April 18, 2019, T+6, Part 7 -- Tesla; Road To Colorado; Update On The Apple-Qualcomm Deal; United Van Lines National Movers Study

Words Musk Melon does not want to hear in same sentence: major investor slashes Tesla holdings.

Link here.

T. Rowe Price funds slashed Tesla Inc holdings in the first quarter, data showed on Wednesday, as the institutional investor continued to cut its positions in the electric vehicle maker.

The firm, which has been one of the largest investors in the Silicon Valley company, sold off 92 percent of its prior holdings in the company during the quarter.

Coincides with end of federal credits for Tesla.

T. Rowe Price: well played.

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Road To Colorado

From Rigzone staff.

Colorado governor proudly signs bill killing Colorado's oil industry.

Oil companies will start/stop drilling based on a 6% extraction tax vs a 5% extraction tax. Colorado has passed a law that will be much more challenging than a one percent change in the extraction tax. 

************************* 

New York City

Passes law to require skyscrapers to "go green."

Unless I'm missing something, this brings no new income to the city itself.

The owners will have to spend money on upgrades; this will be a capital expense which will lower their city, state, and federal income taxes.

Big players will pass costs on to tenants.

Smartest decision Jeff Bezos ever made: flee Long Island City. Can you imagine?

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Update On That Apple-Qualcomm Deal

Link here.

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Occasional Cortex

Just when one thought a politician couldn't do anything more stupid than dissing Jeff Bezos / Amazon .... the New York City council just found a way to:

• cut city income
• drive out the rich and famous

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Speaking Of Which

From CNBC so you know it's true. 

Retirees fleeing these three states...

• New Jersey
• Maine
• Connecticut

... and moving to these three states:

• New Mexico
• Florida
• Arizona

2018 United Van Lines National Movers Study.

Not Much Today: A Single New Permit -- April 18, 2019

Active rigs:

$64.07	4/18/2019	04/18/2018	04/18/2017	04/18/2016	04/18/2015
Active Rigs	63	59	51	29	93

One new permit:

• Operator: Abraxas
• Field: North Fork (McKenzie)
• Comments: Abraxas has a permit for a single Jore Yellowstone well in lot 2/section 2-149-97.

And, that was all. 

Natural Gas Glut -- April 18, 2019

Natural gas: US shale gas swamps market -- Bloomberg. Data points:

• natural gas futures tumbled to lowest level in almost three years
• soothes concern about a potential supply crunch next winter
• inventories are more than 30% below normal, they're poised to refill quickly

Graphic posted below.

Fill rate, link here. Look at the steep curve. And how early it turned.

Argus Announces A New Benchmark -- West Texas Light -- April 18, 2019

Reminder: Argus recently announced a new benchmark -- North Sea Dated -- to reflect US crude oil being exported to Europe.

Now, today, Argus announces yet another benchmark: West Texas Light which will be distinct from West Texas Intermediate. Press release (April 10, 2019)/link here.

• WTI: Cushing
• WTI Permian: 40-44°API
• WTL: Permian light oil, Midland terminals (44.1-49.9°API)
• WTH: Houston light, pending, as volumes grow.

Global energy and commodity price reporting agency Argus today launches a new light crude price assessment to reflect growing light oil production in the Permian basin of west Texas and New Mexico. The new West Texas Light (WTL) price, published daily in the Argus Crude report, is for Permian basin crude with a gravity of 44.1-49.9°API traded at terminals in Midland, Texas.

Midland is the chief gathering hub for Permian basin crude, the fastest growing source of oil in the world. An increasing share of Permian crude is lighter than 44°API, and midstream companies have created the WTL stream to separate lighter crude from the denser main Permian WTI grade, which is typically at 40-44°API.

Much WTL trade is taking place at differentials to Argus’ benchmark WTI Midland price, which is assessed at terminals in Midland, Texas. Argus will publish its new WTL price assessment as a differential to WTI Cushing as well as an outright number.

WTL has also begun to trade at Houston at a differential to the benchmark Argus WTI Houston price, which is widely used to price US exports. Argus WTI Houston, which is assessed at Magellan’s MEH terminal, is also the settlement price for derivatives contracts on the Ice and CME exchanges, where open interest currently stands at 200 million barrels with daily trading volumes topping 10 million bbls. Argus intends to publish a separate WTL Houston index as volumes grow.

