The Bakken Is In Its Manufacturing Stage -- June 28, 2016; 1Q16 Taxable Sales/Purchases 50% Higher Than 1Q10

As with any manufacturer, there will be ups and downs, commensurate with the economy and the particular sector one is in.

In this case, North Dakota has a diversified economy with a major energy component. How has the Bakken affected North Dakota's diversified economy?

The 1Q16 taxable sales and purchases data has been released by the state and this note: "First quarter 2016 is nearly 50 percent greater than the same timeframe in 2010.”

For newbies, this is the timeframe:

• 2000: the Bakken boom begins in Montana
• 2007: the Bakken boom begins in North Dakota
• 2012: the Bakken hits its stride
• early 2014: the Bakken setting new records, almost every month
• late 2014: the Saudi Surge
• 2015: the Bakken re-trenches
• 1Q16 taxable sales 50% greater than 1Q10
• mid-2016: the Bakken bottoms out -- at least that is what the tea leaves suggest

Wow, think about that: the Bakken was starting to move in 2010, and now, when things appear so dire, 1Q16 taxable sales/purchases are still 50% higher. I find that quite remarkable. I hope I haven't misinterpreted the report but that was a direct quote from the state tax commissioner. 

The full report is here.

By county:

• Cass (Fargo): $643,058,308
• Burleigh (Bismarck): $362,191,851
• Williams (Williston): $280,809,315
• Grand Forks: $262,939,803
• Ward (Minot): $238,532,521
• Stark (Dickinson): $171,710,392
• Morton (Mandan): $56,835,128

Perhaps the most amazing data point is how incredibly stable the Fargo area is. Year-over-year (1Q15 to 1Q16, Cass County's taxable sales and purchases declined less than 4%. The oil counties, like Williams, TSP declined as much as 60%. Williams' decline at 62% was barely better than Burke County's decline year-over-year of 66%.

But you know, when I see 1Q16 taxable sales 50% greater than 1Q10 for North Dakota, I can't get too concerned. A lot of infrastructure has been put in place. We are probably at the nadir of this particular cycle. Yes, it could get worse, but the tea leaves don't suggest that. 

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A Note For The Granddaughters

Wow, this brings back memories: the magic of Britain's least-used train stations. 

We were stationed as a family in England from 1986 to 1989. I was then back to England multiple times between 2002 and 2004. While there alone, I hiked a lot and I took the train frequently. I visited some of those least-used train stations. 

The Brits (or, perhaps, better said, the English) love "the three P's": pets, plants, and planes. I would add "passenger trains" to continue the alliteration, but in fact the English love trains of all sorts, not just passenger trains. Perhaps one could add "the three T's": tea, trains, and taxes.

Wow, wow, wow! Such pleasant memories.

1Q16 GDP Revised Upward To 1.1% Vs Early 0.8% -- June 28, 2016; 2Q16 Estimate/Forecast Dips Slightly

I guess if you give them long enough to "run the numbers," you can get any number you want. Whatever. Bloomberg reports:

The world’s largest economy expanded more than previously projected in the first quarter as improved performance in trade and business investment more than made up for weaker consumer spending.
Gross domestic product, the value of all goods and services produced, rose at a 1.1 percent annualized rate, compared with a previously estimated gain of 0.8 percent, a Commerce Department report showed Tuesday in Washington. Corporate profits at the start of the year were also revised up, giving a brighter picture to gross domestic income.

Meanwhile, for 2Q16, GDP Now forecasts as of June 24, 2016 (last week):

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.6 percent on June 24, down from 2.8 percent on June 17.

The forecast for second-quarter real residential investment growth declined from 3.6 percent to 1.7 percent yesterday (June 23, 2016) after the U.S. Census Bureau released data on new home sales, prices, and construction costs.

The forecast for the contribution of inventory investment to second-quarter growth declined from -0.41 percentage points to -0.53 percentage points after this morning's (June 24, 2016) advance durable manufacturing report from the Census Bureau.

