Wednesday, March 18, 2015

More Red Lines; Throwing The Israelis Under The Bus -- March 18, 2015

It looks like President Obama is ready to throw the Israelis under the bus. Foreign Policy is reporting:
Shortly before this week’s election, the United States informed its diplomatic partners that it would hold off any moves in the U.N. Security Council designed to put Israel on the spot at the United Nations in the event that Netanyahu’s challenger, Isaac Herzog, won the election. But U.S. officials signaled a willingness to consider a U.N. resolution in the event that Netanyahu was re-elected and formed a coalition government opposed to peace talks. The United States has not yet circulated a draft, but diplomats say Washington has set some red lines and is unwilling to agree to set a fixed deadline for political talks to conclude.
Let's see:
  • UN resolution written by US condemning Israel
  • US sanctions on Israel
  • Iran to get nuclear weapons
  • What could possibly go wrong? 
Again, President Obama is checking off his bucket list -- damn the torpedoes, full speed ahead.

Global Warming
Climate Change
Ice Age Now

Snow to blanket the northeast on the first day of spring. In case the Kennedy kids did not get enough snow this winter, more coming.

The Limbo 

Sweden cuts its prime rate further below zero.
Sweden's central bank took its key interest rate further into negative territory Wednesday in a surprise move aimed at supporting a return to inflation.
The Riksbank cut its repo rate by 0.15 percentage points to -0.25 percent and said it was buying government bonds worth 30 billion kronor ($3.4 billion, 3.2 billion euros) to prevent an appreciating krona from hindering an uptick in inflation.
Those on a fixed income ...

Another Question Answered: Why Did CEOs Accept Salaries Of $1/Year?
A Huge "Thank You" To President Bill Clinton

Yahoo!Finance is reporting:
The issue of "tax-deductible performance pay" stems from 1993 legislation that capped corporate deduction of executive pay at $1 million, per executive. Section 162(m) of the IRS code was Bill Clinton's effort to both cap CEO pay and more closely link it to company performance; laudable goals. But the law of unintended consequences prevailed. Since 1993, executive pay has skyrocketed, thanks largely to a dramatic increase in "performance-based" stock options and bonuses, which aren't subject to the $1 million cap.

"Clinton’s law soon became an inside joke in boardrooms across America," David Nelson, chief strategist at Belpointe Capital, writes of the 1993 law. "After 20 years I think it’s safe to say the policy is a failure. Performance-based pay became so attractive that there are countless examples of CEOs willing to accept just $1 in salary. Stock-based compensation in all its forms became the preferred currency. Today, CEOs have no better friend than the IRS."

Random Update Of Five (5) Whiting Tarpon Federal Wells Still On The Confidential List -- March 18, 2015

Regular readers know the history of Whiting's Tarpon Federal wells. I track them here. In the process of looking something up for a reader, I came across the production numbers of the five Tarpon Federal wells that are still on the confidential list but have been completed and producing oil. Here they are:
  • 28496, drl->conf, Tarpon Federal 24-20-3RTF, Sand Creek, sundry form says "Middle Bakken, NOS; 
DateOil RunsMCF Sold

  • 28495, drl->conf, Tarpon Federal 24-20-2RH, Sand Creek:
DateOil RunsMCF Sold

  • 28494, drl->conf, Tarpon Federal 24-20-2RTF, Sand Creek, sundry form says "Middle Bakken," 30-stage, NOS, producing, strange production profile; 32K first month; 285 bbls second month:
DateOil RunsMCF Sold

  • 28493, loc->conf, Tarpon Federal 24-20-1RTF, Sand Creek, Three Forks B1, a strange production profile; 32K first month; 285 bbls second month:
DateOil RunsMCF Sold

  • 28492, conf, Tarpon Federal 24-20-1H, Sand Creek, a strange profile, 42K first month; 378 bbls second month:
DateOil RunsMCF Sold

It is possible the low production in January, 2015, for these wells is due to the reason cited at this post. These wells come off the confidential list in mid-June / late July, but I expect we will see them come off sooner, in the "producing wells completed" segment of the daily activity report.

Reminder: this is a random update; I continue to track and update these wells at the link above.

Exxon, Apple, ATT Led In 2014 Dividend Payouts -- March 18, 2015; Starbucks To Split 2-1

In terms of dollars, XOM paid out the most in dividends in 2014, followed by AAPL and then ATT at #3. Who would have thought?

From Halcon:
Pursuant to the terms of the Agreement, the Company may sell, from time to time through the Managers, shares of the Company's common stock having an aggregate offering price of up to $150,000,000. Sales of the shares, if any, will be made by means of ordinary brokers' transactions through the facilities of the New York Stock Exchange at market prices, or as otherwise agreed by the Company and the Managers.
At around $1.75/share, that equates to about 85 million shares, or about 20% of current outstanding shares. HK has about 430 million shares outstanding.

