Wednesday, April 3, 2013

Shah Gas Field Has Been Added To The Sidebar At The Right

Shah gas field. COP pulled out; JV partner is OXY.

Statoil and "The Red Queen'

Regular readers of the blog remember the "Red Queen" commentary some time ago. I always thought the writer was either disingenuous or did not under the oil industry.

This story sort of proves the point. Rigzone is reporting:
Norway needs to make a new giant oil and gas discovery every other year for the next decade to offset falling production, Statoil ASA's Chief Financial Officer Torgrim Reitan told Dow Jones Newswires Wednesday.
"We expect the production on the Norwegian shelf to go on pretty well until 2020 or 2025, and after that it will fall," Mr. Reitan said in an interview at the sidelines of a parliament hearing on Norway's public financing needs up to 2060.
Norwegian group Statoil and other oil companies operating on the Norwegian continental shelf are key contributors to Norway's massive wealth. The country's oil and gas revenues were 372 billion kroner ($64 billion) in 2011. It has a $700 billion oil fund and no net debt.
But the high oil sector activity is likely to fade in the coming decade, Statoil warned, unless new acreage is awarded and new discoveries made. Norway's crude oil output has halved since 2000, although somewhat offset by higher gas output. Statoil expects the production fall to accelerate sometime after 2020.
One word: Hess. 

Also note: the exchange came at a hearing concerning public financing needs up to 2060. Sounds like Norway is not worried about global warming destroying the earth.

Cool: Magnum Hunter Sells Eagle Ford Assets to Penn Virgina; $20,000/Acre -- Proven Production

Rigzone is reporting:
Penn Virginia Corp. has offered $400 million to Magnum Hunter Resources Corp. to acquire the company’s producing properties and undeveloped leasehold interests in the Eagle Ford Shale play in Texas.
Under the deal, Penn Virginia will acquire about 19,000 net mineral acres in Gonzales and Lavaca Counties, Texas which are located adjacent to the company’s current position in both counties. As a result, Penn will own roughly 83,000 gross acres of the Eagle Ford Shale and will increase their drilling inventory by 345 locations, for a total of 640 drilling locations, the company noted in a press release.
From the press release:
The assets include 46 producing wells which will increase its count to 117 wells. Seven wells are in the process of being completed or awaiting completion and four wells are being drilled on the acquired acreage. The company stated it plans to drill up to 62 Eagle Ford Shale wells during 2013.
The total consideration for this transaction will be paid approximately 90 percent or $361 million in cash and, at the option of Penn Virginia, the remaining 10 percent or $40 million either in cash or Penn Virginia shares valued at $4 per share, said Magnum Hunter in a released statement.
Quick, back of the envelope: $400 million / 19,000 acres = $20,000 / acre. Okay.

19,000 new net acres. 345 new drilling locations. 19,000 / 640 acres = 30 sections. 345 new locations / 30 sections = 11 wells / section. For newbies, the good Bakken is getting about 4 - 6 wells / section. Okay.

Going through the blog, it appears that Penn Virginia left the Bakken shortly after 2010, though it did transfer some acreage to Anschutz in 2012. 

Wells Coming Off The Confidential List Thursday

Wells coming off the confidential list Thursday:
  • 20804, 329, CLR, Angus 1-9H, Elm Tree, t2/13; cum 2K 2/13;
  • 23289, 1,500, Hess, BB-Olson 150-95-0817H-2, Blue Buttes, t3/13; cum 17K 2/13;
  • 23314, DRL, WPX, Good Bird 36-25HA, Moccasin Creek,
  • 23385, DRL, BEXP, Beaux 18-19 6H, Banks,

23289, see above, Hess, BB-Olson 150-95-0817H-2, Blue Buttes,

DateOil RunsMCF Sold

Signing Leases, Not Signing Leases, Working Interests, Risk Penalties, and Forced Pooling In The Bakken

I will be linking the discussion at this link on my "Data Links" page.

Only comment: avoid paying much attention to comments by Dufus.

