Snarky Comment On Goldman Sachs -- July 21, 2017

Unless you've been under the Geico Rock for the past week, you are aware of Goldman Sachs earnings this past quarter. Not good. It's been fun to watch the news on Goldman Sachs since they reported.

I see that some readers are going back to an earlier post on Goldman Sachs, dated May 11, 2017, in which I wrote:

Goldman Sachs now bullish on oil -- at least for the next 6 to 12 months -- oilprice.com.

He pointed to the futures market, where the curve could be headed into backwardation – a situation in which near-term oil futures trade at a premium to contracts further out. That structure points to concerns about a deficit in the short run, which is why front month contracts would trade at a higher price than deliveries six or twelve months away.

A deficit in the short term? What universe is he living in?

Putting some of the jargon aside, Goldman is simply arguing that the oil market will be much tighter this year than most people seem to think. The investment bank forecasts returns on commodity prices on the order of 13.3 percent over the next three months and 12.2 percent over the next 12 months.

It's been my impression that trying to decipher a Goldman Sachs announcement is akin to sorting out a vision from the Delphi oracle.

And so it goes. 

The Energy And Market Page, T+182 -- July 21, 2017

Wow, wow, wow. Encana shattered earnings: 34 cents vs forecast of 4 cents. From 24/7 Wall Street:

Calgary-based energy producer Encana Corp. on Friday reported second-quarter adjusted earnings per share of $0.34, shattering the consensus estimate of $0.04 per share.

Revenue climbed to $1.08 billion, well above the consensus estimate of $796.65 million. In the year-ago quarter, Encana posted EPS of $0.10 and revenue of $364 million.

Operating expenses fell to $762 million from $1.27 billion in the second quarter of 2016, and operating income totaled $321 million after posting a loss of $912 million a year ago. Net earnings totaled $331 million compared with 2016 second-quarter loss of $601 million.

Cash flow from operations improved to $351 million from $278 million, juiced by a corporate margin of $12.09 per barrel of oil equivalent, up by 25% year over year.

See this post on Encana from late last year. Is the Encana story all about the Permian? If so, portends well for others. Encana shares are up 2.5% on a down day for the market.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything you read here or what you think you may have read here.

OPEC cut (wink, wink): OPEC production forecast to rise in July. But remember, summer production generally goes up -- Arabs love using crude oil to power their air conditioners, just like Americans love using coal to power their Teslas.

Smoke and mirrors: Saudi will cut imports to US to make it look like production cuts being made.

WTI: down $1.32.

Manufacturers' optimism: at 91.4% Apparently this is the highest that American manufacturers' optimism has ever been. Via twitter. No link. 

The Open -- Friday, July 21, 2017

Only one well coming off confidential list today:

• 32742, 1,996, Hess, HA-Grimestad-152-95-3031H-8, Hawkeye, Three Forks, 60 stages; 4.2 million lbs, large (40/70); small (30/50); t5/17; cum 8K after 4 days;

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Headline

Sean Spicer resigns? Apparently. Not a happy separation. Having said that, I always thought Spicer talked too much when giving answers to rabid press.

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The Open

Slow, slow start to the day for the Bakken. Best bet: watching The Open. Live on television. Wind gusts up to 35 mph; hats blowing off players; players with long hair will be handicapped (am I allowed to use that word?). Was supposed to have been a beautiful day; no precipitation (yet) but a miserable, miserable day. The clouds are so low and so dark it almost looks like dusk. Matt Kuchar who shot a T1 65 in the first round, hit an incredibly disappointing 71 today. Phil Mickelson, +8. Most scoring worst today than yesterday. One exception, Zach Johnson, 75 yesterday; 66 today. Leaderboard.

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Supply And Demand -- Ethanol

From the EIA today:

Through the first six months of 2017, U.S. weekly ethanol production averaged 1.02 million barrels per day (b/d), an increase of 5% over the same period in 2016. On a weekly basis, U.S. ethanol production set a record of 1.06 million b/d in the week of January 27, 2017, and it has averaged near or above 1 million b/d in every week of 2017 except for a few weeks in April, when ethanol plants typically undergo seasonal maintenance. If ethanol production remains relatively high through the second half of the year, as EIA’s Short-Term Energy Outlook (STEO) expects, 2017 will set a new record for annual fuel ethanol production. --- EIA

The real world:

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Third Party Payers -- It's Not Just The Health Sector

When a reader sent me a link to a story suggesting the new Apple iPhone could cost upwards of $1,000, I replied (not ready for prime time):

Apple broke the code on iPhone pricing -- 3rd party payers, just like the health industry.

Very few people actually pay the advertised price. The phones are greatly subsidized by the phone company with which one signs a contract for about two years. This will be a huge price to pay for ATT, Verizon. It's very possible they will have to extend the contract for 3 years to pay the $1000 and give the phone away for free to Sophia.

Like health care, if there's a third party payer, the provider can charge whatever they want. In fact, the higher the cost, the more "loyal" the customers become.

Flashback From August 17, 2012 -- July 21, 2017

From a short post on August 17, 2012:

I really appreciate "straight talk":

EOG: near term, horizontal oil production in US (2 million bopd by 2015) will NOT affect 90 million bopd global production; only three consequential horizontal plays in North America: Eagle Ford, Bakken, and Permian (all others are either inconsequential or really NGL plays) -- Mark Papa, EOG/CEO

Hmmm....

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The Political Page

Making America Great Again: Trump's first quarter -- boom --

• mining: +22%
• construction: +6%
• manufacturing: +5%
• finance, insurance: - 2%

Food stamps: food stamp use lowest in 7 years; many reasons.

Dems in debt: DNC finished June, 2017, $3.3 million in debt. Come on, Maxine -- declare for 2020, and the donations will come pouring in. LOL.

Update On Takeaway Capacity In The Niobrara -- July 21, 2017

Active rigs:

$46.54	7/21/2017	07/21/2016	07/21/2015	07/21/2014	07/21/2012
Active Rigs	59	31	68	196	207

RBN Energy: pipelines in place for Niobrara / DJ Basin growth, but will it come?

The rig count in the Niobrara Shale’s Denver-Julesburg (DJ) Basin has doubled in the past year, and crude oil production has been rebounding modestly in recent months. Most of the activity in the play is concentrated in super-hot Weld County, CO, where 23 of the DJ Basin’s 29 active rigs are set up. But with crude prices below $50/barrel, will the DJ make a real comeback, or will production sag again, just like it did after the big price declines of 2014-15? And what about Niobrara-related midstream infrastructure? Even some of the more optimistic forecasts leave the region with far more pipeline takeaway capacity than it needs. Today we consider recent developments in the Rocky Mountain region’s most important shale play and what they mean for exploration and production companies and midstreamers.