Saturday, February 15, 2020

Idle Rambling On A Saturday Night -- February 15, 2020

Link here.

Two screenshots.



The first screenshot is "as is" from the link, but there is a data point in that screenshot that is of incredible interest. See if you can figure out what I want to point out.

The second screenshot, I think, points out a key data point for investors. It shows the dividend history for a publicly-traded company that I purposely did not name yet.

Your mission, should you choose to accept it: what connects those two screenshots, or more to the point, name the publicly-traded company whose dividend history is shown. Hint: the company is seen in the Berkshire Hathaway 13F screenshot above.

This is not an investment site, but I've been watching this for the past eight or nine months.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

Okay, here it is, see this post from May 16, 2019.

I think this -- the most recent Berkshire Hathaway 13F/OXY is a big, big deal. I think there were a lot of folks wondering how Vicki Hollub would do; a lot of folks wondering how OXY would do. I was certainly one of them. I had a lot of "faith" in Hollub and was impressed that she survived as CEO this past year.

I've been waiting for a "sign" before re-investing in OXY. 

Warren Buffett may have just provided that "sign."

The Buffett-OXY deal:
Buffett will receive an 8% return on his preferred shares to finance the deal plus warrants to buy common shares, a similar structure the financier used before in taking stakes in Bank of America Corp. and Goldman Sachs Group Inc. Icahn claimed that at least one large investor that he knows of would have provided the financing without the warrants.
Did Berkshire Hathaway exercise its warrants? See below.

In the 13F, Berkshire Hathaway more than doubled its OXY holdings, raising its stakes from 7,467,508 shares to 18,933,054 shares (about 2.5x its original holdings).

Share price for OXY:
  • one year ago: $67
  • six months ago: $44
  • 45 days ago: $43
  • yesterday: $42
The Berkshire-OXY deal:
With Occidental competing with Chevron to buy Anadarko, Berkshire bought $10 billion of Occidental preferred stock paying an 8% dividend, and received warrants to buy up to 80 million shares of Occidental stock for $62.50 a share.
Some observations:
  • Vicki Hollub survived a very, very rough year;
  • Berkshire Hathaway most likely bought the new OXY shares before the coronavirus shock;
  • Vicki Hollub did not cut the dividend; she actually raised the dividend, albeit not much, but in line with previous dividend raises; 
  • OXY is paying 7.52%;
  • the one-year share price target is $51, which is still well below its 52-week high, just below $70;
  • Berkshire Hathaway did not double its OXY holdings because of the warrants (unless I'm missing something)
  • Warren Buffett likes dividends, but ...
  • OXY's share price has not changed much in the past 45 days;
    • December 31, 2019: $41.20 
    • January 23, 2020 (Chinese cities quarantined): $42.52
    • February 10, 2020: $41.11  
    • February 14, 2020: $41.60
    • the 13F article above was released after the market closed on Friday
  • Occidental Petroleum announced its next ex-dividend date will be on 9-Mar-2020. The next dividend for OXY was announced to be 0.79. 
Again, idle rambling on a Saturday night; not ready for prime time.

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Click Bait
IBD: Warren Buffett Sells Apple, Buys Kroger 

This was the lede over at Investor's Business Daily, link here.
Warren Buffett bought shares of Kroger (KR) and Biogen (BIIB) in the fourth quarter, but the investing legend further pared his Apple (AAPL) and Wells Fargo (WFC) stakes, Berkshire Hathaway's (BRKB) latest quarterly 13F filings with the SEC showed.
This was the internet "tease" that brought me there:


Wow, what a joke. Passes for news these days.

Prior to the sale, on a dollar basis, AAPL was Berkshire Hathaway's biggest holding, at 30% of the entire portfolio. In the last quarter, BRK sold 1.4% of his shares in AAPL, dropping from 248,838,679 to 245,155,566 AAPL shares (3,683,113 shares). If he sold on December 2, 2019, shares were selling at $264. AAPL shares are currently fetching $325.

Paper loss: $225 million or close to a quarter billion dollars.

Warren's move certainly seems to be ridiculous on the surface, but we don't know the particulars. But Investor's Business Daily headlining "Buffett pared his Apple stakes" certainly seems a bit over the top.

