Monday, July 6, 2020

Notes From All Over -- The Early Evening Edition -- July 6, 2020

A series of unfortunate events, with apologies to Ms Lemony Snicket. I don't know if anyone other than ZeroHedge is following this story but it's getting very, very interesting.

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. 

The market: after another huge day on Wall Street, futures are in the green tonight. But this early in the evening is usually a "carry-over" from the close today and will have little "impact"on tomorrow's market. But it's still nice to see. Good luck to everyone.
  • AAPL: not only held today's gains after hours but added another $1.64/share
  • MSFT: ditto
  • BRK-B: ditto  
  • IMUX: ditto
  • AMZN: ditto, but even more so -- LOL
Clearing out the in-box:
Buffett and natural gas. Analysis continues:
"Warren Buffett's bet is a midstream buying signal. Berkshire Hathaway's long-awaited pandemic-era purchase in a seemingly difficult business might seem  like odd time, but there is good logic behind it -- WSJ, July 6, 2020, "Heard On The Street."
This is really pretty cool. Two items.

First: this is really, really quite interesting. Warren Buffett has been looking for an acquisition for quite some. What better time to look at energy? Energy prices are incredibly low but the tea leaves suggest this will only be temporary. If you look at the map of his Berkshire Energy holdings, Buffett was "well-covered" in the west, southwest, and midwest. His big gap was on the east coast.

Buffett's been following the Atlantic Coast Pipeline story for quite some time and knows that the board rooms over at Dominion and Duke Energy were probably well-divided on whether to continue with that "white elephant," the Atlantic Coast Pipeline.

Aha! That's it. Maybe Dominion would like to get rid of that "white elephant." But how to do it? Warren comes up with a solution and gives Dominion a phone call. The rest is history. Love it.

Second: I've read any number of articles on this story since it was announced over the weekend, writers with their analysis. Very informative, very entertaining. But there is one word I've not yet seen used by any writer when discussing this story.

Years ago --- LOL, years ago? -- shoot, it was decades ago, I took a Forbes course on investing, one of the best things I ever did, that was probably back in 1983. One of the words I learned from the course: moat.

In this case, "moat" means any business endeavor ... from Investopedia:
What Is an Economic Moat?
The term economic moat, popularized by Warren Buffett, refers to a business' ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. .July 7, 2019.
LOL. Connecting the dots. Amazing.

Warren Buffett followed his own advice several years ago when he bought the Burlington Northern Railroad, perhaps the classic example of a "moat."

Now, again, with a $10 billion acquisition, Warren Buffett is following his own advice. In the current political environment, I can't think of any sector with a bigger economic moat than the crude oil and natural gas pipeline sector.

Absolutely brilliant. And anyone who thinks there won't be continued growth along the Atlantic coast from North Carolina to Virginia to DC isn't paying attention.  AOC and New Yorkers may not want growth but folks south of the Mason-Dixon Line certainly do.

BR With Eight New Permits -- July 6, 2020

Active rigs:

Active Rigs1158655731

Eight new permits, #37693 - #37700, inclusive:
  • Operator: BR
  • Field: North Fork (McKenzie)
  • Comments: 
    • BR has permits for two 4-well pads:
      • Lone Beaver, SWSW 8-149-96, ~ 800' FSL and 575' FWL in North Fork,
      • Ole, SWSE/SESW 20-149-96, 600' FSL and 1375' FWL in North Fork;
  • Two separate pads; the wells on each of these new pads will be drilled from the north, to the south

Notes From All Over -- The Harvard Edition -- Mid-Afternoon -- July 6, 2020

Harvard: $50K / year and all on-line. The good news: a computer only costs $1,000 and free wi-fi at Starbucks -- once they open again. LOL.

