Monday, December 30, 2013

For Newbies: The Bakken Oreo -- Market Realist

Another nice article by Market Realist. The link takes you to part 14 of a 14-part series.
One factor in the Bakken that has increased its value in the eyes of many producers is that oil can be produced from more than one “horizon”, or layer of rock. Originally, oil had been produced from only the “Bakken” layer which is where the play got its name. However, over the past few years many companies also began to produce oil from the Three Forks Sanish formation or “TFS”, which is located below the Bakken. More recently, companies have began to test lower layers of the TFS, also referred to as different “benches”, and these lower layers are referred to by number such as the “TFS 2″ and “TFS 3″, with higher numbers representing lower layers.

Maybe Someone Else Wants To Do The Math ....

Rigzone is reporting:
Vanguard Natural Resources, LLC  has entered into a definitive agreement to acquire natural gas and oil properties in the Pinedale and Jonah fields of Southwestern Wyoming for a purchase price of $581 million from an unnamed source. The properties being sold consist of approximately 87,000 gross acres (14,000 net acres) that are currently producing approximately 113.4 million cubic feet equivalent per day (MMcfe/d) with approximately 80 percent being natural gas, percent oil and 16 percent natural gas liquids. The effective date of the acquisition is Oct. 1, and the Company anticipates closing this acquisition on or before Jan. 31, 2014. 
$581 million / 14,000 net acres = $41,500/acre.

Also, at the press release:
Approximately 2,000 producing wells and over 970 proved undeveloped drilling locations; there are approximately 5,200 additional locations not booked at this time due to the current expectation that they will not be drilled within a five year period as required by the SEC for recording proved reserves.

2,000 + 970 + 5,200 = 8,170 / 14,000 net acres = 8,170 drilling locations / 14,000 net acres. 

Drones Over Dakota

More stories on the drones here

Bloomberg/Politics is reporting:
The U.S. approved drone test centers in six states, including North Dakota, as the start of research efforts to eventually allow civilian unmanned aircraft widespread access to the nation’s airways.
The Federal Aviation Administration, after sifting through 25 applicants, also approved bids from Alaska, Nevada, New York, Texas and Virginia, it said in an e-mailed statement.
This was actually reported more than a year ago, back in July, 2012 -- either something new, or Bloomberg just getting around to this story. Other than reading the headline and the first one or two paragraphs I didn't spend any more time on the story. I assume that between the NSA and the wild blue yonder will soon be filled with drones: some with spy cameras, some with packages.

Memo To Self: Mail One Less Letter Every Two Months For The Next Two Years; "Warmists" Bailing

I use about ten (10) first-class stamps/month.

x 12 months = 120 stamps

x 2 years = 240 stamps

x 46 cents for one "forever" stamp = $110.40

With the "temporary" increase to 49 cents for a first class stamp effective January 26, 240 stamps would cost = $117.60.

Decisions, decisions.

But how gullible does Congress think Americans are? This is being "sold" as a temporary measure.

Back to the arithmetic.  

$117.60 - $110.40 = $7.20.

$7.20 / $0.49 = 15 first-class stamps (15 letters)

So, the easiest thing to do is maintain my $110.40 postage stamp budget for the next two years, and mail 15 less letters over the course of the next two years.

Christmas cards? Nope, Christmas postcards.

That was easy.

Global Warming

I can't make this stuff up. A bunch of "warmist" scientists set sail this summer to study the effect of global warming on the Antarctic ice sheet. They were expecting the Antarctic ice sheet to have shrunk either in area or in thickness due to global warming. Remember, it's summer in the Antarctic.

It appears their ship was iced in. For the past several weeks, folks smarter than I have been trying to figure out how to rescue these latter-day Gullivers. Ice-breaking ships were unable to reach the stranded "warmists."

The "warmists" have given up. They will be rescued by helicopter.

I can't make this stuff up.  Mail On-Line is reporting.

Three More Very Nice Bakken Wells In Siverston Oil Field

Active rigs: 187

Ten (10) new permits -- 
  • Operators: Burlington Resources (3), MRO (3), CLR (2), Hess (2)
  • Fields: Banks (McKenzie), Blue Buttes (McKenzie), Chimney Butte (Dunn), Rainbow (Williams)
  • Comments:
Wells coming off the confidential list over the weekend, Monday, were posted earlier; see sidebar at the right.

