Monday, July 18, 2016

Mainstream Media Seems To Have Noticed: Gasoline Prices Are Falling During Peak Driving Season -- July 18, 2016

The Herald-Tribune noted that prices in Florida are heading toward $2.00/gallon.

Later, Don sent me a note suggesting that we are starting to see gasoline at less than $2.00/gallon.  Apparently in south Minnesota one can find gasoline for $2.03 and in Fargo, $1.99.

The #1 Image Journalists Are Watching For Every Five Minutes This Week In Cleveland -- July 18, 2016


California State Pension Fund: Worst Return Since 2009 -- July 18, 2016

I was going to add this to an earlier post, but the story is so incredible, my boss told me to post it as a stand-alone.

When you go through this article, take some time to think about all the story lines, all the ramifications. The first question I would like answered is: what was the state's investment strategy? Did the state take "moral investing" too far (like no investing in fossil fuel energy; no investing in cigarette companies; no investing in Big Pharma, no investing in US companies)?

I don't know anyone who can get a return of less than 1% in this investing environment. And when they say "less than 1%" it doesn't really convey how bad it really was: the return was just 0.61%. I guess I could understand 0.64% or 0.63% or even 0.62% but down to just 0.61%. Wow, that's worse than how badly the global warming folks are missing on their own projections.

The Los Angeles Time is reporting:
California’s largest public pension fund made a return of less than 1% in its most recent fiscal year, the fund’s worst performance since 2009.
The California Public Employees’ Retirement System said Monday that its rate of return for the year ended June 30 (2016) was just 0.61%. What’s more, Ted Eliopoulos, the pension fund’s chief investment officer, said the poor year has pushed CalPERS’ long-term returns below expected levels.
But now the good news. There really is no reason for CalPERS managers to worry about return. Constitutionally -- and upheld by the courts -- any shortfall must be made up by the taxpayers.
CalPERS assumes that, in the long-term, it will earn investment returns averaging 7.5% a year. If the fund fails to meet that goal, the state’s taxpayers could be forced to make up any shortfall in pension funding.
Now, after two consecutive years of lackluster returns, CalPERS’ long-term averages have fallen below that crucial benchmark. Over the past 20 years, average investment returns now stand at 7.03%. Returns over the last 10 and 15 years now average less than 6%.
This reminds me of the financial ads on local radio in which the pitchmen tell us they will guarantee a 9% return. I guess CalPERS sort of guarantees their stakeholders a minimum return, because if they don't get it through investments and/or good management, they will get it from the taxpayers.

So, what else in the article?
Over the past few years, many public pension funds have lowered their expected annual returns, according to pension consulting firm Milliman, and CalPERS could do likewise. That would increase pension costs for state and local government agencies that have employees covered by the pension giant.
Such a change is likely more than a year away, though. CalPERS next year will reassess its investment strategies, a process that, starting in 2018, could lead the pension fund to change how it manages its money and to lower its return expectations.
And then this:
In a statement Monday, Eliopoulos said he was proud of eking out a positive return in a year of market volatility.
Eliopoulos is, no doubt, on Hillary's short list to be her Czar of Economic Development.

By the way, "elios" (Greek) translates to "pity." "Poulis" is, of course, probably from which "polis" -- city-state -- is derived. A pitiful city-state?

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So, Let Me Get This Straight -- IOC Might Punish Russia By Not Letting Its Athletes Go Where Security Is Absent; Zika Is Real; And The Subway System Isn't Even Working

Half our US golfers and half our NBA wish the IOC would threaten the US with the same punishment: forbidding them to attend the Olympics.  For the Russians, I'm looking for the downside.

We're less than a few weeks from the Opening Spectacle, and the IOC still hasn't decided whether to let Russia attend. No link. Article everywhere. 

1.1 Mile Pipeline To Cost $4.5 Million -- In North Dakota -- July 18, 2016

Updates

July 20, 2016: in California, a 65-mile pipeline would have cost $621 million

July 19, 2016: a reader correctly points out why the cost of this short pipeline would be so high: front end engineering, permits, land acquisition, tie-ins - probably hot taps at both ends, valves at both ends, launcher at one end and receiver at other, mob/demob costs = $3MM?, 1 mile of pipeline = $1MM?

