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I admit it. I am, in many regards, a cultural luddite. For instance, I don't watch much network TV. I did catch a show tonight, however, called "Extreme Makeover, Home Edition" where a crew builds really nice cribs for heroic families. Good juju. They do it in a WEEK. Of course, I understand that my house took 2 years to build because they didn't have thousands of volunteers and Patricia Heaton helping, at least according to my contractor. I understand the Cost/Quality/Timeliness pyramid. But a week. Wow.
It didn't surprise me that they could build and finish out a brand new 4,000 sq. ft. house in a week by coordinating masses of people, mind you. What flabbergasted me was that they could get their permits and variances and inspections during that time frame. I guess that is the power of network television. Keep that in mind, contractors! Go in with a camera crew when when filing your permits or asking for an inspection!
It gave me a great idea. "Extreme Makeover, Well Drilling Edition". We film only in Colorado, where today it takes me 6 F***ING MONTHS IF NOT LONGER to get a simple new drill permit. I get some male models to toolpush and I film it all for ABC. Maybe this way I can get these worthless idiot politicians and their bureaucrat minions in the Rocky Mountain High state to get some life-giving oxygen to their brains and issue permits instead of the institutionalized screwing they have mandated for the E&P business in Colorado over the last year. Delay for the sake of delay, because they hate the oil business, bigotry swaddled in words like "environment" and "water quality", but not REALLY for these things, because they don't do anything other than what they used to do, they just delay you to dick with you. Bad government. No Doughnut.
I love Mike Leach, the head football coach at Texas Tech. I watched him answer a reporter's question as he went in for halftime just now thusly:
"Coach, what did you do to ignite the running game in the second quarter?"
"We ran some running plays. That generally ignites the running game, you know?"
Brilliant.
OK, on to hallucinogenic advertising. Castrol. The Texas Tech- UH football game.
A red-bearded Scot that looks eerily like Robin Williams whacking people's backs and asses with a dipstick, saying "use yerrrd dipstyck, Jimmah" when they say "All synthetics are all alike". WTF?
I had no idea there was so much casual conversation amongst motorists about the differences in synthetic motor oils. I mean, I am a guy, with attendant chromosomal interest in the automotive arts, and I can't remember having a conversation remotely like that. In fact, I had no idea that the differences or similarities between synthetic lubricants was so controversial.
My second thought was what kind of person conceives of an ad campaign that entails a Scot assaulting people with a stinging weapon and taunting them in deep brogue? Follow that question with what kind of in-house marketing person actually approves that ad campaign?
I imagine a room of stunned suits that have devoted their careers and lives to the esoterica of synthetic hydrocarbons.
"Uhhhhh. I mean. Wow, I don't really know what to say, Fred. It is, uh.... memorable. I guess. A couple of suggestions. Uhhh. Assuming we go with this, we can't have that insane Glaswegian... or is it meant to be a huge Scottish lebrechaun???... assault a woman. NOW would be on us like a spider monkey. Also, absolutely no striking African Americans. The image of Old World white men assaulting an African American with whiplike dipsticks doesn't really.... translate, I don't think. Jesse would extort millions from us if we did that. And DEFINITELY no kids. What a nightmare THAT would be. So, I guess that leaves is with assaulting only our target demographic... White Men....................................... Wait a minute. Remind me again why this is a good idea at all?"
"Well, it WOULD be memorable. As you know, the goal of advertising is to create a memorable image in the consumer's mind, and Lord knows how difficult it has gotten in this day and age. No longer does a mustachioed curmudgeonly supermarket owner warning people to not squeeze the toilet paper. Old hat, that. Insane images are what work. Cognitively dissonant images. Our study suggests that the American consumer thinks of Scot's as charming kilt wearers that are slightly insane, like Keebler elves, only bigger, so not a real negative. I mean, he isn't going all William Wallace on them and decapitating them with a dipstick or anything. He is just spanking dad with a dipstick while talkin' funny. See the humor? Plus we might get picked up by some bored bloggers!"
