RBN Energy

Tuesday, 4/07/2020

E&Ps have long been accustomed to negative investor sentiment and the depressed stock valuations that come with it. But who among them could have anticipated the first quarter’s devastating one-two punch of coronavirus-related energy demand destruction and the collapse of the OPEC+ supply-management effort that for more than three years had propped up crude oil prices? E&Ps responded by slashing their 2020 capital spending plans and touting how much of their 2020 production is hedged. But there’s no doubt about it, the E&P sector is in for particularly hard times, as evidenced by Whiting Petroleum’s Chapter 11 filing last week. A major impediment for Whiting and other already hobbled E&Ps is a cost structure that, for many, significantly exceeds the current price of oil. Today, we discuss what an examination of more than 30 E&Ps’ lifting, DD&A and other costs reveals about the companies’ ability to stay afloat in rough seas.

Recently Published Reports

Report Title Published
LNG Voyager LNG Voyager Weekly - April 7, 2020 1 day 9 hours ago
Crude Oil Permian Crude Oil Permian - April 7, 2020 1 day 9 hours ago
Natgas Billboard NATGAS Billboard - April 6, 2020 2 days 8 hours ago
Natgas Permian NATGAS Permian - April 6, 2020 2 days 10 hours ago

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Daily energy Posts

Monday, 03/16/2020
Category:
Crude Oil

With a number of U.S. producers slashing their drilling plans for 2020, crude oil production may flatten or even decline somewhat in the oil-focused basins over the next few months. Still, large volumes of crude — somewhere north or south of 3 MMb/d — will need to be exported from Gulf Coast docks for the foreseeable future to keep U.S. supply and demand in relative balance. That raises the questions of whether more export capacity will be needed, and if so, how much and when? The answers to these questions depend in large part on how much crude the existing marine facilities in Texas and Louisiana can actually handle. Today, we begin a series that details the region’s export-related infrastructure and examines its capacity to stage and load export cargoes this year and beyond.

Sunday, 03/15/2020
Category:
Natural Gas

The natural gas market dynamics that were expected to turn gas flow patterns and price relationships in the Eastern U.S. on their heads and, in turn, transform supply-demand dynamics in Louisiana — including around the U.S. price benchmark Henry Hub — have come to fruition. LNG exports have surged as new liquefaction and export terminals have come online, injecting a new demand source along the Louisiana coastline. Producers have lined up to serve that demand. And midstreamers have worked to get the gas there, reversing and expanding existing northbound pipelines to move gas south into and through the Bayou State. Now, Louisiana’s gas market is nearing a critical juncture: the pipelines that connect the supply gateways in northern Louisiana to the demand centers along the Gulf Coast are nearing saturation. Today, we begin a series providing an update on Louisiana’s gas pipeline constraints and the projects lining up to alleviate them.

Thursday, 03/12/2020
Category:
Crude Oil

The crude-oil price crash of the past couple of weeks is forcing producers in every U.S. shale play to reassess their drilling-and-completion plans for the balance of 2020. Still, while the pace of activity in the Permian, the Bakken and other major plays may slow somewhat in the coming months if crude prices stay low, the vast majority of the new wells that are drilled will need to be connected to crude gathering systems — ideally ones that offer producers and shippers a high degree of destination optionality. Today, we continue our series on crude-related assets in western North Dakota with a look at another leading midstreamer’s gathering system, and its link to the Dakota Access Pipeline and a nearby refinery.

Wednesday, 03/11/2020
Category:
Natural Gas

New U.S. liquefaction trains and export terminals have added LNG to an oversupplied global market. International gas prices are at their lowest levels in several years, price spreads between the U.S. and destination markets have collapsed and — to make matters even worse — a coronavirus pandemic threatens to undermine LNG demand growth. U.S. LNG exports nevertheless have been increasing with each new liquefaction train that comes onstream, though, mostly because their long-term offtake contracts make cargo liftings relatively insensitive to global prices. The question is, will dire global market conditions somehow undo U.S. LNG production growth? Today, we discuss highlights from our new Drill Down Report on the future of U.S. LNG exports.

