Tuesday, July 21, 2015

Most Important Oil And Gas Story For 2015

Tectonic shifts in the oil and gas industry.

From 2010 - 2015, the most important story was the shale revolution.

In 2015, the biggest story is the fact that Saudi Arabia is transitioning to a refining economy. Huge. The reason this is so big:
  • Saudi Arabia export numbers are now "shifted"; it will take time to sort out KSA petroleum export numbers
  • one could measure Saudi Arabian exports; no one outside KSA can independently verify refinery activity inside the kingdom
  • in other words, KSA crude oil production and export numbers will be much, much harder to interpret
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Setting Us Up For $200 Oil

Reuters/Rigzone is reporting:
Oil firms trying to sell ageing North Sea oilfields are considering shouldering hundreds of millions of dollars in future dismantling costs to help find buyers.
One of the world's oldest and most important offshore oil and gas production basins, the UK North Sea faces dwindling output and a growing number of redundant platforms that require decommissioning in a scale and complexity never seen before.
The near halving of oil prices over the past year to below $60 a barrel has forced the industry to slash spending, increase efficiencies and sell or shut down assets that are least profitable or which do not fit their portfolios. But despite a large rise in the number of assets up for sale in the North Sea in recent months, only a few deals have been completed.
Decommissioning, which involves plugging wells with cement on the seabed and removing obsolete platforms and pipelines, has proved to be a major stumbling block for deals.
Think about where "we" would be had there not been the Bakken revolution. All that talk about "peak oil" might have taken on more ... I can't think of the word.

By the way ... just a reminder. And we all survived "2009."

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For The California Readers

Cool Water, Gaither Vocal Band

Tuesday, July 21, 2015, Part III

Disclaimer: this is not an investment site.

There are reports everywhere that the FCC is ready to approve ATT's purchase of DirectTV. Huge. Forbes.

Being reported by Fox News: Muslim plot to kill US airman at largest American air base in England, RAF Lakenheath, foiled. We were stationed at RAF Lakenheath for three wonderful years.

Also being reported by Fox News: US Army Chief of Staff says US could have stopped ISIS ... but is now clarifying his comments. I assume he got a phone call from the White House. I don't think the Obama administration has articulated an ISIS strategy yet. The Obamas are probably busy studying the Keystone XL proposal.

Second video surfaces with Planned Parenthood executive "haggling" over price of baby body parts; executive needs commission to pay for Lamborghini. Not being reported anywhere except by "the usual suspects."

John Kerry says he is now disappointed with Iranian leaders' trash talk following the "deal." Sort of sours his legacy.

With regard to oil, this is where we are:
  • service companies have hit bottom, and are starting to recover
  • too early to tell which drillers will survive, which won't; we'll know by this time next year (2016) 
  • cheaper to buy pipelines than build new ones
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AAPL with a P/E of 16 is risky; Tesla with a P/E of 156 is a "strong buy." Highlights from today's Apple's earnings:
  • quarterly profit surges 38%
  • iPhone unit sales up 35% to 47.4 million iPhones 
  • gross margin was 39.7%, above its estimated range of 38.5% to 39.5%
  • prospects in China are outstanding
  • Apple watch sales higher in June than in April, May




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The Apple Watch is not understood by analysts, non-Apple fan boys. Remember, I was Apple fan boy #3.

Apple Fan Boy #56

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Absolutely Nothing About Anything

This is kind of cool. Don sent me a link to today's post by Mark Perry (Carpe Diem) which has an interesting graph of the Bakken.  That alone is worth the visit, but even more interesting is the note about Pabst Blue Ribbon.

it's hard to find inexpensive beer in a can for beer can chicken. PBR is the answer, although I sometimes have trouble finding it. As a substitute, Modelo from Mexico.

And speaking of "hip" PBR. Perhaps the most hip singer in the past few years, Lana Del Rey, mentions PBR in This Is What Makes Us Girls.

By the way, speaking of current culture, I finally connected the last dot with regard to David Lynch's Mulholland Drive. I can now die happy.

I've also finally beginning to understand the progression of dinosaurs to birds and mammal-like reptiles to mammals after reading Richard Dawkins' The Ancestor's Tale for the third time. I don't always "get" something the first time around.

