Wednesday, June 4, 2014

In Other News -- June 4, 2014; North Dakota Bakken In The WSJ Again

The Wall Street Journal

Widening US trade gap dims growth views.

Federal Reserve officials growing wary of market complacency -- from the June 3, 2014  on-line edition / June 4, 2014 edition:
Federal Reserve officials are starting to wonder whether a tranquillity that has descended on financial markets is a sign that investors have become unafraid of the type of risk that could lead to bubbles and volatility.
The Dow Jones Industrial Average, up a steady if unspectacular 1% since the beginning of the year, has consolidated big gains registered last year. The VIX, a measure of expected stock-market fluctuations based on options trading, has gone 74 straight weeks below its long-run average—a string of steadiness not seen since 2006 and 2007, before the financial crisis and recession.
Moreover, the extra return that bond investors demand on investment-grade corporate debt over low-risk Treasury bonds, at one percentage point, hasn't been this low since July 2007. The lower this "spread," the less risk-averse are bond investors.
The Fed's growing worry—which could influence future interest rate decisions—is that if investors start taking undue risk it could lead to economic turbulence down the road. 
Or maybe they're finally worried about the US debt at $17 trillion, headed toward $18 trillion.


Down that slippery slope:
As the U.S. oil-and-gas boom rolls into its second decade, a new idea is starting to resonate with regulators and communities: Certain places should simply be off-limits to drilling.
That is not how it has worked up until now. Over the past decade, oil and gas wells have been drilled for hydraulic fracturing in suburban subdivisions, airports, public parks and golf courses. As long as energy companies leased the mineral rights, they could drill almost anywhere.
Now this all-or-nothing approach is starting to weaken as the fracking juggernaut, which has created jobs and lowered the U.S. trade deficit, has left some communities feeling trampled.
North Dakota, which has rolled out the red carpet for rigs, is reconsidering whether it should issue drilling permits near some historical sites, parks and areas of particular beauty. The state last month said that any requests to drill near designated areas would result in additional scrutiny and require public comment. The new approach reflects "growing momentum from the public to make sure the state is protecting some of the most scenic and historic places," said Alison Ritter, a spokeswoman for the state's Department of Mineral Resources.
I love the photo of the beautiful town on the prairie at the linked article.


Crude oil pipelines vs water pipelines:
The Mobile, AL, legal battle reflects growing conflict between some water systems and pipeline companies.
Environmental activists have long cited drinking-water concerns as a basis for opposing pipelines. But in the past few years, utilities have begun voicing similar worries too—in lawsuits and regulatory comments, with the media and on the Web.
Officials say they have been motivated by recent high-profile spills in Arkansas, Michigan and elsewhere, as well as by the race to build and upgrade pipelines to accommodate the U.S. oil-and-gas boom brought on by hydraulic fracturing. "It's about critical infrastructure coexisting," says Lisa Ragain, a risk consultant for water systems. "It's an awareness-building campaign…getting a sector that is very far removed from the provision of safe drinking water to understand what that entails."
Gender bias alleged at UCLA's Anderson Graduate School of Management, one of the nation's top-ranked business schools, is "inhospitable to women faculty," according to an interanl academic review. [Comment: what does not kill you, makes you stronger. -- Fred Nietzsche]

Mr Sterling to drop lawsuit; sell L.A. Clippers.

State income-tax credits, carpool access lanes, employer support, charging stations, etc., etc., has Atlanta leapfrogging Seattle as the #2 metropolitan market for electric cars in the US behind San Francisco.
Los Angeles Times


Route 66. In a few weeks, I will be taking a road trip with the two granddaughters from Dallas to Los Angeles, with a side trip to the Grand Canyon. We will taken as much of Route 66 as we can. I particularly look forward to Oatman, AZ. It's gonna be a scorcher.

Reminder: CLR's Corporate Presentation, June, 2014 Is Available

PDF at the CLR website.

