What Some Of Us Wil Be Talking About Tomorrow -- October 20, 2014

This is simply amazing. From Macrumors:

Apple CEO Tim Cook commented on the balance between supply and demand for the iPhone 6 and iPhone 6 Plus during today's earnings call, stating that demand is far outstripping supply despite a satisfactory production ramp-up. Cook noted that available data makes it unclear as to when supply will catch up with demand, and that the company was "not close" to having a balance between supply and demand at the end of Q4 2014.   

Now that the Ebola scare is over and the president is back to golfing, back to business as usual. From tomorrow's WSJ:

IBM woes point to a fresh overhaul.

Oh-oh. Looks like ISIL-like chaos could erupt next in Lebanon.

Here we go again: federal regulators apparently find ways to expand access to mortgages for many Americans. Haven't we seen this movie before?

Close to home: we're getting tired of toll-roads here in Texas.

What does feel-good, early release for good behavior get you? More murders by a serial murderer.

My wife will be happy to see this: Latinos may have genetic trait protecting them from breast cancer.

This is a hoot: France "demands" that German pass a three-year 50-billion-euro stimulus program.

China's growth slows to 7.3%.

Top story in section B: iPhone 6 recharges Apple's growth. Tim Cook firmly in charge.

Reported earlier, Halliburton's earnings rise 70%.

Heard on the street: Apple's latest results showcased the company's ability to continue upselling customers on its newest products, even as it boosted its gross margin.

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The Los Angeles Times

Does this surprise anyone?

Los Angeles County officials and business leaders rose to the defense of a Japanese company Monday that has all but given up plans to build a $60-million manufacturing facility in the Antelope Valley because of a dispute with local labor leaders.

Two years ago, Osaka-based Kinkisharyo International won an $890-million contract to build 175 light-rail cars for the Metropolitan Transportation Authority.

Most of the parts will be built in Japan, but the firm agreed to perform final assembly, including painting and wiring the cars, in Los Angeles County. It has been doing that from a temporary facility in Palmdale.

Kinkisharyo leaders said they hoped to build a permanent plant that would allow them to also move some heavy rail car manufacturing from Japan to the United States.

The 60-acre Palmdale site that Kinkisharyo chose, however, came under fire this summer when local activists—including members of the International Brotherhood of Electrical Workers Local 11—presented the city with a 588-page appeal claiming violations of state environmental law. The document says the factory has not secured proper water rights, and that construction could kick up spores that carry Valley fever.

And so it goes.

This is a lede that should get one's attention: the journalist being treated for Ebola in Nebraska can't explain how he could have gotten it. Okay.  

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The Big Question

Why are we still quarantining buses for Ebola -- the president repeats what he said earlier: "you can't get Ebola riding on a bus?" Unless, I suppose the Ebola passenger next to you vomits on you.

Tesoro Significantly Expands Presence In North Dakota Bakken -- October 20, 2014

It seems I've seen this story before and I thought I had posted it, but cannot find it on the blog, so I must be mistaken. Regardless, from Bloomberg via Bakken.com:

Tesoro Logistics LP has acquired a natural-gas pipeline and processing business from QEP Resources Inc. 

The $2.5 billion dollar deal will expand Tesoro’s presence in the Bakken area significantly. 

Tesoro stated Sunday that this deal adds over 2,000 miles of pipeline capable of moving 2.9 billion cubic feet of gas per day or 54,000 barrels of oil.

In June, QEP stated that it would be focusing more on exploration and production in the energy industry rather than processing and transportation.

Post-acquisition, Tesoro now owns a 58 percent stake in the QEP Midstream Partners LP stock. 

QEP plans to focus primarily on the Williston and Permian basins and hopes to expand production following this transaction.

Changing Saudi Perspective -- October 20, 2014

This is from Reuters via Bakken.com, the new "oil numbers" for Saudi Arabia as we move into a brave new world, a world in which there is a tsunami of North America oil coming down the pipelines and the rails.

