Tuesday, February 23, 2021

California Bullet Train Update -- LA Times -- February 22, 2021

I wasn't looking for this. I thought the project was dead. But the story popped up in my news feed, somewhere. Don't remember where. 

From The Los Angeles Times:

  • the bullet train is now estimated to cost upwards of $100 billion;
  • original budget, about $30 billion

This is just the beginning: 

A 65-mile section of California’s bullet train through the San Joaquin Valley that a contractor assured could be constructed much more cheaply — with radical design changes — has become another troubling and costly chapter in the high-speed rail project.

The segment runs across rivers, migratory paths for endangered species and an ancient lake bed through the length of Kings County, a fertile agricultural belt south of Fresno. Before awarding a contract for the section, the California High-Speed Rail Authority and its consultants knew about these sensitive issues and prepared lengthy environmental reports aimed at accelerating construction by avoiding legal obstacles.

But in 2014, when the rail authority awarded the contract, it went with the lowest bidder — a Spanish company named Dragados — which promised $300 million in cost savings by altering the design that the authority had proposed to regulators.

Seven years later, these changes have been largely abandoned and have contributed to more than $800 million in cost overruns on the Kings County segment. That figure is 62% above the contract price tag, which the rail authority has agreed to pay.

So much more. What a debacle. But it's a given that the Biden administration, unlike Trump, will continue funding this white elephant for Californians. Makes so much less sense than the Keystone XL but it's all politics. 

The bullet train is tracked here.

Corky Was The First To Notice That The Internet Was Down -- February 23, 2021

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Double Masking


Commentary -- 2021 -- Lots Of Work Left To Be Done In The Bakken -- February 23, 2021

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

This is not an investing site. I follow the operators in the Bakken to help me understand the Bakken. Different operators do things differently.

Three companies that seem best aligned to do well in an environment of rising oil prices. Two of the companies will by minimally impacted by a DAPL shutdown. I don't know about the third. It's very possible a DAPL shutdown could actually improve the situation for one or two of these three companies.

The three companies: CLR, Hess, and MRO, in alphabetical order. 

I am not recommending that individuals invest in these companies. I find them interesting from a "Bakken" point of view and not from an investing point of view. 

30-second elevator speech for these three:

  • Hess: slow and steady; stay true; no sharp turns; lots of natural gas, production, gathering, and processing;
  • MRO: some of the best sites in the Bakken; many fields are excellent fields for re-fracking;
  • CLR: damn the torpedoes; full speed ahead; more rigs; a bit more fracking; "unitized" locations by another name;

Narrative to follow.

Graphic:

Compare with CLR in the Elm Tree:

Other graphics:





 


Links:

Previously posted:

Running the numbers. 

The Bakken holds 500 billion bbls of OOIP. Ten percent is definitely recoverable. Harold Hamm once suggested the Bakken held upwards of one trillion bbls of OOIP but then backed off. The "500" number comes from a paper written years ago, never vetted, never published. With new data, one does wonder if 500 is off by half. 

Early in the boom, it was expected that 1 - 3% of OOIP would be recovered/produced through primary production. It didn't take long for Whiting to show that 10% was easily achievable, and now there are estimates that percent recoverable through primary production could be much, much higher. But let's stick with the conservative numbers.

  • OOIP: 500 billion bbls
  • primary production, 10%: 50 billion bbls
  • Bakken production: one million bbls / day = 365 million bbls/year
  • do the math: (50 billion bbls ) / (365 million bbls/year) = 50,000 / 365 = 140 years of drilling and CBR

Now let's assume primary production is 20% and let's assume OOIP remains the same. Let's assume that production drops to an average of 250 million bbls/year for various reasons (Biden policies; EVs; pipelines shut down, etc):

  • 500 billion x 0.2 = 100 billion bbls
  • 100 billion bbls / (250 million bbls/years) = 400 years and CBR

The law of big numbers.

If the numbers seem impossible, remember that they were drilling in North Dakota for sixty years before the Bakken became a "thing." And the Bakken dwarfs the other plays in North Dakota. 

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Work To Be Done

Some of the wells in the graphic above, working from west to east.

  • 21450, 1,600, MRO, Jessica USA 21-6TFH, Reunion Bay, t3/12; cum 369K 1/21;
  • 37771, conf, MRO, Plenty Horns USA 31-6H, Reunion Bay, 
  • 37774, conf, MRO, Odell USA 41-6H, Reunion Bay,
  • 18230, 552, MRO, Fisher USA 21-5H, Reunion Bay, t11/09; cum 323K 1/21; perhaps a subtle increase in production after coming back on line, 9/20;
  • 37857, loc, MRO, Morgan USA 11-5TFH, Reunion Bay,
  • 37654, drl, MRO, Albert USA 31-5TFH, Reunion Bay, 
  • 37655, drl, MRO, Joba USA 31-5H, Reunion Bay,
  • 21479, 1,753, MRO, MHA USA 11-4TFH, Reunion Bay, t6/12; cum 343K 1/21;
  • 37787, drl, MRO, Watterberg USA 41-5TFH, Reunion Bay,
  • 30512, 3,255, MRO, Gaynor USA 34-33H, Reunion Bay, t2/17; cum 405K 7/20; off line 7/20; remains off line 1/21; 
  • 30516, 1,536, MRO, Hannah USA 31-4TFH, Reunion Bay, t9/16; cum 465K 1/21;
  • 18191, 613, MRO, Raymond USA 41-4H, Reunion Bay, t12/09; cum 392K 1/21;


