Wednesday, May 11, 2016

Two Articles In WSJ On Salman's Plans For Saudi Transformation -- May 11, 2016

Probably one of the best summaries regarding Saudi Arabia was posted here.

Today there were two articles -- one a news story of sorts and the other an op-ed -- in the WSJ regarding Saudi Arabia.

First, the "news article of sorts": Saudi Aramco signals rise in oil output.
Saudi Arabia’s state-owned oil company is likely to increase its production to meet rising demand this year, its chief executive said, as the company begins an expansion that includes a partial IPO and new refining capabilities.
“We’re seeing a global increase in demand,” Amin Nasser, the chief executive of Saudi Arabian Oil Co., known as Saudi Aramco, said at a news briefing Tuesday at the company’s headquarters. “We are meeting that call on us.”
Saudi Arabia, the world’s largest exporter of crude oil, is already pumping at near-record levels of about 10.2 million barrels a day. That output was part of an overall Saudi strategy for dealing with oil prices that collapsed more than 70% from June 2014 to January 2016: Pump flat out and compete with other countries for crude buyers.
Note the "near-record levels of about 10.2 million bopd." That "near-record" number never seems to change (see first link above).

Mr. Nasser’s comments suggest the kingdom’s oil company isn’t changing course. Saudi Arabia’s output tends to increase in the summer to deal with rising air-conditioner use when temperatures in the kingdom reach scorching levels, but Mr. Nasser said Aramco would pump more to meet demand elsewhere, particularly in the U.S. and India.
Then note this:
Mr. Nasser declined to give an average figure for crude production this year but said the new output would come mostly from expansions of current fields.
Jim Krane, a fellow at Rice University’s Baker Institute where he studies Saudi energy policy, said the kingdom has no choice but to increase production if it wants to protect its share of crude markets and increase its refining capacity. He said the Saudis were also considering the possibility of oil demand falling in the future.
“If the Saudis want to avoid being stuck with most of their reserves stranded underground, the signs now say they better sell it off sooner rather than later,” Mr. Krane said.
Aramco plans to keep its maximum sustainable output capacity of 12 million barrels a day for now, but could expand it in the future if needed, he said. Saudi Arabia’s capacity is a closely watched figure because it shows how much the kingdom could help if there were a sudden shortage of oil supplies from elsewhere in the world.
Saudi Arabia is also looking to increase its production of natural gas, with plans to nearly double its output in 10 years. Earlier this year, Mr. Nasser had said Aramco wanted to raise its gas output to 23 billion standard cubic feet a day from about 12 billion cubic feet.
Saudi Aramco also plans to increase its refining capacity to eight million to 10 million barrels a day from its current capacity of about 5.4 million barrels a day.
The expansion is part of Aramco’s plan to be the world’s leading energy-chemicals company by 2020 and represents the future of its fossil-fuels business.
 We can re-visit these numbers ten years from now to see how Saudi has done.

The world's top ten energy-chemicals companies are listed here (by revenue, some numbers rounded):
  • BASF, Germany, $90 billion
  • Dow Chemical, US, $60 billion
  • Bayer, Germany, $50 billion
  • Saudi Basic Industries, Saudi Arabie, $50 billion
  • LyondellBasell Industries, US, $40 billion
  • E.I.Du Pont, US, $35 billion
  • Linde, Germany, $20 billion
  • Henkel, Germany, $20 billion
  • Air Liquide, France, $20 billion
  • PPG Industries, US, $15 billion
Now, the second article, the op-ed: the 30-year-old Saudi revolutionary. This is an extremely disappointing op-ed. It is essentially a short history and a shorter overview of current events in Saudi Arabia. It was written by a "Ms House, a former publisher of The Wall Street Journal who is the author of On Saudi Arabia: Its People, Past, Religion, Fault Lines -- and Future. To be so knowledgeable about Saudi Arabia to have a book published on the subject, one would expect a comment or two from the writer with her views about the chances Mr Salman has of reaching any of his goals.

But all we get, as noted, is a brief history lesson and an even shorter overview of current events.

I hope Mr Salman has read the history of the Wars of the Roses (British history), called the Cousins' Wars at the time. Dan Jones would be a great place to start. The Wars of the Roses involved three or four brothers/cousins with royal blood and three very powerful families. Henry V chose his son Henry VI to be the next king, but that did not work out so well. In contrast, Salman, they say, is one of 7,000 princes, although clearly first among equals.

