Tuesday, July 23, 2013

No Keystone XL. Where Does That Leave The Canadians? Playing Catch-Up With CBR; And We Will See It This Year

Reuters is reporting:
For the last three years, Canada has lagged the United States in using its rail system to haul crude oil, hindered by a lack of loading terminals and a shortage of specially built rail cars that reheat viscous oil sands crude.
Now it's on the brink of catching up. Over the next 12 months, producers like Cenovus Energy Inc  and logistics firms like Gibson Energy Inc will load up mile-long dedicated trains with ultra-heavy bitumen oil and move them thousands of miles in heated and coiled rail cars that eliminate the need to dilute the crude for pipeline shipments.
Yet they are opening up a new phase in the oil-by-rail boom at a moment of deepening uncertainty. An oil-train derailment that killed 50 people in Quebec has cast a shadow over the controversial practice and could raise new hurdles.
For the moment, the handful of new projects to potentially quadruple the amount of oil sands crude shipped by rail are moving ahead. Exports could soon rival U.S. shale oil rail shipments, currently three times greater than Canada's.
James Cairns, vice president of petroleum and chemicals at Canadian National Railway Co, said in Calgary this week that companies were moving at "breakneck speed" to overcome nationwide shortages of both infrastructure and rolling stock.
"In my 26 years in the rail business I have never seen this much massive investment in CN lines by our customers to get their products onto our railways," Cairns said. CN, the nation's largest carrier, expects to more than double last year's 30,000 carloads of raw bitumen and crude this year.

North Dakota Coal Plants Given Top Grade By Environmentalists

The Dickinson Press is reporting:
A report issued Tuesday highlighting the harmful effects coal-powered plants have on natural water resources found that North Dakota’s six coal plants do not pose a serious risk to the state’s rivers and lakes.
A nationwide coalition of environmental and clean water groups issued “Closing the floodgates: How the coal industry is poisoning our water and how we can stop it,” which details the water permits for the 386 coal plants across the country.
The report highlights the plants in Mercer, Oliver and Morton counties, saying none of them has impaired any natural water resource with toxic byproducts such as arsenic, mercury and lead.
The article leads me to believe there was absolutely nothing the coalition could find with regard to the North Dakota coal plants that bothered them even a little bit. Otherwise we would have heard from them. It appears activist environmentalists have only two categories for coal plants:
  • the coal plant DOES pose a serious risk to a state's rivers and lakes
  • the coal plant DOES NOT pose a serious risk to a state's rivers and lakes

Wells Coming Off Confidential List Wednesday -- Emerald Reports A Nice Well -- Its First Completion; BR Reports A Huge Well In Blue Buttes

I can't say for sure that the Emerald well below is the company's first company-operated completion, but it is the first to report an IP. Pretty nice.  Emerald has another six wells on DRL status. Emerald, of course, is the old VOG, now a two-rig company, I believe.
  • 23245, 721, CLR, Richmond 3-26H, Brooklyn, t6/13; cum 2K 5/13;
  • 23501, drl, Hess, BB-Burk-151-95-00718H-4, Blue Buttes, no data,
  • 23554, drl, HRC, Fort Berthold 152-94-14D-11-4H, Antelope, no data,
  • 23988, 1,209, Oasis, Dale 5601 14-26B,  Tyrone, t1/13; cum 31K 5/13;
  • 24121, 2,886, BR, Blegen 44-24MBH, Blue Buttes, t6/13;
  • 24438, drl, Petro-Hunt, Sorenson 152-96-24D-13-5H, Union Center, no data,
  • 24668, 1,579, Emerald, Pirate 1-2-11H, Foreman Butte, t3/13; cum 39K 5/13;

23988, see above, Oasis, Dale 5601 14-26B,  Tyrone:

DateOil RunsMCF Sold

24668, see above, Emerald, Pirate 1-2-11H, Foreman Butte:

DateOil RunsMCF Sold

Fifteen (15) New Permits -- The Williston Basin, North Dakota, USA; As Noted Earlier, Halcon Had A Very Nice Well

Active rigs: 188 (steady, up 2)

Fifteen (15) new rigs --
  • Operators: Marathon (4), Hess (3), BR (2), Whiting (2), Samson Oil And Gas (2), Newfield (1), Enduro (1),
  • Fields: Stockyard Creek (Williams), Charlson (McKenzie), Siverston (McKenzie), Ellsworth (McKenzie), Hawkeye (McKenzie), Mouse River Park (Renville), Bailey (Dunn)
  • Comments: Whiting has a permit for a wildcat in Golden Valley County, 11-142-105
The one well coming off the confidential list today was reported earlier; see sidebar at the right.

