Monday, February 26, 2018

Must-Read Article From Killdeer, North Dakota -- Great Story -- Nothing About The Bakken -- February 26, 2018

A reader sent me this story from Killdeer Mountain Manufacturing. Anyone from North Dakota living west of the Missouri River will love it; everyone should read it. Great story. My hunch: During my 30+ years in the USAF, I probably flew in aircraft that used components made by Killdeer Mountain Manufacturing.

Article here.

Huge "thank you" to the reader sending me the article.

For All The Truck Drivers

Girl on the Billboard, Del Reeves

Futures Mean Squat ... But ... February 26, 2018 -- Six More Reasons Why The Market Is Surging; And A Bonus: The Apple Page


February 27, 2018: percent of S&P 500 firms beating sales estimates highest in over a decade

Later, 8:08 p.m. CT: by 9:00 p.m. ET, Dow futures were down to a more believable 26 points.

Original Post

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship-related decisions based on what you read here or what you may think you have read here.

Now, the post.

Futures mean squat. Futures for the following business day start to be seen after 6:00 p.m. Eastern Time. Generally, early in the evening, especially after a particularly good day (or bad day, I suppose) futures may remain high, which I assume is a bit of a "hangover" from the day. So, if history is a guide (using that same phrase again), we won't have a good idea for tomorrow's market until well after midnight.

But, if the futures right now mean anything ... it's going to be another huge day tomorrow.

If there is another huge day tomorrow, I think I can safely say that there will be many pundits tomorrow who will say they saw this coming -- "it always happens after a 10% correction." And, remember, we had a 10% correction. I haven't watched cable television all month (except NASCAR and some other minor exceptions) so I don't know what the buzz on Wall Street is, or what the talking heads are saying about the market now.

However, some time ago, I presented "sixteen reasons" why the market was surging then. I then followed it up with "eight more reasons" why the market would continue to surge. I then added "another reason."

I am now going to add "five more reasons" why the market will continue to surge.
  • In the short run, maybe just a day or two or week or two, the tea leaves suggest a reason for buyers to buy: the volatility index is back to "zero" or some such ridiculously low number.
  • The real reason for the market surge today (actually there were two and they were both related): the annual Berkshire Hathaway letter and the treacly Becky Quick-Warren Buffett interview.
  • Warren Buffett gave the signal that everything was okay in the market and it was safe to buy.
  • Warren Buffett said (to paraphrase) that anyone investing in bonds was an idiot; that will move a lot of money from bonds to equity.
  • AAPL shares gave a clear signal that tech was back (it came close to reaching its all-time high). Note: many analysts no longer consider Apple, Inc, a tech company.
  • The bond market (again, actually there were four reasons with regard to the bond market)
  • First, Warren Buffett called ... well, see 2b above
  • Second, when the 10-year Treasuries did hit 3% on yield, and the world did not come to an end, that calmed the market
  • Third, as the market panicked with 3% yield on ten-year Treasuries (and the Dow corrected by 10%) more and more folks came out of the woodwork to tell us that "this time was different." Don't worry about the ten-year Treasury yield; we will all do just fine.
  • Today, and maybe this is the other reason (the first reason being Warren Buffett's letter and treacly interview) the market surged today: the ten-year Treasury dropped back to a 2.8% yield.
  • the 10% correction was really, really overdone; folks are still trying to sort that out; so now the pendulum is swinging the other way; but it's an open-book test: after every correction, there's a surge.
  • percent of S&P 500 companies beating sales estimates highest in over a decade. 
So, now we have these reasons for a surging bull market:
  • sixteen reasons
  • eight more reasons
  • one more reason
  • six more reasons
The next "GDP Now" estimate comes out tomorrow. Let's see if we have yet another reason for the market to surge.

So, having said all that, what are futures right now? Hold on to your hat. Dow futures are up almost 500 points. But, as I said earlier, this is most likely a hangover from today:

I said I had no plans to watch CNBC or any television through the month of February. I have gotten so used to not watching CNBC I may continue my little boycott.