I was listening to the radio on the way to work this morning and the topic of discussion was how a local lawyers group had set up a series of "discussions and debates" for high school seniors on a variety of topics. The first was topic was
"If gasoline goes to $10 per gallon, should we nationalize the oil industry?"
These students voted that they did indeed think it was a good idea. The lawyer/moderator said something to the effect that "all those young people who voted to do so, did so only after considering all the facts and after having thoroughly debating it. It was the American way."
Good to know that our young folk are so well schooled in sophistry and debate. Yay. Unfortunately, it seems like they might be a pantload light on economics or history. The REAL cost in the increasingly eroding return on investment we have in our educational system is in the damage these energetic and idealistic, yet ignorant, pups can do when they are given the keys (and handguns and whiskey) of power. The regrettable shrinking SAT scores just portend that.
Let's face it. The entire premise is so silly on so many levels that I cannot believe it was seriously chosen as a topic of debate.
First, what good would nationalizing the US oil industry do?
If it was done to decouple price from market conditions, you know, the whole "supply and demand" bugaboo that screws up Marxist economic theory, you would succeed in dropping the price of gasoline to $5 or $1 or a penny a gallon or whatever level you choose to fix it at. Until it runs out. The lower you set the price, the faster you won't have any more product to sell.
The problem with all price manipulation is supply disruption. The two go hand in hand, like Pressure and Temperature. Fix the price artificially low, you will soon run out of product because no one in their right mind will continue to make it... unless you control the whole market. Fix it to high, and you are swamped with product. Just ask the Department of Agriculture.
Unfortunately, the US is a long, long way from controlling the whole oil market. Our "Big Oil" bogeymen that haunt our fevered dreams in the pages of Time and Newsweek and Mother Jones and the Atlantic Monthly control MAYBE 20% of the word's oil supply, and most of that isn't in the US.
Should our "mighty race of genius toddlers", as I heard our government described in a movie recently, noting the age of aides in D.C., decide to do that, the Multinationals that make up Big Oil wouldn't be American very long. You can take away their domestic assets, but you ain't taking away their worldwide assets. Switzerland or Dubai beacon as fine corporate headquarters. Thus, we are dealing with around 5.5 to 6 million barrels of oil a day that you get to "nationalize". Too bad we consume 20 million. Whoops.
The other bummer is that the US production that was, what is that word for "taken without consent of the owners"? Oh yeah, stolen from its rightful owners, the producers and royalty owners, have this nasty habit of Declining, meaning "making less and less everyday", unless new wells are drilled.
I wonder what the exploration budget will be for Nationalized E&P Company? Do you think that Nationalized E&P will support the thousands of independent oilfield service providers? Or would we have to Nationalize all of them as well?
I think it is safe to say that without the competition of tens of thousands of creative folks coming up with ideas where to drill and frac and perforate, drilling rates would most likely fall dramatically, and service companies would "consolidate". Unfortuneatly, this leaves only 1/3 of American demand that can be sold under market this year, 1/4 next year, 1/5 the year after, not to mention the couple of hundred thousand unemployed oil and gas folks, and a collapse of the school tax base in many states, including a huge percentage of overall state budgets in Oklahoma and New Mexico.
Whoops.
Thus Nationalizing the US oil industry will certainly decrease DOMESTIC supply. It cannot help but do so. Where does all of this lead? It leaves us increasingly dependent on foreign oil supplies.
Will our foreign oil-supplying "friends" listen when the American people demand their "right" to cheap gasoline? I mean, after all, the American people have a "right" to all sorts of things for free or cheap, like healthcare. Right? Hell, we can rationalize it all sorts of ways.... Just look at the arguments being proposed for the "right" to universal healthcare. The problem is that the "rights" arguments hold a lot less water when you demand your "rights" from Saudis instead of preying on the misspent guilt of fellow citizens who make more than you.