Starbucks will split 2-1.

Disclaimer. This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here or think you may have read here.

The Fed Is Now Impatient -- March 18, 2015

I was out and about much of the day today. Wow, a lot of news.

I was surprised about the "action" of the stock market. It is disheartening that so much of the volatility is related to reading the tea leaves stirred by the Federal Reserve. Much could be written but I need to move on.

For the archives, the DOW is back up over 18,000. The NASDAQ briefly hit 5,000 again; it appears it closed at 4,982. The Russell 2000 closed at a new high. Oil surged 2 or 3 or 4% -- I don't "trust" what I see over at Yahoo!Finance any more -- it is so often wrong. But WTI is still below $45, I think.

So, back to the Fed's "dovish statement." What exactly was said? Oh, how funny -- the Fed did exactly what was predicted: it removed the word "patient" from the March meeting statement. OMG. Ridiculous. But it's fun. Puts me in an upbeat mood to see these new highs or a return to near-record highs.

Ms Yellen can remove the punch bowl any time she wants. At her own risk.

So, what else? A reader sent me this. I had not seen this particular story in the WSJ but it seems I saw the same story somewhere else: despite the slump in oil prices, Watford City is bursting at the seams:
For now, Watford City and other once-tiny towns in this region of western North Dakota are still humming with construction. Developers are building thousands of apartment units and homes, hoping to see the same demand that sent rents for two-bedroom apartments soaring to $2,800 a month—more than double what landlords got before a type of oil extraction known as hydraulic fracturing, or fracking, took off in the area starting around 2009.
By the way, the state is pouring millions of dollars into the Bakken oil patch this summer for infrastructure, mostly roads and bridges. 

For newbies, the EIA now says that the Bakken reserves exceed those of the Gulf of Mexico. Some readers used to call Watford City and Williston the "Odessa and Midland" of the north. If the Bakken is bigger than the Gulf of Mexico, should WC and Boomtown, USA, now be the Houston and Baton Rouge of the north?

I had forgotten but BNSF put a thousand-dollar ($1,000) surcharge on refiners using old tank cars. Now those refiners are suing. That's fine; if BNSF loses the lawsuit, they can simply refuse to pull/push the old tank cars down the track. Whatever. Too many chefs in this kitchen.

What else? Netanyahu won by a landslide -- a landslide? Not everyone would agree, but he did win; by the time he puts his new government together it might look like a landslide.

I see Target is going to raise its minimum wage to $9/hour as competition heats up for lower wage workers who can a) speak English or Spanish; b) show up to work on time; and, c) be relatively drug-free. The pool of relatively drug-free minimum wage workers who can show up to work on time seems to be shrinking. I assume the extra 45 cents/hour in their paychecks will help cover the costs of mandatory ObamaCare. How funny; just after writing that I went to the article and starting reading the comments. This was the first comment:
Interesting how the pay is relatively comparable with each other, but when you go into Walmart, you find toothless ex-drug addict employees, and those who do not have a remote grasp on the English language (regardless of race), and when you go into Target, you get very nice, educated but progressive (may have a tattoo or piercing), but they are articulate, helpful, knowledgeable, and look like they're working their way through college or something.
I hate to imagine what the writer really wanted to say.

I see The Dickinson Press is happy to report that the slump in oil prices will knock another billion dollars off North Dakota's revenue forecast.
North Dakota’s oil tax revenues took another nearly $1 billion hit in an updated revenue forecast released Wednesday, but the picture for general fund revenues was nearly $131 million rosier than in January, leaving some lawmakers scratching their heads as they pointed to slumping oil prices and a drop in drilling activity.
The forecast, prepared by the Office of Management and Budget with consultant Moody’s Analytics, is the first since a Jan. 29 forecast from Legislative Council predicted that oil and gas revenues would total $4.3 billion next biennium – $4 billion less than the December forecast used in Gov. Jack Dalrymple’s budget proposal.
Wednesday’s forecast drops oil tax collections by another $870 million in 2015-17, and assumes $108 million less in the current biennium.
I think a lot of states would be happy with a billion-dollar surplus with a population of less than a million people. 