In the June, 2014, NDIC dockets:
  • 22545, CLR, Cedar Coulee-Bakken, 16 wells on each existing 1280-acre unit in Zones IV, Vi, and VI; 32 wells on each 2560-acre unit in Zones VII, VIII, and IX, Dunn
  • 22546, CLR, Corral Creek-Bakken, 16 wells on each existing 1280-acre unit within Zones II, III, and IV, Dunn
  • 22547, CLR, Jim Creek-Bakken, 16 wells each existing 1280-acre unit within Zones I, II, III, IV, V, and VI; 16 wells on each existing 1920-acre unit within Zone VII; 32 wells on each 2560-acre unit in Zones VIII and IX; Dunn
  • 22548, CLR, Haystack Butte-Bakken, 16 wells on each existing 1280-acre unit within Zones II, III, IV, V, and VI; 32 wells on each 2560-acre unit in Zone VII; Dunn, McKenzie
  • 22549, CLR, Rattlesnake Point-Bakken, 16 wells on each existing 1280-acre unit withink Zones I, II, and III; 16 wells on each existing 1920-acre unit within Zone IV; 32 wells on each 2560-acre unit in Zones V and VI; Dunn
  • 22550, CLR, Oakdale-Bakken, 16 wells on each existing 1280-acre unit within Zone I; 32 wells on each 2560-acre unit in Zones III and IV; Dunn
  • 22551, CLR, Chimney Butte-Bakken, 16 wells on each existing 1280-acre unit within Zones I, II, III, IV and V; 32 wells on each 2560-acre unit in Zones VI, VII, VIII, IX, and X; Dunn
If you are wondering how 32 wells in one drilling spacing unit (DSU) are spaced in each formation, go to slide #9 of the 34-slide presentation.

While you are at the presentation, look at slide #10. For quite some time, CLR has estimated the "average" EUR across the Bakken to be 603,000 boe. In slide #10, note the comments about the "robust Hawkinson pad:
  • 13 of the 14 wells on the Hawkinson pad are trending 50% above 603,000 boe model EUR
  • the Hawkinson wells were completed using "standard design," 100,000 lbs proppant/stage, and 30 stages
Comment: a long, long time ago, I opined that placing new wells near existing wells would improve EURs. A lot of folks suggest otherwise. [1.5 x 603,000 = 900,000 boe, something Filloon predicted for quite some time for the better Bakken]

Then go to the next slide, the "promising preliminary results of the Rollefstad pad:
  • existing well IPs averaged 1,330 boe
  • new well IPs averaged almost 3,000 boe
  • 7 wells completed with 200,000 lbs of proppant, 30 stages (30 x 2 = 6 million lbs)
  • 1 well was completed with 300,000 lbs, 30 stages (30 x 3 = 9 million lbs)
Nine million lbs is similar to the amount EOG is using but EOG is using significantly more stages, and thus less proppant per stage (if I remember correctly) 

The entire presentation is worth viewing. Slide #25 is a "sleeper." There are two graphics on that slide. Look at the one on the right: the "603,000 BOE EUR Model." Note the x-axis. Three generations of roughnecks, roustabouts, and maintainers will be drilling and maintaining CLR wells.

Another Inconvenient Truth

The chart-of-the-day, Carpe Diem

 Whistling Past The Graveyard

I still get a kick out of mainstream media spin. After another horrendous job report today, Reuters is still able to post this headline: "Economy On Solid Ground Despite Cooler Hiring." For months, maybe years, Reuters has been telling us that the data suggests employers are laying off fewer folks, hiring more. 

Random Note From Most Recent Oasis Corporate Presentation

At my "Snapshot" page, I have this recent information regarding Oasis:
  • September, 2013: announces acquisition of 161,000 net acres for $1.515 billion; brings total total Williston Bakken acreage to 492,000 net acres; 42K bopd;  
  • December 31, 2013: summary, calendar year, 2013: 515,314 net acres; 34,000 boepd; 150 wells in 2014
  • March 31, 2014: 506,960 net acres 
  • 1Q14 earnings; sold some non-core assets; acreage should change; sold Sanish non-core for $183.4 million
Of interest was the statement in the 1Q14 earnings summary: "sold Sanish non-core for $183.4 million." At the time I was unable to find the amount of acreage that was involved in this sale. I did not see it but could have missed it.