It Would Be Interesting To See the Taxes Paid By The Ten Most Successful Renewable Energy Companies

At CarpeDiem from a WSJ article linked earlier, the ten corporations paying the most in taxes in 2012:
Matthews points out that the two biggest corporate taxpayers last year were oil giants ExxonMobil and Chevron, and along with No. 6 ConocoPhillips, the three oil companies paid more in taxes last year ($59 billion) than the other seven companies combined. As the chart above shows, the Big Oil companies also paid much higher effective tax rates than the other companies on the list – the 51.5% effective tax rate of ConocoPhillips was more twice the rates paid by Apple (25.4%), IBM (24.2%) and Microsoft (22.8%).
Go to CarpeDiem, linked above, for the full article. 

It was interesting to note that President Obama's economic advisor's company (GE) did not make the list. Perhaps an honorable mention.

#1, #2, and #6: company; taxes paid; effective tax rate.
  • #1: ExxonMobil, $31 billion (with a "b"), 39%
  • #2: Chevron, $20 billion, 43%
  • #6: Conoco, $8 billion, 52%
Conoco spun off Phillips 66 (refining and marketing) in 2012, which accounts for the delta (between #6 and the two at the top. Add in PSX (Phillips 66) tax to get full story.

As noted, it would be interesting to see what the top ten renewable energy companies paid in taxes (or received in tax credits).

Eight (8) New Permits -- The Williston Basin, North Dakota, USA

Active rigs: 185 (steady)

Eight (8) new permits --
  • Operators: XTO (4), Whiting (3), EOG
  • Fields: Sanish (Mountrail), Cedar Coulee (Dunn), Parshall (Mountrail), Delhi (Golden Valley)
  • Comments: XTO is active; 2nd permit in Delhi this week, I believe
Wells coming off confidential list were reported earlier; see sidebar at the right.

Two permits canceled:
  • 18710, PNC, KOG, Hovd 5-21H, Truax,
  • 25134, PNC, Whiting, Jandt 14-1, Delhi,
Producing well completed:
  • 24263, 503, Whiting, S-Bar 11-7-2TFH, Sanish, t3/13; cum 1K 2/13;
Twelve (12) permits renewed: I normally don't follow renewed permits, but for some reason the list caught my attention this time: XTO (2), Oasis (3), CLR (5), and WPX (2). Except for the Oasis wells in Williams County, these renewed permits were for locations in Dunn and McKenzie counties.

Best Bakken Wells of 2012 -- Mike Filloon

Mike Filloon provides an update to an earlier article, same subject, at SeekingAlpha.

There's  a ton of information to go through at the article.

Some takeaways:
  • it appears that ceramics perform better than sand; not sure yet what the right mix is
  • more proppant, better wells
  • more stages, better wells
  • shorter stages, better wells
  • length of lateral, shorter may be better
  • Bakken activity moving to northeast McKenzie County
  • the "Helis Grail" is right in the middle of the sweet spot in northeast McKenzie County
  • EURs are increasing
  • costs for drilling/completing wells are coming down
  • there seems to be a real disconnect between IPs and ultimate well performance (the jury is still out; way too many variables to make a sweeping statement)
Operators are learning more and more about best completion designs. Filloon:
What may be the most important is stage length. While most operators are using 300 feet as an average, EOG is working under 200. By using shorter laterals and stages an operator can get the most out of the hydraulic horsepower used from its pump trucks. This produces better fracturing of the source rock. Plenty of proppant and water is needed to fill in these fractures. The better this is done, the more production garnered from the stimulation. 
Mike's summary in this article:
In summary, the middle Bakken continues to produce better well results. At one time, we believed that Parshall and Sanish fields were by far the best areas in North Dakota. New results show northeast McKenzie County may have more upside. Not only are the EURs higher in this area, but there is added Three Forks upside. Helis has proven the Three Forks can be as good, if not better. It also has a much larger number of possible locations. Better well design also contributes as operators use more stages, water and proppant.
Please visit the original article. Full of interesting and important information.

