Thursday, July 24, 2014

Bakken Crude Oil Train Derails; Sand Car Goes Off Track At 5 MPH In Seattle; A Couple Of New Fortified Tank Cars Left The Track; No Leak; No Fire, No Injuries -- July 24, 2014

BallardNewsTribune is reporting.

A huge thank you to a reader for spotting this.

To date:
  • Canada -- 100% human error -- engineer forgot to set the brakes
  • Casselton -- oil train hit a derailed wheat train which had just derailed
  • Lynchburg, VA -- recent rains washed out rail bed
  • Seattle -- sand hopper's wheel jumped the track at 5 mph

Our granddaughters in traditional Japanese kimonos. Their Japanese maternal great-grandmother came to the United States when she was about 21 years old. She emigrated from Japan after WWII and ended up in California.

Twenty (20) New Permits; XTO With Several Nice Wells; HRC To Report Another Huge Well; July 24, 2014

Wells coming off confidential list Friday:
  • 21805, 1,362, HRC, Fort Berthold 152-93-9C-10-5H, Four Bears, t5/14; cum 12K 5/14;
  • 25983, 1,800, Whiting, Chitwod 34-36-2H, Ellsworth, t1/14; cum 40K 5/14;
  • 26491, 1,088, Newfield, Wahus state 152-97-12-1-3H, Westberg, t5/14; cum 22K 5/14;
  • 26862, drl, XTO, Ruby State Federal 34X-36A, Grinnell, no production data,
  • 27289, drl, SM Energy, Robert 3-27HN, Colgan, no production data,
Active rigs:

Active Rigs19320818113877

Twenty (20) new permits --
  • Operators: Hess (13), Newfield (3), Samson (2), Legacy, QEP
    Fields: Alkali Creek (Mountrail) ,Beaver Lodge (Williams), Little Knife (Dunn), Blooming Prairie (Divide), Sand Creek (McKenzie), Red Rock (Bottineau), Blue Buttes (McKenzie)
Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Six (6) producing wells completed:
  • 25378, 380, XTO, Loomer 41X-3F, Tobacco Garden, t7/14; cum -- 
  • 25379, 1,471, XTO, Loomer 41X-3C, Tobacco Garden, t7/14; cum --
  • 25380, 973, XTO, Loomer 41X-3G, Tobacco Garden, t6/14; cum --
  • 25381, 1,872, XTO, Loomer 41X-3D, Tobacco Garden, t7/14; cum --
  • 26454, 1,666, XTO, Broderson 31X-27G, Siverston, t7/14; cum --
  • 26879, 1,940, XTO, FBIR Guyblackhawk 24X-27A, Heart Butte, t7/14; cum --
For Investors Only

And then there were three: Google, Facebook, and Apple. 

Amazon just tanked.
Shares of Inc. fell Thursday after the e-commerce retailer reported a deeper-than-expected second quarter loss as expenses outpaced a surge in revenue.
Amazon has long focused on spending the money it makes to grow and expand into new areas. In one of its most high-profile moves, Amazon is introducing its own smartphone, the Fire, which starts selling Friday.
The company has been heavily investing in services for its loyalty program, Prime, which costs $99 a year, and includes free two-day shipping on many items. It has added a grocery delivery services and music streaming for Prime Members as well as offering original TV shows and apps. It also expanded Sunday deliveries and recently began offering a set-top video streaming box.
Amazon reported second-quarter revenues of $19.34 billion, right in line with analyst expectations according to Thomson Reuters and a 23% increase year-over-year.
However, Amazon lost 27 cents per share, much worse than consensus, which modeled a loss of 15 cents per share.
Net sales increased 23% year-over-year. In the first quarter, the Seattle-based online retailer earned 23 cents a share on $19.74 billion in revenue and net sales increased 23% year-over-year.
The operating loss was $15 million this quarter, compared with $146 million in the first quarter and an operating income of $79 million a year ago. Net loss was $126 million, or 27 cents per share, compared with $7 million, or 2 cents per share, in the second quarter 2013.
[Some hours later, when re-reading this story -- I just can't get too excited about this. Jeff Bezos continues to pour money into the company. Everyone knew that Amazon was going to report a loss this quarter, and the loss was much worse that expected, but it's not like everyone expected a huge profit, only to be surprised by a loss. This, too, shall pass and Amazon will do just fine.]

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.

Trading at new highs today: BK, COP, CVX, ENB, EPD, F, HAL, HES, KOG, LUV, NFX, NOV, OAS, WLL, XOM.

