Public Transporation Ridership Plummeting In Southern California Despite Billions Being Spent -- January 27, 2016

The issue of decreased ridership on public transportation in Arizona despite billions being spent has been a "frequent" topic over at The Coyote Blog which I link at the sidebar at the right as one of my favorite blogs.  It was interesting, to me, then that this article appeared in the Los Angeles Time today: billions spent, but fewer people are using public transportation in Southern California. Why does this not surprise me? The story is here:

For almost a decade, transit ridership has declined across Southern California despite enormous and costly efforts by top transportation officials to entice people out of their cars and onto buses and trains.

The Los Angeles County Metropolitan Transportation Authority, the region's largest carrier, lost more than 10% of its boardings from 2006 to 2015, a decline that appears to be accelerating.

Most other agencies fare no better. In Orange County, bus ridership plummeted 30% in the last seven years, while some smaller bus operators across the region have experienced declines approaching 25%. In the last two years alone, a Metro study found that 16 transit providers in Los Angeles County saw average quarterly declines of 4% to 5%.

Why does this not surprise me? The same phenomenon has apparently been noted in Arizona. See update at The Coyote Blog (at my post) or click here for direct link to The Coyote Blog post which I recommend.

And California is looking at spending another $100 billion on a bullet train.  What was Einstein's definition of insanity?

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Facebook Earnings

Facebook shares shot up 12% after the giant social network said it earned 79 cents a share on revenue of $5.84 billion in the fourth quarter, easily topping Wall Street estimates.Facebook topped $5 billion in quarterly revenue for the first time, up 52% from a year ago. It was also the first quarter in which Facebook posted more than $1 billion in quarterly net income.

Facebook was expected to report earnings of 68 cents a share, excluding certain expenses, up from 54 cents a year ago, according to S&P Capital IQ. Analysts expected revenue of $5.37 billion. Facebook reported earnings after the close of the market.

Disclaimer: this is not an investment site. Do not make any investment, financial, or travel decisions based on what you read here or what you think you may have read here. If this is important to you, go to the source.

Ten (10) New Permits -- January 27, 2016; Cobra Oil & Gas, A New Operator In North Dakota

Three (3) producing wells completed:

• 29439, 2 (no typo), Murex, Sherry Ann 13-24H, Three Forks, no frac data yet; 18 days drilling; gas shows poor to fair throughout, Temple, t111/5; cum --
• 29491, 1,170, XTO, Rita 44X-34C, Tobacco Garden, t12/15; cum -- 
• 30787, 1,592, XTO, Rita 44X-34CXD, Tobacco Garden, t12/15; cum --

Operator transfer: about 42 wells were transferred from Whiting to Cobra Oil & Gas; all were in the North Elkhorn Ranch Unit; the oldest well file was #08422; the most recent was 16506, except for one outlier, #25539. When I go to "Well Search" at the NDIC website, all but one of the transferred wells was already at the NDIC Cobra Oil well site. There was just one Cobra well at the NDIC web site that I did not see among the 42 transferred wells; #8422 was a Whiting well until at least 11/10/2015; this suggests that Cobra Oil is a new operator in North Dakota. Cobra Oil & Gas website here; their webpage says they have producing properties in AL, AR, KS, LA, NM, OK, and TX, but no mention of ND. It appears Cobra is a new operator in North Dakota. Interestingly enough, Cobra Oil & Gas was mentioned in a December 9, 2015, NDIC briefing;

• 08422, 254, Cobra Oil/Whiting, North Elkhorn Ranch Unit 2202, producing about 450 bbls/month, t6/81; cum 695K 11/15;
• 25539, 330, Cobra Oil/Whiting, NERU 0904HERH, North Elkhorn Ranch, producing about 2300 bbls/month, t1/14; cum 79K 11/15;

Ten (10) new permits --

• Operators: QEP (6), EOG (4)
• Fields: Spotted Horn (McKenzie), Clarks Creek (McKenzie)
• Comments:

