Monday, June 6, 2016

Monday, June 6, 2016

Before getting started today, perhaps this is the most important story for the traders on Wall Street: Scotland's court will rule soon on whether the "state" can set a floor on the price of alcohol. There is a  push to increase the price of alcohol in Scotland to decrease the amount of alcohol being drunk. I assume Scotch in Scotland could be as cheap as water. I don't know. All I know is that some day I hope to taste test a $19.95 bottle of Speyside scotch vs a $600 bottle of Scotch. If it happens, it may be when our younger daughter finally decides to "put me" in a nursing home.

By the way -- continuing to procrastinate -- for those who missed it -- the Cleveland Cavaliers (James LeBron's team) was/were "schooled" in the "new" NBA way of playing basketball by the Golden State Warriors. For the moment, the only team playing the "new" NBA style of basketball is/are ... the Golden State Warriors. It would have been a huge shame had they faltered against OKC Thunder. I'm not taking anything away from OKC -- they almost did it -- but it's fun to see the Warriors play. Their starters are incredible; their bench may be better? Probably not, but I don't think they have have player that isn't astounding. 

In the past 72 hours there have either been a number of stories on India's growth / energy demand, or I'm much more cognizant of the story based on Al Troner's articles.

I mention "STACK" in one of the notes below. I track the "STACK" here (at the sidebar at the right). 

Devon will sell oil and gas assets for almost $1 billion. The oil fields are in Texas and Oklahoma and a royalty interest in northern Midland Basin, to undisclosed buyers. The largest transaction was for reserves in East Texas for $525 million. It will also sell its position in the Anadarko Basin's Granite Wash are for $310 million. Devon is also apparently ready to sell its half stake in the Access Pipeline. East Texas assets: producing 22,000 boepd, but only 5% of that was crude; sales generated $10 billion in cash. Proved reserves are about 87 million boe. Even with that the compnay ays it would need to make progress on asset sales before considering an increase in production.

From Finance!Yahoo:
  • the Dow up almost 100 points, slightly over 17,900; "energy leads as oil rises"
  • crude oil up 1.8%, at $49.50
  • top story: US stock market is getting closer to a "melt up" -- HSBC
  • global governments boosting spending at fastest rate since 2009
  • after a story last week that Saudi Aramco lowered prices in Europe, today the report is that SA raised prices in Asia
From Google Finance: incredible -- nothing of interest

Yahoo!Finance In-Play:
  • WPX Energy upsizes & prices 49.5 mln shares of its common stock for total gross proceeds of ~$485 mln (WPX)
Now, The Bakken

Active rigs:

Active Rigs2682194189215

RBN Energy: worth reading today. This is how the economics work for US crude oil exports on VLCCs to Asia. Archived. From the article:
A number of European refiners, like their U.S. counterparts, have invested in using heavier, sour (higher-sulfur) grades because these tend to be cheaper.  These refineries are not interested in paying a premium for the light, sweet barrels coming from the U.S.  Where there is an appetite for the lighter, sweeter crude is in Asia.  India is a big importer of Nigerian grades, which are similar to the U.S. ones.  In China, the government is facing rising social pressure to do something about heavy pollution in the big cities.
Cleaner transportation fuels are a priority, but producing those at many of the unsophisticated local refineries is difficult - unless you are using light, sweet crude.
Taking U.S. crude to these markets is a good fit, except for one problem: distance.  
The fact that it takes two months to sail around South Africa's Cape of Good Hope and on to China, in itself, is not an impediment. After all, it takes five weeks to get from the Middle East Gulf to the Gulf of Mexico, and there is about one Very Large Crude Carrier (VLCC)--a ship that can carry 2,000,000 barrels (2 MMbbl)-- completing that journey every 18 hours or so.  The problem is that such long journeys make economic sense only when the shipper is using a VLCC or the even larger Ultra Large Crude Carrier (ULCC).
The larger the ship, the lower the cost per barrel.  VLCCs are around 1,500 feet long. When fully loaded, the bottom of the ship is about 66 feet below the waterline. There is no port on the U.S. Gulf Coast that can handle ships this size, except for the Louisiana Oil Offshore Port. This port, called LOOP for short, was specifically built to offload VLCCs, and that is all it can do: offload.
The RBN article also helps explain how Harold Hamm can make money on $45 oil -- remember, he has suggested he may have a deal with South Korea.
America’s oil and gas producers are still finding places where they can prosper even at today’s lower prices.
Companies are refocusing their drilling efforts on the Permian Basin in Texas and New Mexico and rushing into a part of Oklahoma known as the Stack where they can claim solid returns. While small in terms of overall production, the move is gathering steam, even as drilling in places like North Dakota and Pennsylvania remains sluggish.
Wells in the Permian and the STACK—which stands for Sooner Trend, Anadarko basin, and Canadian and Kingfisher counties—are racking up between 10% and 30% returns based on oil priced at $45 a barrel, operators say; premium wells are generating greater profit.
In part, returns benefit from access to established pipeline, storage and other infrastructure. Drillers in both areas have been able to find energy stacked in layers underground. Some producers also are tapping holdings that were acquired long ago, when acquisition costs were lower.
Continental Resources Inc., which helped spark the North Dakota boom, says its best wells today are in the Stack—a well-trod part of Oklahoma near Cushing, OK, a major oil storage and trading hub. The company says its drilling there can yield a 75% return with oil at $45 a barrel. The company recently announced a gusher of a well in the field.
The graph at this site is incredible -- it shows just how inefficient "Cadillac" is at selling cars. It may take a page from MuskMelon's playbook. If the link is broken it has to do with Cadillac considering "carless" dealerships.

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