Prognostications -- January 13, 2022

Today: EIA forecasts crude oil prices will fall in 2022 and 2023. 

Yesterday:

For all that talk of $100-oil and shortage of oil this summer, I just don't see it. Most credible analysts suggest the price of oil is currently at its peak and will gradually drop back to the $70 - $80 range in the near term, and back to $70 - $75 in the longer term (2023).

Link to Irina Slav, by this summer, the US will producing almost 2 million bopd more than needed:

From the EIA:

From an earlier post: 

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Take On Me

Take On Me, A-Ha

Rig Counts Flat -- January 13, 2022

Link here.

The thing is this: rigs counts are not increasing despite $80-WTI, and, the number of DUCs are declining. There are three reasons given for rig counts not increasing:

• operators showing restraint; focused on free cash flow, not growth;
• supply chain shortages impacting oil industry;
• labor shortage.

It's a labor shortage. But the industry is also highly dependent on technology (think "computer chips") and supply chain shortages are impacting drilling.

But the long pole in the tent: labor. 

I don't see it getting better any time soon.

But "restraint." LOL.

So, if operators want to grow, how do they do it? Simply buying land / mineral rights won't be enough. They need to acquire entire companies: drilling assets and human resources.

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A Musical Interlude

Total Eclipse of the Heart, Bonnie Tyler

No New Permits; One DUC Reported As Completed; Sixteen Permits Renewed -- January 13, 2022

SCOTUS: rules on vaccine mandate. 

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Back to the Bakken

Active rigs:

$82.12	1/13/2022	01/13/2021	01/13/2020	01/13/2019	01/13/2018
Active Rigs	32	11	54	67	55

No new permits.

Sixteen permits renewed:

• XTO (8): three Wood permits, all in Williams County; five Wolff Federal permits in McKenzie County;
• Lime Rock (5): two State permits; one Garfield permit, one Kary permit, and one Emil Veverka permit, all in Dunn County;
• Rimrock (3): two Skunk Creek permits in Dunn County; one Schneider permit in Dunn County;

One producing well (a DUC) was reported as completed:

• 35122, 2,624, XTO, Prairie Federal 31X-30E,

SCOTUS Slip Opinion; SCOTUS With Split Decision On Government Mandates -- January 13, 2022

Slip Opinion: released by SCOTUS moments ago. 

This one has nothing to do with Covid-19 mandates. This has to do with double-dipping: whether the Social Security Administration can penalize a military member with a pension who also has a pension from a civil service job. Social Security Administration imposed "windfall" limitations. SCOTUS ruled SSA could not impose these "windfall" limitations in these cases, overturning the District Court and the Sixth Circuit Court. Wow, this is huge: a lot of military folks went on to become US postal employees. A very, very nice (somewhat delayed) Christmas present.

SCOTUS, slip opinion, webpage. 

The Covid-related rulings we were waiting for:

• Biden v. Missouri.

• NFIB v. OSHA.

It will be interesting to see how the various news outlets "report" this story. 

Bottom line:

• Biden's mandate struck down, except for health workers. My take. Fact check needed. 

Link here for story at YahooFinance.com.

Link here for story at CNBC.

Comment: The court got it right on both legal and health safety grounds. This does not preclude companies from imposing their own mandates and the fact that the Court approved mandates for health care facilities it provides "cover" for other companies that want to impose mandates.

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Time For A Break

TSM CAPEX Blows The Doors Down -- January 13, 2022

BK: Bank of New York Mellon -- hit a 52-week high. 

AAPL: finally getting traction as an autonomous automobile company. MS says the autonomous vehicle revolution is the mother of all IoT; Tesla is the leader by many laps; the question is whether Apple can be the "second mover" as it has done in so many other sectors. With those MS remarks earlier today, AAPL is moving today: up 68 cents today. 

TSM: CAPEX blows me away -- link here. It will be interesting to hear what Jim Cramer has to say on this, and then "tech check" at 10:00, my least favorite hour on CNBC. 