Saudi crude exports: about 7 million bopd until December, 2014
Saudi exports:

• August, 2014: 6.663 million bopd -- lowest since March, 2011
• July, 2014: 6.989 million bopd 
• June, 2014: 6.946 
• May, 2014: 6.987
• August, 2013: 7.795

Saudi imports into US:

• May to August, 2014: averaged 1.0 to 1.2 million bopd
• mid-2013 to April, 2014: averaged 1.3 to 1.6 million bopd

Saudi domestic oil consumption:

• August usage increases to generate power for air-conditioning
• Saudi launches to new refineries: adds 800,000 bopd in combined capacity
• August, 2014: 2.167 million bopd for refining
• July, 2014: 1.915 million bopd for refining
• August, 2013: 1.551 million bopd for refining

Saudi likes 1.5 million to 2 million bopd spare capacity to cover any unexpected global supply shortage

Saudi's increase in refinery runs presents a new challenge to its role as a swing producer

The EIA has not yet posted the Saudi imports into US for the month of August, 2014. I'm looking for numbers last seen in March, 2009.

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A World Without OPEC

The New York Times is reporting:

“OPEC is not going to survive another 50 years,” Morse told me. “It probably won’t even survive another 10. It has become extremely difficult for them to forge an agreement.”

When Morse and Jaffe wrote their article last year, the price of oil was more than $100 a barrel. Today, the per-barrel price is in the low- to mid-$80s. It has dropped more than 25 percent since June. There was a time when $80 a barrel would have been more than satisfactory for OPEC members, but those days are long gone. Venezuela’s budgetary needs requires that it sell its oil at well above $100 a barrel. The Arab Spring prompted a number of important OPEC members — including Saudi Arabia and the United Arab Emirates — to increase budgetary spending to keep their own populations quiescent. According to the International Monetary Fund, the United Arab Emirates needs a price of more than $80 to meet its budgetary obligations. That’s up from less than $25 a barrel in 2008.

Not long ago, Venezuela asked for an emergency OPEC meeting to discuss decreasing production. Iran has said that such a meeting is unnecessary. Meanwhile, Saudi Arabia has made it clear that it is primarily concerned with not losing market share, so it will continue to pump out oil regardless of the needs of other OPEC members. This is not exactly cartel-like behavior. The next OPEC meeting is scheduled for late November, but there is little likelihood of an agreement.

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$2.79

One can easily find gasoline at $2.79 in the DFW area. Unfortunately, in west Los Angeles on Santa Monica Boulevard and Sawtelle Boulevard, the lowest price is still $4.29. At Wilshire and 26th, it's still $4.99. Wow. In Lower Manhattan, $3.99.

Twelve (12) New Permits; Farmers Getting More And More Like Utilities -- October 21, 2014

AAPL blows through earnings estimates, guides strongly. CNN: 

•  iPhone: Apple sold 39.3 million iPhones in the past quarter, which included [less than] two weeks of sales for the new iPhone 6 and iPhone 6 Plus.iIPhone sales beat most Wall Street analysts' expectations and were up 16% from a year ago.
• iMac: Most surprisingly, Apple sold a record 5.5 million Macintosh computers, up a remarkable 21% from the same quarter in 2013. As overall personal computer sales continue to shrink, Apple now has its largest share of the PC market since 1995.
• iPad: Apple also sold 12.3 million iPads, which was the latest disappointing result in a series of bad quarters for Apple's tablet. iPad sales were down 13% from last year, the third straight quarter of shrinking iPad demand and the smallest number of iPad sales in more than two years.  Analysts had predicted Apple would sell about 13 million of its tablets. 

"Remarkable" was the adjective for describing a 21% increase in desktop computer sales. If I remember correctly, analysts had given up Mac computers for dead. Tim Cook says Mac sales had everything to do with college students. Apple's long, long history of introducing Apple computers into elementary schools and middle schools is paying off.

