Tuesday, March 26, 2013

Life After Oil and Gas

The New York Times is reporting:
"WE will need fossil fuels like oil and gas for the foreseeable future. So there’s really little choice (sigh). We have to press ahead with fracking for natural gas. We must approve the Keystone XL pipeline to get Canadian oil. "
This mantra, repeated on TV ads and in political debates, is punctuated with a tinge of inevitability and regret. But, increasingly, scientific research and the experience of other countries should prompt us to ask: To what extent will we really “need” fossil fuel in the years to come? To what extent is it a choice? [I guess if one doesn't need plastic, one might not need fossil fuel.]
As renewable energy gets cheaper and machines and buildings become more energy efficient, a number of countries that two decades ago ran on a fuel mix much like America’s are successfully dialing down their fossil fuel habits. Thirteen countries got more than 30 percent of their electricity from renewable energy in 2011, according to the Paris-based International Energy Agency, and many are aiming still higher. [I wonder if one of the 13 countries includes Spain or other European countries that have since put a "hold" on further renewable energy projects because of the expense.]
For anyone who falls into this claptrap, some suggestions:
  • first, check out the experience in Iowa. Look at the table at the bottom of the page at that link. The wind declines significantly in July, August, and September, requiring all those fossil fuel plants (natural gas and coal) to be on stand-by or in operation
  • no discussion whether wind industry could survive without tax credits
  • the article references hydroelectric power in Canada; not much hydroelectric power available in Iowa or many other places in the states; huge difference between Canada and the US with regard to hydroelectricity
  • electricity in Iowa is not being used to drive many cars, much less any farm equipment
  • fossil fuel for electricity is only part of the equation; where does the NY Times writer think plastics, fertilizer, etc., come from?
With regard to the Keystone XL, that pipeline would be operational now had there not been the totally unnecessary delays before President Obama finally killed it outright. So, WTI spikes above $96 today, and Canadian oil (yes, the Canadian oil that would be going down the Keystone XL) is languishing at $60/bbl or thereabout. 

The Perfect Storm: Senate's Mid-Term Elections In The Middle of The ObamaCare Debacle

The stories are everywhere: folks are finally starting to see the ramifications of the ObamaCare debacle. As Ms Pelosi predicted, once folks read the law, they will know what is in it. This is the most recent story: business groups in states that have said "no" to ObamaCare are asking for the President's help. Businesses in those states can't afford the $3,000/employee penalty.  (They won't get help from Mr Obama signature program; he will count on the Senate/Congress to delay enactment/penalties until after the mid-term election; claiming more time is needed to put the necessary bureaucracy in place.) Here's the story alluded to:
Under the 2010 Affordable Care Act, or “Obamacare” as it is known, states were required to expand Medicaid, the federally funded health insurance plan for the poor and disabled, with the federal government covering all costs for three years and the states paying about 10 per cent of costs after that. 
But the Supreme Court said last year the state mandate was unconstitutional and gave states the right to opt out. So far, 14 have [opted out], meaning employers of low-wage workers in those states will either have to offer insurance plans to employees or face federal penalties.
In states that are not expanding Medicaid, employers will have to pay $3,000 for each employee who joins a state exchange programme to buy health insurance.
Meanwhile, with another Democratic retirement, that's "democratic" with a "big D," it looks like the Dems will lose the Senate in 2010 unless there's a  miracle.
“The battle for the Senate will come down to Democrats’ ability to hold seats in Republican-leaning states,” said Nathan Gonzales, deputy editor of the non-partisan Rothenberg Political Report, based in Washington. “A lot depends on how popular the president is” next year “because if people are dissatisfied, their option is to vote against the president’s party.” 
 I assume if it's that "bad" in the Senate, the House is even "worse."

Yes, this looks like the perfect storm: ObamaCare ramifications hit the 2014-mid-term elections.


It looks like the Dow closed up 112 points, hitting a new all-time high.

The S&P is only three points from an all-time high.

Oil finished very, very strong today, up over a buck fifty. Nice.

OAS up almost 5%. KOG up over 2%.

Disclaimer: this is not an investment site; make no investment decisions based on what you read here, or what you think you read here.

Random thought: one wonders how much money is simply flowing from bonds and bond funds into equities. If so, ....

Wells Coming Off The Confidential List Wednesday

Active rigs: 186 (steady)

Wells coming off the confidential list Wednesday:
  • 22899, 445, Murex, John Randy 13-24H, Stanley, t10/12; cum 5K 1/13;
  • 23260, 1,026, KOG, Grizzly 146-99-3-3-10-14H, Ranch Creek, t2/13; cum --
  • 23488, 20, Surge, Scandia 1N NENE 34 02 NENW 35H, Souris, spacing ICO, t11/12; cum 5K 1/13;
  • 23572, drl, Hess, AN-Bohmbach 153-94-2734H-4, Antelope,
  • 23656, drl, XTO, Denbury Onshore, Hegg 11-29SH, Siverston

Pretty Nice

If I recall correctly, some analyst, maybe over at Forbes, said that all things being equal, SRE would drop 0.79% when it went ex-dividend today.