I replied: Yes, you are correct. The longer the pipeline, the better the law of large numbers works. A short pipeline with all the requirements at either end is obviously the reason. Thank you.
 
Original Post
 
I have historically used "$1 million / 1 mile of pipeline" as an estimate when guesstimating the price of a new pipeline.

I might have to re-set my "calculator." According to the AP/Bakken.com, these data points:
  • ETP seeks a permit for a 1.1 mile-long crude oil pipeline
  • $4.5 million project
  • from the Ramberg Truck Facility to the ETP Facility about seven miles south of Tioga
  • capacity: 70,000 bopd; "normal" amount -- 50,000 bopd
  • location of hearing: Neset Consulting Service
Project and map here

When you look at the map, one finds it incredible. The pipeline is between two streets and two avenues -- I mean, we are talking a really, really small connector pipeline -- and it is projected to cost $4.5 million. Wow.

For newbies: when thinking about the cost of this project, that helps put into perspective how incredibly "valuable" the Bakken is. 

Update On Saudi Arabia Foreign Exchange Reserve Stories These Past Few Months -- July 18, 2016

Updates

July 19, 2016: OPEC's Pyrrhic victory
 
Original Post
 
Update on Saudi Arabia foreign exchange reserves.

The most recent data is May, 2016:
Foreign Exchange Reserves in Saudi Arabia increased to 2179747 SAR Million in May from 2177649 SAR Million in April of 2016.
Foreign Exchange Reserves in Saudi Arabia averaged 2280987.77 SAR Million from 2010 until 2016, reaching an all time high of 2796941 SAR Million in August of 2014 and a record low of 1569145 SAR Million in April of 2010. Foreign Exchange Reserves in Saudi Arabia is reported by the Saudi Arabian Monetary Agency. 




From March 30, 2016, the BusinessInsider headline: "Saudi foreign exchange reserves slide to lowest levels since 2012."
Saudi Arabia, the Gulf State which is taking a beating from the crash in oil prices, got another chunk of bad news on the state of its economy.

In a note released by analysts Simon Williams and Razan Nasser, HSBC shows that in February, the country's foreign-exchange holdings took another big dive, adding to the massive losses in foreign currencies held by the oil rich nation seen in the past couple of years.

HSBC shows that FX reserves dropped by more than $9 billion (£6.2 billion) in February, falling to their lowest level in nearly four years, and continuing their inexorable slide lower. Reserves had fallen by £14 billion (£9.7 billion) in January.

The amount of reserve assets held by the Saudi government now stands at $593 billion (£411 billion), more than $150 billion (£104 billion) down from its recent peak in late 2014, just before oil prices started plummeting.
From June 5, 2016, the Bloomberg headline: "Saudi Arabia races through financial toolkit to raise funds."
Saudi Arabia’s plans to bolster its finances are taking on a new sense of urgency as lower oil prices put the economy under more strain than at any other time in the past decade.

In recent weeks, the kingdom raised a $10 billion loan, clamped down on currency speculators and informed banks of plans to raise as much as $15 billion in its first international bond sale, people with knowledge of the matter said. It’s also said to be contemplating IOUs to pay contractor bills and hired HSBC Holdings Plc banker Fahad Al Saif to set up a new debt office.

The speed of the measures underscores Deputy Crown Prince Mohammed bin Salman’s urgency to shore up the country’s finances as an era of oil-fueled abundance falters. Though currency reserves remain strong -- among the world’s largest -- net foreign assets are at a four-year low after declining for 15 months in a row and the kingdom may post a budget deficit of about 13.5 percent of economic output this year.

“The pace of the decline in Saudi Arabia’s foreign assets is faster than in previous oil downturns and the period over which they’ve been falling is longer,” Raza Agha, VTB Capital’s chief economist for the Middle East and Africa, said by e-mail. “This generates a real sense of urgency to get the ball rolling in raising external funding.”
From February 24, 2016, the Forbes headline and analysis: "Three reasons Saudi Arabia is so desperate for cash. The kingdom has 3 - 5 years of cash reserves left."
There is one key principle driving Saudi Arabia to sell shares in Aramco: the kingdom needs money to buy time.

