The Million Dollar Way (The Bakken Oil Blog): 01/20/14

Monday, January 20, 2014

A Couple Of Data Points Coming Out Of China

CNOOC estimates oil output growth below target for third year:

Top Chinese offshore oil and gas producer CNOOC Ltd is aiming for an up to 4.3 percent output increase this year, excluding contributions from acquisition Nexen, well below its average annual growth target for 2011-2015 for a third year.

CNOOC has vowed it will still meet the annual growth target of 6-10 percent for the five years through 2015, increasing its capital spending budget by as much as a third from last year to almost $20 billion and aiming to get 20 projects into construction this year while launching up to 10 more.

The 2014 growth rate target missed the expectations of some research houses, including Barclays, which had been looking for a 6 percent increase for this year. CNOOC, once an investor darling for its high-growth profile, has been struggling to boost its output over the past few years as domestic fields age.

Meanwhile, Chinese demand for oil has decreased, according to Reuters via Rigzone:

China's oil consumption in 2013 posted the slowest rise in more than two decades, data showed on Monday, as softer economic growth sliced into demand for transportation and industrial fuels such as diesel.

While a slowdown in oil consumption by the world's second-largest user was expected, the sluggish rise could pressure global oil prices at a time OPEC member Iran's nuclear deal with world powers is raising the possibility of the Middle Eastern nation being allowed to pump and export more oil.

China's energy appetite has driven global oil demand growth for the past decade as usage slows in industrialized nations. Its slowing demand last year capped prices that would have otherwise soared on the plunge in exports from Iran, prolonged outages in Libya and disruptions in Sudan.

China's implied oil demand rose 1.6 percent in 2013, or 150,000 barrels per day (bpd) on the year, according to Reuters calculations based on preliminary government data. Reuters started calculating implied oil demand from 2005.

But data from the International Energy Agency (IEA) indicates that apparent oil demand has not grown as slowly since at least 1992, although its calculation methods may differ.

This Is What The Folks At Starbucks Will Be Talking About Tomorrow

The op-ed in Tuesday's Wall Street Journal:

insurers already warning on losses
government ups the ante on bail-out (no Congressional approval)

Predicted.

For Investors Only: Earnings This Week

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

Monday, March 3:

Tuesday, March 4:

Wednesday, March 5:

Thursday, Feb 27:

NOG, 27 cents, after market close
KOG, 18 cents, after market closes
LINE, 27 cents, before market opens
SD, 0, after market closes
SRE, 98 cents; 9:00 ET
WEN, 8 cents, no time supplied

Friday, Feb 28:

Isis, -19 cents, before market opens

********************************

MHR: beats by 7 cents; expected loss of 21 cents; loss of 14 cents; great report

EOG: beats by 6 cents; announces stock split.

DNR misses by 4 cents.

Wal-Mart misses "badly."

ARII has a good quarter; manufactures more oil tank cars; leases more; lease rate higher.

Fourth quarter diluted EPS from continuing operations were $0.52 on a non-GAAP basis compared with $0.47 for the fourth quarter of 2012. Shares surge 8%.

Oasis with an incredible quarter; an incredible year.

Edward Lifesciences beats by 9 cents.

MDU: 48 cents vs forecast 41 cents; versus 40 cents 4Q12; huge year for MDU.

Anadarko (91 cents): wide 4Q13 loss of $770 million.

CVX misses by 3 cents, $2.57.

COP beats by 8 cents.

OXY beats by 4 cents; $1.72; an after-tax gain from sale of assets.

XOM misses by one penny; $1.91/share. Revenues fall 3.3%.

Noble Corp increases dividend by 50%.

PSX beats by 30 cents.

Hess profit surges on asset sales, but production sags. Beats by 85 cents.

Dow Chemical beats by 22 cents.

Marathon Petroleum beats by 95 cents; misses on revs.

Boeing beats by 31 cents. Boeing core profit up 29%. The market is down triple digits (about 110 points) and the pundits blame today's earnings. Hogwash. The pullback has nothing to do with earnings. The Fed is poised to taper another $10 billion. And durable goods dropped 4.3%.

Valero beats by 31 cents; revenues fell 0.8% y/y.

