Nine (9) New Permits -- The Williston Basin, North Dakota, USA

Heckmanm webcast, March 11, 2013 (click here).

Active rigs: 189 (very nice, somewhat surprising, up nicely)

Nine (9) new permits --

• Operators: CLR (5), Triangle (3), Whiting
• Fields: Sanish (Mountrail), Pronghorn (McKenzie), Baker (McKenzie)
  Comments:

Wells coming off the confidential list were posted earlier; see sidebar at the right.

Producing well completed:

• 21983, 504, CLR, Alpha 2-14H, Camp, middle Bakken, 4-section spacing, t2/13; cum -- runs south;

Note: CLR's Alpha 2-14H is on a six-well pad; the four-section spacing unit is a stand-up (vertical; sections 2, 11, 14, and 23; that means that an individual owning mineral acres in section 2 will participate in royalties for oil from section 23 as much as four miles away); if one has minerals for any one of these wells, one has minerals for all six wells; one well is still DRL status; the other five:

• 21977, 1,016, CLR, Florida 3-11H, middle Bakken, t1/13; cum -- ; runs north
• 21979, 338, CLR, Alpha 3-14H, middle Bakken, t1/13 cum --; runs south
• 21980, 569, CLR, Florida 1-11H, Three Forks, t1/13; cum -- ;runs north
• 21981, 377, CLR, Alpha 1-14H, Three Forks, t1/13; cum --; runs south,
• 21982, drl, CLR, Florida 2-11H, should run north;

These six wells are on the eastern half of the four sections; there is room for similar wells in the western half, or six more wells; twelve total. Eight of the twelve will be middle Bakken; four of the twelve will be upper Three Forks (or possible six/six).  Depending on the geology, one could think about six more wells in each half of the sections, targeting the 2nd and 3rd benches of the lower Three Forks. Therefore, if the geology supports it, this one spacing unit could see 24 wells. That works out to 6 wells/section which is about what folks are expecting with current technology in the best Bakken. One can make a case for even more wells if the geology and the production supports it, but I don't want to get ahead of myself.

Clever: Keystone XL Proposal; The Sequester and the Market; Cronies Parking Corporate Money Overseas

Isn't this interesting?

I always find it fascinating how statesmen can find ways to work around very, very difficult issues.

House Republicans have co-sponsored a bill with friends across the aisle which would "argue" that former SecState Hillary Clinton's "approval" of the Keystone XL is sufficient to allow TransCanada to complete the controversial pipeline. The link takes you to an Oil & Gas Journal article.

One could even go so far as to make it veto-proof, with the president's approval, so he could say he vetoed it, but Congress over-ruled him. It would all be done with a blink of an eye (or the simultaneous blink of many eyes) and life would go on. If the price of gasoline hits new records on Memorial Day (having just set new records in February), all sides might feel this is not a bad outcome. Even John Kerry would be able to remain aloof of this very difficult dilemma.

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On a completely different, the stock market has been hitting new highs, almost every day since the sequester went into effect, starting back on Monday, March 4, 2013, the first full day of business follow the date the sequester went into effect.

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The President's economic adviser "parks" $108 billion of the company's money overseas to avoid taxes.  [GE is referred to as the Jedi master of US tax avoidance.] That would be true of many other companies whose CEOs have publicly supported this president. Sort of like Warren Buffett who advocates higher taxes but then fights the IRS on disallowed write-offs. Whatever. Most investors don't mind, as long as their investments do well for them. From the linked article:

Microsoft Corporation  increased its stockpile to $61 billion, up 36 percent from 2011 and up from $30 billion in 2010. 

Apple Inc. raised its ante to $40 billion, up 73 percent from 2011. Sixty of the country’s largest nonfinancial corporations kept $166 billion in cash outside of the U.S. last year, shielding more than 40 percent of their profits from taxes, according to a report in Monday’s Wall Street Journal.

And that’s from total overseas earnings of $1.3 trillion, up 15 percent from 2011. A separate analysis of 83 of the largest nonfinancial corporations found that companies increased by $183 billion their foreign-based cash accumulations, representing a 14.4 percent rise from 2011, according to Bloomberg.

