Amnesty: ‘Disturbing’ Rise in Executions Worldwide in 2015by webdesk@voanews.com (Henry Ridgwell) Wednesday April 6th, 2016 at 6:33 PM
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Amnesty: ‘Disturbing’ Rise in Executions Worldwide in 2015by webdesk@voanews.com (Henry Ridgwell)
Amnesty International says there was a disturbing rise in the number of executions carried out worldwide in 2015. At least 1,634 people were executed last year – a rise of more than 50 percent in 2015 and the highest in 25 years. But the true figure is likely much higher, as Henry Ridgwell reports for VOA from London.
Why Oil Prices Will Rise and You Will Be Caught By Surpriseby Brad Beago / Oilprice.com
I follow oil pretty closely given our exposure. As such, I get frustrated with many press and news show accounts of the commodity. It gets worse when the pundits and writers should know better. Frequently inexact terminology leads to misconceptions and sometimes I see outright falsehoods that completely distort the truth.
As a former oil analyst and professional energy investor, I feel compelled to take those to task. As a realist, I see that all markets require a difference of opinion and all investors talk their “book”. For this reason, when Jeff Currie at Goldman Sachs Commodities Group gets on CNBC and opines about future price movements, I give little notice. Jeff is posturing for his customers’ and GSs’ positions. Jeff can spin the story either way and chooses his statistics accordingly…That’s what he is paid very well to do.
Last week (March 28, 2016), I heard Dennis Gartman of the Gartman Letter, a trader and investor that I respect and have learned much from, spout an outright falsehood on CNBC. Everyone can have a bad day, but I’ve been hearing various versions of this for months. Dennis said in essence that oil prices could not rise very much because of “all the capped wells that could be brought on line very rapidly”. He predicted no more than $42/bbl this year. He estimated that at current strip pricing, you could lock in $45/bbl in 12 months, making large numbers of these “capped” wells profitable. The implication being that at current prices, the market would be rapidly flooded with new oil.
I’ll take the over on price, the under on production and bet all my capital that I’m right. (Oh, I already did that…). Dennis should know better. For fun though, I thought I’d like to take apart his thesis.
First, there are no “capped” wells in the U.S. To my knowledge not one well has been capped due to low prices, especially relatively young horizontal shale wells. Older wells are capped all the time when production is no longer sufficient to pay operating expenses for the well. Generally, onshore wells may cost something in the order of only $2,000 per month to operate. At $40 dollar oil, 3 barrels per day of production (gross) should cover operating costs.
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What Dennis is likely referring to is the “Drilled Uncompleted” or DUC well inventory in the various shale plays. Some estimates have shown as many as 4,000 of these DUCs exist and the numbers are rising. Many pundits cite these DUCs as an effective ceiling on oil prices.
However, a DUC is very different from Gartman’s implied “capped” well. There are many reasons why a producer would drill and not complete a well. They may have had a rig under contract, they may want to beat competitors, retain their or their service companies’ good employees, they may be able to hold expiring acreage, they may just want to see what the rocks look like in a particular area. However, the most likely reason is that the completion costs of these wells can amount to over 60 percent of well cost maybe – $3 to $4 million per well. As such, this investment is very difficult to recoup if a well’s flush initial production is sold at low prices. This is compounded when whole well pads are completed at the same time to increase efficiency. If you don’t like the price one well gets, six wells coming on line at the same time is worse.
This also flows into the other reasons why this production will not flood the market, namely the intersection of costs, timing and decline rates.
• Costs – 4,000 wells at even $3 million per well is $12 billion dollars. Given the upheaval among producers, where does Dennis suppose the $12 billion will come from to “instantly” “uncap” these wells and increase production? Not from the banks, the high yield market is tight, equity investors have stepped up for some Permian and Eagle Ford producers, but $12 billion is a lot of money.