The Saudi Arabia Monetary Authority (SAMA) acknowledges that the country ran a deficit of 21.6% of GDP in 2015—a quantum leap from 3% the prior year. They hope to cut that to 13% in 2016. However, the IMF expects a deficit of 20% in 2016.

They have burned through almost $100 billion in reserves the last few years. A second, similarly sized deficit would consume another $100 billion. Reserves now stand at roughly $650 billion.

The problem with those estimates is that they assume an average price for Saudi light crude of $50 in 2016. As we write this article, West Texas Intermediate (WTI) is priced around $30. And that is the delivered price of oil. The actual price a producer gets is even less. 
And finally, from October 28, 2015, a News headline: "IMF predicts Saudi Arabia's cash reserves will deplete in five years."
Watching your bank account dwindle by $930 billion in five years is a scary prospect. But that’s the reality facing one of the world’s richest countries, which could run out of cash by 2020.

If the government continues spending at current levels, without taking into account the collapsing value of oil, Saudi Arabia will be in real trouble.

A report released by the International Monetary Fund this week contains a dire warning for the gulf kingdom — that if oil prices remain at their current lows, the country will run out of cash very quickly.

For decades the petro-state, which is home to 28 million people, has relied on its huge oil reserves to fill the state coffers but that luxury might be coming to an end earlier than anticipated.

The IMF’s Regional Economic Outlook report for the Middle East and Central Asia said “low oil prices will wipe out an estimated $US360 billion from the region this year alone.”

The current price of oil is $US50 a barrel. That figure has plunged by more than half from peaks above $US100 a barrel in June last year due to slackening demand in the global economy, record production, and a strong US dollar.

Seventeen Permits Renewed -- Daily Activity Report -- July 18, 2016

Active rigs:


7/18/201607/18/201507/18/201407/18/201307/18/2012
Active Rigs3073196189208

No new permits.

Seventeen permits renewed:
  • Oasis (11): ten Lawlar permits in McKenzie County; one Erickson permit, in Burke County
  • Whiting (2): two P Thomas permits in Williams County
  • Sinclair: one Olson Federal permit in Dunn County
  • Resource Energy: one Curtis permit, in Divide County 
  • Hess: one EN-Weyrauch permit, in Mountrail County
Statoil temporarily abandons nine (9) wells: two Hospital wells, five Banks State wells, and two Enderud wells, all in McKenzie and Mountrail counties.

Oasis and Continental each temporarily abandon one well: a Wade Federal and a Jersey well, respectively.

There are no wells coming off confidential list Tuesday.

No producing wells completed.

2Q16 Earnings

This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here. If this is important to you, go to the source. There will be factual and typographical errors on this page. If something looks wrong, it probably is.

Earnings Calendar

Earnings for the current quarter will be reported at this page; the link will be on the sidebar at the right, under "Earnings Central." When we start to see earnings reports for any quarter, the "Earnings Central" link is moved to the top of the sidebar until the earning season is over.

I don't have time to check/update earnings on all companies listed below. If you see one that I have missed, feel free to send it in (anonymous comment or by e-mail) and I will post it.

Much of this information is done in haste. I assume there are factual and typographical errors. It is for my personal use only. If this information is important to you, go to the source.


August 5, 2016

BRK: profit jumps 25%. "B" shares up 2.5% on a huge day for the market. 
NOG: press release here

August 4, 2016

EOG: here
Chesapeake Energy: here. A huge miss.
SRE: here. A huge miss.

August 3, 2016

August 2, 2016


July 29, 2016

XOM: big miss; unusual for XOM; usually hits its numbers; 41 cents vs $1.00 year ago; but expectations were for 64 cents/share this quarter.

