The Market And Energy Page, Part 3, T+210 -- August 18, 2017

DAPL upends region's dependence on oil: from The Financial Post --  As Dakota Access comes online, America's most pipeline-constrained shale play sees new life. The completion of the Dakota Access pipeline in June has upended the region’s dependence on rail — good news for Calgary's Enerplus.

Ian Dundas expects to see far fewer oil trains rumbling across the sprawling farmlands of North Dakota in coming years.

Dundas is the chief executive of Calgary-based Enerplus Corp., one of the first companies to enter the Bakken, an oilfield spanning southern Saskatchewan, North Dakota and Montana. In the absence of available pipeline capacity, companies operating in the region had for years moved oil on an existing rail network in Canada and the United States. As production boomed, producers began investing more in oil-by-rail terminals, paying a premium to get their product to market.

But the completion of the highly contentious Dakota Access pipeline in June, a major oil conduit carrying some 570,000 barrels per day of crude from North Dakota to Illinois, has upended the region’s dependence on rail.

The pipeline has dramatically reduced shipping costs for Bakken companies, bringing overall costs in line with other U.S. shale producers, like those in the highly prolific Permian Basin in Texas and New Mexico.  

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

STACK. From an analyst's press release:

Despite the fact that the Oklahoma STACK oil and gas play is still evolving and its total potential is undetermined, evidence thus far indicates the play is delivering impressive results, leading operators to commit significant 2017 CAPEX to its development, according to new analysis from IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions.

“The Oklahoma STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher County) play is early in its development but wells have shown great productivity,” said Imre Kugler, associate director, energy research at IHS Markit and author of the IHS Markit Plays and Basins: Oklahoma STACK analysis. “Questions still remain regarding potential across various horizons; however, for operators with acreage and capital to test the play, economic upside exists so the biggest six operators in the play are on track to invest more than $2.5 billion during 2017.”

Whether the play will be a major contributor to domestic supply is still undetermined, Kugler said. “To date, fewer than 1,000 wells have been brought online in the liquids-rich STACK play, but estimated break-evens for first quintile wells in the play are quite low and competitive with top Permian plays. First quintile wells in the STACK for both short- and long-laterals are estimated to break even under $30 per barrel.”

The early stage of the STACK play equates to some variance in well performance as operators seek to optimize development. The spread between first and second quintile wells is wider when compared with the relatively more well-known Permian plays, with second quintile STACK wells estimated to break even near $41 per barrel for longer laterals, and $55 per barrel for shorter laterals, IHS Markit said.

The Market And Energy Page, Part 2, T+210 -- August 18, 2017

Rick Weiss. Say what? A Harvard University study in 2012 called "it" just right:

Global oil supply capacity is growing at an unprecedented level, and could result in an overproduction glut and steep dip in oil prices, according to a June 2012 study from Harvard University's Kennedy School of Government.

Contrary to the idea among some that global oil supply is running out, additional production of 17.6 million barrels of oil per day (bopd) could come online by 2020, boosting global production capacity to 110.6 million bopd, even with depletion rates for currently producing oilfields and reserve growth.

"This would represent the most significant increase in any decade since the 1980s," said Leonardo Maugeri, author of the study "Oil: The Next Revolution -- The Unprecedented Upsurge of Oil Production Capacity and What It Means for the World."

Field-by-field analysis of global oil exploration and production projects suggests unrestricted, additional production of over 49 million bopd of crude oil and natural gas liquids could come online in 2020, the equivalent of over half the current world production capacity of 93 million bopd.

In the comment section, Rick Weiss:

One should be aware of possible incompetence in the report. Crucial errors were summarized in David Strahan’s blog (http://www.davidstrahan.com/blog/?p=1576) as follows (quoted from that blog). Plenty of ink has already been spilled by oil depletion experts exposing some of the wildly optimistic assumptions contained in Maugeri’s report. More damning is that the work is shot through with crass mistakes that render its forecast worthless.  

But this is what caught my ire/attention:

Maugeri claims this looming glut has three legs: booming upstream investment by the oil industry; the rise and rise of unconventional production such as US shale oil; and a tendency among forecasters to over-estimate massively the rate at which production from existing oil fields declines. The first point is uncontroversial, the second is moot, but the third is the most important; without it, Maugeri’s glut evaporates. 

