Quite A Day -- And It's Not Quite Over -- January 27, 2022

NY:

• anticipating winter storm this weekend;
• but severe cold could persist in to mid-February; link here;
  

Subsidies for fossil fuel:

• add Denmark to list of countries providing subsidies for households using natural gas; link here; previously posted; 
• ignores UN climate agreement(s), COP26 from just a few months ago;
  

GS:

• forecast, link here:
• WTI will rise 16% to $101 / bbl and Brent by 17% to $105 / bbl by year-end 2023
• S&P 500 companies in the Energy sector will post 2022 earnings growth of 84% followed by 2023 growth of 22% compared with consensus bottom-up estimates of 37% growth this year followed by a 4% decline in 2023
• Brent hits $90 / bbl for first time since 2014; link here;
  

US shale: Bloomberg catching on;

• for first time in a decade, US shale producers are in the free cash flow sweet spot;
• oil at $79: producers can return $50 billion in cash to investors and lift output by 2 million bopd
• that's equivalent to the entire ANNUAL production of Nigeria and Venezuela combined;
• or they could return $75 billion and grow daily output by just 500,000 bbls
  

Bakken: just a bit more valuable; link here, or go direct to WP paywall;

• a federal judge just invalidated the oil and gas leases that the Biden administration auctioned off in the largest offshore lease sale in US history in the GoM last year;
• 1.7 million acres of leases vacated; XOM, CVX, others
• $192 million in leases; link here;
  

Ukraine:

• Biden phones Ukraine president: "brace for invasion"; link here;
• Russians just moved 100,000 troops to the Ukraine border including tons of armor; incredible video at link, especially if you like armored vehicles;
• General Patton would have been impressed;
• Bloomberg: invasion may be imminent; link here;

Natural gas: link here; as contracts expire;

• greatest one day gain in natural gas in history; up almost 50% in one day;
• US can't source natural gas that would be required for Europe if sanctions on Russia follow incursion; 
• futures hit $7.346, the highest intraday price since November, 2008, before falling back to $6.265;
• move signaled a short squeeze ahead of the contract's expiration; link here;
  

IPO debacle:

• Robinhood: perhaps the greatest post-IPO disaster ever seen in 25 years; link here;
• $5,000 investment at the top back in August, 2021, now worth $600

*************************************
A Musical Interlude

She Thinks I Still Care, Teddy Thompson

Energy Transfer Set For Highest Return In Sector -- Rigzone -- January 27, 2022

Link here. 

A cash bonanza may help Energy Transfer LP deliver the highest return among major U.S. oil and natural gas pipeline operators. 

The company owned by billionaire Kelcy Warren is seen reporting a record annual profit next month, boosted by sales of gas at skyrocketing prices during last February’s Texas freeze. The largest U.S. pipeline operator also signaled more cash will soon be returned to shareholders via dividends and buybacks as it has slashed debt following a decade of expansion. 

As a “first step”, Energy Transfer announced Tuesday, January 25, 2022, a 15% increase in its quarterly cash distribution to 17.5 cents per common unit. 

The Dallas-based company, which operates more than 114,000 miles (183,000 kilometers) of pipelines across North America, trades at a discount to major rivals. Energy Transfer’s enterprise value is at 7.7 times the company’s forecast earnings before items such as taxes and interest. That compares with 10 times for Kinder Morgan Inc. and 9.6 times for Enterprise Products Partners LP. 

Much more at the link.

And then this:

Analysts are targeting a share price for Energy Transfer that is 55% above current levels, the biggest upside in the industry, according to data compiled by Bloomberg. The stock has risen about 13% this year, trailing an almost 17% gain in the S&P 500 Energy Index.

************************************
A Musical Interlude

He Thinks He'll Keep Her, Mary Chapin Carpenter

When It Rains, It Pours -- And No One Has Even Mentioned This Yet Today! Natural Gas Jumped 50% Today -- January 27, 2022

Link here.

And headline:

Folks watching closely:

• President Biden; ISO NE; and, Germany.
• Note to Texans: winter is not yet over. February is the cruelest month, and March can be bad, also. 

