Friday, April 29, 2016

Many, Many Story Lines In Today's RBN Energy Post On US LPG Exports From The Gulf Coast -- Friday, April 29, 2016; More Bad News For ObamaCare -- People Have Quit Signing Up; Dropping Out In Large Numbers


May 7, 2016: ObamaCare exchange in Idaho the most recent to look like to be in trouble.
An ObamaCare insurance exchange once viewed as a steady ship in a sea of glitch-plagued websites is now running into problems of its own – adding to a new mess of health industry complications under the Affordable Care Act, including premium hikes, jittery insurers and failing co-ops.
Your Health Idaho (YHI), the Idaho marketplace that was one of the better-run systems when the law went into effect, was late getting thousands of state residents critical tax forms this year. One recent report said the call center also has struggled to answer customer calls, directing them instead to send requests by email -- and the system has taken months to enroll some people after they signed up. 
“We saw this coming years ago. We were promised that by having a state exchange, the customer would have a far superior experience compared to the federal level, and that’s proven to be false,” said Wayne Hoffman, the CEO of the Idaho Freedom Foundation who has opposed the Idaho state exchange from the start. He said they were warned that under the federal exchange, customers might “have to wait months and months for forms to be returned to them, yet, that is exactly the same experience people in Idaho are having today.”
Your Health Idaho, meanwhile, is blaming Washington -- saying the reason for the delay in tax forms was faulty information they received from the federal government.
Later, 8:09 p.m. Central Time: for background to this update, see the original post below (obviously) but also this post from 2015. When I read the original earnings report from Aetna (see below) I thought there was much more to the story that was not being published. I was write. Forbes provides that additional information:
Bertolini praised U.S. Health and Human Services Secretary Sylvia Burwell and the Obama administration for changes they have made within the regulatory framework established under the law. In particular, Burwell’s team curtailed “special enrollment” periods, which allow Americans to sign up for coverage after the traditional and primary enrollment period that runs from November through January of each year.
Insurance executives from Aetna and Anthem to Cigna, Humana, and UnitedHealth complained special enrollment periods made it more difficult to manage costs. Actuaries need to know who is paying the premiums, their health issues, ages and other characteristics to manage premiums and expenses that are paid in claims from so-called risk pools. Allowing additional sign-up periods messes with their risk planning.
Bertolini said Aetna’s losses in the first two and a half years that subsidized coverage has been available on public exchanges have been “well, well below” the costs of buying that membership or building out the markets he mentioned. Thus, he sees a path for long-term success akin to private insurance industry administration of Medicare benefits for seniors under the Advantage program as well as Medicaid managed care.
“We see this as a good investment, hoping that we have an administration and a Congress that will allows us to change the product like we change Medicare every year and we change Medicaid every year,” Bertolini said. “But we haven’t been able to touch this product because of the politics. But if we get to that point, we are in a very good place to make this a sustainable program.”
Original Post
This is the kind of typographical error I used to make when I first started blogging. It's an error made by lack of attention to detail; or complete ignorance. See how long it takes you to spot the glaring error in the "cut and paste" taken from The Street: Real Money:
Inside the United States, [Hess has] pared back fracking operations in both the Bakken, where it currently operates only two wells and in the Utica shale, where it currently operates none.
Whatever. Time to move on.

One know things have really changed in the Bakken when one is relieved that the number of active rigs remains near 30.

