Monday, November 3, 2014

Has EOG Moved On? -- November 3, 2014

In addition to earlier notes regarding the lack of much EOG activity in the Bakken in the last six months, this is an interesting side story. From Rigzone:
A change in leadership at an American Indian reservation in North Dakota wouldn't normally get a whole lot of attention. But come Tuesday, the oil industry will be watching this dusty area of the state as two reformers vie to become tribal chairman, an office with outsized power over the course of the state's booming oil industry.
That's because the reservation's Three Affiliated Tribes of Mandan, Hidatsa and Arikara (MHA) Nation control roughly a third of North Dakota's oil output.
In the past two years alone, production on the MHA Nation has jumped 145 percent, cementing the state's role as the second-largest U.S. oil producer after Texas.
The reformers, Damon Williams, the tribal attorney, and Mark Fox, the tax director, each propose tighter environmental regulations. They also promise to ensure more money goes directly to projects that improve life for the 12,000 tribal members on the 980,000-acre reservation.
In other words: this stands to make things more complicated for the oil industry. So far, oil companies aren't saying a whole lot about the leadership change.
EOG Resources Inc, the largest oil producer on the reservation, said its goal is "to maintain good relationships with tribal members regardless of the election's outcome."
Marathon Oil Co and Exxon Mobil's XTO Energy declined comment.
The North Dakota Petroleum Council, an industry group, said the candidates each have an "open demeanor and are willing to sit down with companies, state and federal agencies" to resolve regulatory questions.
Lynn Helms, head of North Dakota's Department of Mineral Resources, the state's oil regulator, is blunter: Oil producers are "deeply concerned," he said, adding: "drilling on the reservation could be slowed." That's because if the tribes give stricter scrutiny to environmental issues, more stringent rules could mean more obstacles for new drilling permits.
Amazon: Incredible Customer Service
A Note to the Granddaughters

This is quite a story. I couldn't find a replacement lens cover for a camera in the local big box stores. I ordered "the best" I could find on Amazon, hoping it would "fit." The lens cover arrived very quickly but unfortunately it did not fit.

I put the lens cap back in the OEM packaging and simply sent it back to the Amazon partner in the original mailer. I included a note thanking them for their quick service. I told them not to worry about a refund. It was my mistake and the process for a refund would likely be cumbersome for a $5.00 item.

Tonight, out of the blue as Shakespeare might have coined, just three days from when I mailed the package, I got an e-mail note from Amazon saying they would credit my account.

I am totally amazed. I have never had one bad experience with Amazon.

[I remember some years ago, Amazon accidentally sent me two identical items when I had just ordered one. I called them asking for details on returning the second item. They said it was not worth the trouble of receiving it and restocking it, telling me to simply keep the second item and consider it a "gift" from Amazon.]

[Years ago, a similar story in the US Air Force during one of the Gulf Wars. I assume it was the first George Bush war, but they seem to run together. Thousands of units of blood were being sent from the states to the Mideast in anticipation of hostilities. I was stationed at Bitburg Air Base, Germany, at the time, one of the staging areas for the blood headed toward the theater of operations. For some reason, long forgotten, an active duty member needed to send a unit of his own blood back to the states which he might need. The Bitburg AB lab officer thought it could not be done: thousands of units of blood going east and he would be sending one unit west. He was sure that some well-meaning airman would see the one unit, assume an address error and re-route it back to Bitburg. But lo and below, like a fish swimming upstream, that single unit made it back to Walter Reed. Some things just boggle the mind.]

On Tap For Tuesday Earnings -- November 4, 2014

A lot of stuff has been posted very, very quickly. I assume there are errors. If this information is important to you, go to the source. This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or think you may have read here. Do not make any travel plans based on what you read here.  