My hunch: there was a long, long discussion between Munger, Buffett, et al, about what to do with a stock (AAPL) that was now 30% of the entire Berkshire Hathaway portfolio. "Traditional rules" would have argued for a much bigger cut, maybe as much as a 50% cut in the portfolio's AAPL holdings, but that would have been beyond the pale.

A bit of irony: Warren Buffett sells AAPL but then buys Kroger, which also sells apples. Along with oranges and cauliflower.

WPX To Buy Additional Acreage, Production In The Permian -- February 15, 2020

Old news, reported back on December 16, 2019, in The Denver Post:
Oklahoma-based WPX Energy said Monday that it is acquiring Denver-based Felix Energy in a $2.5 billion deal that will add to its holdings in the Permian Basin in Texas.
From that newspaper report, these data points:
  • Felix Energy, founded by private equity firm EnCap Investments
  • operates in the Delaware Basin, west Texas
  • 1,500 undeveloped sites in the east part of the basin
  • expected production of roughly 60,000 boepd
  • last major deal by WPX in the Permian Basin: January, 2017, during the height of the buying there
  • at that time, WPX acquired assets in the Delaware Basin from Panther Energy and its partners for $775 million, or around $30,000/acre
  • pricing on the new acquisition: about $10,000/acre after adjusting for production value
  • note: "The difference in price and the emphasis by WPX on how the deal will help it fund returns to shareholders and generate free cash flow highlight how conditions have changed, he added. A couple of years ago, a company making a similar deal “would be focused on showing how it will be able to ramp up drilling and accelerate growth,” Dittmar said."
Incredibly, unless I missed it, and I checked the article three times, the number of gross/net acres being sold was not provided.

More detail from WPX letter to stockholders, dated February 5, 2020, data regarding Felix:
  • based in Denver, CO
  • core operations in the Delaware Basin: Loving, Reeves, Ward and Winkler counties in west Texas
  • 57,620 net acres
  • substantially all operated by Felix
  • Wolfcamp shale and Bone Spring shale
  • Felix operates 182 wells in the Delaware Basin
  • owns interests in 175 wells in the Delaware Basin operated by others
  • production: 47,000 boepd; 72% oil
  • proved reserves: 577.8 million boe of which 15% were proved developed
Back of the envelope:
  • The Permian deal as noted above
    • $2.5 billion / 57,620 net acres = $40,000 / net acre
      • but as noted in The Denver Post article, after adjusting for production values, about $10,000 / acre
    • proved reserves: 577,775,000 boe
    • $2.5 billion / 577,775,000 boe = $4.33/boe
    • 577,775,000 boe / 57,620 net acres = 10,000 boe/net acre
  • Tier 1 Bakken
    • 12 wells per 1280-acre drilling unit
    • each well: 1 million boe EUR
      • 12 million boe/1280-acre drilling unit = 9,375 boe/acre
    • 24 wells per 1280-acre drilling unit
    • each well: 1 million boe EUR
      • 24 million boe/1280-acre drilling unit = 18,750 boe/acre
  • Tier 1 Bakken: upwards of 95% oil, although that is coming down over time
Disclaimer: I often make simple arithmetic errors. My "back of the envelope" calculations are only done for my benefit to help me put these multi-billion-dollar deals in perspective.

Update: CLR's Long Creek Unit -- Three Rigs -- February 15, 2020

CLR's Long Creek Unit has been updated.

Week 7: February 9, 2020 -- February 15, 2020

Best graphic of the week:
Top international non-energy story:
Top international energy story:

Top national non-energy story:

Top national energy story:

Top North Dakota non-energy story:

Top North Dakota energy story:
Geoff Simon's top North Dakota stories:
  • ND Supreme Court ruling on royalties;  
  • ND oil production could peak within five years; "best of the best" oil wells nearly finished;
  • ND Hwy 85 4-lane project, Watford City south to Long X bridge to be build; start date: 2023;
  • ND revenues tracking 8% above legislature's forecast
  • Carbon dioxide pipeline hearing goes positive, Bowman County Pioneer
  • Belfield, ND, might build $15 million school
  • Ray, ND, school construction ahead of schedule; to be completed in July, 2020
Wells of interest:
Operators:
Operations:

Fracking:

Pipelines:

Bakken 101:
Commentary:

The Sports Page -- Nothing About The Bakken -- February 15, 2020

PGA: wow, talk about a bad day for the host at the Genesis Invitational. Tiger Woods is +4 for the tournament, after the first nine. Bogeys galore.

