Tuesday, February 10, 2015

Update On Rig Count; Update On SCOOP (Harold Hamm/CLR) -- February 10, 2015

Drop In Rig Count Gives Industry "Hope"
Musings over at Rigzone:
Another week and another huge drop in the Baker Hughes oil-directed drilling rig count. The speed with which the rig count is dropping has encouraged forecasters to translate the decline into an immediate fall in oil output.
The focus of analysts has been on the oil rig decline since the world is absorbed with determining when either Saudi Arabia cuts its production to boost global oil prices from current levels or the American shale industry cuts back drilling sufficiently that the natural decline rate of shale wells eliminates the existing oil surplus.
The chart (at the link) of the count of active oil drilling rigs since the turn of the century shows an almost vertical decline in recent weeks. The angle of this oil rig decline is sharper than occurred in the 2008-2009.
On the surface, this picture would support the view of a rapid decline in new oil production. Below the surface there may be some variances in the pace of decline of the various drilling rig types that could moderate the optimism of a quick production reaction.
Between November 26, 2014, and last week, the industry lost rigs drilling 59 directional wells, 283 horizontal wells and 119 vertical wells. On a percentage basis, the declines were 30.4%, 20.6% and 33.8%, respectively.
What we take away from these figures is that we are on the cusp of the decline in oil production growth. Vertical rigs are often used to deep the top section of horizontal wells with the main portion drilled by larger rigs (horizontal).
Efforts to improve drilling efficiencies and lower well costs have led to this rig specialization. The recent pattern in the rig declines suggests that pad drilling is only beginning to be impacted, which is good news for the optimists who believe this will be a short industry downturn. So far, the industry has laid down 461 rigs since Thanksgiving Day week. Oil rigs will continue to fall until the industry has shut down enough rigs to truly impact oil production growth, and unfortunately that may take a while.
We would not be surprised to see another 300+ rigs shut down before production starts to slow. We will continue to watch the nature of the wells being drilled. We also need to examine where the rigs are falling to further gauge how fast oil production may fall and oil prices respond.

Wood Mackenzie in Rigzone is reporting:
Even in the current price environment, the best producing parts of the South-Central Oklahoma Oil Province (SCOOP) are on par with the Eagle Ford and Bakken according to Wood Mackenzie’s latest key play analysis.
"The region will see drawbacks, rig counts are down in the near-term but production won’t fall off by much and we expect it to bounce back quickly in 2016," said Brandon Mikael, Analyst US Lower 48 Upstream.
"It's still one of the most exciting growth areas in the Lower 48 because of the stacked pay potential." Wood Mackenzie's analysis breaks the SCOOP, STACK, and Cana Woodford plays down into nine sub-play areas that span the Anadarko and Ardmore Basins of the Mid-Continent.
"The area has some of the largest producing wells in the Lower 48, bigger than the Permian and Bakken and comparable to the best parts of the Eagle Ford," explained Mikael. Currently, oil breakevens are lowest in the SCOOP Core where Springer and Woodford wells breakeven at WTI prices of $41/bbl and $47/bbl at our long-term Henry Hub price assumption of $4.12/mcf.
Much more at the link. The article will be archived at the source. 

Abraxas To Focus On The Bakken -- Very, Very Interesting; Speaks Volumes -- February 10, 2015; USS North Dakota Ready For Deployment; Cholesterol Isn't As Bad As Once Thought; But CO2 Is Still Dangerous

Some weeks ago I had a lot of fun with this post on IRRs. But there were some significant data points in that post taken from other sources (and credited to those sources).

Look again at that post to see where the Bakken, the Eagle Ford, the Permian are relative to each other and then look at this story from Bakken.com:
Abraxas Petroleum has announced that it will be increasing oil production in 2015 despite the current low prices.
For the upcoming year, the San Antonio-based company will focus entirely on its assets in the Bakken formation and will suspend its drilling operations in the Eagle Ford and Permian Basin formations.
The company has approximately 5,000 net acres in the Bakken, the majority of which are centered on the formation’s core in McKenzie County.
Last week at a Florida industry conference, Abraxas CEO Robert Watson said, “We are fortunate to be in the core of the core. We have a very good inventory of wells to drill when conditions warrant and that would be when crude oil prices go back up or service costs go down.” Until that happens though, the Abraxas team of around 100 expects to produce around 7,300 barrels of oil per day this year.
Very, very interesting. Right now, everything's relative.