Wells coming off confidential list Thursday:

• 22503, SI/NC, HRC, Fort Berthold 148-95-25B-36-2H, no production data,
• 24115, 2,277, Whiting, Skunk Creek 4-18-17-1H, Heart Butte, spud July 28; cease drilling August 7; 33 stages, 7.7 million lbs, t11/15; cum 22K 11/15;
• 29455, 439, Triangle USA, Little Muddy 12TFH, 31 stages, 4 million lbs; Williston, t8/15; cum 62K 11/15;
• 30512, SI/NC, MRO, Gaynor 34-33H, Reunion Bay,
• 30749, SI/NC, XTO, Amundson 44X-22HXE, Siverston,
• 31402, 1,824, BR, CCU Burner 31-26 TFH, Corral Creek, 27 stages, 7.3 million lbs, t12/15; cum --

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31402, see above , BR, CCU Burner 31-26 TFH, Corral Creek:

Date	Oil Runs	MCF Sold
11-2015	515	0

29455, see above, Triangle USA, Little Muddy 12TFH, Williston:

Date	Oil Runs	MCF Sold
11-2015	11938	10562
10-2015	18436	15573
9-2015	15655	10424
8-2015	15562	8886
7-2015	343	362

24115, see above, Whiting, Skunk Creek 4-18-17-1H, Heart Butte:

Date	Oil Runs	MCF Sold
11-2015	21270	0

Fast And Furious -- January 27, 2016; US Crude Oil Stocks At Highest Inventory Level For Month Of December Since The Great Depression

Updates

January 31, 2016: someone over at The New York Times must be reading this blog. LOL. 

Original Post

Several interesting tweets one following the other, fast and furious:

• Reuters: Russian energy ministry says possible coordination with OPEC was discussed at meeting with Russian oil companies
• Russia's Transneft says Russia and OPEC will discuss possible output cuts -- Tass
• From John Kemp, Remains unclear whether Russia is seriously contemplating coordinated OPEC cuts but speculation intensifying
• From John Kemp: CAVEAT LECTOR: Earlier today Reuters carried this: Russia plans no joint action with OPEC 

Other energy tweets:

• US commercial crude oil inventories +8.4 million bbl for week ended Jan. 22 to 494.9 million bbl,
• From John Kemp: Canada's oil output projected to rise 56% to 6.1m b/d by 2040 under reference price scenario (most from oil sands)
• Oil Companies Holding On: Deloitte Says M&A Deals Down 53%.
• At 484 million bbl (+23% YOY), US crude oil stocks hit highest inventory level for December since 1930
• US oil output in December averaged 9.3 million b/d, down 1.4% YOY but 2nd highest for month since 1972,
• US petroleum demand in December was highest for month in 5 years.

That last bullet was a bit interesting in view of this graph that shows gasoline demand continues to fall, though it now "parallels" last year's decline:

Tell me again why we're adding ethanol to gasoline? Oh, that's right. The first presidential "primary" is held in Iowa.

What peak oil? Did you notice that US crude oil stocks hit highest inventory level for month of December since 1930 -- wasn't that during the Great Depression? 

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In Other News

California's snowpack --- S-N-O-W -- is deepest in five years -- Los Angeles Times. Link here. Kennedy clan is likely booking a flight out to the west coast now to confirm. And to go skiing.

Atlantic City: has been devastated by the quick collapse of its one-time monopoly on East Coast casino gambling and could see its cash flow run dry by April. The ravaged local economy laid bare the city's bloated budget and over dependence on a single industry.
 

MDU Refinery Update -- January 27, 2016; Scroll Down For "The Apple Page"

John Kemp posted this graphic today:

Bloomberg posted this story a couple of days ago: How the Oil Bust Wiped Out One North Dakota Oil Refiner's Profit --

For the first new refinery in the U.S. in seven years, the idea was simple: Buy cheap oil from shale producers, then score a quick profit by selling it right back to them as more expensive diesel needed to power their trucks and drilling rigs.

