Rigs In ND Down To 153; NE NGL - Daunting For The Producers "Forever" -- January 28, 2015

The winds are dying down off Cape Cod: link here.  Click anywhere on the map to see real-time wind speeds. Also, delete all the symbols/numbers after "orthographic") from the URL (=-90.86,39.66,764) and the entire earth will show up. You can spin the earth around to whatever location you want to observe.

Reporting today:

• American Electric Power (AEP): forecast 51 cents; misses by 2 cents; fourth-quarter profit of $191 million.On a per-share basis, the Columbus, Ohio-based company said it had profit of 39 cents. Earnings, adjusted for non-recurring costs, came to 47 cents per share.
• Hess (HES): forecast 29 cents; before market opens; misses by 5 cents; reported a fourth quarter net loss of $8 million after crude prices fell. Net loss per share was 3 cents, compared with profit of $1.9 billion or $5.76 a year earlier. Per share profit excluding some items was 18 cents, 5 cents below the average estimate
• Murphy Oil Company (MUR): forecast 31 cents; huge beat; profit of $2.10 per share. Earnings, adjusted for non-recurring gains, were 39 cents per share.
  The results exceeded Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 25 cents per share.
• Qualcomm (QCOM): forecast $1.25; shares fall sharply after guidance; the company cut its forecast fiscal 2015 adjusted earnings to $4.75 to $5.05 a share, on revenue of $26 billion to $28 billion. Wall Street projects adjusted profit of $5.21 a share, on revenue of $27.81 billion for fiscal 2015. Qualcomm had previously forecast adjusted profit of $5.05 to $5.35 a share on revenue of $26.8 billion to $28.8 billion. For the recent first quarter, Qualcomm posted net income of $2 billion, or $1.17 a share, up from $1.9 billion, or $1.09 a share, a year ago. Revenue grew to $7.1 billion, from $6.6 billion last year.

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More Apple

Of course I can never get enough Apple news. Here's another story from Financial Times, "Apple reports largest profit in history of mankind."

Apple reported the largest net income of any public company in history in the three months to December, as record iPhone sales of 74.5m units beat even the most bullish Wall Street forecasts.

“Demand for iPhone has been staggering, shattering our high expectations,” said Tim Cook, chief executive. “This volume is hard to comprehend.”

Apple has now shipped more than 1billion iPhones, iPads and iPods running its iOS operating system that launched in 2007.

Apple’s net profit grew 37 per cent to $18bn, topping ExxonMobil’s previous quarterly record of $15.9bn in 2012, according to S&P Dow Jones Indices. 

A reader told me that Apple's market cap has gone up over $40 billion overnight. He also noted that there are very few companies that are worth $40 billion and it's unlikely (m)any have gone up $40 billion in 24 hours.

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Back to the Bakken

Active rigs:

	1/28/2015	01/28/2014	01/28/2013	01/28/2012	01/28/2011
Active Rigs	153	191	190	204	163

RBN Energy: Natural gas in the northeast; daunting for producers.

The NYMEX gas futures curve for 2015 was sitting right at $3.00/MMBtu yesterday (January 27, 2015) as colder weather has halted it’s recent slide. This still puts outright prices in the Northeast gas forward curve in dangerous territory for producers – very close to breakeven levels – through 2015 and not much higher even beyond this year.

With NGL prices no longer supporting drilling activity for many producers in the region, the gas forwards market is becoming a bigger factor in signaling producers’ drilling prospects. Today in Part 3 of our Forward Curve Series, we continue our look at Northeast forward curves, with a focus on the Dominion South Point price hub, its historical shape and the fundamentals behind where it stands now.

When added back to the underlying Henry Hub futures curve, these discounts in the Dom S forward curve translate to an average outright price of $1.85/MMBtu for the balance of 2015 and an average barely above $2.00/MMBtu for 2016.

In fact, the current forward curve does not show outright prices at Dom S reaching $3/MMBtu on an average annual basis until at least 2019, and even then just barely.

These values out that far in the forward curve are no doubt daunting for producers in the region looking to do better than breakeven on their drilling costs. Market consensus as seen in the curve shows the new trend of negative pricing deepening in the next two years, pounded by continued production growth and limited takeaway capacity, with producers essentially at the mercy of weather-related demand in the region to help soak up the excess supply, at least until 2017-18.

Both the Transco Z6 NY and the Dom S forward curves show some semblance of support by 2018, when the annual peak shifts up to near minus $0.50/MMBtu and the lows also jump to near minus $1.00/MMBtu. This slight uplift coincides with the in-service dates for pipeline projects that the market is expecting to provide relief for the pent-up supply congestion in the Northeast.

But the curve still does not return to anywhere near pre-Marcellus/Utica levels. The market’s perceptions of the Northeast market as represented by the New York and Dom S hubs have broken from historical trends and the forward curves have been permanently reshaped. There is no going back.

But that’s not the end of the Northeast story. More big changes are afoot that will again reshape the forward curves, from new infrastructure to capitulating oil prices. For instance, once new pipe capacity is available to seek out new demand markets, the Northeast will be vulnerable to yet a new dynamic – downstream demand swings and competing supply. The next blog in the series will wrap up our look at Northeast forward curves with a summary of the major drivers to watch.