Google "President Eisenhower" Golf - 229,000 Hits; "President Obama" Golf - 7,550,000 Hits -- January 18, 2015

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His Legacy

Before I went to the linked story, based on the headline, I assumed it was Fox News and really did not want to see another Fox News op-ed on President Obama disguised as a news story. I was surprised this was a Reuters headline and a Reuters new story featured at Yahoo!News: middle class decline looms over final years of Obama presidency.

Barack Obama enters the final two years of his presidency with a blemish on his legacy that looks impossible to erase: the decline of the middle class he has promised to rescue.

The revival of middle-class jobs has been one of Obama's mantras since he took office in 2009 fighting the worst economic crisis in generations. It was a major theme of his last State of the Union address and is expected to feature in the one scheduled for Tuesday.

Administration officials said on Saturday the president would propose higher capital gains taxes, new fees on large financial firms, and other measures to raise $320 billion for programs and tax breaks aimed at the middle class.

Obama's administration can take credit for stabilizing the U.S. economy, which is growing again and last year added jobs at the fastest clip since 1999.

But for the middle class the scars of the recession still run deep. Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office.

In the six years through 2013, over the recession and recovery that have spanned Obama's tenure, jobs have been added at the top and bottom of the wage scale, a Reuters analysis of labor statistics shows. In the middle, the economy has shed positions - whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators.

The trend is in plain sight in Dalton, Georgia, a manufacturing hub 90 miles (145 km) north of Atlanta. Massive factories that made it "the carpet capital of the world," were slammed by the collapse of the housing bubble. During the recession, with machines idle, they began investing heavily in new technology and are now laying plans to restore some lost jobs.

More at the linked article. 

I guess all those weekly job-updates were what most of us felt or knew: spin.

I assume these initiatives will hit the middle class much harder than they will hit the rich, the super-rich, and the hyper-rich. These initiatives will do nothing for the poor:

• higher capital gains taxes (middle class wealth, if any, is held in IRAs, pensions)
• new fees on large financial firms (middle class wealth, if any, is held in IRAs, pensions); and, 
• .... well, not much.

That's what I was taught in college also: when making lists, come up with "three" data points. If you come up with only two, it suggests you couldn't think of any more, and if you have more than three data points, you begin to bore your audience. It looks like the White House was able to come up with only two data points to share with Reuters as a teaser for the SOTU address.

By the way, what was that metric conversion all about? Was that really necessary, in that kind of story, to convert miles (90) to kilometers (145)? 

Buried in the story:

The forces at work in the American economy appear so entrenched that Obama may be remembered as the president who pulled the nation from its worst downturn since the Great Depression, but failed to arrest deepening economic inequality.

Before evening seeing this story, while driving our older granddaughter to water polo this afternoon, this thought crossed my mind, perhaps because of the Oprah movie, Selma: this was probably the last presidency  -- the last opportunity -- this country had to help the overly unemployed and the grossly disenfranchised African-American community.

I doubt I am in the minority when I opine that the African-American community has lost ground during this administration and the anxiety for that community in 2016 is that they will lose the bully pulpit to an old white man or an old white woman. Al Sharpton will no longer be the morning show spokesman for the White House.

Of course, that might be a good thing.

By the way, I doubt if any one (except pointy-headed liberal elitist historians) will ever remember President Obama for "pulling the nation from its worst downtown since the great depression."

I assume most will remember President Obama as having the same impact as President Carter did, but having more fun (golfing, dining out in Paris, swimming in Hawaii).

After all, what is Ike remembered for? Golfing.

By the way, just for the fun of it, Google:

• "President Eisenhower" golf --229,000 hits
• "President Obama" golf -- 7,550,000 hits

Now that's a legacy.

Something To Think About: Re-Fracking And The Current Slump In The Price Of Oil -- January 18, 2015

On January 17, 2015, I posted a number of things to think about with regard to the current slump in the price of oil. Rigzone/Wood Mackenzie made this their #2 item on their list of things to think about with the current slump in oil price.

Refracs start to look better than new fracs: Over the past year, lower US natural gas prices drove Marcellus operators to shift attention to horizontal refracs in order to increase recovery rates at reduced costs (~25% lower expenses for a standard well). Successful refrac testing also took hold in gas-rich plays like the Haynesville and Barnett where some operators were able to re-set production rates to early life profiles and, in some cases, increase performance. 

