Friday, July 31, 2015

Friday Night Meanderings -- July 31, 2015

That was easy. It appears the avian flu outbreak is over and things are returning to normal. I stopped by Albertson's on the way home to check the prices of whole fryers this evening. The refrigerator cases were overflowing with fryers and they were selling for 69 cents/pound.

For newbies, this was quite an incredible day in the Bakken. First, there were sixteen new permits, and the permits were for multiple operators. But even more remarkable: look at the IPs for the nine (9) producing wells that were completed. Nine completed producing wells is not trivial, either.

In the summer of 1972, the year between my junior and senior year in college, I spent a summer on the North Slope of Alaska doing research. I remember listening to Lynn Anderson's I Never Promised You A Rose Garden on the Armed Forces Network. But the big song that summer was Donna Fargo's I'm The Happiest Girl In The Whole USA. The sun was up 24 hours/day during the middle of the summer and I stayed up until the wee hours of the morning listening to the radio and doing my research. It was reported that Lynn Anderson died sometime in the past 24 hours.

I'm The Happiest Girl In The Whole USA, Donna Fargo

Without question, the biggest story being talked about among the techies today is the report that IBM is switching -- the entire corporation is switching -- to Apple. That is absolutely huge. Think about it. The comments at Macrumors are absolutely enlightening. I was looking for Meg Whitman's comment on the HP computer when she took over as HP CEO, but this is the best I could do (after a very short search):
While HP's new products certainly have a more consistent look and feel that is far from the "brick" of a laptop Whitman said she received on her first day at HP, it's hard to deny that HP's new look bears more than a passing resemblance to Apple's MacBook and iMac lines. Whitman even said that "Apple taught us that design really matters," and feels that HP has "made a lot of progress" with its new lineup. While the company may have an attractive line of new products that will help show off Windows 8 when it launches this fall, it's hard to look at HP's latest as anything but excessively Apple-inspired.
I can see why so many folks in the USA are overweight. I have never had a Cheesecake Factory cheesecake in my entire life until this past week. My daughter, bless her heart, bought a slice of Oreo cheesecake for me from the Cheesecake Factory. It is incredibly delicious, and the single slice is huge. I have a small portion of that one slice for five desserts so far this week, and it looks like I have one or two desserts left from that same portion. I would never be able to have a full dinner at Cheesecake Factory followed by dessert -- I assume they serve meals -- I don't know -- I've never visited a Cheesecake Factory even though there is one right next door to the Barnes and Noble in Southlake (Texas) that I visit almost every week. (I've bicycled to that Barnes and Noble for the past three consecutive days.

Folks may be interested in the status of permits so far this year, on the last day of July, 2015. Pretty impressive, considering all the headwinds.

My wife loves iced coffee, particularly Starbucks iced coffee. I see that one can buy ready-to-drink Starbucks iced coffee at grocery stores, like Albertson's. I will buy her the Starbucks iced coffee when she gets back to Texas after a long summer in southern California. As for me, I haven't been to Starbucks since I returned from California, about two weeks ago, and plan never to visit Starbucks again but when absolutely necessary when traveling and needing wi-fi. But I simply won't pay the increased prices that Starbucks recently announced.

When Minyard's bought the Tom Thumb store next door, they replaced the Starbucks coffee shop with Peet's. I haven't bought coffee at Peet's but I assume it's about as expensive as Starbucks when Peets advertised "$2.00 Tuesdays." If coffee is $2.00 when sold at a discount, I can only imagine the regular price. I now have coffee at home, and I buy Peets at Minyard's, $7.99 for a package of ground beans vs $9.99 for same size package of Starbucks ground coffee.

I bought a chocolate Babka at Southlake's Central Market to go with my morning coffee. I had never heard of Babka until watching a rerun of Seinfeld. I think cinnamon Babka would be better with morning coffee.

Are we done here? Yup.

