MRO Targeting The Tyler In Southwest Corner Of The State; About 30 Miles Northeast Of Bowman

Someone was asking me just the other day -- I think it was an e-mail from a reader -- if I had any updates on drilling in the Tyler formation.

Don just alerted me to an MRO rig-on-site that will be targeting the Tyler formation. See this post which has been updated.

The significance of these MRO wells. 

Eleven (11) New Permits -- The Williston Basin, North Dakota, USA; Halcon With A Big Well

Active rigs: 184 (steady, trending down)

Eleven (11) new permits --

• Operators: BR (3), QEP (3), CLR (2), EOG (2), Fidelity
• Fields: Charlie Bob (McKenzie), Ukrainia (Billings), Van Hook (Mountrail), Hawkeye (McKenzie), Stanley (Mountrail)
• Comments:

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

Wells coming off the confidential list Friday:

• 23905, 536, Fidelity, Cliff 12-24H-25, Alger, t4/13; cum 31K 7/13;
• 24338, 2,576, HRC, Fort Berthold 148-94-33D28-4H, McGregory Buttes, t8/13; cum --
• 24726, drl, Hess, HA-Nelson 152-95-3328H-3, Hawkeye, no production data,
• 24730, 578, Whiting, Finsaas 31-16-2H, Hay Creek, t3/13; cum 39K 7/13;
• 24789, drl, KOG, Smokey 13-7-19-13H3, Pembroke, no production data,
• 25099, drl, MRO, Jenson 34-11TFH, Reunion Bay, no production data,

Team Oracle Wins America's Cup; Story For The Ages

I first saw this in today's WSJ; it's an incredible story.

First, the NY Times report: Oracle completes voyage to history, winning America's Cup.

But while it once looked all but certain that Spithill, the Oracle Team USA skipper and helmsman, and his crew mates were going to end up as feather dusters in San Francisco, they were ultimately able to turn Fischer’s catchphrase on its head, pulling off the greatest comeback in America’s Cup history and one of the most dramatic in any sport.

Trailing by 8-1 to the challenger, Emirates Team New Zealand, and within one defeat of losing the Cup, Oracle continued to upgrade its boat and its confidence and — against overwhelming odds and a team of veteran sailors — proceeded to win an unprecedented eight straight races to defend the trophy.

The final blow was delivered Wednesday in the first winner-take-all race since 1983. It was a grand spectacle, with the biggest and loudest crowd of the regatta gathered onshore and the two predatorial catamarans crossing the start line in near unison at well over 30 knots.

From The WSJ: how Oracle saved the America's Cup.

Oracle Team USA, the resilient crew of sailors who capped an epic comeback Wednesday to win the America's Cup, had spent hundreds of hours at sea over the past three years preparing to win this 162-year-old yacht race.

But in the end, the victory came down to one of the oldest methods of rescue in team sports: calling a timeout to make adjustments.

The defending America's Cup champion Oracle team, which is financed by billionaire Oracle Corp. founder Larry Ellison, struggled early in the final, falling behind Emirates Team New Zealand 8 races to 1. Then, something clicked. The Oracle boat began to dominate, erasing deficits on San Francisco Bay with ease and accelerating to win by sometimes yawning margins. It finished the comeback Wednesday to take the first-to-nine-wins series, 9-8. 

The Kiwis, who were funded by the New Zealand government and a mishmash of corporate sponsors, suddenly looked hapless. By any reasonable standard, the eight straight wins Oracle reeled off to win the Cup rank among the most impressive comebacks in the history of sports. "These guys just showed so much heart," said Oracle skipper Jimmy Spithill.

Given the extraordinary complexity of these seven-ton double-hulled, carbon-fiber catamarans, which were built expressly for this iteration of the race, it's hard for everyday sailors, let alone engineers, to know what really makes them tick. And given that the teams are free to tweak the boats between races, the puzzle is even more complex. 

So much more at both links.

I was surprised that the US winning America's Cup was not the lead story at Yahoo!Sport. The lead story on Yahoo!Sports front page: something about coaches and the union. Incredible lack of insight. Of the top ten stories linked at the top right of that page, winning Ameria's Cup was #9. The top story: man stabbed to death near San Francisco ballpark. Okay.

If it bleeds, it leads.

Closer Look At RBN Energy's Update On The Bakken

Yesterday, RBN Energy had a great post on the Bakken. I linked it but did not say much about it.

