Shale drillers are ramping up production in the U.S. as oil prices rise, moving beyond the West Texas oil field that became the country’s drilling center.
From Oklahoma to North Dakota, companies are increasing investment in oil fields that fell out of favor several years ago, as $70-a-barrel crude prices make fracking and horizontal drilling economical in more places again.
While the Permian Basin in Texas and New Mexico remains the fastest-growing shale spot, congested pipelines and shortages of labor and materials there are crimping profits, making other fields attractive alternatives.
EOG Resources Inc., EOG 1.08% one of the shale sector’s leaders, is active in the Permian but also in Colorado, North Dakota and Oklahoma. In Wyoming, the company has built up larger lease holdings and expanded production over the past two years.
More from the article:
Some of the oil fields that are growing, notably the Bakken and Eagle Ford, had been popular among shale drillers and experienced their own bottleneck problems before prices started dropping in 2014. After topping out at more than $100 a barrel in June 2014, oil prices plunged, falling below $30 in early 2016 before slowly recovering. The current prices above $70 are the highest in more than three years.
Continental Resources Inc., CLR which is focused in North Dakota and Oklahoma, is benefiting from improved pipeline capacity in those areas. It sold crude produced in North Dakota at a discount to the main U.S. oil benchmark, West Texas Intermediate, of just $4.31 a barrel, executives told investors this month. In parts of Oklahoma, that figure was less than $2.
Price differentials in the Bakken had become as wide as $28 a barrel six years ago, according to the EIA, as production outstripped pipeline capacity.
“We are having infrastructure catch up with development in North Dakota and in Oklahoma,” said Blu Hulsey, the company’s senior vice president of government and regulatory affairs.
Latest forecast: 4.0 percent — May 9, 2018, link here:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2018 is 4.0 percent on May 9, unchanged from May 3.
The nowcasts of second-quarter real consumer spending growth and second-quarter real private fixed investment growth inched down from 3.1 percent and 5.6 percent, respectively, to 3.0 percent and 5.4 percent, respectively, after Friday's employment report from the U.S. Bureau of Labor Statistics.
The nowcast of the contribution of inventory investment to second-quarter real GDP growth increased from 0.67 percentage points to 0.78 percentage points after this morning's wholesale trade release from the U.S. Census Bureau.
Numbers like this could certainly impact the November elections.
More on this later; family commitments now.
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Cryptocurrency
It took me awhile, but I finally understand cryptocurrency. I thought it was a scam. Nope. I'm a "believer" now.
By the way, for those who missed it, the general consensus is that McDonald's will start taking "Bitcoin" by the end of the year (2018). With the new kiosk ordering, I can see how McDonald's could do that fairly easily.
Later, 1:38 p.m. CDT: interesting. Under Trump -- the US Supreme Court okays betting on professional sports in all states. Wow.
Later, 12:15 p.m. CDT: wow, this connects the dots. See my note below regarding GE in the original post. It now makes sense. From a reader:
Mark Hanes on CNBC. .. the CNBC staff was given GE stock as 100 % of their 401 K ... your matching $$$ were also in GE stock ...
GE
went from ~ $60 to $30, and then to $ 6 at the bottom of the 0bama
depression ... When Hanes called the bottom in Dow/market in mid march of
2009, he talked about all the $$$$ the NBC employees lost in their 401 K's.
So
maybe now the NBC staff is doing a "Cramer" and talking up GE stock so they
can retire ... ( remember that Cramer got caught selling/shorting/buying
before his recommendations of a stock and paid a undisclosed $$$ figure
in about 2004 or maybe earlier.
Original Post
Chatter: I had a great bike ride home. I love my Diamondback Hanjoon Metro 1 x 9; with no extra work, I think I'm 25% "more efficient," whatever that might mean. I get home, turn on television to CNBC, and then turn on the shower. While waiting for the shower, I see the Power Lunch panel has just begun talking about GE. I take a long shower. After the shower, they are still talking about GE. I have nothing "against" GE, but certainly ten minutes is a bit much for one company, especially when I can think of 1,499 companies I would rather invest in than GE.
Chatter: years and years ago -- actually decades ago -- when I first started investing, I thought it was impossible to lose. I thought more and more people would want to invest and at some point there would not be enough shares for everyone. I did not know who publicly traded markets worked. I did not know companies could issue more shares. I did not know there were buybacks. I did not know there were splits. I didn't know squat. And then, today, after they "got off" GE, the most sour of the Power Lunch panel was concerned there may not be enough shares for all the demand. Wow.
