The Million Dollar Way (The Bakken Oil Blog): 06/11/18

Monday, June 11, 2018

Stocks In The News -- June 11, 2018 -- The Market, Energy, And Political Page -- T+11

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

EW: In all the "commotion" today, I completely missed this one. In addition to having a great day today, it is on the top ten list of stocks moving the pre-market. Trading at record highs. Don't know why. I don't follow it.

Meanwhile, SRE: after closing 15% higher in one day, is flat after-hours. My hunch: profits will be taken; the shares will drop back to $105 or less; the news that drove the 15% jump in price won't be "actionable" for two years, at best.

UNP: another incredible day. We talked about it earlier.

Dow components: I will leave it up to the reader, but when you get right down to it, the Dow (30) is an incredibly stodgy, old white man's list. The best thing the makers and shakers could do, "modernize the Dow." Maybe they are waiting for leadership at Berkshire Hathaway to change. I would remove the following and replace with any number of other great candidates: GE; HD; IBM; INTC; JNJ; KO; MRK; PG; TRV; maybe others. Maybe change 15 of the 30. Without question the S&P 500 is a better market basket to follow. So why am I "hooked" on the Dow? Maybe I need to change. S&P 500:

today's close: around 2,782
52-week range: 2,406 - 2,873
up 3 points today (0.11%)
record high, around: 2,873

I'm gonna work really hard to start following the S&P 500. I have to get out of my rut.

Maybe this will help:

1% of 2,800: 28 points
1% of 25,000: 250 points but that's close enough to 28,000 or 280 points, so the ratio still holds, about 1:10
on the S&P 500, anything less than a 15 point-point move (up or down) is background noise
15 points on the S&P 500 -- that's my new "dot" to follow

Newfield Update -- Michael Fitzsimmons -- June 11, 2018

Over at SeekingAlpha. It was Fitzsimmons, I believe, who said Newfield was the top operator in the Bakken -- I could be wrong [I was wrong: it was Mike Filloon -- see this link] -- maybe I will look that up later ... but now... at the linked article:

Q1 EPS was impacted by an (unrealized) $79 million derivative loss (-0.39/share)
in the meantime, the company's Q1 domestic production was 39% dry gas
the company has some prolific STACK wells, but the relatively high dry gas split and the hedging program are headwinds
yet the stock has been beaten down, in part, owing to Oklahoma drilling restrictions due to high earthquake activity in the state
it may have been beaten down too much - but where is the catalyst moving forward?

I've talked about hedges and derivatives before. CLR is not hedged (yet).

Will US Approve ATT - Time Warner Merger? Poll -- June 11, 2018

We should know by close of business tomorrow, Tuesday, June 12, 2018 if North Korea denuclearizes -- just kidding. We should know by close of business tomorrow if the US government approves the ATT - Time Warner merger.

Poll at sidebar at the right.

Flash poll: less than 24 hours to vote.

T shares were up 1% today in a market that almost went negative; T was slightly positive after hours.

Same with Time Warner (TMX) shares: up just less than 1% on an otherwise flat day for the market, and up minimally after hours.

The "green" would suggest the word is out.

But that doesn't mean the deal is approved or not.

Many shareholders don't want the deal to go foward, and thus that would explain the "green."

Many shareholders want the deal to go forward, and thus that, too, would explain the "green."

See what Time Warner owns, link to wiki.

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The Singapore Summit

This is pretty cool. Singapore is exactly halfway around the world from NYC. In NYC it is now about 8:15 p.m., (Monday, June, 11, 2018).

In Singapore, it is now about 8:15 a.m. (Tuesday, June 12, 2018). The sun has been up for a couple of hours in Singapore. Kim Jong Un and Donald Trump are probably getting last minute instructions, probably getting ready to get into their limousines. I assume top story at 9:00 a.m. Singapore time will be which one has arrived stylishly late

I think their meeting is scheduled to begin at 9:00 a.m. ST / 9:00 p.m. EDT.