Announcements today:
  • EOG: press release; $1.31;
  • Sempra Energy (SRE), before market open; $1.24; beats by 16 cents; profit rises 16%
  • Linn Energy (LINE), before market open, 41 cents; actual, 53 cents; press release;
  • Targa Resources (TRGP), before market open; 65 cents; actual, press release
  • Midstates Petroleum (MPO), after market close, 10 cents; beats by 18 cents;
  • Oasis (OAS), after market close, 73 cents: misses by 19 cents;
  • ONEOK (OKE), after market close, 38 cents; beats by a penny;
  • ONEOK Partners (OKS), after market close; 63 cents; missed by 24 cents;
  • Pioneer Natural Resources (PXD), after market close, $1.27; $1.35; announces public offering of 5.75 million shares; beats by 10 cents;
  • Devon Energy (DVN), after market close, $1.24; beats by 11 cents; output jumps 19 percent;
  • Valero Energy (VLO), before market open; $1.57; beats by 45 cents;

SolarCity (SCTY), after market close; a loss of $1.11;

Reminder: 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. Do not make any travel plans based on what you read here or think you may have read here 

With the current slide in oil prices, a reader asked whether it was better for a small oil company to be privately held or publicly traded. That is a bit beyond the scope of this blog, but ... there it is ... the poll is at the sidebar at the right. 

A Note for the Granddaughters

It was the usual Monday night driving schedule for me tonight. At 5:30 I drove the younger one to soccer and at 7:00 I drove the older one to water polo. It was the first night back on "regular time" -- we "fell back" one hour last night. It was noticeably darker when we arrived at the soccer fields at 6:00 p.m.

What an incredibly beautiful evening. Thunderstorm clouds were moving in but they were not active, and were not expected to be active until tomorrow morning. The soccer field lights were on; the soccer team would be practicing "under the lights" which always seems so much more pleasant, so much more inviting.

The parking lot was overfilled with cars; there were many season-ending games for older players being played, apparently, along with the younger-player practices. I don't think I saw an old car there; all newer models, lots of SUVs, and even more F-150s' (this is Texas). This really is a great country.

On the way back to pick up the older granddaughter, there seemed to be a lot more cars on the road than usual; the drivers, if not the cars, all seemed happier and peppier. Everyone seemed to be driving a bit faster with lots of jack-rabbit starts at the intersections. No doubt it was the inexpensive gasoline that made the Texas autos and their drivers seem so happy. The least expensive gasoline I saw was $2.57, but the "average" price seems to be $2.69.

When I saw the $2.57/gallon price, I wondered if we might see gasoline sell for under $2.00 before the driving season begins again, next Memorial Day, 2015. I personally can't see it, but I suppose it's possible.

Maybe at $2.69 folks still aren't all that excited about the price of gasoline, but if it gets to $2.19 in the DFW area (or the equivalent in your area), it's going to be quite a story. I never thought I would see the day that the price of gasoline would drop so quickly and so far, with the possibility of further decreases.

Flashback: CNN, 2011 -- "Gasoline Prices Won't Be Lowered By Increased Domestic Drilling" -- CNN Money -- Posted November 3, 2014


December 27, 2014: if there was any one story that cemented my decision to stop blogging about the Bakken, it was this one, the one below as reported at CNN. At some point I guess I just got tired of beating my head against the wall. I started the blog for my own use -- to learn about the Bakken. HTML, hyperlinking, and a webpage seemed the best way for me to track and link articles. At some point I thought others might be interested in what I was learning, and so I went public with the blog.

Over time, it became clear that the audience was changing. By coming in "late," the "new" audience did not seem to understand the purpose of the blog. I thought about ending the blog ever since 2012, I suppose, but I hung in there. Readers provided me a lot of links that really helped. But when my data points seemed to start confusing readers, I thought it best to quit the blog. Actually, I will continue to track the Bakken -- I continue to learn much about it -- but it will no longer be public. It's been a great run.

Original Post

From Carpe Diem:
CNN Money in 2011: “Gas prices won’t be lowered by more domestic oil drilling, domestic production can’t possibly move gas prices from $4 to $3 per gallon,” see full story here.
Kudlow: "drill, drill, drill."

Saudi just lowered its prices today -- pundits say it was to compete with US shale.

My 30-second sound bite: "It's all about market share. Saudi does not want to lose market share. What market? California."

Ebola Burning Itself Out

The US military has yet to build one treatment facility, but the US will get credit for stemming the tide. Well played, Mr Obama. 

I posted this on October 8, 2014 (it was sincere, and not sarcastic as can be inferred from the entire note:)
When Ebola is conquered, and it will be, President Obama should share in the Nobel Prize for Medicine for that feat. That will be one he has earned.
I find the Ebola story incredibly interesting on so many levels, but especially in the medical arena. There will be a lot of research papers coming out of this most recent epidemic. I wish one nurse had been a bit more savvy, but in the big scheme of things, I repeat what I said early: in their own arenas, no major political figure made any missteps in regard to handling this epidemic.

