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.”

Click here to watch this powerful 5 minute video.

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

On Saudi Pledge Oil Climbs To 17-Month High

Bloomberg: Non-OPEC Producers Join Deal to Cut Production

Introduction:  Largest oil producers strengthen commitment to tighten supply, Non-OPEC countries agree to trim output 558,000 barrel per day next year.

Oil advanced to the highest since July 2015 after Saudi Arabia signaled it’s ready to cut output more than earlier agreed and non-OPEC countries including Russia pledged to pump less next year.  WTI closed Monday at $52.83 P/B.

Futures climbed 2.6 percent in New York and 2.5 percent in London. Saudi Energy Minister Khalid Al-Falih said Saturday the biggest crude exporter will “cut substantially to be below” the target agreed on last month with members of OPEC. His comments followed a deal by 11 non-OPEC countries to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years.

U.S. oil futures have gained almost 20 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to cut output for the first time in eight years. Saudi Arabia, which initiated OPEC’s decision in 2014 to pump without limits, is leading efforts to regain control of the market. The OPEC and non-OPEC plan encompasses countries that produce about 60 percent of the world’s crude.

OPEC Collaboration…”The main impact of the non-OPEC collaboration is to pull the global market into balance, if not in deficit, in the second quarter of 2017, rather than in the third quarter,” said Sarah Emerson, managing director of ESAI Energy in Wakefield, Massachusetts. “On an annual average basis, this pushed the global balance into a 200,000 to 300,000 barrel-a-day deficit for the year.”

Oil prices at $60 a barrel would be “ideal” for OPEC as higher levels risk sparking a recovery in competing supplies from the U.S., Nigerian Minister of State for Petroleum Emmanuel Kachikwu said in a Bloomberg Television interview.

Conclusion…U.S. exporters rushed back to the shale patch with the largest weekly addition of oil rigs since July 2015 according to Baker Hughes.  OPEC deal cous drain almots half of the global oil surplus.

Sources:  Mark Shenk, Oil Climbs to 17-Month High on Saudi Pledge, Non-OPEC Output Cut, Bloomberg, December 11, 2016; Gran Smith, OPEC-Russia Deal Could Drain Almost Half the Global Oil Surplus, Bloomberg December 12, 2016; Non-OPEC oil producer to cut output 558,000 barrels a day, CNBC, December 10, 2016

Permian Basin Rig Count Explodes

Apache Corp. Drilling In Andrews County, TX

Introduction…The most attractive oil exploration and production region in the United States and perhaps the world has added 101 active drilling rigs since just May 13, 2016. That’s a giantic 84% gain in rigs in just in seven months.

The Permian basin in West Texas and southwestern New Mexico which is 250 miles wide and 300 miles long has become the most attractive drilling region due to the major infrastructure that reduces time and expense to getting oil and gas to the market.

The first commercial oil well in the Permian Basin was completed in 1921 in Mitchell County, on the east side of the basin; completed at a total depth of 2,498 feet, it was the discovery well of the Westbrook field.

With the coming of World War II the need for oil was urgent, and it became economically justified to drill more and deeper tests.

The entire Permian Basin during 1966 produced a total of 607 million barrels of oil and 2.3 trillion cubic feet of gas for a total of $2 billion. A cumulative total of 11.3 billion barrels of oil had been produced.

Conclusion...Intrastate and interstate gas pipeline systems were expanded throughout the area, and Midland-Odessa was the headquarters for the oil and gas industry in the Permian Basin area. Hundreds of millions of dollars have been spent on petrochemical refineries and supplemental construction work in the Permian Basin, which was rated the largest inland petrochemical complex in the United States. Is it no wonder the Permian basin is the most attractive oil exploration and production region in the United States and perhaps the world?

Take away...One business that benefits greatly from the new oil exploration and development is the saltwater disposal wells. These properties tend to have a consistent cash flow and a short payback period. Drop me a note if this intrigues you.

Trump Presidency Bullish On Oil & Gas Production

PumpingRigWTexas Pumping Rig W Texas

Introduction…While there are some specifics about President-elect Donald Trump‘s energy policy to be worked out, overall his presidency is “very bullish long term for oil and gas,” Warwick Energy CEO Kate Richard told CNBC on Thursday.

Trump has said he wants to roll back regulations and produce more energy, which he believes will create more wealth for America.

Richard thinks Trump’s economic plan could probably spur economic growth and demand for oil.

“I think the market loves Republican administrations and infrastructure is very bullish for crude and natural gas demand,” she said in an interview with “Power Lunch.”

Trump has promised a massive infrastructure spending program, saying in his victory speech early Wednesday morning he’s going to fix highways bridges, tunnels, airports, schools and hospitals — and put millions of people to work to get it done.

While Richard believes Trump’s energy policy is “interesting,” she noted the whole story can’t be put together yet.

For one, she said talk about repealing Environmental Protection Agency regulations are a little hard to understand.

“We haven’t seen a decline in drilling in this country because of EPA regulations. We’ve seen a decline in drilling in this country because of two years of low prices,” she said.

Conclusion…In Texas, the Texas Railroad Commission is primarily responsible for regulating the oil and gas industry.  One could conclude it has done an amazing job of protecting the public health and promoting the industry.  The primary benefit of a Trump Presidency to the industry may be not be a change in regulations.  Rather the increase in economic activity and infrastructure improvement from his intitatives may drive demand for oil related products.  Howevert, it is reassuring to have a President-Elect who understands that a healthy oil and gas industry is important to the overall economic health of the country,

Source: “Trump presidency bullish long term for oil and gas, energy CEO Says, CNBC, Michaelle Fox, 10 Nov 2016

20 Billion Barrels Of Oil North Of Midland Says USGS

wolfcamp-03-jpg-scale-largeThe Wolfcamp Is Largest US Shale Play

Introduction...The Wolfcamp Shale Formation is the largest continuous oil that the USGS has ever assessed in the United States.  Many are calling this discovery just north of Midland and west of Abiliene ‘world class.’