So, it went ex-dividend, and the company rose $1.59/share, or 2.02%. Sweet.

It came within a penny of a new high. 

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

Very, Very Clever --

Reuters is reporting:
Wal-Mart Stores Inc is ramping up plans to combine its physical stores with online technology, testing the use of lockers to hold goods ordered on the Internet until shoppers pick them up, as the world's largest retailer tries to catch up with e-commerce leader Amazon.com Inc.

Wells Coming Off Confidential List Today Have Been Updated; Whiting With A Nice Red River Well

Active rigs: 186 (nice)

Wells coming off the confidential list today have been updated.

EPA Establishes Fracking Research Advisory Team

Oil & Gas Journal is reporting:
A panel of 31 experts has been formed to review the US Environmental Protection Agency’s hydraulic fracturing research, EPA’s independent Scientific Advisory Board announced on Mar. 25.
It said the group will be asked to specifically seek input from applied scientific practitioners to get fresh information on emerging science and technology in what SAB considers a rapidly changing industry.
The panel is comprised of 5 current employees of companies and consulting firms; 2 government employees; and 21 academics and university professors (including some previously employed in the oil and gas industry), according to SAB.
It said the group would review a draft report that EPA expects to complete in 2014 on any potential health and environmental impacts of fracing on drinking water resources. It also will be asked to provide scientific feedback on EPA’s research leading up to the peer review, the SAB said.
It never quits, does it?

No End In SIght For Crude Oil By Rail (CBR)

Calgary Herald is reporting:
North American crude-laden carloads have surged by more than 50-fold since 2009 and there appears to be no end to the growth in sight, analyst Steve Hansen said.
He said both Canadian National Railway Co. and its smaller domestic rival, Canadian Pacific Railway Ltd., will play an important role in the evolution of this business in the years ahead.
As a result, Hansen on Monday raised his price target on CN to $115 a share, from $92 previously, and raised his rating on the stock to outperform.
Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read, or what you think you read, here. 

Ground Broken on MDU/Calumet Diesel Refinery West of Dickinson; First US Refinery To Be Built Since 1976

Bismarck Tribune is reporting, March 26, 2013:
A green field project and a cold brown field made history in Dickinson Tuesday.
A green field refinery — a term that means from the dirt on up — officially started construction in bare frozen soil about four miles west of town, the first time since 1976 that a new refinery has gone under construction anywhere in the country.
Calumet Specialty Products and MDU Resources are 50-50 partners in the $300 million venture that will turn Bakken crude into diesel for local truck and equipment markets, and other hydrocarbon byproducts. The companies invited dignitaries, employees and local residents to a golden-shovel photo op in a cold March wind out at the site and then to warm up with coffee and speeches at the local activities center.
Suits and smiles abounded and Dickinson’s economic development director Gaylon Baker wore both. He told the crowd he was probably the single luckiest developer in the USA that day.
“Who else can claim they’ve got the only new refinery in the country?” he said.
Reuters is reporting:
MDU Resources Group Inc and Calumet Specialty Products Partners LP broke ground on the first U.S. refinery to be built since 1976 on Tuesday, aiming to supply locally produced diesel to North Dakota's oil patch.
The $300 million refinery should take about 20 months to complete, the companies said.

Gotta Go; Traveling Again; Blogging Later; Glad To See The President Continues to Take Vacations; Deny White House Tours

Market must love to see the White House shut down.

I can't wait for the next Reaganesque presidential nominee to announce that when he/she takes office, the first thing he/she will do is open the White House back up to the American people. And if that means cutting aid to Palestine, so be it. As it is, the $500 million for Palestine announced this past weekend would pay for more than 145 years of White House tours. At a 3% return on the $500 million, the Palestinian aid would pay for almost five years of White House tours. One can generate 3% return by investing in the company run by the president's economic adviser: GE.

And so it goes.

Oil Up Another Solid Dollar; Peak Driving Season Around The Corner

No word about the Keystone XL.

Government denies permit for Enbridge Sandpiper.

Cue up Connie Francis.

Wow: Brent/WTI -- $13 Spread

Bloomberg link, dynamic; accurate when posted.
  • Brent: $109
  • WTI: $96
  • Bakken selling at a 50-cent premium to WTI at Clearbrook, MN.

Completions in Eastern Montana; Oasis With A Nice Well

Fairfield Sun Times is reporting:
Whiting Oil and Gas Corporation reported the completion of two Richland County wells, both tapping the Bakken Formation.

The Lone Butte Patricia 24-25 1H, 356.

The Mahlen 24-32H, 388.

XTO Energy Inc. reported the completion of the Headington 43X-23B, a Richland County well, 222.

In Roosevelt County, Oasis Petroleum North America LLC brought in the Tana 2759 43-7H, 962.