July 28, 2016

Amazon Bezos: becomes world's third-richest man, leap-frogging Warren Buffett; part of the reason was that Warren Buffett continued to donate part of his worth to charity;
COP: misses by 18 cents; billion-dollar loss.
Baker Hughes: missed;
Alphabet (Google): beats expectations; shares surge.
Amazon: beats again in Q2; thanks to cloud services; a very high bar had been set; analysts expected $29.54 billion in revenue, $1.11/share. Actual: $30.4 billion and, wow, a $1.78/share. Incredible.
Cabela's: misses 2Q profit forecasts; shares slump;
Carbo Ceramics: a loss of 50 cents easily beats expectations; shares surge;
Helmerich & Payne: wider-than-expected losses; shares down;
SolarCity: it now looks like SCTY will report August 3, 2016; forecast a loss of $2.47/share
TransCanada: the Keystone folks; profit beats; asset sales plan moving forward; shares up; net income 40 cents/share;
July 27, 2016

Comcast: revenue grew 2.8% to $19.27 billion; net income fell to 83 cents from 84 cents a hear ago;
Exelon: 
Facebook: slams earnings/revenue; 97 cents vs 81 cents; $6.44 billion vs $6 billion
Hess: reports a $1.29/share loss; expectations, $1.26/share loss; shares down in pre-market trading
Murphy Oil: wow, holy mackeral, is this correct? earnings at 36 cents/share vs a forecast of a loss of 41 cents/share;
NextEra Energy: huge beat; $1.67/share vs $1.16/share; a subsidiary, FPL: net income was essentially flat at 96 cents vs 97 cents same period a year ago;
QEP: 23 cents/share loss vs 38 cents/share expectations, but shares drop
Whiting: a loss of $1.33; adjusted, 70 cents/share; missed expectations, a loss of 48 cents/share; WLL down almost 6%, at $7.35;
XLNX: revenue, $2.214 vs $2.377 last year; earnings, $2.05 vs $2.35 last year; shares up before announcement; down minimally after announcement

July 26, 2016

McDonald's misses estimates. Analysts worry restaurants headed toward recession.
APPL beats expectations. Huge story.
Baxter slammed estimates; earned 46 cents vs 38 - 40 cents/share.
CAT: regardless of details, investors must be happy. Shares surge over 5%.
EW: up almost 2%. 
July 22, 2016

SLB: beats on top and bottom lines. Earnings of 23 cents vs estimate of 22 cents; revenue of $7.164 billion vs estimate of $7.126 billion. Still, huge decrease y-o-y. But they are still making money.
GE: reported best profit gain in more than five years; earnings soared 65% to 51 cents/share, beating estimates by 5 cents. Shares fell slightly in early trading.

July 21, 2016

ATT: shares down slightly on a down day for the market; profit meets estimates; TV subscribers drop; 72 cents/share; in-line
Chipotle: bad report though Chipotle tried to "talk it up"; same-store sales still more than 20% lower than this time last year; 87 cents/share; underperformed analysts' expectations significantly; shares slump
GM: earnings released for 2Q16. GM profit more than doubles on US earnings. Incredible. 
Earnings of $2.87 billion; cut low-profit sales to rental car companies. GM raised its earnings guidance for the year. Even eked out a $137 million profit in Europe, but made $500 million on its joint venture in China
Starbucks: sales growth is slowing; earnings beat forecast; particularly worrisome was the 4% growth in the Americas, Starbucks' largest segment
Union Pacific: profit falls 19%; demand remains under pressure

July 20, 2016

KMI: matched earnings at 15 cents/share; but missed on revenue estimates. Shares up slightly.

Qualcomm: improved results; a solid outlook for 3Q16; earned a whopping 97 cents/share, up from 73 cents/share. Shares jumped in after-hours trading.

HAL: beat expectations; sees rig count rising in 2H16. I'm not as optimistic.