Because it was all about the Bakken, I thought I would go through some of the high points made by Sandy Felden. Some data points:

The numbers have certainly outpaced earlier predictions

As [RBN Energy] pointed out recently Bentek was projecting as recently as 2011 that North Dakota crude oil production would not reach 875 Mb/d until at least 2017 – four years from now. Now output from North Dakota is on course to reach 1 MMb/d by the end of 2013. If you add recent production data from Montana (~75 Mb/d) and South Dakota (~5 Mb/d), which is only available through May 2013, the total US Williston Basin production is somewhere north of 950 Mb/d today.

Rig counts have come down a bit, but drilling has increased

The data shows the rig count dropping off in September 2012 (187 rigs) and staying at that level since then even as production continues its upward trajectory. As [RBN Energy] predicted in [its] 2013 New Year Prognostications, faster drill times, more efficient operations, multi-pad drilling and a variety of technological enhancements have resulted in increasing productivity from each rig in the US. That translates into more barrels from each rig that is working.  So fewer rigs are needed to generate the same number of new barrels.

Crude-by-rail (CBR)

As [RBN Energy has] relayed on many occasions, the build out of twenty crude rail-loading terminals in North Dakota during 2012 brought relief to Bakken producers by facilitating a way to bypass the Midwest pipeline logjam. Although rail transportation is typically more expensive than pipelines, railroad shippers could deliver direct to coastal locations where prices were considerably higher – justifying the extra freight.

The graph, from the North Dakota Pipeline Authority is simply incredible:

Again, from RBN Energy: The use of rail to ship Bakken crude to market may have declined over the past few months but the terminals have not gone away. And the pipelines that were sucking air back in April have won some new business but they are still not running at capacity. That is because Bakken producers now have an abundance of crude takeaway capacity on both rail and pipeline – even as production is surging.

Summary

Bakken crude oil production continues to increase relentlessly. Overall production and well productivity are higher than anyone expected a couple of short years ago. Along the way the transportation hiccups have not had any noticeable impact on output. Producer and shipper ingenuity in the Bakken devised the crude-by-rail workaround to bypass the Midwest logjam roadblock to market. Now pipeline and rail capacity together offer more than enough space to get expanding crude production to market this year and next. 

Almost the entire narrative comes from RBN Energy; please go to the link to see the entire story and additional graphics, but it was important enough in the Bakken story that I did not want the narrative to be lost.

Around The Horn; Market Starts Out Strong

Opening. Boring. But WLL continues to move up.

[Market close: global recession. What global recession? NNike says its first-quarter net income rose 38%, boosted by strong demand for its namesake brand and revenue growth in every region except China. Shares are up 6% in after-hours trading.][Market close: WLL, KOG, and OAS all trade at new highs today.]

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

KOG is up almost 2%, hitting a new high, $11.70.

Oasis is up almost a percent. It might hit a new high today.

HK is up a couple of pennies. I used to consider KOG the bellwether for the Bakken (I personally don't own any KOG), but now, for the short term, HK is a better Bakken indicator in my mind.

CVX, COP, XOM: all three "green" but inconsequential at the moment.

EOG is down slightly, but it must be due to profit-taking.

CHK: back up a bit, but a dollar under its 52-week high.

SD: green, but barely; flat.

AMZG: no trades yet/or flat.

TPLM: up about a percent.

UNP up slightly. It looks like everything is pretty much following the market in general, which is flat at the moment (8:42 CT).

I don't follow BNSF (BRK) much any more; BRK follows the market in general.

ENB, EEP: both up; in a trading range. Boring.

EPD: up slightly.

SRE up about half a percent.

TransCanada: up slightly.

CLR: up about 70 cents; below its 52-week high.

WLL: up over 2%; up another $1.25; trading at a new high.

Apple Chips

Link at SeekingAlpha. The article is all about investing but I was more interested in what the writer had to say about Apple and chips. It is all very, very interesting.

The most objective way to analyze a chip's power and performance is through benchmarking. In this form, Apple's chip beats everything else on the market by a significant margin, even though specs-wise it appears to be less powerful.

The more one looks into the iPhone 5s' development, the clearer it becomes that it has absolutely no need for Intel's more expensive chips in the foreseeable future. This becomes even more evident when one analyzes how Apple achieved this.

1. Apple started with licensed architecture from ARM - Intel does not license its architecture.

2. Apple designed its chip in-house, then outsourced the manufacturing to Samsung, most likely for minuscule margins. This kind of foundry business is not an appealing business for Intel - but even if it was, Apple has shown that it does not need the latest foundry tech (Intel's biggest strength) to create the most advanced mobile chip.

