Tuesday, January 8, 2013

Reminder: 4Q12 Earnings Will Start to "Flow"

Alcoa reported today, initiating this earnings season. Earnings for Bakken-related companies are at the sidebar at the right.

Crude Oil Pricing Projections -- US Department of Energy

US Dept of Energy oil forecast for 2013, data points:
  • global consumption will climb to a record
And one could stop right there, but let's continue:

  • 2012: WTI average: $94.12
  • 2013est: WTI average -- $89.54/bbl (up 1.3 percent from last month's forecast)
  • Brent, 2013est: $105.17/bbl average (up 1.4 percent from last month's forecast)
  • 2014est: WTI to $91/bbl
  • 2014est: Brent will slip to $99.25 
Brent-WTI spread 
  • 2013est: Brent-WTI spread -- $16/bbl (rounded)
  • 2014est: Brent-WTI spread -- $8/bbl (rounded)
Global demand:
  • 2012: 89.17 million bbls
  • 2013est: 90.11 million bbls
  • 2014est:  91.46 million bbls
Note: to the best of my knowledge, these numbers are correct; the article was a bit confusing due to so many projections from month to month. At least confusing to me. Recommend: check out the linked article. 

Wells Coming Off Confidential List Wednesday; Two New Permits Today -- The Bakken, The Williston Basin, North Dakota

Active rigs, Wednesday morning: 182 (steady, up 1 from yesterday)

Wells Coming Off Confidential List Wednesday

21596, drl, Slawson Exploration, Coyote 2-32H, Big Bend,
22351, 394, OXY USA, Louie Pavlicek 1-28-33H-142-97, Willmen, t7/12; cum 15K 11/12; on a NG pipeline;
22809, 315, Samson Resources, Baja 1522-04TFH, Ambrose, t10/12; cum 13K 11/12; no NG pipeline;
22832, 1,739, Denbury Onshore, Siverston, GV 44-32NEH, t11/12; cum 13k 11/12; hooked up to NG pipeline, most being flared but only the first full month of production;

Bakken Operations, Tuesday

Active rigs: 181 (steady, up one)

Two (2) new permits --
  • Operators: BEXP, Whiting
  • Fields: Camp (McKenzie), South Heart (Stark)
  • Comments: None.
Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Producing well completed:
  • 23568, 1,399, Whiting, Miller 44-10H, Sanish, t12/12; cum --
Permits canceled:
  • 20264, PNC, Newfield, Vincent 159-102-22-15-1H, Williams County
  • 23848, PNC-->new submission, CLR, Dragseth 1-4H, Williams County

Richardton, ND, To Get Local Grocery Store

Link here to The Dickinson Press.
This southwestern North Dakota city is getting a long-awaited grocery store this spring.
With an opening date sometime in March, Springfield Market in Richardton will fill an empty gap in a community of more than 500 with the nearest small grocer 15 miles away in Hebron and large grocer 23 miles away in Dickinson.
The grocery store was made possible with a loan from the Bank of North Dakota Flex PACE program and help from Stark Development Corp. to buy down the interest.

For Investors Only: CLR is "Surging"

Check out CLR at Yahoo!Finance. Dynamic link so numbers will change. At time of posting, CLR was up almost 3.5% for the day. Some are associating it with rumors that KOG could be bought. I will "vote" no on this but could really, really be wrong. But if CLR is surging because of rumors that it might be buying KOG, the latter should be "surging" a lot more than 25 cents/share.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read at this blog.

Illinois: Soon To Release Updates Regarding Shale Oil Potential

Like North Dakota, information regarding hydrocarbon potential in Illinois is collected by the ISGS.

For Investors Only: Look For ONEOK To Post a 24% Gain in 2013 -- SeekingAlpha

Link here to SeekingAlpha.com.

