Monday, October 13, 2014

Re-Posting The Filloon Seeking Alpha Article -- October 13, 2014

I am re-posting this. I don't do this often (I don't believe I have ever done this before). I am doing this to get your attention. And to remind me to come back to this article later.

This is an incredibly important article.

This is not an investment site. Do not make any investment, financial, or relationship decisions based on anything you read here or think you may have read here.

I think the Greenbrier discussion provided by Michael Filloon could be applied to many other oil-related companies and investing. Remember: many (most?) SeekingAlpha articles "disappear" after some time and a subscription is required to access them.

Over at SeekingAlpha (linked article above):
  • Greenbrier's stock price has pulled back 31% from its 52-week high.
  • 8% of all US crude production is transported by rail.
  • There is significant upside to tank car retrofits and phase outs.
  • Railroads and tank car manufacturers may be somewhat insulated to a temporary pullback of oil prices.
  • The rails have been a better fit to transport crude as set up times and costs are lower than pipelines
That last bullet is interesting, isn't it?
I may or may not provide data points from the article. 

CBR For Investors -- An Opportunity -- October 13, 2014

This is not an investment site. Do not make any investment, financial, or relationship decisions based on anything you read here or think you may have read here.

I think the Greenbrier discussion provided by Michael Filloon could be applied to many other oil-related companies and investing. Remember: many (most?) SeekingAlpha articles "disappear" after some time and a subscription is required to access them.

Over at SeekingAlpha:
  • Greenbrier's stock price has pulled back 31% from its 52-week high.
  • 8% of all US crude production is transported by rail.
  • There is significant upside to tank car retrofits and phase outs.
  • Railroads and tank car manufacturers may be somewhat insulated to a temporary pullback of oil prices.
  • The rails have been a better fit to transport crude as set up times and costs are lower than pipelines
That last bullet is interesting, isn't it?

Only Six New Permits, North Dakota; ISIS Makes Significant Advances -- October 13, 2014

New poll: with announcement of proposed $4 billion plastics plant coming to North Dakota, which city is at the top of the list. Since Fargo is clearly the #1 choice in my mind (right, wrong, or indifferent), I'm just looking for thoughts from readers which city might be #2.

Active rigs:

Active Rigs191184192195153

Wells coming off the confidential list over the weekend and Monday were posted earlier; see sidebar at the right.

Six (6) new permits --
  • Operators: Statoil (6)
  • Fields: Banks (McKenzie)
  • Comments: 6-well pad, I believe
Wells coming off confidential list Tuesday:
  • 27504, drl, Hess, BB-Budahn A-150-95-0403H-7, Blue Buttes, no production data,
  • 27809, drl, Statoil, Maston 34-27 6H, Banks, no production data,
Five permits cancelled.

Pressure Building To D/C Exploratory Drilling In The Bakken

Bloomberg is reporting:
Bakken shale-oil producers are under pressure from tumbling prices to scale back their 2015 drilling plans in a region that accounts for one of every eight U.S. barrels of crude.
Bakken oil fell 1 percent to $79.40 a barrel today, the first time it’s dropped below $80 in 11 months, according to data compiled by Bloomberg. Crude prices have been declining worldwide as ample North American supplies tempered the U.S. appetite for imports and Persian Gulf producers signaled they’re prepared to keep output high to protect their market shares in Asia.
Companies drilling expensive, experimental wells in frontier regions such as the Tuscaloosa Marine Shale beneath Louisiana and Mississippi will be first to feel pinched by the drop-off in prices, said Gabriele Sorbara, an analyst at Topeka Capital Markets in New York. Bakken producers will soon feel the pain as well as their returns dwindle.
That would stop the flaring problem.

CNN is reporting:
The battle for a key Syrian city on the Turkish border intensified Monday as ISIS continued its push for control of Kobani while also scoring a victory in neighboring Iraq, taking a strategically important military base in Anbar province.
A fighter from the Kurdish People's Protection Unit, or YPG, told CNN's Arwa Damon that the battle in Kobani concerned the main border crossing into Turkey. If ISIS took control, he said, "it's over."
The fighter said the Kurdish fighters had pushed back an attempted advance by ISIS on Monday morning but that it would be "impossible" for them to hold their ground if current conditions continued.
Should they take Kobani, the militants would control three official border crossings between Turkey and Syria and a stretch of the border about 60 miles (97 kilometers) long.
Official: Even Small Droplets Could Contain Ebola Virus

Dr. Dennis Maki, University of Wisconsin-Madison infectious disease specialist and former head of hospital infection control: "New data suggest that even tiny droplets of a patient’s body fluids can contain the virus, Maki said."