Next 2Q16 forecast will be released tomorrow. 

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The Katie Ledecky Page

Qualifies For The 400 Meter Freestyle -- June 27, 2016

War On Coal -- New Oakland (CA) Terminal Votes To Ban Handling Coal For Overseas Shipments -- June 28, 2016

Updates

August 1, 2016: The WSJ has a nice short update of west coast war on coal. 

 

Original Post

From The Wall Street Journal:

City officials in Oakland, California, late Monday moved to block a proposal that would have made the city a gateway for Utah coal to be shipped overseas, after the issue became a political flashpoint between environmentalists and a longtime political ally to Gov. Jerry Brown.

The Oakland City Council voted to ban the handling and storage of coal and coke at the city’s terminals and bulk material facilities. The unanimous vote came after a long, packed city council meeting; advocates and opponents of the ban demonstrated outside. A second, largely procedural, vote is expected in July.

The ban aims to derail a proposed deal that would have granted four coal-producing counties in Utah rail access to a major commodities shipping terminal under development on city land, adjacent to the Port of Oakland.

The new terminal is part of a major redevelopment of an old Army Base the city hopes will bring thousands of jobs to a city that still has pockets of poverty and violence, even as the region’s tech sector booms and housing costs rise. Utah had agreed to invest $53 million in the project for the right to export its goods.

California ports in Stockton, Richmond and Long Beach export coal, but because of climate change and pollution concerns, such terminals have become highly contested on the West Coast.

Environmentalists have defeated similar proposals in Oregon and Washington.

Is there an opportunity here for Texas? With the expanded Panama Canal? Probably not.

MDU Sells Dakota Prairie Refining To Tesoro -- Press Release -- June 28, 2016; For One Day, MDU Owned The Whole Refinery

Updates

Later, 6:10 p.m. Central Time: by now, everyone who has wanted has done their own back-of-the-envelope calculations on this deal. Everyone who has written me seems to agree that Tesoro got this little refinery that cost $430 million (way over budget) for about $77 million. And considering that most of that may be debt, there may be some tax advantages. Regardless. I am thrilled that the Dickinson folks got a world-class refiner to take over this refinery. I sincerely hope it all works out for all involved. Now ... upward and onward to that $4 billion ethane processing plant. Or in the words of Buzz Lightyear, "to infinity and beyond!"

Later, 9:18 a.m. Central Time: from the AP:

Texas-based Tesoro Corp. has bought an oil refinery in southwestern North Dakota that has struggled to turn a profit.

North Dakota-based MDU Resources Group Inc. and Indianapolis-based Calumet Specialty Products Partners LP spent $430 million on the Dakota Prairie Refinery in Dickinson. It began selling fuel last year but hasn't been profitable due to the slumping oil industry and low diesel prices.

The plant lost $7.2 million in the first three months of the year, and officials in May announced plans to operate it at only 75 percent capacity. The developers also had considered a similar plant in Minot but late last year delayed those plans because of the red ink at the Dickinson plant, which currently totals about $66 million.

Tesoro will assume the $66 million in debt and contribute about $10 million toward working capital, the company said.

Later, 9:05 a.m. Central Time: from SeekingAlpha --

• Calumet Specialty Products Partners sells its 50% equity interest in the Dakota Prairie Refining joint venture to MDU Resources Group, which then sells the entire JV to Tesoro
• TSO winds up acquiring Dakota Prairie Refining in exchange for the continued servicing of DPR's $66M term loan debt and ~$10M towards working capital
• DPR's refinery has a crude oil capacity of 20K bbl/day and produces ultra-low sulfur diesel, naphtha and resid; TSO says it will continue to market the ultra-low sulfur diesel to local customers and utilize the naphtha and resid in its integrated value chain system 

Original Post

 

For one day, MDU owned the whole refinery.

