Thursday, January 15, 2015

Random Update On BNSF Expansion Plans -- January 15, 2015

From the press release:
In BNSF’s North Region, the company will invest approximately $1.5 billion across eight states for engineering maintenance and line expansion projects, of which approximately $700 million* is planned for projects to expand the rail lines and Positive Train Control (PTC) in that region.
BNSF’s North Region has experienced the most rapid growth in recent years. It is the corridor used to move agriculture and coal to export facilities in the Pacific Northwest, petroleum products produced in the region that are destined for refinery facilities, and for consumer products shipped to and from marine ports in the Pacific Northwest.
The North Region is also a destination point for materials that support the production of crude oil in the Bakken shale formation. 

The North Region includes: Illinois, Minnesota, Montana, North Dakota, Oregon, South Dakota, Washington and Wisconsin.
Expansion projects include:
  • Continue to install double track on the Glasgow subdivision between Minot, ND, and Snowden, MT, located in the far western part of the state.
  • Extend the siding on the Dickinson subdivision located between Mandan, ND, and Glendive, MT, and expand the terminal at the Dickinson yard to accommodate expected growth in single car volumes.
  • Convert the entire Devils Lake subdivision, located between Minot, ND, and Grand Forks, ND, to centralized train control, which will improve capacity for freight operation while improving on-time performance of passenger trains.
  • Complete implementation of centralized train control on the Hillsboro subdivision, located in eastern North Dakota. Upgrade connection track between the Hillsboro subdivision and the Devils Lake subdivision to permit faster train speeds.
 * Illinois is included in the disclosure of the planned expenditure for the North Region despite the state being part of the company’s South Region. In this announcement Illinois was included in the North Region because the Chicago complex also serves as an origination and destination point for traffic along that corridor. Illinois was also included in the North Region reporting when BNSF’s 2014 capital expenditure was announced in the prior year.
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A Note For The Granddaughters

It's been a good night. I finally finished James Essinger's Ada's Algorithm: How Lord Byron's Daughter Ada Lovelace Launched The Digital Age, c. 2014. Ada Lovelace is receiving some new attention this year in light of the Alan Turing movie, The Imitation Game. She is also heavily featured in the new book by Walter Isaacson (Steve Jobs [2011],  The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution (2014). I have the new Isaacson book around here somewhere -- I think the cover has the portraits/photos of Ada Lovelace, Alan Turing, and Steve Jobs. The Essinger book is "the story of the woman who wrote the first computer program -- in 1843."

The book is "endorsed" by Reshma Saujani, found of Girls Who Code and author of Women Who Don't Wait In Line. From the Girls Who Code website: In middle school, 74% of girls express interest in Science, Technology, Engineering and Math (STEM), but when choosing a college major, just 0.3% of high school girls select computer science.

Our older granddaughter, in middle school, is one of the 74%. It will be interesting where she ends up. 

The Essinger book is a quick read, but extremely well-researched it appears. One could probably read it over the course of several evenings, but I enjoy taking my time to finish a book. On completion, I felt a very intimate relationship with someone who had lived more than a 150 years ago. Really well done. It's the kind of book that Anglophiles will really enjoy; there's a little bit of British trivia on every page it seems. It's also fun to use Google maps and satellite views to check in on many of the sites mentioned in the book.

Before calling it an evening, my wife and I watched a new DVD I bought while we were out in southern California over the Christmas - New Year holidays. Due to family commitments we were able to visit only one museum this California trip, the Norton Simon museum which we had not seen in years. While there, among several books also bought, I bought the museum DVD, "The Art of Norton Simon." Surprisingly, it was narrated by Gregory Peck.

For the archives.

Some North Dakota Politicians Want A Do-Over With Regard To New Flaring And Conditioning Rules -- January 15, 2015

Bakken.com is reporting:
A bill sponsored by nine Republican lawmakers could potentially void North Dakota’s efforts to curb natural gas flaring and the conditioning of Bakken’s sweet crude, according to a report by The Dickinson Press.
Lead sponsor of the bill Rep. Keith Kempenich said that one of the bills is in response to the flaring goals and oil conditioning standards being approved by the Industrial Commission without going through the Legislature’s Administrative Rules Committee.
The Dickinson Press reports that Kempenich said, “We need to be involved when they get into that broad of public policy. The Legislature was pretty much left out of the loop as far as what those policies were.” He added that the rules committee would have likely rejected the order to reduce flaring because the goals are “arbitrary.”
That order, adopted July 1, requires oil and gas producers in the Bakken and Three Forks shale formations to capture 77 percent of the gas being released by January 1, 85 percent by January 2016 and 90 percent by October 2020. If operators are unable to meet these goals they would be forced to cut back on production.
I agree completely.  However, a slippery slope either way.