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Wells coming off confidential Tuesday:

• 27492, conf, Murex, Shauna Micelle 26-35H, Daneville, producing, I think this is only the second permit in Daneville in the Bakken boom; very inactive area in Divide County, far west; 1280-acre, Three Forks (as expected);
• 27966, drl, XTO, Kathy 31X-15D, Tioga,

Eight (8) producing wells completed:

• 26179, 2,024, Oasis, Clementine 5693 44-35T, Alger, t4/14; cum 30K 8/14;
• 26265, 2,168, Petro-Hunt, Van Hise Trust 153-95-28D-21-4H, Charlson, t9/14; cum --
• 26341, 659, HRC,  Miller 157-101-12D-1-3H, Otter, t9/14; cum --
• 26779, 1,014, EOG, Mandaree 17-05H, Squaw Creek, Three Forks First Bench (TF1), one section, t10/14; cum --
• 27199, 345, Petro-Hunt, Watterud 160-95-11D-2-2H, Stoneview, 4 sections, t9/14; cum --
• 27201, 607, Petro-Hunt, Watterud 160-95-14A-23-1H, Stoneview, 4 sections, t9/14; cum --
• 27202, 661, Petro-Hunt, Watterud 160-95-11D-2-1H, Stoneview, 4 sections, t9/14; cum --
• 27579, 1,920, BR, Sequoia 31-4MBH, Hawkeye, t9/14; cum --

Twelve (12) new permits --

• Operators: MRO (5),  SHD (4), CLR (2), QEP,
• Fields: Reunion Bay, Mountrail, Clarks Creek (McKenzie), Sanish (Mountrail), Grail (McKenzie),
• Comments:

Active rigs:

	10/20/2014	10/20/2013	10/20/2012	10/20/2011	10/20/2010
Active Rigs	191	184	186	195	153

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Record crops will cost taxpayers. Being reported by Chicago Business:

In reauthorizing farm policies, Democrats and Republicans crafted a compromise to overhaul programs that protect farmers from market swings or bad weather. The law replaced direct payments with programs tied to price and revenue, and raised the threshold at which farmers would get a subsidy when commodity prices fall.

Sort of like utilities: a guaranteed rate of return. 

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Nice Graphic On The Economic Impact Of The North Dakota Bakken -- October 20, 2014

Aries Residence Suites has provided a very nice graphic to show exactly how the Bakken has impacted the US energy revolution. The graphic is at this link (click on the graphic to enlarge it). See comments.

Time suggests imports may have actually dropped slightly more in 2013 -- down to just 32%.

By the way, the link to Aries Residence Suites, above, is very interesting. I had not seen it before (if I have, I have forgotten). Aries has suites in Texas and North Dakota. In North Dakota: Tioga and Watford City:

Aries Residence Suites offers nightly, weekly, and monthly workforce housing (aka man camps) at two locations in the Bakken oil fields in North Dakota: Tioga & Watford City. Unlike typical man camps, our locations strive to offer amenities that make our guests feel like home. Whether you need temporary lodging or extended stay workforce housing, we hope you’ll discover the difference Aries Residence Suites provides!

By the way, I believe North Dakota now accounts for 13% of US domestic production. Mark Perry, over at Carpe Diem provides a list of more North Dakota energy milestones, posted October 16, 201, including:

August marked the fifth straight month that daily oil production in the Peace Garden State exceeded one million barrels. Another important production milestone was reached in August, as average daily crude oil output from the state’s shale-rich Bakken oil fields topped one million bpd for the third straight month, as the Bakken recently joined an elite group of only ten oil fields in world history whose daily output exceeded one million barrels at peak production.

When I read that last line, " ... the Bakken recently joined an elite group of only ten oil fields in world history whose daily output exceeded one million barrels at peak production" I am reminded that Snopes.com has never acknowledged their error on reporting the Bakken, and Jane Nielson's comment: " ... there's some oil in the Bakken, but not much." Or something to that effect.

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Did I Ever Love You, Leonard Cohen

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A most interesting book to re-read in light of the Ebola scare: DeFoe's A Journal of the Plague Year. The key: quarantine. My notes on the book here.

Apple Is Scheduled To Report After Market Close -- October 20, 2014

Updates

Later, 6:14 p.m. CDT: you gotta love this Reuters headline -  "Apple sales beat Street (estimates) but iPad volumes slide." They must have missed the October 16, 2014, Apple presentation. iPads volumes may have slipped but still a stunning story.

Later, 4:04 p.m. CDT: wow, it's so much fun going back and reading all the negative comments about Apple. Freudenschade, I believe, is the word. Not the best word, but close enough. At $1.42 far exceeded estimates, and "guides strongly."
 
