Wednesday, February 18, 2015

Mexico To Delay / Cancel Major Deep Water Exploration Projects -- February 18, 2015

Reporting tomorrow:
California Resources Corp (CRC), OXY USA spin-off, forecast 7 cents, before market opens:
Cheniere Energy (LNG), forecast, a 26-cent loss; after market close;
Denbury (DNR), forecast 23 cents, before market opens;
Linn Energy (LINE), forecast 6 cents, before market opens;
Nobel Energy (NBL), forecast 34 cents; before market opens;

Mexico To Cancel / Delay Deep-Sea Projects

When the slump in oil prices hit, I said the following would be most vulnerable:
  • North Sea (off-shore)
  • ultra-deepwater ventures in the Atlantic off Brazil and Angola (off-shore)
  • Canadian oil sands
  • the Arctic
It turns out "stripper wells" needed to be added to that list. Be that as it may, it was pretty obvious that deep-sea projects would be most vulnerable. Today, Reuters via Rigzone is reporting:
Mexico's state-run oil company Pemex has postponed some deep water exploration projects and will cut jobs as part of a raft of planned capital delays due to slumping crude prices.
Pemex said on Monday it would delay execution of capital projects including major refinery reconfigurations and ultra-low sulfur fuel projects because of a sharp fall in oil prices.
"There are ... some exploration projects in deep waters, those that carry higher risks, well if we haven't started them then they will be delayed," Lozoya told local radio.
As noted before,
"With all the big oil projects that are being delayed or canceled, 2017, and possibly 2016, is going to be a huge year for oil investors."
My hunch is that in 2016 / 2017 there will be a relative shortage of oil with these big projects delayed or canceled.

Update On Talisman / Repsol Deal

Previously posted, this is an update being reported by Rigzone
Talisman Energy Inc common shareholders on Wednesday voted to approve an $8.3 billion offer for the Canadian oil and gas producer from Repsol SA, clearing the way for the Spanish company to acquire Talisman's worldwide operations
Talisman common and preferred shareholders both voted nearly unanimously in favor of Repsol's December 16, 2014, offer to pay $8 per share for the company, a 56 percent premium to the day-prior closing price for the company on the Toronto Stock Exchange. 
Repsol will also assume Talisman's $4.7 billion long-term debt. Though the deal still requires regulatory approval, expected by mid-year, the vote is a crucial step towards completing Repsol's acquisition of Canada's No.5 independent oil producer.
Dutch Earthquakes

Posted several times previously, this is simply an update on something that fascinates me for some reason. Being reported by Reuters at Rigzone, also:

Royal Dutch Shell, Exxon Mobil Corp and the Dutch government ignored the danger of earthquakes caused by gas extraction at the massive Groningen gas field for decades, the Dutch Safety Board said on Wednesday.
Its critical report is one of several recommendations to the government of Liberal Party Prime Minister Mark Rutte in coming months about production levels at the Groningen field.
The issue has become a political flashpoint ahead of local elections. The correlation between gas extraction and earthquakes was clear in 1993, but "the risks to residents were not recognised" until 2013, the report said.
The board's year-long inquiry concluded that the Economy Ministry, State Supervision of Mines and NAM, the Shell-Exxon Mobil joint venture which operates the gas field, worked collectively to maximise production.
"The parties concerned considered the safety risk to the population to be negligible and thus disregarded the uncertainties surrounding this risk assessment," it said. They "failed to act with due care for citizen safety in Groningen."
MRO Cuts CAPEX A Second Time

Reuters via Rigzone is reporting
Marathon Oil Corp on Wednesday cut its 2015 budget by another 20 percent to $3.5 billion and said its fourth-quarter profit rose, boosted by a gain related to the sale of oil and gas properties in Angola and Norway.
Profit in the quarter was $926 million, or $1.37 per share, compared with $375 million, or 54 cents in the year-ago period.
Marathon, which previously said it was slashing 2015 spending about 20 percent in December, said it would make a second budget cut of another 20 percent.

