Tuesday, January 29, 2019

Again, The Weather Channel Hyped The Story In Atlanta -- January 29, 2019

Weather Channel says the weather did not turn out as badly as predicted for the southeast. But that doesn't mean that it's not gong to be really, really cold tomorrow. Also not nearly as much snow as they predicted for Maryland or Boston. But their marketing was great. They had me watching.

ISO New England: burning 3% coal. Spiking to $175/MWh.

Oil? Another build. Up another 2.098 million bbls. 2,098,000 bbls. I love the precision. 450 million bbls in storage and the API has the increase "accurate" to a thousand bbls (1,000 / 450 million = 0.000002222, or 0. 00002%. But note this: the whopping build of over 2 million bbls was way less than the forecast which was up to almost 8 million bbls. We'll see the EIA data tomorrow; EIA and API data often diverge widely, and not necessarily in a good way.

WTI: up 2.46%; up $1.28; trading at $53.27.

PG&E:

Apple -- January 29, 2019 -- EPS Reaches All-Time High at $4.18

Those reports that Apple had died were premature. Apple's EPS hit an all-time high despite iPhone revenue coming in lower. I would love to see the graphic with three EPS lines on it: hardware, services, EcoSystem.


Link here

How big is Apple? It's above the banner at the Drudge Report. Yup, that big.

Apple's EPS hit an all-time high. Everything else is background noise. Despite buybacks, wasted R&D, currency losses, plunging Chinese market, Apple still has $245 billion in cash and about $115 billion in debt.

Dividend: for the past few years, Apple has raised its annual dividend in February. The last dividend increase was a full dime, from 63 cents to 73 cents (quarterly). If I have one complaint with regard to Apple from an investor's point of view: the company has been a bit too "tight." I think the company has always been that way but now the company would be hugely influenced by Warren Buffett who absolutely does not like dividends, unless he's the one on the receiving end. 

Updates

Immediately After Results Reported 

Q&A:
  • Why not more stock buybacks? We've done $250B in repurchases since the beginning of the program. But want to buy back stock in a "disciplined" manner that accounts for market conditions.
  • Wow! $250 billion in repurchases equals the amount of cash Apple has. Had they not done the buybacks, all things being equal, they would have $500 billion in cash
  • Apple's stock is now up 5.6% after hours. The earnings call disclosures about services and the installed base seem to be helping.
  • Long term stock? It's an open-book test. 
  • The XR is Apple's most popular iPhone model, and is followed by the XS Max and then the XS.


Look at the CFO's remarks:
  • Also notes product gross margin was 34.3% and services GM was 62.8%. This is the first time that Apple is breaking this out.
  • Margins of 62.8%!!
  • Double-digit growth seen in Germany, Poland, Spain, Mexico, Vietnam.
  • Apple's iPhone active installed base is now above 900M. -- closing in on one billion for the installed base -- almost equal to every person over the age of 12 owning an Apple iPhone in China
  • Services revenue hit new records in all 5 geographic segments.
  • Apple has surpassed 360M paid subscriptions across its ecosystem, up from 330M+ three months earlier. Adds the number is expected to top 500M next year.
  • The Mac and iPad installed bases hit all-times. Half of last quarter's Mac and iPad buyers were first-time buyers. 
  • Apple's wearables business is said to be approaching the size of a Fortune 200 company.
  • Reiterates Apple aims to eventually become net cash neutral. Currently has ~$130B in net cash.
Tim Cook, earnings call, oldest to newest:
  • Reiterates China was responsible for most of Apple's revenue shortfall relative to original guidance, and that revenue grew outside of China.
  • China wearables revenue was up over 50%, and Apple's Chinese active installed base grew. Over 2/3 of Chinese Mac and iPad buyers were first-time buyers.
  • Cook takes a minute to talk up the iPhone XS and XR's feature sets. "We couldn't be more proud of our iPhone lineup and our industry-leading customer satisfaction." But he admits that customers are (on average) holding onto their existing iPhones a little longer. 
  • App Store, Apple Pay, cloud services, App Store search ad revenue and AppleCare had record revenue.  
  • Apple Pay transactions hit 1.8B, well over twice year-ago levels.
  • Cloud services revenue rose over 40%.Apple News had over 85M monthly active users. Remarks come amid reports that Apple is planning a news/magazine subscription service that will be integrated with Apple News. Apple News had over 85M monthly active users. 
  • The largest services category represents less than 30% of total services revenue. 
  • Regarding wearables sales, which rose nearly 50%, Cook says (not surprisingly) that both Apple Watch and AirPods were strong. 
  • We're trying to make it easier to trade in an iPhone in stores. Company recently began making it easier to pay via installments.
The link to the earnings release.