A lot of  credit goes to the US military for taking on yet another ver difficult mission, and this time, with little guidance. I have all the respect for these young men and women in our US military. If asked to endure 21 days of quarantine, they do it without making it an issue. Life is not about; it's about whom they serve and protect.

Ballard's Madison Well Comes Up Dry; Venezuela Starts Importing Oil; WPX Will Report A Huge Well In The Bakken Tuesday -- November 3, 2014

Biggest story of the day: MDU bailing on the Bakken. MDU will "market" its Fidelity exploration and production division. Rumors (but then there are always rumors): Oasis could be doing the same thing. Maybe some big operator could scoop up both Oasis and Fidelity. Add Fidelity to the list that includes OXY USA.

Wells coming off confidential Tuesday:
  • 26610, 876, Newfield, Hoffman 149-98-14-23-2H, Pembroke, t7/14; cum 30K 9/14;
  • 27301, drl, Zavanna, Husky 33-28 6H, Williston, no production data,
  • 27606, drl, BR, Bullrush 34-10MBH-B, Elidah, no production data,
  • 27704, dry, Ballard,Drovdal 13-2, Wildcat, a Madison well; 1.5 miles SE of Maxbass, ND; Bottineau County; the geologist report states the well was spud May 5, 2014, and reached TD of 4300' MD on March 14 (sic) ... yes; the sundry form said the spud date was May 1.  I assume TD was reached May 14. Another form stated the re-entry date was May 4, and total depth was reached May 12; so, take your pick.
  • 27728, 1,458, WPX, Ruby 31-30HX, Antelope, Sanish formation; the app says Three Forks B1; 33 stages; 5.2 million lbs sand, t8/14; cum 57K 9/15;
  • 28199, 230, Petro Harvester, Busch 5-1H, Portal, Midale formation, the Midale is part of the Madison group; 8 stages; 426,100 pounds sand; t8/14; cum 6K 9/14;
  • 28233, dry, Statoil, Myron 9-4 5H, Squires, no file report available yet;

27728, see above, WPX, Ruby 31-30HX, Antelope:

DateOil RunsMCF Sold
Active rigs in North Dakota:

Active Rigs186181188194152

Wells coming off the confidential list over the weekend, today were posted earlier; see sidebar at the right

Six (6) new permits --
  • Operators: Emerald (2), Whiting (2), Hess, Enduro
  • Fields: Boxcar Butte (McKenzie), Sanish (Mountrail), Alger (Mountrail), Little Deep Creek (Renville)
  • Comments:
One (1) producing wells completed:
  • 21373, 2,451, Statoil, Barstad 34-14 5H, Alger, t9/14; cum 5K 9/14;
Huge Development, I Suppose In Some Quarters, Though Regular Readers Are Probably Not Surprised (For The Record, I Am Surprised)

Venezuela starts importing oil. And, yes, Venezuela is the country with the largest oil reserves in the world -- even more than Saudi Arabia, though by a slim margin -- unfortunately, the "wrong" kind.
Venezuela, a major exporter of crude oil for decades, has started importing oil to meet domestic demand that it cannot currently fulfill.
It is the first time in the century-long history of Venezuela’s state-owned oil industry that it has imported oil, and it is focusing on Russia and Algeria.

Venezuela has hundreds of millions of barrels of extra-heavy crude. But it needs to dilute that with lighter varieties from elsewhere in order to refine it or sell it elsewhere, USA Today said. 
In addition, other countries’ massive reserves, including the United States’, is driving oil prices down internationally, causing Venezuela to lose more money.
It's too bad we don't have a president who understands oil. Here is an opportunity to trade US light oil (Bakken oil) for heavy oil which our own US refineries need. Allah must be laughing.