But whether I do or not, only two more days in February.

The Apple Page

From Macrumors:
First day pre-orders for the HomePod, which became available late last month, were higher than day one pre-orders for several other smart speakers including the Sonos One and the Google Home Max in the United States.

The data was shared by NPD Group and was gathered using NPD's Checkout service, which tracks consumer purchase behavior across multiple retailers.  
HomePod beat out all other smart speaker first day pre-orders with the exception of the Amazon Echo Dot.

Random Look At Well Demonstrating An Unusual Bakken Phenomenon -- February 26, 2018

Five Petro-Hunt wells have been recently fracked; see graphic below. This is the "USA" well that came off the confidential list today:
  • 28464, 1,630, Petro-Hunt, USA 153-96-24C-13-5H, Keene, Bakken/Three Forks, t10/17; cum 45K 12/17; (#18356)

When these Petro-Hunt wells (DUCs) came off the confidential list, I was curious how an older well would do. This well was fracked back in 2010. I am hoping that someone can tell me this well was recently re-fracked. There is no sundry form in the well file suggesting it was re-fracked; and FracFocus has no data suggesting it was re-fraced:
  • 18356, 1,029, Petro-Hunt, USA 153-96-24D-13-1H, API - 33-053-03060, Keene, Bakken/Three Forks, t8/10; cum 323K 12/17, recent production:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN/THREE FORKS12-201731218102175713683520934850143
BAKKEN/THREE FORKS11-201730217392177511723307032511350
BAKKEN/THREE FORKS10-201710768775371295822308216
BAKKEN/THREE FORKS9-2017122370000
BAKKEN/THREE FORKS8-20172514411566503386103687
BAKKEN/THREE FORKS7-20172818231555740389303702
BAKKEN/THREE FORKS6-20173012481154612304202840
BAKKEN/THREE FORKS5-20173114921516532335703141
BAKKEN/THREE FORKS4-20173014761429522307402865

The production data after this well was originally fracked, back in 2010:

BAKKEN/THREE FORKS1-2011318862889996911598113810
BAKKEN/THREE FORKS12-201031972796909851322812784227
BAKKEN/THREE FORKS11-201030896589958451173197411780
BAKKEN/THREE FORKS10-20103110838109459161447255788677
BAKKEN/THREE FORKS9-2010309682961872115395264712538
BAKKEN/THREE FORKS8-2010281285512405327815402015185

Again, there is no evidence that this well was re-fracked but the recent production data suggests that it was. It should be noted that the Charlson field is a particularly good field with some incredibly good wells, suggesting extensive natural fracturing.

WTI At $64; Two New Permits; Four DUCs Reported As Completed (Unremarkable Results) -- February 26, 2018

Active rigs:

Active Rigs574038121193

Two new permits:
  • Operators: Slawson, Enerplus
  • Fields: Big Bend (Mountrail County); Eagle Nest (Dunn County)
  • Comments:
Four producing wells (DUCs) reported as completed:
  • 28464, 1,630, Petro-Hunt, USA 153-96-24C-13-5H, Keene, Bakken/Three Forks, t10/17; cum 45K 12/17; (#18356)
  • 28945, 589, Petro-Hunt, Kostelnak 145-97-32D-29-3H, Little Knife, t1/18; cum -- ;
  • 32977, 30, BR, Dodge 3B MBH, Dimmick Lake, t1/18; cum --;
  • 32979, 32, BR, Dodge 3D MBH, Dimmick Lake, t12/18; cum -- ;
Two abandoned producing wells:
  • CLR: two Anderson wells in Williams County (#31602; #31604)

Great Lakes Ice Coverage -- February 26, 2018

Don suggested the idea. Thank you.

Historical ice coverage of the Great Lakes:
In the chart above, if you can see a trend, I'm impressed. After Algore's book came out in 2006, the surface ice coverage over the Great Lakes was greater in ten (10) of twelve (12) years. And not by just a trivial amount. Wow, talk about perfect (and, lucky) timing. He could not have done as well had he been playing the slots in Las Vegas. I think my 2018 box might be a bit "short."