For newbies: the North Dakota legislature meets only every two years, and only for a few months when it does meet. 

Bakken.com is also reporting:
An incident at a North Dakota oil well has left one man dead and another one injured.
The Bismarck Tribune reports the men were repairing equipment at the oil well location near Mandaree when fluids somehow ignited, burning both men.
Reports from the Occupational Safety and Health Administration show that Denver-based QEP Resources operates the well. The incident’s fatal victim was the owner of Legendary Field Services of Watford City, and the man who was injured is employed by that oil-field service provider.
Very, very sad. 

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First Visit To The Library

 Which book tastes the best?

Fourteen (14) New Permits -- North Dakota -- January 15, 2015

Active rigs:


1/15/201501/15/201401/15/201301/15/201201/15/2011
Active Rigs156187185200163

Fourteen (14) new permits --
  • Operators: Whiting (3), Emerald (3), BR (3), OXY USA (2), Oasis, Crescent Point, MRO
  • Fields: Juniper (McKenzie), Boxcar Butte (McKenzie), North Fork (McKenzie), Murphy Creek (Dunn), Willow Creek (Williams0, West Ambrose (Divide), Antelope (McKenzie)
  • Comments:
Wells coming off the confidential list earlier today have been posted; see sidebar at the right.

Wells coming off the confidential list Friday:
  • 27468, 389, Crescent Point CPEUSC Matilda May 32-29-158-100, Church, a Bakken well, t11/14; cum 8K 11/14;
  • 27914, drl, Slawson, Bootleg 6-14-15TFH, Stockyard Creek, no production data,
  • 28158, 2,052, MRO, Longoria USA 21-17H, Van Hook, t11/14; cum 16K 11/14;
  • 28624, A, CLR, Mildred 4-19H, Brooklyn, no IP, s7/14;
  • 28625, drl, CLR, Mildred 5-19H1, Brooklyn, producing,
  • 28864, 780, Hess, BW-Norgard-149-100-1102H-4, Ellsworth, t11/14; cum 17K 11/14;

Three (3) producing wells completed:
  • 22363, 2,108, QEP, Kirkland 15E-23/14H, Grail, T10/14; cum 45K 11/14;
  • 26210, 1,184, HRC, State 157-100-29A-32-3H,  Marmon, t2/14; cum 106K 11/14;
  • 27614, 1,049, Oasis, Andre Shepherd 55-1 31-8 7T, Missouri Ridge, t12/14; cum --
Four (4) permits canceled, included one recent permit. Canceled were a Slawson well in Billings (#16077), two HRC wells in Williams County (Pasternak and Berg; #24824, #24825); and, an Oasis, permit in Williams County (#30170, Williams).

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How Can Analysts Get It So Wrong? SLB Earnings

How can analysts get it so wrong?
The Houston, Texas-based company reported a profit of $302 million, or 23 cents per share, down from $1.66 billion, or $1.26 per share, a year ago. Fourth quarter revenue rose 6% from a year ago to $12.64 billion.
Wall Street analysts expected earnings of $1.46 per share and revenue of $12.72 billion.
Based on how shares did, it suggests that analysts did not know how much SLB was writing down some assets. Along that line:
Schlumberger Ltd. said Thursday it has recorded a $296 million charge reflecting a headcount reduction of 9,000. The oil-services provider didn't specify whether the reductions had already taken place. "In response to lower commodity pricing and anticipated lower exploration and production spending in 2015, Schlumberger decided to reduce its overall headcount to better align with anticipated activity levels for 2015," the company said in a release. In December, the company said it would record a $800 million charge as it restructured its WesternGeco marine seismic fleet by reducing its fleet.

Now That Connecticut Has Banned Fracking, Will The State Ban Flaring? -- January 15, 2015

Updates

February 5, 2015: 136 active rigs:

 



Original Post
 
What the North Dakota Bakken looks like today, 156 rigs (January 15, 2015):


 We will compare this graphic with the 3Q15 graphic later in the year.

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Tweeting right now: President Obama directs federal agencies to advance 6 weeks of paid family leave for federal workers.