3. Apple's new chip is 64-bit. This poses another danger to Intel, as it most likely marks the rest of the industry's move to 64-bit for mobile. With this, mobile chips based on ARM's architecture will increasingly encroach on Intel's business.

4. Perhaps most importantly, Apple was only able to do this by integrating vertically. I mentioned earlier that at first glance, Apple's chip does not seem very powerful. However, because Apple designs its chips along with its software, it is able to optimize them more effectively than all of its competitors. This likely marks a trend in which leaders will imitate this model (if they can). Samsung already manufactures its own chips, and will most likely be working hard to produce something that competes with the A7, not just through hardware, but by optimizing the hardware to their own software.

The Apple story is simply amazing. Again, Apple is positioning itself to be as self-sufficient as possible.

Initial Unemployment Claims Fall; Will Apple Destroy These Companies?

Of course the data is no longer believable, and I won't be linking this data to the page where I track this date because it has lost its credibility, but for the record, the AP is reporting:

The number of Americans seeking unemployment benefits fell 5,000 last week to a seasonally adjusted 305,000, the second-lowest level in six years. Steady declines in applications show that very few companies are laying off workers.

The Labor Department says the less volatile four-week average declined 7,000 to 308,000, the lowest since June 2007.

I hope to start linking this data to the original page once the data seems to be back on track. 

How is this affecting futures? Dow futures are now up 33, and oil is up 39 cents. It looks like a nice day for the market.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this site or anything you think you might have read at this site.

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Some pundits suggest Apple could severely hurt Pandora and Sirius XM. I don't know, I don't care; I don't have a dog in that fight.

All I know is that this morning, while updating the blog, I was sent a note by Apple that it would be updating iTunes/iRadio on my computer this morning. All I had to do was click on "Install." And then it happened. My iTunes/iRadio was updated, and I didn't have to do a thing, except click on "Install." I did not even have to restart my computer.

I listened to Pandora some months ago, maybe more than a year ago, but then lost interest. There seemed to be restrictions, and "they" decided what songs I wanted to listen to based on my previous listening habits. Unfortunately, my listening habits change over time. iRadio and iTunes will offer more options, remain free (as far as I know) -- and if not entirely free, it will certainly compete with Pandora and Sirius XM.

I don't have Sirius XM (of course, I barely have a car) but I do know there's an annual fee that is not trivial, but I think the service is very, very easy to subscribe to. But I also know that most luxury cars now have USB "outlets" in which folks connect this iPhones, iPads, etc, for iTunes and iRadio.

And so it goes.

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A Note to The Granddaughters

It's been a long time since I've written a note to the granddaughters. My wife and I, sometimes together, sometimes separately, provide 24/7 care for our two granddaughters. We've been doing this since Christmas, 2007. I have done most of it and will probably continue doing most of that child care for the next seven years.

I enjoy everything about taking care of them: making their meals (breakfast and dinner); walking them to school; swimming with them; taking them to soccer; helping them with their schoolwork, etc.

The younger one has the healthiest eating habits of all: most fruits and vegetables, apples and carrots.

The older one, however, is a cook's dream. She loves what I cook. My specialty has been the six-minute soft-hard boiled egg for breakfast. It consistently comes out perfectly.

Sometime ago I started grilling steaks for the older one. She loves steak.

Years ago, before I had a salary, I subscribed to The New Yorker. I recall seeing one-inch column ads for "Omaha Steaks." That would have been forty years ago. I was too poor to even consider "Omaha Steaks" but was always curious.

I do not know how it started. But about a year ago I ordered my first "Omaha Steak." Wow.

I am now a regular. I send "Omaha Steaks" to my younger daughter and son-in-law (he loves them), and to my dad, occasionally. I will start sending them to my younger daughter and son-in-law on a regular basis.

I order for myself, pretty much once a month, and always keep my freezer stocked.

I have no idea how their prices compare to what I would pay at the local store for the same quality and experience but I assume it is significantly more. But I don't know. But for Bakken mineral owners who have additional discretionary income, I heartily recommend trying "Omaha Steaks."

You will pay full price for the first order but after that you will get regular mailings offering huge discounts. Shipping is generally $20 but even shipping costs are waived periodically. Some readers will be fortunate enough to have an "Omaha Steak" store within driving distance. (My brother-in-law has an "Omaha-Steak" within walking distance.)

I honestly don't know what makes "Omaha Steak" so appealing for me. But here are some of the reasons.

Consistency.

One of the reasons McDonald's did so well from the beginning was that folks knew exactly what they were going to get each time they walked in.

