Friday, February 5, 2016

Week 5: January 31, 2016 -- February 6, 2016

We end the week with a post-boom record low for active rigs: 42
Idle chatter on DUCs, commentary
Vertical wells in the Bakken; a confused story?
February, 2016, NDIC hearing dockets agenda posted
Visualizing US shale oil production: a new data link

Bakken economy
Number of active business registrations in North Dakota leveling off
North Dakota budget shortfall identified

Obama declares war on the US oil and gas industry; favors Iran 
Wal-Mart to pump its own gasoline
Weatherford to cut 6,000 jobs (on top of previous announcements)
Global oil demand growth is slowing going into 2016
Venezuela crude output falls short, forces it to import oil
US gasoline demand -- perhaps some good news
Ethanol: The New York Times must be reading the blog
Petrobras slashes oil reserves to lowest level in 14 years 

COP slashed dividend
MDU reoprts 4Q15 earnings
CLR lost almost $700 million on bet price slump wouldn't last long

Four (4) New Permits; XTO Reports A Huge Well In The Bakken -- February 5, 2016

Active rigs:

Active Rigs42136191182202

Four (4) new permits --
  • Operator: BR
  • Field: Corral Creek
  • Comments:
This is the graphic including the area for the newly proposed 4-well pad:

Ballantyne Oil canceled one permit, a Sagsveen permit in Bottineau County.

BTA renewed three permits, all were Beaver Creek permits in Billings County.
WPX renewed one permit, a Helena Ruth Grant permit in Dunn County.

One producing well was completed:
  • 29861, 2,661, Johnsrud Federal 34X-14A, Bear Den, gas shows up to 7,013 units; t1/16;  cum --
Whiting transferred another Federal well (#16223) in Billings County to White Rock Oil & Gas.

Pontoon -- George Jones Would Have Approved

Pontoon, Little Big Town

Friday, February 5, 2016

From Bloomberg/Rigzone:
Oil tycoon T. Boone Pickens, who made and lost fortunes targeting some of the largest U.S. crude explorers over the past 40 years, has cashed out as the worst crude market downturn in decades drags on.

Pickens has sold all his oil holdings and is waiting for the best moment to get back in, he said Thursday in an interview on “Bloomberg Go.”

Crude prices have slumped 70 percent since June 2014, leading the oil industry to eliminate more than 250,000 jobs and slash over $100 billion in spending in the last year, with more cuts expected this year.

Pickens started reversing course in the third quarter by slimming down his energy holdings and selling several stocks he’d bought just three months earlier.
While T. Boone Pickens cuts ties with oil, GE cuts ties with Connecticut. This is what it might mean for CT:
General Electric’s big move to Boston this summer could mean much more than leaving an empty corporate campus behind.
Residents and small business owners in the tony town of Fairfield, Conn. – home to GE’s global headquarters for more than four decades – are bracing themselves for the collateral damage after the company announced last month it would be moving to Massachusetts and taking 800 jobs, millions in grants and opportunities for expansion with them. 
But that’s not even the half of it.
The trickle-down devastation triggered by GE’s move is predicted to spare no sector. The real estate market is expected to suffer as residents pick up and leave for better job prospects. Small businesses and infrastructure projects also could start to see setbacks in the near future, as the high taxes blamed in part for GE's move remain
“Probably half of the higher-end homes that used to house the GE executives will sit either unsold or foreclosed because no one else living in the area can afford them at their current price,” Christopher Mills, president of C. Mills & Associates, which manages real estate portfolios nationwide, told 
While there is a slight possibility a large company could swoop in and save the city, the odds aren’t in Fairfield’s favor.
“[It’s] not likely to happen because the same tax and legislative hindrances that chased GE out will keep other companies away,” he said. “Those hindrances are what have to be removed to prevent a localized depression.”
GE, which has a market value of nearly $290 billion, made good on threats to leave Connecticut following two of the largest corporate tax hikes in the state’s history in 2011 and 2015.
Massachusetts – often referred to as “Taxachusetts” -- ranks 25th in a 2016 Tax Foundation survey of positive tax climates in the U.S. Connecticut, though, comes in a distant 44th. Connecticut’s corporate income tax rate stands at 7.5 percent but bigger companies have to pay more in corporate tax liability.  
GE likely paid 9 percent due to surcharges on growth income. They’ll pay 8 percent in Massachusetts, Jared Walczak, a policy analyst at the Tax Foundation, told Reuters.
My hunch: a) GE used the corporate tax rate as just one reason to move out; and, b) made the decision out of spite when CT raised corporate taxes even after GE threatened to move if the state raised taxes.