I think this has been known by "everyone" for the past ten years. The first known outbreak was back in 1976. It has been studied "to death" ever since.

$4 Billion Plastics Plant Announced For North Dakota -- October 13, 2014


July 13, 2016: update on plastics (ethane to ethylene/polyethylene) plant for Pittsburgh

June 16, 2015: personal note from reader provides update on plastics factory; site still not determined; still on track but could be delayed one year longer than planned. 

October 25, 2014: much more background on the $4 billion plastics factory at this post.

October 15, 2014: ethane cracker talk in Ohio, also. is reporting from Akron Beacon Journal:
Ohio’s Utica shale is generating enough liquid ethane to support several processing plants that can carry a price tag of several billion dollars. 
At least four of the so-called cracker plants that turn ethane into ethylene, a key ingredient in making plastic, have been proposed in Ohio, West Virginia and western Pennsylvania.
Natural gas wells in the Utica and Marcellus shale formations in those three states are producing enough ethane to support three large cracker plants, said [Cleveland State University economist Iryna] Lendel, whose comments were based on a preliminary economic assessment of the Utica Shale.
About 60 percent of the liquids derived from Utica wells are ethane, she said.
Cracker plants cost from $1 billion to $7 billion, depending on size. It probably will take five to seven years before the first plant opens in the Appalachian Basin, Lendel said.
October 14, 2014: Bismarck. There is talk -- from message boards, e-mail -- that more than one plant might be possible. 
Original Post

The Dickinson Press and KXNET are reporting a $4 billion petrochemical plastics plant coming to North Dakota:

From The Dickinson Press:
A company announced plans Monday to build a $4 billion manufacturing plant in North Dakota that will convert a byproduct of natural gas processing into an ingredient for making plastic products, representing what Gov. Jack Dalrymple called the largest private investment in state history.
Badlands NGL’s LLC and two partners are developing the facility, which will convert ethane into polyethylene, which is used to make a wide variety of plastics for consumers and industry.
The plant will produce 3.3 billion pounds of polyethylene annually and employ 500 people, company CEO Bill Gilliam said. He said the partners hope to be cranking out the finished product – little white plastic beads – by the end of 2017.
Gilliam said more than two sites are being considered in North Dakota but he wouldn’t say where, except that they aren’t in active oil drilling locations in western North Dakota. The plant is expected to cost $4 billion to $4.2 billion and will require a “substantial footprint” of more than 1,000 acres, he said.
One of the project partners, Madrid, Spain-based Tecnicas Reunidas, a major contractor for petrochemical plants, is doing a preliminary engineering analysis that is scheduled for completion this year and will include a final site selection for the facility.
With regard to ethane and ethane pipelines, a reader recently commented:
The Vantage pipeline to Alberta from the Hess plant is probably the longest ethane pipeline in North America. OneOK y-grade pipe line takes Bakken NGLs to Conway, Kansas, where the propane is fractionated and sent to north to Iowa and points north. The rest of the NGLs are sent to Mt Belvieu, TX, where the rest of the fractionations occur. 
The Vantage pipeline:
The Vantage Pipeline is a high vapour pressure (HVP) pipeline carrying ethane from a source near Tioga, North Dakota, extending northwest, through Saskatchewan, Canada, and terminating near Empress, Alberta, Canada. The pipeline links a growing supply of ethane from North Dakota to markets in Alberta
The Vantage Pipeline is 445 miles steel pipeline, with an outside diameter of 10 inches.
This Is The Problem

The president: Ebola is difficult to transmit:
"I know that the American people are concerned about the possibility of an Ebola outbreak, and Ebola is a very serious disease. And the ability of people who are infected who could carry that across borders is something that we have to take extremely seriously," Obama said. "At the same time, it is important for Americans to know the facts, and that is that because of the measures that we’ve put in place, as well as our world-class health system and the nature of the Ebola virus itself — which is difficult to transmit — the chances of an Ebola outbreak in the United States is extremely low."
From the chief of the CDC: 
CDC spokesman Tom Skinner said the agency is still investigating the case of the Dallas nurse, but stressed that "meticulous adherence to protocols" is critical in handling Ebola. "One slight slip can result in someone becoming infected." 
[This was taken to be a "blame the victim" comment; nurses outraged; Skinner has now apologized.]
The Gift That Keeps On Giving