North Dakota Expects "Big Surge" In Production This Summer

I think I posted this story earlier, when it was running in a regional newspaper, such as The Bismarck Tribune. It's been picked up by Bloomberg (note the date, July 15, 2014):
North Dakota, the second-largest oil-producing state in the U.S., expects output to surge through the summer as more benign weather gives roughnecks extra time to work in the field.
Output rose about 3.6 percent to 1.04 million barrels a day in May, the state’s Department of Mineral Resources reported yesterday. It was the largest increase since August.
The growth came even as rain and high winds kept well-completion crews out of the fields for several days during the month. Better summer weather will lead to production growth in the region of 5 to 6 percent a month in June, July and August, said Lynn Helms, director of the state’s Department of Mineral Resources.
“We still expect the big surge to come in June, July and August in terms of completions and some really rapid production increases,” Helms said on a conference call with reporters yesterday.
North Dakota is home to the majority of the Bakken shale formation, an underground layer of oil-and-gas-rich rock. High oil prices and improvements in horizontal drilling and hydraulic fracturing technologies have helped output from the state’s portion of the Bakken rise fivefold over the past five years.
Texas, which extracts more than 3 million barrels a day, is the only state producing more crude. North Dakota pumped more oil than three OPEC member nations in May.
Much more at the linked article; much the same as we've heard before.

Exponential Growth In Production

I discussed this at an earlier post.

I know I'm going to get into a lot of trouble for posting this again, but it's interesting to say the least.

Starting with production of 547,326 bopd in January, 2012, and currently standing at 1,039,635 bopd as of May, 2014, the exponential formula comes very close to:

P = P(0)*1.023^t

where P = current daily production
P(0) = initial daily production (January, 2012)
t = time in months (exponent)

Plugging into the formula:
1,034,579  bopd (May, 2014)= 547,326 bopd (January, 2012) * 1.023^28

At the same rate, in January, 2015 (the Director's Cut will be out in March, 2015):
P = P(0)*1.023^36
P = 1,240,992 bopd in January, 2015

Once you have that formula you can do all kinds of things with it.

If one starts with the base month/year of January, 2011, when production was 342,088 bopd --
  • Using the same formula, one would be at only 849,500 bopd, so somewhere between 2011 and 2014, the pace of production has increased.
If one starts with the base month/year of January, 2010, when production was 235,925 bopd --
  • Using the same formula, one would be at only 769,674 bopd, so somewhere between 2010 and 2014, the pace of production increased even more than that between 2011 and 2014.  
With the anticipated surge this summer, the monthly increase should be greater than 2.3% month-over-month through maybe October or November, but then there could actually be some "negative" growth.

If the rate were to remain 2.3% increase month-over-month over the next several years, North Dakota would cross the 2 million bopd before January, 2017 (i.e., late 2016), using 2012 as the base year.

Disclaimer: I often make simple arithmetic mistakes. I used an on-line calculator for the calculations.

Anyway, to each his own. 

Burger King Cuts Corporate Headcount To 6%; Antarctic Sea-Ice Extent Breaks Daily Record -- July 24, 2014

From Wiki: With an area of 70,762 square miles, North Dakota is the 19th largest state.

From IceAgeNow: Antarctic sea-ice extent breaks daily record by 65,000 sq miles.

The warmists predicted that Antarctic sea-ice would increase significantly. It was counter-intuitive but their proprietary GIGO models predicted this. At first the GIGO models did not predict this; warmists told us the melting polar ice would devastate the planet (The National Geographic even had a cover predicting the Statue of Liberty would be inundated), but then the warmists tweaked the GI and got new GO, predicting a much bigger Antarctic. I can't make this stuff up.

Burger King Cuts Corporate Headcount To 6% Of Previous Workforce

This is an interesting data point:
Under the direction of 3G, Schwartz has helped reduce Burger King's corporate headcount from 38,884 to 2,425 by refranchising restaurants, meaning those workers now report to franchise owners. He has implemented deep cost-cutting measures that axed many executive perks, including lavish offices that employees called "Mahogany Row" and a $1 million annual party at a chateau in Italy.
Assuming that is not a typographical error, that seems impossible.  I must be missing something. It would be interesting to see a bit more detail. Although it seems to be simply a "restructuring" and no real loss in jobs, the article states that the new Burger King CEO cut the corporate headcount from almost 40,000 workers to less than 2,500 workers. Obviously all those folks did not simply go away; they are "reporting" to franchise owners now, not to the Burger King headquarters.

But let's say the article is accurate, that Burger King has cut its corporate workforce from 40,000 to 2,500 by simply restructuring. All of a sudden, Burger King is pushing ObamaCare costs to the franchise owners. One also wonders whether those 40,000 are all white collar workers earning big bucks or if many of them are hourly wage earners subject to minimum wage laws. If so, the CEO is anticipating a "$10.10 nation" and responding early.

