Friday, January 10, 2014

Abraxas Update

TheStreet mentioned Abraxas earlier, so I was curious. It just so happens that Abraxas has an operational update, dated January 6, 2014. Two things: Abraxas acquired some more acreage in Eagle Ford and the CEO commented on the Lillibridge pad in the Bakken.

First the acquisition, all 440 net acres:
Abraxas continues to identify and transact on targeted lease blocks in its core focus areas of the Eagle Ford shale. Recently, Abraxas acquired approximately 440 net acres of leasehold in McMullen County known as Dilworth East. The company believes the acreage block can accommodate up to four 5,000 foot lateral wells. Abraxas expects to be in a position to announce further acreage acquisitions in the Eagle Ford in the near future. 
Second, the Lillibridge:
In McKenzie County, North Dakota, the Lillibridge 5H, producing from the Middle Bakken, averaged 1,049 boepd (861 barrels of oil per day, 1,127 mcf of natural gas per day) over the well’s first 30 full days of production.
The Lillibridge 6H, producing from the Three Forks, averaged 921 boepd (762 barrels of oil per day, 954 mcf of natural gas per day) over the well’s first 30 full days of production.
The Lillibridge 7H, producing from the Middle Bakken, averaged 1,005 boepd (840 barrels of oil per day, 989 mcf of natural gas per day) over the well’s first 30 full days of production. The Lillibridge 8H, producing from the Three Forks, averaged 1,049 boepd (902 barrels of oil per day, 883 mcf of natural gas per day over the well’s first 25 full days of production. Each of the four Lillibridge wells was constrained on a 16 to 20/64th choke.  
CEO's comment:
“The Lillibridge West pad again shows the benefit of our focused development program in the Bakken. With a team oriented culture allowing our geology, drilling and completion teams to work together seamlessly toward a common goal, and with a stalwart focus on attention to detail, we continue to show superior well results. 
Who do they have write this stuff? LOL.

On Another Down Day -- Look At The Winners; This Is The Earliest That The Great Lakes Have Ever Frozen -- US Coast Guard

Updates

Later, 12:02 pm Pacific Time: this probably doesn't have anything to do with what I posted earlier, but did not want to post this as a stand-alone post, so I thought I would post it here. Two photos to compare: one a solar farm. One a Bakken well.

First, the Apple solar farm. At the link, scroll to the bottom.

Second, the Bakken oil well near White Earth, North Dakota.
 
Original Post

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.

I love the Warren Buffett philosophy of investing. I am not a trader. I have left a lot of money on the table. Let's see: any more cliches? Invest in what you know.

Enough of that. One of my favorite holdings has been SRE. The share price has been struggling for the past few weeks (months?) -- but with a long term horizon and automatic dividend reinvestment, I love it when the company shares are on sale.

But today, SRE is up almost 2%, trading near its 52-week high. So, what's the news? Reuters is reporting: California may relay on more gas-fired generation due to drought.
California power companies may be forced to rely more on higher-cost natural gas-fired generation in 2014 as record drought conditions are expected to reduce the state's hydropower output for a third year in a row.

Public power utilities that rely heavily on hydroelectric generation may be forced to use more expensive power sources, such as gas-fired plants, and purchase power to make up for any hydropower shortfall, Fitch Ratings, a credit rating agency, said in a report on Friday.
Fitch said eight of the 14 public power companies it rates receive between 10 percent and 32 percent of their power from hydroelectric resources. Among them is the Sacramento Municipal Utility District, one of the state's largest power providers.
I posted another story (sent in by a reader) on hydroelectric power just the other day. At the time I did not know it affected California to this extent.

What happened to solar power and wind power to fill the hydroelectric gap? Oh, yes, that's right, two data points: a) the numbers don't add up; and, b) way too expensive. I assume solar/wind is thirty times more expensive than what hydroelectric power costs. Maybe just twenty times. Natural gas (and coal)? Dirt cheap. 

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PSX also hit a new high today. But CVX is having a terrible day and COP not doing much better. So, winners and losers.

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It's official: this is the earliest that the Great Lakes have frozen -- US Coast Guard. It looks like mainstream media is missing the biggest story of the year: the polar vortex.

