"Fathomless Ignorance" Is The Phrase For Today -- Wednesday, February 11, 2015; The Other Big Word For The Day: Tesla; Back To Boots On Ground

Reminder: with all the talk of conditioning / reformulating Bakken crude oil, for those with a very, very technical interest in all this, back in September, 2013, there was a long article on the properties of Bakken crude oil.  For newbies: I add new links to this page.

Active rigs:

	2/11/2015	02/11/2014	02/11/2013	02/11/2012	02/11/2011
Active Rigs	138	195	183	203	165

RBN Energy: why not more storage?

It seems logical to maintain stockpiles of critically important commodities like crude oil, heating oil and gasoline. After all, supply can be cut off suddenly by acts of God or man, causing price spikes, cold houses and empty gas tanks. Worries about supply interruption led to the creation of a federal Strategic Petroleum Reserve (SPR) and Northeast Home Heating Oil Reserve (NEHHOR) and, more recently, both federal and state reserves for motor fuels, again in the Northeast. But does the SPR as currently configured still make sense, given how much has changed in crude production and flows? Should we set up heating oil or motor fuel reserves in regions beyond the Northeast? And what about a strategic reserve for propane—an important fuel for millions of American homes and businesses? Today, we continue our look at the challenges of stockpiling hydrocarbons in a changing, unpredictable energy world.

It may surprise many readers to know that the U.S. is actually in worse shape today as far as our reliance on crude supplies from overseas (imports) are concerned than it was during the Arab oil embargoes of the 1970s—in spite of the recent shale boom driven increase in domestic production.

In May of 1973 Energy Information Administration (EIA) data shows that U.S. crude production was 9.3 MMb/d while imports were 3.2 MMb/d. In November of 2014 production was 9 MMb/d but imports were 7.3 MMb/d – more than double what they were in the 70’s. So we remain vulnerable to the disruptive, out-of-the-blue supply cut-offs that can come from events as different as a Category 5 hurricane, an uprising in the Middle East or the current U.S. refinery workers strike As we said in Episode 1 of our series, the federal government responded to the 1973-74 Arab oil embargo by establishing the SPR that now stores 692 MMBbl of crude at four salt-dome sites along the Gulf Coast and reacted to spiking heating oil prices in the winters of 1996-97 and 1999-2000 by setting up NEHHOR, the nation’s first refined products stockpile that now stores a total of 1 MMBbl at sites in Connecticut and Massachusetts.

More recently, in the wake of Superstorm Sandy in October 2012, both the feds and the state of New York started strategic reserves for gasoline and diesel. The feds are storing a total of 1 MMBbl of motor fuel, 700 MBbl of it at sites in New Jersey and 300 MBbl at sites in Massachusetts and Maine; New York is storing a total of 131 MBbl, 71 MBbl of it on Long Island and 60 MBbl upstate.

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Who Are You Gonna Believe?

Last night, stacking rigs gave the industry "hope" (Rigzone); this morning, stacking rigs "doesn't mean diddly squat" (Goldman Sachs). By the way: read that second linked story -- the one coming out of Goldman Sachs -- very, very closely. Regular readers will see why I say that.

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Yemen: Example of Success -- President Obama

US, UK, and France Closed Embassies In Yemen Over The Weekend

  The Guardian is reporting:

The US, Britain and France are closing their embassies in Yemen and urging their citizens to leave the country over security concerns in the Arab world’s poorest country, where Shia rebels finalised their power-grab last week.

Just six months ago, President Obama was touting Yemen, Somalia as success stories. I liked the way The Wall Street Journal  characterized President Obama's foreign policy.

In fact as I'm writing this, I'm listening to radio news and the Yemen story is the top story today.

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Three Years And A Gazillion Dollars 
Needed To Defeat ISIS -- The JV Team -- President Obama

That JV team in the Mideast? ISIS? ISIL? It looks like they were misunderestimated. The President says a minimum of three years and a gazillion dollars and another war will be needed to (maybe) defeat the JV team, despite A-team from Jordan finally joining the fight. Are any links needed? We'll see. This one will do. The only phrase Chuck Todd did not use in that interview: "fathomless ignorance."

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Kennedy Mega-Storms Continue To Hit Boston

Snow is out of control in Boston.

More than 2 feet of snow piled up in parts of New England by early Tuesday, breaking records set 37 years ago as forecasters warned still more winter weather was on the way.

The snowfall numbers in the area are staggering. Boston's Logan Airport measured 72 inches of snow in the last two and a half weeks. In the last two days, the town of Norwell, which is outside Boston, got buried in 30 inches of snow. 

Boston's snowfall surpassed the Colorado ski resort town of Crested Butte.

And more is yet to come.

Schools to the north of Boston have closed until Feb. 23 and forecasters warned that more snow was expected Thursday and again next weekend. The Massachusetts Emergency Management Agency said that potentially record-low temperatures and wind chills are expected later in the week. 

All that time and money spent on conferences on global warming and worries that the oceans will rise 0.01 inch/decade would have been better spent preparing for these winter storms. I suppose.

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Tesla Headlines

Tesla CEO threatens firings: Chinese sales are dismal.

Tesla sold about 120 cars in China last month, one of the sources told Reuters, well below the company's aggressive targets. Musk has previously said he expected China sales could rival those in the United States as early as 2015.

While Tesla sales in many overseas markets from Europe to Asia have not met expectations - and executives have subsequently been fired or demoted - results have fallen far short in China, a key market for Musk's expansion strategy.

Changes time of earnings conference call.  Will report earnings at 4:00 p.m. CT.

Tesla's growth is a matter of survival, WSJ. What earnings will mean:

Although expected earnings of 56 cents for 2014 would be down from 78 cents the prior year, the result would mark a second consecutive year in the black.

But that is on an adjusted, pro-forma basis. The company’s reported result will be negative, as it always has been. The gap is due to differences in the treatment of share compensation, leases and nearly $3 billion in convertible notes.

Those securities, which can be converted into stock at various share prices, get surprisingly little notice. The higher the stock price, currently about $217, goes over the next six years, the more dilution of existing shareholders that occurs as the securities are converted from debt into equity.

That’s a high-class problem, naturally. If the stock doesn’t appreciate by at least 160% in that time (over the next six years), though, Tesla could have to repay or refinance a big slug of the convertible notes. It would be challenging.

True, the stock has risen 460% over the past two years. Yet, in the past 12 months, the company produced only $158 million in cash flow. So the success of its mass-market model and battery-producing “Gigafactory” are necessary not just for growth but for survival.

A lot can happen between now and six years from now.

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Ms Merkel Needs To Get Her Checkbook Out

It looks like Germany may be on the hook for $3 billion if they want to keep the Ukraine from going into default. AFP is reporting:

Kiev has requested a restructuring of its debt to Russia but Moscow is expecting its $3 billion loan to be repaid in full this year, Russia's finance minister said Tuesday.

"Ukraine asked us to review the issue of restructuring its debt," Finance Minister Anton Siluanov told Russian media on the sidelines of the G20 summit of finance ministers and central bank chiefs in Istanbul.

Siluanov said that Russia is unwilling to defer the repayment however, expecting Kiev to comply with the deadline.

It's not like Russia has all that much oil income coming in.

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No Boots On Ground -- Never Mind

Tweeting right now:

• White House: It's time for Congress to 'step up to the plate' on authorizing military force - @Reuters
• White House: US combat soldiers on the ground may be used for hostage rescue operations - @Reuters