Live, from a blog, oldest to newest:
  • Earnings are out. Revenue is at $84.3B, above an $83.97B consensus. EPS is at $4.18, slightly above a $4.17 consensus.
  • For the March quarter, Apple expects revenue of $55B-$59B vs. a $58.98B consensus.
  • Shares are up 2% after hours.
  • iPhone revenue fell 15% Y/Y in the December quarter to $51.98B. That fits with the guidance Apple previously gave. Mac revenue rose 9% to $7.42B, iPad revenue rose 17% to $6.73B.
  • "Wearables, Home and Accessories" revenue rose 33% to $7.31B. Services revenue, previously said by Apple to be above $10.8B, rose 19% to $10.9B. 
  • The stock is now up 3% after hours. Expectations were clearly pretty low for Apple going into earnings, and that's allowing shares to move higher in spite of a light March quarter outlook that implies a 7% Y/Y revenue drop at the midpoint.  
  • Mac, iPad, Services and wearables/home/accessories revenue all came in above analyst estimates. iPhone revenue came in below.
  • Apple posted a December quarter gross margin of 38%, down 0.4 points annually and in line with its revised guidance. For the seasonally weaker March quarter, it expects a GM of 37%-38% -- lower unit volumes are a headwind, but lower memory prices appear to be limiting the impact. 
  • Last quarter's sales by region: 
    • Americas +5% Y/Y to $36.94B 
    •  Europe -3% to $20.36B 
    • Greater China -27% to $17.96B 
    • Japan -5% to $6.91B 
    • Rest of Asia Pac +1% to $6.93B 
  •  China is (as signaled by the warning) clearly quite weak right now. But U.S. sales seem to be holding up well. And the performance of the Rest of Asia Pac segment is encouraging given what Apple has said about emerging markets pressures.
  • Apple is now up 3.7% after hours. Some chip suppliers, such as Skyworks, Qorvo and Broadcom, are up moderately.
  • Apple ended its December quarter with $245B in cash and $115B in debt. Its cash-flow statement says that repurchases of common stock totaled $8.8B during the quarter.
  • Buybacks at work: Apple's diluted share count for the December quarter was 4.77B. That's down from 5.16B a year ago and helped EPS grow 7% in spite of a 5% revenue drop.
  • The company notes its active device installed base hit a new high of 1.4B last quarter. It was previously reported to be at 1.3B as of January 2018.

  •  Original Post

    From Business Insider:
    • Apple is set to release its first-quarter results Tuesday afternoon
    • it is one of the most highly anticipated reports in years
    • strategists point out that despite recent volatility and some uncertainty surrounding the upcoming report, shares are not expected to see a particularly large move
    • Apple shares have fallen 33% since their October high of $233.47
    Apple trade live here.
    Tim Cook, the company's CEO, already warned investors and analysts earlier this month of disappointing results, saying that its revenue will likely be around $84 billion for the holiday period. Previously, the company had expected to post sales of between $89 billion and $93 billion.
    Analysts and investors will be keen to hear at least one new detail that Apple will start releasing with this earnings report: the profitability of its services business, which Apple wants to grow into a $50 billion business by 2020.
    More:
    Here's what analysts are now expecting the company to report on its top and bottom lines, and how those forecasts compare with its year-earlier results:
    • Fiscal first-quarter (FQ1) revenue: $83.97 billion. In FQ1 2018, Apple posted $88.29 billion in sales.
    • FQ1 earnings per share (EPS): $4.17. In FQ1 2018, the company earned $3.89 a share.
    • Fiscal second-quarter (FQ2) revenue guidance: $58.97 billion. In FQ2 2018, Apple saw sales of $61.14 billion.
    • FQ2 EPS guidance: $2.62. In FQ2 2018, the company earned $2.73 a share.
    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.