Microsoft, Apple and Google Inc. together hold $134.5 billion in cash abroad.

I believe the CEOs of all three companies vigorously supported the re-election of the president. 

Lack of Expertise In China To Drill Shale

Results of wells coming off the confidential list have been posted.

Reuters is reporting:

China's plans to unlock what could be the world's biggest shale gas reserves risk running further off track after 16 firms awarded exploration rights in the latest auction lacked one core skill - not one has drilled a gas well before.

Beijing is hoping shale gas can transform the country in the same way as the U.S. boom, though to date there has been little commercial production and a target of producing 6.5 billion cubic metres of gas by 2015 in the world's biggest energy consumer looks out of reach, according to industry experts.

The lack of experience exploiting shale among new firms scrambling to enter the sector will make it an even bigger challenge to get at the gas, and if they fail to deliver China will struggle to reduce its dependence on expensive imports of oil, liquefied natural gas and coal.

Monday Links, News, and Commentary

Results of wells coming off the confidential list have been posted.



Updates

Later, 3:34 pm: Judge "slaps down" Mayor Bloomberg's "Big Gulp" ban; this is not a bit surprising. I would think there would be many ways to get around the law. That store owner who threw out $1,000 worth of 2-liter soft drink bottles and changed her menus acted a bit prematurely.

Original Post

Miscellaneous Links

Good for Starbucks: will defy Mayor Bloomberg's ban on the Big Gulp.

WSJ Links

Section R (Big Data):

Section C (Money & Investing):

• Commodities squeeze banks: could this be another reason the price of oil has dropped? It turns out that this is the lead story at Yahoo Finance, also, and reported by Reuters.
• Crude gets left out of latest rally: supply glut, slack demand overshadow other bullish forces
• The big challenge beneath Exxon Mobil's big buybacks from "Heard on the Street": 

If Exxon could have a do-over, it might have redirected more of that cash spent on buybacks toward capital expenditure and acquisitions. Instead, it seems Exxon didn't really buy into the notion of rising energy prices. Today, spending huge amounts, it is of necessity a believer. But it is paying the price for its earlier lack of faith. 

It also bet big on natural gas, as did COP. But they weren't the only ones. Just a few years ago, there were many, many stories of new natural gas import terminals along the Gulf Coast; now they are being converted to export terminals.

Section B (Marketplace):

• A toy maker leaves China, comes home to USA
• Drooping cable ratings pressure NBCU's cash cow
• US rules on ethanol squeeze oil refiners (the whole story reminds me of the stories I read of USSR central planning when I was in high school):

The sharp rise in ethanol-credit prices reflects broader problems with the 2007 law, which sought to drive increased use of renewable fuels. Another piece of the mandate, requiring industry to buy fuels made from nonedible plants, has run into trouble because there isn't enough supply to meet federal requirements.

The ethanol provisions require that the oil industry blend more of the corn-derived fuel with petroleum-based gasoline each year. The government required the use of about 13.2 billion gallons of ethanol last year. When an ethanol maker produces a gallon, the company receives a credit representing roughly that much ethanol. Such credits are subsequently bought by refineries to establish how much ethanol they have blended into fuel. If a refinery doesn't have enough credits, it can be fined.

Until now, refiners have been able to hit their quotas because about 10% of U.S. gasoline is ethanol. The U.S. consumed about 133 billion gallons of gasoline last year, according to the Energy Information Administration. That meant that about 13.3 billion gallons of ethanol was blended into gasoline, just above the requirement of roughly 13.2 billion gallons.

Section A:

• Telltale finding of heart disease: I wasn't going to post this story; I first saw it on Drudge yesterday; it was an old story (at least in my mind); a "dog-bites-man" story, but in the WSJ, so must be of interest to some:

Researchers who examined 137 mummies from four cultures spanning 4,000 years said Sunday they found robust evidence of atherosclerosis, or hardening of the arteries, challenging widely held assumptions that cardiovascular disease is largely a malady of current times.

• "King Coal" has a huge one-page ad sponsored by Peabody Energy, the World Coal Association, WorldCoal.org, and CoalCanDoThat.com: "On the contrary, Mayor Bloomberg: coal is the world's fastest growing major fuel. 

