Another Painful Week Of Earnings Reports Due Out -- August 2, 2015

It was painful, but I think I'm pretty much caught up with posting snippets of earnings reports over at the "Earnings" post.

This will be another tough week for investors in the oil and gas sector. Scroll through the post at the link and note all the companies reporting earnings on August 3 and August 4.

Disclaimer: this is not an investment site. I follow earnings reports to help me better understand the Bakken, get a feel for where it is headed, and put it in perspective with other oil plays around the US, Canada, and the world.

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

Quick: What Was The Last Name Of The Captain Of The Exxon Valdez In 1989

This is a pretty good story, the link sent to me by a reader. It's a long article / long story, and it does not directly pertain to the Bakken but it's worth posting.

My hunch is that 95% of folks who follow the oil and gas sector closely can name the captain of the Exxon Valdez when it spilled its cargo of oil off the Alaskan coast back in 1989.

Hold that thought.

Two articles, both from same source. First article:

A drum full of radioactive waste exploded at the Waste Isolation Pilot Plant in New Mexico last February, sparking serious safety concerns about the U.S.'s only longterm nuclear storage site. A yearlong government investigation has officially fingered the long-suspected culprit: kitty litter.

Kitty litter? Yes, inorganic kitty litter is commonly used to pack nuclear waste. But the contractor switched to wheat-based organic kitty litter, which reacted with existing chemicals in the waste.

"The nitrate salt residues, organic sorbent (Swheat Scoop® ), and neutralization agent (triethanolamine) known to be present represent a potentially reactive chemical mixture of fuels and oxidizers," concludes the report's summary.

The cost of the clean-up is apparently at $500 million and rising.

The report does not say exactly how the "wrong" kitty litter was acquired, but it may have been due to a simple typographical error. Second article:

Since September 2012, in fact, the LANL packed up to 5,565 barrels of radioactive waste with organic kitty litter but mislabeled it as inorganic kitty litter—16 of these barrels are also highly acidic and contain nitrate salts like the one that burst. It took an explosion before anyone noticed the mistake.

In addition to being horrifying on its own, the February explosion raises serious question about the safety of nuclear waste storage, especially when you consider how "comically simplistic," to use the New Mexican's words, the explosion's origins seems to be. There are many more worrying details in the New Mexican story, including how LANL took other shortcuts in packing the drum and failed to inform WIPP. It certainly doesn't inspire confidence in our nation's handling of radioactive waste. 

The reader points out that almost 30 years later, we can still remember the name of the captain of the Exxon Valdez back in 1989 but the government won't even name the individual (or individuals) responsible for ordering the wrong "kitty litter" and the apparent cover-up of same.

While Greenpeace activists are trying to stop Shell from drilling in the Arctic, they ignore the nuclear waste program being mismanaged by our own government. 

The reader who sent me the Carlsbad story put it in words that I understand:

Very briefly, New Mexico has some salt caverns near Carlsbad. That area was deemed ideal to store supposed "low-level" radioactive waste, and for over 20 years, the stuff has been trucked in there.

A couple years ago someone (who I imagine was infected with "SantaFe-itis") bought organic kitty litter (think Trader Joe's or Whole Foods) instead of inorganic kitty litter (think clay pellets). When the wheat-based kitty litter was mixed in the nuclear waste, it fed a reaction (think barley fermenting into beer - duh). Barrels couldn't withstand that pressure, and burst.

I doubt more than 50 people (outside the nuclear industry) have even heard about this story. But we can all name the captain of the Exxon Valdez.

Summer Wine, Lee Hazlewood and Nancy Sinatra
Yes, the spelling of the last names vary.

Want To Boost North Dakota's Ag Sector? Build More Pipelines, American Farm Bureau Federation -- August 2, 2015

This is another really good piece on the Bakken, this time from the American Farm Bureau Federation:

Agriculture relies on affordable energy to stay competitive. The cost of crude oil and natural gas directly impacts farmers’ ability to maintain a healthy bottom line, driving the costs of necessary expenditures like diesel fuel, irrigation, fertilizer, lubricants and more.