Five (5) producing wells were completed:
  • 26465, 2,107, Whiting, S-Bar 13-2H, Sanish, t11/13; cum --
  • 26137, 396, Whiting, Moore 14-7-2XH, Sanish, t12/13; cum --
  • 24933, 1,908, XTO, Lundin 41X-14C, Siverston, t9/13; cum 20K 10/13;
  • 25111, 2,869, XTO, Lundin 41X-14D, Siverston, t10/13; cum --
  • 24932, 1,956, XTO, Lundin 41X-14G, Siverston, t9/13; cum 17K 10/13;

Global Warming

Green Bay sets "global warming" record -- 19 degrees below zero.

Green Bay Press Gazette is reporting:
Green Bay set a new record low of minus 19 Monday morning, according to the National Weather Service in Ashwaubenon. The frigid weather is expected to persist through the day and the early part of the week.
Monday’s low just edged out the previous record, minus 18, set in 1976. A number of other cities also recorded record lows.
Is it just me or are we seeing more cold weather than usual ever since Algore received his Nobel Prize?

How Soaring Propane Exports Affect Domestic Prices

Regular readers know the background to this story. When I get caught up I will include a few more links. For now, enjoy the story sent in by another reader: how soaring propane exports is (are?) affecting prices, as reported by MarketRealist/Yahoo!Finance

Excellent article, background, and analysis. If I don't forget I will put in some data points in case the link breaks, but I just got back from being out and about all day and am now catching up.

Warren Buffett Buys PSX Unit For $1.4 Billion

Reuters via Yahoo!News is reporting:
Warren Buffett's Berkshire Hathaway Inc struck a deal to buy a Phillips 66 business that makes chemicals to improve the flow potential of pipelines for around $1.4 billion of stock Phillips 66 said on Monday that Berkshire will pay for the unit, Phillips Specialty Products Inc, using about 19 million shares of Phillips 66 stock that it currently owns.

"I have long been impressed by the strength of the Phillips 66 business portfolio," Buffett said in a statement. "The flow improver business is a high-quality business with consistently strong financial performance."

Early Reports On The Bakken Crude OIl / Grain Train Collision


February 8, 2017: NTSB releases its findings, after five years -- a broken axle on the train carrying soybeans. The CBR train was not at blame one iota. 

January 6, 2014: The Dickinson Press is reporting that in the past nine years there have been four (4) derailments west of Fargo, near Casselton, where the most recent Bakken crude oil unit train derailed/three explosions after hitting a derailed train carrying soybeans.

January 2, 2014: both tracks are back to operating normally. The Bismarck Tribune is reporting:
BNSF Railway has reopened the two lines at Casselton that were shut down Monday when a crude oil-carrying train derailed and caught fire.
One of the lines reopened at 3 a.m. Thursday and the second about 15 minutes later. Railroad spokeswoman Amy McBeth says trains have been operating on the route since then without incident.
Later, 9:32 p.m. Pacific Time: Oil produced in North Dakota's Bakken formation for delivery at Clearbrook, Minnesota, was unchanged at a discount of $8.25 a barrel versus U.S. benchmark West Texas Intermediate crude yesterday.

