Making America Great Again -- August 7, 2017

Cove Point LNG, Maryland -- open for business -- later this year. Link here.

Dominion Energy said work on the Cove Point LNG export facility near Lusby, Maryland is 95 percent complete and on track to start service in the fourth quarter of 2017.

All of the major equipment has been set in place with the focus now turning on commissioning activities, Dominion said in its July report.

All of the five tower cranes used to transfer equipment onsite have been taken down and transported offsite, Dominion said, adding that all the barge loads and heavy haul deliveries have been transported.

Once it is completed, the liquefaction facility being built at its existing LNG terminal will have the capacity to produce 5.25 million metric tons of liquefied natural gas per year.

The production capacity has been fully subscribed with Pacific Summit Energy, a U.S. unit of Sumitomo Corporation, as well as with GAIL Global (USA) LNG, a U.S. unit of India’s utility GAIL, under 20-year terminal service agreements.

According to this site, it appears that the US will increase LNG exports from almost zero in 2016 to almost 4 trillion cubic feet by 2020 (if I'm reading the graph correctly).

If I did the math correctly, 4 trillion cubic feet LNG equals about 80 million metric tons LNG. Of that 80 million metric tons, Cove Point will account for 5.25 million metric tons (again, of course, if I did the math correctly). If you want to check the math, start with this data point: 1 million metric tons LNG = 48.7 billion cubic feet NG.

Whether or not I'm reading the graph correctly or if I did all the math correctly, at least I have a feel for the size of Cove Point vs the total amount of LNG the US will export in the out years.

**************************

The Movie Page

Wow, wow, wow. I never expected this. This was supposed to be the summer blockbuster -- The Dark Tower.

It looks like a phenomenal dud -- The Guardian.

Four New Permits; Four DUCs Reported As Completed -- August 7, 2017

Active rigs:

$49.25↓	8/7/2017	08/07/2016	08/07/2015	08/07/2014	08/07/2013
Active Rigs	59	34	73	192	181

Four new permits:

• Operator: BR
• Field: Elidah (McKenzie)
• Comments: BR has permits for a 4-well pad in NENW 14-151-97. These wells will be east of the BR Haymaker wells if they run south. There is currently only one horizontal in that area, but it runs from the south to the north, a CLR well, #19715, Don 1-23H, a nice well.  

On permit renewed:

• 31782, Denbury, a CHSU permit in Bowman County

Four producing wells (DUCs) reported as completed (check on #20282 in a couple of months):

• 30869, 582, BR, Curtis 21-16 MBH-2NH, North Fork, t7/17; cum --
• 31974, 2,578, Statoil, Lougheed 2-11 7H, Todd, t7/17; cum --
• 31977, 2,279, Statoil, Lougheed 2-11 3H, Todd, t7/17; cum --
• 31978, 2,008, Statoil, Lougheed 2-11 4TFH, Todd, t7/17; cum --

EOG transferred four Horse Camp wells to Petroshale:

• 20090, 20091, 20243, and 20244, all in Dunn County

Markets Have Another All-Time Record Close, T+199 -- August 7, 2017

Officially, it's T+200, but my number is T+199.

S&P: on track to record four gains in five days. It did. Closes at all-time record high.

Dow 30: ninth consecutive record close; 10th consecutive day with trading gains day-over-day.

Nasdaq: star of the show all day long.

Soundbites on records: records based on fundamentals. Records based on earnings. 

WTI: CNBC talking head says OPEC might "cut the cut." Now, "everyone" seems to be saying that OPEC was unable to make any production cuts. Another talking head says OPEC might be saved by "Venezuela." I guess they forget that Venezuelan heavy oil = Canadian heavy oil. The talking head says to watch Venezuelan oil production/exports; maybe, maybe not. I would recommend watching Canadian oil. And OPEC heavy oil = Venezuelan heavy oil. Could OPEC be looking to beat Canada to the punch when/if Venezuela implodes? Might OPEC be thinking the same way as the analyst: someone (Canada or OPEC) has to replace Venezuelan heavy oil. The US summer driving season ends in a month or so. A strong argument can be made that the price of WTI will trend lower going forward.

