Saturday, August 29, 2015

Saturday Notes Continued, Part III -- August 29, 2015

I've really covered most of the news in Part I and Part II, but my contract requires a certain amount of blogging each week. To meet contract obligations, the notes continue. That does not mean you have to read them. I only have to post them. The contract only says I have to mention the Bakken; the contract does not say I have to blog about the Bakken.

The definition of "is," is?

I've mentioned the Bakken (three times now) but I doubt there will be anything in this post about the Bakken (ka-ching, #4). If you came here looking for the Bakken (ka-ching, #5), I apologize. Scroll up or down, or go to the sidebar and you will come across sme Bakken (ka-ching, #6).

My favorite: William Herbert Hunt is a billionaire once again. Hunt became a billionaire by selling some of his Bakken (ka-ching, #7) acreage to Halcon back in 2012. The story begs the question: could William Herbert Hunt buy back his acres from Halcon?

After the Bakken (ka-ching, #8) and energy related issues, my favorite subject is ObamaCare. So many stories came out this past week about ObamaCare co-ops failing (and being compared to Solyndra) and ObamaCare premiums increasing 20, 30, 40 and dare we say 50%? Probably not 50%. CNBC reported this story Friday afternoon when most reporters had already called it a week, and had already left for the bars, so none of you probably saw it until now (send a thank you note to Don):
Bigger might be better, but it can also be pricier—at least when it comes to Obamacare.
A new analysis found that the largest insurer in each of the states served by HealthCare.gov raised their prices in 2015 much more sharply—by an average of 10 full percentage points—than smaller competitors on that federal Obamacare marketplace.
Those steeper price hikes for monthly premiums didn't seem warranted by the level of health claims made by customers of those bigger plan.
They also stand in contrast to the belief that economies of scale will result in lower prices.
"On average, the largest issuers raised rates by 23.9 percent, while the other issuers only raised rates by 13.7 percent," the authors wrote.
That means the largest issuer in each state had, on average, a 75 percent higher premium increase compared to other insurers in the same state, the report found. 
It's a pretty lame story, but it sort of rounds out a sort of lousy week.

The unemployed in St Louis are about to welcome some new members. KMOV is reporting:
St. Louis' governing board has approved a compromise measure that raises the city's minimum wage to $11 by 2018. 
Every study in the history of the world says raising the minimum wage in St Louis will result in more unemployment. I guess that's why the call-sign for that particular news station is "KMOV" -- folks are MOVing out as fast as they can. Especially after Ferguson. My hunch is that the discussion to raise the minimum wage revolved around Ferguson to a great extent. A lot of guilt assuaged. (That's the first time I've ever used that word on this blog.)

By the way, speaking of which, I mentioned the other day I was reading a very, very long article on a failed high school in Queens, NYC. I was hoping to come away from that article with some pithy comments on what it all meant, but all I came away with was a real feeling of depression. I guess I can say this: money is not the answer. Nor are Harvard-trained social scientists who thought up the whole busing thing.

Quick! What city is the most segregated school system in the US?
  • Birmingham, AL
  • Montgomery, AL
  • Selma, Al
  • Jackson, MS
That was a trick question. Actually the question was not a trick. The given answers were a trick. The answer was not given. From the linked article in The New Yorker:
Last year (2014), a study by the Civil Rights Project at UCLA found that New York City has the most segregated school system in the country, a reflection of the persistence of the housing patterns that Arthur Levitt talked about in 1954 but also of the failure of the integrationist ideal that was intended to address it.
So there you have it. And I thought it was Montgomery, AL, all these years. 

Saturday Notes Continued, Part IV -- August 29, 2015

See "continued notes, Part III" to explain this note.

I skimmed through this article over at Seeking Alpha on the break-even prices in the Bakken, but articles like this don't interest me a whole lot -- at least not any more. I'm not sure why. They may have interested me at one time. What does interest me is the comments on articles like these, and in this case, no different. Some of the comments are priceless. My pet peeve is when anyone asks how long a typical Bakken well will last when trying to sort out the economics. We've discussed that so many times; so irrelevant.



By the way, that MacKenzie graph from was posted on the blog (or if not posted, linked) back in October, 2014. I had not seen it in a long, long time, but it is way out of date, at least for the Bakken.

On another note, the Casper Star Tribune is reporting that an ethanol plant in Torrington, Wyoming, is closing down. The article talks about how efficient this ethanol plant was (at least compared to others), but one needs to get deep into the article to learn that the plant was no longer financially viable when the state ended the 40-cent per gallon tax credit for ethanol this past June.

