A Rambling Thought -- Wednesday, February 8, 2023

I don't know about "you," but in the big scheme of "all things energy" I thought 2022 was a pretty lackluster year for oil investors.

There was no OPEC embargo; there was no huge production cut coming out of OPEC; WTI / Brent didn't trade at particularly high levels; for the most part .... let's do this in bullets:

• there was no OPEC embargo; 
• there was no huge production cut coming out of OPEC; 
• WTI / Brent didn't trade at particularly high levels; 
• for the most part China was still shut down for most of the year due to Covid;
• China's demand for crude oil was way down;
• gasoline demand in the US was way down;
• more than 50% of office workers were still working from home at the end of the year;
  
• President Biden flooded the US market with oil from the SPR which not only resulted in more oil in America but more oil being exported overseas;
• there were the usual currency issues but for the most part "hurt" US companies.

And with all that, XOM, COP, CVX, TTE reported best profits -- not just revenue -- but the best profits in their entire history -- and these companies have been around a long time and have had some really good years in the past -- and they didn't just have a great year, they reported the best profits ever in their company's career and in many cases doubled their profit year/year and that was with a very, very lackluster year when it came to oil.

Imagine when China is fully open; the Russian sanctions fully implemented; US driving season is back; US office workers return to work; WTI hits $100 as predicted by "almost everyone." 

A lackluster year in oil last year and oil companies are reporting their best profits ever in their companies' history. 

That just blows me away.

Another thought along that same line:

• these companies sell absolutely 100% of the product they produce, and they sell it in less than a month after it's produced, so not a lot of wasted  / stagnant inventory;their product doesn't sit on the shelf and expire after some "use-by" date;
  
• month-after-month; every bit of the product these companies produce is sold;
• none of the product is thrown out because it expired
• these companies are cutting rigs and cutting CAPEX simply because they can
• these companies are no longer focused on growing their companies; they're focused on growing their free cash flow; their dividends; and, their share buyback programs.

What's not to like?

By the way, how are the EV companies doing? Over the past six months:

• LCID: down 34%;
• RIVN: down 45%;
• GOEV (Canoo): down 70%;
• ARVL: down 78%;
• F: down 12%;
  
• TSLA: incredibly well; shares have doubled over the past six months;