Friday, October 31, 2014

Alaskan Oil To South Korea -- Because Of The Bakken, How Do You Like Us Now? -- October 31, 2014

Bloomberg is reporting:
For signs of how the U.S. shale boom is transforming the global flow of oil, look halfway across the world at South Korea.
The Asian nation, which relies on the Middle East for about 86 percent of its oil imports, is benefiting as new output from Texas to North Dakota displaces the crudes that fed U.S. refineries for decades.
South Korea received this month a shipment of Alaskan oil for the first time in at least eight years and may buy more, the importing company said. The country was one of the first to receive a cargo of the ultralight U.S. oil known as condensate after export rules were eased.
The U.S. shale revolution has driven oil output to the highest in more than three decades, reducing America’s need for overseas purchases and sinking global prices into a bear market. South Korea is seeking to reduce its dependence on Middle East crude just as OPEC’s biggest members discount supplies to protect market share and Goldman Sachs Group Inc. predicts the group is losing influence.
The US is trying to take market share away from OPEC. Memo to OPEC: how do you like us now?

How Do You Like Me Now, Toby Keith

Whoever thought the US would be an exporter of crude?

Week 44: October 26, 2014 -- November, 1, 2014

Oil prices dropping, but fracking revolution rolls on
COP to cut back drilling in the Bakken due to slump in oil prices

Bakken Economy
Alexander, Watford City bypasses completed
New businesses in the Bakken -- Williston Wire
Update on the $4-billion petrochemical plant to be built near Bismarck

Natural-Gas Liquids
Shale boom shines light on natural-gas liquids

A Silurian well hits the one-million bbl milestone

Bakken 101
Bakken nomeclature -- CLR

Flashback: From The Archives -- The Coming Glut -- October 31, 2014

This was posted on June 5, 2013.
For the archives. From SeekingAlpha.
Stepping away from the pack, Andrew Coleman of Raymond James Equity Research is making a contrarian forecast for an oil glut in 2014. Shale oil production is on the ascent, with the United States joining Saudi Arabia on the supply side, while China's hunger for oil may be sliding and demand in developed countries remains in decline. In this interview with The Energy Report, Coleman explains his thinking and names the producers best positioned to capitalize on the turbulence ahead.
The Energy Report: Why are you expecting an oil glut in 2014?
Andrew Coleman: Because of the evolution of North American shale oil plays, we are on track to add about 3 million barrels [3 MMbbl] of new supply over the next five years. Yet we know oil demand has been falling across the developed nations and is still weak coming out of the global financial crisis. Those developments point toward a glut.
Investors had a full year to position their investments. I hope Mr Coleman was justly rewarded by his firm. Great, great call. 

Seventeen (17) New Permits -- North Dakota, October 31, 2014

Active rigs:

Active Rigs193180186199152

Seventeen (17) new permits --
  • Operators: BR (5), WPX (5), KOG (3), Enduro (2), XTO, Denbury
    Fields: Johnson Corner (McKenzie), Pershing (McKenzie), Truax (Williams), Newburg (Bottineau), Eagle Nest (McKenzie), Bear Creek (Dunn), Cedar Hills (Bowman)
I was wrong; yesterday I said there were no wells coming off confidential list today; it turns out there were two (but I see why they were not listed):
  • 23846, loc, CLR, Bison 41-23H, Cedar Hills,
  • 24650, PNC, KOG, P Wood 154-98-3-27-16-3H, 
Two (2) producing wells completed:
  • 27747, 812, XTO, Willey 31X-3G, West Capa, t10/14; cum --
  • 27748, 655, XTO, WIlley 31X-3F, West Capa, t10/14; cum --

Top Story At Yahoo!Finance Right Now: Oil Prices Dropping But Shale Revolution Rolling On -- October 31, 2014


Later, 6:12 p.m. CDT: a reader sent me this link with regard to the current slump in oil prices --
“We don’t really know where oil prices are heading, or how this will affect our chief competitors, OPEC and Texas, but we are in this together,” states Helms. “Not only is North Dakota under a lot of pressure, the OPEC counties are as well.”
Helms reports that today’s world oil price is $66.25 per barrel.
“Saudi Arabia needs $94 per barrel, and Iraq $116, to satisfy their current government budget,” states Helms. “So they are below break-even in terms of world oil prices.”
The only oil-producing country that is still faring well is Kuwait, which requires $59 per barrel.
The good news is that, as far as North Dakota and McKenzie County are concerned, McKenzie County’s break-even point is $28 per barrel, which is the lowest break-even point of all the oil-producing counties in North Dakota.
McKenzie County also has the highest number of drilling rigs at 66 out of 190. 
Original Post
The story:
$75 dollars a barrel – that’s the price crude oil would have to hit for frackers in North Dakota’s Bakken fields to feel pressure to slow new production, according to Greg Zuckerman, author of “The Frackers” and a special reporter at the Wall Street Journal.
“All these guys have hedged. They’ve got production [and] they’ve already got the acreage. They’re not gonna stop but maybe they’ll kind of slow new stuff.”
Fracking in other parts of the country, though, is likely to be much more resilient.
In Texas’s Eagle Ford and Permian basin, Zuckerman says oil prices would have to drop as low as $60 a barrel for production to be impacted.
Which is to say – don’t think the free fall in oil prices this year will jeopardize the fracking revolution.
“There’s a challenge, [frackers are] going to make less money; you’ll see a slowdown in production. But the revolution’s going to continue,” said Zucerman.
“I would argue that we’re only in sort of, maybe, the third inning even of a long, impressive revolution. And so this will slow things down but I don’t think it’s going to stop the revolution.”
My copy of The Frackers is across the room; reading slowly to enjoy it. A reader sent me a copy. Much appreciated.

The Market

This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Do not change any travel plans based on what you read here. 

At new 52-week highs: AAPL, AEP, CAH, EW, SRE, TSO, UNP, UPS.

Why I Love To Blog: Reason 4,359 - The Links, October 31, 2014

Over the years I have collected a number of links that readers have sent me.  One can find all this data by googling, but there are advantages to maintaining a data link list.

The data link / metric that I think will be one of the most interesting to follow for the next 14 months is "gasoline demand."

When you get to that link, scroll immediately to the bottom of the page (I have no idea why this graph is not the first thing one sees when one gets to that page): the graph on gasoline demand. Two things should drive gasoline demand:
  • dropping price of gasoline
  • recovery of the economy
Of course gasoline demand driven upward by those two factors will be offset by better gas mileage, but I doubt average mileage in fourteen months will not be all that different than gasoline mileage today.

After you check out the gasoline demand graph, take a look at the rest of the page. For example, gasoline stocks and days of supply. Note that most of those graphs have multiple graphs "behind" the one you may be looking at. There are links to related graphs to the right of the graph you are looking at.

After you finish reviewing this page, then go back to the narrative, this week in petroleum. This is essentially what the talking heads at CNBC do. The producer downloads the report, highlights the key phrases with a yellow highlighter and then hands it to guys and gals like Bob Pisani or Sharon Epperson.

The other graph to follow, but of much less interest to me, is the graph on crude oil imports. Crude oil imports will never drop below 6 million bbls/day, much less go to zero, for several reasons. Because the Keystone XL has been killed, US gulf coast refiners cannot get the heavy oil they need; they will get heavy oil from OPEC countries, like Venezuela. A second reason is that the country's largest island, California, gets its oil from three sources: the Bakken (a very minor percent at this point); Alaska (not exactly a good news story); and OPEC. The third reason is Motiva: the Port Arthur refinery, owned jointly by Saudi Arabia and Shell, is the largest refinery in North America and the fifth largest in the world.

It is interesting to look at US crude oil exports but it's pretty meaningless.

Global Warming
Climate Change
Extreme Weather
Ice Age Now

Headlines today suggest an earlier winter than some had expected with CO2 levels exceeding  400 ppm:
Boots On The Ground

I think the big question for President Obama with regard to "boots on the ground": where will he deploy troops first: Anbar Province (west of Baghdad) or Ferguson (west of east St Louis)?

