Dinner For One -- August 25, 2016

Updates

August 27, 2016: Target offers 10% discount on everything in the store; everything at the website.

Target is launching a first-of-its-kind one-day sale to try and boost back-to-school shopper traffic amid a boycott over its bathroom policy.

The retailer is offering a 10% discount on everything in its stores and online on Sunday. Target is calling the event #TargetRunDay.

It marks the first time Target has ever offered a 10% discount both in stores and on its website.

The sale comes after Target last week reported its first quarterly traffic decline in more than two years.

Target's same-store transactions, which is how traffic is measured, fell 2.2% in the second quarter. Overall, sales fell 7.2% to $16.2 billion.

Won't amount to a hill of beans. Our local grocery store went out of business, offering 30% discount one everything, and the story was still "empty" of shoppers.

Original Post

This is quite a story. From Fortune:

The world’s largest retailer, Wal-Mart, hit its dollar store competitor, hard.

Dollar General has been cutting prices by about 10% on hundreds of staples like milk and eggs as it looks to keep customers who are drifting back to Walmart.

The dollar store was one of the fastest growing retailers in the years after the Great Recession as low-income shoppers looked for lower prices and closer stores to spend less on gas. On Thursday it reported comparable sales increased 0.7%, well below the 2.6% growth analysts were expecting. 

And from Bloomberg, Walmart strikes back at Dollar Stores:

Looks like Wal-Mart is finally coming after Dollar General -- and it seems to be working.
Shares of America's two largest dollar store chains tumbled Thursday after both reported quarterly sales that fell short of Wall Street estimates. One, Dollar Tree, also cut its sales forecast for the year. Both companies mentioned increased competition and deflation. Dollar General suffered from that sadly common retailer affliction, "unseasonably mild spring weather."

From an earlier post: Walmart sells more than Apple, Amazon, and Microsoft combined.

Data points from the Fortune story:

• shares of Dollar General fell almost 20% today, in a market that was mostly flat, slightly negative
• fewer shoppers visiting Dollar General, according to latest earning report
• meanwhile, Walmart reported shopper traffic rose for the 8th straight quarter
• Walmart resurgence due to aggressive pricing that boosted its grocery business
• Walmart gets some 55% of its revenue from food
• Target also hurt by Walmart's aggressive pricing (Target has other problems)
• Dollar Tree shares also fell today; down about 10%
• Walmart efforts to upgrade its fresh food area looks to be working
• # of Americans on food stamps has been dropping

Data points from the Bloomberg story:

• Walmart Express was a failure; it was in response to Dollar General, Dollar Tree
• Walmart changed strategy; shutter Walmart Express; instead, cut prices even more
• Walmart's cut in prices are over 12% less than DG, DT (in North Carolina, as an example)
• also, German no-frills supermarket Aldi has been expanding at a faster clip
• another German competitor, Lidl, poised to enter the US; the race to the bottom is unlikely to abate
• aside from the most recent recession, grocery prices haven't fallen this much since the 1960s; it pays to cook at home

Comment: in our immediate area (I can bike to all), we have:

• a Walmart (10 minutes by bike)
• a Target (4 minutes by bike)
• an Albertson's (Safeway, Tom Thumb) (4 minutes by bike)
• a Minyard's (1 minute by bike)
• Market Street (15 minutes by bike)

Minyard's opened one year ago across the street from where we live; it closed one week ago, unable to compete with the others.

Target is generally "empty." Very, very nice store, but very, very little traffic.

Albertson's has really upgraded in the past year and is probably the only one capable of competing with Walmart.

Market Street, upscale, but a bit pricey. The typical Walmart shopper won't go to Market Street, but most Market Street customers will visit Walmart periodically.

We live in a very upscale neighborhood north of Ft Worth, near DFW. Our older adult daughter (three school children of her own) with above-average income prefers Walmart for grocery shopping. Target is her least favorite.

I can bike to all grocery stores mentioned, although Albertson's is closest (now that Minyard's has closed) and the one I prefer, but I have no problem shopping at Walmart. I've never seen a Target close its door due to lack of business but this particular Target seems to lose grocery shoppers to Albertson's and/or Walmart and department shopping to Walmart.

 

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We'll have a Bakken story later to accompany these photos. Life is good.

