million -- the big three -- the US, Saudi Arabia, and Russia each supply 10 million bopd; most agree that by 2040, Saudi Arabia will be a net importer of oil (possibly due to need to supply new refinery buildout)
• the US is set to become the undisputed global oil and gas leader, accounting for 80% of the increase in global oil supply to 2025 (so, if we are at 100 million bopd, and global production increases to 105 million bopd, the delta is 5 million bopd and 80% of that is 4 million bopd -- easily accomplished: the Permian can add another 1 to 2 million bopd; and the Bakken can add another 1 million bopd)
• natural gas will grow to account for a quarter of global energy demand by 2040, becoming the second-largest fuel in the global mix after oil (coal dropping to 3rd place, I assume; nuclear is dead)
• and then this:

"One of the most interesting themes is the expected rise of the US as a global leader in oil and gas production, largely due to its success in the unconventionals sphere – something that was unforeseen a decade ago,” Burns said in a statement sent to Rigzone.

2017. A decade ago, 2007. The Bakken boom began in 2007. Wow, I love following this story. There's only one thing I enjoy more than blogging about the Bakken is traveling cross-country and if I didn't have Sophia to care for, that's all I would be doing. Just saying.

US -- hyperrole in energy -- we didn't stumble in -- lots of technology, entrepreneurial culture, and lots of politics to hold back the likes of Andrew Cuomo, Hillary Clinton, Tom Steyer ..

Stumblin' In, Chris Norman and Suzi Quatro

Miscellaneous Notes, Part 2 -- November 15, 2017

Prince Salman: The New York Times perspective on Prince Salman. Headline: "the upstart Saudi prince who's throwing caution to the winds."

With the tacit backing of his father, Saudi Arabia’s 32-year-old crown prince has established himself as the most powerful figure in the Arab world, rushing into confrontations on all sides at once.

Crown Prince Mohammed bin Salman ordered the arrest of 11 princes in his royal family and nearly 200 members of the Saudi business elite, and has begun to take power from the kingdom’s conservative clerics. He has blockaded neighboring Qatar, accused Iran of acts of war and encouraged the resignation of Lebanon’s prime minister. And in Yemen, his armed forces are fighting an Iranian-aligned faction in an intractable war that created a humanitarian crisis.

The crown prince has moved so quickly that American officials and others worry that he is destabilizing the region. Signs of potential blowback are growing.

Investors, nervous about his plans, have been moving money out of the kingdom. Prince Mohammed has sought to counter the capital flight by squeezing detainees and others to surrender assets. He has presented the arrests as a campaign against corruption, but his targets call it a shakedown, and he has turned for advice to a former Egyptian security chief who has been pilloried at home for brutality and graft.

The market, connecting the dots: there is some chatter that part of the reason for the Dow 30 (US stock market) to be pulling back at the moment is that the Saudi government -- facing a financial crisis -- and individual princes (as noted above) may be liquidating some of their vast holdings in the US stock market. My hunch is we could see more about this as time goes on. 

Comment: based on how family feuds played out in British history, I'm not convinced that we have seen the end of the "silent civil war" in Riyadh. Just saying.

More from the Times article on Prince Salman:

But analysts around the region debate whether the headlong rush might be driven more by a desire to consolidate power before a possible royal succession, desperation for cash to pay for his plans or simply unchecked ambition to put his stamp on the broader Middle East. And despite President Trump’s enthusiasm for the prince, some in the State Department, the Pentagon and the intelligence agencies say they fear that his impulsiveness could both set back his own goals and destabilize the region.

“He’s decided he doesn’t do anything cautiously,” said Philip Gordon, the White House Middle East coordinator under President Barack Obama. But, Mr. Gordon said, “if the crown prince alienates too many other princes and other pillars of the regime, pursues costly regional conflicts and scares off foreign investors, he could undermine the prospects for the very reforms he is trying to implement.”

Remember: Saudi recently bought a huge amount of military hardware from the United States. It might be liquidating equity holdings for cash to help pay for some of this hardware.

Revolutionary Guards:

Even though discussions between Baghdad and Tehran have been conducted between oil ministry officials and the Chamber of Commerce, the Revolutionary Guards are poised to step in.

"Any oil transaction between Iran and Iraq should be approved by the Revolutionary Guards, not the oil ministry." said Reza Mostafavi Tabatabaei, president of London-based ENEXD, a firm involved in the energy equipment business in the Middle East.

Those dealings are overseen by the desk responsible for Iran's investments in Iraq at the president’s office and are run by the Revolutionary Guards.

The pipeline project will be the Revolutionary Guards' reward to the Kurds for helping with the recapture of Kirkuk, said Tabatabaei.

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Tea Leaves Suggest It's Not Going To Be A Bright, Bright Sunshiny Day

At Least Not For The Kurds

From Reuters via Rigzone: oil is seen as the real prize of Iran's Kurdish adventure. Where we stand now:

• ISIS is defeated
• Saudi Arabia is in a fight for its life, economically and militarily
• Iran has Saudi Arabia surrounded
• Iran's star was rising under previous administration
• President Trump's first foreign trip was to Saudi Arabia
• US renews tough talk on Iran
• Kurds defeated in their attempt for independence

"The Kurdish dream of being a big oil exporter is in tatters," said a source close to the government in Erbil, who predicted that "Iran will be king of the game".

