The Political Page -- January 2, 2016

It wouldn't be "themilliondollarway" blog without a political page. So, let's begin. First a song; this is the second of twenty songs that will be played continuously in our apartment unit until January 20, 2017. The first was at this post yesterday. Today:



The Washington Post is said to have retracted a story about the Russians hacking into the US national electric grid through a Vermont utility. In fact, The WaPo has not exactly retracted the story, but it has posted a huge correction, saying they lied. Okay, they did not use that exact word, but it is what it is.

They had the facts but "inflated" the story. Maybe it was just a "white" lie as they used to say. The headline remains "Russian operation hacked a Vermont utility" which, is of course, wrong on several levels. Now the "editor's note":

Editor’s Note: An earlier version of this story incorrectly said that Russian hackers had penetrated the U.S. electric grid. Authorities say there is no indication of that so far. The computer at Burlington Electric that was hacked was not attached to the grid. 

Again, there is no proof this came from "the Russians" -- whoever they may be. It was "off-the-shelf-malware" said to originate in Russia.

Fox News has rightly noted that when the Chinese stole over a million US government documents two years ago through hacking, the Obama administration did not even issue a press release. The government did offer credit monitoring for its former and current employees.

I am one of those folks who has that free credit monitoring. Whoopee.

It is correct to say that the expulsion of 35 Russian spies was unprecedented in modern history.

With regard to the Russian hacking story, the funniest part of the story is this: Hillary says seventeen (17) US intelligence agencies said the Russians were hacking into the DNC, and apparently told Hillary or the DNC until it was too late. I do know that the Russians were using subliminal techniques to tell Hillary not to campaign in Wisconsin based on how that turned out. Ouch.

 Tomorrow, we will have the third of 20 songs that are being played in our apartment unit continuously for the next 20 days.

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Quatum Theory

Looking back on the Obama presidency, trying to explain it, is very much like quantum theory.

Take Valery Jarret's analysis of the Obama presidency ("it's been scandal-free"), like quantum theory, if it is not covered by the media it does not exist. Quantum theory says the same thing about particles: if they are not observed/measured/detected, they do not exist.

And just like quantum theory, Obama's actions and reactions cannot be explained.

DAPL Forecast Top Story; Global Warming Bringing Record Snow, Severe Cold -- January 2, 2017

I was awoken by a huge thunderstorm here in northern Texas. The thunder was severe enough to shake our apartment unit, but, surprisingly, I have not yet loss internet connection. That generally happens in thunderstorms of this magnitude. I'm keeping my fingers crossed that we don't lose internet -- that's just a figure of speech. Obviously if I had my fingers crossed, I wouldn't be able to blog.

But I digress.

Because the thunderstorm awoke me I turned on television to see what was going on. CNBC had some banal "documentary" -- the market is closed. I surfed through MSNBC "Morning Joe" on the way to the weather channel. Top story was the severe winter weather in Bismarck and Glen Ullin.

I guessed it's called Winter Storm Gregory. The last named storm of which I was aware was Winter Storm Decima. This is the storm that will last for a couple of days, apparently, and will drop a lot of snow on "the Dakotas and Minnesota." A lot of winter snowfall records are going to be broken over the next few days. In addition to snow, it's going to be very, very cold.

By the way, while blogging this, the Weather Channel has been showing a number of videos of snowfall in Bismarck, ND.

When I was growing up in Williston, we never got much snow (except in the late 1950's); we used to say it was too cold to snow. Apparently with global warming we now get both: severe cold and huge snowstorms.

This link will show you how severe the temperatures are right now (I'm not sure if this is a dynamic link or not).

The second big story was the huge thunderstorm hitting the DFW area. It's a pretty remarkable storm, even by Texas standards.

How Oil Companies Survived Two Death-Star Events -- January 2, 2017

You've seen much of this page before. There were a number of essays that the graph generated. The third essay was never written because I did not know what I was going to write or how I was going to tell the story how remarkable it was that oil companies survived the two incredible collapses in the price of oil. The graph below suggests that those events were unprecedented.

One "crash" in the price of oil was attributed to the global recession, market meltdown, and financial crisis of 2008 - 2009. The other "crash" was attributed to Saudi Arabia's trillion-dollar mistake to announce that it would no longer cut production to maintain crude oil prices.

In the big scheme of things I was amazed how well the oil sector managed. I wanted to write about that but I was unable to articulate what I was thinking.

Fortunately, The Wall Street Journal has posted a story that explains how the oil companies survived, and how they are now reaping benefits of their actions.

Oil-and-gas companies that sold shares to raise cash during a vicious collapse in the price of crude finished on top in 2016, rewarded when U.S. oil prices finally turned and closed the year 45% higher.

More than 70 North American energy companies sold about $57 billion worth of shares in so-called follow-on stock offerings during the past two years. Many of these shares spent stretches trading below their offering prices, hurting investors who wagered on companies that failed to find footing as well as those who sold out before shares rebounded. A handful of the stock sellers went bankrupt as the price of oil fell by more than half.

But most survived, defying widespread predictions that the plunge in crude and high levels of debt would force many more producers out of business.

It's a great article that should generate a lot of discussion in business schools and corporate boardrooms.

Source: EIA.