For investors:
In September 2012, ONEOK indicated that it expects to increase its total dividend by approximately 65 to 70 percent between 2012 and 2015, including dividend increases of 3 cents per share semiannually in 2013, subject to approval by its board of directors. It also affirmed a long-term dividend payout target of 60 to 70 percent of recurring earnings. 

Since January 2006, the company has increased the dividend 14 times, representing a 136-percent increase during that period. OKE has a current dividend yield of 2.98% with a 5-year average dividend growth rate of 12.9%.
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read at this blog.

Emerald Oil Selling Colorado Acreage; Focus on The Bakken

Link  here to the Denver Post.

Emerald will focus on it 48,800 net acres in the Bakken.

For Investors Only: KOG Buyout Rumors -- Probably Just That: Rumors

.... and very, very unfounded at that... you can find other links by googling....

It looks like KOG was at about $9.20 for a low yesterday, and "spiked" to $9.55 later in the day.

So, KOG went up less than a buck, staying between $9 and $10 yesterday. KOG has traded as high as $11. If there were serious buyout rumors, my hunch is that at a minimum, the pop would be 20% ($11.50, more likely surging to $13 within 48 hours after any announcement) and maybe significantly more. With share dilution over the years, one can make a case that KOG has traded at levels much higher than they are now.

Those numbers are based on no number crunching (except in broad terms) and based on history of deals in the Bakken.

Mike Filloon's modeling showing better Bakken wells with EURs of up to 2 million bbls should be a game-changer for KOG.

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

For Investors Only: OXY USA "Surges" On News It Has Cut Drilling Costs

Link for today's story. The headline says OXY has detailed the results of their cost-cutting efforts. The article is not particularly detailed. OXY is rising from $80 to $82/share today, presumably on this news. Most other oil companies are down slightly today, although KOG is bucking the trend, and is up a bit.

Here was an earlier Reuters story on cost of drilling in the Bakken, which noted, that back in October, 2012, drilling costs may have peaked in the Bakken.

By the way, when I googled "oxy usa cutting drilling costs Bakken," without the punctuation, of course, this was the first link. Hoo-ah!

Also, at the latter link is the data point that suggested to me that OXY USA  might release its acreage in Burke County; from the link:
Question (taken out of context):

You've added acreage in the Bakken. You've got a huge acreage position in California. Presumably, it doesn't make sense to just sit on these assets. Asset sales, joint ventures, bringing in others to drill this stuff, is that part of the plan? Or practically speaking, what does it really mean to cut CapEx when you've been building up these big acreage positions over the years?
Answer (taken out of context):
So I view it as sort of a deferral mechanism, rather than just sort of cutting it. But if they can't -- if they can't generate the returns in some of the assets, we might farm some out to people who might operate more efficiently.
If OXY has cut drilling costs, this should be true of others in the Bakken, also. 

Business-Oriented States: Texas, Kansas; Others Unfixable

Don sent me a selection of interesting stories that have some common themes.

A big story coming out of Texas: considering eliminating the "business tax."

As the federal tax bite grows, there is a nascent movement at the Texas Legislature to phase out the tax, commonly called the margins tax, without replacing it.
Business leaders and some conservative lawmakers say the tax, which taxes gross receipts as opposed to profits, is complicated and not applied evenly. Other critics of the tax say dropping it would make the state’s business climate even more attractive.
At first blush, eliminating the tax without a replacement might seem improbable. The tax raised $4.5 billion in 2012 and accounted for 10.3 percent of the state’s total taxes, according to the comptroller’s office.
Texas does have budgetary problems, so this is not without controversy, which you can read about at the link.


The next two stories, both coming out of Kansas. Taking them together suggests the state legislature is very serious about improving the business climate and accelerating oil and gas activity in the state.

First: reduction in state income taxes which includes exempting 191,000 businesses from all income tax.
Sweeping changes in the Kansas tax code take effect Tuesday, when new rates for individual income taxpayers take effect.