Well Completions Starting To Pick Up In Shale Plays -- July 21, 2015

When you read this story, remember there are over 900 wells in the Bakken waiting to be fracked/completed. Reuters/Rizgone is reporting:
Oilfield services provider Baker Hughes Inc's quarterly revenue fell less than expected as more and more North American shale oil producers returned to complete wells they had abandoned as crude oil prices slumped.
These producers had built up a heavy backlog of drilled but uncompleted wells, but with oil steadying at about $50 per barrel, some producers are now coming back to these wells.
Rising stage intensity - the practice of fracking more stages per well to increase production - also helped Baker Hughes stem revenue losses.
Industry leader Schlumberger Ltd and No.2 Halliburton have also reported better-than-expected revenue and said they expect an uptick in demand in North America this year.
But they appear to be "burning daylight" in the Bakken -- winter will be here before we know it, and come November, December, January, February, it's pretty tough to frack in North Dakota. 

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Johnny Carson and Stump the Band with Teri Stone

Ten (10) New Permits -- North Dakota -- July 21, 2015

Wells coming off the confidential list Wednesday:
  • 28802, drl/NC, CLR, Florida Federal 5-11H, Camp, no production data,
  • 28810, A, Fidelity, Dorothy 1-12H, Zenith, producing, a nice well, choked back, cum 58K 5/15;
  • 29531, drl, Enerplus, Mink 150-94-04B-09H TF, Spotted Horn, no production data,
  • 29672, drl, XTO, Werre Trust 44X-34C, Bear Creek, no production data,
  • 29875, SI/NC, BR, Morgan 41-28TFH ULW, Johnson Corner, no production data,
Active rigs:


7/21/201507/21/201407/21/201207/21/201107/21/2010
Active Rigs68196207180137

Ten (10) new permits --
  • Operators: Hess (6), BR (4)
  • Fields: Blue Buttes (McKenzie), Antelope (McKenzie), Elidah (McKenzie)
  • Comments: Hess with permits for a 4-well pad, and a 2-well pad; BR with permits for a 4-well pad
Aeon Energy reported a dry hole, Lillie Farms, in Bottineau County. North Maxbass oil field. Target: Mississippian age 3rd Wayne Porosity; 8 feet thick; 160-acre spacing; apparently large amounts of water; no oil cut.

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Cummins

Over a year ago, in passing, I mentioned Cummins.  Now, Cummins pops up on the radar scope again. This time it is noted that Cummins has raised its quarterly dividend from 78 cents to 97.5  cents. Bloomberg is reporting that Cummins is among the winners in US trucking proposal:
U.S. regulators delivered a victory for engine makers such as Cummins Inc. in a battle over emissions regulations for heavy-duty trucks.
The Environmental Protection Agency and the Transportation Department proposed fuel-economy standards Friday that would mandate efficiency gains in engines and transmissions made by companies such as Cummins and Eaton Corp. The rules are intended to encourage the development of new technology, and the replacement of engines.
Trucking fleets will have to buy new trucks or retrofit new engines made by companies like Cummins.

Truckers will most likely switch to natural gas

Grenora, North Dakota -- July 21, 2015

The Williston Herald has a nice piece on Grenora.
Around 3 p.m. on a Friday at Treasured Stitches. a mother and her young children entered the store to consider buying clothes and a personalized towel to use at the swimming pool. The store is the newest retail business on Main Street in Grenora. It sits across the street from construction on a soon-to-open hair salon and only several blocks away from ongoing build-out of a town square.
Grenora is a gem settled in the shadow of Williston, 44 miles to the north and west. Though it hides in the Bakken formation, four miles east of the North Dakota and Montana border, the city and its people remain independent from the chaos of the so-called booms and busts.
Founded in 1916 and named after the Great Northern Railroad, the city has avoided the troubles of most oil drilling and remains one of the only regional cities to decline joining the Western Area Water Supply Authority, a domestic water project utilizing the Missouri River and treated at the Williston Water Treatment Plant.
In recent years, the majority of Grenora officials and residents have preferred independence and keeping the right to sell its water supplies, for example, rather than prescribing to the rush of outside influence — and in doing so have managed to not outpace themselves.
This was the "North Dakota" I grew up with. Great memories. 

Much more at the link. 