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Myfoxny is reporting: the quakes continue. Despite the ban on fracking, the earthquakes continue shaking Connecticut:
A 2.2-magnitude earthquake has rattled eastern Connecticut again.
In what's becoming a daily seismic event, the Weston Observatory of Boston College said the earthquake occurred at about 4:40 a.m. Thursday near Plainfield, where previous earthquakes were recorded.
It says two minor earthquakes were recorded on Wednesday and another on Tuesday.
Several were recorded on Monday and last week, too.
The observatory says that while the greatest earthquake activity in the United States is in the west, earthquakes are "quite common" in many areas of the eastern United States, including New England.
I guess that's why all the reporting of these earthquakes; they are actually quite common in New England. If so, why just Connecticut? Why not Massachusetts? Rhode Island? Vermont? And all this time I thought they were related to fracking.

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Wind Energy In NYC
$7,500 In Annual Costs And $750,00 Up Front Will Get You Enough Electricity For Two Houses For A Year

The New York Times reports --
In less than a month of operation, the first large-scale wind turbine to be installed in New York City, standing more than 160 feet tall, has produced enough energy to power two homes for over a year, or one 20-watt light bulb for over a century.
But this turbine, in Sunset Park, Brooklyn, was built to help power a recycling plant on a pier at the South Brooklyn Marine Terminal. It is expected to provide 4 percent of the energy used by the plant, which is owned and operated by Sims Metal Management, an Australian company.
A full-page story for a single wind turbine that will provide four (4) percent -- repeat, 4% -- of the energy used by a recycling plant. Cost: $750,000. 
Don has done the math:
Use 1% interest on the money for electricity, %750,000 x .01 = $ 7,500 for electricity for two (2) houses for 1 year.  Wow what a bargain, but I think this is still cheaper then Solyndra (bankruptcy declared and ceased all business activity on September 1, 2011).
And at that price -- it provides all of 4 percent the amount of energy the recycling plant needs. By the way, the utility needs to provide additional back-up power for those periods when the wind is blowing too fast or to slow.

Bottom line: the wind turbine was someone's hobby horse.

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Christmas Shopping For The Chronically Unemployed And Disenfranchised

The Ferguson problem:


From Carpe Diem

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Really?

Tweeting now: Southwest Airlines hit with record fine by Department of Transportation for Chicago Midway airport delays.

For The Archives: The 2015 Oscar Nominations -- January 15, 2015

For Kei who reads all my non-oil / non-Bakken posts:

The Oscar nominations for 2015 just came out. I am absolutely thrilled. Two of my favorite DVDs were on the list: The Grand Budapest Hotel for best movie (and eight other nominations); and Finding Vivian Maier for best documentary.

The Washington Post is reporting: 2015 Oscar nominations: Complete list; Selma snubbed; Birdman and The Grand Budapest Hotel lead with nine.
The Grand Budapest Hotel,which won a best picture award at the Golden Globes, is starting to look like an unstoppable force.  
Actress in a Leading Role included Julianne Moore in Still Alice.
Julianne Moore is the favorite here, playing a linguistics professor grappling with an early onset Alzheimer’s diagnosis.
Makeup and Hairstyling:
Will it be Steve Carell’s prosthetic nose in Foxcatcher or an unrecognizable Tilda Swinton under an aged face in The Grand Budapest Hotel
The Grand Budapest Hotel; nine (9) nominations: best film, director, cinematography, costume design, film editing, makeup and hairstyling, music, production design, original screenplay.

I was surprised to see that The Grand Budapest Hotel did not get a nomination for visual effects. The visual effects in GBH were sublime, subtle, sweet (to complete the alliteration). Maybe that was the problem.

I was thrilled to see Julianne Moore on the list. She is a supporting actress in one of my current favorite movies, The Big Lebowski. I watched it again last night. She is gorgeous.

I was also thrilled to see Tilda Swinton get a nomination -- actually, I suppose it was her makeup artist that got the nod, not Ms Swinton. She is in another of my current favorite DVDs, one I can watch two or three times back-to-back in one sitting, after the midnight hour: Only Lovers Left Alive, 2013.

And finally, wow, wow, and wow: the documentary Finding Vivian Maier -- I first saw that at one of the fine arts museums in Ft Worth, TX; I don't recall what specifically caught my interest, but it's a great, great documentary. I bet it was one of only two such documentaries I have paid much attention to in the last couple of years, and it is up for an Oscar (won't win). The other documentary that caught my attention recently: Tim's Vermeer, also 2013. I'm kinda surprised it did not get nominated.