“The Wolfcamp could possibly become the largest oil and gas discovery in the world,” said Scott Sheffield, chief executive officer, Pioneer Natural Resources Co.

The operator is the largest acreage holder in the Spraberry/Wolfcamp field with about 900,000 gross acres (730,000 net acres), the majority of which could be prospective for the horizontal Wolfcamp shale.

Based on Pioneer’s extensive geologic database, petrophysical analysis, and successful drilling results to date, there is significant horizontal Wolfcamp shale resource potential in this acreage.

A vast resource...”The Wolfcamp is interesting because it’s been out there,” said J. Ross Craft, chief executive officer, Approach Resources Inc. Since the onset of Permian development in the early 1920s, operators have drilled through this formation. “Early in my career, we knew the Wolfcamp as a nonproductive shale that would put oil in the pits every once in a while,” Craft said. “That was about it.”

Today, Approach Resources holds 170,000 gross acres (mostly contiguous) in the Permian basin with a reported production of 8.4 MMboe/d as of the first quarter of 2013. In 2012, then company held 95.5 MMboe of proved reserves, with 69% represented by oil and natural gas liquids. “When we first started the company in 2006, we had a $5 million commitment, 0 acres, and 0 reserves,” Craft said.

Both Pioneer and Approach Resources tout Wolfcamp potential as a boon for the industry. According to Sheffield, Pioneer’s Eagle Ford success has provided a smooth transfer into the Wolfcamp. “When comparing phases of development, we see the Wolfcamp trending higher than the Eagle Ford based on activity and production,” he said.

According to Sheffield, the company will test 13 zones within the next 3 years. Sheffield noted that recoverable reserves were based solely on the Wolfcamp A, B, and D shelves and the Jo Mill formation. The potential is enormous, and “more reserves are yet to be discovered,” Sheffield said.

Pioneer combines its Spraberry/Wolfcamp acreage. It operates on the northern end of the play, which is said to contain an estimated 3,500-4,000 ft of shales, which translates to nearly 3 to 4 million acres when considered in 3D space as opposed to surface area. “Compare that to the Eagle Ford shale formation, which is about 300 ft thick and the Spraberry/Wolfcamp shale, with its 50 billion boe, begins to dwarf the Eagle Ford and the Bakken with 27 billion boe and 13 billion boe, respectively,” Sheffield said.

Conclusion…The United States is not running out of oil and gas anytime soon as new application of technology is discovering vast resources.

Take away...Some in the oil and gas industry are saying that the produciton costs of thi new shale play make it uneconomical and this is a just a stock price publicity push for Pioneer and Apache.  Time will tell.

References:  USGS Estimates 20 Billion Barrels of Oil in Texas’ Wolfcamp Shale Formation, USGS.gov., November 15, 2016; Permian’s Wolfcamp formation called biggest shale oil field in U.S., Joe Carroll, Bloomberg News, November 15, 2016

Injection Versus Disposal Wells

Saltwater Disposal Well

Straightforward Operation- Saltwater Disposal Wells

Introduction…Due to our current opportunity in acquiring Saltwater disposal Wells, further discussion of the topic is appropriate.  So, what is the difference between injection wells and disposal wells?

Disposal wells may be used to inject mineralized water produced with oil and gas into underground zones for the purpose of safely and efficiently disposing of the fluid. Typically, the underground interval is one that is not productive of oil and gas. In some cases, however, the disposal interval is a productive zone from which oil or natural gas has been produced or is currently produced. In either case, the disposal interval must be sealed above and below by unbroken, impermeable rock layers.

Injection wells inject fluids into a reservoir for the purpose of enhanced oil recovery from the reservoir. The vast majority of wells in Texas are injection wells. Operators use injection wells to increase or maintain pressure in an oil field that has been depleted by oil production and also to displace or sweep more oil toward producing wells. This type of secondary recovery is sometimes referred to as waterflooding.

Why Texas is so great…Texas is the nation’s number one oil and gas producer with more than 294,543 active oil and gas wells statewide according to oil and gas well proration schedules (as of September 2016). Injection and disposal wells are also located throughout the state to improve oil and gas recovery and to safely dispose of the produced water and hydraulic fracturing flowback fluid from oil and gas wells.

Texas has more than 54,700 permitted oil and gas injection and disposal wells with approximately 35,915 currently active as of September 2016. Of these 35,915 active injection and disposal wells, about 7,482 are wells that are used for disposal, the remainder (about 28,433) are injection wells.

Operators requirements...Operators are required to follow the Texas Railroad Commission (Commission) disposal regulations administered by the agency’s Technical Permitting Section – Underground Injection Control (UIC) Program. Underground Injection Control is a program that is federally delegated by the U.S. Environmental Protection Agency (EPA) to Texas, and it follows national guidelines under the federal Safe Drinking Water Act for surface and groundwater protection. EPA awarded the Commission primary enforcement responsibility over oil and gas injection and disposal wells on April 23, 1982.

In conclusion…Disposal wells ( our current focus)  are not terribly complicated as compared to oil and gas exploration and development.  Nevertheless, certrain requirements of the Texas Railroad Commission are required.  The Commission is oneof the first agencies our team contacts during due dilegence on any future saltwater well purchase is the Commission.

Source: “Injection and Disposal Wells,” Texas Railroad Commission, rrc.state.tx.us