Unintended Consequences Of Bakken Shale + High Gasoline Demand -- July 21 2015

Remember reading this?
One interesting side effect of U.S. refineries running flat out to produce more gasoline is a shortage of the blending components required to boost the octane rating in summer gasoline – alkylate and reformate. The shale crudes being processed in greater volumes by U.S. refiners these days contain lighter naphtha components that make fewer octanes. That means refiners have to buy in expensive alkylate and reformate – increasing prices at the pump – especially if your Beamer only runs on premium gas.
This very issue was discussed (and predicted) in their Sunday, July 19, 2015, blog that was posted Monday, July 20, 2015.

Now Platts is reporting: High octane RBOB premium surges on US Atlantic Coast.
The premium for 91.4 octane RBOB on the US Atlantic Coast Tuesday held on to gains made late Monday as prompt supplies became tight, market participants said.

Premium RBOB (H2) loading July 23 on the Buckeye Pipeline traded at NYMEX August RBOB plus 59.00 cents/gal late Monday, up 8 cents from Monday's assessment. Trading was limited early Tuesday, but market participants said the premium has held on to gains from late Monday.

The current spread between the standard 83.7 octane RBOB and the high octane RBOB has widened to 48.5 cents/gal, the widest differential since September 19, 2012.
The market for high octane RBOB on the Atlantic Coast is particularly tight for prompt loading.
Also archived.

Don't You Just Love It? Apple Earnings Are Out -- July 21, 2015

Comment from live blog:
So Apple beat on profit, revenue, iPhone sales and Mac sales, yet AAPL sliding fast, below $120.
Highlights:
  • quarterly profit surges 38%
  • iPhone unit sales up 35% to 47.4 million iPhones 
  • gross margin was 39.7%, above its estimated range of 38.5% to 39.5%
From Macrumors:
For the quarter, Apple posted revenue of $49.6 billion and net quarterly profit of $10.7 billion, or $1.85 per diluted share, compared to revenue of $37.4 billion and net quarterly profit of $7.7 billion, or $1.28 per diluted share, in the year-ago quarter.

Gross margin for the quarter was 39.7 percent compared to 39.4 percent in the year-ago quarter, with international sales accounting for 64 percent of revenue. Apple also declared an upcoming dividend payment of $0.52 per share, payable on August 13 to shareholders of record as of August 10. The company currently holds $202.8 billion in cash and marketable securities.  
I find that incredible: a year ago, not quite $8 billion profit; this year (quarterly), an almost $11 billion profit.  It would be interesting to see one other mature "tech" company report results like that.

California Drivers Pay Dearly For Refinery Problems -- John Kemp, July 21, 2015

 Addendum

Later, 2:35 p.m. Central time: Pet peeve -- California drivers who think there is an oil industry conspiracy for the prices of gasoline in California. Direct taxation, California gets 61 cents from each gallon; XOM gets around 3 cents from each gallon (reminds me of Henny Penny and her bread baking day). Other costs are all state government related; unfettered, XOM could provide gasoline for Californians at a lower price than what most others pay across the United States (volume pricing).

Later, 12:29 p.m. Central time: California drivers account for more gasoline / more miles driven than any other state. In the notes below, it was noted that gasoline demand the first few months of 2015 was the highest since 2005. That led me to opine that this August the US will hit 10 million bbls of gasoline/day demand -- first time ever in the history of the US that gasoline demand hits the 10-million milestone. Part of that demand was driven by relatively inexpensive gasoline. However, with the high cost of gasoline in California right now (and no end in sight for the duration of the summer -- in fact, it could get worse), California demand may go down. If California demand goes down from here to the end of August, we may not hit the 10-million bbls of gasoline/day. Having said that, I still think we will hit the number (10 million); summer plans were made months ago, and folks have become accustomed to driving again. It will take several months of high prices (and we may not be there yet) for folks to change their driving habits (again) in California (the change will be temporary, of course -- just until prices come down again).

See also: OilPrice tells us why Californians pay more for their gasoline -- 
In large part because an Exxon Mobil Corp. refinery in Torrance has been out of commission since an explosion there in February, and the state’s environmental regulations are hampering the company’s efforts to quickly get it back to full production.
The refinery is now operating at under 20 percent of its potential, mostly because the explosion damaged its two pollution control units, according to Mohsen Nazemi, the deputy executive officer for engineering and compliance of California’s Sourth Coast Air Quality Management District.
ExxonMobil has sought permission to use a previous model of the unit until the newer version can be installed, but was denied because the older unit emits between two and six times more greenhouse gases than the newer model, which would violate state regulations. To use the older equipment, he said, the company would need to show the state that it can contain offset these increased emissions.