Shakedown Cruise In Devils Lake Apparently Went Well 

For those in North Dakota who are unfamiliar with nautical terms -- which would be about 99.99% of us -- a shakedown cruise is a nautical term in which the performance of a ship is tested. Generally, shakedown cruises are performed before a ship enters service or after major changes such as a crew change, repair or overhaul. The shakedown cruise simulates working conditions for the vessel, for various reasons.

From Bakken.com:
A Navy attack submarine named for North Dakota could be deployed within two months, its senior enlisted sailor says.
Construction of the $2.6 billion USS North Dakota began in March 2009. It was commissioned in late October at a Navy base in Connecticut.
According to Senator John McCain the biggest problem right now is how to get the 150-foot boat from central North Dakota to the East Coast. He says he has Sarah Palin working on the issue since she used to watch Russian submarines off her back porch for many years.  There's no correlation, of course, but for a politician that hardly matters.

Speaking of correlations that seem not to matter any more, a reader sent me this story. When I saw it, I almost fell off my bar stool scattering my steak and egg breakfast over Denny's counter. Did you all see this. The government is ready to say, "hey, we were wrong. Cholesterol isn't bad for your health. It's the other stuff."

The Washington Post is reporting:
The nation’s top nutrition advisory panel has decided to drop its caution about eating cholesterol-laden food, a move that could undo almost 40 years of government warnings about its consumption.
The group’s finding that cholesterol in the diet need no longer be considered a “nutrient of concern” stands in contrast to the committee’s findings five years ago, the last time it convened. During those proceedings, as in previous years, the panel deemed the issue of excess cholesterol in the American diet a public health concern.
The finding follows an evolution of thinking among many nutritionists who now believe that, for healthy adults, eating foods high in cholesterol may not significantly affect the level of cholesterol in the blood or increase the risk of heart disease.
The rumor is that President Obama had finally "had it up to here" (as he pointed to his chin) with Michelle's lectures on healthy eating.

Just in time for the $35,000-plate campaign dinners. 

The next thing too be announced is that the science on global warming is no longer "closed." We can only hope.

Active Rigs In North Dakota Stabilizing At High 130's; Eleven (11) New Permits; Whiting Cancels Six (6) KOG Smokey Permits; Fourteen (14) Wells Come Off Confidential Wednesday -- February 10, 2015

Coming off the confidential list Wednesday:
  • 21537, drl, Enerplus, Hidatsa 150-94-32C-29H, Spotted Horn, no production data,
  • 26226, 2,364, QEP, Kirkland 1-23-14BH, Grail, t10/14; cum 53K 12/14;
  • 26227, 2,383, QEP, kirkland 2-23-14BH, Grail, t10/14; cum 68K 12/14;
  • 27036, 137, EOG, Parshall 41-1509H, Parshall, a big well, but interesting production profile, t8/14; cum 78K 12/14;
  • 27392, 456, Fidelity, Barnharts 20-17H, Heart River, producing, a nice well for Fidelity, t9/14; cum 44K 12/14;
  • 27823, see below, Petro-Hunt, Moberg 159-94-20B-29-1HS, North Tioga, a nice well, t11/14; cum 19K 12/14;
  • 28265, see below, QEP, Kirkland 14-23-13-24LL, Grail, t10/14; cum 58K 12/14;
  • 28345, drl, BR, Copper Draw 41-27MBH-ULW, Croff, no production data,
  • 28373, drl, Hess, AN-Brenna-153-94-3130H-8, Antelope, no production data,
  • 28642, drl, CLR, Boston 2-25H, Brooklyn, no production data,
  • 28833, drl, SM Energy, Waters 3B-28HS, Ambrose, no production data,
  • 28870, drl, Hess, GN-Halseth-158-97-3130H-3, New Home, no production data,
  • 28970, 2,690, Statoil, Syverson 1-12 8H-R, Stony Creek, interesting production profile, t11/14; cum 7K 12/14;
  • 29022, drl, Slawson, Bootleg 8-14-15TF2H, Stockyard Creek, no production data,


