Friday, August 7, 2015

Week 31: August 2, 2015 -- August 8, 2015

The big story this week has not changed: the slump in the price of oil continues. But the tea leaves suggest activity in the Bakken reached its post-boom low point in the second quarter. Those same tea leaves suggest activity in the Bakken will pick up a bit this quarter (just a bit) and then plateau for a full year before taking off again.

The tea leaves also suggest Saudi Arabia is getting ready to lay the hammer down on OPEC and impose tighter control over production/exports. Enough is enough. Saudi could be facing an existential crisis giving away its oil for $60/bbl.

Other high points were posted in a long note earlier.

Operations
MRO reports a huge Three Forks second bench well
Early use of ESPs in the Bakken
Many, many "pearls" in EOG's 2Q15 conference call
A new flow / IP record in the Bakken?
Fifteen new permits on Thursday
Thursday: every well coming off confidential status to DRL status; four DUCs 
Update on a huge well, only 320-acre spacing
Hess completes a Lodgepole outside of Tioga
ONEOK has more than 700 wells to hook up in the Bakken
Update on an old Hess Bakken well; huge production; only 700,000 lbs of sand

Fracking
Check out the remarks made by the EOG/CEO regarding high density fracking
Re-fracking: the jury is still out

Refiners
Hitting new records 

Bakken Economy
Best general interest article of the week in the New York Times travel section
How to measure a boom town's population in real time
Now Inc to buy Bismarck-based Challenger Industries 
Want to improve North Dakota's "Ag" sector? Build more pipelines
Yes, Williston Wal-Mart is open 24/7 (but as of August 18, I am told that hours will be shortened)
The Williston Wire: regional airports to get huge amount of federal funding

Miscellaneous
Parallels between today's oil glut and the US railroads in the late 1880s
Interview with KMI/CEO

Cleaning Out The In-Box -- August 7, 2015

Capacity Factor

There are still a lot of stories about intermittent energy sources, wind and solar. Whether wind and solar has "legs" will depend on which political party takes the White House in 2016/2017.

It is obvious that at the moment (August 7, 2015) the only country really touting intermittent energy any more is the United States. The EU gives it a lot of lip service to it, but reality being what it is, Europe knows that intermittent energy is not all it's cracked up to be. I continue to post notes about intermittent energy for two reasons: a) it helps put the Bakken into perspective from an archival point of view; and, b) readers seem to be fascinated by the subject.

If one wants to question my views on EU's intermittent energy, I'll direct you to this post with the incredible graphics.

Personally I have learned a lot about energy by following the intermittent energy story. Prior to the blog, I did not understand "nameplate capacity" and, now, all of a sudden there's another "old" concept that is getting a lot of attention: "capacity factor" which is very closely related to "nameplate capacity."They may be synonyms. I recently posted a story from The Lead for the archives and now it turns out that Forbes has a long article on the very same subject: "The Clean Power Bill Will Collide With The Incredibly Weird Physics Of The Electric Grid." Coincidence?

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US Crude Oil Exports

The headline says CLR/CEO, Harold Hamm expects the ban on the export of US crude oil to be lifted by October, 2015. I read the article very closely several times and unless I missed it, I did not see a quote that was so specific. Maybe the quote was in the conference call (I'll check later if I find time and if the spirit moves me). Doesn't matter. Not gonna happen. Certainly not by October, 2015.

It may be counter-intuitive, but there are a lot of folks in the oil and gas industry that don't want to see the ban lifted. Tesoro might be one of the big players that likes the way things are. Tesoro just increased its dividend by a significant amount. Things must be going well for Tesoro. The refiners have cracked the code: they can make a lot of money buying cheap oil and exporting high-margin refined products overseas. There must be a reason why UK diesel is the least expensive it's been in decades relative to gasoline. Refiners are running at all-time highs, as reported earlier today, with a great graph for those who like graphs.

