Wednesday, May 21, 2014

Note to readers: I have no idea how this was posted on January 19, 2015 when it was originally posted May 21, 2014. There must have been a glitch in the blogger application. 

Regardless: note -- this post was originally published May 21, 2014. 

Weatherford, Shengli Highland Petroleum Equipment,  and Sinopec (China) Oilfield Service to form joint venture. The joint venture will combine the complementary strengths of each of its parent companies to provide products and services within a collaborative framework helping to tap into the vast unconventional resource base in mainland China.

Summary of weekly petroleum data for week ending May 16, 2014 (averages, and rounding)

• crude oil refinery inputs: 16 million bopd, an increase of 300,000 bopd over previous week 
• US crude oil imports: 6.5 million bopd, a decrease of 660,000 bopd
• over past four weeks, imports averaged 7.0 million bopd, 11% below same period last year
• crude oil inventories decreased by 7 million bopd from previous week
• at 391 million bopd, US inventories are near upper limit of average range for this time of year
• total motor gasoline inventories increased by 1.0 million bbls; middle of the average range
• distillate fuel inventories increased by 3.4 million bbls but below the lower limit of the average range for this time of year 
• gasoline demand turns positive again after several weeks of a decreasing trend

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Yahoo!InPlay

From Yahoo!InPlay: "July crude oil shows muted reaction to inventory data; now up 1.0% at $103.34." I'm not exactly sure what to make of that quote: the inventory numbers were a bit mixed, but the headline would have been that crude oil inventories decreased by 7 million bopd; price of oil up over 1%. If inventories are at their highest historical levels, and domestic oil production continues on a tear, one could argue that imports did not decrease that much because a) a certain type of crude oil is required, and only imports can provide the quantity; b) contractural requirement

Target misses by one cent; reports revenue in-line; guides Q2 EPS below consensus; market up strongly today; TGT down slightly

PetSmart beats by 3 cents; misses on revenue and shares plunge almost 8%

Northrop Gumman increases quarterly dividend substantially: from 61 cents to 70 cents/share; 15% increase

Trina Solar beats by 32 cents; shares surge 24%

OAS up 3%

Disclaimer: this is not an investment site; do not make any investment decisions based on what you read here or what you think you may have read here. 

HK down over 1%; profit-taking, no doubt; balance sheet could be of concern; posted previously

Greenbrier Corp announces orders for 7,000 new railcars valued at over $700 million; a broad range of railcar types including 1,700 intermodal platforms; 2,500 small cube covered hoppers; more than 2,300 tank cars primarily used in the energy sector; shipments of petroleum and petroleum products, including CBR, have grown nearly 7% compared to same period in 2013, driving demand for tank cars; newly developed techniques for energy extraction by hydraulic fracking require more sand per well; car loadings for crushed stone, sand and grave up up by nearly 7% compared to similar 2013 loadings

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Google overtakes Apple as most valuable brand.

Google has surpassed Apple as the world's most valuable brand, according to MillwardBrown's 2014 BrandZ ranking.

Apple, which had been #1 in the prior three years, fell 20% in brand value to an estimated $147.9 billion amid a "growing perception that it is no longer redefining technology for consumers," according to MillwardBrown, New York-based research firm.

With the passing of Steve Jobs, Apple has indeed suffered from a perception problem and that it's lost the mo-jo that made it the world's most valuable company -- both in terms of market cap and brand value. The company's real issue is that it set an incredibly high bar for itself: Until very recently, consumers (and investors) expected Apple to create or redefine major categories every few years, i.e. music via the iPod/iTunes and communications via the iPhone. To say that's easier said than done is a huge understatement; the truly amazing thing is that Apple did that with such frequency during its huge growth phase earlier this century.

Apple's spectacular growth trajectory may have slowed -- at least in the mindshare department -- but Google has been "hugely innovative" in the past year, MillwardBrown reports, citing Google Glass, artificial intelligence and "a multitude of partnerships" for its Android operating system.

CLR -- Investor Update, January 2015

See disclaimer; there maybe typographical and factual errors; if this information is important to you, go to the source. in this case, the CLR webpage. 

