Sunday, July 10, 2016

Headline Story Over At WSJ: For Tesla, The Forecast Is Partly Cloudy; We've Seen This Movie Before; Losses Are Horrendous -- July 10, 2016

Link here. It looks like we've seen this movie before.
Mr. Musk said that bringing electric cars, solar panels and battery storage under one corporate roof would produce operational synergies and create “the potential for Tesla to be a $1 trillion market cap company.”
That’s about 32 times Tesla’s current valuation.
Neither company (Tesla nor SolcarCity), though aided considerably by government renewable-energy subsidies, has ever recorded an annual profit.
Last year Tesla lost $889 million—nearly three times as much as in 2014—while SolarCity’s loss doubled to $769 million. Investors may be feeling déjà vu as a shadow has fallen over the solar industry.
In April, the renewable-energy conglomerate SunEdison filed for chapter 11 bankruptcy following an Icarus-like fall. A year ago, former CEO Ahmad Chatila predicted that his company would be worth $350 billion by 2020—about 35 times its market capitalization at the time. Nine months later, the stock price had plunged by 99%, to 21 cents per share.
SunEdison’s stock first began to tumble last July when Mr. Chatila proposed paying $2.2 billion for the rooftop-solar installer Vivint Solar (the deal was scrapped in March), which activist investors lambasted as overpriced. It soon became clear that SunEdison’s growth, enabled by debt and complicated financial engineering, was unsustainable. 
Notwithstanding Mr. Chatila’s sunny forecasts, the company had failed to earn a profit in five years. An internal probe in April faulted a lack of accounting controls and an “overly optimistic culture and its tone at the top.” The Tesla-SolarCity deal is an all-stock exchange, but the SunEdison fiasco is a flashing yellow light.
Much more at the link. Meanwhile, the AP is reporting that MuskMelon has "another secret masterplan."
Tesla Motors CEO Elon Musk, under pressure after a fatal crash involving one of his electric cars, went on Twitter Sunday to say he's working on another "Top Secret Tesla Masterplan." He said he hoped to publish details this week.
The tantalizing message echoes an August 2006 blog post, titled "The Secret Tesla Motors Master Plan (just between you and me)," in which Musk unveiled the cars that became the Tesla Model S four-door family car and the Tesla 3 sports sedan.
About the time we start hearing "secret plans" about anything, it seems it is just a matter of time before the house of cards starts to fall. 

Easier/Cheaper To Buy Than To Build -- Southern Buys Half Of Kinder System In Latest Gas Expansion -- Bloomberg -- July 10, 2016

Also at the WSJ

From Bloomberg. Data points:
  • Southern Natural Gas pipeline, built, owned, operated by KMI
  • 7,600 mile pipeline
  • connects natural gas supply basins in TX, LA, MS, AL, and GOM to markets in southestern US
  • KMI will continue to operate
  • Southern will own half
  • Southern's share valued at almost $1.5 billion
With demand for electricity declining and natural gas taking market share from coal, Atlanta-based Southern was among the first utility owners to seek growth by buying a gas transporter.
Duke Energy Corp. and Dominion Resources Inc. followed suit.
Southern last month received regulatory clearance for its $8 billion takeover of natural-gas distributor AGL Resources Inc.
I use a $1 million / mile to build pipeline from scratch.

7,600 / 2 = 3,800 = $3.8 billion. Southern got it for less than $1.5 billion. 

Denbury Sells Its Remaining Non-Core Williston Basin Acreage -- July 10, 2016

From Seeking Alpha. Data points:
  • Denbury sold its remaining non-core Williston Basin assets for $58 million
  • averaged around 1,350 boepd; 96% oil
  • around $43,000 / flowing bbl
  • well above what Pioneer Natural Resources paid for its Midland Basin acquisition  ($35,000 per flowing barrel; but Midland was only 70% oil)
I don't know how much acreage this amounts to.

The last data point I had for DNR was that DNR sold most of its acreage in the Williston Basin to XOM back in September, 2012, for $1.6 billion. That deal was said to include 196,000 acres in the Bakken; prior to that deal, some said DNR had about 200,000 to 260,000 acres in the Bakken. At about $5,000/acre, $58 million = 12,000 acres, so unless we get the acreage numbers, it's anyone's guess what the actual amount of acreage was. The buyer was not identified.

We'll watch the NDIC daily activity report to see to whom the wells were transferred. 