Tuesday, 03/10/2020
Category:
Crude Oil

It’s a new world, folks. The Saudis and Russians, who until a few days ago had been trying to prop up crude oil prices through supply management, are now engaged in an all-out war for market share. Crude oil prices are sharply lower. Three weeks ago, West Texas Intermediate was selling for $53/bbl and Western Canadian Select for $37/bbl; yesterday, they were selling for $34/bbl and $22/bbl, respectively. And things may get worse. All this has profound implications for North American production, but the effects on production in U.S. shale plays versus the Canadian oil sands will be very different. Today, we explain how the oil sands provide steady-as-she-goes baseload supply through pricing peaks and valleys while U.S. shale plays serve as a global swing supplier.

Monday, 03/09/2020
Category:
Natural Gas Liquids

Canada has been facing a similar situation to the U.S. in recent years in which the production of natural gas liquids, such as propane, has been rising sharply thanks to a focus on liquids-rich gas wells in unconventional gas plays. In response to the rising bounty of propane, infrastructure development in Canada has focused on export projects, and in 2019, the completion of the new Ridley Island Propane Export Terminal in British Columbia enabled the first overseas exports of propane from Canada’s west coast, allowing Western Canadian producers to access destination markets beyond just the U.S. for the first time. Later this year, Pembina Pipelines, a developer of energy infrastructure projects across Western Canada, will complete a new propane export terminal just outside Prince Rupert, BC, further boosting propane exports to overseas markets. Today, we take a closer look at propane supply issues, Pembina’s new propane export terminal and recently announced plans to further expand the terminal’s export capacity.

Sunday, 03/08/2020
Category:
Crude Oil

On Friday, global energy markets entered uncharted territory. Already facing declining demand due to the impact of COVID-19, markets then were dealt a body blow with the collapse of the OPEC-Plus alliance and the resulting prospect of a significant increase in supply. Saudi Arabia wanted to manage supply to balance against lower demand, but Russia was having none of it. Instead, reports from the OPEC-Plus meeting indicate that Vladimir Putin has declared war on U.S. shale. Then on Saturday, the plot thickened. Saudi Arabia made huge cuts in the price of its crude oil, presumably in a high-stakes move to bring Russia back to the negotiating table. Even though we are witnessing unprecedented market conditions, it’s not Armageddon. Crude oil will continue to be pumped, piped, shipped and refined. Most infrastructure projects under construction before the collapse in oil prices will be completed. The big question is, how will the market adapt? In today’s blog, we’ll begin an exploration of that question.

Thursday, 03/05/2020
Category:
Crude Oil

It’s been a good couple of years for many of the midstream companies active in the Bakken. Crude oil-focused drilling and completion activity has rebounded from a mid-decade slump, flows through their crude and gas gathering systems have been rising, and gas processing constraints that had threatened continued production growth have been on the wane. All that has led Bakken producers to plan for further gains in output in 2020 –– though that may change as the economic effects of the coronavirus become clearer. In any case, production growth is only possible if there’s sufficient gathering infrastructure in place to handle it. Today, we continue our series on crude-related assets in western North Dakota with a look at two midstreamers that have experienced big gains in their Bakken crude-gathering volumes.

Wednesday, 03/04/2020
Category:
Natural Gas

Unlike most natural gas producing jurisdictions in North America facing a pullback in drilling and capital spending, producers in Western Canada appear to be doing the opposite and lining up for a year of rising production, higher average prices and additional pipeline capacity from producing basins. In short, 2020 should be a year in which supplies in the region mount a comeback after the dismal down year for supplies — and prices — that characterized 2019. A good part of that supply and pipeline capacity growth optimism has to do with a major pipeline expansion out of the Montney Basin in northeastern British Columbia that just recently entered service. Dubbed the North Montney Mainline and operated by Canada’s largest gas pipeline company, TC Energy, this vital piece of new pipeline egress from one of the most prolific unconventional gas basins in North America is setting up Western Canadian gas supplies for recovery in 2020 and beyond. Today, we continue our series with a look at what this may portend for gas supplies this year.

Tuesday, 03/03/2020
Category:
Natural Gas

Given that Permian natural gas prices are once again hovering under $0.50/MMBtu, Texas’s other gas markets get little attention these days. That doesn’t mean that major shifts in the Lone Star State’s natural gas supply and demand markets aren’t occurring outside of West Texas, however. In fact, it’s quite the contrary, particularly when it comes to the Houston Ship Channel gas market. There, major changes — new gas pipelines, pipeline reversals and new LNG trains — continue to influence flows and prices. Today, we provide an update on the latest in gas infrastructure changes along the Texas coast and their potential impacts on the region’s supply and demand balance.

