China Has Recognized The Importance of Unconventional Oil -- Meanwhile, The US Looks to Shut It Down

Link here.

In early January, China Petroleum Corp. struck a multi-billion dollar deal with Devon Energy for five major shale oil and gas plays.  This is the third billion-dollar-plus investment in U.S. oil fields by a foreign oil company in the last three weeks — Spain’s Repsol YPF (REP.MC) entered into a $1 billion pact with SandRidge Energy Inc. to jointly develop oil fields in Kansas and Oklahoma, and France’s Total SA paid $2.32 billion to Chesapeake Energy for a stake in its Utica shale discovery in Ohio.

These foreign firms are on a buying spree in a mission to hedge against volatile energy prices and uncertain supplies. The interest in the shale plays stems from an asset acquisition strategy, but also from a move to obtain the technology and the management expertise that must be in place for shale drilling.

In an effort to emphasize the importance of shale exploration, the Chinese government has categorized shale gas as a separate natural mineral resource, as opposed to including it in the general oil and gas category.  In June 2011, the government held its first auction for shale plays and a second one will soon follow.

In the U.S., we are dealing with a conundrum.  The origins of fracing technology and horizontal drilling are not new and the technology has finally come of age.  The data makes a powerful statement.

In July 2011 for instance, the Bakken shale produced 424,000 barrels of oil a day (b/d) compared to 453,000 b/d in Alaska.  The Eagle Ford play in Texas produced 190,000 b/d in August 2011, compared to 3,100 b/d two years ago, and this output is expected to quadruple in the next five years.

NOG -- Dollar-Cost Averaging Since Inception -- The Bakken, North Dakota, USA

NOG has a most unique business model. I first talked about NOG's business plan two or three years ago. 

For analysts who follow the oil industry very, very closely, this should be the easiest oil production company to project earnings and share price target; think of NOG as a trust but with some interesting twists. US oil trusts, once established, cannot add more wells. NOG, on the other hand is not constrained. A lot of wells are going to be drilled on NOG acreage over the next 20 years. 

Be advised of the disclaimer for this blog at the sidebar on the right. This is not an investment site.

This is just a bit of rambling that would rise to the level of a Saturday morning discussion at the Williston Economart. This is not a recommendation to invest in NOG or any other company mentioned. I have owned shares in NOG off and on but do not hold any shares now and have no intention of buying any time soon.

I am an investor, not a trader.

I am probably the only one who still recommends dollar-cost averaging investing: investing the same amount each month.

I was curious how this would have worked out for Northern Oil and Gas (NOG) which was founded in 2007.

Just for the fun of it, using Yahoo!Financial, I imagined investing $100 in NOG at the beginning of every month starting on May 1, 2007, and going through January 1, 2012.

The total amount invested would have been $5,700. The investment would have resulted in 727 shares of NOG which on January 23, 2012, would be worth about $19,000. That's more than tripling one's investment in less than five years. Okay. (This was done quickly; numbers not checked; your results may vary.)

One can also compare investment returns among various companies on Yahoo!Financial. I compared NOG's five years with the past five years of several different companies. Yahoo!Financial returned these numbers:

• NOG: 580%
• AAPL: 380%
• CLR: 400%
• MSFT: 0%
• CVX: 50%
• WLL: 150%
• T: -20%

Oasis has been around for less than two years; for two years:

• NOG: 120%
• OAS: 120%

An investor who watched the market closely and took advantage of the pullbacks could have done significantly better. Some pullbacks have been significant.

NOG's business model is unique in the Bakken. I discuss it elsewhere on this blog and there are numerous investment sites that have talked about NOG, and have recommended NOG, over the past few years.

I could have picked any company in the Bakken, but of those I checked, NOG was by far the best, barely beating CLR, and significantly beating WLL.

T and MSFT paid dividends which changes the parameters. NOG does not pay a dividend.

*******************

I wrote the piece above yesterday.

Overnight I got to thinking about this again. Since 2007, had one put in $100/month (plus $9.95 commission/transaction), one would now have almost $20,000. Makes me wonder why I didn't do that. Smile.

Global Warming Hits Davos, Switzerland --

"....In the last 42 years, I have never seen so much snow....."

The rest is by paid subscription, but that says it all....

But most, if not all, of the story is here:

The snow is yards deep and continued to pile up Tuesday, despite a short afternoon respite. "In the last 42 years, I have never seen so much snow in Davos," the forum's founder, Klaus Schwab, tweeted on Sunday.

