Weekend Musings -- June 7, 2014 ...Or Maybe June 8, 2014 By The Time I Finish; Oil / Natural Gas Production Drop On Federal Land, But Huge Increase From Private Sector

Easy money: Investors might want to look at two items and connect the dots. The first one is slide 18 of CLR's June corporate presentation, debt maturities summary:

• 2019, $300 million, 8.25%, called 10/1/14
• 2020, $200 million, 7.35%, callable 10/1/15
• 2021, $400 million, 7.125%, callable 4/1/16
• 2022, $2 billion, 5%, callable 3/15/17
• 2023, $1.5 billion, 4.5%
• 2024, $1 billion, 3.8%
• 2044 (no typo), $700 million, 4.9%

CLR can call the higher-paying bonds, and replace them with lower-yielding bonds.

So the question is this: how long might the good times last? Possibly for a very long, long time. Even if the US starts raising rates, the Europeans are planning on doing just the opposite. Reuters is reporting:

Euro zone interest rates will diverge from those in the United States and Britain for a number of years, European Central Bank (ECB) Executive Board member Benoit Coeure told France Inter radio on Saturday.

Speaking after the ECB this week cut rates to record lows, Coeure said they would remain around that level for a long time, whereas central banks in the United States and UK would at some point raise rates. "Clearly what we wanted to indicate on Thursday is the fact that monetary conditions will diverge between the euro zone on one hand and the United States and the United Kingdom on the other for a long period, which will be several years," he said.

And, actually, I'm not convinced the US Fed will raise rates significantly any time soon.

By the way, the European Central Bank says they will be paying "negative" interest rates on savings going forward.

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What's wrong with this picture? Nothing if your goal is to kill the domestic oil and gas industry.

Forbes is reporting:

From 2009 -2013 on FEDERAL land natural gas production is down by 28% and crude oil production is down by 6%. 

But on private land or land owned by a state government, natural gas production  from 2009-2013 is up 33 % ( this even with the lousy NG price for 3 of these years ) and crude oil is up a whopping 61%.

The 33% increase in natural gas production comes in spite of severely depressed natural gas prices during those years, although that might be improving somewhat. 

Fortunately, presidents come and go. XOM, CVX, and COP will be here forever. Can you imagine the price of gasoline if ...

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Investing in EOG? A little late? Or maybe never too late? I don't know. EOG has appreciated 62% in the past year (according to Yahoo!Finance); AAPL about 48%.  So, is EOG still a buy? Achilles Research thinks so. Amazing.

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. 

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China's new map. Rigzone is reporting a number of stories of interest. I particularly enjoyed the article on "China's Nine-Dash Line":

China claims sovereignty over all the islands, rocks and reefs in the four main groups, while Vietnam, the Philippines, Malaysia and Brunei each claim some of them.

Much of the dispute revolves around the "Nine Dash Line", which appears on China's official maps and encompasses almost the entire South China Sea.

The Nine Dash Line made its first appearance in official atlases issued in 1948, though the territorial claims on which it rests go back much further. It has been subject to only minor modifications since then.

The number of dashes - which roughly indicate the boundary - has varied between nine and 11 at various times and currently stands at 10 after a new dash was added east of Taiwan in 2013.

China has included the Nine Dash Line on illustrative maps used in disputes with the other coastal states, and it is now used in passports issued by the People's Republic. But the exact status of the line remains "ambiguous", according to Euan Graham at Britain's Royal United Services Institute ("China's new map: just another dash?" September 2013).

The latest edition of the official atlas designates the line as a national boundary and uses identical shading to the lines on China's land borders. Exactly what China is claiming, however, remains somewhat mysterious, even to experts.

Meanwhile, President Obama visits Standing Rock Indian Reservation this next Friday, June 13th.

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Another break for western Canadian oil sands. Reuters is reporting that western Canadian oil industry might have lucked out again: finding rich deposits of light oil / condensate to dilute their heavy oil.

Canada is enjoying an unexpected boom in production of ultra-light crude known as condensate, defying long-held predictions of dwindling supply.

This surprising bounty from one corner of Alberta, better known as the home to Canada's vast tar-like oil sands reserves, is a boon for firms like Vermilion Energy Inc and Chevron who have built up positions in the Duvernay, now hotly tipped as one of North America's most exciting shale plays with vast reserves waiting to be tapped.

It also is fuelling hope of cost relief for traditional heavy oil sands companies such as Cenovus Energy Inc, who in the past have paid premiums of up to $25 a barrel to buy imported condensate used to dilute their viscous oil sands production so that it can flow through pipelines.

The activist billionaire environmentalist and big Obama contributor, My Steyer, is probably thrilled. This will make it easier to ship western Canadian oil through "his" TransMountain pipeline, west under the Canadian Rockies, to the Pacific coast, to China.

Income inequality: speaking of activist billionaires investing in the oil and gas industry, I find it somewhat ironic that with increasing talk-inside-the-beltway about income inequality, the rich are getting significantly richer, the poor are getting significantly poorer, and the unemployed are .... well, staying unemployed under this administration. I read this morning, somewhere, that Mr Gates, of Microsoft fame, could buy every house in Boston, and still have $1 billion left over. Unfortunately, that one billion would not be enough to pay the property taxes, but I suppose he could rent them out.

Speaking of income disparity, it's nice to see NPR.org present a positive story for a multi-millionaire getting another $126 million for six years of work:

One of the NFL's most dynamic young play-callers, Kaepernick received a $126 million, six-year contract extension Wednesday that keeps him with the organization through the 2020 season. The deal includes $61 million in guaranteed money, a person with knowledge of the contract said, speaking on condition of anonymity because terms weren't disclosed.

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India's electricity problem: one more note and then I will move on. Bloomberg Businessweek is reporting on India'a electricity problem. I knew it was bad, but not this bad. Here are the data points:

• the government requires electricity distributors to sell power below cost
• even so, 80% of electricity loss in India is due to theft
• 319 million people in India have no access to electricity
• the goal of the government: to reach all Indians using renewable electricity
• the goal of the government: enough electricity so every Indian has enough electricity for at least one light bulb

Americans have no idea how good we have it. 

Meanwhile, President Obama will be visiting Standing Rock Indian Reservation next Friday.