Huge Drop In Active Rigs In North Dakota: 130; Fifteen (15) New Permits -- February 18, 2015

Wells coming off confidential list Thursday:
  • 26703, 1,858, QEP, MHA 1-27-34H-148-92, Heart Butte, t1/15; cum --
  • 27564, IA/SI, CLR, Holstein Federal 2-25H, Elm Tree, no production data,
  • 28341, 1,523, BR, Bullrush 2-7-9UTFH, Elidah, t1/15; cum 1K 12/14;
  • 28724, 556, Hess, TI-Arlene Stone-157-95-2423H-1, Tioga, t12/14; cum 10K 12/14;
  • 28936, drl, CLR, Alfsvaag 2-31H, Crazy Man Creek, no production data,
  • 29040, 105, Enduro, NSCU J-715-H1, Newburg, a Spearfish/Charles well, t11/14; cum 4K 12/14;
  • 29102, 80, Enduro, NSCU S-706-H1, Newburg, a Spearfish/Charles well, t101/4; cum 7K 12/14;
Price of oil plummeted by the end of the day, dropping almost 6% for the day; back down to around $50/bbl WTI.

Active rigs:

Active Rigs130185180199171

Fifteen (15) new permits --
  • Operators: Newfield (5), EOG (4), XTO (4), Oasis, Whiting
  • Fields: Sand Creek (McKenzie), Parshall (Mountrail), Siverston (McKenzie), Tyrone (Williams), Arnegard (McKenzie)
  • Comments: circling the wagons, though Tyrone is interesting at this point
Three (3) producing wells completed:
  • 27423, 547, XTO, Lyla 24X-10A, Lindahl, t1/15; cum --
  • 27607, 1,512, BR, Bullrush 34-10TFH-B, Elidah, t2/15; cum --
  • 26485, 3,454, Statoil, Hawkeye 16-21 3H, Todd, t1/15; cum --
Wells coming off the confidential list today were posted earlier; see sidebar at the right.

Permits canceled:
CLR canceled two permits (#22370, #22523), J Lazy H in Billings; Pocatello in McKenzie County
XTO canceled five permits (#23690 - #23692, #26399, #26400); all FBIR wells, Dunn County

Another Oasis well name change suggesting shift from lower benches to middle Bakken and T1.

Companies Reporting After Hours: EOG Appears To Have Big Miss -- February 17, 2015

Reporting today:
See disclaimer. This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here. I post this data quickly; I often make mistakes, both factual and typographical. There is a lot of data; not everything is "apples and oranges." If this is important to you, go to the source.

EOG With 3 Dry Holes; Random Look At A Busy Location In The Parshall Oil Field -- February 18, 2015

This is posted just for the fun of it while waiting to pick up  the older granddaughter from school.

This is mostly for newbies, to let them know how active some parts of the Bakken are, even during the period of a severe slump in the price of oil.

This is a screen shot of a very busy area in the Bakken, in the Parshall oil field. I have marked the three areas "A," "B," and "C" and then zoomed in on those areas to make it easier to see the individual permits and wells.

First, the big picture:

Area A:

17934, 718, EOG, Parshall 16-32H, one section, t8/09; cum 317K 7/17;
30333, loc, EOG, Parshall 94-32H,
30334, loc, EOG, Parshall 95-3330H,
29635, 524, EOG, Parshall 164-3332H, two sections, t12/16; cum 64K 7/17;
29636, 1,673, EOG, Parshall 27-3332H, two sections, t12/16; cum 83K 7/17;
29637, 1,103, EOG, Parshall 24-3332H, two sections, t12/16; cum 48K 7/17;
17621, 1,117, EOG, Parshall 17-33H, one section, t8/09; cum 232K 7/17;
29298, 1,744, EOG, Parshall 96-3332H, two sections, t12/16; cum 81K 7/17;
29299, 988, EOG, Parshall 97-3332H, two sections, t12/16; cum 69K 7/17;
29300, 804l, EOG, Parshall 98-3332H, one section, t12/16; cum 59K 7/17;
25238, 2,262, EOG, Fertile 50-0509H, ICO, t9/13; cum 338K 7/17;
29837, 468, EOG, Fertile 70-0509H, ICO, t3/17; cum 41K 7/17;
29838, 973, EOG, Fertile 69-0509H, ICO, t3/17; cum 75K 7/17;
17727, 975EOG, Fertile 5-04H, one section, t8/09; cum 173K 7/17;
30384, 503, EOG, Fertile 68-0410H, ICO, t3/17; cum 48K 7/17;
30385, 1,088, EOG, Fertile 67-0410H, ICO, t3/17; cum 59K 7/17;
30386, PA, EOG, Fertile 66-0410H,
22091, 537, EOG, Fertile 51-0410H, t11/12; cum 286K 12/14;
30128, 390, EOG, Fertile 60-0410H, ICO, t7/15; cum 73K 7/17;
30129, 740, EOG, Fertile 61-0410H, ICO, t7/15; cum 97K 7/17;
30130, 888, EOG, Fertile 62-0410H, ICO, t7/15; cum 156K 7/17;