Global Warming Wallops Maine

Reuters is reporting: Rare early season storm brings record-setting snowfall to Maine.
A rare early season snowstorm brought 50-miles-per-hour (80-kph) winds and record-breaking snowfall to parts of Maine overnight, leaving more than 140,000 homes and businesses without power on Monday.
Governor Paul LePage declared a limited state of emergency as slippery driving conditions, downed trees and white-out conditions led to a spike in accidents and shut down many local roads.
According to unofficial observations reported to the National Weather Service, Cary in eastern Maine got the most snow, 21 inches. Orrington got 17, Hampden recorded 15.5 inches and Bangor got more than a foot.
Record low hits Miami also. CBS Miami is reporting:
A cold snap set new record low temperature Sunday morning in Miami.
The thermometer at Miami International Airport tumbled to 52 degrees breaking the date’s previous record of 54 degrees set in 1993.
What South Florida considers a “normal” or average low for this time of year is 70 degrees, this morning the area woke up to a twenty degree dip from the norm.
Some communities across interior sections of western Broward and Miami-Dade counties dropped into the 40’s.
In West Palm Beach, the temperature dipped to 49 degrees, below the previous record of 51 degrees in 1993.
I think the warmists predicted that the winters would be colder and would start earlier. Something they called "counterintuitive." The rest of us called it "bullshit." SecState John Kerry, floating in space, calls it "something very important." Meanwhile, on his watch, ISIS is about ready to take Baghdad. But that's not being reported in US mainstream media.

OXY USA Reports Three Huge Wells -- That's Only The Headline -- November 3, 2014

Here are the three wells:
  • 26077, 940, OXY USA, Evelyn Stroh, 3-17-20H-143-96, Fayette, 30 stages, 900,000 lbs sand, t5/14; cum 74K 9/14;
  • 26078, 842, OXY USA, Evelyn Stroh 2-8-5H-143-96, Fayette, 30 stages; 900,000 lbs sand, t5/14; cum 79K 9/14;
  • 26079, 1,336, OXY USA, Harry Stroh 2-8-5H-143-96, Fayette, 30 stages; 900K lbs sand; t5/14; cum 100K 9/14;
Note the amount of proppant used. I rounded the number; in two cases the actual amount was slightly less than 900,000 lbs of sand; in the third case, the actual amount was 904,000 lbs of sand. Generally, operators are using 4 million lbs of proppant, and some operators (notably EOG and CLR) are pushing upwards of 10 million lbs and even upwards of 14 million lbs.

I often make factual and typographic errors, but I believe these are accurate numbers. If this information is important to you, go to the source, the NDIC.

I track the Stroh wells (Cabernet and Fayette fields) here

Carpe Diem's Map of the Day

Link here: fracking = a better income.

Top five counties in the United States for largest increases in median income, 2010 - 2013:
  • #1, Williams County, North Dakota
  • #2, Cleburne County, Arkansas
  • #3, Stark County, North Dakota
  • #4, Rowan County, Kentucky
  • #5, Perry County, Kentucky

193 ... 189 ... 186 -- November 3, 2014

Last Friday, 193 active rigs in North Dakota.

This morning, once the first reports started coming in: 189.

Now, 11:01 a.m.: 186.

Active Rigs186181188194152

Perhaps too early to say, but I enjoyed the comment last week from a reader suggesting that rig counts won't drop this fast because of outstanding contracts and CAPEX set in place some time ago. I agree. I think decisions were made some months ago. EOG appears to have pretty much stopped drilling in the Bakken several months ago, before the slump in oil prices. The question is how much of this has to do with the slump in oil prices and how much has to do with quite a few other factors, previously posted.

Before you all get too excited, 186 is about normal for this time of year, it appears. Several readers have suggested that the "193" was artificially high due to late reports (or non-reports) coming in to the NDIC.

Quantum Energy Secures Site For Topping Plant Diesel Refinery; Near Stanley, ND -- The Bakken, November 3, 2014


November 15, 2014: Quantum "drops" plans for a energy center at Billings, Montana
The Arizona company is planning to develop up to five refineries designed to produce diesel fuel from Bakken crude oil.
Quantum announced earlier this month that it had signed a two-year option agreement on a 260-acre refinery site in Stanley, N.D., a town of around 2,000 people and the county seat of Mountrail County about halfway between Minot and Williston.
In addition to the Stanley agreement, the company has signed option agreements for property in Baker and Fairview, towns about 100 miles apart on the Montana and North Dakota border.
In August, Quantum officials announced that Billings also was under consideration in its plans to build up to five 20,000-barrel-per-day Bakken crude refineries, each at a cost of about $500 million. They presented their proposal to Yellowstone County commissioners on Aug. 19. But since then, there hasn’t been any contact between the company and the board.
Original Post

A reader sent me this. Quantum Energy secures a North Dakota site for "energy center."
The company has signed a two year Option Agreement on a two hundred sixty (260) acre site in the Stanley, North Dakota area in Mountrail County, North Dakota for the construction and operation of an Energy Center that will include a 20,000 barrel per day topping plant diesel refinery.
More on this later, perhaps.

