Monday, October 26, 2015

If You Only Have Time To Read One Thing Today, This Is The Article You Want To Read (It Has Nothing To Do With The Bakken ...

... except there is a Buffalo Wild Wings in Williston).

The article to read is on the back page of today's edition of The Wall Street Journal, page R10, "Minimum Wages and the Casual-Dining Chain," a Q&A with Buffalo Wild Wings CEO, Ms Sally Smith.

Her interview makes me want to become a regular. Outstanding interview. Enjoy. [You can get past the paywall by googling the link.]

That was the Original Post above. Tonight, October 28, 2015, I was stunned to see one of my favorite blogs, Carpe Diem, have two posts on that very story.

Here's the first link.

And here's the second link.

Incredible. Of all the stories in the WSJ this past weekend, both Mark Perry and I caught this one as being perhaps the most important story all weekend.

Minot, North Dakota, Native To Umpire World Series -- October 26, 2015

This was sent to me by a reader. First the link and the story:
Gary Cederstrom, of MINOT, NORTH DAKOTA, was named the crew chief today by Major League Baseball.
Cederstrom has been umpiring in the Major Leagues since 1989 and has umpired in two previous World Series - in 2005 and 2011.
Cederstrom will be the right field umpire for game one of the fall classic tomorrow night in Kansas City as the Royals take on the New York Mets. He is scheduled to serve as home plate umpire in game six, should the best-of-seven series last that long.
My hunch is that being from Minot he doesn't take any crap (can I say that?) from the players, no matter how much they (the players) get paid. I remember as a wrestler at Williston High School in the late 60s, there were only three teams I feared: a) the Minot teams, especially Minot Ryan; b) the Watford City team; and, c) any team from Montana (generally we wrestled Billings, I recall; I don't remember Miles City but I assume we wrestled them, also).

Anyway, here's the backstory to the KXNET story, from the reader:
This might be remembered by Minot State alumni who graduated in 1978. One of the guys in a frat there had (what I thought) was a rather unusual (and far-fetched in my mind) career aspiration. 
Gary Cederstrom wanted to be a major league umpire. Well, now I find out that he is leading the umpire crew in the World Series this year! Amazing!!
For The Granddaughters

By the way, the same reader (that sent me the Gary Cederstrom story above) reminded me of the donut "shop" near Rickard Elementary School, Williston, North Dakota, when I was in high school. It was run by an elderly couple out of their house in a residential neighborhood (I was 16 or so at the time and anyone over 30 was "elderly"). I could be wrong, but correct me if I am, but I think the house was less than 500 square feet. I think the city sidewalk around the house had more square feet of cement than the foundation of the house under discussion. I always wondered where the donuts could possibly be made. Well, now I know: in the basement. (You know, in the basement in New Jersey in the 1920's they would have been distilling, but in North Dakota, in the 60s, the Norwegians made donuts and the Swedes made meatballs.)

Coach Amsden had me pick up two dozen donuts for the concession stand that the Lettermen's Club operated for every varsity basketball game (Phil Jackson played at WHS when I was there in my freshman year). I had an old 1948 Willys Jeep (no door windows) and religiously I would drive to the donut "shop" about two hours before every game to pick up the donuts, regardless of the weather. I can't even imagine explaining to Coach Amsden why I hadn't picked up the donuts if I ever failed in the mission.

I have no idea what I paid/sold the donuts for but it wouldn't surprise me if we bought the donuts for 10 cents a piece and sold them for a quarter. I did not know then, but I know now, the purpose of selling donuts was not to make money, but to have the donut aroma permeate the gymnasium, sort of like the popcorn, to entice customers. Wow, I wish I knew then what I know now. (For starters I would have bought 10 mineral acres northeast of Watford City with the money we made on donuts.)

I had long forgotten the name of this donut "shop." In fact, I don't recall ever knowing that it ever had a name. I still wonder how I found the "shop" the first time Coach Amsden sent me on what must likely seemed to be a wild-goose chase. But from the reader, now I know that, also. Apparently it was called the Donut Hole.

For those who wonder where the Donut Hole was located (if that was its name), it was two houses north of the Njos's. I know how to pronounce Kjorstad but I won't attempt "Njos's." I think it needs one less consonant, and maybe an extra vowel would help. (Yes, I know this is going to invite comments from those living in the southwest part of the state.)

