Saturday, April 3, 2021

Week 13: March 28, 2021 -- April 3, 2021

Top story of the week:

Top international non-energy story:

Top international energy story:

Top national non-energy story:

Top national energy story:

Top North Dakota non-energy story:

Top North Dakota energy story:

Geoff Simon's top North Dakota energy stories:

Operators:

Operations:

Wells:

Fracking:

Pipelines:

Commentary:

Notes From All Over -- Early Morning Saturday -- April 3, 2021

Pop quiz. Fill in the blank / compete the sentence:

Mexico relies mostly on pipeline imports from the United States to meet its natural gas needs, although Mexico’s LNG import terminals have played an important role in system balancing since Mexico ___________________________. The answer is provided below.

Note: due to the condition that my condition was in when I wrote this, I anticipate there will be more typographical and content errors than usual.

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

Paywalls: they don't work. They are a hassle but there are always ways to get around them if one tries hard enough. Don't take that out of context. Without subscriptions, one can't access gazillions of great articles. However, when it comes to news -- political, science, business -- if one finds a headline through googling only to be stopped by a paywall, there's usually another source. Earlier this evening google brought me to a CNBC link with BofA's eight picks for 2Q21. It led to a subscription site. Another google query and I easily found BoA's eight picks. The elite eight, as it were.

The elite eight: link here. The only one that caught my eye -- Schlumberger. That suggests to me it's not only Pioneer's CEO Sheffield who thinks oil is going to $80 to $100.

Will oil go to $80? It's a fool's errand to predict oil prices, but having said that, no, I don't think it's going to happen by the end of the month. I do know that the Biden administration will do wonders for the non-federal land in the Permian and the Bakken. The new Secretary of the Interior telegraphed that on Friday. Maybe Pioneer's CEO Sheffield saw that coming. One wonders what percent of "the Permian" is on federal land? Having said that, maybe it's more of a factoid / meme than a fact. From a quick google query:

Q: How much of America's oil-and-gas production happens on federal lands? 
A: Most U.S. oil-and-gas drilling now takes place on state or private land, so the freeze only directly affects a fraction of total production. Output from onshore federal land comes to roughly 9% of the U.S. total. Jan uary27, 2021.

Saudi Aramco: will likely cut dividend. I guess I posted that earlier. Forgot. 

The cult of the mask: I used that phrase in a throwaway line with a reader earlier last night. I was surprised, that later, when I googled it, how much has been written about "the cult of the mask." I truly had no idea. Apparently among Catholics it's a big deal. At least for some Catholics.

Calculus: this is really, really interesting. In response to my post on the jobs numbers released Friday, April 2, 2021, a reader who really follows this stuff closely noted that nine months of one million added jobs each month will get us back to where we were pre-pandemic. That reminded me, which I mentioned in my reply, of my days in calculus. The absolute numbers don't matter. It's the rate of change that is important. Velocity is one thing, acceleration is another. 

Biden's Amtrak Plan: perhaps the most exciting thing to be announced this week. I was wrong. This will not be hard to do at all if the money is allocated. The track is already there in most cases. At most, simply upgrading some of the track, maybe putting in side tracks at some points. But it pretty much amounts to locos (GE), cars, and right-of-way deals. If Buttigieg pulls this off, he will be in Washington for quite some time. Will it happen? Unlikely.

Color me impressed, what semiconductor shortage? Tesla's numbers. Earlier I suggested the number to watch was 160,000. Elon Musk blew past that number with reports that 184,800 Tesla vehicles were delivered in the first quarter. That's really, really impressive on so many levels. Analysts had projected only 168,000, which would have been a good number. He now says he wants to increase global deliveries by more than fifty percent this year. Right now, and for quite some time to come, it looks like Tesla's biggest competitors are Ford Motor Company and Volkswagen AG. From the linked WSJ article:

Deliveries of Tesla Model S and Model X vehicles in the first quarter totaled around 2,020. Tesla handed over about 182,780 Model 3 sedans and Model Y compact sport-utility vehicles combined. Tesla doesn’t disclose deliveries by region.

Tesla also said it produced 180,338 vehicles in the quarter, all of them Model 3s or Model Ys.

The company said the new Model S and Model X have been “exceptionally well received,” adding that it is in the early stages of boosting production after installing and testing new equipment.

The strong delivery numbers are poised to underpin what Wall Streets expects to be robust first-quarter earnings for Tesla, due in a few weeks. Sales are expected to top $10 billion, helping generate around $470 million in profit, according to a FactSet survey of analysts before the latest delivery figures were posted.