T beats by 3 cents; revenues up almost 2%; raises guidance; transcript; this is not a "bad" report; it might be as good as it gets for ATT.

Ford beats by 3 cents; reports revs in-line; reaffirms FY14 guidance.

Apple reported virtually flat earnings [but not a loss] as intensified competition for mobile devices offset growing iPhone and iPad sales.

The Cupertino, Calif., technology giant is coming off its first decline in annual profit in more than a decade amid growing competition in the smartphone and tablet markets.

Apple also is facing questions about whether it can repeat its innovative success with a new product category—as it did with the iPhone in 2007 and iPad in 2010.

For the first quarter, Apple reported earnings of $13.1 billion, or $14.50 a share, on sales of $57.6 billion. A year ago, Apple reported first-quarter earnings of $13.08 billion, or $13.81 a share, on sales of $54.51 billion.

Analysts, on average, were expecting earnings of $14.07 a share on sales of $57.46 billion, according to Thomson Reuters. Apple in October had projected revenue between $55 billion and $58 billion. For its flagship products, Apple said it sold 51 million iPhones in the first quarter, up from 47.8 million units in the year-ago period, while iPad sales increased to 26 million units from 22.9 million units.

The increase in iPhone and iPad sales comes as the company rolled out two new versions of its iPhone, the first time it launched more than one new model of its smartphone at the same time. It also refreshed its iPad lineup within a thinner, lighter model and a smaller version with a sharper display. Analysts, in general, were expecting sales of about 55 million iPhones and about 25 million iPads.

Plum Creek Lumber misses by a nickle; the company announced fourth quarter earnings of $40 million, or $0.24 per share, on revenues of $331 million. Earnings for the fourth quarter of 2012 were $79 million, or $0.49 per share, on revenues of $354 million.

Caterpillar surges 7% premarket on Q4 beat; earnings of $1.54 per share, $0.26 better than the Capital IQ Consensus of $1.28; revenues fell 10.4% year/year to $14.4 bln vs the $13.61 bln consensus. better than feared FY14 guidance & new $10 bln stock buyback: CAT is surging in premkt after beating Q4 ests; co also guided FY14 'better than feared' and announced a new $10 bln stock repurchase program.

Microsoft beats by $0.10, beats on revs: Reports Q2 (Dec) earnings of $0.78 per share, $0.10 better than the Capital IQ Consensus Estimate of $0.68; revenues rose 14.3% year/year to $24.52 bln vs the $23.67 bln consensus.

Starbucks beats by $0.02, misses on revs; guides Q2 EPS below consensus; guides Q3 (Jun) EPS below consensus; guides FY14 EPS in-line: Reports Q1 (Dec) earnings of $0.71 per share, $0.02 better than the Capital IQ Consensus Estimate of $0.69; revenues rose 11.8% year/year to $4.24 bln vs the $4.29 bln consensus. Transcript here.

McDonald's beats by $0.01, reports revs in-line: Reports Q4 (Dec) earnings of $1.40 per share, $0.01 better than the Capital IQ Consensus Estimate of $1.39; revenues rose 2.0% year/year to $7.09 bln vs the $7.11 bln consensus.

Union Pacific beats by $0.06, beats on revs : Reports Q4 (Dec) earnings of $2.55 per share, $0.06 better than the Capital IQ Consensus Estimate of $2.49; revenues rose 7.2% year/year to $5.63 bln vs the $5.57 bln consensus.

Netflix beats by $0.15, reports revs in-line; guides Q1 EPS above consensus:Reports Q4 (Dec) earnings of $0.79 per share, $0.15 better than the Capital IQ Consensus Estimate of $0.64; revenues rose 24.3% year/year to $1.18 bln vs the $1.17 bln consensus.

Xilinx, Inc. beats by $0.07; announced third quarter fiscal 2014 sales of $587 million, down 2% from the prior quarter and up 15% from the same quarter of the prior fiscal year. Third quarter fiscal 2014 net income was $176 million or $0.61 per diluted share; including the reversal of a litigation reserve with a net impact of $19 million, or $0.06 per diluted share.