Proof? Any proof that Canada might take up the Venezuelan slack. Yup. Here at the Oil & Gas Journal:

The number of active rigs drilling worldwide climbed by 69 month-over-month in July to average 2,041, according to Baker Hughes data. The count was up 629 year-over-year.

Canada provided most of the monthly rise, gaining 48 rigs in July compared with its June average to tally 198, an increase of 104 year-over-year. It marked the second straight month in which Canada led global gains, reflecting a better-than-expected seasonal ramp up in drilling while US rig count growth slowed.

The elevated Canadian count compared with a year ago prompted the Petroleum Services Association of Canada (PSAC) last week to lift its forecast for total wells drilled in the country during the year to 7,200 from 6,680.

PSAC now estimates 3,604 wells will be drilled during the year in Alberta, up from 1,900 in the original forecast. In British Columbia, it expects 580 wells will be drilled, up 300 from the original forecast.

Venezuela? Rig count edged up by one, now even with last year's number. Same link as above.

Avis: big miss on both top and bottom lines. Shares plunge 10% in after-hour trading. Guidance outlook not particularly good. Will talking heads mention the 800-lb gorilla in the room? Uber. The 750-lb gorilla? Lyft. My son-in-law is a great --- ah, the talking head just mentioned Uber -- example ... my son-in-law is a great example. Works for international company out of London, incorporated in Bermuda, US HQ in New York, major regional office in Atlanta and he travels all the time. He ground transportation preference: Uber. Both he and our daughter love Uber. In the "old" days he would have been a loyal Hertz customer. On their recent week-long trip to Chicago, the two of them, no rental; took Uber instead. 

Prince Salman's Plan "On Hold" -- August 7, 2017

Updates

August 13, 2017: the headline suggests things are going better for Saudi Arabia but data suggests Prince Salman's plan is still fantasy. From Bloomberg, data points:

• with price of oil recovering (sort of), the kingdom's total revenue climbed 6%
• income from crude oil jumped 28%
• but, revenue from non-oil sources fell by 17%
• spending dropped 1.3%
• that non-oil revenue? taxes and fees!
• despite the government’s efforts to decrease its reliance on oil income, its share of overall revenue rose to 62 percent in the second quarter, compared to 51 percent in the same period last year, reflecting the rise in oil prices. Non-oil income fell in the same period largely because of a decline in “other revenues,” which include returns on investments by the central bank and the Public Investment Fund. Revenue collected from customs taxes and and other taxes, including the zakat religious levy, also declined
  

Original Post 

I track the "Prince Salman Plan" at the sidebar at the right.

"On hold."

From Bloomberg:

The kingdom is converting thousands of square kilometers of sand into new cities as it seeks to diversify away from crude, create jobs and boost investment.

In the past month alone, the world’s biggest oil exporter has announced two major developments -- one covering an area bigger than Belgium and another almost the size of Moscow. That’s on top of plans to build a series of so-called economic cities -- special zones in logistics, tourism, industry and finance, an entertainment city and a $10 billion financial district.

The overall progress with the economic cities has been very slow, even before the collapse of the oil price,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “Since then, the pace of development has moderated even further with a number of projects being placed on hold.”

"The plan" has gone from "very slow" to "moderated even further with a number of projects being placed on hold."

Solar energy is one of those projects being placed on hold; see earlier posts.

**********************************

Bald-Faced Lie  (Bold-Faced Lie?)

James Comey stated there were no records on the Bill Clinton - Loretta Lynch meeting on the tarmac. On Friday, the Justice Department released 413 pages of documents related to the meeting. Some argue that James Comey lied. Unlikely to be any media interest. I doubt it will be in his book, either.

Not All Is Going Well In The Solar Patch -- August 7, 2017; New Tesla Bonds? Junk Rated

Updates

August 12, 2017: apparently Tesla's JUNK bonds went at $1.8 billion for 5.3%. 