By the way, this jump in the pride of natural gas: for those not paying attention --

The jump in the price of natural gas came out after White House said they can't find alternate NG sources for Europe if Russia invades Ukraine and sanctions cut off Russian natural gas. 

Don't worry: US won't run short. White House won't ban NG exports, but there is simply a limit to how much natural gas can be exported, due to:

• logistics; and,
• contracts.

Ovintiv With Three New Permits; Three DUCs Reported As Completed; MRO With Another Monster Well -- Oil Settles Below $87 -- January 27, 2022

Tesla: in free fall. Fell over $100 today; now trading around $835. The meme, right or wrong, Tesla more interested in "the robot" than in actually rolling off new models.

Investors: all (?) oil stocks had a huge day. 

US admits finding non-Russian natural gas for Europe is a challenge: link to Tsvetana Paraskova. 

Active rigs:

$86.61	1/27/2022	01/27/2021	01/27/2020	01/27/2019	01/27/2018
Active Rigs	31	12	55	65	57

Three new permits, #38759 - #38761, inclusive:

• Operator: Ovintiv (Newfield)
• Field: Westberg (McKenzie)
• Comments:
• Ovintiv has permits for three more Clear Creek Federal wells in Westberg; to be sited in SESE 36-152-97; sited 804 FSL and between  807 FEL and 767 FEL;

Three producing wells completed:

• 37741, 2,368, MRO, Leon USA 33-14TFH, Moccasin Creek, first production, 10/21; t--; cum 51K 11/21;
  
• 37742, 3,567, MRO, Marion USA 33-14H,Moccasin Creek, first production, 10/21, t--; cum 114K 11/21;
  
• 35768, 3,053, Whiting, Tarpon Federal 44-19-5H, Sand Creek, first production, 10/21; t--; cum 52K 11/21;
  

Initial production:

• 37741:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	11-2021	30	28825	28795	57609	24608	22684	209
BAKKEN	10-2021	18	22225	22074	32814	15442	14056	0

• 37742:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	11-2021	30	51131	51237	52347	30213	27070	171
BAKKEN	10-2021	30	62928	62501	76349	40277	36487	0
BAKKEN	9-2021	3	0	0	170	0	0	0

• 35768: 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	11-2021	22	31140	31415	20287	78875	77464	1411
BAKKEN	10-2021	9	20610	20067	8691	52178	50794	1384

Apple Earnings, October - December, 2021

Updates

January 28, 2022: Goldman Sachs analyst -- very negative about Apple. Lumps it in which all consumer electronics. Wow, what a doofus. Sure he says it's neutral, but has same old argument we hear from these analysts about Apple every quarter. Their bottom line argument: "we're not convinced Apple can keep growing." Truly amazing. 

January 28, 2022: Jim Cramer -- 

Apple (AAPL) strong on all but the most supplied constrained (Mac tab) ... Tim Cook spent most of the time talking about installed base of 1.8 billion. Looking at almost 800 million subscribers ... Card on fire. No defaults for bills (almost unheard-of). China abnormally STRONG—highest-ever market share. Beginning to get the value of lifetime sub and notion of delivery system for content …

January 28, 2022: transcript.

January 27, 2021: Jim Cramer --

Gross margins came in at 43.8%, well ahead of the 42% consensus, and are representative of a 399bps YoY improvement. These benefited from the growth in Services, which boast a higher-margin profile.<

• Driving that result was a 72.37% Services gross margin (+397bps YoY) and a 38.42% Products gross margin (+336bps YoY). Once again, we can see why the growth in Services is so important in terms of overall profitability.
• While Services represented 15.75% of sales, it represented 26.04% of gross income.

As we've noted previously, the combination of stronger profitability and the recurring nature of the Services results, investors are putting a higher value on the associated earnings stream. As the growth in services has expanded, so too has the company's valuation multiple.

Later, 6:12 p.m. CT: active devices set record. 

