Wednesday, February 11, 2015

Increasing Activity In Madison Formation Near Canadian Border; Politics, Not Low Prices Slowing Pipeline Construction; End Of The Oil Industry In California As We Knew It -- February 11, 2015

A reader writes:
Ballard Petroleum has been very active north of Glenburn in Bottineau County's Madison formation.
They drilled two wells in January in the Chatfield oil field area and started drilling a third well on February 8, farther north -- close to Eckman near the Cut Bank Creek which about 4.5 miles from the Chatfied oil field.
It has been a long time since an oil company has drilled in this area.
It will be interesting to see how other formations are targeted during the slump in oil prices; there were a couple of new permits for Golden Valley County today, most like Red River wells.

Worse Administration In Years
There -- I've Said It Again

I've said over and over that no administration in recent history has done so much to make life more difficult for the "working class" than the Obama administration. Another case in point, FuelFix is reporting:
While cheap prices might be slowing production of natural gas, it’s political fights that are really hurting the midstream sector, said Williams Co. chairman and chief executive officer Alan Armstrong.
The decline in prices hasn’t changed the need for pipelines, as the continued position of natural gas as a cheep feedstock for electricity generators and other producers has offset any slowdown in drilling, Armstrong said in an interview with FuelFix.
Instead, he said, it’s political hassles and complex regulation that make moving natural gas from the wellhead to the market more uncertain and expensive.
“It used to be pretty limited to just going through the federal process, which was pretty bureaucratic and from our vantage point more cumbersome than it needed to be. We’d like to see the FERC have more control now, because there are so many local entities,” Armstrong said, referring to the pipeline-regulating Federal Energy Regulatory Commission.
“You get stuck in this loop of having so many opinions that need to be reconciled, without having certainty of who’s in charge from a jurisdictional perspective, that’s really the challenge.”
The End Of The California Oil Industry As We Know It

The Sacramento SunTimes is reporting:
California legislators unveiled an ambitious plan Tuesday that would make the state one of the most energy-efficient areas in the world.
The plan, which is laid out in a series of bills, would force the state to cut oil use in half by 2050, use renewable energy for 50 percent of the state’s electricity and,  in perhaps the most controversial section of the plan, the state’s retirement fund would have to divest from all oil companies.
As I've said many times: the end of the California oil industry as we know it.

Tiger Joins Brian Williams In "Retirement"

The Los Angeles Times is reporting that Tiger Woods has announced an indefinite leave from golf. 

XTO WIth Five (5) Huge Rieckhoff Wells; Nine (9) Huge Producing Wells Completed;Ten (10) New Permits; Eight (8) Wells Coming Off Confidential List Thursday -- February 12, 2015

Active rigs:

Active Rigs137195183203165

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

Hess cancelled two permits today, both EN-D Cvancara S wells, (#30449, #30450).

Ten (10) new permits:
  • Operators: Statoil (4), SM Energy (2), BTA (2), MRO, Whiting
  • Fields: Alger (Mountrail), East Fork (Williams), Burg (Divide), Bicentennial (Golden Valley), Reunion Bay (Mountrail), Pleasant Hill (McKenzie)
  • Comments: Circling the wagons, but look how all four counties are still involved despite the slump in oil prices
Nine (9) producing wells completed:
  • 25585, 3,122, Whiting, Moccasin Creek 14-33-28-3H, Moccasin Creek 14-33-28-3H,  t1/15; cum -- 27770, 772, Hess, BL-Iverson B-155-95-0708H-2, Beaver Lodge, t1/15; cum --
  • 28216, 1,298, XTO, Rieckhoff 21X-3G, North Tobacco Garden, t12/14; cum 3K 12/14;
  • 28217, 2,065, XTO, Rieckhoff 21X-3B, North Tobacco Garden, t1/15; cum --
  • 28218, 1,615, XTO, Rieckoff 21X-3F, North Tobacco Garden, t1/15; cum --
  • 28290, 1,715, XTO, Rieckhoff 21X-3A, North Tobacco Garden, t12/14; cum 4K 12/14;
  • 28317, 853, EOG, Parshall 38-1608H, Parshall, spacing ICO, t12/14; cum 7K 12/14;
  • 28326, 1,587, Hess, EN-Freda-154-94-2635H-5, Alkali Creek, t1/15; cum --
  • 28577, 2,096, XTO, Rieckoff 21X-3E, North Tobacco Garden, 4 sections, t1/15; cum --
Wells coming off the confidential list Thursday:
  • 27551, drl, CLR, Steele Federal 4-24AH1, Banks, no production data,
  • 28266, 1,390, Whiting, Gunder T.31-30-2H, Lonesome, a nice well, t8/14; cum 60K 12/14;
  • 28267, 1,368, Whiting, Gunder T. 31-30-3H, Lonesome, a nice well, t8/14; cum 54K 12/14;
  • 28371, drl, Hess, AN-Brenna-153-94-3130H-6, Antelope, a Sanish well, no production data,
  • 28372, drl, Hess, AN-Brenna-153-94-3130H-7, Antelope, a Sanish well, no production data,
  • 28475, 1,267, Newfield, Rolfsrud State 152-96-29-32-11H, Westberg, a huge well, t11/4; cum 31K 12/14;
  • 28834, drl, SM Energy, Waters 3B-24HN, Ambrose, no production data,
  • 29031, conf, MBI, Hueske 30-1, wildcat,