DAPL: to be drained. I assume pipes rust. In reply, from a reader:
The oil that has flowed through the pipeline has coated the interior surface of the steel. This pipeline, if left drained and closed, would last for several years before a rust action would occur. Also, see comments.
Analysis continues: Berkshire Hathaway, Dominion, Duke. Motley Fool here:
  • Dominion (D) becomes a much safer retirement holding per Motley Fool;
  • Dominion (and Duke) will quit dumping good money after bad money on a proposed $8 billion natural gas pipeline; always a good thing to quit losing money;
  • Dominion's balance sheet improves;
  • Dominion sees $3 billion in after-tax proceeds: will be used to re-purchase stock
  • D's market cap: $63 billion
  • D will reduce annual dividend to reflect new reality
  • payout will improve company's payout ration from 85% to 65%, more in line with industry leaders
  • dividend expected to drop from $3.76/share to $2.50 share
  • 2020 operating earnings will likely fall to $3.50 vs $4.50/share
  • D: drops almost 10% on news; now trading at $75
Analysis continues: "Warren Buffett's bet is a midstream buying signal. Berkshire Hathaway's long-awaited pandemic-era purchase in a seemingly difficult business might seem  like odd time, but there is good logic behind it -- WSJ, July 6, 2020, "Heard On The Street."

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.

D: wow, this is a tough one. I'm fully invested, and I do have some Dominion in the portfolio but would like more at this price. I have gone through the portfolio and there is absolutely nothing I would like to sell to raise cash for additional Dominion. What a perfect situation to be in. So, we'll see. 

DAPL Shut Down -- July 6, 2020


July 8, 2020: owner-operator says the company won't shut down / won't empty DAPL.

Original Post

Back to CBR. Great news for Warren Buffett and the railroads:

I don't recall what I last said about this but I do recall thinking that based on "evidence," the judge had no choice but to make this decision. But, wow, this is huge for Warren Buffett.

US pipelines becoming unbuildable -- Bloomberg.
To be an energy superpower, U.S. oil and gas requires a suitably gargantuan pipeline network that stretches for millions of miles. The country’s ability to expand that infrastructure is being tested like never before.
In what’s possibly the biggest victory yet for an environmental movement targeting the conduits carrying fossil fuels, Dominion Energy Inc. and its partner Duke Energy Corp. said Sunday they’ll no longer pursue their $8 billion Atlantic Coast natural gas pipeline after years of delays and ballooning costs.
It’s the third such project this year to be sidelined or canceled altogether amid mounting opposition to development of coal, oil and gas. Armed with experienced lawyers and record funding, environmental groups are finding enormous success blocking key pipeline permits in court. The keep-it-in-the-ground movement has increasingly turned its attention to the pipes, rather than the wells themselves, because they require various federal and state permits, which, for the most part, can be more easily litigated.
Texas and exports: looking better and better. 

Notes From All Over -- The "Market Breakout" Edition -- July 6, 2020


Later, 11:49 a.m. CDT: wow,
  • IMUX: up over 14%; up $1.79; now trading just above $14. Woo-hoo.
  • CLR: down almost 6%; down about a dollar; trading at $17.28;
Later, 10:45 a.m. CDT: wow,
  • APPL is now up almost $12, up over 35, now trading at $375.77 which is an all-time new record. Woo-hoo.
  • IMUX: up over 13%; up $1.65; now trading just below $14. Woo-hoo. 
Original Post
The market: here we go again. So what moved the market? Berkshire Hathaway buying Dominion natural gas storage assets? Tesla surging on deliveries? Market is open:
  • AAPL: trading at just under $373; up about 2.5%; up $8.56; market cap: $1.616T
  • IMUX: trading near $13; up over 4%; about about 50 cents;
  • NFLX: trading just over $481; up about a percent; up about $5
  • AMZN: trading near the "3-handle" -- that would be 3,000; surging; up over 3%; up almost $100/share; market capt: $1.486T;
  • TSLA: won't even look. LOL.
  • MSFT: trading at $210; up almost 2%; up $3.64; market cap: $1.591T
NASCAR: "lowest ratings ever"? Being tweeted. I don't know. I doubt it. I didn't watch. Getting too political. Other sources suggest NASCAR ratings are up. If true, it's probably because NASCAR and PGA are the only live sporting events on television right now. Minor exceptions of course: arm wrestling; corn bag toss; dodge ball are now being televised.

Almost forgot -- 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.


Well, duh:

So, the protesters got a two-fer:
  • shut down cities during the demonstrations; and,
  • raise specter of further shutdowns as number of cases surge

Sixteen Wells Coming Off The Confidential List -- July 6, 2020

Renewable energy: there's no "there" there. ISO New England -- this morning -- 92% natural gas and nuclear; 5% renewable energy.

OPEC basket, link here, $42.93.

