Oasis Earnings Call -- 1Q18

Link at SeekingAlpha.

Oasis Petroleum and Oasis Midstream Partners.

Highlights (pretty much just the Bakken; if you want to know about the Delaware go to hte link)

• 76,800 boepd; full-year guidance raised to 81K - 84K boepd
• growing volumes at 15% to 20% y-o-y
• limited cost inflation or service tightness in either the Williston or the Delaware Basin
• Bakken taught Oasis a lot; developed a lot of long-term provider relationships
• Bakken: primarily focused on the core
• looks like a 5-rig program in the Bakken
• will complete 100 - 110 gross operated wells in 2018
• CAPEX, upstream: $815 to $855 million
• 85% of that CAPEX in Williston
• about 90% E&P capital on drilling and completions
• proppant: 
• middle Bakken -- 10 million lbs proppant/well
• Three Forks -- 4 million lbs proppant/well
• particularly happy with Spratley wells in Alger; in line with Wild Basin and Alger type curves
• Indian Hills wells continue to perform above the type curve
• recently moved Painted Woods into the core due to strong performance seen by offfset operators
• takes Oasis from 483 to 585 net locations in the core with the addition of Painted Woods
• across all plays, lifting costs, $6.48/bbl; below guidance of $7 to $7.50/bbl
• = 88K bbls/day = $16,000K - $32,000K/year
• will use Oasis' new 200 million-cubic-feet-per-day natural gas processing plant at Wild Basin; will come online at the end of the year (2018); currently 65% complete; on time; on budget
• DUC backlog grew; bumped from the high 70s to around 90 or so

Saudi's Foreign Exchange Reserves Getting Healthy Again? -- May 8, 2018

Link here. Exporting a lot less oil, but charging more for it?

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But Not Good News Today

Saudi "needs" $88-oil. Today, WTI and Brent are coming off recent highs. WTI is down 2.5%, now trading below $67. A reader asked my thoughts on why oil was going down today. My reply, somewhat "tongue--in-cheek":

I've never understood pricing of oil. The fundamentals certainly don't support $70-oil, but just as Scott Adams says that "facts don't matter," likewise, when it comes to oil, "fundamentals don't matter."

Movers and shakers are talking, moving the price of oil up and down, and making a lot of money doing it.

For the past month, the movers and shakers (traders in oil) have used Trump's tweets and threats on the Iran sanctions to move the price of oil up. Now that we are there (supposedly Trump will announce today) the traders in oil are suggesting that whatever Trump does or doesn't do will have no real effect in the Mideast.

For the Mideast, where there is always a war going on somewhere or the threat of a big invasion by some military, I'm sure the Iranian leaders are pretty much blowing off a lot of talk from Trump. At best, they see him around for three more years and then the US will elect a Democrat, perhaps Bernie Sanders, LOL, and so they aren't worried. And if Iran is not worried, traders in oil know things will pretty much go on usual. They probably read the CNBC report yesterday that reminded them that 100 million bbls of oil are moved every day, and whether Trump's 300,000 bbls or Obama's 1.5 million bbls are at risk, it won't affect anything.

Who knows, maybe the rumor on the street is that Trump listened to Angela and Macro and agreed to "stay the course."

In other words, I have no idea what's going on. Perhaps oil traders are simply taking profits.

Arizona Has Opportunity To Add To Its Collection Of Historic Bridges -- May 8, 2018

From the archives:London Bridge (Lake Havasu City) London Bridge is a bridge in Lake Havasu City, Arizona. It was built in the 1830s and formerly spanned the River Thames in London, England. It was dismantled in 1967 and relocated to Arizona.

Now, another opportunity for Arizona to add to their collection of historic bridges. From The Bismarck Tribune:

The North Dakota Department of Transportation is proposing to remove the historic Long X Bridge and is seeking a public or private agency to adopt one or more segments of the structure.

The announcement Monday came as the agency published the draft environmental impact statement for the proposed expansion of U.S. Highway 85 in western North Dakota.

Proponents of the highway expansion say a four-lane highway is needed to improve safety due to increased oil traffic, but others have raised concerns about impacts to the 7-mile stretch through the Badlands and the North Unit of Theodore Roosevelt National Park.

The Department of Transportation’s preferred alternative is to expand Highway 85 between Interstate 94 and Watford City to a divided, four-lane highway with a depressed center median.

The department’s preferred option is to remove the bridge that was constructed in 1959 and replace it with a four-lane bridge to the east.