Nothing Can Stop The Freight Train That Is The American Job Market -- Fiscal Times

 A reminder: I track oil permits / projections here.

Reporting Today

Words you don't want to hear regarding your investment: volatile; misses by wide margin; surprise loss; misses delivery target

See disclaimer

Tesoro Corp (TSO): forecast, $1.50; $1.13 per share. Earnings, adjusted to account for discontinued operations and non-recurring costs, came to $1.46 per share; increased its quarterly dividend by 40% to 42.5 cents a share
Cisco Systems (CSCO): forecast, 51 cents; net income of 46 cents. Earnings, adjusted for one-time gains and costs, were 53 cents per share.
Tesla (TSLA): forecast, 31 cents; a loss of $107.6 million in its fourth quarter.The Palo Alto, had a loss of 86 cents per share. Losses, adjusted for non-recurring costs and stock option expense, were 13 cents per share. Tesla headlines without links:
  • Tesla shares decline in volatile post-quarterly results trading
  • Tesla loses $107 million in 4Q14; upbeat about 2015
  • Tesla misses estimates by wide margin; shares fall
  • Tesla's losses widen as spending increases
  • Tesla reports surprise loss, misses delivery target
  • Tesla misses estimates as automaker adjusts approach to China 
  • Tesla stock plunges after it posts $108 million quarterly loss
Another Freight Train That Can't Be Stopped 
-- The American Jobs Market -- Tony Mirhaydari

Fiscal Times is reporting:
Nothing, it seems, can stop the freight train that is the American job market.
On Friday, another strong payroll report confirmed the best run of job gains since 1997.
On Tuesday, the latest data from government statisticians showed job openings at their highest level since 2001 — to a seasonally adjusted 5 million openings. All indicators suggest that not only is the labor market tightening fast and increasing opportunities for out-of-work Americans, but it's setting the stage for a powerful surge of wage increases later this year. 
The writer: Anthony Mirhaydari. It will be interesting to take a look at this article later this year. For the archives.
Apple Surging

On a down day for the market, down about a 100 points, AAPL is up over $2.00, after hitting all-time highs yesterday and becoming the first $700-billion-market-cap company. XOM, #2: well under $400 billion.

See disclaimer.


The Bismarck, North Dakota, police department, in a "reverse sting," netted 17 "johns" responding to a "prostitution ad." There were so many respondents, the Bismarck Police Department could not keep up with the processing of all the "johns" and had to "pull the ad."

Their biggest concern: there were so many respondents -- who, of course, after been being hooked and booked, would have been released on bond -- the police department worried that the "johns" would start running into each other, and letting the "cat out of the bag."

You have no idea how much I wanted to use another word for "cat" in that last line.

By the way, isn't the North Dakota state legislature in session now?  Awful cold this time of year.

Link here.

Wow, I'm glad this happened in Bismarck and not Williston. I wonder if The Dickinson Press will carry this story?

Some Huge Bakken Wells Reported; "I Can Understand Mom-And-Pop Businesses Not Being Able To Afford ObamaCare" -- Presdident Obama; Staples To Mandate 25-Hour Work Weeks; ObamaCare Is High-Cost Catastrophic Health Insurance

A large number of Bakken wells came off the confidential list today; they have been updated. There are some huge well (again, as usual). 

ObamaCare? That Was Easy -- Staples

The Federally-mandated 30-hour work week? Think again: it's 25 hours.  Staples, the No. 1 U.S. office supplies retailer, has told its employees not to work more than 25 hours per week.

I'm not exactly sure where to place this story; I have a link at the bottom of the blog about companies "leaving" ObamaCare, but "leaving" needs to be in "air quotes" because everyone seems to have their own way of dealing with ObamaCare.

