Wednesday, April 16, 2014

Reason #45,690 Why I Love To Blog; Two 100-Tank-Car-Unit Trains Every Three Days With Propane/Butane From The Bakken To Washington State

This was posted yesterday, April 15, 2014:
RBN Energy: an update on the LPG export industry in Washington State.
On March 4th, Petrogas announced the purchase of the Ferndale, WA LPG terminal, the only functioning butane and propane export facility on the U.S. west coast.  Then last Thursday (April 10th) Sage Midstream announced a project to build another world scale LPG (liquefied petroleum gas) export terminal a couple of hundred miles south at the Port of Longview, WA.  These are big developments for the west coast LPG markets. Today we begin a blog series that examines the history of Ferndale, how it has been used in the past, and what these two announcements mean for the future of west coast propane and butane markets.
Rusty and I both have a warm spot in our heart for Ferndale, having managed the commercial activities out of that terminal more than two decades ago when we were with Texaco.  Ferndale is a 750MBbl storage, tank car, truck and waterborne import/export facility that sits near several Northwest area refineries, and is just a tank car ride away from some of the richest natural gas liquids (NGL) producing areas in North America.  For most of its existence, Ferndale has been the backwater of NGL markets, almost exclusively used for butane exports to Latin America and the Asia/Pacific markets.  But now NGL markets are changing dramatically due to the onslaught of new production from the shale revolution.  And exports have become the market of choice for NGL surpluses.  Up to now most of the action in exports has been along the Gulf Coast, and to a lesser extent in the Northeast out of the Marcus Hook terminal.   
That article was pretty much all about propane- and butane-by-rail to Washington State.

Today, Don sends me this news story:
Port of Longview commissioners will hold two special meetings Wednesday about Haven Energy’s proposed propane and butane export terminal in Longview. The meetings are at 3 p.m. and 6 p.m.
The meetings, which will take place at the Cowlitz Expo Center, will allow the company to make a public presentation about the proposal and give citizens a chance to ask questions.
Last week, Haven announced it wants to build the $275 million terminal at the port’s vacant Berth 4. The project would create 2,000 construction jobs for the 21-months needed to build it, according to the company.
Haven officials say the completed terminal would create 110-125 full-time permanent jobs, including 26 to 35 direct company jobs and 22 direct railroad and maritime industry jobs — all at what the company described as above-average wages.
Liquid propane and butane would be shipped from North Dakota by rail car at an average of two 100-car-long trains every three days. Haven President Greg Bowles said the trains would use the existing rail corridor and not effect public roads. From the rail cars, liquid products would be transferred to two 100-foot-tall concrete storage tanks before eventually making its way to oceangoing ships bound for Hawaii, Mexico, the U.S. Pacific Coast and Asia.
Global Warming Climate Change Extreme Weather
Call It What You Want: Another Winter Storm In Minnesota; Another 12 Inches Of Snow

The Weather Channel is reporting:
Issued by The National Weather Service Minneapolis, MN

Fairfield Sun Times: Statoil Completes Two Prolific Bakken Formation Wells

Week after week, when I see them, I post an update from Montana. The wells never seem quite as good as North Dakota wells, so it gets a bit discouraging. So to see this headline -- wow!

From the Fairfield Sun Times --

Richland County (west of McKenzie County, North Dakota):
  • Statoil, Sundheim 26-35 1H, two laterals (14,358 feet; 20,145 feet); 1,612
  • CLR, Williamson 1-34H, 14,64 feet; 97
  • CLR, Blount 1-27H, 14,852 feet; 154
  • XTO, P & Q Farms 21X-28D, 20,981 feet, 953
  • XTO, P & Q Farms 21X-28BXC, 20,069 feet, 1,083
Roosevelt County (west of Williams County, North Dakota)
  • Statoil, Powers Ranch 20-17 1H, 20,950 feet, 1,305

Sixteen (16) New Permits -- The Williston Basin, North Dakota, USA; For Investors Only; EOG To Declare A Non-Cash Loss In 1Q14 Due To Derivatives; Whiting With Three Huge Wells

To what degree this affects over all earnings, I do not know. From a press release:
  • EOG Resources expects a ~$155M non-cash losss during Q1 on the mark-to-market of its crude oil and natural gas derivatives contracts, according to an SEC filing.
  • EOG says the net cash paid for settlements of the derivative contracts in Q1 was $34M, while actual realizations for crude oil and natural gas differ from average Nymex prices due to delivery location and quality adjustments.
  • EOG typically reports its adjusted profit figures that exclude impacts from mark-to-market commodity derivative contracts.
I thought that was interesting simply because I had just mentioned that even with high oil prices it was possible for companies to report a loss due to derivatives.

