Active Rigs Break Below 130 -- Now At 127 -- Falling Fast In North Dakota; EOG - After Missing Estimates Will Sharply Curtail Drilling -- February 19, 2015

Updates

February 21, 2015:

What Wal-Mart has effectively done is raise the cost of doing business for all retailers not named Costco, which has long paid workers well above minimum wage -- the average Costco worker earns $21 an hour. According to job site Glassdoor, the average Sears cashier pulls in $8.38 an hour, while at Sear-owned Kmart, it's $8.16 an hour. That's barely above the current federal minimum hourly wage of $7.25.
The average J.C. Penney hourly associate earns $9.16 an hour, according to Glassdoor. Instead of Wal-Mart shoppers and employees being the butt of Twitter jokes from teens, the higher pay may actually attract them to apply for gigs there instead of at Abercrombie, where sales associates only earn an average of $8.68 an hour, according to Glassdoor.

Original Post

Obama's ISIS strategy: literally "kill" them with kindness; offer them jobs, opportunities to start their own businesses. Meanwhile, Wal-Mart (Walmart) will give nearly half its workers pay raises. AP is reporting:

As part of its biggest investment in worker training and pay ever, Wal-Mart told The Associated Press that within the next six months it will give raises to about 500,000 workers, or nearly 40 percent of its 1.3 million employees. Wal-Mart follows other retailers that have boosted hourly pay recently, but because it's the nation's largest private employer, the impact of its move will be more closely watched.

In addition to raises, Wal-Mart said it plans to make changes to how workers are scheduled and add training programs for sales staff so that employees can more easily map out their future at the company.

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Reporting today:

• Linn Energy (LINE), forecast 6 cents; huge miss; shares fall almost 5% in pre-market trading; reports a loss of 47 cents; misses by 52 cents;  
• Noble Energy (NBL), forecast 34 cents; before market opens; beats by 3 cents; 
• Denbury (DNR), forecast 23 cents, before market opens; shares fall 4% in futures; rise after earnings release: fourth-quarter 2014 earnings of 27 cents per share, flat year over year. The bottom line, however, came above the Zacks Consensus Estimate of 23 cents. The outperformance was mainly backed by higher production;
• California Resources Corp (CRC), OXY USA spin-off, forecast 7 cents, after market close;
• Cheniere Energy (LNG), forecast, a 26-cent loss; after market close;

"Best shale driller"  (EOG) is going to halt growth. -- BloombergBusiness. 
Why EOG's "crummy corner" is good for oil -- Forbes. By the way, the Forbes writer is using the same phrase I've been using for quite some time: "circling the wagons":

And yet EOG’s results should be received as great news if you’re looking for reasons to be bullish on oil prices. EOG, a shale-drilling pioneer and biggest oil producer in the Lower 48, expects to be producing less oil at the end of the year than it is now.

Why is this a good thing? Because it means that America’s oil and gas drillers are responding quickly to low oil prices by circling the wagons, shutting down drilling rigs, cutting back on fracking and conserving capital.

See disclaimer.

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 here.

The Dickinson Press is reporting:

Hedge fund Paulson & Co. has boosted its stake in Whiting Petroleum Corp. to become the No. 1 shareholder in North Dakota’s largest oil producer, taking advantage of plunging crude prices that have pummeled the company’s stock.

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Active rigs:

	2/19/2015	02/19/2014	02/19/2013	02/19/2012	02/19/2011
Active Rigs	127	186	182	199	171

RBN Energy: held by production.

Can it make sense for a producer to drill a well in today’s low price environment even if the rate of return on that well is below zero?  Surprisingly the answer is yes, and the issue has important implications for the impact lower prices will ultimately have on U.S. oil and gas production volumes.   Factors such as lease requirements can incentivize drilling and cause production levels to continue growing, even when spot prices don’t seem to support it.  As the new economics of lower oil, NGL and natural gas prices suggest that production declines are just down the road,  the market’s quest to nail down when and how much production will decline  has brought the role of “hold by production” (HBP) drilling into the spotlight. Questions about HBP status and its role in producers drilling strategies have been a staple in the latest round of earnings calls.Today we take a closer look at HBP drilling.

One of the he biggest differentiators between the U.S. and other countries when it comes to drilling for oil and gas is that in the U.S. individuals own the rights to produce minerals beneath the land.  That means when producers want to drill for oil or gas, the mineral rights owner (sometimes but frequently not the owner of the surface rights, generally thought of as the landowner) gets to share some of the proceeds. That is good news for the mineral rights owner but it does require the negotiation of a lease agreement with any would-be producer.  A key provision in any such oil and gas lease agreement between mineral right owners and producers is the Habendum clause, which establishes the length of the lease and defines the primary and secondary terms for drilling rights. These primary and secondary terms play a critical role in determining if and when the producer is required to drill for oil or gas.

Many leases in the shale and other high-growth oil and gas basins are structured with a feature designed to protect the mineral rights owner from a producer leasing those rights but then never actually drilling a well (and providing royalties for the mineral rights owner).  In this type of lease, the primary term defines the initial period of the lease, which gives the producer time to determine whether to drill or give up the lease. When the primary term expires, the lease terminates or rolls into the secondary term as long as there is a producing well on the lease. In other words, to keep from losing the lease, (i.e., extend the lease beyond the primary term), a producer needs to drill at least one producing well to “hold” the lease by production - HBP. For a producer, a longer primary term is advantageous because it gives them more time to decide whether and when to drill. For the mineral rights owner a shorter primary term is better because it reduces the time they have to wait for drilling and potential production revenues.