The tag:

Regular readers know that I have been tracking ObamaCare from day 1

The story I am referring to today come from ReutersObama slams Staples, big companies on healthcare: 'Shame on them' - :
U.S. President Barack Obama singled out office supply giant Staples Inc as undercutting his healthcare reform law and said large corporations should not use the health insurance issue as an excuse for cutting wages. 
"It's one thing when you've got a mom-and-pop store who can't afford to provide paid sick leave or health insurance or minimum wage to workers … but when I hear large corporations that make billions of dollars in profits trying to blame our interest in providing health insurance as an excuse for cutting back workers’ wages, shame on them,” Obama said in an interview with BuzzFeed.
The Affordable Care Act requires companies with more than 50 employees to pay for health insurance for people who work 30 hours a week or more. Reuters has reported that some businesses are keeping staffing numbers below 50 or cutting the work week to less than 30 hours to avoid providing employee health insurance.
Staples, the No. 1 U.S. office supplies retailer, has told its employees not to work more than 25 hours per week.
So many story lines here. I love the line from President Obama that he could understand mom-and-pop businesses not being able to afford ObamaCare. Does he not realize that the bulk of American businesses in the US are small business?

Whatever.  Wait until Staples defines their employees as "individual contractors." LOL.

Minimum Wage? That Was Easy -- Aldopho Gomez

By the way, speaking of cutting hours for employees because of ObamaCare, the same thing is happening with regard to the minimum wage, but I guess it's a win-win: the employee gets the same amount of pay but has more free hours to spend at home (maybe less day-care expenses); and the employer gets to bring in family members to take up the slack. The Los Angeles Times is reporting:
[Due to the minimum wage] wage increases ate into profits at businesses in San Francisco, San Jose, Albuquerque and Santa Fe, N.M. And that fundamentally changed the way they did business. Owners couldn't simply absorb the costs, so they scrubbed their budgets to preserve profits.
Many question whether workers benefited.
"The thought process is that you're going to put more money in people's pockets," said Ghattas, who owns the Slate Street Café, a wine bar and restaurant in Albuquerque. "In theory, that makes sense. But people end up getting hours cut, and they don't actually make any more money."
I think this administration has done more to hurt the "working class" than any recent administration in history:
Health Insurers Move High-Cost Patients Off Their Rolls

Forbes is reporting (and quoting The New York Times):
The health insurance market is changing. And the changes are not good. Even before there was Obamacare, most insurers most of the time had perverse incentives to attract the healthy and avoid the sick. But now that the Affordable Care Act has completely changed the nature of the market, the perverse incentives are worse than ever.
Writing in Sunday’s New York Times Elizabeth Rosenthal gives these examples:
  • When Karen Pineman of Manhattan sought treatment for a broken ankle, her insurer told her that the nearest in-network doctor was in Stamford, Connecticut – in another state.
  • Alison Chavez, a California breast cancer patient, was almost on the operating table when her surgery had to be cancelled because several of her doctors were leaving the insurer’s network.
  • When the son of Alexis Gersten, a dentist in East Quogue New York, needed an ear, nose and throat specialist, the insurer told her the nearest one was in Albany – five hours away.
  • When Andrea Greenberg, a New York lawyer, called an insurance company hotline with questions she found herself speaking to someone reading off a script in the Philippines.
  • Aviva Starkman Williams, a California computer engineer, tried to determine whether the pediatrician doing her son’s 2-year-old checkup was in-network, the practice’s office manager “said he didn’t know because doctors came in and out of network all the time, likening the situation to players’ switching teams in the National Basketball Association.”
But aren’t these insurers worried that if they mistreat their customers, their enrollees will move to some other plan? Here’s the rarely told secret about health insurance in the Obamacare exchanges: insurers don’t care if heavy users of medical care go to some other plan. Getting rid of high-cost enrollees is actually good for the bottom line.
Insurers are going to do very, very well under ObamaCare. This on Facebook (possibly a dynamic link):
Frances Fisher avoiding seeing the doctor for gastro-intestinal bleeding because of a high deductible.  
ObamaCare is essentially high-cost catastrophic insurance. People just don't get it.

A great opportunity for investors.

See disclaimer.

