I May Not Catch The Director's Cut First Thing In The Morning -- June 18, 2015

Updates

June 19, 2015: never mind. The car passed inspection. I should catch the Director's Cut when it is released today.
 

Original Post

Tomorrow morning I plan to take the 2011 Honda Civic in for its annual Texas state-mandated safety inspection. I've been looking forward to this all year. LOL.

Oh, why not?


I will be leaving first thing in the morning. I can't say for sure whether I will have access to wi-fi or whether I will be able to blog.

But the most important thing I might miss is the release of the Director's Cut. So, if I'm not here in the morning, it is not because I have died (although that's always a possibility), it's more likely I am pre-occupied with other business.

The Director's Cut should be at this link.

See how the Director's Cut and this post match.

Watch for the price of Bakken crude oil this month, and the fracklog.

*******************************

US Open: Tiger Woods Will Likely Miss The Cut

The cut line is likely to be "plus 2."

Par is 70. "Plus 2" after two rounds would be 142.

Tiger shot a blistering 80 in today's first round, tied for the 152nd place out of 156.

142 - 80 = 62.

To get to "plus 2" Tiger needs to card no more than a 62 tomorrow, eight under. The best anyone did today was five under. Phil Mickelson shot a "one under" in the first round.

“The world has come around to the realization that the U.S. shale barrel is the swing barrel.” -- June 18, 2015

This is a good example where the rhetoric may be a bigger deal than the facts. Here's the lede from Bloomberg/Rigzone:

Not content with the blow it’s dealt to U.S. oil drillers, Saudi Arabia is set to escalate the battle for market share by raising production to maximum levels.

The world’s largest oil exporter has already increased output to a 30-year high of 10.3 million barrels a day in a bid to check growth from nations including the U.S., Canada and Brazil. It will add even more to the global glut, according to Goldman Sachs Group Inc.

Citigroup Inc. predicts the kingdom will push toward its maximum daily capacity, which the bank estimates at about 11 million barrels, in the second half of 2015.

Saudi Arabia steered the Organization of Petroleum Exporting Countries in November to protect its market share in the face of swelling U.S. crude output, rather than cut supplies to shore up prices as it did in the past.

Having abandoned the role of swing supplier -- adjusting production in line with demand -- the kingdom will maximize sales to increase pressure on producers outside the group, the banks said. “If you are Saudi Arabia and you’re looking at the new oil order we live in, you would go to full capacity,” Jeff Currie, head of commodities research at Goldman Sachs in New York, said by e-mail on June 15.

“The world has come around to the realization that the U.S. shale barrel is the swing barrel.” 

In my simple mind, this is my world view:

• numbers coming out of Saudi Arabia can never be trusted;
• Saudi's production fluctuates around 9.5 million barrels of oil;
• at one time, pundits said Saudi's maximum production was 12 million bbls (now it's 11 million bbls);
• this post and the graph at this post tell the story;
•  a jump from 10.3 million to 11 million (assuming it's even "real") is hardly earth-shattering especially as off-shore projects are cancelled / delayed;
• Saudi needs to increase production by a million bbls just to meet its own domestic demand -- which is increasing -- and to meet the requirements of the new refineries Saudi is building in-country; 
• Saudi has huge new self-defense expenses and a shooting war to fund; but the biggie is ...
• ... Saudi has just canceled its solar projects for desalination and will require more oil for the energy required for desalination

Goldman Sachs has been talking down oil for months, I think at one time anticipating $40 oil by this time, and hinting at possibilities of $20 oil.

So, maybe I'm just whistling past the graveyard, but I can't get too excited about an analyst telling me Saudi Arabia looks to increase production from 10.3 million bopd to 11 million bopd.

But as long as Saudi wants to give away their oil for $50 / bbl, that's fine with me.

Speaking of "fiction":

Pulp Fiction, Dance Scene   John Travolta says they were on the set for 13 hours, from 7:00 a.m. to 8:00 p.m. for this scene. It also sounds like Travolta was the inspiration for the choreography. 

Reason #345 Why I Love To Blog Even Though My Wife Never Reads The Blog -- June 18, 2015

This is quite remarkable. Earlier this afternoon I wrote a rambling piece about another company relocating from California to Texas.