Road Trip -- Intermittent Blogging -- Early February, 2016 -- Grapevine, TX, To The Bakken

Three hours from Williston. The FedEx guys in the Belfield truck stop are loving the weather. They are aware that Monday could be a harsh weather day.

8:00 a.m. Central Time, Daily Addiction, Williston: the coffee shop on Main Street is busy -- not nearly as busy as it was during the boom when the line stretched from the counter to the front door and folks stood in line for 15 minutes or longer before being served. I'm glad to see it is surviving if not thriving.  

Friday, February 5, 2016

I chronicle my first day back in the Bakken at this post.

5:44 p.m. Central Time, Williston, ND: I'll post some stand-alone posts on Williston later, but for now, just a quick note: I got to Williston fine, arriving about 2:00 p.m. earlier today. I immediately went to Dad's apartment, picked him up, to pick up some groceries, check his lottery tickets, visit Books on Broadway, check out the new bypass north and west of Williston, and now dinner at Fuddruckers. My first impression: Williston is 1,000% better than I expected; and, if the price of oil comes back, maybe by 2017, it will be 2,000% better.

11:43 a.m. Central Time, Belfield, ND: beautiful, beautiful day; seems like summer in North Dakota, or at least an early spring; what little snow there is here, it is melting; perfect day for driving. Stayed overnight in Bowman, ND. With snow melting in North Dakota in February, with the sun shining brightly, with the roads in great condition, I'm trying to find the "down side" of global warming. If the Maldives "sink" there is plenty of room in North Dakota and Texas for the Malivians.
Three hours from Williston.

Thursday, February 4, 2016

3:52 p.m. Mountain Time, Sturgis, SD: overcast, but otherwise beautiful weather; feels warm; slush and mud; melting snow.

1:09 p.m. Central Time, Winner, SD: bright, sunny, hot, slush; beautiful weather. Lana Del Rey; cruising; biography of Ayn Rand. 

11:00 a.m. Central Time, O'Neill, NE: roads clear; beautiful day for driving; huge amount of snow along roads, especially in towns.

6:20 a.m., Concordia, KS, another excellent McDonald's. Has more than enough outlets for charging mobile devices. A big change from my experience years ago with McDonald's. Roads are fine; some evidence of snow/ice, particularly in town in parking lots.

5:45 a.m., departing Salina, Kansas. 

Wednesday, February 3, 2016

10:05 p.m., motel in Salina, Kansas: plan to leave in the morning. Roads clear to south of York, NE. I-80 with slush which will probably freeze overnight. Black ice. Improve during the day. 
11:02 a.m. McDonald's in Salina, Kansas: the camera shots suggests the roads are in a lot better shape than the descriptions provide(d). However, much depends on the skill of other drivers. It still appears pretty bad in south Nebraska, and it would be impossible to avoid it. I have decided to stay one more night in Salina. Wow, it's a great day. The weather here is beautiful; and, lots of time to read.
8:06 a.m., motel in Salina, Kansas: it looks like the road north to Nebraska state line will be open later today, but Nebraska still looks formidable and it's not going to get above 28 degrees, it appears, and then western South Dakota isn't looking all that good either.  I'll definitely stay put for a several hours, probably stay another night in Salina. 

Tuesday, February 2, 2016

7:27 p.m. Taco Bell across from "motel," Salina, Kansas:  things could not have worked out better. I am snowed in, here in Salina, Kansas. I have enough power on the computer to last an hour or so. Actually, I'm not snowed in. A light snow is falling, but I am told by the state DOTs (Nebraska, Colorado, Iowa, Nebraska, and South Dakota), there is no way I am heading north, east, or west out of Salina tonight.

One of the nice things about 30+ years in the USAF, is billeting is never an issue, as long as there are no critters, alive or dead, in the room. When I trained with the US Marines, they were thrilled to be sleeping in a tent. I couldn't tell if the motel sign said rooms "$29.99 or $39.99 and up" but either way, it's fine with me. The neon red "open" sign was all I wanted to see. It does not appear there is wi-fi in the room. I'm not going to ask.

The gentleman at the front desk speaks enough English to check me in but I don't want to ask about motel amenities. I assume there are none. I told him I hope to spend only one night; he says not to worry: the roads will be open tomorrow. He's from India so he probably knows. I grew up in North Dakota, so I have my doubts. Also, Norwegians are, by nature, never very optimistic.

I walked across the parking lot to see if Taco Bell has wi-fi. I haven't been in a Taco Bell in 30+ years. I know that because the last time I was in a fast food "taco" restaurant was in a "Taco something or other" in Los Angeles back in 1974.