WTI, Permian, tends to be 40-44°API.

WTL is a lighter crude, probably competing directly with Bakken.

For what it's worth, I have a page devoted to the "types" of oil. Link here.

April 18, 2019, T+6, Part 6 -- US Retail Bounces Back

Pipelines: from US News -- and if from US News it must be true -- seven pipeline with big dividends worth buying -- open book test for investors -- 

• Antero Midstream, 8%
• Buckeye Partners: 9%
• DCP Midstream: 9%; consistency in income
• Enable Midstream Partners: 9%
• EnLink Midstream: 8%
• MPLX LP: 8%; market cap -- $26 billion
• Targa Resources: 9%; market cap -- $9 billion

Note: until late next week I won't be paying much attention to national news. Watching a lot of sports. Hockey: Stanley playoffs.  Dallas Stars scored four points in the first period last night on their way to a 5 -1 win over Nashville. Texas Rangers, baseball, doing well. Basketball, not following yet. PGA: Tiger Woods is the story.

Re-posting:

US retail: US retail spending rebounds in March (headline is wrong); driven by autos

• Drudge links France24: 

American consumers resumed spending in March, snapping up autos ahead of the summer driving season and pushing the US retail sector to its biggest gains in 18 months, government data showed Thursday.

The unexpectedly strong month for the key retail sector helped recover losses after December's worrisome slump, according to the Commerce Department.

More from the linked article:

The sector's performance pointed to resilience in consumption by ordinary members of the public -- a main driver of the world's largest economy -- and should support GDP growth in the first quarter, which is nevertheless expected to be weaker than the final quarter of 2018.

Total retail sales rose 1.6 percent to $514.1 billion, well above the 0.9 percent economists had been expecting.

The result put the retail sector 3.6 percent above March of last year.

Auto sales zoomed 3.1 percent higher, also the strongest showing in a year and a half, after a 0.1 percent dip.

Excluding the volatile auto sector, sales rose by a slower 0.9 percent, although this was still above expectations.

China drilling off-shore Cuba in areas where Cuban technology could not reach.

The market:

• WTI: trading just below $64
• Dow up 100 points; S&P up 4 points
• Edwards Lifesciences: huge drop this week
• UNP: holds, up $7/share today; up over 4%; now trading at $177; three years ago, $70/share
• AAPL: maintains its momentum
• QCOM: maintains its momentum
• NOG: down 4%
• JAG: flat, at just $11/share

Disclaimer: this is not an investment site.

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

Reminders

Best AGW site on the internet: deplorable climate science.  

Great site -- but sometimes "over the top" but any site banned from Facebook can't be all bad. 

April 18, 2019, T+6, Part 5 -- Notley Nocked Out -- Not Even Close

From The National Post, link here:

• Alberta: home of the TransMountain pipeline fight
• outcome not even close
• United Conservative Party wins in a landslide
• UCP takes 63 of the province's 87 "ridings"
• Jason Kenney to replace Rachel Notley
• Notley's NDP took 24 of the 87 ridings

From the linked article:

Kenney entered UCP headquarters at Calgary’s Stampede Grounds Tuesday night in the blue pickup truck he made famous on the campaign trail. As a “build that pipe” chant went up in the room, the UCP leader stopped the crowd to correct them. It’s not just one pipeline we need, it’s several, he said. “It’s build those pipes,” said Kenney.

“Today, we Albertans begin to fight back.”

Has already directly threatened British Columbia.

• threatening to turn off the oil and gas taps right after he takes office later this month.

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The Word Page

"Riding" is no doubt a British term. I first came across when deployed to northern England/Yorkshire some years ago. I thought I had blogged about "riding" and Yorkshire on many occasions, but perhaps not. Here is one post (at the link, scroll to the very bottom).

I can pretty much guess the etymology of the British/English term "riding." The Brits/English are incredibly "concrete" when it comes to their language.

A traffic circle, for example, is a "round-about" in England.

So, "riding."