Back to Tesoro. Argus Media has an update on Tesoro. There are three stories in the article:
  • Tesoro still needs Vancouver, Washington, to agree to increased Bakken crude oil for the Tesoro refinery; Tesoro thinks perseverance will pay off; I'm not so sure
  • Tesoro recently expanded the refinery at Salt Lake City for waxy crude oil from the Uinta oil field; but Newfield has slashed CAPEX and now Tesoro has a larger white elephant on its hands
  • either Argus or Tesoro pointed out that supplies are tight and demand continues to increase but at the moment there is no shortage of gasoline in California (though supplies are tight; and prices are as much as $2.00/gallon higher than the rest of the country); from the linked article on Tesoro:
Tesoro is the second largest refiner by crude capacity in California, where outages including an ongoing shutdown of gasoline-producing equipment at ExxonMobil's 155,000 b/d Torrance refinery have sharply curtailed the normal supply of gasoline and driven up prices.
The state has seen a significant increase in imports compared to previous years, but the backwardation may make it difficult for exporters to fully capture that arbitrage.
Tesoro had meanwhile tilted production toward gasoline and ran at 523,000 b/d in California during the second quarter. Refiners in the state last week hit a 2015 record of 1.04mn b/d of production for the state's boutique gasoline blend.
Don't you just love that word "boutique" when talking about gasoline blends? Especially if you are an investor?
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US Crude Oil Productivity 

As hard as they try, US operators simply cannot slow the glut of oil production fast enough. There are several reasons. In no particular order:
  • there is no central planning body; the US is not a dictatorship (regardless of what President Obama thinks); operators are all independent and they all have their own issues to deal with;
  • even if all new drilling stopped, in the Bakken alone there are 7 years x 1500 wells/year = 10,000 relatively new wells that are producing oil; the costs are sunk; and it costs very little for each additional bbl to be produced from these wells; and there are 3 - 4x that many new wells across the US (Eagle Ford, Permian, Oklahoma);
  • contractual agreements to provide a certain amount of oil to midstream (pipeline) companies or to refineries;
  • contractual agreements to lease rigs; if one already has the rig leased, might as well drill the well (though it may not be completed);
  • the operators are now drilling the best wells they've ever drilled -- they need to if they want to survive; so they may be cutting way back on their drilling/completing, but the wells they are getting are some of the best wells ever; 
  • operators need a minimum amount of production to maintain liquidity or cash flow or cover fixed overhead expenses.
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The Canary In The Coal Mine

When I first started blogging, there was a lot of discussion about the break-even points for US shale (tight) oil and for Canadian oil sands oil. It was always my understanding that the break-even point for Canadian oil sands oil was around $60; the Bakken, across the board, slightly less. There were other folks who said the Bakken was more expensive than Canadian oil sands. Regardless of which side of the fence one was on with regard to that argument, the fact remained that the break-even point was said to be around $60/bbl for both. I always thought Canada would be the "canary in the coal mine": if the price of oil dropped far enough, fast enough we would see stories about the implosion of the Canadian oil sands. I don't know how bad things are out in Alberta, but I haven't seen many stories that the Canadians are calling it quits. This past week, Canadian oil sands oil hit a new low: $27/bbl and not much was written about that.

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And Then There Were Three

It is my understanding that approximately 50% of US oil production comes from tight oil; and there are only three places really active right now: the Permian, the Eagle Ford, and the Bakken. The EOG 2Q15 conference call certainly spent a lot of time on the Bakken. Abraxas says it won't drill any more in Texas until WTI gets back to $65 but they will leave their lone company rig working in the Bakken. By the way, in that linked Abraxas, it is stated that costs for drilling a well have come down 50% in the Bakken. I think that's a bit of hyperbole; EOG says wells have gotten a lot less expensive but they still run $7.5 million for a short lateral.

The tea leaves suggest activity in the Bakken reached its post-boom low point in the 2Q15 (April-May-June 2015); will plateau through 2Q16; and Willistonites will see increased sewage runs by August, 2016.

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Record Bakken Wells

Back to US crude oil productivity (up above). It was noted that:
the operators are now drilling the best wells they've ever drilled -- they need to if they want to survive; so they may be cutting way back on their drilling/completing, but the wells they are getting are some of the best wells ever; 
With that in mind, did you all see the comment made  by the EOG/CEO in the 2Q15 conference call?
Riverview 102-32H, first Bakken well in the Antelope extension using high density completion
  • maximum rate: 3,395 bopd
  • 6 million cfpd
  • with an average rate of 2,760 bopd for July, 2015, this short 4,300' lateral will be the highest rate ever recorded for the Bakken or Three Forks
  • "EOG excited to continue applying high density completions throughout the entire play"
That's what he said: this short 4,300' lateral will be the highest rate ever recorded for the Bakken or Three Forks. It was not clear if he meant the highest rate ever recorded in the Bakken/TF or the best rate for an EOG Bakken/TF well, but it certainly sounded like he meant "across the board." If so, that's quite a statement.

Filloon recently said the same thing with regard to mega-fracks.