Later, 9:32 p.m. Pacific Time: Bloomberg is reporting (linked at Clearbrook, MN, news site):
A BNSF Railway Co. train carrying oil erupted into flames after colliding with railcars that went off the tracks earlier yesterday in North Dakota, causing a series of explosions that forced local residents to take cover.
The accident occurred at 2:10 p.m. local time near Casselton, North Dakota, about 25 miles (40 kilometers) west of Fargo, Berkshire Hathaway Inc.’s BNSF said in a statement on its website. About 12 railcars were ablaze as of 5 p.m., prompting emergency responders to issue a shelter-in-place order for Casselton, Cecily Fong, a spokeswoman for the state Emergency Services Department, said by telephone.
It was the fourth major North American derailment in six months by trains transporting crude. Record volumes of oil are moving by rail as shale plays from North Dakota to Texas have spurred U.S. output to the most since 1988 and pipeline capacity has failed to keep up. Berkshire’s Burlington Northern Santa Fe railroad carried about 500,000 barrels of oil a day in March, Chief Executive Officer Warren Buffett said at the time.
“A westbound train carrying soybeans derailed just west of Casselton just after 2 p.m., and then an eastbound train carrying oil hit that derailed train, causing a series of explosions and then a subsequent fire,” Fong said.
 Original Post
The Dickinson Press is reporting:
A westbound grain train derailed, crashing into an eastbound crude oil train, which caused it to derail one mile west of Casselton about 2:10 p.m., said BNSF spokeswoman Amy McBeth.
About 10 of the 106 oil train cars are fully engulfed in flames after the collision, and fire and hazmat crews are on scene, keeping the fire at bay. No crew members reported injuries after the accident, McBeth said.
Meanwhile in a related/unrelated story, being reported by the
Burlington Northern xpects to be hauling 1 million barrels of crude oil per day by the end of 2014, said Matthew K. Rose, executive chairman of the railroad.
My colleague Bill Hethcock talked to Rose Monday morning about his role on the AT&T board of directors but also asked a few questions about the booming oil by rail industry.
Right now, Fort Worth-based BNSF is hauling about 750,000 barrels of oil from places like the Bakken in North Dakota and the Permian Basin in West Texas to refineries.
It's possible crude-by-rail would have become a big player in oil shipment regardless of the Keyston XL decision, but there's no question that President Obama killing the "XL" at the behest of activist environmentalists hastened the day that CBR would be so important to the oil industry. It's really quite a story. On so many levels. Here's just one story, being reported by WyomingStarTribune: CBR raises concerns of small Wyoming towns --
It's tough to miss the trains hauling crude oil out of the Northern Plains. They are growing more frequent by the day, mile-long processions of black tank cars that rumble through wheat fields and towns, along rivers and national parks.
As common as they have become across the U.S. and Canada, officials in dozens of towns and cities where the oil trains travel say they are concerned with the possibility of a major derailment, spill or explosion, while their level of preparation varies widely.
Stoking those fears was the July crash of a crude train from the Bakken oil patch in Lac Megantic, Quebec — not far from the Maine border — that killed 47 people. A Nov. 8 train derailment in rural Alabama where several oil cars exploded reinforced them.
"It's a grave concern," said Dan Sietsema, the emergency coordinator in northeastern Montana's Roosevelt County, where oil trains now pass regularly through the county seat of Wolf Point. "It has the ability to wipe out a town like Wolf Point."
The number of carloads hauled by U.S. railroads has surged in recent years, from 10,840 in 2009 to a projected 400,000 this year.
As noted earlier,  it might have happened anyway, but there is no question that President Obama killing the Keystone XL....well, you know... 

Top Automobile Dealership Shifts Insurance Costs To ObamaCare

I think I've been pointing this out ever since the law was passed.

Cost shifting.

I track the cost-shifting story elsewhere.

For Wall Street, ObamaCare is great news.

For Main Street, not so good.

For investors, ObamaCare gets the unpredictability and spiraling health care costs off the company's books.

Companies are going to do exactly what Extreme Dodge, Jackson, Michigan, is doing:
... when employees were told that the health insurance plan that the auto dealership had provided its workers was canceled because it doesn’t comply with the Affordable Care Act, better known as Obamacare.
Rather than officially sponsor a new policy, the company -- voted one of the 100 best car dealerships to work for in the country last year -- will instead provide its employees with $2,400 apiece to buy their own insurance, or to pocket and pay the new federal penalty if they elect to go without it.
That’s a little bit more than the company says it spent on health insurance this year.  Dealership owner Wesley Lutz said his decision to go in a new direction was driven by the fact that health insurance is “incredibly expensive” and getting more so. He says he needs to be able to control his future costs.
“As a business owner, we have to be viable first and then provide services,” he said. Lutz is not required to provide health insurance to workers, but has done so for 35 years.
 How bad are spiraling health care costs with the Affordable Health Care Act? Again, the article:
Insurance broker Michael Harp said small businesses, part of what’s known in the industry as the “small group market,” are used to seeing health insurance premiums climb about 10 percent a year, but it’s never before been this dramatic. 
For Extreme Dodge to have kept deductibles and out-of-pocket costs at last year’s levels, he said, would have cost the dealership almost 50 percent more than last year.
The story has a hundred story lines. Another one -- the act of civil disobedience. By law, everyone must carry health insurance under ObamaCare:
Four younger workers opted not to sign up for any health insurance at all, according to a company official. 
Four works out of 26. That is 15 percent, and my hunch is that about 15% of the overall general population will not enroll in ObamaCare. It could be significantly worse: the next time you visit a Wal-Mart, or a Target, or a grocery story of your choosing, look around, and think for yourself how many of those you see shopping actually know how to enroll in ObamaCare electronically. Scary, huh?