The Los Angeles Times is reporting: Orange County, California, will refinance new toll road -- now drivers can expect to pay tolls through 2050:
An Orange County toll road that has struggled to build ridership will be refinanced for a second time -- a move that will add years to the period motorists will have to pay tolls to ride it.
On a 12-2 vote, the board of the San Joaquin Hills corridor approved restructuring at least half of the $2.2 billion in bonds that were sold to build the highway, which courses through the coastal hills from Newport Beach to San Juan Capistrano.
The plan by the Transportation Corridor Agencies in Irvine is expected to improve the road's bottom line, but motorists might have to pay tolls until 2050 to retire the debt.
The Other Gift That Keeps On Giving

I talked about this from the beginning. To keep premiums "low" -- the deductibles and co-pays are very, very high. And more health care facilities (clinics and hospitals) want their money up front. The AP is reporting:
They have health insurance, but still no peace of mind. Overall, 1 in 4 privately insured adults say they doubt they could pay for a major unexpected illness or injury.
A new poll from The Associated Press-NORC Center for Public Affairs Research may help explain why President Barack Obama faces such strong headwinds in trying to persuade the public that his health care law is holding down costs.
The survey found the biggest financial worries among people with so-called high-deductible plans that require patients to pay a big chunk of their medical bills each year before insurance kicks in.
Such plans already represented a growing share of employer-sponsored coverage.
Now, they're also the mainstay of the new health insurance exchanges created by Obama's law.
Edward Frank of Reynoldsville, Pennsylvania, said he bought a plan with a $6,000 deductible last year through That's in the high range, since deductibles for popular silver plans on the insurance exchanges average about $3,100 — still a lot.
"Unless you get desperately ill and in the hospital for weeks, it's going to cost you more to have this plan and pay the premiums than to pay the bill just outright," said Frank, who ended up paying $4,000 of his own money for treatment of shoulder pain.
"The deductibles are so high, you don't get much of anything out of it," said Frank, who is in 50s and looking for a new job.
The bigger problem: folks don't really understand the concept of "insurance." Frank bought catastrophic health insurance; he did not buy a policy to pay for his day-to-day expenses. Folks understand auto insurance (apparently) but can't make the leap to health insurance.

It's Counterintuitive

Prediction: analysis of the results of the mid-term elections will show that President Obama was correct. If the Dems are to hold the Senate, Mr Obama needs to be on the ballot. The fact that Mr Obama is not on the ballot is the Dems biggest challenge this year.

Texas Pipeline Story; Targa Update -- October 13, 2014

Wells coming off the confidential list over the weekend, today have been posted.

RBN Energy has an interesting pipeline story. Normally I would not be all that interested in this story -- on the surface it seems to be a "Texas" story but there's much more to it, and puts the Bakken into perspective.

The story is this: a new Permian/Texas pipeline is now on-line. A year ago it was expected this new pipeline would solve the Permian takeaway problems; now, it turns out, it won't even come close.

Some data points / observations from the linked RBN Energy story:

BridgeTex Pipeline: 400-mile pipeline from eastern part of the Permian Basin to Houston, came online at end of September, 2014; online five months late

Had been expected to solve the Permian Basin takeaway problems; did not -- two problems:
  • turns out the pipeline is not big enough
  • turns out the pipeline is not long enough
First, the "not long enough" problem: the pipeline did not extend far enough into the Permian Basin. It turns out that:
Most new Permian production is occurring in the Midland and Delaware basins of the Permian and is centered well to the west of Colorado City. That means crude has to get to Midland, TX, and then to Colorado City before it can be shipped to market on BridgeTex. 
As a result, BridgeTex is unable to provide an overnight solution to the Permian crude bottleneck because crude is still stranded west of Midland, waiting for new capacity to Colorado City. That means BridgeTex is unlikely to provide anything more than limited relief until another new pipeline, being built as we write, is completed at the beginning of next year. That is the Plains Sunrise pipeline, Sunrise is expected online on January 1, 2015 and will provide 250 Mb/d of additional capacity between Midland and Mesa – helping to unblock the logjam.
The second problem, and this really puts the Bakken into perspective: RBN Energy estimates that crude oil production in the Permian reached 1.75 million bopd (October, 2014), up about one-half million bopd since January, 2013. RBN Energy expects production to increase by another 750,000 bopd to 2.5 million bopd by 2020, and some think it could go as high as 3.0 million bopd. And this is just the Permian. The Eagle Ford is another Texas / Mexico play.

