Thursday, August 6, 2015 -- Part II; XOM To Expand In The Permian

Gasoline demand (dynamic link):

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Risk Of Social Unrest

Back on February 23, 2015, I suggested there was a risk for serious social unrest in the smaller crude oil exporting countries. I also suggested that countries that depend on OPEC largesse, like Palestine, were at particular risk. It looks like someone is reading the blog. The linked article doesn't say that explicitly, but it's not hard to connect the dots:

“As Iran comes back to the market, under the current Saudi oil policy, it is still more likely in our opinion that any sustained price recovery will come through another OPEC country breaking down than from North American crude oil production collapsing."

The same article noted:

Norbert Ruecker, head of Julius Baer commodities research, told the WSJ that oversupply concerns are a burden on oil prices. “Shale oil producers are lowering costs swifter-than-expected, proving their superior competitiveness within the industry,” Ruecker told the WSJ, adding that US unconventional producers have surprised many with their “resilient production.”

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Railroad History

In four short pages (pages 113 - 115) in Appetite For America by Stephen Fried, c. 2010, provides some analogies that might be relevant today for the oil and gas industry. Paraphrasing:

Since the beginning of the Civil War, the US government had given away almost one-tenth of all the land in the entire continental US to the railroads to encourage construction and development. Most of these land grants were in the central and western stages, where the railroads controlled over 30 percent of the land. 

Then Grover Cleveland was elected president.

Cleveland orders a massive investigation of the land grant system, and the railroads were forced to return about 80 million acres.

Next, the president began to look into the "monopoly-like" powers the railroads had and began to take measures to change that. The biggest change: the creation of the Interstate Commerce Commission, which Congress established in 1886, the year the Supreme Court ruled against the railroad fare system. Overnight, the President and Congress basically added a fourth branch to the American system of government: the federal regulatory agency. The ICC was the first such government regulatory agency.

With the creation of the ICC, the railroads went wild competing with each other, trying to undercut one another.

In the chaos of this new economics of railroads, William Strong (president of the Atchison, Topeka, and Santa Fe railroad at the time) believed that only a few of the strongest would survive. He felt he was left with no choice -- his Santa Fe had to get much bigger and more powerful very quickly, or it would be swallowed by Jay Gould and the other big eastern financiers who were still the power players in the industry.

By the way, Barstow, CA, is named after William Barstow Strong.

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Australian Wind: For The Archives

Website: Hornsdale wind farm.  As of this date, August 6, 2015, 35% of proposed power has been bought; 0% construction.
Press release from The Lead.
315 MW; $250 million.

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The Apple Page

From Macrumors:

In an interview with USA Today, Apple's Eddy Cue reveals that Apple Music currently has 11 million users taking advantage of the initial three-month trial period, with two million of those taking advantage of the family plan that will cost $14.99 per month once the trial ends. A single-user membership will be priced at $9.99 per month. 

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This Is Not An Investment Site

Reporting today:

• APA: beats by 48 cents; crushes loss estimate on production gains; shares up nicely; Reuters story here;
• AXAS: AP story; EPS in-line; loss of 6 cents;
• EOG: Rigzone story here; beats by 17 cents; press release here;
• MRO: Zacks; loss narrower than expected; 23 cents vs 27 cents;

The list may or may not be accurate; things change.

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XOM To Expand In The Permian

Link here.

Exxon Mobil today announced it has executed two agreements to obtain horizontal development rights in 48,000 acres in the core of the Midland Basin.

The two agreements include an acquisition and farm-in adjoining XTO’s existing acreage position in Martin and Midland Counties, providing rights to all intervals within the basin. The acreage will be operated by ExxonMobil’s subsidiary XTO Energy Inc.

“The recent emergence of strong Lower Spraberry results, combined with the established Wolfcamp intervals, demonstrates the significant potential of the stacked pays in the Midland Basin core.”

ExxonMobil has executed five agreements in the Midland Basin since January 2014, providing the company with over 135,000 operated net acres.

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Can't Please Everyone

Link here.

In interviews and in hundreds of comments on Facebook, Wal-Mart employees are calling the move [to boost store workers' minimum wage] unfair to senior workers who got no increase and now make the same or close to what newer, less experienced colleagues earn. New workers started making a minimum of $9 an hour in April and will get at least $10 an hour in February.

Some workers also said they suspect their hours are being cut and annual raises reduced to cover the cost of the wage increase for newer workers. Wal-Mart denies that and says it’s taking steps to ensure all employees have an opportunity to move into higher-paying jobs. Along with bumping up the minimum wage, it increased the amount workers receive when promoted, boosted pay for some managers and raised the maximum pay for all hourly positions.

One word: kwityerbitchin. Life ain't fair.