John Kemp has also noticed it; he calls them "super-wells." This London analyst noted that "all of a sudden," producers are reporting an inordinate number of "super-wells."

How good are these "super-wells"? They completely moved the average IP to a new level

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Time To Quit

There's so much more, but I have to quit. The pipeline / storage story is incredible. RBN Energy is doing a great job keeping us up to date. Oh, by the say, did you all catch the EOG/CEO's passing reference to how "far out" fracking is effective? If I remember I will come back to that one; it's a huge story and something the blog got right from the git go.

Notes From EOG's 2Q15 Conference Call -- August 7, 2015

In a long note like this, there will be factual and typographical errors. If this information is important to you, go to the source. This is not an investment site. Do not make any investment or financial decisions based on what you read here or what  you think you may have read here. 

Highlights from EOG's 2Q15 earnings / conference call transcript with regard to the Bakken operations only.

Net resource potential in the Bakken/Three Forks:
  • 1 billion boe ("just over")
  • represents 2.5x EOG's original estimate of 420 million boe
  • remaining drilling activity increased from 580 to over 1500 net drilling locations
  • 760 million boe remaining; decades of drilling
  • premier asset
  • [760 million / 1500 = EURs of 500,000 boe]
EOG has split the Bakken into two categories: Core and Non-Core 
  • main focus will be on the Core Bakken in the near term
Core Bakken
  • returns competitive with Eagle Ford and the Delaware Basin
  • includes acreage in EOG's Bakken core and Antelope extension
  • 120,000 net acres
  • 590 net drilling locations
  • 360 million boe: remaining net resource potential (360/120 = 3,000 boe/acre)
  • 10 years of drilling
Non-Core Bakken
  • Bakken Lite, State Line, Elm Coulee (Montana)
  • non-core acreage "will be very economic even with low oil prices"
  • 110,000 net acres
  • 400 million boe (400 million / 110,000 = 3,600 boe/acre)
  • 950 net drilling locations
  • decades of drilling 
Riverview 102-32H, first Bakken well in the Antelope extension using high density completion
  • maximum rate: 3,395 bopd
  • 6 million cfpd
  • with an average rate of 2,760 bopd for July, 2015, this short 4,300' lateral will be the highest rate ever recorded for the Bakken or Three Forks
  • "EOG excited to continue applying high density completions throughout the entire play"
Completion costs in the Bakken
  • $7.1 million for a 8,400' treated lateral
  • represents a 20% decrease in well costs from 2014
  • most savings due to efficiency gains, not vendor cost reductions
  • sustainable over time
  • drilling times: averaging 8.2 days spud-to-TD for a 8,400' lateral
  • record drilling time for EOG: 5.6 days
Completion efficiencies
  • 10 completion stages per day (up from 4.5 stages per day in 2014)
  • plug drill out times have been cut in half since 2014
Cost savings not limited to CAPEX cuts
  • added infrastructure this year in Bakken core: results in dramatic LOE reductions
  • 2Q15 LOE is down more than 25% from 1Q15
Miscellaneous
"The first one is, we continue to drill our laterals in better rock. We're drilling -- we are taking a lot of time and effort, picking out the best quality rock in each one of these plays and keeping the lateral in that longer. And then and to execute that well is very important. And when we do that, we now are doing a much better job with these high density fracs and better distributing the frac along the lateral, connecting up more of that good rock. And it certainly lowering our decline rates over time and that makes it easier to grow production."

"Really, even if oil stays where it is right now, we are going to go ahead and move forward in a pretty aggressive fashion on that DUC inventory in the first part of the year. That would be the highest return decision that we could make with our capital. And so we will be starting completion fairly aggressive on these DUCs early next year."

"We are set up so well with the DUC inventory that even with the low prices we would have enough cash flow to keep production flat."

"I think next year, Pearce, what we are saying is that even with the minimum, even with the low-price cash flow scenario the highest return investment we could make in the company would be to begin completing those DUCs and complete those DUCs earlier in the year versus spending that money on other things. So the quality of these DUCs is very high quality. So we have infrastructure in place. So that would be the highest return place to put the money."

In the Eagle Ford: "We have about 3.2 billion barrels of recoverable oil out of 7200 locations. That's an average of about 40 acre spacing."

