Wednesday, January 9, 2013

Surprised to See Jump in Price of Oil; Wells Coming Off Confidential List Have Been Posted

With the build in gasoline and oil inventories yesterday, and all the talk of the price of oil bottoming out this summer, I was surprised to see "oil" up about a buck this morning.

The only two things I am aware of that might explain some of this is the Bank of England and the European Central Bank leaving interest rates the same, and the delay of the swearing in of Mr Chavez. [Later: probably the news coming out of China.] The Seaway will come on-line in a day or two, but that's been talked about for quite some time and shouldn't have this effect on Brent.

Wells coming off the confidential list have been posted.  Denbury and Slawson each have a nice well.

RBN Energy: power burn economics; the switch from coal to natural gas; how did RBN's hypothesis work out for 2012?
Back in July 2012 we took a detailed look at power generation economics to improve our understanding of the circumstances when coal-to-gas switching can happen (see Talkin’ Bout My Generation Part I and Part II). Our hypothesis then was that plant fuel costs determine whether coal-to-gas switching is economic. Plant fuel costs are calculated based on the efficiency of a generating asset not just the underlying price of coal or natural gas. We are going to recap that analysis here and then look at the complete 2012 data to see if our hypothesis panned out.

US Corn Supply Dropping At Fastest Pace Since 1995

I saw this story in the WSJ earlier today but didn't post it (for various reasons).

Don sent me a similar story from a different source, and I had a chance to read it more closely. See if you notice what I noticed. The article begins:
U.S. corn supplies, the world’s biggest, are dropping at the fastest pace in 17 years as drought damage exceeds government forecasts and five months of declining prices spurs demand from livestock producers.
Inventories on Dec. 1 were 15 percent lower than a year earlier at 8.22 billion bushels (208.8 million metric tons), the smallest post-harvest stockpile since 2003, according to the average of 26 analyst estimates compiled by Bloomberg. 
Go to the linked article and see if you notice what I noticed. It's pretty obvious. It is "what is not said" that caught my attention.

Here's a hint at this link.

Kinda reminds me of the Guatamala article in the New York Times earlier this week. 

Global Warming In China Continues To Be A Story -- Global Warming Causing Extreme Temperatures

Link here to Yahoo!News.

There doesn't appear to be anything new in this article -- the record cold was reported a few days ago. But for some reason Yahoo!News is reporting it again.

From the article:
An unusually cold winter across China has some regions hitting their lowest average temperatures in more than 40 years, according to state media reports. The Chinese national meteorological agency said polar fronts caused by global warming are to blame for the frigid air.
The freeze is the coldest winter in 28 years, the English-language newspaper China Daily reported. The national average temperature across China's vast territory was a chilly 25.2 degrees Fahrenheit (minus 3.8 degrees Celsius) since late November. In northeast China, which typically has snowy, cold winters, the average temperature was an icy 4.5 degrees Fahrenheit (minus 15.3 degrees Celsius), the lowest in 42 years.
Temperatures have dropped down to minus 40 degrees Fahrenheit (minus 40 degrees Celsius) in eastern Inner Mongolia, northern Xinjiang and the Arctic reaches of northeast China. (Mohe, in northeast China, holds China's record low temperature of minus 62.1 F, or minus 52.3 C, set on Feb. 13, 1962.)
I love that line in bold: "... polar fronts caused by global warming are to blame for the frigid air."

I cannot make this stuff up. 

Unlike earlier reports, these cold temps are really, really severe.

Those forecasts of an increase of one to two degrees in global temperature over the next century are starting to look a bit shaky.

Hess Sets Global Exploratory CAPEX: $6.8 Billion

Link here to
Hess Corp. said its capital and exploratory budget for 2013 is 18% smaller than last year's expenditures, as the oil-and-gas company looks to again spend most of the funds of exploration and production.
The company's 2013 budget is $6.8 billion, down from $8.3 billion spent in 2012. Last January, the company initially set its capital budget for the year at $6.8 billion as well.
Of the $6.7 billion budgeted this year for exploration and production, $2.7 billion is dedicated to unconventional shale resources and the rest is focused on conventional resources--with $1.85 billion for production, $1.6 billion for development and $550 million for exploration. As in past years, $100 million is set aside for marketing and refining and corporate needs.
Almost $3 billion for unconventional shale. 

This Will Spur Off-Shore Development ...

... assuming, of course, the Federal government approves leases.

