Thursday, January 23, 2014

Railroad Renaissance -- Forbes

I wouldn't have linked this story except for two reasons: 1) a reader sent it to me; and, 2) it has a personal angle.

First, I try very hard to find a reason to link any story readers send me. I've learned a lot from readers.

But this story in Forbes seems a bit dated; we've been talking about a rail renaissance two years ago.

But, it was the personal angle that was compelling (I love that over-used word).

My wife's father was raised by his aunt in Beeville, Texas, which is mentioned in the linked story. His father was sent back to Mexico when he was caught as an illegal immigrant. I have spent a fair amount of time helping the current patriarch of the Garcia side of the family raise race horses south of San Antonio.

Forbes is reporting, it begins:
One of the significant out-growths of America’s nascent Shale oil and gas boom is the subsidiary booms it is creating in other industries.  Businesses that either service the oil and gas industries or rely on its end products as feedstock for products of their own are bringing thousands of jobs back from overseas and investing billions of dollars in new domestic infrastructure.
Nowhere has this direct cause and effect been any more apparent than in America’s rail industry, and nowhere is this impact more visible than in the Eagle Ford Shale region, where four major new rail terminals have opened in the last two years. Media coverage of this rail renaissance has focused on increased rail transport of crude oil from areas where the necessary pipeline infrastructure doesn’t yet exist.  And rail transport has been a godsend in plays like the Bakken Shale in North Dakota, for that reason, and because of rail’s versatility in being able to route crude oil shipments to any number of market and refining centers.
And then this. I never thought I would see "Beeville" mentioned in a Forbes article:
For a boy like me, who grew up in Beeville hearing the sound of that Southern Pacific train whistle as it passed through town in the middle of the night, only to see those tracks get torn up in the 1980s as the transition to truck transport was in its heyday, this revival of the nation’s rail industry is music to my ears.  It’s just one more way the current shale oil and gas boom benefits all Americans.
Wow, "for a boy like me, who grew up in Beeville hearing the sound of that Southern Pacific train..."

The patriarch of my wife's Beeville family still talks about hopping that train to get from Beeville to the next little town, the name of which I have long (sadly) forgotten.

Higher Utility Bills Will Be Seen This Winter; How's That Renewable Energy Working Out; Where's Algore? New Yankee Pitcher Should Have Been A Ranger

Higher utility bills being reported by USA Today:
First came the deep cold, then sharply higher heating bills.
Bone-chilling temperatures have rattled consumers across the nation since mid-December. Bitter cold is likely to linger over the Northeast and Midwest, and unseasonably low temperatures are forecast for the Southeast, so millions of consumers who've seen skyrocketing utility bills are likely to see another spike in January and February.
The Energy Information Administration predicted that more than 90% of the nation's 116 million homes would have higher heating bills this winter, projecting rises of 2% (for those heating with electricity) to 13% (natural gas). Homes heated with propane were expected to spend 9% more than last year, while those using heating oil were expected to get a 2% price break
Those estimates came in October, before two-decade-low temperatures, rising demand and lower energy stockpiles gripped much of the nation. Revised EIA estimates from earlier this month peg some home heating bills rising as much as 23.5% in the Midwest. But even those estimates may be too low.
This winter isn't even as bad as previous winters. Algore tells us this is the warmest year on record, or maybe the 4th warmest year, or maybe the 7th or the 14th. Whatever one wants to believe. Oh, I see I'm wrong. USA Today says "we" are seeing "two-decade-low temperatures. That's right, I forgot. Global warming stopped 18 years ago. Whatever.

By the way, the propane shortage was man-made. Mainstream media is not mentioning the Cochin pipeline.


Should have been a Ranger.

