In true Trumpian social media fashion, I have recently come to the conclusion that any and all things can be described and explained in a well scripted twitter storm – not to exceed 50 tweets in a thread.

 

Inspired by this awesome revelation of the power of the tweet, I have decided to prove my thesis by describing my thoughts on the state of the oil industry in no more than 50 tweets.

 

To be truly effective and thought provoking, it kinda needs to be stream of consciousness so it’s pretty hard to follow. Plus I wrote it all hopped up on caffeine and in secret so no one could possibly come and edit me. If you are left with a sinking feeling of abject confusion after reading this, I can assure you that you are not alone. I feel the same way.

 

1. Oil price rally seems to be holding up in the face of headwinds. But red flags suggest caution B4 doubling down!! #warningsigns

 

2. Production in the US has risen 400k barrels since mid-2016, another 400 expected this year – kinda offsets OPEC right? Very bad.

 

3. US Rig count up a whopping 280 since May, with most in RED HOT Permian basin. #hype?

 

4. DUC inventory still at all-time high. Completions accelerating, drilling ON FIRE… expect a wave of production in the next few quarters.

 

5. Never underestimate the ability of profit-seeking industry to destroy a good thing – 400k could be low estimate, remember nat gas in 2009? Mom – shale killed my industry…

 

6. So, American oil jobs and activity recovery, but for how long? Is this a case of eating the goose that laid the golden egg and then frying the egg and exporting it? #weirdnurseryrhymereference

 

7. FAKE NEWS Media won’t report on how much Dumb money is going back into the same companies that were BANKRUPT 6 months ago. Will these banks never learn? FREE CASH FLOW matters! Stop feeding the fire!!!! Where’s the discipline?

 

8. Land rush into the Permian continues. Stacked formations and existing infrastructure make this an easy play. Still expensive to develop, but cheap and flexible compared to alternatives, plus, the banks! #easymoney #whocaresaboutunderwriting

 

9. How long can the production party last? 5-10 years according to EIA. 4ever according to Wall Street – please sign the cheque here. #suckerbet?

 

10. Cushing Storage is at an all-time high – it really seems people don’t care anymore or this time around? Does storage only matter when prices are LOW? Dumb.

 

11. OECD storage overhang of 500 million barrels probably needs to be 200 mm – means OPEC cuts need to be in place for at least a year if not more – NOT GONNA HAPPEN

 

12. Continued OPEC compliance is no guarantee – these guys all hate each other. Very sad.

 

13. Nigeria increasing production, bribing the right militants at just the wrong time.

 

14. Libya – what’s going on? Output at 700k and climbing, can one country outside of US kill the whole rally? When do they become part of the cuts?

 

15. Iran and Russia teaming up on oil production. Is this Trump’s idea? #putinthefox

 

16. Of course, if the world just shut in their production for two or three days, the problem would be solved. Weird to think of it that way huh? #radicalsolution

 

17. Bullish bets on oil price extremely high – ironically usually leading indicator to a price drop. These guys are always wrong. #crashinthemaking?

 

18. Reserves rout – Exxon! Conoco! Oil sands no more! Reserve write downs don’t eliminate barrels – they are still there. 176 billion barrels don’t disappear because an accountant says so. #Thatsalotofoil

 

19. Still, doesn’t look good for greenfield Cdn oilsands unless price ^ or costs come down. Step up Canada, technology needs to play a role. That said, DUMB to count them out. Why does Cdn media have to play that game? #FortMacStrong

 

20. Supply Demand balance now not expected until late 2017. Do we even know what that means? Has this industry ever been balanced?

 

21. So what happens when we are back in so-called balance? All bets are off? Back to peak production and start the cycle again? What if we go too far and crush inventory? #unasweredquestions

 

22. Now that the Permian is back, can the Bakken be far behind? Not so fast – production off 30%, activity down 50%, need a pipeline to be competitive #DAPL

 

23. DAPL protestors packed up and moved by US Army – will Canada show the same muscle? Not likely!

 

24. That KXL submission was 30 days ago – is it conceivable to have it moving forward in the next 45? Rex “Sexy Rexy” Tillerson in charge on this one – #thefixmaybein #justneedtofindsomeUSsteel

 

25. Never mind peak oil, it’s all about PEAK DEMAND! no one wants oil anymore because everyone is driving an electric vehicle. Oil is a failing commodity.

 

26. Chief economist at BP says there is enough oil in the ground for demand til 2050 2 times over and price will never jump to $100. Dude – U no who signs ur paycheque right?

 

27. Just saw 2 4casts on oil demand by 2040 – one at 120 mm bpd and one at 35 mm. Guess which one was Greenpeace’s? Guys – demand projection is not a self-fulfilling prophecy. My forecast is somewhere in between, likely biased up. #canweallcalmdown?

 

28. FAKE NEWS Media says Canada can’t do oil at low prices. That’s what they think. #makecanadagreatagain

 

29. Job killing carbon sales taxes help kill Canada’s competitiveness. Why the rush to make the expensive more expensive!

