Shale Operators Running Out Of Core Drilling Locations? Not Yet -- Filloon -- March 28, 2018

Earlier this post: Update on the Permian -- Mike Filloon.  Link here. Part 2 here.

• Occidental, Chevron, EOG, and RSP Permian  have the top oil curves of operators with multiple completions
• Delaware well design improvements have increased oil production per location by 18% yoy. We believe there is greater upside in the Delaware in 2017 than in Midland. It is possible the Delaware has more upside than any other US play
• Lea County is starting to separate itself as the best county, although northern Loving has had a few mammoth results
• the drop in world oil inventories is enough to start pushing short pops in prices. We think WTI will push above $70/bbl by June, but pushing above $75 will be difficult 

There was something else Mike mentioned in that article -- in fact, he led with it:

In our previous article, we provided oil production data from the Midland Basin. From 2016 to 2017, this improved 32.5%.

Oil bears have stated that they believe operators will run out of core geology, and this will seal the fate of unconventional US oil producers. It is inevitable that shale will eventually dry up, but it doesn't seem to be occurring in the near future.

In a recent article, we provided an oil price estimate for the 2018 driving season. US operators continue to increase oil production, but it probably will not meet increased demand. We expect relatively large oil draws, and WTI to eclipse $70/bbl and peak at $75. This should push the US Oil ETF higher by 12% in just a few months. Oil prices should drop after and trade in the $60 to $70 range throughout 2018. It will be difficult to push oil prices above $75, as the resultant oil production could outpace demand.

Weekly Petroleum Report -- Pretty Much Ho-Hum -- March 28, 2018

Weekly petroleum report:

• crude oil inventories: increased by 1.6 million bbls; now at 429.9 million bbls
• refineries operating at 92.3% operable capacity -- nice; pretty much the sweet spot between 92 - 94%
• gasoline production up a bit; distillate fuel production up a bit
• if folks weren't following crude oil inventories so closely, this would pretty much be a ho-hum report

Days of crude oil supply in the US: pretty much unchanged at 26 days

WTI: I'm impressed the price of WTI held as well as it did. By the way, did you all see that Mike Filloon expects WTI to get to $70 by June? That's only three months from now. I don't see that happening. Maybe $68?  But that's quibbling.

Gasoline demand:

Active Rigs Take A Nice Jump To 62; Five New Permits Six Permits Renewed, But No DUCs Reported As Completed -- March 28, 2018

Active rigs:

$64.38↓	3/28/2018	03/28/2017	03/28/2016	03/28/2015	03/28/2014
Active Rigs	62	49	31	97	194

Five new permits:

• Operators: Whiting (4); BR
• Fields: Banks (McKenzie); Pershing (McKenzie)
• Comments: Whiting -- seemingly the most active operator in the Bakken right now -- permits for a 4-well Renbarger pad in SESW 33-154-97

Six permits renewed:

• Oasis (5): perhaps the second most active operator in the Bakken right now -- five Domalakes permits, all in Burke County
• Enerplus: a Morgan permit in Dunn County

And that was all.

FWIW -- Update On The Permian -- Mike Filloon, Part 2 -- March 28, 2018

Update on the Permian -- Mike Filloon.  Link here. Part 2 here. See also this post.

• Occidental, Chevron, EOG, and RSP Permian  have the top oil curves of operators with multiple completions
• Delaware well design improvements have increased oil production per location by 18% yoy. We believe there is greater upside in the Delaware in 2017 than in Midland. It is possible the Delaware has more upside than any other US play
• Lea County is starting to separate itself as the best county, although northern Loving has had a few mammoth results
• the drop in world oil inventories is enough to start pushing short pops in prices. We think WTI will push above $70/bbl by June, but pushing above $75 will be difficult

Saudi Announces Ready To Start On World's Largest Solar Power Project -- WSJ -- March 28, 2018

Final 4Q17 GDP: almost hit the 3% threshold we were "promised." Final reading: 2.9% vs 2.7% expected. And the 2.9% is up from the previously reported 2.5%.

Later today: EIA crude oil inventory data and gasoline demand.

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Solar

Saudis, SoftBank Group announce world's largest solar power project. Development to start this year with a $1 billion investment from Saudi-SoftBank Vision Fund. From The WSJ.

Saudi Arabia’s sovereign-wealth fund and Japan’s SoftBank Group Corp. announced plans to launch the world’s biggest solar-power-generation project, providing another ambitious goal for two of the world’s richest investors.

The development would start this year with a $1 billion investment from the joint Saudi-SoftBank Vision Fund, said Masayoshi Son, chief executive of SoftBank. It is expected to grow into a $200 billion behemoth that provides about 200 gigawatts of power by 2030, he added—more power than Saudi Arabia would need to light up the entire country by then.

The first stage of the project will cost around $5 billion and begin this year, Mr. Son said, with the installation of solar panels that will produce around 7.2 gigawatts of power in 2019. Most of it will be financed with debt.

We've talked about Saudi's solar energy program on many occasions. The numbers are "all over the place." Not long ago, the Saudi's goal was 3.45 GW by 2020, so increasing to 7.2 GW is significant. But announcing a $1 billion-downpayment for a $200 billion-project speaks volumes.

Everyone agrees that this is an existential issue for Saudi Arabia. If the kingdom does not quit burning oil to produce electricity for summer air conditioning, Saudi Arabia will be a net importer of crude oil in less than ten years.

This is the other problem:

And this is the other, other problem (note that crude oil prices have improved, and yet Saudi's cash reserves decreased month-over-month, after an improvement in recent months), link here:

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Back to the Bakken

Active rigs:

$64.70↓	3/28/2018	03/28/2017	03/28/2016	03/28/2015	03/28/2014
Active Rigs	60	49	31	97	194

RBN Energy: rebounding E&Ps curb CAPEX growth, use capital to reward shareholders.

Another MLP bites the dust, but that's a good thing -- Motley Fool. A familiar name: Tallgrass Energy Partners. Others mentioned.