In the meantime, ExxonMobil is working to repair the newer pollution control units by replacing about 1,300 plates that trap the emissions, which are made of a fine dust. “That’s not going to happen next week or next month,” Nazemi told the Los Angeles Times. “You’re probably looking at the end of the year.”
Original Post
 
John Kemp, a perfect storm -- these factors coming together to create a localized spike in prices
  • refinery problems
  • strong demand
  • falling stocks
  • a market separated from the rest of the country 
The only solution: bring finished gasoline and blending components such as alkylate in from other parts of the US and Asia

Did Saudi Arabia see this coming? Is Saudi Arabia able to provide the gasoline California needs? I don't know. But Saudi Arabia is transitioning to one of the world's largest refiners after a history of importing refined products for domestic consumption.

Reuters is reporting:
California motorists are paying $1 per gallon more for gasoline than drivers in the rest of the country as problems at state refineries leave the state fuel market unusually tight.
The average price of gasoline sold in the state was $3.95 per gallon on Monday, compared with a nationwide average of $2.89, according to the U.S. Energy Information Administration.
In fact, we're paying about $2.50/gallon here in Texas and about $4.60/gallon in California. The $1-spread suggested by John Kemp is a very, very optimistic spread. Driving cross-country from Los Angeles to Dallas last week suggests to me the spread is closer to $2.

The reasons are clear-cut.

1. California is an "island" when it comes to gasoline. Only the California refineries supply the state government-mandated formulation of gasoline. Refineries in neighboring states do not provide the required formulation that California requires. Some overseas refineries do.

2. To meet demand nationwide, and I assume in California, the refineries pretty much have to run at 96% capacity. The XOM refinery in Torrance (south Los Angeles) lost two pollution control panels which has cut XOM refinery to about 20% capacity. That's a huge, huge cut. XOM has asked for relief from the state to allow it to produce gasoline without the pollution control panels, but the state has said no.

3. XOM also lost a supply of crude oil off-shore due to a pipeline rupture. XOM could have used trucks to bring this crude oil to their refineries, but again, the state said no.

4. The state gasoline tax is the second highest in the nation. The sales tax is clearly seen on every pump.

5. The state has a hidden "carbon cap-and-trade" fee on every gallon of gasoline; that fee is "hidden," and the actual cost is unknown. The cost is estimated to add anywhere from 20 cents to $1.40/gallon. The EPA has made it very clear that the "carbon cap-and-trade" fee will do absolutely nothing to affect global temperature. Absolutely nothing, but the fee probably adds about $1.00/gallon. The fact that no one can provide a cost suggests it's much higher than people think.

6. According to John Kemp: pump prices include taxes and fees imposed by federal, state and local governments, and California levies the fourth-highest charges in the union (only Pennsylvania, New York and Hawaii tax fuel sales more heavily):
  • 61 cents state tax vs national average of 49 cents (inconsequential with $5.00 oil
  • environmental fees, hidden, as noted above
7. Over the last decade, the price of premium gasoline has averaged just 32 cents per gallon, less than a third of the current differential. As recently as December, 2014, the spread was less than 30 cents per gallon.

8. West Coast refineries are currently processing 2.4 million bopd, about 6% less than the 10-year average for this time of year (150,000 bopd); West Coast refineries have been processing at or near the lowest volume of crude for a decade since early this year.  
  • the state has been drawing down its stocks of refined gasoline much faster than usual as refineries fail to keep up with demand 
  • gasoline stockpiles on the West Coast stand at the lowest level for this time of year in more than decade
  • the California market is particularly tight because demand in the first few months of the year grew at the fastest rate since 2005
9. In contrast, refineries in the rest of the country have been processing record amounts since January to take advantage of very high crack spreads. Refinery runs are now 1.2 million bopd (or almost 10% higher than average).

10. Two cargoes of gasoline and blending components are on way from Asia, which should provide some temporary relief.

11. But California's gasoline prices look set to remain at an unusually high premium until the state's refineries are fully back on line.

