Wednesday, July 27, 2016

Atlantic City May Default -- July 27, 2016

Wow, I haven't added an entry to this page in a long, long time. From Bloomberg:
Atlantic City is likely to default on $3.4 million of debt payments on Aug. 1 without an agreement with New Jersey on a $74 million bridge loan or other state action, according to Moody’s Investors Service.
Although state lawmakers had approved a loan as part of a rescue package in May for the distressed gaming hub, the terms are still being worked out between the state and city. Mayor Don Guardian told residents in a meeting Tuesday evening that city council would approve the agreement when it’s reached, according to a presentation on the city’s website.
The last time Atlantic City was mentioned was over a year ago:
Notes to the Granddaughters

This is so incredibly cool. The "girls" have arrived in San Jose. Southlake, TX, sent seven teams to the National Junior Olympics water polo tournament in San Jose, CA: four boys teams and three girls teams. Seven hundred teams from across the US are competing. The boys have completed their four-day tournament. The girls arrived today; scrimmaged; and will start the tournament tomorrow.

Arianna is on the 14 and under team.

Grandma May flew out to attend the tournament. 

One New Permit; Three Permits Renewed -- July 27, 2016

Active rigs:

Active Rigs3573193207182

Wells coming off confidential list Thursday:
  • 29857, 895,  Newfield, Jorgenson Federal 148-96-10-15-2HR, Lost Bridge, nt6/16; cum --
  • 32013, TASC, MRO, Tony USA 24-34H, Reunion Bay, no production data,
One new permit:
  • Operator: North Range Resources
  • Field: Rough Rider (McKenzie)
Three permits renewed:
  • XTO (3): three Lundin permits in McKenzie County
One producing well completed:
  • 31933, 1,155, Hess, HA-Grimestad-LW-152-95-3031H-1, Clear Creek 50 stages, 3.5 million lbs, t7/16; cum --

Petrochemical Demand -- July 27, 2016

To my "Big Stories" post I am adding this "big story" under "US Energy Revolution": petrochemical demand.

I know absolutely nothing about this, but across all economic sectors, from Apple computers to Zynga applications, it seems, there is a pretty good match between supply and demand. If there are mismatches in supply and demand in any sector, it seems minimal, of interest only to specialists, and quickly corrected.

I would assume the same is true for petrochemicals. Has anyone seen any stories of a dire shortage of petrochemicals around the world? Have there been any headlines that the world is about to come to an end as we know it because of a shortage of petrochemical plants? If so, I haven't seen them. Until recently, I haven't even thought about petrochemical plants. And now that I've thought about them, I can't find any stories reporting that the world is facing a dire shortage of petrochemical plants. And yet, all of a sudden, a day does not go by, it seems, that I am not reading about yet another petrochemical complex being planned, constructed, or opened.

When I face a conundrum (as opposed to say, a corundum), I tell my grandchildren and my wife to either a) follow the money; or, b) google it.

In this case, a google search led to 164,000 hits in 0.35 seconds.

This was the 2nd hit: petrochemical demand for oil set to hold through 2021 -- IEA. Data points from the article:
  • along the US coast, seven world-class steam crackers are now under construction
  • ethylene capacity is project to increase by almost 40% in the US between now and 2021; increasing the demand for ethane by around 500,000 bbls/day 
  • global oil demand for petrochemicals is expected to remain robust through 2021
  • the demand for petrochemicals is expected to increase by roughly 2 million bbls/day from 2015 through 2021, an annual growth rate of almost 3%
  • growth will be led by the US, the Middle East, and China
  • the main feedstocks are: naphtha (50%), LPG (propane, butane, ethane)(40%), and recently methanol (mainly in China)
  • 70% of oil is used in dedicated steam cracker; converts oil into a wide range of petrochemicals
  • US has traditionally been the leader; accounts for a fifth of the total petrochemical sector
  • the Middle East: 15% (vs 20% for #1, US)
  • rounding out the top six: EU (14%), China (13%), Korea (8%), and Japan (6%)
  • China's demand for oil demand growth will be dampened by "use of coal as a comparatively cheap feedstock in coal-to-olefins and methanol-to-olefins plants."

Active Rig Count In North Dakota Jumps To 35 -- July 27, 2016; Tesla Giga Factory Now Open (At Least The Entry Way); Company Hopes To Have Rest Of It Built Sometime This Century


Later: I mis-wrote when I typed in "Paul Kruger" below (it has since been corrected). I was thinking of the Hollywood horror stories and Freddie Krueger. It should have been Paul Krugman. My apologies to Freddie Krueger. I was talking about horror stories on Wall Street, not Elm Street. 

Original Post 

Active rigs:

Active Rigs3573193207182

Back in April/May, 2016, we were down to 25 active rigs in North Dakota

RBN Energy: northeast natural gas vs Gulf Coast production, big update, part 1 of 2. Archived.