• Taiwan Semiconductor Manufacturing said on Thursday that it would spend between $40 billion and $44 billion on capital expenditures, as demand for semiconductors continues to surge, a problem exacerbated by the ongoing pandemic and supply chain crunch.
• Taiwan Semiconductor said it earned $1.15 per share during the fourth-quarter on $15.74 billion in revenue, up 24.1% year-over-year. Estimates called for the company to earn $1.11 a share on $15.77 billion. Gross margin for the quarter was 52.7%, operating margin was 41.7%, and net profit margin was 37.9%.
• AAPL's gross margin in the 25 - 30% range?
  
• For the first-quarter, Taiwan Semiconductor said it expects to generate between $16.6 billion and $17.2 billion in revenue, with gross margins between 53% and 55%, while operating profit margins are expected to be between 42% and 44%.

RBN Energy: while SCOOP/STACK oil output falls, "rich" gas signals a rebound, part 2.

Activity in Oklahoma’s SCOOP/STACK play has been picking up. In 2021, the number of active rigs there improved by about 30 — that’s a bigger gain than any U.S. hydrocarbon production basin except the Permian. On a percentage basis, the 160% year-over-year increase in the SCOOP/STACK rig count was exceeded — and just barely — by only a couple of other rich-gas regions: the Niobrara and Ohio portion of Marcellus/Utica. Is SCOOP/STACK really on the rebound and, if so, why? The answers are tied to commodity prices and the fact that the Oklahoma play offers producers both crude oil and “rich,” NGL-saturated associated gas. In today’s RBN blog, we discuss recent developments in the Sooner State’s premier production area.

TSM, again: earnings call. From the CEO:

This concludes my financial presentation. Now I will move on to key messages. I will start by making some comments on our 2022 capital budget and depreciation. Every year, our CapEx is spent in anticipation of the growth that will follow in the future years. We are witnessing a structural increase in underlying semiconductor demand underpinned by the industry megatrends of 5G-related and HPC applications.

In 2021, we spent US$30 billion to capture the strong demand and support our customers' growth. In 2022, our capital budget is expected to be between US$40 billion to US$44 billion. Out of the US$40 billion to US$44 billion CapEx for 2022, between 70% and 80% of the capital budget will be allocated for advanced process technologies, including 2-nanometer, 3-nanometer, 5-nanometer and 7-nanometer. About 10% will be spent for advanced packaging and mask making and 10% to 20% will be spent for specialty technologies.

Our depreciation expense is expected to increase by low to mid-teens percentage year-over-year in 2022 as newly incurred depreciation will be partially offset by other notes rolling off depreciation. With this level of CapEx spending in 2022, we reiterate that TSMC remains committed to a sustainable cash dividend on both an annual and quarterly basis.

California, reported previously:

Notes From All Over -- After PPI / Jobless Claims Data Released -- January 13, 2022

Oh, before I forget, DWAC jumped almost 12% yesterday; up $7.46; closed at $71. 26. 

Jobless claims: continuing claims finally back to pre-Covid

PPI: not bad at all. Dow jumps on PPI and jobless numbers. 

Ten-year treasury: 1.74%.

Why?

Pre-market after release of PPI / jobless claims:

• TSM, a proxy for AAPL: up a bit higher after the numbers came up -- wow, wow, wow -- up 2.4% yesterday; now up almost 5% today in pre-market trading
  
• QCOM: still up nicely;
  
• NVDA: still up nicely;
  
• HES: earlier up a bit; now up 0.5%.
  
• EOG: remains down.
  
• CVX: was flat; now up slightly.
  
• SRE: was flat; now up slightly.
  
• AAPL: was negative, now positive. Later: back to slightly negative.
  
• RIVN: down.

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.  

Let's add a few more:

• OKE: flat
• ENB: down one-quarter percent
• EPD: up one -quarter percent
• BRK-B: up one-quarter percent
• UNP: up half-a-percent
• UNP a proxy for BNSF, which is a proxy for BRK-B
  

Mobile power generation solutions: webpage. Instead of clipboards, FEMA needs to be buying these solutions. 

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No Inflation Here

Prices unchanged since first offered.

Notes From All Over, Thursday The Thirteenth -- January 13, 2022

Can we end the lunacy?  Covid-19 and Sweden.