Federal Fracking Rules Delayed Another Month -- July 21, 2015

The Casper StarTribune is reporting:
The fate of a federal fracking rule will not be decided for at least another month.
A federal judge magistrate recently granted the U.S. Bureau of Land Management's request for an additional month to compile its official account of how the regulation was drafted. 
The account had been due by July 22 under the stay issued by U.S. District Court Judge Scott W. Skavdahl in June. The bureau now has until Aug. 28 to submit the record. 
The development represents the latest setback in the Obama administration's effort to update the rules governing oil and gas development on federal land.
The rule, first proposed five years ago, sets higher standards for well construction, requires greater disclosure of the chemicals used in frack jobs and imposes more stringent requirements for the disposal of drilling fluids.
Industry interests cheered the delay, saying it was evidence of their argument BLM is unprepared to implement the rule. Environmentalists said the delay has no bearing on BLM's readiness and instead reflected the laborious process of compiling all the comments the government received in drafting the standards.
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Bakken Cooperation

The Bismarck Tribune is reporting:
The oil company that’s having a huge impact on the Little Missouri State Park north of Killdeer has pledged to move some hiking and riding trails away from its operations.
ConocoPhillips, developer of the 30,000-acre Corral Creek Unit - the biggest drilling unit in the Bakken - says it will pay $100,000 to move two trails away from a seven-pad drilling platform that will eventually contain 30 wells, service roads and three separate storage tank batteries.
The mega-unit, which is  not constrained to the usual two-section drilling spacing unit, was created in 2011 to give the oil company more flexibility in where it drills wells.
Jim Lowry, spokesman for ConocoPhillips, said the company has worked with the North Dakota Parks and Recreation Department to be as least disruptive as possible.
Note also:
Because of oil discoveries in the Three Forks formation, the company has already exceeded its original plans to drill 83 wells in the unit. It is now at 86 wells, producing 471,000 barrels a month, with another 20 wells permitted.
I've always maintained there are three "Bakkens":
  • the geologic formation and oil reserves
  • as a laboratory where drillers learn how best to produce tight oil
  • a cooperative relationship among operators, private drillers, and the state (the Federal government to some extent)

Saudi's Crude Oil Exports Drop To Lowest Level Since December -- July 21, 2015

Updates

July 21, 2015: from Bloomberg, oil guru who called 2014 slump sees a return to $100-crude --
Gary Ross, the founder of consultants PIRA Energy Group, said oil markets aren’t nearly as oversupplied as many believe and spare capacity is tight since Saudi Arabia is pumping all the crude it can without new drilling.
“Current prices are unsustainable,” he said Monday in an interview in London. “It’s hard not to see oil hitting $100 a barrel at some point in the next five years.”
If it takes longer than one year to get back to $75, and longer than two years to get back to $100 oil, the US oil and gas industry is going to look a lot differently in 2018 than it does now. The big change: the little fish will be eaten by bigger fish (yesterday it was announced that Rosetta Resources had been bought by Noble, for example), and the bigger fish will be eaten by the majors who will find off-shore drilling too expensive and too dangerous environmentally (think BP).

With Saudi Arabia transitioning to becoming one of the world's biggest refiner, $60 oil may, in fact, be tolerable for Saudi Arabia much longer than originally expected.

I don't think the average investor in the oil and gas industry (and, of course, no one else) has yet understood the tectonic change that is occurring with Saudi's transition. Saudi could easily become a net oil importer sooner than expected. They have a steady supply of oil (their own) but they can buy a lot of cheap oil on the open market to sell refined products at huge margins.
 
Original Post, July 21, 2015
 
There's an important story line in the article below. I will come back to it tomorrow if I remember, and if the spirit moves me. This is the link to the story. When you get to the story, note this incredibly interesting data point:
Saudi Arabia's crude oil exports fell in May to their lowest since December, with official data showing daily shipments stood at 6.935 million barrels a day (bpd) compared to 7.737 million bpd in April.
The decline came despite record high output of over 10 million bpd as the Kingdom—traditionally the world's biggest exporter of crude—transforms into one of the largest oil refining centers. 
I have several posts on this subject, including:

Tuesday, July 21, 2015 -- Part II

New York Times sees ISIS as a modern state in the not too distant future, one that will use torture rather than economic growth as source of expansion. The article suggests, at least to me, The NYT editor(s) have no problem with this scenario.

ObamaCare Costs Exploding For Insurers, States; Closer To A Single-Party Payer

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Panic Time?