Active rigs:

Active Rigs2986189186209

RBN Energy: US LPG export terminals poised to serve the Pacific Basin.
Fueled by soaring domestic production of natural gas liquids (NGLs) like propane and butane, U.S. liquefied petroleum gas (LPG) export volumes the past three years have rocketed to the top, surpassing exports by the old Big Three of LPG: United Arab Emirates, Qatar and Algeria. But that rise in LPG exports may be ending, and the share of exports made from Gulf Coast docks may be in for a decline. More propane and butane will be pulled from the Marcellus and Utica to the docks at Marcus Hook, PA, and demand for propane on the Gulf Coast—from new propane dehydrogenation plants and flexible steam crackers—will be climbing. That suggests that less LPG may need to be exported from the Gulf Coast to keep the market in balance. In today’s blog we continue our look at the soon-to-open Panama Canal expansion with an updated examination of U.S. LPG export terminals along the Gulf Coast.
As we said in Episode 1, the wider, deeper locks being built along the Panama Canal will (finally) be in business within a few weeks, enabling the world’s growing fleet of Very Large Gas Carriers (VLGCs) that move most U.S. LPG exports to take that important short-cut between the Caribbean and the Pacific. (All but the world’s very biggest liquefied natural gas (LNG) vessels will be able to float through the expanded canal as well.) The time saved will be huge; a trip from the Gulf Coast to Asia around the Cape of Good Hope takes more than six weeks, compared with only three weeks-plus via the Panama Canal. And time, of course, is money. Cut the time it takes for a Houston-to-Tokyo round trip in half and (aside from the canal tolls) you’ve halved the LPG freight rates.
And that’s not the only way LPG shipping costs are coming down. According to a recent analysis by Fearnley Securities, average daily VLGC rates are now below $40,000 (in part because of all the new carriers being built—one a week in recent months) and daily rates may fall to $25,500 (at or below the representative break-even price) in 2017. That would of course be good news for those hoping to sell increasing volumes of U.S.-sourced LPG to Asian markets (including the India subcontinent), which use the propane/butane mix primarily for cooking and heating but also as a petrochemical feedstock.
As we discussed in yesterday’s blog, however, when the 275 Mb/d Mariner East 2 pipeline across Pennsylvania comes into service in 2017, it will pull significant volumes of propane/LPG to the Marcus Hook export terminal near Philadelphia, leaving less Marcellus/Utica-sourced propane and butane to be railed out of the region to distribution terminals across the U.S. Volumes at those terminals will be replaced by propane otherwise headed to the Gulf Coast. Also, flexible steam crackers (which we expect to turn to more propane as ethane supplies tighten and ethane prices rise) and new PDH plants will increase domestic (more specifically, Gulf Coast) consumption of propane, thereby leaving less propane available to export from Gulf Coast terminals—especially under RBN Energy’s Cutback Scenario, which is a pricing view similar to the current forward curves for crude oil and gas, and which would result in a lot less propane being produced over the next five years than most of the market had been figuring before the oil price collapse.
The Other Page
Warning: this is not an investment site. Do not make any investment, financial, travel, or relationship decisions based on anything you read here or think you may have read here.

I say that because I'm going to post/link some financial stories. I post them not because I'm invested in them (in fact, I am not directly invested in any of them to the best of my knowledge); I'm posting them because they help put the Bakken in perspective; they have interesting story lines; and/or they simply caught my eye and I couldn't sleep earlier this morning, and I didn't want to read any more of Dorothy Parker right now and the Wall Street Journal has not yet arrived.