For me, this is a trivial item that hardly merits posting except to make a point.

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.

On a day when the overall market surged 160 points, EOG finished flat.

Will The Rally Continue?

Dow futures are down 50 points; oil is flat.

Daily Activity Report

Active rigs:

Active Rigs184186204175108

Sixteen (16) new permits --
  • Operators: QEP (4), Triangle (4), OXY USA (3), Emerald Oil (3), Hess, American Eagle
  • Fields: Grail (McKenzie), Elk (McKenzie), Fayette (Dunn), Boxcar Butte (McKenzie), Colgan (Divide), Blue Buttes (McKenzie)
Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Wells coming off the confidential list Thursday:
  • 20259, drl, KOG, Skunk Creek 3-24-25-14H3, Mandaree, no production data,
  • 24661, 928, Whiting, Zalesky 21-17PH, North Creek, t10/13; cum 27K 2/14;
  • 25381, drl, XTO, Loomer 41X-3D, Tobacco Garden, no production data,
  • 25789, 2,495, Whiting, Lucky Lady 44-35H, Timber Creek, t10/13; cum 44K 2/14;
  • 25790, 2,013, Whiting, Evelyn Moen 4-34H, Arnegard, t10/13; cum 43K 2/14;
  • 25791, 2,172, Whiting, Roy Moen 44-34-2H, Arnegard, t10/13; cum 50K 2/14;
  • 25913, drl, Zavanna, Bills 32-29 2H, Stockyard Creek, no production data,
  • 26573, 116, Corinthian Exploration, Corinthian Kornkven 1-32 1H, North Souris, a Spearfish well, t12/13; cum 6K 2/14;
  • 26638, drl, CLR, Cecelia 1-27H1, Stoneview, no production data,
  • 26719, drl, Hess, EN-State C-156-93-1615H5, Alger, no production data,

More Of The Same ...

.... there's really no reason to post this. This is just more of the same: more oil loading facilities for CBR, this time in Wyoming.

Gillette Star & Tribune is reporting:
That sound you hear coming down the tracks is Wyoming's growing oil industry. 
Business leaders and Gov. Matt Mead celebrated the opening of Eighty-Eight Oil LLC's new transloading facility on Tuesday in Fort Laramie. The rail terminal is aimed at exporting new oil production from the Powder River Basin to buyers outside the state. It will also connect pipelines transporting Canadian crude to Burlington Northern Santa Fe railroad's mainline near Eighty-Eight Oil's existing crude oil terminal in Guernsey. 
"By connecting our terminal to BNSF’s expansive railway system, we can provide producers in the Rocky Mountain region and Canada further flexibility in adding value to their production and transporting it to markets throughout the United States,” Eighty-Eight Oil Superintendent Jerry Herz said in a statement. 
The terminal consists of three loop tracks, each capable of accommodating 100-car unit trains. The initial loading capacity of the facility is 80,000 barrels per day with the potential to expand, Eighty-Eight Oil said.
This -- CBR -- is turning out to be very, very interesting.

President Obama's decision to dither on the Keystone showed activist environmentalists that they could stop pipelines. Even in a good environment, the pipeline industry was not keeping up. All one has to do is look at the situation in North Dakota. But it's not a good environment, and the tea leaves suggest the environment for pipelines will get worse: the activist environmentalists have become emboldened.

The oil and gas industry is not waiting. There is a huge resurgence in the US railroad industry that no one could have predicted. Warren did not predict this; he was simply lucky.

This is huge for the US economy. Pipelines have a huge up-front cost and huge employment up front, but then it drops to "zero" and the only benefit is rental payments to land owners. [A reader corrected me: the payments are all up front; it's the county -- local governments -- that continue to reap annual income through taxes.]

But rail is capital expensive at the start, and that CAPEX continues as locomotives and tank cars are replaced. The personnel costs are huge and will get bigger when the government requires an additional engineer in all locomotives as a way to minimize rail mishaps.

Rail is going to become a bigger and bigger story - all driven by the Bakken experiment.

Speaking Of The Same

John Gribbon reviews Heinrich Pas' new book, The Perfect Wave, another book on physics, neutrinos, time travel, string theory, and multiple universes. The timing could not be better. I am back into one of my recurring physics phases, this time initiated by the Sunday night series "Cosmos." I don't have any better understanding, but if one does not "use" something, one "loses" something. I keep forgetting 20th century physics, and each time I read it, I see something new.