One reason for mergers: one of the two parties, sometimes both, are failing, or see "failure" in their future. Zacks reports:
Earlier this month, Humana agreed to be acquired by Aetna Inc. AET. Humana has been incurring increased operating and capital expenses, huge heath insurer fees, dependence on Medicare Advantage (MA) plans and an expected cut in MA funding. However, many of these issues will be mitigated by its association with Aetna.

The combination of the two majors from the insurance industry space is likely to create the second-largest managed health care company in the U.S. Post acquisition, Aetna will have a 74% stake in the combined entity, while the remaining 26% will be held by Humana.
Humana has been experiencing higher benefit ratios across most operating segments owing to increased benefits. The company’s escalating expenses have also been weighing on margin expansion.

The majority of Humana’s revenue generation is supported by the sale of its Medicare Advantage plans, which are the privately administered versions of the federal health program for seniors. However, the health care reform has resulted in lower sale of Humana’s Medicare Advantage products, which might affect the insurer’s top line.

Moreover, as mandated by the Health Care Reform Law, Humana paid $562 million as health insurance industry fee in 2014. This fee is expected to increase by 41% in 2015, which is definitely a headwind to the company’s bottom-line growth.

Humana’s agreement to be a part of Aetna, therefore, is the company’s best bet to survive in the fast changing health insurance industry. Furthermore, Humana’s Accountable Care agreements, partnerships, efficient capital deployment, focus on expansion through acquisitions and diversifications as well as strong ratings position it for long-term gains.

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North Dakota Revises Estimate of Medicaid Costs
From Under $3 Billion To More Than $8 Billion For FY2017

KXNews is reporting:
North Dakota's costs for expanding Medicaid under the Affordable Care Act are higher than had been projected.
The Department of Human Services has revised its cost estimates from $2.9 million to $8.2 million for the 2017 fiscal year. The agency says actual health care costs are higher than forecast when the state opted to expand the health program for the poor in 2013.
I don't understand the numbers. I will let others sort it out for now.

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Hillary's Plan To Save Medicare -- Raise Capital Gains

The AP is reporting:
Hillary Rodham Clinton plans later this week to propose raising capital gains taxes for some investors, pivoting from a 2008 pledge not to increase the rate beyond 20 percent.
The policy is part of a larger effort by her campaign to encourage greater focus on longer-term economic growth rather than more immediate gains for investors_a priority for the liberal Democrats she'll need in 2016.

The new rates would be pegged to the duration of the investment, with short-term holdings taxed at a higher percentage.
The reporter (or Hillary) sounds like he/she is unaware that that is currently the practice: the rates are pegged to the duration of the investment, with short-term holdings taxed at a higher percentage.
Earlier this year, Obama proposed increasing the rate to 28 percent for the highest earners. While Clinton's proposal is still being finalized, her rate would likely be higher than Obama's plan for the shortest-held investments, according to a campaign official who spoke anonymously to discuss plans still being developed. Currently, gains on securities held for more than a year are taxed at the same rate as those held for decades.
In fact, if she wants money to move more quickly, she needs to upset the wheelbarrow. The shorter the holding duration, the lower the capital gains taxes. Securities held for years should be taxed at a higher rate if she wants money to move more quickly.

Some of us hold securities for multiple generations. 

History of capital gains taxes:
Clinton's tax proposal marks a shift from her 2008 campaign, when she promised not to raise capital gains rates higher than the 20 percent bracket established during her husband's administration. At the time, the rate was 15 percent — a result of the tax cuts championed by then-President George W. Bush.
"I wouldn't raise it above the 20 percent, if I raised it at all," Clinton said in an April 2008 debate.
Now, Clinton says a surge in companies focusing on shorter-term goals, like stock buybacks, rather than longer-range investments in employees and communities prompted her change in position.
"The increase in short-termism has grown in urgency since 2008, and the urgency of our solutions has to match it," she said on Monday, in a question and answer session that Facebook hosted.
Over his time in the White House, President Barack Obama has raised the capital gains rate for top earners to 23.8 percent — fulfilling a campaign promise to raise the tax.

Tuesday, July 21, 2015

This is not an investment site. Sweet and short.

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Bank Gets It Together

Bank of New York Mellon earnings surge 50%.  