Great Lakes ice coverage of as of yesterday. This year's coverage actually looks more extensive than in 2007 but overall is not. Why? It appears the difference is Lake Superior. Link here. Remind me to check this link at the end of the season.

If you are having trouble with cognitive dissonance when it comes to "Algore experts" on global warming and what reality is telling you, see this post.

Another Random Look At A Strange Phenomenon In The Bakken -- February 26, 2018


September 15, 2018: checked FracFocus again; no data to suggest this well was re-fracked; see this post. 

March 26, 2018: production data updated --

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Original Post 

Wow, wow, wow, take a look at this post and then the production update below.

FracFocus has no data that this well has been re-fracked.

From the linked post above: "So, now, pick another horizontal. Let's pick #19397."
  • 19397, 417, CLR, Buelingo 1-20H, Elm Tree, t3/11; cum 309K 7/18; (note, it's even started flaring again):
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

I selected that well simply because of its location near wells that had been recently fracked (see its location at the graphic at the linked post above).

As of November, 2017, it was too early to say what would happen but considering that the well produced more oil in 3 days than it had produced in 30 days prior to being taken off-line was quite interesting.

So, here we go. We now have another month of data:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

When I see a production number like this (26,355 bbls in one month) I can only assume the well was fracked or re-fracked. In this case, FracFocus has no data that this well was fracked; there are no sundry forms in the file report suggesting this well has been re-fracked.

Interestingly enough, this well didn't even produce this much oil when it was initially fracked:


I'm not saying this well was not refracked but I haven't seen any sundry form or FracFocus data to suggest it wasn't. But if it wasn't, this is quite stunning. The next question, of course, is how sharp the decline will be.

For The Archives -- EIA's Forecast Regarding US Shale -- February 26, 2018

For the archives.

Clicking on the following link will result in a pdf being downloaded: Annual Energy Outlook 2018. Among many graphics, these are two that jumped out at me:

By the way, look at this graphic and see what major "play/basin/field" is missing from the graphic below. Wow, how things have changed in only two years.

From the EIA, August 22, 2016:

Global Warming Slams Europe -- This Is At Least The Third Such Winter Since 2013 -- February 26, 2018

Before we get to the European cold spell (see below), note that iceagenow is reporting record amounts of snow in northern Japan:
The snow depth in Horokanai, in northern Japan’s Hokkaido, has been measured at 3.124 meters (slightly more than 10 feet), setting a new local record.
It beats the previous record of 3.119 meters set in 1970.
I've been to Hokkaido once. It was late fall, and quite cold, with a bit of snow; glad I wasn't there when the "real snow" falls.

Now, back to global warming slamming Europe. From AP News:

Late last week we anticipated this:
Global Warming Hits Europe

We noted this was going to happen earlier this week. From iceagenow.

We were stationed in Germany, England, and Turkey for 13 consecutive years. In addition, I spent another one year there on my own. I do not recall temperatures ever being this cold. I'm sure we had some cold spells and there may have been winter storms that I have forgotten but I honestly do not recall the kinds of winter storms that have been hitting Europe the last seven years. Temperatures, in Celsius, across Europe today:

Now the headlines:

If you are having trouble with cognitive dissonance when it comes to "Algore experts" on global warming and what reality is telling you, see this post.

There It Is: WTI With A "64-Handle" -- February 26, 2018 -- 11:33 A.M. Central Time.


Later, 1:07 p.m. Central Time: the Dow is now up 364 points. 

Later, 12:12 p.m. Central Time: holy mackerel, Batman, the Dow is now up 340 points. See this post for some misguided analysis.

