Focus On Fracking -- Sunday, February 27, 2022

The weekly edition has been posted.

The lede: 

US oil price tops $100 for first time since July 2014; SPR at a new 19 year low; total oil + products supplies, including SPR, at a 7 3/4 year low; distillate supplies at 26 month low; natural gas drilling at a 26 month high.

Warren Buffett's Annual Letter -- Palindromic Sunday -- 2-27-22

Link here.

Three quick observations:

• the incredible amount of "value" in BRK that does not drop to the bottom line due to accounting rules;
• the huge connection with Ft Worth, TX (we live in a "suburb" north of Ft Worth);
• the value of Burlington Northern railroad.

From CNBC: Berkshire's operating earnings surge as Buffett repurchases record $27 billion in stock during 2021.  

• The company’s operating earnings — which encompass profits made from the myriad of businesses owned by the conglomerate — totaled $7.285 billion in the fourth quarter of 2021.
• That’s up roughly 45% from the year-earlier period’s profit of $5.021 billion.
• Berkshire used $6.9 billion to buy back shares in the fourth quarter, bringing the total in share repurchases to a record $27 billion for 2021.

From the linked article: 

However, Berkshire tends to downplay the importance quarterly changes in the company’s investment gains or losses. 

“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said. 

Earnings from Berkshire’s railroad, utilities and energy business jumped 12.3% to $2.241 billion from $1.995 billion a year earlier. Meanwhile, Berkshire’s insurance-underwriting business earned $372 million after losing $299 million in the fourth quarter of 2020. 

The earnings report came as Berkshire’s B shares broke out to a record high this year, up nearly 7%. 

Full-year overall earnings came in at $89.795 billion, more than double 2020′s total of $42.521 billion.

Some astounding data points from Warren Buffett's annual letter this year: 

Many people perceive Berkshire as a large and somewhat strange collection of financial assets. 

In truth, Berkshire owns and operates more U.S.-based “infrastructure” assets – classified on our balance sheet as property, plant and equipment – than are owned and operated by any other American corporation. That supremacy has never been our goal. It has, however, become a fact. 

At yearend, those domestic infrastructure assets were carried on Berkshire’s balance sheet at $158 billion. 

That number increased last year and will continue to increase. Berkshire always will be building.

The float: 

From an $8.6 million purchase of National Indemnity in 1967, Berkshire has become the world leader in insurance “float” – money we hold and can invest but that does not belong to us. Including a relatively small sum derived from life insurance, Berkshire’s total float has grown from $19 million when we entered the insurance business to $147 billion. 

So far, this float has cost us less than nothing. Though we have experienced a number of years when insurance losses combined with operating expenses exceeded premiums, overall we have earned a modest 55-year profit from the underwriting activities that generated our float. 

Of equal importance, float is very sticky. Funds attributable to our insurance operations come and go daily, but their aggregate total is immune from precipitous decline. When it comes to investing float, we can therefore think long-term. 

To my surprise, our float increased $9 billion last year, a buildup of value that is important to Berkshire owners though is not reflected in our GAAP (“generally-accepted accounting principles”) presentation of earnings and net worth.

Berkshire's four giants:

#1: insurance
#2, runner-up: AAPL
#3: BNSF (and this is how I ended up owning so much BRK-B)
#4: BHE -- ENERGY -- Berkshire Hathaway Energy.

BNSF: 

BNSF, our third Giant, continues to be the number one artery of American commerce, which makes it an indispensable asset for America as well as for Berkshire. If the many essential products BNSF carries were instead hauled by truck, America’s carbon emissions would soar. 

Your railroad had record earnings of $6 billion in 2021. Here, it should be noted, we are talking about the old-fashioned sort of earnings that we favor: a figure calculated after interest, taxes, depreciation, amortization and all forms of compensation. 

(Our definition suggests a warning: Deceptive “adjustments” to earnings – to use a polite description – have become both more frequent and more fanciful as stocks have risen. Speaking less politely, I would say that bull markets breed bloviated bull . . ..) 

BNSF trains traveled 143 million miles last year and carried 535 million tons of cargo. Both accomplishments far exceed those of any other American carrier. You can be proud of your railroad. 