In the past five years, crude oil production in the U.S. has skyrocketed, bringing a surge of economic activity. Our country will surpass Saudi Arabia and Russia as the world’s most prolific producer of fossil energy in 2015. For the first time in decades, the once vaporous concept of American “energy independence” is within reach.

The boom has been good news for farmers, helping to keep energy prices and operating costs under control. But it has also brought some growing pains – especially in the Midwest – due in large part to the strain that greater production has placed on the region’s freight transportation infrastructure. The increase in crude oil trains has reduced the freight capacity available to transport grain and other commodities. Without action, the future of shipping agricultural goods will be defined by delays, price spikes and uncertainty.

I recently partnered with the American Farm Bureau Federation to attempt to quantify the financial impact of regional transportation strain on farmers in the Midwest. We found that the surge in crude oil traffic – combined with other factors, – caused millions of dollars of losses to farmers, elevators and end users. The Agriculture Department confirms that $570 million were lost from Upper Midwest farmers’ profits during the 2014 harvest season alone. In North Dakota, the insufficient freight environment could be expected to reduce the average corn farmer’s income by $10,000 relative to a “normal” year.

Grain producers are uniquely dependent on efficient rail systems, especially in crude oil traffic “hot spots.” The nature of grain production and use renders the industry inflexible with regard to the freight methods that it must use. Grain farmers simply must have access to efficient rail in order to manage shipping costs, minimize delay and get their products to market in an economically competitive manner.

Fortunately, a clear path forward does exist.

Modern pipelines servicing the Bakken region can help provide a solution by channeling hundreds of thousands of barrels of crude oil per day off of the rails and roadways.

Much more at the link.

Reason #5 Why I Love To Blog -- Yes, Wal-Mart Is Open 24/7 In Williston -- August 2, 2015

Screenshot taken at 12:01 a.m., Sunday morning, August 2, 2015:

This is the latest I could find on "blue laws" in North Dakota, as of March, 2015:

When it comes to retail sales, North Dakota has among the most extensive blue laws in the country. For example, while stores can be open on Sunday, many items cannot be sold between midnight and noon — from clothing, housewares and linens, to appliances, hardware and computers. As a result, most retail stores in North Dakota do not open until noon.

But not Wal-Mart in Boomtown, USA -- open 24/7.

Apparently roughnecks can get their soft drinks and snacks before heading out to the field. Just no housewares or fine linen.

Disclaimer: the website could be inaccurate. Not everything on the internet is true. At least that's what I've been told. Perhaps readers will tell me if Wal-Mart is open this Sunday morning. I don't recall visiting Wal-Mart Sunday mornings when the last time I was in Williston. 

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

A Note To The Granddaughters 

What a great night. I babysat the one-year-old so her parents (our daughter, son-in-law) could go to a neighborhood party. Wow, we had fun. She got up from her evening nap at 7:30 p.m. and stayed up one hour past her usual bedtime of 10:00 p.m., staying up until 11: 00 p.m. when she finally fell asleep on my shoulder.

The highlight of the evening was grilling, for the first time ever for me, a very small ham, only two pounds, but wow, it turned out perfect. I had never grilled a ham before but I received a free two-pound ham from Omaha Steaks with a recent promotion and decided to see how to grill it. I don't care for ham all that much, so I figured if it was ruined, not much was lost. I read several "recipes" on the internet about grilling a whole ham, and it seemed like it would be a lot of fun.

Briefly: I placed very hot coals on either side of a drip pan and the ham was cooked over the drip pan the full one hour and five minutes (indirect heat, but very hot coals -- wow, the coals were nice tonight for some reason). About twenty fresh coals divided evenly on each side, on top of about 15 old coals from the previous use -- so a lot of coals, maybe a third more than needed.

While the coals were getting started in the chimney, I prepared a honey-brown sugar paste with a bit of apple juice. I then spooned the honey-brown sugar-apple juice paste on the ham, liberally.

