Friday, March 7, 2014

News You May Have Missed -- Just Catching Up -- Nothing Important -- For The Archives

The Wall Street Journal is reporting:
According to the data, Texas saw the largest influx of well-heeled households moving into the state last year, consistent with move trends overall. South Carolina and Florida also posted net gains.
On the flip side, Illinois and Pennsylvania saw more high-value households move out of state than in, according to the data. California saw the biggest net loss of heavy-weight moves.
Last year, California had a net loss of 49,259 people to other states, according to the U.S. Census. California markets also have seen some of the strongest year-over-year price growth in the U.S., says Ellen Haberle, economist at real-estate brokerage Redfin.
"For the average buyer, it's not that California was affordable to start with—it's just getting even harder," she says.
Texas had the highest net gain in terms of domestic migration—113,528 more people moved into the state than out last year, census data show. Job opportunities are home-buyers' top reason for relocating to Texas, according to a Redfin survey last month of 1,909 customers and website users.
It's not just the numbers of folks leaving California; it's the demographics of those leaving -- the higher income/higher taxed.


Shale (really) is different -- BP. Rigzone is reporting
BP has belatedly recognised there is not a good cultural fit between shale buccaneers and the petroleum engineers and MBAs in the rest of the organisation.
Interestingly, ExxonMobil seems to have known this from the start, and maintained its XTO shale unit as a separate business with a separate headquarters after buying it in 2010. 
XTO operates as a separate entity in North Dakota, though it is a wholly-owned subsidiary of XOM.


We've discussed the Kashagan numerous times. It's in the news again. Rigzone is reporting:
Kazakhstan is suing foreign oil majors developing its huge Kashagan oilfield in the Caspian Sea, a tactic similar to those that secured the government large stakes in two of the three multinational energy projects on its territory.
Repeated delays at the 13-year-old project, targeted to produce as much oil as OPEC member Angola from a reserve almost as big as Brazil's, have infuriated the Kazakh government. The consortium, led by Exxon, Royal Dutch Shell, Total and Eni as well as Kazakh state oil firm KazMunaiGas, may face Kazakhstan seizing a bigger stake in Kashagan or refusing to reimburse a big chunk of the $50 billion spent on bringing it onstream.
The latter option is written into the Kashagan contracts. Production at Kashagan, the world's biggest oil discovery in 35 years, began in September but was stopped just weeks later after gas was found to be leaking from its pipelines.

FlexGen brings portable power to remote drilling sites. Rigzone is reporting:
FlexGen Power Systems is a branch of U.S.-based military power supply provider Earl Energy, and its FlexGen Solid State Generator, while new to the oil and gas sector, has been in use by the military worldwide, including Afghanistan and Iraq for several years, Steven Jones, FlexGen’s director of communications told Rigzone.
The company was started by former military personnel who knew first-hand what the shortcomings of typical generators were out in the field and decided a new approach was called for, Jones explained. While the power systems were developed by the military, the company realized there were other applications, such as the oil and gas industry, where the power systems could offer significant advantages over existing products.

For Investors Only

This is an interesting "moment in time" for investors. There are three major events that are affecting the market in the short term:
  • the Ukranian event
  • the ObamaCare delay
  • the Fed's dual mandate
  • First, the Fed's dual mandate: jobs and inflation. Inflation is not an issue at the moment. The strong jobs report today should have brought the market down. It didn't. This suggests to me, investors have factored in continued gradual tapering.
  • Second, the Ukranian event: short term, it's a diplomatic event.
  • Third, the ObamaCare delay: this is a "positive" for the market. The perception that the entire program is now on hold through 2017 can only be viewed as a huge "plus" for investors.
With regard to the jobs report, Reuters is reporting:
U.S. stocks finished mostly higher on Friday, with the S&P 500 closing at a record after more jobs than expected were created in February and January's figure was revised higher.
The S&P 500 ended at a record closing high for the second day in a row. Friday's milestone also was the S&P 500's fifth record closing high in the past seven sessions.
But the overall sentiment was cautious and trading was volatile throughout the session as investors adjusted their positions ahead of the weekend and kept a close eye on the simmering crisis in Ukraine.
The S&P 500 had climbed to an intraday record of 1,883.57 shortly after the opening bell, lifted by the Labor Department's report showing that U.S. employers added 175,000 jobs to their payrolls in February. Economists had expected a gain of 149,000 jobs, according to a Reuters poll.
This tug-of-war on "good" employment numbers vs "bad" employment numbers is perhaps coming to an end where "bad" numbers meant more stimulus, contributing to a rising market. If investors have baked in cautious, continued tapering, then "good" numbers are important right now for investors. The next debate will be whether "better" job numbers are a reflection of a better economy, or the "discontinuation" of 99+ weeks of unemployment benefits.

