Saturday, May 29, 2021

Re-Posting: Disrupted By Technology, But Many Investors And Companies Still Don't 'Get It'. -- Fitzsimmons -- SeekingAlpha -- May 29, 2021

I'm re-posting the link to this SeekingAlpha article -- giving folks a second chance to catch it in case they missed it the first time. I do have it archived.

The subject:

Oil & Gas: Disrupted By Technology, But Many Investors And Companies Still Don't 'Get It'. 

The article was submitted by Michael Fitzsimmons, perhaps one of the best contributors over at SeekingAlpha.

The summary:

  • I have been writing on Seeking Alpha about the technological disruption (i.e. fracking and Hz drilling) of the oil & gas industry for a few years now.
  • That technology disruption has led to a new era of energy abundance in which the world has a huge and secure supply of oil and gas.
  • Yet, from the comments to my articles, I can tell that many investors, in addition to many US O&G company CEOs, still don't "get it".
  • As a result, the O&G sector has been one of the worst - if not THE worst - performing sectors of the entire market over the past 3, 5, and 10 years.
  • Investors (and O&G CEOs) need to be careful to make sure that the next decade is not as bad as the last decade.

Near the end:

So, my advice to energy investors who - from many of the comments I see - are very bullish on their energy holdings is to, well, be careful. 
As I have been mentioning in my comments and in this article, the only reason WTI is over $60/bbl is because OPEC+ is holding 6-7 million bpd off the global market. 
If not for that action, WTI would likely be $10/bbl (or less). 
In addition, don't underestimate the resiliency of US shale producers. Yes, they seem to have new-found religion when it comes to disciplined capital expenditures. However, the top shale producers are printing money at >$60/bbl WTI. 
Note that COP, OXY, and EOG all made more than $1 billion of FCF in Q1. PXD delivered $369 million of Q1 FCF and notes that it just raised $750 million in relatively low-cost (as in 0.55%) short-term (2023) debt. Looks to me like PXD is going to be ramping up production. Will the rest of the shale companies stand idly by and watch PXD make hay while the sun is shinning? Will OXY, which badly needs to pay down its massive debt load, be a spectator or jump-in and pump? 
My bet is that shale oil production will surprise the upside later this year. But I think we have a couple 3-4 months of clear sailing yet. Lastly, the oil & gas producers face ESG and EV headwinds that are not going away, just the opposite - they will be growing stronger every day going forward.

Fitzsimmons advice:

Take advantage of the current and substantial rebound in oil prices. The rest of this year looks good for a rally in oil producers given the economic re-opening, travel, and the stimulus plans. 
But as soon as US exports start to threaten OPEC and Russian market share in Asia, watch out below because many of the 6-7 million bpd of production currently sitting on the sidelines are likely to be put on the global oil market. And that will be reflected (as we have seen in the past...) back on US shale oil producers.

Share Buybacks

On a completely different note but one of the reasons why I re-posted the above article again, this paragraph in the linked article above:

Unfortunately for me (and other COP shareholders), while COP's strategy has been brilliant, and their operational and financial performance excellent, the management team has fumbled the ball on the 1-yard line in my opinion. I say that because CEO Lance has made it clear that COP will be over-emphasizing share buybacks over dividends directly to shareholders. 
As I have noted in my recent Seeking Alpha articles on Pioneer Resources - which has implemented a variable dividend policy, and EOG Resources which recently announced a $1/share special dividend, energy investors don't want companies that are focused on share buybacks and/or acquisitions simply to accumulate (yet more...) oil and gas resources, they want dividend income and companies that are going to deliver total returns to shareholders. 
As a result, COP's stock has lagged that of the more dividend friendly management teams at PXD and EOG. That is because investors likely see no reason for management to build such a massive cash balance in light of last year's one penny dividend increase.

Notes From All Over -- Saturday Mid-Day Edition -- Memorial Day Weekend -- May 29, 2021

GasBuddy: US gasoline demand on Friday, day prior to Memorial Day weekend, closed "the gap." Was 97% of pre-pandemic demand. 

GasBuddy: US gasoline demand on Friday, day prior to Memorial Day weekend, surged 7.4% vs the prior Friday. That was 9.4% over the average of the last four Fridays, to the single highest daily demand since the summer of 2019. Demand was 42.6% higher than the Friday of Memorial Day last year. Question: is this based on volume or dollar sales?

USAF buy: Biden administration will seek to buy 85 Lockheed Martin F-35 jets in the coming fiscal year, tracking a plan the Trump administration outlined last year. 

May Madness

Another hamburger challenge -- trending on Whataburger over at twitter today.

National Burger Day: 2021.

The interesting thing when I first saw this, my first thought: regardless of who wins, what a great country that there are no less sixteen burger joints that almost anyone in America can afford, and can find almost anywhere, though some, may be a bit more regional than others, e.g., White Castle, and Whataburger. 

To me, it really doesn't matter which wins; everyone has his/her own taste, and they are all great. One is not going to lose regardless of which burger joint one visits.

