Tuesday, June 10, 2014

For Investors Only; Active Rigs In North Dakota Down A Bit, Nice RBN Energy Article On Future Price Points For Natural Gas

Trading at 52-week highs: AAPL, CAT, COP, DAVE, DVN, HAL, HES, MRO, NOV, NRG, SLB, UNP, WIN.

Six companies that will benefit from fracking. CNBC is reporting

Active rigs:

Active Rigs190187213169124

RBN Energy: natural gas prices going forward ...
It is important to remember that these forward curves are not forecasts – they represent the value of futures contracts for deliveries out into the future - typically governed by market sentiment on the day. Not all of these 150 delivery month contracts out into the future are necessarily traded each day, but if futures market participants hold open contracts then the CME provide a settlement price each trading day.
Looking at six different historic curves like this provides a snapshot of the history of gas prices for the past six years. You can see the range of prices that natural gas futures have traded at (just in the month of June, don’t forget). The lowest value on the chart is $2.40/MMBtu for the July 2012 contract in June 2012 – that was a couple of months after gas prices crashed below $2/MMBtu in 2012 following the “non-winter” of 2011-2012 and fears that there would not be enough demand to soak up surging shale gas supplies. That year the reality of bounteous shale supplies sunk in and even though power generators burned up a lot more gas at $2/MMBtu there was a step fall in gas market prices. You can see that the 2012 curve is much lower than the 2011 curve – on average prices for the 2012 curve are $2/MMBtu lower than for 2011.
Since 2012, gas prices have traded in a lower range so that instead of values in the $4-$9/MMBtu range for 2009-2011 prices from 2012 to 2014 have been in the $2-$7/MMBtu range. For the record the highest settlement value on our chart is $9.01/MMBtu at the end of the 2010 curve for delivery in December 2022. Bet producers wished they had that contract hedged!

Meantime we turn the spotlight onto the most recent curve for yesterday, June 9, 2014.
The first thing to note about June 2014 is the odd shape at the front of the curve that looks like a giant molar pushing up from the baseline. That giant molar is the footprint left behind by last winter’s freezing polar vortex weather that sucked up a huge amount of natural gas storage inventories by the end of March. The empty gas storage tanks in March and the implied threat of a shortage of gas at the start of next winter this coming November has led current market prices for gas to jump to $4.645/MMBtu (about $0.65/MMBtu above where they were at the same time last year).
After July, the forward prices on the curve fall 30 cnts this summer and then increase next winter from November through January before falling back to $4.636 in March 2015, when they promptly fall off a cliff – dropping $0.48/MMBtu in April 2015 to $4.156/MMBtu. Now it is normal for prices to fall between March and April after the threat of winter cold recedes, but the fall off we are seeing next April is wider than usual and represents a readjustment of the curve to a more “normal” shape that continues out in a straight trajectory until 2026.
What is significant in this forward curve is that futures market sentiment seems to be saying – “yes – we are worried about shortage for next winter but as soon as we get through this next winter everything will be back to normal."
And by “normal," you can see that we actually mean “much lower than normal." In fact current market expectations of prices in December 2023 ($5.65/MMBtu) are a whopping $0.63/MMBtu lower now than they were in June 2012 and $1.24/MMBtu lower than they were in June 2013.
Go to the linked article for superb graphs and an interesting summary.

Do The Math

I can't make this stuff up. ThinkProgress is reporting:
Over the last 40 or so years, natural drivers would have caused cooling, and so the warming there has been (and some) is caused by a combination of human drivers and some degree of internal variability. I would judge the maximum amplitude of the internal variability to be roughly 0.1 deg C over that time period, and so given the warming of ~0.5 deg C, I’d say somewhere between 80 to 120% of the warming. Slightly larger range if you want a large range for the internal stuff.  -- Dr. Gavin Schmidt, NASA's newly appointed Director of its Goddard Institute for Space Studies (GISS).
Yes, somewhere between 80 to 120%. Say what? Whatever. Literally whatever.

The Wall Street Journal

General Shinseki stopped sending "turaround experts to underperforming hospitals, just as a growing number of VA facilities showed consistently high death and complication rates. President Obama's "pick" for next VA chief told the President, "thank, but no thanks." Not many folks have the self-control to turn a president down.

The president took personal credit, if I recall correctly, for the swap. Now, it turns out, the president tells us, it was SecDef who made the final decision. Hagel will explain on the Hill. It is getting awful crowded "under the bus."

Russia-Ukraine gas talks stumble. Surprise, surprise.

Bulgaria suspended construction of the Russian-backed South Stream natural-gas pipeline -- at the request of the EU -- and Senator John McCain.