Selected BR wells in North Fork oil field have just been updated: still no production data released; seven wells go to DUC status

Quickly Through The Headlines -- Lots Of News Today

Hess: reports a $1.29/share loss; expectations, $1.26/share loss; shares down in pre-market trading
NextEra Energy: huge beat; $1.67/share vs $1.16/share (NextEra: wind in ND; Google)
Comcast revenue tops estimates, WSJ
At McDonald's: all-day breakfast cools, WSJ; previously reported from different sources
Coca-Cola beats on earnings, cuts revenue forecast, CNBC
Deutsche Bank earnings fall 98%. Really? Deutsche Bank turnaround rocked by profit surprise, Bloomberg
Panera Bread might mark the beginning of the restaurant recession, The Street
SLB, HAL beat 2!16 forecasts, Zacks
Apple does it again: stock climbs 6% as bet on iPhone SE pays off (this is the "affordable" phone); can't wait to see comments over at Macrumors
Oil, now under $43, clse to 3-month low as oversupply weighs
Why the Federal Reserve is rethinking everything, Washington Post (I assume she wants to keep her job)

The Market

Early afternoon, new 52-week highs, NYSE: 192, including:
  • Baxter (big whoop)
  • CAT
  • Comcast: not listed yet, but it will come close if it doesn't hit a new high; it looks like it matched it 52-week high;
  • Exelon
  • Sprint: $6 yesterday; $6.28 today
New lows: 8


"Facebook reports another mega quarter, crushing revenue." --  Yahoo!Finance. Beat expectations on both earnings and revenue: 97 cents vs 81 cents; and $6.44 billion vs $6 billion.

MuskMelon Announces That The GigaFactory Is Now Open

Link here.
Tesla Motors has officially open (sic) the doors to its $5 billion Gigafactory near Reno, Nevada.

Although Tesla opened the Gigafactory on Tuesday, only about 14 percent of the facility has been completed. By this time next year Tesla hopes to have about a third of the construction done.
I can't make this stuff up.

McDonald's All-Day Breakfast Cools -- WSJ

Link here.  
Mr. Easterbrook said he expected that demand for all-day breakfast would settle down from its initial boost but that the company expects to get another lift in the fall, when it makes more breakfast items available all day and that the company will continue to make improvements to its food and operations.
He also cited softening growth in the restaurant industry as a reason for the results.
Consumers have been pulling back as a result of economic uncertainties.
“First of all, there is a widening gap between food away from home and food at that’s a small part of it. I think generally there is just a broader level of uncertainty in consumers’ minds at the moment, both trying to gauge their financial security going forward,” Mr. Easterbrook said. “Whether through elections or through local events, people are slightly mindful of an unsettled world. When people aren’t certain, when families are uncertain, caution starts to prevail and they start to hold back on spend.”
Finally, Now They Tell Us

From TheWashington Post:
The Federal Reserve is being forced to reevaluate its most basic assumptions about the economy after trillions of dollars of stimulus and years of ultralow interest rates have failed to generate a more robust recovery.
Trillions of dollars of stimulus ... failed to generate a more robust economy.

Paul Krugman: put that in your pipe and smoke it. Of course he will tell us not enough trillions were spent on stimulus. 

Personally, and I'm taking my "MDW" hat off and talking personally, now, not to run afoul of some law: I think the amount of stimulus was not the problem. Where the money was spent was the problem. One can start with the 28 failed solar companies jump-started with federal money, or whatever it was.

Crony capitalism.

More from the linked article, linked, not leaked:
Seven years after the recession officially ended, many of the headwinds have indeed dissipated — yet normal remains elusive. In its place is a gnawing fear that the economy has permanently downshifted into an era of weak growth that policymakers have little power to reverse. Fed officials have all but given up hope of the 3 percent rate of expansion once considered the baseline for a healthy economy. Instead, they are coming to grips with the possibility that lackluster growth is the best this recovery can offer.
And one hopes it doesn't crash:
The Fed’s most recent economic projections show growth leveling off this year at 2 percent and remaining there for the foreseeable future. That, in turn, has pushed down the central bank’s estimates of how high it will raise interest rates and how quickly it will do so. Speaking to reporters last month, Fed Chair Janet L. Yellen acknowledged that slow growth and low interest rates might be the United States' “new normal.”
“The Fed is coming to realize that the U.S. economy is a plane that is flying more slowly and closer to the ground, and it has to reset its expectations for what it can deliver,” said Vincent Reinhart, chief economist for Standish Mellon Asset Management and formerly a senior official at the central bank.
Me? I couldn't be more optimistic. Maybe we need some "leveling" to prepare us for the next leg up.

The Fed, by the way, saying things have really improved, but then said they would not raise rates. Janet does not want to be blamed for a recession. What does GDPNow say as of July 27?
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.3 percent on July 27, down from 2.4 percent on July 19. After this morning's advance durable manufacturing report from the U.S. Census Bureau, the forecast for second-quarter real equipment investment growth declined from –1.2 percent to –1.9 percent and the forecast of the contribution of inventory investment to real GDP growth declined from –0.57 percentage points to –0.63 percentage points.

You know things are getting desperate when both the New York Times and The Los Angeles Times publish a Donald Trump joke as a headline story. On a more serious note, the editors are more concerned about a joke than the loss of 30,000 Hillary Clinton e-mails. I call that a "blind spot." Actually it's worse: it's really poor reporting; really poor analysis; really lop-sided favoritism.

Later: The Wall Street Journal has now reported the same story the same way.