This is the same with "Omaha Steaks." I now know exactly what I'm getting, and I know precisely how to cook each type of steak. I know precisely how to cook the sides (various types of potatoes, generally) and the desserts.

I know precisely when to take them out of the freezer to thaw and when to cook them. There is no waste.

The consistency cannot be emphasized enough. Whenever I went to the supermarket in the past, I would do what I see everyone else do: go through the various cuts to look for what looked good, the right size, and the right price. With "Omaha Steak" -- none of that. When you order filet mignon, you know exactly what you are going to get. And that's the same with every other cut of "Omaha Steak."

Marketing and execution.

Like Apple Inc, "Omaha Steak" has their marketing down perfectly. Once you order the first time, you will be inundated with circulars/advertisements in your mailbox, and the occasional phone call. All the mail and phone calls irritate some folks; it used to irritate me. But I've gotten used to it. Once you understand the method to their madness you will become hooked.

The cuts are on the small size, the size you might find in an upscale French restaurant. I'm sure many folks eat more than one cut or one portion at a sitting. I discipline myself to one portion at a sitting; it certainly is a healthier way of eating.

It's funny how things work out. Forty years ago "Omaha Steak" was a luxury I could not afford. These days "Omaha Steak" is a luxury I cannot afford not to have.

Oh, I completely forgot what led me to this note. My older granddaughter absolutely loves "Omaha Steak." Her favorite are the very, very thick filet mignons wrapped in bacon. Last night she had the first in a long time. She says she was waiting for a filet mignon/bacon ever since they left Boston several months ago. About a month ago, she reminded me to order those with my next order.

So, I cooked a filet mignon/bacon for her last night. It came out perfectly. She gave it a "five-star" rating (her highest). Wow, she enjoyed it. It was a lot of fun. I also cooked an "Omaha Steak" chicken breast for the younger daughter who ate about half of it; the older granddaughter had the rest.

So, now, like Oprah, a few of my favorites: Omaha Steak; Whataburger; Apple Inc; the Target Red Card; and bicycles.

Next month, if I remember, I might write about KHS bikes. 

News, Views, Links -- Part V; Op-Ed From WSJ; A Sinkhole In Louisiana

ObamaCare will collapse under its own weight -- op-ed, WSJ.

What the GOP's Defund-ObamaCare Caucus is failing to see is that ObamaCare is no longer just ObamaCare. It is about something that is beyond the reach of a congressional vote.

As its Oct. 1 implementation date arrives, ObamaCare is the biggest bet that American liberalism has made in 80 years on its foundational beliefs. This thing called "ObamaCare" carries on its back all the justifications, hopes and dreams of the entitlement state. The chance is at hand to let its political underpinnings collapse, perhaps permanently.

If ObamaCare fails, or seriously falters, the entitlement state will suffer a historic loss of credibility with the American people. It will finally be vulnerable to challenge and fundamental change. But no mere congressional vote can achieve that. Only the American people can kill ObamaCare.

No matter what Sen. Ted Cruz and his allies do, ObamaCare won't die. It would return another day in some other incarnation. The Democrats would argue, rightly, that the ideas inside ObamaCare weren't defeated. What the Democrats would lose is a vote in Congress, nothing more.

A political idea, once it becomes a national program, achieves legitimacy with the public. Over time, that legitimacy deepens. So it has been with the idea of national social insurance. 

Of course, that is just the beginning. Go to the link to see why ObamaCare will collapse. The writer has it 30% correct. He is just missing one piece.  A piece in my mind that is the 800-pound gorilla. I'm reminded of the 800-pound gorilla with regard to O'BamaCare every time I visit Wal-Mart.

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The other day I mentioned that Disneyland will tweak its policy of letting the physically challenged move to the head of the line. Today, the WSJ has a short op-ed on the same.

The New York Times

This is fascinating. I think we first saw it on YouTube. Now it's the lead story on the front page of the NYT under the photograph: Almost nothing in Bayou Corne, La., has been the same since a voracious sinkhole formed in 2012, and a year later, it’s still swallowing trees and belching methane: the Bayou Corne sinkhole. 

More than a year after it appeared, the Bayou Corne sinkhole is about 25 acres and still growing, almost as big as 20 football fields, lazily biting off chunks of forest and creeping hungrily toward an earthen berm built to contain its oily waters. It has its own Facebook page and its own groupies, conspiracy theorists who insist the pit is somehow linked to the Gulf of Mexico 50 miles south and the earthquake-prone New Madrid fault 450 miles north. It has confounded geologists who have struggled to explain this scar in the earth.

