EIA Weekly Petroleum Report: "Colossal" Draw; WTI Surges -- August 28, 2019

After yesterday's API report, everyone is waiting with bated/baited breath for the EIA report due out at 9:30 a.m. CT. [Yes, "bated breath" is another phrase/idiom first used by Shakespeare -- at least first written down by Shakespeare.]

Link here. 

• US crude oil weekly draw: decreased by a whopping 10.0 millions
• WTI: $56.51, up $1.58; up almost 3%
• US crude oil inventory: 427.8 million bbls -- now at the five-year average for this time of year
• refinery operating capacity: at 95.2% operable capacity; near high end
• gasoline production: close to 11 million bbls/day; gasoline demand graph will be out later today
• for first time in a long time, jet fuel supplied was down compared with same four-week period last year 
• the EIA also reported a 2.1-million-barrel drop in gasoline inventories and a 2.1-million-barrel draw in distillate fuel inventories.
• buzz? Still waiting for stories; the stories still from yesterday's API data. Even CNBC isn't reporting it yet. CNBC: still preaching the "recession is right around the corner" story; that's still their headline story.

Re-balancing:

Week	Week Ending	Change	Million Bbls Storage
Week 0	November 21, 2018	4.9	446.9
Week 1	November 28, 2018	3.6	450.5
Week 2	December 6, 2018	-7.3	443.2
Week 3	December 12, 2018	-1.2	442.0
Week 4	December 19, 2018	-0.5	441.5
Week 5	December 28, 2018	0.0	441.4
Week 6	January 4, 2019	0.0	441.4
Week 7	January 9, 2019	-1.7	439.7
Week 8	January 16, 2019	-2.7	437.1
Week 9	January 24, 2019	8.0	445.0
Week 10	January 31, 2019	0.9	445.9
Week 11	February 6, 2019	1.3	447.2
Week 12	February 13, 2019	3.6	450.8
Week 13	February 21, 2019	3.7	454.5
Week 14	February 27, 2019	-8.6	445.9
Week 15	March 6, 2019	7.1	452.9
Week 16	March 13, 2019	-3.9	449.1
Week 17	March 20, 2019	-9.6	439.5
Week 18	March 27, 2019	2.8	442.3
Week 19	April 3, 2019	7.2	449.5
Week 20	April 10, 2019	7.0	456.5
Week 21	April 17, 2019	-1.4	455.2
Week 22	April 24, 2019	5.5	460.1
Week 23	May 1, 2019	9.9	470.6
Week 24	May 8, 2019	-4.0	466.6
Week 25	May 15, 2019	5.4	472.0
Week 26	May 22, 2019	4.7	476.8
Week 27	May 30, 2019	-0.3	476.5
Week 28	June 5, 2019	6.8	483.3
Week 29	June 12, 2019	2.2	485.5
Week 30	June 19, 2019	-3.1	482.4
Week 31	June 26, 2019	-12.8	469.6
Week 32	July 3, 2019	-1.1	468.5
Week 33	July 10, 2019	-9.5	459.0
Week 34	July 17, 2019	-3.1	455.9
Week 35	July 24, 2019	-10.8	445.1
Week 36	July 31, 2019	-8.5	436.5
Week 37	August 7, 2019	2.4	438.9
Week 38	August 14, 2019	1.6	440.5
Week 29	August 21, 2019	-2.7	437.8
Week 30	August 28, 2019	-100.0	-427.8

Notes From All Over, Part 2 -- August 28, 2019

BP leaving Alaska. Link here.

Wow, wow, wow ... just as I predicted ... nuanced ... hinted at on the blog numerous times ... New Mexico ready to shut down "their" Permian .... link here. New tag: "Road_To_New_Mexico."  This will be re-posted later. How big can I make this graphic? "New Mexico officials claim they are not trying to stifle the industry." "Read my lips."

Heavy oil: more bad news for Canada.

Nigeria: another huge natural gas discovery. ENI on a roll: Eni also announced a gas and condensate discovery offshore Ghana, in May, 2019, and a gas discovery in the Nour prospect, offshore Egypt, in March, 2019.

Four Wells Coming Off The Confidential List Today -- August 28, 2019

Wells coming off the confidential list today -- Wednesday, August 28, 2019:
35088, conf, Liberty Resources, CO 158-92-7-6-2TFH,
34757, conf, MRO, Ruth 44-23TFH,
34303, conf, XTO, Rough Federal 44X-23G, 
24020, conf, Slawson, Wolverine Federal 3-31-30H, 

Active rigs:

$55.83	8/28/2019	08/28/2018	08/28/2017	08/28/2016	08/28/2015
Active Rigs	61	61	55	30	76

RBN Energy: autumn school of energy.

