Energy Transfer Partners, L.P. (NYSE:ETP) announced that:
“Dakota Access, LLC (“Dakota Access”) has received an easement from the U.S. Army Corps of Engineers (“Army Corps”) to construct a pipeline across land owned by the Army Corps on both sides of Lake Oahe in North Dakota. The release of this easement by the Army Corps follows a directive from President Donald Trump to the Department of the Army and the Army Corps to take all necessary and appropriate steps that would permit construction and operation of the Dakota Access Pipeline, including easements to cross federal lands. With this action, Dakota Access now has received all federal authorizations necessary to proceed expeditiously to complete construction of the pipeline.”
The Dakota Access Pipeline consists of approximately 1,172 miles of new 30-inch diameter crude oil pipeline from North Dakota to Patoka, Illinois, and the Energy Transfer Crude Oil Pipeline consists of more than 700 miles of existing pipeline that has been converted to crude oil service from Patoka to Nederland, Texas. The two pipelines (together, the “Bakken Pipeline”) are expected to be in service in the second quarter of 2017.
"The estimate is 60 days to complete the drill and another 23 days to fill the line to Patoka," a spokesperson for ETP stated. When completed, the pipeline will effectively reduce the breakeven for about 500,000 b/d of Bakken crude production by about $5/b. I expect that will stimulate production in that basin.
October production
Continental Resources (NYSE:CLR) December presentation (page 8) provides a chart that shows that its ND Bakken uncompleted wells can earn a 100% ROR with WTI prices in the low $40s. The average cost of completing DUCs is $3.5 million, as compared to full costs of $6.0 million. CLR's updated guidance says that it has 175 DUCs in the Bakken and had two simulation crews working, but planned to double that to 4 crews by end-2016. "The projected year-end Bakken uncompleted well count of 175 excludes approximately 15 wells that will have been stimulated by year-end 2016, but not produced with first sales until 2017."
EIA production data for October showed an increase in production in North Dakota of 72,000 b/d over September. It was the first meaningful increase since crude production had peaked there.
CLR completion crews
Continental Resources (NYSE:CLR) has stated that about 70% of its drilling budget there will be devoted to completing DUCs, which have a much lower breakeven than completing new wells. CLR has estimated that it can earn a 100% ROR on completing 'Drilled but Uncompleted' wells (DUCs) with WTI at $50/b.
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Best,
Robert Boslego
INO.com Contributor - Energies
Disclosure: This contributor does not own any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
Oil is likely to see a short run peak due to the global production cut (on condition that OPEC sticks to it), but this trend will not be sustainable in the long term, due to the development of new technologies regarding shale oil production, which will reduce costs considerably, resulting in lower prices. Taking this into account, it might be a good investment move to jump on this bandwagon while the upsurge lasts and decide upon the right timing to sell.
While oil will see a downtrend in the long run, the opposite is true for shale oil producers. These companies are most likely to witness a rise in their share prices for the reason mentioned above. Lower costs will lead to lower breakeven points, increased sales and higher profit margins. As for CLR, it might prove to be a good investment, both for fundamental reasons mentioned in the article, declining short interest to equity ratio (which is an indication of waning bearish and rising bullish sentiment) and good liquidity (CF to debt ratio). Technical indicators also point in the same direction. The share price has been in a downtrend for quite a while, which is about to end. there have been five mini divergences, the number after which the trend usually reverses.
Great post, which shale oil producers do you think
will benefit? Carol F