If Trump arrives first, he should pull out a laptop and tweet a few tweets for the international news media to record. If Kim is really late, Trump could sit down with a few journalists for an off-the-record ("wink-wink") talk. In college, full professors got 15 minutes before students were allowed to leave. For world leaders, maybe 30 minutes. If Kim hasn't shown up by then, maybe time for Trump to head to his plane.

It might get a clue to how things are going by watching overnight futures; also watching to see if T or TWX) make the top ten list of what's moving the pre-market (same link).

8:00 p.m. EDT: the Dow is up 7.00 points
9:23 p.m. EDT: after turning negative for a short period, the Dow is green, up 11 points; the S&P is up 0.75 points
11:09 p.m. EDT: the Dow is now up 17 points, and the S&P is up 1.5 points
7:30 a.m. EDT, June 12, 2018: reversed overnight; S&P down 3 points; T not on the top ten list of stocks moving the pre-market; in pre-market, T is up 0.6%; TWX is not popping up in pre-market trading
8:30 a.m. EDT, June 12, 2018: S&P down 0.75 (much improved); T is now up more than 1%; TWX is now up 0.26% pre-market; has the word gotten out?

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Who Has The Most To Lose

I think this is a make or break moment for North Korea. I don't think he has a nuclear program any more. It was destroyed when the mountain collapsed. Remember when the Soviet Empire collapsed? The entire US intelligence community agreed, in hindsight, the USSR was a paper tiger.

My hunch: Trump will bend over backwards (but not bow) as they say to "help" this young dictator make the right decision. But Trump won't give him a second chance.

But tomorrow won't be the day. It will "be the beginning of a long process."

At best, behind closed doors, but not announced, Trump will give Kim Jong Un his word that the US will not attack NK first, in effect ending the Korean War if Kim wants to end it.

Finally, 63 Active Rigs In North Dakota -- June 11, 2018

Active rigs:

$66.17↑	6/11/2018	06/11/2017	06/11/2016	06/11/2015	06/11/2014
Active Rigs	63	52	28	77	188

Seven new permits:

Operators: Hess (6); Lime Rock Resources
Fields: Long Creek (Williams); Cabernet (Dunn)
Comments: Hess has permits for a 6-well Hamilton pad in SENE 13-153-99;

Five permits renewed:

EOG (4): four West Clark permits in McKenzie County
Slawson: a Gunslinger Federal permit in McKenzie County

One permit canceled:

Slawson: an Armada Federal permit in Mountrail County

DUCs reported as completed: none.

Wind Energy And The Road To Great Britain -- July 11, 2018

Updates

July 20, 2018: update here, the wind drought in the UK continues.

Original Post

Wow, talk about perfect timing.

I just posted an entry in which all agree: renewable energy is one of the least efficient ways to go about replacing coal consumption in a short period of time.

The article did not say what the least efficient way to go. Most likely that's nuclear power. It takes ten years to get the permits, and then another ten years to build the damn thing. Assuming all goes well.

So, here we have a most interesting story.

Apparently, those living in the United Kingdom are learning that:

a) the wind doesn't blow all the time (except over Menwith Hill);
b) wind power is not dispatchable; and,
c) their Kingdom does not have a good answer for energy when the wind quits blowing

Here's the story. Huge thanks to Don; I would have missed it.

Britain has gone nine days with no wind generation
forecasts show the doldrums to persist for another two weeks
day-ahead power prices are the highest level for this time of year for at least a decade
except for a surge forecast for June 14th, the forecast is for the wind to stay low for at least the next two weeks
UK turbines can produce about as much power as 12 nuclear reactors when conditions are right
recently, wind generated about 4.3% of the Kingdom's electricity
coal output has dropper near zero
gas and nuclear power have picked up the slack, 54% and 25% respectively
repeat: natural gas is now supplying more than half of the Kingdom's electricity requirements, and that's without all those Teslas which Musk promises us we will see next year

So, the Kingdom's answer? I can't make this up:

A new nuclear reactor. The financing push begins soon. Whenever that might be.

