Exactly Right -- July 19, 2015

This is an excellent article; reports something we've been saying for quite some time. The Houston Chronicle is reporting: oil statistics haven't kept pace with evolving industry.

Despite rig count's plunge, production of crude has surged.

Despite the rig count's dramatic fall, oil production surged to a 44-year high, helping push an early 2015 price rally into another slide. It's a perplexing outcome that highlights the challenge of analyzing and predicting rapid trends in the global oil market.

"We're talking about a very different industry," said R.T. Dukes, an analyst at energy consulting group Wood Mackenzie. "The technology is much different today that it was in the past."

That's because producers now use a single rig to drill multiple wells from a single site, allowing them to boost output with fewer machines. And since prices began plummeting, many oil companies have pulled out of less proven shale plays to refocus their attention on the sweet spots in the nation's biggest shale plays to better their chances of striking big bounties of crude.

"You're using your best rigs and your best crews on your best properties with the best technology," Sieminski said. "So it's easier to maintain production given the drop in the rig count."

Finally, a mainstream article mentioning the "human factor," the best crews.

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Disclaimer

This is not an investment site; see disclaimer/welcome at the tab at the top.

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COP And The Dividend Increase

24/7 Wall Street provides some details.

To cancel a deep-sea drilling rig was quite a decision. Note:

According to Ensco, Conoco is obligated to pay Ensco the operating day rate of the drillship monthly for two years. The day rate of Ensco’s DS-9 drillship is approximately $550,000 a day. That works out to $16.5 million a month, $198 million per year, or $396 million for the two-year period.

In other words, whether or not COP went ahead with drilling plans, they had a contract with Ensco to pays them about $400 million over two years. Obviously the companies are talking and COP is unlikely to take the full $400 charge (?). I don't know if underwriters/insurers share in the charge.

The article continues:

In the first quarter of this year, ConocoPhillips posted net income of $272 million, so a charge of $200 million to $400 million is not trivial.

However, this is where I find accounting on Wall Street interesting (nothing new; these are simply the accounting rules):

As a special, one-time item it will not affect net earnings or earnings per share, but it has already had an impact on Conoco’s dividend increase, and the impact on cash flow will be non-trivial as well.

The big question is whether "seed corn" for oil companies is similar to R&D for the pharmaceutical companies or the automobile manufacturers. Some say "yes," some say "no." I'm not sure.

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Jerked Around

It will be interesting to see if Americans show their frustration of being jerked around when November, 2016, comes around.

It's not that ObamaCare is so entirely awful on so many levels, the real problem is middle class folks and the "working class" getting jerked around. There is no longer any stability in their health care plans. There are at least four ways of being jerked around:

• if employed by a "larger employer," you run the risk of your employer finding loopholes to get you knocked off the company plan, or slim down the program to just barely meet federal standards, which is mostly wellness and health promotion and birth control;
• physicians, clinics, hospitals enter and exit a particular plan seemingly willy-nilly; one year your physician accepts ObamaCare, the next year she doesn't;
• your health insurer has one name this year, and then a new name next year when there is a merger; and with the merger, one must start all over again, researching a healthcare plan; and, then,
• at the federal level, exceptions are being considered and granted, again, willy-nilly.

By the way, I talked about this "unpredictability back in March, 2014, more than a year ago; as I've said, predicting the problems with ObamaCare does not require the likes of a rocket scientist or even Elon Musk.

So, now it's the Native Americans being jerked around. My hunch is that the rank-and-file Native American men and women are just like the rest of us when it comes to health insurance: keep it simple and if my employer will pay for it, great.

But apparently, ObamaCare is scalping the Native American leadership and they want it stopped. The Rapid City Journal is reporting a move underway to exempt Native Americans from employer-mandated ObamaCare rules:

Representatives of several Indian tribes say they support legislation introduced this week in Congress that would exempt tribes nationwide from being classified as a large employers under the federal Affordable Care Act.

Members of Montana's congressional delegation and others introduced legislation this week that would exempt tribal governments from the large employer mandate.

Tribal spokesmen say requiring tribes to provide insurance for tribal employees is more expensive than allowing employees to register for individual insurance coverage. People who register as individuals may qualify for tax credits that offset the cost of coverage.

Again, remember, there are three legs of the ObamaCare three-legged stool:

• employer-mandated coverage (delayed, and now finally being implement)
• individual mandate for those not employed by a "large" employer (delayed, but went into effect a year or so ago)
• excise tax on medical devices (being whittled away by Congress due to heavy lobbying by the medical device lobbies)

I've added a new tag to capture this cost shifting: ObamaCareCostShifting. A reminder that the ObamaCareCosLeaving tag is still there and has been there for quite some time.

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Spinning

It will be interesting to see how The New Yorker spins the Chattanooga execution of four US Marines and a US Navy sailor. The editors did a great job spinning the terrorism story in Charleston. 

Tuesday, January 20, 2015; RBN Energy -- Part 2 -- Pricing

Tweeting now: Oilfield services company Schlumberger buys 46% of Russian Eurasia Drilling Company for approximately $1.7 billion.

Active rigs:

	1/20/2015	01/20/2014	01/20/2013	01/20/2012	01/20/2011
Active Rigs	161	187	187	202	163

RBN Energy: Pricing, Part 2.

There was no open outcry trading on the CME NYMEX yesterday because of the MLK holiday but after rallying on Friday U.S. crude prices resumed their descent here in electronic trading and the London ICE Brent contract lost $1.40/Bbl to close at $48.77/Bbl. Unsurprisingly the Baker Hughes oil drilling rig count is down by 209 (13%) since December 2014 as producers take a hard look at their production budgets. Yet production is still expected to increase in the short term – in part because the rigs that are left will focus on “sweet spots”. In today’s blog “It Don’t Come Easy – Low Crude Prices, Producer Breakevens and Drilling Economics – Part 2” Sandy Fielden looks at the assumptions behind RBN’s IRR and breakeven scenario analysis.

These articles are eventually archived for subscribers only.

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Arizona, New Mexico, Nevada, Texas

The Los Angeles Times is reporting: In 2013, only 46 manufacturing operations started or expanded in California, compared with 253 in Texas.

"There's a fresh look at the whole country," said Rothrock, president of the California Manufacturers & Technology Assn. "Unless you're forced to be in California for some reason, increasingly it's hard to find reasons that you have to be here."

California's high costs for land and energy are preventing the state from grabbing its share of companies relocating production back to the U.S. from overseas markets such as China. 

Although California is responsible for about 11% of the nation's manufacturing production, the state has accounted for only 1.8% of investment in new or expanded manufacturing across the country since 2001. That compares with 6% in the 1980s, according to economic development data purchased by the association.

I would assume the shale oil boom in Texas accounted for many of the 253 new or expanded manufacturing operations in Texas last year.

Much, much more at the linked article. See next post.

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Tax Incentives Bring Jobs To Nevada

The San Jose Mercury (California) News is reporting:

RENO, Nev. -- The largest lithium battery factory in the world is getting a new neighbor at an industrial park east of Reno -- the world's biggest data center. Las Vegas-based Switch plans to invest $1 billion in the 3 million square foot "supernap" center.

It will be built on 1,000 acres at the Tahoe Reno Industrial Center, where Tesla Motors currently is building its $5 billion gigafactory to make batteries to power its electric cars.

Gov. Brian Sandoval announced the plan in his State of the State address Thursday night along with a $1 billion expansion of Switch data space in Las Vegas. "This will make Nevada the most digitally connected state in the nation,"says CEO.

The company operates two data center facilities in Las Vegas, providing security, power and cooling for stacks of thousands of servers owned by more than 1,000 clients that include eBay, Xerox, Zappos, Amazon, DreamWorks, Shutterfly and the U.S. government.

Switch's "supernap" project includes the development of a 500-mile fiber optic network it calls a "superloop" that will connect Reno, Las Vegas, Los Angeles and San Francisco and dramatically increase the speed of information traveling between the cities. 

This is really interesting. Private enterprise needs a "superloop" to carry information between Los Angeles, Silicon Valley, Hollywood, and San Francisco. The obvious place to locate the data center would be somewhere in California, perhaps Fresno. So, where does it go -- a couple hundred miles to the east. Meanwhile, Jerry Brown is looking to the 19th century model to build a new trans-continental state railroad. LOL. 

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Background Reading Before Tonight's SOTU

The Article Will Help Explain Why The President Wants To Raise Your Taxes (Again)

USA Today is reporting that US workers are being'squeezed' by health insurance costs:

State-by-state analysis also shows that in every state over the course of a decade, the cost of employer-provided health care still grew faster than incomes.

