Friday, May 5, 2017

Idle Chatter On The Market -- May 5, 2017

Updates

Later, 10:55 p.m. CT: shortly after posting the article below, a reader sent me the link to a NYT article: "The Fabulous Apple Cash Machine."
That hasn’t prevented its share price from powering upward. For the moment, the stock market remains entranced with what Apple is doing financially, and for understandable reasons. Apple may no longer be a great growth company but it is still extraordinary, said Aswath Damodaran, a New York University finance professor, who has analyzed Apple’s earnings closely since 2010. Come what may, he said, Apple churns out staggering quantities of money with metronomic regularity.
“Apple is the greatest corporate cash machine in history,” he said in an interview. “We should appreciate that amazing achievement. The problem is, it’s not growing much. It’s a slow-growth cash-generating machine.”
On Tuesday, the company provided fresh details of how great a cash machine it is. In just three months, after expenses and investments and payouts to shareholders, Apple’s already colossal pile of cash and marketable securities grew another $10.8 billion, reaching a nearly unfathomable $256.8 billion.
Quantum theory: Although the use of the wave-particle duality has worked well in physics, the meaning or interpretation has not been satisfactorily resolved.

Likewise, Apple, to me suggests a similar problem when trying to pigeon-hole Apple: is it a growth company? Is it a value company?

I don't think the answer to that has been satisfactorily resolved.

In physics, whether an entity is a particle or a wave depends on how it is measured.

Same with Apple Inc: how one sees Apple Inc -- as a growth company or as a value company depends on how it is measured.

My hunch is that Apple folks like to think of the company as a "growth" company, whereas financial analysts see Apple as a "value" company. 


Original Post

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here. In this particular case, I am only stating what I plan to do if I win a $1 million+ lottery. This is not my recommendation for anyone else.

In my 40+ years of mediocre investing, I've never seen such clear-cut options for those who want to invest in the equity market (NYSE or NASDAQ). For me there are three options if I win the $1 million + lottery:
a) one-half goes into AAPL and one-half goes into Berkshire Hathaway (Warren Buffett). One could live off the AAPL dividends but if not enough, then sell a portion of Berkshire shares at one year + one day, paying capital gains tax
b) if one thinks WTI will never go below $40 again, then put the entire $1 million into oil and oil service companies
c) if either of those options are too extreme, then simply put the entire amount into a John Bogle mutual fund and forget about it
That's what I plan to do if I win the $1 million+ lottery. Plus buy a new bike. Plus an expensive bottle of Scotch. New shoes for my wife. Ditto, a new purse. A chocolate croissant for Sophia. And a new iPad for Sophia. But that's about it.

With regard to AAPL, these are the current price targets:

 With regard to Warren Buffett: he's finally seen the light when it comes to technology and 21st century investing.

Week 18: April 29, 2017 -- May 6, 2017

Everything was going well until things went wrong. Really wrong. Crude oil pricing flash crash in Asia overnight, May 4 - May 5, 2017, dropping crude oil to $43 and change. By the end of the week, WTI had recovered a bit but still in the $46-range. Saudi Arabia got caught with its siphon in its storage tanks. OPEC production cuts pretty much mean nothing at this point -- for whatever cuts Saudi Arabia "might" be making (wink, wink), they are more than compensating with oil from storage. One big shell game. The analysts and traders finally caught on.

The blog has a new metric: the number of weeks until US oil is re-balanced.

Bloomberg says the independent shale producers are dancing circles around the majors. One wonders how ugly the Permian might get. Fracking solutions in the Bakken suggests that the Permian has a fracking problem.

Meanwhile, Trump's administration is hitting on all cylinders: a) The US House repeals ObamaCare (whatever that means); and, b) unemployment rate hits 10-year low, four months into Trump's administration. MSNBC confused; CNBC shocked -- only Rick Santelli came close

Most depressing graphic for the week at this post.

For the archives: the eleven most under-reported stories in the US

Operations
Top producing wells in North Dakota 
Halcon reports a monster well; more than 50K in one month
Resource Energy adds more Bakken acreage for less than $800/acre

Pipelines
Pembina Pipeline to buy Veresen
DAPL protests: follow the money and the amenities

Fracking
Best damn fracking company goes public

Bakken economy:
State bank posts record profits (again)

The Hess AN-Gudbranson Wells

Updates

July 13, 2018: production data below updated.

