EVs: Cash Burn -- March 2, 2023

Update

March 6, 2023: Rivian to sell $1.3 billion in bonds.

Original Post

EVs: Cash Burn -- tracked here. 

In The WSJ, the past two days:

Rivian cash burn. Link here.

From the linked article:

Rivian electric trucks don’t burn gas, but they sure do burn cash. The company’s stock could increasingly become a bet on the funding environment.

Free cash flow for 2022 ended up at a negative $6.4 billion, according to results posted late Tuesday, as Rivian lost money on each car it sold while also investing for the future. Airlines consumed more in pandemic-afflicted 2020, but among tech disrupters throwing new money at old markets this is a number with few peers. Netflix’s free cash flow bottomed out at minus $3.1 billion in 2019, Uber’s at $4.8 billion the same year. Amazon, Rivian’s largest shareholder and customer, has posted bigger outflows for the past two years, but only because of outsized investments.

Tesla once bumped painfully down the same road that Rivian is now on—investing in and ramping up production of the world’s largest and most expensive consumer product. It had at least 13 consecutive years of negative free cash flow, including a low of minus $4.1 billion in 2017, before reaping rewards. Lucid, Rivian’s closest peer, burned through $3.3 billion last year.

Meanwhile, Arrival, link here:

Semiconductors: Hedge Fund Billionaire Has Taken A Passive Position In AMD -- March 2, 2023

See this post where semiconductors are tracked.

The story: billionaire takes a passive position in AMD.  Archived. 

From the linked story:

(Reuters) -Billionaire investor Daniel Loeb on Thursday told investors in his hedge fund Third Point the firm has invested in chip designer Advanced Micro Devices, a source familiar with the matter said.

Third Point, which occasionally pursues an activist strategy and pushes for changes at companies, is not planning to press for changes at AMD and the investment can be considered a passive stake, the person familiar with the fund said.

A spokesperson for Loeb declined to comment and AMD declined to comment.

AMD, which designs chips used in PCs, data centers and gaming consoles Xbox and PlayStation, has seen its stock rise about 21% this year, as analysts expect the firm and its peer Nvidia Corp to power the technology behind AI chatbots such as ChatGPT.

The chip firm's market value, at roughly $125 billion, has pulled ahead of key rival Intel Corp, as its strategy to outsource chipmaking to contract manufacturers such as TSMC helped it gain a technological lead.

Hess With Four New Permits; Seven DUCs Reported As Completed -- March 2, 2023

Breaking:

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Back to the Bakken

Active rigs: 45.

WTI: $77.91.

Natural gas: $2.785.

Four new permits, #39692 - #39695, inclusive:

• Operator: Hess
• Field: Tioga (Willliams)
• Comments:
• Hess has permits for four TI-Beauty Valley permits, NENE 14-158-95, 
• to be sited 525 FNL and between 874 FEL and 973 FEL

Five permits renewed:

• MinnKota Power Coop (3): a Liberty, a Unity, and a McCall, all in Oliver Couunty
• Oasis (2): two MHA permits in Heart Butte;

Two permits canceled:

• Slawson: two Armada Federal permits, Mountrail County (mentioned yesterday)

Seven DUCs reported as completed:

• 36322, 628, Lime Rock Resources, Brew 4-13-12H-143-96,
• 37538, 507, Lime Rock Resources, Emerson 4-24-25H-143-96,
• 37419, 494, Petro-Hunt, Blikre 158-93-6B-7-2H,
• 36954, 1,171, CLR, LCU Ralph 12-27H1,
• 36995, 821, CLR, LCU Ralph 9-27H1,
• 36996, 910, CLR, LCU Ralph Federal 8-27H,
• 38659, 553, CLR,  LCU Reckitt Federal 9-22H1X,

Margins -- March 2, 2023

Yesterday I mentioned "margins."

As a reminder:

Nio: link here.

• gross margins: 3.9% in 4Q22 vs 17.2% in 4Q21 and 13.3% inn 3Q22. 
• vehicle margin: 6.8% in 4Q22; 21% in 4Q21; and 16% in 3Q22

I suggested folks compare a 4% gross margin for Nio with gross margins of some tech companies.

Example, at The WSJ:

For the fiscal year that started Feb. 1, Salesforce is projecting adjusted operating margins of about 27%, up from 22.5% in its recently completed year.

Last year, Salesforce executives laid out to analysts a plan that would boost its adjusted operating margins to 25% by 2026. Before 2022, the company’s margin was perennially less than 20%.

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Ford's February, 2023, Sales

Link here.

Some data points:

• from a year earlier, sales increased by 20%;
• from previous month, increased by 8%
• Ford's F-Series pickups:
• y/y: 22% increase -- includes a spike in sales of its electric F-150 Lightning
• but: EV sales account for onlly 2.9% of Ford's total sales through February
• Ford sales outpaced other automakers
• Toyota's sales: down 8.5% y/y
• Hyundai-Kia: up by 16.2% y/y
• margins not provided

The National Nightmare Is Over -- March 2, 2023

White eggs, one dozen, at Walmart: $2.72.

Since the current administration is being blamed for 9% inflation, will the current administration now get credit for this huge drop in the price of eggs?  