That, in turn, had led to workers footing a bigger share of the costs of their health insurance.

In fact, employee contributions to their insurance costs have risen by as much as 175% since 2003 in some cases — with workers in the south having the biggest cost burden.
The report comes after years of slow growth in overall health-care costs on the heels of the 2008 financial meltdown, and as the effects of President Obama's health-care reform law, the Affordable Care Act, are being felt. The ACA contains several provisions designed to slow the rate of health-care cost growth.

The report notes that from 2010 to 2013, on the heels of the ACA's passage, 31 states and the District of Columbia saw a slowdown in the growth of premiums charged for health insurance for workers. Twelve of those states saw at least a three-percentage-point decrease in the rate of premium inflation.

But from 2003 through 2013, in all states, the price of employer-provider insurance premiums grew quicker than the pay for the workers there.

 The president will propose higher taxes to help subsidize his "affordable care" premiums.

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Income Stagnation

Why President Obama Wants To Raise Your Taxes (Again)

The New York Times is reporting that there is little modern precedent for the income stagnation seen during the Obama adminisration:

Even as job growth has picked up in recent months, wages haven’t grown much more quickly than inflation. As a result, the government’s official statistics suggest that the typical American household makes no more than the typical household did in the final years of the 20th century.

That’s remarkable. There is little modern precedent for a period of income stagnation lasting as long as this one. Official records don’t exist before World War II. But the best estimate is that the Great Depression may be the only other modern time in which incomes for most households in the United States have grown so slowly — or not at all — for so long.

The great wage slowdown has several main causes: globalization, which has forced Americans to compete with hundreds of millions of poorer workers from around the world; technological change, which allows machines to replace human labor in new ways; the slowdown in American educational attainment, even as the rest of the world has continued to become more educated and more highly skilled; and the shifting balance of economic power, away from workers and toward companies and their executives.

This comes after a gazillion dollars in stimulus, most of which went to Solyndra.  

ObamaCare, new EPA rules, and thousands of new regulations across all sectors were inadvertently omitted by The New York Times as the main reasons for wage stagnation. We should see a small one-line correction to this story buried on page 7 of next Friday's weekend edition.

More Black, Now Comes The White -- November 1, 2014; ONEOK Announces Completion Of Projects

A reader sent me a nice article from The Minneapolis Star-Tribune: we're going to see a bit more color on the regional railroads. It used to be all black oil tankers; now we'll start seeing white propane tank cars. There just is not enough pipeline for all the propane that needs to be shipped:

More propane is shifting from pipelines to railways this fall as Minnesota marketers bulk up supplies of the fuel for crop-drying and winter heating.

At least three rail terminals in the state have expanded their unloading and storage areas in recent months, and a new rail terminal in central Wisconsin is scheduled to open in two weeks.

Driving the changes was the closure in May of the Cochin Pipeline from Canada that carried 40 percent of the propane used in Minnesota. An estimated 230,000 homes, farms and businesses in the state depend on the product.

The pipeline’s owner, Kinder Morgan Energy Partners of Houston, halted propane shipments late last spring and began sending light petroleum condensate the other direction: from Illinois to Canada’s booming oil industry in Alberta.

Helping to fill the void left by the pipeline has been CHS Inc., the nation’s largest farmer-owned cooperative and a major wholesaler and retailer of propane. The Inver Grove Heights-based company is investing $24 million to develop a more robust network to supply propane in the northern tier region of North Dakota, Minnesota and Wisconsin.

And the Minnesota governor has signed an executive order temporarily easing propane delivery rules:

Governor Dayton signed an executive order Friday that allows propane delivery drivers a longer daily window to transport the product. They would still face limits on the amount of time they can spend behind the wheel. The order is similar to ones he's signed in the past to combat distribution shortages. Last year, propane shortages drove up heating costs.

I guess propane is less volatile, less dangerous this time of year. But our grocery store across the street here in Texas is taking no chances; the sign reads: no propane containers inside the store. 

Another article from the same newspaper has a story that I posted earlier; in fact, it may have been the very same article. I don't recall. But it's an extremely good article, coming at a time when there is a slump in oil prices. North Dakota looks to huge new investment in the state: plastics and fertilizer.

Even as it fills the railroads of the Upper Midwest with oil tank cars, the Bakken has allowed its natural gas riches to languish.

Less profitable than oil and more difficult to transport, natural gas has been so secondary in North Dakota that drillers still burn off more than a fourth of what rises from the ground. In satellite pictures, the flames sprawl across the Williston basin, lighting it up like a giant suburb.

A quiet transformation is underway, however, as the state bids to turn natural gas into a native business and drive down flaring.

A growing network of pipelines and processing plants has made North Dakota a recent target for billions of dollars of investment toward factories that convert natural gas into other products like fertilizer and plastic.

“It’s the natural progression of OK, now we’re pretty fully developing on the drilling side of things, and now comes the next component, which is the value add,” said Cullen Goenner, an economist at the University of North Dakota. “That’s where you really get the biggest bang for the buck, in terms of the employment and all those supplemental jobs, is in the value-added industries, more so than in just the extractive industries.”

A group called Badlands NGL announced in a news conference with Gov. Jack Dalrymple two weeks ago that it wants to convert cheap, abundant ethane into polyethylene, the raw material of plastic bags and bottles. The $4 billion factory would churn out rail car loads of the tiny, milk-white plastic beads.

A month earlier, Inver Grove Heights-based agriculture giant CHS Inc. said it will build a $3 billion fertilizer plant 90 miles west of Fargo. Another group with board members from the North Dakota Corn Growers Association, called Northern Plains Nitrogen, is trying to raise money for a $2 billion fertilizer plant just north of Grand Forks.

This could be a huge decade for North Dakota.

It should be noted that Hillary should get credit for these new projects. She never gets enough credit for all she has done building the Bakken. 

This really is quite exciting for North Dakota. These are huge projects. Had there been just one such project announced years ago, it would have been a big deal, but it seems very month another story comes out of North Dakota for a huge project.

For example, ONEOK just announced:

Tulsa-based ONEOK Partners LP announced it has completed work on three major projects in the oil and gas-rich Niobrara and Bakken shales of the Rockies and northern Plains.

Work is done on the Garden Creek III natural gas processing facility in North Dakota, the Bakken NGL Pipeline expansion in Wyoming and the Niobrara NGL lateral pipeline, also in Wyoming. These projects totaled more than $500 million in capital expenditures.

Completion of the Garden Creek III brings the company’s Williston Basin processing capacity to more than 600 million cubic feet per day in natural gas. ONEOK has increased its processing thereby 500 million daily cubic feet since 2010.

The three projects are part of the partnership’s previously announced $8.3 billion to $9.0 billion capital-growth program through 2016. ONEOK Partners has natural gas and natural gas liquids pipeline and processing assets throughout the central U.S.

And again, please send a thank you note to Hillary, Barry, and Pocahontas for building these plants.

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Ahead Of The Curve
A Note For The Granddaughters

This is so cool: in today's WJS Review section. The new buzz on Wall Street -- two phones - a phablet and a clamshell. It turns out the writer -- a slim-suited tech minimalist -- felt silly when making a phone call on his Samsung 5.5-inch-long "slab." His solution: a clamshell for making phone calls. He still carries his phablet but makes his calls on his clamshell. As regular readers know, I only carry a clamshell. It took about two weeks to find a replacement battery but now I'm connected again.

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The 800-Pound Gorilla

The front-page story in this week's Bloomberg Business: Stimulate This! John Maynard Keynes has the last laugh on what works for the global economy.

This segment is particularly interesting:

If Keynes were alive today, he might be warning of a repeat of 1937, when policy mistakes turned a promising recovery into history’s worst double dip.

This time, Europe is the danger zone; then it was the U.S.

What’s called the Great Depression was really two steep downturns in the U.S. The first ended in 1933. It was followed by four years of output growth averaging more than 9 percent a year, one of the strongest recoveries ever.

What aborted the comeback is still debated. Some economists blame President Franklin Roosevelt for signing tax hikes and cuts in New Deal jobs programs. Others blame the Federal Reserve. Dartmouth College economist Douglas Irwin argues that the Roosevelt administration triggered the relapse by buying up gold, removing it from the U.S. monetary base. The move to prevent inflation succeeded all too well, causing deflation.

Whatever the cause, Britain and other trading partners were dragged down, and U.S. output plunged and didn’t fully recover until America’s entry into World War II.

“We are really at a kind of 1937 moment now,” says MIT’s Temin. “It’s a cautionary history for us.”

The writer's focus is on the global economy and emphasizes "this time Europe is the danger zone."