Updating DUCS That Reported 2Q19 -- May 29, 2021

The following wells all came off confidential list in 2Q19.

On May 29, 2021, I went through the 2Q19 list and updated only the wells that were SI/NC at that time. I did not get through the entire list.

The wells:

  • 35840, SI/NCW, XTO, Halverson 13X-33EXH, Alkali Creek, no production data, 
  • 34604, 458, Slawson Wolverine Federal 10-31-30TF2H, Elm Tree, t12/19; cum 63K 3/20; cum 195K 3/21;
  • 34937, SI/NCW, XTO, Darlean 41X-2G2, Alkali Creek, no production data, 
  • 34936, SI/NCW, XTO, Darlean 41X-2C, Alkali Creek, no production data,
  • 34865, 3,080, Hess, BB-Eide-151-95-3328-H-11, Blue Buttes, t7/19; cum 197K 3/21;
  • 34603, 1,034, Slawson, Wolverine Federal 11-31-20TF2H, Elm Tree, t12/19; cum 199K 3/21; 
  • 34935, SI/NCW, XTO, Darlean 41X-2H, Alkali Creek, no production data,
  • 34934, SI/NCW, XTO, Darlean 41X-2D, Alkali Creek, no production data, 
  • 30030, 3,609, Hess, BB-Federal-151-95-0817H-3, Blue Buttes, t6/19; cum 164K 3/21;
  • 34907, 1,942, Hess, SC-JCB-LE-154-98-1720H-1, Truax, t8/19; cum 193K 3/21;
  • 35738, 665, Ovintiv/Newfield, Skipjack 149-98-11-2-12H, Pembroke, t6/19; cum 160K 3/21;
  • 35457, 2,461, WPX, Minot Grady 26-35HWL, Squaw Creek, t6/19; cum 362K 3/21;
  • 35298, 4,634, WPX, Minot Grady 26-35HD, Squaw Creek, t6/19; cum 245K 3/21;
  • 35297, 3,224, WPX, Minot Grady 26-35HZ, Squaw Creek, t6/19; cum 261K 3/21;
  • 34906, 1,755, Hess, SC-JCB-154-98-1720H-9, Truax, t8/19; cum 110K 3/21; four sections;
  •  35318, 5,651, MRO, Gartland USA 31-16H, Reunion Bay, t6/19; cum 378K 3/21;
  • 35299, 2,552, WPX, Minot Grady 26-35HT, Squaw Creek, t6/19; cum 286K 3/21;
  • 34905, 2,323, Hess, SC-JCB-154-98-1720H-8, Truax,  t9/19; cum 210K 3/21; four sections;
  • 35319, 5,922, MRO, Sears USA 21-16TFH, Reunion Bay, t6/19; cum 293K 3/21;
  • 35300, 3,792, WPX. Minot Grady 26-35HC, Squaw Creeky, t6/19; cum 248K 3/21;
  • 31563, 1,137, Slawson, Submariner Federal 5-23-20TFH, Big Bend, t6/19; cum 160K 3/21;
  • 35726, SI/NCW, XTO, Halverson 13X-33DXA, Capa, no production data,
  • 35359, 1,528, Hunt, Halliday 146-92-19-18H-4, Werner, t7/19; cum 186K 3/21;
  • 35320, 8,448, MRO, Reyes USA 21-16H, Reunion Bay, t6/19; cum 353K 3/21;
  • 35301, 2,864, WPX, Minot Grady 26-35HY, Squaw Creek, t6/19; cum 316K 3/21;
  • 35271, 1,176, Petroshale, Bear Chase 2MBH, Spotted Horn, t6/19; cum 305K 3/21;
  • 34904, 1,469, Hess, SC-JCB-154-98-1720H-7, Truax, four sections, t9/19; cum 151K 3/21;
  • 34294, F/A, Petro-Hunt, USA 154-95-36D-35-2H, Charlson, first production, 3/20; t--; cum 76K 3/21;
  • 35582, SI/NCW,  XTO, Halverson 13X-33H, Capa, no production data,
  • 35269, 958, Petroshale, Bear Chase 1MBH, Spotted Horn, t6/19; cum 480K 3/21;
  • 35150, SI/NCW, XTO, Bullberry Federal 24X-2H2, Lost Bridge, no production data,
  • 31562, 2,514, Slawson, Submariner Federal 3-23-20H, Big Bend, t6/19; cum 374K 3/21;
  • 35583, SI/NCW, XTO, Halverson 13X-33CXD, Capa, no production data, 
  • 35584, SI/NCW, XTO, Halverson 13X-33BXC, Capa, no production data, 
  • 34903, 2,177, Hess, SC-Gene-154-98-0805H-1, Truax, t9/19; cum 247K 3/21;
  • 31561, 2,175, Slawson, Submariner Federal 6-23-20TFH, Big Bend, t6/19; cum 229K 3/21;
  • 35585, SI/NCW, XTO, Halverson 13X-33EXF, Capa, no production data,
  • 35154, SI/NCW, XTO, Bullberry Federal 24X-2G, Lost Bridge, no production data,
  • 34902, 2,204, Hess, SC-Gene-154-98-0805H-9, Truax, t9/19; cum 196K 3/21;
  • 34901, 1,512, Hess, SC-Gene-154-98-0805H-8, Truax, four sections, t9/19; cum 118K 3/21;
  • 35586, SI/NCW, XTO, Halverson 13X-33A, Capa, no production data,  
