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CRUDE OIL INVENTORY/’000 bbls (Week Ended 4/3/13)

Current: 395,284
Actual Build/(Withdrawal): 6,696
Economist Average Estimate: 1,018
Previous: 388,588

Click here for the chart with five year averages.

CRUDE OIL IN THE MEDIA

*Bakken, Three Forks Has More Oil Than 2008 Estimate: USGS – Bloomberg

Oil resources in shale formations of North Dakota, Montana and nearby states are 7.4 billion barrels, U.S. government researchers said, doubling an estimate for the region made five years ago. The U.S. Geological Survey said today the resources can be extracted using current technology and exclude those oil-shale reserves that have already been tapped or listed by industry. In 2008, the agency estimated total oil in the Bakken formation, which is within the region assessed in today’s report, was 3 billion to 4.3 billion barrels. The agency for the first time studied the Three Forks formation, which is estimated to include 3.73 billion barrels, exceeding the recoverable oil in the Bakken. Five years ago, Three Forks, which lies further underground than the Bakken, was considered out of reach, the agency said. – Read More

*Boom Times for a Tiny Texas Town – WSJ

It was a railroad that brought this tiny town into existence in 1910, when it was named after the stationmaster, William F. Barnhart. Today that same railroad is putting the town on the map again—as an unlikely hub of the new American oil boom. Hydraulic fracturing, or fracking, has created a surge of oil production from the Permian Basin, as drillers use water, chemicals and sand to crack open oil-bearing rocks deep underground. The heart of the West Texas oil region now produces about 550,000 barrels of oil a day, up 38% from three years ago. – Read More

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*NM county ordinance bans oil, gas development – Associated Press

A sparsely populated county in northern New Mexico has taken aim at the oil and natural gas industry, approving an ordinance that outlaws the extraction of the natural resources and puts the county’s decision-making rights ahead of business interests and federal and state permits. The Mora County Commission voted 2-1 on Monday in favor of the ordinance, which is aimed primarily at protecting groundwater sources across the county. – Read More

*Keystone Pipeline Support Enlists Oil Firms to U.S. Jews: Energy – Bloomberg

Almost 50 groups representing everything from oil companies to American Jews have stepped up their Washington spending as the proposed Keystone XL oil pipeline proves to be a bonanza for lobbyists. The American Petroleum Institute, a Washington-based oil industry trade group, increased its lobbying spending on all issues, including Keystone, to $2.1 million in the first three months of the year from $1.8 million during the same period a year earlier, Senate records show. The American Jewish Committee lobbying costs rose to $40,000 from $30,000. – Read More

*Lawmakers advance bill to halt oil fracking – Associated Press

Critics of hydraulic fracturing urged lawmakers Monday to impose a moratorium on the controversial drilling technique, saying there is too much uncertainty about its health and environmental effects. More than two dozen opponents of “fracking” lined up to share their concerns at an Assembly Natural Resources Committee hearing, where lawmakers advanced three bills to prohibit the practice temporarily. The drilling technique involves blasting water, sand and chemicals into deep rock formations to release oil or natural gas. – Read More

*Oil Retreats Amid Glum Data, Worsening Demand Worries – Reuters

World oil prices slid more than one percent on Tuesday, headed for their biggest daily decline in almost two weeks after U.S. data showed Midwest business activity contracted in April and European data showed record unemployment. A survey showing a rebound in supply from OPEC producers in April further pressuring prices a day after they had rallied up to $104. In mid-April, oil hit a nine-month low below $97, and Brent crude is still down nearly 7 percent for the month, heading for its biggest monthly decline in 11 months. – Read More

*Canadians must fight U.S. protectionism in the energy sector, Prentice says – Calgary Herald

Former Conservative cabinet minister Jim Prentice says Canadians need to step up their efforts to maintain free and open energy markets for Canada’s oil, gas and electricity in the United States. Prentice, who is now a vice-president at CIBC, is in Halifax Tuesday to discuss how Canada will fare in a North America that is on the verge of being energy independent. “If we play our cards right, there will be profound opportunities for Atlantic Canada and for our country as a whole,” he told the Maritimes Energy Association in Halifax, according to a text of his speech. – Read More