Did Folks Finally Realize How Bad The Employment Numbers Really Are? The Market Suggests That

I've been talking about it for several years. Scroll through the dismal reports. Two pages of no improvement in the jobs numbers. The original post dates back to January 21, 2011; that is more than two years ago, and the numbers have not changed. Each week Steve Liesman on CNBC, White House administration officials, and Obama apologists at Reuters, Yahoo, and Bloomburg, try to spin the numbers, but the numbers are what they are. And today there were bad:
The ADP National Employment Report revealed Wednesday that private employers hired 158,000 workers in March -- the smallest gain in five months and below economists' forecasts of around 200,000. And there were mostly in low-paying service sector jobs. 
The Dow is off almost 100 points; the S & P is down an incredible 15 points (how often do we see losses like that) and the price of oil is plummeting, down $2.50.

This suggests to me, that finally, the Steve Liesmans of the world and the Obama apologists can no longer spin the employment / unemployment story. Hopefully the numbers are good tomorrow and Friday or it's going to be another long weekend. And not because of Good Friday.

Truly In Over His Head -- Poverty Rate Highest Since the 1960s

I posted this earlier; linked the story earlier. By tomorrow, it will be just another story forgotten (or ignored by mainstream media -- it is interesting to note that it was a British paper that posted the story, not CBS News.) If the link is broken:
The number of Americans living in poverty has spiked to levels not seen since the mid 1960s, classing 20 per cent of the country’s children as poor. It comes at a time when government spending cuts of $85 billion have kicked in after feuding Democrats and Republicans failed to agree on a better plan for addressing the national deficit. The cuts will directly affect 50 million Americans living below the poverty income line and reduce their chances of finding work and a better life.
I just don't get it. Certainly reasonable folks could see this: unemployment at record levels and yet, at every opportunity to increase jobs, the administration put up obstacles or flat out killed them (President Obama killed Keystone XL not once, but twice). He came into office clearly in over his head, and relied on listening to ideologues for advice, and that will be his legacy.

However, with one exception (actually two exceptions), presidents are not remembered for their economic failures; their other legacies are in "big ideas" or scandals. Obama's "big idea" was ObamaCare -- and that is yet to play out. Ms Pelosi was correct: no one knows what is in ObamaCare. But the bad news is starting to trickle out: $3,000/year for employee. 30-hour work weeks. Loss of minimum wage jobs. Health insurance premiums will skyrocket. Not enough physicians as gatekeepers/primary care physicians where one must start when accessing ObamaCare.

There was one other two-term president who was an exception to the general rule regarding legacies. That was Ike: his legacy -- golfing. 

With regard to the Keystone, folks think only about the pipeline and the tens of thousands of jobs that would have developed directly. But in addition, this oil would have gone to US refineries in the south and would have produced petroleum products that would have been sold overseas, improving the US export-import numbers.

I just don't get it.

The more I think about it, the crazier it gets: the US would have been paid to ship raw material into the country; US workers would have been paid to convert that raw material into refined products; and, the US would have sold the refined products back to foreign countries. Even the Brits had this figured out in the 17th and 18th centuries: sending cotton from the colonies back to England where textile mills converted it into cloth, and then sold the finished product back to the colonies. 

Whatever. What a presidency.

Maybe a Korean war would take my mind off this craziness.

I see the price of oil is down significantly today: it points to a softening global economy, and possibly talk of a recession (again). My hunch: we will see talk of recession at CNBC sometime in the next five business days. 

They Are All Bailing: First Goldman Sachs Getting Out of Solar; Now BP Getting Out of Wind

Earlier this week Goldman Sachs announced that it sold its large solar farm in California to First Solar.