Merry Christmas! Baby, Please Come Home

Darlene Love, 2013 --

Baby, Please Come Home, Darlene Love
 1986: her first appearance on the Dave Letterman show -- 

Baby, Please Come Home, Darlene Love

Fire In The Hole (St Louis, Missouri, Story) -- Puts Fracking Into Perspective; Tea Leaves Suggest WTi Will Trade Toward $85 In 2014

Active rigs: 187

RBN Energy: the tea leaves suggest that most pundits expect WTI to fall towards $85/bbl in 2014.
In their Short Term Energy Outlook published earlier in December (2013) the EIA predicted that US crude production will increase by 1 MMb/d in 2013 to 7.5 MMb/d and is expected to increase by another 1 MMb/d in 2014. Those increases are driven by tight oil production of predominantly light sweet crude. As a result we cannot expect there to be any demand for imports of light sweet crude at the Gulf Coast in 2014. That means Brent prices will continue to be “detached” from the US domestic crude market.
Whatever happens in the world market, WTI prices will continue under pressure from rising domestic production and the oversupply of light-sweet crude on the Gulf Coast. If international supplies are tight then Brent prices will rise relative to WTI. If international markets are oversupplied then Brent prices will fall but they are unlikely to dip below WTI. The greatest danger for producers is that both WTI and Brent prices will be pushed into a downward spiral by a glut of world crude supplies. But of course in that case it might just be refiners who will “Get Lucky.”
Worst Funded US Pension Plans: City, State -- Financial Times

In case the link breaks, the worst-funded metropolitan pension plans ("best" to worst, % funded):
San Diego (70%); Boston (60%); Phoenix (60%), New York City (60%), Jacksonville (50%), Philadelphia (50%), Chicago (37%). [80% funded is considered a healthy threshold.]

For the states: US average (70%), Rhode Island (60%), Mississippi (60%), Kansas (60%), New Hampshire (60%), Louisiana (60%), Connecticut (50%), Kentucky (45%), Illinois (40%), Puerto Rico (10%).

The Wall Street Journal

Chesapeake energy got cash for sales; now bills come due.  
As Chesapeake Energy Corp. burned through cash in recent years, it raised billions of dollars by selling pieces of its empire: oil and gas properties, pipelines, even royalties from wells yet to be drilled.
Some of these deals saddled the nation's second-largest natural-gas producer with costs that only now are becoming clear.
The obligations pose hurdles to new Chief Executive Doug Lawler, who has pledged to rein in spending and improve profit.
When Chesapeake unloaded its pipeline business last year in a medley of transactions totaling more than $4 billion, it agreed to ship a certain amount of natural gas on lines now owned by Access Midstream Partners. But in north Texas, Chesapeake isn't tapping enough gas to fill the space it reserved as it cuts back on drilling new gas wells.
The shortfall means Chesapeake must pay for a service it isn't using. If its wells there continue to produce gas at current rates—which isn't likely, given that production has been falling—the company would have to pay at least $400 million to Access over the next five years to make up for the shortfall, according to a Wall Street Journal analysis of regulatory filings. That equals almost half of the company's profits through the first nine months of 2013. 
This seems to have come at the wrong time. What's up with this? Mass-transit commuters face a hit.
An expiring tax-code provision means commuting by mass transit will cost some people more when the new year begins Wednesday.
An expiring tax-code provision means commuting by mass transit will cost some people more when the new year begins Wednesday.
The maximum monthly tax exemption for transit riders is set to drop to $130 in 2014, while the benefit for drivers' parking expenses will rise slightly, to $250. This year, mass-transit users have been allowed to set aside up to $245 a month of their pretax income to pay for commuting expenses, reducing their overall tax bill and effectively lowering the cost of their ride. Americans who drive to work have gotten the same benefit for their parking costs in 2013. The reasons for the divergence in mass transit and parking next year reflect the complicated ways Congress sometimes writes tax law.
Lawmakers originally set the transit benefit lower than the drivers' break, but since 2009 has temporarily raised it to match the drivers', and that provision expires at the end of this year. Meantime, the drivers' benefit is set to rise in the new year because it is tied to inflation.
Fire in the hole! And folks are worried about salt-water waste from fracking. St Louis, Missouri, has a radioactive waste problem on their hands.
A dispute is smoldering here, in one sense quite literally, over what to do with thousands of tons of radioactive waste in a landfill in this suburban St. Louis town.
Some residents argue the waste, created decades ago by the U.S. nuclear-weapons program and other federal work, poses a health and environmental threat and should be removed. The landfill's owner disputes that and says the best course is to leave the waste in place with some beefed-up protections. The Environmental Protection Agency has favored the second option but is reconsidering in reaction to community opposition.
The dispute is complicated by other factors. What officials from the EPA and the landfill's owner call a "subsurface smoldering event"—locals call it an underground fire—has sprung up in a nearby nonnucleaThe price of a popular genetic test that predicts women's risk of breast cancer is likely to drop in the New Year after the agency that administers Medicare benefits said it would slash its reimbursement rate for the test by half.r landfill area. It isn't clear what would happen if the smoldering reaches the radioactive materials. Efforts are under way to prevent that.
Reimbursement for breast-cancer test to be cut. I had no idea one test would cost nearly $3,000.
The rate cut goes into effect on Jan. 1, 2014, with consequences for genetic-testing companies, particularly Myriad Genetics Inc., the dominant supplier of screenings for mutations in the genes known as BRCA1 and BRCA2. Medicare will pay a maximum of $1,440 for the BRCA test, a 48.5% decline from the rate of $2,795 it paid in 2013, according to a notice published Friday afternoon on the website of the Centers for Medicare and Medicaid Services.
Los Angeles Times

