Exactly Right -- July 19, 2015

This is an excellent article; reports something we've been saying for quite some time. The Houston Chronicle is reporting: oil statistics haven't kept pace with evolving industry.

Despite rig count's plunge, production of crude has surged.

Despite the rig count's dramatic fall, oil production surged to a 44-year high, helping push an early 2015 price rally into another slide. It's a perplexing outcome that highlights the challenge of analyzing and predicting rapid trends in the global oil market.

"We're talking about a very different industry," said R.T. Dukes, an analyst at energy consulting group Wood Mackenzie. "The technology is much different today that it was in the past."

That's because producers now use a single rig to drill multiple wells from a single site, allowing them to boost output with fewer machines. And since prices began plummeting, many oil companies have pulled out of less proven shale plays to refocus their attention on the sweet spots in the nation's biggest shale plays to better their chances of striking big bounties of crude.

"You're using your best rigs and your best crews on your best properties with the best technology," Sieminski said. "So it's easier to maintain production given the drop in the rig count."

Finally, a mainstream article mentioning the "human factor," the best crews.

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COP And The Dividend Increase

24/7 Wall Street provides some details.

To cancel a deep-sea drilling rig was quite a decision. Note:

According to Ensco, Conoco is obligated to pay Ensco the operating day rate of the drillship monthly for two years. The day rate of Ensco’s DS-9 drillship is approximately $550,000 a day. That works out to $16.5 million a month, $198 million per year, or $396 million for the two-year period.

In other words, whether or not COP went ahead with drilling plans, they had a contract with Ensco to pays them about $400 million over two years. Obviously the companies are talking and COP is unlikely to take the full $400 charge (?). I don't know if underwriters/insurers share in the charge.

The article continues:

In the first quarter of this year, ConocoPhillips posted net income of $272 million, so a charge of $200 million to $400 million is not trivial.

However, this is where I find accounting on Wall Street interesting (nothing new; these are simply the accounting rules):

As a special, one-time item it will not affect net earnings or earnings per share, but it has already had an impact on Conoco’s dividend increase, and the impact on cash flow will be non-trivial as well.

The big question is whether "seed corn" for oil companies is similar to R&D for the pharmaceutical companies or the automobile manufacturers. Some say "yes," some say "no." I'm not sure.

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Jerked Around

It will be interesting to see if Americans show their frustration of being jerked around when November, 2016, comes around.

It's not that ObamaCare is so entirely awful on so many levels, the real problem is middle class folks and the "working class" getting jerked around. There is no longer any stability in their health care plans. There are at least four ways of being jerked around:

• if employed by a "larger employer," you run the risk of your employer finding loopholes to get you knocked off the company plan, or slim down the program to just barely meet federal standards, which is mostly wellness and health promotion and birth control;
• physicians, clinics, hospitals enter and exit a particular plan seemingly willy-nilly; one year your physician accepts ObamaCare, the next year she doesn't;
• your health insurer has one name this year, and then a new name next year when there is a merger; and with the merger, one must start all over again, researching a healthcare plan; and, then,
• at the federal level, exceptions are being considered and granted, again, willy-nilly.

By the way, I talked about this "unpredictability back in March, 2014, more than a year ago; as I've said, predicting the problems with ObamaCare does not require the likes of a rocket scientist or even Elon Musk.

So, now it's the Native Americans being jerked around. My hunch is that the rank-and-file Native American men and women are just like the rest of us when it comes to health insurance: keep it simple and if my employer will pay for it, great.

But apparently, ObamaCare is scalping the Native American leadership and they want it stopped. The Rapid City Journal is reporting a move underway to exempt Native Americans from employer-mandated ObamaCare rules:

Representatives of several Indian tribes say they support legislation introduced this week in Congress that would exempt tribes nationwide from being classified as a large employers under the federal Affordable Care Act.

Members of Montana's congressional delegation and others introduced legislation this week that would exempt tribal governments from the large employer mandate.

Tribal spokesmen say requiring tribes to provide insurance for tribal employees is more expensive than allowing employees to register for individual insurance coverage. People who register as individuals may qualify for tax credits that offset the cost of coverage.

Again, remember, there are three legs of the ObamaCare three-legged stool:

• employer-mandated coverage (delayed, and now finally being implement)
• individual mandate for those not employed by a "large" employer (delayed, but went into effect a year or so ago)
• excise tax on medical devices (being whittled away by Congress due to heavy lobbying by the medical device lobbies)

I've added a new tag to capture this cost shifting: ObamaCareCostShifting. A reminder that the ObamaCareCosLeaving tag is still there and has been there for quite some time.

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Spinning

It will be interesting to see how The New Yorker spins the Chattanooga execution of four US Marines and a US Navy sailor. The editors did a great job spinning the terrorism story in Charleston.