Rig Counts Don't Matter (Not To Be Taken Out Of Context) -- December 26, 2019

Link here, Platts S&P Global.

From the linked article:

Continued production in Oklahoma's SCOOP-STACK demonstrates how tracking rig count to determine production swings has become an antiquated practice in some US shale plays.

For example, crude oil production in the SCOOP-STACK recently reached annual highs of 488,000 b/d even as rigs continued to plummet to new lows last seen in 2016.

While producers had more than 100 rigs deployed across the SCOOP-STACK in January, the number has since fallen to 44 rigs.

While tracking rigs used to be a key indication of where basin production would head in the near-term future, SCOOP-STACK operators have proven in 2019 this modeling concept does not always apply, as the region is expected to grow production 7% year over year, while rigs are down 60% year to date from the most recent drilling data by Enverus.

While well-level efficiencies are a key contributor toward understanding production gains or losses, the SCOOP-STACK happened to significantly draw from their built drilled-but-uncompleted (DUC) inventory for most of 2019, as heightened completion activity from January through May helped operators grow production.

Moving into 2020, Platts Analytics is forecasting the SCOOP-STACK to grow by 11,000 b/d, as operators such as Continental Resources and Encana can continue to utilize the same strategy developed in 2019.

All Three Major Indices Hit All-Time Highs -- Boxing Day, 2019

S & P 500:

• up 1,6.53 points
• up 0.51%
• closed at 3,239.91
• intra-day high: 3,240.08
• 52-week high: 3,240.08

NASDAQ:

• up 69.51 points
• up 0.785
• closed at 9,022.39 (first time ever over 9,000)
• intra-day high: 9,022.46
• 52-week high: 9,022.46

DOW:

• up 105.94 points
• up 0.37%
• closed at 28,621.39
• intra-day high: 28,624.10
• 52-week high: 28,624.10

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Four Biggest Economies In Europe: Will Struggle To Recover In 2020 -- Barron's

Data points from the article (paywall; access through Starbucks):

• UK will leave the EU at the end of January, 2020
• Boris will look to clinch an economic deal before the end of 2020
• UK's hope: inflation will remain low ('cause the economy won't grow) and then the Bank of England can lower rates -- LOL -- if the economy takes a turn for the worse)
• the UK at least has a stable government (Boris' landslide); not the same can be said for:
• Germany: leadership split among two parties; political paralysis likely
• Germany's unemployment barely more than 3% so unlikely it would incentivize fiscal expansion
• France: EU's strongest growth rate;
• same problem as Germayn -- political paralysis
• Italy: will continue to underperform
• staggering under a debt load topping 130% of GDP
• (is US debt load about 105% of GDP?)

WTI Trending Toward $62 -- No New Permits Today? -- December 26, 2019

Active rigs:

$61.74	12/26/2019	12/26/2018	12/26/2017	12/26/2016	12/26/2015
Active Rigs	56	68	53	41	62

No new permits today.

Four permits renewed:

• Hess: four EN-Madisyn permits in Mountrail County

More On The IRA Tax Law Changes -- December 26, 2019

I track the new IRA rules at this post. For something I thought was relatively simply, it is much more complicated than I ever imagined. From MarketWatch:

Beneficiaries of individual retirement accounts may not see their inheritances for a decade under the newly passed SECURE Act, and when they do get the money, they may be taxed heavily for it.

Under the new retirement legislation, which was signed into law just days before Christmas, beneficiaries of inherited IRAs will need to withdraw that money within 10 years — that is, if they have access to it at all within that time.

Previously, nonspousal beneficiaries could opt to take only required minimum distributions over their life expectancy, rather than taking all the money within five years. (Required minimum distributions are calculated with factors such as the beneficiary’s age, life expectancy and account balance.) That tax-advantaged possibility disappears with the SECURE Act, which only allows one option: up to 10 years to drain the account.

After the 10th year, any money that is left must be taken and the account closed, regardless of the tax consequences. 

Okay, we knew most of that. The "if one has access to it at all within that time."

I was a bit confused on that, but it appears that the writer suggests that if the beneficiary is held in a trust that dictates when/how the money can be withdrawn there could be problems with the new tax laws.

Imagine a 25-year-old grandson named beneficiary of a trust to include an IRA. Imagine if the grantor of the trust dictated that the proceeds could be not be distributed until the beneficiary was 45 years old, which would be 20 years from now. Under the trust, the grandson would not have access to the trust IRA until age 45, 20 years from now. But the new law says the IRA funds must be completely distributed within ten years.

