energy tidbits - saf group...6. looks like saudi has an understanding with the houthis. (click here)...

The Disclaimer: Energy Tidbits is intended to provide general information only and is written for an institutional or sophisticated investor audience. It is not a recommendation of, or solicitation for the purchase of securities, an offer of securities, or intended as investment research or advice. The information presented, while obtained from sources we believe reliable as of the publishing date, is not guaranteed against errors or omissions and no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. This publication is proprietary and intended for the sole use of direct recipients from Dan Tsubouchi and SAF Group. Energy Tidbits are not to be copied, transmitted, or forwarded without the prior written permission Dan Tsubouchi and SAF Group. Please advise if you have received Energy Tidbits from a source other than Dan Tsubouchi and SAF Group.

Energy Tidbits

Dan Tsubouchi

Principal, Chief Market Strategist

[email protected]

Aaron Bunting

Principal, COO, CFO

[email protected]

Ryan Dunfield

Principal, CEO [email protected]

Alan Cooper

Vice President

[email protected]

Ryan Haughn

Principal, Energy

[email protected]

Zero US Producer Equity Issues In Q4/19 + Surplus US DUCs

Soon Depleted + Declining Oil Rigs = US Oil Production Plateau

In H1/20?

Welcome to new Energy Tidbits memo readers. We are continuing to add new readers to our Energy Tidbits

memo and energy blogs. The focus and concept for the memo was set in 1999 with input from PMs, who were

looking for research (both positive and negative items) that helped them shape their investment thesis to the energy

space, and not focusing on day to day trading. Our priority was and still is to not just report on events, but interpret

and point out implications therefrom. The best example is our review of investor days, conferences and earnings calls

focusing on sector developments that are relevant to the sector and not just a specific company results/guidance.

Our target is to write on 48 to 50 weekends per year and to send out by noon mountain time.

This week’s memo highlights:

1. Our SAF blog posted on Friday on why we believe US oil production is pointing to a plateau in H1/2020. (Click

Here)

2. There have been zero US producer equity issues to date in Dec. (Click Here)

3. Raymond James comment that surplus DUCs declining faster than expected and likely all gone by Feb. (Click

Here)

4. Wood Mackenzie’s webcast on increasing Permian PDP decline rates and challenge to grow Permian oil. (Click

Here)

5. OPEC+ agrees to cut an additional 503,000 b/d but no extension past March 31, 2020. (Click Here)

6. Looks like Saudi has an understanding with the Houthis. (Click Here)

7. Please follow us on Twitter at [LINK] for breaking news that ultimately ends up in the weekly Energy Tidbits memo

that doesn’t get posted until Sunday noon MT.

8. For new readers to our Energy Tidbits and our blogs, you will need to sign up at our blog sign up to receive future

Energy Tidbits memos. The sign up is available at [LINK].

Produced by: Dan Tsubouchi

Dec 8, 2019

https://twitter.com/Energy_Tidbits

http://www.safgroup.ca/research/trends-in-the-market/


2

Energy Tidbits

Table of Contents Natural Gas – Natural gas withdraw of 19 bcf, storage now +591 bcf YoY surplus .................................................5

Figure 1: US Natural Gas Storage ....................................................................................................................5

Natural Gas – Good thing Texas/North Dakota haven’t clamped down on flaring ...................................................5

Figure 2: US Vented and Flared Natural Gas...................................................................................................5

Natural Gas – India’s LNG 2019/2020 demand growth likely to continue to be modest ..........................................6

Oil – US oil rigs down 5 to 663 oil rigs ......................................................................................................................6

Figure 3: Baker Hughes Total US Oil Rigs .......................................................................................................6

Oil – Total Cdn rigs +12 to 138 total rigs ..................................................................................................................6

Figure 4: Baker Hughes Total Canadian Oil Rigs ............................................................................................7

Oil – US oil production flat at the all time record of 12.9 mmb/d ..............................................................................7

Figure 5: Weekly US Oil Production .................................................................................................................7

Figure 6: US Weekly Oil Production .................................................................................................................8

Figure 7: YoY Change in US Weekly Oil Production ........................................................................................8

Oil – Wood Mackenzie challenge of growth with increasing Permian decline rates ................................................8

Figure 8: Permian Operators PDP Decline Rates ............................................................................................9

Permian decline rates ave ~40% vs 28% for Cdn oil decline rates ..........................................................................9

Figure 9: 2019E Conventional Decline Rates For Cdn Oil Producers .............................................................9

Oil – Reminder of the challenge to replace high decline rate Eagle Ford shale wells .......................................... 10

Oil – More job losses in US shale plays ................................................................................................................ 10

Oil – Zero equity issues for US energy producers in Q4 ....................................................................................... 10

Figure 10: US Energy Producer Equity Issuances ........................................................................................ 11

Oil – $30.15b debt issues in H2, but $23b is Exxon, Cheniere and Occidental .................................................... 11

Figure 11: US Debt Issues For Integrated, Producers, LNG and Midstream ................................................ 11

Oil – Surplus DUCs are being depleted quickly and will soon be gone ................................................................ 12

Figure 12: EIA Historical DUC Count ............................................................................................................ 12

Oil – No equity + DUCs Depleting + Oil Rigs Declining = US Oil Plateau in H1/20? ............................................ 12

Figure 13: US Oil Rigs, MoM Changes In DUCs, Completions and Oil Production ...................................... 13

Oil –EIA’s updated database on US liquids pipeline projects................................................................................ 13

Figure 14: Excerpts From EIA Liquids Pipeline Projects Excel, Projects Planned To Start 2020 ................. 14


3

Energy Tidbits

Oil – Big positive for Cdn oil - TMX to physically lay pipe before Xmas ................................................................ 14

Oil – Premiers call for changes to Bill C-69 ........................................................................................................... 14

Oil – Liberal throne speech no specifics on oil or Bill C-69 ................................................................................... 15

Oil – Oil input into refineries up 464,000 b/d to 16.789 mmb/d ............................................................................. 15

Figure 15: US Refinery Crude Oil Inputs (thousand b/d) ............................................................................... 16

Oil – Co-op refinery locks out workers amid strike notice ..................................................................................... 16

Oil – US “NET” oil imports up 144,000 b/d to 2.854 mmb/d .................................................................................. 16

Figure 16: US Weekly Preliminary Oil Imports By Major Countries .............................................................. 17

Oil – Bloomberg OPEC survey for Nov, OPEC production down 110,000 b/d MoM ............................................ 17

Figure 17: Bloomberg Survey of Nov 2019 production ................................................................................. 17

Oil – OPEC+ additional 503,000 b/d cuts, still March 31/2020 term ..................................................................... 17

Figure 18: OPEC, non-OPEC Quota Reductions and Targets (thousand b/d) Dec 6, 2019 ......................... 18

Oil – Does no cut extension mean Saudi still think Permian oil is about to plateau .............................................. 18

Oil – Iraq protests and protestor deaths not stopping post PM resignation .......................................................... 19

Oil – Saudi Aramco IPO priced at high end on well over-subscribed book ........................................................... 19

Oil – Has Saudi reached an understanding with the Houthis to peace? ............................................................... 19

Figure 19: Yemen 1967-1990 Pre Unification ............................................................................................... 20

Oil – Libya oil production currently at 1.25 – 1.30 mmb/d ..................................................................................... 20

Figure 20: Libya Monthly Oil Production ........................................................................................................ 21

Oil –Libya NOC shuts in again the el-Feel oilfield in SW Libya, nearby Sharara oilfield ...................................... 21

Will Russia’s support for Haftar lead to a successful push on Tripoi?........................................................... 21

Oil – Mexico still on track to add 100,000 b/d new production by end of Dec ....................................................... 22

Figure 21: Pemex Development Projects Adding 100,000 b/d By End of Dec ............................................. 22

Pemex new “gigante” oil discovery to add 110,000 b/d by 2021 ................................................................... 22

Oil – Colombia Oct oil production up 0.4% YoY to 883,000 b/d ............................................................................ 23

Figure 22: Colombia oil production vs. rig count ........................................................................................... 23

Oil – IMO 2020, survey shows only 11% of German ships to use scrubbers/HSFO ............................................ 23

Oil – Excellent IMO 2020 insights from Bloomberg’s monthly report .................................................................... 24

Figure 23: Marine Bunkers Outlook Update .................................................................................................. 24

Capital Markets – Expect more oil/gas deletions in TSX Index Dec rebalancing.................................................. 25

Figure 24: Possible Membership Changes in The S&P/TSX Composite Index ............................................ 25

Capital Markets – Increasing % of LPs plan to reduce oil and gas investments ................................................... 25

Capital Markets – 61% of Americans say stock market has little/no effect ........................................................... 26


4

Energy Tidbits

Capital Markets – End of an era, GMP/Griffiths McBurney is no longer ............................................................... 26

Water – “WPS Global Early Warning Tool” forecasts more conflict in Basra, Iraq................................................ 26

Figure 25: WPS Global Tool – Conflict Forecast Oct 2019 – Sept 2020 ...................................................... 27

Twitter – Look for our first comments on energy items on Twitter every day ........................................................ 27

Energy Tidbits – Sign up on our email distribution for tidbits and blogs ................................................................ 27

LinkedIn – Look for quick energy items from me on LinkedIn ............................................................................... 27

Misc Facts and Figures.......................................................................................................................................... 28

Study: Average American adult wakes up grumpy 300 days a year ............................................................. 28

Hopefully the last time we write on this Subway real chicken saga .............................................................. 28

Even most art loves must be shaking their head at Cattelan’s new sculpture .............................................. 28


5

Energy Tidbits

Natural Gas – Natural gas withdraw of 19 bcf, storage now +591 bcf YoY surplus

The EIA reported a 19 bcf natural gas draw, which was in line with a 20 bcf draw. This brings storage to 3.591 tcf as of Nov 29. This is a widening of the YoY surplus to 591 bcf vs 548 bcf surplus last week, with storage now 9 bcf below the 5 yr average. The EIA’s is calling for gas withdrawals to fall below the 5 yr average over the withdrawal period, which combined with higher YoY production, will be a continued negative to HH prices. Below is the EIA’s storage table from its Weekly Natural Gas Storage Report. [LINK] Figure 1: US Natural Gas Storage

