Tuesday, July 1, 2014

July 1, 2014 -- First Day Of Third Quarter -- Chesapeake's Spinoff Starts Trading Today; Slawson Exercises Option To Acquire 50% Interest In SSN Well In Stockyard Creek

Active rigs:

Active Rigs188192215172129

RBN Energy: the US southeast -- epicenter of US gas industry. This is really an incredible story. Of course, the Obama administration will tell them they did not build that, but considering the federal obstacles put in place, it is quite remarkable what private enterprise and free market capitalism is doing in Louisiana. RBN Energy has another great series, this time on the transformation of the natural gas industry in the southeast.
With U.S. natural gas production continuing to hit all-time records, the big question for the gas market is demand. Where is all that gas going to go?  Well, we are pretty sure that most of the supply growth will be absorbed by the triad of new gas fired power generation, industrial demand and exports.   The funny thing is that most of the volumes associated with these demand sources are located in one region – the southeastern U.S., with a heavy concentration of demand in Louisiana, home of the Henry Hub.  This shift is turning what was a major supply area into an epicenter of natural gas demand, with the need for extensive new transportation paths into, rather than out of, the region.  Today, we explore the implications of this transformation.
Historically Louisiana has had many roles in the natural gas market. It has long been a supply state, with significant onshore and offshore production.  Cheap natural gas encouraged the development of major petrochemical and other industries along the Mississippi River corridor, across the Gulf Coast region and elsewhere.  And Louisiana has functioned as a conduit, funneling gas from Texas, New Mexico and other states to pipelines feeding the Southeast and Northeast. 
But a few decades back, all that market activity ground down to a crawl. Louisiana onshore and offshore production started a long, slow decline in the 1970s.  Regulatory and supply problems hit the market and prices started to increase.  Many of those industrial facilities closed up shop and moved overseas.  Increasingly Louisiana’s gas market role became more focused on that of a conduit, and a major pricing point with the selection of the Henry Hub as the delivery point for the NYMEX futures contract.  In the mid 2000s there was a brief spurt of new production growth from the Haynesville in Northwest Louisiana, one of the highest profile early shale plays.  But Haynesville’s dry gas and expensive wells eventually fell victim to low gas prices, and those production volumes started to decline as well.
Chesapeake's spin-off begins trading under ticker symbol SSE today. Today, all things being equal, CHK should open lower.  Those holding CHK will receive one share of SSE (Seventy Seven Energy) for every 14 shares of CHK.

Update on NRG, a familiar story we are seeing in the market this year:
NRG Yield completed its previously announced acquisition of three Right of First Offer assets from NRG Energy for $349 mln in total cash consideration; raises FY14 Pro-Forma Adjusted EBITDA guidance:
  • As a result of the completed acquisition, NRG Yield is raising its full-year 2014 Pro-Forma Adjusted EBITDA guidance to $410 mln, from $292 mln, and Cash Available for Distribution guidance to $140 mln, from $115 mln. The company is also reaffirming 2nd quarter Adjusted EBITDA guidance of $75 mln and CAFD guidance of $22 mln.
  • Primarily driven by positive year to date results and the closing of the first ROFO transactions, the Company is now targeting an annualized dividend of $1.50 per share by the 4th quarter of 2014, which represents a 25% increase to NRG Yield's initial annualized dividend of $1.20 per share
  • Further, with a pipeline of nearly 2.1 GW of assets identified by NRG as being eligible for drop-down and giving effect to the pending acquisition of the 947 MW Alta Wind portfolio, NRG Yield is also raising its 5-year target dividend per share compound annual growth rate to 15-18% from 10-15%.
Update on Samson Oil & Gas:
Samson Oil & Gas provides weekly operations update: Co announces an update on the infill development plan for North Stockyard is to drill 8 middle Bakken wells and 8 Three Forks wells.