[Wow, wow, wow -- I said this a long, long time ago in the blog.] "So we used to think, it has really been a shift in thinking, we used to think that these big fracs just connected up a lot of rock both laterally and vertically, but as we go forward and we change the design and we get more data we become more convinced that the frac is just, especially these high density fracs is really most effective very, very close to the wellbore. So that is really helping to boost our confidence and that we're going to add additional reserve potential going forward."
With regard to "radial separation," see these two posts:


From The EOG 2Q15 Conference Call -- August 7, 2015


Updates

August 6, 2016: I can't recall if I've posted this link before. With regard to #30286, from Bakken Magazine:
Bill Thomas, chairman and CEO of the independent oil and gas producer, explained how the company has drilled and completed the best Bakken well in the history of the play.
Using its high-intensity design, EOG drilled and completed a well—Riverview #102-32H—in its Antelope field area that produced 200,000 barrels of oil in its first 91 days for an average daily production total of roughly 2,200 bopd.
Although the well is still on confidential status, Thomas said the well’s results are “definitely repeatable.” The horizontal was drilled at only 4,600 feet, only half of the typical length for most Williston Basin wells.
The process used is similar to that of EOG’s Eagle Ford approach to completing wells. Instead of the 540 fracture events per 1,000 foot of lateral EOG accomplished in 2010 wells, its 2015 wells are completed with 4,030 fracture events per 1,000 feet.
According to Thomas, the new approach generates 8 to 10 times the number of fractures within 1,000 feet when compared to the old method. Containing fracture events closer to the wellbore is crucial for EOG.
EOG now works to keep fractures within 200 to 300 feet of the well bore.
“It allows us to downspace and drill wells closer and closer together,” he said. In addition to wellbore proximity for fractures, the drilling teams are working to keep the bit within a 20 to 30 foot window instead of the traditionally accepted 100 to 150 foot drilling window.
January 2, 2015: production updated --
  • 30286, 1,974, EOG, Riverview 102-32H, Antelope, s3/16/15; TD 3/20/15; MD 15,564', TVD 10,523'; short lateral, 23 stages, 12.8 million lbs, 320-acre spacing, W/2 sect 29-152-94, t6/15; cum 271K 11/15; 
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
SANISH11-2015222323424173776567426064716
SANISH10-201531392113918210746829845305826345
SANISH9-201530456344527811980814745632121521
SANISH8-201523395873959011087701891057459278
SANISH7-2015318692287531221321783730177874
SANISH6-20152236401351521145434600
From a sundry form: EOG is selling this crude oil to Shell Trading (US) Company at the lease. Shell will use Prairie Field Service as the crude transporter. Effective October 1, 2015.

From a sundry form: EOG is selling this crude oil to Enterprise at the lease. Enterprise will use Big Lease Trucking to transport the crude. Effective November 1, 2015.

There was vegetation fire in the area; well was shut in during a few days in August, 2015.
From a sundry form: "In order to increase frac volumes, EOG respectfully requests authorization to increase the hole size and lay 5 1/2" liner as described in the Preferred Option.
September 21, 2015: the other well on the 2-well pad with #30286:
  • 19247, 1,692, EOG, Riverview 01-32H, Antelope, off-line much of 2015, short lateral, 320-acre spacing; 15 stages, 9.2 million lbs; t11/10; cum 207K 10/15; 
September 18, 2015: I'm going to quit blogging! I have seen something so incredible, I cannot even get my hands around it as they say. This is so incredible. I thought I was overly exuberant about the Bakken, but I have been overly conservative. A reader brought this to my attention. This well is still on confidential status but look at the production in the first full month (for newbies, a well that produced 50,000 bbls in the first year back in 2007 was considered a good Bakken well. This well produced almost 100,000 bbls in the first month -- okay, a little hyperbole but 87,531 bbls of oil in the first full month of production.
  • 30286, conf, EOG, Riverview 103-32H, Antelope, s3/16/15; TD 3/20/15; short lateral, t-pending; cum -- 
DateOil RunsMCF Sold
10-20153918253058
9-20154527856321
8-20153959010574
7-2015875310
6-2015351520

Note: this was a short lateral. I don't agree completely, but some folks feel that, all things being equal, a long lateral (two sections) should double the production of a short lateral (one section), which this one was. If so, this would have produced in excess of 150,000 bbls the first full month.

But I'm kidding. I will keep blogging. But it seems I've been way too conservative in my estimates of what the Bakken can do. I hope the roughnecks and frackers were rewarded for this incredible well. The well is still on confidential list so we don't know the completion history.