Source: EIA

Natural Gas – Good thing Texas/North Dakota haven’t clamped down on flaring

This week, the EIA posted a blog “Natural gas venting and flaring increased in North Dakota and Texas in 2018”, which reminded of the increasing issue of gas flaring in these states as vented/flared natural gas. No question this is an issue and one that the regulators in both states want reduced. However, the oil patch is fortunate that these increasing gas flaring issues from associated natural gas in oil wells is in North Dakota and Texas – two states that have been very supportive to growing oil production. One of the items that didn’t come true as expected in fall 2018 was that we expected more North Dakota oil shut in because gas flaring levels were well above govt proposed limits. Our Nov 25, 2018 Energy Tidbits had an item “North Dakota relaxes gas flaring restrictions’” on that week’s NDIC announcement [LINK] that it was easing the flaring restrictions. Our Supplementary Documents package includes the EIA brief. https://www.eia.gov/todayinenergy/detail.php?id=42195 Figure 2: US Vented and Flared Natural Gas

Source: EIA

Texas/North

Dakota flaring

continues to

increase

YoY storage at

591 bcf YoY

surplus

http://ir.eia.gov/ngs/ngs.html

http://www.nd.gov/ndic/ic-press/Corrected-news%20-%20DMR%20181120a.pdf

https://www.eia.gov/todayinenergy/detail.php?id=42195


6

Energy Tidbits

Natural Gas – India’s LNG 2019/2020 demand growth likely to continue to be modest

We shouldn’t be looking for India to be any great help to LNG demand growth in 2020, rather our expectation is still for only modest growth in LNG imports. The most India LNG import data is for Oct and was 4.2 bcf/d, +8.1% and +0.3 bcf/d YoY. This has been the story in 2019 – only modest growth in LNG imports due to a lagging build out of its domestic natural gas infrastructure and a weakening economy. Unfortunately, India’s economy continues to be weakening. This week, the Reserve Bank of India lowered its GDP growth forecast. The Economic Times (India) reported [LINK] “The Reserve Bank of India has once again downgraded the growth forecast to 5 per cent in its fifth bi-monthly policy from 6.1 per cent two months ago. It has revised the growth to 4.9-5.5 per cent in H2 and 5.9-6.3 per cent for H1 2020-21. While improved monetary transmission and a quick resolution of global trade tensions are possible upsides to growth projections, a delay in revival of domestic demand, a further slowdown in global economic activity and geo-political tensions are downside risks. The third revision of the full year economic growth estimate by the RBI comes in the backdrop of the second quarter GDP growth falling to 4.5 per cent from 5 per cent in the first quarter. Second quarter GVA was reported at 4.3 per cent.”

Oil – US oil rigs down 5 to 663 oil rigs

Baker Hughes reported its weekly rig data on Friday which was a positive for WTI. US oil rigs were down again this week, with a decrease of 5 to 663 oil rigs as of Dec 6. Increases were in Granite Wash +1, and Williston +1. Decreases were in Permian -5, and Cana Woodford -2 US oil rigs are now 214 lower YTD, with the Permian accounting for 88 of this decrease. US rigs don’t normally drop at Xmas like they do in Canada but should keep drifting down with capex budgets likely being close to spent. US oil rigs should increase in Jan with refreshed budgets, but we don’t expect to see US drilling activity to bounce back to June/19 levels due to equity markets being basically closed for US E&Ps in H2/19. As mentioned before, the consensus from major service companies Q3 calls is for drilling activity to move lower and reach a bottom in Q4, and then modestly increase in Q1 with the renewed budgets. Below is our graph of total US oil rigs.

Figure 3: Baker Hughes Total US Oil Rigs

Source: Baker Hughes

Oil – Total Cdn rigs +12 to 138 total rigs

Baker Hughes reported total Cdn rigs were +12 to 138 total rigs as of Dec 6. Cdn oil rigs were up 10 to 87 Cdn oil rigs. Cdn gas rigs were up 2 to 51 gas rigs. To put in perspective, a year ago, Cdn oil rigs were 102 and Cdn gas rigs were 84 for a total Cdn rigs of 186, meaning total Cdn rigs are -48 YoY. Cdn rigs usually rise before reaching an Xmas peak two weeks before Xmas, but even with the increase this week, its looking more like Canadian rigs

US oil rigs

were -5 this

week

Total Cdn rigs

+12 this week

India economy

continues to

weaken

https://economictimes.indiatimes.com/news/economy/policy/rbis-downgrading-of-fy20-growth-means-the-5-tn-gdp-goal-may-have-to-wait-longer/articleshow/72378898.cms


7

Energy Tidbits

will more or less drift until Xmas, and the real test will be how much of an increase we see post Xmas with new capex budgets. Below is our graph of total Cdn oil rigs.

Figure 4: Baker Hughes Total Canadian Oil Rigs

Source: Baker Hughes

Oil – US oil production flat at the all time record of 12.9 mmb/d

The increasing expectation is for US oil growth to be less than expected in 2020, still growing but at a lesser rate. This week EIA reported US oil production was flat at the all time high of 12.9 mmb/d for the Nov 29 week. Lower 48 production was also unchanged at the all time high of 12.4 mmb/d. US oil production has averaged 12.71 mmb/d so far in Q4, meaning US oil production needs to average ~13.70 mmb/d in the remaining 4 weeks of 2019 to hit the EIA’s new Q4 forecast of 13.01 mmb/d. Given the continuous pullback on active US oil rigs, we don’t see this playing out and should expect to see a downward revision to the EIA’s forecast. Below we pasted an excerpt from the EIA weekly oil production data. [LINK]

Figure 5: Weekly US Oil Production

Source: EIA

US oil

production at

12.9 mmb/d

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W


8

Energy Tidbits

Figure 6: US Weekly Oil Production

Source: EIA, SAF

Figure 7: YoY Change in US Weekly Oil Production

Source: EIA, SAF

Oil – Wood Mackenzie challenge of growth with increasing Permian decline rates

On Wed, we tweeted [LINK] “Thx Wood Mackenzie f/ great webcast, many Permian producers w/ PDP #Oil decline rates >40%, hard to keep production flat if 2020 drilling is same as 2019. Same as SAF Oct 7 outlook “Math Says Permian Growth Forecasts Have To Be Lowered”. The Wood Mackenzie webinar on Wed “Benchmarking Permian PDP Decline Rates” that was subtitled “here today, gone tomorrow – getting ahead of 2020 PDP decline rates and their impact on operator revenue”. (i) The focus of the webcast was how increasing decline rates in the Permian make it tougher to grow. There are a lot of Permian producers with PDP decline rates >40% and they will be challenged to stay flat unless they increase their drilling levels in 2020 vs 2019. They said “Expectation of these companies today is that they will rein in spending at least to a point of cash flow neutrality, if not generating modest cash flow while also growing or at least holding flat production volumes. There is a magic number between 40% and 42% decline rate. That makes it above that, above that decline rate, it makes it very difficult if an operator were to have an identical year, were to drill the same number of wells in roughly the same locations next year as this year to hold production flat. that’s the magic number”. (ii) Wood Mackenzie estimates that 57% of 2019 Permian revenue comes from wells drilled pre 2019. This means that in 2019, the total Permian revenue is split between 4 bbl of Permian PDP is sold for every 3 bbls of 2019 new Permian drill production adds. This is why they stressed PDP is so important. But we look at these numbers also from the other side, because it means that 43% of the Permian 2019 revenue (and likely production) therefore comes from wells drilled in 2019 that have higher decline rates, and what it means to Permian growth if they stop that machine from adding 3 barrels or whatever the number is in 2020 of new production drills in the Permian, and how this challenge is way harder in 2020 given the draw down in DUCs in 2019 that are cheaper

Permian PDP

decline rates

~40%

https://twitter.com/Energy_Tidbits/status/1202385599862194176


9

Energy Tidbits

production adds than drilling new wells. Below is the key Permian base decline rates from the Wood Mackenzie webcast [LINK]. Our Supplemental Documents package includes the notes we took during the webcast.

Figure 8: Permian Operators PDP Decline Rates

Source: Wood Mackenzie

Permian decline rates ave ~40% vs 28% for Cdn oil decline rates Our first thought on seeing the Wood Mackenzie PDP decline rates was on the challenge to grow at 40% decline rates and living within cash flow. But then our second thought was that they are hugely higher than Cdn oil decline rates. On Wed, we also tweeted [LINK] on how the Wood Mackenzie Permian PDP decline rates compare to Cdn oil decline rates. Our tweet said “… also reminds of a key advantage to Cdn oil producers, who have had to live with what US is going thru now with very little new equity/debt capital, and proving a growth + dividend oil producing model is working – Cdn oil decline rates are way hugely lower.” Our tweet included the below graph from Scotiabank on conventional decline rates for Cdn oil producers.

Figure 9: 2019E Conventional Decline Rates For Cdn Oil Producers

Source: Scotiabank

https://readytalk.webcasts.com/viewer/event.jsp?ei=1274017&tp_key=3eb122a0b7



10

Energy Tidbits

Oil – Reminder of the challenge to replace high decline rate Eagle Ford shale wells

There was a good reminder of how quickly high decline Eagle Ford wells become low rate wells and the challenge to keep drilling and adding new wells on production to offset high first year decline rates. And don’t forget that these are wells that cost in excess of US$5 mm. Bloomberg terminal story “Faded Texas Oil Field Offers Austerity Lesson for U.S. Shale” Bloomberg note that the Eagle Ford first year decline is ~60%. Bloomberg wrote “The Eagle Ford now produces 1.37 million barrels a day, about 20% below its peak four years ago. Of the basin’s 17,511 shale oil wells that came online before 2018, 60% are pumping less than 25 barrels a day. Most new drilling just fills the gaps left by rapidly declining older wells”. This is not just an Eagle Ford phenomenon however, as Bloomberg says US shale wells decline about 60% in the first year, which provides immense difficulty for producers to fund growth without external capital. The story of declines and US oil growth reminds us of a perfectly applicable Lewis Carroll quote “Here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.” Unfortunately for US producers, you can’t run twice as fast without access to capital. Our Supplemental Documents package includes the Bloomberg terminal story.