By that time the coals were very hot, and the grill was ready for the ham. Every twenty minutes I sprayed the ham with apple juice to keep the ham moist. Again, apple juice is really inexpensive and I was quite liberal with the spray. [My only error: I forgot to place aluminum foil under the ham; some, but not all, internet sources said playing aluminum foil under the ham would help retain moisture.]

The sun had set about the time I got started and it was pitch black outside the last forty minutes so it was hard to see exactly what was going on, but no big deal. At one hour and five minutes (it would have been exactly one hour, but I had to work with the one-year-old to keep her away from the Weber grill), I stuck two huge forks in the ham, lifted it off the grill and brought it inside where I could see it. I stuck a meat thermometer into the center: 160.9 degrees and then while still resting, the temperature rose to 163. I quit measuring after that. Perfect.

Juices were still running out of it so I knew it was still very moist, but I won't know how good it tastes until tomorrow. I had eaten earlier, so this ham was simply a trial run, and I will have ham sandwiches tomorrow. Maybe ham and eggs for breakfast; ham slices instead of bacon.

Unfortunately no photos -- a) I forgot; and, b) as noted, it was well after dark when completed.

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

Another Burr Under My Saddle

In the extras on the Casablanca DVD, Roger Ebert provides commentary during the movie. It is absolutely an incredible commentary. I listen to it often. However, there are a few things I had trouble with. This is the worst: he has trouble with the plausibility of the "letters of transit" that Elsa and her husband require to fly safely out of Morocco. Ebert says such letters did not exist and even if they did, the Nazis would not have honored them. Maybe, maybe not. But "letters of transit" are very, very real.

In Stephen Fried's Appetite for America, c. 2010, p. 229, early in the outbreak of WWI, when Germany declared war on Russia on August 1, 2014, and France and Britain quickly joined the war, hundreds of thousands of Americans were trapped abroad. The very wealthy contacted friends in high places, including the White House, seeking safe passage home.

President Woodrow Wilson, an isolationist, relented by arranging for an armored ship, the Tennesse, to sail to Europe hauling nearly $8 million ($178 million, 2010) in gold to rescue tourists. Part of the money was government aid, but most was from American banks so that the wealthier travelers could cash large checks.

After weeks of trying, some very wealthy US tourists, Stephen Fried writes, "finally received personalized letters of passage from the US envoy in Bern [Switzerland]. With those documents ["letters of transit"] they were able to get to Paris, and then to England, where they arranged first-class accommodations on the RMS Cameronia out of Glasgow."

Good, another burr under my saddle taken care of. 

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

Music video.

Near You, George Jones and Tammy Wynette

Interview With Kinder Morgan CEO -- Forbes, August 1, 2015

Incredibly good interview. I might come back to it later, but for now, I will just post the link. A big thank you to the reader for sending me the link. This is a must-read -- all eight (8) internet pages.

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

Shell Resumes Drilling In The Arctic

Updates

August 4, 2015: I don't think this adds much to the story but fills in some details for later use, if necessary. The AP is reporting:

Hours after a repaired Shell icebreaker eased past protesters in Oregon to join an Arctic drilling operation, the oil giant used other vessels in its flotilla to begin excavating off the coast of Alaska in hopes of confirming the presence of billions of barrels of crude below the ocean floor.

Royal Dutch Shell PLC now only needs the 380-foot Fennica, repaired at a Portland shipyard, to be on hand at the drill site to ask federal regulators for permission to dig into oil-bearing rock already included on its Arctic offshore leases.

The drilling would come over the protests of environmental groups in Portland and elsewhere who say Shell has not proved it can clean up a major spill in a region covered by ice much of the year.

Critics have decried Arctic offshore drilling since before the federal government auctioned off billions of dollars in leases to Shell and other companies in 2008. But after failed lawsuits and protests, opponents have few options to stop drilling.

Protesters seized one of their last chances this week after the Fennica was gashed by an underwater obstruction in the Aleutian Islands and sent to Portland for repairs.

