Texas Fifth Straight Double-Digit Jump

The boom continues in The Permian Basin

Introduction: The US drilling rig count rose by double digits for the fifth consecutive week during the week ended Feb. 17.

Data from Baker Hughes Inc. shows the tally of active rigs gained 10 units to 751, an increase of 347 units since a modern era nadir of 404 touched last May 27 (OGJ Online, Feb. 10, 2017). In the last 2 months alone, the count has risen by 114 units.

Onshore rigs climbed by 13 to 730, with horizontal units up 7 to 614 and directional units up 6 to 72. The horizontal count has expanded by 300 since May 27.

The US offshore count dropped 3 units to 18 as it approaches lows not seen since the aftermath of the Macondo deepwater well blowout and crude oil spill. Three rigs remain drilling in inland waters.

Given the Permian’s overall increased drilling activity, the US Energy Information Administration forecasts Permian oil production to rise 70,000 b/d month-over-month in March to 2.25 million b/d (OGJ Online, Feb. 13, 2017). As of January, the basin boasted a suite of 1,757 drilled but uncompleted (DUC) wells, an increase of 84 from the December total.

EIA projects the Eagle Ford to record a 14,000-b/d month-over-month increase in March to 1.077 million b/d, marking the South Texas region’s first rise in Drilling Productivity Report data since late 2015. Its tally of DUC wells during January gained 11 month-over-month to 1,255.

In summary for Texas:  Texas is the only oil- and gas-producing state to record an increase with the exception Utah during the week, rising 1 unit to 6. The Permian Basin is driving much of the new drilling activity in Texas and the U.S.

Source: Matt Zborowski, “BHI: US rig count makes fifth straight double-digit jump, Oil & Gas Journal, 17 Feb. 2017

Why Saltwater Disposal Wells Attract Investors

Saltwater Disposal Wells

Introduction...Last October we discussed here The Surprising Discovery Of One Oil Executive.    Now we want to continue that discussion Why Saltwater Disposal Wells Attract Investors by enjoying the ATM of the oil patch as described by insiders.

  • Location – The proximity of the Saltwater Disposal Wells “CSWD” to producing fields is critical, as the cost of transporting produced water to a disposal facility is one of the larger recurring expenses that an operator incurs. Our next facility is one of three in this immediate area.  However, none of them will accept saltwater from outside truckers.  They use their wells for the water they produce only.  As a result, the truckers are driving by this property and driving as much as an additional 50 miles to dispose of their water.
  • Water Commitment – Our well currently under contract is being utilized for only 10% of its daily licensed disposal capacity.  With trucks driving past the property every day, it will be relatively easy to convert them to customers.  The good news is contract requires the grandson of the seller be allowed by dispose of his water which is the current 10% utilization.  By the way, this small utilization is profitable as is.
  • Commitment to the Customer – The management of our next facility also operates producing properties.  The management understands the other issues that concern an operator as it relates to choosing their disposal partner.  These Issues such include safety, ease and speed of off-loading.  Accurate and readily available reporting is important to the trucking company.

Conclusion: The steady cash flow that is not dependent on oil pricing or new discovery makes prime CSWD properties a valuable asset.  That is one reason these ATM’s of the oil patch rarely come up for sale.  However, we have found a seller who is retiring and wants to spend more time with his wife.  Does this intrigue you? Drop me an email if you desire additional information on this discovery.  We have a current property under contract that meets  these requirements.

This has been Bill Moist, MS, CPA reporting today Why Saltwater Disposal Wells Attract Investors.

Why Are So Many Bullish On Oil?

Apache Drilling Andrews County

Indtroduction...A Wall Street Journal survey of 15 investment banks finds cautious optimism among oil watchers. The monthly survey is a good barometer for market sentiment, as shifts in price forecasts can signal a change in expectations. The latest survey finds that analysts predict that Brent will average $56 per barrel in 2017, up $1 per barrel from the previous month’s forecast. The banks also raised their forecast for WTI by $1 to $55 per barrel. As the WSJ notes, this was the first increase in the average estimate in five months.

And while the investment banks are more optimistic than last month, they are still, on average, predicting oil will trade in the mid-$50s per barrel over the course of the year – not exactly an aggressive call given that both WTI and Brent are currently trading just a bit below those levels. Moreover, the expectation of $55 for WTI in 2017 is sharply lower than the expectations from a year ago when the same 15 investment banks expected crude to trade well above $60 per barrel this year.