Current constraints are probably resulting in a $5 - $6/bbl level discount from WTI on stranded Permian oil.

The good news for the Bakken: it looks like operators in the Permian are still focused on getting their oil to Houston, leaving the west coast (California) for the Bakken.

Targa: Another Pipeline Story For The Archives

Bloomberg is reporting:
Targa Resources Partners LP and Targa Resources Corp. agreed to buy Atlas Pipeline Partners LP and Atlas Energy LP for a total of about $7.7 billion.

The $5.8 billion transaction, including $1.8 billion in assumed debt, represents a 15 percent premium for Atlas Pipeline holders.
As part of the deal, Atlas Energy will spin off some assets before it’s acquired by Targa Resources for $1.87 billion. 

The deal helps Targa expand its market for processing and exporting natural gas liquids.
The transactions are among more than a dozen pipeline deals announced this year amid consolidation of an industry that’s dominated by tax-advantaged master-limited partnerships and often complex corporate structures.
The combined company would have a presence in the Permian Basin, Eagle Ford and Bakken formations, where hydraulic fracturing and horizontal wells have unlocked huge oil and natural gas resources. 
The companies being bought:
  • Atlas Energy: Atlas Energy owns the general partner of Atlas Resource Partners, L.P. active in oil and gas production in the Barnett Shale (TX), the Appalachian Basin, the Raton Basin (NM), the Black Warrior Basin (AL), and the Mississippi Lime (OK). Atlas Energy also owns the general partner of Atlas Pipeline Partners, L.P. a midstream energy service provider engaged in the gathering and processing of natural gas in the Mid-Continent region of the U.S., namely in Oklahoma and Texas.
  • Atlas Pipeline Partners: mostly Oklahoma and west Texas. 
Targa is mostly in the south but has Bakken presence in Watford City (which they call "Waterford City" at their website):
  • Little Missouri Gas Plant (Watford City, ND)
  • Johnsons Corner Terminal ("Waterford City, ND)
Targa at the blog:

The Missing 800-Pound Gorilla In Media; Fox News Beats ESPN -- October 13, 2014

Summary: the two most amazing data points from this story:
  • FoxNews beats ESPN
  • Rachel Maddow is the star over at MSNBC
This is a very, very interesting story: the theme of the story has to do with MSNBC in free-fall, having lost 21% of its viewers. Interestingly enough, The New York Times story also says Fox News has lost viewers over the past five years. What it neglected to say was this (for 3Q14):
Fox is also up 12% over this same quarter last year. MSNBC sunk a whopping 21%
The headline: leaning forward, MSNBC loses ground to CNN

Multiple other headlines were probably considered including this one: leaning forward, MSNBC went over the cliff.

Read the story. It's nothing but fascinating news. I don't get cable but I watch it when I travel. I am fascinated by Rachel Maddow. I am fascinated by the fact she is still on the air. She is a one-schtick comedienne. Obviously a huge cult following. Surfing through 84 cable networks, I don't think I have heard a full sentence from her  in the past year. The last time I listened to her, she was still blaming George Bush for something. Yeah, that's her schtick. That's it.

But read the article. Then do a word search. Yes, Fox News was barely mentioned; it was mentioned in passing. This is why:
Fox has little to worry about because its numbers so dwarf the others.
The story was not about CNN, MSNBC, and Fox News. It was about the race to the bottom, the fight for 2nd in a three-way race in which the leader is so far out in front, The New York Times sees little need to mention the network. Be that as it may, some takeaways:

Viewers leaving cable news:
  • MSNBC: down 21% over the last five years
  • CNN: down 13% over the last five years
  • Fox News: down 13% over the last five years
Demographics, median age of viewers, uh-oh:
  • MSNBC: 61 (up from 58 five years ago)
  • CNN: 59 (down from 62 five years ago)
  • Fox News: 68 (up from 65)
In freefall, and remember, Ms Maddow is the one bright star over at MSNBC:
During the third quarter, Ms. Maddow reached an average of 183,000 viewers in the audience component that most matters to MSNBC’s advertisers, viewers between the ages of 25 and 54, her lowest total since she started her show in 2008.
In freefall:
Rachel Maddow, the biggest star on the MSNBC cable network, just posted her lowest quarterly ratings results ever.
In freefall:
“Morning Joe,” MSNBC’s signature morning program, scored its second-lowest quarterly ratings, reaching an average of just 87,000 viewers in the key news demographic group.
Never got high enough to even get into freefall:
“Ronan Farrow Daily,” the network’s heavily promoted new afternoon show, which stars a 26-year-old Rhodes Scholar with a high-profile Hollywood lineage, has been largely a dud.
In freefall:
Though it has mostly happened quietly, which may be a comment on the cable network’s larger status in the media landscape, MSNBC has seen its ratings hit one of the deepest skids in its history, with the recently completed third quarter of 2014 generating some record lows.
And if you enjoy this stuff, here are all the numbers -- Fox News slaughters CNN, MSNBC; hits historic ratings milestone -- Breitbart.
For the third quarter of 2014, Fox News not only humiliated its leftwing cable news counterparts at CNN and MSNBC during the all-important primetime hours, Fox News also beat all of cable -- all hundred or so cable channels, including perennial winners ESPN and USA.
THR rightly describes this as a "historic cable ratings victory."
Here are the third quarter primetime numbers:
  • FNC: 1,797,000 viewers, up 12 percent (313,000 adults 25-54, up 12 percent)
  • CNN: 555,000 viewers, up 2 percent (186,000 adults 25-54, up 4 percent)
  • MSNBC: 557,000 viewers, down 2 percent (150 adults 25-54, down 21 percent)
  • HLN: 352,000 viewers, down 4 percent (120 adults 25-54, down 12 percent)
In total primteime viewers, Fox nearly doubled the leftwing CNN and MSNBC combined.
In demo viewers, Fox earned almost as many as CNN and MSNBC combined.
Fox is also up 12% over this same quarter last year. MSNBC sunk a whopping 21%.
While CNN increased its dismal ratings a mere 4% in the demo, that apparently didn't come from an increase in viewers for CNN's news programming. The jump came from the network's move away from news and towards reality programming.
In this case, Baby Boomer nostalgia: CNN, saw a rather unexpected series perched atop its own rankings. Documentary series The Sixties stands as CNN's most-watched show of the quarter, edging pasting Anderson Cooper with an average 650,000 viewers — 186,000 of them in the key demo.

I assume Chris Matthews still feels that tingle in his leg whenever he sees POTUS.

A Great, Great Day -- Lots Of Stories -- October 13, 2014

Wow, I'm in a good mood.

I love it when I hit the target. I was off a little bit but not my much. The lead story this morning: the head of the CDC is being hammered for suggesting the nurse in Dallas contracted Ebola because the nurse broke protocol. Huge story on many levels.

Also exciting is news that Saudi Arabia will let prices drift lower, and remain lower for extended period of time. More on that later. Another big story. The story and comments here.

There was an announcement of another huge Canadian oil sands pipeline in Alberta; again big news.  TransCanada, the Keystone XL folks, announced regulatory approval for a 300-mile pipeline in northern Alberta with capacity to move up to 900,000 bopd of crude oil and 330,000 bdpd. More on that later, also.

Earning surprise? Arch Coal expects significant better results in 3Q14. How's that war on coal going?

RBN Energy has a great story on another pipeline in Texas, and even that won't be enough. More on that later.

And on top of all that, three days of wells coming off the confidential list. I will do those a bit later.

And sometime this week the production report for August, 2014, and possibly the Director's Cut. The last Director's Cut was released on September 12, so it's possible we could see the update as early as today. 

Targa in the news again.

ObamaCare never lets me down: October surprise -- premiums will jump significantly going into next year (not unexpected; more on that, also) and Dems avoiding the issue.  But the most interesting story: illegal immigrants (Nancy Pelosi's dreamers) love ObamaCare and want it expanded to include them. They will need it when the first case of Ebola hits Ciudad Juarez. No country for old men.

The headline in the Los Angeles Times: new Ebola case in Texas raises worries about US health care. To the best of my knowledge, US HEALTH CARE = OBAMACARE. The president bought it, he owns it.

Hopefully I have time for the Orange County (California) toll road story

But the reason I am in the best mood is going to be a media story.

From the outset I have suggested that one or two cases of Ebola in Ciudad Juarez will result in mass migration of undocumented into the US. Now it's being reported more widely. No less than US Southern Commander US Marine General John Kelly is saying the same thing.

But the biggest story: the Dallas Cowboys defeated the defending Super Bowl champions, the Seattle Seahawks in a thriller over the weekend. And they beat them in Seattle.

Wow, it's going to be a long, long day. Where does one start? I think with the media news, and then perhaps the pipeline news.