Monday, December 2, 2013

Putting Things Into Perspective: Water, Fracking, And Green Energy

Just how much water does fracking require? Lots. But not as much as is required to produce/manufacture biodiesel.

The Dickinson Press is reporting:
Water is a precious resource: So, conservationists should smile at how little water fracking requires versus other energy sources. According to the U.S. Energy Department and the Ground Water Protection Council, it typically takes three gallons of water to produce 1 million British Thermal Units of energy from deep-shale natural gas/fracking. Nuclear power requires 11 gallons/million BTUs. Coal: 23 gallons. Corn ethanol? A whopping 15,800 gallons. And soy biodiesel requires nearly triple that amount: 44,500 gallons per million BTUs — 14,833 times the water needed for fracking.
But what about ground water pollution? The hysteria that fracking poisons drinking water lacks one key ingredient: Evidence. As former EPA chief Lisa Jackson testified before Congress in May 2011: “I’m not aware of any proven case where the fracking process itself has affected water.”

Update On The New And Improved ObamaCare Website; Security Not Built Into ObamaCare Website


Later, 10:46 pm CT, local:  in addition to everything else, it turns out the ObamaCare website was never built with "security built in." CNBC is reporting (for all the supporters of the ObamaCare website, note that these are not my comments. The story comes from CNBC):
It could take a year to secure the risk of "high exposures" of personal information on the federal Obamacare online exchange, a cybersecurity expert told CNBC on Monday.

"When you develop a website, you develop it with security in mind. And it doesn't appear to have happened this time," said David Kennedy, a so-called "white hat" hacker who tests online security by breaching websites. He testified on Capitol Hill about the flaws of last week. [Does anyone take Congressional testimony serious any more?]

"It's really hard to go back and fix the security around it because security wasn't built into it," said Kennedy, chief executive of TrustedSec. "We're talking multiple months to over a year to at least address some of the critical-to-high exposures on the website itself."
According to the Department of Health and Human Services, which oversaw the implementation of the website, the components used to build the site are compliant with standards set by Federal security authorities.
There you have it: the "components used to build the site are compliant with standards set by Federal security authorities." Reminder: Consumer Reports advises folks to avoid the ObamaCare website.

 Original Post

Cyber Monday for Amazon.

Amateur hour for ObamaCare.

As you read the report from the linked article below, remember that Amazon plans to ship more than 1 million separate items every hour today, cyber-Monday. I don't know how many visitors the Amazon website can handle at any given time, but I would assume the average order is four separate items, meaning that 250,000 folks are ordering every hour. In additon, two, three, four times that number maybe checking out prices and products at Amazon. And, when the 250,000 folks order their products every hour, they are also paying for them. Amazon has a cash flow.

On the other hand, after all the fixes, it appears that the ObamaCare website is unable to handle more than 40,000 users, even less than what they had "promised," and a fraction of what Amazon can handle. And from what I can tell, Amazon is selling hundreds of millions of products at millions of different prices, whereas the ObamaCare website offers a choice of probably not more than ten or twelve different plans. And no one is paying for their health care policies yet. The Washington Post is reporting:
Around 10 a.m. Monday morning, the Obama administration began using queuing software to meter entry into the Web site. At the time, the site had fewer than 40,000 users, somewhere in the "mid-30,000" range, as Medicare spokeswoman Julie Bataille put it.
"As we looked at error rates, that was the team's determination," Bataille said.
Most notably, the queuing system went up before hit its planned target of handling 50,000 concurrent users. When pressed on this point, Bataille referred to a separate metric that the administration has used to measure success: that 800,000 people be able to use the Web site in a single day.
"The idea is that we said the site would be able to handle 800,000 in the course of a day," Bataille said. "What we wanted to do today, with the new upgrades and to ensure the most optimal experience, was deploy the queuing that people would have the most optimal experience possible. We are working through this in real time."
One interesting "fix": if the system is overwhelmed it no longer says it is "down." Instead, the site says it is really, really busy, and tells the user to sign in anyway, and stand in the queue until some unknown time in the future.