Recently beta decay finally "makes sense" to me if one can use that terminology when studying quantum mechanics. I guess the short sound bite: beta decay is the "release" of an electron from an atomic nucleus. Until this last week, I completely misunderstood where this "electron" came from. I wrongly recalled/thought that the electron was from the electron cloud. Wrong. The electron is a "by-product" from beta decay when a neutron "mutates/transforms" into a proton. To conserve energy, an electron is also formed, which leaves/escapes the new atom. An antineutrino is also produced in order to conserve lepton equality. Pretty simplistic, I know. A quick wiki search reveals a gazillion more concepts to sort out.

I am back to re-reading Louisa Gilder's Age of Entanglement. When I read Gribbin's review of Pas' new book, I got the feeling that readers were not going to learn anything new if they already were readers of modern physics.

So, I will peruse it at Borders to see if The Perfect Wave is worth buying.

An aside: I'm only a few pages back into Gilder's book and I'm already seeing things that I had not seen before.

For Investors Only; Whirlpool Raises Dividend; April 14 - 18, 2014; KOG Over At SeekingAlpha

Whirlpool raises dividend from 62.5 cents to 75 cents.

Abbott Labs beats by 5 cents.

St Jude Medical beats by 1 cent.

Bank of America misses by 10 cents. 

A reminder:
GOOG: after market close; expectations, $6.39

Kansas City Southern: after market close; expectations, 99 cents

Kinder Morgan (KMI): after market close; expectations, 33 cents

Yahoo!Financial shows TPLM reporting today, but it won't be (if I recall correctly).
Tomorrow, Thursday, April 17:
  • BHI, forecast, 78 cents; before market opens,
  • GE, forecast, 32 cents; before market opens,
  • Schlumberger, forecast, $1.20; before market opens,
  • Union Pacific, forecast, $2.37, before market opens, 
Halcon Following GDP Well in TMS Over At Seeking Alpha

Halcon has a substantial position in the TMS, but is a much larger company than Goodrich. HK stock moved up ~10% in response to the result, versus GDP moving up ~40%. It also probably didn't help that the result was a Goodrich well and not a Halcon well. Incidentally, I had the opportunity to briefly meet with Floyd Wilson, Halcon's CEO, at the recent IPAA conference in NYC in early April. He is confident the TMS will work and believes Halcon has sufficient liquidity, operating expertise and scale to successfully exploit the play. (Would the CEO say otherwise?)

Throwaway KOG Article Over At SeekingAlpha

For archival purposes only, a link to an article over at SeekingAlpha -- the writer is a bit late, and probably a dollar short. Where was he two years ago? Six years ago? I think most regular readers could have written this column:
Share price of Kodiak Oil & Gas has risen by 72% over the past 12 months, significantly outpacing a 19% return for the S&P 500 index. In my view, the shares still offer great value at the this level, as it appears the company's improving cash flow outlook is underappreciated by the market, and the current stock price is trading below my intrinsic value estimate.
KOG has been a solid cash flow generator. Over the past 3 years, the company has managed to grow its operating cash flow margin from 45% in 2011 to 61% in 2013, primarily due to production growth and continued improvement in capital efficiency (i.e. cost per production). Given that most of KOG's acreage is currently held by production, it is expected that costs per well/production are expected to decline over time, while production will gain momentum. In my view, these dynamics should drive up operating cash flow margin, which should even exceed its record level of 67% seen in 2012, as current well costs at $10M is notably below $12M in 2012, and it is forecasted to drop to $9M in 2014, according to management. Moreover, management has provided capex budget of $940M for 2014, which is in line with the actual level at $1B in 2013 (additional $0.8B was mainly due to the acquisition of Liberty). I expect capex to remain somewhat flattish over the next few years given that most of KOG's assets are in production stage and management will likely focus on deleveraging, rather than pursuing major acquisitions.

Futures Mean Squat ...

... but if this holds, it could shape up to be an interesting day --

... Dow futures are up 75 points; and WTI is surging, up over a dollar and closing in on $105.

Someone smarter than I will have to explain what is driving this. I've posted two notes in the past week what I think may be going on, but I will have to see how the day plays out before going back to those notes.

Neither the Los Angeles Times nor The New York Times will be helpful.

Born to Die

Born to Die, Lana Del Rey

Leonard Cohen comes to mind.