And it has split this unincorporated hamlet of about 300 people into two camps: the hopeful, like Mr. Landry, who believe that things will eventually settle down, and the despairing, who have mostly fled or plan to, and blame their misery on state and corporate officials. 

Is Occidental Petroleum involved? See the story at the link.

The Los Angeles Times

A lot of interesting articles but nothing for the blog today.

Natural Gas Boom Powers Sea-Going Shipping

Another huge story in today's WSJ: the US natural gas boom is powering ocean shipping.

Coming U.S. regulations on engine exhaust and cheap natural gas are encouraging some commercial marine operators to power their vessels with liquefied natural gas instead of diesel.

Ferries, tugboats, cruise ships and cargo vessels are mostly powered by diesel and marine oil, which have higher sulfur and nitrogen oxide emissions than the diesel used in trucks and cars. The regulations will require ships operating within 200 miles of the U.S. coast to reduce sulfur emissions beginning in 2015.

Additional regulations that take effect in 2016 would require exhaust treatment to reduce nitrogen oxide emissions in new vessels. Both sets of standards are expected to drive the adoption of cleaner burning, and less expensive, liquefied natural gas, which sells for about $1.70 a gallon, about half the cost of marine diesel. 

I may not like (or believe in) anthropogenic global warming and I certainly don't like the war on coal, etc., etc., but, as I've said many, many times: with huge government policy shifts, there will be winners and there will be losers. Natural gas and the Bakken is a winner right now.

How big is this?

The maritime industry is one of the largest commercial consumers of fuel in the U.S. Sales of diesel fuel for marine vessels reached 2.1 billion gallons in 2011, the latest year available from the U.S. Energy Information Administration. An additional 4.5 billion gallons of marine oil was sold in 2011. Marine oil is a thick oil typically burned by large oceangoing cargo ships.

By comparison, the U.S. railroad industry consumed 3.1 billion gallons of diesel in 2011, while the construction industry used 1.8 billion gallons. The U.S. trucking industry bought more than 36 billion gallons of fuel.

Firms Punt Health Plans -- The WSJ

The MDW has been reporting this for at least a year.

At the end of the day, investors are going to do very, very well with O'BamaCare. The federal health program will be a trainwreck for millions of Americans, but investors are going to do quite well.

Top story in the second section of today's Wall Street Journal: firms punt health plans.

The nation's largest provider of security guards plans to discontinue its lowest-cost health plans and steer roughly 55,000 workers to new government-sponsored insurance exchanges for coverage next year, in the latest sign of the fraying ties between employment and health care.

The U.S. arm of Sweden's Securitas AB is among more than 1,200 employers that offer the kind of bare-bones health plans that must be phased out beginning Jan. 1 under the health-care law. Nearly four million people are enrolled in these so-called mini-med plans, which cap benefits to participants, sometimes at as little as $3,000 a year.

"The mini-meds go away and we're not replacing them," said Jim McNulty, a spokesman for Securitas's U.S. operation. "Their option is to go to the exchanges."

Other big employers, including Darden Restaurants Inc., Home Depot Inc. and Trader Joe's Co., say they will stop offering health insurance to part-time workers, and will direct those employees to the state exchanges. Darden, Home Depot and Trader Joe's previously offered mini-meds to their part timers.

There are a number of story lines here; I don't have time to go into them all -- I've touched on them numerous times in the past, but O'BamaCare is going to be bigger than anyone realizes. 

I track O'BamaCare cost shifting here, but I may quit. I certainly won't be posting all examples. The trend is obvious. Any company not moving their employees to O'BamaCare will regret it. My hunch is that Warren Buffett is directing all his companies to move their employees to O'BamaCare as fast as they can. Jack Welch, if he were still at GE, would have done this Day 1.

Deep in the story, this bombshell:

In July the Obama administration may have inadvertently opened a window for some companies to drop coverage by imposing a yearlong delay on penalties for employers that don't offer health insurance.

Until then, Securitas executives said, they had planned to offer guards a health plan with more benefits, but which would have required employees to pay more to participate. Executives subsequently changed course, deciding not to offer insurance to most guards next year, and to develop offerings that comply with the health law for 2015.

News, Views, And Links -- Part IV; On Again, Off Again, Can't We Get Our Story Straight? Shipping Canadian Coal Through The Arctic

A while ago we were told it was so warm this year, the Arctic would be ice-free, allowing cargo ships to take a shorter route from South Korea to Norway, via the Arctic.