Oil – More job losses in US shale plays

Last week, we commented on employment data from the Dallas Fed, showing that employment in the Permian Basin had fallen by 400 jobs in 2019 thru to October, and this week Bloomberg Terminal reported on individual company data that shows more job losses in US shale plays. (i) Halliburton plans to lay off more than 800 workers in Oklahoma, due to weakened demand for its technology and services in the US oil sector. This was expected based on comments from Halliburton’s Q3 call, as our Oct 27, 2019 Energy Tidbits memo discussed the Q3 call, where we said “(ii) Moving to more cost cutting in the US. They didn’t provide any specifics, but mgmt. comments clearly point to layoffs coming soon. They said “playbook, we plan to undertake further cost reductions by streamlining our operations and corporate functions. We're still finalizing our estimates, but expect to capture approximately $300 million in annualized cost savings over the next few quarters”. (ii) Superior Energy Services cut 112 jobs from its Pumpco unit in the Permian in November. (iii) National Oilwell also cut 85 jobs in Harris County, which includes Houston in November. It may not be an perfect indicator that says US oil growth forecasts need to be lowered, but we always go back to the simple question, why would services companies cut jobs and retire frack fleets if they believed the current activity slowdown was just a transitory issue? We believe the pullback on US shale jobs is a clear sign of management teams not expecting a quick rebound in US drilling activity.

Oil – Zero equity issues for US energy producers in Q4

Our primary focus in looking at US oil growth is equity markets. Debt markets are important, but, as a general rule, producers won’t expand drilling using debt in today’s investor expectations for producers to live within cash flow and keep debt low. One way to think about debt and equity is that without access to debt producers probably can’t stay afloat, but without access to equity producers probably can’t grow. It’s no surprise that equity markets have been tough for US oil producers in 2019, and its been even worst in the last two months as there have been zero equity issuances in Q4/19. On Fri morning, we tweeted [LINK] “Zero equity issues for US energy producers in Q4/19, even worse than expected, don’t recall seeing a zero equity issue quarter before. More on how this fits into our view of US oil growth in 2020 in SAF blog to be posted by noon on our website. #OOTT”. We don’t recall seeing a zero equity issue quarter before, which makes Q4/19 even worse then when oil dipped below $30 in Q1/16. This zero equity issue quarter is significant as it means the level of US oil rig increase will be limited to refreshed capex budgets with capex being generally limited to cash

Challenge to

replace high

decline rate

shale wells

More job losses

in US shale

plays

Zero equity

issues for US

energy

producers in Q4



11

Energy Tidbits

flow. We think equity, not debt, issues are the key to how much US oil rigs will ramp up. US producers are already under market pressure to keep spending within cash flow and avoid letting debt out of control. We don’t think producers would make any significant expansion in levels just using debt alone. With investor pullback, and rangebound oil prices, there really isn’t anything visible on the horizon, even with higher OPEC+ higher cuts, to suggest new equity capital is coming back to US producers. Below is our graph of US energy producer equity issuances going back to 2015.

Figure 10: US Energy Producer Equity Issuances

Source: Bloomberg, SAF

Oil – $30.15b debt issues in H2, but $23b is Exxon, Cheniere and Occidental

As noted above, debt markets are no question important for producers to stay afloat, but we don’t believe producers will generally use debt to expand drilling budgets in today’s investor expectations for producers. But there has been a significant inflow of debt issues to integrateds, producers, LNG and midstream companies. In H2/19 to date, there have been $30.15b of debt issues, but that total includes $23b from ExxonMobil $7b, Occidental $13b and Cheniere $3b. In Q4/19, producer debt issues include Diamondback $3b, Murphy Oil $0.55b and Endeavor Energy Resources $1b. Below is our graph of US energy producer equity issuances going back to 2015. Our Supplemental Documents package includes a listing of the debt issues by company.

Figure 11: US Debt Issues For Integrated, Producers, LNG and Midstream


$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2015 2016 2017 2018 2019

($'b

illio

ns)

US Energy Producer Equity Issuances

No Equity Issuances in Q4 to

Dec 5

$4.55b debt

issues for

producers in

Q4/19


12

Energy Tidbits

Oil – Surplus DUCs are being depleted quickly and will soon be gone

There was an excellent Raymond James comment on Monday “Energy Stat: DUC Season is Back! Biggest Ever Draw in October; EIA DUC Inventory Down ~750 in 2H19” that highlighted the faster than expected depletion of surplus DUCs in the past two months. The level of surplus DUCs is a critical input for 2020 US oil growth. RJ wrote “After building a tremendous inventory of Drilled but Uncompleted wells, or DUCs, since 2016 (adding nearly 3,000), operators have drawn down DUC inventories for five consecutive months through October. Amidst this decline in the absolute number of DUCs, monthly completions have remained extremely robust, with the EIA reporting 1,373 completions in October, (~2% below the August peak and still above the level seen in any month last year). As a result of this, DUC "months of inventory" have declined by ~25% in 2019, and are now nearing what we believe are "normal levels" and “Using what we believe to be the correct count, DUCs reach critical levels by February. At that point, frac crews will need to be idled or dropped as their simply won't be enough slack (DUCs) to operate at today's rapid pace, supporting our below consensus oil growth forecast next year.” Note that from Jan 1, 2017 thru May 31, 2019, DUCs increased by 2,789 and there were only two months that saw decreasing DUCs. However, from June thru Oct, DUCs were reduced by 732 or an average of 146 over the 5 months. Note that the MoM reduction in DUCs was 204 in Sept and 225 in Oct, well above the average of 146 over the May 1 thru Oct 31 period. Our Supplemental Documents package includes the Raymond James comment.

Figure 12: EIA Historical DUC Count

Source: Raymond James

Oil – No equity + DUCs Depleting + Oil Rigs Declining = US Oil Plateau in H1/20?

On Friday, we posted our blog “Zero US Producer Equity Issues In Q4/19 + Surplus US DUCs Soon Depleted + Declining Oil Rigs = US Oil Production Plateau In H1/20?” We, like others, have been following the declining US oil rig count but, after updating our US energy equity issuance excel to realize we may be seeing the first zero equity issues for producers and Raymond James soon to be depleted surplus DUCs comment, we couldn’t help believe the picture for US oil growth in 2020 has changed dramatically lower in the past two months. Our recent Oct 7, 2019 webcast for the SAF Group 2020 Energy Market Outlook highlighted our view that the math says Permian growth forecasts have to be lowered and lowered significantly. We didn’t a detailed US oil growth model then and still don/t, but since then, we

Surplus DUCs

being depleted

quickly

US oil plateau in

H1/20?


13

Energy Tidbits

have seen numerous US sellside analysts significantly lower their US oil growth forecasts for 2020. But we think it is even worse. In the two months since our webcast, we have seen key input factors get even worse – the surplus (rainy day fund) of DUCs are being depleted quickly and will soon be gone, there have been zero equity issues for US producers in Q4/19, and US oil rigs are declining more than expected in Q4/19. These are happening at the same time as Permian PDP decline rates look to be confirmed at just under 40%, which poses challenges to growth. Refreshed capex budgets should lead to an immediate increase in US oil rigs in Jan but, with the lack of new equity, we don’t believe that rate and timing of US oil rig growth from refreshed capex budgets will be enough to offset the impact of the depletion of DUCs. It doesn’t mean US average oil production in 2020 won’t show YoY growth, but we believe it points to US oil production plateau in H1/20 and effectively zero YoY growth when looking at exit 2019 to exit 2020. The challenge for growth is that the big drawdown in DUCs since May gave a one time supply burst and likely accounted for almost all of the growth in US oil production in H2/19. We estimate that the depletion of surplus DUCs accounted for ~650,000 b/d of the growth in H2/19 vs total estimated US oil growth of ~800,000 b/d. Once the surplus (rainy day fund) of DUCs is gone, US oil growth will rely on drilling new wells with drilling levels dependent on cash flow given there have been zero equity issues in Q4/19. Refreshed capex budgets should see a steady increase in oil rigs, but our concern is that the increase in US oil rigs won’t be enough to maintain that DUC driven higher oil production level. Rather we also see the potential for a modest step down in US oil production levels, before returning to a period of sustained, but much lower oil growth based on increasing US oil rigs without the benefit of new equity capital. A US oil production plateau in H1/2020 will be big positive to oil as we move into H2/2020. Our Supplemental Documents package includes our blog.

Figure 13: US Oil Rigs, MoM Changes In DUCs, Completions and Oil Production

Source: EIA, Baker Hughes, SAF

Oil –EIA’s updated database on US liquids pipeline projects

This week, the EIA updated its US liquids pipeline project excel sheet as of Dec 2, 2019. As we highlighted when the first version was released on May 30, 2019, this is an excellent reference guide as it lists all pipeline projects, and a great starting point for any information on liquids pipeline projects. The EIA updated its excel sheet for recent pipeline project announcements, including the 400,000 b/d P66 Red Oak pipeline, and the 350,000 b/d

EIA’s updated

pipeline projects

database


14

Energy Tidbits

P66/Bridger Liberty pipeline, both of which start in PADD 2 and end in the Gulf. We compared the pipelines to the Gulf Coast with our SAF pipeline database, and the only difference is on the Wink to Webster pipeline. The SAF database is current with the recent comments that the pipeline is going to be more like 1.5 mmb/d, whereas the EIA database still shows the pipeline capacity at 1.0 mmb/d. Below we pasted some of the columns and some of the lines from the excel sheet, the EIA has more data than the columns shown. The “pipeline projects” excel is found at [LINK]

Figure 14: Excerpts From EIA Liquids Pipeline Projects Excel, Projects Planned To Start

2020

Source: EIA

Oil – Big positive for Cdn oil - TMX to physically lay pipe before Xmas

It was a big week for the Trans Mountain pipeline, as on Monday Trans Mountain announced construction was set to begin, with pipe in the ground before Xmas [LINK] and we tweeted [LINK] “Thx @geoffreymorgan for good news for Cdn #Oil. its one thing to buy pipe, but its a bigger thing to actually start to dig/lay pipe in the ground & physically construct TMX pipeline. Yes its Alberta leg, but they wouldn't start w/o at least believing they will finish TMX. #OOTT”. And on Tues, Trans Mountain CEO Ian Anderson said construction should be in a position to begin laying pipe in BC in the spring [LINK]. This is a big positive for Cdn oil, as this is an announcement of construction work, not just preparatory work. Trans Mountain kicked off construction in Greater Edmonton (Spread 1) on Tues, which includes a 50km stretch from Trans Mountain’s Edomonton Terminal in Sherwood Park to Acheson, Alberta [LINK].

