Pages

Tuesday, January 13, 2015

Musings On A Tuesday Night -- January 13, 2015

Scroll down to see wells coming off the confidential list on Wednesday.

Richard Zeits makes a bullish case for natural gas in 2015 over at SeekingAlpha.

These are some of the other stories I missed earlier today or will be reading about tomorrow, from The Wall Street Journal.

Oil replays 1980s bust.
A surge of oil from outside of the Middle East flooded global energy markets. The world-wide thirst for crude didn’t keep up. The Organization of the Petroleum Exporting Countries stood by and watched as oil prices fell and then fell more. Welcome to the world of oil in 2015—a repeat in surprising ways of the story 30 years ago.
Between November 1985 and March 1986, the price of crude plunged by 67%. Between June 2014 and today, crude prices have fallen by 57% and could well head lower.
After the mid-1980s bust, it took nearly two decades for oil prices to rebound to pre-bust levels and remain there. Energy executives are now haunted by the question: Will it take as long this time?
Many economists and energy analysts believe that prices will probably rebound somewhat from current levels by the end of the year.
The global benchmark for oil, currently $46.59, will “head back toward the $70 range and I suspect that will be sustainable for quite some time,” says Stephen P. A. Brown, an energy economist at the University of Nevada, Las Vegas, and former economist with the Dallas Federal Reserve Bank.
The dollar increased in value in the early 1980s as the Federal Reserve wrung inflation out of the U.S. economy, but the Reagan Administration engineered a large devaluation in 1985 in agreement with other major economic powers. Between March 1985 and December 1987, the dollar lost 40% of its value against a basket of other major currencies.
That stands in contrast to the current episode: The dollar rose more than 12% in 2014, compared with a basket of widely traded securities.
Much, much more at the linked article including how little it can cost to drill for oil in the Bakken and the Eagle Ford.

Railroads steam toward big gains
How are plunging crude-oil prices affecting railroads? That’s the crucial question as big North American freight railroads begin to report their fourth-quarter earnings, with CSX Corp. posting a 15% rise in profit on Tuesday.
The answer isn’t what one might guess.
Despite a drop since mid-June of more than 50% in the price of crude oil—one of the fastest-growing parts of the rail business—analysts expect nearly all railroads to post strong fourth-quarter profit gains.
While the growth of crude-by-rail transport could start slowing by midyear as cheaper pipelines become available, Wall Street expects most railroads to post double-digit 2015 earnings-per-share growth as they raise prices and improve service.
No, the big problem for rail won’t be lost oil revenue, it will be stiffer competition from trucks. Lower fuel prices will trim the price advantage trains have had over trucks in recent years, an edge that has helped railroads steal share from the highways.
Also, much, much more at the linked article.

What about the Canadian oil sands? Suncor cuts spending but ...
It said projects under way such as the C$13.5 billion Fort Hills oil-sands mine in Alberta and the Hebron oil field off Canada’s east coast, will move forward as planned and take full advantage of the current economic environment. These long-term growth projects are expected to come online in late 2017.  
And finally, US racks up smallest deficit since 2007. I wonder why? Could it be the decrease in oil imports? Let's see what this article has to say. It's all smoke and mirrors in a sense; it's the lowest since 2007, but that's because the gap between 2007 and 2013 was so severe -- why:
The government’s fiscal outlook has improved markedly since the 2007-09 recession, when government tax revenues withered as the national unemployment rate climbed toward 10%. The Obama White House responded to the economic collapse with a more-than-$800 billion stimulus package, designed to defibrillate the economy even as it added further to the deficit.
A look at the graph at the linked article "proves" the point. 

Disclaimer: this is not an investment site. Do not make any investment, financial, or relationship decisions based on anything you read here. Having said that, I remain inappropriately exuberant about the US economy. I particularly got a kick out of the article on the profitability of trains (despite slump in oil prices) and the likelihood of the resurgence in truck manufacturing. If both trains and trucks show resiliency, I think it spells great things for the economy. And the automobile manufacturers came off one of the best Decembers ever. I was impressed that Suncor will cut CAPEX but won't scrap projects. That WSJ article on "the replay of the 80's oil bust" was quite enlightening. Right now, I think Saudi Arabia is looking at $50 oil for quite some time. And China is looking at more and more ocean-going tankers to store it. For young folks with a long, long horizon, this is a great opportunity for investing. If young folks are having difficulty looking for places to invest, read: Wall Street Journal, Barrons, and Wired, for starters. 

Speaking of Wired, look at the great photo at this article: "The Flying Hospital That Rushes Wounded Soldiers To Safety." It was my pleasure and my honor and my fortune to have served under the US Air Force Surgeon General who first conceived the need for an airborne hospital, not just air evacuation. It was his vision, and then the subsequent USAF Surgeon General who kept the ball rolling. It is amazing how far flying hospital has come. The most impressive thing: the average age of the pilots (male and female) up front is probably 27; the average age of the nurses (male and female) in the back: 25; the average age of the physicians (male and female) in back, 29. And most of the advancements in flying hospitals were developed by those young folks. I could be way wrong on the ages; it's just what I remember some decades ago.

And it really was men and women both in the front end (pilots) and back end (medics). 


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.