*Billionaire Plots to Beat Chevron to Largest Latin Shale – Bloomberg

Argentina’s Eurnekian family, after becoming billionaires from media and airports, is planning to become the government’s first shale oil and gas partner. Eduardo Eurnekian, tapping a fortune of at least $1.3 billion, has pledged $700 million in two deals to hasten a definitive partnership with Argentine government-owned YPF SA to develop its Vaca Muerta fields. After his $500 million preliminary accord with YPF in October, the 70-year-old last week paid about $200 million for 81 percent of Cia. General de Combustibles SA, an oil producer and shareholder in pipelines to YPF’s first operating shale-gas well. – Read More

*Saudi Prince Says Crude Capacity Will Rise to 15 Million Barrels – Bloomberg

Saudi Arabia plans to raise production capacity to 15 million barrels a day by 2020 from 12.5 million barrels a day now, a Saudi prince said, reviving talk of a higher internal target. The new capacity will allow the kingdom to be able to export as much as 10 million barrels of crude a day, Prince Turki Al Faisal, 68, a former head of intelligence, said in an April 25 speech at Harvard University that was posted on the university’s website yesterday. – Read More

*Saudi Oil Minister Plays Down Production Expansion Talk – CNBC

Saudi Arabia Oil Minister Ali Al-Naimi Tuesday emphasized the Saudis currently have no plans to expand production, while he also framed the U.S. energy boom as a companion, not competitor to his country’s production. In a carefully worded speech highlighting the importance of cooperation with the United States, Naimi commented directly on the expansion in shale oil and gas production in North America and welcomed the new supplies onto the global market. – Read More

*Egypt Seeks Oil Deals to Ease Shortages – WSJ

Egypt is working to secure oil supply deals on favorable credit terms from major Arab producers in an attempt to ease fuel shortages and a government cash crunch that have proved politically damaging for the country’s Islamist president, Mohammed Morsi. Egypt’s neighbor Libya has agreed in principle to offer Cairo close to 1 million barrels a month of crude supplies on a lengthy one-year credit term, with the first shipment expected next month, officials from the two countries told The Wall Street Journal. – Read More

RESEARCH COMMENTARY

*Wells Fargo Securities (5.1.13)

NGL Market Overview. The composite price for a gallon of natural gas liquids (NGLs) decreased by 4.9% in March, to $0.94 per gallon from $0.98 per gallon in February. WTI crude oil prices decreased by 2.7% in March, to $92.76 per Bbl from $95.36 per Bbl in February, while Brent oil prices decreased by 5.8%, to $109.49 per Bbl. The NGL-to-WTI crude ratio decreased slightly, to 42% in March versus 43% in February. The processing margin decreased by 12.8% in March, to $0.61 per gallon from $0.71 per gallon in February due to the decrease in NGL prices and a 14.7% increase in the price of natural gas.

Tweaking Our NGL Price Deck. We increased our Mont Belvieu composite NGL price estimate for 2013 to $0.95 per gallon from $0.92 per gallon. We also adjusted our 2014, 2015, and 2016 NGL price forecasts to $0.96 per gallon, $1.09 per gallon, and $1.13 per gallon, respectively, from $0.97 per gallon, $1.07 per gallon, and $1.15 per gallon. Our long-term forecast (2017+) of $1.21 per gallon is unchanged. Please see inside for additional details.

*Wunderlich Securities (4.30.13)

The Wattenberg Field Is Not Just About the Niobrara Anymore

Niborara discoveries set the stage for Codell. The horizontal Niobrara play began to pick up steam again last year. Recent tests and pilots prove that there are at least three prospective benches in Niobrara and that the Codell is also productive. Down-spacing pilots can compound potential drilling locations for most producers. Noble Energy (NBL-$113.04, Buy) and Whiting Petroleum (WLL-$45.26, Buy) reported positive well results in the northern portion of the play and extended reach lateral wells drilled by NBL are yielding strong results and high return.