It's All About The Asian Market -- Slump In Oil Prices -- February 11, 2015; OPEC Cuts Oil Prices To Asia; Maybe It's All Those Teslas Being Sold In China

I track "slump in oil prices" here. I think I came to this same conclusion some time ago -- I'm sure most readers figured it out a lot sooner than I did. Whatever. Here's the latest, from Bloomberg:
Iraq, Kuwait and Iran joined Saudi Arabia in cutting their March crude prices for Asia, signaling the battle for a share of OPEC’s largest market is intensifying.
Iraq’s Basrah Light crude will sell at $4.10 a barrel below Middle East benchmarks, the deepest discount since at least August 2003.
National Iranian Oil Co. said its official selling price for March Light crude sales will be a discount of $2.10 a barrel, the widest since at least March 2000.
Kuwait Petroleum Corp. said Wednesday its discount will be $4.10, the biggest since August 2008.
The cuts come after Saudi Arabia, the largest crude exporter, reduced pricing to Asia last week to the lowest in at least 14 years. The Organization of Petroleum Exporting Countries left its members’ output targets unchanged at a November meeting, choosing to compete for market share against U.S. shale producers rather than support prices.
Iraq is the second-biggest producer in OPEC, Kuwait is third and Iran fourth. 
Weak demand right now. Maybe it's all those Teslas they're selling in China.
“This is a global market that’s oversupplied,” Emerson said. “Late March and early April are in normal times a period of weak demand, so you have to be rather aggressive now if you want to sell your oil.” 
Wait for summer.


Getting back to the story above. Note this line near the end of the story:
The Organization of Petroleum Exporting Countries left its members’ output targets unchanged at a November meeting, choosing to compete for market share against U.S. shale producers rather than support prices. 
"...choosing to compete for market share against US shale producers rather than ...."

The writer seems to be confused. That paragraph, by the way, has become a trope in less than three months (trope is a fancy word for "boiler plate," it appears).

First, the US bans exports of oil, so it's hard for folks to see the connection between OPEC and US competing for the Asian market.

Second, I thought the story was all about cheating within OPEC. In fact, there was another story about all the oil flowing from Latin America to Asia just last night (or early today, I forget). I guess OPEC blaming the low oil prices on US shale is sort of like MSNBC blaming all the US woes on George W. Bush.

"Fathomless Ignorance" Is The Phrase For Today -- Wednesday, February 11, 2015; The Other Big Word For The Day: Tesla; Back To Boots On Ground

Reminder: with all the talk of conditioning / reformulating Bakken crude oil, for those with a very, very technical interest in all this, back in September, 2013, there was a long article on the properties of Bakken crude oil For newbies: I add new links to this page.

Active rigs:

Active Rigs138195183203165

RBN Energy: why not more storage?
It seems logical to maintain stockpiles of critically important commodities like crude oil, heating oil and gasoline. After all, supply can be cut off suddenly by acts of God or man, causing price spikes, cold houses and empty gas tanks. Worries about supply interruption led to the creation of a federal Strategic Petroleum Reserve (SPR) and Northeast Home Heating Oil Reserve (NEHHOR) and, more recently, both federal and state reserves for motor fuels, again in the Northeast. But does the SPR as currently configured still make sense, given how much has changed in crude production and flows? Should we set up heating oil or motor fuel reserves in regions beyond the Northeast? And what about a strategic reserve for propane—an important fuel for millions of American homes and businesses? Today, we continue our look at the challenges of stockpiling hydrocarbons in a changing, unpredictable energy world.
It may surprise many readers to know that the U.S. is actually in worse shape today as far as our reliance on crude supplies from overseas (imports) are concerned than it was during the Arab oil embargoes of the 1970s—in spite of the recent shale boom driven increase in domestic production.
In May of 1973 Energy Information Administration (EIA) data shows that U.S. crude production was 9.3 MMb/d while imports were 3.2 MMb/d. In November of 2014 production was 9 MMb/d but imports were 7.3 MMb/d – more than double what they were in the 70’s. So we remain vulnerable to the disruptive, out-of-the-blue supply cut-offs that can come from events as different as a Category 5 hurricane, an uprising in the Middle East or the current U.S. refinery workers strike As we said in Episode 1 of our series, the federal government responded to the 1973-74 Arab oil embargo by establishing the SPR that now stores 692 MMBbl of crude at four salt-dome sites along the Gulf Coast and reacted to spiking heating oil prices in the winters of 1996-97 and 1999-2000 by setting up NEHHOR, the nation’s first refined products stockpile that now stores a total of 1 MMBbl at sites in Connecticut and Massachusetts.
More recently, in the wake of Superstorm Sandy in October 2012, both the feds and the state of New York started strategic reserves for gasoline and diesel. The feds are storing a total of 1 MMBbl of motor fuel, 700 MBbl of it at sites in New Jersey and 300 MBbl at sites in Massachusetts and Maine; New York is storing a total of 131 MBbl, 71 MBbl of it on Long Island and 60 MBbl upstate.
Who Are You Gonna Believe?

