Pages

Sunday, February 27, 2022

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:

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:
DateOil RunsMCF Sold
1-2022128230
12-20211831455867
11-20212631163474
10-20212916763827
9-20214614949745
  •  38062:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN1-202231111191112929753000
BAKKEN12-202131153361536933350472484717870
BAKKEN11-202130198901988649200544345433797
BAKKEN10-2021162140121337261902983929639200
BAKKEN9-20211918647187506137640191378572334
BAKKEN8-2021529258290812381627466204886978

  • 38090:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN1-202231125761257122831000
BAKKEN12-202131148761489427930511145103876
BAKKEN11-202130172531726230349456814560081
BAKKEN10-2021312054020525396434353943247292
BAKKEN9-20212729878299518249154836516513185
BAKKEN8-202124316133142255162500703390316167

  • 38061,
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN1-2022319158916724932000
BAKKEN12-202131126081263928942387843872757
BAKKEN11-202130169441691535348458914580982
BAKKEN10-2021311428614292501816125460844410
BAKKEN9-202129248672500513335278385738334552
BAKKEN8-202116390693883361639642254348720738

  • 38060
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN1-202231107611076827245000
BAKKEN12-202131142981433729705502255015174
BAKKEN11-202130196891971136441557325563399
BAKKEN10-2021312529125231489125667456294380
BAKKEN9-202128260822621711208079932752904642
BAKKEN8-202111394173917954612707704791922851
  • 36161
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN1-20220000000
BAKKEN12-20210000000
BAKKEN11-202100160000
BAKKEN10-2021312535252890522402723866161
BAKKEN9-2021302343236485251404313227816
BAKKEN8-2021314924524113695449713045014521
BAKKEN7-2021242945282897011940518442963
BAKKEN6-2021304819479412236246652463035
BAKKEN5-2021315631567311434207902069298
BAKKEN4-2021306941669515437178201779327
BAKKEN3-20211308811827321855
BAKKEN2-20217119313812499604436122432
BAKKEN1-2021319586955215354399391589024049
BAKKEN12-2020255989602911534298001642213378
BAKKEN11-202030839783151104535437354343
BAKKEN10-202031930992781585847609423845225
BAKKEN9-2020309580974591952285422285569
BAKKEN8-20202812564124511106353060500762984
BAKKEN7-20203116648164561737146668456041064
BAKKEN6-2020002260000
BAKKEN5-2020291510015091159393330733008299
BAKKEN4-2020281716717159291993488634612274
BAKKEN3-2020312351623622357184718446225959
BAKKEN2-20202937371370566725965700634202280
BAKKEN1-20200000000