Production from wells coming off confidential list Wednesday:

26226, see above, QEP, Kirkland 1-23-14BH, Grail:

DateOil RunsMCF Sold

26227, see above, QEP, kirkland 2-23-14BH, Grail:

DateOil RunsMCF Sold
28265, see above, QEP, Kirkland 14-23-13-24LL, Grail:

DateOil RunsMCF Sold

27036, see above, EOG, Parshall 41-1509H, Parshall:

DateOil RunsMCF Sold

27392, see above, Fidelity, Barnharts 20-17H, Heart River:

DateOil RunsMCF Sold
27823, see above, Petro-Hunt, Moberg 159-94-20B-29-1HS, North Tioga:

DateOil RunsMCF Sold

28970, see above, Statoil, Syverson 1-12 8H-R, Stony Creek:

DateOil RunsMCF Sold


Active rigs:

Active Rigs138196185203165

During the harsh winter in North Dakota and with the slump in oil prices, to see a stabilizing of rigs in the high 130's is refreshing. However, a reminder: when the rig count was in the 185 range, Harold Hamm suggested the rig count in North Dakota could drop 90 rigs.  So, we'll see.


Wells coming off the confidential list earlier today have been posted; see sidebar at the right.

Whiting canceled six (6) permits, they were all KOG Smokey permits (#27386, #27387, #27388, #27389, #27446, #27447; the first four on section 16-149-98; the other two on section 29-149-98). See below. 

Eleven (11) new permits:
  • Operators: Whiting (5), Hess (3), EOG (2), XTO
  • Fields: Twin Buttes (Dunn), Beaver Lodge (Williams), Parshall (Mountrail), Twin Valley (McKenzie), Garden (McKenzie)
  • Comments:
Four (4) producing wells completed:
  • 27721, 163, SM Energy, Almos Farms 1-26HN, West Ambrose, 4 sections, t12/14; cum 3K 12/14;
  • 28714, 541, EOG, Parshall 93-2827H, Parshall, t2/15; cum --
  • 28877, 1,081, Whiting, Solberg 31-2TFH, Ray, t1/15; cum --
  • 28878, 867, Whiting, Solberg 21-2TFH, Ray, t1/15; cum --
These are the six (6) KOG Smokey permits that Whiting canceled. I did this quickly and could be wrong. I often make mistakes. If this information is important to you, go to the source. This blog is not the source on which to make any financial, investment, or relationship decisions.

I'm not sure what to make of these cancellations. Often when a new operator comes in and cancels permits in a great location, the operator will submit applications for new permits in the same area with slightly different parameters (siting locations, formation targets). However, the slump in oil prices changes everything.

Money Changes Everything, Cyndi Lauper

Apple's Newly Announced Solar Farm Comes With Huge Price Tag; California's New Solar Mega-Farm With Mega-Price Tag -- February 10, 2015