Tesla is aiming to open two new vehicle factories this year, one near Austin, Texas, and the other outside of Berlin. That plant will be the company’s first in Europe, the world’s largest electric-vehicle market as of last year, and is seen as key to improving Tesla’s fortunes in the region.

Tesla registrations in Western Europe slipped roughly 11% last year compared with 2019, as auto makers such as Volkswagen and Renault SA gained traction in the all-electric vehicle market.

Natural gas fill rate, link here. One word: amazing. Less than two months after the Texas Deep Freeze --


Road to Mexico: the country is relying more and more on natural gas from the United States even as its president tries to stop it. Link here.

New Fortress Energy Inc. (NFE) said Monday it has signed an agreement to supply natural gas to two power plants owned by Mexican state power utility Comisión Federal de Electricidad (CFE) in Mexico’s difficult-to-reach Baja California Sur (BCS) state.
The NFE agreement comes amid rising tensions between Mexico’s government and the private energy sector, punctuated by a recently passed law to give power plants owned by CFE priority in the dispatch order regardless of marginal generating costs. 
Implementation of the law has been blocked for now as multiple lawsuits against it are considered by the courts. 
Mexico relies mostly on pipeline imports from the United States to meet its natural gas needs, although Mexico’s LNG import terminals have played an important role in system balancing since Mexico has no underground storage capacity.

Back to Amtrak: who makes Amtrak's passenger cars? Wow, talk about a rabbit hole. This rabbit hole doesn't belong to Peter Cottontail; it belongs to Franz Kafka. Two links and you are on your own:

Bud Company, perhaps it will rise again, if so, to be renamed the Hunter Biden Bud Company:

Budd Company became part of Budd Thyssen in 1978, and in 1999 a part of ThyssenKrupp Budd. Body and chassis operations were sold to Martinrea International in 2006. No longer an operating company, Budd filed for bankruptcy in 2014. It currently exists to provide benefits to its retirees.

Friday, April 2, 2021

The Pioneer - Double Point Energy - Permian Deal -- April 2, 2021

This page has turned into a real mess. Sorry. Not sorry.
 
Compare the COP - Concho deal here:
  • $10 billion vs $6.4 billion
  • 550,000 acres vs 97,000 acres
Updates

May 10, 2021: from social media today --
 

April 3, 2021: very nice update here. 

Original Post
 
I found it impossible to put this page in any orderly fashion so just a bunch of links, comments, re-postings, etc. 

I hope readers see the theme.
 
If this page fails to provide that ("the theme"), perhaps this link to twitter will. The only "given" in this deal, and noted by others, Sheffield is betting on $80 - $100 oil.
  • $80-oil: he survives as CEO
  • $90-oil: he looks brilliant; becomes the new face of the shale sector
  • $100-oil: enshrined as a saint at the Holy Lady of Shale
 
Raise your hand if you think we'll see $100 oil by the end of the year. By the way, having said that, based on 2Q21 picks by BofA, others may be thinking the same thing: significantly higher oil prices.
 
As of late Friday night, the most recent article regarding the Pioneer - DoublePoint Energy deal: from The Dallas Morning News -- "Pioneer Natural Resources says it will be Permain Basin's biggest producer with $6.4 billion purchase of DoublePoint. Link here. Data points and observations:
  • no financial analysis; nothing more than a reporter's narrative of the press release in the big scheme of things;
  • will have more than one million net acres in the Permian (Midland Basin);
  • article does say the company paid a "hefty premium" relative to recent mergers and acquisitions but doesn't say what that "hefty premium" was;
Much of this was posted earlier today. It is interesting that very little has been written about this deal (so far -- maybe everyone took off early for the Easter weekend). I am re-posting the following and then below this will add updates. 

Pioneer to acquire DoublePoint Energy assets, press release here:
  • bolt-on acquisition
  • Midland Basin
  • $6.4 billion
  • 97,000 high quality (tier 1) net acres
  • back of the envelope: $6.4 billion / 97,000 net acres = $66,000 / acre
    • 27.2 million shares of Pioneer common stock
    • $1 billion in cash
    • $0.9 billion in debt and liabilities
  • forward:
    • the deal "will lead to an increase in the expected per share variable dividend beginning in 2022" -- raise your hand if you think you will see an increased dividend in 2022.
At almost $70K/net acre, social media is having a field day with this one. Lots of talk that "we're" back to lack of fiscal discipline in the shale sector. 

Link here.

Link here.


 

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"PXD Gets It"

From twitter:

Pioneer's market cap is $36 billion. Pioneer's total value is contained within its Permian footprint. 

