Thursday, June 18, 2015

Idle Chatter; Abraxas In The Williston Basin; Halcon; Greece -- June 18, 2015

Senator Hoeven tweeted on June 16, 2015: right now, North Dakota produces more oil than Iran

With the slump in oil prices, my hunch is that some crafty CEOs are waiting to pounce -- will buy some highly undervalued property. My timeline:
  • October, 2014: slump in oil price takes many by surprise
  • November, 2014 -- June, 2015: survival mode; CFOs working overtime to make "it" work
  • July, 2015 -- December, 2015: CEOs watching tea leaves closely to see if Saudi's strategy works; worse might be over;
  • January, 2016 -- June, 2016: companies that survive, see light at the end of the tunnel; financial statements and balance sheets much improved over a year ago
  • July, 2016 -- December, 2016: signs of consolidation as CEOs take advantage of opportunities
  • January, 2017 -- June, 2017: pundits start talking about all those off-shore projects canceled, delayed; will see if Saudi's strategy worked
Greece: it's not worth the time linking all the articles, but the tea leaves suggest a) regardless of what happens, it will be one to two years for this to play out even under worse possible outcome; and, b) everything suggests things are looking better and better for Greece. Everyone will have his/her two-cent-opinion, but it looks like Greece has not blinked.

The Fed:
  • any sign of inflation? no
  • economy ready for interest rate hike? "no" -- Janet Yellen, as recently as yesterday
  • any reason to raise interest rates? no
  • why raise interest rates? Janet Yellen feels the need to do something, anything; if she doesn't, her legacy is simply "Bernanke II"
  • risk? economy tanks; but at least Yellen's legacy is different than Bernanke's
Does she feel the need for speed? Is Yellen ready to take it to the DangerZone?

Danger Zone, Kenny Loggins

From a contributor over at Seeking Alpha with regard to Abraxas. This provides some insight into the Bakken in general, Abraxas specifically:
Management added color to the April 30 acquisition announcement.
Per that announcement, they added a bolt-on 210 net Bakken acres which gives Abraxas majority interest in an additional unit. They are petitioning the NDIC for operatorship, but mentioned they don't have a solid timeframe and that it's a federal unit. Petitions on federal units have been taking longer to get approved of late. There is a clear precedent that if you own more than 50% of a unit, you will be granted operatorship. Assuming operatorship gets approved, this deal, which looks small on the surface, can add a year and a half of inventory, or 4.5 MMBoe due to the unbooked reserves on the land. The company continues to seek both additional bolt-on acquisitions and larger deals.
Abraxas' more recent Williston Basin wells are significantly outperforming the DeGolyer and MacNaughton type curve. The company has been tweaking their drilling and completion design and their geo-steering has improved. As of March 19 strip pricing (which was lower), they were seeing 25% rate of return on wells which is strong enough to keep drilling.
Abraxas owns their rig in the Bakken and are seeing record results out of the rig. It has become extremely efficient, drilling wells in just 11 days, and saving costs in their North Fork and Eastern McKenzie County wells. These wells are in the deeper part of the basin, with prolific Three Forks, and not a lot of difference in well results.
One of Abraxas' newer strategies is to take their non-operated interests and trade up for operated interests that they can take over. They've been successful in doing so, and will very soon have 1 to 2 more operated units in the Williston, which will give their wholly-owned rig 5 to 6 years of drilling inventory in front of it.
The company made the decision to drill but not complete their wells in the wintertime. That decision yielded cost savings on completions this year upwards of 50%.
Abraxas participated in some wells with Continental Resources that are testing right now. They have not counted any of those in their inventory and if they come back positive it will have a significant positive impact on inventory in the North Fork.
Also HK Over At Seeking Alpha

I can't recall if I posted this link earlier. I generally don't post "purely" financial articles, but this article and a couple of comments shed light on where HK has its challenges, or as some would say, where they went wrong.  

Federal ObamaCare Subsidies

This would be the right thing to do, but somehow the GOP will screw it up.  The WSJ is reporting:
Republican leaders are coalescing around a plan to extend the health law’s tax credits for as long as two years, while repealing other parts of the law, if the Supreme Court invalidates the credits. 

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