From the press release:

MDU Resources Group, Inc. announced today that its subsidiary, WBI Energy, Inc., has sold Dakota Prairie Refining LLC to Tesoro Refining & Marketing Company LLC, an affiliate of Tesoro Corporation.

WBI Energy had been equal partners in building and operating the refinery with Calumet North Dakota LLC, a subsidiary of Calumet Specialty Products Partners LP.

To effect the sale of the refinery to Tesoro, WBI Energy on June 27 acquired Calumet North Dakota’s 50 percent membership interests.

Dakota Prairie Refining is capable of processing up to 20,000 barrels per day of Bakken crude oil and can produce approximately 8,000 barrels per day of diesel fuel, as well as the byproducts naphtha and atmospheric tower bottoms. Located just west of Dickinson, North Dakota, the refinery began operating in May 2015 and employs approximately 75 people.

That was easy.

We Start The Day With 31 Active Rigs In North Dakota -- June 28, 2016; US Ethane Export To Asia, Latin America About To Pop -- RBN Energy

US Olympic Swimming Trials (or as some call it, the "Katie Ledecky Show"):

• at SwimSwam
• dash / schedule / results

Active rigs:

	6/28/2016	06/28/2015	06/28/2014	06/28/2013	06/28/2012
Active Rigs	31	75	191	189	216

RBN Energy: US ethane exports to Asia, Latin America about to pop. Archived.

Canadian ethylene plants have been receiving U.S.-sourced ethane by pipeline for two and a half years now, and waterborne ethane exports from Marcus Hook, PA to Norway started earlier in 2016. Soon the real fun will begin, when Enterprise Products Partners initiates (and quickly ramps up) ethane exports from a new, 200 Mb/d terminal on the Houston Ship Channel at Morgan’s Point.  The destinations of the ships leaving Morgan’s Point are likely to be places like India, Brazil, Europe, and maybe even Mexico.  Today, we consider the imminent bump-up in U.S. ethane export capacity, the international markets ethane will be headed to in the near-term, and the longer-term question about how much ethane exports can grow.

Just a few years ago, before the Shale Revolution, the thought that sometime soon the U.S. would be piping significant volumes of ethane to Canada and floating ship after refrigerated ship of the lightest natural gas liquid (NGL) to European ethylene plants (steam crackers) would be dismissed as nothing short of crazy. But here we are.  

Ethane exports to Canada via the Mariner West and Vantage pipelines ramped up from zero in 2013 to average 38 Mb/d in 2014, 65 Mb/d in 2015 and almost 80 Mb/d so far this year.  Oceangoing ethane exports started on March 9 of this year when the JS Ineos Intrepid departed Marcus Hook with 175 Mbbl of ethane headed for INEOS’s cracker at Rafnes, Norway.  Since then about 16 Mb/d of ethane has moved out of Marcus Hook, with 22 Mb/d exported in May.

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Walmart Wins Food Stamp Debate?

From The Wall Street Journal:

U.S. regulators are pushing stricter rules for stores that accept food stamps, ultimately determining which retailers win and lose the billions of taxpayer dollars at stake.

The proposal is throwing gas stations and corner stores into a battle with giants like Wal-Mart Stores Inc. and Kroger Co. over the $74 billion Supplemental Nutrition Assistance Program, or SNAP.

By year end, the U.S. Department of Agriculture wants to adopt rules that require stores redeeming food stamps to stock a wider variety of meats and vegetables and sell fewer hot meals, like pizza.

At a time when sales growth is hard to come by, redeeming food stamps is critical for grocers. Last year, SNAP funds comprised an average of 5.8% of sales at participating stores.

Big supermarket chains like Wal-Mart already happen to meet the tougher requirements because of their breadth of inventory.

But some 195,000 smaller stores would have to add as many as 168 items to their shelves—a move they say would be costly and unprofitable, given their limited shelf space and spoilage issues for fresh food.