Does the Double Point Energy footprint look like a sixth of that $36-billion market cap? 


Possibly. I don't know. I find it interesting how the analyst who wrote the note in the graphic above simply "ignored" 2/3rds of $6.4 billion, or $4.3 billion. This is like saying Double Point Energy was paid $6.4 billion for the deal, but it only cost Pioneer $2.1 billion. Somehow the books don't balance. Whatever. Value it anyway you want. 

What others think:


Monday:
  • watch share price of PDX; should be fascinating; and,
  • article over at SeekingAlpha on this deal.

Idle Rambling Regarding The Pioneer - Double Point Eagle Deal -- April 2, 2021

In a sidebar discussion, a reader and I were discussing the Pioneer - Double Point Energy deal. See this post. See this twitter thread.

The reader mentioned the "vertical feet of play" in the Permian.

My not-ready-for-prime-time reply:

Yes, the "vertical feet of play" is often mentioned.

For me that's another questionable metric with regard to horizontal / unconventional / tight oil drilling. I've discussed it before on the blog. I might have to talk about it again.

Except I get so much pushback, it's not worth it to bring it up again. LOL.

It all goes back to original oil in place -- OOIP -- (with all else being equal: porosity, permeability; quality of oil; percent recoverable through primary production).

"Vertical feet of play" is a conventional drilling metric. It's not a metric I find useful in shale.

A second concept: how much money can one person make in one lifetime? Sheffield (CEO of Pioneer) appears to be putting together an "empire" that will outlive him. Harold Hamm, however, has decided to drill the heck out of the empire he already owns. Harold Hamm is focused on free cash flow. Sheffield seems to be focused on something else. Maybe he thinks he is the Elon Musk of the Permian.

A year ago or so, Sheffield said there was no reason for more acquisitions; he said he already had so many locations, he would never drill them all before he died. Or something to that effect. And now, a year later, he pays an unbelievable amount of money for an acquisition. Doesn't make sense.

Harold Hamm may yet make another acquisition if the price is right, but it seems to me he is simply going to drill out the Bakken to the extent possible and see what happens. He is getting to be an old man; he proved he could do it. Nothing else to prove now except to see how many wells he can drill with three or four rigs. Meanwhile Sheffield has seven (?) rigs in the Permian. Lots of CAPEX with lots of debt.
This should be quite fascinating to watch: comparing XOM, COP (BR), PXD, and CLR. Same with Bud Brigham and MNRL -- I think he's thinking like Harold Hamm.

Approaching Four Million COVID Vaccinations Being Given Daily In The US -- April 2, 2021

Link here. 



Doses of vaccine distributed to health facilities

Change from day before

Vaccinations given

Change from day before

Percent of distributed vaccine that is actually administered

Doses received in past week, current Monday from previous Tuesday

Average number of doses given / day in past seven days

Friday

April 2, 2021

204,719,335

4,222,700

157,606,463

3,975,059

76.99%



Thursday 

April 1, 2021

200,496,635

4,914,910

153,631,404

3,358,112

76.63%



Wednesday

March 31, 2021

195,581,725

6,130,440

150,273,292

2,670,947

76.83%



Tuesday 

March 30, 2021

189,451,285

8,804,720

147,602,345

1,789,510

77.91%



Monday

March 29, 2021

180,646,565

100

145,812,835

2,350,144

80.72%

23,912,010

3,416,001

Sunday

March 28, 2021

180,646,465

2,340

143,462,691

3,281,956

79.42%



Saturday 

March 27, 2021

180,644,125

3,142,350

140,180,735

3,496,047

77.60%



Friday

March 26, 2021

177,501,775

3,976,440

136,684,688

3,379,393

77.00%



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High School Girls Soccer
Texas Championship Playoffs

The Texas high school girls soccer championship season, "March Madness," is in full swing.

Our middle granddaughter is a freshman on the Grapevine High School varsity team. Her team made the playoffs, and in the round of 64, they defeated Manfield, TX, nationally ranked at #122. They defeated Mansfield by a score of 7 - 2, and went up in the national rankings from 61 to 39.  When they qualified for the Texas championship playoffs they went from #69 to #61.

Today, in a very difficult game our granddaughter's team defeated Wichita Falls, TX, by a score of 2 - 1 in overtime. Wichita Falls, TX, going in this game was ranked #129 -- that's why it's called March Madness.

Two years ago, Grapevine, our team, was knocked out of the playoffs in this range. Last year there was no tournament due to Covid-19. So, for the first time in quite awhile our team will advance to the elite sixteen. 

Win or go home.

As many as four more games; as few as one more. 

Whoo-hoo!