More On The CLR Elm Tree Unit -- August 26, 2019

Updates

Later, 1:17 p.m. CT: this gets way into the weeds but this is a nice history of these wells / this drilling unit / this area / CLR's possible intentions. From a reader:

I am not sure, but I believe the Charolais and Brangus 1280-acre spacing units were originally one 2560-acre unit. Note that the CLR Jersey wells dsu immediately to the east is 2560 acres. [Comment: I went back to the permit; approved 3/9/16; 1280 spacing. If this was originally an [overlapping] 2560-acre unit, there would be two cases in the NDIC dockets; there' s no way I would be able to locate those cases without a lot of effort. But the reader's suggestion that these two 1280-acre units were once a 2560-acre unit certainly is likely/possible.]

With regard to the siting of these CLR wells, your graphic shows a CLR Vachal wells pad in the northeast corner of section 27. Just across the road/section line is the Hess EN-Freda pad in the northwest corner of section 26. Hess began this pad in 2013 subsequent to CLR's development of the first Vachal wells. Hess has drilled 16 wells from this pad -- 12 Freda wells, a 2560-Freda well and the first 3 EN-Leo wells whose dsu is a 1280-acre horizontal unit adjoining to the north (sections 23 and 24). Note the 2560-Freda well was drilled quite a while ago, but has no production.

CLR began development of their Jersey dsu in 2014. They sited 21 wells on a main pad with 8 wells on a separate pad to the north. You can see from your graphic they drilled in a "fan pattern" from the northeast corner of the 2560-acre dsu. They drilled and completed the first 7 wells, Jersey 23-29, from the main pad in 2014. They finished drilling the 8 wells, Jersey 1-8, on the separate pad, in the last quarter of 2014, concurrent with the crude price collapse. Harold Hamm held these 8 wells in DUC status for three years. (The Jersey 1, #27997, is a real nice well in this group.)

Meanwhile the CLR Elm Tree leases on section 2, 3, 10 and 11 lapsed and CLR renewed them. In addition to their desire to get these dsu's in HBP status in 2016, I believe CLR wanted to see what they had here, particularly with the application of their "enhanced completion" techniques.

CLR was already exploring the lower bench formations with their Jersey wells. Two of the original 7 Jersey wells are drilled in the Third Bench Three Forks. As I recall, another Third Bench TF well was slated in the Jersey 1-8 group, but was moved up to a higher bench with the late 2014 price collapse. [Comment: supports my thesis, thank you.]

CLR and Hess have leases for their respective Vachal and Freda pads with the Vachal family, so in 2016 it was obviously easy for CLR to obtain a surface lease for a small pad to site the Charolaise and Brangus wells.

As your graphic shows this pad is located in the Hess dsu about a third of a mile south of the Hess Freda pad. CLR laid pipe back up to their Vachal pad, from which they provide tanks and other support for these two wells.

I don't know what the siting situation is south of the river, but my instincts are CLR may drill future wells from there.

Original Post

 
See this post for background and for an incredible graphic.

A reader wrote:

That's an interesting looking unit [see the graphic at the link above].

The one well holding it looks to have been an ultra-long lateral done from the other side. I wonder if CLR lacks a pad space on the bank of that unit and will have to drill several more extra long laterals from the other side? Or could they make a deal with the area to the south to run a pad from there (even if not fracking within that unit). Don't know ...totally speculating. But just looks odd there, how hard that unit has been to develop.

In the original graphic I did not include the siting of the two long laterals that "hold this unit by production." It's getting crowded in the Bakken so it's hard to point out some of the things that need to be pointed out. But we'll do our best.

I've expanded the original graphic to include the siting of the wells that led to the super-long laterals, or the extended long laterals.

The two wells in question:

• 32605, 1,995, CLR, Charolais North Federal 1-3H1 Elm Tree, t9/16; cum 629K 6/19; TD = 24,841 feet;
• 32606, 2,305, CLR, Brangus North 1-2H2 Elm Tree, t9/16; cum 605K 6/19; TD = 24,909 feet;

This is a good case study for newbies. Let's spend some time on this one.

