shutdown of DAPL

yikes, pipelines

Hondo Lane | July 08, 2020

(Petrolytics) - With the shutdown of the DAPL, it appears as though the Bakken might be shut-in for awhile longer. Even with pipeline access, the well-level economics will most likely struggle to compete with other opportunities (although the strike-down definitely isn't helping operators in North Dakota).

We'd expect the core acreage in the Bakken to continue development, however, the more fringe leases could sit idle or expire. The fraction of economically shut-in volume doesn't inspire confidence either. Many of these wells will require serious well intervention to return online. Many more will need to be P&A'd

"Oil production in North Dakota – from which more than 95% of the basin's crude output comes – averaged about 925,000-970,000 b/d in mid-June versus about 1.45 million b/d pre-pandemic owing to the pandemic-related output shut-ins."

Starr Spence, S&P Global Platts

Pretty fortunate that a significant piece of the Permian doesn't require interstate transportation, otherwise the fate could've been similar (albeit the economics are much better).

In any case, let's look at a few interesting pieces this morning.

  1. EIA July Short-Term Energy Outlook - July STEO increase over June STEO - May & June STEO forecast ~$40/bbl WTI by January 2021, while July STEO forecasts ~$40/bbl WTI months prior. All-in-all, forecasts are similar.
  2. Phillips 66 tech - interesting read on private 5G towers
  3. Counter-argument to new ESG pension rules - We'll dedicate a post to our take on ESG. In-short, the emphasis on ESG is worrisome. While it appears to be virtuous, the second-order effects are unknown. Introducing qualitative metrics for performance can have unintended consequences with regard to fiduciary duty. Could exacerbate the principal-agent problem. Interested to hear your thoughts.

We'll wrap up with a non-energy related story:

Harvard appears to be charging full tuition for virtual learning this fall. In our opinion, this is a misstep. We would encourage our kids to explore other options this fall. Perhaps it's worth taking a gap year, checking out the Lambda school, or going to vocational school. Full price for subpar product is crazy.

Stay safe!