Tonight my wife brought me today's copy of the Wall Street Journal (which I seldom read any more except on-line) to read a particular story.

The story was on page A3. Folks know the relevancy of page A3 in the WSJ. Page A3 for the WSJ is as important as Page 3 is to the readers of the British tabloid, The Sun.

Page A3 is "page 1" news but the stories are written in a bit more depth and the writers have had more time for research before going to press.

Today's headline story on page A3 in the WSJ: Texas' Engine Keeps Revving.

The plunge in oil prices over the past year has taken some of the energy out of the Texas economy, but the Lone Star State has been able to muddle through thanks to the still-booming Dallas-Fort Worth metro region.

Even in Texas, the recently opened Nebraska Furniture Mart in this suburb 30 miles north of Dallas stands out for its outsize ambitions. A retail pièce de résistance roughly the size of three Wal-Mart supercenters, it carries a vast array of recliners, refrigerators, rugs and just about everything else. Ron Blumkin, president of the Omaha-based chain, majority-owned by Warren Buffett’s Berkshire Hathaway Inc., is confident the DFW region’s growth can support the mammoth store.

“I look out there and I see hundreds of new rooftops,” he said. “That is pretty exciting to me.”

The continued economic success of the DFW metro area, the nation’s fourth largest, with nearly seven million people, is one of the reasons Texas has so far managed to stave off a sharp downturn despite losing thousands of jobs in the oil patch and related industries. The region lost more than 100,000 jobs during the recession, but it has added nearly four times that number since then.

It's really impossible to articular how much activity is going on in the DFW area. Major highway construction that took more than a decade is finally complete, but now they are doing "the-nice-to-have" highway construction -- stuff that was not absolutely necessary but really, really nice to have. As in the Bakken, the construction is going on 24/7 and does not interrupt daily activity: the traffic moves through major highway construction projects with minimal hassle.

I've never seen so many world-class malls going up as they are in our area: the confluence of Southlake-Colleyville-Grapevine-Euliss-DFW Airport.

Mostly in Dallas-Ft Worth and San Antonio:

Once the nation’s top job creator, Texas has tumbled to a middling 36th place in that category, the latest data from the U.S. Bureau of Labor Statistics show. In Houston, the country’s energy capital and one of the state’s main economic engines, some 35,300 people abandoned the workforce from December to April, the largest five-month decline since 2000, according to the Federal Reserve Bank of Dallas. The bank expects Texas employment to grow by less than 1% in 2015, after galloping at a pace of 3.6% last year.

But the story is markedly different in the DFW region, which, with its thriving business-services and tech sectors, highlights how much Texas has diversified since the 1980s oil-price collapse threw the state into a long-lasting slump. The area has added a net of more than 36,000 jobs since October, when oil prices started to nosedive.

Dallas isn’t the only Texas region that has diversified. The San Antonio metro area, which has 2.3 million residents, now has a burgeoning biotech sector. Austin, with its population of 1.9 million, had the lowest unemployment rate among the nation’s largest metro areas in April as it undergoes a hotel boom. But because of its economic heft and size, Dallas will play a bigger role in determining the rate of Texas’ growth.

One last bit:

In Plano, another Dallas suburb, bulldozers are readying a 240-acre plot to build a complex that houses Toyota Motor Corp.’s new U.S. headquarters, which is being moved from Southern California.

FedEx Corp. and Liberty Mutual Insurance are building towers in the same office park, dubbed Legacy West. Those three companies alone are expected to employ about 13,000 workers with an estimated payroll of about $1.7 billion a year.

To cater to them, [one developer] is speeding up his own project, an adjacent high-end shopping center with condos and a luxury hotel, by more than a year. The center, [the developer] calculates, will generate at least 2,000 jobs. Meanwhile, retail giant Amazon is adding more than 1,500 jobs at its fulfillment centers in DFW.

For Newbies -- A Quick Look At The Recent Fracklog -- June 18, 2015

Recently a new term was introduced in the Bakken: fracklog.

This is the number of wells waiting to be fracked, the "fracking backlog," or "fracklog" for short.

