Friday, June 19, 2015

Active rigs:

	6/19/2015	06/19/2014	06/19/2013	06/19/2012	06/19/2011
Active Rigs	78	189	186	213	173

RBN Energy: Developing NGL Supply/Demand and Price Scenarios

If it persists, the oil price crash may have undermined many of the assumptions behind massive infrastructure investments in steam cracker plants and export facilities for natural gas liquids (NGLs). These projects expected to take advantage of booming domestic NGL production and low NGL prices relative to crude. Yet take-or-pay commitments and committed investment in plant infrastructure means they may be exposed to  poor returns if crude prices remain low.

One complicating factor in the projection of ethane prices is “rejection” – meaning leaving ethane in the tailgate outlet gas stream from a processing plant – instead of recovering it for commercial use. Rejection typically occurs when the market price for recovering ethane is lower than for natural gas – making it more valuable left in the outlet stream of a gas processing plant. The “rejection” equation is also strongly influenced by distance to market because most demand for ethane is located at the Gulf Coast whereas production occurs in different regions across the U.S. So economic recovery of ethane must also factor in transport cost. The Drill Down provides a detailed explanation of the supply, demand and cost variables required to determine the ethane price forecast. The analysis is broken down by production region and details where supplies to meet Gulf Coast demand will come from as new steam crackers come online – based on the relative cost of transport and available capacity. The cost to produce and transport the last barrel of ethane required to meet prevailing demand sets the “clearing” price for ethane.  

It really is amazing: regardless of all that talk about "Peak Oil," whoever back in 1973 would have guessed there would be a glut of fossil fuel in 2015? I find it quite remarkable.

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Gloom and Doom

Bloomberg is reporting: The Shale Industry Could Be Swallowed by Its Own Debt.

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And It Continues

Bloomberg at Rigzone is reporting: Oil-Sands Megaproject Era Wanes as Suncor to Imperial Scale Down

The era of the megaproject in Canada’s oil sands is fading.

Crude’s price slump, pressure to get off fossil fuels and tax increases in Alberta are adding to high costs and a lack of pipelines, prompting producers from Suncor Energy Inc. to Imperial Oil Ltd. to accelerate a shift to smaller projects.

Companies are deferring new mines in favor of cheaper, bite-sized drilling programs that deliver quicker returns and require less labor. The moves will help reduce cost overruns and make Canadian companies more competitive with U.S. shale producers. The trade off will be reduced production growth and a smaller economic boost for the country’s oil patch.

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Meanwhile

BloombergBusiness is reporting: Enbridge Income to Buy Parent’s Pipelines for $25 Billion.

Enbridge Income Fund Holdings Inc. will buy Enbridge Inc.’s Canadian liquids pipeline business and certain renewable energy assets for $24.8 billio), freeing cash for its parent company.

Enbridge will continue to operate the pipeline assets.

The company said the deal will reduce its cost of capital and allow it to boost payments to shareholders. Enbridge will receive C$18.7 billion of units in the income fund, which will also assume C$11.7 billion of debt.

The sale to the income fund is the first in a two-stage reorganization Enbridge announced last year that will enable it to focus on developing faster-growing projects. The company also plans to sell U.S. pipeline assets to another affiliate, Enbridge Pipeline Partners LP.

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Tesla Battery Update: Panasonic

A contributor over at Seeking Alpha: Tesla's Battery Supplier Panasonic Forecasts Drastically Less Growth Than Forecast By Tesla.

Summary:

• In a recent investor presentation, Panasonic forecast auto battery sales growth of just 11 percent in the next 12 months even as Tesla's Model X is ramping
• While Tesla forecasts perpetual 50% annual sales growth, over the next four years, Panasonic forecasts a CAGR of just 16.5%
• Even in 2019, when the Model 3 is supposed to be in full production, Panasonic forecasts auto battery sales only 84% higher than in FY 2015
• Tesla  forecasts 50% growth in sales per year indefinitely, but Panasonic forecasts battery growth of less than a third much over the next 4 years.

We'll know a year from now how this all works out. For newbies: my world view of Tesla is that it is a battery company disguised as an automobile company surviving on tax breaks, subsidies, and grants. Just days after borrowing another $750 million (from seven banks, no less), Tesla "bagged" another $15 million in tax credits from the state of California.

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Office Depot Staples

Office Depot shareholders approve sale to Staples.