Now the shale bust is threatening to ruin a renaissance in small refineries, known as teapots, before it even begins. When Dakota Prairie Refining LLC was building its plant in 2014, it could buy some of the cheapest oil in America and sell among the most expensive diesel in America. But the oil bust obliterated its local diesel market, along with the fat premium the fuel used to fetch, as its potential customers shut down operations.

In the fall of 2014, when tiny Dakota Prairie was getting ready to open its processing plant in Dickinson, North Dakota, diesel fuel near the state’s Bakken oil fields sold for $100 a barrel more than the oil produced there. Now it’s selling for just $16 a barrel more.

"The last thing you want to be doing right now is running a refinery that makes a lot of diesel and very little gasoline," said Robert Campbell, head of oil-products research at Energy Aspects Ltd.  It’s a "double whammy," he said, as the diesel market weakens worldwide and demand in their specific local market plunges. Dakota Prairie lacks the pipelines and storage units a larger refiner uses to sell to customers farther away, and it’s not equipped to make vehicle-ready gasoline instead of diesel.

A big "thank you" to Don for sending me the link a couple of days ago.

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The Apple Page

The general consensus, it seems, was that Apple's 4Q15 earnings report was not particularly good -- the company reported record profits for the quarter, but forward guidance was dismal, and sales of iPhones were slowing down, and there seems like nothing new on the horizon.

It took rebates or price slashing to move Apple watches and TV, but record quarterly sales were reported. From Macrumors:

Both the Apple Watch and the Apple TV set new quarterly sales records in 1Q 2016, according to information shared by Tim Cook during today's earnings call. The Apple Watch saw especially strong sales in December as people purchased the device during the holiday season, something that's perhaps not a surprise given the significant discounts offered by some third-party retailers.

While Apple did not offer discounts itself, Best Buy cut prices on the Apple Watch by $100, and Target offered a $100 gift card with the purchase of an Apple Watch. These price drops likely boosted Apple Watch sales by a good amount during the quarter. Apple also expanded Apple Watch availability to more than 48 countries ahead of the holiday season.  

Wednesday Morning Ramblings -- January 27, 2016; ObamaCare Enrollment Projections Plummet; Payouts Surge

Another quarter like this and Anthem will consider joining UnitedHealth in threatening to withdraw from ObamaCare. This is quite incredible. Anthem's profit plummets 64%.

From Zacks:

ANTM is one of the premier healthcare service providers when it comes to providing medical and specialty products.Already sporting one of the top position in the health insurance industry, the company is set to become a titan with the pending acquisition of another player Cigna Corp. Anthem is projected to become one of the top three health insurers. Also, the company is expected to witness significant earnings accretion from the deal.

The company has been working towards enhancing healthcare through the provision of reliable and superior quality services. The aforementioned deal is expected to help it in this regard.

However, adverse effect of the Health Insurance Provider (HIP) fee, increased financial leverage, higher medical costs in the Senior, Local Group and State-Sponsored businesses, lower favorable prior year reserve development and the impact of minimum medical loss ratio requirements are a drag.

"Are a drag"? Tell me about it.

Press release:

.... fourth quarter 2015 net income was $180.9 million, or $0.68 per share. These results included net negative adjustment items of $0.46 per share. Net income in the fourth quarter of 2014 was $506.7 million, or $1.80 per share, which included net negative adjustment items of $0.06 per share. Excluding the items noted in each period, adjusted net income was $1.14 per share in the fourth quarter of 2015, a decrease of 38.7 percent compared with adjusted net income of $1.86 per share in the prior year quarter.