This is truly amateur hour. Again, folks are simply looking at various insurance plans, and, at best, "putting a plan in their cart." They are not actually paying for anything. That software has not been written yet.

The insurance companies are paying claims as we speak and will be paying claims for high risk patients starting January 1, 2014. They need a cash flow -- i.e., premiums -- to pay those claims.

It matters now what the politicians say now, or how they count users, enrollees, buyers. Come next March 15th, and April 15th, and May 15th, if the insurance companies haven't enrolled 7 million new premium payers, these companies are going to start getting nervous. Next summer may be very, very interesting. I remember watching CNBC that summer day back in 2000 when the bubble burst and the market tanked. One almost gets the feeling that we may see a repeat for the smaller health insurance companies next summer.

I don't know, but no one is talking about cash flow. All anyone is talking about is accessing the ObamaCare website and it seems not to be happening.

For Investors Only -- Some Days Just Too Much News: QEP To Spin Off Midstream Operations; ONEOK With Huge Cash Flow, Raises Guidance; Forbes On Utilities, Falling Natural Gas Prices, Stable-Rising Electric Rates - What Gives?

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

I don't like grouping a lot of different stories on one post (exception: WSJ stories), but with so much news, some times  no choice.

Two readers alerted me to the ONEOK story; QEP, after splitting from Questar, is not spinnign off its midstream operations; and, the utility story in Forbes is even more interesting. I will have to read the Forbes story again to try to sort this out. It certainly contrary to general consensus.

The stories:

ONEOK: at SeekingAlpha -- press release --
ONEOK today announced that its 2014 cash flow available for dividends is expected to be in the range of $560 million to $640 million, reflecting higher anticipated cash distributions received from its general and limited partner interests in ONEOK Partners.  A Jan. 1, 2014, transaction effective date for the separation of the company's natural gas distribution segment into ONE Gas, Inc. has been assumed for 2014 guidance disclosure purposes, with the separation expected to be completed in the first quarter 2014.
The 2014 guidance also includes a projected 53 percent increase in ONEOK's 2014 dividend declared to $2.33 per share, compared with $1.52 per share declared for 2013, subject to board approval.  On a dividend paid basis, the 2014 dividend is expected to be $2.125 per share paid, compared with $1.48 per share paid in 2013, an increase of 44 percent.
The 53 percent dividend increase in 2014 is expected to consist of an initial increase to 56 cents per share for the quarter after the separation is completed, compared with the current quarterly dividend of 38 cents per share, a 47 percent increase; and subsequent quarterly dividend  increases of 1.5 cents per share in 2014. 
QEP: Yahoo!Finance is reporting --  to spin off midstream operations --
Oil and gas company QEP Resources said Monday it will separate its midstream business, QEP Field Services, into a separate company.
The move will include QEP's interest in QEP Midstream Partners. QEP said the move will create more value for shareholders and will allow the two businesses to allocate their resources independently and compete more effectively in their markets.
Midstream activities broadly refer to the processing, storage, marketing and shipping of oil and gas. Denver-based QEP also explores for oil and gas. 
I invest in neither QEP nor ONEOK but both these stories suggest how vibrant the Bakken is, and to think we are only just beginning in the Bakken. If you don't believe me, re-read recent comments by Harold Hamm, CLR/CEO.

Forbes article on utilities and roof-top solar:
The status quo – i.e., low natural gas prices and high electricity prices – is unsustainable. Consumers are expecting to benefit from cheap, abundant natural gas.
This is a very, very interesting article. I can't remember where I read it, possibly RBN Energy, but I've read the same thing somewhere else. Consumers and regulators are starting to notice that electricity rates are not falling despite falling natural gas prices. What gives? It looks like Forbes is asking the same question. And if consumers, regulators, Forbes are asking, the huge commercial users of electricity are probably asking also. What an incredible story going forward, which I've blogged about often: incredibly "cheap" energy in the US compared to what China and the EU will be facing.

I have to re-read the Forbes article: I have to get educated on the issue. I've been following Germany's problems and thought the US had similar risks; maybe not.