 

30. Canada has access to some of the best oil and gas resources in the world. All will be well.

 

31. Short term problems though – slow recovery and still too much equipment

 

32. Crappy winter (not cold enough) holding back activity may be blessing in disguise as breakup may be earlier and shorter

 

33. Oilfield services are busy and hiring – let’s smooth it out and keep people working

 

34. FAKE NEWS Media jabbering about a jobless recovery – I guess the 12k service people hired in last few months don’t have real jobs? DUMB. #itsnotjustwhitecollar #lookbeyonddowntowncalgary

 

35. Is anyone else tired of hearing how investment is “leaving Alberta/Canada”? Does the FAKE NEWS Media even know what they mean when they say this? Capex up more than 30% this year!

 

36. BTW – NDP rising in the polls in BC. Election in May. LNG announcement not til after. Expect TransMountain to be singular election flashpoint. Christy Clark, Notley and Trudeau need to wake up! #itsgonnagetugly

 

37. Random – at 259 million barrels, U.S. gasoline storage levels are now at their highest level since the EIA began tracking the data back in 1990. 2 much prod. = 2 much gas = price crash???

 

38. US exports of oil at record high – must be nice to have pipelines to major ports.

 

39. These US exports at high WTI price suggest no urgency to replace discount Cdn crude at Gulf Coast – canucks are suckers. #americawinning

 

40. More than 100 years of natural gas supply in the US! Wait, to get it you have to frack under Philadelphia. OK, more like 50 then. Do I hear 25?
41. Interesting tidbit, Permian production of oil way up, but gas production down – what’s up with that?

 

42. LNG is never going to happen in Canada

 

43. LNG may happen in Canada

 

44. It’s too late for LNG this cycle in Canada, need to wait

 

45. #wtf

 

46. Q for LNG naysayers – Do you really think Petronas would buy Progress, spend billions of dollars drilling North BC, continue to spend, propose a change to offtake island if they weren’t serious about their project?

 

47. Here’s a hint – they ARE serious

 

48. Bottom line – people who think we are out of the woods on oil are DUMB. There are bigly risks all around. Look before you leap

 

49. Gas rally is stalled on weather and lower draws, price is going to be a bear for a few quarters, but don’t let it fool you, the long term fundamentals are strong in this carbon atom #imabeliever

 

50. #crazy #volatile #risky #mostfunbusinessintheworld #Justanotherdayintheoffice

 

Prices as at February 24, 2017 (February 17, 2017)

• The price of oil was choppy during the week ending up as increased drilling activity, storage and OPEC compliance battled for market influence.
  • Storage posted a modest increase
  • Production was flat
  • The rig count in the US continues to grow, although at a slower pace

• Natural gas was weak during the week as milder weather crushed sentiment and pushed prices down

• WTI Crude: $54.04 ($53.37)
• Nymex Gas: $2.627 ($2.843)
• US/Canadian Dollar: $0.7631 ($ 0.7633)

Highlights

• As at February 17, 2017, US crude oil supplies were at 518.7 million barrels, a increase of 0.7 million barrels from the previous week and 42.4 million barrels ahead of last year.
  • The number of days oil supply in storage was 33.2, ahead of last year’s 32.4.
  • Production was down for the week by 24,000 barrels a day at 9.001 million barrels per day. Production last year at the same time was 9.102 million barrels per day. The change in production this week came from a small increase in Alaska deliveries and increased Lower 48 production.
  • Imports fell from 8.491 million barrels a day to 7.286, compared to 7.802 million barrels per day last year.
  • Refinery inputs were down during the week at 15.281 million barrels a day
• As at February 17, 2017, US natural gas in storage was 2.356 billion cubic feet (Bcf), which is 7% above the 5-year average and about 10% less than last year’s level, following an implied net withdrawal of 89 Bcf during the report week.
  • Overall U.S. natural gas consumption was down by 15% during the week on warmer weather and demand declines across all sectors
  • Production for the week was flat and imports from Canada fell by 12% from the week before
• As of February 21, the Canadian rig count was 262 (41% utilization), 195 Alberta (45%), 29 BC (41%), 30 Saskatchewan (26%), 8 Manitoba (53%)). Utilization for the same period last year was about 26%.
• US Onshore Oil rig count at February 24 was at 602, up 5 from the week prior.
  • Peak rig count was October 10, 2014 at 1,609
• Natural gas rigs drilling in the United States was down 2 at 151.
  • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
• Offshore rig count was down 1 at 17
  • Offshore rig count at January 1, 2015 was 55

  US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 56%/44%

Drillbits

• I think it’s safe to say that the twitter storm above are Drillbits for the week
• A tale of two plays – the seven major shale plays in the US account for more than half of Lower 48 production and have been growing at 14% a year on average since 2007 (notwithstanding recent declines) while conventional lower 48 production has been in terminal decline (4% a year) since 2009.
• Veresen announced it has entered into a “suite of separate agreements” to sell its power generation business for $1.18 billion. Proceeds from the sale will be used to fund the company’s natural gas and infrastructure projects.
• The Alberta Energy Regulator issued a report on oil and gas companies’ track record on spills and leakages. While some of the stats are a bit misleading on a company specific basis, the overall picture is of an industry improving its track record with incidences declining 44% over the past 10 years and 3% year over year 2015 to 2016
• Trump Watch: Slow news week in Trumplandia unless you are concerned about civil rights, in which case, well it wasn’t a banner week.