Saturday, December 3, 2016

Chain Of Command -- December 3, 2016

This may be of interest in early 2017:

Tick, Tick, Tick

From the AP: Venezuala to issue larger bills; currency continues to melt. Data points:
  • Venezuela bordering on economic collapse
  • triple-digit inflation
  • largest note currently worth about 2 US cents on the black market
  • Venezuela currency lost 67% of its value on the black market last month -- the steepest monthly plunge ever

Oasis Petroleum -- November, 2016 Presentation

This is a very, very impressive presentation. My recommendation: skip my post and go directly to the presentation.

Oasis: only "play"is the Williston Basin
  • 485,000 net acres
  • pending: another 55,000 net acres; to close December 1, 2016 (see deals at sidebar at the right or go direct to this post
  • with acquisition, I believe Oasis is now the #2 operator in the Bakken based on net acreage, surpassing Whiting by just a bit; CLR remains out front by a large margin
  • 91% held by production
  • 97% operated
  • 395 drilling units
  • ~ 25 years of drilling activity
  • more than 1,300 locations are economic at $40
EURs -- look at this: Whiting says the same thing --
  • 1.55 million boe EUR in area around Watford City (Wild Basin area)
  • the pending acquisition includes a fair amount of acreage in the Wild Basin rarea
  • this is even more amazing: the 1.55 million boe EUR is new; but the previous EUR was 1.2 million boe; these are incredible EURs
  • LOE down to $7.00/boe; was over $10/boe as recently as 2014
  • bringing well costs down to $5.2 million; Slickwater wells
  • 55,000 acres; a bolt-on acquisition
  • bolt-on means that the new acreage abuts producing acreage
  • will ad 34 operated drilling units
  • will result in a 25% increase in OAS core inventory position
Average spud to rig release
  • 2014: 22 days
  • 2016: 13 days
  • about 80 DUCs right now
  • "highly economic" at current strip (~ $3.5 million completion cost)
  • ~ 80% of DUCs in core  
EUR Curves

These curves are simply staggering.

Gathering system: pipeline and CBR:

Expanding takeaway capacity out of the Williston Basin:

  • Note: pay particular attention to the "Guernsey." Previously discussed in light of the DAPL.

Finally, We're Done -- Jill Stein Throws In The Towel In Pennsylvania -- December 3, 2016

Jill Stein calls off recount attempt in Pennsylvania. It does not matter what happens in Wisconsin and / or Michigan. [Update: actually, there's a bit more to this but hopefully we're near the end. I track the "recount" here.]

The Trump Style

A reader sent me a link to an interesting look at Trump's "management" (for lack of a better word) style. From the article the reader noted this:
The Trump Organization, which began in the early 1970s but has grown rapidly since 1980, includes his patient younger brother, who terms himself the "plow horse" of the team; a shrewd and cautious negotiator whose previous employer was wildly successful before its fortunes plunged; and two former city commissioners with valuable contacts in government and law.
It includes his wife, Ivana, who is president of the Plaza Hotel, and three other very strong-willed women, among them one of the few female construction supervisors in the industry. "I have found in many cases {women} are more effective than a man would be," Trump said. "They're very dedicated to showing me that they can do it."
Something tells me world leaders are scouring the "literature" to  learn more about Trump. My advice: watch the first few seasons of "The Apprentice."

Update, December 5, 2016: MSNBC "Morning Joe" actually hit the nail on the head, but only in passing, with regard to the Taiwan phone call. It comes down to this: Trump's "Art of the Deal" is to find the "point of leverage" when it comes to negotiating. Someone said that when Trump begins negotiations he always starts with the most extreme position and then backs off, winning concessions far greater than he otherwise might.

Teaching Her Best Friend To Read

Sophia is 2.5 years old. One of her favorite activities is being read to. She also has her favorite books.

Her favorite friend is a huge, stuffed monkey, which goes by the name, "Little Georgie," after her great-uncle with the same name who passed away some years ago.

When she comes home from TutorTime, she runs into the house, runs past her mom, runs past her sisters, and heads directly to "Little Georgie" to give him a huge hug.  And then read to him.

Most remarkable: the book is being held correct-side up.

Little Georgie is not making as much progress as we had all hoped.

From Whiting's November, 2016, Presentation; Targeting 1.5 Million BOE EURs -- December 3, 2016


December 10, 2016: contributor over at SeekingAlpha doesn't believe Whiting's numbers or projections.
Original Post

The usual disclaimer

Whiting is projecting 1.5 million boe EUR wells in the Bakken. Currently, the standard is 900,00 boe EURs. 

