Issue #49 | The Two-Headed Black Swan

Oilfield Water Weekly

Wednesday March 11, 2020

‘March Madness’ has taken on a whole new meaning this year. Since our last water weekly digest last Wednesday morning, it feels like the world has changed (ended?).

March 2020 has been marred by the arrival of a two-headed black swan event in the global oil market: i) OPEC+ collapse on the supply side, ii) COVID-19 crushing demand.

The shale E&P outlook is materially impacted to the downside, and operators are scaling back activity quickly as you’ll see in our news digest below.

So… water midstreamers are now grappling with what this means for formation water volumes in their pipes. Source water purveyors are wondering how many fracs will still need water. And water service and technology providers are caught up in the uncertainty now gripping the full-cycle oilfield water markets.

Our team at Oilfield Water Connection certainly doesn’t have all the answers. But we have spent decades working in the US onshore oilfield industry – and we’ve lived through some dark times similar to these. The one thing we’ve come to know and trust to be a universal truth in the oilfield is: change is constant.

Business conditions can change on a dime – for good or for bad. And although things just got very nasty out there, the sun will shine again. How could this new two-headed black swan meet its demise sooner rather than later? Well, here is your daily dose of optimism:

  • Oil Demand Black Swan Skeptic. We heard a great quote about COVID-19 stats: “the stats you see today are like looking up at a star – the light you see today was emitted a long time ago.” The point is there was a great deal of travel between US and China AFTER the virus emerged but BEFORE it was detected. If the highly contagious novel coronoavirus has been among us for much longer than the stats from a limited sample of tests (which only started in March) show and is as lethal as the stats imply, then why haven’t our hospitals been overrun already? Could it be that everyone is looking in the rear view mirror thinking they are looking forward? While things may certainly get worse and we are closely monitoring the US situation, there is still a strong possibility that today’s press-fueled hysteria could burn out by April or May. Over the next four to six weeks, more hard data may potentially show that the economic and lifestyle impact is not nearly as lasting or severe as the mainstream media headlines suggest.
  • Oil Supply Black Swan Skeptic. Saudi and Russia clearly aren’t bluffing in their price war. They took material actions over the weekend. But how long can they withstand the impact of $30 or $20 oil? There will be public unrest and serious financial losses for their governments if their draconian measures are sustained. What if this week’s aggressive moves by the Kingdom and the Kremlin quickly get the other side back to the table and a deal is reached in the next month or so? Things could look much better headed into May / June…

Finally, before the news… here is a quick conference update. We are continuing full steam ahead with the planning of our Oilfield Water Markets 2020 Conference at the Gaylord Texan Resort in Dallas Fort Worth on May 26-28. We are closely monitoring the COVID-19 situation and proactively developing contingency plans that will be attractive to all participants in an unexpected scenario where worse-comes-to-worse. But for now, the event is on track and developing according to plan with a great turnout, content, and networking opportunities expected. Events like this one are crucial in downturns, as they facilitate the discovery of efficiencies, innovations, solutions and new partners that can help firms navigate troubled waters.

Our event is now eleven weeks away, and sponsors and attendees and speakers continue to sign on. Today, we are excited to announce the event’s latest sponsor: Twenty20 Solutions has joined the event as a Silver+WIFI sponsor. Twenty20 Solutions provides security and automation solutions that allow pipeline and SWD operators to monitor and react to threats and maintenance issues in real-time, before a loss or breakdown occurs. We are thrilled to have their team as part of the event, and we believe that smart solutions like theirs (and those provided by our other sponsors) are more critical than ever as the industry’s cost reduction focus escalates in this environment.

And now, here are the top oilfield water industry headlines of the week…


News Digest

Oil Price War: U.S. Drillers Feeling Immediate Pain [NPR Marketplace Segment On The Crash]

For the past decade, U.S. producers have been the new kids on the global oil block, drilling and fracking and stealing customers from the old-school behemoths, the Saudis and Russians. Last Friday, the Russians declared “enough,” inviting producers to drill full bore, crash prices and see who survives...

White House Likely To Pursue Federal Aid For Shale Companies Hit By Oil Shock, Coronavirus Downturn

The White House is strongly considering pushing federal assistance for oil and natural gas producers hit by plummeting oil prices amid the coronavirus outbreak, as industry officials close to the administration clamor for help, according to four people familiar with internal deliberations....

On Black Monday, A Double Black Swan Leaves Us Staring Into A Black Abyss [free trial unlocks]

"It’s always darkest before it goes completely black” (Sen. John McCain). Here are 10 things that matter in this, the oilfield's darkest hour, starting with a prediction on Monday morning that has been fulfilled in the past 36 hours, as evidenced by the next story down...

US Tight Oil E&Ps React Swiftly, Decisively To SLAM The Brakes [free trial unlocks]

This update is divided into two parts. First, you’ll find things Infill Thinking has learned in their channel checks with contacts in the field over the past 48 hours. Second, you’ll find a summary of the E&Ps that have publicly press released reductions to their D&C programs in the wake of this weekend’s crude oil carnage...