Area B:

18110, 1,018, EOG, Fertile 11-10H, t6/10; cum 218K 7/17;
17888, 835, EOG, Fertile 4-03H, t8/09; cum 177K 7/17;
28434, 1,308, EOG, Fertile 102-0333H, Parshall, t12/16; cum 118K 7/17;
28435, 871, EOG, Fertile 55-0333H, Parshall, t12/16; cum 92K 7/17;
28452, PNC, EOG Fertile 56-0333HC, Parshall,
28453, PNC, EOG Fertile 57-0333HC, Parshall,
28454, PNC, EOG Fertile 59-0333HC, Parshall,
29080, PNC, EOG Fertile 58-0333HC, Parshall,
29588, 1,256, EOG, Fertile 59-0333H, Parshall, t12/16; cum 102K 7/17;
29589, 1,355, EOG, Fertile 58-0333H, Parshall, t12/16; cum 107K 7/17;
29590, 929, EOG, Fertile 57-0333H, Parshall, t12/16; cum 115K 7/17;

Area C:

30184, 1,078, EOG, Fertile 77-0905H, Parshall, t3/17; cum 57K 7/17;
30185, dry, EOG, Fertile 78-0905H, Parshall,
30293, 967, EOG, Fertile 79-0905H, Parshall, t3/17; cum 67K 7/17;
30314, 552, EOG, Fertile 80-0905H, Parshall, t3/17; cum 58K 7/17;

29821, 894, EOG, Fertile 74-0905H, Parshall, t3/17; cum 70K 7/17;
29822, dry, EOG, Fertile 75-0905H, Parshall,
29823, 931, EOG, Fertile 76-0905H, Parshall, t3/17; cum 64K 7/17;

29832, 1,362, EOG Fertile 72-0905H, Parshall, t3/17; cum 51K 7/17;
29833, dry, EOG Fertile 71-0905H, Parshall,
29915, TA, EOG Fertile 73-0905H, Parshall,

30126, 444, Fertile 65-1004H, Parshall, t3/17; cum 51K 7/17;
30127, 580, Fertile 64-1004H, Parshall, t3/17; cum 48K 7/17;
30296, 701, Fertile 63-1004H, Parshall, t2/17; cum 50K 7/17;

Update On The West Virginia Derailment -- No Serious Injuries, No Oil In Water, Newer Tank Cars -- February 18, 2015

The Dickinson Press updates the West Virginia derailment on February 16:
  • none of the 25 tank cars that derailed fell into the nearby Kanawha River, CSX said. On Monday, officials said at least one car had entered the river.
  • water tests along the Kanawha River have so far come up negative for traces of oil
  • the train was hauling newer model tank cars
  • the CPC 1232 is the newer, supposedly tougher version of the DOT-111 car manufactured before 2011, which was faulted by regulators and operators for a number of years
The JV Team
Faster Than A Speeding Bullet, More Powerful Than A Locomotive, 
Able To Leap Tall Camels In A Single Bound -- Yahoo News

Yahoo!News is reporting:
It’s been less than a year since IS burst onto the stage, seizing large amounts of territory and shocking the world with its brutally violent tactics. During that time, the group has evolved into a highly sophisticated multimedia organization, boasting slick social media strategies that could give major corporate marketing teams a run for their money.
IS knows how to package its extremist ideology in the form of well-produced videos, attractive graphics, polished magazines and strategic online posts. It’s also strikingly savvy at spreading them online, tailoring their presentation and message to media sites like Twitter, YouTube and Vine. The messages are hypercustomized in language, tone and content to reach as many people possible and ultimately go viral. As Marshall Sella recently wrote in Matter, IS is “an entire brand family, the equivalents of the Apple logo’s glow ... terrorism’s Coca-Cola.” There’s no need to hold an IS-stamped watch or baseball hat in your hands to face the truth: IS is a powerful and terrifying brand that we were not prepared to reckon with.
The writer asks how this could happen ... literally overnight. 