• Agency move hints at shift in China's one-child policy; huge story; one suggestion: allow two children and greatly expand adoption rules for childless couples overseas

• Op-ed: green cars have a dirty little secret (this might end up as a stand-alone post)

For proponents such as the actor and activist Leonardo DiCaprio, the main argument is that their electric cars—whether it's a $100,000 Fisker Karma (Mr. DiCaprio's ride) or a $28,000 Nissan Leaf—don't contribute to global warming. And, sure, electric cars don't emit carbon-dioxide on the road. But the energy used for their manufacture and continual battery charges certainly does—far more than most people realize.

A 2012 comprehensive life-cycle analysis in Journal of Industrial Ecology shows that almost half the lifetime carbon-dioxide emissions from an electric car come from the energy used to produce the car, especially the battery. The mining of lithium, for instance, is a less than green activity. By contrast, the manufacture of a gas-powered car accounts for 17% of its lifetime carbon-dioxide emissions. When an electric car rolls off the production line, it has already been responsible for 30,000 pounds of carbon-dioxide emission. The amount for making a conventional car: 14,000 pounds.

Leonardo DiCaprio has never impressed me as the sharpest knife in the drawer. Cue up Connie Francis.

ObamaCare -- This Is What It Has Come Down To -- Cut Jobs or Cut Hours? -- NBC

This is very, very interesting. The talk all day on CNBC has been about whether an increase in the minimum wage would hurt jobs. This is almost hysterical -- what a great way to change the discussion.

First, the minimum wage issue affects a very small percentage of all full-time workers in the US; ObamaCare affects all full-time workers, and will re-define "part-time" worker. Second, the minimum wage proposal is just that: a proposal. ObamaCare is here and now. Third, many states already have higher minimums. This discussion on the minimum wage has simply caused some folks to take their eye off the real job-killer: ObamaCare.

It is truly amazing how the mainstream media can be ... well ... in football it's called a head fake.

[On a completely different note, a bit of trivia on the minimum wage. There are exemptions even in minimum wage laws:

Many home health care aides are exempt from federal minimum wage and overtime laws, due to a little-known provision in the Fair Labor Standards Act passed in 1974, which puts them in the same category as casual babysitters. The Obama administration has been trying to change that over the past two years, but its efforts have been met fiercely with lobbying from the industry. 

I find that absolutely incredible. Minimum wage for McDonald's teenagers but not for home heath care aides. It certainly is obvious who has the lobbyists in Washington. Reported by CNNMoney, March 11, 2013.]

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Having said that, at least one reporter kept her eye on the ball: a CNBC reporter is noting that large firms are deciding how they will pay for ObamaCare. She says it pretty much comes down to cutting jobs or cutting hours which is a pretty old story by now. But for those who are not "newsaholics" this may still be news.

Interestingly, the rules have not yet been set:

"There's going to be a lot of complexity," said Neil Trautwein, Employee Benefits Policy Counsel at the National Retail Federation (NRF).

The Obama administration is expected to finalize the new rules by spring. So far, Trautwein and others have said officials have been responsive to business concerns about the details.

"We've made some progress on the question of variable workers," he said. It's likely the final rules will include a one-year look back period of an employee's weekly hours to determine full-time status, so that the mandate isn't triggered for seasonal workers.

CNBC did not report this in the story: the government will determine the number of full-time workers, not the employer. The way ObamaCare is set up, a company that thinks it has 35 full-time employees and 15 part-time employees, may in fact hit the 50-employee threshold and be subject to the mandate.

This is why:

Part-time employees can count toward the 50 full-time-employee limit.

According to the Congressional Research Service: The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120.”

The CRS provides an example: “For example, a firm has 35 full-time employees (30+ hours). In addition, the firm has 20 part-time employees who all work 24 hours per week (96 hours per month). These part-time employees’ hours would be treated as equivalent to 16 full-time employees, based on the following calculation: 20 employees x 96 hours / 120 = 1920 / 120 = 16."

In the example above, this firm would be considered to have more than 50 full-time employees because of the way that part-time employees are counted.

Bottom line: CNBC is asking whether employers will have to cut jobs or cut hours. It looks like they will have to do both, especially those employers right on the cusp of 50 employees.