Two (2) producing wells were completed:
  • 23612, 673, CLR, Charlotte 4-22H, Banks, Three Forks, no fracking data yet; 4 sections; no production data;
  • 23795, 1,829, KOG, Smokey 3-30-18-3HA, Pembroke, no fracking data; t6/13; cum --
In the Smokey well file, #23795, there was a letter dated May 7, 2013, from KOG to NDIC explaining KOG's two well spacing programs and requesting extension of the confidentiality period.

The NDIC noted that the confidentiality period could not be administratively extended.

Excerpt of the KOG letter:
Kodiak Oil & Gas {USA), Inc. is currently developing two well spacing pilot programs. The Polar
Pilot Project is located in Williams County (sections 27 and 34, T154N-R98W) while the Smokey Pilot
Project is located in McKenzie County (sections 18 and 19, T149N-R98W). Each project will have 12 wells
within the drilling and spacing unit. Six wells will be in the middle Bakken, three wells will be in the
upper Three Forks and three wells will be in the middle Three Forks. These projects are designed to
determine the optimum spacing between wells. This determination will control the development
pattern for the entire Bakken-Three Forks play in the region west of the Nesson Anticline. ....
As of today, we have drilled 10 of the 12 wells at the Polar Project. Two rigs are currently
drilling the final wells in this project. We have drilled a salt water disposal well on one of the
three pads to minimize trucking when production begins. We will begin fracture stimulation on
the first four well pad in early June. The oil, gas and water gathering systems should be
operational by late summer. All three four well pads should be fracture stimulated by mid-July.
We will monitor the post fracture stimulation flow back and design the most effective
interference testing program at that time. The wireline logs and core analyses are continuing,
but due to the nature of the evaluations, these are slow processes. After we have collected all
the pertinent data including the interference tests, we will be able to formulate an
interpretation with valuable conclusions. We project these data should be fully collected by the
fourth quarter of 2013. The data integration will follow.
Kodiak Oil & Gas respectfully requests the North Dakota Industrial Commission grant an
extension of the confidentiality period on all the wells in the Polar Pilot Project until June 1,
2014. This will afford an opportunity to gather and interpret the extensive data set in this critical
The Smokey Pilot Project is less extensive than the Polar Project. The Smokey Project
does not include a pilot hole, cores or advanced wireline logs. However, it is a twelve well test
on similar spacing as the Polar Project. We have currently drilled nine wells, two rigs are on
location to finish the last three wells by late June. Two of the wells were completed earlier,
three more are scheduled for completion in July. The last of the wells will be fracture stimulated
by late August. Production and interference testing will continue into the fourth quarter of
Kodiak Oil & Gas respectfully requests the North Dakota Industrial Commission extend
the confidentiality period for all wells in the Smokey Pilot Project until January 1, 2014.

Random Look At US Rail Traffic -- Week 28, Ending July 13, 2013 -- Lots Of Red

The link to the PDF.

Two story lines jump out:
  • no evidence of any economic recovery; lots of red. A lot.
  • if it weren't for "petroleum and petroleum products" more than just the rails would be in trouble
Cumulative, year-to-date:
  • grain shipments were down almost 17%
  • motor vehicles up 2.3% year-to-date, cumulative, but were down almost 20% this week vs same week one year ago
Cumulative, year-to-date, it was all red except for:
  • forest products, up 2.3%
  • motor vehicles and parts, up 2.6%
  • nonmetallic minerals and products (fracking sand?), up 6.6%
Oh, one more sector was up, cumulative, year-to-date:
  • petroleum and petroleum products: up 46% 
It's a pretty sad report. And it hasn't changed much in the past year.

Five Bakken Completions In Montana

The Fairfield SunTimes is reporting:

In Richland County, Continental Resources Inc. filed completion reports for three Bakken Formation wells.
  • The Devin 1-13H, two laterals, reported an IP of 293 barrels of oil per day (bopd).
  • The Shevlin 2-20H, three laterals, reported an IP of 243 bopd.
  • The Schilling 1-20H reported an IP of 797 bopd.
Oasis Petroleum North America LLC turned in completion reports for two Bakken Formation wells in Richland County.
  • The Otis 2658 43-23H reported an IP of 1,073 bopd.
  • The Carl Federal 2658 43-23H reported an IP of 1,563 bopd.
The IPs are consistent with IPs that these two companies typically report in the good-to-better Bakken in North Dakota.