Original Post

First Essay 

Looking at the far right side of the graph, three lines, A, B, and C. Essentially those are the three possibilities for 2017:

A) price of oil creeps up, trending toward $75/bbl by the end of the year
B) price of oil remains at present level, $53 +/- $5 per bbl
C) price of oil trends down, toward $40 but not much lower

Likelihood, my opinion:

A) 20% chance
B) 75% likelihood
C) 5% chance

Implications:

A) if the price of oil trends toward but without going over $75: huge win for almost anyone involved in production of oil, including passive investors; consumers see more expensive gasoline but probably not enough to send economy into recession, but nonetheless, painful

B) win-win for everyone, US producers and global consumers; at $50 - $55 barely adequate for Russia, Saudi Arabia, but better than C)

C) not good for anyone, except consumers, but particularly ominous for Saudi Arabia, Russia

Saudi Arabia and Russia would almost be forced to do "anything" to prevent C). Because oil at less than $40 becomes an existential issue for Saudi Arabia, my hunch is that Saudi Arabia would probably do almost anything to keep the price of oil from trending down again.

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Second Essay: Opportunity

The run-up in price the price of oil between 2007 and 2009 (just before the "crash") was critical for the Bakken to boom. Had this run-up not occurred, one can argue the Bakken boom would not have occurred; it most likely would have been significantly delay.

The second opportunity came during the sustained increase in the price of oil after the "crash", from 2009 to 2014. Again, had this price increase not occurred, it's unlikely the Bakken boom would have been sustained.

If folks remember: it was incredibly expensive to explore, drill, frack, obtain leases, put in the roads, put in the pads, obtain the sand, etc., etc., in the early days of the boom. At $50-oil this boom could not have occurred.

Now, in 2016, going into 2017:

• upfront leases -- incredibly expensive -- are a thing of the past
• oilfield services are so much less expensive
• sand is easily obtained, and much less expensive
• operators using more sand (cheap) and less ceramic (expensive)
• roads, pads, pipelines, rail -- the infrastructure is all in place (yes, more will be added, but hardly "needed"; and whatever infrastructure is added/"needed" pales in comparison to the story in 2007
• wells were much less productive in the early days
• wells costs have come way, way down (less then half?) and production has increased immensely in the first 90 days, and the first full year
• EURs have gone from 350,000 boe to 1.5 million boe
• pad drilling, DUCs, permits-in-hand, walking rigs, more effective rigs, better completion techniques now in place
• work force incredibly experienced; based on accuracy of drilling; speed of drilling
• geologists understand the Bakken; just before the 2014 crash, the middle Bakken was pretty much all mapped out but the Three Forks first bench hardly explored (by comparison); second, third, and fourth benches hardly explored at all -- handful of deeper wells in the Bakken pool

$100-oil was needed to light the Bakken boom.

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Later, thoughts about the slump in the price of oil in 2008 - 2009; and in 2014 - 2016. [Update: that essay is at the top of this post.]

Oasis Hellig Trust Wells In Alkali Creek Have Been Updated -- January 1, 2017

The Oasis Helling Trust wells in Alkali Creek have been updated.

Random Update Of A Recently Drilled Tyler Well -- January 1, 2017

Targeting the Tyler formation in the southwest corner of the state. Note the shallow depth and location (in graphic below the spreadsheet. No production decline.

• 18216, 30, Williston Exploration, LLC, Vanvig 1, Tracy Mountain oil field, t7/12; cum 52K 11/16;

NDIC File No: 18216     API No: 33-007-01639-00-00     
Well Type: OG     Well Status: A     Status Date: 10/23/2011     Wellbore type: Directional
Location: NWSE 28-138-102     Footages: 2100 FSL 1980 FEL     Latitude: 46.736695     Longitude: -103.553664
Current Operator: WILLISTON EXPLORATION, LLC
Current Well Name: VANVIG 1
Elevation(s): 2701 KB   2688 GR   2689 GL     Total Depth: 8068     Field: TRACY MOUNTAIN
Spud Date(s):  7/27/2011
Completion Data
   Pool: TYLER     Perfs: 7938-7942     Comp: 10/23/2011     Status: AL     Date: 7/31/2012
Cumulative Production Data
   Pool: TYLER     Cum Oil: 52201     Cum MCF Gas: 4293     Cum Water: 48231
Production Test Data
   IP Test Date: 7/31/2012     Pool: TYLER     IP Oil: 30     IP MCF:     IP Water: 42

Production profile for only the last year; this well has shown no production decline since being completed. This well is a directional well, not a horizontal, and it was not fracked.

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	11-2016	30	3578	3346	4290	5870	5289	344
BAKKEN	10-2016	31	4710	4805	4363	6417	5978	200
BAKKEN	9-2016	28	4540	4692	3334	5653	5465	0
BAKKEN	8-2016	31	5256	5208	4197	6833	6585	0
BAKKEN	7-2016	31	4614	4635	4663	6356	6111	0
BAKKEN	6-2016	30	4750	4886	4725	5917	5677	0
BAKKEN	5-2016	31	5804	5661	6230	7198	6950	0
BAKKEN	4-2016	29	5579	5814	5153	6718	6499	0
BAKKEN	3-2016	31	6747	6953	7117	8571	8173	150
BAKKEN	2-2016	29	5924	5847	6227	6850	6253	365
BAKKEN	1-2016	31	6643	6095	8906	7196	6698	250
BAKKEN	12-2015	16	2236	2089	4494	2318	2215	0