ATR is reporting: new New York Yankee pitcher will pay half of $155 million in taxes to various governments.
However sweet this $155 million dollar deal seems, the reality is that Tanaka will lose almost $90 million over the 7-year life of his contract with the Yankees
As reported by ESPN, the New York Yankees have signed Masahiro Tanaka to a 7-year contract worth $155 million, earning an estimated $22.1 million per year. According to ESPN, Tanaka's contract is the largest ever for an international free agent and the fifth-largest deal for a pitcher. However sweet this $155 million dollar deal seems, the reality is that Tanaka will lose almost $90 million over the 7-year life of his contract with the Yankees.
In addition to the Yankees, Tanaka was also being courted by the Arizona Diamondbacks and the Chicago Cubs. Unlike New York City, the cities of Phoenix and Chicago do not impose a city income tax. Had Tanaka chosen a contract with the Diamondbacks or the Cubs, he would have saved almost $12 million over the life of his contract. Instead, Tanaka chose New York, where the state and local rates are some of the highest in the country. By choosing to sign with the Yankees, Tanaka automatically forfeited almost $12 million in taxes that would have been saved had he signed with the Cubs or Diamondbacks.
Tanaka will pay a combined marginal income tax rate of 56.1 percent - over half of his contract.
And then there's the utility bills to heat his McMansion during the New York winters.

There's a reason some San Antonio Spurs don't leave the team.

For Investors Only: Emerald Oil Provides Operational Update; Phillips to Proceed With Houston Channel Project

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

Emerald Oil provides an interim operations update on recent drilling and completion activities:
Co provides an interim operations update on recent drilling and completion activities along with its Q4 and year end production rates. Emerald's drilling operations continue with two rigs currently operating in the Low Rider project area in McKenzie County, North Dakota. The co intends to add a third operated drilling rig beginning in April 2014. Subsequent to Emerald's last operational update in early Nov 2013, the co drilled and completed 3.9 net wells that are now producing. Emerald currently has 6.9 net wells drilling, completing or waiting on completion early in Q1. During Q4, co averaged approximately 2,430 BOEPD from its operated drilling program. This represents an increase of 103% YoY and 30% sequentially.
Phillips 66 to proceed with cross-channel connector project; this project will expand the capacity to transport refined petroleum products across the Houston Ship Channel via pipeline:
Phillips 66 Pipeline LLC, a wholly owned subsidiary of Phillips 66, will proceed with developing the Cross-Channel Connector project. This project will expand the capacity to transport refined petroleum products across the Houston Ship Channel via pipeline. The company completed a successful open season for the Cross-Channel Connector after receiving shipper commitments to utilize the additional capacity. In addition, Phillips 66 Pipeline LLC received positive response to a potential Phase 2 of the project and is proceeding with an evaluation of this expansion.

The Cross-Channel Connector project leverages existing assets and will combine a reactivated pipeline under the Houston Ship Channel along with the expansion of an active line in Pasadena. The company plans to connect to Magellan's refined product pipeline which will allow the Cross-Channel Connector to transport refined petroleum products from the south side of the Houston Ship Channel to the Magellan Midstream Partners and Kinder Morgan Energy Partners systems on the north side of the channel at Galena Park and East Houston.

The company anticipates the project could be complete as early as Q4 of 2014, subject to the receipt of necessary permits and regulatory approvals. The Cross-Channel Connector is expected to have an initial system capacity of up to 180,000 barrels per day. The Phase 2 expansion could add an additional 50,000 barrels per day of capacity. 
Note to the Granddaughters

Your aunt Laura told me she and her husband were caught in traffic today because the wind blew a house off a truck-trailer.

And I always thought it was windy in North Dakota. LOL.

Thirteen (13) New Permits -- The Williston Basin, North Dakota, USA; Nineteen (19) Producing Wells Completed; Several Nice Wells Being Reported: Oasis With A "High IP" Well

Price of oil: held today despite a fairly down day for the market.

Active rigs:

Active Rigs18719020316587

Thirteen (13) new permits:
  • Operators: Whiting (5), Newfield (3), Oasis (3), OXY USA (2)
  • Fields: Ray (Williams), Twin Valley (McKenzie), Murphy Creek (Dunn), Sanish (Mountrail), Sand Creek (McKenzie), Cow Creek (Williams), Gros Ventre (Burke)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right.