I see AAPL is up another $1.50.

Other News -- Monday -- November 3, 2014; Record Snow -- "Stunning" -- Their Word, Not Mine

The other day it was reported that Algore's home state recorded 16 inches of snow in upper elevations. It appears that global warming is spreading across the entire eastern United States, from the southeast to the north east. Today The Weather Channel is reporting that "record early double-digit snow in Maine after record early snow hits South Carolina. A lot of "records" in that headline. Makes me want to take another look at the natural gas fill rate.  The linked story:
Officially, only 0.4 inches of snow was measured in Portland, Maine, and a trace was tallied at both Boston's Logan Airport and Providence, Rhode Island.
Please Come To Boston, Dave Loggins
Parts of eastern Massachusetts picked up over an inch of snow, including Kingston (1.6 inches) and Assonet (1.5 inches). A light blanket of snow covered the field at Gillette Stadium in Foxborough, Massachusetts hours before a big National Football League game between the host New England Patriots and the Denver Broncos. The field was cleared of snow prior to kickoff.
Record Southern Snow 
Snow was observed Saturday as far south and east as Charleston, South Carolina, the earliest flakes on record in the city. This occurred less than three days after a string of four straight days in the mid-upper 80s. Places like Folly Beach and downtown Charleston picked up a trace of snowfall.
Even more stunning were the snowfall amounts in the South Carolina Midlands. Up to 4.5 inches of snow fell in Red Bank, just west of Columbia. Red Bank is only about 350 feet above sea level.
Other News

First-time homebuyers are record low. CNBC is reporting:
The U.S. economy is improving, employment is growing and home prices are recovering, but first-time homebuyers are not returning to their normal, historical levels of homeownership.
The share of these buyers, who are generally younger Americans, fell to the lowest level in nearly three decades-just 33 percent this year, down from 38 percent a year ago, according to an annual survey of homebuyers by the National Association of Realtors (NAR). The long-term average, dating back to 1981, shows that 4 out of 10 purchases are by first-time buyers.
"Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who've experienced limited job prospects and flat wage growth since entering the workforce," said Lawrence Yun, chief economist of the NAR. "Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums."
They may not be buying homes, but they sure are buying SUVs and Jeeps. Auto dealers report their best October in a decade. [Note that auto dealers have their numbers posted the first business day of the new month, one business day after close-out of previous month; it will take Washington, DC, bureaucrats six (6) to post data.] Government Motors missed expectations:
Automakers reported their strongest U.S. October sales in a decade on Monday on strong demand for brawny pickup trucks and roomy SUVs, but top-seller General Motors Co missed expectations.
The results, often an early snapshot of U.S. consumer spending, continued the strong run for a sector that has outraced the broader economy since 2010.
The Wall Street Journal

Top story: the day before THE election.

Big Oil feels need to get smaller

"Pilot Error": the most dreaded words in aviation. Improper pilot command cited in Virgin Galactic crash.

The US closed the book on buying sovereign debt. Japan did just the opposite. What will the EU do? As my dad used to say: you get three guesses, and the first two don't count.

Colorado's democratic drift seems to stall. I assume the potheads got what they wanted; why go out to vote?

This is pretty cool for basic research. Is the nurse in Maine a carrier of Niemann-Pick Type C? It seems that carriers of a genetic disorder, the fatal genetic disease Niemann-Pick Type C may be protected from Ebola.

WSJ/NBC poll finds wide support for quarantining health workers.  First, do no harm.

Even Silicon Valley tilts Republican. They are tired of seeing increased taxes. Actually they blame it on Harry Reid who scuttled patent reform.

Notable and quotable: "A Democratic victory in the midterm will save the planet." -- Algore. I can't make this stuff up. He made that statement as he stepped into his SUV on the way out to his private jet on the tarmac. (I made that up.)

Opinion: the prime suspect in the global slowdown? Global debt. World-wide debt as a percentage of GDP has jumped to a record high of 212%. Keynes would be happy. If 212% is good, why not 500%?

Really? Good news if true: a very low-fat diet can actually reverse atherosclerosis.

San Francisco and Berkeley residents will vote on whether to impose special taxes on sugary beverages. So, will a Starbucks coffee cost more if is has sugar?

Returns on municipal bonds soar.