Salman needs to be most concerned about the adherents and leaders of the "harsh and intolerant Wahhabi religious philosophy." If they played any role in 9/11, taking out Salman should be child's play in comparison.

The individual who may be most vengeful once the old man dies is the 55-year-old deposed heir in waiting, Mohammed bin Nayef. It's hard for me to believe that he will simply fade away.

Salman will need support from the third influential group: princes, businessmen, and technocrats to keep the others at bay. He needs to show results in twelve months or he could be toast if there is anything to be learned from the Wars of the Roses, the Bolshevik revolution, or even earlier Saud revolutions. By the way, google "Saud revolutions" and note what shows up.

He Should Have Bet On Cattle Futures -- May 11, 2016

Wow, he should have bet on cattle futures. Chelsea's husband lost 90% of his hedge fund's value:
The son-in-law of presumptive Democratic presidential nominee Hillary Clinton is reportedly closing a hedge fund he started that bet on a Greek economic revival but lost around 90% of its value.
Two sources told the New York Times that Eaglevale Partners, the hedge fund firm founded by Marc Mezvinsky, husband to Clinton’s daughter Chelsea, will be closing the Eaglevale Hellenic Opportunity fund. The fund had raised around $25 million to buy stocks from Greek banks and government debt.
The principle behind the fund was that the Greek economy, after going through the crises that have made big news the past few years, would see a revival that could be a boon for investors. The Times notes, though, that while some investors scored big gains, others suffered the fate of Mezbinsky’s fund, depending on the timing of the bets.
Most of the loss, I presume, was "other people's money," something his family knows a lot about.

By the way, guess where Marc learned his financial skills: after Stanford University he worked eight years for ... drum roll ... Goldman Sachs. We should have known.

Another famous employee of Goldman Sachs (actually the CEO at one time), Jon Corzine, also lost a lot of "other people's money." From wiki: [Corzine's] company filed for bankruptcy protection in October 2011 after losing $1.6 billion of customer money and Corzine resigned on November 4, 2011.


The ObamaEconomy: It Takes A Village To Raise A Child
The Problem: They Never Leave Home

Bloomberg talks about the new American home -- multi-generational living: adult children living at home, as a form of downsizing.

I love these euphemisms.

The Music Page

The 60's were a huge decade for music. I am watching and re-watching two documentaries, one on Bob Dylan and one on the Bee Gees; and listening over and over to the Beatles "1" album -- their 27 number 1 hits.

It is "instructive" to follow these three (the Beatles, the Bee Gees, and Bob Dylan) simultaneously through the 60's. Add Brian Wilson and I think one could argue one has the four most important / influential song-writers of the decade. I don't know much about Brian Wilson, so I can't say much about him. But my thoughts regarding the other three:

Elevator, 30-second sound bites:
  • Bob Dylan: not understood at the time; probably the most important of the three.
  • The Beatles: polished; great production; as much instrumentalists as singers, song-writers.
  • Bee Gees: vocalists and song-writers; as such, better than Dylan or the Beatles.
  • Of the three, Bob Dylan was probably the one genius. 
  • The best voices, best harmonizers, most distinctive voices: the Bee Gees.
  • It's most interesting to compare the first #1 songs of each of the three (the Beatles, the Bee Gees, Bob Dylan).

Atmospheric CO2 Surges To 408 In April, 2016; North American Winter Seems To Never End -- May 11, 2016

For the archives, atmospheric CO2 (CO2 Now), a dynamic link:

An Opportunity To See Struggling Polar Bears

Norwegian explorer Roald Amundsen took three years in the early 1900s to complete the first successful navigation of the Northwest Passage, the ice-choked arctic sea route connecting the Pacific and Atlantic. Only in 1944, did a ship make it through in a single year.
This summer, the Crystal Serenity—a 820-foot-long, 13-deck cruise ship with a casino, a movie theater, six restaurants and a driving range—is planning to steam through in less than a month.
Operated by Los Angeles-based Crystal Cruises LLC, the trip sold out in three weeks, with some 1,000 would-be passengers paying about $22,000 each. That price doesn’t include such extras as a $4,000 helicopter ride along the way, or a three-day, $6,000 excursion exploring the Eqip Sermia glacier in Greenland.
About 200 ships have traversed the 900-mile route since Amundsen’s voyage between 1903 and 1906. But most of those have gone through just in the last decade as ocean warming diminishes ice cover further, and for longer, during the summer months. Last August, the surface area of ice extending across the Arctic Circle was 30% less than 25 years ago, according to the Colorado-based National Snow and Ice Data Center.
The DNA Page