• record number of active Apple devices: 1.8 billion active devices, a new all-time record;

• has grown from 1.5 active billion devices in January, 2020 and 1.65 active billion devices in January 2021; demand is still there.

Original Post

MacRumors. Yahoo!Finance. 

Record quarterly revenue.  

On a per share basis the numbers are even better due to huge share buybacks.

• overall earnings/profit, up 20% year/year;
• earnings / share, up 25% year/year    .

Holy mackerel! See the graphic at MacRumors link. Best quarter ever, and not only that, the new record was not trivial.

• previous record: $110 billion
• this quarter, new record: $124 billion
• how many business days in a quarter? At five days a week? 65 days;
  
• $125 billion / 65 days = almost $2 billion / normal business day
  

Dividend: no change in dividend. 

Numbers out, headline: "Apple smashes Wall Street expectations with historic 1Q22 revenue."

• after numbers come out, shares up $3.07 / share; later, up as much as $5.68. / share; looks like will end up about $5 / share in the after hours. Wrong: now up over $7 share.
  
• beats top and bottom line
• cash hoard jumps: $202.6 billion from $190.5 billion; expect huge share buyback;
  
• EPS: $2.10 / share vs $1.89 / share estimate
  
• only iPad did not beat 
• $7.25 billion vs $8.18 estimate; huge supply chain problem;
  
• revenue beat: $123.95 billion vs %118.66 billion
• quarter year ago: $111.4 billion
• profit: $34.6 billion or $2.10 per share
• quarter year ago: $28.8 billion or $1.68 per share
  
• profit, total dollar profit, percent jump quarter-over-year-ago-quarter: 20% despite significant supply change shortages
• profit, per share, percent jump quarter-over-year-ago-quarter: 25% despite  
• profit per share increase y/y better than overall profit  y/y due to share buyback
• Apple bought back $20 billion shares
  
• revenue, percent jump quarter-over-year-ago-quarter: 11.3%
• so, profit per share
  
• margins: 43.8 vs forecast 41.7 estimate
  
• iPhone: $71.6 billion vs $68.34 billion;
  
• wearables: $14.7 billion vs 14.1 billion forecast;
• services: beat at $19.5 billion vs $18.6 billion
• waiting for guidance at conference call; probably won't be given; Apple seldom provides guidance;

Comments:

• huge
•  nothing broken
• firing on all cylinders
• March, 2022, should be better than December, 2021
• has not been said yet, but indications are this is the best quarter Apple has ever reported;
  

Other Apple-related news:

• Square Reader? New iPhone software could negate need for Square Reader attachment; link here.
• Face ID: will work with "mask on." Incredible. This will help women in the Mideast, also. Link here.
• Price cut: 64 GB wi-fi iPad Air for $539; down $60; link here.
  

Other earnings while waiting:

• Robinhood, down 15% on greater loss than expected.
• big slide; trading below $10; was $12.41 at the close;

************************************
Now, Fast Money

Apple:

• comments from correspondent on "Fast Money"

• grew 21% in China; all-time revenue record in China
• record number of "upgraders" in China
• expects supply constraints in March to be less than in most recent quarter

Guy:

• remarkable
• should trade back at all-time highs
• one nit-pick: services not as big a percent as one would liike

Karen:

• a lot to really like about this quarter;
• size of the beat was pretty impressive
• what is the "right" P/E
• right mix of hardware and software
• wants to stay long
• due to strange quarter, no real direct comparisons
  

BK:

• is valuation too high or too low? Doesn't know; says "price" too low;
• sentiment perspective: demand is still there; have probably reached passed recession worries;

Dan:

• huge divergence between APPL and NASDAQ
• AAPL trending up; NASDAQ trending down;
• AAPL makes up huge percent of top 100 NASDAQ stocks; imagine the NASDAQ without AAPL
  

Melissa:

• mentions Block (Square Reader); mentioned earlier;
• Block will get hit badly; down 5% today;
  
• Apple will take a lot of that Block business
• Apple doesn't let many other companies take the prime rib; lets them lick up scraps, crumbs

Hess CAPEX 2022 Updated -- January 27, 2022

Hess: CAPEX 2022 updated. Hess, as a Bakken operator, is tracked here.