Free market capitalism in Pennsylvania: the state may allow Tesla to operate its direct-sales model. But then this: the proposed legislation would not allow other manufacturers from bypassing franchised dealers. Would this hold up in court?

Canadian Finance Minister says Canada will be in deep doo-doo (not his exact words) if the country fails to find new markets for the country's energy products.

US Supreme Court rules against mom-and-pop; rules for big corporations in environmental lawsuit case. Man bites dog? 
The Los Angeles Times

Friendly fire may have killed five (5) US soldiers. Story written by Hashmat Baktash and Shashank Bengali.

Gunman reported dead after shooting at Troutdaly, Oregon high school (east of Portland). I would assume Oregon has some tough gun laws, but I could be wrong.

Top Yahoo!Finance Story: Drought Can't Stop Fracking

The emphasis the mainstream media puts on these stories always surprise me. NBC is now the most partisan of the three non-partisan major networks (NBC, ABC, CBS), so it is not surprising to see CNBC feature this as the top story, but it still surprises me. Of all the things that investors need to know about, this seems pretty unimportant in the big scheme of things. CNBC is reporting, as the Yahoo!Finance top story at the moment: 
Critics of fracking, may have hoped drought-ridden states might be inclined to shut down the oil and gas abstraction method that uses lots of water.

But just last month, in the midst of the worst drought in California's history, the state Senate killed a bill that would have put a moratorium on the state's use of hydraulic fracturing.  
The battle over water and the need to drill for energy is likely to get worse, said Christiana Peppard, a professor of science, theology and water ethics at Fordham University.
Although the hook of the story was "drought," the author(s) were able to drag in every myth about fracking. 
Buffett and Renewable Energy

Before anyone gets into the "I told you so" mode, note that Warren Buffett is investing $15 billion into renewable energy (and another $15 billion if he finds something he likes) not because he "believes in renewable energy" but because he likes the tax credits.
Berkshire has been able to plow so much into renewable energy because it can use tax credits to offset profit at other businesses, Abel, the 52-year-old CEO of Berkshire Hathaway Energy, said yesterday.
For the record, I also invest in wind and solar; there are niches for renewable energy investments.

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.

Military Housing
A Note for the Granddaughters

One of the big challenges for the families in the military was finding adequate housing around the world. I remember the challenge of finding such housing every two or three years when we moved. Even in the best locations, a top concern was being located near a "good" school for your mother and your aunt. As an officer, I had it pretty good. I was often appalled by the substandard housing they put young enlisted families in. I remember responding to a medical emergency at Grand Forks AFB, ND, and was absolutely aghast to see the house this young family with a young child was living in. And before they got into that "house," they had been on a waiting list for base housing. Base housing waiting lists were often up to a year, especially overseas. Many folks simply fell off the list, tired of waiting. There was never enough money for housing. That's what we were told.

Now I read that the commander-in-chief, President Obama, has opened up a third military base for all the illegal immigrants, mostly children. This has occurred under his watch. I am not aware of military bases ever being opened in the past to house illegal immigrants. But I guess there's enough money available for military housing for illegal immigrants, even if there is still not enough money for families of active duty military. 

It will be a real eye-opener for the next medical response to a house on a military base housing an illegal immigrant family, while the medical responders may in fact be on the waiting list for base housing.

I no longer have a dog in this fight. I was fortunate to have served many of my military years under a commander-in-chief that appreciated his military. 

By this time next week we will be down to less than 950 days left.

By The Numbers
A Note for the Granddaughters

A reader sent me this data. I have not verified it. I normally don't post this data (or similar data) because it is to far removed from the Bakken, ObamaCare, and global warming extreme weather, but sometimes things are such, they need to be posted.

And, again, this is for the granddaughters and for the archives.

According to the reader, the US ranks third in murders. However, if you take out Chicago, Detroit, Washington (DC), and New Orleans, the United States is near the bottom of the world list, specifically, only three countries worldwide have a higher murder rate than the US if you remove four US cities, all well-known for having the toughest gun control laws in the country. All four cities have something else in common, and it ain't the weather.

According to Wiki: New Orleans' average annual per capita homicide rate of 52 murders per 100,000 people overall (1980–2012) is the highest of U.S. cities with average annual homicide totals that were among the top 10 highest during the same period.

By the way, in the 503 days since the Trayvon/Zimmerman verdict, there have been 10,865 African-Americans killed by African -Americans.

I don't recall any story in the mainstream media about any of the 10,865. Surely there must have been one story that had a human interest angle. Almost 11,000 homicides since that earlier story and not one national mainstream media story that I came across.

Again, the data was sent to me by a reader. It has not been verified, except for the wiki comment.

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