It couldn't have worked out better. I brought eight books with me to read, and if I had not been forced to stop, I probably would not have gotten to them until later this week. So, after some quick blogging, a taco (actually a burrito), I will be back in the room reading.

After completing my order, "Kevin" asked me my name so he could call me when my order was ready. I thought "hey, you" would work since I was  the only one in here. But I'm glad I told him I was "Bruce" because two more people just walked in -- make that four. It's getting busy.

The other nice thing about this unscheduled stop it prepares me for the part of the trip I like the least: going west across half the state of Nebraska and covering the entire state north to south. It will take a full day, even if the roads are clear. I never look forward to Nebraska. The state is fine; it's just a long, long haul.

So, God willing, I will be back on the road in the morning. I won't know until tomorrow because I won't have wi-fi in the room. But the gentleman from India says the roads will be clear by tomorrow. Inshallah. 

Tuesday, February 2, 2016

6:25 p.m.  arrived McDonald's, Salina, Kansas. All roads to north and west are closed due to snow. Can go east but that's the same direction the storm is headed and roads are already closed in eastern Nebraska. No reason to go as far east as Iowa since northwestern Iowa is already snowed in. I'll spend the night in Salinas, see what tomorrow brings. 

Tuesday, February 2, 2016

3:30 p.m. departing McDonald's, Perry, Oklahoma.

2:30 p.m. arrived McDonald's, Perry, Oklahoma. Windy, 50 degrees, feels like 40, I suppose; dry; clear. Jacket weather but kids in short sleeves. Two moms just brought in a dozen boys and girls, probably 2nd through 4th grade. They each got a huge ice-cream cone. And all with big smiles on their faces.

Beautiful drive. I always enjoy the ride through Oklahoma City area. It seems I never have traffic going north, but when I return southbound it's always very busy. Again, no traffic this time. A long time ago and in a far away place, I once had a close friend who had ties to Norman (Oklahoma). Always brings back powerful memories.

I would write about the music I'm listening to, but I doubt anyone cares, so we move on.

But, this is interesting; SNOW. All highways in southern Minnesota are closed (Feb 2, 2016, 2:59 p.m.) due to heavy snow from SuperStorm Kayla; I-80 in Nebraska closed.
Winter Storm Kayla is hammering the Plains, and the impacts have become very serious for hundreds of thousands.
More than 100 miles of Interstate 80 were closed Tuesday in Nebraska due to the nearly impossible driving conditions, the state Department of Transportation reported. The closure spanned from an area west of Kearney at Exit 369 all the way to Exit 257, near Beaver Crossing. There was no timetable for when that freeway would reopen.
According to Google maps, Exit 369 is east of Kearney, and is the exit for Beaver Crossing; exist 272 is the exit for Kearney, according to Google maps. I guess I will have to check this out for myself. Exit 257 is west of Kearney, on Highway 183. 

Tuesday, February 2, 2016

11:50 a.m. departed Marietta McDonalds; this article is a must-read. I will read it at the next stop. Archived. Off the net  now.

11:10 a.m. arrived McDonalds, exit 15, 13 mile marker, I-35, south side of Marietta, OK. Same spot I stopped last trip north; multiple electric outlets; wi-fi friendly. The construction activity at the 13-mile market noted last trip, is a bit farther along, but not much; looks like new roadside rest area; tourist rest area? Several oil rigs in the area. Don tells me blizzard continues in Nebraska; foot of new snow. I probably won't get to Nebraska until tomorrow or sometime overnight; we'll see.

Wow, I thought Texans were friendly. When I came in, it was very, very busy, so I sat down, started working, waiting for line to die down. Quiet now; a young woman from the counter stopped by to see if customers were doing okay. A few minutes later I went up to counter; same woman; I ordered a small Coke. She gave me the cup -- no charge. Okay, I'm blown away. I said I would be back up in a few minutes and order lunch. I'll give her an extra $5 to hold for next customer that needs a meal.

9:50 a.m., departed Grapevine, TX; traffic backed up on Highway 121 out of town; back roads through town got me to Highway 114 west very nicely, past Texas Motor Speedway.

Jobs -- February 5, 2016

When President Obama's mouthpiece, NBC, describes it as a "mixed report," just how bad was it? Really, bad. Really, really bad. And the market is letting us know how bad the jobs report. Remember, this is n expanding economy. Supposedly. This is an economy six years into a recovery. This is an economy with trillions of dollars in stimulus, and by some accounts, an economy facing $19 trillion in debt.

So, what was the "jobs number"? 151,000.

That's bad.