I may not be interpreting the writer's thoughts correctly, but one gets the idea. My hunch is that either there are provisions in the law to address this, or the IRS will formulate rules. I assume the IRS would say the US tax law supersedes the trust instructions and that the IRA must be liquidated in full upon the tenth year. Ouch.

Be that as it may, a relatively simple-sounding change in the law seems to be a bit more complicated than I thought.

We May Have An Explanation For Burning Oil To Generate Electricity -- Even If Not Needed -- December 26, 2019

Re-posting from earlier today. I don't want folks to miss it. If accurate, it just explains how "crazy" the world has become.

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Burning Oil In The US To Generate Electricity

To Max Out Pollution Credits By The End Of The Year

Fact: ISO New England has more than enough energy the past two days (including today) so as not to have to use oil. Earlier I asked why ISO New England might be burning oil under these circumstances. A reader who corresponds with me closely regarding ISO New England and understands it very, very well, had this to say after I posed the question:

I have also been curious as to why oil is being burned as per the ISO. 

While I am certain the source/reason can be found, I, my self, do not know, but suspect it is coming from the oil burning Wyman plant in Yarmouth, Maine.

The restrictions on emissions might be prompting an 'end of the year' burning of onsite fuel so as to 'use up' all the permitted pollutants before December 31, 2019. 

Don't know, but the steady ~355 Megawatts produced from oil for several mid-morning hours indicates a controlled, purposeful operation.

If accurate, it shows just how screwed up the world really is. 

The reader's response came in reply to my note below, posted earlier today:

Plenty of energy today, not sure why they're burning oil to generate electricity:

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Israel's Leviathan Field Back On Hold -- December 26, 2019

Back on December 20, 2019, I posted:

Never mind: earlier today it was reported that an Israeli judge told Delek Drilling and Noble Energy to stand down, not to produce natural gas from the Leviathan basin. Someone must have made a phone call; the order was rescinded. The operators will begin producing natural gas on December 23, 2019. 

Today, December 26, three days after production was to have begun, it looks like not all the documents were signed and notarized (LOL), link here:

The launch of production at Israel’s Leviathan natural gas field has been delayed pending permits from the Ministry of Environmental Protection.

“The flow of gas from the reservoir hasn’t yet begun,” Israel’s Delek Drilling LP, a partner to the project, said Tuesday in a statement to the Tel Aviv Stock Exchange. “The partnership believes that it will begin in coming days, after the necessary permits are received from the Ministry of Environmental Protection.” The statement didn’t elaborate.

Environmental groups concerned about the field’s impact on air pollution and public health have been waging a protest against its operations and last week won a daylong temporary injunction from an Israeli court. They were planning to abandon their homes in towns along the shoreline for the first 24 hours of the platform’s operation.

You mean to tell me they didn't have the necessary permits before drilling? Or were the original permits lost? Are they still in the mail? And Epstein didn't hang himself. 

Never Mind -- Apparently Did Not Happen -- 11:52 A.M. CT, December 26, 2019

Off The Net For Awhile -- Boxing Day, 2019

NASDAQ hits an all-time high (again). It just hit 9,000.

All three major indices are on pace for another record close. 

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

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Burning Oil In The US To Generate Electricity

To Max Out Pollution Credits By The End Of The Year

Fact: ISO New England has more than enough energy the past two days (including today) so as not to have to use oil. Earlier I asked why ISO New England might be burning oil under these circumstances. A reader who corresponds with me closely regarding ISO New England and understands it very, very well, had this to say after I posed the question:

I have also been curious as to why oil is being burned as per the ISO. 

While I am certain the source/reason can be found, I, my self, do not know, but suspect it is coming from the oil burning Wyman plant in Yarmouth, Maine.

The restrictions on emissions might be prompting an 'end of the year' burning of onsite fuel so as to 'use up' all the permitted pollutants before December 31, 2019. 

Don't know, but the steady ~355 Megawatts produced from oil for several mid-morning hours indicates a controlled, purposeful operation.

The reader's response came in reply to my note below, posted earlier today:

Plenty of energy today, not sure why they're burning oil to generate electricity:

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Cheez-It Bowl

December 27, 2019

Off The Net For Awhile -- Boxing Day, 2019

In an earlier post I mentioned the "TSP," the Thrift Savings Plan. In addition there is the Roth TSP.