Link here to
Energy-rich states would be in a position to receive millions of dollars of oil royalties and other energy revenue currently collected by the federal government under a proposal being put together by a pair of key lawmakers.
The plan, being developed by top members of the Senate Energy & Natural Resources Committee, would allow states like Alaska to collect a share of royalties from oil in the U.S.-controlled waters of the Arctic Ocean and sets up other states like California to collect a share of revenue from solar power produced on public lands.

Born With Debt They Can Never Repay

Oh ... my bad ... that was a headline to an LA Times story.

I thought it was a story about my granddaughters' generation. My bad.

Then, I saw it was about Pakistan.

But one has to admit: when you see this, a quote from the article --
... a life of indentured servitude known as bonded labor. They must borrow to live, and their debts pass on to their children when they die ....
-- it certainly sounds like the future for our grandchildren. And their children. I can't make this stuff up.

"Bonded labor."

A guess the phrase I was thinking of is no longer politically correct. 

Boston Declares Public Health Emergency

Link here to The StarTribune.
Boston declared a public health emergency Wednesday as flu season struck in earnest and the state reported 18 flu-related deaths so far.
The city is working with health care centers to offer free flu vaccines and hopes to set up places where people can get vaccinated. The city said there have been four flu-related deaths, all elderly residents, since the unofficial start of the flu season Oct. 1.
The city was experiencing its worst flu season since at least 2009, Menino said, with about 700 confirmed cases of the flu, compared with 70 all of last season.
Most of US is now "intense."

Wells Coming Off The Confidential List Thursday, The Williston Basin, North Dakota

21338, 1,015, Denbury Onshore, Bayer 14-20NEH/Simmons 14-20NEH, Arnegard, t10/12; cum 13K 11/12;
22341, 1,520, MRO, Lorene Stohler 11-3H, Bailey, t10/12; cum 49K 11/12;
22742, 467, True Oil, True Federal 21-6 6-7H, Bowline, t11/12; cum 8K 11/12;
22770, 701, Hess, EN-Dobrovolney-155-93-2128H-3, Alger, t12/12; cum 11K 11/12;
22798, drl, Hess, LK-Obrigewitch 146-97-3427H-2, Little Knife,
23255, 1,092, Slawson Exploration, Sniper Federal 5-6-7TFH, Big Bend, t10/12; cum 26K 11/12;

Wow, it seems like it's been "forever" since I first posted a "Sniper" well. See the link at Big Bend, above.

22341, 1,520, MRO, Lorene Stohler 11-3H, Bailey, t10/12; cum 49K 11/12; hooked up to NG line:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

23255, 1,092, Slawson Exploration, Sniper Federal 5-6-7TFH; already hooked up to NG line:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

So Much For All Those Naysayers: US Oil Production Tops 7 Million Bbls; A Level Not Seen Since 1993; 20 Percent Higher Than Last Year

Link here to Yahoo!News.
U.S. oil production topped seven million barrels per day for the first time since March, 1993 and is nearly 20 percent above the amount produced at this time last year.
The latest weekly data from the Energy Information Administration Wednesday again highlights how the growing role of the U.S. as a major energy producer is changing the dynamic of the energy market. As domestic production rose, U.S. imports fell in the week ended Jan. 4 to 7.9 million barrels per day, 10 percent below the four-week average and nearly 16 percent below the level imported in the same period last year.
U.S. oil production continues to accelerate at a surprising rate, and the government now predicts the U.S. industry could pump 14 percent more oil this year alone. The use of non conventional drilling techniques in places like North Dakota and Texas has created an explosion in U.S. production to the point where the U.S. is expected to surpass Saudi Arabia in crude production by 2020, according to the International Energy Agency.
If the president really gets us on the road to oil independence and surpassing Saudi Arabian oil production, the country needs to re-elect him for a third term by acclimation. 

A decrease in imports by almost 20% is not trivial.

Nissan Launching Leaf Production in Right-To-Work State; Gets US Government Loan

Link here to The Detroit News.

Nissan is the only automobile company making its own lithium batteries.

Will launch a new Leaf factory in Tennessee.
Nissan Motor Co. said it will begin U.S. production of its all-electric Leaf on Thursday in Tennessee as part of a $1.4 billion government loan.
The Japanese automaker won an Energy Department loan in 2010 to build a battery plant in Smyrna, Tenn., and to retool to build the Leaf at its assembly plant next door.
The Leaf will be built alongside the company's gasoline-powered products.
Nissan says it is the only automaker that manufactures its own electric vehicle batteries, at the biggest lithium-ion automotive battery plant in the United States.