Warren Buffett Now Controls More Than 15% Of Phillips 66 -- August 25, 2016

Every now and then one comes across a story that ... well, really surprises me ... in the investment arena. This is one of those stories. A big whoop! The ScottsbluffStarHerald says Warren Buffett/Berkshire Hathaway has bought more shares in Phillips 66. Another big whoop!

Warren Buffett's company now controls more than 15 percent of Phillips 66 stock after buying another 414,065 shares of the oil refiner this week.

Berkshire now owns about 79.5 million shares of Phillips 66, which represents 15.2 percent of the Houston-based company's stock.

Berkshire has been steadily buying Phillips 66 stock since 2012. After building up a sizeable initial stake, Berkshire traded about $1.4 billion of its Phillips 66 stock for one of the refiner's additive businesses in late 2013.

Many, many story lines.

And this is why I love to blog. It helps me put the Bakken into perspective.  

Gee! PSX was up nicely today ... on a day that the market was down a bit. Currently trading at $79. Warren will get  a little over 3% just by waiting around.

A bit of trivia a day later: Phillips 66 will defer maintenance on one of their Gulf Coast refineries. 

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GDP Now -- August 25, 2016

Latest forecast: 3.4 percent, Augsut 25, 2016.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.4 percent on August 25, down from 3.6 percent on August 16. After yesterday's existing-home sales release from the National Association of Realtors, the forecast for third-quarter real residential investment growth declined from 1.0 percent to –2.6 percent.

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All My Loving, Paul McCartney

Eight New Permits -- August 25, 2016

Active rigs:

	8/25/2016	08/25/2015	08/25/2014	08/25/2013	08/25/2012
Active Rigs	31	74	194	184	189

One well coming off confidential list Friday:

• 32151, SI/NC, XTO, Johnson 31X-6HXE, Siverston, no production data,

Eight new permits:

• Operators: Oasis (4), CLR (4)
• Fields: Banks (Mckenzie), Last Chance (Williams)
• Comments:

Two permits renewed:

• Oasis: a McCowan permit in Burke County
• WPX: a Behr permit in Dunn County

Two producing wells completed:

• 27651, 1,205, Petro-Hunt, Klatt 145-97-19C-18-4H, Little Knife, t8/16; cum --
• 30423, 932, Hess, HA-Sanford-152-96-1819H-8, Westberg, t8/16; cum -- 

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George Bush Proposed This Years Ago 

California proposes mandatory retirement plan for workers who are not "covered." This is the very same idea proposed by President George Bush some years ago -- even down to the amount that would be withheld: 3%. His proposal was DOA even before it left the Oval Office.

What goes around, comes around. 

Key Energy Services To Re-Structure, Allowing It To Remain A Publicly Traded Company -- August 25, 2016

From SeekingAlpha:

• Key Energy Services (KEG) unveils a plan support agreement to be implemented ahead of prepackaged Chapter 11 reorganization in which it would remain a publicly traded company.
• Under the plan, senior noteholders would own ~95% of the reorganized company’s common stock; current shareholders would have a ~5% stake; P-E firm Platinum Equity would become Key's largest shareholder upon completion of the restructuring.
• KEG expects its reorganization will reduce its debt to $250M from nearly $1B.

I have mentioned Key Energy rarely on the blog, mostly back in 2012 when "Cramer" mentioned the company.

Not ready for prime time. A reader asked my thought on the restructuring agreement. This was my (slightly edited) reply:

I don't known when I last "followed" KEG.

What little I know about KEG restructuring sounds like many of the other restructuring deals in the oil patch. Holders of "common shares" who held on through the "end" will not be happy.

But if one thinks that oil is going to be a lot higher four years from now, there are going to be some great buying opportunities.

Mike Filloon (Bakken Updates) contributed often to SeekingAlpha during the boom; but then in calendar year 2015 he seemed not to write as much. Now, all  of a sudden, we see four articles from him, and he says he's long (bullish) in a number of tight oil operators.

When I see four articles from Filloon in a very short space of time, I get the feeling that he's very aware that things may have turned the corner.

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. Everything I post on this site -- even the non-energy posts -- is to help me better understand the Bakken and keep it in perspective. It should not be used as an investment tool. If this is important to you, go to the source.