The Crimean Event

This Crimean thing is very interesting on so many levels. I don't watch television as a rule, and traveling the last two days, I haven't kept up at all. But it certainly looks like the Ukraine could have been headed for a civil war with two "weak" participants (the Crimean Russian civilians with no army and the Ukrainians with a bullet-less army) fighting it out for bragging rights.

Right, wrong, or indifferent, it almost appears that Putin could be recognized for stepping in and restoring a bit of "adult" leadership. If Putin had not stepped in, I think one could argue that we would now be seeing a lot of physical fighting between the Ukrainians and the Crimeans. Putin stopped that potential fighting and has moved it into the diplomatic arena per this story by Reuters:
In a signal to Moscow, Obama announced plans to punish Russians and Ukrainians involved in what he called “threatening the sovereignty and territorial integrity of Ukraine.” A U.S. official said Russian President Vladimir Putin was not on the list of those to be sanctioned.
I have no idea what it means to "punish the Russians" but not include Putin on that list of those to be sanctioned. I assume I am missing something, but exactly what would "we" be doing if "we" sanctioned Putin? Not let him speak to the US Congress? LOL.

New Bakken Pipeline Proposed -- ETP -- Bakken To Texas Coast


March 24, 2015: ETP, Bakken-to-Illinois, Dakota Access Pipeline, miles of pipeline being brought in, stored near Aberdeen, SD; South Dakota state has until December 15, 2015, to make decision.

August 30, 2014: Iowa activists trying to stop the ETP pipeline
Original Post
Reuters is reporting:
Energy Transfer Partners on Friday announced plans to build an oil pipeline from the Bakken shale in North Dakota to U.S. Midwest and Gulf Coast refineries, seeking support for a major new conduit even after rivals dropped similar plans.
Dallas-based ETP said it will launch a so-called open season on March 12 to assess market interest in the project, and said one of the pipeline's destinations will be Sunoco Logistics Partners LP's Nederland, Texas terminal.
A spokeswoman for ETP declined to provide any further details on the project, including what capacity the pipeline might have or when the open season would conclude.
ETP has also been working to develop another major north-south conduit by converting a 30-inch (76-cm) existing natural gas line, known as Trunkline, to ship up to 420,000 barrels-per-day Bakken and Canadian crude from Patoka, Illinois to Nederland.
Don sent me the link. My two cents worth:
Lots of "competition" between rail and pipeline -- it seems folks are trying to sort this out.

I think most folks realize that rail cannot be the permanent answer, but yet, pipeline may not be the preferred choice for some years. Perhaps ETP "knows" that it will take many years to get the pipeline approved, laid, so might as well start now.

