Wednesday, February 25, 2015

Wednesday -- February 25, 2015

Active rigs:


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RBN Energy: why "high" production will continue even as rigs are coming down.
Producer rates of return are far below where they were a few months back, and the Baker Hughes crude rig count is down 553 since November. A third of pre-crash crude rigs are now idled. That means that crude oil production will be falling soon, right?  Not necessarily.  There are a number of factors working to keep production up, not the least of which is the rapidly declining cost for drilling and completion services.  Today we examine the impact of these factors, review RBN’s crude oil production scenarios and consider what it all means for the long-term relationships between prices, returns and production volumes.
This blog builds on our analysis of production economics, productivity improvement and factors influencing producer behavior in several postings over the past few weeks.  In It Don’t Come Easy Part 1, Part 2 and Part 3, we showed that with prices in the $50/bbl range, rates of return for most crude oil plays are breakeven at best.  We made the point that there are a lot of assumptions imbedded in that analysis, including no change in current producer productivity and no change in drilling/completion costs from last year. We’ll get back to that one a little later. 
In Getting Better all the Time – Productivity Improvements, Crude Production and Moore’s Law we showed how much drilling productivity has improved over the past few years, and speculated that new rounds of improvement could be driven by producers doing what it takes to survive in a world with lower oil prices.
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Tesla Skyfall

Business Insider is reporting:
Given that Tesla missed on earnings expectations for its fourth quarter and was unable to deliver 1,400 cars (out of a total of 35,000) in 2014, all eyes are now focused on whether the company can justify its still lofty stock price and $26 billion market cap.
That's why Lovallo's bearishness is important. He's predicting a nearly 70% decline in Tesla's stock price.
That's a massive collapse. Massive. Bottom line: Lovallo thinks Tesla is a lot of smoke and mirrors:
We believe Tesla has seemingly managed to offset a steady stream of negative news and weak financial results by issuing long-term targets that, in our view, are often quite difficult to fathom. We believe that baring a significant reset in investor expectations, this strategy is certain to lose its luster, particularly considering what we see as the long road of challenging financial results and cash burn that lie ahead. 
Lovallo's bear case is part of a larger trend among Tesla's financial followers. Since the middle of last year, Tesla's story has changed from being a narrative about a booming stock to being a tale of a manufacturing company with a lot of ground to cross between where it is now and where it says its business will be in five or 10 years.
I've always felt Tesla was a scam as an automobile company. I've always felt it was a battery company disguised as a car company. But if it can't come up with a battery, it will go the way of A123. 

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