Oil – Premiers call for changes to Bill C-69

We continue to be skeptical that the Liberals will make any changes to Bill C-69 based on what the Liberals have said post the minority govt election. However, that isn’t stopping the premiers from pushing for change. This week, ahead of the throne speech, Canada’s Premiers gathered to discuss opportunities and challenges in the Cdn economy, and outlined immediate actions needed to address regional disparities across the country [LINK]. One of the key priority areas was economic competitiveness, and although it was non specific, there was clear pointing to Trans Mountain and Bill C-69. The Premiers’ priorities related to economic competitiveness include “• Continuing to develop resources in a responsible manner and ensure access to markets for Canada's products, which are among the most sustainably and ethically produced in the world. • Working with the federal government to

Project Name Project Developer(s) Project Type Status Start Year Start Quarter Beg_State End_State Beg_Region End_Region Miles Product TypeAdded Capacity

Falcon Ethane Pipeline Project Shell Midstream Partners New Construction 2020 Q4 OH, PA PA PADD 2, PADD 1PADD 1 98 HGL 107,000

EPIC Crude Pipeline EPIC Pipeline New Construction 2020 Q1 TX TX PADD 3 PADD 3 730 CRD 600,000

Mariner East 2X Energy Transfer Partners New Construction 2020 Q3 OH, WV PA PADD 2, PADD 1PADD 1 350 PRD 250,000

Diamondback Pipeline TransMontaigne Conversion Announced 2020 Q1 TX TAM PADD 3 Mexico 16 PRD 32,000

Arbuckle II Pipeline OneOK New Construction 2020 Q1 OK TX PADD 2 PADD 3 530 HGL 400,000

Elk Creek Pipeline phase 2 OneOK New Construction 2020 Q1 MT CO PADD 4 PADD 4 600 HGL 240,000

EPIC Purity Pipeline EPIC Pipeline New Construction 2020 Q3 TX TX PADD 3 PADD 3 131 HGL 120,000

West Texas LPG Delaware Basin expansion 2OneOK Expansion Construction 2020 Q1 TX TX PADD 3 PADD 3 240 HGL 80,000

Plantation Pipeline Roanoke Expansion Kinder Morgan Expansion Announced 2020 Q2 LA, MS VA PADD 2 PADD 1 PRD 21,000

Sand Hills NGL Pipeline expansion 6 DCP Midstream; Enbridge; Phillips 66Expansion Construction 2020 Q2 TX TX PADD 3 PADD 3 400 HGL 100,000

Diamond Pipeline expansion Plains All American; Valero Expansion Announced 2020 Q3 OK TN PADD 2 PADD 2 440 CRD 200,000

Pony Express Pipeline expansion Tallgrass Energy Expansion Announced 2020 Q3 WY, CO OK PADD 4 PADD 2 760 CRD 300,000

Bluestem Pipeline Williams New Announced 2020 Q4 KS OK PADD 2 PADD 2 188 HGL 120,000

Compañero Pipeline Permico Energia New Announced 2020 Q4 TX TX PADD 3 PADD 3 510 HGL 300,000

Jupiter Pipeline Jupiter New Announced 2020 Q4 TX TX PADD 3 PADD 3 650 CRD 1,000,000

Lone Star Express Pipeline expansion Energy Transfer Partners Expansion Announced 2020 Q4 TX TX PADD 3 PADD 3 352 HGL 400,000

Voyager Pipeline Magellan; Navigator Energy ServicesNew Announced 2020 Q4 OK TX PADD 2 PADD 3 500 CRD 250,000

Ace Pipeline System Harvest Midstream; PBF Logistics; Phillips 66New Announced 2020 LA LA PADD 3 PADD 3 CRD 400,000

Enbridge Line 3 Replacement Project Enbridge Expansion Construction 2020 AB WI Western CanadaPADD 2 1,031 CRD 370,000

Southern Access (Line 61) Upgrade Project expansion 4Enbridge Expansion Construction 2020 WI IL PADD 2 PADD 2 454 CRD 250,000

Swordfish Pipeline Marathon Pipeline (MPLX); Crimson MidstreamOther Announced 2020 LA LA PADD 3 PADD 3 60 CRD 170,000

EPIC NGL Pipeline—Crane to Corpus ChristiEPIC Pipeline Conversion Construction 2020 Q1 TX TX PADD 3 PADD 3 430 HGL 220,000

Ingleside Pipeline Harvest Midstream New Construction 2020 Q1 TX TX PADD 3 PADD 3 24 CRD 600,000

Mariner East 2 Pipeline (Bypass) Energy Transfer Partners New Construction 2020 Q2 OH, WV PA PADD 2, PADD 1PADD 1 350 HGL 125,000

Baymark Pipeline Enterprise Products Partners; Lavaca Pipe Line CompanyExpansion Construction 2020 Q3 TX TX PADD 3 PADD 3 91 HGL 100,000

Equality Pipeline Bridger Pipeline (True Companies)New Announced 2020 Q3 WY WY PADD 4 PADD 4 190 CRD 200,000

Midland-to-ECHO 3 pipeline system Enterprise Products PartnersNew Announced 2020 Q3 TX TX PADD 3 PADD 3 CRD 450,000

Saddlehorn Pipeline expansion Saddlehorn Expansion Announced 2020 Q4 CO OK PADD 4 PADD 2 538 CRD 100,000

Red River Pipeline Plains All American; Delek LogisticsExpansion Announced 2020 OK TX PADD 2 PADD 3 CRD 85,000

TMX to lay pipe

before Xmas

Premiers United

outline priorities

for economic

competitiveness

https://www.eia.gov/petroleum/data.php

https://calgaryherald.com/commodities/energy/trans-mountain-construction-set-to-begin-with-pipe-in-the-ground-before-christmas/wcm/ccc298cf-676b-47c4-8d66-fc11f755025b


https://business.financialpost.com/commodities/as-work-starts-in-alberta-trans-mountain-expects-to-be-laying-pipe-in-b-c-in-the-spring

https://www.transmountain.com/news/2019/trans-mountain-marks-the-start-of-pipeline-construction

https://www.newswire.ca/news-releases/premiers-united-call-for-federal-partnership-and-action-825366137.html


15

Energy Tidbits

pursue improvements to the federal environmental assessment regime to ensure regulatory certainty, globally competitive timelines, and the full implementation of 'one project, one assessment' by exempting projects that fall within provincial-territorial jurisdiction from mandatory federal impact assessment”. We hope that a partnership between Canada’s Premiers and the federal government will create a positive impact for changes to Bill C-69 from the Liberals, but our ongoing concern is the stance from new Environment Minister Jonathan Wilkinson who has been clear that there will be no amendments or changes to Bill C-69.

Oil – Liberal throne speech no specifics on oil or Bill C-69

The Liberal throne speech was Thurs afternoon. As a general rule, throne speeches do not get into too many specifics, rather they outline or emphasize the priorities and direction for the govt. (i) As expected, climate change is the #1 priority for this govt, which is looking ahead to the next election and knows it is a clear differentiator to the positive vs the Conservatives. And one that will only continue to increase as an advantage for the Liberals. Plus the Liberals don’t fully control when the next election may be called, so we believe climate change will be an immediate priority to further separate themselves from the Conservatives and, at the same time, convince pro climate change supporters that they can deal with climate change better than a vote for the NDP or Green or Bloc Quebecois. (ii) To non politicians, it almost sounds silly that the Liberals refused to use the word oil to not drive Blanchet crazy or risk the Bloc’s overall support on the throne speech. Its not like Blanchet didn’t know that using natural resources meant oil. But it was interesting seeing the pundits advising of key things to look for and one was whether the Liberals would use the word oil – they didn’t. Rather they use they said “And while the Government takes strong action to fight climate change, it will also work just as hard to get Canadian resources to new markets, and offer unwavering support to the hardworking women and men in Canada’s natural resources sectors, many of whom have faced tough times recently.” (iii) Offering support vs taking action. We have seen politics for a long time, and we don’t mean to be skeptical, but we believe there is a big difference in the Liberals offering support, or listening, or understanding vs saying they will take action. (iv) No signaling or hint that they will do anything on Bill C-69. Our concern remains that the Liberals have clearly said they won’t make any changes to Bill C-69. Rather they are only open to discuss how to implement. There are core issues with the Bill itself and the Liberals haven’t to date and did not in the throne speech indicate or hint to any potential to change Bill C-69. We actually some say that they implied an openness to do so by their prior comment on offering support to the people in the natural gas sectors. That isn’t a glass half full view, it’s a glass 1/1000th full view. (v) Lastly, tied to climate change push, we have to believe the Liberals are pointing to a continuation of their views to phase out fossil fuels. They may not have said as specifically as Trudeau as said in the past, but they made sure the throne speech used their expression “modern economy” a couple times.

Oil – Oil input into refineries up 464,000 b/d to 16.789 mmb/d

For the Nov 29 week, EIA estimates crude oil inputs to refineries were up 464,000 b/d to 16.789 mmb/d. Overall crude inputs are now 689,000 b/d lower YoY. This is the normal seasonal period for crude inputs to ramp up, and the YoY difference is due to heavy maintenance in preparation for IMO 2020 along with the closure of the PES Philadelphia refinery complex (335,000 b/d). We should continue to see the seasonal increase in crude inputs towards year end. Refinery utilization was up 2.6% this week to 91.9%. Below is our graph of the EIA weekly crude oil input to refineries.