    Disclaimer: I am Apple Fanboy #3.

    Note: my investment horizon is 75 years. 

Kraken Development III, LLC

Kraken Development III, LLC has four new permits today, January 29, 2019.

My assumption is that Kraken, Kraken Operating, and Kraken Development III are all related.

It appears that Kraken Development III, LLC, came into being to take transfer of the Kaiser-Francis wells in Mountrail County. Kraken Development III, LLC, currently has 75 permits, including the four new permits today.

Bakken operators are tracked here

Ten DUCs Reported As Completed; Kraken With Four New Permits -- January 29, 2019

Active rigs:

$53.231/29/201901/29/201801/29/201701/29/201601/29/2015
Active Rigs64573845146

Four new permits:
  • Operator: Kraken Development III, LLC;
  • Field: Sanish (Mountrail)
  • Comment: Kraken has permits for a four-well Bigfoot pad in 26-153-92
Ten producing wells (DUCs) reported as completed:
  • 34612, 2,629, WPX. Benson 3HZ, Squaw, t1/19; cum --
  • 30052, 3,161, WPX, Good Voice 34-27HF, Spotted Horn, t1/19; cum --
  • 30051, 3,090, WPX, Good Voice 3-27HU, Spotted Horn, t1/19; cum --
  • 34991, 237, Petroshale, Horse Camp West 2TFH, Mandaree, t11/18; cum --
  • 34990, 760, Petroshale, Horse Camp West 2MBH, Mandaree, t11/18; cum --
  • 34231, 66, Crescent Point Energy, CPEUSC Elena 8-22-15-157N-100W TFH, Marmon, t1/19; cum --
  • 34229, 739, Crescent Point Energy, CPEUSC Elena 4-22-15-157N-100W MBH, Marmon, t1/19; cum --
  • 34233, 1,562, Crescent Point Energy, CPEUSC Elena 3-22-15-157N-100W MBH, Marmon, t1/19; cum --;
  • 34230, 668, Crescent Point Energy, CPEUSC Lloyd 8-27-34-157N-100W TFH, Marmon, t1/19; cum --;
  • 34228, 309, Crescent Point Energy, CPEUSC Lloyd 4-27-34-157N-100W, Marmon, t1/19; cum --; 

More To Follow -- January 29, 2019

The Music Page

I was talking with our oldest granddaughter the other night: I am absolutely convinced musicians are doing better these days than ever if measured by a) financial success; and/or, b) fame.

*************************
The Book Page
Two Bombs

The Making of the Atomic Bomb, Richard Rhodes, c. 1996; The 25th Anniversary edition, c. 2012.
Apparently the last chapter of the original book was removed entirely. From a reader at Amazon.com:
A quick note for anyone deciding which edition to buy: The "25th Anniversary Edition" removes the book's final chapter completely, which feels utterly disingenuous and revisionist to me. While Rhodes' "Dark Sun" covers the same ground as the omitted epilogue, this edition ends so abruptly I'm amazed there wasn't an advertisement for the other books in his "nuclear anthology" on the final page. The Kindle version is somewhat flawed; there are quite a few typos and dropped punctuation, and it's not always obvious when direct quotations begin and end. I'd recommend buying one of the older physical editions if you want to read this book as it was meant to be read.
Having just visited Los Alamos, I am in my Robert Oppenheimer phase. LOL.
 ***************
Herodotus

The Landmark Herodotus: The Histories, edited by Robert B. Strassler; a new translation by Andrea L. Purvis, introduction by Rosalind Thomas.
  • introduction
  • nine books
  • twenty-one appendices
  • maps, glossary, and footnotes galore
  • the usual "Landmark" format -- awesome
Yes, I will end up with the five (so far) "Landmark" volumes on my shelf. Hardback copies are out of my reach, but the softcover are doable. The hard cover Julius Caesar, for example, is more than $130. Plus shipping. And they are used copies but apparently in excellent condition.