Last night, stacking rigs gave the industry "hope" (Rigzone); this morning, stacking rigs "doesn't mean diddly squat" (Goldman Sachs). By the way: read that second linked story -- the one coming out of Goldman Sachs -- very, very closely. Regular readers will see why I say that.

Yemen: Example of Success -- President Obama
US, UK, and France Closed Embassies In Yemen Over The Weekend
  The Guardian is reporting:
The US, Britain and France are closing their embassies in Yemen and urging their citizens to leave the country over security concerns in the Arab world’s poorest country, where Shia rebels finalised their power-grab last week.
Just six months ago, President Obama was touting Yemen, Somalia as success stories. I liked the way The Wall Street Journal  characterized President Obama's foreign policy.

In fact as I'm writing this, I'm listening to radio news and the Yemen story is the top story today.

Three Years And A Gazillion Dollars 
Needed To Defeat ISIS -- The JV Team -- President Obama

That JV team in the Mideast? ISIS? ISIL? It looks like they were misunderestimated. The President says a minimum of three years and a gazillion dollars and another war will be needed to (maybe) defeat the JV team, despite A-team from Jordan finally joining the fight. Are any links needed? We'll see. This one will do. The only phrase Chuck Todd did not use in that interview: "fathomless ignorance."

Kennedy Mega-Storms Continue To Hit Boston

Snow is out of control in Boston.
More than 2 feet of snow piled up in parts of New England by early Tuesday, breaking records set 37 years ago as forecasters warned still more winter weather was on the way.
The snowfall numbers in the area are staggering. Boston's Logan Airport measured 72 inches of snow in the last two and a half weeks. In the last two days, the town of Norwell, which is outside Boston, got buried in 30 inches of snow. 
Boston's snowfall surpassed the Colorado ski resort town of Crested Butte.
And more is yet to come.
Schools to the north of Boston have closed until Feb. 23 and forecasters warned that more snow was expected Thursday and again next weekend. The Massachusetts Emergency Management Agency said that potentially record-low temperatures and wind chills are expected later in the week. 
All that time and money spent on conferences on global warming and worries that the oceans will rise 0.01 inch/decade would have been better spent preparing for these winter storms. I suppose.

Tesla Headlines

Tesla CEO threatens firings: Chinese sales are dismal.
Tesla sold about 120 cars in China last month, one of the sources told Reuters, well below the company's aggressive targets. Musk has previously said he expected China sales could rival those in the United States as early as 2015.
While Tesla sales in many overseas markets from Europe to Asia have not met expectations - and executives have subsequently been fired or demoted - results have fallen far short in China, a key market for Musk's expansion strategy.
Changes time of earnings conference call.  Will report earnings at 4:00 p.m. CT.

Tesla's growth is a matter of survival, WSJ. What earnings will mean:
Although expected earnings of 56 cents for 2014 would be down from 78 cents the prior year, the result would mark a second consecutive year in the black.
But that is on an adjusted, pro-forma basis. The company’s reported result will be negative, as it always has been. The gap is due to differences in the treatment of share compensation, leases and nearly $3 billion in convertible notes.
Those securities, which can be converted into stock at various share prices, get surprisingly little notice. The higher the stock price, currently about $217, goes over the next six years, the more dilution of existing shareholders that occurs as the securities are converted from debt into equity.
That’s a high-class problem, naturally. If the stock doesn’t appreciate by at least 160% in that time (over the next six years), though, Tesla could have to repay or refinance a big slug of the convertible notes. It would be challenging.
True, the stock has risen 460% over the past two years. Yet, in the past 12 months, the company produced only $158 million in cash flow. So the success of its mass-market model and battery-producing “Gigafactory” are necessary not just for growth but for survival.
A lot can happen between now and six years from now.

Ms Merkel Needs To Get Her Checkbook Out

It looks like Germany may be on the hook for $3 billion if they want to keep the Ukraine from going into default. AFP is reporting:
Kiev has requested a restructuring of its debt to Russia but Moscow is expecting its $3 billion loan to be repaid in full this year, Russia's finance minister said Tuesday.
"Ukraine asked us to review the issue of restructuring its debt," Finance Minister Anton Siluanov told Russian media on the sidelines of the G20 summit of finance ministers and central bank chiefs in Istanbul.
Siluanov said that Russia is unwilling to defer the repayment however, expecting Kiev to comply with the deadline.
It's not like Russia has all that much oil income coming in.

No Boots On Ground -- Never Mind

Tweeting right now:
  • White House: It's time for Congress to 'step up to the plate' on authorizing military force - @Reuters
  • White House: US combat soldiers on the ground may be used for hostage rescue operations - @Reuters