Emerald Oil Acquires >20,000 Acres In The Bakken At Incredible Low Per Acreage Price; Increases Their Bakken Acreage Significantly; American Eagle Provides Operational Update; The Retailer Target States Breach Was Worse Than Initially Reported; Apple Enters Microsoft's Turf

Emerald Oil acquires ~ 20,800 net acres in the Williston Basin for $74.6 mln in cash: Co announces that it has entered into two separate definitive purchase and sale agreements with two unrelated sellers to acquire additional core Bakken and Three Forks producing properties and undeveloped leasehold in McKenzie and Williams Counties, North Dakota. The total purchase price for the asset packages is $74.6 mln in cash.  [$75 million/20,800 acres = $3,605/acre.]

20,800 acres represents almost 45% of their previous acreage. Previously, my data base (which could be way wrong, showed that Emerald had 48,800 acres. Now, almost 70,000 net acres, all in the Bakken.

I don't know if the recent operator transfer that was announced in the daily activity reports were part of this Emeral Oil deal.
Williams and McKenzie are the better counties in the Bakken. The source said this was undeveloped leasehold property. But $4,000 / acre seems like a good deal. 

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American Eagle Energy estimates that average production for the first quarter ended March 31, 2014, will be ~1,850 to 1,950 BOEPD: During the quarter ended December 31, 2013, American Eagle added four operated wells to production in its Spyglass Project area consisting of two field extension wells and two infill wells. The extension wells included one Three Forks producer and one Middle Bakken producer and the two infill wells are producing from the Middle Bakken formation. Two of the wells (Bryce and Erling) are part of the Farm-Out Agreement in which the Company's JV partner pays 100% of the Company's working interest share of well development costs for up to six wells, all of which will be operated by American Eagle. During the month of December 2013, Williston, North Dakota had 19 days with temperatures below zero degrees Fahrenheit.

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 I haven't posted an "investment article" from The Street for a long, long time but this headline caught my eye: where to invest in oil and gas in 2014? Abraxas.

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RBN Energy: part 2 in the series on the natural gas debacle in Boston, New England. Won't get better until 2016 and even then the "fix" will be far short of what is needed.

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Dividends and distributions: Ford raised its dividend from 10 cents to 12.5 cents. 25%. The yield is now 3.16% -- easily exceeds what one gets in a money market fund.

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.

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Target breach worse than initially reported:
Target lowers Q4 EPS, comp guidance; co discloses that certain guest information -- separate from the payment card data previously disclosed -- was taken during the data breach. 
As part of Target's ongoing forensic investigation, it has been determined that certain guest information -- separate from the payment card data previously disclosed -- was taken during the data breach. This theft is not a new breach, but was uncovered as part of the ongoing investigation. At this time, the investigation has determined that the stolen information includes names, mailing addresses, phone numbers or email addresses for up to 70 million individuals. Much of this data is partial in nature, but in cases where Target has an email address, the Company will attempt to contact affected guests. This communication will be informational, including tips to guard against consumer scams. Target will not ask those guests to provide any personal information as part of that communication. In addition, guests can find the tips on our website. 
More concerning: Target does not mention that, yes, indeed, PINs were also filched, something they initially denied.

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The Wall Street Journal

I linked the stories on this yesterday from a different source, but now The Wall Street Journal also notices: Apple devices flow into corporate world. This is a huge story.
The popularity of the iPhone and iPad among employees is prompting corporate tech managers to rewrite policies and change traditional buying patterns.
The iPhone has replaced the BlackBerry as the mobile phone of choice, as the iPad assumes tasks once reserved for PCs. Apple won about 8% of global business and government spending on computers and tablets in 2012, Forrester Research says, up from 1% in 2009. By 2015, Forrester estimates that figure will climb to 11%. The numbers exclude the iPhone, which may be the most widely purchased Apple product by corporate customers. It is often Apple's gateway into a business.
This was also reported at the blog yesterday, at the same link as above: PC shipments fell 10% last year. Apple's iPad destroying the PC market.

Wow, this all seems like "old" news. I also wrote at length about this issue yesterday: Barnes and Noble's digital content fell almost 30% last year. It's gonna fall more this year. My hunch: Microsoft and B&N will partner on digital.