Later, 12:05 p.m. Central Time: literally, less than five minutes after I posted the seven reasons why crude oil was going to go higher (in price), Mike Filloon says the same thing -- "oil prices are headed higher as we go into driving season."  Folks should remember that Bakken producers have said -- pretty much across the board -- that they are cash neutral at $45-WTI.
Oil prices have continued to head higher since June of last year when WTI dipped below $43/bbl. It is impossible to be certain as to the trajectory of oil, but there are a number of factors that could push oil higher. The recent pullback seems to be an opportunity going into what could be a very good driving season. We are bullish oil prices into the 2018 driving season. WTI could move as high as $75/bbl. 
World GDP growth is almost at 4%, the best since 2011. Expansion of trade has been seen across a number of developed countries. For the first time in quite a while, confidence is driving investment. The Philly Fed manufacturing capital expenditure outlook is near an all time high. Business investment is up 6.3% yoy in Q4, and we think this will accelerate in 2018.
The financial markets are in the best shape since the crisis, and the removal of overly restrictive regulations are positive. Labor markets continue to tighten across much of the developed world. We think inflationary pressures will be held in check, and rates will not increase at current estimates.
We think pricing pressures are a 2019 event, followed by wage increases. Commodities are cheap in comparison to equities, and this should continue as long as policy remains loose. Financial markets have decent liquidity, and this is a positive for oil.
Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship-related decisions based on what you read here or what you think you may have read here.

Original Post
Lots of reasons for $64-oil, of course, but headline news suggests it is due to:
  • Libya; and, 
  • Venezuela
Nope and nope. It's due to speculators. LOL. Other reasons:
  • cheap dollar
  • inventories at Cushing plummeting
  • Saudi says it will keep cuts in place despite better prices
  • experts say we are now supply/demand balanced
  • US driving season is almost here
  • US economy firing on all cylinders
  • Uber, Lyft pulling folks from public transportation 
  • 10-year Treasury yield lowest since February 14, 2018 (around 2.8% and even if the yield hits 3%, economists and other experts discount the effect a 3%+ yield on ten-year T-bills will have on the economy)
Having said that, the US has placed new sanctions on Venezuela and the Venezuelan president has said, in the past, he would ban his country's crude oil exports to the US if more sanctions were imposed.

My hunch: Venezuela will export oil to Mexico (rather than the US), and Mexico will export that oil to the US for refining into gasoline, which Mexico will then import back into their own country. Think about it this way: Boston imported natural gas from Russia (despite sanctions) when the Marcellus/Utica were located in Beantown's backyard.

By the way, US refiners need heavy oil; that's why the Keystone XL from Canada (home of heavy oil/oil sands) was so important. With the loss of heavy oil from Canada and Mexico and Venezuela, the US refiners are in deep doo-doo. LOL. Nope. But we're going to hear more stories of Canadian CBR

No, I am not making that up. See this post from December 31, 2016:
The original story was at this post.

Now, additional data is provided, from Platts. Data points:
  • Mexico's record-low refiner production and growing consumer demand: pushed US gasoline exports there to a new high in October
  • gasoline exports to Mexico climbed 1.86 million bbls to 12.08 million bbls in October
  • the previous peak was 11.42 million bbls in December, 2010
  • Mexico is by far the largest importer of US gasoline; take 46% of the 177 million bbls of finished gasoline exported by the US in October, 2016
  • exports push the price of gasoline higher
  • outright price of Gulf Coast pipeline-delivered conventional gasoline, $1.71, highest price since August 18, 2015
  • prime reason for increased exports to Mexico: chronic underinvestment in downstream investments over the years
  • Mexico's refined product production is at its lowest point since Pemex started tracking data in 1995
  • this, despite domestic sales climbing to a record high
  • Mexico is expanding its main import terminal, the port of Tuxpan on Mexico's east coast
This won't be the top energy story of 2016, and it may not even make the top ten list, but it's a huge story and it's going to get much bigger.  
What makes this incredibly important and timely is this: in July, just a few months from now, Mexico will elect a socialist who has said his top energy priority is to re-look at all energy "dealings" between the US and his country. Andres Manuel Lopez Obrador (who looks a bit like an older Jamie Dimon) wants to turn his country into a refining country, instead of simply producing oil.

Good luck. My hunch: Obrador is sending his energy minister to Venezuela to see how to do things the "left" way.