August 11, 2017: Tesla's JUNK bonds are over-subscribed; will pay 5.25%.

Original Post

Junk: Phil LeBeau, the #2 cheerleader (after Musk Melon) for Tesla was just on CNBC announcing the $1.5 billion bond Tesla offering. The bonds have received a JUNK rating. I could have missed it, but I don't think Phil LeBeau mentioned these bonds have a JUNK rating. Link here.

Following the announcement, Standard & Poor's reaffirmed its negative outlook for the automaker and assigned a "B-" rating for the bond issue - deep into junk credit territory. S&P also maintained its "B-" long-term corporate credit rating on Tesla.

Now, back to the solar patch story.

Now that President Obama is no longer in office, it appears that the mainstream media is feeling a bit more comfortable reporting stories suggesting not all is going well in the solar patch.

From the StarTribune (Minneapolis/St Paul):

• Sunvia: a Georgia solar-panel and solar-cell maker, filed for bankruptcy in April, 2017; Sunvia is majority-owed by a company in Hong Kong
• SolarWorld: Oregon, joined the suit; SolarWorld is a German company
• Ten K Solar: Minnesota's only solar-panel maker of any size; Bloomington; announced in May, 2017, it was getting out of the solar-panel business
• Heliene: based in Sault Ste. Marie, Ontario; was left "out in the cold" (perhaps better said, left in the dark) when Silicon Energy, which manufactured panels for Heliene closed down

Meanwhile, St Louis Post-Dispatch reports that St Louis area companies are reeling from the bankruptcy filing of Sunvia.

I've always felt the solar panels being sold for residential rooftops reminded me of the aluminum siding craze in Williston, ND, when I was growing up there in the 50's and 60's.

***************************
Note For The Granddaughters

Over the weekend I read a note suggesting that for three-year-olds, the "great room" in Goodnight Moon was particularly superb. I forget where I read that; perhaps in the "Review" section of The Wall Street Journal, but most likely somewhere else. Having toddlers name everything they see in the "great room" is quite compelling.

Today, coincidentally, I get this daily update from TutorTime where Sophia attends "school" and loves it:

Goodnight Moon, Margaret Wise Brown

GM Losing "Some $9,000" On Every Bolt It Sells, But It's Actually Much Worse -- Financial Times -- August 7, 2017

I'm re-posting the Financial Times story on EVs (see link below). I don't think the writer could have spelled it out any simpler:

GM believes it is losing "some $9,000" on every Bolt it sells. 

What can that possibly say about Tesla's Model 3? But note also, even with government subsidies, EVs cost significantly more than ICEV by a wide margin. EVs are simply not mainstream yet, and the tea leaves suggest that will not change for at least ten years.

From an earlier post:

And yet another article on the downside of EVs: Electric vehicle realities in the Financial Times.

In the spirit of non-consensus thinking, it’s time for FT Alphaville to ask just how green electric cars really are. Are policies to ban diesel and gasoline cars at some arbitrary point in the future likely to unleash a barrage of negative externalities that no one’s yet even thought about?

Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.

The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.

With numbers crunched, a comparison between the Chevy Bolt EV and two equivalent ICEVs, the Chevy Sonic and the Open Astra, over 100,000 miles, shows that there’s no denying EVs are still more expensive than ICEVs.

Three points come up in particular.

1) Excluding subsidies, the net expense difference is about $16,000 in the US, $18,500 in Germany and $13,200 in France.

2) After subsidies, the difference is about $6,600 in New York State, $13,900 in Germany and $6,000 in France.

3) Even if electricity were free (which of course it isn’t), after subsidies, the difference in cost of ownership in NY would be $3,400, $3,200 in Germany and $600 in France.

With respect to the Bolt specifically, the analysts note GM believes it’s losing some $9,000 with every Bolt it sells. The automaker would need manufacturing costs to be cut by about $14,750 — 34 per cent — to make the vehicle competitive with GM’s Opel Astra in France.