February 16, 2015: this is really, really cool. This explains why Apple is willing to pay almost any price for solar energy. The price is not the issue: programming, budgeting in the outyears is the issue. Great, great article at Seeking Alpha:
It's the oldest trick in the financial book, a hedge you can write a bond on.
Electricity is an input cost to a data center operator, or to anyone with a lot of electronics. If you're going to plan ahead, and these companies now think in terms of decades ahead, you're going to want to predict that cost.
Solar power makes the cost predictable. You buy X number of panels delivering Y amount of megawatts, with a life expectancy of Z. You put that capital cost into a sinking fund, a lease, or a mortgage, and you let time do the rest. Now you know what your costs for electricity are going to be next year, and the year after that, and 10 years down the road.
Whatever the other claimed benefits of fossil fuels, they can't deliver that certainty. This is especially true for California utilities, whose costs (and rates) can vary considerably from place-to-place. A lot depends on the cost of fuel. That may be low today, but it may be higher tomorrow. Whatever the cost, it's not fixed.
So if you can afford to deal with whatever the cost of your lease or mortgage is for solar panels today, and if you have faith in the operator it's a win-win for a utility like Pacific Gas & Electric because they're buying the project, which adds to their capex, and they're guaranteeing a customer account for decades, which assures cash flow.
This is an important point when you're looking at utility "resistance" to solar power. Resistance is less about costs than control. If a utility builds or buys a solar farm, it's getting solar power wholesale and adding to its capex. It can plan for the cost of getting that power to market as well. If you put panels on your roof, on the other hand, it is buying power retail, you are not adding to capex, but you are adding to the utility's costs - it has to manage and may have to store that power.
For solar stocks, it means that "solar parity" - the point at which solar costs fall below those of utility power - isn't necessary to get a deal done. So long as you can see parity on the horizon, with current technology, you can make the deal. You no longer have to assume that your costs are going to drop, merely that their costs are going to rise.
February 11, 2015: finally, environmentalists see the problem solar energy: takes up large tracts of land; single use. CNBC is reporting:
A lineup of significant environmental groups, including the Audubon Society, Defenders of Wildlife and the Sierra Club, say the land that solar power contractor First Solar has purchased for its California Flats solar farm is home to several species of endangered or threatened species of wildlife. Some activists would prefer solar companies would choose "degraded" sites for their projects, rather than an area one activist calls "beautiful, open, largely intact land."

One of the species in question is the federally protected golden eagle.
Talk about disingenuous, dishonest folks: wind farms are killing a lot more golden eagles than any solar farm -- and this particular solar farm is going to be pretty small. I think the only thing the environmentalists are upset about is the fact that this was another "big, bad corporation" building the solar farm (First Solar).

Note: see "Flummoxed" as a separate entry near the bottom of this post.  

Later, exact time unknown (forgot to post), February 10, 2015: It was just announced this afternoon, apparently during Tim Cook's presentation, that Apple is building another 130 MW solar farm to power in central California. Forbes is reporting
First Solar said Tuesday it’s signed a 25-year contract with Apple to deliver solar electricity from a yet-to-be-built project in central California.
Apple “has committed $848 million” for 130 megawatts of energy from California Flats Solar Project in southeast Monterey County, said a press release.
The deal is part of Apple’s larger plan to inject more clean energy into the grid in areas it operates. Earlier this month, Apple announced a plan build a solar-powered data center in Mesa, Ariz., and has completed similar projects near its data center in North Carolina.
Apple won’t directly use the electricity from California Flats, but it will get credit, at wholesale rates, from the local utility, Pacific Gas and Electric, for sending that much energy into the grid, said Steve Krum, First Solar’s spokesman. The project is located roughly 150 miles south of Apple’s headquarters.
$848 million / 130 MW = $6.5 million / MW.  Disclaimer: you may want to check my arithmetic. I often make simple arithmetic errors. But the story says $848 million for 130 MW of energy; if that's correct, and if $6.5 million / MW is correct, that's horrendous by anyone's standards. See story below. But again, I could be wrong. Deserve Sunlight is costing not enough twice $848 million and is getting way more than 130 MW.

Original Post

Desert Sunlight

There's been a lot of press regarding the new solar farm in California, Desert Sunlight. I believe the price tag for this 550-MW solar farm was $1.46 billion though I can't find a source that clearly states what the final cost was. One gets the feeling this was the "posted price" but the final price may come in at a completely different number.

Be that as it may, the mainstream media stories that I've seen on this solar farm do not tell us how much this farm cost/MW nor did they post comparison prices for wind farms and/or natural gas plants.

