Notes On A Monday Night -- June 22, 2020

Corona virus pressure? Dak Prescott signed. Regular readers know my thinking on this one. This is a one-two contract story, so it's not over yet. Prescott signed a $31.4 million contract "under the franchise tag." He must report to training camp, or risk being fined. He and the Cowboys are still working on a long-term contract. Links everywhere; here's one (paywall). Same story, no paywall.

As it stands now, Dak is guaranteed $31.4 million to play one year, 2020 - 2021. He and the Cowboys have until July 15, 2020, to sign a longer term contract. If they can't come to an agreement, we will go through this again in 2021.

So, when will the NFL begin playing before full stadiums? My hunch: the day after the November, 2020, general election.

MLB: sounds like no one cares. 

Prop 65: Bayer, Roundup, cancer -- Bayer wins ruling blocking warming in California. Completely unexpected. 

Did anyone else catch this, or did corona virus drown out the news: NASDAQ closed at a record high, no doubt propelled by the likes of AAPL. NASDAQ up 1.11% to 10,056.48. Link here.

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Warren Buffett

For background, see these posts:

• June 10, 2020;
• June 9, 2020;
• June 8, 2020;
• the Investor's Business Daily article, June 8, 2020;

Since that story was posted on June 8, 2020, this imaginary portfolio:

• the four airline holdings mentioned increased from $2.7 billion to $2.942 billion, a 9% increase;
• meanwhile, AAPL holdings in this imaginary portfolio increased from $2.7 billion to 3.845 billion, a 42% increase in value (between March 24, 2020, and June 22, 2020);

 And, of course, the real question: would you rather be holding the four airlines or AAPL stock in your portfolio today?

This spreadsheet is unlikely to make much sense to anyone. I am posting it for the archives. 

The Buffett hypothetical spreadsheet, airlines vs AAPL:

	Airline	Shr Price: 3/31/2020	Dollars: 3/31/2020	Shares	Shr Price: June 22, 2020	Total: June 19, 2020
	DAL	28.53	675,000,000	23,659,306	29.45	696,766,562
	UAL	31.55	675,000,000	21,394,612	36.47	780,261,490
	AAL	12.19	675,000,000	55,373,257	14.64	810,664,479
	SWA (LUV)	35.61	675,000,000	18,955,350	34.54	654,717,776
			2,700,000,000			2,942,410,306
	AAPL	254.29	2,700,000,000	10,617,799	362.10	3,844,704,865
						902,294,558
						2,942,410,306
						30.67%
March 24, 2020		224		10,617,799		2,378,386,881
6/19/2020		362.10		10,617,799		3,844,704,865
						1,466,317,983

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All Caught Up

I'm calling it a night. Nights like these come only once in a blue moon, as they say. I am all caught up.

I have cleared my desk; everything is scanned, everything is thrown away or electronically filed. I no longer file hard copies but for some some very, very rare exceptions. Every bill has been paid, including bills that are in sealed envelopes but won't go out until July 1, 2020. I could pay all bills electronically but there are a few I like to pay the old-fashioned way.

There is nothing on television worth watching. I'm not interested in any of my DVDs. Our cars have all passed annual inspection and are registered for another year. Every member of the extended family is home or if not  home, where they want to be.

It's only 9:45 p.m. I don't go to bed until after midnight. Three hours of bliss. And how will I spend it?

Listening to Charlie Rich. I will start with Charlie Rich. From there, who knows where I will end up.