Williston Basin Bakken in Montana Update: 22 Rigs

Link here to Fairfield Sun Times. com.
Drilling equipment and crews are moving back across the border from North Dakota—where the Bakken Boom has been the Biggest—boosting Montana’s rig count to 22 from just eight at this time last year. Montana’s Department of Natural Resources and Conservation issued a record 356 oil drilling permits in the first ten months of the year, easily beating the previous record of 313 set in 2005.

In October a Texas company paid $13.5 million for 75,000 acres of oil and gas leases, one of the largest federal lease acquisitions by a single company in Montana in recent years. Several other companies, including Bakken leader Continental, are working to expand the boundaries of the state’s most productive Bakken field, known as Elm Coulee.

Investors often forget that the first successful horizontal well drilled into the Bakken was drilled into the Elm Coulee field in Montana, drilled by Lyco Energy Corp in 2000. There were earlier wells, even horizontal ones, but this 2000 Lyco well is widely cited as the first successful one.

Previously Announced: Update On $140 Million Development Project for Stanley, ND

Link to The Bismarck Tribune.

Data points:
  • Minnesota Oppidan financial group to invest $140 million in Stanley, ND
  • commercial and residential projects
  • 150,000 square feet of commercial space: $12 million
  • construction should start in the spring
  • $1.9 million for water and sewer expansion for city of Stanley (total upgrade could cost around $ million
Earlier links regarding Oppidan:

KOG Reports Another Huge Well; Three New Permits -- The Williston Basin, North Dakota

Bakken Operations

Active rigs: 182 (no change)

Three (3) new permits --
  • Operators: CLR (3)
  • Fields: Antelope
  • Comments:
Wells coming off confidential list were reported earlier; see sidebar at the right.

Producing well completed:
  • 21390, 2,151, KOG, Smokey 15-7-6-2H3, Pembroke, t12/12; cum --

Six Years To Get Back to 6.5% Unemployment -- CNBC

The first question: why did CNBC choose 6.5% as the goal? Because the Fed said they would peg interest rates to jobs, and once unemployment moved toward 7%, it would start tightening.

MDW posted this a couple days ago or so (January 4, 2012, to be exact), and now Steve Liesman over at CNBC  has a short segment.

A couple of data points, according to Steve Liesman:
  • at 155,000 jobs/month --> six years to get to 6.5% unemployment
  • majority of central bankers see first rate increase in 2015 (rate increase now tied to jobs)
Two comments: during my peak earning years, full employment was considered to be 4%. Apparently the goal posts are being moved for our children and grandchildren: to 6.5%. And with all the safety nets in place, one cannot argue that 7 - 8 percent might not be injurious to those who are content/satisfied with the United States economy.

Interestingly, MDW was more optimistic than Steve Liesman. At the link, MDW said it would only take four years or so to get back to the baseline. Four years, six years, eight years -- does it really matter any more?

Here is the link to CNBC: it does not show the first graph that Steve Liesman showed -- the one that showed six years to get to 6.5% unemployment with 155,000 / month. 

Wednesday Links -- Absolutely "Nothing" At The WSJ Today

WSJ Links

Section D:
  • After seeing the Surface tablet at the Microsoft store in a south coast mall (California), I was curious to see what Walt Mossberg had to say about Windows 8 or the Surface. I think he has written about the Surface and was "okay" with it, but I don't remember the specifics. I may even be wrong about saying he's reviewed the Surface. Having said that, Walt Mossberg has a big story, a review of Windows 8, in today's Wall Street Journal. I don't think it's good news for Microsoft. 
Section A:
  • Lawmakers fail to fix Illinois pension gap.
    Illinois lawmakers failed to address the deepest public-pension shortfall in the nation Tuesday, unable to come to an agreement before a new legislature is sworn in.
    "All that happens is the problem gets bigger and the solutions get more challenging," said Elaine Nekritz, a Democratic state representative and co-author of a failed bill that called for a freeze in the annual cost-of-living increase for public-sector retirees.
Wow, talk about a slow day in the WSJ

Yes, here's Walter Mossberg's review of the Surface: I Like The Microsoft Surface Tablet, But I've Got Some Big Complaints About It --