Fifteen (15) New Permits -- The Williston Basin, North Dakota, USA; CLR Cancels Thirteen (13) Linbeck Permits, Possibly Replaced By Jersey Federal Wells (Alkali Creek)

Spring road/load restrictions coming soon. An annual event, reported by The Bismarck Tribune. Elsewhere the US Army Corps of Engineers says a repeat of spring flooding like that seen in 2011 is unlikely:
The mountain snowpack in the Missouri River's upper basin is close to levels seen before devastating 2011 flooding along the river, but a repeat this year isn't likely, an Army Corps of Engineers official said.
Drought in 2012 has resulted in a one-third increase in water storage capacity in the three Missouri River reservoirs in the Dakotas and Montana, according to Jody Farhat, chief of Missouri River water management for the corps. There also is not as much snow accumulation on the plains as there was three years ago, when flooding devastated hundreds of thousands of acres of mostly farmland in the Dakotas, Nebraska, Iowa, Kansas and Missouri.
Active rigs:

Active Rigs191186204204171

Fifteen (15) new permits:
  • Operators: CLR (7), MRO (4), Whiting (3), KOG
  • Fields: Alkali Creek (Mountrail), McGregory Buttes (Dunn), Fryburg (Billings), Poe (McKenzie)
  • Comments:
Wells coming off confidential list were posted earlier; see sidebar at the right.

Four (4) producing wells were completed:
  • 22834, 1,208, Emerald, Hot Rod 1-27-26H, Boxcar Butte, t9/13; cum 45K 1/14;
  • 25231, 1,115, Emerald, Slugger 1-16-21H, Charbonneau, t8/13; cum 65K 1/14;
  • 25232, 1,098, Emerald, Talon 1-9-4H, Charbonneau, t8/13; cum 66K 1/14;
  • 25920, 1,218, Emerald, Hot Rod 4-27-26H, Boxcar Butte, t9/13; cum 31K 1/13;
This may or may not be interesting, cancellations: 
  • Continental Resources (CLR) canceled the thirteen (13) Linbeck wells, 6-153-93. These were permitted in Alkali Creek. There is no other activity in the immediate area. Whiting canceled one permit in this area some time ago; Whiting has one well in the immediate area that is a pretty good well but other than that, not much. It is possible these wells are being replaced by the Jersey Federal wells in 6-153-93.

Natural Gas Exports And The Ukraine

It's not gonna happen like one might expect, but Breakout is reporting that some think that Putin is making it more likely that President Obama will approve natural gas (and maybe oil) exports. Changes to the export laws won't change in my investing lifetime, but there are plenty of loopholes and regulatory permissions already on the books that will allow increased exports of both.

Having said that, here is Breakout's outlook:
Eying an opportunity to stick it to Vladimir Putin, hawkish Republicans, and Democrats from energy-rich states are pushing the administration to loosen exports of natural gas for shipment to Ukraine and other countries dependent on Russia. Currently exports of natural gas are limited to countries that are free trade partners with U.S., but lawmakers see an opportunity for domestic energy producers to benefit, as well as put pressure on Russia.
Natural gas had an extreme run-up recently as cold weather boosted demand, however the commodity has cooled off in the last couple weeks. David Lutz of Stifel Nicolaus has been following the trade for years, and despite arguably bullish talk coming out from Washington recently, he doesn’t see the clean burning fuel taking off in the short term.
“We’re starting to see as we move closer and closer towards the spring” that nat gas is weakening price-wise, he says in the attached video. “Nat gas [was] down for the month of February, lost 30% in the past week, and the reason why? They’ve shifted from March deliveries to April deliveries.”
As usual, the headline is more exciting than the reality.

A Note To The Granddaughters

I don't have time to expand on this -- maybe later. I honestly don't understand all the media hysteria over the "crisis" in the Ukraine. Yes, Putin did this unilaterally. But this was a handful of troops sent to protect his naval station in the Ukraine and to protect the Russian majority in the Crimean. Regardless of whether the US entered Germany (WWII), Japan, Korea, Vietnam, Kuwait, Iraq, Afghanistan, several Central American/South American countries over the past 75 years unilaterally or part of a larger coalition, the end result was the same: a huge number of American soldiers on foreign soil, most of which had no historical tie to the United States (I won't even get into the "Indian Wars").

The Crimean/Ukraine is a non-event for the US but it takes our mind off ObamaCare. Short term the market agrees with me: the market has had one of the best weeks ever. Oil moved higher today, but if this was truly a serious event threatening a major disruption in oil movement, the price of oil would have spiked.