I'm re-posting this story because there are so many other data points from the article. For example:

• the numbers above can thus be adapted for a “What If…” scenario, wherein GM actually begins selling the Bolt at average corporate profitability
• in that case the numbers get even more bleak. Excluding subsidies, a Bolt would be $26,900 more expensive in the US than the equivalent ICEV, $29,300 more expensive in Germany and $24,000 more expensive in France

More:

• there are additional manufacturing costs for “Pure Play” EV vendors like Tesla, meanwhile, because unlike integrated auto manufacturers, they can’t use many of the same components from ICEV production, limiting economies of scale
• but the common denominator for all EVs is the cost of batteries, say the analysts, since that’s a commodity. It’s also the key factor behind the faster rate of depreciation of EVs versus ICEVs

More:

• here, arguably, some significant issues are being overlooked. For example, while the consensus view is that EV battery prices have been experiencing price declines over the past few years (in the order of 8 to 14 per cent), the analysts themselves could not find any evidence to support that position
• some confusion is probably also occurring on the comparables. While some reports claim battery cells cost $145/kWh, the analysts stress this is not the same thing as a battery pack, which comes as a fully assembled unit with wiring, electronics and a cooling system. In the case of the Bolt, GM lists the cost of its battery pack as $15,734, so about $262/kWh

And this:

• the analysts further suspect it may be part of GM’s commercial strategy to subsidise the battery packs so as not to show EV buyers that a replacement battery is overwhelmingly expensive.
• given the Bolt comes with a 100,000-mile guaranty and an 8-year warranty on the battery, however, the analysts believe it’s highly unlikely many consumers will spend $15,734 (plus labour) to replace the battery on an eight-year-old EV. This allows GM to sell them below cost, since it’s unlikely to sell many replacements. Accordingly the analysts note: “We believe that most likely the actual cost of the battery pack of the Bolt is much higher than $15,734”
• regardless, when it comes to degradation, GM's own expectation is that depending on use, the battery may degrade as little as 10% to as much as 40% of capacity over the warranty period
• overall, batteries currently don’t last much more than 100,000 miles and yet 18,300 miles per year is the average UK mileage for a company car. Assuming a normal distribution, the BCA analysts predict up to half of all EV drivers may experience degradation sooner than the eight year guarantee because of surpassing the 100,000-mile limitation on the warranties (comment: a flaw in this argument: most agree that EVs will be bought as a second or third car and used for local trips; not long trips; thus average mileage will be will less than 18,000 miles per year)

I have to quit here. But I haven't even gotten to the "most important" part of the article. See the linked article for more. If behind a paywall, googling it will get you there.

Re-Posting: Canada's "Permian Of The North" Now In Question -- August 7, 2017

I'm re-posting an earlier post. I had forgotten how "big" the Montney was. On May 20, 2017, the Montney, as a natural gas play, described as the "Permian of the North" was said "to be back."

With the cancellation of the Pacific Northwest LNG project, the Montney is now said "to be in question." Mr Trudeau is quickly learning it's hard to govern a socialist-leaning, faux-environmental country.

From earlier:

Boom and bust: canceled LNG project casts shadow over Canada's biggest shale play.

Petronas' decision to cancel its Pacific NorthWest LNG project is a blow to the growth outlook for Canada's largest shale play, eliminating a potentially huge source of future gas demand.

Gas from the Montney shale play in western Canada would have supplied the C$36 billion ($28.7 billion) project in northern British Columbia. The project, majority-owned by Malaysia's Petronas, would then have shipped 12 megatonnes per year of liquefied natural gas to Asia.

Instead, state-owned Petroliam Nasional Bhd (Petronas) subsidiary Progress Energy will keep developing and selling gas from its vast Montney position into a North American market where prices have been languishing at historically low levels.

The Montney is linked at the sidebar at the right (same link as above).