Anyway, enough of this. Life is too short at the front end; too long at the back end.

[Back to the wrestling story: I especially feared Minot Ryan because it was a Catholic school. I was Lutheran and went to the public schools in Williston, but the Catholics had their own school until the later grades. I figured there must be a special reason for anyone to go to a Catholic school -- based on physique and stamina and discipline -- and then I heard about nuns, which confirmed my fears. At least the stamina and discipline part. Montana was just plain scary.]

Tuesday, Open With "F"; Close With "APPL" -- Should Be An Exciting Day -- October 26, 2015

Earnings announced Tuesday:
Yet to report:
  • Apple (AAPL), after market close, forecast: $1.88/share
Disclaimer: the usual disclaimer. This is not an investment site. Do not make any investment or financial decisions based on anything you read or think you may have read here. Of the companies listed above, I have invested in only three, and have no plans to add more to my holdings. I have never invested in any of the others and have no plans to do so.

Texas Monthly

I will subscribe to almost any periodical that offers an introductory annual subscription for $10 -- or thereabouts. That's how I got BloombergBusiness for a year or so. That's how I ended up getting the Smithsonian. Unless the latter is renewable at $10, I have no plans to renew. The magazine is an embarrassment with innumerable pages of "cheap" advertising (e.g., "Athena Pheromones Increase Affection"; "Rent an Apple Tree"; "Men's Wide Shoes"; and, Word's Finest Eye Cream!" I believe the latter goes around the eyes, not in them). But I digress.

I got an introductory offer for Texas Monthly but now, because I live here, I'm pretty much committed to renewing every year despite the price. The covers are always enticing, and the titles to the articles are always interesting, but the font is way too small to read, and the advertising is excessive -- worse than the Smithsonian if that's possible.

If there was less advertising and the articles had slightly larger font, it might be enjoyable to read the articles. A sampling of this month's stories:

The median price for a house in the major metropolitan areas in Texas seems to be about $225,000 -- I'm not sure who buys these houses when 51% of Americans earn less than $30,000 / year.

The best article: the top 25 new and improved BBQ joints in Texas. There are over 2,000 BBQ joints in Texas, so to get to the top 25 is no mean feat. It turns out that one of the BBQ restaurants that made the list is here in Grapevine: Meat U Anywhere BBQ. It's been open for about a year. There are two others in Dallas (where I will never go) and two others in Ft Worth.

The best story, however, may be on the sanctuary city of Mission, Texas. This Hispanic town of about 80,000 people just west of McAllen on the Mexico border is close to becoming the butterfly capital of the United States. Last year, the city council unanimously passed an ordinance, believed to be the first of its kind in the country, prohibiting the capture or killing of butterflies on public property. Around 300 species of butterfly can be found in the Valley. Birdwatching remains the biggest draw, but butterflying is quickly catching up. 

Just What We Need: More Natural Gas -- This Time From Alaska -- October 26, 2015

This is most interesting. And why I love to blog. I just posted this over the weekend:
I mentioned that to Don. He agreed, reminding me of the "gloom and doom" of 1973 - 1975 and then again in 1978 - 89. Things were so bad that there was serious talk of a 48-inch natural gas pipeline from the Alaskan North Slope to the Northwest Territory (Canada), and from there to the continental US. 
Now, today, from Seeking Alpha:
BP and ConocoPhillips have provided written assurances that they will commit their shares of Alaska North Slope natural gas to a future pipeline project, Alaska's Governor Walker says, adding that he will not introduce property tax legislation on gas leases within the Prudhoe Bay and Point Thomson units.
The announcement comes as the state legislature begins a special session concerning the project, which now is likely to focus on buying out TransCanada’s interest in the proposed $45B-$65B project that would be the largest single investment in Alaska in the state’s history.
Exxon Mobil, also one of the three top North Slope producers, has not yet made public a similar commitment.
It sure doesn't sound like the US oil and gas industry is dead, as Saudi Arabia would like to paint it.

