Friday, October 23, 2015

Huge Rain Returns To All Of Texas -- October 23, 2015; The Williston Wire; Slicers And Dicers; Texas Sets Wind Record


Later, 7:06 p.m. Central Time: after posting the note below regarding the PBS News story on wind turbines, a reader sent me this note (again, why I love to blog; the things I learn). FuelFix is reporting:
The Texas electric grid hit a new record for wind power use early Thursday, as the state continues dominating the rest of the nation in wind farm growth.

At 12:30 am Thursday, the main Texas grid operator reported that nearly 37 percent of demand was met with wind power. The Electricity Reliability Council of Texas, which manages nearly 90 percent of the state’s electric needs, said it used 12,237.6 megawatts of wind power at the time. That bested a previous record set on Sept. 13 of 11,467 megawatts.

A megawatt powers about 500 typical Texas residences during periods of normal demand.

The new record came the same day as the American Wind Energy Association reported Texas accounted for nearly half of the nation’s wind power growth in the third quarter of the year. Texas added 771 megawatts of wind generation in the third quarter and, nationwide, about 1,600 megawatts were put online. Texas now has about 16,400 megawatts of wind power, according to the AWEA, which is about 10,000 megawatts more than the second and third windiest states, California and Iowa. [Boone Pickens was ahead of his time; came out for wind too soon; couldn't get the transmission lines built.]

Texas is expected to exceed 20,000 megawatts next year. Further growth after 2016 may depend on whether Congress extends the production tax credit for wind projects.

The wind association praised recent project announcements like SunEdison saying it will build the 300-megawatt South Plains II wind farm northeast of Lubbock to power Hewlett-Packard data centers, and Monday’s announcement that EDF Renewable Energy will build a 123-megawatt wind project north of Dallas to power Procter & Gamble plants that make its laundry, dish-washing and other cleaning products.

Some companies are even studying ways for wind to power the production of oil and gas. Norway-based DNV GL has partners with Exxon Mobil Corp., Statoil and others on the “WIN WIN” joint industry project to use floating wind turbines to power offshore oil and gas production. [Too bad XOM is saying "goodbye" to California; the state and XOM could have been great partners. LOL.]
Original Post
Be sure to check out Hurricane Patricia at this site, "Winds." (This is a dynamic link; it will change over time.)

The city of Houston, TX, is being told to expect as much as a foot of rain from this hurricane which will moderate to a tropical storm over the weekend as it heads for southeastern and eastern Texas later this weekend.

The weathermen and weatherwomen on local television are being advised to take their medication to moderate their "enthusiasm." They are almost jumping out of their clothes reporting all this rain.

Meanwhile back in the Bakken, from The Williston Wire:
The City of Williston, North Dakota, has entered into a partnership with Buxton to strengthen the city's retail development strategy. Buxton's advanced consumer analytics will reveal the best retail options for the community and also help city leaders to better understand the differences between business visitors and tourists. By partnering with Buxton, Williston will utilize the same advanced consumer insights relied on by retailers for site selection decisions.
The City of Williston is getting ready to open new office space in Downtown Williston. The Williston Development Center will be ready for move-ins beginning November 9, 2015. The building, located at 113 4th St. E., is most commonly known as the former Hess Corp building. The two-story site has been completely renovated to make room for the Williston Planning and Zoning Department and Department of Building Safety on the second floor. Williston Economic Development, the Small Business Development Center, Williston Convention & Visitor Bureau and Tri County Regional Economic Development Association will be housed on the main floor.
Williston residents are invited to attend the ribbon cutting for the Main Street Reconstruction project on Thursday, Oct. 29 at 2 p.m. The celebration will be held at the intersection of Main Street and 4th Street. Representatives from the North Dakota Department of Transportation, City of Williston, Knife River, DowlHKM, Williston Area Chamber of Commerce and Williston Downtowners Association will participate in a short program. The Main Street Reconstruction project replaced and improved under and above ground infrastructure in Downtown Williston.
PBS News Hour Had A Segment On Slicers And Dicers 
October 23, 2015

PBS News Hour had a segment on slicers and dicers. It turns out only "older" wind turbines kill migratory birds; new turbines don't. LOL.