Supporting this view from Yahoo!In Play:
Equity indices enjoyed a broad-based rally on Tuesday that sent the S&P 500 (+1.5%) and the Russell 2000 (+2.5%) to new record closing highs. Stocks surged out the gate after index futures received a considerable bid around 1:00AM ET.
The overnight strength came about after it was reported that Russian President Vladimir Putin called back the troops that were conducting exercises on the country's border with Ukraine. Mr. Putin commented on the tense situation, saying Russia is not aiming to annex the Crimean peninsula and that military force is a choice of last resort. The overnight developments were viewed positively by market participants who rushed into risk while shedding some of the safe-haven assets that were in strong demand on Monday.
On that note, Treasuries spent the entire session in a steady retreat with the 10-yr yield ending at its session high (+9 bps at 2.69%); gold futures fell 0.9% to $1337.80/ozt; and crude oil lost 1.6%, ending at $103.34/bbl. The risk rally translated into solid gains for all ten sectors.
This is simply turning into a UN-mediated diplomatic concern. 

For Investors Only

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.


Later, 1:58 p.m. central time: market is barely green; oil is up almost 1%. New highs 289 vs new lows 12. New highs include: UNP, XLNX, HP.

Being reported now: even the president appears to hate ObamaCare. Well, duh. He might lose the Senate over this.

One-half of young adults are ready to leave France: taxes. (CBN-TV) I doubt many readers will watch this video to the end, but it's incredible. Imagine if this story was by ABC or NBC about the United States.

Original Post
Nine companies announce increased dividends or distributions, including Devon.

Futures: both the price of oil and the Dow are up. The Dow is up strong, and the price of oil is solidly above $102.

I did not invest in any of the companies below. I don't have any plans to invest in any of them, but I mentioned them early on in the blog for those who might have been paying attention. Look at the two-year history for these shares.

MDU: 22 ->34
CCR: 98 -->126 (and as low as 63 in this time period
HP: 60 --> 100

I would mention more, but a) I'm running out of time; and, b) I can't find many examples of companies that make the point. BNSF, of course, is the one that would be most impressive, except I couldn't show it. It was a long term holding for me until Warren bought it. A nice proxy for BNI is UNP.

The Early Bakken Wells Were Not All That Good -- Thank Goodness For That Oilman's Trait: Tenacity

The Tyler may or may not turn out to be a winner, but I wouldn't get too shook about the results of the early wells.

It took a lot of "poor" Bakken wells before the 2007 Parshall well that really got things rolling.

The list below is all of the Bakken wells between permits number 15989 and 15905, most of them drilled in 2005 and 2006 (I may have missed some, but if I did, it was not on purpose). Look at the total production for these wells (I've highlighted the first few). These are atrocious by today's standards.

I continue to update this list at this post.