Pain in trains falls mainly on the plain. Rail delays slow shipments, pushing prices up despite bumper crops. Send your thank you notes to the farmers in Minnesota, Iowa, and Nebraska. 
Congestion on railroad networks, now threatening to extend into a second year in the U.S. Farm Belt, is forcing some buyers to purchase additional soybean meal, used mainly in animal feed, to ensure a steady supply, analysts said.
That helped push futures prices up 11% in the past week. And soybeans and corn both jumped by around 7% as livestock and poultry operations in the eastern U.S. rushed to avoid feed shortages and speculators bid up the price of the commodities related to soy meal, analysts said.
I've heard beef prices are ready to soar; I'm considering buying a freezer for my Omaha Steak purchases while the prices are good.


This is cool: an article adapted form the paperback edition of The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. Link here

Heard on the street: refining Saudi Arabia's oil strategy. Collapse in refining margins suggests crude prices have further to fall

The Los Angeles Times

Why Iraqi army can't fight, despite $25 billion in US aid, training. One word, various spellings (it's how our allies operated when I was stationed in the Mideast): inshallah. Or proper spelling, In Sha Allah

It's not that easy to transmit, but fifth doctor dies of Ebola in Sierra Leona. Meanwhile patient at Duke University tests negative for Ebola, but remains quarantined. Which of course makes no sense: the disease is very, very hard to transmit, and the patient has already tested negative on preliminary testing. The patient, not identified, developed a fever after returning from Ebolaland, more specifically from the same country of origin as Mr Duncan, Liberia.

This is cool. Sort of like Only Lovers Left Alive: when it comes to doubling up with roommates, crashing at your cousin's or staying at your parent's house well into your 20s (how about well into your 60's), there's no place like Southern California. This explains another California phenomenon:
eight cars or more in front of one-car garage tract homes; it's killing school budgets. Property tax on a single home with a dozen school-age children. 

Some days I can't seem to play this song loud enough:

Million Dollar Man, Lana Del Rey

MDU To "Market" Its Eploration/Production Division; Earnings On Tap Today -- November 3, 2014; Number Of Active Rigs In North Dakota Slumps

Biggest story of the day: MDU bailing on the Bakken. MDU will "market" its Fidelity exploration and production division. Rumors Oasis could be doing the same thing. Maybe some big operator could scoop up both Oasis and Fidelity. Add Fidelity to the list that includes OXY USA.

Second biggest story of the day, non-energy: Sprint with huge earnings miss; loses 19 cent; almost 4x expected; revenues rise less than expected; will cut 2,000 more jobs; reduce staff 5%. Stock falls 7%. 

Now, Back To The Bakken

Number of active rigs in North Dakota slumps:

Active Rigs189181188194152


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

On tap today, if Yahoo!Finance is correct:
  • MDU, after market closes, 45 cents: actual, 44 cents; press release here;
  • MRO, after market closes, 59 cents; actual 57 cents; press release here;
  • Black Hills Corp, after market closes, 52 cents; beats by 8 cents; misses on revs;
  • Otter Tail, after market closes, 41 cents;
  • Sprint, after market closes; a loss of 5 cents;
In long posts I often make factual and typographical errors. If this is important to you, go to the source.


The Bakken: Bulletproof? All You Do Is Fill Me Up With Doubt...

Bulletproof, La Roux

Impact Of Lower Oil Prices -- November 3, 2014; Record SUV Sales

Boomtown nervous. AP is reporting:
That oil has averaged $96 a barrel over the past four years, fueling more drilling, more hiring, and bigger appetites in North Dakota, Texas, Oklahoma and elsewhere. Now oil has hit a rough patch, plunging to $80 from $107 in June on fears of a global glut. Many expect these lower prices are to stick around for a while.
Lower oil prices, while good for the broader U.S. economy, are a threat to what has been a surprising and dramatic surge in oil production in the U.S., and to drilling communities that have come to depend on oil money.
Record SUV Sales