UPS says it may owe the Central States Pension Fund almost $4 billion. It's a complicated story (at least for me) but I "love" UPS so I thought I would read the article:
United Parcel Service Inc. warned it may have to take a charge of as much as $3.8 billion related to a potential pension-fund obligation.
The cost would be triggered if the U.S. Treasury Department approves benefit cuts to protect the solvency of the Central States Pension Fund, UPS executives said Thursday. UPS pulled out of the fund in 2007 but agreed to make up any losses its remaining members experienced.
The world’s largest package-delivery company may have to record a charge of $3.2 billion to $3.8 billion if the government approves the benefit cuts, executives said in an earnings conference call. UPS plans to oppose such a move by the Treasury. Even with the charge, earnings this year probably still will fall within the company’s forecast of $5.70 to $5.90 a share.
Call Bernie. Call Hillary. More evidence of income inequality. Pig-to-man pancreas cell transplant will make scientist highest-paid US executive of 2015. Patrick Soon-Shiong will soon be inshiongly rich:
Patrick Soon-Shiong performed the world’s first pig-to-man cell transplant to treat diabetes. He sold two drug companies, making enough to become a billionaire and buy a stake in the Los Angeles Lakers basketball team. Now Soon-Shiong can also add this distinction to his resume: the highest-paid U.S. executive of 2015.
The 63-year-old physician received a $329.7 million pay package last year as chief executive officer of NantKwest Inc., a cancer-research firm that went public last July and has a market value of $715.5 million. That sum vaults him to the No. 1 spot on the Bloomberg Pay Index, a ranking of the top-paid executives at companies that trade on U.S. exchanges.
Most of his pay stems from 19.4 million stock options granted before the initial public offering.
Hess. I am not interested in the discussion about investing per se, but I was curious on The Street's headline: "...based on the Hess strategy." So, what's the Hess strategy?
Two of the U.S. independents reporting this week, Hess and Pioneer Natural Resources, show vastly different approaches, with Pioneer continuing to increase production at all costs and Hess showing restraint on spending until oil markets recover.

Pioneer's CEO Scott Sheffield has been singular in his goals during this bust in oil prices. It's been about maintaining production growth throughout.
Indeed, in his latest quarterly report he broke his company record again, delivering 220,000 barrels of oil equivalent, an increase of 7,000 barrels of oil equivalent (BOE) over the fourth quarter of 2015. But revenues from this gain in production, with oil below $50 a barrel, have not translated to the kind of cash flow that PXD will need to continue to keep beating its own records.
With a projected $1.4 billion in cash flow for 2016, Sheffield will still come in $600 million short of his own guidance for covering capital expenditures for the year. With that kind of cash burn, it'll need a seriously large asset sale, or a much less likely secondary stock or bond capital infusion. That's not a strategy for an oil price that remains below $50 for very long.
Now, look at Hess.
CEO John Hess was quick to begin his quarterly comments by noting a lower-for-longer strategy. This corresponds to the $1.6 billion stock secondary it did in February, shoring up their balance sheet for the long haul.  Inside the United States, it's pared back fracking operations in both the Bakken, where it currently operates only two wells and in the Utica shale, where it currently operates none. It's assigned much of their capex for 2016, lowered 40% from 2015 levels, to offshore projects in the Gulf of Mexico and Guyana. These are growth projects that reflect a long-term investment return on capital that current shale assets onshore cannot deliver. But with revenues missing by $47 million for the quarter and down 36% from 2015, Hess shares were pummeled, dropping below $60 a share.
And, of course, more dismal news regarding ObamaCare. From Investor's Business Daily:
Aetna reported 911,000 ObamaCare exchange members as of March 31, down more than 4% from over 950,000 at the same time a year ago.

The news is somewhat of a surprise after Anthem said it saw a modest increase in customers largely thanks to nonprofit co-ops going out of business in some of its 14 markets like New York and Colorado.

Anthem ObamaCare enrollment rose 8.6% to 975,000, from 898,000 a year ago.

Centene, a Medicaid insurer specialist that’s rapidly expanding its ObamaCare exchange reach with low-premium, high-deductible plans, recently reported a 55% enrollment spike to 683,000. UnitedHealth (UNH) had 795,000 exchange customers at the end of Q1, but has said it will exit all but a “handful” of states in 2017.

Total exchange sign-ups rose 8.5% to 12.7 million, from 11.7 million a year ago, but it’s not yet clear how many people actually paid. Last year, 1.5 million had dropped out by the end of March.

Reports from six states show that ObamaCare enrollment has shrunk about 14% from the number reported in February, but it’s unclear if that trend will hold.

Aetna management expressed optimism that its exchange business will break even in 2016, though it’s still getting a feel for the medical costs of this year’s members, given the relatively large amount of customer churn from year to year.

Overall, Aetna’s ObamaCare-compliant enrollment, including off-exchange customers, fell to 1.2 million from 1.275 million a year ago.

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