I never guess on who will win the Oscar in any category. Too much politics in Hollywood of which I know nothing.  That's why there are two lists for Oscars: a) those who will win; b) those who should have won.

And that, by the way, is why the Golden Globes has better Hollywood attendance: the awards go to who should win.

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Oil Supply, Oil Demand, Automobiles, and China

At SeekingAlpha: The Crude Oil Slump Is Also Temporary From A Demand Standpoint. Even without reading the article, one can about predict what it is going to say if it's about oil, China, and automobiles.

Don sent me the link to the linked article. This was my response:
I think all these folks who think the price of oil will rebound sooner than later start off with that argument and then try to prove their thesis. 
Meanwhile, folks who think we won't see $100 oil again are doing the same thing: starting off with that premise and then finding data/articles to support their thesis. 
All I can say is I'm happy with my blog post of -- "The Future of Shale" :
  • at $150 oil: the Bakken and all North American plays become very, very active 
  • at $100 oil: most North American plays become active again 
  • at $75 oil: only the sweet spots in the Bakken, Permian, and Eagle Ford remain active 
  • at $50 oil: shale starts shutting down
Regardless, it is pretty much proven that beyond a shadow of a doubt that Peak Oil theorists lost their argument (as a viable investment argument for the next 20 years); at even reasonable prices ($150 oil) it appears "we" won't run out of oil any time soon.
There appear to be three centers of gravity:
  • Saudi Arabia/OPEC 
  • off-shore 
  • North American (shale and Canadian sands) 
One can put them in a different order based on how fast they can react or affect prices:
  • Saudi Arabia/OPEC: immediately 
  • North American: 6 months 
  • off-shore: 3 years 
In other words, a Saudi Arabia announcement on oil production today can affect prices the same day; an announcement regarding North American production will affect prices six months out; off-shore drillers need at least three years to put together a project and won't affect prices until that project comes on line. 
The linked article above focuses on China. I think most analysts forget about China. China will grow a lot faster than people think.
But my hunch is that oil supply can easily keep up for quite some time.

From The Williston Wire, January 15, 2015

Williston: A major construction project in Downtown Williston is on track to open this fall. Renaissance on Main, a mixed-use building with retail, office, and apartment space, is located at the corner of 2nd Street and Main Street. Project officials say they have received a lot of interest in the property from both new and current retailers.

Watford City: After Diane Gariety and Pamela Scott (Holm sisters) were gifted land from their brother, Rick Holm, a little over two years ago, the sisters decided to donate some land for a school, a softball complex and soccer field, and for essential workforce housing in a new residential development being planned on the north side of Watford City. "We are donating the land because we want to give back to the community," says Gariety. "It's a time of growth here, and we want to be a part of it." One of the largest donations will accommodate The Homestead, a 720-acre master planned community.

Watford City: Home of Economy hopes to open a new store in Watford City in February. The store will be located in the space currently occupied by Alco in the South Park Plaza. "We will be 90 percent work wear and boots," said Scott Pearson, CEO of Home of Economy. "The best sellers of our products will be in the store and everything we carry will be available by special order. So, if you like something in one of our other stores, we can get that item shipped to the Watford City store.

Bismarck: A Bismarck-led development group has plans for a downtown apartment and retail complex with attractions geared toward young professionals. Bismarck Futures' housing development will not only include 300 to 400 "chic" studio, one-bedroom and two-bedroom apartments. There will be health spas on the main level with potential attractions, such as a 30-foot climbing wall, boutique dining options and other things developer Don Cardon said will make the next generation want to move to Bismarck.

Sidney, MT: The Sidney City Council has granted Final Plat Approval for Phase 1 of The Homestead Subdivision, a 28-acre land parcel zoned for both Residential and Commercial development in Sidney. "As the only existing approved subdivision of its kind within the immediate area, the Homestead Subdivision features both a "Commercial Park" and a "Residential Park" each with shovel-ready lots that are available for immediate development," said Don Sterhan, President and CEO of Mountain Plains Equity Group.