Countries Without Borders

I can only assume this is how President Obama pictures the Mexican-US border in the future, and what Homeland Security has nightmares about. The [London] Telegraph posts a photograph of countries without borders,  states without passport control. If you zoom in on the photograph to see individual refugees, you can identify the Bernie Sanders supporters. The ISIS terrorists are a bit harder to recognize but the ones carrying mortars are probably not our friends.

CO2 Emissions By State, 2000 - 2013 -- EIA

As far as I'm concerned, it's meaningless, but policy wonks in Washington, DC, will love it, and a few other folks will spend some time looking at the analysis and the spreadsheets.

EIA is reporting it's 2000 - 2013 energy-related CO2 emissions at the state level report:

Energy-Related Carbon Dioxide Emissions at the State Level, 2000-2013
Over the time period from 2000 to 2013, CO2 emissions fell in 37 states and rose in 13 states (Table 1). The greatest percentage decrease in CO2 emissions occurred in Maine at 27%, or 6 million metric tons (mt). The greatest absolute decline was 52 million mt in New York (25%). The state with both the greatest percentage and absolute increase was Nebraska, at 28% (11 million mt).

This analysis examines some of the factors that influence state-level carbon dioxide emissions from the consumption of fossil fuels. These factors include: the fuel mix — especially in the generation of electricity; the state climate; the population density of the state; the industrial makeup of the state and whether the state is a net exporter or importer of electricity. 
Two links:
The only data point I found interesting I will post later. But I will give readers a chance to look at the data before I point out something very, very interesting. Hint: it has to do with North Dakota, and it has to do with the Bakken boom. 

Eight (8) New Permits; Eight (8) Producing Wells Completed: BR With Three High-IP Bakken Wells; XTO With Three Nice Wells; Statoil, HRC, CLR Each Report A High-IP Well; Three More DUCs -- October 26, 2015

Although eight producing wells reported as completed (see below) is less than three / day (the weekend and Monday), it is still more than I have seen in several weeks. Putting that data point against the narrative in the Wall Street Journal article linked earlier today is quite interesting. 

Active rigs:

Active Rigs68194182186199

Wells coming off confidential list Tuesday:
  • 27001, 1,428, HRC, Nelson 157-100-25A-26-3H, Marmon; it appears gas averaged about 2,000 units along the lateral; spiked to near 3,000 units; in-zone percentage and footage are 77.7% and 7,780 feet; the target was a 10-foot window between 13' and 23' below the top of the middle Bakken; 34 stages, 4.1 million lbs, t4/15; cum 64K 8/15;
  • 29839, 1,033, CLR, Maynor 1-35H, Crazy Man Creek, a 3-well Ecopad; an 11-foot target zone situated between 16' and 27' beneath the base of the upper Bakken shale; alternately, a 14-foot target zone between 15' and 29' feet beneath the upper Bakken shale; ; total gas was static, ranged around 800 units but 2,000 units at the toe; remained in the target zone for 6,009 feet, 64%; 30 stages, 3.5 million lbs, t5/15; cum 61K 8/15;
  • 30041, SI/NC, XTO, Deep Creek Federal 43X-5G, Lost Bridge, no production data,
  • 30233, SI/NC, BR, Old Hickory 43-32TFH, Sand Creek, no production data,
  • 30664, SI/NC, XTO, Smouse 31X-28D, West Capa, no production data,
Eight (8) new permits --
  • Operators: CLR (4), Petro-Hunt (3), Hess
  • Fields: Banks (McKenzie), Little Knife (Dunn), Capa (Williams)
  • Comments: Capa oil field is very, very active lately; the permits for the 4 CLR wells are for the same pad but they have three different names: Chicago, Charlotte, and Akron;
Eight (8) producing wells completed:
  • 28284, 1,421, XTO, Carus 24X-36D, Lost Bridge, t6/15; cum 14K 8/15;
  • 28285, 1,146, XTO, Carus 24X-36H, Lost Bridge, t7/15; cum 19K 8/15;
  • 28286, 1,829, XTO, Carus 24X-36C, Lost Bridge, t7/15; cum 28K 7/15;
  • 29231, 1,816, Statoil, Heen 26-35 4TFH, Todd, t9/15; cum --
  • 29738, 191, SM energy, Karlberg 14-12HN, Garnet, t10/15; cum --
  • 30091, 2,445, BR, CCU Dakotan 7-8-17TFH, Corral Creek, t9/15 cum --
  • 30778, 1,844, BR, CCU Red River 8-2-15MBH, Corral Creek, t9/15; cum --
  • 30780, 2,525, BR, CCU Gopher 2-2-15MBH, Corral Creek, t9/15; cum --
Evertson Operating abandons a fairly recent well, but it was essentially "dry," producing less than 700 bbls since test date, 5/10:
  • 17488, 42, Evertson Operating, Viall 30-1, Ray oil field, a Red River well, Williams County, t5/10; cum 697 bbls

