Thursday, January 16, 2014

This Pretty Much Tells Me All I Need To Know About The Future Of Solar Energy In The US ...

... Exxon said the same thing several years ago: the math doesn't work. The Washington Post is reporting:
But there is still a long way to go. In 2012, coal and natural gas plants produced 37 percent and 30 percent of U.S. electricity, respectively, according to the U.S. Energy Information Administration, while wind generated 3.5 percent and solar just 0.1 percent.
With all the subsidies, all the demagoguery, all the politics, all the ... whatever ... solar produced 0.1 percent of all electricity generated in the US in 2012. That's not one percent; that's one-tenth of one percent.


Meanwhile, how is that Massachusetts off-shore wind project coming along, the Cape Wind project? The promoter, using smoke and mirrors, says a last minute agreement with Siemens met the federal requirement to qualify for an investment tax credit. Windpoweroffshort is reporting:
Despite the progress, gaps remain before construction can begin. Cape Wind has yet to finalise its financing, although Rodgers said it expects to have funding in place in the second or third quarter this year.
Siemens has said it will likely take an equity stake in the project, although the company's US office would not comment further. Danish pension fund PensionDanmark conditionally agreed last year to provide the project with a $200 million mezzanine loan and remains committed to the project, said Christian Skakkebæk, senior partner at Copenhagen Infrastructure Partners, which manages the fund through which PensionDanmark is investing in Cape Wind.
"The project is progressing well and expects to qualify for ITC for a significant part of the invested capital. We are keen to see the project being realised and reaching financial close later in 2014, but there is still some work to be done before our mezzanine loan commitment of $200 million can be made unconditional," Skakkebæk said.
So, we'll see. I have no dog in this fight. I am not a Danish pensioner and I don't summer in Cape Cod.

The State Climbing The Fastest In Millionaire Rankings Has No BMW Dealership; It Also Doesn't Have A Lamborghini Dealership (Yet)

A reader sent me this link. RealTimeEconomics is reporting:
The state making the fastest climb up the millionaire rankings doesn’t have a single Tiffany or Saks Fifth Avenue store.
The closest BMW dealership is a six-hour drive from the capital. Welcome to North Dakota, which jumped 14 spots in the annual rankings of millionaire households per capita released by Phoenix Marketing International. The firm derives its figures from a combination of data from the Federal Reserve, Census Bureau and polling firm Nielsen Co. 
I assume The Minneapolis Star Tribune will be posting this story on their front page later this week. LOL.

For The Archives

I track the demise of mainstream media hereThe Los Angeles Times is reporting:
Significant layoffs hit the newsrooms Thursday at the Orange County Register and the Riverside Press-Enterprise, a troubling sign for the Aaron Kushner-owned publications.
Exact numbers have not been released at the Register, although the cuts there are reported to number roughly 35 people. The paper’s editor, Ken Brusic, and most other top editorial managers have departed, according to multiple sources in the newsroom who asked not to be named because they were not authorized to speak. Rob Curley, deputy editor of local news, has assumed the editor position, at least temporarily.
Cutbacks at the Press-Enterprise, meanwhile, totaled 39, according to a memo circulated internally late Wednesday and reviewed by the Los Angeles Times. The reductions were not limited to the newsroom, but at least a dozen copy editors have been laid off, according to numerous individuals at the newspaper. Affected employees are being given severance of one week’s pay per year of employment.

The Los Angeles Times is reporting that light rail will come close, but it will not reach LAX, the city's airport. Too expensive to build. This is an old story. Still being studied. The studies will probably take as long as studying the Keystone XL 2.0 North.