Now, today, Don sends me this incredible story. It's a very, very short story, but is filled with many story lines. The headline: BP is getting out of the wind energy business.
BP  has put its U.S. wind farm operation, one of the largest in the country, up for sale, marking the continued retreat of big oil companies from renewable energy investments while oil and gas projects offer them better returns.
The British oil company has already sold or earmarked for sale some $38 billion worth of assets, partly to raise funds to pay for its 2010 U.S. oil spill liabilities, but also to reposition itself as a smaller, leaner company with an emphasis on high-margin oil production and exploration. Reports said the sale could raise a further $1.5 billion.
BP would not put a value on any sale, but said in a statement it expected "attractive offers" for the assets. They include interests in 16 operating wind farms in nine states with a combined generating capacity of around 2,600 megawatts of renewable power, as well as a portfolio of projects in various stages of development.
At the end of the article:
BP, which under former chief executive John Browne once named itself "Beyond Petroleum", still has a substantial interest in Brazilian biofuels, but has invested only about $1 billion a year in renewables since 2005 from a total capital spending budget of well over $20 billion annually. It has no specific investment plans for the sector in the years ahead.
Lots and lots of story lines, from the specific to the general:
  • The specific: BP marketed itself, for years, as going green -- it's "Beyond Petroleum" was a lot like the President's "all of the above." Neither slogan worked, apparently.
  • The general: it appears that all that growth in renewables was financed by those with deep pockets. Look at that last paragraph. BP, at one time, was earmarking up to $20 billion ANNUALLY for renewables. There are not many companies that can bankroll projects that cost that much. I can think of two: Google and Apple. And they have.
  • This is not a good omen for states looking to add more renewable projects: if companies with very, very deep pockets are pulling out, these projects won't find funding -- not without guarantees from states for huge subsidies and/or tax credits. Venture capitalists certainly can't trust the federal government which provides for tax credits a year or so at a time. And with the bond debacles in the GM bankruptcy, the Cyprus bailout, and the news coming out of Stockton, CA, it makes investing in bonds for wind farm constructions dubious at best, and foolhardy at worst. 
  • The specific and the general: they are bailing out of renewables.  BP, which used to earmark as much as $20 billion ANNUALLY for renewables has spent all of $1 billion since 2005 on such energy.
[By the way, XOM, some years ago, predicted this in a great op-ed piece. I posted it on my original blog but there's no way I could it now. The op-ed was eye-opening and very prescient.]

Back to the story lines:
  • The specific: the oil spill has turned out to be a debacle.The company has sold $38 billion in assets so far to pay off claims and legal fees related to the spill.
  • The general: this is not a small sale -- 16 wind farms in 9 states. If a BP with very deep pockets is bailing out of renewables, it certainly suggests the future is not bright for those 9 states to add more wind farms unless government subsidies and tax credits are very, very generous.
  • The specific: $1.5 billion is a drop in the bucket compared to the legal bills BP has yet to pay. My hunch is that the litigation won't quit until there is literally no more money to drain away from BP. As noted, BP already sold off $38 billion. If they are getting down to $1.5 billion deals, they are getting near the bottom of the line-item "sale" list.
Yes, this is a huge, huge story, and the Reuters article was one of the shortest I've seen on such a big story. It will be interesting if the WSJ has a feature on this.

Preview Of This Week's Jobs Numbers -- Not Looking Good


Later, 1:49 pm: the labor market is even worse than you think.
The ADP National Employment Report revealed Wednesday that private employers hired 158,000 workers in March -- the smallest gain in five months and below economists' forecasts of around 200,000.
Many of these new jobs are in low-paying sectors such as retail, food services and health care. The Bureau of Labor Statistics (BLS) reported in February that retailers hired 252,000 new workers over the past 12 months and the industry overall has recovered 723,000 jobs since reaching a low in December 2009. In comparison, the construction industry has added just 349,000 new jobs since reaching its employment low in January 2011.
The U.S. economy overall has increased payrolls by 355,000 since the beginning of the year and more than 1.8 million in 2012. This Friday the BLS will give its latest snapshot of the domestic labor market. Economists are expecting an average gain of 200,000 jobs in March.
This has nothing to do with the Obama presidency. This is simply the structural changes in the job market. Automation continues to kick in. Employers will look at the low-hanging fruit first. It did not matter if an employer automated a low-paying job or not, but with an additional $3,000/employee for ObamaCare, it will be worth their while to automate those positions also. Look for companies like McDonald's go to customer-self-ordering at a kiosk just before getting to the cashier.