Halliburton beats by $0.04, beats on revs: Reports Q4 (Dec) earnings of $0.93 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus of $0.89; revenues rose 4.8% year/year to $7.64 bln vs the $7.56 bln consensus; adjusted operating income was up 2% sequentially, driven by record revenue in our Middle East/Asia and Europe/Africa/CIS regions.

Baker Hughes beats by $0.01, beats on revs: Reports Q4 (Dec) earnings of $0.62 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.61; revenues rose 10.0% year/year to $5.86 bln vs the $5.66 bln consensus. Q4 results excludes after-tax severance charges of $29 mln ($0.06 per diluted share), but includes after-tax losses of $79 mln ($0.18 per diluted share) in Iraq.

Delta Air Lines beats by $0.01, reports revs in-line: Reports Q4 (Dec) earnings of $0.65 per share, excluding non-recurring items, better than the Capital IQ Consensus Estimate of $0.64; revenues rose 5.6% year/year to $9.09 bln vs the $9.07 bln consensus.

Verizon beats by $0.04, reports revs in-line: Reports Q4 (Dec) earnings of $0.66 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus Estimate of $0.62; revenues rose 3.4% year/year to $31.07 bln vs the $31.04 bln consensus.

Target CEO pulled the plug on credit-card anti-theft technology over a decade ago. One more reason to cancel my Target credit card.

Verizon buying an Intel internet TV service is very interesting. Huge earnings report for Verizon.

Global Warming 2013 - 2014; This Could Be The Biggest Winter Storm Since January, 2011; Sweden Sets "Cold" Record; Mainstream Media Reports On US Propane Shortage

Finally, it's being reported by the mainstream media: the US propane shortage, as reported by USA Today. Regular readers of the blog have known about the impending (and now existing) propane shortage since early 2012. From USA Today:

As meteorologists on Monday added up to 10 inches of snow to their frigid forecasts for the Northeast and Midwest this week, the regions are struggling with a lack of the essential resources residents need to keep warm.

Sand used to keep roads safe during snowstorms and ice buildup is running low in some states, as are the budgets to buy the sand and deploy trucks and plows. Propane stocks in many states have also hit disconcerting lows since the winter started with meager allowances and back-to-back cold spells have increased the energy dilemma for millions.

In anticipation of the cold and snow, Ohio Gov. John Kasich declared an energy emergency focused on expediting propane GAS shipments in order to mitigate tight supplies.

More than 14 million families across the U.S. use propane to fuel their furnaces, according to the Propane Education & Research Council.

Kasich followed the lead of officials in 17 other U.S. states — mostly in the Midwest and North — who declared energy emergencies and loosened rules for propane transportation from other states, most of which are effective until the end of January.

Interestingly, unless I missed it, nothing was said about the reason for the shortage of propane.

New York state continues to ban fracking.

*******************************

The Drudge Report headlines and links if worthwhile:

thelocal is reporting new "severe cold" records --

The village of Karesuando, right at the very northern tip of Sweden, clocked the epic cold temperature during Sunday reports the Swedish weather agency SMHI.

"It is also a seasonal record," said SMHI meteorologist Lars Unnerstad to the TT news agency. The recorded temperature of -41.2 was a record for that region which is right on the Finnish border.

Unnerstad added that he expected more cold records to break during the next 24 hours due to the high pressure, lack of wind and the continuing clear weather.

AccuWeather is reporting:

Along the leading edge of the invading polar blast, accumulating snow will spread from the Midwest to the East Coast on Tuesday.

The snow will come courtesy of yet another Alberta Clipper set to drop through the Dakotas and Ohio Valley on Monday through Monday night with accumulations on the order of a coating to 2 inches.

The storm could rival the storm from early December in parts of southeastern Pennsylvania and Delaware.

According to Winter Weather Expert Brian Wimer, "For Washington, D.C., this could be the biggest storm since Jan. 26, 2011, when about 5 inches of snow fell."

AccuWeather is reporting: dangerous cold heading back to the Midwest.