Busy, Busy, Busy Day But I Will Be On The Net For Only An Hour Or So This Morning -- October 31, 2014

Busy, busy, busy day. Not much yet in the Bakken but a lot in the market.

Reminder: this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or what you think you may have read here. Also, do not make any changes to your travel plans based on what you read here.

CVX and XOM numbers are out. I will get back to them later.

The Dow was up almost 200 points in pre-market trading, has dropped back to 140 on the upside, and has hit new highs. Who wudda thought?

Here in the Bakken:

Active rigs:

Active Rigs191180186199152

I'm looking for 175 rigs before the end of 2015 if the movers and shakers on Wall Street think the  price of oil will remain low for the foreseeable future.

RBN Energy has a great story -- second in a series -- on Japan and LNG which dovetails with the story out of Japan today, the latter driving the market higher. From RBN Energy:
Japan is the world’s leading importer of liquefied natural gas, and its dependence on LNG has only increased since the March 2011 Fukushima nuclear disaster, which led to the shutdown of Japan’s 48 nuclear units. Some of those nukes are expected to return to service starting in 2015, but it’s possible—some would say likely—that a quarter or maybe even half of Japan’s nuclear fleet will never be restarted. While coal is cheap and oil is cheaper than it was a few months ago, natural gas-fired generation is seen as the best short-, mid- and long-term substitute for nuclear power. As a result, Japan utilities are working to increase and geographically diversify their LNG purchases, and to break what for decades has been a link between the pricing of LNG and oil. Today, we continue our look at how Japan’s response to the Fukushima disaster affects U.S. and Canadian natural gas producers and LNG exporters.
US and Canadian natural gas producers and prospective LNG exporters should read all that as good news. After all, the Japanese government and its big LNG importers (including its electric utilities) have indicated that they see US suppliers in particularly as their next go-to source for LNG. (So do India, China and South Korea.) Why? While Qatar and most other traditional LNG suppliers to big Asian buyers have remained adamant in linking their LNG prices to the price of oil, US exporters have been very willing to link their LNG prices to Henry Hub natural gas prices—typically 115% of Henry Hub plus a capacity charge of $3 or so per MMBTU (shipping and handling not included).
Canadians have been less willing to jettison the LNG/oil linkage, to their detriment. Oil prices, as we know too well, have been sagging as of late, so an LNG price indexed to oil isn’t as onerous now as it was just a few months ago.
Still, three primary aims of Japanese and other Asia LNG buyers are hedging, hedging and hedging—namely, to mitigate the price premium long associated with LNG prices linked to oil to minimize long-term price risk. No one wants to overpay, whether they are buying a new car or cable service or LNG.
Next time, we will take a deeper look at LNG pricing in Asia, what Japanese LNG buyers have already committed to purchase from North American suppliers, and how much of the incremental LNG Japan will need in the next 10 to 30 years is likely to come from US and Canadian sources.
Much, much more at the linked article. 


On a more depressing note it looks like the Enbridge Sandpiper is the new Keystone XL. I think I will take the poll down and then bring it back up in a couple days to see if sentiment changes with the updates coming out of Minnesota. But that will have to wait. Not sure if I want to go through all that bother.


So, what's the market doing?
CVX: quarterly profit jumps 13%. From Reuters:
The company posted net income of $5.59 billion, or $2.95 per share, compared with $4.95 billion, or $2.57 per share, in the year-ago period.
Production fell nearly 1 percent to 2.57 million barrels of oil equivalent per day as new wells failed to offset declines at old wells.
XOM: quarterly profit rises 3%. From Reuters:
Profit in the third quarter rose to $8.07 billion, or $1.89 per share, from $7.87 billion, or $1.79 per share in the year-ago period.
Analysts, on average, expected a profit of $1.71 per share.
Oil and gas production fell 4.7 percent. Exxon said it remained on track for full-year output of 4 million barrels oil equivalent per day (boed).
MMP: beats by a nickel; shares rise nicely. Press release

Genesee and Wyoming had a great quarter. The AP is reporting:
On a per-share basis, the Darien, Connecticut-based company said it had net income of $1.27. Earnings, adjusted for non-recurring gains, were $1.21 per share.
The results beat Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of $1.17 per share.
The railroad operator posted revenue of $432.5 million in the period, also surpassing Street forecasts. Analysts expected $424.5 million, according to Zacks.

Thursday, October 30, 2014

Three More KOG P Wood Permits In Truax Oil Field -- October 30, 2014

It never seems to quit. KOG has three more permits for P Wood wells in Truax oil field, sited on the same pad (or near the same pad) as the four new permits issued October 27, 2014:
These three new permits - wells will be sited - SESW 22-154-98 --
  • 29865, loc, KOG, P Wood 154-98-14-22-16-3HA,
  • 29864, loc, KOG, P Wood 154-98-14-22-16-3H,
  • 29863, loc, KOG, P Wood 154-98-14-22-16-2H,
These wells are tracked here.  It looks like these wells will be sited in section 22 and terminate to the northwest in section 16, unlike the previous four which will run straight north into section 15.

Global Warming
Climate Change
Extreme Weather 
Ice Age Now

Perhaps the best thing I've read on the subject all month. Recommended for adults only. 

What Some Of Us Will Be Talking About Friday -- October 30, 2014

The Wall Street Journal

US extends solid growth; sidestepping global tumult; 3.5% GDP.

Judge approves bankruptcy-exit plan for Stockton, California; city can raise taxes to protect pensioners.

Just the other day (or was it today?) I mentioned that water is the issue to follow in the Southwest: top news in the WSJ tomorrow -- parched cities in the west (Phoenix and Tucson, AZ) -- find ways to share resources. It's just a matter of time.

Wow, wow, wow -- this is great news! Ukraine and Russia settle gas dispute. This is really an amazing story. Adult leadership. Or sanctions.

The Los Angeles Times

Nothing. Unless one is interested in truffles or the fact that one of Kobe Bryant's early homes is on sale.

Fast Facts On New Bypass Around Watford City -- October 30, 2014

Taken directly from MDU's Fast Facts, sent to me by a reader:
The North Dakota oil patch town of Watford City is the fastest growing city in the fastest growing county in the country.
Tuesday morning (October 28, 2014), thanks to Knife River, the city finally got some much-needed breathing room. With an assist from North Dakota’s governor and a pair of shiny scissors, Knife River officially opened the U.S. Highway 85 bypass.
The $55 million project — which routes traffic around Watford City to the west — was the largest in Knife River history. The nine-mile bypass takes 13,000 vehicles a day, including 5,000 trucks, out of downtown Watford City. It improves both safety and traffic flow in the busy Bakken oilfield.
“It’s a great feeling to complete a project of this size that will have such a positive impact for so many people,” said Brad Arntson, president of Knife River’s North Dakota Division. “We’re proud to be involved with this bypass. This was a huge job and took some good teamwork. In the end, we worked together to build a safe, high-quality road on time and within budget. This project is a big success.”
Knife River’s Andy Cramer and Stacey Ashinhurst managed the project out of the company’s Williston, North Dakota, office.
The North Dakota team worked closely with Dave Midtlyng, Zach Cooper and Knife River’s Idaho Division, which handled much of the civil construction.
In total, Knife River moved 2.1 million cubic yards of dirt and provided 520,000 tons of aggregates and 200,000 tons of asphalt. The project also included 30,000 cubic yards of concrete.
Knife River finished the project on budget and in less than 13 months, which was ahead of schedule.
“To have this happen in the speed that it did speaks to great cooperation,” Watford City Mayor Brent Sanford said at Tuesday’s ribbon cutting. “And to (Knife River), thank you. This has to be a record for finishing a project.” 
I was in the area two or three times when they were working on this project. A couple of things stuck out. It seemed they worked on this 24/7 and it seemed they kept the traffic moving throughout the process with a minimum of fuss.