The Los Angeles Times

The LA Times leads with the jobs story. The LA Times usually doesn't lead with this kind of story; suggests just how bad the job market it.

Yes, here it is: The LA Times headline -- the Target breach is much wider than first reported. Now up to 110 million and much personal data taken from as many as 70 million. I believe the original number was 40 million. Now we are up to 110 million, and much more information was stolen that originally reported.
Target Corp on Friday said that last month's data breach affected up to 110 million customers and that the data theft was broader than originally thought.
The Minneapolis-based retailer said that as as many as 70 million customers' information, which included names, mailing addresses, emails and phone numbers, was stolen last month during the busy holiday shopping season.
Target said the theft was not a new breach but was uncovered as part of the ongoing investigation into the theft of millions of customers' credit and debit card information during the busy holiday shopping season. Between Nov. 27 and Dec. 15, hackers pilfered the data from U.S. Target stores. 
The worst part about all this is that Target has been incredibly slow in getting the word out to its customers. I know I won't use a credit card at Target any more. 
Friday's disclosure, however, shows that hackers made off with more than just payment card information.
“I know that it is frustrating for our guests to learn that this information was taken and we are truly sorry they are having to endure this,” said Gregg Steinhafel, Target's chief executive said. “I also want our guests to know that understanding and sharing the facts related to this incident is important to me and the entire Target team.”
The retailer is offering one year of free credit monitoring and identity theft protection to all affected customers who shopped at U.S. stores. Customers will have three months to enroll, Target said in a statement.
Target says folks should not change their credit card account numbers or discontinue them. Simply monitor them for unauthorized use. Okay.

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Here we go: the insurers get the blame (of course, this is being reported in the LA Times, which appears to be less reliable than the New York Times on political issues of that's even possible. The Los Angeles Times is reporting that "insurers are under first as Obamacare kicks in. New policy holders are having trouble confirming coverage, obtaining ID numbers and getting medical care." Remember: they enrolled under Obamacare-developed-and-mandated websites. The insurers are simply pass-through entities now. But they will get the blame.

[Also at Breitbart:
Insurance companies are still trying to sort out cases of so-called health insurance orphans, customers for whom the government has a record that they enrolled, but the insurer does not.

Government officials say the problem is real but under control, with orphan records being among the roughly 13,000 problem cases they are trying to resolve with insurers. But insurance companies are worried the process will grow more cumbersome as they deal with the flood of new customers who signed up in December as enrollment deadlines neared.

More than 1 million people have signed up through the federal insurance market that serves 36 states. Officials contend the error rate for new signups is close to zero.

Insurers, however, are less enthusiastic about the pace of the fixes. The companies also are seeing cases in which the government has assigned the same identification number to more than one person, as well as so-called "ghost" files in which the insurer has an enrollment record but the government does not.

But orphaned files _ when the insurer has no record of enrollment _ are particularly concerning because the companies have no automated way to identify the presumed policyholder. They say they have to manually compare the lists of enrollees the government sends them with their own records because the government never built an automated system that would do the work much faster.]
Governor Jerry Brown is his own personal earthquake predictor, something new in the science of earthquakes. Brown: "earthquakes are just around the corner." I can't make this stuff up.

Now the good stuff that the Los Angeles Times is known for: the Geico caveman the elephant shark genome wins race for most 'slowly evolved vertebrate.'
Move over, coelacanth. No longer is this extremely rare order of ancient fish crowned the slowest evolving vertebrate animal in the world. That honor now goes to the elephant shark, whose freshly sequenced genome was described in Nature this week.
Known formally as Callorhinchus milii, the elephant shark boasts an incredibly compact genome -- about a billion DNA base pairs, roughly one-third the length of the human genome. And it could provide scientists with new insight into the evolution of their now very distant cousins -- the group of bony fishes called Osteichthyes, which gave rise to all terrestrial vertebrates, including humans.
The elephant shark, also known as the Australian ghost shark, can be found off the coast of southern Australia, and can stretch to about 4 feet long. They’re part of the group of cartilaginous fish known as Chondrichthyes, whose skeletons are made up mostly of cartilage instead of bone.
The cartilaginous fish separated from the bony-jawed fishes -- our ancestors -- around 450 million years ago. But together, these two groups make up about 99.9% of the living vertebrate species.
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A Note to the Granddaughters

We went to the Annenberg Space for Photography yesterday in downtown "Century City," west of Los Angeles city center. It was a great day. The Annenberg and National Geographic were celebrating the magazine's 125th anniversary.