Fourteen (14) New Permits -- The Williston Basin, North Dakota, USA

Active rigs: 187

Fourteen (14) new permits --
  • Operators: Emerald Oil (4), WPX (4), Whiting (4), Newfield (2)
  • Fields: Sheep Butte (McKenzie), Moline (McKenzie), Siverston (McKenzie), Squaw Creek (McKenzie), Arnegard (McKenzie)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right. I have no idea why the following well was listed as released from "tight hole" status on today's daily activity report:
  • 2949, 260, Denbury Onshore, Cedar Creek Unit 8B 14X-2A-8, Cedar Creek, an Ordovician well,  t8/61; cum 456K 11/13;
Two producing wells were completed:
  • 25632, 160, Samson Resources, Bel Air 2314-3H, Ambrose, t12/13; cum --
  • 25633, 174, Samson Resources, Comet 2635-3H, Ambrose, t12/13; cum --
Wells coming off confidential list Friday:
  • 25533, drl, SM Energy, Tomlinson 3-2HS, Alexandria; a nice well; 
  • 25716, 112, Murex, Marcelo Manuel 32-29H, Fortuna, t8/13; cum 26K 11/13;
  • 25905, drl, CLR, Jefferson 3-17H1,  Crazy Man Creek, no production data,
  • 25906, drl, CLR, Jefferson 4-17H, Crazy Man Creek, no production data, 

Back To Mike Filloon's Recent Article: Part 2 Of 2 On The Bakken, 2014

Is it even possible to provide just a few blurbs on his excellent article?

Mostly I was curious what he mentioned about efficiencies of pad drilling. So, the word search, "pad" resulted in:
It is not surprising that North Dakota and Montana can see mega-pad type development. It is a surprise how quickly this has occurred.
That was it. It would be interesting to see how pad drilling results in decreased costs. I can think of many; it would be interesting to see a nice breakout. Pad drilling, to the extent it is being used in the Bakken, is truly revolutionary. Someone called the Bakken an ocean of oil, and pad drilling is akin to drilling off-shore.

From Mike:
Continental has stated its Wahpeton pad is progressing as planned, but a more bullish indicator is three additional tests planned near the Nesson Anticline. This includes Lawrence, Mack, and Hartman. These pads will test 8 wells per interval from the middle Bakken to the third bench of the Three Forks.  
I have a post that links to CLR's density well projects. I'm not sure why Mike would say "future wells will produce better as Continental gets more comfortable with pads this size." I don't think the size of the pad matters; there are a dozen other factors, including geology which is probably the most important factor (location, location, location) -- though Mike differs on this (I see his point).

This was striking, the decreasing well costs (though I approach published costs with caution). In 2014, Hess' well cost averaged $13.4 million; in 2013, $7.8 million. So, in round figures, from $14 million to $8 million. Not trivial, if accurate.

CLR's average well cost was said to have been $9.2 million in 2012; $8 million in 2013; and is estimated to be $7.5 million this calendar year.

Well design and water:
Well design will be a popular topic in 2014. Some operators have decided to stick with what has worked, while others are testing out new and different completion methods. Slickwater fracs have been used more in west McKenzie and Williams counties. I covered this frequently last year, and it has shown promise. Slickwater fracs have always provided good results, but well costs pushed operators to other completion styles. Early in development, there were water shortages throughout North Dakota. Back then, there weren't enough industrial water permits in play to sell to the oil companies, which increased water costs significantly. Since then, a large number of agricultural water permits have been converted to industrial. This has made water much more affordable, and easily obtained near the well site.
I believe the water shortage was logistical. Certainly there is more than enough water available in the Bakken; water is not an issue in North Dakota. Unless you want it to be.

Mike touches on depletion rates when he talks about Halcon:
It was initially thought these well weren't economic. In reality, they model differently with a much lower rate of depletion. Halcon has improved this design, which has helped increase recoveries. 
The extensive verbiage Mike gives to Oasis is significant.

Mike likes EOG's completion technique, something I've blogged about many, many time. EOG is operating on all cylinders.