There Won't Be Anymore, Charlie Rich

CLR With Four New Permits On Indian Hill; WTI Settles Above $40 -- June 22, 2020

Active rigs:

$40.46	6/22/2020	06/22/2019	06/22/2018	06/22/2017	06/22/2016
Active Rigs	12	64	65	59	29

Four new permits, #37658 - #37661, inclusive --

• Operator: CLR
• Field: Indian Hill (McKenzie County) 
• Comments:
• CLR has permits for four Harrisburg wells in NENW 27-153-101, Indian Hill, all 1625' FWL and most about 450' FNL

An Enerplus well was resurveyed:

• 36275, Sturgeon, is correctly in SWNE 03-148-94 (was incorrectly listed as SWNE 03-149-94); this well is tracked here;

Notes From All Over -- Early Afternoon Edition -- June 22, 2020

Apple Special Event streaming now: https://www.apple.com/apple-events/event-stream/. One may need to be on Apple browsers to access.

1Q20 hedge fund top 30 picks: link here. You can easily scroll through #30 to #26, but to get to the top five you need to listen to a video. AAPL, by the way, was #10. Here they are:

5. Alphabet (GOOG) -- unchanged since previous quarter (shows up in the linked list above at #7; there is an error somewhere).
4. Alibaba -- unchanged since previous quarter
3. Facebook (fell one spot since previous quarter)
2. Microsoft (a huge influx since previous quarter)
1. Amazon -- huge.

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.

NFLX: wow, all the attention was on AAPL. But there was more! NFLX "broke out." NFLX was up $14.32, up 3.16% for the day, closed at $468.04, with an intra-day high of $468.59. I first talked about Netflix as the next big thing on March 21, 2013. Wow, what a ride. NFLX was #16 among hedge funds, 1Q20, see above.

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Apple Special Event
WWDC 2020

Generally these events are live and streaming.

This almost looks taped.

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iPhone / IOS 14

App Library: organizing the apps

• all app pages are there but can be hidden
• IOS automatically organizes the app icons
• but these are only suggestions, and one can move them around

Widgets:

• new designs; new sizes;
• widgets can be easily moved to iPhone home page (among all the app icons)
• Smart Stack: AI will sort

Picture-in-picture video

• continuous movie watching while using the iPhone

Siri: new update.

• old Siri: completely obscures home page
• new Siri: no longer obscures other pages when being used

Yes, this WWDC 2020 is taped. 

Siri

• better dictation
• translations improved
• new app called: "Translate"
• operates completely off line so conversation is kept private
• conversation mode in landscape mode

Messages:

• memoji and groups
• conversations
• pin most important conversations; keeps them at the top
• groups: AI will bring order to chaos
• will help with "Family" group messages
• looks a lot like "Meeting" or "Zoom"

Maps

• new "Maps" rolled out earlier this year
• to more countries (UK)
• introduces dedicated cycling app to maps; limited to major cities worldwide
• previously car, public transportation, walking
• introduces EV routing; will route to compatible stations

CarPlay

• available in almost every new car sold
• re-thinking car keys
• digital version of car keys
• car can be locked/unlocked by iPhone; keys can be left at home;
• can turn off car remotely through iCloud;
• can share electric keys; let anyone drive one's car by "sharing" electronically
• 2021 BMW 5-series: first to support; next month;
• working on standards with industry groups

App Store

• "App Clips" -- small, quick to load,

***********************

iPad OS 14

All about the Apps

Widgets: similar to IOS 14

Photo organization improved

• same approach used to organize notes, calendar, music, etc

Siri:

• again, compact design
• won't block out entire screen when being used

Search:

• much improved
• looks like google but can be launched from any screen, while using any other app

Pencil:

• goal: make "writing" as efficient as "typing"
• "Scribble" -- huge 
• wow: once one picks up an Apple Pencil they don't like to set it down; Apple took that and ran with it; can use Apple Pencil / handwriting everywhere;

******************************

Air Pods 

Air Pods will route to any audio source

Spatial audio: immersive surround-sound experience: incredibly sophisticated; one needs to see the video;

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I'll Stop Here

13:03 CDT: AAPL: market is fairly flat, slightly green. AAPL is up an amazing $6.80, up almost 2%, now trading at $356.60 well into the WWDC presentation. This suggests analysts liked what they saw.