Thirteen members of Greenpeace USA dangled from a bridge over the Willamette River and kayakers converged on the Fennica to block the repaired icebreaker from heading toward the Pacific Ocean and on to Alaska.

The Greenpeace protesters persisted even after a federal court judge in Anchorage ordered $2,500 hourly fines. They were finally removed by authorities. Two people were arrested.

Original Post

 

Apparently Shell has resumed drilling in the Arctic:

Oil giant Shell has resumed offshore drilling off the coast of Alaska following a two-day delay by Greenpeace activists.

The move marks the first time Shell has conducted exploratory drilling in the Arctic since 2012. Royal Dutch Shell PLC announced on Friday that drilling operations had resumed in the Chukchi Sea off the northwest coast of Alaska on Thursday afternoon.

I lost the bet. I didn't think they would actually get started this season, but I'm thrilled that they did, especially after the shenanigans demonstrated by the environmentalists trying to stop Shell from moving forward.

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

Canary CEO

Speaking of interviews (see link to the Kinder story above). Here's another great impression of the Bakken during the slump in prices.

Falling oil prices may have caused a slowdown of activity in and around North Dakota's resource-rich Bakken shale play – but there are surprising benefits from the downturn, according to Dan Eberhart, CEO of Canary, LLC, one of the largest privately held wellhead companies in the US.

As the global economy weakened in 2014 and the oil market swung to the supply side, particularly after OPEC refused to cut production amid an American energy glut, oil prices began a precipitous drop. Today, a barrel of West Texas Intermediate (WTI) oil – the US benchmark – has lost more than half its value compared to a year ago.

As a result of the price slide, the US oil rig count declined for 29 consecutive weeks, bottoming out in late June at 628, the lowest it had been since August 2010. Recently released data from the North Dakota Department of Mineral Resources reported 75 drilling rigs in the Bakken, or 112 fewer than a year ago.

Although the national count has rebounded slightly since, for Bakken producers who were pumping out more than 1 million barrels a day a year ago, recovery is uncertain as oil prices remain soft.

That would seem to make positive news hard to come by. But Eberhart, who spoke at the July 27-29 Bakken Conference & Expo in Grand Forks, said that during a recent visit to North Dakota he saw how energy companies and state leaders are shaking off the "bust mentality" and putting the lull to good use.

For one thing, he said, even before prices started to decline, established producers were optimizing their wells to increase productivity.

"By innovating, producers lowered their break-even points, which allowed many wells to remain viable in a low-price environment," Eberhart said. "This is one reason we're seeing crude inventories continuing to build despite the rig count falling."

In addition, North Dakota is taking advantage of the breather to catch up on infrastructure upgrades – including improvements that will help energy companies lower their operating costs, particularly those related to transportation.

Since the Bakken shale boom began in 2007, the state has struggled to keep up with infrastructure demands. Workers streaming into the western part of the state overtaxed housing, schools and other resources. Trucks hauling heavy equipment clogged rural two-lane roads never engineered to carry the kind of traffic associated with oil operations.

In February, Gov. Jack Dalrymple signed a $1.1 billion budget to improve those roads, along with sewers, schools, water treatment and other facilities. Much of the money to fund the upgrades has come from oil extraction taxes paid by energy companies.

According to Eberhart, these infrastructure improvements will help oil companies lower well development and operating costs even further.

Much more at the link.

Hello Maah Daah -- August 1, 2015

From The Williston Wire:

From its humble beginning four years ago when 65 mountain bikers competed in the first Maah Daah Hey 100, the bike race in the rugged and picturesque North Dakota Badlands has gained worldwide attention. 

Today, the dream of Watford City's Nick Ybarra to have a world class biking adventure in western North Dakota has become a reality. And come Saturday, Aug. 1, over 350 mountain bikers from throughout the United States and Canada will embark upon a 100-mile race that begins at the CCC Campground south of Watford City, and ends in Medora. 

I'll watch the covers of biking magazines for the next few weeks. It will be interesting if any feature the Maah Daah Hey 100.

Hello Muddah, Hello Faddah, Allan Sherman