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Schlumberger

For folks with a long horizon, and an automatic dividend re-investment program in SLB, this might be the best of times. Schlumberger announced a dividend of 50 cents, unchanged from the previous quarter. Here is the two-year history of SLB dividends:
  • August, 2013: $0.313
  • December, 2013: $0.313
  • February, 2014: $0.40
  • June, 2014: $0.40
  • August, 2014: $0.40
  • November, 2014: $0.40
  • February, 2015: $0.50
  • June, 2015: $0.50
  • October, 2015: $0.50
Even farther back:
  • quarterly dividend in 2012: $0.25 raised to $0.275
  • quarterly dividend in 2011: raised to $0.25 from $0.21 in 2010
  • Although it appears there will be one less dividend paid in CY 2015, the quarterly dividend is now at 50 cents, up from 25 cents as recently as 2012. In addition, there was a "split" back in April, 2013.
Easily beats estimates, 88 cents vs 79 cents

Schlumberger announced 2Q15 results back on July 16.  
Schlumberger second-quarter revenue decreased 12% sequentially, driven by the dramatic decline in North American land activity as the rig count dropped by a further 40% and as pricing erosion continued in both North America and the International Areas. North America revenue fell 27% sequentially, while International revenue was 5% lower as customer budget cuts and pricing concessions impacted results for a full quarter.
“Despite the much more challenging market conditions, overall pretax operating margins were maintained at levels well above the previous downturns as we continued to proactively manage costs and resources, carefully navigate the commercial landscape, and further accelerate our transformation program. The success of our efforts can be seen in pretax operating margins of 10.2% in North America and 24.5% internationally while generating $1.5 billion in free cash flow, representing 132% of earnings.
“In the first half of 2015, year-on-year revenue dropped 26% in North America and 14% internationally. In spite of these declines being more severe than those of the 2009 downturn, we delivered first-half decremental margins of 37% in North America and 18% internationally. These results represent a marked improvement over the equivalent figures that were both in excess of 70% for the same period in 2009.
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Layoffs

Qualcomm preparing to lay off several thousand employees.

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Never Mind

After blowing off the IMF, Greece paid back the IMF the $2 billion the country owed the "bank."

I bet the German taxpayers just love this. The German taxpayers sent their money to Greece, and Greece in turns, sends the German bailout money to the bankers in NYC.

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End Of The Road For Tesla?

Third downgrade in a month:
Tesla is just not feeling the love from Wall Street, with UBS on Tuesday becoming the third investment bank this month to downgrade the electric sports-car maker's stock.
Tesla's shares fell as much as 5 percent in early trading after UBS analyst Colin Langan cut his rating to "sell" from "neutral", saying he expects the company's car sales and home battery sales growth to disappoint.
Tesla shares are pricing in deliveries of more than 1.5 million vehicles in 10 years and full utilization of Tesla Energy's capacity, said Langan. He says both scenarios are unlikely.
A UBS analysis indicates Tesla's planned 15 gigawatt of storage capacity may be larger than the market demand by 2020, Langan said.
The company is burning through cash, and it took a consortium of seven banks to put together Tesla's most recent bailout of $750 million. 

I think if Tesla requires another $500 million to $1 billion bailout before July, 2016, it will speak volumes of how Tesla is doing.

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From Sunday Evening, July 19, 2015

Wow, talk about a beautiful evening, despite being 91 degrees at 9:30 p.m. Almost fully dark now and the sky in incredibly clear: most striking, of course, to the west is the crescent moon, Venus to the right, and Jupiter to the right of Venus. The high tomorrow will only reach 99 degrees.

I just got back from my evening bike ride; stopped by the store to pick up a few items. Yesterday the grocery store where we normally shop had no whole chicken fryers -- for my beer can chicken -- so I had to go to another grocery store in the neighborhood. They had a few but very few. Tonight, I see our regular grocery store has a small number of whole chicken fryers. At Albertson's where I got the chicken yesterday, the price was 99 cents/pound. A local chain, Minyards, our regular grocery store has them for $1.59/lb. At Albertson's a typical fryer cost about $5.49; an "organic" fryer cost somewhere between $11 and $12.

I assume most folks are aware that Starbucks has increased the price of their drinks by 5 cents to 20 cents. A small ("tall") Starbucks coffee now costs $2.00 here in the Grapevine area. We now have Peets in the same neighborhood so we now have options. At Minyards, off the shelf, a 12-oz bag of ground Starbucks is $9.79; Peets is $7.99. Something tells me that the Peets I bought tonight will taste the same as the Starbucks I used to buy.