Seven (7) From The Century Mark -- March 18, 2015; Six (6) New Permits; OXY USA With Two Pretty Good Wells; CLR And WLL With Some Nice IPs

Active rigs:

Active Rigs107191186205171

Six (6) new permits --
  • Operators: BR (4), EOG, Triangle
  • Fields: North Fork (McKenzie), Parshall (Mountrail), Elk (McKenzie)
  • Comments:
Wells coming off the confidential list Thursday:
  • 25855, drl, Statoil, Skarston 1-12 3TFH, Banks, no production data,
  • 27755, 2,100, EOG, Parshall 75-2127H, Parshall, t9/14; cum 79K 1/15; choked back;
  • 28673, 765, Whiting, Lydia 21-14-2PH, Bell, t9/14; cum 40K 1/15;
  • 28885, IA/SI, Zavanna, Gust 2-11 3TFH, Long Creek, no production data,
  • 29268, 1,407, Newfield, Sand Creek Federal 153-96-21-28-13HLW, Sand Creek, t12/14; cum 26K 1/15;
  • 29364, 57, Enduro, NSCU G-718-H1, Newburg, a Spearfish/Charles well; t11/14; cum 3K 1/15;

27755, see above, EOG, Parshall 75-2127H, Parshall:

DateOil RunsMCF Sold

29268, see above, Newfield, Sand Creek Federal 153-96-21-28-13HLW, Sand Creek:

DateOil RunsMCF Sold

Twelve (12) producing wells completed:
  • 24794, 1,249, Slawson, Billabong 2-13-14HBK, Stockyard Creek, t2/15; cum --
  • 27164, 584, Hess, GN-Norman-158-97-3427H-1, New Home, t2/15; cum --
  • 27285, 732, OXY USA, Velenchenko 3-4-9H-143-97, Crooked Creek, t12/14; cum 14K 1/15;
  • 27286, 642, OXY USA, Velenchenko 2-4-9H-143-97, Crooked Creek, t12/14; cum 9K 1/15;
  • 27350, 727, Hess, GN-Willard-158-98-0607H-1, Rainbow, t2/15; cum --
  • 28364, 2,160, BR, CCU Pullman 5-8-7MBH, Corral Creek, t2/15; cum --
  • 28936, 849, CLR, Alfsvaag 2-31H, Crazy Man Creek, t3/15; cum --
  • 28987, 1,129, CLR, Debreen 4-3H1, Crazy Man Creek, t2/15; cum --
  • 29063, 859, Whiting, Earl T 11-6TFH, Sanish, t2/15; cum --
  • 29188, 1,199, Hess, EN-nelson-155-94-2833H-6, Alkali Creek, t2/15; cum --
  • 29814, 1,455, Whiting, Rovelstad 21-13-3H, Timber Creek, t2/15; cum --
  • 29815, 1,398, Whiting, Rovelstad 21-13HU, Timber Creek, t2/15; cum --

Explanation For Production Anomaly Reported In The Pyramid Wells -- March 18, 2015

Last night, when updating production numbers for the Pyramid wells on what used to be the northwest edge of Williston, I noted something unusual about the production profile for a number of Pyramid wells.

A reader explained it:
If you look at the Pyramid 3H production in the same month (8-14) that you noted low production on a number of other Pyramid wells, you will see a large spike in oil production. This is almost certainly due to some sort of miss on the allocation.
(This production should have been spread across the other wells.)
On the large multi-well pads, the wells often share facilities and the total production (from all wells on pad) goes into the facilities; the production has to be allocated back to each individual well.
It depends on the individual pad and operator set-up, but this is often done with separator meters. If even one of these meters is out of whack or not working it can throw off the production allocation back to each well.
The volumes for the entire lease will be correct, but at the single well level it may differ from what really happened. In this case if you look at the water volume (metered and allocated separately) you will see the wells all produced about the same water volume as you would expect for the month which leads me to believe it was just an oil allocation (bad meter) issue.
I have seen any number of things throw off allocations to individuals wells, my favorite (so far) was a mouse stuck in a water meter.
A huge "thank you" to the writer for taking time to write.

Today's EIA Brief: Ecuador

From today's EIA brief:
In Ecuador, the oil sector accounts for more than half of the country's export earnings and approximately two-fifths of public sector revenues.
Ecuador is the smallest producer in the Organization of the Petroleum Exporting Countries (OPEC) and it produced 556,000 barrels per day (bbl/d) of petroleum and other liquids in 2014, of which crude oil production was 555,000 bbl/d.
A lack of sufficient domestic refining capacity to meet local demand has forced Ecuador to import refined products, limiting net oil revenue. --- EIA 
Ecuador may be the smallest OPEC producer, but the US imports appreciably more oil from Ecuador than from the largest west African producer, Nigeria.

Easy Come, Easy Go

The Los Angeles Times is reporting:
Authorities have [quietly] revoked the [state] tax-exempt status of nonprofit Blue Shield of California, potentially putting it on the hook for tens of millions of dollars in state taxes each year.
The move by the California Franchise Tax Board comes as the state's third-largest health insurer faces fresh criticism over its rate hikes, executive pay and $4.2 billion in financial reserves.
The state quietly stripped the San Francisco insurer of its exemption from California income taxes in August. The company held that since its founding in 1939.
A spokeswoman for the tax agency declined to comment on the reasons for revocation.
The highly unusual action comes after a lengthy state audit that looked at the justification for Blue Shield's taxpayer subsidy.
The insurer has paid federal taxes for years.
Blue Shield said Tuesday that it's protesting the decision. In the meantime, state officials have ordered it to file tax returns back to 2013.