The bridge is available to “any responsible state, local or private agency willing to take ownership of, relocate and preserve the Long X Bridge in a new location,” with preference given to public entities, the agency said.

May 8, 2018 -- Making America Great Again

Updates

May 8, 2018: CNS News on labor force participation:

Last month, a record 95,745,000 Americans were counted as "not in the labor force," meaning they are not employed and are not seeking a job, according to the Labor Department's Bureau of Labor Statics. "This category includes retired persons, students, those taking care of children or other family members, and others who are neither working nor seeking work," BLS said.

In a March 2018 report, the Congressional Budget Office noted that a lower labor force participation rate is associated with lower gross domestic product and lower tax revenues. It is also associated with larger federal outlays, because people who are not in the labor force are more likely to enroll in federal benefit programs, including Social Security.

Lower tax revenues? April, 2018, tax revenue -- sets all-time record. See original post.

Original Post

Making America great again:I was traveling yesterday. I see this was mentioned by the Washington Times. I assume it got wide play across all major networks including MSNBC and CNBC:

Weren't we told by mainstream media, Obama apologists, and never-Trumpers that the Trump Tax Bill would result in greatly reduced revenue for the US government? That's what I recall.

April: IRS tax haul collected $515 billion, swamping the previous monthly record of $190 billion set in 2001 -- wow, that's amazing -- all the way back to 2001. That takes us back to King George III, doesn't it?

And not only that, the haul of $515 billion greatly outpaced spending which was reported at less than $300 billion.

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Summer in North Dakota: a reader tells me that folks in North Dakota hope to see summer sometime later this year. Right now, the forecast is this: "official" summer for North Dakota will be from August 15 - August 18, and then first signs of winter. Here it is, May 7, 2018, last evening, over at the Grand Forks Herald, Lake Sakakawea could challenge last ice-out date. This, despite global warming:

Ice remains on a good portion of Lake Sakakawea and it may remain that way for at least another week.The upper end of Lake Sakakawea has been ice free for several days. However, the middle and lower ends of the reservoir remained coated in a great sheet of ice. Sakakawea's latest ice-free date is May 17, 1979.

Comment: my hunch is that folks are going to be watching this very, very closely. There are few stories in North Dakota that are bigger than a) flaring; b) pipeline protests; and, c) ice-free dates.

Headline a bit over the top, from Reuters: "oil surges on Venezuela-Conoco disute, Iran sanction worries. In fact, WTI goes slightly over $70 (hardly surges), and then falls back to slightly under $70. This morning: $69.92. Hardly surging.

Comment: For its current budget Saudi needs $88-oil to stay afloat; last year it needed $83-oil. Right now, Brent well below that at $75. 

From the linked article:

Oil prices rose for the fourth straight day on Monday to hit levels not seen since late 2014, boosted by the latest trouble for Venezuelan oil company PDVSA and the possibility that the United States could re-impose sanctions on Iran.

U.S. West Texas Intermediate (WTI) crude futures rose $1.01, or 1.5 percent, to settle at $70.73 a barrel. This was the first time since November 2014 that WTI had climbed above $70. Brent crude futures jumped $1.30, or 1.7 percent, to settle at $76.17 a barrel.

U.S. oil major ConocoPhillips moved to take Caribbean assets of Venezuela's state-run PDVSA to enforce a $2 billion arbitration award.

Iran sanctions: pending. Trump expected to make announcement today.

API US crude oil inventory numbers to be released later this afternoon, 3:30 p.m. CDT, I believe.

Boom: Comcast to make ALL CASH unsolicited offer for Fox. Like this will go anywhere.

Boom:

• Apple's march to a trillion-dollar-market cap.
• Some say fair value for AAPL: $400.

Gone: NY attorney general resigns over reports of really weird activity. No links. Story everywhere. Good riddance. Makes Donald Trump look like a Boy Scout.

I wonder if the NY attorney general story will be reported on MSNBC this morning. More likely, Eric Schneiderman will become MSNBC analyst for #MeToo, #BlackLivesMatter, #Hey,WeAllDoIt; and, #What'sTheBigDeal. Rumors are Bill Clinton continues to keep a very, very low profile.

It appears the story was broken by Jane Mayer and Ronan Farrow in The New Yorker. Really? The New Yorker actually published this story. Hell must be freezing over.

Ronan Farrow: an American journalist, lawyer, and former government advisor. In late 2017, Farrow's articles in The New Yorker helped to uncover the Harvey Weinstein sexual abuse allegations. For this reporting, or this reporting, The New Yorker won the 2018 Pulitzer Prize for public service, sharing the award with The New York Times.