Here it is from wiki:

The term 'riding' is of Viking origin and derives from Threthingr meaning a third part. The three ridings in Yorkshire were named the East Riding, West Riding and North Riding.

More from wiki:

A riding is an administrative jurisdiction or electoral district, particularly in several current or former Commonwealth countries.

The word riding is descended from late Old English *þriðing or *þriding (recorded only in Latin contexts or forms, e.g., trehing, treding, trithing, with Latin initial t here representing the Old English letter thorn).

It came into Old English as a loanword from Old Norse þriðjungr, meaning a third part (especially of a county) – the original "ridings", in the English counties of Yorkshire and Lincolnshire, were in each case a set of three, though once the term was adopted elsewhere it was used for other numbers (cf. farthing).

The modern form riding was the result of initial th being absorbed in the final th or t of the words north, south, east and west, by which it was normally preceded.

A common misconception holds that the term arose from some association between the size of the district and the distance that can be covered or encircled on horseback in a certain amount of time (cf. the Walking Purchase).

The term was used in 19th century Canada to refer to subdivisions of counties.

In Canadian politics, "riding" is a colloquial term for a constituency or electoral district. Officially, "electoral district" is generally used, although government documents sometimes use the colloquial term. In colloquial Canadian French, a riding is known as comté, i.e., "county", as the electoral districts in Quebec were historically identical to its counties; the official French term is circonscription.

The Canadian use of "riding" is derived from the English local government term, which was widely used in Canada in the 19th century.

The local association for a political party, which legally is known as an "electoral district association", is often referred to as a riding association.

April 18, 2019, T+6, Part 4 -- PG&E Collapses

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

PG&E.

Wow.

PCG (PG&E):

• pays no dividend
• from a recent high of ~ $50/share, now trading at $20/share

From The Financial Times: (most of this will be deleted later today) --

Californians like to think they show the rest of the country the way to a clean energy future.

Inconveniently, utility power purchase agreements (PPAs), which have been the principal economic model for renewable energy in the state, face legal collapse within two weeks.

The PPA crisis is one of the consequences of the bankruptcy of Pacific Gas & Electric, the state’s largest utility. The immediate cause of PG&E’s filing on January 29 was the weight of its prospective liabilities for billions in wildfire damages allegedly caused by its transmission equipment.

The company took the opportunity afforded by the bankruptcy court’s protection to “reject” more than $30bn of its high-cost, long-term PPAs for renewable energy. With the support of the Federal Energy Regulatory Commission (FERC), PG&E’s renewables suppliers are fighting the company’s attempt to default on its obligations. So far PG&E appears to have the support of the judge, Dennis Montali.

On April 10, he announced that he would give PG&E and its PPA counterparties until May 3 to agree a resolution. Judge Montali stressed his concern about the practical effects of PPA rejection. These will not include any sudden termination of electricity supply, or of payments that would cover operations and maintenance costs. But the “morning after” will be a world-class hangover for investors in wind and solar. No one seems to believe a compromise will be reached: there is too much precedent and financial leverage at stake. Almost certainly, the case will wend its way through the courts for years.

Quite possibly it will reach the Supreme Court. There, the conservative majority is known to be sceptical of the powers of regulatory agencies such as FERC. That is probably not good for the renewables people, since in this case FERC is their friend. Until now, the apparent certainty provided by PPAs, made with consumer-facing electric utilities, has given the independent renewable energy industry its financial basis. 

The high fixed costs of wind and solar generation could be amortised with 15 or 20 years of secure revenue flows from state-regulated monopolies. As clean-energy mandates became more demanding, unit costs of wind and solar declined with improving technology and economies of scale. While that progress turned wind and solar into mainstream industries, it made older contracts less attractive. In PG&E’s case, though, the rapid lowering of the cost of renewables contributed to the undoing of its financial model.

PG&E and the other California utilities lost much of their profitable peak-demand revenue to rooftop solar installations. Their answer was to increase charges to remaining customers, who responded by subscribing to “direct access” and “community choice aggregation” programmes — allowing them to bypass at least part of the utilities’ rising rates. As more power supplies came from mandated renewables with low-to-zero marginal costs, gas-fired power producers were unable to cover their cost of capital. But PG&E and the other California utilities still relied on the gas-fired plants, along with hydro and imports from other states, to maintain reliable power.

