Update On EPD Announcement To Buy WMB; And Some Other Stuff -- July 7, 2015

Enterprise Partners may have to make it a "hostile" takeover. The Wall Street Journal is reporting:

Energy Transfer Equity LP said it would pursue a multibillion-dollar deal to acquire rival pipeline operator Williams Cos. with or without the company’s cooperation.

Energy Transfer had been quietly pursuing Williams for six months when the pipeline company rejected an all-equity offer valued at $48 billion last month. Now Energy Transfer, run by Dallas billionaire Kelcy Warren, is signaling that it may be willing to go in a hostile direction with its takeover bid.

In a statement issued late Tuesday, Energy Transfer was critical of how Williams has responded to its proposal and reiterated its offer—an offer Williams has already deemed too low.

This isn't the first contentious deal that has pitted Energy Transfer and Williams against each other. In 2011, Energy Transfer agreed to buy pipeline operator Southern Union Co. for $4.2 billion when Williams tried to scuttle the deal with a higher offer. Energy Transfer ultimately had to pay $5.7 billion to win.

Though little-known outside of the energy patch, Energy Transfer has become one of top oil and gas transportation companies in the U.S. The company controls an intricate network of 70,000 miles of oil, gas and fuel lines.

Geographically, a deal with Williams would give Energy Transfer an expanded footprint. And Williams has significant fuel-moving capabilities in the northeastern U.S., where it is tough to build new pipelines because projects tend to be fraught with political tension and delays. Most of Energy Transfer’s oil and gas lines are located across the South and Midwest. Since there is little overlap between the two companies’ networks, analysts have predicted that federal regulators would probably approve a combination of the companies.

With this administration I wouldn't hold my breath on regulators approving this deal.

Let's do the math:

• (5.7 - 4.2) / 4.2 = 0.357
• 1.357 x 64 = 87

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Shell Places Huge Bet On The Arctic
The Wall Street Journal is reporting:

Royal Dutch Shell PLC is days away from drilling in the Arctic Ocean—betting it can find enough oil to justify the huge risks that keep almost every other competitor out of those icy waters.

The company is hauling two massive rigs—the Polar Pioneer and the Noble Discoverer—more than 2,000 miles up and around the Alaska coast to the Chukchi Sea, where it plans to begin work the third week of July. Accompanying the rigs are 30 support vessels and seven aircraft, a large entourage even by big oil-company standards.

The voyage represents Shell’s effort to mount a comeback in the Arctic three years after a different rig ran aground following an unsuccessful drilling season. This time, Shell executives say they have both costs and safety under control, but the project has already hit a snag.

A federal agency said last week that Shell can’t drill wells simultaneously within a 15-mile radius to minimize impacts on walruses, which means the company may only be able to drill one well this year instead of the two it had planned. And on Tuesday, Shell said that it discovered a small breach in the hull of a vessel carrying equipment for spill response and is examining what repairs are necessary.

If I were a betting man, and I'm not, I would not want to bet the farm on the Arctic adventure.

I'm sure we are all 99% sure that Shell's interest in the Arctic is simply what they say it is, but the intensity with which they pursue this object suggests one at least think of other possibilities, not necessarily to develop at this time, but to explore.

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A Chinese Birthday Present

A reader writes me regularly about this issue. The Wall Street Journal is reporting:

China’s state-sponsored stock-market rally is unraveling, with potentially dangerous consequences. The first major sign that all wasn’t going according to script came on June 15.

Chinese had awakened expecting big gains because it was President Xi Jinping’s birthday, but the Shanghai market fell more than 2%.

One deeply indebted day trader committed suicide by jumping out a window, his net worth wiped out by the collapse of a single stock that he had borrowed heavily to purchase. The market has since fallen by another 25%—and some fear that prices could go much lower.

In most countries, no one thinks there is a link between a leader’s birthday and the market. That such a theory prevails in China reflects the widespread belief that Beijing’s authoritarian government can produce any economic outcome it wants. Now trust in China’s ability to command and control the economy is faltering. If trust collapses, the global repercussions could be more severe than those from the Greek debt crisis.

I knew about the plunge in the Chinese stock market; I did not know it was related to a birthday.

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A Dry State

Everyone knows the huge amount of water that marijuana crops require. Now we're beginning to see just how much. The Wall Street Journal is reporting:

California’s marijuana industry is taking a toll on the state’s scarce water resources and the environment, with growers sometimes illegally siphoning off entire streams to produce the nation’s largest supply of pot.

In the Cascade Mountains here in the northern part of the state, thousands of mostly illegal pot farms dot the lush evergreen forests—many using pipes and other equipment to siphon water for their crops even though few have rights to do so.

Just last month sheriff’s deputies discovered an unattended, 10-horsepower generator along a creek that was pumping water to four pot farms. “You can stop them one day, and they’ll put in another the next day,” he said. “They don’t care. It’s all money, money, money.”

The problem, while not seen as a major issue in the state’s broader drought emergency, is a byproduct of a boom in marijuana production in California amid a nationwide movement toward legalization.

California legalized marijuana for medical use in 1996, while pot for recreational use has been legalized in Alaska, Colorado and Washington and Oregon over the past three years. A petition for a 2016 ballot initiative on legalizing recreational use is circulating in the Golden State.

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Why I Love The Wall Street Journal

The WSJ has a piece on Janis Joplin's Mercedes Benz.