I was hoping that the company's most recent corporate presentation would shed more light but it did not; it confused matters by saying only this -- "divested non-operated properties for ~$322 million" -- slide 17.

For now, I will ignore the $322 million figure and go back to the earlier information.

Everyone agrees that at the end of calendar year 2013, the company had 515,314 net acres in the Bakken.

Everyone agrees that in June, 2014, the company had 506,960 net acres in the Bakken.

The earning statement for 1Q14 said the company sold Sanish non-core acreage for $183.4 million.

515,314 - 506,960 = 8,354 acres divested.

$183.4 million / 8,354 acres = $22,000 / acre.

Disclaimer: I often make simple arithmetic errors. I often make wrong assumptions. I often misread things. There is no attempt to mislead; I do these "back-of-the-envelope" calculations for my benefit only. It seems like I've posted this information before; if it looks familiar, maybe I have posted it before; I don't remember. 

Question Regarding Inflatable Packers And June NDIC Hearing Dockets -- North Dakota

In the June NDIC Hearing Dockets, OXY USA has several cases with regard to using inflatable packers:
OXY USA has eight (8) cases requesting "an exception to NDA 43-02-03-21 and any other applicable regulations to allow the use of inflatable packers in the casing string in connection with cementing operations for the isolation of oil, gas or water-bearing formations.
We are hoping a reader out there will provide a bit more background why these cases are required.

There are sites on the internet with some background/explanation but I'm not sure why this requires permission from the NDIC. Maybe I'm misreading the cases.

One source:
This has a bit more background/explanation:
but again I don't know why it requires NDIC permission. I think this is the first time I've ever seen a case for inflatable packers, but early on I might have missed them, not knowing as much about the dockets.

Hopefully someone can provide a bit of background. Thank you.

Number Of Active Rigs Jumps To 193; Fifteen (15) New Permits; KOG, XTO Each WIth "High-IP" Wells

Wells coming off confidential list Thursday:
  • 26474, 52, Corinthian, Corinthian LIndstrom 5-34-1H, Souris, a Spearfish/Madison well; t2/14; cum 8K 4/14;
  • 26680, 2,664, BR, CCU Burner 41-26MBH, Corral Creek, t4/14; cum 7K 4/14;
Active rigs:

Active Rigs193189214171121

Fifteen (15) new permits --
  • Operators: Hess (10), KOG (4), Whiting, 
    Fields: Little Knife (Dunn), Westberg (McKenzie), Ellsworth (McKenzie), Epping (Williams), Sanish (Mountrail)
  • Comments:
Wells coming off the confidential list were posted earlier; see sidebar at the right.

Five (5) producing wells were completed:
  • 24804, 1,031, CLR, Wahpeton 14-16H2, Banks,  t5/14; cum --
  • 25333, 2,791, XTO, Martin Federal 21X-33A, Cedar Coulees, t4/14; cum 9K 4/14;
  • 25535, 2,083, KOG, P Thomas 154-98-14-33-4H, Truax, t51/14; cum --
  • 26171, 1,299, Hess, SC-4WX-153-98-3130H-1, Banks, t5/14; cum 12K 4/14;
  • 26404, 1,602, Annapolis 3-29H, Dollar Joe, 4 sections, t4/14; cum 11K 4/14;

Considering Two Million Signed Up / Paid First Premium, This Is Probably Not Good News