Nineteen (19) producing wells completed:
  • 24955, 915, SM Energy, Cade 12-19HB, Poe, t11/13; cum 10K 11/13;
  • 24956, 764, SM Energy, Cade 12X-19H, Poe, t11/13; cum 9K 11/13;
  • 24957, 894, SM Energy, Cade 12-19HA, Poe, t11/13; cum 11K 11/13;
  • 25000, 596, SM Energy, Annie 12X-18HB, Poe, t11/13; cum 16K 11/13;
  • 25058, 1,286, Hess, BB-Chapin 151-95-0506H-3, Blue Buttes, t12/13; cum --
  • 25059, 1,086, Hess, BB-Chapin 151-95-0506H-4, Blue Buttes, t1/14; cum --
  • 25068, 876, Hess,  EN-Hermanson A 155-93-3601H-2, Robinson Lake, t12/13; cum --
  • 25070, 1,023, Hess, EN-Hermanson A 155-93-3601H-4, Robinson Lake, t1/14; cum --
  • 25146, 764, Hess, HA-Mogen-152-95-0508H-6, Hawkeye, t1/14; cum --
  • 25241, 1,806, KOG, Nelson 156-100-17-20-2H, East Fork, t10/13; cum 20K 11/13;
  • 25242, 681, KOG,  Nelson 156-100-17-20-11TFH, East Fork, t10/13; cum 10K 11/13;
  • 25243, 1,365, KOG, Nelson 156-100-17-20-3H, East Fork, t10/13; cum 18K 11/13;
  • 25418, 1,166, Hess, CA-Halverson 154-95-0409H-4, Hofflund, t12/13; cum --
  • 25419, 1,190, Hess, CA-Halverson 154-95-0409H-5, Hofflund, t1/14; cum --
  • 25518, 655, SM Energy, Walla 13X-19H, Poe, t11/13; cum 8K 11/13;
  • 25519, 846, SM Energy,  Walla 13-19H, Poe, t12/13; cum 5K 11/13;
  • 25574, 333, Hess, EN-Riersgard 156-93-1718H-4, Alger, 4 secs, t12/13; cum -- 
  • 25681, 2,926, BR, Sunline 31-1TFH-SH, Clear Creek, 4 secs, t12/13; cum --
  • 25683, 1,764, BR, Rising Sun 31-1TFH-6NH, 4 secs, t12/13; cum --
Well recompleted:
  • 16071, A, Armstrong Operating, Hanisch 26-1, Moraine, this was a Duperow well producing since 3/06; recompleted as a Winnipegosis, 11/13; the Winnipegosis was dry (4/06); the Interlake was dry (4/06); the Duperow is PNA (10/13); cum 93K 11/13; (Duperow);
Wells coming off confidential list Friday:
  • 22099, 863, Oasis, Yukon 5301 41-12T, Baker, t9/13; cum 8K 11/13;
  • 24278, 436, Triangle, Triangle 15-101-36-25-6H, Rawson, t8/13; cum 55K 11/13;
  • 24279, 478, Triangle, Triangle 150-101-36-25-5H, Rawson, t8/13; cum 52K 11/13;
  • 24718, 226, OXY USA, James Cross 1-5-8H-143-98, Little Knife, t6/13; 19K 11/13;
  • 25007, drl, WPX, Olson 12-1HY, Van Hook, no production data,
  • 25230, 995, Oasis, Sara 5792 13-3B, Cottonwood, t8/13; cum 16K 11/13;
  • 25264, 355, Oasis, Calmers Federal 6092 43-14T, Cottonwood, t10/13; cum 14K 11/13;
  • 25339, 3,170, Oasis, Gene Zumhof 5300 11-23T, Willow Creek, t8/13; cum 35K 11/13;
  • 25477, drl, CLR, Josephine 4-17H1, Sauk, no production data,
  • 25680, drl, BR, Washburn 42-36TFH, Charlson, no production data,
  • 25892, drl, BR, Blue Ridge 41-30MBH ULW, Three Forks, Keene, no production data,
  • 25894, 1,999, Newfield, Norby State 152-96-16-2H, Westberg, t9/13; cum 35K 11/13;
  • 25923, drl, Hess, EN-Jeffrey A 155-94-2734H-4, Alkali Creek, no production data,
  • 25994, 1,016, Newfield, Barracuda 150-100-11-2-3HR, Sandrocks, t10/13; cum 25K 11/13;