  • 15989, 191, OXY USA/Anschutz, Franchuk 44-5H, Willmen, t5/06; cum 99K 10/13;
  • 15986, 70, Hess, J. Horst 1-11H, Robinson Lake, t2/06; cum 34K 10/13;
  • 15984, 54, CLR, Buck 3-8H, Juno, t1/06; cum 10K 10/13;
  • 15942, 17, Murex, Leslie Learl 13-24H, t2/06; cum 17K 10/13;
  • 15934, 82/PA, Petro-Hunt, Zobolotny 4D-4-2H, Little Knife, t5/06; cum 13K 10/13; 
  • 15920, 67, SM Energy, Mondak Federal 4-1H, t5/06; cum 26K 10/13;
  • 15919, 189, Murex, Susan Kaye 6-7H, t12/05; cum 163K 10/13;
  • 15917, 32, Petro-Hunt, 20411 JV-P Koufax 1423, Stoneview, t12/05; cum 20K 10/13;
  • 15916, 71, Samuel Gary/Missouri River Royalty, Manitou 4-1H, t5/06; cum 30K 10/13;
  • 15908, 37, BR, State Lindsey 41-28H, Pierre Creek, t11/05; cum 86K 10/13;
  • 15905, 73, Bakken Hunter, Points 2-11H, Paulson, t1/06; cum 24K 10/13;
  • 15889, 38/IA, Hess, Sara g. Barstad 6-44H, Alkali Creek, t12/05; cum 26K 10/13;
  • 15887, 222, MRO, Voss 14-11H, Murphy Creek, t10/05; cum 109K 10/13;
  • 15878, 72, Triangle USA, Sigma-Lee 14-3, Squires, t3/06; cum 59K 10/13;
  • 15854, 368, MRO, Fedora 34-22H, Bailey, t10/05; cum 152K 10/13;
  • 15851, 231, XTO, McKenzie Federal 14X-31, t12/05, cum 78K 11/13;
  • 15846, 118, Petro-Hunt, 20501 JV-P Battleview 1621 1-H, t11/05; cum 23K 1/14;
  • 15845, 155, Hess, Nelson Farms 1-24H, t10/05; cum 95K 11/13;
  • 15824, 334, OXY USA, Miller 44-31H, t8/05; cum 131K 11/13;
  • 15808, 250, CLR, Rindel 3-9 HD, Juno, t9/05; cum 81K 11/13;
  • 15806, 42, BR, Federal Amy 14-8H, Mondak, t10/05, cum 27K 11/13;
  • 15789, 476, XTO, Paluck 41X-28, St Demetrius, t8/05, cum 126K 11/13;
  • 15787, n/d, Murex, Angela Kaye 2-11H, West Bank, t-- ; cum 227K 11/13;
  • 15777, 78, XTO, Eide 11X-29, McGregor, t8/05; cum 23K 11/13;
  • 15772, 262, CLR, Burau 4-22H, Larson, t7/05; cum 4K 11/13;
  • 15761, 179, Baytex, 20406 JV-P Moraine 211 1-H, Whiteaker, t8/05; cum 52K 11/13; 
  • 15772, 262, CLR, Burau 4-22H, t7/05; cum 35K 12/13;
  • 15778, 78, XTO, Eide 11X-29, t8/05; cum 23K 12/13;
  • 15787, N/A, Murex, Angela Kaye 2-11H, West Bank, s7/05; cum 227K 12/13;
  • 15789, 376, XTO, Paluck 41X-28, St Demetrius, t8/05; cum 126K 12/13;
  • 15806, IA/42, BR, Federal Amy 14-8H, Mondak, t10/05; cum 27K 12/13;
  • 15809, 250, CLR, Rindel 3-9 HD, Juno, t9/05; cum 81K 12/13;
  • 15824, 334, OXY USA, Miller 44-31H, Willmen, t8/05; cum 132K 12/13;
  • 15832, 396, Hess, Russell E Smith 24-43H, Capa, t11/05; cum 156K 12/13;
  • 15845, 155, Hess, Nelson Farms 1-24H, Ross, t10/05; cum 96K 12/13;
  • 15846, 118, Petro-Hunt, 20501 JV-P Battleview 1621 1-H, North Tioga, t11/05; cum 23K 12/13;
  • 15851, 231, XTO, McKenzie Federal 14X-31, t12/05; cum 78K 12/13;
  • 15854, 368, MRO, Fedora 34-22H, Bailey, t10/05; cum 153K 12/13;
  • 15878, 72, Triangle Petroleum, Sigma-Lee 14-3, Squires, 1 million lbs sand; t3/06; cum 59K 12/13;
  • 15887, 222, MRO, Voss 14-11H, Murphy, t10/05; cum 110K 12/13;
  • 15889, IA/38, Hess, Sara g. Barstad 6-44H, t12/05; cum 26K 12/13;
  • 15905, IA/73, Bakken Hunter, Points 2-11H, t1/06; cum 25K 12/13;
Look at all those wells. Don't take the results of the first Tyler well as indicative of what the Tyler may or may not do. 