Sixteen (16) New Permits; Nine Huge Producing Completed Wells Completed -- North Dakota -- July 31, 2015

Active rigs:

Active Rigs74193180208184

Sixteen (16) new permits --
  • Operators: EOG (8), Newfield (4), Enerplus (2), XTO (2)
  • Fields: Lost Bridge (Dunn), Antelope (McKenzie), Grinnell (Williams)
  • Comments: the two Enerplus permits and the eight EOG permits are all for Antelope oil field; there is one other EOG Hawkeye well in the section where EOG is proposing these 8 new wells, see below.
Zavanna canceled four Meriwether permits, all in Williams County; Whiting canceled three Chameleon State permits in McKenzie County, and Oasis canceled a Vor permit in Williams County.

Nine (9) producing wells completed:
  • 28549, 1,841, XTO, Schettler 14X-9G, Cedar Coulee, t6/15; cum --
  • 28550, 1,991, XTO, Schettler 14X-9D, Cedar Coulee, t7/15; cum --
  • 29173, 1,527, XTO,Granli 34X-20BXC, Arnegard, t7/15; cum --
  • 29174, 1,334, XTO, Granli 34X-20C, Arnegard, t6/15; cum --
  • 29211, 2,929, MRO, Doll USA 12-14H, Reunion Bay, ICO, t6/15; cum --
  • 29673, 1,987, XTO, Werre Trust 44X-34G, Bear Creek, t6/15; cum --
  • 29789, 2,028, Enerplus, Euphorbia 149-92-35B-05H, Heart Butte, ICO, t7/15; cum --
  • 29819, 1,623, Enerplus, Rebutia 149-92-35B-05H, Heart Butte, ICO, t7/15; cum --
  • 30009, 2,426, MRO, CK USA 31-6H, Murphy Cree, t6/15; cum --
The EOG well in the drilling unit where EOG has permits for eight (8) new wells:
24337, 2,519, EOG, Hawkeye 3-2413H, Antelope, 2 sections, 28 stages, 9.7 million lbs sand, t5/13; cum 514K 5/15 (choked back); the scout ticket says this is the Sanish pool, though the application and stimulation said "Bakken." 

Note the production profile for the past nine months, paying particular attention to a) number of days on-line; and b) the volatility in flaring:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

18,000 Posts -- July 31, 2015

A milestone: over 18,000 single stand-alone posts at "The Million Dollar Way."

The Apple Page

IBM will buy 200,000 Macs annually, with 50 - 70% of employees ultimately switching from Lenovo.  I don't know if folks recall what Meg Whitman, CEO of HP said about HP computers when she first came on board, but I bet Ginni Rometty, over at IBM, had the same thought.

I'm going swimming with our one-year-old right now. If I can find the quote from Meg Whitman later, I will post it. Something about a "brick."

Rest In Peace 
Born September 26, 1947 in Grand Forks, North Dakota

I Never Promised You A Rose Garden, Lynn Anderson

Kuwait's New Oil And Gas Strategy Copies Saudi Arabia's: Produce And Refine -- July 31, 2015

Read this story in light of recent reports that Saudi Arabia has taken a strategic turn from producing and exporting oil, to producing and refining oil. Now it's Kuwait:
Kuwait National Petroleum Co. has let a series of contracts to groups of oil and gas service providers to build the planned 615,000-b/d Al-Zour refinery complex in southern Kuwait as part of the company’s Clean Fuels Project.
KNPC officially awarded four contract packages worth an estimated $11.5 billion for the grassroots refinery on July 28, with a fifth contract package due to be awarded in the coming weeks, the state-run company confirmed in a series of posts to its social media accounts.
KNPC let a $4.1 billion lump-sum turnkey contract to a consortium of Spain’s Tecnicas Reunidas SA, China’s Sinopec Engineering (Group) Co. Ltd., and Hanwha Engineering & Construction Corp. of South Korea to provide engineering, procurement, construction, and commissioning for main processing units at the plan.
Note the contractors: Spain, China, and South Korea.