One slicer and dicer is known to have killed one eagle each year for ten years. It was torn down, but the 149 wind turbines on the same farm are still standing. The US government now allows wind turbines to kill up to five eagles every year, or something like that.

Bottom line: wind energy has not one redeeming factor. That was always true and will always remain true. Great Britain figured that out.

Seven (7) New Permits; OXY USA Permits Start Getting Canceled; More DUCs, Fewer Completions -- North Dakota, October 23, 2015

Active rigs:

Active Rigs68194181181188

Seven (7) new permits --
Eleven (11) permits renewed:
  • Hunt, 4, Trulson (2), Cook, Halliday -- Trulson in Mountrail; others in Dunn County
  • Whiting, 3, Chameleon State permits in McKenzie County
  • Zavana, 2, George permits in Williams County
  • HRC, 1, a Borrud permit in Williams County
  • Enerplus, 1, a Saguaro permit in Dunn County
As expected, we will start seeing OXY USA permits being canceled:
  • OXY USA, 4, Sharon Rainey, State Dvorak (2), Kelsey Elizabeth -- all in Dunn County
  • HRC, a Pederson permit in Williams County
For these keeping score at home, not one producing well was reported as completed (more DUCs, less completions; the fracklog grows).

Simply Staggering -- What The Torrance Refinery Outage Means For Californians -- EIA -- October 23, 2015


May 6, 2016: Torrance refinery to re-start.
Original Post
This was posted by the EIA on October 15, 2015, a screen shot in case the link is ever broken:

and then the map showing origin of imported gasoline:

I wonder when/if the Los Angeles Times will ever put this on their front page, above the fold. Every gas station in California should post this story, along with photographs of their governor, US senators, congressmen, and local state representatives.

But for all of that, the average premium for Los Angeles spot gasoline is only 31 cents.

From the linked site:
Over a five-month period following an explosion at a California oil refinery in February 2015, imports of gasoline into California increased to more than 10 times their typical level, drawing from sources that include India, the United Kingdom, and Russia.

Imported gasoline has been arriving from all over the world (see graph above) at rates of 28,000–68,000 barrels per day (b/d) for March through July (the latest data available). These levels compare with an average of 5,000 b/d in 2013-14.

California gasoline markets continue to adjust to the February 18 explosion and fire at the ExxonMobil refinery in Torrance, California, located southwest of Los Angeles. The ExxonMobil refinery is the third-largest refinery in Southern California. The refinery unit affected by the explosion, the fluid catalytic cracker (FCC), is essential to making gasoline. Torrance's FCC represents 22% of the region's total FCC capacity, making it a key source of gasoline and distillate fuels that meet California's very stringent fuel specifications. On September 30, ExxonMobil announced the sale of the refinery to PBF Energy, which will be PBF Energy's first refinery on the West Coast once the sale is complete.

Because of its unique product specifications and long distance from international gasoline markets, California specifically, and the West Coast in general, does not typically import much gasoline. As a result, the sudden loss of supply from the Torrance refinery resulted in immediate supply shortfalls and higher wholesale and retail prices. The higher wholesale prices covered the costs of importing more gasoline from distant markets into California to make up for the supply shortfalls.

The U.S. Energy Information Administration's company-level import data show that from March to July, California imports of motor gasoline averaged 52,000 b/d, from 15 different countries. The main supply sources have been refineries in India and the United Kingdom, averaging 13,000 b/d and 11,000 b/d over that time, respectively. California has also imported an average of 5,600 b/d from Russia over that period, along with smaller amounts from refineries across Europe and Asia.
An earlier post regarding the Torrance refinery is at this link.

Compare this graph, around the 34th week, about mid-August, 2015, with the graph above. It took awhile to arrange for imports and then to have the gasoline delivered.