One can quickly scroll through the list at this post to see the fracklog for the past six months or so.

******************************

A Note For The Granddaughters

The granddaughters will all have birthdays in July: the oldest turns 12; the middle one turns 9, and the baby turns one year old.

One of my goals over the years has always been to get the granddaughters in the water and swimming as early as possible, mostly for safety reasons. Over the years I had read too many stories of toddlers falling into neighborhood swimming pools.

I was quite successful with the first granddaughter; she was swimming by the age of two years of age -- I think; I can't remember for sure. She is now playing on a Texas championship water polo team.

I was not quite as successful with the second granddaughter; it took a bit longer, but she was an expert swimmer by age 5 and competitively swimming by age 7. She no longer swims competitively; she is now 24/7 involved with soccer, and has less time for swimming.

Because of "things" beyond my control, I was a bit delayed with the youngest granddaughter. I had hoped to be in the water with her by six months but was delayed until she was 10 months old, or thereabouts. She is now 11 months old and we are in the pool one hour each afternoon (unless the weather does not cooperate).

She's not swim on her own yet, but there's a possibility she will swim before she walks. I really don't think that will happen, but we're working on it.

Anyway, after the hour or so of swimming, we take our towels and then "chill out," sitting in the sun to dry off.

The family pool is shaded by too many trees and there is not a good place to sunbathe, so we take our towels, go out to the front of the house, and stretch out on the driveway.

This afternoon my wife caught a nice candid shot of the two of us "chillin."

 
(If you look closely, my back is covered with mosquito bites. I try to avoid mosquito spray. We protect Sophia with mosquito spray and sun tan lotion.)

(Sophia is very petite. She has her one-year well baby exam in the next week or so. She is on her growth curve but will probably be on the 10th to 25th percentile for height/length, and 25th to 50th percentile for weight. She loves to eat.)

Lost In Translation -- June 18, 2015

Compare the story at Bakken.com and the story is covers at The Street.

A screen shot of the last paragraph of the Bakken.com story:

Compare that with what The Street said (correctly), a screen shot:

Bottom line: WTI and Bakken crude are near parity for a number of reasons. This is one of two data points that will be interesting to note in the Director's Cut to be released tomorrow: price for Bakken crude oil in April, 2015.  

By the way, for newbies, how does $45 to $60 translate into almost $30?

When WTI was at $45 some months ago, the spread between WTI and Bakken was much worse, close to $15. In other words when WTI was $45 some months ago, Bakken was being sold for $30 (see January, 2015, below, for example).

Now, WTI and Bakken are near parity at $60. And that's the $30 increase seen for Bakken oil. 

Here is Bakken pricing as reported in the Director's Cut over the six months or so:

• May 13, 2015: $46.00
• One month ago, 2015: $36.25 (lowest since February, 2009, and January, 2015) (all-time high was $136.29 7/3/2008)
• April, 2015: $38.33
• March, 2015: $31.47
• February, 2015: $34.11
• January, 2015: $31.41
• December, 2014: $40.74
• November, 2014: $60.61
• October, 2014: $68.94
• Sept, 2014: $74.85
• August, 2014: $78.46

Eighteen (18) New Permits In The Bakken -- June 18, 2015

Active rigs:

	6/18/2015	06/18/2014	06/18/2013	06/18/2012	06/18/2011
Active Rigs	78	189	184	212	173

Wells coming off the confidential list Friday:

• 28317, 853, EOG, Parshall 38-1608H, Parshall, t12/14; cum 76K 4/15;
• 29024, SI/NC, Enduro, GCMU 6-32-H1, Glenburn, no production data,
• 29371, 864, CLR, Gronfur 3-28H1, Brooklyn, t5/14; cum 3K 4/15;
• 29587, 1,758, MRO, Faiman 24-9TFH, Bailey, t3/15; cum 19K 4/15;
• 29635, SI/NC, EOG, Parshall 164-3332H, Parshall, no production data,
• 29965, SI/NC, XTO, Eckert 41X-6DXA, Camp, no production data,