Williston: The City of Williston is calling for residents to show support for the so-called "surge" bill at the 64th North Dakota Legislative Session this Friday. "Attendance speaks volumes and we want to show legislators that the approval of the surge bill is extremely important to the growth needs of western North Dakota," said Shawn Wenko, Williston Economic Development executive director.Wenko spoke about the bills during a Williston Stakeholders meeting recently. The Senate Appropriations Committee will hold a hearing for Senate Bills 2103 and 2126 on Friday, January 16th beginning at 8 a.m.

Natural Gas Fill Rate -- January 15, 2015

Natural gas fill rate, a dynamic link: -236. The biggest drop this winter to date. All regions had a negative fill rate. What does a "-236" mean? At the link, scroll down to the graph: current fill rate is right at the middle of the historical average. This is quite incredible considering where the current rate was when the cold weather started.

I should have taken screen shots of the graphs on previous dates. The current fill rate was well below the five-year range when I started following this metric in mid-2014. Now, the EIA has "colored" in the five-year range, bringing that range all the way down to the current fill rate. One no longer can see just how great that gap was in mid- to late-2014.

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This Is A Very Important Day

See disclaimer.

From Yahoo!Finance:
Stock futures on a roller coaster ride this morning because of something the Swiss did. Really. The Swiss National Bank (SNB) said they were abandoning the Franc -- Or "swissie" -- link to the euro. Analysts are still figuring out what this means on a global basis. The knee-jerk reaction was a 2% drop in U.S. stock futures before rebounding. If you think that's aggressive consider it in the context of a 30% spike in the price of a swissie.
I know nothing about global currency, but this suggests to me the Swiss think the Euro is either a) on the rocks; doomed; could fail; and/or, b) the euro, if it survives, it going to take a big, big hit with the problems in Greece.

Idle Musings; Update On The H M Hove Wells In West Capa, January 15, 2015

Updates

September 28, 2019: production updates / wells updated.

Original Post

This is kind of fun.

Remember the disclaimer.

Look at the initial production numbers and the other data coming from the wells coming off the confidential list today:
  • 28057, 45, Zargon, Zargon Mackobee Coulee 2HZ 9-21, Mackobee Coulee, a Madison well, t10/14; cum 52K 10/18;
  • 28552, 1,302, XTO, HM Hove 34X-33G, West Capa, t3/15; cum 162K 10/18;
  • 28731, 28, Enduro, NSCU K-74-H1, Newburg, a Spearfish/Charles well, t9/14; cum 7K 10/18;
  • 28747, 2,592, Slawson, Jore Federal 2-12H, Clarks Creek, t9/14; cum 189K 10/18;
The above data is simply a snapshot in time. One cannot make any predictions on such few data points. Well almost no one. LOL.

First of all, note: these wells were all planned and drilled well ahead of the slump in oil prices. However, it would surprise me if really, really smart oil men who have been in the business for 30 years did not see the price slump coming. Let's say they did.

Four wells came off the confidential list.

Fifty percent of them were NOT Bakken wells. Wow! In the prolific Williston-Bakken formation, fifty percent of wells coming off the confidential list today were NOT Bakken wells.

Of the two Bakken wells, 50% were not completed. 

Of the two Bakken wells, 100% were drilled in sweet spots in the Bakken.

Of the two Bakken wells, 50% were not completed. Saving a gazillion dollars in fracking/completion costs.

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Pad Drilling In The Bakken
The H M Hove Wells In West Capa, Williams County
Southeast Corner of Williams County, Just North of the River

So, what does pad drilling in the Bakken look like these days. Here's a snapshot of the proposed HM Hove pad:



Note: only two wells are shown, but note the "additional future wells with separators/treaters and oil & water measurement" comment.