Sixteen (16) New Permits -- The Williston Basin, North Dakota, USA; Looks Like Zenergy Has A Nice Well In Foreman Butte

Active rigs: 192

Sixteen (16) new permits -- 
  • Operators: QEP (6), BR (5), MRO (3), Hess (2)
  • Fields: Truax (Williams), Johnson Corner (McKenzie), Reunion Bay (Mountrail), Grail (McKenzie), Keene (McKenzie)
  • Comments: QEP has permits for a 6-well pad in the Helis Grail, I believe
Wells coming off confidential list were reported earlier; see sidebar at the right.

Two (2) producing wells were completed:
  • 25029, 974, Hess, EN-Sorenson A 154-94-0211H-5,
  • 25283, 998, Hess, SC-Barney 154-98-1819H-2, 
If I have the permit locations for the new QEP wells, it looks like they will sit between these two wells (based on their names, I think all six new wells will run north, three 23/14 and three 22/15):
  • 21052, 1,684, QEP, Moberg 15-22/15H, t12/11; cum 177K 10/13;
  • 19379, 1,379, QEP, Kirkland 13-23/14H, t8/11; cum 181K 10/13;
Wells coming off the confidential list Tuesday:
  • 24741, 3,192, Zenergy, State Wolf 16-21H, Foreman Butte, t10/13; cum 16K 10/13;
  • 25088, drl, Statoil, Edna 11-2 4TFH, Camp, no production data,
  • 25089, drl, Statoil, Edna 11-2 3H, Camp, no production data,

Another Random Look At What Folks Are Getting For Royalty Payments In The Bakken

Another reader has provided some data on royalty payments.
These are from Bowman County, Denbury wells (not actually Bakken, more like Cedar Creek). There is a time lag so that when oil is sold in January, it may not be until March when the payments are made/received.
Here are the numbers for this calendar year:
  • Apr: $85.26 
  • May: $87.44 
  • June: $89.99 
  • July: $88.27 
  • Aug: $103.43 
  • Sept: $101.38 
  • Oct: $99.38 
  • Nov: $89.08
For other comparisons, click on "Pricing" in the tag below. 

BC/BS Thinks The Commissioner's Request Is BS

I don't know if folks recall: North Dakota was the ONLY state in which the insurance commissioner ASKED insurance companies to "roll back" their health care policies. Ha.

The early list (in order in which the announcements were made):
  • Washington State: NO (decision announced two hours after President Obama's decision)
  • Massachusetts: NO
  • Minnesota: NO 
  • New York State: NO
  • California: NO
  • North Dakota: YES (but premiums will likely increase for previous policy) 
BC/BS thinks the commissioner's request is BS.
Blue Cross Blue Shield of North Dakota will not extend coverage for health insurance plans it will discontinue because of new standards under the Affordable Care Act.
President Barack Obama decided to allow health insurers to extend coverage after many customers complained that they were losing coverage they wanted to maintain.
North Dakota Insurance Commissioner Adam Hamm recently asked insurers to consider extending coverage for the discontinued policies to give customers the option of keeping the policies.

For Investors Only -- Refiners; PSX Hits A New 52-Week High

PSX hits another 52-week high, and does it with a flourish, up an incredible 2.5% when the overall market was down today.

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 

Just last week, PSX hit a 52-week high

So, what's going with this refiner?

Minyanville is reporting:
If you ever get a chance to visit a refinery, do so. I will assure you of one thing, and that is you will depart the premises wondering how these things ever stay intact. Say “hot hydrocarbons under pressure” to yourself over and over to enhance the experience. Consider there are 206 refineries in North America and 43 of them have some form of unplanned outage at the time of this writing, including three whose stint on the DL is ascribed to “explosion/fire.”

