Sum

Sum from Studiocanoe on Vimeo.

The Boom is Over in the Bakken

OilPrice:

The performance of Blood & Oil, a soap opera based on the North Dakota oil boom, is not going well. The show saw its episodes trimmed by ABC amid tepid viewer interest. But the real life Bakken is also suffering from a lack of interest, a development that doesn’t bode well for the oil-producing region.
The Bakken had been a key part of the U.S. shale boom over the past half-decade. But production peaked at 1.22 million barrels per day in December 2014. Since then production has bounced around, with month-to-month fluctuations, but is slightly down from that high point reached almost a year ago.
The EIA expects the Bakken’s production to drop by 23,000 barrels in November, a decline second only to the Eagle Ford in terms of size....
But falling production is contributing to another problem for the region. Several East Coast refiners are losing interest in Bakken crude, instead preferring to import oil from abroad to use in their refineries. According to Reuters, it is now cheaper for East Coast refiners to import oil from South America, Africa, or the Middle East, than it is to buy oil from North Dakota. The transit costs of moving crude by rail from North Dakota across the country tips the balance in favor of foreign oil.
The U.S. had managed to significantly cut its dependence on imported oil over the past decade, but the share of imports has stopped declining as foreign oil is cheap again.

If that isn't bad enough, there's also this:

In addition, Occidental Petroleum, the fourth-largest U.S. oil producer, reported a third-quarter loss of $2.61 billion, after reporting a profit of $1.21 billion in the 3rd quarter of last year.  Simultaneous with their earnings statement, they announced they'd be shutting down and pulling out of their operations in the North Dakota oil patch, to concentrate their capital outlays on their core Texas shale holdings.  Meanwhile, Marathon Oil, with a large presence in the Eagle Ford, became the first major shale producer to cut their dividend, slashing it from 21 cents to a token 5 cents per share, after they reported 3rd quarter profits of $948 million, compared with $672 million in the same period a year ago, largely from the profitable results of their Speedway retail gas station chain...
Others reporting this week included Hess Corporation, who reported a third-quarter loss of $279 million, compared to earnings of nearly $1 billion a year earlier; Anadarko Petroleum, who reported a third-quarter net loss of $2.24 billion, compared to a profit of $1.09 billion a year earlier; Murphy Oil, who reported a third quarter loss of $1,595 million on revenue of $714.9 million in the period; Whiting Petroleum, the largest oil producer operating in North Dakota, who reported a net loss of $1.87 billion, compared with a net income of $158 million last year; Pennsylvania based Range Resources, who lost $301 million in the quarter vs profits of $146 million in the same period a year ago; Cabot Oil & Gas, who reported a third-quarter loss of $2.2 million, after reporting net income of $85 million in the same period a year earlier, and Pittsburgh based EQT Corp, who reported third quarter net income of $40.8 million, mostly from hedging operations, compared to third quarter 2014 earnings of $98.6 million. Excluding the profits from derivatives trading, EQT reported an adjusted net loss of $50.2 million for the quarter...
There were two companies that didn't report earnings this week.  Denver based American Eagle Energy and Tulsa based Samson Resources, both working shale plays in the Bakken of North Dakota, both filed for Chapter 11 bankruptcy, both announcing plans to sell off their North Dakota assets in an attempt to pay off some of their debts.  Samson Resources apparently hopes to reorganize and emerge as a viable operator; American Eagle "could not be reached" for comment.  Between June and September, 10 oil and gas companies working in North Dakota's Bakken oil patch have filed for bankruptcy; a total of 19 have filed in the last year.  As of Tuesday, North Dakota sweet crude was selling for about $36 a barrel, more than $7 a barrel below the US benchmark price.  With few pipelines in place, most Bakken crude must be shipped by rail, adding to its costs...

I just can't imagine what things are like out there after all the crazy development of the last few years.  Is there a bunch of half-built projects and empty apartments?  I know there was gobs of money to be made there the last few years, but personally, I'd have probably been happy to miss the boom and the bust.  I seriously doubt that all of the damage to roadways has been or ever will be repaired.  I can only imagine that environmental issues that were looked at as a small cost of the boom will look much worse during the bust.  Hopefully, things will work out for the folks of western North Dakota, but I wouldn't expect the boom to return.