But look at that traffic: 13,000 vehicles per day; 5,000 of them trucks! Gives newbies some idea just how busy the Bakken is.

No Wells Coming Off Confidential List Tomorrow -- October 30, 2014

Companies reporting earnings Friday, according to Yahoo!Finance:
  • CVX, before market open, $2.56;
  • XOM, 8:00 a.m. ET, $1.73;
  • Genesee & Wyoming, before market open, $1.17;
  • Magellan Midstream Partners (MMP); before market open; 66 cents;
This is not an investment site, yada, yada, yada....


Daily Activity Report For Thursday, October 30, 2014

Wells coming off confidential list Friday: None. There was no "April 31" this year.

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

Three (3) producing wells completed:
  • 21374, 2,263, Statoil, Barstad 23-14 4TFH, Alger, t9/14; cum --
  • 28611, 1,160, Whiting, Bartleson 13-18-2XH, Sanish, ICO, t10/14; cum --
  • 28610, 1,807, Whiting, Bartleson 13-18-3XH, Sanish, ICO, t10/14; cum --
Seventeen (17) new permits --
  • Operators: Newfield (4), WPX (3), KOG (3), Sedalia (2), XTO (2), Slawson, Hess, CLR
  • Fields: Lost Bridge (Dunn), Mandaree (Dunn), Truax (Williams), Pratt (McHenry), Bear Den (McKenzie), Big Bend (Mountrail), Truax (Williams), Brooklyn (Williams)
  • Comments: Sedalia has a relatively long history in North Dakota, though it has drilled very few wells; their two permits today are for Madison wells (horizontal) in the Pratt Madison Unit; the Pratt oil field is east of the Glenburn oil field, about 8 miles east of the city of Glenburn; the field is about 20 miles northeast of Minot;
Active rigs:

Active Rigs190182185200152

COP (BR) To Slow Drilling In The Bakken Due To Slump In Oil Prices; The Road To Fukushima -- October 30, 2014

Bloomberg is reporting:
ConocoPhillips became the first major oil company to announce plans to reduce spending due to falling crude prices as drilling in some emerging North American fields becomes less profitable.
The third-largest U.S. energy producer can meet its target to boost production by as much as 5 percent each year even as it reduces annual spending to below $16 billion, Chairman and Chief Executive Officer Ryan Lance told investors today.
ConocoPhillips plans to scale back drilling in emerging oil regions such as West Texas and the Rocky Mountains. The company’s ability to produce oil at lower costs in more established areas that have fueled the U.S. shale boom make growth sustainable. ConocoPhillips could also reduce exploration spending, he said. 
The "Rocky Mountains" include the Bakken in this context. In the Bakken, BR is COP. 

Later in the article:
ConocoPhillips increased production 33 percent to the equivalent of 212,000 barrels of oil a day in North Dakota’s Bakken and Texas’ Eagle Ford formations, two of the fastest-growing U.S. oil fields. That follows a 41 percent output increase in the second quarter. The company also completed a sale of its interest in Nigeria for $1.4 billion.
The company has gone from a small player in fast-growing U.S. shale regions to a dominant force able to turn a profit at an oil price of $40 a barrel.
“They have plenty of places to put capital, and they can take the time to make sure that when they drill an unconventional well, they are successful and realize a high margin,” James Sullivan, a New York-based analyst at Alembic Global Advisors, said today in a telephone interview.
ConocoPhillips became the second major oil company today to report rising profits in the face of falling crude prices as an asset sale in Nigeria and higher output in Texas and North Dakota boosted returns. 
New 52-Week Highs

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.

Wow, what a market. Hitting new 52-week highs: AEP, AMGN, CSX, EW, SRE.

Fukushima All Over Again

This is an incredible story. I had a different "headline" but I thought it might be a bit too much (LOL).

A huge "thank you" for Don spotting this story. I missed it. Pretty much encapsulates the entire global problem with renewable energy. Even Spain and Germany are mentioned. Newbies probably need to read the entire article to understand the blurb below, but regular readers will understand this, from the AP via Yahoo!Finance:
The utilities say they can't accommodate the flood of newcomers to the green energy business, throwing in doubt the future of Japan's up-to-now aggressive strategy on renewable energy.
Another challenge is that supplies of power from sources such as solar are not reliable enough or easily stored.
"Kyushu electric shock is spreading in a domino effect," said Oba. "It's like fraud on the national level, with utility companies and the government in cahoots with each other."
Traumatized by the world's worst nuclear disaster since Chernobyl and encouraged by the highest rates for renewable energy in the world, Japan has been undergoing a green boom. It's now rapidly turning into a fiasco as the cost proves prohibitive and utilities anticipate putting some nuclear reactors, shuttered since the March 2011 Fukushima disaster, back online. The unfolding green glut in Japan echoes similar experiences in Germany and Spain.

I see the state of Maine plans to ask the nurse returning from Ebolaland vis New Jersey to "self-quarantine" herself for 21 days. One would think the clock would have started when she entered the states, which must have been about a week ago. [I see the 21 days is up November 10, 2014.] I see she has not yet been invited to the White House to be hugged by the president. I don't blame him. It's now well confirmed that the virus can survive outside the human body for a lot longer than suspected or first reported. Like on doorknobs and toilet seats.

[Update: I posted that two days ago, October 28, 2014. Today, two days later, October 30, it is being reported that the CDC is, in fact, reporting the same thing: Ebola is more easily spread than we are being told:
Ebola is a lot easier to catch than health officials have admitted — and can be contracted by contact with a doorknob contaminated by a sneeze from an infected person an hour or more before.
And there you have it.]

[This is kind of funny. The other day Mike Savage, talk radio, was upset about folks using the word "catch" when talking about contracting an infectious disease. He often reminds us that he has a doctorate in something, maybe infectious disease epidemiology but I really don't know and I really don't care, but it is interesting that he was upset about the use of "catch." As noted above, almost everyone uses the colloquial "catch" including the NY Post above. The question is: do recognized medical authorities use "catch" in connection with infectious disease? It turns out that the Mayo Clinic does:
An easy way to catch most infectious diseases is by coming in contact with a person or animal who has the infection. 
I can't make this stuff up. Reason #2,387 why I love to blog. LOL. Mike Savage needs to move on.]

The nurse, by the way, is now out and about in the state of Maine, bicycling (photo of her bicycling at this link). CNN update (their words, not mine), October 31, 2014:
Nurse Kaci Hickox recently returned to the United States after treating Ebola patients in Sierra Leone. She's been in a tense standoff with state authorities, who want her to stay home for 21 days -- the incubation period for the deadly virus.
"Want her to stay .... "

By the way, speaking of Ebola, the CDC has backtracked. After a call from the White House and the Ebolaczar, the CDC has removed posters warning folks that Ebolavirus, like all viruses, can be found in droplets from sneezing and coughing. I can't make this stuff up.  This was noted October 31, 2014, one day after the posters were noted by mainstream media.

A Note For the Granddaughters

About two months ago we noted a "new" pastry item at our favorite breakfast restaurant in downtown Grapevine. The pastry item was a "Cronut." I had never heard of such a thing until then. It's a "cross" between a croissant and a donut. I asked the folks at the restaurant what that was all about. They have apparently had it for quite some time; it has become very, very popular. While we were talking -- this was a Sunday morning -- a person rushed in to pick up two Cronuts. Unfortunately the pastry shop had sold out; none were left. The proprietor gave the individual a half dozen other pastry items as a gift to make up for the fact they had sold out of Cronuts. The individual had not pre-ordered; we were told that if we wanted to assure ourselves of a Cronut we needed to call ahead and put an order in. Only so many are made each day and once that batch is made, no more are set out for the day.

The reason the proprietor was so happy to give the aforementioned individual half-a-dozen other pastry items was because this customer was a regular. Actually, the person coming in the restaurant-pastry shop was not the customer; he was the chauffeur to the customer who was outside, waiting in the limousine.