This is somewhat different than the imbalance seen for farmers. If a drought hits, say, the western corn belt, prices rise but only a few farmers can take advantage of it as their crops have wilted, too. If a refiner’s neighbor starts putting on a fireworks show, well, let’s just say one firm’s unplanned outage is another firm’s unplanned price boost. 
And then this:
The higher crude oil feedstock costs led refiners to draw down inventories and postpone incremental purchases of crude oil; this process led first to backwardation in the crude oil forward curve, and then to a narrowing of the spread between Brent and West Texas Intermediate crude oil. By September, the whole process started to reverse as rising distillate fuel oil exports led to expanded refining margins from the revenue side, and as increased availability of shale oil from Texas’ Eagle Ford formation expanded margins from the cost side. Relative performance reversed and has advanced by 19.9% since September 23, 2013. This is in a mature industry, not some high-tech gizmo that will be here today and gone tomorrow.

Those rising exports of distillate, a category inclusive of heating oil, diesel fuel, and jet kerosene, are an interesting phenomenon themselves. The US has been willing, by law, to be very restrictive of crude oil exports on the indefensible grounds that such a move would benefit US consumers. This logic led to Alaska North Slope crude oil being shipped to west coast refineries when it could have been shipped more economically, after the costs of retrofitting for the highly naphthenic crude oil were taken into account. Similar and equally foolish arguments have been made with respect to natural gas exports; one might think few in Congress are familiar with the 18th century principles of comparative advantage in trade.

Refiners can add value to crude oil and then export these products. This does not work as well for less-fungible gasoline, though. The net effect is higher refinery utilization rates than would exist with slow US demand growth, gasoline production as a credit to the export of distillates, and downward pressure on gasoline prices for the US motorist. Refiners are capturing the economic rent of increased US crude oil production and are aiding the US trade balance as a positive externality. Not bad for a day’s work, is it?
 The article talks about the various refiners (at the link).

Update On The NDIC Oil And Gas Permits Issued in 2010

The status of the 1,678 oil and gas permits issued in calendar year 2010 by the NDIC.

My data will be at variance from the NDIC official data; my data comes from my database based on daily activity reports and will have some errors (but not many, I bet). My database gets better with each year; there were some inconsistencies in my 2010 database, but the overall numbers are probably pretty accurate.

So, here goes, using similar format to data for 2012 and 2011.

In calendar year 2010, the NDIC issued 1,678 oil and gas permits (this does not include permits for salt water disposal wells).

Permits: #18571 - #20246.
  • 1,433 have a reported IP. (An additional 11 wells were completed, but no IP provided.)
  • 147 permits were canceled (PNC; one was PNA) [8.76% of original permits issued.]
  • 23 wells are still on the confidential list. 
  • 13 wells were still "permit only" (LOC): nothing has yet happened at these permitted sites.
  • 20 wells were reported as dry or 0 bbls at time of testing. This does not include a fair number of wells with minimal production.
  • 10 wells on DRL status (some have been on DRL status so long, I think they are abandoned; paperwork has not been filed)
  • 24 permits had expired.
  • 1 well was actively producing; completed wells but no IPs reported. 
  • 4 "WI" (water injected) permits.
  • 2 "TA" (temporarily abandoned). These usually do not come back on line.
  •  4 wells are "AB" (abandoned).
Reported IPs:
  • Greater than 5,000 bbls: 1
  • 4,000 to 4,999 bbls: 6
  • 3,000 to 3,999 bbls: 20
  • 2,000 to 2,999 bbls: 132
  • 1,000 to 1,999 bbls: 350
  • 750 to 999 bbls:189
  • 500 to 749 bbls: 260
  • 250 to 499 bbls: 245
  • 100 to 249 bbls: 129
Compare with data points for 2012 permits.

Compare with data points for 2011 permits.

Update On The NDIC Oil And Gas Permits Issued in 2011

[Will be edited; updated; the wife is telling me "we have to go."]

The status of the 1,916 oil and gas permits issued in calendar year 2011 by the NDIC.

There were a few wells that are producing but no IPs were provided: those are designated "A-pro" (active, producing, but no IP provided). In some cases the IPs may have been in the file reports, but I did not look at all file reports.

My data will be at variance from the NDIC official data; my data comes from my database based on daily activity reports and will have some errors (but not many, I bet).

So, here goes.

In calendar year 2011, the NDIC issued 1,916 oil and gas permits (this does not include permits for salt water disposal wells.