13:24 CDT: AAPL: hit another intra-day all-time high -- $357.67. Just before the announcement that Apple will make their own chip.

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macOS: Big Sur

macOS: Big Sur
biggest change since introduction of macOS X;

******************************

Big Changes

Tim Cook takes the stage again.

A huge leap forward: fourth major change -- transitioning to Apple's own chip.

Renewable Energy In ISO New England -- June 22, 2020

Electricity is relatively inexpensive in New England today, but look at the contribution being made by renewable energy. It's almost embarrassing considering how much resources, time, money, advocacy have been poured into renewable energy over the years decades. And look how absolutely steady, dependable nuclear energy is.

Five percent -- that's the contribution being provided by renewable energy -- in the big scheme of things, is a rounding error, in the sense that if "renewable energy" somehow disappeared today, natural gas could fill the void, and probably at a cheaper rate once all the costs are factored in.

For ISO New York, the renewable energy contribution is even more laughable. In this case, "wind" energy really is a rounding error, coming in at 0.12% contribution. Not 12%; not 1.2% but 0.12%. That's almost not even measurable. Thank goodness for hydroelectricity, I guess. And thank goodness Amazon, Inc, didn't build in Long Island -- the electricity demand would have been huge and prices would have gone up significantly. AOC knew what she was doing when she stopped Amazon, Inc, from coming into her neighborhood.

******************************************

The Financial Page

Reader Asks How "Hedging" Might Affect Mineral Owners' Royalties -- June 22, 2020

Updates

Later, 11:25 a.m. CDT: from a reader, see comments --

To get WTI future contract price, go to Marketwatch upper left, click on" Oil," scroll down and there are WTI contract prices for the next 12 months. Another link was on my "Data Links" page: CME. 

Original Post

A reader asked:

When oil companies hedge oil futures, do the mineral owners benefit from this, or do they get market price for that month?

At risk of looking like the fool I am, this was my reply, not ready-for-prime time:

Mineral owner royalties are based on the price the seller (the operator, in this case) gets for selling his/her oil to the buyer (usually a refinery).

Nearly 100% of oil sold to refiners is sold on a contract drawn up six months earlier between the seller and the buyer. The seller contracts to physically deliver a certain amount of oil to the refiner on a specific date for a specific price regardless of what the market is doing on the day of delivery.

Some operators, notably, according to public statements, like CLR, do not hedge. They simply contract to take the price of oil on the day the oil is delivered. Most sellers use hedges to protect against wild swings. I assume that CLR contracts with a refiner to deliver a certain amount of oil on a specific day for the "official" selling price that day (as determined at the hub: WTI, for example, at Cushing; I believe, Bakken is set at the Clearbook hub in Minnesota). It can be a big risk for both the buyer and seller to enter into a contract not knowing the price that will be paid. Perhaps those contracts also set limits on whether the buyer has to actually take delivery if the price is too high.

The WTI price seen in the TV crawler I believe is the "spot price" for that day. One can find the "price of oil" in the six month contracts -- I used to post those once in a while, but I've long forgotten where to find them. I'm sure it's not hard to find. It's those contracts that lead to articles in the mainstream financial pages about backwardation and contango.

But bottom line: mineral owners royalties are based simply on what the seller receives for his oil. It doesn't matter directly whether hedges were involved or not. Don't take that out of context. 

The NDIC in its monthly "Director's Cut" does provide the "average" price of oil that North Dakota operators received for light, sweet ND oil (Bakken oil) during that month. This number should be based on actually selling prices supplied by the operators. The state would be very, very interested in accurate data since that determines the state's royalties, also.

At least that's how I understand it. 

I'm sure the reader would appreciate corrections and comments to my reply.

Earlier today, just coincidentally, I posted this link at Bloomberg via Rigzone: the big oil turnaround. It begins:

Every day, traders in London congregate at 4 p.m. to buy and sell North Sea oil for half an hour. The window, as it’s known in the industry, is where competition between the most powerful players in the market sets the price of Brent crude.