Mass Layoffs in Chinese Coal Fields

Marketplace:

Behind the doors of this gritty coal town, nobody answers the repeated knocks. When they hear there's a foreign journalist on the other side, most keep their doors shut. But then, a woman opens hers, shoos the visitor inside, and explains why. "We don’t dare talk about what’s happened," she said. "You talk, and they’ll retaliate."
She's referring to local government officials and the managers at the Eastern Wind coal mine across the street. The mine is run by Longmay, the largest state-owned coal mining company in China’s northeast. It’s one of several here in the city of Qitaihe that will empty when Longmay lays off 100,000 workers later this autumn....
Mining makes up nearly a quarter of Qitaihe’s economy. Most of the city’s 800,000 people work to support the city’s coal mines. Longmay runs twelve mines here. Several will be shut down as the company lays off 40 percent of its workforce. “This is all related to corruption," Song said, yelling. "The whole Communist Party is corrupt; the entire system. They do whatever they want. We could all die on the street and it’s no business of theirs!”
Four years ago, Longmay made more than $100 million in profit. But now this region has the slowest economic growth in China, and lower coal prices have plunged the company into hundreds of millions of dollars’ worth of debt.
Corruption also played a part. A few years ago, a company vice president was charged with accepting $50 million worth in bribes, money he used to buy dozens of sports cars and 58 houses, several of which he had never even visited...."Longmay’s situation is in fact rather universal in China in recent years," Deng said "Datong Coal Mine Group in Shanxi, China National Coal Group, Yankuang Group in Shandong, Shandong Energy Group — all these old coal companies have similar predicaments. They all have heavy personnel burdens, and they all have big local social responsibilities."
Combined, these companies have 600,000 employees whose jobs could soon be on the chopping block, too. “This situation is precisely what the government fears the most," Deng said. "A lot of idle men in their prime working age, without jobs. It threatens to cause social unrest.”

100,000 employees laid off?  Potentially more layoffs than that in the industry?  What gives?  Is coal from Australia cheaper, or has demand decreased that much?  I wouldn't think demand would be going down with all the power plants that have come on-line in the last few years.  I can imagine that many unemployed coal miners could lead to social unrest.  From here, China appears very opaque.  I have to wonder what in the hell is really going on over there.

Biologic

Biologic from Tangible Media Group on Vimeo.

A Welsh Family Tradition

NASA Photo of the Day

November 1:

The Milky Way Over Monument Valley
Image Credit & Copyright: Wally Pacholka (AstroPics.com, TWAN) Explanation: You don't have to be at Monument Valley to see the Milky Way arch across the sky like this -- but it helps. Only at Monument Valley USA would you see a picturesque foreground that includes these iconic rock peaks called buttes. Buttes are composed of hard rock left behind after water has eroded away the surrounding soft rock. In the featured image taken in 2012, the closest butte on the left and the butte to its right are known as the Mittens, while Merrick Butte can be seen just further to the right. High overhead stretches a band of diffuse light that is the central disk of our spiral Milky Way Galaxy. The band of the Milky Way can be spotted by almost anyone on almost any clear night when far enough from a city and surrounding bright lights.

The Most Complicated Watch Ever Made

Agricultural Welfare

Next time you hear somebody speaking about the fierce independence of the American farmer or the power of the free market, you might bring up some of the headlines today on the Des Moines Register agriculture news page:

World's largest cellulosic ethanol plant opens - Steve King (?!) talking about the importance of the Renewable Fuel Standard (ethanol mandate).

USDA budgets $5.6 billion to attract new farmers, ranchers - Because market prices, lending policies and demand definitely aren't

Ethanol from corncobs: A cure for climate change? - No, but a very concentrated use of subsidies and regulatory special treatment.  It is funny to see folks who usually want the government to stay out of private enterprise talk about how bad it would be for EPA regulations to be rolled back.

Washington promises to restore crop insurance cuts - Because actuaries would never sign off on such open-ended risk and farmers would never pay the necessary premiums to make this a free-market program.

Now don't get me wrong, I'm not opposed to government intervention in the economy.  I just get sick of seeing people who claim to be for free markets and reduced government spending for others defend subsidies and regulations that benefit them.  Personally, I think that cellulosic ethanol is a pipe dream without massive subsidies and mandates, and that corn ethanol is a boondoggle which has been a major contributor to a massive agricultural land bubble that will soon deflate with significant pain for farmers and rural Americans, and is also a net negative for the environment.  Finally, I think it is a major mistake for farmers to routinely elect politicians dumb enough to believe the free market fixes all, and ready to slash programs that go directly to their constituents, all so that the extremely rich can pay less in taxes.  

Daylight Saving Time Explained