In summary…Still, on the whole the banks are a bit more bullish on crude than they were a few weeks ago, and that is noteworthy. Standard Chartered tops the list with an expectation of oil rising to the high-$60s before the year is out.

Source: Nick Cunningham, “Why Is Everyone So Bullish On Oil?” OilPrice.com, 30 Jan 2017

Trump Advances Keystone Pipeline

 Keystone Pipeline Executive Order Signed

Introduction…President Trump signed executive orders on Tuesday effectively reviving the controversial Keystone XL and Dakota Access pipelines, as a major builder said it will reapply to build one of the projects which had been stalled by the Obama administration under pressure from environmental and other groups.

The president said the projects would be subject to a “renegotiation of the terms.” But he made clear the government was resuming consideration for both pipelines, describing them as a potential boon to construction workers.

“We’re going to put a lot of … steel workers back to work,” Trump said. “We’ll build our own pipelines, we will build our own pipes.”

Builder TransCanada said Tuesday afternoon it was “preparing the application” for the Keystone XL pipeline.

“We appreciate the President of the United States inviting us to re-apply for KXL,” TransCanada spokesman Terry Cunha said in a statement.

“KXL creates thousands of well-paying construction jobs and would generate tens of millions of dollars in annual property taxes to counties along the route as well as more than $3 billion to the U.S. GDP,” Cunha added.

In conclusion...North Dakota Rep. Kevin Cramer said: “Today’s executive orders affirm President Trump’s respect for the rule of law and his support for responsible infrastructure development, energy production and job creation.”

It’s refreshing to have a president who genuinely desires to create American jobs for Americans. The forgotten man and woman as he stated previously.

Sources: “Trump signs orders reviving pipeline projects, TransCanada sales it will reapply for Keystone,” FoxNews.com, 24 Feb 2017; Athena Jones, “Trump advances controversial oil pipelines with executive action,” CNN Politics, 24 Feb 2017

$25 Trillion Investment Needed

  West Texas Drilling Rig

Introduction...We’ve been documenting the massive cuts in new oil and gas drilling programs.  Now we are seeing the results.  The world needs to invest US$25 trillion in new oil-producing capacity over the next 25 years to meet growing demand, Saudi Aramco’s chief executive Amin Nasser said at the World Economic Forum in Davos last Tuesday.

Demand is still healthy and oil “will be with us for decades”, CNBC quoted Nasser as telling a Wall Street Journal panel at the Davos forum. The global oil and gas industry needs to expand and requires more investment, Nasser said.

In summary…Wood Mackienzie sees E&P global spend rise with about 3 percent in 2017 to around $450 billion. According to WoodMac’s Malcolm Dickson, ‘’companies will get more bang for their buck,”as internal rates of return jump from 9 to 16 percent, comparing 2014 to 2017.

Source: Tsvetana Paraskova, $25 Trillion Invesement Needed To Meet Future Oil Demand, OilPrice.com, 17 Jan 2017

8 Easy Ways To Supercharge Your IRA or 401k

Introduction: This topic has been well received by various Chambers and civic groups.  So, far no one has taken me up on the guarantee because everyone learns something they’ve never heard before.  

If you are in Keller on February 15, 2017, I encourage you to attend this enlightening presentation.  If not and you are a member of a Chamber or civic group, contact me to book a personal presentation for your group.

Saudi Arabia Oil Production Cuts Push Oil Up

 U.S. Oil Production Falls

Introduction…Oil prices rose on Friday as a result of a strong draw to U.S. oil inventories and early signals that OPEC is following up on their pledge to cut output

Oil prices are set to end the week slightly up from where it started, following a few rocky days of trading. After a sharp correction, earlier in the week, oil regained ground on a steep fall in crude oil inventories. Still, the gains would have been much larger if not for the fact that U.S. gasoline stocks rose sharply. Nevertheless, oil is starting off the year on a positive note, and early signs of OPEC compliance (more below) are buoying the market.