Impact of lower crude oil prices? Record Ford SUV sales. Bloomberg is reporting:
Ford Motor Co., Fiat Chrysler Automobiles NV and Nissan reported U.S. sales that exceeded analysts’ estimates as buyers emboldened by falling gasoline prices flocked to sport-utility vehicles. GM also had strong SUV sales while missing of estimates.
Fiat Chrysler, led by the Jeep brand’s 52 percent gain, said vehicle sales climbed 22 percent for a 55th straight monthly increase. The average estimate was for a 20 percent gain. Sales for GM, the largest U.S. automaker, rose 0.2 percent, less than analysts’ forecast of a 3.1 percent gain. Ford’s light-vehicle sales fell 1.8 percent, better than analysts’ estimate of a 4.3 percent decline. Ford’s SUV sales rose 10.3 percent, while its car and truck sales declined.
Sales of SUVs, including crossovers, have been increasing as fuel prices have fallen this year. The average price for a gallon of gasoline in the U.S. fell to $2.98 as of Nov. 2, according to AAA, the motoring club. Total light-vehicle deliveries are expected to rise 5.6 percent from year earlier to 1.28 million.
It's not the drop in prices that is spurring SUV buying: the cost savings for a SUV at 20 mpg over one year of driving 20,000 miles works out to about $130 for the year, or the cost of two Big Macs each month. No, the surge in SUV buying is the anticipation that oil prices are not going to get worse, and, in fact, may go lower. And the fact that the Fed continues to push lower interest rates. My hunch is that folks are getting some very good deals. 

Overall, my oil and gas portfolio is hurting, but overall the slump in oil prices is incredibly good news overall. In addition to the obvious, there will be a lot of opportunities for long-term investors. Again, and again, I keep sending thank you notes to the good folks in Minnesota and Nebraska for saying "no" to pipelines. UNP has surged, trading at all-time highs; the shares have split; and the dividend has increased from 13.5 cents/share to $1.00/share (taking the 2-1 split into account. BRK-B is also trading at new highs; it, too, is a railroad company, and with an improving economy due to lower oil prices will go higher.

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

Small Oil Companies Scrambling

This article has appeared in several places recently. A reader suggested I note the last paragraph. I've included the last two paragraphs:
Shares of Halcon Resource Corp., a $1.2 billion market cap company which produces oil and natural gas primarily in Texas and North Dakota, for example, have fallen 48 percent over the last three months. The company’s shares, which traded at approximately $3.10 late Wednesday, could fall below $1 if oil falls below $75 a barrel, largely because those lower prices would result in a funding gap of $614 million for its 2015 fiscal year, according to Goldman Sachs estimates.
Breard said that his fund has been adding to its position in Matador Resources Corp., a $1.7 billion market cap company whose operations are primarily focused in Texas’s Eagle Ford shale and the Permian Basin. The company, which announced on Oct. 14 that it had recently completed a new well in a company record 7.4 days, is one of the best-managed companies in the industry, which will give it the option to acquire leases or its rivals if prices continue to decline, Breard said.
I don't know if the "completed a new well in 7.4 days" means drilling and completion (fracking). If it does mean both, that is quite incredible. Here's the press release:
One recent well on Matador’s western acreage in La Salle County, was drilled from spud to a total depth of 12,300 feet, including an approximate 5,100-foot lateral, in 7.4 days, which was a new Company record. Costs have also continued to move somewhat lower, primarily as a result of continued drilling efficiencies, and several wells on Matador’s western acreage have been drilled and completed for between $5.5 and $6.0 million. The Company has continued to observe small decreases in overall service costs in the areas it operates in the Eagle Ford shale.
That sounds like just the drilling, not the completion/fracking, but in any event, a short lateral in less than 8 days is impressive. To say the least. A huge shout-out to the roughnecks.

Note: $5.5 to $6 million for a short lateral, compared to $9 - $10 million for a long lateral in the Bakken (though true costs/recent costs may have changed significantly in the Bakken. It looks like the Matador is looking for EURs of 500K on its better wells in Eagle Ford. 

For Investors Only

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

Having said that, this is an interesting Yahoo!Finance story today with the headline: historic market rebound leaves fund managers in the dust.
For the year the S&P 500 is up 9.2%. That's about double the return of the average mutual fund. And hedge funds? Forget about it! According the the best available data from that still murky industry the average buy-side shop is lucky to be breaking even this year.
If you're a long term index investor this doesn't matter to you, but I can personally guarantee anyone running money professionally is starting to feel like a fraternity hazing victim right now. If you're running a hedge fund that's flat for the year you've got less than two months to save your job. Unless you're one if those 10-20 huge brand names like Ackman or Einhorn your investors are going to take away the money unless you kick it into gear in a huge way starting now.
One starts to see why "Ackman" and "Einhorn" get so much time on CNBC -- sort of like product placement / free advertising.