Fifteen largest equity holdings:

• AMEX
• AAPL
• BofA
• Bank of New York Mellon
• BYD: held by BHE; Berkshire shareholders have only a 91.1% interest in this position;
• Charter Communications
• CVX
• KO
• GM
• ITOCHU Corp
• Mitsubishi Corp
• Mitsui
• Moody's Corp
• US Bancorp
• Verizon
• others include a $10.7 billion investment in OXY
  

Cash: the company will always hold more than $30 billion in cash and cash equivalents

Interesting observation regarding buybacks: 

It should be noted that Berkshire’s buyback opportunities are limited because of its high-class investor base.

If our shares were heavily held by short-term speculators, both price volatility and transaction volumes would materially increase. That kind of reshaping would offer us far greater opportunities for creating value by making repurchases. 

Nevertheless, Charlie and I far prefer the owners we have, even though their admirable buy-and-keep attitudes limit the extent to which long-term shareholders can profit from opportunistic repurchases. 

Buy a pontoon boat: 

I will end this letter with a sales pitch. “Cousin” Jimmy Buffett has designed a pontoon “party” boat that is now being manufactured by Forest River, a Berkshire subsidiary. The boat will be introduced on April 29 at our Berkshire Bazaar of Bargains. And, for two days only, shareholders will be able to purchase Jimmy’s masterpiece at a 10% discount. Your bargain-hunting chairman will be buying a boat for his family’s use. Join me.

Sunday Night -- One Week Into "The Invasion" -- February 27, 2022

For Monday morning at the open, first group "financial / economic" indicators:

• 10-Year Treasury: link here. Tonight: 1.896%. Down 0.088.
  
• DXY: link here. Tonight: 97.44. Up 0.74%.
  
• Silver: link  here. Tonight: $24.385. Up 1.62%.
• Gold: link here. Tonight: $1,906.97. Up $17.93. Up 0.95%.
  
• CBOE volatility index: link here. Explained at Investopedia. Last: 27.59. Down 95.
  

For the archives:

The exit of BP from Rosneft raises big question about the future of others:

• Global oil services companies: SLB, HAL
• TTE is a big shareholder in gas producer Novatek
• oil traders Vitol and Trafigura are pouring billions into Rosneft's flagship new Vostok project
• it will be no surprise when Vitol becomes bigger than BP
  
• Norway's sovereign wealth fund will divest its Russian holdings
• Shell has a big stake in an LNG plant in the east and a retail footprint
• US dollar explodes

Putin's army:

• more than 3,000 Russian dead in four days;
• 40 Russian tanks destroyed yesterday (Saturday) alone;
• entire Chechen special forces brigade Putin brought in to create chaos and fear among the Ukrainians were instead slaughtered yesterday (Saturday) / completely destroyed

Add President Biden to the winner's list, also add cryptocurrency to the winner's list:

Other data points:

• Russia continues its advance in/on Ukraine;
• Putin plays the nuclear card;
• EU, USA, UK seem to be aligned with overwhelming sanctions;
• most notable: banning Russia from SWIFT
• Russian generals launch nuclear weapons at their own country's peril
• social media suggests Russia military leaders have lost confidence in Putin
  
• with all that, how is oil doing? first note at 6:42 p.m. CT, Sunday night
  
• WTI: up 5.3%; up $4.84; trading at $96.43. Later, around midnight: $96.47.
  
• Brent: up 5.2%; up $5.05; trading at $102.98. Later, around midnight: $103.15.
  
• natural gas: up 2.8%; up 13 cents; trading at $4.596.
  

********************************
ABBA

Waterloo, ABBA

With Ukraine In The News, Great Post To Read -- Sent By A Reader -- February 27, 2022

Link here. Archived.

When I first started blogging about the Bakken, I saw the Ukraine / Russian names in the southwestern part of the state. With regard to oil, it started out strong (Whiting and OXY), then faded, and now maybe coming back a bit.

Ukrainian cultural center, North Dakota. From another reader. 

*****************************
BP Severs Relationship With Rosneft

Link here. Story one hour old, at 3:23 p.m. CT, Sunday, February 27, 2022. Changes in the oil sector and business world are snowballing. It's very possible, the Russian stock market will simply implode Monday.

*****************************
Haircut

In a sidebar to a reader:

57°F here in our neighborhood.