Yes, in Grapevine, Cronuts are very popular.

I, of course, would never have posted that except for an Adam Gopnik's article in this week's issue of The New Yorker: Bakeoff: What is happening to our pastry? The first paragraph:
It would probably be going too far to say that there is a war on between Maury Rubin's pretzel croissant and Dominique Ansel's Cronut -- going too far because the two things can and do coexist grudgingly, one at Rubin's City Bakery, off lower Fifth, and theother at Ansel's self-named bakery, in SoHo, and also because, truth be told, Rubin's combinaiton of croissant sweetness and pretzel salt is by now a familiar staple fo the lower-Manhattan breakfast, while the crowd for Ansel's deep-fried croissant-doughnut is still a phenomenon, creating lines that sometimes start crawling aroudn the block at Spring and Thompson Streets at five in the morning.
" still a phenomenon in New York"? Apparently we've had Cronuts in Grapevine, TX, for quite some time and they, too, are still a phenomenon.

Busy, Busy, Busy -- October 30, 2014; Nominations For 2017 Audio CD Now Being Taken

Wow, I'm in a good mood. More later. I forgot. I have to update the IPs for the wells coming off confidential well today.

Okay, that's done.

From A Reader

Here's another Bakken success story for you.
American Smoke Wagon in Watford a City started out in a food trailer along Hwy 85 south of Watford.  I heard their radio spot and had a sandwich a couple years ago.  Today I am picking up sandwiches for the crew in a nice modern restaurant across from the new Cashwise in Watford.  In 2011 when I came here this area was a big mudhole and now is nicely developed , and from all appearances is doing well.

American Smoke Wagon: Bill Nichols.
Food is superb.
3Q14 grew at a solid 3.5%. I believe this is the first estimate. I believe there are at least two more revisions, over the next two months.

These countries are getting "killed" by low oil prices
Oil is selling for roughly $83 a barrel on the global market.
That's bad news for Iran, Nigeria, Venezuela, Russia, and Saudi Arabia, among others.
Iran's budget is built on oil at $135 dollars per barrel. 
Russia has oil budgeted at $100, while Saudi Arabia will break even at $95 per barrel. 
See my list here.

Same reader notes:
Forgot to mention that the Watford and Alexander bypasses are open and are just great. Makes an awesome drive now.  
[Memo to Google: update your satellite views of the Bakken.]

I drove on part of the bypasses that were complete back in August (or whenever it was I was last there); the roads are incredible; I can't believe how wide they are. I also can't believe how fast they got this completed. I don't recall public discussion about these bypasses even as recently as 2011 or 2012. I'm sure it was all there but I missed it, but in my mind, these huge bypasses were "done overnight."


Funny how time changes everything (regular readers know where this is going). After the election when he can throw his base under the bus, the Obama administration is likely to delay EPA rules on electric utilities and CO2. The question is why would he do this? He's not up for election any more. 

Time Changes Everything, Bob Wills

They Won't Build This Either -- Hillary, Barack, and Pocahantas

The Bismarck Tribune is reporting:
Watford City officials joined principals from Triton Real Estate Investments in a ground-breaking ceremony held Oct. 15 for a new 40,000- square-foot, four-story office and retail building located on Main Street in Watford City.
“We’re very excited about this,” said Jonathan Kalikow, one of the principals of Triton Real Estate Investments. “It’s our first office building in North Dakota. It’s our first, but definitely not our last.”
Estimated cost of the building is approximately $15.5 million. Triton currently has no tenants for the new building.
The rumor is that all building material will be delivered by trucks using roads built by the government and/or trains using rail placed on ground given to tycoons in the 19th century.

Audio CD Nominations, January 20, 2017

I'm starting to put together a commemorative audio CD for the outgoing president come January 20, 2017.  I'll choose the best 20.

Here's the first nomination.

Ray Price, For The Good Times

The Fill Rate? 87; The West Region Had A Fill Rate Of Only 8 BCF -- October 30, 2014

The magic number is now more than 100 as winter approaches.

More is better if one is worried about preparation for the winter.

The number today: 87. At the link, scroll down to see the graph.

See "NG_Fill_Rate" at bottom of blog for past posts on this subject.

This link probably explains the most.

Wow, wow, wow -- 87. Yes, as we move into autumn, the fill rate will start to decrease, as consumers start to use more natural gas. I understand that. What is fascinating to watch is the delta between current fill rate and historical ranges, and historical average. The EIA's statement:
Stocks were 294 Bcf less than last year at this time and 310 Bcf below the 5-year average of 3,790 Bcf. In the East Region, stocks were 130 Bcf below the 5-year average following net injections of 41 Bcf.
Stocks in the Producing Region were 146 Bcf below the 5-year average of 1,223 Bcf after a net injection of 38 Bcf.
Stocks in the West Region were 34 Bcf below the 5-year average after a net addition of 8 Bcf.
At 3,480 Bcf, total working gas is below the 5-year historical range.

Thursday -- October 30, 2014

Active rigs:

Active Rigs190182185200152

RBN Energy: continuation of the series on diluent by pipeline to Canada. A very, very good series.
Canadian production of diluent range light hydrocarbon materials such as natural gasoline and condensate are not currently meeting demand from the oil sands region. Diluent is used to reduce the viscosity of heavy Canadian crude so that it can flow to market in pipelines. Diluent supplies required to supplement Canada’s domestic output are nearly all imported from the U.S. via two pipelines that originate in the Midwest. Those pipelines are mostly supplied with diluent sourced from the Gulf Coast. Today we look at how imported diluent gets to Western Canada.
The first episode in this series provided an overview of current and expected demand for diluent range materials for use by oil producers in the Western Canadian Sedimentary Basin (WCSB). The diluent is blended with heavy bitumen and heavy conventional crude to reduce its viscosity enough to flow to market in pipelines. We covered the range of diluent materials used by WCSB producers including natural gasoline and synthetic crude oil. Total Canadian demand for diluent in 2014 is expected to average 380 Mb/d – meaning that with 160 Mb/d of local supply about 220 Mb/d will be imported – mostly from the U.S. By 2019 that import requirement number will more than double to 485 Mb/d (assuming that Canadian domestic production doesn’t increase dramatically – which it might.). This series details the distribution infrastructure being built out to deliver increasing quantities of diluent to production locations in the WCSB. In this episode we recap pipeline diluent routes from the U.S. to Western Canada.

Shale Boom Shines Light On Natural-Gas Liquids -- WSJ, October 30, 2014

This really is quite remarkable.

For newbies, two data points:
  • the Bakken is an oil play, not a gas play; 90% - 95% of hydrocarbons coming out of the Bakken is crude oil, not gas
  • however, 5% to 10% of a gazillion boe is still a lot of natural gas 
  • the second data point: Bakken natural-gas liquid is said to be particularly "rich"
Now the WSJ is reporting:
An unsung byproduct of oil and natural-gas production is getting more attention from hedge funds and investors as they seek new ways to bet on the U.S. shale boom.
Natural-gas liquids, which include ethane, propane, butane, isobutane and natural gasoline, are separated out from crude oil and natural gas. They are known as the fuels in propane grills and butane lighters and as feedstocks to make plastics and chemicals. Until recently, they attracted little investor consideration.

Remember that word.

Regular readers are aware of the $4 billion significance.

Let's see if the article mentions the Bakken. Nope.

Other comments from the article:
“I don’t think the market really truly appreciates just what [NGLs] can do” for oil-and-gas producers, added Mr. MacDonald, who manages the $1.4 billion Invesco Energy Fund.

