Hedging -- Today's EIA Blurb -- April 2, 2015

EIA's blurb today:

Analysis of hedging can be difficult because not all producers consistently report their hedging activity. In general, producers are not required to report hedge effectiveness in regulated financial statements. However, 32 U.S. oil producers have consistently reported their hedge results in their financial statements.

The portfolio of these producers shows a 22% decline in oil sales revenue, down $2.4 billion from $10.9 billion in third-quarter 2014 to $8.6 billion in fourth-quarter 2014. But because of $1.3 billion from hedging activities, the combined sales and hedge revenue in fourth-quarter 2014 had a milder decrease of $1.1 billion. --- EIA

Williston Region (The Bakken) With More Job Openings Than Last Year At This Time -- April 2, 2015

Huge jobs report. In the "old days" -- two months ago -- a strong jobs report would have scuttled the stock market due to fears of a rate increase by the Fed. What did the market do today with unemployment claims dropping far below expectations? The market surges. Well, sort of. But it is up 100 points. Something tells me the movers and shakers are trading the market with a Fed rate increase already baked in.

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

The incredible drop in unemployment claims certainly raises questions about all those doom and gloom stories of 100,000 jobs lost in the oil and gas sector. USA Today is reporting:

Planned oil industry layoffs in the U.S. are approaching 100,000 in the past four months with more likely to come.

Oil-producing states such as North Dakota, Texas, Oklahoma and Louisiana are catching the brunt of the cutbacks just as consumers are enjoying cheaper gasoline prices brought on by the 55% drop in crude oil prices since last June.

"The entire Midwest from Texas to North Dakota is really feeling the effects," says Moody's Analytics economist Aaron Smith.

About 91,000 energy-related job cuts have been made public since early December, says Continental Resources, the Oklahoma City-based oil producer, which has been tracking companies' layoff announcements by the week.

They came from oil exploration and production companies, oilfield services companies and manufacturers, such as U.S. Steel, that supply them. Some cuts have occurred, and most are expected this year.

So, what is the job situation in the Bakken? Hold onto your hats. Reuters is reporting:

There are 1,706 job openings in the Williston region, 350 more than a year ago. Despite the sliding oil prices, job openings actually rose in February from January, according to Job Service data.

Old story? Nope, March 12, 2015. 

What's going on? You know all those wells in the Bakken? They don't run on their own; lots of maintenance.

Continuing with the linked story:

Halliburton Co, Schlumberger, and other large energy companies were conspicuously absent from a major North Dakota job fair this week, a telling sign as employers in the No. 2 U.S. oil-producing state grapple with sliding crude prices.

Instead of roustabouts, the state's oil industry wants pump technicians, gas-processing plant operators and truck drivers to help sustain existing production of 1.2 million barrels of oil per day - not to necessarily grow production. 

"When a well is out, you still have to service it," said Cindy Sanford of Job Service North Dakota, which helped organize the two-day job fair in Williston, capital of the state's oil boom. (There are almost 13,000 active wells in the state.) 

The change in job type highlights the anxiety many oil producers and their service providers feel as they try to weather a more than 50 percent drop in crude prices since last summer. Halliburton was a key participant in last year's Williston job fair. Today, it's all but stopped regional hiring. 

Contractors and local schools and water districts, among others, are offsetting the drop in oilfield employment as they hire in tandem with a rise in the region's population.
"People are coming here and staying here, and if they get laid off, they're cross-training for a new job," Sanford said. 

I didn't want to post this story yesterday -- "the Williston region with more job openings than last year" -- folks would have thought it an April Fools' joke. 

It's interesting. The oil industry in North Dakota will probably pay more attention to improving producing wells than they did in the past.

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RadioShack Is Dead

The WSJ is reporting:

After a brush with liquidation last week, a reimagined version of the chain will debut later in April under the ownership of hedge fund Standard General LP with an assist from Sprint Corp.

According to plans filed with the bankruptcy court, the stores will look a lot like the streamlined outlets RadioShack Corp. had hoped to build before running short on cash earlier this year. The stores’ top management will also have a new face after chief executive Joe Magnacca, hired two years ago to remake the company into a flashy specialty retailer, resigned this week.

Sales of cellphones, a crucial traffic driver that nevertheless had long since stopped being very profitable for the chain, will be outsourced to Sprint. To reduce clutter, products like laptops, tablets and digital cameras will be cut back, as will name brands that don’t have much of a following. That will leave RadioShack to focus on higher margin house-brand chargers, batteries and speakers.

Wow, I love American capitalism. 