For investors only. Mike says:
It is not necessarily the operators with the best acreage, but the acreage with the most upside. Operators in central to northeast McKenzie County could see as many locations as the best parts of the play. Keep in mind, EURs will not be as good on a per well basis. I would stick with names levered to these areas. This includes Oasis, Whiting, Triangle, and Emerald. Whiting has further upside as it is using an optimal well design and one that still can improve. Emerald's slickwater fracs have also outperformed and seem well suited to this specific area. Triangle and Oasis have further upside as its integrated model provides cost containment.
There was one Wall Street darling not mentioned in that list of four. I've always thought Whiting and Oasis were the most interesting (and that has nothing do with investment advice) plays in the Bakken. EOG has turned out to be a huge surprise. I had to look, I honestly did not remember. I wondered whether I put EOG as the top story for 2013. I did not, but I did opine that EOG was the most interesting operator in 2013. 

Be sure to note Mike's comment regarding KOG, cash flow, takeover remarks, and point of entry.


How music royalties work, or the story of how Jerry Seinfeld's ex-girlfriend "owns" six early Beatles' songs.

Best Buy is bludgeoned. But the big story of 2014 or 2015 or 2016 will be the fate of Barnes and Noble, the last big book retailer. My thoughts on B&N are buried in this post. I feel as strongly about the B&N fate as I did about Netflix.

There are (at least) two story lines in this article. First, I was unaware that the federal government had "suspended" subsidies for wind power. I knew that the issue was still being debated, but this article sounds like subsidies may be off the table for awhile. We'll see. Like cockroaches.... The second story line is, of course, the outright lie (or myth) that "the subsideies have made renewable power cheaper than coal." Not even close. Coal is not subsidized and despite the fact that the president has done everything in his power to kill coal, the fossil fuel is still cheaper than wind power for the average consumer even with the subsidies. Wow, what hogwash.
Last year, billions of dollars in wind production tax credits, or PTCs, amounted to some 2.3 cents per kilowatt hour for an industry that has struggled to compete against oil and gas.
But winds of change are blowing. The repeatedly renewed credits expired at the end of 2013, along with many other renewable energy benefits.
Wind energy is now an industry that can "stand on its own," argued Senator Lamar Alexander and other anti-tax-credit lawmakers last month.
"Our nation's energy policy must make economic sense for taxpayers and not manipulate markets," he and Senator Joe Manchin of coal-producing West Virginia, wrote in a position letter.
"After more than 20 years and tens of billions of tax-payer dollars, it's time to let the wind PTC expire and continue to invest in new technologies."
"Invest in new technologies." And what would they be? Algae-bio-diesel. The oil industry is sending a gazillion dollars in taxes to the federal government; has solar or wind sent any tax dollars to Washington, or is the money trail all one-way? For more on how your tax dollars were spent (and lost), see the list of 38.


The winds of change are also blowing in Hollywood. I guess the Hollywood elite had their fill of the Chicago outsider who never fit in along the west coast. Of course, we're talking about Oprah who was completely ignored in the 2014 Oscar nominations. That offsets a bad day in the market any day. 

Some interesting stories coming out of Warren Buffet's Berkshire Hathaway: why he bought BNSF, and why the tea leaves suggest he will buy USG. He already owns 30% of the latter and its market cap, at $160 million, is pocket change. Doesn't BRK have about $42 billion in cash or something like that? I can't deal with large numbers, so let's knock off all the zeroes. $160 million becomes $160 (8 $20-bills). $42 billion becomes $42,000 (2,100 $20-bills). So, while paying for an Omaha steak dinner, Warren hands Charlie the equivalent of 8 $20 bills out of his 2,100 $20-bills to buy USG -- it wouldn't even be noticed. Or even simpler: let's say you had $2,100 and for about $6 you could buy the rest of USG. Remember, he already owns 30% of the company.

Warren Buffet considers BNSF a regulated utility and will move BNSF to the "utility" sector in his portfolio.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you may have read here. 

I will bury a great piece written by a reader and sent to me regarding recent articles on the Bakken by the Minneapolis Star and Tribune. At some later date, I will provide the link. Right now it's an Easter egg.

