WPX Energy To Sell Assets In Northwest New Mexico; Will Continue To Focus On The Bakken And The Permian -- February 27, 2018

This was done quickly; there may be typographical and/or factual errors, from PennEnergy: Oklahoma-based WPX Energy sells northwest New Mexico assets.

The Daily Times of Farmington reports the Tulsa, Oklahoma-based WPX Energy Inc. recently announced the sale of the last of its Four Corners assets to the tune of $700 million.

The company says WPX sold its holdings in the Gallup oil play to an undisclosed third party in a transaction that is expected to close by the end of March.

WPX spokesman Kelly Swan says the sale involves some 150 oil wells on about 100,000 acres.

Swan says WPX has been shifting its focus and funneling its resources to its operations in the Permian Basin of southeast New Mexico and west Texas and in the Williston Basin of North Dakota over the past few years.

Back-of-the-envelope:

• $700 million / 100,000 acres = $7,000 / acre

Problems In Paradise -- Production Hell? Getting Worse? -- February 27, 2018

There's been a flurry of tweets the last few days about the possibility / likelihood that Tesla is going to miss its already reduced goals/deliveries when their 1Q18 report is released. We won't know for awhile. But more and more tweets suggesting there may be problems.

Now these two independent tweets from late this afternoon:

US Consumer Confidence Jumps To A 17-Year High -- February 27, 2018 -- GDP Estimate Slips Well Below 3%

When it rains, it pours.

In the last hour or so:

• turkey vultures circling Citgo, Venezuela;
• US LNG / US nat gas exports establish new records;
• tweets that Tesla is going to miss already-low projections/goals/deliveries in 1Q18 by a wider-than-expected margin (yet to be posted);
• Now this: US consumer confidence at a 17-year high. Being reported by Bloomberg, so you know it has to be true:

U.S. consumer confidence jumped to a 17-year high as optimism about employment prospects grew and Americans began seeing additional money in their paychecks from recently enacted tax cuts, data from the New York-based Conference Board showed Tuesday.

More at the article.

By the way, talk radio suggests that Americans across the board are excited about seeing less money being taken out of their paycheck by the IRS. In some cases the amount of money being "returned" to workers is substantial, but my hunch is that most Americans "hate" the IRS so much than even if they saw one more dollar being returned to them, they would be happy. Even if pesky Pelosi calls it "crumbs" (let them eat bread), the average American worker sees it as something else.

Other details from the linked Bloomberg report:

• share of respondents expecting stock prices to increase in the year ahead fell to 41.3 percent from a record 51 percent;
• 25.8 percent of consumers said they expect better business conditions in next six months, up from 21.5 percent in previous month;
• share of households who expect incomes to rise in next six months rose to 23.8 percent, highest since 2001, from 20.6 percent; and,
• buying plans for homes, major appliances and new cars increased

Bloomberg did not take the opportunity to suggest this was making America great again. They must assume the average reader can connect the dots.

********************************

GDP Now Not Reflecting That Consumer Sentiment

Latest forecast: 2.6 percent — February 27, 2018.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.6 percent on February 27, down from 3.2 percent on February 16.

After this morning's Advance Economic Indicators and durable manufacturing reports from the U.S. Census Bureau, the nowcasts of the contributions of real nonresidential equipment investment and real inventory investment to first-quarter real GDP growth declined from 0.45 percentage points and 1.20 percentage points, respectively, to 0.37 percentage points and 0.95 percentage points, respectively.

The nowcast of first-quarter real residential investment growth declined from 0.6 percent on February 16 to -4.5 percent on February 26 after housing market releases from the Census Bureau and the National Association of Realtors.

US Natural Gas Exports Hit An All-Time High -- HFIR Energy -- February 27, 2018

Updates

Later, 7:58 p.m. Central Time: this really should be a separate stand-alone post, rather than an update, but I don't want to put two natural gas stories on separate posts so close together, so bear with me.

The original post is a very, very important post -- it's a US-centric post. This "update" is a more global look provided by Platts:

There was a certain air of triumphalism surrounding Anglo-Dutch major Shell’s statement in February that the world’s growing supply of LNG would be “comfortably” absorbed by rising demand in 2018, and that the much anticipated glut would never materialize.

This glut has been much predicted, predicated on the apparent surplus of new LNG capacity coming on stream versus predictions of demand rising, but at a slower rate than supply.

If Shell’s position holds, it is an important development because it could launch a new round of multi-billion dollar investments in LNG capacity, targeting an increasingly tight market between 2022-25.

This would have profound effects on the fortunes of many countries, not least those on LNG standby such as Mozambique and Tanzania, not to mention Qatar’s expansion plans for the giant North Field, Russia’s Arctic LNG 2, and the raft of developers waiting to export the growing volumes of “free” associated gas emanating from the latest shale boom in Texas’s Permian basin.