Original Post
CNBC is reporting: oh-oh.
Private-sector job creation was considerably less than expected in March, indicating that the labor market's improvements could begin stalling.
A joint report Wednesday from ADP and Moody's Analytics showed 158,000 new positions, well below economist expectations of 200,000.
The report serves as a precursor to Friday's nonfarm payrolls report, so the miss could cause economists to lower their projections.
The spin:
"I'm very optimistic about the economy but I think the next six months are going to be pretty tricky and we're going to see that in the job market," Moody's economist Mark Zandi told CNBC. "So I think we actually will see weaker jobs numbers in the next few months." 
I am optimistic about the economy also, but for me it's wishful thinking. For an economist, I would assume, one needs more than that.

Although the article mentions that construction jobs following Hurricane Sandy are disappearing, the article, incredibly, does not mention "sequester." That's where we're going to see some job losses, and they won't be temporary.


By the way, the AP will no longer use the phrase "illegal immigrant." -- AP
The AP will now refer to them as "undocumented Democrats." -- Jay Leno

An Inconvenient Truth

US poverty level at highest since the 1960s -- I always said President Obama was in over his head when he was elected the first time; didn't get any better with time. One can start with all the jobs lost in the energy industry. Off-shore exploration and production ground to a half in 2010. The Keystone XL, which would have provides tens of thousands of jobs, was killed by the President, not once, but twice, and he may get the opportunity to do it again. And as noted in earlier stories, even if it is approved now, it may be too little too late. Sequester-related job losses? Remember, it was the president who first proposed the sequester. Congress called his bluff on it but it was his idea. In over his head. ObamaCare -- that's where we're going to see huge job losses as a result. 


Desperate: A Word One Does Not Like To See In The Oil Patch; When The Keystone XL Is Approved -- Too Little, Too Late? Economic Collapse: Also Not A Phrase One Wants To Hear in The Mideast

Wells coming off the confidential list have been posted. Hess and BR both have nice wells.

Active rigs: 184

Bakken/WTI spread at Clearbrook, MN: no change from yesterday; at $2.50.

RBN Energy: sailing stormy waters -- the Gulf Coast market for Canadian heavy crude. This will be the first in a series of articles on this issue. It will be interesting if the writer addresses the newly proposed Easter Energy Pipeline.
Western Canadian heavy crude producers are getting desperate to find markets for oil sands production expected to increase by 1 MMb/d over the next 3 years. Few Canadian refineries can process these heavy bitumen crudes and domestic Canadian conventional crude production exceeds local refining capacity. Of all the current market alternatives, the US Gulf Coast is the most logical. Transporting heavy crude to that market continues to be constrained by a lack of infrastructure. Oversupply into the Midwest market and continued uncertainty about infrastructure have created a volatile price environment. Today we begin a two-part analysis of the Gulf Coast market for heavy Canadian crude.
In the past year, Canadian heavy oil has sold at a discount of almost $40/bbl to WTI (currently about $15/bbl). On the other hand, Maya oil has sold at a premium to Western Canadian Select by as much as $40 (currently about $20).
The unnerving part about this price analysis for Canadian producers is that over the past 15 months the price relationships that we have looked at between WTI, WTS and Maya have been extremely volatile.
Price swings of $20/Bbl in either direction during relatively short time periods have been common. This volatility is very unattractive to producers facing high transportation costs to market. (It goes a long way toward explaining why more heavy crude rail transport capacity has not been developed from Western Canada to the Gulf Coast yet).
Canadian heavy crude producers do not have the luxury of multiple market destinations that (for example) Bakken producers have been afforded by rail destinations on the East and West Coast in addition to the Gulf.
Except for a few notable exceptions like the PBF Delaware City refinery, the Gulf Coast is the only destination market for Canadian heavy crude right now. Selling into a volatile market with high transport costs and no alternative destinations is not a pleasant occupation. Or one that makes much sense economically over the long term. 
WSJ Links