I don't recall the exact date but I believe the federal TSP was made available to active duty military in 2000. It's possible active duty military were always eligible for the federal TSP, I forget, but something changed around 2000. I had seven years left to serve in the USAF and in those seven years I maxed out my TSP contributions.

From the Federal News Network;

Your Thrift Savings Plan account. Uncle Sam’s generous in-house 401(k) plan. As of the end of last year, the TSP had almost 4.9 million participants. That includes active-duty federal and uniformed military personnel as well as tens of thousands of retirees. It dwarfs all other plans. And if you are like most feds working today, the money you (and Uncle Sam) put into your TSP could be the source of from one-third to one-half of all the income you have in retirement.

It really is an incredible program. I've long forgotten the specifics but some data points from the internet:

• TSP accounts continue to increase by an average of about $3,000/month;
• in April, 2019, the average TSP account was $145,423;
• $36,000 / $145,000 = about a 25% rate of annual return
• administrative expenses vary, but in general, about 0.040% = 0.0004 or about 40 cents per $1,000 invested;
• at the end of December, 2016, there were 9,599 TSP accounts were worth more than $1 million;
• there is at least one TSP account holder who had a balance greater than $5.3 million in his/her account

I point this out because I keep reading about a lot of high school graduates / college students who do not consider the military as an option. The military is a great option for many women and men coming out of high school or college. 

Notes From All Over, Part 2 -- December 26, 2019

Market today: more evidence of FOMO.

Soybeans:

Pork: this was not a goodwill gesture. LOL. Trump won; China blinked. CNBC saw it differently. Surprise. surprise.

Notes From All Over, Part 1 -- Boxing Day, 2019

It seems not a whole lot is not mentioned at least once on the blog. LOL.

Garum.

A couple of days ago I'm reading one of those articles used as clickbait: archaeologist solve Roman Empire mystery with 500 letters discovered near Hadrian's Wall, from  The [London] Express. 

[NOTE: if you click on that link it will slow down your computer.]“

Among the meany treasures, archaeologists have uncovered around 500 letters sent to and from Roman troops based at the fort [along Hadrian's Wall].

“Many contain requests for favourite foods from back home, the find reveals that, even here, soldiers were being sent a variety of goods from their home countries.

“Among the most sought after products was garum.” At the time of their discovery, the tablets were the oldest surviving handwritten documents in Britain.

Garum. I've mentioned it at least twice on the blog.

Garum: fermented fish sauce, much like we use soy sauce or ponzu sauce.

Japanese sauces.

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California Bans Per-Minute Billing

This will be an interesting story to follow. Link here.

On December 16, 2019, California’s Office of Administrative Law approved amendments to its Electric Vehicle Fueling Systems Specifications. Effective January 1, 2020, these new rules ban operators of electric vehicle charging stations from billing by the minute.

This is a huge blow to Electrify America and EVgo.

Both firms bill by the minute for EV charging, leaving drivers with sticker shock and feeling ripped off by the end of the session. Chargepoint will also be negatively affected, as many of their site-host partners choose to bill per minute.

And while Tesla already bills by the kilowatt-hour, California will also be requiring charging stations to physically display “on their face” important information about electricity cost and delivery, a move that will put the most burden on Tesla’s Supercharger stations.

In the lead-up to the rule, charging network operators repeated their usual arguments about “selling a service” versus selling electricity, but California wasn’t having any of it:

The Department acknowledges this group of comments and disagrees with the interpretation of the primary commodity being traded. As defined in BPC § 13400(a)(4) and (p), electricity is considered a type of motor vehicle fuel.

NIST Handbook 44 makes clear what the unit of measure of electricity as motor vehicle fuel dispensed from EVSE shall be measured by — either the kWh or the megajoule (MJ).

The Department concludes that the primary commodity delivered by EVSE is electricity, not parking space accessibility, parking space rental time, or accessibility to the EVSE itself. The Department considers those as “other services” of the transaction.

The Department clarifies that time is not an acceptable unit of measure for dispensing and billing electricity as motor vehicle fuel.

Idle Rambling On The 2019 Tax Law -- December 26, 2019

Love him or hate him, President Trump really shakes things up. I am absolutely fascinated by the overhaul of the voluntary retirement "system" -- which I track here. There are so many story lines:

• how this happened during a period of such political divisiveness
• for such a big change, it seemed to be off everyone's radar scope
• it passed with such little fanfare, it suggests "everyone" supported the change
• the tax revenue does not explain the reason for the overhaul
• imagining "who" spearheaded the change
• sorting out winners and losers
• why was only the traditional IRA targeted for major changes?