Monday, 03/02/2020
Category:
Crude Oil

The new, large-diameter crude oil pipelines coming online between the Permian Basin and the Gulf Coast grab all the headlines. They wouldn’t be nearly as valuable to producers, however, if it weren’t for a number of other, smaller projects being developed in West Texas to transport large volumes of crude from major gathering systems and storage hubs to these new takeaway pipelines. A case in point is Lotus Midstream’s recently unveiled Augustus Pipeline project, which will use a combination of new and existing pipe to initially transport up to 150 Mb/d of West Texas Intermediate (WTI), West Texas Light (WTL) and West Texas Sour (WTS) from Midland to Crane. When Augustus starts flowing late this year, crude delivered to the Crane hub could flow into the Longhorn Pipeline to Houston, or maybe the EPIC Crude or Gray Oak pipelines to Corpus Christi. Today, we discuss Lotus’s planned Midland-to-Crane project, and its significance for Midland Basin producers and the pipe’s owner/developer.

Sunday, 03/01/2020
Category:
Crude Oil

On Friday, CME/NYMEX WTI Cushing crude oil for April delivery closed at $44.76/bbl, down more than $16/bbl, or about 27%, since New Year’s Day. The declines in natural gas and NGL prices were not quite as severe, but only because those commodities were hit harder than crude during 2019. Even before COVID-19 landed on the market, energy prices were already under pressure from continued record production levels from U.S. shale, weakening demand, a mostly mild winter and a general investor pall over all things carbon. The threat of a global coronavirus pandemic was all it took to push things over the edge. So now what? Of course, nobody knows. But we can contemplate what this all could mean for energy markets, based on what we’ve seen in recent market statistics and price behavior. So that’s what we’ll do in today’s blog.

Thursday, 02/27/2020
Category:
Crude Oil

The Bakken was among the first plays to benefit big-time from the Shale Revolution, experiencing a 400%-plus increase in crude production in the first half of the 2010s. The play has had more than its share of challenges, however, including a serious lack of takeaway capacity that spurred the first rapid deployment of modern-day crude-by-rail, followed by a rig-count collapse and major production decline after the mid-decade crash in oil prices. But the Bakken has been roaring back. Crude output there now tops 1.5 MMb/d — some 250 Mb/d higher than its late-2014 peak — and producers have been planning for continued production growth in 2020, though many may be reassessing those plans in light of this week’s coronavirus-related price slide. In any case, production growth is only possible if there’s sufficient gathering infrastructure in place to handle it. Today, we continue our series on crude-related infrastructure in western North Dakota with a look at a leading Bakken midstreamer’s assets.

Wednesday, 02/26/2020
Category:
Crude Oil

Back in 2013-14, a run-up in demand for Jones Act tankers and large articulated tug barges –– and a spike in time charter rates — spurred orders for a flotilla of new vessels. By the time the new tankers and ATBs were built and launched, however, demand for them had fallen off. That decline was mostly due to the mid-decade slump in U.S. crude oil production and, with the lifting of the ban on most U.S. crude exports, the drop in crude shipments from one U.S. port to another. Term charter rates plummeted and ship owners stopped ordering new tankers and large ATBs. Now, for the first time in more than five years, there are barely enough Jones Act vessels to go around, and charter rates are on the rise. Today, we discuss recent trends and how they’re impacting crude oil and refined products transportation costs.

Tuesday, 02/25/2020
Category:
Natural Gas Liquids

It’s almost Spring 2020 and energy markets are making another turn. Prices have been clobbered by a combination of low, weather-related demand and COVID-19. Tight capital markets have the E&P sector hunkered down and the pace of production growth is slowing. But at the same time, new pipelines out of the Permian and Bakken are under construction; some are already ramping up flows. Long-delayed LNG terminals and NGL-consuming petrochemical plants are coming online. Essentially all growth in crude and gas — plus most incremental NGL production — is being exported to global markets, and those markets are pushing back. All this has huge implications for commodity flows, infrastructure utilization and price relationships for oil, natural gas and NGLs. Which means that it’s time for RBN’s School of Energy, with all of our curriculum and models updated for the realities of today’s energy markets. Today — in a blatant advertorial — we’ll examine our upcoming School of Energy and explain why this time around we are concentrating even more than usual on NGLs.