Tesla gigafactory starts up. Tesla (NYSE:TSLA) announced that its gigafactory has started commercial production of batteries at its much-hyped gigafactory in Nevada. The inauguration of mass battery production marks a new era for the energy industry. The gigafactory could lower the cost of batteries for electric vehicles as well as home energy storage systems. Tesla says that at peak production, slated for 2018, the factory will add as much battery capacity to the global market as the rest of the world currently produces.

U.S. to become net-energy exporter. The EIA released its Annual Energy Outlook 2017, with projections out through 2050. The report estimates that the U.S. will become a net-energy exporter in the years ahead under most of its possible scenarios. That is largely due to falling oil imports and rising natural gas exports. The higher energy prices go, the quicker the U.S. becomes a net-exporter.

In Conclusion…It’s too early to tell which OPEC and Non-OPEC countries will stay with the recent production cuts agreed to.  However, it appears that Saudii Arabia is meeting its lower target.  Time will tell who is cheating.

Fossil Fuel Will Supply 80% Of Global Energy Till 2040

The global energy mix will not look much different for oil, gas, and coal through the year 2040.

Introduction...Both the middle class and world GDP is expected to double in the next 14 years, accelerating demand for air conditioned homes, cars, and appliances such as refrigerators, washing machines, and smart phones. Non-OECD nations, particularly China and India, will experience the most economic growth, driven by urbanization.

Oil is expected to remain the world’s primary energy source, driven by demand for transportation fuel and feedstock for the chemical industry. Plastics and other advanced materials provide advantages to manufacturers and consumers including energy efficiency gains.

Natural gas is projected to grow the most of any energy type, accounting for a quarter of all demand by 2040. Coal will remain important but will lose a significant amount of its share as the world transitions to cleaner energy.

The World ElectrifiesIncreasing electrification will drive the growth in global energy demand over the next 25 years, 55 percent of energy demand growth coming from power generation to support increasingly digital and plugged-in lifestyles and electricity will grow the most of any sector.

Conclusion: While renewable energy will grow in the next 15 years, it’s growth is not expected to keep pace with the overall demand for energy.  Oil, gas, and coal are expected to meet 80% of the world’s energy demand through the year 2040.

Sources: U.S. Energy Outlook 2016, U.S. Energy Information Agency, eia.gov/outlooks; International Energy Outlook 2016, U.S. Energy Information Agency, eia.gov/outlooks; Exxon’s 2040 Outlook, oilprice.com, December 30, 2016

Forget New Year’s Resolutions

 Introduction…Every year Americans fail to keep their New Year’s Resolutions.

But, somehow we think if we just try harder, this year will  be different.

There are scientific and spiritual reasons why we should “Forget New Year’s Resolutions and Instead Prepare Our Minds For Success.”

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Click to Get FREE UPDATES & Oil And Gas Reports.

Coming Oil Shortage In 2017?

Oil shortage…Global oil markets will swing from surplus to deficit in the first half of 2017 as OPEC and other producers follow through on an agreement to cut supply, according to the International Energy Agency.

Oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect, said the agency, which had previously assumed inventories wouldn’t drop until the end of 2017. Russia, the biggest producer outside OPEC to join the deal, will gradually implement the full reduction it promised, according to the IEA.

Oil has gained about 17 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to trim output for the first time in eight years, an accord expanded on Dec. 10 with the participation of 11 non-members including Russia and Kazakhstan.

“Before the agreement among producers, our demand and supply numbers suggested that the market would re-balance by the end of 2017,” the Paris-based agency said in its monthly market report. “If OPEC promptly and fully sticks to its production target” and other producers cut as agreed, “the market is likely to move into deficit in the first half of 2017.”

Stockpile declines…The stockpile declines will only occur if OPEC reduces supply enough to meet and maintain a target of about 32.7 million barrels a day, the agency said. The organization pumped a record 34.2 million a day in November, making the cut required to reach its target even bigger, according to the IEA, which advises 29 nations on energy policy.

In summary…There are some signs the market is already starting to tighten. While inventories of crude and refined oil in industrialized nations remain 300 million barrels above their five-year average, they dropped for a third month in October, the longest run of declines since 2011, according to the IEA.

Source: Grant Smith, OPEC Deal To Create Oil-Supply Deficit Next Half, IEA Says, Bloomberg, 13 December 2016; Jeremiah Carver, From oil glut to oil deficit in 2017, Oilpro.com, 13, December 2016