Wednesday, Part IV; ObamaCare And The Supreme Court -- June 10, 2015

Updates

June 17, 2015: another story suggesting the decision has been leaked. Reuters is reporting:

As the U.S. Supreme Court prepares to rule on whether people in 34 states can continue to receive Obamacare health insurance subsidies, economists are projecting billions of dollars in lost healthcare spending for hospitals, drugstores and drugmakers if the justices say the payments are illegal.

Original Post

Elsewhere in the blog I posted this:

June 10, 2015: the tea leaves are swirling. There are two questions with regard to the ObamaCare case currently before the Supreme Court: when and what? When will the court release its decision? What will the court say? My earlier posts have always been that the best outcome would be to throw the case back to Congress.

Now, at 11:40 a.m. today we get this story from Fox News: SecHHS says the same thing: if the Supreme Court rules "against" ObamaCare, it's back to Congress to fix it.

That story answers the two questions: what the decision will be, and when it will be released.

But the answers are in the swirling tea leaves. As a reminder, President Obama spoke to the issue yesterday. 

Wednesday, Part III -- Quickies, Market Surges -- June 10, 2015

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

• Market: up 175 185 280 points in early trading. Crude oil up another 2% after a 3% gain yesterday.
• Fed Ex is up almost $2.00 and trading near its 52-week high. It raised its dividend 25%. Hardly looks like a company worried about a recession. My hunch is that FedEx, USPS, and UPS are growing on the backs of Amazon -- faster and faster delivery times requested by their customers.
• UPS up a bit today; well off its highs but still not doing so badly, I suppose
• Netflix, already high, surges 5%; may split

Greece. I always said that Merkel would cave. Bloomberg Business reports that Germany is ready to cave. Is this why the market is up 185 280 points?

Chancellor Angela Merkel’s government may be satisfied with Greece committing to at least one economic reform sought by creditors to open the door to bailout funds, according to two people familiar with Germany’s position.

While the Germans still insist on a package of steps that includes higher taxes, state asset sales and less generous retirement benefits, they may settle for a clear commitment by the Greek government to a measure up front to unlock aid, said the people, who asked not to be identified discussing the government’s negotiating stance.

With Greece’s aid program set to expire on June 30 and no deal in sight, the comments reflect more German flexibility than the government’s public statements. Merkel and French President Francois Hollande may hold talks with Greek Prime Minister Alexis Tsipras on the sidelines of a European Union summit on Wednesday to try to break the impasse.

Tesla, from The Los Angeles Times:

Musk also disclosed that a much publicized effort to allow people to pull into roadside stations and swap a spent battery for a fully charged one has not worked out.

Tesla built such a station on Interstate 5 at the Harris Ranch, a midpoint on the drive from Los Angeles to San Francisco, but Tesla owners aren’t using it.

The automaker issued sample invitations to a group of about 200 California Model S owners to test out the swap system but only a handful used it, and then only once. A wider roll out also failed.

“We are seeing a very low take rate,” Musk said. “People don’t care about pack swap.”
Instead, they use Tesla’s network of free “superchargers” to recharge the cars. It takes longer, but they time it for a coffee break or a meal, he said.

Tesla doesn’t plan to expand its battery swap system, Musk said.

But, and remember, this is from the land of fruits and nuts,

At the behest of shareholders addressing the company at the meeting, Musk agreed to look into using vegan materials for seating and other surfaces in Tesla cars.

I know when I'm traveling cross-country, I like to take 30 - 60 minutes to re-fill my car with gasoline so I can have a coffee break or a meal at a service station (where they now serve sushi).

The new "Brian Williams":

• Michelle notes her own struggles as a high school senior
• doesn't feel comfortable in art museums

As ISIS destroys antiquities in the Mideast, one can only thank the grave robbers in the 19th century

• Egypt intensifying security at antiquities sites
• suicide bomber attacks Luxor temple

And, then of course, there was the Dresden fire bombing in WWII.

Wednesday, Part II -- June 10, 2015

IPs have been reported for wells coming off the confidential list today. Link here. Note how incredibly these wells are, and they are choked back and/or taken off-line a significant portion of the month. Also note the number of stages and the incredible amount of sand EOG is using for a simple long lateral.

Active rigs:

	6/10/2015	06/10/2014	06/10/2013	06/10/2012	06/10/2011
Active Rigs	82	190	187	213	169

RBN Energy: the evolution of the Asian LNG market.

As natural gas takes on an ever-expanding role in Asian energy markets, the traditional practice of sourcing liquefied natural gas (LNG) through long-term, “point-to-point” supply deals at oil-indexed prices is being challenged on several fronts.

For one, U.S. exporters are linking the price of their LNG to Henry Hub gas prices.

For another, Asian LNG customers, eager to reduce costs in a suddenly glutted LNG market, are working to renegotiate their oil-linked deals, and turning to the LNG spot market, where prices have been attractively low.

Fast-changing market dynamics include planned gas pipelines from Siberia to China that may well make the Asian LNG market more like Europe, where LNG competes head-to-head with piped-in gas and with coal. Today, we continue our look at the changing international market and what it means for U.S. and Canadian gas producers and LNG exports.

The future success of U.S. and Canadian shale producers exporting their gas in the form of liquefied natural gas (LNG) depends primarily on how competitive they can be on price. There are reasons to be optimistic, especially over the long term. After all, the U.S. and Canada have vast reserves of low-cost, accessible gas; good access to the three key markets (Asia, Europe and South America); and outstanding reputations as reliable trading partners.