With PG&E’s revenue squeezed, the company skimped on maintaining and improving its transmission grid. This may have contributed to the risk of wildfires, which eventually led to the bankruptcy. PG&E’s renewables counterparties felt the financial squeeze even before the company indicated its willingness to reject their contracts. Once the company formally rejects its old renewables PPAs, it is generally believed that it will be unable to back up new renewables contracts during or after the bankruptcy. Southern California Edison, the second-largest utility in the state, is also at risk of becoming an unreliable counterparty for long-term contracts due to its own potential liability for wildfire damages.

The state has recognised that its clean energy progress is seriously at risk.

Governor Gavin Newsom formed an advisory “strike force” to propose solutions to deal with wildfires and clean energy finance. On April 12 it came out with support for “new procurement support models, including a new state procurement entity that could enter into long-term (electricity) contracts”.

There is a history of state involvement in power purchases in California, and it is not an entirely happy one. PG&E filed for bankruptcy once before, in 2001. Out-of-state generators refused to give it commercial credit terms, and the state government had to step in to finance $6bn of hastily negotiated and expensive contracts.

Gray Davis, the governor at the time, lost his re-election bid, partly because of what was seen as his poor management of the energy crisis. So if, as seems likely, the PPA-based financing model has failed in California, it is not going to be easy to make the political case for direct state support. At the very moment there is increasing political pressure for 100 per cent renewable power, it is unclear how it can be paid for. 

April 18, 2019, T+6, Part 3 -- UNP Surges

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

UNP.

Wow.

Earlier post:

Tuesday, March 19, 2019, T+76: the market continues to climb the wall of worry. UNP falls 3% ($5) after a single analyst says the flooding in Nebraska will have a material impact on UNP's revenues/earnings.

Wow. I saw that note as a reason to buy. Based on one analyst (whom I won't name), UNP falls 3% on Iowa flood worries.

UNP has been trading in a $155 to $165 range for as long as I can remember. I am getting very, very old, and my memory is not very good, nor has it ever been very good, so I may be mistaken on that trading range. Hey, I have an idea, let's take a look:

Story? Link here. Upbeat 1Q19 earnings. Data points:

• strong 1Q19 earnings
• $1.93 vs $1.89 forecast
• 15% growth y-o-y
• actual earnings have beat forecasts in eight of the last nine quarters
• pays 2%

April 18, 2019, T+6, Part 2 -- Kinder Morgan May Build Third Natural Gas Permian Pipeline

Permian pipeline: RBN Energy now suggests there is a concern there will be a pipeline "overbuild" in the Permian.

Didn't get the memo: Kinder Morgan in discussions to build third Permian Basin gas pipeline.

Kinder Morgan Inc has begun internal discussions about building a third natural gas pipeline in the Permian Basin as demand for gas takeaway capacity continues to surge, Chief Executive Officer Steven Kean told investors on Wednesday.

As natural gas production has outpaced pipeline capacity in the Permian Basin, a gas glut has led to plummeting prices in the region, with spot prices at the Waha hub even trading at negative levels.

Kinder Morgan believes demand for gas takeaway capacity could grow by 2 billion cubic feet per day each year over the next few years, equivalent to the Houston pipeline operator's Gulf Coast Express project, Kean said.

North Sea deal: Chrysaor to buy COP's North Sea assets. Link here. Data points:

• buyer: private equity group
• $2.7 billion deal
• will add approx 72,000 boepd to Chrysaor's output
• Chrysaor: ambitious plans to become one of the largest producers in the aging basin since its $3 billion deal two years ago to acquire "a host" of Royal Dutch Shell's old assets.

The market:

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

Accomplishments of the 115th US Congress, day 106:

Moving on, back to the market: 

Holy mackerel -- UNP. We'll talk about this in a stand-alone post.

Holy Mackerel! Jobless Claims Set 50-Year "Low" Record Last Week -- Even Lower This Week -- Resist!! -- April 18, 2019, T+6, Part 1

Jobless claims: link here --  

• forecast: 206,000
• prior: 196,000, revised to 197,000
• actual: 192,000

Trump: make America great!