But they all use the "boilerplate" language that solar energy is coming down in price so fast that it is becoming with "conventionally-produced" electricity -- produced from coal and/or natural gas I assume.

At $1.46 billion and 550 MW one gets about $2.65 million / MW.

How does that compare with other sources of electricity?
From an August 25, 2014, post, this is 30-second sound bite for "cost of renewable megawatt":
  • Solar: $3 million / MW
  • Wind: $2.5 million / MW
  • Natural gas: $865,000 / MW
The Los Angeles Times pretty much makes it clear that these projects would not work without huge tax incentives. Even with tax incentives, it is the mandates that drive the projects.

By the way, this is what makes me wonder about the price for this solar farm. From the linked LA Times story:
First Solar received $1.46 billion from the U.S. Department of Energy, a partial loan guarantee funded by a group of private investors, to finance the project.
".... received $1.46 billion...a partial loan guarantee ... funded by ...."

But there are other obstacles:
[A spokesman] expects the company will explore other forms of solar energy generation that use less land area than the approximately 4,000 acres the PV field requires. Such large energy developments are becoming increasingly challenging amid new federal regulations that seek to minimize both the actual footprint and the environmental impact of power projects.
“The 550(-megawatt projects) probably will be lesser and lesser just simply because of the dynamics of land, but I would see it as an important part of the future of renewable energy,” Antoun said.
One major obstacle for solar development has been the looming expiration of a 30% federal investment tax credit, which is scheduled to fall to 10% at the end of 2016. Jewell said she is committed to urging Congress to continue such benefits, as it has with fossil fuel industries.
And remember, the 160,000 homes served by this solar farm will need a conventional power plant to provide electricity during twilight, dusk, night, dawn, and twilight again.  

Disclaimer: I often make simple arithmetic errors, and I often misread news reports. Sometimes I mis-remember facts and factoids. Do not make any investment, financial, or relationship decisions based on what you read above. If this information is important to you or if you are writing a "term paper" for your college course, go to the source.


I normally don't do this, posting something before it's ready for prime time but I am really confused on this one: Apple's announcement regarding a new California solar farm. A reader sent me a one-word e-mail after reading the post on Apple's new central California solar farm: "interesting."

I replied:
I have absolutely nothing against solar per se. I just like to have everything as "transparent" as possible and I don't think folks are getting the full story on costs associated with solar. 
I originally thought Apple was getting into solar to guarantee power to their facilities; solar for their communications center in Mesa, I thought, was to take them off the grid, so they would never have to worry about power outages, brownouts, etc. But with this deal in central California announced today, it makes no sense, except as a a) PR stunt; b) a tax write-off, which I doubt; c) a real concern about global warming; d) an "insurance policy" so that environmental nuts don't go after Apple as being "not green." 
But if the math is correct, Apple is really, really paying a lot for this energy -- which, of course, they can afford. It puts a lot of pressure on other corporations to follow suit, and for investors, to look at some opportunities. 
This is really beyond my pay grade as they say in the military; I don't understand it -- not at this cost and if it isn't going to feed Apple headquarters directly to get them off the grid to insure uninterruptible power.
Because this has me so confused, I am opening up the "comments" section again to see if anyone want to comment. Folks can always e-mail me but I get the feeling some folks prefer not to go that route.

Reader:  I had forgotten -- Agore is on the Apple board of directors. It all makes sense now. It would be interesting to see how his relationship with First Solar, others; shares he owns in these other companies. 

Re-Fracking In The Bakken; Global Warming Hitting Boston -- February 10, 2015

Emerald Oil's play in western McKenzie County, the Charbonneau oil field, has been updated.

Manitou field has been updated; predominantly Hess; talk about a field that is ripe for re-fracking -- see next link.