And while he sounds positive about the Surface, he seems to have some major problems with it, such as:
  • There's a "paucity" of apps, with just 5,000 to start.
  • Battery life is "mediocre," only getting 7 hours of life, versus the iPad which gets 10. 
  • The screen is worse than the iPad.
  • The one megapixel camera is really bad.
  • The mail app needs improvement. It doesn't support POP email, and it doesn't have a unified inbox, allowing people to have mulitple email addresses.
Now I see why I couldn't remember Mossberg's review of the Surface. It was done on video and I generally do not read news stories on the net on video -- takes way too long. One cannot scan a video. Also, with print media, the most important stuff is generally put at the top. In a video, there's a lot of fluff during the introduction. In addition, a video interview cannot be edited the same way a print article can be edited to keep it "tight."

Random Look At The Market

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read hear.

CLR continues to hold onto gains made yesterday.

Although OAS is down a bit today, it has held up very, very well. (I haven't checked in on Oasis for about four weeks; I am blown away that OAS has held up this well despite some headwinds.)

KOG up a bit today, but certainly nothing to suggest any "big" news coming out of KOG this week.

ENB down a bit at the opening, as is GLP.

TransCanada has just hit a new 52-week high and pays 3.7%. News? TransCanada will build a $5 billion NGL pipeline to Pacific Coast:
TransCanada Corp., builder of the Keystone XL oil pipeline, agreed to build and operate a C$5 billion ($5.1 billion) natural-gas conduit to Petroliam Nasional Bhd’s proposed export terminal in British Columbia.
The Prince Rupert Gas Transmission project has a proposed initial capacity of 2 billion cubic feet a day from the Montney region to the proposed liquefied natural gas terminal in Port Edward, British Columbia, TransCanada said today in a statement. The pipeline may begin operation in 2018.
BRK, the railroad company, has pulled back slightly from almost hitting a new 52-week high.

EEP and EPD are both up a tad.

Except for XOM, all the majors are up a bit.

Did Halcon Resources "change" its name? It shows up as "Halc" at Yahoo!Finance. Will have to check in later on that.

Huge "Thank You" to President Obama and Senator Reid

Thank you, thank you, thank you.

There is so much to write about every day; I just can't get around to everything.

I was going to note this some time ago, but I forgot all about it.

Lost in all the talk and hand-wringing about the "fiscal cliff" deal were two huge story lines:
  • the deal was done with very little hysteria; it was done within hours of the deadline
  • the Bush tax cuts were made permanent for 98% of all Americans
Permanent. As in "forever." 

Another look from the LA Times.

But, wow, think about that: President Obama and Senator Harry Reid agreed to make the Bush tax cuts permanent for 98% of Americans. I honestly don't think "we" could have gotten this done so quickly and so smoothly with Mr Romney. Counterintuitive. Very, very interesting. It is a given that had Mr Romney won, Congress would have waited to solve the "fiscal cliff" until after President Romney was sworn in. Can you imagine a month of CNBC "fiscal cliff" hysteria?

But the Bush tax cuts permanent; at best I had expected simply an extension. Even the wind energy tax credit was given just a one-year extension.

Whiting's Sanish Wells Model To 2 Million Barrel-EURs -- Filloon, SeekingAlpha

Link here to
At first glance the Whiting wells look better than EOG's. This is not the case when taking lateral length into consideration. The average lateral length of the Whiting wells are twice that of EOG's. In reality, the Whiting wells produced half the resource per foot. Well number 17092 is a great well, modelling to almost 2 million barrels of oil. These wells do not include natural gas or natural gas liquids in EURs, which accounts for an estimated 8% of production in Mountrail County.
There are several story lines in Mike Filloon's most recent article. 

the biggest story line: this takes me back to a discussion that does not get much attention -- long laterals vs short laterals. This discussion is not "dead." It was brought back up as recently as last year. I posted that discussion but don't have the link right now. Maybe a reader can find it, or link to another story talking about length of laterals.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read at the blog.

Public-Private Partnership to Build City Hall in Stanley, ND

From the Grand Forks Herald:
A group that includes Earl Pomeroy is proposing to build a much-needed City Hall in Stanley using a public-private partnership funding model.
Potential investors, an architect and Pomeroy, the former North Dakota Congressman who now works for a Washington, D.C., law firm, met with Stanley City Council members Tuesday to outline their idea.
Under the proposal, private investors would finance the construction of a new City Hall and lease the building to the city, said Pomeroy, legal counsel for Alston & Bird LLP. The agreement would allow the city the option to buy the building at some point in the future, Pomeroy said.
I thought I had already posted this story, but couldn't find it, so maybe I hadn't posted it. Regardless, a big "thank you" to the reader for bringing this to our attention.