With regard to DNA, the other day I wrote:
My favorite of the four [books I'm currently reading]: Sam Kean, The Violinist's Thumb, [a pop lit book on DNA]. He might be a bit flippant but overall it's really good. Before reading it, I would recommend reading a wiki entry on DNA, then James Watson's book on DNA; and then this book. The title is obviously a take-off on Stephen Jay Gould's The Panda's Thumb.
For folks who still have an open mind about global warming / climate change / extreme weather, I highly recommend chapter 10 in Sam Kean's book. It is an excellent chapter on how close Homo sapiens have come extinction over the millenia.

Kean writes about the Toba supereruption in a most fascinating way.

Newfield, Whiting To Report Nice Bakken Wells Thursday; One New Permit; Four (4) More Bakken DUCs -- May 11, 2016

Wells coming off confidential list Thursday:
  • 26363, SI/NC, QEP, MHA 8-28-29H-148-92, Heart Butte, no production data,
  • 30971, SI/NC, BR, Gudmunson 3-1-26MBH, Elidah, no production data,
  • 31023, 1,647, Whiting, P Berger 156-100-14-7-19-13H, East Fork, t11/15; cum 101K 3/16;
  • 31025, 1,832, Whiting, P Berger 156-100-14-7-19-14H, East Fork, t11/15; cum 84K 3/16;
  • 31061, SI/NC, MRO, Juantia USA 13-35H, Antelope, no production data,
  • 31876, drl, CLR, Corsican Federal 3-15H, Sanish, no production data,
  • 32040, 2,347, Newfield, Skaar Federal 153-96-30-1H, Sand Creek, t2/16; cum 42K after 46 days;
One (1) new permit --
  • Operator: XTO
  • Field: Heart Butte (Dunn)
  • Comments:
Active rigs:

Active Rigs2685192185209


32040, see below, Newfield, Skaar Federal 153-96-30-1H, Sand Creek:

DateOil RunsMCF Sold

31023, see above, Whiting, P Berger 156-100-14-7-19-13H, East Fork:

DateOil RunsMCF Sold

31025, see above, Whiting, P Berger 156-100-14-7-19-14H, East Fork:

DateOil RunsMCF Sold

Hope Springs Eternal -- May 11, 2016

One could think of any number of 30-second sound bites for this graphic, but suggesting that the takeaway from this graphic, that commercial crude oil stocks appear to have peaked and begun the normal seasonal drawdown, suggests an exuberant optimism that is only exceeded by my own inappropriate enthusiasm for the Bakken.

And with that, I'm off the net for awhile -- biking, perhaps. After a few minutes of listening to Rush.


Dynamic link, latest forecast, May 10, 2016:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.2 percent on May 10, up from 1.7 percent on May 4.
Since the previous GDPNow update on May 4, the forecast for second-quarter real consumer spending growth increased from 2.6 percent to 3.0 percent and the forecast for second-quarter real fixed investment growth increased from 0.4 percent to 2.2 percent.
Going From Bad To Worse In Nigeria

May 11, 2016: breaking news now -- Nigeria lifts controversial gas subsidy, nearly doubling the price of fuel.

John Kemp Never Fails To Provide Graphics Worth A Thousand Words -- May 11, 2016; Pay Attention To Saudi Arabia; China, US More Of The Same; India Could Surge

The takeaways from this graphic are amazing.

The green "wow" arrows: Asia, sub-continent Asia, and Saudi Arabia. The big "wow" is Saudi Arabia. This is oil consumption, not oil production.

The red "oh-oh" arrows: the EU.

One could argue that energy usage reflects economic growth.