Eighteen (18) new permits --

• Operators: Slawson (11), CLR (4), EOG (2), Whiting,
• Fields: Big Bend (Mountrail), Crazy Man Creek (Williams), Parshall (Mountrail), Moccasin Creek (Dunn)
• Comments: first glance appears to be -- CLR, a 4-well pad; Slawson, a 5-well pad; Slawson, a 4-well pad; Slawson, a 2-well pad;

Two (2) producing wells completed:

• 28862, 625, Hess, EN-Hermanson-LE-155-93-3501H-6, Robinson Lake, 4 sections, t5/15; cum --
• 29164, 896, Hess, SC-Norma-154-98-0706H-6, Truax, t6/15; cum --

Mid-Afternoon Rambling -- June 18, 2015

I was on my bike so I missed it, but by my calculations, the Dow was up as much as 240 points at one time today, closing about 180 points up. Somewhere I read the health companies were the leaders; I don't know. If so, doesn't surprise me; I've talked about it forever -- that under ObamaCare the Big Pharma and Big Health Insurers were going to be the Big Winners.

Also, from Yahoo!Finance:The tech-heavy Nasdaq Composite ripped past the all-time high it struck during the Dot-Com bubble amid optimism over a dovish Fed and upbeat Greece developments. So, if "tech-heavy" NASDAQ makes a new high, how did XLNX do? Up about a percent but still below it's 52-week high.

******************************

Tesla: Gridlocked?

I normally would not have posted the link to this article but it was sent by a reader who sends me some very good links, and it led me to a neat graphic that needs to be posted. BizJournals is reporting:

Alevo Group has chosen Parker Hannifin’s Grid Tie Division in Charlotte to supply power-transfer systems for Alevo’s first major rollout of its GridBank batteries to utility grids.

The division will initially supply power-conversion systems, battery container control and thermal management systems to independent systems operators in the United States and Canada. That is in conjunction with Alevo’s January agreement with Customized Energy Systems to provide 200 megawatts worth of energy storage to wholesale energy markets in North America.

There are perhaps five or six major regions in the US right now, including:

• the northeast corridor from NYC to Boston (I don't include Washington, DC, except as a political center, which may be my mistake not to include it)
• the eastern seaboard to include Florida to the south and Tennessee/Kentucky to the west (North Carolina may be its center, and it may be the most overlooked center)
• Texas (includes east Texas often referred to as southern Louisiana)
• California (to some extent riding on its laurels)

I point that out because a story coming out of Charlotte, NC, may not catch your attention, but it's a trendsetter. What Charlotte does, others will copy.

With regard to the linked article I replied to the reader:

There are a lot of story lines in that article.

1. I could be wrong, but this sounds like a challenger to Tesla. And it looks like Tesla and Alevo aren't the only ones into batteries and grid management. This has to be bad news for Tesla. It seems Tesla is a very, very vocal self-promoter whereas a lot of competitors are quietly working in the background. I'm probably missing something, but I'm still not impressed with the story that Tesla partnered with an innovator in Nova Scotia.

2. Grid management, regardless of solar / wind aspect looks like "the next big thing" for utilities.

3. Not necessarily in this article, but in other articles, very conservative investors who thought utilities were a safe investment probably need to tread carefully, especially in states like Minnesota, Iowa, California.

In the process of looking something up with regard to the linked article, I happened across this graphic:

Source of graphic, ComputerWorld, April 22, 2015.

And there are a lot of story lines in that graphic. But I need to move on.

**************************

Bragging, Sort Of

A Note For The Granddaughters

If I lived in Tioga, North Dakota, I would blog about all the wonderful things happening in Tioga. If I lived in Hong Kong, I would blog about all the wonderful things happening in Hong Kong. Ditto NYC. Ditto Watford City.

But I live in Grapevine, TX, so it's now home for me. And I will blog about all the wonderful things happening in Grapevine, TX.

We have a very, very good (free) community newspaper that does as good a job as any I've seen keeping residents informed of what is going on in their community.

Today, there were three big stories. The first, of course, was the recent flooding. The second story was a great story on fiber-optic partnership between the city of Grapevine and the school district. It's really quite a story. The Grapevine schools are all "connected," but they pay an outside contractor $200,000 annually to maintain the system.