Original Post

From EOG's 2Q15 conference call
  • 30286, SI/NC-->conf -- see above, EOG, Riverview 102-32H,
    • maximum rate: 3,395 bopd
    • 6 million cfpd
    • with an average rate of 2,760 bopd for July, 2015, this short 4,300' lateral will be the highest rate ever recorded for the Bakken or Three Forks
Also at Bakken Magazine.com: EOG calls this their best well to date

From the NDIC file, the scout ticket:

NDIC File No: 30286     API No: 33-053-06603-00-00     CTB No: 130286
Well Type: ON CONFIDENTIAL STATUS
Location: NWNW 32-152-94     Footages: 308 FNL 724 FWL     Latitude: 47.947861     Longitude: -102.746937
Current Operator: EOG RESOURCES, INC.
Current Well Name: RIVERVIEW 102-32H
    Field: ANTELOPE
Monthly Sales Data:
DateOil RunsMCF Sold
6-2015351520

NOTE: in the graphic below, 30286 is still on the confidential list. We now know the horizontal runs north into section 29. The three long horizontals that run into section 29 are: #27591, #27590, and #27589. The fourth and fifth wells on that pad, #27587 and 27588, runs into 28, to the east. These five wells are Enerplus wells on the turtle/butterfly pad that I follow here.

Location:



See this post for the Enerplus Monarch well on Enerplus' butterfly/turtle 5-well pad above, in the southeast corner of section 32:
  • 27591, 2,079, Enerplus, Monarch 152-94-32D-29H, Antelope, a huge well, 44 stages; 8.9 million lbs; about 200,000 lbs/stage; NGL unit to reduce flaring on-site; large volume deethanizer (stabilizer) on site; spud Feb 28, 2014; big rig moved on sit May 19, 2014; began lateral on May 29, 2014; TD June 12, 2014; total days, 29; total drilling hours 336 (14 days); TVD, 10,614 feet; lateral, 8,815 feet; trip gases as high as 3,400; t12/14; cum 136K 10/15;
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The EOG Riverview Wells Sited In The Southwest Quadrant

While we're on this page, let's look at the legal names of the EOG wells in the southwest quadrant. The important data point in the legal name is in bold, red (these wells are on confidential; the running directions are assumptioins based on the legal name, and could be wrong):
  • 31445, conf, EOG, Riverview 107-3229H, running north, 
  • 31447, conf, EOG, Riverview 109-3229H, running north,
  • 31449, conf, EOG, Riverview 111-3229H, running north,
  • 31450, conf, EOG, Riverview 113-3229H, running north,
  • 31451, conf, EOG, Riverview 9-3229H, running north,
  • 31452, conf, EOG, Riverview 10-3229H, running north,
  • 31453, conf, EOG, Riverview 11-3229H, running north,
  • 31714, conf, EOG, Riverview 12-3229H, running north,
  • 31444, conf, EOG, Riverview 108-3229H, running north,
  • 31446, conf, EOG, Riverview 110-3229H, running north,
  • 31448, conf, EOG, Riverview 112-3229H, running north,
  • 31713, conf, EOG, Riverview 120-3229H, running north,

Three (3) New Permits -- North Dakota, August 7, 2015

Active rigs:


8/7/201508/07/201408/07/201308/07/201208/07/2011
Active Rigs73192181199184

Three (3) new permits --
  • Operators: WPX (2), Denbury Onshore
    Fields: Antelope (McKenzie), Cedar Hills (Bowman)
    Comments:
Two permits canceled. Statoil canceled a Bugs permit in McKenzie County; Peregrine Petroleum Partners canceled a Larson permit also in Mckenzie County.

Best Read All Weekend? The New York Times Travel Section Features North Dakota; Also, Best Method For Tracking Population In Boom / Bust Micro-Metro Areas -- August 7, 2015