AAPL's Earnings 3Q13 -- iPhone Sales Exceed Forecasts -- Shares Surge (Well, Sort Of)

The "only" important number was the number of iPhones sold. Knocked that out of the park, according to some. Shares of AAPL up 5% after-hours but that doesn't mean a whole considering how much it has been knocked down. But still, 5% is 5%.

Apple reports (rounded):
  • Earnings of $7.47
  • Revenue at $35 billion (highest in its history? if I heard correctly)
  • A gross profit margin of 37%.
  • 31 million iPhones sold (vs 26 million one year ago; sales ahead of expectations; with 39% share, #1 in US)
  • 15 million iPads sold.
Analysts' expectations:
  • Earnings of $7.32 a share, down 21% from a year ago.
  • Revenue at $35 billion, roughly flat from a year ago.
  • A gross profit margin of about 36.7%,
  • 26.5 million iPhones sold.
  • 18 million iPads sold.
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or what you think you may have read here. 

The second-largest school district in the United States, the Los Angeles school system, will roll out a massive iPad program to "give" each and every student in the school system an iPad tablet. Incredible. Many, many story lines. 

Could Gasoline Spike To Over $5/Gallon Leading Into The 2014 Elections?


March 22, 2020: my, how things have changed. Saudi again plans to flood the world with oil, as does Russia. WTI drops to $20/bbl. Gasoline as low as 99 cents in Oklahoma City, OK. 

November 27, 2016: the price of gasoline never happened; in fact, just the opposite. Saudi "opens the taps" and the price of oil plummets, as does the price of gasoline. The Saudi decision is called the "trillion-dollar mistake."

December 9, 2015: gasoline hitting new lows, now down to about $1.99 across the US; WTI down to $37/bbl. 

July 26, 2013: ethanol demand is at an 11-week low. Cue up Connie Francis.

Later, 1:40 pm PDT: absolutely amazing. I just posted the story below -- mostly because I finally understand RFS and RINs, and then a link to this article is tweeted to me: the AAA has grave concerns about E85, though the organization has trouble saying it in so many words. Don't you just love it? The AAA can see the writing on the wall, also. Wow, a lot of impending train wrecks in 2014.

Original Post 
Save this one for the archives. No one knows but these are some"givens":
  • Saudi has said very clearly they intend to cut back on oil production when they meet in December, 2013
  • The Oil Drum says US shale won't be able to make up the difference; "Red Queen" effect
  • the Chinese have said they won't tolerate a GDP less than 7 percent (drives oil consumption)
  • as the global economy improves, demand for oil will increase (unless offset by oil prices)
  • WTI-Brent spread has narrowed, though it may be only temporarily
  • experts say the renewable fuels standards will raise the price of oil (Oil & Gas Journal)
I haven't followed the renewable fuels standard discussion; it never interested me. It seemed to me to be another shell game: the government mandating "something" but allowing producers to get around the mandate by trading/selling/buying virtual 'bitcoins."

As long as the "bitcoins" were costing the producers pennies, no one seemed to mind, but when the experts warned Congress that everything suggests these "bitcoins" will result in a (good news) rise of 50 cents/gallon to as much as (bad news) $1 a gallon spike next year, even I got a bit interested.

Congress is also getting concerned: the writing is on the wall. Repeal of the RFS is critical but it won't happen (Senate Democrats; Iowa farmers who vote in the early primary). So, at best, Congress is looking to "fix" the mandate. I don't know how to fix it except to issue more "bitcoins."

The timing of the Oil & Gas Journal article could not have come at a better time. I had just posted the note reminding myself that the President and his former Director of Energy both wanted to see "significantly" higher gasoline prices when I saw the OJG article.

The Oil & Gas Journal is reporting:
The increase for gasoline with a 10% ethanol blend could be as little as 20¢/gal, but only “under somewhat unrealistic and favorable assumptions regarding enormous gains in market penetration and consumer acceptance for E85,” it said. A spike of 50¢-$1/gal is more likely, the July 22 study added.
That paragraph can be hard to understand.