Update On The Dakota Access Pipeline -- Local Interest -- Dickinson Press - July 10, 2016

From The Dickinson Press. Data points (numbers rounded):
  • farmers are starting to receive "mailbox money" for the pipeline
  • the South Dakota portion of the project is expected to cost $820 million (almost a billion dollars)
  • the South Dakota portion will generate an estimated $40 million for the state during the construction
  • after completion, the "pipeline" will pay annual property tax payments to each traversed county
  • the company will pay an estimated $15 million in property tax payments to South Dakota counties in its first year in service
  • even farmers who objected to the pipeline are cashing their "mailbox money" checks rather than sending them back to the pipeline company in protest

This Is Not Good: Underwater Oil-Well Bolts Are Failing -- July 10, 2016

From The Wall Street Journal: Underwater oil-well bolts are failing, causing alarm.
General Electric Co. , oil drillers and U.S. regulators are scrambling to determine why massive bolts used to connect subsea oil equipment keep failing, prompting costly shutdowns and raising safety concerns about hundreds of wells in the Gulf of Mexico.
Safety regulators at the Department of the Interior began investigating the matter in 2013, after a GE oil-exploration equipment business issued a global recall for faulty bolts on one of its components. The bolts have corroded and sometimes snapped, raising the possibility of a major oil leak.
But the U.S. investigation and two recent bolt failures convinced regulators and industry officials that the problem goes beyond GE and its blowout preventers—safety gear used to halt oil-and-gas flow during a well emergency.
Flaws also have been found in bolts made by GE’s two main competitors for blowout preventers— National Oilwell Varco Inc. and the Cameron unit of Schlumberger Ltd. —and in bolts used in other areas on subsea wells, said Interior Department officials. 
Those commenting are probably correct on the cause. Off-shore wind turbines? Same problem?

Some Folks "Invested" In Money Market Accounts Ten Years Ago; Others Did Not

From Investopedia: behind Exxon's 51.2% rise in ten years. Misleading headline, to say the least. Fundamentals:
Exxon Mobil reported net income of $16.2 billion in 2015 on total revenues of $269 billion. This represented a year-over-year decline of 34.7% on the top line, bringing the 10-year average growth rate to -3.2%. 
Sharp declines were also experienced in 2009 when oil prices dropped. Earnings growth rates were even more volatile, with large fixed costs creating operating leverage. 
Exxon Mobil's dividend steadily rose over the 10-year period from 2006 to 2016, with management explicitly focusing on dividend growth as a priority through lean times
To counteract the 2014 and 2015 price drop, the company shed operating and capital expenses.

Portugal Claims Its First European Championship; Stuns France -- July 10, 2016

Portugal stuns France in soccer: 1 - 0. Portugal claims its first European Championship.


The US Is On The Road To "The British National Health Care Model" -- July 10, 2016

This is really cool. Great Britain has a two-tier medical system: a national health service to which everyone belongs, and  private insurance (in addition to NHS) for those who can afford it. I don't know if folks have caught it, but Hillary Clinton has proposed the very same thing. Whether "we" want it or not, or whether it's "good or bad" for the US, we are moving toward the British system. There will be a lot of resistance, but it will happen ... the only question is how long will it take.

It's really cool, not because I necessarily support it, but the way "it" developed.

I'm not going to provide any links. I mentioned it in passing in an earlier post.

I think it's a big, big deal. Again, I'm not saying I'm "for" or "against" it; I'm just saying it's going to happen. At least the tea leaves told me that earlier this morning.

[For the record, I don't drink tea. But while brewing my daily cup of coffee, I also brew a cup of tea to read the "tea leaves." It's easier (and less messier) han reading the entrails of some gopher.]

How Bad Is It?

Link here.
Health Alliance Plan, Priority Health and Federated Insurance have decided to continue offering small-business customers with two to 50 employees the option of continuing through 2017 health plans that do not conform to new benefit and rate-setting rules mandated by the Affordable Care Act.

After President Barack Obama was criticized for his campaign promise that individuals and businesses could "keep their policy if they wanted," he deferred to state insurance commissioners in November 2013 whether to allow health insurers to extend plans that were not Obamacare-compliant through 2017.

Under Obamacare, health insurance policies must include a minimum of 10 essential health benefits — including wellness, mental health, ambulatory and maternity coverage — set prices using an age rating system, and comply with other affordability requirements.

Michigan's health insurers were allowed to choose whether they wanted to extend existing plans for three years starting in 2015. Only a few allowed small businesses to continue their existing plans with price increases that reflect historical trends.


Four Wells Coming Off Confidential List To Be Reported Monday -- July 10, 2016

Monday, July 11, 2016
32336, SI/NC, SM Energy, Nystuen 14B-35HS, Skabo, no production data, 

Sunday, July 10, 2016
26906, 1,492, HRC, Fort Berthold 152-93-19D-18-7H, Four Bears, Three Forks, 33 stages, 4.9 million lbs, t1/16; cum 76K 5/16; only 13 days in 5/16;

Saturday, July 9, 2016
31979, drl, Statoil, Lougheed 2-11 5H, Todd, no production data,
32335, SI/NC, SM Energy, Nystuen 14-35HN, Moraine, no production data,


26906, see above, HRC, Fort Berthold 152-93-19D-18-7H, Four Bears:

DateOil RunsMCF Sold

US PADD 3 Exports To West Coast Of South America

Previously posted. This time the graphic:

Green Bay Now Imports Refined Oil Products, Used To Be An Exporter
Pipeline Shut Down

This is a trivial story in the big scheme of things, I suppose, but a pipeline that use to export refined products from Green Bay to the East Coast has been shut down. Now, instead of exporting refined products, Green Bay is importing refined products. The story is linked here.

Shut down the pipeline and we now have two barges/week -- emitting all that CO2 -- delivering diesel fuel to Green Bay.