Now another piece of the puzzle, from Barron's: Roth conversions to get SECURE boost. Link here. It may be behind a paywall but one can access it while visiting one's local Starbucks.

As Barron’s previously reported, advisors should be aware of several key provisions in the Secure Act, including the elimination of the stretch IRA.

IRA beneficiaries, with certain exceptions, will have to take distributions over 10 years rather than over the course of their lifetimes. It’s this provision that could cause the Roth IRA boom.

Converting a traditional IRA to a Roth could significantly reduce an inheritor’s future tax bill. The strategy is worth considering by people with IRA savings of $1 million or more who plan to pass it on to someone other than their spouses. Beneficiaries can let the money accumulate tax-free in a Roth.

It's interesting the way that article is phrased:

As Barron’s previously reported, advisors should be aware of several key provisions in the Secure Act, including the elimination of the stretch IRA. 

That seems to be THE key provision.

The change in the age for RMDs is also of note, but I see that as a compromise to get this bill passed. 

This is the big question: if this was an "overhaul" of the voluntary retirement system, why was only the traditional IRA targeted. I may be wrong, but it seems that the Roth IRA, the 401(k), and the TSP (one of the most incredible retirement programs ever, and this for federal and military employees).

The sponsors and the lobbyists probably thought changing the traditional IRA rules was taking a big gamble and going after changes in the others would have been a bridge too far.

Activity On The Whiting Tarpon Federal Pad -- December 26, 2019

This page will not be updated.

There's activity on the Whiting Tarpon Federal pad.

One well has gone from drl status to SI/NC; a second well has gone from loc to drl status. Paperwork lags what is going on in the field so it's possible at least another well on this pad has been drilled to depth.

Two Whiting Tarpon Federal wells have gone for the half-million crude oil mark:

• 20589, 4,815, Tarpon Federal 21-4H, t10/11, Twin Valley, t10/11; cum 631K 10/19;
• 22361, 4,971, Tarpon Federal 21-4-3H, t12/12, Twin Valley; t12/12; cum 584K 10/19;

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For The Granddaughters
The family is on their cross-country trip to Louisville, KY, to see Josh's family.

For the past year or so, Sophia has been consistent in her requests for a unicorn. She said she would settle for a "stuffed buddy" while waiting for the real thing.

Incredibly, Santa found the most precious unicorn in some out-of-the-way place, maybe a prop at a furniture story. Details are murky, but we do know it did not come from Santa's Workshop #1.

The family departed about 8:30 p.m. local time last evening. They stayed overnight in Little Rock, Arkansas.

The blemish on her right forearm is the remnants of a temporary tattoo.

Twenty Wells Yet To Be Reported This Week -- December 26, 2019

Active rigs:

$61.16	12/26/2019	12/26/2018	12/26/2017	12/26/2016	12/26/2015
Active Rigs	56	68	53	41	62

Twenty wells yet to be reported this week: see this post.

RBN Energy: IMO 2020 finally arrives, not with a bang, but a whimper. Color me surprised. LOL.

It’s been more than three years since the International Maritime Organization (IMO) fully committed to the January 1, 2020, implementation of IMO 2020, a rule that slashes the allowable sulfur content in bunker fuel used in the open seas around most of the world from 3.5% to only 0.5%.

There’s been a lot of angst in the interim, most of it regarding the changes in crude slates, refinery operations and fuel blending needed to meet a flip-of-a-switch spike in global demand for low-sulfur bunker. Also, shippers worried that prices for rule-compliant fuel would go through the roof. Well, it turns out that the transition period in the months leading up to the IMO 2020 era has been largely drama-free. Supplies of very low-sulfur fuel oil (VLSFO) and marine gasoil (MGO) — the bunker most ships will now use — have been building in most places, prices are up but moderating, and while there may be a few hiccups as ships shift to new, cleaner fuels, life will go on. Heck, life will likely be even better for most complex U.S. refineries, which can churn out large volumes of low-sulfur refined products and which will have access to price-discounted high-sulfur “resid” as an intermediate feedstock.

Today, we take a big-picture look at the global bunker market as IMO 2020’s implementation day approaches.