Permits: #20247 - #22170 (with one Murex "R" will with original file #9446, but it was permitted to enter the Bakken under this file number).
  • 1,530 have a reported IP. (An additional 11 wells were completed, but no IP provided.)
  • 157 permits were canceled (PNC). 
  • 104 wells are still on the confidential list. 
  • 35 wells were still "permit only" (LOC): nothing has yet happened at these permitted sites.
  • 23 wells were reported as dry. This does not include a few wells with minimal production.
  • 14 wells on DRL status.
  • 13 permits had expired.
  • 11 wells are actively producing; completed wells but no IPs reported.
  • 8 wells have been shut in (SI).
  • 6 wells are producing but still on confidential list.  
  • 5 "WI" (water injected) permits.
  • 2 "TA" (temporarily abandoned). These usually do not come back on line.
  • 2 "PA" (permanently abandoned).
  • 2 well are "AB" (abandoned). 
  • 1 well on "IA" (inactive) status. These generally are returned to production. 
  • 1 natural gas well; producing both natural gas and oil, but drilled for natural gas.
Reported IPs:
  • Greater than 5,000 bbls: 1
  • 4,000 to 4,999 bbls: 9
  • 3,000 to 3,999 bbls: 48
  • 2,000 to 2,999 bbls: 155
  • 1,000 to 1,999 bbls: 373
  • 750 to 999 bbls: 193
  • 500 to 749 bbls: 303
  • 250 to 499 bbls: 244
  • 100 to 249 bbls: 119
Compare with data points for 2012 permits.


My wife, fluent in Spanish noted this from the ObamaCare website (I had missed it, Spanish not being my first language):

Note the huge 40% "coinsurance" that must still be met even after the $10,000 annual deductible has been met, and after spending almost $10,000 annually in premiums. Look at the ER visit: $200 co-pay before the deductible; 100% of the ER charge up to $10,000 yearly maximum for all health care costs, and then 40% of the ER charge after that, regardless of how much one has already paid in health care. [Parameters for this plan: two 54-year-old adults with no other family members.]


Opportunities In The North Dakota Oil Patch

I've added a link at the top of the sidebar at the right: job opportunities in the North Dakota oil patch.

The link takes you to a "commercial" website. I have no connection with this company, but it has some utility beyond just an "ad" as it were.

The items on the sidebar are re-arranged periodically and this link will eventually move farther down the sidebar. I generally like to keep the "new wells reporting" link and similar data at the top of the sidebar.

Monday: Rigs Steady At 192; ObamaCare Site Up And Running -- Insurers Trying To Go Around It; Is The Government Underspending On Rail? New York Magazine Retreats

Active rigs: 192

RBN Energy: Part II -- looking at supply and demand of natural gas in the US
The golden years of natural gas abundance in which we find ourselves are sparking tremendous enthusiasm among potential users of the fuel, from power generators to major industrial companies, to exporters both current and potential.  After all, a trifecta of cheap, abundant, and clean is hard to resist.  But the big question is  how supply and demand really shake out after everyone’s enthusiasm results in new and growing use of the resource.  Is the natural gas industry going to be able to supply all the new demand without prices going up the way they have in the past, most recently hitting double-digits at Henry Hub just five years ago?  The first step in order to weigh supply against demand is to have a plausible scenario of what that demand might be. What does it all add up to?  So in today’s blog we will see how much demand we should be trying to meet, to be followed later by a next installment to see how producers might meet it.
Wells coming off the confidential list over the weekend, today, have been posted; scroll down, or see sidebar at the right.


Several have written sending me the link on federal government spending $600 million on rail that benefits private companies. McClatchyDC is reporting:
Last week in Missouri, Federal Railroad Administrator Joseph Szabo cut the ribbon on a new bridge that added a second track over the Osage River, eliminating a bottleneck between St. Louis and Kansas City. Though the Obama administration paid for $22 million of the $28 million project through its High Speed Intercity Passenger Rail Program, the bridge will benefit the nation’s largest freight railroad, Union Pacific, which operates as many as 60 trains a day on the line.
In November, the Port of Miami restored its rail connection, which Hurricane Wilma had severed in 2005. A DOT grant paid for $22 million of the $49 million project. Port Director Bill Johnson said the grant was essential and that the project wouldn’t have happened without it. The Miami port is undertaking a massive expansion to accommodate bigger ships. It’s scheduled to be ready when a widened Panama Canal opens in 2015.