“I’m actually beginning to move some of my businesses more into the NGL side because of the demand,” said Steve Reese, chief executive of Reese Energy Consulting and Reese Energy Training in Edmond, Okla., who said he is planning to start a propane business. “The trading activity has definitely increased.”
It helps that unlike oil and natural gas, NGLs can easily be exported overseas, where prices are higher. Connections to the global market make it less likely NGLs will meet the same fate as natural gas, which saw prices crash when production swamped U.S. demand. NGLs fetch an average of $9.94 a million British thermal units, more than double the price of natural gas.
Remember: this is not an investment site. Do not make any financial, investment, relationship decisions or change any travel plans based on anything you read at this site or anything you think you might have read at this site. Perhaps this is a red flag:
The lack of transparency in the market is keeping OppenheimerFunds Inc. from trading NGLs, said George Zivic, portfolio manager for the $420 million Oppenheimer Commodity Strategy Total Return Fund.
“Unless you’re privy to what [producers and manufacturers] are doing on a month-to-month basis, you can really get squeezed,” Mr. Zivic said.

First Time Unemployment Benefits Rise; The Spin Continues -- October 30, 2014

Wow, talk about spin.

This is the headline from Bloomberg: Fewer Americans Filed for Jobless Benefits in Past Month. I fell line, hook, and sinker for that. Wow, you have to read this closely. Look at the first two paragraphs:
Fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years, a sign the strengthening U.S. economy is buoying the labor market.
The four-week average of jobless claims, a less-volatile measure than the weekly figure, fell to 281,000 in the period ended Oct. 25, the lowest since May 2000, from 281,250 the week before, a Labor Department report showed today in Washington. Compared with the prior week, applications for benefits rose by 3,000 to 287,000. 
I had a devil of a time finding the number for this week because I was reading through this so fast. The number is there, but it's buried (usually it's the first line); and second, in the three years or so of posting jobs data, this is the first time, I recall, that Bloomberg put the four-week average first; that is never, never, ever done. I was wondering why the market was down on seemingly good news; now I know. The jobs picture is not getting better. It's mired in quicksand.

Applications ROSE this week. The reason the four-week average -- the less-volatile measure -- is lower is due to the anomalous report of two weeks ago when the number dropped an incredible (as unbelievable, never explained, impossible, LOL-hilarious) 50,000 or something like that.

But from the headline today, I thought first-time applications THIS WEEK plummeted. In fact they rose.

Is this the last report before the election?

The worse thing: a) it delayed me to getting to what I love most, the Bakken; and, b) put me in the mood to take the day off, enjoy Starbucks coffee (and a donut). So, we'll see.

[Update, two hours later: it appears Reuters read my note. Even they realized their reporting/spin "jumped the shark." Reuters has this headline: "US Jobless Claims Rise, But Underlying Labor Market Trends Firming." Nice to see they fessed up.]

And the spin continues.

Yesterday, I posted:
The Fed is so happy with low unemployment, it has ended quantitative easing. After $1.6 trillion.
This is from the source that came up with the $16-trillion figure:
An effort to stimulate economic growth through easier lending and an increased money supply, the Fed’s current round of quantitative easing, as the program is called, has been in place since September 2012, when the jobless rate was 7.8 percent. Since then, the Fed has purchased $1.6 trillion in Treasury bonds and mortgage-backed securities.  
I thought the $1.6 trillion was low, but I don't have time to fact check, and in the big scheme of things, who cares? It turns out, at least one reader cares. It appears that mainstream media US News failed to account for everything.

I hate to say it, but it appears Wiki is a more reliable source than mainstream print media. From Wiki, the total is a tad higher than $1.6 trillion:
On 18 September 2013, the Fed decided to hold off on scaling back its bond-buying protram. Purchases were halted on October 29, 2014, after accumulating $4.5 trillion in assets
Predictable: ObamaCare
Employers Dropping Health Care Coverage For Their Employees To Save Money

The Wall Street Journal is reporting that "small firms start to drop health plans." These small health firms view ObamaCare as inviting and affordable.
Small companies are starting to turn away from offering health plans as they seek to reduce costs and increasingly view the health law’s marketplaces as an inviting and affordable option for workers.
In the latest sign of a possible shift, WellPoint Inc. said Wednesday its small-business-plan membership is shrinking faster than expected and it has lost about 300,000 people since the start of the year, leaving a total of 1.56 million in small-group coverage.
Some other insurers have flagged a similar trend.
Aetna Inc. Chief Financial Officer Shawn M. Guertin said the company was seeing “some erosion at the bottom of the market” among employers with two to 10 workers.
Kaiser Permanente is seeing “some contraction” in the small-group market, particularly in places where insurers are offering cheap individual plans.
Laura Land, who co-owns cellphone-case-maker Empire Cell Phone Accessories in Riverside, CA, which has 38 full-time employees, said the company plans to discontinue its health plan next year and instead direct workers to the state’s health-insurance exchange.
“It’s getting to be too much paperwork for us to administer the plan, especially if workers are going to decline anyway and go to the exchange,” said Ms. Land, adding that several new hires recently turned down the plan in favor of cheaper exchange options.
It’s not yet clear how widespread the shift will ultimately be. An April survey by the International Foundation of Employee Benefit Plans found that 22.5% of employers with 50 or fewer employees said they “definitely will” still be offering health benefits in five years, while an additional 42% said they “very likely” would. Among large employers with 500 or more employees, about three-quarters fell into those two categories.
The health law doesn’t penalize companies with fewer than 50 workers that don’t offer coverage, and those with fewer than 100 employees won’t face fines until 2016.
So, over time, all things being equal, the number of folks signing up for ObamaCare will start to increase, but not for the reasons the mainstream media will cite. 

Thursday -- October 29, 2014; What Some Of Us Will Be Talking About Later Today

From Rigzone: Mideast gas field up for grabs ... again.
Islamic State militants in Syria killed at least 30 pro-government fighters in an assault on a gas field that has witnessed some of the bloodiest confrontations between the two sides.
Islamic State seized the Sha'ar gas field in July, killing some 350 government troops, allied militiamen, guards and staff.
Government forces recaptured the field, east of the central city of Homs, later that month. In a new round of fighting on Tuesday, Islamic State seized three wells and killed at least 30 government and pro-government fighters.
The Wall Street Journal

The Fed is so happy with low unemployment, it has ended quantitative easing. After $1.6 trillion.  That source failed to mention the total spent. From a more reliable source, I guess, wiki:
On 18 September 2013, the Fed decided to hold off on scaling back its bond-buying protram. Purchases were halted on October 29, 2014, after accumulating $4.5 trillion in assets.
North American energy boom can withstand steeper oil-price drop. It sure seems like there is a lot of angst over the price of oil. One would think we should be celebrating cheap oil. And talk of "Peak Oil" is going the way of talk about "global warming." Or whatever Algore calls it now.

It never quits, does it? The US Air Force says it is running short of jet mechanics because of the war on ISIL. If "we" can't handle Al-Qaeda's "junior varsity" how in the world could we have taken on the USSR, or even Al-Qaeda's varsity team? This is quite mind-boggling. "Officials say campaign against ISIS is exacerbating its shortage of plane-maintenance experts." Really? It's hard to imagine that SecDef Hagel could have cut the USAF personnel that fast, that quickly. That's why he was hired by POTUS, to cut the military, but Air Force jet mechanics? [Update: I posted that October 29, 2014, around midnight. Today, October 30, 2014, about noon, less than 12 hours later, CNN is hinting that Chuck Hagel is about to be thrown under the bus. Timing is everything. It's amazing how much one can learn from this blog. LOL.]

Amnesty rules for people in the US who don't have government-issued photo IDs.

Largest active sunspot in 24 years has launched six major flares toward Earth so far, intermittently disrupting navigation systems and radio communciations. I wonder if this can be blamed on George W. Bush?

This is what happens when POTUS lets others decide: chaos. President Obama, on Wednesday, made a broad appeal for US leadership (who would that be?) to stem an Ebola outbreak in West Africa and expressed frustration with policies that may discourage health-care workers from volunteering on the front lines. Memo to POTUS: your US Army is mandating a 21-day quarantine for all troops who spend any time whatsoever in west Africa.