It says: the price of gasoline will increase by as little as 20 cents/gallon next year, simply due to the President's mandate to increase the price of gasoline.

However, that 20 cents/gallon is based on wildly optimistic assumption. Most likely the increase, again, according to the experts, the increase in gasoline will be 50 cents/gallon at the pump, and it is very possible gasoline could increase by $1/gallon at the pump simply due to presidential whimsy. Yes, I know it took Congress to pass the legislation but the president advocated for it, and signed the bill. This is not rocket science.

So, place this in the archives and check on the price of gasoline next summer (2014). 

With Oil Flirting At New Highs, Time To Review "Oil Speculation"

"The Coyote Blog," a featured blog at the sidebar at the right, linked this article on oil speculation from another blog back in 2011. This article was originally linked here.

I haven't watched CNBC in quite some time, so I don't know if the talking heads are talking about oil speculators again, but if not, I assume it will only be a matter of time.

But from the first linked article:
[The price of oil] is an important topic for the Democrats, for obvious reasons: both President Obama and his [first] Secretary of Energy are on record as favoring much higher gasoline prices, which is exactly what their administration has delivered.
That was written before the 2012 election, and here we are again, getting ready for the 2014 election. 

Irony: despite the higher gasoline prices, less revenue from gasoline sales are flowing to city, state, and federal governments.

Platts Gets It; NY Times Does Not; A Corridor Of High Income Mobility Running Down The Midsection Of The United States (Most Of It NOT The Bakken)

Platts is tweeting: "NYT story doesn't state it, but graph shows US area with highest income mobility is the Bakken."

Platts is referring to this story in The New York Times. On a per capita basis, North Dakota would surprise a lot of non-car-owning NYT reporters. The Times narrative completely avoided comment on the dark blue areas (incredible good areas) in North Dakota -- I guess the reporters felt the region was an outlier (a "one-off") or the Bakken story did not fit their narrative.

Wow! Look at that top graphic at the top of the linked article: Williams County and Dunn County. Drag your "mouse icon" over the dark blue areas in North Dakota: Williston and Dickinson are singled out. The only other area in the entire US with a similar number is the Vernal area east of Salt Lake City (a couple of minor exceptions in South Dakota and North Dakota, also with sky-high income mobility).

If you spend some time on the graphic, you will notice that there is a corridor of high income mobility running down the midsection of the United States.

Scroll down and play with the interactive US map at the linked article above: you can find specifically how your area is doing. 

I would assume much of the success "achieved" by young folks in New York City and Boston has to do with silver spoons and nepotism. 

CarpeDiem has posted a gazillion stories about the successes of the Bakken. It's hard to believe that The New York Times missed it. Well, maybe it's not surprising. 

UK Proposes Tax Break On Shale Gas

The Oil & Gas Journal is reporting:
The UK government outlined a proposed tax regime for shale gas, including a new shale gas allowance based on existing field allowances for oil and gas production.
The proposed allowance would reduce the tax on a portion of a company’s production income to 30% from 62%, the UK Treasury said in a statement. No UK shale gas wells are on production yet.
As noted elsewhere, the UK is in deep, deep trouble when it comes to energy -- despite all that incredibly expensive off-shore wind power. 

Tuesday Morning Links, News, And Views; Coal Use Increasing In The US;

Active rigs: 186

RBN Energy: another must-read article -- the spread between WTI and Brent is ... going, going, gone. But the good news probably won't last. Memo to self: insert "sad face" here.

Photo op: isn't this an outstanding photograph? It was sent to me by a reader. Over the wide Missouri between Bismarck/Mandan.

Counter-intuitive: SeekingAlpha is reporting --
Coal consumption in the U.S. has been increasing for the last few months and this trend is expected to benefit the U.S. coal companies. Total coal consumption in first-quarter 2013 was up by 11%, as compared to 1Q'12. The surge in coal consumption is mainly due to higher coal usage by electricity generators.
The IP for the one well coming off the confidential list has been posted, and it's a huge one for Halcon:
  • 24255, 2,447, HRC Operating, Fort Berthold 152-93-7D-6-2H, Four Bears, t4/13; cum 45K 5/13:
DateOil RunsMCF Sold

Chinese stocks rose the most today since July 11 after Chinese press reports indicated the government sees 7% growth as the bottom line it will tolerate for economic growth.
I've opined many, many times that China has a huge problem with employment and demographics. The one-child rule has resulted in a huge "unnatural" mismatched male/female ratio. If the Chinese government doesn't keep these young men employed, the government has a huge problem. China cannot afford a GDP below a certain level, and apparently right now they think it needs to be at least 7%. [I wouldn't bother listening to the video at the link; the story is hardly worth reading; the headline says it all.]