Number Of Active Rigs In North Dakota Continuing To Fall

Active rigs:

Active Rigs183186204175108

RBN Energy: continuation of the series on US laws on natural gas and crude oil exports.
So what conclusions can we draw from our survey of the Molecule Laws that are in turn both cryptic and contradictory but all have an impact on hydrocarbon exports?  Well first there is a common theme across natural gas, NGL and crude oil markets – namely that, in a new world of surpluses for these hydrocarbons, exports naturally balance the market. Therefore constraints on exports will result in market imbalances. And inconsistencies in export policies will create artificial arbitrage opportunities that will be exploited by some market participants. That is the reality regulators and legislators need to understand when reviewing these laws. The U.S. is now a major exporter of energy. Hopefully we will develop policies that are in sync with this reality.
For me, this is not about changing laws; as an investor, this is dealing with reality and watching the tea leaves.

The Wall Street Journal

The Ukraine uses military force for the first time. 

Housing market slows abruptly.

A nice story on the lunar eclipse in the front section.

US consumer prices rise slightly. Housing and food costs helped lift overall consumer prices last month, a development that could reassure some Fed officials as they roll back their easy-money policies.

New Hampshire's rollout of the Affordable Care Act has been one of the rockiest in the nation, putting Democratic Senator Jeanne Shaheen on the front lines of Republican efforts to make the 2014 elections a referndum on the health law.

Obama administration won't extend insurance enrollment. The administration said that a midnight deadline for most people to finish health-insurance applications for private coverage this year wouldn't be extended amid signs that enrollment waits had dissipated.

Detroit reaches deal with police, firefighter retirees.

Shale boom's new problem: "North Dakota has been slow to address repercussions from the surge in crude output, including the proliferation of radioactive oil filters. The state how no place to store such waste, which has led to illegal dumping." Top story, second section. Another red herring which can be quickly resolved. Illegal dumping is a problem; radioactivity is not.

In a digital world, Lego sticks to its bricks.


Why people are eating less fish. Michelle appears to have missed an opportunity.
At a time when some Americans have started to improve their diets, they're increasingly turning their noses up at one of the healthiest foods around: fish.
The average U.S. consumer ate 14.4 pounds of seafood in 2012, the last year for which figures are available, down from 15 pounds in 2011 and a record high 16.6 pounds consumed in 2004. That's far less than the average 82 pounds of chicken, 57 pounds of beef and 46 pounds of pork Americans consume in a year. It's also much less than the amount of seafood eaten in other countries. The average Japanese consumer eats 120 pounds a year, while Spaniards consume 96 pounds.
This fading appetite for fish shows that for a fragmented industry having a healthy product isn't enough. Surveys show consumers aren't sure how to cook fish and prices can be high, while the seafood industry hasn't been able to organize any major marketing campaigns to promote fish consumption, the kind of efforts that paid off for the beef and pork industries.

Companies try to get kids hooked on fish sticks.

Google unveils "Project Ara," a 'modular' smartphone. Earlier this year, The WSJ had an article suggesting why "lego" phones would not work.

Charles Schwab's first-quarter profit rose almost 60% as a resurgence in investor trading activity helped the discount brokerage report the highest volume of daily average trades on record.

Utilities are sweating the small stuff—with good reason. "Shining Cities" is a new report from an environmental-advocacy group ranking the top 20 U.S. cities by installed solar capacity. One fact stands out: Solar power is tiny. The top 20 cities' aggregate solar capacity, 892 megawatts, represents 0.08% of total U.S. electricity capacity. Solar overall equates to 1.1%.
Even at this scale, solar power is raising existential questions for utilities. Solar, along with other renewables, erodes already weak power demand, threatening the revenue utilities rely on to maintain the grid and pay shareholders. So, already, battles are being waged between utilities and solar advocates in hotspots like Arizona and California.
And the trend isn't utilities' friend.
Raymond James estimates the current addressable market for residential solar panels at 76 gigawatts. That is fully 33 times the current installed residential base. And with electricity bills only going one way—up—and the cost of solar technology the other way, that addressable market will only expand. Small stuff has a way of eventually adding up.
Fortunately, US utility companies can look at the German experience.

The Los Angeles Times

The Dickinson Press

Walking and talking rigs could revolutionize fracking.  

Illegal dumping of salt water could cost Black Hills Trucking a one-million-dollar fine. Driver faces criminal charges. Hopefully the state takes as much action as possible, and if guilty, a maximum fine. If true, no excuse.