Meanwhile, that nurse who arrived back from Ebolaland with a fever now in an undisclosed location in Maine says she will "resist" quarantine. The fever, she says, was bogus. She tested negative for Ebola on two occasions.

And there it is, the third in a series of three stories on Ebola: SecDef approves mandatory 21-day quarantine for any and all military personnel returning from Ebolaland.

Sanctions are seen to be hurting Moscow. And Italy. And Germany. And the Ukraine.

ISIS executes at least 40 tribal and Iraqi government fighters.

It appears President Obama has made another executive decision; along with choosing the Capitol Christmas Tree, I now count two executive decisions he's made this week. The second: US to lift sanctions on Fiji.

Sanctions, what sanctions? Apple looks to sell iPhone in Iran.

Small firms drop health plans -- citing ObamaCare. More here.

Regular readers are aware of the "payments system" challenging Apple Pay: CurrentC. It just got hacked: hackers stole e-mail addresses of some people participating in the pilot project.

Arctic shipping volume rises as ice melts: northern sea route primarily carries oil, much of the cargo involving Russia. All that oil over the pristine Arctic. 
The opening up of the Arctic for commercial cargo offers a faster route for some shipments between Europe and Asia, and holds the promise of increased trade for once icebound ports in the High North of Arctic countries such as Russia, Norway and Canada.
However, much of the new traffic through the Northern Sea Route is one-way shipments of fossil fuels from Northern Europe to Asia or is between Russian ports, according to a report to be released Friday by the Arctic Institute, a Washington think tank.
The institute said 71 ships carried 1.35 million tons of goods through the route last year. That was up from 46 vessels with 1.26 million tons of cargo the previous year. The majority of ships originated in Russia and many were from one Russian port to another in the country. Only 41 vessels traveled the full length of the Arctic shipping lane, and of those, 30 ships carried cargo, the report said.
[From elsewhere: video of the Arctic ice pack.]

Samsung in free-fall? But not because of Apple. It's really quite a story with several story lines. Not enough time to discuss. Gotta move along.

Wednesday, October 29, 2014

Great Article Over At Rigzone On Enhanced Oil Recovery -- Propsects For CO2-Based EOG -- October 29, 2014


October 31, 2014: 3rd in the series -- the prospects for thermal enhanced oil recovery (EOR), highlighting the opportunities for using heat to improve oil recovery in regions that have not traditionally used the technique
Within the Canadian oil sands, thermal EOR techniques are used when reserves are too deep to mine.
Thermal processes overtook mining as the dominant production method in 2012, and with around 80 percent of the remaining oil sands reserves in Alberta more than 200 meters (650 feet) below the surface and thus deemed too deep to mine, EOR techniques will play an increasingly dominant role in the oil sands market over next ten years.
Steam assisted gravity drainage (SAGD) is the leading technology, used at 75 percent of currently operational projects, with cyclic steam stimulation (CSS) used at most other locations. The thermal oil sands market is about to experience a period of rapid expansion as a wave of new projects come online in 2015 and 2016. However, the increased production that this creates may lead to transportation and refinery bottlenecks. Moreover, slowing Chinese investment, at the behest of the Canadian federal government, along with the potential for lower oil prices could also restrain the market, with projects likely to be delayed or cancelled.
Nonetheless, with more than 160 projects under construction, approved or announced, the thermal oil sands market will see fairly substantial production growth even if just a fraction of these projects are completed.
October 30, 2014: 2nd in the series -- can chemical EOR take off?
In terms of current spending and production figures, chemical EOR will remain the smallest segment of the EOR market for the immediate future. Yet the potential for chemical EOR development is vast in terms of both size and regional scope. Chemical EOR already surpasses both thermal and gas EOR methods in terms of the number of countries with active projects (14), while double-digit spending growth is anticipated over the next five years as pilot projects are set up and expanded. As such, chemical EOR is set to emerge from the shadow of its rival EOR methods to become an important technology on the global scale.
Original Post
This is a fairly long article for Rigzone, providing background and prospects for CO2-based EOR. I wold love to place this as a permanent link on the sidebar at the right, but my hunch is that this article will require a subscription or password in the not-too-distant future.

The most interesting takeaway: the shale (tight) oil revolution is an under-discussed threat to CO2 EOR prospects.
The table at the linked article shows the 15 largest CO2 EOR producers in North America ranked alongside the 15 largest spenders in the shale oil market in 2014; the table shows there is significant overlap with companies involved in both endeavors.
Shale oil development has lower start-up costs and quicker returns than CO2 EOR projects. Consequently, investors and company executives are likely to prioritize their shale oil asset development at this present time. Occidental – by far the largest CO2 EOR company in terms of production with 30 percent of the U.S. total – plans to keep CO2 EOR production in the Permian Basin flat through 2016 while increasing production from its shale oil assets in the region, according to the company's most recent presentation.
The second most interesting takeaway: "growth prospects for US CO2 EOR are overstated."
Although a CO2 EOR pure play company such as Denbury Resources could achieve 10-percent per year production growth (in a best case scenario), the market as a whole is unlikely to grow at this rate in the medium term. The optimistic forecasts for CO2 EOR production have tended to focus on the availability of new CO2 sources and pipelines, without paying enough attention to the plans of CO2 EOR producers and outside factors influencing the market. 
The other major points:
  •  prospects for CO2 EOR are more favorable in China, Brazil, and the Middle East
  • CO2 EOR not economical in the North Sea (at least in the near term and at current oil prices)
Long postings -- especially those done in the midnight hour while watching "Lost In Translation" -- may contain factual and/or typographical errors. If this information is important to you, go to the linked article. 

First Things First -- Yes, President Obama Has Selected The Capitol Christmas Tree -- October 29, 2014

This is not an investment site. Do not make any investment, financial, relationship, or travel decisions based on what you read here or think you may have read here. If any of this is important to you, go to the linked source. I'm only doing this for myself to help me better understand the Bakken and to put the Bakken in perspective. And it gives me something to do when I'm not with the granddaughters.

On tap for later today (Thursday, October 30, 2014), earnings that interest me:
  • CARBO Ceramics (CRR), 7:00 a.m. ET; 75 cents; beats by 8 cents; shares fall.
  • Cardinal Health (CAH), before market open, 96 cents; beats by 4 cents; shares flat.
  • COP, before market open, $1.20; beats by 10 - 12 cents; shares flat.
  • EPD, before market open, 37 cents; in-line; misses on revs; shares down a bit.
  • Greenbrier (GBX), before market open, $1.03; beats, in-line; shares down a bit.
  • Kellogg (K), before market open, 92 cents; beats by 2 cents; sales down (again); shares up
  • National Oilwell Varco (NOV), before market open, $1.53; beats by 7 cents; shares fall;
  • Tallgrass Energy Partners (TEP), after market close, 9 cents; misses by 5 cents; shares down more than 16%;
  • Tesoro (TSO), after market close, $2.16;
This, from Yahoo!Finance; occasionally something changes.

The list has nothing to do with my personal investments. Of the list above, I've only ever invested in three of the companies listed, and have held shares in two of those companies for more than 30 years. I bought shares in the third company by mistake, and it turned out to be one of my best holdings, and I will now hold it forever. I have no plans to buy or sell any shares in any of the companies listed above.

Is Pinocchio's Nose Getting Longer?

This will be the top story in today's (Thursday) WSJ. The headline and the lede: "Fed Closes Chapter on Easy Money":
The Federal Reserve said it would end its long-running bond-purchase program, concluding a historic experiment that stirred disagreement among policy makers, economists, and investors about its impact even though the central bank said it helped accomplish its goal of reducing unemployment.
Really? $1.6 trillion in easy money and ... unemployment went from 7.8% to 6.0% or thereabouts (and about 25% among those whose sons like Trayvon). [The "7.8%" figure is their number, not mine. I would have guessed much higher.]