It helps to be labeled the "JV Team" when just getting started. Fathomless ignorance never seems to go out of style.

Global Warming Update
The Sun Has Gone Quiet Again During The Weakest Solar Cycle In More Than A Century

VenCoreWeather is reporting:
The main driver of all weather and climate, the entity which occupies 99.86% of all of the mass in our solar system, the great ball of fire in the sky – has gone quiet again during what is likely to be the weakest sunspot cycle in more than a century.
For the past 5 days, solar activity has been very low and one measure of solar activity – its X-ray output – has basically flatlined in recent days.
Not since cycle 14 peaked in February 1906 has there been a solar cycle with fewer sunspots.
We are currently more than six years into Solar Cycle 24 and today the sun is virtually spotless despite the fact that we are still in what is considered to be its solar maximum phase. Solar cycle 24 began after an unusually deep solar minimum that lasted from 2007 to 2009 which included more spotless days on the sun compared to any minimum in almost a century.
Contraction Of US Demand For Goods And Services
No Wonder The President Goes Golfing So Much
With Numbers Like These, I Would Want To Escape Also

From the US government -- a look at "final demand for goods and services." This is something I would never pay attention to but Don certainly picks up on some interesting graphics. This is one of them. From the Bureau of Labor Statistics:
The Final Demand-Intermediate Demand system replaced the Producer Price Index  Stage-of-Processing system as the  primary aggregation system with the release of data for January 2014.

The [new] system expands coverage beyond that of the [previoius] system through the addition of services, construction, exports, and government purchases.

Final demand measures price change for commodities sold for personal consumption, capital investment, government, and export.
The final demand goods index measures price change for both unprocessed and processed goods sold to final demand.
Final demand services includes trade services; transportation and warehousing services; and services other than trade, transportation, and warehousing sold to final demand. 
So, what does the graph look like: Pretty striking, to say the least:

And this is after a gazillion dollars of stimulus.

They say the US economy is the best on earth. Scary, isn't it?

This is four years of data and all I've heard from business sources (predominately Bloomberg, Reuters, and the AP) is that the economy continues to recover. My hunch is that Janet Yellen looks at this graph before deciding whether to raise interest rates.

It would be bad enough if the trend were flat, or slightly negative, but the trend literally shows the demand for goods falling off a cliff. And yet, investors have done incredibly well over this same period of time.

I wonder what an overlay of an ObamaCare Graph would look like on top of this graph: a graph of number of folks enrolled in ObamaCare. Remember: all those folks paying their premiums for high-cost catastrophic health insurance.

Update, 1:44 p.m., later same day: yup, here it is. Janet Yellen appears NOT eager to raise rates

Privileged Planet

One of my favorite books is The Privileged Planet: How Our Place in the Cosmos is Designed for Discovery, Guillermo Gonzalez and Jay Richards, c. 2004.

I was reminded of that after seeing the stories on the "newest planet" discovered in our solar system: Ceres. The "planet" is covered with craters from meteorites hitting it. (And actually Ceres wasn't recently discovered; I think it's been around for a long time and scientists have known about it, but it has only recently been designated a "planet" or "planetoid." I'm probably wrong the the specifics, but it's the thought that counts.)

The authors of The Privileged Planet note that without the other planets in the solar system -- Mars, Jupiter, ... and now Ceres, the earth likely would have been clobbered with meteors. The other solar  system planets literally provide a shield for the Earth from incoming asteroids. The solar system planets collectively missed a big meteor 65 million years ago, but other than that, they've done a pretty good job. The mammals aren't complaining; that meteor finally got rid of those pesky dinosaurs.

For the granddaughters: asteroids (out of harm's way); meteors (penetrating the planet's atmosphere); meteorites (impact).  

Privileged City

Chicago gets the headline today: setting cold records. ABC7Chicago is reporting:
Record-breaking cold could be on the way Thursday, Butler said. The Chicago area reached a record-low temperature of -7 degrees in 1936. Temperatures are expected to reach -8 or -9 degrees on Thursday. High temperatures will hover around 2 degrees.