November 2, 2017: random update of the wells

The Permits 
The Hess AN-Gudbranson wells in Elm Tree oil field:
  • 33533, 2,444, AN-Gudbranson-153-94-2215H-8, Elm Tree, t10/18; cum 264K 6/19;
  • 33532, 1,407, AN-Gudbranson-153-94-2215H-9, Elm Tree, t10/18; cum 70K 6/19;
  • 33531, 5,872, Hess, AN-Gudbranson-153-94-2215H-10, Elm Tree, t10/1; cum 244K 6/19; see this post;
  • 33530, 1,672, Hess, AN-Gudbranson-153-94-2215H-11, Elm Tree, t10/18; cum 57K 6/19;
  • 33529, 2,054, Hess, AN-Gudbranson-153-94-2215H-12, Elm Tree, t10.18; cum 227K 6/19;
  • 33249, 1,748,AN-Gudbranson-LW-153-94-2215H-1, Elm Tree, t10/17; cum 331K 6/19;
  • 26924, 2,121, Hess, AN-Gudbranson-153-94-2215H-7, Elm Tree, t9/17; cum 2271K 6/19;
  • 26923, 2,145, Hess, AN-Gudbranson-153-94-2215H-6, Elm Tree, t9/17; cum 104K 6/19; -- off line 8/18; back on line;
  • 26922, 2,173, Hess, AN-Gudbranson-153-94-2215H-5, Elm Tree, t9/17; cum 312K 6/19;
  • 26921, 1,708, Hess, AN-Gudbranson-153-94-2215H-4, Elm Tree, t9/17; cum 86K 6/19; -- off line 8/18; back on line 9/18;
  • 26920, 2,110, Hess, AN-Gudbranson-153-94-2215H-3, Elm Tree, t9/17; cum 203K 6/19; off line most of 8/18; but now back on line for five days in 8/18;
  • 21312, IA/2,087, Hess, AN-Gudbranson-153-94-2215H-2, Elm Tree, 34 stages, 1.66 million lbs, t7/12; cum 367K 8/18; was off line for 15 days in 8/18; now back on line;
  • 19538, IA/1,152, Hess, AN-Gudbranson-153-94-2215H-1, Elm Tree, Three Forks, 23 stages, 1 million lbs, t7/12; cum 363K 8/18; was off line for 15 days in 8/18 ... and remains off line (6/19)
The Graphic:

Other Than One DUC Reported As Completed, A Fairly "Tame" Daily Activity Report -- May 5, 2017

Active rigs:


5/5/201705/05/201605/05/201505/05/201405/05/2013
Active Rigs492786186192

Five new permits:
  • Operator: Hess
  • Field: Elm Tree (McKenzie)
  • Comments: permits for a 5-well pad in SESE 22-153-94; these are Gudbranson permits; there is already a 5-well pad in that section as well as two producing wells (in the same section); thus, this section will now have 12 wells sited therein
Eight permits renewed:
  • Slawson (5): five Jore Federal permits in McKenzie County
  • Oasis (2): two Hanover Federal permits in Williams County
  • Petro-Hunt: one CMNU permit in McKenzie County
One producing well (DUC) reported as completed:
  • 20087, 378, Enerplus, Hudson 13-21H, Mandaree, t3/17; cum 7K over 13 days;

Truly A Sad Story -- Activists Worried About Islands And Rising Sea Levels In 100 Years -- Meanwhile In Colorado .... May 5, 2017

Horrendous livestock losses in recent winter storm.
Seven foot high snow drifts buried cows and toppled acres of wheat crops in Prowers County and Baca County near the Kansas and Oklahoma borders, costing farmers millions of dollars.
There are no confirmed numbers yet, but it’s estimated as many as 10,000 cattle were killed in the rare spring storm.
The good news: we have a White House and cabinet that are sensitive to these issues. Proof? The prior administration ignored North Dakota's request for financial aid in providing law enforcement during the DAPL protests; this administration has already responded positively.

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The Tide Is Turning
Michigan Thumb: Thumbs Down On Wind
Michigan Thumbs Nose At Wind

This is the third or fourth state to re-consider the advisability of wind farms. Good for them.  Michigan Thumb voters reject wind farm proposals.

