Tuesday Lnks

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

Active rigs: 186 (no change)

COP: a nice update on COP at SeekingAlpha: I did not this; I thought it was XOM, but this writer says ConocoPhillips is the largest independent E&P company based on production and proved reserves.

ConocoPhillips is also one of the more shareholder friendly companies out there, with its large dividend and share buybacks. Since its spin-off of its refining segment Phillips 66  in 2012, ConocoPhillips has been rebalancing its asset portfolio, and moving towards lower risk areas. As of quarter-end, ConocoPhillips' quarterly dividend was $0.66 per share, for a dividend yield of about 4.40%.

Cramer's top picks today include: ENB. Of course, as others have repeated often: Cramer's picks change as often as dirty diapers, or the weather.

RBN Energy: Will natural gas pricing survive the spring thaw?

Last Thursday (March 28, 2013) the CME Henry Hub natural gas futures contract closed out the first quarter of 2013 at $4.024/MMBtu (prices slipped 9 cents to $4.015/MMBtu Monday). A year ago the futures price was $2.126/MMBtu – about half what it is today. During that same period, US dry gas production has risen by 0.5 Bcf/d to 64.1 Bcf/d and natural gas power burn has fallen by 2.2 Bcf/d (source: Bentek). With production still increasing and demand from power generation falling it seems unlikely that the market can sustain $4/MMBtu prices. Today we look at the supply demand picture at the end of the winter season.

WSJ Links

Section D (Personal Journal):

Dylexia workarounds: creativity without a lot of reading.
Actor Henry Winkler was told he was stupid. A teacher labeled Dan Malloy, the future governor of Connecticut, "mentally retarded." Delos Cosgrove recalls "hanging on by my fingernails" in high school and college before becoming a thoracic surgeon and the Cleveland Clinic's chief executive officer.

Each has dyslexia, a condition that makes reading difficult but has little to do with intelligence. Mounting evidence shows that many people with dyslexia are highly creative, out-of-the-box thinkers, and neuroimaging studies demonstrate that their brains really do think differently.

That helps explain the long list of entrepreneurs, inventors, scientists, actors and other professionals, doctors and lawyers who have excelled despite, or perhaps because of, their affliction, experts say.

Section C (Money & Investing):

Dynegy's power play on natural gas: coal.
Dynegy recently announced a deal to buy 4.1 gigawatts of Midwestern coal-fired power plants from Ameren. Dynegy put no money down and assumed $825 million of debt. Importantly—especially as Dynegy only recently emerged from bankruptcy—the debt's earliest maturity is in 2018 and is nonrecourse to the parent.

A big reason Dynegy got the plants so cheap is the impact cheap gas has had on the economics of coal-fired power. Gas-fired power plants have not only taken market share, they also have helped reduce electricity prices overall, which squeezes profit margins for coal-fired plants.

Section B (Marketplace): Nothing.

Section A:

Iran blinks: Iran cools nuclear work as vote looms.
Supreme Leader Ayatollah Ali Khamenei has decided to keep Iran's nuclear program within limits demanded by Israel for now, according to senior U.S., European and Israeli officials, in a move they believe is designed to avert an international crisis during an Iranian election year.

Marcellus: getting environmentally safer. As big drillers move in, safety goes up.
A firm called East Resources Inc. was among the first to drill into the Marcellus Shale, a rock layer found to be rich in natural gas. As the small wildcatter drilled, starting in 2008, regulators repeatedly cited it for spills or other environmental infractions, almost two for every shale well it drilled.

In 2010 Royal Dutch Shell PLC bought East Resources. The first thing the oil giant did was shut down the rigs for two weeks and retrain the workers. Since taking over, Shell has averaged less than one violation for every four wells.

A similar pattern is showing up across the Marcellus Shale, a vast underground stretch that holds more natural gas than any other rock formation in the U.S., by government estimates. As big energy companies buy out smaller rivals, one side effect is an improving environmental record, according to a Wall Street Journal analysis of Pennsylvania records.

The state offers a glimpse of the direction the U.S. drilling boom may be headed in Texas, North Dakota and elsewhere, as Big Oil increasingly takes over from the smaller, risk-embracing but often cash-strapped companies that pioneered tapping oil and gas from shale. Regulators and some environmentalists say the multinationals bring more rigorous approaches, mindful that one big mistake can affect their ability to operate everywhere. Superior financial resources allow them to wield teams to analyze and reduce violations as they carry out the complex process needed to unlock oil and gas trapped in shale.