For The Archives -- From The Perspective Of Oil Bulls -- January 27, 2022

I have an incredibly good twitter account that works for me. Except for a few wayward tweets, those I follow seem to understand "oil," renewable energy, and global warming quite well. I follow no one on twitter whose primary interest is investing. 

To keep me grounded, the sidebar at the right of all twitter accounts includes "trending." Very, very valuable. 

The Dow was up an incredible 600 points before it went negative, down at least 100 points when I last looked.

During that transition, these were the items from my twitter account. I'll try to group them to keep some kind of order.

The Biden Boom: trending. 

• none of my readers are going to like this one;
• I can already hear the "but ... but ... but ... but ... but"
• facts don't matter; the narrative matters, and I haven't seen Mitch McConnell's narrative in several years;

GDP: from the above thread, this link:

• GDP growth under Biden more than 3 times each of the last 3 GOP presidents;
• job growth under Bend 3 times last 3 GOP presidents combined;
• 40 million of the 42 million jobs created since 1989, 95% have come under Democrat presidents
• repeating:
• I can already hear the "but ... but ... but ... but ... but"
• facts don't matter; the narrative matters, and I haven't seen Mitch McConnell's narrative in several years;

Canada:

• at over 70 km long, Canada's convoy shatters the prior world record for longest truck convoy ever recorder. Link here.

US Russian crude oil imports:

• oil imports from Russian reached a record high during Biden's first year. Link here.
• US oil imports from Russia have gone from "zero" in 1990 to 800,000 bopd (2008) to 200,000 bopd in 2019, back to a record 850,000 bopd in his first year as president

New England ISO:

• LNG tanker from Trinidad/Tobago just arrived Boston;
• that natural gas costing 3x from Marcellus, PA, natural gas; link here.
• great graphic at the link

US energy:

• link here;
• diesel demand ended 2021 above pre-pandemic levels;
• gasoline demand ended year at pre-pandemic levels;
• jet fuel at 80% of pre-pandemic levels;
• impact of Covid variant on oil demand is waning (so if gas demand is plummeting it must be demand destruction)
• weekly US days of supply of crude oil has crept up slightly, week-over-week; link here;
• demand destruction?
• US gas flaring hits record low; link here;
  

Goodbye to global warming COP26 initiatives:

• Swedish government has asked parliament to approve a cut in gasoline and diesel taxes; link here;
• Japan implements subsidy to mitigate oil price rise; link to Argus Media;

Renewable energy:

• link here;
• not going so well for Saudi Aramco;

Fed rate hike:

• since 1972, every rate hike cycle has resulted in commodities returning 19% and outpacing the S&P 500 by 900 basis points; link here;

Covid silliness:

• people are up to two times as likely to have an accurate positive Covid-19 test result if they test in the middle of the day compared to at night; Vanderbilt research shows;

Middle East myth of spare capacity:

• active drilling rigs in the Middle East still significantly below 2019 levels (despite high crude oil prices); link here;
• supply response has been poor so far and setting up for a very bullish spring as demand picks up considerably, further draining already-low inventories; great graphic at the link;

Oilman's cartoon: link here.

Chart of the day:

• CVX; link here;
• hits an all-time high; previous peak set 8 years ago;
• a larger-than-expected hike in the quarterly dividend;
• current market cap is $262 billion -- that's $115 billion more than NextEra Energy

US big oil vs European big oil over last twelve months, investing:

• link here:
• XOM: +76%
• CVX: +63%

• RDS: +50%
• TTE: +54%
• BP: +42%

Meanwhile, OXY, oh-oh:

• link here; great graphic at the link;
• in less than a year, OXY has gone from being the top Permian producer, down to 7th spot in terms of daily oil production;
• production down 36% in 18 months even with OXY currently running 15 active rigs

Meanwhile, ION Geophysical is preparing for a bankruptcy filing, link here;

• stunning;
• oil at 7-year highs
• stock currently down 39% on the day and 75% down in the past year
• stock selection matters;

EV silliness: link here;

• the US refuses to fall in love with EV .. and that's the problem;

Or As Homer Would Have Said, "Between A Rock And A Hard Place" -- January 27, 2022

The current economic situation is so fascinating, so incredibly fascinating.