29839, see above, CLR, Maynor 1-35H, Crazy Man Creek:

DateOil RunsMCF Sold

27001, see above, HRC, Nelson 157-100-25A-26-3H, Marmon:

DateOil RunsMCF Sold

Natural Gas Growth In The US -- October 26, 2015

This is really cool, again something I wouldn't have known about, much less thought about, had I not blogged. Something called the "NERC" divides North America into eight regions. Most of the regions are multi-state / multi-province, but a couple of them are pretty much just one state, e.g., Texas (TRE) and Florida (FRCC). I assume the latter is based on something other than just economics / customer base.

Be that as it may. 

These are three very, very interesting graphs taken from a Seeking Alpha contribution today.

The first graph is projected natural gas-fired generation increase by region (note that only four regions are broken out; the fifth ("rest of the US") consists of the other four regions which includes the midwest (two sub-regions, not very many people), the northeast (a lot of faux environmentalists, looking more and more like the EU) and Florida.

Based on the graph, it looks like the following:
  • the western region has a few coal plants to retire, and a bit of wind competition when it comes to NG in the short ter, but by 2025, the writing is on the wall: natural gas will be needed in huge amounts (I wonder if this doesn't correspond to nuclear plants reaching the end of their programmed life?)
  • the Texas region takes off in 2025; probably simply due to growth, residential and commercial
  • the southeast region has the largest number of coal plants to retire; certainly no wind competing; maybe nuclear plants retiring, also (I don't know)
  • the Indiana-Ohio-Pennsylvania corridor as well as the rest of the US appear to simply mirror growth (and/or the loss of nuclear plants)
What stands out most but doesn't necessarily surprise me is the growth in the southeast, which by 2040 passes all the other regions. The "rest of the US" which includes the northeast, the continental midsection, and Florida, plateaus.

But again, look at the most interesting part of that graph. For all intents and purposes, the WECC is California. For all intents and purposes, for this discussion, nothing else matters in the WECC. Just California. Look at the amount of NG growth projected for "California." It's the only region that is still (very, very slightly) negative in 2020 and then surges, surpassing all other regions in the US. Even those who still read Dr Seuss can see that. It's incredible. It would be interesting to see an in-depth analysis of why that will occur -- perhaps the California bullet train is going to use a lot more electricity than we imagine -- and all those EVs. Or maybe it's the retirement of nuclear energy plants.

The second graph is of less interest and I hate the 3-D effect; it's hard to see the actual tops -- when I see this kind of graph it suggests the author might be trying to hide something (or just make the graph look more interesting).

It's easy to see that coal pretty much holds its own, despite all the headwinds. But speaking of wind (headwinds and tailwinds), look at the growth of intermittent energy, from about 0.42 to almost exactly 0.8 (a 90% increase -- rounding, intermittent energy doubles between now and 2040. Natural gas, on the other hand jumps from almost exactly 1.20 to 1.70 or something like that -- again, the graph is hard to read -- (about a 40% increase). So, intermittent energy doubles, and natural gas jumps about 40% -- compared to themselves. But compared to each other, a jump of 0.38 TkWhs vs a jump of 0.5 TkWHs is (0.5-0.38 / 0.38 = a 30% increase in natural gas over intermittent energy -- if I'm saying that correctly, and if I'm doing the math correctly -- both big "if's."  But I think the point is made.