Filloon Updates The Midland -- Similar To Previous Updates -- August 7, 2017

Summary over at SeekingAlpha:

• new well completions continue to produce more oil and this will continue to pressure the US Oil ETF (USO)
• production improvements more than offset the increased costs
• completions using more than 10 million lbs of proppant are improving economics in the Midland Core
• the Midland core continues to be one of the best areas in the US, and this is why operators like PXD are hedging below $50/bbl

Update On Permian Natural Gas Processing -- Part 2 -- RBN Energy -- August 7, 2017

Active rigs:

$49.11↓	8/7/2017	08/07/2016	08/07/2015	08/07/2014	08/07/2013
Active Rigs	58	34	73	192	181

RBN Energy: Permian natural gas processing plants and NGL pipelines, part 2.

WTI: down 1%; but 10-year Treasury bonds up sharply. But is that the reason. Over at Reuters, oil slide from nine-week high as traders take another look at OPEC's cuts (wink, wink).

Oilprice: "nothing to see here" -- frackers ignore rising well decline rates. Oilprice.com notes what is going on in the Permian; mentions something similar in the Eagle Ford; but, interestingly, the Bakken is not mentioned.

Boom and bust: macroeconomic risks for the oil industry -- John Kemp, Reuters oil analyst. Long article; doesn't say much but does suggest, to the newbie, how an oil sector recovery begins.

Cramer (CNBC): WTI to remain at $50 for years (not 2, 3, or 4 years, but at least five years).

Boom and bust: canceled LNG project casts shadow over Canada's biggest shale play.

Petronas' decision to cancel its Pacific NorthWest LNG project is a blow to the growth outlook for Canada's largest shale play, eliminating a potentially huge source of future gas demand.

Gas from the Montney shale play in western Canada would have supplied the C$36 billion ($28.7 billion) project in northern British Columbia. The project, majority-owned by Malaysia's Petronas, would then have shipped 12 megatonnes per year of liquefied natural gas to Asia.

Instead, state-owned Petroliam Nasional Bhd (Petronas) subsidiary Progress Energy will keep developing and selling gas from its vast Montney position into a North American market where prices have been languishing at historically low levels.

The Montney is linked at the sidebar at the right.

Coal: I'll be posting this as an update to an earlier post, and may re-post it as a stand-alone post. This is a big story over at notalotofpeopleknowthat.com: German's long goodbye to coal despite Merkel's green push.

Tesla: this tells me all I need to know about Musk Melon lowering the price of the Model X. Tesla is planning a $1.5 million bond offering to support Model 3.

And yet another article on the downside of EVs: Electric vehicle realities in the Financial Times.

In the spirit of non-consensus thinking, it’s time for FT Alphaville to ask just how green electric cars really are. Are policies to ban diesel and gasoline cars at some arbitrary point in the future likely to unleash a barrage of negative externalities that no one’s yet even thought about?

Brian Piccioni and team at BCA Research offer a good starting point to our questions on Thursday, in a report entitled Electric Vehicles Part 1: Costs of Ownership.

The bad news for EV fans is their work determines that the cost of ownership of an EV still far exceeds that of an internal Combustion Engine Vehicle (ICEV), even after subsidies are accounted for.

With numbers crunched, a comparison between the Chevy Bolt EV and two equivalent ICEVs, the Chevy Sonic and the Open Astra, over 100,000 miles, shows that there’s no denying EVs are still more expensive than ICEVs.

Three points come up in particular.

1) Excluding subsidies, the net expense difference is about $16,000 in the US, $18,500 in Germany and $13,200 in France.

2) After subsidies, the difference is about $6,600 in New York State, $13,900 in Germany and $6,000 in France.

3) Even if electricity were free (which of course it isn’t), after subsidies, the difference in cost of ownership in NY would be $3,400, $3,200 in Germany and $600 in France.

With respect to the Bolt specifically, the analysts note GM believes it’s losing some $9,000 with every Bolt it sells. The automaker would need manufacturing costs to be cut by about $14,750 — 34 per cent — to make the vehicle competitive with GM’s Opel Astra in France.

Do the dots connect?

• Warren Buffett's Berkshire Hathaway reports a loss on it insurance division
• new "attitude" by millennials as evidenced in car insurance commercials: "What good is car insurance if you can't use it?"

Solar: This will test the grid -- will be interesting to observe ...