Read more here:
If the graphic is current, accurate, two data points are noted:
  • almost all the $500 million spent by the federal government on rail was all east of the Mississippi River with two exceptions (San Bernadino -- benefits Amtrak, Union Pacific, BNSF, local commuter)
  • the $500 million was distributed/spent since 2009 (the past four years)
To help put this in perspective, ONEOK recently announced it will spend as much as $780 million in North Dakota on a new natural gas gathering and processing plant. That project should be completed sometime in the next three years.

The big question: is the US government underspending on rail?


The Wall Street Journal

Insurers seek to bypass the ObamaCare health site. Why does this matter? There's only one reason. [On a side note, I have checked plans for many states over the past few weeks, and it seems the cost is about $900/month for two 55-year-old adults with $12,000 out-of-pocket expenses yearly. The mainstream media reports that hospitals are looking for payment up front suggesting the $12,000 out-of-pocket expenses is a reality. Once the deductible is met, there is still a $50 co-pay and a 25% co-insurance. Wow. So, this adult couple pays $12,000/year in premium, plus $12,000 up-front; and then 25% of on-going costs, plus the $50/visit nuisance fee. One can look at a typical example here and scroll through all the plans. I assume no North Dakota Bakken millionaire will be eligible for a subsidy to help cover the cost of the premium. Smile.]

The Detroit debacle: A crucial court ruling is expected this week on Detroit's eligibility for bankruptcy, but the legal battle over the city's future is likely far from over.

Again, the US will go it alone. Allies would not sign on, so the US will destroy Syria's most lethal chemical weapons on a ship in international waters, an unprecedented operation, after Washington was unable to enlist other countries to undertake the task on their own soil.

Break, break.....I was just listening to an NPR story on Jeff Bezos/Amazon talk about delivering packages by drone. The reporter and an analyst suggested this was a non-starter. They completely missed a niche for drone delivery. I guess that's why they are reporters/analysts and not entrepreneurs. They almost stumbled on the reason where drones make sense when they talked about increasing postage rates, but then missed that opportunity.

Now, back to The Wall Street Journal.

How "ironic?" Is that the right use of this word. The very next story that caught my eye in The Journal: Amazon developing drones for deliveries.
He said it was possible Amazon could introduce the drones within four to five years, depending in part on Federal Aviation Administration approvals.
Amazon has been working to cut delivery time through warehouse-equipment efficiencies and by building more of them near urban centers. The Seattle retailer has drawn millions of customers to its $79-a-year shipping Prime program, which promises unlimited two-day shipping.
Mr. Bezos said the drones could carry packages weighing up to 5 pounds, which make up 86% of the company's deliveries, according to the transcript.
That's about it.

Oh, from a DrudgeReport link: the New York Magazine retreats
Using the tenets of so-called New Journalism, the magazine helped popularize the knowing, skeptical voices of writers including Tom Wolfe, Jimmy Breslin, Gloria Steinem and Nora Ephron. It was the birthplace of both Ms. Magazine and the concept of “radical chic.”
Now, this magazine that has been at the vanguard of Manhattan publishing for almost five decades is acknowledging that the cutting edge is not necessarily a lucrative, or sustainable proposition, at least on the same schedule.
Beginning in March, New York will retreat from its long-standing status as a weekly and come out every other week instead.
Along with the closing of the printed Newsweek and the planned spin-off of Time Inc., which includes the weeklies Time and People, the move to bi-weekly publishing represents the end of an era and underscores the dreary economics of print and its diminishing role in a future that’s already here.
The change will beget misty eyes from magazine geeks — myself among them — while other consumers will shrug and dive into the ever-changing web version of New York magazine that shows up in their browser.
I track the demise of mainstream media here