Morgan Stanley: profits fells 14% but beat forecasts, and stories remain positive about banks and Morgan Stanley.
July 19, 2016
 
Microsft earnings reported as "surprisingly strong":
Microsoft posted revenue of $20.6 billion in the fourth quarter of its 2016 financial year, a decline of 7 percent year on year. Operating income was $3.1 billion, compared to a $2.1 billion loss in the same quarter last year. Net income was also $3.1 billion, as compared to a $3.2 billion loss, and earnings per share were $0.39.
The full 2016 financial year figures were revenue of $85 billion, down 9 percent year on 2015, operating income of $20.2 billion, up 11 percent, net income of $16.8 billion, up 38 percent, and earnings per share of $2.79, up 42 percent.
Those 2015 losses were substantially a result of the $7.6 billion write-down of Nokia's assets. 2016 also included a further, final Nokia-related write-down but this one was a mere $950 million.  
Goldman Sachs Group: quarterly profit soared 78%, handily beating expectations, as the Wall Street bank earned more from bond trading and debt underwriting.

UnitedHealth's profit surges. Quarterly earnings soared above Wall Street expectations, though the nation's largest health insurer took another hit from coverage linked to ObamaCare. Earnings at $.196 vs $1.89 forecast; added another $200 million more in losses this year due to ObamaCare.


July 18, 2016

Hasbro: Hasbro fascinates me because of my interest in Lego.
Hasbro posted the biggest decline among S&P 500 constituents following its Q2 earnings release. The headline numbers were strong, as sales, operating profit, and earnings all improved. Hasbro's licensed brands led the way higher. In particular, demand for Disney's Star Wars, Princess, and Frozen-branded toys and games pushed that segment up by 15%, compared with a 5% gain for company-owned brands such as Nerf and Play-Doh.
Hasbro squeezed more profit out of those sales gains as well. Operating margin rose to 9.7% of revenue from 9.5% a year ago. The company is reaping the financial rewards from its success at "driving strong consumer and retailer demand for our brands globally," CEO Brian Goldner said.  
Netflix: long-time readers know my fascination with Netflix.
Netflix shares dropped as much as 15 percent in after-hours trading after it posted subscriber numbers that missed its own guidance. This news overshadowed its earnings results that beat analysts' expectations on Monday. The company said it added 1.7 million subscribers during the quarter, below its own expectations of 2.5 million. For the quarter, Netflix added 160,000 memberships in the U.S. and 1.52 million internationally. The streaming giant had said in April it expected to add 500,000 members in the U.S. and 2 million internationally. Netflix said membership churn increased slightly during the quarter.

Market Continues To Climb "Wall Of Worry"; Shrugs Off Turkish Coup; Shrugs Off Brexit; Shrugs Off "War On Cops" -- July 18, 2016

Updates

Later, 5:38 p.m. Central Time: yes, the Dow and the S & P 500 hit new records according to Reuters:
Wall Street closed slightly higher on Monday to mint new record highs for the S&P 500 and the Dow industrials, fueled by Bank of America's better-than-expected profit and a major tech sector acquisition.  
Original Post
 
NYSE, Dow, S&P 500 will hit or flirt with 52-week highs today.

New 52-week highs number 163, including:
  • Exelon
  • Kellogg
  • Lockheed Martin
New 52-week lows number 4, including:
  • CVR Energy
  • CVR Refining
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Hemingway In Love

A Memoir by A. E. Hotchner, c. 2015.

Like Socrates and Plato, Hemingway and Hotchner are inseparable.

This memoir is based on notes taken from time spent with Hemingway in 1948. The story could not be published until now. From the preface:
But looking back on those years, there was one event that seriously interrupted our adventuring: the consecutive plane crashes that Ernest suffered in the African jungle. He had been subjected to a near-death experience in the second of those crashes; that experience upended him, and he was determined to tell me about a painful period in his life that he had never discussed but that he wanted me to know about in case he never got around to telling it.
Over the following years, while we traveled, he relived the agony of that period in Paris when he was writing The Sun Also Rises and at the same time enduring the harrowing experience of being in love with two women simultaneously, an experience that would haunt him to his grave.
And now, to begin the memoir.

Later, July 19, 2016: I finished this small book in two sittings at the library. I have ordered my own copy from Amazon. Anyone interested in Hemingway needs to read it; it fills in some gaps. In a sense one does not learn anything new, but to hear Hemingway tell his side of the story is poignant and compelling. This may be one of the best "memoirs" I have ever read. Hemingway In Love is strictly about his love affair and his love for Hadley.