A spokesman said the tax credit's expiration came as crude prices fell, driving down what the plant could fetch for its ethanol. The combination proved fatal. There are many, many story lines but it is not worth the effort. I am just amazed that an ethanol plant as efficient as this one could not survive without a 40-cent/gallon tax credit. Holy husks of corn. This is a credit we're talking about, not a deduction. A full-fledged tax credit. For every dollar the company owes in taxes, they send the state only 60 cents; what a great deal. If I had been asked what the credit had been without knowing, I might have guessed three to five  cents, certainly not 40 cents.

The other story line, of course, is how many more such plants will announce closure over the next 24 months. One wonders about the new Spiritwood ethanol plant in Jamestown, ND.

North Dakota Continues To Be In The News, Saturday's Note, Part II -- August 29, 2015

I'm paging through this weekend's edition of BloombergBusiness. I assume it's the last issue I will get for my introductory subscription, $10 for the year. BB has sent me several notices telling me my subscription ended some weeks ago, but someone keeps dropping off the current edition at my front door every Saturday morning. Almost tempted to renew at full subscription price. The key word is "almost."

As I was saying, I was paging through this weekend's issue of BB. There, on page 27, a full-page story (almost full page, about 5/6 of the page) is the story about the pressure on Heidi Heitkamp, the Democratic Senator from North Dakota to vote against the Iran nuclear plan. I always said it was a mistake for North Dakotans to vote a Democrat senator into office and now we will find out. It would be ironic if the Senate fails by one vote to override the Obama veto to save his Iran nuclear deal. When Iran dumps 1 - 3 million bopd on the global market, it's nothing but bad news for the Bakken.

I haven't done a poll in a long time. This is a great poll. Will Ms Heitkamp support Barack or will she support the Bakken? The poll is at the sidebar at the right; it's been such a long time, I almost forgot how to put up a poll. I'm betting she will not support the GOP on this one.

Speaking of North Dakota, the state is on a roll.

First, with the president's Clean Power initiative, North Dakota is going to have an entire new industry converting coal plants to natural gas plants. This will result in a gazillion investment dollars and a lot more jobs. And there will no longer be any worry about all that natural gas ONEOK is gathering, processing, and transporting.

Second, there is still some discussion on pros and cons regarding wind energy, but at the end of the day, there will be additional wind farms going up in North Dakota. As long as they put the farms up near Bismarck, Dickinson, and Fargo, it's fine with me, just NIMBY.

Third, I see Bobcats wherever I go when traveling cross-country. And now I read that Bobcat in North Dakota is expanding. Do you remember all those dire predictions and all that hand-wringing when a South Dakota Korean company bought the Bobcat company? Widely read Farm Equipment
is reporting the story:
Bobcat Co. and parent organization Doosan have broken ground on a $9.5 million company headquarters expansion in West Fargo, N.D.
The current headquarters — built in 2000 — houses individuals within several departments of business administration, as well as product development and marketing communications for Bobcat Co. and Doosan, a heavy equipment brand.
The expansion will double square footage and employee capacity, and Bobcat and Doosan will pursue LEED certification for the facility in both design and construction.
Last year, Bobcat and Doosan opened the exciting new Acceleration Center in Bismarck, N.D., a facility focused on engineering, R&D, training and product testing. Other North Dakota Bobcat and Doosan facilities have undergone renovations over the last two years.
That's in West Fargo. Fargo/West Fargo is one of the fastest growing smallish communities in the US. Despite the winters. By the way, my hunch is that a lot of that growth is coming from Minnesotans moving across the state line to escape taxes.

More news from North Dakota, previously reported: the FAA gave the state final approval to test drones at night. Of the six drone-testing sites in the US, only North Dakota got the nod. Some other dots to connect.
  • Amazon uses drones
  • Amazon has a customer-services center in Grand Forks, ND (one of the very few nationwide)
  • Amazon now delivers alcohol and promises one-hour delivery
  • North Dakota leads the nation in beer consumption on a per-capita basis
  • most people drink beer at night
  • folks in Fargo are upset about the "Fighting Sioux" thing and have a reason to drink
  • winter is coming; it starts getting dark about 2:30 p.m. in West Fargo, about an hour earlier than in Fargo
I'm not sure about the complete accuracy of those four five six seven bullets, but I do believe they are "almost" correct. This is not a beer-drinking recommending site. Do not make any beer drinking decisions based on what you read here. If this information is important to you, have another beer, and look up the source next week on your company's computer.