If so, it looks like France has become a great place to lay out in the sun sipping margaritas, slurping lattes at sidewalk cafes, or visiting museums for those who are wary of the solar energy/melanoma connection.  But look at Italy: not only did it drop down the list, but look at how big that drop was: from 1.9 to 1.2 million bopd (almost a 40% drop from 1.9). I doubt this was due to Italy going to wind and solar.

To some extent, the decrease in Europe reflects increased solar and wind energy, but the numbers are such, and the trends in the US, China, India, Indonesia, and Saudi Arabia are such that it appears that oil demand is more about economic growth and less about where one's energy comes from.

India's consumption today is where China's consumption was 20 years ago. Think about that. India is the most populous country on earth and middle class is growing.

Saudi Arabia's growth has been incredible; this puts Salman's strategic plan in perspective; don't bet against him is the takeaway.
Saudi jumped from #14 to #5 on the list, where Germany is today.
Most interesting projection:
Saudi Arabia's growth far exceeded that of Iran. Iran has faced a number of headwinds during the past decade, but that could change over the next twenty years as Iran becomes the leader in the Mideast.
Salman recognizes that, and thus his economic plan. Salman wants to construct petrochemical plants and refineries to exported finished hydrocarbon products to the rest of the world. He has said that he wants Saudi Arabia to be the energy "manufacturer" for Europe. Saudi Arabia sits astride three continents: Africa, Europe, and Asia. At 30 years of age, he's young, aggressive, and has the ego of Steve Jobs, it is said. In addition, it appears that, like it or not, Europe will be a Muslim continent thirty years from now. Opportunities for investors are endless.
The next set of data points we need: oil demand per capita. That's where Saudi Arabia will blow away the others (numbers rounded, and otherwise manipulated), number of people / bbl of oil / day:
  • Saudi Arabia: 30 million people / 3 million bopd = 10  
  • US: 350 million people / 20 million bopd = 20 
  • Iran: 80 million people / 2 million bopd = 40
  • France: 70 million people / 1.5 million bopd = 45 
  • China: 1.5 billion people / 15 million bopd = 100 
  • India: 1.5 billion people / 5 million bopd = 300

Cool Story On The Permian -- May 11, 2016

Over at Bloomberg: How Oil’s Most Boring CEO Found Himself Atop 10 Billion Barrels.
In the fall of 2011, Tom Spalding, a slim geologist with salt-and-pepper hair, stood before the board of directors of Pioneer Natural Resources, an oil and gas exploration company, to make a presentation unlike any he’d made in his 14 years there.

Using two flatscreens in Pioneer’s suburban Dallas boardroom, Spalding, the company’s vice president for geoscience, walked directors through the results of weeks of research. He and his team had explored for undiscovered oil in horizontal shales deep within the Permian Basin, a vast rock formation beneath West Texas. They had analyzed seismic data and core samples of 7,000 company wells as well as information on decades-old wells archived at the University of Texas. “When we first did it, we couldn’t believe it,” Spalding recalls. “We had to go back to check our measurements.”

He showed the board a schematic of 13 slabs stacked one atop another like something out of a Frank Gehry sketchbook. Almost every tier was splashed in bright red, signifying the presence of crude. Crucially, there was scant evidence of the saltwater zones that often dot such diagrams and can spell doom. It was all oil.

Pioneer’s chief executive officer, Scott Sheffield, watched with anticipation. He’d been drilling vertical wells in the Permian since 1979 with only modest success. After hearing his geologist, he ordered the drilling of two horizontal test wells.

Those wells cost four times what a vertical did, but wound up spewing seven times the crude. Sheffield called for more horizontals. He had the money to invest because he’d sold off seemingly sexier oil projects and avoided borrowing while other independent drillers were wagering yet again that oil prices would forever climb.

By 2015, Sheffield had stopped drilling new vertical wells altogether and diverted almost all of Pioneer’s effort and money into the Permian’s shale. All of which helps explain how Pioneer—a $26 billion company with less than a 10th of ExxonMobil’s market value, almost no oil fields beyond Texas, and the same boring CEO for more than 30 years—is now showing the world how to thrive amid the worst oil bust since the 1980s.
Much more at the link.