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Summer Reading
Books Being Read Right Now

Hemingway In Love: A Memoir, A. E. Hotchner, c. 2015
Spain in Our Hearts: Americans in the Spanish Civil War, Adam Hochschild, advance reading copy, c. 2016
Song of the Vikings: Snorri and the Making of Norse Myths, Nancy Marie Brown, c. 2012
Subliminal: How Your Unconscious Mind Rules Your Behavior, Leonard Mlodinow, c. 2012
Why Beauty Is Truth: A History of Symmetry, Ian Stewart, c. 2007
The Drunken Botanist: The Plants That Create The World's Great Drinks, Amy Stewart, c. 2013
The Tyrannosaur Chronicles: The Biology of the Tyrant Dinosaurs, David Hone, c. 2016
Ivory Vikings: The Mystery of The Most Famous Chessman In The World and The Woman Who Made Them, Nancy Marie Brown, c. 2015

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The Politics Page

Because someone asked, but not ready for prime time.

Based on what little I know, I am 100% aligned with Rush Limbaugh with regard to presidential politics, Hillary vs Trump.

With regard to the Republican Convention in Cleveland and possible violence:
  • the networks are hoping for fireworks
  • it is noteworthy that the Ohio governor could not find a legal loophole banning "open carry" for a couple of days -- I can think of several ways he could have done that had he wanted
  • "open carry" will result in a better outcome than had "open carry" been temporarily banned
  • "open carry" patriots will put themselves between the uniformed law enforcers and the crowds, and they (the "open carry" patriots") will have their backs toward the uniformed law enforcers, and their guns on their front sides, holstered and/or unloaded
  • the Cleveland command post knows that 99% of demonstrators are peaceful and sheepish; 1% are out-of-state anarchists; take out those 1% with immediate arrests and there is a better chance of minimizing Baltimore-Ferguson chaos
I do not watch network news (including Fox News). I generally don't read much about politics on the internet except that posted by The New York Times and The Washington Post when linked by the Drudge Report.

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Speaking Of Politics

HUD secretary Julian Castro breaks the law and uses the "Hillary defense":
Castro also expressed regret about his actions during the interview and never intended to violate any federal law, according to the report.
What's the penalty for breaking the Hatch Act of 1939? Apparently a news story in some obscure newspaper. I would assume Supreme Court Justice Ginsberg also violated the Hatch Act of 1939 when expressing her views on Donald Trump. This could come back to haunt the Supreme Court later this fall or even next year.

Lewis and Clark Bridge Southwest Of Williston Coming Along -- July 18, 2016

Updates

July 18, 2016: from an older Inforum article, April 19, 2016, posted because the article includes a "recent" photograph of the new bridge --
Mild spring weather has set road construction in motion earlier than usual in North Dakota, and more money will be spent on highways and bridges than last year despite recent budget cuts to the state Department of Transportation. 
The department has $680 million in work planned for this construction season, up from $615 million last year.
Original Post
 
I can hardly wait for photographs of the finished bridge. I assume many state leaders, and maybe even some national politicians will show up for the dedication. It would be nice to see the president appoint a "US Bridge Czar." Not.

From The Williston Herald on Friday, July 15, 2016 -- just before this past weekend:
Motorists traveling on the Lewis and Clark Bridge on US Highway 85 south of Williston will experience delays during the overnight hours on Friday and Monday.
The delays will occur beginning at 10 p.m. each night and will conclude by 5 a.m. the next morning.
In order to complete bridge construction work, this delay will occur periodically throughout the next few months.
For up to date information on traffic delays go to the Travel Information Map at http://www.dot.nd.gov/travel-info-v2/.
During this time, motorists may have to stop and take turns to cross the bridge and the bridge will be closed to traffic for short times throughout the night. Delays are expected to be approximately 20 minutes. A width restriction of 16 feet will be in place.
For folks living on the west coast or east coast, here are some photos of US Highway 85 through the Bakken during rush hour: http://www.dot.nd.gov/travel-info-v2/. At the site, click on "Camera Images" and filter "US Highway 85."