Oil input into

refineries up

464,000 b/d

Liberals throne

speech


16

Energy Tidbits

Figure 15: US Refinery Crude Oil Inputs (thousand b/d)

Source: EIA, SAF

Oil – Co-op refinery locks out workers amid strike notice

As of our news cut off at 8am MT this morning, there has been no change to the Co-op refinery lock out. On Tues, workers at the 130,000 b/d Co-op Refinery served 48-hour strike notice over newly proposed changes to pension plans for the Co-op Refinery workers. As part of the strike notice, the workers union Local 594 proposed shutting down the refinery units before starting job action, and shortly thereafter the Co-op Refinery gave a 48 hour lockout notice to workers. No resolutions were met within the 48 hours, and the Co-op Refinery locked out its workers, with mgmt. saying the refinery would maintain operations with replacement workers [LINK]. According to the reports, mgmt. and the replacement workers are living in the facility (locked in) to keep the refinery operating, meanwhile the actual refinery workers have been picketing outside the premises. We aren’t sure how long the lockout will go on for, or how experienced the replacement workers are, but Co-op says they are going to be able to carry on operations. We have been checking and we haven’t seen any reports that the strike is disrupting tanker truck deliveries from the refinery. As was seen this week in the France strikes, the issue is often that tanker truck drivers won’t cross the picket line with deliveries from the refinery.

Oil – US “NET” oil imports up 144,000 b/d to 2.854 mmb/d

US “NET” imports were up 144,000 b/d to 2.854 mmb/d for the Nov 29 week. US imports were down 201,000 b/d to 5.989 mmb/d and US exports were down 345,000 b/d to 3.135 mmb/d. Some items to note on the by country data. (i) Canada was down 85,000 b/d to 3.162 mmb/d for the Nov 29 week, and imports from Canada should remain lower than the pre Keystone outage levels until full pressure on Keystone is resumed, with the qualifier being CBR may be higher to offset Keystone. (ii) Saudi Arabia was up 138,000 b/d to 460,000 b/d which is a reversal from the 113,000 b/d decrease last week. Imports from Saudi have been much lower in H2 vs H1. Saudi has averaged 420,000 b/d so far in H2, vs an average 570,000 b/d in H1 this year. (iii) Colombia was down 287,000 b/d to 71,000 b/d. Although a big decrease, it may just be due to tanker timing. (iv) Ecuador was +184,000 b/d to 434,000 b/d. (v) Venezuela remained at 0 due to US sanctions. (vi) Mexico was +133,000 b/d to 763,000 b/d, which is well above its H2/19 average of 590,000 b/d and will be interesting to watch heading into 2020 as Mexico returns to growth in oil production. Below is our table of the US oil imports by major country.

US NET oil

imports up

144,000 b/d

Co-op Refinery

locks out

workers

https://leaderpost.com/news/local-news/lockout-begins-at-co-op-refinery-as-workers-rally-for-pensions


17

Energy Tidbits

Figure 16: US Weekly Preliminary Oil Imports By Major Countries

Source: EIA, SAF

Oil – Bloomberg OPEC survey for Nov, OPEC production down 110,000 b/d MoM

Bloomberg released its survey of Nov OPEC production on Monday morning, and we had a similar takeaway as the Reuters survey. (i) Bloomberg had OPEC production -110,000 b/d to 29.70 mmb/d in Nov. Saudi was over 10 mmb/d for the second month, and was -10,000 b/d to 10.010 mmb/d in Nov, which is 301,000 b/d below quota. (iii) Ecuador was +50,000 b/d to 520,000 b/d, and as a reminder, Ecuador is leaving OPEC at Dec 31. (iv) Iran was down 40,000 b/d to 2.070 mmb/d. Iran’s oil production is holding in there considering the US is still holding strong on cutting Iran exports to zero. (iv) Iraq was up 30,000 b/d to 4.710 mmb/d and is still 198,000 b/d above its quota, but Iraq oil minister said earlier this week that they just reached compliance (actually exceeding cuts) as of this week. (v) Nigeria was down small to 1.890 mmb/d and still 205,000 b/d above quota. Earlier this week, Nigeria oil minister said they are committed to hitting the quota. (vi) Venezuela back to 700,000 b/d after two months below 700,000 which feels like the bottom may have been reached, at least for now. Below is our running table of Bloomberg survey data.

Figure 17: Bloomberg Survey of Nov 2019 production


Oil – OPEC+ additional 503,000 b/d cuts, still March 31/2020 term

We think the overall takeaway from the OPEC+ meetings was a success based on the OPEC+ increasing cuts by 503,000 b/d and with the comments from countries (ie. Nigeria and Iraq) on complying. We will have to wait to see on the compliance but, regardless the additional cuts of 503,000 b/d are a positive even if there wasn’t an extension past March 31, 2020. Q1 is the critical period given the seasonal decreasing in oil demand in Q1/20 vs Q4/19. The other key part of the deal is the setting of meetings in early March to review the oil supply/demand outlook, which will be viewed as the key meeting to decide on cuts extension post March 31. Others may not agree, but we thought the other success was how

Oct 4/19 Oct 11/19 Oct 18/19 Oct 25/19 Nov 1/19 Nov 8/19 Nov 15/19 Nov 22/19 Nov 29/19 WoW

Canada 3,405 3,276 3,469 3,758 3,516 3,009 3,195 3,247 3,162 -85

Saudi Arabia 350 390 452 605 177 346 435 322 460 138

Venezuela 0 0 0 0 0 0 0 0 0 0

Mexico 524 522 264 762 539 438 473 650 763 113

Colombia 72 538 74 66 200 337 112 358 71 -287

Iraq 519 181 281 123 283 259 303 210 313 103

Ecuador 221 98 137 418 128 214 235 250 434 184

Nigeria 411 152 82 0 138 320 309 171 166 -5

Kuwait 0 0 0 0 0 0 0 0 0 0

Angola 0 70 48 0 114 0 89 20 0 -20

Top 10 5,502 5,227 4,807 5,732 5,095 4,923 5,151 5,228 5,369 141

Others 722 1,068 1,050 965 982 827 821 962 620 -342

Total US 6,224 6,295 5,857 6,697 6,077 5,750 5,972 6,190 5,989 -201

thousand b/d Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov MoM YoY Quota

Nov vs

Quota

Algeria 1,070 1,060 1,050 1,030 1,025 1,020 1,010 1,010 1,010 1,020 1,030 1,020 1,020 0 -50 1,025 -5

Angola 1,490 1,470 1,450 1,440 1,440 1,380 1,450 1,410 1,360 1,400 1,360 1,340 1,280 -60 -210 1,481 -201

Congo 320 320 330 330 350 350 340 330 320 330 320 330 310 -20 -10 315 -5

Ecuador 520 510 520 530 520 520 520 530 540 530 540 470 520 50 0 508 12

Equatorial Guinea 110 120 110 110 120 120 110 110 120 120 120 120 120 0 10 123 -3

Gabon 180 170 210 200 190 180 200 200 190 200 190 200 180 -20 0 181 -1

Iran 3,040 2,890 2,740 2,740 2,710 2,550 2,380 2,280 2,210 2,210 2,130 2,110 2,070 -40 -970

Iraq 4,570 4,700 4,690 4,620 4,550 4,630 4,730 4,750 4,750 4,780 4,780 4,680 4,710 30 140 4,512 198

Kuwait 2,800 2,810 2,750 2,710 2,700 2,720 2,700 2,690 2,680 2,640 2,690 2,670 2,670 0 -130 2,724 -54

Libya 1,110 1,000 900 900 1,100 1,190 1,150 1,150 1,100 1,070 1,120 1,180 1,150 -30 40

Nigeria 1,760 1,770 1,790 1,830 1,870 1,900 1,860 1,890 1,890 1,950 1,930 1,910 1,890 -20 130 1,685 205

Saudi Arabia 11,070 10,650 10,200 10,100 9,820 9,790 9,830 9,820 9,780 9,830 8,650 10,020 10,010 -10 -1,060 10,311 -301

UAE 3,270 3,260 3,090 3,070 3,050 3,070 3,070 3,060 3,060 3,070 3,070 3,070 3,070 0 -200 3,072 -2

Venezuela 1,230 1,220 1,230 1,070 830 840 780 770 780 760 660 690 700 10 -530

Total OPEC 14 32,540 31,950 31,060 30,680 30,275 30,260 30,130 30,000 29,790 29,910 28,590 29,810 29,700 -110 -2,840 25,937 -157

OPEC+ cuts

another 503,000

b/d


18

Energy Tidbits

Saudi energy minister Abdulaziz bin Salman (ABS) managed the meeting process. No question it was more difficult for media/analysts without the normal scrums and pressers, but we thought it was better to have very little leakage and for any informal messaging to be consistent. Below is the Bloomberg’s table of the 503,000 added cuts allocated by country and the old/new quotas by country. Our Supplemental Documents package includes the OPEC releases.

Figure 18: OPEC, non-OPEC Quota Reductions and Targets (thousand b/d) Dec 6, 2019

Source: Bloomberg

Oil – Does no cut extension mean Saudi still think Permian oil is about to plateau

There was some disappointment that OPEC+ did not extend cuts past March 31, 2020, and only agreed to have a new set of meetings in early March to review the oil outlook ie. will they need to extend the cuts. We don’t know how hard the Saudis pushed for cuts to be extended, but they were able to convince the group on deeper cuts. Lets not forget that in prior cycles when the Saudis wanted higher prices, they cranked up production to punish and force other producers to lower production and hammer capex, see price drop short term, but then recover with the other than Saudi supply response. They continue to act on the different strategy started by former energy minister Al-Falih – keep cutting themselves and waiting for a correction. It makes us wonder if Saudi still thinks Permian oil is about to decline, a view that was first noted by former Saudi energy minister Al-Falih’s comments in July. On July 3, 2019, we posted a blog “A Big Plus To Post 2020 Oil If Saudi Is Even Directionally Right That Permian Plateau Is “In A Year Or Two Years or Four Years” to highlight then Saudi energy

Does Saudi still

think Permian is

about to

plateau?