US Suspends 12mmbbl SPR Sale Due To Drop In Oil Prices

The US Department of Energy has suspended a sale set for later Tuesday of up to 12 million barrels of government-owned crude, due to the recent crash in global oil prices, an agency spokeswoman said...

Shale’s New Reality: Almost All Wells Drilled Now Lose Money

America’s shale producers already had a profitability problem. It just got a lot worse. At a stroke, Saudi Arabia and Russia and their battle for market share have made almost all U.S. shale drilling unprofitable....

Decline In U.S. Shale Production Is Closer Than You Think

A pre-crash analysis of US oil production growth trends...

What Oil War Could Mean for Trucking

“A surge in oilfield activity was one of the reasons that the truck market was so hot in 2018, especially for flatbed,” Vise said. “If Saudi Arabia's price war makes it uneconomic for many oil exploration and production companies to remain in business, we could see oilfield activity drop sharply, which would hurt carriers involved in hauling frac sand, equipment, and so on."...

Antelope Water Management Completes KMX Membrane Technologies Asset Acquisition

Beyond treating challenging industrial waste streams to high standards, KMX has the potential to recover high-value by-products including Rare Earth Elements (REEs) and lithium from abandoned coal mines, acid mine drainage, power plant slurry ponds, and oil & gas produced water....

Colorado O&G Spills See Modest Rise

While the Colorado Oil and Gas Association says the number of spills must be viewed in the context of production quadrupling in the Denver-Julesburg Basin between 2011 and 2017, environmental advocates say the numbers suggest that the industry must be even more strictly regulated....

3.4-Mag Quake Disrupts Continental Resources Well Completion

Continental Resources suspended efforts to complete a well Thursday night after a 3.4-magnitude earthquake happened nearby....

2.5 Mag Earthquake Recorded East Of Odessa

 A 2.5 magnitude earthquake was reported east of Odessa on Monday morning...

Don’t Conflate Exxon’s Big Permian Rig Count Chop With Completions [free trial unlocks]

Exxon held their highly anticipated annual analyst day on Thursday, May 5, 2020. While the headline in the oilfield press is “Exxon is slowing down in the Permian,” we would note the importance of delineating their activity reduction commentary between rigs and wells....

WATER TALENT POOL: Gradiant Energy Services Hiring A Permian Technical Support Engineer

Gradiant Energy Services is seeking a Technical Support Engineer in our Midland, Texas location to support the technical sales efforts including understanding the market and competitors, preparing technical proposals, project pricing, Gradiant technology integration to customer's business, and understanding and communicating the technical requirements of the customer to the internal teams....

WATER TALENT POOL: MFG Chemical Names Jonathan O ’Dwyer VP Commercial Operations

MFG Chemical, a global leader in specialty and custom chemical manufacturing, announces that Dr. Jonathan O’Dwyer has joined the company as VP Commercial Operations. Jonathan will be responsible for all commercial operations including marketing, sales, and product management, and be part of the senior management team...

WATER TALENT POOL: Jinxuan Hu Joins Select Energy Services As VP Engineered Water Solutions

Jinxuan Hu, Vice President of Engineered Water Solutions at Select Energy Services, writes: "After a fantastic 7.5 years helping to develop the technology and business with Hydrozonix, I look now to pastures new..."

Milestone Environmental Opens Midland Office

Milestone Environmental Services has seven facilities around the Permian Basin, from slurry disposal facilities to two landfills. To accommodate its growth, the company has opened a Midland office....

The Blended Finance Opportunity For Water Investments

Water flows are a prerequisite for every one of the Sustainable Development Goals (SDGs), including those on food security, healthy lives, clean energy, and marine and terrestrial ecosystems...

A Brief History Of The Flaring Dialog Between E&P CEOs & Investors

To create the timeline summary below, Infill Thinking reviewed, interpreted, and distilled more than 1,000 executive/investor conversations about flaring over the past 1.5 decades into a 5-minute-read...

2019 Top SWD Wells - Eddy County, NM [Analysis]

Chris Weyand shares a table of Total BBLs Injected & Best Month, ranking at the top: Mewbourne Oil Co, Solaris Water Midstream, NGL Energy Partners LP, Cimarex Energy, and Matador Resources Company...

New Mexico Governor Signs Solar Energy, Grid Update Bills

New Mexico will reinstate a tax credit for households and businesses that adopt solar energy systems and take new steps to modernize the electric grid and export more renewable energy under bills signed Tuesday by the governor....

Frac Hit Crisis – Producer Solutions

Collaboration is the ultimate answer to the pervasive frac hit crisis, which may just be getting started. The initial instinct of the Permian frac hit coalition to pick up a phone and work through a solution was the right one....

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