Beer is slightly more expensive here in Grapevine ($9.49/6-pack for most brands) than in California Trader Joe's where it was about $7.99/6-pack for most brands. KBC (IPA) is the least expensive offering in Trader Joe's both in San Pedro (CA) and in Grapevine (TX), $5.99 vs $6.49.

For the archives, the books I am reading (some for the 2nd or 3rd time because I have a bad memory, and always see something new in books I re-read): two books on dinosaurs; Richard Dawkins' The Ancestor's Tale; and, a biography of J. D Salinger.

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Geography Update

Somewhere along the line I completely missed this; it's pretty much been true since at least mid-2014: al-Raqqa  (Syria) is the new capital of ISIS. They say it's a 12-hour bus ride from al-Raqqa to Beirut.

As fast as ISIS is moving, they may have their own country before the Kurds get theirs.


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Desperate

I desperately need a music video but the one I want to post has been seen too many times on the Million Dollar Way. Whatever I end up posting will be my #2 choice.

I've Got To Get A Message to You, The Bee Gees


Without question, the most difficult evening of the week throughout my life has been Sunday evening. It is an incredibly bittersweet evening for me.

Huge Milestone In Active Rigs In North Dakota -- Drops Below The Magin Number Of 70; Now At 68 -- July 21, 2015

Active rigs:


7/21/201507/21/201407/21/201207/21/201107/21/2010
Active Rigs68196207180137


I believe when we were at 120 rigs or 140 rigs, Harold Hamm said the number could to go half. That was quiet some time ago. Looks like he had it right. Will we go below 60?

RBN Energy: Natural Gas Supply and Long-Haul Deliveries to the New LNG Terminal.
The start-up of Sabine Pass, the first liquefied natural gas (LNG) export terminal in the Lower 48, is only months away, and the complicated gas-delivery logistics behind the project are coming into focus.
Surely one of the biggest challenges has been assembling the long-haul pipeline capacity needed to move several billion cubic feet of gas a day (Bcf/d) to Sabine Pass from deliberately diverse sources as far away as the Marcellus/Utica.
After all, the nation’s pipeline network was initially designed to move gas from the Gulf Coast to the Northeast and Midwest, not vice versa.
Today, we continue our look at the challenges of securing and moving huge volumes of gas to LNG export terminals, the emerging epicenters of U.S. gas demand. There’s obviously a lot involved in pulling together Cheniere Energy’s Sabine Pass LNG export project in Cameron Parish, LA, which when it begins commercial operation in early 2016 will be the first new LNG export facility in the U.S. since a much smaller project came online in Kenai, AK 46 years ago. For one thing, there’s the matter of planning, designing and building what will now likely be a total of six liquefaction trains at Sabine Pass, each of which will have the capacity to supercool up to 650 MMcf/d of natural gas into LNG for loading and shipment overseas.
Then there’s the need to line up LNG traders and consumers interested in committing to the vast majority of each train’s liquefaction capacity (without those Sales and Purchase Agreements, or SPAs, the project could not have been financed), as well as the necessity of lining up pipeline capacity to move gas hundreds of miles to Louisiana and—equally important—the last few miles to Sabine Pass LNG itself. Finally, there’s the gas supply itself. In our First Episode, we explained that Cheniere is actually developing 11 liquefaction trains: six at Sabine Pass that will come online one-by-one over the next few years, and five trains at a Corpus Christi site (the first two of which are now under construction). Taken together, the 11 trains by 2020 or so would (if running at full capacity) consume more than 7 Bcf/d, or about one-tenth of current U.S. natural gas production. Last time we noted that the services Cheniere will be providing under the SPAs include procuring the natural gas, liquefying it and loading it on LNG vessels. We also described the four pipelines that will move the Sabine Pass-bound gas the last few miles to the terminal: Cheniere’s own Creole Trail Pipeline (recently made bi-directional), Kinder Morgan’s (already bi-directional) Natural Gas Pipeline (NGPL), Williams’s planned Gulf Trace project (which will make its Transco main line and Southwest Louisiana Lateral pipeline bi-directional), and Kinder Morgan’s Louisiana Pipeline.
This time we look at Cheniere’s plan for moving large volumes of gas long-distance from the Marcellus and other production areas to the four Sabine Pass-area pipelines we just mentioned.