Absolutely excellent. A must-read for anyone interested in northwest North Dakota. Really, really good. A huge "thank you" to a reader for sending this link to me. "In North Dakota, Boom, Bust, and Oil. North Dakota’s northwest region, which has seen Native Americans, Lewis and Clark and settlers come and go, is home to the state’s latest oil boom."
These remnants of earlier booms look almost quaint. The city of Williston, the unofficial capital of the current boom, has grown in the past decade from about 12,000 residents to as many as 60,000, and some predict it will hit 100,000 before too long.
Developers have built sprawling neighborhoods where everything — apartments, townhouses, free-standing houses, maybe thousands of units in all — is rented by oil companies. A stylish new apartment complex several miles east of town, surrounded by absolutely nothing, harks back to a mid-1880s photo of a towering apartment house at 72nd Street and Central Park West, a location then so remote that the edifice was named the Dakota.
The open plains are dotted with modular “man camps”: The shabbier ones are haphazard collections of RVs, trailers and cabins; the nicer ones look like mobile home parks with scores of units, perfectly aligned and identical down to the placement and angle of their satellite dishes. The largest resemble military bases.
The roads, flat and endlessly straight, can be a pleasure to drive, as long as all the newly rendered potholes have been patched adequately. Traffic is a function of the price of oil; above $80 or $90 per barrel, and it could start to look displeasingly metropolitan. At $50-something, though, as it was when I last visited, you can cruise and pass at leisure as you seek out that giant gravel pit you overheard someone talking about in your hotel’s breakfast room, or that cluster of 250,000-barrel oil tanks across the way from a towering old grain elevator, a scene that in the gloaming brings to mind King Kong squaring off against Godzilla.
All of it — flares, derricks, pumps, King Kong — is surrounded by wheat. Occasionally you will spot a pond with water as blue-black as the North Atlantic; but mostly there’s wheat. Miles of it. And somehow, it keeps the petroleum works in check, even makes them look clean. Some of that, to be sure, is the fact that they are new, but these are also not the dusty, grimy oil fields of West Texas or the San Joaquin Valley, at least not yet. In the right frame of mind, you might even find something romantic in the sight of a pair of bobbing pump jacks silhouetted against the setting sun.

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Best Method For Tracking Population In Boom / Bust Micro-Metro Areas

At first glance, one wonders if this is being reported tongue-in-cheek. But the method for tracking population in a boom / bust micro-metro area in the US seems to be fairly accurate. Reuters is reporting this story out of Williston:

The population of a U.S. oil boomtown that became a symbol of the fracking revolution is dropping fast because of the collapse in crude oil prices, according to an unusual metric: the amount of sewage produced.  
Williston, North Dakota, has seen its population drop about 6 percent since last summer, according to wastewater data relied upon heavily by city planning officials.
They turned to measuring effluent because it was a much faster and more accurate way to track population than alternatives such as construction permits, school enrollment, tax receipts or airport boardings. 

Local officials now estimate the population by dividing daily effluent flow by 75, the number of gallons of wastewater each resident is estimated to produce each day. Weather and construction can affect the flows.
When figuring out how large to make a sewage treatment plant, engineers have long multiplied the number of residents by the 75 gallon rule of thumb. Williston simply inverts this formula, a method academics have touted for its accuracy in measuring population.

Friday, August 7, 2015 -- Part III -- Katie Ledecky Takes First In 800-Meter Preliminaries

Katie Ledecky won the 800-meter freestyle preliminaries. One more race. Eight seconds slower than here own 800-meter record and she still took first place. Eight seconds off in a long sprint. LOL.
Katie Ledecky led the women’s 800-meter free in prelims posting a final time of 8:19.42 to claim the first-place seed coming back for finals. While she was 8.21 seconds off her world best of 8:11.21 for 2015 there is hardly a doubt that Ledecky will return to finals determined to hit the 8:11 mark.
The second place finisher came in almost two seconds later. More than enough time for Miss Ledecky to turn around, take off her goggles, look at her time, and then smile at the #2 approaching the wall.

Well off her best time, this is how The Washington Post headlined the story: Katie Ledecky takes it easy in 800 meter prelims at World Swimming championships.
For her penultimate swim of the FINA World Championships, Katie Ledecky, the 18-year-old Bethesda native and the sport’s resident phenomenon, delivered a performance that, in its own way, was as remarkable as any she has produced during this meet. In the preliminary heats of the women’s 800-meter freestyle Friday morning, she looked decidedly human. But don’t be fooled.
For any actual mortal – which is to say, any competitor besides herself – Ledecky’s time of 8:19.42 would have represented an unfathomably fast race. Only one other swimmer in the world had gone faster than that in the past 24 months.
But for Ledecky, who has spent the past five days at Kazan Arena rewriting the record book and leaving little doubt she is the top performer in the world right now, that time represented an off-day, a swim that did what she set out to do — win the qualifying heats and give her the top spot in Saturday night’s finals – but little else.
Read the whole story; it will water your eyes. Then go back and read about Hillary. It puts things in perspective.

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Railroad History

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on anything you read here or think you may have read here. 