I honestly don't know. But cutting "corporate headcount from 38,884 to 2,425 is a data point that can't help but catch one's attention.

By the way, there's another benefit of this restructuring. My hunch is that "franchise owners" will be much, much more sensitive to having folks on the payroll who do not provide any added value.

Individual franchise owners will start to do it their way.

For Investors Only -- July 24, 2014; Three Airlines (Southwest, Alaska Air, United Continental) Beat Forecasts -- Despite Record High Sustained Energy Prices; Anyone Betting Against A Global Economic Recovery Needs To Look At Ford Results This Quarter; New Home Sales Plummet; Past Home Sales Figures Revised Significantly Downward

Note: wells coming off confidential list today have been posted. XTO reports a "high-IP" well; Oasis has two huge wells

The next big thing: mobile payments -- and it will be head-to-head, Apple vs Facebook. Apple has the eco-niche: hardware, integrated operating system, a cult-following, a handshake with IBM. But the killer technology Apple has: iBeacon. One won't even have to take one's credit card out or mobile device out to pay for one's purchase. iBeacon's range is measured in meters, and is scalable/flexible/personal. Apple doesn't talk much about iBeacon; it's just there. iBeacon even has its own wiki entry. I talk about "the next big thing" here. 

Fourteen (14) companies announce increased dividends, including:
  • Carbo Ceramics
  • Dupont
  • Norfolk Southern
Yahoo!Finance In-Play
  • Southwest Airlines beats by 9 cents; reports record quarterly operating income
  • Alaska Air beats by 2 cents
  • United Continental beats by 15 cents
  • Dr Pepper Snapple beats by 16 cents
  • Cabela's beats by 10 cents
  • Caterpillar beats by 16 cents
  • Noble energy beats by 8 cents
Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you may have read here. 

Dunkin' Donut blames global warming global cooling extreme weather the rain for lackluster sales. Someone isn't buying that excuse:
The doughnut and coffee chain is getting dunked by investors after its earnings report. The company matched Wall Street EPS estimates at 47 cents a share, but revenue missed.
As you probably already guessed this is where we return to weather.
Here are some problems with that excuse: 1) It's Bull. Dunkin sells coffee and doughnuts, not bathing suits and sunscreen 2) Weather isn't in Dunkin's control. I'm not that fired up to own a doughnut company that effectively goes out of business when it rains and I don't have an investing edge on weather 3) It's lazy.
Whatever is wrong with Dunkin I know for sure it won't get fixed because management is apparently all standing in the parking lot shaking their fists at clouds.
Early morning trading:
  • CVX on a tear; up another dollar; hits a new 52-week high -- probably an all-time high
  • SRE up a bit; COP flat
  • WLL up a bit; KOG follows, but flat
  • TPLM, OAS both down
  • So, back to CVX: what's moving CVX? No news yet today, but quite a few stories yesterday, including this one at Seeking Alpha: the most under-valued DJIA component. As recently as 2012, this company paid an 81-cent-dividend; it was just increased from a buck to $1.07 this past May, 2014; and it's one company unlikely to be bought by Warren Buffett 
  • COP has gone from a 50-cent dividend to 69 cents in the same time period, but also a PSX spin-off that is paying 2.30%
The Ford story is compelling; Bloomberg is reporting:
Ford Motor Co., the second-largest U.S. automaker, posted profit that topped analysts’ estimates as sales in China increased and the company reported its first profit in Europe in three years.
Ford reported its 21st consecutive profitable period, with net income of $1.3 billion, or 32 cents a share, compared with $1.23 billion, or 30 cents, a year earlier, according to a statement today. Excluding one-time costs, second-quarter profit was 40 cents a share, beating the 36-cent average estimate of analysts surveyed by Bloomberg. North American operations also reported record pretax results.
Rising sales in China and Europe helped to offset the negative effects of a currency crisis in Venezuela, as well as higher taxes and increased costs to introduce 23 new models worldwide this year. Ford sales in China soared 35 percent in the year’s first half to a record 549,256 vehicles, while deliveries rose 6.6 percent in Europe, which is recovering from a deep recession. Ford has said profits will decline this year as it spends to roll out new models such as the aluminum-bodied F-150 pickup, its top seller.
Regardless where the market / WTI crude oil end up today, it's an incredible day. Think about this:
  • first-time unemployment claims hit 8-year low (long-term benefits expired in January, 2014)
  • Ford sales sore 35% in China (not trivial) in the year's first half, and only 1 million vehicles adjusted for full year; lots of growth left
  • three airlines report earnings that beat expectations
  • majority of companies reporting earnings are beating estimates
  • Facebook surprises
  • mobile payments the next big thing
  • and, the Bakken keeps chugging along 
The US sells first condensate to Asia in more than 40 years. Reuters is reporting:
South Korea and Japan have purchased the first condensate, or ultra-light oil, from the United States since the easing of a 40-year-old ban on U.S. crude oil exports, sources familiar with the matter told Reuters on Thursday.
The U.S. has recently softened a total ban on crude oil exports in place since the Arab oil embargo of the 1970s, allowing energy companies to export a variety of ultra-light oil if it has been minimally refined.
Refined products, such as gasoline and diesel, are not restricted.
The relaxation of the ban coincides with a resurgence in domestic shale oil and gas production as the U.S. seeks to assure energy importers in Europe and Asia of alternative sources of supply.
Energy hungry nations, grappling with disruption fears as geopolitical crises in Eastern Europe and the Middle East deepen, would welcome steady shipments of oil and gas from a stable exporter such as the U.S.
"It means very little in itself, but because of current events it takes on a more political or symbolic importance," said Alex Yap, a senior oil analyst at FGE.
This does not fit the narrative: new home sales plummet in June. Let's see how The AP spins this story:
New home sales fell 8.1 percent last month to a seasonally adjusted annual rate of 406,000, the Commerce Department said Thursday. The report also revised down the May sales rate to 442,000 from 504,000.
That revision is quite significant; that represents either a 12% or a 14% difference depending whether one uses 442,000 or 504,000 as the denominator. So, last month, those "stellar" first-time-home-sales numbers were bogus.