Great graphics, by the way, as usual, at the linked Bloomberg article.

By the way, one more thing: this wind-thing won't happen during the winter. Had it happened during the winter it would be a catastrophe for England. In the summer, not so bad. Just higher prices.

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Kim-Xi Moon Pies

I see the marketing in Singapore for summit-related kitsch has begun. There's still time for someone who wants to fight the trademark fights to start working on Kim-Xi Moon pies for next year.

Free Cash Flow And Three US Majors -- Idle Chatter -- For Investors Only -- June 11, 2018

The problem with this Motley Fool story is that it:

doesn't discuss analysts' view of future oil prices leading to their conclusions in this article;
doesn't discuss oil prices at all which prevents "those playing at home" to better assess the article;
doesn't discuss hedging and how the majors have protected themselves; and,
doesn't say to what degree that time is less of a factor or more of a factor now that the year is about half over

With regard to the price of oil, I think we can make these assumptions:

most oil companies have hedges in place for the rest of the year
if the price of oil drops, those with hedges should do better than expected
if the price of oil rises, those with hedges might do worse on paper, but overall better than expected
bottom line: with the year half over, and hedges in place, analysts should have a range of "free cash flow estimates for the three majors discussed

So having said all that, this is the bottom line from the contributor to the story at the link:

XOM: the writer links to another article, which I did not read; does not provide assessment of XOM in this article except to say it won't do as well as COP or CVX
CVX: shares at $126 today could go to $145 within a year; a 15% profit in addition to paying a 3.5% dividend that's nearly as good as Exxon's 3.9%
COP: at $70 today, could rise to $82/share based on free cash flow; a 17% profit over the next year; it has a 1.6% dividend yield

So, comparing CVX and COP:

15% vs 17% profit over the next year (possibly)
1.6% vs 3.5% dividend
in 2015, when the price of crude oil plummeted, one company cut its dividend by two-thirds (paying one-third what it did before the crash); the other company maintained its dividend

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

Re-Posting: The Road To Venezuela -- An Update -- June 11, 2018

Updates

June 11, 2018: I don't know the ins and outs of force majeure, but what little I understand about the term, Venezuela's woes do not qualify. Venezuela's problem was simply mismanagement. I think their customers will see it the same way. I'm disappointed CNBC hasn't discussed it. Whatever. Three more links to bring us up to date:

Citgo, most impacted by Venezuela's backlog, scrambles to find new sources
Venezuela may "try" ship-to-ship" transfer at sea -- wow, this is scary (and memo to those reading: Venezuela will fail
same story, different source

Original Post

This story is being tracked here. And as far back as 2015.

June 7, 2018; 24 million bbl backlog; Venezuela's fate looks very, very bleak. From the linked article:

Dozens of tankers waiting to load over 24 million barrels of Venezuelan crude are sitting at the country’s main oil export terminal, with the loading delays at almost a month, Reuters reports, citing shipping data. This could put the company in breach of its oil supply contracts with refiners such as Valero and oil majors such as Chevron and China’s CNPC.

Let's put that 24 million bbls in perspective:

Motley Fool On China's Move To Renewable Energy -- June 11, 2018

In "top stories of the week" posted over the weekend, I suggested this might be the top story of the past week:

Market researchers are in a rush to lower their solar capacity addition forecasts for this year after China surprised everyone by announcing it will not issue approvals for any new solar power installations this year and will also cut the feed-in tariff subsidy that has been a major driver of the solar business in the country that accounts for as much as 50 percent of capacity.

From a week ago, more on that story from Motley Fool:

China is investing tens of billions of dollars every year into renewable energy deployment and supply chains. Its motivations are simple: The country wants to improve its environmental footprint and air quality, develop a leadership position in global markets, and increase national security and energy independence (you don't have to import renewable energy).

These plans are also longer-term than many headlines would lead investors to believe.