The other big story out there today, also over at Yahoo!Finance: ObamaCare could face large nubmer of dropouts.

I've said this a gazillion times. The administration estimated 7.3 million signed up for ObamaCare. I always said it would be closer to 2 million who actually stayed with the program: a) kept paying their premiums; and, b) signed up for the second year.

Then a week ago or so it was reported that the 7.3 million might have been a tad optimistic and the number might be significantly lower. Now we have this story. We're getting close to 2 million.

There are a number of things the linked ObamaCare story did not mention, and it made wrong assumptions on other things. It is what it is. ObamaCare for those not covered by their employer will wither on the vine. The employer-mandated ObamaCare will continue to evolve.

Simply Crass Bashing
The Bush administration set up a $6 billion slush fund to fight bioterrorism, including Ebola, but President Obama diverted at least $1 billion for his own pet projects. That's fine. That's the prerogative of the president. I'm sure presidents past and future have done this and will continue to do this. This article over at DailySignal is simply crass bashing of the president. This is as bad as Rush Limbaugh.

Facing Reality

No Keystone XL? Plan B: Energy East across Canada to New Brunswick, and then on ocean-going tankers to Europe, Gulf Coast. That was easy. 


I will be away from the blog for a short period of time while I update the IPs for the wells that came off the confidential list over the weekend, and today.

OXY USA reported a couple of nice wells (not all results have been posted yet):
  • 26077, 940, OXY USA, Evelyn Stroh, 3-17-20H-143-96, Fayette, t5/14; cum 74K 9/14;
  • 26078, 842, OXY USA, Evelyn Stroh 2-8-5H-143-96, Fayette, t5/14; cum 79K 9/14;

Monday The Day Before THE Election -- November 3, 2014; Sixty (60) Natural Gas Pipelines Reversing Direction Of Flow

RBN Energy has a must-read story on the tsunami of natural gas. It's going to be very, very turbulent for energy bulls for awhile. There's another article out there somewhere today reporting that Big Oil is starting to sell off assets and cut back on CAPEX. The RBN Energy story on natural gas:
There is an onslaught of surplus natural gas supply bearing down on the Henry Hub in South Louisiana.  More than 60 natural gas pipeline projects are in the process of reversing the continent's gas flows to move gas out of the Northeast, and much of that production will be moved to the Gulf Coast
That gas will slam into supplies moving in to Louisiana from the west, sourced from “wet” gas and associated gas from crude oil plays in TX, NM, OK and ND.   Demand from gas fired power generation, industrial gas use and LNG exports will eventually absorb the incremental supply, but not for a few years.   We’ve seen this movie before, in the 2008-10 timeframe when Rockies gas battled it out with new shale supplies from the Haynesville and Fayetteville.  But this time there is a big difference in the economics of production.   Today we summarize the conclusions from a new deep-dive report from RBN Energy and BTU Analytics.
We wrapped up that analysis by examining the only market that could possibly absorb all of that gas in (South) Eastbound and Down: The Southeast—Emerging Demand Epicenter of US Gas Industry.  
But we did not talk about when that demand might materialize, what will happen in the interim, and most importantly – what kind of competition that Northeast gas might see from prolific gas producing plays to the west of Louisiana.  It turns out that these issues have the potential to wreak more havoc in the natural gas market than we’ve seen in years.
The Battle is Coming to Henry
The point of all of those earlier blogs was that the entire natural gas market in North America is being upended, with scores of proposed pipeline projects being developed to reverse the continent’s gas flows.
The ultimate goal for most of these projects is to transport (or displace) surplus Marcellus/Utica production to the Gulf Coast to meet the anticipated demand growth from gas fired power generation, new industrial plants, and of course, most of the U.S.’s impending LNG exports.  That onslaught of gas supply is aimed directly at the Henry Hub, price reference point for essentially all natural gas in North America.  This is not the first time in recent memory that the Henry Hub has been inundated with natural gas surpluses.
Much more at the linked site. For energy bulls it may not be a pretty sight or a pretty site. But, wow, talk about opportunities.

A price point:
Today the opponents are Northeast gas versus gas from Texas, New Mexico, Oklahoma and North Dakota.  And the productivity arms race has changed the battle plan.  Many producers in Northeast Pennsylvania can profitably produce gas at prices less than $2.50/MMbtu.
North Dakota Bakken

Active rigs:

Active Rigs193181188194152