I guess America's job is to provide security while Kuwait gets the necessary engineering from Europe and Asia. Incredible.

 Are Refineries Worth It?

MPC just raised its dividend from 25 cents to 32 cents.

PSX: Phillips 66 beats by $0.02; increases quarterly dividend 12% to $0.56/share.

A Note For The Archives

A few weeks ago when we were out in California, I was talking to my brother-in-law about the Bakken. Unbeknownst to me, our 12-year-old granddaughter was taking notes on our conversation, but in a "graphic" way.

She was using the back of a Yahtzee score sheet. Today, when opening up one of the books I had started reading out in California, the drawing fell out. I annotated it to highlight some of the things she noted from our little discussion.

Active Rigs Increase By One After Days Of No Movement; Also, Break-Even Prices In The Bakken; California Reliance On Foreign Oil, Bakken Oil -- July 31, 2015

Active rigs:

Active Rigs74193180208184

So, what's the breakeven price for drilling for crude oil in North Dakota? NDIC has this to say about that with link here

Exhibit A: Why Feds Won't Stop CBR
90% Of California's CBR Comes From The Bakken

Exhibit A is at this EIA link.
Bakken crude oil production from the Midwest (PADD 2, Cushing) is the major source of rail shipments to the West Coast (PADD 5), accounting for nearly 90% of West Coast crude-by-rail receipts in 2014. Relatively small shipments from other domestic regions have also increased. Shipments from the Gulf Coast (PADD 3, Texas-Louisiana) tripled from 2013 to 2014, and Rocky Mountain (PADD 4) shipments quintupled. These increases in crude-by-rail movements occurred only after West Coast crude-by-rail unloading infrastructure was significantly expanded.
And there's more, look at this headline, from June, 9, 2015: Crude by rail provides the West Coast with supply as regional crude oil production falls --
While total U.S. crude oil production increased by nearly 3.2 million barrels per day (b/d) from 2010 to 2014, production in the West Coast region (PADD 5) decreased by 0.1 million b/d, continuing a long-term decline. With no major crude oil pipelines connecting the West Coast to other parts of the country, refineries on the West Coast adjusted to the declining in-region production by increasing imports of foreign crude oil, reaching an average of 1.1 million b/d over the past five years. Shipments of domestic crude by rail (CBR) to the West Coast have also increased, from an average of 23,000 b/d in 2012 to 157,000 b/d in 2014. In the first quarter of 2015, West Coast CBR movements averaged 191,000 b/d.
There's a nice graph of PADD crude oil capacity at this link

Wind Energy Unable To Meet California's EV Demands -- July 31, 2015

Back on June 12, 2011, I posted:
Nissan realizes that recharging electric vehicles is going to disrupt the neighborhood grid. It's my understanding that the transformers you see hanging on the utility lines in your neighborhood are not rated to handle more than one or two rechargeable electrical vehicles in your neighborhood. Once electric vehicles catch on, General Electric will have to build enough transformers to replace all those we currently have. 
In today's news, sent to me by a reader -- the Bay Area is already experiencing the problem:
With more and more plug-in cars hitting the roads, there's been growing concern over the strain these vehicles will have on the nation's overtaxed power grid. BMW thinks it may have a solution in California.
The German automaker has partnered with utility Pacific Gas & Electric Co. for an 18-month pilot program in the San Francisco Bay Area that's just getting underway. The trial, dubbed BMW iChargeForward, gives $1,540 in gift cards to 100 owners of i3 hatchbacks to charge their vehicles during off-peak times.
Most automakers' electric vehicles already include app-based timer functions to allow owners to charge their vehicles during less-costly off-peak hours.
Charging EVs overnight may solve the "grid" problem, but more than two or three EVs in one neighborhood, and the transformers are going to be need upgrading.