The "space" is relatively small. There were two long introductory videos, very well done, but one could not take their children to see them. They were definitely R-rated for violence; no nudity. The exhibit was a handful of framed photographs and posters. The vast majority of photographs were displayed on dynamic large-screen, flat television monitors.

The highlight for me was the inclusion of photographs from the Bakken, including: Williston, Tioga, Watford City, and Stanley. Without question, the photograph of Watford City was most remarkable. The photographs were taken from the March, 2013, issue, "America Strikes New Oil." It is free to access on-line but requires e-mail registration.

I would not recommend the visit unless you have absolutely nothing else to do while visiting Los Angeles. Having said that, I'm glad I went. The photographs were most contemporary. There was no history of photo-journalism of the National Geogrpahic and very little science. It was mostly a political agenda that will suit the Angeleno elite. The video of the interviews with the photographers appears to have been produced by the same folks that do the Jonathan Ive/Apple interviews.

Following the museum, I took May to, perhaps, the best mom-and-pop/authentic sushi restaurant in Los Angeles (if not the best; none are better): Hide Sushi. Cash only. Bottomless tea cups which my Japanese-Hispanic wife tells me is the norm in Japanese restaurants. But we were also offered more rice, something she has never seen in any restaurant. I did a Yelp review if interested. Although not called "Little Tokyo" it looks like Sawtelle Boulevard in this part of Los Angeles is a Japanese destination. My wife lived in this area before we met, many, many years ago.

We stopped by Yamaguchi Bonsai Nursery: incredible.  I could not afford to buy many of the bonsai. Then I noted that even if I could afford to buy them, they were not for sale: a private collection.

Wells Coming Off Confidential List Have Been Posted; Unemployment Drops To 6.7% -- Record Low For This Administration? Sears In A Death Spiral

The wells coming off the confidential list have been posted. Newbies should note three things:
  • the six-month production rate for new wells (especially Hess and EOG) are simply incredible
  • most wells coming off the confidential list are going to DRL status -- operational reasons
  • more wells than ever will be reported in January, 2014 -- January, 2014, sets a record for wells coming off the confidential list
[Later, same day, some hours later: I like this headline from Rigzone -- "Oil rises, jobs data show economy needs Fed help.
The world's largest economy added just 74,000 thousand jobs in December, the Labor Department said, while analysts had forecast the addition of 196,000 jobs.]
Jobless claims (reported yesterday). Reuters is reporting:
  • weekly first time unemployment claims drop an astonishing 15,000 to 330,000
  • the less volatile four-week average dropped 9,750 to 349,000
  • no indication that the polar vortex caused the drop in applications -- LOL 
Unemployment rate drops to Obama-administration record of 6.7%; break out the champagne; add golf to the weekend schedule. Reuters is reporting:
  • job growth weakest in three years -- despite all those new ObamaCare navigators, new web designers
  • now Reuters says "the polar vortex might have had an impact"; I can't make this stuff up.
  • the nonfarm payroll rose 74,000 last month (December)
I honestly don't remember a report this bad since I began blogging. I guess my memory doesn't go back farther than January, 2011 (see linked story).

For newbies, remember, the number needed for job growth it at least 200,000 new jobs each month. When "they" get down to 150,000 it is very, very bad news. I don't know what adjectives Fox will use to describe "67,000."

From the linked article:
"It looks like it's a weather issue - a big drop in construction and a 1,000 drop in transportation. People will focus on the unemployment rate drop and the upward revision to the prior month," said John Canally, an economist for LPL Financial in Boston.
It was bad in December, but the real bad weather began in January -- didn't it? Anyway, weather was not a factor in the unemployment claims report; weather was a factor in the new jobs report.

But the bad news continues.