Buttigieg: has an answer to "make America great!" I do not know what it is.

Politico: why the media dumped Beto for Buttigieg. 

Missouri River flooding: it should be noted that Kirsten Gillibrand and Cory Booker both voted against a multi-million-dollar bill to provide disaster relief for Missouri River flooding in Iowa.

Jobs:

• Drudge links ZeroHedge story.  

Initial jobless claims keep grinding lower and lower.
The last time this few Americans sought the help of government after losing a job was in November 1969. Initial Jobless Claims tumbled another 5K from the prior week's revised 197K to just 192K: the second consecutive sub-200K print in 50 years, and the lowest print since September 1969.

US retail: US retail spending rebounds in March (headline is wrong); driven by autos

• Drudge links France24: 

American consumers resumed spending in March, snapping up autos ahead of the summer driving season and pushing the US retail sector to its biggest gains in 18 months, government data showed Thursday.

The unexpectedly strong month for the key retail sector helped recover losses after December's worrisome slump, according to the Commerce Department.

If it weren't for Drudge we wouldn't even know about this. The media is only interested in "negative" stories and is now obsessed with a nothing burger -- the Mueller report.

Now There Is Worry That There Will Be A Permian "Overbuild" -- LOL -- April 18, 2019

Jobless claims: link here --  

• forecast: 206,000
• prior: 196,000, revised to 197,000
• actual: 192,000

Wells coming off confidential list today -- Thursday, April 18, 2019: 62 wells for the month; 62 wells for the quarter

• 34930, 870, Liberty Resources, Double-R N 158-94-34-33-1MBH, White Earth, t10/18; cum 76K 2/19;
• 32927, drl, Sinclair, Sinclair State 5-36H, Robinson Lake, no production data; spud, November 10, 2018; cease drilling, November 28, 2018; TVD: 10,684.66 feet; TD, 20,480';
• 16648, 508, CLR, Carus 13-28H, Cedar Coulee, SESW 28-147-96; Bakken pool, t8/07; cum 302K 2/19; see this post where this well will be followed; the file report is still confidential (9:00 a.m. CT, April 18, 2019)

Active rigs:

$64.08	4/18/2019	04/18/2018	04/18/2017	04/18/2016	04/18/2015
Active Rigs	64	59	51	29	93

RBN Energy: can a Permian crude takeaway overbuild be averted? LOL. An overbuild? Part 1.

Only a few months after major crude oil takeaway constraints out of the Permian Basin caused price spreads to widen, the pipeline network serving the U.S.’s most prolific shale play may be on the brink of becoming overbuilt. We’ve already seen a number of new expansions and pipeline conversions completed in the past six months, and construction is underway on another 2 MMb/d of new pipeline capacity scheduled to come online between now and the first quarter of 2020. Beyond that, a few remaining projects have been proposed but have not yet reached final investment decisions. No midstream group wants to build a pipeline that will be half full, and no producer wants to make a 10-year commitment to a pipeline if there are going to be plenty of other options available. So who blinks first? In today’s blog, we review the Permian pipeline projects that are still on the fence and examine what factors will determine whether they end up being a “go” or a “no.”

In part 1 we looked at the recent pipeline expansions that have contributed to a sizeable bump-up in Permian takeaway capacity and a tightening in price spreads in the basin. All in, the Permian was able to swiftly increase pipeline capacity by 635 Mb/d in just under six months. The build-out started with Plains All American’s Sunrise Expansion (350 Mb/d) in November 2018, followed by a 40-Mb/d increase in BridgeTex’s capacity at the end of last year, a 45-Mb/d expansion of Enterprise Products Partners’ Midland-to-Echo pipeline in March 2019, and finally, Enterprise’s most recent conversion of an existing NGL pipeline to crude oil service, which added 200 Mb/d of capacity. Also in Part 1, we discussed the pipeline projects that are currently under construction. Between Plains’ Cactus II, EPIC’s EPIC Crude, and Phillips 66/Enbridge’s Gray Oak pipelines (white rectangles in Figure 1 below), there is upwards of 2 MMb/d of new pipeline capacity that should be completed and in-service by this time next year, with at least 1 MMb/d of that likely to come online by the third or fourth quarter of 2019.