Miffed! Most Depressing Graphic Of The Week -- May 5, 2017

Here's the graphic:

The story:
On April 19, the Iowa Fertilizer Company (IFCo) announced the start of production at its plant in Wever, Iowa (sits on the Illinois state line, and near the Missouri state line to the south).
The $3 billion plant is estimated to produce 1.5 to 2 million metric tons (MMmt) of nitrogenous fertilizer products annually, using natural gas as both a feedstock and a fuel.
According to IFCo, it's Wever plant is the first world-scale, greenfield nitrogen fertilizer facility built in the United States in more than 25 years.
IFCo's parent company, OCI N.V., produces natural gas-based fertilizers throughout the world and is based in the Netherlands. Foreign investment in the U.S. industrial sector is part of a growing trend in natural gas-intensive manufacturing, such as chemical manufacturing. One of the factors supporting this trend is an extended period of low U.S. natural gas prices, which have made it economical for companies to expand or construct new facilities.
The first such plant in IOWA?
  • the state most associated with Hillary
  • the state most associated with wind energy
  • the state most associated with anti-fossil fuel energy
  • one of the states adamantly opposed to the DAPL pipeline
Meanwhile in the state that produces so much natural gas, that supports fossil-fuel, that supports the DAPL, and the only state that has a state bank that could fund a big project, and on and on, here's the most recent update of a fertilizer plant in North Dakota:
Data points from The Grand Forks Herald:
  • Northern Plains Nitrogen fertilizer plant
  • Grand Forks, ND
  • $2 billion
  • path unclear
  • "seed money" in place
  • project first announced in 2013
  • had hoped to have it up and running sometime this year
  • low commodity prices driving farmers away from corn and wheat (use nitrogen) -- one can always find an excuse not to do something
  • farmers moving to soybeans (don't use nitrogen)
  • promoters remain optimistic
  • other suppliers too far away: Iowa and Mexico
Maybe Mexico is a bit far, but Iowa? No, not really. Except you have to go through Minnesota on Warren's trains.
 What are they thinking in North Dakota?

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The Most Magical Photograph Of The Week

The butterflies have hatched:


YES! The NDIC Map Is Back Up! -- May 5, 2017

Link here.

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For The Archives 
A Note For The Granddaughters

On another note, a reader sent me a nice note regarding the Carscallen wells in Truax oil field, east of Williston. Now that the NDIC map is back up I could look at them again (their location). In the process, I took the time to update the production numbers for these wells. 

Attached are clippings from an old Williston ND Herald, dated May 27, 1966, written by Katherine Carscallen, reminiscing about the good/bad ol' days.

It looks like part of the story is missing (about the basket) but more than enough is there to give one an idea of what it was like back in the day (this article reminds me a lot of the stories my dad would tell me about growing up in Newell, SD).

I believe one can click on the clippings and then with "zoom" on your computer enlarge the clippings to make it easier to read. Or the old fashioned way -- find that magnifying glass. Actually, you don't even have to do that: you can make the browser zoom in as big as you want and then easily read the article.

The essay by Katherine Carscallen begins:
How I received a gift of land on the 17th of May (1903) is a long story. It began way back in Norway many years ago, when we heard of a Great Uncle in America that offered to give away 160 acres of land for free. All he wanted from us in return for his land was hard work.

So with my parents, Alfred and Johanne Hoving, and my brother Oscar, we rushed off to America.

First we came to Devils Lake, where we stayed for almost a year. Then on the 29th of April, 1904, we came to Wheelock. Here at the depot we were met by the land locator, Mason Smith. He had brought along a team of horses and a hayrack. Into that hayrack went pots and pans, stoves, beds, table and chairs, 12 hens, a rooster and us. Poor Lovelin had to trot behind. Mr Smith drove us to about eight miles south of Wheelock. And there lay our gift form the Great Uncle. There was land all around, but no people.
My own grandfather and grandmother, also from Norway, also got their land from that Great Uncle, about the same time, and settled near Newell, SD.




Saudi Arabia's 2nd Trillion-Dollar Mistake -- Playing a Shell Game -- May 5, 2017

The stories now coming out: OPEC likely to extend production cuts but won't make the cuts deeper.

The initial cuts were minimal in the big scheme of things, and as we've seen, were easily made up by US shale and US Gulf of Mexico.

But now we learn that Saudi Arabia, and probably some/many/most of the others, have been playing a shell game. Saudi Arabia cut production (wink, wink) but more than made up for those cuts (wink, wink) by taking oil out of storage. In the process they actually increased exports to the US by 32% in February, 2017.

A 32% increase in Saudi imports for the US in one month is incredible (February, 2017, compared to February, 2016).

The Energy And Market Page, T+105 -- May 5, 2017

Disclaimer: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here. I often make typographical and factual mistakes. See the "welcome" to understand the purpose of the blog. If this information is important to you, go to the source. 

Oil: futures suggest the slump is not over.