• 2019: historic low annual morality (pre-Covid)
• 2020: higher mortality, similar to 2013 (year of the plague)
• 2021: last year -- historic second low

Investors:

• TSM, a proxy for AAPL: up $3.06, up 2.4% yesterday; futures today: up $5.67, up 4.3%.
• QCOM: yesterday, up $1.02; futures, today, up again
• NVDA: after huge fall, seems to have bottomed, in futures today, up nicely in pre-market;
• HES: up a bit;
• EOG: down slightly
• CVX: down yesterday; flat in pre-market trading today:
• SRE: flat today; this $124 stock is trading at $136
• AAPL: this $145 stock is trading at $175
• RIVN: up 3.5% yesterday; trading at its IPO; slightly negative today in pre-market trading;

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.

Map of the day: North American bear habitats. If you zoom in, you will see there are no bears left on Wall Street.

Returns: all those ESG hedge funds? At risk of missing record returns are now back to buying oil companies.

US oil production: EIA forecasts record average production in 2023 -- that's next year -- production forecast to be 600k bopd greater than 2022 average;

• 2022e: 12.4 million bopd -- forecast based on $63-WTI
• 2021e: 11.8 million bopd
• 2020: statista says US hit 16.5 million bopd in 2022; link here.
  
• 2019: 12.3 million bopd (current record); statista says US record was 17.045 million bopd
  

Big discrepancy between statista and EIA: obviously they're measuring / reporting differently. But I do believe the 30-second elevator number is 12 million bopd is being produced by the US. Regardless, the US is the world's largest producer. EIA report here.

Most honest comment ever, on shale:

With regard to EIA's 2023 forecasts, I'm a bit skeptical; notably we will run out of DUCs by then, but shale has always surprised me (to the upside). Javier Blas.

Permian carbon capture: Permian's largest CCS project in New Mexico. Lucid Energy.

Pet peeve: when someone asks me if I got the text message? It would be a lot more efficient to just make a declarative statement ... "John said ...." Instead of, "Did you get John's message?

Jobless claims: continuing claims finally back to pre-Covid

PPI: not bad at all. Dow jumps on PPI and jobless numbers.

Wow, It's Already Thursday; Watch For SCOTUS Rulings; Two Wells Coming Off Confidential; DAPL Expansion HODL -- January 13, 2022

Biden's attack on meat packers: connecting the dots. Hillary. Biden. Max Baucus. Montana ranchers.

DAPL expansion: Buffett wins again. Back to CBR? Illinois appellate court vacates DAPL capacity expansion. Links everywhere; here's one. 

Clickbait: over at MoneyWise / Yahoo!Finance -- MS has an overweight on three stocks yielding up to 9.1% -- nail them down in case inflation soars even higher --

• Microsft: 0.79%
• PG: 2.2% -- well below inflation
• a pipeline MLP: see headline above

Delta Air Lines: revenues beat; estimates must have been pretty low to begin with but that's not how the game is played, is it?

Gasoline: average costs by state, updated to January 7, 2022 -- Texas is lowest, just barely beating perennial favorite, Oklahoma. Not quite there but close to Texas, $2.50; California, $5.00.

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Back to the Bakken

Active rigs:

$82.37	1/13/2022	01/13/2021	01/13/2020	01/13/2019	01/13/2018
Active Rigs	32	11	54	67	55

Thursday, January 13, 2022: 15 for the month, 15 for the quarter, 15 for the year --

• 38395, conf, CLR, Pletan 8-18HSL, Jim Creek, no production data,
  
• 37337, conf, Whiting, Miller 44-10HU, Sanish, first production, 7/21; t--; cum 75K 11/21;
  

RBN Energy: while SCOOP/STACK oil output falls, "rich" gas signals a rebound, part 2.

Activity in Oklahoma’s SCOOP/STACK play has been picking up. In 2021, the number of active rigs there improved by about 30 — that’s a bigger gain than any U.S. hydrocarbon production basin except the Permian. On a percentage basis, the 160% year-over-year increase in the SCOOP/STACK rig count was exceeded — and just barely — by only a couple of other rich-gas regions: the Niobrara and Ohio portion of Marcellus/Utica. Is SCOOP/STACK really on the rebound and, if so, why? The answers are tied to commodity prices and the fact that the Oklahoma play offers producers both crude oil and “rich,” NGL-saturated associated gas. In today’s RBN blog, we discuss recent developments in the Sooner State’s premier production area.