The other day I posted a bit about the railroad history in the United States. There are parallels between what was happening to the nation's railroads in 1888 / 1889 is eerily similar to what is happening to the oil industry in the US today.

In 1888 / 1889, there was a glut of rail track and a glut of rolling stock. The government's tectonic changes in regulation changed everything. Everything was falling apart for the railroads.
In less than six months, the Santa Fe went from being the darling of the financial markets to a possible takeover target for financier Jay Gould, who owned the competing Missouri Pacific but had made so much money financing other railroads that there was a constant threat the he would destroy, or buy, anything in his path.
When the Santa Fe announced it needed to borrow millions to make ends meet, financial markets became wary.
Just after Christmas, in the year that was supposed to be the most triumphant and satisfying of his career, William Strong announced he might resign as president of the Santa Fe. While his health was blamed, everyone knew he was being pressured by board members who wanted a more fiscally conservative strategy, among them financier Oliver Peabody, whose Boston brokerage house, Kidder, Peabody, handled the Santa Fe's bonds.
Remember a few data points:
  • the East Coast banks and hedge funds (in Boston, New York) still run the US, and maybe the world
  • oil is the most traded commodity in the world
  • market caps for every oil company has plummeted
  • one can buy a share of some (historically) pretty good companies for less than a cup of Starbucks coffee
  • the bloodbath is yet to come in the minds of many investors
A share in each of these companies costs less than a cup of Starbucks coffee:
  • AXAS: $1.74
  • Halcon: 97 cents
  • SandRidge: 54 cents 
There are many, many more examples in which one can buy a share of equity in the oil and gas sector for less than the cost of a Big Mac meal, about $6.50.

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Jobs

I posted July's job numbers earlier (the unemployment rate remained unchanged at 5.3%). I mentioned that I consider any unemployment number less than 8% as full employment. I've discussed it before. Many of us were taught that full employment meant less than 4% unemployment but interestingly enough, policy wonks over the years, have suggested anything less than 6% is full employment, and seem even suggest higher numbers.

I define full employment as when everyone who needs to work is working. I'm not saying the jobs are good, or the pay is great, or folks are doing very well financially. All I'm saying is that the US economy is at full employment if everyone who wants a job has a job.

One needs to read the stories of what folks did to get work during the Depression to understand what I'm suggesting. Everywhere I go I see "Help Wanted" signs. The most recent example is the grocery store in our neighborhood: they've had "Help Wanted" signs for quite some time now. There are almost 2,000 job openings in Williston, North Dakota, according to some sources. and that despite the huge downturn in oil activity.

The safety net that FDR started has become wider and wider; it's pretty hard to miss the safety net if one falls. The unemployed millennials have cracked the code: live at home. Take Uber when you absolutely, positively have to be somewhere. Their most expensive line item: their smart phone data plan (and if they can swing it, they are on their mom or dad's family plan).

Despite the job openings, the number of folks participating in the labor force is said to be at a 38-year low, 62.6% (same as in June, 2015). The number of Americans not working is said to be 93,770,000 -- almost 100 million Americans.

I doubt 100 million Americans have no income from some kind of work. One wonders how much work is being done "off the books." I bet quite a bit. I learned a  lot about running a business "off the books" listening to stories of the wholesale food business (and, in some cases, the retail food business) while living in Boston for long periods of time.

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Milestones

Our one-year-old granddaughter took her first wobbly step last evening.

Friday, August 7, 2015 -- Part II -- This Is Not An Investment Site

Big, big day. I last had coffee "outside" the house on July 16, 2015, on my road trip back to Grapevine, TX, from San Pedro (south Los Angeles). With the recently announced increase in the price of Starbucks coffee -- about 10% -- I no longer go to Starbucks. At $1.87 for a small cup of black coffee, it was a bit on the high side, and I found I couldn't get much work down. Too many folks wanted to talk. But then when that same small cup of coffee went to over $2.00, it was time to call it quits.

No more Starbucks, except when there are few options when traveling cross country. I now have coffee and Babka at home. I've zeroed out my Starbucks card and told the family no more Starbucks gift cards.

I generally have no trouble sleeping at night. My problem is going to bed, and sleeping in. There is simply too much to do. Last night (or rather early this morning) I finally called it a day, turning in around 1:30 a.m. For whatever reason, I was up about 6:30 a.m. Generally, after such a short night, I stay in bed for another hour or so, but thought it a beautiful day to take a short bike ride to McDonald's.