Shale: nimble shale drillers outpump giants, confounding OPEC -- Bloomberg. The lede:
The biggest oil explorers in the world are being left in the dust by the production gains registered by nimbler shale oil specialists who are confounding OPEC’s glut-killing efforts.
None of the so-called supermajors increased output by more than 3.6 percent in the first quarter, according to company statements. Production actually shrank by 4 percent at  Exxon Mobil Corp., the biggest of the group, and tumbled 9.5 percent at Mexico’s state oil company, Petroleos Mexicanos. Compare that to  Diamondback Energy Inc., which raised production 61 percent.
The stout shale production gains rattled the oil market Thursday, sending oil prices to 5-month lows and effectively canceling out positive earnings news from U.S. producers, which fell along with crude.
Other data points:
  • Concho: production rose 30% in the first quarter 
  • US crude production rose for the 11th week, capping the longest stretch of gains since 2012
  • output climbed to 28,000 bopd to 9.3 million bopd
  • OPEC cuts haven't much difference in the global glut of crude
  • US benchmark crude fell 4.8% May 4 to $45.52, the lowest settlement price since November 29, 2016
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Other Market News

Ouch! Buffett cuts holdings in IBM.

Crabby: Joe's Crab Shack owner said to be preparing bankruptcy filing -- Bloomberg

Unemployment Rate At 10-Year Low -- 4.4% -- Great Jobs Report -- Trump Is Making America Great Again -- The Political Page, T+105 -- May 5, 2017

Jobs report: before the report comes out later this morning, talking heads still blaming the bad weather for one bad report earlier this year. Wow. Once the narrative begins, it never ends.

The magic number: the magic numbers have changed significantly over the past 10 years. The bar was lowered during President Obama's administration. Right now, this is where the magic numbers stand:
New jobs: 150,000 (< 150,000 new jobs: economic stagnation)
Economists estimate the labor market needs to create about 125,000 jobs a month to keep the unemployment rate steady, though estimates vary -- Reuters.
CNBC's Steve Liesman waffled when asked about the "magic number" but he finally said that he accepted 125,000 to 150,000 would be an "appropriate" number to keep the economy growing, or suggesting the economy is growing, or whatever.

Predictions:
  • consensus: 190; first talking head says 175,000 based on weather impact (Jared)
  • next talking head: 200,000, based on retail
  • next talking head: 160,000,
  • next talking head: 205,000, and last month's number will be revised upward -- Rick Santelli
  • next talking head: 145,000 -- Steve Liesman
Nurses: CNBC: first story on where there are huge shortages -- nurses.

Today's numbers: Here are the numbers for today's jobs report: 211,000.

Wow! 211,000. Everyone was low on their forecast; Rick Santelli came closest, even calling the upward revision for the last report.

62.9% participation rate.

Unemployment rate dropped to 4.4%, down from 4.5%. Lowest rate since May, 2007.

Last month's number revised up to 98,000 from 79,000.

One head scratcher: Jared says wages are accelerating (I'm not sure) but we're not seeing any sign of inflation. Reason? Wage inflation doesn't affect core inflation for quite some time.

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US House Repeals ObamaCare

Counterintuitively, the GOP is doing this just right. We can thank the Founding Fathers on this one.

It starts with the fact that ObamaCare is dying on the vine.

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News From Chicago

 This is just one of the problems: the Chicago police department and the police union are quibbling over the actual percent of Chicago cops committing suicide, both numbers well ahead of the national average. 

Chicago stats: either 29/100,000 or 23/100,000 depending on the source.

National rate: 18/100,000.

While in the military, we went through a period when suicides were becoming an issue, and a lot of attention was placed on suicide prevention. I don't recall the rates. According to USA Today, for the year 2015:
The Pentagon reported Friday that 265 active-duty servicemembers killed themselves last year (2015), continuing a trend of unusually high suicide rates that have plagued the U.S. military for at least seven years.
The number of suicides among troops was 145 in 2001 and began a steady increase until more than doubling to 321 in 2012, the worst year in recent history for servicemembers killing themselves.
The suicide rate for the Army that year was nearly 30 suicides per 100,000 soldiers, well above the national rate of 12.5 per 100,000 for 2012.
So, in general:
  • national rate: 12
  • military: 30
  • Chicago police (union numbers): 29
  • Chicago police (dept numbers): 23

The Permian: Things Could Get Ugly -- May 5, 2017

Active rigs:


5/5/201705/05/201605/05/201505/05/201405/05/2013
Active Rigs502786186192

RBN Energy: once again, Permian producers fear takeaway constraints, price hits. Related:
Related, from an April 21, 2017 post:
Shale doesn't matter?: From Reuters -- oil prices could tumble again on US shale influx. Shocked, I'm shocked! Memo to self: another note to Jane Nielson.
One has to ask: if XOM's CEO's job safe? Especially for overpaying (?) for "unknown" area in the Permian.