For newbies: search "EURS" at the blog. I have long forgotten but early on in the boom, EURs of 400,000 were the norm, but by 2014, we were talking some remarkably higher estimates. See this post: EURs in excess of 2 million boe?

  • 3Q16 LOE below low end guidance at $7.98 / boe ("below" is good)
  • Williston Basin 5+ million pound completions: tracking 900,000 boe-type curves
  • Williston Basin 10+ million pound completions: tracking1.5 million boe-type curves
  • thirteen (13) new McKenzie County test at average rate of 3,727 boe/day 
  • Whiting is focused on the Bakken and the Niobrara
    • positioning the company to be the operator in those two basins
    • Williston Basin: 106,000 boe/day
    • Niobrara (Redtail): 11,000 boe/day
  • Bakken acreage
    • 738,479 gross acres
    • 443,125 net acres 
    • 99% held by production
    • completed well cost: $6.8 million
  • Bakken development plan
    1280-acre units
    • 5,471 potential gross drilling locations
    • targeting 900,000 boe EUR wells in 2016
    • approximately 22 DUCs at end of CY2016
  • correction from original post (see first comment): Whiting's most recent presentation does not mention southwest North Dakota but a reader says that 6% of Whiting's locations are still in Stark County
  • most of Whiting's interests are around Williston, Watford City, Parshall
  • EUR s have jumped from 700,000 boe to 900,000 boe using "enhanced completion")
  • but look at this:

Record-setting production: According to their data, Whiting is the top producer in the Bakken based on initial 90-day production rate for wells completed between August, 2015, and July, 2016. Peer group includes Newfield, QEP, Oasis, XTO, Hess, EOG, BR, CLR, and SM Energy.

Drilling times -- Bakken -- Niobrara:
  • 1Q12: 40 days Bakken; 16 days Niobrara
  • 1Q13: 30 days Bakken; 18 days Niobrara
  • 1Q14: 30 days Bakken; 12 days Niobrara
  • 1Q15: 24 days Bakken; 15 days Niobrara
  • 1Q16: 14 days Bakken; 7 days Niobrara
Note: the drilling times are "spud to spud" -- this is really quite amazing -- the time it takes a rig to drill a well and then move to thenext location and begin drilling the next well. When the Bakken boom began, it could take weeks to get a rig torn down, moved to a new location, and then set back up before beginning drilling again.
Cash flow:
According to their data, Whiting is the top operator based on cash flow vs CAPEX. WLL cash flow/CAPEX ratio is 200%. The peer group ranges from 175% to a very, very low 25%. [100%: Cash flow = CAPEX; 200%: cash flow is twice CAPEX]. Peer group includes Noble Energy, Denbury Resources, CLR, Cimarex Exploration, EOG, SM Energy, Pioneer Natural Resources, Murphy OIl, Concho Resources, Oasis Petroleum, and Range Resources.
Very liquid balance sheet.

  • 2016: $44 - $74
  • 2017: $53 - $70
There is so much to write about / consider when discussing hedges that the actual prices are only a single data point, but I don't want to go down that road right now.

Trump And The Generals; Nothing About The Bakken -- December 3, 2016

I'm not sure if President-elect is predictably unpredictable or unpredictably unpredictable.

This screenshot is from the Drudge Report a few minutes ago. This has been at the Drudge Report for several days now:

One of the links takes you to The New York Times with this story, again, another screenshot:

Now, moments ago, this is the top story over at Google Finance
Zenefits CEO David Sacks is stepping down amid speculation that he has been tapped by billionaire technology investor Peter Thiel to assist president-elect Donald Trump.
In a memo to Zenefits staff, Sacks said late Friday he would become chairman of Zenefits and lead a search for a new CEO.
The Wall Street Journal reported late Friday that people familiar with the matter said Sacks would help Thiel, one of Trump's few Silicon Valley supporters, with the transition. 
So, again, we have the trope: "one of Trump's few Silicon Valley supporters" but then Trump starts naming folks from Silicon Valley to his team. Running circles around the media.

Trump and The Generals

"Trump and the Generals" has brought back some great memories of my USAF career. But enough about me.

Walk, Don't Run.

By the Ventures.

17-y/o drummer had a lot to do with the original arrangement.

Unfortunately, the 17-year-old was (legally) too young to go on tour so the Ventures hired another drummer.