We have really, really, respected, credible "economists" at both ends of the spectrum talking about the current economic situation. At one end, those who think inflation is out of control and that the Fed is not reacting fast enough to contain it; and, at the other end, those who think over-reaction by the Fed will result in things worse than they would otherwise be. 

The "horns of a dilemma." "Between a rock and a hard place."

From wiki: 

From wiki:

Scylla and Charybdis were mythical sea monsters noted by Homer; Greek mythology sited them on opposite sides of the Strait of Messina between Sicily and Calabria, on the Italian mainland.

Scylla was rationalized as a rock shoal (described as a six-headed sea monster) on the Calabrian side of the strait and Charybdis was a whirlpool off the coast of Sicily.

They were regarded as maritime hazards located close enough to each other that they posed an inescapable threat to passing sailors; avoiding Charybdis meant passing too close to Scylla and vice versa.

According to Homer's account, Odysseus was advised to pass by Scylla and lose only a few sailors, rather than risk the loss of his entire ship in the whirlpool.

Wow, wow, wow. 

I have no dog in this fight. I can't influence anyone to do anything. But it sure is fascinating to watch. Sort of like being on Odysseus' ship in real time. LOL.

For me, this is going to be fascinating to watch. It will be a real credit to Jay Powell if he can navigate the strait.

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

Carrying the analogy forward.

As noted:  

Odysseus was advised to pass by Scylla and lose only a few sailors, rather than risk the loss of his entire ship in the whirlpool.

I assume the horns of dilemma in today's environment:

• raise the Fed rate to 10% overnight and risk (guarantee?) a recession; some suggest we need a recession;
• go slow and steady, and invite (guarantee?) stagflation;

Cutting to the chase, along with a bunch of other stuff, in either a recession or severe stagflation a lot of folks are going to lose their jobs.

So, it comes down to this, if Homer were writing this today, would he advise Jay Powell to pass by Scylla (slow and steady) and lose only a few sailors, or pass by Charybdis and lose the entire ship?

Nothing new under the sun.

Maybe Leonard Cohen had it exactly right. LOL.

The future: 

The Future, Leonard Cohen

As some are saying, we are going the way of Europe. Except we have oil and are energy independent.

Big difference.

Excellent Economic Numbers Being Reported This Morning -- A Flood Of Good Numbers -- CNBC -- January 27, 2022

 GDP: 6.9% vs 5.5% estimate. Former Fed member: this number is astonishing. No one expected numbers like this.

That's about the only economic number mainstream media journalists will see. 

How everyone heard Steve Liesman this morning: "Yada, yada ,yada, yada, GDP, yada, yada, yada, yada, 6.9%, yada, yada, yada, much better than expected, yada, yada, yada."

Last three months, GDP grew at an incredible 6.9%.

Full year, 2021: 5.7%. 

Fantastic numbers. But comes at a cost: inflation. The latter hurts fixed-income and low-income folks. 

But on CNBC this morning, I heard the word "recession" mentioned more than twice. 

Full employment: 3.9%.

More jobs available than workers available. Workers should have pricing power.

But wages, for some reason, not moving up as fast as one would expect. Low-wage earners are hurting. 

I still get a kick out of this, this concern that interest rates going up too fast. Free money now, at worst, maybe 1% Fed rate at end of 2022 -- which pretty seems like free money for many folks. 

The market seems to agree. 

After the close yesterday, the Dow was down as much as 400 points.

This morning, before the GDP numbers came out, Dow flat to slightly positive. Right now, now that investors are up and digesting these numbers, the Dow has an implied opening of 175.