The US Labor Department is reporting: it appears that of the approximately two million who signed up for ObamaCare AND paid their first month's premium, it looks like approximately two million of them provided inadequate information during the signing-in process.
More than 2 million people who got health insurance under President Obama's law have data discrepancies that could jeopardize coverage for some, a government document shows. 
About 1 in 4 people who signed up have discrepancies, creating a huge paperwork jam for the feds and exposing some consumers to repayment demands, or possibly even loss of coverage, if they got too generous a subsidy. 
The 7-page slide presentation from the Health and Human Services department was provided to The Associated Press as several congressional committees are actively investigating the discrepancies, most of which involve important details on income, citizenship and immigration status.
It should be noted that no one really knows how many have "new" ObamaCare enrollees have actually paid their first month's premium, but based on statistical analysis one could probably assume about one in four have.

And folks think the VA system is in a shambles; the President has been focused on that trainwreck ever since he was a junior senator.

Mainstream Media Reports A Story You Won't See On NBC Nightly News -- Endless Winter -- USA Today

USA Today is reporting:
I'm gonna keep writing about this until the last cube of ice is melted (if that happens). Unimaginably, there's still ice from the savage winter of 2013-14 on the south shore of Lake Superior near Marquette, MI.
The National Weather Service in Marquette posted this late yesterday, June 1: a photo of the ice still on Lake Superior.
The Marquette Mining-Journal newspaper reports that according to some forecasts, the ice may last until July:
"To many area residents who suffered through one of the worst winters on record for the area, seeing the ice chunks on the lake every day is a continuing reminder of that wintry grip of Mother Nature, which still has yet to completely loosen," the paper noted.
And so it goes. Utility rates to rise just when winters are getting colder and lasting longer. What a great legacy Algore and BarackObama leave us. But the science is settled; shut up and color.

For Investors Only -- June 4, 2014 -- A Stock-Picker's Market?

The ISM non-manufacturing index - very, very strong: 
Growth in the bulk of the nation's economy is very strong but the strength isn't leading to new hiring. This is the story for both this morning's services report from Markit Economics and the ISM non-manufacturing report where the composite index rose to 56.3 vs April's 55.2. Best number since August, 57.9. Business activity is exceptionally strong in the ISM report, at 62.1 for a 1.3 point gain as are new orders at 60.5 for a 2.3 point gain. Backlog orders are also strong, moving out of contraction with a 5.0 point gain to 54.0 vs April's 49.0.
S&P sets another record on strong services sector growth, just shy of 1,928. If that's a hard number to remember, that's about the number of acres in a 1900-acre drilling unit in the Bakken.

Price of WTI oil holds its gains; trading around $103/bbl.

Five companies could benefit from EPA's 30-30 rules. 24/7 Wall Street is reporting that these five companies could be winners -- XOM, CHK, Anadarko, Devon, and Southwestern. I invested in one of these for my older granddaughter's portfolio just days before the Exxon Valdex debacle; since then automatic dividend reinvestment; never looked back. I "initiated" a position in one of the other four just a few months ago when it became obvious it was way underpriced.

Trading at new 52-week highs: AAPL, EOG, ERF, HES, NGL, NRG, TRGP, WFT.

CLR also traded at a new 52-week high. Oasis is over $50/share, clawing its way back up the wall of worry.

AAPL is surging; market cap at $555 billion. XOM's market cap: $431 billion. According to Yahoo, TPLM traded as high as $9.98 but has since dropped back a bit; very close to $10/share.

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

Big Supply Drop In Oil -- WSJ -- June 4, 2014

The WSJ is reporting: oil holds gains after US data shows big drop in supplies.
U.S. crude futures held gains Wednesday after official U.S. data showed a larger-than-expected drop in domestic oil inventories.
The U.S. Energy Information Administration said overall domestic crude inventories fell by 3.4 million barrels in the week ended May 30. Analysts surveyed by The Wall Street Journal predicted a decline of 100,000 barrels, and a survey by industry group American Petroleum Institute predicted a decline of 1.4 million barrels.
I'll get back to this story later. It will be interesting if they get the analysis right.