The "best and the brightest" often don't get it. Case in point: a senior UK defense adviser is quoted as saying "Obama is clueless about what he wants to do in the world." In fact, Obama knows exactly what he wants to do and he has laid much of the groundwork which will play out over the next 20 to 30 years. Unlike ObamaCare, a genie which cannot be put back in the bottle, Obama's foreign policy can be changed (and probably will be changed) in the future by some new president.

Speaking of those who don't get it, H-P getting back into the smart-phone game is doomed to failure. Forget Apple: Google will crush them. Google has its hands full with Apple as a competitor and won't let a new player get a toehold.

Rahm gets it (don't take this as an endorsement): the US energy revolution is as big as the internet revolution. Folks are talking about this in Washington, DC.

Thursday -- Best Buy Is Bludgeoned; Interesting News Coming Out Of Berkshire Hathaway; H-P Doesn't Get It

IPs for the two wells coming off the confidential list today have been posted.

Active rigs:

Active Rigs18718520016380

RBN Energy: Part IV -- supply and demand, natural gas.

Jobs report: Bloomberg tells us the number today (down 2,000 to 326,000) tells us the economy is on track, the corner has been turned, we see light at the end of the tunnel, and this is the lowest number in a month. The Los Angeles Times reports:
The number of people filing for first-time unemployment benefits fell to 326,000 from a downwardly revised 328,000 the previous week. The drop was in line with analyst expectations.
The last time the figure was lower was in the week ended Nov. 30, when 305,000 filed for claims at the start of the holiday season, which typically causes volatility in the numbers.
The four-week average of claims, which smooths out the volatility, dropped to 335,000 last week, down 13,500 from the previous week, the Labor Department said. Economists say weekly claims below 350,000 indicate moderate labor-market growth.
Investors like the report so much, the market dropped only modestly.

The Wall Street Journal

Well, isn't this interesting? Bare-bones health plans survive through quirk in the law
The health-care overhaul was supposed to eliminate insurance plans that offer skimpy coverage at cut rates. But a quirk in the law stands to help some companies keep them going for years to come.
AlliedBarton Security Services, a closely held firm that employs more than 63,000 people nationwide, has offered a modestly updated version of its so-called mini-med plan to employees this year and it intends to do so in 2015 as well, even though the cheap coverage fails to meet requirements of the Affordable Care Act.
Lawmaker retirements to hit centrist ranks
A parade of retirements from Congress threatens to deplete Capitol Hill's ranks of centrists, graybeards and legislative craftsmen—increasingly rare commodities in a political hothouse more prone to line-drawing than bridge-building in recent years. Many of the House members who are leaving are centrist Republicans, which could leave the GOP caucus more dominated than ever by the party's conservative wing. Democrats, meanwhile,are losing some of the last of their party's conservative "Blue Dog" wing.
JCPenney to close 33 stores, cut 2,000 jobs.  I may do a stand-alone post on this later, if I have time, and if the spirit moves me.

They never learn. H-P jumps back into the smart-phone market.

S&P hit new record yesterday. I completely missed it. When the market pulls back (which it did earlier this month) and the price of oil drops more than a couple of backs, I tend not to watch the market, unless I have a specific reason. So I completely lost sight that the S&P hit a new record yesterday. I immediately to see how the bellwether equity, Warren Buffet's Berkshire Hathaway, did. BRK did not participate in the new record, but there are some interesting stories coming out of Berkshire Hathaway. Again, I hope to do a stand-alone post on all of these odds and ends sometime before the weekend ends.

Best Buy is plummeting. Predictable. I follow the demise of big-box stores here.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you thought you might have read here.

Okay, all for now. Many, many readers have sent me notes. I hope to reply to all of them eventually. One reader sent an incredibly well-written analysis of a couple of stories reported by The Minneapolis StarTribune. I don't know if he intended to have the note posted. I will post it anonymously but bury it deeply; it will become an important part of the archives.