Crosby, ND, Newspaper Notes New Drilling -- The Bakken, The Williston Basin, North Dakota

A reader sent me this link:
Hunt Oil Co. is awaiting state approval of its plan to blanket Alexandria and Sioux Trail townships in southwest Divide county with 36 oil wells.
Hunt representatives told the North Dakota Industrial Commission that each completed well would cost $7.9 million, which would total over $142 million in each township if all the wells are drilled.
David Luttner, an engineering advisor for Dallas-based Hunt, said the wells would target the middle Bakken and upper Three Forks formations.
He said Hunt anticipates recovering 400,000 barrels of oil from each well.
Yes, I assume this refers to the case in the December, 2012, dockets:
Case 19331, Hunt, extend West Ambrose, Musta, and/or Smoky Butte-Bakken, establish 18 1280-acre units; one well each, Divide.

RBN Energy: Update On Big Changes In Pipeline Routing

Wells coming off the confidential list today have been posted.

RBN Energy: the seven gates of hell for WTI crude oil traders.
By the end of this week (Friday January 11, 2013) Phase 2 of the Seaway Reversal pipeline project that delivers crude from Cushing to Houston is supposed to have come online - expanding pipeline capacity from 150 Mb/d to 400 Mb/d. Phase 1 of the project was eagerly anticipated by the market but since then (June 2012) the narrowing in price differentials between WTI Cushing and Brent expected by much of the market has not materialized. Today we explain why Seaway Phase 2 is only one factor in today’s complex US crude market evolution.
Another incredible and timely link. Especially in light of the PSX-GLP story just posted.

I still opine that one could get develop a college-level introduction course to oil production and marketing around the RBN Energy daily posts. They are really quite remarkable. 

Why CLR Surged Yesterday -- The Bakken, North Dakota, USA

Some headlines:
CLR didn't just "rise," some said it "surged." It didn't quite "surge," but it was a good day for CLR.


I'm glad you asked.

More headlines from yesterday.
From the WSJ article (when I get a chance, I will shorten this):
Phillips 66 signed a five-year contract for 50,000 barrels a day of North Dakota crude oil to be delivered by rail to its New Jersey refinery, the company said Tuesday, a move that underscores how important the North American oil boom has become to refiners on the East Coast.
Phillips 66's contract with Global Partners LP also cements North Dakota crude's hold in the East Coast refining belt, where Philadelphia Energy Solutions and PBF Energy Inc. already get crude from North Dakota's Bakken field by rail. Most pipeline construction has focused on bringing oil from West Canada and North Dakota to the Gulf Coast, leaving East Coast refiners relying on railcars to bring in domestic oil.
Under the contract, Phillips 66 will use Global's network of loading facilities and offloading terminals. The cost of the deal wasn't disclosed.
Even after shipping costs, a barrel of Bakken crude can be $10 less than the Brent oil imports that East Coast refiners have traditionally relied upon. That price difference has revived the fortunes of refiners in a region where last year numerous refineries were expected to shut down because of the high cost of imported oil.
"The ability to get crude from someplace other than the world market keeps those guys alive," said RBN Energy analyst Rusty Braziel said of the East Coast refining industry.
I need to do a better job capturing bopd at "Snapshot," but a quick look reveals that CLR produces about 100,000 bopd. 

Global, of course, can easily come up with 50,000 bopd when ND is producing 700,000 bopd, but it is a lot easier to sign contracts/make deals with as few producers as possible. I didn't price action of other Bakken-centric cmpanies, but something tells me ....

Regardless of which Bakken-centric producer is involved with this deal (and there may be none), PSX committing $1 billion to the Bakken is, should we say, non trivial?

From the Reuters link:
Oil production from the Bakken field more-than-doubled between 2011 and 2012 but connectivity from the field to refineries has not kept pace with the increased output.
But there is much more to the story.

GLP is headquartered in Waltham, MA, 5 miles from where I am today. I drive by it almost every week.

Investors may be interested in the profile of the GLP: this is where I begin to step out on a limb, so I won't post my thoughts, but folks might be able to connect dots with regard to a) the bit in bold above; b) the fact that the company was founded in 2005; and, c) the profile.

GLP, by the way, pays 8%. Just saying.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this site.