  • 35155, SI/NC-->SI/IAW-->Si/NCW, XTO, Bullberry Federal 24X-2C, Lost Bridge, no production data,
  • 34900, A, Hess, SC-Gene-154-98-0805H-7, Truax, first production, 10/19; t--; cum 202K 3/21;
  • 29800, 301, Zavanna, George 19-30-3TFHXW, Sotckyard Creek, t4/19; bcum 115K 3/21;
  • 34634, SI/A, Slawson, Wolverine Federal 13-31-30TF2H, Elm Tree, although there was production much earlier, first real production, 3/21; t--; cum 28K 3/21;
  •  35302, 964, Hess, BL-Domy-156-95-2932H-6, Beaver Lodge; t5/19; cum 135K 3/20;
  • 35303, 1,179, Hess, BL-Domy-156-95-2932H-7, Beaver Lodge; t5/19; cum 168K 3/21;
  • 35304, 752, Hess, BL-Domy-156-95-2932H-8, Beaver Lodge, t5/19; cum 112K 3/21;
  • 34637, SI/A, Slawson, Wolverine Federal 14-31-30TF2H, Elm Tree, first production, 2/20; cum 199K 3/21;
  • 35306, 925, Hess, BL-Domy-156-95-2932H-10, Beaver Lodge, t6/19; cum 112K 3/21;
  • 35305, 1,259, Hess, BL-Domy-156-95-2932H-9, Beaver Lodge, t6/19; cum 156K 3/21;
  • 35006, 1,207, Hess, CA-Ferguson Smith-155-95-3031H-5, Capa, t6/19; cum 181K 3/21;
  • 35007, 1,760, Hess, CA-Ferguson Smith-155-95-3031H-6, Capa, t6/19; cum 262K 3/21;
  • 34309, 22, Crescent Point Energy, CPEUSC David 10-29-32-157N-99W-LL TFH, Lone Tree Lake, t8/19; cum 128K 3/21;
  • 33875, 760, Crescent Point Energy, CPEUSC David 2-29-32-157N-99W MBH, Lone Tree Lake, t8/19; cum 208K 3/21;
  • 33876, 291, Crescent Point Energy, CPEUSC Bennie 5-20-17-157N-99W TFH, Lone Tree Lake, t8/19; cum 128K 3/21;
  • 34295, SI/A, Petro-Hunt, USA 154-95-36D-35-3H, Charlson, first production, 3/20; t--; cum 16K in 28 days in 3/20; cum 64K 1/21;33877, 350, Crescent Point Energy, CPEUSC David 6-29-32-157N-99W TFH, Lone Tree Lake, t8/19; cum 134K 3/21;
  • 32927, 319 Sinclair, Sinclair State 5-36H, Robinson Lake, t7/19; cum 122K 3/29;spud, November 10, 2018; cease drilling, November 28, 2018; TVD: 10,684.66 feet; TD, 20,480';
  • 34313, SI/NCW, XTO, Arlene Federal 44X-23B, North Fork, no production data,
  •  33880, 266, Crescent Point Energy, CPEUSC Bennie 6-20-17-157N-99W TFH, Lone Tree Lake, t8/19; cum 175K 3/21;
  • 34315, SI/NCW, XTO, Arlene Federal 44X-23F, North Fork, no production data,
  • 30860, conf, BR, Rollacleetwood 11-27MBH ULW, Elidah, no production data,
  • 34985, 1,409, XTO, Roxy 21X-6EXH, West Capa, t5/19; cum 217K 3/21;
  • 34316, SI/NC-->IAW-->SI/NCW, XTO, Arlene Federal 44X-23G, North Fork, no production data, 
  • 34317, SI/NC, XTO, Arlene Federal 44X-23D, North Fork, no production data,

Memorial Day Weekend -- May 29, 2021

Memorial Day: four months into the new administration and the White House is already feeling heat on price of gasoline. White House released presser yesterday that gasoline prices this Memorial Day in line with historical gasoline prices. That may or may not be true. But that's not the perception many (most?) Americans have, and it's all about perception. Having said that, with a glut of crude oil, the real question is not why are gasoline prices "in line" with historical prices, but why aren't they lower? Link here

For the record: I did not vote for higher gasoline prices, although a lot of my neighbors did based on bumper stickers on Volvos and Subarus. 

Even A Caveman Could Read This Graph -- May 28, 2021

Link here

Using a straight edge, draw a straight line on the "goods" line starting from "2015" to "2020" and then continue that line at the same slope through today's date. 

Services: currently about $10 trillion in consumer spending.

Goods: currently about $5.5 trillion in consumer spending. 

Chicago PMI hit an all-time (?) record in most recent reporting period.