Week 26: June 26, 2016 -- July 2, 2016

Big stories of the week:
The ExxonMobil - Guyana story; and here 
The Panama Canal expansion
OPEC revenues continue to drop
US sets gasoline production record; US gasoline demand setting new records; 

Operations
July dockets posted
Water flooding, infill density, halo effect; and here, and here;
NP Resources back in the Bakken news
CLR to put in 28 wells in one drilling unit
The Bakken is in the manufacturing stage -- taxable sales and purchases for 1Q16
New NDIC update on the Bakken

Natural Gas
US natural gas production: the Bakken is a major contributor

Refinery
MDU sells Dickinson refinery to Tesoro Corp

Ethane
Update on Bakken ethane production  

US ethane exports to Asia, Latin America about to pop

Fracking
SWD management has decreased number of earthquakes in Oklahoma
Bakken fracking shows signs of life 

Miscellaneous
Update on oilfield expansion in Saudi Arabia
Prince Salman to focus on midstream, downstream; less on upstream
Saudi Arabia's crude oil inventories are dropping
BLM ready to okay 6,000 wells in Moab, Utah

Drop In Oklahoma Earthquakes -- SWD Well Management Cited As Reason -- July 1, 2016

In The Wall Street Journal today: Oklahoma Quakes Decline Amid Curbs on Energy Industry’s Disposal Wells. Drop attributed to restrictions on oil and gas companies’ pumping of wastewater from underground operations.

The number of earthquakes in Oklahoma has fallen 25% in 2016 compared with a year earlier, a decline attributed in part to actions by state regulators to police the oil and gas industry’s practice of pumping wastewater from its operations deep underground.

The Oklahoma Corporation Commission, which oversees the state’s oil and gas industry, earlier this year stepped up efforts to get companies to reduce the amount of wastewater they inject into hundreds of disposal wells, which have been blamed for a surge in earthquake activity in the state over the past decade.

More than 2,700 temblors of magnitude 2.5 or higher occurred in Oklahoma last year, up from 3 in 2005, according to data from the U.S. Geological Survey. So far this year, Oklahoma has had 1,098 quakes of that magnitude—strong enough to be felt by humans— down from about 1,400 over the same period in 2015.

It's a fine distinction, but an important distinction, it's not fracking per se that has been associated with earthquakes. It is the disposal of "salt water" that is associated with earthquakes. 

CLR With Eighteen (18) New Permits -- Friday, July 1, 2016

For those "into the weeds as deep as I am" with regard to the Bakken, see if you see what I saw in the graphic below: yup, #16510 (in the second graphic) -- the very well we were discussing earlier regarding the "halo effect": here and here. I may be seeing something here that does not exist, but I think there's a huge "clue" here with regard to the placement of these particular pads at this particular time. I'll discuss this in another post on another day.

By the way, the area in the graphics below is in the same area where CLR plans to place 28 wells in a 2560-acre drilling unit.

For now, the summary of the daily activity report and then the CLR permits.

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Active rigs:

	7/1/2016	07/01/2015	07/01/2014	07/01/2013	07/01/2012
Active Rigs	30	76	189	192	215

Eighteen (18) new permits:

• Operator: CLR
• Field: Jim Creek (Dunn), Corral Creek (Dunn)
• Comments: it looks like a 10-well pad (13-146-96 -- Oakdale and Ryden wells); and an 8-well pad (36-147-96 -- Weydahl and Brandvik wells); see graphic below

Hess renewed four (4) permits:

• four EN-Skabo Trust permits in Mountrail County

Lime Rock Resources abandoned one well:

• 24694, AB, Lime Rock Resources, Henry Kovash 2-6-7H-142-95;

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This appears to be the location of the new pads noted above (CLR's new 18 permits). In both cases the wells will run in a straight horizontal line, running east to west (or west to east). The horizontals will run north/south (or south/north). Although these two pads are in two different fields, they are geographically located very closely, in adjacent sections:

The Jim Creek pad:

The Corral Creek pad:

Note: not drawn to scale, and in general area only. I often make mistakes when doing these graphics. Do not make any investment or financial decisions based on what you see here If this is important to you, go to the source. I am posting these graphics only for my benefit to get a better understanding of the Bakken. 