Then we heard that the Arctic had frozen over earlier this year than previously, and thus the goal of shipping over the top of the globe was less likely.

Now, The WSJ is reporting that a cargo ship has carved a path in the Arctic Sea:

A coal-laden cargo ship is on track to become the first bulk carrier to traverse the Northwest Passage through Canada's Arctic waters, blazing a trail that shippers hope will become a time-saving route in global trade.

Traveling with a Canadian Coast Guard escort, the Nordic Orion underscores Ottawa's recent efforts to bolster a thin presence in its vast Arctic territory. Experts say the country already has fallen behind Russia, which is developing a series of Arctic ports and has a fleet of ice breakers keeping open its competing Northern Sea Route.

The vessel, which left Vancouver Sept. 17 carrying 15,000 metric tons of coal, is off the coast of Greenland and is expected to dock in Pori, Finland, next week after chugging through waters once choked almost year-round with thick sea ice.

In recent years, the Arctic region has drawn interest on the international stage as global warming makes access to resource development easier and opens these trade routes to more ships, even as questions remain about the Canadian sea lane's commercial viability. 

The big story, of course, was the route through the Arctic.

But look at the cargo: coal. Whoo-ah!

Electrical Failure Outside New York City Shuts Down Amtrak: "Broad Disruption For Northeast Trains"

The other day I posted a new energy-related poll asking why folks thought Apple Inc had made the decision to rely completely on renewable energy, particularly solar energy. Apple Inc is co-locating solar farms next to their data farms. I asked, "why"?

It was a rhetorical question. I already knew the answer. I was curious what percent of MDW readership knew the correct answer.

Today, a front section article says it all. Remember: Apple Inc is building data centers in Oregon, California, North Carolina, and elsewhere (I suppose) for cloud computing. Failure is not an option. so this article in today's WSJ explains why Apple has made the decision to with its own solar energy.

A power failure outside New York City could disrupt some Amtrak service in the Northeast for up to three weeks, government officials said Wednesday.

The failure of a high-voltage feeder line in Mount Vernon, N.Y., early Wednesday morning cut electric power to heavily traveled tracks shared by Amtrak and the Metro-North commuter railroad. A second feeder line was already out of service for a repair project when the first one failed.

Both railroads scrambled to supplement service with diesel locomotives, but they expected to have only a fraction of their normal capacity available for Thursday morning's rush hour. Metro-North's contingency plans include shuttle buses.

Without electricity for its overhead wires, Amtrak announced it would halt service on its Acela express trains between New York and Boston through Thursday. Regional trains will run between those two cities, but with expected delays of an hour or more.

This had nothing to do with the war on coal, but a few years from now it might.  Steve Jobs and Apple skate to where the puck will be. The "war on coal" and the deterioration of the nation's electrical grid is a 1-2 punch that Apple was a big enough of a concern for Apple to go its own way. Going solar was financially and politically the only option. Apple never would have gotten permits for its own fossil fuel power plants in today's political climate.

Thursday Morning News, Views, And Links -- Part III Or Thereabouts -- The US Is Running Out Of Cash More Quickly Than Anticipated; Egypt Stomping On The Islamists;

The Wall Street Journal

A fair number of interesting articles. 

This might be the most interesting. The top stop, front page: the US is running out of cash more quickly than anticipated. I don't know if folks have been following the story that Drudge linked for several days running. Drudge noted that America's debt -- which rises every day, like clockwork -- had all of a sudden quit rising. For about a hundred days, or something like that, the US debt clock was stuck at some $16 trillion and change. That had never happened before -- that to the very penny, the US debt had not changed. Of course, there was something nefarious going on; it would be literally impossible for the debt not to change by even one penny from day to day. I suggested that the government was scrambling daily to come up with ways to shift money from one account to another account to keep various agencies of the government running. It looks like I might not have been too far off the mark.

It looks like the government is closer to running out of "cash on hand" than thought just a few weeks ago. The new "drop dead" day is October 17th.

Treasury Secretary Jacob Lew said the government would be left with just $30 billion cash on hand "no later" than Oct. 17, and the Congressional Budget Office predicted these funds would be used up between Oct. 22 and Oct. 31 if legislation isn't enacted to raise the ceiling on government borrowing.

That little cash could make it difficult, if not impossible, for the government to pay the roughly $55 billion in Social Security, Medicare and military payments due Nov. 1.

Lawmakers on Wednesday cast about for options to keep the government funded beyond Oct. 1, a separate deadline that is offering a taste of what a debt-ceiling fight might look like later in October. Democrats and Republicans remain far apart on how to avoid a government shutdown, with no path to a deal in sight.