Meanwhile, the 17-year-old drummer went on to college, get his degree, joined the USAF, subsequently rising to 4-star general, the top rank in peacetime military.

His name: George Babbitt.

From his resume:
10. August 1980 - September 1981, commander, 36th Aircraft Generation Squadron, Bitburg Air Base, West Germany
11. September 1981 - July 1985, assistant deputy commander for maintenance and later, deputy commander for maintenance, 36th Tactical Fighter Wing, Bitburg Air Base, West Germany 
My first assignment to Bitburg Air Base was from 1983 to 1986. Then-lieutenant-colonel Babbitt was responsible for the F-15s. No doubt he was responsible for the maintenance support for all the "bare-base" operations to which we were deployed, the most notable being Sidi Slimane, Morocco. 

Walk, Don't Run, 1998 -- Ventures With George Babbitt

A Small World, A Wonderful World

Some things never cease to amaze me. Today it's Amazon (again) and global commerce. I was looking for a better price on a rather expensive book with limited availability. Of course, it was available through Amazon. I ordered it about ten days ago. Ah, there it is: packing slip says it was ordered November 22, 2016 -- about twelve days ago.

Today it arrived. Return shipping address:
Glynn's Collection
Lydican, Claregalway
County Galway H91 X7E2

Whisk(e)y -- Nothing About The Bakken -- December 3, 2016

The beloved waiter Manuel of "Fawlty Towers" has passed away at the age of 86.


Wow, I'm in a good mood. The "Off Duty" section in today's Wall Street Journal is devoted in its entirety (well, almost) to "Presents With A Past." (What a great line. But I digress.) The subtext: "these 50 nostalgic gifts -- whose origins date back decades and beyond -- will conjure a simpler time when the holidays were lower-voltage, but just as bright."

From the "Off Duty" section: #30: A Scotch above.
They're not the smokiest, boldest, [but] some of the most elegant expressions come from the Auchentoshan distillery. Triple-distilled and aged for two-plus decades in bourbon and Sherry casks, the suave and complex Auchentoshan 21 Year Old Single Malt will please ...$205.
I immediately pulled Whiskey: The Manual, by Dave Broom, c. 2014, off the shelf. Auchentoshan is not even in the index. Wow.

So, then I pulled out the best book I have ever found on whiskey: Whisk(e)y Distilled: A Populist Guide to the Water of Life, Heather Greene, c. 2014 (also). There in the index, Auchentoshan is mentioned on five different pages:
  • page 55:
Ireland is famous for triple distilled whiskey, although not all of its whiskeys are triple distilled. Only one distillery in Scotland, Auchentoshan, is triple distilled -- another whiskey tidbit that pops up with whiskey connoisseurs at my bar. I've never heard of a quadruple distilled whiskey, in case you are wondering.
  • page 59:
To make things more complicated, some whiskeys age in several different types of asks before they are bottled as part of their maturation. For example, Auchentoshan Three Wood (master blender Rachel Barrie) is matured in refill bourbon, ex-Spanish oloroso sherry butts, and ex-Pedro Ximenez butts. 
  • page 73:
... and "malt" describes a style of whiskey in Scotland. Lagavulin, Laphroaig, Glenmorangie, and Auchentoshan are all distilleries producing single malt Scotch.
  • page 88:
Only three single male Scotches come from the Lowlands -- Glenkinchie, Bladnoch, and Auchentoshan -- and that makes it a challenge to describe some sort of overall single malt Scotch Lowland style. I hear people all the time refer to the Lowlands as "light" whiskies. But I find a rich nuttiness in the Auchentoshan Three Wood, which I don't describe as light. It is also the last distillery in Scotland to triple distill its whisky, a practice common in the Lowlands in the nineteenth century.
[Note the various spellings of whisk(e)y; she is correct, and she is consistent.
  • page 89:
You may have just breezed over that smattering of letters in the word "Auchentoshan" without trying to sound it out. Let me help you. If you see ch in a Gaelic word, pronounce it as you would the ck in "clock." That's not exactly how the Scots do it, but close enough, and better than using the ch sound as in "chum." The Scots actually soften the ck sound; they breathe through it and never quite touch the back of the tongue to the roof of the palate to create a hard stop as we do. Now you know how to pronounce Glenfiddich and Loch Ness, in case you were unsure. 
By the way, I am putting a $20 bill into an envelope every month. I started that about six months ago. My plan is to take out the money in that envelope and buy a $600 bottle of Scotch when I start collecting social security in about two years.