I wonder if the the writer should be so sanguine about the US economy.

The writer notes the three "things" that economists blame for the US Great Depression:

• FDR raises taxes just as recovery was taking off (this, by the way, is the #1 accepted explanation)
• the Federal Reserve
• buying up gold

The latter two seem to have little relevance today (comparing what the Fed did in 1937 with what the Fed is doing now) and the gold story certainly has no relevance.

The 800-pound gorilla? The nation's biggest tax hike is yet to go into effect. Most of ObamaCare was deferred, delayed, or waived by executive action and won't go into effect until 2015 and 2016.  The good news: it's very possible, that tax hike will be offset by the fall in US energy prices. 

CEOs Shifting Health Care Cost: Unintended Consequences For Retirees; IRS Says "No" To Same Tactic For Employees

Updates

May 27, 2014: Daily Ticker takes a look at this new rule; I comment on it; too early to tell how this will play out. 

May 26, 2014: it looks like the Obama administration / IRS have done an end-run around this little gambit. It will be interesting if this is the end of the story. This is very, very good news for existing employees. Not such good news for those looking for employment. On the other hand, now that the defines health care as part of one's salary, it's very possible companies could tie hourly wages and/or salaries to health care costs.

May 26, 2014: hospitals starting to cut "charity" care, also being reported in The New York Times. 

Original Post

ObamaCare: CEOs Are Shifting Health Care Costs To Employees, Retirees

We've talked about this before. ObamaCare was never about the "30 million uninsured." ObamaCare was all about saving CorporateAmerica. The Department of Defense saw the coming trainwreck: but for the military, the trainwreck was not ObamaCare. The trainwreck for the military was the ever-increasing health care costs for active duty and retirees. Unfortunately for the military, that trainwreck is still coming.

The Department of Defense might have been the first to see the trainwreck coming, but Corporate America also saw that healthcare costs were unmanageable: a) rising quickly; and, b) unpredictable.

Hillary and Barry were able to change the discussion from how do we save Corporate America to how do we insure "30 million uninsured"? The answer was ObamaCare.  Had Hillary won, it would have been HillaryCare. They already had RomneyCare in Massachusetts, so had he won ....

ObamaCare was never about insuring the "30 million uninsured." The proof is in the pudding, the number of folks who actually signed up for ObamaCare. A few million newly insured were eligible all along for Medicaid. ObamaCare might have signed up two million uninsured (and, of those, a million might pay their first month's premium). The president called it a major success; two million people signing up; and, then he fired the person who made it all succeed, Ms Sebelius.

ObamaCare did not sign up man of the 30 million uninsured, but ObamaCare will allow Corporate America to shift health care costs from the CEO to the employee and to the retiree.

Yahoo!Finance is reporting just that: employees are shifting the burden of health care to retirees --

If you expect your employer to help cover the cost of your healthcare in retirement, you may be unpleasantly surprised.

The number of employers providing health benefits for retirees has been in a state of steady erosion over the past few decades — dropping from 40% of firms to 28% between 1988 and 2013, according to a new report by the Kaiser Family Foundation. At larger companies (200+ employees) the drop has been even more dramatic, falling from 66% to 28%.

As it stands, fewer than one in five employees work for a company that offers health benefits to retirees.

"It's hard to forsee a scenario where this trend will be reversed," says Trisha Neuman, senior vice president of the Kaiser Family Foundation and co-author of the report. "Employers are making decisions on an annual basis on how they want to structure their plans. They’re deciding what they’re willing to pay.”

The root of the decline is simple enough: Healthcare is growing increasingly expensive, and as retirees live longer each year, covering their medical expenses will only grow costlier. 

To mitigate future costs, some firms are capping their contribution to retiree health care, while others are tightening their eligibility standards for coverage by raising minimum age and years-of-service requirements. Newer hires may be excluded from coverage altogether. In a recent survey by Prudential Insurance Company of America, nearly half of 1,000 employers said they are considering moving to a defined contribution model, which would cap their contribution to retiree health coverage at a predetermined amount.

For young retirees, the blow to retiree health benefits has been cushioned by the implementation of the Affordable Care Act and the new healthcare marketplace. In the past, retirees who were too young to qualify for Medicare relied on employer-backed health coverage to fill in their gap in coverage until they turned 65.

For investors: this is great news. Health care expenses are going to decrease dramatically by nimble firms dropping retirees from company health care plans.

ObamaCare: A Football Analogy

Sometime ago I saw ObamaCare as a metaphor for a football game. Here is where we stand:
ObamaCare

• July 19, 2015: the second half is just beginning: the Supreme Court upheld ObamaCare with first significant challenge; insurers are predicting 30% premium hikes for 2016; and Native Americans want out
• May 15, 2014: half-time is almost over. The half-time show is quickly coming to an end. We are now hearing, as predicted, premiums are going to go up significantly in 2015. There are two story lines here: first, premiums are going up significantly in 2015. Second, some folks have only paid their first premium for 2014 (sticker shock) and now they are going to be told that their premiums will be even higher in 2015; they have not had a chance to get used to the unexpectedly high premiums.
• April 1, 2014: half-time. The enrollment period for 2014 is "officially" over, though it's probably been extended in several states (it was extended in California). We haven't even gotten to the second half and insurers are already worried about the backlash when they announce the premiums for 2015
• March 26, 2014: coming up to half-time, the ObamaCare "drop-dead" deadline (March 31, 2014) has been delayed two more weeks, on the "honor" system. Musings on ObamaCare to date. The administration crows that 6 million signed up, topping their target. The original target was a paltry 7 million but lowered to 6 million. During the Obama/Hillary presidential nomination content in 2008, it was said that 30 million to 46 million Americans were uninsured. ObamaCare had nothing to do with uninsured minions; it had to do with cost shifting health care costs from the CEO to the employee.
• February 4, 2014: barely into the second quarter, and we're getting an update from the booth (CNBC, The Washington Times) -- Congress is reporting that the estimate has now tripled, the number of folks that will be locked out of the job market due to ObamaCare. The second quarter is not going to look pretty for the home team. 
• January 5, 2014: We are underway: the second quarter. Both sides are now trotting out human interest stories, how good ObamaCare is, how bad ObamaCare is. "They" say ObamaCare is now fully executed; not quite true: the employer mandate was delayed a full year, and the individual mandate for all intents and purposes is all delayed a full year. Everyone has estimates of the number of folks who enrolled (mostly Medicaid, it appears), but the government can not even tell us how many have paid their first premium. There are occasional stories about the real metrics that are not being followed in the media (who enrolled; how many have paid). And now Forbes provides another ankle-biting article on ObamaCare: the "taxes" Americans will now pay for ObamaCare.
• Updates, analysis of the first quarter of the ObamaCare debacle: the website rolled out in October; the chief information officer resigned in November; the chief operating officer (#2 in the chain) retired in December; federal enrollments shockingly low; overall enrollment may be less than 2 million; goal was at least 3 million at this point; insurers "need 7 million"; the ObamaCare act was necessary for the 30 million uninsured, it was said; at least 8 million have lost their coverage since October (two months); corporate mandate delayed a year; individual mandate effectively delayed indefinitely; deadlines extended; chaos and confusion; White House won't consider putting a single person (a "CEO") in charge of his biggest program despite requests of insurers, his own political party [even the quasi-governmental US Postal Service has a "CEO" that takes all the heat for problems]
• The break between the first and second quarter. What to watch for in the second quarter: off-side penalties. 
• The end? Obama repeals ObamaCare for 2014. The end of the first quarter: the rollout was a debacle, and now we learn that Obamacare shuns the best hospitals in the world (MD Anderson, Cedars Sinai Los Angeles, Mayo)
• The Passing Game, the first quarter: fraudulent subsidies will be passed on to taxpayers
• The Ground Game, the first quarter: not going well; Obama says shop around; his czar says if you want to keep your doctor, you will have to pay more; get over it;
• Rollback: Obama says "Yes"; states say "No on rollback to canceled policies"
• The Rollout:  ObamaCare -- the death spiral begins
• The Prelude:  ObamaCare; no additional posting to this site as of October 24, 2013 
• ObamaCare Cost Shifting 
• The website and security issues
• ObamaScare Headlines

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ObamaCare Was Just A Big Political Mess

The Daily Ticker is reporting: Obamacare "wasn't fundamental change at all, just a big political mess."

Actually, the "talking head" is quite wrong. ObamaCare is/was a fundamental change, and it is a big political mess.

Random Look At Some Interesting Names Of Bakken Wells

Some time ago I noted that CLR might be naming their wells after the home towns of their roughnecks, or perhaps their well supervisors. I first noted that, I think, in their Brooklyn field. Now some new names suggesting the same.