This Week In Crude Oil / Gasoline / Diesel

I keep reminding folks this is not an investment site. But it is amazing what sites like RBN Energy and others have really helped me become a better investor. The above story was a real disappointment. That's about all it said. No analysis.

So, let's see if we can pull together some data points. Again, this is on the fly; I have no idea where this will take me.

First to EIA's "gasoline demand" link. This is an interesting data point. Go to the "conventional gasoline stocks" -- that would be the gasoline that Algore puts into his SUVs (by the way, when you look at these numbers, remember, US auto sales surged in May to some of the highest levels we've seen in years -- and yes, a lot of US autos still use gasoline, contrary to what Tesla supporters would have you think) -- so, back to the "conventional gasoline stocks" table.

For the US, one year ago, conventional gasoline stocks 46.5 million bbls. Let's round that to 50 million bbls. Easier to remember. The most recent report: 28.7 million bbls, or rounded to 30 million bbls, but if one rounds to 25 million, the table suggests that gasoline stocks are running 50% lower than a year ago. That can't be correct. I must be misreading the table. Look at the regional breakdown.

Look at Cushing, PADD 2: remember: the huge Keystone XL South is draining that site and without the Keystone XL North (killed by President Obama), it's not recharging as fast. I guess. At least that's my thought. Others will have different thoughts, I'm sure. By the way, TransCanada changed the name of the Keystone XL South pipeline to another name; I've forgotten what the new name is. Machts nichts.

Okay, on to the next data point. At the very bottom of the same page, look at the last table, and the last graph. Gasoline demand is rising ... well, pretty darn fast.

On to the next data point.

This is the EIA's weekly petroleum status report. I haven't read it yet; I'm reading it with you. I have no idea where it will go. Here goes:

Refineries are operating at 91% of their capacity (low).
  • gasoline production decreased last week
  • US crude oil imports continue to decrease, down by 700,000 bopd from previous week
  • US crude oil inventories decreased by 3.4 million bbls from the previous week, but still near the upper limit of the average range for this time of year
  • total motor gasoline inventories increased slightly and are in the middle of the average range
  • distillate fuel inventories (diesel) increased by 2 million bbls but remain below the lower limit of the average range for this time of year
So, a mixed report. The 'low' refinery utilization jumps out at me as we head into the summer driving season.

For what it's worth, and it's not worth a lot, this is a link to gasoline prices around the US.

Longest Jobs Recovery On Record Since US Started Tracking Data In 1939, The Year Germany Invaded Austria; Suicide-In-Seattle

First, the background. When I first started following the unemployment numbers, I could never keep track of the magic numbers (see below). So, I posted the "magic numbers." They have come in very, very handy. The Obama administration moved the goal posts (not surprising) but I've kept the original numbers.

The Magic Numbers

The two key numbers:
  • First time claims, unemployment benefits: 400,000 (> 400,000: economic stagnation)
  • New jobs: 200,000 (< 200,000 new jobs: economic stagnation)
Economists estimate the labor market needs to create about 125,000 jobs a month to keep the unemployment rate steady, though estimates vary -- Reuters. That was when mainstream media moved the goal posts, the first time I noted that Reuters had changed the number -- and it was changed significantly.
I will stick with 200,000 (the "magic number" prior to the Obama administration) -- it's a nicer, "rounder" number to remember.

Over the two years that I had been posting these updates, it had become clear/obvious that the figures were often suspect, if not outright falsified. On November 18, 2013, it was reported that, indeed, unemployment figures have been falsified.
In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.
The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.
And the Census Bureau, which does the unemployment survey, knew it.
 Take the numbers for what they are worth, I guess. Not much. As so much else with ObamaNation.


Today's ADP figure: 179,000 new jobs. Expectation: 210,000.

