Tuesday, December 1, 2015

Auto sales: on track to hit 18 million new vehicles sold in calendar year 2015. EV sales will be reported Tuesday with the exception of Ford EVs which will be reported Wednesday.

Automakers selling cars and trucks in the US will report November sales on Tuesday, and the thinking from the analyst community is that the annual sales pace will clock in very close to, at, or above 18 million new vehicles sold.

Barring a horrible December, that means we're about to see a record year for auto sales in the US.

The previous annual peak was 17.4 million, set 15 years ago in 2000. The sales pace has moved above 18 million since then, on a monthly basis, but we've never wrapped up a year at that level.

Active rigs:

	12/1/2015	12/01/2014	12/01/2013	12/01/2012	12/01/2011
Active Rigs	65	187	191	182	196

RBN Energy: hedge protection for gas producers continues to melt away.

U.S. oil and gas companies currently have hedge protection in place for less than one-fifth of their expected 2016 production, and the strike price of the remaining derivatives is significantly lower than in previous years. With a bleak gas price outlook for 2016, the result could be even more severe capital spending reductions, potential production curtailments, and increased financial stress for mid-size and smaller firms. In today’s blog, we examine what has happened to producer hedging protection and the implications for capital spending and production trends.

The Rolling Stones lyrics from 1969 must be echoing in the minds of gas producers today: “Oh, a storm is threat’ning, my very life today; if I don’t get some shelter, oh yeah, I’m gonna fade away.”  In recent weeks there have been a spate of reports from banks and consultants that warn of more pricing problems facing U.S. gas producers.  During 2015, about half of gas production was hedged out.  But that will drop like a rock in 2016, down below 20% according to most reports.  Worse yet, the price of those hedges is also headed south.  Given the potential impact on producer drilling activity and ultimately on production, we thought it would be a good idea to look at the numbers.
But before we start – a quick disclaimer. We are not an investment advisor.  The purpose of this blog is not investment advice or endorsement.  RBN looks at company level numbers to see what they mean for the market as a whole, not implications for any particular company’s stock. 

Current natural gas market conditions make this a particularly bleak time to be exposed to market prices. Henry Hub spot prices averaged $2.07/MMbtu in November; the lowest level seen since 1998, and according to NGI the spot price plunged below $2.00/MMbtu in the first week of November for the first time since the summer of 2012. As we pointed out in “Breakdown: U.S. Natural Gas Storage Hits 4 Tcf for the First Time”, working natural gas inventories recently reached an all-time high.

We also detailed the threat to winter gas prices in “A Hazy Shade of Winter – Shadow of Storage Surplus Threatens Winter Natural Gas prices” and “Hazy Shade of Winter Part 2”. In its November 2015 Short Term Energy Outlook, the U.S. Energy Information Administration said it expects warmer than average temperatures caused by the strong El Nino in the Pacific Ocean will reduce winter heating demand and provide little price relief to gas producers.

And with the CME/NYMEX forward curve below $3.00/MMbtu until December 2017, the access to additional shelter for next year’s volumes doesn’t look good. 

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No Good Deed Goes Unpunished

California oil and gas regulator resigns after helping Governor Brown. Fox News is reporting:

California's chief oil regulator announced his resignation after 17 months as head of the embattled agency, including a criticized episode in which he directed state workers to investigate the oil and gas potential of Gov. Jerry Brown's family ranch.

Additionally, days after Brown appointed Bohlen in June 2014, the governor and the governor's aides asked Bohlen to have oil and gas regulators research and map out the oil, gas and mineral potential and history of the Brown family ranch in Northern California, The Associated Press reported earlier this month.

Bohlen and Brown aides this month defended the oil agency's work for Brown family private property, saying it was legal and normal, and that Brown had no interest in drilling on his family land.

However, the oil regulator who prepared the map for Brown filed a whistleblower complaint over being made to do the work. Former oil regulators and oil-industry veterans told the AP the state oil work for Brown was unique because of the custom map with drilling information and color-coded geological records and legends, and because of the report's conclusion by state regulators that the area of Brown's family ranch was unlikely to warrant any drilling or mining in the future.

Bohlen told The Los Angeles Times this month that Brown also directed him in June 2014 to keep the personal work done for Brown out of email, citing open-records laws.

State officials were unable to produce any other examples of state regulators mapping out the petroleum, mineral and geology of land for personal purposes, and records showed the state oil agency specifically rejecting requests for maps from a state lawmaker's office and from a private individual.