The Deep Utica: Update On The Utica Through The Eyes Of EQT; Another "Sleeping Giant"? -- October 23, 2015

Disclaimer: in a long note like this, there will be typographical and factual errors. In addition, opinions and forward-looking comments, as they say, are interspersed with facts; it is hard to keep them all separate. If this information is important to you for any reason, go to the source. This is simply to help me understand the oil and gas industry in North Dakota and put it into perspective. And, yes, there is a short answer quiz at the end of the post. Good luck.

A huge "thank you" to two readers who helped me with this post.


October 27, 2015: this is the story, I believe, that Jim Cramer reported on in one of his video segments, yesterday, Monday, October 26. The WSJ is reporting:

Natural gas prices plunged Monday to their lowest level in more than three years on concerns that the market will remain oversupplied this winter.
Adding to investors’ fears, some companies are hinting at a new production boom.
Most of the growth in natural-gas production in recent years has been in the Marcellus Shale in Pennsylvania and West Virginia. Some industry experts say the Utica Shale, which stretches into Ohio and also lies underneath the Marcellus in some places, could be just as bountiful.
EQT Corp.said in an earnings call Thursday that it has drilled wells in the Utica with very high production rates. EQT’s shares fell more than 7% that day.
“A year ago, it would have been hard to imagine a more prolific play than the Marcellus,” said David Porges, EQT chief executive, on the call. “However, if the deep Utica works, it is likely to be larger than the Marcellus over time.”
This comes on top of already-booming production. Total output rose to a record of 74.9 billion cubic feet per day in September, according to the latest Energy Information Administration estimate.

Original Post

 A New Natural Gas Play

3Q15 EQT transcript.

See first comment at this post.

I know nothing about EQT. This is the business summary of EQT at Yahoo!Finance:
EQT Corporation, together with its subsidiaries, operates as a natural gas company in the United States. It operates in two segments, EQT Production and EQT Midstream. The EQT Production segment explores for, as well as develops and produces natural gas, natural gas liquids (NGLs), and crude oil primarily in the Appalachian Basin. As of December 31, 2014, it had 10.7 trillion cubic feet of proved natural gas, NGLs, and crude oil reserves across approximately 3.4 million gross acres, including approximately 630,000 gross acres in the Marcellus play. The EQT Midstream segment provides natural gas gathering, transmission, and storage services for the company’s produced gas, as well as for independent third parties in the Appalachian Basin. This segment owns and operates approximately 8,200 miles of gathering lines and 176 compressor units with approximately 225,000 horsepower of installed capacity. The company was founded in 1925 and is headquartered in Pittsburgh, Pennsylvania.
Highlights of the 3Q15 EQT transcript (linked above):
  • 3Q15 earnings: a loss of 33 cents/share vs an 83-cent decrease from earnings in 3Q14
  • earnings: impacted by lower commodity prices
  • expenses high consistent with volume growth
  • midstream results: operating income was up 21%
  • the call started off with an update on the company's first deep Utica well, Scotts Run  591340
    • 24-hour IP: 72.9 million cubic feet = 12,000 boe
    • steady flow at this rate
    • cumulative total: 2.6 billion cubic feet in first 3 months = 430,000 boe in three months
    • forecast: in eight months, 1.23 million boe
    • EUR: 15 billion cubic feet = 2.6 million boe ("Our current reservoir modeling suggests an ultimate expected recovery for this well in a range between 13.9 Bcf and 18.8 Bcf or a range of 4.3 Bcf to 5.9 Bcf per thousand foot of lateral.")
    • 2nd deep well, Pettit 593066: at 12,000 feet; ready to begin lateral
    • 3rd deep well, the Big 190 well: just spud
    • cost for these deep wells: $12 - $14 million, as much as $17 million, about $2,500/foot
    • deep wells at 13,000 feet vs 10,000 feet (latter, $1,500/foot)
    • due to economics, will suspend operations except core Marcellus assuming the deep Utica works
  • bottom line: looks like company is moving to deep Utica; vice Marcellus
  • takeaway capacity may not be sufficient
  • better economics: higher volumes, more concentrated (geographically) - "tighter area"
From all this, a reader provides these thoughts on the implication of this:
  • if the deep Utica pans out, the area in Appalachia to be drilled will shrink, geographically
  • a "small corner" of Appalachia has the potential to deliver most of North America's gas
  • within the basin, non-core Marcellus and Upper Devonian would become non-competitive (or the core Marcellus will shrink)
  • takeaway capacity could be an issue much longer than expected
  • longer term, it may be desirable to have separate gathering systems for Marcellus and dry Utica because of the higher pressure of the Utica
  • if the deep Utica pans out, and once takeaway capacity meets supply, other plays will be impacted negatively (Haynesville, Fayetteville; conventional gas prospects, GOM gas and Canadian gas have all been negatively impacted)
Bottom line for me: the "deep Utica" is a new term; the "deep Utica may move the needle for natural gas production in North America in the next 3 to 5 years if it pans out.