Apple, BMW

A year or so ago, Apple made a big splash by buying Beats, the headphone company. At the time, I thought it was smart of Apple -- a luxury brand, urban cool, and it seemed to fit the Apple music business.

But, looking back, that was truly small potatoes. Tim Cook and Apple need to be looking at much bigger ways to affect change. They need to take a page from Elon Musk's playbook. Whether one "believes" in Elon Musk (and I don't), he has certainly defined himself -- or let the mainstream media define him -- as "transformational." He's on the cover of The New York Review of Books this week.

Apple needs to be seen, again, as transformational. Evolution in mobile devices is becoming more and more irrelevant by the day. Apple TV is yet to be what it needs to be, and if it does come, it, too, in hindsight will be seen as small potatoes.

I am therefore thrilled to see that talks between BMW and Apple are back on. I think Apple has lost four or five years, stagnating with iPhone updates and needs to be seen as doing something much, much bigger. Reuters has this story, but I prefer this link over at Macrumors

A Note to the Granddaughters

My roots are in North Dakota. I don't know much about New York City but it holds a special attraction for me because of the one summer I spent working in a "bedroom community" for New York City on the New Jersey side of the river. Until recently I had never heard of Delmonico's but now the name of this very famous, very elegant NYC restaurant pops up in two books I'm reading, This Side of Paradise by F. Scott Fitzgerald, and Appetite for America, the story of Fred Harvey, by Stephen Fried.

The question is: how could I possibly have missed Delmonico's with all these movie references:


Fitzgerald uses Delmonico's in Chapter 5, "The Egotist Becomes a Personage," to emphasize the delta that exists between the fantastically rich and the impoverished state Amory was in by the end of the book. [His impoverished state was both financial and emotional, having lost the love of his live to someone else.]

Delmonico's is mentioned three times in Appetite for America but its main entry comes early in the book:
There, in 1830, the legendary Delmonico's morphed from just another coffee and pastry shop into the first full-service restaurant in the United States. New York, like other major American cities, had always had hotels that fed their guests from a set menu, as well as oyster bars, coffeehouses, and carts for quick, modest far. But the idea of eating in a full-service restaurant -- where patrons could order what they wanted from a broad and varied menu, à la carte -- was still novel.
Restaurants ahd existed in France for some time, but in British culture, which still heavily influenced life in America, dining in a public place was considered uncivilized, gauche. The success of Delmonico's in the 1830s heralded a new chapter in American dining. with its authentic French cuisine and choice American beef -- all served with its signature potatoes, grated into long strands and then oven baked with butter, Parmesan, and a touch of nutmeg -- Delmonico's became the country's gold standard for eating out.
I had not heard of Delmonico's. I assume there's a few New Yorkers who have have not (yet) heard of the Bakken.


Friday, July 31, 2015; After Two Years, FRA Issues Final Ruling To/For Warren Buffett -- Phone It In -- Part IV

Like this will make any difference. LOL. FRA issues final ruling on preventing unattended Bakken crude oil trains from rolling downhill into Canadian towns. The ruling: phone it in.

As If

Reuters/Rigzone is reporting: OPEC suggests price stability.
OPEC expects increasing oil demand to prevent a further fall in prices and sees a more balanced market in 2016, its secretary-general said on Thursday, the latest sign the group is sticking to its policy of defending market share.
Oil has dropped about 15 percent this month and halved in value in the past year but neither OPEC nor Russia, the world's top producer, have cut output to support prices, hoping cheaper oil will hit U.S. shale and other rival sources. "I would not expect they (prices) are going to fall because demand is growing," OPEC Secretary-General Abdullah al-Badri told reporters in Moscow. OPEC pumps around 40 percent of global oil production.
Highway Song, Blackfoot

The Race Is On

Electricity from natural gas surpasses coal for first time, but just for one month. From EIA.

Friday, July 31, 2015 -- Part III


August 1, 2015: the wing has arrived at a French facility The linked story is dated August 1, 2015, but no time-stamp was placed.