Second leg: the rise and rise of unconventional production such as US shale oil, which Rick Weiss called "moot." LOL. 

Rick's bottom line: " ... wildly optimistic assumptions contained in Maugeri’s report. More damning is that the work is shot through with crass mistakes that render its forecast worthless."

Must have been advising Goldman Sachs lately.

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Oil Demand Peak? Peak Oil Supply?

From Rigzone, a great article for the archives:

The oil industry is quite familiar with the concept of a “Peak Oil Supply” but people find it hard to believe that there is another side of the theory, which is “Peak Oil Demand”. This article will examine why the concept of peak oil supply failed to materialize and why one should believe the concept of peak oil demand will materialize.

Archived.

The Market And Energy Page, T+210 -- August 18, 2017

Deere: buying opportunity?

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

Energy costs across the US: the best and worse places in the US to buy energy. States with highest total energy costs (full list here):

1. Connecticut ($380 average monthly energy bill)
2. Alaska ($332)
3. Rhode Island ($329)
4. Massachusetts ($327)
5. Wyoming ($320) -- winter heating bills, but still -- with all that coal?

States with the lowest total energy costs:

51. DC ($219) -- standard of living?
50. Washington ($226) -- hydroelectricity; some wind
49. Colorado ($228)
48. Oregon ($246)
47. Illinois ($247)

What to watch today? The 10-year Treasury. Could drop to 2.10%

Henry Hub: emerges as the global natural gas benchmark -- from The WSJ.  Henry Hub is helping to set prices around the world as wave of US natural gas reaches Europe, South America, Asia. Pretty amazing. Just a few years ago, it was forecast that US would be a net importer of natural gas; now, the US is not only a net exporter of natural gas, but will eventually become #1 in natural gas exports. Location of Henry Hub? Erath, Louisiana -- an unassuming confluence of pipelines in the heart of Cajun Country.

In the first half of the year, there was a 31% increase in the volume of Henry Hub natural gas futures traded outside of typical U.S. trading hours, compared with the same period last year, according to CME Group, which owns the New York Mercantile Exchange. That is a sign that traders abroad are increasingly dabbling in the U.S. gas benchmark.

Boo-hoo. Also from The WSJ today -- wrong-way natural gas bet fueled Goldman's second quarter swoon. A $100 million loss from gas-price water contributes to worst-ever quarter for commodities unit. I wonder if Rick Weiss was their lead analyst?

Goldman wagered that gas prices in the Marcellus Shale in Ohio and Pennsylvania would rise with the construction of new pipelines to carry gas out of the region, said people familiar with the matter. Instead, prices there fell sharply in May and June as a key pipeline ran into problems.

Goldman said in July that the quarter ended June 30 was the worst ever for its commodities unit, which has been one of the firm’s most consistent profit centers and a training ground for many of its top executives, including Chief Executive Lloyd Blankfein. 

Reminder: speaking of pipelines, MDU (WBI Energy) expanding natural gas transportation infrastructure in northwest North Dakota. This is not new; it may have been posted previously. I forget. From MDU Resources in June, 2017:

MDU Resources Group, Inc. (NYSE: MDU) announced today that subsidiary WBI Energy, Inc. plans to expand its Line Section 27 natural gas transportation system in the Bakken producing area in northwestern North Dakota.

The $27 million to $30 million expansion project will involve construction of approximately 13 miles of 24-inch diameter pipeline and associated facilities. When the expansion is complete, the transportation capacity on WBI Energy’s Line Section 27 will be over 600,000 dekatherms per day. The targeted in-service date for the project is fall 2018, which is the same timeframe for completion as WBI Energy’s $55 million to $60 million Valley Expansion project near Fargo, North Dakota.

The Political Page, T+210 -- August 18, 2017

ObamaCare: Iowa's only insurer seeks 57% rate increase. The good news? Only affects about 14,000 Iowans and most of the "shock" will be absorbed by taxpayers across the US who will provide subsidies pretty much making the premiums moot for those who qualify.

Active Rigs At 53 -- August 18, 2017

Active rigs:

	8/18/2017	08/18/2016	08/18/2015	08/18/2014	08/18/2013
Active Rigs	53	33	74	193	183

RBN Energy: NGL pipelines out of the Permian, part 5.