**********
Camille
 
Provocations, Camille Paglia, c. 2018. Her introduction has a list of those for whom the book is not written, including:
This book is not for those who see women as victims and men as the enemy or who think that women are incapable of asserting their rights and human dignity everywhere, including the workplace, without the intervention and protection of authority figures deputized by the power of the state. 
I wonder how this issue will play out in the Mideast. But I digress.
Wow, wow, wow!

For those who have always been intrigued by Ms Paglia this is a must-read, if not a must-have-on-my shelf. Wow.

I've only been able to page through it, but it looks awesome. It appears she and her editor have "simply" selected seventy-four (74) of her best essays. She is probably as good as anyone when it comes to film and culture. I think she gives Hunter S Thompson a run for his money. 

There are eight sections. Each section has about a dozen essays, each essay two to eight pages long, with the average, it seems, about four pages. 


An example of an essay from each section:
  • Popular culture: "A Love Letter to Joan Rivers."
  • Film: "Women and Magic in Alfred Hitchcock."
  • Sex, Gender, Women: "On Ayn Rand."
  • Literature: "Dispatches from the New Frontier: Writing on the Internet."
  • Art: Millennium Masterwordks: "The Mona List."
  • Education: "Free Speech and the Modern Campus."
  • Politics: "No to the Invasion of Iraq."
  • Religion: "Resolved: Religion Belongs in the Curriculum."
 *****************************
The Art Page

Keeping The Riff-Raff Out -- January 29, 2019

It looks like the NDIC won't be reporting this morning. As of 9:06 a.m. the production data for wells coming off confidential list today have not been posted. No big loss. It appears two of the three wells will be DUCs. The third well, an Enerplus Steel is a huge well:

33969, conf, Enerplus, Steel 147-93-09D-04H-TF, Moccasin Creek, t--; cum --; production data to date:

DateOil RunsMCF Sold
11-20181415513482
10-20181727613032
9-2018264424535
8-201835723108
7-2018923108
Meanwhile:

************************************
Fighting The Unicorn Is Expensive

From https://www.foxnews.com/opinion/texas-towns-environmental-narcissism-makes-al-gore-happy-while-sticking-its-citizens-with-the-bill
Political leaders in a college town in central Texas won wide praise from former Vice President Al Gore and the larger Green Movement when they decided to go “100 percent renewable” seven years ago. Now, however, they are on the defensive over electricity costs that have their residents paying more than $1,000 per household in higher electricity charges over the last four years.
That’s right - $1,219 per household in higher electricity costs for the 71,000 residents of Georgetown, Texas, all thanks to the decision of its Republican mayor, Dale Ross, to launch a bold plan to shift the city’s municipal utility to 100 percent renewable power in 2012.
Look at these numbers:
But while Ross was being lauded far and wide, the residents of his town were paying a steep price.
His decision to bet on renewables resulted in the city budget getting dinged by a total of $29.8 million in the four years from 2015 to 2018. [$30 million / 71,000 / 4 years =  $104/resident/year. Am I missing something? This works out to 30 cents/day. I often make simple arithmetic errors, but that's what I got.]
Georgetown’s electric costs were $3.5 million over budget in 2015, ballooning to $6.3 million in 2016, the same year the mayor locked his municipal utility into 20- and 25-year wind and solar energy contracts to make good on his 100 percent renewable pledge.
By 2017, the mayor’s green gamble was undercut by the cheap natural gas prices brought about by the revolution in high-tech fracking. Power that year cost the city’s budget $9.5 million more than expected, rising to $10.5 million last year, according to budget documents reported by The Williamson County Sun. [$10 million / 71,000 = $140 for the year or 40 cents/day. Again, maybe I'm missing something. This is less than a senior pays for coffee at McDonald's.]
And then this:
Most Texas residents have the ability to choose their electricity provider in a competitive statewide market, leading to electricity prices that are among the lowest in the nation: 18 percent below the national average in 2018, and 48 percent below prices in green energy pacesetter California.
Okay, so let's fact check. From Georgetown, TX: from their own website, the residents pay 11.10 cents/kWh, an incredible, whopping 1% more than the average rate paid by the rest of Texas, 10.98 cents/kWh.