Two months ago, every trader wanted to sell cargoes and none were keen to buy. Now the window has transformed into a bull market, where bids outnumber offers 10 to one and prices are surging.

I assume, but the article did not say, that the price agreed to during the 4:00 p.m. to 4:30 p.m. period in London is the official selling price for Brent the following day. From that number, contracts can then be drawn up for deliveries in the future -- six months out, for example -- as well as provide an official selling price for oil physically delivered the next day if not otherwise specified in a contract. Obviously, the difference between the "official selling price" and the contract price can further affect paper losses and profits. 

I assume the same thing happens in New York (the NYMEX) as in London.

I assume it's a bit like the stock market. All day long an equity is bought and sold based on what buyers and sellers agree to, but at the end of the day, the closing price becomes the "official" price fo that equity for that day. I don't know, but perhaps oil is traded back and forth on the spot market all day long, but then at the end of the day, the London group sets the daily Brent price so that everyone in the game is working from the same number.

1Q20

Note: this is, hands down, one of the most boring things I to do each quarter. I doubt anyone really looks at it but the day I quit doing this will be the day I miss posting something important. The word "important" is used loosely. Very loosely.

This is linked at the top of the sidebar at the right during earnings season. After earnings -- pretty much after Whiting and Apple posts their earning, this post will move back into obscurity.

Calendar.

Disclaimer: this is not an investment site.

Earnings -- 1Q20

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. If this is important to you, go to the source. There will be content and typographical errors on this page. If something looks wrong, it probably is.

THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK

Wow, This Month Seems To Be Moving Slowly -- Feels Like We've Been In June Forever -- And We Have Another Week To Go -- June 22, 2020

So, white collar crime does pay: link here --

The U.S. Supreme Court on Monday placed limits on the Securities and Exchange Commission's practice of forcing defendants to surrender profits obtained through fraud as part of its enforcement of investor-protection laws in federal courts, but stopped short of disallowing such action. [I assume it's either a violation of "cruel or unusual punishment" and/or illegal seizure of property and/or interference with the pursuit of happiness.

Can you spell SUV?: EIA says motor gasoline accounted for almost half of US petroleum consumption in 2019. Twitter link here. EIA link here.

The big turnaround: from negative prices to a bull market. Bloomberg via Rigzone. With OPEC basket below $40, I suspect some folks have trouble seeing this as a bull market.

Vitol estimates that oil demand is rising by about 1.4 million barrels a day every week in June -- that’s roughly equal to adding the whole consumption of the U.K. to the market, weekly.

Steel: US Supreme Court upholds Trump's tariffs on steel imports. Link here. 

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.

OPEC basket, link here: $39.45.

Futures: early last evening Dow futures were down about 300 points. All night long the headlines: Dow futures down due to spike in number of cases of corona virus. Sometime around midnight, the Dow futures flipped, up almost 300 points. Now, Dow futures are up about 125 points.

• AAPL: down $2.01 at the close on Friday, AAPL is up about $2.40 in pre-market trading

Running out the clock: US attorney general Barr says "Durham's FBI probe" might have some "developments" by the end of summer. No link, Story everywhere

Pipeline delay: recently in the news. Now this:

Dominion Energy Inc. has asked FERC for two more years to complete the beleaguered $8-billion Atlantic Coast natural gas pipeline, which is now expected to enter service in early 2022.

Running out of storage? The number of tankers waiting off China's coast to off load oil is increasing. Apparently they've simply run out of onshore storage. Link here.

The congestion illustrates the explosion in purchases by Chinese refiners as the country re-opened after shutting down to contain the coronavirus. The rush for cheap crude is overwhelming port infrastructure and storage amid an influx of cargoes from the Middle East, Latin America, Russia and West Africa.