CLR:

• In Dollar Joe: the Annapolis wells, the Raleigh wells
• In Indian Hill: the Cincinnati wells, the Scottsdale wells

SM Energy is starting to name wells after NFL greats, in (training?) Camp oil field:

• Elway 1-32H
• Manning 1-32H
• Davis 1-32H

A personal observation. Both my brother and I were recipients of "college scholarships" from the Eckert Foundation; the "scholarships" came with a very low interest rate; both the capital and the interest had to be repaid; due to a mix-up with names, I paid off both my brother's scholarship and my own. Smile. In Elk old field, three new "Eckert Foundation" wells. The Elk oil field is just south of Williston, on the south side of the river, east of the highway. [March 30, 2014: see comments below. My apologies to the Alva J Field trust. It was the Alva J Field trust who provided low-interest loans to my brother and to me; I had the Eckerts and Alva J Field mixed up. Again, my apologies to Alva J Field.]

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For Investors Only

I have opined almost from the beginning that ObamaCare was/is a godsend for investors and for corporations. I was reminded of that again while reading Sylvia Nasar's Grand Pursuit: The Story of Economic Genius.

It's hard to believe (with hindsight being 20/20) that Keynes wrote in the early 1920's, during the interwar years: "... inflations and deflations made it difficult for investors and businessmen to calculate the effects of decisions and, to a much greater degree than the public appreciated, distorted decisions to save or invest." -- p. 284.

Before ObamaCare there were two huge problems for businesses of all sizes vis a vis health care: inflationary costs and unpredictability. Unpredictability is the bigger of the two problems. With ObamaCare, both of those problems have been solved. Corporations can now plan precisely what their health care costs will be going forward by cost-shifting their employees over to ObamaCare. Many (most) have already done that: instead of offering a company health care program, CEOs can give their employees a fixed monthly amount to help pay health insurance premiums. CEOs will determine the amount to be paid, not Blue Cross/Blue Shield. That is huge. [By the way, cost-shifting employees to ObamaCare is the patriotic thing to do; ObamaCare is the law of the land.]

But there's something else going on in America that will help investors: the energy revolution.

Long-time readers will remember the posts by analysts suggesting that the "Bakken experiment" has resulted in flattening the volatility of the price of crude oil. I assume folks remember the volatility of crude oil that started with the OPEC embargo back in the 70's and continued through the early years of the Bakken boom -- fifty years of volatility. The price of oil would fall, only to surge with the "outbreak" of any "world crisis." Folks were wringing their hands when oil hit $150/bbl but the actual price was less of a problem than the volatility. Keynes had figured out that "... inflations and deflations made it difficult for investors and businessmen to calculate the effects of decisions and, to a much greater degree than the public appreciated, distorted decisions to save or invest." Likewise, it is now apparent that the volatility of the price of oil was a much bigger problem than the actual price. If the actual price -- whether high or low -- was predictable, businessmen could plan. With volatility, they could not.

It is now apparent that the energy wealth in North America has evened out that volatility. Best example: oil hardly moved during the Crimean crisis. I think the entire range for WTI during this period was between $98 and $101. That is an incredibly narrow range, even in "normal" times, but it is absolutely incredible during a US-Russian "crisis."

All things being equal, ObamaCare and the "Bakken experiment" will be huge for investors going forward. Regardless of what happens politically with ObamaCare, this genie cannot be put back in the bottle -- corporations have been given the green light to cost-shift health care costs to their employees, and they are not going to go back to the way things were. 

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

The Way We Were, Barbra Streisand

Early Morning Trading -- Slow News Day -- For Investors Only

Investing talk. 

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

Jobs report status quo. My hunch is the weekly initial unemployment claims will now remain in a narrow range. The monthly unemployment number will continue to improve, though it won't mean much. Things are in a holding pattern right now. "Everyone" has baked ObamaCare into the stock market ... and guess what: the President, by executive order, has put the whole program on hold. Technically and legally NOT the WHOLE program but the word on the street is that the program is on hold. Do you remember the movie, Waiting For Guffman? Life follows art; now it's "waiting for Obamacare." This is what we will get:

• insurers will get a huge bailout
• 2015 premiums will skyrocket; government will step in; cap premiums
• folks will finally understand what "deductibles" mean
• urgent care clinics will flourish; hospitals will struggle
• insurers will be pass-through entities for Obamacare; regulated; same as federal crop insurance
• federally-mandated 30-hour work week will be the biggest single cultural change 
• massive civil disobedience as folks don't sign up for ObamaCare (it's the law of the land)
• employers have been given the green light to cost-shift health care expenses to employees
• cost-shifting will be the headline story when unions, NLRB gets involved
• all the current talk about the minimum wage is a spin-off from Obamacare reality

For investors, Obamacare will be a godsend. I think folks forget how this all started. It was demagoguery that got it passed; it was passed on the premise that 30 million Americans are uninsured for health care.

The dirty little secret was this: employers -- BIG BUSINESS -- knew they were going to go broke because of health care expenses. I saw it in the military: the general officers were the first to see it but they couldn't stop it. TRICARE was a bigger operation than flying in the US Air Force by the time I retired. Conscientious municipal financial officers saw it coming, but mayors and governors didn't want to "touch it." Hillary was pragmatic; she knew it. She had business experience (cattle futures, if nothing else) and she listened to BIG BUSINESS that was supporting her financially. BIG BUSINESS needed to do something. Health care costs had two liabilities:  a) increasing exponentially; and, b) increasing capriciously. It was bad enough that Blue Cross Blue Shield premiums increased 20% every October for the next year's coverage, but not being able to plan was the most difficult.

BIG BUSINESS can handle 20% increases in any expense year after year if the playing field is even (everybody incurs the 20% increase) and if it is predictable: they simply bake it into their numbers and pass the increased cost unto their customers.

It was unpredictably that was the killer. Hillary listened. She was the first to succeed at making this her entire campaign. And she almost won. Until a better orator came along.

The genie cannot be put back in the bottle. Obamacare is a win-win for everyone. The consumers got two things: no pre-existing conditions clauses (smoke all you want, gain all the weight you want, you won't be penalized); and, no annual cap on medical expenses. BIG BUSINESS got two things: predictably and the green-light to cost shift their employees.

Everything else is marginal. Everything else will be sorted out in the US Congress and in state legislatures. But with consumers getting no pre-existing-condition clauses and no annual/lifetime caps; and BIG BUSINESS getting out of the health insurance business, Obamacare, by another name, is not going to go away.

And now that it's on hold, the market can only go one way. Companies will start reporting falling health expenses this year. My hunch is there will be no headlines reporting that. It will be hard to find. In fact, the health care expense line in financial reports will simply and silently disappear, except for the $200/month/employee subsidy that employers will provide their employees to find their own health insurance. And employers will be very resistant to raising that amount, just as they are very, very (ostensibly) resistant to raising the minimum wage. (I say ostensibly because I don't think BIG BUSINESS is all that resistant to increasing the minimum wage -- maybe a separate blog on that in the future, why BIG BUSINESS probably favors an increase in the minimum wage. Spoiler alert: think Darwinian).

Yesterday, I wrote Don, that TESLA surging in after-hours was a huge plus for the market. It has nothing to do with TESLA, per se. But a lot of retail investors are sitting on the side line watching the market recover from the January slump and missing out. Even conservative investors have missed out on MDU -- hitting new highs almost every day for the past couple of weeks.

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

Oil is flat today. Taking a breather. Not much news, I suppose, but that doesn't mean the oil and gas companies are flat. TPLM up a bit, but AMZG is up almost 4%. WMB is up over 3%.

WMB: beats by a whole penny and the shares go wild, up 3%. Gotta love it. Earnings were actually down this year compared to last year. By a pretty healthy amount.

That's the problem with the market for some folks. It doesn't make sense. All things being equal, it comes down to perception, sentiment, fear, greed, I suppose.

Must be the start of summer here in the DFW area. I see the mowers alongside the interstate and state highways. Drives my allergies wild.

Thursday -- For Investors Only And Other Odds And Ends; Doubling The Minimum Wage Won't Offset Losses Incurred Due To ObamaCare

KOG trading at a new high. Just barely, but it's still a new high. 

Maybe more on this later: a recurring theme on this blog is health care cost-shifting due to Obamacare. Now this report, read it closely. It's the most succinct explanation of what I mean by cost-sharing.  Bloomberg is reporting:

One-third of U.S. employers plan to move their workers’ health-care coverage to a private exchange in the next few years, a survey found, following the lead of companies like Walgreen Co. seeking to reduce costs.