Along that same line:

• Target, Lays, salt and vinegar chips, 7.75 oz: $4.29
• Walmart, store-brand, salt and vinegar chips, 8.0 oz; $1.98 (less than half price for slightly more)

A Little Insight Into Berkshire Hathaway's Cash Horde -- March 2, 2023

For 4Q22 and full year guidance for 2023 for Berkshire Hathaway, this is where that is being tracked. 

One of the criticisms has been that Buffett and Munger are building a cash horde but not putting that cash to work, as they say.

This article provides a bit of insight.

This explains a lot:

Berkshire Hathaway — and every other major name in finance — is somewhat limited in what it can do. By law, major financial institutions and billionaire investors can’t buy more than 5% of a company without submitting a 13-D filing as a beneficial owner to the Securities and Exchange Commission and all of the headaches that come with it.

This essentially shuts Buffett out of the world of microcap investing — unless Berkshire Hathaway decides to jump through those regulatory hoops. And even if the company chose to do so, and uncovered a 10 times opportunity, the upside would be barely noticeable to Berkshire Hathaway. If a $2 million stake turned into $20 million, that wouldn’t move the needle for a company that collects hundreds of millions of dollars in dividends each year from its stake in Coca-Cola alone.

In addition, Buffett does not do hostile takeovers. That's also huge. 

Now, think about that. If you are a 30-year-old investor, how should this affect your investing strategy?

Gasoline Demand Re-Visited -- March 2, 2023

If you are going to be an analyst, at least get the facts straight.

The analyst may be referring to the "average" demand over some time period, but we clearly peaked higher than 9. 3 million bpd. See below.

From the blog before the pandemic over the July 4th weekend:

From the blog yesterday: ignore the four-week average (the "lines"); instead look at the demand for week ending 2/24/23: 9.1 million bpd. That's huge:

• there's not a lot of difference between 9.8 (peak) and 9.1 milllion bpd (most recent);
• the peak was over a July 4th weekend before the pandemic;
• yesterday's 9.1 was in February, perhaps the month with the least automobile driving in the;
• no holiday driving during that week;
• fifty percent of office workers have still not returned to the office;
• upwards of 75% of office workers are not at the office full time (and many of them will probably never return full time);
• better mileage overall;
• greater EV penetration;
• my hunch: we get very, very close to 10 million bpd this year; and, if we don't hit 10 million bpd this summer, we'll see that milestone in 2024.

Three Wells Coming Off Confidential List Today -- March 2, 2023

Tesla lithium refinery: Corpus Christi.

In September 2022, we learned that Tesla has a plan to build a lithium refining facility on the Gulf Coast of Texas.

At the time, we knew very little about the project other than Tesla was planning on moving fast with hope to start building in Q4 2022.

A few months later, Tesla officially submitted the proposal for a project in Robstown, Texas, 25 minutes outside of Corpus Christi, with the purpose of “developing a battery-grade lithium hydroxide refining facility, the first of its kind in North America, as well as facilities to support other types of battery materials processing, refining, and manufacturing and ancillary manufacturing operations in support of Tesla’s sustainable product line.”

Tesla also confirmed that it planned to invest $365 million in the lithium plant, which would employ about 165 people full-time plus another 250 construction jobs for about two years.

China and oil, link here:

Each vessel can transport a whopping 2 million barrels of crude.

The people said that the loading of the tankers is expected to occur across US Gulf Coast terminals.

"Chinese buying activity of US barrels seems to be the hottest activity right now," Viktor Katona, a lead crude analyst at Kpler.

He said Chinese firms are taking advantage of a "remarkable, profitable arbitrage" for US crude that has been suppressed because of President Biden's massive releases from the Strategic Petroleum Reserve (remember when China was buying SPR releases last year?). 

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Back to the Bakken

Active rigs: 45.

Peter Zeihan newsletter.

WTI: $77.97.

Natural gas: $2.760.

Friday, March 3, 2023: 14 for the month; 176 for the quarter, 176 for the year
38959, conf, KODA Resources, Stout 1603-3BH, 
38957, conf, KODA Resources, Stout 1622-1BH, 
38615, conf, Hunt, Halliday 146-93-25-36H 3,
38342, conf, Enerplus, Grip 149-92-31C-30H,

Thursday, March 2, 2023: 10 for the month; 172 for the quarter, 172 for the year
39083, conf, CLR, Woodrow 2-32H,
38747, conf, Ovintiv, Sorenson Federal 153-96-9-4-13H,
38346, conf, Enerplus, Court 149-92-31D-30H,

RBN Energy: Uinta Basin's gas-egress dilemma clouds forecast, part 2. Archived.

Production of waxy crude in the Uinta Basin is up by more than half since mid-2021 and E&Ps there would like to produce more — the dense, slippery hydrocarbon is in high demand, not just by refineries in nearby Salt Lake City but also by at least a few of their Gulf Coast counterparts. Producers seem to have a handle on transporting increasing volumes of the stuff to market by truck and rail. The problem is, waxy crude emerges from Uinta wells with associated gas that needs to be piped away, the gas pipelines out of the play are nearing capacity, and addressing the takeaway constraints is a very complicated matter. In today’s RBN blog, we discuss the northeastern Utah play’s gas-takeaway concerns and the prospects for continued growth in waxy crude production.

Half-Staffed Today -- March 2, 2023

Due to Texas Independence Day, today, the office will be half-staffed.