But there’ll be a lot of competition out there—from LNG exporters in Qatar and Australia, and from Siberian gas producers, to name just three.

LNG also will need to compete with other forms of energy. For example, while China, India and other Asia nations (Japan among them) may want to shift from coal to gas as a primary power-generation fuel for the sake of public health and the environment, how much they’ll actually shift (and how much gas they’ll end up needing) will depend to a large degree on whether gas is an economically viable alternative.

What seems clear is that they want it to be, and that they’re doing everything they can to keep gas and LNG prices low and to reduce the price volatility that sometimes can be pretty scary.

The G-7 suggesting that the world's energy in 2100 will be 100% fossil-free will be something for my great-grandchildren to witness. Gonna be a lot of solar and wind farms in Japan, I guess. Or all nuclear. 

Wednesday; This Is Not An Investment Site; US Overtakes Russia As Leading Fossil Fuel Producer; While WTI Has Risen $15/Bbl, Bakken Crude Has Advanced A Bit More -- June 10, 2015

We start the day with links to several articles on oil:

• US #1, overtakes Russia -- that link is no longer there; this says US is #1 in oil production;
• disappearing Bakken oil discount -- most interesting
• oil prices jump on US stock draw, easing production
• oil acquisitions continue, good news for Bakken producers -- Seeking Alpha
• the three seismic shifts that are shaking the world of energy -- Bloomberg (see below if link breaks)

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Not "Just" Oil Any More

Regular readers know this story: it's not "just" oil any more; it's the type of oil. And east coast refineries want Bakken oil. And that's deflating the discount spread (a theme that has been voiced by more than writer in the past 24 hours). A contributor over at Seeking Alpha is reporting:

Investors in Bakken oil producers such as EOG Resources, Chesapeake Energy, Continental Resources, Hess Corporation, Oasis Petroleum, and Whiting Petroleum should take note of the rise in Bakken oil prices and the deflating of the discount which has been associated with Bakken oil for some time now.

While oil prices in general are still down sharply this past year, it is worth noting that these producers have seen the prices paid for their oil rise as traders look for supply in certain parts of the country. So while oil prices have risen $15/barrel, the rise in Bakken produced crude is actually a bit higher.

What is causing this? Well at this point it is hard to say, but it could be the first signs of the market being impacted by decreased drilling in the Bakken field which many have thought would lead to actual production declines.

While many have joined the consensus in believing that decreased drilling and the lack of new wells would allow transportation capacity to catch up to production, the majority has not jumped on board with the belief that production could actually decline with the lower activity.

That certainly appears a real possibility now, and with producers having gotten smart about transportation over the last few years, it appears that they are no longer flooding certain delivery points.

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This Is Not An Investment Site

Do not make any financial or investment decisions based on what you read here or think you may have read here.

Target doubles stock buyback to $10 billion; raises dividend slightly (7.7%). That increase in the dividend sounds impressive (7.7%) but think about it. On the other hand, FedEx is raising its dividend from 20 cents to 25 cents. 5/20 = 25% increase. Speaks volumes about FedEx concern about coming recession.

Short interest in AAPL plunges. The change may have been related to rumors of successful sales of Apple Watch or forecasts about product or services announcements at the recent Apple Worldwide Developers Conference

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ERF From Yahoo!In-Play

Enerplus increases production guidance and capital spending for 2015 : The co says that year to date, it has been producing at the high end of its guidance range while maintaining cost discipline.

Additionally, the co has decided to accelerate the completion of eight North Dakota oil wells at a cost of $60 million.

As a result of the combination of operational success and the additional completions, the co is increasing its 2015 annual average production guidance range to 97,000 -- 103,000 BOE per day, and its crude oil and natural gas liquids to 43 -- 45% of the production mix. Highlights include:

• Revised 2015 annual average production guidance upwards from 93,000 -- 100,000 BOE per day to 97,000 -- 103,000 BOE per day. 
• Increased 2015 capital budget by $60 million from $480 million to $540 million. 
• The average expected rate of return for the completions (excluding the drilling capital already spent), using a flat West Texas Intermediate oil price of US$60 per barrel, is approximately 60%. The average expected payout period for the completions is less than two years under a flat WTI oil price of US$60 per barrel.
• The co expects to utilize its $1 billion bank facility, which was approximately 4% drawn at May 31st 2015, to fund the additional $60 million in capital spending. The well completions are expected to improve our 2015 and 2016 debt to funds flow ratios as a result of accelerating funds flow.

The co also says it added additional crude oil hedge positions in the fourth quarter of 2015 and for the full year in 2016 to help support the economics of the accelerated well completions. Its total crude oil hedge position in the fourth quarter of 2015, through a combination of fixed price swaps and option structures, is now 44% of forecasted net production after royalties, at a weighted average floor price of $80.09 per barrel.

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Bakken Wells Pay For Themselves In Two Years
Produce for Thirty

Something tells me ERF is not the only company that thinks a 60% rate of return is something to ignore. My hunch is that ERF is not the only operator in the Bakken that is focused on costs. I still go back to my analogy of buying a house: paying for a Bakken well in less than two years: not bad. Just a year ago EOG said it wouldn't drill a well in the Bakken if it didn't pay for itself in six months; see yesterday's daily activity report.

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Not My Three

In case the link above breaks, Bloomberg's three seismic shifts affecting the global energy market:

• explosive rise in US oil production (okay, I'll buy that one)
• China's energy slowdown (temporary; what about India?)
• global solar boom (the total amount of electricity from solar energy in the US rounds to 0% when rounding to nearest whole number); Bloomberg must be talking about those powerhouses, Germany and Spain