Folks are figuring out how to game the system. Wait as long as possible before signing up for ObamaCare, starting medical treatment about the same time; get your prescriptions for the year, and then drop out of ObamaCare (simply quit paying your premiums). Then repeat next cycle, next open enrollment period. We've talked about this before.

In addition, for any insurance program to work, one must spread the risk across as large a risk pool as possible. CBO yesterday from Forbes:

Yesterday, the nonpartisan Congressional Budget Office released its annual ten-year Budget and Economic Outlook.

The document contains the CBO’s updated estimates for economic growth, employment, and the nation’s fiscal health. The most notable change was to enrollment in Obamacare’s health insurance exchanges. The CBO, bowing to reality, slashed their 2016 estimates of exchange enrollment from 21 million to 13 million.

Furthermore, the CBO implied that it expects exchange enrollment to peak at 16 million: a far cry from the 24 million it predicted last March.

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Blinking

Last night, just before going to bed, I posted a note, asking the question, who blinks first, Russia or Saudi Arabia? This morning, posted at 8:20 a.m. ET, this note from 24/7 Wall Street: if OPEC blinks and cuts production, buy these top oil stocks at once. Well, duh.

Wednesday, January 27, 2016

Active rigs:

	1/27/2016	01/27/2015	01/27/2014	01/27/2013	01/27/2012
Active Rigs	47	154	187	190	204

RBN Energy: Incremental Production in the Gulf of Mexico.

Deepwater and ultra-deepwater crude oil production projects in the Gulf of Mexico are complex and take years to complete, so the several GOM projects on which exploration and production companies made final investment decisions in 2012-14 are only now coming online—just in time, it turns out, for the lowest oil prices in a dozen years.  So there’s this irony: Crude is selling for little more than $30/Bbl, but the new projects coming online in 2016 and beyond are likely to bring GOM production to record highs. Today, we continue our examination of still-rising production in the GOM with a review of more projects increasing the Gulf’s output.

A key aim of this blog series is to point out one of the reasons why—even after a year and a half of falling crude oil prices—U.S. oil production has remained so high and fairly steady. According to U.S. Energy Information Administration (EIA) monthly reports, domestic crude production peaked in April 2015, at 9.7 MMb/d and then fell by 400 Mb/d to 9.3 MMb/d in October (the latest monthly data). The less reliable weekly EIA domestic field production for the week ending January 15, 2016 showed output still averaged 9.2 MMb/d.

As we said in Episode 1, while U.S. production as a whole fell by 3.6% from April to October 2015 - production in the GOM is up by 4.8% to 1.6 MMb/d over the same period; and since oil prices started falling in June 2014 GOM production has increased by nearly 14%. The reasons for the still-widening gap between onshore production declines and GOM production gains are 1) that production from the best GOM wells typically remains high and flat for years (unlike most onshore shale wells, with their high initial production rates and quick falloffs), 2) that E&Ps active in the GOM take a decidedly long-term view of oil prices when considering whether to make a Final Investment Decision (FID) on a new production project, and 3) that (due to project scope and complexity) it typically takes at least several years to take a GOM project from FID to “first oil.”

In Episode 2, we discussed the major GOM projects that two of the most active E&Ps in the Gulf—Shell and Noble Energy—either brought online in 2015 or plan to start up this year (2016). This time we look at the rest of the big GOM projects with production starting in 2016. As we noted last time, these projects (and projects like Shell’s Stones floating production, storage and offloading—or FPSO--project that will start up in 2017-18) will push Gulf production to all-time highs.

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Reporting Today

Anthem, $1.14 vs $1.21 forecast, profit drops 64%; ObamaCare taking its toll;
Boeing, $1.51 vs $1.37 forecast, but guidance lowered; shares fall sharply; makes one wonder about the reported vs forecast; doesn't look like a good day for the market; also here;
Hess Corp, a loss of  $1.40 vs $1.47, LOL; the only bright spot among those reporting early
NSC, $1.20 vs $1.23 forecast, perhaps not going to be a good day;