Links From Today's WSJ, and Elsewhere -- October 2, 2012

In light of the recent discussions regarding the re-distribution of federal monies, this little nugget is interesting and why reading the WSJ is so pleasurable. From the October 2, 2012, print edition of the WSJ, page B2:

The Washington Post buys a majority stake in Celtic Healthcare, a provider of home health care. The deal comes as the Post's longtime cash cow, the Kaplan's higher-education unit, is suffering from tighter government regulations on the for-profit college sector, helping to send operating profit down 84% in the second quarter. 

The home health-care industry and for-profit colleges have parallel business models, in the sens that they both lean heavily on government funds. The overwhelming majority of students in for-profit colleges take out student loans, and the federal government makes or guarantees the overwhelming majority of student loans. -- WSJ, page B2.

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Google the 60th vote regrets for a nice op-ed in the WSJ on how ObamaCare was passed -- for those who don't remember the story.

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Elizabeth Warren, the first woman of color admitted to Harvard Law School, running for Senate in Massachusetts says she could work with GOP Indiana Senator Dick Lugar; he's out of office in three months. Okay. Maybe Luger will return to Capitol Hill as a lobbyist. From the Drudge Report. Wow, I'm glad I didn't watch that debate, and I won't be watching the presidential debates either.

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The Ryder Cup: American Team -- all 12 members of the US team attended college, some of them elite colleges. UK team -- just two members of Europe's team attended college (in the US). Google golfers should cut class. 

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"Oregon State is the surprise of the college-football season so far, upsetting No. 13 Wisconsin and Arizona en route to a No. 14 ranking. But if anything can derail the Beavers' hopes, it's not their anemic run game or brutal schedule, it's this: their proximity to an In-N-Out Burger." -- The WSJ.  Google Oregon State's hamburger helper.

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Remember that XOM-DNR deal? At the same time that deal was being hammered out: In a separate agreement, Denbury will either purchase CO2 from the LaBarge Field from XOM or will purchase an interest in reserves in the field. The $1.6 billion in cash from Exxon will be reduced by the amount of the CO2 agreement. Hold that thought; you will see it referenced again, below. 

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A random comment on Willie Nelson's Red-Headed Stranger. This is an incredibly original album and has gotten better over time. I remember reading that when the record company front office bosses heard this album, it was mostly, "are you kidding?" The rest is history. Every genre of music is featured, I suppose, except orchestral/symphony -- but if I listen long enough, I will probably hear that also. As I write that I think back to the XOM-DNR deal. Yesterday we saw an analysis of the deal, Part I, and waiting for Part II.

This is my take on the XOM-DNR deal; this is what I think happened:

a) The facts, stretched: DNR's wells were 15 to 20% less "good" than Oasis wells (earlier SeekingAlpha story). DNR in North Dakota didn't fit DNR's strategic vision. EOR in North Dakota is a ways off (years from now). And no CO2 infrastructure (pipelines). North Dakota is also a miserable place to have to fly to for the DNR folks who are mostly in Texas, Wyoming. North Dakota was a thorn in their side: a) remote; b) less than great wells; c) not in their EOR vision; d) no CO2 infrastructure -- in short, a nuisance. 

b) So DNR went to someone with deep pockets -- they didn't care who, just someone with deep pockets. XTO was already there, so they said, "What the heck, let's ask XOM if they are interested in our Bakken property -- and, oh, by the way, XOM has some acreage down where we (DNR) have some EOR property. Wow, what a great fit. Let's see if XOM is game. (Some recent MBA graduate working at DNR probably put 2+2 together -- XOM acreage in DNR's backyard in Texas and Wyoming, and XTO in the Bakken -- "Hey, isn't XTO a subsidiary of XOM now?" It was probably over a 3-martini lunch.) 

c) DNR pitches it to XOM. A 10-minute PowerPoint presentation. XOM/CEO fiddling on back of envelope during presentation: 

i) It will cost me $1.6 billion in cash 

ii) Gee, I (XOM/CEO) have $20 billion in cash; $60 billion in operating cash flow; and a market cap of $425 billion. And this is going to cost me $1.6 billion at most. Let me check my wallet. 

iii) Why am I even listening to this 10-minute presentation? I could be out golfing. $1.6 billion for more acreage for my XTO boys to fool around with? Ah, why not? Sure, if DNR wants to dump 200,000 acres on us, that's fine. It's a bullet on some (XOM) slide down the road. Shoot: the Bakken may be important if Harold Hamm becomes SecEnergy. 

iv) Gotta make it look like I'm good at negotiating. Let's say I take DNR's deal with the understanding that DNR buys my (XOM) CO2. That brings the price down to $1.5 billion. Maybe less.

iv) Where do I sign? Let's go golfing.

d) And that's the way it happened.