As I said earlier, in 2035, when I'm about 85 years old, they will be talking about a "new Ice Age" and Cher will be completing her umpteenth "Farewell Tour."

Ten (10) New Permits -- The Bakken, North Dakota, USA

Daily activity report, January 24, 2012 --

Operators: Petro-Hunt (4), Oasis (3), Hunt (2), XTO

Fields: Eagle Nest, North Fork, Crazy Man Creek, Parshall, Camp

Seven wells came off the confidential list; five were completed/fracked, reported elsewhere, including:

• 17636, 1,731, Oasis, Helling Trust 11-15H, Mountrail
• 20139, 1,122, MRO, Oren USA 31-6TFH, Mountrail

Four wells, previously on DRL status, reported IPs, none particularly remarkable.

Apple: Incredible Numbers

Update

Apple clearly ahead of XOM in market cap --- #1 now.

UP 6% today.

Original Post

Steve Jobs is smiling in iHeaven.

Crushes estimates.

37 million iPhones sold. The highest estimate I had seen was 30 million and that was raised in the last few days.

Apple computer sales up 60% in Asia.

Profit margins blow away estimates: 45%.

New York Times drools.

Stay stoked.

Peak Oil? What Peak Oil?

Link here to Oil and Gas Journal.

Increased production through 2035. I'll be about 84 years old.

By then, probably a lot of stories on a "new Ice Age." Cher will be doing one more "Final Tour."

More to follow.

Finally We Know Who Can Be Credited With The Fossil Fuel Gains -- It's Not Harold -- All About the Bakken

Updates

October 6, 2012: in the original post below I said I would cut and paste a bit of the story if I remembered; I finally got back to the story. Here's the lede:

President Barack Obama is taking credit for higher U.S. oil and gas production and lower imports, angering industry groups and Republicans who say he is working against domestic energy production. 

American energy will be a major theme of Obama’s State of the Union address to Congress tonight, Jay Carney, the White House spokesman, said in a briefing yesterday. In his first campaign ad this year, Obama boasts that U.S. dependence on foreign oil is below 50 percent for the first time in 13 years. 

Original Post

Who claims credit?

Click here to a Bloomberg article.

If I remember, I will cut and paste a bit of the story here in case the link breaks, but I want folks to guess who claims credit.

One hint: he piloted the lead helicopter that crashed into the compound when and where OBL was killed. His wife piloted the back-up helicopter, which took all commandos and prisoners back to safety after destroying the disabled helicopter.

New Wells Reporting Today -- The Bakken, North Dakota, USA

New wells reporting so far today have been posted elsewhere; again, thank you Karen.

Two caught my eye:

• 21042, DRL, KOG, 20711 Mildred 94 1H, Epping, Bakken,
• 17636, 1,731, Oasis, Helling Trust 11-15H, Alkali Creek, Bakken, 

The Oasis well caught my eye because of the IP.

The KOG well caught my eye because of its name. I have no idea how the name was chosen; perhaps after someone currently living in the area, and/or after a township so named.

But I did know a wonderful woman many, many years ago: Ms Mildred Manger, her family name. She never married. Well into her senior years (I would hazard to guess how old she was then) she was my Sunday School teacher at First Lutheran Church when I was in elementary/middle school. I don't recall the exact years.

But I do know that her parents homesteaded in the Spring Brook/Epping area, and I always associated her family with the families I read about in Giants in the Earth.

Regardless of how this well came to gets its name, it brought back pleasant memories, albeit not pleasant at the time. She was a very, very serious Sunday School teacher.

Slush Funds -- Absolutely Nothing To Do With The Bakken

The "T" in the Boston metropolitan area is fantastic: this is the public rail and bus system. It is clearly one of the best systems in the world. It is showing its age, but all-in-all, it's a gem.

There are several rail lines, mostly subway, identified by various colors. The Green Line is the oldest and its quaintness is part of the charm. Even underground, one can walk across the tracks in front of stopped subways to get to where one is going. It's a bit disconcerting to see others do it and I've never dared; my wife would "kill" me if I tried, especially if the granddaughters were with me, which begs the question: would be it better to be "killed" by a spouse or "not killed" by walking across the "Green Line" tracks.

My granddaughters and I go everywhere on it. I can get anywhere in the metropolitan area for about $2.50; the granddaughters ride for free. 

Unfortunately, the system is going broke and the city leaders are proposing to: a) raise fares dramatically; b) cut some lines entirely; and, c) reduce service on the weekends (sounds like the US Postal Service response to its own budgetary problems: raise price of stamps; close some post offices; eliminate Saturday service).