I will be watching for RBN Energy to talk about the "Deep Utica."

By the way, does the "Deep Utica" remind anyone of anything closer to home, say, perhaps, Glen Ullin or Linton, North Dakota? One hint: North Dakota's Winnipeg Shale runs very, very, very deep, about 12,000 feet down, well below the Bakken and just below the Red River (which I've always considered the "deepest" formation in North Dakota to be drilled). 

[At $2.00/mcft, 15 billion cubic feet = $27.5 million
at $20/boe , 2.6 million boe = $52 million]

Signing Off For Awhile -- Theme Song For North Texas Today -- October 23, 2015

Embedding disabled by request.

Have You Ever Seen The Rain, CCR

Without question we were warned about three days and three nights of heavy raining in north Texas, but I don't think the weather forecasters really knew it was going to be this intense. Maybe they did and we weren't listening. Forecast for 3 - 6 inches cumulative over three days, possibly seven to ten inches. I think we are about to get three inches in the next half-hour. Not kidding. One has to see it to believe it. Hurricane deluge without the wind.

Nap Time

US Natural Gas Exports To Mexico Set A Monthly Record High In July -- EIA -- October 23, 2015

This pretty much says it all:

January, 2014: less than 1.5 billion cubic feet per day
July, 2015: approaching 3.5 billion cubic feet per day

The Apple Page

Pandora investors worried about ability of Pandora to compete with Apple; stock tanks.

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on anything you read here or think you may have read here. I report on Apple simply because I am an Apple fanboy and have been since 1984.

From Fortune, linked above:
Long before there was a Spotify or an Apple Music, there was Pandora. One of the earliest streaming music services, it was founded in 2000, and built up a huge listener base—in fact, it is still the largest. But the digital music business has shifted dramatically since Pandora was first launched, and it looks as though the company is having a hard time keeping up with that transition.

On Thursday, Pandora’s stock price tumbled by more than 30% after the company reported a third quarter loss of $85 million, or 40 cents a share.

It’s not that investors were expecting a profit from the company, mind you—Pandora has lost money since inception, and its most recent loss was well within the range of what the market had been forecasting. Revenue for the quarter also came in close to consensus expectations, at $311.6 million.
According to Pandora’s latest financial statements, the company still has about $440 million in cash and investments on its books, so it’s not going to run out any time soon.
But its cash pile is dwindling faster than expected, as the company’s costs continue to rise. That’s part of the reason why it lowered its guidance for the upcoming quarter and for the full fiscal year—it now expects revenue of about $1.15 billion.