Revised 2015 CAPEX and production guidance

• $2.7 billion (reduced 41%)
• 16 - 20% yoy production growth

Two (2) world-call platforms for growth

• SCOOP: 471,000 net acres
• Bakken: 1.2 million net acres

Repeatable, low risk inventory in the Bakken

• 4.1 billion boe unrisked potential
• 11,817 net unrisked potential locations
• 10 years of inventory averaging 775,000 boe/well
• 25 years of inventory averaging 600,000 boe/well

Repeatable, low risk inventory in SCOOP

• 3.6 billion boe net unrisked potential
• 4,750 unrisked potential locations

2015 Bakken drilling program

• focus on high ROR core
• 800,000 boe average EUR
• 15% increase in EUR due to high-graded 2015 drilling program

2015: expanding footprint of enhanced 30-stage completions

• 30% to 45% uplift in average 90-day rates
• 25% to 30% increase in EUR

2015 projected average operated rigs

• 18 rigs in early January, 2015
• about 10 rigs rest of 2015

Status of well

• 122 gross operated completed wells waiting completion

Slide 9: comparing slickwater with hybrid wells; both with greater uplift than offset average

• slickwater: 10 middle Bakken and 3 TF1 wells; will yield 46% uplift
• hybrid: 7 middle Bakken and 10 TF1 wells; about $500K less cost than slickwater; 29% uplift

Bakken

• Current CWC: $9.5 million (15% CWC reduction)
• anticipate 15% more reduction in service costs due to lower oil prices
• 800K boe model parameters
• 664K oil
• 820 MMcf gas (conversion factor: 6,029)
• minimum decline, oil: 6%
• minimum decline, gas: 4%

SCOOP

• CWC: $9.7 million (anticipate further 15% reduction)
• 4,500-foot laterals (short laterals
• current EUR model: 940K boe (67% oil; 17% NGL, 16% gas)
• conversion factor: 6,000

Woodford Thickness

• 130 feet north end and south end (Hunton)
• max of 950 feet in the Woodford center

Google "President Eisenhower" Golf - 229,000 Hits; "President Obama" Golf - 7,550,000 Hits -- January 18, 2015

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His Legacy

Before I went to the linked story, based on the headline, I assumed it was Fox News and really did not want to see another Fox News op-ed on President Obama disguised as a news story. I was surprised this was a Reuters headline and a Reuters new story featured at Yahoo!News: middle class decline looms over final years of Obama presidency.

Barack Obama enters the final two years of his presidency with a blemish on his legacy that looks impossible to erase: the decline of the middle class he has promised to rescue.

The revival of middle-class jobs has been one of Obama's mantras since he took office in 2009 fighting the worst economic crisis in generations. It was a major theme of his last State of the Union address and is expected to feature in the one scheduled for Tuesday.

Administration officials said on Saturday the president would propose higher capital gains taxes, new fees on large financial firms, and other measures to raise $320 billion for programs and tax breaks aimed at the middle class.

Obama's administration can take credit for stabilizing the U.S. economy, which is growing again and last year added jobs at the fastest clip since 1999.

But for the middle class the scars of the recession still run deep. Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office.

In the six years through 2013, over the recession and recovery that have spanned Obama's tenure, jobs have been added at the top and bottom of the wage scale, a Reuters analysis of labor statistics shows. In the middle, the economy has shed positions - whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators.

The trend is in plain sight in Dalton, Georgia, a manufacturing hub 90 miles (145 km) north of Atlanta. Massive factories that made it "the carpet capital of the world," were slammed by the collapse of the housing bubble. During the recession, with machines idle, they began investing heavily in new technology and are now laying plans to restore some lost jobs.

More at the linked article. 

I guess all those weekly job-updates were what most of us felt or knew: spin.

I assume these initiatives will hit the middle class much harder than they will hit the rich, the super-rich, and the hyper-rich. These initiatives will do nothing for the poor:

• higher capital gains taxes (middle class wealth, if any, is held in IRAs, pensions)
• new fees on large financial firms (middle class wealth, if any, is held in IRAs, pensions); and, 
• .... well, not much.

That's what I was taught in college also: when making lists, come up with "three" data points. If you come up with only two, it suggests you couldn't think of any more, and if you have more than three data points, you begin to bore your audience. It looks like the White House was able to come up with only two data points to share with Reuters as a teaser for the SOTU address.