Finally, the third graph considers the relative price of alternative/alternate forms of energy. This interests me the least. There are too many factors that impact this. The accountants can manipulate these figures too easily. The graph includes "all building and operating costs over the lifetime of the plants" which is a big, big area to manipulate the data. And then, of course, how does one even begin to factor in the tax creditors and giveaways for intermittent energy? For the archives I will post it, but it doesn't mean a lot to me. I think one can compare solar with wind but that's about it. The cost of geothermal does not matter; it is a niche source of energy, although the northeast (US) may grow it's Canadian geothermal base.

Monday, October 26, 2015; Duke Energy Is Buying Piedmont Natural Gas, $4.9 Billion

Whiting reports three nice wells in Truax oil field; eight more DUCs reported over the weekend.

After years of decline, US crude oil imports rise again. At least that's what the Wall Street Journal is reporting:
U.S. imports of foreign oil are rising again after a long decline, as the oil bust forces domestic producers to scale back.
Less than a year after the Organization of the Petroleum Exporting Countries opted to continue production despite plummeting prices, member countries including Saudi Arabia and Iraq are clawing back market share they ceded to oil companies pumping in Texas and North Dakota.
U.S. crude imports declined 20% between 2010 and 2014 amid the domestic energy boom but have recently started to rise again. Total crude-oil imports rose for three straight months between April and July, according to the most recently available data from the Energy Information Administration. Imports of light crude grew more rapidly, from 5.6% of total imports in April to 11% in July. [Read the entire article at the link to learn why.]
On the Gulf Coast, vessels carrying nearly a week’s worth of imports waited offshore Friday to unload.
The slowdown in the nation’s shale-oil output has pushed up the price of high-quality U.S. oil relative to global prices, giving U.S. refiners a reason to buy from countries such as Nigeria. Until very recently, the boom in U.S. shale-oil production forced countries that exported oil to the U.S. to hustle for new customers.
US new home sales drop to near one-year low.

Active rigs:

Active Rigs68194182186199

RBN Energy: Can the Jones Act Tanker Market Keep Growing?
The cost to charter U.S. Flag Jones Act tankers that are used to transport crude and refined products along U.S. coastal waters is still as high as $75,000/day for medium-range 330 MBbl vessels. That’s four times what it costs for an equivalent foreign flag tanker. Higher charter rates – caused by tight vessel supply in a regulated market – have attracted investment from Kinder Morgan and other midstream companies and the tanker fleet will expand by 40% in the next 3 years. Today we discuss the market potential.
The Jones Act is a federal statute requiring that all goods transported by water between U.S. ports be carried in U.S. Flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and/or U.S. permanent residents. Because of the regulations, operating expenses are higher for Jones Act vessels (as much as 2.7 times non-flag alternatives according to a U.S. Maritime Administration (MORAD) study in 2011). We have provided considerable coverage of the role that Jones Act vessels have played in the U.S. crude oil distribution system over the past 4 years since shale production increased domestic output including our Rock The Boat series in the spring of 2014. 
The Jones Act fleet used by the petroleum industry consists of three main categories of vessel. The first are smaller barges that typically carry either 10 MBbl or 30 MBbl of crude or refined products and operate on inland waterways as well as coastal canals – the fleet size is approximately 3,750 tank barges (source: Kirby Corp.). The second vessel type is the coastal barge - including larger articulated tug barges, ATBs. The fleet of coastal barges numbers 269 having capacity larger than 195 MBbl.
The third vessel class is self-propelled tankers that operate in both coastal and international waters and generally carry over 300 MBbl of crude oil or refined product.
This latter Jones Act tanker category currently numbers 43 vessels of which 31 are medium-range “Handy” size meaning they carry about 330 MBbl and 11 are Aframax or Suezmax vessels that carry 800-1500 MBbl.
The 11 larger vessels are currently dedicated to the Alaska trade– moving Alaska North Slope (ANS) crude oil from the Port of Valdez, AK down the West Coast to refineries in Washington State or California. The Handysize fleet is largely engaged on long term charters by oil companies to move crude or refined products between ports on the East or West Coast although a few are also used as “shuttle” tankers to ship production crude to port from Gulf of Mexico offshore wells.
The size of the Jones Act tanker fleet is limited for a couple of reasons (as we said - there are just 43 operating today). First the regulations require they be built in U.S. shipyards – of which there are only two currently operating that can build Jones Act tankers – Akers Philadelphia (soon to be renamed Philly Shipyard) and General Dynamics NASSCO shipyard in San Diego. Between them these two shipyards could produce at most 7 vessels per year and NASSCO builds navy vessels as well – reducing their Jones Act capacity.
The second reason the Jones Act tanker fleet remains small is their high cost of operation compared to non-U.S. flagged vessels that effectively restricts their use to U.S. waters because they cannot compete with tankers registered in other jurisdictions (e.g. Panama) that can operate for a third of the cost or less. Yet despite their limited utility and expensive operating costs – demand for new vessels is currently high. Two new tankers are expected online by the end of 2015 with 15 scheduled for completion by the end of 2018 – expanding the fleet by 40% to 60 vessels. And a number of recent industry consolidations have occurred - reflecting strong interest in owning Jones Act tankers from U.S. midstream companies.
Big Week: Apple, XOM Report Earnings