While 95 percent of employers said they would continue to offer health care in the next three to five years, 33 percent may use a private exchange to provide the benefit up from 5 percent currently, according to a survey released today by a unit of Aon Plc, a London-based insurance broker.

Traditionally, most large employers are self-insured, meaning they take on the financial risk of their employees’ health costs. Under a private exchange, workers are given a subsidy to pick from a limited number of health plans and the insurer takes on the risk.

Wal-Mart "badly" misses expectations. Expectations: $1.59 vs actual: $1.34, compared to $1.67 a year earlier. Profit falls 21%; guides lower.  I haven't been in a Wal-Mart in months. Our favorite retailer remains Target but we try not to go there, and we definitely never use a credit card there. My wife mentioned that ever since the Target security breach, she has saved a lot of money. I'm impressed. 

Russian hockey team loses to Finland; out of the competition.  The New York Times reports:

President Vladimir V. Putin and any other Russian who was asked made it plain that the Sochi Games’ success hinged on the Russian men’s hockey team.

Sure, Russia has a formidable delegation, winning medals in many events, from biathlon to bobsled. But it was the hockey team, representing the national sport, that would offer the world the most meaningful symbol of the country’s might.

Active rigs in North Dakota:

	2/20/2014	02/20/2013	02/20/2012	02/20/2011	02/20/2010
Active Rigs	186	184	200	171	94

Sixteen companies announce increased dividends or distributions, including Alaska Air Group, Flowserve, Foot Locker, Permian Basin (PBT).

Denbury Resources misses by $0.04, misses on revs: Reports Q4 (Dec) earnings of $0.27 per share, excluding non-recurring items, $0.04 worse than the Capital IQ Consensus Estimate of $0.31; revenues fell 1.2% year/year to $596 mln vs the $610.22 mln consensus.

American Railcar Industries beats by $0.14, reports revs in-line: Reports Q4 (Dec) earnings of $1.14 per share, $0.14 better than the Capital IQ Consensus Estimate of $1.00; revenues fell 5.1% year/year to $197.2 mln vs the $196.86 mln consensus. Primary reason for the increase in manufacturing revenue was a higher mix of tank railcars; the primary reason for the increase in leasing revenue was an increase in the number of railcars and an increase in the average lease rate.

Could we see a Balkanization of the union? A segment of Colorada wants to split away from Colorado. Now, a proposition to split California into six states gets the "ok" to gather signatures; 12 senators vs the current two.

RBN Energy: musings on US energy policy.

There is a common theme of surplus in US energy markets today with more natural gas, natural gas liquids (NGLs) and light sweet crude oil being produced than can be processed and consumed domestically. The likely destination of those surpluses is export markets – either directly or in the form of derivative products.  How should we think about these exports in the context of “energy independence”?   U.S. energy policy since the 1970s has been centered on the importance to national security of reducing dependence on foreign resources—the oft-touted, elusive goal of “energy independence.”  Today we examine whether a btu energy balance is a practical and effective measure of energy independence.

One way to look at the energy independence issue is the same way we view US economic national security, where the closely watched statistic is the balance of payments.  By that measure if we spend more on imports than we make back on exports there is a net outflow of money.  But if we spend about the same amount of money on imports as we make on exports, we have a healthy trading relationship with the world.  The same kind of logic could be applied to energy.  The theme of today’s blog forms part of the analysis in RBN Energy’s latest Drill Down Report “The Future’s So Bright I’ve Gotta Wear Shades – Crude, NGLs and Natural Gas Outlook."

 The Wall Street Journal

Yes, the news that was posted yesterday made the front section of The WSJ: judge in Nebraska says "NO" on the Keystone XL 2.0 North route. Back to square one for the banana republic.

Japan's trade deficit soars.

There is a suggestion that work on widening the Panama Canal may resume.

I first learned about this story in Forbes many, many years ago. Lost track of it. Wondered how it would play out. Grupo Mexico and Kansas City Southern are battling a Mexican bill that would dial back exclusive railroad rights purchased more than a decade ago. I'm amazed the "exclusive deal" last this long.

In the third section, the lead story: Arctic winds put fire under natural gas, which traded over $6 yesterday, at a five-year high. We'll see more of the same this summer when global warming kicks in and everyone turns on their air conditioners.

The Los Angeles Times

In parched states, fracking thirst grows. Greeley, CO, sells water to the oil and gas companies that have bought a drilling boom to town Some residents wonder whether it will run out. Fracking, nationwide, uses much less water than the amount of water used to water golf courses. Another inconvenient truth.

The LA Times is absolutely right: the last argument against raising the minimum wage is  over. Presidential wanna-be's need to get out in front on this. The minimum wage needs to be raised to help offset the impact of Obamacare on low-wage earners. Because of Obamacare, the federally-mandated 30-hour work week will result in an immediate 25% pay cut for low-wage earners. That's bad enough, but the same folks will be the first targets for health care cost shifting. I don't think doubling the minimum wage would be enough to offset the losses that low-wager earners will incur because of Obamacare. By the way, those folks who suggest with the 30-hour work week, they will have the opportunity to get a second 30-hour/week job. Not so fast. The jobs may not be available. ObamaCare and an increased minimum wage will both result in lost job opportunities.

Tuesday; Number Of Active Rigs In North Dakota Remains High; Fracking Continues Through Cold Weather; Gen & Wyo Rail Doubles Year-Over-Year

Wells coming off the confidential list have been posted. 

Fracking resumes/continues. Samson Oil & Gas provides update of its North Stockyard project in the North Dakota Bakken:

Coopers 2-15-14HBK and Tooheys 4-15-14HBK: Fracture stimulation operations on the Coopers and Tooheys wells have been completed, and both of these wells are currently shut-in. The wells are located on the Tofte 2 pad and flow-back operations on these wells will commence around January 20th in conjunction with the Little Creature well flow back.

Genesee & Wyoming traffic in Dec 2013 was 155,769 carloads, up 109.0% y/y, and up 11.0% y/y pro forma for the RA acquisition.

Coal & coke traffic increased 5,776 carloads primarily due to increased shipments in G&W's Midwest, Central, Mountain West and Ohio Valley regions. Agricultural products traffic increased 3,758 carloads primarily due to increased shipments in G&W's Australia, Pacific and Ohio Valley regions. Metallic ores traffic increased 1,890 carloads primarily due to increased iron ore shipments in G&W's Australia Region. G&W's Other commodity group traffic increased 1,800 carloads primarily due to overhead Class 1 shipments. All remaining traffic increased by a net 2,227 carloads. 

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

JPMorgan Chase beats GAAP by $0.06, beats adjusted by $0.06.

Wow, look at Delphi: Delphi Automotive approves an increase in the annual dividend rate paid on its ordinary shares to $1 per ordinary share from $0.68; announces new $1 billion share repurchUase program.

Active rigs:

	1/14/2014	01/14/2013	01/14/2012	01/14/2011	01/14/2010
Active Rigs	193	184	200	163	79

RBN Energy: Continuation of the series on crude oil storage and takeaway in western Canada.

Spectra Energy purchased the 280 Mb/d Express pipeline from Kinder Morgan in December 2012. The Express originates in Hardisty and ships crude to Caspar WY where it connects with the Platte pipeline into the Midwest. The Express is small compared to the huge 2.5 MMb/d Enbridge mainline and the planned 1.1 MMb/d TransCanada Energy East pipelines but it is not the smallest export pipe from Hardisty. That honor belongs to the Inter Pipeline Bow River that ships less than 100 Mb/d of crude across the border into Montana. Today we continue our Canadian crude storage series describing Edmonton and Hardisty crude oil infrastructure.

Also note: in this blog we announce that everyone attending our School of Energy - Session A in March will be joining us for the Brad Paisley concert at the Houston Rodeo!

The Wall Street Journal

Health sign-ups skew older, raising fears over costs.  I have no idea why this is a concern. The insurers will be bailed out by the government. The insurers will simply become "pass-through" entities operating the national health care system for the federal government. But from the linked article:

One-third of health plan enrollees in new insurance marketplaces are 55 or older, the Obama administration said Monday, a figure that insurers said makes the pool older than they would need to sustain their coverage at current premiums.

Administration officials said they are pushing to enroll more young people before a March 31 deadline for most people to get coverage for this year, and some cushions built into the law mean it won't necessarily face trouble right away even if the 2014 pool of enrollees skews older.

Still, the release of the data, showing for the first time the age breakdown of people who had signed up for coverage through December, highlighted the challenge in persuading younger people who may not have a pressing need for health coverage to sign up for policies that can cost about $200 a month before subsidies. 