7,000 In 2011; 12,000 In 2012; 18,000 In 2013 -- The Boom Continues; North Dakota In Line For Second US Representative

The Bismarck Tribune is reporting:
  • The Census Bureau estimates that about 18,000 people migrated into North Dakota last year, after gains of 12,200 people in 2012 and 6,900 in 2011.
  • Iverson says that between 2000 and 2003, North Dakota lost about 8,400 residences.
  • Census data show North Dakota's population reached an estimated all-time high of 723,393 residents last year.
Forbes needs to update this map.

The apportionment for US House of Represenatives: US population/435.

The US population: 313.9 million (2012).

Let's make it 315 million/435 = 724,137.

At 314 million/435 =  721,839. I'm sure I'm not the only one who noted this.

This is why some states are eager to fast-track-immigration-citizenship: to save the number of their federal representatives.

Now Faust And ObamaCare

I have learned a lot from the blog, and I have learned a lot from the readers.

Three years ago I would not have understand the significance of the story that Moody's has downgraded the creditworthiness of the US health insurers, citing "uncertainties" of ObamaCare.

What this means simply, up front, is that it will cost US health insurers more to borrow money for implementing ObamaCare.

There are so many Faustian stories here. Remember, it was the insurance companies that drafted ObamaCare. The big three (Obama, Hillary, Pelosi) set the tone, set the guidelines, but the insurers drafted the plan.

CBS Reporting Numerous ASCEs To Continue

CBS is reporting:
The Delaware Valley may not see a significant warm up — or even a seasonable day — until AFTER the Super Bowl!
Our current pattern of bitter cold should continue for at least the next two weeks, complemented by a few quick-moving disturbances, or clippers.
In fact, three separate clippers will reinforce the cold over the next five days. They’ll also bring more snow potential.
Clipper #1, a weak system, comes Thursday night.
Clipper #2 has a little more gusto. It arrives Saturday.
Clipper #3 (Sunday night into Monday) had been showing potential to be the “next big thing” with recent model guidance. However, the very latest information into the Eyewitness Weather Center keeps this system to our north.
CBS refers to these cold systems as "clippers." Other see them as just more ASCE's.

Nevada Gun Dealers See Windfall

Breitbart is reporting:
On January 22nd renowned gun maker Smith & Wesson joined Sturm, Ruger, & Co., by announcing it would cease California sales of its semi-automatic pistols due to microstamping requirements that went into effect last year.
Ruger made the same announcement earlier this month. Microstamping is a requirement that each firearm be fitted with a special firing pin that leaves a fingerprint on a bullet casing which differs from the fingerprint of every other firearm.
In other words--every one of the wildly popular Smith & Wesson M&P .45 semi-automatic handguns would have to be manufactured in such a way so that no two of them left the same mark on a shell casing.
The cost of doing this would be incredibly high to manufacturers, and would be a cost they would have to pass on to consumers in higher prices. Moreover, the result of doing this would be yet another gun registry--every gun sold that met microstamping requirements would have be to registered so that the government knew who owned the gun that left that fingerprint.
Harry Reid is breaking out the champagne.

Unemployment Claims Tick Up

The AP is reporting:
The number of Americans seeking unemployment benefits ticked up 1,000 last week to a seasonally adjusted 326,000, a level consistent with steady job gains.
The Labor Department says the four-week average, a less volatile measure, fell for the third straight week to 331,500. Both figures are close to pre-recession levels and suggest that companies are laying off few workers.
One sour note in the report: Nearly 1.4 million people who have been unemployed longer than six months lost benefits in the week that ended Jan. 4, the latest period for which figures are available. That's because an emergency program that provided extended benefits expired Dec. 28.
The number of recipients fell to 3.7 million from 4.7 million in the previous week. About 300,000 people began receiving unemployment benefits in the week ended Jan. 4.
The total number of beneficiaries was already falling steadily even before the cutoff: More than 5.6 million people were receiving aid a year ago.