Stockton, CA: learning from GM.  California city's bankruptcy poses risk to pensions. It looks like this case could be a bellwether, depending how it plays out. Right now, its bondholders vs pensioners and retirees (Calpers), and it looks like the judged ruled in favor of the pensioners and retirees, though it will be fought out in court. One more reason to exit bonds.

A federal judge allowed Stockton, Calif., to restructure its finances under bankruptcy protection Monday, but he signaled it might have to cut payments to its pension fund, possibly setting a precedent for other cities.

Stockton, a port and agriculture center of 300,000 residents 80 miles east of San Francisco, filed in June 2012 for Chapter 9 under the U.S. Bankruptcy Code, which allows municipalities to seek protection from creditors by establishing a plan to resolve their debt. It is the largest U.S. city to file for bankruptcy.

Stockton is the latest in a string of California cities that have moved toward bankruptcy—it follows San Bernardino, Vallejo and Mammoth Lakes—after their finances crumbled in the face of the recent recession and as costs such as city pension obligations mounted.

Stockton, which had $700 million in bond debt and faced a $26 million annual budget shortfall when it filed for bankruptcy, also could become one of the first municipalities to use bankruptcy protection to force bondholders to take less than the principal they are owed. Two other areas operating under Chapter 9 protection, San Bernardino and Jefferson County, Ala., are also trying to negotiate such concessions from their bondholders.

Cyprus: kicking the can down the road. Cyprus bailout terms ease.
International lenders have softened the terms of Cyprus's bailout package by giving the island an extra year to meet budget targets, according to a draft copy of its loan agreement, as the country struggles with the fallout out of its worst financial crisis in decades.

Euro-zone countries and the International Monetary Fund say Cyprus will have to meet a 4% primary budget surplus by 2017—versus a previously negotiated target by 2016—as the shock of the country's two-week-long banking crisis threatens to send the island's economy into a recessionary tailspin. For this year, Cyprus is forecast to post a primary budget deficit—which represents the hole in the central government's finances before taking into account debt payments—equal to 2.4% of gross domestic product. 

Op-ed: a tale of two oil spills. Greens fret over pipeline leaks but are mute about train derailments.

The greens are flogging claims that Canada's oil-sands crude is more corrosive to pipelines than is other oil, and that this makes the Pegasus leak (and future Keystone leaks) inevitable. Oil experts refute that claim. In any case Pegasus was built in the 1940s, and about half of America's 2.3 million miles of pipeline were built more than 40 years ago. The best way to minimize leaks is to replace this aging network with modern pipelines such as the one planned for the Keystone XL, which use technology that instantly recognizes leaks and immediately shuts down oil flow. [MDW said the same thing earlier.]

Op-ed: bondholders, beware. Stockton will use bankruptcy to skin lenders, not pensions. 

Op-ed: packing up the legal circus. Amazing, but true: a plaintiff is punished for a frivolous lawsuit.

Judge Sullivan ruled that animal-rights organizations that sued Feld Entertainment, producer of the Ringling Brothers and Barnum & Bailey Circus, must pay Feld's attorneys fees. The plaintiffs included the Animal Welfare Institute and the Fund for Animals. Feld says it has spent more than $20 million on a legal circus that began in 2000 with claims that Ringling was abusing its elephants.

Feld won the case in 2009 after a six-week trial. On Friday, Judge Sullivan noted that "the plaintiffs were unable to produce any credible evidence that any of them had standing to pursue their claims." The judge also reminded the litigants that the testimony of the plaintiffs' star witness had been "wholly incredible, and in certain instances, he testified falsely."

The judge was referring to Tom Rider, a former Ringling employee who was paid by the plaintiffs and posed as a kind of whistleblower who opposed Feld's treatment of elephants. But according to Judge Sullivan, "Rider's claim that he received written reprimands from [Feld] for complaining about animal abuse was false; he received written reprimands for, e.g., missing work, insubordination, and drunk and disorderly conduct."

All of this may explain the December decision by one of the plaintiffs, the American Society for the Prevention of Cruelty to Animals, to pay Feld $9.3 million.