Boll: the rounded seed capsule of plants such as cotton or flax.

Hence: the boll weevil.

But also from
The earliest historical reference to whisky comes much later, Mr J Marshall Robb, in his book ‘Scotch Whisky’, says: ‘The oldest reference to whisky occurs in the Scottish Exchequer Rolls for 1494, where there is an entry of ‘eight bolls of malt to Friar John Cor wherewith to make aquavitae’. A boll was an old Scottish measure of not more than six bushels. (One bushel is equivalent to 25.4 kilograms)
I thought of that after listening to all the "Boll and Branch" ads on Rush.

The Tesla Problem

In today's "Review" section in the WSJ there were a couple of articles unrelated to "Presents from the Past."

One of them was a feature article on the new SUV being built by Maserati. It is Maserati's first SUV. I did not know -- or had forgotten -- that Maserati was owned by Fiat Chrysler Automobiles. When I looked at the photograph of the new Maserati SUV, called the Levante, it did remind me of the Chrysler crossover, the Pacifica. Hmmm.

This is a Tesla problem because these are really nice high-end cars -- not just the Maserati Levante but all high-end luxury cars -- that will compete directly with Teslas. People paying $100K for a car are not buying cars to save money on gasoline, and I doubt most of them are buying cars to "save the environment."

One can get a 2017 Levante for $72,000 MSRP, or $83,000 for a 2019 Levante "S" model, base price. The one tested for the article was listed at $94,600. Unlike the new Teslas, the Levante is available now.

By the way, the writer compared this car to the Porsche Cayenne S, not the Tesla.

The Young Ones

The Young Ones, Cliff Richards and The Shadows

The Shadows 50th

Long Meandering Commentary -- Nothing About The Bakken -- Not Ready For Prime Time -- December 3, 2016

The usual dislaimer: 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. If this stuff is important to you, go to the source.

The usual "error" disclaimer: in a long note like this there will be factual and typographical errors. Facts and opinions will be interspersed and it is often hard to tell facts from opinions in commentaries. There is no attempt to make this a "fake news" story. The commentary may not be ready for prime time, and I may change my views over time, but it's kind of how I feel right now.

The usual meandering commentary warning: this is one of those meandering commentaries that may not hold together. I have no idea where the commentary will lead, so we will find out together, I suppose.

This is in response to two articles a reader sent me this morning. I had seen the headlines of both articles earlier in the week but had not gotten around to reading either. In fact, I had not planned to read either.

One article did not interest me at all, and the other was just going to be a feel-good article about Trump, and I was already pretty much feeling good about Trump and didn't need to read another article to get my spirits any higher. My spirits were as high as they were going to get that day.

The "Trump-feel-good" article is a must read. It's by Holman W. Jenkins, Jr., on the editorial staff of the WSJ and one of my favorite -- perhaps my favorite -- columnists in the WSJ. Since I've read the article now, I'm not going to go through it again. I'm going to look at some of the 386 comments. Generally, the number of comments any article gets at the WSJ varies from zero (0) to ninety-nine (99). Obviously Holman's article caught the attention of a lot of readers, especially with his "smug obliviousness" tag.

So, we move on.

The second article over at Yahoo!Finance: what 13 strategists forecast for the S&P 500 in 2017. I could say I have absolutely no interest in these kinds of articles. One can find anything one wants to find.

But, as usual, if I said that, I would be wrong. There is a usefulness to these articles: like Twitter, one just needs to know how to "use" articles like these.

The article is a collection of thirteen paragraphs, each summarizing the "predictions" of where the "market" will go in 2017.

Again, I highly recommend reading the comments before reading the article.

Now the take-aways from the article itself. The article provides two numbers: the "target" for the S&P 500 and the forecast for EPS for the S&P 500.

Currently, the S&P 500 is: 2,191 -- at the close, Friday, December 3, 2016.

Currently, the EPS for the S&P 500 can be found at these sites:
So obviously there appears to be an "apples vs oranges" thing: obviously whatever these guys are measuring it's not the same thing. I certainly don't get it.

Having said that, it appears the "number" that the Yahoo!Finance folks are following is the same number that GS and Bloomberg are following: the 2016 S&P 500 EPS is about $105.