The city of Grapevine and the school district are partnering to enhance network connectivity for both entities by investing in more than $5 million fiber-optic cable system. The 57-mile-long system will save the school district at least $200,000 per year and increase the school district's bandwidth from one gigabit to a minimum of 10GB. 

The community partnerships in Grapevine seem quite remarkable. It seems to be a unique "little" city.

The third has to do with another California company moving its headquarters to Texas. The paper added this company to the list of other companies that had recently moved to Grapevine. Unfortunately, except with the subject company today, the paper did not say where the other companies had "re-located from."

I was particularly interested in GameStop, which is now headquartered in Grapevine. Prior to reading the story, I had no idea GameStop was here nor did I know where it came from, but a company like GameStop should naturally be headquarters in Silicon Valley, California, or in Pasadena, California, down the road from where the Big Bang folks live.

Well, it turns out I was wrong. GameStop is "Texas-through-and-through." From wiki:

GameStop traces its roots to Babbage's, a Dallas, Texas-based software retailer founded in 1984 by former Harvard Business School classmates James McCurry and Gary M. Kusin.

The company was named after Charles Babbage and opened its first store in Dallas' NorthPark Center with the help of Ross Perot, an early investor in the company.

The company quickly began to focus on video game sales for the then-dominant Atari 2600. Babbage's began selling Nintendo games in 1987. The company went public in 1988. By 1991, video games accounted for two-thirds of Babbage's sales.

The rest, I assume, is history, as they say.

GameStop did not re-locate from California, but this one did, at least its US headquarters. It was the subject of the third big story in today's community paper: Kubota. From wiki:

Kubota Corporation is a tractor and heavy equipment manufacturer based in Osaka, Japan.

Its US headquarters recently moved from California to Grapevine, Texas. More on this later. I don't have the paper in front of me .... but one can read about it here in The Dallas Star-Telegram.

Kubota Tractor Corp. and Kubota Credit Corp. will move their headquarters from Torrance, Calif., to a 25-acre site northeast of Grapevine Mills mall on city-owned property.

The companies, subsidiaries of Kubota Corp. in Osaka, Japan, are under contract to buy the property from Grapevine, where they plan a 200,000-square-foot research and development and corporate center.

Initially, 345 jobs will be created.

I know Torrance, CA, very, very well. It was where my mother-in-law used to work and shop (more on that later). This is not good news for Torrance.

Read more here: http://www.star-telegram.com/news/business/article21020427.html#storylink=cpy

Wind Knocked Out Of This Sail -- June 18, 2015

K-FIRE / KQCD is reporting:

The company planning a wind farm east of Dickinson has withdrawn their sitting application from the Public Service Commission.

Dickinson Wind, LLC, had applied for a permit for a transmission line and a 87-turbine wind farm located in the area of Gladstone, Taylor and Richardton. The Stark County Commission rejected a conditional use permit in May.

If the company chooses to try and build a wind farm in that area, they will need to start over in the application process.

They did the right thing. The last thing tourists want to see on their way to the Teddy Roosevelt parks is the rough-and-ready state going green. What an eyesore. I love solar and wind -- just not in my backyard.

Forbes: why the left needs AGW.  The five-step cycle involved in slaying ever-smaller fire-breathing dragons:

• first stage: small group becomes promoting an alarming discovery, another dragon
• second stage: the dopamine stage; euphoric enthusiasm by activists
• third stage: the "hinge" stage; folks discover it's very, very difficult to slay the dragon (that probably doesn't exist in the first place); that's where AGW has been since Kyoto, and even the Canadians have dropped out
• fourth stage: a gradual decline in the intensity of public interest; occurring now; US consumers will be in full fourth stage when President Obama leaves office
• fifth stage: prolonged limbo .. until replaced by the sighting of a new dragon

Adult language, strong language:

Global Warming, George Carlin

Outstanding Update On The Bakken, June, 2015

World Oil has a long, excellent update on current state of affairs in the Bakken. Will archive.

After January 1, 2016, if this article is unavailable, and you want to see it, let me know. I will have a copy. For folks who follow the Bakken, the linked article is a "keeper."

From the article:

Just how much of the 7.4-Bbbl Bakken/ThreeForks resource potential will the shale operators be able to exploit?