Northern Colorado – Top ten wells yielded average 30-day peak rate of 549 boepd with 83% oil. NBL has ~360-day of production history from at least 27 wells at its East Pony Project, these wells are exceeding the 335 Mboe type curve. The EURs could improve with time we believe. We identified the top 10 producing wells from Northern Colorado (Figure 1) with the best well, Noble’s Rohn 16-96 HN, testing at a peak 30 day rate of 710 boepd (85% oil). Carrizo Oil and Gas (CRZO-NR), drilled five of the top 10 wells, including its Hemberger 2-26-34-8-60 well tested 658 boepd (91% oil) and WLL’s Razor 26-352-4H could also end up on the top ten list.

*Howard Weil (4.29.13)

ExxonMobil $88.00 (SP): Kearl Oil Sands Start-up

Quick Take: Late last week XOM announced the start-up of the highly anticipated Kearl project in the Canadian Oil Sands. The project should reach an initial production peak of 110MBbl/d later this year with another 110MBbl/d expected by late ’15. The Company is targeting 4.6BBbls of resource over the next 40-years and this is the first mining operation without use of an upgrader. We believe Kearl will be a strong contributor of future cash flow to XOM given the liquids orientation of the hydrocarbons, stable political and fiscal regime and the long-life plateau production profile.

*Wells Fargo Securities (4.29.13)

Commodities: After over a month of questioning whether the natural gas rally could continue and repeatedly being proved wrong, we finally saw the commodity pull back, down 5.8% on the week. At the market close on Friday, natural gas was trading at $4.15. Storage report largely in-line with expectations, first time in a while we haven’t seen the release drive natural gas higher. Hard to pinpoint drop to any one factor, but we think that gas to coal switching and meaningful hedging by producers likely part of the equation. Natural gas strip fared better than front-month, falling 3.7% for the week and finishing at $4.40. WTI rebounded nicely on the week, finishing up 5.3% at $92.93/Bbl. With Brent up 3.3% w/w, the WTI-Brent spread narrowed by 12%. Spread has narrowed for 6 out of last 7 weeks and is now at $10.03.

*Baird Equity Research (last week 4.25.13)

Crude differentials update: watching Clearbrook on Calumet refinery work. Continuing to monitor crude oil differentials as a key theme of investor focus for 2013 following YTD tightening in both Brent/WTI ($10.79/bbl currently, off $10/bbl recent low) and LLS/WTI ($11.14/bbl currently) due to increased infrastructure capacity bringing more crude to the Gulf Coast region. Making headlines yesterday was the widening in the Clearbrook/WTI differential to -$3.75/bbl vs. its 50-day and 200-day moving averages of -$0.50/bbl and -$1.72/bbl respectively due to the start of plant wide maintenance at Calumet’s 45,000 bbl/d Superior, WI refinery that processes primarily Bakken and western Canadian crude. Maintenance is expected to take three weeks so expect some near-term volatility in the Clearbrook/WTI spread though less than in the past given increased rail outlets. The Midland/WTI spread remains effectively at parity (-$0.10/bbl) and trending in flattish over the past two month; 50-day and 200-day moving averages of -$0.34/bbl and -$3.78/bbl.

EIA inventories: positive on mogas. EIA inventories were bullish for near-term oil prices, which rallied >2% on the day, primarily due to the largest draw in mogas inventories in over a year at -3.9 MMbbls vs. -0.4 MMbbls consensus and last week’s -2.7 MMbbls. A smaller-than-expected build in crude inventories was also modestly positive, increasing +0.9 MMbbls vs. +1.7 MMbbls consensus though reversing course from last week’s -1.2 MMbbls draw. Distillate the negative on the week with inventories increasing +0.1 MMbbls vs. consensus of -0.3 MMbbls but better than last week’s +2.4 MMbbls. Cushing stocks continued their climb higher increasing +0.1 MMbbls on the week to 51.2 MMbbls, which is 55% above the five year average.

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable.  This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note.  This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results.  EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services.  In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies.  As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note.  The company or companies covered in this note did not review the note prior to publication.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.