Chatter: top story -- breaking news -- update on a CBS lawsuit. Then, nothing else. I would have thought the Mideast might have been a more important story. LOL. And everyone thought the Mideast would blow up today. Nope. Apparently it's all about CBS.
Treat: later, when I have lots of free time, I have a great blog coming up with regard to my thoughts and observations regarding cable, satellite, network, television. Stay tuned (pun intended).
Dow: still up 125 points and WTI right at $71.
Talking turkey: US has lost "mediator role" in the Mideast -- Turkey's Recep Tayyip Erdogan. Yippe-ki-yay! He's talking to his base but if he really believes that, Turkey will be a Putin satellite in less than ten years.
The yip part of yippee is old. It originated in the 15th century and meant "to cheep, as a young bird." The more well-known meaning, to emit a high-pitched bark, came about around 1907, as per the OED, and gained the figurative meaning "to shout; to complain."
Yip is imitative in origin but probably also influenced by the 16th century yelp, which has an even older meaning of "boasting, vainglorious speaking." Yawp is even older, coming about in the 14th century, but now is primarily associated with Walt Whitman's late 19th century "barbaric yawp."
Yippee came about after yip. The earliest record of this exclamation of delight is from 1920 in Sinclair Lewis's novel, Main Street: "She galloped down a block and as she jumped from a curb across a welter of slush, she gave a student 'Yippee!'"
Now how about the whole phrase, yippee-ki-yay? It seems to be a play on "yippie yi yo kayah," a refrain from a 1930s Bing Crosby song, "I'm An Old Cowhand."
Comment: I don't think I learned anything from this article. Nor worth the time spent on it (three minutes).
Protect the environment. From Aljazeera, "Palestine: a distinctive voice for climate action. Those illegally denied control over their natural resources must be heard in the global climate conversation."
Fake news. I may be wrong on this, but think not. The mainstream media keeps telling us that "Trump canceled the Iran deal." He did no such thing. There was a negotiated "Iran deal" some years ago. It was quite harsh and it took a lot of arm twisting to get US allies to go along with it. Then, out of nowhere, President Obama unilaterally weakened the sanctions. It was the weakening of the sanctions that Trump had problems with. It's my feeling he may not have liked the original deal, but he certainly did not like Obama's deal to water-down the sanctions. It's possible Maxine Waters and Nancy Pelosi confused water-boarding with water-downing the sanctions. I digress. As it stands now, I don't know what "Iran deal," if any, remains in place. The way I understand it, the US is back to the original deal. The rest of the world? Blaming Trump for kidnapping three Koreans from North Korea.
Bowling tournament. Scott Adams' periscope a couple of hours ago was incredibly good. Helps me understand the "McCain is not a hero" trope. Warning: strong language.
But of course the main concern with Permian producers these days is adequate takeaway capacity,
both for oil and natural gas. As a result of transportation
bottlenecks, many producers in the region are seeing significantly lower
realized prices. [C]urrently Midland crude futures are
trading at a $12/bbl discount to WTI, and the strip widens throughout
the summer to $14/bbl in August.
Note that FANG's realized oil price during Q1 was $61.66/bbl ($56.82
after hedging). That's very strong and has to do with the majority of
FANG's production being shipped via pipelines.
The key going forward is the company's announcement of a
50,000 bpd agreement on the Gray Oak pipeline. I covered the Gray Oak
pipeline in [an earlier] Seeking Alpha article. Phillips 66
always seems to be ahead of the pack when building critical pipeline
infrastructure (consider the Bakken Pipeline System and Sand Hills NGLs
pipelines, for instance) and Gray Oak is not only a winner in terms of
its potential for 1 million bpd of transport, but also its connection to
Buckeye Partners' Corpus Christi terminal that will load VLCCs for exporting Permian crude to global markets.
As
most of you know, US refining capacity for light-sweet shale oil has
topped out, so new production will have to exported - that is the key
moving forward. Gray Oak can solve this problem for Permian (and Eagle
Ford) producers. I expect strong subscription announcements for the Gray
Oak pipeline at the close of the second open season - which is
currently in progress.
I hate hedging. LOL. Apparently, so does Harold Hamm, and several others in the Bakken.