Daytona 500: Sunday (tomorrow); 1:30 p.m. CT, Fox.

XFL: based on minimal watching last weekend (both Saturday and Sunday) and now today -- the NF has nothing to worry about vis a vis the XFL. Awful.

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The Grilling Page






Lamb chops directly on the coal: three minutes on one side, two minutes on the other side. Continue to cook for fifteen minutes in heavy aluminum foil.

Miscellaneous Notes -- Fossil Fuel -- Pipelines -- February 15, 2020

Enbridge:
  • Enbridge update here. Very exciting. Along with fact that "Line 3" might be moving forward. Don't hold your breath.
  • Easier to buy than to build: Houston LNG company to sell South Texas pipeline project. Link here. Another link here. Details:
    • Rio Bravo Pipeline project
    • seller: NextDecade
    • $25 million
    • Enbridge: will oversee construction and operation of the pipeline
    • 137-mile natural gas pipeline project
    • 4.5 billion cubic feet per day (around 750,000 boepd)
    • from the Aqua Dulce hub near Corpus Christi to the port of Brownsville
    • will close when NextDecade reaches a positive final investment decision
    • expands Enbridge's presence at the Port of Brownsville and the Rio Grande Valley
      • Enbridge placed its $1.5 billion Valley Crossing Pipeline into operation last year
      • has since started moving natural gas from the Agua Dulce hub into Mexico
    • Enbridge also bought a 10.5% stage in Annova LNG, a competing export terminal also proposed to be built at the Port of Brownsille
    • environmentalists, shrimpers, fishermen working to have FERC overturn these permits
PSX:
Closer look at PSX: in progress --

Disclaimer: this is not an investment site.  Do not make any investment, financial, career, travel, job, or relationship decisions based on what you read here or think you may have read here.

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Investing 2020

We've talked about this before. I am absolutely convinced that the next decade will be the decade for investors. It has, of course, already started.  But the tea leaves suggest some big things are happening for US investors.

Now this: the Trump administration appears to be ready to announce a new incentive for middle-class investors. It sounds like they will be identical to IRAs / 401(k)s but no requirement to hold until retirement and no RMDs. The new investment vehicles need a catchy name, like "IRAs" or "401(k)s, but until then I will simply refer to them as individual investment accounts (IIAs).

Just like IRAs, after one pays taxes on income, one can invest that income ("after-tax income") in these investment accounts. One will not pay taxes on these dividends or and will no pay taxes on capital gains. Of course, there will be limits on how much one can invest. My hunch is that to calm Bernie Sanders the new investment vehicles will be available only for the middle class; billionaires and millionaires need not apply.

I'm not convinced the US House would be willing to support anything the Trump administration proposes in an election year, but one never knows. The majority of US House members would probably qualify for this new incentive, and certainly their extended families and friends would qualify. So, we'll see.

Can you imagine tax-free dividends and capital gains? Who would lose? Tax-free municipal bonds? IRS?

The Virus Page -- Nothing About The Bakken -- February 15, 2020

The coronavirus story has gotten me excited about viruses again. I have a link at the top of the sidebar at the right to the post where I follow this story. I assume I will be able to take down that link by June, 2020, if not earlier. Inshallah.


By the way, just how robust is the United States when it comes to post-graduate education. I've talked about this often. When one speaks of post-graduate education in England, one talks about Cambridge and Oxford. One can throw in Leeds, Edinburgh, and a couple of others, I suppose, Here in the states? Los Angeles, alone, exceeds anything Great Britain has to offer in this arena.
I was reminded of that when it was reported yesterday that "new images of the novel coronavirus were released from the National Institute of Allergy and Infectious Diseases' Rocky Mountain Laboratories in Hamilton, Montana." Hamilton, Montana? Say what. This alone inspires me to want to live forever. What else have I missed? What else will we see in the next fifty years? Graphics pending.
I know nothing about Hamilton -- I've driven through Hamilton -- and I certainly know nothing about the national lab ther.e My hunch is that it came about because of the hysteria surrounding "Rocky Mountain spotted fever" some decades ago. Rock Mountain spotted fever even has its own acronym: RMSF. Any disease with "spotted" in it gets our attention. Likewise, have you noticed that the current coronavirus is often described as the "novel" coronavirus, and its official name will include "novel" to remind us how terrifying this virus was, when we look back at 2020. Hindsight.