19

Energy Tidbits

minister al Falih’s comments on CNBC early that morning because no one, at that time, was calling for the Permian to potentially plateau in a year. Al Falih said “There will be a plateau for these unconventional resources in the US, the Permian being one of them. is it in a year, or two years or four years, I don’t know but certainly its not indefinitely.” No one was then calling for Permian plateau (peak oil) in a year or two and not likely 4. Maybe most assumed it was just musings from al Falih. But we thought it was more than musings because Saudi Arabia has been taking a different tactic this time than their normal strategy to get market share – increase oil production, crash oil prices, ruin growth prospects for other oil basins. They want solid oil prices and an increasing oil market share. And this time, we thought al Falih’s comments suggested they believe that, they can regain market share, by letting US shale play out. At that time, we said If Saudi Arabia is even directionally right in Permian reaching plateau (peak oil), it means that Permian and US oil is going to hit peak oil probably at least a few years earlier than expected. This will be very bullish to oil post 2020. Based on what is playing out in the past two months, it looks like al Falih may be right. Our Supplemental Documents package includes our July 3 blog

Oil – Iraq protests and protestor deaths not stopping post PM resignation

Last week’s (Dec 1, 2019) Energy Tidbits memo noted the breaking news that that parliament accepted PM Mahdi’s resignation, and the cabinet is now acting in a caretaker role until a new government is put in place. This effectively satisfies two of the major needed changes from Ayatollah Sistani – a new PM and a new govt. Sistani’s other big needed change is major reform, but that can’t happen until a new govt is put in place. It was breaking news so we didn’t know then if protests would stop or slow down. Well they haven’t and it was a bad week for protestor deaths. he takeaway from this week is that Iraq continue to be in chaos and the appointment of a new government is the next critical event and it can’t happen soon enough. Clearly, the big issue for Sistani and Iraqi’s is where is the money going. Iraq exports ~3.6 mmb/d, which is approx. $7 billion per month. We still don’t know if the new government will or can satisfy the demands of the people and clerics. And, if not, what happens then and for how long. Iraq has to keep high on any priority oil watch.

Oil – Saudi Aramco IPO priced at high end on well over-subscribed book

There were no surprises to the Saudi Aramco IPO pricing as last week’s reporting noted that the book was well oversubscribed from both the retail and institutional investors sides and international institutional interest outside the Gulf was very small. As a result, they priced the deal at the high end of the $1.6 to $1.7 trillion valuation range with an implied valuation of $1.7 trillion. This was below the MBS original desired valuation of $2 trillion. Once we the bankers came out with the range below the $2 trillion, we, like most everyone else, figured it would end up at the high end of the valuation. Our Supplemental Documents package includes the FT story on the IPO. [LINK]

Oil – Has Saudi reached an understanding with the Houthis to peace?

Earlier this morning, we tweeted [LINK] on what looks to be the first clear indication that the Saudi/Houthi talks for the past two months have led to an understanding on the future. It looks to be a confirmation that Saudi is acknowledging that they Houthis are here to stay, but more than that, the Houthis are going to be part of the future of Yemen and participating in new institutions for Yemen. Yesterday, Saudi Gazette reported on Saudi Foreign Minister Al-Jubeir comments “Speaking on the situation in Yemen, Al-Jubeir said that the only solution in Yemen is a political solution. We support the legitimate government and the creation of new institutions that can be representative of all Yemenis. “Yemen is of particular importance to us, and Iran’s intervention there is devastating. The only solution in Yemen is political, and the Houthis are the ones who started the war, not us.” “All Yemenis, including the Houthis,

Aramco IPO

priced at high

end

Iraq chaos

continues

A Saudii/Houthis

understanding?

https://www.ft.com/content/67e3fbd6-1775-11ea-8d73-6303645ac406



20

Energy Tidbits

have a role in the future of Yemen,” he added.” This should not surprise anyone. Our prior Energy Tidbits memos have noted how discussions with the Houthis really started to take off post Abqaiq and the Saudi’s MBS 60 Minutes interview [LINK], the essential need to reduce the risk of another Houthi attack on Aramco facilities if it is to do the IPO, and the financial reality of the cost of the Houthis war at the same time that Saudi cut govt spending for the 1st time in 3 years [LINK]. This is a positive to reduce/eliminate the risk of Houthis attacks on Aramco facilities and tankers. We don’t believe there has been a risk premium in oil prices for the risk of Houthis attack but, to the extent there is one, that risk premium should be eliminated. If a deal is ultimately announced on the future of Yemen, we would expect to see Saudi Arabia end up contributing/committing to spend billions to help rebuild Yemen in particular in Houthi controlled North Yemen. We don’t believe these will be called war reparations or anything that acknowledges wrongdoing on the Saudi part, but we believe spending billions to rebuild Yemen (and not billions on fighting) is a critical piece of any understanding. The Saudis have not been able to wipe out the Houthis in over 3 ½ years and the Houthis know that. We just can’t believe the Houthis will say fighting is over without getting something for them ie. a significant role in a unified Yemen and billions! Our Supplemental Documents package includes the Saudi Gazette story. [LINK]

Makes sense Saudi would push for united Yemen and not North/South Yemens Its not just the Saudis signaling an understanding may have been reached with the Houthis, its also that they see the Houthis as part of a unified Yemen. This makes sense from a Saudi perspective as opposed to the potential return to the pre 1991 situation of separate North and South Yemen, wherein North Yemen would be the Houthis. Having the Houthis part of a unified Yemen would significantly reduce the risk for a surprise or quick return to fighting.

Figure 19: Yemen 1967-1990 Pre Unification

Source: Edmaps.com

Oil – Libya oil production currently at 1.25 – 1.30 mmb/d

Our Nov 24, 2019 Energy Tidbits memo [LINK] highlighted “Risk to oil markets in 2020 if fighting stops in Libya” on NOC Chairman Sanalla’s outlining the NOC strategy to boost oil production and improve energy security in 2020 and beyond [LINK]. The NOC plan is to add 250,000 b/d in 2020 to take oil production to 1.5 mm/d, and this week Platts [LINK] reported on comments from Sanalla on Wed saying they are currently pumping 1.25-1.3 mmb/d. Sanalla said "Because of political problems, we have issues [and] we are very keen to keep our current production levels … We need every penny". Outages at major Libya oilfields in

Libya producing

1.25-1.30 mmb/d

https://www.cbsnews.com/news/mohammad-bin-salman-denies-ordering-khashoggi-murder-but-says-he-takes-responsibility-for-it-60-minutes-2019-09-29/


http://saudigazette.com.sa/article/584356/SAUDI-ARABIA/Irans-threat-to-the-region-can-no-longer-be-tolerated-Al-Jubeir

http://www.safgroup.ca/wp-content/uploads/2019/11/Energy-Tidbits-Nov-24-2019.pdf

https://noc.ly/index.php/en/new-4/5327-noc-chairman-mustafa-sanalla-announces-ambitious-strategies-driving-%E2%80%9C2-1-by-2024%E2%80%9D-production-increase-campaign

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/120419-libya-to-keep-crude-production-at-125-13-mil-b-d-noc-chairman


21

Energy Tidbits

2019 and late 2018 have reduced the country’s ability to ramp up oil production, but current production levels of 1.25-1.3 mmb/d puts the country in a better position to reach its 1.5 mmb/d target in 2020. Below is a graph of monthly Libya oil production since 2018.

Figure 20: Libya Monthly Oil Production

Source: Bloomberg

Oil –Libya NOC shuts in again the el-Feel oilfield in SW Libya, nearby Sharara oilfield

Notwithstanding the Libya NOC Chairman’s positive update on oil production (noted above), Libya continues to face production interruptions in SW Libya. This week, the Libya NOC advised that, once again, oil production at its el Feel oilfield in SW Libya was interrupted. This time the NOC [LINK] “confirms that production at El Feel oil field has been interrupted as a result of an unlawful valve closure on the export pipeline from El Feel field to Mellitah. NOC Chairman, Eng. Mustafa Sanalla said: “This is another criminal attempt to disturb the work of NOC and it harms the Libyan economy. We call on the local leaders and authorities in the area to identify the offenders. NOC will notify the public prosecutor, and will press for those responsible for this damaging and unlawful act to be held to account.” This follows last week’s NOC’s announcement first that it had to shut in el Feel due to fighting and air strikes at the gates of the oilfield, and then it was reopened two days later.

Will Russia’s support for Haftar lead to a successful push on Tripoi? For the past several months, we have noted how Haftar has been stalled in his attempt to take over Tripoli. One of the Libya stories this week were the multiple reports on Libya getting evidence of Russian fighters fighting alongside Haftar forces. This was reinforced in by reports Friday night (ie. Reuters [LINK]) reporting Russian air defenses in Libya shot down a US drone. One of the reasons we are big Twitter is we get some excellent feedback to our tweets, with the feedback often in the form, either directly or indirectly, of you should think about this. We had this in our Nov 28 tweet on Libya [LINK] “Looks like No, fighting is continuing. Bloomberg "Haftar will press a seven-month offensive to seize Tripoli". NOC shut in ~73,000 b/d el-Feel oilfield for 2 days due to fighting. Hard to see NOC's plan to add 250,000 b/d on a sustainable basis.” The referenced Bloomberg story [LINK] noted Russia’s intervention with Haftar. We had a great food for thought reply to the tweet that said “Haftar’s initial assault on Tripoli was half hearted at best, clearly waiting on something (ie more Russian support) … in Tripoli ‘advising’ for the gov has said they have been expecting a bigger push for a while. Hard to see substantial improvement anytime soon.” We will be watching.

Libya el-Feel

oilfield shut in

again

https://noc.ly/index.php/en/new-4/5367-unlawful-valve-closure-interrupts-el-feel-production

https://can01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.reuters.com%2Farticle%2Fus-usa-libya-russia-drone-exclusive%2Fexclusive-u-s-says-drone-shot-down-by-russian-air-defenses-near-libyan-capital-idUSKBN1YB04W&data=02%7C01%7C%7C98799ef427ee441f4de508d77b0481d5%7C201318985d8447879a8ed802356a1421%7C0%7C0%7C637113131604321212&sdata=drrFK42jHBSvuEofAhfWQ%2BrOaC3dMoEVVH%2BCibvc%2FXY%3D&reserved=0


https://www.bloomberg.com/news/articles/2019-11-27/libya-s-haftar-to-press-tripoli-offensive-as-u-s-urges-a-halt


22

Energy Tidbits

Oil – Mexico still on track to add 100,000 b/d new production by end of Dec

Pemex posted a new presentation on Thurs and provided its slide listing all the development projects and the timing for each project to contribute to the addition of 100,000 b/d by the end of Dec. We would assume they should have a pretty good handle on the timing of these projects and wanted to reinforce the return to growth to their capital providers. Pemex’s Dec update also reiterated its forecast for 2020 oil production to average 1.880 mmb/d, up 170,000 b/d YoY vs 1.710 mmb/d average for 2019. One of our concerns is that increasing Mexico oil production will ultimately lead to increasing oil exports to Gulf Coast refineries and competing against an increasing market for Cdn heavy/medium crude. Its why we posted our July 30 blog “TMX Is Needed Even More Now, Mexico Oil Production Looks To Be Returning To Growth And More Exports To US Gulf Coast” [LINK]. Below is the graph of Pemex development projects adding 100,000 b/d by the end of Dec. Our Supplemental Documents package includes excerpts from the new Pemex slide deck [LINK] and our July 30 blog.