  • 37799, drl, MRO, Gracie USA 11-3TFH, Reunion Bay,
  • 37801, drl, MRO, Brusseau USA 11-3TFH, Reunion Bay,
  • 18378, 577, MRO, Henry Charging USA 21-3H, Reunion Bay, t4/10; cum 559K 1/21;
  • 29759, 2,456, MRO, Steinhaus 24-34H, Reunion Bay, t8/15; cum 312K 1/21;
  • 29760, 2,267, MRO, Halvorson 34-34TFH, Reunion Bay, t8/15; cum 346K 1/21;

WTI Hits $62 Overnight; Pulls Back A Bit -- February 23, 2021

Suncor: link here

India: oil imports from North American break another record. Link to Charles Kennedy.

Free cash flow. This is exactly what CLR said during its earnings call. Link here.

Must-watch YouTube: this is real video footage -- not artists' depictions. If this is confusing or disorienting, read the comments at the link.

Perseverance

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Back to the Bakken

Active rigs:

$61.68
2/23/202102/23/202002/23/201902/23/201802/23/2017
Active Rigs1554665641

No wells coming off the confidential list.

RBN Energy: propane and the 2021 deep freeze; where are we now? 

Here in Texas, the snow is melting, the power is back on, and some of us even have drinkable water.  We’ll be dealing with the aftermath of the 2021 Deep Freeze for months, and talking about the insane natural gas and power prices for as long as gas and power markets exist. One thing you have not heard much about during these crazy few days is propane. And given what we’ve been through, no news is good news. Sure, it was impossible to exchange a tank at the local Quickie Mart, and there were sporadic reports of delayed propane deliveries and local shortfalls. 
But even up in the coldest Midwest states, there were no market meltdowns, no skyrocketing prices. 
Instead, propane has been the go-to fuel to keep folks warm, to get energy production moving again by defrosting wellheads and pipeline valves, and even to get restaurants back on their feet. It’s always dangerous to declare a winter victory with a few weeks left to go in the season, but today we’ll take that risk.

Commentary -- February 23, 2021

Not-ready-for-prime-time. Will be edited once Sophia finishes with her schoolwork. 

Is there a disconnect here? The "surging" price of oil would suggest this would be the very time that the future of EVs would look even better and share prices of companies like Tesla should be surging in response.

The paradox: the price of oil is surging; folks are talking about oil demand exceeding supply by the end of the year; more and more EVs coming on line, we have most-friendly EV administration in the White House; crude oil and propane pipelines are being shut down, and yet, EV companies are coming under huge pressure. This should be the moment for EVs to shine. What's going on?

Commentary: GE was a high-flying stock once upon a time. I'm not sure what the tipping point was but certainly buying Alstom was in the mix. Running through the headlines this morning, I'm seeing things that suggest we may see the same thing happen to GM. But GM won't be alone. 

These are four items that got my attention over the past ten days:

  • the Texas Deep Freeze revealing the Achilles' heel of renewable energy;
  • NASDAQ plummeting over last few days; e.g., TSLA shares dropping like a rock;
  • the price of oil; projections for oil demand by the end of the year;
  • Daimler's rollout of a 250-mile range 18-EV-wheeler;
  • Warren Buffett's views about high-capital intensive industries;

Here those data points are in graphic form or video.

Texas deep freeze:

NASDAQ plummeting as interest rates trend higher but still at relative record lows. Like so many things, the headlines give traders a reason for selling even if the facts don't fit the story.

Analysts see $70 - $75 oil by this summer / end of year (2021).


Daimler EV truck:



Yes, the BWM video is a few years old, but batteries haven't improved all that much over time, and as batteries have improved over the years, the realities of rare earth metals are becoming more concerning. The biggest concern? China holds four aces in this poker hand.

Finally, this:

  • Warren Buffett's views on capital intensive industries. Link here

Some legacy industrial companies with an incredible history (think GE) are betting the farm on EVs (think Ford).

For me the tipping point came during the recent unfavorable event in Texas, the "Four-Day Deep Freeze"; seeing the range of the Daimler Cascadia; seeing the $50,000 BWM golf cart; and, no indications that anyone is addressing the issue of rare earth metals.

Bottom line:

  • Texas deep freeze revealed the Achilles heel of renewable energy: the Achilles heel: capital intensive and surprises [China]);
  • ordinary Americans cannot afford EVs; at the end of the day, EVs are luxury vehicles;
  • long haul truckers won't buy EV trucks if the range is 250 miles;
  • some legacy manufacturing companies are betting the farm on EVs