Some comments:

• some time ago, there were reports that we would be seeing more extended laterals (instead of the standard two-section lateral, the extended laterals are three sections long) in the Bakken; we haven't seen that to a great extent, but technologically it seems non-problematic and a solution for some parts of the Bakken (like under the river)
• look how far back these wells were sited: in the middle of section 26; they go directional through the next section (section 35) before they finally become horizontal through sections 2 and 11 to the south
• both wells are spaced for standard laterals; two-mile spacing; 1280-acre spacing
• talk about a lot of "wasted" pipeline; 
• it looks CLR plans on doing the same thing -- long, directional drilling before finally laying the laterals which will only be horizontal for two miles, but will have 2560-acre spacing
• as the reader above noted, it's very possible CLR could drill from the south
• CLR already has a pad on the south side of the river in that very location: #20805, Angus 3-9H; and, #24473, Angus 2-9H2
• which, by the way brings us to a new point
• wow, this takes us back to a discussion we had years ago
• I don't know if folks recall but the Saudis try to kill the US shale industry back in the 2016 time frame by flooding the world with their oil; WTI dropped into the 20s (?) -- can't remember, but certainly into the low 30s -- before Saudi realized their "trillion-dollar mistake" and turned off the spigots
• by 2016, the Bakken operators had pretty much mapped the entire middle Bakken and were ready to do the same with the first bench of the Three Forks
• but the "Saudi surge" stopped development of the first bench Three Forks dead in its tracks in 2016
• development of the first bench was delayed because of the "Saudi surge" and has been delayed further because of the depressed price of WTI
• there were exceptions to the rule; one of those exceptions was CLR; Harold Hamm continued drilling the Three Forks
• when you see H2 designated in a CLR well name, it is the second bench of the Three Forks, a formation that one seldom sees drilled in the Bakken; H1 is the first bench;
• of the four wells mentioned in this area (#32605, #32606, #24473, and, #20805) note that only one is a middle Bakken. The other three are Three Forks wells, and of those three, two are second bench Three Forks wells. To me, that speaks volumes. Why so many deeper formation wells here? Certainly the middle Bakken would be the preferred formation by most operators in the Elm Tree oil field. Answer: Harold Hamm is mapping the deeper benches of the Three Forks;
• look at the cumulative production of these four wells:
• 32605, first bench, completed less than three years ago, and has already produced well over 600,000 bbls of oil, and is still producing at an astounding rate of 7,000 bbls/month
• 32606, second bench, completed less than three years ago, and has already produced over 600,000 bbls of oil and is still producing at an astounding rate of 8,000 bbls/month after three years;
• 24473, second bench, completed in early 2013, and six years later, 373,000 bbls of oil
• 20805, middle Bakken, completed in early 2013, and six years later, 341,000 bbls of oil
• frack data:
• 32605: a very moderate 46 stages and 10 million lbs of sand
• 32606: ditto -- a very moderate 46 stages and 10 million lbs of sand
• I don't even care what the completion strategies for the earlier wells were because that's old history -- we've moved on, but for those who are curious:
• 24473: only 30 stages and only 2.7 million lbs of sand and ceramic
• 20805: remarkably, only 28 stages and 2.5 million lbs of sand and ceramic
• anyone wanna bet that when considering all costs, the two earlier wells, despite very, very little sand, cost a whole lot more than the two more recent wells which used almost 5x as much sand?

Notes From All Over, Part 1 -- August 28, 2019 -- Biggest Story Of The Year?

Watts Up With That: a number of incredibly good articles. Scroll through to get an idea of all the "fake news" seen in the mainstream media. One of my seven featured blogs.

Ditto. Not a lot of people know that.

Newspapers. I was told that Starbucks across the US would quit selling newspapers by the end of August, 2019. Not all Starbucks sold newspapers. Most of the Starbucks coffeehouses I frequent sold the New York Times, the local newspaper, and The Wall Street Journal. And as of yesterday: no newspapers being sold in the Starbucks I usually visit. The manager told me she couldn't make money on the newspapers, but what was worse, most copies were picked up, and read by customers, without paying, and then returned to the stand. Why would that be surprising? Put coffee urns out in the open, and have a "pay on the honor system," and see how that works out.

Content: "Blinded By The Light." I heard a lot about that movie before it was released. Our older daughter saw it last week. Didn't say much about it. Now I read that it has "bombed," as have most "Sundance faves." Unless I missed it, the "Obama" Netflix movie was not mentioned.

Pop quiz, fill in the blanks: A 2014 article in The Atlantic that examined how Netflix categorized nearly 77,000 different personalized genres found that _____________________ was rated as the favorite actor by Netflix users. _________________ was rated seventh. _____________________, the director of many of the television movies and whose father directed many episodes of the TV series, led the list of directors. Todd Yellin, vice president of product innovation for Netflix and the person who designed the system, was at a loss to explain what journalist Alexis Madrigal called "this weird __________________thing."

By the way: this is the biggest story of the year --- as noted earlier -- Starbucks quits selling newspapers. This is the latest nail in the coffin for the The New York Times. Outside of NYC, Washington (DC), and airports, can anyone find a hard copy of The New York Times? Starbucks ending newspaper sales is the death knell for for the US newspaper industry.