They've changed things at the McDonald's closest to our house. Coffee is now self serve which means re-fills are easy-peasy-lemon-squeeze. For $1.62 I can have "unlimited" coffee and a breakfast item.

Biking here, I passed the high school. The band was out practicing. It's quite a sight. Band director/choreographer on scaffolding. Public address system that can be heard throughout the neighborhood. A hundred or more -- let's see, 20 rows, ten across -- maybe 200 band members and it looks a bit thin. A lot of students are probably still on summer vacation.

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Remember The Buffalo Commons?

Tweeting now:  88% of South Dakota’s land area is suitable for wind resource development. LOL.

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Jobs

In-line with forecasts, I believe. We will have to wait a few minutes to see the spin the Bangladeshi robots / boilerplate post. For July, 2015:
  • employment increased by 215,000; in line with estimates; 
  • unemployment unchanged at 5.3% -- full employment (I define full employment when unemployment is under 8%; strong US employment numbers if unemployment less than 6%)
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Reporting Today

Remember, this is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here.
  • Dakota Plains Holdings:
  • ERF: 
The list may be inaccurate. Things change.
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Tesla

From a Seeking Alpha contributor:
Adding it all up, Tesla will have:
  • $1.15 billion (cash on hand) + $0.7 billion (highest possible credit) - $1 billion (cash burn next two quarters) = $0.85 billion in cash after the next 6 months (2 quarters).
So in the best case (using the highest possible credit availability), Tesla is already headed below the $1 billion cash floor set by Elon Musk. And since Tesla can't risk issuing equity when it absolutely needs to, it will issue it when it can. That amounts to issuing it in the next 6 months, before this math becomes evident.
But then this:
Were this equity raise not to take place in the next 6 months, and it would probably become obvious that Tesla would burn through all its remaining cash within the 12 months after that. So bankruptcy risk would be real at that point.
The naysayers will simply brush this off as another kook shorting Tesla.

The cash burn speaks volumes. Remember, Tesla just took out another $750 million loan not so long ago. The cash burn looks like $1 billion/two quarters.

Friday, August 7, 2015

Ledecky wins the 200 meter freestyle: link here This video might be slow to load. If possible, open it in another window, let it run, and then come back to it in a few minutes so you can watch it uninterrupted. I think the announcer may have had to change his underwear at the end of this race.

Refineries running all-out. I don't know about you, but I find this quite exciting --

Some points to consider:
  • have the refiners cracked the code? The US bans crude oil exports (with minor exceptions) but does not ban export of refined products
  • refiners produce much more than just gasoline
  • the record was previously set in 2014 (last year)
  • the record is being broken this year -- by a lot

If refineries are running at record capacities, with really low price of oil / gasoline, how are gasoline stocks doing in the US? From a Jack Kemp posting, August 10, 2015:



Tesoro raises dividend significantly: from 42.5 cents to 50 cents/share. 

Active rigs in the Bakken:


8/7/201508/07/201408/07/201308/07/201208/07/2011
Active Rigs73192181199184

RBN Energy: update on Houston midstream. Archived.
Crude oil distribution to Houston area refineries is still being re-plumbed to reflect the ongoing transition to domestic supply. Estimates of current crude pipeline flows indicate as little as 43% of inbound pipeline capacity is being used - but new projects could add over 1 MMb/d to inbound supplies by early next year.
Today we start a new series reviewing how well crude infrastructure is meeting Houston area logistic challenges.
About a year ago we posted an in-depth series covering the Houston refining region with an emphasis on crude storage. Since then a lot has changed in the oil market in the wake of the crude price crash, the subsequent pull back in drilling, and changing production forecasts. For one thing - new midstream infrastructure project announcements are less frequent than they used to be because of lower future crude production expectations. But even though many large crude oil pipelines planned during booming production from 2012 to 2014 have now come online – a number of infrastructure challenges have yet to be resolved. Last year’s drop in crude prices caused a huge build up in crude inventories because of the contango market (where future prices are higher than today – incentivizing storage).
That prompted market concerns about whether storage space would run out. And although the build out of pipelines to the Gulf Coast from nearby basins such as the Permian and the Eagle Ford has been relatively smooth – that has not been the case for crude travelling from Western Canada or North Dakota. Along the Gulf Coast the movement of crude from west to east has also been far from smooth with a lot of barge and tanker traffic required to bypass pipeline congestion. Growing exports of processed condensate also pose a challenge for the distribution system because they have to be segregated en-route to marine docks. We start this series by revisiting the crude supply/demand balance in the Houston area.