Supply - Demand Imbalance -- Covid-19 -- August 8, 2021

Updates

Later, 8:09 p.m. MT:  Sunday night, oil is "selling off." WTI drops below $67. Down over 2%, now trading at $66.80.

Original Post 

Again, the tea leaves keep suggesting ....

... see the recent Devon post.

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Covid-19

The bigger problem is that the guy celebrating his birthday should be setting an example. Completely neutralizes any comments from Dr Fauci regarding Sturgis. 

Demographics -- August 8, 2021

I like this graphic for a number of reasons, link here. Whether it's the MOST important is debatable, but it is something to consider. 

Left to right:

• gen z and younger
• millennial
• gen x
• boomer
• silent (and really becoming more silent every day)

Berkshire Hathaway -- Saudi Aramco -- 2Q21 Earnings

Flashback, Fortune Global 500 rankings, 2020: link here.

Flashback, link here.

Fast forward, 2Q21 earnings, link here. Data points, some are mine, some are from the linked Bloomberg article:

• Covid-19: the gap between the investing class and the non-investing class widens
• be greedy when others are fearful; be fearful when others are greedy
• Buffett is reaping the benefits of the post-Covid economy
• BRK posted its second-highest quarterly profit going back to mid-2009
• the interesting thing: we're not even "out of the woods yet" as they say
• cash: fairly steady at $144 billion; just slightly below its record but that was due to the fact BRK bought back $6 billion of stock, down from $6.6 billion
• still, the $6 billion of repurchases was the fourth-highest amount of stock bought back since Berkshire tweaked its policy in 2018
• six-month buyback total: $12.6 billion
• last year (full twelve months): a record buyback of $24.7 billion of its own stock
  

BNSF:

Berkshire’s railroad, BNSF, ended up posting record quarterly profit helped by its efforts in the past to boost productivity and the economic recovery.

Freight volumes increased across all of its product categories --- consumer, industrial, agricultural and coal. Consumer product shipping has benefited from e-commerce activity and auto shipments, Berkshire said.

“They reported a pretty strong increase in volumes revenue,” Edward Jones’s Shanahan said. “What is really powerful about the BNSF results is that the margins are really strong.” See graphic above, the 9% vs 25%.

Part 2

Finance 101: reading a financial statement -- link here.

Later, we're going to start seeing these terms:

• revenues
• operating income
• EBIT
• EBITDA
• net income

This is important because "generally speaking," one would assume that net income would always be less than operating income, but that is not necessarily true, and in Warren Buffet's case this is incredibly interesting. 

Pay particular attention to BRK's 2Q21 operating income and net income. It will also be interesting to compare these numbers to those of Saudi Aramco which also reported yesterday, Saturday, August 7, 2021.

Part 3 -- Back To BRK

BRK-A / BRK-B = 1500

From CNBC:

• operating income: $6.69 billion, up 21% from $5.51 billion same quarter one year ago
• net income: $28 billion, up 6.8% from same quarter on year ago
• BRK wiped out out all of its 2020 losses and hit a record high in the period
  

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Saudi Aramco

CNBC: 

• Aramco’s net income of $25.5 billion for the quarter compares to $6.6 billion in the same quarter of 2020.
• The result beat expectations, with analysts expecting a median net income of $24.7 billion for the quarter. 
• Saudi state oil giant Aramco reported a stunning 288% increase in net income to $25.5 billion for the second quarter, while maintaining its dividend of $18.8 billion, as big oil benefits from higher prices and a recovery in worldwide demand.
  

Rigs don't matter, following worst timing ever, January - March, 2020, graphic below, note the ever-so-subtle jump in rig count. Saudi records an incredible quarter after slashing rigs from fifty to less than thirty.

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Net Income Vs Operating Income

This is really cool for me. I had never really thought about net income vs operating income all that much. It is what it is, and it all made sense.

Until I saw $28 billion in net income vs $7 billion operating income for BRK vs whatever the corresponding numbers are Saudi Aramco. Very interesting. At least for me.

EBIT vs EBITDA vs net income, link here.

From reddit:

Q: Why do some companies have net income that is larger than EBIT?

A: It IS possible for Net Income to be more than Operating Income. This is because Operating Income does not include discontinued operations (product lines that were shut down) or extraordinary transactions (sales of assets, like if Pfizer sold off a subsidiary or a drug patent).

The answer should have included income from investments and/or discontinued operations.

No Production Data Reported For Any Of The Wells Coming Off Confidential List This Next Week -- August 8, 2021

The wells:

• 37407, conf,  CRL, Gale 14-32HSL Cedar Coulee, no production data,
• 22653, conf, WPX, Charles Blackhawk 31-30HZ, Heart Butte, no production data,
• 37842, conf, WPX, Charles Blackhawk 31-30HDL, Heart Butte, no production data,
• 37941, conf, CLR, Bang 3033H1 Cedar Coulee, no production data,
• 37406, conf, CLR, Gale 13-32H1 Cedar Coulee, no production data,
• 37405, conf, CLR, Gale 12-32H, Cedar Coulee, no production data, 

The CLR Cedar Coulee Gale wells are tracked here. Graphic updated.

Wells Coming Off The Confidential List This Next Week -- August 8, 2021

Monday, August 16, 2021: 8 for the month, 19 for the quarter, 199 for the year:
37407, conf,  CRL, Gale 14-32HSL,
22653, conf, WPX, Charles Blackhawk 31-30HZ,

Sunday, August 15, 2021: 6 for the month, 17 for the quarter, 197 for the year:
37842, conf, WPX, Charles Blackhawk 31-30HDL,

Saturday, August 14, 2021: 5 for the month, 16 for the quarter, 196 for the year:
37941, conf, CLR, Bang 3033H1,

Friday, August 13, 2021 4 for the month, 15 for the quarter, 195 for the year:
None

Thursday, August 12, 2021 4 for the month, 15 for the quarter, 195 for the year:
None.

Wednesday, August 11, 2021: 4 for the month, 15 for the quarter, 195 for the year:
37406, conf, CLR, Gale 13-32H1,

Tuesday, August 10, 2021 3 for the month, 14 for the quarter, 194 for the year:
None.

Monday, August 9, 2021: 3 for the month, 14 for the quarter, 194 for the year:
37405, conf, CLR, Gale 12-32H,

Sunday, August 8, 2021: 2 for the month, 13 for the quarter, 193 for the year:
None.

Satruday, August 7, 2021: 2 for the month, 13 for the quarter, 193 for the year:
None.