Before Apple Music came along, Pandora looked fairly good compared to the rest of the industry. It has about 80 million active users, more than even Spotify has (although the latter has almost caught up). But it has only ever had a tiny fraction of paying subscribers—about 5% of the total. Just a month or so after launch, Apple already has more than twice as many paying customers, with about 6.5 million. Spotify has 20 million paying users.
I was an active user of Pandora years ago, but quickly lost interest, and never subscribed. I don't know why. I'm not interested in Spotify or Apple Music either. I suppose if I were still in the military and running daily and working out in the gym daily I would be tuned into Apple Music but I've changed. I'm not keeping up with Pandora, Spotify, or Apple Music. Spotify is a Swedish start-up; the parent company is now HQ'd in London. I do a lot of bike riding and for some reason I don't like headphones while riding; it may be a safety issue (subconsciously).
Britain was the center of the universe for music at one time -- think the Beatles, the Rolling Stones, the British invasion. But America's Got Talent, also. LOL.  And now it's Apple's turn, I guess.

The Next Big Thing

Over at "the next big thing," I've posted:
Amazon and/or Facebook will get into the flight reservation business (one or the other will buy Travelocity, Orbitz, or start fresh). October 23, 2015. Three stories converge: Amazon reports surprise profit 3Q15; Facebook introduces universal search across entire social network; and, airlines try to win customer loyalty by keeping fliers informed 

Weatherford To Cut An Additional 3,000 Jobs -- October 23, 2015; UK Going Nuclear -- Intermittent Energy Fad Must Be Dying

Rigzone is reporting: Weatherford to cut an additional 3,000 jobs --
The oilfield services provider successfully completed its previously announced headcount reduction of 11,000, according to its 3Q report. Weatherford stated it has now increased its workforce reduction target to 14,000, “with an increased focus on support positions to be completed by year end.”

In addition to the job cuts, Weatherford has also closed five of its seven planned manufacturing and service facilities. The company said it will close one additional office by the end of the year and the remaining closure will occur in 2016. Weatherford has closed more than 70 operating facilities in North America through Sept. 30, with plans to close 90 by the end of 2015. Weatherford believes these efforts will “mitigate the effects of the downturn,” but noted that a challenging market may continue and that the company plans to further reduce its cost structure to reflect the current environment.
Micro-Radar Start-Up In North Dakota

The Bismarck Tribune is reporting:
When Meir Zorea stepped foot in Grand Forks on Thursday, there were more than 6,000 miles between where his company was founded and where its future could be.
Zorea is the chairman of Israeli startup company ARTsys360, which manufactures a 3-D micro radar system, and is looking for a potential U.S. location for the firm.
As the company's product could find use in the unmanned aircraft systems industry, North Dakota is one option Zorea is investigating. Two features that have captured the ARTsys360's attention are the state's UAS resources and harsh weather conditions in which the radar's capabilities can be tested.
The cost of radar can put it out of reach for many that aren't associated with the military, Zorea said, leaving some potential uses for the technology unexplored.
A smaller, less expensive micro radar system--ARTsys360's product runs about $5,000--could be used for various means, including detecting unmanned aircraft flying into restricted zones or allowing the aircraft to detect other objects and avoid colliding with them during flight.
In the 1950's it was railroad hobbyists. In the 2020's it's going to be backyard airfields, drones, and micro-radar systems.

UK Going Nuclear
The AP is reporting:
Britain will be China's "partner of choice" in the West, Prime Minister David Cameron declared Wednesday, as China demonstrated its commitment by putting down a 6 billion-pound ($9.3 billion) stake in the U.K.'s first nuclear power plant since the 1980s.
Chinese President Xi Jinping signed the nuclear agreement on the second day of a four-day visit that has seen the two countries agree more than 30 billion pounds ($46 billion) in business deals.
Cameron said the "historic agreement" would create 25,000 jobs and eventually provide power to 6 million homes.
The nuclear deal will see the new Hinckley Point plant in southwest England built jointly by Electricite de France and China's state-owned China General Nuclear Power Corporation.
For the past several years it seems I saw no end to all the intermittent energy stories coming out of Britain: the Thames Array being just one example. This $10-billion nuclear deal with China tells me that intermittent energy in Britain is pretty much dead.