Of equal importance is that Shell’s statement justifies past spending because higher LNG prices mean that overspent LNG projects in Australia may be back in
the money, while US LNG gets a wide open arbitrage to Asia.

As US LNG production ramps up, producers there will be heavily dependent on this opportunity, which they hope will exist not as a function of below cost-recovery, must-run LNG production in the US — the glut scenario — but high prices in Asia as a result of strong demand growth.

 Much, much more at the link.

 Original Post

The weekly natural gas data will be released tomorrow or Thursday; I believe Thursday. I forget. The weekly petroleum report comes out on Wednesdays, but I think the natural gas data comes out on Thursday. Whatever.

Over at SeekingAlpha in a report dated today, February 27, 2018

• we expect a -84 Bcf change in the storage report for the week ended February 23, 2018
• a storage report of -84 Bcf would be compared to -7 Bcf last year and -118 Bcf for the five-year average
• LNG exports hit an all-time high yesterday
• but LNG demand won't increase from this level until 2019
• the elephant in the room for the rest of 2018 will still be just how fast lower 48 production grows

Also from the report:

After a month of delay, Cove Point LNG is kicking into high gear. Yesterday's reading had US LNG exports coming in at ~4 Bcf/d, the highest in history. Total US gas exports, as a result, pushed passed 8 Bcf/d marking a milestone.

And these milestones are not subtle. Look at these two graphs:

And this graphic released earlier today:

The Vultures Are Circling -- February 27, 2018

On my drive up to Lewisville this evening to take our oldest granddaughter to water polo practice I was thinking about vultures. We have a lot of vultures of one sort or another in Texas. Especially in the summer. Years ago when running to keep in shape to meet USAF standards, I often saw dozens of vultures roosting on those high-voltage transmission towers.

But I wasn't thinking about Texas vultures tonight. I was thinking about the vultures circling Venezuela. Over on Twitter there has been more and more chatter in the last couple of days regarding Citgo failing and Russia (Rosneft, specifically) getting ready to pounce. Then, earlier today a tweet suggesting that the US was ready to intervene to keep Russia from getting a toehold inside Venezuela. The tweet suggested that China wouldn't let Russia or the US get the booty without a fight.

So, early this afternoon, tweets suggesting that the US, Russia, and China were getting ready to go head-to-head/toe-to-toe on Venezuela or Citgo or some piece of either or both. It's complicated.

Now, tonight, on twitter again, this story from The [London] Financial Times: Swiss trader seeks go-ahead to buy Venezuea-Russia oil loan.

I said it was complicated.

Washington approval of the Swiss request could avert Russia (Rosneft) from taking over a stake in Citgo refineries in the US.

First thought: wow, I'm glad we have adult leadership in the White House, starting with the President. Can you imagine President Obama: "I can guarantee you that Russia won't get Citgo. I keep my word. I bring a gun to a knife fight. I said you could keep your insurance plan. I said you could keep your doctor. I absolutely, positively guaranteed that the Russians were not meddling in our presidential elections. So, tonight, I can, again, absolutely, positively guarantee you that the Russians won't own a refinery in the US."

So, back to the story:

Commodity trader Mercuria has asked the US Treasury for permission to buy out a $1.5bn loan between Russia’s Rosneft and Venezuela’s state oil company, which had raised the prospect of Moscow taking control of refineries on US soil. 

The cash-strapped Venezuela state oil company PDVSA, which has borrowed more than $6bn from Kremlin-controlled Rosneft, caused consternation in Washington last year after putting up a stake in its US-based refining subsidiary, Citgo, as collateral against a portion of the loan. 

The move by Switzerland-based Mercuria would see the trader put up the money to buy out the $1.5bn loan tied to Citgo, before syndicating it to other investors, according to people familiar with the proposal. 

If approved by the US Office of Foreign Assets Control, the deal could avoid a potential diplomatic tangle in the event that PDVSA defaults on its loans, with the US seen as unlikely to approve Rosneft taking over the 49.9 per cent stake in Citgo’s plants. Both Russia and Venezuela are subject to US sanctions, with Rosneft and PDVSA executives singled out for attention from the Treasury. 

Mercuria, which has a deal to supply Citgo’s three US-based refineries with non-Venezuelan crude oil, is attempting to structure the deal so as not to breach US restrictions on providing new finance to Rosneft.  

There is so much more at the linked article.

This is complicated.

And it's going to get more complicated.

We haven't heard from the Chinese yet.

And again, this is a $1.5 billion deal -- and that's just a start. The Venezuelans have at least $6 billion in loans from Russia.