The HM Hove wells:
  • 18102, 806, XTO, HM Hove 34X-33, West Capa, Three Forks, open hole, 12 stages; 1.1 million lbs;  from the narrative: "in addition to the primary Three Forks target, secondary zones of interest were the Ratcliffe, Mission Canon and Middle Bakken formations; the first two formations evaluated during the vertical drilling phase; the middle Bakken evaluated while building the curve"; in the Three Forks, at least 5 minor faults with displacements of roughly 3' to 5' over an interval of 10,000 feet; gas as high as 5,000 units; Ratcliffe, Mission Canyon are not productive in this well; the middle Bakken may not be as good but should be productive; t4/10; cum 188K 7/19;
  • 28551, 1,057, XTO, HM Hove 34X-33C, West Capa, t3/15; cum 192K 7/19;
  • 28553, 1,580, XTO, HM Hove 34X-33D, West Capa, Bakken NOS,  t3/15; cum 197K 7/19;
  • 28552, 1,302, XTO, HM Hove 34X-33G, West Capa, Bakken NOS,  t3/15; cum 1172K 7/19;
  • 28650, 1,701, XTO, HM Hove, 34X-33H, West Capa, Three Forks B1, t2/15; cum 206K 7/19;
For newbies: a long, long time ago I posted a "primer" on the five most important "things" that determine how good an oil well will be. That list came from textbooks on oil and gas, so it was a  really, really solid list. Interestingly enough, something was omitted from that list, and I've not seen anyone discuss it per se but it is in many narrative reports: the percent horizontal lateral remains in the target formation. Remember: the middle Bakken can narrow to as much as four feet thick; keeping the drill bit in that narrow seam two miles down and two miles horizontal can be a real challenge. It's great to see a report that says the driller kept the horizontal lateral in the seam 100% of the distance. I see it often. It's not always reported (if it is, the data is hard to find in many cases for a layman).

Compared to California, North Dakota geology is a cinch when it comes to drilling. In #18102 above, note: "...at least 5 minor faults with displacements of roughly 3' to 5' over an interval of 10,000 feet..."

I find it remarkable that the driller consider displacements of 3' to 5' in a seam that might have 40 feet thick were considered "minor." When the drill bit comes to a fault, it takes a good driller to find the seam again. They generally find it, but the time lost in drilling can be significant as well as wear and tear on the hardware.

California is nothing but "major faults." That goes for California geology also. That's why successful fracking in California has not yet made headlines. See recent post on the Monterey shale.

Idle chatter. See disclaimer.

Yahoo!In-Play -- January 15, 2015

Disclaimer.

Target surges on plan to exit Canada; raises Q4 US comp guidance to +3% from +2%: Co plans to discontinue operating stores in Canada Target Canada currently has 133 stores across the country and employs ~17,600 people. Target Canada is seeking the appointment of Alvarez & Marsal Canada as Monitor in the CCAA proceedings to oversee the liquidation and wind-down process for Target Canada and its subsidiaries.
  • Target Corporation expects this decision will increase its earnings in fiscal 2015 and beyond, and increase its cash flow in fiscal 2016 and beyond.
Target Corporation now expects to report fourth quarter 2014 U.S. comparable sales of ~3 percent, better than prior guidance of approximately 2 percent, driven primarily by increased traffic and stronger-than-expected digital sales

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Williams Cos announces it delivered a record amount of natural gas on its Transco interstate gas pipeline to meet demand driven by recent cold weather in markets on the U.S. Eastern Seaboard : Two recently completed expansions of Transco, totaling 315,000 dekatherms per day (dth/d) of natural gas transportation capacity, contributed to the volume record in early January.
  • The new peak-day mark surpasses the previous high of 11.9 MMdt set on Jan. 7, 2014. Transco also set a three-day market area delivery record Jan. 7-9, averaging 11.9 MMdt. The Jan. 7, 2015 record volume represents enough gas to heat about 50 million U.S. homes.
  • Williams expects deliveries to increase substantially in the coming years as additional planned Transco projects go into service.

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McDermott International (MDR) and GE Oil & Gas (GE) launched io oil & gas consulting, a new independent venture to transform front-end offshore field development. Through early engagement at the front end of complex field development projects, io can help ensure sound engineering design from the beginning to create execution efficiencies and improved constructability.

Not ready-for-prime-time comments regarding MDR and GE:
MDR is one company I've been in and out over the last 30 years; I generally am in for the long haul but MDR has always proved to be a problem. But at $2.40, MDR is almost a penny stock. GE should just buy it and put is out of its misery. The question GE is asking: will deep sea drilling ever come back?

I think folks who still talk about deep sea drilling forget a) how easy it is for US shale to ratchet up or down in 30 days (compared to 3 years for deep-sea drilling projects); b) how huge the Permian, Eagle Ford, and the Bakken are; c) the Canadian sands oil once the Keystone is approved; and, d) Mideast countries, like UAE, #5 producer in OPEC, says they are upping their production from 1 million bopd (ball-park some years ago) to 3 million bopd (ball-park by 2017).

I don't know the numbers but everything seems to suggest deep-sea drilling is in deep-sea trouble.
When one can ratchet up or down Canadian sands oil / US shale oil in 30 days, and an OPEC member says we will never see $100 oil again, how does one even begin pricing deep-sea drilling projects? Answer? Very, very conservatively. 