I track the Permian at various links:

France May Ban Imported "Fracked" Natural Gas -- May 11, 2016; Global Energy Consumption To Grow By Almost 50% Over Next Three Decades

Later, 12:24 p.m. Central Time: France may ban "fracked" natural gas but they can always go back to coal. Meanwhile others might want to take a look at this article in Newsweek suggesting that, "hey, fracking ain't that bad." For the archives.

I was surprised to see this in Newsweek. My hunch is that Newsweek is privy to Hillary Clinton's strategy sessions. Hillary knows that fracking is necessary. Hillary will use the mainstream media to support her position. This is one example of the Hillary-liberal industrial complex in shaping American opinion.

Later, 8:57 a.m. Central Time: wow, this is why I love to blog. Check the time the original post was uploaded. Yup, maybe a minute ago. In the original post I wrote: the only markets that will move the energy needle twenty years from now will be China and India.

From EIA today (link here):
World energy consumption is projected to increase by 48% over the next three decades, led by strong increases in the developing world—especially in Asia, according to International Energy Outlook 2016 (IEO2016), released today by the U.S. Energy Information Administration (EIA).

Rising incomes in China, India, and other emerging Asia economies are a key driver of the global energy outlook. “Developing Asia accounts for more than half of the projected increase in global energy use through 2040." said EIA Administrator Adam Sieminski. "This increase will have a profound effect on the development of world energy markets." Clean energy technologies play an important role in the outlook, with renewables expected to be the fastest-growing energy source.
Comment: he's being politically correct. Intermittent, unreliable energy will be a player, but it will remain intermittent, unreliable, wasteful, and expensive. Whatever. Continuing:
Some key findings:

World energy use increases from 549 quadrillion British thermal units (Btu) in 2010 to 815 quadrillion Btu in 2040. The increase mainly occurs in the developing world, driven by long-term growth in economies and populations. More than half of the total world increase in energy consumption is attributed to developing Asia.
By 2040, France will be begging for any source of energy.

Note: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here or what you think you may have read here, but having said that, I am making sure that Sophia's equity portfolio includes a bunch of energy-related companies. In 30 years, she will be about 30 years older, and looking to buy a McMansion on the French Riviera.

It's amazing. A lot of folks think three decades is a long way off, but it's very possible I will still be blogging 30 years from now. If all goes well, I will be a) less than a 100 years old; and, b) in business with Sophia. I think an upscale ice cream parlor catering to the jet setters at Cannes Film Festival is a great goal.

Dinner last night in our little apartment. Her favorite vegetable, and I'm not making this up, appears to be broccoli. Second: peas. Her favorite fruit: strawberries. Second: apples. The strawberry martini was her idea; we just provided the ingredients. I have no idea what that is all about but it's our impression she copies everything.

[Her martini recipe: a chilled glass; two parts tap water; one part bottled water; 1 1/2 large strawberries, sliced; stirred, not shaken.]

Original Post
This is a "cute" story but at the end of the day: France now says that it may banned "franked" natural gas from the US. It's a "cute" story but at the end of the day, the only markets that will move the energy needle twenty years from now will be China and India.

I have a whole page dedicated to Europe's energy story. Bottom line: Europe will be the only continent that will depend on imported energy.

This sort of reminds me of folks who boycott genetically-modified vegetables, fruit, and meat.

Later, when I get caught up, I might talk about why carrots are orange. LOL.

Wednesday, May 11, 2016; Office Depot - Staples Keystoned By Judge; One Of The Two Now On Glide Path To Bankruptcy


May 12, 2016: the WSJ sees through the keystoning of the Staple-Office Depot merger. LOL. It was to help the big firms, like Amazon, Walmart. This is the "news" story.
Eventually, the judge sided with FTC lawyers who argued that combining the two biggest U.S. office suppliers could hurt large businesses. The companies had counted on the deal to help them cut costs in the face of shrinking demand for office supplies and competition from online players.
U.S. District Judge Emmet G. Sullivan has a reputation for thinking out loud in court, and many of his early thoughts from the bench didn't sound promising for the FTC. He openly questioned key parts of the government’s case, and an FTC lawyer at times stumbled in answering his questions.
Also this: Staples is in deep doo-doo
Staples Inc. executives gambled they could navigate a tough retail market by gobbling up their closest rival. Now that the bet has backfired, the office-supply chain must shrink to survive.
Shares of Staples and Office Depot Inc. tumbled Wednesday after a federal judge ruled against a combination that would have created a company with $36 billion in annual revenue and 3,600 stores. The judge sided with Federal Trade Commission lawyers who argued that combining the two biggest U.S. office suppliers could hurt large businesses.
The companies now must fend for themselves in a market that has become even less forgiving than it was 15 months ago, when the chains originally proposed joining forces, analysts say. Both companies had counted on the deal to help them slash as much as $1 billion in costs to combat shrinking demand for office supplies and fresh competition from online players like Inc.