The city is holding public meetings to discuss the challenges and the proposed solutions. The Boston Globe dutifully covers the story and the public meetings.

But one has to read fairly deep into the story, and even then, it is glossed over, but the reason the "T" is in such financial trouble is because the surplus that the "T" generated each year over the years was used to pay for the highway system that was put "under" the city of Boston some years ago. It was known as the "Big Dig" and was the source of financial overruns, shoddy work, probably "fraud" somewhere in there, but I've long lost the bubble on the Big Dig.

I just find it incredible that the city leaders allowed a gem to be hurt in such a significant way, to pay for a highway system. Boston is one of the centers of the "green movement" and the last place that public transportation money should be used to subsidize highways, it seems, would be here.

But that's what happens when city leaders, state governments, and the federal government see a pile of unused money.

The "T" should have operated at a deficit all those years to ensure there was no money to steal.

But, for me, the two things that stand out: a) the liberal Boston Globe glosses over why the "T" is in trouble (I suppose the issue falls into "it is what is is"); and, b) the city is actually looking to dismantle one of their gems, bus by bus, line by line.

Sad.

[Speaking of which, I was sent a note today that says the state of North Dakota is spending all the money that is being generated from the oil industry. There is a "Legacy" fund but it is slowly kicking in. I don't have the tool set required to check North Dakota's savings and checking account, but if it's true that North Dakota has no savings account despite the huge amount of oil royalties, well, shame on them. The big question, I suppose, is whether the state of North Dakota is using a credit card or a debit card to fund its biennial budget. -- See first comment below. This may not be accurate.]

Crude-By-Rail: Some Great Aerial Photos -- The Bakken, North Dakota, USA

If you want to see some great aerial photos of the crude-by-rail terminals in the Bakken, click here to a corporate website.

For me, this is more evidence that a) the Bakken is not a flash-in-the-pan (assuming Obama does not kill it); and, b) the Bakken is bigger than we are being told.

There are several CBR terminals in operation or currently under construction from Minot to Williston to Dickinson.

The "N" Word -- Sorry

Link here.

At first, the Chevy Volt was a novelty, and dealers couldn't get enough (usually one was all they got) -- not to actually sell but to bring folks into their show rooms.

Now some Chevy dealers don't want the Volt at all. It's become a nuisance.

I am sure the sales people are getting tired of defending the exploding battery, coal-powered car that fails California's elite emissions standards. Why spend all that time talking about a car that they won't be selling, wasting time that could be better spent talking about cars they might actually sell.

Also, there's that awkward fear that the car might actually explode at any moment. Even though the owner, Government Motors, says that the problem is resolved, or at least no longer worth studying.

From the linked site:

Some Chevrolet dealers are turning down Volts that General Motors wants to ship to them, a potential stumbling block as GM looks to accelerate sales of the plug-in hybrid.

For example, consider the New York City market. Last month, GM allocated 104 Volts to 14 dealerships in the area, according to a person familiar with the matter.

Dealers took just 31 of them, the lowest take rate for any Chevy model in that market last month. That group of dealers ordered more than 90 percent of the other vehicles they were eligible to take, the source said. 

You have got to be kidding: allocation - 100 vehicles; dealer acceptance: 30.

For Investors Only -- NOG, CLR -- Huge Profit Margins -- The Bakken, North Dakota, USA

This is very, very interesting.

Let's say you took a data base of ALL publicly listed companies in the US. And then ranked them according to profit margins, highest to lowest. All publicly listed companies. And then wrote a story in a national investors newspaper/journal featuring five or six. And that newspaper/journal does not target any specific industry. What would you expect to find? Certainly not this:

High oil prices hurt at the gas pump. But they help at the wellhead pump. That has boosted profit margins at Continental Resources the largest landholder in the Bakken Shale oil and gas play in parts of North Dakota, Montana and Canada.

Continental generated almost 63 cents of profit for every dollar of sales last year, topping IBD's Screen of the Day for Monday, which ranks firms by that key metric.

Northern Oil & Gas, another Bakken Shale play, also ranked high, with 58.1%.

Credit card processor Visa ranked second, at a 60.2% annual margin, with MasterCard is a few rungs lower, with a profit margin just under 50%.

Of ALL the publicly traded companies in the US, NOG comes in at number 3. I remember a lot of hoopla about this company some months ago.  Number 3.

And CLR #1.

Incredible.