Morning In America? December 27, 2017

First things first, football: today is the day that college football playoffs and bowl games reach their stride with three to four bowl games / day. Today there are four games. Whoo-hoo. I may go over to Applebee's and simply hang out. LOL I  hate the names of the bowl games, but some of the match ups should be pretty good:

• Southern Miss vs Florida State, must watch, 12:30 p.m. CT
• Iowa vs Boston College, must watch 4:15 p.m. CT
• Purdue vs Arizona, no interest, but someone must want it, prime time, 7:30 p.m. CT
• Missouri vs Texas, no interest, but someone must want it, prime time, 8:30 p.m. CT

So, Applebee's this afternoon; couch potato this evening. What a great country!

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ISO New England 

After posting, a reader made these observations:

The NE power situation this moment ...
Couple of observations ...
The nuke, coal and GAS fuel percentage has been 'flatlined' all day, potentially indicating the fuel/facilities are maxxed out.
Oil is currently providing 19% of the juice - approaching gas' contribution
Forecast calls for next ten days remaining below freezing (32) all day and night.
Those folks are not only facing catastrophic costs just as winter begins, I'm wondering how secure/reliable their oil supplies are if they are burning through it a such a high rate.

There is a fairly large oil burning plant in Maine that was one of the most vociferous critics to gas pipeline build out.
Easy, in these circumstances, to see why. 

Looks like it's time to turn on the wind and solar farms. Link here.

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The Market

Tesla: And more trouble for Tesla, at least that’s what analysts at KeyBanc are predicting. After conversations with Tesla salespeople across the the country, analysts believe the electric car maker will report 70% fewer Model 3 deliveries for the current quarter than previously expected. Elon Musk said he would deliver 15,000 Model 3 vehicles in December, 2017. Early this morning, CNBC talking head said the number was more likely to be 5,000. Thirty percent of 15,000 is 4,500. Thirty percent of 5,000 is 1,500. If it's 5,000 vehicles, the believers will still believe. If it is less than 2,000 ... watch out....

Bull market: earlier this mornig a talking head on CNBC reminded us that the secular bull market that began in 1949 lasted until 1966. The "great recession" ended in 2012. 2029 is seventeen years from now.

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Where E-Media Shines

The Wall Street Journal has an excellent article on the defeat of ISIS. The dynamic maps are incredible and really bring the story to life. If caught behind a paywall try googling how islamic state's caliphate crumbled wsj. See also this post.

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Energy

Later today: the calendar suggests that API will release its weekly US crude oil inventories later today, but unlike previous weeks, no forecast is provided. Update: the forecast was for a drawdown of 3.8 million bbls; in fact, API shows actual drawdown of 6 million bbls. I use EIA data to follow re-balancing. EIA data should be released tomorrow, unless holiday Monday delays EIA data for one day.

Putting miners back to work: not only will the Trump EPA "repeal" the Clean Power Plan but it looks like Rick Perry, not the sharpest knife in the drawer, has found a way to subsidize coal. LOL.

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Shell Game

Shell confusion. I'm hearing conflicting stories on how the new tax bill will affect Royal Dutch Shell. For the past 36 hours -- including minutes ago (8:03 a.m. CT) on CNBC that RDS will incur a $3 billion charge in the fourth quarter. But now this "breaking story," at 5:33 a.m ET, from thefly.com:

Royal Dutch Shell expects U.S. tax reform to be favorable to Shell.

Royal Dutch Shell plc expects the potential economic impact of the recently enacted U.S. tax reform legislation to be favorable to Shell and to its U.S. operations, primarily due to the future reduction in the U.S. corporate income tax rate from 35% to 21%.

This change in U.S. tax legislation, effective January 1, 2018, will impact Shell's Q4 results but the analysis of the actual impact is not yet complete.

Shell intends to determine and announce the actual impact including any Q4 movements, and balance sheet adjustments, as part of its Q4 results.

However, on the basis of the Q3 financial statements, Shell would have incurred an estimated charge to earnings of $2B-$2.5B primarily driven by a re-measurement of its deferred tax position to reflect the lower corporate income tax rate. This charge represents a non-cash adjustment and will be reflected as an identified item.

How will the average investor know where the truth lies? Follow the share price of RDS-A or RDS-B. By the way, in 2019, the difference between RDS-A and RDS-B will no longer exist, which begs the question: do the "B" shares go away?