As I've said earlier: after the July, 2018, Mexican presidential elections, California will be begging to have the wall built.

By the way, the market is up almost 300 points. See this post for a bit of misguided analysis

Gartman, Uber, Public Transportation (Again) -- February 26, 2018

I was fascinated by Dennis Gartman suggesting the Uber was Big Oil's biggest threat. That did not make any sense to me.

I've posted several times regarding Gartman and Uber:
Common sense would tell you that as it becomes easier and less expensive for millennials to take Uber or Lyft rather than public transportation, the millennials will ditch public transportation for automobiles, electric or otherwise.

Now this story from studies are increasingly clear: Uber and Lyft congest cities.  "Ride sharing" is pulling from and not complementing public transportation:
One promise of ride-hailing companies like Uber and Lyft was fewer cars clogging city streets. But studies suggest the opposite: that ride-hailing companies are pulling riders off buses, subways, bicycles and their own feet and putting them in cars instead.

And in what could be a new wrinkle, a service by Uber called Express Pool now is seen as directly competing with mass transit.

One study included surveys of 944 ride-hailing users over four weeks in late 2017 in the Boston area. Nearly six in 10 said they would have used public transportation, walked, biked or skipped the trip if the ride-hailing apps weren’t available.

The report also found many riders aren’t using hailed rides to connect to a subway or bus line, but instead as a separate mode of transit, said Alison Felix, one of the report’s authors.
And more. This is incredibly important on so many levels, think about it:
And a survey released in October of more than 4,000 adults in Boston, Chicago, Los Angeles, New York, the San Francisco Bay Area, Seattle and Washington, D.C., also concluded that 49 to 61 percent of ride-hailing trips would have not been made at all — or instead by walking, biking or public transit — if the option didn’t exist.
The Boston study found that the main reason people opted for ride-hailing was speed. Even those with a public transit pass would drop it for ride-hailing despite the higher cost. 
In other words, because of Uber, folks who would otherwise stay home, order on-line, are now getting out and about. And when they get out and about to go shopping, they also take time to have lunch or dinner. And they might take in a movie before taking Uber back home.

Perhaps this example says it all. Even is Sarah had best intentions to be taken to the nearest subway, once she got into the Uber car, she took the car to her "real" destination:
Sarah Wu, a graduate student at Boston University, uses Uber less than once a week but more often if she has guests. She lives near a subway line but will opt for Uber if it looks like public transit will be a hassle.
“I would prefer to have the Uber take me there directly rather than having to transfer several times and wait at a bus stop,” said Wu, who doesn’t own a car.
And Uber is simply so much more efficient: no switching subways; no waiting for buses (in the rain); no walking to and from the subway/bus station; no hassle with parking; even better than valet parking. 

Beyond The Pale -- We're Heading Headlong Into A Recession -- LA TImes Writer Reports -- February 26, 2018

Without question, the best thing on Twitter right now is "TeslaCharts." I mentioned this the other day.

The most recent chart, posted earlier today (and we will see many more before the day is over). Those following Tesla know the importance of Norway to Tesla:

Beyond The Pale

This story was beyond the pale, even for The Los Angeles Times.

I saw this headline around midnight late last night over at The Los Angeles Times and noted the other headline stories. This morning the story was gone (it's still at The Los Angeles Times; it's just been removed from the "headline" stories) but the other headline stories were still there. Even for the LA Times, this article was beyond the pale, and once the morning editor arrived on scene, saw the Dow futures, moved the story off the front page. Pretty funny. Here's the screen shot:

I think I may spend the rest of the hour just pointing how bad this headline / story really is.

From CNBC, December 18, 2017: the Dow rises 5,000 points in one year; first time ever.

The correction and the recovery:

Today, the Dow is up for the third consecutive day; up around 200 points for the day. If recent history is any guide (to coin a phrase), the Dow will pull back, possibly even have a "down" day but right now, Dow action certainly does not fit the LA Times story.