Personal note: the very, very, very first patient I ever took care of after getting out of training was a 7-year-old boy with a tick bite recently from Montana .. and the Rocky Mountains. The dad was one of my best friends, a general surgeon, who had just been assigned to Grand Forks AFB, just as I had. He was convinced this son was going to get RMSF. Against my protestations, we put the child on oral chloramphenicol - well known for risk of aplastic anemia. I don't know why we did didn't use doxycycline -- either it was not available or not recommended for children under 7. I don't recall. The patient did fine.
My hunch about history of RML? Correct. See this site. Hamilton is south of Missoula, MT, in one of the most beautiful areas in the world. I don't recall Hamilton but I would have driven through it on one our annual trips to Flathead Lake, also one of the most beautiful areas in the world.
Masks. Surgical asks do not work (by the way, that brings up another issue, but that will have to wait for another day) to prevent coronavirus; surgical masks don't come close to protecting against viruses. The N95 respirators generally don't work either, so that begs the question: why are we not seeing a bigger collapse of the healthcare system in Wahun, or elsewhere for that matter? If you enjoy this stuff, be sure to check out the linked sites. I follow this one. At that site, there are many, many more links. The home site is worldometer.

Dire: Harvard professor says it is likely the "governing" world body will call this a "pandemic" before the year is over. He says 40% to 70% of the world "could" be infected this year.  Proportion of those that will be symptomatic:
"I can't give a good number," he says. 
Or a bad number.

Does a tree falling in a forest make a noise if there is no one there to hear it?

Japan reported an interesting case yesterday: a 50-year-old man in Hokkaido who says he had not recently traveled outside of his local area.. In New Scientist, two reporters wrote that "no one knows if the virus could infect 60% of the world's population and kill 1 in 100 of those infected -- around 50 million people because there are many things we still don't know about the virus."

Right now, the case fatality rate is somewhere between 2 and 3 percent.
So that brings me to Ebola. There was a link over at Drudge about how Ebola might help fight one of our worst cancers -- brain tumors. I didn't care much for the article one way or the other, but it did give me a chance to review Ebola to some extent. This past month I have been reading two books on origin of life, so the review of Ebola was particularly interesting.

First interesting site: how Ebola kills. Kind of amateurish, but it got me started.