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Pre-Fourth of July Grilling

Germany's "Cap And Trade" Program; Huge Stimulus For The Economy -- WSJ -- July 1, 2016

Germany estimates the cost for their "cap and trade" program at $86 billion over the next four years, as reported in The Wall Street Journal.

Germany will cap the birth rates of northern Europeans in their country prior to 2014 and will trade those births for those of the non-northern Europeans streaming into the country.  The northern European birth rate cap is entirely voluntary. But whether mandatory or voluntary, it is capped. In fact, I believe the birth rate for Germany was "negative" a few years ago.

Under "cap and trade" here in the US, wealthy investors in the oil and gas industry see their wealth being transferred to wealthy investors in the unreliable energy sector. The US cap and trade program does very little for economic stimulus, except for a few crony capitalists.

But, transferring $84 billion from all current Germans to the non-northern European immigrants streaming into Germany is a huge stimulus. Most of that money will go right back into the economy for food, rent, and mosques.

This isn't rocket science.

US Auto Sales; End Of 1H16; Expected To Set A Record -- July 1, 2016

From The New York Times:

U.S. auto sales may be slowing, but they're still expected to set a record in the first six months of this year.

Sales through June were expected to be up 2 percent over last year to 8.66 million.

That was partly due to a strong June, which saw sales rebound after a disappointing May. Sales were expected to rise 5.4 percent to more than 1.5 million.

Ford, Honda, Fiat Chrysler and Nissan all reported gains for the month. Sales were down at General Motors, Toyota and Volkswagen.

After six straight years of growth — and record sales of 17.5 million last year— U.S. sales are beginning to plateau. In the first six months of last year, for example, sales were up 4 percent, or double the pace of this year. But low gas prices, low interest rates, enticing new vehicles and strong consumer confidence should keep them at a very high level.

General Motors Co. said its sales dropped 2 percent to 255,210, due in part to ongoing cuts in sales to low-profit rental car companies. GM said its rental sales are down 37 percent so far this year. Cadillac sales were up 6 percent and Chevrolet sales were flat compared to last June, but Buick and GMC sales were down.

Ford Motor Co.'s sales rose 6 percent to 240,109. Sales of its F-Series pickup — the nation's best-selling vehicle — jumped 29 percent to nearly 71,000 vehicles, or more than one every minute. But car sales fell 12 percent thanks to Americans' growing preference for SUVs. Sales at Fords luxury Lincoln brand were up 6 percent.

Toyota Motor Corp.'s sales fell 6 percent to 198,257. The company said short supplies of Toyota SUVs were partly to blame, along with weak sales of cars like the hybrid Prius, which sales slump 27 percent. Sales of the company's luxury Lexus SUVs were up 11 percent.

Fiat Chrysler said its June sales rose 7 percent to 197,073. Jeep sales jumped 17 percent and Ram truck sales were up 14 percent. But car sales suffered. Chrysler brand sales fell 20 percent, while Fiat sales dropped 19 percent.

Honda Motor Co.'s sales rose 3 percent to 138,715 vehicles. The Honda brand saw increases in both car and truck sales, but sales at the company's luxury Acura brand dropped 27 percent.

Pickup truck sales; it looks like mid-size pickup trucks are the real winners so far this year. From 24/7 Wall Street:

• After a rather dismal month of May, pickup truck sales improved somewhat in June, and the leading full-size pickup opened up a wider lead on its competitors. After a disappointing May, Ford Motor Co. saw sales of its F-Series pickups rise to more than 70,000 again in June.
• Ford sold 70,937 F-Series full-size pickups the month of June, a whopping year-over-year increase of 28.6%. Compared with May 2016 sales of 67,412, that’s a gain of 5.2%.
• GM: Silverado pickups dropped 3.7% y-o-y. GMC's Sierra trucks dropped almost 8% y-o-y. GM's mid-size Colorado rose 38% y-o-y.
• Ram: a gain of 14% y-o-y. 
• Toyota: down 5% y-o-y. Titan sold only 896 units in June, vs 9,433 Tundras. The good news is that Toyota's mid-size Tacoma p/u, with almost 16,000 units sold, held its place as the leader in this space.
• Nissan's mid-size Frontier is up 84% y-o-y.

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A Note for the Granddaughters

Valiant Ambition: George Washington, Benedict Arnold, and the Fate of the American Revolution, Nathaniel Philbrick, c. 2016.