Of course it won't doom ObamaCare. As noted above, the insurers have a bailout clause.  Also, I'm not sure why one-third of enrollees are 55 years old or over comes as a surprise. Isn't that just about the "size" of the US population over 55? Of those over 26 years old (remember, those under the age of 26 can remain on their parents' insurance: one-third. From 26 to 55: one-third; over 55, one-third. Seems about right.

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I would never have guessed: another booming American business -- Kentucky bourbon.

The world is developing a fresh taste for Kentucky bourbon.

In a $13.6 billion all-cash deal, Osaka, Japan-based beer and soft-drinks maker Suntory Holdings Ltd. agreed Monday to buy Beam Inc., BEAM the owner of Jim Beam, Maker's Mark and Knob Creek bourbons and the second-largest maker of American whiskey behind Brown-Forman Corp.

The acquisition would catapult family-owned Suntory from No. 15 in global liquor dollar sales to No. 3, behind only U.K.-based Diageo  PLC and France's Pernod Ricard SA, according to alcohol industry tracker IWSR.

Beam, based in Deerfield, Ill., currently is No. 4 globally. Beam is positioned squarely in a part of the liquor business experiencing a powerful global upswing: bourbon whiskey.

The traditional American spirit is made mostly from corn, aged in charred oak barrels and typically hails from Kentucky. Its popularity is building as some consumers grow tired of vodka, the top-selling U.S. spirit, and gravitate toward distillers of brown spirits with more than centurylong domestic roots. Long in the doldrums, U.S. bourbon has made a comeback in the past decade and production in 2012 rose above one million barrels for the first time since 1973. Distillers have invested roughly $300 million to boost capacity since 2011.

North American whiskey—including bourbon, Tennessee and Canadian whiskeys—accounted for more than half of the total growth in the $21 billion U.S. spirits market in the 52 weeks ended Oct. 12, 2013, according to store tracker Nielsen.

"Heard on the Street": Beam deal jacks up values.

North American whiskey is one of the most rapidly growing spirits in the U.S., particularly at the high end of the market. At Beam, comparable sales of Maker's Mark were up 17% year-to-date at the end of the third quarter, while sales of Knob Creek and Basil Hayden's were up 15% and 34%, respectively. That compares with 3% growth for Jim Beam. Timothy S. Ramey, an analyst with D.A. Davidson, says this trend has staying power. People's palates tend to move on a continuum toward greater complexity and depth of flavor as they age. The fact that 20-somethings are already drinking bourbon bodes well for the continued growth of the industry.

There appears to be a correlation here: 20-somethings not signing up for ObamaCare but increasing their consumption of bourbon.

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Groups pledge $330 million to save Detroit's art collection.

West Virginia begins to lift water ban.  Another crisis, another day.

Two panels to investigate New Jersey bridgegate. Another crisis, another day. The problem went on for four days and a) no one told the governor "why"; and, b) the governor never asked. Apparently.

No criminal charges will be filed over IRS heightened scrutiny of conservative groups. And this is news? This is as newsworthy as learning that Jesse Jackson, Jr, now in prison, gets around $9,000 monthly in disability (while in prison) after developing a mood disorder following his sentencing. The United States: what a great country.

Supreme Court likely to limit presidential recess appointments. Along with executive orders and picking and choosing which laws to enforce, the US was looking more and more like a banana republic. Or perhaps an Islamic republic without the beheadings.

By not acting, the Supreme Court agrees that abortions beyond 20-weeks "constitutional."

The Los Angeles Times

Disclaimer: this is not an entertainment site. Do not buy any concert or movie tickets based on what you read here or think you might have read here. 

And still more stories on bourbon: at the Golden Globes parties, booze was promoted throughout the show and after.

CALPERS posts 16% return on investments -- best return since 1977. Unmanaged stock portfolios rose about 26% last year, and John Bogle's Vanguard Windsor had a return of about 39%. The North Dakota Legacy Fund probably had a return of less than 1% if the fund did not invest in equities. I have not seen the North Dakota Legacy Fund annual report yet.

In the US, rich kids getting skinnier, poor kids getting fatter.

The Boston Globe

From ancient fish, insight into origin of limbs. 

The 375-million-year-old fish Tiktaalik roseaewas first written into biology textbooks in 2006, when a team of three paleontologists discovered a fossil of the curious crocodile-like fish showing it had front fins resembling limbs, with elbows and primitive wrists. The same team announced Monday that Tiktaalik also had surprisingly large pelvic bones, suggesting the transitional creature was shifting toward “all-wheel drive” though it still lived in the sea.

Senate postpones action on jobless benefits. Memo to unemployed: develop a mood disorder.

Top Automobile Dealership Shifts Insurance Costs To ObamaCare

I think I've been pointing this out ever since the law was passed.

Cost shifting.

I track the cost-shifting story elsewhere.

For Wall Street, ObamaCare is great news.

For Main Street, not so good.

For investors, ObamaCare gets the unpredictability and spiraling health care costs off the company's books.

Companies are going to do exactly what Extreme Dodge, Jackson, Michigan, is doing:

... when employees were told that the health insurance plan that the auto dealership had provided its workers was canceled because it doesn’t comply with the Affordable Care Act, better known as Obamacare.

Rather than officially sponsor a new policy, the company -- voted one of the 100 best car dealerships to work for in the country last year -- will instead provide its employees with $2,400 apiece to buy their own insurance, or to pocket and pay the new federal penalty if they elect to go without it.

That’s a little bit more than the company says it spent on health insurance this year.  Dealership owner Wesley Lutz said his decision to go in a new direction was driven by the fact that health insurance is “incredibly expensive” and getting more so. He says he needs to be able to control his future costs.

“As a business owner, we have to be viable first and then provide services,” he said. Lutz is not required to provide health insurance to workers, but has done so for 35 years.

 How bad are spiraling health care costs with the Affordable Health Care Act? Again, the article:

Insurance broker Michael Harp said small businesses, part of what’s known in the industry as the “small group market,” are used to seeing health insurance premiums climb about 10 percent a year, but it’s never before been this dramatic. 

For Extreme Dodge to have kept deductibles and out-of-pocket costs at last year’s levels, he said, would have cost the dealership almost 50 percent more than last year.

The story has a hundred story lines. Another one -- the act of civil disobedience. By law, everyone must carry health insurance under ObamaCare:

Four younger workers opted not to sign up for any health insurance at all, according to a company official. 

Four works out of 26. That is 15 percent, and my hunch is that about 15% of the overall general population will not enroll in ObamaCare. It could be significantly worse: the next time you visit a Wal-Mart, or a Target, or a grocery story of your choosing, look around, and think for yourself how many of those you see shopping actually know how to enroll in ObamaCare electronically. Scary, huh?

Monday: EOG Set To Become Largest Producer In Lower 48; The San Pedro Wall Lizard

Active rigs: 185

RBN Energy: continuing the series on all that crude oil ending up along the Texas coast -- what to do with it.

When over 4 MMb/d of new crude transportation capacity opens up to the Texas Gulf Coast by the end of 2015 shippers are likely to face congestion getting their supplies to refiners in the region. Given the U.S. Department of Commerce ban on exports, some of that crude needs to find a home elsewhere. Pipeline options to get crude supplies to Eastern Gulf refineries are limited to the Ho-Ho reversal project. Today we examine shipper alternatives.

EOG: set to become largest oil producer in the lower 48 -- Michael Fitzsimmons over at SeekingAlpha. 

Not being satisfied with that distinction, President and CEO Bill Thomas has set the company's sights on being the largest oil producer in all of the US. Total oil production has grown at a 43% annual rate over the last three years with many wells achieving a 100%+ rate of return. New completion techniques should offset any potential weakness in WTI prices. As a result, the company's stock price should power higher. After doubling over the last 5 years, EOG should continue to deliver superior shareholder returns and could double again over the next 3 years.

At a recent BofA Global Energy conference presentation, I was surprised to hear Thomas claim EOG would soon be the largest oil producer in the continental United States.

Calumet-MDU have laid the foundation for their new refinery four miles west of Dickinson. Photo at the link.

The Wall Street Journal

I'll do a stand-alone post on this later. I've been writing about for the past year. I was waiting for the mainstream media to start reporting. Like it or hate it, there is no putting the genie back in the bottle, and that's great news for investors. These are the facts: I don't think anyone can deny them. The cost of health care was "killing" business. That's the first fact. Second, businesses could never set solid long term financial / business plans because they never knew what their health care costs (in terms of health insurance premiums) were going to cost them. Every October, or thereabouts, the insurance companies would sent them a bill for the following year. (It's no different that your personal car insurance; you don't know what the premium will be until you get the bill at the time of renewal).