Figure 21: Pemex Development Projects Adding 100,000 b/d By End of Dec

Source: Pemex

Pemex new “gigante” oil discovery to add 110,000 b/d by 2021 On Friday night, Pemex posted a Spanish press release [LINK] announcing the discovery of a “gigante” oil field. As everyone can guess without using Google Translate, gigante is giant. We don’t believe giant is the right description as giant oil fields are oil fields that have over 500 million barrels of recoverable oil (ie 2P reserves), whereas the Pemex release described this Quesqui oil discovery as “well and the seismic data of the area, confirm today the existence of a giant deposit of 500 million barrels of crude oil equivalent in 3P reserve.” 3P reserves include possible reserves. Regardless, its still a big oil field and will add to Mexico’s oil growth. Pemex wrote “the Quesqui 1 exploratory well was finished drilling on June 17 of this year, with a measured production of 4,500 barrels per day, with a potential of 7,500 barrels per day and the initial expectation of this field was a reserve of 40 million barrels of crude oil equivalent. "With the analysis of the information provided by this well and the seismic data of the area, we can confirm today the existence of a giant deposit of 500 million barrels of crude oil equivalent in 3P reserve," he said. He said that this 34 km2 field will be developed to achieve a production, with 11 wells, of 69 thousand barrels per day of oil and 300 million cubic feet of gas in the next year, and by 2021 reach a production of 110 thousand daily barrels and 410 million cubic

Mexico looks to

be returning to oil

growth at year

end

http://www.safgroup.ca/research/articles/tmx-is-needed-even-more-now-mexico-oil-production-looks-to-be-returning-to-growth-and-more-exports-to-us-gulf-coast/

https://www.pemex.com/en/investors/investor-tools/Presentaciones%20Archivos/Investor%20Presentation%2005122019.pdf

https://www.pemex.com/saladeprensa/boletines_nacionales/Paginas/2019-051_nacional.aspx


23

Energy Tidbits

feet of oil and gas respectively. "Thus we will achieve a significant increase, and above all, very rapid production of hydrocarbons in the South Region," he said.” Our Supplemental Documents package includes the Google Translate version of the Pemex Spanish release.

Oil – Colombia Oct oil production up 0.4% YoY to 883,000 b/d

Colombia’s oil production seems to fit a common theme among many of the world’s oil basins – they found a bottom in 2017 or 2018 or early 2019 but have failed to post meaningful growth thereafter. Bloomberg terminal posted the Colombia Oct oil production of 883,000 b/d, which was +0.4% YoY from 879,000 b/d in Oct 2018. Bloomberg Terminal said “Production increased due to development and optimization of fields including Akacias, Chichimene, Chichimene SW and Castilla Norte, Caricare”. Colombia oil production has held steady just below 900,000 b/d for the past few years. We had expected it to go over 900,000 with the higher rig count starting in July 2019. Our table below shows the Colombia rig count vs. production levels.

Figure 22: Colombia oil production vs. rig count

Source: Bloomberg, Baker Hughes

Oil – IMO 2020, survey shows only 11% of German ships to use scrubbers/HSFO

We are not three weeks from the official start of IMO 2020, but the reality is that much of the shipping industry has converted to working under IMO 2020. Last week, the German Shipowners’ Association (Verband Deutscher Reeder, or VDR) released a survey on IMO 2020 and the challenges for German shipowners. The survey reminded of concerns on global LSFO availability, and on Sunday we tweeted [LINK] “Can see why concerns on global LSFO fuel availability. VRA survey of German shipping fleet for #IMO2020 implementation: 81% to use LSFO, 11% HSFO with scrubbers, 6% other already prescribed fuels, 2% LNG. Germany #4 globally in ship #'s and tonnage. #OOTT”. No question, the survey confirms that a large majority of German shipowners have decided to run LSFO as opposed to installing scrubbers and burning HSFO. And this makes sense, as shipowners probably realize that restrictions will only increase, and won’t get easier, so may as well switch over to LSFO now. However, the issue with a majority of shipowners switching over to LSFO becomes fuel availability at the ports, at least in the short term until the logistical issues are flushed out. VDR writes “German shipping companies are also concerned about the question of availability. “There are many who fear that the new fuels could cause technical problems during operation – problems that could also have financial consequences,” said Nagel: “We therefore call on all stakeholders to be as committed and flexible as possible in preparing for

Colombia Oct oil

production was

883,000 b/d

Concerns on

global LSFO fuel

availability



24

Energy Tidbits

the changeover, to ensure that it will become a success story.” We haven’t seen similar data from other countries, but note that as of Jan 1, 2018 UNCTAD data [LINK] Germany ranks 4th in number of ships owned, and ranked 4th by tonnage owned. Our Supplemental Documents package includes the VDR survey

Oil – Excellent IMO 2020 insights from Bloomberg’s monthly report

Another of Bloomberg terminal’s good reports is their IMO 2020 Monthly, which gives a good recap and near term forecast for all key items related to IMO 2020. There are several good insights this month. (i) No change to their forecast of HSFO demand. “Our assumptions for scrubber uptake, compliance and bunker consumption to 2025 are unchanged this month”. “The volume of |MO-compliant fuels required (either 0.5% spec or 0.1Yo gasoil)will be 500k b/d in the second half of 2019 and 1.86m bld in 2020, according to our estimates We expect a significant level of incremental 0.1% gasoil demand next year, which will decline as refiners increase the supply of 0.5% compliant fuels.” (ii) The math be not be perfect, but we found the Bloomberg estimate of HSFO for scrubbers interesting. If we assume the 2018 3.5% HSFO was 3.36 mmb/d (the 2019 HSFO of 2.86 + 0.1% or 0.5% est of 0.5 mmb/d), this means that the 2020 HSFO of which scrubbers of 0.71 mmb/d is 21% of the 2018 level ie. scrubbers retained 21% of the HSFO usage. Compare that to VDR German survey in the prior item that said 11% of German ships via tonnage or # of ships was using scrubbers, and Germany is #4 in the world of global shipping fleet. (iii) Good data on scrubbers so far. Estimate 2,999 ships with scrubbers at end of 2019. The order book stands at 3,750 and they highlight “new orders remain near zero”, also that “marine services firms such as Wartsila and Alfa Lavalhave limited remaining capacity to complete installs before the end of the year”. (iv) “Prices for high-sulfur fuel oil (HSFO) have fallen to record lows and fuel oil cracks have widened to the point where it makes sense to push HSFO back into the refining system as heavy feedstock. Both the U.S. and lndia have increased imports of HSFO to feed complex refineries.” (v) Bloomberg highlights the miss in forecasts on middle distillates under IMO 2020. “Many observers expected the build up to IMO 2020 to benefit middle distillates as more gasoil is redirected to the marine bunker demand pool. Middle distillates have underperformed, however, in particular in Asia, as new refinery capacity has coincided with slowing diesel demand growth in China and lndia.” Also highlight the big middle distillates inventory build east of Suez. (vi) There are many more insights in the monthly report. Our Supplemental Documents package includes the tables/graphs.

Figure 23: Marine Bunkers Outlook Update

Source: Bloomberg

Bloomberg’s

good IMO 2020

Monthly report

https://stats.unctad.org/handbook/MaritimeTransport/MerchantFleet.html


25

Energy Tidbits

Capital Markets – Expect more oil/gas deletions in TSX Index Dec rebalancing

It looks like we should see a continuation of o&g companies being deleted from the TSX index in Dec. As a reminder, the index is rebalanced quarterly and companies are removed if their market cap based on float adjusted shares falls below 0.025% of the overall value of the index. On Monday, the NBF Energy Sales team noted that several energy companies are at risk of falling below the 0.025% threshold and could be deleted from the index. These names include Gran Terra, Freehold Royalties, and Frontera Energy, and note 5 E&Ps and 2 services companies were deleted from the index in the Sept rebalancing. The rebalancing reminds of the challenge for Cdn energy companies to attract capital, especially with the rise of ETF investing, as companies deleted from the index will no longer be included in index tracking passive funds. Below we have pasted an NBF table showing possible membership changes in the S&P/TSX Composite Index.

Figure 24: Possible Membership Changes in The S&P/TSX Composite Index

Source: NBF

Capital Markets – Increasing % of LPs plan to reduce oil and gas investments There were some good insight into LP views on investing in PE funds from last week’s Coller Capital Global Private Equity Barometer Winter 2019-20. [LINK] (i) “A majority of LPs expect the overall rate of private equity fund management fees to reduce over the next five years”. (ii) ESG is an increasing factor for European and Asian LPs “Where investors are based affects how likely they will be to modify their investment strategy in response to climate change. Well over half of LPs based in Europe and the Asia-Pacific expect to modify their PE investment strategies in the next five years. However, the same is true for less than a third of North American LPs. Even fewer North American Limited Partners – just 16% – see a need to modify their own operating processes in the next five years.” (iii) LPs plan to reduce investment in oil and gas. “Around 40% of LPs are planning to reduce their investment in oil and gas over the next five years. Around the same proportion will ramp up investment in renewable energy and climate-friendly products/services”. (iv) “Almost 70% of private equity investors co-invest alongside their GPs – and 44% of LPs are proactive in seeking out co investment opportunities.” (v) “Over half of North American and Asia-Pacific investors believe

More o&g

deletions coming

in TSX index

More LPs to

reduce oil and

gas investments

https://www.collercapital.com/sites/default/files/


26

Energy Tidbits

significantly more retail money (401K or equivalent) will be invested in private equity in the next five years. Two in five European Limited Partners expect such a development.” (vi) “Four in five LPs believe an increase in default rates will pose a significant challenge to investment in private debt funds in the next three years.” (vii) “Equal proportions of private debt investors will accelerate and slow their pace of commitment to private debt funds over the next two years. This is in noticeable contrast to the Barometer of winter 2015-16, when a significant balance of LPs were speeding up their commitment pace”. (viii) “80% of Limited Partners expect to achieve annual net returns of more than 11% from across their private equity portfolios in the next 3-5 years.” Our Supplemental Documents package includes some excerpts from the barometer.