For the moment that taps out (pun intended) the news from North Dakota.

The Storm We Call Hillary Dissipates, Saturday's Note, Part I -- August 29, 2015

This is likely to be a meandering note that will go nowhere, almost none of it about the Bakken directly but years from now some of this, hopefully, will put the Bakken into perspective. Some of it, but not very much.

The Obama administration did all it could to keep the dream alive, but the fact is, it has still been a decade since we've had any hurricanes in the Gulf of Mexico. The warmists really, really needed Erika to turn into something, but it never did. Even the Weather Channel hung on long as it could, trying to keep the dream alive, but even now the Weather Channel concedes Erika has dissipated, though they hold out some hope it could re-form yet as it heads toward Florida. (I don't know if that's a dynamic link or not.)

After this last week, one could say the storm we call "Hillary" is much like Erika. First, they both have unusual names, barely feminine, and both roll off the tongue. It's very possible Hillary herself will become a tropical depression before the Florida primary some months from now, but my hunch is she will get the DNC nomination, regardless. If not, it's Joe Biden and some of the best one-on-one presidential debates we will ever see. I think folks will be surprised how well Joe will banter with the Donald. It looks like Jeb Bush will dissipate faster than Erika at this point. I've never really paid much attention to good ol' Jeb, but now that I've seen some Vanity Fair photos of him, he appears to be the quintessential definition of a "suit."

Suit, slang: a business executive or white-collar manager. 

Another storm that dissipated almost as fast as Erika this past week was the Chinese storm. That storm may not be over, but at least no one can say they weren't warned. The US stock market crashes, oil drops below $39 but then the market comes up a bit and finishes the week a lot lower than it started, but certainly, back in territory that provides a sense of relief, warranted or not. Oil surged 10% and finished the week well above $40.

I'm inappropriately bullish on oil and not a bit concerned. The tea leaves suggest folks will still be using oil and natural gas and gasoline and jet fuel (made from crude oil) and coal five years from now. It looks like Warren Buffett thinks the same. I don't know if folks remember, but Warren really got burned in energy a few years ago when he bought COP "high" and ended up selling it "low." At the time he joked about what a bad decision that was and vowed never to repeat it. I had the feeling he was going to stay away from the majors. But then it turns out, he has a huge stake in COP refining, now called Phillips 66. Warren owns 10% of PSX at a current value of $4.5 billion. That speaks volumes. Let me count the ways:
  • first, as mentioned earlier, he got burned in COP and probably thought long and hard about PSX before buying, holding, and accumulating;
  • second, Warren says he's a warmist, believes strongly in global warming, and here he is, buying an oil refiner;
  • third, if the government okays oil exports, the refiners aren't going to look quite as good as they do now;
  • fourth, unless Warren has turned into a trader at age 85, he is a value investor, a long term investor, someone who holds stocks for a very, very long time, suggesting he sees refiners as a good long-term investor.
Of the four, point #3 is most interesting -- something tells me Warren took out a yellow legal pad and summarized the pros and cons of the US sanctioning crude oil imports -- just kidding, too much work; he simply phoned the president and they had a friendly little chat. Then, after promising her a few dollars for her presidential campaign, he had the same chat with Hillary. Both reassured him there was no way that the US would "across-the-board" okay oil exports.

Meanwhile, in other areas there was also some big energy news. Schlumberger will buy Cameron for almost $15 billion, assuming the regulators and the EU okay the deal. I think SLB is still a French company so they have that on their side. HAL and BHI are American companies. The EU pretty much killed the HAL-BHI merger.

GE snookered Connecticut. Of course, we don't know the sweetheart deal got from Connecticut but there was no chance GE was leaving Connecticut for Dallas. Too many reasons. Not enough time to elaborate. GE simply used the Dallas threat to get some tax breaks. 

End of Part I. 

Week 34: August 23, 2015 -- August 29, 2015

The big story, of course, was the market meltdown due to concerns about China, and the accompanying decline of the price of WTI oil to well below $40. By the end of the week, things had quieted down, the market bounced back a bit, but oil surged 10%, closing well above $40/bbl. While China implodes, the US reports 2Q15 GDP of 3.7%. Whether anyone "believes" that number is another story, but all agree that the number for 2Q15 is unlikely to presage the 3Q15 number.

Gasoline demand this past week was particularly interesting to follow: are California refineries having a tough time meeting demand?