Same Ol', Same Ol', -- European Companies Setting Up Factories Where Energy Is Cheap; Austrian Company Setting Up Shop in Texas

Reuters is reporting:
When Wolfgang Eder and his team started looking around for a site for a new plant for Voestalpine, the Austrian steelmaker he heads, they had 17 sites in eight countries on their list.
This month, after more than a year of looking, they settled on the U.S. state of Texas, after a boom in the production of natural gas from shale extraction brought gas prices down to just a quarter of what companies paid in Europe.

Enbridge Not Concerned About Permit Denial


Link takes you to "oilpatchdispatch," a Fargo Forum outlet.

Reuters' Scheyder's Video Diary: North Dakota Man-Camp

Traveling; short layover in Dallas.

Notes will be brief.

A reader sent this video; huge thanks.

Reuters' Scheyder's North Dakota "man camp" video 03-20-13

Welcome to the “man camp” (2:44) - Rules at a North Dakota “man camp.” No alcohol. Leave your muddy boots at the door. Cost: $120 a night. Food served 24 hours a day. “Man camps” are the temporary housing solution for the energy boom’s workers.

Tuesday Morning Links; WTI Solidly Back Above $95 -- Again

Wells coming off the confidential list have been posted. NDIC has not updated the scout tickets; information was taken from file reports; information is lacking, and may be in error in some cases.

WTI solidly above $95 before economic data released later this morning. Canadian sands oil still sells at hefty discount. No word from the administration on how review of the Keystone XL permit is going. Cue up Connie Francis.

RBN Energy: a look at the recent run-up in the price of natural gas (NYMEX).
It is not immediately apparent why open interest should be hitting record numbers just now on the NYMEX. During 2012 natural gas prices hit a 10 year low in April (under $2/MMBtu). Physical gas volumes have fallen off because the price spreads between trading hubs in the US have narrowed - making it harder to profit from the arbitrage between geographic locations. Rampant new US gas production is also changing traditional basis relationships and making storage requirements harder to forecast.
A number of trading firms have cut back their operations as a result. Last week (March 15, 2013) the Russian trading company Gazprom closed its Houston gas trading operation. In November 2012 Freepoint Commodities laid off gas traders and in May 2012 the Centaurus Hedge Fund that traded natural gas closed down.
The dreary outlook for physical gas trading is reflected in data from the Intercontinental Exchange (ICE) electronic exchange. The chart below shows monthly average natural gas day ahead trading volumes on ICE at US trading hubs. The data shows that trading volumes in 2013 are down about 10 percent since 2012 and that December 2012 volumes were down 20 percent versus the prior year.
From a reader: a nice human interest story on a Vietnam vet; the Walking Man of Murphys. At the LA Times.

WSJ Links

Section R (Environment):
  • Green investing: so much promise, so little return -- "At the Wall Street Journal's ECO:nomics conference, the talk was about all the innovations taking place in renewable energy -- and about al the investors who are losing interest." The worse thing one can do in business and investing is over-promise and under-deliver. And that's exactly what Algore, Barryobama, and environmental activists have done, probably setting their movement back two or three decades. Promoting natural gas the bridge to the future, the movement could have made incredible strides. 
Section D (Personal Journal):
Section C (Money & Investing):
Heard on the street: Cyprus may need more doses of medicine:
The terms of the deal are certainly very tough, tougher even than the original deal that the Cypriot Parliament had rejected a week earlier, which would have seen the government impose a tax on all depositors, both insured and uninsured. That deal was a serious misjudgment by the euro zone and Nicosia since it clearly breached the spirit of the European Union-mandated deposit guarantee.
The effective collapse of the two major banks will have inflicted grave damage on Cyprus's credibility as an offshore financial center. The drastic shrinking of the financial services sector, currently 18% of gross domestic product, will have profound consequences for the rest of the domestic economy. That in turn could lead to much greater losses for the banking sector than originally envisaged under a review of banking-system assets by investment manager PIMCO.The risk is that the loss of confidence is so severe that, as in the case of Greece, further bailouts are needed.
At the very least, Cyprus will now need sustained support from the euro zone, over and above its bailout loan, to rebuild its shattered economy.
Section B (Marketplace):
Section A:

Richard Zeits On ZaZa, EOG Resources, and Eaglebine

The Eaglebine.

Link here to SeekingAlpha:
The announcement of the joint venture between ZaZa and EOG is a positive development for the play, although perhaps of a smaller magnitude than the headlines appear to suggest.
EOG is no novice as it comes to complex horizontal oil plays, and its interest in the Eaglebine certainly sends a positive signal. EOG's Eagle Ford expertise is particularly important in the Eaglebine context.
At least three test wells will be drilled by EOG before 2013 year end on ZaZa's acreage. In the event of a positive result, drilling activity can be accelerated.
However, it would be premature to read much into the announcement. EOG is paying a relatively low price for its option to test the acreage and would be able to exit the Joint Venture after three wells should the results disappoint.

Traveling Today; Blogging Will Be Sporadic

Good luck to all. I see futures are up a bit.