EOG Reports Another Huge Well; OXY Reports A Nice Well

Tuesday, January 21, 2014

22110, 1,012, Petro-Hunt, Frderickson 160-94-33D-28-5H, North Tioga, t10/13; cum 14K 11/13;
23310, 878, WPX, Good Bird 36-25HZ, Moccasin Creek, t101/13; cum 24K 11/13;
24850, 1,619, QEP, MHA 6-06-07H-147-92, Heart Butte, t11/13; cum 9K 11/13;
25475, drl, CLR, Josephine 2-17H1, Sauk, no production data,
25531, drl, SM Energy, Meadow Valley 3-1H, West Ambrose, producing,
25678, drl, BR, Washburn 41-36TFH, Charlson, no production data,

Monday, January 20, 2014

25485, 1,635, MRO, Kari 11-13TFH, Big Bend, t11/13; cum 12K 11/13;
25751, 56, Legacy, Legacy Et Al Schillander 5-18 2H, Red Rock, a Spearfish well; t9/13; cum 10K 11/13;

Sunday, January 19, 2014

22687, drl, Hess, EN-Jeffrey-155-94-2215H-1, Alkali Creek, no production data,
22918, 784, OXY USA, Matthew Schmidt 3-35-2H-144-97, Cabernet, t7/13; cum 53K 11/13;
22926, 885, OXY USA, Brew 3-13-12H-143-96, Murphy Creek, t7/13; cum 61K 11/13;
23309, 1,140, WPX, Good Bird 36-25HD, Moccasin Creek, t10/13; cum 26K 11/13;
24124, drl, Gadeco, Alexander 26-35-3H, Epping, no production data,
24694, 129, OXY USA, Henry Kovash 2-6-7H-142-95, Manning, no production data,
25660, 1,896, Oasis, Safely USA 5-8H, Foreman Butte, t10/13; cum 24K 11/13;

Saturday, January 18, 2014

22917, 470, OXY USA, Matthew Schmidt 2-35-2H-144-97, Cabernet, t7/13; cum 50K 11/13;
23269, 1,607, EOG, Bear Den 24-1621H, Spotted Horn, t8/13; cum 96K 11/13;
24642, 42 (no typo), Murex, Jennifer Abigail 16-21H, t9/13; cum 29K 11/13;

******************************

23269, see above, EOG, Bear Den 24-1621H, Spotted Horn:

Date	Oil Runs	MCF Sold
11-2013	22166	8116
10-2013	18652	19893
9-2013	21024	0
8-2013	33199	13992
7-2013	0	318

The List Of Extraordinary Sites Where Drilling Might Not Be Allowed

Bakken.com is reporting:

The sites proposed by Stenehjem are:

Black Butte in Slope County
Bullion Butte in Billings County
Camel’s Hump Butte in Golden Valley County
Columnar Junipers (Limber Pines) and Burning Coal Vein, formerly known as the Dakota National Forest, in northwest Slope County
Confluence of Yellowstone and Missouri Rivers
Elkhorn Ranch
Killdeer Mountain Battlefield State Historic Site, Wildlife Management Area
Lake Sakakawea
Little Missouri River
Little Missouri River National Grasslands – areas designated by the U.S. Forest Service as not administratively available for future leasing after July 31, 2002
Little Missouri State Park
Pretty Butte in Slope County
Sentinel Butte in Golden Valley County
Theodore Roosevelt National Park
Tracy Mountain in Billings County
West Twin Butte in Golden Valley County
White Butte in Slope County
Wildlife Management Areas

A reader was kind enough to send that story, as well as an interactive link to "Wildlife Management Areas."

One of two things will happen:

the legislature will push back on this and permits will be considered on a case-by-case basis
the issue will be settled in court

Some of the "designated" areas seem a bit unclear, like the "entire" Little Missouri River drainage. Wow. And Lake Sakakawea -- off-shore? The same with the "Confluence." The whole drainage area? Wow.

A very slippery slope at the top of which the attorney general is putting on his skis.

Additional Stories

February 22, 2014: managing editor, The Dickinson Press; property rights above all else

February 21, 2014: farmers/ranchers vehemently against "extraordinary list"

February 15, 2014: state senator representing Dickinson area comes out against "the extraordinary list."