It all depends upon the profitability of their operations in 2015, and beyond, in the light of low crude oil prices.

According to the North Dakota Industrial Commission, the wellhead price that operators are getting has touched $30/bbl.

Hedges and swaps are protecting many of the operators, such as Whiting Petroleum, to crude prices just $5-$6/bbl less than the NYMEX prices, as far into the future as 2020.

With significant cost reductions, a few of the operators, such as EOG Resources, are suggesting that their economics are better at a $65/bbl crude oil price than they were when the price was $95/bbl.

Meanwhile, ConocoPhillips says its full-cycle finding and development (F&D) cost in the Bakken is only $20/bbl. As such, industry analysts, who’ve suggested the decline and fall of the Bakken/Three Forks play, may be premature in their pessimistic assessments.

For that reason, one of the two data points I am most anticipating in tomorrow's Director's Cut: the wellhead price of North Dakota light crude oil.

*************************

"Energy Cookie" For The Day

EIA's "energy cookie":

From June 2014 to May 2015, when the oil and gas prices as measured by the PPI fell by 49%, the PPI by industry classification showed the following changes:

• rates for drilling activities, which primarily represent service fees for contractors to drill oil and gas wells, declined by 19.6% 
• rates for support activities, which include the surveying, cementing, casing, and otherwise treating wells, declined by 1.4% 
• the price of sands primarily used for hydraulic fracturing declined 12.5%

Idle Chatter; Abraxas In The Williston Basin; Halcon; Greece -- June 18, 2015

Senator Hoeven tweeted on June 16, 2015: right now, North Dakota produces more oil than Iran. 

With the slump in oil prices, my hunch is that some crafty CEOs are waiting to pounce -- will buy some highly undervalued property. My timeline:

• October, 2014: slump in oil price takes many by surprise
• November, 2014 -- June, 2015: survival mode; CFOs working overtime to make "it" work
• July, 2015 -- December, 2015: CEOs watching tea leaves closely to see if Saudi's strategy works; worse might be over;
• January, 2016 -- June, 2016: companies that survive, see light at the end of the tunnel; financial statements and balance sheets much improved over a year ago
• July, 2016 -- December, 2016: signs of consolidation as CEOs take advantage of opportunities
• January, 2017 -- June, 2017: pundits start talking about all those off-shore projects canceled, delayed; will see if Saudi's strategy worked

Greece: it's not worth the time linking all the articles, but the tea leaves suggest a) regardless of what happens, it will be one to two years for this to play out even under worse possible outcome; and, b) everything suggests things are looking better and better for Greece. Everyone will have his/her two-cent-opinion, but it looks like Greece has not blinked.

The Fed:

• any sign of inflation? no
• economy ready for interest rate hike? "no" -- Janet Yellen, as recently as yesterday
• any reason to raise interest rates? no
• why raise interest rates? Janet Yellen feels the need to do something, anything; if she doesn't, her legacy is simply "Bernanke II"
• risk? economy tanks; but at least Yellen's legacy is different than Bernanke's

Does she feel the need for speed? Is Yellen ready to take it to the DangerZone?

Danger Zone, Kenny Loggins
From a contributor over at Seeking Alpha with regard to Abraxas. This provides some insight into the Bakken in general, Abraxas specifically:

Management added color to the April 30 acquisition announcement.

Per that announcement, they added a bolt-on 210 net Bakken acres which gives Abraxas majority interest in an additional unit. They are petitioning the NDIC for operatorship, but mentioned they don't have a solid timeframe and that it's a federal unit. Petitions on federal units have been taking longer to get approved of late. There is a clear precedent that if you own more than 50% of a unit, you will be granted operatorship. Assuming operatorship gets approved, this deal, which looks small on the surface, can add a year and a half of inventory, or 4.5 MMBoe due to the unbooked reserves on the land. The company continues to seek both additional bolt-on acquisitions and larger deals.

Abraxas' more recent Williston Basin wells are significantly outperforming the DeGolyer and MacNaughton type curve. The company has been tweaking their drilling and completion design and their geo-steering has improved. As of March 19 strip pricing (which was lower), they were seeing 25% rate of return on wells which is strong enough to keep drilling.