This is exactly how FoxNews loses credibility. Or again, maybe I'm missing something. I quit watching Fox News a long time ago, but I do check in on their website daily.


Next Year, The US Becomes A Net Exporter Of Energy -- EIA -- January 29, 2019

I have no complaints, but the EIA must have a huge "twitter" budget. The agency is a prolific tweeter, posting multiple tweets throughout the day. For every Trump tweet, there must be a dozen or more EIA tweets.

From twitter today:


Enerplus Is Starting To Drill Their "Lizard" Pad

These were new permits February 12, 2018 Three of them have now been drilled to depth but not fracked (#34582 - 23584, inclusive).

The "lizard pad" (see graphic below):
  • 34575, loc, ERF, Tegu, Antelope,
  • 34576, loc, ERF, Lizard, Antelope,
  • 34577, loc, ERF, Cayman, Antelope,
  • 34578, loc, ERF, Gecko, Antelope,
  • 34579, loc, ERF, Basilisk, Antelope,
  • 34580, loc, ERF, Frilled, Antelope,
  • 34581, loc, ERF, Anole, Antelope,
  • 34582, 309, ERF, Komodo, Antelope, t1/19; cum 182K 7/19;

  • DateOil RunsMCF Sold
    5-20191712723591
    4-20193571332678
    3-20193278143845
    2-20193488841709

  • 34583, 639, ERF, Alligator, Antelope, t1/19; cum 198K 7/19;

    DateOil RunsMCF Sold
    5-20194405260682
    4-20194674242768
    3-20192903838839
    2-20193074036751
    1-2019937658

  • 34584, 806, ERF, Crocodile, Antelope, t1/19; cum 212K 7/19;

    DateOil RunsMCF Sold
    5-20194105256549
    4-20193587132821
    3-20193746450108
    2-20193939247093
    1-201918191278
The graphic:



The Kennedy-Miles Wells Have Been Updated -- January 29, 2019

This page will not be updated.

The Kennedy-Miles wells have been updated.

It looks like the wells have all been fracked and all of the wells have been brought back on line.

Huge jumps in production for some wells. One example previously reported.

Now, another example, of one of the original Kennedy-Miles wars: a well that went from 700 bbls/month to over 8,500 bbls/month.
  • 18541, 161, CLR, Miles 1-6H, t11/10; cum 145K 11/18; still off line, since 1/18; just went back on line, 11/18 -- huge jump: 2,300 bbls over 8 days extrapolates to 8,700 bbls/month;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN11-2018823072296248851094453655
BAKKEN10-20180000000
BAKKEN9-201810002140214
BAKKEN8-20180000000
BAKKEN7-20180000000
BAKKEN6-20180000000
BAKKEN5-20180000000
BAKKEN4-2018138550000
BAKKEN3-20180000000
BAKKEN2-20180000000
BAKKEN1-2018163434831478938930
BAKKEN12-201731717694258183718370
BAKKEN11-201730749703270181118110

A Healthy Sign For The Bakken -- Number Of Active Rigs Holding Steady; Slightly Up -- January 29, 2019

A tree falls in the forest ... US puts a "de facto" oil ban on Venezuela ... as far as I can tell, no one noticed. Price of oil pretty much unchanged.

Saudi: pledges deeper oil cuts in February. Meanwhile, US shale production will continue to increase.

Beer. I seldom drink beer. I never drink Budweiser. The company has just give me another reason not to drink Budweiser. They now depend on wind energy to brew their beer. We'll see that in their Super Bowl commercial. 