UNP, McDonald's Reports; Netflix Surges $50/Share -- Up More Than 15%

On a day when the market sees a triple-digit "plunge," Netflix advances more than 15%, up more than $50/share.  At one time, earlier today, it was up $63, almost 20%.

On the other hand, the market "plunges" 145 points and the pundits say it is due to poor earnings reports like McDonald's. Okay:
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.  Believe what you want, but the market does not "plunge" 145 points because McDonald's beats by one penny. Perhaps it's the jobs report. The Obama administration: one big fail.

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

Reminder: earnings are tracked here; and this week's earnings reports of interest are tracked here.  
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.
"For the first time in six quarters, we reported overall volume growth, despite significantly weaker coal shipments.  It highlights the strength of our diverse franchise, the extensive network reach we have to various markets, and a strong grain harvest. Volume growth, combined with solid core pricing gains and our continued focus on safety, service, and efficiency, generated a record fourth quarter operating ratio of 65.0 percent.  The fourth quarter wrapped up another tremendous year for Union Pacific, with our overall financial performance exceeding all previous milestones."

Scientific Study Which Helps Explain Production Differences Across The Bakken

A huge "thank you" to a reader for sending "us" a superb presentation on the geological and technological aspects and their influence on production in the Bakken. The study comes from the Colorado School of Mines; the presentation is very current, dated May 2, 2013, but the results are based on older wells. The link will take you to a PDF:

Slide 8 is particularly interesting for many reasons. The graphic shows the average EUR among ten (10) subdivisions in the Bakken, based on township boundaries. The average EURs (in 1,000's; 2010 to 2011):
  • Sanish Parshall: 632
  • Ft Berthold: 569
  • Bear Den: 536
  • South Nesson: 506
  • Rough Rider: 466
  • Bailey: 459
  • Elm Coulee (Montana): 433 (2001 - 2003 data)
  • North Nesson: 393
  • Mondak: 283
  • St Demetrius: 209
The data on number of frack stages vs those subdivisions seems to be inconclusive.

Data regarding type of proppant used:
  • Sand: 614 wells
  • Sand and ceramic: 78 wells
  • Ceramic only: 74 wells
Based on a very limited data set, a mixture of 2/3rds sand and 1/3rd ceramic appears more effective than either along.

The maturity boundary of the Bakken/Three Forks:
  • northern boundary: eastern half of Divide County
  • eastern boundary: splits Mountrail County in half; diagonally splits Dunn County in half
  • southeastern boundary: includes the western third of Stark County
  • western boundary: well into Montana; off of Williams, McKenzie, Billings, and Golden Valley counties inside the boundary limits
With the commentary, I am unable to interpret data on slide 18 which investigates whether the Parshall is self-sources, or a result of migration.

Slide 19 is one of the more interesting slides: graphic depicting oil / oil + water.

Slide 20 is also interesting: the sweet spots / uneconomic spots tend to correlate with oil / oil +water.

Slide 22 should satisfy mineral owners to the east of Williston and explain why Stockyard Creek has been such a good field. Epping field should also be a great field.

Slide 23: back to oil / oil +water. Elm Coulee ≠ Bear Den ≠ Rough Rider.

For Investors Only: Arctic Cat With Huge Miss

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

Fifteen companies announced increased dividends/distributions, including CenterPoint Energy, from about 21 cents to about 24 cents. Nine companies reported increased dividends/distributions yesterday, including Crosstex Energy, LRR Energy, and Alliant Energy.