PSX IPO -- raging success: hugely bullish for PSX shareholders (read "Disclaimer" here). At SeekingAlpha:
Phillips 66 Partners (PSXP) began trading today on the NYSE and by all indications the IPO was a rousing success. The MLP opened at $28.98, well above the initial pricing of $23. An AP report this morning said PSXP raised $377.8 million from its initial public offering of stock. These proceeds were above expectations and is bullish for Phillips 66 (PSX).
PSX is up about 3% in mid-day trading. 
WSJ Links

Biogen: "Woman's Death Unlikely Due to Multiple Sclerosis Pill. Biogen Idec is investigating the death of a 59-year-old woman who had taken its new multiple-sclerosis pill Tecfidera but wasn't on the drug when she died." -- no link, and I did not read the story. The "sub-headline" seems to tell me all I need to know. I assume the ampicillin she wasn't taking did not cause her death either.

Apple: "Apple Tests Larger Screens for iPhones, iPads. Apple has asked its Asian suppliers for prototypes of screens larger than 4 inches for smartphones and under 13 inches for tablets, people at its suppliers said."  -- no link, and I did not read the story. Sometime ago I suggested that the iPhone and the iPad would morph into each other. In fact, it's just a matter of time before we start seeing tablet-size iPhones on tables in corporate committee rooms replacing conventional speaker phones. Memo to self: patent paperwork.

Unionsb: "A Backdoor Approach to Union Organizing. Nonprofit community groups called worker centers are helping to unionize workplaces, but they have more freedom than unions, which are constrained by national labor laws." -- no link, and I did not read the article, but this was the top story in The WSJ today. Smart folks.

North Dakota's abortion bill put on ice. -- no link; story easily found, if interested, but it's nice to see that The WSJ prints stories about North Dakota that don't just involve the Bakken. The ND abortion bill, by the way, was a political statement only; no one expected it to really survive the courts.

Unions: "Unions in Detroit See Clout Shrivel.  Detroit's municipal unions stepped up protests against proposals to slash worker benefits as part of the city's bankruptcy, but they face an uphill fight." -- no link; the Detroit story will play out over the next few years. It was interesting to hear on the radio yesterday that not one Congressman has placed a bill into consideration to bailout Detroit.

Syria, finally: "Assad Forces Step Up Operations in Damascus. Military forces of President Bashar al-Assad's regime, emboldened by recent gains in central Syria, have stepped up military operations against rebels in and around the capital Damascus, where they already have the upper hand." -- no link; this will go on for months, years.

Better late than never: "EU Puts Hezbollah on Terror ListA10 Europe's foreign ministers agreed to add the military wing of Lebanese Shiite group Hezbollah to the European Union's list of terrorist organizations." -- no link; does anyone even care?

Wow, wow, wow: I can't remember if I've blogged about Lego, but I've opined often what a great comeback Lego made some years ago. My younger daughter grew up with Lego blocks in Europe, and continues to enjoy them to this day. I cannot pass up a new Lego set without buying it, or thinking about buying it. Now, a book on Legos and a WSJ book review:
The patents on the core product of the Lego Group—its famous build-it-yourself bricks—expired decades ago, yet the company seems to be thriving: Its gross profit margin of 71% is far higher than that of other major toy companies and, for that matter, Apple.
It was not always thus. Only 10 years ago, Lego was posting record losses; retailers were backlogged with unsold Lego toys; and it was unclear whether Lego would survive as an independent company. An internal review discovered that 94% of the sets in its product line were unprofitable. The turnaround story that followed is well told by Wharton professor David Robertson in "Brick by Brick."
As a family-owned Danish company, Lego isn't watched closely by the American business press. Yet its story may hold as many lessons as those of companies whose chief executives adorn magazine covers. In Mr. Robertson's diagnosis, Lego's near-collapse came not from a lack of innovation but from an excess of it—more precisely, from innovation without discipline.
 Yes, I will buy this book at "full price"; I won't wait for remaindered copies.