For instance, China isn't using renewable energy to immediately replace coal-fired power plants, which supplied 72% of the country's electricity in 2015 -- more than double the share of coal in the electric grids of the United States.

That's because renewable energy is one of the least efficient ways to go about replacing coal consumption in a short period of time. Instead, China is hurriedly building natural gas and liquefied natural gas (LNG) import infrastructure to replace coal in the near-term. In fact, the country is single-handedly shifting global markets, having imported 58% more LNG in the first four months of 2018 than in the year-ago period, with American supply playing a central role.

Again, from those two articles:

China announced it will not issue approvals for any new solar power installations this year
renewable energy is one of the least efficient ways to go about replacing coal consumption in a short period of time (I assume a greenfield nuclear plant is even less efficient in the short term)
China will be using a lot of natural gas in the short term to meet its energy needs

Another open-book test for investors.

Fourteen Wells Come Off Confidential List Today; Twelve Are DUCs -- Helms Sugggests North Dakota's June Production Will Hit An All-Time Record -- June Data Will Be Reported In August -- June 11, 2018

Even by Bakken standards, this is almost unprecedented. Fourteen (14) wells come off the confidential list over the weekend and twelve are are DUCs. Only two report production. (Note: the fourteenth well is supposed to come off confidential list today; data has not been posted by NDIC; right now it shows no production; if so, it will be a DUC, and I've included it as a DUC.

Monday, June 11, 2018:
34282, SI/NC, Abraxas, Lillibridge 20-17-11H, Pershing, no production data,
33860, SI/NC, BR, Faye 1B UTFH, Elidah, no production data,
33606, SI/NC, Hess, SC-JCB-154-98-1720H-4, Truax, no production data,
33031, SI/NC, BR, State Veeder 2A MBH, Blue Buttes, no production data,

Sunday, June 10, 2018:
33859, SI/NC, BR, Faye 1C MBH, Elidah, no production data,
33032, SI/NC, BR, State Veeder 2B UTFH, Blue Buttes, no production data,
30569, SI/NC, Petro-Hunt, USA 153-95-22C-15-6H, Charlson, no production data,
30158, 1,404, CLR, Syracuse 5-23H, Banks, a huge well for CLR, 140K first four months; t118; cum 140K 4/18;

Saturday, June 9, 2018:
34283, SI/NC, Abraxas, Lillibridge 20-17-12H, Pershing, no production data,
33858, SI/NC, BR, Faye 1D UTFH, Elidah, no production data,
33607, conf, Hess, SC-Gene-154-98-0805H-6, Truax, no production data,
33077, A, Oasis, Patsy 5198 12-17 5T, Siverston, Three Forks, 18 stages; 1.3 million lbs, t -- ; cum 82K 4/18; it appears frack not completed for some reason; only 18 stages reported, and no "test data" when well came off confidential list;
33033, SI/NC, BR, State Veeder 2C MBH, Blue Buttes, no production data,
24048, SI/NC, Petro-Hunt, State 154-94-31C-32-5H, Charlson, no production data,

Note: in a sundry form received September 18, 2017, Oasis requested a variance for the tubing/packer requirement. I doubt that had anything to with unreported results today, but noted. With regard to #33077, the Oasis Patsy well was drilled in 9 days, to a total depth of 21,550. The well was considered an engineering and a geological success based on the combination of:

maximum exposure to the target
minimal days from spud to total depth
no Pronghorn strike
no contact with claystone
no sidetracks were necessary

"Lower For Longer"? (Again) -- June 11, 2018

SRE: jumps 17% at opening. It would be interesting to read the report / analysis. What changed? Trump's tariff talks and Mexico's July 1, 2018, presidential election? Was this an open-book test? I don't know. But "those with an agenda" suggest SRE could go to $159. At least that's what I heard. No link. See disclaimer.

JPM: apparently suggests "lower for longer" (again). Perhaps down to $50/bbl (WTI). No link.

AAPL: inches closer to $1 trillion market value. Link here. Apple could be the first company to hit that mark.

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

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