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For Those Who Love The Smell Of Diesel 

Diesel? Yup, diesel is the new green!

Welcome to a clean green Australia where they gave up coal to move to diesel. Fear of blackouts means diesel generator sales up 400%. Over at JoanneNova.

You can "believe" that story or you can go with Elon Musk: Tesla's enormous battery in Australia, just weeks old, is already responding to outages in "record" time, from The Washington Post. 

Less than a month after Tesla unveiled a new backup power system in South Australia, the world's largest lithium-ion battery is already being put to the test. And it appears to be far exceeding expectations: In the past three weeks alone, the Hornsdale Power Reserve has smoothed out at least two major energy outages, responding even more quickly than the coal-fired backups that were supposed to provide emergency power. Tesla's battery last week kicked in just 0.14 seconds after one of Australia's biggest plants, the Loy Yang facility in the neighboring state of Victoria, suffered a sudden, unexplained drop in output.

But this is the real story:

Fed by wind turbines at the nearby Hornsdale wind farm, the battery stores excess energy that is produced when the demand for electricity isn't peaking. It can power up to 30,000 homes, though only for short periods — meaning that the battery must still be supported by traditional power plants in the event of a long outage. 

Astute readers will know why Australia needed batteries in the first place and why their spot electricity prices are surging.

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Back to the Bakken

Active rigs:

$59.44→	12/27/2017	12/27/2016	12/27/2015	12/27/2014	12/27/2013
Active Rigs	53	41	62	173	187

RBN Energy: Alberta gas production tests takeaway capacity.

Western Canadian natural gas producers are increasingly facing oversupply conditions and price volatility. While competition and pushback from growing U.S. shale gas supply continues to be a factor, producers are now also contending with fresh problems closer to home — namely transportation constraints right where production is growing the most, in central Alberta.

This fall, the Alberta market experienced extreme bottlenecks that left production stranded and sent area gas prices reeling. The ramp-up of winter heating demand has since helped ease the constraints, but the problems are likely to return in the spring when demand is lower, leaving producers exposed to the risk of severe price weakness again in 2018 and limited in their ability to grow supply. Today, we continue our look at what’s behind the local constraints and the implications for production growth and prices in Western Canada.

Enbridge: growth portfolio is underappreciated -- Morningstar.

Enbridge is positioned to benefit from growing oil sands supply dynamics with its Mainline system and regional oil sands pipelines. The regulated Mainline system generates attractive tolls and represents approximately 70% of Canada’s pipeline takeaway capacity. The system offers refinery access to various markets, adding to the network’s attractiveness.

While crude pipelines are Enbridge’s bread and butter, the company operates a diverse energy portfolio. Gas distribution operations benefit from regulated returns and provide the company with reliable cash flows. Enbridge also operates natural gas pipelines and processing assets that supplement its crude pipeline network. Future natural gas pipeline projects benefit from long-term contracts that are tied into emerging projects.

Recently, Enbridge finalized its acquisition of Spectra Energy. The deal positions Enbridge to diversify its operations toward natural gas. The company intends to increase its annual dividend and has maintained an average distributable cash coverage ratio of approximately 3 times over the past three years.

Overall, Enbridge is in a strong position to benefit from the growing oil sands supply, which we expect to outstrip pipeline takeaway capacity in the near term. We expect the Line 3 Replacement to help; we project it to be in service by the end of 2019 and fuel tremendous growth for the company. We believe the stock is undervalued based on the company’s vast growth portfolio, highlighted by the lucrative natural gas projects associated with the Spectra acquisition and the Line 3 Replacement.

Enbridge Energy Partners: 10% dividend just got safer -- Motley Fool.

Not only that, but management expects the payout to grow at around 3% per year through 2020. Investors were rightly shocked by the news, sending shares up by as much as 10%. Enbridge Energy Partners and its parent, Enbridge, Inc. (NYSE: ENB), have made multiple moves in recent years that would leave anyone's head spinning. But the ship seems to have been righted, and the stock's sky-high yield appears safe for the foreseeable future in light of the outlook's key details. In fact, for venturesome investors, EEP is a great high-yield stock to consider heading into the new year. 

COP: did COP's earning growth outperform the industry? -- Simply Wall St.

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