One can "search" for KEG or Key Energy Services on the blog. I think I only really talked about it for a short period of time back during the boom, when Cramer mentioned it, back in 2012.

I do not know if KEG is working in the Bakken; some time ago a reader sent me an e-mail suggesting KEG was no longer in North Dakota.

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A Note For The Granddaughters

Genome: The Autobiography of a Species in 23 Chapters
Matt Ridley
c. 1999
DDS: 599.935 RID

"We may live on a natural gas machine." -- WSJ

A Field Guide to Bacteria
Betsey Dexter Dyer
c. 2003
DDS: 579.3 DYE

I could be wrong, but it appears that a senior in high school with plans to major in biology in college would be well-advised to scan through Dyer's book during the summer between graduating from high school and entering college. 

Dyer seems to suggest that Archaea separated from Eubacteria. I believe Woese argues that the two (along with eukaryotes) had a common ancestor before all three diverged.

Archaea: very, very odd life forms. Their cell walls are strange (fragmented, or "missing" altogether) and are made of chemicals unknown in other bacteria. They are also found in odd, inhospitable environments.

Archaea:

• methanogens
• hyperthermophiles
• halophiles (salt lovers) 

Photosynthetic bacteria

• green sulfur bacteria: use hydrogen sulfide (H2S) as source of hydrogen; waste product sulfur, which is hard to get rid of
• green nonsulfur bacteria: use water as source of hydrogen; waste product oxygen;
• cyanobacteria
• some of the protobacteria (purple bacteria)
• heliobacteria

Protobacteria (purple bacteria)
highly diverse; extremely successful
all are gram negative (trivial, but "first" among ways to differentiate bacteria)
five subgroups denoted by Greek letters (alpha, beta, gamma, delta, epsilon) based on DNA sequences

The Gram-Positive Bacteria

• gram-positive: thick, but simple, wall
• gram-negative: thin, but complex, wall; and membrane
• gram-variables: with EM, appear to be gram-positive based on appearance of cell walls
• gram staining is not used to identify archaea
• DNA: gram-positives -- one major branch; as a group, ubiquitous and highly successful
• DNA: gram-negaives -- nine major branches
• Gram-Positive
• of food and drinks
• of soil and other substrates
• symbionts of animals and plants

Cyanobacteria

• hard to find because eukaryotes (plants) dominate landscape; began with the emergence of eukaryotic algae 2 billion years ago
• look for cyanobacteria: hot springs, acid or alkaline lakes, hypersaline waters, dry desert crusts, bare Antarctic rocks
• the great innovation of cyanobacteria: oxygen-generating photosynthesis; evolved about 3.5 billion years ago; once established, became dominant form of metabolism for fixing carbon in the form of sugars
• before cyanobacteria, the only alternative was H2S

Types of Cyanobacteria

• of aquatic and terrestrial habitats
• cyanobacterial associations with other organisms

Bacteroides, Gliders, and their relatives

• are still being sorted and categorized based on DNA sequences

Spirochetes: a chapter of their own

• symbionts of invertebrates, particularly molluscs and termites
• in both organisms, spirochetes involved in helping digestion

Thermus and Deinococcus

• tough, resilient bacteria that form their own cohesive taxonomic group based more on their DNA sequences than on physical characteriestics
• Thermus: hot springs
• Deinococcus: completely lacking in field marks
• originally discovered in canned meat that had been preserved using irradiation (but they are not pathogens)
• can withstand doses of radiation thousands of times greater than typical lethal doses
• 500 to 1,000 rads will kill a human
• some Deinococcus can withstand millions of rads

Planctomycetes and their relatives

• most distinctive members: stalked bacteria
• unusual and fairly common; strange 
• Chlamydia: unstalked, but related to Planctomycetes
• having an appendage is not distinctive enough to be placed in Planctomycetes
• stalks: extensions of the cell that have no protoplasm
• prosthecae: extensions of the cell that have protoplasm

From wiki:

The three-domain system is a biological classification introduced by Carl Woese that divides cellular life forms into archaea, bacteria, and eukaryote domains.

In particular, it emphasizes the separation of prokaryotes into two groups, originally called Eubacteria (now Bacteria) and Archaebacteria (now Archaea).

Woese argued that, on the basis of differences in 16S rRNA genes, these two groups and the eukaryotes each arose separately from an ancestor with poorly developed genetic machinery, often called a progenote.