Like it or leave it, ObamaCare is a godsend to big business. Big Business will get two huge things out of the act. First, they will cost-shift employees / unions over to ObamaCare. They could agree to pay full insurance premiums. But that's not going to happen. Big Business will simply give their employees "X" amount of dollars each month and let the employees / unions buy their own health plans. ObamaCare policies, like them or hate them, by law, provides incredible coverage, and, with regard to cost, ever our president has simple advice "shop around."

I mentioned that Big Business gets two things out of ObamaCare. The first was cost-shifting. But the second thing they get is even more important. Their CFO can now truly plan for personnel expenses going forward. The CFO knows how much the corporation is going to shell out for health are premiums, and the CFO knows that figure out as many years in the future as the CEO/board of directors want to plan.

This is why the bill is called the Affordable Care Act. It has nothing to do with affordability for onesies and twosies that are buying health care policies; this has everything to do with big business.

Today, in the front section of The Wall Street Journal, this story: companies prepare to pass more health costs to workers.

Companies are bracing for an influx of participants in their insurance plans due to the health-care overhaul, adding to pressure to shift more of the cost of coverage to employees.

Many employers are betting that the Affordable Care Act's requirement that all Americans have health insurance starting in 2014 will bring more people into their plans who have previously opted out.

That, along with other rising expenses, is prompting companies to raise workers' premium contributions, steer them toward high-deductible plans and charge them more to cover family members.

The changes as companies roll out their health plans for 2014 aren't solely the result of the ACA. Employers have been pushing more of the cost of providing health insurance on to their workers for years, and firms that aren't booking much sales growth due to the sluggish economy are under heavy pressure to keep expenses down.

Some are dealing with rising expenses by making employees pick up a bigger share of the premiums for coverage of family members. Employees this year are responsible for an average 18% of the cost of individual coverage, but 29% of the cost of family coverage, according to a survey of employee health plans by the Kaiser Family Foundation and the Health Research & Educational Trust.

Great news for investors. But companies will go one step farther. They will eventually provide workers a monthly stipend for workers to "shop around," buy their own ObamaCare policy.

On another note regarding ObamaCare. Out of Colorado, The Denver Post is reporting:

Enrollment in the Affordable Care Act through Colorado's health insurance exchange is barely half the state's worst-case projection, prompting demands from exchange board members for better stewardship of public money.

The shortfall could compromise the exchange's "ability to deliver on promises made to Colorado citizens" and threatens the funding stream for the exchange itself, according to board e-mails obtained by The Denver Post in an open records request.

The exchange, meant for individuals and small groups buying insurance, had projected a lowest-level mid-November enrollment of 11,108, in a presentation to a board finance committee. The exchange announced Nov. 18 that it had signed up 6,001 Coloradans so far.

The midlevel scenario for November was 20,186 members, and the highest projection 30,944 members.

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

This is an incredible story. As long as I've been able to read, I've read stories about the trash problem in Naples, Italy. It is so "normal" one does not even see stories about it any more. Until today: trash crisis piles up on city outskirts. It must be bad, if this story is now in the front section.

A new garbage crisis is exploding on the outskirts of this city long plagued by recurring trash-handling problems—this time fueling toxic bonfires that have burned unchecked and worries about contaminated water and food supplies.

While the mountains of rotting trash that made front pages around the world five years ago have largely disappeared from the city's center, the problem has shifted to Naples's impoverished periphery. There, residents say the local mafia burns toxic industrial refuse, including asbestos, unchecked, and piles of trash sit alongside farmland.

"People are just terrified," says Maurizio Patriciello, a priest in one of the most exposed towns in the area. "Central and local governments have underestimated this problem for decades."

Though the area's waste-handling woes are long-standing, the effects on food and water safety have grown more apparent and intensified public outrage.

Thousands of demonstrators last month took to Naples's streets to protest the garbage crisis and, last week, Pope Francis also voiced concern. The problem is so serious that officials at the U.S. Navy base outside Naples have moved personnel away from surrounding areas over the past two years after they found contaminated water supplies nearby.

No links or comments to the Iran nuclear story. I have no dog in that fight.

Schadenfreude.  Short sellers adjust as stocks keep rising.

Some bearish investors are exiting short positions more quickly than usual when their bets turn negative, trying to keep losses to a minimum. Others are reducing wagers they had placed against the broader market, to avoid further pain if the rally continues. Some of these investors continue to maintain bearish bets on individual companies they suspect will run into trouble. Still others are shifting to shorting emerging-market stocks and pockets of weakness in the U.S. In any case, these investors have been licking their wounds.

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

The Los Angeles Times
Our winter cottage is in San Pedro, south Los Angeles. But we also spend one month during the summer there, taking the granddaughters for a southern California vacation. They will love this story. We all enjoy watching the "wall lizards" but did not know anything about them. Here's the story:

The Italian wall lizard is a relative newcomer to Southern California. It's thin and elegant, and some of the showier males have a dot of brilliant turquoise on their sides.

The wall lizards arrived in San Pedro in 1994, when a homeowner brought a few of them back from a trip to Sicily. He released four males and three females into his backyard, and they thrived and multiplied.

Nearly 20 years later, the Italian wall lizards have almost entirely replaced native lizards in a five-block radius from where they were introduced.

"Since I started studying this population, I've seen literally a thousand wall lizards in this area and just two native lizards," says Pauly, 36, who's decked out in a pair of Tevas and a pale blue T-shirt that says, "Newt and Improved." "The takeover feels pretty complete.

ObamaNation -- Lame Duck Presidency

Doomsday (this section was in the "original post" below but for easier access, I brought it up here):

• Doomsday: The Endangered Species Act
• Doomsday: The Big Box Store 
• Doomsday: Mainstream Media 
• Doomsday: The US Worker 
• Doomsday: Public Sector Pensions
• Doomsday: US Cities 
• Doomsday: US Unions 
• Doomsday: US States 
• Doomsday: US Health Care 
• Doomsday: Iraq
• Unions and Demise of the US Auto Industry

Updates

August 3, 2014: Reuters is reporting:

President Barack Obama dismissed Russia as a nation that "doesn't make anything" and said in an interview with the Economist magazine that the West needs to be "pretty firm" with China as Beijing pushes to expand its role in the world economy.

Obama has tried to focus U.S. foreign policy on Asia, a response to China's economic and military might. But for months, that "pivot" has been overshadowed by a flurry of international crises, including Russia's support for separatists in eastern Ukraine. 

Russia is the world's third-largest oil producer and second-largest natural gas producer. Europe relies heavily on Russian energy exports, complicating the West's response to the Ukraine crisis.

Don and I had the same reaction to this story: this guy is a nut. Remember: he also said that no American CEO or businessman "built" their own company. This guy is getting more and more delusional as a) his polling numbers fall; and, the world gets more and more out of control. With his approval ratings well below 50%, maybe below 40% depending on the day, Obama, more and more, must "cater" to his base -- the Trayvon Martins and Maxine Waters of the world.   


March 30, 2014: in the original post I noted that on/about October 23, 2013, more than ever, it appeared the White House was spiraling out of control. That was before President Obama lost the Ukraine. In "Saturday Morning Musings, March 29, 2014" I posted an update on a most interesting week. In all my years of blogging, I had the impression that the week of March 23, 2014 -- just five months later than the original post, was another incredible week for investors in the oil and gas sector.

On another note, there have been very few stories on fiscal challenges facing cities and states. Note the "doomsday" updates for cities and states below, and note there have been no updates in a long time. This certainly suggests the economy is improving, albeit slowly.
 

Original Post

I am removing a number of links from the sidebar at the right. The Obama Presidency has become irrelevant for me. I will continue to post updates for archival purposes to help keep the Bakken in perspective, but this is pretty much the end of the Obama presidency for all practical purposes.

My internet viewing habits have not changed in the past six years. My primary source of news are the mainstream links (CBS, ABC, NBC, FoxNews, London Telegraph, London Mail OnLine, Bloomberg, Breitberg, the Huffington Post) at the Drudge Report. Drudge, himself, never posts or writes any stories. He simply links a gazillion other outlets.

