Tuesday -- Happpy St Patrick's Day -- March 17, 2015; Newfield Suspends Drilling In Utah's Uinta Basin

A word you do not want to hear used when describing housing starts: plunge.

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From Yahoo!In-Play:

ConocoPhillips announced its 2015 to 2017 capital budget and growth outlook; co reduces annual capital expenditures to ~$11.5 billion, versus the co's previous plan of ~$16 billion: Co announced its 2015 to 2017 capital budget and growth outlook. Details of the 2015 to 2017 plan will be reviewed at the co's upcoming Analyst and Investor Meeting on April 8, 2015.

Greenbrier announces that it received new orders in its second quarter ended February 28, 2015 for 10,100 railcar units valued at $1.09 bln: Orders for the quarter include double stack intermodal cars, covered hopper cars primarily for grain transportation, refrigerated and insulated boxcars, gondolas and tank cars, both for transportation of crude oil and other commodity types.

Samson Oil & Gas reports February production was significantly higher due to a number of North Stockyard being returned to production: Co provides its monthly update. Co reports February production was significantly higher due to a number of North Stockyard being returned to production. All of the infill development wells drilled in North Stockyard during 2014 are now in a position to be produced, however given the low oil price, 6 of the wells will remain shut in pending the recovery of the oil price.

• All wells in the North Stockyard field are currently being produced at lower than maximum capacity due to pipeline constraints and the weak oil price. 
• All of the 17 drilled in fill wells in North Stockyard have now been fracked and cleaned out and are capable of producing however 6 are currently shut in, waiting on an improvement in the oil price.

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Active rigs:

	3/17/2015	03/17/2014	03/17/2013	03/17/2012	03/17/2011
Active Rigs	111	191	185	205	170

RBN Energy: Newfield suspends drilling in the Utah's Uinta basin.

Newfield Exploration - the largest crude oil producer in Utah’s Uinta basin - has temporarily suspended new drilling operations there in response to lower prices. Other producers in the region have reduced their drilling and capex budgets as well. The cutbacks stem in part from the extra logistics expense required to deliver and process the thick yellow and black “waxy” Uinta crudes that do not flow at room temperature. Today we describe how low prices are impacting Uinta basin production.
The Uinta Basin (pronounced you-IN-tah, sometimes spelled Uintah) located about 150 miles southeast of Salt Lake City in Northeast Utah, has produced crude oil since the 1950’s. As we previously described back in 2013, the strange looking yellow and black waxy crudes produced from the Uinta Basin resemble shoe polish at room temperature.

Since 2011 the basin has attracted a lot of producer interest with crude output increasing from new horizontal drilling as well as the use of enhanced recovery on older wells through water flooding. Production stood at about 50 Mb/d in January 2011 but has more than doubled since then to 110 Mb/d by the end of 2014 (source: Bentek). Granted that expansion pales beside the nearby Bakken crude boom that saw output jump threefold from 400 Mb/d to 1300 Mb/d over the same period, but it is significant when you consider the logistical challenges faced by producers to get their Uinta waxy crude to market and processing it. Those challenges arise from the fact that Uinta waxy crude does not flow unless it is heated and unlike Canadian bitumen, can’t be diluted using light hydrocarbons as diluent. 

Waxy crude also requires specialized refinery configuration to handle its high paraffin content that few refiners outside Utah have developed.  As a result, these crudes have traditionally been consumed close by at Salt Lake City refineries – delivered heated in special insulated trucks - placing a firm ceiling on production based on how much waxy crude those refineries can process.

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Trainwreck

Regular readers read this years ago -- accurately predicted -- this was the very first non-advertising supported blog to predict that ObamaCare heralded the demise of employer-provided health insurance. MarketWatch is reporting:

Could employer-provided health insurance be going the way of employer-sponsored pension plans?

Rick Lindquist, president of Zane Benefits, which specializes in individual health insurance reimbursement for small businesses, says: Not only could it happen; it’s happening already.

Lindquist and Pilzer’s Salt Lake City, Utah-based company stands to profit if employers shift from traditional health insurance and toward their defined-contribution reimbursement system. In that model, employees are given a flat amount of cash from their employers — say $500 a month — told to buy a health-care plan with it and that their firms will cover their medical costs.

Q: Why are employers moving away from offering health insurance?

Lindquist: There will be a massive shift; in fact, we’re in the middle of it. People categorize this as employers dumping health insurance. Yes, they stop offering insurance but they don’t stop offering benefits. They’re just changing they way they deliver them and replacing them with defined-contribution plans. It could save millions of dollars for employees and employers.

Q: How fast is this switch happening? A: In our book, we project that by 2017, the majority of small businesses that now offer health insurance will switch to defined-contribution. This is being led by small-business owners. But it doesn’t stop there. A few years ago, some big companies [Verizon and AT&T] leaked documents saying they were evaluating dropping health insurance plans.

Some big companies will drop their plans and that will have a snowball effect. We project that 90% of all businesses will drop offering health insurance plans in the next 10 years. Why don’t we see more big companies doing this? They don’t understand it. Plus, there’s a cost to make the transition: To avoid a revolt, you need to educate employees, which is hard. It will happen.

I predicted this would happen, though I thought I read somewhere the IRS / HHS said employers could not "manage" ObamaCare this way. Maybe I misread.....