DF said Wednesday that it would take a 66.5 percent share in the 18 billion-pound ($28 billion) plant and CGN 33.5 percent. The two firms also agreed to develop two further nuclear power stations in southeast England — one of which would be Chinese-designed and majority Chinese-owned.
Apple and the Swiss


February 20, 2016: Apple Watch Sales Estimated at 5.1 Million in Holiday Quarter, Swiss Watch Sales in Trouble.
The latest data from Strategy Analytics reveals that the Apple Watch remained the most popular smartwatch through the fourth quarter of 2015, capturing 63 percent global market share based on an estimated 5.1 million sales in the three-month period.

Samsung trailed in second place with 16 percent market share and an estimated 1.3 million sales. Apple and Samsung together accounted for 8 in 10 of all smartwatches shipped worldwide during last year's holiday shopping season, based on the data.

Global smartwatch sales rose to an estimated 8.1 million units in the fourth quarter of 2015, an increase of 316 percent from 1.9 million in the year-ago quarter. The growth was led by North America, Western Europe, and Asia.

The record-breaking smartwatch growth contrasted the troubled Swiss watch market, which declined 4.8 percent in Q4 2015 over the year-ago quarter. Swiss watch sales totaled 7.9 million units in Q4 2015, down from 8.3 million in Q4 2014.
Original Post
I remember all that "brave" talk coming out of Switzerland that their timepieces had no cause to worry with Apple getting into the market. CNBC is reporting:
The swathe of smart watches entering the market led by Apple's Watch has dented sales of Swiss-made timepieces and looks set to continue weighing on the sector.
Swiss watch exports slowed sharply in the year to September with their value sinking around 8 percent compared to September 2014, with Asia and U.S. shouldering the brunt of the decline.
Demand dropped off the most in the lower end of the market, with watches that export for below 500 Swiss francs ($520) being hit the hardest. Alternatives to the luxury watches, such as the Apple Watch, have made retailers nervous of stocking cheaper Swiss watches as technological advances are likely to make them "obsolete," luxury analysts warn.
Times have changed, I guess. For me, the "lower end of the market" used to be $8 Casios. 

Friday, October 23, 2015 -- Why Canadian Heavy Crude Is So Important For US Manufacturing Industry

Active rigs:

Active Rigs68194181181188

RBN Energy: Can An Impending Aluminum Industry Petcoke Shortage Be Fixed?
A critical ingredient consumed in the production of aluminum is sourced exclusively from petroleum refineries. Complex refineries use coker units to break up residual fuel left over from initial crude processing to squeeze out the last drops of lighter components – leaving a solid carbon based residue known as petcoke.
Without anode grade petcoke (GPC) there would be no aluminum industry. As we explain today aluminum producers are scrambling to address a looming petcoke shortage that could seriously disrupt their industry.
This blog series is based on the recently published “Alliance Anode Coke Study” prepared by Turner, Mason and Company, AZ China Ltd and Cascade Resources.
In Episode 1 we described how aluminum is made using an electrolysis process at very high temperatures where the anode electrode is made almost exclusively from higher grades of petroleum coke known as GPC.
Every metric tonne (MT) of aluminum produced consumes 0.4 to 0.45 MT of GPC. This makes the aluminum industry highly dependent on petroleum refiners to produce enough GPC to meet their needs.
Petcoke is a residue byproduct of refining that is produced by coker units that extract light components from fuel oil – leaving behind a layer of solid carbon. However the supply of anode grade GPC is not growing fast enough to meet aluminum demand. Part of the reason is to do with crude quality because GPC is only produced from heavy crudes with low impurities and low sulfur whereas many of today’s heavy crudes contain a lot of sulfur and unwanted impurities.
As a result when these crudes are processed through a coker the resultant petcoke is inferior “fuel grade” that is not suitable for GPC. In addition in the U.S. despite rising coker capacity at refineries, the output of petcoke is falling because the overall slate of crude has become lighter with less carbon as a result of the surge in shale production. This time we look at global GPC supply and demand for the next 10 years to understand when petcoke demand will exceed supply in different scenarios.
Huge story. Another reason why I love to blog.