Abraxas owns their rig in the Bakken and are seeing record results out of the rig. It has become extremely efficient, drilling wells in just 11 days, and saving costs in their North Fork and Eastern McKenzie County wells. These wells are in the deeper part of the basin, with prolific Three Forks, and not a lot of difference in well results.

One of Abraxas' newer strategies is to take their non-operated interests and trade up for operated interests that they can take over. They've been successful in doing so, and will very soon have 1 to 2 more operated units in the Williston, which will give their wholly-owned rig 5 to 6 years of drilling inventory in front of it.

The company made the decision to drill but not complete their wells in the wintertime. That decision yielded cost savings on completions this year upwards of 50%.

Abraxas participated in some wells with Continental Resources that are testing right now. They have not counted any of those in their inventory and if they come back positive it will have a significant positive impact on inventory in the North Fork.

*********************************** 

Also HK Over At Seeking Alpha

I can't recall if I posted this link earlier. I generally don't post "purely" financial articles, but this article and a couple of comments shed light on where HK has its challenges, or as some would say, where they went wrong.  

*********************************** 

Federal ObamaCare Subsidies

This would be the right thing to do, but somehow the GOP will screw it up.  The WSJ is reporting:

Republican leaders are coalescing around a plan to extend the health law’s tax credits for as long as two years, while repealing other parts of the law, if the Supreme Court invalidates the credits. 

Natural Gas Fill Rate And Gasoline Demand -- June 18, 2015

Gasoline demand declined slightly week-over-week, but still setting records (dynamic link).

Natural gas fill rate: 89 (dynamic link).

For the first time, it is easy to see that current fill-rate is very, very slightly ahead of the 5-year average. It should be noted the continuing story line:

In the East Region, stocks were 102 Bcf below the 5-year average following net injections of 59 Bcf.

Last week, stocks were 106 Bcf below the 5-year average in the East Region.

Inappropriately Exuberant Update On US LNG Export Terminals -- June 18, 2015

The other day I made this catty remark in response to some new energy project in the US:

Just one more example of the "stuff" going on in the oil and gas industry in the United States while France bans fracking; Germany returns to coal; Spain asks "WTF" happened to solar; the Mideast blows itself up; and, Russia can't get anything going.  It's not even going well for the Norwegians.

Maybe I'm making too much of this, but Cheniere Energy's Sabine Pass story is absolutely incredible -- at least it seems to me -- by the way, with the market up 160 points today in early trading, what is SRE doing? Not much, up a little.

Okay, back to the Sabine, from RBN Energy (link here, but it will be archived), look at this:

The six liquefaction “trains” under development at Cheniere Energy’s Sabine Pass liquefied natural gas (LNG) terminal will demand nearly 4 Bcf/d of natural gas on average, the first 650 MMcf/d of that starting within a few months. And the five trains now planned at Cheniere’s Corpus Christi site—yes, now five, not three—will require another 3.2 Bcf/d. Taken together, that’s about 10% of current daily gas production in the U.S.; in other words, a monumental logistical task.

The development of the initial quartet of LNG export facilities on the Gulf Coast and East Coast continues.

Construction of the first project out of the gate—Train 1 at Cheniere’s Sabine Pass terminal in Cameron Parish, LA—is nearing completion, with initial LNG production likely by the end of 2015 and the first shipments in early 2016. Meanwhile, work on three other trains at Sabine is well along (they’ll start operating in 2016-17), and Cheniere is closing in on final investment decisions (FIDs) on two more trains at the same site (for a total of six).

A few miles to the east, Cameron LNG is building three liquefaction trains in Hackberry, LA, and in Freeport, TX, Freeport LNG is building two trains of its own.

On the East Coast, Dominion is building a one-train liquefaction plant at Cove Point, MD.

All four projects have something big going for them—namely, each is at the site of an existing LNG import terminal (developed before the shale era), so a lot of the docking and other infrastructure is already in place. That’s given what we’ve been calling these “First Four” LNG export projects a capital-cost edge that, in turn, has enabled them to offer attractively low liquefaction tolling fees and to reach long-term deals with a long list of international off-takers.