A better article over at NIH. Some data points that make this so interesting:
  • only primates are susceptible to Ebola
    • non-human primates are the intermediate hosts for Ebola -- 2019, J Infect Dis
    • it is not understood why rodents, rats, for example, are not affected by Ebola
  • Ebola: an RNA virus of the Filoviridae family
    • the only other member of this family, Marburg, which is just as fatal, but not nearly as "exciting" to the general public
  • the virus has only seven genes -- only seven genes -- I find that incredibly interesting -- seven genes
    • the seven genes? encode at least eight proteins -- huge data point -- does away with the "one gene-one protein" theory -- and that theory has been with us for decades -- all science is settled for global warming but everywhere else we continue to learn more ... but I digress ..
  • case-fatality ratios, early on, 90% in humans and virtually 100% in experimentally-infected non-human primates (NHP) -- compare with novel coronavirus: 2% case-fatality rate (which will probably decrease in time)
  • all animal species, equipped with natural barriers to infection, to include, among others:
    • cellular sensors
    • innate cytokines
    • innate immune cells 
  • "infectivity" sequence:
    • first: the Ebola virus easily, described as a "promiscuous process," easily attached to surface proteins on target cells -- of course that's the most important step for a virus -- finding something to which to attach
    • the target cell envelopes the virus and brings it inside the cell, in a little sac, called an endosome; under "normal" circumstances that would be the end of the story, but..
    • .. the Ebola virus then engages another receptor inside the endosome -- this receptor / this process is indispensable for Ebola virus infection
    • animals (rodents) with mutations such that they don't have this particular receptor are resistant to Ebola infection
    • most interesting: animals have different mutations, different genetic protein receptors that give them species-specific immunity: the receptor in that endosome is genetically different in rodents from snakes (Russell's vipers, King cobras) and bats (African straw-colored fruit bats, for example) ... that suggests to me that other species have evolved to survive Ebola and that evolution occurred at the time primates "broke away" from non-primate animals... or primates somehow changed ... after the break ..
  • the Ebola virus targets a broad range of primate cells -- epithelial cells, liver cells, and, unfortunately, some cells involved in the immune system, such as macrophages (everyone knows about macrophages) and dendritic cells (something new for me)
    • dendritic cells are antigen-presenting cells (also known as accessory cells) of the mammalian immune system. Their main function is to process antigen material and present it on the cell surface to the T cells of the immune system. They act as messengers between the innate and the adaptive immune systems.
    • dendritic cells are the bridge between innate and adaptive immunity -- dendritic cells are necessary to process pathogens into defined receptors and carry them to T cells that have never seen Ebola before; considering that most of the human population has never seen Ebola virus ("immunologically naive"), the dendritic cell - T cell bridge is incredibly important -- in fact, it looks like this may be the crucial detail in studying Ebola virus
  • bottom line: the dendrites do their job picking up the Ebola virus but fail to do anything with the virus before handing it over to the T cell .... "hey, you dendrites .... you had one job to do ...." 
  • and, then, of course, it's history, it's too late .. the Ebola virus is inside the human body undetected; 
  • the rest of the genes then do the dirty work
  • one assumes there are many viruses that have ways, like Ebola, of pranking the human immune system but fortunately don't have the other genes to cause death
  • interestingly enough, part of the immune system is to suppress a strong inflammatory reaction when exposed to a foreign particle -- the exception... macrophages .... "macrophages are remarkable exceptions." In these cells, Ebola infection elicits a strong inflammatory response .. and that's what kills us when we get Ebola
  • enough of this, time to move on but I have a much, much better understanding of Ebola
  • thank you novel coronavirus for piquing my curiosity
  • oh, one more thing: the genetic sequence of the seven-gene virus:
  • under the electron microscope, the Ebola virus looks like a "hangman's noose":

Getting Ready For A Great Day -- February 15, 2020

Wow, I'm in a good mood. I have no commitments until 9:30 a.m. so I could have slept in but as soon as I woke up, I jumped out of bed to get started. Too much going on.

Weather: first of all, the-3day weekend is going to be gorgeous in north Texas. Each day -- Sat-Sun-Mon -- will get progressively. The weather-person said it was going to be another cold day today. Hardly. Temperature right not -- 7:38 a.m. local -- 40 degrees with not a cloud to be seen. Will get near 70° by late this afternoon.

Virus: the coronavirus story has gotten me all excited about viruses again. Will provide a few comments later.

Tax reform "2": or whatever they call it. Exciting, exciting, exciting. Trump administration, after vacillating for quite some time, appears ready to clearly differentiate themselves from the tax and spend party. Yes, I know, the GOP will spend just as much.

Investing in oil: this is not an investment site, but the news coming out of the market yesterday certainly suggested an interesting take on investing in fossil fuel. More on that later, also.

Director's Cut: and I still have to provide commentary on the Director's Cut that was released yesterday.

Granddaughters: I think Sophia had one of her best days ever at Tutor Time yesterday, the annual Valentines Day party. It really was nice. Olivia will have an incredible day today for her soccer game. I won't be going, because I will be at gymnastics with Sophia later this morning. And finally, the oldest, Arianna, is in Ft Lauderdale, FL, this weekend staying at a 5-star hotel to participate in a national water polo tournament. A pretty big deal. I remember my big trip growing up was a train ride from Williston to Ray, ND, when I was in kindergarten. Arianna flew to Florida on her own, met up with her teammates, and says she's having a great time. I'm sure she is. Unlike most past trips, the vast majority of parents did not go this time -- just the coaches, the players, and a few parents.

Speaking of family: I updated the family genealogy website. I see that someone from Germany left a comment regarding the maternal family name: Fle├čner or Flessner. This social media "stuff" is truly incredible.

Okay, time to start. Where to begin? I usually start out fast and then slow down. We'll see what happens.