To reflect these primary lines of descent, he treated each as a domain, divided into several different kingdoms. Woese initially used the term "kingdom" to refer to the three primary phylogenic groupings, and this nomenclature was widely used until the term "domain" was adopted in 1990.

Prokaryotes vs eukaryotes.

Prokaryotes: Bacteria and Archaea. 

From Evolution: The Whole Story, Steve Parker, general editor, c. 2015.

Yet persuasive evidence of shared characteristics suggests that chloroplasts, which have their own genetic make-up distinct from the other plant genes in the cell nucleus, were once free-living cyanobacteria, pages 56 - 57.

The Ediacaran animals lived mostly on, or close to, the surface of seabed sediments, in shallow seas, or deep on the ocean floor, and some left trace fossils of their burrows. A possible trigger for the evolution of htese diverse creatures could have been a rise in the proportion of oxygen in the atmosphere, produced mainly by photosynthetic cyanobacteria, page 47. 

The Ediacaran were pre-Cambrian.

First US LNG Tanker Arrives In China Via Panama Canal -- Cool, Cool Story -- August 25, 2016

From The WSJ: new locks in recently expanded canal ease access to Asian market for US exporters.

Cool, cool story.

Sort of offsets The Los Angeles Times headline: Governor Brown gets even with oil companies. LOL. I read the article and did not see how Governor Brown "got back" at the oil companies. The oil companies will do just fine. Whatever. I digress.

Back to the WSJ story:

The first shipment of liquefied natural gas from the lower 48 U.S. states to China arrived this week, thanks to the recently expanded Panama Canal’s easing access to the robust Asian market for U.S. gas exporters.

The shipment was chartered by Royal Dutch Shell PLC, the company. The cargo, from the Sabine Pass export facility in the U.S. Gulf of Mexico, was delivered to the Yantian Port on Monday in southern China and was purchased by China National Offshore Oil Corp. as part of a long-term contract.

U.S. LNG, which is usually transported on large ships that can’t fit in the older Panama Canal locks, hasn’t been able to compete in Asia. The new locks, which opened in June and can accommodate larger ships, mark a significant moment for U.S. exporters.

The new locks can reduce the travel time from the U.S. to North Asia for ships that couldn’t fit in the old locks by about one third—to 20 days—and cut transportation costs by about 30 cents to $1 per million British thermal units.

I don't expect to see this story in The New York Times. It doesn't fit their world view.

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Non-Energy News

ATT gets okay to provide wireless in Cuba. This is a big story, but a small headline.

U.S. telecom behemoth AT&T Inc. recently entered into an agreement with Cuba’s state-run telecommunications company Empresa de Telecomunicaciones de Cuba to offer direct roaming mobile interconnection services between the two countries. With this agreement, AT&T customers will soon be able to connect through talk, text and data while in Cuba. The date of commencement and pricing of these services will be declared later on. 

President Barack Obama’s decision to normalize U.S. diplomatic and economic relations with Cuba, which have been considerably tensed since 1961, is starting to show results. Under his administration, new Cuban policy regulations, which have been approved by the Treasury and Commerce departments, aided the U.S. telecommunications industry to gain initial exemptions from the existing embargo to invest in Cuba.

Drones in North Dakota. Link here for Hermes 450:

Elbit Systems of America, along with its local partners, hosted an Unmanned Aircraft Systems (UAS) field day today, August 22, 2016, at the Hillsboro Regional Airport to highlight its recent Hermes 450 flights over North Dakota. The event welcomed Lt. Governor Drew Wrigley, who served as Master of Ceremonies. Also attending were U.S. Sen. John Hoeven, R-ND. and U.S. Rep. Kevin Cramer, R-ND.

"North Dakota has been called the 'Silicon Valley of Drones' and it is our honor to bring the Hermes 450 to Traill County," said Elbit Systems of America President and Chief Executive Officer Raanan Horowitz. "Leveraging the experience of our parent company with the commercial insights of our partners, we bring advanced technology to the farmland, demonstrating effective approaches for data collection."