  • Slawson has exercised its option to acquire 50% of Samson's interest in the Billabong well following the successful conclusion to the drill pipe recovery workover
  • Frontier Rig 24 has drilled to kick off point of 10,813 feet and is tripping out of the hole to pick up the curve drilling assembly on the Bootleg 7-14-15TFH well. The rig will then skid to Bootleg 6-14-15TFH well to drill the surface and intermediate holes. 
  • Drilling operations have been completed in the Bluff 1-11 well. Preliminary planning for two cased hole tests has been completed and will be presented to the working interest owners for their consideration.
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you might have read here. 

Before we get to the top story in the WSJ, just a reminder with regard to ObamaCare:
The law doesn’t contain specific language about which denominations or religions would qualify for an exemption, but it does specify that individuals belonging to religious groups for exemptions if they have religious beliefs opposed to health insurance or medical treatment. These kinds of exemptions exist for other federal programs, and there are rules for determining who qualifies.
Based on who has obtained exemptions from other federal programs like Medicare and Social Security, it looks like the Amish would qualify, as would Mennonites.
The Wall Street Journal

US Supreme Court makes religious exception to ObamaCare.

Mr Obama to bolster border security. Helloooo! The horse is already out of the barn. Whatever. Apparently immigration reform known as "open borders" not working so well. My hunch is we will see a US High Commissioner on Refugees named in the not-so-distant future, probably after the news cycle ends on a Friday night in the dog days of August. The last thing the administration needs to see is the video of multiple human tsunamis flooding the borders of a) Texas, b) New Mexico, and c) Arizona. By the way, that's why the feds are trucking, busing, and flying these new immigrants to New York state, California, and Minnesota. No doubt any immigrant placed in a "detention" camp will be eligible for reparations once the paperwork for citizenship is started. Just to be clear: none of this was in The Wall Street Journal, except that bit on Mr Obama plans to bolster border security.

US pending home sales surge 6.1%. A gauge of pending home sales jumped in May, the latest evidence that the US housing recovery began to regain its footing this spring. I guess all those college graduates are finding jobs and buying homes. Whatever.

California cities cracking down on water use. Businesses such as golf courses and lawn care are seeing revenue dry up due to water restrictions.

Setting up a patchwork of fracking-free zones, New York state's highest court said communities can ban fracking.

The next man to be thrown under the VA bus? A former CEO of Procter & Gamble to be named next secretary of the Department of Veterans Affairs.

US Supreme Court: some workers can avoid union fees. This was a narrow ruling but it opened the door to more litigation.

GM recalls 8.5 million more cars. Previously reported, but the number keeps changing; it started at 8.2, then went to 8.4 last night; now up to 8.5 million.

North Dakota's latest fracking opportunity: managing flaring. A huge opportunity for entrepreneurs and investors.

Devon will sell some non-core assets to Linn Energy for $2.3 billion as the company continues to shift from gas to oil.
The Los Angeles Times

I missed a great screenshot. Earlier this morning, the top story was the "unrest" in Iraq. A sub-headine bullet suggested that civil war could break out in Iraq. Say what? I almost had another nominee for the 2014 Geico Rock Award, but interestingly enough, the LA Times has removed that sub-headline text. I guess the managing editor pointed out to the writer that, yes, indeed, there was a civil war already going on in Iraq. The Iraq story is still the headline story but the focus is on Baghdad's Shiite Muslim milita's re-emergence which is "giving US pause."

Many California community college students need four years to graduate. And I assume that's after many have taken an extra year of pre-college (remedial) studies to qualify for admission.

Hillary Rodham Clinton calls Hobby Lobby ruling a "slippery slope." Not providing increased security for our Libyan ambassador after his pleas for more protection was probably a "slippery slope" also. But what does it matter (her words, not mine)?

Oh, here it is. I was wrong. Yes, we have another nominee for the 2014 Geico Rock Award. Shasahnk Bengali is reporting that "nearly 60% of Iraqis killed in June are civilians. The fierce Sunni (the peacful ones) Muslim insurgency that led to the deadly month threatens to plunge Iraq back into civil war." I honestly thought that's what we had in Iraq, a civil war, although I have to agree, it's more akin to an uncivil war. And to think this all began with George W. Bush the crusades back in the 12th century.

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