It was warm enough to sit on the balcony and have Sophia cut my hair. I had no mirror. She had the scissors and did an incredibly good job.

She charged $15. I did not have change, nor did she, for a $20 bill. 

Haircut and photos by Sophia:

My last trip to a "professional" barber was either late February, 2020, or very, very early in March, 2020. Since then Sophia has been my only barber.  Sophia gave me my first haircut when she was five years old. She is now seven years old and will turn eight this summer. I think that's correct. I could be off by a year or so, but I do know she turns eight this summer because she told me.

Themes -- 2023

New world order following Russian-Ukraine war.

OPEC+ Trims Forecast For 2022 Oil Market Surplus -- February 27, 2022

I will have to update my major themes for 2022. 

This is going to be a most fascinating story: whether global crude oil supply will meet global demand.

From Reuters today: OPEC+ trims forecast for 2022 oil market surplus in latest data. 

It seems folks are pretty much evenly divided on this subject.

In fact, the wrong question is being asked.

Of course, production / supply will meet demand. 

The question? 

At what price? 

Newest wrinkle: the fact that Putin has actually played the nuclear card changes things dramatically. I can only assume Germany and the EU are scrambling to figure out how they respond. 

Putin wasn't bluffing when he positioned his military along the Ukraine border. It's hard to argue he's bluffing when he plays the nuclear card.

One of the big banks forecast $120 / bbl as the average price for oil in the first quarter. I will have to go back and check that. If that was for the first quarter 2021, we're quickly running out of runway. 

***************************
New Word

Link here. The Germans have had this word for years. Biden-Kerry have a similar plan for the US. 

Answer to question: Energiewende.

Production Data For CLR's Anna Wells Southeast Of Williston -- February 27, 2022

The CLR Anna wells are tracked here.

NDIC is starting to report January, 2022, production, but data has not yet been reported for January, 2022, "runs" for the eight CLR Anna wells. Through December, 2021 -- note the total production delta, December, 2021, over November, 2021.

Again, I do this quickly and there could be errors.

Runs
The “Anna” Wells			Dec 21	Nov 21	Oct 21	Sep 21	Aug 21	Jul 21	Jun 21	May 21	Apr 21
32967			943	874	1566	1027	1127	1507	1409	100	0
32966			241	51	426	467	602	757	763	285	1093
30155			1202	387	679	221	690	632	817	232	867
30154			834	273	640	208	720	935	1048	330	1282
32969			1301	506	993	715	918	1222	961	376	1061
30156			973	658	740	850	951	874	936	220	1231
32968			1449	50	788	734	998	1596	1531	955	1435
23279			1909	434	1193	1416	1190	477	946	233	1569
30157			2656	2050	1229	1020	1369	2490	2534	766	2813
TOTAL	0	0	11,508	5,283	8,254	6,658	8,565	10,490	10,945	3,497	11,351

Hess Wells One Mile South Of Ray, North Dakota -- February 27, 2022

The GO-Braaten wells are tracked here.

These wells are on two parallel pads about one mile directly south of Ray, North Dakota:

• 36161, IA/2,320, Hess, GO-Hauge-LW-156-97-2116H-1, Dollar Joe, t2/20; cum 197K 1/22; 
• 36160, 2,100, Hess, GO-Hauge-156-97-2116H-4, Dollar Joe, t2/20; cum 153K 1/22; 
• 36159, 2,131, Hess, GO-Hauge-156-97-2116H-3, Dollar Joe, t2/20; cum 168K 1/22; 
• 36158, 1,914, Hess, GO-Hauge-156-97-2116H-2, Dollar Joe, t2/20; cum 131K 1/22;
  

• 38063, conf, Hess, GO-Soine A-156-97-2932H-2, Dollar Joe, first production, 9/21; t--; cum 133K 1/22; 
• 38062, loc/A, Hess, GO-Soine A-156-97-2932H-3, Dollar Joe, first production, 8/21; t--; cum 116K 1/22; 
• 38090, loc/A, Hess, GO-Braaten-LW-156-97-2833H-1, Dollar Joe, first production, 8/21; t--; cum 127K 1/22; 
• 38061, loc/A, Hess, GO-Braaten-156-97-2833H-3, Dollar Joe, first production, 8/21; t--; cum 117K 1/22; 
• 38060, loc/A, Hess, GO-Braaten-156-97-2833H-2, Dollar Joe, first production, 8/21; t--; cum 136K 1/22;
  

The parent well:

• 21497, 736, Hess, GO-Hauge-156-97-2116H-1, Dollar Joe, t3/12; cum 167K 1/22;

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

Initial production of selected wells from above.