Nine (9) Away From The Century Mark -- March 18, 2015; One Well In The Marcelllus -- Almost One Million BOE In First Year


Later, 9: 17 a.m. Comments are not google-searchable, so I brought the first comment below up here --
The production numbers coming out of the Marcellus/Utica plays is nothing short of staggering. 
One of the numerous 'monster wells' - Rice Energy's Bigfoot 9-H - has been producing 16MMcf/day, and is expected, in a few weeks time, to post a first year output of 5 1/2 Bcf. 
In oil equivalent terms, (dividing by 6), Bigfoot is putting out over 2,600boe/day and over 900,000boe its first year
There are several others with profiles comparable to, or exceeding, this well's production.
Original Post
Active rigs:

Active Rigs109191186205171

RBN Energy: Part 3 of the Marcellus / Utica infrastructure
Natural gas production is growing faster in the Marcellus and Utica than any other part of North America. Even with lower prices, Appalachia natural gas production will probably hit record highs in the next few days, and NGL production is into the stratosphere, now more than four times where it was two years ago, growing on average 6% PER MONTH!
All of that new production requires lots of new gathering, processing and pipeline infrastructure and consequently midstream construction in the region has been booming.  But building midstream infrastructure in Appalachia doesn’t work the way it does in other high-growth shale plays. The region has lots of huge, legacy natural gas pipelines that are being repurposed, new gas plants and fractionation that must be build, and a paucity of underground salt formations needed for high-volume NGL storage. Today we get further into the details of Marcellus/Utica infrastructure, starting with natural gas pipelines.
This is Part 3 of our blog series covering the latest developments in Marcellus/Utica midstream infrastructure. In Part 1 we described the huge growth in Marcellus/Utica natural gas production since 2010 and the subsequent expansion in natural gas liquids (NGL) production from Marcellus and Utica wet gas when many drillers switched their focus to liquids in 2011. Part 2 provided an overview of Marcellus/Utica geography. We discussed how even though these two shale formations cover most of Pennsylvania, West Virginia, Eastern Ohio and parts of other states, it turns out that most of the production comes from only 20 or so counties across those states. Such geographic concentration has significant implications for regional infrastructure development and take-away capacity.
Our ultimate aim in this blog series is to examine the unique aspects of the Marcellus/Utica region that have spurred midstream companies to build gas processing infrastructure from a small group of stand-alone plants into a fully integrated system designed to operate without the luxury of significant NGL storage capacity. The clue to this intent is in our title - “Join Together With Demand” – designing infrastructure to join supply to demand with fault tolerance as a foundation of the design.
One has to chuckle. Steve Jobs would have been the first to notice this if he had been in the fossil fuel / renewable energy business. With all the Algore fees and penalties, solar energy -- as expensive as it is -- will reach parity with coal in ten years (or so I've been told). The real story is natural gas.

Steve Jobs always talked about skating to where the puck WOULD be. With so much natural gas being produced and so much infrastructure in place AND so much opportunity for investors, the real question is not whether heavily-subsidized solar energy will reach parity with high-penalty coal, but whether heavily-subsidized solar energy will ever reach parity with natural gas. Deutsche Bank may be looking at the wrong commodity.

Speaking of Coal, Which In Fact We Were ...

This is kind of interesting. The Wall Street Journal has a human interest story on "the last man betting on coal": Robert Murray.
The king of American coal is 75 years old, has had four strokes and broken his neck three times, but Robert Murray is still gobbling up mines.
This week, he said his closely held Murray Energy Corp., based in St. Clairsville, Ohio, would pay $1.4 billion for a controlling stake in Foresight Energy LP, which has extensive coal operations in the Illinois basin and was founded by longtime rival Christopher Cline.
Mr. Murray’s big bet would create the nation’s No. 3 coal producer—after Peabody Energy Corp. and Arch Coal Inc.—highlighting his faith in a fuel under pressure from lower natural-gas prices and new emissions regulations.
Mr. Murray built up his company, which was the country’s eighth-biggest just two years ago, through aggressive deal making. A year ago, with Foresight’s shares treading water after an initial public offering, it made its first approach to Mr. Murray, said a person familiar with the matter.
Another Inconvenient Truth

The party of Obama is upset that the "Lynch" nomination has not yet been brought up for a Senate vote; the party blames the GOP of stalling. In fact, her nomination was made last fall when the party of Obama was in control of the Senate.  Making inflammatory statements like "back of the bus," it's only a matter of time before we see references to "the plantation," and "lynching." Reminds me of the "lynching of Bork," a phrase used by the liberal Washington Post.