Equipped with advanced sensors and high resolution cameras, such as the Vision Map A3 Edge and the Elbit Systems Compass EO/IR real time sensor, the Hermes 450 is capable of covering 40,000 acres in one hour and can remain in flight for 17 hours.
Elbit Systems of America, a US company headquartered in Fort Worth, Texas, has been operating from the Hillsboro Regional Airport for the last four months where it has flown multiple precision agriculture flights. In collaboration with

North Dakota State University and the Northern Plains UAS Test Site, Elbit Systems of America has worked with select local farmers to gather and analyze data for crop management improvement, increasing efficiency, and greater yield.

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Ledecky Smokes Competitors

Runs Away With 800-Meter Freestyle

Wins By 12 Seconds For Gold

2016 Rio Olympics

Link here. NBC won't allow embedding. 

Katie Ledecky's view is about the same in the 400-meter freestyle.

Update On The GOM Lease This Past Week -- August 25, 2016

As posted yesterday, the GOM western area lease in Louisiana was a bust. From Rigzone today:

BHP Billiton Petroleum was the high bidder in the last federal Gulf of Mexico oil and gas lease sale of the Obama Administration, offering $9.9 million on 12 tracts in the Western Planning Area program in place between 2012 and 2017.

BP Exploration & Production Inc. followed BHP with more than $6 million in bids on 10 blocks. Exxon Mobil Corp. was the third company to participate in the August 24, 2016, sale and bid almost $2 million on two tracts.

Deepwater assets drew 40 percent more bids than other depths. In all, 24 bids were offered on 4,399 blocks for a total raise of $18,067,020.

Marcellus / Utica and Sarnia, Ontario -- The Series Continues -- RBN Energy -- August 25, 2016

Job watch. US jobless claims fall for third straight week.  Big headline  for a small story. Initial claims slipped 1,000 to a seasonally adjusted 261,000. Four-week moving average fell 1,250 to 264,000.

Biofuels worse for environment than gasoline; University of Michigan, as printed in The Detroit Free Press.

Active rigs:

	8/25/2016	08/25/2015	08/25/2014	08/25/2013	08/25/2012
Active Rigs	32	74	194	184	189

RBN Energy: NOVA's plan to boost its Marcellus / Utica ethane use in Sarnia.

NOVA Chemicals’ 1.8-billion-pound/year ethylene plant in Sarnia, ON already is one of the largest consumers of Marcellus/Utica-sourced ethane, and plans are in the works to significantly increase the steam cracker’s ethane consumption.

In 2018, NOVA will complete a project that will enable the cracker to be fed 100% ethane; the petrochemical company also is mulling a cracker expansion –– again with ethane as the feedstock –– and a new polyethylene plant next door. All these plans are driven in large part by the availability of low-cost ethane piped from the U.S. Northeast.

From the beginning of the hydrocarbon era in North America, Sarnia has played an outsized role in crude oil, refining and petrochemicals, in large part due to that essential truth of real estate: location, location, location.

First, it was its local oil resource. As we said in Part 1 of this series, an 1858 oil well in nearby Oil Springs, ON, is said to have been the first on the continent. Over time, oil-production, refining and petchem infrastructure was developed in southwestern Ontario (as were railroads and pipelines); that infrastructure made Sarnia a refining/petchem center, a position that continues to this day, decades after most oil production in southwestern Ontario dried up.

Earlier, we looked at the crude oil side of things, describing the three refineries in Chemical Valley, the oil pipelines that supply them, and the petroleum-products pipelines that help move the refineries’ output to market.

Then, we turned to Sarnia’s increasingly important natural gas liquids (NGLs) sector –– the pipelines that transport purity ethane and mixed propane/butane to Chemical Valley, the fractionator that separates the propane/butane mix into purity products, the NGL storage facilities, and the big NOVA ethylene plant that “cracks” ethane, propane and butane into petrochemical products, with the star of the show being ethylene –– a critically important petchem building block.

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Ukraine On Edge

Ukraine: Russia to conduct military drills amid Ukraine tensions -- WSJ.

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The Market

Late day trading. NYSE:

• new highs: 108
• new lows: 14
  

Mid-day trading. Flat. Down 2 points right now. NYSE:

• new highs: 60
• new lows: 11
  

Opening. Having trouble getting a bit of traction. Opening a bit on the negative side, but well off the lows / futures. 

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The Ledecky Page

Flashback

An old video, but still great.

Katie Ledecky Interview, CBS This Morning, October 1, 2015.