• 38063:

Date	Oil Runs	MCF Sold
1-2022	12823	0
12-2021	18314	55867
11-2021	26311	63474
10-2021	29167	63827
9-2021	46149	49745

•  38062:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2022	31	11119	11129	29753	0	0	0
BAKKEN	12-2021	31	15336	15369	33350	47248	47178	70
BAKKEN	11-2021	30	19890	19886	49200	54434	54337	97
BAKKEN	10-2021	16	21401	21337	26190	29839	29639	200
BAKKEN	9-2021	19	18647	18750	61376	40191	37857	2334
BAKKEN	8-2021	5	29258	29081	23816	27466	20488	6978

• 38090:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2022	31	12576	12571	22831	0	0	0
BAKKEN	12-2021	31	14876	14894	27930	51114	51038	76
BAKKEN	11-2021	30	17253	17262	30349	45681	45600	81
BAKKEN	10-2021	31	20540	20525	39643	43539	43247	292
BAKKEN	9-2021	27	29878	29951	82491	54836	51651	3185
BAKKEN	8-2021	24	31613	31422	55162	50070	33903	16167

• 38061,

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2022	31	9158	9167	24932	0	0	0
BAKKEN	12-2021	31	12608	12639	28942	38784	38727	57
BAKKEN	11-2021	30	16944	16915	35348	45891	45809	82
BAKKEN	10-2021	31	14286	14292	50181	61254	60844	410
BAKKEN	9-2021	29	24867	25005	133352	78385	73833	4552
BAKKEN	8-2021	16	39069	38833	61639	64225	43487	20738

• 38060, 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2022	31	10761	10768	27245	0	0	0
BAKKEN	12-2021	31	14298	14337	29705	50225	50151	74
BAKKEN	11-2021	30	19689	19711	36441	55732	55633	99
BAKKEN	10-2021	31	25291	25231	48912	56674	56294	380
BAKKEN	9-2021	28	26082	26217	112080	79932	75290	4642
BAKKEN	8-2021	11	39417	39179	54612	70770	47919	22851

• 36161

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2022	0	0	0	0	0	0	0
BAKKEN	12-2021	0	0	0	0	0	0	0
BAKKEN	11-2021	0	0	16	0	0	0	0
BAKKEN	10-2021	31	2535	2528	9052	24027	23866	161
BAKKEN	9-2021	30	2343	2364	8525	14043	13227	816
BAKKEN	8-2021	31	4924	5241	13695	44971	30450	14521
BAKKEN	7-2021	24	2945	2828	9701	19405	18442	963
BAKKEN	6-2021	30	4819	4794	12236	24665	24630	35
BAKKEN	5-2021	31	5631	5673	11434	20790	20692	98
BAKKEN	4-2021	30	6941	6695	15437	17820	17793	27
BAKKEN	3-2021	1	30	88	118	273	218	55
BAKKEN	2-2021	7	1193	1381	2499	6044	3612	2432
BAKKEN	1-2021	31	9586	9552	15354	39939	15890	24049
BAKKEN	12-2020	25	5989	6029	11534	29800	16422	13378
BAKKEN	11-2020	30	8397	8315	11045	35437	35434	3
BAKKEN	10-2020	31	9309	9278	15858	47609	42384	5225
BAKKEN	9-2020	30	9580	9745	9195	22854	22285	569
BAKKEN	8-2020	28	12564	12451	11063	53060	50076	2984
BAKKEN	7-2020	31	16648	16456	17371	46668	45604	1064
BAKKEN	6-2020	0	0	226	0	0	0	0
BAKKEN	5-2020	29	15100	15091	15939	33307	33008	299
BAKKEN	4-2020	28	17167	17159	29199	34886	34612	274
BAKKEN	3-2020	31	23516	23622	35718	47184	46225	959
BAKKEN	2-2020	29	37371	37056	67259	65700	63420	2280
BAKKEN	1-2020	0	0	0	0	0	0	0