Unlike the previous budget battles that have consumed the federal government since 2011, there appear to be no back-room negotiations aimed at crafting a comprehensive deal that might offer a respite, or even a small deal to get past the looming deadlines.

If the government does not meet its obligations to pay the military or social security recipients by November 1, 2013, my hunch is they will find a way to pay them by November 2, 2013. 

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This, of course, was predictable, set in motion some years ago when activists succeeded in limiting mandatory treatment for the mentally ill. I was in graduate school out in California and had a front row seat, watching this debacle unfold. It took awhile for mainstream media to see it, but the numbers are too high to ignore:

America's lockups are its new asylums. After scores of state mental institutions were closed beginning in the 1970s, few alternatives materialized. Many of the afflicted wound up on the streets, where, untreated, they became more vulnerable to joblessness, drug abuse and crime.

The country's three biggest jail systems—Cook County, in Illinois; Los Angeles County; and New York City—are on the front lines. With more than 11,000 prisoners under treatment on any given day, they represent by far the largest mental-health treatment facilities in the country. By comparison, the three largest state-run mental hospitals have a combined 4,000 beds.

Put another way, the number of mentally ill prisoners the three facilities handle daily is equal to 28% of all beds in the nation's 213 state psychiatric hospitals, according to the National Association of State Mental Health Program Directors Research Institute Inc.

Wow, that brings back interesting memories. I was in training from 1973 - 1980, first in southern California at the Los Angeles County Hospital, and then northern California. I saw firsthand changes affecting the mentally ill happen almost overnight, and it was clear to me then that the results would not be good.

I'm glad to be out of that quagmire, writing about the Bakken instead.

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US household wealth has hit new peak. 

Americans' household finances have made up most of the ground lost in the recession, but rising interest rates and renewed turmoil in Washington are threatening to short-circuit that recovery.

Rebounding home prices and a rising stock market helped boost household wealth by more than $1.3 trillion in the second quarter of this year, Federal Reserve data showed Wednesday. The gain marked the seventh consecutive quarterly increase and pushed household net worth—the value of homes, stocks and other assets minus debts and other liabilities—to $74.8 trillion, an all-time high. Adjusting for inflation, net worth is about 4% below its peak, meaning households have made back about 80% of what they lost during the bust.

Just in time for O'BamaCare to kick in. Remember, Mr Cruz warned us for 21 hours. 

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Speaking of wealth, the French continue to have a problem with wealth:

The French government unveiled a 2014 budget Wednesday that continues to rely on higher taxes, threatening to further dent household spending power and economic growth, as well as President François Hollande's record low popularity.

Faced with growing discontent over high taxation, Mr. Hollande's government emphasized efforts in the budget to improve France's public finances by curbing spending. But net new taxes are still set to increase by €3 billion, with households shouldering the greatest burden, including an increase in the sales tax.

The measures add to a tax burden that is already among the highest in Europe and are likely to weigh on the modest recovery in France, the eurozone's second-largest economy, where households account for the largest component of gross domestic product.

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Wow, this is really quite amazing. Egypt is really stomping on the Islamists. I can't remember where I read it but there was a great article somewhere about "revenge in the Mideast." When the tables turn in the Mideast, revenge is incredible; something we don't see in the western world. Think the Marshall Plan after WWII, and how we rebuilt Japan after the same war. But not in Egypt. First, the Muslim Brotherhood was banned -- just days ago. Today, it is reported that Egypt shuts down an Islamist newspaper.

Egypt's interim government closed the Muslim Brotherhood's last remaining media outlet and issued coverage directives to all Egyptian television stations.

The moves were part of a broad media crackdown that some journalists said recalled the free-speech restrictions of the country's authoritarian past.

The government closed the Brotherhood's "Freedom and Justice" newspaper late Tuesday because of the paper's stance against the military's ouster of Muslim Brotherhood-backed President Mohammed Morsi in early July, staffers at the publication said.

Hours later, the military-backed cabinet urged public and private television channels to carry the banner "Egypt on the road to democracy" on its broadcasts "in order to reflect the new democratic path to development and construction," the government said.

It looks like Egypt has had enough. Wow.

Early Morning Links, Views, News, And Links; 2 Million BOPD -- Goldman Sachs Must Have Just Read The Bentek Study

Futures point to a higher opening; oil is holding its own, about $103, which is just a bit higher than the sweet spot of $91 to $100/bbl.