Interest Rates Are So Low, So, Why Not?

Bloomberg is reporting:
Wisconsin Governor Scott Walker, facing a $283 million deficit that needs to be closed by the end of June, will skip more than $100 million in debt payments to balance the books thrown into disarray by his tax cuts.
Delaying the $108 million principal payment due in May on short-term debt would free funds. The move doesn’t require legislative approval, the nonpartisan Legislative Fiscal Bureau said in a Feb. 13 memorandum. The terms of the debt sale allow Wisconsin to defer the payment in any given year, a procedure known as a restructuring, without defaulting. 
Walker’s plan would increase debt-service bills by $545,000 in the next budget year, which starts July 1, and by $18.7 million in the one after that.
Since taking office in 2011, Walker has steered more than $2 billion in tax cuts through the Republican-controlled legislature. The state reported a $759 million surplus on June 30, 2013. 
I don't understand the numbers: restructuring results in an increased debt-service by about one-half million dollars this coming year, but then in the next year the debt-service jumps to almost $20 million. In one year? Not to worry; if he's president by then, it's all moot. LOL.

Speaking Of ObamaCare

Did you all see this in today's WSJ? A hospital collected about $40,000 from the government to pay for knee infection following surgery. The individual was discharged on the day the hospital maxed out its reimbursement. Any further days in hospital would not lead to further government reimbursement.

But this is the real cool part: had the hospital discharged the patient one day earlier, total reimbursement would have $20,000.

So that one extra day of in-hospital care doubled the reimbursement, and one more day would have been a "negative" in the CFO's bookkeeping ledger.

In the emotional arena, one can get upset.

In the investing arena, it emphasizes what I've been saying for quite some time: Big Health wrote the ObamaCare bill; Big Health guides Medicare's reimbursements. This is not rocket science.

This may not be rocket science but this is the disclaimer: I spent most of my entire adult life in medicine, but I am not a professional investor, and this is not an investment site. Do not make any investment, financial, or relationship decisions based on anything you read here or think you may have read here. I am not directly invested in any ObamaCare health insurers and have no plans to start now. I assume my managed portfolios (mutual funds, IRAs, pensions, etc) are invested in ObamaCare health insurers. Hopefully the big ones.

Wednesday -- February 18, 2015

Active rigs:

Active Rigs135185180199171

RBN Energy: update on refiners.
According to EIA, refinery utilization in the Midwest was at record levels last year and reached over 100% for the week ending July 11, 2014 before the price crash took hold.
How did refinery utilization get over 100%? That was because utilization rates are based on “normal” refining conditions that can be exceeded when refineries are firing on all cylinders. The average utilization in the Midwest over 2014 was 93% and the average 4-3-1 crack spread was just under $16/Bbl making it a very profitable year for regional refiners. In fact, Midwest refiners have enjoyed healthy refining margins since the boom in domestic shale crude production began in 2011.
Increased crude supplies have flooded into the region from the Bakken and Niobrara plays as well as from Western Canada - leading to congestion at the Midwest trading hub in Cushing, OK and crude price discounts compared to international levels.
Discounts for U.S. and Canadian crudes priced against U.S. domestic benchmark West Texas Intermediate (WTI) at Cushing meant that Midwest refiners enjoyed cheaper feedstock than their coastal rivals who were paying higher prices based on international benchmark Brent crude for more on the Brent/WTI relationship. Because refined product prices were still set at higher levels by international markets, the lower feedstock cost of advantaged crude meant Midwest refiners enjoyed high margins as long as WTI was priced at a wide discount to Brent. Since June of 2014 however, falling crude prices in general have eroded the domestic crude price advantage as the spread between WTI and coastal crude prices collapsed – although the Brent premium over WTI has opened up again in the past week. In the circumstances you might have expected refining margins at Midwest refineries to weaken as the Brent premium to WTI narrowed.
So while it has been a bumpy ride for Midwest refiners in the past couple of months, the recent recovery in margins indicates that refining remains profitable in the region even as some of their crude supply advantages evaporated during the final quarter of 2014. For the immediate future, the build up of crude inventories at Cushing to take advantage of the contango storage play suggests that crude prices in the Midwest will remain under pressure from an oversupplied market – keeping refining margins robust so long as the refined product outputs can find a market.