The top individual income tax rate drops to 4.9 percent from 6.45 percent. The owners of 191,000 businesses are exempt from income taxes. 
While other states struggle with how best to regulate horizontal drilling and hydraulic fracturing, or wonder whether to permit the practice at all, Kansas is actively courting fracking firms in the hope of repeating North Dakota's oil boom.
Interest centres on the Mississippian Lime Play (MLP), a porous limestone formation found under parts of southern and western Kansas as well as across the boundary in northern Oklahoma.
The Mississippian Lime has already produced more than 1 billion barrels of oil in the state since 1915 from conventional wells but was considered largely tapped out.
Now horizontal drilling and hydraulic fracturing have kindled hopes of a new oil rush as drillers unlock oil and gas previously trapped in impermeable parts of the rock formation.
Seeing these stories coming out at the same time suggest some states are taking steps to separate themselves from states with serious budgetary problems, like California and Illinois.

For more on the Mississippi Lime, see the link at the sidebar at the right.


With regard to Illinois, in today's edition of the WSJ:
Illinois legislators, caught between public-employee unions and Wall Street credit-rating agencies, weighed a divisive plan on Monday to dig the state out of the nation's deepest pension hole by cutting retirement benefits.
Illinois is wrestling with a $95 billion pension gap that has left it neck-and-neck with California for the worst state credit rating in the country. The Democrat-controlled legislature has been stalled over how to reverse its failure over decades to adequately fund pensions for state workers.
Two competing plans are working their way through the legislature. The House is debating a six-year freeze in the cost-of-living increase for retirees and an increase in employee contributions, among other changes. The Senate last year passed a bill requiring those in the pension system to choose between a diminished cost-of- living increase and retiree health benefits.
Back on November 22, 2012, the WSJ called Illinois "the Unfixable."
Illinois's pension system is heading for a meltdown and may now be beyond help. That's the forecast from a Chicago business group, which told its members last week that the state's pension crisis "has grown so severe" that it is now "unfixable."
The Commercial Club of Chicago wrote that because the November elections did not bring in lawmakers willing to push real reform, the state's roughly $200 billion debt now threatens education, health care and basic public services. The problem is worsening so fast that the usual menu of reforms won't be enough to keep public pensions from sucking taxpayers and whole cities into its yawning maw.
Yawning maw.  The tea leaves suggest there is no support at the federal level to bail out Illinois, or California, though we will be seeing more stories along that line over the next couple of years.

Three Amigos Restaurant in Williston, North Dakota: Succeeding Despite Adversity; A Human Interest Story

Link here to KFYR-TV.
Opening a new restaurant in Williston isn`t easy…But it can be done. Cam Holt opened Three Amigos with his business partner about a year ago. He`s had to deal with high wages and high turnover, but one issue has stood above the rest.

"Hands down the toughest part about running a business in Williston is the housing... without a doubt."

Holt was able to lease 3 houses near the restaurant, where he houses 9 of his 15 employees.

Chariots on Fire: First Volts, Now Dreamliners


January 16, 2013: FAA grounds all Dreamliners; cites lithium batteries as concern; this, by the way, has implications for vehicles with lithium batteries

Original Post

Over a year ago, Don suggested a new name for the phenomenon of Volts catching on fire: chariots on fire. It appears that "chariots on fire" may not be limited to earthbound transportation. Although
  • details have not been released;
  • the incident is still under investigation; and,
  • no one is yet saying the fire was caused by the lithium batteries; 
the video is compelling, and the location of the fire in the Dreamliner was interesting: in a compartment where lithium batteries were located.