Arctic Cat misses by $0.44, misses on revs; Lowers FY14 EPS below consensus, revs in-line: Reports Q3 (Dec) earnings of $0.89 per share, $0.44 worse than the Capital IQ Consensus Estimate of $1.33; revenues rose 3.6% year/year to $225.8 mln vs the $239.38 mln consensus.

Lenovo Group Ltd has agreed to buy IBM Corp's server business for $2.3 billion as the Chinese PC giant grabs another piece of the computing world in a long-awaited deal.  This is China's biggest tech M&A to date.

Thursday: Fast-Tracked?

The AP is reporting via Rigzone:
A Canadian company on Wednesday started delivering oil through the Texas portion of a proposed cross-border pipeline that has stirred controversy and tension between the United States and its northern neighbor. TransCanada began delivering oil from a hub in Cushing, Oklahoma, to customers in Nederland, Texas, early Wednesday, Alex Pourbaix, president of energy and oil pipelines, said at a news conference.
The company expects to complete a smaller pipeline that will transport oil from Nederland to refineries near Houston later this year.
The $2.3 billion pipeline from Cushing to Texas is the Gulf Coast — or southern portion — of TransCanada's proposed Keystone XL pipeline. This shorter leg will begin transporting on average about 300,000 barrels of oil daily and should end the year at an average of about 520,000 barrels, Pourbaix said.
The longer Keystone XL, which would transport heavy tar sands crude from Canada and oil from North Dakota's Bakken shale, requires a permit from President Barack Obama because it crosses an international border. That $5.4 billion segment has not yet been approved. Obama fast-tracked the shorter, southern portion of the pipeline with the hope of relieving a bottleneck in Oklahoma.
Active rigs in North Dakota:

Active Rigs18719020316587

RBN Energy: first in a series on royalties for mineral owners
There has been a great deal of publicity around royalties involved with the shale gas—stories of instant millionaires (or “shaleionaires,” as 60 Minutes called them in 2010), stories of producers reducing or even eliminating some royalty payments as the vast oversupply of natural gas took hold in the last couple of years, stories of long, excruciating negotiations to reach a royalty/lease agreement, only to find out that the seller’s side of the table didn’t actually contain the owner of the rights, and stories of neighbors turning on each other when they got radically different deals based on timing or whom they were dealing with, and so on.  
Unless you have been directly involved in leasing and royalty work, a lot of it can be confusing.  So today we begin a blog series to illuminate the world of mineral rights, oil & gas leases and royalties.
 The Wall Street Journal

Cheating probe roils Philadelphia school system.
Nearly 140 teachers and administrators in Philadelphia public schools have been implicated in one of the nation's largest cheating scandals, according to district officials, who also said Wednesday that they will spend the next few weeks disciplining or firing dozens of employees.
The Pennsylvania attorney general's office also is conducting a criminal investigation into the allegations, according to a person familiar with the matter. Three principals were fired late last week as part of the probe, which grew out of a 2009 state analysis of questionable erasure patterns on test booklets on the Pennsylvania System of School Assessment math and reading exams. 
Shock! Shock! I'm shocked to learn there is cheating in Philadelphia! Shocked! Round up the usual suspects. It's gonna be a slow news day if that was in the front section of The WSJ.


If the jury doesn't like a law, they can acquit an otherwise-guilty individual through a process known as "nullification" in New Hampshire. Live free or die. There's something inherently wrong with that but it is not surprising. The judge who ruled that probably went to same law school as the president.

The debt-ceiling deadline is now "put" at late February. With some smoke and mirrors, "we" can easily get this deadline out to April, and then the income tax revenue starts rolling in .

The EU's suicide plan: it forges ahead with climate plan. Neither side likes the plan, so it must be perfect.

Boeing adds workers at South Carolina plant to address Dreamline "hiccups."


MarketWatch is reporting that California is close to meeting ObamaCare's enrollment targets.
Halfway through the process, officials running the Obamacare program in California said Tuesday they are close to reaching the minimum expected enrollment for subsidy-eligible consumers and have surpassed the half-million mark in overall signups.
That should end the discussion on success/failure of ObamaCare.