Musings, Continued -- The Bakken, Eagle Ford, And The Permian Are Modulating The Price Of Brent

There's really no reason to post this story, it's old news (by 24 hours). The link is to a story in which a huge amount of ink is devoted to why activist environmentalists don't want this pipeline reversal approved (I did not read much of the article). It's old news -- Canadian regulators approved the reversal.

This is why I posted the link.

Yesterday, I drove back from Williston, North Dakota, to Grapevine, TX, and had plenty of time to listen to radio stations all along the way. I happened to catch a very, very small snippet suggesting that the "fossil fuel industry" had won vis a vis the activist environmentalists.

(I personally think of it as a win for Americans, not a win for the "fossil fuel industry." But I digress.)

I didn't listen very long to that snippet. I only caught a piece of it. The "reporter" suggested that huge amounts of money were behind the North American energy revolution and although there will be a lot of political theater played out in the press, the fact is the oil and gas industry is pretty much steam-rolling ahead (poor metaphor, of course).

The price of gasoline was approaching $4.00/gallon in the northern tier, and in the mid-continent. It was back to a more reasonable (?) $3.39 here in Texas. In California it is solidly above $4.50/gallon. Without the Bakken, the Eagle Ford, and the Permian, gasoline would be a whole lot more expensive. Those three fields, and the Canadian oil sands, prevented a huge surge in the price of Brent following the events in the Ukraine/Crimean.

Musings On The Bakken: Cold Winters

I just got back from the Bakken.

I drove cross-country from Los Angeles to Williston, a few days in the Bakken, and then Williston, back to Dallas-Ft Worth area.

The story linked below discusses the challenges the Bakken operators face during the harsh winters. It will be interesting to see how this plays out over the next few years. During my week in the Bakken, I noted that during some of the harshest weather, the operators continued to build pads, drill, and frack.

One thing the article did not mention (unless I missed it), the impact cold weather has on the rails. Anyone who has Amtrak'd knows how winter weather impacts the train. Everything slows down. Folks forget that 71% of Bakken oil is moved by rail.

Personally, I think the spring thaw and (occasional) flooding presents a bigger challenge to everyone operating and working in the Bakken.

Now the story over at Rigzone:
Data published by the North Dakota Industrial Commission’s Department of Mineral Resources showed a 48,305 barrel-a-day decline in the state’s production for the month of December.
The report attributed the production decline primarily to the severe winter weather that hit the state at the end of last year.
According to the DMR, the state experienced low temperatures of 21 to 31 degrees below zero, four major snow storms and five major wind storms in December. Oil production for November had climbed by 31,278 barrels a day to 911,292 barrels a day, for a 3.6% increase over October’s level. The production drop in December was 5.3%.
The production decline, which was clearly impacted by weather, may also be demonstrating that there is a fundamental slowing in output and activity underway, which is not a good omen for the future for America’s oil output. During December, the drilling industry, according to the DMR, operated 190 rigs, up from 184 in November. The January rig count was 188. There were 119 wells completed during December, down from the 138 wells reportedly completed in November.
The monthly report stated that the days from spud to completion for wells drilled during December increased to 132 days, for an increase of 18 days from the length of time it took to drill wells in November. Another very interesting observation from the DMR report was that there were a total of 635 wells that had been drilled and were awaiting completion at the end of December, an increase of 125 wells during the month.
What the report doesn’t show, however, is how many of the wells being drilled were Bakken horizontal wells versus vertical wells in other producing formations. If we assume that 100% of the current drilling activity is for Bakken oil, which is not an unreasonable assumption given how hot the play is, then we can look at the change in the number of producing Bakken wells to see what is actually happening to activity in North Dakota. The December Bakken producing well count showed a 40-well increase from November, which if we compare against the 119 wells reportedly completed during the month of December leaves us with 79 wells that would have been added to the drilled-but-uncompleted total. That leaves us with 46 unaccounted wells from the figures for wells drilled, in production and added to the drilled-but-uncompleted pool. We are not sure whether we should be worried about this number of unaccounted for wells, or attribute them to weather-related counting issues.