Now the op-ed: protecting big business
Stuck in a declining market, Staples and Office Depot have been reporting reduced sales. Government lawyers might have noticed that people are using less paper and ink these days. Then there are those little competitors called Amazon, Costco and Wal-Mart. Such competition is why the government couldn’t argue with a straight face that a merged company would force higher prices on individual consumers or small businesses. So the government claimed that the victims of the proposed merger would be huge corporations that buy in bulk.
Amazon’s unit selling to this market is already a billion-dollar business, but the feds asked the court to believe there would be little competition for large corporate accounts. As if Amazon and others couldn’t react to new opportunities if the combined firm started mistreating corporate giants.
The FTC argument was so weak in court that the companies rested their case without offering a defense. Yet federal Judge Emmet Sullivan decided to approve the government’s request for a preliminary injunction to stop the merger, which has killed the deal and sent the stock prices of both companies plunging.
Original Post
Active rigs:

Active Rigs2885192185209

RBN Energy: Whatever Happened to Condensates after Lifting of the Crude Export Ban?

CNBC asks an interesting question, providing a great discussion on "type" of oil -- I don't care for the phrase "quality of oil." For the umpteenth time, all I will say is that the oil companies had this figured out twenty years ago and then President Obama came along and killed the Keystone. Kompletely unexpected. The timing was such it probably had no impact on the Bakken boom but had the Keystone come on-line ten years earlier, it's very possible the Bakken boom would not have happened.

With regard to US oil independence, two comments:
  • the question is moot; and, 
  • the question changed slightly years ago, from American (US) independence to North American independence 
Job watch: last week the Labor Department reported one of the worst job reports ever, and in the process, catching "everyone" off balance. I said at the time folks would be working "overtime" to massage the numbers and find the right spin to explain this. I was surprised that nothing was reported. It turns out it just took longer than expected to find the spin. But today "they" have explained it. LOL. Yahoo!Finance is reporting that the number of minimum wage workers has actually decreased. Well, that's good. We got that figured out. Last week's horrendous jobs report? Never mind. [Yes, I know this article on "minimum wage" had nothing to do with the jobs report. Just filling time until the day starts.]

Loose Ends

Bloomberg reports that "Big Oil" abandons $2.5 billion in US Arctic drilling rights. Shell, COP, others have quietly "relinquished" claims. The Arctic is estimated to hold 27 billion bbls of oil (less than the Bakken) and 132 trillion cubic feet of natural gas. From an earlier post, to put these things into perspective:
The size of the Utica shale play’s technically recoverable resources is larger than previously thought, a recent study by West Virginia University (WVU) has found. WVU found that the Utica play contains technically recoverable resources of 782 trillion cubic feet (Tcf) of natural gas and around 1.9 billion barrels of oil. That’s higher than the U.S. Geological Survey’s (USGS) 2012 estimate of technically recoverable resources at 38 Tcf of gas and 940 million barrels of oil.
What a mess. WSJ reports that ETE wants to restructure or escape a $33 billion agreement to acquire WMB.

WSJ also reports that Macy's slashes forecasts as sales slump accelerates. Like many retailers, the Cincinnati-based department-store chain has been struggling with declining sales, hurt by dwindling store traffic, competition from discount retailers and cautious consumer spending. The company said earlier this year that challenges would persist during the first quarter, but the sales decline was much steeper than analysts expected.

No link but reported everywhere: Staples-Office Depot merger scrapped after judge says "no." Apparently, despite the fact that Amazon and Walmart are dominant, the judge was concerned that SOD would be a monopoly. Wow.

WSJ also has a story on "new" jobs being created in the Obama economy. A lot of data but doesn't add a whole lot to the discussion. Except discussion.