Blurbs From The Past Few Days

Bad, bad news for Tesla:

Obviously, that's bad news for EVs, which brings us back to Tesla. Tesla's made a name for itself as the future of "green" cars, and as of the time of this writing, its stock price is trading as if that's true. However, according to Climate Central, in 46 states Tesla's Model S is the least climate-friendly EV, and it's worse than all but two hybrids when it comes to CO2 emissions over 100,000 miles of driving. When you couple that with the above information from the EPA, it's clear that Tesla isn't nearly as "green" as it wants you to believe.

EVs sound promising on the surface, but when you get down to the nitty-gritty, they're not nearly as environmentally friendly as they seem, nor do they help America become energy independent. Further, thanks to its battery, the Model S is even less environmentally friendly than most other EVs. As such, it doesn't meet the requirements for "green car of the future."

I remember all the grief Apple used to get regarding its environmental footprint. It appears the issues folks brought up regarding Apple and the environment pale in comparison to Tesla.

********************************

How's that renewable energy working out for Germany? Worse than you think. Merkel really stepped in it. AFP is reporting this via Yahoo!News. The story gets worse and worse, the deeper you get into it. Germany prided itself on its renewable energy program, but it was costing consumers a heck of a lot of money (it seems like the West Germans love spending money -- before renewable energy, it was bailing out Cyprus, Portugal, and Spain, trying to save the EU. Before that, it was "repatriation" of East Germany into West Germany).

Following the Japanese nuclear disaster, Merkel made a knee-jerk decision to kill nuclear energy in her own country, hoping renewable energy could take up the slack. Not!

Generous state incentives for solar, wind and biogas that have driven up prices, now among Europe's highest, would be trimmed from this year under Energy Minister Sigmar Gabriel's much-anticipated proposals.

Gabriel, a Social Democrat who is Merkel's vice chancellor and also economy minister, is mulling a new law encapsulating the energy changes that would take effect from August 1.

Speaking on ZDF public television, he sought to dampen any consumer hopes that the proposals would lead to a reduction in electricity prices, according to early excerpts of the interview to be broadcast Sunday.

Correcting earlier mistakes with worse mistakes, Germans will not be lucky to see their incredibly high utility rates stay flat. Everything suggests Germans will see already record utility rates increase.

So, got renewable energy?

Random Update On Coal Industry In North Dakota With Comparison To Rest Of Energy Sources In North Dakota

The Bismarck Tribune is reporting:

In 2010, 82 percent of North Dakota's net electricity generation came from North Dakota’s six coal-fired power plants, according to the U.S. Energy Information Administration.

In 2011, 15 percent of the state’s power came from wind, making North Dakota the third highest state in the nation for wind generation, and 6 percent came from hydroelectric power.

According to 2012 estimates, about 130.5 trillion BTUs (British thermal units) were generated by natural gas in the state.

The focus of the story was on retirements in the North Dakota coal industry now occurring:

Those power plants that the state relies on for most of its energy started operating between 1954 and 1981. The plants that came online in the ’70s are seeing the most turnover from retirements, said Curt Pearson, media and community relations manager for Basin.

A lucrative pension plan and 30 years on the job have Basin Electric Power Cooperative employees retiring en masse.

Facing a more competitive hiring environment, the cooperative is trying to replace the 259 employees it has lost to retirement in the last two years,including 179 who left in 2013.

Another North Dakota opportunity for employment.

By the way, again, something I've said before. When folks from Texas, Louisiana, Florida, California, and Arkansas come up to North Dakota to find work, you know how bad the US economy -- in terms of jobs -- is.

No one -- and everyone in North Dakota knows this -- no one comes from out-of-state to North Dakota voluntarily or easily to find a job. Most newcomers arrive here because the Air Force sent them (Minot AFB, Grand Forks AFB) or this was about the only state that had an unlimited opportunity to find work.

I'm always impressed to read that North Dakota is #3 in the nation when it comes to wind-generated electricity production.

If 2012 - 2013 Was The Year Of Rail, 2014 - 2015 Will Be The Year For Pipeline

Updates

August 16, 2014: The Minneapolis Star-Tribune reports on North Dakota's pipeline and CBR for the Bakken. It appears The Star-Tribune is leading the fight for laying more pipeline through Minnesota to get Bakken oil to Chicago without having to use rail.