Business As Usual -- Solar Raises More Financing Through "Tax Equity Financing" -- July 18, 2016

Active rigs:


7/18/201607/18/201507/18/201407/18/201307/18/2012
Active Rigs3073196189208

RBN Energy: Caribbean crude storage market.  Think:
  • Venezuela storage: requirement for light oil
  • China: shore up future crude oil requirements
  • US hedge funds: easy profits
From the article:
With crude storage tanks along the U.S Gulf Coast nearly full, the nine storage terminals currently operational in the Caribbean offer an advantageous close-by alternative. Right now these terminals are heavily used by Venezuela for oil blending and distribution, but there has been growing interest and investment from outside the region. China is now neck and neck with the U.S. as the world’s largest crude importer and is making a significant strategic investment in Caribbean storage to cement crude supply deals with Latin American producers.
Private equity fund ArcLight Capital and trader Freepoint Commodities together purchased a huge terminal and shuttered refinery in the U.S. Virgin Islands in January of this year (2016) and have leased most of the working storage to Chinese-owned Sinopec. Today, we examine the growing role of Caribbean crude terminals. (This blog is based on Morningstar’s recently published Caribbean Crude Storage Outlook, which provides a comprehensive analysis of this evolving market.)
Crude oil prices have dropped by about 50% since June 2014 to around $45/barrel in the face of a global supply surplus. Falling prices led to a contango market structure, which encourages crude storage because prices for future delivery are higher than today’s price.
As a result of the contango market and other supply/demand dynamics, crude inventory levels in the U.S. and overseas have risen to record levels in the past six months.
Although total U.S. commercial oil inventories have retreated by about 3% from their late April 2016 record high of 544 million barrels, they are still 33% above their five-year average for this time of year.
Crude inventory levels in the Gulf Coast region also reached record levels (286 MMbbl) this April and are still 39% above the five-year average. To accommodate increased demand for storage capacity, the Energy Information Administration reports that Gulf Coast storage capacity increased by 13 million bbls between September 2015 and May 2016.
More new-build storage capacity is on the way – including an 11-MMbbl salt-dome underground storage facility in Houston being developed by Fairway Energy Partners.
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$50 Oil For The Rest of 2016

That's what the industry is reporting. I think we will be closer to $45 than $50 through the rest of the year. This is a challenging environment for the US oil and gas industry but this is absolutely horrendous for Saudi Arabia. Outrageously, early on, there were some reports that Saudi was looking forward to $80 oil by the end of the year, but it quickly became clear that the kingdom would be lucky to see $60 oil by the end of the year, and re-set their spending plans accordingly. Fifty dollars is half of what they need ($100) and if the price of oil trades nearer $45 than $50 the rest of the year, things do not bode well for the Mideast.

Today, despite a failed coup attempt in Turkey over the weekend, oil is actually falling in price -- probably due to a) strength of the dollar following the failed coup; and, b) continued glut.

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Canada's Oil Heartland: Worst Recession on Record

From Bloomberg/Rigzone:
Alberta, the home of Canada's oil sands, is going through its worst downturn in activity on record as a prolonged period of low oil prices and the wildfires earlier this year buffet the provincial economy.
According to Toronto-Dominion Bank's economics team, the cumulative annual percentage contraction in real output projected for 2015 to 2016 exceeds even the financial crisis, as well as the last supply-side driven crash in oil prices in the mid-1980s, in magnitude.
While the recent episode seems poised to be the worst single recession on record, the two recessions in the 1980s mean that stretch "is still likely to be regarded as the most challeng­ing period in the post-war period in Alberta," says a TD team led by Deputy Chief Economist Derek Burelton.
However, TD's team notes that labor market indicators point to a more mild downturn.
"Periods of boom followed by bust are no strangers to an econ­omy that is tied to the vagaries of the global oil market," write the economists. "The current recession is expected to yield a cumulative annual decline in real GDP of around 6.5 percent, which is more than twice that of the average of past downturns."
While economic activity appeared to be picking up earlier this year, the wildfires that wreaked havoc in the region and disrupted oil operations threw a wrench in the province's nascent comeback story. The economists note that the softness in the Canadian dollar and low interest rates helped Alberta's economy escape an even worse fate.
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Sempra Gains OK To Increase LNG Exports Non-Free Trade Agreement Countries