Stories Still Coming Fast And Furious -- January 15, 2015

Reuters is reporting: U.S. producer prices post biggest drop in more than three years. Your grocer is out there right now lowering the prices on all his/her products; beef and pork plummet; automobiles with huge discounts; airlines paying customers to fly; some airlines bringing peanuts back. For free.

[Note: except for that in bold, everything in that last paragraph was made up. I doubt any of it is true. Except for producer prices posting (great alliteration, huh?) drop in more than three years. Wanna guess why? Maybe I'll suggest something later on. Think: 800-lb gorilla. Think about the huge surge in unemployment claims reported this morning. Remember, 2015 was the year that the 800-lb gorilla moved back into your living room. From the linked article:
The Labor Department said its producer price index for final demand declined 0.3 percent, the biggest drop since October 2011, after falling 0.2 percent in November.
Fed officials largely view the energy-driven weakness in inflation as transitory. But with retail sales and average hourly earnings, another key inflation measure, falling in December, that could give pause to some policymakers.

U.S. producer prices in December recorded their biggest fall in more than three years on tumbling energy costs while underlying inflation pressures were muted, a cautionary note for the Federal Reserve as it ponders its next step on monetary policy.
Market Realist is reporting: Must-know: US leads global rig counts and oil growth.
According to Baker Hughes’ estimates, the US rig count currently exceeds the total number of rigs in the rest of the world combined. On average, there were 1,862 rigs active in the US in 2014—compared to 1,716 rigs combined for Africa, Asia-Pacific, Canada, Europe, Latin America, and the Middle East.
The Middle East is a distant second to the US. On average, it had 406 rigs for 2014.
From 2009 to 2014, the US continued to surpass the total international rigs combined by ~230 rigs, or 16%.
CNN Money is reporting Texas: America's boom-and-bust oil capital.
Survival of the fittest: While the oil meltdown is causing jitters in Texas, Danny Jimenez knows dramatic price moves also present opportunities.
"A drastic decline in commodity prices is going to result in winners and losers. The weak get weaker and the strong get stronger," said Jimenez, who is CEO of Craig Energy, a Denver-based oil services company.
Jimenez, who previously worked at Texas-based Halliburton and Schlumberger, said companies that are financially irresponsible and believed the good times were "going to last forever" will be in trouble.
"You have to stay within your means so you don't stretch yourselves too much," Jimenez said.

Another Exciting Day In The Bakken -- January 15, 2015; First Time Claims Rise "Much More" Than Anticipated; Oil Has Risen Almost 10% In 24 Hours

It's been a long time since I've been up this early -- I couldn't wait to start blogging. It's "job watch" day -- one of my favorite days of the week, to see the spin.

Actually, that's only partially true. I was eager to see the granddaughters and take them to school. My wife had been doing that for the past few weeks (I don't know when that switched from me taking them to school to my wife taking them to school; it just sort of happened). I was eager to follow-up the discussion with our old granddaughter on the three Greek philosophers that got the ball rolling.

But for now, the Bakken and the jobs report.

Did you all see that oil was up about 6% yesterday and I see this morning WTI is up about 3%. Of course when oil is below $50/bbl, these moves don't mean a lot in "raw dollars" but the trends are very, very important.

Note this very, very long Bloomberg article. It was filled with data points but it was the two last paragraphs that summed things up best:
Crude may fall below a six-month forecast of $39 a barrel and rallies could be thwarted by the speed at which lost shale production can recover, Jeff Currie, New York-based head of commodities research at Goldman Sachs Group Inc., said in an interview on Bloomberg Television yesterday.
"Shale has fundamentally changed this market," he said. "The lead time between when you put money in the ground and when you get production has collapsed from three to four years, all the way down to 30 days." 
Active rigs in North Dakota:


1/15/201501/15/201401/15/201301/15/201201/15/2011
Active Rigs157187185200163

Lately the ethane market seems out of whack.  Ethane production continues to increase even as it’s become the lowest margin (highest cost) feedstock for Gulf Coast petrochemical crackers – it’s main market.  Ethane production by processing plants has been at an all-time high since June this year even as ethane prices fell to historical lows.  Meanwhile, ethane inventories have fallen from their recent peak in July.  How can all that make sense?  Today we speculate as to what may be going on.
Ethane was the highest margin (lowest cost) feedstock for Gulf Coast petrochemical crackers for almost all of the past five years as shale production resulted in increasing supplies putting downward pressure on ethane prices.  Most of the time it was a much more profitable feedstock than other NGLs -- propane, butane or natural gasoline, and vastly better than naphtha and gas oil. 
Over the 2013-2014 period, the margin for ethane on the Gulf Coast averaged about 50 cents per pound of ethylene ($.50/lb), while propane came in at $.42/lb. Normal butane was about $.40/lb while natural gasoline brought up the rear at $.24/lb. 
Now as of the first week in 2015, those numbers are flipped around.  The best margin is propane, still at $.42/lb, while butane is at $.39/lb and natural gasoline is $.37/lb.  Poor ethane is sitting at $.34/lb, partially due to more dramatic price declines for the other NGLs and partially because of the impact of lower ethylene prices. 
Granted this is still a pretty darned good margin from a historical perspective, so it’s not like the petchems are dealing with anything like what oil producers are going through right now.  But still, it is a big reversal for the margin on the NGL which was supposed to be the rising star of a half-dozen new world scale petrochemical plants expected to be completed between 2017 and 2020. 
Their answer to the question is interesting. 

Okay, the jobs report; it will be interesting to see the AP, CNBC, and the Bloomberg spin. These are the dry numbers from Kitco News
First-time claims for US unemployment benefits rose by much more than anticipated in the week ended January 10th, according to a report released by the Labor Department on Thursday.
The Labor Department said initial  jobless claims climbed to 316,000, an increase of 19,000 from the previous week's revised level of to 297,000.
Economists had expected  jobless claims to inch up to 295,000 from the 294,000 originally reported for the previous week.
I noticed this was not a headline story over at Yahoo!Finance.  Had there been even a slight improvement, it would have been headline news. But here we go again; can't wait for the spin.

Headline at Morningstar: jobless claims hit highest level since September. First paragraph: applications for unemployment benefits surge 19,000 to 316,000. And here's the spin (it's unclear what the numbers mean):
So-called initial claims are prone to sudden swings after the holiday season, so it's unclear if the increase reflects any deterioration in what's been a rapidly improving U.S. labor market.
Headline at Bloomberg: jobless claims in US unexpectedly climb to four-month high. And here's the spin (it's just seasonal; it happens every year; no big deal):
More Americans unexpectedly filed applications for unemployment benefits last week, indicating companies let go of seasonal workers following the holidays.
“It happens at the beginning of every calendar quarter and the beginning of every year, so it’s difficult to seasonally adjust at this time,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who projected claims would jump to 325,000. “People are finding work. The labor market is fine.”
Reuters spin (hey, the labor market is firming up -- it's been firming up for 18 weeks):
It has remained below 300,000, which is associated with a firming labor market, for 18 weeks.
AP headline at m.roanoke.com: applications for US jobless aid climb to 18-week high. Here's the spin (hey, the level remains near historically low levels; never mind we're 8 years into a recovery having put a gazillion dollars into stimulus):
The end of the holiday season led to more Americans seeking unemployment benefits last week, raising the number of applications to an 18-week high. Still, the level remains near historically low levels.
And, of course, the best spin:
The four-week average, a less volatile measure, rose 6,750 to 298,000. That average has plunged 11.4 percent in the past 12 months, staying at historically low sub-300,000 levels since September.
And that, folks, is why I love waking up early every Thursday morning: just to read the Obama-press releases on the unemployment numbers.

It gives me something to do while waiting for the NDIC to post the initial production numbers for wells coming off the confidential list today. 

By the way, did anyone notice that no one talks about all the folks that have dropped out of the labor force? That only comes up once in awhile and usually with the monthly US unemployment report.

It's kind of funny. After the initial post, I go back and fix typographical errors. Re-reading some of the spin reminds me of the good old days, back in middle school, when I read Mad Magazine -- before the price went up and I could no longer afford the magazine.

So, how did the market respond? Futures were down before the unemployment numbers were released. After the numbers were released, the market went "green." The investors know what Janet Yellen knows.

And oil is up almost 4%. 

Disclaimer: oh, you guys and gals should know what the disclaimer is by now. I post it at least once every day and it's always at the "welcome/disclaimer." But for those who might not know, this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here. I'm not even sure you want to read what's here; it is very, very biased, written by someone who is inappropriately exuberant about the Bakken and similarly exuberant about the opportunities young folks have these days.