Yes, Virginia, There Will Be A Holiday Tree In DC This Year

Earlier today, rhetorically and tongue-in-cheek, I asked whether the president had decided on the Capitol Christmas Tree yet. There were so many things on his to-do list put together by The New York Times. It turns out that, yes, the Capitol Christmas (aka Holiday) Tree has been selected. CapitolChristmasTree is reporting:
The Chippewa National Forest, in partnership with the Leech Lake Band of Ojibwe and Choose Outdoors, invites the public to the 2014 U.S. Capitol Christmas Tree cutting ceremony Oct. 29. The event begins at 12 p.m. with a welcome from Chippewa National Forest Supervisor Darla Lenz; remarks by U.S. Senator Amy Klobuchar and U.S. Representative Richard Nolan; and a traditional blessing ceremony by Leech Lake Band of Ojibwe members. Minnesota Logger of the Year Jim Scheff will have the honor of cutting the tree, which will then be carefully lowered onto a 100-foot truck and trailer.
Well, at least some decisions are still being made. 

Bakken Economy Update, The Williston Wire; 70% Of California Physicians Do Not Participate In ObamaCare; 70% Is A Failing Grade; 360 Million Americans, Maybe 4 Million Signed Up For ObamaCare -- October 29, 2014

"They didn't build the following businesses" according to Hillary, but the following were noted by the Williston Wire:

New owners celebrate grand opening of Walt's Market. This is a big story for me. It is just down the street from where my dad lives on University Avenue. It's claim to fame: some of the best beef in state of North Dakota in the US.  When I was younger, I remember my dad stopping at Walt's Market to pick up some of the best beef in town. I'm glad to see it's going to be re-invented.

"They didn't build it" but Sherwin-Williams is opening a new store in Williston. It's a 5,800-square-foot facility at 2112 4th Avenue West.

"They won't build it" but Culver's will celebrate a ground breaking on November 10, 2014, which will be located just west of Buffalo Wild Wings. The address: 401 Reiger Driver. Culver's is a Wisconsin-based restaurant recognized for its homemade butterburgers and fresh frozen custard. I wonder if Hillary will take credit for the cooking?

"They didn't build it," but Sanford will donate $1 million to Watford City's new medical center.

In this case, I think he really did build it -- an Arkansas man converts a yellow-school bus to a BBQ truck in Ray.

Fifteen cultural economics students from Denmark spent three weeks studying and touring North Dakota, driving on roads provided by the government.

Wow, it's amazing how much "they didn't build."

How does one spell cockamamie?

$100 oil?

I'm not really in the mood to do much with this article. I will note just one or two data points. Bloomberg is posting:
Global consumption will grow to 99 million barrels a day in 2019 from 92.8 million this year, according to the Paris-based International Energy Agency. While the U.S. is producing the most oil since 1985 as it taps shale-rock formations and OPEC production grew at the fastest rate in 13 months in September, future demand will require supply from areas with high costs, such as the deep waters of the Gulf of Mexico or the Arctic.

Prices may rebound well before 2020. Brent, the global benchmark, will climb to as much as $100 a barrel next year, according to Sanford C. Bernstein & Co., Standard Chartered and Barclays Plc. 
This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here but this is another once-in-a-lifetime investing opportunity from my point of view. That and a $1.00 will get you a small drink at McDonald's.

Hess Will Stick With $6 Billion Stampede Project In The Gulf

Rigzone is reporting:
U.S. independent oil company Hess Corp. said on Tuesday it would proceed with the development of the $6 billion Stampede project in the U.S. Gulf of Mexico, one of the biggest energy investments announced during the current oil price slump.
Hess, the operator of the deepwater project, has a 25 percent stake in Stampede. A unit of Chevron Corp, Norway's Statoil and Nexen Petroleum Offshore will also each hold a 25 percent stake.
Hess said first production from the project is expected in 2018.
Total estimated recoverable resources for Stampede, located about 115 miles south of Fourchon, Louisiana, are estimated in the range of 300 million to 350 million barrels of oil equivalent. Gross processing capacity for the Stampede project is some 80,000 barrels of oil per day.
This Ship Has Sailed
At a time when the Obama administration is lurching from crisis to crisis — a new Cold War in Europe, a brutal Islamic caliphate in the Middle East and a deadly epidemic in West Africa, to name just the most obvious ones — it is not surprising that long-term strategy would take a back seat. But it raises inevitable questions about the ability of the president and his hard-pressed national security team to manage and somehow get ahead of the daily onslaught of events.
The biggest problem it seems is this: the problems keep piling up because no one makes a decision. With regard to protecting the military, the US Army couldn't wait for any decision from the commander-in-chief. The US Army, unilaterally, set its own policy on Ebola: quarantining 100% of the troops returning from west Africa. They even picked the location for quarantine. I assume other agencies will make their own ad hoc decisions in lieu of directions from the Oval Office.

Heartaches by the number, troubles by the score, every day you love me less, each day I love you more :

Ray Price, Heartaches By The Number

I wonder if they've picked out the Christmas tree yet?


I love this. I have opined from the beginning that the ObamaCare numbers were inflated. The official numbers are in the 8 million range; many observers suggest a more realistic number is closer to 4 million. I've opined that it may be around 2 million that are actually happy they enrolled demonstrated by the fact that they: a) are paying their premiums on time; and, b) will re-enroll.

It turns out I may not be far off. IBD via Yahoo!Finance is reporting:
The Obama administration's tally of 7.3 million paid enrollees in ObamaCare exchange plans as of mid-August increasingly looks like an artificial peak that hasn't been sustained.
The most telling data point since the Department of Health and Human Services announced exchange membership last month comes from California, where the 1.4 million sign-ups as of mid-April have dwindled to just over 1.1 million paying customers — a drop of 20.3%.
That decline is on the same scale as in Florida, where insurer rate filings in June showed 763,000 exchange plan members, down 22.5% from the 984,000 sign-ups reported by HHS.
And it looks like consumers are not the only ones dropping out/opting out. CNS News is reporting:
Over 214,000 doctors won't participate in the new plans under the Affordable Care Act (ACA,) analysis of a new survey by Medical Group Management Association shows.
That number of 214,524, estimated by American Action Forum, is through May 2014, but appears to be growing due to plans that force doctors to take on burdensome costs. It's also about a quarter of the total number of 893,851 active professional physicians reported by the Kaiser Family Foundation.
In January, an estimated 70% of California's physicians were not participating in Covered California plans.
We had the same problem with Tricare when I was in the military. Initially, providers and health care insurers were eager to compete for military healthcare contracts, but when they saw the 5-inch thick contracts with incomprehensible legalese and unreachable goals, most quickly dropped out. It was miserable for the first three or four years of Tricare for the Department of Defense to find physicians and health insurers who would sign on. 

I honestly did not think there would be this much difficulty finding physicians for ObamaCare, and had 20% opted out, I would not have been surprised. But I would have been surprised had the number gotten to 35%. I am astounded that 70% of California physicians have opted out. Remember, this is the most liberal state in the union, now.

By the way, most of ObamaCare has not yet kicked in. Most of ObamaCare was delayed or waived by executive order and won't kick in until 2015 or 2016 or later. That's why we don't hear much about ObamaCare any more and why those who want to see it repealed haven't said much about it. It will simply die on the vine. Insurers will cherry pick; investors will do very, very well; but it won't change things much for those who did not win life's lottery as Hillary would say.

By the way, one has to ask the next question: who are the 3 out of 10 physicians in California who have elected to participate in ObamaCare? My hunch is they are the physicians, who for whatever reason, are having trouble maintaining a practice for lack of patients. In the early early days of Tricare it seemed the military was not able to sign up the best and the brightest. The best and the brightest are not short of patients. 

