President Obama Declares War On US Oil And Gas Industry -- February 5, 2016

Updates

February 9, 2016: for the archives -- Tesla stories on Tuesday, prior to earnings announcement, Wednesday:

• analyst downgrades Tesla
• all eyes on the $35,000 mass-market Model S: launch will be "late 2018, a year later than expected" -- analyst; 200-mile-plus range 
• Fortune: what to watch for in earnings report: in 2015, shipped only 208 Model X cars; Tesla says they will hit pace of 235 cars/week as of 1Q16; did Tesla exceed its own massive spending plan of $1.5 billion in 2015; will Tesla maintain its earlier guidance of 90,000 cars (S and X) in 2016; will analysts be happy with the progress of the gigafactory in Nevada; mixed reports coming from the site;

February 9, 2016: API, of course, speaks out strongly against President Obama's "$10-fee" on every bbl of crude oil. That's no surprise. My immediate reaction was the same: this is the beginning of Obama's war on oil, just as his successful war on coal. However, in some respects his plan is absolutely brilliant. Absolutely brilliant. I'm against the proposal on principle alone even if it's a brilliant idea, but it's really quite clever. I will write about it sometime, but I will use the time-date stamp of 9:15 a.m., February 9, 2016, as the time I officially "blogged" that his plan was brilliant. I might even be able to endorse it.

February 8, 2016: from Seeking Alpha:

Shares continue to plunge, now below $150.

Reuters UK reports Elon Musk is using shares as collateral for personal loans.

At what point does Musk get a margin call?

As the market continues to sell off, one of the stocks that has been hit the hardest is Tesla Motors.

On Monday, shares broke $150, just a few days ahead of the company's earnings. A further decline after earnings could be a major problem for CEO Elon Musk and shareholders, one that isn't even related to the sale of electric vehicles.

In August 2015, an article on this site discussed how Elon Musk took out a loan to help buy shares in Tesla's latest secondary offering. 

TSLA sold the stock at $242 a share, and shares have lost about 39% since. With shares plunging by the day, one must wonder at what point Musk could face a margin call for lenders.

Later, 12:23 p.m. Central Time: wow, wow, and wow. Tesla is in deeper trouble than I realized. Don just sent me the Seeking Alpha link and this confirms my thoughts that Elon Musk called President Obama this past week:

• Last month, we showed that Tesla lags far behind both its own Gigafactory forecasts and its promises to the State of Nevada.
• Mark Hibben responded that the failed forecasts don't matter because Tesla has overestimated how large the Gigafactory must be, and because Panasonic has expressed confidence in Tesla.
• Mr. Hibben's arguments have obvious logical flaws. Worse, it appears he badly botched the calculations that he claims prove his point.
• Even though it's not economical to do so, Tesla has begun assembling its Tesla Energy products at the Gigafactory. Why? Probably to mollify Nevada state officials.
• The Gigafactory is too small, and Tesla lacks the funds to finish it. It was a dubious idea to begin with. Is the company now looking for a way out?

This is an incredibly important and interesting article. Tesla's shares are getting crushed.

The SeekingAlpha article above has been archived.

A contrarian view, also at Seeking Alpha: contributor opines the smaller Nevada "gigafactory" will still be sufficient to meet Tesla's needs (it certainly will be adequate if sales disappoint).

Other recent article regarding Tesla: Fortune: Here's What's Behind Tesla's Long, Slow Stock Slide. Data points from this article:

• share prices at two-year low; 50% of their 2014 low
• longtime cheerleader at Morgan Stanley turned negative
• Berenberg analyst then slapped a rare sell rating on the stock
• Model X acceptance appears to be slower than expected
• last month, the company reveals it had shipped only 208 Model Xs, a car plaged with delays that leftcustomers waiting for years
• one of the delays due to car's swooping door; subcontractor couldn't make the doors; Tesla scrambled for a new supplier
• "confusion" on assembly line between Model X and Model S has caused further problems
• Model S  has been a "resounding success" but has borrowed heavily to get where it is
• increasing competition from Chevrolet Bolt
• the "big reveal' in March, 2016, might simply be an "image," not an actual production car
• low gasoline prices hammering EVs, but Musk says not to worry
• the Nevada gigafactory is critical for financial success of the Model S; see Seeking Alpha story above

Before the end of 2Q16, we will see Tesla announce another share price offering.
 

Original Post

 

Reporting today, as regards earning reports from publicly listed companies: nothing of interest for me.

 

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War On US Oil And Gas Industry

For folks paying attention, this is exactly how is war on coal began: "we won't ban coal, but we will make it too expensive for them to survive."

With questions whether the US oil industry can survive the current price slump, what better time to announce his war on the US oil industry.

John Kemp's response at this link.  Kemp is correct; this is fiction. The bad news is that this now sets a marker ($10/bbl) and that's where the negotiating begins.

Reuters has its story here: http://www.rigzone.com/news/article.asp?hpf=1&a_id=142899&utm_source=DailyNewsletter&utm_medium=email&utm_term=2016-02-04&utm_content=&utm_campaign=feature_1.

The fee, which would be paid by oil companies and phased in over five years, is likely to fall flat in the Republican-controlled Congress.

In the last year of his presidency, Obama has said the country must stop subsidizing the "dirty" fossil fuels of the past and focus on clean, renewable fuels that do not exacerbate climate change.

"By placing a fee on oil, the President's plan creates a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future," the White House said in a statement. A $10 tax would come at a time of tumbling oil prices.

Oil prices fell last month to below $30 a barrel, the lowest level since 2003, as demand fails to keep pace with a glut of new supply and the world's biggest oil producers resist cutting production.

Unfortunately, Obama's proposal sets a marker in the sand from which negotiations will begin. Already, movers and shakers are "giving in" by suggesting an increase in the federal sales tax on gasoline as an alternative idea.

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Who Called President Obama?

It is not surprising that President Obama has openly declared war on the oil and gas industry. The question is why now? One of two things: either Elon Musk called him or John Kerry called him on behalf of the struggling Iranians. Both Elon Musk and the Iranians (and the Saudis and Russia) need to see the destruction of the US oil and gas industry.

The Street: Tesla (TSLA) Stock Plummets, Analysts Warn of Risks to Earnings.

Tesla stock is down 6.49% to $163.95 in early-afternoon trading on Friday after UBS warned of three risks going into the company's earnings release next week.

Tesla's fiscal 2016 outlook will be in focus in its fourth quarter earnings.

For 2016, Tesla will have to contend with historically volatile selling, general and administrative expenses, and research and development costs, according to UBS. These costs will likely continue to accelerate ahead of Tesla's Model 3 launch.

UBS projects that this year's deliveries will be at the low end of guidance, as Model X production appears to be progressing slower than expected, Barron's notes.

Low gas prices and an increasingly crowded electric vehicles market will further pressure Tesla's target of 500,000 shipments by 2020.

Additionally, Tesla continues to face storage demand headwinds such as low energy prices and slow initial adoption from utilities, UBS pointed out.

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Good News for The Bakken, Texas

Pennsylvania regulators have stiffened rules on fracking in their state. Anything to cut production in Pennsylvania will help North Dakota and Texas.