Everybody will focus on the record low participation rate. People are leaving the labor force in droves. My son-in-law did the math: if one's benefits total around $36,000/year (and federal, state direct payment; plus social services; plus "perks" for unemployed) it is better to stay unemployed than get a minimum-wage job.

This is the important number: "there was also a decline in the average workweek." Remember, this was the December report when all the retailers extended their hours, hired additional staff, for holiday and Christmas shopping. And even with all that extra hiring, longer hours, there was a decline in the average work week. Remember: employers need to get the work week down to 29 hours or less to avoid the ObamaCare tax.

The market can interpret the numbers and the market is down. Again.

The comments at the linked stories are spot on.

Later: the pundits are starting to comment on this devastating jobs report --
Wow, I've been saying the same thing for two years: spring hopes eternal (mainstream media spin) vs reality -- no jobs. Yahoo!Finance is reporting:
"Longer term, we know the story has been 'two steps forward, one step back,'" Hamrick says. "So should we be really surprised [at December's weakness]? Not that much."

Beyond the quantity of job creation, there also has been a lot of focus on the quality of jobs created.
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Wow, breaking news: Sears is in a death spiral; could be gone by 2017. My wife has never shopped in Sears, so she would not know but she thinks JCP's death spiral is tighter and steeper. Actually she didn't use those words; I paraphrased her comments. I also think Barnes and Noble is in deep trouble. I buy a lot of books and I consider myself a reader. In the past year, I spent 8% of my book budget at Barnes and Noble, and like I said, I spend a lot on books. I used to buy only used books, but this past year, about 75% of my book budget went to Amazon.

The Bakken Puts Sixteen (16) European Refineries Out Of Business; US Mac Sales Grow Almost 30% In Christmas Quarter; PCs Suffer Worst Decline Ever -- MacRumors

I remember some folks saying they weren't impressed with the Bakken -- even Snopes suggested the Bakken wasn't as good as it was cracked up to be. The last time I checked Snopes had not updated its post on the Bakken.

How big is the Bakken? Bloomberg reports:
The U.S. oil boom has put European refineries out of business and undercut West African crude suppliers. Now domestic drillers threaten to roil Asian markets and challenge producers in the Middle East and South America.
Fifteen European refineries have closed in the past five years, with a 16th due to shut this year, the International Energy Agency said, as the U.S. went from depending on fuel from Europe to being a major exporter to the region.
Nigeria, which used to send the equivalent of a dozen supertankers of crude a month to the U.S., now ships fewer than three, according to the U.S. Energy Information Administration. And cheap oil from the Rocky Mountains, where output has grown 31 percent since 2011, will soon allow West Coast companies to cut back on imports of pricier grades from Saudi Arabia and Venezuela that they process for customers in Asia, the world’s fastest-growing market.
About that "the Bakken has put sixteen European refineries out of business" ... I'm using the third definition of "the Bakken."

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APPLE
MacRumors is reporting:
Apple saw its U.S. PC marketshare rise from 9.9 percent to 13.7 percent in the holiday quarter year-over-year, according to data just released from Gartner. The 28.5 percent rise shows a substantial increase in Mac sales, largely at the expense of HP and Toshiba.
The U.S. PC market fared slightly worse than the global market, dropping 7.5 percent in unit sales, from 17.07 million units last year to 15.8 million units this year. Continuing a trend from the last several quarters, tablets have continued to eat into PC sales and though hybrid tablet-notebooks have appealed to some shoppers, the market size for those devices remains very small. As a result of the demand for tablets, the overall PC market saw its worst unit decline in history.
In addition, iPhones driving other Apple hardware sales in the business place. MacRumors is also reporting:
Apple is seeing increased success in selling its wares to large corporations thanks to the iPhone, reports The Wall Street Journal. A number of Apple products have acted as "halos" over the years, selling to first-time Apple owners and seeing that penetration lead to sales of more products.

The iPod helped drive Mac adoption with consumers, particularly amongst college students, but the iPhone is the most successful product in Apple's history and has driven tremendous amounts of Mac and iPad sales. One-quarter of Cisco's company-provided notebooks are Macs following that company's decision to allow employees to choose which platform they preferred.