Friends again: Saudi Arabia and Kuwait restart production at shared oil field. Link here. So, while Saudi Arabia bullies rest of OPEC countries to cut production, it re-starts a huge field. Okay.

Back to the Bakken

Active rigs:

Active Rigs1158655731

Sixteen wells coming off confidential list --

Monday, July 6, 2020: 25 for the month; 25 for the quarter, 470 for the year:
  • 35974, drl/NC, XTO, Skarpsno Federal 22X-20F, Haystack Butte, no production data,
  • 31521, SI/A, CLR, Steele Federal 6-24H, Banks, t--; cum 179K in less than five months; 57K months;
  • 31520, SI/A, CLR, Steele Federal 5-24H1, Banks, t--; cum 118K in less than five months; 
Sunday, July 5, 2020: 22 for the month; 22 for the quarter, 467 for the year:
  • 37043, drl/NC, CLR, Simmental Federal 13-16HSL2, Elm Tree, no production data,
  • 36428, SI/A, Whiting, Lindseth 11-1-2H, Sanish, t--; cum 106K over five months;
  • 35973, drl/NC, XTO, Skarpsno Federal 22X-20B, Haystack Butte, no production data,
  • 32434, drl/NC, MRO, Stillwell 21-13H, 33-025-03101, Lost Bridge, first production, 8/20; t--; cum 215K 9/20; fracked, 8/19/20 - 8/25/20; 7.9 million gallons of water; 81.2% fresh water by mass; 6.4% produced water by mass; production; note 90K in first full month of production; 215K in three months. Early in the boom, EURs of 300K were the expected.
Saturday, July 4, 2020: 18 for the month; 18 for the quarter, 463 for the year:
  • 37044, drl/NC, CLR, Charolais South Federal 2-10HSL Elm Tree, no production data, 
  • 36819, drl/NC, WPX, Omaha Woman 24-13-12HY, Squaw Creek, no production data,
  • 35972, drl/NC, XTO, Skarpsno Federal 22X-20E, Haystack Butte, no production data,
  • 35694, SI/A, Oasis, Joplin 5397 42-32 6T, Banks, t--; cum 70K over four months;
Friday, July 3, 2020: 14 for the month; 14 for the quarter, 459 for the year:
  • 37045, drl/NC, CLR, Simmental Federal 12-16H, Elm Tree, no production data,
  • 36820, drl/NC, WPX, Omaha Woman 24-13-12HC, Squaw Creek, no production data,
  • 35971, drl/NC, XTO, Skarpsno Federal 22X-20AXD, Haystack Butte, no production data,
  • 35693, SI/A, Oasis, Joplin 5397 42-32 5B, Banks, t--; cum 137K over five months;
  • 35692, SI/NC, Oasis, Joplin 5297 42-32 4T, Banks, t--; cum 70K over four months;
RBN Energy: rulings on KXL permit cloud other oil and gas pipeline projects.
The demand destruction caused by COVID-19 hasn’t only hurt producers and refiners; it’s also slowed the development of a number of planned midstream projects. In fact, the only multibillion-dollar crude-related project to reach a final investment decision (FID) during the pandemic is TC Energy’s Keystone XL, which in late March won financial backing from Alberta’s provincial government. But Keystone XL soon hit another snag, this time in the form of U.S. district and appellate court rulings that vacated the project’s Nationwide Permit 12 for construction in and around hundreds of streams and wetlands along the U.S. portion of the pipeline’s route in the U.S. More important, the courts also put on ice — at least for now — the use of the general water-crossing permit for other new oil and natural gas pipelines as well. As we discuss in today’s blog, that could result in delays and legal challenges to dozens of projects that midstreamers and their counterparties have been counting on.
For midstream companies, the process of advancing a pipeline, an export terminal, or another major project is often fraught with challenges. For one, there’s the competition among midstreamers to line up the long-term commitments generally needed to secure financing — a factor that has always been a hurdle for large new midstream projects. Then there’s the matter of locking down the various regulatory approvals and permits that the project will need — again, always a stumbling block that has only increased in significance over the years. Today, environmental, landowner, and stakeholder challenges to pipeline projects, even from the states they traverse, have become very difficult. For example, Williams has failed to convince New York regulators that its Constitution Pipelien project passes environmental muster. And even when midstream developers do get the approvals and permits they need from administrative agencies, there’s always the very real possibility that there will be court challenges that could drag on for years.