Thirteen (13) New Permits; Eleven (11) Producing Wells Completed; Five (5) "High IP" Wells -- October 29, 2014

Wells coming off the confidential list Thursday:
  • 23272, 808, CLR, Caretan 1-28H, St Demetrium, t8/14; cum 12K 8/14;
  • 26717, 1,452, Emerald Oil, Pirate 4-2-11H, Foreman Butte, t5/14; 40K 8/14;
Eleven (11) producing wells completed:
  • 26326, 879, XTO, Boomer Federal 34X-35G, Lost Bridge, t9/14; cum --
  • 26861, 2,207, XTO, Ruby State Federal 34X-36F, Grinnell, t8/14; cum 9K 8/14;
  • 26874, 1,130, CLR, Lawrence 11-24H1, Three Forks, first bench, North Tioga, t10/14; cum --
  • 27018, 2,721, Whiting, Gajewski 31-18H, Lonesome, t4/14; cum --
  • 27308, 2,253, BR, Lillibridge 21-27MBH, Johnson Corner, 4 sections, t9/14; cum --
  • 27368, 2,253, Petro-Hunt, Brenna 152-96-24C-13-1HS, Clear Creek, no frack data yet; gas max almost 3,000 units, 4 units, t10/14; cum --
  • 27407, 2,179, KOG, Koala 4-4-31-13H, Poe, 4 sections, t9/14; cum --
  • 27578, 1,296, BR, Sequoia 31-4TFH, Hawkeye, t9/14; cum --
  • 27911, 453, Slawson, Bootleg 5-14-15TFH, Stockyard Creek, t9/14; cum --
  • 28419, 671, Triangle, State 152-102-36-25-3H, Elk, t10/14; cum --
  • 28420, 868, Triangle, State 152-102-36-25-4H, Elk, t10/14; cum --
Thirteen (13) new permits:
  • Operators: CLR (7), HRC (3), EOG (2), Petro-Sentinel,
  • Fields: Crazy Man Creek (Williams), Parshall (Mountrail) McGregory Buttes (Dunn), Coyote Creek (Bowman)
  • Comments: the Petro-Sentinel permit is the third one for this company in North Dakota, and the second one in as many days
Active rigs:

Active Rigs190182183200152

Hess, 3Q14 Earnings -- October 29, 2014

From Reuters via Yahoo!News:
Production in North Dakota, the second-largest oil producing state in the United States, jumped 21 percent to 86,000 boe/d.
Hess opened 59 Bakken wells in the third quarter, but still managed to slash production costs by 8 percent to $7.2 million per well, bucking an industry trend to increase spending per North Dakota well in an attempt to boost output.
Last month Continental Resources Inc, North Dakota's largest oil producer, said it would boost spending per well to $10 million as it uses much more sand, or proppant, to hydraulically fracture rock and extract oil, and combines several new fracking techniques.
Hess said it is comfortable with its current spending and believes its techniques are the best way to produce the most oil.
"We've tried some of these more expensive completion designs, but thus far none have proven to be economically superior to our methodology," Greg Hill, the Hess president, told investors.
Waiting for the transcript.

The Road To New England ... And The Southwest -- October 29, 2014

Don sent me the link to this Bloomberg story:
U.S. electricity markets face years of higher prices as clean-air regulations shut more coal-fired power plants than earlier forecast, cutting supply and forcing producers to rely more on natural gas.
Standard & Poor’s estimates that 40 to 75 gigawatts (75,000 megawatts) of coal units may be shut by 2020, compared with announced permanent shutdowns of 27 gigawatts. About 18 percent of the closures expected through the end of next year will be replaced by natural gas.
The loss of the cheaper coal units will boost power prices by as much as 25 percent on grids that serve about a third of the nation’s population, according to the Brattle Group, a Cambridge, Massachusetts-based consulting company. The biggest impact may be in the Midwest and Northeast, where demand for gas for heating jumps during the cold-weather months.
“We are really in for a wild ride for five to six years because of the amount of coal shutting down in such a short amount of time and the transformation toward more gas being used to generate electricity,” Philip Moeller, a member of the Federal Energy Regulatory Commission in Washington, said in an Oct. 23 interview.
“Prices will definitely rise. The question is how much.”
Midcontinent Independent System Operator Inc., or MISO, which manages the electricity network that runs from Manitoba to Louisiana, expects its power reserves to fall short of targets by about 2,000 megawatts by 2016, with deficits mounting after that.
Even with the shale boom that’s cut gas prices, power generated with the fuel costs $30 to $35 a megawatt-hour, compared with about $25 for coal.  
There is much more at the article; highly recommend reading. There is some editing of the post above. In a long post, there will be factual and typographical errors. If this issue is important to you go to the source. In addition, this is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here.

Upon reading that Bloomberg article linked above, I replied to Don:
Good morning, I'm back.
Great article on coal and cost.
One certainly gets the feeling that we both lived long enough to experience another tectonic change in the energy story. We both lived through the OPEC embargo and the decades where OPEC pretty much controlled our energy destiny. Peak Oil seemed to be the overriding concern.
Had there been no energy revolution in North America, US consumers may have faced a double whammy: a) OPEC in control of oil prices; and, b) Algore warmists taking away the one resource Americans had in great amounts: coal.
But the North American energy revolution changed everything.
Everything suggests that we are now experiencing a huge transition, actually two huge transitions. The US is transitioning from a dependence on OPEC to independence with regard to oil. The second transition is from coal to natural gas.
The North American/OPEC oil transition, to some extent, transcends politics.
The transition from coal to natural gas is all about politics. This could change with a new president in 2017.
For the academician, this will be very, very interesting to watch as it plays out over the next 20 years, the political war on coal in the US vs the reality of coal/energy on a global scale.
For the investor, huge opportunities.
I think investors might have the best of both worlds. The fact is that coal is not going to go away, and for those with a very long horizon, investing in coal could eventually pay off.
In the short term, investors in natural gas may be sitting in the catbird seat, as they say.
First, politically, in the US, natural gas will take market share from coal. Second, realistically, there is no alternative (anywhere in the world) to coal and natural gas. Nuclear energy is dead, and even if it rose from the dead today, it would take ten years to get new plants on-line.
Renewables (wind and solar) will always have a niche but the numbers will never work for renewables to make much more than a dent in total energy production. Hydro-electric is regional, and I believe hydro-electricity is maxed out anyway.
After reading Unreal City: Las Vegas, Black Mesa, and The Fate of the West, by Judith Nies, c. 2014 , I am convinced the "canary in the coal mine" (pun intended) will be in the southwest, specifically Los Angeles, Las Vegas, and Phoenix. These cities continue to grow; they are highly dependent on electricity to get water to their cities; and the US is in the process of shutting down the largest coal-generating power plant in the US. It will be interesting to watch. It will take awhile (a decade) to get a better idea how this plays out.
However, we may get an idea much sooner by watching how things play out in another region of the country, New England. The northeast has turned out to natural gas; prices spiked last winter, and it certainly looks to get worse before it gets better.
For investors, it seems pipelines may offer an incredible opportunity. I haven't been posting them but for the past week or so, but the list of companies increasing dividends has been quite long, and most of the companies listed are MLPs in pipelines.
The pipeline companies are in a win-win situation. If the environmentalists shut down increased pipeline capacity, the companies a) raise their rates on transportation (simple supply and demand); and, b) save on CAPEX that they won't be spending on building out huge pipelines. TransCanada has done very well even though they have not been able to complete the Keystone. It will be very interesting to watch New England over the next few years. Likewise, southern California, Las Vegas, and Phoenix are also the places to watch.
More that was not in the note:

It appears that pipeline investing is all about market share. Just like the railroads, pipeline companies have a huge moat protecting them: very unlikely that any huge new pipeline companies will appear overnight -- except as spin-offs from larger companies, but still part of the umbrella. Berkshire Hathaway, ONEOK, Enbridge, KinderMorgan, and ETP all come to mind. It also appears that the regulatory agencies are less averse to mergers and acquisitions in the pipeline sector.