• Time – Let’s say that oil prices above $40/bbl equals a green light for energy producers to attack their DUCs. (There appears to be no factual basis for this, but let’s pretend.) A quick look at C&J energy services, which controls the country’s third largest frac fleet as well as other completion services, tells part of the story. Today, just over 50 percent of the companies’ fleet is working and the rest is “stacked” or to be retired. The people were laid off months ago. Clearly, when they get the signal that their customers want more completion services, they will begin to reactivate some of this idle iron – one frac fleet at a time. The problem is the C&Js stock price is $1.46 and they have close to $1.2 billion in debt. Where will the money come from to rehire people, and reactivate idle equipment? After that, will the people return? Yes, but slowly and at a high cost. What about Baker and Schlumberger? Both are in better financial shape but their fleets have been stacked also and at this time, investors are in no mood to hear a company talk about adding capacity. When these companies return fleets to active status, they will be competing to hire a smaller pool of laid off workers.
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• Decline rates – Wells producing from tight rock or shale (wells that must be fracked) exhibit steep decline curves on the order of 75 percent during the first year of production. The implication is that producers are on a never ending treadmill in order to maintain or grow production volumes. That is, they must complete new wells in order replace the natural declines from existing wells. There are two critical points associated with these steep decline curves that pundits like Gartman don’t appear to grasp. The first is that based on current data, the four key liquids rich shale plays have declined by over 600,000 bopd since their peak of production in March, 2015. This production is gone. These wells have depleted. They can’t be turned back on. The only way to increase production again is new completions and new wells – in other words massive new reinvestment. This is very different from past cycles when OPEC dialed back production by idling a major field or two until demand rebounded. These OPEC giant and super giant fields are a totally different animal. It’s all about the infrastructure, not the productivity of a single well. The entire complex can be shut down, reworked, maintenance performed, etc. then turned back on…more akin to a refinery than typical single or multiple well fields. But that’s another story. Bottom line – that 600,000 bopd is not magically coming back. It took the onshore industry something like 12 months running flat out to add those volumes. Given oil prices, it will be quite a while and it will take higher prices before the industry even gets back to a steady walk, much less a flat run.
Another key thing to understand about decline curves is that they are continuous and right now declines are accelerating. However for example purposes, let’s look at the Eagle Ford. There are some 10,000 wells in the Eagle Ford producing today, and they are all in decline. The EIA estimates the average Eagle Ford well adds 800 bopd in its first month of production. Last month, Eagle Ford production is estimated to have declined by 60,000 bopd. That implies that 75 new wells per month must be drilled and completed to just replace this 60,000 bopd. Assuming it takes 15 days to drill a well, that implies around 38 rigs drilling and around 25 frac fleets running above what is running today! Today, there are 42 rigs drilling for oil and we estimate 10 – 15 frac fleets running in the Eagle Ford…so just to replace production, the industry would have to increase rigs running by nearly 100 percent and frac fleets by 150 – 200 percent. This would require a massive mobilization of capital and manpower. During this whole mobilization process, production from existing wells is declining, month after month. Don’t get me wrong, I believe this will happen. However, I know this won’t happen quickly and won’t happen at $40/bbl oil, making Gartman’s thesis and pricing argument completely false.
Production data, or lack thereof, is a primary hindrance to clear and transparent oil fundamentals. The mechanics of the above discussion would be more obvious if we could measure field production in real time. In fact, production data in Texas takes some three months to even estimate, and these estimates are often revised. The same goes for well completion data. The EIA tries to model this through its “Drilling Productivity Report”. However, there are no similar efforts for the rest of the global oil industry, in fact, OPEC publications use third party reporting not internal or “real” data from the companies themselves.
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In Saudi Arabia, production statistics are a state secret. Not surprisingly, many countries distort the data to suit their own needs. That’s why the IEAs look at G7 storage data is an important industry statistic. It is widely recognized that both global demand and supply data is inaccurate, but changes in storage inventories should reflect supply and demand changes. The only problem with this approach is they only get data for around 2/3 of the global storage capacity. This is what led to the recent headlines “800,000 bopd of oil is missing”. Supply estimates exceeded demand estimates by 800,000 bopd during the quarter, yet storage didn’t build, leaving the question of where did the oil go? The answer is that there never was this extra oil…if it existed, it was burned. More than likely, both supply and demand estimates were off by that amount.