Back in 2011, I started started blogging about MRO's program to re-frack. The linked Rigzone/Wood Mackenzie article only mentions natural gas but ....

In the Bakken there are currently 750 wells waiting to be fracked for the first time, according to the most recent Director's Cut, much, much higher than "usual" number of 350 to 450.

In addition it's my hunch there are 3,000 wells (and that estimate may be very, very low) that are candidates for re-fracking.

Something To Think About: Break-Even Prices Decline When The Price Of Oil Declines -- January 18, 2015

On  December 10, 2014, with regard to the cost of bringing oil to market, I wrote:

The break-even point is somewhat irrelevant in big scheme of things for reasons I have discussed before. 

This is why: the "break-even" point is a moving target. On what date did the analyst determine the break-even point and on what basis did the analyst determine the break-even point for what date in the future?

Anyone who has followed the oil industry for any length of time knows that the break-even price declines as the price of oil declines.

That was the point I was trying to make in my post of December 27, 2014 when talking about IRRs. It's all relative; it all depends.

I did not expand on that point at the time for several reasons, only of which I will mention: I knew I could not explain it as well as others could, so I was waiting for others to write about it.

I was glad to see that not only did Rigzone/Wood Mackenzie write about it, but they listed it first among a dozen or so data points or thoughts about the current slump in oil prices.

Upstream costs are the silver lining for operators: As companies have decreased capital budgets, we are seeing a slowdown in drilling activity. This reversal is already having an impact on the demand for rigs, pressure pumping fleets, and other key equipment and services. If the oil price were to average around $50/bbl in 2015, we anticipate a 40% decline in the horizontal rig count compared to 2014. Rig day rates could fall by 30% or more. 

Minimal Blogging Through Tuesday -- January 18, 2015

I apologize. I'm going to be out and about with family this weekend and I won't be blogging as much. I particularly want readers who send me links to continue sending me links; I will eventually get to them. Likewise, I always respond to e-mail, but responses this weekend are likely to be delayed.

Some very exciting things are going on; stories are coming out fast and furious with regard to the current slump in oil prices and I suspect things will get busier before they slow down as folks try to figure out what is going on and where things might be headed.

No updates for the Bakken daily activity report until Monday evening, Tuesday morning.

Something To Think About -- January 17, 2015

I'm going to come back to this later, but something to think about.

I think the low-cost operators coul drill and complete a well, prior to the slump in oil prices, for about $6 million in the Bakken. Prior to new completion techniques, costs were pretty much 50/50 between drilling and completing/fracking.

Let's say day rates for rigs decrease by 30%.

Let's say operators focus on drilling, delay fracking.

Or, let's say operators concentrate on re-fracking wells drilled back at the beginning of the boom. 

Something to think about.

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Rigzone Predictions: The Slump in Oil Prices

The articles on the slump in oil prices continue to come fast and furious. I will probably post/link many of them for archival purposes, though it's a bit tiring and repetitive.

Having said that, this is perhaps the best opinion piece I have seen to date on what the future holds with regard to the slump in oil prices. It was posted over at Rigzone a couple days ago. These articles are often archived and available by subscription only in a short period of time.

From that article, these are the main bullets. Go to the link for a more detailed look.

• upstream costs are the silver lining for operators
• refracks start to look better than new fracks
• Haynesville -- dry gas is back
• Eagle Ford remains the cream of the crop
• Permian M&A will heat up in 2H15
• US Gulf of Mexico activity will defy low oil prices
• operators ease off the gas in Canadian unconventionals ...
• ... and hit the brakes in the Canadian oil sands
• North American LNG loses some luster, but maintains momentum
• ethane is maxed out
• 2014 outages are a structure feature of the chemicals market, rathn than random variation
• Keystone XL remains in a holding pattern
• the MLP boom still has a bit of room to run
• US crude oil export policy -- evolution rather than revolution
• the benefits of Mexico's opening will accrue mainly to larger players

Regular readers should not be a bit surprised by any of these.

There is enough "stuff" in that article to keep me busy for months.