China's crude oil inventories soar to new high. S&P Global Platt. Since some of the numbers don't make sense to me, recommend that you go to the link. If the numbers are correct and if I'm reading them correctly, China's seaborne crude oil imports increased by almost 40% month-over-month:

• total crude oil in storage: 14.3 million b/d in June
• domestic production: 3.9 million b/d over the first-half of 2020
• imported 11.34 million b/d last month (May, 2020) -- an historical high
• seaborne crude arrivals may hit 14.16  million b/d in June
• a new record high
• follows 10.21 million bbls arriving by sea in May 
• some of the June deliveries won't actually unload until July due to port congestion;

India: has also run out of crude oil storage. 

Best news: I didn't watch any television over the weekend, except a bit of golf, so I'm sure I missed it, but surfing the net, I did not come across any book reviews of John Bolton's book. I don't even know the title of the book. And don't write to tell me. Ignorance if bliss. I did see a headline that NPR faked a story / photograph. So, what's new?

No television: as noted, I did not watch any television except a bit of golf; saw the re-airing of some PGA tournament. Apparently the tournament survived despite one player testing positive for corona virus. Hope he's doing well.

Surfing the net: lots of shootings across the country. Mostly in cities with strong anti-gun laws, it appears. One common theme: no witnesses.

Corona virus in the Mideast: both Dubai and Saudi Arabia have now relaxed restrictions due to the virus.

North Dakota online sales tax: totaled about $43 million over the first two years that such taxes were authorized. $43 million over two years. To put that in perspective, Legacy Fund deposits will total that much each month if price of oil gets back to "normal."

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Back to the Bakken

Active rigs:

$39.50	6/22/2020	06/22/2019	06/22/2018	06/22/2017	06/22/2016
Active Rigs	12	64	65	59	29

Wells coming off confidential list over the weekend, today:

Monday, June 22, 2020: 54 for the month; 199 for the quarter, 426 for the year:

• 37055, drl/drl, CLR, Angus Federal 12-9H,  Elm Tree, 

Sunday, June 21, 2020: 53 for the month; 198 for the quarter, 425 for the year:

• 37056, drl/drl, CLR, Angus Federal 11-9H2, Elm Tree, 
• 36875, drl/TASC, Equinor, Jack Cvancara 19-18 4H, Alger,
• 35958, SI/A, Whiting, Arndt 14-5-3XH, Sanish, t--; cum 75K 4/20;
• 35676, SI/A, CLR, Boston 8-25H, Brooklyn, t--; cum 59K 4/20;

Saturday, June 20, 2020: 49 for the month; 194 for the quarter, 421 for the year:

• 37057, drl/drl, CLR, Angus Federal 10-9N, Elm Tree,
• 36876, drl/TASC, Equinor, Domaskin 30-31 9H, Alger, no production data,
• 35668, SI/NC, Zavanna, Stranger 28-21 4H, Poe, t--; cum 139K 4/20;

Friday, June 19, 2020: 46 for the month; 191 for the quarter, 418 for the year:

• 37058, drl/drl, CLR, Angus Federal 9-9H, Elm Tree,
• 35677, SI/A, CLR, Boston 9-25H1, Brooklyn, 42K in 52 days;
• 35674, SI/A, CLR, Boise 0-24H1, Brooklyn, 38K in 54 days;

RBN Energy: FERC prepares to slash the liquids pipeline rate index.

On Thursday, June 18, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) to reset the index that’s used to make annual changes to the rate ceilings for interstate pipelines that transport crude oil, refined products, and other hydrocarbon liquids. Every year, the highest rate an indexed oil pipeline can charge goes up or down — almost always up — using the FERC index. The commission’s new proposal, which would become effective in July 2021, follows an already-approved index adjustment that will take effect a week from Wednesday, on July 1. Taken together, the two changes would reduce the maximum annual increase in the rate ceiling from more than 4% now to less than 1%, which could have a major impact on liquids pipeline owners. Today, we discuss the NOI, the meaning of the pipeline index, where it came from, and where it might be headed.