Back to the linked article. First EPS:
  • target range: $123 - $132
  • average: $129
Now, the S&P index:
  • S&P 500 close, December 3, 2016: 2,192
  • target range for 2017: 2,300 to 2,400
  • mode: 2,300 (6 of 11 analysts target 2300)
  • average: 2,322
Percent changes, S&P:
  • S&P index: 2300 - 2200/2200 = up 4.5% average forecast for 2017 over 2016
Percent change, EPS:
  • If GS and Bloomberg are/were correct that FY16 EPS is/was in the range of $105, then:
  • 129 - 105 / 105 = a 23% increase in corporate earnings in 2017 for the S&P 500
My thoughts (talk about cognitive dissonance):
  • a Republican Senate, Congress, and President will do the easy things first; the tough things later
  • the easy things include "huge" corporate tax relief -- even the Dems will come around to this when they see all the sweeteners; shoot, even Pelosi's husband is going to love this (talk about a "conflict-of-interest" story the mainstream media never talks about)
  • the easy things will all be great news for the market
  • the tough things will all be bad for the market but we won't see them until much later, if at all
  • Republicans like to spend money just as much as the Democrats
  • Trump thinks big: you have to spend money to make money
  • the mainstream media will all of a sudden get religion: the national debt is bad. (Apparently under the Democrats, the bigger the debt the better [Krugman]; under the Republicans, the mainstream media will harp about the debt; the national debt is already $20 trillion after Bush-Obama; a story about another one-to-two trillion vs 20 trillion won't have legs; and, by the time we get to $25 trillion, the Trump administration will be nearing its mid-point and the electorate will decide if things are good or bad -- in other words: lots of hand-wringing by everyone over the debt, but that won't stop Congress from spending money)
  • my hunch is that Krugman will still argue that "debt is okay -- the more the better"; the important thing is where the government spends its money as it goes deeper into debt
  • lots of spending on the military
  • Saudi needs lots of stuff: security (military) and technology (petrochemical industry); the US can (and will) provide both
  • entitlement cuts: lots of talk but marginal; and compared to everything else, really, really marginal
  • all that protectionism talk -- counterintuitively will actually help America; Canada, China, Mexico, EU will be falling all over themselves to protect their market share with America
  • energy will be America's advantage over EU, China -- and it will be a huge advantage
  • human psyche affects the economy more than economists understand: a "make-America-great-again" attitude from the top is incredibly better than "Carteresque-gloom-and-doom-wear-a-sweater" attitude; consumer confidence at a 9-year high will drive US economy
  • the first thing Wall Street will be looking at: how fast Trump moves on corporate tax relief
  • the first thing I will be looking at: how fast Trump moves on pipelines
How in the world did Hillary lose this election? The answer is below the graph:
How in the world did Hillary lose this election? Under the Obama administration Wall Street won; Main Street lost. Trump figured that out. 

By the way, that graph above is the 10-year graph. The "max" graph for the S&P is even more "amazing."

Buffett: Stay Calm and Make Bread

From Forbes:
The biggest post-election winner has been Warren Buffett.
Shares of the Berkshire Hathaway investment giant he leads are up 8%, which has boosted his fortune by more than $5 billion—bringing his total net worth increase for the month of November to $7 billion.
Berkshire Hathaway has performed well in part due to a surge in the stock price of Wells Fargo, after a fraudulent accounts scandal dogged the company earlier this fall. Buffett is now the world’s third wealthiest person, behind only Bill Gates and Amancio Ortega, the Spanish retailing billionaire worth $72 billion.

Stay Calm and Make Bread

Homemade bread, herring, Deer Stag Cheddar, and a little bit of Scotch.

Persia Rising -- Saturday, December 3, 2016

Active rigs:

Active Rigs3963189193182

DAPL update: the one-two punch. Winter storm Blanche was a warning shot. The real storm hits this next week. And then we settle into twelve weeks of North Dakota winter. The AP, with a long story, has an update.

Heidi Heitkamp meets Trump: that pretty much sums it up.

OPEC: commentary by Richard Zeits. I don't know how I missed this one. The article is five days old. Fortunately Don caught it; sent it to me. The article itself doesn't say much, but that's in light of the fact that it's an old article. Maybe it read better the day it was posted. Whatever. Having said that, here are my thoughts, now, also five days late:
  • at the end of the day, this is all about Saudi Arabia, not OPEC
  • or maybe, at the end of the day, this is all about Saudi Arabia and Iran
  • those two had to agree for the meeting to end on a positive note for OPEC
  • Saudi Arabia gave "everything" to get this deal
  • Iran gave up "almost nothing" to get this deal
  • Persia rising