The State of California may be "turning on "Sempra" by a) denying a short connector pipeline request; and, b) denying a modest rate increase, but Sempre presses on. From Seeking Alpha:
  • Sempra Energy says the Cameron liquefied natural gas project in Louisiana has won approval from the U.S. Department of Energy to increase its export capacity to non-free trade agreement countries.
  • The authorization to export an additional 1.41B cf/day of natural gas will bring Cameron LNG's export capacity to 3.53B cf/day, or 24.92M tons/year.
  • SRE says construction on the first phase of the $10B Cameron LNG project is underway; the facility is expected to commence operations during 2018, with the first full year of operations in 2019.
  • The Cameron LNG venture is owned by SRE, Engie, Mitsui and a Japanese joint venture, and comprises the Cameron LNG liquefied natural gas receipt terminal in Hackberry, LA, and the construction and operation of the liquefaction export facilities.
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Stayin' Alive

By raising more cash through "tax equity investing" (something the rich folks do), SolarCity Corp is stayin' alive. From Reuters:
SolarCity Corp (SCTY.O), which received a takeover bid from Elon Musk's Tesla Motors in June, said it has raised $345 million in tax equity and also increased its debt facility by $110 million to $760 million.
At US PREF we get a talking paper on "tax equity investing." It begins:
Federal clean energy policies have made tax equity a critical component in the private - sector financing of clean energy projects.
This is because federal tax credits and other tax benefits are among the government’s main incentives to help drive the adoption of domestic clean energy technologies.
Examples of such tax benefits include the 30% investment tax credit (available for solar through 2016 and for wind through 2012); the 2.2 cent production tax credit (available through 2012 for wind projects that do not elect the ITC); and accelerated depreciation (including bonus depreciation) that can be used to offset taxable income from other sources.
The paper does not appear to be updated to reflect any (?) extensions of the tax credits.

An increase in "tax credit investing" in 2016 was predicted:
The U.S. wind and solar markets in 2015 saw $11.5 billion in new tax equity deals, up from $10.1 billion in 2014, John Eber, managing director, head of energy investments for J.P.Morgan, said on January 13, 2016.

“2014 was a huge year, so any increase in 2015 over 2014 is significant,” according to one analyst. “Those are sizeable numbers for the tax equity marketplace from a historical perspective.”
Of the $11.5 billion, $6.4 billion was secured in the wind marketplace for 40 projects totaling 5,700 MW of capacity. The total for the wind marketplace was the same as in 2014. Three leading sponsors in the wind tax equity marketplace completed deals totaling about $1 billion each, accounting for 47 percent of tax equity raised in the year.
In the residential solar tax equity marketplace, about $2.6 billion was raised by three leading residential solar companies, accounting for 90 percent of the residential market. That total was up from $1.9 billion in 2014.
The tax equity market will be active in 2016.
“Looking at extensions, the full value of the [wind production tax credit] will be available for start of construction through 2016, so clients and investors will take advantage of the full value time period,” he said. “[The investment tax credit] for solar will be longer, so the solar market will be business as usual.”
Business as usual. 'Nuf said.

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Stayin' Alive Part II

 Updates

Later, 8:48 p.m. Central Time: one wonders if the federal government had mandated its own government fleets and especially the quasi-governmental agency, the US Postal Service, fleets to be 100% electric, how much better this would have been for the environment than putting 98% of the onus on the private sector. Every time I see one of those gas-guzzling (diesel?) blue-and-white postal trucks driving down the street, I wonder why they aren't EVs running on coal?

Original Post

USA Today reports that is unlikely that the US government will relax CAFE standards even though Americans are making personal choice to purchase larger gas-guzzling vehicles.

US auto manufacturers, if they get no relief, are likely to be forced to buy "credits" from battery manufacturers. If MuskMelon can hold on long enough, he looks forward to huge payday in 2022.