[On a side note, I was cleaning up the blog a little bit the other night and noticed I had a post "IN PROGRESS" from several years ago regarding LNG IMPORT terminals in the US. It looks like I quit updating that post literally as news came in that IMPORT terminals were going to turn the pumps around and become EXPORT terminals.

I cannot believe how fast this all happened.

So, four (4) sites above. But there's more:

Cheniere—a gutsy pioneer in the LNG-export business—remains decidedly upbeat. In mid-May (2015), the company gave its contractor the go-ahead to start building two liquefaction trains at a site in Corpus Christi; the final investment decision—on a third train is expected later this year).

Corpus will be the first “greenfield” LNG export project in the Lower 48 states (a small LNG export terminal near Kenai, AK came online in 1969 and is still operating).

And on June 10 (2015), Cheniere announced that it hopes to build two more trains at Corpus and—as if that weren’t enough—that it’s partnering with Parallax Enterprises on two somewhat smaller LNG export projects in Louisiana.

Cheniere estimates that each of the now 11 trains planned at Sabine and Corpus will demand 650 MMcf/d of natural gas, or a total of more than 7.1 Bcf/d. 

Meanwhile France bans fracking, Germany turns to coal, Spain asks WTF happened to solar, and Putin looks to Greece to save his country as he knows it. Think of all the jobs these LNG export terminals jobs are providing. 

Related:

From ArgusMedia, January 2, 2015:

The US has a much larger labor pool to draw from than Australia, which faced labor shortages for its LNG projects.

Expansions at existing US LNG terminals will have advantages over greenfield US LNG projects because of cost savings.

The Cameron LNG export project is being built at the site of an existing import facility and Sempra is considering adding two more liquefaction trains, in addition to the three already being built.

Labor pool issues, from wiki:

The construction cost of greenfield LNG projects started to skyrocket from 2004 afterward and has increased from about $400 per ton per year of capacity to $1,000 per ton per year of capacity in 2008.
The main reasons for skyrocketed costs in LNG industry can be described as follows:

1. Low availability of EPC contractors as result of extraordinary high level of ongoing petroleum projects world wide.
2. High raw material prices as result of surge in demand for raw materials.
3. Lack of skilled and experienced workforce in LNG industry.
4. Devaluation of US dollar.

Great Jobs Report, If One Looks At Numbers Only -- Types Of Jobs Yet To Be Sorted Out; 80% Of Bakken Wells Coming Off List Today Not Completed -- June 17, 2015

The market must like this: first time claims hit 15-year low the day after Janet says no raise in interest rates ... yet. The market is up 160 points in early morning trading.

Reuters is reporting: US weekly jobless claims total 267,000 vs 275,000 estimate.

The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to a tightening labor market.

Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 267,000 for the week ended June 13.

Claims for the prior week were unrevised. It was the 15th straight week that claims held below 300,000, a threshold usually associated with a firming labor market.

I don't know if this plays into the "GDP Now" forecast. We'll see later. 

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,000 to 276,750 last week.

Looks like very, very little risk of any recession this year. Although 2Q15 not looking to be great, it won't be negative.

****************************************** 

Again, Bakken Wells Not Being Completed

The wells coming off the confidential list have been reported.

Again, look at the percent of wells coming off the confidential list that are drilled to depth but not completed -- 80%:

• 26855, 1,655
• 28335, drl/NC 
• 28861, drl/NC
• 29927, SI/NC 
• 30065, drl/NC 

Supposedly the Director's Cut comes out tomorrow. I will really be surprised if the fracklog decreases. Anything's possible, but I just haven't seen the number of "producing wells completed" and "new wells with IPs" matching all the wells coming off the confidential list and not being completed. But we will soon see.

Active rigs in North Dakota unchanged from yesterday:

	6/18/2015	06/18/2014	06/18/2013	06/18/2012	06/18/2011
Active Rigs	79	189	184	212	173

RBN Energy: Begin the Sabine—Delivering Gas to the Lower 48’s First LNG Export Terminal. Another good report by RBN Energy; archived.

Tioga Tribune reports that the new Tioga Clinic will open in August.