Third parties like “Drilling Info”, BTU Analytics, CERA, etc. provide their looks at the market for very high prices, and as such are much more granular than those from government data providers. As much as they try, they are still limited by the availability of international data and reporting time lags domestically, not to mention their own biases.
Generally it takes 18 months before the world has a decent picture of supply and demand. This is little consolation to those trying to do real time analysis on the direction of prices. That is why I can say categorically “the fix is in”. In other words, fields are declining, meaning investment is far below levels required just to replace production. The only thing that will change the vector of these declines is more spending, lots more spending, and the only thing will spur lots more spending is higher prices. Significantly higher than $40/bbl.
In conclusion, we have a typical commodity price cycle. Prices have dropped to levels destroying capital, bankrupting businesses, idling massive amounts of equipment and manpower. The cycle is reversing now. The weekly EIA numbers are showing steady declines in production (this is a balancing item – not real production estimates) and also increasing demand – In the United States. The IEA is showing the same thing in their monthly report that has a decent look at the G7 countries and attempts to look at the G20. Between these two, there is a large world with little accurate measurement. China for instance jailed a Platts reporter for espionage when he tried to put together a fundamental energy statistics database.
Inevitably, we will have another price shock – or at minimum an upside surprise. It’s unavoidable at this point. Oil never transitions smoothly. Just like all the oil bulls had to be run out during the declining price stage, all the price bears, like Dennis Gartman, will be run out when fundamentals hit them over the head. Gartman, to his credit, will change his tune 180 degrees when he sees the actual data shaping up. That’s how he has survived so long and profitably as a trader.
But by then it will be too late, the world will want incremental supplies immediately – yet the industry cannot scale in real time. In order to motivate producers to get busy and provide incremental supplies, prices must increase sharply from current levels. My prediction – $80/bbl in 18 months, but it won’t last very long. I think $60 – $70/bbl is a healthy range.
This article originally appeared on Oilprice.com
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 Reuters |
White House redirects money to fight Zika, urges Congress to act
Reuters WASHINGTON The White House said on Wednesday it will redirect $589 million in funds to prepare for and respond to the Zika virus before the mosquito that carries it begins to emerge in the continental United States. But White House budget director ... White House to Shift About $500 Million for Fighting Ebola to Combating ZikaWall Street Journal White House to spend $589M in Ebola funds to fight ZikaWashington Post White House to Redirect Ebola Funds to Fight ZikaVoice of America Fox News-USA TODAY-Washington Times-Vox all 403 news articles » |
The National Guard being formed in Russia will be given broad powers to put down mass riots among other tasks.
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 Bloomberg |
Congressional Report Says Brazil's Impeachment Vote Can Proceed
Bloomberg Dilma Rousseff's political future hung in the balance on Wednesday as a congressional report recommended impeachment proceedings move ahead, while the Brazilian president's biggest ally stopped short of defecting from the government. The report ... Reports: Rapporteur recommends impeachment of Brazil pres.Washington Post Brazil Impeachment Battle Rests on Handful of VotesVoice of America Brazil congressional report favors impeaching President RousseffReuters GlobalPost-BBC News-Tribuna-Xinhua all 21 news articles » |
UNITED NATIONS (Reuters) - Islamic State militants in Syria and Iraq are netting between $150 million and $200 million per year from illicit trade in plundered antiquities, Russia's ambassador to the United Nations said in a letter released on Wednesday.
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Leftist Colombia Rebels Say Paramilitary Attacks Slow Peace Deal by webdesk@voanews.com (Reuters)
Colombia's Marxist FARC rebels said an increase in violence by paramilitary groups made it harder to reach a final peace accord with the government as the two sides met for a round of negotiations in Cuba on Wednesday. The FARC and the government reconvened after a two-week break, having made progress in more than three years of talks in Havana but missing a self-imposed March deadline over the issue of how to disarm the rebels. The rebels fear for their safety once an accord is...
Brazilian news reports say the rapporteur of an impeachment commission in the lower house of Congress will recommend that Brazil’s President Dilma Rousseff be impeached.