Capital Markets – 61% of Americans say stock market has little/no effect

It was interesting to hear some of the US business commentators talk about this FT-Peterson poll “Two-thirds of Americans don’t feel the benefits of Wall St rally” [LINK]. They were shocked to hear these results like how can Americans not know the S&P is up 25% this year. How can they not know or at least be aware of how the average American family’s focus is not on the stock market? Regardless the poll does reinforce that most Americans don’t follow the stock market. FT wrote “the poll of likely voters for the Financial Times and the Peter G Peterson Foundation found 61 per cent of Americans said stock market movements had little or no effect on their financial wellbeing. Thirty-nine per cent said stock market performance had a “very strong” or “somewhat strong” impact. The survey suggested most Americans are not aware of market movements, with just 40 per cent of respondents correctly saying the stock market had increased in value in 2019. Forty-two per cent of likely voters said the market was at “about the same” levels as at the start of the year, while 18 per cent believed it had decreased.” Our Supplemental Documents packager includes the FT story.

Capital Markets – End of an era, GMP/Griffiths McBurney is no longer Friday marked the end of an era with closing of the sale of GMP’s capital markets group to Stifel. I had the good fortune and honor to have been there for 15 years in their heyday from Oct 1998 to July 2013. I still remember joining Griffiths McBurney & Partners in Oct 1998. It was easy to be part of the leading independent investment dealer in their heyday, easy because of the high standards/expectations set by the leadership who led by delivering. It isn’t often that a firm can truly have the leaders who best in their field like Tom Budd in investment banker, Mike Wekerle in trading and Kevin Sullivan in sales. It made it easy for us in research when you knew that your partners would make sure we would be #1 in trading and banking for any of our researched companies. On one hand it has been sad to have watched it come to an end, but all great things must come to an end. And I am sure there are many others from GMP and outside GMP who know that it was great. So my thanks to all my former partners at Griffiths McBurney/GMP on the end of an era and for your friendship and support for making it a life changing experience.

Water – “WPS Global Early Warning Tool” forecasts more conflict in Basra, Iraq

Fresh water availability is something we take for granted in North America. No one really worries that there won’t be water when you turn on the tap, just like we don’t worry about having 24/7 reliable electricity. But it is an issue in Africa, Middle East and parts of Asia. We often don’t think about conflicts being solely driven by lack of freshwater, but, it has to be a factor. And therefore it has to be a factor to remember when looking at these regions. This week, the Water, Peace and Security (WPS) partnership released its new tool “WPS Global Early Warning Tool” [LINK] , which the WPS said that the “tool uses machine learning to predict violent conflicts, with an 86% success rate”. The WPS highlighted some key oil regions as high risk for the next 12 months. The WPS wrote “Initial findings from the WPS

Water shortage an

indicator for conflct

GMP/ Griffiths

McBurney is

gone

61% of

Americans don’t

see a stock

market effect

https://www.ft.com/content/7fdedb5e-152f-11ea-9ee4-11f260415385

https://www.waterpeacesecurity.org/


27

Energy Tidbits

Global Early Warning Tool predict risk of conflict in the next 12 months in many parts of the world, including (i) In Basra, Iraq, where water is one of several factors stirring up tensions. Due to seawater coming upstream from the Persian Gulf and pollution coming downriver on the Tigris and Euphrates, many people there lack access to clean water, with more than 120,000 people hospitalized after drinking polluted water last year. This has led to violent protests, and we believe this situation could further deteriorate if water issues aren’t addressed. (ii) Across the border in southwestern Iran, residents of Khorramshahr and Abadan recently experienced water shortages and poor-quality drinking water, helping trigger violent protests that we also expect to see intensify in the region. (iii) In Nigeria, killings and reprisals between farmer and pastoralist groups over scarce water and land resources are reaching a crescendo.” Our Supplemental Documents package includes the WPS comments on Iraq risk.

Figure 25: WPS Global Tool – Conflict Forecast Oct 2019 – Sept 2020

Source: Water, Peace and Security

Twitter – Look for our first comments on energy items on Twitter every day

For new followers to our Twitter, we are trying to tweet on breaking news or early views on energy items, most of which are followed up in detail in the Energy Tidbits memo or in separate blogs. Our Twitter handle is @Energy_Tidbits and can be followed at [LINK]. We wanted to use Energy Tidbits in our name since I have been writing Energy Tidbits memos for over 19 consecutive years. Please take a look thru our tweets and you can see we aren’t just retweeting other tweets. Rather we are trying to use Twitter for early views on energy items. Our Supplemental Documents package includes our tweets this week.

Energy Tidbits – Sign up on our email distribution for tidbits and blogs

For those interested in receiving out Energy Tidbits memos and blogs, please go to our blog sign up. We will be using the blog notification list for Energy Tidbits. The blog sign up is available at [LINK].

LinkedIn – Look for quick energy items from me on LinkedIn

I can also be reached on Linkedin and plan to use it as another forum to pass on energy items in addition to our weekly Energy Tidbits memo and our blogs that are posted on the SAF Energy website [LINK].

Look for energy

items on LinkedIn

Sign up to receive

future Energy

Tidbits memos

https://twitter.com/Energy_Tidbits

http://www.safgroup.ca/research/trends-in-the-market/

http://www.safgroup.ca/


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Energy Tidbits

Misc Facts and Figures.

During our weekly review of items for Energy Tidbits, we come across a number of miscellaneous facts and figures that are more general in nature

Study: Average American adult wakes up grumpy 300 days a year We always find something interesting/amusing in the studies highlighted on StudyFinds, such as this week’s “Morning Madness: Average Adult Wakes Up Grumpy 300 Days A Year!” [LINK] Its too bad there isn’t historical data as we would like to know how the not sleeping due to stress/anxiety % has changed and if that % moves consistent with economic strength/weakness. StudyFinds noted the key reasons “A great deal of that grumpiness can be traced back to nighttime disruptions, with respondents waking up in the middle of the night due to temperature issues roughly three times per week, and at least once a week because of outside noise or a nightmare. Alarmingly, a full night’s sleep is so rare that respondents report only getting an uninterrupted night’s sleep about a quarter of the time each year.” “Americans will, on average, spend 90 minutes each night tossing and turning. Broken down even further, respondents report waking up an average of two times per night, and staying awake for a total of 45 minutes each time.” “Other common factors keeping people up at night include stress and anxiety (31%) and the urge to use the bathroom (75%). For respondents with a significant other, their partner’s snoring was another common complaint (30%), followed by bedtime differences (31%), and their partner tossing and turning (19%).” Hopefully the last time we write on this Subway real chicken saga It looks like the saga is ending on how real is Subway’s oven roasted chicken. On Thurs, Zerohedge reported [LINK] “Subway has suffered yet another embarrassment after a Canadian court threw out a $210 million lawsuit against journalists who tested the company's meat, only to discover that Subway chicken contains as little as 42.8% actual chicken.” Our March 5, 2017 included a misc item “Hopefully the last real chicken tidbit until 2018 super bowl. By Sunday night, I had multiple Energy Tidbits readers ask me I had seen the CBC Marketplace “The chicken challenge: Testing your fast food” [LINK]. In case you didn’t see it, Marketplace did lab testing on grilled chicken from A&W, Macdonalds, Subway, Tim Horton’s and Wendy’s, and said that one brand’s grilled chicken (Subway) only had ~50% chicken content per total content. CBC analysis was that “Tests showed an average of 53.6 per cent chicken DNA for the oven-roasted chicken and 42.8 per cent for the chicken strips.” No surprise, Subway issued a March 1 press release [LINK] “Independent Labs Discredit Canadian Story on Subway® Chicken”. The Subway released concluded “Subway has shared the results of the independent tests with Marketplace and the lab that conducted the flawed test. The company is demanding a retraction and apology”. CBC issued a detailed story on its analysis (its actually an interesting read) that noted “Marketplace stands by its report and is releasing the Subway test results as well as additional detail about the methodology and investigation” [LINK].” Even most art loves must be shaking their head at Cattelan’s new sculpture The big Art Basel Miami Beach show received a huge amount of publicity on news on Thurs/Fri but we wonder if it boosted or hurt the prestige of the art gathering. All of the reports were on the latest piece from well known controversial Italian artist Maurizio Cattelan. His pieces are likely among the most well known among non art lovers. One of his most well known among non art lovers was his 2016 sculpture “America”, which was looked like the standard flush toilet in office washrooms, but it

https://www.studyfinds.org/morning-madness-average-adult-wakes-up-grumpy-300-days-a-year/

https://www.zerohedge.com/health/subway-loses-lawsuit-against-journalists-who-discovered-chicken-strips-only-43-actual?utm_campaign=&utm_content=ZeroHedge%3A+The+Durden+Dispatch&utm_medium=email&utm_source=zh_newsletter

http://www.cbc.ca/marketplace/episodes/2016-2017/chicken

http://www.newswire.ca/news-releases/independent-labs-discredit-canadian-story-on-subway-chicken-615170284.html

http://www.cbc.ca/news/business/subway-defends-its-chicken-after-cbc-marketplace-report-1.4005268


29

Energy Tidbits

was made of 103 kg of gold. His new 2019 sculpture “Comedian” is likely to be as well known to non art lovers – it’s called “Comedian”. Comedian is easy to describe, it’s a banana duct taped to a wall. ARTnews reported [LINK] “As you may know by now, the semi-retired artist, whose last major creation was a golden toilet titled America (2016), has now taped a banana to a wall of Perrotin gallery’s booth at Art Basel Miami Beach, the glitzy bazaar that alights in that flood-endangered city every December. It is titled Comedian, and it is priced at $120,000. Three were available, and the first two apparently sold on opening day.” The reports last night were that Comedian was sold.

https://www.artnews.com/art-news/news/maurizio-cattelan-banana-basel-1202670910/