It was announced that a Chinese company, having received US approval, will buy mineral acreage just east of Midland, TX. The county seats of Howard and Borden counties are 50 - 100 miles east / northeast of Midland. The linked article did not say how much acreage was involved in the $1.3 billion deal.

The AP is reporting that Duke Energy will buy Piedmont Natural Gas for almost $5 billion. In addition to one million new customers, the big story is that the two companies are partners in the $5 billion Atlantic Coast Pipeline that will be the first major natural gas pipeline to serve the eastern half of North Carolina. The $60 that Piemont shareholders will receive in the deal is a 42% premium to the closing price on Friday.

The Dickinson Press reported over the weekend that the "big crane" business was taking a hit during the slowdown. Not unexpected.

Final three choices for UND's new athletic nickname: Fighting Hawks, Roughriders, and Nodaks.

Tesla posted strongest quarterly sales in China this year for three months that ended in September. Tesla sole 1,345 units in China. They had sold 797 units in the first quarter and 883 units in the second quarter. BloombergBusiness story here. Elon Musk said China's sales could match the US in five years; I'm not sure what he meant by that; it could be taken either way, I suppose.

Initial 3Q15 GDP estimates will be released this week. GDPNow suggests GDP will be well below 2%:
The GDPNow model nowcast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 0.9 percent on October 20, unchanged from October 14. The model's nowcasts of real consumer spending and real government spending in the third quarter fell slightly following last Thursday’s Monthly Treasury Statement and Consumer Price Index release (from the U.S. Bureau of Labor Statistics). This was mostly offset by an increase in the nowcast of motor vehicle and parts dealer inventories after Friday's industrial production release from the Federal Reserve Board.
At least one talking head suggests the Fed will announce "negative" interest rates. I would love to poll that but a) it gets a bit far afield of the Bakken per se; and, b) no way, Jose, will the Fed announce negative interest rates.

GM, UAW reach tentative deal, avoiding strike.

Wow, wow, wow: USAA is dumping Mastercard; will replace it with Visa. Earlier this year Costco dumped American Express and also partnered with Visa. Visa seems to be on a roll.

Upon review, it appears the US House of Representatives thinks corporate welfare is important. The House will vote to re-open the Ex-Im Bank. I have no dog in that fight; it's just interesting to watch the intersection of politics and reality.

Bridgestone to buy Pep Boys for about a billion dollars.

FedEx predicts a 12% increase in holiday shipments. I assume will do incredibly well this holiday season. Amazon reported a surprise profit in 3Q15, but the way Jeff Bezos likes to spend money investing in his company suggests he will increase customer loyalty. I love Amazon. I don't invest in Amazon; never have, no plans to, but as a company I love it on so many levels.

Notes For The Granddaughters

I always enjoy following "the dots." Today, while trying to sort out Euripides (The Wooden Horse, Keld Zeruneith, c. 2007, p. 478) I learn (again?) about Medea, in Greek mythology, a sorceress, who was the granddaughter of the sun god Helios, and later the wife to the hero Jason, with whom she had two children. Reading about Medea brings one to the goddess Hecate. That brings me full circle to Edmund Wilson's Memoirs of Hecate County. I say "full circle" because I have read it twice, and have forgotten most of it. It looks like I've found the book of fiction that I need to be re-reading now. There is a great review of Memoirs of Hecate County over at The New York Times (January 3, 1960).