Some things are happening in the Mideast. McDermott, an oil services company, received a record contract and record lump sump from Saudi Aramco for work in fields offshore Saudi Arabia.

There are rumors that President Obama will officially announce he is denying the Keystone XL pipeline a permit. 

Schlumberger will buy Cameron for almost $15 billion.

Utility rates may be up as much as 88% along the US East Coast.

Operations
Update on the Whiting Obrigewitch wells in Stark County
Excess crude oil storage along the Gulf Coast?
Missouri River Resources is on the board
Zavanna, seeming to be on a roll lately, has seven (7) more permits in Foreman Butte oil field
Zavanna, reporting some nice wells
Random look at Zavanna's "old Nelson" well after gas life
What do you get when you cross a great operator (Whiting) with great sites (KOG)? Huge wells
NDIC's September, 2015, hearing docket agenda posted

CBR;
East coast refinery no longer taking Bakken CBR

Bakken 101
NDIC's "break-even" points for the Bakken
Rig productivity
The Bakken is changing

Miscellaneous
North Dakota gets FAA approval to test night-flights for drones
Hess now deducts a transportation fee from royalty checks

Investors
There are indications this is close to the "end" for Halcon in its present form 

Family Commitments -- August 29, 2015

I apologize for not posting much in the past 24 hours. I had family commitments last night and then again this morning, taking me through much of the day, into the afternoon.

I also felt I needed to take a bit of a break from the internet. 

But I will be back to "normal" by this evening, hopefully.

What fascinates me most today? Hurricane Erika. This site now doesn't even show a hurricane, simply calling it "remnants of Erika." And the winds in the Caribbean don't seem all that much stronger than what blows through North Dakota on a typical day. But wow, look at those winds in the north Atlantic, especially the whirling dervish smack dab right in the middle between Iceland and Ireland. And on the west side of Greenland, it ain't a whole lot better. There's another whirling dervish off the northeast coast of Alaska. One wonders what this is doing to the ice pack?

Friday, August 28, 2015

Seven (7) New Permits; XTO Reports Two High-IP Wells -- North Dakota, August 28, 2015

Active rigs:

8/28/201508/28/201408/28/201308/28/201208/28/2011
Active Rigs76195181191199

Seven (7) new permits --
  • Operators: Hess (5), HCR (2)
  • Fields: Beaver Lodge (Williams), Antelope
  • Comments: 
Two (2) producing wells completed --
  • 30215, 2,622, XTO, Thompson 44X-20B, Blue Buttes, t8/15; cum --
  • 30217, 2,353, XTO, Thompson 44X-20A, Blue Buttes, t8/15; cum --

With An IP Of "5" This Well Turned Out To Be Pretty Good -- August 28, 2015

This is a South Red River B well in the southwest corner of North Dakota. It turned out to be a pretty good well, despite the IP and the fact the well was not stimulated:
  • 28264, 5, Denbury Onshore, CHSU 24-23NH 15, Cedar Hills, unitized, a South Red River B well, not fracked/not stimulated (form: "No stim treatments were performed."), drilling unit, 54,799 acres, KOP 8,790 feet; TD, 9,352 feet (lateral about one mile long), t8/14; cum 17K 6/15;
Previously NC/SI, Abraxas reported a nice well a while back:
28323, 917, Abraxas, Stenehjem 27-34-4H, North Fork, t12/14; cum 105K 11/14;
******************************
21st Century Crime

Earlier this morning I happened to read an op-ed in the Los Angeles Times about the 20% increase in crime in the Los Angeles area over the past year or so. I forget the particulars. The usual list of reasons was provided.

I was reminded of that op-ed while reading a very, very long article in The New Yorker, "Class Notes," discussing "what really happens" when a school closes. It has to do with Jamaica High School in Queens, NYC, which closed in 2014. At one time, Jamaica High School was the largest high school in the United States. The article doesn't say (at least as far as I've read) when the school opened  but it says the school, as it exists "now," was designed in the 1920's so I assume it opened early in the 20th century.

In 2011, the NYC Department of Education announced that the school would be closed, citing persistent violence and a graduation rate of around fifty percent.