Analysis: lousy, lousy report.
How the press reported it:
How bad was it? Compare this to the report back in February when "everyone" (even CNBC) said 175,000 new jobs was a bad, bad, bad report (today's number was practically the very same number):
February 5, 2014: new jobs, 175,000 in January, 2014. Lousy report. Anything less than 200,000 = economic stagnation. Note: this is the ADP number for new PRIVATE jobs; I believe the government figures for ALL new jobs comes out at the end of the week; analysts are expecting a number of 190,000 which is less than the magic number of 200,000.
 Interestingly, there was no real analysis why US employers pulled back in May. Remember, for months now (actually, years), the AP and Reuters have been telling us the weekly first time claims report is evidence that employers are starting to hire more people. Inconvenient truth: not happening.

And this was in May. One can't blame it on the winter weather (oh, I suppose you can, and some will), but winter is over. Hellooooo. One could make the opposite argument; after the slowdown this past winter, employers should have been eager to get back on track. There should be a lot of pent-up demand. I guess that's what the analysts thought; they expected 210,000 new jobs. So, we got 179,000.

And it appears the mainstream media does not care.

CNBC is focused on what-they-call-the-break-even-point:
Set your sights on this number: 113,000.
That's how many jobs the U.S. economy needs to hit its break-even point, to finally recover all the jobs lost in the financial crisis.
Get ready, because we're about to get there this Friday.
That's when the U.S. Department of Labor will release its May jobs report, and the outlook is rosy. Economists surveyed by CNNMoney expect the U.S. economy added 200,000 jobs in May.
"The outlook is rosy." That's why the Dow is barely in the green today. LOL.

So, $1 trillion in stimulus (and the stimulus continues) and six years into the Obama recovery, we are at the break-even point. You have got to be kidding: CNBC thinks this is good. And folks listen to them for investment advice. Okaaaaaayyy.

Another inconvenient truth:
Breaking even is a key milestone, but was a long time coming. It took just two years to wipe out 8.7 million American jobs, but it took more than four years to recover them all, making this the longest jobs recovery on record since the Department of Labor started tracking the data in 1939.
Despite $16 trillion in debt, $1 trillion initially in stimulus. Or whatever it was. Maybe it was $2 trillion when you add in the printing of money since then. The numbers hardly matter any more, do they. 

The question needs to be asked: why did employers pull back on hiring in May, just when everyone thought we turned the corner?

When you are listening to the mainstream media talk about the break-even point this Friday, remember, in the past six years the US population has increased significantly, mostly due to illegal immigrants, I suppose. Even as the population is increasing, a smaller percentage of folks are actually finding jobs. The percentage of Americans in the labor force has decreased significantly under President Obama.

Suicide in Seattle

The $15/hour minimum wage approved by the Seattle city council continues to reverberate.

The Washington Post is reporting:
DRAKESBORO, Ky. — In the shadow of Paradise Fossil Plant’s aging smokestacks, where white steam and carbon dioxide rise into the sky, outdated coal-fired generators are being replaced with one that runs on natural gas.
The change in Muhlenberg County, once the nation’s top producer of coal, is emblematic of what’s been happening across the U.S. as natural gas becomes cheaper and electric utilities try to meet stiffer carbon emissions rules the Obama administration announced this week. When the $1 billion natural gas facility is finished in 2017, the Tennessee Valley Authority, the nation’s largest public utility, will shut down two coal-burning units at Paradise that date to the 1960s.
Randall Parham, who earns about $19 an hour working at the Paradise No. 9 mine, said new restrictions set forth by the White House on Monday could endanger the livelihood of many in Kentucky. The state is required to cut its carbon emissions by 18 percent by 2030.
Forget all the EPA stuff. We already know the proposed rules are DOA.

Did you see what I saw in that article?

I consider coal mining one of the most dangerous jobs in America. It is surely one of the most arduous. It may be one that is least glamorous. And look what coal miners get paid: $19/hour (before union dues). So, they probably make about ... drum roll... the same wage entry-level hamburger flippers now expect to earn in Seattle. 

Time to get back to the Bakken. Have a great day folks.