Sunday, August 28, 2011

Sunday Night Links

1. North Dakota's oil rig count reached the 200 mark for the first time in state history on Friday.  In 2001, the state had only 15.

2.  Jobs are fairly plentiful in some states - America's bleak economic landscape includes pockets of prosperity. 

3. What makes Steve Jobs great? He broke every rule of management. 

4. Miami: Highest number of condo resales in the month of July since 2005.


At 8/28/2011 8:16 PM, Blogger VangelV said...

In early 2009 the rig count was at approximately 30.

By March 2010, the rig count passed 100 for the first time since the early 1980s.

On Oct. 5, 2010, the state hit 149 rigs, surpassing that all-time record set in October 1981.

Since then, the rig count has continued its upward climb.

The alarm bells should be ringing. The rig count is now around seven times the level in 2009. Such an increase in drilling activity in a conventional field would mean a production increase of around twentyfold. But we have only seen a fourfold increase for ND production. This tells us a great deal about depletion rates and the EUR assumptions made by the producers.

There is a positive however for those that want to look at reality and want to profit from it. It may have escaped notice but the natural gas rigs are no longer increasing by enough to offset depletion. The extra rigs are going to drilling for liquids and are targeting wells that will produce very small amounts of oil when compared to traditional conventional production. What gas rigs there are have been used to hang on to soon-to-expire leases. The shale gas producers have largely given up trying to make a profit from producing gas at sub $7.50 prices as only a few companies in the best of locations can make money at current prices.

From what I see, any pickup in real economic activity could cause natural gas prices to spike substantially, particularly if the current La Niña developments bring another very cold winter. Of course, given the price levels such an increase in price should be more beneficial to the conventional gas producers who have positive cash flows and will see a major increase in their profits and to the conventional oil producers who have much better depletion curves and do not require to burn through cash just to keep their production flat.

It's true: America's bleak economic landscape includes pockets of prosperity. Factories are expanding in the Sacramento area, the Rust Belt and elsewhere. The tech sector is humming, from Silicon Valley to North Carolina.

Sorry, but I doubt that California is seeing a pick-up of manufacturing jobs. While some start-ups may see a benefit to build plants where there are so many unemployed high-tech workers, most of the established players are looking for excuses to get out. And pockets of prosperity may be wonderful but the general picture isn't. The U-6 report is still showing 16% unemployed. If we include the people who are unemployed but not seeking full time positions because they have given up the unemployment rate is over 20%. With the housing picture is still bleak with foreclosures becoming a significant part of the picture and little chance of a pickup in building of new homes the employment picture is bound to stay bleak for a while.

At 8/29/2011 7:22 AM, Blogger juandos said...

Hey vangIV, have you perused the following blog site at all and if so what's your opinion of the content presented there?

Bakken Blog

At 8/29/2011 7:34 AM, Blogger VangelV said...

Hey vangIV, have you perused the following blog site at all and if so what's your opinion of the content presented there?

I took a brief look. It seems to be a great site if you work in the area or are looking for a job in the shale industry. But my problem is with the lack of the type of analysis that an investor would really want. There are no articles that I see that are looking at actual production data and using it to evaluate the assumptions made by the producers. There is no analysis of operational effectiveness and actual returns on the capital invested. Without such analysis we would need to go elsewhere or slog through all of the SEC reporting to draw our own conclusions.

Of course, I may have missed something. I have been on vacation for the past five weeks and have had little time to go through the reports that I usually look at and less time to read and evaluate in a thorough manner.

At 8/29/2011 7:49 AM, Blogger juandos said...

"But my problem is with the lack of the type of analysis that an investor would really want"...

Yeah, I can that blog might be a bit thin in that particular area vangIV...

At 8/29/2011 12:31 PM, Blogger morganovich said...

i think that article about steve jobs gets it precisely backwards.

steve was not great because he broke every rule of management.

stever was able to break rules because he was great.

he is a true visionary and as such, could follow his own visions.

his style would not work for most people any more than Mozart's style of composing would work for most composers.


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