HAL also blew away earnings estimates at $1.19; raises dividend. What's not to like?

I guess Flowserve did not report today. Moved to October 23rd, I see.

Remember: the next time AAPL reports, it will include the holidays and ALL of Apple's new products and upgrades are already available or will be available by then, except, the AppleWatch, due to come out in 2015, I believe. Could be wrong. Often am.

Original Post

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According to Yahoo!Finance:

• Apple, expectations: $1.31 ($9.17 pre-split), after market close
• Flowserve, expectations: $1.00, after market close
• Halliburton, expections: $1.10; actual -- Net income rose 70 percent to $1.2 billion, or $1.41 a share, from $706 million, or 79 cents, a year earlier, Houston-based Halliburton said in a statement today. Excluding one-time items, the company earned $1.19 a share, 9 cents more than the average of 31 estimates compiled by Bloomberg. Sales rose 16 percent to a record $8.7 billion. 
• IBM with big miss; expectations: $4.32 (actual, see below): drops 7%; CEO abandons 2015 earnings forecast; this is not an industry-wide issue; IBM "is struggling to transform fast enough to handle the shift to cloud computers." IBM's earnings:

Third-quarter adjusted earnings from continuing operations were $3.68 a share, down from $4.08 a year earlier. Including the loss from discontinued operations, the company had profit of 2 cents a share. Revenue fell 4 percent to $22.4 billion, the 10th straight quarterly drop, weighed down by declines in its hardware division and in emerging markets.

The cloud? "Everyone" was doing 'the cloud' before Apple, I suppose, but Apple a) popularized it for the consumer; b) was responsible for educating the consumer with its slick, easy-to-understand iCloud commercials; and, c) provided software engineers with the tools to make some really, really cool apps that make the iCloud so incredibly wonder. The most interesting: "Continuity." [I assume iCloud is the link for "Continuity" but could be wrong.]

By the way, the demo at the "Continuity" link above shows something else Apple is doing that is also transformational in the world of marketing for Apple. That link, by the way, doesn't actually show what "Continuity" does despite the headline. Here's a better link for "Continuity":

Apple's Continuity
More on "Continuity" and iCloud here.

And this video confirms that Apple-Pay is going to be transformational. Or is it "transformative?" Whatever. A game changer.  The best part about it: no credit card seen by anyone.

Whiting And MRO Each Report A "High-IP" Well; Active Rigs Hold Steady -- October 20, 2014

Wells coming off confidential list over the weekend, today, have been posted. Whiting and MRO each report a "high-IP" well.

Active rigs:

	10/20/2014	10/20/2013	10/20/2012	10/20/2011	10/20/2010
Active Rigs	191	184	186	195	153

RBN Energy: Houston, we have a storage problem.

Those of us old enough to remember Apollo 13, OPEC oil embargoes, and the glitter rock of David Bowie and Iggy Pop have witnessed a lot of ups and downs in space travel, the energy business and rock-star fashion.

But few, if any, changes have been more amazing to watch (and blog about) than the skyrocketing growth in crude output in the big US shale plays—the Eagle Ford, the Permian and the Bakken chief among them.

While the word “transformational” may be a tad overused, how else can you describe the market effect of oil production in Texas rising 155% (to 3.1 MMb/d) over the past 48 months (according to the US Energy Information Administration, or EIA), and crude output in North Dakota jumping 223% (to 1.1 MMb/d) over the same period?

All that crude—and crude from the Niobara and Anadarko, and even the Canadian oil sands—is reducing the need for waterborne imports, and spurring development of new pipelines to the Gulf Coast (and Houston in particular) as well as new storage capacity.

And, because so much of the new production is light sweet crude (or, in the case of some production like Eagle Ford, very light or super-light condensate), Gulf Coast refineries designed and built to process heavy crude are scrambling to adjust, either by investing in new infrastructure to handle light crudes or (more often--at least for now) resorting to extensive blending of very light crude with heavier crudes. (Blending requires storage capacity too.)

See how Houston is handling all this at the link.

A reminder: the Keystone XL was designed to carry heavy crude oil to the Gulf Coast, but that water is under the bridge, that train has left the station, and one shouldn't cry over spilled milk.