Original Post

Buffett recently bought a company that will improve oil flow through pipelines.

Now, Don sends me this Yahoo!Finance story: GE buying a company that provides flow equipment for oil and gas production.

GE Oil & Gas and Cameron, a Houston-based provider of flow equipment, systems and services, today announced that GE has agreed to acquire Cameron’s Reciprocating Compression division for $550 million.

The division provides reciprocating compression equipment and aftermarket parts and services for oil and gas production, gas processing, gas distribution and independent power industries. Cameron’s Reciprocating Compression division, which generated sales of approximately $355 million in 2012, has approximately 900 employees and operates from 20 global locations. The acquisition is expected to close later this year subject to regulatory approval.

High-speed reciprocating compressors are used in several applications from gas gathering, gas lift and injection, as well as transmission and storage. The development of shale oil and gas fields, particularly in North America, has increased demand for high-speed reciprocating compressors. As shale continues to develop in other regions of the world, such as Asia and South America, the acquisition will position GE to serve the industry globally.

It looks like everyone is positioning themselves for the huge pipeline story yet to be written.

By the way, just a few days ago I wrote:

I no longer care about wind energy: companies are simply buying wind farms for the tax credits. I no longer care about solar energy: after twenty years of investment, solar energy provides 0.1% of the electricity for the US. GE can talk all they want about wind and solar; they are making their money from conventional energy sources.

As a reminder, GE CEO was the president's "go-to" man on driving the US economic turnaround. I don't think President Obama or the country got much from the Immelt-led commission, but GE certainly learned a lot -- where US energy was headed and who owned what.

Random Updates Of Total Production For EOG Wells -- Idle Chatter On A Long Weekend

Just for the fun of it, I've updated the cumulative production for EOG wells for permits for 2009, 2008, 2007, and 2006. Not everything has been updated, but enough to get an idea of what is happening.

When one looks at these figures, remember that EOG was drilling short laterals in their Parshall oil field at this time. Most of their wells are short laterals. These wells were drilled before they began their new completion techniques.

It will be interesting to see which wells hit the one-million mark the fastest.These are just a few examples of permits issued in 2008; the wells were drilled in 2008 and 2009.

17500, 2,162, EOG, Austin 19-30H, Parshall, t11/08; cum 791K 11/13;
17470, 1,334, EOG, Austin 17-20H, Parshall, t6/09; cum 594K 11/13;
17416, 1,124, EOG, Austin 16-19H, Parshall, t7/09; cum 701K 11/13;
17386, 2,205, EOG, Austin 15-17H, Parshall, t11/08; cum 556K 11/13;
17346, 1,853, EOG, Austin 13-08H, Parshall, t10/08; cum 516K 11/13;
17287, 1,137, EOG, Austin 22-31H, Parshall, t10/08; cum 810K 11/13;

If you go to the linked article, some notes:

I only provided "full" data for wells with total production of 500,000 bbls (or thereabouts)
it may be hard to read, but the total production, as an example, of 55K means 55,000 bbls
I did not provide the completion date for most of the wells but one can assume they were all drilled in 2009 or before
there may be typographical errors; I don't spend a lot of time making these lists
note that once wells got to about 100,000 bbls, these wells were paid for
wells that are "not" economical are still holding the leases by production

Additional comments:

During the initial boom years in the Bakken, EOG had several rigs working in their Parshall oil field, but then they took ALL (or almost all) rigs off the field for a period of time. I forget exactly when, but it was probably when they were delineating the rest of the Bakken and beginning their move into the Eagle Ford. During that same period, Whiting remained pretty consistent with having 5 to 7 rigs in their Sanish field at all times.

EOG stated during their 3Q13 earnings call they were going to ramp up in the Bakken again (I can't recall if they specifically said which field). They now have ten rigs operating in their Parshall field. I believe that is the most EOG rigs I have ever seen in that field.

Past EOG wells in the Parshall have all been short laterals. The field is now spaced for 1280-acre drilling units. There are currently no 2560-acre drilling units in the Parshall.

Pages

Monday, January 20, 2014