Tuesday, February 10, 2015; Apple To Issue Bonds Paying 0.5% For Ten Years

See disclaimer.

Well, that was interesting. At 6:15 a.m. CT, there was a headline that the market would open lower (Greece, Ukraine), and futures were up about 24 points. Then at 6:30 a.m. CT, futures spiked to 120 points; now up 100 points (6:50 a.m. CT).

RBN Energy: process condensate volumes slow to export.

We posted numerous blogs on condensate exports last year (2014) as the topic garnered “hot-button” status in the industry and Washington, DC. Here are the cliff notes for beginners – skip to the next paragraph if you are a condensate veteran. “Processed” condensate is considered a refined product derived from the distillation of lease condensate – a liquid produced at the wellhead from natural gas – that is similar to but lighter than crude oil - containing more light components giving it a higher API degrees gravity specification. Arcane Federal rules supervised by the BIS restrict the export of U.S. produced crude oil and lease condensate.

Last year (2014), the BIS appeared to loosen the regulations for processed lease condensate by providing letters of ruling to Enterprise Product Partners and Pioneer Natural Resources certifying that the way they processed lease condensate (typically using a stabilization unit with a distillation tower) qualified their products for export. After that development became public in July, the BIS received multiple similar applications from companies anxious to join the bandwagon. In December BIS indicated that more companies would be issued letters approving their classification of processed condensate as a refined product that is not subject to BIS export prohibitions and also attempted to make the process more transparent by providing a FAQ’s document.

According to the Energy Information Administration (EIA) exports of processed condensate (classified as "kerosene and light gas oils" in the EIA Petroleum Supply Monthly report) began last year in July and averaged 16 Mb/d through November (latest data). Our friends at ClipperData who track movements out of the Enterprise Texas City terminal observed one cargo each in December and January amounting to 21 Mb/d for those months.

The early sales back in July 2014 were to Asian buyers including Mitsubishi, Mitsui and South Korean refiner SK Innovation Co. November, December and January exports were reportedly delivered to European buyers. Reuters reported in November 2014 that Enterprise had secured export contracts with Petro-Diamond Singapore the oil trading arm of Mitsubishi Corp, and independent oil trader Vitol for 600 MBbl of processed condensate per month in 2015 – a total of 40 Mb/d.

However another Enterprise tender for 20 Mb/d starting in March 2015 apparently failed to attract high enough bids. Aside from Enterprise (who market all of Pioneer’s condensate) other potential exporters include Australian conglomerate BHP Billiton Ltd (that has reportedly sold two cargoes), major oil company Royal Dutch Shell and Midstream giant Plains All American (both recently given the green light by BIS) as well as Conoco Phillips (waiting on BIS approval). But in spite of a lot of producer interest, significant export volumes have yet to materialize.

Active rigs:

	2/10/2015	02/10/2014	02/10/2013	02/10/2012	02/10/2011
Active Rigs	137	196	185	203	165

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Apple goes ahead with Swiss franc bond sale. Link here:

The iPhone maker is seeking to raise at least 1 billion francs ($1.08 billion) from the two-part bond sale on Tuesday, according to one of the banks running the deal.

Bankers say the bond, due to mature in November 2024, will price at an implied yield of roughly 0.25%, while the 15-year bond will price at an implied yield of around 0.7%.

Wow, Apple is going to raise "at least" a billion francs and they will pay the lucky investors 0.25% for the next ten years. Really. And the 15-year will get you 0.7%. Am I missing something? I must be. These bonds will be over-subscribed.

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Railcar market collapses. Reuters reports:

The sudden slump in the tank car market has more to do with narrowing crude oil spreads and ample tank car supply from manufacturers such as Greenbrier and American Railcar Industries than with more than 50% dive in U.S. crude prices over the past seven months.

But it may be an early warning for rail companies such as CSX, BNSF and Union Pacific, which have been resolutely upbeat despite growing expectations that booming U.S. oil production will begin to slow as soon as this summer.

Monthly lease rates for the most common of oil rail cars fell to $1,300 late last month from a high of $2,450 about year earlier, according to data obtained by Reuters from energy industry intelligence service Genscape.

The rates for cars, used to transport more than half of North Dakota’s crude, are at their lowest in about three years, said Tom Williamson, owner of Transportation Consultants.

“It wasn’t that long ago that you couldn’t find a car to lease, now I’m getting calls from brokers offering the cars,” he said, adding that he has received offers for 1,500 cars since late October.

I would have to check but I believe overall rail traffic remains below pre-recession levels, but I haven't looked at the numbers in a long time.