What do you bet that Putin or Ahmadinijad (or however you spell it or pronounce it) or the Saudi royal family will not be as attuned to our American "rights" as, say, the ACLU? So, assuming I am right, these fellas, with the rationality that comes with being a maker or seller of goods rather than the rationality of American high schoolers who have been apparently conditioned that they should be given things , aren't likely going to sell us that oil for $5 or $1 or a penny for gallon of gasoline equivalent if they can get a better price elsewhere.
It seems like our only choice, once we have decided to take other folks' property domestically, is to extend that same rationale and make the foreign owners sell us their property at below market conditions. I mean, if it was good enough for patriotic Americans to have their property confiscated, it sure should be good enough for the towel wearers and ex commie bastards, right?
Clearly, Hugo and the Sheiks and Putin won't appreciate the beauty of our reasoning that this is some sort of American Right, so that leaves us with the other alternative to stealing... War. Hard to do the whole war thing without fuel, though. Ask Nazi Germany. I wonder if the concept of "mandatory draft" popped up in the debate that Mr. Lawyer was so proud of?
For the life of me, if one was knowledgeable about where America's energy comes from, who controls its supply, and how supply and demand really work, how could one rationally propose such an idea? Congressmen and Senators, sure. We have come to expect insane statements from them. But American High School students? I expect better.
Survey says 10 out of 10 economists would tell you that the fundamental price will rise in that scenario. Should you force your supply to be sold "outside of market", the result will be scarcity as you run out of hostage supply. This isn't even debatable. It is as immutable as a law of physics. Are they still teaching laws of physics in high school? If so, I wonder why since it doesn't seem to help you in a legal career...
By the way, here is a picture of the fellow they just busted for trying to do the ol' WMD thing in NYC.
I guess I can understand why profiling is such a bad idea. Who woulda thunk this fella would be a terrorist? I think we can declare victory in regards to the terrorist threat to our national security from blue-haired senior citizens from Amarillo. Our airport security seems to have shut that threat down cold.
Jimmy Carter is an embarrassment. His ideals are so outside the mainstream of American thought that it is unbelievable to me that he was ever elected President of the US. Mayor of Madison or Berkeley, maybe...
As a businessman, I cringe when I read in the paper how such and such State is cheating it's parents and school children because they are "below average in per student spending". Beyond the reality that there HAS to be some States that are below average, by definition, and 24 States that will be "below the median", the metric has always seemed to me only half-formed.
I mean, I don't look at any part of my operation and pat myself on the back because I pay more than my competitors for what I do. What I want is to pay LESS than my competitors for the same result, or get proportionally more result per unit cost. Right?
Thus, we should look at State spending per student versus a "success metric". I chose to look at average SAT scores. Some caveats here. Some states do not encourage their students to take the SAT, so the few that do are top of the class college aspirants. Those states where only a small fraction of the graduating class take the SAT have a higher SAT score in general. From looking a the data, after 30 or so percent of the students take the SAT, the average scores remain relatively flat through 100+% (the percentages over indicate juniors and sophomores taking the test), although this in itself is a whole topic. The populations break down to three natural groupings 1) High Performers, where 1-8% of the graduating class takes the SAT, 2) the mid population, where 8 to 29% take the SAT, and 3) the Rest where 30% or more take the test.
Note that for the High Performers and the Mid Case, the average score trends much higher with fewer students as a percentage of the whole taking the test, which makes sense. Now lets look at these three populations by average test score versus annual spending per student.
Note that for the very top students, more money generally translates into better scores. For the Mid case and the Rest of 'em, more money spent actually, as a whole, results in lower score trending! Of course, the correlation coefficents between per student spending and scores are very low, which would leave one to the qunatifiable conclusion that spending more money has no real effect on educational quality, but like in the case of all other human endeavors, what you spend it on could have an effect. Which States get the most bang for the buck? I have circled those populations...
Washington and Arizona spend the least and get the most in the Rest case, while Kentucky and Tennessee lead the Mid case and Iowa and South Dakota lead the Top student cases.