By the way, what was that metric conversion all about? Was that really necessary, in that kind of story, to convert miles (90) to kilometers (145)? 

Buried in the story:

The forces at work in the American economy appear so entrenched that Obama may be remembered as the president who pulled the nation from its worst downturn since the Great Depression, but failed to arrest deepening economic inequality.

Before evening seeing this story, while driving our older granddaughter to water polo this afternoon, this thought crossed my mind, perhaps because of the Oprah movie, Selma: this was probably the last presidency  -- the last opportunity -- this country had to help the overly unemployed and the grossly disenfranchised African-American community.

I doubt I am in the minority when I opine that the African-American community has lost ground during this administration and the anxiety for that community in 2016 is that they will lose the bully pulpit to an old white man or an old white woman. Al Sharpton will no longer be the morning show spokesman for the White House.

Of course, that might be a good thing.

By the way, I doubt if any one (except pointy-headed liberal elitist historians) will ever remember President Obama for "pulling the nation from its worst downtown since the great depression."

I assume most will remember President Obama as having the same impact as President Carter did, but having more fun (golfing, dining out in Paris, swimming in Hawaii).

After all, what is Ike remembered for? Golfing.

By the way, just for the fun of it, Google:

• "President Eisenhower" golf --229,000 hits
• "President Obama" golf -- 7,550,000 hits

Now that's a legacy.

Something To Think About: Re-Fracking And The Current Slump In The Price Of Oil -- January 18, 2015

On January 17, 2015, I posted a number of things to think about with regard to the current slump in the price of oil. Rigzone/Wood Mackenzie made this their #2 item on their list of things to think about with the current slump in oil price.

Refracs start to look better than new fracs: Over the past year, lower US natural gas prices drove Marcellus operators to shift attention to horizontal refracs in order to increase recovery rates at reduced costs (~25% lower expenses for a standard well). Successful refrac testing also took hold in gas-rich plays like the Haynesville and Barnett where some operators were able to re-set production rates to early life profiles and, in some cases, increase performance. 

Back in 2011, I started started blogging about MRO's program to re-frack. The linked Rigzone/Wood Mackenzie article only mentions natural gas but ....

In the Bakken there are currently 750 wells waiting to be fracked for the first time, according to the most recent Director's Cut, much, much higher than "usual" number of 350 to 450.

In addition it's my hunch there are 3,000 wells (and that estimate may be very, very low) that are candidates for re-fracking.

Something To Think About: Break-Even Prices Decline When The Price Of Oil Declines -- January 18, 2015

On  December 10, 2014, with regard to the cost of bringing oil to market, I wrote:

The break-even point is somewhat irrelevant in big scheme of things for reasons I have discussed before. 

This is why: the "break-even" point is a moving target. On what date did the analyst determine the break-even point and on what basis did the analyst determine the break-even point for what date in the future?

Anyone who has followed the oil industry for any length of time knows that the break-even price declines as the price of oil declines.

That was the point I was trying to make in my post of December 27, 2014 when talking about IRRs. It's all relative; it all depends.

I did not expand on that point at the time for several reasons, only of which I will mention: I knew I could not explain it as well as others could, so I was waiting for others to write about it.

I was glad to see that not only did Rigzone/Wood Mackenzie write about it, but they listed it first among a dozen or so data points or thoughts about the current slump in oil prices.

Upstream costs are the silver lining for operators: As companies have decreased capital budgets, we are seeing a slowdown in drilling activity. This reversal is already having an impact on the demand for rigs, pressure pumping fleets, and other key equipment and services. If the oil price were to average around $50/bbl in 2015, we anticipate a 40% decline in the horizontal rig count compared to 2014. Rig day rates could fall by 30% or more. 

Minimal Blogging Through Tuesday -- January 18, 2015

I apologize. I'm going to be out and about with family this weekend and I won't be blogging as much. I particularly want readers who send me links to continue sending me links; I will eventually get to them. Likewise, I always respond to e-mail, but responses this weekend are likely to be delayed.

Some very exciting things are going on; stories are coming out fast and furious with regard to the current slump in oil prices and I suspect things will get busier before they slow down as folks try to figure out what is going on and where things might be headed.

No updates for the Bakken daily activity report until Monday evening, Tuesday morning.