I never understand these stories: the top story in The LA Times today is a story about a pedophile priest who was moved from California to Texas without folks knowing his background, and now the headline: one troubled priest who got a second chance.
Yolanda Villegas adored Father John. A pillar of the Church of the Holy Spirit, she knew nothing of his past. Few parishioners did. Nearly every Sunday for a decade, she arrived for the Spanish-language Mass, knelt in the same pew and wondered how he'd inspire her that week.
After several paragraphs of what a great guy he was, and how he was molested by his mother, we finally learn well into the article, "in 1987, Salazar pleaded guilty to abusing two teenage boys and sent to prison."

Not once is the word "pedophile" used in the article. The word used was "abuse" to describe the sexual molestation.

By 1991, he was out of prison, on parole. He left California to be a priest of a parish in Texas where folks did not know him.

He was accused of sexually molesting a close family friend after his arrival in Texas. In 2004, he was finally defrocked and was criminally charged for the third time. He was found guilty and sentenced to life in prison. In 2011, the top criminal appeals court in Texas overturned Salazar's conviction and was released from prison last year. [The LA Times uses the word "abuse" to describe "forcible oral sex" on the 18-year-old family friend. His defense: it was consensual.]

And, as the Los Angeles Times reports, Salazar is given a second chance. A second chance?

Another young man has now stepped forward and Salazar faces his fourth criminal charge for sexual molestation -- although again, the LA Times only says he is charged with "abuse."

I never understand these stories. But again, I may be missing something. It was hard to wade through the story that was more concerned with touchy-feely writing than presenting the facts, and/or using the word pedophile.
Los Angeles and Santa Monica have approved several construction projects along two well-known faults in recent years without requiring seismic studies. But they will study fracking for decades. Fracking began in 1947 in western Kansas.
Obamacare: 1.1 million enroll at federal website; maybe a total of 2 million have enrolled overall. Goal was 3 million by this time; the insurers need 7 million (that was the original story, but the goalposts will move. But folks are following the wrong metric. The metrics that need to be tracked: a) how many are paying their premiums; and, b) who enrolled. By July, 2014, we will know. These are the two immediate problems:
Others may discover that although they're properly enrolled in a health plan, the doctor or hospital they visit or the prescription they want to fill won't be covered by the plan they have selected.
Still other patients, including many who have never had insurance before, may be shocked to learn they have to pay thousands of dollars out of pocket before their coverage kicks in. Like employer-provided health plans, many insurance plans set up under the health law come with low premiums and high deductibles.
Obamacare, unlike Obamaphones, has a very high up-front cost for lost-premium health care policies.
For Investors Only

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. 

PSX is off and running: up over a percent, and now trading at a new high.

SRE, still well off it's highs, is up about half a percent today, at just under $90.

CHK, despite the WSJ story earlier today, is up over 1%, at almost $28, trading near its 52-week high of $29.

Oasis, well off its highs of nearly $60 and now trading well below $50, is up over a percent today.

Schlumberger is up a bit today.

CVX is down about as much as SLB is up today.

And that gives me a quick overview of how the market values the energy companies today.