Crying Wolf

From Forbes:
Nearly all U.S. coal plants have come into compliance with the EPA’s Mercury and Air Toxics Standard—which the Supreme Court last year ruled is illegal—and only a small percentage have closed.
It may be another sign that U.S. pollution goals may be more easily achievable than opponents claim. [Again, this is a Forbes article.]
Last June, the Supreme Court ruled in Michigan vs. EPA that the EPA had not conducted a sufficient cost-benefit analysis of the 2012 rule, which prohibits the emission of mercury, arsenic and other airborne toxins. But the court left the rule in place while the EPA conducted that analysis, and nearly all vulnerable coal plants have borne the costs and stayed in business.
About 1,400 coal and oil plants are affected by the rule, but EIA measures the industry in terms of gigawatts, a unit of the energy produced. From December 2014 to April 2016, U.S. coal capacity dropped from 299 GigaWatts to 276. Of that vanished capacity, about 20 GW retired. About 6 GW converted to natural gas.
But a much larger number—87.4 GW—adapted to the new regulation by installing pollution control equipment.
In A Nutshell

Hillary now supports:
  • a new government agency to provide health care to Americans -- the "public health insurance option" -- which would compete directly with private insurers (by the way, this is the British NHS -- a two tier system: government NHS alongside private insurers)
  • expanding Medicare, allowing folks to sign up at age 55, rather than age 65
  • tax-payer-financed college tuition
A little bit for everyone.

ObamaCare Enrollment Not "As Good" As Originally Advertised
So, What Else Is New?
Must Have Been A Slow News Day

The Centers for Medicare and Medicaid Services has released the latest report on the state of enrollment for the Affordable Care Act, better known as Obamacare, and it contained quite a surprise.
As a refresher, the CMS reported Obamacare enrollment as of the end of the 2016 enrollment period to be about 12.7 million. This included more than 9.6 million enrollees via, the federally run marketplace exchange covering 38 states, and roughly 3.1 million enrollees coming from the one dozen states, such as California, New York, and Washington, that operate their own exchanges. Seeing as how Obamacare ended 2015 with 9.1 million enrollees, this jump of 3.6 million people, equal to about 40%, was viewed as a big win for the program.
But looks can be deceiving. Last week's CMS report, which used insurer and marketplace data through March 31, 2016, just two months following the 2016 enrollment deadline, found that only 11.1 million consumers were still enrolled and paying. In just two months, 1.6 million people had stopped paying their premiums or lost coverage.
This is not news; this has been the norm since the program went live. We've talked about it at length. There are a number of reasons people would quit paying premiums, but we've talked about them before.

Time to move on.

Random Update On Austin Chalk, East Texas -- July 10, 2016

Pantheon Resources announced it has permission to frack VOS #1, Tyler County, onshore East Texas. This will provide valuable data regarding the "independent" Austin Chalk zone, above the discovered Eagleford sandstone section.

I track the Austin Chalk here.

Cuba Impacted By Venezuela's Woes

From Reuters, data points:
  • Cuba-Venezuela: a 15-year oil assistance program
  • Venezuela will cut exports to Cuba
  • signals an unraveling of that 15-year assistance program
  • Cuba: reliant on Venezuela -- its top energy supplier
  • this year: 53,500 bopd from Venezuela, a 40% cut since 1H15
  • Cuba receives 4% of Venezuela's total oil exports
  • Cuba was the last to feel the impact; earlier: Uruguay, Jamaica, Dominican Republic
  • on top of everything else, it's the type of oil that makes the problem worse
  • Cuba has been getting Mesa 30 oil, a medium weight oil 
  • Venezuela needs Mesa 30 oil as a diluent for his heavy oil refining
  • Venezuela needs to cut exports of Mesa 30, the very oil Cuba nees
  • forecast: Venezuela production will fall to lowest level since a devastating strike at PDVSA in 2002/2003

Reason #89 Why I Love To Blog -- Update On Lake Mead -- July 10, 2016

Three days ago, July 7, 2016, just on a whim, nothing else to do, I checked the level of Lake Mead -- and noted the lake had reached "historic lows."

Today, three days later, a headline story in today's Los Angeles Times: facing historically low levels, Lake Mead officials are fending off a water war.
This may be what the start of a water war looks like.
Drought is draining the West’s largest reservoir, Lake Mead, to historic low levels.
Forecasts say climate change will make things worse. Headlines warn of water shortages and cutbacks. Members of Congress are moving to protect their states’ supplies.
Yet if war is really imminent, why is one of the region’s most experienced water managers doing the same thing he has done for years: tinkering?
“I like to describe this as another incremental step,” said Tom Buschatzke, director of the Arizona Department of Water Resources.
Buschatzke was talking about a plan he is helping develop, along with water managers in California, Nevada and Mexico, that would voluntarily reduce water allocations from the Colorado River to those three states and Mexico. They hope to have it in place in time to avoid steeper, mandatory cuts that could begin as soon as 2018.
And much, much more at the link.

And if you have nothing else to do, google: the 'Holy Grail' for earthquake scientists has been accidentally destroyed, or if you have a subscription:

What are the odds?