Monday, November 25, 2013

Monday: EOG Set To Become Largest Producer In Lower 48; The San Pedro Wall Lizard

Active rigs: 185

RBN Energy: continuing the series on all that crude oil ending up along the Texas coast -- what to do with it.
When over 4 MMb/d of new crude transportation capacity opens up to the Texas Gulf Coast by the end of 2015 shippers are likely to face congestion getting their supplies to refiners in the region. Given the U.S. Department of Commerce ban on exports, some of that crude needs to find a home elsewhere. Pipeline options to get crude supplies to Eastern Gulf refineries are limited to the Ho-Ho reversal project. Today we examine shipper alternatives.
EOG: set to become largest oil producer in the lower 48 -- Michael Fitzsimmons over at SeekingAlpha. 
Not being satisfied with that distinction, President and CEO Bill Thomas has set the company's sights on being the largest oil producer in all of the US. Total oil production has grown at a 43% annual rate over the last three years with many wells achieving a 100%+ rate of return. New completion techniques should offset any potential weakness in WTI prices. As a result, the company's stock price should power higher. After doubling over the last 5 years, EOG should continue to deliver superior shareholder returns and could double again over the next 3 years.

At a recent BofA Global Energy conference presentation, I was surprised to hear Thomas claim EOG would soon be the largest oil producer in the continental United States.
Calumet-MDU have laid the foundation for their new refinery four miles west of Dickinson. Photo at the link.

The Wall Street Journal

I'll do a stand-alone post on this later. I've been writing about for the past year. I was waiting for the mainstream media to start reporting. Like it or hate it, there is no putting the genie back in the bottle, and that's great news for investors. These are the facts: I don't think anyone can deny them. The cost of health care was "killing" business. That's the first fact. Second, businesses could never set solid long term financial / business plans because they never knew what their health care costs (in terms of health insurance premiums) were going to cost them. Every October, or thereabouts, the insurance companies would sent them a bill for the following year. (It's no different that your personal car insurance; you don't know what the premium will be until you get the bill at the time of renewal).

Like it or leave it, ObamaCare is a godsend to big business. Big Business will get two huge things out of the act. First, they will cost-shift employees / unions over to ObamaCare. They could agree to pay full insurance premiums. But that's not going to happen. Big Business will simply give their employees "X" amount of dollars each month and let the employees / unions buy their own health plans. ObamaCare policies, like them or hate them, by law, provides incredible coverage, and, with regard to cost, ever our president has simple advice "shop around."

I mentioned that Big Business gets two things out of ObamaCare. The first was cost-shifting. But the second thing they get is even more important. Their CFO can now truly plan for personnel expenses going forward. The CFO knows how much the corporation is going to shell out for health are premiums, and the CFO knows that figure out as many years in the future as the CEO/board of directors want to plan.

This is why the bill is called the Affordable Care Act. It has nothing to do with affordability for onesies and twosies that are buying health care policies; this has everything to do with big business.

Today, in the front section of The Wall Street Journal, this story: companies prepare to pass more health costs to workers.
Companies are bracing for an influx of participants in their insurance plans due to the health-care overhaul, adding to pressure to shift more of the cost of coverage to employees.
Many employers are betting that the Affordable Care Act's requirement that all Americans have health insurance starting in 2014 will bring more people into their plans who have previously opted out.
That, along with other rising expenses, is prompting companies to raise workers' premium contributions, steer them toward high-deductible plans and charge them more to cover family members.
The changes as companies roll out their health plans for 2014 aren't solely the result of the ACA. Employers have been pushing more of the cost of providing health insurance on to their workers for years, and firms that aren't booking much sales growth due to the sluggish economy are under heavy pressure to keep expenses down.
Some are dealing with rising expenses by making employees pick up a bigger share of the premiums for coverage of family members. Employees this year are responsible for an average 18% of the cost of individual coverage, but 29% of the cost of family coverage, according to a survey of employee health plans by the Kaiser Family Foundation and the Health Research & Educational Trust.
Great news for investors. But companies will go one step farther. They will eventually provide workers a monthly stipend for workers to "shop around," buy their own ObamaCare policy.

On another note regarding ObamaCare. Out of Colorado, The Denver Post is reporting:
Enrollment in the Affordable Care Act through Colorado's health insurance exchange is barely half the state's worst-case projection, prompting demands from exchange board members for better stewardship of public money.
The shortfall could compromise the exchange's "ability to deliver on promises made to Colorado citizens" and threatens the funding stream for the exchange itself, according to board e-mails obtained by The Denver Post in an open records request.
The exchange, meant for individuals and small groups buying insurance, had projected a lowest-level mid-November enrollment of 11,108, in a presentation to a board finance committee. The exchange announced Nov. 18 that it had signed up 6,001 Coloradans so far.
The midlevel scenario for November was 20,186 members, and the highest projection 30,944 members.

This is an incredible story. As long as I've been able to read, I've read stories about the trash problem in Naples, Italy. It is so "normal" one does not even see stories about it any more. Until today: trash crisis piles up on city outskirts. It must be bad, if this story is now in the front section.
A new garbage crisis is exploding on the outskirts of this city long plagued by recurring trash-handling problems—this time fueling toxic bonfires that have burned unchecked and worries about contaminated water and food supplies.
While the mountains of rotting trash that made front pages around the world five years ago have largely disappeared from the city's center, the problem has shifted to Naples's impoverished periphery. There, residents say the local mafia burns toxic industrial refuse, including asbestos, unchecked, and piles of trash sit alongside farmland.
"People are just terrified," says Maurizio Patriciello, a priest in one of the most exposed towns in the area. "Central and local governments have underestimated this problem for decades."
Though the area's waste-handling woes are long-standing, the effects on food and water safety have grown more apparent and intensified public outrage.
Thousands of demonstrators last month took to Naples's streets to protest the garbage crisis and, last week, Pope Francis also voiced concern. The problem is so serious that officials at the U.S. Navy base outside Naples have moved personnel away from surrounding areas over the past two years after they found contaminated water supplies nearby.
No links or comments to the Iran nuclear story. I have no dog in that fight.

Schadenfreude.  Short sellers adjust as stocks keep rising.
Some bearish investors are exiting short positions more quickly than usual when their bets turn negative, trying to keep losses to a minimum. Others are reducing wagers they had placed against the broader market, to avoid further pain if the rally continues. Some of these investors continue to maintain bearish bets on individual companies they suspect will run into trouble. Still others are shifting to shorting emerging-market stocks and pockets of weakness in the U.S. In any case, these investors have been licking their wounds.

The Los Angeles Times

Our winter cottage is in San Pedro, south Los Angeles. But we also spend one month during the summer there, taking the granddaughters for a southern California vacation. They will love this story. We all enjoy watching the "wall lizards" but did not know anything about them. Here's the story:
The Italian wall lizard is a relative newcomer to Southern California. It's thin and elegant, and some of the showier males have a dot of brilliant turquoise on their sides.
The wall lizards arrived in San Pedro in 1994, when a homeowner brought a few of them back from a trip to Sicily. He released four males and three females into his backyard, and they thrived and multiplied.
Nearly 20 years later, the Italian wall lizards have almost entirely replaced native lizards in a five-block radius from where they were introduced.
"Since I started studying this population, I've seen literally a thousand wall lizards in this area and just two native lizards," says Pauly, 36, who's decked out in a pair of Tevas and a pale blue T-shirt that says, "Newt and Improved." "The takeover feels pretty complete.

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