*************************************  
Back to the Bakken

Enerplus: this Canadian company will focus on North Dakota this year. From The Calgary Herald, Enerplus to spend $600 million on growing North Dakota oil production. Data points:
  • will spend between $565 million and $635 million this year; mid-point: $600 million
  • only 7.5% of ERF budget will be spent in Canada in 2019
  • 80% of ERF budget is allocated to fund a net 42-well drilling program in North Dakota; the rest of the budget will be earmarked for its assets in the northeast US and Colorado
  • ERF: produced an average of 97,800 boepd in the 4th quarter; up from 88,600 boepd in the same period of 2017 
  • let's do the math
    • 80% of $600 million = $480 million
    • $480 million / 42 wells = over $11 million / well
Wells coming off the confidential list today: Tuesday, January 29, 2019: 94 wells for the month; 94 wells for the quarter
34002, conf, Hess, SC-1WX-152-99-0809H-4, Banks, no production data,
34001, conf, Hess, SC-1WX-152-99-0809H-3, Banks, no production data,
33969, conf, Enerplus, Steel 147-93-09D-04H-TF, Moccasin Creek, a nice well; the "heavy metal" wells are tracked here;

Active rigs:

$52.421/29/201901/29/201801/29/201701/29/201601/29/2015
Active Rigs66573845146

RBN Energy: evaluating midstream companies' prospects in the shale era. Archived.
There’s a case to be made that midstream-sector stocks are being undervalued, in part because of the market’s stubborn adherence to an old — and now outdated — dictum that links midstream prospects to the price of crude oil. That maxim, based largely on the belief that lower prices result in declining production and pipeline volumes, has been undone by the Shale Revolution’s proven promise that, thanks to remarkable efficiency gains, production of crude, natural gas and NGLs can increase even during periods of not-so-stellar prices. Despite this new Shale Era rule, the outlook for individual midstream players can vary widely, depending on a number of factors, including their assets’ locations, their exposure to shipper-contract roll-offs and their strategies for growth. Today, we discuss key themes and findings from East Daley Capital’s newly updated “Dirty Little Secrets” report assessing the owners of U.S. pipelines, processing and storage facilities, export terminals and other midstream assets.
A newly issued, 217-page 2019 report examines 27 midstream companies in depth, and drives home the point that (1) production of crude oil, gas and NGLs continues to increase, even when prices sag, and (2)  midstream-sector EBITDA (earnings before interest, taxes, depreciation and amortization) has been growing with production, but that these positive trends are not reflected in midstream-company valuations. As evidence,
This disconnect between rising production in the U.S. and highly variable midstream valuations has left many investors scratching their heads, and led some to avoid midstream equities altogether. East Daley’s analysis suggests that low valuations and investor wariness are tied in part to the difficulty of quantifying the risks posed by specific midstream assets. To tackle this problem, they developed a “Treadmill Incline Intensity” (TII) index for assessing each company’s exposure to revenue declines from legacy pipelines, storage and other midstream assets through 2022 — this exposure might be tied to contract roll-offs, marketing risks, tariff rate cases and/or production declines in less-productive basins. Like the treadmill at your gym, the steeper the incline, the tougher the challenge. And some midstream companies are in for a real workout, with expected EBITDA declines from legacy assets in the 2018-22 period equal to more than 10% or even 15% of their total 2018 EBITDA. (Others are sitting pretty from a TII perspective, with little or no exposure to legacy cash-flow risk.)

Cold In New England -- January 29, 2019 -- Is Global Warming Failing Us?

SOTU address: Fancy Nancy says it's okay for President Trump to give his SOTU address in her house on February 5, 2019, a week later than originally scheduled. Today? Day 4 of the 21-day truce while negotiations on border security continue.

Polar vortex has arrived. Winter storm Jayden hitting New England.

ISO New England:
  • held to around $150/MWh
  • burning coal and oil
Real-time vs day-ahead pricing: link here