Early in the article, the writer, a graduate of Jamaica High School, writes:
[F]or much of its time, Jamaica was a gemstone of the city's public-education system.
In 1981, the schools chancellor, Frank Macchiarola, decided to take on the additional role of an interim high-school principal, in order to better appreciate the daily demands of school administration.
He chose Jamaica, and was roundly criticized for picking such an easy school to lead.
Four years later, the US Department of Education named it one of the  most outstanding public secondary schools in the nation. Alumni include Stephen Jay Gould (one of my "heroes"), Attorney General John Mitchell (one of RMN's "heroes" until things went badly), Representative Sheila Jackson Lee, Walter O'Malley, Paul Bowles and three winners of the Pulitzer Prize: Gunther Schuller, Art Buchwald, and Alan Dugan. Bob Beamon, who set a world record for the long jump in the 1968 Olympics, graduated with the class of 1965.
Sheila Jackson Lee, an alumnus,  is the U.S. Representative for Texas's 18th congressional district, serving since 1995.

Walter O'Malley, another alumnus, went to Jamaica High School from 1918 to 1920 before completing high school and graduating from Culver Academy. O'Malley brought professional baseball to the West Coast, owning the Brooklyn / Los Angeles Dodgers from 1950 to 1979.

It will be interesting to see if The New Yorker writer ruminates on how Jamaica High School went from one of the most outstanding public secondary schools in the nation to a school that needed to be closed due to persistent violence and a graduation rate of around fifty percent. If he does, it will be interesting under what mayor this occurred and maybe a bit of background of the chancellor and the leadership of the city's department of education.

ObamaCare Co-Op Failure(s) Compared To Solyndra -- August 28, 2015

It's funny how things turn out. This morning I posted a story I happened to come across in The Boston Globe about the huge health care premium increases scheduled for Massachusetts in 2016, after huge increases already in 2014 and 2015.  I didn't know if I really wanted to post it / link it but in the end decided to do so. Now, I get this link from Don: another ObamaCare co-op "bites the dust," this one in Harry Reid's backyard. Investors.com is reporting:
On Wednesday, the Nevada Health Co-Op announced that it will go out of business at the end of the year. This is the third out of the 23 ObamaCare-created nonprofit health plans to fail, but it isn't likely to be the last.
After getting $69.5 million in government-sponsored startup loans, Nevada's co-op saw enrollment come in far lower than expected, and claims costs far higher, resulting in a $15 million loss last year.
The co-op was seeing the same dismal results this year, making it impossible to provide "quality care at reasonable rates."
Democrats who designed ObamaCare created these nonprofit co-ops in the belief that they could provide price competition in ObamaCare exchanges. To get them off the ground, the federal government pumped more than $2.5 billion in startup loans and $355 million in solvency loans when things started to turn sour last year.
More:
Before calling it quits, Nevada's co-op was asking for hikes as high as 27.53%.
A recent audit found that enrollment in most of the state co-ops was significantly below expectations, and costs were far higher. All but one of the 23 co-ops lost money in 2014 — more than half saw losses that were higher than Nevada's.
Earlier this year, CoOpportunity — which served members in Iowa and Nebraska — ceased operations, and the Louisiana Health Cooperative announced it would close its doors at the end of the year. Tennessee's coop had to freeze enrollment this year amid mounting losses.
The three failed co-ops received a total of $310 million in federal startup and solvency loans. Overall, $2.9 billion in federal loans is at risk.
For perspective, Solyndra — the solar panel company that famously failed early in the Obama administration — cost taxpayers $500 million.
Anyone who doesn't think the current president will go down in history as the worst US president since WWII simply isn't paying attention. 

That Was Easy -- Federal Judge Blocks EPA's Water Rule -- August 28, 2015

Being reported everywhere, but this is from The Hill:
A federal judge in North Dakota acted late on Thursday to block the Obama administration’s controversial water pollution rule, hours before it was due to take effect.
Judge Ralph Erickson of the District Court for the District of North Dakota found that the 13 states suing to block the rule met the conditions necessary for a preliminary injunction, including that they would likely be harmed if courts didn't act and that they are likely to succeed when their underlying lawsuit against the rule is decided.
The decision is a major roadblock for the Environmental Protection Agency (EPA) and the Army Corps of Engineers, who were planning on Friday to begin enforcing the Waters of the United States rule, expanding federal jurisdiction over small waterways, like streams and wetlands. 
But the Obama administration says it will largely enforce the regulation as planned, arguing that the Thursday decision only applies to the 13 states that requested the injunction.
Those who snooze, lose.  The 13 states (sort of like the original 13 colonies): Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota and Wyoming.

Notable states that failed to join the original 13: Minnesota, Texas, California, Washington, Oregon, Florida, IowallinoisIndiana (think pig farmers who probably started this entire "mess"), Vermont, New Hampshire, and Maine.