Nice comeback. Some time ago I posted a comment about the high price of gasoline and "anonymous" asked me what at what price gasoline "should" be priced. Today, Yahoo!Finance has a nice response in terms of an analogy. The analogy has to do with the Dow at 17,000:
The S&P 500 hit yet another record on Wednesday propelled by decent earnings from Apple and Pepsi.
For the year the total return of the S&P is approaching 10%.
Since the generational lows of March 2009 the benchmark measure of the stock market has gained more than 200%.
If your first reaction to that reminder is to pitch a fit over what stocks “should” be doing you’re missing the point, and probably the rally as well.
"Should" isn’t a concept that carries much weight around Wall Street.
The market is about absolutes not intent. The key to getting in front of the tape isn’t figuring out what should happen but determining why a rally is taking place. Only after you’ve done that can you decide whether or not you want to get involved.
Insert "gasoline at $5.00/gallon" wherever the article talks about the Dow at 17,000." Gasoline at $5.00/gallon is not good for the economy; what gasoline "should" cost is missing the point (their phrase, not mine).

Announcing Two Conferences: Multi-Well Pad Drilling And Annual Eagle Ford Product Markets / Takeaway Capacity

Two conferences coming up that folks might be interested in. The "Congress" on multi-well pad drilling, I am told, is the first such conference on multi-well pad drilling. I find it amazing how far we've come in the Bakken. I remember Harold Hamm introducing us to the Eco-Pad, a four-well pad. In hindsight it seems a no-brainer, but apparently it was quite an innovation. 

Multi-Well Pad Drilling Congress 2014 - September 30-October 1 | Houston | Texas: Hess, Halcon, COP, WPX will all be represented.

First-Time Unemployment Benefits Plummet; Lowest In Eight (8) Years -- July 24, 2014

Fox News is reporting:
The number of Americans filing for first-time unemployment benefits fell last week to 284,000 from an upwardly revised 303,000 the week prior. Wall Street expected claims to rise to 308,000 from an initially reported 302,000. The reading was the lowest since February 2006.
WTHR is reporting:
The number of people seeking U.S. unemployment benefits fell last week to its lowest level in more than eight years.
Weekly applications for unemployment aid dropped 19,000 to a seasonally adjusted 284,000, the Labor Department said Thursday. That's the lowest reading since February 2006, nearly two years before the Great Recession began.
The four-week average, a less volatile measure, declined 7,250 to 302,000. Claims for jobless aid have been falling for the past three months. Recent reports have coincided with the temporary summer shutdowns of auto plants, yet the impact of those closures is addressed through seasonal adjustments.
If these numbers hold, this is quite remarkable: the lowest reading since February, 2006, nearly two years before the Great Recession began. It will be very, very interesting to see how the market responds, especially during a very dynamic earnings reporting week.

The market hardly reacts: the DOW is flat, up about 26 points in early morning trading.