When the story first broke yesterday, it was not made immediately clear that the plane had just landed 30 minutes earlier at Boston following a fairly long flight from ... Tokyo.
The fire broke out on an empty Boeing 787 Dreamliner jet in Boston's Logan Airport after a non-stop flight from Tokyo, prompting more safety concerns about the new plane since its 2011 release.
The incident occurred Monday morning when an electrical fire broke out on board the Japan Airlines jet 30 minutes after 173 passengers and 11 crew members exited the plane. The Massachusetts Port Authority's fire chief, Bob Donahue, said the fire began in a battery pack for the plane's auxiliary power unit, which runs the jet's electrical systems when it's not getting power from its engines. 
So, yes, the plane was empty, but thirty minutes earlier, it was not. Wow. 

Lagging Indicator: EU Unemployment Tops 26 Million For The First Time

It looks like the EU has been through the worse ... and now things should start getting better ...

Link here to AP news.

For newbies: a few days ago I suggested that the lousy US jobs numbers were foreshadowing the Great Recession of 2013. "Anonymous" corrected me, pointing out that unemployment was a lagging indicator, and as such did not foreshadow anything.

So, with that in mind, back to the story: EU employment has topped 26 million for the first time and unemployment in Greece has soared to 26 percent. These are lagging indicators.

Greece does not have the highest unemployment rate. That distinction goes to Spain with unemployment at 26.6 percent in November. 

At the linked article:
Unemployment in the 17 EU countries that use the euro rose to 11.8 percent in November, as the number of jobless people in the region rose to 18.8 million, the highest figure since the single currency was founded in 1999.
According to data released Tuesday by the EU's official statistics agency, eurozone unemployment was up 0.1 percentage points over October — but up a full 1.2 percentage points from a year ago. The rate for the 27-member European Union was 10.7 percent, the same as in October, but up from 10.0 percent a year ago. The number of unemployed across the full EU topped 26 million.
The figures illustrate the daunting tasks confronting European Union officials. While the threat of a collapse of the eurozone due to too much government debt may have receded, the economies in many EU countries stubbornly refuse to expand and joblessness continues to rise, creating broad social crises.
At 7.8 percent, it looks like Britain's unemployment rate is the same as ours (the US).

SandRidge and KOG in the News Yesterday

Link here to SeekingAlpha.com.

a Canadian holding company by the name of Fairfax Financial disclosed that they bought 4.975 million shares over a five day span at the end of December in SandRidge Energy
another buyout rumor
And so it goes. 

General Interest Story: Canada's Oil Landlocked Without Those Pipelines

Link here to the Calgary Herald.

Canadian faux environmentalists don't want pipelines in their country either.
This tough talk is part of the billion-dollar problem challenging the federal and provincial dreams of Canada becoming an energy superpower: While the country has massive reserves and an eager marketplace, it has huge hurdles to get product to consumers.
Today, Alberta produces about 2.2 million barrels of oil per day, with around 1.7 million in the form of bitumen.
As billions of dollars of investment pours into the area north of Fort McMurray, oil-sands production is expected to double by 2020, and grow to five million barrels a day a decade after that.
If no new pipelines are built - an unlikely but possible scenario - infrastructure capacity will run out by 2016.
Already, lack of pipeline space and access to a wider range of customers means western Canadian oil is selling at a steep discount compared to the world price.
And so it goes.

Having said that, the article gives a nice overview of Canadian pipeline system.

RBN Energy: Bakken Oil to the St James Rail Yards In Louisiana

Wells coming off the confidential list today have been posted.

RBN Energy: St. James Rail Yards End the North Dakota Crude Oil Blues
This time our focus turns to NuStar Energy LP that owns the largest volume of crude oil storage at St. James, LA. NuStar Energy L.P. is a publicly traded, MLP based in San Antonio, TX with 8,433 miles of pipeline; 84 terminal and storage facilities and a 50 percent share in two asphalt refineries.
NuStar is a spin off from Valero midstream transportation assets. The company’s focus over the past two years has moved away from asphalt, refining and trading activities that are exposed to commodity prices towards fee based transportation and storage. In the process NuStar has built a crude oil infrastructure in the Eagle Ford and a major storage and transportation hub at St. James, LA.