A reader send me a link to this article on re-fracking. FuelFix is reporting
Try your hand at this oil field engineering problem.
You have to get a massive amount of gritty, grimy sand into an oil well – it’s one of the ingredients in the powerful slurry of water and chemicals used to crack open shale rocks two miles underground, a process known as hydraulic fracturing. Can you do it without letting the sand erode the steel in the high-horsepower pumps that blast the mixture into the well?
Give up? The question had bugged Ron Gusek for a decade.
In the Bakken Shale, it takes $6 million a year in maintenance and repair costs to keep a frac fleet of trucks and pumps up and running, leaving North Dakotan oil field workers no choice but to replace broken valves and other pump components every four days.
Gusek says his company, Liberty Oilfield Services, is a month or two away from bringing a new technology to market that could fix that problem. It is planning to deploy a trailer carrying a heavy tungsten carbide-built pumping system that will allow sand to bypass the high-horsepower charge pumps and only mix with water and chemicals in an outside blender before shooting through tungsten carbide tubes — many times stronger than steel — and into the well.
That may cut down on oil field maintenance costs at a time when U.S. shale oil producers are scraping for every penny after crude’s seven-month plunge to around $50 a barrel. At a booth in the Society of Petroleum Engineer’s seventh annual Hydraulic Fracturing Technology Conference in the Woodlands on Wednesday, Gusek said the new pumping system won’t be the only new, more efficient technology oil companies need, but it’s another tool that could save them time and money.
Re-fracking -- one of the buzzwords around the oil patch these days.

Kennedy Cold Front To Hit Boston Later This Week

Here's where it stands in Boston today, looking toward the rest of the week, and then to the end of the month. Boston CBS Local is reporting there are two scenarios this week:
#1) We catch just the beginning stages of this rapid development and get “fringed” by some light, but likely plowable snow in Eastern Massachusetts. This is currently the more likely scenario, however we cannot rule out. . .
#2) The whole system isn’t quite as progressive and it literally explodes in the perfect spot (the sweet spot, 40/70) for New England storms. We feel the full rage of this nor’easter, get blizzard conditions Thursday night into Friday, strong and damaging winds and a boatload of new snow.
Clearly the second option would cause MAJOR problems. With no place to put the snow and wind gusts which could exceed 50-60 mph I cannot even imagine the mess we would have on our hands. The next 24 hours of model runs will be critical in determining the final track, timing and ultimately the significance of this event in southern New England.
And it won't end:
We are nearing the breaking point and a storm like this one could potentially hurdle us right over the edge. Please don’t take this as “hype”, this is a very serious situation. Of course, our team will keep you updated as the forecast becomes more clear.
One thing is certain, this pattern is going nowhere. The snow and cold are here to stay in New England, likely for at least the remainder of February. There is no thaw, no pattern change, no immediate relief in sight. Storm or no storm, later this week some of the coldest air thus far will pour down from Northern Canada. If it isn’t snow records, we will likely challenge some low temperature records over the weekend.
It seems time and money would have been better spent preparing for these incredible winters than preparing for predictions that the ocean will rise 0.01 inch/decade over the next century, and the earth's temperature will increase by two degrees at worse.

My hunch is that earth's temperature will  have to increase by 2 degrees just to get us back to normal. Assuming the warmists don't "manipulate" the thermometers.

JetBlue To Accept Apple Pay

Macrumors is reporting that JetBlue will be first airline to accept Apple Pay:
Passengers on select JetBlue Airways flights will be able to use Apple Pay to purchase things in-flight starting next week, according to USA Today. It will become the first airline to accept Apple Pay in-flight. 
JetBlue is my wife's favorite airline. Unfortunately it does not have a direct flight from Dallas-Ft Worth area to southern California. There is a direct flight from LAX to DFW, but to get back to LAX, one must take a connecting flight through Boston.

Yes, Boston. Dallas (DFW) to Logan International Airport - Boston to LAX.