BloombergBusiness spins it, of course, suggesting that the jobs number -- how's this for optimism -- well, at least the numbers suggest it's less likely we will go into recession this year. They're setting the bar pretty low. A few months ago, the talk was that "strong" jobs numbers suggested the economy was likely to expand. Now, the sentiment has changed: "well, the economy might not expand much, but at least we may not go into recession.
Job growth settled into a more sustainable pace in January and the unemployment rate dropped to an almost eight-year low of 4.9 percent, signs of a resilient labor market that’s causing wage growth to stir.
The 151,000 advance in payrolls, while less than forecast, largely reflected payback for a seasonal hiring pickup in the final two months of 2015, Labor Department figures showed Friday. The jobless rate fell to the lowest level since February 2008. Hourly earnings rose more than estimated after climbing in the year to December by the most since July 2009.
Others would argue that with so few jobs and yesterday's report of record number of layoffs that the 4.9% unemployment rate (a slight tick down) simply means fewer people looking for jobs.

The median forecast in a Bloomberg survey called for a 190,000 gain in overall payrolls last month, with estimates ranging from gains of 142,000 to 260,000.

I assume it was the White House that estimated a 260,000 increase. 

New Post-Boom Low For Active Rigs: 42 -- Heading to 35 -- February 5, 2016

Active rigs:

Active Rigs42136191182202

RBN Energy: consequences of a lower crude oil to natural gas price ratio.
Prices for CME/NYMEX West Texas Intermediate (WTI) have been on a rollercoaster this week – falling under $30/Bbl one minute then jumping back over $32/Bbl the next. Yesterday (February 4, 2016) WTI closed down 56 Cents at $31.72/Bbl. CME Henry Hub natural gas futures fell back under $2/MMBtu to close at $1.972 yesterday.
That left the crude-to-gas ratio (WTI divided by Henry Hub) at just over 16 X – a little higher than the 15 X range we’ve been seeing this year.
That is nearly half as much again as the 27X average between 2009 and 2014. The futures market implies that low ratios could continue for years – with December 2024 values implying a ratio of 13.3 X.
The potential consequences of these low ratios are dramatic for the natural gas liquids (NGL) business as well as the competitiveness of U.S. natural gas in international markets.  Today we describe the implications.

President Obama Declares War On US Oil And Gas Industry -- February 5, 2016


February 9, 2016: for the archives -- Tesla stories on Tuesday, prior to earnings announcement, Wednesday:
  • analyst downgrades Tesla
  • all eyes on the $35,000 mass-market Model S: launch will be "late 2018, a year later than expected" -- analyst; 200-mile-plus range 
  • Fortune: what to watch for in earnings report: in 2015, shipped only 208 Model X cars; Tesla says they will hit pace of 235 cars/week as of 1Q16; did Tesla exceed its own massive spending plan of $1.5 billion in 2015; will Tesla maintain its earlier guidance of 90,000 cars (S and X) in 2016; will analysts be happy with the progress of the gigafactory in Nevada; mixed reports coming from the site;
February 9, 2016: API, of course, speaks out strongly against President Obama's "$10-fee" on every bbl of crude oil. That's no surprise. My immediate reaction was the same: this is the beginning of Obama's war on oil, just as his successful war on coal. However, in some respects his plan is absolutely brilliant. Absolutely brilliant. I'm against the proposal on principle alone even if it's a brilliant idea, but it's really quite clever. I will write about it sometime, but I will use the time-date stamp of 9:15 a.m., February 9, 2016, as the time I officially "blogged" that his plan was brilliant. I might even be able to endorse it.

February 8, 2016: from Seeking Alpha:
Shares continue to plunge, now below $150.
Reuters UK reports Elon Musk is using shares as collateral for personal loans.
At what point does Musk get a margin call?
As the market continues to sell off, one of the stocks that has been hit the hardest is Tesla Motors.
On Monday, shares broke $150, just a few days ahead of the company's earnings. A further decline after earnings could be a major problem for CEO Elon Musk and shareholders, one that isn't even related to the sale of electric vehicles.
In August 2015, an article on this site discussed how Elon Musk took out a loan to help buy shares in Tesla's latest secondary offering. 
TSLA sold the stock at $242 a share, and shares have lost about 39% since. With shares plunging by the day, one must wonder at what point Musk could face a margin call for lenders.