The Kurds' bid for independence angered Turkey and Iran, which both have large Kurdish populations and condemned the referendum as destabilising the region. The United States also called on Kurdistan to scrap the vote.

But it was probably internal Kurdish divisions which doomed the referendum to failure, local political sources believe. Oil was at the heart of this dispute.

• Iran helped Iraq stop the Kurds
• what did Iran gain? oil -- 

Iraq has agreed for the first time to divert crude from Kirkuk province, which it retook from the Kurds, to Iran, where it will supply a refinery in the city of Kermanshah.

who loses? Turkey. 

The pipeline would replace existing export routes for crude from northern Iraq via Turkey and the Mediterranean and would be a blow to Ankara's hopes of becoming an energy hub for Europe.

I Can See Clearly Now, Johnny Nash  

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Best Posting In The World?

Wow, this did not happen during President Obama's administration and certainly would not have happened during a Hillary administration.

From US Defense News: US breaks ground for new permanent base in Israel --

U.S. and Israeli officers broke ground in Israel on Monday for a permanent U.S. Army base that will house dozens of U.S. soldiers, operating under the American flag, and charged with the mission of defending against rocket and missile attack.

The American base, officers in Israel say, will be an independent facility co-located at the Israel Defense Forces Air Defense School in southern Israel, near the desert capital of Beersheba. Once completed, the base will house U.S. operational systems to identify and intercept a spectrum of aerial threats, along with barracks, recreational and other facilities required to support several dozen American air defenders.

I would go there for the music. LOL.

Women Of The Israeli Defense Forces

Miscellaneous Notes -- November 15, 2017

Quarterly state leases: over the past few quarterly leases, I have not seen a lot of activity in Divide County, maybe five to eight tracts being leased. But the November quarterly leases by the state saw huge interest in Divide County -- 61 tracts. For the entire state of North Dakota only 68 tracts were leased; 61 of them were in Divide County. In addition, five companies were involved in the leases, one or two I do not recall seeing before, including Norra Resources and Woodstone Resources (it's likely they've been in the state before but I simply forgot).

Sandowsky, Anschutz --> OXY --> Lime Rock --> Bruin: it's a little hard to keep track of all this. But several years ago, OXY bought most/all of Anschutz' holdings in North Dakota. Anschutz/OXY holdings were predominantly in the southwest corner of North Dakota, north of Dickinson. Subsequently, OXY sold out in North Dakota, transferring most of its wells to Lime Rock. A year or so ago, Bruin acquired about 60 wells from Lime Rock. Of interest now, Bruin is drilling a Sandowsky well in St Anthony (#34254). At least two readers have written me about this activity.
It looks like there are three Bruin Sadowsky wells in St Anthony and an Alfred Sadowsky well in Russian Creek oil field. Most recently (today -- November 14, 2017), in a comment elsewhere, a reader noted that the pad had been staked out. This well is about 7 miles directly north of Dickinson. There is another active well in this section, #17808:

• 17808, 80 (no typo); Bruin, Sadowsky 24-14H, t3/09; cum 182K 9/17, open hole; 12 stages; 2 million lbs; drilled by Anschutz; St Anthony oil field; a middle Bakken well; middle Bakken only 7 feet thick at this location (the completion form suggests the middle Bakken was 13 feet thick at this location; (Lodgepole: 376 feet thick; Madison, 25 feet thick; Mission Canyon, 155 feet thick); difficulty staying within the middle Bakken; came within one foot of hitting the upper Bakken shale; operators drilled vertically as deep as the Duperow (10,803 feet); gas peaks of 500 - 3,000 units; connection gases as high as 6,403 units; trip gases as high as 7,020 units; overall exposure to the thin, ideal middle Bakken target interval was estimated to be 95% (8,834 feet of 9,332 feet of lateral); currently (9/17) producing only 400 bbls/month, this well seems to be a candidate for re-fracking; it most likely will be shut in when #34254 is fracked;

Torpedo Federal: I follow these Slawson wells here. I can't imagine anyone being interested, but this is the link to the environmental impact study Slawson provided during the permitting process. It will open as a PDF, probably on your desktop.

SandRidge to buy Bonanza Creek: these are two familiar names from a few years back at the height of the Bakken boom though both operators were operating in non-Bakken plays at the time. From The WSJ:

• $750 million cash-and-stock deal
• Bonanza Creek and SandRidge were among the largest of more than 120 North American oil and gas producers bankrupted in recent years by plunging oil prices
• SandRidge: drills in Oklahoma and Colorado; filed for bankruptcy in May, 2016, with $8.3 billion of debt
• Bonanza Creek, drills in Colorado and Arkansas, held on until early this year; when it filed for bankruptcy in January, 2017, it reported $1.1 billion of debt
• SandRidge: current market cap of about $700 million
• Bonanza Creek: current market cap of about $650 million
• SandRidge was founded in 2006 by Tom Ward, who had earlier founded Chesapeake Energy Company (famed wildcatter aubrey McClendon) - within two years it had a market cap of more than $11 billion
• Mississippi Lime near the Oklahoma-Kansas border; wells produced unusually high volumes of wastewater -- costly to remove
• much more at the link