Anxiety In Williston, Boom Town -- February 10, 2015

Reporting Today

Genesee & Wyoming (GWR), misses by $0.06, reports revs in-line: reports earnings of $1.12 per share, excluding non-recurring items, $0.06 worse than the Capital IQ Consensus Estimate of $1.18; revenues rose 6.1% year/year to $415.6 mln vs the $417.7 mln consensus. (good news in USA; bad news in Australia)
Coca-Cola (KO), forecast $0.42; net income attributable to shareholders fell to $770 million, or 17 cents per share, in the quarter from $1.71 billion, or 38 cents per share, a year earlier; excluding items such as the effects of cost-cutting measures and the refranchising of bottlers, the company earned 44 cents per share.

Williams Partners L.P. announced its expanded Geismar, Louisiana olefins plant has begun manufacturing ethylene for sale.  Williams Partners' share of the total capacity of the expanded plant will be approximately 1.7 billion pounds per year

Anxiety in Boom Town?

From The Financial Times:
“No one expected prices to fall this far, this fast,” said Ward Koeser, the long-time former mayor of Williston who lived through that 1980s crash. “It’s fair to say there is a lot of nervousness around town. A lot of people worrying if it’s a case of ’here we go again.'”
And it’s not hard to see why. Everywhere in Williston there are signs of retrenchment. Oil companies and the contractors who provide them with everything from drilling rigs to pork ribs, pipes to Portaloos, are now battening down the hatches for what many fear will be a prolonged period of lower prices.
The headline indicators are stark. The number of drilling rigs in North Dakota fell to 156 last month from a 2014 high of 206 and the lowest number since 2010. Nationwide rig numbers fell by about 15%, in the last 60 days, according to Halliburton.
Much, much more at the link.

All That Cash Just Isn't Enough

I get a kick out of this story. "Everyone" seems surprised that Microsoft and Apple would raise even more cash by selling bonds. But when they are paying interest of less than 2% the question is why isn't everyone doing this. Again, the top story over at Yahoo!Finance at the moment:
Microsoft, with about $90 billion on its balance sheet, sold $10.8 billion yesterday. The 10-year portion of that offering yields 2.7%. That's less than the dividend yield on Microsoft shares.
Apple  is pricing Swiss bonds today. Since Swiss franc denominated debt has a negative yield Apple is expected to pay buyers of its corporate bond less than .5 percentage points a year for 10 or 15 year paper. This is astonishingly low.
The company's are telling us they think yields may go higher from here. Apple famously nailed the absolute low for corporate debt yields in 2013 issuing $17 billion at the rock bottom. If you look at the long term for the 10-year rates you can see they didn't get as low as they were in 2013 until last week when, yes, Apple hit the offer again.
What's not to like?

Re-Fracking -- February 10, 2015

This is an incredible article.

I have a tag at the bottom of the blog on "re-fracking." Originally, the tag related to MRO's re-fracking program, undertaken long before the slump in the price of oil.

Then, with the slump in the price of oil, I suggested we would see a huge change in fracking practices, including re-fracking.

A reader sent me the link to this article yesterday. BloombergBusiness is reporting that drillers take second crack at fracking old wells to cut cost:
New wells can cost as much as $8 million, while re-fracking costs about $2 million, significant savings when the price of crude is hovering close to $50 a barrel, according to Halliburton Co., the world’s biggest provider of hydraulic fracturing services. 
There are a lot of older wells with primitive frack work that are prime candidates for a fresh workover.
“The timing is absolutely perfect for this opportunity,” Freitag said. “Right now, the North American unconventional oil and gas industry is in a bit of a crisis.”
Before the crash, Halliburton had a harder time convincing customers that re-fracking horizontal wells was worthwhile, largely because of inconsistent results. 
The article was actually quite light in data points. Check out the tag, re-fracking, at the end of the blog; you might be surprised. 

Tuesday, February 10, 2015; Apple To Issue Bonds Paying 0.5% For Ten Years

See disclaimer.

Well, that was interesting. At 6:15 a.m. CT, there was a headline that the market would open lower (Greece, Ukraine), and futures were up about 24 points. Then at 6:30 a.m. CT, futures spiked to 120 points; now up 100 points (6:50 a.m. CT).