Holy Mackerel! -- One Hour Ago -- January 27, 2022

XLNX: surges. Up $2.22 (1.3%) at close yesterday; pre-market today, up $12.77 (7.31%). Something happened? AMD down. Even Jim Cramer mentioned this in the eight o'clock hour (central time). Later: XLNX up $14.50, up 8.3%, in pre-market trading. INTC down 3% in pre-market. Of the five major semiconductors, INTC the only one that is down.

Story. 

Wow, wow, wow.

One year ago: $112; now? $175.

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

Teddy Thompson and Jenni Muldaur: A Tribute to Porter Wagoner and Dolly Parton

And So It Begins -- WTI Solidly Above $88 -- Three Wells Coming Off Confidential List -- Saudi Says It Will Raise OSP In March -- January 27, 2022

Tractor Supply: increased dividend by 77% and adds $2 billion to buybacks. 

OSP: official selling price. Link here.  

Spotify: top story on CNBC this morning. Wow. Wait until the rest of the "woke" artists take their music off Spotify. Spotify shares are plummeting. One year ago: $350. Yesterday, at close: $175.

Joe Rogan / Rush Limbaugh? I don't know. I've never listed to Joe Rogan but that's mostly because I've never listened to podcasts. 

Air tag stalking: mountain out of a mole hill. 

XLNX: surges. Up $2.22 (1.3%) at close yesterday; pre-market today, up $12.77 (7.31%). Something happened? AMD down.

Tesla: beats. 

Full-self-driving was the focus; explains why no new models. TSLA margins approaching 30%; in same ballpark as Apple's margins of 38%. Pulling away from competition: margins for GM and F 14%. TSLA now the benchmark for manufacturing. Much more than a car company now. 

Shakeout coming? TSLA pulling away from competition. Oh, I already said that. 

Ford is the second best. 

Rivian having problems; that's why Amazon "switched." To succeed, EV manufacturers need three things: 1) attractive product; 2) ability to produce; and, 3) quality -- it has to work. Tesla clicking on all three, as is Ford. Rivian is faltering in manufacturing and quality. GM: questions about attractiveness and quality. They had to recall all their Bolts last year; only delivered 26 EVs in 4Q21. Ford delivered 29,000 Mustang EVs; ramping up200,000  to and doubling their F-150 Lightning production; $40 billion cash on hand. 

See also today's article on Tesla over at SeekingAlpha.

NE ISO: hitting all-time highs?

• 8th decile; the only reason it's not in the 9th or 10th decile is because of the screwy "deciles"
• $335 / MW in Massachusetts
• demand: 18,225 MW
• fuel mix:
• oil: a whopping 25%
• nuclear: only 15%
• expensive hydro: 11%
• renewables: down to 5%, with wind at 17% = 0.85% contribution

Josh Young, exclusive: https://www.breitbart.com/economy/2022/01/21/exclusive-climate-change-backlash-hedge-fund-cashing-oil-gas-equities-fossil-fuel-sector-flourishes/. 

*************************************
Back to the Bakken

Active rigs:

$88.20	1/27/2022	01/27/2021	01/27/2020	01/27/2019	01/27/2018
Active Rigs	31	12	55	65	57

Thursday, January 27, 2022: 47 for the month, 47 for the quarter, 47 for the year
38391, conf, Petro-Hunt, Dahl 162-100-13A-24-2H,
38049, conf, Slawson, Muskrat Federal 8-28-33H,
37905, conf, CLR, Charolais South Federal 7-10H2,

RBN Energy: LNG's increasing commoditization driven by rising US production.

As recently as the mid-to-late 2000s, the U.S. was expected to become a major importer of LNG. Instead, the opposite occurred. Once forecast to need tens of millions of metric tons of LNG each year to meet its own power needs, the U.S. is now producing about the same amount and sending it out to Asia, Europe, and other overseas markets. That swing — from the expectation of being a major LNG importer to the reality of being a top-tier producer/exporter — has had a huge impact on the global market, and the influence of that reversal cannot be overemphasized. In today’s RBN blog, we look at how U.S. production has moved LNG closer to being a global commodity, the effect of growing U.S. production on the market, and prospects for future growth.