Section D (Personal Journal):
Another tablet: a laptop with a flip screen is not a tablet. It a laptop with a flip screen.
Dell laptop does flips to try to be a tablet; by Walter Massberg. It's still a laptop:
However, as with all of its competitors I've tested that don't completely separate the screen and the keyboard, the XPS 12 doesn't make for a very usable tablet, both for hardware and software reasons. The hardware weighs 3.35 pounds, more than double the weight of the heaviest iPad. At its thickest point, it's twice as thick as an iPad. It's also much larger.
The XPS 12 was uncomfortable to use as a tablet, in my hands or lap, for long periods. Like its convertible rivals, it is, at best, a standard laptop that can be occasionally used in tablet mode, preferably on a desk or table.
Best tip of the day, no relevance in North Dakota: does turning off cruise control in the mountains help?  The answer is what I always thought (common sense): allowing the vehicle to slow a bit while ascending hills and gradually regain speed on the descent, a driver can do better than the cruise control, which may use more fuel as it tries to maintain speed. 
Section C (Money & Investing):
S&P fires new salvo in battle with states;
Standard & Poor's Ratings Services said the Justice Department failed to tell a federal judge the "true" reason the U.S. government is supporting 17 state attorneys general in their lawsuits against the rating firm.
In an eight-page filing ... the McGraw-Hill Cos.  unit complained that Justice Department officials failed to tell the same judge in a filing last week that they have "actively collaborated with" the 17 states and are doing so "to this day."
It was S&P's latest salvo in a legal battle that could wind up costing S&P billions of dollars if the firm loses the cases or settles them to cut its losses.
As part of S&P's defense against the state lawsuits, which accuse the firm of shoddy ratings and could cost it billions of dollars in damages, the company is trying to combine the 17 cases into one and move them to federal court. The Justice Department, in a filing Friday, asked a judge to rule that the cases should be decided in state courts, echoing earlier arguments by state attorneys general in various court filings.
Section B (Marketplace):
TransCanada pushes Eastern pipeline project; posted yesterday at MDW: big story; nothing new from earlier posts.
Section A:

Oil exports get a second look; won't happen in my investing lifetime; from my perspective, there is only "bad news" in that story.
Economic collapse: Egypt's subsidies stall its IMF aid; IMF very unhappy that government subsidizes heating oil, gasoline, other products
A delegation from the International Monetary Fund is due to visit Cairo on Wednesday for talks over the country's bid for a $4.8 billion loan, as a political impasse over tough economic reforms pushes Egypt closer to economic collapse.
How's that Arab Spring working out?

Op-ed: for the archives; about those tax breaks for Big Oil;
President Obama has been telling America for months that special tax breaks for the oil and gas industry must come to an end. The presidential demand always prompts puzzled gazes among tax and energy-industry experts, who ask: What special tax breaks?

Thanks in part to a bill sponsored by Rep. Chris Van Hollen, a Democrat from Maryland and ranking member on the House Budget Committee, it's all much clearer now. The congressman has inadvertently called attention to the fact that those special tax breaks just for the oil and gas industry don't exist. Mr. Van Hollen proposes to create some very special punishments instead. Regardless of the bill's fortunes on Capitol Hill, it has already performed a public service by illuminating the fallacy behind assaults on the industry.

Mr. Van Hollen's ''Stop the Sequester Job Loss Now Act" would raise taxes on individuals—what he calls the "Fair Share on High-Income Taxpayers"—and effectively hike taxes on the oil and gas industry by changing the way their taxes are calculated. The problem with the bill is that the so-called tax breaks the industry would lose are not specific to oil and gas at all. They are widely available to lots of industries. [just what I said on MDW the other day.]