Graphic Of The Day -- How Much US Oil Comes From Fracking? 50% -- April 2, 2015; How Much US Electricity Provided By Solar? 0%

From the WSJ:

California Activists Want Water Restrictions On Oil Industry -- April 2, 2015

Yesterday Governor Brown announced state-wide water restrictions in California. The oil and gas industry was not mentioned; I was curious. A reader sent a link confirming that the California oil and gas industry was not mentioned with regard to water restrictions which has activists upset. The Jamestown Sun is reporting:

California’s oil and gas industry uses more than 2 million gallons of fresh water a day to produce oil through well stimulation practices including fracking, acidizing and steam injection, according to estimates by environmentalists. The state is expected to release official numbers on the industry’s water consumption in the coming days.

It turns out that much of the water used by the oil and gas industry in California is returned to agriculture.

Regardless, I doubt the California oil industry can sustain many more hits. Be that as it may, I have no dog in this fight, either.

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When The Wind Doesn't Blow, The Sun Doesn't Shine, The Water Doesn't Flow

FoxNews is reporting:

This winter's record-low snowfall means less hydroelectricity for California.

Snowpack in the Sierra Nevada stands at 12 percent of average. Energy officials say that means less melting snow throughout the year to run the turbines at dams.

California Energy Commission Chairman Robert Weisenmiller says it will force the state to increase its use of fossil-fuel-burning power plants. The state says it will also seek to import more electricity from states not hit as hard by drought.

The nonprofit Pacific Institute calculates that California ratepayers have already paid $1.4 billion more in utility costs because of the falling snowpack and hydro power. The center says using more natural-gas-fired power plants has increased greenhouse-gas emissions by 8 percent.

Global warming death spiral? No, even warmists say that the continuing California drought has nothing to do with global warming. 

First Time Unemployment Claims Drop To 268,000; Continuing Claims At 15-Year Low; EIA's Monthly Crude Production -- Largest Month-On-Month Decline Since 2011 In March -- April 2, 2015

Active rigs:

	4/2/2015	04/02/2014	04/02/2013	04/02/2012	04/02/2011
Active Rigs	96	190	184	207	170

RBN Energy:

The Energy Information Administration’s (EIA) latest U.S. monthly crude production statistics published March 30^th show January production down 135 Mb/d versus December 2014, the largest month-on-month decline since June 2011.  There was an earlier warning sign from EIA.  The agency’s Drilling Productivity Report published March 9^th predicted that production would decline in April in three major U.S. oil production regions – Bakken, Eagle Ford and Niobrara. Since oil and NGL prices crashed last fall, the market has been watching with bated breath for the first signs of a production slowdown. Certainly rig counts have nosedived amid producer budget cuts in 2015. But are we really seeing the beginnings of a long-term slowdown just yet?  Was the DPR a harbinger of the January production decline? The clues lie within the DPR report.  Today’s blog parses DPR methodology, assumptions and risks as well as contributing market factors to get to the bottom of what is driving those reported production declines.

We first described the EIA’s DPR report – a new measure of production drilling efficiencies – shortly after it was launched in November 2013. Since then the report has become something of a bellwether for production trends in seven major U.S. oil and gas producing regions: Bakken, Eagle Ford, Niobrara, Permian, Haynesville, Marcellus and Utica. The report estimates the increase or decrease in rig productivity and the resulting production gain/loss for the current and next month. These are topics that RBN has also covered in detail in the past few months. The latest report predicted the first month-on-month oil and gas declines in DPR data in over a year (since late 2013). Table 1 below shows forecasts in  the March 2015 DPR  for each of the seven regions indicating that Bakken production is projected to drop by 8 Mb/d of oil and 8 MMcf/d of gas in April versus March. Eagle Ford production is projected to be down 10 Mb/d in oil but up 14 MMcf/d in natural gas. Niobrara is expected to fall 5 Mb/d in oil and 15 MMcf/d in gas.

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Jobs

Tweeting now:  US applications for unemployment benefits fall to 268,000 in sign of strong job market - @AP

Business Insider: continuing claims at 15-year low.

Another great report on the labor market.

Initial jobless claims fell to 268,000 last week, blowing away expectations for initial claims to totaled 286,000. 

Continuing jobless claims, also called insured unemployment, fell to a 15-year low. 

Continuing claims declined to 2,325,000, the lowest since December 2000 when this figure was at 2,322,000. 

Last week's initial claims figure was also revised up slightly, to 288,000, an the four-week moving average of claims is now down to 285,500. This is the lowest 4-week average for initial claims since October.

I like the lede: "another great report." LOL.

On another note, all that talk about 100,000 jobs being lost in the oil and gas industry -- must be just that: talk. The folks working the oil and gas industry are very talented; they will find jobs anywhere. Speaking of which, I see a lot of "Hiring CDL Drivers" here in the DFW metroplex area. Expensive area to live but really inexpensive locations within easy commute.