So now you know more than that reporter who only gives you HALF the score! I am going to use this basis to begin looking at how states allocate their spending per student to see if patterns emerge. I have often thought, and may perhaps prove or disprove with this, that capital spending is the piece that gets out of control and negatively affects the correlation between spending and education. Of course, it is a bias that comes from a guy that was no stranger to modular classrooms!
With a crowd ranging from 15,000 (CNN) to 2,000,000 (ABC), (I guess media estimates are like horsehoes and hand grenades), the Tea Party march on Washington took place over the last couple of days. Great photos of these scary extremists that clearly can't get with the program.
Wow. I have been forwarded Berman's World Oil article declaring the Barnett a loser by several people. I was an original user of Drillinginfo's Barnett Shale Platform, so I kind of knew Berman was off base but it wasn't worth my time to counter it. Actually, I was hoping no one would. More opportunities for Papa.
Allen Gilmer, Ramona Hovey, and Jason Simmons, the authors of the Platform published by DI's Energy Strategy Partners group, just published a stinging counter to Berman's article.
1) Berman's "high grading" of Barnett wells is anything but,
2) Because of this, Berman is not able to differentiate between good an bad operators,
3) Misses the whole "Marginal Operator" concept that is emerging in these plays (ie, as they put it in a speech I heard, "In conventional reservoirs, it didn't matter if you were Dad Joiner or Humble that drilled East Texas Field, the hydrocarbons were waiting to get out, and treated everyone the same. In the Shale Plays, engineering and operational excellence is key. One man's garbage is another man's gold. Or gas, as the case may be".
4) Shows pretty definitively that by properly grading acreage, and choosing your predictive elements a little more carefully, all the statistical and operational elements Berman said were missing from Barnett production not so magically appear.
A pretty definitive slapdown. Woof. Read it and comment what you think.
Here is a link to a couple of seminars they did recently. I heard they might do another one due to requests driven from these two. I heard from a friend that did attend, and a skeptic when he walked in, that it was the best seminar he had ever attended.
If you were to ask me which Major Oil Company was my favorite, the best Big Oily, as it were, I would have to say it is ConocoPhillips. Now CP may not be the best producer, the best refiner, or best whatnot, but they do now and have always made the good ol' US of A a stomping grounds. When every other major decided that the sexy siren song of mascaraed, slinkily-dressed crazy warlords or South American fuertes was where it was at, and turned away from their dowdy, overweight first wife, the American oilpatch, CP always made sure it made it home for dinner. Sure, CP might cat around overseas with the best of 'em, but they never abandoned good ol' hearth and home.
I mean, don't get me wrong. Getting a farmout or doing a deal with 'em is still a painful hell, they are a major (unless your named Levrett and live in Amarillo), after all. But their folks are smart, they are good, and they think more like an independent than any other major.
My second favorite Major Oil Company is British Petroleum, or BP as they like to be known now, you know, the Petroleum is Silent. They are a smart bunch of folks, and they used to be Amoco, a real Gold Brand with exceptional people if ever one existed. Anyone who would keep and promote a country manager that spent his waterwell budget to drill a successfull off the books exploration well at least has a genetic tie to wildcatting.
I could go on, but that would defeat the purpose of who my FAVORITE majors are, wouldn't it?
Current standard 3000' horizontal drilling costs in the Fort Worth Basis Barnett range from $1.9 to $2.4 MM, depending on depth. This is down 40% from the highs of last year.
Wellhead takes for Barnett dry gas are Nymex minus 40% , a trend that has been increasing since 2000 when the takes were Nymex minus 5-10%. This is probably due in part to gatherers forcing a Waha index on Barnett producers over the last year along with contracts with percentage and fixed cost components like "Waha minus 5% minus 85 cents", that exacerbate the pain in low wellhead price environments. Tough Sh** for operators, royalty owners, and the State of Texas who collect their piece of flesh on production at the wellhead from severance taxes.
Thanks to Ramona Hovey, Jason Simmons, and Allen Gilmer at DI-ESP for the pricing info.
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