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Russian Public Unfazed by Panama Papersby webdesk@voanews.com (Daniel Schearf)
People around the world have reacted with shock and outrage to the trove of documents leaked from a law firm in Panama that revealed secret bank accounts connected to hundreds of public officials, politicians and celebrities. The list of notables includes the current leaders of Argentina, Britain, China, Iceland, Russia, and Ukraine, among others, or people closely linked to them. But, while the Panama Papers named close friends of Russian President Vladimir Putin, and...
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The Panama leaks exposed much about Russian officials’ unsavory offshore lives, but is unlikely to cause any immediate trouble for them. At least for now.
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06/04/16 11:29 from Mike Nova’s Shared Newslinks
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» Satellite Firm Stops Hezbollah TV Broadcasts in Lebanon
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mikenova shared this story from Voice of America. A regional satellite provider cut the broadcast for Hezbollah’s TV station in its native Lebanon Wednesday, deepening the Mediterranean country’s isolation from the Arab world. Al-Manar, …
06/04/16 11:22 from Mike Nova’s Shared Newslinks
mikenova shared this story from Voice of America. A regional satellite provider cut the broadcast for Hezbollah’s TV station in its native Lebanon Wednesday, deepening the Mediterranean country’s isolation from the Arab world. Al-Manar, …
» Amnesty: ‘Disturbing’ Rise in Executions Worldwide in 2015
06/04/16 11:07 from Mike Nova’s Shared Newslinks
mikenova shared this story from Voice of America. More people were put to death in countries around the world last year than in any other year during the past quarter-century, Amnesty International said Tuesday. The report said at least …
06/04/16 11:07 from Mike Nova’s Shared Newslinks
mikenova shared this story from Voice of America. More people were put to death in countries around the world last year than in any other year during the past quarter-century, Amnesty International said Tuesday. The report said at least …
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Leading up to and during the 2016 Nuclear Security Summit, Belfer Center experts released reports, published commentary, and provided insight and analysis into global nuclear security. In advance of the Summit, the Project on Managing the Atom set the stage for discussion with the report Preventing Nuclear Terrorism: Continuous Improvement or Dangerous Decline?
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Russian President Vladimir Putin made his first public appearance Wednesday, since the "Panama Papers" leak, alleging insiders, officials funneled billions of dollars to offshore accounts worldwide.
Former Israeli President Denied Early Prison Releaseby webdesk@voanews.com (VOA News)
Former Israeli president Moshe Katsav’s request for a conditional early release from prison has been rejected by a parole board. He is serving a seven-year term for raping an employee, while he was the minister of tourism in 1998. Katsav has always maintained his innocence. The Justice Ministry said Wednesday the parole board concluded Katsav, the first Israeli president to be incarcerated, did not show remorse, regret or sympathy toward victims. The parole board also said Katsav could still be a threat to women and conducts himself in an aggressive manner. His victims also expressed opposition to an early release before the board. Charges of rape, sexual harassment Katsov was convicted in 2010 on charges of rape, sexual harassment, indecent acts, and obstruction of justice. “The board emphasized that the prisoner has presented himself as victim and has continually attributed responsibility for his situation to others,” the Justice Ministry said. During his 18-month trial, his former secretary made allegations against him. AFP reported the woman “described Katsav as monstrous, with a split personality that subjected her to terror.” The 70-year-old Katsav took the mostly ceremonial role as president in 2000. After public pressure following the allegations, Katsav was offered a plea bargain and resigned in 2007. He later decided to call off the plea bargain and face trial and said he would “fight until the truth comes out.” Nobel Peace laureate Shimon Peres took over the presidency after Katsav’s resignation. Katsav’s lawyers are expected to appeal Wednesday's decision.
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Cease-Fire Holds in Disputed Nagorno-Karabakh Regionby webdesk@voanews.com (VOA News)
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World Bank: Russian Economic Woes, Growing Poverty 'Undoing Nearly Decade's Worth Of Gains'by support@pangea-cms.com (RFE/RL)
The World Bank says an estimated 3.1 million Russians have slipped below the poverty line as the country's economy struggles with low global oil prices and international sanctions.
President Obama convened more than 50 world leaders in Washington this week hoping that international progress on one of his long-standing policy priorities, nonproliferation, would outlast his administration, but the gathering served mostly to highlight the mixed record of Obama’s nuclear agenda.
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