Short squeeze: reported previously -- Elon Musk getting ready to pull off a huge short squeeze. Yesterday/today it is being reported that Elon Musk bought $10 million worth of TSLA. He could flip them today and make a tidy profit -- shares were up almost 3% yesterday on news of that deal, trading up almost $9 and back over $302/share.

Back In The Saddle Again -- Arrived At Destination -- Tuesday, May 8, 2018

Active rigs:

$69.82↓	5/8/2018	05/08/2017	05/08/2016	05/08/2015	05/08/2014
Active Rigs	61	49	27	84	191

RBN Energy: trouble on the way as implementation of IMO's low-sulfur bunker rule looms.

Shipowners and refiners are struggling with how to prepare for January 1, 2020, when all vessels involved in international trade will be required to meet significantly stricter limits on emissions of sulfur oxides (SOx), either by using fuel with a sulfur content of less than 0.5% or by “scrubbing” the exhaust of ship engines when using the much higher-sulfur bunker fuel that most ships now rely on.

The International Maritime Organization’s (IMO) new sulfur rule isn’t a minor tweak.

It’s a game changer that already is causing widening spreads on the futures market between 3.5%-sulfur heavy fuel oil (HFO) — the traditional global bunker fuel — and rule-compliant low-sulfur distillates.

The rule also promises to be a boon to complex Gulf Coast and other refineries that can break down residual-based HFO into higher-value, lower-sulfur distillates. Today, we begin a new series on how shipowners, refiners and the markets for HFO and low-sulfur marine fuel are responding (or not) to the coming change in global bunker requirements.

Key points:

Much like necessity is the mother of invention, uncertainty is the mother of inaction. The fence-sitting that we’re seeing by shipowners and refiners is, in many ways, a direct result of the approach the IMO took in implementing its 0.5% sulfur rule. Rather than calling for shipping fleets to gradually lower their average sulfur emissions over time (say, 2.5% sulfur by 2018, 1.0% by 2020 and 0.5% by 2022 — and to do so entirely through the use of low-sulfur distillate — the IMO opted to establish only what the end would be (emissions equivalent to the use of 0.5% sulfur fuel) and a single date for the implementation, but not dictate the means by which the end would be achieved. That left shipowners and refiners staring each other down and saying, in effect, “You tell me first what you’re going to do to deal with this, then I’ll decide.” So far, neither side has really made a move.

It can take about 12 months to contract for and retrofit an existing ship with a scrubber (which requires a drydocking for hull penetrations to allow scrubber wash water to flow in and out), about 2 years to contract for and build a new, fully scrubbed ship from scratch and even longer (four or five years) to design and build a major refinery upgrade to boost distillate production.

Given those long lead times, it’s fair to say that, with the January 2020 compliance date closing in and only between 158 and 600 ships fitted with scrubbers (more on this in a moment), the vast majority of the ships affected by the IMO’s 0.5% sulfur rule will comply by switching from high-sulfur HFO to either rule-compliant 0.5% sulfur marine distillate or blends of higher-sulfur HFO and ultra-low sulfur distillate.

[As for the number of vessels with scrubbers, analysis of IMO’s Global Integrated Shipping Information System (GISIS) by Navigistics shows that there are currently 158 ships equipped with scrubbers, while the Exhaust Gas Cleaning Systems Association (EGCSA) claims there are now ~600 ships so equipped.

And then this little nugget:

The differential between ultra-low sulfur diesel and high-sulfur HFO is widening in the futures market, with the differential for January 2020 delivery at about $171/bbl versus its current (forward month – June 2018) $156/bbl.

The spread widens dramatically starting in mid-2019, about the time ship operators will need to begin planning for the switch-over of their vessel fuel systems for IMO-rule compliance. The differential continues to grow as the rule-implementation date approaches.

It’s important to point out that from June 2018 to January 2020, the futures price for West Texas Intermediate (WTI) drops from about $70/bbl to $60/bbl (14%) and the price for high-sulfur HFO falls from about $62/bbl to $43/bbl (32%), but the price for ultra-low sulfur diesel stays close to flat, inching down only 2%, from about $218/bbl to $213/bbl.

Note to diesel truck drivers: The shift to low-sulfur fuels for shipping won’t only be affecting shipowners and charterers.

Doing the math: $215/42 = $5.12. And I assume that's wholesale.