Perhaps it is just my imagination but on/about October 23, 2013, more than ever, it appeared the White House was spiraling out of control:

• restricting news outlets from reporting government data
• restricting government bureaucrats from disseminating government data
• revelations that the president has eavesdropped on German chancellor's mobile phone
• news that the president may, in fact, delay the individual mandate for ObamaCare

The List 

ObamaNation

• ObamaNation, page 2. Posting begin October 24, 2013. 
• ObamaNation, page 1. No additional posting after October 24, 2013. 
• Obama Scandals 
• ObamaNation: 2013 
• ObamaNation: 2013

ObamaCare

• May 1, 2015: half of the 17 state exchanges are in deep doo-doo. Can't afford it. 
• January 7, 2015: PreferredOne, Minnesota, drops out of ObamaCare. Can't afford it.
• November 29, 2014: "the Schumer speech"; admits that ObamaCare was a debacle; we are now in the third quarter of the four-quarter football game called ObamaCare. The mid-terms were a disaster; Senator Schumer says ObamaCare was a mistake; the former OMB budget analyst whose forte is "numbers," is caught padding the numbers for ObamaCare; says she is outraged;  

The Day ObamaCare Died

• November 7, 2014: Obama's team got a shellacking in the mid-term elections; may be one of the worst, if not the worse, ever mid-term election for an incumbent Senate majority; all about ObamaCare; the GOP picked up 8 or 9 Senate seats; and will pick up another if, as expected, Landrieu loses in Louisiana
• November 3, 2014: the mid-term elections tomorrow; referendum on ObamaCare; sure it's about the economy, but it's "always" about the economy; after tomorrow's election, we start the third quarter of ObamaCare (continuing to use the football analogy). For all intents and purposes, the game is over, but we still have a full half (two quarters) to live through. "Open Season" for the second year of ObamaCare begins in two weeks; premiums are said to be rising 6%; my hunch: that figure will be revised, significantly upward. Numbers re-enrolling expected to decline significantly.
• October 7, 2014: Wal-Mart, Target, Home Depot will no longer provide health insurance coverage for part-time employees (those working less than 30 hours); so now folks will need two jobs to reach 40 hour+/week and neither employer will provide health care coverage
• September, 2014: IRS will be sending letters to "hundreds of thousands" of folks to ask them to reconcile their stated income when applying for ObamaCare and their income as reported to the IRS last year. Might not be a pretty picture. 
• August 8, 2014: essentially "everyone" will be exempt from ObamaCare for 2015. If not exempt, they will have a case for a waiver if they so desire. More e-mails missing from HHS over ObamaCare.
• June 7, 2014: The Congressional Budget Office has quietly dropped projections that ObamaCare will decrease the US deficit. As Hillary would say, "does it even matter?" The question is no longer "whether" but "how much will ObamaCare add to the deficit?"
• May 20, 2014: ObamaCare is now mainstream (link to follow). Any hope of repealing it long gone. Republicans don't even talk about repealing it any more. Everyone talks about "fixing it." Obama will have his "FDR" legacy. 
• May 15, 2014: half-time is almost over. The half-time show is coming to an end. We are now hearing, as predicted, premiums are going to go up significantly in 2015. There are two story lines here: first, premiums are going up significantly in 2015. Second, some folks have only paid their first premium for 2014 (sticker shock) and now they are going to be told that their premiums will be even higher in 2015; they have not had a chance to get used to the unexpectedly high premiums. 
• April 1, 2014: half-time. The enrollment period for 2014 is "officially" over, though it's probably been extended in several states (it was extended in California). We haven't even gotten to the second half and insurers are already worried about the backlash when they announce the premiums for 2015
• March 26, 2014: coming up to half-time, the ObamaCare "drop-dead" deadline (March 31, 2014) has been delayed two more weeks, on the "honor" system. Musings on ObamaCare to date. The administration crows that 6 million signed up, topping their target. The original target was a paltry 7 million but lowered to 6 million. During the Obama/Hillary presidential nomination content in 2008, it was said that 30 million to 46 million Americans were uninsured. ObamaCare had nothing to do with uninsured minions; it had to do with cost shifting health care costs from the CEO to the employee.
• February 4, 2014: barely into the second quarter, and we're getting an update from the booth (CNBC, The Washington Times) -- Congress is reporting that the estimate has now tripled, the number of folks that will be locked out of the job market due to ObamaCare. The second quarter is not going to look pretty for the home team. 
• January 5, 2014: We are underway: the second quarter. Both sides are now trotting out human interest stories, how good ObamaCare is, how bad ObamaCare is. "They" say ObamaCare is now fully executed; not quite true: the employer mandate was delayed a full year, and the individual mandate for all intents and purposes is all delayed a full year. Everyone has estimates of the number of folks who enrolled (mostly Medicaid, it appears), but the government can not even tell us how many have paid their first premium. There are occasional stories about the real metrics that are not being followed in the media (who enrolled; how many have paid). And now Forbes provides another ankle-biting article on ObamaCare: the "taxes" Americans will now pay for ObamaCare.
• Updates, analysis of the first quarter of the ObamaCare debacle: the website rolled out in October; the chief information officer resigned in November; the chief operating officer (#2 in the chain) retired in December; federal enrollments shockingly low; overall enrollment may be less than 2 million; goal was at least 3 million at this point; insurers "need 7 million"; the ObamaCare act was necessary for the 30 million uninsured, it was said; at least 8 million have lost their coverage since October (two months); corporate mandate delayed a year; individual mandate effectively delayed indefinitely; deadlines extended; chaos and confusion; White House won't consider putting a single person (a "CEO") in charge of his biggest program despite requests of insurers, his own political party [even the quasi-governmental US Postal Service has a "CEO" that takes all the heat for problems]
• The break between the first and second quarter. What to watch for in the second quarter: off-side penalties. 
• The end? Obama repeals ObamaCare for 2014. The end of the first quarter: the rollout was a debacle, and now we learn that Obamacare shuns the best hospitals in the world (MD Anderson, Cedars Sinai Los Angeles, Mayo)
• The Passing Game, the first quarter: fraudulent subsidies will be passed on to taxpayers
• The Ground Game, the first quarter: not going well; Obama says shop around; his czar says if you want to keep your doctor, you will have to pay more; get over it;
• Rollback: Obama says "Yes"; states say "No on rollback to canceled policies"
• The Rollout:  ObamaCare -- the death spiral begins
• The Prelude:  ObamaCare; no additional posting to this site as of October 24, 2013 
• ObamaCare Cost Shifting 
• The website and security issues
• ObamaScare Headlines

Renewable Energy

• March 30, 2014: the price of ethanol has steadily climbed and is now more expensive than gasoline.
• March 23, 2014: The (London) Telegraph reports that the UN will issue a report suggesting that biofuels do more harm than good, driving up prices, and poses risks to ecosystems (manure and fertilizer runoff into streams) and biodiversity.
• November 12, 2013:  The AP reveals the devastation created by the ethanol program; despite the overwhelming evidence, the president stands by his Interior Secretary, the EPA, and the ethanol program
• And now the other side of the story: 

Robert Malsam nearly went broke in the 1980s when corn was cheap. So now that prices are high and he can finally make a profit, he's not about to apologize for ripping up prairieland to plant corn. 

Across the Dakotas and Nebraska, more than 1 million acres of the Great Plains are giving way to corn fields as farmers transform the wild expanse that once served as the backdrop for American pioneers. 

This expansion of the Corn Belt is fueled in part by America's green energy policy, which requires oil companies to blend billions of gallons of corn ethanol into their gasoline. Ethanol has become the No. 1 use for corn in America, helping keep prices high. 

"It's not hard to do the math there as to what's profitable to have," Malsam said. "I think an ethanol plant is a farmer's friend." 

What the green-energy program has made profitable, however, is far from green. A policy intended to reduce global warming is encouraging a farming practice that actually could worsen it. 

That's because plowing into untouched grassland releases carbon dioxide that has been naturally locked in the soil. It also increases erosion and requires farmers to use fertilizers and other industrial chemicals. In turn, that destroys native plants and wipes out wildlife habitats.

Doomsday 

• Doomsday: The Endangered Species Act
• Doomsday: The Big Box Store 
• Doomsday: Mainstream Media 
• Doomsday: The US Worker 
• Doomsday: Public Sector Pensions
• Doomsday: US Cities 
• Doomsday: US Unions 
• Doomsday: US States 
• Doomsday: US Health Care 
• Doomsday: Iraq
• Unions and Demise of the US Auto Industry
   

Economy

• Debt Ceiling Debate, 2001, Part I

External links removed from the sidebar

• Obama's Hawaiian Vacations 
• Twitter The Second Term 
• Help! Repay The National Debt Here
• Say Anything Blog 
• Actions Have Consequences
• Tapping the SPR
• Is It Just Me? 
• I Can't Make This Stuff Up 
• The Shirtless Man FBI Story 
• Cap And Trade And North Dakota 
• Green Notes From All Over
• Fossil Fuel Companies Going Green. Sort Of.
• Quote of the Day 
• Anything To Destroy the Oil Industry