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

Earlier this week, shares of some Bakken operators surged based on recommendations from Goldman Sachs. One reader noted that maybe Wall Street has finally discovered the Bakken. It's only been 13 years since the Bakken boom began in Montana, and six years since the boom began in North Dakota.

Here is more evidence that Wall Street might have found the Bakken. Seeking Alpha is reporting: Bakken oil producers begin to outperform the market.

Bakken oil producers Kodiak Oil & Gas, Whiting Petroleum, Continental Resources, and Oasis Petroleum  have really taken off in September and have outperformed the S&P 500 by more than 2.5x over the past three months.

Upcoming Q3 earnings are expected to ride the wave of growing production and recent higher oil prices. In addition, analysts at Goldman Sachs predicted Bakken production growth will exceed Wall Street expectations. The seemed to put pep-in-the-step of the group.

The Goldman report published a curve showing sharp production growth in the Bakken will continue until production levels off around 2 million bpd in the 2023 timeframe. Note the three benches of the Three Forks will be significant contributors to overall production growth over the next 10 years.

Yesterday, RBN Energy suggested the Bakken was on its way to one million bopd. Now, Goldman Sachs is suggesting 2 million bopd by 2023..

Folks might want to take a look at the Bentek study again (it is at the sidebar at the right). That was posted quite awhile ago. Bentek's conclusions: oil production will climb to 2.2 million bopd and gross gas production will top 3 billion cubic feet/day by the end of 2022.

Whether the Bakken reaches one million bopd or not, it is no longer a drilling issue. The roughnecks and frack teams can easily get us to that threshhold. Whether we do or don't is all geopolitical. 

Notes On A Three Forks Study In Northeast McKenzie County; Three Forks Wells 5ive Times Better Than A Middle Bakken Well

The lead sentence of this story should catch your attention.

Do you remember Lynn Helms saying that the Three Forks could be better than the Bakken? It might have been an understatement.

Here's the lead sentence, something I seldom do, putting it in bold red:

The recent discovery that wells drilled in northeastern McKenzie County have an initial production that is five times the amount of an average Bakken well has caught the attention of the oil and gas industry as well as the state of North Dakota.

And then this:

“An average Bakken well has an initial production, or starts on day one, producing generally 1,000 barrels of oil per day (bpd),” states Lynn Helms, director of Mineral Resources for the North Dakota Industrial Commission. “Wells that are produced in northeastern McKenzie County, have an initial production of roughly 5,000 bpd.”

And more:

To discover what makes this area so special, and to develop a more complete computer model of the Bakken and Three Forks Formations, a data compilation effort, called the Geothermal Gradient Study, is being conducted by the Department of Mineral Resources in northeast McKenzie County.

According to Helms, the area in northeastern McKenzie County happens to be the deepest part of the Williston Basin. It is the hottest and its layers are the thickest, which is why it has been targeted for this study.

The Geothermal Gradient Study has also targeted a high thermal gradient in eastern Bottineau and eastern Rolette counties, as well as around Bismarck, for similar reasons.
“These areas have abnormally high temperature and pressure,” states Helms.

But there is more to it than that. Helms states that the study looks at all the layers, when they were deposited, where they eroded to, how much they have been heated, whether they are buried to a certain depth, the amount of time over which this has occurred, and the amount of carbon that is being produced.

Go to the link for the rest of the story. It should water your eyes.

Of course, that water in your eyes might be allergies. The pollen, here in northern Texas, is really, really affecting my eyes and nose.

A huge "thank you" to a Minnesota reader for sending me this story. I would have missed it.

Thursday Morning News, Views, And Links; The Shale-Driven US Industrial Revival

Active rigs: 186

RBN Energy: another excellent essay on the US energy revolution.

The promise of vast quantities of shale gas at low and stable prices is sparking a U.S. industrial revival no one could have envisioned only a few years ago. Most of the big-dollar industrial expansion projects planned for later this decade are chemical facilities and gas-to-liquids (GTL) plants; many of the rest are steel mills and other energy-intensive industrial facilities.

If all—or even most—of these projects become a reality over the next five to 10 years, gas producers in the big shale plays would benefit from sharply higher demand and  the likelihood of higher prices as well. But how many industrial projects will actually be built? Will the forecasted industrial boom turn out to be more of a boomlet?  That could happen if several factors converge, like the approval of a few more LNG export terminals, environmental regulations that result in big growth in gas fired generation, and higher natural gas exports to Mexico. 

Any combination of these factors could result in significant upward pressure on domestic gas prices. In this two-part series we explore the potential for a shale-driven industrial revival.