RBN Energy: process condensate volumes slow to export.
We posted numerous blogs on condensate exports last year (2014) as the topic garnered “hot-button” status in the industry and Washington, DC. Here are the cliff notes for beginners – skip to the next paragraph if you are a condensate veteran. “Processed” condensate is considered a refined product derived from the distillation of lease condensate – a liquid produced at the wellhead from natural gas – that is similar to but lighter than crude oil - containing more light components giving it a higher API degrees gravity specification. Arcane Federal rules supervised by the BIS restrict the export of U.S. produced crude oil and lease condensate.
Last year (2014), the BIS appeared to loosen the regulations for processed lease condensate by providing letters of ruling to Enterprise Product Partners and Pioneer Natural Resources certifying that the way they processed lease condensate (typically using a stabilization unit with a distillation tower) qualified their products for export. After that development became public in July, the BIS received multiple similar applications from companies anxious to join the bandwagon. In December BIS indicated that more companies would be issued letters approving their classification of processed condensate as a refined product that is not subject to BIS export prohibitions and also attempted to make the process more transparent by providing a FAQ’s document.
According to the Energy Information Administration (EIA) exports of processed condensate (classified as "kerosene and light gas oils" in the EIA Petroleum Supply Monthly report) began last year in July and averaged 16 Mb/d through November (latest data). Our friends at ClipperData who track movements out of the Enterprise Texas City terminal observed one cargo each in December and January amounting to 21 Mb/d for those months.
The early sales back in July 2014 were to Asian buyers including Mitsubishi, Mitsui and South Korean refiner SK Innovation Co. November, December and January exports were reportedly delivered to European buyers. Reuters reported in November 2014 that Enterprise had secured export contracts with Petro-Diamond Singapore the oil trading arm of Mitsubishi Corp, and independent oil trader Vitol for 600 MBbl of processed condensate per month in 2015 – a total of 40 Mb/d.
However another Enterprise tender for 20 Mb/d starting in March 2015 apparently failed to attract high enough bids. Aside from Enterprise (who market all of Pioneer’s condensate) other potential exporters include Australian conglomerate BHP Billiton Ltd (that has reportedly sold two cargoes), major oil company Royal Dutch Shell and Midstream giant Plains All American (both recently given the green light by BIS) as well as Conoco Phillips (waiting on BIS approval). But in spite of a lot of producer interest, significant export volumes have yet to materialize.

Active rigs:

Active Rigs137196185203165


Apple goes ahead with Swiss franc bond sale. Link here:
The iPhone maker is seeking to raise at least 1 billion francs ($1.08 billion) from the two-part bond sale on Tuesday, according to one of the banks running the deal.
Bankers say the bond, due to mature in November 2024, will price at an implied yield of roughly 0.25%, while the 15-year bond will price at an implied yield of around 0.7%.
Wow, Apple is going to raise "at least" a billion francs and they will pay the lucky investors 0.25% for the next ten years. Really. And the 15-year will get you 0.7%. Am I missing something? I must be. These bonds will be over-subscribed.


Railcar market collapses. Reuters reports:
The sudden slump in the tank car market has more to do with narrowing crude oil spreads and ample tank car supply from manufacturers such as Greenbrier and American Railcar Industries than with more than 50% dive in U.S. crude prices over the past seven months.
But it may be an early warning for rail companies such as CSX, BNSF and Union Pacific, which have been resolutely upbeat despite growing expectations that booming U.S. oil production will begin to slow as soon as this summer.
Monthly lease rates for the most common of oil rail cars fell to $1,300 late last month from a high of $2,450 about year earlier, according to data obtained by Reuters from energy industry intelligence service Genscape.
The rates for cars, used to transport more than half of North Dakota’s crude, are at their lowest in about three years, said Tom Williamson, owner of Transportation Consultants.
“It wasn’t that long ago that you couldn’t find a car to lease, now I’m getting calls from brokers offering the cars,” he said, adding that he has received offers for 1,500 cars since late October.
I would have to check but I believe overall rail traffic remains below pre-recession levels, but I haven't looked at the numbers in a long time.