Original Post
Is it just me or does it seem we are being slow-rolled on the investigation of that piece of wing found off Madagascar (Reunion Island), thought to be part of a Boeing 777? Only one Boeing 777 has ever been lost. This morning, a news story on the radio reported that the wing part is being flown to some military installation where it will be studied.

Call me naive, but you can't tell me that Boeing couldn't have had a team on the ground by now, and verified "yes/no" it was part of a Boeing 777?

This seems to be dragging out much longer than seems reasonable.

Lost Decade

From AEIdeas: Lost Decade? The US is about to have its first 10-year period since World War II without at least one year of 3% growth. [Another reason, no doubt, the Obama administration decided a few months ago to revise the formula for calculating the nation's GDP.] This will be the legacy President Obama leaves us. 

If you read the Bloomberg article, which I doubt any will do, just remember that President Obama presided over the second lost decade. (The first lost decade, 1998 - 2008; the second lost decade, 2008 - present).
`This has been a uniquely slow period of growth that's delivered very little for low- and middle-income households,'' said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities in Washington and former chief economist for Vice President Joe Biden. ``We need to grow faster and more equitably.'' 
The last time America expanded at 3 percent-plus for the year was 2005, according to Commerce data.  That means the nation is on track to miss such growth for an entire decade, a first in the post-World War II era. Why?
Notice the words that were not seen in the linked article: TrainWreck, ObamaCare, Keystone, wind energy, solar energy, Solyndra, trillion-dollar stimulus, Fed rate.

Notice the phrase in the linked article: " ... a uniquely slow period of growth." Unique = one.

And this phrase: "... that's delivered very little for low- and middle-income households." Very little? How about nothing?

At the same that story was being read, Reuters reported that GE may ship $10 billion in work overseas as U.S. trade bank languishes. Not much more needs to be said. 

Native Americans Didn't Read The Act Either

NativeAmericans on the hook for big fine from US government for "avoiding" OabamaCare.


American Pie, Don McLean

Friday, July 31, 2015 -- Part II

This is not an investment site.

This is a huge day for earnings releases by energy companies. I won't get to all of them very quickly. Eventually they will all be posted.


But let's start with some great news: Enbridge beats 13 cents and reaffirms FY 15 earnings. Reuters says Enbridge's profit "rises as shipments increase."
Canada's largest pipeline company, reported a higher-than-expected rise in quarterly adjusted profit, helped by increased throughput as producers moved more oil by pipes than on rail.
The company, whose Mainline system moves the bulk of Canadian crude exports to the United States, added further capacity over the last 12 months to meet demand.
Mainline shipped an average of 2.07 million barrels per day (bpd) in the second quarter ended June 30, compared with 1.97 million bpd a year earlier.
The company, which has been shielded from a slump in global crude prices because of its fee-based contracts, is currently in the midst of a C$44 billion growth program to fund new projects.
Bloomberg, sounding a lot like The Dickinson Press reports that Enbridge's profit declined 24% amid rising capacity.
Enbridge Inc., Canada’s largest pipeline company, said second-quarter profit fell as the downturn in the energy industry affected how much oil and natural gas the company processed and shipped.
Net income was C$577 million ($443 million), or 67 cents a share, compared with C$756 million, or 91 cents, a year earlier, the Calgary-based company said in a statement on Marketwire Friday. Excluding one-time items, per-share profit was 60 cents, higher than the 47-cent average of 12 analysts’ estimates compiled by Bloomberg.
Enbridge’s earnings were weighed down by the impact on its customers of lower oil prices. West Texas Intermediate, the U.S. benchmark, averaged $57.95 in the second quarter, down 44 percent from a year earlier, according to Bloomberg data.