Later, 12:23 p.m. Central Time: wow, wow, and wow. Tesla is in deeper trouble than I realized. Don just sent me the Seeking Alpha link and this confirms my thoughts that Elon Musk called President Obama this past week:
  • Last month, we showed that Tesla lags far behind both its own Gigafactory forecasts and its promises to the State of Nevada.
  • Mark Hibben responded that the failed forecasts don't matter because Tesla has overestimated how large the Gigafactory must be, and because Panasonic has expressed confidence in Tesla.
  • Mr. Hibben's arguments have obvious logical flaws. Worse, it appears he badly botched the calculations that he claims prove his point.
  • Even though it's not economical to do so, Tesla has begun assembling its Tesla Energy products at the Gigafactory. Why? Probably to mollify Nevada state officials.
  • The Gigafactory is too small, and Tesla lacks the funds to finish it. It was a dubious idea to begin with. Is the company now looking for a way out?
This is an incredibly important and interesting article. Tesla's shares are getting crushed.

The SeekingAlpha article above has been archived.

A contrarian view, also at Seeking Alpha: contributor opines the smaller Nevada "gigafactory" will still be sufficient to meet Tesla's needs (it certainly will be adequate if sales disappoint).

Other recent article regarding Tesla: Fortune: Here's What's Behind Tesla's Long, Slow Stock Slide. Data points from this article:
  • share prices at two-year low; 50% of their 2014 low
  • longtime cheerleader at Morgan Stanley turned negative
  • Berenberg analyst then slapped a rare sell rating on the stock
  • Model X acceptance appears to be slower than expected
  • last month, the company reveals it had shipped only 208 Model Xs, a car plaged with delays that leftcustomers waiting for years
  • one of the delays due to car's swooping door; subcontractor couldn't make the doors; Tesla scrambled for a new supplier
  • "confusion" on assembly line between Model X and Model S has caused further problems
  • Model S  has been a "resounding success" but has borrowed heavily to get where it is
  • increasing competition from Chevrolet Bolt
  • the "big reveal' in March, 2016, might simply be an "image," not an actual production car
  • low gasoline prices hammering EVs, but Musk says not to worry
  • the Nevada gigafactory is critical for financial success of the Model S; see Seeking Alpha story above
Before the end of 2Q16, we will see Tesla announce another share price offering.
Original Post
Reporting today, as regards earning reports from publicly listed companies: nothing of interest for me.
War On US Oil And Gas Industry

For folks paying attention, this is exactly how is war on coal began: "we won't ban coal, but we will make it too expensive for them to survive."

With questions whether the US oil industry can survive the current price slump, what better time to announce his war on the US oil industry.

John Kemp's response at this link.  Kemp is correct; this is fiction. The bad news is that this now sets a marker ($10/bbl) and that's where the negotiating begins.

Reuters has its story here:
The fee, which would be paid by oil companies and phased in over five years, is likely to fall flat in the Republican-controlled Congress.
In the last year of his presidency, Obama has said the country must stop subsidizing the "dirty" fossil fuels of the past and focus on clean, renewable fuels that do not exacerbate climate change.
"By placing a fee on oil, the President's plan creates a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future," the White House said in a statement. A $10 tax would come at a time of tumbling oil prices.
Oil prices fell last month to below $30 a barrel, the lowest level since 2003, as demand fails to keep pace with a glut of new supply and the world's biggest oil producers resist cutting production.
Unfortunately, Obama's proposal sets a marker in the sand from which negotiations will begin. Already, movers and shakers are "giving in" by suggesting an increase in the federal sales tax on gasoline as an alternative idea.

Who Called President Obama?

It is not surprising that President Obama has openly declared war on the oil and gas industry. The question is why now? One of two things: either Elon Musk called him or John Kerry called him on behalf of the struggling Iranians. Both Elon Musk and the Iranians (and the Saudis and Russia) need to see the destruction of the US oil and gas industry.

The Street: Tesla (TSLA) Stock Plummets, Analysts Warn of Risks to Earnings.
Tesla stock is down 6.49% to $163.95 in early-afternoon trading on Friday after UBS warned of three risks going into the company's earnings release next week.

Tesla's fiscal 2016 outlook will be in focus in its fourth quarter earnings.

For 2016, Tesla will have to contend with historically volatile selling, general and administrative expenses, and research and development costs, according to UBS. These costs will likely continue to accelerate ahead of Tesla's Model 3 launch.

UBS projects that this year's deliveries will be at the low end of guidance, as Model X production appears to be progressing slower than expected, Barron's notes.
Low gas prices and an increasingly crowded electric vehicles market will further pressure Tesla's target of 500,000 shipments by 2020.

Additionally, Tesla continues to face storage demand headwinds such as low energy prices and slow initial adoption from utilities, UBS pointed out.
Good News for The Bakken, Texas

Pennsylvania regulators have stiffened rules on fracking in their state. Anything to cut production in Pennsylvania will help North Dakota and Texas.