The one-year Dow, Trump's first year as president:

Recession: no one is predicting a recession except, apparently, some folks on the fringe. In fact, for the Times story, the writer relied on one analyst who spoke at Harvard the other day suggesting that Trump's policies could result in recession. The irony is that the tea leaves, a year ago, suggested that another administration with Obama's policies would have pushed the US into a recession.

This is the 100-year Dow chart. If you look really, really closely, you might be able to see the "correction" that the LA Times writer used to suggest a) the sky is falling; and, b) we are headed straight into a recession, link here. Note that the x-axis is not linear; if it were, the graph would be even more striking:

The LA Times writer? One of the newspaper's (LA Times) most accomplished business writers. No wonder the newspaper is going broke.

I'm sure all the brokers in southern California just loved this article, as if they don't have enough problems with investors spooked by the volatility.

Speaking of volatility: it's obvious even experienced business analysts and writers are uncomfortable with statistics; humans prefer raw data. I see that everywhere (especially when it comes to atmospheric CO2 data, but that's another story for another day). The change in the Dow on a daily basis is now "striking" because the Dow is up to 26,000 points. But the actual swings, in percentage terms, is very, very small. At 26,000 points, any move less than 100 points on the Dow is simply white noise. Exhibit A: 100/26,000 = 0.4% (think atmospheric CO2: 0.04% but 400 parts per million sounds a lot scarier).

The guys that actually know something about volatility? Not so worried.

Perhaps more later; time to move on.

Good luck to all.

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here. The LA Times is suggesting, based on what I'm reading, that we are headed straight toward a recession. Others are not suggesting that.

By the way, I think most reasonable investors were getting worried about the Dow this past year with no correction. The correction was very, very welcome for investors, for at least two reasons:
  • it suggested that the market was still working (fear vs greed); and, 
  • the correction gave a lot of folks an opportunity to buy shares at a discounted price

Monday, February 26, 2018

Wow, another busy day.

These are the stories that I will be blogging about later during the day.

I have to complete the March, April, 2018, NDIC hearing dockets.

It's Iowa (6) vs Pennsylvania (20) when it comes to renewables.

Data suggests that Asia will reach peak oil in the next couple of years.

Gartman - Uber - fail. Can't wait to post that story.

The oil industry saved the right whale ... but ...

Jeff Immelt laughing all the way to the bank. Cramer and Buffett not laughing.

This story was beyond the pale, even for The Los Angeles Times.

The Fed and stock market volatility.



More on Warren Buffett.

But before we get to all that ...

Back to the Bakken

Active rigs:

Active Rigs574038121193

RBN Energy: an update on Corpus Christi Bay's crude oil export infrastructure.
Corpus Christi, TX, is quickly becoming a strategic hub for U.S. crude oil exports. Since the repeal of the crude oil export ban in December 2015, crude exports from the Sparkling City by the Sea have increased to nearly 500 Mb/d — and that may be just the beginning. Numerous pipeline and terminal projects have been announced to receive, store and ship out a lot more crude from the Permian and Eagle Ford shale plays, with an increasing share of those barrels destined for the international market. Today, we discuss recent developments in crude exports out of South Texas.
RBN has written often about crude oil pipelines to Corpus Christi and refineries, storage and ship docks in Corpus and nearby Ingleside. Permian production is rising fast, and a significant share of the new pipelines being developed to accommodate Permian growth would flow to the South Texas coast. RBN’s Growth Scenario shows Permian crude oil production rising by about 300 Mb/d a year through the early 2020s — topping 3 MMb/d late this year, 4 MMb/d in late 2020 and pushing 5 MMb/d by 2023. Further, recent increases in oil prices could accelerate the pace of that growth, not just in the Permian but in the recently rebounding Eagle Ford, where production now averages more than 1.3 MMb/d.
There is an extensive crude-related infrastructure already in place in Corpus.
RBN has discussed recent increases in exports out of Corpus-area docks, including Occidental Petroleum’s (Oxy) new Ingleside Energy Center Terminal in Ingleside (across the bay from Corpus); and has described a few of the projects under way to increase Corpus’s capacity for shipping out more and more crude.
Today, a recap and an update.