Some more great news. COP

Bloomberg/Rigzone is reporting that COP, the third largest energy producer in the US, reported better-than-expected results.
Excluding certain items, Houston-based ConocoPhillips had a profit of 7 cents a share, which was 3 cents higher than the average of 21 analyst estimates compiled by Bloomberg. Production that was the equivalent of 1.595 million barrels of oil a day in the second quarter was the same as a year earlier.
The company can maintain its current rate of production “for a long period of time” if spending is cut to as low as $8 billion, Chief Executive Officer Ryan Lance told analysts and investors Thursday on a conference call.
“They are, like everybody else in the industry, achieving more efficiencies,” Pavel Molchanov, an analyst at Raymond James in Houston, who rates the shares the equivalent of a hold and owns none, said by phone. “They’re getting cost savings from their oilfield service suppliers. That’s why they’re able to keep production the same.

I'll get back to XOM later, but this helps put the Bakken into perspective.

Note the last paragraph in this short Bloomberg article:
Even as Tillerson cut spending and re-evaluated whether some multi-billion dollar projects make economic sense with oil around $50 a barrel, the company has discovered a field off the coast of Guyana that the government said may hold the equivalent of more than 700 million barrels of crude. Such a prize would be worth about $40 billion at current oil prices. 
700 million bbls total? And XOM is counting on that to save them? The Bakken, at 1 million bopd, produces 365 million bbls in one year and more than that 700 million in less than two years. And Bentek predicted several years ago, that unfettered, the Bakken would produce 2.2 million bopd, or more than the 700 million bbls in one year.

Friday, July 31, 2015

Active rigs:

Active Rigs73193180208184

It appears it was on July 24, 2015, active rigs in North Dakota jumped from 70 to 73 (after hitting a post-boom low of 68 some days earlier), and since July 24, the number of active rigs (73) has not changed. This is the longest period of time when the number of rigs did not move at least one rig up or down, to the best of my recall.

RBN Energy: making propylene from natural gas.
A proposed BASF plant in Freeport, TX - that would make propylene from natural gas – is expected to be the subject of a final investment decision in 2016. If the plant is built it will have a similar purpose to another 6 Gulf Coast plants being built or planned in the next few years to make propylene from propane. All these plants are designed to make up for lower propylene output from U.S. petrochemical steam crackers using ethane, which yields less propylene from the cracking process. Today we discuss why using natural gas as a feedstock instead of propane might make sense.
There’s an awful lot of new petrochemical infrastructure being built along the Gulf Coast these days – most of it designed to process abundant supplies of natural gas liquids (NGLs) extracted from rich gas. Our latest Drill Down report “It’s Not Supposed To Be That Way” details 10 expansion and new capacity projects for petrochemical steam crackers. Those new facilities will mostly use ethane feedstock to produce ethylene. Our “Son of a PDH Man” series detailed six new plants along the Gulf Coast being built to produce “on-purpose” propylene by propane dehydrogenation (PDH).
There are other petchem plants being developed to use natural gas as a feedstock to produce petrochemicals.  We have documented more than a dozen methanol mega-projects in various stages of planning, design and construction, most of them along the Gulf Coast that (if they are all built) could increase US methanol production capacity more than 10-fold and consume as much as 2.4 Bcf/d of natural gas feedstock (see Skyrockets in Flight). Another chemical derived from natural gas is ammonia – that is mostly used as fertilizer and is now being manufactured again in the U.S. for the first time in years (see Fertile Prospects for Natural Gas).
We have also posted blogs on plans by SASOL and Shell to build two huge plants converting natural gas to liquids (GTL) in Louisiana (see Jumping Jack Gas) – both of those projects have subsequently been put on hold in the wake of lower oil prices. This time we take a closer look at a project proposal that advanced a step in March of this year when BASF selected Freeport, TX as the site for a new world-scale methane-to-propylene plant. The BASF plant – the first of its type in the U.S. would produce 475 thousand metric tons per year of propylene – subject to a final investment decision (FID) by BASF in 2016.